SF-1/A

As filed with the Securities and Exchange Commission on October 13, 2023

REGISTRATION NOS. 333-274433 and 333-274433-01​

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

Amendment No. 1
to
FORM SF-1

REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

PUBLIC SERVICE COMPANY OF NEW MEXICO (Exact name of registrant, sponsor and depositor as specified in its charter)	PNM ENERGY TRANSITION BOND COMPANY I, LLC (Exact name of registrant and issuing entity as specified in its charter)
New Mexico (State or other jurisdiction of incorporation or organization)	Delaware (State or other jurisdiction of incorporation or organization)
001-06986 (Commission File Number)	​
0000081023 (Central Index Key Number)	0001992267 (Central Index Key Number)
85-0019030 (I.R.S. Employer Identification Number)	93-3095291 (I.R.S. Employer Identification Number)
414 Silver Avenue SW Albuquerque, New Mexico 87102 (505) 241-2700 (Address, including zip code, and telephone number, including area code, of depositor’s principal executive offices)	c/o Public Service Company of New Mexico 414 Silver Avenue SW Albuquerque, New Mexico 87102 (505) 241-2700 (Address, including zip code, and telephone number, including area code, of issuing entity’s principal executive offices)

Patrick V. Apodaca, Esq.
Senior Vice President, General Counsel and Secretary
Public Service Company of New Mexico
414 Silver Avenue SW
Albuquerque, New Mexico 87102
(505) 241-2700

(Name, address, including zip code, and telephone number, including area code, of agent for service)

With Copies to:

Leonard D. Sanchez, Esq.
Associate General Counsel
PNM Resources, Inc.
414 Silver Avenue SW
Albuquerque, New Mexico 87102
(505) 241-2700 R. Mason Bayler, Jr., Esq.
Eric A. Koontz, Esq.
Troutman Pepper Hamilton Sanders LLP
600 Peachtree Street, NE, Suite 3000
Atlanta, GA 30308
(404) 885-3309 Michael F. Fitzpatrick, Jr., Esq.
Adam R. O’Brian, Esq.
Hunton Andrews Kurth LLP
200 Park Avenue
New York , NY 10166
(212) 309-1071

Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this Registration Statement.

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act of 1933, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.   ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act of 1933, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.   ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act of 1933, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.   ☐

The Registrants hereby amend this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrants shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, or until this Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

The information in this prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell nor does it seek an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

SUBJECT TO COMPLETION, DATED OCTOBER 13, 2023

PRELIMINARY PROSPECTUS

$343,200,000 Senior Secured Energy Transition Bonds, Series A

Public Service Company of New Mexico

Sponsor, Depositor and Initial Servicer
Central Index Key Number: 000081023

PNM Energy Transition Bond Company I, LLC

Issuing Entity
Central Index Key Number: 0001992267

Tranche

Expected Weighted Average Life (Years)

Principal Amount Offered*

Scheduled Final Payment Date

Final Maturity Date

Interest Rate

Initial Price to Public

Underwriting Discounts and Commissions

Proceeds to Issuing Entity (Before Expenses)

A-1

​

​

​

​

%

​

%

​

%

​

$

A-2

​

​

​

​

​

​

​

​

*

Principal amounts are approximate and subject to change.

The total price to the public is $      . The total amount of the underwriting discounts and commissions is $      . The total amount of proceeds to PNM Energy Transition Bond Company I, LLC before deduction of expenses (estimated to be $      ) is $      . The distribution frequency is semi-annually. The first scheduled payment date is            , 2024.

Investing in the Series A Bonds involves risks. See “Risk Factors” beginning on page 19 to read about factors you should consider before buying the Series A Bonds.

Public Service Company of New Mexico, or PNM, as depositor, is offering $343,200,000 of the Senior Secured Energy Transition Bonds, Series A, referred to herein as the Series A Bonds, or the bonds, in two tranches to be issued by PNM Energy Transition Bond Company I, LLC, as the issuing entity. PNM is also the seller, initial servicer and sponsor with regard to the bonds. The Series A Bonds will be issued pursuant to Sections 62-18-1 through 62-18-23 of the New Mexico Statutes Annotated, or the Energy Transition Act, and an irrevocable financing order, or Financing Order, issued by the New Mexico Public Regulation Commission, or NMPRC, on April 1, 2020. The Series A Bonds are senior secured obligations of the issuing entity supported by energy transition property, which consists of the right to impose, charge, collect and receive non-bypassable charges, known as energy transition charges, paid by all retail electric customers that receive electric delivery service from PNM under NMPRC-approved rate schedules or special contracts, and customers that acquire electricity from an alternative or subsequent electricity supplier in PNM’s utility service area. These energy transition charges pay principal, interest and expenses of the Series A Bonds and upon the issuance of the bonds may not be reduced, altered or impaired except as adjusted pursuant to the true-up adjustment mechanism described herein. The Energy Transition Act and the Financing Order include the right to a mandatory true-up adjustment for making any adjustments that are necessary to correct for any overcollection or undercollection of energy transition charges and to provide for timely payment of scheduled principal of and interest on the bonds and other financing costs. The primary forms of credit enhancement for the bonds will be provided by the true-up adjustment mechanism and the accounts held under the indenture for the Series A Bonds.

Each of the bonds will be entitled to interest on                 and                 of each year, beginning on            , 2024. Interest will accrue from the date of issuance. The first scheduled payment date is            , 2024. On each payment date, scheduled principal payments will be paid sequentially in accordance with the expected amortization schedule in this prospectus, but only to the extent funds are available in the collection account after payment of certain fees and expenses and after the payment of interest. Principal is due for each tranche of the bonds on the final maturity date for such tranche.

The Series A Bonds represent obligations only of the issuing entity, PNM Energy Transition Bond Company I, LLC, and do not represent obligations of the sponsor or any of its affiliates other than the issuing entity. The Series A Bonds are not a debt or general obligation of the NMPRC, the State of New Mexico or any of its counties, municipalities or other political subdivisions. The Series A Bonds are secured by the collateral, consisting principally of the energy transition property acquired pursuant to the sale agreement and funds on deposit in the collection account for the Series A Bonds and related subaccounts. Please read “Security for the Series A Bonds” in this prospectus.

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

The underwriters expect to deliver the Series A Bonds through the book-entry facilities of The Depository Trust Company for the accounts of its participants, including Clearstream Banking, S.A. and Euroclear Bank SA/NV, as operator of the Euroclear System, against payment in immediately available funds on or about            , 2023.

Joint Book-Running Managers

RBC Capital Markets  Citigroup

Co-Managers

The date of this prospectus is            , 2023

TABLE OF CONTENTS

​	Page
ABOUT THIS PROSPECTUS	​	1
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS	​	1
PROSPECTUS SUMMARY	​	3
SUMMARY OF RISK FACTORS	​	17
RISK FACTORS	​	19
REVIEW OF THE ENERGY TRANSITION PROPERTY	​	36
THE ENERGY TRANSITION ACT AND THE FINANCING ORDER	​	40
PNM ENERGY TRANSITION BOND COMPANY I, LLC, THE ISSUING ENTITY	​	47
PUBLIC SERVICE COMPANY OF NEW MEXICO — THE DEPOSITOR, SPONSOR, SELLER AND SERVICER	​	53
DESCRIPTION OF THE SERIES A BONDS	​	61
THE INDENTURE TRUSTEE	​	84
SECURITY FOR THE SERIES A BONDS	​	86
WEIGHTED AVERAGE LIFE AND YIELD CONSIDERATIONS FOR THE SERIES A BONDS	​	93
THE SALE AGREEMENT	​	95
THE SERVICING AGREEMENT	​	104
HOW A BANKRUPTCY MAY AFFECT YOUR INVESTMENT	​	113
USE OF PROCEEDS	​	117
PLAN OF DISTRIBUTION	​	118
AFFILIATIONS AND CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS	​	120
MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS	​	121
ERISA CONSIDERATIONS	​	126
LEGAL PROCEEDINGS	​	129
RATINGS FOR THE SERIES A BONDS	​	131
WHERE YOU CAN FIND MORE INFORMATION	​	132
INCORPORATION BY REFERENCE	​	132
INVESTMENT COMPANY ACT OF 1940 AND VOLCKER RULE MATTERS	​	133
RISK RETENTION	​	133
LEGAL MATTERS	​	133
OFFERING RESTRICTIONS IN CERTAIN JURISDICTIONS	​	133
GLOSSARY	​	136
SIGNATURES	​	II-5

i

ABOUT THIS PROSPECTUS

This prospectus is part of a registration statement filed with the Securities and Exchange Commission, or SEC. This prospectus provides you with information about the issuing entity, the Series A Bonds and Public Service Company of New Mexico, or PNM, the depositor, sponsor and initial servicer. This prospectus describes the terms of the Series A Bonds being offered hereby. You should carefully review this prospectus, any free writing prospectus the issuing entity files with the SEC, and the information, if any, contained in the documents referenced in this prospectus under the heading “Where You Can Find More Information.”

References in this prospectus to the term we, us or the issuing entity mean PNM Energy Transition Bond Company I, LLC, the entity which will issue the Series A Bonds. References to the Series A Bonds or the bonds, unless the context otherwise requires, means the energy transition bonds offered pursuant to this prospectus. References to PNM, the seller, the depositor or the sponsor refer to Public Service Company of New Mexico. References to the servicer are to PNM, and any successor servicer under the servicing agreement described in this prospectus. References to the administrator mean PNM, or any successor or assignee under the administration agreement described in this prospectus. References to the NMPRC are to the New Mexico Public Regulation Commission. References to the Energy Transition Act are to Sections 62-18-1 through 62-18-23 of the New Mexico Statutes Annotated. Unless the context otherwise requires, the term customer means each customer that obtains electric delivery service from PNM under NMPRC-approved rate schedules or special contracts, and each customer who acquires electricity from an alternative or subsequent electricity supplier in PNM’s utility service area, to the extent that such acquisition is permitted by New Mexico law. References to the Financing Order are to the irrevocable financing order issued by the NMPRC on April 1, 2020. You can find a glossary of some of the other defined terms used in this prospectus on page 136 of this prospectus.

This prospectus includes cross-references to other sections in this prospectus to allow you to find further related discussions. You can also find key topics in the table of contents on the preceding pages. Check the table of contents to locate these sections.

You should rely only on the information contained or incorporated by reference in this prospectus and in any free writing prospectus from the issuing entity or the underwriters specifying the terms of this offering. Neither the issuing entity nor any underwriter, agent, dealer, salesperson or PNM has authorized anyone else to provide you with any different information. If anyone provides you with different or inconsistent information, you should not rely on it. The Series A Bonds are not being offered in any jurisdiction where the offer or sale is not permitted. The information in this prospectus and any free writing prospectus is current only as of the date of this prospectus.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This prospectus includes forward-looking statements, including regarding expectations, estimates and projections about the electric usage and demand of customers, number of customers, PNM’s ability to service the energy transition property and collect the energy transition charges, the issuing entity’s ability to pay back the Series A Bonds, and the NMPRC’s adherence to the New Mexico state pledge to protect the rights of bondholders. Any statements that express, or involve discussions as to, expectations, beliefs, plans, objectives, assumptions or future events of performance (often, but not always, through the use of words or phrases such as “will,” “will likely result,” “are expected to,” “will continue,” “is anticipated,” “believe,” “could,” “should,” “estimated,” “may,” “plan,” “potential,” “projection,” “target,” “outlook,” “is designed to,” or “intended”) are not statements of historical facts and may be forward-looking. Forward-looking statements involve estimates, assumptions and uncertainties. Accordingly, any such statements are qualified in their entirety by reference to important factors included in “Risk Factors” ​(in addition to any assumptions and other factors referred to specifically in connection with such forward-looking statements) that could have a significant impact on financial results, and could cause actual results to differ materially from those contained in forward-looking statements made by or on behalf of us or PNM, in this prospectus, in presentations, on websites, in response to questions or otherwise.

1

The following are some factors, among others, that could cause actual results to differ materially from those expressed or implied by forward-looking statements in this prospectus:

•

state, federal and foreign legislative, judicial and regulatory actions or developments, including deregulation, re-regulation and restructuring of the electric utility industry, and changes in, or changes in application of, laws or regulations applicable to other aspects of PNM’s business;

•

uncertainty related to the potential for regulatory orders, legislation or rulemakings that provide for municipalization of utility assets or public ownership of utility assets, including generation resources;

•

the impacts on the electricity usage of customers due to performance of state, regional, and national economies, energy efficiency measures, weather, seasonality, alternative sources of power, advances in technology, and other changes in supply and demand;

•

the performance of generating units, transmission systems and distribution systems, which could be negatively affected by operational issues, fuel quality and supply chain issues (disruptions), unplanned outages, extreme weather conditions, wildfires, terrorism, cybersecurity breaches, and other catastrophic events, including the impacts of COVID-19;

•

the accuracy of the servicer’s forecast of energy usage, demand and number of customers;

•

the accuracy of the servicer’s estimates of customer payment patterns, including the rate of delinquencies and any collections curves;

•

direct or indirect results of cyberattacks, security breaches or other attempts to disrupt PNM’s business;

•

acts of war or terrorism, global instability, pandemics or other catastrophic events affecting electric customer energy usage or demand or the number of customers in the service territory;

•

actions of nationally recognized statistical rating organizations, including downgrading the ratings of the Series A Bonds; and

•

other factors discussed in this prospectus and any of our subsequent SEC filings.

You should not place undue reliance on forward-looking statements. Each forward-looking statement speaks only as of the date on which such statement is made, and, except to the extent required by law, the depositor does not undertake any obligation to update any forward-looking statement to reflect events or circumstances, including unanticipated events, after the date on which such statement is made. New factors emerge from time to time and it is not possible for management to predict all of such factors, nor can it assess the impact of each such factor on the business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statement.

2

PROSPECTUS SUMMARY

The following section is only a summary of selected information and does not provide you with all the information you will need to make your investment decision. There is more detailed information in this prospectus. To understand all of the terms of the offering of the Series A Bonds, carefully read this entire prospectus. You should carefully consider the matters discussed under “Risk Factors” beginning on page 19 of this prospectus before you invest in the Series A Bonds.

Securities Offered:

$343,200,000 Senior Secured Energy Transition Bonds, Series A (collectively, the Series A Bonds), scheduled to pay principal semi-annually and sequentially in accordance with the expected amortization schedule described in this prospectus.

Tranche	Principal Amount*
A-1
A-2	​

*

Principal amounts are approximate and subject to change.

Issuing Entity and Capital Structure:

PNM Energy Transition Bond Company I, LLC, a special purpose subsidiary of PNM, is organized as a Delaware limited liability company. PNM is our sole member and owns all of our equity interests. The issuing entity has no commercial operations. The issuing entity was formed for the limited purpose of purchasing, owning and administering energy transition property, issuing energy transition bonds from time to time (including the Series A Bonds) and performing activities incidental thereto. These are the first energy transition bonds which the issuing entity has issued. The issuing entity may issue additional energy transition bonds under a separate indenture, but only as authorized under a new and separate financing order of the NMPRC and subject to satisfaction of the rating agency condition (defined below).

The issuing entity will be capitalized with an upfront cash deposit by PNM of 0.50% of the total capitalization of the issuing entity (to be held in the capital subaccount described herein), with the Series A Bonds representing the remaining 99.5% of the total capitalization of the issuing entity. The issuing entity also will have an excess funds subaccount to retain, until the next payment date, any amounts collected and remaining after all scheduled payments due on a payment date for the Series A Bonds have been made.

Issuing Entity’s Address and Telephone Number:

414 Silver Avenue SW
Albuquerque, New Mexico 87102
(505) 241-2700

The Depositor, Sponsor, Seller and initial Servicer:

PNM is a public utility that was organized under the laws of the State of New Mexico on May 9, 1917. PNM is an electric utility that provides electric generation, transmission and distribution services to its rate-regulated customers. PNM’s retail electric service territory covers a large area of north-central New Mexico, including the cities of Albuquerque, Rio Rancho and Santa Fe, and certain areas of southern New Mexico. As of December 31, 2022, PNM had 545,783 retail electric customers. Service to retail electric customers

3

is subject to the jurisdiction of the New Mexico Public Regulation Commission (NMPRC).

PNM is a wholly-owned subsidiary of PNM Resources, Inc. (PNMR). PNMR has entered into a merger agreement with Avangrid, Inc. pursuant to which PNMR would become a wholly-owned subsidiary of Avangrid, Inc. See “Public Service Company of New Mexico — The Depositor, Sponsor, Seller and Servicer —  PNMR’s Proposed Merger” for additional information regarding the proposed merger.

PNM, acting as the initial servicer, and any successor servicer, referred to in this prospectus as the servicer, will service the energy transition property under a servicing agreement with the issuing entity.

PNM’s Address and Telephone Number:

414 Silver Avenue SW
Albuquerque, New Mexico 87102
(505) 241-2700

Indenture Trustee:

U.S. Bank Trust Company, National Association, referred to herein as the indenture trustee. See “The Indenture Trustee” for a description of the duties and responsibilities of the indenture trustee.

Purpose of the Transaction:

The issuance of the Series A Bonds will enable PNM to recover certain costs associated with the retirement of two coal-fired generating units at the San Juan Generating Station (SJGS) that are eligible for recovery under the Energy Transition Act. See “The Energy Transition Act and the Financing Order” in this prospectus.

Transaction Overview:

On March 22, 2019, Governor Michelle Lujan-Grisham signed into law the Energy Transition Act, which is codified as Sections 62-18-1 through 62-18-23 of the New Mexico Statutes Annotated. The Energy Transition Act authorizes an electric utility to apply to the NMPRC for a financing order to issue energy transition bonds to finance certain costs associated with the abandonment of coal-fired generating units, referred to as energy transition costs. A financing order issued by the NMPRC under the Energy Transition Act authorizes the imposition of non-bypassable energy transition charges on all customers receiving electric distribution service from the electric utility to pay principal of and interest on and other financing expenses of the energy transition bonds.

On April 1, 2020, the NMPRC approved a financing order, referred to herein as the Financing Order, which authorized PNM to cause the issuance of up to $360.1 million of energy transition bonds to finance certain costs related to PNM’s abandonment of two coal-fired generating units at SJGS. The Series A Bonds are being issued pursuant to the Financing Order.

The primary transactions underlying the offering of the Series A Bonds are as follows:

•

PNM will sell energy transition property to the issuing entity in exchange for the net proceeds from the sale of the Series A Bonds;

•

the issuing entity will sell the Series A Bonds, which will be

4

secured primarily by the energy transition property, to the underwriters named in this prospectus; and

•

PNM will act as the initial servicer of the energy transition property.

The Series A Bonds are not obligations of the indenture trustee, the issuing entity’s managers, PNM, PNMR or any of their respective affiliates other than the issuing entity. The Series A Bonds are not obligations of the State of New Mexico or of any county, municipality or any other political subdivision of the State of New Mexico.

The Series A Bonds will be secured by separate energy transition property than the energy transition property securing any additional energy transition bonds that the issuing entity may issue. The rating agency condition (as defined below) must be satisfied prior to the issuing entity’s issuance of any additional energy transition bonds. In addition, PNM may not cause the issuance of any additional energy transition bonds or similar bonds through a separate entity unless the rating agency condition is satisfied.

Diagram of Transaction:

The following chart represents a general summary of the parties to the transactions underlying the offering of the Series A Bonds, their roles and their various relationships to the other parties:

(1)

As of December 31, 2022.

(2)

Net of upfront issuance costs and expenses.

5

Flow of Funds:

The following chart represents a general summary of the flow of funds.

The Energy Transition
Property:

In general terms, all of the rights and interests of PNM under the Financing Order that are transferred to the issuing entity pursuant to the sale agreement are referred to in this prospectus as the energy transition property. The energy transition property includes the right to impose, charge, collect and receive the energy transition charges in amounts sufficient to pay principal and interest and ongoing financing costs in connection with the Series A Bonds, the right under the Financing Order to obtain periodic true-up adjustments of the energy transition charges, and all revenues and other proceeds arising from those rights and interests. The energy transition property is a present property right created by the Energy Transition Act and the Financing Order and is protected by the State Pledge in the Energy Transition Act described below, and the NMPRC affirmation of the State Pledge in the Financing Order.

The issuing entity will purchase the energy transition property from PNM to support the issuance of the Series A Bonds. PNM, as the initial servicer, will bill and collect the energy transition charges from current and future retail customers. PNM will include the energy transition charges in its bills to retail electric customers and is required to show the energy transition charges as a separate line item.

Security for the Bonds

The Series A Bonds will be secured only by the collateral. The principal asset securing the Series A Bonds will be the energy transition property. The collateral also includes:

•

the issuing entity’s rights under the sale agreement pursuant to which it will acquire the energy transition property;

•

the issuing entity’s rights under the servicing agreement and any subservicing, agency, intercreditor or collection agreements executed in connection with the servicing agreement;

•

the collection account for the Series A Bonds and all related subaccounts;

6

•

all of the issuing entity’s other property related to the Series A Bonds, other than any cash released to the issuing entity by the indenture trustee on any payment date to be distributed to PNM as the return on its invested capital;

•

all present and future claims, demands, causes and choses in action in respect of any or all of the foregoing; and

•

all payments on or under and all proceeds in respect of any or all of the foregoing.

The subaccounts consist of a capital subaccount, which will be funded at closing in an amount equal to 0.50% of the total capitalization of the issuing entity (with the Series A Bonds representing the remaining 99.5% of the total capitalization of the issuing entity), a general subaccount, into which the servicer will deposit all energy transition charge collections, and an excess funds subaccount, into which the issuing entity will transfer any amounts collected and remaining on a payment date after all payments to bondholders and other parties have been made. Amounts on deposit in each of these subaccounts will be applied to make payments on the Series A Bonds on each payment date. For a description of the energy transition property, please read “The Energy Transition Act and the Financing Order” in this prospectus.

New Mexico State Pledge:

The State of New Mexico has pledged to bondholders that they will not take or permit any action that impairs the value of energy transition property, except for the true-up adjustments allowed by Section 6 of the Energy Transition Act, or reduces, alters, or impairs the energy transition charges that are imposed, collected and remitted for the benefit of bondholders, until the entire principal of, interest on and redemption premium, if any, on the Series A Bonds, and all financing costs are paid in full and performed in full. This agreement is referred to herein as the State Pledge. The NMPRC has affirmed the State Pledge in its Financing Order. New Mexico has a voter referendum process; however, the time for challenging the Energy Transition Act through a referendum has expired. Please read “Risk Factors — Risks Associated with Potential Judicial, Legislative or Regulatory Actions” in this prospectus.

True-Up Adjustment
Mechanism:

Energy transition charges are required to be adjusted semi-annually to:

•

correct for any overcollection or undercollection of the energy transition charges; and

•

provide for the recovery of revenues sufficient to make timely payment of scheduled principal of and interest on the Series A Bonds and all other ongoing financing costs associated with the bonds.

In addition to the semi-annual true-up adjustments, additional true-up adjustments may be made more frequently at any time during the term of the Series A Bonds to correct any undercollection in order to assure timely repayment of the Series A Bonds. Beginning two years prior to the final maturity date of the Series A Bonds, there will be quarterly true-up adjustments for the Series A Bonds that remain outstanding.

7

In addition, PNM may make non-standard true-up adjustments to the energy transition charges in connection with any general rate case, as necessary to reflect any changes in the allocation of energy transition charges among customer classes as a result of changes in the production cost allocation methodology used in such general rate case.

Please read “The Energy Transition Act and the Financing Order — Energy Transition Act Requires Periodic Adjustments of the Energy Transition Charges” and “The Servicing Agreement —  True-Up Adjustment Process” in this prospectus.

Non-bypassable Energy Transition
Charges:

The energy transition charges are non-bypassable charges separate and apart from PNM’s base rates. The Energy Transition Act provides that the energy transition charges established in the Financing Order will be collected from each customer (1) that obtains electric delivery service from PNM under NMPRC-approved rate schedules or special contracts, and (2) who acquires electricity from an alternative or subsequent electricity supplier in PNM’s utility service area, to the extent that such acquisition is permitted by New Mexico law. Please read “The Energy Transition Act and the Financing Order — Non-Bypassable Energy Transition Charges” in this prospectus.

Initial Energy Transition Charge as a Percentage of Customer’s Total Electricity Bill:

The initial energy transition charge is expected to represent approximately    % of the total bill, as of June 30, 2023, received by a 600 kWh residential customer of PNM. For residential customers, a minimum per customer charge will be assessed to each customer each month, and a higher monthly charge will apply to any customer with usage above 900 kWh in any month. Please read “The Energy Transition Act and the Financing Order — Non-Bypassable Energy Transition Charges” in this prospectus.

Payment Dates:

Semi-annually, on          and          . The first scheduled payment date is          , 2024.

Interest Payments:

Interest is due on each payment date. Interest will accrue on each tranche of the Series A Bonds on a 30/360 basis at the interest rate specified for such tranche in the table below:

Tranche	Interest Rate
A-1	​
A-2	​

If any payment date is not a business day, payments scheduled to be made on such date may be made on the next succeeding business day, and no interest shall accrue upon such payment in the intervening period.

The issuing entity will pay interest on each tranche of the Series A Bonds before the issuing entity will pay the principal of each tranche of the Series A Bonds. Please read “Description of the Series A Bonds — Interest Payments and — Principal Payments. If there is a shortfall in the amounts available in the collection account to

8

make interest payments, the indenture trustee will distribute interest pro rata to each tranche of the Series A Bonds based on the amount of interest payable on each outstanding tranche.

Principal Payments and
Record Dates and
Payment Sources:

The issuing entity will to the extent of funds available be scheduled to make payments of principal on each payment date and sequentially in accordance with the expected amortization schedule included in this prospectus.

Principal for each tranche is due upon the final maturity date for that tranche. Failure to pay the entire outstanding principal amount of a tranche by the final maturity date for such tranche will result in an event of default.

Failure to pay a scheduled principal payment on any payment date or the entire outstanding amount of the Series A Bonds of any tranche by the scheduled final payment date will not result in a default with respect to that tranche. The failure to pay the entire outstanding principal balance of the Series A Bonds of any tranche will result in a default only if such payment has not been made by the final maturity date for such tranche.

If there is a shortfall in the amounts available to make principal payments on the Series A Bonds that are due and payable, including upon an acceleration following an event of default, the indenture trustee will distribute principal from the collection account pro rata to each tranche of the Series A Bonds based upon the principal amount then due and payable on the payment date; and if there is a shortfall in the remaining amounts available to make principal payments on the Series A Bonds that are scheduled to be paid, the indenture trustee will distribute principal from the collection account pro rata to each tranche of the Series A Bonds based on the principal amount then scheduled to be paid on the payment date.

Weighted Average Life:

Tranche	Expected Weighted Average Life (years)
A-1	​
A-2	​

Please read “Weighted Average Life and Yield Considerations for the Series A Bonds” in this prospectus.

Scheduled Final Payment Date and Final Maturity Date:

The scheduled final payment date and the final maturity date of the Series A Bonds are as set forth in the table below:

Tranche	Scheduled Final Payment Date	Final Maturity Date
A-1	​	​
A-2	​	​

Optional Redemption:

None. Non-call for the life of the Series A Bonds.

Mandatory Redemption:

None. The issuing entity is not required to redeem the Series A Bonds at any time prior to maturity.

Priority of Payments:

On each payment date for the Series A Bonds (or any other date as directed in writing by the servicer with respect to operating expenses

9

described in clauses (1) through (4) below, payable prior to the next payment date), the indenture trustee will allocate or pay all amounts on deposit in the general subaccount of the collection account in the following order of priority (solely in accordance with the related semi-annual servicer’s certificate):

(1)

payment of the indenture trustee’s fees, expenses and outstanding indemnity amounts in an amount not to exceed $200,000 annually in the then current calendar year; provided, however, that such cap shall not apply after the occurrence of an event of default;

(2)

payment of the servicing fee with respect to such payment date and any unpaid servicing fees for prior payment dates;

(3)

payment of the allocable share of the administration fee for such payment date and the fees of the issuing entity’s independent manager fee for such payment date and any unpaid administration fees or independent manager fees from prior payment dates;

(4)

payment of all other ordinary and periodic operating expenses of the issuing entity;

(5)

payment of the interest due on the Series A Bonds for such payment date, including any overdue interest;

(6)

payment of the principal required to be paid on the final maturity date for each tranche of the Series A Bonds or as a result of acceleration upon an event of default;

(7)

payment of the principal then scheduled to be paid in accordance with the expected amortization schedule included in this prospectus, including any overdue payments of scheduled principal, paid pro rata among the Series A Bonds if there is a deficiency;

(8)

payment of any other unpaid operating expenses (including fees, expenses and indemnity amounts owed to the indenture trustee but unpaid due to the limitation in clause (1) above) and any remaining amounts owed pursuant to the basic documents (as defined in the Glossary), on a pro rata basis;

(9)

replenishment of amounts drawn from the capital subaccount;

(10)

payment to PNM of an amount equal to the rate of return on the amount contributed by PNM to the capital subaccount (equal to the interest rate on the longest maturing Tranche of the Series A Bonds);

(11)

allocation of the remainder, if any, to the excess funds subaccount for future payments; and

(12)

after the Series A Bonds have been paid in full and discharged, and all of the other foregoing amounts have been paid in full, the balance (including all amounts then held in the capital subaccount and the excess funds subaccount), if any, will be paid to the issuing entity, free from the lien of the indenture.

The amount of the servicing fee referred to in clause (2) above will be 0.05% of the initial aggregate principal amount of the Series A

10

Bonds (for so long as PNM or an affiliate of PNM is the servicer) on an annualized basis. The priority of distributions for the collected energy transition charges, as well as available amounts in the subaccounts, are described in more detail under “Security for the Series A Bonds — How Funds in the Collection Account will be Allocated.”

Issuance of Additional Energy Transition Bonds by the Issuing Entity:

The issuing entity has been organized to serve as a special purpose limited liability company to issue energy transition bonds under the Energy Transition Act. As authorized by the Financing Order, the issuing entity’s organizational documents as well as the transaction documents supporting the Series A Bonds give the issuing entity the authority and flexibility to issue additional energy transition bonds under the Energy Transition Act in future transactions, with the approval of the NMPRC.

Any additional energy transition bonds may be issued by the issuing entity, subject to the conditions described below. Each series of additional energy transition bonds will be secured by separate energy transition property created by an additional financing order of the NMPRC and will be issued under a separate indenture. Any series of additional energy transition bonds may include terms and provisions unique to that particular series of additional energy transition bonds.

However, the issuing entity may not issue additional energy transition bonds unless the rating agency condition (as defined in the Glossary) for the Series A Bonds has been satisfied. In addition, the issuing entity may not issue additional energy transition bonds unless each of the following conditions is satisfied:

•

PNM requests and receives another financing order from the NMPRC;

•

each series of additional energy transition bonds has recourse only to the energy transition property and funds on deposit in the trust accounts maintained by the indenture trustee with respect to that series of additional energy transition bonds, is nonrecourse to the collateral securing the Series A Bonds and does not constitute a claim against the issuing entity if revenue from the energy transition charges and funds on deposit in the trust accounts with respect to that series of additional energy transition bonds are insufficient to pay such other series in full;

•

the indenture trustee and the rating agencies then rating any series of the issuing entity’s outstanding energy transition bonds are provided an opinion of a nationally recognized law firm experienced in such matters to the effect that such issuance would not result in the issuing entity’s substantive consolidation with PNM and that there has been a true sale of the energy transition property with respect to such series, subject to the customary exceptions, qualifications and assumptions contained therein;

•

the issuing entity delivers to the indenture trustee an officer’s

11

certificate certifying that the additional series of energy transition bonds shall have the benefit of a true-up adjustment mechanism under the Energy Transition Act;

•

transaction documentation for the other series provides that holders of the additional energy transition bonds of the other series will not file or join in filing of any bankruptcy petition against the issuing entity;

•

if holders of such additional energy transition bonds are deemed to have any interest in any of the issuing entity’s assets that are dedicated to the Series A Bonds, holders of such other additional energy transition bonds must agree that their interest in the assets that are dedicated to the Series A Bonds is subordinate to claims or rights of holders of the Series A Bonds;

•

each series of additional energy transition bonds will have its own bank accounts and trust accounts; and

•

each series of additional energy transition bonds will bear its own trustee fees and servicer fees and a pro rata portion of the fees due under the administration agreement.

Please read “Description of the Series A Bonds — Conditions to the Issuance of Additional Energy Transition Bonds and Acquisition of Additional Energy Transition Property by the Issuing Entity” in this prospectus.

The Financing Order provides that in the event a customer does not pay in full the amounts owed under any bill that includes energy transition charges, the servicing agreement provides that any resulting shortfalls in energy transition charges will be allocated pro rata based on the amount of energy transition charges owing with respect to each series. Please read “The Servicing Agreement — Remittances to Collection Account” in this prospectus.

Other Issuances of Energy Transition Bonds or Similar Bonds:

In addition, PNM may, from time to time, seek approval from the NMPRC to issue additional energy transition bonds under the Energy Transition Act or securities secured by customer charges similar to the energy transition charges pursuant to other legislation similar to the Energy Transition Act, in each case, through a subsequently created special purpose entity other than the issuing entity.

Any such additional bonds would be secured by separate property created by a separate financing order or orders. PNM has covenanted in the sale agreement that the satisfaction of the rating agency condition and the execution of an intercreditor agreement is a condition precedent to the sale of property consisting of charges similar to the energy transition charges sold to the issuing entity through the sale agreement. Please read “Risk Factors” and “The Sale Agreement — Covenants of the Seller” in this prospectus.

See “Public Service Company of New Mexico — The Depositor, Sponsor, Seller and Servicer — Application for Issuance of Additional Energy Transition Bonds” for additional information regarding

12

PNM’s application to issue additional energy transition bonds in connection with its proposed abandonment of the Four Corners Power Plant.

Allocation Among Series:

The Series A Bonds will not be subordinated in right of payment to any other series of energy transition bonds. If the issuing entity or another affiliate of PNM issues an additional series of energy transition bonds, each series of energy transition bonds will be secured by its own energy transition property, which will include the right to impose, charge, collect and receive energy transition charges calculated in respect of that series, and the right to impose true-up adjustments in respect of that series. Each series will also have its own collection account, including any related subaccounts, into which revenue from the energy transition charges relating to that series will be deposited and from which amounts will be withdrawn to pay the related series of energy transition bonds. Holders of one series of energy transition bonds will have no recourse to collateral for a different series. The administration fees, independent manager fees and other operating expenses of the issuing entity will be allocated to each series of energy transition bonds on a pro rata basis, based upon the respective outstanding principal amounts of each series. See “Security for the Series A Bonds — Description of Indenture Accounts” and “— How Funds in the Collection Account Will Be Allocated” in this prospectus.

Although each series of energy transition bonds will have its own energy transition property, energy transition charges relating to the Series A Bonds and energy transition charges relating to any other series of energy transition bonds will be collected through a single monthly bill delivered to each electric service customer.

In the event a customer does not pay in full the amounts owed under any bill that includes energy transition charges, the Financing Order provides that any resulting shortfalls in energy transition charges will be allocated pro rata based on the amount of energy transition charges owing with respect to each series. Please read “The Servicing Agreement — Remittances to Collection Account” in this prospectus.

Credit Enhancement:

The primary forms of credit enhancement for the Series A Bonds are the true-up adjustment process and funds held in the collection account and related subaccounts.

•

True-Up Adjustment Process:   The energy transition charges are required to be adjusted at least semi-annually to:

•

to correct for any overcollection or undercollection of the energy transition charges; and

•

to provide for the recovery of revenues sufficient to make timely payment of scheduled principal of and interest on the Series A Bonds and all other ongoing financing costs associated with the bonds.

The servicer may also make interim true-up adjustments more frequently under certain circumstances. Please read “The Servicing Agreement — True-Up Adjustment Process” in this prospectus.

•

Collection Account:   Under the indenture, the indenture

13

trustee will hold a collection account for the Series A Bonds, divided into various subaccounts. The primary subaccounts for credit enhancement purposes are:

•

the general subaccount — the trustee will deposit into the general subaccount all energy transition charge collections remitted to it by the servicer;

•

the capital subaccount — PNM will deposit an amount equal to 0.50% of the total capitalization of the issuing entity (with the Series A Bonds representing the remaining 99.5% of the total capitalization of the issuing entity) on the date of issuance of the Series A Bonds; and

•

the excess funds subaccount — any excess amount of energy transition charge collections held after the payment on a payment date of scheduled principal, interest and ongoing financing costs, and investment earnings will be held in the excess funds subaccount.

Reports to Bondholders; SEC Filings:

Pursuant to the indenture, the indenture trustee will make available on its website (currently located at https://pivot.usbank.com) to the holders of record and to beneficial owners of the Series A Bonds regular reports prepared by the servicer containing information concerning, among other things, the issuing entity and the collateral. These reports will not be examined and reported upon by an independent public accountant. In addition, no independent public accountant will provide an opinion thereon. Please read “Description of the Series A Bonds — Reports to Bondholders” in this prospectus.

Because the issuing entity is authorized by its governing documents to issue more than one series of energy transition bonds, neither the issuing entity nor the depositor will be an asset-backed issuer and the Series A Bonds are not asset-backed securities as such terms are defined by the SEC in governing regulations Item 1101 of Regulation AB. However, the issuing entity will file offering documents and will plan to file with the SEC required periodic and current reports related to the Series A Bonds consistent with the disclosure and reporting regime established in Regulation AB and will also post those periodic and current reports at the website set forth above.

Servicing Compensation:

The issuing entity will pay the servicer on each payment date the servicing fee with respect to the Series A Bonds. As long as PNM or any affiliated entity acts as servicer, this fee will be 0.05% of the initial aggregate principal amount of the Series A Bonds on an annualized basis, plus reimbursement for its out-of-pocket costs. If a successor servicer is appointed, the servicing fee will be negotiated by the successor servicer and the indenture trustee, but will not, unless the NMPRC consents, exceed 0.60% of the initial aggregate principal amount of the Series A Bonds on an annualized basis. In no event will the indenture trustee be liable for any servicing fee in its individual capacity.

Federal Income Tax Status:

In the opinion of Troutman Pepper Hamilton Sanders, LLP, counsel to the issuing entity and PNM, for federal income tax

14

purposes, the Series A Bonds will constitute indebtedness of PNM, the sole member of the issuing entity. If you purchase a beneficial interest in any Series A Bonds, you agree by your purchase to treat the Series A Bonds as debt of PNM for federal income tax purposes.

ERISA Considerations:

Employee benefit plans, plans and other investors subject to the Employee Retirement Income Security Act of 1974, as amended (ERISA), Section 4975 of the Internal Revenue Code of 1986, as amended (Internal Revenue Code) or Similar Law (as defined herein) may acquire the Series A Bonds subject to specified conditions. The acquisition, holding or disposition of the Series A Bonds could be treated as a direct or indirect prohibited transaction under ERISA and/or Section 4975 of the Internal Revenue Code, or in the case of governmental, church or non-U.S. plans subject to Similar Law, a violation of Similar Law. Accordingly, by acquiring the Series A Bonds, each investor that is or is acting on behalf of, or using assets of, any such employee benefit plan or plan subject to Similar Law will be deemed to certify that the acquisition, holding and subsequent disposition of the Bonds will not constitute or result in a non-exempt prohibited transaction under ERISA or Section 4975 of the Internal Revenue Code or, in the case of a governmental, church or non-U.S. plan subject to Similar Law, a violation of Similar Law. Please read “ERISA Considerations” in this prospectus.

Credit Ratings:

The Series A Bonds are expected to receive credit ratings from at least two nationally recognized statistical rating organizations. See “Ratings for the Series A Bonds” in this prospectus.

Use of Proceeds:

The issuing entity will use the proceeds of the offering to (i) pay upfront issuance costs (including reimbursement of any costs previously paid by PNM), and (ii) purchase the energy transition property from PNM, who in turn will use the proceeds it receives from the sale of the energy transition property to (A) reimburse itself for required payments made to state-administered funds for Indian affairs, energy transition economic development and the assistance of displaced workers, (B) pay decommissioning and reclamation costs related to the retirement of SJGS, (C) pay severance and job training costs related to the retirement of SJGS, (D) make capital expenditures for the purpose of providing utility service to customers, and (E) repay indebtedness incurred for the purpose of making such payments. This will include repayment of a term loan and outstanding borrowings under PNM’s revolving credit agreements.

1940 Act Registration:

The issuing entity will be relying on an exclusion or exemption from the definition of “investment company” under the 1940 Act contained in Section 3(c)(5) of the 1940 Act, although there may be additional exclusions or exemptions available to the issuing entity. The issuing entity is being structured so as not to constitute a “covered fund” for purposes of the Volcker Rule under the Dodd-Frank Wall Street Reform and Consumer Protection Act, or the Dodd-Frank Act.

Credit Risk Retention:

The Series A Bonds are not subject to the 5% risk retention requirements imposed by Section 15G of the Securities Exchange Act of 1934, as amended, or the Exchange Act, due to the exemption

15

provided in Rule 19(b)(8) of the risk retention regulations in 17 C.F.R. Part 246 of the Exchange Act, or Regulation RR. For information regarding the requirements of the European Union Securitization Regulation as to risk retention and other matters, please read “Risk Factors — Other Risks Associated with the Purchase of the Series A Bonds — Regulatory provisions affecting certain investors could adversely affect the price and liquidity of the Series A Bonds” in this prospectus.

Conflicts of Interest:

As described in “Use of Proceeds,” PNM plans to use a portion of the net proceeds to repay borrowings outstanding under a term loan and borrowings under its revolving credit agreements. Certain of the underwriters in this offering or their affiliates are lenders under the term loan and the revolving credit agreements. As such, certain of the underwriters in this offering or their affiliates will receive 5% or more of the net proceeds of this offering, not including the underwriting discount. Any such underwriter would be considered to have a “conflict of interest” pursuant to FINRA Rule 5121. Consequently, this offering will be required to be made in compliance with FINRA Rule 5121. Pursuant to that rule, the appointment of a qualified independent underwriter is not necessary in connection with the offering because the offering is of a class of securities that are investment grade rated. Under FINRA Rule 5121, no affected underwriter is permitted to confirm sales to any account over which it exercises discretionary authority without the prior written consent of the account holder. Please read “Use of Proceeds” in this prospectus.

Minimum Denominations:

$2,000, or integral multiples of $1,000 in excess thereof, except for one Series A Bond of each tranche which may be a smaller denomination.

Expected Settlement:

On or about               , 2023, settling flat. DTC, Clearstream and Euroclear.

16

SUMMARY OF RISK FACTORS

Set forth below is a summary of the material risk factors which you should consider before deciding whether to invest in the Series A Bonds. These risks can affect the timing or ultimate payment of the Series A Bonds and value of your security. A description of such risk factors in greater details follows this summary.

Limited Source of Payment for the Series A Bonds:   The only source of funds for the Series A Bonds is the energy transition property and the other limited moneys held by the indenture trustee. The Series A Bonds are non-recourse to PNM. Therefore, the sources for repayment of the Series A Bonds are limited. You must rely for payment of the Series A Bonds solely upon the Energy Transition Act, state and federal constitutional rights to enforcement of the securitization provisions of the Energy Transition Act, the irrevocable Financing Order, collections of the energy transition charges and funds on deposit in the related accounts held by the indenture trustee.

Risks Associated with Potential Judicial, Legislative or Regulatory Actions:   The energy transition property is an asset created under the Energy Transition Act and through regulatory proceedings at the NMPRC. Neither PNM nor the issuing entity will indemnify you for any changes in law, whether effected by means of any legislative enactment, constitutional amendment or any final and non-appealable judicial decision. The Energy Transition Act and the Financing Order have been challenged in court and may be challenged again.

In addition, the NMPRC retains the power to adopt, revise or rescind rules or regulations affecting PNM and may attempt to take actions which could potentially impair the value of the energy transition property. Also, true-up adjustment submissions made with the NMPRC may be challenged before the NMPRC or in court, resulting in delays in implementation of the true-up adjustment. Additionally, subject to any required NMPRC approval, PNM may establish billing, collection and posting arrangements with consumers which could impact the timing and amount of consumer payments.

Also, a municipality may seek to acquire portions of PNM’s service territory, and may dispute their obligation to pay the energy transition charges, or even if obligated to do so, may fail to bill and remit the energy transition charges on a timely basis.

Servicing Forecasting and Related Servicing Risks:   The collection of energy transition charges on a timely and sufficient basis depend upon the ability of the servicer to accurately forecast customer usage and demand and the number of customers. If the servicer inaccurately forecasts usage, demand or its number of customers or underestimates consumer delinquencies for any reason, there could be a shortfall or material delay in energy transition charge collections. Factors which might cause inaccurate projections of usage or consumer delinquencies, include unanticipated weather conditions, general economic conditions, including an economic downturn caused by a pandemic (or other health related event), natural or other disasters, such as blizzard and wind storms, an act of war or terrorism, cyber attacks or other catastrophic events. PNM’s ability to collect energy transition charges from customers may also be impacted by some of these same factors. In addition, the New Mexico legislature or the NMPRC may take additional actions in the future in response to COVID-19 or any future pandemic, such as temporary suspension of disconnections and late payment fees for nonpayment of utility bills.

It may be difficult for the issuing entity to find a replacement servicer should PNM default in its obligations. Assuming the issuing entity can obtain a successor servicer, the successor servicer may be less effective in servicing the energy transition charges, potentially resulting in a delay in collections, which might reduce the value of your investment.

Risks Associated with the Unusual Nature of Energy Transition Property:   In the event of foreclosure following an event of default, there is likely to be a limited market, if any, for the energy transition property. Therefore, foreclosure might not be a realistic or practical remedy. Moreover, although principal of the Series A Bonds will be due and payable upon acceleration of the Series A Bonds before maturity, payment of the energy transition charges by customers likely would not be accelerated and the nature of the issuing entity’s business will result in principal of the Series A Bonds being paid as funds become available.

17

Natural Disaster-Related Risk:   Severe weather, such as winter storms and wind storms, and other natural disasters, may cause outages and property damage. The potential disruption of PNM’s operations due to storms, natural disasters or other catastrophic events could be substantial. Generation, transmission, distribution and usage and demand of electricity might be interrupted temporarily, reducing the collections of energy transition charges or otherwise impacting PNM’s ability to service the energy transition property. As the energy transition charge is a consumption-based charge, any unexpected failure to deliver electricity may impact the collection of energy transition charges. There might be longer-lasting weather-related adverse effects on residential and commercial development and economic activity in the PNM service area, which could cause the per-kWh energy transition charges to be greater than expected. Legislative action adverse to the bondholders might be taken in response, and such legislation, if challenged as a violation of the New Mexico state pledge, might be defended on the basis of public necessity.

Risks Associated with Potential Bankruptcy of the Seller or the Servicer:   In the event of a bankruptcy by PNM, you may experience a delay in payment or a default on payment of the Series A Bonds due to various factors, including the comingling of energy transition charges with other revenue of the servicer, a challenge to the characterization of the sale of the energy transition property as a financing transaction, an effort to substantively consolidate the issuing entity’s assets and liabilities with those of PNM, a characterization of energy transition charge payments to the indenture trustee as preferential transfers, the treatment of the issuing entity’s claims against the seller as unsecured claims and a general limitation on the remedies available in a bankruptcy, including the risks related to the automatic stay.

Other Risks Associated with an Investment in the Series A Bonds:   Other risks associated with the purchase of the Series A Bonds include the inadequacy of any indemnification obligations provided by the seller, the impact of a change of ratings or the issuance of an unsolicited rating, the absence of a secondary market for the Series A Bonds, the issuance of additional energy transition bonds or similar instruments creating greater burdens on the same consumers, regulatory actions affecting certain investors and losses on investments held by the indenture trustee.

18

RISK FACTORS

You should consider carefully all the information included in this prospectus, including the following factors and the statements contained under the heading “Cautionary Statement Regarding Forward-Looking Statements” in this prospectus, before you decide whether to invest in the Series A Bonds:

You may experience material payment delays or incur a loss on your investment in the Series A Bonds because the source of funds for payment is limited.

The only source of funds for payments of interest on and principal of the Series A Bonds will be the collateral for the Series A Bonds, which consists of:

•

the energy transition property securing the Series A Bonds, including the right to impose, charge, collect and receive energy transition charges as provided in the Financing Order and the right to obtain true-up adjustments of the energy transition charges as provided in the Financing Order and the Energy Transition Act;

•

the funds on deposit in the accounts for the Series A Bonds held by the indenture trustee; and

•

the issuing entity’s rights under various contracts described in this prospectus.

The Series A Bonds will not be insured or guaranteed by PNM, including in its capacity as sponsor, depositor, seller or servicer, or by its parent, PNMR, any of their respective affiliates, the indenture trustee or any other person or entity. The Series A Bonds will be nonrecourse obligations, secured only by the collateral. Delays in payment on the Series A Bonds might result in a reduction in the market value of the Series A Bonds and, therefore, the value of your investment in the Series A Bonds.

The Series A Bonds will not constitute debt or a pledge of the faith and credit or taxing power of the State of New Mexico or of any county, municipality or any other political subdivision of the State of New Mexico. Bondholders will have no right to have taxes levied by the legislature or the taxing authority of any county, municipality or other political subdivision of the State of New Mexico for the payment of the principal of or interest on the Series A Bonds. The issuance of the Series A Bonds does not obligate the State of New Mexico or a political subdivision of the State of New Mexico to levy any tax or make any appropriation for payment of the principal of or interest on the Series A Bonds.

Thus, you must rely for payment of the Series A Bonds solely upon the Energy Transition Act, state and federal constitutional rights to enforcement of the Energy Transition Act, the Financing Order, collections of the energy transition charges and funds on deposit in the accounts for the Series A Bonds held by the indenture trustee. If these amounts are not sufficient to make payments or there are delays in recoveries, you may experience material payment delays or incur a loss on your investment in the Series A Bonds. The organizational documents of the issuing entity restrict the issuing entity’s right to acquire other assets unrelated to the issuance of energy transition bonds. Please read “PNM Energy Transition Bond Company I, LLC, the Issuing Entity” in this prospectus.

Risks Associated with Potential Judicial, Legislative or Regulatory Actions

The issuing entity will not be obligated to indemnify you for changes in law.

Neither the issuing entity nor PNM will indemnify you for any changes in the law, including any federal preemption or repeal or amendment of the Energy Transition Act that may affect the value of your Series A Bonds. PNM will agree in the sale agreement to institute any action or proceeding as may be reasonably necessary to block or overturn any attempts to cause a repeal, modification or amendment to the Energy Transition Act that would be materially adverse to the issuing entity, the indenture trustee or the bondholders. However, PNM may not be able to take such action and, if PNM does take action, such action may not be successful. Although PNM or any successor assignee might be required to indemnify the issuing entity if legal action based on the law in effect at the time of the issuance of the Series A Bonds invalidates the energy transition property, such indemnification obligations do not apply for any changes in law after the date the Series A Bonds are issued, whether such changes in law are effected by means of any legislative enactment, any constitutional amendment, any regulatory or administrative action that is

19

legislative in nature or any final and non-appealable judicial decision. See “The Sale Agreement — Seller Representations and Warranties” and “The Servicing Agreement — Servicing Standards and Covenants” in this prospectus.

Future judicial action could reduce the value of your investment in the Series A Bonds.

The energy transition property securing the Series A Bonds is created pursuant to the Energy Transition Act and the Financing Order issued by the NMPRC pursuant to the Energy Transition Act. The Energy Transition Act became effective in 2019. PNM is the first utility to issue energy transition bonds under the Energy Transition Act and this the first issuance of energy transition bonds pursuant to the Energy Transition Act.

The Energy Transition Act or any provisions thereof might be directly contested in courts or otherwise become the subject of litigation. In addition, the Financing Order or any provision thereof might be directly contested in courts or otherwise become the subject of litigation. For example, on April 10, 2020, two intervenors in the proceedings related to the Financing Order filed a notice of appeal with the New Mexico Supreme Court of the NMPRC’s approval of the Financing Order. In their appeal, the intervenors asserted that the NMPRC improperly applied the Energy Transition Act and that the Energy Transition Act violates the New Mexico Constitution. On January 10, 2022, the New Mexico Supreme Court issued its decision rejecting the constitutional challenges to the Energy Transition Act and affirmed the Financing Order. In addition, through proceedings initiated in February 2022 (the “Show Cause Proceeding”) and filings made in PNM’s base rate case filed in December 2022, parties challenged PNM’s continuing authority to issue the Series A Bonds under the Financing Order and the Energy Transition Act. On August 18, 2023, PNM entered into a settlement agreement with the intervening parties to resolve the remaining legal challenges. On September 21, 2023, the NMPRC issued an order that affirms the validity of the Financing Order and the authorizations and approvals granted to PNM therein, including the Financing Order’s determination of its irrevocability and PNM’s ongoing authority to cause the issuance of up to $360.1 million of energy transition bonds pursuant to the Financing Order. In addition, the NMPRC affirmed its non-impairment pledge pursuant to the Financing Order and the Energy Transition Act. On September 22, 2023, all parties to the Show Cause Proceeding filed an agreement with the New Mexico Supreme Court stipulating to dismissal of the appeals relating to the Show Cause Proceeding and requesting that the New Mexico Supreme Court issue an order dismissing such appeals. See “Legal Proceedings” for additional information.

The issuing entity cannot assure you that another lawsuit challenging the validity of the Energy Transition Act or the Financing Order will not be filed in the future or that, if filed, such lawsuit will not be successful. If an invalidation of any relevant underlying legislative provision or Financing Order provision were to result from such litigation, you might lose some or all of your investment or you might experience delays in recovering your investment. Therefore, future legal challenges to the Energy Transition Act or the Financing Order may affect the value of your investment in the Series A Bonds. See “The Energy Transition Act and the Financing Order” in this prospectus.

Other states have passed legislation similar to the Energy Transition Act to authorize recoveries by utilities of specified costs, such as costs associated with deregulation of the electricity market, environmental control costs or storm recovery costs, and some of those laws have been challenged by judicial actions or utility commission proceedings. To date, none of those challenges has succeeded, but future challenges might be made. An unfavorable decision challenging legislation similar to the Energy Transition Act would not automatically invalidate the Energy Transition Act or the Financing Order, but it might provoke a challenge to the Energy Transition Act or the Financing Order, establish a legal precedent for a successful challenge to the Energy Transition Act or the Financing Order or heighten awareness of the political and other risks of the Series A Bonds, and in that way may limit the liquidity and value of the Series A Bonds. Therefore, legal activity in other states might indirectly affect the value of your investment in the Series A Bonds.

Future New Mexico legislative action might attempt to invalidate the Series A Bonds or the energy transition property and reduce the value of your investment.

Under the Energy Transition Act, the State of New Mexico has pledged to and agreed with the bondholders that the State of New Mexico will not take or permit any action that impairs the value of the energy transition property securing the Series A Bonds, except for the true-up adjustments allowed by Section 6

20

of the Energy Transition Act, or reduces, alters or impairs the energy transition charges that are imposed, collected and remitted for the benefit of bondholders, until the entire principal of, interest on and redemption premium on the Series A Bonds and all financing costs are paid in full and performed in full. For a description of the New Mexico state pledge, see “The Energy Transition Act and the Financing Order” in this prospectus. Despite the state pledge, the New Mexico legislature might attempt to repeal the Energy Transition Act, or attempt to amend the Energy Transition Act.

New Mexico has a voter referendum process but does not have a voter initiative process. The time for challenging the Energy Transition Act through a referendum has expired. As a result, absent an amendment to the New Mexico Constitution, the Energy Transition Act cannot be amended or repealed by direct action of the electorate of New Mexico.

Under U.S. and New Mexico constitutional principles related to the impairment of contracts, the New Mexico legislature would generally be prohibited, without paying just compensation, from passing any subsequent law or exercising any legislative powers, as applicable, that would alter, reduce or impair the value of the energy transition property so as to substantially impair the rights of the owners of the energy transition property or the bondholders. Legislative or popular concerns with the burden of taxation or government charges have at times led to adoption of legislation reducing or eliminating taxes or charges that supported bonds or other contractual obligations.

The issuing entity cannot assure you that a repeal or amendment of the Energy Transition Act will not be adopted or sought or that any action or refusal to act by the State of New Mexico will not occur, any of which may constitute a violation of the state pledge with the owners of the energy transition property and the bondholders. If a violation of this pledge occurred, costly and time-consuming litigation might ensue regardless of the outcome of such litigation. Any such public effort contrary to the state pledge or related litigation might materially adversely affect the price of the Series A Bonds and your ability to resell the Series A Bonds and might delay the timing of payments on the Series A Bonds. Moreover, given the lack of controlling judicial precedent directly addressing the Series A Bonds and the state pledge, the issuing entity cannot predict the outcome of any litigation with certainty, and, accordingly, you could experience a delay in receipt of payments on or incur a loss on your investment in the Series A Bonds.

Except as described in “The Sale Agreement — Indemnification” in this prospectus, neither the issuing entity, PNM, nor any of its successors, assignees or affiliates will indemnify you for any change in law, including any amendment or repeal of the Energy Transition Act, that might affect the value of the Series A Bonds.

The NMPRC might attempt to take actions which could reduce the value of your investment in the Series A Bonds.

The Energy Transition Act provides that the Financing Order is irrevocable and that the NMPRC may not reduce, impair, postpone or terminate the energy transition charges approved in the Financing Order, the energy transition property or the collection or recovery of revenues through the energy transition charges. However, the NMPRC retains the power to adopt, revise or rescind rules or regulations affecting PNM.

For instance, in response to COVID-19, the NMPRC issued an emergency order that was applicable during the duration of the Governor of New Mexico’s emergency executive order that prohibited the discontinuance of a residential customer’s service for non-payment. Please read “Public Service Company of New Mexico — The Depositor, Sponsor, Seller and Servicer — COVID-19 Consumer Protections” in this prospectus. Any new or amended regulations or orders from the NMPRC might affect the ability of the servicer to disconnect customers for nonpayment, assess late fees or impose deposit requirements which may impact PNM’s ability to collect energy transition charges in full, and on a timely basis, which may negatively impact, the rating of the Series A Bonds or their price and, accordingly, the amortization of the Series A Bonds and their weighted average lives.

In addition, under the Energy Transition Act, the NMPRC retains the power to investigate the compliance of a utility with the terms and conditions of a financing order and requiring compliance therewith. For example, on March 30, 2022, the NMPRC issued an order appointing hearing examiners to conduct a hearing and to issue a recommended decision to address the issues raised by a joint motion from

21

two intervenors in the proceedings relating to the Financing Order for an order to show cause and enforce the Financing Order. On June 29, 2022, the NMPRC issued an order that required PNM to, among other things, include (in its next rate case application) an explanation and defense of the prudence of the timing of the issuance of the Series A Bonds beyond the SJGS abandonment dates and what actions were taken to protect customers from interest rate increases occurring as well as the continued marketability of the Series A Bonds issued. In PNM’s rate case filed in December 2022, parties filed challenges to PNM’s continuing authority to issue the Series A Bonds pursuant to the Financing Order and the Energy Transition Act. On August 18, 2023, PNM entered into a settlement agreement with the intervening parties to resolve the remaining legal challenges. On September 21, 2023, the NMPRC issued an order that affirms the validity of the Financing Order and the authorizations and approvals granted to PNM therein, including the Financing Order’s determination of its irrevocability and PNM’s ongoing authority to cause the issuance of up to $360.1 million of energy transition bonds pursuant to the Financing Order. In addition, the NMPRC affirmed its non-impairment pledge pursuant to the Financing Order and the Energy Transition Act. On September 22, 2023, all parties to the Show Cause Proceeding filed an agreement with the New Mexico Supreme Court stipulating to dismissal of the appeals relating to the Show Cause Proceeding and requesting that the New Mexico Supreme Court issue an order dismissing such appeals. See “Legal Proceedings” for additional information.

PNM, as servicer, is required to file with the NMPRC certain true-up adjustments to adjust the energy transition charges. See “The Servicing Agreement — True-Up Adjustment Process” in this prospectus. These adjustments are intended to provide, among other things, for timely payment on the Series A Bonds. Challenges or delays in the true-up adjustment process might adversely affect the market perception and valuation of the Series A Bonds. Also, any litigation, as well as being costly and time-consuming, might materially delay energy transition charge collections due to delayed implementation of true-up adjustments and might result in missing payments or payment delays and lengthened weighted average lives of the Series A Bonds.

The servicer may not fulfill its obligations to act on behalf of the bondholders to protect bondholders from actions by the NMPRC or the State of New Mexico, or the servicer may be unsuccessful in any such attempt.

The servicer will agree in the servicing agreement to take any action or proceeding necessary to compel performance by the NMPRC and the State of New Mexico of any of their obligations or duties under the Energy Transition Act or the Financing Order, including any actions reasonably necessary to block or overturn any attempts to cause a repeal or modification of the Energy Transition Act or the Financing Order. The servicer, however, may not be able to take those actions for a number of reasons, including due to legal or regulatory restrictions, financial constraints and practical difficulties in successfully challenging any such legislative enactment or constitutional amendment. Additionally, any action the servicer is able to take may not be successful. Any such failure to perform its obligations or to successfully compel performance by the NMPRC or the State of New Mexico could negatively impact bondholders’ rights and result in a loss of their investment.

A municipal entity might assert the right to acquire portions of PNM’s electric distribution facilities and avoid payment of the energy transition charges.

A municipality might bring a proceeding and allege that it has the right to acquire portions of PNM’s electric distribution facilities through the power of eminent domain for use as part of municipally-owned utility systems. There can be no assurance that one or more municipalities will not seek to acquire some or all of PNM’s electric distribution facilities while the Series A Bonds remain outstanding. The Energy Transition Act provides that energy transition charges shall be paid by each customer who acquires electricity from an alternative or subsequent electricity supplier in PNM’s utility service area. The Financing Order provides that the energy transition charges will be non-bypassable as defined in the Energy Transition Act and shall be paid by each customer receiving electric delivery service from PNM or its successors for as long as the energy transition bonds secured by the energy transition charges are outstanding and the related financing costs have not been recovered in full. In the servicing agreement, PNM will covenant to assert in an appropriate forum that any municipality that acquires any portion of PNM’s electric distribution facilities must be treated as a successor to PNM under the Financing Order. However, the involved municipality might assert that it should not be treated as a successor to PNM for these purposes and that its distribution

22

customers are not responsible for payment of the energy transition charges. In any such case, PNM cannot assure you that the energy transition charges will be collected from customers of municipally-owned utilities who were formerly customers of PNM and that such an occurrence might not affect the timing or receipt of payments with respect to the Series A Bonds.

Risks Associated with Servicing

Inaccurate forecasting of usage, demand, number of customers or collections might reduce scheduled payments on the Series A Bonds.

The energy transition charges will be calculated by the servicer according to the methodology approved in the Financing Order, which includes the allocation of cost responsibility among the customer classes based on the production cost allocation methodology approved by the NMPRC in PNM’s most recent general rate case. The calculation of the energy transition charges securing the Series A Bonds will be based primarily on estimates of kWh usage and number of customers (residential customer block charges), estimates of kW demand (general power and large power) and estimates of number of customers (small power customers). The amount and the rate of energy transition charge collections will depend in part on actual electricity usage or demand or the actual number of customers for such classes, and the amount of collections and write-offs. If the servicer inaccurately forecasts electricity usage or demand or the number of customers in certain customer classes, or underestimates customer delinquencies or charge-offs when setting or adjusting the energy transition charges, there could be a shortfall or a material delay in energy transition charge collections, which might result in missed or delayed payments of principal and interest and lengthened weighted average life of the Series A Bonds. See “The Servicing Agreement — True-Up Adjustment Process.”

Inaccurate forecasting of electricity usage or demand by the servicer could result from, among other things:

•

unanticipated weather or economic conditions, resulting in less electricity usage or demand than forecasted;

•

general economic conditions, including the economic downturn caused by the COVID-19 pandemic being worse than expected, or the impacts of inflation, causing customers to migrate from PNM’s service territory or reduce their electricity usage or demand;

•

the occurrence of a natural disaster, such as a blizzard or wind storm, or an act of war or terrorism, cyber-attacks, or other catastrophic event, including pandemics, unexpectedly disrupting electrical service and reducing electricity usage or demand;

•

unanticipated changes in the market structure of the electric industry;

•

large customers unexpectedly ceasing business or departing PNM’s service territory;

•

dramatic and unexpected changes in energy prices resulting in decreased electricity usage;

•

customers consuming less electricity than anticipated because of increased energy prices, unanticipated increases in conservation efforts or unanticipated increases in electric consumption efficiency;

•

differences or changes in forecasting methodology; or

•

customers switching to alternative sources of energy, including self-generation or co-generation of electric power in some cases without using PNM’s transmission or distribution system. Self-generators that receive no electric delivery service from PNM are not liable for the energy transition charges. The Energy Transition Act and the Financing Order do not provide for exit fees to be charged to any customers that might leave the grid to self-generate.

Inaccurate forecasting of delinquencies or charge-offs by the servicer could result from, among other things:

•

unexpected deterioration of the economy, the occurrence of a natural disaster, an act of war or terrorism or other catastrophic events, including pandemics, causing greater charge-offs than expected or forcing PNM or a successor distribution utility to grant additional payment relief to more customers;

23

•

an unexpected change in law or actions taken by the NMPRC that make it more difficult for PNM or a successor distribution utility to disconnect nonpaying customers or that requires PNM or a successor distribution utility to apply more lenient credit standards in accepting customers; or

•

the introduction into the energy markets, as a result of a fundamental change in the regulation of electric utilities in New Mexico, of less creditworthy alternative energy suppliers that are permitted to collect payments arising from the energy transition charges, but who may fail to remit collections to the servicer in a timely manner.

The impacts of COVID-19, high inflation, actions by the Federal Reserve to address inflationary concerns or other market conditions, geopolitical activity and the resulting impact on business and economic conditions could negatively affect PNM’s ability to collect and service the Energy Transition Charges and might reduce scheduled payments on the Series A Bonds.

Continued supply chain issues that were initially experienced during the COVID-19 pandemic, high inflation, actions by the Federal Reserve to address inflationary concerns or other market conditions, geopolitical activity and the resulting impact on the economy and financial markets could adversely affect PNM’s business, results of operations, financial condition, cash flows and access to capital markets and, in turn, its ability to service the energy transition charges. These effects could adversely impact PNM by, among other things, (i) reducing usage and/or demand for electricity by PNM’s customers, (ii) causing delays and disruptions in the availability of and timely delivery of materials and components used in PNM’s operations, (iii) causing a deterioration in the credit quality of PNM’s customers; and (iv) causing other unpredictable events.

In addition, the New Mexico legislature or the NMPRC may take additional actions in the future in response to COVID-19 or any future pandemic, such as temporary suspension of disconnections and late payment fees for nonpayment of utility bills. In addition, COVID-19 or any future pandemic may impact PNM’s ability to maintain operations at the same level as it was able to prior the pandemic. For instance, a large portion of PNM’s employees may be unable to perform their job functions due to illness, family illness, quarantine requirements, social distancing, telework requirements and other impacts of a pandemic. Any of these factors could adversely affect the timing of collection of energy transition charges. As a consequence, there could be a shortfall or material delay in collections of energy transition charges, which might result in missed or delayed payments of principal and interest and lengthened weighted average life of the Series A bonds and downgrade of the credit rating on the Series A Bonds.

Your investment in the Series A Bonds depends on PNM or its successors or assignees acting as servicer of the energy transition property.

PNM, as servicer, will be responsible for, among other things, calculating, billing, collecting and posting the energy transition charges from customers, submitting requests to the NMPRC to adjust these charges, monitoring the collateral for the Series A Bonds and taking certain actions in the event of non-payment by a customer. The indenture trustee’s receipt of collections in respect of the energy transition charges, which will be used to make payments on the Series A Bonds, will depend in part on the skill and diligence of the servicer in performing these functions. The systems that the servicer has in place for energy transition charge billings, collections and postings, as the same may be modified by any applicable current or future NMPRC regulations, might, in particular circumstances, cause the servicer to experience difficulty in performing these functions in a timely and accurate manner. If the servicer fails to make collections for any reason, then the servicer’s payments to the indenture trustee in respect of the energy transition charges might be delayed or reduced. In that event, the issuing entity’s payments on the Series A Bonds might be delayed or reduced.

Changes to billing, collection and posting practices might reduce the value of your investment in the Series A Bonds.

The Financing Order specifies the methodology for determining the amount of the energy transition charges the issuing entity may impose. The servicer may not change this methodology without approval of the NMPRC. However, subject to any required NMPRC approval, the servicer may set its own billing,

24

collection and posting arrangements with customers from whom it collects energy transition charges, provided that these arrangements comply with any applicable NMPRC customer safeguards and the provisions of the servicing agreement. For example, to recover part of an outstanding bill, the servicer may agree to compromise amounts due or to extend a customer’s payment schedule, including the energy transition charges, so long as such action is in accordance with the servicer’s existing collection policies and complies in all material respects with applicable law. Also, subject to any required NMPRC approval, the servicer may change billing, collection and posting practices, which might adversely impact the timing and amount of customer payments and might reduce energy transition charge collections, thereby limiting the issuing entity’s ability to make scheduled payments on the Series A Bonds. Separately, the NMPRC might require changes to these practices. Any changes in billing, collection and posting practices or regulations might make it more difficult for the servicer to collect the energy transition charges and adversely affect the value of your investment in the Series A Bonds.

Cyberattacks and data security breaches could adversely affect the business of PNM and its ability to service the energy transition charges.

PNM faces the risk of physical and cybersecurity attacks, both threatened and actual, against generation facilities, transmission and distribution infrastructure, information technology systems, and network infrastructure, which could negatively impact the ability of PNM to generate, transport, and deliver power, or otherwise operate facilities in the most efficient manner or at all.

The utility industry in which PNM operates is a highly regulated industry that requires the continued operation of sophisticated information technology systems and network infrastructure, some of which are deemed to be critical infrastructure under North American Electric Reliability Corporation guidelines. Certain of PNM’s systems are interconnected with external networks. In the regular course of business, PNM handles a range of sensitive security and customer information. PNM is subject to the rules of various agencies and the laws of various states, concerning safeguarding and maintaining the confidentiality of this information. Cyberattacks regularly occur, and generally are unsuccessful. Those few events that are successful do not generally result in significant or consequential business impacts. However, despite steps the PNM may take to detect, mitigate and/or eliminate threats and respond to security incidents, the techniques used by those who wish to obtain unauthorized access, and possibly disable or sabotage systems and/or abscond with information and data, change frequently and PNM may not be able to protect against all such actions.

In the event that a capable adversary attacks PNM’s computer and operating systems, despite the best efforts of PNM, the generation, transmission, or distribution of electrical services could be degraded or disrupted, and customer information, business records, or other sensitive data could be lost, destroyed, or released outside of PNM’s control. Further, PNM’s use of technologies manufactured by third parties may be subject to espionage activities and cyberattack of the third party resulting in losses outside of the control of the company. Although PNM has implemented security measures to identify, prevent, detect, respond to, and recover from cyber and physical security events and supply chain disruptions, critical infrastructure, including information and operational technology systems, are vulnerable to disability, failures, or unauthorized access, which could occur as a result of malicious compromise, employee error, and/or employee misconduct or supply compromise. A successful physical or cybersecurity attack or other similar failure of the systems could impact the reliability of PNM’s generation, transmission and distribution systems, including the possible unauthorized shutdown of facilities. Such an event could lead to disruptions of business operations, including PNM’s ability to generate, transport, and deliver power to serve customers, to bill customers, and to process other financial information. A breach of PNM’s information systems could also lead to the loss and destruction of confidential and proprietary data, personally identifiable information, trade secrets, intellectual property and supplier data, and could disrupt business operations which could harm PNM’s reputation and financial results, as well as potential increased regulatory oversight, litigation, fines, and other remedial action. The costs incurred to investigate and remediate a physical or cybersecurity attack could be significant.

A significant physical or cybersecurity attack on PNM’s critical infrastructure could have an adverse impact on the operations, reputation and financial condition of PNM and, in turn, its ability to service the energy transition charges.

25

If the issuing entity needs to replace PNM as the servicer, the issuing entity may experience difficulties finding and using a replacement servicer.

Under certain circumstances, PNM may resign as servicer, or the indenture trustee or certain bondholders may remove PNM as servicer. See “The Servicing Agreement — Matters Regarding the Servicer” and “— Rights Upon a Servicer Default.” If PNM ceases to service the energy transition property related to the Series A Bonds, it might be difficult to find a successor servicer. Also, any successor servicer might have less experience and ability than PNM and might experience difficulties in collecting energy transition charges and determining appropriate adjustments to the energy transition charges and billing and/or payment arrangements may change, resulting in delays or disruptions of collections. A successor servicer might only be willing to perform such services for fees higher than those approved in the Financing Order or might charge fees that, although permitted under the Financing Order, are substantially higher than the fees paid to PNM as servicer. Although a true-up adjustment would be required to allow for the increase in fees, there could be a gap between the incurrence of those fees and the implementation of the true-up adjustment to adjust for that increase that might adversely affect payments to bondholders. In addition, in the event of the commencement of a case by or against the servicer under the Title 11 of the United States Code, or the Bankruptcy Code, or similar laws, the issuing entity and the indenture trustee might be prevented from effecting a transfer of servicing due to operation of the Bankruptcy Code. Any of these factors might delay the timing of payments and reduce the value of your investment.

In addition to the above, it is possible that PNM may, in the future, cause other subsidiaries to issue other securities, similar to the Series A Bonds, that are backed by charges owing from customers or similar types of property. PNM has covenanted in the sale agreement that, in the event of any issuance of that sort, it will enter into an intercreditor agreement with the indenture trustee and the trustees for those other issuances. These provisions could impair the ability of the indenture trustee to appoint a successor servicer in the event of a servicer default.

It might be difficult for successor servicers to collect the energy transition charges from PNM’s customers.

Any successor servicer may bring an action against a customer for non-payment of the energy transition charge, but only a successor servicer that is a successor electric utility may terminate electric service for failure to pay the energy transition charge. A successor servicer that does not have the threat of termination of electric service available to enforce payment of the energy transition charge would need to rely on the successor electric utility to threaten to terminate service for nonpayment of other portions of monthly electric utility bills. This inability might result in higher delinquencies and reduce the value of your investment.

Risk Associated with the Unusual Nature of the Energy Transition Property

Foreclosure of the indenture trustee’s lien on the energy transition property for the Series A Bonds might not be practical, and acceleration of the Series A Bonds before maturity might have little practical effect.

Under the Energy Transition Act and the indenture, the indenture trustee or the bondholders have the right to foreclose or otherwise enforce the lien on the energy transition property securing the Series A Bonds. However, in the event of foreclosure, there is likely to be a limited market, if any, for the energy transition property. Therefore, foreclosure might not be a realistic or practical remedy. Moreover, although principal of the Series A Bonds will be due and payable upon acceleration of the Series A Bonds before maturity, energy transition charges likely would not be accelerated and the nature of the issuing entity’s business will result in principal being paid as funds become available. If there is an acceleration of the Series A Bonds, all tranches of the Series A Bonds will be paid pro rata; therefore, some tranches might be paid earlier than expected and some tranches might be paid later than expected.

Risks Associated with Natural Disasters

Storm damage to PNM’s operations might impair payment of the Series A Bonds.

Severe weather, such as winter storms and wind storms, and other natural disasters may cause outages and property damage. The potential disruption of PNM’s operations due to storms, natural disasters or other catastrophic events could be substantial. Generation, transmission, distribution and usage and demand

26

of electricity might be interrupted temporarily, reducing the collections of energy transition charges. There might be longer-lasting weather-related adverse effects on residential and commercial development and economic activity in the PNM service area, which could cause the per-kWh energy transition charges to be greater than expected. Legislative action adverse to the bondholders might be taken in response, and such legislation, if challenged as a violation of the New Mexico state pledge, might be defended on the basis of public necessity. Please read “The Energy Transition Act and the Financing Order” and “Risk Factors — Risks Associated with Potential Judicial, Legislative or Regulatory Actions — Future New Mexico legislative action might attempt to invalidate the Series A Bonds or the energy transition property and reduce the value of your investment” in this prospectus.

Risks Associated with Potential Bankruptcy Proceedings of the Seller or the Servicer

For a more detailed discussion of the following bankruptcy risks, please read “How a Bankruptcy May Affect Your Investment” in this prospectus.

The servicer will commingle the energy transition charges with other revenues it collects, which might obstruct access to the energy transition charges in case of the servicer’s bankruptcy and reduce the value of your investment in the Series A Bonds.

The servicer will be required to remit estimated energy transition charge collections to the indenture trustee no later than the second servicer business day of receipt. Prior to remitting such funds to the indenture trustee, the servicer will not segregate energy transition charge collections from the other funds it collects from customers or its general funds. The energy transition charge collections will be estimated and segregated only when the servicer remits them to the indenture trustee.

Despite this requirement, the servicer might fail to remit the full amount of the energy transition charges payable to the indenture trustee or might fail to do so on a timely basis. This failure, whether voluntary or involuntary, might materially reduce the amount of energy transition charge collections available to make payments on the Series A Bonds.

Absent a default under the servicing agreement, PNM will be permitted to remit estimated energy transition charge collections to the indenture trustee. While PNM will be responsible for identifying and calculating the actual amount of energy transition charge collections in the event of a default under the servicing agreement, it may be difficult for PNM to identify such charges, given existing limitations in its billing system.

The Energy Transition Act provides that the priority of a lien and security interest perfected in the energy transition property securing the Series A Bonds is not impaired by the commingling of the funds arising from the energy transition charges with any other funds. In a bankruptcy of the servicer, however, a bankruptcy court might rule that federal bankruptcy law takes precedence over the Energy Transition Act and might decline to recognize the issuing entity’s right to collections of the energy transition charges that are commingled with other funds of the servicer as of the date of bankruptcy. If so, the collections of the energy transition charges held by the servicer as of the date of bankruptcy would not be available to pay amounts owing on the Series A Bonds. In this case, the issuing entity would have only a general unsecured claim against the servicer for those amounts. This decision could cause material delays in payments of principal or interest, or losses, on your Series A Bonds and could materially reduce the value of your investment in the Series A Bonds.

Bankruptcy of PNM or any successor or assignee could result in losses or delays in payments on the Series A Bonds.

The seller will represent and warrant in the sale agreement that the transfer of the energy transition property to the issuing entity under that sale agreement is a valid sale and assignment of that energy transition property from the seller to the issuing entity. The seller will also represent, warrant, and covenant that it will take the appropriate actions under the Energy Transition Act to perfect this sale. The Energy Transition Act provides that the transactions described in the sale agreement shall constitute a sale of the energy transition property to the issuing entity, and the seller and the issuing entity will treat the transaction as a sale under applicable law, although for financial reporting and tax reporting purposes the transaction will be

27

treated as debt of the seller. If the seller were to become a debtor in a bankruptcy case, and a party in interest (including the seller itself) were to take the position that the sale of the energy transition property to the issuing entity should be recharacterized as the grant of a security interest in such energy transition property to secure a borrowing of the seller, delays or reductions in payments on the Series A Bonds could result.

Pursuant to the Energy Transition Act and the Financing Order, upon the sale of the energy transition property, the energy transition property is created as a current property right, and it thereafter continuously exists as property for all purposes. Nonetheless, if the seller were to become the debtor in a bankruptcy case, a party in interest (including the seller itself) may take the position that, because the energy transition charges are usage-based charges, the energy transition property comes into existence only as consumers use electricity. If a court were to adopt this position, no assurance can be given that the court would not also rule that any energy transition property relating to electricity consumed after the commencement of the seller’s bankruptcy case was not required to be transferred to the issuing entity, thus resulting in delays or reductions of payments on the Series A Bonds.

A bankruptcy court generally follows state property law on issues such as those addressed by the provisions described above. However, a bankruptcy court has authority not to follow state law if it determines that the state law is contrary to a paramount federal bankruptcy policy or interest. If a bankruptcy court in a bankruptcy of PNM refused to enforce one or more of the state property law provisions described above for this reason, the effect of this decision on you as a bondholder would be similar to the treatment you would receive in a bankruptcy of PNM if the Series A Bonds had been issued directly by PNM. A decision by the bankruptcy court that, despite the separateness of the issuing entity from PNM, the assets and liabilities of the issuing entity and those of PNM should be substantively consolidated would have a similar effect on you as a bondholder.

The issuing entity has taken steps together with PNM, as the seller, to reduce the risk that in the event PNM or an affiliate of PNM were to become the debtor in a bankruptcy case, a court would order that the assets and liabilities of the issuing entity would be substantively consolidated with those of PNM or an affiliate. Such steps include, without limitation, provisions in the limited liability company agreement of the issuing entity concerning entity separation and requiring an independent manager. Nonetheless, these steps might not be completely effective, and thus if PNM or an affiliate of PNM were to become a debtor in a bankruptcy case, a court may order that the assets and liabilities of the issuing entity be substantively consolidated with those of PNM or the affiliate. This might cause material delays in payment of, or losses on, your Series A Bonds and might materially reduce the value of your investment in the Series A Bonds. For example:

•

without permission from the bankruptcy court, the indenture trustee might be prevented from taking actions against PNM or recovering or using funds on your behalf or replacing PNM as the servicer;

•

the bankruptcy court might order the indenture trustee to exchange the energy transition property for other property of lower value;

•

tax or other government liens on PNM’s property might have priority over the indenture trustee’s lien and might be paid from collections of energy transition charges before payments on your Series A Bonds;

•

the indenture trustee’s lien might not be properly perfected in collections of energy transition charges prior to or as of the date of PNM’s bankruptcy, with the result that the Series A Bonds would represent only general unsecured claims against PNM;

•

the bankruptcy court might rule that neither the issuing entity’s property interest nor the indenture trustee’s lien extends to energy transition charges in respect of electricity consumed after the commencement of PNM’s bankruptcy case, with the result that your Series A Bonds would represent only general unsecured claims against PNM;

•

the issuing entity and PNM might be relieved of the obligation to make any payments on your Series A Bonds during the pendency of the bankruptcy case and might be relieved of any obligation to pay interest accruing after the commencement of the bankruptcy case;

28

•

PNM might be able to alter the terms of the Series A Bonds as part of its plan of reorganization;

•

the bankruptcy court might rule that the energy transition charges should be used to pay, or the issuing entity should be charged for, a portion of the cost of providing electric service; or

•

the bankruptcy court might rule that the remedy provisions of the sale agreement are unenforceable, leaving the issuing entity with an unsecured claim of actual damages against PNM that may be difficult to prove or, if proven, to collect in full.

Furthermore, if PNM enters bankruptcy proceedings, it might be permitted to stop acting as servicer, and it may be difficult to find a third party to act as successor servicer. The failure of the servicer to perform its duties or the inability to find a successor servicer might cause payment delays or losses on your investment in the Series A Bonds. Also, the mere fact of a servicer or seller bankruptcy proceeding might have an adverse effect on the resale market for the Series A Bonds and on the value of the Series A Bonds.

The sale of the energy transition property might be construed as a financing and not a sale in a case of PNM’s bankruptcy which might delay or limit payments on the Series A Bonds.

The Energy Transition Act provides that the characterization of a transfer of the energy transition property as a sale or other absolute transfer will not be affected or impaired by treatment of the transfer as a financing for federal or state tax purposes or financial reporting purposes. The issuing entity and PNM will treat the transaction as a sale under applicable law, although for financial reporting and income and franchise tax purposes the transaction is intended to be treated as a financing. In the event of a bankruptcy of PNM, a party in interest in the bankruptcy might assert that the sale of the energy transition property to the issuing entity was a financing transaction and not a “sale or other absolute transfer” and that the treatment of the transaction for financial reporting and tax purposes as a financing and not a sale lends weight to that position. If a court were to characterize the transaction as a financing, the issuing entity expects that it would, on behalf of the issuing entity and the indenture trustee, be treated as a secured creditor of PNM in the bankruptcy proceedings, although a court might determine that the issuing entity only has an unsecured claim against PNM. Even if the issuing entity had a security interest in the energy transition property, the issuing entity would not likely have access to the related energy transition charge collections during the bankruptcy and would be subject to the risks of a secured creditor in a bankruptcy case, including the possible bankruptcy risks described in the immediately preceding risk factor. As a result, repayment of the Series A Bonds might be significantly delayed and a plan of reorganization in the bankruptcy might permanently modify the amount and timing of payments to the issuing entity of the related energy transition charge collections and therefore the amount and timing of funds available to the issuing entity to pay bondholders.

If the servicer enters bankruptcy proceedings, the payment of energy transition charges by the servicer prior to the date of bankruptcy might constitute preferences, which means these funds might be unavailable to pay amounts owing on the Series A Bonds.

In the event of a bankruptcy of the servicer, a party in interest might take the position that the remittance of funds prior to bankruptcy of the servicer, pursuant to the servicing agreement, constitutes a preference under bankruptcy law if the remittance of those funds was deemed to be paid on account of a preexisting debt. If a court were to hold that the remittance of funds constitutes a preference, any such remittance within 90 days of the filing of the bankruptcy petition could be avoidable, and the funds could be required to be returned to the bankruptcy estate of the servicer. To the extent that energy transition charges have been commingled with the general funds of the servicer, the risk that a court would hold that a remittance of funds was a preference would increase. Also, if the issuing entity is considered an “insider” of the servicer, any such remittance made within one year of the filing of the bankruptcy petition could be avoidable as well if the court were to hold that such remittance constitutes a preference. In either case, the issuing entity or the indenture trustee would merely be an unsecured creditor of the servicer. If any funds were required to be returned to the bankruptcy estate of the servicer, the issuing entity would expect that the amount of any future energy transition charges would be increased through the statutory true-up adjustments to recover such amount, though this would not eliminate the risk of payment delays or losses on your investment in the Series A Bonds.

29

Claims against PNM or any successor seller might be limited in the event of a bankruptcy of the seller.

If the seller were to become a debtor in a bankruptcy case, claims, including indemnity claims, by the issuing entity against the seller under the sale agreement and the other documents executed in connection with the sale agreement would be unsecured claims and would be adjudicated in the bankruptcy case. In addition, the bankruptcy court might estimate any contingent claims that the issuing entity has against the seller and, if it determines that the contingency giving rise to these claims is unlikely to occur, estimate the claims at a lower amount. A party in interest in the bankruptcy of the seller might challenge the enforceability of the indemnity provisions in the sale agreement. If a court were to hold that the indemnity provisions were unenforceable, the issuing entity would be left with a claim for actual damages against the seller based on breach of contract principles, which would be subject to estimation and/or calculation by the court. The issuing entity cannot give any assurance as to the result if any of the above-described actions or claims were made. Furthermore, the issuing entity cannot give any assurance as to what percentage of their claims, if any, unsecured creditors would receive in any bankruptcy proceeding involving the seller.

The bankruptcy of PNM or any successor seller might limit the remedies available to the indenture trustee.

Upon an event of default for the Series A Bonds under the indenture, the Energy Transition Act permits the indenture trustee to enforce the security interest in the energy transition property, as well as the statutory lien created by the Energy Transition Act, in accordance with the terms of the indenture. In this capacity, and pursuant to the Energy Transition Act and the Financing Order, the indenture trustee is permitted to request a court to order the sequestration and payment to bondholders of all revenues arising with respect to the energy transition property. There can be no assurance, however, that a court would issue this order, after a PNM bankruptcy in light of the automatic stay provisions of Section 362 of the Bankruptcy Code. In that event, the indenture trustee would be required to seek an order from the bankruptcy court lifting the automatic stay to permit this action by the court. There can be no assurance that the bankruptcy court would lift the stay and/or the court would issue the sequestration and payment order.

Other Risks Associated with the Purchase of the Series A Bonds

PNM’s obligation to indemnify the issuing entity for a breach of a representation or warranty might not be sufficient to protect your investment.

PNM will be obligated under the sale agreement to indemnify the issuing entity and the indenture trustee, for itself and on behalf of the bondholders, only in specified circumstances and will not be obligated to repurchase any energy transition property in the event of a breach of any of its representations, warranties or covenants regarding the energy transition property. Similarly, PNM will be obligated under the servicing agreement to indemnify the issuing entity and the indenture trustee, for itself and on behalf of the bondholders only in specified circumstances. Please read “The Sale Agreement” and “The Servicing Agreement” in this prospectus.

Neither the indenture trustee nor the bondholders will have the right to accelerate payments on the Series A Bonds as a result of a breach under the sale agreement or servicing agreement, absent an event of default under the indenture as described in “Description of the Series A Bonds — Events of Default; Rights Upon Event of Default.” Furthermore, PNM might not have sufficient funds available to satisfy its indemnification obligations under these agreements, and the amount of any indemnification paid by PNM might not be sufficient for you to recover all of your investment in the Series A Bonds. In addition, if PNM becomes obligated to indemnify bondholders, the ratings on the Series A Bonds might be downgraded as a result of the circumstances causing the breach and the fact that bondholders will be unsecured creditors of PNM with respect to any of these indemnification amounts. PNM will not indemnify any person for any loss, damages, liability, obligation, claim, action, suit or payment resulting solely from a downgrade in the ratings on the Series A Bonds, or for any consequential damages, including any loss of market value of the Series A Bonds resulting from a default or a downgrade of the ratings of the Series A Bonds. Please read “The Sale Agreement — Seller Representations and Warranties” and “— Indemnification” in this prospectus.

The Series A Bonds will be issued in multiple tranches.

The Series A Bonds are being issued by the issuing entity in three different tranches. Energy transition charges collected by PNM for the benefit of the issuing entity will be allocated among the tranches of Series A

30

Bonds as set forth in the expected amortization schedule and the priority of payments set forth under “Security for the Series A Bonds — How Funds in the Collection Account will be Allocated” in this prospectus. However, the issuing entity cannot assure you that the existence of multiple tranches of Series A Bonds would not cause reductions or delays in payment on your Series A Bonds. In addition, some matters relating to the Series A Bonds may require the vote of the holders of all tranches of the Series Bonds. Your interests in these votes might conflict with the interests of the beneficial owners of Series A Bonds of another tranche and therefore these votes could result in an outcome that is materially unfavorable to you.

PNM may cause the issuance of additional energy transition bonds through the issuing entity or may cause the issuance of additional energy transition bonds or other similar bonds through another affiliated entity in the future.

The issuing entity may, at its sole discretion, but subject to conditions set forth in its organizational documents and the indenture, acquire additional energy transition property created under a separate financing order of the NMPRC, and issue additional energy transition bonds under a separate indenture supported by such additional energy transition property without your prior review or approval. In addition, PNM may in its sole discretion sell additional energy transition property or property similar to the energy transition property, created by a separate financing order to one or more entities other than the issuing entity in connection with the issuance of additional energy transition bonds or obligations similar to the Series A Bonds without your prior review or approval. Please read “Description of the Series A Bonds — Conditions of Issuance of Additional Energy Transition Bonds and Acquisition of Additional Energy Transition Property by the Issuing Entity” and “Security for the Series A Bonds — Issuance of Additional Energy Transition Bonds or Similar Bonds”.

Any new issuance would be offered separately and may include terms and provisions that would be unique to that particular issuance. The issuing entity may not issue additional energy transition bonds unless the rating agency condition is satisfied. In addition, PNM has covenanted in the sale agreement that the satisfaction of the rating agency condition and the execution and delivery of an intercreditor agreement are condition precedents to the sale of additional energy transition property under the Energy Transaction Act or other property consisting of charges similar to the energy transition charges under another similar law, as the case may be, to another entity. Please read “Security for the Series A Bonds — Issuance of Additional Energy Transition Bonds or Similar Bonds” and “Sale Agreement — Covenants of the Seller” in this prospectus.

In the event a consumer does not pay in full all amounts owed under any bill, including energy transition charges, PNM, as servicer, is required under the Financing Order to allocate any resulting shortfalls in energy transition charges ratably based on the amounts of energy transition charges owing in respect of the Series A Bonds and amounts owing in respect of any additional energy transition bonds. However, if a dispute arises with respect to the allocation of such energy transition charges or other delays occur on account of the administrative burdens of making such allocation, the issuing entity cannot assure you that any new issuance would not cause reductions or delays in payment of your Series A Bonds.

In addition, actions taken by the holders of one or more series of additional energy transition bonds and additional other similar bonds might conflict with the interests of the beneficial owners of the Series A Bonds, and could result in an outcome that is materially unfavorable to you.

The credit ratings are no indication of the expected rate of payment of principal on the Series A Bonds.

The issuing entity expects the Series A Bonds will receive credit ratings from at least two nationally recognized statistical rating organizations (NRSRO). A rating is not a recommendation to buy, sell or hold the Series A Bonds. The ratings merely analyze the probability that the issuing entity will repay the total principal amount of the Series A Bonds at the final maturity date (which is later than the scheduled final payment date) and will make timely interest payments. The ratings are not an indication that the rating agencies believe that principal payments are likely to be paid on time according to the expected amortization schedule.

Under Rule 17g-5 of the Exchange Act, NRSROs providing the sponsor with the requisite certification will have access to all information posted on a website by the sponsor for the purpose of determining the

31

initial rating and monitoring the rating after the closing date in respect of the Series A Bonds. As a result, a NRSRO other than a NRSRO hired by the sponsor (a hired NRSRO) may issue ratings on the Series A Bonds (“unsolicited ratings”), which may be lower, and could be significantly lower, than the ratings assigned by the hired NRSROs. The unsolicited ratings may be issued prior to, or after, the closing date in respect of the Series A Bonds. Issuance of any unsolicited rating will not affect the issuance of the Series A Bonds. Issuance of an unsolicited rating lower than the ratings assigned by the hired NRSRO on the Series A Bonds might adversely affect the value of the Series A Bonds and, for regulated entities, could affect the status of the Series A Bonds as a legal investment or the capital treatment of the Series A Bonds. Investors in the Series A Bonds should consult with their legal counsel regarding the effect of the issuance of a rating by a non-hired NRSRO that is lower than the rating of a hired NRSRO. None of PNM, the issuing entity, the underwriters or any of their affiliates will have any obligation to inform you of any unsolicited ratings assigned after the date of this prospectus. In addition, if either the issuing entity or PNM fail to make available to a non-hired NRSRO any information provided to any hired rating agency for the purpose of assigning or monitoring the ratings on the Series A Bonds, a hired NRSRO could withdraw its ratings on the Series A Bonds, which could adversely affect the market value of your Series A Bonds and/or limit your ability to resell your Series Bonds.

The Series A Bonds’ credit ratings might affect the market value of your Series A Bonds.

A downgrading of the credit ratings of the Series A Bonds might have an adverse effect on the market value of the Series A Bonds. Credit ratings might change at any time and a NRSRO has the authority to revise or withdraw its rating based solely upon its own judgment. In addition, any downgrade in the credit ratings of the Series A Bonds may result in the Series A Bonds becoming ineligible to be held by certain funds or investors, which may require such investors to liquidate their investment in the Series A Bonds and result in lower prices and a less liquid trading market for the Series A Bonds.

Technological change might make alternative energy sources more attractive in the future.

Technological developments and/or tax or other economic incentives might result in the introduction of economically attractive, more fuel-efficient, more environmentally-friendly and/or more cost-effective alternatives to purchasing electricity through a utility’s distribution facilities for increasing numbers of retail customers. Manufacturers of self-generation facilities may develop smaller-scale, more fuel-efficient on-site generating and/or storage units that can be cost-effective options for a greater number of retail customers. Moreover, an increase in self-service power may result if extreme weather conditions result in shortages of grid-supplied energy or if other factors cause grid-supplied energy to be less reliable. Technological developments might allow greater numbers of retail customers to reduce or even altogether avoid the energy transition charges under such provisions through on-site generation and storage. This might reduce the kilowatt-hours of electric energy delivered to retail customers by means of PNM’s distribution facilities, thereby causing energy transition charges to the remaining retail customers to increase.

The absence of a secondary market for the Series A Bonds might limit your ability to resell your Series A Bonds.

The underwriters for the Series A Bonds might assist in resales of the Series A Bonds, but they are not required to do so. A secondary market for the Series A Bonds might not develop, and the issuing entity does not expect to list the Series A Bonds on any securities exchange. If a secondary market does develop, it might not continue or there might not be sufficient liquidity to allow you to resell any of your Series A Bonds. Please read “Plan of Distribution” in this prospectus.

You might receive principal payments for the Series A Bonds later than you expect.

The amount and the rate of collection of the energy transition charges for the Series A Bonds, together with the related true-up adjustments to those charges, will generally determine whether there is a delay in the scheduled repayments of bond principal. A failure to pay principal as anticipated in the expected amortization schedule is not an event of default under the indenture.

32

PNM’s credit ratings might affect the market value of your Series A Bonds.

Although PNM is not an obligor on the bonds, a downgrading of PNM’s current credit ratings might have an adverse effect, at least temporarily, on the market value of the Series A Bonds. Credit ratings might change at any time. A rating agency has the authority to revise or withdraw its rating based solely upon its own judgment.

Regulatory provisions affecting certain investors could adversely affect the price and liquidity of the Series A Bonds.

European Union (EU) legislation comprising Regulation (EU) 2017/2402 of 12 December 2017 (as amended, the EU Securitization Regulation) together with any guidance published in relation thereto by the European Banking Authority, the European Securities and Markets Authority, the European Insurance and Occupational Pensions Authority or the European Commission and any relevant regulatory and/or implementing technical standards adopted by the European Commission in relation thereto or to precedent legislation (together, the European Securitization Rules) imposes certain restrictions and obligations with regard to securitisations (as such term is defined for purposes of the EU Securitization Regulation). The European Securitization Rules are in force throughout the EU in respect of securitisations the securities of which were issued (or the securitisation positions of which were created) on or after January 1, 2019.

Pursuant to Article 5 of the European Securitization Rules, EU Institutional Investors, prior to investing in, (or otherwise holding an exposure to) a securitisation (as so defined) other than the originator, sponsor or original lender (each as defined in the EU Securitization Regulation), must, amongst other things, (a) where the originator or original lender is established in a third country (that is, not within the EU or the EEA), verify that the originator or original lender grants all the credits giving rise to the underlying exposures on the basis of sound and well-defined criteria and clearly established processes for approving, amending, renewing and financing those credits and has effective systems in place to apply those criteria and processes to ensure that credit-granting is based on a thorough assessment of the obligor’s creditworthiness, (b) verify that the originator, sponsor or original lender retains on an ongoing basis a material net economic interest which, in any event, shall not be less than 5% in the securitisation, determined in accordance with Article 6 of the EU Securitization Regulation, and discloses that risk retention to such EU Institutional Investors in accordance with Article 7 of the EU Securitization Regulation, and (c) verify that the originator, sponsor or relevant securitisation special purpose entity (SSPE) has, where applicable, made available information as required by Article 7 of the EU Securitization Regulation in accordance with the frequency and modalities provided for in that Article (which sets out transparency requirements for originators, sponsors and SSPEs), and (d) carry out a due-diligence assessment which enables the institutional investor to assess the risks involved, considering at least (i) the risk characteristics of the securitisation position and the underlying exposures, and (ii) all the structural features of the securitisation that can materially impact the performance of the securitisation position. EU Institutional Investors include: (a) insurance undertakings and reinsurance undertakings as defined in Directive 2009/138/EC, as amended; (b) institutions for occupational retirement provision falling within the scope of Directive (EU) 2016/2341 (subject to certain exceptions), and certain investment managers and authorized entities appointed by such institutions; (c) alternative investment fund managers as defined in Directive 2011/61/EU which manage and/or market alternative investment funds in the EU; (d) certain internally-managed investment companies authorized in accordance with Directive 2009/65/EC, and managing companies as defined in that Directive; (e) credit institutions as defined in Regulation (EU) No 575/2013 (CRR) (and certain consolidated affiliates thereof); and (f) investment firms as defined in CRR (and certain consolidated affiliates thereof).

With respect to the United Kingdom (UK), relevant UK established or UK regulated persons (as described below) are subject to the restrictions and obligations of the EU Securitization Regulation directly applicable in the UK adopted as part of UK domestic law by operation of the European Union (Withdrawal) Act 2018 as amended by the European Union (Withdrawal) Act 2020 (as amended, the EUWA), and as amended by the Securitisation (Amendment) (EU Exit) Regulations 2019 (together with the EUWA, the EU Exit Regulations), (the UK Securitization Regulation) and as further amended from time to time.

The UK Securitization Regulation, together with (a) all applicable binding secondary legislation, technical standards or implementing technical standards made under the UK Securitization Regulation (in

33

each case, as amended, varied or substituted from time to time), (b) any EU regulatory technical standards or implementing technical standards relating to the EU Securitization Regulation (including such regulatory technical standards or implementing technical standards) that are applicable and binding in the UK pursuant to EU Exit Regulations and subject to any transitional directions from the Financial Conduct Authority (the FCA), (c) all relevant guidance, policy statements or directions relating to the application of the UK Securitization Regulation (or any binding technical standards) published by the FCA, the Bank of England, the UK pensions regulator (the “Pensions Regulator”) and/or the Prudential Regulation Authority (the PRA) or any other UK regulator (or their successors), (d), any other transitional direction and any transitional relief of the FCA, the Bank of England, the PRA, the Pensions Regulator (or their successors) and (e) any other applicable laws, acts, statutory instruments, rules, guidance or policy statements published or enacted relating to the UK Securitization Regulation, in each case, as may be further amended, supplemented or replaced, from time to time, are referred to in this prospectus as the UK Securitization Rules.

Article 5 of the UK Securitization Regulation places certain conditions on investments in a “securitisation” ​(as defined in the UK Securitization Regulation) by a UK Institutional Investor. UK Institutional Investors include: (a) an insurance undertaking as defined in section 417(1) of the Financial Services And Markets Act 2000 (as amended, the FSMA); (b) a reinsurance undertaking as defined in section 417(1) of the FSMA; (c) an occupational pension scheme as defined in section 1(1) of the Pension Schemes Act 1993 that has its main administration in the UK, or a fund manager of such a scheme appointed under section 34(2) of the Pensions Act 1995 that, in respect of activity undertaken pursuant to that appointment, is authorized for the purposes of section 31 of the FSMA; (d) an alternative investment fund manager as defined in regulation 4(1) of the Alternative Investment Fund Managers Regulation 2013 that markets or manages alternative investments funds (as defined in regulation 3 of the Alternative Investment Fund Managers Regulation 2013) in the UK; (e) a management company as defined in section 237(2) of the FSMA; (f) an undertaking for collective investment in transferable securities as defined by section 236A of the FSMA, which is an authorized open ended investment company as defined in section 237(3) of the FSMA; and (g) a CRR firm as defined in Regulation (EU) No 575/2013, as it forms part of UK domestic law by virtue of the EU Exit Regulations (and certain consolidated affiliates thereof).

Prior to investing in (or otherwise holding an exposure to) a “securitisation position” ​(as defined in the UK Securitization Regulation), a UK Institutional Investor, other than the originator, sponsor or original lender (each as defined in the UK Securitization Regulation), must, among other things: (a) verify that, where the originator or original lender is established in a third country (i.e. not within the UK), the originator or original lender grants all the credits giving rise to the underlying exposures on the basis of sound and well-defined criteria and clearly established processes for approving, amending, renewing and financing those credits and has effective systems in place to apply those criteria and processes to ensure that credit-granting is based on a thorough assessment of the obligor’s creditworthiness; (b) verify that, if established in the third country (i.e. not within the UK), the originator, sponsor or original lender retains on an ongoing basis a material net economic interest that, in any event, shall not be less than 5%, determined in accordance with Article 6 of the UK Securitization Regulation, and discloses the risk retention to the affected UK Institutional Investors; (c) verify that, where established in a third country (i.e. not within the UK), the originator, sponsor or relevant securitisation special purpose entity, where applicable, made available information that is substantially the same as that which it would have made available under Article 7 of the UK Securitization Regulation (which sets out certain transparency requirements) if it had been established in the UK and has done so with such frequency and modalities as are substantially the same as those with which it would have made information available if it had been established in the UK; and (d) carry out a due-diligence assessment that enables the UK Institutional Investor to assess the risks involved, considering at least (i) the risk characteristics of the securitisation position and the underlying exposures and (ii) all the structural features of the securitisation that can materially impact the performance of the securitisation position.

The issuing entity and PNM do not believe that the Series A Bonds fall within the definition of a “securitisation” for purposes of the EU Securitization Regulation or the UK Securitization Regulation as there is no tranching of credit risk associated with exposures under the transactions described in this prospectus.

34

Therefore, the issuing entity and PNM believe such transactions are not subject to the European Securitization Rules or the UK Securitization Rules. As such, neither the issuing entity nor PNM, nor any other party to the transactions described in this prospectus, intend, or are required under the transaction documents, to retain a material net economic interest in respect of such transactions, or to take, or to refrain from taking, any other action, in a manner prescribed or contemplated by the European Securitization Rules or the UK Securitization Rules. In particular, no such Person undertakes to take, or to refrain from taking, any action for purposes of compliance by any investor (or any other Person) with any requirement of the European Securitization Rules or the UK Securitization Rules to which such investor (or other Person) may be subject at any time.

However, if a competent authority were to take a contrary view and determine that the transactions described in this prospectus do constitute a securitisation for purposes of the EU Securitization Regulation or the UK Securitization Regulation, then any failure by an EU Institutional Investor or a UK Institutional Investor (as applicable) to comply with any applicable European Securitization Rules or UK Securitization Rules (as applicable) with respect to an investment in the Series A Bonds may result in the imposition of a penalty regulatory capital charge on that investment or of other regulatory sanctions and remedial measures.

Consequently, the Series A Bonds may not be a suitable investment for EU Institutional Investors or UK Institutional Investors. As a result, the price and liquidity of the Series A Bonds in the secondary market may be adversely affected.

Prospective investors are responsible for analyzing their own legal and regulatory position and are advised to consult with their own advisors and any relevant regulator or other authority regarding the scope, applicability and compliance requirements of the European Securitization Rules and the UK Securitization Rules, and the suitability of the Series A Bonds for investment. Neither the issuing entity nor PNM, nor any other party to the transactions described in this prospectus, make any representation as to any such matter, or have any liability to any investor (or any other Person) for any non-compliance by any such Person with the European Securitization Rules, the UK Securitization Rules or any other applicable legal, regulatory or other requirements.

If the investment of collected energy transition charges and other funds held by the indenture trustee in the collection account results in investment losses or the investments become illiquid, you may receive payment of principal and interest on the Series A Bonds later than you expect.

Funds held by the indenture trustee in the collection account will be invested in eligible investments at the written direction of the servicer. Eligible investments include money market funds having a rating from Moody’s and S&P in the highest short term rating category. Although investments in these money market funds have traditionally been viewed as highly liquid with a low probability of principal loss, illiquidity and principal losses have been experienced by investors in certain of these funds as a result of disruptions in the financial markets in recent years. If investment losses or illiquidity is experienced, you might experience a delay in payments of principal and interest and a decrease in the value of your investment in the Series A Bonds.

35

REVIEW OF THE ENERGY TRANSITION PROPERTY

Pursuant to the rules of the SEC, PNM, as sponsor, has performed, as described below, a review of the energy transition property underlying the Series A Bonds. As required by these rules, the review was designed and effected to provide reasonable assurance that disclosure regarding the energy transition property is accurate in all material respects. PNM did not engage a third party in conducting its review.

The Series A Bonds will be secured by the collateral pledged under the indenture. The principal asset included within the collateral is the energy transition property relating to the Series A Bonds. The energy transition property is a present property right authorized and created pursuant to the Energy Transition Act and the Financing Order. The energy transition property includes the rights and interests of PNM and the issuing entity under the Financing Order, including the right to impose, charge, collect and receive energy transition charges in an amount necessary to provide for full payment and recovery of all energy transition costs identified in the Financing Order, including payment of all principal of and interest on the Series A Bonds, as well as all revenues and other proceeds arising from those rights and interests. The rights and interests under the Financing Order also include the right to obtain true-up adjustments to the energy transition charges as provided in the Energy Transition Act and the Financing Order. The energy transition charges are non-bypassable and will be assessed against and collected from each customer that obtains electric delivery service from PNM under NMPRC-approved rate schedules or special contracts, and each customer who acquires electricity from an alternative or subsequent electricity supplier in PNM’s utility service area, to the extent that such acquisition is permitted by New Mexico law.

The energy transition property is not a receivable, and the energy transition property and other collateral held by the indenture trustee securing the Series A Bonds do not constitute a pool of receivables. Under the Energy Transition Act, the Financing Order is irrevocable and the NMPRC shall not reduce, impair, postpone or terminate the energy transition charges approved in the Financing Order, except for the specified true-up adjustments to correct for any overcollections or undercollections. The rates at which energy transition charges are billed to consumers will be adjusted to correct any overcollections or undercollections from prior periods. These adjustments are intended to ensure the recovery of revenues sufficient to retire the principal amount of the Series A Bonds in accordance with the expected amortization schedule, to pay all interest on the Series A Bonds when due, to pay fees and expenses of servicing the Series A Bonds and to fund any required credit enhancement for the Series A Bonds. In addition to the required semiannual true-up adjustments, the servicer (a) is required to implement quarterly true-up adjustments if there are Series A Bonds outstanding during the two-year period preceding the final maturity date of the latest maturing tranche of the Series A Bonds, and (b) may request an interim true-up adjustment at any time in order to ensure timely payment of scheduled principal of and interest on the Series A Bonds and other required amounts and charges owing in connection with the Series A Bonds. There is no cap on the level of energy transition charges that may be imposed on consumers as a result of the true-up adjustment process to pay principal of and interest on the Series A Bonds when due and other required amounts and charges owing in connection with the Series A Bonds. All revenues and collections resulting from energy transition charges provided for in the Financing Order are part of the energy transition property. The energy transition property relating to the Series A Bonds is described in more detail under “The Energy Transition Act and the Financing Order” in this prospectus.

In the Financing Order, the NMPRC, among other things:

•

ordered the imposition and collection of non-bypassable energy transition charges during the term that the Series A Bonds are outstanding, with the energy transition charges to be paid by all customer receiving electric delivery from PNM or its successors under NMPRC-approved rate schedules or special contracts, and all customers who acquire electricity from an alternative or subsequent electricity supplier in the utility service area currently served by PNM, to the extent such acquisition is permitted by New Mexico law;

•

approved the true-up adjustment mechanism, pursuant to which energy transition charges will be adjusted not less often than semiannually in a manner designed to correct for any overcollection or undercollection of energy transition charges and to provide for timely payment of scheduled principal and interest on the Series A Bonds and recovery of other financing costs in accordance with the Financing Order; and

36

•

approved the sale, assignment and transfer of the energy transition property to the issuing entity, determined that upon such transfer the issuing entity will have all the rights, title and interest of PNM with respect to the energy transition property, and determined that the sale, assignment and transfer of the energy transition property to the issuing entity shall be an absolute transfer and true sale of, and not a pledge or secured transaction relating to, PNM’s right, title and interest in, to and under the energy transition property; and

•

pledged to and agreed with holders of the Series A Bonds, the issuing entity and the indenture trustee that the NMPRC shall not take or permit any action that impairs the value of the energy transition property, except for the true-up adjustments specified in the Energy Transition Act, or reduces, alters or impairs energy transition charges that are imposed, collected and remitted for the benefit of the holders of the Series A Bonds, the issuing entity and the indenture trustee, and all financing costs are paid in full and performed in full.

