10-Q 1 pnm930201210-q.htm 10-Q PNM 9.30.2012 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 September 30, 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 October 26, 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 October 26, 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 October 26, 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.



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
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
D.C. Circuit
 
U.S. Court of Appeals for the District of Columbia Circuit
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
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
NAAQS
 
National Ambient Air Quality Standards
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

4


NMED
  
New Mexico Environment Department
NMIEC
  
New Mexico Industrial Energy Consumers Inc.
NMPRC
  
New Mexico Public Regulation Commission
NOI
  
Notice of Inquiry
NOPR
 
Notice of Proposed Rulemaking
NOx
  
Nitrogen Oxides
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, a wholly owned subsidiary of PNMR
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
Tenth Circuit
 
U.S. Court of Appeals for the Tenth Circuit
TNMP
  
Texas-New Mexico Power Company and Subsidiaries, a wholly owned subsidiary of TNP
TNMP Revolving Credit Facility
  
TNMP’s $75.0 Million Revolving Credit Facility
TNP
  
TNP Enterprises, Inc. and Subsidiaries, a wholly owned subsidiary of PNMR
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 September 30,
 
Nine Months Ended September 30,
 
2012
 
2011
 
2012
 
2011
 
(In thousands, except per share amounts)
Electric Operating Revenues 
$
390,411

 
$
549,498

 
$
1,019,646

 
$
1,352,747

Operating Expenses:

 
 
 

 

Cost of energy
110,777

 
250,854

 
297,342

 
582,814

Administrative and general
45,283

 
69,755

 
135,371

 
197,016

Energy production costs
40,365

 
39,730

 
131,546

 
135,510

Regulatory disallowances

 

 

 
21,402

Depreciation and amortization
42,820

 
42,370

 
122,289

 
119,115

Transmission and distribution costs
17,082

 
17,925

 
50,896

 
52,962

Taxes other than income taxes
15,934

 
20,580

 
45,218

 
50,564

Total operating expenses
272,261

 
441,214

 
782,662

 
1,159,383

Operating income
118,150

 
108,284

 
236,984

 
193,364

Other Income and Deductions:
 
 
 
 
 
 
 
Interest income
3,130

 
3,748

 
9,808

 
12,010

Gains (losses) on investments held by NDT
5,716

 
(4,109
)
 
9,376

 
7,688

Other income
2,484

 
1,755

 
6,991

 
3,559

Other deductions
(3,451
)
 
(4,685
)
 
(10,719
)
 
(11,638
)
Net other income (deductions)
7,879

 
(3,291
)
 
15,456

 
11,619

Interest Charges
30,515

 
31,124

 
90,280

 
92,251

Earnings before Income Taxes
95,514

 
73,869

 
162,160

 
112,732

Income Taxes
33,538

 
25,964

 
54,609

 
37,206

Net Earnings
61,976

 
47,905

 
107,551

 
75,526

(Earnings) Attributable to Valencia Non-controlling Interest
(3,980
)
 
(4,111
)
 
(10,699
)
 
(10,764
)
Preferred Stock Dividend Requirements of Subsidiary
(132
)
 
(132
)
 
(396
)
 
(396
)
Net Earnings Attributable to PNMR
$
57,864

 
$
43,662

 
$
96,456

 
$
64,366

Net Earnings Attributable to PNMR per Common Share:
 
 
 
 
 
 
 
Basic
$
0.73

 
$
0.48

 
$
1.21

 
$
0.70

Diluted
$
0.72

 
$
0.48

 
$
1.20

 
$
0.70

Dividends Declared per Common Share
$
0.145

 
$
0.125

 
$
0.435

 
$
0.375


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 September 30,
 
Nine Months Ended September 30,
 
2012
 
2011
 
2012
 
2011
 
(In thousands)
Net Earnings
$
61,976

 
$
47,905

 
$
107,551

 
$
75,526

Other Comprehensive Income (Loss):
 
