10-Q 1 pnm331201210-q.htm FORM 10-Q PNM 3.31.2012 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, 2012

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)
 
 
 
 
Alvarado Square
 
 
 
 
Albuquerque, New Mexico 87158
 
 
 
 
(505) 241-2700
 
 
 
 
 
 
 
001-06986
 
Public Service Company of New Mexico
 
85-0019030
 
 
(A New Mexico Corporation)
 
 
 
 
Alvarado Square
 
 
 
 
Albuquerque, New Mexico 87158
 
 
 
 
(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 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 April 27, 2012, 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 April 27, 2012 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 April 27, 2012 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.




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
BART
  
Best Available Retrofit Technology
BHP
  
BHP Billiton, Ltd, the Parent of SJCC
Board
  
Board of Directors of PNMR
CAA
 
Clean Air Act
CCB
  
Coal Combustion Byproducts
CO2
  
Carbon Dioxide
CTC
  
Competition Transition Charge
Decatherm
  
Million British Thermal Units
Delta
  
Delta-Person Generating Station
DOE
  
United States Department of Energy
DOI
  
United States Department of Interior
ECJV
  
ECJV Holdings, LLC, a wholly owned subsidiary of Cascade Investment, L.L.C.
EIB
  
New Mexico Environmental Improvement Board
EIP
  
Eastern Interconnection Project
EPA
  
United States Environmental Protection Agency
ERCOT
  
Electric Reliability Council of Texas
Exchange Act
 
Securities Exchange Act of 1934
FASB
  
Financial Accounting Standards Board
FERC
  
Federal Energy Regulatory Commission
FIP
  
Federal Implementation Plan
First Choice
  
FCP Enterprises, Inc. and Subsidiaries
Four Corners
  
Four Corners Power Plant
FPPAC
  
Fuel and Purchased Power Adjustment Clause
GAAP
  
Generally Accepted Accounting Principles in the United States of America
GEaR
  
Gross Earnings at Risk
GHG
  
Greenhouse Gas Emissions
GWh
  
Gigawatt hours
IBEW
  
International Brotherhood of Electrical Workers, Local 611
IRP
 
Integrated Resource Plan
ISO
  
Independent System Operator
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
Moody’s
  
Moody’s Investor Services, Inc.
MW
  
Megawatt
MWh
  
Megawatt Hour
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 Corporation
NMAG
  
New Mexico Attorney General
NMED
  
New Mexico Environment Department
NMIEC
  
New Mexico Industrial Energy Consumers Inc.

4


NMPRC
  
New Mexico Public Regulation Commission
NOx
  
Nitrogen Oxides
NOI
  
Notice of Inquiry
NRC
  
United States Nuclear Regulatory Commission
NSPS
  
New Source Performance Standards
NSR
  
New Source Review
O&M
  
Operations and Maintenance
OCI
  
Other Comprehensive Income
OPEB
  
Other Post Employment Benefits
Optim Energy
  
Optim Energy, LLC, a limited liability company, formerly known as EnergyCo, LLC
OSM
 
United States Office of Surface Mining Reclamation and Enforcement
PCRBs
  
Pollution Control Revenue Bonds
PNM
  
Public Service Company of New Mexico and Subsidiaries
PNM Revolving Credit Facility
 
PNM's $400.0 Million Unsecured Revolving Credit Facility
PNMR
  
PNM Resources, Inc. and Subsidiaries
PNMR Revolving Credit Facility
 
PNMR's $300.0 Million Unsecured Revolving Credit 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
RFP
  
Request for Proposal
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
TNMP
  
Texas-New Mexico Power Company and Subsidiaries
TNMP Revolving Credit Facility
  
TNMP’s $75 Million Revolving Credit Facility
TNP
  
TNP Enterprises, Inc. and Subsidiaries
Valencia
  
Valencia Energy Facility
VaR
  
Value at Risk


5


PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS


PNM RESOURCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
 
Three Months Ended March 31,
 
2012
 
2011
 
(In thousands, except per share amounts)
Electric Operating Revenues 
$
305,374

 
$
387,663

Operating Expenses:

 
 
Cost of energy
91,847

 
158,507

Administrative and general
44,800

 
58,465

Energy production costs
45,128

 
48,652

Depreciation and amortization
38,414

 
38,473

Transmission and distribution costs
16,248

 
16,877

Taxes other than income taxes
15,208

 
14,469

Total operating expenses
251,645

 
335,443

Operating income
53,729

 
52,220

Other Income and Deductions:
 
 
 
Interest income
3,292

 
4,028

Gains on investments held by NDT
4,454

 
5,902

Other income
2,645

 
995

Other deductions
(4,551
)
 
