PNM Resources, Inc. (PNM) has reported total operating revenues of $1.96 billion for the year-end 2008, compared with the total operating revenues of $1.91 billion in previous year-end. It has also reported a net loss of $229.7 billion, or $2.75 loss per diluted share, for the year-end 2008, compared with the net earnings 0f $74.8 million, or $0.96 per diluted share, in the previous year-end.
PNM also posted unaudited 2008 consolidated GAAP losses of $229.7 million, or $2.75 per diluted share, compared with earnings of $74.9 million, or $0.96 per diluted share, in the previous year. Unaudited, consolidated 2008 ongoing earnings were $9.9 million, or $0.12 per diluted share, compared with earnings of $86.7 million, or $1.11 per diluted share in the previous year.
Year-To-Date Performance Summary
GAAP losses in 2008 include different non-recurring charges that affected results. Non-cash charges related to impairments of intangible assets were taken in the second and third quarters totaling $147.9 million. Additionaly, GAAP losses recorded in the fourth quarter reflect a $25.0 million after-tax impairment charge on intangible assets, exclusive of goodwill, for First Choice Power. Because of the complexity of the calculations needed in the second step of the impairment analysis, PNM is in the process of determining whether additional impairment charges related to goodwill at First Choice Power will be recorded. The impairment charges will be finalized when PNM files its 2008 Form 10-K with the Securities and Exchange Commission.
For the year 2008, PNM Electric had an after-tax write-off of $18.3 million related to regulatory disallowances resulting from its rate case filed in the previous year. Optim Energy, formerly known as EnergyCo, had a write-off related to its inventory balance of emission allowances under the Clean Air Interstate Rule, which has been invalidated by a federal appeals court in July 2008. PNM’s share of Optim Energy’s write-off was $9.6 million.
Consolidated ongoing earnings reflect First Choice Power’s 2008 losses of $22.1 million compared with earnings of $29.1 million in the previous year. For the year 2008, First Choice Power’s bad debt expense increased to $49.2 million in 2008 from $15.1 million in the previous year. The increase in bad debt expense is a result of a higher number of customer departures, average higher bill amounts and an increase in default rates. Higher call volumes and aggressive marketing campaigns designed to switch month-to-month customers to long-term contracts increased First Choice Power’s annual customer-service and marketing costs to $42.5 million from $31.5 million.
Year-end earnings also reflect weak PNM Electric performance prior to the May implementation of new base rates and the fuel and purchase power adjustment clause one month later.
Fourth Quarter Performance Summary
PNM unaudited consolidated quarterly GAAP losses were $32.1 million, or $0.36 per diluted share, compared with earnings of $16.6 million, or $0.21 per diluted share, in the previous year. Unaudited, consolidated 2008 ongoing losses were $10.8 million, or $0.12 per diluted share, compared with earnings of $6.6 million, or $0.08 per diluted share, in the previous year. Reduced consolidated earnings were driven by First Choice Power, which sustained significantly higher bad debt expense, marketing costs and customer-service expenses compared with the same period in the previous year. First Choice Power bad debt expense for the quarter increased to $26.4 million in 2008 from $3.3 million in the previous year.
Year-End Segment Reporting Of Earnings
Regulated Operations
PNM Electric:
For the year 2008, PNM Electric has declared ongoing earnings of $15.7 million, or $0.19 per diluted share, compared with earnings of $35.9 million, or $0.46 per diluted share in the previous year. GAAP losses were $67.0 million, or $0.82 per diluted share, compared with earnings of $22.9 million, or $0.29 per diluted share, in the previous year.
Costs incurred early in the year related to power plant availability and higher coal prices negatively affected results. The benefit of higher base rates partially offset the absence of sales of SO2 credits and realized losses related to assets held in the Nuclear Decommissioning Trust.
GAAP losses include after-tax, non-cash charges related to impairment of intangible assets of $51.1 million and a write-off of $18.3 million related to regulatory disallowances.
TNMP
For the year 2008, TNMP declared ongoing earnings of $23.2 million, or $0.28 per diluted share, compared with $18.9 million, or $0.24 per diluted share, in the previous year. GAAP losses were $8.8 million, or $0.11 per diluted share, compared with the previous year earnings of $18.4 million, or $0.23 per diluted share.
Customer growth and higher usage, combined with reduced debt expense, improved ongoing earnings year-over-year.
GAAP losses include after-tax, non-cash charges related to impairment of intangible assets of $34.5 million.
Unregulated Operations
First Choice Power – a competitive retail electric provider in the Electric Reliability Council of Texas.
For the year, First Choice Power declared negative ongoing EBITDA of $26.8 million, compared with the previous year ongoing EBITDA of $47.8 million.
First Choice Power declared 2008 ongoing losses of $22.1 million, or $0.26 per diluted share, compared with the previous year earnings of $29.1 million, or $0.37 per diluted share. GAAP losses were $136.6 million, or $1.64 per diluted share, compared with the previous year earnings of $27.2 million, or $0.35 per diluted share.
Ongoing losses mainly are associated with $49.2 million of bad debt expense, increasing from $15.1 million in the previous year, and higher marketing and customer service costs that increased to $42.5 million from $31.5 million in the previous year.
Average retail margins decreased to around $18 per megawatt-hour from around $24 per megawatt-hour in the previous year.
GAAP losses include after-tax, non-cash charges related to impairment of intangible assets of $80.3 million.