 
 
 
 
 
 
Unrealized Gain on Investment Securities:
 
 
 
 
 
 
 
Unrealized holding gains (losses) arising during the period, net of income tax (expense) of $(4,972), $1,123, $(15,409), and $(8,157)
7,587

 
(1,713
)
 
23,511

 
12,448

Reclassification adjustment for (gains) included in net earnings, net of income tax expense of $4,248, $1,593, $12,786, and $11,555
(6,481
)
 
(2,431
)
 
(19,509
)
 
(17,632
)
Changes in unrecognized amounts of pension and postretirement benefits, net of income tax (expense) benefit of $(476), $(425), $(1,428), and $176
727

 
648

 
2,181

 
(318
)
Fair Value Adjustment for Cash Flow Hedges:
 
 
 
 
 
 
 
Change in fair market value, net of income tax (expense) benefit of $51, $123, $150, and $441
(92
)
 
(219
)
 
(270
)
 
(781
)
Reclassification adjustment for (gains) losses included in net earnings, net of income tax expense (benefit) of $(16), $(827), $(47), and $(1,129)
29

 
1,493

 
85

 
2,036

Total Other Comprehensive Income (Loss)
1,770

 
(2,222
)
 
5,998

 
(4,247
)
Comprehensive Income
63,746

 
45,683

 
113,549

 
71,279

Comprehensive (Income) Attributable to Valencia Non-controlling Interest
(3,980
)
 
(4,111
)
 
(10,699
)
 
(10,764
)
Preferred Stock Dividend Requirements of Subsidiary
(132
)
 
(132
)
 
(396
)
 
(396
)
Comprehensive Income Attributable to PNMR
$
59,634

 
$
41,440

 
$
102,454

 
$
60,119


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)
 
Nine Months Ended September 30,
 
2012
 
2011
 
(In thousands)
Cash Flows From Operating Activities:
 
 
 
Net earnings
$
107,551

 
$
75,526

Adjustments to reconcile net earnings to net cash flows from operating activities:
 
 
 
Depreciation and amortization
153,992

 
151,984

Bad debt expense
2,458

 
20,120

Deferred income tax expense
55,141

 
43,167

Net unrealized (gains) losses on derivatives
3,076

 
(5,869
)
Realized (gains) on investments held by NDT
(9,376
)
 
(7,688
)
Stock based compensation expense
2,748

 
4,302

Regulatory disallowances

 
21,402

Other, net
(4,495
)
 
991

Changes in certain assets and liabilities:
 
 
 
Accounts receivable and unbilled revenues
(31,550
)
 
(88,462
)
Materials, supplies, and fuel stock
(6,769
)
 
(985
)
Other current assets
(4,225
)
 
(2,901
)
Other assets
(9,499
)
 
(3,310
)
Accounts payable
3,973

 
13,781

Interest and taxes
22,336

 
33,049

Other current liabilities
(21,681
)
 
(12,919
)
Proceeds from governmental grants
21,567

 

Other liabilities
(80,248
)
 
(43,691
)
Net cash flows from operating activities
204,999

 
198,497

 
 
 
 
Cash Flows From Investing Activities:
 
 
 
Additions to utility and non-utility plant
(214,743
)
 
(236,275
)
Proceeds from sales of investments held by NDT
136,305

 
121,202

Purchases of investments held by NDT
(138,658
)
 
(122,174
)
Proceeds from sale of First Choice
4,034

 

Return of principal on PVNGS lessor notes
23,455

 
32,274

Proceeds from sales of utility plant
1,367

 

Other, net
260

 
145

Net cash flows from investing activities
(187,980
)
 
(204,828
)

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)

 
Nine Months Ended September 30,
 
2012
 
2011
 
(In thousands)
Cash Flows From Financing Activities:
 
 
 
Short-term borrowings (repayments), net
30,700

 
67,000

Long-term borrowings
20,000

 
50,000

Repayment of long-term debt
(20,000
)
 
