10-Q 1 pnm331201310-q.htm 10-Q PNM 3.31.2013 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)
 [X]
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2013

Commission File
 
Name of Registrants, State of Incorporation,
 
I.R.S. Employer
 Number
 
 Address and Telephone Number
 
 Identification No.
001-32462
 
PNM Resources, Inc.
 
85-0468296
 
 
(A New Mexico Corporation)
 
 
 
 
414 Silver Ave. SW
 
 
 
 
Albuquerque, New Mexico 87102-3289
 
 
 
 
(505) 241-2700
 
 
 
 
 
 
 
001-06986
 
Public Service Company of New Mexico
 
85-0019030
 
 
(A New Mexico Corporation)
 
 
 
 
414 Silver Ave. SW
 
 
 
 
Albuquerque, New Mexico 87102-3289
 
 
 
 
(505) 241-2700
 
 
 
 
 
 
 
002-97230
 
Texas-New Mexico Power Company
 
75-0204070
 
 
(A Texas Corporation)
 
 
 
 
577 N. Garden Ridge Blvd.
 
 
 
 
Lewisville, Texas 75067
 
 
 
 
(972) 420-4189
 
 

Indicate by check mark whether each registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.
 
PNM Resources, Inc. (“PNMR”)
YES
ü
NO
 
 
Public Service Company of New Mexico (“PNM”)
YES
ü
NO
 
 
Texas-New Mexico Power Company (“TNMP”)
YES
 
NO
ü

(NOTE: As a voluntary filer, not subject to the filing requirements, TNMP filed all reports under Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months.)

Indicate by check mark whether each registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

 
PNMR
YES
ü
NO
 
 
PNM
YES
ü
NO
 
 
TNMP
YES
ü
NO
 





Indicate by check mark whether registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer or a smaller reporting company (as defined in Rule 12b-2 of the Exchange Act).

 
 
Large accelerated
filer
 
Accelerated
filer
 
Non-accelerated
filer
 
Smaller Reporting Company
 
PNMR
 
ü
 
 
 
   
 
 
 
   
 
 
 
   
 
 
PNM
 
   
 
 
 
   
 
 
 
ü
 
 
 
   
 
 
TNMP
 
   
 
 
 
   
 
 
 
ü
 
 
 
   
 


Indicate by check mark whether any of the registrants is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES     NO ü

As of May 1, 2013, 79,653,624 shares of common stock, no par value per share, of PNMR were outstanding.

The total number of shares of common stock of PNM outstanding as of May 1, 2013 was 39,117,799 all held by PNMR (and none held by non-affiliates).

The total number of shares of common stock of TNMP outstanding as of May 1, 2013 was 6,358 all held indirectly by PNMR (and none held by non-affiliates).

PNM AND TNMP MEET THE CONDITIONS SET FORTH IN GENERAL INSTRUCTIONS (H) (1) (a) AND (b) OF FORM 10-Q AND ARE THEREFORE FILING THIS FORM WITH THE REDUCED DISCLOSURE FORMAT PURSUANT TO GENERAL INSTRUCTION (H) (2).

This combined Form 10-Q is separately filed by PNMR, PNM, and TNMP.  Information contained herein relating to any individual registrant is filed by such registrant on its own behalf.  Each registrant makes no representation as to information relating to the other registrants.  When this Form 10-Q is incorporated by reference into any filing with the SEC made by PNMR, PNM, or TNMP, as a registrant, the portions of this Form 10-Q that relate to each other registrant are not incorporated by reference therein.



2


PNM RESOURCES, INC. AND SUBSIDIARIES
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES

INDEX

 
Page No.
 
 
 
 
 
 


3


GLOSSARY

Definitions:
  
 
Afton
  
Afton Generating Station
AFUDC
 
Allowance for Funds Used During Construction
ALJ
  
Administrative Law Judge
AMS
 
Advanced Meter System
AOCI
  
Accumulated Other Comprehensive Income
APS
  
Arizona Public Service Company, which is the operator and a co-owner of PVNGS and Four Corners
BACT
  
Best Available Control Technology
BART
  
Best Available Retrofit Technology
BHP
  
BHP Billiton, Ltd, the parent of SJCC
Board
  
Board of Directors of PNMR
BTU
  
British Thermal Unit
CAA
 
Clean Air Act
CCB
  
Coal Combustion Byproducts
CO2
  
Carbon Dioxide
D.C. Circuit
 
United States Court of Appeals for the District of Columbia Circuit
Delta
  
Delta-Person Generating Station
DOE
  
United States Department of Energy
DOI
  
United States Department of Interior
EIB
  
New Mexico Environmental Improvement Board
EIP
  
Eastern Interconnection Project
EPA
  
United States Environmental Protection Agency
ERCOT
  
Electric Reliability Council of Texas
ESA
 
Endangered Species Act
Exchange Act
 
Securities Exchange Act of 1934
FASB
  
Financial Accounting Standards Board
FERC
  
Federal Energy Regulatory Commission
FIP
  
Federal Implementation Plan
Four Corners
  
Four Corners Power Plant
FPPAC
  
Fuel and Purchased Power Adjustment Clause
GAAP
  
Generally Accepted Accounting Principles in the United States of America
Gallup
 
City of Gallup, New Mexico
GHG
  
Greenhouse Gas Emissions
GWh
  
Gigawatt hours
IBEW
  
International Brotherhood of Electrical Workers, Local 611
IRP
 
Integrated Resource Plan
KW
  
Kilowatt
KWh
  
Kilowatt Hour
Lordsburg
  
Lordsburg Generating Station
Luna
  
Luna Energy Facility
MD&A
  
Management’s Discussion and Analysis of Financial Condition and Results of Operations
MMBTU
  
Million BTUs
Moody’s
  
Moody’s Investor Services, Inc.
MW
  
Megawatt
MWh
  
Megawatt Hour
NAAQS
 
National Ambient Air Quality Standards

4


Navajo Acts
  
Navajo Nation Air Pollution Prevention and Control Act, Navajo Nation Safe Drinking Water Act, and Navajo Nation Pesticide Act
NDT
  