Please read “The Energy Transition Act and the Financing Order” in this prospectus for more detail.

The characteristics of the energy transition property are unlike the characteristics of assets underlying mortgage and other commercial asset-based financings because the energy transition property is a creature of statute and state regulatory commission proceedings. Because the nature and characteristics of the energy transition property and many elements of energy transition bond financings are set forth in and constrained by the Energy Transition and the Financing Order, PNM, as sponsor, does not select the assets to be pledged as collateral in ways common to many asset-based financings. Moreover, the Series A Bonds do not contain origination or underwriting elements similar to typical mortgage or other loan transactions involved in other forms of asset-backed securities. The Energy Transition Act and the Financing Order require the imposition on, and collection of energy transition charges from, all customers. Since the energy transition charges are assessed against all such customers and the true-up adjustment mechanism adjusts for the impact of customer defaults, the collectability of the energy transition charges is not ultimately dependent upon the credit quality of particular customers, as would be the case in the absence of the true-up adjustment mechanism.

The review by PNM of the energy transition property underlying the Series A Bonds has involved a number of discrete steps and elements as described in more detail below. First, PNM has analyzed and applied the Energy Transition Act’s requirements for recovery through securitization of energy transition costs in seeking approval of the NMPRC for the issuance of the Financing Order and in its application for a financing order with respect to the characteristics of the energy transition property to be created pursuant to the Financing Order. In preparing this proposal, PNM worked with its legal counsel and its financial advisor in preparing the application for a financing order. PNM has analyzed economic issues and practical issues for the scheduled payment of principal and interest on the Series A Bonds, including the impact of economic factors, potential for disruptions due to weather or catastrophic events, and its own forecasts for electricity usage as well as the historic accuracy of its prior forecasts.

In light of the unique nature of the energy transition property, PNM has taken (or, prior to the offering of the Series A Bonds, will take) the following actions in connection with its review of the energy transition property and the preparation of the disclosure for inclusion in this prospectus describing the energy transition property, the Series A Bonds and the proposed financing transaction:

•

reviewed the Energy Transition Act, other relevant provisions of New Mexico statutes and any applicable rules, regulations and orders of the NMPRC as they relate to the energy transition property in connection with the preparation and filing of the application with the NMPRC for the approval of the Financing Order in order to confirm that the application and proposed Financing Order satisfied applicable statutory and regulatory requirements;

•

actively participated in the proceedings before the NMPRC relating to the approval of the Financing Order;

•

compared the process by which the Financing Order was adopted and approved by the NMPRC to the requirements of the Energy Transition Act and any applicable rules and regulations of the NMPRC as they relate to the energy transition property to confirm that it met such requirements;

37

•

compared the proposed terms of the Series A Bonds to the applicable requirements in the Energy Transition Act, other relevant provisions of New Mexico statutes, the Financing Order and any applicable rules and regulations of the NMPRC to confirm that they met such requirements;

•

prepared and reviewed the agreements to be entered into in connection with the issuance of the Series A Bonds and compared such agreements to the applicable requirements in the Energy Transition Act, other relevant provisions of New Mexico statutes, the Financing Order and any applicable rules and regulations of the NMPRC to confirm that they met such requirements;

•

reviewed the disclosure in this prospectus regarding the Energy Transition Act, other relevant provisions of New Mexico statutes, the Financing Order and the agreements to be entered into in connection with the issuance of the Series A Bonds, and compared such descriptions to the relevant provisions of the Energy Transition Act, other relevant provisions of New Mexico statutes, the Financing Order and such agreements to confirm the accuracy of such descriptions;

•

consulted with legal counsel to assess if there is a basis upon which the bondholders (or the indenture trustee acting on their behalf) could successfully challenge the constitutionality of any legislative action by the State of New Mexico (including action by the NMPRC) that could repeal or amend the provisions of the Energy Transition Act in a way that could substantially impair the value of the energy transition property, or substantially reduce, alter or impair the energy transition charges;

•

reviewed the process and procedures in place for it, as servicer, to perform its obligations under the servicing agreement, including billing, collecting and remitting the energy transition charges to be provided for under the energy transition property, forecasting energy transition charges, and preparing and filing applications for true-up adjustments to the energy transition charges;

•

reviewed the methodology and procedures for the true-up adjustments for adjusting energy transition charge levels to meet the scheduled payments on the Series A Bonds and in this context took into account its experience with the NMPRC; and

•

with the assistance of its advisors, prepared financial models in order to set the initial energy transition charges to be provided for under the energy transition property at levels sufficient to pay principal of and interest on the Series A Bonds when due and other ongoing costs in connection with the Series A Bonds.

In connection with the preparation of such models, PNM:

•

reviewed (i) the historical electric usage, demand and customer growth within its service territory and (ii) forecasts of expected energy sales, demand and customer growth; and

•

analyzed the sensitivity of the weighted average life of the Series A Bonds in relation to variances in actual electric usage levels and related charge collections from forecasted levels and in relation to the true-up adjustment in order to assess the probability that the weighted average life of the Series A Bonds may be extended as a result of such variances, and in the context of the operation of the true-up adjustment for adjustment of energy transition charges to address undercollections or overcollections in light of scheduled payments on the Series A Bonds to prevent an event of default.

As a result of this review, PNM has concluded that:

•

the energy transition property, the Financing Order and the agreements to be entered into in connection with the issuance of the Series A Bonds meet in all material respects the applicable statutory and regulatory requirements;

•

the disclosure in this prospectus regarding the Energy Transition Act, other relevant provisions of New Mexico statutes, the Financing Order and the agreements to be entered into in connection with the issuance of the Series A Bonds, as of its respective date, is accurate in all material respects and fails to omit any material information;

•

the servicer has adequate processes and procedures in place to perform its obligations under the servicing agreement;

38

•

Energy transition charges, as adjusted from time to time as provided in the Energy Transition Act and the Financing Order, are expected to generate sufficient revenues to pay principal of and interest on the Series A Bonds when due and other ongoing costs in connection with the Series A Bonds; and

•

the design and scope of PNM’s review of the energy transition property as described above is effective to provide reasonable assurance that the disclosure regarding the energy transition property in this prospectus is accurate in all material respects.

39

THE ENERGY TRANSITION ACT AND THE FINANCING ORDER

Background

On March 22, 2019, Governor Michelle Lujan-Grisham signed into law the Energy Transition Act, which is codified as Sections 62-18-1 through 62-18-23 of the New Mexico Statutes Annotated. The Energy Transition Act became effective as of June 14, 2019 and sets a statewide standard that requires investor-owned electric utilities to have specified percentages of their electric-generating portfolios be from renewable and zero-carbon generating resources.

The Energy Transition Act provides for a transition from fossil-fuel generation resources to renewable and other carbon-free resources through certain provisions relating to the abandonment of coal-fired generating facilities. These provisions include the use of energy transition bonds, which are designed to be highly rated bonds that can be issued to finance certain costs of abandoning coal-fired facilities that are retired prior to January 1, 2023 for facilities operated by a “qualifying utility,” or prior to January 1, 2032 for facilities that are not operated by a qualifying utility. The Energy Transition Act authorizes an electric utility to apply to the NMPRC for a financing order to issue energy transition bonds.

The Energy Transition Act authorizes an electric utility to apply to the NMPRC for a financing order to issue energy transition bonds to finance “energy transition costs.” Energy transition costs include (1) “abandonment costs,” ​(2) “financing costs,” and (3) “Section 16 payments,” which are payments required under Section 16 of the Energy Transition Act to promote economic development, education and job training in areas impacted by the retirement of the coal-fired facilities. Abandonment costs include (1) undepreciated investment as of the abandonment date of a qualifying generating facility that were either being recovered in rates as of January 1, 2019 or are otherwise found to be recoverable through a court decision, (2) plant decommissioning and mine reclamation costs, and (3) severance and job training costs for employees losing their jobs as a result of the abandonment of a qualifying generating facility. The amount of energy transition bonds that can be issued to recover abandonment costs is limited to the lesser of $375.0 million or 150% of the undepreciated investment of the facility as of the abandonment date. Financing costs include, among other things, (1) the upfront costs of issuing the energy transition bonds (upfront issuance costs), (2) principal and interest payments on energy transition bonds, and (3) other costs related to supporting, repaying and servicing the energy transition bonds (other ongoing financing costs).

Energy transition bonds must be issued under a NMPRC-approved financing order, and proceeds of issuance must be used only for purposes related to providing utility service to customers and to pay energy transition costs.

Issuance of Financing Order

On July 1, 2019, PNM filed a Consolidated Application for the Abandonment and Replacement of SJGS and Related Securitized Financing Pursuant to the ETA (the SJGS Abandonment Application). The SJGS Abandonment Application sought NMPRC approval to retire PNM’s share of SJGS after the existing coal supply and participation agreements end in June 2022, for approval of replacement resources, and for the issuance of approximately $361 million of energy transition bonds. PNM’s request for the issuance of energy transition bonds included approximately $283 million of forecasted undepreciated investments in SJGS at June 30, 2022, an estimated $28.6 million for plant decommissioning and coal mine reclamation costs, approximately $9.6 million in upfront financing costs, approximately $20.0 million for job training and severance costs for affected employees, and approximately $19.8 million for Section 16 payments for economic development in the Four Corners area.

On February 21, 2020, the hearing examiners issued two recommended decisions recommending approval of PNM’s proposed abandonment of SJGS, subject to approval of replacement resources, and approval of PNM’s proposed financing order to issue energy transition bonds. The hearing examiners recommended that PNM be authorized to abandon SJGS by June 30, 2022. The hearing examiners also recommended PNM be authorized to issue energy transition bonds of up to $360.1 million. On April 1, 2020, the NMPRC unanimously approved the hearing examiners’ recommended decisions regarding the abandonment of SJGS and the securitized financing, which included the Financing Order authorizing the issuance of the Series A Bonds. Through the Financing Order, the NMPRC found that the entire amount of

40

the energy transition costs to be recovered through the issuance of the energy transition bonds are “energy transition costs” within the meaning of the Energy Transition Act.

See “Legal Proceedings” for a discussion of certain legal challenges to the Energy Transition Act and the Financing Order and to PNM’s authority to issue energy transition bonds pursuant to the Financing Order. On August 18, 2023, PNM entered into a settlement agreement with the intervening parties to resolve the remaining legal challenges. On September 21, 2023, the NMPRC issued an order that affirms the validity of the Financing Order and the authorizations and approvals granted to PNM therein, including the Financing Order’s determination of its irrevocability and PNM’s ongoing authority to cause the issuance of up to $360.1 million of energy transition bonds pursuant to the Financing Order. In addition, the NMPRC affirmed its non-impairment pledge pursuant to the Financing Order and the Energy Transition Act. On September 22, 2023, all parties to the Show Cause Proceeding filed an agreement with the New Mexico Supreme Court stipulating to dismissal of the appeals relating to the Show Cause Proceeding and requesting that the New Mexico Supreme Court issue an order dismissing such appeals.

Issuance of the Series A Bonds and Creation of the Energy Transition Property

The Financing Order authorizes the issuance of energy transition bonds in one or more series with one or more tranches in an aggregate principal amount not to exceed $360.1 million. The Financing Order also approves the organization and capitalization of the issuing entity, the creation of the energy transition property, the transfer of the energy transition property to the issuing entity, the issuing entity’s pledge of the energy transition property as security for repayment of the Series A Bonds, and the use of proceeds of the Series A Bonds. The Financing Order contains all determinations of the NMPRC that are required under the Energy Transition Act for the issuance of a financing order, including that the SJGS Abandonment Application satisfied all of the requirements of the Energy Transition Act.

Under the Energy Transition Act, the energy transition property relating to the Series A Bonds includes the rights and interests of PNM under the Financing Order, including the right to impose, charge, collect and receive energy transition charges in an amount necessary to provide for full payment and recovery of all energy transition costs identified in the Financing Order, including all revenues or other proceeds arising from those rights and interests. In accordance with the Energy Transition Act, the Financing Order provides that the creation of the energy transition property shall be simultaneous with PNM’s sale of the energy transition property to the issuing entity and the issuing entity’s pledge of the energy transition property to secure the Series A Bonds.

Energy Transition Act Provides that Transfer of Energy Transition Property to the Issuing Entity is a True Sale

The Energy Transition Act provides that the right to collect payments based on the energy transition charges is a property right which may be assigned or sold in connection with the issuance of energy transition bonds. In accordance with the Financing Order, PNM and the issuing entity will enter into a sale agreement pursuant to which PNM will sell, assign and transfer the energy transition property to the issuing entity.

Under the Energy Transition Act, any sale, assignment or transfer of energy transition property to an assignee that is a financing entity wholly owned by the utility will be an absolute transfer and true sale of, and not a pledge of or secured transaction relating to, the energy transition property if the documents governing the transaction expressly state that the transaction is a sale or other absolute transfer. The sale agreement will expressly provide that the transfer of the energy transition property from PNM to the issuing entity is a sale or other absolute transfer of the energy transition property. In addition, the Financing Order expressly provides that the sale of the energy transition property from PNM to the issuing entity will be treated as an absolute transfer and true sale in accordance with the provisions of the Energy Transition Act, and not as a pledge or secured transaction.

Under the Energy Transition Act, the characterization of the transfer of the energy transition property as an absolute transfer and true sale will not be affected or impaired by:

•

commingling of energy transition revenues with other funds;

41

•

the retention by PNM of a partial or residual interest, including an equity interest, in the energy transition property or the right to recover costs associated with taxes or license fees imposed on the collection of energy transition revenues;

•

any recourse that the issuing entity may have against PNM;

•

any indemnification rights, obligations or repurchase rights made or provided by PNM;

•

the obligation of PNM to collect energy transition revenues on behalf of the issuing entity;

•

the treatment of sale, assignment or transfer of the energy transition property for tax, financial reporting or other purposes;

•

any subsequent order of the NMPRC amending the Financing Order as provided in the Energy Transition Act;

•

any use of the true-up adjustment mechanism approved in the Financing Order; or

•

anything else that might affect or impair the characterization of the property.

Under the Energy Transition Act, upon the filing of a financing statement with the New Mexico Secretary of State, the transfer of the energy transition property shall be perfected against all third persons, except creditors holding a prior security interest, ownership interest or assignment in the energy transition property previously perfected in accordance with the Energy Transition Act.

Energy Transition Act Protects the Lien on Energy Transition Property for the Benefit of Bondholders

In accordance with the Financing Order, pursuant to the indenture, the issuing entity will grant the indenture trustee a security interest in the energy transition property for the benefit of bondholders to secure the repayment of the principal and interest on the Series A Bonds.

The Energy Transition Act provides that the creation, perfection and enforcement of a security interest in the energy transition property to secure the repayment of principal and interest on the Series A Bonds is governed by the Energy Transition Act. Under the Energy Transition Act, a security interest in the energy transition property is created at the latest of (i) issuance of the Financing Order, (ii) a security agreement is executed and delivered, and (iii) value is received for the Series A Bonds. The description of the energy transition property in a security agreement is sufficient only if it references both the Energy Transition Act and the Financing Order.

Under the Energy Transition Act, upon the filing of a financing statement with the New Mexico Secretary State, the security interest in the energy transition property will attach without any physical delivery or other act and the lien of the security interest will be valid, binding and perfected against all parties having claims of any kind against the issuing entity, regardless of whether such parties have notice of the lien. The Energy Transition Act provides that a security interest in energy transition property is a continuously perfected security interest and has priority over any other lien that subsequently attaches to the energy transition property unless the holder of the security interest has agreed in writing otherwise. The Energy Transition Act further provides that the priority of a security interest in the energy transition property is not affected by the commingling of energy transition revenues with other funds, and no order of the NMPRC amending the Financing Order and application of the true-up adjustment mechanism thereunder will affect the validity, perfection or priority of the security interest.

Non-Bypassable Energy Transition Charges

The Financing Order establishes, among other things, the energy transition charges to recover the energy transition costs specified therein. Pursuant to the Energy Transition Act, the energy transition charges are non-bypassable. This means that as long as the Series A Bonds are outstanding and the related financing costs have not been recovered in full, the Energy Transition Act requires that the energy transition charges securing the Series A Bonds must be paid by all customers receiving electric delivery from PNM or its successors under NMPRC-approved rate schedules or special contracts, and all customers who acquire electricity from an alternative or subsequent electricity supplier in the utility service area currently served by PNM, to the extent such acquisition is permitted by New Mexico law.

42

Under the Energy Transition Act and the Financing Order, PNM will allocate the revenues to be collected from each customer class based on the production cost allocation methodology established by the NMPRC in PNM’s most recent general rate case to its then current rate structure using a forecast of billing determinants. The production cost methodology approved in PNM’s most recent rate case is based on the coincident peak during the four highest peak months of the year: three summer months (June, July and August) and one winter month (December) (“3S1W”). Based on the 3S1W production cost allocation methodology used in PNM’s most recent general rate case and a current forecast of billing determinants (test period (2024 forecast) data filed in PNM’s pending general rate case), responsibility for the energy transition charges would be allocated to customer classes as follows:

Customer Rate Class(1)	Allocation Percentage
Residential (1A and 1B)	​	51.7%
General Power (3B and 3C)	​	18.8%
Small Power (2A and 2B)	​	10.7%
Large Power (4B)	​	8.9%
Manufacturing (30B)	​	6.2%
Large Service (3 MW) (35B)	​	1.3%
Other	​	2.4%

(1)

Each customer rate class includes one or more rate schedules within the customer rate class (such as rate schedules 1A and 1B within the residential class).

In the event the NMPRC approves a change to the production cost methodology in a future general rate case, PNM will file a non-standard true-up adjustment to reflect any changes to the allocation of revenues to be recovered through the energy transition charges to its customer classes.

Energy transition charges are to be assessed to the rate schedules within each customer class consistent with the production cost allocation methodology and the determination of energy and demand costs within each customer class, both of which are subject to the true-up adjustment mechanism described below. Under the Financing Order, energy transition charges for customer classes will be assessed on the basis of: (1)(A) kWh usage (residential customer block charges, with a minimum per customer charge and a higher monthly charge for usage above 900 kWh), (B) kW demand (general power and large power customers), (C) number of customers (per customer charge for small power customers), (D) projected kW demand by individual customer (individual customer charge for manufacturing and large service customers), and (E) number of lights (per light charge for street lighting customers); and (2) estimated weighted average days sales outstanding and estimated write-offs.

The Financing Order provides that PNM will file an advice notice with the NMPRC, subject to review by the NMPRC for errors and corrections, that identifies the initial energy transition charges to be included on customer bills, effective 15 days from the date the advice notice is filed. The initial energy transition charge is expected to represent approximately      % of the total bill, as of June 30, 2023, received by a 600 kWh residential customer of PNM.

Although the energy transition charges by each rate class will differ, any deficiency in the payment of such charges by any class of customers, including write-offs or other reasons, will be included in determining the revenue requirement used in calculating the next true-up adjustment for all customers.

Energy Transition Act Requires Periodic Adjustments of the Energy Transition Charges

The Energy Transition Act and the Financing Order require that the energy transition charges be reviewed and adjusted at least semi-annually (or beginning two years prior to the final maturity date of the latest maturing tranche, at least quarterly) to correct for any overcollection or undercollection of the energy transition charges or to otherwise ensure the timely payment of scheduled principal of and interest on the bonds and all other ongoing financing costs associated with the bonds. Under the servicing agreement, the servicer will make adjustments to the energy transition charges at least semi-annually.

43

There are no caps on the level of energy transition charges that may be imposed on customers as a result of the true-up adjustment process. In addition to the semi-annual true-up adjustments, the servicer (a) is also required to implement quarterly true-up adjustments beginning two years prior to the latest final maturity date for the Series A Bonds, and (b) may request an interim true-up adjustment at any time to ensure timely payment of principal of and interest on the bonds and other required amounts and charges owing in connection with the Series A Bonds.

Each true-up adjustment will allocate the revenue requirement among all customer rate classes in accordance with the production cost allocation methodology approved in PNM’s last rate case before the NMPRC.

Under the Energy Transition Act, an adjustment to the energy transition charges filed by the servicer will be deemed approved without a hearing 30 days after the filing unless (1) no later than 20 days from the date of filing of the true-up adjustment, the NMPRC is notified of a potential mathematical or transcription error in the adjustment and (2) the NMPRC determines that the calculation of the adjustment is unlikely to provide for timely payment or is likely to result in a material overpayment. In such a case, implementation of the true-up adjustment may be suspended by the NMPRC for a period not exceeding 60 days pending a hearing. Any such hearing will be limited to determining whether there is a mathematical or transcription error in the calculation of the adjustment.

See “The Servicing Agreement — True-Up Adjustment Process” for additional information regarding the true-up adjustment mechanism.

Energy Transition Act Provides that a Financing Order is Irrevocable

The Energy Transition Act provides that the Financing Order is irrevocable and that the NMPRC shall not, except for the true-up adjustments described above, reduce, impair, postpone or terminate the energy transition charges approved in the Financing Order. The Energy Transition Act provides that the Financing Order will remain in effect until the Series A Bonds and any related financing costs have been paid in full. In addition, under the Energy Transition Act, the Financing Order will remain in effect and unabated notwithstanding the bankruptcy, reorganization or insolvency of PNM or any non-utility affiliate or the commencement of any proceeding for bankruptcy or appointment of a receiver.

Having issued the Financing Order, the Energy Transition Act provides that the NMPRC shall not treat the Series A Bonds as debt of PNM, the energy transition charges under the financing order as revenues of PNM, or the energy transition costs to be financed by the Series A Bonds as costs of PNM.

The Energy Transition Act provides that the Series A Bonds do not constitute a debt or a pledge of the faith and credit or taxing power of the State of New Mexico or of any county, municipality or any other political subdivision of the State of New Mexico. Bondholders shall have no right to have taxes levied by the legislature or the taxing authority of any county, municipality or other political subdivision of the State of New Mexico for the payment of the principal of or interest on the Series A Bonds. The issuance of the Series A Bonds does not obligate the State of New Mexico or a political subdivision of the state to levy any tax or make any appropriation for payment of the principal of or interest on the Series A Bonds.

State Pledge

Pursuant to Section 62-18-19 of the Energy Transition Act, the State of New Mexico has pledged to and agreed with the bondholders, the issuing entity and the indenture trustee that it will not take or permit any action that impairs the value of energy transition property, except for the true-up adjustment expressly allowed by Section 62-18-6 of the Energy Transition Act, or reduces, alters, or impairs the energy transition charges that are imposed, collected and remitted for the benefit of bondholders, until the entire principal of, interest on and redemption premium on the Series A Bonds and all financing costs and all amounts to be paid to the issuing entity are paid in full and performed in full. In the Financing Order, the NMPRC has affirmed the pledge of the State of New Mexico.

Constitutional Matters

To date, no U.S. federal or New Mexico cases addressing the repeal or amendment of statutory provisions analogous to those contained in the Energy Transition Act have been decided. There have been

44

cases in which courts applied the Contract Clause of the United States Constitution and the Contract Clause of the New Mexico Constitution to strike down legislation regarding reducing or eliminating taxes, public charges or other sources of revenues servicing other types of recovery bonds issued by public instrumentalities or private issuers (or issuing entities), or otherwise substantially impairing or eliminating the security for recovery bonds or other indebtedness. Based upon this case law, Troutman Pepper Hamilton Sanders LLP expects to deliver an opinion, in connection with the closing of the offering of the Series A Bonds, that, with respect to United States federal law, a reviewing court of competent jurisdiction, in a properly prepared and presented case, would conclude that: (i) the pledge contained in Section 62-18-19 of the Energy Transition Act (the “State Pledge”) constitutes a contractual relationship between the bondholders and the State of New Mexico for purposes of the Contract Clause of the United States Constitution; and (ii) absent a demonstration by the State of New Mexico that a substantial impairment of that contract is reasonable and necessary to further a significant and legitimate public purpose, the bondholders (or the indenture trustee acting on their behalf) could successfully challenge under the Contract Clause of the United States Constitution the constitutionality of any State of New Mexico law subsequently enacted, whether by legislation, voter referendum or legislative action taken by the NMPRC (any such actions being referred to as a “legislative action”), determined by such court to alter, impair or reduce the value of the energy transition charge, the energy transition property, the Financing Order and all rights thereunder or ownership thereof or security interest therein, so as to cause a substantial impairment of the Series A Bond obligations prior to the time that the Series A Bonds are fully paid and discharged, unless adequate provision shall be made by law for the protection of the issuing entity, the bondholders and the indenture trustee. Additionally, although sound and substantial arguments support the granting of preliminary and permanent injunctive relief to prevent implementation of any law determined to alter, impair or reduce the value of the energy transition charge or the energy transition property in violation of the Contract Clause of the United States Constitution, the decision to do so will be in the discretion of the court requested to take such action, which will be exercised on the basis of the considerations discussed in the opinion. Miller Stratvert P.A. expects to deliver an opinion substantially to the same effect under the Contract Clause of the New Mexico Constitution. It may be possible for the New Mexico legislature to repeal or amend the Statute or for the NMPRC to amend or revoke the Financing Order notwithstanding the pledge of the State of New Mexico, if the legislature or the NMPRC acts in order to serve a significant and legitimate public purpose, such as protecting the public health and safety or responding to a national or regional catastrophe affecting the issuer’s service territory, or if the legislature otherwise acts in the valid exercise of the State of New Mexico’s police power.

In addition, any legislative action adversely affecting the energy recovery property or the ability to collect fixed recovery charges may be considered a “taking” under the Takings Clause of Amendment V of the United States Constitution, which is made applicable to the State of New Mexico by the Fourteenth Amendment to the United States Constitution. Troutman Pepper Hamilton Sanders LLP has advised the issuing entity that it is not aware of any federal or New Mexico court cases addressing the applicability of the Takings Clause of the United States Constitution in a situation analogous to that which would be involved in an amendment or repeal of the Energy Transition Act. Troutman Pepper Hamilton Sanders LLP expects to render an opinion to the effect that under existing case law, assuming a Takings Clause analysis were applied under the United States Constitution, there are sufficient legal grounds for a court of competent jurisdiction to require the State of New Mexico to pay just compensation to bondholders if the State of New Mexico's repeal or amendment in contravention of the State Pledge, after the Series A Bonds are issued, but before they are fully paid, (a) constituted a permanent appropriation of the property interest of bondholders in the Series A Bonds or the energy transition property or denying all economically beneficial or productive use of the energy transition property; (b) destroyed the energy transition property, other than in response to emergency conditions; or (c) substantially altered, impaired or reduced the value of the energy transition property in a manner that inflicts a severe economic impact on such bondholders and unduly interferes with their reasonable expectations, unless adequate provision shall be made by law for the protection of the bondholders. Miller Stratvert P.A. expects to deliver an opinion substantially to the same effect under the Takings Clause of the New Mexico constitution.

In connection with the foregoing, each of Troutman Pepper Hamilton Sanders LLP and Miller Stratvert P.A. has advised us that issues relating to the Contract and Takings Clauses of the United States Constitution and New Mexico constitution are decided on a case-by-case basis and that the courts’ decisions in most cases are strongly influenced by the facts and circumstances of the particular cases. Both firms

45

have further advised us that there are no reported controlling judicial precedents that are directly on point. The opinions described above will be subject to the qualifications included in them. The degree of impairment necessary to meet the standards for relief under either the Contract Clause or the Takings Clause could be substantially in excess of what a bondholder would consider material.

We will file a copy of each of the Troutman Pepper Hamilton Sanders LLP and Miller Stratvert P.A. opinions as an exhibit to an amendment to the registration statement of which this prospectus is a part or to one of our periodic filings with the SEC.

For a discussion of risks associated with potential judicial, legislation or regulatory actions, please read “Risk Factors — Risks Associated with Potential Judicial, Legislative or Regulatory Actions.”

Servicing Agreement

In the financing order, the NMPRC authorized PNM, as the initial servicer, to enter into the servicing agreement which is described under “The Servicing Agreement” in this prospectus.

Binding on Successors

The Energy Transition Act provides that if energy transition bonds issued pursuant to a financing order are outstanding and the related energy transition costs have not been paid in full, the energy transition charges authorized by the financing order shall be collected by the qualifying utility or its successors or assignees, or a collection agent, in full through a non-bypassable charge that is a separate line item on customer bills and not a part of the qualifying utility’s base rates.

The Financing Order provides that any successor to PNM will be bound by the requirements of the Energy Transition Act and shall perform and satisfy all obligations of PNM under the Financing Order, including the obligation to collect and pay energy transition charge revenues to the indenture trustee. The Financing Order further provides that it is binding upon any servicer or other entity responsible for billing and collecting the energy transition charges on behalf of the issuing entity and upon any successor to the NMPRC.

46

PNM ENERGY TRANSITION BOND COMPANY I, LLC, THE ISSUING ENTITY

General

The issuing entity is a limited liability company organized under the laws of the State of Delaware and is governed by an amended and restated limited liability company agreement. PNM is the sole member of the issuing entity. The issuing entity was formed on August 25, 2023.

The issuing entity has been organized to serve as a special purpose subsidiary of PNM, for the limited purpose of holding energy transition property and issuing energy transition bonds secured by energy transition property and the other collateral pledged to secure the energy transition bonds. See “— Restricted Purposes” below. At the time of the issuance of the Series A Bonds, the issuing entity’s assets will consist primarily of the energy transition property and the other collateral held under the indenture and the series supplement for the Series A Bonds.

The organizational documents of the issuing entity, as well as the basic documents supporting the Series A Bonds, give the issuing entity the authority and flexibility to issue additional series of energy transition bonds authorized by one or more future financing orders issued by the NMPRC and to acquire additional energy transition property which will be pledged to the payment of other energy transition bonds if the rating agency condition is satisfied. As a result, the issuing entity may acquire additional energy transition property and issue one or more additional series of energy transition bonds that are supported by such additional and separate energy transition property or other collateral to finance the energy transition costs approved in a future financing order. In addition, PNM may cause the issuance of additional energy transition bonds through a different entity if the rating agency condition is satisfied. See “Security for the Series A Bonds — Issuance of Additional Energy Transition Bonds or Similar Bonds” and “— Allocation Among Series” in this prospectus.

Each series of energy transition bonds that the issuing entity may issue will be issued under a separate indenture and will be backed by separate energy transition property the issuing entity acquires for the separate purpose of repaying that series. Any new series of energy transition bonds may include terms and conditions that would be unique to that particular series.

As of the date of this prospectus, the issuing entity has not carried on any business activities and has no operating history. Selected provisions of the issuing entity’s limited liability company agreement, a copy of which has been filed as an exhibit to the registration statement of which this prospectus forms a part, are summarized below. On or before the date of issuance of the Series A Bonds, PNM will make a capital contribution to the issuing entity in an amount not less than 0.5% of the total capital of the issuing entity (with the initial principal amount of the Series A Bonds representing the remaining 99.5% of the total capital of the issuing entity). Under the Financing Order, PNM will be entitled to a return on this capital contribution equal to the rate of interest on the longest maturing tranche of the Series A Bonds. This return will be available for distribution to PNM, subject to the priority of payment set forth in the indenture and the series supplement. See “Security for the Series A Bonds — How Funds in the Collection Account Will Be Allocated” in this prospectus.

Restricted Purposes

The issuing entity has been created for the limited purposes of:

•

acquiring, owning, holding, administering, servicing or entering into agreements regarding the receipt and servicing of energy transition property and the other collateral, along with certain other related assets with respect to one or more series of energy transition bonds;

•

managing, selling, assigning, pledging, collecting amounts due on or otherwise dealing with energy transition property and the other collateral and related assets with respect to one or more series of energy transition bonds to be so acquired in accordance with the terms of the basic documents relating to such series;

•

negotiating, authorizing, executing, delivering, assuming the obligations under, and performing its duties under, the basic documents and any other agreement or instrument or document relating to the

47

activities set forth in the above bullets; provided, that each party to any such agreement under which material obligations are imposed upon the issuing entity shall covenant that it shall not, prior to the date which is one year and one day after the termination of the indenture and the payment in full of the energy transition bonds and any other amounts owed under any indenture, acquiesce, petition or otherwise invoke or cause the issuing entity to invoke the process of any court or governmental authority for the purpose of commencing or sustaining an involuntary case against the issuing entity under any federal or state bankruptcy, insolvency or similar law or appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator or other similar official of PNM or any substantial part of the property of the issuing entity; or ordering the winding up or liquidation of the affairs of the issuing entity; and provided, further, that the issuing entity shall be permitted to incur additional indebtedness or other liabilities payable to service providers and trade creditors in the ordinary course of business in connection with the foregoing activities;

•

filing with the SEC one or more registration statements, including any pre-effective or post-effective amendments thereto and any registration statement filed pursuant to Rule 462(b) under the Securities Act of 1933, as amended (including any prospectus supplement, prospectus and exhibits contained therein) and filing such applications, reports, surety bonds, irrevocable consents, appointments of attorney for service of process and other papers and documents necessary or desirable to register one or more series of energy transition bonds under the securities or “Blue Sky” laws of various jurisdictions;

•

authorizing, executing, delivering, issuing and registering one or more series of energy transition bonds;

•

making payment on energy transition bonds;

•

pledging the issuing entity’s interest in energy transition property and other collateral relating to any series of energy transition bonds to an indenture trustee under one or more indentures and one or more series supplements in order to secure the related series of energy transition bonds; and

•

engaging in any lawful act or activity and exercise any powers permitted to limited liability companies formed under the laws of the State of Delaware that, in either case, are incidental to, or necessary, suitable or convenient for the accomplishment of the above-mentioned purposes.

The issuing entity’s limited liability company agreement does not permit the issuing entity to engage in any activities not directly related to these purposes, including issuing additional securities (other than additional energy transition bonds) or investing in additional securities, borrowing money or making loans to other persons. The list of permitted activities set forth in the issuing entity’s limited liability company agreement may not be altered, amended or repealed without the affirmative vote of a majority of the issuing entity’s managers, which vote must include the affirmative vote of its independent manager. The issuing entity’s limited liability company agreement and the indenture will prohibit the issuing entity from issuing any energy transition bonds (as such term is defined in the Energy Transition Act), other than the Series A Bonds that we will offer pursuant to this prospectus and any additional energy transition bonds issued by the issuing entity pursuant to a separate financing order of the NMPRC and secured by separate energy transition property. Please read “Security for the Series A Bonds — Issuance of Additional Energy Transition Bonds and Acquisition of Additional Energy Transition Property by the Issuing Entity” and “— Allocation Among Series” in this prospectus.

The Issuing Entity’s Relationship with PNM

On the issue date of the Series A Bonds, PNM will sell energy transition property to the issuing entity pursuant to the sale agreement between the issuing entity and PNM. PNM will service such energy transition property pursuant to a servicing agreement between the issuing entity and PNM related to the Series A Bonds. Please read “The Sale Agreement” and “The Servicing Agreement” in this prospectus. PNM will provide certain administrative services to the issuing entity, pursuant to an administration agreement between the issuing entity and PNM.

The Issuing Entity’s Management

Pursuant to the issuing entity’s limited liability company agreement, the business of the issuing entity will be managed by three or more managers, at least one of whom must be an independent manager, in each

48

case appointed from time to time by PNM or, in the event PNM transfers its interest in the issuing entity, by the issuing entity’s owner or owners. Following the issuance of the Series A Bonds, the issuing entity will have at least one independent manager, who among other things, must be a natural person who, for the five-year period prior to his or her appointment as an independent manager has not been and during the continuation of his or her service as independent manager is not:

•

a member, partner, equity holder, manager, director, officer, agent, consultant, attorney, accountant, advisor or employee of PNM or any of its equityholders or affiliates (other than as an independent director, independent manager or special member of PNM or an Affiliate of PNM that is not in the direct chain of ownership of PNM and that is required by such PNM’s creditors to be a single purpose bankruptcy remote entity); provided, that the indirect or beneficial ownership of stock of PNM or its Affiliates through a mutual fund or similar diversified investment vehicle with respect to which the owner does not have discretion or control over the investments held by such diversified investment vehicle shall not preclude such owner from being an independent manager;

•

a creditor, supplier or service provider (including provider of professional services) to PNMR, PNM or any of their respective equityholders or affiliates (other than a nationally-recognized company that routinely provides professional independent managers and other corporate services to PNMR, PNM or any of its affiliates in the ordinary course of its business);

•

a family member of any of the foregoing; or

•

a person who controls (whether directly, indirectly or otherwise) any of the foregoing.

PNM, as the sole member of the issuing entity, will appoint the independent manager prior to the issuance of the Series A Bonds. None of the issuing entity’s managers or officers has been involved in any legal proceedings which are specified in Item 401(f) of the SEC’s Regulation S-K. None of our managers or officers beneficially own any equity interest in the issuing entity.

49

The following is a list of the issuing entity’s managers and executive officers as of the date of this prospectus:

Name	Age	Title	Background
Elisabeth A. Eden	56	Manager, President and Treasurer	Senior Vice President, Chief Financial Officer and Treasurer of PNM since July 2022. Vice President and Treasurer of PNM from February 2021 to June 2022. Vice President and Chief Information Officer of PNM from January 2021 to February 2022. Vice President of Human Resources of PNM from April 2018 to January 2021.
Henry E. Monroy	45	Manager and Secretary	Vice President, Regulatory and Corporate Controller of PNM since July 2022. Vice President and Controller of PNM from January 2020 to June 2022. Controller Utility Operations of PNM from December 2017 to January 2020.
Kevin P. Burns	54	Independent Manager	President and co-founder of Global Securitization Services, LLC established in 1996. He is responsible for the management of all aspects of GSS’s administration services, as well as overall supervision of the firm. Fortune 1000 companies have selected Mr. Burns to serve as Independent Director for their SPV subsidiaries established to finance auto loans/leases, commercial real estate, energy infrastructure and many classes of financial assets. Prior to co-founding Global, Mr. Burns spent five years with Lord Securities Corporation where he became a Director and Vice President in charge of Lord’s asset backed commercial paper group. Prior to Lord, he spent a year at the broker/dealer Mabon Securities Corporation where he sat on the intermediate corporate bond desk. Mr. Burns holds a B.S. in Finance from the University of Notre Dame.

Manager Fees and Limitations on Liability

The issuing entity has not and will not compensate the managers, other than the independent manager, for their services on behalf of the issuing entity. The issuing entity will pay the independent manager annual fees from the issuing entity’s revenues and will reimburse such independent manager for reasonable and documented expenses These expenses include the reasonable compensation, expenses and disbursements of the agents, representatives, experts and counsel that the independent manager may employ in connection with the exercise and performance of his or her rights and duties under the issuing entity’s limited liability company agreement, the indenture, the series supplement, the sale agreement and the servicing agreement. In the event that more than one series of energy transition bonds is issued, the administration fees, independent manager fees and other operating expenses payable by the issuing entity on a payment date will be assessed to each series on a pro rata basis, based upon the respective outstanding principal amounts of each series.

The issuing entity’s limited liability company agreement provides that the managers will not be personally liable for any of the issuing entity’s debts, obligations or liabilities to the extent permitted by law. The issuing entity’s limited liability company agreement further provides that, to the fullest extent permitted by law, the issuing entity will indemnify the managers against any liability incurred in connection with their services as managers for the issuing entity except if caused by the manager’s fraud, gross negligence or willful misconduct or in the case of an independent manager, bad faith or willful misconduct. The issuing entity will pay any indemnification amounts owed to managers out of funds in the collection account, subject

50

to the priority of payments described in “Security for the Series A Bonds — How Funds in the Collection Account Will Be Allocated” in this prospectus.

The Issuing Entity is a Separate and Distinct Legal Entity

Under the issuing entity’s limited liability company agreement, the issuing entity may not file a voluntary petition for relief under the Bankruptcy Code without a unanimous vote of its managers, including the independent manager. PNM has agreed that it will not cause the issuing entity to file a voluntary petition for relief under the bankruptcy code without the affirmative vote of PNM and a unanimous vote of our mangers, including the independent manager. The issuing entity’s limited liability company agreement requires the issuing entity, except for financial reporting purposes (to the extent required by generally accepted accounting principles) and for federal income tax purposes, to maintain its existence separate from PNM including:

•

taking all necessary steps to continue the issuing entity’s identity as a separate legal entity;

•

making it apparent to third persons that the issuing entity is an entity with assets and liabilities distinct from those of PNM, other affiliates of PNM, the managers or any other person and correcting any known misunderstandings; and

•

making it apparent to third persons that, except for federal and certain other tax and accounting purposes, the issuing entity is not a division of PNM or any of its affiliated entities or any other person.

The separateness provisions in the issuing entity’s limited liability company agreement may be amended by the issuing entity, with the affirmative vote of the independent manager, and PNM with written notice to the indenture trustee, as well as satisfaction of the rating agency condition.

The issuing entity is authorized to issue additional series of energy transition bonds that are supported by additional and separate energy transition property and other separate collateral.

The issuing entity has been organized to serve as a special purpose Delaware limited liability company, for the purpose of holding energy transition property and issuing energy transition bonds secured by energy transition property and other collateral and related activities to finance certain activities of PNM related to the recovery of energy transition costs. At the time of issuance of the Series A Bonds, the issuing entity’s assets will consist primarily of the energy transition property and the other collateral held under the indenture and series supplement for the Series A Bonds. The issuing entity’s organizational documents as well as the transaction documents supporting the Series A Bonds give the issuing entity the authority and flexibility to issue additional energy transition bonds, with the approval of the NMPRC. As a result, the issuing entity may acquire additional, separate energy transition property and issue one or more additional series of energy transition bonds that are supported by such additional and separate energy transition property or other collateral. See “Public Service Company of New Mexico — The Depositor, Sponsor, Seller and Servicer — Application for Issuance of Additional Energy Transition Bonds” for additional information regarding PNM’s application to issue additional energy transition bonds in connection with its proposed abandonment of the Four Corners Power Plant.

Each series of energy transition bonds that the issuing entity may issue will be backed by separate energy transition property the issuing entity acquires for the separate purpose of repaying that series. Any new series of energy transition bonds may include terms and conditions that would be unique to that particular series. Each series of energy transition bonds that the issuing entity may issue will have the benefit of a true-up adjustment mechanism.

However, the issuing entity may not issue additional series of energy transition bonds if such issuance would not satisfy the rating agency condition for the Series A Bonds. See “Security for the Series A Bonds — Issuance of Additional Energy Transition Bonds or Similar Bonds” and “— Allocation Among Series” in this prospectus.

In addition, the organizational documents of the issuing entity require the issuing entity to operate in a manner intended to reduce the likelihood that the issuing entity would be consolidated in PNM’s bankruptcy

51

estate if PNM becomes involved in a bankruptcy proceeding. The issuing entity has no intent to file a voluntary petition for relief under the Bankruptcy Code, so long as the issuing entity is solvent and does not reasonably foresee becoming insolvent.

The Administration Agreement

Pursuant to an administration agreement between PNM and the issuing entity, PNM will provide or arrange for the provision of administrative services to the issuing entity, including services relating to the preparation of financial statements, required filings with the SEC, any tax returns the issuing entity might be required to file, qualifications to do business, and minutes of the issuing entity’s managers’ meetings. The issuing entity will pay PNM a fixed fee of $50,000 per annum for performing such services described above. The $50,000 fee will be paid in full on the first interest payment date following the issuance of the Series A Bonds and every second interest payment date thereafter.

The administrator may not resign or be removed without satisfaction of the rating agency condition, and without the successor administrator assuming all of the obligations of the former administrator under the administration agreement.

52

PUBLIC SERVICE COMPANY OF NEW MEXICO —
THE DEPOSITOR, SPONSOR, SELLER AND SERVICER

PNM will be the seller and initial servicer of the Series A Bonds and will be the depositor and sponsor of the transaction in which the Series A Bonds covered by this prospectus are issued.

PNM is a public utility that was organized under the laws of the State of New Mexico on May 9, 1917. PNM is an electric utility that provides electric generation, transmission and distribution services to its rate-regulated customers. PNM’s retail electric service territory covers a large area of north-central New Mexico, including the cities of Albuquerque, Rio Rancho and Santa Fe, and certain areas of southern New Mexico. As of December 31, 2022, PNM had 545,783 retail customers in its retail electric service territory. PNM is a wholly-owned subsidiary of PNMR. PNMR is an investor-owned holding company with two regulated utilities providing electricity and electric services in New Mexico and Texas. PNMR’s electric utilities are PNM and Texas-New Mexico Power Company (“TNMP”). TNMP is a regulated utility providing transmission and distribution services in Texas. See “— PNMR’s Proposed Merger” below.

PNM is subject to the jurisdiction of the NMPRC with respect to retail utility rates, accounting, utility services, certain facilities, certain asset transfers, certain corporate mergers and other matters. PNM is subject to the jurisdiction of the Federal Energy Regulatory Commission under the Federal Power Act with respect to acquisitions, operations and disposals of certain assets and facilities, services provided and rates charged, conduct among affiliates and other matters.

Following the sale of the energy transition property to the issuing entity, PNM will have no ownership or other interest in the energy transition property transferred to the issuing entity and will have no right to receive any energy transition charges (other than collected as servicer on behalf of the issuing entity). Neither PNM nor any of its affiliates will purchase any Series A Bonds.

PNM’s executive offices are located at 414 Silver Ave. SW, Albuquerque, New Mexico 87102, and its telephone number is (505) 241-2700.

PNM’s Retail Customer Base and Energy Usage

The table below sets forth PNM’s total retail electric revenues from electric sales, annual average number of customers and retail sales volume for the years 2018 to 2022. There can be no assurances that the retail electricity sales, retail electric revenues and number of retail customers or composition of any of the foregoing will remain at or near the levels reflected in the following tables.

Total Retail Electric Revenues from New Mexico Retail Customers ($ in thousands)*

Rate Schedule

2018

2019

2020

2021

2022

1A – Residential

​

$

342,532

​

$

344,399

​

$

366,523

​

$

359,227

​

$

360,868

1B Residential – TOU

​

​

354

​

​

371

​

​

371

​

​

331

​

​

385

2A – Small Power

​

​

102,482

​

​

101,036

​

​

95,525

​

​

98,067

​

​

100,228

2B Small Power – TOU

​

​

1,915

​

​

1,519

​

​

1,370

​

​

1,364

​

​

1,342

3B – General Power

​

​

115,104

​

​

117,886

​

​

114,465

​

​

112,754

​

​

118,580

3C – General Power Low LF

​

​

21,416

​

​

20,274

​

​

17,114

​

​

20,366

​

​

20,984

3D – Pilot Municipalities & Counties General Power – TOU

​

​

7,978

​

​

9,493

​

​

9,033

​

​

8,833

​

​

8,685

3E – Pilot Municipalities & Counties General Power Low LF – TOU

​

​

1,711

​

​

1,857

​

​

1,745

​

​

1,738

​

​

1,429

4B – Large Power

​

​

66,830

​

​

62,073

​

​

54,337

​

​

53,877

​

​

54,529

5B – Lg. Svc. (8 MW)

​

​

4,143

​

​

4,590

​

​

4,306

​

​

4,134

​

​

3,837

6 – Private Lighting

​

​

2,546

​

​

2,527

​

​

2,498

​

​

2,457

​

​

2,516

10A – Irrigation

​

​

364

​

​

313

​

​

297

​

​

244

​

​

241

53

Rate Schedule

2018

2019

2020

2021

2022

10B Irrigation Service – TOU

​

​

1,521

​

​

1,402

​

​

1,401

​

​

1,353

​

​

1,357

11B – Wtr/Swg Pumping

​

​

8,159

​

​

7,560

​

​

9,624

​

​

8,740

​

​

8,406

15B – Universities 115 kV

​

​

3,181

​

​

3,344

​

​

2,428

​

​

2,530

​

​

3,293

20 – Streetlighting

​

​

12,718

​

​

5,918

​

​

4,999

​

​

4,934

​

​

4,779

30B – Manuf. (30 MW)

​

​

14,486

​

​

14,997

​

​

16,094

​

​

17,117

​

​

16,617

33B – Lg. Svc. (Station Power)

​

​

194

​

​

189

​

​

213

​

​

214

​

​

200

35B Large Power Service – TOU

​

​

—

​

​

6,697

​

​

6,701

​

​

6,117

​

​

5,999

36B – SSR – Renew. Energy Res.

​

​

1,699

​

​

10,724

​

​

21,113

​

​

17,143

​

​

13,131

Other

​

​

241,581

​

​

223,382

​

​

274,835

​

​

328,850

​

​

330,897

Total

​

$

950,913

​

$

940,549

​

$

1,004,992

​

$

1,050,390

​

$

1,058,303

*

Totals may not add due to rounding.

Annual Average Number of Customers

Rate Schedule	2018		2019		2020		2021		2022
1A – Residential	​	468,143	​	471,819	​	476,405	​	480,700	​	483,951
1B Residential – TOU	​	115	​	116	​	117	​	117	​	121
2A – Small Power	​	52,506	​	52,717	​	53,043	​	53,663	​	53,993
2B Small Power – TOU	​	621	​	576	​	571	​	570	​	567
3B – General Power	​	3,089	​	3,168	​	3,241	​	3,078	​	3,108
3C – General Power Low LF	​	770	​	716	​	663	​	756	​	753
3D – Pilot Municipalities & Counties General Power – TOU	​	178	​	217	​	223	​	213	​	200
3E – Pilot Municipalities & Counties General Power Low LF – TOU	​	76	​	92	​	97	​	91	​	66
4B – Large Power	​	206	​	187	​	173	​	167	​	167
5B – Lg. Svc. (8 MW)	​	2	​	2	​	2	​	2	​	3
6 – Private Lighting	​	—	​	—	​	—	​	—	​	—
10A – Irrigation	​	108	​	107	​	105	​	103	​	102
10B Irrigation Service – TOU	​	206	​	206	​	209	​	208	​	208
11B – Wtr/Swg Pumping	​	154	​	154	​	155	​	153	​	150
15B – Universities 115 kV	​	1	​	1	​	1	​	1	​	1
20 – Streetlighting	​	169	​	173	​	192	​	205	​	248
30B – Manuf. (30 MW)	​	—	​	1	​	1	​	1	​	1
33B – Lg. Svc. (Station Power)	​	1	​	1	​	1	​	1	​	1
35B Large Power Service – TOU	​	—	​	4	​	5	​	4	​	5
36B – SSR – Renew. Energy Res.	​	—	​	1	​	1	​	1	​	1
Other	​	—	​	1	​	1	​	1	​	1
Total	​	526,345	​	530,259	​	535,206	​	540,035	​	543,647

54

Annual Total Energy Volumes (MWh)*

Rate Schedule	2018		2019		2020		2021		2022
1A – Residential	​	3,229,976	​	3,226,448	​	3,414,182	​	3,350,265	​	3,366,541
1B Residential – TOU	​	3,398	​	3,559	​	3,493	​	3,407	​	3,384
2A – Small Power	​	952,124	​	930,384	​	872,166	​	896,003	​	922,789
2B Small Power – TOU	​	18,152	​	14,065	​	12,592	​	12,467	​	12,277
3B – General Power	​	1,541,210	​	1,554,802	​	1,493,970	​	1,501,104	​	1,558,364
3C – General Power Low LF	​	197,170	​	185,391	​	150,683	​	181,028	​	187,191
3D – Pilot Municipalities & Counties General Power – TOU	​	106,132	​	128,020	​	120,825	​	117,273	​	118,208
3E – Pilot Municipalities & Counties General Power Low LF – TOU	​	14,637	​	15,440	​	13,868	​	14,420	​	11,682
4B – Large Power	​	1,096,607	​	1,033,756	​	917,158	​	903,151	​	922,164
5B – Lg. Svc. (8 MW)	​	67,120	​	76,908	​	65,006	​	62,627	​	57,090
6 – Private Lighting	​	14,616	​	14,339	​	14,170	​	13,934	​	13,630
10A – Irrigation	​	4,650	​	3,933	​	3,726	​	3,042	​	2,995
10B Irrigation Service – TOU	​	19,301	​	17,643	​	17,704	​	17,165	​	17,075
11B – Wtr/Swg Pumping	​	178,009	​	167,820	​	174,627	​	162,745	​	156,474
15B – Universities 115 kV	​	74,849	​	73,754	​	51,609	​	41,868	​	72,070
20 – Streetlighting	​	257,922	​	40,531	​	35,467	​	35,297	​	33,565
30B – Manuf. (30 MW)	​	349,845	​	360,498	​	396,771	​	421,605	​	409,976
33B – Lg. Svc. (Station Power)	​	3,296	​	3,362	​	3,294	​	3,351	​	3,500
35B Large Power Service – TOU	​	—	​	215,214	​	196,372	​	195,865	​	186,138
36B – SSR – Renew. Energy Res.	​	26,027	​	288,652	​	571,410	​	717,722	​	929,389
Other	​	698,013	​	659,120	​	416,790	​	508,693	​	532,532
Total	​	8,853,054	​	9,013,639	​	8,945,883	​	9,163,032	​	9,517,034

*

Totals may not add due to rounding.

There were no customers that accounted for 10% or more of PNM’s revenues in the year ended December 31, 2022.

Estimated Usage and Estimate Variance

PNM’s calculation of the initial energy transition charges and subsequent adjustments will be based primarily on estimates of number of customers and kWh usage (residential customer block charges, with a minimum per customer charge and a higher monthly charge for usage above 900 kWh), estimates of kW demand (general power, large power, large service and manufacturing customers) and estimates of number of customers (small power customers). PNM will use these estimates to calculate and set the energy transition charges at levels designed to ensure revenues sufficient to pay interest on and principal of the Series A Bonds when due, to pay fees and expenses of servicing and retiring the Series A Bonds and to replenish the capital subaccount. With respect to the foregoing, interest is due on each payment date and principal for a specific tranche is due upon the final maturity date for such tranche. See “Description of the Series A Bonds — Events of Default; Rights Upon Event of Default” in this prospectus.

PNM conducts sales estimate variance analyses on a regular basis to monitor the accuracy of delivery estimates against recorded usage. The table below presents the estimates of PNM’s retail sales in megawatt-hours, or MWh, for the years 2018 through 2022. Each estimate was made in the prior year.

55

Annual Estimated Variances
Billed Retail Delivery Sales (MWh)

​	2018		2019		2020		2021		2022
Forecast	​	8,704,949	​	8,939,758	​	9,366,929	​	9,441,171	​	9,715,506
Actual	​	8,853,054	​	9,013,639	​	8,945,883	​	9,163,032	​	9,517,034
Variance	​	148,105	​	73,881	​	(421,046)	​	(278,139)	​	(198,472)
Variance (%)	​	1.70%	​	0.83%	​	(4.50)%	​	(2.95)%	​	(2.04)%

Actual usage depends on several factors, including temperatures and economic conditions. For example, while PNM’s methodology for estimating usage assumes normal weather conditions, abnormally hot summers or cold winters can add growth in electricity sales, while conversely, abnormally cool summers or warm winters can suppress growth in electricity usage. Regional economic conditions can also affect usage as customers curb electricity consumption to save money, businesses close and customers migrate to other service territories. Accordingly, variations in conditions will affect the accuracy of any estimate.

The following table sets forth information related to annual forecast variance for customer counts for residential and non-residential customers in PNM’s service area for the years 2018 through 2022. Variances between actual customer counts and forecasted customer counts can be caused by a number of factors such as: the timing of completion of new housing developments (i.e., when the meter is connected), delinquent customers not disconnected due to COVID-19 moratoriums during 2020 and 2021, the timing of completion of PNM capital projects, abnormal weather conditions (i.e., colder or warmer than normal) impacting the timing of when a customer reconnects or disconnects service, and the health of the overall economy.

Annual Estimated Variances
Annual Average Number of Customers

​	2018		2019		2020		2021		2022
Residential	​	​	​	​	​	​	​	​	​	​
Forecast	​	466,831	​	469,130	​	476,071	​	480,168	​	485,424
Actual	​	468,258	​	471,935	​	476,522	​	480,817	​	484,072
Variance	​	1,427	​	2,805	​	451	​	649	​	(1,352)
Variance (%)	​	0.31%	​	0.60%	​	0.09%	​	0.14%	​	(0.28)%
Non-Residential	​	​	​	​	​	​	​	​	​	​
Forecast	​	57,798	​	58,064	​	59,132	​	59,145	​	59,682
Actual	​	58,087	​	58,324	​	58,684	​	59,218	​	59,575
Variance	​	289	​	260	​	(448)	​	73	​	(107)
Variance (%)	​	0.50%	​	0.45%	​	(0.76)%	​	0.12%	​	(0.18)%
Total	​	​	​	​	​	​	​	​	​	​
Forecast	​	524,629	​	527,194	​	535,203	​	539,313	​	545,106
Actual	​	526,345	​	530,259	​	535,206	​	540,035	​	543,647
Variance	​	1,716	​	3,065	​	3	​	722	​	(1,459)
Variance (%)	​	0.33%	​	0.58%	​	0.00%	​	0.13%	​	(0.27)%

Billing and Collections

The energy transition charges that PNM, in its capacity as servicer, estimates to have been collected from PNM’s customers’ electricity bills will be remitted on a daily basis to the collection account. On or before the last servicer business day of each month, the servicer will prepare and deliver to the issuing entity, the indenture trustee and the rating agencies a report that sets forth the energy transition charge collections received during the preceding monthly billing period, except for months in which the servicer must prepare a semi-annual servicers’ certificate. See “The Servicing Agreement — Evidence as to Compliance.” In addition,

56

under the Financing Order, as directed by the Energy Transition Act, the NMPRC will implement the true-up adjustment mechanism for implementing adjustments to the energy transition charges designed to ensure that the aggregate energy transition charges billed for an applicable period will result in energy transition charge collections that are sufficient to pay principal and interest on the Series A Bonds and all other required amounts and charges payable in connection with the Series A Bonds. See “The Servicing Agreement — True-Up Adjustment Process.”

Credit Policy

PNM’s credit and collections policies are regulated by the NMPRC. Under the New Mexico Administrative Code (NMAC) Rule 410, PNM is obligated to provide service to all customers within its service territory. Most requests for energy service are processed by phone at PNM’s contact center or online via PNM’s website. Customer names are reviewed automatically for prior service before service is established.

Residential and non-residential applicants who have not previously had utility service with the Company and have not established an acceptable credit rating; has on three (3) or more occasions, within a 12-month period, received a final notice; had a discontinuation of service for nonpayment of bills rendered by the Company; or without authorization, interfered or diverted the service or tampered with Company equipment are required to pay a deposit. The deposit may be in the form of cash, a surety bond, a letter of guarantee and/or an irrevocable letter of credit. The amount of the deposit for both residential and non-residential is normally 1/6 of the customer’s estimated annual billings.

According to the NMPRC regulations, PNM may refuse to provide service to an applicant who is indebted to it for any utility service previously furnished to the applicant. However, for both residential and non-residential applicants, PNM may commence service if a reasonable payment plan is first established.

Billing Process and Payment Policy

PNM’s billing and payment policies are regulated by the NMPRC under the New Mexico Administrative Code (NMAC) Rule 410. Information included on the customer’s bill is specified in the regulation and includes all factors necessary for the customer to check the calculation of the bill against PNM’s published tariffs. Approximately 36% of customers receive paperless bills.

PNM bills electric services monthly. Meter readings for billing are scheduled monthly. Approximately 97.8% of monthly bills are based on actual meter readings. PNM bills its customers once every 28 to 32 days and distributes an approximately equal number of bills each Business Day in 21 billing cycles. Monthly charges for longer or shorter bill periods are prorated. A select group of accounts receive calendar month bills.

An active account is established by customer request at a service address with at least one contracted service. The account becomes final when all contract services are terminated at the customer’s request, or all services are terminated for non-payment. Billing processes track usage between customers and an attempt is made to match service measured to the new customer.

All bills are due and payable twenty (20) days from the date of rendition. Any bill not paid after twenty (20) calendar days from rendition are deemed delinquent. If a bill is not paid fifteen (15) days after it becomes delinquent, service is subject to discontinuation of service pursuant to regulations.

For accounts with potential billing errors, exception reports and work items are generated for manual review. This review examines accounts that have abnormally high or low bills, potential meter-reading errors and possible meter malfunctions.

PNM Electric offers the following billing programs:

•

Budget Billing — Residential and non-residential customers may elect to participate in the Company’s Budget Billing Payment Plan program. The plan year is twelve (12) months ending each year with the customer’s August bill. If customer begins program in September, the monthly payment is 1/12 of the estimated charges for the customer’s plan year. If the customer begins the program in October

57

or later, the monthly payment is based on the remaining months in the budget year. The budget amount may be periodically adjusted to match the customer’s current level of usage. The plan settles up for any difference between what was paid and the actual costs in month 12. Any balance due to or from the customer is utilized in computing the next year’s monthly plan payments. Any amount due the customer or the Company will be settled and paid at the time the customer, for any reason, ceases to be a participant in the program.

•

Automatic Payment — Residential and non-residential customers may sign up to pay bills automatically from the customer’s bank account beginning one or two bills after application.

•

Summary billing — Non-residential customers may combine at least five qualifying electric accounts onto a summary bill. All accounts must be current. The summary bill may have automatic payment.

PNM may change its credit, billing, collections and termination/restoration of service policies and procedures from time to time while adhering to regulatory guidelines. It is expected that any such changes would be designed to enhance PNM’s ability to bill and collect customer charges on a timely basis.

COVID-19 Consumer Protections

In March 2020, PNM and other utilities voluntarily implemented a temporary suspension of disconnections and late payment fees for non-payment of utility bills in response to the impacts of COVID-19. On March 18, 2020, the NMPRC conducted an emergency open meeting for the purpose of adopting emergency amendments to its rules governing service to residential customers. The NMPRC’s emergency order was applicable during the duration of the Governor of New Mexico’s emergency executive order and allowed for the closure of payment centers, prohibited the discontinuance of a residential customer’s service for non-payment, and suspended the expiration of medical certificates for certain customers.

On February 3, 2021, the NMPRC issued an order finding that the temporary mandatory moratorium on disconnections of residential utility customers would be in effect from the date of the order for 100 days, which ended May 14, 2021. At the end of the moratorium, the 90-day transition period began, which continued the temporary moratorium on disconnections to provide the utilities additional time to assist residential customers with arrearages to enter into installment agreements. On July 14, 2021, the NMPRC issued an order clarifying previous orders that the mandatory requirements of the NMPRC’s previous order prohibiting residential disconnects should be voluntarily complied with by investor-owned utilities until August 12, 2021. PNM resumed disconnections at the end of the transition period.

Loss Experience

The following table sets forth information relating to PNM’s annual net charge-offs (i.e., net of recoveries) for all retail electric customers for the years 2018 to 2022:

​	2018		2019		2020		2021		2022
Net Charge-Offs ($ in thousands)	​	2,856	​	2,850	​	2,206	​	5,199	​	4,507
Percentage of Retail Electric Revenues	​	0.31%	​	0.31%	​	0.22%	​	0.51%	​	0.44%

Days Revenue Outstanding

The following table sets forth information relating to the average number of days customer electricity bills remained outstanding for the years 2018 through 2022:

​	2018		2019		2020		2021		2022
Average number of days outstanding	​	25.68	​	25.03	​	35.81	​	29.91	​	30.04

Delinquencies

The following table sets forth information relating to the delinquencies as a percentage of total annual billed revenues for all classes of customers as of December 31 for the years 2018 to 2022. This historical

58

information is presented because PNM’s actual accounts receivable aging experience may affect the timing of collections and the amounts charged-off, and consequently the timing of remittances and the total amounts remitted to the collection account, that arise from the Energy Transition Charges.

​	2018		2019		2020		2021		2022
31 – 60 days	​	3.3%	​	4.5%	​	6.0%	​	8.8%	​	4.2%
61 – 90 days	​	2.1%	​	1.7%	​	5.7%	​	4.5%	​	3.3%
91+ days	​	1.6%	​	1.8%	​	14.4%	​	14.9%	​	6.7%

Municipalization

As discussed above under “Risk Factors — Risks Associated with Potential Judicial, Legislative or Regulatory Actions — A municipal entity might assert the right to acquire portions of PNM’s electric distribution facilities and avoid payment of the Energy Transition Charges,” a municipal entity may assert that New Mexico law authorizes municipalities to acquire portions of PNM’s electric distribution facilities through the power of eminent domain for use as part of municipally-owned utility systems. Proposals are periodically advanced in various localities to municipalize, or otherwise take over PNM’s facilities, which PNM believes would require state legislative or other legal action to implement, or to establish new municipal utilities in areas currently served by PNM. As of the date of this prospectus, PNM is not aware of any local municipality which is actively seeking or threatening to acquire portions of PNM’s electric distribution system.

The Energy Transition Act provides that energy transition charges shall be paid by each customer who acquires electricity from an alternative or subsequent electricity supplier in PNM’s utility service area. The Financing Order provides that the energy transition charges will be non-bypassable as defined in the Energy Transition Act and shall be paid by each customer receiving electric delivery service from PNM or its successor for as long as the energy transition bonds secured by the energy transition charges are outstanding and the related financing costs have not been recovered in full. In the servicing agreement, PNM will covenant to assert in an appropriate forum that any municipality that acquires any portion of PNM’s electric distribution facilities must be treated as a successor to PNM under the Financing Order.

Where to Find More Information About PNM

PNM’s annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to those reports are made available on PNMR’s website, www.pnmresources.com, free of charge, as soon as reasonably practicable after they are filed with or furnished to the SEC. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at www.sec.gov. No information on these websites constitutes a part of the registration statement of which this prospectus forms a part.

Application for Issuance of Additional Energy Transition Bonds

In January 2021, PNM filed an application with the NMPRC requesting the issuance of up to $300 million in additional energy transition bonds in connection with PNM’s proposed exit of the Four Corners Power Plant. In December 2021, the NMPRC issued a final order denying approval of the Four Corners Power Plant abandonment application and the corresponding request for issuance of additional energy transition bonds. PNM filed a notice of appeal with the New Mexico Supreme Court in December 2021. On July 6, 2023, the New Mexico Supreme Court affirmed the NMPRC’s final order denying approval of the Four Corners Power Plant abandonment and the corresponding issuance of additional energy transition bonds. PNM is reviewing the New Mexico Supreme Court’s decision and will determine next steps.

PNMR’s Proposed Merger Transaction

On October 20, 2020, PNMR, Avangrid, Inc. (Avangrid), and NM Green Holdings, Inc. (Merger Sub), entered into the Agreement and Plan of Merger, dated October 20, 2020 (the Merger Agreement), pursuant

59

to which Merger Sub will merge with and into PNMR, with PNMR surviving the merger as a wholly-owned subsidiary of Avangrid (the Merger). Pursuant to the Merger Agreement, PNMR shareholders will receive $50.30 in cash for each share of PNMR common stock held at the closing of the Merger.

The proposed Merger has been unanimously approved by the Boards of Directors of PNMR, Avangrid and Merger Sub and approved by PNMR shareholders at the Special Meeting of Shareholders held on February 12, 2021.

The Merger Agreement provided that it may be terminated by each of PNMR and Avangrid under certain circumstances, including if the effective time of the Merger shall not have occurred by January 20, 2022 (the End Date); however, either PNMR or Avangrid could extend the End Date to April 20, 2022 if all conditions to closing have been satisfied other than the obtaining of all required regulatory approvals. As discussed below, in December 2021, the NMPRC issued an order rejecting the stipulation agreement relating to the Merger. In January 2022, PNMR, Avangrid and Merger Sub entered into an Amendment to the Merger Agreement pursuant to which PNMR and Avangrid agreed to extend the End Date to April 20, 2023. On April 12, 2023, PNMR, Avangrid, and Merger Sub entered into Amendment No. 2 to the Merger Agreement whereby all of the parties agreed to extend the End Date to July 20, 2023. On June 19, 2023, PNMR, Avangrid, and Merger Sub entered into Amendment No. 3 to the Merger Agreement whereby all of the parties agreed to extend the End Date to December 31, 2023, subject to a three-month extension by PNMR and Avangrid by mutual consent if all of the conditions to closing, other than the conditions relating to regulatory approval, have been satisfied as of December 31, 2023.

The Merger is subject to certain regulatory approvals, including from the NMPRC. PNM, PNMR, Avangrid, the Merger Sub and Iberdrola, S.A. (the Joint Applicants) and a number of intervening parties had entered into an amended stipulation and agreement in the Joint Application for approval of Merger pending before the NMPRC. On November 1, 2021, a Certification of Stipulation was issued by the hearing examiner, which recommended against approval of the amended stipulation. On December 8, 2021, the NMPRC issued an order adopting the Certification of Stipulation, rejecting the amended stipulation reached by the parties. On January 3, 2022, PNMR and Avangrid filed a notice of appeal with the New Mexico Supreme Court. On March 8, 2023, PNM, Avangrid, and the NMPRC filed a motion with the New Mexico Supreme Court to dismiss the appeal and remand the proceeding back to the NMPRC for further proceedings. On May 15, 2023, the New Mexico Supreme Court issued an order denying the joint motion to dismiss the appeal, retaining jurisdiction over the case and has set oral argument for September 15, 2023.

As a result of the delay in closing of the Merger due to the need to obtain NMPRC approval, PNMR and Avangrid were required to make a new filing under the HSR Act and request extensions of approvals previously received from the FCC and NRC. PNM has received approval from the FCC that runs through September 5, 2023, approval from the NRC that runs through May 25, 2024 and clearance under the HSR Act through March 10, 2024. No additional approvals are required from CFIUS, FERC or the PUCT.

With respect to other regulatory proceedings related to the Merger, in 2021 PNMR received clearances for the Merger from the Federal Trade Commission under the Hart-Scott-Rodino Act (the “HSR Act”), the Committee on Foreign Investment in the United States (“CFIUS”), the Federal Communications Commission (the “FCC”), FERC, the Public Utility Commission of Texas (the “PUCT”), and the Nuclear Regulatory Commission (the “NRC”). As a result of the delay in closing of the Merger due to the need to obtain NMPRC approval, PNMR and Avangrid were required to make a new filing under the HSR Act and request extensions of approvals previously received from the FCC and NRC. PNM has received approval from the FCC that runs through September 5, 2023, approval from the NRC that runs through May 25, 2024 and clearance under the HSR Act through March 10, 2024. No additional approvals are required from CFIUS, FERC or the PUCT.

Consummation of the Merger remains subject to the satisfaction or waiver of certain customary closing conditions, including, without limitation, the absence of any material adverse effect on PNMR, the receipt of required regulatory approval from the NMPRC, and the agreements relating to the divestiture of PNM’s ownership interest in the Four Corners Power Plant (Four Corners) being in full force and effect and all applicable regulatory filings associated therewith being made. The agreement relating to the divestiture of Four Corners has been entered into and is in full effect and related filings have been made with the NMPRC.

60

DESCRIPTION OF THE SERIES A BONDS

The following summary describes the material terms of the bonds, the indenture and the series supplement. The forms of the bond, the indenture and the series supplement have been filed as exhibits to the registration statement of which this prospectus forms a part. Please read “Where You Can Find More Information” in this prospectus.

The Series A Bonds are not a debt or a pledge of the faith and credit or taxing power of the State of New Mexico, the NMPRC or of any county, municipality or any other political subdivision, governmental agency, authority or instrumentality of the State or New Mexico and do not represent an interest in or legal obligation of PNM or any of its affiliates, other than the issuing entity. Neither PNM nor any of its affiliates will guarantee or insure the Series A Bonds. The Financing Order authorizing the issuance of the Series A Bonds does not constitute a pledge of the full faith and credit of the State of New Mexico or of any of its political subdivisions. The issuance of the Series A Bonds under the Energy Transition Act will not directly, indirectly or contingently obligate the State of New Mexico or any of its political subdivisions to levy or to pledge any form of taxation for the Series A Bonds or to make any appropriation for their payment.

The issuing entity will issue the Series A Bonds and secure their payment under an indenture and the series supplement that the issuing entity will enter into with U.S. Bank Trust Company, National Association, as indenture trustee. The issuing entity will issue the bonds in minimum denominations of $2,000 and in integral multiples of $1,000 in excess thereof, except that the issuing entity may issue one bond in each tranche in a smaller denomination. The initial principal balance, scheduled final payment date, final maturity date and interest rate for each tranche of the Series A Bonds are stated in the table below.

Tranche	Expected Weighted Average Life (Years)	Principal Amount Offered*	Scheduled Final Payment Date	Final Maturity Date	Interest Rate
A-1	​		​	​	​	%
A-2	​	​	​	​	​	%

*

Preliminary, subject to change.

The scheduled final payment date for each tranche of the Series A Bonds is the date when the outstanding principal balance of that tranche will be reduced to zero if the issuing entity makes payments according to the expected amortization schedule for that tranche. The final maturity date for each tranche of the Series A Bonds is the date when the issuing entity is required to pay the entire remaining unpaid principal balance, if any, of all Series A Bonds of that tranche. The failure to pay principal of any tranche of the Series A Bonds by the scheduled final payment date will not be an event of default under the indenture and the series supplement. An event of default would occur if there were a failure to pay principal for any tranche on the final legal maturity date for such tranche.

Interest Payments

Beginning           , 2024, the issuing entity is required to pay interest semi-annually on the Series A Bonds on each           and           (or, if any payment date is not a business day, the following business day) of each year. The record date (so long as the Series A Bonds are evidenced by book-entry) for any payment of interest on and principal of the Series A Bonds will be the business day immediately before the applicable payment date.

Interest on each tranche of the Series A Bonds will accrue from, and including, the issue date to, but excluding, the first payment date, and thereafter from and including the previous payment date to (but excluding) the applicable payment date until such tranche of the Series A Bonds has been paid in full, at the interest rate indicated in the table on the cover page of this prospectus and in the table above. Each of those periods is referred to as an “interest accrual period.” The issuing entity will calculate interest on tranches of the Series A Bonds on the basis of a 360-day year of twelve 30-day months.

On each payment date, the issuing entity will pay interest on each tranche of the Series A Bonds equal to the following amounts:

61

•

accrued interest on the principal balance of each tranche of the Series A Bonds as of the close of business on the preceding semi-annual payment date, or the date of the original issuance of the Series A Bonds, after giving effect to all payments of principal made on the preceding semi-annual payment date, if any; and

•

if there has been a payment default, any interest payable but unpaid on any prior payment date, together with interest on such unpaid interest, if any.

On each payment date, the issuing entity will pay interest on the Series A Bonds before the issuing entity pays principal on the Series A Bonds.

If there is a shortfall in the amounts available in the collection account to make interest payments on the Series A Bonds, the indenture trustee will distribute interest pro rata to each tranche of Series A Bonds based on the amount of interest payable on each such outstanding tranche. Please read “Security for the Series A Bonds — How Funds in the Collection Account will be Allocated” in this prospectus.

Principal Payments

On each payment date, the issuing entity will pay principal of the Series A Bonds to the bondholders equal to the sum, without duplication, of:

•

the unpaid principal amount of any Series A Bond whose final maturity date is on that payment date, plus

•

the unpaid principal amount of any Series A Bond upon acceleration following an event of default relating to the Series A Bonds, plus

•

any overdue payments of principal, plus

•

any unpaid and previously scheduled payments of principal, plus

•

the principal scheduled to be paid on any Series A Bond on that payment date,

but only to the extent funds are available in the collection account after payment of certain of the issuing entity’s fees and expenses and after payment of interest as described above under “— Interest Payments” in this prospectus. If the indenture trustee receives insufficient collections of energy transition charges for any payment date, and amounts in the collection account (and the applicable subaccounts of the collection account) are not sufficient to make up the shortfall, principal of any tranche of the Series A Bonds may be payable later than expected. Please read “Risk Factors — Other Risks Associated with the Purchase of the Series A Bonds” in this prospectus. To the extent funds are so available, we will make scheduled payments of principal of the Series A Bonds in the following order:

•

to the holders of the tranche A-1 bonds, until the principal balance of that tranche has been reduced to zero, and

•

to the holders of the tranche A-2 bonds, until the principal balance of that tranche has been reduced to zero.

However, on any payment date, unless an event of default has occurred and is continuing and the Series A Bonds have been declared due and payable, the indenture trustee will make principal payments on the Series A Bonds only until the outstanding principal balances of the Series A Bonds have been reduced to the principal balances specified in the applicable expected amortization schedule for that payment date. Accordingly, principal of the Series A Bonds may be paid later, but not sooner, than reflected in the expected amortization schedule, except in the case of an acceleration. The entire unpaid principal balance of each tranche of the Series A Bonds will be due and payable on the final maturity date for that tranche. The failure to make a scheduled payment of principal on the Series A Bonds because there are not sufficient funds in the collection account does not constitute a default or an event of default under the indenture, except for the failure to pay in full the unpaid balance of any tranche upon the final maturity date for such tranche.

Unless the bonds have been accelerated following an event of default, any excess funds remaining in the collection account after payment of principal, interest, applicable fees and expenses and payments to the

62

applicable subaccounts of the collection account will be retained in the excess funds subaccount until applied on a subsequent payment date.

If an event of default (other than a breach by the State of New Mexico of the state pledge) has occurred and is continuing, then the indenture trustee or the holders of not less than a majority in principal amount of the Series A Bonds then outstanding may declare the Series A Bonds to be immediately due and payable, in which event the entire unpaid principal amount of the Series A Bonds and all accrued and unpaid interest thereon will become due and payable. Please read “— Events of Default; Rights Upon Event of Default” in this prospectus. However, the nature of the issuing entity’s business will result in payment of principal upon an acceleration of the Series A Bonds being made as funds become available. Please read “Risk Factors — Risks Associated With the Unusual Nature of the Energy Transition Property — Foreclosure of the indenture trustee’s lien on the energy transition property for the Series A Bonds might not be practical, and acceleration of the Series A Bonds before maturity might have little practical effect” and “Risk Factors — You may experience material payment delays or incur a loss on your investment in the Series A Bonds because the source of funds for payment is limited” in this prospectus.

If there is a shortfall in the amounts available to make principal payments on the Series A Bonds that are due and payable, including upon an acceleration following an event of default, the indenture trustee will distribute principal from the collection account pro rata to each tranche of Series A Bonds based on the principal amount then due and payable on the payment date; and if there is a shortfall in the remaining amounts available to make principal payments on the Series A Bonds that are scheduled to be paid, the indenture trustee will distribute principal from the collection account pro rata to each tranche of Series A Bonds based on the principal amount then scheduled to be paid on the payment date.

The expected amortization schedule below sets forth the principal balance that is scheduled to remain outstanding on each payment date for each tranche of the Series A Bonds from the issuance date to the scheduled final payment date. Similarly, the expected sinking fund schedule below sets forth the corresponding principal payment that is scheduled to be made on each payment date for each tranche of the Series A Bonds from the issuance date to the scheduled final payment date.

Expected Amortization Schedule
Outstanding Principal Balance(1)

Payment Date	Tranche A-1 Principal Balance		Tranche A-2 Principal Balance
Closing Date	​	$	​	$
​	​	$	​	$
​	​	$	​	$
​	​	$	​	$
​	​	$	​	$
​	​	$	​	$
​	​	$	​	$
​	​	$	​	$
​	​	$	​	$
​	​	$	​	$
​	​	$	​	$
​	​	$	​	$
​	​	$	​	$
​	​	$	​	$
​	​	$	​	$
​	​	$	​	$
​	​	$	​	$

63

Payment Date	Tranche A-1 Principal Balance		Tranche A-2 Principal Balance
​	​	$	​	$
​	​	$	​	$
​	​	$	​	$
​	​	$	​	$
​	​	$	​	$
​	​	$	​	$
​	​	$	​	$
​	​	$	​	$
​	​	$	​	$
​	​	$	​	$
​	​	$	​	$
​	​	$	​	$

(1)

Terms are preliminary and subject to change.

The issuing entity cannot assure you that the principal balance of any tranche of the Series A Bonds will be reduced at the rate indicated in the table above. The actual reduction in tranche principal balances may occur more slowly. The actual reduction in tranche principal balances will not occur more quickly than indicated in the above table, except in the case of acceleration due to an event of default under the indenture. The Series A Bonds will not be in default if principal is not paid as specified in the schedule above unless the principal of any tranche is not paid in full on or before the final maturity date of that tranche.

Expected Sinking Fund Schedule(1)

Payment Date	Tranche A-1 Principal		Tranche A-2 Principal
​	​	$	​	$
​	​	$	​	$
​	​	$	​	$
​	​	$	​	$
​	​	$	​	$
​	​	$	​	$
​	​	$	​	$
​	​	$	​	$
​	​	$	​	$
​	​	$	​	$
​	​	$	​	$
​	​	$	​	$
​	​	$	​	$
​	​	$	​	$
​	​	$	​	$
​	​	$	​	$
​	​	$	​	$
​	​	$	​	$
​	​	$	​	$
​	​	$	​	$

64

Payment Date	Tranche A-1 Principal			Tranche A-2 Principal
​	​	$		​	$
​	​	$	​	​	$
​	​	$	​	​	$
​	​	$	​	​	$
​	​	$	​	​	$
​	​	$	​	​	$
​	​	$	​	​	$
​	​	$	​	​	$
​	​	$	​	​	$
Total Payments	​	$		​	$

(1)

Terms are preliminary and subject to change.

On each payment date, the indenture trustee will make principal payments to the extent the principal balance of such tranche of the Series A Bonds exceeds the amount indicated for that payment date in the table above and to the extent of funds available in the collection account after payment of certain of the issuing entity’s fees and expenses and after payment of interest.

Distribution Following Acceleration

Upon an acceleration of the maturity of the Series A Bonds, the total outstanding principal balance of and interest accrued on the Series A Bonds will be payable, without regard to tranche. Although principal will be due and payable upon acceleration, the nature of the issuing entity’s business will result in principal being paid as funds become available. Please read “Risk Factors — Risks Associated With the Unusual Nature of the Energy Transition Property — Foreclosure of the indenture trustee’s lien on the energy transition property for the Series A Bonds might not be practical, and acceleration of the Series A Bonds before maturity might have little practical effect” and “Risk Factors — You may experience material payment delays or incur a loss on your investment in the Series A Bonds because the source of funds for payment is limited” in this prospectus.

No Optional Redemption

The issuing entity may not voluntarily redeem any tranche of the Series A Bonds.

Payments on the Series A Bonds

The indenture trustee will pay on each payment date to the holders of each tranche of the Series A Bonds, to the extent of available funds in the collection account, all payments of principal and interest then due. The indenture trustee will make each payment other than the final payment with respect to any Series A Bonds to the holders of record of the Series A Bonds of the applicable tranche designation on the record date for that payment date. The indenture trustee will make the final payment for each tranche of the Series A Bonds, however, only upon presentation and surrender of the bonds of that tranche at the office or agency of the indenture trustee specified in the notice given by the indenture trustee of the final payment. The indenture trustee will send notice of the final payment to the bondholders no later than five days prior to the final payment date (and, with respect to Book-Entry Series A Bonds, such notice shall be sent to DTC (or any successor clearing agency) pursuant to DTC’s (or such successor clearing agency’s) applicable procedures), specifying the date set for the final payment and the amount of the payment.

The failure to pay accrued interest on any payment date (even if the failure is caused by a shortfall in energy transition charges received) will result in an event of default for the Series A Bonds unless such failure is cured within five business days. Any interest not paid when due (plus interest on the defaulted interest at the applicable interest rate to the extent lawful) will be payable to the bondholders as of a special record date. The special record date will be at the close of business on the 15th business day prior to the

65

date on which the indenture trustee is to make such special payment (a special payment date). The issuing entity will fix any special record date and special payment date. At least 10 days before any special record date, the issuing entity will cause the indenture trustee to send to each affected bondholder a notice that states the special record date, the special payment date and the amount of defaulted interest (plus interest on the defaulted interest) to be paid. Please read “— Events of Default; Rights Upon Event of Default”.

The entire unpaid principal amount of each tranche of the Series A Bonds will be due and payable (i) on the final maturity date for such tranche or (ii) upon a declaration of acceleration by the indenture trustee or the holders of a majority in principal amount of the Series A Bonds if an event of default under the indenture and the series supplement (other than an event of default arising from any act or failure to act by the State of New Mexico or any of its agencies (including the NMPRC), officers or employees that violates the state pledge or is not in accordance with the state pledge) occurs and is continuing.

However, the nature of the issuing entity’s business will result in payment of principal upon an acceleration of the Series A Bonds being made as funds become available. Please read “Risk Factors — Risks Associated With the Unusual Nature of the Energy Transition Property — Foreclosure of the indenture trustee’s lien on the energy transition property for the Series A Bonds might not be practical, and acceleration of the Series A Bonds before maturity might have little practical effect” and “Risk Factors — You may experience material payment delays or incur a loss on your investment in the Series A Bonds because the source of funds for payment is limited” in this prospectus.

At the time, if any, the issuing entity issues the Series A Bonds in the form of definitive bonds and not to The Depository Trust Company, or DTC, or its nominee, the indenture trustee will make payments with respect to that tranche on a payment date or a special payment date by check sent to each holder of a definitive bond of the tranche of record on the applicable record date at its address appearing on the register maintained with respect to the Series A Bonds. Upon written application by a holder of any tranche of the Series A Bonds in physical form to the indenture trustee not later than the applicable record date, the indenture trustee will make payments by wire transfer to an account maintained by the payee.

If any special payment date or other date specified for any payments to bondholders is not a business day, the indenture trustee will make payments scheduled to be made on that special payment date or other date on the next business day, and no interest will accrue upon the payment during the intervening period.

Fees and Expenses

As set forth in the table below, the issuing entity is obligated to pay fees to the servicer, the indenture trustee, its independent manager and PNM as administrator. The following table illustrates this arrangement.

Recipient	Source of Payment	Fees and Expenses Payable
Servicer	Energy transition charge collections and investment earnings	$171,600 (0.05% of the initial principal balance of the Series A Bonds) on an annualized basis (so long as the servicer is PNM or an affiliate), plus expenses
Indenture trustee	Energy transition charge collections and investment earnings	$12,500 per annum, plus expenses and indemnities
Independent manager	Energy transition charge collections and investment earnings	$3,500 per annum, plus expenses
Administration fee	Energy transition charge collections and investment earnings	$50,000 per annum, plus expenses

The annual servicing fee payable to any servicer not affiliated with PNM shall not at any time exceed 0.60% of the initial principal balance of the Series A Bonds unless a higher rate is approved by the NMPRC.

Series A Bonds Will Be Issued in Book-Entry Form

The Series A Bonds will be available to investors only in the form of book-entry bonds. You may hold your Series A Bonds through DTC in the United States, Clearstream Banking, Luxembourg, S.A., referred

66

to as Clearstream, or Euroclear in Europe. You may hold your Series A Bonds directly with one of these systems if you are a participant in the system or indirectly through organizations that are participants.

The Role of DTC, Clearstream and Euroclear

Cede & Co., as nominee for DTC, will hold the global bond or bonds representing the Series A Bonds. Clearstream and Euroclear will hold omnibus positions on behalf of the Clearstream consumers and Euroclear participants, respectively, through consumers’ securities accounts in Clearstream’s and Euroclear’s names on the books of their respective depositaries. These depositaries will, in turn, hold these positions in consumers’ securities accounts in the depositaries’ names on the books of DTC.

The Function of DTC

DTC, the world’s largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions of Section 17A of the Exchange Act. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC’s participants (direct participants) deposit with DTC. DTC also facilitates the post-trade settlement among direct participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between direct participants’ accounts, thereby eliminating the need for physical movement of securities certificates. Direct participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation (DTCC). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a direct participant, either directly or indirectly (indirect participants). The DTC Rules applicable to its Participants are on file with the SEC. More information about DTC can be found at www.dtcc.com and www.dtc.org. The contents of such websites do not constitute a part of the registration statement of which this prospectus forms a part.

The Function of Clearstream

Clearstream holds securities for its consumers and facilitates the clearance and settlement of securities transactions between Clearstream consumers through electronic book-entry changes in accounts of Clearstream consumers, thereby eliminating the need for physical movement of securities. Transactions may be settled by Clearstream in any of various currencies, including United States dollars. Clearstream provides to its consumers, among other things, services for safekeeping, administration, clearance and settlement of internationally traded securities and securities lending and borrowing. Clearstream also deals with domestic securities markets in various countries through established depositary and custodial relationships. Clearstream is registered as a bank in Luxembourg and therefore is subject to regulation by the Luxembourg Commission de Surveillance du Secteur Financier, which supervises Luxembourg banks. Clearstream’s consumers are world-wide financial institutions including underwriters, securities brokers and dealers, banks, trust companies and clearing corporations, among others, and may include the underwriters of the Series A Bonds. Clearstream’s U.S. consumers are limited to securities brokers and dealers and banks. Clearstream has consumers located in various countries. Indirect access to Clearstream is also available to other institutions that clear through or maintain a custodial relationship with an account holder of Clearstream. Clearstream has established an electronic bridge with Euroclear to facilitate settlement of trades between Clearstream and Euroclear.

The Function of Euroclear

The Euroclear System was created in 1968 in Brussels. Euroclear holds securities and book-entry interests in securities for Euroclear participants and facilitates the clearance and settlement of securities

67

transactions between Euroclear participants, and between Euroclear participants and participants of certain other securities intermediaries through simultaneous electronic book-entry delivery against payment, thereby eliminating the need for physical movement of securities and any risk from lack of simultaneous transfers of securities and cash. Such transactions may be settled in any of various currencies, including United States dollars. The Euroclear System includes various other services, including, among other things, safekeeping, administration, clearance and settlement, securities lending and borrowing and interfaces with domestic markets in several countries generally similar to the arrangements for cross-market transfers with DTC described below. The Euroclear System is operated by Euroclear Bank SA/NV. Euroclear participants include central banks and other banks, securities brokers and dealers and other professional financial intermediaries and may include the underwriters of the Series A Bonds. Indirect access to the Euroclear System is also available to other firms that clear through or maintain a custodial relationship with a Euroclear participant, either directly or indirectly.

Terms and Conditions of Euroclear

Securities clearance accounts and cash accounts with Euroclear are governed by the Terms and Conditions Governing Use of Euroclear and the related Operating Procedures of the Euroclear System, and applicable Belgian law (collectively, the Terms and Conditions). These Terms and Conditions govern transfers of securities and cash within the Euroclear System, withdrawals of securities and cash from the Euroclear System and receipts of payments with respect to securities in the Euroclear System. All securities in Euroclear are held on a fungible basis without attribution of specific securities to specific securities clearance accounts. Euroclear acts under the Terms and Conditions only on behalf of Euroclear participants and has no record of or relationship with persons holding through Euroclear participants.

The Rules for Transfers Among DTC, Clearstream or Euroclear Participants

Transfers between DTC participants will occur in accordance with DTC rules. Transfers between Clearstream consumers or Euroclear participants will occur in the ordinary way in accordance with their applicable rules and operating procedures and will be settled using procedures applicable to conventional securities held in registered form.

Cross-market transfers between persons holding directly or indirectly through DTC, on the one hand, and directly or indirectly through Clearstream consumers or Euroclear participants, on the other, will be effected through DTC in accordance with DTC rules on behalf of the relevant European international clearing system by its depositary; however, those cross-market transactions will require delivery of instructions to the relevant European international clearing system by the counterparty in that system in accordance with its rules and procedures and within its established deadlines, which will be based on European time. The relevant European international clearing system will, if the transaction meets its settlement requirements, deliver instructions to its depositary to take action to effect final settlement on its behalf by delivering or receiving Series A Bonds in DTC and making or receiving payment in accordance with normal procedures for same-day funds settlement applicable to DTC. Clearstream consumers and Euroclear participants may not deliver instructions directly to Clearstream’s and Euroclear’s depositaries.

Because of time-zone differences, credits of securities in Clearstream or Euroclear as a result of a transaction with a participant will be made during the subsequent securities settlement processing, dated the business day following the DTC settlement date, and those credits or any transactions in those securities settled during that processing will be reported to the relevant Clearstream consumer or Euroclear participant on that business day. Cash received in Clearstream or Euroclear as a result of sales of securities by or through a Clearstream consumer or a Euroclear participant to a DTC participant will be received with value on the DTC settlement date but will be available in the relevant Clearstream or Euroclear cash account only as of the business day following settlement in DTC.

DTC Will Be the Holder of the Series A Bonds

Bondholders that are not participants or indirect participants but desire to purchase, sell or otherwise transfer ownership of, or other interest in, the Series A Bonds may do so only through direct participants and indirect participants. In addition, bondholders will receive all payments of principal of and interest on the Series A Bonds from the indenture trustee through the participants, who in turn will receive them from

68

DTC. Under a book-entry format, bondholders may experience some delay in their receipt of payments because payments will be forwarded by the indenture trustee to Cede & Co., as nominee for DTC. DTC will forward those payments to its participants, who thereafter will forward them to indirect participants or bondholders. It is anticipated that the only “bondholder” will be Cede & Co., as nominee of DTC. The indenture trustee will not recognize bondholders as bondholders, as that term is used in the indenture, and bondholders will be permitted to exercise the rights of bondholders only indirectly through the participants, who in turn will exercise the rights of bondholders through DTC.

Under the rules, regulations and procedures creating and affecting DTC and its operations, DTC is required to make book-entry transfers of book-entry certificates among participants on whose behalf it acts with respect to the Series A Bonds and is required to receive and transmit payments of principal and interest on the Series A Bonds. Direct participants and indirect participants with whom bondholders have accounts with respect to the Series A Bonds similarly are required to make book-entry transfers and receive and transmit those payments on behalf of their respective bondholders. Accordingly, although bondholders will not possess Series A Bonds, bondholders will receive payments and will be able to transfer their interests.

Because DTC can act only on behalf of participants, who in turn act on behalf of indirect participants and certain banks, the ability of a bondholder to pledge Series A Bonds to persons or entities that do not participate in the DTC system, or otherwise take actions in respect of those Series A Bonds, may be limited due to the lack of a physical certificate for those Series A Bonds.

DTC has advised us that it will take any action permitted to be taken by a bondholder under the indenture only at the direction of one or more participants to whose account with DTC the Series A Bonds are credited. Additionally, DTC has advised us that it will take those actions with respect to specified percentages of the collateral amount only at the direction of and on behalf of participants whose holdings include interests that satisfy those specified percentages. DTC may take conflicting actions with respect to other interests to the extent that those actions are taken on behalf of participants whose holdings include those interests.

Except as required by law, none of any underwriter, the servicer, PNM, the indenture trustee, the issuing entity or any other party will have any liability for any aspect of the records relating to or payments made on account of beneficial interests in the certificates held by Cede & Co., as nominee for DTC, or for maintaining, supervising or reviewing any records relating to such beneficial interests.

How Bond Payments Will Be Credited by Clearstream and Euroclear

Payments with respect to Series A Bonds held through Clearstream or Euroclear will be credited to the cash accounts of Clearstream consumers or Euroclear participants in accordance with the applicable system’s rules and operating procedures, to the extent received by its depositary. Those payments will be subject to tax reporting in accordance with relevant United States tax laws and regulations. Please read “Material U.S. Federal Income Tax Considerations” in this prospectus. Clearstream or the Euroclear operator, as the case may be, will take any other action permitted to be taken by a bondholder under the indenture on behalf of a Clearstream consumer or Euroclear participant only in accordance with its applicable rules and operating procedures and subject to its depositary’s ability to effect those actions on its behalf through DTC.

Although DTC, Clearstream and Euroclear have agreed to the foregoing procedures in order to facilitate transfers of the Series A Bonds among participants of DTC, Clearstream and Euroclear, they are under no obligation to perform or continue to perform those procedures, and those procedures may be discontinued at any time.

Definitive Series A Bonds

The issuing entity will issue the Series A Bonds in registered, certificated form to bondholders, or their nominees, rather than to DTC, only under the circumstances provided in the indenture, which will include: (1) the issuing entity advising the indenture trustee in writing that DTC is no longer willing or able to properly discharge its responsibilities as nominee and depositary with respect to the book-entry Series A Bonds and that the issuing entity is unable to locate a successor, (2) the issuing entity electing to terminate the book-entry system through DTC, with written notice to the indenture trustee, or (3) after the occurrence of an

69

event of default under the indenture, holders of energy transition bonds aggregating not less than a majority of the aggregate outstanding principal amount of all series of energy transition bonds issued under the indenture maintained as book-entry bonds advising the issuing entity, the indenture trustee, and DTC in writing that the continuation of a book-entry system through DTC (or a successor) is no longer in the best interests of those bondholders.

Upon surrender by DTC of the definitive securities representing the Series A Bonds and instructions for registration, the issuing entity will sign and the indenture trustee will authenticate and deliver the Series A Bonds in the form of definitive Series A Bonds, and thereafter the indenture trustee will recognize the registered holders of the definitive Series A Bonds as bondholders under the indenture. Upon issuance of definitive Series A Bonds, the Series A Bonds evidenced by such definitive Series A Bonds will be transferable directly (and not exclusively on a book-entry basis) and registered holders will deal directly with the indenture trustee with respect to transfers, notices and payments.

The indenture trustee will make payment of principal of and interest on the Series A Bonds directly to bondholders in accordance with the procedures set forth herein and in the indenture. The indenture trustee will make interest payments and principal payments to bondholders in whose names the definitive Series A Bonds were registered at the close of business on the related record date. The indenture trustee will make payments by wire transfer to the bondholder as described in the indenture or in such other manner as may be provided in the series supplement. The indenture trustee will make the final payment on any Series A Bonds (whether definitive Series A Bonds or Series A Bonds registered in the name of Cede & Co.), however, only upon presentation and surrender of the Series A Bonds on the final payment date at the office or agency that is specified in the notice of final payment to bondholders. The indenture trustee will provide the notice to registered bondholders not later than the fifth day prior to the final payment date.

Definitive Series A Bonds will be transferable and exchangeable at the offices of the transfer agent and registrar, which initially will be the indenture trustee. There will be no service charge for any registration of transfer or exchange, but the transfer agent and registrar may require payment of a sum sufficient to cover any tax or other governmental charge imposed in connection therewith.

Conditions of Issuance of Additional Energy Transition Bonds and Acquisition of Additional Energy Transition Property by the Issuing Entity

The issuing entity’s acquisition of additional energy transition property and issuance of additional energy transition bonds with respect thereto after the issuance of the Series A Bonds described in this prospectus is subject to the following conditions, among others:

•

PNM requests and receives another financing order from the NMPRC;

•

each series of additional energy transition bonds has recourse only to the energy transition property and funds on deposit in the trust accounts held by the indenture trustee with respect to that series of additional energy transition bonds, is nonrecourse to the collateral securing the Series A Bonds and does not constitute a claim against the issuing entity if revenue from the energy transition charges and funds on deposit in the trust accounts with respect to that series of additional energy transition bonds are insufficient to pay such other series in full;

•

the indenture trustee and the rating agencies then rating any series of the issuing entity’s outstanding energy transition bonds are provided an opinion of a nationally recognized law firm experienced in such matters to the effect that such issuance would not result in the issuing entity’s substantive consolidation with PNM and that there has been a true sale of the energy transition property with respect to such series, subject to the customary exceptions, qualifications and assumptions contained therein;

•

the issuing entity delivers to the indenture trustee an officer’s certificate certifying that the additional series of energy transition bonds shall have the benefit of a true-up adjustment mechanism under the Energy Transition Act;

•

transaction documentation for the other series provides that holders of the additional energy transition bonds of the other series will not file or join in filing of any bankruptcy petition against the issuing entity;

70

•

if holders of such additional energy transition bonds are deemed to have any interest in any of the issuing entity’s assets that are dedicated to the Series A Bonds, holders of such other additional energy transition bonds must agree that their interest in the assets that are dedicated to the Series A Bonds is subordinate to claims or rights of holders of the Series A Bonds;

•

each series of additional energy transition bonds will have its own bank accounts and trust accounts; and

•

each series of additional energy transition bonds will bear its own trustee fees and servicer fees and a pro rata portion of the fees due under the administration agreement, except that the allocation of such fees with respect to such additional energy transition bonds will be governed by the terms of the servicing agreement of the Series A Bonds.

The sale of energy transition property created by an additional financing order and issuance of additional energy transition bonds by the issuing entity with respect thereto after the issuance of the Series A Bonds described in this prospectus is subject to satisfaction of the rating agency condition.

PNM also may cause the issuance of additional energy transition bonds through an entity other than the issuing entity pursuant to a future financing order. However, PNM has covenanted under the sale agreement that it will not sell to any other affiliate property consisting of charges similar to the energy transition charges sold pursuant to this sale agreement, payable by customers pursuant to the Energy Transition Act or any similar law, unless (A) the seller and the other parties to such arrangement shall have entered into an intercreditor agreement in connection therewith and (B) the rating agency condition has been satisfied. Please read “Security for the Series A Bonds — Issuance of Additional Energy Transition Bonds or Similar Bonds” in this prospectus.

Allocation Among Series

The Energy Transition Act and the Financing Order require energy transition charges to be shown as a separate line item on the periodic bills sent to customers. In the event a customer does not pay in full all amounts owed under any bill including energy transition charges, the servicer is required under the Financing Order to allocate any resulting shortfalls in energy transition charges ratably based on the amounts of energy transition charges owing in respect of each series of energy transition bonds. Please read “The Servicing Agreement — Remittances to Collection Account” in this prospectus.

Access of Bondholders

Upon written request of any bondholder or group of bondholders of outstanding Series A Bonds evidencing at least 10% of the aggregate outstanding principal amount of the Series A Bonds, the indenture trustee will afford the bondholder or bondholders making such request a copy of a current list of bondholders for purposes of communicating with other bondholders with respect to their rights under the indenture or the series supplement; provided, that the indenture trustee gives prior written notice to the issuing entity of such request.

The indenture and the series supplement do not provide for any annual or other meetings of bondholders.

Reports to Bondholders

On or prior to each payment date, special payment date or any other date specified in the indenture or the series supplement for payments with respect to any tranche of the Series A Bonds, the servicer will deliver to the indenture trustee, and the indenture trustee will make available on its website (currently located at https://pivot.usbank.com), a statement prepared by the servicer with respect to the payment to be made on the payment date, special payment date or other date, as the case may be, setting forth the following information:

•

the amount of the payment to bondholders allocable to (1) principal, if any, and (2) interest;

•

the aggregate outstanding principal balance of the Series A Bonds, before and after giving effect to payments allocated to principal reported immediately above;

71

•

the difference, if any, between the amount specified immediately above and the principal amount scheduled to be outstanding on that date according to the related expected amortization schedule;

•

any other transfers and payments to be made on such payment date, including amounts paid to the indenture trustee and to the servicer; and

•

the amounts on deposit in the capital subaccount and the excess funds subaccount, after giving effect to the foregoing payments and the required capital level.

Such reports will not constitute financial statements prepared in accordance with generally accepted accounting principles. The financial information provided to bondholders will not be examined and reported upon by an independent public accountant. In addition, an independent public accountant will not provide an opinion on the financial information.

Within the prescribed period of time for tax reporting purposes after the end of each calendar year during the term of the Series A Bonds, if the entity acting as indenture trustee is also acting as paying agent and transfer agent and registrar for the Series A Bonds, then the indenture trustee will, upon written request by the issuing entity or any bondholder, send to persons or entities that at any time during the calendar year were bondholders and received any payment on the Series A Bonds, a statement containing certain information for the purposes of the bondholder’s preparation of United States federal and state income tax returns.

Although neither the issuing entity nor the depositor is an asset-backed issuer and the Series A Bonds are not asset-backed securities as defined by the SEC in governing regulations Item 1101 of Regulation AB because the issuing entity is authorized by its governing documents to issue more than one series of energy transition bonds, the issuing entity intends to file with the SEC reports related to the Series A Bonds consistent with the disclosure and regulatory regime established by Regulation AB. Such reports will be filed under the name of the issuing entity and will include reports on Form 10-D, Form 10-K and Form 8-K. Please read “The Servicing Agreement — Evidence as to Compliance” in this prospectus.

Website Disclosure

The issuing entity will cause to be posted on a website associated with PNM, currently located at www.pnmresources.com, periodic and current reports containing, to the extent such information is reasonably available to it:

•

a statement of energy transition charge remittances made to the indenture trustee and balances in the collection account (and each subaccount thereof), in each case, as of the most recent payment date;

•

the semi-annual servicer’s certificate and monthly servicer’s certificate delivered for the Series A Bonds pursuant to the servicing agreement;

•

the text (or a link to the website where a reader can find the text) of each filing of a true-up adjustment and the results of each such filing;

•

any change in the long-term or short-term credit ratings of the servicer assigned by the rating agencies;

•

material legislative or regulatory developments directly relevant to the Series A Bonds; and

•

any reports and other information that are required to be filed with the SEC under the Exchange Act, including but not limited to periodic and current reports related to the Series A Bonds consistent with the disclosure and reporting regime established in Regulation AB.

Information on PNMR’s website or that can be accessed through the website is not incorporated into and does not constitute a part of the registration statement of which this prospectus forms a part.

The Issuing Entity and the Indenture Trustee May Modify the Indenture and the Series Supplement

Modifications of the Indenture that do not Require Consent of Holders

From time to time, and without the consent of the bondholders (but with prior notice to the rating agencies and when authorized by an issuing entity order), the issuing entity and the indenture trustee may

72

enter into one or more agreements supplemental to the indenture and to the series supplement for various purposes described in the indenture and the series supplement, including:

•

to correct or amplify the description of any property, including the collateral subject to the indenture or the series supplement, or to better assure, convey and confirm to the indenture trustee the property subject to the indenture or the series supplement, or to add additional property;

•

to add to the covenants of the issuing entity for the benefit of the bondholders and the indenture trustee, or surrender any right or power conferred to the issuing entity by the indenture or the series supplement;

•

to convey, transfer, assign, mortgage or pledge any property to or with the indenture trustee;

•

to cure any ambiguity, to correct or supplement any provision in the indenture, in the series supplement or in any supplemental indenture that may be inconsistent with any other provision in the indenture, in the series supplement or in any supplemental indenture or to make any other provisions with respect to matters or questions arising under the indenture, under the series supplement or under any supplemental indenture, provided however, that (i) such action will not, as evidenced by a legal opinion of external counsel to the issuing entity, adversely affect in any material respect the interests of the bondholders and (ii) the rating agency condition shall have been satisfied with respect thereto;

•

to evidence and provide for the acceptance of the appointment under the indenture of a successor trustee with respect to the Series A Bonds and to add or change any of the provisions of the indenture as shall be necessary to facilitate the administration of the trusts thereunder by more than one trustee;

•

to evidence the succession of another person or entity to the issuing entity in accordance with the terms of the indenture and the assumption by any such successor of the covenants in the indenture, in the series supplement and in the Series A Bonds;

•

to modify, eliminate or add to the provisions of the indenture or the series supplement to such extent as shall be necessary to effect qualification under the Trust Indenture Act of 1939, as amended, or the Trust Indenture Act, and to add provisions expressly required by the Trust Indenture Act;

•

to qualify the Series A Bonds for registration with a clearing agency;

•

to satisfy any rating agency requirements; or

•

to authorize the appointment of any fiduciary for any tranche of the Series A Bonds required or advisable with the listing of any tranche on any stock exchange and otherwise amend the indenture or the series supplement to incorporate changes requested or required by any government authority, stock exchange authority or fiduciary for any tranche in connection with such listing.

Modifications of the Indenture or the Series Supplement that Require the Approval of Bondholders

The issuing entity and the indenture trustee may, with the consent of bondholders holding a majority of the aggregate outstanding principal amount of the Series A Bonds of each tranche to be adversely affected (and with prior notice to the rating agencies and when authorized by an issuing entity order), enter into one or more indentures supplemental to the indenture for the purpose of, among other things, adding any provisions to or changing in any manner or eliminating any of the provisions of the indenture or modifying in any manner the rights of bondholders. In determining whether a majority of holders have consented, Series A Bonds owned by the issuing entity, PNM or any other of our affiliates shall be disregarded, except that, in determining whether the indenture trustee shall be protected in relying upon any such consent, the indenture trustee shall only be required to disregard any Series A Bonds it actually knows to be so owned. No supplement, however, may, without the consent of each bondholder of each tranche affected thereby, take certain actions enumerated in the indenture or in the series supplement, including:

•

change the date of payment of any installment of principal of or premium, if any, or interest on any bond of such tranche, or reduce the principal amount thereof, the interest rate thereon or the premium, if any, with respect thereto;

73

•

change the provisions of the indenture or the series supplement and any applicable supplemental indenture relating to the application of collections on, or the proceeds of the sale of, the collateral to payment of principal of or premium, if any, or interest on the Series A Bonds or tranche, or change the place of payment where, or the coin or currency in which, any Series A Bond or the interest thereon is payable;

•

reduce the percentage of the aggregate amount of the outstanding Series A Bonds, the consent of the bondholders of which is required for any supplemental indenture, or the consent of the bondholders of which is required for any waiver of compliance with any provisions of the indenture or the series supplement specified therein or of defaults specified therein and their consequences provided for in the indenture;

•

reduce the percentage of the outstanding amount of the Series A Bonds or tranche the holders of which are required to direct the indenture trustee to direct the issuing entity to sell or liquidate the collateral;

•

modify any of the provisions of the indenture or the series supplement in a manner so as to affect the calculation of the amount of any payment of interest, principal or premium, if any, due on any Series A Bond or tranche on any payment date or change the expected amortization schedule or final maturity date of any Series A Bonds or tranche;

•

decrease the required capital level;

•

permit the creation of any lien ranking prior to or on a parity with the lien of the indenture with respect to any of the collateral for the Series A Bonds or, except as otherwise permitted or contemplated in the indenture or the series supplement, terminate the lien of the indenture on any property at any time subject thereto or deprive the holder of any Series A Bonds of the security provided by the lien of the indenture;

•

cause any material adverse U.S. federal income tax consequence to the seller, the issuing entity, the managers, the indenture trustee or the beneficial owners of the Series A Bonds;

•

modify the provisions of the indenture or the series supplement with respect to amendments to the indenture and to certain of the other basic documents requiring consent of bondholders except to increase any percentage specified; or

•

impair the right to institute suit for the enforcement of those provisions of the indenture or the series supplement regarding payment or application of funds.