(50,000
)
Proceeds from stock option exercise
10,301

 
2,570

Purchases to satisfy awards of common stock
(21,930
)
 
(5,288
)
Dividends paid
(33,454
)
 
(34,690
)
Valencia’s transactions with its owner
(12,034
)
 
(11,972
)
Proceeds from transmission interconnection agreements
983

 
1,246

Repayment of transmission interconnection agreements
(1,169
)
 
(4,637
)
Other, net
(151
)
 
2,458

Net cash flows from financing activities
(26,754
)
 
16,687

 
 
 
 
Change in Cash and Cash Equivalents
(9,735
)
 
10,356

Cash and Cash Equivalents at Beginning of Period
15,091

 
15,404

Cash and Cash Equivalents at End of Period
$
5,356

 
$
25,760

 
 
 
 
Supplemental Cash Flow Disclosures:
 
 
 
Interest paid, net of amounts capitalized
$
64,040

 
$
64,130

Income taxes paid (refunded), net
$
5,302

 
$
(3,744
)
 
 
 
 
Supplemental schedule of noncash financing activities:
 
 
 
Liability incurred for purchase of Convertible Preferred Stock, Series A
 
 
$
73,475


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)
 
September 30,
2012
 
December 31,
2011
 
(In thousands)
ASSETS
 
 
 
Current Assets:
 
 
 
Cash and cash equivalents
$
5,356

 
$
15,091

Accounts receivable, net of allowance for uncollectible accounts of $1,931 and $1,778
119,887

 
87,794

Unbilled revenues
54,399

 
57,401

Other receivables
43,418

 
71,069

Materials, supplies, and fuel stock
61,000

 
54,231

Regulatory assets
47,899

 
44,993

Commodity derivative instruments
1,184

 
3,713

Income taxes receivable
100,802

 
95,130

Other current assets
38,467

 
33,397

Total current assets
472,412

 
462,819

Other Property and Investments:
 
 
 
Investment in PVNGS lessor notes
54,666

 
79,049

Investments held by NDT
186,839

 
168,851

Other investments
9,977

 
12,207

Non-utility property, net of accumulated depreciation of $137 and $120
4,615

 
4,631

Total other property and investments
256,097

 
264,738

Utility Plant:
 
 
 
Plant in service and plant held for future use
5,223,543

 
5,120,167

Less accumulated depreciation and amortization
1,766,689

 
1,705,520

 
3,456,854

 
3,414,647

Construction work in progress
148,313

 
132,420

Nuclear fuel, net of accumulated amortization of $50,106 and $36,411
86,496

 
80,067

Net utility plant
3,691,663

 
3,627,134

Deferred Charges and Other Assets:
 
 
 
Regulatory assets
468,991

 
482,155

Goodwill
278,297

 
278,297

Other deferred charges
92,747

 
89,470

Total deferred charges and other assets
840,035

 
849,922

 
$
5,260,207

 
$
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)
 
September 30,
2012
 
December 31,
2011
 
(In thousands, except share information)
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
Current Liabilities:
 
 
 
Short-term debt
$
113,400

 
$
82,700

Current installments of long-term debt
2,387

 
2,387

Accounts payable
81,463

 
103,139

Customer deposits
17,655

 
15,971

Accrued interest and taxes
82,169

 
53,114

Commodity derivative instruments
1,888

 
1,632

Dividends declared
11,680

 
10,089

Current portion of accumulated deferred income taxes
9,080

 
9,080

Other current liabilities
73,269

 
95,156

Total current liabilities
392,991

 
373,268

Long-term Debt
1,672,124

 
1,671,626

Deferred Credits and Other Liabilities:
 
 
 