(3,072
)
Net other income (deductions)
5,840

 
7,853

Interest Charges
29,566

 
30,615

Earnings before Income Taxes
30,003

 
29,458

Income Taxes
9,526

 
9,506

Net Earnings
20,477

 
19,952

(Earnings) Attributable to Valencia Non-controlling Interest
(3,265
)
 
(3,183
)
Preferred Stock Dividend Requirements of Subsidiary
(132
)
 
(132
)
Net Earnings Attributable to PNMR
$
17,080

 
$
16,637

Net Earnings Attributable to PNMR per Common Share:
 
 
 
Basic
$
0.21

 
$
0.18

Diluted
$
0.21

 
$
0.18

Dividends Declared per Common Share
$
0.145

 
$
0.125


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



6


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

 
Three Months Ended March 31,
 
2012
 
2011
 
(In thousands)
Net Earnings
$
20,477

 
$
19,952

Other Comprehensive Income:
 
 
 
Unrealized Gain on Investment Securities:
 
 
 
Unrealized holding gains arising during the period, net of income tax (expense) of $(7,415) and $(3,453)
11,314

 
5,269

Reclassification adjustment for (gains) included in net earnings, net of income tax expense of $3,546 and $2,070
(5,411
)
 
(3,158
)
Changes in unrecognized amounts of pension and postretirement benefits, net of income tax (expense) benefit of $(476) and $1,026
727

 
(1,614
)
Fair Value Adjustment for Cash Flow Hedges:
 
 
 
Change in fair market value, net of income tax (expense) benefit of $59 and $(9)
(106
)
 
23

Reclassification adjustment for (gains) losses included in net earnings, net of income tax expense (benefit) of $(15) and $(87)
27

 
154

Total Other Comprehensive Income
6,551

 
674

Comprehensive Income
27,028

 
20,626

Comprehensive (Income) Attributable to Valencia Non-controlling Interest
(3,265
)
 
(3,183
)
Preferred Stock Dividend Requirements of Subsidiary
(132
)
 
(132
)
Comprehensive Income Attributable to PNMR
$
23,631

 
$
17,311


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 CASH FLOWS
(Unaudited)
 
Three Months Ended March 31,
 
2012
 
2011
 
(In thousands)
Cash Flows From Operating Activities:
 
 
 
Net earnings
$
20,477

 
$
19,952

Adjustments to reconcile net earnings to net cash flows from operating activities:
 
 
 
Depreciation and amortization
48,777

 
48,458

Bad debt expense
967

 
5,062

Deferred income tax expense
9,601

 
9,312

Net unrealized (gains) on derivatives
(3,502
)
 
(11,002
)
Realized (gains) on investments held by NDT
(4,454
)
 
(5,902
)
Stock based compensation expense
1,236

 
945

Other, net
(1,438
)
 
(1,055
)
Changes in certain assets and liabilities:
 
 
 
Accounts receivable and unbilled revenues
13,671

 
8,231

Materials, supplies, and fuel stock
(3,058
)
 
691

Other current assets
1,854

 
8,836

Other assets
(270
)
 
(918
)
Accounts payable
737

 
(7,838
)
Interest and taxes
20,749

 
22,969

Other current liabilities
(29,474
)
 
(26,354
)
Proceeds from governmental grants
20,859

 

Other liabilities
(83,129
)
 
(12,649
)
Net cash flows from operating activities
13,603

 
58,738

 
 
 
 
Cash Flows From Investing Activities:
 
 
 
Additions to utility and non-utility plant
(84,018
)
 
(63,129
)
Proceeds from sales of investments held by NDT
26,760

 
48,120

Purchases of investments held by NDT
(27,395
)
 
(48,938
)
Return of principal on PVNGS lessor notes
12,632

 
15,374

Proceeds from sales of utility plant
1,367

 

Other, net
1,064

 
(365
)
Net cash flows from investing activities
(69,590
)
 
(48,938
)

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,
 
2012
 
2011
 
(In thousands)
Cash Flows From Financing Activities:
 
 
 
Short-term borrowings (repayments), net
67,100

 
2,000

Proceeds from stock option exercise
5,005

 
1,265

Purchases to satisfy awards of common stock
(11,088
)
 
(2,752
)
Dividends paid
(10,089
)
 
(11,563
)
Equity transactions with Valencia’s owner
(4,009
)
 
(3,932
)
Proceeds from transmission interconnection agreements
953

 
152

Other, net

 
2,566

Net cash flows from financing activities
47,872

 
(12,264
)
 
 
 
 
Change in Cash and Cash Equivalents
(8,115
)
 
(2,464
)
Cash and Cash Equivalents at Beginning of Period
15,091

 
15,404

Cash and Cash Equivalents at End of Period
$
6,976

 
$
12,940

 
 