Promptly following the execution of any supplement to the indenture, the indenture trustee will furnish either a copy of such supplement or written notice of the substance of the supplement to each bondholder of a Series A Bond to which such supplement relates, and a copy of such supplement to each rating agency.

Notification of the Rating Agencies, the Indenture Trustee and the Bondholders of Any Modification Requiring Bondholder Consent

If the issuing entity, PNM, the administrator or the servicer or any other party to the applicable agreement:

•

proposes to amend, modify, waive, supplement, terminate or surrender, or agree to any amendment, modification, waiver, supplement, termination or surrender of, the terms of the sale agreement, the administration agreement or the servicing agreement, or

•

waives timely performance or observance by PNM, the administrator or the servicer or any other party under the sale agreement, the administration agreement or the servicing agreement,

in each case in a way that would materially and adversely affect the interests of bondholders, the issuing entity must first notify the rating agencies and satisfy the rating agency condition. Upon receiving notification regarding satisfaction of the rating agency condition, the issuing entity must thereafter notify the indenture trustee and the bondholders in writing of the proposed amendment, modification, waiver, supplement, termination or surrender and whether the rating agency condition has been satisfied with respect thereto (or, upon the issuing entity’s written request, the indenture trustee shall so notify the bondholders on behalf

74

of the issuing entity). The indenture trustee will consent to this proposed amendment, modification, supplement, waiver, termination or surrender only if the rating agency condition has been satisfied and only with the written consent of the holders of a majority of the outstanding principal amount of the bonds of the tranches materially and adversely affected thereby. In determining whether a majority of holders have consented, bonds owned by the issuing entity, PNM or any other of our affiliates shall be disregarded, except that, in determining whether the indenture trustee shall be protected in relying upon any such consent, the indenture trustee shall only be required to disregard any bonds it actually knows to be so owned.

Modifications to the Sale Agreement, the Administration Agreement and the Servicing Agreement and Other Basic Documents

Except as set forth under “Notification of the Rating Agencies, the Indenture Trustee and the Bondholders of Any Modification Requiring Bondholder Consent” and “Enforcement of the Sale Agreement, the Administration Agreement, the Servicing Agreement and Other Basic Documents”, the sale agreement, the administration agreement and the servicing agreement may be amended, so long as such amendment does not change the true-up adjustment process and the rating agency condition is satisfied in connection therewith, at any time and from time to time, without the consent of the bondholders, but with the acknowledgement of the indenture trustee upon receipt by the indenture trustee of an officer’s certificate evidencing satisfaction of such rating agency condition and an opinion of external counsel evidencing that such amendment is in accordance with the provisions of such basic document. The servicing agreement does not provide any bondholder or any other person or entity with any legal or equitable right, remedy or claim in the energy transition property, the servicing agreement or any covenants, conditions or provisions contained therein.

Enforcement of the Sale Agreement, the Administration Agreement, the Servicing Agreement and Other Basic Documents

The indenture provides that the issuing entity will take all lawful actions to enforce its rights under the sale agreement, the administration agreement, the servicing agreement and the other basic documents, and to compel or secure the performance and observance by each of PNM, the administrator and the servicer of their respective obligations to the issuing entity under or in connection with the sale agreement, the administration agreement, the servicing agreement and the other basic documents. So long as no event of default occurs and is continuing, the issuing entity may exercise any and all rights, remedies, powers and privileges lawfully available to the issuing entity under or in connection with the sale agreement, the administration agreement and the servicing agreement provided that such action shall not adversely affect the interest of bondholders in any material respect. However, if the issuing entity or the servicer propose to amend, modify, waive, supplement, terminate or surrender, or agree to any amendment, modification, supplement, termination, waiver or surrender of, the process for adjusting the energy transition charges, the issuing entity must notify the indenture trustee and the bondholders in writing of this proposal (or, upon the issuing entity’s written request, the indenture trustee shall so notify the bondholders on behalf of the issuing entity). In addition, the indenture trustee may consent to this proposal only with the written consent of the holders of a majority of the principal amount of the outstanding Series A Bonds of the tranches affected thereby and only if the rating agency condition is satisfied. In determining whether a majority of holders have consented, bonds owned by the issuing entity, PNM or any other of our affiliates shall be disregarded, except that, in determining whether the indenture trustee shall be protected in relying upon any such consent, the indenture trustee shall only be required to disregard any bonds it actually knows to be so owned.

If an event of default occurs and is continuing, the indenture trustee may, and, at the written direction of the holders of a majority of the outstanding amount of all affected tranches of Series A Bonds, shall exercise all of the issuing entity’s rights, remedies, powers, privileges and claims against PNM, the administrator and the servicer, under or in connection with the sale agreement, the administration agreement and the servicing agreement, including the right or power to take any action to compel or secure performance or observance by the seller, the administrator or the servicer of each of their obligations to the issuing entity thereunder and to give any consent, request, notice, direction, approval, extension or waiver under the sale agreement, the servicing agreement and the administration agreement and any right of the issuing entity to take this action shall be suspended.

75

Issuing Entity’s Covenants

The issuing entity may not consolidate or merge with or into any other entity, unless:

•

the entity formed by or surviving the consolidation or merger is organized under the laws of the United States or any state of the United States;

•

the entity expressly assumes, by a supplemental indenture, the performance or observance of all of the issuing entity’s agreements and covenants under the indenture and the series supplement;

•

the entity expressly assumes all of the issuing entity’s obligations and succeeds to all of the issuing entity’s rights under the sale agreement, the servicing agreement and any other basic document to which the issuing entity is a party;

•

no default, event of default or servicer default under the indenture or the series supplement has occurred and is continuing immediately after the merger or consolidation;

•

the rating agency condition will have been satisfied with respect to the merger or consolidation;

•

the issuing entity has delivered to PNM, the indenture trustee and the rating agencies an opinion or opinions of outside tax counsel (as selected by the issuing entity, in form and substance reasonably satisfactory to PNM and the indenture trustee, and which may be based on a ruling from the Internal Revenue Service) to the effect that the consolidation or merger will not result in a material adverse U.S. federal or state income tax consequence to the issuing entity, PNM, the indenture trustee or the then-existing bondholders;

•

any action as is necessary to maintain the lien and the perfected security interest in the collateral for the Series A Bonds created by the indenture and the series supplement has been taken, as evidenced by an opinion of the issuing entity’s external counsel delivered to the indenture trustee; and

•

the issuing entity has delivered to the indenture trustee an officer’s certificate and an opinion of the issuing entity’s external counsel, each stating that the consolidation or merger complies with the indenture and the series supplement and all conditions precedent in the indenture and the series supplement provided for relating to the transaction have been complied with.

The issuing entity may not sell, convey, exchange, transfer or otherwise dispose of any of its properties or assets included in the collateral for the Series A Bonds to any person or entity, unless:

•

the person or entity acquiring the properties and assets:

•

is a United States citizen or an entity organized under the laws of the United States or any state of the United States;

•

expressly assumes, by a supplemental indenture, the performance or observance of all of the issuing entity’s agreements and covenants under the indenture and the series supplement;

•

expressly agrees by means of a supplemental indenture that all right, title and interest so conveyed and transferred will be subject and subordinate to the rights of bondholders;

•

unless otherwise specified in the supplemental indenture referred to above, expressly agrees to indemnify, defend and hold the issuing entity and the indenture trustee harmless against and from any loss, liability or expense arising under or related to the indenture, the series supplement and the Series A Bonds;

•

expressly agrees by means of a supplemental indenture that the person or entity (or if a group of persons or entities, then one specified person or entity) will make all filings with the SEC (and any other appropriate person or entity) required by the Exchange Act in connection with the collateral and the Series A Bonds;

•

if such sale, conveyance, exchange, transfer or disposal relates to the issuing entity’s rights and obligations under the sale agreement or the servicing agreement, such person or entity assumes all obligations and succeeds to all of the issuing entity’s rights under the sale agreement and the servicing agreement, as applicable;

76

•

no default, event of default or servicer default under the indenture or the series supplement has occurred and is continuing immediately after the transactions;

•

the rating agency condition has been satisfied with respect to such transaction;

•

the issuing entity has delivered to PNM, the indenture trustee and the rating agencies an opinion or opinions of outside tax counsel (as selected by the issuing entity, in form and substance reasonably satisfactory to PNM and the indenture trustee, and which may be based on a ruling from the Internal Revenue Service) to the effect that the disposition will not result in a material adverse U.S. federal or state income tax consequence to the issuing entity, PNM, the indenture trustee or the then-existing bondholders;

•

any action as is necessary to maintain the lien and the perfected security interest in the collateral created by the indenture and the series supplement has been taken as evidenced by an opinion of the issuing entity’s external counsel delivered to the indenture trustee; and

•

the issuing entity has delivered to the indenture trustee an officer’s certificate and an opinion of the issuing entity’s external counsel, each stating that the sale, conveyance, exchange, transfer or other disposition complies with the indenture and the series supplement and all conditions precedent therein provided for relating to the transaction have been complied with.

The issuing entity will not, among other things, for so long as any Series A Bonds are outstanding:

•

except as expressly permitted by the indenture and the other basic documents, or in connection with the issuance of additional energy transition bonds, sell, transfer, convey, exchange or otherwise dispose of any of its assets, including those included in the collateral for the Series A Bonds, unless in accordance with the provisions of the indenture;

•

claim any credit on, or make any deduction from the principal or premium, if any, or interest payable in respect of, the Series A Bonds (other than amounts properly withheld from such payments under the Internal Revenue Code, the Treasury regulations promulgated thereunder or other tax laws) or assert any claim against any present or former bondholder by reason of the payment of the taxes levied or assessed upon any part of the collateral securing the Series A Bonds;

•

terminate its existence, or dissolve or liquidate in whole or in part, except as permitted above;

•

permit the validity or effectiveness of the indenture, series supplement or the other basic documents to be impaired;

•

permit the lien of the indenture and the series supplement to be amended, hypothecated, subordinated, terminated or discharged, or permit any person to be released from any covenants or obligations with respect to the Series A Bonds under the indenture except as may be expressly permitted by the indenture;

•

permit any lien, other than the lien and security interest granted under the indenture and the series supplement, to be created on or extend to or otherwise arise upon or burden the collateral securing the Series A Bonds or any part thereof or any interest therein or the proceeds thereof (other than tax liens arising by operation of law with respect to amounts not yet due);

•

permit the lien of the indenture or the series supplement not to constitute a valid first priority perfected security interest in the related collateral;

•

elect to be classified as an association taxable as a corporation for U.S. federal income tax purposes, file any tax return or take any other action or make any election inconsistent with the issuing entity’s treatment for U.S. federal income tax purposes and, to the extent consistent with applicable state tax law, state income and franchise tax purposes, as a disregarded entity that is not separate from the issuing entity’s sole member;

•

change its name, identity or structure or the location of the issuing entity’s chief executive office unless at least ten (10) business days prior to the effective date of any such change, the issuing entity delivers to the indenture trustee (with copies to each Rating Agency) such documents, instruments or agreements, executed by the issuing entity, as are necessary to reflect such change and to continue the perfection of the security interest of the indenture and the series supplement;

77

•

take any action that is subject to the rating agency condition without satisfying the rating agency condition;

•

except to the extent permitted by applicable law, voluntary suspend or terminate its filing obligations with the SEC as described in the indenture; or

•

issue any debt obligations other than the Series A Bonds permitted by the Indenture or, upon satisfaction of the rating agency condition, any additional series of energy transition bonds pursuant to a new financing order.

The issuing entity may not engage in any business other than financing, purchasing, owning, administering, managing and servicing energy transition property and other collateral and the issuance of energy transition bonds in the manner contemplated by the Financing Order and any additional financing order and the indenture and the other basic documents and activities incidental thereto.

The issuing entity will not issue, incur, assume, guarantee or otherwise become liable for any indebtedness except for one or more series of energy transition bonds and any other indebtedness expressly permitted by or arising under the basic documents. Also, the issuing entity will not, except as contemplated by the sale agreement, the servicing agreement or the indenture, make any loan or advance or credit to, or guarantee, endorse or otherwise become contingently liable, directly or indirectly, in connection with the obligations, stocks or dividends of, or own, purchase, repurchase or acquire (or agree contingently to do so) any stock, obligations, assets or securities of, or any other interest in, or make any capital contribution to, any other person. The issuing entity will not, except for the acquisition of energy transition property as contemplated by the Series A Bonds or in connection with the issuance of any additional energy transition bonds, make any expenditure (by long-term or operating lease or otherwise) for capital assets (either realty or personalty).

The issuing entity will not, directly or indirectly, pay dividends or make other distributions to any holder of its equity interest in respect of that interest or redeem or repurchase its equity interests, except, in each case, in accordance with the indenture and the other basic documents.

The issuing entity will cause the servicer to deliver to the indenture trustee the annual accountant’s certificates, compliance certificates, reports regarding distributions and statements to bondholders required under the servicing agreement.

Events of Default; Rights Upon Event of Default

An event of default with respect to the Series A Bonds is defined in the indenture as any one of the following events:

•

default for five business days in the payment when due of any interest on any Series A Bond (whether such failure to pay interest is caused by a shortfall in energy transition charges received or otherwise);

•

default in the payment of the then unpaid principal with respect to any tranche on the final maturity date for that tranche;

•

a default in the observance or performance of any of the issuing entity’s covenants or agreements made in the indenture (other than defaults described above) and the continuation of any such default for a period of 30 days after the earlier of (i) the date that written notice of the default is given to the issuing entity by the indenture trustee or to the issuing entity and the indenture trustee by the holders of at least 25% of the outstanding principal amount of the Series A Bonds or (ii) the date that the issuing entity had actual knowledge of the default;

•

any representation or warranty made by the issuing entity in the indenture, the series supplement or in any certificate or other writing delivered pursuant to the indenture or in connection with the indenture having been incorrect in any material respect as of the time made, and such breach not having been cured within 30 days after the earlier of (i) the date that notice of the breach is given to the issuing entity by the indenture trustee or to the issuing entity and the indenture trustee by the holders of at least 25% of the aggregate outstanding principal amount of the Series A Bonds or (ii) the date that the issuing entity had actual knowledge of the default;

78

•

certain events of bankruptcy, insolvency, receivership or liquidation; or

•

any act or failure to act by the State of New Mexico or any of its agencies (including the NMPRC), officers or employees which violates the state pledge or is not in accordance with the state pledge.

If an event of default (other than as specified in the last bullet point above) should occur and be continuing with respect to the Series A Bonds, the indenture trustee or the holders representing a majority of the aggregate outstanding principal amount of the Series A Bonds may declare the unpaid principal of the Series A Bonds and all accrued and unpaid interest thereon to be immediately due and payable. However, the nature of the issuing entity’s business will result in payment of principal upon an acceleration of the Series A Bonds being made as funds become available. Please read ““Risk Factors — Risks Associated With the Unusual Nature of the Energy Transition Property — Foreclosure of the indenture trustee’s lien on the energy transition property for the Series A Bonds might not be practical, and acceleration of the Series A Bonds before maturity might have little practical effect” and “Risk Factors — You may experience material payment delays or incur a loss on your investment in the Series A Bonds because the source of funds for payment is limited” in this prospectus.

The holders representing a majority of the aggregate outstanding principal amount of the Series A Bonds may rescind and annul that declaration and its consequences so long as the issuing entity deposits with the indenture trustee any past due amounts of all Series A Bonds and expenses of the indenture trustee and all events of default, other than the nonpayment caused by acceleration, have been cured. Additionally, the indenture trustee may exercise all of the issuing entity’s rights, remedies, powers, privileges and claims against the seller, the administrator or the servicer under or in connection with the sale agreement, the administration agreement or the servicing agreement. If an event of default as specified in the last bullet above has occurred, the servicer will be obligated under the servicing agreement to institute (and the indenture trustee, for the benefit of the bondholders, shall be entitled and empowered to institute) any suits, actions or proceedings at law, in equity or otherwise, to enforce the state pledge and to collect any monetary damages as a result of a breach thereof, and each of the servicer and the indenture trustee may prosecute any suit, action or proceeding to final judgment or decree. The servicer will be obligated to institute and maintain such action or proceedings only if it is being reimbursed on a current basis for its costs and expenses and will not be required to advance its own funds in order to bring any suits, actions or proceedings. The costs of any such actions shall be an operating expense of the issuing entity payable from the energy transition charges. The indenture trustee will not be deemed to have knowledge of any servicer default, event of default or a breach of representation or warranty unless a responsible officer of the indenture trustee has actual knowledge of the default or the indenture trustee has received written notice of the default in accordance with the indenture. The indenture trustee shall not be required to take any action it is directed to take under the indenture if the indenture trustee determines in good faith that the action so directed is inconsistent with the indenture, any other basic document or applicable law, or would involve the indenture trustee in personal liability.

If an event of default (other than a breach of the pledge of the State of New Mexico as specified in the last bullet point above) shall have occurred and be continuing, the indenture trustee may, at the written direction of the holders of not less than a majority in principal amount of the Series A Bonds outstanding, either sell the energy transition property securing the Series A Bonds or elect to have the issuing entity maintain possession of all or a portion of the energy transition property and continue to apply energy transition charge collections as if there had been no declaration of acceleration. There is likely to be a limited market, if any, for the energy transition property following a foreclosure, in light of the event of default, the unique nature of the energy transition property as an asset and other factors discussed in this prospectus. In addition, the indenture trustee is prohibited from selling the energy transition property following an event of default, other than a default in the payment of any principal or a default for five business days or more in the payment of any interest on any Series A Bond, unless:

•

the holders of all of the outstanding Series A Bonds consent to the sale;

•

the proceeds of the sale are sufficient to pay in full the principal of and the accrued interest outstanding on the Series A Bonds and all financing costs, including all fees, expenses and indemnities due and owing to the indenture trustee; or

79

•

the indenture trustee determines that the proceeds of the collateral securing the Series A Bonds would not be sufficient on an ongoing basis to make all payments on the Series A Bonds as those payments would have become due if the Series A Bonds had not been declared due and payable, and the indenture trustee obtains the written consent of the holders of at least two-thirds of the aggregate outstanding principal amount of the Series A Bonds.

Subject to the provisions of the indenture relating to the duties of the indenture trustee, if an event of default occurs and is continuing, the indenture trustee will be under no obligation to exercise any of the rights or powers under the Series A Bonds at the request or direction of any of the holders of the Series A Bonds if the indenture trustee reasonably believes it will not be adequately indemnified against the costs, expenses and liabilities which might be incurred by it in complying with the request. Subject to the provisions for indemnification and certain limitations contained in the indenture:

•

the holders of not less than a majority of the aggregate outstanding principal amount of an affected tranche of the Series A Bonds will have the right to direct the time, method and place of conducting any proceeding for any remedy available to the indenture trustee; and

•

prior to the acceleration of the Series A Bonds, the holders of a majority of the aggregate outstanding principal amount of the Series A Bonds may, in certain cases, waive any default with respect thereto, except a default in the payment of principal or interest or a default in respect of a covenant or provision of the indenture that cannot be modified without the consent of all of the holders of the outstanding Series A Bonds of all tranches affected thereby.

No holder of any Series A Bond will have the right to institute any proceeding, to avail itself of any remedies provided in the Energy Transition Act or of the right to foreclose on the collateral, or otherwise to enforce the lien and security interest on the collateral or to seek the appointment of a receiver or indenture trustee, or for any other remedy under the indenture, unless:

•

the holder previously has given to the indenture trustee written notice of a continuing event of default;

•

the holders of a majority of the aggregate outstanding principal amount of the Series A Bonds have made written request of the indenture trustee to institute the proceeding in its own name as indenture trustee;

•

the holder or holders have offered the indenture trustee indemnity satisfactory to it against the costs, expenses and liabilities to be incurred in complying with such request;

•

the indenture trustee for 60 days after receipt of the notice set forth above, requesting an offer of indemnity, has failed to institute the proceeding; and

•

no direction inconsistent with the written request has been given to the indenture trustee during the 60-day period by the holders of a majority of the aggregate outstanding principal amount of the Series A Bonds.

In addition, the indenture trustee and the servicer will covenant and each bondholder will be deemed to covenant that it will not, prior to the date which is one year and one day after the termination of the indenture, institute against the issuing entity or against the issuing entity’s managers or member or members any bankruptcy, reorganization or other proceeding under any federal or state bankruptcy or similar law, subject to the right of a court of competent jurisdiction to order sequestration and payment of revenues arising with respect to the energy transition property.

Neither any manager nor the indenture trustee in its individual capacity, nor any holder of any ownership interest in the issuing entity, nor any of their respective owners, beneficiaries, agents, officers, directors, employees, successors or assigns will, in the absence of an express agreement to the contrary, be personally liable for the payment of the principal of or interest on the Series A Bonds or for the issuing entity’s agreements contained in the indenture.

Actions by Bondholders

Subject to certain exceptions, the holders of not less than a majority of the aggregate outstanding principal amount of all energy transition bonds issued under the indenture (or, if less than all series or

80

tranches are affected, the affected series or tranche or tranches) will have the right to direct the time, method and place of conducting any proceeding for any remedy available to the indenture trustee, or exercising any trust or power conferred on the indenture trustee under the indenture; provided, that:

•

the direction is not in conflict with any rule of law or with the indenture or the series supplement or any basic document and would not involve the indenture trustee in personal liability or expense, in each case, as determined by the indenture trustee in good faith;

•

subject to other conditions specified in the indenture, the consent of holders of 100% of the outstanding principal amount of the Series A Bonds is required to direct the indenture trustee to sell or liquidate the collateral (other than event of default for failure to pay interest or principal at maturity); and

•

the indenture trustee may take any other action deemed proper by the indenture trustee that is not inconsistent with the direction.

Notwithstanding the foregoing, the indenture allows each bondholder to institute suit for the nonpayment of (1) the interest, if any, on its Series A Bond which remains unpaid as of the applicable due date and (2) the unpaid principal, if any, of any tranche of the Series A Bonds on the final maturity date for such tranche.

Annual Report of Indenture Trustee

If required by the Trust Indenture Act, the indenture trustee will be required to mail each year to all bondholders a brief report. The report must state, among other things:

•

any change in the indenture trustee’s eligibility and qualification to continue as the indenture trustee under the indenture;

•

any amounts advanced by it under the indenture;

•

any change in the amount, interest rate and maturity date of specific indebtedness owing by the issuing entity to the indenture trustee in the indenture trustee’s individual capacity;

•

any change in the property and funds physically held by the indenture trustee; and

•

any action taken by it that materially affects the Series A Bonds and that has not been previously reported.

Annual Compliance Statement

The issuing entity will file annually with the indenture trustee and the Rating Agencies a written statement as to whether the issuing entity has fulfilled its obligations under the indenture.

Satisfaction and Discharge of Indenture

The indenture will cease to be of further effect with respect to the Series A Bonds and the indenture trustee, and on the issuing entity’s reasonable written demand and at the issuing entity’s expense, will execute instruments acknowledging satisfaction and discharge of the indenture with respect to the Series A Bonds, when:

•

either (a) all Series A Bonds that have already been authenticated or delivered, with certain exceptions set forth in the indenture, have been delivered to the indenture trustee for cancellation or (b) either the scheduled final payment date for Series A Bonds not delivered for cancellation has occurred or will occur within one year and the issuing entity has irrevocably deposited or cause to be deposited in trust with the indenture trustee cash and/or U.S. government obligations that through the scheduled payments of principal and interest in accordance with their terms are in an amount sufficient to pay principal, interest and premiums, if any, on the Series A Bonds and ongoing transaction costs and all other sums payable by the issuing entity with respect to the Series A Bonds when scheduled to be paid and to discharge the entire indebtedness on such Series A Bonds when due;

•

the issuing entity has paid all other sums payable by it under the indenture with respect to the Series A Bonds; and

81

•

the issuing entity has delivered to the indenture trustee an officer’s certificate, an opinion of the issuing entity’s external counsel, and, if required by the Trust Indenture Act or the indenture trustee, a certificate from a firm of independent registered public accountants, each stating that all conditions precedent in the indenture relating to the satisfaction and discharge of the indenture have been complied with.

The Issuing Entity’s Legal and Covenant Defeasance Options

The issuing entity may, at any time, terminate all of its obligations under the indenture, referred to herein as the legal defeasance option, or terminate its obligations to comply with some of the covenants in the indenture, including some of the covenants described under “— Issuing Entity’s Covenants”, referred to herein as the issuing entity’s covenant defeasance option.

The issuing entity may exercise the legal defeasance option notwithstanding its prior exercise of the covenant defeasance option. If the issuing entity exercises the legal defeasance option, the Series A Bonds will be entitled to payment only from the funds or other obligations set aside under the indenture for payment thereof as described below. The Series A Bonds of any tranche will not be subject to payment through acceleration prior to the scheduled final payment date for such tranche. If the issuing entity exercises the legal defeasance option, the maturity of the Series A Bonds may not be accelerated because of an event of default. If the issuing entity exercises the covenant defeasance option, the maturity of the Series A Bonds may not be accelerated because of an event of default relating to a default in the observance or performance in any material respect of any of the issuing entity’s covenants or agreements made in the indenture.

The indenture provides that the issuing entity may exercise its legal defeasance option or its covenant defeasance option of the Series A Bonds only if:

•

the issuing entity irrevocably deposits or causes to be irrevocably deposited in trust with the indenture trustee cash and/or U.S. government obligations that through the scheduled payments of principal and interest in accordance with their terms are in an amount sufficient to pay principal, interest and premium, if any, on the Series A Bonds and all other sums payable by the issuing entity under the indenture with respect to the Series A Bonds when scheduled to be paid and to discharge the entire indebtedness on the Series A Bonds when due;

•

the issuing entity delivers to the indenture trustee a certificate from a nationally recognized firm of independent registered public accountants expressing its opinion that the payments of principal of and interest on the U.S. government obligations when due and without reinvestment plus any deposited cash will provide cash at times and in sufficient amounts (but, in the case of the legal defeasance option only, not more than such amounts) to pay in respect of the Series A Bonds:

•

principal in accordance with the expected amortization schedule;

•

interest when due; and

•

ongoing transaction costs and all other sums payable by the issuing entity under the indenture with respect to the Series A Bonds;

•

in the case of the legal defeasance option, 95 days pass after the deposit is made and during the 95-day period no default relating to events of the issuing entity’s bankruptcy, insolvency, receivership or liquidation occurs and is continuing at the end of the period;

•

no default has occurred and is continuing on the day of such deposit and after giving effect thereto;

•

in the case of the legal defeasance option, the issuing entity delivers to the indenture trustee an opinion of the issuing entity’s external counsel stating that the issuing entity has received from, or there has been published by, the Internal Revenue Service a ruling, or since the date of execution of the indenture, there has been a change in the applicable U.S. federal income tax law, and in either case confirming that the bondholders will not recognize income, gain or loss for U.S. federal income tax purposes as a result of the exercise of the legal defeasance option and will be subject to U.S. federal income tax on the same amounts, in the same manner and at the same times as would have been the case if the legal defeasance had not occurred;

82

•

in the case of the covenant defeasance option, the issuing entity delivers to the indenture trustee an opinion of the issuing entity’s external counsel to the effect that the bondholders will not recognize income, gain or loss for U.S. federal income tax purposes as a result of the exercise of the covenant defeasance option and will be subject to U.S. federal income tax on the same amounts, in the same manner and at the same times as would have been the case if the covenant defeasance had not occurred;

•

the issuing entity delivers to the indenture trustee a certificate of one of the issuing entity’s officers and an opinion of the issuing entity’s counsel, each stating that all conditions precedent to the satisfaction and discharge of the Series A Bonds to the extent contemplated by the applicable provisions of the indenture have been complied with;

•

the issuing entity delivers to the indenture trustee an opinion of counsel of external counsel of the issuing entity to the effect that: (i) in a case under the Bankruptcy Code in which PNM (or any of its affiliates, other than the issuing entity) is the debtor, the court would hold that the deposited moneys or U.S. government obligations would not be in the bankruptcy estate of PNM (or any of its affiliates, other than the issuing entity, that deposited the moneys or U.S. government obligations); and (ii) in the event PNM (or any of its affiliates, other than the issuing entity, that deposited the moneys or U.S. government obligations) were to be a debtor in a case under the Bankruptcy Code, the court would not disregard the separate legal existence of PNM (or any of its affiliates, other than the issuing entity, that deposited the moneys or U.S. government obligations) and the issuing entity so as to order substantive consolidation under the Bankruptcy Code of the issuing entity’s assets and liabilities with the assets and liabilities of PNM or such other affiliate; and

•

the rating agency condition shall have been satisfied with respect to the exercise of any legal defeasance option or covenant defeasance option.

No Recourse to Others

No recourse may be taken, directly or indirectly, with respect to the obligations of the issuing entity or the indenture trustee on the Series A Bonds or under the indenture or any certificate or other writing delivered in connection therewith, against (a) the issuing entity, other than from the collateral securing the Series A Bonds, (b) any owner of a membership interest in the issuing entity (including PNM) or (c) any shareholder, partner, owner, beneficiary, agent, officer, director or employee of the indenture trustee, the managers of or any owner of a membership interest in the issuing entity (including PNM) in its respective individual capacity, or of any successor or assign of any of them in their respective individual or corporate capacities, except as any such person may have expressly agreed in writing.

Notwithstanding any provision of the indenture or the series supplement to the contrary, bondholders shall look only to the collateral securing the Series A Bonds with respect to any amounts due to the bondholders under the indenture, the series supplement and the Series A Bonds, and, in the event such collateral is insufficient to pay in full the amounts owed on the Series A Bonds, shall have no recourse against the issuing entity in respect of such insufficiency.

Each bondholder by accepting a Series A Bond specifically confirms the nonrecourse nature of these obligations, and waives and releases all such liability. The waiver and release are part of consideration for issuance of the Series A Bonds.

83

THE INDENTURE TRUSTEE

U.S. Bank Trust Company, National Association, a national banking association (“U.S. Bank Trust Co.”), will be the indenture trustee, and will act as the paying agent and registrar for the Series A Bonds. U.S. Bank National Association (“U.S. Bank N.A.”) made a strategic decision to reposition its corporate trust business by transferring substantially all of its corporate trust business to its affiliate, U.S. Bank Trust Co., a non-depository trust company (U.S. Bank N.A. and U.S. Bank Trust Co. are collectively referred to herein as “U.S. Bank.”). Upon U.S. Bank Trust Co.’s succession to the business of U.S. Bank N.A., it became a wholly owned subsidiary of U.S. Bank N.A. The indenture trustee will maintain the accounts of the issuing entity in the name of the trustee at U.S. Bank N.A.

U.S. Bancorp, with total assets exceeding $681 billion as of June 30, 2023, is the parent company of U.S. Bank N.A., the fifth largest commercial bank in the United States. As of June 30, 2023, U.S. Bancorp operated over 2,300 branch offices in 26 states. A network of specialized U.S. Bancorp offices across the nation provides a comprehensive line of banking, brokerage, insurance, investment, mortgage, trust and payment services products to consumers, businesses, and institutions.

U.S. Bank has one of the largest corporate trust businesses in the country with office locations in 48 domestic and 2 international cities. The Indenture will be administered from U.S. Bank’s corporate trust office located at 190 South LaSalle Street, 7th Floor, Chicago, Illinois 60603.

U.S. Bank has provided corporate trust services since 1924. As of June 30, 2023, U.S. Bank was acting as trustee with respect to over 127,000 issuances of securities with an aggregate outstanding principal balance of over $5.8 trillion. This portfolio includes corporate and municipal bonds, mortgage-backed and asset-backed securities and collateralized debt obligations.

The trustee shall make each monthly statement available to the bondholders via the trustee’s internet website at https://pivot.usbank.com. Bondholders with questions may direct them to the trustee’s bondholder services group at (800) 934-6802.

U.S. Bank serves or has served as trustee, paying agent and registrar on several issues of utility rate-payer-backed securities.

U.S. Bank N.A. and other large financial institutions have been sued in their capacity as trustee or successor trustee for certain residential mortgage-backed securities (“RMBS”) trusts. The complaints, primarily filed by investors or investor groups against U.S. Bank N.A. and similar institutions, allege the trustees caused losses to investors as a result of alleged failures by the sponsors, mortgage loan sellers and servicers to comply with the governing agreements for these RMBS trusts. Plaintiffs generally assert causes of action based upon the trustees’ purported failures to enforce repurchase obligations of mortgage loan sellers for alleged breaches of representations and warranties, notify securityholders of purported events of default allegedly caused by breaches of servicing standards by mortgage loan servicers and abide by a heightened standard of care following alleged events of default.

U.S. Bank N.A. denies liability and believes that it has performed its obligations under the RMBS trusts in good faith, that its actions were not the cause of losses to investors, that it has meritorious defenses, and it has contested and intends to continue contesting the plaintiffs’ claims vigorously. However, U.S. Bank N.A. cannot assure you as to the outcome of any of the litigation, or the possible impact of these litigations on the trustee or the RMBS trusts.

On March 9, 2018, a law firm purporting to represent fifteen Delaware statutory trusts (the “DST”) that issued securities backed by student loans (the “Student Loans”) filed a lawsuit in the Delaware Court of Chancery against U.S. Bank N.A. in its capacities as indenture trustee and successor special servicer, and three other institutions in their respective transaction capacities, with respect to the DSTs and the Student Loans. This lawsuit is captioned The National Collegiate Student Loan Master Trust I, et al. v. U.S. Bank National Association, et al., C.A. No. 2018-0167-JRS (Del. Ch.) (the “NCMSLT Action”). The complaint, as amended on June 15, 2018, alleged that the DSTs have been harmed as a result of purported misconduct or omissions by the defendants concerning administration of the trusts and special servicing of the Student Loans. Since the filing of the NCMSLT Action, certain Student Loan borrowers have made assertions against U.S. Bank N.A. concerning special servicing that appear to be based on certain allegations made on behalf of the DSTs in the NCMSLT Action.

84

U.S. Bank N.A. has filed a motion seeking dismissal of the operative complaint in its entirety with prejudice pursuant to Chancery Court Rules 12(b)(1) and 12(b)(6) or, in the alternative, a stay of the case while other prior filed disputes involving the DSTs and the Student Loans are litigated. On November 7, 2018, the Court ruled that the case should be stayed in its entirety pending resolution of the first-filed cases. On January 21, 2020, the Court entered an order consolidating for pretrial purposes the NCMSLT Action and three other lawsuits pending in the Delaware Court of Chancery concerning the DSTs and the Student Loans, which remains pending.

U.S. Bank N.A. denies liability in the NCMSLT Action and believes it has performed its obligations as indenture trustee and special servicer in good faith and in compliance in all material respects with the terms of the agreements governing the DSTs and that it has meritorious defenses. It has contested and intends to continue contesting the plaintiffs’ claims vigorously.

While the legal proceedings discussed above involve certain affiliates of the indenture trustee, none of such legal proceedings are material to the holders of the Series A Bonds.

The indenture trustee may resign at any time upon not less than 30 days’ prior written notice to the issuing entity. The holders of not less than a majority of the aggregate outstanding principal amount of the energy transition bonds then outstanding under the indenture may remove the indenture trustee by so notifying the indenture trustee and may appoint a successor indenture trustee. The issuing entity will remove the indenture trustee if the indenture trustee:

•

ceases to be eligible under the Trust Indenture Act;

•

ceases to satisfy certain credit standards set forth in the indenture;

•

becomes a debtor in a bankruptcy proceeding or is adjudicated insolvent or a receiver or other public officer takes charge of the indenture trustee or its property;

•

becomes incapable of acting; or

•

fails to provide to the issuing entity certain information it reasonably requests that is necessary for the issuing entity to satisfy its reporting obligations under the securities laws.

If the indenture trustee resigns or is removed or a vacancy exists in the office of indenture trustee for any reason, the issuing entity will be obligated promptly to appoint a successor indenture trustee eligible under the indenture, and notice of such appointment is required to be given to each Rating Agency by the successor indenture trustee. No resignation or removal of the indenture trustee will become effective until acceptance of the appointment by a successor indenture trustee. The issuing entity is responsible for payment of the expenses associated with any such removal or resignation.

The indenture trustee shall not be liable for any action it takes or omits to take in good faith that it believes to be authorized or within its rights or powers; provided, that the indenture trustee’s conduct does not constitute willful misconduct, negligence or bad faith. The issuing entity has agreed to indemnify the indenture trustee and its officers, directors, employees and agents against any and all loss, liability or expense (including reasonable attorneys’ fees and expenses) incurred by it in connection with the administration of the trust and the performance of its duties under the indenture; provided that the issuing entity is not required to pay any expense or indemnify against any loss, liability or expense incurred by the indenture trustee through the indenture trustee’s own willful misconduct, negligence or bad faith. Please read “Security for the Series A Bonds — How Funds in the Collection Account Will Be Allocated” in this prospectus.

The issuing entity, PNM and its respective affiliates may from time to time enter into normal banking and trustee relationships with U.S. Bank Trust Co. and its affiliates. U.S. Bank Trust Co. and its affiliates, among other relationships, are (i) lenders under term loan and revolving credit agreements of PNM and its affiliates, and (ii) the trustee and paying agent under the indentures governing various debt securities of PNM and its affiliates. No relationships currently exist between PNM, us and our respective affiliates, on the one hand, and U.S. Bank Trust Co. and its affiliates, on the other hand, that would be outside the ordinary course of business or on terms other than would be obtained in an arm’s length transaction with an unrelated third party.

85

SECURITY FOR THE SERIES A BONDS

General

The Series A Bonds will be non-recourse obligations and are payable solely from and secured solely by a pledge of and lien on the energy transition property and the other collateral as provided in the indenture. If and to the extent the energy transition property and the other assets of the trust estate are insufficient to pay all amounts owing with respect to the Series A Bonds, then the bondholders will generally have no claim in respect of such insufficiency against the issuing entity or any other person. By the acceptance of the Series A Bonds, the bondholders waive any such claim.

Pledge of Collateral

To secure the payment of principal of and interest on the Series A Bonds, the issuing entity will grant to the indenture trustee a security interest in all of the issuing entity’s right, title and interest (whether now owned or hereafter acquired or arising) in and to the following property:

•

the energy transition property created under and pursuant to the Financing Order and the Energy Transition Act, and transferred by the seller to the issuing entity pursuant to the sale agreement (including, to the fullest extent permitted by law, the right to impose, charge, collect and receive the energy transition charges, the right to obtain true-up adjustments to those charges, and all revenues and other proceeds arising from those rights and interests);

•

all energy transition charges related to the energy transition property;

•

the issuing entity’s rights under the sale agreement and the bill of sale executed in connection therewith and all property and interests in property transferred under the sale agreement and the bill of sale with respect to the energy transition property and the Series A Bonds;

•

the issuing entity’s rights under the servicing agreement, the administration agreement, and any subservicing, agency, intercreditor, administration or collection agreements executed in connection therewith, to the extent related to the energy transition property and the Series A Bonds;

•

the issuing entity’s rights under the administration agreement;

•

the collection account for the Series A Bonds, all subaccounts of thereof, and all amounts of cash, instruments, investment property or other assets on deposit therein or credited thereto from time to time and all financial assets and securities entitlements carried therein or credited thereto;

•

all rights to compel the servicer to file for and obtain true-up adjustments to the energy transition charges in accordance with the Energy Transition Act and the Financing Order;

•

all present and future claims, demands, causes and choses in action in respect of any or all of the foregoing;

•

all accounts, chattel paper, deposit accounts, documents, general intangibles, goods, instruments, investment property, letters of credit, letters-of-credit rights, money, commercial tort claims and supporting obligations relating to the foregoing; and

•

all payments on or under and all proceeds in respect of any or all of the foregoing.

The collateral does not include:

•

amounts released to PNM on any payment date relating to its return on capital of its capital contribution and amounts related to the issuing entity following the retirement of the Series A Bonds;

•

amounts deposited with the issuing entity on the issuance date for payment of costs of issuance with respect to the Series A Bonds (together with any investment earnings thereon); and

•

proceeds from the sale of the Series A Bonds required to pay the purchase price of the energy transition property paid pursuant to the sale agreement and the costs of issuance of the Series A Bonds.

86

We refer to the foregoing assets in which the issuing entity, as assignee of the seller, will grant the indenture trustee a security interest as the collateral securing the Series A Bonds.

Security Interest in the Collateral

Section 62-18-13.C. of the Energy Transition Act provides that a security interest in energy transition property is created, valid and binding at the latest of when: (a) the financing order is issued; (b) a security agreement is executed; and (c) value is received for the energy transition bonds. Upon perfection by filing a financing statement with the Secretary of State of New Mexico, a security interest in energy transition property is continuously perfected and has priority over any other lien that may subsequently attach to the energy transition property unless the holder of the security interest has agreed in writing otherwise. No continuation statements are necessary to maintain such perfection.

A valid and binding security interest in the energy transition property securing the Series A Bonds will be created pursuant to the indenture and series supplement. The servicer pledges in the servicing agreement to file with the Secretary of State of New Mexico the financing statement required by Section 62-18-13.D of the Energy Transition Act to perfect the lien of the indenture trustee in the energy transition property. The seller will represent, at the time of issuance of the Series A Bonds, that no prior filing of a financing statement has been made under Section 13.D. of the Energy Transition Act with respect to the energy transition property securing the Series A Bonds other than a filing which provides the indenture trustee with a first priority perfected security interest in the energy transition property.

Description of Indenture Accounts

Collection Account

Pursuant to the indenture and the series supplement, the issuing entity will establish a segregated trust account in the name of the indenture trustee with an eligible institution (as defined below) for the Series A Bonds called the collection account. The collection account will be under the sole dominion and exclusive control of the indenture trustee. The indenture trustee will maintain the collection account for the issuing entity’s benefit as well as for the benefit of the bondholders. The collection account for the Series A Bonds will consist of three subaccounts: a general subaccount, an excess funds subaccount and a capital subaccount, which need not be separate bank accounts. For administrative purposes, the subaccounts may be established by the indenture trustee as separate accounts that will be recognized individually as subaccounts and collectively as the collection account. All amounts in the collection account not allocated to any other subaccount will be allocated to the general subaccount. Unless the context indicates otherwise, references in this prospectus to the collection account include the collection account and each of the subaccounts contained therein.

The following institutions are eligible institutions for the establishment of the collection account:

•

the corporate trust department of the indenture trustee or an affiliate thereof, so long as the indenture trustee or such affiliate has (i) either a short-term deposit or issuer rating from Moody’s of at least “P-1” or a long-term unsecured debt or issuer rating from Moody’s of at least “A2”, and (ii) a short-term deposit or issuer rating from S&P of at least “A-1”, or a long-term unsecured debt or issuer rating from S&P of at least “A”; or

•

a depository institution organized under the laws of the United States of America or any State (or any domestic branch of a foreign bank) (i) that has either (A) a long-term unsecured debt or issuer rating of “AA-” or higher by S&P and “A2” or higher by Moody’s, or (B) a short-term deposit, short-term (bank deposit) or issuer rating of “A-1” or higher by S&P and “P-1” or higher by Moody’s, or (ii) whose deposits are insured by the Federal Deposit Insurance Corporation.

If so qualified under the second bullet point of this definition, the indenture trustee may be considered an eligible institution for the purposes of the first bullet point of this definition.

87

Eligible Investments for Funds in the Collection Account

Funds in the collection account may be invested only in such investments as meet the criteria described below and which mature on or before the business day immediately preceding the next payment date:

(1)

direct obligations of, or obligations fully and unconditionally guaranteed as to timely payment by, the United States of America;

(2)

demand or time deposits of, unsecured certificates of deposit of, money market deposit accounts of or bankers’ acceptances issued by, any depository institution (including the indenture trustee of any of its affiliates, acting in its commercial capacity) incorporated or organized under the laws of the United States of America or any State thereof and subject to supervision and examination by U.S. federal or State banking authorities, so long as the commercial paper or other short-term debt obligations of such depository institution are, at the time of deposit or contractual commitment, rated at least “A-1” and “P-1” or their equivalents by each of S&P and Moody’s, or such lower rating as will not result in the downgrading or withdrawal of the ratings of the Series A Bonds;

(3)

commercial paper (including commercial paper of the indenture trustee, acting in its commercial capacity, and other commercial paper of PNM or any of its affiliates), which at the time of purchase is rated at least “A-1” or “P-1” or their equivalents by each of S&P and Moody’s or such lower rating as will not result in the downgrading or withdrawal of the ratings of the Series A Bonds;

(4)

investments in money market funds which have a rating in the highest investment category granted thereby (including funds for which the indenture trustee or any of its affiliates is investment manager or advisor) from Moody’s and S&P;

(5)

repurchase obligations with respect to any security that is a direct obligation of, or fully guaranteed by, the United States of America or certain of its agencies or instrumentalities, entered into with eligible institutions;

(6)

repurchase obligations with respect to any security or whole loan entered into with an eligible institution or with a registered broker/dealer acting as principal and that meets the ratings criteria set forth below:

(i)

a broker/dealer (acting as principal) registered as a broker or dealer under Section 15 of the Exchange Act (any such broker/dealer being referred to in this definition as a “broker/dealer”), the unsecured short-term debt obligations of which are rated at least “P-1” by Moody's and “A-1+” by S&P at the time of entering into such repurchase obligation; or

(ii)

an unrated broker/dealer, acting as principal, that is a wholly-owned subsidiary of a non-bank or bank holding company the unsecured short-term debt obligations of which are rated at least “P-1” by Moody's and “A-1+” by S&P at the time of purchase so long as the obligations of such unrated broker/dealer are unconditionally guaranteed by such non-bank or bank holding company; or

(7)

any other investment permitted by each rating agency.

Notwithstanding the foregoing: (1) no securities or investments which mature in 30 days or more will be eligible investments unless the issuer thereof has either a short-term unsecured debt rating of at least “P-1” from Moody’s or a long-term unsecured debt rating of at least “A1” from Moody’s; (2) no securities or investments described in clauses (2) through (4) above which have maturities of more than 30 days but less than or equal to 3 months will be eligible investments unless the issuer thereof has a long-term unsecured debt rating of at least “A1” from Moody’s and a short-term unsecured debt rating of at least “P-1” from Moody’s; (3) no securities or investments described in clauses (2) through (4) above which have maturities of more than 3 months will be eligible investments unless the issuer thereof has a long-term unsecured debt rating of at least “A1” from Moody’s and a short-term unsecured debt rating of at least “P-1” from Moody’s; (4) no securities or investments described in clauses (2) through (4) above which have a maturity of 60 days or less will be eligible investments unless such securities have a rating from S&P of at least “A-1”; and (5) no

88

securities or investments described in clauses (2) through (4) above which have a maturity of more than 60 days will be eligible investments unless such securities have a rating from S&P of at least “AA-”, “A-1+” or “AAAm”.

The indenture trustee will have access to the collection account for the purpose of making deposits in and withdrawals from the collection account in accordance with the indenture. The servicer will select the eligible investments in which funds will be invested, unless otherwise directed by the issuing entity.

The servicer will remit energy transition charge collections to the collection account in the manner described under “The Servicing Agreement — Remittances to Collection Account” in this prospectus.

General Subaccount

The general subaccount will hold all funds held in the collection account that are not held in the other two subaccounts. The servicer will remit all energy transition charge collections to the general subaccount. On each payment date, the indenture trustee will draw on amounts in the general subaccount to pay the issuing entity’s expenses and to pay interest and make scheduled principal payments on the Series A Bonds, and to make other payments and transfers in accordance with the terms of the indenture. Funds in the general subaccount will be invested in the eligible investments described above.

Excess Funds Subaccount

The indenture trustee, at the written direction of the servicer, will allocate to the excess funds subaccount any amounts on deposit in the general subaccount available with respect to any payment date in excess of amounts necessary to make the payments specified in the indenture on such payment date. The excess funds subaccount will also hold all investment earnings on the collection account (other than investment earnings on the capital subaccount) in excess of such amounts.

Capital Subaccount

In connection with the issuance of the Series A Bonds, PNM, in its capacity as the sole member of the issuing entity, will contribute capital to the issuing entity in an amount equal to the required capital level, which will not be less than 0.50% of the total capital of the issuing entity (with the initial principal amount of the Series A Bonds representing the remaining 99.5% of the total capital of the issuing entity). This amount will be funded by PNM and not from the proceeds of the sale of the Series A Bonds, and will be deposited into the capital subaccount on the issuance date of the Series A Bonds.

In the event that amounts on deposit in the general subaccount and the excess funds subaccount are insufficient to make scheduled payments of principal of and interest on the Series A Bonds and payments of fees and expenses contemplated by the first eight clauses under “— How Funds in the Collection Account will be Allocated” below, the indenture trustee will draw on amounts in the capital subaccount to make such payments up to the lesser of the amount of such insufficiency and the amounts on deposit in the capital subaccount. In the event of any such withdrawal, energy transition charge collections available on any subsequent payment date that are not necessary to pay scheduled payments of principal of and interest on the Series A Bonds and payments of fees and expenses will be used to replenish any amounts drawn from the capital subaccount. If the Series A Bonds have been retired as of any payment date, the amounts on deposit in the capital subaccount, if any, will be released to the issuing entity, free of the lien of the indenture and the series supplement.

How Funds in the Collection Account will be Allocated

On each payment date, the indenture trustee will, with respect to the Series A Bonds, pay or allocate, at the written direction of the servicer, all amounts on deposit in the collection account (including all investment earnings thereon) to pay the following amounts in the following priority:

(1)

payment of the indenture trustee’s fees, expenses and outstanding indemnity amounts in an amount not to exceed $200,000 annually in the then current calendar year; provided, however, that such cap shall not apply after the occurrence of an event of default;

89

(2)

payment of the servicing fee with respect to such payment date and any unpaid servicing fees for prior payment dates;

(3)

payment of the allocable share of the administration fee for such payment date and the fees of the issuing entity’s independent manager for such payment date and any unpaid administration fees or independent manager fees from prior payment dates;

(4)

payment of all other ordinary and periodic operating expenses for such payment date of the issuing entity for such payment date;

(5)

payment of the interest due on the Series A Bonds for such payment date, including any overdue interest;

(6)

payment of principal required to be paid on the final maturity date for each tranche of the Series A Bonds or as a result of acceleration upon an event of default;

(7)

payment of the principal then scheduled to be paid in accordance with the expected amortization schedule, including any overdue payments of scheduled principal, paid pro rata among the Series A Bonds if there is a deficiency;

(8)

payment of any other unpaid operating expenses (including fees, expenses and indemnity amounts owed to the indenture trustee but unpaid due to the limitation in clause (1) above) and any remaining amounts owed pursuant to the basic documents, on a pro rata basis;

(9)

replenishment of any amounts withdrawn from the capital subaccount;

(10)

payment to PNM of an amount equal to the rate of return on the amount contributed by PNM to the capital subaccount (equal to the interest rate on the longest maturing tranche of the Series A Bonds), including any portion of such rate of return for any prior payment date that has not yet been paid;

(11)

allocation of the remainder, if any, to the excess funds subaccount for future payments; and

(12)

after the Series A Bonds have been paid in full and discharged, and all of the other foregoing amounts have been paid in full, the balance (including all amounts then held in the capital subaccount and the excess funds subaccount), if any, will be paid to the issuing entity, free from the lien of the indenture.

If, on any payment date, funds in the general account are insufficient to make the allocations or payments contemplated by items (1) through (9) above, the indenture trustee will draw from amounts on deposit in the following accounts in the following order up to the amount of the shortfall:

1.   from the excess funds subaccount for allocations and payments contemplated in items 1 through 9; and

2.   from the capital subaccount for allocations and payments contemplated by items 1 through 8 above.

If the indenture trustee uses amounts on deposit in the capital subaccount to pay those amounts or make those transfers, as the case may be, subsequent adjustments to the related energy transition charges will take into account, among other things, the need to replenish those amounts.

If, on any payment date, available energy transition charge collections, together with available amounts in the subaccounts, are not sufficient to pay interest due on all outstanding Series A Bonds on that payment date, amounts available will be allocated pro rata based on the amount of interest payable. If, on any payment date, remaining energy transition charge collections, together with available amounts in the subaccounts, are not sufficient to pay principal due and payable on all outstanding Series A Bonds on that payment date (i.e. principal required to be paid on the Series A Bonds on a final maturity date or as a result of acceleration upon an event of default), amounts available will be allocated pro rata based on the principal amount of each tranche then due and payable at its final maturity or upon acceleration. If, on any payment date, remaining energy transition charge collections, together with available amounts in the

90

subaccounts, are not sufficient to pay principal scheduled to be paid on all outstanding bonds (i.e. payment of the principal then scheduled to be paid on the bonds in accordance with the expected amortization schedule), amounts available will be allocated pro rata based on the principal amounts then scheduled to be paid on the payment date.

On any business day on which the indenture trustee receives a written request from the administrator stating that any operating expense payable by the issuing entity (but only as described in clauses (1) through (4) above) will become due and payable prior to the next payment date, and setting forth the amount and nature of such operating expense, as well as any supporting documentation that the indenture trustee may reasonably request, the indenture trustee, upon receipt of such information will make payment of such operating expenses on or before the date such payment is due from amounts on deposit in the general subaccount, the excess funds subaccount and the capital subaccount in that order and only to the extent required to make such payment.

Issuance of Additional Energy Transition Bonds or Other Similar Bonds

The issuing entity has been organized as a special purpose subsidiary of PNM for the limited purpose of holding energy transition property and issuing energy transition bonds, including the Series A Bonds. As a result, the issuing entity may acquire additional energy transition property and issue one or more series of additional energy transition bonds that are supported by such additional and separate energy transition property or other collateral to finance energy transition costs approved by an additional financing order of the NMPRC under the Energy Transition Act. Any additional energy transition bonds will be issued under a separate indenture.

The issuing entity may not issue additional energy transition bonds unless the rating agency condition for the Series A Bonds has been satisfied. In addition, the issuing entity may not issue additional energy transition bonds unless each of the following conditions is satisfied:

•

PNM requests and receives another financing order from the NMPRC;

•

each series of additional energy transition bonds has recourse only to the energy transition property and funds on deposit in the trust accounts held by the indenture trustee with respect to that series of additional energy transition bonds, is nonrecourse to the collateral securing the Series A Bonds and does not constitute a claim against the issuing entity if revenue from the energy transition charges and funds on deposit in the trust accounts with respect to that series of additional energy transition bonds are insufficient to pay such other series in full;

•

the indenture trustee and the rating agencies then rating any series of the issuing entity’s outstanding energy transition bonds are provided an opinion of a nationally recognized law firm experienced in such matters to the effect that such issuance would not result in the issuing entity’s substantive consolidation with PNM and that there has been a true sale of the energy transition property with respect to such series, subject to the customary exceptions, qualifications and assumptions contained therein;

•

the issuing entity delivers to the indenture trustee an officer’s certificate certifying that the additional series of energy transition bonds shall have the benefit of a true-up adjustment mechanism under the Energy Transition Act;

•

transaction documentation for the other series provides that holders of the additional energy transition bonds of the other series will not file or join in filing of any bankruptcy petition against the issuing entity;

•

if holders of such additional energy transition bonds are deemed to have any interest in any of the issuing entity’s assets that are dedicated to the Series A Bonds, holders of such other additional energy transition bonds must agree that their interest in the assets that are dedicated to the Series A Bonds is subordinate to claims or rights of holders of the Series A Bonds;

•

each series of additional energy transition bonds will have its own bank accounts and trust accounts;

•

each series of additional energy transition bonds will bear its own trustee fees and servicer fees and a pro rata portion of the fees due under the administration agreement, except that the allocation of

91

such fees with respect to such additional energy transition bonds will be governed by the terms of the servicing agreement of the Series A Bonds.

In the event a customer does not pay in full the amounts owed under any bill that includes energy transition charges, the Financing Order provides that any resulting shortfalls in energy transition charges will be allocated pro rata based on the amount of energy transition charges owing with respect to each series. Please read “The Servicing Agreement — Remittances to Collection Account” in this prospectus.

In addition, PNM may, from time to time, seek approval from the NMPRC to issue additional energy transition bonds under the Energy Transition Act or securities secured by customer charges similar to the energy transition charges pursuant to other legislation similar to the Energy Transition Act, in each case, through a subsequently created special purpose entity other than the issuing entity.

Any such additional bonds would be secured by separate property created by a separate financing order or orders. PNM has covenanted in the sale agreement that the satisfaction of the rating agency condition and the execution of an intercreditor agreement is a condition precedent to the sale of property consisting of charges similar to the energy transition charges sold to the issuing entity through the sale agreement. Any series of additional energy transition bonds may include terms and provisions unique to that particular series of additional energy transition bonds. Each series of additional energy transition bonds will have the benefit of a true-up adjustment mechanism as required by the Energy Transition Act.

92

WEIGHTED AVERAGE LIFE AND YIELD CONSIDERATIONS
FOR THE SERIES A BONDS

The actual amount of principal and interest payments in respect of the Series A Bonds on each semi-annual payment date of each tranche designation of the Series A Bonds and the weighted average life thereof will depend on the timing of receipt of energy transition charges and the implementation of the true-up adjustment mechanism. The aggregate amount of energy transition charges collected and the rate of principal amortization depends, in part, on energy usage and number of customers (residential class) demand (general power and large power classes) and number of customers (small power class), and the rate of delinquencies and write-offs. The energy transition charges are required to be adjusted at least every six months based in part on the actual rate of collected energy transition charges. However, we can give no assurance that the servicer will forecast accurately actual electricity usage, demand and number of customers and the rate of delinquencies and write- offs or implement adjustments to the energy transition charges so as to cause energy transition charges to be collected at any particular rate. Please read “Risk Factors — Risks Associated with Servicing — Inaccurate forecasting of usage, demand, number of customers or collections might reduce scheduled payments on the Series A Bonds” and “The Servicing Agreement — True-Up Adjustment Process” in this prospectus.

If the servicer collects energy transition charges at a slower rate than forecast during the period of time between mandatory semi-annual true-up adjustments and does not implement an interim true-up adjustment, the Series A Bonds may be retired later than scheduled. The servicer, however, may implement a true-up adjustment at any time it believes the slower collections may affect the timely payment of principal of and interest on the Series A Bonds on a scheduled payment date prior to the mandatory semi- annual true-up adjustment.

No prepayment is permitted. Except in the event of an acceleration of the final payment date of the Series A Bonds after an event of default, the Series A Bonds will not be paid at a rate faster than that contemplated in the expected amortization schedule for each tranche of the Series A Bonds even if the receipt of collected energy transition charges is greater than anticipated. Instead, receipts in excess of the amounts necessary to pay debt service on the Series A Bonds in accordance with the applicable expected amortization schedules, to pay related fees and expenses and to fund subaccounts of the related collection account will be allocated to the excess funds subaccount. Amounts on deposit in the excess funds subaccount will be taken into consideration in calculating the next true-up adjustment.

Upon an acceleration, due to the nature of our business, payment of principal of the Series A Bonds will only be made as funds become available. Please read “Risk Factors — Risks Associated With the Unusual Nature of the Energy Transition Property — Foreclosure of the indenture trustee’s lien on the energy transition property for the Series A Bonds might not be practical, and acceleration of the Series A Bonds before maturity might have little practical effect” and “Risk Factors — You may experience material payment delays or incur a loss on your investment in the Series A Bonds because the source of funds for payment is limited” in this prospectus.

Weighted Average Life Sensitivity

Weighted average life refers to the average amount of time from the date of issuance of a security until each dollar of principal of the security has been repaid to the investor. The rate of principal payments on each tranche of Series A Bonds, the aggregate amount of each interest payment on each tranche of Series A Bonds and the actual final payment date of each tranche of Series A Bonds will depend on the timing of the servicer’s receipt of energy transition charges from customers. Changes in the expected weighted average lives of the tranches of the Series A Bonds in relation to variances in actual number of customers using less than 900 kWh/month and actual number of customers using more than 900 kWh/month (residential customer block charges), actual kW demand (general power and large power customers) and actual number of customers (residential, small power, irrigation, water/sewer pumping customers) and lights (street lights and area lights) from forecast levels are shown below.

93

Weighted Average Life Sensitivity

Tranche	Expected Weighted Average Life (yrs)	–5% (    Standard Deviations from Mean)		–15% (    Standard Deviations from Mean)
		Weighted Average Life (yrs)	Change (Days)	Weighted Average Life (yrs)	Change (Days)
A-1	​	​	​	​	​
A-2	​	​	​	​	​

Assumptions

For the purposes of preparing the above chart, the following assumptions, among others, have been made: (i) in relation to the initial forecast, the forecast error stays constant over the life of the Series A Bonds and is equal to (A) an overestimate of the number of residential customers using less than 900 kWh/month and the number of residential customers using more than 900 kWh/month (residential customer block charges) of 5% (      standard deviations from mean) or 15% (      standard deviations from mean), (B) an overestimate of kW demand (general power and large power customers) of 5% (      standard deviations from mean) or 15% (      standard deviations from mean), and (C) an overestimate of number of customers (residential, small power, irrigation, water/sewer pumping customers) and lights (street lights and area lights) of 5% (      standard deviations from mean) or 15% (      standard deviations from mean); (ii) the servicer makes timely and accurate filings to make a true-up adjustment to the energy transition charges semi-annually; (iii) customer charge-off rates are held constant at    % for all classes of customers; (iv) days sales outstanding are based upon historical averages; (v) operating expenses are equal to projections; (vi) there is no acceleration of the final maturity date of the Series A Bonds; (vii) a permanent loss of all customers has not occurred; and (viii) the issuance date of the Series A Bonds is           , 2023. There can be no assurance that the weighted average lives of the Series A Bonds will be as shown.

94

THE SALE AGREEMENT

The following summary describes particular material terms and provisions of the purchase and sale agreement (the sale agreement), pursuant to which the issuing entity will purchase energy transition property from the seller. We have filed the form of the sale agreement as an exhibit to the registration statement of which this prospectus forms a part.

Sale and Assignment of Energy Transition Property

On the issuance date the seller will sell to the issuing entity, without recourse or warranty, its entire right, title and interest in and to the energy transition property to be transferred to the issuing entity on that date, subject to the satisfaction of the conditions specified in the sale agreement and the indenture and the series supplement. The energy transition property will include all of the seller’s rights under the Financing Order, including the right to impose, charge, collect and receive energy transition charges in an amount necessary to provide for full payment of all energy transition costs identified in the Financing Order, and all revenues and other proceeds arising out of those rights and interests under the Financing Order. The rights and interests of the seller under the Financing Order also include the right to obtain true-up adjustments to the energy transition charges in accordance with the Energy Transition Act and the Financing Order.

The Energy Transition Act provides that energy transition property shall constitute an existing, present property right, even though the imposition and collection of energy transition charges depend on the electric utility continuing to provide electric energy or on the level of future energy consumption. The Energy Transition Act also provides that a sale, assignment or transfer energy transition property by an electric utility to a financing entity that is wholly-owned by the electric utility, such as the issuing entity, shall be an absolute transfer and true sale of, and not a pledge of or secured transaction relating to, the seller’s right, title and interest in, to and under the energy transition property if the documents governing the transaction expressly state that the transaction is a sale or other absolute transfer.

In accordance with the Energy Transition Act, a transfer of the energy transition property will be created upon the issuance of the financing order creating the energy transition property, the execution and delivery of the related sale agreement, and value is received by the seller. On the filing of a financing statement with the Secretary of State of New Mexico with respect to the sale, the transfer of the energy transition property to the issuing entity will be perfected against all third persons, except creditors holding a prior security interest in the energy transition property previously perfected in accordance with the Energy Transition Act. As of the date hereof, there are no other creditors holding a security interest in the energy transition property.

Under the Energy Transition Act, characterization of the sale of energy transition property as a true sale under New Mexico law will not be affected or impaired by:

•

commingling of the energy transition charge revenues with other amounts held by PNM;

•

the retention by PNM of an equity interest in the energy transition property;

•

PNM’s right to recover costs associated with taxes or license fees imposed on the collection of energy transition charge revenues;

•

any recourse the issuing entity may have against PNM;

•

any indemnification rights, obligations or repurchase rights made or provided by PNM;

•

the obligation of PNM to collect of energy transition charge revenues on behalf of the issuing entity;

•

PNM’s treatment of the transfer as a financing for tax, financial reporting or other purposes;

•

any subsequent order of the NMPRC amending the Financing Order;

•

any use of the true-up adjustment mechanism; or

•

anything else that might affect or impair the characterization of the property.

95

Conditions to the Sale of the Energy Transition Property

The issuing entity’s obligation to purchase and the seller’s obligation to sell the energy transition property on the issuance date is subject to the satisfaction or waiver of each of the following conditions:

•

on or prior to the issuance date, the seller shall have duly executed and delivered to the issuing entity a duly executed bill of sale identifying the energy transition property to be conveyed on that date;

•

on or prior to the issuance date, the seller must have obtained the Financing Order from the NMPRC creating the energy transition property;

•

as of the issuance date, the seller may not be insolvent and may not be made insolvent by the sale of the energy transition property to the issuing entity, and the seller may not be aware of any pending insolvency with respect to itself;

•

as of the issuance date, the representations and warranties of the seller in the sale agreement must be true and correct with the same force and effect as if made on that date (except to the extent they relate to an earlier date), no breach of any covenant or agreement of the seller contained in the sale agreement has occurred and is continuing, and no servicer default under the servicing agreement shall have occurred and be continuing;

•

as of the issuance date, the issuing entity must have sufficient funds available to pay the purchase price for the energy transition property to be conveyed and all conditions to the issuance of the Series A Bonds intended to provide the funds to purchase that energy transition property set forth in the indenture and series supplement must have been satisfied or waived;

•

on or prior to the issuance date, the seller must have taken all action required to transfer to the issuing entity ownership of the energy transition property to be conveyed on the issuance date, free and clear of all liens other than liens created by the issuing entity pursuant to the basic documents and to perfect such transfer, including filing any statements or filings under the Energy Transition Act or the New Mexico Uniform Commercial Code; and the issuing entity or the servicer, on behalf of the issuing entity, must have taken any action required for the issuing entity to grant the indenture trustee a lien and first priority perfected security interest in the collateral and maintain that security interest as of the issuance date;

•

the seller must receive and deliver to the rating agencies and the issuing entity any opinions of counsel required by the rating agencies;

•

the seller must receive and deliver to the issuing entity and the indenture trustee an opinion or opinions of outside tax counsel (as selected by the seller, and in form and substance reasonably satisfactory to the issuing entity) to the effect that: (i) the issuing entity will not be subject to U.S. federal income tax as an entity separate from its sole owner, (ii) that the Series A Bonds will be treated as debt of the issuing entity’s sole owner for U.S. federal income tax purposes and (iii) for U.S. federal income tax purposes, the seller will not be treated as recognizing gross income upon the issuance of the Series A Bonds;

•

on and as of the issuance date, the issuing entity’s certificate of formation, its limited liability company agreement, the servicing agreement, the sale agreement, the indenture, the series supplement, Energy Transition Act and the Financing Order must be in full force and effect;

•

the seller must deliver to the issuing entity and to the indenture trustee an officer’s certificate confirming the satisfaction of each of these conditions; and

•

the seller must have received the purchase price for the energy transition property.

Seller Representations and Warranties

In the sale agreement, the seller will represent and warrant to the issuing entity and the indenture trustee, as of the issuance date, among other things, that:

•

subject to the clause below regarding assumptions used in calculating the energy transition charges as of the issuance date, all written information, as amended or supplemented from time to time, provided by the seller to the issuing entity with respect to the energy transition property (including the

96

expected amortization schedule and the Financing Order) is true and correct in all material respects and, based on the information available to the seller on such date, the assumptions used for such calculations are reasonable and made in good faith;

•

it is the intention of the parties that the transfer, sale, assignment and conveyance of the energy transition property constitutes a sale or other absolute transfer of all of the seller’s right, title and interest in the energy transition property to the issuing entity; upon the execution and delivery of the sale agreement and the bill of sale, the seller will have no right, title or interest in the energy transition property and the energy transition property would not be part of the estate of the seller as debtor in the event of a filing of a bankruptcy petition by or against the seller.

•

the seller is the sole owner of the energy transition property sold to the issuing entity on the transfer date and such sale will have been made free and clear of all liens other than liens created by us pursuant to the indenture and the series supplement; all actions or filings, including filings under the Energy Transition Act and the UCC, necessary to give the issuing entity a valid ownership interest in the energy transition property and to grant the indenture trustee a first priority perfected security interest in the energy transition property, free and clear of all liens of the seller or anyone else have been taken or made;

•

the seller is not aware (after due inquiry) of any judgment or tax lien filings against the issuing entity or the seller;

•

under the laws of the State of New Mexico (including the Energy Transition Act) and the United States in effect on the issuance date:

•

the Financing Order pursuant to which the energy transition property has been created has become final and non-appealable and is in full force and effect;

•

as of the issuance of the Series A Bonds, the Series A Bonds are entitled to the protection provided in the Energy Transition Act and, accordingly, the Financing Order and the energy transition charges are not revocable by the NMPRC;

•

as of the issuance of the Series A Bonds, revisions to PNM’s electric tariff to implement the energy transition charges have been filed and, in accordance with the Energy Transition Act, will become effective 15 days after such filing, such revisions are consistent with the Financing Order, and any electric tariff implemented consistent with a financing order issued by the NMPRC is not subject to modification by the NMPRC except for true-up adjustments made in accordance with the Energy Transition Act;

•

the process by which the Financing Order was adopted and approved complies with all applicable laws, rules and regulations;

•

no governmental approvals, authorizations, consents, orders or other actions or filings, other than filings under the Energy Transition Act or the UCC of New Mexico or Delaware, are required for the seller to execute, deliver and perform its obligations under the sale agreement except those which have previously been obtained or made or are required to be made by the servicer in the future pursuant to the servicing agreement; and

•

under the Energy Transition Act, the State of New Mexico may not take or permit any action that would impair the value of the energy transition property, except for the true-up adjustments permitted under the Energy Transition Act, or reduce, alter or impair, the energy transition charges to be imposed, collected or remitted for the benefit of the bondholders until the principal, interest or other charges incurred in connection with the Series A Bonds are paid in full. Furthermore, under the Contract Clauses of the United States Constitution and the State of New Mexico Constitution, the State of New Mexico, including the NMPRC, could not take any action of a legislative character, including repeal or amendment of the Energy Transition Act or the Financing Order, that substantially impairs the value of the energy transition property or substantially reduces or alters, except for the true-up adjustments permitted under the Energy Transition Act, the energy transition charges to be imposed, collected or remitted for the benefit of the related bondholders unless such action is a reasonable exercise of the State of New Mexico’s sovereign powers and of a character reasonable and appropriate to further a significant

97

and legitimate public purpose. Under the Takings Clauses of the United States Constitution and the New Mexico Constitution, the State of New Mexico, including the NMPRC, could not repeal or amend the Energy Transition Act or the Financing Order or take any other action in contravention of the state pledge, without paying just compensation to the bondholders, as determined by a court of competent jurisdiction, if such action constitutes a permanent appropriation of a substantial property interest of the bondholders in the energy transition property and deprives the bondholders of their reasonable expectations arising from their investment in the Series A Bonds. However, there is no assurance that, even if a court were to award just compensation, it would be sufficient to pay the full amount of principal of, interest on and redemption premium (if any), on the Series A Bonds.

These representations and warranties made above by the seller will survive the execution and delivery of the sale agreement and the issuing entity’s pledge of the energy transition property to the indenture trustee. The seller will further represent and warrant that:

•

the seller is a corporation duly organized, validly existing and in good standing under the laws of New Mexico, with requisite power and authority to own its properties and conduct its business as of the transfer date;

•

the seller has the requisite corporate power and authority to execute and deliver the sale agreement and to carry out its terms; the seller has full corporate power and authority to own the energy transition property and sell and assign the energy transition property to the issuing entity, and the seller has duly authorized such sale and assignment to the issuing entity by all necessary corporate action; and the execution, delivery and performance of the sale agreement has been duly authorized by the seller by all necessary corporate action;

•

the sale agreement constitutes a legal, valid and binding obligation of the seller, enforceable against it in accordance with its terms, subject to bankruptcy, receivership, insolvency, reorganization, moratorium or other laws affecting creditors’ rights generally from time to time in effect and to general principles of equity, regardless of whether considered in a proceeding in equity or at law;

•

the consummation of the transactions contemplated by the sale agreement do not conflict with, result in any breach of any of the terms and provisions of, or constitute a default under, the seller’s organizational documents or any indenture, or other material agreement or instrument to which the seller is a party or by which it is bound, result in the creation or imposition of any lien upon the seller’s properties pursuant to the terms of any such indenture, agreement or other instrument (other than any that may be granted under the basic documents or any liens created by us pursuant to the Energy Transition Act) or violate any existing law or any order, rule or regulation applicable to the seller of any court or of any federal or state regulatory body, administrative agency or other government instrumentality having jurisdiction over the seller or its properties;

•

except as disclosed in the sale agreement and to the seller’s knowledge, there are no proceedings pending or, to the seller’s knowledge, investigations pending or threatened or proceedings threatened, before any court, federal or state regulatory body, administrative agencies or other governmental instrumentality having jurisdiction over the seller or its properties:

•

asserting the invalidity of the basic documents, the Series A Bonds, the Energy Transition Act or the Financing Order;

•

seeking to prevent the issuance of the Series A Bonds or the consummation of any of the transactions contemplated by the basic documents;

•

seeking a determination or ruling that could reasonably be expected to materially and adversely affect the performance by the seller of its obligations under, or the validity or enforceability of, the basic documents, the Series A Bonds or the Financing Order; or

•

challenging the seller’s treatment of the Series A Bonds as debt of the seller for federal income tax purposes;

•

no governmental approvals, authorizations, consents, orders or other actions or filings, other than filings under the Energy Transition Act or with the Secretary of State of New Mexico or the UCC of

98

Delaware, are required for the seller to execute, deliver and perform its obligations under the sale agreement except those which have previously been obtained or made or are required to be made by the servicer in the future pursuant to the servicing agreement;

•

there is no order by a court providing for the revocation, alteration, limitation or other impairment of the Energy Transition Act, Financing Order, energy transition property or energy transition charges, or any rights arising under them, or that seeks to enjoin the performance of any obligations under the Financing Order;

•

for purposes of the Energy Transition Act, the energy transition property constitutes a present property right that will continue to exist until the Series A Bonds and the financing costs associated with those bonds are paid in full;

•

the energy transition property consists of (A) all rights and interest of the seller under the Financing Order, including the right to impose, charge, collect and receive energy transition charges in an amount necessary to provide for full payment and recovery of all energy transition costs identified in the Financing Order; (B) the right under the Financing Order to obtain true-up adjustments of the energy transition charges; and (C) all revenues or other proceeds arising out of the rights and interests described in (A) and (B); and

•

after giving effect to the sale of the energy transition property under the sale agreement, PNM:

•

is solvent and expects to remain solvent;

•

is adequately capitalized to conduct its business and affairs considering its size and the nature of its business and intended purposes;

•

is not engaged and does not expect to engage in a business for which its remaining property represents unreasonably small capital;

•

reasonably believes that it will be able to pay its debts as they become due; and

•

is able to pay its debts as they mature and does not intend to incur, or believes that it will not incur, indebtedness that it will not be able to repay at its maturity.

The seller will make no representation or warranty that amounts collected from the energy transition charges will be sufficient to meet payment obligations on the Series A Bonds or assumptions made in calculating the energy transition charges will in fact be realized.

Certain of the representations and warranties that the seller will make in the sale agreement involve conclusions of law. The seller will make those representations and warranties in order to reflect the good faith understanding of the legal basis on which the bondholders are purchasing the Series A Bonds and to reflect the agreement that, if this understanding proves to be incorrect, the seller will be obligated to indemnify the issuing entity under certain circumstances to the same extent as if the seller had breached its representations and warranties under the sale agreement. Please read “— Indemnification.”

The seller will not be in breach of any representation or warranty as a result of any change in law by means of any legislative enactment, constitutional amendment or voter referendum that renders any of the representations or warranties untrue.

Covenants of the Seller

In the sale agreement, the seller will make the following covenants:

•

Subject to the provisions described below under “— Assumptions of the Obligations of the Seller”, so long as any of the Series A Bonds are outstanding, the seller will keep in full force and effect its existence and remain in good standing or equivalent status under the laws of the jurisdiction of its organization, and will obtain and preserve its qualifications to do business in each jurisdiction in which such qualification is or will be necessary to protect the validity and enforceability of the sale agreement and each other instrument or agreement to which the seller is a party necessary to the proper administration of the sale agreement and the transactions contemplated thereby.

99

•

Except for the conveyances under the sale agreement or any lien for the issuing entity’s benefit, the bondholders or the indenture trustee, the seller will not sell, pledge, assign or transfer to any other person, or grant, create, incur, assume or suffer to exist any lien on, any of the energy transition property, or any interest therein. The seller will not at any time assert any lien against or with respect to any energy transition property, and will defend the right, title and interest of the issuing entity and of the indenture trustee as our assignee in, to and under such energy transition property against all claims of third parties claiming through or under the seller.

•

The seller will use the proceeds of the sale of the energy transition property in accordance with the Financing Order.

•

If the seller is not the servicer and the seller receives any collections of the energy transition charges or other payment in respect of the energy transition property or the proceeds thereof, the seller will pay the servicer all payments received by the seller in respect thereof as soon as practicable after receipt thereof.

•

The seller will notify us and the indenture trustee promptly after becoming aware of any lien on any of the energy transition property, other than the conveyances under the sale agreement, indenture, series supplement and the other basic documents.

•

The seller will comply with its organizational or governing documents and all laws, treaties, rules, regulations and determinations of any governmental authority applicable to it, except to the extent that failure to so comply would not materially adversely affect our or the indenture trustee’s interests in the energy transition property under any of the basic documents or of seller’s performance of its material obligations under the sale agreement or under any of the other basic documents.

•

So long as any of the Series A Bonds are outstanding:

•

the seller will treat the energy transition property as the issuing entity’s property for all purposes other than financial accounting or tax purposes;

•

the seller will treat such Series A Bonds as debt of the issuing entity and not that of the seller, except for financial accounting and tax purposes;

•

the seller will disclose in its financial statements that it is not the owner of the energy transition property and that the issuing entity’s assets are not available to pay creditors of the seller or its affiliates (other than the issuing entity);

•

the seller will not own or purchase any Series A Bonds; and

•

the seller will disclose the effects of all transactions between the issuing entity and the seller in accordance with generally accepted accounting principles.

•

The seller agrees that, upon the sale by the seller of the energy transition property to the issuing entity pursuant to the sale agreement:

•

to the fullest extent permitted by law, including the Energy Transition Act and applicable regulations of the NMPRC, the issuing entity will have all of the rights originally held by the seller with respect to the energy transition property, including the right to collect any amounts payable by any customer in respect of such energy transition property, notwithstanding any objection or direction to the contrary by the seller; and

•

any payment by any customer directly to the issuing entity of energy transition charges will discharge that customer’s obligations in respect of the energy transition property to the extent of such payment, notwithstanding any objection or direction to the contrary by the seller.

•

So long as any of the Series A Bonds are outstanding:

•

in all proceedings relating directly or indirectly to the energy transition property, the seller will affirmatively certify and confirm that it has sold all of its rights and interests in and to such property (other than for financial accounting or tax purposes);

•

the seller will not make any statement or reference in respect of the energy transition property that is inconsistent with the issuing entity’s ownership interest (other than for financial accounting or tax purposes);

100

•

the seller will not take any action in respect of the energy transition property except solely in its capacity as servicer or as contemplated by the basic documents; and

•

neither the issuing entity nor the seller shall take any action, file any tax return or make any election inconsistent with the issuing entity’s treatment, for U.S. federal income tax purposes and, to the extent consistent with applicable state tax law, state income and franchise tax purposes, as a disregarded entity that is not separate from the seller (or, if relevant, from another sole owner).

•

The seller will execute and file, or cause to be executed and filed, such filings required by law to fully preserve, maintain, protect and perfect the issuing entity’s ownership interest in the energy transition property.

•

The seller will institute any action or proceeding necessary to compel performance by the NMPRC, the State of New Mexico or any of their respective agents of any of their obligations or duties under the Energy Transition Act or the Financing Order. The seller also agrees to take those legal or administrative actions that may be reasonably necessary (i) to seek to protect the issuing entity from claims, state actions or other actions or proceedings of third parties which, if successfully pursued, would result in a breach of any representation or warranty or covenant of the seller in the sale agreement and (ii) to seek to block or overturn any attempts to cause a repeal of, modification of or supplement to the Energy Transition Act, the Financing Order or the rights of the related bondholders by legislative enactment or constitutional amendment that would be materially adverse to the issuing entity, the indenture trustee or the bondholders or which would otherwise cause an impairment of the rights of the issuing entity or the indenture trustee or the bondholders. The costs of any such actions or proceedings undertaken by the seller will be reimbursed by us as an operating expense.

•

So long as any of the Series A Bonds are outstanding, the seller will pay, and will cause each of its affiliates to pay, all material taxes, assessments and governmental charges imposed upon it or any of its properties or assets or with respect to any of its franchises, business, income or property before any penalty accrues if the failure to pay any such taxes, assessments and governmental charges would, after any applicable grace periods, notices or other similar requirements, result in a lien on the energy transition property; provided that no such tax need be paid if the seller or one of its affiliates is contesting the same in good faith by appropriate proceedings promptly instituted and diligently conducted and if the seller or such affiliate has established appropriate reserves as shall be required in conformity with generally accepted accounting principles.

•

The seller will comply with all filing requirements, including any post closing filings, in accordance with the Financing Order and the Energy Transition Act.

•

Promptly after obtaining knowledge of any breach in any material respect of its representations and warranties or covenants in the sale agreement, the seller will notify the issuing entity, the indenture trustee and the rating agencies of the breach.

•

Even if the sale agreement, indenture or series supplement is terminated, the seller will not, prior to the date which is one year and one day after the termination of the indenture and payment in full of the Series A Bonds and other amounts owed under the indenture and the series supplement, petition or otherwise invoke or cause the issuing entity to invoke the process of any government authority for the purpose of commencing or sustaining a voluntary case against the issuing entity under any federal or state bankruptcy, insolvency or similar law, appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator or other similar official for any substantial part of the issuing entity’s property, or ordering the winding up or liquidation of the issuing entity’s affairs.

•

Upon the issuing entity’s request, the seller will execute and deliver such further instruments and do such further acts as may be reasonably necessary to carry out the provisions and purposes of the sale agreement.

•

The seller shall not become a party to any (i) trade receivables purchase and sale agreement or similar arrangement under which it sells all or any portion of its accounts receivables owing from New Mexico electric distribution customers unless the indenture trustee, the seller and the other parties to such additional arrangement shall have entered into an intercreditor agreement in connection

101

therewith and the terms of the documentation evidencing such trade receivables purchase and sale arrangement or similar arrangement shall expressly exclude energy transition property (including energy transition charges) from any receivables or other assets pledged or sold under such arrangement or (ii) sale agreement selling to any affiliate property consisting of charges similar to the energy transition charges sold pursuant to the sale agreement, payable by customers pursuant to the Energy Transition Act or any similar law, unless (A) the seller and the other parties to such arrangement shall have entered into an intercreditor agreement in connection with any agreement or similar arrangement described in the sale agreement, and (B) the rating agency condition is satisfied.

Indemnification

The seller will indemnify, defend and hold harmless the issuing entity, the indenture trustee (for itself and for the benefit of the bondholders), and each of the issuing entity’s and the indenture trustee’s respective officers, directors, trustees, managers, employees and agents against:

•

any and all taxes, other than any taxes imposed on the bondholders solely as a result of their ownership of the Series A Bonds, that may at any time be imposed on or asserted against any of those persons as a result of the sale and assignment of the energy transition property to the issuing entity, the ownership or assignment of the energy transition property by the issuing entity or the issuance and sale by the issuing entity, the Series A Bonds or the other transactions contemplated by the basic documents, including any franchise, sales, gross receipts, general corporation, tangible personal property, privilege or license taxes, but excluding any taxes imposed as a result of a failure of that person to properly withhold or remit taxes imposed with respect to payments on any Series A Bond, it being understood that the bondholders will be entitled to enforce their rights against PNM solely through a cause of action brought for their benefit by the indenture trustee in accordance with the terms of the indenture;

•

any and all losses, damages, payments and claims, and reasonable costs and expenses, of any kind whatsoever, that may be imposed on or asserted against any such person, in each case as a result of PNM’s breach of any of its representations, warranties or covenants contained in the sale agreement

However, the seller is not required to indemnify the indenture trustee or related parties against any liability, obligation, claim, action, suit or payment incurred by them through their own willful misconduct, gross negligence or bad faith.

The seller’s indemnification obligations provided for in the sale agreement will survive any repeal of, modification of, supplement to, or judicial invalidation of, the Energy Transition Act or the Financing Order and will survive the resignation or removal of the indenture trustee or the termination of the sale agreement and will rank pari passu with other general, unsecured obligations of the seller. The seller shall not indemnify any person or entity otherwise indemnified under the sale agreement for any changes in law after the issuance date, whether such changes in law are effected by means of any legislative enactment, any constitutional amendment or any final and non-appealable judicial decision.

Amendment

The sale agreement may be amended by the issuing entity and the seller (a) with the prior written consent of the indenture trustee, (b) satisfaction of the rating agency condition and (c) if any amendment would adversely affect in any material respect the interest of any bondholder, the consent of a majority of bondholders of each affected tranche of Series A Bonds. In determining, whether a majority of bondholders have consented, Series A Bonds owned by the issuing entity or any affiliate of the issuing entity shall be disregarded, except that, in determining whether the indenture trustee shall be protected in relying upon any such consent, the indenture trustee shall only be required to disregard any Series A Bonds it actually knows to be so owned. We will notify the rating agencies promptly after the execution of any such amendment or consent.

Assumptions of the Obligations of the Seller

Any person (a) into which the seller may be merged or consolidated and which succeeds to all or substantially all of the electric distribution business of the seller, (b) which results from the division of the

102

seller into two or more persons and which succeeds to all or substantially all of the electric distribution business of the seller, (c) which may result from any merger or consolidation to which the seller shall be a party and which succeeds to all or substantially all of the electric distribution business of the seller, (d) which may succeed to the properties and assets of the seller substantially as a whole and which succeeds to all or substantially all of the electric distribution business of the seller, or (e) which may otherwise succeed to all or substantially all of the electric distribution business of the seller, and which person in any of the foregoing cases executes an agreement of assumption to perform every obligation of the seller under the sale agreement, shall be the successor to the seller thereunder without the execution or filing of any document or any further act by any of the parties so long as the conditions of any such assumption are met. The conditions include:

•

immediately after giving effect to such transaction, no representation or warranty made in the sale agreement will have been breached, and no servicer default, and no event that, after notice or lapse of time, or both, would become a servicer default will have occurred and be continuing;

•

the seller shall have delivered to the issuing entity and to the indenture trustee an officers’ certificate and an opinion of counsel stating that such consolidation, merger or succession and each agreement of assumption comply with the requirements of the sale agreement and that all conditions precedent relating to such transaction have been complied with;

•

the seller shall have delivered to the issuing entity and to the indenture trustee an opinion of counsel stating, in the opinion of such counsel, either (a) all filings to be made by PNM, in its capacity as seller or as servicer, including filings under the Energy Transition Act with the Secretary of State of New Mexico and the UCC, that are necessary to preserve the issuing entity’s interests and the interests of the indenture trustee in the energy transition property have been executed and filed or (b) that no such action is necessary to preserve such interests;

•

the rating agencies will have received prior written notice of the transaction; and

•

the seller shall have delivered to the issuing entity, the indenture trustee and the rating agencies an opinion of an external tax counsel to the effect that, for federal income tax purposes, such consolidation or other succession to, and assumption of, the obligations of the seller will not result in a material adverse federal income tax consequence to the issuing entity or to the seller, the indenture trustee or the holders of the outstanding Series A Bonds.

So long as the conditions of any such assumption are met, the depositor will automatically be released from its obligations under the sale agreement.

103

THE SERVICING AGREEMENT

The following summary describes the material terms and provisions of the servicing agreement pursuant to which the servicer is undertaking to service the energy transition property. We have filed the form of the servicing agreement as an exhibit to the registration statement of which this prospectus forms a part.

Servicing Procedures

The servicer will manage, service and administer, bill, collect and post all payments in respect of, the energy transition property according to the terms of the servicing agreement. The servicer’s duties will include:

•

calculating usage and demand, billing the energy transition charges, collecting the energy transition charges from customers and posting all collections;

•

responding to inquiries of customers, the NMPRC or any other governmental authority regarding the energy transition property or energy transition charges;

•

investigating and handling delinquencies (and furnishing reports with respect to such delinquencies to the issuing entity);

•

processing and depositing collections and making periodic remittances;

•

furnishing periodic and current reports and statements to the issuing entity, the rating agencies and the indenture trustee;

•

making all filings with the NMPRC and taking such other actions necessary to perfect the issuing entity’s ownership interests in and the indenture trustee’s first priority lien on the energy transition property;

•

making all filings and taking such other action as may be necessary to perfect the indenture trustee’s lien on and security interest in all collateral;

•

selling, as the issuing entity’s agent, as the issuing entity’s interests may appear, defaulted or written off accounts;

•

taking all necessary action in connection with true-up adjustments; and

•

performing other duties specified under the Financing Order.

The servicer will be required to notify the issuing entity, the indenture trustee and the rating agencies in writing of any laws or NMPRC regulations promulgated after the execution of the servicing agreement that have a material adverse effect on the servicer’s ability to perform its duties under the servicing agreement. The servicer is also authorized to execute and deliver documents and to make filings and participate in proceedings on behalf of the issuing entity.

In addition, upon the issuing entity’s reasonable request or the reasonable request of the indenture trustee or any rating agency, the servicer will provide to the issuing entity, the indenture trustee or any rating agency public financial information about the servicer and any material information about the energy transition property that is reasonably available, as may be reasonably necessary and permitted by law to enable the issuing entity or any rating agency to monitor the servicer’s performance, and, so long as any Series A Bonds are outstanding, within a reasonable time after written request thereof, any information available to the servicer or reasonably obtainable by it that is necessary to calculate the energy transition charges applicable to each customer rate class. No such request by the indenture trustee shall create any obligation for the indenture trustee to monitor the performance of the service. The servicer will also prepare any reports required to be filed by the issuing entity with the SEC, as further described below, and will cause to be delivered required opinions of counsel to the effect that all filings with the Secretary of State of New Mexico and the Secretary of State of Delaware necessary to preserve and protect the interests of the indenture trustee in the energy transition property have been made.

104

Servicing Standards and Covenants

The servicing agreement will require the servicer, in servicing and administering the energy transition property, to exercise the same care and diligence it customarily employs and exercises with respect to billing, collection and posting activities it conducts for its own account and, if applicable, for others.

The servicing agreement will require the servicer to implement procedures and policies designed to ensure that customers remit the energy transition charges to the servicer on behalf of the issuing entity and on behalf of the bondholders. The servicer will also monitor payments and will impose collection policies on customers, as permitted under the Financing Order and the rules of the NMPRC.

The servicing agreement will require the servicer to (i) manage, service, administer, bill, collect, receive and post collections in respect of the energy transition property with reasonable care and in material compliance with applicable requirements of law, including all applicable regulations of the NMPRC, (ii) follow standards, policies and procedures in performing its duties as servicer that are customary in the electric distribution industry, (iii) use all reasonable efforts, consistent with its customary servicing procedures, to enforce, and maintain rights in respect of, the energy transition property and to bill, collect and post the energy transition charges, (iv) comply with all requirements of law, including all applicable regulations of the NMPRC applicable to and binding on it relating to the energy transition property, (v) file all reports with the NMPRC required by the Financing Order, (vi) file and maintain the effectiveness of financing statements filed with the Secretary of State of New Mexico with respect to the property transferred under the sale agreement and (vii) take such other action on the issuing entity’s behalf to ensure that the lien of the indenture trustee on the collateral remains perfected and of first priority. The servicer shall follow customary and usual practices and procedures as it deems necessary or advisable in servicing the energy transition property, which, in the servicer’s judgment, may include taking legal action at the issuing entity’s expense but subject to the priority of payments set forth in the indenture or in the series supplement.

Notwithstanding anything to the contrary in the servicing agreement, the duties of the servicer set forth in the servicing agreement shall be qualified in their entirety by the Financing Order, any NMPRC regulation and U.S. federal securities laws, as in effect at the time such duties are to be performed.

The servicing agreement will also require the servicer to provide various reports regarding the energy transition charges and allocation of the energy transition charges among various classes of customers and payments to the bondholders, in each case as are necessary to effect collection, allocation and remittance of payments in respect of energy transition charges and other collected funds as required under the basic documents.

The servicer will be responsible for instituting any action or proceeding to compel performance by the State of New Mexico or the NMPRC of their respective obligations and duties under the Energy Transition Act, the Financing Order, including defending against or instituting and pursuing legal actions and appearing or testifying at hearings or similar proceedings, as may be reasonably necessary to attempt to block or overturn any attempts to cause a repeal of, modification of or supplement to the Energy Transition Act, the Financing Order or the rights of holders of energy transition property by legislative enactment, constitutional amendment or other means that would be adverse to bondholders. Any costs associated with such legal or administrative action will be borne by the issuing entity as an operating expense. The servicer will be obligated to institute and maintain such action or proceedings only if it is being reimbursed on a current basis for its costs and expenses in taking such actions in accordance with the indenture or series supplement, and is not required to advance its own funds to satisfy these obligations.

In any proceedings related to the exercise of the power of eminent domain by any municipality to acquire a portion of PNM’s electric distribution facilities, the servicer will assert that the court ordering such condemnation must treat such municipality as a successor to PNM under the Energy Transition Act and the Financing Order.

The servicing agreement will also designate the servicer as the custodian of our records and documents.

True-Up Adjustment Process

The Energy Transition Act and the Financing Order require that the energy transition charges be reviewed and adjusted at least semi-annually to correct for any overcollection or undercollection of the

105

energy transition charges or to otherwise ensure the timely payment of scheduled principal of and interest on the bonds and all other ongoing financing costs associated with the bonds. Under the servicing agreement, the servicer will make adjustments to the energy transition charges at least semi-annually.

In addition to the semi-annual true-up adjustments, the servicer (a) is also required to implement quarterly true-up adjustments beginning two years prior to the latest final maturity date for the Series A Bonds, and (b) may request an interim true-up adjustment at any time to ensure timely payment of principal of and interest on the bonds and other required amounts and charges owing in connection with the Series A Bonds.

Each true-up adjustment will allocate the revenue requirement among all customer rate classes in accordance with the production cost allocation methodology approved in PNM’s last rate case before the NMPRC.

As part of each true-up adjustment, the servicer will calculate the energy transition charges that must be billed in order to generate the revenues for the next two semi-annual periods necessary to result in:

•

all accrued and unpaid interest on the Series A Bonds being paid in full;

•

the outstanding principal balance of the Series A Bonds equaling the amount provided in the expected amortization schedule;

•

the amount on deposit in the capital subaccount equaling the required capital level; and

•

all of our other fees, expenses and indemnities being paid by the applicable scheduled payment date.

Under the Energy Transition Act, an adjustment to the energy transition charges filed by the servicer will be deemed approved without a hearing 30 days after the filing unless (1) no later than 20 days from the date of filing of the true-up adjustment, the NMPRC is notified of a potential mathematical or transcription error in the adjustment and the notice identifies the error with specificity and (2) the NMPRC determines that the calculation of the adjustment is unlikely to provide for timely payment or is likely to result in a material overpayment. In such a case, implementation of the true-up adjustment may be suspended by the NMPRC for a period not exceeding 60 days pending a hearing. Any such hearing will be limited to determining whether there is a mathematical or transcription error in the calculation of the adjustment.

Remittances to Collection Account

The servicer will remit energy transition charge collections directly to the indenture trustee on a daily basis. The servicer will remit energy transition charges based on estimated collections using a weighted average balance of days outstanding (ADO) on PNM’s retail bills. Energy transition charge collections remitted will represent the charges estimated to be received for any period based upon the ADO and an estimated system-wide write-off percentage.

Each day on which those remittances are made is referred to as a daily remittance date. The estimated payments are made from collections received from customers.

No less often than annually, the servicer will reconcile remittances of estimated energy transition charge collections remitted to the indenture trustee with actual energy transition charge payments received by the servicer to more accurately reflect the amount of billed energy transition charges that should have been remitted, based on ADO and the actual system-wide write-off percentage. To the extent the remittances of estimated payments arising from the energy transition charges exceed the amounts that should have been remitted based on actual system-wide write-offs, the servicer will be entitled to withhold the excess amount from any subsequent remittance to the indenture trustee until the balance of such excess is reduced to zero. To the extent the remittances of estimated payments arising from the energy transition charges are less than the amount that should have been remitted based on actual system wide write-offs, the servicer will remit the amount of the shortfall to the indenture trustee within two business days. Although the servicer will remit estimated energy transition charge collections for the Series A Bonds to the indenture trustee, the servicer will not be obligated to make any payments on the Series A Bonds.

The servicer has agreed and acknowledged that it holds all energy transition charge collections for the Series A Bonds received by it and any other proceeds for the collateral received by it for the benefit of the

106

indenture trustee and the bondholders and that all such amounts will be remitted by the servicer without any surcharge, fee, offset, charge or other deduction. The servicer has further agreed not to make any claim to reduce its obligation to remit all energy transition charge payments collected by it in accordance with the servicing agreement.

The servicing agreement provides that upon a partial payment by a customer of amounts reflected on a customer’s bill, such partial payments will be allocated in accordance with applicable NMPRC requirements and any other requirements of applicable law. As of the date of the servicing agreement, (a) the servicer allocates payments received (i) first, to past-due amounts, (ii) second, to customer deposit requirements, (iii) third, to current customer charges, and (iv) fourth, to charges previously written-off, and (b) for amounts billed on the same date, charges are credited based on a priority waterfall, with late payment charges being credited first, energy transition charges being credited second, and other charges being credited therafter in the priority waterfall. In accordance with the financing order, if more than one series of energy transition bonds are outstanding, partial payments allocable to energy transition charges shall be allocated pro rata based upon the amount of energy transition charges owing with respect to each series.

Servicing Compensation

The servicer will be entitled to receive an annual servicing fee in an amount equal to:

•

0.05% of the aggregate initial principal amount of the Series A Bonds plus out-of-pocket expenses for so long as PNM or an affiliate is the servicer; or

•

if PNM or any of its affiliates is not the servicer, an amount agreed upon by the successor servicer and the indenture trustee, provided, that the fee shall not exceed 0.60% of the aggregate initial principal amount of the Series A Bonds unless the NMPRC has approved the appointment of a successor or the NMPRC does not act to either approve or disapprove such appointment on or before the expiration of 45 days following notice to the NMPRC.

The servicing fee shall be paid semi-annually, with half of the servicing fee being paid on each payment date, except for the amount of the servicing fee to be paid on the first payment date in which the servicing fee then due will be calculated based on the number of days the servicing agreement has been in effect. The indenture trustee will remit the servicing fee on each payment date (together with any portion of the servicing fee that remains unpaid from prior payment dates) to the extent of available funds prior to the distribution of any interest on and principal of the Series A Bonds. See “Security for Series A Bonds — How Funds in the Collection Account Will Be Allocated” in this prospectus.

Servicer Representations and Warranties

In the servicing agreement, the servicer will represent and warrant to the issuing entity, as of the issuance date of the Series A Bonds, among other things, that:

•

the servicer is duly organized, validly existing and is in good standing under the laws of the state of its organization, with requisite power and authority to own its properties, to conduct its business as such properties are currently owned and such business is presently conducted by it, to service the energy transition property and hold the records related to the energy transition property, and to execute, deliver and carry out the terms of the servicing agreement;

•

the servicer is duly qualified to do business, is in good standing and has obtained all necessary licenses and approvals in all jurisdictions in which the ownership or lease of property or the conduct of its business (including the servicing of the energy transition property as required under the servicing agreement) requires such qualifications, licenses or approvals (except where a failure to qualify would not be reasonably likely to have a material adverse effect on the servicer’s business, operations, assets, revenues or properties or to its servicing of the energy transition property);

•

the execution, delivery and performance of the terms of the servicing agreement have been duly authorized by all necessary action on the part of the servicer under its organizational or governing documents and laws;

•

the servicing agreement constitutes a legal, valid and binding obligation of the servicer, enforceable against it in accordance with its terms, subject to applicable insolvency, reorganization, moratorium,

107

fraudulent transfer and other laws relating to or affecting creditors’ rights generally from time to time in effect and to general principles of equity (including concepts of materiality, reasonableness, good faith and fair dealing), regardless of whether considered in a proceeding in equity or at law;

•

the consummation of the transactions contemplated by the servicing agreement do not: (i) conflict with, result in any breach of or constitute (with or without notice or lapse of time) a default under the servicer’s organizational documents or any indenture or other agreement or instrument to which the servicer is a party or by which it or any of its property is bound, (ii) result in the creation or imposition of any lien upon the servicer’s properties pursuant to the terms of any such indenture or agreement or other instrument (other than any lien that may be granted in favor of the indenture trustee for the benefit of bondholders under the basic documents) or (iii) violate any existing law or any existing order, rule or regulation applicable to the servicer of any governmental authority having jurisdiction over the servicer or its properties;

•

to the servicer’s knowledge, there are no proceedings or investigations pending or, to the servicer’s knowledge, threatened against the servicer before any court, federal or state regulatory body, administrative agency or other governmental instrumentality having jurisdiction over the servicer or its properties: (i) seeking to prevent issuance of the Series A Bonds or the consummation of the transactions contemplated by the servicing agreement or any of the other basic documents, or, if applicable, any supplement to the indenture or amendment to the sale agreement; (ii) seeking any determination or ruling that might materially and adversely affect the performance by the servicer of its obligations under, or the validity or enforceability against the servicer of, the servicing agreement or any of the other basic documents, or, if applicable, any supplement to the indenture or amendment to the sale agreement; or (iii) relating to the servicer and which might materially and adversely affect the federal or state income, gross receipts or franchise tax attributes of the Series A Bonds;

•

no governmental approvals, authorizations, consents, orders or other actions or filings with any governmental authority are required for the servicer to execute, deliver and perform its obligations under the servicing agreement except those that have previously been obtained or made, those that are required to be made by the servicer in the future pursuant to the servicing agreement and those that the servicer may need to file in the future to continue the effectiveness of any financing statements; and

•

each report or certificate delivered in connection with any filing made to the NMPRC by the servicer on behalf of the issuing entity with respect to the energy transition charges or true-up adjustments will constitute a representation and warranty by the servicer that each such report or certificate, as the case may be, is true and correct in all material respects. To the extent that any such report or certificate is based in part or upon or contains assumptions, forecasts or other predictions of future events, the representation and warranty of the servicer with respect thereto will be limited to the representation and warranty that such assumptions, forecasts or other predictions of future events are reasonable based upon historical performance and the facts known to the servicer on the date such report or certificate is delivered.

The servicer, the indenture trustee and the issuing entity are not responsible as a result of any action, decision, ruling or other determination made or not made, or any delay (other than any delay resulting from the servicer’s failure to make any filings with the NMPRC required by the servicing agreement in a timely and correct manner or any breach by the servicer of its duties under the servicing agreement that adversely affects the energy transition property or the true-up adjustments), by the NMPRC in any way related to the energy transition property or in connection with any true-up adjustment, the subject of any such filings, any proposed true-up adjustment or the approval of any revised energy transition charges and the scheduled adjustments thereto. Except to the extent that the servicer otherwise is liable under the provisions of the servicing agreement, the servicer shall have no liability whatsoever relating to the calculation of any revised energy transition charges and the scheduled adjustments thereto, including as a result of any inaccuracy of any of the assumptions made in such calculations, so long as the servicer has acted in good faith and has not acted in a grossly negligent manner in connection therewith, nor shall the servicer have any liability whatsoever as a result of any person or entity, including the bondholders, not receiving any payment, amount or return anticipated or expected or in respect of any Series A Bond generally.

108

The Servicer Will Indemnify the Issuing Entity and Other Entities in Limited Circumstances

The servicer will indemnify, defend and hold harmless the issuing entity and the indenture trustee (for itself and for the related bondholders’ benefit) and the independent manager and each of their respective trustees, officers, directors, employees and agents from any and all liabilities, obligations, losses, damages, payments and claims, and reasonable costs or expenses, arising as a result of:

•

the servicer’s willful misconduct, bad faith or gross negligence in the performance of, or reckless disregard of, its duties or observance of its covenants under the servicing agreement;

•

the servicer’s material breach of any of its representations and warranties that results in a default under the servicing agreement; and

•

litigation and related expenses relating to its status and obligations as servicer (other than any proceeding the servicer is required to institute under the servicing agreement).

The servicer will not be liable, however, for any liabilities, obligations, losses, damages, payments or claims, or reasonable costs or expenses, resulting from the willful misconduct, bad faith or gross negligence of the party seeking indemnification, or resulting from a breach of a representation or warranty made by any such person or entity in any of the basic documents that give rise to the servicer’s breach.

Except for payment of the servicing fee and payment of the purchase price of the energy transition property, the servicing agreement also provides that the servicer releases and discharges the issuing entity and its independent manager, the indenture trustee and each of their respective officers, directors and agents from any and all actions, claims and demands that the servicer, in the capacity of servicer or otherwise, may have against those parties relating to the energy transition property or the servicer’s activities with respect to the energy transition property, other than actions, claims and demands arising from the willful misconduct, bad faith or gross negligence of the parties.

This indemnification will survive the resignation or removal of the indenture trustee or any independent manager and the termination of the servicing agreement.

Evidence as to Compliance

The servicing agreement will provide that the servicer will furnish annually to the issuing entity, the indenture trustee and the rating agencies, on or before March 31 of each year, beginning March 31, 2024 or, if earlier, on the date on which the annual report relating to the Series A Bonds is required to be filed with the SEC, a report on its assessment of compliance with specified servicing criteria as required by Item 1122(a) of Regulation AB, during the preceding 12 months ended December 31 (or preceding period since the issuance date of the Series A Bonds in the case of the first statement), together with a certificate by an officer of the servicer certifying the statements set forth therein.

The servicing agreement also provides that a firm of independent certified public accountants, at the servicer’s expense, will furnish annually to the issuing entity, the indenture trustee and the rating agencies on or before March 31 of each year, beginning March 31, 2024 or, if earlier, on the date on which the annual report relating to the Series A Bonds is required to be filed with the SEC, an annual accountant’s report, which will include any required attestation report that attests to and reports on the servicer’s assessment report described in the immediately preceding paragraph, to the effect that the accounting firm has performed agreed upon procedures in connection with the servicer’s compliance with its obligations under the servicing agreement during the preceding 12 months, identifying the results of the procedures and including any exceptions noted.

Copies of the above reports will be filed with the SEC. You may also obtain copies of the above statements and certificates by sending a written request addressed to the indenture trustee.

The servicer will also be required to deliver to the issuing entity, the indenture trustee and the rating agencies monthly reports setting forth certain information relating to collections of energy transition charges received during the preceding calendar month and, shortly before each payment date, a semi-annual report setting forth the amount of principal and interest payable to bondholders on such date, the difference between the principal outstanding on the Series A Bonds and the amounts specified in the related expected

109

amortization schedule after giving effect to any such payments, and the amounts on deposit in the capital subaccount and excess funds subaccount after giving effect to all transfers and payments to be made on such payment date. The servicer is required to file copies of the semi-annual payment date reports with the SEC.

In addition, the servicer is required to send copies of each submission or notice evidencing a true-up adjustment to the issuing entity, the indenture trustee and the rating agencies. The servicer is also required to provide to the rating agencies any non-confidential and non-proprietary information as is reasonably requested by the rating agencies.

Matters Regarding the Servicer

The servicing agreement will provide that PNM may not resign from its obligations and duties as servicer thereunder, except when:

•

PNM delivers to the indenture trustee and NMPRC an opinion of external legal counsel to the effect that PNM’s performance of its duties under the servicing agreement is no longer permissible under applicable law; or

•

the NMPRC has approved such resignation and the rating agency condition is satisfied.

No resignation by PNM as servicer will become effective until a successor servicer has assumed PNM’s servicing obligations and duties under the servicing agreement.

The servicing agreement further provides that neither the servicer nor any of its directors, officers, employees, and agents will be liable to the issuing entity or to any other person or entity, except as provided under the servicing agreement, for taking any action or for refraining from taking any action under the servicing agreement or for good faith errors in judgment. However, neither the servicer nor any of its directors, officers, employees or agents will be protected against any liability that would otherwise be imposed by reason of gross negligence, recklessness or willful misconduct in the performance of its duties or by reason of reckless disregard of obligations and duties under the servicing agreement. The servicer and any of its directors, officers, employees or agents may rely in good faith on the advice of counsel reasonably acceptable to the indenture trustee or on any document submitted by any person or entity respecting any matters under the servicing agreement. Except as provided in the servicing agreement, the servicer is under no obligation to appear in, prosecute or defend any legal action that is not directly related to one of its duties in the servicing agreement or otherwise related to its indemnification obligations.

Any entity which becomes the successor by merger, consolidation, division, sale, transfer, lease, management contract or otherwise to all or substantially all of the servicer’s electric distribution business may assume all of the rights and obligations of the servicer under the servicing agreement without the execution or filing of any document. The following are conditions to the transfer of the duties and obligations to a successor servicer:

•

immediately after the transfer, no representation or warranty made by the servicer in the servicing agreement will have been breached and no servicer default or event which after notice of, lapse of time or both, would become a servicer default, has occurred and is continuing;

•

the servicer has delivered to the issuing entity and the indenture trustee an officer’s certificate and an opinion of counsel stating that the transfer complies with the servicing agreement and all conditions to the transfer under the servicing agreement have been complied with;

•

the servicer has delivered to the issuing entity, the indenture trustee and the rating agencies an opinion of counsel stating either that all necessary filings, including those under the Energy Transition Act and the UCC, to fully preserve and protect our interests in all of the energy transition property have been made or that no such filings are required;

•

the servicer has given prior written notice to the rating agencies; and

•

the servicer has delivered to the issuing entity and the rating agencies, an opinion of counsel stating that for U.S. federal income tax purposes, such consolidation, conversion, merger or succession and

110

such agreement of assumption will not result in material adverse U.S. federal income tax consequences for the bondholders.

So long as the conditions of any such assumptions are met, then the prior servicer will automatically be released from its obligations under the servicing agreement.