Accumulated deferred income taxes
705,945

 
645,099

Accumulated deferred investment tax credits
14,101

 
15,771

Regulatory liabilities
438,377

 
418,098

Asset retirement obligations
84,191

 
79,233

Accrued pension liability and postretirement benefit cost
129,858

 
224,766

Commodity derivative instruments
2,770

 
2,437

Other deferred credits
94,749

 
106,378

Total deferred credits and other liabilities
1,469,991

 
1,491,782

Total liabilities
3,535,106

 
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)
1,183,886

 
1,193,191

Accumulated other comprehensive income (loss), net of income taxes
(60,858
)
 
(66,856
)
Retained earnings
509,456

 
447,650

Total PNMR common stockholders’ equity
1,632,484

 
1,573,985

Non-controlling interest in Valencia
81,088

 
82,423

Total equity
1,713,572

 
1,656,408

 
$
5,260,207

 
$
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
10,301

 

 

 
10,301

 

 
10,301

Purchases to satisfy awards of common stock
(21,930
)
 

 

 
(21,930
)
 

 
(21,930
)
Excess tax (shortfall) from stock-based payment arrangements
(424
)
 

 

 
(424
)
 

 
(424
)
Stock based compensation expense
2,748

 

 

 
2,748

 

 
2,748

Valencia’s transactions with its owner

 

 

 

 
(12,034
)
 
(12,034
)
Net earnings before subsidiary preferred stock dividends

 

 
96,852

 
96,852

 
10,699

 
107,551

Subsidiary preferred stock dividends

 

 
(396
)
 
(396
)
 

 
(396
)
Total other comprehensive income

 
5,998

 

 
5,998

 

 
5,998

Dividends declared on common stock

 

 
(34,650
)
 
(34,650
)
 

 
(34,650
)
Balance at September 30, 2012
$
1,183,886

 
$
(60,858
)
 
$
509,456

 
$
1,632,484

 
$
81,088

 
$
1,713,572



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 September 30,
 
Nine Months Ended September 30,
 
2012
 
2011
 
2012
 
2011
 
(In thousands)
Electric Operating Revenues
$
321,731

 
$
323,760

 
$
832,242

 
$
797,232

Operating Expenses:
 
 
 
 
 
 
 
Cost of energy
99,217

 
108,708

 
263,009

 
279,419

Administrative and general
41,150

 
37,916

 
120,857

 
110,833

Energy production costs
40,365

 
39,730

 
131,546

 
135,510

Regulatory disallowances

 

 

 
17,479

Depreciation and amortization
24,437

 
25,058

 
72,017

 
71,691

Transmission and distribution costs
11,172

 
11,848

 
33,679

 
35,357

Taxes other than income taxes
8,417

 
12,586

 
25,386

 
30,323

Total operating expenses
224,758

 
235,846

 
646,494

 
680,612

Operating income
96,973

 
87,914

 
185,748

 
116,620

Other Income and Deductions:
 
 
 
 
 
 
 
Interest income
3,173

 
3,770

 
9,938

 
12,052

Gains (losses) on investments held by NDT
5,716

 
(4,109
)
 
9,376

 
7,688

Other income
1,176

 
1,179

 
4,378

 
1,921

Other deductions
(1,682
)
 
(2,643
)
 
(4,553
)
 
(5,480
)
Net other income (deductions)
8,383

 
(1,803
)
 
19,139

 
16,181

Interest Charges
19,230

 
18,487

 
56,652

 
54,593

Earnings before Income Taxes
86,126

 
67,624

 
148,235

 
78,208

Income Taxes
31,235

 
25,052

 
51,929

 
26,574

Net Earnings
54,891

 
42,572

 
96,306

 
51,634

(Earnings) Attributable to Valencia Non-controlling Interest
(3,980
)
 
(4,111
)
 
(10,699
)
 
(10,764
)
Net Earnings Attributable to PNM
50,911

 
38,461

 
85,607

 
40,870

Preferred Stock Dividends Requirements
(132
)
 
(132
)
 
(396
)
 