Nuclear Decommissioning Trusts for PVNGS
NEC
 
Navopache Electric Cooperative, Inc.
NERC
  
North American Electric Reliability Council
Ninth Circuit
  
United States Court of Appeals for the Ninth Circuit
NMAG
  
New Mexico Attorney General
NMED
  
New Mexico Environment Department
NMIEC
  
New Mexico Industrial Energy Consumers Inc.
NMPRC
  
New Mexico Public Regulation Commission
NOx
  
Nitrogen Oxides
NOPR
 
Notice of Proposed Rulemaking
NRC
  
United States Nuclear Regulatory Commission
NSPS
  
New Source Performance Standards
NSR
  
New Source Review
OCI
  
Other Comprehensive Income
OPEB
  
Other Post Employment Benefits
OSM
 
United States Office of Surface Mining Reclamation and Enforcement
PNM
  
Public Service Company of New Mexico and Subsidiaries
PNM Revolving Credit Facility
 
PNM's $400.0 Million Unsecured Revolving Credit Facility
PNM Term Loan Agreement
  
PNM’s $75 Million Unsecured Term Loan Facility
PNMR
  
PNM Resources, Inc. and Subsidiaries
PNMR Revolving Credit Facility
 
PNMR's $300.0 Million Unsecured Revolving Credit Facility
PNMR Term Loan Agreement
  
PNMR’s $100 Million Unsecured Term Loan Facility
PPA
  
Power Purchase Agreement
PSD
  
Prevention of Significant Deterioration
PUCT
  
Public Utility Commission of Texas
PV
  
Photovoltaic
PVNGS
  
Palo Verde Nuclear Generating Station
RCRA
  
Resource Conservation and Recovery Act
RCT
  
Reasonable Cost Threshold
REA
 
New Mexico's Renewable Energy Act of 2004
REC
  
Renewable Energy Certificates
REP
  
Retail Electricity Provider
RMC
  
Risk Management Committee
RPS
  
Renewable Energy Portfolio Standard
SCE
  
Southern California Edison Company
SCR
 
Selective Catalytic Reduction
SEC
  
United States Securities and Exchange Commission
SIP
  
State Implementation Plan
SJCC
  
San Juan Coal Company
SJGS
  
San Juan Generating Station
SNCR
 
Selective Non-Catalytic Reduction
SO2
  
Sulfur Dioxide
SPS
  
Southwestern Public Service Company
S&P
  
Standard and Poor’s Ratings Services
TECA
  
Texas Electric Choice Act

5


Tenth Circuit
 
United States Court of Appeals for the Tenth Circuit
TNMP
  
Texas-New Mexico Power Company and Subsidiaries
TNMP 2011 Term Loan Agreement
 
TNMP's $50 Million Secured Term Loan
TNMP Revolving Credit Facility
  
TNMP’s $75 Million Revolving Credit Facility
Tri-State
  
Tri-State Generation and Transmission Association, Inc.
Valencia
  
Valencia Energy Facility
VaR
  
Value at Risk
WEG
 
WildEarth Guardians


6


PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS


PNM RESOURCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
 
Three Months Ended March 31,
 
2013
 
2012
 
(In thousands, except per share amounts)
Electric Operating Revenues 
$
317,665

 
$
305,374

Operating Expenses:

 
 
Cost of energy
104,706

 
91,847

Administrative and general
44,691

 
44,800

Energy production costs
43,573

 
45,128

Depreciation and amortization
40,807

 
38,414

Transmission and distribution costs
16,295

 
16,248

Taxes other than income taxes
16,889

 
15,208

Total operating expenses
266,961

 
251,645

Operating income
50,704

 
53,729

Other Income and Deductions:
 
 
 
Interest income
2,634

 
3,292

Gains on investments held by NDT
1,533

 
4,454

Other income
1,707

 
2,645

Other deductions
(3,350
)
 
(4,551
)
Net other income
2,524

 
5,840

Interest Charges
31,297

 
29,566

Earnings before Income Taxes
21,931

 
30,003

Income Taxes
7,969

 
9,526

Net Earnings
13,962

 
20,477

(Earnings) Attributable to Valencia Non-controlling Interest
(3,204
)
 
(3,265
)
Preferred Stock Dividend Requirements of Subsidiary
(132
)
 
(132
)
Net Earnings Attributable to PNMR
$
10,626

 
$
17,080

Net Earnings Attributable to PNMR per Common Share:
 
 
 
Basic
$
0.13

 
$
0.21

Diluted
$
0.13

 
$
0.21

Dividends Declared per Common Share
$
0.165

 
$
0.145


The accompanying notes, as they relate to PNMR, are an integral part of these financial statements.



7


PNM RESOURCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)

 
Three Months Ended March 31,
 
2013
 
2012
 
(In thousands)
Net Earnings
$
13,962

 
$
20,477

Other Comprehensive Income:
 
 
 
Unrealized Gain on Investment Securities:
 
 
 
Unrealized holding gains arising during the period, net of income tax (expense) of $(3,111) and $(7,415)
4,747

 
11,314

Reclassification adjustment for (gains) included in net earnings, net of income tax expense of $529 and $3,546
(807
)
 
(5,411
)
Pension Liability Adjustment:

 

Reclassification adjustment for amortization of experience (gain) loss recognized as net periodic benefit cost, net of income tax expense (benefit) of $(631) and $(476)
960

 
727

Fair Value Adjustment for Cash Flow Hedges:
 
 
 
Change in fair market value, net of income tax (expense) benefit of $(4) and $59
8

 
(106
)
Reclassification adjustment for losses included in net earnings, net of income tax expense (benefit) of $(17) and $(15)
31

 
27

Total Other Comprehensive Income
4,939

 
6,551

Comprehensive Income
18,901

 
27,028

Comprehensive (Income) Attributable to Valencia Non-controlling Interest
(3,204
)
 
(3,265
)
Preferred Stock Dividend Requirements of Subsidiary
(132
)
 
(132
)
Comprehensive Income Attributable to PNMR
$
15,565

 
$
23,631


The accompanying notes, as they relate to PNMR, are an integral part of these financial statements.