 
 
Supplemental Cash Flow Disclosures:
 
 
 
Interest paid, net of amounts capitalized
$
4,312

 
$
6,061

Income taxes paid, net
$
1,500

 
$


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


9


PNM RESOURCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
 
March 31,
2012
 
December 31,
2011
 
(In thousands)
ASSETS
 
 
 
Current Assets:
 
 
 
Cash and cash equivalents
$
6,976

 
$
15,091

Accounts receivable, net of allowance for uncollectible accounts of $1,873 and $1,778
78,361

 
87,794

Unbilled revenues
52,196

 
57,401

Other receivables
48,533

 
71,069

Materials, supplies, and fuel stock
57,289

 
54,231

Regulatory assets
42,415

 
44,993

Commodity derivative instruments
7,003

 
3,713

Income taxes receivable
96,877

 
95,130

Other current assets
38,297

 
33,397

Total current assets
427,947

 
462,819

Other Property and Investments:
 
 
 
Investment in PVNGS lessor notes
67,742

 
79,049

Investments held by NDT
183,711

 
168,851

Other investments
10,612

 
12,207

Non-utility property, net of accumulated depreciation of $126 and $120
4,627

 
4,631

Total other property and investments
266,692

 
264,738

Utility Plant:
 
 
 
Plant in service and plant held for future use
5,142,887

 
5,120,167

Less accumulated depreciation and amortization
1,731,614

 
1,705,520

 
3,411,273

 
3,414,647

Construction work in progress
152,734

 
132,420

Nuclear fuel, net of accumulated amortization of $42,593 and $36,411
92,217

 
80,067

Net utility plant
3,656,224

 
3,627,134

Deferred Charges and Other Assets:
 
 
 
Regulatory assets
477,271

 
482,155

Goodwill
278,297

 
278,297

Commodity derivative instruments
799

 

Other deferred charges
90,666

 
89,470

Total deferred charges and other assets
847,033

 
849,922

 
$
5,197,896

 
$
5,204,613


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,
2012
 
December 31,
2011
 
(In thousands, except share information)
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
Current Liabilities:
 
 
 
Short-term debt
$
149,800

 
$
82,700

Current installments of long-term debt
2,387

 
2,387

Accounts payable
89,992

 
103,139

Customer deposits
16,669

 
15,971

Accrued interest and taxes
75,610

 
53,114

Commodity derivative instruments
2,169

 
1,632

Dividends declared
11,682

 
10,089

Current portion of accumulated deferred income taxes
9,080

 
9,080

Other current liabilities
71,877

 
95,156

Total current liabilities
429,266

 
373,268

Long-term Debt
1,671,792

 
1,671,626

Deferred Credits and Other Liabilities:
 
 
 
Accumulated deferred income taxes
660,127

 
645,099

Accumulated deferred investment tax credits
15,214

 
15,771

Regulatory liabilities
426,009

 
418,098

Asset retirement obligations
80,848

 
79,233

Accrued pension liability and postretirement benefit cost
136,792

 
224,766

Commodity derivative instruments
2,568

 
2,437

Other deferred credits
101,222

 
106,378

Total deferred credits and other liabilities
1,422,780

 
1,491,782

Total liabilities
3,523,838

 
3,536,676

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)
1,187,975

 
1,193,191

Accumulated other comprehensive income (loss), net of income taxes
(60,305
)
 
(66,856
)
Retained earnings
453,180

 
447,650

Total PNMR common stockholders’ equity
1,580,850

 
1,573,985

Non-controlling interest in Valencia
81,679

 
82,423

Total equity
1,662,529

 
1,656,408

 
$
5,197,896

 
$
5,204,613

 
 
 
 

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


11


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, 2011
$
1,193,191

 
$
(66,856
)
 
$
447,650

 
$
1,573,985

 
$
82,423

 
$
1,656,408

Proceeds from stock option exercise
5,005

 

 

 
5,005

 

 
5,005

Purchases to satisfy awards of common stock
(11,088
)
 

 

 
(11,088
)
 

 
(11,088
)
Excess tax (shortfall) from stock-based payment arrangements
(369
)
 

 

 
(369
)
 

 
(369
)
Stock based compensation expense
1,236

 

 

 
1,236

 

 
1,236

Valencia’s transactions with its owner

 

 

 

 
(4,009
)
 
(4,009
)
Net earnings before subsidiary preferred stock dividends

 

 
17,212

 
17,212

 
3,265

 
20,477

Subsidiary preferred stock dividends

 

 
(132
)
 
(132
)
 

 
(132
)
Total other comprehensive income

 
6,551

 