(396
)
Net Earnings Available for PNM Common Stock
$
50,779

 
$
38,329

 
$
85,211

 
$
40,474


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 September 30,
 
Nine Months Ended September 30,
 
2012
 
2011
 
2012
 
2011
 
(In thousands)
Net Earnings
$
54,891

 
$
42,572

 
$
96,306

 
$
51,634

Other Comprehensive Income (Loss):
 
 
 
 
 
 
 
Unrealized Gain on Investment Securities:
 
 
 
 
 
 
 
Unrealized holding gains arising during the period, net of income tax (expense) of $(4,972), $1,123, $(15,409), and $(8,157)
7,587

 
(1,713
)
 
23,511

 
12,448

Reclassification adjustment for (gains) included in net earnings, net of income tax expense of $4,248, $1,593, $12,786 and $11,555
(6,481
)
 
(2,431
)
 
(19,509
)
 
(17,632
)
Change in unrecognized amounts of pension and postretirement benefits, net of income tax (expense) benefit of $(476), $(423), $(1,428), and $9
727

 
646

 
2,181

 
(13
)
Fair Value Adjustment for Cash Flow Hedges:
 
 
 
 
 
 
 
Reclassification adjustment for (gains) losses included in net earnings, net of income tax expense (benefit) of $0, $0, $0, and $(11)

 

 

 
17

Total Other Comprehensive Income (Loss)
1,833

 
(3,498
)
 
6,183

 
(5,180
)
Comprehensive Income
56,724

 
39,074

 
102,489

 
46,454

Comprehensive (Income) Attributable to Valencia Non-controlling Interest
(3,980
)
 
(4,111
)
 
(10,699
)
 
(10,764
)
Comprehensive Income Attributable to PNM
$
52,744

 
$
34,963

 
$
91,790

 
$
35,690


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)
 
Nine Months Ended September 30,
 
2012
 
2011
 
(In thousands)
Cash Flows From Operating Activities:
 
 
 
Net earnings
$
96,306

 
$
51,634

Adjustments to reconcile net earnings to net cash flows from operating activities:
 
 
 
Depreciation and amortization
97,086

 
97,918

Deferred income tax expense
52,558

 
33,835

Net unrealized (gains) losses on derivatives
3,076

 
(4,120
)
Realized (gains) on investments held by NDT
(9,376
)
 
(7,688
)
Regulatory disallowances

 
17,479

Other, net
(1,005
)
 
3,228

Changes in certain assets and liabilities:
 
 
 
Accounts receivable and unbilled revenues
(26,183
)
 
(25,871
)
Materials, supplies, and fuel stock
(6,404
)
 
(974
)
Other current assets
(6,942
)
 
1,626

Other assets
(9,425
)
 
8,187

Accounts payable
2,353

 
(2,013
)
Interest and taxes
80,418

 
18,186

Other current liabilities
(9,850
)
 
(4,173
)
Proceeds from governmental grants
21,567

 

Other liabilities
(75,629
)
 
(45,417
)
Net cash flows from operating activities
208,550

 
141,837

 
 
 
 
Cash Flows From Investing Activities:
 
 
 
Utility plant additions
(144,571
)
 
(185,402
)
Proceeds from sales of NDT investments
136,305

 
121,202

Purchases of NDT investments
(138,658
)
 
(122,174
)
Return of principal on PVNGS lessor notes
23,455

 
32,274

Other, net
(720
)
 
496

Net cash flows from investing activities
(124,189
)
 
(153,604
)

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)

 
Nine Months Ended September 30,
 
2012
 
2011
 
(In thousands)
Cash Flows From Financing Activities:
 
 
 
Short-term borrowings (repayments), net
(66,000
)
 
67,000

Long-term borrowings
20,000

 

Repayment of long-term debt
(20,000
)
 

Valencia’s transactions with its owner
(12,034
)
 