8


PNM RESOURCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
Three Months Ended March 31,
 
2013
 
2012
 
(In thousands)
Cash Flows From Operating Activities:
 
 
 
Net earnings
$
13,962

 
$
20,477

Adjustments to reconcile net earnings to net cash flows from operating activities:
 
 
 
Depreciation and amortization
51,818

 
48,777

Deferred income tax expense
7,795

 
9,601

Net unrealized (gains) losses on derivatives
4,902

 
(3,502
)
Realized (gains) on investments held by NDT
(1,533
)
 
(4,454
)
Stock based compensation expense
1,903

 
1,236

Other, net
(348
)
 
(471
)
Changes in certain assets and liabilities:
 
 
 
Accounts receivable and unbilled revenues
4,062

 
13,671

Materials, supplies, and fuel stock
944

 
(3,058
)
Other current assets
2,335

 
1,854

Other assets
8,774

 
(270
)
Accounts payable
(17,895
)
 
737

Interest and taxes
25,430

 
20,749

Other current liabilities
(38,761
)
 
(29,474
)
Proceeds from governmental grants

 
20,859

Other liabilities
(64,763
)
 
(83,129
)
Net cash flows from operating activities
(1,375
)
 
13,603

 
 
 
 
Cash Flows From Investing Activities:
 
 
 
Additions to utility and non-utility plant
(73,584
)
 
(84,018
)
Proceeds from sales of investments held by NDT
14,284

 
26,760

Purchases of investments held by NDT
(15,122
)
 
(27,395
)
Return of principal on PVNGS lessor notes
10,965

 
12,632

Other, net
1,241

 
2,431

Net cash flows from investing activities
(62,216
)
 
(69,590
)

The accompanying notes, as they relate to PNMR, are an integral part of these financial statements.

9


PNM RESOURCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

 
Three Months Ended March 31,
 
2013
 
2012
 
(In thousands)
Cash Flows From Financing Activities:
 
 
 
Short-term borrowings (repayments), net
84,600

 
67,100

Proceeds from stock option exercise
2,293

 
5,005

Awards of common stock
(9,651
)
 
(11,088
)
Dividends paid
(11,683
)
 
(10,089
)
Valencia’s transactions with its owner
(5,260
)
 
(4,009
)
Other, net
(584
)
 
953

Net cash flows from financing activities
59,715

 
47,872

 
 
 
 
Change in Cash and Cash Equivalents
(3,876
)
 
(8,115
)
Cash and Cash Equivalents at Beginning of Period
8,985

 
15,091

Cash and Cash Equivalents at End of Period
$
5,109

 
$
6,976

 
 
 
 
Supplemental Cash Flow Disclosures:
 
 
 
Interest paid, net of amounts capitalized
$
4,817

 
$
4,312

Income taxes paid (refunded), net
$
(603
)
 
$
1,500

 
 
 
 

The accompanying notes, as they relate to PNMR, are an integral part of these financial statements.


10


PNM RESOURCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
 
March 31,
2013
 
December 31,
2012
 
(In thousands)
ASSETS
 
 
 
Current Assets:
 
 
 
Cash and cash equivalents
$
5,109

 
$
8,985

Accounts receivable, net of allowance for uncollectible accounts of $1,339 and $1,751
89,634

 
87,093

Unbilled revenues
50,410

 
57,266

Other receivables
43,517

 
53,332

Materials, supplies, and fuel stock
58,699

 
59,643

Regulatory assets
41,478

 
39,120

Commodity derivative instruments
2,114

 
3,785

Income taxes receivable
100,699

 
101,477

Other current assets
40,414

 
31,490

Total current assets
432,074

 
442,191

Other Property and Investments:
 
 
 
Investment in PVNGS lessor notes
43,752

 
54,325

Investments held by NDT
197,691

 
188,971

Other investments
8,363

 
9,139

Non-utility property, net of accumulated depreciation of $135 and $131
4,483

 
4,487

Total other property and investments
254,289

 
256,922

Utility Plant:
 
 
 
Plant in service and plant held for future use
5,332,025

 
5,313,796

Less accumulated depreciation and amortization
1,789,039

 
1,774,223

 
3,542,986

 
3,539,573

Construction work in progress
140,147

 
125,287

Nuclear fuel, net of accumulated amortization of $49,605 and $42,644
81,376

 
81,627

Net utility plant
3,764,509

 
3,746,487

Deferred Charges and Other Assets:
 
 
 
Regulatory assets
543,074

 
555,577

Goodwill
278,297

 
278,297

Commodity derivative instruments

 
352

Other deferred charges
98,517

 
92,757

Total deferred charges and other assets
919,888

 
926,983

 
$
5,370,760

 
$
5,372,583


The accompanying notes, as they relate to PNMR, are an integral part of these financial statements.


11


PNM RESOURCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
 
March 31,
2013
 
December 31,
2012
 
(In thousands, except share information)
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
Current Liabilities:
 
 
 
Short-term debt
$
243,300

 
$
158,700

Current installments of long-term debt
2,530

 
2,530

Accounts payable
77,435

 
99,177

Customer deposits
16,040

 
18,176

Accrued interest and taxes
77,000

 
52,003

Regulatory liabilities

 
15,173

Commodity derivative instruments
4,132

 
1,000

Dividends declared
13,271

 
11,679

Current portion of accumulated deferred income taxes
258

 
258

Other current liabilities
60,111

 
75,407

Total current liabilities
494,077

 
434,103

Long-term Debt
1,669,926

 
1,669,760

Deferred Credits and Other Liabilities:
 
 
 
Accumulated deferred income taxes
713,483

 
701,545

Accumulated deferred investment tax credits
13,694

 
14,242

Regulatory liabilities
426,208

 
423,460

Asset retirement obligations
87,651

 
85,893

Accrued pension liability and postretirement benefit cost
157,711

 
224,565

Commodity derivative instruments
1,785

 
1,933

Other deferred credits
111,206

 
116,523

Total deferred credits and other liabilities
1,511,738

 
1,568,161

Total liabilities
3,675,741

 
3,672,024

Commitments and Contingencies (See Note 9)


 


Cumulative Preferred Stock of Subsidiary
 
 
 
without mandatory redemption requirements ($100 stated value; 10,000,000 shares authorized; issued and outstanding 115,293 shares)
11,529

 
11,529

Equity:
 
 
 
PNMR common stockholders’ equity:
 
 
 
Common stock outstanding (no par value; 120,000,000 shares authorized; issued and outstanding 79,653,624 shares)
1,176,912

 
1,182,819

Accumulated other comprehensive income (loss), net of income taxes
(76,691
)
 
(81,630
)
Retained earnings
504,482

 
506,998

Total PNMR common stockholders’ equity
1,604,703

 
1,608,187

Non-controlling interest in Valencia
78,787

 
80,843

Total equity
1,683,490

 
1,689,030

 
$
5,370,760

 
$
5,372,583

 
 
 
 

The accompanying notes, as they relate to PNMR, are an integral part of these financial statements.