 
6,551

 

 
6,551

Dividends declared on common stock

 

 
(11,550
)
 
(11,550
)
 

 
(11,550
)
Balance at March 31, 2012
$
1,187,975

 
$
(60,305
)
 
$
453,180

 
$
1,580,850

 
$
81,679

 
$
1,662,529



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



12



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,
 
2012
 
2011
 
(In thousands)
Electric Operating Revenues
$
250,416

 
$
234,238

Operating Expenses:
 
 
 
Cost of energy
80,557

 
89,214

Administrative and general
39,050

 
34,337

Energy production costs
45,128

 
48,652

Depreciation and amortization
23,634

 
23,735

Transmission and distribution costs
10,843

 
11,607

Taxes other than income taxes
9,099

 
8,528

Total operating expenses
208,311

 
216,073

Operating income
42,105

 
18,165

Other Income and Deductions:
 
 
 
Interest income
3,335

 
4,057

Gains on investments held by NDT
4,454

 
5,902

Other income
1,834

 
301

Other deductions
(1,306
)
 
(986
)
Net other income (deductions)
8,317

 
9,274

Interest Charges
18,493

 
18,080

Earnings before Income Taxes
31,929

 
9,359

Income Taxes
10,852

 
2,395

Net Earnings
21,077

 
6,964

(Earnings) Attributable to Valencia Non-controlling Interest
(3,265
)
 
(3,183
)
Net Earnings Attributable to PNM
17,812

 
3,781

Preferred Stock Dividends Requirements
(132
)
 
(132
)
Net Earnings Available for PNM Common Stock
$
17,680

 
$
3,649


The accompanying notes, as they relate to PNM, 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 COMPREHENSIVE INCOME
(Unaudited)
 
Three Months Ended March 31,
 
2012
 
2011
 
(In thousands)
Net Earnings
$
21,077

 
$
6,964

Other Comprehensive Income:
 
 
 
Unrealized Gain on Investment Securities:
 
 
 
Unrealized holding gains arising during the period, net of income tax (expense) of $(7,415) and $(3,453)
11,314

 
5,269

Reclassification adjustment for (gains) included in net earnings, net of income tax expense of $3,546 and $2,070
(5,411
)
 
(3,158
)
Change in unrecognized amounts of pension and postretirement benefits, net of income tax (expense) benefit of $(476) and $855
727

 
(1,305
)
Fair Value Adjustment for Cash Flow Hedges:
 
 
 
Reclassification adjustment for (gains) losses included in net earnings, net of income tax expense (benefit) of $0 and $(11)

 
17

Total Other Comprehensive Income
6,630

 
823

Comprehensive Income
27,707

 
7,787

Comprehensive (Income) Attributable to Valencia Non-controlling Interest
(3,265
)
 
(3,183
)
Comprehensive Income Attributable to PNM
$
24,442

 
$
4,604


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 CASH FLOWS
(Unaudited)
 
Three Months Ended March 31,
 
2012
 
2011
 
(In thousands)
Cash Flows From Operating Activities:
 
 
 
Net earnings
$
21,077

 
$
6,964

Adjustments to reconcile net earnings to net cash flows from operating activities:
 
 
 
Depreciation and amortization
31,498

 
31,601

Deferred income tax expense
10,852

 
2,395

Net unrealized (gains) losses on derivatives
(3,502
)
 
(1,908
)
Realized (gains) losses on investments held by NDT
(4,454
)
 
(5,902
)
Other, net
(195
)
 
(234
)
Changes in certain assets and liabilities:
 
 
 
Accounts receivable and unbilled revenues
9,920

 
8,187

Materials, supplies, and fuel stock
(3,117
)
 
340

Other current assets
402

 
6,587

Other assets
(1,533
)
 
1,240

Accounts payable
1,014

 
5,010

Interest and taxes
81,263

 
17,040

Other current liabilities
(18,379
)
 
(20,821
)
Proceeds from governmental grants
20,859

 

Other liabilities
(78,133
)
 
(10,596
)
Net cash flows from operating activities
67,572

 
39,903

 
 
 
 
Cash Flows From Investing Activities:
 
 
 
Utility plant additions
(66,668
)
 
(51,520
)
Proceeds from sales of NDT investments
26,760

 
48,120

Purchases of NDT investments
(27,395
)
 
(48,938
)
Return of principal on PVNGS lessor notes
12,632

 
15,374

Other, net
180

 
(144
)
Net cash flows from investing activities
(54,491
)
 
(37,108
)

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,
 
2012
 
2011
 
(In thousands)
Cash Flows From Financing Activities:
 
 
 
Short-term borrowings (repayments), net
(21,900
)
 