(11,972
)
Proceeds from transmission interconnection arrangements
983

 
1,246

Repayment of transmission interconnection arrangements
(1,169
)
 
(4,637
)
Dividends paid
(18,076
)
 
(47,730
)
Other, net
(151
)
 
2,558

Net cash flows from financing activities
(96,447
)
 
6,465

 
 
 
 
Change in Cash and Cash Equivalents
(12,086
)
 
(5,302
)
Cash and Cash Equivalents at Beginning of Period
12,307

 
10,336

Cash and Cash Equivalents at End of Period
$
221

 
$
5,034

 
 
 
 
Supplemental Cash Flow Disclosures:
 
 
 
Interest paid, net of amounts capitalized
$
43,167

 
$
40,582

Income taxes paid (refunded), net
$
(63,114
)
 
$
(1,539
)

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)
 
September 30,
2012
 
December 31,
2011
 
(In thousands)
ASSETS
 
 
 
Current Assets:
 
 
 
Cash and cash equivalents
$
221

 
$
12,307

Accounts receivable, net of allowance for uncollectible accounts of $1,931 and $1,778
94,315

 
68,661

Unbilled revenues
46,998

 
48,928

Other receivables
42,454

 
65,465

Affiliate receivables
8,930

 
8,912

Materials, supplies, and fuel stock
57,925

 
51,521

Regulatory assets
46,940

 
44,480

Commodity derivative instruments
1,184

 
3,713

Income taxes receivable
66,374

 
128,858

Other current assets
33,144

 
26,776

Total current assets
398,485

 
459,621

Other Property and Investments:
 
 
 
Investment in PVNGS lessor notes
54,666

 
79,049

Investments held by NDT
186,839

 
168,851

Other investments
3,985

 
2,900

Non-utility property
976

 
976

Total other property and investments
246,466

 
251,776

Utility Plant:
 
 
 
Plant in service and plant held for future use
4,075,995

 
4,009,873

Less accumulated depreciation and amortization
1,342,958

 
1,305,754

 
2,733,037

 
2,704,119

Construction work in progress
120,303

 
116,030

Nuclear fuel, net of accumulated amortization of $50,106 and $36,411
86,496

 
80,067

Net utility plant
2,939,836

 
2,900,216

Deferred Charges and Other Assets:
 
 
 
Regulatory assets
352,871

 
352,387

Goodwill
51,632

 
51,632

Other deferred charges
84,041

 
79,655

Total deferred charges and other assets
488,544

 
483,674

 
$
4,073,331

 
$
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)
 
September 30,
2012
 
December 31,
2011
 
(In thousands, except share information)
LIABILITIES AND STOCKHOLDER’S EQUITY
 
 
 
Current Liabilities:
 
 
 
Short-term debt
$

 
$
66,000

Accounts payable
64,213

 
82,619

Affiliate payables
11,922

 
14,592

Customer deposits
17,655

 
15,971

Accrued interest and taxes
51,092

 
32,111

Commodity derivative instruments
1,888

 
1,632

Dividends declared
16,885

 
132

Current portion of accumulated deferred income taxes
16,562

 
16,562

Other current liabilities
53,219

 
60,944

Total current liabilities
233,436

 
290,563

Long-term Debt
1,215,569

 
1,215,540

Deferred Credits and Other Liabilities:
 
 
 
Accumulated deferred income taxes
562,534

 
504,419

Accumulated deferred investment tax credits
14,101

 
15,771

Regulatory liabilities
390,563

 
373,703

Asset retirement obligations
83,337

 
78,425

Accrued pension liability and postretirement benefit cost
125,840

 
213,688

Commodity derivative instruments
2,770

 
2,437

Other deferred credits
83,514

 
94,700

Total deferred credits and liabilities
1,262,659

 
1,283,143

Total liabilities
2,711,664

 
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
(60,615
)
 