Servicer Defaults

Servicer defaults under the servicing agreement will include:

•

any failure by the servicer to remit to the collection account any required amount, which failure continues unremedied for five business days after written notice from us or the indenture trustee is received by the servicer or after discovery of the failure by a responsible officer of the servicer;

•

any failure by the servicer or, if the servicer is PNM or an affiliate of PNM, by PNM to observe or perform in any material respect any covenants or agreements in the servicing agreement or the other basic documents to which it is a party, which failure materially and adversely affects the rights of bondholders and which failure continues unremedied for 60 days after written notice of this failure has been given to the servicer or, if the servicer is PNM or an affiliate of PNM, by the issuing entity, or by the indenture trustee or after such failure is discovered by a responsible officer of the servicer;

•

any failure by the servicer to duly perform its obligations to make true-up adjustment filings in the time and manner set forth in the servicing agreement, which failure continues unremedied for a period of five business days;

•

any representation or warranty made by the servicer in the servicing agreement or any other basic document proves to have been incorrect in a material respect when made, which has a material adverse effect on the bondholders and which material adverse effect continues unremedied for a period of 60 days after the giving of written notice to the servicer by the issuing entity or the indenture trustee or after such failure is discovered by a responsible officer of the servicer; and

•

events of bankruptcy, insolvency, receivership or liquidation of the servicer.

Rights Upon a Servicer Default

In the event of a servicer default that remains unremedied, the indenture trustee, at the written direction of the holders of not less than a majority of the outstanding principal amount of the Series A Bonds, subject to the terms of any intercreditor agreement executed in connection with any additional series of energy transition bonds, by notice then given in writing to the servicer, will terminate all the rights and obligations (other than servicer’s indemnity obligation and obligation to continue performing its functions as servicer until a successor servicer is appointed) of the servicer under the servicing agreement. In addition, upon a servicer default described in the first bullet point above, the issuing entity and the indenture trustee shall be entitled to apply to any court of competent jurisdiction for sequestration and payment to the indenture trustee of revenues arising with respect to the applicable energy transition property.

On or after the receipt by the servicer of a notice of termination, all authority and power of the servicer under the servicing agreement, whether with respect to the Series A Bonds, the energy transition property, the energy transition charges or otherwise, shall, upon appointment of a successor servicer under the servicer agreement, without further action, pass to and be vested in such successor servicer and, without limitation, the indenture trustee is hereby authorized and empowered to execute and deliver, on behalf of the predecessor servicer, as attorney-in-fact or otherwise, any and all documents and other instruments, and to do or accomplish all other acts or things necessary or appropriate to effect the purposes of the notice of termination, whether to complete the transfer of the energy transition property records and related documents, or otherwise. The predecessor servicer shall cooperate with the successor servicer, the indenture trustee and with the issuing entity in effecting the termination of the responsibilities and rights of the predecessor servicer under the servicing agreement, including the transfer to the successor servicer for administration by it of all cash amounts that shall at the time be held by the predecessor servicer for remittance, or shall thereafter be received by it with respect to the energy transition property or the energy transition charges. As soon as practicable after receipt by the servicer of such notice of termination, the servicer shall deliver the energy transition property records to the successor servicer. All reasonable costs and expenses (including attorneys’

111

fees and expenses) incurred in connection with transferring the energy transition property records to the successor servicer and amending the servicing agreement to reflect such succession as servicer pursuant to the servicing agreement shall be paid by the predecessor servicer upon presentation of reasonable documentation of such costs and expenses. Termination of PNM as servicer shall not terminate PNM’s rights or obligations under the sale agreement or any other basic document other than the servicing agreement.

Waiver of Past Defaults

The indenture trustee, with the consent of the holders of a majority of the outstanding principal amount of the Series A Bonds may waive in writing any default by the servicer in the performance of its obligations under the servicing agreement and its consequences, except a default in making any required remittances to the collection account in accordance with the servicing agreement. Upon any such waiver of a past default, such default shall cease to exist, and any default of the servicer arising therefrom shall be deemed to have been remedied for every purpose of the servicing agreement. The servicing agreement will provide that no waiver will impair the related bondholders’ rights relating to subsequent defaults.

Successor Servicer

Upon the receipt of a notice of termination or upon the servicer’s resignation or removal in accordance with the terms of the servicing agreement, the predecessor servicer shall continue to perform its functions as servicer and shall be entitled to receive the requisite portion of the servicing fees, until a successor servicer has assumed in writing the obligations of the servicer. In the event of the servicer’s removal or resignation, the indenture trustee, at the written direction of the holders of a majority of the principal amount of the outstanding bonds of the Series A Bonds, may appoint a successor servicer with the issuing entity’s prior written consent (which consent shall not be unreasonably withheld).

If no successor servicer has been appointed within 30 days after the delivery of the termination notice, the indenture trustee, at the written direction of the holders of a majority of the outstanding amount of the Series A Bonds, may petition the NMPRC or a court of competent jurisdiction for the appointment of, a successor servicer which is permitted to perform the duties of the servicer pursuant to the NMPRC regulations, satisfies the rating agency condition, enters into a servicing agreement with the issuing entity having substantially the same provisions as the servicing agreement in effect between the issuing entity and the predecessor servicer and, if applicable, its compensation is approved (or not disapproved) by the NMPRC.

If for any reason a third party assumes the role of the servicer under the servicing agreement, the servicing agreement will require the servicer, on an ongoing basis, to cooperate with the successor servicer and provide whatever information is, and take whatever actions are, reasonably necessary to assist the successor servicer in performing its obligations under the servicing agreement.

Amendment

The servicing agreement may be amended in writing by the servicer and the issuing entity, with the prior written consent of the indenture trustee and if the rating agency condition has been satisfied; provided, that such amendment may not adversely affect the interest of any bondholder in any material respect without the consent of the bondholders of a majority of the outstanding principal amount of the Series A Bonds.

112

HOW A BANKRUPTCY MAY AFFECT YOUR INVESTMENT

Challenge to True Sale Treatment

PNM will represent and warrant that the transfer of the energy transition property in accordance with the sale agreement constitutes a true and valid sale and assignment of the energy transition property by PNM to the issuing entity. It will be a condition of closing for the sale of the energy transition property pursuant to the sale agreement that PNM will take the appropriate actions under the Energy Transition Act, including filing a financing statement with the Secretary of State of New Mexico, to perfect this sale. The Energy Transition Act provides that the sale, conveyance, assignment, or other transfer of energy transition property by an electric utility to an assignee that the parties have in the governing documentation expressly stated to be a sale or other absolute transfer is an absolute transfer and true sale of, and not a pledge of or secured transaction relating to, the transferor’s right, title, and interest in, to, and under the energy transition property. The issuing entity and PNM will treat such a transaction as a sale under applicable law. However, we expect that the Series A Bonds will be reflected as debt on PNM’s consolidated financial statements. In addition, we anticipate that the Series A Bonds will be treated as debt of PNM for U.S. federal income tax purposes. Please read “Material U.S. Federal Income Tax Considerations”. In the event of a bankruptcy of a party to a sale agreement, if a party in interest in the bankruptcy were to take the position that the transfer of the energy transition property to us pursuant to that sale agreement was a financing transaction and not a true sale under applicable creditors’ rights principles, there can be no assurance that a court would not adopt this position. Even if a court did not ultimately recharacterize the transaction as a financing transaction, the mere commencement of a bankruptcy of PNM and the attendant possible uncertainty surrounding the treatment of the transaction could result in delays in payments on, and adversely affect the value of, the Series A Bonds.

In that regard, we note that the bankruptcy court in In re LTV Steel Company, Inc., et al., 274 B.R. 278 (Bankr. N. D. Oh. 2001) issued an interim order that observed that a debtor, LTV Steel Company, which had previously entered into securitization arrangements with respect both to its inventory and its accounts receivable may have “at least some equitable interest in the inventory and receivables, and that this interest is property of the Debtor’s estate . . . sufficient to support the entry of” an interim order permitting the debtor to use proceeds of the property sold in the securitization. 274 B.R. at 285. The court based its decision in large part on its view of the equities of the case.

LTV and the securitization investors subsequently settled their dispute over the terms of the interim order, and the bankruptcy court entered a final order in which the parties admitted and the court found that the prepetition transactions constituted true sales. The court did not otherwise overrule its earlier ruling. The LTV Steel memorandum opinion serves as an example of the pervasive equity powers of bankruptcy courts and the importance that such courts may ascribe to the goal of reorganization, particularly where the assets sold are integral to the ongoing operation of the debtor’s business.

Even if creditors did not challenge the sale of the energy transition property as a true sale, a bankruptcy filing by PNM could trigger a bankruptcy filing by the issuing entity with similar negative consequences for bondholders. In a more recent bankruptcy case, In re General Growth Properties, Inc., 406 B.R. 171 (Bankr. S.D.N.Y 2009), General Growth Properties, Inc. filed for bankruptcy together with many of its direct and indirect subsidiaries, including many subsidiaries that were organized as special purpose vehicles. The bankruptcy court upheld the validity of the filings of these special purpose subsidiaries and allowed the subsidiaries, over the objections of their creditors, to use the lenders’ cash collateral to make loans to the parent for general corporate purposes. The creditors received adequate protection in the form of current interest payments and replacement liens to mitigate any diminution in value resulting from the use of the cash collateral, but the opinion serves as a reminder that bankruptcy courts may subordinate legal rights of creditors to the interests of helping debtors reorganize.

The issuing entity and PNM have attempted to mitigate the impact of a possible recharacterization of a sale of energy transition property as a financing transaction under applicable creditors’ rights principles. The sale agreement will provide that if the transfer of the applicable energy transition property is thereafter recharacterized by a court as a financing transaction and not a true sale, the transfer by PNM will be deemed to have granted to the issuing entity on behalf of the issuing entity and on behalf of the indenture trustee a first priority security interest in all of PNM’s right, title and interest in, to and under the energy

113

transition property and all proceeds thereof. In addition, the sale agreement will authorize the filing of a notice of security interest in the energy transition property and the proceeds thereof as collateral in accordance with the Energy Transition Act. As a result of this filing, the issuing entity would, in the event of a recharacterization, be a secured creditor of PNM and entitled to recover against the collateral or its value. This does not, however, eliminate the risk of payment delays or reductions and other adverse effects caused by a PNM bankruptcy. Further, if, for any reason, an energy transition property notice is not filed under the Energy Transition Act or the issuing entity fails to otherwise perfect its interest in the energy transition property, and the transfer is thereafter deemed not to constitute a true sale, the issuing entity would be an unsecured creditor of PNM.

The Energy Transition Act provides that except as otherwise provided in the Energy Transition Act, the creation, perfection and enforcement of a security interest in energy transition property are governed by the Energy Transition Act and not by the New Mexico Uniform Commercial Code. Under the Energy Transition Act, a security interest in energy transition property is created, valid and binding at the latest of when: (1) a financing order is issued; (2) a security agreement is executed and delivered; and (3) value is received for the energy transition bonds. Upon perfection through the filing of a financing statement with the Secretary of State of New Mexico, the security interest in the energy transition property is a continuously perfected security interest and has priority over any other lien that subsequently attaches to the energy transition property unless the holder of the security interest has agreed in writing otherwise. None of this, however, mitigates the risk of payment delays and other adverse effects caused by a PNM bankruptcy.

Consolidation of the Issuing Entity and PNM

If PNM were to become a debtor in a bankruptcy case, a party in interest might attempt to substantively consolidate the assets and liabilities of the issuing entity with those of PNM. The issuing entity and PNM have taken steps to attempt to minimize this risk. Please read “PNM Energy Transition Bond Company I, LLC, the Issuing Entity” in this prospectus. However, no assurance can be given that if PNM were to become a debtor in a bankruptcy case, a court would not order that the assets and liabilities of the issuing entity be substantively consolidated with those of PNM. Substantive consolidation would result in payment of the claims of the beneficial owners of the Series A Bonds to be subject to substantial delay and to adjustment in timing and amount under a plan of reorganization in the bankruptcy case.

Status of Energy Transition Property as Present Property

PNM will represent in the sale agreement, and the Energy Transition Act provides, that the energy transition property sold pursuant to such sale agreement constitutes a present property right on the date that it is first transferred to the issuing entity in connection with the issuance of the Series A Bonds. Nevertheless, no assurance can be given that, in the event of a bankruptcy of PNM a court would not rule that the applicable energy transition property comes into existence only as customers use electricity.

If a court were to accept the argument that the applicable energy transition property comes into existence only as customers use electricity, no assurance can be given that a security interest in favor of the bondholders would attach to the energy transition charges in respect of electricity consumed after the commencement of the bankruptcy case or that the energy transition property has been sold to the issuing entity. If it were determined that the energy transition property had not been sold to the issuing entity, and the security interest in favor of the bondholders did not attach to the applicable energy transition charges in respect of electricity consumed after the commencement of the bankruptcy case, then the issuing entity would have an unsecured claim against PNM. If so, there would be delays and/or reductions in payments on the Series A Bonds. Whether or not a court determined that energy transition property had been sold to the issuing entity pursuant to a sale agreement, no assurances can be given that a court would not rule that any energy transition charges relating to electricity consumed after the commencement of the bankruptcy could not be transferred to the issuing entity or the indenture trustee.

In addition, in the event of a bankruptcy of PNM, a party in interest in the bankruptcy could assert that the issuing entity should pay, or that the issuing entity should be charged for, a portion of PNM’s costs associated with the distribution of the electricity, usage of which gave rise to the energy transition charge receipts used to make payments on the Series A Bonds.

114

Regardless of whether PNM is the debtor in a bankruptcy case, if a court were to accept the argument that the energy transition property sold pursuant to the sale agreement comes into existence only as customers use electricity, a tax or government lien or other nonconsensual lien on property of PNM arising before that energy transition property came into existence could have priority over the issuing entity’s interest in that energy transition property. Adjustments to the energy transition charges may be available to mitigate this exposure, although there may be delays in implementing these adjustments.

Estimation of Claims; Challenges to Indemnity Claims

If PNM were to become a debtor in a bankruptcy case, to the extent the issuing entity does not have secured claims as discussed above, claims, including indemnity claims, by the issuing entity or the indenture trustee against PNM, as seller, under the sale agreement and the other documents executed in connection therewith would be unsecured claims and would be subject to being discharged in the bankruptcy case. In addition, a party in interest in the bankruptcy may request that the bankruptcy court estimate any contingent claims that the issuing entity or the indenture trustee have against PNM. That party may then take the position that these claims should be estimated at zero or at a low amount because the contingency giving rise to these claims is unlikely to occur. If a court were to hold that the indemnity provisions were unenforceable, the issuing entity would be left with a claim for actual damages against PNM based on breach of contract principles. The actual amount of these damages would be subject to estimation and/or calculation by the court.

No assurances can be given as to the result of any of the above-described actions or claims. Furthermore, no assurance can be given as to what percentage of their claims, if any, unsecured creditors would receive in any bankruptcy proceeding involving PNM.

Enforcement of Rights by the Indenture Trustee

Upon an event of default under the indenture or the series supplement, the indenture trustee may enforce the security interest in the energy transition property sold pursuant to the sale agreement in accordance with the terms of the indenture and the series supplement. In this capacity, the indenture trustee is permitted to request that a court order the sequestration and payment to bondholders of all revenues arising with respect to the energy transition property. There can be no assurance, however, that a judge would issue this order after a seller bankruptcy in light of the automatic stay provisions of Section 362 of the Bankruptcy Code. In that event, the indenture trustee may under the indenture seek an order from the bankruptcy court lifting the automatic stay with respect to this action by the court and an order requiring an accounting and segregation of the revenues arising from the energy transition property sold pursuant to the sale agreement. There can be no assurance that the bankruptcy court would lift the stay and/or the court would issue the sequestration and payment order.

Bankruptcy of the Servicer

The servicer is entitled to commingle the energy transition charges that it receives with its own funds until each date on which the servicer is required to remit funds to the indenture trustee as specified in the servicing agreement. The Energy Transition Act provides that the priority of a lien and security interest created under the Energy Transition Act is not impaired by the commingling of funds arising from energy transition charges with other funds. In the event of a bankruptcy of the servicer, a party in interest in the bankruptcy might assert, and a court might rule, that the energy transition charges commingled by the servicer with its own funds and held by the servicer, prior to and as of the date of bankruptcy were property of the servicer as of that date, and are therefore property of the servicer’s bankruptcy estate, rather than property of the issuing entity. If the court so rules, then the court would likely rule that the indenture trustee has only a general unsecured claim against the servicer for the amount of commingled energy transition charges held as of that date and could not recover the commingled energy transition charges held as of the date of the bankruptcy.

However, if the court were to rule on the ownership of the commingled energy transition charges, the automatic stay arising upon the bankruptcy of the servicer could delay the indenture trustee from receiving the commingled energy transition charges held by the servicer as of the date of the bankruptcy until the court grants relief from the stay. A court ruling on any request for relief from the stay could be delayed

115

pending the court’s resolution of whether the commingled energy transition charges are the issuing entity’s property or are property of the servicer, including resolution of any tracing of proceeds issues.

The servicing agreement will provide that the indenture trustee, as assignee of the issuing entity, together with the other persons specified therein, may appoint a successor servicer that satisfies the rating agency condition. The servicing agreement will also provide that the indenture trustee, together with the other persons specified therein, may petition the NMPRC or a court of competent jurisdiction to appoint a successor servicer that meets this criterion. However, the automatic stay in effect during a servicer bankruptcy might delay or prevent a successor servicer’s replacement of the servicer. Even if a successor servicer may be appointed and may replace the servicer, a successor servicer may be difficult to obtain and may not be capable of performing all of the duties that PNM as servicer was capable of performing. Furthermore, should the servicer enter into bankruptcy, it may be permitted to stop acting as servicer.

116

USE OF PROCEEDS

The net proceeds of this offering are estimated to be approximately $            , after deducting underwriting discounts and commissions and other upfront issuance costs. The issuing entity will use the proceeds from the sale of the Series A Bonds to purchase the energy transition property from PNM and pay upfront issuance costs (including reimbursement of any costs previously paid by PNM).

PNM will apply the proceeds of the sale of the energy transition property in accordance with the Financing Order, to (A) reimburse itself for required payments made to state-administered funds for Indian affairs, energy transition economic development and the assistance of displaced workers, (B) to pay decommissioning and reclamation costs related to the retirement of SJGS, (C) to pay severance and job training costs relating to the retirement of SJGS, (D) to make capital expenditures for the purpose of providing utility service to customers, and (E) repay indebtedness incurred for the purpose of making such payments. The repayment of indebtedness by PNM relating to the foregoing purposes will include (1) a term loan of $225 million scheduled to mature in February 2024, from lenders named therein and Royal Bank of Canada, as administrative agent (the “Term Loan”), and (2) all or a portion of the outstanding borrowings under (A) PNM’s $400 million revolving credit agreement that is scheduled to terminate in October 2025, from the lenders named therein and Wells Fargo Bank, National Association, as administrative agent (the “2025 Revolving Credit Facility”), and (B) PNM’s $40 million revolving credit agreement that is scheduled to terminate in May 2026 (the “2026 Revolving Credit Facility”). Borrowings under the Term Loan, the 2025 Revolving Credit Facility and the 2026 Revolving Credit Facility incur interest at a variable rate based on term SOFR, which is periodically reset. As of September 30, 2023, the interest rate on the Term Loan was 6.18%. As of September 30, 2023, borrowings of $126.9  million were outstanding under the 2025 Revolving Credit Facility at an interest rate of 6.68%, and borrowings of $40.0 million were outstanding under the 2026 Revolving Credit Facility at an interest rate of 6.67%.

117

PLAN OF DISTRIBUTION

Subject to the terms and conditions in the underwriting agreement among the issuing entity, PNM and the underwriters, for whom RBC Capital Markets, LLC and Citigroup Global Markets Inc. are acting as representatives, the issuing entity has agreed to sell to the underwriters, and the underwriters have severally agreed to purchase, the principal amount of the Series A Bonds listed opposite each underwriter’s name below:

Underwriter	Tranche A-1		Tranche A-2
RBC Capital Markets, LLC	​	$	​	$
Citigroup Global Markets Inc.	​	$	​	$
​	​	$	​	$
​	​	$	​	$
Total	​	$	​	$

Under the terms of the underwriting agreement, the underwriters are obligated take and pay for all of the Series A Bonds offered through this prospectus, if any are taken. If an underwriter defaults, the underwriting agreement provides that the purchase commitments of the non-defaulting underwriters may be increased or the underwriting agreement may be terminated.

The Underwriters’ Sales Price for the Series A Bonds

The Series A Bonds sold by the underwriters to the public will be initially offered at the prices to the public set forth on the cover of this prospectus. The underwriters propose initially to offer the Series A Bonds to dealers at such prices, less a selling concession not to exceed the percentage listed below for such tranche. The underwriters may allow, and dealers may reallow, a discount not to exceed the percentage listed below for such tranche.

​	Selling Concession		Reallowance Discount
Tranche A-1	​	%	​	%
Tranche A-2	​	%	​	%

After the initial public offering, the public offering prices, selling concessions and reallowance discounts may change.

No Assurance as to Resale Price or Resale Liquidity for the Series A Bonds

The Series A Bonds are a new issue of securities with no established trading market. They will not be listed on any securities exchange. The underwriters have advised the issuing entity that they intend to make a market in the Series A Bonds, but they are not obligated to do so and may discontinue market making at any time without notice. The issuing entity cannot assure you that a liquid trading market will develop for the Series A Bonds.

Various Types of Underwriter Transactions That May Affect the Price of the Series A Bonds

The underwriters may engage in overallotment transactions, stabilizing transactions, syndicate covering transactions and penalty bids with respect to the Series A Bonds in accordance with Regulation M under the Exchange Act. Overallotment transactions involve syndicate sales in excess of the offering size, which create a syndicate short position. Stabilizing transactions are bids to purchase the Series A Bonds, which are permitted, so long as the stabilizing bids do not exceed a specific maximum price. Syndicate covering transactions involve purchases of the Series A Bonds in the open market after the distribution has been completed in order to cover syndicate short positions. Penalty bids permit the underwriters to reclaim a selling concession from a syndicate member when the Series A Bonds originally sold by the syndicate member are purchased in a syndicate covering transaction. These overallotment transactions, stabilizing transactions, syndicate covering transactions and penalty bids may cause the prices of the Series A Bonds to be higher

118

than they would otherwise be. None of the issuing entity, PNM, the indenture trustee, the issuing entity’s managers or any of the underwriters represents that the underwriters will engage in any of these transactions or that these transactions, if commenced, will not be discontinued without notice at any time.

The underwriters and their affiliates have in the past provided, and may in the future from time to time provide, investment banking and general financing and banking services to PNM and its affiliates for which they have in the past received, and in the future may receive, customary fees.

The issuing entity estimates that the total expenses of this offering will be $         .

The issuing entity and PNM have agreed to indemnify the underwriters against some liabilities, including liabilities under the Securities Act, or to contribute to payments the underwriters may be required to make in respect of those liabilities.

The underwriters are offering the Series A Bonds, subject to prior sale, when, as and if issued to and accepted by them, subject to approval of legal matters, including the validity of the Series A Bonds and other conditions contained in the underwriting agreement, such as receipt of ratings confirmations, officer’s certificates and legal opinions. The underwriters reserve the right to withdraw, cancel or modify offers to the public and to reject offers in whole or in part.

The issuing entity expects to deliver the Series A Bonds against payment for the Series A Bonds on or about the date specified in the last paragraph of the cover page of this prospectus, which will be the    business day following the date of pricing of the Series A Bonds. Since trades in the secondary market generally settle in two business days, purchasers who wish to trade Series A Bonds on the date of pricing or the            succeeding business day(s) will be required, by virtue of the fact that the Series A Bonds initially will settle in T+    , to specify alternative settlement arrangements to prevent a failed settlement.

Conflicts of Interest

As described in “Use of Proceeds,” PNM plans to use a portion of the net proceeds to repay borrowings outstanding under a term loan and borrowings under its revolving credit agreements. Certain of the underwriters in this offering or their affiliates are lenders under the term loan and the revolving credit agreements. As such, certain of the underwriters in this offering or their affiliates will receive 5% or more of the net proceeds of this offering, not including the underwriting discount. Any such underwriter would be considered to have a “conflict of interest” pursuant to FINRA Rule 5121. Consequently, this offering will be required to be made in compliance with FINRA Rule 5121. Pursuant to that rule, the appointment of a qualified independent underwriter is not necessary in connection with the offering because the offering is of a class of securities that are investment grade rated. Under FINRA Rule 5121, no affected underwriter is permitted to confirm sales to any account over which it exercises discretionary authority without the prior written consent of the account holder. Please read “Use of Proceeds” in this prospectus.

119

AFFILIATIONS AND CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The issuing entity is a wholly-owned subsidiary of PNM. PNM is a wholly-owned subsidiary of PNMR. PNM and its affiliates may maintain other banking relationships in the ordinary course with the indenture trustee, the underwriters and their respective affiliates.

120

MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS

General

The following discussion describes the material United States federal income tax consequences to United States Holders (as defined below) and Non-United States Holders (as defined below) of the purchase, ownership, and disposition of the Series A Bonds acquired in this offering and, insofar as it relates to matters of United States federal income tax law and regulations or legal conclusions with respect thereto, constitutes the opinion of PNM’s tax counsel, Troutman Pepper Hamilton Sanders LLP. Except where noted, this discussion only applies to Series A Bonds that are held as capital assets by holders who purchase the Series A Bonds upon their original issuance. This discussion does not address the tax considerations applicable to subsequent purchasers of Series A Bonds. This discussion does not describe all of the material tax considerations that may be relevant to holders in light of their particular circumstances or to holders subject to special rules, such as certain financial institutions, regulated investment companies, real estate investment trusts, banks, insurance companies, tax-exempt entities, certain former citizens or residents of the United States, dealers in securities, traders in securities that elect to use a mark-to-market method of accounting, partnerships and other pass-through entities (and persons holding the Series A Bonds through a partnership or other pass-through entity), holders whose functional currency is not the United States dollar, passive foreign investment companies, controlled foreign corporations, and corporations that accumulate earnings to avoid United States federal income tax, accrual method taxpayers subject to special tax accounting rules under Section 451(b) of the Code, or persons holding the Series A Bonds as part of a hedge, straddle, or other integrated transaction. In addition, this discussion does not address the effect of any state, local, foreign, or other tax laws or any United States Medicare contribution tax on net investment income, federal estate, gift, alternative minimum or foreign tax considerations. This discussion is based upon the Internal Revenue Code, administrative pronouncements, judicial decisions, and final, temporary, and proposed Treasury regulations, all as in effect on the date hereof, and all of which are subject to change or differing interpretations, possibly with retroactive effect, so as to result in United States federal income tax consequences different from those discussed below.

As used in this prospectus, the term United States Holder means a beneficial owner of a Series A Bond that is for United States federal income tax purposes:

•

an individual citizen or resident of the United States;

•

a corporation (or other entity taxable as a corporation) created or organized in or under the laws of the United States, any state thereof, or the District of Columbia;

•

an estate the income of which is subject to United States federal income taxation regardless of its source; or

•

a trust (i) with respect to which a court within the United States is able to exercise primary supervision over its administration and one or more United States persons have the authority to control all of its substantial decisions, or (ii) that was in existence on August 20, 1996 and has a valid election in effect under applicable Treasury regulations to be treated as a domestic trust.

The term Non-United States Holder means a beneficial owner of a Series A Bond that is neither a United States Holder nor a partnership (or other pass-through entity).

If a partnership holds Series A Bonds, the tax treatment of the partnership and its partners will generally depend on the status of the partner and the activities of the partnership and its partners. If a holder of Series A Bonds is a partnership or a partner in such a partnership, such holder should consult with its own tax advisors regarding the United States federal income tax considerations of the purchase, ownership and disposition of Series A Bonds.

THIS SUMMARY IS NOT INTENDED TO CONSTITUTE A COMPLETE DESCRIPTION OF ALL TAX CONSEQUENCES RELATING TO THE PURCHASE, OWNERSHIP, AND DISPOSITION OF THE SERIES A BONDS. PROSPECTIVE INVESTORS SHOULD CONSULT WITH THEIR TAX ADVISORS REGARDING THE PARTICULAR TAX CONSEQUENCES TO THEM

121

(INCLUDING THE APPLICATION AND EFFECT OF ANY STATE, LOCAL, AND NON-UNITED STATES INCOME AND OTHER TAX LAWS) OF PURCHASING, OWNING AND DISPOSING OF THE SERIES A BONDS.

Taxation of the Issuing Entity and Characterization of the Series A Bonds

The energy transition property will be treated as having been transferred to the issuing entity pursuant to, and the issuance of the Series A Bonds will be treated as, a “qualifying securitization” within the meaning of Revenue Procedure 2005-62. Accordingly, for United States federal income tax purposes (i) the issuing entity will not be treated as a taxable entity separate and apart from PNM, (ii) the Series A Bonds will be treated as debt of PNM and (iii) neither PNM nor the issuing entity will be treated as recognizing gross income upon the issuance of the Series A Bonds. By acquiring a Series A Bond, a beneficial owner agrees to treat the Series A Bonds as debt of PNM for United States federal income tax purposes.

Tax Consequences To United States Holders

Interest

PNM and the issuing entity expect that the Series A Bonds will not be issued with more than a de minimis amount of original issue discount, or OID, for United States federal income tax purposes. Thus, stated interest on the Series A Bonds generally will be taxable to a United States Holder as ordinary income at the time it is paid or accrued in accordance with such United States Holder’s method of accounting for United States federal income tax purposes. If, however, the issue price of the Series A Bonds is less than their stated principal amount and the difference is equal to or more than a de minimis amount (as set forth in the applicable Treasury regulations), United States Holders will be required to include the difference in income as OID as it accrues in accordance with the constant yield method (as set forth in the applicable Treasury regulations). The remainder of this discussion assumes that the Series A Bonds will not be treated as issued with more than a de minimis amount of OID.

Information Reporting and Backup Withholding

In general, information reporting requirements will apply to certain payments of principal and interest on the Series A Bonds and to the proceeds from the sale of the Series A Bonds unless the recipient is an exempt recipient. In addition, backup withholding at the current rate will apply to the payments if a United States Holder fails to provide its taxpayer identification number, a certificate of exempt status, or otherwise comply with the applicable requirements of the United States backup withholding rules.

Backup withholding is not an additional tax. Any amounts withheld from payments to a United States Holder under the backup withholding rules will be allowed as a credit against such United States Holder’s United States federal income tax liability and may entitle the United States Holder to a refund, provided that the required information is timely furnished to the Internal Revenue Service. United States Holders should consult their own tax advisors regarding the application of backup withholding in their particular situation, the availability of an exemption from backup withholding, and the procedure for obtaining such an exemption, if available.

Sale, Exchange, or Retirement of Series A Bonds

On a sale, exchange, or retirement of the Series A Bonds, a United States Holder generally will recognize taxable gain or loss equal to the difference between the amount received (other than any amount received attributable to accrued but unpaid interest on the Series A Bonds not previously included in income, which will be taxable as ordinary income) and the United States Holder’s adjusted tax basis in the Series A Bonds. A United States Holder’s adjusted tax basis in a Series A Bond is the United States Holder’s cost, subject to adjustments such as increases in basis for any OID previously included in income and reductions in basis for principal payments received previously. Gain or loss will generally be capital gain or loss, and will be long-term capital gain or loss if the Series A Bond was held for more than one year at the time of disposition. Long-term capital gains of non-corporate United States Holders may be eligible for reduced rates of taxation. The deductibility of capital losses by both corporate and non-corporate United States Holders is subject to limitations.

122

Tax Consequences to Non-United States Holders

Interest

Subject to the discussion below concerning backup withholding and FATCA, a Non-United States Holder generally will not be subject to United States federal withholding tax on interest received in respect of the Series A Bonds, provided that such Non-United States Holder (i) does not own, actually or constructively, 10% or more of the total combined voting power of PNM, (ii) is not a controlled foreign corporation for United States federal income tax purposes directly or indirectly related to PNM within the meaning of section 881(c)(3)(C) of the Internal Revenue Code, (iii) is not a bank whose receipt of interest on the Series A Bonds is described in section 881(C)(3)(A) of the Internal Revenue Code, and (iv) satisfies certain certification requirements under penalties of perjury (generally through the provision of a properly completed and executed IRS Form W-8BEN or IRS Form W-8BEN-E, as applicable).

A Non-United States Holder that qualifies for the exemption from withholding described above (the Portfolio Interest Exemption), generally will not be subject to United States federal income tax on interest received in respect of the Series A Bonds unless such interest is effectively connected with the conduct by the Non-United States Holder of a trade or business in the United States (and, if an applicable tax treaty so requires, is attributable to the conduct of a trade or business through a permanent establishment or fixed base in the United States). A Non-United States Holder that is subject to United States federal income tax on interest under the rules described in the preceding sentence will not be subject to United States federal withholding tax on any such interest that might otherwise be subject to United States federal withholding tax, if such Non-United States Holder satisfies certain certification requirements under penalties of perjury (generally through the provision of a properly completed and executed IRS Form W-8ECI (or successor form)).

The gross amount of payments of interest that do not qualify for the Portfolio Interest Exemption generally will be subject to United States federal withholding tax at a rate of 30% unless (i) the Non-United States Holder provides a properly completed and executed IRS Form W-8BEN or W-8BEN-E (or successor form), as applicable, establishing an exemption from or reduction in withholding under an applicable tax treaty or (ii) the Non-United States Holder establishes that such interest is effectively connected with the conduct of a United States trade or business by such Non-United States Holder and the Non-United States Holder provides a properly completed and executed IRS Form W-8ECI (or successor form).

If interest or other income received with respect to Series A Bonds is effectively connected with a United States trade or business conducted by a Non-United States Holder (and, if an applicable tax treaty so requires, is attributable to the conduct of a trade or business through a permanent establishment or fixed base in the United States), the Non-United States Holder generally will be subject to United States federal income tax on such interest or other income in the same manner as if it were a United States Holder. In addition, if the Non-United States Holder is a foreign corporation, it may be subject to a branch profits tax equal to 30% of its effectively connected earnings and profits for the taxable year, subject to certain adjustments, unless reduced or eliminated by an applicable tax treaty. Even though such effectively connected income is subject to United States federal income tax, and may be subject to the branch profits tax, it is not subject to United States federal withholding tax if the Non-United States Holder satisfies the certification requirements described above.

Sale, Exchange, or Retirement of Series A Bonds

Subject to the backup withholding discussion below, a Non-United States Holder generally will not be subject to United States federal income or withholding tax on gain realized on the sale or exchange of the Series A Bonds, unless:

•

the Non-United States Holder is an individual who is present in the United States for 183 days or more during the taxable year and certain other conditions are met; or

•

the gain is effectively connected with the conduct by the Non-United States Holder of a trade or business in the United States (and, if required by an applicable income tax treaty, is attributable to a permanent establishment or fixed base maintained by the Non-United States Holder in the United States).

123

Except to the extent that an applicable income tax treaty otherwise provides, generally a Non-United States Holder will be taxed in the same manner as a United States Holder with respect to gain that is effectively connected with the Non-United States Holder’s conduct of a United States trade or business. A corporate Non-United States Holder may also, under certain circumstances, be subject to an additional branch profits tax at a 30% rate (or such lower rate as may be specified by an applicable income tax treaty) on any effectively connected gain on the Series A Bonds. A Non-United States Holder who is both an individual present in the United States for 183 days or more in the taxable year and meets certain other conditions will be subject to United States federal income tax at a rate of 30% (or at a reduced rate under an applicable income tax treaty) on the amount by which capital gains from United States sources (including gains from the sale or other disposition of the Series A Bonds) exceed capital losses allocable to United States sources. To claim the benefit of an applicable income tax treaty, a Non-United States Holder may be required to file an income tax return and disclose its position under the Treasury regulations concerning treaty-based return positions.

Information Reporting and Backup Withholding

Generally, the amount of interest paid to a Non-United States Holder and the amount of tax, if any, withheld with respect to those payments must be reported to the Internal Revenue Service and to the Non-United States Holder. Copies of the information returns reporting such interest payments and any withholding may also be made available to the tax authorities in the country in which the Non-United States Holder resides under the provisions of an applicable tax treaty.

In general, a Non-United States Holder will not be subject to backup withholding with respect to payments of interest on the Series A Bonds that are made to the Non-United States Holder, provided that the Non-United States Holder has provided certification that such Non-United States Holder is a Non-United States Holder, and the payor does not have actual knowledge or reason to know that the Non-United States Holder is a United States person as defined under Section 7701(a)(30) of the Internal Revenue Code.

Information reporting and, depending on the circumstances, backup withholding will apply to the proceeds of a sale or other disposition (including a retirement or redemption) of the Series A Bonds within the United States or conducted through certain United States-related financial intermediaries, unless the Non-United States Holder certifies to the payor under penalties of perjury that it is a Non-United States Holder and the payor does not have actual knowledge or reason to know that the Non-United States Holder is a United States person as defined under the Internal Revenue Code, or the Non-United States Holder otherwise establishes an exemption.

Backup withholding is not an additional tax. Any amounts withheld from a payment to a Non-United States Holder under the backup withholding rules will be allowed as a credit against such Non-United States Holder’s United States federal income tax liability and may entitle such Non-United States Holder to a refund, provided that the required information is timely furnished to the Internal Revenue Service. Non-United States Holders should consult their tax advisors regarding the application of information reporting and backup withholding in their particular situations, the availability of an exemption from backup withholding, and the procedure for obtaining such an exemption, if available.

The Foreign Account Tax Compliance Act (FATCA)

Under FATCA, Treasury regulations thereunder, and additional guidance issued by the IRS, a United States federal withholding tax of 30% generally will apply to interest on a debt obligation paid to (i) a “foreign financial institution” ​(as specifically defined in the Internal Revenue Code), whether such foreign financial institution is the beneficial owner or an intermediary, unless such institution enters into an agreement with the United States government to collect and provide to the United States tax authorities, on an annual basis, substantial information with respect to the United States account holders of such institution (which could include certain equity and debt holders of such institution, as well as certain account holders that are foreign entities with United States Holders), or (ii) a “non-financial foreign entity” ​(as specifically defined in the Internal Revenue Code), whether such non-financial foreign entity is the beneficial owner or an intermediary, unless such entity certifies to the withholding agent that it does not have any substantial United States owners or provides the name, address, and taxpayer identification number of each substantial United States

124

owner of the entity, which generally includes any United States person who directly or indirectly owns more than 10% of the entity, and certain other requirements are met. FATCA generally will apply to all payments otherwise subject to FATCA withholding without regard to whether the beneficial owner of the payment is a United States person or would otherwise be entitled to an exemption from imposition of withholding tax pursuant to an applicable tax treaty with the United States or United States domestic law. Certain Non-United States Holders located in a jurisdiction with an intergovernmental agreement with the United States governing FATCA may be subject to different rules. PNM will not be obligated to pay any additional amounts to “gross up” payments to holders as a result of withholding or deduction for such taxes. If an interest payment is both subject to withholding under FATCA and subject to the withholding tax under “—Information Reporting and Backup Withholding” above, the withholding under FACTA may be credited against, and therefore reduce, such other withholding tax. Non-United States Holders should consult their own tax advisors regarding the possible implications of FATCA and whether FATCA may be relevant to such Non-United States Holder’s acquisition, ownership, and disposition of the Series A Bonds.

125

ERISA CONSIDERATIONS

General

ERISA and the Internal Revenue Code impose certain requirements on employee benefit plans or plans subject to ERISA and/or Section 4975 of the Internal Revenue Code and on persons or entities that are fiduciaries with respect to such plans. For purposes of this discussion, Plans refers to employee benefit plans (as defined in Section 3(3) of ERISA) subject to Title I of ERISA, plans (as defined in Section 4975(e)(1) of the Internal Revenue Code) subject to Section 4975 of the Internal Revenue Code (which includes plans that provide retirement income, including individual retirement accounts and annuities and Keogh plans) and entities, including collective investment funds and insurance company general or separate accounts, that may be deemed to hold the assets of the foregoing by virtue of such employee benefit plans or plans’ investment in such entities. A fiduciary of a Plan is any person or entity that in connection with the assets of the Plan:

•

exercises discretionary authority or control over the management or disposition of plan assets, or

•

provides investment advice for a fee.

Governmental plans, certain church plans and non-U.S. plans, and the fiduciaries of those plans, may not be subject to the fiduciary responsibility provisions of ERISA or the prohibited transaction rules of ERISA or Section 4975 of the Internal Revenue Code. Accordingly, assets of these plans may be invested in the Series A Bonds without regard to the ERISA considerations described below, but any such governmental or church plan that is qualified and exempt from taxation under Sections 401(a) and 501(a) of the Internal Revenue Code is subject to the prohibited transaction rules in Section 503 of the Internal Revenue Code. In addition, such plans may be subject to the provisions of federal, state, local or other laws or regulations that are substantially similar to Title I of ERISA or Section 4975 of the Internal Revenue Code (collectively Similar Law). Accordingly, any fiduciary of such plans must determine whether purchasing the Series A Bonds is permitted under any such Similar Law.

ERISA imposes certain general fiduciary requirements on fiduciaries, including:

•

investment prudence and diversification, and

•

the investment of the assets of such Plan in accordance with the documents governing such Plan.

Section 406 of ERISA and Section 4975 of the Internal Revenue Code also prohibit a broad range of transactions involving the assets of a Plan and persons or entities that have certain specified relationships to the Plan, referred to as parties in interest (as defined under ERISA) or disqualified persons (as defined under the Internal Revenue Code), unless a statutory or administrative exemption is available. For purposes of this discussion, the term Parties in Interest include parties in interest under ERISA and disqualified persons under the Internal Revenue Code. The types of transactions between a Plan and a Party in Interest that are prohibited include:

•

sales, exchanges or leases of property;

•

loans or other extensions of credit; and

•

the furnishing of goods or services.

Certain persons or entities that participate in a prohibited transaction may be subject to an excise tax under Section 4975 of the Internal Revenue Code or a penalty imposed under Section 502(i) of ERISA, unless a statutory, administrative or individual exemption is available. In addition, the persons or entities involved in the prohibited transaction may have to cancel the transaction and pay an amount to the Plan for any losses realized by the plan or profits realized by these persons or entities. In addition, individual retirement accounts involved in the prohibited transaction may be disqualified which would result in adverse tax consequences to the owner of the account.

Regulation of Assets Included in a Plan

A fiduciary’s investment of the assets of a Plan in the Series A Bonds may cause the issuing entity’s assets to be deemed assets of such Plan. DOL regulations at 29 C.F.R. Section 2510.3-101, as modified by

126

Section 3(42) of ERISA (collectively, the Plan Asset Regulations), provide that the assets of an entity will be deemed to be assets of a Plan that purchases an interest in the entity (such as the issuing entity) if the interest that is purchased by the Plan is an equity interest, equity participation held by Plans (referred to in the Plan Asset Regulations as Benefit Plan Investors is “significant” within the meaning of the Plan Asset Regulations and none of the other exceptions contained in the Plan Asset Regulations applies. An equity interest is defined in the Plan Asset Regulations as an interest in an entity other than an instrument that is treated as indebtedness under applicable local law and that has no substantial equity features. Although there is no authority directly on point, it is anticipated that the Series A Bonds will be treated as indebtedness for purposes of the Plan Asset Regulations.

If the Series A Bonds were deemed to be equity interests in the issuing entity and none of the exceptions contained in the Plan Asset Regulations were applicable, then the issuing entity’s assets would be considered to be assets of any Plans that purchase the Series A Bonds. The extent to which the Series A Bonds are held by Benefit Plan Investors will not be monitored. If the issuing entity’s assets were deemed to constitute “plan assets” pursuant to the Plan Asset Regulations, transactions the issuing entity might enter into, or may have entered into in the ordinary course of business, might constitute non-exempt prohibited transactions under ERISA and or Section 4975 of the Internal Revenue Code.

In addition, the acquisition or holding of the Series A Bonds by or on behalf of, or using assets of, a Plan could give rise to a prohibited transaction if the issuing entity or the indenture trustee, PNM, any other servicer, PNMR, any underwriter or certain of their affiliates has, or acquires, a relationship to an investing Plan. Each purchaser of the Series A Bonds that is or is acting on behalf of, or using assets of a Plan will be deemed to have represented and warranted that its purchase, holding and disposition of the Series A Bonds will not constitute or result in a non-exempt prohibited transaction under ERISA or the Internal Revenue Code.

Before purchasing any Series A Bonds by or on behalf of, or with assets of, a Plan, you should consider whether the purchase, holding or disposition of the Series A Bonds might result in a prohibited transaction under ERISA or the Internal Revenue Code and, if so, whether any prohibited transaction exemption might apply to the purchase, holding or disposition of the Series A Bonds.

Prohibited Transaction Exemptions

If you are a fiduciary of a Plan or any other person or entity proposing to purchase the Series A Bonds on behalf of, or using assets of, a Plan, before purchasing any Series A Bonds, you should consider the availability of one of the DOL’s prohibited transaction class exemptions, referred to as PTCEs, or one of the statutory exemptions provided by ERISA or Section 4975 of the Internal Revenue Code, which include:

•

PTCE 75-1, relating to transactions effected by certain broker-dealers, reporting dealers and banks;

•

PTCE 84-14, relating to transactions effected by a “qualified professional asset manager;”

•

PTCE 90-1, relating to transactions involving insurance company separate accounts;

•

PTCE 91-38, relating to transactions involving bank collective investment funds;

•

PTCE 95-60, relating to transactions involving insurance company general accounts;

•

PTCE 96-23, relating to transactions effected by an “in-house asset manager;” and

•

the statutory service provider exemption provided under Section 408(b)(17) of ERISA and Section 4975(d)(20) of the Internal Revenue Code, relating to certain transactions between Plans and certain Parties in Interest that are not fiduciaries with respect to the transaction.

The issuing entity cannot provide any assurance that any of these class exemptions or statutory exemptions will apply with respect to any particular investment in the Series A Bonds by, on behalf of or using assets of, a Plan or, even if it were deemed to apply, that any exemption would apply to all transactions that may occur in connection with the investment. For example, even if one of these class exemptions or statutory exemptions were deemed to apply, Series A Bonds may not be purchased with assets of any Plan if

127

the issuing entity or the indenture trustee, PNM, any other servicer, PNMR, any underwriter or any of their affiliates:

•

has investment discretion over the assets of the Plan used to purchase the Series A Bonds;

•

has authority or responsibility to give, or regularly gives, investment advice regarding the assets of the Plan used to purchase the Series A Bonds for a fee under an agreement or understanding that the advice will serve as a primary basis for investment decisions for the assets of the Plan, and will be based on the particular investment needs of the Plan; or

•

is an employer maintaining or contributing to the Plan, unless one or more applicable prohibited transaction exemptions is/are available to provide relief for such purchase, holding and disposition of any Series A Bonds or the transactions are not otherwise prohibited.

Each purchaser and holder of a Series A Bond will be deemed to have represented and warranted by virtue of its acquisition and holding of a Series A Bond on each day from and including the date of its purchase of the Series A Bonds through and including the date of disposition of any such Series A Bond that either (i) it is not and is not acting on behalf of, or using assets of, (a) a Plan or any governmental, church or non-U.S. plan that is subject to any Similar Law or (ii) its purchase, holding and disposition of the Series A Bond, in the case of a Plan, will not constitute or result in a non-exempt prohibited transaction in violation of Section 406 of ERISA or Section 4975 the Internal Revenue Code or, in the case of a governmental, church or non-U.S. plan subject to Similar Law, will not result or constitute a violation of such Similar Law.

Consultation with Counsel

The sale of Series A Bonds to a Plan or any governmental, church or non-U.S. plan subject to Similar Law is in no respect a representation by the issuing entity, the indenture trustee, PNM, any other servicer, PNMR, any underwriter that this investment meets all relevant legal requirements for investments by such Plans or plans generally or any particular Plan or plan or that this investment is appropriate for such Plans or plans generally or any particular Plan or plan.

If you are a fiduciary which proposes to purchase the Series A Bonds on behalf of, or with assets of a Plan or governmental, church or non-U.S. plan subject to Similar Law, you should consider your general fiduciary obligations under ERISA, the Internal Revenue Code or Similar Law and you should consult with your legal counsel as to the potential applicability of ERISA, the Internal Revenue Code or Similar Law in connection with any investment in the Series A Bonds, including, in the case of a Plan, the applicability of the Plan Asset Regulation and other provisions of ERISA, the prohibited transaction provisions of ERISA and the Internal Revenue Code to any such investment and the availability of any prohibited transaction exemption.

This summary is based on current provisions of ERISA, the Internal Revenue Code, the regulations thereunder and other related guidance. All of these authorities and interpretations are subject to change, and any change may apply retroactively and affect the accuracy of the opinions, statements and conclusions set forth in this discussion.

128

LEGAL PROCEEDINGS

Other than as disclosed in this prospectus, there are no legal or governmental proceedings pending against the issuing entity, the sponsor, seller, indenture trustee or servicer, or of which any property of the foregoing is subject, that is material to the holders of the Series A Bonds.

On April 10, 2020, two intervenors in the proceedings related to the Financing Order filed a notice of appeal with the New Mexico Supreme Court of the NMPRC’s approval of the Financing Order. In their appeal, the intervenors asserted that the NMPRC improperly applied the Energy Transition Act and that the Energy Transition Act violates the New Mexico Constitution. On January 10, 2022, the New Mexico Supreme Court issued its decision rejecting the constitutional challenges to the Energy Transition Act and affirmed the Financing Order.

On February 28, 2022, two intervenors in the proceedings relating to the Financing Order filed a joint motion for order to show cause and enforce the Financing Order and supporting brief, which requested that the NMPRC order PNM to show cause why its rates should not be reduced at the time SJGS is abandoned, and to otherwise enforce the Financing Order. The NMPRC issued an order appointing hearing examiners to conduct a hearing, if necessary, and to issue a recommended decision to address the issues raised by the motion.

On June 17, 2022, the hearing examiners issued a recommended decision requesting the NMPRC issue an order that would require PNM to:

•

Revise its rates to remove all of the costs of SJGS Unit 1 by issuing rate credits of $21.1 million on an annual basis, to customers by July 1, 2022;

•

Revise its rates again, to remove all costs of SJGS Unit 1, Unit 4 and common facilities by increasing the rate credits to $98.3 million on an annual basis, by October 1, 2022;

•

Transfer payments due and owing to the Indian Affairs Fund, Economic Development Assistance Fund, and the Displaced Workers Assistance Fund within 30 days of the abandonment of SJGS Unit 1; and

•

Include (in its next rate case application) an explanation and defense of the prudence in the timing of the issuance of the bonds beyond the abandonment dates and what actions were taken to protect customers from interest rate increases occurring as well as the continued marketability of the bonds issued.

On June 29, 2022, the NMPRC issued its final order adopting and approving the recommended decision in its entirety with certain additions. The additions to the final order include requirements for PNM file a report, no later than October 15, 2022, that contains a record of all of its costs incurred in the show cause proceeding so that the prudence of those costs will be known and be subject to review in PNM’s future rate case and that the prudency review shall include a compliance filing to enable a review of the prudence of PNM’s decision to delay bond issuance beyond the dates of the SJGS abandonment.

On June 29, 2022, PNM filed an Emergency Motion and Supporting Brief for Stay with the NMPRC, which was denied. On June 30, 2022, PNM filed a Notice of Appeal and an Emergency Motion for Partial Interim Stay of the NMPRC’s Final Order with the New Mexico Supreme Court. Subsequently, on July 25, 2022, PNM filed another emergency motion seeking an immediate and ongoing stay from the New Mexico Supreme Court for the pendency of the appeal. In the interim, PNM began issuing rate credits effective July 31, 2022, and PNM made payments totaling $19.8 million to the Indian Affairs Fund, Economic Development Assistance Fund, and the Displaced Workers Assistance Fund. On September 2, 2022, the New Mexico Supreme Court issued an order granting PNM’s July 25, 2022 motion for partial stay and as a result PNM suspended issuing rate credits. On October 14, 2022, PNM made its required compliance filings under the NMPRC’s June 29, 2022, final order. On November 1, 2022, the New Mexico Supreme Court issued an order continuing the partial stay of the rate credits during the pendency of the appeal.

On December 5, 2022, PNM filed a general base rate case with the NMPRC. In March 2023, the New Mexico Attorney General and another intervenor jointly filed a motion in the general base rate case proceedings for a declaratory order, contending that PNM no longer had authority to cause the issuance of

129

the Series A Bonds and that the Financing Order was effectively revoked because the Series A Bonds were not issued at the time of the abandonment of SJGS. In July 2023, the hearing examiners in the general base rate case denied the joint motion for declaratory order because it was not filed in accordance with the NMPRC’s procedure requirements for declaratory orders.

On August 18, 2023, PNM, along with the intervening parties in the pending appeal of the Show Cause Order, filed an unopposed joint motion for abeyance and remand to implement settlement and request for expedited order at the New Mexico Supreme Court. In the motion, the parties asked the New Mexico Supreme Court to hold the appeal in abeyance and remand the matter to the NMPRC to consider and take formal action on a unanimous proposed settlement on remand.

Under the terms of the unanimous settlement, PNM will provide $115.0 million in rate credits (the “settlement rate credits”) to customers over a one-year period. In addition, PNM will be required to provide additional rate credits (the “interest rate credits”) to customers to protect customers from rising interest rates if the weighted-average rate on the securitization bonds exceeds 5.5%.

On September 21, 2023, the NMPRC issued an order (the ‘‘2023 NMPRC Order’’) that affirms the validity of the Financing Order and the authorizations and approvals granted to PNM therein, including the Financing Order’s determination of its irrevocability and PNM’s ongoing authority to cause the issuance of up to $360.1 million of energy transition bonds pursuant to the Financing Order. In addition, the NMPRC affirmed its non-impairment pledge pursuant to the Financing Order and the Energy Transition Act. Further, the 2023 NMPRC Order affirmed that PNM’s obligation to provide the settlement rate credits and the interest rate credits shall neither (i) impair the characterization of the sale, assignment and transfer of the energy transition property as an absolute transfer and true sale, or affect or impair the issuing entity’s ownership of the energy transition property or status as an entity separate from PNM, nor (ii) alter, reduce or impair in any way the energy transition property or the imposition, collection or remittance of the energy transition charges authorized under the Financing Order, or any rights under the Financing Order.

On September 22, 2023, all parties to the Show Cause Proceeding filed an agreement with the New Mexico Supreme Court stipulating to dismissal of the appeals relating to the Show Cause Proceeding and requesting that the New Mexico Supreme Court issue an order dismissing such appeals.

130

RATINGS FOR THE SERIES A BONDS

The issuing entity expects that the Series A Bonds will receive credit ratings from at least two NRSROs. A security rating is not a recommendation to buy, sell or hold securities and may be subject to revision or withdrawal at any time by the assigning NRSRO. Each rating should be evaluated independently of any other rating. No person is obligated to maintain the rating on any Series A Bonds and, accordingly, the issuing entity can give no assurance that the ratings assigned to any tranche of the Series A Bonds upon initial issuance will not be lowered or withdrawn by a NRSRO at any time thereafter. If a rating of any tranche of Series A Bonds is lowered or withdrawn, the liquidity of this tranche of the Series A Bonds may be adversely affected. In general, ratings address credit risk and do not represent any assessment of any particular rate of principal payments on the Series A Bonds other than the payment in full of each tranche of the Series A Bonds by the final maturity date or tranche final maturity date, as well as the timely payment of interest.

Under Rule 17g-5 of the Exchange Act, NRSROs providing the sponsor with the requisite certification will have access to all information posted on a website by the sponsor for the purpose of determining the initial rating and monitoring the rating after the closing date in respect of the Series A Bonds. As a result, an NRSRO other than the NRSROs hired by a sponsor (a hired NRSRO) may issue unsolicited ratings on the Series A Bonds, which may be lower, and could be significantly lower, than the ratings assigned by a hired NRSROs. The unsolicited ratings may be issued prior to, or after, the closing date in respect of the Series A Bonds. Issuance of any unsolicited rating will not affect the issuance of the Series A Bonds. Issuance of an unsolicited rating lower than the ratings assigned by a hired NRSRO on the Series A Bonds might adversely affect the value of the Series A Bonds and, for regulated entities, could affect the status of the Series A Bonds as a legal investment or the capital treatment of the Series A Bonds. Investors in the Series A Bonds should consult with their legal counsel regarding the effect of the issuance of a rating by a non-hired NRSRO that is lower than the rating of a hired NRSRO.

A portion of the fees paid by the issuing entity to a NRSRO which is hired to assign a rating on the Series A Bonds is contingent upon the issuance of the Series A Bonds. In addition to the fees paid by the issuing entity to a NRSRO at closing, the issuing entity will pay a fee to a NRSRO for ongoing surveillance for so long as the Series A Bonds are outstanding. However, no NRSRO is under any obligation to continue to monitor or provide a rating on the Series A Bonds.

131

WHERE YOU CAN FIND MORE INFORMATION

This prospectus is part of a registration statement the issuing entity and PNM have filed with the SEC relating to the Series A Bonds. This prospectus describes the material terms of some of the documents that have been filed or will be filed as exhibits to the registration statement. However, this prospectus does not contain all of the information contained in the registration statement and the exhibits.

Information filed with the SEC can be inspected at the SEC’s Internet site located at http://www.sec.gov, or on the website of PNM’s parent, PNMR, currently located at www.pnmresources.com. The information contained on PNMR’s website is not a part of the registration statement or any report that PNM files with, or furnishes to, the SEC. PNM and the issuing entity are providing the address to this website solely for the information of investors and does not intend the address to be an active link. You may also obtain a copy of issuing entity’s filings with the SEC at no cost, by writing to or telephoning the issuing entity at the following address:

PNM Energy Transition Bond Company I, LLC
414 Silver Avenue SW
Albuquerque, New Mexico 87102
(505) 241-2700

The depositor’s Securities Act file number is 001-06986.

The issuing entity or PNM as depositor will also file with the SEC all periodic reports the issuing entity or the depositor are required to be filed under the Exchange Act and the rules, regulations or orders of the SEC thereunder; however, neither the issuing entity nor PNM as depositor intends to file any such reports relating to the Series A Bonds following completion of the reporting period required by Rule 15d-1 or Regulation 15D under the Exchange Act, unless required by law. Unless specifically stated in the report, the reports and any information included in the report will neither be examined nor reported on by an independent public accountant. For a more detailed description of the information to be included in these periodic reports, please read “Description of the Series A Bonds — Website Disclosure.”

INCORPORATION BY REFERENCE

The SEC allows the issuing entity and PNM to “incorporate by reference” into this prospectus information the issuing entity and PNM file with the SEC. This means disclosure of important information may be made by referring you to the documents containing the information. The information incorporated by reference is considered to be part of this prospectus, unless such information is updated or superseded by the information that the issuing entity or PNM files subsequently that is incorporated by reference into this prospectus.

To the extent that the issuing entity is required by law to file such reports and information with the SEC under the Exchange Act, the issuing entity will file annual and current reports and other information with the SEC. The issuing entity is incorporating by reference any future filings it or the sponsor, but solely in its capacity as the sponsor, makes with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act prior to the termination of the offering, excluding any information that is furnished to and not filed with the SEC. These reports will be filed under the issuing entity’s name.

The issuing entity is incorporating into this prospectus any future distribution report on Form 10-D, current report on Form 8-K or any amendment to any such report which the issuing entity or PNM, solely in its capacity as depositor, make with the SEC until the offering of the Series A Bonds is completed. These reports will be filed under the issuing entity’s name. In addition, these reports will be posted on the website of PNM’s parent, PNMR, at www.pnmresources.com. Any statement contained in this prospectus or in a document incorporated or deemed to be incorporated by reference in this prospectus will be deemed to be modified or superseded for purposes of this prospectus to the extent that a statement contained in this prospectus or in any separately filed document which also is or is deemed to be incorporated by reference herein modifies or supersedes that statement. Any statement so modified or superseded will not be deemed, except as so modified or superseded, to constitute part of this prospectus.

132

Under the indenture, the issuing entity may voluntarily suspend or terminate the filing obligations as issuing entity (under the SEC rules) with the SEC, to the extent permitted by applicable law.

INVESTMENT COMPANY ACT OF 1940 AND VOLCKER RULE MATTERS

The issuing entity will be relying on an exclusion or exemption from the definition of “investment company” under the Investment Company Act of 1940, as amended, or the 1940 Act, contained in Section 3(c)(5) of the 1940 Act, although there may be additional exclusions or exemptions available to the issuing entity. As a result of such exclusion, the issuing entity will not be subject to regulation as an “investment company” under the 1940 Act.

In addition, the issuing entity is being structured so as not to constitute a “covered fund” for purposes of the Volcker Rule under the Dodd-Frank Act. As part of the Dodd-Frank Act, federal law prohibits a “banking entity” — which is broadly defined to include banks, bank holding companies and affiliates thereof — from engaging in proprietary trading or holding ownership interests in certain private funds. The definition of “covered fund” in the regulations adopted to implement the Volcker Rule includes (generally) any entity that would be an investment company under the 1940 Act but for the exemption provided under Sections 3(c)(1) or 3(c)(7) thereunder. Because the issuing entity will rely on Rule 3(c)(5) of the 1940 Act, it will not be considered a “covered fund” within the meaning of the Volcker Rule regulations.

RISK RETENTION

This offering of the Series A Bonds is a public utility securitization exempt from the risk retention requirements imposed by Section 15G of the Exchange Act due to the exemption provided in Rule 19(b)(8) of Regulation RR.

For information regarding the requirements of the European Union Securitization Regulation as to risk retention and other matters, please read “Risk Factors — Other Risks Associated with the Purchase of the Series A Bonds — Regulatory provisions affecting certain investors could adversely affect the price and liquidity of the Series A Bonds” in this prospectus.

LEGAL MATTERS

Certain legal matters relating to the Series A Bonds, including material U.S. federal income tax matters, will be passed on by Troutman Pepper Hamilton Sanders LLP, counsel to PNM and the issuing entity. Certain other legal matters relating to the Series A Bonds will be passed on by Miller Stratvert P.A., New Mexico counsel to PNM, and by Hunton Andrews Kurth LLP, counsel to the underwriters. Hunton Andrews Kurth LLP from time to time has and may perform legal services for PNMR, PNM and their affiliates.

OFFERING RESTRICTIONS IN CERTAIN JURISDICTIONS

NOTICE TO RESIDENTS OF THE EUROPEAN ECONOMIC AREA

THE SERIES A BONDS ARE NOT INTENDED TO BE OFFERED, SOLD OR OTHERWISE MADE AVAILABLE TO, AND SHOULD NOT BE OFFERED, SOLD OR OTHERWISE MADE AVAILABLE TO, ANY RETAIL INVESTOR IN THE EUROPEAN ECONOMIC AREA (EEA) OR IN THE UNITED KINGDOM (UK). FOR THESE PURPOSES, THE EXPRESSION RETAIL INVESTOR MEANS A PERSON WHO IS ONE (OR MORE) OF THE FOLLOWING: (1) A RETAIL CLIENT AS DEFINED IN POINT (11) OF ARTICLE 4(1) OF DIRECTIVE 2014/65/EU (AS AMENDED, MIFID II); (2) A CUSTOMER WITHIN THE MEANING OF DIRECTIVE (EU) 2016/97 (AS AMENDED), WHERE THAT CUSTOMER WOULD NOT QUALIFY AS A PROFESSIONAL CLIENT AS DEFINED IN POINT (10) OF ARTICLE 4(1) OF MIFID II; OR (3) NOT A QUALIFIED INVESTOR (QUALIFIED INVESTOR) WITHIN THE MEANING OF REGULATION 2017/1129 (AS AMENDED, THE PROSPECTUS REGULATION). CONSEQUENTLY NO KEY INFORMATION DOCUMENT REQUIRED BY REGULATION (EU) NO 1286/2014 (AS AMENDED, THE PRIIPS REGULATION) FOR OFFERING OR SELLING THE SERIES A BONDS OR OTHERWISE MAKING THEM AVAILABLE TO RETAIL INVESTORS IN THE EEA HAS BEEN PREPARED; AND THEREFORE OFFERING OR SELLING THE SERIES A BONDS OR OTHERWISE MAKING

133

THEM AVAILABLE TO ANY RETAIL INVESTOR IN THE EEA OR THE UK MAY BE UNLAWFUL UNDER THE PRIIPS REGULATION.

THIS PROSPECTUS IS NOT A PROSPECTUS FOR PURPOSES OF THE PROSPECTUS DIRECTIVE. THIS PROSPECTUS HAS BEEN PREPARED ON THE BASIS THAT ANY OFFER OF SERIES A BONDS IN ANY MEMBER STATE OF THE EEA (EACH, A RELEVANT STATE) WILL BE MADE ONLY PURSUANT TO AN EXEMPTION UNDER THE PROSPECTUS REGULATION FROM THE REQUIREMENT TO PUBLISH A PROSPECTUS FOR OFFERS OF SERIES A BONDS. ACCORDINGLY ANY PERSON MAKING OR INTENDING TO MAKE AN OFFER IN THAT RELEVANT STATE OF SERIES A BONDS WHICH ARE THE SUBJECT OF THE OFFERING CONTEMPLATED IN THIS PROSPECTUS MAY ONLY DO SO IN CIRCUMSTANCES IN WHICH NO OBLIGATION ARISES FOR THE ISSUER OR ANY OF THE UNDERWRITERS TO PUBLISH A PROSPECTUS PURSUANT TO ARTICLE 3 OF THE PROSPECTUS REGULATION, IN RELATION TO SUCH OFFER. NEITHER THE ISSUER NOR ANY UNDERWRITER HAVE AUTHORISED, NOR DO THEY AUTHORISE, THE MAKING OF ANY OFFER OF SERIES A BONDS IN CIRCUMSTANCES IN WHICH AN OBLIGATION ARISES FOR THE ISSUER OR ANY OF THE UNDERWRITERS TO PUBLISH A PROSPECTUS FOR SUCH OFFER.

ACCORDINGLY, ANY PERSON MAKING OR INTENDING TO MAKE AN OFFER IN THAT RELEVANT MEMBER STATE OF SERIES A BONDS WHICH ARE THE SUBJECT OF THE OFFERING CONTEMPLATED IN THIS PROSPECTUS MAY DO SO ONLY WITH RESPECT TO QUALIFIED INVESTORS. NEITHER WE NOR ANY UNDERWRITER HAS AUTHORIZED, NOR DO WE OR THEY AUTHORIZE, THE MAKING OF ANY OFFER OF SERIES A BONDS OTHER THAN TO QUALIFIED INVESTORS.

ANY DISTRIBUTOR SUBJECT TO MIFID II THAT IS OFFERING, SELLING OR RECOMMENDING THE SERIES A BONDS IS RESPONSIBLE FOR UNDERTAKING ITS OWN TARGET MARKET ASSESSMENT IN RESPECT OF THE SERIES A BONDS AND DETERMINING ITS OWN DISTRIBUTION CHANNELS FOR THE PURPOSES OF THE MIFID II PRODUCT GOVERNANCE RULES UNDER COMMISSION DELEGATED DIRECTIVE (EU) 2017/593 (AS AMENDED, THE DELEGATED DIRECTIVE). NONE OF PNM, THE ISSUING ENTITY OR ANY UNDERWRITER MAKES ANY REPRESENTATIONS OR WARRANTIES AS TO A DISTRIBUTOR’S COMPLIANCE WITH THE DELEGATED DIRECTIVE.

EACH UNDERWRITER HAS REPRESENTED AND AGREED THAT IT HAS NOT OFFERED, SOLD OR OTHERWISE MADE AVAILABLE, AND WILL NOT OFFER, SELL OR OTHERWISE MAKE AVAILABLE, ANY SERIES A BONDS WHICH ARE THE SUBJECT OF THE OFFERING CONTEMPLATED BY THIS PROSPECTUS TO ANY RETAIL INVESTOR (AS DEFINED ABOVE) IN THE EEA OR THE UK. FOR THIS PURPOSE, THE EXPRESSION OFFER INCLUDES THE COMMUNICATION IN ANY FORM AND BY ANY MEANS OF SUFFICIENT INFORMATION ON THE TERMS OF THE OFFER AND THE SERIES A BONDS SO AS TO ENABLE AN INVESTOR TO DECIDE TO PURCHASE OR SUBSCRIBE FOR THE SERIES A BONDS.

NOTICE TO RESIDENTS OF UNITED KINGDOM

IN THE UNITED KINGDOM, THIS PROSPECTUS IS BEING COMMUNICATED ONLY TO, AND IS DIRECTED ONLY AT, (1) PERSONS WHICH HAVE PROFESSIONAL EXPERIENCE IN MATTERS RELATING TO INVESTMENTS AND WHICH FALL WITHIN ARTICLE 19(5) OF THE FINANCIAL SERVICES AND MARKETS ACT 2000 (FINANCIAL PROMOTION) ORDER 2005 (AS AMENDED, THE ORDER); (2) PERSONS WHICH FALL WITHIN ARTICLE 49(2)(A) TO (D) OF THE ORDER; OR (3) PERSONS TO WHICH IT MAY OTHERWISE LAWFULLY BE COMMUNICATED OR DIRECTED (EACH SUCH PERSON, A RELEVANT PERSON). ANY INVESTMENT OR INVESTMENT ACTIVITY TO WHICH THIS PROSPECTUS RELATES, INCLUDING THE SERIES A BONDS, IS AVAILABLE ONLY TO RELEVANT PERSONS AND WILL BE ENGAGED IN ONLY WITH RELEVANT PERSONS. THIS PROSPECTUS MUST NOT BE ACTED ON OR RELIED ON BY ANY PERSON WHICH IS NOT A RELEVANT PERSON.

EACH OF THE UNDERWRITERS HAS REPRESENTED AND AGREED THAT (I) IT HAS ONLY COMMUNICATED OR CAUSED TO BE COMMUNICATED AND WILL ONLY

134

COMMUNICATE OR CAUSE TO BE COMMUNICATED AN INVITATION OR INDUCEMENT TO ENGAGE IN INVESTMENT ACTIVITY (WITHIN THE MEANING OF SECTION 21 OF THE FINANCIAL SERVICES AND MARKETS ACT 2000, AS AMENDED (THE FSMA)) RECEIVED BY IT IN CONNECTION WITH THE ISSUE OR SALE OF THE SERIES A BONDS IN CIRCUMSTANCES IN WHICH SECTION 21(1) OF THE FSMA DOES NOT APPLY TO THE ISSUING ENTITY; AND (II) IT HAS COMPLIED AND WILL COMPLY WITH ALL APPLICABLE PROVISIONS OF THE FSMA WITH RESPECT TO ANYTHING DONE BY IT IN RELATION TO THE SERIES A BONDS IN, FROM OR OTHERWISE INVOLVING THE UNITED KINGDOM.

NOTICE TO RESIDENTS OF CANADA

THE SERIES A BONDS MAY BE SOLD IN CANADA ONLY TO PURCHASERS PURCHASING, OR DEEMED TO BE PURCHASING, AS PRINCIPAL THAT ARE ACCREDITED INVESTORS, AS DEFINED IN NATIONAL INSTRUMENT 45-106 PROSPECTUS EXEMPTIONS OR SUBSECTION 73.3(1) OF THE SECURITIES ACT (ONTARIO), AND ARE PERMITTED CLIENTS, AS DEFINED IN NATIONAL INSTRUMENT 31-103 REGISTRATION REQUIREMENTS, EXEMPTIONS AND ONGOING REGISTRANT OBLIGATIONS. ANY RESALE OF THE SERIES A BONDS MUST BE MADE IN ACCORDANCE WITH AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE PROSPECTUS REQUIREMENTS OF APPLICABLE SECURITIES LAWS.

SECURITIES LEGISLATION IN CERTAIN PROVINCES OR TERRITORIES OF CANADA MAY PROVIDE A PURCHASER WITH REMEDIES FOR RESCISSION OR DAMAGES IF THIS PROSPECTUS (INCLUDING ANY AMENDMENT THERETO) CONTAINS A MISREPRESENTATION, PROVIDED THAT THE REMEDIES FOR RESCISSION OR DAMAGES ARE EXERCISED BY THE PURCHASER WITHIN THE TIME LIMIT PRESCRIBED BY THE SECURITIES LEGISLATION OF THE PURCHASER’S PROVINCE OR TERRITORY. THE PURCHASER SHOULD REFER TO ANY APPLICABLE PROVISIONS OF THE SECURITIES LEGISLATION OF THE PURCHASER’S PROVINCE OR TERRITORY FOR PARTICULARS OF THESE RIGHTS OR CONSULT WITH A LEGAL ADVISOR.

PURSUANT TO SECTION 3A.3 OF NATIONAL INSTRUMENT 33-105 UNDERWRITING CONFLICTS (NI 33-105), THE UNDERWRITERS ARE NOT REQUIRED TO COMPLY WITH THE DISCLOSURE REQUIREMENTS OF NI 33-105 REGARDING UNDERWRITER CONFLICTS OF INTEREST IN CONNECTION WITH THIS OFFERING.

135

GLOSSARY

As used in this prospectus the terms below have the following meanings:

“Administration agreement” means the administration agreement to be entered into between PNM and the issuing entity, as the same may be amended and supplemented from time to time.

“Administrator” means PNM, as administrator under the administration agreement, or any successor administrator to the extent permitted under the administration agreement.

“Bankruptcy Code” means Title 11 of the United States Code, as amended from time to time.

“Basic documents” means the indenture, the series supplement, the certificate of formation of the issuing entity, the limited liability company agreement of the issuing entity, the administration agreement, the sale agreement and the related bill of sale, the servicing agreement, the letter of representations executed by the issuing entity in favor of DTC, the underwriting agreement, any intercreditor agreement adopted in accordance with the indenture and all other documents and certificates delivered in connection therewith.

“Bondholder” or “holder” means a registered holder of the Series A Bonds.

“Business day” means any day other than a Saturday, a Sunday or a day on which banking institutions in Albuquerque, New Mexico or New York, New York are, or DTC or the corporate trust office of the indenture trustee is, authorized or obligated by law, regulation or executive order to be closed.

“Capital subaccount” means the capital subaccount, a subaccount of the collection account created by the indenture and maintained by the indenture trustee under the indenture.

“Clearstream” means Clearstream Banking, Luxembourg, S.A.

“Collection account” means the segregated trust account or accounts relating to the Series A Bonds designated as the collection account and maintained by the indenture trustee under the indenture.

“Customer” means (a) any customer receiving electricity delivery service from PNM or its successors or assignees under NMPRC-approved rate schedules or special contracts, and (b) any customer who acquires electricity from an alternative or subsequent electricity supplier in the service area of PNM, to the extent such acquisition is permitted by law.

“Definitive bonds” means Series A Bonds issued in fully registered, certificated form.

“Depositor” means Public Service Company of New Mexico.

“DOL” means the U.S. Department of Labor.

“DTC” means The Depository Trust Company, New York, New York, or its nominee holder, Cede & Co.

“DTCC” means The Depository Trust & Clearing Corporation.

“Eligible institution” means:

(a)   the corporate trust department of the indenture trustee or an affiliate thereof, so long as the indenture trustee or such affiliate has (i) either a short-term deposit or issuer rating from Moody’s of at least “P-1” or a long-term unsecured debt or issuer rating from Moody’s of at least “A2”, and (ii) a short-term deposit or issuer rating from S&P of at least “A-1”, or a long-term unsecured debt or issuer rating from S&P of at least “A”; or

(b)   a depository institution organized under the laws of the United States of America or any State (or any domestic branch of a foreign bank) (i) that has either (A) a long-term unsecured debt or issuer rating of “AA-” or higher by S&P and “A2” or higher by Moody’s, or (B) a short-term deposit, short-term (bank deposit) or issuer rating of “A-1” or higher by S&P and “P-1” or higher by Moody’s, or (ii) whose deposits are insured by the Federal Deposit Insurance Corporation.

If so qualified under clause (b) of this definition, the indenture trustee may be considered an eligible institution for the purposes of clause (a) of this definition.

136

“Eligible investments” means:

Funds in the collection account may be invested only in such investments as meet the criteria described below and which mature on or before the business day immediately preceding the next payment date:

(1)

direct obligations of, or obligations fully and unconditionally guaranteed as to timely payment by, the United States of America;

(2)

demand or time deposits of, unsecured certificates of deposit of, money market deposit accounts of or bankers’ acceptances issued by, any depository institution (including the indenture trustee of any of its affiliates, acting in its commercial capacity) incorporated or organized under the laws of the United States of America or any State thereof and subject to supervision and examination by U.S. federal or State banking authorities, so long as the commercial paper or other short-term debt obligations of such depository institution are, at the time of deposit or contractual commitment, rated at least “A-1” and “P-1” or their equivalents by each of S&P and Moody’s, or such lower rating as will not result in the downgrading or withdrawal of the ratings of the Series A Bonds;

(3)

commercial paper (including commercial paper of the indenture trustee, acting in its commercial capacity, and other commercial paper of PNM or any of its affiliates), which, at the time of purchase is rated at least “A-1” or “P-1” or their equivalents by each of S&P and Moody’s or such lower rating as will not result in the downgrading or withdrawal of the ratings of the Series A Bonds;

(4)

investments in money market funds which have a rating in the highest investment category granted thereby (including funds for which the indenture trustee or any of its affiliates is investment manager or advisor) from Moody’s and S&P;

(5)

repurchase obligations with respect to any security that is a direct obligation of, or fully guaranteed by, the United States of America or certain of its agencies or instrumentalities, entered into with eligible institutions;

(6)

repurchase obligations with respect to any security or whole loan entered into with an eligible institution or with a registered broker/dealer acting as principal and that meets the ratings criteria set forth below:

(i)

a broker/dealer (acting as principal) registered as a broker or dealer under Section 15 of the Exchange Act (any such broker/dealer being referred to in this definition as a “broker/dealer”), the unsecured short-term debt obligations of which are rated at least “P-1” by Moody’s and “A-1+” by S&P at the time of entering into such repurchase obligation; or

(ii)

an unrated broker/dealer, acting as principal, that is a wholly-owned subsidiary of a non-bank or bank holding company the unsecured short-term debt obligations of which are rated at least “P-1” by Moody's and “A-1+” by S&P at the time of purchase so long as the obligations of such unrated broker/dealer are unconditionally guaranteed by such non-bank or bank holding company; or

(7)

any other investment permitted by each rating agency.

Notwithstanding the foregoing: (1) no securities or investments which mature in 30 days or more will be eligible investments unless the issuer thereof has either a short-term unsecured debt rating of at least “P-1” from Moody’s or a long-term unsecured debt rating of at least “A1” from Moody’s; (2) no securities or investments described in clauses (2) through (4) above which have maturities of more than 30 days but less than or equal to 3 months will be eligible investments unless the issuer thereof has a long-term unsecured debt rating of at least “A1” from Moody’s and a short-term unsecured debt rating of at least “P-1” from Moody’s; (3) no securities or investments described in clauses (2) through (4) above which have maturities of more than 3 months will be eligible investments unless the issuer thereof has a long-term unsecured debt rating of at least “A1” from Moody’s and a short-term unsecured debt rating of at least “P-1” from Moody’s; (4) no securities or investments described in clauses (2) through (4) above which have a maturity of 60 days or less will be eligible investments unless such securities have a rating from S&P of at least “A-1”; and (5) no

137

securities or investments described in clauses (2) through (4) above which have a maturity of more than 60 days will be eligible investments unless such securities have a rating from S&P of at least “AA-”, “A-1+” or “AAAm”.

“Energy Transition Act” means Sections 62-18-1 through 62-18-23 of the New Mexico Statutes Annotated, as the same may be amended from time to time.

“Energy transition bonds” means any energy transition bonds issued under a financing order pursuant to the Energy Transition Act.

“Energy transition charge” means any energy transition charge as defined in Section 62-18-2(G) of the Energy Transition Act that is authorized by a financing order issued under the Energy Transition Act.

“Energy transition property” means all energy transition property as defined in Section 62-18-2(I) of the Energy Transition Act created pursuant to a financing order issued under the Energy Transition Act, including the right to impose, charge, collect and receive energy transition charges in an amount necessary to the provide for full payment and recovery of all energy transition costs identified in the financing order, the right under the financing order to obtain true-up adjustments of the energy transition charges, and all revenues and other proceeds arising from those rights and interests.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

“Euroclear operator” or “Euroclear” means Euroclear Bank S.A./N.V.

“Euroclear participants” means participants of the Euroclear System.

“Excess funds subaccount” means the excess funds subaccount, a subaccount of the collection account created by the indenture trustee and maintained by the indenture trustee under the indenture.

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“Financing Order” means the financing order issued by the NMPRC to PNM on April 1, 2020, Docket No. 19-00018-UT, authorizing the creation of the energy transition property with respect to the Series A Bonds.

“General subaccount” means the general subaccount, a subaccount of the collection account created by the indenture trustee and maintained by the indenture trustee under the indenture.

“Indenture” means the indenture, to be entered into among the issuing entity, the indenture trustee and the securities intermediary, providing for the issuance of the Series A Bonds, as the same may be amended and supplemented from time to time.

“Indenture trustee” means U.S. Bank Trust Company, National Association and each successor as indenture trustee under the indenture.

“Internal Revenue Code” means the Internal Revenue Code of 1986, as amended.

“Issuing entity” means PNM Energy Transition Bond Company I, LLC, a Delaware limited liability company.

“kWh” means kilowatt hour.

“Limited liability company agreement” means the amended and restated limited liability company agreement of PNM Energy Transition Bond Company I, LLC.

“Moody’s” means Moody’s Investors Service, Inc. References to Moody’s are effective so long as Moody’s is a rating agency.

“NMPRC” means the New Mexico Public Regulation Commission.

“NMPRC regulations” means any regulations, including temporary regulations, promulgated by the NMPRC pursuant to New Mexico law.

138

“Non-bypassable” means that the payment of an energy transition charge may not be avoided by an electric service customer located within PNM’s utility service area and shall be paid by each customer that receives electric delivery service from PNM as long as the energy transition bonds secured by the charge are outstanding and the related financing costs have not been recovered in full.

“NRSRO” means a nationally recognized statistical rating organization.

“Payment date” means                 and                 of each year or, if any such date is not a business day, the next business day, commencing                 , 2024, and continuing until the earlier of repayment of the Series A Bonds in full and the final maturity date.

“Periodic revenue requirement” means, for each payment date, the scheduled principal of and interest on the Series A Bonds and other financing costs and other required amounts and charges to be accrued in connection with the Series A Bonds.

“PNM” means Public Service Company of New Mexico.

“PNMR” means PNM Resources, Inc.

“Rating agency” means any of Moody’s or S&P that provides a rating with respect to the Series A Bonds. If no such organization (or successor) is any longer in existence, “rating agency” shall be a nationally recognized statistical rating organization or other comparable person designated by the issuing entity, notice of which designation shall be given to the indenture trustee and the servicer.

“Rating agency condition” means, with respect to any action, not less than ten business days’ prior written notification to each rating agency of such action and written confirmation from each of S&P and Moody’s to the servicer, the issuing entity and the indenture trustee in writing that such action will not result in a suspension, reduction or withdrawal of the then current rating by such rating agency of the Series A Bonds; provided that if within such ten business day period, any rating agency (other than S&P) has neither replied to such notification nor responded in a manner that indicates that such rating agency is reviewing and considering the notification, then (a) the issuing entity shall be required to confirm that such rating agency has received the rating agency condition request and, if it has, promptly request the related rating agency condition confirmation and (b) if the rating agency neither replies to such notification nor responds in a manner that indicates it is reviewing and considering the notification within five business days following such second request, the applicable rating agency condition requirement shall not be deemed to apply to such rating agency. For the purposes of this definition, any confirmation, request, acknowledgment or approval that is required to be in writing may be in the form of electronic mail or a press release (which may contain a general waiver of a rating agency’s right to review or consent).

“Record date” means one business day prior to the applicable payment date.

“Regulation AB” means the SEC’s Asset Backed Securities regulations under 17 CFR Part 229, Subpart 229.1100 et seq.

“Regulation RR” means the risk retention regulations in 17 C.F.R. Part 246 of the Exchange Act.

“Required capital level” means the amount required to be funded in the capital subaccount for the Series A Bonds, which will equal 0.5% of the total capital of the issuing entity.

“S&P” means S&P Global Ratings, a division of S&P Global Inc., or any successor thereto. References to S&P are effective so long as S&P is a rating agency.

“Sale agreement” means the purchase and sale agreement to be entered into between PNM, as seller, and the issuing entity, with respect to the sale of the energy transition property to the issuing entity, as the same may be amended and supplemented from time to time.

“SEC” means the U.S. Securities and Exchange Commission.

“Securities Act” means the Securities Act of 1933, as amended.

“Securities intermediary” means U.S. Bank National Association and each successor as securities intermediary under the indenture.

139

“Seller” means PNM, as the seller of the energy transition property, and each successor to PNM (in the same capacity) pursuant to the sale agreement.

“Series A Bonds” means $343,200,000 Senior Secured Energy Transition Bonds, Series A.

“Series supplement” means an indenture supplemental to the indenture that authorizes the issuance of the Series A Bonds.

“Servicer” means PNM, as servicer under the servicing agreement.

“Servicer business day” means any day other than a Saturday, a Sunday or a day on which banking institutions in Albuquerque, New Mexico or New York, New York are authorized or obligated by law, regulation or executive order to be closed, on which the servicer maintains normal office hours and conducts business.

“Servicing agreement” means the energy transition property servicing agreement to be entered into between the issuing entity and PNM, pursuant to which PNM will act as servicer of the energy transition property, as the same may be amended and supplemented from time to time.

“Special payment date” means the date on which, with respect to any tranche of the Series A Bonds, any payment of principal of or interest (including any interest accruing upon default) on, or any other amount in respect of, the Series A Bonds of such tranche that is not actually paid within five days of the payment date applicable thereto is to be made by the indenture trustee to the bondholders.

“State” means any one of the fifty states of the United States of America or the District of Columbia.

“State Pledge” means the pledge of the State of New Mexico pursuant to the Energy Transition Act, whereby the State of New Mexico has pledged to and agreed with the bondholders, that the State of New Mexico shall not take or permit any action that impairs the value of the energy transition property, except for the true-up adjustments allowed by Section 62-18-6 of the Energy Transition Act, or reduces, alters, or impairs the energy transition charges that are imposed, collected and remitted for the benefit of bondholders, until the entire principal of, interest on and redemption premium on the Series A Bonds, and all financing costs have been paid in full and performed in full.

“Treasury regulations” means proposed or issued regulations promulgated from time to time under the Internal Revenue Code.

“True-up adjustment” means any semi-annual, interim or non-standard adjustment to the energy transition charges, as the case may be.

“True-up adjustment mechanism” means the formula-based calculation used to make adjustments to the energy transition charges that are necessary to correct for any overcollection or undercollection of the energy transition charges, to provide for the timely and complete payment of scheduled principal and interest on the Series A Bonds and the payment and recovery of other financing costs, as required by Section 62-18-6 of the Energy Transition Act and the Financing Order.

“Trust Indenture Act” means the Trust Indenture Act of 1939, as amended, as in force on the issuance date, unless otherwise specifically provided.

“UCC” means the Uniform Commercial Code, as in effect in the relevant jurisdiction.

“Underwriting agreement” means the underwriting agreement to be entered into among PNM, the representatives of the underwriters named therein and the issuing entity, with respect to the sale of the Series A Bonds.

140

$343,200,000 Senior Secured Energy Transition Bonds, Series A

Public Service Company of New Mexico

Depositor, Sponsor and Initial Servicer

PNM Energy Transition Bond Company I, LLC

Issuing Entity

PROSPECTUS

Book-Running Managers

RBC Capital MarketsCitigroup

Co-Managers

Through and including,            2024 (the 90th day after the date of this prospectus), all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to a dealer’s obligation to deliver a prospectus when acting as an underwriter and when offering an unsold allotment or subscription.

PART II

Information Not Required in Prospectus

Item 12.   Other Expenses of Issuance and Distribution

The following table sets forth the various expenses expected to be incurred by the registrants in connection with the issuance and distribution of the securities being registered by this prospectus, other than underwriting discounts and commissions. All amounts are estimated except the Securities and Exchange Commission registration fee.

Securities and Exchange Commission registration fee	$	38,019
Printing and engraving expenses	​	35,000
Indenture trustee fees and expenses	​	24,754
Legal fees and expenses	​	2,627,500
Accounting fees and expenses	​	200,000
Rating Agencies’ fees and expenses	​	517,000
Structuring agent fees and expenses	​	161,438
Organizational costs	​	7,750
Miscellaneous fees and expenses	​	129,725
Total	$	3,741,186

Item 13.   Indemnification of Directors and Officers

Section 18-108 of the Delaware Limited Liability Company Act provides that subject to such standards and restrictions, if any, as are set forth in its limited liability company agreement, a limited liability company may and has the power to indemnify and hold harmless any member or other person from and against any and all claims and demands whatsoever. Section 10.1 of the limited liability company agreement of the issuing entity (the “LLC Agreement”) provides that the issuing entity shall, to the fullest extent permitted by law, indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the issuing entity) by reason of the fact that he or she is or was a director, manager, officer, employee or agent of the issuing entity, or is or was serving at the request of the issuing entity as a manager, director, officer, employee or agent of another company, partnership, joint venture, trust or other enterprise, against any and all losses, liabilities, expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement in connection with such action, suit, proceeding or in enforcing such person’s right to indemnification hereunder, in each case, actually and reasonably incurred by such Person, if such Person acted in good faith and in a manner reasonably believed to be in or not opposed to the best interests of the issuing entity, and, with respect to any criminal action or proceeding, had no reasonable cause to believe such conduct was unlawful; provided that such Person shall not be entitled to indemnification if such judgment, penalty, fine or other expense was directly caused by such Person’s fraud, gross negligence or willful misconduct. Section 10.05 of the LLC Agreement of the issuing entity provides that expenses incurred in defending or investigating a threatened or pending action, suit or proceeding may be paid by the issuing entity in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of the manager, director, officer, employee or agent to repay such amount if it shall ultimately be determined that he or she is not entitled to be indemnified by the issuing entity as authorized in the LLC Agreement.

Public Service Company of New Mexico (the “Corporation” or “PNM”) is incorporated under the Business Corporation Act of the State of New Mexico.

II-1

Section 7 of Article II of PNM’s Bylaws contains the following provisions with respect to indemnification of directors and officers:

Each person serving as a director or an officer of the Corporation, or, at the request of the Corporation, as a director or an officer of any other company in which the Corporation has a financial interest and regardless of whether or not the person is then in office, and the heirs, executors, administrators and personal representatives of the person, shall be indemnified by the Corporation to the full extent of the authority of the Corporation to so indemnify as authorized by New Mexico law.

Section 53-11-4.1 of the Business Corporation Act of the State of New Mexico provides that a corporation shall have power to indemnify any person made (or threatened to be made) a party to any proceeding (whether threatened, pending or completed) by reason of the fact that the person is or was a director (or, while a director, is or was serving in any of certain other capacities) if: (1) the person acted in good faith; (2) the person reasonably believed: (a) in the case of conduct in the person’s official capacity with the corporation, that the person’s conduct was in its best interests; and (b) in all other cases, that the person’s conduct was at least not opposed to its best interests; and (3) in the case of any criminal proceeding, the person had no reasonable cause to believe the person’s conduct was unlawful. Indemnification may be made against judgments, penalties, fines, settlements and reasonable expenses, actually incurred by the person in connection with the proceeding, but may be limited or unavailable with respect to certain proceedings. In some instances, indemnification of a director may be mandatory or, upon the application of a director, may be ordered by a court. Reasonable expenses incurred by a director may, under certain circumstances, be paid or reimbursed in advance of a final disposition of a proceeding. Unless limited by its articles of incorporation, a corporation may (or, as the case may be, shall) indemnify and advance expenses to an officer of the corporation to the same extent as to a director under Section 53-11-4.1. Also, unless limited by its articles of incorporation, a corporation has (1) the power to indemnify and to advance expenses to an employee or agent of the corporation to the same extent that it may indemnify and advance expenses to directors under the statute and (2) additional power to indemnify and to advance reasonable expenses to an officer, employee or agent who is not a director to such further extent, consistent with law, as may be provided by its articles of incorporation, bylaws, general or specific action of its Board of Directors, or contract.

Section 53-11-4.1 was amended in 1987 to provide that the indemnification authorized thereunder shall not be deemed exclusive of any rights to which those seeking indemnification may be entitled under the articles of incorporation, the by-laws, an agreement, a resolution of shareholders or directors or otherwise. PNM and/or its parent PNMR, have entered into agreements with each director and officer which provide for indemnification of directors and officers to the fullest extent permitted by law including advancement of litigation expenses where appropriate. The agreements provide for the appointment of a reviewing party by the applicable board of directors to make a determination whether claimed indemnification is permitted under applicable law.

Insurance is maintained on a regular basis (and not specifically in connection with this offering) against liabilities arising on the part of directors and officers out of their performance in such capacities or arising on the part of PNM out of its foregoing indemnification provisions, subject to certain exclusions and to the policy limits.

II-2

Item 14.   Exhibits

List of Exhibits

EXHIBIT NO.	DESCRIPTION OF EXHIBIT
1.1	Form of Underwriting Agreement**
3.1	Certificate of Formation of PNM Energy Transition Bond Company I, LLC*
3.2	Form of Amended and Restated Limited Liability Company Agreement of PNM Energy Transition Bond Company I, LLC
4.1	Form of Indenture between PNM Energy Transition Bond Company I, LLC, the indenture trustee and the securities intermediary (including forms of the energy transition bonds and series supplement)
5.1	Opinion of Troutman Pepper Hamilton Sanders LLP with respect to legality
8.1	Opinion of Troutman Pepper Hamilton Sanders LLP with respect to federal tax matters
10.1	Form of Servicing Agreement between PNM Energy Transition Bond Company I, LLC and Public Service Company of New Mexico, as Servicer
10.2	Form of Purchase and Sale Agreement between PNM Energy Transition Bond Company I, LLC and Public Service Company of New Mexico, as Seller
10.3	Form of Administration Agreement between PNM Energy Transition Bond Company I, LLC and Public Service Company of New Mexico, as Administrator
21.1	List of Subsidiaries*
23.1	Consent of Troutman Pepper Hamilton Sanders LLP (included as part of its opinions filed as Exhibit 5.1, 8.1 and 99.2)
23.2	Consent of Miller Stratvert P.A. (included as part of its opinion filed as Exhibit 99.3)
24.1	Power of Attorney (Public Service Company of New Mexico) (included on signature page to this Registration Statement)*
24.2	Power of Attorney (PNM Energy Transition Bond Company I, LLC) (included on signature page to this Registration Statement)*
25.1	Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939 of U.S. Bank Trust Company, National Association*
99.1	Financing Order*
99.2	Form of Opinion of Troutman Pepper Hamilton Sanders LLP with respect to U.S. constitutional matters
99.3	Form of Opinion of Miller Stratvert P.A. with respect to New Mexico constitutional matters
99.4	Consent of Manager Nominee*
99.5	Order on Remand Adopting Uncontested Stipulation
107.1	Filing Fee Table*

*

Previously filed.

**

To be filed by amendment.

Item 15.   Undertakings

The undersigned registrants hereby undertake that, for purposes of determining any liability under the Securities Act of 1933, each filing of the issuing entity’s annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

II-3

Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrants pursuant to the foregoing provisions, or otherwise, each registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by a registrant of expenses incurred or paid by a director, officer or controlling person of such registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, each registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.

The undersigned registrants hereby undertake that:

(1)

For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.

(2)

For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the annual report pursuant to section 13(a) or section 15(d) of the Securities Exchange Act of 1934 of a third party that is incorporated by reference in the registration statement in accordance with Item 1100(c)(1) of Regulation AB (17 CFR 229.1100(c)(1)) shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

II-4

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all the requirements for filing on Form SF-1 and has duly caused this Amendment No. 1 to Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Albuquerque, New Mexico, on the 13th day of October 2023.

PUBLIC SERVICE COMPANY OF NEW MEXICO

By:   

/s/ Joseph D. Tarry 

Name:

Joseph D. Tarry

Title:

President and Chief Executive Officer

Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.

/s/ Joseph D. Tarry  Joseph D. Tarry	Principal Executive Officer and Director	October 13, 2023
/s/ Elisabeth A. Eden  Elisabeth A. Eden	Principal Financial Officer and Director	October 13, 2023
/s/ Henry E. Monroy  Henry E. Monroy	Principal Accounting Officer	October 13, 2023
* Patricia K. Collawn	Chairman of the Board	October 13, 2023
/s/ Michael P. Mertz Michael P. Mertz	Director	October 13, 2023

*By: /s/ Elisabeth A. Eden ​ Elisabeth A. Eden
Attorney-in-Fact

II-5

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all the requirements for filing on Form SF-1 and has duly caused this Amendment No. 1 to Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Albuquerque, New Mexico, on the 13th day of October 2023.

PNM ENERGY TRANSITION BOND COMPANY I, LLC

By:    

/s/ Elisabeth A. Eden 

Name:

Elisabeth A. Eden

Title:

Manager, President and Treasurer

Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.

/s/ Elisabeth A. Eden  Elisabeth A. Eden	Manager, President and Treasurer (principal executive and financial officer)	October 13, 2023
/s/ Henry E. Monroy  Henry E. Monroy	Manager and Secretary (principal accounting officer)	October 13, 2023

II-6

EX-3.2

Exhibit 3.2

AMENDED AND RESTATED

LIMITED LIABILITY COMPANY AGREEMENT

OF

PNM ENERGY TRANSITION BOND COMPANY I, LLC

Dated and Effective as of

[●], 2023

TABLE OF CONTENTS

Page(s)

ARTICLE I GENERAL PROVISIONS		1
SECTION 1.01.	Definitions	1
SECTION 1.02.	Sole Member; Registered Office and Agent	2
SECTION 1.03.	Other Offices	3
SECTION 1.04.	Name	3
SECTION 1.05.	Purpose; Nature of Business Permitted; Powers	3
SECTION 1.06.	Initial Issuance of Energy Transition Bonds	4
SECTION 1.07.	Additional Issuances of Energy Transition Bonds	4
SECTION 1.08.	Limited Liability Company Agreement; Certificate of Formation	5
SECTION 1.09.	Separate Existence	6
SECTION 1.10.	Limitation on Certain Activities	9
SECTION 1.11.	No State Law Partnership	10
ARTICLE II CAPITAL		10
SECTION 2.01.	Initial Capital	10
SECTION 2.02.	Additional Capital Contributions	10
SECTION 2.03.	Capital Account	10
SECTION 2.04.	Interest on Capital Account	10
ARTICLE III ALLOCATIONS; BOOKS		11
SECTION 3.01.	Allocations of Income and Loss	11
SECTION 3.02.	Company to be Disregarded for Tax Purposes	11
SECTION 3.03.	Books of Account	11
SECTION 3.04.	Access to Accounting Records	12
SECTION 3.05.	Annual Tax Information	12
SECTION 3.06.	Internal Revenue Service Communications	12
ARTICLE IV MEMBER		12
SECTION 4.01.	Powers	12
SECTION 4.02.	Compensation of Member	13
SECTION 4.03.	Other Ventures	14
SECTION 4.04.	Actions by the Member	14
ARTICLE V OFFICERS		14
SECTION 5.01.	Designation; Term; Qualifications	14
SECTION 5.02.	Removal and Resignation	15

i

SECTION 5.03.	Vacancies	15
SECTION 5.04.	Compensation	15
ARTICLE VI MEMBERSHIP INTEREST		16
SECTION 6.01.	General	16
SECTION 6.02.	Distributions	16
SECTION 6.03.	Rights on Liquidation, Dissolution or Winding Up	16
SECTION 6.04.	Redemption	16
SECTION 6.05.	Voting Rights	16
SECTION 6.06.	Transfer of Membership Interests	16
SECTION 6.07.	Admission of Transferee as Member	17
ARTICLE VII MANAGERS		17
SECTION 7.01.	Managers	17
SECTION 7.02.	Powers of the Managers	18
SECTION 7.03.	Compensation	19
SECTION 7.04.	Removal of Managers	19
SECTION 7.05.	Resignation of Manager	19
SECTION 7.06.	Vacancies	19
SECTION 7.07.	Meetings of the Managers	20
SECTION 7.08.	Electronic Communications	20
SECTION 7.09.	Committees of Managers	20
SECTION 7.10.	Limitations on Independent Managers	20
ARTICLE VIII EXPENSES		20
SECTION 8.01.	Expenses	20
ARTICLE IX PERPETUAL EXISTENCE; DISSOLUTION, LIQUIDATION AND WINDING-UP		21
SECTION 9.01.	Existence	21
SECTION 9.02.	Dissolution	22
SECTION 9.03.	Accounting	22
SECTION 9.04.	Certificate of Cancellation	22
SECTION 9.05.	Winding Up	22
SECTION 9.06.	Order of Payment of Liabilities Upon Dissolution	22
SECTION 9.07.	Limitations on Payments Made in Dissolution	22
SECTION 9.08.	Limitation on Liability	23
ARTICLE X INDEMNIFICATION		23
SECTION 10.01.	Indemnity	23

ii

SECTION 10.02.	Indemnity for Actions By or In the Right of the Company	23
SECTION 10.03.	Indemnity If Successful	24
SECTION 10.04.	Expenses	24
SECTION 10.05.	Advance Payment of Expenses	24
SECTION 10.06.	Other Arrangements Not Excluded	24
ARTICLE XI MISCELLANEOUS PROVISIONS		25
SECTION 11.01.	No Bankruptcy Petition; Dissolution	25
SECTION 11.02.	Amendments	25
SECTION 11.03.	Governing Law	26
SECTION 11.04.	Headings	26
SECTION 11.05.	Severability	26
SECTION 11.06.	Assigns	26
SECTION 11.07.	Enforcement by Each Independent Manager	26
SECTION 11.08.	Waiver of Partition; Nature of Interest	26
SECTION 11.09.	Benefits of Agreement; No Third-Party Rights	27

iii

AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT OF
PNM ENERGY TRANSITION BOND COMPANY I, LLC

This AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT (this “Agreement”) of PNM ENERGY TRANSITION BOND COMPANY I, LLC, a Delaware limited liability company (the “Company”), is made and entered into as of [●], 2023 by PUBLIC SERVICE COMPANY OF NEW MEXICO, a New Mexico corporation (including any additional or successor members of the Company other than Special Members, the “Member”).

WHEREAS, the Member has caused to be filed a Certificate of Formation with the Secretary of State of the State of Delaware to form the Company under and pursuant to the LLC Act and has entered into a Limited Liability Company Agreement of the Company, dated as of August 25, 2023 (the “Original LLC Agreement”); and

WHEREAS, in accordance with the LLC Act, the Member desires to enter into this Agreement to amend and restate in its entirety the Original LLC Agreement and to set forth the rights, powers and interests of the Member with respect to the Company and its Membership Interest therein and to provide for the management of the business and operations of the Company.

NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained and other good and valuable consideration, the receipt, adequacy and sufficiency of which are hereby acknowledged, the Member, intending to be legally bound, hereby agrees to amend and restate in its entirety the Original LLC Agreement as follows:

ARTICLE I

GENERAL PROVISIONS

SECTION 1.01. Definitions.

(a)            Capitalized terms used herein shall have the meanings assigned to them in Appendix A hereto.

(b)            All terms defined in this Agreement shall have the defined meanings when used in any certificate or other document made or delivered pursuant hereto unless otherwise defined therein.

(c)            The words “hereof,” “herein,” “hereunder” and words of similar import, when used in this Agreement, shall refer to this Agreement as a whole and not to any particular provision of this Agreement; Article, Section, Schedule, Exhibit, Annex and Attachment references contained in this Agreement are references to Articles, Sections, Schedules, Exhibits, Annexes and Attachments in or to this Agreement unless otherwise specified; and the terms “includes” and “including” shall mean “includes without limitation” and “including without limitation”, respectively.

(d)            The definitions contained in this Agreement are applicable to the singular as well as the plural forms of such terms.

(e)            Non-capitalized terms used herein which are defined in the LLC Act, shall, as the context requires, have the meanings assigned to such terms in the LLC Act as of the date hereof, but without giving effect to amendments to the LLC Act.

SECTION 1.02. Sole Member; Registered Office and Agent.

(a)            The sole member of the Company shall be Public Service Company of New Mexico, a New Mexico corporation, or any successor as sole member pursuant to Sections 1.02(c), 6.06 and 6.07. The registered office and registered agent of the Company in the State of Delaware shall be Corporation Service Company, 251 Little Falls Drive, Wilmington, New Castle County, Delaware 19808. The Member may change said registered office and agent from one location to another in the State of Delaware. The Member shall provide notice of any such change to the Indenture Trustee.

(b)            Upon the occurrence of any event that causes the Member to cease to be a member of the Company (other than upon continuation of the Company without dissolution upon the transfer or assignment by the Member of all of its limited liability company interest in the Company and the admission of the transferee or an additional member of the Company pursuant to Sections 1.02(c), 6.06 and 6.07), each Person acting as an Independent Manager (as defined herein) pursuant to the terms of this Agreement shall, without any action of any Person and simultaneously with the Member ceasing to be a member of the Company, automatically be admitted to the Company as a Special Member and shall continue the Company without dissolution. No Special Member may resign from the Company or transfer its rights as Special Member unless (i) a successor Special Member has been admitted to the Company as Special Member by executing a counterpart to this Agreement, and (ii) such successor has also accepted its appointment as an Independent Manager pursuant to this Agreement; provided, however, the Special Members shall automatically cease to be members of the Company upon the admission to the Company of a substitute Member. Each Special Member shall be a member of the Company that has no interest in the profits, losses and capital of the Company and has no right to receive any distributions of Company assets (and no Special Member shall be treated as a member of the Company for federal income tax purposes). Pursuant to Section 18-301 of the LLC Act, a Special Member shall not be required to make any capital contributions to the Company and shall not receive a limited liability company interest in the Company. A Special Member, in its capacity as Special Member, may not bind the Company. Except as required by any mandatory provision of the LLC Act, each Special Member, in its capacity as Special Member, shall have no right to vote on, approve or otherwise consent to any action by, or matter relating to, the Company, including the merger, consolidation or conversion of the Company. In order to implement the admission to the Company of each Special Member, each Person acting as an Independent Manager pursuant to this Agreement shall execute a counterpart to this Agreement. Prior to its admission to the Company as Special Member, each Person acting as an Independent Manager pursuant to this Agreement shall not be a member of the Company. A “Special Member” means, upon such Person’s admission to the Company as a member of the Company pursuant to this Section 1.02(b), a Person acting as an Independent Manager, in such Person’s capacity as a member of the Company. A Special Member shall only have the rights and duties expressly set forth in this Agreement. For purposes of this Agreement, a Special Member is not included within the defined term “Member”.

(c)            The Company may admit additional Members (as distinguished from a transferee admitted pursuant to Sections 6.06 and 6.07) with the affirmative vote of a majority of the Managers, which vote must include the affirmative vote of each Independent Manager. Notwithstanding the preceding sentence, it shall be a condition to the admission of any additional Member that the sole Member shall have received an opinion of outside tax counsel (as selected by the Member in form and substance reasonably satisfactory to the Member and the Indenture Trustee) that the admission of such additional Member shall not cause the Company to be treated, for federal income tax purposes, as having more than a “sole owner” and that the Company shall not be treated, for federal income tax purposes, as an entity separate from such “sole owner”.

2

SECTION 1.03. Other Offices. The Company may have an office at 414 Silver Ave. SW Albuquerque, New Mexico, 87102-3289, or at any other offices that may at any time be established by the Member at any place or places within or outside the State of Delaware. The Member shall provide notice to the Indenture Trustee of any change in the location of the Company’s office

SECTION 1.04. Name. The name of the Company shall be “PNM Energy Transition Bond Company I, LLC”. The name of the Company may be changed from time to time by the Member with ten (10) days’ prior written notice to the Managers and the Indenture Trustee, and the filing of an appropriate amendment to the Certificate of Formation with the Secretary of State as required by the LLC Act.

SECTION 1.05. Purpose; Nature of Business Permitted; Powers. The Company is intended to qualify as an “Assignee” as defined in Section 2(B) of the Energy Transition Act. The purposes for which the Company is formed are limited to:

(a)            acquire, own, hold, administer, service or enter into agreements regarding the receipt and servicing of one or more Energy Transition Properties and the other Energy Transition Bond Collateral, along with certain other related assets;

(b)            manage, sell, assign, pledge, collect amounts due on or otherwise deal with the Energy Transition Properties and the other Energy Transition Bond Collateral and related assets to be so acquired in accordance with the terms of the Basic Documents;

(c)            negotiate, authorize, execute, deliver, assume the obligations under, and perform its duties under, the Basic Documents and any other agreement or instrument or document relating to the activities set forth in clauses (a) and (b) above; provided, that each party to any such agreement under which material obligations are imposed upon the Company shall covenant that it shall not, prior to the date which is one year and one day after the termination of the applicable indenture and the payment in full of the related Energy Transition Bonds and any other amounts owed under such indenture, acquiesce, petition or otherwise invoke or cause the Company to invoke the process of any court or Governmental Authority for the purpose of commencing or sustaining an involuntary case against the Company under any federal or state bankruptcy, insolvency or similar law or appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator or other similar official of the Company or any substantial part of the property of the Company; or ordering the winding up or liquidation of the affairs of the Company; and provided, further, that the Company shall be permitted to incur additional indebtedness or other liabilities payable to service providers and trade creditors in the ordinary course of business in connection with the foregoing activities;

(d)            file with the U.S. Securities and Exchange Commission one or more registration statements, including any pre-effective or post-effective amendments thereto and any registration statement filed pursuant to Rule 462(b) under the Securities Act of 1933, as amended (including any prospectus supplement, prospectus and exhibits contained therein), and file such applications, reports, surety bonds, irrevocable consents, appointments of attorney for service of process and other papers and documents necessary or desirable to register one or more series of Energy Transition Bonds under the securities or “Blue Sky” laws of various jurisdictions;

(e)            authorize, execute, deliver, issue and register one or more series of Energy Transition Bonds;

(f)             make payments on the Energy Transition Bonds;

3

(g)           pledge its interest in Energy Transition Properties and other Energy Transition Bond Collateral to the indenture trustee under the related indenture in order to secure the respective series of Energy Transition Bonds; and

(h)           engage in any lawful act or activity and exercise any powers permitted to limited liability companies formed under the laws of the State of Delaware that, in either case, are incidental to, or necessary, suitable or convenient for the accomplishment of the above-mentioned purposes.