12


PNM RESOURCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(Unaudited)

 
Attributable to PNMR
 
Non-
controlling
Interest
in Valencia
 
 
 
Common
Stock
 
AOCI
 
Retained
Earnings
 
Total PNMR Common Stockholder's Equity
 
 
Total
Equity
 
(In thousands)
Balance at December 31, 2012
$
1,182,819

 
$
(81,630
)
 
$
506,998

 
$
1,608,187

 
$
80,843

 
$
1,689,030

Proceeds from stock option exercise
2,293

 

 

 
2,293

 

 
2,293

Awards of common stock
(9,651
)
 

 

 
(9,651
)
 

 
(9,651
)
Excess tax (shortfall) from stock-based payment arrangements
(452
)
 

 

 
(452
)
 

 
(452
)
Stock based compensation expense
1,903

 

 

 
1,903

 

 
1,903

Valencia’s transactions with its owner

 

 

 

 
(5,260
)
 
(5,260
)
Net earnings before subsidiary preferred stock dividends

 

 
10,758

 
10,758

 
3,204

 
13,962

Subsidiary preferred stock dividends

 

 
(132
)
 
(132
)
 

 
(132
)
Total other comprehensive income

 
4,939

 

 
4,939

 

 
4,939

Dividends declared on common stock

 

 
(13,142
)
 
(13,142
)
 

 
(13,142
)
Balance at March 31, 2013
$
1,176,912

 
$
(76,691
)
 
$
504,482

 
$
1,604,703

 
$
78,787

 
$
1,683,490



The accompanying notes, as they relate to PNMR, are an integral part of these financial statements.



13



PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
A WHOLLY OWNED SUBSIDIARY OF PNM RESOURCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)

 
Three Months Ended March 31,
 
2013
 
2012
 
(In thousands)
Electric Operating Revenues
$
257,894

 
$
250,416

Operating Expenses:
 
 
 
Cost of energy
91,660

 
80,557

Administrative and general
38,758

 
39,050

Energy production costs
43,566

 
45,128

Depreciation and amortization
25,834

 
23,634

Transmission and distribution costs
10,603

 
10,843

Taxes other than income taxes
10,234

 
9,099

Total operating expenses
220,655

 
208,311

Operating income
37,239

 
42,105

Other Income and Deductions:
 
 
 
Interest income
2,673

 
3,335

Gains on investments held by NDT
1,533

 
4,454

Other income
1,311

 
1,834

Other deductions
(1,437
)
 
(1,306
)
Net other income
4,080

 
8,317

Interest Charges
19,957

 
18,493

Earnings before Income Taxes
21,362

 
31,929

Income Taxes
6,589

 
10,852

Net Earnings
14,773

 
21,077

(Earnings) Attributable to Valencia Non-controlling Interest
(3,204
)
 
(3,265
)
Net Earnings Attributable to PNM
11,569

 
17,812

Preferred Stock Dividends Requirements
(132
)
 
(132
)
Net Earnings Available for PNM Common Stock
$
11,437

 
$
17,680


The accompanying notes, as they relate to PNM, are an integral part of these financial statements.


14


PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
A WHOLLY OWNED SUBSIDIARY OF PNM RESOURCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
 
Three Months Ended March 31,
 
2013
 
2012
 
(In thousands)
Net Earnings
$
14,773

 
$
21,077

Other Comprehensive Income:
 
 
 
Unrealized Gain on Investment Securities:
 
 
 
Unrealized holding gains arising during the period, net of income tax (expense) of $(3,111) and $(7,415)
4,747

 
11,314

Reclassification adjustment for (gains) included in net earnings, net of income tax expense of $529 and $3,546
(807
)
 
(5,411
)
Pension Liability Adjustment:

 

Reclassification adjustment for amortization of experience (gain) loss recognized as net periodic benefit cost, net of income tax expense (benefit) of $(631) and $(476)
960

 
727

Total Other Comprehensive Income
4,900

 
6,630

Comprehensive Income
19,673

 
27,707

Comprehensive (Income) Attributable to Valencia Non-controlling Interest
(3,204
)
 
(3,265
)
Comprehensive Income Attributable to PNM
$
16,469

 
$
24,442


The accompanying notes, as they relate to PNM, are an integral part of these financial statements.


15


PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
A WHOLLY OWNED SUBSIDIARY OF PNM RESOURCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
Three Months Ended March 31,
 
2013
 
2012
 
(In thousands)
Cash Flows From Operating Activities:
 
 
 
Net earnings
$
14,773

 
$
21,077

Adjustments to reconcile net earnings to net cash flows from operating activities:
 
 
 
Depreciation and amortization
34,655

 
31,498

Deferred income tax expense
6,685

 
10,852

Net unrealized (gains) losses on derivatives
4,902

 
(3,502
)
Realized (gains) on investments held by NDT
(1,533
)
 
(4,454
)
Other, net
(343
)
 
(195
)
Changes in certain assets and liabilities:
 
 
 
Accounts receivable and unbilled revenues
5,467

 
9,920

Materials, supplies, and fuel stock
879

 
(3,117
)
Other current assets
(84
)
 
402

Other assets
8,772

 
(1,533
)
Accounts payable
(18,857
)
 
1,014

Interest and taxes
20,932

 
81,263

Other current liabilities
(44,068
)
 
(18,379
)
Proceeds from governmental grants

 
20,859

Other liabilities
(64,893
)
 
(78,133
)
Net cash flows from operating activities
(32,713
)
 
67,572

 
 
 
 
Cash Flows From Investing Activities:
 
 
 
Utility plant additions
(44,389
)
 
(66,668
)
Proceeds from sales of NDT investments
14,284

 
26,760

Purchases of NDT investments
(15,122
)
 
(27,395
)
Return of principal on PVNGS lessor notes
10,965

 
12,632

Other, net
1,214

 
180

Net cash flows from investing activities
(33,048
)
 
(54,491
)

The accompanying notes, as they relate to PNM, are an integral part of these financial statements.