(66,798
)
Retained earnings
267,889

 
217,111

Total PNM common stockholder’s equity
1,269,050

 
1,212,089

Non-controlling interest in Valencia
81,088

 
82,423

Total equity
1,350,138

 
1,294,512

 
$
4,073,331

 
$
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

 

 

 

 
(12,034
)
 
(12,034
)
Net earnings

 

 
85,607

 
85,607

 
10,699

 
96,306

Total other comprehensive income

 
6,183

 

 
6,183

 

 
6,183

Dividends declared on preferred stock

 

 
(396
)
 
(396
)
 

 
(396
)
Dividends declared on common stock

 

 
(34,433
)
 
(34,433
)
 

 
(34,433
)
Balance at September 30, 2012
$
1,061,776

 
$
(60,615
)
 
$
267,889

 
$
1,269,050

 
$
81,088

 
$
1,350,138



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 September 30,
 
Nine Months Ended September 30,
 
2012
 
2011
 
2012
 
2011
 
(In thousands)
Electric Operating Revenues:
 
 
 
 
 
 
 
   Non-affiliates
$
68,680

 
$
54,787

 
$
187,404

 
$
150,175

   Affiliate

 
12,196

 

 
30,608

        Total electric operating revenues
68,680

 
66,983

 
187,404

 
180,783

Operating Expenses:
 
 
 
 
 
 
 
Cost of energy
11,560

 
10,307

 
34,333

 
30,719

Administrative and general
10,130

 
9,998

 
30,700

 
29,798

Regulatory disallowances

 

 

 
3,923

Depreciation and amortization
13,819

 
12,674

 
37,173

 
33,662

Transmission and distribution costs
5,910

 
6,072

 
17,217

 
17,597

Taxes other than income taxes
6,291

 
6,381

 
16,322

 
16,113

Total operating expenses
47,710

 
45,432

 
135,745

 
131,812

Operating income
20,970

 
21,551

 
51,659

 
48,971

Other Income and Deductions:
 
 
 
 
 
 
 
Interest income

 
1

 
1

 
1

Other income
771

 
418

 
1,708

 
1,068

Other deductions
(405
)
 
(105
)
 
(464
)
 
(181
)
Net other income (deductions)
366

 
314

 
1,245

 
888

Interest Charges
7,047

 
7,276

 
21,214

 
21,880

Earnings Before Income Taxes
14,289

 
14,589

 
31,690

 
27,979

Income Taxes
5,205

 
5,721

 
11,577

 
10,845

Net Earnings
$
9,084

 
$
8,868

 
$
20,113

 
$
17,134


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 September 30,
 
Nine Months Ended September 30,
 
2012
 
2011
 
2012
 
2011
 
(In thousands)
Net Earnings
$
9,084

 
$
8,868

 
$
20,113

 
$
17,134

Other Comprehensive Income (Loss):
 
 
 
 
 
 
 
Change in unrecognized amounts of pension and postretirement benefits, net of income tax (expense) benefit of $0, $(1), $0, and $169

 
2

 

 
(305
)
Fair Value Adjustment for Cash Flow Hedges:
 
 
 
 
 
 
 
Change in fair market value, net of income tax (expense) benefit of $51, $110, $150, and $382
(92
)
 
(198
)
 
(270
)
 
(689
)
Reclassification adjustment for losses included in net earnings, net of income tax expense (benefit) of $(16), $(850), $(47), and $(1,052)
29

 
1,535

 
85

 
1,900

Total Other Comprehensive Income (Loss)
(63
)
 
1,339

 
(185
)
 
906

Comprehensive Income
$
9,021

 
$
10,207

 
$
19,928

 
$
18,040


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)
 
Nine Months Ended September 30,
 
2012
 
2011
 
(In thousands)
Cash Flows From Operating Activities:
 
 
 
Net earnings
$
20,113

 
$
17,134

Adjustments to reconcile net earnings to net cash flows from operating activities:
 
 
 