The Company shall engage only in any activities related to the foregoing purposes or required or authorized by the terms of the Basic Documents or other agreements referenced above. The Company shall have all powers reasonably incidental, necessary, suitable or convenient to effect the foregoing purposes, including all powers granted under the LLC Act. The Company, the Member, any Manager (other than an Independent Manager), or any officer of the Company, acting singly or collectively, on behalf of the Company, may enter into and perform the Basic Documents and all registration statements, underwriting agreements, documents, agreements, certificates or financing statements contemplated thereby or related thereto, all without any further act, vote or approval of any Member, Manager or other Person, notwithstanding any other provision of this Agreement, the LLC Act, or other applicable law, rule or regulation. Notwithstanding any other provision of this Agreement, the LLC Act or other applicable law, any Basic Document executed prior to the date hereof by any Member, Manager or officer on behalf of the Company is hereby ratified and approved in all respects. The authorization set forth in the two preceding sentences shall not be deemed a restriction on the power and authority of the Member or any Manager, including any Independent Manager, to enter into other agreements or documents on behalf of the Company as authorized pursuant to this Agreement and the LLC Act. The Company shall possess and may exercise all the powers and privileges granted by the LLC Act or by any other law or by this Agreement, together with any powers incidental thereto, insofar as such powers and privileges are incidental, necessary, suitable or convenient to the conduct, promotion or attainment of the business purposes or activities of the Company.

SECTION 1.06. Initial Issuance of Energy Transition Bonds. It is anticipated that the Company’s first issuance of Energy Transition Bonds will be a series issued pursuant to the Financing Order approved by the Commission on April 1, 2020.

SECTION 1.07. Additional Issuances of Energy Transition Bonds. The Company may issue one or more additional series of Energy Transition Bonds if authorized pursuant to a Financing Order adopted in the future by the Commission. Such additional series of Energy Transition Bonds shall be referred to as “Additional Issuances.”

(a)            Each series of Energy Transition Bonds will be secured by separate Energy Transition Property and other Energy Transition Bond Collateral. Energy Transition Property which is pledged to secure one series of Energy Transition Bonds shall not be pledged to secure any other series of Energy Transition Bonds.

(b)            The Company shall not issue any Additional Issuance unless the Rating Agency Condition set forth in the Basic Documents for any outstanding series of Energy Transition Bonds has been satisfied and any such Additional Issuance shall be pursuant to an indenture other than the Indenture.

(c)            The following additional conditions must be satisfied in connection with any Additional Issuance:

(i) the Company shall receive another Financing Order from the Commission;

4

(ii) each Additional Issuance shall have recourse only to the Energy Transition Bond Collateral pledged in connection with such Additional Issuance, shall be nonrecourse to any of the Company’s other assets and shall not constitute a claim against the Company if cash flow from the pledged Energy Transition Bond Collateral is insufficient to pay such Additional Issuance in full;

(iii) the Company has delivered to the Indenture Trustee an Opinion of Counsel of a nationally recognized firm experienced in such matters to the effect that after such issuance, in the opinion of such counsel, if the Member were to become a debtor in a case under the United States Bankruptcy Code (Title 11, U.S.C.), a federal court exercising bankruptcy jurisdiction and exercising reasonable judgment after full consideration of all relevant factors would not order substantive consolidation of the assets and liabilities of the Company with those of the bankruptcy estate of the Member, subject to the customary exceptions, qualifications and assumptions contained therein;

(iv) the Company has delivered to the Indenture Trustee an Officer’s Certificate stating that the Energy Transition Bonds issued pursuant to such Additional Issuance shall have the benefit of a true-up mechanism;

(v) the transaction documentation for such Additional Issuance provides that holders of the Energy Transition Bonds of such Additional Issuance will not file or join in the filing of any bankruptcy petition against the Company;

(vi) if the holders of the Energy Transition Bonds of any Additional Issuance are deemed to have any interest in any of the Energy Transition Bond Collateral pledged under the applicable Indenture (other than Energy Transition Bond Collateral pledged with respect to such Additional Issuance), the holders of such Energy Transition Bonds must agree that any such interest is subordinate to the claims and rights of the holders of such other related series of Energy Transition Bonds;

(vii) the Additional Issuance shall have its own bank accounts or trust accounts; and

(viii) the Additional Issuance shall bear its own trustees fees and servicer fees, and a pro rata portion of the fees due under the Administration Agreement except that the allocation of such fees with respect to such Additional Issuances will be governed by the terms of the servicing agreement of the Energy Transition Bonds.

SECTION 1.08. Limited Liability Company Agreement; Certificate of Formation. This Agreement shall constitute a “limited liability company agreement” within the meaning of the LLC Act. Henry E. Monroy, as an authorized person within the meaning of the LLC Act, has caused a certificate of formation of the Company to be executed and filed in the office of the Secretary of State on August 25, 2023 (such execution and filing being hereby ratified and approved in all respects). The existence of the Company as a separate legal entity shall continue until the cancellation of the Certificate of Formation of the Company as provided in the LLC Act.

5

SECTION 1.09. Separate Existence. Except for financial reporting purposes (to the extent required by generally accepted accounting principles) and for federal income tax purposes and, to the extent consistent with applicable state tax law, state income and franchise tax purposes, the Member and the Managers shall take all steps necessary to continue the identity of the Company as a separate legal entity and to make it apparent to third Persons that the Company is an entity with assets and liabilities distinct from those of the Member, Affiliates of the Member or any other Person, and that, the Company is not a division of any of the Affiliates of the Company or any other Person. In that regard, and without limiting the foregoing in any manner, the Company shall:

(a)            allocate fairly and reasonably shares expenses, including shared office space;

(b)            maintain the assets of the Company in such a manner that it is not costly or difficult to segregate, identify or ascertain its individual assets from those of any other Person, including any Affiliate;

(c)            conduct all transactions with Affiliates on a basis consistent with an arm’s-length basis;

(d)            not guarantee, become obligated for or pay the debts of any Affiliate or hold the credit of the Company out as being available to satisfy the obligations of any Affiliate or other Person (nor, except as contemplated in the Basic Documents, indemnify any Person for losses resulting therefrom), nor, except as contemplated in the Basic Documents, have any of its obligations guaranteed by any Affiliate or hold the Company out as responsible for the debts of any Affiliate or other Person or for the decisions or actions with respect to the business and affairs of any Affiliate, nor seek or obtain credit or incur any obligation to any third party based upon the creditworthiness or assets of any Affiliate or any other Person (i.e. other than based on the assets of the Company) nor allow any Affiliate to do such things based on the credit of the Company;

(e)            except as expressly otherwise permitted hereunder or under any of the Basic Documents, not permit the commingling or pooling of the Company’s funds or other assets with the funds or other assets of any Affiliate;

(f)             maintain separate deposit and other bank accounts and funds (separately identifiable from those of the Member or any other Person) to which no Affiliate has any access (except PNM in its capacity as Servicer, Administrator or Sponsor), which accounts shall be maintained in the name and, to the extent not inconsistent with applicable federal tax law, with the tax identification number of the Company;

(g)            maintain full books of accounts and records (financial or other) and financial statements separate from those of its Affiliates or any other Person, prepared and maintained in accordance with generally accepted accounting principles (including, all resolutions, records, agreements or instruments underlying or regarding the transactions contemplated by the Basic Documents or otherwise) and audited annually by an independent accounting firm which shall provide such audit to the Indenture Trustee;

(h)            pay its own liabilities out of its own funds, including fees and expenses of the Administrator pursuant to the Administration Agreement and the Servicer pursuant to any Servicing Agreement;

(i)             not hire or maintain any employees, but shall compensate (either directly or through reimbursement of the Company’s allocable share of any shared expenses) all consultants, agents and Affiliates, to the extent applicable, for services provided to the Company by such consultants, agents or Affiliates, in each case, from the Company’s own funds;

6

(j)             allocate fairly and reasonably the salaries of and the expenses related to providing the benefits of officers or managers shared with the Member, any Special Member or any Manager;

(k)            allocate fairly and reasonably any overhead shared with the Member, any Special Member or any Manager;

(l)             pay from its own bank accounts for accounting and payroll services, rent, lease and other expenses (or the Company’s allocable share of any such amounts provided by one or more other Affiliates) and not have such operating expenses (or the Company’s allocable share thereof) paid by any Affiliates; provided, that the Member shall be permitted to pay the initial organization expenses of the Company and certain of the expenses related to the transactions contemplated by the Basic Documents as provided therein;

(m)           maintain adequate capitalization to conduct its business and affairs considering the Company’s size and the nature of its business and intended purposes and, after giving effect to the transactions contemplated by the Basic Documents, refrain from engaging in a business for which its remaining property represents an unreasonably small capital;

(n)           conduct all of the Company’s business (whether in writing or orally) solely in the name of the Company through the Member and the Company’s Managers, officers and agents and hold the Company out as an entity separate from any Affiliate;

(o)            not make or declare any distributions of cash or property to the Member except in accordance with appropriate limited liability company formalities and only consistent with sound business judgment to the extent that it is permitted pursuant to the Basic Documents and not violative of any applicable law;

(p)            otherwise practice and adhere to all limited liability company procedures and formalities to the extent required by this Agreement or all other appropriate constituent documents and the laws of its state of formation and all other appropriate jurisdictions;

(q)            not appoint an Affiliate or any employee of an Affiliate as an agent of the Company, except as otherwise permitted in the Basic Documents (although such Persons can qualify as a Manager or as an officer of the Company);

(r)             not acquire obligations or securities of or make loans or advances to or pledge its assets for the benefit of any Affiliate, the Member or any Affiliate of the Member (other than the Company);

(s)            except as expressly provided in the Basic Documents, not permit the Member or any Affiliate to guarantee, pay or become liable for the debts of the Company nor permit any such Person to hold out its creditworthiness as being available to pay the liabilities and expenses of the Company nor, except for the indemnities in this Agreement and the Basic Documents, indemnify any Person for losses resulting therefrom;

(t)             maintain separate minutes of the actions of the Member and the Managers, in their capacities as such, including actions with respect to the transactions contemplated by the Basic Documents;

7

(u)           cause (i) all written and oral communications, including letters, invoices, purchase orders, and contracts, of the Company to be made solely in the name of the Company, (ii) the Company to have its own tax identification number (to the extent not inconsistent with applicable federal tax law), stationery, checks and business forms, separate from those of any Affiliate, (iii) all Affiliates not to use the stationery or business forms of the Company, and cause the Company not to use the stationery or business forms of any Affiliate, and (iv) all Affiliates not to conduct business in the name of the Company, and cause the Company not to conduct business in the name of any Affiliate;

(v)           direct creditors of the Company to send invoices and other statements of account of the Company directly to the Company and not to any Affiliate and cause the Affiliates to direct their creditors not to send invoices and other statements of accounts of such Affiliates to the Company;

(w)           cause the Member to maintain as official records all resolutions, agreements, and other instruments underlying or regarding the transactions contemplated by the Basic Documents;

(x)            disclose, and cause the Member to disclose, in its financial statements the effects of all transactions between the Member and the Company in accordance with generally accepted accounting principles, and in a manner which makes it clear that (i) the Company is a separate legal entity, (ii) the assets of the Company (including any Energy Transition Property transferred to the Company pursuant to a Sale Agreement) are not assets of any Affiliate and are not available to pay creditors of any Affiliate and (iii) neither the Member nor any other Affiliate is liable or responsible for the debts of the Company;

(y)           treat and cause the Member to treat the transfer of Energy Transition Property from the Member to the Company as a sale under the Energy Transition Act;

(z)            except as described herein with respect to tax purposes and financial reporting, describe and cause each Affiliate to describe the Company, and hold the Company out as a separate legal entity and not as a division or department of any Affiliate, and promptly correct any known misunderstanding regarding the Company’s identity separate from any Affiliate or any other Person;

(aa)          so long as any Energy Transition Bonds of any series are outstanding, treat the Energy Transition Bonds as debt for all purposes and specifically as debt of the Company, other than for financial reporting, state or federal regulatory or tax purposes;

(bb)         solely for purposes of federal taxes and, to the extent consistent with applicable state, local and other tax law, solely for purposes of state, local and other taxes, so long as any Energy Transition Bonds of a series are outstanding, treat the Energy Transition Bonds of that series as indebtedness of the Member secured by the applicable Energy Transition Bond Collateral unless otherwise required by appropriate taxing authorities;

(cc)          file its own tax returns, if any, as may be required under applicable law, to the extent (i) not part of a consolidated group filing a consolidated return or returns or (ii) not treated as a division or disregarded entity for tax purposes of another taxpayer, and pay any taxes so required to be paid under applicable law;

8

(dd)         maintain its valid existence in good standing under the laws of the State of Delaware and maintain its qualification to do business under the laws of such other jurisdictions as its operations require;

(ee)          not form, or cause to be formed, any subsidiaries;

(ff)           comply with all laws applicable to the transactions contemplated by this Agreement and the Basic Documents;

(gg)         cause the Member to observe in all material respects all limited liability company procedures and formalities, if any, required by this Agreement, the laws of the State of Delaware and all other appropriate jurisdictions;

(hh)         except as provided in Section 7.6, at all times have at least one Independent Manager;

(ii)            not, directly or indirectly, engage in any business or activity other than the transactions contemplated by this Agreement and the Basic Documents; and

(jj)           not make or permit to remain outstanding any loan or advance to, or own or acquire any stock or securities of, any Person, other than as contemplated in this Agreement and the Basic Documents.

SECTION 1.10. Limitation on Certain Activities. Notwithstanding any other provisions of this Agreement, the Company, and the Member or Managers on behalf of the Company, shall not:

(a)            engage in any business or activity other than as set forth in Section 1.05 hereof;

(b)            without the affirmative vote of the Member and the affirmative vote of all of the Managers, including each Independent Manager, file a voluntary petition for relief under the Bankruptcy Code or similar law, consent to the institution of insolvency or bankruptcy proceedings against the Company or otherwise institute insolvency or bankruptcy proceedings with respect to the Company or take any company action in furtherance of any such filing or institution of a proceeding;

(c)            without the affirmative vote of all Managers, including each Independent Manager, and then only to the extent permitted by the Basic Documents, convert, merge or consolidate with any other Person or sell all or substantially all of its assets or acquire all or substantially all of the assets or capital stock or other ownership interest of any other Person;

(d)            take any action, file any tax return, or make any election inconsistent with the treatment of the Company, for purposes of federal income taxes and, to the extent consistent with applicable state tax law, state income and franchise tax purposes, as a disregarded entity that is not separate from the Member;

(e)            incur any indebtedness or assume or guarantee any indebtedness of any Person (other than the indebtedness incurred under the Basic Documents);

(f)            issue any bonds other than Energy Transition Bonds contemplated by the Basic Documents or, upon satisfaction of the Rating Agency Condition, any additional series of Energy Trust Bonds pursuant to a new Financing Order; or

9

(g)            to the fullest extent permitted by law, without the affirmative vote of its Member and the affirmative vote of all Managers, including each Independent Manager, execute any dissolution, liquidation, or winding up of the Company.

So long as any of the Energy Transition Bonds are outstanding, the Company and the Member shall give written notice to each applicable Rating Agency of any action described in clause (b), (c) or (g) of this Section 1.10 which is taken by or on behalf of the Company with the required affirmative vote of the Member and all Managers as therein described.

SECTION 1.11. No State Law Partnership. No provisions of this Agreement shall be deemed or construed to constitute a partnership (including a limited partnership) or joint venture, or the Member a partner or joint venturer of or with any Manager or the Company, for any purposes.

ARTICLE II

CAPITAL

SECTION 2.01. Initial Capital. The initial capital of the Company shall be the sum of cash contributed to the Company by the Member (the “Capital Contribution”) in the amount set out opposite the name of the Member on Schedule A hereto, as amended from time to time and incorporated herein by this reference.

SECTION 2.02. Additional Capital Contributions. The assets of the Company are expected to generate a return sufficient to satisfy all obligations of the Company under this Agreement and the other Basic Documents and any other obligations of the Company. It is expected that no capital contributions to the Company will be necessary except in connection with the purchase from time-to-time of Energy Transition Properties. On or prior to the date of issuance of a series of Energy Transition Bonds, the Member shall make an additional contribution to the Company such that the capital contributions of the Member are in an amount equal to at least 0.50% of the total capital of the Company (with the initial principal amount of such series of Energy Transition Bonds representing the remaining 99.5% of the total capital of the Company) or such greater amount as agreed to by the Member in connection with the issuance by the Company of the series of Energy Transition Bonds, which amount the Company shall deposit into the capital subaccount established by the indenture trustee as provided in the indenture for such series of Energy Transition Bonds. No capital contribution by the Member to the Company will be made for the purpose of mitigating losses on any Energy Transition Property that has previously been transferred to the Company, and all capital contributions shall be made in accordance with all applicable limited liability company procedures and requirements, including proper record keeping by the Member and the Company. Each capital contribution will be acknowledged by a written receipt signed by any one of the Managers. The Managers acknowledge and agree that, notwithstanding anything in this Agreement to the contrary, such additional contribution will be invested only in investments eligible pursuant to the Basic Documents, and all income earned thereon shall be allocated or paid by the indenture trustee in accordance with the provisions of the indenture for such series of Energy Transition Bonds.

SECTION 2.03. Capital Account. A Capital Account shall be established and maintained for the Member on the Company’s books (the “Capital Account”). An additional, separate Capital Account may be established and maintained pursuant to each indenture relating to a series of Energy Transition Bonds, as necessary.

SECTION 2.04. Interest on Capital Account. Except for the Return on Invested Capital (or, with respect to any Additional Issuance, the return on invested capital authorized in the applicable Financing Order), no interest shall be paid or credited to the Member on its Capital Account or upon any undistributed profits left on deposit with the Company. Except as provided herein or by law, the Member shall have no right to demand or receive the return of its Capital Contribution.

10

ARTICLE III

ALLOCATIONS; BOOKS

SECTION 3.01. Allocations of Income and Loss.

(a)            Book Allocations. The net income and net loss of the Company shall be allocated entirely to the Member.

(b)            Tax Allocations. Because the Company is not making (and will not make) an election to be treated as an association taxable as a corporation under Section 301.7701-3(a) of the Treasury Regulations, and because the Company is a business entity that has a single owner and is not a corporation, it is expected to be disregarded as an entity separate from its owner for federal income tax purposes under Section 301.7701-3(b)(1) of the Treasury Regulations. Accordingly, all items of income, gain, loss, deduction and credit of the Company for all taxable periods will be treated for federal income tax purposes, and for state and local income and other tax purposes to the extent permitted by applicable law, as realized or incurred directly by the Member. To the extent not so permitted, all items of income, gain, loss, deduction and credit of the Company shall be allocated entirely to the Member as permitted by applicable tax law, and the Member shall pay (or indemnify the Company, the Indenture Trustee and each of their officers, managers, employees or agents for, and defend and hold harmless each such person from and against its payment of) any taxes levied or assessed upon all or any part of the Company’s property or assets based on existing law as of the date hereof, including any sales, gross receipts, general corporation, personal property, privilege, franchise or license taxes (but excluding any taxes imposed as a result of a failure of such Person to properly withhold or remit taxes imposed with respect to payments on any Energy Transition Bond). The Indenture Trustee (on behalf of the Secured Parties) shall be a third party beneficiary of the Member’s obligations set forth in this Section 3.01, it being understood that holders shall be entitled to enforce their rights against the Member under this Section 3.01 solely through a cause of action brought for their benefit by the Indenture Trustee.

SECTION 3.02. Company to be Disregarded for Tax Purposes. The Company shall comply with the applicable provisions of the Code and the applicable Treasury Regulations thereunder in the manner necessary to effect the intention of the parties that the Company be treated, for federal income tax purposes, as a disregarded entity that is not separate from the Member pursuant to Treasury Regulations Section 301.7701-1 et seq. and that the Company be accorded such treatment until its dissolution pursuant to Article IX hereof and shall take all actions, and shall refrain from taking any action, required by the Code or Treasury Regulations thereunder in order to maintain such status of the Company. In addition, for federal income tax purposes, the Company may not claim any credit on, or make any deduction from the principal or premium, if any, or interest payable in respect of, the Energy Transition Bonds (other than amounts properly withheld from such payments under the Code or other tax laws) or assert any claim against any present or former holder by reason of the payment of the taxes levied or assessed upon any part of the Energy Transition Bond Collateral.

SECTION 3.03. Books of Account. At all times during the continuance of the Company, the Company shall maintain or cause to be maintained full, true, complete and correct books of account in accordance with generally accepted accounting principles, using the fiscal year and taxable year of the Member. In addition, the Company shall keep all records required to be kept pursuant to the LLC Act.

11

SECTION 3.04. Access to Accounting Records. All books and records of the Company shall be maintained at any office of the Company or at the Company’s principal place of business, and the Member, and its duly authorized representative, shall have access to them at such office of the Company and the right to inspect and copy them at reasonable times.

SECTION 3.05. Annual Tax Information. The Managers shall cause the Company to deliver to the Member all information necessary for the preparation of the Member’s federal income tax return.

SECTION 3.06. Internal Revenue Service Communications. The Member shall communicate and negotiate with the Internal Revenue Service on any federal tax matter on behalf of the Member and the Company.

ARTICLE IV

MEMBER

SECTION 4.01. Powers. Subject to the provisions of this Agreement and the LLC Act, all powers shall be exercised by or under the authority of, and the business and affairs of the Company shall be controlled by, the Member pursuant to Section 4.04. The Member may delegate any or all such powers to the Managers. Without prejudice to such general powers, but subject to the same limitations, it is hereby expressly declared that the Member shall have the following powers:

(a)            To select and remove the Managers and all officers and agents of the Company, prescribe such powers and duties for them as may be consistent with the LLC Act and other applicable law and this Agreement, fix their compensation, and require from them security for faithful service; provided, that, except as provided in Section 7.06, at all times the Company shall have at least one Independent Manager. Prior to issuance of any Energy Transition Bonds, the Member shall appoint at least one Independent Manager. An “Independent Manager” means an individual who (1) has prior experience as an independent director, independent manager or independent member, (2) is employed by a nationally-recognized company that provides professional independent managers and other corporate services in the ordinary course of its business, (3) is duly appointed as an Independent Manager and (4) is not and has not been for at least five years from the date of his or her or its appointment, and will not while serving as Independent Manager, be any of the following:

(i) a member, partner, equity holder, manager, director, officer, agent, consultant, attorney, accountant, advisor or employee of the Company or any of its equityholders or Affiliates (other than as an independent director, independent manager or special member of the Company or an Affiliate of the Company that is not in the direct chain of ownership of the Company and that is required by a creditor to be a single purpose bankruptcy remote entity); provided, that the indirect or beneficial ownership of stock of the Member or its Affiliates through a mutual fund or similar diversified investment vehicle with respect to which the owner does not have discretion or control over the investments held by such diversified investment vehicle shall not preclude such owner from being an Independent Manager;

(ii) a creditor, supplier or service provider (including provider of professional services) to the Company, the Member or any of their respective equityholders or Affiliates (other than a nationally-recognized company that routinely provides professional Independent Managers and other corporate services to the Company, the Member or any of its Affiliates in the ordinary course of its business);

12

(iii) a family member of any of the foregoing; or

(iv) a Person that controls (whether directly, indirectly or otherwise) any of (i), (ii) or (iii) above.

A natural person who otherwise satisfies the foregoing definition and satisfies subparagraph (i) by reason of being the independent manager or independent director of a “special purpose entity” affiliated with the Company shall be qualified to serve as an Independent Manager of the Company, provided that the fees that such individual earns from serving as an independent manager or independent director of affiliates of the Company in any given year constitute in the aggregate less than five percent (5%) of such individual’s annual income for that year. For purposes of this paragraph, a “special purpose entity” is an entity, whose organizational documents contain restrictions on its activities and impose requirements intended to preserve such entity’s separateness that are substantially similar to the Special Purpose Provisions (as hereinafter defined) of this Agreement.

The Company shall pay each Independent Manager annual fees totaling not more than $5,000 per year (the “Independent Manager Fee”). Such fees shall be determined without regard to the income of the Company, shall not be deemed to constitute distributions to the recipient of any profit, loss or capital of the Company and shall be considered a fixed Operating Expense of the Company. Each Manager, including each Independent Manager, is hereby deemed to be a “manager” within the meaning of Section 18-101(10) of the LLC Act.

Promptly following any resignation or replacement of any Independent Manager, the Member shall give written notice to each applicable Rating Agency and to the Indenture Trustee of any such resignation or replacement.

(b)            Subject to Sections 1.09 and 1.10 and Article VII hereof, to conduct, manage and control the affairs and business of the Company, and to make such rules and regulations therefor consistent with the LLC Act and other applicable law and this Agreement.

(c)            To change the registered agent and office of the Company in Delaware from one location to another; to fix and locate from time to time one or more other offices of the Company; and to designate any place within or without the State of Delaware for the conduct of the business of the Company.

SECTION 4.02. Compensation of Member. To the extent permitted by applicable law and the Basic Documents, the Company shall have authority to reimburse the Member for out-of-pocket expenses incurred by the Member in connection with its service to the Company. It is understood that the compensation paid to the Member under the provisions of this Section 4.02 shall be determined without regard to the income of the Company, shall not be deemed to constitute distributions to the recipient of any profit, loss or capital of the Company and shall be considered an Ongoing Financing Cost of the Company subject to the limitations on such expenses set forth in the Financing Order.

13

SECTION 4.03. Other Ventures. Notwithstanding any duties (including fiduciary duties) otherwise existing at law or in equity, it is expressly agreed that the Member, the Managers and any Affiliates, officers, directors, managers, stockholders, partners or employees of the Member, may engage in other business ventures of any nature and description, whether or not in competition with the Company, independently or with others, and the Company shall not have any rights in and to any independent venture or activity or the income or profits derived therefrom.

SECTION 4.04. Actions by the Member. All actions of the Member may be taken by written resolution of the Member which shall be signed on behalf of the Member by an authorized officer of the Member and filed with the records of the Company.

ARTICLE V

OFFICERS

SECTION 5.01. Designation; Term; Qualifications.

(a)            Officers. Subject to the last sentence of this Section 5.01(a) the Managers may, from time to time, designate one or more Persons to be officers of the Company. Any officer so designated shall have such title and authority and perform such duties as the Managers may, from time to time, delegate to them. Each officer shall hold office for the term for which such officer is designated and until such officer’s successor shall be duly designated and shall qualify or until such officer’s death, resignation or removal as provided in this Agreement. Any Person may hold any number of offices. No officer need be a Manager, the Member, a Delaware resident, or a United States citizen. The Member hereby appoints the Persons identified on Schedule C to be the officers of the Company.

(b)            President. The President shall be the chief executive officer of the Company, shall preside at all meetings of the Managers, shall be responsible for the general and active management of the business of the Company and shall see that all orders and resolutions of the Managers are carried into effect. The President or any other officer authorized by the President or the Managers may execute all contracts, except: (i) where required or permitted by law or this Agreement to be otherwise signed and executed, including Section 1.10; and (ii) where signing and execution thereof shall be expressly delegated by the Managers to some other officer or agent of the Company.

(c)            Vice President. In the absence of the President or in the event of the President’s inability to act, the Vice President, if any (or in the event there be more than one Vice President, the Vice Presidents in the order designated by the Managers, or in the absence of any designation, then in the order of their election), shall perform the duties of the President, and when so acting, shall have all the powers of and be subject to all the restrictions upon the President. The Vice Presidents, if any, shall perform such other duties and have such other powers as the Managers may from time to time prescribe.

(d)            Secretary and Assistant Secretary. The Secretary shall be responsible for filing legal documents and maintaining records for the Company. The Secretary shall attend all meetings of the Managers and record all the proceedings of the meetings of the Company and of the Managers in a book to be kept for that purpose and shall perform like duties for the standing committees when required. The Secretary shall give, or shall cause to be given, notice of all meetings of the Member, if any, and special meetings of the Managers, and shall perform such other duties as may be prescribed by the Managers or the President, under whose supervision the Secretary shall serve. The Assistant Secretary, or if there be more than one, the Assistant Secretaries in the order determined by the Managers (or if there be no such determination, then in order of their designation), shall, in the absence of the Secretary or in the event of the Secretary’s inability to act, perform the duties and exercise the powers of the Secretary and shall perform such other duties and have such other powers as the Managers may from time to time prescribe.

14

(e)            Treasurer and Assistant Treasurer. The Treasurer shall have the custody of the Company funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Company and shall deposit all moneys and other valuable effects in the name and to the credit of the Company in such depositories as may be designated by the Manager. The Treasurer shall disburse the funds of the Company as may be ordered by the Manager, taking proper vouchers for such disbursements, and shall render to the President and to the Managers, at its regular meetings or when the Managers so require, an account of all of the Treasurer’s transactions and of the financial condition of the Company. The Assistant Treasurer, or if there shall be more than one, the Assistant Treasurers in the order determined by the Managers (or if there be no such determination, then in the order of their designation), shall, in the absence of the Treasurer or in the event of the Treasurer’s inability to act, perform the duties and exercise the powers of the Treasurer and shall perform such other duties and have such other powers as the Managers may from time to time prescribe.

(f)             Officers as Agents. The officers of the Company, to the extent their powers as set forth in this Agreement or otherwise vested in them by action of the Managers are not inconsistent with this Agreement, are agents of the Company for the purpose of the Company’s business and, subject to Section 1.10, the actions of the officers taken in accordance with such powers shall bind the Company.

(g)            Duties of Managers and Officers. Except to the extent otherwise provided herein, each Manager (other than an Independent Manager) and officer of the Company shall have a fiduciary duty of loyalty and care similar to that of directors and officers of business corporations organized under the General Corporation Law of the State of Delaware.

SECTION 5.02. Removal and Resignation. Any officer of the Company may be removed as such, with or without cause, by the Managers at any time. Any officer of the Company may resign as such at any time upon written notice to the Company. Such resignation shall be made in writing and shall take effect at the time specified therein or, if no time is specified therein, at the time of its receipt by the Managers.

SECTION 5.03. Vacancies. Any vacancy occurring in any office of the Company may be filled by the Managers.

SECTION 5.04. Compensation. The compensation, if any, of the officers of the Company shall be fixed from time to time by the Managers. Such compensation shall be determined without regard to the income of the Company, shall not be deemed to constitute distributions to the recipient of any profit, loss or capital of the Company, shall be payable only to the extent permitted by the Basic Documents and shall be considered a fixed Operating Expense of the Company subject to the limitations on such expenses set forth in the Financing Order.

15

ARTICLE VI

MEMBERSHIP INTEREST

SECTION 6.01. General. “Membership Interest” means the limited liability company interest of the Member in the Company. The Membership Interest constitutes personal property and, subject to Section 6.06, shall be freely transferable and assignable in whole but not in part upon registration of such transfer and assignment on the books of the Company in accordance with the procedures established for such purpose by the Managers of the Company.

SECTION 6.02. Distributions. The Member shall be entitled to receive, out of the assets of the Company legally available therefor, distributions payable in cash in such amounts, if any, as the Managers shall declare. Notwithstanding any provision to the contrary contained in this Agreement, the Company shall not make a distribution to the Member on account of its interest in the Company if such distribution would violate the LLC Act or any other applicable law or any Basic Document.

SECTION 6.03. Rights on Liquidation, Dissolution or Winding Up.

(a)            In the event of any liquidation, dissolution or winding up of the Company, the Member shall be entitled to all remaining assets of the Company available for distribution to the Member after satisfaction (whether by payment or reasonable provision for payment) of all liabilities, debts and obligations of the Company.

(b)            Neither the sale of all or substantially all of the property or business of the Company, nor the merger or consolidation of the Company into or with another Person or other entity, shall be deemed to be a dissolution, liquidation or winding up, voluntary or involuntary, for the purpose of this Section 6.03.

SECTION 6.04. Redemption. The Membership Interest shall not be redeemable.

SECTION 6.05. Voting Rights. Subject to the terms of this Agreement, the Member shall have the sole right to vote on all matters as to which members of a limited liability company shall be entitled to vote pursuant to the LLC Act and other applicable law.

SECTION 6.06. Transfer of Membership Interests.

(a)            The Member may transfer its Membership Interest, in whole but not in part, but the transferee shall not be admitted as a Member except in accordance with Section 6.07. Until the transferee is admitted as a Member, the Member shall continue to be the sole member of the Company (subject to Section 1.02) and to be entitled to exercise any rights or powers of a Member of the Company with respect to the Membership Interest transferred.

(b)            To the fullest extent permitted by law, any purported transfer of any Membership Interest in violation of the provisions of this Agreement shall be wholly void and shall not effectuate the transfer contemplated thereby. Notwithstanding anything contained herein to the contrary and to the fullest extent permitted by law, the Member may not transfer any Membership Interest in violation of any provision of this Agreement or any Basic Document or in violation of any applicable federal or state securities laws.

16

SECTION 6.07. Admission of Transferee as Member.

(a)            A transferee of a Membership Interest desiring to be admitted as a Member must execute a counterpart of, or an agreement adopting, this Agreement and, except as permitted by paragraph (b) below, shall not be admitted without unanimous affirmative vote of the Managers, which vote must include the affirmative vote of each Independent Manager. Upon admission of the transferee as a Member, the transferee shall have the rights, powers and duties and shall be subject to the restrictions and liabilities of the Member under this Agreement and the LLC Act. The transferee shall also be liable, to the extent of the Membership Interest transferred, for the unfulfilled obligations, if any, of the transferor Member to make capital contributions to the Company, but shall not be obligated for liabilities unknown to the transferee at the time such transferee was admitted as a Member and that could not be ascertained from this Agreement. Except as set forth in paragraph (b) below, whether or not the transferee of a Membership Interest becomes a Member, the Member transferring the Membership Interest is not released from any liability to the Company under this Agreement or the LLC Act.

(b)            The approval of the Managers, including each Independent Manager, shall not be required for the transfer of the Membership Interest from the Member to any successor pursuant to Section 5.02 of a Sale Agreement or the admission of such Person as a Member. Once the transferee of a Membership Interest pursuant to this paragraph (b) becomes a Member, the prior Member shall cease to be a member of the Company and shall be released from any liability to the Company under this Agreement and the LLC Act.

ARTICLE VII

MANAGERS

SECTION 7.01. Managers.

(a)            Subject to Section 1.09 and 1.10, the business and affairs of the Company shall be managed by or under the direction of three or more Managers designated by the Member. Subject to the terms of this Agreement, the Member may determine at any time in its sole and absolute discretion the number of Managers. Subject in all cases to the terms of this Agreement, the authorized number of Managers may be increased or decreased by the Member at any time in its sole and absolute discretion, upon notice to all Managers; provided, that, except as provided in Section 7.06, at all times the Company shall have at least one Independent Manager. The initial number of Managers shall be three, one of which shall be an Independent Manager. Each Manager designated by the Member shall hold office until a successor is elected and qualified or until such Manager’s earlier death, resignation, expulsion or removal. Each Manager shall execute and deliver the Management Agreement in the form attached hereto as Exhibit A.  Managers need not be a Member. The initial Managers designated by the Member are listed on Schedule B hereto.

(b)            Each Manager shall be designated by the Member and shall hold office for the term for which designated and until a successor has been designated.

(c)            The Managers shall be obliged to devote only as much of their time to the Company’s business as shall be reasonably required in light of the Company’s business and objectives. Subject to Section 7.02, a Manager shall perform his or her duties as a Manager in good faith, in a manner he or she reasonably believes to be in the best interests of the Company, and with such care as an ordinarily prudent Person in a like position would use under similar circumstances.

(d)            Except as otherwise provided in this Agreement, the Managers shall act by the affirmative vote of a majority of the Managers. Each Manager shall have the authority to sign duly authorized agreements and other instruments on behalf of the Company without the joinder of any other Manager.

17

(e)            Subject to the terms of this Agreement, any action may be taken by the Managers without a meeting and without prior notice if authorized by the written consent of a majority of the Managers (or such greater number as is required by this Agreement), which written consent shall be filed with the records of the Company.

(f)             Every Manager is an agent of the Company for the purpose of its business, and the act of every Manager, including the execution in the Company name of any instrument for carrying on the business of the Company, binds the Company, unless such act is in contravention of this Agreement or unless the Manager so acting otherwise lacks the authority to act for the Company and the Person with whom he or she is dealing has knowledge of the fact that he or she has no such authority.

(g)            To the extent permitted by law, the Managers shall not be personally liable for the Company’s debts, obligations or liabilities.

SECTION 7.02. Powers of the Managers. Subject to the terms of this Agreement, the Managers shall have the right and authority to take all actions which the Managers deem incidental, necessary, suitable or convenient for the day-to-day management and conduct of the Company’s business.

An Independent Manager may not delegate his, her or its duties, authorities or responsibilities hereunder. If any Independent Manager resigns, dies or becomes incapacitated, or such position is otherwise vacant, no action requiring the unanimous affirmative vote of the Managers shall be taken until a successor Independent Manager is appointed by the Member and qualifies and approves such action.

To the fullest extent permitted by law, including Section 18-1101(c) of the LLC Act, and notwithstanding any duty otherwise existing at law or in equity, the Independent Managers shall consider only the interests of the Company, including its creditors, in acting or otherwise voting on the matters referred to in Section 1.10. Except for duties to the Company as set forth in the immediately preceding sentence (including duties to the Member and the Company’s creditors solely to the extent of their respective economic interests in the Company but excluding (i) all other interests of the Member, (ii) the interests of other Affiliates of the Company, and (iii) the interests of any group of Affiliates of which the Company is a part), the Independent Managers shall not have any fiduciary duties to the Member, any Manager or any other Person bound by this Agreement; provided, however, the foregoing shall not eliminate the implied contractual covenant of good faith and fair dealing. To the fullest extent permitted by law, including Section 18-1101(e) of the LLC Act, an Independent Manager shall not be liable to the Company, the Member or any other Person bound by this Agreement for breach of contract or breach of duties (including fiduciary duties), unless the Independent Manager acted in bad faith or engaged in willful misconduct.

No Independent Manager shall at any time serve as trustee in bankruptcy for any Affiliate of the Company.

Subject to the terms of this Agreement, the Managers may exercise all powers of the Company and do all such lawful acts and things as are not prohibited by the LLC Act, other applicable law or this Agreement directed or required to be exercised or done by the Member. All duly authorized instruments, contracts, agreements and documents providing for the acquisition or disposition of property of the Company shall be valid and binding on the Company if executed by one or more of the Managers.

18

Notwithstanding the terms of Section 7.01, 7.07 or 7.09 or any provision of this Agreement to the contrary, (x) no meeting or vote with respect to any action described in clause (b), (c) or (g) of Section 1.10 or any amendment to any of the Special Purpose Provisions (as hereinafter defined) shall be conducted unless any Independent Manager is present and (y) neither the Company nor the Member, any Manager or any officer on behalf of the Company shall (i) take any action described in clause (b), (c) or (g) of Section 1.10 unless the Independent Manager(s) has consented thereto or (ii) adopt any amendment to any of the Special Purpose Provisions unless the Independent Manager(s) has consented thereto. The vote or consent of an Independent Manager with respect to any such action or amendment shall not be dictated by the Member or any other Manager or officer of the Company.

SECTION 7.03. Compensation. To the extent permitted by applicable law and the Basic Documents, the Company may reimburse any Manager, directly or indirectly, for out-of-pocket expenses incurred by such Manager in connection with its services rendered to the Company. Such compensation shall be determined by the Managers without regard to the income of the Company, shall not be deemed to constitute distributions to the recipient of any profit, loss or capital of the Company and shall be considered a fixed Operating Expense of the Company subject to the limitations on such expenses set forth in the Financing Order.

SECTION 7.04. Removal of Managers.

(a)            Subject to Section 4.01, the Member may remove any Manager with or without cause at any time.

(b)            Subject to Section 4.01 and 7.05, any removal of a Manager shall become effective on such date as may be specified by the Member and in a notice delivered to any remaining Managers or the Manager designated to replace the removed Manager (except that it shall not be effective on a date earlier than the date such notice is delivered to the remaining Managers or the Manager designated to replace the removed Manager). Should a Manager be removed who is also the Member, the Member shall continue to participate in the Company as the Member and receive its share of the Company’s income, gains, losses, deductions and credits pursuant to this Agreement.

SECTION 7.05. Resignation of Manager. A Manager other than an Independent Manager may resign as a Manager at any time by thirty (30) days’ prior notice to the Member. An Independent Manager may not withdraw or resign as a Manager of the Company without the consent of the Member. No resignation or removal of an Independent Manager, and no appointment of a successor Independent Manager, shall be effective until such successor (i) shall have accepted his or her appointment as an Independent Manager by a written instrument, which may be a counterpart signature page to the Management Agreement in the form attached hereto as Exhibit A, and (ii) shall have executed a counterpart to this Agreement.

SECTION 7.06. Vacancies.

(a)            Subject to Section 4.01, any vacancies among the Managers may be filled by the Member. In the event of a vacancy in the position of Independent Manager, the Member shall, as soon as practicable, appoint a successor Independent Manager.

(b)            Notwithstanding anything to the contrary contained in this Agreement, no Independent Manager shall be removed or replaced unless the Company provides the Indenture Trustee with no less than two (2) Business Days’ prior written notice of (a) any proposed removal of such Independent Manager, and (b) the identity of the proposed replacement Independent Manager, together with a certification that such replacement satisfies the requirements for an Independent Manager set forth in this Agreement.

19

SECTION 7.07. Meetings of the Managers. The Managers may hold meetings, both regular and special, within or outside the State of Delaware. Regular meetings of the Managers may be held without notice at such time and at such place as shall from time to time be determined by the Managers. Special meetings of the Managers may be called by the President on not less than one day’s notice to each Manager by telephone, facsimile, mail, telegram or any other means of communication, and special meetings shall be called by the President or Secretary in like manner and with like notice upon the written request of any one or more of the Managers.

SECTION 7.08. Electronic Communications. Managers, or any committee designated by the Managers, may participate in meetings of the Managers, or any committee, by means of telephone conference or similar communications equipment that allows all Persons participating in the meeting to hear each other, and such participation in a meeting shall constitute presence in Person at the meeting. If all the participants are participating by telephone conference or similar communications equipment, the meeting shall be deemed to be held at the principal place of business of the Company.

SECTION 7.09. Committees of Managers.

(a)            The Managers may, by resolution passed by a majority of the Managers, designate one or more committees, each committee to consist of one or more of the Managers. The Managers may designate one or more Managers as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee.

(b)            In the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not such members constitute a quorum, may unanimously appoint another Manager to act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extent provided in the resolution of the Managers, shall have and may exercise all the powers and authority of the Managers in the management of the business and affairs of the Company. Such committee or committees shall have such name or names as may be determined from time to time by resolution adopted by the Managers. Each committee shall keep regular minutes of its meetings and report the same to the Managers when required.

SECTION 7.10. Limitations on Independent Managers. All right, power and authority of each Independent Manager shall be limited to the extent necessary to exercise those rights and perform those duties specifically set forth in this Agreement.

ARTICLE VIII

EXPENSES

SECTION 8.01. Expenses. Except as otherwise provided in this Agreement or the other Basic Documents, the Company shall be responsible for all expenses and the allocation thereof including without limitation:

(a)            all expenses incurred by the Member or its Affiliates in organizing the Company;

(b)            all expenses related to the business of the Company and all routine administrative expenses of the Company, including the maintenance of books and records of the Company, and the preparation and dispatch to the Member of checks, financial reports, tax returns and notices required pursuant to this Agreement;

20

(c)            all expenses incurred in connection with any litigation or arbitration involving the Company (including the cost of any investigation and preparation) and the amount of any judgment or settlement paid in connection therewith;

(d)            all expenses for indemnity or contribution payable by the Company to any Person;

(e)            all expenses incurred in connection with the collection of amounts due to the Company from any Person;

(f)             all expenses incurred in connection with the preparation of amendments to this Agreement;

(g)            all expenses incurred in connection with the liquidation, dissolution and winding up of the Company; and

(h)            all expenses otherwise allocated in good faith to the Company by the Managers.

ARTICLE IX

PERPETUAL EXISTENCE; DISSOLUTION, LIQUIDATION AND WINDING-UP

SECTION 9.01. Existence.

(a)            The Company shall have a perpetual existence. So long as any of the Energy Transition Bonds are outstanding, the Member shall not be entitled to consent to the dissolution of the Company.

(b)            Notwithstanding any provision of this Agreement, the Bankruptcy of the Member or Special Member will not cause such Member or Special Member, respectively, to cease to be a member of the Company, and upon the occurrence of such an event, the business of the Company shall continue without dissolution. For purposes of this Section 9.01(b), “Bankruptcy” means, with respect to any Person (A) if such Person (i) makes an assignment for the benefit of creditors, (ii) files a voluntary petition in bankruptcy, (iii) is adjudged a bankrupt or insolvent, or has entered against it an order for relief, in any bankruptcy or insolvency proceedings, (iv) files a petition or answer seeking for itself any reorganization, arrangement, composition, readjustment, liquidation or similar relief under any statute, law or regulation, (v) files an answer or other pleading admitting or failing to contest the material allegations of a petition filed against it in any proceeding of this nature, or (vi) seeks, consents to or acquiesces in the appointment of a trustee, receiver or liquidator of the Person or of all or any substantial part of its properties, or (B) if 120 days after the commencement of any proceeding against the Person seeking reorganization, arrangement, composition, readjustment, liquidation or similar relief under any statute, law or regulation, if the proceeding has not been dismissed or if within 90 days after the appointment without such Person’s consent or acquiescence of a trustee, receiver or liquidator of such Person or of all or any substantial part of its properties, the appointment is not vacated or stayed, or within 90 days after the expiration of any such stay, the appointment is not vacated. The foregoing definition of “Bankruptcy” is intended to replace and shall supersede and replace the definition of “Bankruptcy” set forth in Sections 18-101(1) and 18-304 of the LLC Act. Upon the occurrence of any event that causes the last remaining member of the Company to cease to be a member of the Company or that causes the Member to cease to be a member of the Company (other than upon continuation of the Company without dissolution upon an assignment by the Member of all of its limited liability company interest in the Company and the admission of the transferee pursuant to Sections 6.06 and 6.07), to the fullest extent permitted by law, the personal representative of such member is hereby authorized to, and shall, within ninety (90) days after the occurrence of the event that terminated the continued membership of such member in the Company, agree in writing (i) to continue the Company and (ii) to the admission of the personal representative or its nominee or designee, as the case may be, as a substitute member of the Company, effective as of the occurrence of the event that terminated the continued membership of the last remaining member of the Company or the Member in the Company.

21

SECTION 9.02. Dissolution. The Company shall be dissolved and its affairs shall be wound up upon the occurrence of the earliest of the following events:

(a)            subject to Section 1.10, the election to dissolve the Company made in writing by the Member and each Manager, including each Independent Manager, as permitted under the Basic Documents and after the discharge in full of all Energy Transition Bonds;

(b)            the termination of the legal existence of the last remaining member of the Company or the occurrence of any event that causes the last remaining member of the Company to cease to be a member of the Company unless the business of the Company is continued without dissolution in a manner permitted by the LLC Act or this Agreement; or

(c)            the entry of a decree of judicial dissolution of the Company pursuant to Section 18-802 of the LLC Act.

SECTION 9.03. Accounting. In the event of the dissolution, liquidation and winding-up of the Company, a proper accounting shall be made of the Capital Account of the Member and of the net income or net loss of the Company from the date of the last previous accounting to the date of dissolution.

SECTION 9.04. Certificate of Cancellation. As soon as possible following the occurrence of any of the events specified in Section 9.02 and the completion of the winding up of the Company, the Person winding up the business and affairs of the Company, as an authorized person, shall cause to be executed a Certificate of Cancellation of the Certificate of Formation and file the Certificate of Cancellation of the Certificate of Formation as required by the LLC Act.

SECTION 9.05. Winding Up. Upon the occurrence of any event specified in Section 9.02, the Company shall continue solely for the purpose of winding up its affairs in an orderly manner, liquidating its assets, and satisfying the claims of its creditors. The Member, or if there is no Member, the Managers, shall be responsible for overseeing the winding up and liquidation of the Company, shall take full account of the liabilities of the Company and its assets, shall either cause its assets to be sold or distributed, and if sold as promptly as is consistent with obtaining the fair market value thereof, shall cause the proceeds therefrom, to the extent sufficient therefor, to be applied and distributed as provided in Section 9.06.

SECTION 9.06. Order of Payment of Liabilities Upon Dissolution. After determining that all debts and liabilities of the Company, including all contingent, conditional or unmatured liabilities of the Company, in the process of winding-up, including, without limitation, debts and liabilities to the Member in the event it is a creditor of the Company to the extent otherwise permitted by law, have been paid or adequately provided for, the remaining assets shall be distributed in cash or in kind to the Member.

SECTION 9.07. Limitations on Payments Made in Dissolution. Except as otherwise specifically provided in this Agreement, the Member shall only be entitled to look solely to the assets of Company for the return of its positive Capital Account balance and shall have no recourse for its Capital Contribution and/or share of net income (upon dissolution or otherwise) against any Manager.

22

SECTION 9.08. Limitation on Liability. Except as otherwise provided by the LLC Act and except as otherwise characterized for tax and financial reporting purposes, the debts, obligations and liabilities of the Company, whether arising in contract, tort or otherwise, shall be solely the debts, obligations and liabilities of the Company, and no Member or Manager shall be obligated personally for any such debt, obligation or liability of the Company solely by reason of being a Member or a Manager.

ARTICLE X

INDEMNIFICATION

SECTION 10.01. Indemnity. Subject to the provisions of Section 10.04 hereof and the provisions of the Basic Documents, to the fullest extent permitted by law, the Company shall indemnify any Person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, except an action by or in the right of the Company, by reason of the fact that such Person is or was a Manager, Member, officer, controlling Person, legal representative or agent of the Company, or is or was serving at the request of the Company as a member, manager, director, officer, partner, shareholder, controlling Person, legal representative or agent of another limited liability company, partnership, corporation, joint venture, trust or other enterprise, against expenses, including attorneys’ fees, judgments, fines and amounts paid in settlement actually and reasonably incurred by such Person in connection with the action, suit or proceeding if such Person acted in good faith and in a manner which such Person reasonably believed to be in or not opposed to the best interests of the Company, and, with respect to a criminal action or proceeding, had no reasonable cause to believe such Person’s conduct was unlawful; provided that such Person shall not be entitled to indemnification if such judgment, penalty, fine or other expense was directly caused by such Person’s fraud, gross negligence or willful misconduct or, in the case of an Independent Manager, bad faith or willful misconduct.

SECTION 10.02. Indemnity for Actions By or In the Right of the Company. Subject to the provisions of Section 10.04 hereof and the provisions of the Basic Documents, to the fullest extent permitted by law, the Company shall indemnify any Person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the rights of the Company to procure a judgment in its favor by reason of the fact that such Person is or was a Member, Manager, officer, controlling Person, legal representative or agent of the Company, or is or was serving at the request of the Company as a member, manager, director, officer, partner, shareholder, controlling Person, legal representative or agent of another limited liability company, corporation, partnership, joint venture, trust or other enterprise, against expenses, including amounts paid in settlement and attorneys’ fees actually and reasonably incurred by such Person in connection with the defense or settlement of the actions or suit if such Person acted in good faith and in a manner which such Person reasonably believed to be in or not opposed to the best interests of the Company; provided that such Person shall not be entitled to indemnification if such judgment, penalty, fine or other expense was directly caused by such Person’s fraud, gross negligence or willful misconduct or, in the case of an Independent Manager, bad faith or willful misconduct. Indemnification may not be made for any claim, issue or matter as to which such Person has been adjudged by a court of competent jurisdiction, after exhaustion of all appeals therefrom, to be liable to the Company or for amounts paid in settlement to the Company, unless and only to the extent that the court in which the action or suit was brought or other court of competent jurisdiction determines upon application that in view of all the circumstances of the case, the Person is fairly and reasonably entitled to indemnity for such expenses as the court deems proper.

23

SECTION 10.03. Indemnity If Successful. To the fullest extent permitted by law, and subject to the provisions of the Basic Documents, the Company shall indemnify any Person who is or was a Manager, Member, officer, controlling Person, legal representative or agent of the Company, or is or was serving at the request of the Company as a member, manager, director, officer, partner, shareholder, controlling Person, legal representative or agent of another limited liability company, corporation, partnership, joint venture, trust or other enterprise against expenses, including reasonable attorneys’ fees, actually and reasonably incurred by him or her in connection with the defense of any action, suit or proceeding referred to in Sections 10.01 and 10.02 or in defense of any claim, issue or matter therein, to the extent that such Person has been successful on the merits.

SECTION 10.04. Expenses. Any indemnification under Sections 10.01 and 10.02, as well as the advance payment of expenses permitted under Section 10.05 unless ordered by a court or advanced pursuant to Section 10.05 below, must be made by the Company only as authorized in the specific case upon a determination that indemnification of the Manager, Member, officer, controlling Person, legal representative or agent is proper in the circumstances. The determination must be made:

(a)            by the Member if the Member was not a party to the act, suit or proceeding; or

(b)            if the Member was a party to the act, suit or proceeding by independent legal counsel in a written opinion.

SECTION 10.05. Advance Payment of Expenses. To the extent permitted by the Basic Documents, the expenses of each Person who is or was a Manager, Member, officer, controlling Person, legal representative or agent, or is or was serving at the request of the Company as a member, manager, director, officer, partner, shareholder, controlling Person, legal representative or agent of another limited liability company, corporation, partnership, joint venture, trust or other enterprise, incurred in defending a civil or criminal action, suit or proceeding may be paid by the Company as they are incurred and in advance of the final disposition of the action, suit or proceeding, upon receipt of an undertaking by or on behalf of such Person to repay the amount if it is ultimately determined by a court of competent jurisdiction that such Person is not entitled to be indemnified by the Company. The provisions of this Section 10.05 shall not affect any rights to advancement of expenses to which personnel other than the Member or the Managers (other than each Independent Manager) may be entitled under any contract or otherwise by law.

SECTION 10.06. Other Arrangements Not Excluded. The indemnification and advancement of expenses authorized in or ordered by a court pursuant to this Article X:

(a)            does not exclude any other rights to which a Person seeking indemnification or advancement of expenses may be entitled under any agreement, decision of the Member, consent or action of the Managers, or otherwise, for either an action of any Person who is or was a Manager, Member, officer, controlling Person, legal representative or agent, or is or was serving at the request of the Company as a member, manager, director, officer, partner, shareholder, controlling Person, legal representative or agent of another limited liability company, corporation, partnership, joint venture, trust or other enterprise, in the official capacity of such Person or an action in another capacity while holding such position, except that indemnification and advancement, unless ordered by a court pursuant to Section 10.05 above, may not be made to or on behalf of such Person if a final adjudication established that its acts or omissions involved intentional misconduct, fraud or a knowing violation of the law and were material to the cause of action; and

(b)            continues for a Person who has ceased to be a Member, Manager, officer, legal representative or agent and inures to the benefit of the successors, heirs, executors and administrators of such a Person.

24

ARTICLE XI

MISCELLANEOUS PROVISIONS

SECTION 11.01. No Bankruptcy Petition; Dissolution.

(a)            To the fullest extent permitted by law, the Member, each Special Member and each Manager hereby covenant and agree (or shall be deemed to have hereby covenanted and agreed) that, prior to the date which is one year and one day after the termination in accordance with their terms of all indentures and the payment in full of all series of Energy Transition Bonds and any other amounts owed under the related indentures, it will not acquiesce, petition or otherwise invoke or cause the Company to invoke the process of any court or Governmental Authority for the purpose of commencing or sustaining an involuntary case against the Company under any federal or state bankruptcy, insolvency or similar law or appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator or other similar official of the Company or any substantial part of the property of the Company, or ordering the winding up or liquidation of the affairs of the Company; provided, however, that nothing in this Section 11.01 shall constitute a waiver of any right to indemnification, reimbursement or other payment from the Company pursuant to this Agreement. This Section 11.01 is not intended to apply to the filing of a voluntary bankruptcy petition on behalf of the Company which is governed by Section 1.10 of this Agreement.

(b)            To the fullest extent permitted by law, the Member, each Special Member and each Manager hereby covenant and agree (or shall be deemed to have hereby covenanted and agreed) that, until the termination in accordance with their terms of all indentures relating to the Energy Transition Bonds and the payment in full of all series of Energy Transition Bonds and any other amounts owed under any such indenture, the Member, such Special Member and such Manager will not consent to, or make application for, or institute or maintain any action for, the dissolution of the Company under Section 18-801 or 18-802 of the LLC Act or otherwise.

(c)            In the event that the Member, any Special Member or any Manager takes action in violation of this Section 11.01, the Company agrees that it shall file an answer with the court or otherwise properly contest the taking of such action and raise the defense that the Member, the Special Member or Manager, as the case may be, has agreed in writing not to take such action and should be estopped and precluded therefrom and such other defenses, if any, as its counsel advises that it may assert.

(d)            The provisions of this Section 11.01 shall survive the termination of this Agreement and the resignation, withdrawal or removal of the Member, any Special Member or any Manager. Nothing herein contained shall preclude participation by the Member, any Special Member or a Manager in assertion or defense of its claims in any such proceeding involving the Company.

SECTION 11.02. Amendments.

(a)            The power to alter, amend or repeal this Agreement shall be only with the consent of the Member, provided, that the Company shall not alter, amend or repeal any provision of Sections 1.02(b) and (c), 1.05, 1.09, 1.10, 3.01(b), 3.02, 6.06, 6.07, 7.02, 7.05, 7.06, 9.01, 9.02, 11.02 and 11.06 of this Agreement or the definition of “Independent Manager” contained herein or the requirement that at all times the Company have at least one Independent Manager (collectively, the “Special Purpose Provisions”) without, in each case, the affirmative vote of a majority of the Managers, which vote must include the affirmative vote of any Independent Manager.

25

So long as any Energy Transition Bonds of any series are outstanding, the Company and the Member shall give written notice to each applicable Rating Agency and to the Indenture Trustee of any amendment to this Agreement. The effectiveness of any amendment of the Special Purpose Provisions shall be subject to the Rating Agency Condition set forth in the Basic Documents (other than an amendment which is necessary: (i) to cure any ambiguity or (ii) to correct or supplement any such provision in a manner consistent with the intent of this Agreement).

(b)            The Company’s power to alter or amend the Certificate of Formation shall be vested in the Member. Upon obtaining the approval of any amendment, supplement or restatement as to the Certificate of Formation, the Member on behalf of the Company shall cause a Certificate of Amendment or Amended and Restated Certificate of Formation to be prepared, executed and filed in accordance with the LLC Act.

(c)            Notwithstanding anything in this Agreement to the contrary, including Sections 11.02(a) and (b), unless and until any Energy Transition Bonds are issued and outstanding, the Member may, without the need for any consent or action of, or notice to, any other Person, including any Manager, any officer, the Indenture Trustee or any Rating Agency, alter, amend or repeal this Agreement in any manner.

SECTION 11.03. Governing Law. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.

SECTION 11.04. Headings. The headings of the various Articles and Sections herein are for convenience of reference only and shall not define or limit any of the terms or provisions hereof.

SECTION 11.05. Severability. Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remainder of such provision (if any) or the remaining provisions hereof (unless such construction shall be unreasonable), and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

SECTION 11.06. Assigns. Each and all of the covenants, terms, provisions and agreements contained in this Agreement shall be binding upon and inure to the benefit of the Member, and its permitted successors and assigns.

SECTION 11.07. Enforcement by Each Independent Manager. Notwithstanding any other provision of this Agreement, the Member agrees that this Agreement constitutes a legal, valid and binding agreement of the Member, and is enforceable against the Member by each Independent Manager in accordance with its terms.

SECTION 11.08. Waiver of Partition; Nature of Interest. Except as otherwise expressly provided in this Agreement, to the fullest extent permitted by law, each of the Member and the Special Members hereby irrevocably waives any right or power that such Person might have to cause the Company or any of its assets to be partitioned, to cause the appointment of a receiver for all or any portion of the assets of the Company, to compel any sale of all or any portion of the assets of the Company pursuant to any applicable law or to file a complaint or to institute any proceeding at law or in equity to cause the dissolution, liquidation, winding up or termination of the Company. The Member shall not have any interest in any specific assets of the Company, and the Member shall not have the status of a creditor with respect to any distribution pursuant to this Agreement.

26

SECTION 11.09. Benefits of Agreement; No Third-Party Rights. Except for the Indenture Trustee and Persons entitled to indemnification hereunder, none of the provisions of this Agreement shall be for the benefit of or enforceable by any creditor of the Company or by any creditor of the Member or Special Member. Nothing in this Agreement shall be deemed to create any right in any Person (other than the Indenture Trustee and Persons entitled to indemnification hereunder) not a party hereto, and this Agreement shall not be construed in any respect to be a contract in whole or in part for the benefit of any third Person.

[SIGNATURE PAGE FOLLOWS]

27

IN WITNESS WHEREOF, this Agreement is hereby executed by the undersigned as the sole Member of the Company and is effective as of the date first written above.

	PUBLIC SERVICE COMPANY OF NEW MEXICO
	By:
		Name:
		Title:
ACKNOWLEDGED AND AGREED:
Kevin P. Burns,
as Independent Manager

Signature Page to

Limited Liability Company Agreement

SCHEDULE A

SCHEDULE OF INITIAL CAPITAL CONTRIBUTION OF MEMBER

MEMBER’S NAME	CAPITAL CONTRIBUTION		MEMBERSHIP INTEREST PERCENTAGE			CAPITAL ACCOUNT
Public Service Company of New Mexico	$	100		100	%	$	100

Schedule A

SCHEDULE B

INITIAL MANAGERS

Elisabeth A. Eden

Henry E. Monroy

Kevin P. Burns

Schedule B

SCHEDULE C

INITIAL OFFICERS

Name	Office
Elisabeth A. Eden	President and Treasurer
Henry E. Monroy	Secretary
Sabrina G. Greinel	Assistant Treasurer
Leonard D. Sanchez	Assistant Secretary

Schedule C

EXHIBIT A

MANAGEMENT AGREEMENT

[date of A/R LLC Agreement]

PNM Energy Transition Bond Company I, LLC

414 Silver Ave. SW

Albuquerque, New Mexico 87102

Re: Management Agreement — PNM Energy Transition Bond Company I, LLC

Ladies and Gentlemen:

For good and valuable consideration, each of the undersigned Persons, who have been designated as managers of PNM Energy Transition Bond Company I, LLC, a Delaware limited liability company (the “Company”), in accordance with the Amended and Restated Limited Liability Company Agreement of the Company, dated as of [      ], 2023 (as it may be amended, restated, supplemented or otherwise modified from time to time, the “LLC Agreement”), hereby agree as follows:

1.            Each of the undersigned accepts such Person’s rights and authority as a Manager under the LLC Agreement and agrees to perform and discharge such Person’s duties and obligations as a Manager under the LLC Agreement, and further agrees that such rights, authorities, duties and obligations under the LLC Agreement shall continue until such Person’s successor as a Manager is designated or until such Person’s resignation or removal as a Manager in accordance with the LLC Agreement. Each of the undersigned agrees and acknowledges that he or she has been designated as a “manager” of the Company within the meaning of the Delaware Limited Liability Company Act.

2.            Until a year and one day has passed since the date that the last obligation under the Basic Documents was paid, to the fullest extent permitted by law, each of the undersigned agrees, solely in its capacity as a creditor of the Company on account of any indemnification or other payment owing to the undersigned by the Company, not to acquiesce, petition or otherwise invoke or cause the Company to invoke the process of any court or governmental authority for the purpose of commencing or sustaining a case against the Company under any federal or state bankruptcy, insolvency or similar law or appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator or other similar official of the Company or any substantial part of the property of the Company, or ordering the winding up or liquidation of the affairs of the Company.

3.            THIS MANAGEMENT AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, AND ALL RIGHTS AND REMEDIES SHALL BE GOVERNED BY SUCH LAWS WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.

Capitalized terms used and not otherwise defined herein have the meanings set forth in the LLC Agreement.

This Management Agreement may be executed in any number of counterparts, each of which shall be deemed an original of this Management Agreement and all of which together shall constitute one and the same instrument.

Exhibit A -1

IN WITNESS WHEREOF, the undersigned have executed this Management Agreement as of the day and year first above written.

Exhibit A -2

APPENDIX A

DEFINITIONS

As used in this Agreement, the following terms have the following meanings:

“Additional Issuance” is defined in Section 1.07 of this Agreement.

“Administration Agreement” means the administration agreement to be entered into by and between the Member and the Company.

“Administrator” means Public Service Company of New Mexico, as Administrator under the Administration Agreement, or any successor Administrator to the extent permitted under the Administration Agreement.

“Affiliate” means, with respect to any specified Person, any other Person controlling or controlled by or under common control with such specified Person. For the purposes of this definition, “control” when used with respect to any specified Person means the power to direct the management and policies of such specified Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise, and the terms “controlling” and “controlled” have meanings correlative to the foregoing.

“Agreement” has the meaning set forth in the preamble to this Agreement.

“Bankruptcy” is defined in Section 9.01(b) of this Agreement.

“Bankruptcy Code” means Title 11 of the United States Code (11 U.S.C. §§ 101 et seq.), as amended from time to time.

“Basic Documents” means, the Certificate of Formation and this Agreement and, with respect to any series of Energy Transition Bonds, the related indenture, series supplement, administration agreement, the sale agreement, bill of sale, servicing agreement, letter of representations to The Depository Trust Company, underwriting agreement, intercreditor agreement and all other documents and certificates delivered in connection therewith.

“Business Day” means any day other than a Saturday, a Sunday or a day on which banking institutions in Albuquerque, New Mexico or New York, New York are, or The Depository Trust Company or the corporate trust office of the Indenture Trustee from which the Indenture Trustee administers the Indenture is, authorized or obligated by law, regulation or executive order to be closed.

“Capital Account” is defined in Section 2.03 of this Agreement.

“Capital Contribution” is defined in Section 2.01 of this Agreement.

“Certificate of Formation” means the Certificate of Formation filed with the Secretary of State on August 25, 2023 pursuant to which the Company was formed.

“Code” means the Internal Revenue Code of 1986, as amended.

“Commission” means the New Mexico Public Regulation Commission.

“Company” has the meaning set forth in the preamble to this Agreement.

Appendix A - 1

“Energy Transition Act” means the Energy Transition Act, Sections 62-18-1 through 62-18-23 of the New Mexico Statutes Annotated.

“Energy Transition Bond” has the meaning set forth in the Energy Transition Act.

“Energy Transition Bond Collateral” means, with respect to a series of Energy Transition Bonds, (a) the Energy Transition Property created under and pursuant to a Financing Order and the Energy Transition Act with respect to that series, and transferred by the Seller to the Company pursuant to a Sale Agreement (including, to the fullest extent permitted by law, the right to impose, charge, collect and receive Energy Transition Charges in an amount necessary to provide for full payment and recovery of all Energy Transition Costs identified in the Financing Order, the right under the Financing Order to obtain True-Up Adjustments of the Energy Transition Charges, and all revenues or other proceeds arising out of the rights and interests created under the Financing Order with respect to that series), (b) all Energy Transition Charges related to the Energy Transition Property with respect to that series, (c) the Sale Agreement and the Bill of Sale executed in connection with that series of Energy Transition Bonds and all property and interests in property transferred under the Sale Agreement and the Bill of Sale with respect to that Energy Transition Property and that series of Energy Transition Bonds, (d) the Servicing Agreement, the Administration Agreement and any intercreditor, subservicing, agency, administration or collection agreements executed in connection therewith, to the extent related to the foregoing Energy Transition Property and that series of Energy Transition Bonds, (e) the Collection Account, all subaccounts thereof and all amounts of cash, instruments, investment property or other assets on deposit therein or credited thereto from time to time and all financial assets and securities entitlements carried therein or credited thereto, with respect to that series of Energy Transition Bonds, (f) all rights to compel the Servicer with respect to a series of Energy Transition Bonds to file for and obtain adjustments to the Energy Transition Charges in accordance with Section 6 of the Energy Transition Act and the Financing Order, (g) all present and future claims, demands, causes and choses in action in respect of any or all of the foregoing, whether such claims, demands, causes and choses in action constitute Energy Transition Property, accounts, general intangibles, instruments, contract rights, chattel paper or proceeds of such items or any other form of property, (h) all accounts, chattel paper, deposit accounts, documents, general intangibles, goods, instruments, investment property, letters of credit, letters-of-credit rights, money, commercial tort claims and supporting obligations related to the foregoing and (i) all payments on or under, and all proceeds in respect of, any or all of the foregoing.

“Energy Transition Charge” means any energy transition charge as defined in Section 2(G) of the Energy Transition Act that is authorized by a Financing Order.

“Energy Transition Property” means all energy transition property as defined in Section 2(I) of the Energy Transition Act created pursuant to the Financing Order or a Subsequent Financing Order and under the Energy Transition Act, including the right to impose, charge, collect and receive the Energy Transition Charges in an amount necessary to provide for full payment and recovery of all energy transition costs identified in the Financing Order, the right under the Financing Order to obtain periodic adjustments of the Energy Transition Charges, and all revenues or other proceeds arising from those rights and interests.

“Financing Order” means the financing order approved by the Commission on April 1, 2020, Docket No. 19-00018-UT, authorizing the creation of Energy Transition Property and the issuance of Energy Transition Bonds in one or more series for the benefit of PNM. “Financing Order” also means any financing order in the future issued by the Commission pursuant to the Energy Transition Act for the benefit of PNM.

Appendix A - 2

“Governmental Authority” means any nation or government, any U.S. federal, state, local or other political subdivision thereof and any court, administrative agency or other instrumentality or entity exercising executive, legislative, judicial, regulatory or administrative functions of government.

“Indenture” means that certain Indenture, to be entered into, among the Company, U.S. Bank Trust Company, National Association, as indenture trustee (the “Indenture Trustee”), and U.S. Bank National Association, as securities intermediary, with respect to the issuance of the Energy Transition Bonds designated as the Series A Senior Secured Energy Transition Bonds.

“Independent Manager” is defined in Section 4.01(a)  of this Agreement.

“Independent Manager Fee” is defined in Section 4.01(a) of this Agreement.

“LLC Act” means the Delaware Limited Liability Company Act, as amended.

“Manager” means each manager of the Company under this Agreement.

“Member” has the meaning set forth in the preamble to this Agreement.

“Membership Interest” is defined in Section 6.01 of this Agreement.

“Original LLC Agreement” has the meaning set forth in the preamble to this Agreement.

“Person” means any individual, corporation, limited liability company, estate, partnership, joint venture, association, joint stock company, trust (including any beneficiary thereof), unincorporated organization or Governmental Authority.

“PNM” means Public Service Company of New Mexico, a New Mexico corporation, and any of its successors or permitted assigns.

“Rating Agency” and “Rating Agency Condition” shall have the meanings set forth in the applicable indenture pursuant to which any series of Energy Transition Bonds is issued.

“Return on Invested Capital” has the meaning set forth in the Financing Order approved by the Commission on April 1, 2020.

“Sale Agreement” means any Energy Transition Property Purchase and Sale Agreement to be entered by the Company and PNM in connection with the issuance of any Energy Transition Bonds.

“Secretary of State” means the Secretary of State of the State of Delaware.

“Servicing Agreement” means any Energy Transition Property Servicing Agreement to be entered by the Company and PNM in connection with the issuance of any Energy Transition Bonds.

“Special Member” is defined in Section 1.02(b) of this Agreement.

“Special Purpose Provisions” is defined in Section11.02(a) of this Agreement.

“Treasury Regulations” means the regulations, including proposed or temporary regulations, promulgated under the Code.

Appendix A - 3

EX-4.1

Exhibit 4.1

INDENTURE

by and among

PNM ENERGY TRANSITION BOND COMPANY I, LLC,

as Issuer

and

U.S. BANK TRUST COMPANY, NATIONAL ASSOCIATION,

as Indenture Trustee

and

U.S. BANK NATIONAL ASSOCIATION

as Securities Intermediary

Dated as of [·], 2023

Table of Contents

Page

 

ARTICLE I DEFINITIONS AND RULES OF CONSTRUCTION; INCORPORATION BY REFERENCE			9
	Section 1.01.	Definitions and Rules of Construction	9
	Section 1.02.	Incorporation by Reference of Trust Indenture Act	9
ARTICLE II THE ENERGY TRANSITION BONDS			9
	Section 2.01.	Form	9
	Section 2.02.	Denominations: Energy Transition Bonds Issuable in Series	10
	Section 2.03.	Execution, Authentication and Delivery	11
	Section 2.04.	Temporary Energy Transition Bonds	11
	Section 2.05.	Registration; Registration of Transfer and Exchange of Energy Transition Bonds	12
	Section 2.06.	Mutilated, Destroyed, Lost or Stolen Energy Transition Bonds	13
	Section 2.07.	Persons Deemed Owner	14
	Section 2.08.	Payment of Principal, Premium, if any, and Interest; Interest on Overdue Principal; Principal, Premium, if any, and Interest Rights Preserved	14
	Section 2.09.	Cancellation	16
	Section 2.10.	Outstanding Amount; Authentication and Delivery of Energy Transition Bonds	16
	Section 2.11.	Book-Entry Energy Transition Bonds	19
	Section 2.12.	Notices to Clearing Agency	20
	Section 2.13.	Definitive Energy Transition Bonds	20
	Section 2.14.	CUSIP Number	21
	Section 2.15.	Letter of Representations	21
	Section 2.16.	Tax Treatment	21
	Section 2.17.	State Pledge	21
	Section 2.18.	Security Interests	22
ARTICLE III COVENANTS			23
	Section 3.01.	Payment of Principal, Premium, if any, and Interest	23
	Section 3.02.	Maintenance of Office or Agency	23

1

Table of Contents
(continued)
Page
	Section 3.03.	Money for Payments To Be Held in Trust	24
	Section 3.04.	Existence	25
	Section 3.05.	Protection of Collateral	25
	Section 3.06.	Opinions as to Collateral	26
	Section 3.07.	Performance of Obligations; Servicing; SEC Filings	27
	Section 3.08.	Certain Negative Covenants	29
	Section 3.09.	Annual Statement as to Compliance	30
	Section 3.10.	Issuer May Consolidate, etc., Only on Certain Terms	30
	Section 3.11.	Successor or Transferee	32
	Section 3.12.	No Other Business	33
	Section 3.13.	No Borrowing	33
	Section 3.14.	Servicer’s Obligations	33
	Section 3.15.	Guarantees, Loans, Advances and Other Liabilities	33
	Section 3.16.	Capital Expenditures	33
	Section 3.17.	Restricted Payments	33
	Section 3.18.	Notice of Events of Default	34
	Section 3.19.	Further Instruments and Acts	34
	Section 3.20.	Inspection	34
	Section 3.21.	Additional Series	34
	Section 3.22.	Sale Agreement, Servicing Agreement and Administration Agreement Covenants	36
	Section 3.23.	Taxes	37
	Section 3.24.	Notices from Holders	38
	Section 3.25.	Volcker Rule	38
ARTICLE IV SATISFACTION AND DISCHARGE; DEFEASANCE			38
	Section 4.01.	Satisfaction and Discharge of Indenture; Defeasance	38
	Section 4.02.	Conditions to Defeasance	39
	Section 4.03.	Application of Trust Money	41
	Section 4.04.	Repayment of Moneys Held by Paying Agent	41

2

Table of Contents
(continued)
Page
ARTICLE V REMEDIES			42
	Section 5.01.	Events of Default	42
	Section 5.02.	Acceleration of Maturity; Rescission and Annulment	43
	Section 5.03.	Collection of Indebtedness and Suits for Enforcement by Indenture Trustee	44
	Section 5.04.	Remedies; Priorities	46
	Section 5.05.	Optional Preservation of the Collateral	47
	Section 5.06.	Limitation of Suits	47
	Section 5.07.	Unconditional Rights of Holders To Receive Principal, Premium, if any, and Interest	48
	Section 5.08.	Restoration of Rights and Remedies	48
	Section 5.09.	Rights and Remedies Cumulative	48
	Section 5.10.	Delay or Omission Not a Waiver	49
	Section 5.11.	Control by Holders	49
	Section 5.12.	Waiver of Past Defaults	49
	Section 5.13.	Undertaking for Costs	50
	Section 5.14.	Waiver of Stay or Extension Laws	50
	Section 5.15.	Action on Energy Transition Bonds	50
ARTICLE VI THE INDENTURE TRUSTEE			51
	Section 6.01.	Duties of Indenture Trustee	51
	Section 6.02.	Rights of Indenture Trustee	52
	Section 6.03.	Individual Rights of Indenture Trustee	55
	Section 6.04.	Indenture Trustee’s Disclaimer	55
	Section 6.05.	Notice of Defaults	56
	Section 6.06.	Reports by Indenture Trustee to Holders	56
	Section 6.07.	Compensation and Indemnity	57
	Section 6.08.	Replacement of Indenture Trustee and Securities Intermediary	58
	Section 6.09.	Successor Indenture Trustee by Merger	59
	Section 6.10.	Appointment of Co-Trustee or Separate Trustee	60
	Section 6.11.	Eligibility; Disqualification	61

3

Table of Contents
(continued)
Page
	Section 6.12.	Preferential Collection of Claims Against Issuer	61
	Section 6.13.	Representations and Warranties of Indenture Trustee	61
	Section 6.14.	Annual Report by Independent Registered Public Accountants	61
	Section 6.15.	Custody of Collateral	62
ARTICLE VII HOLDERS’ LISTS AND REPORTS			63
	Section 7.01.	Issuer to Furnish Indenture Trustee Names and Addresses of Holders	63
	Section 7.02.	Preservation of Information; Communications to Holders	63
	Section 7.03.	Reports by Issuer	64
	Section 7.04.	Reports by Indenture Trustee	64
ARTICLE VIII ACCOUNTS, DISBURSEMENTS AND RELEASES			65
	Section 8.01.	Collection of Money	65
	Section 8.02.	Collection Account	65
	Section 8.03.	General Provisions Regarding the Collection Account	69
	Section 8.04.	Release of Collateral	70
	Section 8.05.	Opinion of Counsel	70
	Section 8.06.	Reports by Independent Registered Public Accountants	71
ARTICLE IX SUPPLEMENTAL INDENTURES			71
	Section 9.01.	Supplemental Indentures Without Consent of Holders	71
	Section 9.02.	Supplemental Indentures with Consent of Holders	73
	Section 9.03.	Execution of Supplemental Indentures	74
	Section 9.04.	Effect of Supplemental Indenture	74
	Section 9.05.	Conformity with Trust Indenture Act	75
	Section 9.06.	Reference in Energy Transition Bonds to Supplemental Indentures	75
ARTICLE X MISCELLANEOUS			75
	Section 10.01.	Compliance Certificates and Opinions, etc.	75
	Section 10.02.	Form of Documents Delivered to Indenture Trustee	77
	Section 10.03.	Acts of Holders	78

4

Table of Contents
(continued)
Page
	Section 10.04.	Notices, etc., to Indenture Trustee, Issuer and Rating Agencies	78
	Section 10.05.	Notices to Holders; Waiver	79
	Section 10.06.	Conflict with Trust Indenture Act	79
	Section 10.07.	Successors and Assigns	80
	Section 10.08.	Severability	80
	Section 10.09.	Benefits of Indenture	80
	Section 10.10.	Legal Holidays	80
	Section 10.11.	Governing Law	80
	Section 10.12.	Counterparts	80
	Section 10.13.	Recording of Indenture	81
	Section 10.14.	No Recourse to Issuer	81
	Section 10.15.	Basic Documents	81
	Section 10.16.	No Petition	81
	Section 10.17.	Securities Intermediary	82
	Section 10.18.	Rule 17g-5 Compliance	82
	Section 10.19.	Submission to Non-Exclusive Jurisdiction; Waiver of Jury Trial	83
	Section 10.20.	Certain Tax Laws	83

EXHIBITS

Exhibit A	Form of Energy Transition Bonds
Exhibit B	Form of Series Supplement
Exhibit C	Servicing Criteria to be Addressed by Indenture Trustee in Assessment of Compliance
Exhibit D	Form of Intercreditor Agreement

APPENDIX

Appendix A Definitions and Rules of Construction

5

TRUST INDENTURE ACT CROSS REFERENCE TABLE

TRUST INDENTURE ACT SECTION		INDENTURE SECTION
310	(a)(1)	6.11
	(a)(2)	6.11
	(a)(3)	6.10(b)(i)
	(a)(4)	Not applicable
	(a)(5)	6.11
	(b)	6.11
311	(a)	6.12
	(b)	6.12
312	(a)	7.01 and 7.02
	(b)	7.02(b)
	(c)	7.02(c)
313	(a)	7.04
	(b)(1)	7.04
	(b)(2)	7.04
	(c)	7.03(a) and 7.04
	(d)	Not applicable
314	(a)	3.09, 4.01 and 7.03(a)
	(b)	3.06 and 4.01
	(c)(1)	2.10, 4.01, 8.04(b) and 10.01(a)
	(c)(2)	2.10, 4.01, 8.04(b) and 10.01(a)
	(c)(3)	2.10, 4.01, 4.02 and 10.01(a)
	(d)	2.10, 8.04(b) and 10.01
	(e)	10.01(a)
	(f)	10.01(a)
315	(a)	6.01(b)(i) and 6.01(b)(ii)

6

TRUST INDENTURE ACT SECTION		INDENTURE SECTION
	(b)	6.05
	(c)	6.01(a)
	(d)	6.01(c)(i), 6.01(c)(ii) and SECTION 6.01(c)(iii)
	(e)	5.13
316	(a) (last sentence)	Appendix A — definition of “Outstanding”
	(a)(1)(A)	5.11
	(a)(1)(B)	5.12
	(a)(2)	Not applicable
	(b)	5.07
	(c)	Appendix A — definition of “Record Date”
317	(a)(1)	5.03(a)
	(a)(2)	5.03(c)(iv)
	(b)	3.03
318	(a)	10.06
	(b)	10.06
	(c)	10.06

THIS CROSS REFERENCE TABLE SHALL NOT, FOR ANY PURPOSE, BE DEEMED TO BE PART OF THIS INDENTURE.

7

This INDENTURE, dated as of [·], 2023, is by and among PNM ENERGY TRANSITION BOND COMPANY I, LLC, a Delaware limited liability company, U.S. BANK TRUST COMPANY, NATIONAL ASSOCIATION, in its capacity as trustee for the benefit of the Holders (the “Indenture Trustee”), and U.S. BANK NATIONAL ASSOCIATION, in its capacity as securities intermediary (the “Securities Intermediary”).

In consideration of the mutual agreements herein contained, each party hereto agrees as follows for the benefit of the other party hereto and each of the Holders:

RECITALS OF THE ISSUER

The Issuer has duly authorized the execution and delivery of this Indenture and the creation and issuance of Energy Transition Bonds issuable hereunder, which will be of substantially the tenor set forth in the Series Supplement to this Indenture duly executed and delivered by the Issuer and the Indenture Trustee.

The Energy Transition Bonds shall be non-recourse obligations and shall be secured by and payable solely out of the proceeds of the Property and the other Collateral as provided herein. If and to the extent that such proceeds of the Property and the other Collateral are insufficient to pay all amounts owing with respect to the Energy Transition Bonds, then, except as otherwise expressly provided hereunder, the Holders shall have no Claim in respect of such insufficiency against the Issuer or the Indenture Trustee, and the Holders, by their acceptance of the Energy Transition Bonds, waive any such Claim.

All things necessary to (a) make the Energy Transition Bonds, when executed by the Issuer and authenticated and delivered by the Indenture Trustee hereunder and duly issued by the Issuer, valid obligations, and (b) make this Indenture a valid agreement of the Issuer, in each case, in accordance with their respective terms, have been done.

NOW, THEREFORE, THIS INDENTURE WITNESSETH:

That the Issuer, in consideration of the premises herein contained and of the purchase of Energy Transition Bonds by the Holders and of other good and lawful consideration, the receipt and sufficiency of which are hereby acknowledged, and to secure, equally and ratably without prejudice, priority or distinction, except as specifically otherwise set forth in this Indenture, the payment of the Energy Transition Bonds, the payment of all other amounts due under or in connection with this Indenture (including all fees, expenses, counsel fees and other amounts due and owing to the Indenture Trustee) and the performance and observance of all of the covenants and conditions contained herein or in the Energy Transition Bonds, has hereby executed and delivered this Indenture and by these presents does hereby and by the Series Supplement will convey, grant, assign, transfer and pledge, in each case, in and unto the Indenture Trustee, its successors and assigns forever, for the benefit of the Secured Parties, all and singular the property described in the Series Supplement (such property herein referred to as the “Collateral”).

AND IT IS HEREBY COVENANTED, DECLARED AND AGREED between the parties hereto that all Energy Transition Bonds are to be issued, countersigned and delivered and that all of the Collateral is to be held and applied, subject to the further covenants, conditions, releases, uses and trusts hereinafter set forth, and the Issuer, for itself and any successor, does hereby covenant and agree to and with the Indenture Trustee and its successors in said trust, for the benefit of the Secured Parties, as follows:

8

ARTICLE I

DEFINITIONS AND RULES OF CONSTRUCTION; INCORPORATION BY REFERENCE

Section 1.01.         Definitions and Rules of Construction. Capitalized terms used but not otherwise defined in this Indenture shall have the respective meanings given to such terms in Appendix A, which is hereby incorporated by reference into this Indenture as if set forth fully in this Indenture. Not all terms defined in Appendix A are used in this Indenture. The rules of construction set forth in Appendix A shall apply to this Indenture and are hereby incorporated by reference into this Indenture as if set forth fully in this Indenture.

Section 1.02.         Incorporation by Reference of Trust Indenture Act. Whenever this Indenture refers to a provision of the Trust Indenture Act, that provision is incorporated by reference in and made a part of this Indenture. The following Trust Indenture Act terms used in this Indenture have the following meanings:

“indenture securities” means the Energy Transition Bonds.

“indenture security holder” means a Holder.

“indenture to be qualified” means this Indenture.

“indenture trustee” or “institutional trustee” means the Indenture Trustee.

“obligor” on the indenture securities means the Issuer and any other obligor on the indenture securities.

All other Trust Indenture Act terms used in this Indenture that are defined by the Trust Indenture Act, defined by Trust Indenture Act reference to another statute or defined by SEC rule have the meanings assigned to them by such definitions.

ARTICLE II

THE ENERGY TRANSITION BONDS

Section 2.01.         Form. The Energy Transition Bonds and the Indenture Trustee’s certificate of authentication shall be in substantially the forms set forth in Exhibit A, with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture or by the related Series Supplement and may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon as may, consistently herewith, be determined by the officers executing the Energy Transition Bonds, as evidenced by their execution of the Energy Transition Bonds.

9

The Energy Transition Bonds shall be typewritten, printed, lithographed or engraved or produced by any combination of these methods (with or without steel engraved borders), all as determined by the officers executing the Energy Transition Bonds, as evidenced by their execution of the Energy Transition Bonds.

Each Energy Transition Bond shall be dated the date of its authentication.

Section 2.02.         Denominations: Energy Transition Bonds Issuable in Series. The Energy Transition Bonds shall be issuable in the Authorized Denominations specified in the Series Supplement.

The Energy Transition Bonds shall, at the election of and as authorized by a Responsible Officer of the Issuer, and set forth in the Series Supplement, be issued in one or more Tranches, and shall be designated generally as the “Series A Senior Secured Energy Transition Bonds” of the Issuer, with such further particular designations added or incorporated in such title for the Energy Transition Bonds of any particular Tranche as a Responsible Officer of the Issuer may determine. All Energy Transition Bonds shall be identical in all respects except for the denominations thereof, the Holder thereof, the numbering thereon and the legends thereon, unless such Energy Transition Bonds are comprised of one or more Tranches, in which case all of such Energy Transition Bonds of the same Tranche shall be identical in all respects except for the denominations thereof, the Holder thereof, the numbering thereon, the legends thereon and the CUSIP number thereon. All Energy Transition Bonds and of a particular Tranche shall be in all respects equally and ratably entitled to the benefits hereof without preference, priority or distinction on account of the actual time or times of authentication and delivery, all in accordance with the terms and provisions of this Indenture.

The Energy Transition Bonds shall be created by the Series Supplement authorized by a Responsible Officer of the Issuer, which Series Supplement shall specify and establish the terms and provisions thereof, including the following (which terms and provisions may differ as between Tranches):

(a)            designation of the Tranches thereof;

(b)            the principal amount of each Tranche;

(c)            the Bond Interest Rate of each Tranche thereof or the formula, if any, used to calculate Bond Interest Rate or Bond Interest Rates for each Tranche thereof;

(d)            the Payment Dates for each Tranche thereof;

(e)            the Scheduled Payment Dates for each Tranche thereof;

(f)            the Scheduled Final Payment Date(s) of each Tranche thereof;

(g)            the Final Maturity Date(s) of each Tranche thereof;

(h)            the issuance date;

10

(i)             the Authorized Denominations;

(j)             the Expected Amortization Schedule and Expected Sinking Fund Schedule for each Tranche thereof;

(k)            the place or places for the payment of interest, principal and premium, if any;

(l)             any additional Secured Parties;

(m)           the identity of the Indenture Trustee;

(n)            the Charges and the Collateral;

(o)            whether or not the Energy Transition Bonds are to be Book-Entry Energy Transition Bonds and the extent to which Section 2.11 should apply; and

(p)            any other terms of the Energy Transition Bonds (or Tranches thereof) that are not inconsistent with the provisions of this Indenture and as to which the Rating Agency Condition is satisfied.

Section 2.03.         Execution, Authentication and Delivery. The Energy Transition Bonds shall be executed on behalf of the Issuer by any of its Responsible Officers. The signature of any such Responsible Officer on the Energy Transition Bonds may be manual or facsimile.

Energy Transition Bonds bearing the manual or facsimile signature of individuals who were at any time Responsible Officers of the Issuer shall bind the Issuer, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of the Energy Transition Bonds or did not hold such offices at the date of the Energy Transition Bonds.

At any time and from time to time after the execution and delivery of this Indenture and the Series Supplement, the Issuer may deliver Energy Transition Bonds executed by the Issuer to the Indenture Trustee pursuant to an Issuer Order for authentication; and the Indenture Trustee shall authenticate and deliver the Energy Transition Bonds as in this Indenture and the Series Supplement provided and not otherwise.

No Energy Transition Bond shall be entitled to any benefit under this Indenture or the Series Supplement or be valid or obligatory for any purpose, unless there appears on such Energy Transition Bond a certificate of authentication substantially in the form provided for therein executed by the Indenture Trustee by the manual signature of one of its authorized signatories, and such certificate upon any Energy Transition Bond shall be conclusive evidence, and the only evidence, that such Energy Transition Bond has been duly authenticated and delivered hereunder.

Section 2.04.         Temporary Energy Transition Bonds. Pending the preparation of Definitive Energy Transition Bonds pursuant to Section 2.13, the Issuer may execute, and upon receipt of an Issuer Order the Indenture Trustee shall authenticate and deliver, Temporary Energy Transition Bonds that are printed, lithographed, typewritten, mimeographed or otherwise produced, of the tenor of the Definitive Energy Transition Bonds in lieu of which they are issued and with such variations not inconsistent with the terms of this Indenture and the related Series Supplement as the officers executing the Energy Transition Bonds may determine, as evidenced by their execution of the Energy Transition Bonds.

11

If Temporary Energy Transition Bonds are issued, the Issuer will cause Definitive Energy Transition Bonds to be prepared without unreasonable delay. After the preparation of Definitive Energy Transition Bonds, the Temporary Energy Transition Bonds shall be exchangeable for Definitive Energy Transition Bonds upon surrender of the Temporary Energy Transition Bonds at the office or agency of the Issuer to be maintained as provided in Section 3.02, without charge to the Holder. Upon surrender for cancellation of any one or more Temporary Energy Transition Bonds, the Issuer shall execute and the Indenture Trustee shall authenticate and deliver in exchange therefor a like principal amount of Definitive Energy Transition Bonds of authorized denominations. Until so delivered in exchange, the Temporary Energy Transition Bonds shall in all respects be entitled to the same benefits under this Indenture as Definitive Energy Transition Bonds.

Section 2.05.         Registration; Registration of Transfer and Exchange of Energy Transition Bonds. The Issuer shall cause to be kept a register (the “Energy Transition Bond Register”) in which, subject to such reasonable regulations as it may prescribe, the Issuer shall provide for the registration of Energy Transition Bonds and the registration of transfers of Energy Transition Bonds. U.S. Bank Trust Company, National Association shall be “Energy Transition Bond Registrar” for the purpose of registering the Energy Transition Bonds and transfers of Energy Transition Bonds as herein provided. Upon any resignation of any Energy Transition Bond Registrar, the Issuer shall promptly appoint a successor or, if it elects not to make such an appointment, assume the duties of Energy Transition Bond Registrar.

If a Person other than the Indenture Trustee is appointed by the Issuer as Energy Transition Bond Registrar, the Issuer will give the Indenture Trustee prompt written notice of the appointment of such Energy Transition Bond Registrar and of the location, and any change in the location, of the Energy Transition Bond Register, and the Indenture Trustee shall have the right to inspect the Energy Transition Bond Register at all reasonable times and to obtain copies thereof, and the Indenture Trustee shall have the right to rely conclusively upon a certificate executed on behalf of the Energy Transition Bond Registrar by a Responsible Officer thereof as to the names and addresses of the Holders and the principal amounts and number of the Energy Transition Bonds (separately stated by Tranche).

Upon surrender for registration of transfer of any Energy Transition Bond at the office or agency of the Issuer to be maintained as provided in Section 3.02, provided that the requirements of Section 8-401 of the UCC are met, the Issuer shall execute, and the Indenture Trustee shall authenticate and the Holder shall obtain from the Indenture Trustee, in the name of the designated transferee or transferees, one or more new Energy Transition Bonds in any Authorized Denominations, of the same Tranche and aggregate principal amount.

12

At the option of the Holder, Energy Transition Bonds may be exchanged for other Energy Transition Bonds in any Authorized Denominations, of the same Tranche and aggregate principal amount, upon surrender of the Energy Transition Bonds to be exchanged at such office or agency as provided in Section 3.02. Whenever any Energy Transition Bonds are so surrendered for exchange, the Issuer shall, provided that the requirements of Section 8-401 of the UCC are met, execute, and, upon any such execution, the Indenture Trustee shall authenticate and the Holder shall obtain from the Indenture Trustee, the Energy Transition Bonds that the Holder making the exchange is entitled to receive.

All Energy Transition Bonds issued upon any registration of transfer or exchange of other Energy Transition Bonds shall be the valid obligations of the Issuer, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Energy Transition Bonds surrendered upon such registration of transfer or exchange.

Every Energy Transition Bond presented or surrendered for registration of transfer or exchange shall be duly endorsed by, or be accompanied by: (a) a written instrument of transfer in form satisfactory to the Indenture Trustee duly executed by the Holder thereof or such Holder’s attorney duly authorized in writing, with such signature guaranteed by an institution that is a member of: (i) The Securities Transfer Agent Medallion Program (STAMP); (ii) The New York Stock Exchange Medallion Program (MSP); (iii) The Stock Exchange Medallion Program (SEMP); or (iv) such other signature guaranty program acceptable to the Indenture Trustee; and (b) such other documents as the Indenture Trustee may require.

No service charge shall be made to a Holder for any registration of transfer or exchange of Energy Transition Bonds, but the Issuer or the Indenture Trustee may require payment of a sum sufficient to cover any tax or other governmental charge or any fees or expenses of the Indenture Trustee that may be imposed in connection with any registration of transfer or exchange of Energy Transition Bonds, other than exchanges pursuant to Section 2.04 or Section 2.06 not involving any transfer

The preceding provisions of this Section 2.05 notwithstanding, the Issuer shall not be required to make, and the Energy Transition Bond Registrar need not register, transfers or exchanges of any Energy Transition Bond that has been submitted within 15 days preceding the due date for any payment with respect to such Energy Transition Bond until after such due date has occurred.

Section 2.06.         Mutilated, Destroyed, Lost or Stolen Energy Transition Bonds. If (a) any mutilated Energy Transition Bond is surrendered to the Indenture Trustee or the Indenture Trustee receives evidence to its satisfaction of the destruction, loss or theft of any Energy Transition Bond and (b) there is delivered to the Indenture Trustee such security or indemnity as may be required by it to hold the Issuer and the Indenture Trustee harmless, then, in the absence of notice to the Issuer, the Energy Transition Bond Registrar or the Indenture Trustee that such Energy Transition Bond has been acquired by a Protected Purchaser, the Issuer shall, provided that the requirements of Section 8-401 of the UCC are met, execute, and, upon the Issuer’s written request, the Indenture Trustee shall authenticate and deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or stolen Energy Transition Bond, a replacement Energy Transition Bond of like Series, Tranche and principal amount, bearing a number not contemporaneously outstanding; provided, however, that, if any such destroyed, lost or stolen Energy Transition Bond, but not a mutilated Energy Transition Bond, shall have become or within seven days shall be due and payable, instead of issuing a replacement Energy Transition Bond, the Issuer may pay such destroyed, lost or stolen Energy Transition Bond when so due or payable without surrender thereof. If, after the delivery of such replacement Energy Transition Bond or payment of a destroyed, lost or stolen Energy Transition Bond pursuant to the proviso to the preceding sentence, a Protected Purchaser of the original Energy Transition Bond in lieu of which such replacement Energy Transition Bond was issued presents for payment such original Energy Transition Bond, the Issuer and the Indenture Trustee shall be entitled to recover such replacement Energy Transition Bond (or such payment) from the Person to whom it was delivered or any Person taking such replacement Energy Transition Bond from such Person to whom such replacement Energy Transition Bond was delivered or any assignee of such Person, except a Protected Purchaser, and shall be entitled to recover upon the security or indemnity provided therefor to the extent of any loss, damage, cost or expense incurred by the Issuer or the Indenture Trustee in connection therewith.

13

Upon the issuance of any replacement Energy Transition Bond under this Section 2.06, the Issuer and/or the Indenture Trustee may require the payment by the Holder of such Energy Transition Bond of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other reasonable expenses (including the fees and expenses of the Indenture Trustee and the Energy Transition Bond Registrar) in connection therewith.

Every replacement Energy Transition Bond issued pursuant to this Section 2.06 in replacement of any mutilated, destroyed, lost or stolen Energy Transition Bond shall constitute an original additional contractual obligation of the Issuer, whether or not the mutilated, destroyed, lost or stolen Energy Transition Bond shall be found at any time or enforced by any Person, and shall be entitled to all the benefits of this Indenture equally and proportionately with any and all other Energy Transition Bonds duly issued hereunder.

The provisions of this Section 2.06 are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Energy Transition Bonds.

Section 2.07.         Persons Deemed Owner. Prior to due presentment for registration of transfer of any Energy Transition Bond, the Issuer, the Indenture Trustee, the Energy Transition Bond Registrar and any agent of the Issuer or the Indenture Trustee may treat the Person in whose name any Energy Transition Bond is registered (as of the day of determination) as the owner of such Energy Transition Bond for the purpose of receiving payments of principal of and premium, if any, and interest on such Energy Transition Bond and for all other purposes whatsoever, whether or not such Energy Transition Bond be overdue, and none of the Issuer, the Indenture Trustee or any agent of the Issuer or the Indenture Trustee shall be affected by notice to the contrary.

Section 2.08.         Payment of Principal, Premium, if any, and Interest; Interest on Overdue Principal; Principal, Premium, if any, and Interest Rights Preserved.

(a)            The Energy Transition Bonds shall accrue interest as provided in the Series Supplement at the applicable Bond Interest Rate, and such interest shall be payable on each applicable Payment Date. Any installment of interest, principal or premium, if any, payable on any Energy Transition Bond that is punctually paid or duly provided for on the applicable Payment Date shall be paid to the Person in whose name such Energy Transition Bond (or one or more Predecessor Energy Transition Bonds) is registered on the Record Date for the applicable Payment Date by check mailed first-class, postage prepaid, to the Person whose name appears as the Registered Holder (or by wire transfer to an account maintained by such Holder) in accordance with payment instructions delivered to the Indenture Trustee by such Holder, and, with respect to Book-Entry Energy Transition Bonds, payments will be made by wire transfer in immediately available funds to the account designated by the Holder of the applicable Global Energy Transition Bond unless and until such Global Energy Transition Bond is exchanged for Definitive Energy Transition Bonds (in which event payments shall be made as provided above) and except for the final installment of principal and premium, if any, payable with respect to such Energy Transition Bond on a Payment Date, which shall be payable as provided below.

14

(b)            The principal of each Energy Transition Bond of each Tranche shall be paid, to the extent funds are available therefor in the Collection Account for such Series, in installments on each Payment Date specified in the Series Supplement; provided, that installments of principal not paid when scheduled to be paid in accordance with the Expected Amortization Schedule shall be paid upon receipt of money available for such purpose, in the order set forth in the Expected Amortization Schedule. Failure to pay principal in accordance with such Expected Amortization Schedule because moneys are not available pursuant to Section 8.02 to make such payments shall not constitute a Default or Event of Default under this Indenture; provided, however, that failure to pay the entire unpaid principal amount of the Energy Transition Bonds of a Tranche upon the Final Maturity Date for the Energy Transition Bonds of such Tranche shall constitute an Event of Default under this Indenture as set forth in Section 5.01. Notwithstanding the foregoing, the entire unpaid principal amount of the Energy Transition Bonds shall be due and payable, if not previously paid, on the date on which an Event of Default shall have occurred and be continuing, if the Indenture Trustee or the Holders of Energy Transition Bonds representing a majority of the Outstanding Amount of the Energy Transition Bonds have declared such Energy Transition Bonds to be immediately due and payable in the manner provided in Section 5.02. All payments of principal and premium, if any, on such Energy Transition Bonds shall be made pro rata to the Holders entitled thereto unless otherwise provided in the Series Supplement. The Indenture Trustee shall notify the Person in whose name an Energy Transition Bond is registered at the close of business on the date that is 15 days prior to the Payment Date (or on the preceding Business Day if such day is not a Business Day) on which the Issuer expects that the final installment of principal of and premium, if any, and interest on such Energy Transition Bond will be paid. Such notice shall be mailed no later than five days prior to such final Payment Date (and, with respect to Book-Entry Energy Transition Bonds, such notice shall be sent to DTC (or any successor clearing agency) pursuant to DTC’s (or such successor clearing agency’s) applicable procedures) and shall specify that such final installment will be payable only upon presentation and surrender of such Energy Transition Bond and shall specify the place where such Energy Transition Bond may be presented and surrendered for payment of such installment.

(c)            If interest on the Energy Transition Bonds is not paid when due, such defaulted interest shall be paid (plus interest on such defaulted interest at the applicable Bond Interest Rate to the extent lawful) to the Persons who are Holders on a subsequent Special Record Date, which date shall be at least 15 Business Days prior to the Special Payment Date. The Issuer shall fix or cause to be fixed any such Special Record Date and Special Payment Date, and, at least ten days before any such Special Record Date, the Issuer shall mail to each affected Holder a notice that states the Special Record Date, the Special Payment Date and the amount of defaulted interest (plus interest on such defaulted interest) to be paid.

15

Section 2.09.        Cancellation. All Energy Transition Bonds surrendered for payment, registration of transfer or exchange shall, if surrendered to any Person other than the Indenture Trustee, be delivered to the Indenture Trustee and shall be promptly canceled by the Indenture Trustee. The Issuer may at any time deliver to the Indenture Trustee for cancellation any Energy Transition Bonds previously authenticated and delivered hereunder that the Issuer may have acquired in any manner whatsoever, and all Energy Transition Bonds so delivered shall be promptly canceled by the Indenture Trustee. No Energy Transition Bonds shall be authenticated in lieu of or in exchange for any Energy Transition Bonds canceled as provided in this Section 2.09, except as expressly permitted by this Indenture. All canceled Energy Transition Bonds may be held or disposed of by the Indenture Trustee in accordance with its standard retention or disposal policy as in effect at the time.

Section 2.10.        Outstanding Amount; Authentication and Delivery of Energy Transition Bonds. The aggregate Outstanding Amount of Energy Transition Bonds that may be authenticated and delivered under this Indenture shall not exceed the aggregate of the amount of Energy Transition Bonds that are authorized in the Financing Order.

Energy Transition Bonds may at any time be executed by the Issuer and delivered to the Indenture Trustee for authentication and thereupon the same shall be authenticated and delivered by the Indenture Trustee upon Issuer Request and upon delivery by the Issuer to the Indenture Trustee of the following:

(a)            Issuer Action. An Issuer Order authorizing and directing the authentication and delivery of the Energy Transition Bonds by the Indenture Trustee and specifying the principal amount of Energy Transition Bonds to be authenticated.

(b)           Authorizations. Copies of (i) the Financing Order which shall be in full force and effect and be Final, (ii) certified resolutions of the Managers or Member of the Issuer authorizing the execution and delivery of the Series Supplement and the execution, authentication and delivery of the Energy Transition Bonds and (iii) a Series Supplement duly executed by the Issuer.

(c)            Opinions. An opinion or opinions, portions of which may be delivered by one or more counsel for the Issuer, portions of which may be delivered by one or more counsel for the Servicer, and portions of which may be delivered by one or more counsel for the Seller, dated the Series Closing Date, in each case subject to the customary exceptions, qualifications and assumptions contained therein, to the collective effect, that (i) all conditions precedent provided for in this Indenture relating to (A) the authentication and delivery of the Issuer’s Energy Transition Bonds and (B) the execution of the Series Supplement to this Indenture dated the Series Closing Date have been complied with, (ii) the execution of the Series Supplement to this Indenture dated the Series Closing Date is permitted by this Indenture, (iii) such action has been taken with respect to the recording and filing of this Indenture, any indentures supplemental hereto and any other requisite documents, and with respect to the execution and filing of any filings with the Commission, the Secretary of State of the State of Delaware or the New Mexico Secured Transaction Registry pursuant to the Energy Transition Act and the Financing Order, financing statements and continuation statements, as are necessary to perfect and make effective the Lien and the perfected security interest created by this Indenture and the Series Supplement, and, based on a review of a current report of a search of the appropriate governmental filing office, no other Lien that can be perfected solely by the filing of financing statements under the applicable UCC ranks equal or prior to the Lien of the Indenture Trustee in the Collateral, and reciting the details of such action, or stating that, in the opinion of such counsel, no such action is necessary to make effective such Lien, together with the other Opinions of Counsel described in Sections [__] through [__] of the Underwriting Agreement (other than Sections [__] and [__] thereof) relating to the Issuer’s Energy Transition Bonds.

16

(d)           Authorizing Certificate. An Officer’s Certificate, dated the Series Closing Date, of the Issuer certifying that (i) the Issuer has duly authorized the execution and delivery of this Indenture and the Series Supplement and the execution and delivery of the Series of Energy Transition Bonds and (ii) the Series Supplement is in the form attached thereto and complies with the requirements of Section 2.02.

(e)           The Collateral. The Issuer shall have made or caused to be made all filings with the Commission and the New Mexico Secured Transaction Registry pursuant to the Financing Order and the Energy Transition Act and all other filings necessary to perfect the Grant of the Collateral to the Indenture Trustee and the Lien of this Indenture and the Series Supplement, including but not limited to UCC Financing Statements in Delaware or New Mexico as applicable.

(f)            Series Supplement. A Series Supplement for the Energy Transition Bonds applied for, which shall set forth the provisions and form of the Energy Transition Bonds of each Tranche thereof.

(g)            Certificates of the Issuer and the Seller.

(i)            An Officer’s Certificate from the Issuer, dated as of the Series Closing Date:

(A)             to the effect that (1) the Issuer is not in Default under this Indenture and that the issuance of the Energy Transition Bonds will not result in any Default or in any breach of any of the terms, conditions or provisions of or constitute a default under the Financing Order, or any indenture, mortgage, deed of trust or other agreement or instrument to which the Issuer is a party or by which it or its property is bound or any order of any court or administrative agency entered in any Proceeding to which the Issuer is a party or by which it or its property may be bound or to which it or its property may be subject and (2) all conditions precedent provided in this Indenture relating to the execution, authentication and delivery of the Energy Transition Bonds have been complied with;

17

(B)              to the effect that: the Issuer has not assigned any interest or participation in the Collateral except for the Grant contained in this Indenture and the Series Supplement; the Issuer has the power and right to Grant the Collateral to the Indenture Trustee as security hereunder and thereunder; and the Issuer, subject to the terms of this Indenture, has Granted to the Indenture Trustee a first priority perfected security interest in all of its right, title and interest in and to such Collateral free and clear of any Lien arising as a result of actions of the Issuer or through the Issuer, except Permitted Liens;

(C)              to the effect that the Issuer has appointed the firm of Independent registered public accountants as contemplated in Section 8.06;

(D)              to the effect that the respective Sale Agreement, Servicing Agreement and Administration Agreement are, to the knowledge of the Issuer (and assuming such agreements are enforceable against all parties thereto other than the Issuer and Public Service Company of New Mexico), in full force and effect and, to the knowledge of the Issuer, that no party is in default of its obligations under such agreements; and

(E)              certifying that the Energy Transition Bonds have received the ratings from the Rating Agencies if required by the Underwriting Agreement for such Series as a condition to the issuance of such Energy Transition Bonds; and

(F)              stating that (i) all conditions precedent provided for in this Indenture relating to (a) the authentication and delivery of the Energy Transition Bonds, and (b) the execution of the Series Supplement to this Indenture have been complied with, (ii) the execution of the Series Supplement is authorized or permitted by this Indenture, and (iii) the Issuer has delivered the documents required under this Section 2.10 and has otherwise satisfied the requirements set out in this Section 2.10, including, but not limited to, complying with Section 2.10(f)(i) hereof.

(ii)           An officer’s certificate from the Seller, dated as of the Series Closing Date, to the effect that:

(A)             in the case of the Property identified in the Bill of Sale, immediately prior to the conveyance thereof to the Issuer pursuant to the Sale Agreement: the Seller was the original and the sole owner of such Property, free and clear of any Lien; the Seller had not assigned any interest or participation in such Property and the proceeds thereof other than to the Issuer pursuant to the Sale Agreement; the Seller has the power, authority and right to own, sell and assign such Property and the proceeds thereof to the Issuer; the Seller has its chief executive office in the State of New Mexico; and the Seller, subject to the terms of the Sale Agreement, has validly sold and assigned to the Issuer all of its right, title and interest in and to such Property and the proceeds thereof, free and clear of any Lien (other than Permitted Liens) and such sale and assignment is absolute and irrevocable and has been perfected;

18

(B)              in the case of the Property identified in the Bill of Sale, immediately prior to the conveyance thereof to the Issuer pursuant to the Sale Agreement, the attached copy of the Financing Order creating such Property is true and complete and is in full force and effect; and

(C)              the Required Capital Level has been deposited or caused to be deposited by the Seller with the Indenture Trustee for crediting to the Capital Subaccount.