16


PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
A WHOLLY OWNED SUBSIDIARY OF PNM RESOURCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

 
Three Months Ended March 31,
 
2013
 
2012
 
(In thousands)
Cash Flows From Financing Activities:
 
 
 
Short-term borrowings (repayments), net
67,800

 
(21,900
)
Valencia’s transactions with its owner
(5,260
)
 
(4,009
)
Dividends paid
(132
)
 
(132
)
Other, net
(584
)
 
953

Net cash flows from financing activities
61,824

 
(25,088
)
 
 
 
 
Change in Cash and Cash Equivalents
(3,937
)
 
(12,007
)
Cash and Cash Equivalents at Beginning of Period
3,958

 
12,307

Cash and Cash Equivalents at End of Period
$
21

 
$
300

 
 
 
 
Supplemental Cash Flow Disclosures:
 
 
 
Interest paid, net of amounts capitalized
$
4,304

 
$
4,141

Income taxes paid (refunded), net
$

 
$
(63,114
)

The accompanying notes, as they relate to PNM, are an integral part of these financial statements.


17


PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
A WHOLLY OWNED SUBSIDIARY OF PNM RESOURCES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
 
March 31,
2013
 
December 31,
2012
 
(In thousands)
ASSETS
 
 
 
Current Assets:
 
 
 
Cash and cash equivalents
$
21

 
$
3,958

Accounts receivable, net of allowance for uncollectible accounts of $1,339 and $1,751
69,684

 
69,876

Unbilled revenues
43,557

 
49,085

Other receivables
42,905

 
50,975

Affiliate receivables
9,790

 
9,050

Materials, supplies, and fuel stock
55,911

 
56,790

Regulatory assets
37,273

 
36,490

Commodity derivative instruments
2,114

 
3,785

Income taxes receivable
80,320

 
80,223

Other current assets
37,052

 
27,457

Total current assets
378,627

 
387,689

Other Property and Investments:
 
 
 
Investment in PVNGS lessor notes
43,752

 
54,325

Investments held by NDT
197,691

 
188,971

Other investments
4,196

 
4,034

Non-utility property
976

 
976

Total other property and investments
246,615

 
248,306

Utility Plant:
 
 
 
Plant in service and plant held for future use
4,139,281

 
4,133,532

Less accumulated depreciation and amortization
1,361,199

 
1,355,240

 
2,778,082

 
2,778,292

Construction work in progress
108,556

 
102,329

Nuclear fuel, net of accumulated amortization of $49,605 and $42,644
81,376

 
81,627

Net utility plant
2,968,014

 
2,962,248

Deferred Charges and Other Assets:
 
 
 
Regulatory assets
423,208

 
431,956

Goodwill
51,632

 
51,632

Commodity derivative instruments

 
352

Other deferred charges
87,161

 
81,724

Total deferred charges and other assets
562,001

 
565,664

 
$
4,155,257

 
$
4,163,907

 
 
 
 

The accompanying notes, as they relate to PNM, are an integral part of these financial statements.


18


PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
A WHOLLY OWNED SUBSIDIARY OF PNM RESOURCES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
 
March 31,
2013
 
December 31,
2012
 
(In thousands, except share information)
LIABILITIES AND STOCKHOLDER’S EQUITY
 
 
 
Current Liabilities:
 
 
 
Short-term debt
$
88,900

 
$
21,100

Accounts payable
56,186

 
73,914

Affiliate payables
15,432

 
25,340

Customer deposits
16,040

 
18,176

Accrued interest and taxes
51,424

 
30,320

Regulatory liabilities

 
15,172

Commodity derivative instruments
4,132

 
1,000

Dividends declared
132

 
132

Current portion of accumulated deferred income taxes
3,447

 
3,447

Other current liabilities
40,667

 
54,150

Total current liabilities
276,360

 
242,751

Long-term Debt
1,215,589

 
1,215,579

Deferred Credits and Other Liabilities:
 
 
 
Accumulated deferred income taxes
584,511

 
573,881

Accumulated deferred investment tax credits
13,694

 
14,242

Regulatory liabilities
380,887

 
379,841

Asset retirement obligations
86,782

 
85,042

Accrued pension liability and postretirement benefit cost
143,307

 
208,618

Commodity derivative instruments
1,785

 
1,933

Other deferred credits
91,626

 
95,585

Total deferred credits and liabilities
1,302,592

 
1,359,142

Total liabilities
2,794,541

 
2,817,472

Commitments and Contingencies (See Note 9)


 


Cumulative Preferred Stock
 
 
 
without mandatory redemption requirements ($100 stated value; 10,000,000 authorized; issued and outstanding 115,293 shares)
11,529

 
11,529

Equity:
 
 
 
PNM common stockholder’s equity:
 
 
 
Common stock outstanding (no par value; 40,000,000 shares authorized; issued and outstanding 39,117,799 shares)
1,061,776

 
1,061,776

Accumulated other comprehensive income (loss), net of income taxes
(76,514
)
 
(81,414
)
Retained earnings
285,138

 
273,701

Total PNM common stockholder’s equity
1,270,400

 
1,254,063

Non-controlling interest in Valencia
78,787

 
80,843

Total equity
1,349,187

 
1,334,906

 
$
4,155,257

 
$
4,163,907


The accompanying notes, as they relate to PNM, are an integral part of these financial statements.