22,000

Short-term borrowings (repayments), affiliate, net

 
5,400

Equity transactions with Valencia’s owner
(4,009
)
 
(3,932
)
Proceeds from transmission interconnection arrangements
953

 
152

Dividends paid
(132
)
 
(39,254
)
Other, net

 
2,558

Net cash flows from financing activities
(25,088
)
 
(13,076
)
 
 
 
 
Change in Cash and Cash Equivalents
(12,007
)
 
(10,281
)
Cash and Cash Equivalents at Beginning of Period
12,307

 
10,336

Cash and Cash Equivalents at End of Period
$
300

 
$
55

Supplemental Cash Flow Disclosures:
 
 
 
Interest paid, net of amounts capitalized
$
4,141

 
$
5,412

Income taxes paid (refunded), net
$
(63,114
)
 
$


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 BALANCE SHEETS
(Unaudited)
 
March 31,
2012
 
December 31,
2011
 
(In thousands)
ASSETS
 
 
 
Current Assets:
 
 
 
Cash and cash equivalents
$
300

 
$
12,307

Accounts receivable, net of allowance for uncollectible accounts of $1,873 and $1,778
60,680

 
68,661

Unbilled revenues
46,021

 
48,928

Other receivables
42,973

 
65,465

Affiliate receivables
8,973

 
8,912

Materials, supplies, and fuel stock
54,638

 
51,521

Regulatory assets
40,863

 
44,480

Commodity derivative instruments
7,003

 
3,713

Income taxes receivable
65,915

 
128,858

Other current assets
34,061

 
26,776

Total current assets
361,427

 
459,621

Other Property and Investments:
 
 
 
Investment in PVNGS lessor notes
67,742

 
79,049

Investments held by NDT
183,711

 
168,851

Other investments
2,734

 
2,900

Non-utility property
976

 
976

Total other property and investments
255,163

 
251,776

Utility Plant:
 
 
 
Plant in service and plant held for future use
4,030,293

 
4,009,873

Less accumulated depreciation and amortization
1,323,572

 
1,305,754

 
2,706,721

 
2,704,119

Construction work in progress
130,952

 
116,030

Nuclear fuel, net of accumulated amortization of $42,593 and $36,411
92,217

 
80,067

Net utility plant
2,929,890

 
2,900,216

Deferred Charges and Other Assets:
 
 
 
Regulatory assets
351,554

 
352,387

Goodwill
51,632

 
51,632

Commodity derivative instruments
799

 

Other deferred charges
81,394

 
79,655

Total deferred charges and other assets
485,379

 
483,674

 
$
4,031,859

 
$
4,095,287

 
 
 
 

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,
2012
 
December 31,
2011
 
(In thousands, except share information)
LIABILITIES AND STOCKHOLDER’S EQUITY
 
 
 
Current Liabilities:
 
 
 
Short-term debt
$
44,100

 
$
66,000

Accounts payable
75,114

 
82,619

Affiliate payables
11,683

 
14,592

Customer deposits
16,669

 
15,971

Accrued interest and taxes
50,432

 
32,111

Commodity derivative instruments
2,169

 
1,632

Dividends declared
132

 
132

Current portion of accumulated deferred income taxes
16,562

 
16,562

Other current liabilities
50,105

 
60,944

Total current liabilities
266,966

 
290,563

Long-term Debt
1,215,550

 
1,215,540

Deferred Credits and Other Liabilities:
 
 
 
Accumulated deferred income taxes
520,451

 
504,419

Accumulated deferred investment tax credits
15,214

 
15,771

Regulatory liabilities
379,679

 
373,703

Asset retirement obligations
80,029

 
78,425

Accrued pension liability and postretirement benefit cost
131,915

 
213,688

Commodity derivative instruments
2,568

 
2,437

Other deferred credits
89,880

 
94,700

Total deferred credits and liabilities
1,219,736

 
1,283,143

Total liabilities
2,702,252

 
2,789,246

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
(60,168
)
 
(66,798
)
Retained earnings
234,791

 
217,111

Total PNM common stockholder’s equity
1,236,399

 
1,212,089

Non-controlling interest in Valencia
81,679

 
82,423

Total equity
1,318,078

 
1,294,512

 
$
4,031,859

 
$
4,095,287


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 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, 2011
$
1,061,776

 
$
(66,798
)
 
$
217,111

 
$
1,212,089

 
$
82,423

 
$
1,294,512

Valencia’s transactions with its owner

 

 

 

 
(4,009
)
 
(4,009
)
Net earnings

 

 
17,812

 
17,812

 
3,265

 
21,077

Total other comprehensive income

 
6,630

 

 
6,630

 

 
6,630

Dividends declared on preferred stock

 