(h)            Accountant’s Certificate or Letter. One or more certificates or letters, addressed to the Issuer, of a firm of Independent registered public accountants of recognized national reputation to the effect that (i) such accountants are Independent with respect to the Issuer within the meaning of this Indenture and are independent public accountants within the meaning of the standards of the Public Company Accounting Oversight Board and (ii) with respect to the Collateral, they have applied such procedures as instructed by the addressees of such certificate or letter.

(i)             Requirements of Series Supplement. Such other funds, accounts, documents, certificates, agreements, instruments or opinions as may be required by the terms of the Series Supplement.

(j)             Other Requirements. Such other documents, certificates, agreements, instruments or opinions as the related Underwriters may reasonably require.

Section 2.11.         Book-Entry Energy Transition Bonds. Unless the Series Supplement provides otherwise, all of the Energy Transition Bonds shall be issued in Book-Entry Form, and the Issuer shall execute and the Indenture Trustee shall, in accordance with this Section 2.11 and the Issuer Order, authenticate and deliver one or more Global Energy Transition Bonds, evidencing the Energy Transition Bonds, which (a) shall be an aggregate original principal amount equal to the aggregate original principal amount of the Energy Transition Bonds to be issued pursuant to the Issuer Order, (b) shall be registered in the name of the Clearing Agency therefor or its nominee, which shall initially be Cede & Co., as nominee for The Depository Trust Company, the initial Clearing Agency, (c) shall be delivered by the Indenture Trustee pursuant to such Clearing Agency’s or such nominee’s instructions and (d) shall bear a legend substantially to the effect set forth in Exhibit A to the Form of Series Supplement.

Each Clearing Agency designated pursuant to this Section 2.11 must, at the time of its designation and at all times while it serves as Clearing Agency hereunder, be a “clearing agency” registered under the Exchange Act and any other applicable statute or regulation.

No Holder of Energy Transition Bonds issued in Book-Entry Form shall receive a Definitive Energy Transition Bond representing such Holder’s interest in any of the Energy Transition Bonds, except as provided in Section 2.13. Unless (and until) certificated, fully registered Energy Transition Bonds (the “Definitive Energy Transition Bonds”) have been issued to the Holders pursuant to Section 2.13 or pursuant to the Series Supplement relating thereto:

19

(i)            the provisions of this Section 2.11 shall be in full force and effect;

(ii)           the Issuer, the Servicer, the Paying Agent, the Energy Transition Bond Registrar and the Indenture Trustee may deal with the Clearing Agency for all purposes (including the making of distributions on the Energy Transition Bonds and the giving of instructions or directions hereunder) as the authorized representative of the Holders;

(iii)          to the extent that the provisions of this Section 2.11 conflict with any other provisions of this Indenture, the provisions of this Section 2.11 shall control;

(iv)          the rights of Holders shall be exercised only through the Clearing Agency and the Clearing Agency Participants and shall be limited to those established by law and agreements between such Holders and the Clearing Agency and/or the Clearing Agency Participants. Pursuant to the Letter of Representations, unless and until Definitive Energy Transition Bonds are issued pursuant to Section 2.13, the initial Clearing Agency will make book-entry transfers among the Clearing Agency Participants and receive and transmit distributions of principal of and interest on the Book-Entry Energy Transition Bonds to such Clearing Agency Participants; and

(v)           whenever this Indenture requires or permits actions to be taken based upon instruction or directions of the Holders evidencing a specified percentage of the Outstanding Amount of Energy Transition Bonds, the Clearing Agency shall be deemed to represent such percentage only to the extent that it has received instructions to such effect from the Holders and/or the Clearing Agency Participants owning or representing, respectively, such required percentage of the beneficial interest in the Energy Transition Bonds and has delivered such instructions to a Responsible Officer of the Indenture Trustee.

Section 2.12.         Notices to Clearing Agency. Unless and until Definitive Energy Transition Bonds shall have been issued to Holders pursuant to Section 2.13, whenever notice, payment or other communications to the holders of Book-Entry Energy Transition Bonds is required under this Indenture, the Indenture Trustee, the Servicer and the Paying Agent, as applicable, shall make all such payments to, and give all such notices and communications specified herein to be given to Holders, to the Clearing Agency.

Section 2.13.         Definitive Energy Transition Bonds. If (a) (i) the Issuer advises the Indenture Trustee in writing that the Clearing Agency is no longer willing or able to properly discharge its responsibilities under any Letter of Representations and (ii) the Issuer is unable to locate a qualified successor Clearing Agency, (b) the Issuer, at its option, advises the Indenture Trustee in writing that it elects to terminate the book-entry system through the Clearing Agency or (c) after the occurrence of an Event of Default hereunder, Holders holding Energy Transition Bonds aggregating a majority of the aggregate Outstanding Amount of Energy Transition Bonds maintained as Book-Entry Energy Transition Bonds advise the Indenture Trustee, the Issuer and the Clearing Agency (through the Clearing Agency Participants) in writing that the continuation of a book-entry system through the Clearing Agency is no longer in the best interests of the Holders, the Issuer shall notify the Clearing Agency, the Indenture Trustee and all such Holders in writing of the occurrence of any such event and of the availability of Definitive Energy Transition Bonds to the Holders requesting the same. Upon surrender to the Indenture Trustee of the Global Energy Transition Bonds by the Clearing Agency accompanied by registration instructions from such Clearing Agency for registration, the Issuer shall execute, and the Indenture Trustee shall authenticate and deliver, Definitive Energy Transition Bonds in accordance with the instructions of the Clearing Agency. None of the Issuer, the Energy Transition Bond Registrar, the Paying Agent or the Indenture Trustee shall be liable for any delay in delivery of such instructions and may conclusively rely on, and shall be fully protected in relying on, such instructions. Upon the issuance of Definitive Energy Transition Bonds, the Indenture Trustee shall recognize the Holders of the Definitive Energy Transition Bonds as Holders hereunder without need for any consent or acknowledgement from the Holders.

20

Definitive Energy Transition Bonds will be transferable and exchangeable at the offices of the Energy Transition Bond Registrar.

Section 2.14.         CUSIP Number. The Issuer in issuing any Energy Transition Bonds may use a “CUSIP” number and, if so used, the Indenture Trustee shall use the CUSIP number provided to it by the Issuer in any notices to the Holders thereof as a convenience to such Holders; provided, that any such notice may state that no representation is made as to the correctness or accuracy of the CUSIP number printed in the notice or on the Energy Transition Bonds and that reliance may be placed only on the other identification numbers printed on the Energy Transition Bonds. The Issuer shall promptly notify the Indenture Trustee in writing of any change in the CUSIP number with respect to any Energy Transition Bond.

Section 2.15.         Letter of Representations. The Issuer shall comply with the terms of each Letter of Representations applicable to the Issuer.

Section 2.16.        Tax Treatment. The Issuer and the Indenture Trustee, by entering into this Indenture, and the Holders and any Persons holding a beneficial interest in any Energy Transition Bond, by acquiring any Energy Transition Bond or interest therein, (a) express their intention that, solely for the purposes of U.S. federal taxes and, to the extent consistent with applicable state, local and other tax law, solely for the purposes of state, local and other taxes, the Energy Transition Bonds qualify under applicable tax law as indebtedness of the Member secured by the Collateral and (b) solely for the purposes of U.S. federal taxes and, to the extent consistent with applicable state, local and other tax law, solely for purposes of state, local and other taxes, so long as any of the Energy Transition Bonds are outstanding, agree to treat the Energy Transition Bonds as indebtedness of the Member secured by the Collateral unless otherwise required by appropriate taxing authorities.

Section 2.17.         State Pledge. Under the laws of the State of New Mexico in effect on the date hereof, pursuant to Section 19 of the Energy Transition Act, the State of New Mexico has pledged to and agreed with the Holders, any Assignees and any Financing Parties that the State of New Mexico shall not take or permit any action that impairs the value of the Property, except as allowed pursuant to Section 62-18-6 of the Energy Transition Act, or reduces, alters or impairs Charges that are imposed, collected and remitted for the benefit of the Holders, any Assignees and any Financing Parties, until the entire principal of, interest on and redemption premium on the Energy Transition Bonds, all Financing Costs and all amounts paid to an Assignee or Financing Party under an Ancillary Agreement are paid in full and performed in full.

21

The Issuer hereby acknowledges that the purchase of any Energy Transition Bond by a Holder or the purchase of any beneficial interest in an Energy Transition Bond by any Person and the Indenture Trustee’s obligations to perform hereunder are made in reliance on such agreement and pledge by the State of New Mexico.

Section 2.18.         Security Interests. The Issuer hereby makes the following representations and warranties. Other than the security interests granted to the Indenture Trustee pursuant to this Indenture in the Series Supplement, the Issuer has not pledged, granted, sold, conveyed or otherwise assigned any interests or security interests in the Collateral and no security agreement, financing statement or equivalent security or Lien instrument listing the Issuer as debtor covering all or any part of the Collateral is on file or of record in any jurisdiction, except such as may have been filed, recorded or made by the Issuer in favor of the Indenture Trustee on behalf of the Secured Parties in connection with this Indenture. This Indenture and the Series Supplement constitute a valid and continuing lien on, and first priority perfected security interest in, the Collateral in favor of the Indenture Trustee on behalf of the Secured Parties, which lien and security interest is prior to all other Liens and is enforceable as such as against creditors of and purchasers from the Issuer in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws affecting creditors’ rights generally or by general equitable principles, whether considered in a proceeding at law or in equity and by an implied covenant of good faith and fair dealing. With respect to all Collateral, this Indenture, together with the Series Supplement, creates a valid and continuing first priority perfected security interest (as defined in the UCC) in such Collateral, which security interest is prior to all other Liens and is enforceable as such as against creditors of and purchasers from the Issuer in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws affecting creditors’ rights generally or by general equitable principles, whether considered in a proceeding at law or in equity and by an implied covenant of good faith and fair dealing. The Issuer has good and marketable title to the Collateral free and clear of any Lien of any Person other than Permitted Liens. All of the Collateral constitutes Property or accounts, deposit accounts, investment property or general intangibles (as each such term is defined in the UCC), except that proceeds of the Collateral may also take the form of instruments. The Issuer has taken, or caused the Servicer to take, all action necessary to perfect the security interest in the Collateral granted to the Indenture Trustee, for the benefit of the Secured Parties. The Issuer has filed (or has caused the Servicer to file) all appropriate financing statements in the proper filing offices in the appropriate jurisdictions under applicable law in order to perfect the security interest in the Collateral granted to the Indenture Trustee. The Issuer has not authorized the filing of and is not aware, after due inquiry, of any financing statements against the Issuer that include a description of the Collateral other than those filed in favor of the Indenture Trustee. The Issuer is not aware of any judgment or tax lien filings against the Issuer. The Collection Account (including all subaccounts thereof) constitutes a “securities account” and/or a “deposit account” within the meaning of the UCC. The Issuer has taken all steps necessary to cause the Securities Intermediary of each such securities account to identify in its records the Indenture Trustee as the Person having a security entitlement against the Securities Intermediary in such securities account, no Collection Account is in the name of any Person other than the Indenture Trustee, and the Issuer has not consented to the Securities Intermediary of the Collection Account to comply with entitlement orders of any Person other than the Indenture Trustee. All of the Collateral constituting investment property has been and will have been credited to the Collection Account or a subaccount thereof, and the Securities Intermediary for the Collection Account has agreed to treat all assets credited to the Collection Account (other than cash) as “financial assets” within the meaning of the UCC. Accordingly, the Indenture Trustee has a first priority perfected security interest in the Collection Account, all funds and financial assets on deposit therein, and all securities entitlements relating thereto. The representations and warranties set forth in this Section 2.18 shall survive the execution and delivery of this Indenture and the issuance of any Energy Transition Bonds, shall be deemed re-made on each date on which any funds in the Collection Account are distributed to the Issuer as provided in Section 8.04 or otherwise released from the Lien of the Indenture and may not be waived by any party hereto except pursuant to a supplemental indenture executed in accordance with Article IX and as to which the Rating Agency Condition has been satisfied.

22

ARTICLE III

COVENANTS

Section 3.01.         Payment of Principal, Premium, if any, and Interest. The principal of and premium, if any, and interest on the Energy Transition Bonds shall be duly and punctually paid by the Issuer, or the Servicer on behalf of the Issuer, in accordance with the terms of the Energy Transition Bonds and this Indenture and the applicable Series Supplement; provided, that, except on a Final Maturity Date of a Series or Tranche or upon the acceleration of a Series of Energy Transition Bonds following the occurrence of an Event of Default, the Issuer shall only be obligated to pay the principal of such Energy Transition Bonds on each Payment Date therefor to the extent moneys are available for such payment pursuant to Section 8.02. Amounts properly withheld under the Code, the Treasury regulations promulgated thereunder or other tax laws by any Person from a payment to any Holder of interest or principal or premium, if any, shall be considered as having been paid by the Issuer to such Holder for all purposes of this Indenture.

Section 3.02.         Maintenance of Office or Agency. The Issuer shall initially maintain in St. Paul, Minnesota, an office or agency where Energy Transition Bonds may be surrendered for registration of transfer or exchange. The Issuer shall give prompt written notice to the Indenture Trustee of the location, and of any change in the location, of any such office or agency. The Issuer hereby initially appoints the Energy Transition Bond Registrar to serve as its agent for the foregoing purposes, and the Corporate Trust Office of the Indenture Trustee shall serve as the offices provided above in this Section 3.02. If at any time the Issuer shall fail to maintain any such office or agency or shall fail to furnish the Indenture Trustee with the address thereof, such surrenders may be made at the office of the Energy Transition Bond Registrar located at the Corporate Trust Office, and the Issuer hereby appoints the Energy Transition Bond Registrar as its agent to receive all such surrenders.

23

Section 3.03.         Money for Payments To Be Held in Trust. As provided in Section 8.02(a), all payments of amounts due and payable with respect to any Energy Transition Bonds that are to be made from amounts withdrawn from the Collection Account pursuant to Section 8.02(d) shall be made on behalf of the Issuer by the Indenture Trustee or by another Paying Agent, and no amounts so withdrawn from the Collection Account for payments with respect to any Energy Transition Bonds shall be paid over to the Issuer except as provided in this Section 3.03 and Section 8.02.

Each Paying Agent shall meet the eligibility criteria set forth for any Indenture Trustee under Section 6.11. The Issuer will cause each Paying Agent other than the Indenture Trustee to execute and deliver to the Indenture Trustee an instrument in which such Paying Agent shall agree with the Indenture Trustee (and if the Indenture Trustee acts as Paying Agent, it hereby so agrees), subject to the provisions of this Section 3.03, that such Paying Agent will:

(a)            hold all sums held by it for the payment of amounts due with respect to the Energy Transition Bonds in trust for the benefit of the Persons entitled thereto until such sums shall be paid to such Persons or otherwise disposed of as herein provided and pay such sums to such Persons as herein provided;

(b)            give the Indenture Trustee, unless the Indenture Trustee is the Paying Agent, and the Rating Agencies written notice of any Default by the Issuer of which it has actual knowledge in the making of any payment required to be made with respect to the Energy Transition Bonds;

(c)            at any time during the continuance of any such Default, upon the written request of the Indenture Trustee, forthwith pay to the Indenture Trustee all sums so held in trust by such Paying Agent;

(d)            immediately, with notice to the Rating Agencies, resign as a Paying Agent and forthwith pay to the Indenture Trustee all sums held by it in trust for the payment of Energy Transition Bonds if at any time the Paying Agent determines that it has ceased to meet the standards required to be met by a Paying Agent at the time of such determination; and

(e)            comply with all requirements of the Code, the Treasury regulations promulgated thereunder and other tax laws with respect to the withholding from any payments made by it on any Energy Transition Bonds of any applicable withholding taxes imposed thereon and with respect to any applicable reporting requirements in connection therewith.

The Issuer may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, by Issuer Order direct any Paying Agent to pay to the Indenture Trustee all sums held in trust by such Paying Agent, such sums to be held by the Indenture Trustee upon the same trusts as those upon which the sums were held by such Paying Agent; and, upon such payment by any Paying Agent to the Indenture Trustee, such Paying Agent shall be released from all further liability with respect to such money.

24

Subject to applicable laws with respect to escheatment of funds, any money held by the Indenture Trustee or any Paying Agent in trust for the payment of any amount due with respect to any Energy Transition Bond and remaining unclaimed for two years after such amount has become due and payable shall be discharged from such trust and be paid to the Issuer upon receipt of an Issuer Request; and, subject to Section 10.14, the Holder of such Energy Transition Bond shall thereafter, as an unsecured general creditor, look only to the Issuer for payment thereof (but only to the extent of the amounts so paid to the Issuer), and all liability of the Indenture Trustee or such Paying Agent with respect to such trust money shall thereupon cease; provided, however, that the Indenture Trustee or such Paying Agent, at the request of the Issuer, shall, at the expense of the Issuer, cause to be published once, in a newspaper published in the English language, customarily published on each Business Day and of general circulation in The City of New York, notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such publication, any unclaimed balance of such money then remaining will be repaid to the Issuer. The Indenture Trustee may also adopt and employ, at the written direction and expense of the Issuer, any other reasonable means of notification of such repayment (including mailing notice of such repayment to Holders whose right to or interest in moneys due and payable but not claimed is determinable from the records of the Indenture Trustee or of any Paying Agent, at the last address of record for each such Holder).

Section 3.04.         Existence. The Issuer shall keep in full effect its existence, rights and franchises as a limited liability company under the laws of the State of Delaware (unless it becomes, or any successor Issuer hereunder is or becomes, organized under the laws of any other State or of the United States of America, in which case the Issuer will keep in full effect its existence, rights and franchises under the laws of such other jurisdiction) and will obtain and preserve its qualification to do business in each jurisdiction in which such qualification is or shall be necessary to protect the validity and enforceability of this Indenture, the other Basic Documents, the Energy Transition Bonds, the Collateral and each other instrument or agreement referenced herein or therein.

Section 3.05.         Protection of Collateral. The Issuer shall from time to time execute and deliver all such supplements and amendments hereto and all filings with the Commission, the Secretary of State of the State of Delaware or the New Mexico Secured Transaction Registry pursuant to the Financing Order or to the Energy Transition Act and all financing statements, continuation statements, instruments of further assurance and other instruments, and shall take such other action necessary or advisable, to:

(a)            maintain or preserve the Lien (and the priority thereof) of this Indenture and the Series Supplement or carry out more effectively the purposes hereof;

(b)            perfect, publish notice of or protect the validity of any Grant made or to be made by this Indenture;

(c)            enforce any of the Collateral;

(d)            preserve and defend title to the Collateral and the rights of the Indenture Trustee and the Holders in such Collateral against the Claims of all Persons, including a challenge by any party to the validity or enforceability of the Financing Order, the Property or any proceeding relating thereto and institute any action or proceeding necessary to compel performance by the Commission or the State of New Mexico of any of its obligations or duties under the Energy Transition Act, the State Pledge, or the Financing Order; and

25

(e)            pay any and all taxes levied or assessed upon all or any part of the Collateral.

The Indenture Trustee is specifically permitted and authorized, but not required to file financing statements covering the Collateral, including financing statements that describe the Collateral as “all assets” or “all personal property” of the Issuer and/or reflecting Section 62-18-13 of the Energy Transition Act. The Indenture Trustee shall not be responsible for filing any such financing statements.

Section 3.06.         Opinions as to Collateral.

(a)            Within 90 days after the beginning of each calendar year beginning with the calendar year beginning January 1, 2024, the Issuer shall furnish to the Indenture Trustee an Opinion of Counsel of the Issuer either stating that, in the opinion of such counsel, such action has been taken with respect to the recording, filing, re-recording and refiling of this Indenture, any indentures supplemental hereto and any other requisite documents, and with respect to the execution and filing of any filings with the Commission, the Secretary of State of the State of Delaware or the New Mexico Secured Transaction Registry pursuant to the Energy Transition Act and the Financing Order, financing statements and continuation statements, as are necessary to maintain the Lien and the perfected security interest created by this Indenture and the Series Supplement and reciting the details of such action, or stating that, in the opinion of such counsel, no such action is necessary to maintain such Lien. Such Opinion of Counsel shall also describe the recording, filing, re-recording and refiling of this Indenture, any indentures supplemental hereto and any other requisite documents and the execution and filing of any filings with the Commission, the Secretary of State of the State of Delaware or the New Mexico Secured Transaction Registry, financing statements and continuation statements that will, in the opinion of such counsel, be required within the 12-month period following the date of such opinion to maintain the Lien and the perfected security interest created by this Indenture and the Series Supplement.

(b)            Prior to the effectiveness of any amendment to the Sale Agreement or the Servicing Agreement, the Issuer shall furnish to the Indenture Trustee an Opinion of Counsel of external counsel of the Issuer either (i) stating that, in the opinion of such counsel, all filings, including UCC financing statements and other filings with the Commission, the Secretary of State of the State of Delaware or the New Mexico Secured Transaction Registry pursuant to the Energy Transition Act or the Financing Order have been executed and filed that are necessary fully to preserve and protect the Lien of the Issuer and the Indenture Trustee in the Property and the Collateral, respectively, and the proceeds thereof, and reciting the details of such filings or referring to prior Opinions of Counsel in which such details are given, or (ii) stating that, in the opinion of such counsel, no such action shall be necessary to preserve and protect such Lien.

26

Section 3.07.         Performance of Obligations; Servicing; SEC Filings.

(a)            The Issuer (i) shall diligently pursue any and all actions to enforce its rights under each instrument or agreement included in the Collateral and (ii) shall not take any action and shall use its best efforts not to permit any action to be taken by others that would release any Person from any of such Person’s covenants or obligations under any such instrument or agreement or that would result in the amendment, hypothecation, subordination, termination or discharge of, or impair the validity or effectiveness of, any such instrument or agreement, except, in each case, as expressly provided in this Indenture, the Series Supplement, the Sale Agreement, the Servicing Agreement or such other instrument or agreement.

(b)            The Issuer may contract with other Persons selected with due care to assist it in performing its duties under this Indenture, and any performance of such duties by a Person identified to the Indenture Trustee herein or in an Officer’s Certificate shall be deemed to be action taken by the Issuer. Initially, the Issuer has contracted with the Servicer to assist the Issuer in performing its duties under this Indenture.

(c)            The Issuer shall punctually perform and observe all of its obligations and agreements contained in this Indenture, the Series Supplement, the other Basic Documents and the instruments and agreements included in the Collateral, including filing or causing to be filed all filings with the Commission, the Secretary of State of the State of Delaware or the New Mexico Secured Transaction Registry pursuant to the Energy Transition Act or the Financing Order, all UCC financing statements and all continuation statements required to be filed by it by the terms of this Indenture, the Series Supplement, the Sale Agreement and the Servicing Agreement in accordance with and within the time periods provided for herein and therein.

(d)            If the Issuer shall have knowledge of the occurrence of a Servicer Default under the Servicing Agreement, the Issuer shall promptly give written notice thereof to the Indenture Trustee and the Rating Agencies and shall specify in such notice the response or action, if any, the Issuer has taken or is taking with respect to such Servicer Default. If a Servicer Default shall arise from the failure of the Servicer to perform any of its duties or obligations under the Servicing Agreement with respect to the Property, the Collateral or the Charges, the Issuer shall take all reasonable steps available to it to remedy such failure.

(e)            As promptly as possible after the giving of notice of termination to the Servicer and the Rating Agencies of the Servicer’s rights and powers pursuant to Section 7.01 of the Servicing Agreement, the Indenture Trustee shall, at the written direction of the Holders evidencing a majority of the Outstanding Amount of the Energy Transition Bonds, appoint a successor Servicer (the “Successor Servicer”), and such Successor Servicer shall accept its appointment by a written assumption in a form acceptable to the Issuer and the Indenture Trustee. A Person shall qualify as a Successor Servicer only if such Person satisfies the requirements of the applicable Servicing Agreement. If, within 30 days after the delivery of the notice referred to above, a new Servicer shall not have been appointed, the Indenture Trustee may petition the Commission or a court of competent jurisdiction to appoint a Successor Servicer. In connection with any such appointment, Public Service Company of New Mexico may make such arrangements for the compensation of such Successor Servicer as it and such successor shall agree, subject to the limitations set forth in Section 8.02 and in the Servicing Agreement.

27

(f)            Upon any termination of the Servicer’s rights and powers pursuant to the Servicing Agreement, the Indenture Trustee shall promptly notify the Issuer, the Holders and the Rating Agencies of such termination. As soon as a Successor Servicer is appointed, the Indenture Trustee shall notify the Issuer, the Holders and the Rating Agencies of such appointment, specifying in such notice the name and address of such Successor Servicer.

(g)            The Issuer shall (or shall cause the Sponsor to) post on its website (which for this purpose may be the website of any direct or indirect parent company of the Issuer) and, to the extent consistent with the Issuer’s and the Sponsor’s obligations under applicable law, file with or furnish to the SEC in periodic reports and other reports as are required from time to time under Section 13 or Section 15(d) of the Exchange Act, the following information (other than any such information filed with the SEC and publicly available to investors unless the Issuer specifically requests such items to be posted) with respect to the Outstanding Energy Transition Bonds, in each case to the extent such information is reasonably available to the Issuer:

(i)            statements of any remittances of Charges made to the Indenture Trustee (to be included in a Form 10-D or Form 10-K, or successor forms thereto);

(ii)           a statement reporting the balances in the Collection Account and in each subaccount of the Collection Account as of all Payment Dates (to be included on the next Form 10-D filed) and as of the end of each year (to be included on the next Form 10-K filed);

(iii)          the Semi-Annual Servicer’s Certificate as required to be submitted pursuant to the Servicing Agreement (to be filed with a Form 10-D, Form 10-K or Form 8-K, or successor forms thereto);

(iv)          the Monthly Servicer’s Certificate as required to be submitted pursuant to the Servicing Agreement;

(v)           the text (or a link to the website where a reader can find the text) of each filing of a True-Up Adjustment and the results of each such filing;

(vi)          any change in the long-term or short-term credit ratings of the Servicer assigned by the Rating Agencies;

(vii)         material legislative or regulatory developments directly relevant to the Outstanding Energy Transition Bonds (to be filed or furnished in a Form 8-K); and

(viii)        any reports and other information that the Issuer is required to file with the SEC under the Exchange Act, including but not limited to periodic and current reports related to the Energy Transition Bonds consistent with the disclosure and reporting regime established in Regulation AB.

Notwithstanding the foregoing, nothing herein shall preclude the Issuer from voluntarily suspending or terminating its filing obligations as Issuer with the SEC to the extent permitted by applicable law. Any such reports or information delivered to the Indenture Trustee for purposes of this Section 3.07(g) is for informational purposes only, and the Indenture Trustee’s receipt of such reports or information shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Issuer’s compliance with any of its covenants hereunder (as to which the Indenture Trustee is entitled to conclusively rely on an Officer’s Certificate).

28

(h)            The Issuer shall direct the Indenture Trustee to post on the Indenture Trustee’s website for investors (based solely on information set forth in the Semi-Annual Servicer’s Certificate) with respect to the Outstanding Energy Transition Bonds, to the extent such information is set forth in the Semi-Annual Servicer’s Certificate, a statement showing the balance of Outstanding Energy Transition Bonds that reflects the actual payments made on the Energy Transition Bonds during the applicable period.

The address of the Indenture Trustee’s website for investors is https//pivot.usbank.com. The Indenture Trustee shall promptly notify the Issuer, the Holders and the Rating Agencies of any change to the address of the website for investors.

(i)             The Issuer shall make all filings required under the Energy Transition Act relating to the transfer of the ownership or security interest in the Property other than those required to be made by the Seller or the Servicer pursuant to the Basic Documents.

Section 3.08.         Certain Negative Covenants. So long as any Energy Transition Bonds are Outstanding, the Issuer shall not:

(a)            except as expressly permitted by this Indenture and the other Basic Documents, or in connection with the issuance of Additional Series, sell, transfer, convey, exchange or otherwise dispose of any of the properties or assets of the Issuer, including those included in the Collateral, unless in accordance with Article V;

(b)            claim any credit on, or make any deduction from the principal or premium, if any, or interest payable in respect of, the Energy Transition Bonds (other than amounts properly withheld from such payments under the Code, the Treasury regulations promulgated thereunder or other tax laws) or assert any claim against any present or former Holder by reason of the payment of the taxes levied or assessed upon any part of the Collateral;

(c)            terminate its existence or dissolve or liquidate in whole or in part, except in a transaction permitted by Section 3.10;

(d)            (i) permit the validity or effectiveness of this Indenture or the other Basic Documents to be impaired, or permit the Lien of this Indenture and the Series Supplement to be amended, hypothecated, subordinated, terminated or discharged, or permit any Person to be released from any covenants or obligations with respect to the Energy Transition Bonds under this Indenture except as may be expressly permitted hereby, (ii) permit any Lien (other than the Lien of this Indenture or the Series Supplement) to be created on or extend to or otherwise arise upon or burden the Collateral or any part thereof or any interest therein or the proceeds thereof (other than tax liens arising by operation of law with respect to amounts not yet due) or (iii) permit the Lien of the Series Supplement not to constitute a valid first priority perfected security interest in the Collateral;

29

(e)            elect to be classified as an association taxable as a corporation for U.S. federal income tax purposes or otherwise take any action, file any tax return or make any election inconsistent with the treatment of the Issuer, for U.S. federal income tax purposes and, to the extent consistent with applicable state tax law, state income and franchise tax purposes, as a disregarded entity that is not separate from the sole owner of the Issuer;

(f)             change its name, identity or structure or the location of its chief executive office, unless at least 10 Business Days prior to the effective date of any such change the Issuer delivers to the Indenture Trustee (with copies to the Rating Agencies) such documents, instruments or agreements, executed by the Issuer, as are necessary to reflect such change and to continue the perfection of the security interest of this Indenture and the Series Supplement;

(g)            take any action that is subject to a Rating Agency Condition without satisfying the Rating Agency Condition;

(h)            except to the extent permitted by applicable law, voluntarily suspend or terminate its filing obligations with the SEC as described in Section 3.07(g); or

(i)             issue any debt obligations other than the Energy Transition Bonds or, upon satisfaction of the Rating Agency Condition, any Additional Series.

Section 3.09.         Annual Statement as to Compliance. The Issuer will deliver to the Indenture Trustee and the Rating Agencies not later than March 31 of each year (commencing with March 31, 2024), an Officer’s Certificate stating, as to the Responsible Officer of the Issuer signing such Officer’s Certificate, that:

(a)            a review of the activities of the Issuer during the preceding 12 months ended December 31 (or, in the case of the first such Officer’s Certificate, since the date hereof) and of performance under this Indenture has been made; and

(b)            to the best of such Responsible Officer’s knowledge, based on such review, the Issuer has in all material respects complied with all conditions and covenants under this Indenture throughout such 12-month period (or such shorter period in the case of the first such Officer’s Certificate), or, if there has been a default in the compliance of any such condition or covenant, specifying each such default known to such Responsible Officer and the nature and status thereof.

Section 3.10.         Issuer May Consolidate, etc., Only on Certain Terms.

(a)            The Issuer shall not consolidate or merge with or into any other Person, unless:

(i)            the Person (if other than the Issuer) formed by or surviving such consolidation or merger shall (A) be a Person organized and existing under the laws of the United States of America or any State, (B) expressly assume, by an indenture supplemental hereto, executed and delivered to the Indenture Trustee, in form and substance satisfactory to the Indenture Trustee, the performance or observance of every agreement and covenant of this Indenture and the Series Supplement on the part of the Issuer to be performed or observed, all as provided herein and in the Series Supplement, and (C) expressly assumes all obligations and succeed to all rights of the Issuer under the Sale Agreement, the Servicing Agreement and each other Basic Document to which the Issuer is a party;

30

(ii)           immediately after giving effect to such merger or consolidation, no Default, Event of Default or Servicer Default shall have occurred and be continuing;

(iii)          the Rating Agency Condition shall have been satisfied with respect to such merger or consolidation;

(iv)          the Issuer shall have delivered to Public Service Company of New Mexico, the Indenture Trustee and the Rating Agencies an opinion or opinions of outside tax counsel (as selected by the Issuer, in form and substance reasonably satisfactory to Public Service Company of New Mexico and the Indenture Trustee, and which may be based on a ruling from the Internal Revenue Service (unless the Internal Revenue Service has announced that it will not rule on the issues described in this paragraph)) to the effect that the consolidation or merger will not result in a material adverse U.S. federal or state income tax consequence to the Issuer, Public Service Company of New Mexico, the Indenture Trustee or the then-existing Holders;

(v)           any action as is necessary to maintain the Lien and the perfected security interest in the Collateral created by this Indenture and the Series Supplement shall have been taken as evidenced by an Opinion of Counsel of external counsel of the Issuer delivered to the Indenture Trustee; and

(vi)          the Issuer shall have delivered to the Indenture Trustee an Officer’s Certificate and an Opinion of Counsel of external counsel of the Issuer each stating that such consolidation or merger and such supplemental indenture comply with this Indenture and the Series Supplement and that all conditions precedent herein provided for in this Section 3.10(a) with respect to such transaction have been complied with (including any filing required by the Exchange Act).

(b)            Except as specifically provided herein, the Issuer shall not sell, convey, exchange, transfer or otherwise dispose of any of its properties or assets included in the Collateral, to any Person, unless:

(i)            the Person that acquires the properties and assets of the Issuer, the conveyance or transfer of which is hereby restricted, (A) shall be a United States citizen or a Person organized and existing under the laws of the United States of America or any State, (B) expressly assumes, by an indenture supplemental hereto, executed and delivered to the Indenture Trustee, in form and substance satisfactory to the Indenture Trustee, the performance or observance of every agreement and covenant of this Indenture on the part of the Issuer to be performed or observed, all as provided herein and in the Series Supplement, (C) expressly agrees by means of such supplemental indenture that all right, title and interest so sold, conveyed, exchanged, transferred or otherwise disposed of shall be subject and subordinate to the rights of Holders, (D) unless otherwise provided in the supplemental indenture referred to in Section 3.10(b)(i)(B), expressly agrees to indemnify, defend and hold harmless the Issuer and the Indenture Trustee against and from any loss, liability or expense arising under or related to this Indenture, the Series Supplement and the Energy Transition Bonds, (E) expressly agrees by means of such supplemental indenture that such Person (or if a group of Persons, then one specified Person) shall make all filings with the SEC (and any other appropriate Person) required by the Exchange Act in connection with the Collateral and the Energy Transition Bonds and (F) if such sale, conveyance, exchange, transfer or disposal relates to the Issuer’s rights and obligations under the Sale Agreement or the Servicing Agreement, assumes all obligations and succeeds to all rights of the Issuer under the Sale Agreement and the Servicing Agreement, as applicable;

31

(ii)           immediately after giving effect to such transaction, no Default, Event of Default or Servicer Default shall have occurred and be continuing;

(iii)          the Rating Agency Condition shall have been satisfied with respect to such transaction;

(iv)          the Issuer shall have delivered to Public Service Company of New Mexico, the Indenture Trustee and the Rating Agencies an opinion or opinions of outside tax counsel (as selected by the Issuer, in form and substance reasonably satisfactory to Public Service Company of New Mexico, and which may be based on a ruling from the Internal Revenue Service) to the effect that the disposition will not result in a material adverse U.S. federal or state income tax consequence to the Issuer, Public Service Company of New Mexico, the Indenture Trustee or the then-existing Holders;

(v)           any action as is necessary to maintain the Lien and the perfected security interest in the Collateral created by this Indenture and the Series Supplement shall have been taken as evidenced by an Opinion of Counsel of external counsel of the Issuer delivered to the Indenture Trustee; and

(vi)          the Issuer shall have delivered to the Indenture Trustee an Officer’s Certificate and an Opinion of Counsel of external counsel of the Issuer each stating that such sale, conveyance, exchange, transfer or other disposition and such supplemental indenture comply with this Indenture and the Series Supplement and that all conditions precedent herein provided for in this Section 3.10(b) with respect to such transaction have been complied with (including any filing required by the Exchange Act).

Section 3.11.         Successor or Transferee.

(a)            Upon any consolidation or merger of the Issuer in accordance with Section 3.10(a), the Person formed by or surviving such consolidation or merger (if other than the Issuer) shall succeed to, and be substituted for, and may exercise every right and power of, the Issuer under this Indenture with the same effect as if such Person had been named as the Issuer herein.

(b)            Except as set forth in Section 6.07, upon a sale, conveyance, exchange, transfer or other disposition of all the assets and properties of the Issuer in accordance with Section 3.10(b), the Issuer will be released from every covenant and agreement of this Indenture and the other Basic Documents to be observed or performed on the part of the Issuer with respect to the Energy Transition Bonds and the Property immediately following the consummation of such acquisition upon the delivery of written notice to the Indenture Trustee from the Person acquiring such assets and properties stating that the Issuer is to be so released.

32

Section 3.12.         No Other Business. The Issuer shall not engage in any business other than financing, purchasing, owning, administering, managing and servicing the Property and the other Collateral and the issuance of the Energy Transition Bonds and any Additional Series in the manner contemplated by the Financing Order and any Subsequent Financing Order and this Indenture and the other Basic Documents and activities incidental thereto.

Section 3.13.         No Borrowing. The Issuer shall not issue, incur, assume, guarantee or otherwise become liable, directly or indirectly, for any indebtedness except for the Energy Transition Bonds and any Additional Series and any other indebtedness expressly permitted by or arising under the Basic Documents.

Section 3.14.         Servicer’s Obligations. The Issuer shall enforce the Servicer’s compliance with and performance of all of the Servicer’s material obligations under the Servicing Agreement.

Section 3.15.         Guarantees, Loans, Advances and Other Liabilities. Except as otherwise contemplated by the Sale Agreement, the Servicing Agreement or this Indenture, the Issuer shall not make any loan or advance or credit to, or guarantee (directly or indirectly or by an instrument having the effect of assuring another’s payment or performance on any obligation or capability of so doing or otherwise), endorse or otherwise become contingently liable, directly or indirectly, in connection with the obligations, stocks or dividends of, or own, purchase, repurchase or acquire (or agree contingently to do so) any stock, obligations, assets or securities of, or any other interest in, or make any capital contribution to, any other Person.

Section 3.16.         Capital Expenditures. Other than the purchase of Property from the Seller on the Series Closing Date or in connection with an Additional Series, the Issuer shall not make any expenditure (by long-term or operating lease or otherwise) for capital assets (either realty or personalty).

Section 3.17.         Restricted Payments. Except as provided in Section 8.04(c), the Issuer shall not, directly or indirectly, (a) pay any dividend or make any distribution (by reduction of capital or otherwise), whether in cash, property, securities or a combination thereof, to any owner of an interest in the Issuer or otherwise with respect to any ownership or equity interest or similar security in or of the Issuer, (b) redeem, purchase, retire or otherwise acquire for value any such ownership or equity interest or similar security or (c) set aside or otherwise segregate any amounts for any such purpose; provided, however, that, if no Event of Default shall have occurred and be continuing or would be caused thereby, the Issuer may make, or cause to be made, any such distributions to any owner of an interest in the Issuer or otherwise with respect to any ownership or equity interest or similar security in or of the Issuer using funds distributed to the Issuer pursuant to Section 8.02(e)(x) to the extent that such distributions would not cause the balance of the Capital Subaccount to decline below the Required Capital Level or pursuant to comparable provisions in the indenture relating to an Additional Series. The Issuer will not, directly or indirectly, make payments to or distributions from the Collection Account except in accordance with this Indenture and the other Basic Documents.

33

Section 3.18.         Notice of Events of Default. The Issuer agrees to give the Indenture Trustee and the Rating Agencies prompt written notice of each Default or Event of Default hereunder as provided in Section 5.01, and each default on the part of the Seller or the Servicer of its obligations under the Sale Agreement or the Servicing Agreement, respectively.

Section 3.19.         Further Instruments and Acts. Upon request of the Indenture Trustee or as required by applicable law, the Issuer shall execute and deliver such further instruments and do such further acts as may be reasonably necessary or proper to carry out more effectively the purpose of this Indenture and to maintain the first priority perfected security interest of the Indenture Trustee in the Collateral.

Section 3.20.         Inspection. The Issuer agrees that, on reasonable prior notice, it will permit any representative of the Indenture Trustee, during the Issuer’s normal business hours, to examine all the books of account, records, reports and other papers of the Issuer, to make copies and extracts therefrom, to cause such books to be audited annually by Independent registered public accountants, and to discuss the Issuer’s affairs, finances and accounts with the Issuer’s officers, employees and Independent registered public accountants, all at such reasonable times and as often as may be reasonably requested. The Indenture Trustee shall and shall cause its representatives to hold in confidence all such information except to the extent disclosure may be required by law (and all reasonable applications for confidential treatment are unavailing) and except to the extent that the Indenture Trustee may reasonably determine that such disclosure is consistent with its obligations hereunder. Notwithstanding anything herein to the contrary, the preceding sentence shall not be construed to prohibit (a) disclosure of any and all information that is or becomes publicly known, or information obtained by the Indenture Trustee from sources other than the Issuer, provided such parties are rightfully in possession of such information, (b) disclosure of any and all information (i) if required to do so by any applicable statute, law, rule or regulation, (ii) pursuant to any subpoena, civil investigative demand or similar demand or request of any court or regulatory authority exercising its proper jurisdiction, (iii) in any preliminary or final prospectus, registration statement or other document a copy of which has been filed with the SEC, (iv) to any affiliate, independent or internal auditor, agent, employee or attorney of the Indenture Trustee having a need to know the same, provided that such parties agree to be bound by the confidentiality provisions contained in this Section 3.20, or (v) to any Rating Agency or (c) any other disclosure authorized by the Issuer.

Section 3.21.         Additional Series.

(a)            On the basis of any Subsequent Financing Order, the Issuer may, in its sole discretion, acquire additional and separate energy transition bond collateral and issue one or more additional series of energy transition bonds under a separate indenture that are backed by such separate additional energy transition bond collateral. Any additional energy transition bonds may include terms and provisions unique to such additional energy transition bonds.

34

(b)            The Issuer shall not issue additional energy transition bonds if the Additional Series would result in the then-current ratings on any Outstanding Energy Transition Bonds being reduced or withdrawn.

(c)            In addition to all applicable requirements of Section 2.10 hereof, the following conditions must be satisfied in connection with any Additional Series:

(i)            the Rating Agency Condition for the Energy Transition Bonds shall have been satisfied and such Additional Series shall satisfy any minimum rating requirement in the Subsequent Financing Order;

(ii)           each Additional Series shall have recourse only to the assets pledged in connection with such Additional Series, shall be nonrecourse to the Collateral securing the Series A Bonds and shall not constitute a claim against the Issuer if cash flow from the pledged assets for such Additional Series is insufficient to pay such Additional Series in full;

(iii)          the Issuer has delivered to the Indenture Trustee and each Rating Agency then rating any series of Outstanding Energy Transition Bonds an Opinion of Counsel of a nationally recognized firm experienced in such matters to the effect that after such issuance, in the opinion of such counsel, if the Seller were to become a debtor in a case under the United States Bankruptcy Code (Title 11, U.S.C.), a federal court exercising bankruptcy jurisdiction and exercising reasonable judgment after full consideration of all relevant factors would not order substantive consolidation of the assets and liabilities of the Issuer with those of the bankruptcy estate of the Seller and that there has been a true sale of the energy transition property with respect to such Additional Series, subject to the customary exceptions, qualifications and assumptions contained therein;

(iv)          the Issuer has delivered to the Indenture Trustee an Officer’s Certificate from the Issuer certifying that the Additional Series shall have the benefit of a true-up adjustment in accordance with Section 62-18-6 of the Energy Transition Act;

(v)           the transaction documentation for such Additional Series provides that holders of such Additional Series will not file or join in the filing of any bankruptcy petition against the Issuer;

(vi)          if the holders of the Energy Transition Bonds of any Additional Series are deemed to have any interest in any of the Collateral pledged under the Series Supplement, the Holders of such Additional Series must agree that any such interest is subordinate to the claims and rights of the holders of the Series A Bonds;

(vii)         the Additional Series shall have its own bank accounts and trust accounts; and

(viii)        the Additional Series shall bear its own trustee fees and servicer fees and a pro rata portion of fees due under the Administration Agreement.

35

Section 3.22.         Sale Agreement, Servicing Agreement and Administration Agreement Covenants.

(a)            The Issuer agrees to take all such lawful actions to enforce its rights under the Sale Agreement, the Servicing Agreement, the Administration Agreement and the other Basic Documents, and to compel or secure the performance and observance by the Seller, the Servicer, the Administrator and Public Service Company of New Mexico of each of their respective obligations to the Issuer under or in connection with the Sale Agreement, the Servicing Agreement, the Administration Agreement and the other Basic Documents in accordance with the terms thereof. So long as no Event of Default occurs and is continuing, but subject to Section 3.22(f), the Issuer may exercise any and all rights, remedies, powers and privileges lawfully available to the Issuer under or in connection with the Sale Agreement, the Servicing Agreement and the Administration Agreement; provided, that such action shall not adversely affect the interests of the Holders in any material respect.

(b)            If an Event of Default occurs and is continuing, the Indenture Trustee may, and at the direction (which direction shall be in writing) of the Holders of a majority of the Outstanding Amount of the Energy Transition Bonds of all Tranches affected thereby, shall, exercise all rights, remedies, powers, privileges and claims of the Issuer against the Seller, Public Service Company of New Mexico, the Administrator and the Servicer, as the case may be, under or in connection with the Sale Agreement, the Servicing Agreement and the Administration Agreement, including the right or power to take any action to compel or secure performance or observance by the Seller, Public Service Company of New Mexico, the Administrator or the Servicer of each of their obligations to the Issuer thereunder and to give any consent, request, notice, direction, approval, extension or waiver under the Sale Agreement, the Servicing Agreement and the Administration Agreement, and any right of the Issuer to take such action shall be suspended.

(c)            Except as set forth in Section 3.22(d) and Section 3.22(e), the Administration Agreement, the Sale Agreement and the Servicing Agreement may be amended in accordance with the provisions thereof, so long as the Rating Agency Condition is satisfied in connection therewith, at any time and from time to time, without the consent of the Holders of the Energy Transition Bonds, but with the acknowledgement of the Indenture Trustee; provided, that the Indenture Trustee shall provide such acknowledgement upon receipt of an Officer’s Certificate of the Issuer evidencing satisfaction of such Rating Agency Condition and an Opinion of Counsel of external counsel of the Issuer evidencing that such amendment is in accordance with the provisions of such Basic Document.

(d)            Except as set forth in Section 3.22(e), if the Issuer, the Seller, Public Service Company of New Mexico, the Administrator, the Servicer or any other party to the respective agreement proposes to amend, modify, waive, supplement, terminate or surrender, or agree to any amendment, modification, waiver, supplement, termination or surrender of, the terms of the Sale Agreement, the Administration Agreement or the Servicing Agreement, or waive timely performance or observance by the Seller, Public Service Company of New Mexico, the Administrator, the Servicer or any other party under the Sale Agreement, the Administration Agreement or the Servicing Agreement, in each case in such a way as would materially and adversely affect the interests of any Holder of Energy Transition Bonds, the Issuer shall first notify the Rating Agencies of the proposed amendment, modification, waiver, supplement, termination or surrender and shall promptly notify the Indenture Trustee and the Holders of the Energy Transition Bonds in writing of the proposed amendment, modification, waiver, supplement, termination or surrender and whether the Rating Agency Condition has been satisfied with respect thereto (or, pursuant to an Issuer Request, the Indenture Trustee shall so notify the Holders of the Energy Transition Bonds on the Issuer’s behalf). The Indenture Trustee shall consent to such proposed amendment, modification, waiver, supplement, termination or surrender only if the Rating Agency Condition is satisfied and only with the prior written consent of the Holders of a majority of the Outstanding Amount of Energy Transition Bonds of each Tranche materially and adversely affected thereby. If any such amendment, modification, waiver, supplement, termination or surrender shall be so consented to by the Indenture Trustee or such Holders, the Issuer agrees to execute and deliver, in its own name and at its own expense, such agreements, instruments, consents and other documents as shall be necessary or appropriate in the circumstances.

36

(e)            If the Issuer or the Servicer proposes to amend, modify, waive, supplement, terminate or surrender, or to agree to any amendment, modification, supplement, termination, waiver or surrender of, the process for True-Up Adjustments, the Issuer shall notify the Indenture Trustee and the Holders of the Energy Transition Bonds and the Commission in writing of such proposal (or, pursuant to an Issuer Request, the Indenture Trustee shall so notify the Holders of the Energy Transition Bonds on the Issuer’s behalf) and the Indenture Trustee shall consent thereto only with the prior written consent of the Holders of a majority of the Outstanding Amount of Energy Transition Bonds of each Tranche affected thereby and only if the Rating Agency Condition has been satisfied with respect thereto.

(f)             Promptly following a default by the Seller under the Sale Agreement, by the Administrator under the Administration Agreement, or the occurrence of a Servicer Default under the Servicing Agreement, and at the Issuer’s expense, the Issuer agrees to take all such lawful actions as is commercially reasonable or as is requested by the Indenture Trustee in order to compel or secure the performance and observance by each of the Seller and the Administrator or the Servicer of their obligations under and in accordance with the Sale Agreement, the Servicing Agreement and the Administration Agreement, as the case may be, in accordance with the terms thereof, and to exercise any and all rights, remedies, powers and privileges lawfully available to the Issuer under or in connection with such agreements to the extent and in the manner directed by the Indenture Trustee, including the transmission of notices of any default by the Seller, the Administrator or the Servicer, respectively, thereunder and the institution of legal or administrative actions or Proceedings to compel or secure performance of their obligations under the Sale Agreement, the Servicing Agreement or the Administration Agreement, as applicable.

Section 3.23.         Taxes. So long as any of the Energy Transition Bonds are Outstanding, the Issuer shall pay all taxes, assessments and governmental charges imposed upon it or any of its properties or assets or with respect to any of its franchises, business, income or property before any penalty accrues thereon if the failure to pay any such taxes, assessments and governmental charges would, after any applicable grace periods, notices or other similar requirements, result in a Lien on the Collateral; provided, that no such tax need be paid if the Issuer is contesting the same in good faith by appropriate proceedings promptly instituted and diligently conducted and if the Issuer has established appropriate reserves as shall be required in conformity with generally accepted accounting principles.

37

Section 3.24.         Notices from Holders. The Issuer shall promptly transmit any notice received by it from the Holders to the Indenture Trustee.

Section 3.25.         Volcker Rule. The Issuer is structured so as not to be a “covered fund” under the regulations adopted to implement Section 619 of the Dodd Frank Wall Street Reform and Consumer Protection Act, commonly known as the “Volcker Rule.”

ARTICLE IV

SATISFACTION AND DISCHARGE; DEFEASANCE

Section 4.01.         Satisfaction and Discharge of Indenture; Defeasance.

(a)            This Indenture shall cease to be of further effect with respect to the Energy Transition Bonds, and the Indenture Trustee, on reasonable written demand of and at the expense of the Issuer, shall execute proper instruments acknowledging satisfaction and discharge of this Indenture with respect to the Energy Transition Bonds, when:

(i)            Either:

(A)             all Energy Transition Bonds theretofore authenticated and delivered (other than (1) Energy Transition Bonds that have been destroyed, lost or stolen and that have been replaced or paid as provided in Section 2.06 and (2) Energy Transition Bonds for whose payment money has theretofore been deposited in trust or segregated and held in trust by the Issuer and thereafter repaid to the Issuer or discharged from such trust, as provided in the last paragraph of Section 3.03) have been delivered to the Indenture Trustee for cancellation; or

(B)             either (1) the Scheduled Final Payment Date has occurred with respect to all Energy Transition Bonds not theretofore delivered to the Indenture Trustee for cancellation or (2) the Energy Transition Bonds will be due and payable on their respective Scheduled Final Payment Dates within one year, and, in any such case, the Issuer has irrevocably deposited or caused to be irrevocably deposited in trust with the Indenture Trustee (i) cash and/or (ii) U.S. Government Obligations that through the scheduled payments of principal and interest in respect thereof in accordance with their terms are in an amount sufficient to pay principal, interest and premium, if any, on the Energy Transition Bonds not theretofore delivered to the Indenture Trustee for cancellation, Ongoing Financing Costs and all other sums payable hereunder by the Issuer with respect to the Energy Transition Bonds when scheduled to be paid and to discharge the entire indebtedness on the Energy Transition Bonds when due;

(ii)           the Issuer has paid or caused to be paid all other sums payable hereunder by the Issuer; and

38

(iii)          the Issuer has delivered to the Indenture Trustee an Officer’s Certificate, an Opinion of Counsel of external counsel of the Issuer and (if required by the Trust Indenture Act or the Indenture Trustee) an Independent Certificate from a firm of registered public accountants, each meeting the applicable requirements of Section 10.01(a) and each stating that all conditions precedent herein provided for relating to the satisfaction and discharge of this Indenture with respect to the Energy Transition Bonds have been complied with.

(b)            Subject to Section 4.01(c) and Section 4.02, the Issuer at any time may terminate (i) all its obligations under this Indenture with respect to the Energy Transition Bonds (“Legal Defeasance Option”) or (ii) its obligations under Section 3.04, Section 3.05, Section 3.06, Section 3.07, Section 3.08, Section 3.09, Section 3.10, Section 3.12, Section 3.13, Section 3.14, Section 3.15, Section 3.16, Section 3.17, Section 3.18 and Section 3.19and the operation of Section 5.01(c) with respect to the Energy Transition Bonds (“Covenant Defeasance Option”). The Issuer may exercise the Legal Defeasance Option with respect to the Energy Transition Bonds notwithstanding its prior exercise of the Covenant Defeasance Option.

If the Issuer exercises the Legal Defeasance Option, the maturity of the Energy Transition Bonds may not be accelerated because of an Event of Default. If the Issuer exercises the Covenant Defeasance Option, the maturity of the Energy Transition Bonds may not be accelerated because of an Event of Default specified in Section 5.01(c).

Upon satisfaction of the conditions set forth herein to the exercise of the Legal Defeasance Option or the Covenant Defeasance Option with respect to the Energy Transition Bonds, the Indenture Trustee, on reasonable written demand of and at the expense of the Issuer, shall execute proper instruments acknowledging satisfaction and discharge of the obligations that are terminated pursuant to such exercise.

(c)            Notwithstanding Section 4.01(a) and Section 4.01(b), (i) rights of registration of transfer and exchange, (ii) substitution of mutilated, destroyed, lost or stolen Energy Transition Bonds, (iii) rights of Holders to receive payments of principal, premium, if any, and interest, (iv) Section 4.03 and Section 4.04, (v) the rights, obligations and immunities of the Indenture Trustee hereunder (including the rights of the Indenture Trustee under Section 6.07 and the obligations of the Indenture Trustee under Section 4.03) and (vi) the rights of Holders as beneficiaries hereof with respect to the property deposited with the Indenture Trustee payable to all or any of them, each shall survive until the Energy Transition Bonds as to which this Indenture or certain obligations hereunder have been satisfied and discharged pursuant to Section 4.01(a) or Section 4.01(b). Thereafter the obligations in Section 6.07 and Section 4.04 shall survive.

Section 4.02.         Conditions to Defeasance. The Issuer may exercise the Legal Defeasance Option or the Covenant Defeasance Option with respect to of the Energy Transition Bonds only if:

(a)            the Issuer has irrevocably deposited or caused to be irrevocably deposited in trust with the Indenture Trustee (i) cash and/or (ii) U.S. Government Obligations that through the scheduled payments of principal and interest in respect thereof in accordance with their terms are in an amount sufficient to pay principal, interest and premium, if any, on the Energy Transition Bonds not therefore delivered to the Indenture Trustee for cancellation and Ongoing Financing Costs and all other sums payable hereunder by the Issuer with respect to the Energy Transition Bonds when scheduled to be paid and to discharge the entire indebtedness on the Energy Transition Bonds when due;

39

(b)            the Issuer delivers to the Indenture Trustee a certificate from a nationally recognized firm of Independent registered public accountants expressing its opinion that the payments of principal of and interest on the deposited U.S. Government Obligations when due and without reinvestment plus any deposited cash will provide cash at such times and in such amounts (but, in the case of the Legal Defeasance Option only, not more than such amounts) as will be sufficient to pay in respect of the Energy Transition Bonds (i) principal in accordance with the Expected Amortization Schedule therefor, (ii) interest when due and (iii) Ongoing Financing Costs and all other sums payable hereunder by the Issuer with respect to the Energy Transition Bonds;

(c)            in the case of the Legal Defeasance Option, 95 days after the deposit is made and during the 95-day period no Default specified in Section 5.01(e) or Section 5.01(f) occurs that is continuing at the end of the period;

(d)            no Default has occurred and is continuing on the day of such deposit and after giving effect thereto;

(e)            in the case of an exercise of the Legal Defeasance Option, the Issuer shall have delivered to the Indenture Trustee an Opinion of Counsel of external counsel of the Issuer stating that (i) the Issuer has received from, or there has been published by, the Internal Revenue Service a ruling or (ii) since the date of execution of this Indenture, there has been a change in the applicable U.S. federal income tax law, in either case to the effect that, and based thereon such opinion shall confirm that, the Holders of the Energy Transition Bonds will not recognize income, gain or loss for U.S. federal income tax purposes as a result of such legal defeasance and will be subject to U.S. federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such legal defeasance had not occurred;

(f)             in the case of an exercise of the Covenant Defeasance Option, the Issuer shall have delivered to the Indenture Trustee an Opinion of Counsel of external counsel of the Issuer to the effect that the Holders of the Energy Transition Bonds will not recognize income, gain or loss for U.S. federal income tax purposes as a result of such covenant defeasance and will be subject to U.S. federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such covenant defeasance had not occurred;

(g)            the Issuer delivers to the Indenture Trustee an Officer’s Certificate and an Opinion of Counsel, each stating that all conditions precedent to the Legal Defeasance Option or the Covenant Defeasance Option, as applicable, have been complied with as required by this Article IV;

40

(h)            the Issuer delivers to the Indenture Trustee an Opinion of Counsel of external counsel of the Issuer to the effect that: (i) in a case under the Bankruptcy Code in which Public Service Company of New Mexico (or any of its Affiliates, other than the Issuer) is the debtor, the court would hold that the deposited moneys or U.S. Government Obligations would not be in the bankruptcy estate of Public Service Company of New Mexico (or any of its Affiliates, other than the Issuer, that deposited the moneys or U.S. Government Obligations); and (ii) in the event Public Service Company of New Mexico (or any of its Affiliates, other than the Issuer, that deposited the moneys or U.S. Government Obligations) were to be a debtor in a case under the Bankruptcy Code, the court would not disregard the separate legal existence of Public Service Company of New Mexico (or any of its Affiliates, other than the Issuer, that deposited the moneys or U.S. Government Obligations) and the Issuer so as to order substantive consolidation under the Bankruptcy Code of the Issuer’s assets and liabilities with the assets and liabilities of Public Service Company of New Mexico or such other Affiliate; and

(i)             the Rating Agency Condition shall have been satisfied with respect to the exercise of any Legal Defeasance Option or Covenant Defeasance Option.

Notwithstanding any other provision of this Section 4.02, no delivery of moneys or U.S. Government Obligations to the Indenture Trustee shall terminate any obligation of the Issuer to the Indenture Trustee under this Indenture or the Series Supplement or any obligation of the Issuer to apply such moneys or U.S. Government Obligations under Section 4.03 until principal of and premium, if any, and interest on the Energy Transition Bonds shall have been paid in accordance with the provisions of this Indenture and the Series Supplement.

Section 4.03.         Application of Trust Money. All moneys or U.S. Government Obligations deposited with the Indenture Trustee pursuant to Section 4.01 or Section 4.02 shall be held in trust and applied by it, in accordance with the provisions of the Energy Transition Bonds and this Indenture, to the payment, either directly or through any Paying Agent, as the Indenture Trustee may determine, to the Holders of the particular Energy Transition Bonds for the payment of which such moneys have been deposited with the Indenture Trustee, of all sums due and to become due thereon for principal, premium, if any, and interest; but such moneys need not be segregated from other funds except to the extent required herein or in the Servicing Agreement or required by law. Notwithstanding anything to the contrary in this Article IV, the Indenture Trustee shall deliver or pay to the Issuer from time to time upon Issuer Request any moneys or U.S. Government Obligations held by it pursuant to Section 4.02 that, in the opinion of a nationally recognized firm of Independent registered public accountants expressed in a written certification thereof delivered to the Indenture Trustee (and not at the cost or expense of the Indenture Trustee), are in excess of the amount thereof that would be required to be deposited for the purpose for which such moneys or U.S. Government Obligations were deposited; provided, that any such payment shall be subject to the satisfaction of the Rating Agency Condition.

Section 4.04.         Repayment of Moneys Held by Paying Agent. In connection with the satisfaction and discharge of this Indenture or the Covenant Defeasance Option or Legal Defeasance Option with respect to the Energy Transition Bonds, all moneys then held by any Paying Agent other than the Indenture Trustee under the provisions of this Indenture shall, upon demand of the Issuer, be paid to the Indenture Trustee to be held and applied according to Section 3.03 and thereupon such Paying Agent shall be released from all further liability with respect to such moneys.

41

ARTICLE V

REMEDIES

Section 5.01.         Events of Default. “Event of Default” means any one or more of the following events (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body):

(a)            default in the payment of any interest on any Energy Transition Bond when the same becomes due and payable (whether such failure to pay interest is caused by a shortfall in Charges received or otherwise), and such default shall continue for a period of five Business Days;

(b)            default in the payment of the then unpaid principal of any Energy Transition Bond on the Final Maturity Date, or, if applicable, any Tranche on the Tranche Maturity Date for such Tranche;

(c)            default in the observance or performance of any covenant or agreement of the Issuer made in this Indenture (other than defaults specified in Section 5.01(a) or Section 5.01(b)), and such default shall continue or not be cured, for a period of 30 days after the earlier of (i) the date that there shall have been given, by registered or certified mail, to the Issuer by the Indenture Trustee or to the Issuer and the Indenture Trustee by the Holders of at least 25 percent of the Outstanding Amount of the Energy Transition Bonds, a written notice specifying such default and requiring it to be remedied and stating that such notice is a “Notice of Default” hereunder or (ii) the date that the Issuer has actual knowledge of the default;

(d)            any representation or warranty of the Issuer made in this Indenture, the Series Supplement or in any certificate or other writing delivered pursuant hereto or the Series Supplement or in connection herewith proving to have been incorrect in any material respect as of the time when the same shall have been made, and the circumstance or condition in respect of which such representation or warranty was incorrect shall not have been eliminated or otherwise cured, within 30 days after the earlier of (i) the date that there shall have been given, by registered or certified mail, to the Issuer by the Indenture Trustee or to the Issuer and the Indenture Trustee by the Holders of at least 25 percent of the Outstanding Amount of the Energy Transition Bonds, a written notice specifying such incorrect representation or warranty and requiring it to be remedied and stating that such notice is a “Notice of Default” hereunder or (ii) the date the Issuer has actual knowledge of the default;

(e)            the filing of a decree or order for relief by a court having jurisdiction in the premises in respect of the Issuer or any substantial part of the Collateral in an involuntary case or proceeding under any applicable U.S. federal or state bankruptcy, insolvency or other similar law now or hereafter in effect, or appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of the Issuer or for any substantial part of the Collateral, or ordering the winding-up or liquidation of the Issuer’s affairs, and such decree or order shall remain unstayed and in effect for a period of 90 consecutive days;

42

(f)            the commencement by the Issuer of a voluntary case under any applicable U.S. federal or state bankruptcy, insolvency or other similar law now or hereafter in effect, or the consent by the Issuer to the entry of an order for relief in an involuntary case or proceeding under any such law, or the consent by the Issuer to the appointment or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of the Issuer or for any substantial part of the Collateral, or the making by the Issuer of any general assignment for the benefit of creditors, or the failure by the Issuer generally to pay its debts as such debts become due, or the taking of action by the Issuer in furtherance of any of the foregoing;

(g)            any act or failure to act by the State of New Mexico or any of its agencies (including the Commission), officers or employees that violates the State Pledge or is not in accordance with the State Pledge; or

(h)            any other event designated as such in the Series Supplement.

The Issuer shall deliver to a Responsible Officer of the Indenture Trustee and to the Rating Agencies, within five days after a Responsible Officer of the Issuer has knowledge of the occurrence thereof, written notice in the form of an Officer’s Certificate of any event (i) that is an Event of Default under Section 5.01(a), Section 5.01(b), Section 5.01(f), Section 5.01(g) or Section 5.01(h) or (ii) that with the giving of notice, the lapse of time, or both, would become an Event of Default under Section 5.01(c), Section 5.01(d) or Section 5.01(e), including, in each case, the status of such Default or Event of Default and what action the Issuer is taking or proposes to take with respect thereto.

Section 5.02.         Acceleration of Maturity; Rescission and Annulment. If an Event of Default (other than an Event of Default under Section 5.01(g)) should occur and be continuing, then and in every such case the Indenture Trustee or the Holders representing a majority of the Outstanding Amount of the Energy Transition Bonds may declare the Energy Transition Bonds to be immediately due and payable, by a notice in writing to the Issuer (and to the Indenture Trustee if given by Holders), and upon any such declaration the unpaid principal amount of the Energy Transition Bonds, together with accrued and unpaid interest thereon through the date of acceleration, shall become immediately due and payable.

At any time after such declaration of acceleration of maturity has been made and before a judgment or decree for payment of the money due has been obtained by the Indenture Trustee as hereinafter in this Article V provided, the Holders representing a majority of the Outstanding Amount of the Energy Transition Bonds, by written notice to the Issuer and the Indenture Trustee, may rescind and annul such declaration and its consequences if:

(a)            the Issuer has paid or deposited with the Indenture Trustee a sum sufficient to pay:

(i)            all payments of principal of and premium, if any, and interest on all Energy Transition Bonds due and owing at such time as if such Event of Default had not occurred and was not continuing and all other amounts that would then be due hereunder or upon the Energy Transition Bonds if the Event of Default giving rise to such acceleration had not occurred; and

43

(ii)           all sums paid or advanced by the Indenture Trustee hereunder and the reasonable compensation, expenses, disbursements and advances of the Indenture Trustee and its agents and counsel; provided, that, the Indenture Trustee shall not be obligated to pay or advance any sums hereunder from its own funds after an Event of Default; and

(b)            all Events of Default, other than the nonpayment of the principal of the Energy Transition Bonds that has become due solely by such acceleration, have been cured or waived as provided in Section 5.12.

No such rescission shall affect any subsequent default or impair any right consequent thereto.

Section 5.03.         Collection of Indebtedness and Suits for Enforcement by Indenture Trustee.

(a)            If an Event of Default under Section 5.01(a) or Section 5.01(b) has occurred and is continuing, subject to Section 10.16, the Indenture Trustee, in its own name and as trustee of an express trust, may institute a Proceeding for the collection of the sums so due and unpaid, and may prosecute such Proceeding to judgment or final decree, and, subject to the limitations on recourse set forth herein, may enforce the same against the Issuer or other obligor upon the Energy Transition Bonds and collect in the manner provided by law out of the property of the Issuer or other obligor upon the Energy Transition Bonds wherever situated the moneys payable, or the Collateral and the proceeds thereof, the whole amount then due and payable on the Energy Transition Bonds for principal, premium, if any, and interest, with interest upon the overdue principal and premium, if any, and, to the extent payment at such rate of interest shall be legally enforceable, upon overdue installments of interest, at the respective rate borne by the Energy Transition Bonds or the applicable Tranche and in addition thereto such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Indenture Trustee and its agents and counsel.

(b)            If an Event of Default (other than an Event of Default under Section 5.01(g)) occurs and is continuing, the Indenture Trustee shall, as more particularly provided in Section 5.04, proceed to protect and enforce its rights and the rights of the Holders, by such appropriate Proceedings as the Indenture Trustee, subject to Section 5.11, shall deem most effective to protect and enforce any such rights, whether for the specific enforcement of any covenant or agreement in this Indenture or in aid of the exercise of any power granted herein, or to enforce any other proper remedy or legal or equitable right vested in the Indenture Trustee by this Indenture and the Series Supplement or by law, including foreclosing or otherwise enforcing the Lien of the Collateral securing the Energy Transition Bonds or applying to a court of competent jurisdiction for sequestration of revenues arising with respect to the Property.

(c)            If an Event of Default under Section 5.01(e) or Section 5.01(f) has occurred and is continuing, the Indenture Trustee, irrespective of whether the principal of any Energy Transition Bonds shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Indenture Trustee shall have made any demand pursuant to the provisions of this Section 5.03, shall be entitled and empowered, by intervention in any Proceedings related to such Event of Default or otherwise:

44

(i)            to file and prove a claim or claims for the whole amount of principal, premium, if any, and interest owing and unpaid in respect of the Energy Transition Bonds and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Indenture Trustee (including any claim for reasonable compensation to the Indenture Trustee and each predecessor Indenture Trustee, and their respective agents, attorneys and counsel, and for reimbursement of all expenses and liabilities incurred, and all advances made, by the Indenture Trustee and each predecessor Indenture Trustee, except as a result of negligence or bad faith) and of the Holders allowed in such Proceedings;

(ii)           unless prohibited by applicable law and regulations, to vote on behalf of the Holders in any election of a trustee in bankruptcy, a standby trustee or Person performing similar functions in any such Proceedings;

(iii)          to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute all amounts received with respect to the claims of the Holders and of the Indenture Trustee on their behalf; and

(iv)          to file such proofs of claim and other papers and documents as may be necessary or advisable in order to have the claims of the Indenture Trustee or the Holders allowed in any judicial proceeding relative to the Issuer, its creditors and its property;

and any trustee, receiver, liquidator, custodian or other similar official in any such Proceeding is hereby authorized by each of such Holders to make payments to the Indenture Trustee, and, in the event that the Indenture Trustee shall consent to the making of payments directly to such Holders, to pay to the Indenture Trustee such amounts as shall be sufficient to cover reasonable compensation to the Indenture Trustee, each predecessor Indenture Trustee and their respective agents, attorneys and counsel, and all other expenses and liabilities incurred, and all advances made, by the Indenture Trustee and each predecessor Indenture Trustee except as a result of negligence or bad faith.

(d)            Nothing herein contained shall be deemed to authorize the Indenture Trustee to authorize or consent to or vote for or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Energy Transition Bonds or the rights of any Holder thereof or to authorize the Indenture Trustee to vote in respect of the claim of any Holder in any such proceeding except, as aforesaid, to vote for the election of a trustee in bankruptcy or similar Person.

(e)            All rights of action and of asserting claims under this Indenture, or under any of the Energy Transition Bonds, may be enforced by the Indenture Trustee without the possession of any of the Energy Transition Bonds or the production thereof in any trial or other Proceedings relative thereto, and any such action or proceedings instituted by the Indenture Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment, subject to the payment of the expenses, disbursements and compensation of the Indenture Trustee, each predecessor Indenture Trustee and their respective agents and attorneys, shall be for the ratable benefit of the Holders of the Energy Transition Bonds.

45

Section 5.04.         Remedies; Priorities.

(a)            If an Event of Default (other than an Event of Default under Section 5.01(g)) shall have occurred and be continuing, the Indenture Trustee may do one or more of the following (subject to Section 5.05):

(i)            institute Proceedings in its own name and as trustee of an express trust for the collection of all amounts then payable on the Energy Transition Bonds or under this Indenture with respect thereto, whether by declaration of acceleration or otherwise, and, subject to the limitations on recovery set forth herein, enforce any judgment obtained, and collect from the Issuer or any other obligor moneys adjudged due, upon the Energy Transition Bonds;

(ii)           institute Proceedings from time to time for the complete or partial foreclosure of this Indenture with respect to the Collateral;

(iii)          exercise any remedies of a secured party under the UCC, the Energy Transition Act or any other applicable law and take any other appropriate action to protect and enforce the rights and remedies of the Indenture Trustee and the Holders of the Energy Transition Bonds;

(iv)          at the written direction of the Holders of a majority of the Outstanding Amount of the Energy Transition Bonds, either sell the Collateral or any portion thereof or rights or interest therein, at one or more public or private sales called and conducted in any manner permitted by law, or elect that the Issuer maintain possession of all or a portion of the Collateral pursuant to Section 5.05 and continue to apply the Energy Transition Charge Collection as if there had been no declaration of acceleration; and

(v)           exercise all rights, remedies, powers, privileges and claims of the Issuer against the Seller, the Administrator or the Servicer under or in connection with, and pursuant to the terms of, the Sale Agreement, the Administration Agreement or the Servicing Agreement;

provided, however, that the Indenture Trustee may not sell or otherwise liquidate any portion of the Collateral following such an Event of Default, other than an Event of Default described in Section 5.01(a) or Section 5.01(b), unless (A) the Holders of 100 percent of the Outstanding Amount of the Energy Transition Bonds consent thereto, (B) the proceeds of such sale or liquidation distributable to the Holders are sufficient to discharge in full all amounts then due and unpaid upon the Energy Transition Bonds for principal, premium, if any, and interest after taking into account payment of all amounts due prior thereto pursuant to the priorities set forth in Section 8.02(e) or (C) the Indenture Trustee determines that the Collateral will not continue to provide sufficient funds for all payments on the Energy Transition Bonds as they would have become due if the Energy Transition Bonds had not been declared due and payable, and the Indenture Trustee obtains the written consent of Holders of at least two-thirds of the Outstanding Amount of the Energy Transition Bonds. In determining such sufficiency or insufficiency with respect to clause (B) above and clause (C) above, the Indenture Trustee may, but need not, obtain and conclusively rely upon an opinion of an Independent investment banking or accounting firm of national reputation as to the feasibility of such proposed action and as to the sufficiency of the Collateral for such purpose.

46

(b)            If an Event of Default under Section 5.01(g) shall have occurred and be continuing, the Indenture Trustee, for the benefit of the Secured Parties, shall be entitled and empowered, to the extent permitted by applicable law, to institute or participate in Proceedings necessary to compel performance of or to enforce the State Pledge and to collect any monetary damages incurred by the Holders or the Indenture Trustee as a result of any such Event of Default, and may prosecute any such Proceeding to final judgment or decree. Such remedy shall be the only remedy that the Indenture Trustee may exercise if the only Event of Default that has occurred and is continuing is an Event of Default under Section 5.01(g).

(c)            If the Indenture Trustee collects any money pursuant to this Article V, it shall pay out such money in accordance with the priorities set forth in Section 8.02(e).

Section 5.05.        Optional Preservation of the Collateral. If the Energy Transition Bonds have been declared to be due and payable under Section 5.02 following an Event of Default and such declaration and its consequences have not been rescinded and annulled, the Indenture Trustee may, but need not, elect to maintain possession of all or a portion of the Collateral. It is the desire of the parties hereto and the Holders that there be at all times sufficient funds for the payment of principal of and premium, if any, and interest on the Energy Transition Bonds, and the Indenture Trustee shall take such desire into account when determining whether or not to maintain possession of the Collateral. In determining whether to maintain possession of the Collateral or sell or liquidate the same, the Indenture Trustee may, but need not, obtain and conclusively rely upon an opinion of an Independent investment banking or accounting firm of national reputation as to the feasibility of such proposed action and as to the sufficiency of the Collateral for such purpose.

Section 5.06.        Limitation of Suits. No Holder of any Energy Transition Bond shall have any right to institute any Proceeding, judicial or otherwise, to avail itself of any remedies provided in the Energy Transition Act or to avail itself of the right to foreclose on the Collateral or otherwise enforce the Lien and the security interest on the Collateral with respect to this Indenture and the Series Supplement, or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless:

(a)            such Holder previously has given written notice to the Indenture Trustee of a continuing Event of Default;

(b)            the Holders of a majority of the Outstanding Amount of the Energy Transition Bonds have made written request to the Indenture Trustee to institute such Proceeding in respect of such Event of Default in its own name as Indenture Trustee hereunder;

47

(c)            such Holder or Holders have offered to the Indenture Trustee indemnity satisfactory to it against the costs, expenses and liabilities to be incurred in complying with such request;

(d)            the Indenture Trustee for 60 days after its receipt of such notice, request and offer of indemnity has failed to institute such Proceedings; and

(e)            no direction inconsistent with such written request has been given to the Indenture Trustee during such 60-day period by the Holders of a majority of the Outstanding Amount of the Energy Transition Bonds;

it being understood and intended that no one or more Holders shall have any right in any manner whatever by virtue of, or by availing of, any provision of this Indenture to affect, disturb or prejudice the rights of any other Holders or to obtain or to seek to obtain priority or preference over any other Holders or to enforce any right under this Indenture, except in the manner herein provided.

In the event the Indenture Trustee shall receive conflicting or inconsistent requests and indemnity from two or more groups of Holders, each representing less than a majority of the Outstanding Amount of the Energy Transition Bonds, the Indenture Trustee in its sole discretion may file a petition with a court of competent jurisdiction to resolve such conflict or determine what action, if any, shall be taken, notwithstanding any other provisions of this Indenture.

Section 5.07.         Unconditional Rights of Holders To Receive Principal, Premium, if any, and Interest. Notwithstanding any other provisions in this Indenture, the Holder of any Energy Transition Bond shall have the right, which is absolute and unconditional, (a) to receive payment of (i) the interest, if any, on such Energy Transition Bond on the due dates thereof expressed in such Energy Transition Bond or in this Indenture or (ii) the unpaid principal, if any, of the Energy Transition Bonds on the Final Maturity Date or Tranche Maturity Date therefor and (b) to institute suit for the enforcement of any such payment, and such right shall not be impaired without the consent of such Holder.

Section 5.08.         Restoration of Rights and Remedies. If the Indenture Trustee or any Holder has instituted any Proceeding to enforce any right or remedy under this Indenture and such Proceeding has been discontinued or abandoned for any reason or has been determined adversely to the Indenture Trustee or to such Holder, then and in every such case the Issuer, the Indenture Trustee and the Holders shall, subject to any determination in such Proceeding, be restored severally and respectively to their former positions hereunder, and thereafter all rights and remedies of the Indenture Trustee and the Holders shall continue as though no such Proceeding had been instituted.

Section 5.09.         Rights and Remedies Cumulative. No right or remedy herein conferred upon or reserved to the Indenture Trustee or to the Holders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy.

48

Section 5.10.         Delay or Omission Not a Waiver. No delay or omission of the Indenture Trustee or any Holder to exercise any right or remedy accruing upon any Default or Event of Default shall impair any such right or remedy or constitute a waiver of any such Default or Event of Default or an acquiescence therein. Every right and remedy given by this Article V or by law to the Indenture Trustee or to the Holders may be exercised from time to time, and as often as may be deemed expedient, by the Indenture Trustee or by the Holders, as the case may be.

Section 5.11.         Control by Holders. The Holders of not less than a majority of the Outstanding Amount of the Energy Transition Bonds (or, if less than all Tranches are affected, the affected Tranche or Tranches) shall have the right to direct the time, method and place of conducting any Proceeding for any remedy available to the Indenture Trustee with respect to the Energy Transition Bonds of such Tranche or Tranches or exercising any trust or power conferred on the Indenture Trustee with respect to such Tranche or Tranches; provided, that:

(a)            such direction shall not be in conflict with any rule of law or with this Indenture or the Series Supplement or any Basic Document and shall not involve the Indenture Trustee in any personal liability or expense, in each case, as determined by the Indenture Trustee in good faith;

(b)            subject to other conditions specified in Section 5.04, any direction to the Indenture Trustee to sell or liquidate any Collateral (other than an Event of Default described in Section 5.01(a) or Section 5.01(b)) shall be by the Holders representing 100 percent of the Outstanding Amount of the Energy Transition Bonds;

(c)            if the conditions set forth in Section 5.05 have been satisfied and the Indenture Trustee elects to retain the Collateral pursuant to Section 5.05, then any direction to the Indenture Trustee by Holders representing less than 100 percent of the Outstanding Amount of the Energy Transition Bonds to sell or liquidate the Collateral shall be of no force and effect; and

(d)            the Indenture Trustee may take any other action deemed proper by the Indenture Trustee that is not inconsistent with such direction;

provided, however, that the Indenture Trustee’s duties shall be subject to Section 6.01, and the Indenture Trustee need not take any action that it determines might involve it in liability or might materially adversely affect the rights of any Holders not consenting to such action. Furthermore and without limiting the foregoing, the Indenture Trustee shall not be required to take any action for which it reasonably believes that it will not be indemnified to its satisfaction against any cost, expense or liabilities.

Section 5.12.         Waiver of Past Defaults. Prior to the declaration of the acceleration of the maturity of the Energy Transition Bonds as provided in Section 5.02, the Holders representing a majority of the Outstanding Amount of the Energy Transition Bonds may waive any past Default or Event of Default and its consequences except a Default (a) in payment of principal of or premium, if any, or interest on any of the Energy Transition Bonds or (b) in respect of a covenant or provision hereof that cannot be modified or amended without the consent of the Holder of each Energy Transition Bond of all Tranches affected. In the case of any such waiver, the Issuer, the Indenture Trustee and the Holders shall be restored to their former positions and rights hereunder, respectively, but no such waiver shall extend to any subsequent or other Default or Event of Default or impair any right consequent thereto.

49

Upon any such waiver, such Default shall cease to exist and be deemed to have been cured and not to have occurred, and any Event of Default arising therefrom shall be deemed to have been cured and not to have occurred, for every purpose of this Indenture, but no such waiver shall extend to any subsequent or other Default or Event of Default or impair any right consequent thereto

Section 5.13.         Undertaking for Costs. All parties to this Indenture agree, and each Holder of any Energy Transition Bond by such Holder’s acceptance thereof shall be deemed to have agreed, that any court may in its discretion require, in any suit for the enforcement of any right or remedy under this Indenture, or in any suit against the Indenture Trustee for any action taken, suffered or omitted by it as Indenture Trustee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit, and that such court may in its discretion assess reasonable costs, including reasonable attorneys’ fees, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant; but the provisions of this Section 5.13 shall not apply to (a) any suit instituted by the Indenture Trustee, (b) any suit instituted by any Holder, or group of Holders, in each case holding in the aggregate more than 10 percent of the Outstanding Amount of the Energy Transition Bonds or (c) any suit instituted by any Holder for the enforcement of the payment of (i) interest on any Energy Transition Bond on or after the due dates expressed in such Energy Transition Bond and in this Indenture or (ii) the unpaid principal, if any, of any Energy Transition Bond on or after the Final Maturity Date or Tranche Maturity Date therefor.

Section 5.14.         Waiver of Stay or Extension Laws. The Issuer covenants (to the extent that it may lawfully do so) that it will not at any time insist upon or plead or, in any manner whatsoever, claim or take the benefit or advantage of, any stay or extension law wherever enacted, now or at any time hereafter in force, that may affect the covenants or the performance of this Indenture; and the Issuer (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Indenture Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted.

Section 5.15.         Action on Energy Transition Bonds. The Indenture Trustee’s right to seek and recover judgment on the Energy Transition Bonds or under this Indenture shall not be affected by the seeking, obtaining or application of any other relief under or with respect to this Indenture. Neither the Lien of this Indenture nor any rights or remedies of the Indenture Trustee or the Holders shall be impaired by the recovery of any judgment by the Indenture Trustee against the Issuer or by the levy of any execution under such judgment upon any portion of the Collateral or any other assets of the Issuer.

50

ARTICLE VI

THE INDENTURE TRUSTEE

Section 6.01.         Duties of Indenture Trustee.

(a)            If an Event of Default has occurred and is continuing, the Indenture Trustee shall exercise the rights and powers vested in it by this Indenture and use the same degree of care and skill in their exercise as a prudent person would exercise or use under the circumstances in the conduct of such person’s own affairs.

(b)            Except during the continuance of an Event of Default:

(i)            the Indenture Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read into this Indenture against the Indenture Trustee; and

(ii)           in the absence of bad faith on its part, the Indenture Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Indenture Trustee and conforming on its face to the requirements of this Indenture (but need not confirm or investigate the accuracy of mathematical calculations or other facts stated therein).

(c)            The Indenture Trustee may not be relieved from liability for its own negligent action, its own bad faith, its own negligent failure to act or its own willful misconduct, except that:

(i)            this Section 6.01(c) does not limit the effect of Section 6.01(b);

(ii)           the Indenture Trustee shall not be liable for any error of judgment made in good faith by it unless it is proved that the Indenture Trustee was negligent in ascertaining the pertinent facts; and

(iii)          the Indenture Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it hereunder.

(d)            Every provision of this Indenture that in any way relates to the Indenture Trustee is subject to Section 6.01(a), Section 6.01(b) and Section 6.01(c).

(e)            The Indenture Trustee shall not be liable for interest on any money received by it except as the Indenture Trustee may agree in writing with the Issuer.

(f)            Money held in trust by the Indenture Trustee need not be segregated from other funds held by the Indenture Trustee except to the extent required by law or the terms of this Indenture, any Sale Agreement or Servicing Agreement or the Administration Agreement.

51

(g)            No provision of this Indenture shall require the Indenture Trustee to expend or risk its own funds or otherwise incur financial liability in the performance of any of its duties hereunder or in the exercise of any of its rights or powers, if it shall have reasonable grounds to believe that repayments of such funds or indemnity satisfactory to it against such risk or liability is not reasonably assured to it.

(h)            Every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Indenture Trustee shall be subject to the provisions of this Section 6.01 and to the provisions of the Trust Indenture Act.

(i)             In the event that U.S. Bank Trust Company, National Association is also acting as Paying Agent or Energy Transition Bond Registrar hereunder, the rights, benefits, protections, immunities and indemnities of this Article VI shall also be afforded to U.S. Bank Trust Company, National Association in its capacity as Paying Agent or Energy Transition Bond Registrar.

(j)             Except for the express duties of the Indenture Trustee set forth in the Basic Documents, the Indenture Trustee shall have no obligation to administer, service or collect Property or to maintain, monitor or otherwise supervise the administration, servicing or collection of the Charges.

(k)            Under no circumstance shall the Indenture Trustee be liable for any indebtedness of the Issuer, the Servicer or the Seller evidenced by or arising under the Energy Transition Bonds or the Basic Documents. None of the provisions of this Indenture shall in any event require the Indenture Trustee to perform or be responsible for the performance of any of the Servicer’s obligations under the Basic Documents.

(l)             Commencing with March 15, 2024, on or before March 15th of each fiscal year ending December 31, so long as the Issuer is required to file Exchange Act reports, the Indenture Trustee shall (i) deliver to the Issuer a report (in form and substance reasonably satisfactory to the Issuer and addressed to the Issuer and signed by an authorized officer of the Indenture Trustee) regarding the Indenture Trustee’s assessment of compliance, during the preceding fiscal year ended December 31, with each of the applicable servicing criteria specified on Exhibit C as required under Rule 13a-18 and Rule 15d-18 under the Exchange Act and Item 1122 of Regulation AB and (ii) deliver to the Issuer a report of an Independent registered public accounting firm reasonably acceptable to the Issuer that attests to and reports on, in accordance with Rule 1-02(a)(3) and Rule 2-02(g) of Regulation S-X under the Securities Act and the Exchange Act, the assessment of compliance made by the Indenture Trustee and delivered pursuant to Section 6.01(l)(i).

(m)           Any discretion, permissive right or privilege of the Indenture Trustee hereunder shall not be deemed to be or otherwise construed as a duty or obligation.

(n)           The Indenture Trustee’s receipt of publicly available reports hereunder shall not constitute notice of any information contained therein or determinable therefrom, including but not limited to a party’s compliance with covenants under the Indenture.

Section 6.02.         Rights of Indenture Trustee.

(a)            The Indenture Trustee may conclusively rely and shall be fully protected in relying on any document (including electronic documents and communications delivered in accordance with the terms of this Indenture) believed by it to be genuine and to have been signed or presented by the proper person. The Indenture Trustee need not investigate any fact or matter stated in such document.

52

(b)            Before the Indenture Trustee acts or refrains from acting, it may require and shall be entitled to receive an Officer’s Certificate or an Opinion of Counsel, which counsel may be an employee of or counsel to the Issuer or the Seller and which shall be reasonably satisfactory to the Indenture Trustee, or, in the Indenture Trustee’s sole judgment, external counsel of the Issuer (at no cost or expense to the Indenture Trustee) that such action is required or permitted hereunder. The Indenture Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on such Officer’s Certificate or Opinion of Counsel.

(c)            The Indenture Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys or a custodian or nominee, and the Indenture Trustee shall not be responsible for any misconduct or negligence on the part of, or for the supervision of, any such agent, attorney, custodian or nominee appointed with due care by it hereunder. The Indenture Trustee shall give prompt written notice to the Issuer, in which case the Issuer shall then give prompt written notice to the Rating Agencies, of the appointment of any such agent, custodian or nominee to whom it delegates any of its express duties under this Indenture; provided, that the Indenture Trustee shall not be obligated to give such notice (i) if the Issuer or the Holders have directed the Indenture Trustee to appoint such agent, custodian or nominee (in which event the Issuer shall give prompt notice to the Rating Agencies of any such direction) or (ii) of the appointment of any agents, custodians or nominees made at any time that an Event of Default on account of non-payment of principal or interest on the Energy Transition Bonds or bankruptcy or insolvency of the Issuer has occurred and is continuing.

(d)            The Indenture Trustee shall not be liable for any action it takes or omits to take in good faith that it believes to be authorized or within its rights or powers; provided, however, that the Indenture Trustee’s conduct does not constitute willful misconduct, negligence or bad faith.

(e)            The Indenture Trustee may consult with counsel, accountants and other experts, and the advice or opinion of counsel with respect to legal matters or of such accountants or other experts with respect to other matters relating to this Indenture and the Energy Transition Bonds shall be full and complete authorization and protection from liability in respect to any action taken, omitted or suffered by it hereunder in good faith and in accordance with the advice or opinion of such counsel, accountants and other experts.

(f)             The Indenture Trustee shall be under no obligation to take any action or exercise any of the rights or powers vested in it by this Indenture or any other Basic Document, or to institute, conduct or defend any litigation hereunder or thereunder or in relation hereto or thereto or to investigate any matter, in each case, at the request, order or direction of any of the Holders pursuant to the provisions of this Indenture and the Series Supplement or otherwise, unless it shall have received security or indemnity satisfactory to it against the costs, expenses and liabilities that may be incurred.

53

(g)            The Indenture Trustee may conclusively rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties.

(h)            Any request or direction of the Issuer mentioned herein shall be sufficiently evidenced by an Issuer Request or an Issuer Order.

(i)             Whenever in the administration of this Indenture the Indenture Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Indenture Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, conclusively rely upon an Officer’s Certificate.

(j)             The Indenture Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Indenture Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Indenture Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Issuer, personally or by agent or attorney at the sole cost of the Issuer, and shall incur no liability or additional liability of any kind by reason of such inquiry or investigation.

(k)            In no event shall the Indenture Trustee be responsible or liable for special, indirect or consequential loss or damage of any kind whatsoever (including loss of profit) irrespective of whether the Indenture Trustee has been advised of the likelihood of such loss or damage and regardless of the form of action.

(l)            In no event shall the Indenture Trustee be responsible or liable for any failure or delay in the performance of its obligations hereunder arising out of or caused by, directly or indirectly, forces beyond its control, including strikes, work stoppages, accidents, acts of war or terrorism, civil or military disturbances, epidemics, pandemics, nuclear or natural catastrophes or acts of God, and interruptions, loss or malfunctions of utilities, communications or computer (software and hardware) services, it being understood that the Indenture Trustee shall use reasonable efforts that are consistent with accepted practices in the banking industry to resume performance as soon as practicable under the circumstances. In no event shall the Indenture Trustee be liable for failure to perform its duties hereunder or under any other Basic Document if such failure is a direct result of another party’s failure to perform its obligations hereunder or thereunder.

(m)           The Indenture Trustee shall not be deemed to have notice or knowledge of any Servicer Default, Default or Event of Default unless a Responsible Officer of the Indenture Trustee has actual knowledge thereof or the Indenture Trustee has received written notice thereof pursuant to Section 10.04 and such notice references the Energy Transition Bonds and this Indenture.

54

(n)            The Indenture Trustee shall not be required to take any action it is directed to take under this Indenture if the Indenture Trustee determines in good faith that the action so directed is inconsistent with the Indenture, any other Basic Document or Applicable Law, or would involve the Indenture Trustee in personal liability.

Section 6.03.         Individual Rights of Indenture Trustee. The Indenture Trustee in its individual or any other capacity may become the owner or pledgee of Energy Transition Bonds and may otherwise deal with the Issuer or its Affiliates with the same rights it would have if it were not Indenture Trustee. Any Paying Agent, Energy Transition Bond Registrar, co-registrar or co-paying agent or agent appointed under Section 3.02 may do the same with like rights. However, the Indenture Trustee must comply with Section 6.11 and Section 6.12.

Section 6.04.         Indenture Trustee’s Disclaimer.

(a)            The Indenture Trustee shall not be responsible for and makes no representation (other than as set forth in Section 6.13) as to the validity or adequacy of this Indenture or the Energy Transition Bonds, it shall not be accountable for the Issuer’s use of the proceeds from the Energy Transition Bonds, and it shall not be responsible for any statement of the Issuer in this Indenture or in any document issued in connection with the sale of the Energy Transition Bonds or in the Energy Transition Bonds other than the Indenture Trustee’s certificate of authentication. The Indenture Trustee shall not be responsible for the form, character, genuineness, sufficiency, value or validity of any of the Collateral (or for the perfection or priority of the Liens thereon), or for or in respect of the validity or sufficiency of the Energy Transition Bonds (other than the certificate of authentication for the Energy Transition Bonds) or the Basic Documents, and the Indenture Trustee shall in no event assume or incur any liability, duty or obligation to any Holder, other than as expressly provided in this Indenture. The Indenture Trustee shall not be liable for the default or misconduct of the Issuer, the Seller or the Servicer under the Basic Documents or otherwise, and the Indenture Trustee shall have no obligation or liability to perform the obligations of such Persons.

(b)            The Indenture Trustee shall not be responsible for (i) the validity of the title of the Issuer to the Collateral, (ii) insuring the Collateral or (iii) the payment of taxes, charges, assessments or Liens upon the Collateral or otherwise as to the maintenance of the Collateral. The Indenture Trustee shall have no duty to ascertain or inquire as to the performance or observance of any of the terms of this Indenture or any of the other Basic Documents. The Indenture Trustee shall not be responsible for filing any financing or continuation statements or recording any documents or instruments in any public office at any time or times or otherwise perfecting or maintaining the perfection of any security interest in the Collateral.

55

Section 6.05.         Notice of Defaults. If a Default occurs and is continuing with respect to any Series and it is actually known to a Responsible Officer of the Indenture Trustee or a Responsible Officer of the Indenture Trustee has been notified in writing of such Default, the Indenture Trustee shall mail to each Rating Agency and each Holder of Energy Transition Bonds of all Series notice of the Default within ten Business Days after actual notice of such Default was received by a Responsible Officer of the Indenture Trustee (provided that the Indenture Trustee shall give the Rating Agencies prompt notice of any payment default in respect of the Energy Transition Bonds). Except in the case of a Default in payment of principal of and premium, if any, or interest on any Energy Transition Bond, the Indenture Trustee may withhold the notice of the Default if a Responsible Officer of the Indenture Trustee in good faith determines that prompt notice of the Default is not likely to be material to the Holders and the Default is likely to be cured, and therefore withholding such notice is in the interests of the Holders. In no event shall the Indenture Trustee be deemed to have knowledge of a Default (other than a Default in payment of principal, premium, if any, or interest on any Energy Transition Bond) unless a Responsible Officer of the Indenture Trustee shall have actual knowledge of a Default or shall have received written notice thereof.

Section 6.06.         Reports by Indenture Trustee to Holders.

(a)            So long as Energy Transition Bonds are Outstanding and the Indenture Trustee is the Energy Transition Bond Registrar and Paying Agent, upon the written request of any Holder or the Issuer, within the prescribed period of time for tax reporting purposes after the end of each calendar year, the Indenture Trustee shall deliver to each relevant current or former Holder such information in its possession as may be required to enable such Holder to prepare its U.S. federal income and any applicable local or state tax returns. If the Energy Transition Bond Registrar and Paying Agent is other than the Indenture Trustee, such Energy Transition Bond Registrar and Paying Agent, within the prescribed period of time for tax reporting purposes after the end of each calendar year, shall deliver to each relevant current or former Holder such information in its possession as may be required to enable such Holder to prepare its U.S. federal income and any applicable local or state tax returns.

(b)            On or prior to each Payment Date or Special Payment Date therefor, the Indenture Trustee will make available electronically on its reporting website to each Holder of the Energy Transition Bonds on such Payment Date or Special Payment Date a statement as provided and prepared by the Servicer, which will include (to the extent applicable) the following information (and any other information so specified in the Series Supplement for such Series) as to the Energy Transition Bonds with respect to such Payment Date or Special Payment Date or the period since the previous Payment Date, as applicable:

(i)            the amount of the payment to Holders allocable to principal, if any;

(ii)           the amount of the payment to Holders allocable to interest;

(iii)          the aggregate Outstanding Amount of the Energy Transition Bonds, before and after giving effect to any payments allocated to principal reported under Section 6.06(b)(i);

(iv)          the difference, if any, between the amount specified in Section 6.06(b)(iii) and the Outstanding Amount specified in the related Expected Amortization Schedule;

56

(v)           any other transfers and payments to be made on such Payment Date or Special Payment Date, including amounts paid to the Indenture Trustee and to the Servicer; and

(vi)          the amounts on deposit in the Capital Subaccount and the Excess Funds Subaccount, after giving effect to the foregoing payments and the Required Capital Level.

(c)            The Issuer shall send a copy of each of the Certificate of Compliance delivered to it pursuant to Section 3.03 of the Servicing Agreement and the Annual Accountant’s Report delivered to it pursuant to Section 3.04 of the Servicing Agreement to the Rating Agencies, the Indenture Trustee and to the Servicer for posting on the 17g-5 Website in accordance with Rule 17g-5 under the Exchange Act. A copy of such certificate and report may be obtained by any Holder by a request in writing to the Indenture Trustee.

(d)            The Indenture Trustee may consult with counsel, and the advice or opinion of such counsel with respect to legal matters relating to this Indenture and the Energy Transition Bonds shall be full and complete authorization and protection from liability with respect to any action taken, omitted or suffered by it hereunder in good faith and in accordance with the advice or opinion of such counsel. Any reasonable legal fees incurred by the Indenture Trustee shall be payable to the Indenture Trustee from amounts held in the Collection Account in accordance with the provisions set forth in Section 8.02(e).

Section 6.07.         Compensation and Indemnity. The Issuer shall pay to the Indenture Trustee from time to time reasonable compensation for its services. The Indenture Trustee’s compensation shall not, to the extent permitted by law, be limited by any law on compensation of a trustee of an express trust. The Issuer shall reimburse the Indenture Trustee for all reasonable out-of-pocket expenses, disbursements and advances incurred or made by it, including costs of collection, in addition to the compensation for its services. Such expenses shall include the reasonable compensation and expenses, disbursements and advances of the Indenture Trustee’s agents, counsel, accountants and experts, including reasonable extraordinary out-of-pocket expenses. The Issuer shall indemnify and hold harmless the Indenture Trustee and its officers, directors, employees and agents against any and all cost, damage, loss, liability, tax or expense (including reasonable fees and expenses of its counsel, agents, accountants and experts) incurred by it in connection with the administration and the enforcement of this Indenture, the Series Supplement and the other Basic Documents, including the costs and expenses of defending themselves against any claim of liability in connection with the Indenture Trustee’s rights, powers and obligations under this Indenture, the Series Supplement and the other Basic Documents and the performance of its duties hereunder and thereunder and obligations under or pursuant to this Indenture, the Series Supplement and the other Basic Documents other than any such tax on the compensation of the Indenture Trustee for its services as Indenture Trustee. The Indenture Trustee shall notify the Issuer as soon as is reasonably practicable of any claim for which it may seek indemnity. Failure by the Indenture Trustee to so notify the Issuer shall not relieve the Issuer of its obligations hereunder. The Issuer shall defend the claim, the Indenture Trustee may have separate counsel, and the Issuer shall pay the reasonable fees and expenses of such counsel. The Issuer need not reimburse any expense or indemnify against any loss, liability or expense incurred by the Indenture Trustee through the Indenture Trustee’s own willful misconduct, negligence or bad faith. The rights of the Indenture Trustee set forth in this Section 6.07 are subject to and limited by the priority of payments set forth in Section 8.02(e).

57

The payment obligations to the Indenture Trustee pursuant to this Section 6.07 shall survive the termination or satisfaction and discharge of this Indenture and the Series Supplements or the earlier resignation or removal of the Indenture Trustee. When the Indenture Trustee incurs expenses after the occurrence of a Default specified in Section 5.01(e) or Section 5.01(f) with respect to the Issuer, the expenses are intended to constitute expenses of administration under the Bankruptcy Code or any other applicable U.S. federal or state bankruptcy, insolvency or similar law

Section 6.08.         Replacement of Indenture Trustee and Securities Intermediary.

(a)            The Indenture Trustee may resign at any time upon not less than 30 days’ prior written notice to the Issuer subject to Section 6.08(c). The Holders of not less than a majority of the Outstanding Amount of the Energy Transition Bonds may remove the Indenture Trustee by so notifying the Indenture Trustee not less than 31 days prior to the date of removal and may appoint a successor Indenture Trustee. The Issuer shall remove the Indenture Trustee if:

(i)            the Indenture Trustee fails to comply with Section 6.11;

(ii)           the Indenture Trustee is adjudged a bankrupt or insolvent;

(iii)          a receiver or other public officer takes charge of the Indenture Trustee or its property;

(iv)          the Indenture Trustee otherwise becomes incapable of acting; or

(v)           the Indenture Trustee fails to provide to the Issuer any information reasonably requested by the Issuer pertaining to the Indenture Trustee and necessary for the Issuer or the Sponsor to comply with its respective reporting obligations under the Exchange Act and Regulation AB and such failure is not resolved to the Issuer’s and the Indenture Trustee’s mutual satisfaction within a reasonable period of time.

Any removal or resignation of the Indenture Trustee shall also constitute a removal or resignation of the Securities Intermediary.

(b)            If the Indenture Trustee or the Securities Intermediary gives notice of resignation or is removed or if a vacancy exists in the office of Indenture Trustee or Securities Intermediary for any reason (the Indenture Trustee in such event being referred to herein as the retiring Indenture Trustee and the Securities Intermediary in such event being referred to herein as the retiring Securities Intermediary), the Issuer shall promptly appoint a successor Indenture Trustee or a successor Securities Intermediary, as the case may be.

58

(c)            Each of the successor Indenture Trustee and the successor Securities Intermediary, as the case may be, shall deliver a written acceptance of its appointment as the Indenture Trustee or as the Securities Intermediary, as applicable, to the retiring Indenture Trustee and the retiring Securities Intermediary, as applicable, and to the Issuer. Thereupon the resignation or removal of the retiring Indenture Trustee or the retiring Securities Intermediary, as the case may be, shall become effective, and the successor Indenture Trustee or the successor Securities Intermediary, as applicable, shall have all the rights, powers and duties of the Indenture Trustee and Securities Intermediary, as applicable, under this Indenture and the other Basic Documents. No resignation or removal of the Indenture Trustee pursuant to this Section 6.08 shall become effective until acceptance of the appointment by a successor Indenture Trustee having the qualifications set forth in Section 6.11. Notice of any such appointment shall be promptly given to each Rating Agency by the successor Indenture Trustee. The successor Indenture Trustee shall mail a notice of its succession to Holders. The retiring Indenture Trustee shall promptly transfer all property held by it as Indenture Trustee to the successor Indenture Trustee.

(d)            If a successor Indenture Trustee or a successor Securities Intermediary does not take office within 60 days after the retiring Indenture Trustee or the retiring Securities Intermediary, as the case may be, resigns or is removed, the retiring Indenture Trustee or the retiring Securities Intermediary, as the case may be, the Issuer or the Holders of a majority in Outstanding Amount of the Energy Transition Bonds may petition any court of competent jurisdiction for the appointment of a successor Indenture Trustee or a successor Securities Intermediary, as the case may be.

(e)            If the Indenture Trustee fails to comply with Section 6.11, any Holder may petition any court of competent jurisdiction for the removal of the Indenture Trustee and the appointment of a successor Indenture Trustee.

(f)            Notwithstanding the replacement of the Indenture Trustee or the Securities Intermediary pursuant to this Section 6.08, the Issuer’s obligations under Section 6.07 shall continue for the benefit of the retiring Indenture Trustee and the retiring Securities Intermediary.

Section 6.09.         Successor Indenture Trustee by Merger. If the Indenture Trustee consolidates with, merges or converts into, or transfers all or substantially all its corporate trust business or assets to, another corporation or banking association, the resulting, surviving or transferee corporation or banking association without any further act shall be the successor Indenture Trustee; provided, however, that, if such successor Indenture Trustee is not eligible under Section 6.11, then the successor Indenture Trustee shall be replaced in accordance with Section 6.08. Notice of any such event shall be promptly given to each Rating Agency by the successor Indenture Trustee.

In case at the time such successor or successors by merger, conversion, consolidation or transfer shall succeed to the trusts created by this Indenture any of the Energy Transition Bonds shall have been authenticated but not delivered, any such successor to the Indenture Trustee may adopt the certificate of authentication of any predecessor trustee and deliver the Energy Transition Bonds so authenticated; and, in case at that time any of the Energy Transition Bonds shall not have been authenticated, any successor to the Indenture Trustee may authenticate the Energy Transition Bonds either in the name of any predecessor hereunder or in the name of the successor to the Indenture Trustee; and in all such cases such certificates shall have the full force that it is anywhere in the Energy Transition Bonds or in this Indenture provided that the certificate of the Indenture Trustee shall have.

59

Section 6.10.     Appointment of Co-Trustee or Separate Trustee.

(a)            Notwithstanding any other provisions of this Indenture, at any time, for the purpose of meeting any legal requirement of any jurisdiction in which any part of the trust created by this Indenture or the Collateral may at the time be located, the Indenture Trustee shall have the power and may execute and deliver all instruments to appoint one or more Persons to act as a co-trustee or co-trustees, or separate trustee or separate trustees, of all or any part of the trust created by this Indenture or the Collateral, and to vest in such Person or Persons, in such capacity and for the benefit of the Secured Parties, such title to the Collateral, or any part hereof, and, subject to the other provisions of this Section 6.10, such powers, duties, obligations, rights and trusts as the Indenture Trustee may consider necessary or desirable. No co-trustee or separate trustee hereunder shall be required to meet the terms of eligibility as a successor trustee under Section 6.11 and no notice to Holders of the appointment of any co-trustee or separate trustee shall be required under Section 6.08. Notice of any such appointment shall be promptly given to each Rating Agency by the Indenture Trustee.

(b)            Every separate trustee and co-trustee shall, to the extent permitted by law, be appointed and act subject to the following provisions and conditions:

(i)            all rights, powers, duties and obligations conferred or imposed upon the Indenture Trustee shall be conferred or imposed upon and exercised or performed by the Indenture Trustee and such separate trustee or co-trustee jointly (it being understood that such separate trustee or co-trustee is not authorized to act separately without the Indenture Trustee joining in such act), except to the extent that under any law of any jurisdiction in which any particular act or acts are to be performed the Indenture Trustee shall be incompetent or unqualified to perform such act or acts, in which event such rights, powers, duties and obligations (including the holding of title to the Collateral or any portion thereof in any such jurisdiction) shall be exercised and performed singly by such separate trustee or co-trustee, but solely at the direction of the Indenture Trustee;

(ii)           no trustee hereunder shall be personally liable by reason of any act or omission of any other trustee hereunder; and

(iii)          the Indenture Trustee may at any time accept the resignation of or remove any separate trustee or co-trustee.

(c)            Any notice, request or other writing given to the Indenture Trustee shall be deemed to have been given to each of the then-separate trustees and co-trustees, as effectively as if given to each of them. Every instrument appointing any separate trustee or co-trustee shall refer to this Indenture and the conditions of this Article VI. Each separate trustee and co-trustee, upon its acceptance of the trusts conferred, shall be vested with the estates or property specified in its instrument of appointment, either jointly with the Indenture Trustee or separately, as may be provided therein, subject to all the provisions of this Indenture, specifically including every provision of this Indenture relating to the conduct of, affecting the liability of, or affording protection to, the Indenture Trustee. Every such instrument shall be filed with the Indenture Trustee.

60

(d)            Any separate trustee or co-trustee may at any time constitute the Indenture Trustee, its agent or its attorney-in-fact with full power and authority, to the extent not prohibited by law, to do any lawful act under or in respect of this Indenture on its behalf and in its name. If any separate trustee or co-trustee shall die, become incapable of acting, resign or be removed, all of its estates, properties, rights, remedies and trusts shall vest in and be exercised by the Indenture Trustee, to the extent permitted by law, without the appointment of a new or successor trustee.

Section 6.11.     Eligibility; Disqualification. The Indenture Trustee shall at all times satisfy the requirements of Section 310(a)(1) of the Trust Indenture Act, Section 310(a)(5) of the Trust Indenture Act and Section 26(a)(1) of the Investment Company Act. The Indenture Trustee shall have a combined capital and surplus of at least $50,000,000 as set forth in its most recent published annual report of condition and shall have a long-term debt rating from each of S&P and Moody’s in one of its generic rating categories that signifies investment grade. The Indenture Trustee shall comply with Section 310(b) of the Trust Indenture Act, including the optional provision permitted by the second sentence of Section 310(b)(9) of the Trust Indenture Act; provided, however, that there shall be excluded from the operation of Section 310(b)(1) of the Trust Indenture Act any indenture or indentures under which other securities of the Issuer are outstanding if the requirements for such exclusion set forth in Section 310(b)(1) of the Trust Indenture Act are met.

Section 6.12.     Preferential Collection of Claims Against Issuer. The Indenture Trustee shall comply with Section 311(a) of the Trust Indenture Act, excluding any creditor relationship listed in Section 311(b) of the Trust Indenture Act. An Indenture Trustee who has resigned or been removed shall be subject to Section 311(a) of the Trust Indenture Act to the extent indicated therein.