19


PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
A WHOLLY OWNED SUBSIDIARY OF PNM RESOURCES, INC.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(Unaudited)
 
Attributable to PNM
 
 
 
 
 
 
 
 
 
Total PNM
Common
Stockholder’s
Equity
 
Non-
controlling
 Interest in Valencia
 
 
 
 
 
 
 
 
 
 
 
Common
Stock
 
AOCI
 
Retained
Earnings
 
 
 
Total
Equity
 
 
 
 
 
 
 
(In thousands)
Balance at December 31, 2012
$
1,061,776

 
$
(81,414
)
 
$
273,701

 
$
1,254,063

 
$
80,843

 
$
1,334,906

Valencia’s transactions with its owner

 

 

 

 
(5,260
)
 
(5,260
)
Net earnings

 

 
11,569

 
11,569

 
3,204

 
14,773

Total other comprehensive income

 
4,900

 

 
4,900

 

 
4,900

Dividends declared on preferred stock

 

 
(132
)
 
(132
)
 

 
(132
)
Balance at March 31, 2013
$
1,061,776

 
$
(76,514
)
 
$
285,138

 
$
1,270,400

 
$
78,787

 
$
1,349,187



The accompanying notes, as they relate to PNM, are an integral part of these financial statements.

20



TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
A WHOLLY OWNED SUBSIDIARY OF PNM RESOURCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
 
Three Months Ended March 31,
 
2013
 
2012
 
(In thousands)
Electric Operating Revenues
$
59,771

 
$
54,958

Operating Expenses:
 
 
 
Cost of energy
13,046

 
11,290

Administrative and general
11,119

 
10,468

Depreciation and amortization
11,681

 
11,287

Transmission and distribution costs
5,692

 
5,405

Taxes other than income taxes
5,179

 
4,717

Total operating expenses
46,717

 
43,167

Operating income
13,054

 
11,791

Other Income and Deductions:
 
 
 
Other income
337

 
490

Other deductions
(129
)
 
(385
)
Net other income
208

 
105

Interest Charges
7,246

 
7,097

Earnings before Income Taxes
6,016

 
4,799

Income Taxes
2,290

 
1,788

Net Earnings
$
3,726

 
$
3,011


The accompanying notes, as they relate to TNMP, are an integral part of these financial statements.



21


TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
A WHOLLY OWNED SUBSIDIARY OF PNM RESOURCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
 
Three Months Ended March 31,
 
2013
 
2012
 
(In thousands)
Net Earnings
$
3,726

 
$
3,011

Other Comprehensive Income (Loss):
 
 
 
Fair Value Adjustment for Cash Flow Hedges:
 
 
 
Change in fair market value, net of income tax (expense) benefit of $(4) and $59
8

 
(106
)
Reclassification adjustment for losses included in net earnings, net of income tax expense (benefit) of $(17) and $(15)
31

 
27

Total Other Comprehensive Income (Loss)
39

 
(79
)
Comprehensive Income
$
3,765

 
$
2,932


The accompanying notes, as they relate to TNMP, are an integral part of these financial statements.

22


TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
A WHOLLY OWNED SUBSIDIARY OF PNM RESOURCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
Three Months Ended March 31,
 
2013
 
2012
 
(In thousands)
Cash Flows From Operating Activities:
 
 
 
Net earnings
$
3,726

 
$
3,011

Adjustments to reconcile net earnings to net cash flows from operating activities:
 
 
 
Depreciation and amortization
12,686

 
12,604

Deferred income tax expense
2,448

 
1,720

Other, net

 
(276
)
Changes in certain assets and liabilities:
 
 
 
Accounts receivable and unbilled revenues
(1,405
)
 
3,751

Materials and supplies
65

 
60

Other current assets
218

 
(721
)
Other assets
(58
)
 
(50
)
Accounts payable
4,130

 
(1,966
)
Accrued interest and taxes
686

 
2,451

Other current liabilities
(1,278
)
 
2,393

Other liabilities
1,076

 
(4,496
)
Net cash flows from operating activities
22,294

 
18,481

Cash Flows From Investing Activities:
 
 
 
Utility plant additions
(24,594
)
 
(13,082
)
Net cash flows from investing activities
(24,594
)
 
(13,082
)
Cash Flow From Financing Activities:
 
 
 
Short-term borrowings (repayments), net
25,000

 

Short-term borrowings (repayments) – affiliate, net
(22,700
)
 
(700
)
Net cash flows from financing activities
2,300

 
(700
)
 
 
 
 
Change in Cash and Cash Equivalents

 
4,699

Cash and Cash Equivalents at Beginning of Period
1

 
1
Cash and Cash Equivalents at End of Period
$
1

 
$
4,700

 
 
 
 
Supplemental Cash Flow Disclosures:
 
 
 
Interest paid, net of amounts capitalized
$
171

 
$
104

Income taxes paid (refunded), net
$
(604
)
 
$
(1,952
)

The accompanying notes, as they relate to TNMP, are an integral part of these financial statements.




23


TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
A WHOLLY OWNED SUBSIDIARY OF PNM RESOURCES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
 
March 31,
2013
 
December 31,
2012
 
(In thousands)
ASSETS
 
 
 
Current Assets:
 
 
 
Cash and cash equivalents
$
1

 
$
1

Accounts receivable
19,950

 
17,217

Unbilled revenues
6,853

 
8,181

Other receivables
762

 
2,359

Materials and supplies
2,788

 
2,853

Regulatory assets
4,205

 
2,630

Current portion of accumulated deferred income taxes
1,131

 
1,131

Other current assets
841

 
1,107

Total current assets
36,531

 
35,479

Other Property and Investments:
 
 
 
Other investments
281

 
281

Non-utility property
2,240

 
2,240

Total other property and investments
2,521

 
2,521

Utility Plant:
 
 
 
Plant in service and plant held for future use
1,022,770

 
1,009,108

Less accumulated depreciation and amortization
346,365

 
339,315

 
676,405

 
669,793

Construction work in progress
28,207

 
19,801

Net utility plant
704,612

 
689,594

Deferred Charges and Other Assets:
 
 
 
Regulatory assets
119,866

 
123,621

Goodwill
226,665

 
226,665

Other deferred charges
8,747

 
8,349

Total deferred charges and other assets
355,278

 
358,635

 
$
1,098,942

 
$
1,086,229


The accompanying notes, as they relate to TNMP, are an integral part of these financial statements.