 
(132
)
 
(132
)
 

 
(132
)
Balance at March 31, 2012
$
1,061,776

 
$
(60,168
)
 
$
234,791

 
$
1,236,399

 
$
81,679

 
$
1,318,078



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

19



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,
 
2012
 
2011
 
(In thousands)
Electric Operating Revenues:
 
 
 
   Non-affiliates
$
54,958

 
$
45,028

   Affiliate

 
8,814

        Total electric operating revenues
54,958

 
53,842

Operating Expenses:
 
 
 
Cost of energy
11,290

 
10,153

Administrative and general
10,468

 
9,665

Depreciation and amortization
11,287

 
10,262

Transmission and distribution costs
5,405

 
5,268

Taxes other than income taxes
4,717

 
4,770

Total operating expenses
43,167

 
40,118

Operating income
11,791

 
13,724

Other Income and Deductions:
 
 
 
Other income
490

 
362

Other deductions
(385
)
 
(46
)
Net other income (deductions)
105

 
316

Interest Charges
7,097

 
7,299

Earnings Before Income Taxes
4,799

 
6,741

Income Taxes
1,788

 
2,578

Net Earnings
$
3,011

 
$
4,163


The accompanying notes, as they relate to TNMP, 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 COMPREHENSIVE INCOME
(Unaudited)
 
Three Months Ended March 31,
 
2012
 
2011
 
(In thousands)
Net Earnings
$
3,011

 
$
4,163

Other Comprehensive Income (Loss):
 
 
 
Change in unrecognized amounts of pension and postretirement benefits, net of income tax (expense) benefit of $0 and $171

 
(309
)
Fair Value Adjustment for Cash Flow Hedges:
 
 
 
Change in fair market value, net of income tax (expense) benefit of $59 and $(35)
(106
)
 
64

Reclassification adjustment for losses included in net earnings, net of income tax expense (benefit) of $(15) and $(100)
27

 
181

Total Other Comprehensive Income (Loss)
(79
)
 
(64
)
Comprehensive Income
$
2,932

 
$
4,099


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 CASH FLOWS
(Unaudited)
 
Three Months Ended March 31,
 
2012
 
2011
 
(In thousands)
Cash Flows From Operating Activities:
 
 
 
Net earnings
$
3,011

 
$
4,163

Adjustments to reconcile net earnings to net cash flows from operating activities:
 
 
 
Depreciation and amortization
12,604

 
11,050

Deferred income tax expense (benefit)
1,720

 
2,420

Other, net
(276
)
 
(238
)
Changes in certain assets and liabilities:
 
 
 
Accounts receivable and unbilled revenues
3,751

 
(407
)
Materials and supplies
60

 
146

Other current assets
(721
)
 
(866
)
Other assets
(50
)
 
(185
)
Accounts payable
(1,966
)
 
(2,383
)
Interest and taxes
2,451

 
1,191

Other current liabilities
2,393

 
(152
)
Other liabilities
(4,496
)
 
(120
)
Net cash flows from operating activities
18,481

 
14,619

Cash Flows From Investing Activities:
 
 
 
Additions to utility and non-utility plant
(14,449
)
 
(10,031
)
Proceeds from sales of utility plant
1,367

 

Net cash flows from investing activities
(13,082
)
 
(10,031
)
Cash Flow From Financing Activities:
 
 
 
Short-term borrowings (repayments), net – affiliate
(700
)
 
(1,200
)
Dividends paid

 
(2,903
)
Debt issuance costs and other

 
8

Net cash flows from financing activities
(700
)
 
(4,095
)
Change in Cash and Cash Equivalents
4,699

 
493

Cash and Cash Equivalents at Beginning of Period
1

 
1
Cash and Cash Equivalents at End of Period
$
4,700

 
$
494

 
 
 
 
Supplemental Cash Flow Disclosures:
 
 
 
Interest paid, net of amounts capitalized
$
104

 
$
602

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


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 BALANCE SHEETS
(Unaudited)
 
March 31,
2012
 
December 31,
2011
 
(In thousands)
ASSETS
 
 
 
Current Assets:
 
 
 
Cash and cash equivalents
$
4,700

 
$
1

Accounts receivable
17,681

 
19,133

Unbilled revenues
6,175

 
8,473

Other receivables
1,832

 
847

Materials and supplies
2,649

 
2,710

Regulatory assets
1,552

 
513

Current portion of accumulated deferred income taxes
2,272

 
2,272

Other current assets
846

 
694

Total current assets
37,707

 
34,643

Other Property and Investments:
 
 
 
Other investments
267

 
271

Non-utility property
2,240

 
2,240

Total other property and investments
2,507

 
2,511

Utility Plant:
 