Section 6.13.     Representations and Warranties of Indenture Trustee. The Indenture Trustee hereby represents and warrants as of the date hereof that:

(a)            the Indenture Trustee is a national banking association duly organized and validly existing under the laws of the United States of America; and

(b)            the Indenture Trustee has full power, authority and legal right to execute, deliver and perform its obligations under this Indenture and the other Basic Documents to which the Indenture Trustee is a party and has taken all necessary action to authorize the execution, delivery and performance of obligations by it of this Indenture and such other Basic Documents.

Section 6.14.     Annual Report by Independent Registered Public Accountants. The Indenture Trustee hereby covenants that it will cooperate in a reasonable manner with any reasonable request by the Issuer or the Servicer in connection with the attestation by the firm of Independent registered public accountants performing the procedures required under Section 3.04 of the Servicing Agreement, it being understood and agreed that the Indenture Trustee will so cooperate (including delivering any letter agreement or consent to the applicable accountants) in conclusive reliance upon the direction of the Issuer or the Servicer, and the Indenture Trustee makes no independent inquiry or investigation to, and shall have no obligation or liability in respect of, the sufficiency, validity or correctness of such procedures.

61

Section 6.15.     Custody of Collateral. The Indenture Trustee shall hold such of the Collateral (and any other collateral that may be granted to the Indenture Trustee) as consists of instruments, deposit accounts, negotiable documents, money, goods, letters of credit and advices of credit in the State of New York. The Indenture Trustee shall hold such of the Collateral as constitute investment property through the Securities Intermediary (which, as of the date hereof, is U.S. Bank National Association). The initial Securities Intermediary hereby agrees (and each future Securities Intermediary shall agree) with the Indenture Trustee that (a) such investment property (other than cash) shall at all times be credited to a securities account in the name of the Indenture Trustee, (b) the Securities Intermediary shall treat the Indenture Trustee as entitled to exercise the rights that comprise each financial asset credited to such securities account, (c) all property (other than cash) credited to such securities account shall be treated as a financial asset, (d) the Securities Intermediary shall comply with entitlement orders originated by the Indenture Trustee without the further consent of any other Person, (e) the Securities Intermediary will not agree with any Person other than the Indenture Trustee to comply with entitlement orders originated by such other Person, (f) such securities accounts and the property credited thereto shall not be subject to any Lien or right of set-off in favor of the Securities Intermediary or anyone claiming through it (other than the Indenture Trustee) and (g) such agreement shall be governed by the internal laws of the State of New York. The Indenture Trustee shall hold any Collateral consisting of money in a deposit account, and the bank in which such money is being held shall act as “bank” for purposes of perfecting the security interest in such deposit account. Terms used in the two preceding sentences that are defined in the UCC and not otherwise defined herein shall have the meaning set forth in the UCC. Except as permitted by this Section 6.15 or elsewhere in this Indenture, the Indenture Trustee shall not hold Collateral through an agent or a nominee.

Section 6.16. FATCA. The Issuer agrees (i) to provide the Indenture Trustee with such reasonable information as it has in its possession to enable the Indenture Trustee to determine whether any payments pursuant to the Indenture are subject to the withholding requirements described in Section 1471(b) of the Code or otherwise imposed pursuant to Sections 1471 through 1474 of the Code and any regulations, or agreements thereunder or official interpretations thereof (“Applicable FATCA Law”), and (ii) that the Indenture Trustee shall be entitled to make any withholding or deduction from payments under the Indenture to the extent necessary to comply with Applicable FATCA Law, for which the Indenture Trustee shall not have any liability.

Section 6.17. Related Parties. It is expressly acknowledged, agreed and consented to that U.S. Bank National Association will be acting in the capacity of Securities Intermediary and its affiliate, U.S. Bank Trust Company, National Association will be acting in the capacities of Indenture Trustee, Energy Transition Bond Registrar, Paying Agent hereunder and in such other roles as are assigned to them under the Basic Documents. Each of U.S. Bank National Association and U.S. Bank Trust Company, National Association, may in such multiple capacities, discharge its separate functions fully, without hindrance or regard to conflict of interest principles, duty of loyalty principles or other equitable principles to the extent that any such conflict arises from the performance by it of its express duties set forth in this Indenture or any other Basic Document, in any such capacities, all of which defenses, claims or assertions based on the foregoing are hereby expressly waived by the Issuer and Holders and any other Person having rights pursuant to this Indenture and any other Basic Document; provided, in no event shall this Section 6.17 exculpate either U.S. Bank National Association or U.S. Bank Trust Company, National Association in the case of its own willful misconduct, negligence or bad faith.

62

ARTICLE VII

HOLDERS’ LISTS AND REPORTS

Section 7.01.     Issuer to Furnish Indenture Trustee Names and Addresses of Holders. The Issuer will furnish or cause to be furnished to the Indenture Trustee (a) not more than five days after the earlier of (i) each Record Date and (ii) six months after the last Record Date, a list, in such form as the Indenture Trustee may reasonably require, of the names and addresses of the Holders as of such Record Date, and (b) at such other times as the Indenture Trustee may request in writing, within 30 days after receipt by the Issuer of any such request, a list of similar form and content as of a date not more than ten days prior to the time such list is furnished; provided, however, that, so long as the Indenture Trustee is the Energy Transition Bond Registrar, no such list shall be required to be furnished.

Section 7.02.     Preservation of Information; Communications to Holders.

(a)            The Indenture Trustee shall preserve, in as current a form as is reasonably practicable, the names and addresses of the Holders contained in the most recent list furnished to the Indenture Trustee as provided in Section 7.01 and the names and addresses of Holders received by the Indenture Trustee in its capacity as Energy Transition Bond Registrar. The Indenture Trustee may destroy any list furnished to it as provided in Section 7.01 upon receipt of a new list so furnished.

(b)            Holders may communicate pursuant to Section 312(b) of the Trust Indenture Act with other Holders with respect to their rights under this Indenture or under the Energy Transition Bonds. In addition, upon the written request of any Holder or group of Holders of Energy Transition Bonds evidencing at least 10 percent of the Outstanding Amount of the Energy Transition Bonds, the Indenture Trustee shall afford the Holder or Holders making such request a copy of a current list of Holders for purposes of communicating with other Holders with respect to their rights hereunder; provided, that the Indenture Trustee gives prior written notice to the Issuer of such request.

(c)            The Issuer, the Indenture Trustee and the Energy Transition Bond Registrar shall have the protection of Section 312(c) of the Trust Indenture Act.

63

Section 7.03.     Reports by Issuer.

(a)            The Issuer shall:

(i)            so long as the Issuer or the Sponsor is required to file such documents with the SEC, provide to the Indenture Trustee, within 15 days after the Issuer is required to file the same with the SEC, copies of the annual reports and of the information, documents and other reports (or copies of such portions of any of the foregoing as the SEC may from time to time by rules and regulations prescribe) that the Issuer or the Sponsor may be required to file with the SEC pursuant to Section 13 or 15(d) of the Exchange Act;

(ii)           provide to the Indenture Trustee and file with the SEC, in accordance with rules and regulations prescribed from time to time by the SEC, such additional information, documents and reports with respect to compliance by the Issuer with the conditions and covenants of this Indenture as may be required from time to time by such rules and regulations; and

(iii)          supply to the Indenture Trustee (and the Indenture Trustee shall transmit by mail to all Holders described in Section 313(c) of the Trust Indenture Act), such summaries of any information, documents and reports required to be filed by the Issuer pursuant to Section 7.03(a)(i) and Section 7.03(a)(ii) as may be required by rules and regulations prescribed from time to time by the SEC.

Except as may be provided by Section 313(c) of the Trust Indenture Act, the Issuer may fulfill its obligation to provide the materials described in this Section 7.03(a) by providing such materials in electronic format.

(b)           Unless the Issuer otherwise determines, the fiscal year of the Issuer shall end on December 31 of each year, and the Issuer will promptly notify the Indenture Trustee regarding any change in its fiscal year.

(c)           Delivery of such reports, information and documents to the Indenture Trustee is for informational purposes only, and the Indenture Trustee’s receipt of such shall not constitute actual or constructive notice or knowledge of any information contained therein or determinable from information contained therein, including the Issuer’s compliance with any of its covenants hereunder (as to which the Indenture Trustee is entitled to rely exclusively on Officer’s Certificates).

Section 7.04.     Reports by Indenture Trustee. If required by Section 313(a) of the Trust Indenture Act, within 60 days after March 30 of each year, commencing with March 30, 2024, the Indenture Trustee shall send to each Holder as required by Section 313(c) of the Trust Indenture Act a brief report dated as of such date that complies with Section 313(a) of the Trust Indenture Act. The Indenture Trustee also shall comply with Section 313(b) of the Trust Indenture Act; provided, however, that the initial report if required to be so issued shall be delivered not more than 12 months after the initial issuance of the Energy Transition Bonds.

64

A copy of each report at the time of its sending to Holders shall be filed by the Servicer with the SEC and each stock exchange, if any, on which the Energy Transition Bonds are listed. The Issuer shall notify the Indenture Trustee in writing if and when the Energy Transition Bonds are listed on any stock exchange.

ARTICLE VIII

ACCOUNTS, DISBURSEMENTS AND RELEASES

Section 8.01.     Collection of Money. Except as otherwise expressly provided herein, the Indenture Trustee may demand payment or delivery of, and shall receive and collect, directly and without intervention or assistance of any fiscal agent or other intermediary, all money and other property payable to or receivable by the Indenture Trustee pursuant to this Indenture and the other Basic Documents. The Indenture Trustee shall apply all such money received by it as provided in this Indenture. Except as otherwise expressly provided in this Indenture, if any default occurs in the making of any payment or performance under any agreement or instrument that is part of the Collateral, the Indenture Trustee may take such action as may be appropriate to enforce such payment or performance, subject to Article VI, including the institution and prosecution of appropriate Proceedings. Any such action shall be without prejudice to any right to claim a Default or Event of Default under this Indenture and any right to proceed thereafter as provided in Article V.

Section 8.02.     Collection Account.

(a)            Prior to the Series Closing Date, the Issuer shall open or cause to be opened with the Securities Intermediary or at another Eligible Institution, one or more segregated trust accounts in the Indenture Trustee’s name for the deposit of Energy Transition Charge Collections for the Energy Transition Bonds and all other amounts received with respect to the Collateral servicing such Energy Transition Bonds (the “Collection Account” and collectively, the “Collection Accounts”). The Indenture Trustee shall hold the Collection Account for the benefit of the Secured Parties. There shall be established by the Indenture Trustee in respect of the Collection Account three subaccounts: a general subaccount (the “General Subaccount”); an excess funds subaccount (the “Excess Funds Subaccount”); and a capital subaccount (the “Capital Subaccount” and, together with the General Subaccount and the Excess Funds Subaccount, the “Subaccounts”). For administrative purposes, the Subaccounts may be established by the Securities Intermediary as separate accounts. Such separate accounts will be recognized individually as a Subaccount and collectively as the “Collection Account”. Prior to or concurrently with the issuance of the Energy Transition Bonds, the Member shall deposit into the Capital Subaccount an amount equal to the Required Capital Level. All amounts in the Collection Account not allocated to any other subaccount shall be allocated to the General Subaccount. Prior to the initial Payment Date, all amounts in the Collection Account (other than funds deposited into the Capital Subaccount up to the Required Capital Level) shall be allocated to the General Subaccount. All references to a Collection Account shall be deemed to include reference to all subaccounts contained therein. Withdrawals from and deposits to each of the foregoing subaccounts of a Collection Account shall be made as set forth in Section 8.02(d) and Section 8.02(e). The Collection Account shall at all times be maintained as an Eligible Account and will be under the sole dominion and exclusive control of the Indenture Trustee, through the Securities Intermediary, and only the Indenture Trustee shall have access to the applicable Collection Account for the purpose of making deposits in and withdrawals from the applicable Collection Account in accordance with this Indenture. Funds in a Collection Account shall not be commingled with any other moneys. All moneys deposited from time to time in the Collection Account, all deposits therein pursuant to this Indenture and all investments made in Eligible Investments as directed in writing by the Issuer with such moneys, including all income or other gain from such investments, shall be held by the Securities Intermediary in the Collection Account as part of the Series Collateral as herein provided. The Securities Intermediary shall have no liability in respect of losses incurred as a result of the liquidation of any Eligible Investment prior to its stated maturity or its date of redemption or the failure of the Issuer or the Servicer to provide timely written investment direction.

65

(b)           The Securities Intermediary hereby confirms that (i) it will treat the Collection Account as a “securities account” as such term is defined in Section 8-501(a) of the UCC, (ii) it is a “securities intermediary” (as such term is defined in Section 8-102(a)(14) of the UCC) and is acting in such capacity with respect to such accounts, (iii) the Indenture Trustee for the benefit of the Secured Parties is the sole “entitlement holder” (as such term is defined in Section 8-102(a)(7) of the UCC) with respect to such accounts and (iv) no other Person shall have the right to give “entitlement orders” (as such term is defined in Section 8-102(a)(8)) with respect to such accounts. The Securities Intermediary hereby further agrees that each item of property (whether investment property, financial asset, security, instrument or cash) received by it will be credited to the Collection Account such property, other than cash, shall be treated by it as a “financial asset” within the meaning of Section 8-102(a)(9) of the UCC. The Indenture Trustee shall hold any Collateral consisting of money in the Collection Account, and it and U.S. Bank National Association hereby agrees to treat the Collection Account as a “deposit account” within the meaning of Section 9-102(a)(29) of the UCC. Notwithstanding anything to the contrary, the State of New York shall be deemed to be the jurisdiction of the Securities Intermediary for purposes of Section 8-110 of the UCC and the “bank’s jurisdiction” of U.S. Bank National Association acting as the “bank” for purposes of Section 9-304(a) of the UCC, and the Collection Account (as well as the securities entitlements related thereto) shall be governed by the laws of the State of New York to the extent applicable.

(c)           The Indenture Trustee shall have sole dominion and exclusive control over all moneys in the applicable Collection Account through the Securities Intermediary and shall apply such amounts therein as provided in this Section 8.02.

(d)           Energy Transition Charge Collections shall be deposited in the applicable General Subaccount as provided in Section 6.11 of the Servicing Agreement. All deposits to and withdrawals from a Collection Account, all allocations to the subaccounts of a Collection Account and any amounts to be paid to the Servicer under Section 8.02(e) shall be made by the Indenture Trustee in accordance with the written instructions provided by the Servicer in the Monthly Servicer’s Certificate or the Semi-Annual Servicer’s Certificate.

66

(e)           On each Payment Date, the Indenture Trustee shall apply all amounts on deposit in the applicable Collection Account, including all Investment Earnings thereon, in accordance solely with the Semi-Annual Servicer’s Certificate, in the following priority:

(i)            payment of the Indenture Trustee’s fees, expenses and outstanding indemnity amounts shall be paid to the Indenture Trustee (subject to Section 6.07) in an amount not to exceed the amount set forth in the Series Supplement; provided, however, that such cap shall not apply after the occurrence of an Event of Default;

(ii)           payment of the Servicing Fee with respect to such Payment Date, plus any unpaid Servicing Fees for prior Payment Dates shall be paid to the Servicer;

(iii)          payment of the allocable share of the Administration Fee for such Payment Date shall be paid to the Administrator, and the Independent Manager Fee for such Payment Date shall be paid to the Independent Managers, and in each case with any unpaid Administration Fees or Independent Manager Fees from prior Payment Dates;

(iv)          payment of all other ordinary and periodic Operating Expenses for such Payment Date not described above shall be paid to the parties to which such Operating Expenses are owed;

(v)           payment of Periodic Interest for such Payment Date with respect to such Tranche, including any overdue Periodic Interest (together with, to the extent lawful, interest on such overdue Periodic Interest at the applicable Bond Interest Rate), with respect to the Energy Transition Bonds shall be paid to the Holders of Energy Transition Bonds;

(vi)          payment of the principal required to be paid on the Energy Transition Bonds on the Final Maturity Date or Tranche Maturity Date or as a result of an acceleration upon an Event of Default shall be paid to the Holders of Energy Transition Bonds;

(vii)         payment of Periodic Principal for such Payment Date, including any previously unpaid Periodic Principal, with respect to the Energy Transition Bonds shall be paid to the Holders of Energy Transition Bonds, pro rata if there is a deficiency;

(viii)        payment of the allocable share of any other unpaid Operating Expenses (including fees, expenses and indemnity owed to the Indenture Trustee but unpaid due to the limitation in Section 8.02(e)(i)) and any remaining amounts owed pursuant to the Basic Documents shall be paid, pro rata, to the parties to which such Operating Expenses or remaining amounts are owed;

(ix)           replenishment of the amount, if any, by which the Required Capital Level exceeds the amount in the Capital Subaccount as of such Payment Date shall be allocated to the Capital Subaccount;

(x)           the Return on Invested Capital then due and payable shall be paid to Public Service Company of New Mexico;

(xi)          the balance, if any, shall be allocated to the Excess Funds Subaccount; and

67

(xii)         after the Energy Transition Bonds have been paid in full and discharged, and all of the other foregoing amounts are paid in full, together with all amounts due and payable to the Indenture Trustee under Section 6.07 or otherwise the balance (including all amounts then held in the Capital Subaccount and the Excess Funds Subaccount), if any, shall be paid to the Issuer, free from the Lien of this Indenture and the Series Supplement.

All payments to the Holders of the Energy Transition Bonds pursuant to Section 8.02(e)(v), Section 8.02(e)(vi) and Section 8.02(e)(vii) shall be made to such Holders pro rata based on the respective amounts of interest and/or principal owed, unless, in the case of Energy Transition Bonds comprised of two or more Tranches, the Series Supplement provides otherwise. Payments in respect of principal of and premium, if any, and interest on any Tranche of Energy Transition Bonds will be made on a pro rata basis among all the Holders of such Tranche. In the case of an Event of Default, then, in accordance with Section 5.04(c), in respect of any application of moneys pursuant to Section 8.02(e)(v) or Section 8.02(e)(vi), moneys will be applied pursuant to Section 8.02(e)(v) and Section 8.02(e)(vi), as the case may be, in such order, on a pro rata basis, based upon the interest or the principal owed.

(f)            If on any Payment Date, or, for any amounts payable under Section 8.02(e)(i), Section 8.02(e)(ii), Section 8.02(e)(iii) and Section 8.02(e)(iv), on any Business Day, funds on deposit in the General Subaccount are insufficient to make the payments contemplated by Section 8.02(e)(i), Section 8.02(e)(ii), Section 8.02(e)(iii), Section 8.02(e)(iv), Section 8.02(e)(v), Section 8.02(e)(vi), Section 8.02(e)(vii), Section 8.02(e)(viii) and Section 8.02(e)(ix), the Indenture Trustee shall, solely in accordance with the applicable Semi-Annual Servicer’s Certificate, (i) first, draw from amounts on deposit in the Excess Funds Subaccount, and (ii) second, draw from amounts on deposit in the Capital Subaccount, in each case, up to the amount of such shortfall in order to make the payments contemplated by Section 8.02(e)(i), Section 8.02(e)(ii), Section 8.02(e)(iii), Section 8.02(e)(iv), Section 8.02(e)(v), Section 8.02(e)(vi), Section 8.02(e)(vii) and Section 8.02(e)(viii). In addition, if on any Payment Date funds on deposit in the General Subaccount are insufficient to make the allocations contemplated by Section 8.02(e)(ix), the Indenture Trustee shall draw, solely in accordance with the applicable Semi-Annual Servicer’s Certificate, any amounts on deposit in the Excess Funds Subaccount to make such allocations to the Capital Subaccount.

(g)           On any Business Day upon which the Indenture Trustee receives a written request from the Administrator stating that any Operating Expense payable by the Issuer (but only as described in Section 8.02(e)(i), Section 8.02(e)(ii), Section 8.02(e)(iii) and Section 8.02(e)(iv)) will become due and payable prior to the next Payment Date, and setting forth the amount and nature of such Operating Expense and the date such Operating Expense is due, as well as any supporting documentation that the Indenture Trustee may reasonably request, the Indenture Trustee, upon receipt of such information, will make payment of such Operating Expenses on or before the date such payment is due from amounts on deposit in the General Subaccount, the Excess Funds Subaccount and the Capital Subaccount, in that order and only to the extent required to make such payment.

68

Section 8.03.     General Provisions Regarding the Collection Account.

(a)            So long as no Default or Event of Default shall have occurred and be continuing, all or a portion of the funds in the Collection Account shall be invested in Eligible Investments and reinvested by the Indenture Trustee upon Issuer Order; provided, however, that such Eligible Investments shall not mature or be redeemed later than the Business Day prior to the next Payment Date or Special Payment Date for the related Tranche, if applicable, for the Energy Transition Bonds. All income or other gain from investments of moneys deposited in the Collection Account shall be deposited by the Indenture Trustee in such Collection Account, and any loss resulting from such investments shall be charged to the Collection Account. The Issuer will not direct the Indenture Trustee to make any investment of any funds or to sell any investment held in any Collection Account unless the security interest Granted and perfected in such account will continue to be perfected in such investment or the proceeds of such sale, in either case without any further action by any Person, and, in connection with any direction to the Indenture Trustee to make any such investment or sale, if requested by the Indenture Trustee, the Issuer shall deliver to the Indenture Trustee an Opinion of Counsel of external counsel of the Issuer (at the Issuer’s cost and expense) to such effect. In no event shall the Indenture Trustee be liable for the selection of Eligible Investments or for investment losses incurred thereon. The Indenture Trustee shall have no liability in respect of losses incurred as a result of the liquidation of any Eligible Investment prior to its stated maturity or its date of redemption or the failure of the Issuer or the Servicer to provide timely written investment direction. The Indenture Trustee shall have no obligation to invest or reinvest any amounts held hereunder in the absence of written investment direction pursuant to an Issuer Order.

(b)           Subject to Section 6.01(c), the Indenture Trustee shall not in any way be held liable by reason of any insufficiency in the Collection Account resulting from any loss on any Eligible Investment included therein except for losses attributable to the Indenture Trustee’s failure to make payments on such Eligible Investments issued by the Indenture Trustee, in its commercial capacity as principal obligor and not as trustee, in accordance with their terms.

(c)            If (i) the Issuer shall have failed to give written investment directions for any funds on deposit in the Collection Account to the Indenture Trustee by 11:00 a.m. New York City time (or such other time as may be agreed by the Issuer and Indenture Trustee) on any Business Day or (ii) a Default or Event of Default shall have occurred and be continuing with respect to the Energy Transition Bonds but the Energy Transition Bonds shall not have been declared due and payable pursuant to Section 5.02, then the Indenture Trustee shall, to the fullest extent practicable, invest and reinvest funds in such Collection Account in Eligible Investments specified in the most recent written investment directions delivered by the Issuer to the Indenture Trustee; provided, that if the Issuer has never delivered written investment directions to the Indenture Trustee, the Indenture Trustee shall not invest or reinvest such funds in any investments.

(d)           The parties hereto acknowledge that the Servicer may, pursuant to the Servicing Agreement, select Eligible Investments on behalf of the Issuer; provided, however, that any such investment direction on behalf of the Issuer must be given in writing to the Indenture Trustee.

(e)            Except as otherwise provided hereunder or agreed in writing among the parties hereto, the Issuer shall retain the authority to institute, participate and join in any plan of reorganization, readjustment, merger or consolidation with respect to the issuer of any Eligible Investments held hereunder, and, in general, to exercise each and every other power or right with respect to each such asset or investment as Persons generally have and enjoy with respect to their own assets and investment, including power to vote upon any Eligible Investments.

69

Section 8.04.     Release of Collateral.

(a)           So long as the Issuer is not in default hereunder and no Default hereunder would occur as a result of such action, the Issuer, through the Servicer, may collect, sell or otherwise dispose of written-off receivables relating to the Collateral, at any time and from time to time in the ordinary course of business, without any notice to, or release or consent by, the Indenture Trustee, but only as and to the extent permitted by the Basic Documents; provided, however, that any and all proceeds of such dispositions shall become the Collateral and be deposited to the applicable General Subaccount immediately upon receipt thereof by the Issuer or any other Person, including the Servicer. Without limiting the foregoing, the Servicer, may, at any time and from time to time without any notice to, or release or consent by, the Indenture Trustee, sell or otherwise dispose of any Collateral previously written-off as a defaulted or uncollectible account in accordance with the terms of the Servicing Agreement and the requirements of the proviso in the preceding sentence.

(b)           The Indenture Trustee may, and when required by the provisions of this Indenture shall, execute instruments to release property from the Lien of this Indenture, or convey the Indenture Trustee’s interest in the same, in a manner and under circumstances that are not inconsistent with the provisions of this Indenture. No party relying upon an instrument executed by the Indenture Trustee as provided in this Article VIII shall be bound to ascertain the Indenture Trustee’s authority, inquire into the satisfaction of any conditions precedent or see to the application of any moneys. The Indenture Trustee shall release property from the Lien of this Indenture pursuant to this Section 8.04(b) only upon receipt of an Issuer Request accompanied by an Officer’s Certificate, an Opinion of Counsel of external counsel of the Issuer (at the Issuer’s cost and expense) and (if required by the Trust Indenture Act) Independent Certificates in accordance with Section 314(c) of the Trust Indenture Act and Section 314(d)(1) of the Trust Indenture Act meeting the applicable requirements of Section 10.01.

(c)           The Indenture Trustee shall, at such time as there are no Energy Transition Bonds Outstanding and all sums payable to the Indenture Trustee pursuant to Section 6.07 or otherwise have been paid, release any remaining portion of the Collateral that secured the Energy Transition Bonds from the Lien of this Indenture and release to the Issuer or any other Person entitled thereto any funds or investments then on deposit in or credited to the Collection Account.

Section 8.05.     Opinion of Counsel. The Indenture Trustee shall receive at least seven days’ notice when requested by the Issuer to take any action pursuant to Section 8.04, accompanied by copies of any instruments involved, and the Indenture Trustee shall also require, as a condition to such action, an Opinion of Counsel of external counsel of the Issuer, in form and substance satisfactory to the Indenture Trustee, stating the legal effect of any such action, outlining the steps required to complete the same, and concluding that all conditions precedent to the taking of such action have been complied with and such action will not materially and adversely impair the security for the Energy Transition Bonds or the rights of the Holders in contravention of the provisions of this Indenture and the Series Supplement; provided, however, that such Opinion of Counsel shall not be required to express an opinion as to the fair value of the Collateral. Counsel rendering any such opinion may rely, without independent investigation, on the accuracy and validity of any certificate or other instrument delivered to the Indenture Trustee in connection with any such action.

70

Section 8.06.     Reports by Independent Registered Public Accountants. As of the date hereof, the Issuer shall appoint a firm of Independent registered public accountants of recognized national reputation for purposes of preparing and delivering the reports or certificates of such accountants required by this Indenture and the Series Supplement. In the event such firm requires the Indenture Trustee to agree to the procedures performed by such firm, the Issuer shall direct the Indenture Trustee in writing to so agree, it being understood and agreed that the Indenture Trustee will deliver such letter of agreement in conclusive reliance upon the direction of the Issuer, and the Indenture Trustee makes no independent inquiry or investigation to, and shall have no obligation or liability in respect of, the sufficiency, validity or correctness of such procedures. Upon any resignation by, or termination by the Issuer of, such firm, the Issuer shall provide written notice thereof to the Indenture Trustee and shall promptly appoint a successor thereto that shall also be a firm of Independent registered public accountants of recognized national reputation. If the Issuer shall fail to appoint a successor to a firm of Independent registered public accountants that has resigned or been terminated within 15 days after such resignation or termination, the Indenture Trustee shall promptly notify the Issuer of such failure in writing. If the Issuer shall not have appointed a successor within ten days thereafter, the Indenture Trustee shall promptly appoint a successor firm of Independent registered public accountants of recognized national reputation; provided, that the Indenture Trustee shall have no liability with respect to such appointment. The fees of such Independent registered public accountants and its successor shall be payable by the Issuer.

ARTICLE IX

SUPPLEMENTAL INDENTURES

Section 9.01.     Supplemental Indentures Without Consent of Holders.

(a)            Without the consent of the Holders of any Energy Transition Bonds but with prior notice to the Rating Agencies, the Issuer and the Indenture Trustee, when authorized by an Issuer Order, at any time and from time to time, may enter into one or more indentures supplemental hereto (which shall conform to the provisions of the Trust Indenture Act as in force at the date of the execution thereof), in form satisfactory to the Indenture Trustee, for any of the following purposes:

(i)            to correct or amplify the description of any property, including the Collateral, at any time subject to the Lien of this Indenture, or better to assure, convey and confirm unto the Indenture Trustee any property subject or required to be subjected to the Lien of this Indenture and the Series Supplement, or to subject to the Lien of this Indenture and the Series Supplement additional property;

71

(ii)           to evidence the succession, in compliance with the applicable provisions hereof, of another Person to the Issuer, and the assumption by any such successor of the covenants of the Issuer herein and in the Energy Transition Bonds;

(iii)          to add to the covenants of the Issuer, for the benefit of the Secured Parties, or to surrender any right or power herein conferred upon the Issuer;

(iv)          to convey, transfer, assign, mortgage or pledge any property to or with the Indenture Trustee;

(v)           to cure any ambiguity, to correct or supplement any provision herein or in any supplemental indenture, including any Series Supplement, that may be inconsistent with any other provision herein or in any supplemental indenture, including any Series Supplement, or to make any other provisions with respect to matters or questions arising under this Indenture or in any supplemental indenture; provided, that (A) such action shall not, as evidenced by an Opinion of Counsel of external counsel of the Issuer, adversely affect in any material respect the interests of the Holders of the Energy Transition Bonds and (B) the Rating Agency Condition shall have been satisfied with respect thereto;

(vi)          to evidence and provide for the acceptance of the appointment hereunder by a successor trustee with respect to the Energy Transition Bonds and to add to or change any of the provisions of this Indenture as shall be necessary to facilitate the administration of the trusts hereunder by more than one trustee, pursuant to the requirements of Article VI;

(vii)         to modify, eliminate or add to the provisions of this Indenture to such extent as shall be necessary to effect the qualification of this Indenture under the Trust Indenture Act and to add to this Indenture such other provisions as may be expressly required by the Trust Indenture Act;

(viii)        to qualify the Energy Transition Bonds for registration with a Clearing Agency;

(ix)           to satisfy any Rating Agency requirements; or

(x)            to authorize the appointment of any fiduciary for any Tranche required or advisable with the listing of any Tranche on any stock exchange and otherwise amend this Indenture to incorporate changes requested or required by any government authority, stock exchange authority or fiduciary or any Tranche in connection with such listing.

The Indenture Trustee is hereby authorized to join in the execution of any such supplemental indenture and to make any further appropriate agreements and stipulations that may be therein contained.

(b)           The Issuer and the Indenture Trustee, when authorized by an Issuer Order, may, also without the consent of any of the Holders of the Energy Transition Bonds, enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to, or changing in any manner or eliminating any of the provisions of, this Indenture or of modifying in any manner the rights of the Holders of the Energy Transition Bonds under this Indenture; provided, however, that (i) such action shall not, as evidenced by an Opinion of Counsel of nationally recognized counsel of the Issuer experienced in structured finance transactions, adversely affect in any material respect the interests of the Holders and (ii) the Rating Agency Condition shall have been satisfied with respect thereto.

72

Section 9.02.     Supplemental Indentures with Consent of Holders. The Issuer and the Indenture Trustee, when authorized by an Issuer Order, also may, with prior notice to the Rating Agencies and with the consent of the Holders of a majority of the Outstanding Amount of the Energy Transition Bonds of each Tranche to be adversely affected, by Act of such Holders delivered to the Issuer and the Indenture Trustee, enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to, or changing in any manner or eliminating any of the provisions of, this Indenture or of modifying in any manner the rights of the Holders of the Energy Transition Bonds under this Indenture; provided, however, that no such supplemental indenture shall, without the consent of the Holder of each Outstanding Energy Transition Bond of each Tranche affected thereby:

(i)            change the date of payment of any installment of principal of or premium, if any, or interest on any Energy Transition Bond of such Tranche, or reduce the principal amount thereof, the interest rate thereon or premium, if any, with respect thereto;

(ii)           change the provisions of this Indenture and the Series Supplement relating to the application of collections on, or the proceeds of the sale of, the Collateral to payment of principal of or premium, if any, or interest on the Energy Transition Bonds of such Tranche, or change any place of payment where, or the coin or currency in which, any Energy Transition Bond of such Tranche or the interest thereon is payable;

(iii)          reduce the percentage of the Outstanding Amount of the Energy Transition Bonds or of a Tranche thereof, the consent of the Holders of which is required for any such supplemental indenture, or the consent of the Holders of which is required for any waiver of compliance with certain provisions of this Indenture or certain defaults hereunder and their consequences provided for in this Indenture;

(iv)          reduce the percentage of the Outstanding Amount of the Energy Transition Bonds required to direct the Indenture Trustee to direct the Issuer to sell or liquidate the Collateral pursuant to Section 5.04;

(v)           modify any provision of this Section 9.02 or any provision of the other Basic Documents similarly specifying the rights of the Holders to consent to modification thereof, except to increase any percentage specified herein or to provide that those provisions of this Indenture or the other Basic Documents referenced in this Section 9.02 cannot be modified or waived without the consent of the Holder of each Outstanding Energy Transition Bond affected thereby;

73

(vi)          modify any of the provisions of this Indenture in such manner as to affect the calculation of the amount of any payment of interest, principal or premium, if any, due on any Energy Transition Bond on any Payment Date (including the calculation of any of the individual components of such calculation) or change the Expected Amortization Schedule, Tranche Maturity Date, or Final Maturity Date of Energy Transition Bonds;

(vii)        decrease the Required Capital Level;

(viii)        permit the creation of any Lien ranking prior to or on a parity with the Lien of this Indenture with respect to any part of the Collateral or, except as otherwise permitted or contemplated herein, terminate the Lien of this Indenture on any property at any time subject hereto or deprive the Holder of any Energy Transition Bond of the security provided by the Lien of this Indenture;

(ix)          cause any material adverse U.S. federal income tax consequence to the Seller, the Issuer, the Managers, the Indenture Trustee or the then-existing Holders; or

(x)           impair the right to institute suit for the enforcement of the provisions of this Indenture regarding payment or application of funds.

It shall not be necessary for any Act of Holders under this Section 9.02 to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such Act shall approve the substance thereof.

Promptly after the execution by the Issuer and the Indenture Trustee of any supplemental indenture pursuant to this Section 9.02, the Issuer shall mail to the Rating Agencies a copy of such supplemental indenture and to the Holders of the Energy Transition Bonds to which such supplemental indenture relates either a copy of such supplemental indenture or a notice setting forth in general terms the substance of such supplemental indenture. Any failure of the Issuer to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such supplemental indenture.

Section 9.03.     Execution of Supplemental Indentures. In executing any supplemental indenture permitted by this Article IX or the modifications thereby of the trust created by this Indenture, the Indenture Trustee shall be entitled to receive, and subject to Section 6.01 and Section 6.02, shall be fully protected in relying upon an Opinion of Counsel stating that the execution of such supplemental indenture is authorized and permitted by this Indenture and all conditions precedent, if any, provided for in this Indenture relating to such supplemental indenture or modification have been satisfied. The Indenture Trustee and the Securities Intermediary may, but shall not be obligated to, enter into any such supplemental indenture that affects the Indenture Trustee’s or the Securities Intermediary’s own rights, duties, liabilities or immunities under this Indenture or otherwise. All fees and expenses in connection with any such supplemental indenture shall be paid by the requesting party.

Section 9.04.     Effect of Supplemental Indenture. Upon the execution of any supplemental indenture pursuant to the provisions hereof, this Indenture shall be and be deemed to be modified and amended in accordance therewith with respect to each Tranche of Energy Transition Bonds affected thereby, and the respective rights, limitations of rights, obligations, duties, liabilities and immunities under this Indenture of the Indenture Trustee, the Issuer and the Holders shall thereafter be determined, exercised and enforced hereunder subject in all respects to such modifications and amendments, and all the terms and conditions of any such supplemental indenture shall be and be deemed to be part of the terms and conditions of this Indenture for any and all purposes.

74

Section 9.05.     Conformity with Trust Indenture Act. Every amendment of this Indenture and every supplemental indenture executed pursuant to this Article IX shall conform to the requirements of the Trust Indenture Act as then in effect so long as this Indenture shall then be qualified under the Trust Indenture Act.

Section 9.06.     Reference in Energy Transition Bonds to Supplemental Indentures. Energy Transition Bonds authenticated and delivered after the execution of any supplemental indenture pursuant to this Article IX may, and if required by the Issuer shall, bear a notation in form approved by the Indenture Trustee as to any matter provided for in such supplemental indenture. If the Issuer shall so determine, new Energy Transition Bonds so modified as to conform, in the opinion of the Indenture Trustee and the Issuer, to any such supplemental indenture may be prepared and executed by the Issuer and authenticated and delivered by the Indenture Trustee in exchange for Outstanding Energy Transition Bonds.

ARTICLE X

MISCELLANEOUS

Section 10.01.     Compliance Certificates and Opinions, etc.

(a)            Upon any application or request by the Issuer to the Indenture Trustee to take any action under any provision of this Indenture, the Issuer shall furnish to the Indenture Trustee (i) an Officer’s Certificate stating that all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with, (ii) an Opinion of Counsel stating that in the opinion of such counsel the proposed action is authorized and permitted and all such conditions precedent, if any, have been complied with and (iii) (if required by the Trust Indenture Act) an Independent Certificate from a firm of registered public accountants meeting the applicable requirements of this Section 10.01, except that, in the case of any such application or request as to which the furnishing of such documents is specifically required by any provision of this Indenture, no additional certificate or opinion need be furnished.

Every certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture shall include:

(i)            a statement that each signatory of such certificate or opinion has read or has caused to be read such covenant or condition and the definitions herein relating thereto;

75

(ii)           a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based;

(iii)          a statement that, in the opinion of each such signatory, such signatory has made such examination or investigation as is necessary to enable such signatory to express an informed opinion as to whether or not such covenant or condition has been complied with; and

(iv)          a statement as to whether, in the opinion of each such signatory, such condition or covenant has been complied with.

(b)            Prior to the deposit of any Collateral or other property or securities with the Indenture Trustee that is to be made the basis for the release of any property or securities subject to the Lien of this Indenture, the Issuer shall, in addition to any obligation imposed in Section 10.01(a) or elsewhere in this Indenture, furnish to the Indenture Trustee an Officer’s Certificate certifying or stating the opinion of each person signing such certificate as to the fair value (within 90 days of such deposit) to the Issuer of the Collateral or other property or securities to be so deposited.

(c)            Whenever the Issuer is required to furnish to the Indenture Trustee an Officer’s Certificate certifying or stating the opinion of any signer thereof as to the matters described in Section 10.01(b), the Issuer shall also deliver to the Indenture Trustee an Independent Certificate as to the same matters, if the fair value to the Issuer of the securities to be so deposited and of all other such securities made the basis of any such withdrawal or release since the commencement of the then-current fiscal year of the Issuer, as set forth in the certificates delivered pursuant to Section 10.01(b) and this Section 10.01(c), is 10 percent or more of the Outstanding Amount of the Energy Transition Bonds, but such a certificate need not be furnished with respect to any securities so deposited, if the fair value thereof to the Issuer as set forth in the related Officer’s Certificate is less than the lesser of (A) $25,000 or (B) one percent of the Outstanding Amount of the Energy Transition Bonds.

(d)            Whenever any property or securities are to be released from the Lien of this Indenture other than pursuant to Section 8.02(e), the Issuer shall also furnish to the Indenture Trustee an Officer’s Certificate certifying or stating the opinion of each person signing such certificate as to the fair value (within 90 days of such release) of the property or securities proposed to be released and stating that in the opinion of such person the proposed release will not impair the security under this Indenture in contravention of the provisions hereof.

(e)            Whenever the Issuer is required to furnish to the Indenture Trustee an Officer’s Certificate certifying or stating the opinion of any signatory thereof as to the matters described in Section 10.01(d), the Issuer shall also furnish to the Indenture Trustee an Independent Certificate as to the same matters if the fair value of the property or securities with respect thereto, or securities released from the Lien of this Indenture (other than pursuant to Section 8.02(e)) since the commencement of the then-current calendar year, as set forth in the certificates required by Section 10.01(d) and this Section 10.01(e), equals 10 percent or more of the Outstanding Amount of the Energy Transition Bonds, but such certificate need not be furnished in the case of any release of property or securities if the fair value thereof as set forth in the related Officer’s Certificate is less than the lesser of (A) $25,000 or (B) one percent of the then Outstanding Amount of the Energy Transition Bonds.

76

(f)            Notwithstanding any other provision of this Section 10.01, the Indenture Trustee may (A) collect, liquidate, sell or otherwise dispose of the Property and the other Collateral as and to the extent permitted or required by the Basic Documents and (B) make cash payments out of the Collection Account as and to the extent permitted or required by the Basic Documents.

Section 10.02.     Form of Documents Delivered to Indenture Trustee. In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents.

Any certificate or opinion of a Responsible Officer of the Issuer may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel, unless such officer knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to the matters upon which his or her certificate or opinion is based are erroneous. Any such certificate of a Responsible Officer of the Issuer or Opinion of Counsel may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an officer or officers of the Servicer or the Issuer stating that the information with respect to such factual matters is in the possession of the Servicer or the Issuer, unless such counsel knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to such matters are erroneous.

Whenever in this Indenture, in connection with any application or certificate or report to the Indenture Trustee, it is provided that the Issuer shall deliver any document as a condition of the granting of such application, or as evidence of the Issuer’s compliance with any term hereof, it is intended that the truth and accuracy, at the time of the granting of such application or at the effective date of such certificate or report (as the case may be), of the facts and opinions stated in such document shall in such case be conditions precedent to the right of the Issuer to have such application granted or to the sufficiency of such certificate or report. The foregoing shall not, however, be construed to affect the Indenture Trustee’s right to rely conclusively upon the truth and accuracy of any statement or opinion contained in any such document as provided in Article VI.

Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument.

77

Section 10.03.     Acts of Holders.

(a)           Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by agents duly appointed in writing, and except as herein otherwise expressly provided such action shall become effective when such instrument or instruments are delivered to the Indenture Trustee and, where it is hereby expressly required, to the Issuer. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the “Act” of the Holders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and (subject to Section 6.01) conclusive in favor of the Indenture Trustee and the Issuer, if made in the manner provided in this Section 10.03.

(b)           The fact and date of the execution by any Person of any such instrument or writing may be proved in any manner that the Indenture Trustee deems sufficient.

(c)           The ownership of Energy Transition Bonds shall be proved by the Energy Transition Bond Register.

(d)           Any request, demand, authorization, direction, notice, consent, waiver or other action by the Holder of any Energy Transition Bonds shall bind the Holder of every Energy Transition Bond issued upon the registration thereof or in exchange therefor or in lieu thereof, in respect of anything done, omitted or suffered to be done by the Indenture Trustee or the Issuer in reliance thereon, whether or not notation of such action is made upon such Energy Transition Bond.

Section 10.04.     Notices, etc., to Indenture Trustee, Issuer and Rating Agencies. Any notice, report or other communication given hereunder shall be in writing and shall be effective (i) upon receipt when sent through the mails, registered or certified mail, return receipt requested, postage prepaid, with such receipt to be effective the date of delivery indicated on the return receipt, (ii) upon receipt when sent by an overnight courier, (iii) on the date personally delivered to an authorized officer of the party to which sent or (iv) on the date transmitted by facsimile or other electronic transmission with a confirmation of receipt in all cases, addressed as follows:

(a)            in the case of the Issuer, to PNM Energy Transition Bond Company I, LLC, at 414 Silver Ave. SW, Albuquerque, New Mexico 87102, Attention: President, Telephone: (505) 241-2700, Email: treasury@pnmresources.com;

(b)           in the case of (i) the Indenture Trustee, to the Corporate Trust Office of the Indenture Trustee, and (ii) a Responsible Officer of the Indenture Trustee, to the Corporate Trust Office of the Indenture Trustee, made to the attention of: Juan Hernandez, Mary Ann Turbak and Melissa Rosal;

(c)            in the case of Moody’s, to Moody’s Investor Services, Inc., ABS/RMBS Monitoring Department, 25th Floor, 7 World Trade Center, 250 Greenwich Street, New York, New York, Email: servicereports@moodys.com;

78

(d)           in the case of S&P, to S&P Global Ratings, a division of S&P Global Inc., Structured Credit Surveillance, 55 Water Street, New York, New York 10041, Telephone: (212) 438-8991, Email: servicer_reports@spglobal.com (all such notices to be delivered to S&P in writing by email); and

(e)            in the case of the Commission, New Mexico Public Regulation Commission, at 1120 Paseo De Peralta, Santa Fe, New Mexico 87501, Telephone: (888) 427-5722.

Each Person listed above may, by notice given in accordance herewith to the other Persons listed above, designate any further or different address to which subsequent notices, reports and other communications shall be sent

Section 10.05.     Notices to Holders; Waiver. Where this Indenture provides for notice to Holders of any event, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and mailed, first-class, postage prepaid, or otherwise delivered in accordance with DTC’s procedures, to each Holder affected by such event, at such Holder’s address as it appears on the Energy Transition Bond Register, not later than the latest date, and not earlier than the earliest date, prescribed for the giving of such notice. In any case where notice to Holders is given by mail, neither the failure to mail such notice nor any defect in any notice so mailed to any particular Holder shall affect the sufficiency of such notice with respect to other Holders, and any notice that is mailed in the manner herein provided shall conclusively be presumed to have been duly given.

Where this Indenture provides for notice in any manner, such notice may be waived in writing by any Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Indenture Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such a waiver.

In case, by reason of the suspension of regular mail service as a result of a strike, work stoppage or similar activity, it shall be impractical to mail notice of any event of Holders when such notice is required to be given pursuant to any provision of this Indenture, then any manner of giving such notice as shall be satisfactory to the Indenture Trustee shall be deemed to be a sufficient giving of such notice.

Where this Indenture provides for notice to the Rating Agencies, failure to give such notice shall not affect any other rights or obligations created hereunder and shall not under any circumstance constitute a Default or Event of Default.

Section 10.06.     Conflict with Trust Indenture Act. If any provision hereof limits, qualifies or conflicts with another provision hereof that is required to be included in this Indenture by any of the provisions of the Trust Indenture Act, such required provision shall control.

The provisions of Sections 310 through 317 of the Trust Indenture Act that impose duties on any Person (including the provisions automatically deemed included herein unless expressly excluded by this Indenture) are a part of and govern this Indenture, whether or not physically contained herein.

79

Section 10.07.     Successors and Assigns. All covenants and agreements in this Indenture and the Energy Transition Bonds by the Issuer shall bind its successors and assigns, whether so expressed or not. All agreements of the Indenture Trustee in this Indenture shall bind its successors.

Section 10.08.     Severability. Any provision in this Indenture or in the Energy Transition Bonds that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remainder of such provision (if any) or the remaining provisions hereof (unless such construction shall be unreasonable), and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

Section 10.09.     Benefits of Indenture. Nothing in this Indenture or in the Energy Transition Bonds, express or implied, shall give to any Person, other than the parties hereto and their successors hereunder, and the Holders, and any other party secured hereunder, and any other Person with an ownership interest in any part of the Collateral, any benefit or any legal or equitable right, remedy or claim under this Indenture.

Section 10.10.     Legal Holidays. In any case where the date on which any payment is due shall not be a Business Day, then (notwithstanding any other provision of the Energy Transition Bonds or this Indenture) payment need not be made on such date, but may be made on the next Business Day with the same force and effect as if made on the date on which nominally due, and no interest shall accrue for the period from and after any such nominal date.

Section 10.11.     GOVERNING LAW. This Indenture shall be governed by and construed in accordance with the laws of the State of New York, without reference to its conflict of law provisions (other than Section 5-1401 of the New York General Obligations Law and Sections 9-301 through 9-306 of the NY UCC), and the obligations, rights and remedies of the parties hereunder shall be determined in accordance with such laws; provided, that the creation, attachment and perfection of any Liens created hereunder in Property, and all rights and remedies of the Indenture Trustee and the Holders with respect to the Property, shall be governed by the laws of the State of New Mexico.

Section 10.12.     Counterparts. This Indenture may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. The Issuer and Indenture Trustee agree that this Indenture may be electronically signed, that any digital or electronic signatures (including pdf, facsimile or electronically imaged signatures provided by DocuSign or any other digital signature provider as specified in writing to the Indenture Trustee) appearing on this Indenture are the same as handwritten signatures for the purposes of validity, enforceability and admissibility, and that delivery of any such electronic signature to, or a signed copy of, this Indenture may be made by facsimile, email or other electronic transmission. The Issuer agrees to assume all risks arising out of the use of digital signatures and electronic methods of submitting such signatures to the Indenture Trustee, including without limitation the risk of the Indenture Trustee acting upon documents with unauthorized signatures and the risk of interception and misuse by third parties.

80

Section 10.13.     Recording of Indenture. If this Indenture is subject to recording in any appropriate public recording offices, such recording is to be effected by the Issuer and at its expense accompanied by an Opinion of Counsel at the Issuer’s cost and expense (which shall be external counsel of the Issuer) to the effect that such recording is necessary either for the protection of the Holders or any other Person secured hereunder or for the enforcement of any right or remedy granted to the Indenture Trustee under this Indenture.

Section 10.14.     No Recourse to Issuer. No recourse may be taken, directly or indirectly, with respect to the obligations of the Issuer or the Indenture Trustee on the Energy Transition Bonds or under this Indenture or any certificate or other writing delivered in connection herewith or therewith, against (a) the Issuer, other than from the Collateral, (b) any owner of a membership interest in the Issuer (including Public Service Company of New Mexico) or (c) any shareholder, partner, owner, beneficiary, agent, officer or employee of the Indenture Trustee, the Managers or any owner of a membership interest in the Issuer (including Public Service Company of New Mexico) in its respective individual capacity, or of any successor or assign of any of them in their respective individual or corporate capacities, except as any such Person may have expressly agreed in writing. Notwithstanding any provision of this Indenture or any Series Supplement to the contrary, Holders shall look only to the Collateral with respect to any amounts due to the Holders hereunder and under the Energy Transition Bonds and, in the event such Collateral is insufficient to pay in full the amounts owed on the Energy Transition Bonds, shall have no recourse against the Issuer in respect of such insufficiency. Each Holder by accepting an Energy Transition Bond specifically confirms the nonrecourse nature of these obligations and waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Energy Transition Bonds.

Section 10.15.     Basic Documents. The Indenture Trustee is hereby authorized to execute and deliver the Servicing Agreement and to execute and deliver any other Basic Document that it is requested to acknowledge. Upon receipt of an Issuer Request to execute an intercreditor agreement and receipt of an Officer’s Certificate confirming that such intercreditor agreement satisfies the requirements of Section 4.14 of the Sale Agreement (substantially in the form of Exhibit D hereto, with such changes as may be agreed among the parties thereto so long as such changes do not materially and adversely affect any Holder’s rights in and to any Collateral or otherwise under the Indenture), upon which the Trustee may rely conclusively with no duty of independent investigation or inquiry, the Trustee shall execute such intercreditor agreement. Any such intercreditor agreement shall be binding on the Holders, and the Holders shall be deemed to have consented to this Section 10.15.

Section 10.16.     No Petition. The Indenture Trustee, by entering into this Indenture, and each Holder, by accepting an Energy Transition Bond (or interest therein) issued hereunder, hereby covenant and agree that they shall not, prior to the date that is one year and one day after the termination of this Indenture, acquiesce, petition or otherwise invoke or cause the Issuer or any Manager to invoke the process of any court or government authority for the purpose of commencing or sustaining a case against the Issuer under any bankruptcy or insolvency law or appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator or other similar official of the Issuer or any substantial part of its property, or ordering the dissolution, winding up or liquidation of the affairs of the Issuer. Nothing in this Section 10.16 shall preclude, or be deemed to estop, such Holder or the Indenture Trustee (a) from taking or omitting to take any action prior to such date in (i) any case or proceeding voluntarily filed or commenced by or on behalf of the Issuer under or pursuant to any such law or (ii) any involuntary case or proceeding pertaining to the Issuer that is filed or commenced by or on behalf of a Person other than such Holder and is not joined in by such Holder (or any Person to which such Holder shall have assigned, transferred or otherwise conveyed any part of the obligations of the Issuer hereunder) under or pursuant to any such law or (b) from commencing or prosecuting any legal action that is not an involuntary case or proceeding under or pursuant to any such law against the Issuer or any of its properties.

81

Section 10.17.     Securities Intermediary. The Securities Intermediary, in acting under this Indenture, is entitled to all rights, benefits, protections, immunities and indemnities accorded to U.S. Bank Trust Company, National Association, in its capacity as Indenture Trustee under this Indenture.

Section 10.18.     Rule 17g-5 Compliance.

(a)            The Indenture Trustee agrees that any notice, report, request for satisfaction of the Rating Agency Condition, document or other information provided by the Indenture Trustee to any Rating Agency under this Indenture or any other Basic Document to which it is a party for the purpose of determining or confirming the credit rating of the Energy Transition Bonds or undertaking credit rating surveillance of the Energy Transition Bonds shall be provided, substantially concurrently, to the Servicer for posting on a password-protected website (the “17g-5 Website”). The Servicer shall be responsible for posting all of the information on the 17g-5 Website.

(b)            The Indenture Trustee will not be responsible for creating or maintaining the 17g-5 Website, posting any information to the 17g-5 Website or assuring that the 17g-5 Website complies with the requirements of this Indenture, Rule 17g-5 under the Exchange Act or any other law or regulation. In no event shall the Indenture Trustee be deemed to make any representation in respect of the content of the 17g-5 Website or compliance by the 17g-5 Website with this Indenture, Rule 17g-5 under the Exchange Act or any other law or regulation. The Indenture Trustee shall have no obligation to engage in or respond to any oral communications with respect to the transactions contemplated hereby, any transaction documents relating hereto or in any way relating to the Energy Transition Bonds or for the purposes of determining the initial credit rating of the Energy Transition Bonds or undertaking credit rating surveillance of the Energy Transition Bonds with any Rating Agency or any of its respective officers, directors or employees. The Indenture Trustee shall not be responsible or liable for the dissemination of any identification numbers or passwords for the 17g-5 Website, including by the Servicer, the Rating Agencies, a nationally recognized statistical rating organization (“NRSRO”), any of their respective agents or any other party. Additionally, the Indenture Trustee shall not be liable for the use of the information posted on the 17g-5 Website, whether by the Servicer, the Rating Agencies, an NRSRO or any other third party that may gain access to the 17g-5 Website or the information posted thereon.

82

Section 10.19.     Submission to Non-Exclusive Jurisdiction; Waiver of Jury Trial. Each of the Issuer and the Indenture Trustee hereby irrevocably submits to the non-exclusive jurisdiction of any New York State court sitting in The Borough of Manhattan in The City of New York or any U.S. federal court sitting in The Borough of Manhattan in The City of New York in respect of any suit, action or proceeding arising out of or relating to this Indenture and the Energy Transition Bonds and irrevocably accepts for itself generally and unconditionally, jurisdiction of the aforesaid courts. Each of the Issuer and the Indenture Trustee irrevocably waives, to the fullest extent that it may effectively do so under applicable law, trial by jury.

Section 10.20.     Certain Tax Laws. In order to comply with applicable tax laws, rules and regulations (inclusive of directives, guidelines and interpretations promulgated by competent authorities) in effect from time to time to which a foreign financial institution, issuer, trustee, paying agent, holder or other institution is or has agreed to be subject related to the Basic Documents, the Issuer agrees (a) to provide to the Indenture Trustee sufficient information about Holders or other applicable parties and/or transactions (including any modification to the terms of such transactions) so as to enable the Indenture Trustee to determine whether it has tax-related obligations under such applicable tax laws, rules and regulations (inclusive of directives, guidelines and interpretations promulgated by competent authorities) and (b) that the Indenture Trustee shall be entitled to make any withholding or deduction from payments under the Basic Documents to the extent necessary to comply with such applicable tax laws, rules and regulations (inclusive of directives, guidelines and interpretations promulgated by competent authorities) for which the Indenture Trustee shall not have any liability.

{SIGNATURE PAGE FOLLOWS}

83

IN WITNESS WHEREOF, the Issuer, the Indenture Trustee and the Securities Intermediary have caused this Indenture to be duly executed by their respective officers thereunto duly authorized and duly attested, all as of the day and year first above written.

PNM ENERGY TRANSITION BOND COMPANY I, LLC,
as Issuer
By:
	Name: [             ]
	Title:   [             ]
U.S. BANK TRUST COMPANY, NATIONAL ASSOCIATION,
as Indenture Trustee
By:
	Name: [             ]
	Title:   [             ]
U.S. BANK NATIONAL ASSOCIATION,
as Securities Intermediary
By:
	Name: [             ]
	Title:   [             ]

Signature Page to
Indenture

EXHIBIT A

FORM OF ENERGY TRANSITION BOND

See attached.

UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN DEFINITIVE REGISTERED FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO THE NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY. UNLESS THIS SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION, TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY SECURITY ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON OR ENTITY IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

No.  {         }	${               }
Tranche Designation {     }	CUSIP No.: {               }

THE PRINCIPAL OF THIS SERIES A, TRANCHE { } SENIOR SECURED ENERGY TRANSITION BOND (THIS “ENERGY TRANSITION BOND”) WILL BE PAID IN INSTALLMENTS AS SET FORTH HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS ENERGY TRANSITION BOND AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ABOVE. THE HOLDER OF THIS ENERGY TRANSITION BOND HAS NO RECOURSE TO THE ISSUER HEREOF AND AGREES TO LOOK ONLY TO THE COLLATERAL, AS DESCRIBED IN THE INDENTURE, FOR PAYMENT OF ANY AMOUNTS DUE HEREUNDER. ALL OBLIGATIONS OF THE ISSUER OF THIS ENERGY TRANSITION BOND UNDER THE TERMS OF THE INDENTURE WILL BE RELEASED AND DISCHARGED UPON PAYMENT IN FULL HEREOF OR AS OTHERWISE PROVIDED IN SECTION 3.10(b) OR ARTICLE IV OF THE INDENTURE. THE HOLDER OF THIS ENERGY TRANSITION BOND HEREBY COVENANTS AND AGREES THAT PRIOR TO THE DATE THAT IS ONE YEAR AND ONE DAY AFTER THE PAYMENT IN FULL OF THIS ENERGY TRANSITION BOND, IT WILL NOT INSTITUTE AGAINST, OR JOIN ANY OTHER PERSON IN INSTITUTING AGAINST, THE ISSUER ANY BANKRUPTCY, REORGANIZATION, ARRANGEMENT, INSOLVENCY OR LIQUIDATION PROCEEDINGS OR OTHER SIMILAR PROCEEDING UNDER THE LAWS OF THE UNITED STATES OR ANY STATE OF THE UNITED STATES. NOTHING IN THIS PARAGRAPH SHALL PRECLUDE, OR BE DEEMED TO ESTOP, SUCH HOLDER (A) FROM TAKING OR OMITTING TO TAKE ANY ACTION PRIOR TO SUCH DATE IN (I) ANY CASE OR PROCEEDING VOLUNTARILY FILED OR COMMENCED BY OR ON BEHALF OF THE ISSUER UNDER OR PURSUANT TO ANY SUCH LAW OR (II) ANY INVOLUNTARY CASE OR PROCEEDING PERTAINING TO THE ISSUER THAT IS FILED OR COMMENCED BY OR ON BEHALF OF A PERSON OTHER THAN SUCH HOLDER AND IS NOT JOINED IN BY SUCH HOLDER (OR ANY PERSON TO WHICH SUCH HOLDER SHALL HAVE ASSIGNED, TRANSFERRED OR OTHERWISE CONVEYED ANY PART OF THE OBLIGATIONS OF THE ISSUER HEREUNDER) UNDER OR PURSUANT TO ANY SUCH LAW OR (B) FROM COMMENCING OR PROSECUTING ANY LEGAL ACTION THAT IS NOT AN INVOLUNTARY CASE OR PROCEEDING UNDER OR PURSUANT TO ANY SUCH LAW AGAINST THE ISSUER OR ANY OF ITS PROPERTIES.

ENERGY TRANSITION BONDS ISSUED PURSUANT TO THE ENERGY TRANSITION ACT SHALL NOT CONSTITUTE A DEBT OR PLEDGE OF THE FAITH AND CREDIT OR TAXING POWER OF THE STATE OF NEW MEXICO OR OF ANY COUNTY, MUNICIPALITY OR ANY OTHER POLITICAL SUBDIVISION OF THE STATE OF NEW MEXICO. BONDHOLDERS SHALL HAVE NO RIGHT TO HAVE TAXES LEVIED BY THE LEGISLATURE OR THE TAXING AUTHORITY OF ANY COUNTY, MUNICIPALITY OR OTHER POLITICAL SUBDIVISION OF THIS STATE FOR THE PAYMENT OF THE PRINCIPAL OF OR INTEREST ON ENERGY TRANSITION BONDS. THE ISSUANCE OF ENERGY TRANSITION BONDS DOES NOT OBLIGATE THE STATE OR A POLITICAL SUBDIVISION OF THE STATE OF NEW MEXICO TO LEVY ANY TAX OR MAKE ANY APPROPRIATION FOR PAYMENT OF THE PRINCIPAL OF OR INTEREST ON THE ENERGY TRANSITION BONDS.

PNM ENERGY TRANSITION BOND COMPANY I, LLC
SERIES A SENIOR SECURED ENERGY TRANSITION BONDS, TRANCHE{ }

BOND INTEREST RATE		ORIGINAL PRINCIPAL AMOUNT		SCHEDULED FINAL PAYMENT DATE	FINAL MATURITY DATE
{       }	%	$	{          }	{            }, 20{    }	{             }, 20{    }

PNM Energy Transition Bond Company I, LLC, a limited liability company created under the laws of the State of Delaware (herein referred to as the “Issuer”), for value received, hereby promises to pay to {                }, or registered assigns, the Original Principal Amount shown above in semi-annual installments on the Payment Dates and in the amounts specified below or, if less, the amounts determined pursuant to Section 8.02 of the Indenture, in each year, commencing on the date determined as provided below and ending on or before the Final Maturity Date shown above and to pay interest, at the Bond Interest Rate shown above, on each {                } and {                } or, if any such day is not a Business Day, the next Business Day, commencing on {                }, 20{ } and continuing until the earlier of the payment in full of the principal hereof and the Final Maturity Date (each, a “Payment Date”), on the principal amount of this Energy Transition Bond. Interest on this Energy Transition Bond will accrue for each Payment Date from the most recent Payment Date on which interest has been paid to but excluding such Payment Date or, if no interest has yet been paid, from the date of issuance. Interest will be computed on the basis of a 360-day year of twelve 30-day months. Such principal of and interest on this Energy Transition Bond shall be paid in the manner specified below.

The principal of and interest on this Energy Transition Bond are payable in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. All payments made by the Issuer with respect to this Energy Transition Bond shall be applied first to interest due and payable on this Energy Transition Bond as provided above and then to the unpaid principal of and premium, if any, on this Energy Transition Bond, all in the manner set forth in the Indenture.

Unless the certificate of authentication hereon has been executed by the Indenture Trustee whose name appears below by manual, electronic or facsimile signature, this Energy Transition Bond shall not be entitled to any benefit under the Indenture referred to below or be valid or obligatory for any purpose.

IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed, manually or in facsimile, by its Responsible Officer.

Date: {          }, 20{  }	PNM ENERGY TRANSITION BOND COMPANY I, LLC,
	as Issuer
	By:
		Name:	[             ]
		Title:	[             ]

INDENTURE TRUSTEE’S
CERTIFICATE OF AUTHENTICATION

Dated: {          }, 20{ }

This is one of the Series A, Tranche { } Senior Secured Energy Transition Bonds, designated above and referred to in the within-mentioned Indenture.

U.S. BANK TRUST COMPANY, NATIONAL ASSOCIATION,
as Indenture Trustee
By:
	Name:	[             ]
	Title:	[             ]

This Senior Secured Energy Transition Bond, Series A, Tranche { } is one of a duly authorized issue of Series A Senior Secured Energy Transition Bonds of the Issuer (herein called the “Series A Bonds”), which Series are issuable in one or more Tranches. The Series A Bonds consist of { } Tranches, including the Tranche { } Series A Senior Secured Energy Transition Bonds, which include this Senior Secured Energy Transition Bond (herein called the “Tranche { } Energy Transition Bonds”), all issued and to be issued under that certain Indenture dated as of [·], 2023 (as supplemented by the Series Supplement (as defined below), the “Indenture”), among the Issuer, U.S. Bank Trust Company, National Association, in its capacity as indenture trustee (the “Indenture Trustee”, which term includes any successor indenture trustee under the Indenture), and U.S. Bank National Association, in its capacity as a securities intermediary (the “Securities Intermediary”, which term includes any successor securities intermediary under the Indenture), to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights and obligations thereunder of the Issuer, the Indenture Trustee and the Holders of the Bonds. For purposes herein, “Series Supplement” means that certain Series Supplement dated as of {        , 2023} between the Issuer and the Indenture Trustee. All terms used in this Tranche { } Energy Transition Bond that are defined in the Indenture, as amended, restated, supplemented or otherwise modified from time to time, shall have the meanings assigned to such terms in the Indenture.

All Tranches of Series A Bonds are and will be equally and ratably secured by the Series Collateral pledged as security therefor as provided in the Indenture.

The principal of this Tranche { } Energy Transition Bond shall be payable on each Payment Date only to the extent that amounts in the Collection Account for the Series A Bonds are available therefor, and only until the outstanding principal balance thereof on the preceding Payment Date (after giving effect to all payments of principal, if any, made on the preceding Payment Date) has been reduced to the principal balance specified in the Expected Amortization Schedule that is attached to the Series Supplement as Schedule A, unless payable earlier because an Event of Default shall have occurred and be continuing and the Indenture Trustee or the Holders representing a majority of the Outstanding Amount of the Bonds of this Series have declared the Series A Bonds to be immediately due and payable in accordance with Section 5.02 of the Indenture (unless such declaration shall have been rescinded and annulled in accordance with Section 5.02 of the Indenture). However, actual principal payments may be made in lesser than expected amounts and at later than expected times as determined pursuant to Section 8.02 of the Indenture. The entire unpaid principal amount of this Tranche { } Energy Transition Bond shall be due and payable on the Final Maturity Date hereof. Notwithstanding the foregoing, the entire unpaid principal amount of the Bonds shall be due and payable, if not then previously paid, on the date on which an Event of Default shall have occurred and be continuing and the Indenture Trustee or the Holders of the Bonds representing a majority of the Outstanding Amount of the Bonds of this Series have declared the Energy Transition Bonds to be immediately due and payable in the manner provided in Section 5.02 of the Indenture (unless such declaration shall have been rescinded and annulled in accordance with Section 5.02 of the Indenture). All principal payments on the Tranche { } Energy Transition Bonds shall be made pro rata to the Holders of the Tranche{ } Energy Transition Bonds entitled thereto based on the respective principal amounts of the Tranche { } Energy Transition Bonds held by them.

Payments of interest on this Tranche { } Energy Transition Bond due and payable on each Payment Date, together with the installment of principal or premium, if any, shall be made by check mailed first-class, postage prepaid, to the Person whose name appears as the Registered Holder of this Tranche { } Energy Transition Bond (or one or more Predecessor Energy Transition Bonds) on the Energy Transition Bond Register as of the close of business on the Record Date or in such other manner as may be provided in the Indenture or the Series Supplement, except that (a) upon application to the Indenture Trustee by any Holder owning a Global Energy Transition Bond evidencing this Tranche { } Energy Transition Bond not later than the applicable Record Date, payment will be made by wire transfer to an account maintained by such Holder, and (b) if this Tranche { } Energy Transition Bond is held in Book-Entry Form, payments will be made by wire transfer in immediately available funds to the account designated by the Holder of the applicable Global Energy Transition Bond evidencing this Tranche { } Energy Transition Bond unless and until such Global Energy Transition Bond is exchanged for Definitive Energy Transition Bonds (in which event payments shall be made as provided above) and except for the final installment of principal and premium, if any, payable with respect to this Tranche { } Energy Transition Bond on a Payment Date, which shall be payable as provided below. Such checks shall be mailed to the Person entitled thereto at the address of such Person as it appears on the Energy Transition Bond Register as of the applicable Record Date without requiring that this Tranche { } Energy Transition Bond be submitted for notation of payment. Any reduction in the principal amount of this Tranche { } Energy Transition Bond (or any one or more Predecessor Energy Transition Bonds) effected by any payments made on any Payment Date shall be binding upon all future Holders of this Tranche { } Energy Transition Bond and of any Energy Transition Bond issued upon the registration of transfer hereof or in exchange hereof or in lieu hereof, whether or not noted hereon. If funds are expected to be available, as provided in the Indenture, for payment in full of the then-remaining unpaid principal amount of this Tranche { } Energy Transition Bond on a Payment Date, then the Indenture Trustee, in the name of and on behalf of the Issuer, will notify the Person who was the Registered Holder hereof as of the Record Date preceding such Payment Date by notice mailed no later than five days prior to such final Payment Date and shall specify that such final installment will be payable only upon presentation and surrender of this Tranche { } Energy Transition Bond and shall specify the place where this Tranche { } Energy Transition Bond may be presented and surrendered for payment of such installment.

The Issuer shall pay interest on overdue installments of interest at the Bond Interest Rate to the extent lawful.

This Tranche { } Energy Transition Bond is an “energy transition bond” as such term is defined in the Energy Transition Act. Principal and interest due and payable on this Tranche { } Energy Transition Bond are payable from and secured primarily by the Property created and established by the Financing Order obtained from the New Mexico Public Regulation Commission pursuant to the Energy Transition Act. The Property consists of the rights and interests of the Seller in the Financing Order, including the right to impose, charge, collect and receive Charges in an amount necessary to provide for full payment and recovery of all energy transition costs identified in the Financing Order, the right under the Financing Order to obtain True-Up Adjustments of the Charges, and all revenues or other proceeds arising from those rights and interests.

Under the laws of the State of New Mexico in effect on the date hereof, pursuant to Section 19 of the Energy Transition Act, the State of New Mexico has pledged to and agreed with the Holders, any Assignee and any Financing Parties that the State of New Mexico shall not take or permit any action that impairs the value of the Series Property, except as allowed pursuant to Section 6 of the Energy Transition Act, or reduces, alters or impairs Charges that are imposed, collected and remitted for the benefit of Holders, any Assignee and any Financing Parties, until the entire principal of, interest on and redemption premium on this Tranche { } Energy Transition Bond, all Financing Costs and all amounts to be paid to an Assignee or Financing Party under an Ancillary Agreement are paid in full and performed in full.

The Issuer and Public Service Company of New Mexico hereby acknowledge that the purchase of this Energy Transition Bond by the Holder hereof or the purchase of any beneficial interest herein by any Person are made in reliance on the foregoing pledge.

As provided in the Indenture and subject to certain limitations set forth therein, the transfer of this Tranche { } Energy Transition Bond may be registered on the Energy Transition Bond Register upon surrender of this Tranche { } Energy Transition Bond for registration of transfer at the office or agency designated by the Issuer pursuant to the Indenture, duly endorsed by, or accompanied by, (a) a written instrument of transfer in form satisfactory to the Indenture Trustee duly executed by the Holder hereof or such Holder’s attorney duly authorized in writing, with such signature guaranteed by an institution that is a member of one of the following recognized signature guaranty programs: (i) The Securities Transfer Agent Medallion Program (STAMP); (ii) The New York Stock Exchange Medallion Program (MSP); (iii) The Stock Exchange Medallion Program (SEMP); or (iv) such other signature guaranty program acceptable to the Indenture Trustee, and (b) such other documents as the Indenture Trustee may require, and thereupon one or more new Energy Transition Bonds of Authorized Denominations and in the same aggregate principal amount will be issued to the designated transferee or transferees. No service charge will be charged for any registration of transfer or exchange of this Tranche { } Energy Transition Bond, but the transferor may be required to pay a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any such registration of transfer or exchange, other than exchanges pursuant to Section 2.04 or Section 2.06 of the Indenture not involving any transfer.

Each Holder, by acceptance of a Tranche { } Energy Transition Bond, covenants and agrees that no recourse may be taken, directly or indirectly, with respect to the obligations of the Issuer or the Indenture Trustee on the Tranche { } Energy Transition Bonds or under the Indenture or any certificate or other writing delivered in connection therewith, against (a) any owner of a membership interest in the Issuer (including Public Service Company of New Mexico) or (b) any shareholder, partner, owner, beneficiary, agent, officer or employee of the Indenture Trustee, the Managers or any owner of a membership interest in the Issuer (including Public Service Company of New Mexico) in its respective individual or corporate capacities, or of any successor or assign of any of them in their individual or corporate capacities, except as any such Person may have expressly agreed in writing. Each Holder by accepting a Tranche { } Energy Transition Bond specifically confirms the nonrecourse nature of these obligations and waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Tranche { } Energy Transition Bonds.

Prior to the due presentment for registration of transfer of this Tranche { } Energy Transition Bond, the Issuer, the Indenture Trustee and any agent of the Issuer or the Indenture Trustee may treat the Person in whose name this Tranche { } Energy Transition Bond is registered (as of the day of determination) as the owner hereof for the purpose of receiving payments of principal of and premium, if any, and interest on this Tranche { } Energy Transition Bond and for all other purposes whatsoever, whether or not this Tranche { } Energy Transition Bond be overdue, and none of the Issuer, the Indenture Trustee or any such agent shall be affected by notice to the contrary.

The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Issuer and the rights of the Holders of the Energy Transition Bonds under the Indenture at any time by the Issuer with the consent of the Holders representing a majority of the Outstanding Amount of all Energy Transition Bonds at the time outstanding of each Tranche to be affected and upon the satisfaction of the Rating Agency Condition. The Indenture also contains provisions permitting the Holders representing specified percentages of the Outstanding Amount of the Energy Transition Bonds, on behalf of the Holders of all the Energy Transition Bonds, to waive compliance by the Issuer with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Tranche { } Energy Transition Bond (or any one of more Predecessor Energy Transition Bonds) shall be conclusive and binding upon such Holder and upon all future Holders of this Tranche { } Energy Transition Bond and of any Tranche { } Energy Transition Bond issued upon the registration of transfer hereof or in exchange hereof or in lieu hereof whether or not notation of such consent or waiver is made upon this Tranche { } Energy Transition Bond. The Indenture also permits the Indenture Trustee to amend or waive certain terms and conditions set forth in the Indenture without the consent of Holders of the Energy Transition Bonds issued thereunder.

The Indenture contains provisions for defeasance at any time of (a) the entire indebtedness of the Issuer on an Energy Transition Bond and (b) certain restrictive covenants and the related Events of Default, upon compliance by the Issuer with certain conditions set forth in the Indenture, which provisions apply to this Tranche { } Energy Transition Bond.

The term “Issuer” as used in this Tranche { } Energy Transition Bond includes any successor to the Issuer under the Indenture.

The Issuer is permitted by the Indenture, under certain circumstances, to merge or consolidate, subject to the rights of the Indenture Trustee and the Holders under the Indenture.

The Tranche { } Energy Transition Bonds are issuable only in registered form in denominations as provided in the Indenture and the Series Supplement subject to certain limitations therein set forth.

This Tranche { } Energy Transition Bond, the Indenture and the Series Supplement shall be construed in accordance with the laws of the State of New York, without reference to its conflict of law provisions (other than Section 5-1401 of the New York General Obligations Law and Sections 9-301 through 9-306 of the NY UCC), and the obligations, rights and remedies of the parties hereunder and thereunder shall be determined in accordance with such laws; provided, that the creation, attachment and perfection of any Liens created under the Indenture in the Property, and all rights and remedies of the Indenture Trustee and the Holders with respect to the Property, shall be governed by the laws of the State of New Mexico.

No reference herein to the Indenture and no provision of this Tranche { } Energy Transition Bond or of the Indenture shall alter or impair the obligation, which is absolute and unconditional, to pay the principal of and interest on this Tranche { } Energy Transition Bond at the times, place and rate and in the coin or currency herein prescribed.

The Issuer and the Indenture Trustee, by entering into the Indenture, and the Holders and any Persons holding a beneficial interest in any Tranche { } Energy Transition Bond, by acquiring any Tranche { } Energy Transition Bond or interest therein, (a) express their intention that, solely for the purpose of U.S. federal taxes and, to the extent consistent with applicable state, local and other tax law, solely for the purpose of state, local and other taxes, the Tranche { } Energy Transition Bonds qualify under applicable tax law as indebtedness of the sole owner of the Issuer secured by the Collateral and (b) solely for purposes of U.S. federal taxes and, to the extent consistent with applicable state, local and other tax law, solely for purposes of state, local and other taxes, so long as any of the Tranche { } Energy Transition Bonds are outstanding, agree to treat the Tranche { } Energy Transition Bonds as indebtedness of the sole owner of the Issuer secured by the Collateral unless otherwise required by appropriate taxing authorities.

ABBREVIATIONS

The following abbreviations, when used above on this Energy Transition Bond, shall be construed as though they were written out in full according to applicable laws or regulations.

TEN COM	as tenants in common
TEN ENT	as tenants by the entireties
JT TEN	as joint tenants with right of survivorship and not as tenants in common
UNIF GIFT MIN ACT	(Custodian)
	Custodian      (minor)
	Under Uniform Gifts to Minor Act (                    )
	(State)

Additional abbreviations may also be used though not in the above list.

ASSIGNMENT

Social Security or taxpayer I.D. or other identifying number of assignee

FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto

(name and address of assignee)

the within Tranche { } Energy Transition Bond and all rights thereunder, and hereby irrevocably constitutes and appoints , attorney, to transfer said Tranche { } Energy Transition Bond on the books kept for registration thereof, with full power of substitution in the premises.

Dated:
	Signature Guaranteed:

The signature to this assignment must correspond with the name of the registered owner as it appears on the within Tranche { } Energy Transition Bond in every particular, without alteration, enlargement or any change whatsoever.

NOTE: Signature(s) must be guaranteed by an institution that is a member of: (i) The Securities Transfer Agent Medallion Program (STAMP); (ii) The New York Stock Exchange Medallion Program (MSP); (iii) the Stock Exchange Medallion Program (SEMP); or (iv) such other signature guaranty program acceptable to the Indenture Trustee.

EXHIBIT B

FORM OF SERIES SUPPLEMENT

See attached.

This SERIES SUPPLEMENT, dated as of {       , 2023} (this “Supplement”), is by and among PNM ENERGY TRANSITION BOND COMPANY I, LLC, a limited liability company created under the laws of the State of Delaware (the “Issuer”), U.S. BANK TRUST COMPANY, NATIONAL ASSOCIATION, a national banking association (“Bank”), in its capacity as indenture trustee (the “Indenture Trustee”), and U.S. BANK NATIONAL ASSOCIATION, a national banking association, in its capacity as securities intermediary (the “Securities Intermediary”), for the benefit of the Secured Parties under the Indenture dated as of {       , 2023, by and among the Issuer, the Indenture Trustee and the Securities Intermediary (the “Indenture”).

PRELIMINARY STATEMENT

Section 9.01 of the Indenture provides, among other things, that the Issuer and the Indenture Trustee may at any time enter into an indenture supplemental to the Indenture for the purposes of authorizing the issuance by the Issuer of a Series of the Energy Transition Bonds and specifying the terms thereof. The Issuer has duly authorized the creation of a Series of the Energy Transition Bonds with an initial aggregate principal amount of ${           } to be known as Series A Senior Secured Energy Transition Bonds (the “Series A Energy Transition Bonds”), and the Issuer and the Indenture Trustee are executing and delivering this Supplement in order to provide for the Series A Energy Transition Bonds.

All terms used in this Supplement that are defined in the Indenture, either directly or by reference therein, have the meanings assigned to them therein, except to the extent such terms are defined or modified in this Supplement or the context clearly requires otherwise. In the event that any term or provision contained herein shall conflict with or be inconsistent with any term or provision contained in the Indenture, the terms and provisions of this Supplement shall govern.

GRANTING CLAUSE

With respect to the Series A Energy Transition Bonds, the Issuer hereby Grants to the Indenture Trustee, as Indenture Trustee for the benefit of the Secured Parties of the Series A Energy Transition Bonds, all of the Issuer’s right, title and interest (whether now owned or hereafter acquired or arising) in and to (a) the Property created under and pursuant to the Financing Order and the Energy Transition Act, and transferred by the Seller to the Issuer on the date hereof pursuant to the Sale Agreement (including, to the fullest extent permitted by law, the right to impose, charge, collect and receive Charges in an amount necessary to provide for full payment and recovery of all energy transition costs identified in the Financing Order, the right under the Financing Order to obtain True-Up Adjustments of the Charges, and all revenues or other proceeds arising from those rights and interests), (b) all Charges related to the Property, (c) the Sale Agreement and the Bill of Sale executed in connection therewith and all property and interests in property transferred under the Sale Agreement and the Bill of Sale with respect to the Property and the Series A Energy Transition Bonds, (d) the Servicing Agreement, the Administration Agreement and any subservicing, agency, intercreditor, administration or collection agreements executed in connection therewith, to the extent related to the foregoing Property and the Series A Energy Transition Bonds, (e) the Collection Account for the Series A Energy Transition Bonds, all subaccounts thereof and all amounts of cash, instruments, investment property or other assets on deposit therein or credited thereto from time to time and all financial assets and securities entitlements carried therein or credited thereto, (f) all rights to compel the Servicer to file for and obtain periodic adjustments to the Charges in accordance with Section 6 of the Energy Transition Act and the Financing Order, (g) all present and future claims, demands, causes and choses in action in respect of any or all of the foregoing, whether such claims, demands, causes and choses in action constitute Property, accounts, general intangibles, instruments, contract rights, chattel paper or proceeds of such items or any other form of property, (h) all accounts, chattel paper, deposit accounts, documents, general intangibles, goods, instruments, investment property, letters of credit, letters-of-credit rights, money, commercial tort claims and supporting obligations related to the foregoing, and (i) all payments on or under, and all proceeds in respect of, any or all of the foregoing (the “Collateral”), it being understood that the following do not constitute Collateral: (x) cash that has been released pursuant to the terms of the Indenture, including Section 8.02(e)(x) of the Indenture and, following retirement of all Outstanding Series A Energy Transition Bonds, pursuant to Section 8.02(e)(xii) of the Indenture, (y) amounts deposited with the Issuer on the Series Closing Date, for payment of costs of issuance with respect to the Series A Energy Transition Bonds (together with any interest earnings thereon) or (z) proceeds from the sale of the Series A Energy Transition Bonds required to pay the purchase price for the Property and paid pursuant to the Sale Agreement and upfront Financing Costs, it being understood that such amounts described in clause (x) and clause (y) above shall not be subject to Section 3.17 of the Indenture. For the avoidance of doubt, any energy transition property (as defined in the Energy Transition Act) created with respect to an Additional Series shall not be Collateral.

The foregoing Grant is made in trust to secure the Secured Obligations equally and ratably without prejudice, priority or distinction, except as expressly provided in the Indenture, to secure compliance with the provisions of the Indenture with respect to the Series A Energy Transition Bonds, all as provided in the Indenture and to secure the performance by the Issuer of all of its obligations under the Indenture. The Indenture and this Supplement constitute a security agreement within the meaning of the Energy Transition Act and under the UCC to the extent that the provisions of the UCC are applicable hereto.

The Indenture Trustee, as indenture trustee on behalf of the Secured Parties of the Series A Energy Transition Bonds, acknowledges such Grant and accepts the trusts under this Supplement and the Indenture in accordance with the provisions of this Supplement and the Indenture.

SECTION 1.     Designation. The Series A Energy Transition Bonds shall be designated generally as the Series A Energy Transition Bonds, and further denominated as Tranches { } through { }.

SECTION 2.     Initial Principal Amount; Bond Interest Rate; Scheduled Final Payment Date; Final Maturity Date; Required Capital Level. The Series A Energy Transition Bonds of each Tranche shall have the initial principal amount, bear interest at the rates per annum (the “Bond Interest Rate”) and shall have the Scheduled Final Payment Dates and the Final Maturity Dates set forth below:

Tranche	Initial Principal Amount		Bond Interest Rate		Scheduled Final Payment Date	Final Maturity Date
{A-1}	$	{          }	{    }	%	{     }, 20{  }	{     }, 20{  }
{A-2}	$	{          }	{    }	%	{     }, 20{  }	{     }, 20{  }

The Bond Interest Rate shall be computed on the basis of a 360-day year of twelve 30-day months.

The Required Capital Level for the Series A Energy Transition Bonds shall be equal to $[·]; provided that in no event shall the sum of the Required Capital Level for Series A Energy Transition Bonds and the Required Capital Level for all other outstanding series of energy transition bonds (as defined in the Energy Transition Act) issued by the Issuer be less than 0.5% of the total capital of the Issuer.

SECTION 3.     Authentication Date; Payment Dates; Expected Amortization Schedule for Principal; Periodic Interest; Book-Entry Energy Transition Bonds; Waterfall Caps.

(a)            Authentication Date. The Series A Energy Transition Bonds that are authenticated and delivered by the Indenture Trustee to or upon the order of the Issuer on {           } (the “Series Closing Date”) shall have as their date of authentication {          }.

(b)            Payment Dates. The “Payment Dates” for the Series A Energy Transition Bonds are {          } and {         } of each year or, if any such date is not a Business Day, the next Business Day, commencing on {         }, 20{ } and continuing until the earlier of repayment of the Series A Energy Transition Bonds in full and the Final Maturity Date.

(c)            Expected Amortization Schedule for Principal. Unless an Event of Default shall have occurred and be continuing, on each Payment Date, the Indenture Trustee shall distribute to the Holders of record as of the related Record Date amounts payable pursuant to Section 8.02(e) of the Indenture as principal, in the following order and priority: {(1) to the holders of the Series A, Tranche { } Energy Transition Bonds, until the Outstanding Amount of such Series A, Tranche { } Energy Transition Bonds thereof has been reduced to zero; and (2) to the holders of the Series A, Tranche { }Energy Transition Bonds, until the Outstanding Amount of such Series A, Tranche { } Energy Transition Bonds thereof has been reduced to zero; provided, however, that in no event shall a principal payment pursuant to this Section 3(c) on any Tranche on a Payment Date be greater than the amount necessary to reduce the Outstanding Amount of such Tranche of Energy Transition Bonds to the amount specified in the Expected Amortization Schedule that is attached as Schedule A hereto for such Tranche and Payment Date}.

(d)            Periodic Interest. “Periodic Interest” will be payable on each Tranche of the Series A Energy Transition Bonds on each Payment Date in an amount equal to one-half of the product of (i) the applicable Bond Interest Rate and (ii) the Outstanding Amount of the related Tranche of Series A Energy Transition Bonds as of the close of business on the preceding Payment Date after giving effect to all payments of principal made to the Holders of the related Tranche of Series A Energy Transition Bonds on such preceding Payment Date; provided, however, that, with respect to the initial Payment Date, or if no payment has yet been made, interest on the outstanding principal balance will accrue from and including the Series Closing Date to, but excluding, the following Payment Date.

(e)            Book-Entry Energy Transition Bonds. The Series A Energy Transition Bonds shall be Book-Entry Energy Transition Bonds, and the applicable provisions of Section 2.11 of the Indenture shall apply to the Series A Energy Transition Bonds.

(f)            Waterfall Caps. The amount payable with respect to the Series A Energy Transition Bonds pursuant to Section 8.02(e)(i) of the Indenture shall not exceed $200,000 annually prior to an Event of Default.

SECTION 4.     Authorized Denominations. The Series A Energy Transition Bonds shall be issuable in denominations of $2,000 and integral multiples of $1,000 in excess thereof, except for one bond of each Tranche, which may be a smaller denomination (the “Authorized Denominations”).

SECTION 5.     Delivery and Payment for the Series A Energy Transition Bonds; Form of the Series A Energy Transition Bonds. The Indenture Trustee shall deliver the Series A Energy Transition Bonds to the Issuer when authenticated in accordance with Section 2.03 of the Indenture. The Series A Energy Transition Bonds of each Tranche shall be in the form of Exhibits {A, B and C} hereto.

SECTION 6.     Ratification of Indenture. As supplemented by this Supplement, the Indenture is in all respects ratified and confirmed and the Indenture, as so supplemented by this Supplement, shall be read, taken and construed as one and the same instrument. This Supplement amends, modifies and supplements the Indenture only insofar as it relates to the Series A Energy Transition Bonds.

SECTION 7.     Counterparts. This Supplement may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all of such counterparts shall together constitute but one and the same instrument.

SECTION 8.     Governing Law. This Supplement shall be governed by and construed in accordance with the laws of the State of New York, without reference to its conflict of law provisions (other than Section 5-1401 of the New York General Obligations Law and Sections 9-301 through 9-306 of the NY UCC), and the obligations, rights and remedies of the parties hereunder shall be determined in accordance with such laws; provided, that, except as set forth in Section 8.02(b) of the Indenture, the creation, attachment and perfection of any Liens created under the Indenture in Property, and all rights and remedies of the Indenture Trustee and the Holders with respect to the Property, shall be governed by the laws of the State of New Mexico.

SECTION 9.     Issuer Obligation. No recourse may be taken directly or indirectly by the Holders with respect to the obligations of the Issuer on the Series A Energy Transition Bonds, under the Indenture or this Supplement or any certificate or other writing delivered in connection herewith or therewith, against (a) any owner of a beneficial interest in the Issuer (including Public Service Company of New Mexico) or (b) any shareholder, partner, owner, beneficiary, officer, director, employee or agent of the Indenture Trustee, the Managers or any owner of a beneficial interest in the Issuer (including Public Service Company of New Mexico) in its individual capacity, or of any successor or assign of any of them in their respective individual or corporate capacities, except as any such Person may have expressly agreed. Each Holder by accepting a Series A Energy Transition Bond specifically confirms the nonrecourse nature of these obligations and waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Series A Energy Transition Bonds.

SECTION 10.     Indenture Trustee Disclaimer. The Indenture Trustee is not responsible for the validity or sufficiency of this Supplement or for the recitals contained herein.

SECTION 11.     Submission to Non-Exclusive Jurisdiction; Waiver of Jury Trial. Each of the Issuer and the Indenture Trustee hereby irrevocably submits to the non-exclusive jurisdiction of any New York State court sitting in The Borough of Manhattan in The City of New York or any U.S. federal court sitting in The Borough of Manhattan in The City of New York in respect of any suit, action or proceeding arising out of or relating to this Supplement and the Series A Energy Transition Bonds and irrevocably accepts for itself and in respect of its respective property, generally and unconditionally, jurisdiction of the aforesaid courts. Each of the Issuer and the Indenture Trustee irrevocably waives, to the fullest extent that it may effectively do so under applicable law, trial by jury.

IN WITNESS WHEREOF, the Issuer, the Indenture Trustee and the Securities Intermediary have caused this Supplement to be duly executed by their respective officers thereunto duly authorized as of the day and year first above written.

PNM ENERGY TRANSITION BOND COMPANY I, LLC,
as Issuer
By:
	Name:	[             ]
	Title:	[             ]
U.S. BANK TRUST COMPANY, NATIONAL ASSOCIATION,
as Indenture Trustee
By:
	Name:	[             ]
	Title:	[             ]
U.S. BANK NATIONAL ASSOCIATION,
as Securities Intermediary
By:
	Name:	[             ]
	Title:	[             ]

SCHEDULE A
TO SERIES SUPPLEMENT

EXPECTED AMORTIZATION SCHEDULE

OUTSTANDING PRINCIPAL BALANCE

Date	Tranche {A-1}		Tranche {A-2}
Series Closing Date	$	{          }	$	{          }
{          }, 20{  }	$	{          }	$	{          }
{          }, 20{  }	$	{          }	$	{          }
{          }, 20{  }	$	{          }	$	{          }

SCHEDULE B
TO SERIES SUPPLEMENT

EXPECTED SINKING FUND SCHEDULE

Date	Tranche {A-1}		Tranche {A-2}
{          }, 20{  }	$	{          }	$	{          }
{          }, 20{  }	$	{          }	$	{          }
{          }, 20{  }	$	{          }	$	{          }

EXHIBIT {A}
TO SERIES SUPPLEMENT

FORM OF Series A Tranche {A-1} ENERGY TRANSITION BONDS

{         }

EXHIBIT {B}
TO SERIES SUPPLEMENT

FORM OF Series A Tranche {A-2} ENERGY TRANSITION BONDS

{         }

EXHIBIT C

SERVICING CRITERIA TO BE ADDRESSED
BY INDENTURE TRUSTEE IN ASSESSMENT OF COMPLIANCE

Regulation AB Reference	Servicing Criteria	Applicable Indenture Trustee Responsibility
	General Servicing Considerations
1122(d)(1)(i)	Policies and procedures are instituted to monitor any performance or other triggers and events of default in accordance with the transaction agreements.
1122(d)(1)(ii)	If any material servicing activities are outsourced to third parties, policies and procedures are instituted to monitor the third party’s performance and compliance with such servicing activities.
1122(d)(1)(iii)	Any requirements in the transaction agreements to maintain a back-up servicer for the pool assets are maintained.
1122(d)(1)(iv)	A fidelity bond and errors and omissions policy is in effect on the party participating in the servicing function throughout the reporting period in the amount of coverage required by and otherwise in accordance with the terms of the transaction agreements.
1122(d)(1)(v)	Aggregation of information, as applicable, is mathematically accurate and the information conveyed accurately reflects the information.
	Cash Collection and Administration
1122(d)(2)(i)	Payments on pool assets are deposited into the appropriate custodial bank accounts and related bank clearing accounts no more than two business days following receipt, or such other number of days specified in the transaction agreements.	X
1122(d)(2)(ii)	Disbursements made via wire transfer on behalf of an obligor or to an investor are made only by authorized personnel.	X
1122(d)(2)(iii)	Advances of funds or guarantees regarding collections, cash flows or distributions, and any interest or other fees charged for such advances, are made, reviewed and approved as specified in the transaction agreements.
1122(d)(2)(iv)	The related accounts for the transaction, such as cash reserve accounts or accounts established as a form of overcollateralization, are separately maintained (e.g., with respect to commingling of cash) as set forth in the transaction agreements.	X
1122(d)(2)(v)	Each custodial account is maintained at a federally insured depository institution as set forth in the transaction agreements. For purposes of this criterion, “federally insured depository institution” with respect to a foreign financial institution means a foreign financial institution that meets the requirements of Rule 13k-1(b)(1) under the Exchange Act.
1122(d)(2)(vi)	Unissued checks are safeguarded so as to prevent unauthorized access.
1122(d)(2)(vii)	Reconciliations are prepared on a monthly basis for all asset-backed securities related bank accounts, including custodial accounts and related bank clearing accounts. These reconciliations are: (A) mathematically accurate; (B) prepared within 30 calendar days after the bank statement cutoff date, or such other number of days specified in the transaction agreements; (C) reviewed and approved by someone other than the person who prepared the reconciliation; and (D) contain explanations for reconciling items. These reconciling items are resolved within 90 calendar days of their original identification, or such other number of days specified in the transaction agreements.
	Investor Remittances and Reporting
1122(d)(3)(i)	Reports to investors, including those to be filed with the SEC, are maintained in accordance with the transaction agreements and applicable SEC requirements. Specifically, such reports: (A) are prepared in accordance with timeframes and other terms set forth in the transaction agreements; (B) provide information calculated in accordance with the terms specified in the transaction agreements; (C) are filed with the SEC as required by its rules and regulations; and (D) agree with investors’ or the trustee’s records as to the total unpaid principal balance and number of pool assets serviced by the servicer.
1122(d)(3)(ii)	Amounts due to investors are allocated and remitted in accordance with timeframes, distribution priority and other terms set forth in the transaction agreements.	X
1122(d)(3)(iii)	Disbursements made to an investor are posted within two business days to the servicer’s investor records, or such other number of days specified in the transaction agreements.	X

C-1

Regulation AB Reference	Servicing Criteria	Applicable Indenture Trustee Responsibility
1122(d)(3)(iv)	Amounts remitted to investors per the investor reports agree with cancelled checks, or other form of payment, or custodial bank statements.	X
	Pool Asset Administration
1122(d)(4)(i)	Collateral or security on pool assets is maintained as required by the transaction agreements or related pool asset documents.
1122(d)(4)(ii)	Pool assets and related documents are safeguarded as required by the transaction agreements.
1122(d)(4)(iii)	Any additions, removals or substitutions to the asset pool are made, reviewed and approved in accordance with any conditions or requirements in the transaction agreements.
1122(d)(4)(iv)	Payments on pool assets, including any payoffs, made in accordance with the related pool asset documents are posted to the servicer’s obligor records maintained no more than two business days after receipt, or such other number of days specified in the transaction agreements, and allocated to principal, interest or other items (e.g., escrow) in accordance with the related pool asset documents.
1122(d)(4)(v)	The servicer’s records regarding the pool assets agree with the servicer’s records with respect to an obligor’s unpaid principal balance.
1122(d)(4)(vi)	Changes with respect to the terms or status of an obligor’s pool assets (e.g., loan modifications or re-agings) are made, reviewed and approved by authorized personnel in accordance with the transaction agreements and related pool asset documents.
1122(d)(4)(vii)	Loss mitigation or recovery actions (e.g., forbearance plans, modifications and deeds in lieu of foreclosure, foreclosures and repossessions, as applicable) are initiated, conducted and concluded in accordance with the timeframes or other requirements established by the transaction agreements.
1122(d)(4)(viii)	Records documenting collection efforts are maintained during the period a pool asset is delinquent in accordance with the transaction agreements. Such records are maintained on at least a monthly basis, or such other period specified in the transaction agreements, and describe the entity’s activities in monitoring delinquent pool assets, including, for example, phone calls, letters and payment rescheduling plans in cases where delinquency is deemed temporary (e.g., illness or unemployment).
1122(d)(4)(ix)	Adjustments to interest rates or rates of return for pool assets with variable rates are computed based on the related pool asset documents.
1122(d)(4)(x)	Regarding any funds held in trust for an obligor (such as escrow accounts): (A) such funds are analyzed, in accordance with the obligor’s pool asset documents, on at least an annual basis, or such other period specified in the transaction agreements; (B) interest on such funds is paid, or credited, to obligors in accordance with applicable pool asset documents and state laws; and (C) such funds are returned to the obligor within 30 calendar days of full repayment of the related pool assets, or such other number of days specified in the transaction agreements.
1122(d)(4)(xi)	Payments made on behalf of an obligor (such as tax or insurance payments) are made on or before the related penalty or expiration dates, as indicated on the appropriate bills or notices for such payments, provided that such support has been received by the servicer at least 30 calendar days prior to these dates, or such other number of days specified in the transaction agreements.
1122(d)(4)(xii)	Any late payment penalties in connection with any payment to be made on behalf of an obligor are paid from the servicer’s funds and not charged to the obligor, unless the late payment was due to the obligor’s error or omission.
1122(d)(4)(xiii)	Disbursements made on behalf of an obligor are posted within two business days to the obligor’s records maintained by the servicer, or such other number of days specified in the transaction agreements.
1122(d)(4)(xiv)	Delinquencies, charge-offs and uncollectible accounts are recognized and recorded in accordance with the transaction agreements.
1122(d)(4)(xv)	Any external enhancement or other support, identified in Item 1114(a)(1) through (3) or Item 1115 of Regulation AB, is maintained as set forth in the transaction agreements.

C-2

EXHIBIT D

FORM OF INTERCREDITOR AGREEMENT

This INTERCREDITOR AGREEMENT (this “Agreement”) is made as of [date], by and among:

(a)            Public Service Company of New Mexico (in its individual capacity, the “Company”);

(b)            [Public Service Company of New Mexico, in its separate capacity as the Receivables Servicer (as defined below);]¹

(c)            Public Service Company of New Mexico, in its separate capacity as the initial servicer of, and collection agent with respect to, the Initial Customer Property (as defined below) (including any successor in such capacity, the “Initial Property Servicer”);

(d)            [Public Service Company of New Mexico, in its separate capacity as the initial servicer of, and collection agent with respect to, the Additional Customer Property (as defined below) (including any successor in such capacity, the “Additional Property Servicer”);]²

(e)            PNM Energy Transition Bond Company I, LLC, a Delaware limited liability company (the “Initial Bond Issuer”);

(f)             U.S. Bank Trust Company, National Association, not in is individual capacity, but solely in its capacity as indenture trustee (including any successor in such capacity, the “Initial Bond Trustee”) under the Initial Indenture (as defined below);

(g)            [[insert name of affiliated purchaser of Receivables] (“Buyer”), a [          ] corporation;]¹

(h)            [[insert name of agent or trustee acting as representative of third-party receivables purchasers or lenders], as [Administrative Agent][Trustee] (in such capacity, and including any successor agent, the “Administrative Agent”) for the [Receivables Purchasers][Lenders] referred to below;]¹

(i)             [[SPE II], a [_____________] (the “Additional Bond Issuer”);]² and

(j)             [[TRUSTEE], not in is individual capacity, but solely in its capacity as indenture trustee (including any successor in such capacity, the “Additional Bond Trustee”) under the Additional Indenture (as defined below).]²

¹ To be included if Public Service Company of New Mexico becomes a party to a receivables securitization program other than an additional issuance of energy transition bonds or similar bonds.

² To be included if Public Service Company becomes a party to an additional issuance of energy transition bonds or similar bonds. The Initial Bond Issuer may be the Additional Bond Issuer.

D-1

[WHEREAS, pursuant to the terms of that certain [describe purchase agreement whereby Buyer acquires Receivables from Company] (as it may hereafter from time to time be further amended, restated or modified and as supplemented from time to time, the “Purchase Agreement”), between Buyer and the Company, the Company has sold and may hereafter sell to Buyer all of the Company’s right, title and interest in and to certain [Outstanding Receivables] and [Collections] (as such terms are defined in the Purchase Agreement, which terms do not include Initial Customer Charges [or the Additional Customer Charges, each] as defined below, or collections thereof; and the Outstanding Receivables, Collections thereof, related property and all proceeds of the foregoing are collectively referred to herein as the “Receivables”);]³

[WHEREAS, pursuant to that certain [describe agreement whereby Receivables Purchasers acquire security and/or ownership interests in the Receivables from the Buyer] (as it may hereafter from time to time be further amended, restated or modified and as supplemented from time to time, the “[Receivables Purchase Agreement]⁴”), by and among the Buyer, the Receivables Servicer, the Administrative Agent and the financial institutions and other entities party thereto as [purchasers][lenders] (such [purchasers][lenders] and the Administrative Agent being collectively referred to as the “[Receivables Purchasers]⁵”), Buyer has [sold and may hereafter sell undivided interests in][granted a security interest in] the Receivables to the Administrative Agent for the benefit of the Receivables Purchasers;]³

[WHEREAS, pursuant to the terms of the Purchase Agreement, the Receivables Purchase Agreement and that certain [describe any agency or similar agreement comprising part of the receivables purchase documents] (as it may hereafter from time to time be further amended, restated or modified and as supplemented from time to time, the “Agency Agreement”, and together with the Purchase Agreement and the Receivables Purchase Agreement, collectively, the “Receivables Agreements”), the Company has been appointed as a servicer (the “Receivables Servicer”) and collection agent and has agreed to provide certain servicing and collection functions with respect to the Receivables;]³

WHEREAS, pursuant to the terms of that certain Energy Transition Property Purchase and Sale Agreement, dated as of [___________], 20[__] (as it may hereafter from time to time be amended, restated or modified, the “Initial Sale Agreement”), between the Initial Bond Issuer and the Company in its capacity as seller, the Company has sold to the Initial Bond Issuer certain assets known as “Energy Transition Property” which includes the right to impose, charge and collect “Energy Transition Charges” as each such term is defined or as otherwise used in Section 62-18-2 of the Energy Transition Act and the financing order issued under the Energy Transition Act by the New Mexico Public Regulation Commission (“NMPRC”) to Public Service Company of New Mexico on April 1, 2020, Docket No. 19-00018-UT, authorizing the creation of the Energy Transition Property (such Energy Transition Property, the “Initial Customer Property” and such Energy Transition Charges, the “Initial Customer Charges”);

³ This paragraph, and all provisions of this form relating to such a program, to be included only if Public Service Company of New Mexico becomes a party to a receivables securitization program other than an additional issuance of energy transition bonds or similar bonds.

⁴ If additional financing takes the form of a loan and a grant of a security interest, the term “Receivables Purchase Agreement” may be changed throughout to “Receivables Financing Agreement” or another appropriate term.

⁵ If additional financing takes the form of a loan and a grant of a security interest, the term “Receivables Purchasers” may be changed throughout to “Receivables Lenders” or another appropriate term.

D-2

WHEREAS, pursuant to the terms of that certain Indenture dated as of [________], 20[__] (as it may hereafter from time to time be amended, restated or modified and as supplemented by the Series Supplement and any other supplemental indenture, the Series Supplement and Indenture, as supplemented, being collectively referred to herein as the “Initial Indenture”), among the Initial Bond Issuer, the Initial Bond Trustee, and U.S. Bank National Association, as securities intermediary, the Initial Bond Issuer, among other things, has granted to the Initial Bond Trustee a security interest in certain of its assets, including the Initial Customer Property, to secure, among other things, the notes issued pursuant to the Initial Indenture (the “Initial Energy Transition Bonds”);

WHEREAS, pursuant to the terms of that certain Energy Transition Property Servicing Agreement dated as of [_________], 20[__] (as it may hereafter from time to time be amended, restated or modified, the “Initial Servicing Agreement,” and the Initial Servicing Agreement, together with the Initial Sale Agreement and the Initial Indenture, the “Initial Bond Agreements”), between the Initial Bond Issuer and the Initial Property Servicer, the Initial Property Servicer has agreed to provide for the benefit of the Initial Bond Issuer certain servicing and collection functions with respect to the Initial Customer Charges;

[WHEREAS, pursuant to the terms of that certain Energy Transition Property Purchase and Sale Agreement, dated as of [___________], 20[__] (as it may hereafter from time to time be amended, restated or modified, the “Additional Sale Agreement”), between the Additional Bond Issuer and the Company in its capacity as seller, the Company has sold to the Additional Bond Issuer certain assets known as “Energy Transition Property” which includes the right to impose, charge and collect “Energy Transition Charges” as each such term is defined or as otherwise used in Section 62-18-2 of the Energy Transition Act and the financing order issued under the Energy Transition Act by the NMPRC to Public Service Company of New Mexico on [•], 20[•], Docket No. [•], authorizing the creation of the Energy Transition Property (such Energy Transition Property, the “Additional Customer Property” and such Energy Transition Charges, the “Additional Customer Charges”);]⁶

[WHEREAS, pursuant to the terms of that certain Indenture dated as of [________], 20[__] (as it may hereafter from time to time be amended, restated or modified and as supplemented by the Series Supplement and any other supplemental indenture, the Series Supplement and Indenture, as supplemented, being collectively referred to herein as the “Additional Indenture”), between the Additional Bond Issuer and the Additional Bond Trustee, the Additional Bond Issuer, among other things, has granted to the Additional Bond Trustee a security interest in certain of its assets, including the Additional Customer Property, to secure, among other things, the notes issued pursuant to the Additional Indenture (the “Additional Energy Transition Bonds”);]⁶

⁶ This paragraph, and all provisions of this form relating to additional bonds, to be included only if Public Service Company of New Mexico becomes a party to an additional issuance of energy transition bonds or similar bonds.

D-3

[WHEREAS, pursuant to the terms of that certain Energy Transition Property Servicing Agreement dated as of [_________], 20[__] (as it may hereafter from time to time be amended, restated or modified, the “Additional Servicing Agreement,” and the Additional Servicing Agreement, together with the Additional Sale Agreement and the Additional Indenture, the “Additional Bond Agreements”), between the Additional Bond Issuer and the Additional Property Servicer, the Additional Property Servicer has agreed to provide for the benefit of the Additional Bond Issuer certain servicing and collection functions with respect to the Additional Customer Charges;]⁶

WHEREAS, the Receivables, the Initial Customer Charges and the Additional Customer Charges will be invoiced collectively on the bills sent to the Company’s retail electric distribution customers (the “Customers”), which Customers are obligated to pay the Receivables, the Initial Customer Charges and the Additional Customer Charges, and the parties hereto wish to agree upon their respective rights relating to the Receivables, the Initial Customer Property and the Additional Customer Property and any bank accounts into which collections of the foregoing may be deposited, as well as other matters of common interest to them which arise under or result from the coexistence of the Initial Bond Agreements, the Additional Bond Agreements and the Receivables Agreements;

NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, the parties hereto agree as follows:

SECTION 1.     Acknowledgment of Ownership Interests and Security Interests.

(a)            Each of the parties hereto hereby acknowledges the ownership interest of the Initial Bond Issuer in the Initial Customer Property, including the Initial Customer Charges and the revenues, collections, claims, rights, payments, money and proceeds arising therefrom, and the security interests granted therein in favor of the Initial Bond Trustee for the benefit of itself and the holders of the Initial Energy Transition Bonds.

Each of the parties hereto hereby acknowledges the ownership interest of the Additional Bond Issuer in the Additional Customer Property, including the Additional Customer Charges and the revenues, collections, claims, rights, payments, money and proceeds arising therefrom, and the security interests granted therein in favor of the Additional Bond Trustee for the benefit of itself and the holders of the Additional Energy Transition Bonds.

Each of the parties hereto hereby acknowledges the ownership interest and security interests of the Buyer and the Receivables Purchasers in the Receivables and the revenues, collections, claims, rights, payments, money and proceeds arising therefrom.

The parties hereto agree that the Initial Customer Property, the Additional Customer Property and the Receivables each shall constitute separate property rights notwithstanding that they may be evidenced by a single bill.  The Company further agrees that it will not include the Initial Customer Property or the Additional Customer Property in calculating the amount of the Receivables sold or to be sold under the Receivables Agreements.

D-4

The Receivables Purchasers and the Receivables Servicer and the Additional Bond Trustee, the Additional Bond Issuer and the Additional Property Servicer each acknowledge that, notwithstanding anything in the Receivables Agreements or the Additional Bond Agreements to the contrary, none of such parties has any interest in the Initial Customer Property. The Initial Bond Trustee, the Initial Bond Issuer and the Initial Property Servicer and the Receivables Purchasers and the Receivables Servicer each acknowledge that, notwithstanding anything in the Initial Bond Agreements or the Receivables Agreements to the contrary, none of such parties has any interest in the Additional Customer Property. The Initial Bond Trustee, the Initial Bond Issuer and the Initial Property Servicer and the Additional Bond Trust, the Additional Bond Issuer and the Additional Property Servicer each further acknowledge that, notwithstanding anything in the Initial Bond Agreements or the Additional Bond Agreements to the contrary, none of such parties has any interest in the Receivables.