Depreciation and amortization
41,222

 
36,352

Deferred income tax expense
11,337

 
9,981

Regulatory disallowances

 
3,923

Other, net
(275
)
 
(69
)
Changes in certain assets and liabilities:
 
 
 
Accounts receivable and unbilled revenues
(5,367
)
 
(8,751
)
Materials and supplies
(365
)
 
124

Other current assets
(709
)
 
(1,547
)
Other assets
(498
)
 
(2,985
)
Accounts payable
(358
)
 
1,858

Interest and taxes
4,860

 
4,277

Other current liabilities
1,980

 
2,383

Other liabilities
(3,411
)
 
(1,101
)
Net cash flows from operating activities
68,529

 
61,579

Cash Flows From Investing Activities:
 
 
 
Additions to utility and non-utility plant
(61,168
)
 
(44,214
)
Proceeds from sales of utility plant
1,367

 

Net cash flows from investing activities
(59,801
)
 
(44,214
)
Cash Flow From Financing Activities:
 
 
 
Short-term borrowings (repayments), net – affiliate
2,300

 
(1,200
)
Long-term borrowings

 
50,000

Repayment of long-term debt

 
(50,000
)
Dividends paid
(11,028
)
 
(7,066
)
Other, net

 
(100
)
Net cash flows from financing activities
(8,728
)
 
(8,366
)
 
 
 
 
Change in Cash and Cash Equivalents

 
8,999

Cash and Cash Equivalents at Beginning of Period
1

 
1
Cash and Cash Equivalents at End of Period
$
1

 
$
9,000

 
 
 
 
Supplemental Cash Flow Disclosures:
 
 
 
Interest paid, net of amounts capitalized
$
13,074

 
$
14,474

Income taxes paid (refunded), net
$
1,848

 
$
3,250


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)
 
September 30,
2012
 
December 31,
2011
 
(In thousands)
ASSETS
 
 
 
Current Assets:
 
 
 
Cash and cash equivalents
$
1

 
$
1

Accounts receivable
25,572

 
19,133

Unbilled revenues
7,401

 
8,473

Other receivables
1,126

 
847

Materials and supplies
3,075

 
2,710

Regulatory assets
959

 
513

Current portion of accumulated deferred income taxes
2,273

 
2,272

Other current assets
1,426

 
694

Total current assets
41,833

 
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
985,318

 
947,327

Less accumulated depreciation and amortization
338,600

 
323,123

 
646,718

 
624,204

Construction work in progress
20,141

 
12,968

Net utility plant
666,859

 
637,172

Deferred Charges and Other Assets:
 
 
 
Regulatory assets
116,120

 
129,768

Goodwill
226,665

 
226,665

Other deferred charges
6,078

 
6,686

Total deferred charges and other assets
348,863

 
363,119

 
$
1,060,062

 
$
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)
 
September 30,
2012
 
December 31,
2011
 
(In thousands, except share information)
LIABILITIES AND STOCKHOLDER’S EQUITY
 
 
 
Current Liabilities:
 
 
 
Short-term debt – affiliate
$
3,000

 
$
700

Accounts payable
8,055

 
12,263

Affiliate payables
2,258

 
1,314

Accrued interest and taxes
25,525

 
20,666

Other current liabilities
10,412

 
9,480

Total current liabilities
49,250

 
44,423

Long-term Debt
311,432

 
310,963

Deferred Credits and Other Liabilities:
 
 
 
Accumulated deferred income taxes
170,552

 
159,197

Regulatory liabilities
47,814

 
44,395

Asset retirement obligations
737

 
699

Accrued pension liability and postretirement benefit cost
4,018

 
11,078

Other deferred credits
4,106

 
3,437

Total deferred credits and other liabilities
227,227

 
218,806

Total liabilities
587,909

 
574,192

Commitments and Contingencies (See Note 9)


 


Common Stockholder’s Equity:
 
 
 
Common stock outstanding ($10 par value; 12,000,000 shares authorized;