24


TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
A WHOLLY OWNED SUBSIDIARY OF PNM RESOURCES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
 
March 31,
2013
 
December 31,
2012
 
(In thousands, except share information)
LIABILITIES AND STOCKHOLDER’S EQUITY
 
 
 
Current Liabilities:
 
 
 
Short-term debt
$
25,000

 
$

Short-term debt – affiliate
5,600

 
28,300

Accounts payable
12,045

 
8,848

Affiliate payables
2,597

 
4,381

Accrued interest and taxes
31,177

 
30,491

Other current liabilities
10,251

 
8,854

Total current liabilities
86,670

 
80,874

Long-term Debt
311,745

 
311,589

Deferred Credits and Other Liabilities:
 
 
 
Accumulated deferred income taxes
166,302

 
163,710

Regulatory liabilities
45,321

 
43,619

Asset retirement obligations
747

 
732

Accrued pension liability and postretirement benefit cost
14,404

 
15,947

Other deferred credits
6,174

 
5,944

Total deferred credits and other liabilities
232,948

 
229,952

Total liabilities
631,363

 
622,415

Commitments and Contingencies (See Note 9)


 


Common Stockholder’s Equity:
 
 
 
Common stock outstanding ($10 par value; 12,000,000 shares authorized;
 
 
 
issued and outstanding 6,358 shares)
64

 
64

Paid-in-capital
390,366

 
390,366

Accumulated other comprehensive income (loss), net of income taxes
(177
)
 
(216
)
Retained earnings
77,326

 
73,600

Total common stockholder’s equity
467,579

 
463,814

 
$
1,098,942

 
$
1,086,229


The accompanying notes, as they relate to TNMP, are an integral part of these financial statements.


25


TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
A WHOLLY OWNED SUBSIDIARY OF PNM RESOURCES, INC.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN COMMON STOCKHOLDER’S EQUITY
(Unaudited)
 
Common Stock
 
Paid-in Capital
 
AOCI
 
Retained Earnings
 
Total Common Stockholder's Equity
 
(In thousands)
Balance at December 31, 2012
$
64

 
$
390,366

 
$
(216
)
 
$
73,600

 
$
463,814

Net earnings

 

 

 
3,726

 
3,726

Total other comprehensive income

 

 
39

 

 
39

Balance at March 31, 2013
$
64

 
$
390,366

 
$
(177
)
 
$
77,326

 
$
467,579


The accompanying notes, as they relate to TNMP, are an integral part of these financial statements.



26


PNM RESOURCES, INC. AND SUBSIDIARIES
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)



(1)
Significant Accounting Policies and Responsibility for Financial Statements

Financial Statement Preparation

In the opinion of management, the accompanying unaudited interim Condensed Consolidated Financial Statements reflect all normal and recurring accruals and adjustments that are necessary to present fairly the consolidated financial position at March 31, 2013 and December 31, 2012, and the consolidated results of operations, comprehensive income, and consolidated cash flows for the three months ended March 31, 2013 and 2012. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could ultimately differ from those estimated. The Notes to Condensed Consolidated Financial Statements include disclosures for PNMR, PNM, and TNMP. This report uses the term “Company” when discussing matters of common applicability to PNMR, PNM, and TNMP. Discussions regarding only PNMR, PNM, or TNMP are so indicated. Certain amounts in the 2012 Condensed Consolidated Financial Statements and Notes thereto have been reclassified to conform to the 2013 financial statement presentation.

These Condensed Consolidated Financial Statements are unaudited. Certain information and note disclosures normally included in the annual Consolidated Financial Statements have been condensed or omitted, as permitted under the applicable rules and regulations. Readers of these financial statements should refer to PNMR’s, PNM’s, and TNMP’s audited Consolidated Financial Statements and Notes thereto that are included in their respective 2012 Annual Reports on Form 10-K. Weather causes the Company’s results of operations to be seasonal in nature and the results of operations presented in the accompanying Condensed Consolidated Financial Statements are not necessarily representative of operations for an entire year.

GAAP defines subsequent events as events or transactions that occur after the balance sheet date but before financial statements are issued or are available to be issued. Based on their nature, magnitude, and timing, certain subsequent events may be required to be reflected at the balance sheet date and/or required to be disclosed in the financial statements. The Company has evaluated subsequent events as required by GAAP.

Principles of Consolidation
The Condensed Consolidated Financial Statements of each of PNMR, PNM, and TNMP include their accounts and those of subsidiaries in which that entity owns a majority voting interest. PNM also consolidates the PVNGS Capital Trust and Valencia. PNM owns undivided interests in several jointly-owned power plants and records its pro-rata share of the assets, liabilities, and expenses for those plants.

PNMR shared services' administrative and general expenses, which represent costs that are primarily driven by corporate level activities, are charged to the business segments at cost. Other significant intercompany transactions between PNMR, PNM, and TNMP include interest and income tax sharing payments, as well as dividends paid on common stock. All intercompany transactions and balances have been eliminated. See Note 11.

(2)
Segment Information

The following segment presentation is based on the methodology that management uses for making operating decisions and assessing performance of its various business activities. A reconciliation of the segment presentation to the GAAP financial statements is provided.

PNM
PNM includes the retail electric utility operations of PNM that are subject to traditional rate regulation by the NMPRC. PNM provides integrated electricity services that include the generation, transmission, and distribution of electricity for retail electric customers in New Mexico. PNM also provides generation service to firm-requirements wholesale customers and sells electricity into the general wholesale market, as well as providing transmission services to third parties. The sale of electricity

27


PNM RESOURCES, INC. AND SUBSIDIARIES
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


into the wholesale market includes the optimization of PNM's jurisdictional capacity, as well as the capacity excluded from retail rates. FERC has jurisdiction over wholesale and transmission rates.

TNMP
TNMP is an electric utility providing regulated transmission and distribution services in Texas under the TECA. TNMP's operations are subject to traditional rate regulation by the PUCT.