 
 
Plant in service and plant held for future use
949,700

 
947,327

Less accumulated depreciation and amortization
327,912

 
323,123

 
621,788

 
624,204

Construction work in progress
16,919

 
12,968

Net utility plant
638,707

 
637,172

Deferred Charges and Other Assets:
 
 
 
Regulatory assets
125,717

 
129,768

Goodwill
226,665

 
226,665

Other deferred charges
6,313

 
6,686

Total deferred charges and other assets
358,695

 
363,119

 
$
1,037,616

 
$
1,037,445


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,
2012
 
December 31,
2011
 
(In thousands, except share information)
LIABILITIES AND STOCKHOLDER’S EQUITY
 
 
 
Current Liabilities:
 
 
 
Short-term debt – affiliate
$

 
$
700

Accounts payable
6,362

 
12,263

Affiliate payables
1,729

 
1,314

Accrued interest and taxes
23,116

 
20,666

Other current liabilities
12,527

 
9,480

Total current liabilities
43,734

 
44,423

Long-term Debt
311,120

 
310,963

Deferred Credits and Other Liabilities:
 
 
 
Accumulated deferred income taxes
161,043

 
159,197

Regulatory liabilities
46,330

 
44,395

Asset retirement obligations
708

 
699

Accrued pension liability and postretirement benefit cost
4,877

 
11,078

Other deferred credits
3,619

 
3,437

Total deferred credits and other liabilities
216,577

 
218,806

Total liabilities
571,431

 
574,192

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
416,394

 
416,394

Accumulated other comprehensive income (loss), net of income taxes
(137
)
 
(58
)
Retained earnings
49,864

 
46,853

Total common stockholder’s equity
466,185

 
463,253

 
$
1,037,616

 
$
1,037,445


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 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, 2011
$
64

 
$
416,394

 
$
(58
)
 
$
46,853

 
$
463,253

Net earnings

 

 

 
3,011

 
3,011

Total other comprehensive income (loss)

 

 
(79
)
 

 
(79
)
Balance at March 31, 2012
$
64

 
$
416,394

 
$
(137
)
 
$
49,864

 
$
466,185


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



25


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, 2012 and December 31, 2011, and the consolidated results of operations, comprehensive income, and cash flows for the three months ended March 31, 2012 and 2011. 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. For discussion purposes, 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 2011 Condensed Consolidated Financial Statements and Notes thereto have been reclassified to conform to the 2012 financial statement presentation.

These Condensed Consolidated Financial Statements are unaudited, and 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 2011 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. These services are billed at cost, except those that were billed to Optim Energy, which included a profit element. Other significant intercompany transactions between PNMR, PNM, and TNMP include transmission and distribution services; lease, interest, and income tax sharing payments; and dividends paid on common stock. All intercompany transactions and balances have been eliminated. See Note 12.

Dividends on Common Stock

PNM and TNMP declared no common stock dividends to PNMR in the three months ended March 31, 2012. PNM declared cash dividends on its common stock to PNMR of $39.1 million in December 2010, which was paid in January 2011, and $4.6 million in March 2011, which was paid in April 2011. TNMP declared and paid cash dividends to PNMR of $2.9 million in the three months ended March 31, 2011. The TNMP dividend was recorded as a reduction of its paid-in-capital.

(2)
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

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)


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 2011 Annual Reports on Form 10-K.

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 O&M and capacity charges in addition to variable O&M charges under this PPA. For each of the three month periods ended March 31, 2012 and 2011, PNM paid $4.6 million for fixed charges 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.

Summarized financial information for Valencia is as follows:

Results of Operations
 
Three Months Ended March 31,
 
2012
 
2011
 
(In thousands)
Operating revenues
$
4,670

 
$
4,670

Operating expenses
(1,405
)
 