Corporate and Other

The Corporate and Other segment includes PNMR holding company activities, primarily related to corporate level debt and PNMR Services Company.

The following tables present summarized financial information for PNMR by segment. PNM and TNMP each operate in only one segment. Therefore, tabular segment information is not presented for PNM and TNMP.

PNMR SEGMENT INFORMATION
 
PNM
Electric
 
TNMP
Electric
 
Corporate
and Other
 
Consolidated
Three Months Ended March 31, 2013
(In thousands)
Electric operating revenues
$
257,894

 
$
59,771

 
$

 
$
317,665

Cost of energy
91,660

 
13,046

 

 
104,706

Margin
166,234

 
46,725

 

 
212,959

Other operating expenses
103,161

 
21,990

 
(3,703
)
 
121,448

Depreciation and amortization
25,834

 
11,681

 
3,292

 
40,807

Operating income
37,239

 
13,054

 
411

 
50,704

Interest income
2,673

 

 
(39
)
 
2,634

Other income (deductions)
1,407

 
208

 
(1,725
)
 
(110
)
Net interest charges
(19,957
)
 
(7,246
)
 
(4,094
)
 
(31,297
)
Segment earnings (loss) before income taxes
21,362

 
6,016

 
(5,447
)
 
21,931

Income taxes (benefit)
6,589

 
2,290

 
(910
)
 
7,969

Segment earnings (loss)
14,773

 
3,726

 
(4,537
)
 
13,962

Valencia non-controlling interest
(3,204
)
 

 

 
(3,204
)
Subsidiary preferred stock dividends
(132
)
 

 

 
(132
)
Segment earnings (loss) attributable to PNMR
$
11,437

 
$
3,726

 
$
(4,537
)
 
$
10,626

 
 
 
 
 
 
 
 
At March 31, 2013:
 
 
 
 
 
 
 
Total Assets
$
4,155,257

 
$
1,098,942

 
$
116,561

 
$
5,370,760

Goodwill
$
51,632

 
$
226,665

 
$

 
$
278,297

Additions to utility and non-utility plant included in accounts payable
$
8,211

 
$
1,055

 
$
12

 
$
9,278


28


PNM RESOURCES, INC. AND SUBSIDIARIES
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


 
PNM
Electric
 
TNMP
Electric
 
Corporate
and Other
 
Consolidated
Three Months Ended March 31, 2012
(In thousands)
Electric operating revenues
$
250,416

 
$
54,958

 
$

 
$
305,374

Cost of energy
80,557

 
11,290

 

 
91,847

Margin
169,859

 
43,668

 

 
213,527

Other operating expenses
104,120

 
20,590

 
(3,326
)
 
121,384

Depreciation and amortization
23,634

 
11,287

 
3,493

 
38,414

Operating income (loss)
42,105

 
11,791

 
(167
)
 
53,729

Interest income
3,335

 

 
(43
)
 
3,292

Other income (deductions)
4,982

 
105

 
(2,539
)
 
2,548

Net interest charges
(18,493
)
 
(7,097
)
 
(3,976
)
 
(29,566
)
Segment earnings (loss) before income taxes
31,929

 
4,799

 
(6,725
)
 
30,003

Income taxes (benefit)
10,852

 
1,788

 
(3,114
)
 
9,526

Segment earnings (loss)
21,077

 
3,011

 
(3,611
)
 
20,477

Valencia non-controlling interest
(3,265
)
 

 

 
(3,265
)
Subsidiary preferred stock dividends
(132
)
 

 

 
(132
)
Segment earnings (loss) attributable to PNMR
$
17,680

 
$
3,011

 
$
(3,611
)
 
$
17,080

 
 
 
 
 
 
 
 
At March 31, 2012:
 
 
 
 
 
 
 
Total Assets
$
4,031,859

 
$
1,037,616

 
$
128,421

 
$
5,197,896

Goodwill
$
51,632

 
$
226,665

 
$

 
$
278,297

Additions to utility and non-utility plant included in accounts payable
$
18,296

 
$
801

 
$
673

 
$
19,770

(3)
Variable Interest Entities

GAAP determines how an enterprise evaluates and accounts for its involvement with variable interest entities, including determining the primary beneficiary of a variable interest entity, by focusing primarily on whether the enterprise has the power to direct the activities that most significantly impact the economic performance of a variable interest entity. GAAP also requires continual reassessment of the primary beneficiary of a variable interest entity. Additional information concerning PNM's variable interest entities is contained in Note 9 of the Notes to Consolidated Financial Statements in the 2012 Annual Reports on Form 10-K.

Valencia

PNM has a PPA to purchase all of the electric capacity and energy from Valencia, a 145 MW natural gas-fired power plant near Belen, New Mexico, through May 2028. A third-party built, owns, and operates the facility while PNM is the sole purchaser of the electricity generated. PNM is obligated to pay fixed operations and maintenance and capacity charges in addition to variable operations and maintenance charges under this PPA. For the three months ended March 31, 2013 and 2012, PNM paid $4.7 million and $4.6 million for fixed charges and $0.1 million and $0.1 million for variable charges. PNM does not have any other financial obligations related to Valencia. The assets of Valencia can only be used to satisfy obligations of Valencia and creditors of Valencia do not have any recourse against PNM’s assets. PNM has concluded that the third party entity that owns Valencia is a variable interest entity and that PNM is the primary beneficiary of the entity under GAAP. As the primary beneficiary, PNM consolidates the entity in its financial statements. The assets and liabilities of Valencia set forth below are immaterial to PNM and, therefore, not shown separately on the Condensed Consolidated Balance Sheets. The owner's equity and net income of Valencia are considered attributable to non-controlling interest.


29


PNM RESOURCES, INC. AND SUBSIDIARIES
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


Summarized financial information for Valencia is as follows:

Results of Operations
 
Three Months Ended March 31,
 
2013
 
2012
 
(In thousands)
Operating revenues
$
4,775

 
$
4,670

Operating expenses
(1,571
)
 
(1,405
)
Earnings attributable to non-controlling interest
$
3,204

 
$
3,265


Financial Position
 
March 31,
 
December 31,
 
2013
 
2012
 
(In thousands)
Current assets
$
2,691

 
$