(1,487
)
Earnings attributable to non-controlling interest
$
3,265

 
$
3,183


Financial Position
 
March 31, 2012
 
December 31, 2011
 
(In thousands)
Current assets
$
3,308

 
$
2,405

Net property, plant, and equipment
80,077

 
80,785

Total assets
83,385

 
83,190

Current liabilities
1,706

 
767

Owners’ equity – non-controlling interest
$
81,679

 
$
82,423


PNM leases interests in Units 1 and 2 of PVNGS under arrangements, which were entered into in 1985 and 1986, that are accounted for as operating leases. PNM is not the legal or tax owner of the leased assets. PNM has an option to purchase the leased assets at appraised value at the end of the leases, but does not have a fixed price purchase option and does not provide residual value guarantees. PNM has options to renew the leases at fixed rates set forth in the leases for two years beyond the termination of the original lease terms. The option periods on certain leases may be further extended for up to an additional six years if the appraised remaining useful lives and fair value of the leased assets are greater than parameters set forth in the leases. PNM is only obligated to make payments to the trusts for the scheduled semi-annual lease payments, which, net of amounts that will be returned to PNM through its ownership in related lessor notes, aggregate $93.7 million as of March 31, 2012 over the remaining terms of the leases. Under certain circumstances (for example, final shutdown of the plant, the NRC issuing specified violation orders with respect to PVNGS, or the occurrence of specified nuclear events), PNM would be required to make specified payments to the beneficial owners and take title to the leased interests. If such an event had occurred as of March 31, 2012, PNM could have been required to pay the beneficial owners up to approximately $174.2 million, which would result in PNM taking ownership of the leased assets and termination of the leases. PNM has no other financial obligations or commitments to the trusts or the beneficial owners. Creditors of the trusts have no recourse to PNM’s assets other than with respect to the contractual lease

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)


payments. PNM has no additional rights to the assets of the trusts other than the use of the leased assets. PNM has evaluated the PVNGS lease arrangements and concluded that it does not have the power to direct the activities that most significantly impact the economic performance of the trusts and, therefore, is not the primary beneficiary of the trusts under GAAP. PNM has recorded no assets or liabilities related to the trusts other than the accrual of lease payments between the scheduled payment dates, which were $11.8 million at March 31, 2012 and $26.0 million at December 31, 2011 and are included in other current liabilities on the Condensed Consolidated Balance Sheets. For additional information regarding these leases, see Risk Factors, MD&A – Off Balance Sheet Arrangements and Note 7 of the Notes to Consolidated Financial Statements in the 2011 Annual Reports on Form 10-K.

PNM has a PPA covering the entire output of Delta, which is a variable interest under GAAP. This arrangement was entered into prior to December 31, 2003 and PNM has been unsuccessful in obtaining the information necessary to determine if it is the primary beneficiary of the entity that owns Delta, or to consolidate that entity if it were determined that PNM is the primary beneficiary. Accordingly, PNM is unable to make those determinations and, as provided in GAAP, continues to account for this PPA as an operating lease. PNM makes fixed and variable payments to Delta under the PPA. For the three months ended March 31, 2012 and 2011, PNM incurred fixed payments of $1.5 million and $1.5 million and variable payments of $0.1 million and $0.2 million under the PPA. PNM’s only quantifiable obligation under the PPA is to make the fixed payments, which as of March 31, 2012, aggregated $49.6 million through the end of the PPA in 2020. PNM will also pay variable costs, which cannot be quantified since the amounts are based on how much the generating plant is in operation. PNM has no other obligations or commitments with respect to Delta.

(3)
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 Electric
PNM Electric includes the retail electric utility operations of PNM that are subject to traditional rate regulation by the NMPRC. PNM Electric provides integrated electricity services that include the generation, transmission, and distribution of electricity for retail electric customers in New Mexico. PNM Electric also includes the generation and sale of electricity into the wholesale market as well as providing transmission services to third parties. The sale of electricity includes the asset optimization of PNM's jurisdictional assets as well as the capacity excluded from retail rates. FERC has jurisdiction over wholesale and transmission rates.

TNMP Electric
TNMP Electric 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.

First Choice
First Choice, which was sold by PNMR on November 1, 2011 (Note 14), operated as a certified retail electric provider. First Choice provided electricity to residential, small commercial, and governmental customers. Although First Choice was regulated in certain respects by the PUCT, it was not subject to traditional rate regulation.

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.


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)


PNMR SEGMENT INFORMATION
 
PNM
Electric
 
TNMP
Electric
 
First
Choice
 
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

Gross 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

Three Months Ended March 31, 2011
 
Electric revenues from non-affiliates
$
234,238

 
$
45,028

 
$
108,450

 
$
(53
)
 
$
387,663

Intersegment revenues

 
8,814

 

 
(8,814
)
 

Total electric operating revenues
234,238

 
53,842

 
108,450

 
(8,867
)
 
387,663

Cost of energy
89,214

 
10,153

 
67,954

 
(8,814
)
 
158,507

Gross margin
145,024

 
43,689

 
40,496

 
(53
)
 
229,156

Other operating expenses
103,124

 
19,703

 
18,987

 
(3,351
)
 
138,463

Depreciation and amortization
23,735

 
10,262

 
280

 
4,196

 
38,473

Operating income (loss)
18,165

 
13,724

 
21,229

 
(898
)
 
52,220

Interest income
4,057

 

 
4

 
(33
)
 
4,028

Other income (deductions)
5,217

 
316

 
(106
)
 
(1,602
)
 
3,825

Net interest charges
(18,080
)
 
(7,299