(b)            Each of the Administrative Agent and the Buyer and the Additional Bond Issuer and the Additional Bond Trustee hereby releases all liens and security interests of any kind whatsoever which the Administrative Agent or Buyer or the Additional Bond Issuer or Additional Bond Trustee may hold or obtain in the Initial Customer Property. Each of the Administrative Agent and Buyer and the Additional Bond Issuer and the Additional Bond Trustee agrees, upon the reasonable request of the Company or the Initial Bond Trustee, to execute and deliver to the Initial Bond Trustee such UCC partial release statements and other documents and instruments, and to do such other acts and things, as the Company or the Initial Bond Trustee may reasonably request in order to evidence the release provided for in this Section 1(b) and/or to execute and deliver to the Initial Bond Trustee UCC financing statement amendments to exclude the Initial Customer Property from the assets covered by any existing UCC financing statements relating to the Receivables or the Additional Customer Property; provided, however, that failure to execute and deliver any such partial release statements, financing statement amendments, documents or instruments, or to do such acts and things, shall not affect or impair the release provided for in this Section 1(b).

(c)            Each of the Initial Bond Issuer and the Initial Bond Trustee and the Administrative Agent and the Buyer hereby releases all liens and security interests of any kind whatsoever which the Initial Bond Issuer or the Initial Bond Trustee or the Administrative Agent or Buyer may hold or obtain in the Additional Customer Property. Each of the Initial Bond Issuer and the Initial Bond Trustee and the Administrative Agent and Buyer agrees, upon the reasonable request of the Company or the Additional Bond Trustee, to execute and deliver to the Additional Bond Trustee such UCC partial release statements and other documents and instruments prepared by or on behalf of the Company, and to do such other acts and things, as the Company or the Additional Bond Trustee may reasonably request in order to evidence the release provided for in this Section 1(c) and/or to execute and deliver to the Additional Bond Trustee UCC financing statement amendments to exclude the Additional Customer Property from the assets covered by any existing UCC financing statements relating to Initial Customer Property or the Receivables; provided, however, that failure to execute and deliver any such partial release statements, financing statement amendments, documents or instruments, or to do such acts and things, shall not affect or impair the release provided for in this Section 1(c).

D-5

(d)            Each of the Initial Bond Issuer and the Initial Bond Trustee and the Additional Bond Issuer and the Additional Bond Trustee hereby releases all liens and security interests of any kind whatsoever which either of them may hold or obtain in the Receivables. Each of the Initial Bond Issuer and the Initial Bond Trustee and the Additional Bond Issuer and the Additional Bond Trustee agrees, upon the reasonable request of the Administrative Agent or Buyer, to execute and deliver to the Administrative Agent or Buyer, as applicable, such UCC partial release statements and other documents and instruments prepared by or on behalf of the Company, and to do such other acts and things, as the Administrative Agent or Buyer may reasonably request in order to evidence the release provided for in this Section 1(d) and/or to execute and deliver to the Administrative Agent or Buyer, as applicable, UCC financing statement amendments to exclude such Receivables from the assets covered by any existing UCC financing statements relating to the Initial Customer Property or the Additional Customer Property; provided, however, that failure to execute and deliver any such partial release statements, financing statement amendments, documents or instruments, or to do such acts and things, shall not affect or impair the release provided for in this Section 1(d).

SECTION 2.     Deposit Accounts.

(a)            The parties hereto each acknowledge that collections with respect to the Initial Customer Property, the Additional Customer Property and the Receivables may from time to time be deposited into one or more designated accounts of the Company or the Buyer (the “Deposit Accounts”) and that such Deposit Accounts may be subject to a security interest of the Administrative Agent and account control agreements among the Company, the Buyer, the Administrative Agent and the applicable account bank.  Subject to Section 4, the Company, in its capacity as a collection agent with respect to each of the Initial Customer Property, the Additional Customer Property and the Receivables, agrees to:

(i)            maintain the collections in the Deposit Accounts for the benefit of the Initial Property Servicer, the Initial Bond Trustee, the Initial Bond Issuer, the Additional Property Servicer, the Additional Bond Trustee, the Additional Bond Issuer, the Receivables Servicer, the Buyer, the Administrative Agent and the Receivables Purchasers, as their respective interests may appear;

(ii)           allocate and remit funds from the Deposit Accounts, whether or not commingled, (x) in the case of collections relating to the Initial Customer Property, at the times and in the manner specified in the Initial Bond Agreements to the Initial Bond Trustee; (y) in the case of collection relating to the Additional Customer Property, at the times and in the manner specified in the Additional Bond Agreements to the Additional Bond Trustee; and (z) in the case of collections relating to the Receivables, allocate and remit funds to the Receivables Purchasers and the Buyer at the times and in the manner specified in the Receivables Agreements; provided, that:

(A)            to the extent the combined amounts of remittance are insufficient to satisfy amounts owed in respect of the Initial Customer Charges, the Additional Customer Charges and the Receivables, such allocation and remittances shall be made in the manner required by the NMPRC;

D-6

(B)            late payment penalties of the Receivables, the Additional Customer Charges and the Initial Customer Charges shall be allocated (w) to the Initial Bond Trustee, if such late payment penalties are allocable to the Initial Customer Charges and are not allowed to be retained by the Company under the Initial Bond Agreements, (x) to the Additional Bond Trustee, if such late payment penalties are allocable to the Additional Customer Charges and are not allowed to be retained by the Company under the Additional Bond Agreements, (y) to the Receivables Purchasers to the extent that any such late payment penalties are included in the Receivables sold to the Receivables Purchasers, and (z) otherwise to the Company; and

(C)            to the extent the Administrative Agent has exercised exclusive control over any Deposit Account, it shall allocate the funds on deposit therein related to the Initial Customer Property and the Additional Customer Property in accordance with the information provided to it by the Company and consistent with this Section 2, and shall remit such collections related to the Initial Customer Property at the direction of the Initial Bond Trustee and such collections related to the Additional Customer Property at the direction of the Additional Bond Trustee; and

(iii)          maintain records as to the amounts deposited into the Deposit Accounts, the amounts remitted therefrom and the allocation as provided above in this subsection (a).

(b)            The Initial Bond Trustee, the Initial Bond Issuer, the Additional Bond Trustee, the Additional Bond Issuer, the Buyer and the Receivables Purchasers shall each have the right to require an accounting from time to time of collections, deposits, allocations and remittances by the Company relating to the Deposit Accounts.  Because of difficulties inherent in allocating collections on a daily basis, (i) the Initial Property Servicer may implement  estimates for the purposes of determining the amount of collections which are allocable to the Initial Customer Property, which allocations will be subject to annual reconciliations in accordance with the terms of the Initial Bond Agreements but will otherwise be deemed conclusive, subject to reconciliation as provided in the following sentences and (ii) the Additional Property Servicer may implement  estimates for the purposes of determining the amount of collections which are allocable to the Additional Customer Property, which allocations will be subject to annual reconciliations in accordance with the terms of the Additional Bond Agreements but will otherwise be deemed conclusive, subject to reconciliation as provided in the following sentences; provided that unless an Event of Default (as defined in the Initial Indenture or the Additional Indenture and any corresponding term in the Receivables Purchase Agreement) has occurred and is continuing, the Company shall only be required to prepare one such accounting during any fiscal year.

D-7

In the event that the estimated remittances to the Initial Bond Issuer for any calendar year are less than the actual amounts of Initial Customer Charge collections, the Initial Bond Issuer shall look to the Initial Property Servicer for any such shortfall and shall have no claims against the Receivables Purchasers or the Additional Bond Issuer for such amounts.   In the event that the estimated remittances to the Initial Bond Issuer are greater than the actual amounts of Initial Customer Charge collections, the Initial Property Servicer shall have the right, in accordance with the terms of the Initial Bond Agreements, to net an amount equal to such excess collections out of monies otherwise to be paid to the Initial Bond Issuer, and the Receivables Purchasers acknowledge that they shall look solely to the Initial Property Servicer for such excess collections and shall have no claims against the Initial Bond Issuer for such funds.  In the event that the estimated remittances to the Additional Bond Issuer for any calendar year are less than the actual amounts of Additional Customer Charge collections, the Additional Bond Issuer shall look to the Additional Property Servicer for any such shortfall and shall have no claims against the Initial Bond Issuer or the Receivables Purchasers for such amounts. In the event that the estimated remittances to the Additional Bond Issuer are greater than the actual amounts of Additional Customer Charge collections, the Additional Property Servicer shall have the right, in accordance with the terms of the Additional Bond Agreements, to net an amount equal to such excess collections out of monies otherwise to be paid to the Additional Bond Issuer, and the Receivables Purchasers acknowledge that they shall look solely to the Additional Property Servicer for such excess collections and shall have no claims against the Additional Bond Issuer for such funds.  Notwithstanding the foregoing, nothing in this paragraph shall prohibit any party from netting any such reconciliation payments owing by such party (the “remitting party”) to another party (the “receiving party”) against the amounts to be paid hereunder to the remitting party by such receiving party.

(c)            The Initial Bond Trustee, the Initial Bond Issuer, the Additional Bond Trustee and the Additional Bond Issuer waive any interest in deposits to the Deposit Accounts to the extent that they are properly allocable to Collections with respect to Receivables. The Administrative Agent and Buyer and the Additional Bond Trustee and the Additional Bond Issuer waive any interest in deposits to the Deposit Accounts to the extent that they are properly allocable to Initial Customer Charges. The Administrative Agent and Buyer and the Initial Bond Trustee and the Initial Bond Issuer waive any interest in deposits to the Deposit Accounts to the extent they are properly allocable to the Additional Customer Charges. Each of the parties hereto acknowledges the respective ownership and security interests of the others in amounts on deposit in the Deposit Accounts to the extent of their respective interests as described in this Agreement.

(d)            In no event may the Initial Bond Trustee take any action with respect to the Initial Customer Charges with the intent of it obtaining possession of, or any control over, collections of Additional Customer Charges, Collections of Receivables or any Deposit Account.  In the event that the Initial Bond Trustee obtains possession of any Collections related to the Receivables, the Initial Bond Trustee shall notify the Administrative Agent of such fact, shall hold such Collections in trust and shall promptly deliver them to the Administrative Agent upon request.  In the event that the Initial Bond Trustee obtains possession of any collections of Additional Customer Charges, the Initial Bond Trustee shall notify the Additional Bond Trustee of such fact, shall hold such collections in trust and shall promptly deliver them to the Additional Bond Trustee upon request.

D-8

In no event may the Additional Bond Trustee take any action with respect to the Additional Customer Charges with the intent of it obtaining possession of, or any control over, collections of Initial Customer Charges, Collections of Receivables or any Deposit Account.  In the event that the Additional Bond Trustee obtains possession of any Collections related to the Receivables, the Additional Bond Trustee shall notify the Administrative Agent of such fact, shall hold such Collections in trust and shall promptly deliver them to the Administrative Agent upon request.  In the event that the Additional Bond Trustee obtains possession of any collections of Initial Customer Charges, the Additional Bond Trustee shall notify the Initial Bond Trustee of such fact, shall hold such collections in trust and shall promptly deliver them to the Initial Bond Trustee upon request.

Except as contemplated by this Section 2 with respect to the Administrative Agent’s exercise of control over the Deposit Accounts, in no event may the Administrative Agent or Buyer take any action with respect to the collection of Receivables with the intent of it or Buyer, as applicable, obtaining possession of, or any control over, collections of Initial Customer Charges or collections of Additional Customer Charges. In the event that the Administrative Agent or Buyer obtains possession of any collections of Initial Customer Charges, the Administrative Agent or Buyer, as applicable, shall notify the Initial Bond Trustee of such fact, shall hold such collections in trust and shall promptly deliver them to the Initial Bond Trustee upon request. In the event that the Administrative Agent or Buyer obtains possession of any collections of Additional Customer Charges, the Administrative Agent or Buyer, as applicable, shall notify the Additional Bond Trustee of such fact, shall hold such collections in trust and shall promptly deliver them to the Additional Bond Trustee upon request.

SECTION 3.     Time or Order of Attachment.  The acknowledgments contained in Sections 1 and 2 are applicable irrespective of the time or order of attachment or perfection of security or ownership interests or the time or order of filing or recording of financing statements or mortgages or filings under applicable law.

SECTION 4.     Servicing.

(a)            Pursuant to Section 2, the Company, in its role as collection agent hereunder, shall allocate and remit funds received from Customers for the benefit of the Initial Bond Issuer, the Initial Bond Trustee, the Additional Bond Issuer, the Additional Bond Trustee, the Buyer and the Receivables Purchasers, respectively, and shall control the movement of such funds out of the Deposit Accounts in accordance with the terms of this Agreement.  To the extent permitted under the Initial Indenture, the Additional Indenture or the Receivables Purchase Agreement, the Company may appoint a successor servicer or sub-servicer to act in any of its respective capacities under this Agreement so long as such successor servicer or sub-servicer has executed joinder documentation agreeing to act in such capacity and to be bound by the terms of this Agreement.

D-9

(b)            In the event that the Initial Bond Trustee is entitled to and desires to exercise its right, pursuant to the Initial Bond Agreements, to replace the Company as Initial Property Servicer, in the event that the Additional Bond Trustee is entitled to and desires to exercise its right, pursuant to the Additional Bond Agreements, to replace the Company as Additional Property Servicer, or in the event that the Receivables Purchasers are entitled to and desire to exercise their right to replace the Company as Receivables Servicer, and therefore to terminate the role of the Company as the Initial Property Servicer, as the Additional Property Servicer or as Receivables Servicer, as applicable, hereunder, the party desiring to exercise such right shall promptly give written notice to the other parties hereto (the “Servicer Notice”) in accordance with the notice provisions of this Agreement and consult with the other parties with respect to the Person who would replace the Company in its capacity as Initial Property Servicer, as Additional Property Servicer or as Receivables Servicer.  Any successor to the Company in any of such capacities shall be agreed to by the Initial Bond Trustee, the Additional Bond Trustee and the Administrative Agent within ten (10) Business Days of the date of the Servicer Notice, and such successor shall be subject to satisfaction of the Initial Bonds Rating Agency Condition (as defined below) and the Additional Bonds Rating Agency Condition (as defined below) and otherwise satisfy the provisions of the Initial Servicing Agreement, the Additional Servicing Agreement and the Receivables Agreements.  For the avoidance of doubt, (i) the removal of the Company as the Initial Property Servicer shall not automatically cause the removal of the Company as the Additional Property Servicer or as the Receivables Servicer, (ii) the removal of the Company as the Additional Property Servicer shall not automatically cause the removal of the Company as the Initial Property Servicer or as the Receivables Servicer, (iii) the removal of the Company as the Receivables Servicer shall not automatically cause the removal of the Company as the Initial Property Servicer or as the Additional Property Servicer, and (iv) the roles of Initial Property Servicer, Additional Property Servicer and Receivables Servicer may be held by different Persons so long as each such Person has agreed to be bound by the provisions of this Agreement. “Business Day” means any day other than a Saturday, Sunday, or a day on which banking institutions in Albuquerque, New Mexico, New York, New York are, or DTC or the Corporate Trust Office (as defined in the Initial Indenture and the Additional Indenture) is, or is authorized by law, regulation or executive order to be closed. Any Person named as replacement collection agent in accordance with this Section 4 is referred to herein as a “Replacement Collection Agent.”  The parties hereto agree that any entity succeeding to the rights of the Company in its capacity as Initial Property Servicer, Additional Property Servicer or as Receivables Servicer hereunder shall execute customary joinder documentation agreeing to act in such capacity and to be bound by the terms of this Agreement.

(c)            Anything in this Agreement to the contrary notwithstanding, any action taken by the Initial Bond Trustee, the Additional Bond Trustee or the Administrative Agent to appoint a Replacement Collection Agent pursuant to this Section 4 shall be subject to the Initial Bonds Rating Agency Condition and the Additional Bonds Rating Agency Condition.  For the purposes of this Agreement, (i) the “Initial Bonds Rating Agency Condition” means the “Rating Agency Condition” as such term is defined in the Initial Indenture, and (ii) the “Additional Bonds Rating Agency Condition” means the “Rating Agency Condition” as such term is defined in the Additional Indenture. The parties hereto acknowledge and agree that the approval or the consent of the rating agencies which is required in order to satisfy the Initial Bonds Rating Agency Condition or the Additional Bonds Rating Agency Condition is not subject to any standard of commercial reasonableness, and the parties are bound to satisfy this condition whether or not the rating agencies are unreasonable or arbitrary.

SECTION 5.     Sharing of Information. The parties hereto agree to cooperate with each other and make available to each other or any Replacement Collection Agent any and all records and other data relevant to the Initial Customer Property, the Additional Customer Property and the Receivables which they may from time to time possess or receive from the Company, the Initial Property Servicer, the Additional Property Servicer or the Receivables Servicer or any successor hereto or thereto, including, without limitation, any and all computer programs, data files, documents, instruments, files and records and any receptacles and cabinets containing the same.  The Company hereby consents to the release of information regarding the Company pursuant to this Section 5.

D-10

SECTION 6.     No Joint Venture; No Fiduciary Obligations; Etc..

(a)            Nothing herein contained shall be deemed as effecting a joint venture among any of the Company, the Initial Bond Issuer, the Initial Bond Trustee, the Initial Property Servicer, the Additional Bond Issuer, the Additional Bond Trustee, the Additional Property Servicer, the Administrative Agent, the Receivables Servicer and the Buyer.

(b)            Neither Buyer nor the Administrative Agent is the agent of, or owes any fiduciary obligation to, the Initial Bond Trustee, the Initial Bond Issuer, the Additional Bond Trustee, the Additional Bond Issuer, the bondholders or any other party under this Agreement.  Each of the Initial Bond Trustee (on behalf of itself and the bondholders), the Initial Bond Issuer, the Additional Bond Trustee (on behalf of itself and the bondholders), the Additional Bond Issuer and the Company hereby waives any right that it may now have or hereafter acquire to make any claim against Buyer or the Administrative Agent, in their respective capacities as such, on the basis of any such fiduciary obligation hereunder.  None of the Initial Bond Trustee, the Initial Bond Issuer, the Additional Bond Trustee or the Additional Bond Issuer is the agent of, or owes any fiduciary obligation to, Buyer or the Administrative Agent or any other party under this Agreement.  Each of the Administrative Agent, the Company and Buyer hereby waives any right that it may now have or hereafter acquire to make any claim against the Initial Bond Trustee, the Initial Bond Issuer, the Additional Bond Trustee or the Additional Bond Issuer on the basis of any such fiduciary obligation hereunder.

(c)            Notwithstanding anything herein to the contrary, none of Buyer, the Administrative Agent, the Initial Bond Trustee, the Initial Bond Issuer, the Additional Bond Trustee or the Additional Bond Issuer shall be required to take any action that exposes it to personal liability or that is contrary to the Initial Indenture, the Additional Indenture, the Servicing Agreement, any Receivables Agreement or applicable law.

(d)            None of Buyer, the Administrative Agent, the Initial Bond Trustee, the Initial Bond Issuer, the Additional Bond Trustee, the Additional Bond Issuer nor any of their respective directors, officers, agents or employees shall be liable for any action taken or omitted to be taken by it or them under or in connection with this Agreement, except for its or their own negligence, bad faith or willful misconduct.  Without limiting the foregoing, each of Buyer, the Administrative Agent, the Initial Bond Trustee, the Initial Bond Issuer, the Additional Bond Trustee and the Additional Bond Issuer: (i) may consult with legal counsel, independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken in good faith by it in accordance with the advice of such counsel, accountants or experts; (ii) makes no warranty or representation to any party and shall not be responsible to any party for any statements, warranties or representations made by any other party in connection with this Agreement or any other agreement; (iii) shall not have any duty to ascertain or to inquire as to the performance or observance of any of the terms, covenants or conditions of this Agreement or any other agreement on the part of any other party; and (iv) shall incur no liability under or in respect of this Agreement by acting upon any writing (which may be by email) believed by it in good faith to be genuine and signed or sent by the proper party or parties.

D-11

SECTION 7.     Method of Adjustment and Allocation.  Each of the parties hereto acknowledges that (i) the Initial Property Servicer will adjust, calculate and allocate payments of Initial Customer Charges in accordance with Section 4.01 of the Initial Servicing Agreement and Section 6 of Annex 1 of the Initial Servicing Agreement in the form attached thereto, and (ii) the Additional Property Servicer will adjust, calculate and allocate payments of Additional Customer Charges in accordance with Section [__] of the Additional Servicing Agreement and [Section [__] of Annex [__]] of the Additional Servicing Agreement in the form attached thereto. Each of the parties hereto hereby acknowledges that (a) none of the Administrative Agent, the Receivables Purchasers, the Additional Bond Issuer or the Additional Bond Trustee shall be deemed or required under this Agreement to have any knowledge of or responsibility for the terms of the Initial Servicing Agreement and Annex 1 thereto, or any adjustment, calculation and allocation thereunder, and (b) none of the Administrative Agent, the Receivables Purchasers, the Initial Bond Issuer or the Initial Bond Trustee shall be deemed or required under this Agreement to have any knowledge of or responsibility for the terms of the Additional Servicing Agreement and [Annex [__] thereto], or any adjustment, calculation and allocation thereunder. Accordingly, (A) each of the Administrative Agent, the Receivables Purchasers, the Additional Bond Issuer and the Additional Bond Trustee may, solely for the purposes of this Agreement, conclusively rely on the accuracy of the calculations of the Initial Property Servicer in making adjustments, calculations and allocations under the Initial Servicing Agreement and Annex 1 thereto, and (B) each of the Administrative Agent, the Receivables Purchasers, the Initial Bond Issuer and the Initial Bond Trustee may, solely for the purposes of this Agreement, conclusively rely on the accuracy of the calculations of the Additional Property Servicer in making adjustments, calculations and allocations under the Additional Servicing Agreement and [Annex [__] thereto].  Such acknowledgement shall not relieve the Receivables Servicer of any of its obligations to make payments in accordance with the terms of the Receivables Agreements, nor shall it relieve the Initial Property Servicer of its obligations under the Initial Servicing Agreement or the Additional Property Servicer of its obligations under the Additional Servicing Agreement.

SECTION 8.     Termination.  This Agreement shall terminate upon such time that at least two of the following have occurred: (a) the payment in full of the Initial Energy Transition Bonds, (b) the payment in full of the Additional Energy Transition Bonds, and (c) the termination of the Receivables Agreements as to the Company and the release of the Company from all further obligations thereunder, except that the understandings and acknowledgements contained in Sections 1, 2, 3 and 15 shall survive the termination of this Agreement. In addition, this Agreement shall terminate and be of no further force and effect: (i) with respect to the Initial Bond Issuer, the Initial Bond Trustee and the Initial Bond Servicer, upon the payment in full of the Initial Energy Transition Bonds, (ii) with respect to the Additional Bond Issuer, the Additional Bond Trustee and the Additional Bond Servicer, upon the payment in full of the Additional Energy Transition Bonds, and (iii) with respect to the Administrative Agent, the Buyer, the Receivables Purchasers and the Receivables Servicer, the termination of the Receivables Agreements as to the Company and the release of the Company from all further obligations thereunder.

D-12

SECTION 9.     Governing Law; Jurisdiction; Waiver of Jury Trial.

(a)            THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (INCLUDING, WITHOUT LIMITATION, SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF NEW YORK, BUT OTHERWISE WITHOUT REGARD TO THE LAW OF CONFLICTS) OF THE STATE OF NEW YORK.

(b)            Each of the parties hereto hereby irrevocably submits to the non-exclusive jurisdiction of any New York state court sitting in the Borough of Manhattan in The City of New York or any U.S. federal court sitting in the Borough of Manhattan in The City of New York in respect of any suit, action or proceeding arising out of or relating to this Agreement and irrevocably accepts for itself and in respect of its respective property, generally and unconditionally, jurisdiction of the aforesaid courts; and each party hereto agrees to, and irrevocably waives any objection based on forum non conveniens or venue not to, appear in such state or U.S. federal court located in the Borough of Manhattan.

(c)            EACH OF THE PARTIES HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT AND FOR ANY COUNTERCLAIM THEREIN.

SECTION 10.   Further Assurances.  Each of the parties hereto agrees to execute any and all agreements, instruments, financing statements, releases and any and all other documents reasonably requested by any of the other parties hereto in order to effectuate the intent of this Agreement.  In each case where a release is to be given pursuant to this Agreement, the term release shall include any documents or instruments necessary to effect a release, as contemplated by this Agreement.  All releases, subordinations and other instruments submitted to the executing party are to be prepared at the expense of the Company.  Notwithstanding anything herein to the contrary, (i) the Initial Bond Trustee shall not be required to execute any such agreements, instruments, releases or other documents unless directed to do so by an “Issuer Order,” as such term is defined in the Initial Indenture, and (ii) the Additional Bond Trustee shall not be required to execute any such agreements, instruments, releases or other documents unless directed do so by an “Issuer Order,” as such term is defined in the Additional Indenture.

SECTION 11.   Limitation on Rights of Others.  This Agreement is solely for the benefit of the parties hereto, the holders of the Initial Energy Transition Bonds, the holders of the Additional Energy Transition Bonds and the Receivables Purchasers, and no other person or entity shall have any rights, benefits, priority or interest under or because of the existence of this Agreement.

D-13

SECTION 12.   Amendments. In the event that (x) the Company hereafter causes any property (“New Customer Property”) consisting of the right to impose specified charges on Customers to be created and sold and pledged by the buyer thereof for the benefit of bondholders pursuant to any financing order of the NMPRC, and the Company acts as servicer for the bonds issued pursuant to such financing order, or (y) the Company enters into any new receivables program in which the Company participates as a seller or as a servicer or sub-servicer of receivables, then, in either such event, upon the written request of the Company, the other parties hereto agree that this Agreement may be amended and restated (i) to add as parties hereto the relevant issuer of such additional bonds, the indenture trustee therefor, and the servicer of such New Customer Property and/or the relevant lenders or purchasers and servicers under such additional receivables program, as the case may be, and (ii) to reflect the rights and obligations of the parties with respect to such new receivables purchases on terms substantially similar to the rights and obligations of the Receivables Servicer, the Administrative Agent and the Receivables Purchasers [hereunder]⁷ [as set forth in the form of Intercreditor Agreement attached as Exhibit D to the Initial Indenture]⁸ and (iii) to reflect the rights and obligations of the parties with respect to any such New Customer Property on terms substantially similar to the rights and obligations of the Initial Bond Issuer, the Initial Bond Trustee and the Initial Servicer hereunder; provided that no such amendment shall be effective unless (x) evidenced by a written instrument signed by the parties hereto and such additional parties and (y) the Initial Bonds Rating Agency Condition and the Additional Bonds Rating Agency Condition shall have been satisfied with respect thereto and provided, further, that no party hereto shall be required to execute any such amended agreement on terms which are materially more disadvantageous to it or to the holders of the Initial Energy Transition Bonds (in the case of the Initial Bond Trustee), to the holders of the Additional Energy Transition Bonds (in the case of the Additional Bond Trustee) or to the Receivables Purchasers (in the case of the Administrative Agent) than the terms contained herein.  In addition, (i) the Initial Bond Trustee shall not be required to execute any such amendment unless directed to do so by an “Issuer Order,” as such term is defined in the Initial Indenture, and (ii) the Additional Bond Trustee shall not be required to execute any such amendment unless directed to do so by an “Issuer Order,” as such term is defined in the Additional Indenture.

SECTION 13.   Severability.  The provisions of this Agreement shall be deemed severable and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of the other provisions hereof.  If any provision of this Agreement, or the application thereof to any Person or any circumstance, is invalid or unenforceable, (i) a suitable and equitable provision shall be substituted therefor in order to carry out, so far as may be valid and enforceable, the intent and purpose of such invalid or unenforceable provision and (ii) the remainder of this Agreement and the application of such provision to other Persons, or circumstances shall not be affected by such invalidity or unenforceability, nor shall such invalidity or unenforceability affect the validity or enforceability of such provision, or the application thereof, in any other jurisdiction.

⁷ This language will be included if Public Service Company of New Mexico has a general receivables securitization program that is the subject of this Agreement.

⁸ This language will be included if this Agreement addresses only two or more series of energy transition bonds or similar bonds where Public Service Company of New Mexico has not entered into a general receivables securitization program.

D-14

SECTION 14.   Counterparts.  Effectiveness; Counterparts; Construction. This Agreement shall become effective upon the execution and delivery of this Agreement by the parties hereto. This Agreement may be signed in any number of counterparts, each of which shall be deemed an original, which taken together shall constitute one and the same instrument. The words “execution”, “signed” and “signature” and words of like import in this Agreement or in any other certificate, agreement or document related to this Agreement (to the extent not prohibited under governing documents) shall include images of manually executed signatures transmitted in an email (including “pdf”, “tif” or “jpg”) and other electronic signatures (including DocuSign and AdobeSign). The use of electronic signatures and electronic records (including any contract or other record created, generated, sent, communicated, received or stored by electronic means) shall be of the same legal effect, validity and enforceability as a manually executed signature or use of a paper-based record-keeping system to the fullest extent permitted by applicable law, including the Electronic Signatures in Global and National Commerce Act, the Michigan Uniform Electronic Transactions Act, the New York State Electronic Signatures and Records Act and any other applicable law, including any state law based on the Uniform Electronic Transactions Act or the Uniform Commercial Code. Any reference herein to “including” shall be deemed to be followed by the words “without limitation”.

SECTION 15.   Nonpetition Covenant.

(a)            Notwithstanding any prior termination of this Agreement, the Initial Indenture or the Additional Indenture, each of the parties covenants that it shall not, prior to the date which is one year and one day after payment in full of the Initial Energy Transition Bonds and the Additional Energy Transition Bonds, acquiesce, petition or otherwise invoke or cause the Initial Bond Issuer or the Additional Bond Issuer to invoke the process of any court or government authority for the purpose of commencing or sustaining a case against the Initial Bond Issuer or the Additional Bond Issuer under any federal or state bankruptcy, insolvency or similar law or appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator or other similar official of the Initial Bond Issuer or any substantial part of its property, or the Additional Bond Issuer or any substantial part of its property, or ordering the winding up or liquidation of the affairs of the Initial Bond Issuer or the Additional Bond Issuer. Nothing in this Section 15 shall preclude, or be deemed to estop, any party hereto (a) from taking or omitting to take any action prior to such date in (i)(A) any case or proceeding voluntarily filed or commenced by or on behalf of the Initial Bond Issuer under or pursuant to any such law or (B) any involuntary case or proceeding pertaining to the Initial Bond Issuer that is filed or commenced by or on behalf of a Person other than the Initial Bond Trustee, as the case may be, and is not joined in by the Initial Bond Trustee, as the case may be, under or pursuant to any such law, or (ii)(A) any case or proceeding voluntarily filed or commenced by or on behalf of the Additional Bond Issuer under or pursuant to any such law or (B) any involuntary case or proceeding pertaining to the Additional Bond Issuer that is filed or commenced by or on behalf of a Person other than the Additional Bond Trustee, as the case may be, and is not joined in by the Additional Bond Trustee, as the case may be, under or pursuant to any such law, or (b) from commencing or prosecuting any legal action that is not an involuntary case or proceeding under or pursuant to any such law against the Initial Bond Issuer, the Additional Bond Issuer or any of its properties.

D-15

(b)            Notwithstanding any prior termination of this Agreement or the Receivables Purchase Agreement, each of the parties hereto other than the Administrative Agent hereby covenants and agrees that it shall not, prior to the date which is one year and one day after the termination of the Receivables Purchase Agreement and the payment in full of all amounts owing by Buyer thereunder, acquiesce, petition or otherwise invoke or cause Buyer to invoke the process of any court or government authority for the purpose of commencing or sustaining a case against Buyer under any federal or state bankruptcy, insolvency or similar law or appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator or other similar official of Buyer or any substantial part of the property of Buyer, or ordering the winding up or liquidation of the affairs of Buyer.

SECTION 16.   Trustees. [ U.S. Bank Trust Company, National Association], as Initial Bond Trustee, in acting hereunder, is entitled to all rights, benefits, protections, immunities and indemnities accorded to it under the Initial Indenture. [_____________], as Additional Bond Trustee, in acting hereunder, is entitled to all rights, benefits, protections, immunities and indemnities accorded to it under the Additional Indenture.

SECTION 17.   Notices, Etc..  Any notice provided or permitted by this Agreement to be made upon, given or furnished to or filed with any party hereto shall be sufficient for every purpose hereunder if made, given, furnished or filed in writing by email, first-class mail or overnight delivery service to the applicable party at its address set forth on Exhibit A hereto or, as to any party, at such other address as shall be designated by such party by written notice to the other parties hereto.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

D-16

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written.

PUBLIC SERVICE COMPANY OF NEW MEXICO, as Company, as Initial Property Servicer, as Additional Property Servicer, as Receivables Servicer and as a collection agent
By:
	Name:
	Title:
PNM ENERGY TRANSITION BOND COMPANY I, LLC, as Initial Bond Issuer
By:
	Name:
	Title:
[NAME], as Buyer
By:
	Name:
	Title:
[U.S. BANK TRUST COMPANY, NATIONAL ASSOCIATION], not in its individual capacity, but solely as Initial Bond Trustee
By:
	Name:
	Title:

Signature Page to

Intercreditor Agreement

D-17

[Insert Admin Agent name], as Administrative Agent
By:
	Name:
	Title:
[SPE II]
By:
	Name:
	Title:
[________], not in its individual capacity, but solely as Additional Bond Trustee
By:
	Name:
	Title:

Signature Page to

Intercreditor Agreement

D-18

EXHIBIT A

NOTICE ADDRESSES

Public Service Company of New Mexico
414 Silver Avenue SW

Albuquerque, New Mexico 87102
Telephone:

Email:

PNM Energy Transition Bond Company I, LLC
414 Silver Avenue SW

Albuquerque, New Mexico 87102
Telephone:

Email:

[Buyer]

[Address]

Attention:

Telephone:

Facsimile:

Email:

[Administrative Agent]

[Address]

Attention:

Telephone:

Facsimile:

Email:

U.S. Bank Trust Company, National Association

190 S. LaSalle Street, 7^th Floor

Chicago, Illinois 60603

Attention:

Telephone:

Facsimile:

Email:

[SPE II]
414 Silver Avenue SW

Albuquerque, New Mexico 87102
Telephone:

Email:

[Additional Trustee]

[Address]

Attention:

Telephone:

Facsimile:

Email:

D-19

APPENDIX A

DEFINITIONS AND RULES OF CONSTRUCTION

A.            Defined Terms. The following terms have the following meanings:

“17g-5 Website” is defined in Section 10.18(a) of the Indenture.

“Account Records” is defined in Section 1(a)(i) of the Administration Agreement.

“Act” is defined in Section 10.03(a) of the Indenture.

“Additional Series” means issuance by the Issuer of any series of energy transition bonds (as defined in the Energy Transition Act) issued after the date hereof, that will be undertaken only if (i) such issuance has been authorized by the Commission, (ii) the Rating Agency Condition has been satisfied and it is a condition of issuance for each new series of energy transition bonds that the new series receive a rating or ratings as required by a Subsequent Financing Order, (iii) the Issuer has delivered to the Indenture Trustee an Opinion of Counsel of a nationally recognized firm experienced in such matters to the effect that after such issuance, in the opinion of such counsel, if either or both of Public Service Company of New Mexico or the Seller were to become a debtor in a case under the United States Bankruptcy Code (Title 11, U.S.C.), a federal court exercising bankruptcy jurisdiction and exercising reasonable judgment after full consideration of all relevant factors would not order substantive consolidation of the assets and liabilities of the Issuer with those of the bankruptcy estate of Public Service Company of New Mexico or the Seller, subject to the customary exceptions, qualifications and assumptions contained therein.

“Administration Agreement” means the Administration Agreement, dated as of the date hereof, by and between Public Service Company of New Mexico and the Issuer.

“Administration Fee” is defined in Section 2 of the Administration Agreement.

“Administrator” means Public Service Company of New Mexico, as Administrator under the Administration Agreement, or any successor Administrator to the extent permitted under the Administration Agreement.

“Affiliate” means, with respect to any specified Person, any other Person controlling or controlled by or under common control with such specified Person. For the purposes of this definition, “control” when used with respect to any specified Person means the power to direct the management and policies of such specified Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise, and the terms “controlling” and “controlled” have meanings correlative to the foregoing.

“Amendatory Schedule” means a revision to service riders or any other notice filing filed with the Commission in respect of the Energy Transition Rate Schedule pursuant to a True-Up Adjustment.

A-1

“Ancillary Agreement” has the meaning set forth in Section 2(B) of the Energy Transition Act.

“Annual Accountant’s Report” is defined in Section 3.04(a) of the Servicing Agreement.

“Applicable FATCA Law” is defined in Section 6.16 of the Indenture.

“Assignee” means the Issuer and any other assignee (as defined in Section 2(C) of the Energy Transition Act) with respect to any Property.

“Authorized Denomination” means, with respect to any Energy Transition Bond, the authorized denomination therefor specified in the Series Supplement, which shall be at least $2,000 and, except as otherwise provided in the Series Supplement, integral multiples of $1,000 in excess thereof, except for one Energy Transition Bond of each Tranche which may be of a smaller denomination.

“Bankruptcy Code” means Title 11 of the United States Code (11 U.S.C. §§ 101 et seq.).

“Basic Documents” means the Indenture, the Series Supplement, the Certificate of Formation, the LLC Agreement, the Administration Agreement, the Sale Agreement, the Bill of Sale, the Servicing Agreement, the Letter of Representations, the Underwriting Agreement, any intercreditor agreement adopted in accordance with Section 10.15 of this Indenture and all other documents and certificates delivered in connection therewith.

“Bill of Sale” means a bill of sale substantially in the form of Exhibit A to the Sale Agreement delivered pursuant to Section 2.02(a) of the Sale Agreement.

“Billed Energy Transition Charges” means the amounts of Charges billed by the Servicer.

“Bills” means each of the regular monthly bills, summary bills, opening bills and closing bills issued to Customers by Public Service Company of New Mexico in its capacity as Servicer.

“Bond Interest Rate” means, with respect to any Tranche of Energy Transition Bonds, the rate at which interest accrues on the Energy Transition Bonds of such Tranche, as specified in the Series Supplement.

“Book-Entry Form” means, with respect to any Energy Transition Bond, that such Energy Transition Bond is not certificated and the ownership and transfers thereof shall be made through book entries by a Clearing Agency as described in Section 2.11 of the Indenture and the Series Supplement pursuant to which such Energy Transition Bond was issued.

“Book-Entry Energy Transition Bonds” means any Energy Transition Bonds issued in Book-Entry Form; provided, however, that, after the occurrence of a condition whereupon book-entry registration and transfer are no longer permitted and Definitive Energy Transition Bonds are to be issued to the Holder of such Energy Transition Bonds, such Energy Transition Bonds shall no longer be “Book-Entry Energy Transition Bonds”.

A-2

“Business Day” means any day other than a Saturday, a Sunday or a day on which banking institutions in Albuquerque, New Mexico or New York, New York are, or DTC or the Corporate Trust Office is, authorized or obligated by law, regulation or executive order to be closed.

“Capital Contribution” means the amount of cash contributed to the Issuer by Public Service Company of New Mexico as specified in the LLC Agreement.

“Capital Subaccount” is defined in Section 8.02(a) of the Indenture.

“Certificate of Compliance” means the certificate referred to in Section 3.03 of the Servicing Agreement and substantially in the form of Exhibit E to the Servicing Agreement.

“Certificate of Formation” means the Certificate of Formation filed with the Secretary of State of the State of Delaware on August 25, 2023 pursuant to which the Issuer was formed.

“Charge” or “Series Charge” means any energy transition charges as defined in Section 2(G) of the Energy Transition Act that are authorized by the Financing Order.

“Claim” means a “claim” as defined in Section 101(5) of the Bankruptcy Code.

“Clearing Agency” means an organization registered as a “clearing agency” pursuant to Section 17A of the Exchange Act.

“Clearing Agency Participant” means a securities broker, dealer, bank, trust company, clearing corporation or other financial institution or other Person for whom from time to time a Clearing Agency effects book entry transfers and pledges of securities deposited with such Clearing Agency.

“Code” means the Internal Revenue Code of 1986.

“Collateral” is defined in the preamble of the Indenture.

“Collection Account” is defined in Section 8.02(a) of the Indenture for such Series.

“Collection in Full of the Charges” means the day on which the aggregate amounts on deposit in the General Subaccount and the Excess Funds Subaccount are sufficient to pay in full all the Outstanding Energy Transition Bonds and to replenish any shortfall in the Capital Subaccount.

“Commission” means the New Mexico Public Regulation Commission.

A-3

“Commission Regulations” means any regulations, including temporary regulations, promulgated by the Commission pursuant to New Mexico law.

“Company Minutes” is defined in Section 1(a)(iv) of the Administration Agreement.

“Corporate Trust Office” means the office of the Indenture Trustee and the Energy Transition Bond Registrar at which, at any particular time, its corporate trust business shall be administered, which office as of the date of this Indenture is located at U.S. Bank Trust Company, National Association, 190 S. LaSalle Street, 7th Floor, Chicago, Illinois 60603, Attention: PNM Energy Transition Bond Company I, LLC, and for registration of transfers of Energy Transition Bonds, the office is located at U.S. Bank Trust Company, National Association, 111 Fillmore Avenue East, St. Paul, Minnesota 55107, Attention: Bondholder Services, or at such other address as the Indenture Trustee may designate from time to time by notice to the Holders of Energy Transition Bonds and the Issuer, or the principal corporate trust office of any successor trustee designated by like notice.

“Covenant Defeasance Option” is defined in Section 4.01(b) of the Indenture.

“Customer” means (a) any customer receiving electric delivery service from Public Service Company of New Mexico or its successors or assignees under Commission-approved rate schedules or special contracts and (b) any customer who acquires electricity from an alternative or subsequent electricity supplier in the service area currently serviced by Public Service Company of New Mexico, to the extent that such acquisition is permitted by New Mexico law.

“Daily Remittance” is defined in Section 6.11(a) of the Servicing Agreement.

“Default” means any occurrence that is, or with notice or the lapse of time or both would become, an Event of Default.

“Definitive Energy Transition Bonds” is defined in Section 2.11 of the Indenture.

“Delaware UCC” means the Uniform Commercial Code as in effect on the Series Closing Date in the State of Delaware.

“DTC” means The Depository Trust Company.

“Eligible Account” means a segregated non-interest-bearing trust account with an Eligible Institution.

“Eligible Institution” means:

(a)            the corporate trust department of the Indenture Trustee or an Affiliate thereof, so long as the Indenture Trustee or such Affiliate has (i) either a short-term deposit or issuer rating from Moody's of at least “P-1” or a long-term unsecured debt or issuer rating from Moody's of at least “A2”, and (ii) a short-term deposit or issuer rating from S&P of at least “A-1”, or a long-term unsecured debt or issuer rating from S&P of at least “A”; or

A-4

(b)            a depository institution organized under the laws of the United States of America or any State (or any domestic branch of a foreign bank) (i) that has either (A) a long-term unsecured debt or issuer rating of “AA-” or higher by S&P and “A2” or higher by Moody’s, or (B) a short-term deposit, short-term (bank deposit) or issuer rating of “A-1” or higher by S&P and “P-1” or higher by Moody’s, or (ii) whose deposits are insured by the Federal Deposit Insurance Corporation.

If so qualified under clause (b) of this definition, the Indenture Trustee may be considered an Eligible Institution for the purposes of clause (a) of this definition.

“Eligible Investments” means instruments or investment property that evidence:

(a)            direct obligations of, or obligations fully and unconditionally guaranteed as to timely payment by, the United States of America;

(b)            demand or time deposits of, unsecured certificates of deposit of, money market deposit accounts of or bankers' acceptances issued by, any depository institution (including the Indenture Trustee of any of its Affiliates, acting in its commercial capacity) incorporated or organized under the laws of the United States of America or any State thereof and subject to supervision and examination by U.S. federal or State banking authorities, so long as the commercial paper or other short-term debt obligations of such depository institution are, at the time of deposit or contractual commitment, rated at least “A-1” and “P-1” or their equivalents by each of S&P and Moody's, or such lower rating as will not result in the downgrading or withdrawal of the ratings of the Energy Transition Bonds;

(c)            commercial paper (including commercial paper of the Indenture Trustee, acting in its commercial capacity, and other commercial paper of Public Service Company of New Mexico or any of its Affiliates), which, at the time of purchase is rated at least “A-1” or “P-1” or their equivalents by each of S&P and Moody’s or such lower rating as will not result in the downgrading or withdrawal of the ratings of the Energy Transition Bonds;

(d)            investments in money market funds having a rating in the highest investment category granted thereby (including funds for which the Indenture Trustee or any of its Affiliates is investment manager or advisor) from Moody’s and S&P;

(e)            repurchase obligations with respect to any security that is a direct obligation of, or fully guaranteed by, the United States of America or its agencies or instrumentalities, entered into with Eligible Institutions;

(f)            repurchase obligations with respect to any security or whole loan entered into with an Eligible Institution or with a registered broker/dealer acting as principal and that meets the ratings criteria set forth below:

(i)            a broker/dealer (acting as principal) registered as a broker or dealer under Section 15 of the Exchange Act (any such broker/dealer being referred to in this definition as a “broker/dealer”), the unsecured short-term debt obligations of which are rated at least “P-1” by Moody's and “A-1+” by S&P at the time of entering into such repurchase obligation; or

A-5

(ii)            an unrated broker/dealer, acting as principal, that is a wholly-owned subsidiary of a non-bank or bank holding company the unsecured short-term debt obligations of which are rated at least “P-1” by Moody's and “A-1+” by S&P at the time of purchase so long as the obligations of such unrated broker/dealer are unconditionally guaranteed by such non-bank or bank holding company; or

(g)            any other investment permitted by each of the Rating Agencies;

in each case maturing not later than the Business Day preceding the next Payment Date or Special Payment Date, if applicable (for the avoidance of doubt, investments in money market funds or similar instruments that are redeemable on demand shall be deemed to satisfy the foregoing requirement). Notwithstanding the foregoing: (1) no securities or investments that mature in 30 days or more shall be “Eligible Investments” unless the issuer thereof has either a short-term unsecured debt rating of at least “P-1” from Moody’s or a long-term unsecured debt rating of at least “A1” from Moody’s; (2) no securities or investments described in clauses (b) through (d) above that have maturities of more than 30 days but less than or equal to 3 months shall be “Eligible Investments” unless the issuer thereof has a long-term unsecured debt rating of at least “A1” from Moody’s and a short-term unsecured debt rating of at least “P-1” from Moody’s; (3) no securities or investments described in clauses (b) through (d) above that have maturities of more than 3 months shall be “Eligible Investments” unless the issuer thereof has a long-term unsecured debt rating of at least “A1” from Moody’s and a short-term unsecured debt rating of at least “P-1” from Moody’s; (4) no securities or investments described in clauses (b) through (d) above which have a maturity of 60 days or less shall be “Eligible Investments” unless such securities have a rating from S&P of at least “A-1”; and (5) no securities or investments described in clauses (b) through (d) above which have a maturity of more than 60 days shall be “Eligible Investments” unless such securities have a rating from S&P of at least “AA-”, “A-1+” or “AAAm”.

“Energy Transition Act” means Section 62-18-1 through 62-18-23 of the New Mexico Statutes Annotated, as the same may be amended from time to time.

“Energy Transition Bond Register” is defined in Section 2.05 of the Indenture.

“Energy Transition Bond Registrar” is defined in Section 2.05 of the Indenture.

“Energy Transition Bonds” or “Series A Bonds” means the Series A Senior Secured Energy Transition Bonds issued under the Indenture and the Series Supplement.

“Energy Transition Charge Collections” means Charges actually received by the Servicer to be remitted to the Collection Account.

“Energy Transition Charge Payments” means the payments made by Customers based on the Charges.

“Energy Transition Costs” means the energy transition costs (as defined in Section 2(H) of the Energy Transition Act) allowed to be recovered under the Financing Order.

A-6

“Energy Transition Property Records” is defined in Section 5.01 of the Servicing Agreement.

“Energy Transition Rate Class” means one of the separate rate classes to whom Charges are allocated for ratemaking purposes in accordance with the Financing Order.

“Energy Transition Rate Schedule” means the Tariff sheets to be filed with the Commission stating the amounts of the Charges, as such Tariff sheets may be amended or modified from time to time pursuant to a True-Up Adjustment.

“Event of Default” is defined in Section 5.01 of the Indenture.

“Excess Funds Subaccount” is defined in Section 8.02(a) of the Indenture.

“Exchange Act” means the Securities Exchange Act of 1934.

“Expected Amortization Schedule” means, with respect to any Tranche, the expected amortization schedule related thereto set forth in the Series Supplement.

“Expected Sinking Fund Schedule” means, with respect to any Tranche, the expected sinking fund schedule related thereto set forth in the Series Supplement.

“Federal Book-Entry Regulations” means 31 C.F.R. Part 357 et seq. (Department of Treasury).

“Federal Funds Rate” means, for any period, a fluctuating interest rate per annum equal for each day during such period to the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers, as published for such day (or, if such day is not a Business Day, for the preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average of the quotations for such day on such transactions received by the Servicer from three federal funds brokers of recognized standing selected by it.

“Final” means, with respect to the Financing Order, that the Financing Order has become final, that the Financing Order is not being appealed and that the time for filing an appeal thereof has expired.

“Final Maturity Date” means, with respect to each Tranche of Energy Transition Bonds, the final maturity date therefor as specified in the Series Supplement.

“Financing Costs” means all financing costs as defined in Section 2(K) of the Energy Transition Act allowed to be recovered by Public Service Company of New Mexico under the Financing Order.

“Financing Order” means the financing order issued by the Commission to Public Service Company of New Mexico on April 1, 2020, Docket No. 19-00018-UT, authorizing the creation of the Property.

A-7

“Financing Party” means any and all of the following: the Holders, the Indenture Trustee, Public Service Company of New Mexico, collateral agents, any party under the Basic Documents, or any other person acting for the benefit of the Holders.

“General Subaccount” is defined in Section 8.02(a) of the Indenture.

“Global Energy Transition Bond” means an Energy Transition Bond to be issued to the Holders thereof in Book-Entry Form, which Global Energy Transition Bond shall be issued to the Clearing Agency, or its nominee, in accordance with Section 2.11 of the Indenture and the Series Supplement.

“Governmental Authority” means any nation or government, any U.S. federal, state, local or other political subdivision thereof and any court, administrative agency or other instrumentality or entity exercising executive, legislative, judicial, regulatory or administrative functions of government.

“Grant” means mortgage, pledge, bargain, sell, warrant, alienate, remise, release, convey, grant, transfer, create, grant a lien upon, a security interest in and right of set-off against, deposit, set over and confirm pursuant to the Indenture and the Series Supplement. A Grant of the Collateral shall include all rights, powers and options (but none of the obligations) of the granting party thereunder, including the immediate and continuing right to claim for, collect, receive and give receipt for payments in respect of the Collateral and all other moneys payable thereunder, to give and receive notices and other communications, to make waivers or other agreements, to exercise all rights and options, to bring Proceedings in the name of the granting party or otherwise and generally to do and receive anything that the granting party is or may be entitled to do or receive thereunder or with respect thereto.

“Holder” means the Person in whose name an Energy Transition Bond is registered on the Energy Transition Bond Register.

“Indemnified Losses” is defined in Section 5.03 of the Servicing Agreement.

“Indemnified Party” is defined in Section 6.02(a) of the Servicing Agreement.

“Indemnified Person” is defined in Section 5.01(f) of the Sale Agreement.

“Indenture” means the Indenture, dated as [·], 2023, by and among the Issuer, U.S. Bank Trust Company, National Association, as Indenture Trustee, and U.S. Bank National Association, as Securities Intermediary.

“Indenture Trustee” means U.S. Bank Trust Company, National Association, a national banking association, as indenture trustee for the benefit of the Secured Parties, or any successor indenture trustee for the benefit of the Secured Parties, under the Indenture.

“Independent” means, when used with respect to any specified Person, that such specified Person (a) is in fact independent of the Issuer, any other obligor on the Energy Transition Bonds, the Seller, the Servicer and any Affiliate of any of the foregoing Persons, (b) does not have any direct financial interest or any material indirect financial interest in the Issuer, any such other obligor, the Seller, the Servicer or any Affiliate of any of the foregoing Persons and (c) is not connected with the Issuer, any such other obligor, the Seller, the Servicer or any Affiliate of any of the foregoing Persons as an officer, employee, promoter, underwriter, trustee, partner, director (other than as an independent director or manager) or Person performing similar functions.

A-8

“Independent Certificate” means a certificate to be delivered to the Indenture Trustee under the circumstances described in, and otherwise complying with, the applicable requirements of Section 10.01 of the Indenture, made by an Independent appraiser or other expert appointed by an Issuer Order and consented to by the Indenture Trustee, and such certificate shall state that the signer has read the definition of “Independent” in the Indenture and that the signer is Independent within the meaning thereof.

“Independent Manager” is defined in Section 4.01(a) of the LLC Agreement.

“Independent Manager Fee” is defined in Section 4.01(a) of the LLC Agreement.

“Insolvency Event” means, with respect to a specified Person: (a) the filing of a decree or order for relief by a court having jurisdiction in the premises in respect of such specified Person or any substantial part of its property in an involuntary case under any applicable U.S. federal or state bankruptcy, insolvency or other similar law in effect as of the date hereof or thereafter, or appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official for such specified Person or for any substantial part of its property, or ordering the winding-up or liquidation of such specified Person’s affairs, and such decree or order shall remain unstayed and in effect for a period of 60 consecutive days; or (b) the commencement by such specified Person of a voluntary case under any applicable U.S. federal or state bankruptcy, insolvency or other similar law in effect as of the Series Closing Date or thereafter, or the consent by such specified Person to the entry of an order for relief in an involuntary case under any such law, or the consent by such specified Person to the appointment of or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official for such specified Person or for any substantial part of its property, or the making by such specified Person of any general assignment for the benefit of creditors, or the failure by such specified Person generally to pay its debts as such debts become due, or the taking of action by such specified Person in furtherance of any of the foregoing.

“Interim True-Up Adjustment” means either an Optional Interim True-Up Adjustment made in accordance with Section 4.01(b)(ii) of the Servicing Agreement or a Non-standard True-Up Adjustment made in accordance with Section 4.01(b)(iii) of the Servicing Agreement.

“Investment Company Act” means the Investment Company Act of 1940.

“Investment Earnings” means investment earnings on funds deposited in the Collection Account net of losses and investment expenses.

“Issuer” means PNM Energy Transition Bond Company I, LLC, a Delaware limited liability company, named as such in the Indenture until a successor replaces it and, thereafter, means the successor and, for purposes of any provision contained herein and required by the Trust Indenture Act, each other obligor on the Energy Transition Bonds.

A-9

“Issuer Documents” is defined in Section 1(a)(iv) of the Administration Agreement.

“Issuer Order” means a written order signed in the name of the Issuer by any one of its Responsible Officers and delivered to the Indenture Trustee or Paying Agent, as applicable.

“Issuer Request” means a written request signed in the name of the Issuer by any one of its Responsible Officers and delivered to the Indenture Trustee or Paying Agent, as applicable.

“Legal Defeasance Option” is defined in Section 4.01(b) of the Indenture.

“Letter of Representations” means any applicable agreement between the Issuer and the applicable Clearing Agency, with respect to such Clearing Agency’s rights and obligations (in its capacity as a Clearing Agency) with respect to any Book-Entry Energy Transition Bonds.

“Lien” means a security interest, lien, mortgage, charge, pledge, claim or encumbrance of any kind.

“LLC Agreement” means the Amended and Restated Limited Liability Company Issuer, dated as of [·], 2023.

“Losses” means (a) any and all amounts of principal of and interest on the Energy Transition Bonds not paid when due or when scheduled to be paid in accordance with their terms and the amounts of any deposits by or to the Issuer required to have been made in accordance with the terms of the Basic Documents or the Financing Order that are not made when so required and (b) any and all other liabilities, obligations, losses, claims, damages, payments, costs or expenses of any kind whatsoever.

“Manager” means each manager of the Issuer under the LLC Agreement.

“Member” has the meaning specified in the first paragraph of the LLC Agreement.

“Monthly Servicer’s Certificate” is defined in Section 3.01(b)(i) of the Servicing Agreement.

“Moody’s” means Moody’s Investors Service, Inc. References to Moody’s are effective so long as Moody’s is a Rating Agency.

“New Mexico Secured Transactions Registry” means the centralized database in which all initial financing statements, amendments, assignments, and other statements of charge authorized to be filed with the New Mexico Secretary of State.

A-10

“New Mexico UCC” means the Uniform Commercial Code as in effect on the Series Closing Date in the State of New Mexico.

“Non-standard True-Up Adjustment” means any adjustment to the Energy Transition Charges made pursuant to Section 4.01(b)(iii) of the Servicing Agreement.

“NRSRO” is defined in Section 10.18(b) of the Indenture.

“NY UCC” means the Uniform Commercial Code as in effect on the date hereof in the State of New York.

“Officer’s Certificate” means a certificate signed by a Responsible Officer of the Issuer under the circumstances described in, and otherwise complying with, the applicable requirements of Section 10.01 of the Indenture, and delivered to the Indenture Trustee.

“Ongoing Financing Costs” means the Financing Costs described as such in the Financing Order, including Operating Expenses and any other costs identified in the Basic Documents; provided, however, that Ongoing Financing Costs do not include the Issuer’s costs of issuance of the Energy Transition Bonds.

“Operating Expenses” means all unreimbursed fees, costs and out-of-pocket expenses of the Issuer, including all amounts owed by the Issuer to the Indenture Trustee (including indemnities, legal, audit fees and expenses) or any Manager, the Servicing Fee, the Administration Fee, legal and accounting fees, Rating Agency fees and any taxes, fees, charges or other assessments owed by Issuer relating to the Energy Transition Bonds, including on investment income in the Collection Account.

“Opinion of Counsel” means one or more written opinions of counsel, who may, except as otherwise expressly provided in the Basic Documents, be employees of or counsel to the party providing such opinion of counsel, which counsel shall be reasonably acceptable to the party receiving such opinion of counsel, and shall be in form and substance reasonably acceptable to such party.

“Optional Interim True-Up Adjustment” means any Optional Interim True-Up Adjustment made pursuant to Section 4.01(b)(ii) of the Servicing Agreement.

“Outstanding” means, as of the date of determination, all Energy Transition Bonds theretofore authenticated and delivered under the Indenture, except:

(a)            Energy Transition Bonds theretofore canceled by the Energy Transition Bond Registrar or delivered to the Energy Transition Bond Registrar for cancellation;

(b)            Energy Transition Bonds or portions thereof the payment for which money in the necessary amount has been theretofore deposited with the Indenture Trustee or any Paying Agent in trust for the Holders of such Energy Transition Bonds; and

(c)            Energy Transition Bonds in exchange for or in lieu of other Energy Transition Bonds that have been issued pursuant to the Indenture unless proof satisfactory to the Indenture Trustee is presented that any such Energy Transition Bonds are held by a Protected Purchaser;

A-11

provided, that, in determining whether the Holders of the requisite Outstanding Amount of the Energy Transition Bonds or any Series or Tranche thereof have given any request, demand, authorization, direction, notice, consent or waiver under any Basic Document, Energy Transition Bonds owned by the Issuer, any other obligor upon the Energy Transition Bonds, the Member, the Seller, the Servicer or any Affiliate of any of the foregoing Persons shall be disregarded and deemed not to be Outstanding (unless one or more such Persons owns 100% of such Energy Transition Bonds), except that, in determining whether the Indenture Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Energy Transition Bonds that a Responsible Officer of the Indenture Trustee actually knows to be so owned shall be so disregarded. Energy Transition Bonds so owned that have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Indenture Trustee the pledgee’s right so to act with respect to such Energy Transition Bonds and that the pledgee is not the Issuer, any other obligor upon the Energy Transition Bonds, the Member, the Seller, the Servicer or any Affiliate of any of the foregoing Persons.

“Outstanding Amount” means the aggregate principal amount of all Energy Transition Bonds, or, if the context requires, all Energy Transition Bonds of a or Tranche, Outstanding at the date of determination.

“Paying Agent” means, with respect to the Indenture, U.S. Bank Trust Company, National Association, and any other Person appointed as a paying agent for the Energy Transition Bonds pursuant to the Indenture.

“Payment Date” means, with respect to any Tranche of Energy Transition Bonds, the dates specified in the Series Supplement; provided, that if any such date is not a Business Day, the Payment Date shall be the Business Day succeeding such date.

“Periodic Billing Requirement” means, for any Remittance Period, the aggregate amount of Charges calculated by the Servicer as necessary to be billed during such period in order to collect the Periodic Revenue Requirement on a timely basis.

“Periodic Interest” means, with respect to any Payment Date, the periodic interest for such Payment Date as specified in the Series Supplement.

“Periodic Revenue Requirement” for any Remittance Period means the total dollar amount of Energy Transition Charge Collections reasonably calculated by the Servicer in accordance with Section 4.01 of the Servicing Agreement as necessary to be received during such Remittance Period (after giving effect to the allocation and distribution of amounts on deposit in the Excess Funds Subaccount at the time of calculation and that are projected to be available for payments on the Energy Transition Bonds at the end of such Remittance Period and including any shortfalls in Periodic Revenue Requirements for any prior Remittance Period) in order to ensure that, as of the last Payment Date occurring in such Remittance Period, (a) all accrued and unpaid principal of and interest on the Energy Transition Bonds then due shall have been paid in full on a timely basis, (b) the Outstanding Amount of the Energy Transition Bonds is equal to the Projected Unpaid Balance on each Payment Date during such Remittance Period, (c) the balance on deposit in the Capital Subaccount equals the Required Capital Level and (d) all other fees and expenses due and owing and required or allowed to be paid under Section 8.02 of the Indenture as of such date shall have been paid in full; provided, that, with respect to any Semi-Annual True-Up Adjustment or Interim True-Up Adjustment occurring after the date that is one year prior to the last Scheduled Final Payment Date for the Energy Transition Bonds, the Periodic Revenue Requirements shall be calculated to ensure that sufficient Energy Transition Charges will be collected to retire the Energy Transition Bonds in full as of the next Payment Date.

A-12

“Periodic Principal” means, with respect to any Payment Date, the excess, if any, of the Outstanding Amount of Energy Transition Bonds over the outstanding principal balance specified for such Payment Date on the Expected Amortization Schedule.

“Permitted Lien” means the Lien created by the Indenture.

“Permitted Successor” is defined in Section 5.02 of the Sale Agreement.

“Person” means any individual, corporation, limited liability company, estate, partnership, joint venture, association, joint stock company, trust (including any beneficiary thereof), unincorporated organization or Governmental Authority.

“Predecessor Energy Transition Bond” means, with respect to any particular Energy Transition Bond, every previous Energy Transition Bond evidencing all or a portion of the same debt as that evidenced by such particular Energy Transition Bond, and, for the purpose of this definition, any Energy Transition Bond authenticated and delivered under Section 2.06 of the Indenture in lieu of a mutilated, lost, destroyed or stolen Energy Transition Bond shall be deemed to evidence the same debt as the mutilated, lost, destroyed or stolen Energy Transition Bond.

“Premises” is defined in Section 1(g) of the Administration Agreement.

“Proceeding” means any suit in equity, action at law or other judicial or administrative proceeding.

“Projected Unpaid Balance” means, as of any Payment Date, the sum of the projected outstanding principal amount of each Tranche of the Energy Transition Bonds of such Series for such Payment Date set forth in the Expected Amortization Schedule.

“Property” or “Series Property” means all energy transition property as defined in Section 2(I) of the Energy Transition Act created pursuant to the Financing Order and under the Energy Transition Act, including the right to impose, charge, collect and receive the Charges in an amount necessary to provide for full payment and recovery of all energy transition costs identified in the Financing Order, the right under the Financing Order to obtain True-Up Adjustments of the Charges, and all revenues or other proceeds arising from those rights and interests.

A-13

“Protected Purchaser” has the meaning specified in Section 8-303 of the UCC.

“Public Service Company of New Mexico” means Public Service Company of New Mexico, a New Mexico corporation.

“Rating Agency” means, with respect to any Tranche of Energy Transition Bonds, any of Moody’s or S&P that provides a rating with respect to the Energy Transition Bonds. If no such organization (or successor) is any longer in existence, “Rating Agency” shall be a nationally recognized statistical rating organization or other comparable Person designated by the Issuer, notice of which designation shall be given to the Indenture Trustee and the Servicer.

“Rating Agency Condition” means, with respect to any action, at least ten Business Days’ prior written notification to each Rating Agency of such action, and written confirmation from each of S&P or Moody’s to the Servicer, the Indenture Trustee and the Issuer in writing that such action will not result in a suspension, reduction or withdrawal of the then current rating by such Rating Agency of any Tranche of Energy Transition Bonds; provided, that, if, within such ten Business Day period, any Rating Agency (other than S&P) has neither replied to such notification nor responded in a manner that indicates that such Rating Agency is reviewing and considering the notification, then (a) the Issuer shall be required to confirm that such Rating Agency has received the Rating Agency Condition request and, if it has, promptly request the related Rating Agency Condition confirmation and (b) if the Rating Agency neither replies to such notification nor responds in a manner that indicates it is reviewing and considering the notification within five Business Days following such second request, the applicable Rating Agency Condition requirement shall not be deemed to apply to such Rating Agency. For the purposes of this definition, any confirmation, request, acknowledgment or approval that is required to be in writing may be in the form of electronic mail or a press release (which may contain a general waiver of a Rating Agency’s right to review or consent).

“Record Date” means one Business Day prior to the applicable Payment Date.

“Registered Holder” means the Person in whose name an Energy Transition Bond is registered on the Energy Transition Bond Register.

“Regulation AB” means the rules of the SEC promulgated under Subpart 229.1100 — Asset Backed Securities (Regulation AB), 17 C.F.R. §§229.1100-229.1125.

“Reimbursable Expenses” is defined in Section 2 of the Administration Agreement and Section 6.06(a) of the Servicing Agreement.

“Released Parties” is defined in Section 6.02(d) of the Servicing Agreement.

“Remittance Period” means, each six-month period (i) commencing on [_____] and ending on [______]¹, and (ii) commencing on [______] and ending on [_____]²; provided that (a) the initial Remittance Period shall be from the Series Closing Date to the first Payment Date and (b) during the two-year period preceding the Final Maturity Date of the latest maturing Tranche of the Energy Transition Bonds, each three-month period (i) commencing on [____] and ending on [_____], (ii) commencing on [____] and ending on [_____], (iii) commencing on [____] and ending on [_____], and (iv) commencing on [____] and ending on [_____].

¹ Will begin on the first of the yearly semi-annual bond payment dates and end on the day before the other semi-annual bond payment date.

² Will begin on the other semi-annual bond payment date and end on the day before the first yearly semi-annual bond payment date.

A-14

“Required Capital Level” means, with respect to the Energy Transition Bonds, the amount specified as such in the Series Supplement therefor.

“Requirement of Law” means any foreign, U.S. federal, state or local laws, statutes, regulations, rules, codes or ordinances enacted, adopted, issued or promulgated by any Governmental Authority or common law.

“Responsible Officer” means, with respect to: (a) the Issuer, any Manager or any duly authorized officer; (b) the Indenture Trustee, any officer within the Corporate Trust Office of such trustee (including the President, any Vice President, any Assistant Vice President, any Trust Officer, any Secretary, any Assistant Treasurer or any other officer of the Indenture Trustee customarily performing functions similar to those performed by persons who at the time shall be such officers, respectively, and that has direct responsibility for the administration of the Indenture and also, with respect to a particular matter, any other officer to whom such matter is referred to because of such officer’s knowledge and familiarity with the particular subject); (c) any corporation (other than the Indenture Trustee), the Chief Executive Officer, the President, any Vice President, the Chief Financial Officer, the Treasurer, any Assistant Treasurer or any other duly authorized officer of such Person who has been authorized to act in the circumstances; (d) any partnership, any general partner thereof; and (e) any other Person (other than an individual), any duly authorized officer or member of such Person, as the context may require, who is authorized to act in matters relating to such Person.

“Return on Invested Capital” means, for any Payment Date with respect to any Remittance Period, the sum of (i) rate of return, payable to Public Service Company of New Mexico, on its Capital Contribution equal to the rate of interest payable on the longest maturing Tranche of the Energy Transition Bonds plus (ii) any Return on Invested Capital not paid on any prior Payment Date.

“S&P” means S&P Global Ratings, a division of S&P Global Inc. References to S&P are effective so long as S&P is a Rating Agency.

“Sale Agreement” means the Energy Transition Property Purchase and Sale Agreement, dated as of the date hereof, by and between the Issuer and Public Service Company of New Mexico, and acknowledged and accepted by the Indenture Trustee.

“Scheduled Final Payment Date” means, with respect to the Energy Transition Bonds, the date when all interest and principal is scheduled to be paid in accordance with the Expected Amortization Schedule, as specified in the Series Supplement. For the avoidance of doubt, the Scheduled Final Payment Date shall be the last Scheduled Payment Date set forth in the Expected Amortization Schedule. The “last Scheduled Final Payment Date” means the Scheduled Final Payment Date of the latest maturing Tranche of the Energy Transition Bonds.

A-15

“Scheduled Payment Date” means, with respect to each Tranche of Energy Transition Bonds, each Payment Date on which principal for such Tranche is to be paid in accordance with the Expected Amortization Schedule for such Tranche.

“SEC” means the Securities and Exchange Commission.

“Secured Obligations” means the payment of principal of and premium, if any, interest on, and any other amounts owing in respect of, the Energy Transition Bonds and all fees, expenses, counsel fees and other amounts due and payable to the Indenture Trustee.

“Secured Parties” means the Indenture Trustee, the Holders and any credit enhancer described in a Series Supplement.

“Securities Act” means the Securities Act of 1933.

“Securities Intermediary” means U.S. Bank National Association, a national banking association, solely in the capacity of a “securities intermediary” as defined in the NY UCC and Federal Book-Entry Regulations or any successor securities intermediary under the Indenture.

“Seller” is defined in the preamble to the Sale Agreement.

“Semi-Annual Servicer’s Certificate” is defined in Section 4.01(c)(ii) of the Servicing Agreement.

“Semi-Annual True-Up Adjustment” means each adjustment to the Energy Transition Charges made in accordance with Section 4.01(b)(i) of the Servicing Agreement.

“Semi-Annual True-Up Adjustment Date” means, [·] and [·] of each year, commencing on [·], 2024; provided that if any Energy Transition Bonds remain outstanding during the two-year period prior to the Final Maturity Date, [·] and [·] of each such year also shall be Semi-Annual True-Up Adjustment Dates.

“Series Closing Date” means the date on which the Energy Transition Bonds are originally issued in accordance with Section 2.10 of the Indenture and the Series Supplement.

“Series Supplement” means an indenture supplemental to the Indenture in the form attached as Exhibit B to the Indenture that authorizes the issuance of Energy Transition Bonds.

“Servicer” means Public Service Company of New Mexico, as Servicer under the Servicing Agreement.

“Servicer Business Day” means any day other than a Saturday, a Sunday or a day on which banking institutions in Albuquerque, New Mexico or New York, New York are authorized or obligated by law, regulation or executive order to be closed, on which the Servicer maintains normal office hours and conducts business.

A-16

“Servicer Default” is defined in Section 7.01 of the Servicing Agreement.

“Servicer Policies and Practices” means, with respect to the Servicer’s duties under Exhibit A to the Servicing Agreement, the policies and practices of the Servicer applicable to such duties that the Servicer follows with respect to comparable assets that it services for itself and, if applicable, others.

“Servicing Agreement” means the Energy Transition Property Servicing Agreement, dated as of the date hereof, by and between the Issuer and Public Service Company of New Mexico, and acknowledged and accepted by the Indenture Trustee.

“Servicing Fee” is defined in Section 6.06(a) of the Servicing Agreement.

“Servicing Standard” means the obligation of the Servicer to calculate, apply, remit and reconcile proceeds of the Property, including Energy Transition Charge Payments, and all other Collateral for the benefit of the Issuer and the Holders (a) with the same degree of care and diligence as the Servicer applies with respect to payments owed to it for its own account, (b) in accordance with all applicable procedures and requirements established by the Commission for collection of electric utility tariffs and (c) in accordance with the other terms of the Servicing Agreement.

“Special Payment Date” means the date on which, with respect to any Tranche of Energy Transition Bonds, any payment of principal of or interest (including any interest accruing upon default) on, or any other amount in respect of, the Energy Transition Bonds of such Tranche that is not actually paid within five days of the Payment Date applicable thereto is to be made by the Indenture Trustee to the Holders.

“Special Record Date” means, with respect to any Special Payment Date, the close of business on the fifteenth Business Day preceding such Special Payment Date.

“Sponsor” means Public Service Company of New Mexico, in its capacity as “sponsor” of the Energy Transition Bonds within the meaning of Regulation AB.

“State” means any one of the fifty states of the United States of America or the District of Columbia.

“State Pledge” means the pledge of the State of New Mexico as set forth in Section 19 of the Energy Transition Act.

“Subaccounts” is defined in Section 8.02(a) of the Indenture.

“Subsequent Financing Order” means, a financing order of the Commission under the Energy Transition Act issued to Public Service Company of New Mexico subsequent to the Financing Order.

“Successor” means any successor to Public Service Company of New Mexico under the Energy Transition Act, whether pursuant to any bankruptcy, reorganization or other insolvency proceeding or pursuant to any merger, conversion, acquisition, sale or transfer, by operation of law, as a result of electric utility restructuring, or otherwise.

A-17

“Successor Servicer” is defined in Section 3.07(e) of the Indenture.

“Tariff” means the most current version of advice notice on file with the Commission with respect to the Charges.

“Tax Returns” is defined in Section 1(a)(iii) of the Administration Agreement.

“Temporary Energy Transition Bonds” means Energy Transition Bonds executed and, upon the receipt of an Issuer Order, authenticated and delivered by the Indenture Trustee pending the preparation of Definitive Energy Transition Bonds pursuant to Section 2.04 of the Indenture.

“Termination Notice” is defined in Section 7.01 of the Servicing Agreement.

“Tranche” means any one of the groupings of Energy Transition Bonds differentiated by payment date schedule, maturity date, interest rate or sinking fund schedule, as specified in the Series Supplement.

“Tranche Maturity Date” means, with respect to any Tranche of Energy Transition Bonds, the maturity date therefor, as specified in the Series Supplement.

“True-Up Adjustment” means any Semi-Annual True-Up Adjustment, Interim True-Up Adjustment or Non-Standard True-Up Adjustment, as the case may be.

“Trust Indenture Act” means the Trust Indenture Act of 1939 as in force on the Series Closing Date, unless otherwise specifically provided.

“UCC” means the Uniform Commercial Code as in effect in the relevant jurisdiction.

“Underwriters” means the underwriters who purchase the Energy Transition Bonds from the Issuer and sell such Energy Transition Bonds in a public offering.

“Underwriting Agreement” means the Underwriting Agreement, dated [·], 2023, by and among Public Service Company of New Mexico, the representatives of the several Underwriters named therein and the Issuer.

“U.S. Government Obligations” means direct obligations (or certificates representing an ownership interest in such obligations) of the United States of America (including any agency or instrumentality thereof) for the payment of which the full faith and credit of the United States of America is pledged and that are not callable at the option of the issuer thereof.

A-18

B.            Rules of Construction. Unless the context otherwise requires, in each Basic Document to which this Appendix A is attached or incorporated:

(a)            All accounting terms not specifically defined herein shall be construed in accordance with United States generally accepted accounting principles. To the extent that the definitions of accounting terms in any Basic Document are inconsistent with the meanings of such terms under generally accepted accounting principles or regulatory accounting principles, the definitions contained in such Basic Document shall control.

(b)            The term “including” means “including without limitation”, and other forms of the verb “include” have correlative meanings.

(c)            All references to any Person shall include such Person’s permitted successors and assigns, and any reference to a Person in a particular capacity excludes such Person in other capacities.

(d)            Unless otherwise stated in any of the Basic Documents, in the computation of a period of time from a specified date to a later specified date, the word “from” means “from and including” and each of the words “to” and “until” means “to but excluding”.

(e)            The words “hereof”, “herein” and “hereunder” and words of similar import when used in any Basic Document shall refer to such Basic Document as a whole and not to any particular provision of such Basic Document. References to Articles, Sections, Appendices and Exhibits in any Basic Document are references to Articles, Sections, Appendices and Exhibits in or to such Basic Document unless otherwise specified in such Basic Document.

(f)            The various captions (including the tables of contents) in each Basic Document are provided solely for convenience of reference and shall not affect the meaning or interpretation of any Basic Document.

(g)            The definitions contained in this Appendix A apply equally to the singular and plural forms of such terms, and words of the masculine, feminine or neuter gender shall mean and include the correlative words of other genders.

(h)            Unless otherwise specified, references to an agreement or other document include references to such agreement or document as from time to time amended, restated, reformed, supplemented or otherwise modified in accordance with the terms thereof (subject to any restrictions on such amendments, restatements, reformations, supplements or modifications set forth in such agreement or document) and include any attachments thereto.

(i)            References to any law, rule, regulation or order of a Governmental Authority shall include such law, rule, regulation or order as from time to time in effect, including any amendment, modification, codification, replacement or reenactment thereof or any substitution therefor.

(j)            The word “will” shall be construed to have the same meaning and effect as the word “shall”.

(k)            The word “or” is not exclusive.

(l)            All terms defined in the relevant Basic Document to which this Appendix A is attached shall have the defined meanings when used in any certificate or other document made or delivered pursuant thereto unless otherwise defined therein.

(m)            A term has the meaning assigned to it.

A-19

EX-5.1

Exhibit 5.1

Troutman Pepper Hamilton Sanders LLP  600 Peachtree Street NE, Suite 3000 Atlanta, GA 30308-2216   troutman.com  

October 13, 2023

Public Service Company of New Mexico

PNM Energy Transition Bond Company I, LLC

414 Silver Ave. SW

Albuquerque, New Mexico 87102

Re:    Registration Statement on Form SF-1

Ladies and Gentlemen:

We have acted as counsel to Public Service Company of New Mexico, a New Mexico corporation (the “Company”), and PNM Energy Transition Bond Company I, LLC, a Delaware limited liability company (the “Issuing Entity”), in connection with the Registration Statement on Form SF-1 (Registration Statement Nos. 333-274433 and 333-274433-01) filed on September 8, 2023, as amended by Amendment No. 1 filed on October 13, 2023 (together, the “Registration Statement”), with the Securities and Exchange Commission (the “Commission”) under the Securities Act of 1933, as amended (the “Securities Act”), relating to the proposed issuance of $343,200,000 aggregate principal amount of Energy Transition Bonds, Series A (the “Bonds”) of the Issuing Entity to be offered in such manner as described in the form of prospectus (the “Prospectus”) included as part of the Registration Statement. The Bonds are to be issued under an Indenture (the “Base Indenture”), among the Issuing Entity, as issuing entity, U.S. Bank Trust Company, National Association, as indenture trustee (the “Indenture Trustee”), and U.S. Bank National Association, as securities intermediary (the “Securities Intermediary”), as supplemented by a Series Supplement (the “Series Supplement” and, together with the Base Indenture, the “Indenture”), among the Issuing Entity, the Indenture Trustee and the Securities Intermediary, the form of each of which has been filed with the Commission as an exhibit to the Registration Statement.

This opinion letter is being delivered in accordance with the requirements of Item 601(b)(5) of Regulation S-K under the Securities Act.

In rendering the opinions expressed below, we have examined and relied upon copies of the Registration Statement, and the exhibits filed therewith, and the form of Indenture. We have also examined the originals, or duplicates or certified or conformed copies, of such records, agreements, instruments and other documents and have made such other and further investigations as we have deemed relevant and necessary in connection with the opinions expressed herein. As to questions of fact material to this opinion, we have relied upon certificates of public officials and of officers and representatives of the Company and the Issuing Entity.

October 13, 2023 Page 2  

In rendering the opinions set forth below, we have assumed the genuineness of all signatures, the legal capacity of natural persons, the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as duplicates or certified or conformed copies and the authenticity of the originals of such latter documents.

Based upon the foregoing, and subject to the qualifications and limitations stated herein, we are of the opinion that:

1.            The Issuing Entity is a limited liability company validly existing and in good standing under the laws of the State of Delaware.

2.            The Issuing Entity has limited liability company power and authority to execute and deliver the Indenture, to authorize and issue the Bonds and to perform its obligations under the Indenture and the Bonds.

3.            The Bonds will be validly issued and binding obligations of the Issuing Entity when (i) the Registration Statement, as finally amended (including any post-effective amendments), shall have become effective under the Securities Act; (ii) the member or managers of the Issuing Entity have taken all necessary limited liability company action to approve the issuance and establish the terms of the Bonds, the terms of the offering of the Bonds and related matters; (iii) the Indenture shall have been qualified under the Trust Indenture Act of 1939, as amended, and duly executed and delivered by the Issuing Entity, the Indenture Trustee and the Securities Intermediary; and (iv) the Bonds shall have been duly executed and authenticated in accordance with the provisions of the Indenture and shall have been duly delivered to the purchasers thereof against payment of the agreed consideration therefor.

Our opinion is subject to bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, fraudulent transfer and other similar laws relating to or affecting creditors’ rights generally and to general equitable principles (regardless of whether considered in a proceeding in equity or at law), including concepts of commercial reasonableness, good faith and fair dealing and the possible unavailability of specific performance or injunctive relief.

We express no opinion herein as to the law of any jurisdiction other than the law of the State of New York and the Limited Liability Company Act of the State of Delaware.

This opinion is limited to the matters stated in this letter, and no opinion may be implied or inferred beyond the matters expressly stated in this letter. This opinion is given as of the date hereof, and we assume no obligation to advise you after the date hereof of facts or circumstances that come to our attention or changes in the law, including judicial or administrative interpretations thereof, that occur which could affect the opinions contained herein.

October 13, 2023 Page 3  

We hereby consent to the filing of this opinion with the Commission as an exhibit to the Registration Statement and to the statements with respect to our name under the heading “Legal Matters” in the Prospectus forming part of the Registration Statement. In giving the foregoing consent, we do not hereby admit that we come within the category of persons whose consent is required under Section 7 of the Act or the rules and regulations of the Commission thereunder. This opinion may not be relied upon, furnished or quoted by you for any other purpose, without our prior written consent.

Very truly yours,

/s/ Troutman Pepper Hamilton Sanders LLP

EX-8.1

Exhibit 8.1

Troutman Pepper Hamilton Sanders LLP 600 Peachtree Street NE, Suite 3000 Atlanta, GA 30308-2216   troutman.com

October 13, 2023

Public Service Company of New Mexico

PNM Energy Transition Bond Company I, LLC

414 Silver Ave. SW

Albuquerque, New Mexico 87102

Re: PNM Energy Transition Bond Company I, LLC Energy Transition Bonds, Series A

Ladies and Gentlemen:

We have acted as special tax counsel to Public Service Company of New Mexico (the “Company”) and PNM Energy Transition Bond Company I, LLC (the “Issuing Entity”), in connection with the Registration Statement on Form SF-1 (File Nos. 333-274433 and 333-274433-01) filed on September 8, 2023, as amended by Amendment No. 1 filed on October 13, 2023 (together, the “Registration Statement”), with the Securities and Exchange Commission pursuant to the Securities Act of 1933, as amended, including the form of the prospectus (the “Prospectus”) included as part of the Registration Statement, relating to the registration thereunder of the Issuing Entity’s Energy Transition Bonds, Series A (the “Bonds”). The Bonds will be issued pursuant to an Indenture (the “Base Indenture”) among the Issuing Entity, as issuing entity, U.S. Bank Trust Company, National Association, as indenture trustee (the “Indenture Trustee”), and U.S. Bank National Association, as securities intermediary (the “Securities Intermediary”), and a Series Supplement among the Issuing Entity, the Indenture Trustee and the Securities Intermediary (the “Series Supplement” and, together with the Base Indenture, the “Indenture”). Capitalized terms used and not defined herein have the respective meanings ascribed to them in the Prospectus. You have requested our opinion regarding certain United States federal income tax matters.

The Company is the sole member of Issuing Entity. The Bonds will represent obligations of Issuing Entity. The Bonds will be sold pursuant to an underwriting agreement among the Issuing Entity, the Company, RBC Capital Markets, LLC, Citigroup Global Markets Inc. and the other underwriters named therein (the “Underwriting Agreement”). As described in the Prospectus, in connection with the issuance of the Bonds, the Company and the Issuing Entity will also enter into (i) a Sale Agreement for the sale of the Energy Transition Property to the Issuing Entity (the “Sale Agreement”), (ii) a Servicing Agreement for the servicing of the Energy Transition Property owned by the Issuing Entity (the “Servicing Agreement”), and (iii) an Administration Agreement for the provision of administrative services to Issuing Entity (the “Administration Agreement” and, together with the Sale Agreement, the Servicing Agreement, the Indenture and the Underwriting Agreement, the “Transaction Documents”). The assets of the Issuing Entity will consist primarily of the rights and interests under the Financing Order, including the right to receive Energy Transition Charges.

Public Service Company of New Mexico PNM Energy Transition Bond Company I, LLC   Page 2

As special tax counsel to the Company, we have examined and relied upon forms of the Transaction Documents filed as exhibits to the Registration Statement and upon originals or copies, certified or otherwise identified to our satisfaction, of such additional agreements, instruments, certificates, records and other documents and have made such examination of law as we have deemed necessary or appropriate for the purpose of this opinion. In our examination, we have assumed the legal capacity of all natural persons, the genuineness of all signatures, the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as certified or photostatic copies or by facsimile or other means of electronic transmission and the authenticity of the originals of such latter documents. Our opinions are also based on the assumption that there are no agreements or understandings with respect to the transactions contemplated in the Transaction Documents other than those contained in the Transaction Documents and that all parties to the Transaction Documents will comply with the terms thereof, including all tax reporting requirements contained therein.

As to facts relevant to the opinions expressed herein and the other statements made herein, we have relied without independent investigation upon certificates and oral or written statements and representations of public officials and officers and other representatives of the Company.

Based on Revenue Procedure 2005-62, 2005-2 C.B. 507 and the assumptions and representations set forth in the Prospectus and the Transaction Documents, we are of the opinion that for United States federal income tax purposes, (1) the issuance of the Bonds will be a “qualifying securitization” within the meaning of Revenue Procedure 2005-62, (2) the Bonds will be characterized as obligations of the Company, (3) the Issuing Entity will not be subject to federal income tax as an entity separate from the Company (the Issuing Entity’s sole member), and (4) the Company will not be treated as recognizing gross income upon the issuance of the Bonds.

The opinions set forth herein are based upon the current provisions of the Internal Revenue Code of 1986, as amended, and Treasury Regulations issued or proposed thereunder, Revenue Rulings and other releases of the Internal Revenue Service (the “IRS”) and current case law, any of which can change at any time. Any such changes can apply retroactively and modify the legal conclusions on which the opinions set forth herein are based. The opinions expressed herein are limited as described above, and we do not express an opinion on any other legal or income tax aspect of the transactions contemplated by the Transaction Documents. In addition, you should be aware that our opinions will have no binding effect on the IRS or a court and should not be considered a guarantee of the ultimate outcome of any controversy. There can be no assurance that positions contrary to those stated herein may not be asserted by the IRS.

In rendering the foregoing opinions, we express no opinion on the laws of any jurisdiction other than the federal income tax laws of the United States. The opinions expressed and the statements made herein are expressed and made as of the date hereof and we assume no obligation to update this opinion or advise you of changes in legal authorities, facts (including the taking of any action by any party to the Transaction Documents pursuant to any opinion of counsel or waiver), assumptions or documents on which this opinion is based (or the effect thereof on the opinions expressed or the statements made herein) or any inaccuracy in any of the representations, warranties or assumptions upon which we have relied in rendering the opinions set forth herein unless we are specifically engaged to do so.

Public Service Company of New Mexico PNM Energy Transition Bond Company I, LLC   Page 3  

We hereby consent to the filing of this opinion letter as Exhibit 8.1 to the Registration Statement and the incorporation thereof in the Registration Statement and the use of our name under the captions “Prospectus Summary – Federal Income Tax Status”, “Material U.S. Federal Income Tax Considerations”, and “Legal Matters” in the Prospectus. In giving this consent, we do not admit that we are in the category of persons whose consent is required by Section 7 of the Securities Act of 1933, as amended, or the rules and regulations promulgated thereunder by the Commission. This opinion letter is not to be relied on, circulated, quoted, or otherwise referred to for any other purpose.

Very truly yours,

/s/ Troutman Pepper Hamilton Sanders LLP

EX-10.1

Exhibit 10.1

ENERGY TRANSITION PROPERTY SERVICING AGREEMENT

by and between

PNM ENERGY TRANSITION BOND COMPANY I, LLC,
Issuer

and

PUBLIC SERVICE COMPANY OF NEW MEXICO,
Servicer

Acknowledged and Accepted by

U.S. BANK TRUST COMPANY, NATIONAL ASSOCIATION,
as Indenture Trustee

Dated as of [____________], 2023

Table of Contents

Page

ARTICLE I DEFINITIONS AND RULES OF CONSTRUCTION		1
Section 1.01	Definitions and Rules of Construction	1
ARTICLE II APPOINTMENT AND AUTHORIZATION		1
Section 2.01	Appointment of Servicer; Acceptance of Appointment	1
Section 2.02	Authorization	2
Section 2.03	Dominion and Control Over the Series Property	2
ARTICLE III ROLE OF SERVICER		2
Section 3.01	Duties of Servicer	2
Section 3.02	Servicing and Maintenance Standards	5
Section 3.03	Annual Reports on Compliance with Regulation AB	5
Section 3.04	Annual Report by Independent Registered Public Accountants	6
ARTICLE IV SERVICES RELATED TO TRUE-UP ADJUSTMENTS		7
Section 4.01	True-Up Adjustments	7
Section 4.02	Limitation of Liability	9
ARTICLE V THE ENERGY TRANSITION PROPERTY		10
Section 5.01	Custody of Energy Transition Property Records	10
Section 5.02	Duties of Servicer as Custodian	10
Section 5.03	Custodian’s Indemnification	11
Section 5.04	Effective Period and Termination	12
ARTICLE VI THE SERVICER		12
Section 6.01	Representations and Warranties of Servicer	12
Section 6.02	Indemnities of Servicer; Release of Claims	14
Section 6.03	Binding Effect of Servicing Obligations	16
Section 6.04	Limitation on Liability of Servicer and Others	17
Section 6.05	Public Service Company of New Mexico Not to Resign as Servicer	17
Section 6.06	Servicing Compensation	18
Section 6.07	Compliance with Applicable Law	19
Section 6.08	Access to Certain Records and Information Regarding Series Property	19
Section 6.09	Appointments	19
Section 6.10	No Servicer Advances	20
Section 6.11	Remittances	20
Section 6.12	Maintenance of Operations	20
ARTICLE VII DEFAULT		20
Section 7.01	Servicer Default	20
Section 7.02	Appointment of Successor	22

i

Table of Contents

(continued)

Page

Section 7.03	Waiver of Past Defaults	23
Section 7.04	Notice of Servicer Default	23
Section 7.05	Cooperation with Successor	23
ARTICLE VIII MISCELLANEOUS PROVISIONS		23
Section 8.01	Amendment	23
Section 8.02	Maintenance of Accounts and Records	23
Section 8.03	Notices	24
Section 8.04	Assignment	24
Section 8.05	Limitations on Rights of Others	25
Section 8.06	Severability	25
Section 8.07	Separate Counterparts	25
Section 8.08	Governing Law	25
Section 8.09	Assignment to Indenture Trustee	25
Section 8.10	Nonpetition Covenants	25
Section 8.11	Limitation of Liability	26
Section 8.12	Rule 17g-5 Compliance	26
Section 8.13	Indenture Trustee Actions	26

EXHIBITS

Exhibit A	Servicing Procedures
Exhibit B	Form of Monthly Servicer’s Certificate
Exhibit C	Form of Semi-Annual Servicer’s Certificate
Exhibit D	Form of Servicer Certificate
Exhibit E	Form of Certificate of Compliance
Exhibit F	Expected Amortization Schedule

ii

This ENERGY TRANSITION PROPERTY SERVICING AGREEMENT, dated as of [____________], 2023, is by and between PNM ENERGY TRANSITION BOND COMPANY I, LLC, a Delaware limited liability company, as Issuer, and PUBLIC SERVICE COMPANY OF NEW MEXICO, a New Mexico corporation, as Servicer, and acknowledged and accepted by U.S. BANK TRUST COMPANY, NATIONAL ASSOCIATION, a national banking association, in its capacity as Indenture Trustee.

RECITALS

WHEREAS, pursuant to the Energy Transition Act and the Financing Order, Public Service Company of New Mexico, in its capacity as seller, and the Issuer are concurrently entering into the Sale Agreement pursuant to which the Seller is selling and the Issuer is purchasing certain Property created pursuant to the Energy Transition Act and the Financing Order described therein;

WHEREAS, in connection with its ownership of the Property relating to the Series A Bonds and in order to collect the associated Series Charges, the Issuer desires to engage the Servicer to carry out the functions described herein and the Servicer desires to be so engaged;

WHEREAS, the Issuer desires to engage the Servicer to act on its behalf in obtaining True-Up Adjustments from the Commission and the Servicer desires to be so engaged; and

WHEREAS, the Energy Transition Charge Collections may be commingled with other funds collected by the Servicer;

NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, the parties hereto agree as follows:

ARTICLE I
DEFINITIONS AND RULES OF CONSTRUCTION

Section 1.01          Definitions and Rules of Construction.  Capitalized terms used but not otherwise defined in this Servicing Agreement shall have the respective meanings given to such terms in Appendix A of the Indenture dated as of the date hereof (as amended, modified or supplemented from time to time in accordance with the provisions thereof, the “Indenture”), among the Issuer, the Indenture Trustee and U.S. Bank, National Association, in its capacity as securities intermediary. Not all terms defined in Appendix A of the Indenture are used in this Servicing Agreement. The rules of construction set forth in Appendix A of the Indenture shall apply to this Servicing Agreement.

ARTICLE II
APPOINTMENT AND AUTHORIZATION

Section 2.01           Appointment of Servicer; Acceptance of Appointment. The Issuer hereby appoints the Servicer, and the Servicer, as an independent contractor, hereby accepts such appointment, to perform the Servicer’s obligations pursuant to this Servicing Agreement on behalf of and for the benefit of the Issuer or any assignee thereof in accordance with the terms of this Servicing Agreement and applicable law as it applies to the Servicer in its capacity as servicer hereunder. This appointment and the Servicer’s acceptance thereof may not be revoked except in accordance with the express terms of this Servicing Agreement.

1

Section 2.02          Authorization.  With respect to all or any portion of the Series Property, the Servicer shall be, and hereby is, authorized and empowered by the Issuer to (a) execute and deliver, on behalf of itself and/or the Issuer, as the case may be, any and all instruments, documents or notices, and (b) on behalf of itself and/or the Issuer, as the case may be, make any filing and participate in proceedings of any kind with any Governmental Authority, including with the Commission.  The Issuer shall execute and deliver to the Servicer such documents as have been prepared by the Servicer for execution by the Issuer and shall furnish the Servicer with such other documents as may be in the Issuer’s possession, in each case as the Servicer may determine to be necessary or appropriate to enable it to carry out its servicing and administrative duties hereunder.  Upon the Servicer’s written request, the Issuer shall furnish the Servicer with any powers of attorney or other documents necessary or appropriate to enable the Servicer to carry out its duties hereunder.

Section 2.03          Dominion and Control Over the Series Property.  Notwithstanding any other provision herein, the Issuer shall have dominion and control over the Series Property, and the Servicer, in accordance with the terms hereof, is acting solely as the servicing agent and custodian for the Issuer with respect to the Series Property and the Energy Transition Property Records for the Series A Bonds.  The Servicer shall not take any action that is not authorized by this Servicing Agreement, that would contravene the Energy Transition Act, Commission Regulations or the Financing Order, that is not consistent with its customary procedures and practices or that shall impair the rights of the Issuer or the Indenture Trustee (on behalf of the Holders) in the Series Property, in each case unless such action is required by applicable law or court or regulatory order.

ARTICLE III
ROLE OF SERVICER

Section 3.01           Duties of Servicer.  The Servicer, as agent for the Issuer, shall have the following duties:

(a)            Duties of Servicer Generally.

(i)            The Servicer’s duties in general shall include: management, servicing and administration of the Series Property; calculating number of customers, usage and demand, billing the Series Charges, collecting the Series Charges from Customers and posting all collections, responding to inquiries by Customers, the Commission or any other Governmental Authority with respect to the Series Property or Series Charges; investigating and handling delinquencies (and furnishing reports with respect to such delinquencies to the Issuer), processing and depositing collections and making periodic remittances; furnishing periodic and current reports to the Issuer, the Indenture Trustee and the Rating Agencies; making all filings with the Commission and taking such other action as may be necessary to perfect the Issuer’s ownership interests in and the Indenture Trustee’s first priority Lien on the Series Property; making all filings and taking such other action as may be necessary to perfect and maintain the perfection and priority of the Indenture Trustee’s Lien on all the Collateral; selling as the agent for the Issuer, as its interests may appear, defaulted or written off accounts in accordance with the Servicer’s usual and customary practices; taking all necessary action in connection with True-Up Adjustments as set forth herein; and performing such other duties as may be specified under the Financing Order to be performed by it.  Anything to the contrary notwithstanding, the duties of the Servicer set forth in this Servicing Agreement shall be qualified in their entirety by any Commission Regulations, the Financing Order and the U.S. federal securities laws and the rules and regulations promulgated thereunder, including Regulation AB, as in effect at the time such duties are to be performed.  Without limiting the generality of this Section 3.01(a)(i), in furtherance of the foregoing, the Servicer hereby agrees that it shall also have, and shall comply with, the duties and responsibilities relating to data acquisition, usage, demand, customer count and bill calculation, billing, customer service functions, collections, posting, payment processing and remittance set forth in Exhibit A. 

2

(ii)             Commission Regulations Control. Notwithstanding anything to the contrary in this Servicing Agreement, the duties of the Servicer set forth in this Servicing Agreement shall be qualified and limited in their entirety by the Energy Transition Act, the Financing Order and any Commission Regulations as in effect at the time such duties are to be performed.

(b)           Reporting Functions.

(i)             Monthly Servicer’s Certificate.  On or before the last Servicer Business Day of each month, the Servicer shall prepare and deliver to the Issuer, the Indenture Trustee and the Rating Agencies a written report substantially in the form of Exhibit B (a “Monthly Servicer’s Certificate”) setting forth certain information relating to Energy Transition Charge Payments in connection with the Series Charges received by the Servicer during the preceding monthly billing period; provided, however, that, for any month in which the Servicer is required to deliver a Semi-Annual Servicer’s Certificate pursuant to Section 4.01(c)(ii), the Servicer shall prepare and deliver the Monthly Servicer’s Certificate no later than the date of delivery of such Semi-Annual Servicer’s Certificate.

(ii)            Notification of Laws and Regulations.  The Servicer shall immediately notify the Issuer, the Indenture Trustee, and the Rating Agencies in writing of any Requirement of Law or Commission Regulations hereafter promulgated that have a material adverse effect on the Servicer’s ability to perform its duties under this Servicing Agreement.

(iii)           Other Information.  Upon the reasonable request of the Issuer, the Indenture Trustee or any Rating Agency, the Servicer shall provide to the Issuer, the Indenture Trustee or such Rating Agency, as the case may be, any public financial information in respect of the Servicer, or any material information regarding the Series Property to the extent it is reasonably available to the Servicer, as may be reasonably necessary and permitted by law to enable the Issuer or the Rating Agencies to monitor the performance by the Servicer hereunder; provided, however, that any such request by the Indenture Trustee shall not create any obligation for the Indenture Trustee to monitor the performance of the Servicer.  In addition, so long as any of the Series A Bonds are outstanding, the Servicer shall provide the Issuer and the Indenture Trustee, within a reasonable time after written request therefor, any information available to the Servicer or reasonably obtainable by it that is necessary to calculate the Series Charges applicable to each Energy Transition Rate Class.

3

(iv)          Preparation of Reports.  The Servicer shall prepare and deliver such additional reports as required under this Servicing Agreement, including a copy of each Semi-Annual Servicer’s Certificate described in Section 4.01(c)(ii), the annual statements of compliance, attestation reports and other certificates described in Section 3.03 and the Annual Accountant’s Report described in Section 3.04.  In addition, the Servicer shall prepare, procure, deliver and/or file, or cause to be prepared, procured, delivered or filed, any reports, attestations, exhibits, certificates or other documents required to be delivered or filed with the SEC (and/or any other Governmental Authority) by the Issuer or the Sponsor under the U.S. federal securities or other applicable laws or in accordance with the Basic Documents, including filing with the SEC, if applicable and required by applicable law, a copy or copies of (A) the Monthly Servicer’s Certificates described in Section 3.01(b)(i) (under Form 10-D or any other applicable form), (B) the Semi-Annual Servicer’s Certificates described in Section 4.01(c)(ii) (under Form 10-D or any other applicable form), (C) the annual statements of compliance, attestation reports and other certificates described in Section 3.03 and (D) the Annual Accountant’s Report (and any attestation required under Regulation AB) described in Section 3.04.  In addition, the appropriate officer or officers of the Servicer shall (in its separate capacity as Servicer) sign the Sponsor’s annual report on Form 10-K (and any other applicable SEC or other reports, attestations, certifications and other documents), to the extent that the Servicer’s signature is required by, and consistent with, the U.S. federal securities laws and/or any other applicable law.

(c)            Opinions of Counsel.  The Servicer shall obtain on behalf of the Issuer and deliver to the Issuer and the Indenture Trustee:

(i)            promptly after the execution and delivery of this Servicing Agreement and of each amendment hereto, an Opinion of Counsel from external counsel of the Issuer either (A) to the effect that, in the opinion of such counsel, all filings, including filings with the New Mexico Secured Transactions Registry and the Secretary of State of the State of Delaware, that are necessary under the UCC and the Energy Transition Act to fully preserve, protect and perfect the Liens of the Indenture Trustee in the Series Property have been authorized, executed and filed, and reciting the details of such filings or referring to prior Opinions of Counsel in which such details are given, or (B) to the effect that, in the opinion of such counsel, no such action shall be necessary to preserve, protect and perfect such Liens; and

(ii)           within 90 days after the beginning of each calendar year beginning with the first calendar year beginning more than three months after the date hereof, an Opinion of Counsel, which counsel may be an employee of or counsel to the Issuer or the Servicer, dated as of a date during such 90-day period, either (A) to the effect that, in the opinion of such counsel, all filings, including filings with the New Mexico Secured Transactions Registry and the Secretary of State of the State of Delaware, have been authorized, executed and filed that are necessary under the UCC and the Energy Transition Act to fully preserve, protect and perfect the Liens of the Indenture Trustee in the Series Property, and reciting the details of such filings or referring to prior Opinions of Counsel in which such details are given, or (B) to the effect that, in the opinion of such counsel, no such action shall be necessary to preserve, protect and perfect such Liens.

4

Each Opinion of Counsel referred to in Section 3.01(c)(i) or Section 3.01(c)(ii) above shall specify any action necessary (as of the date of such opinion) to be taken in the following year to preserve, protect and perfect such interest or Lien.

Section 3.02          Servicing and Maintenance Standards.  The Servicer will monitor payments and impose collection policies on Customers, as permitted under the Financing Order and the rules of the Commission. On behalf of the Issuer, the Servicer shall: (a) manage, service, administer, bill, collect, receive and post collections in respect of the Series Property with reasonable care and in material compliance with each applicable Requirement of Law, including all applicable Commission Regulations and guidelines, using the same degree of care and diligence that the Servicer exercises with respect to similar assets for its own account and, if applicable, for others; (b) follow standards, policies and procedures in performing its duties as Servicer that are customary in the electric distribution industry; (c) use all reasonable efforts, consistent with its customary servicing procedures, to enforce, and maintain rights in respect of, the Series Property and to bill, collect, receive and post the Series Charges; (d) comply with each Requirement of Law, including all applicable Commission Regulations and guidelines, applicable to and binding on it relating to the Series Property; (e) file all reports with the Commission required by the Financing Order; (f) file and maintain the effectiveness of UCC financing statements filed with the New Mexico Secured Transaction Registry with respect to the property transferred under the Sale Agreement; and (g) take such other action on behalf of the Issuer to ensure that the Lien of the Indenture Trustee on the Collateral remains perfected and of first priority.  The Servicer shall follow such customary and usual practices and procedures as it shall deem necessary or advisable in its servicing of all or any portion of the Series Property, which, in the Servicer’s judgment, may include the taking of legal action, at the Issuer’s expense but subject to the priority of payments set forth in Section 8.02(e) of the Indenture.

Section 3.03           Annual Reports on Compliance with Regulation AB.

(a)            The Servicer shall deliver to the Issuer, the Indenture Trustee and the Rating Agencies, on or before the earlier of (a) March 31 of each year, beginning March 31, 2024, or (b) with respect to each calendar year during which the Sponsor’s annual report on Form 10-K is required to be filed in accordance with the Exchange Act and the rules and regulations thereunder, the date on which such annual report on Form 10-K is required to be filed in accordance with the Exchange Act and the rules and regulations thereunder, certificates from a Responsible Officer of the Servicer (i) containing, and certifying as to, the statements of compliance required by Item 1123 of Regulation AB, as then in effect, and (ii) containing, and certifying as to, the statements and assessment of compliance required by Item 1122(a) of Regulation AB, as then in effect.  These certificates may be in the form of, or shall include the forms attached as Exhibit D and Exhibit E, with, in the case of Exhibit D, such changes as may be required to conform to the applicable securities law.

5

(b)           The Servicer shall use commercially reasonable efforts to obtain, from each other party participating in the servicing function, any additional certifications as to the statements and assessment required under Item 1122 or Item 1123 of Regulation AB to the extent required in connection with the filing of the annual report on Form 10-K; provided, however, that a failure to obtain such certifications shall not be a breach of the Servicer’s duties hereunder.  The parties acknowledge that the Indenture Trustee’s certifications shall be limited to the Item 1122 certifications described in Exhibit C of the Indenture.

(c)            The initial Servicer, in its capacity as Sponsor, shall post on its or its parent company’s website and cause the Issuer to file with or furnish to the SEC, in periodic reports and other reports as are required from time to time under Section 13 or Section 15(d) of the Exchange Act, the information described in Section 3.07(g) of the Indenture to the extent such information is reasonably available to the Sponsor.

(d)            Except to the extent permitted by applicable law, the initial Servicer, in its capacity as Sponsor, shall not voluntarily suspend or terminate its filing obligations as Sponsor with the SEC as described in Section 3.03(c).

Section 3.04           Annual Report by Independent Registered Public Accountants.

(a)            The Servicer shall cause a firm of Independent registered public accountants (which may provide other services to the Servicer or the Seller) to prepare annually, and the Servicer shall deliver annually to the Issuer, the Indenture Trustee and the Rating Agencies on or before the earlier of (i) March 31 of each year, beginning March 31, 2024, or (ii) with respect to each calendar year during which the Issuer’s annual report on Form 10-K is required to be filed in accordance with the Exchange Act and the rules and regulations thereunder, the date on which such annual report on Form 10-K is required to be filed in accordance with the Exchange Act and the rules and regulations thereunder, a report (the “Annual Accountant’s Report”) that attests to, and reports on, the assessment of compliance made by the Servicer and delivered pursuant to Section 3.03.  Such attestation shall be in accordance with Rules 1-02(a)(3) and 2-02(g) of Regulation S-X under the Securities Act and the Exchange Act. In the event that the accounting firm providing such report requires the Indenture Trustee to cooperate with the procedures performed by such firm, the Issuer shall direct the Indenture Trustee in writing to do so; it being understood and agreed the Indenture Trustee will cooperate in conclusive reliance upon the direction of the Issuer, and the Indenture Trustee will not make any independent inquiry or investigation as to, and shall have no obligation or liability in respect of the sufficiency, validity or correctness of such procedures.

(b)            The Annual Accountant’s Report delivered pursuant to Section 3.04(a) shall also indicate that the accounting firm providing such report is independent of the Servicer in accordance with the rules of the Public Company Accounting Oversight Board and shall include any attestation report required under Item 1122(b) of Regulation AB, as then in effect. The costs of the Annual Accountant’s Report shall be reimbursable as an Operating Expense under the Indenture.

6

ARTICLE IV
SERVICES RELATED TO TRUE-UP ADJUSTMENTS

Section 4.01          True-Up Adjustments.  From time to time, until the Collection in Full of the Charges for the Series A Bonds, the Servicer shall identify the need for Semi-Annual True-Up Adjustments, Optional Interim True-Up Adjustments and Non-standard True-Up Adjustments and shall take all reasonable action to obtain and implement such True-Up Adjustments, all in accordance with the following:

(a)            Expected Amortization Schedule; Expected Sinking Fund Schedule.  The Expected Amortization Schedule and the Expected Sinking Fund Schedule for the Series A Bonds are attached hereto as Exhibit F.  If the Expected Amortization Schedule and the Expected Sinking Fund Schedule are revised, the Servicer shall send a copy of such revised Expected Amortization Schedule and Expected Sinking Fund Schedule to the Issuer, the Indenture Trustee and the Rating Agencies promptly thereafter.

(b)            True-Up Adjustments.

(i)            Semi-Annual True-Up Adjustments and Filings.  No later than 30 days before each Semi-Annual True-Up Adjustment Date, the Servicer shall: (A) update the data and assumptions underlying the calculation of the Series Charges, including projected customer count, electricity usage and demand during the next Remittance Period for each Energy Transition Rate Class, as applicable, and including Periodic Principal, interest and estimated expenses and fees of the Issuer to be paid during such period, the timing of collections (which may be estimated using a weighted average balance of days outstanding) and write-offs; (B) determine the Periodic Revenue Requirement and Periodic Billing Requirement for the next Remittance Period based on such updated data and assumptions; (C) determine the Series Charges to be allocated to each Energy Transition Rate Class during the next Remittance Period based on such Periodic Billing Requirement and the terms of the Financing Order, the Tariff and any other tariffs filed pursuant thereto; (D) make all required public notices and other filings with the Commission to reflect the revised Series Charges, including any Amendatory Schedule; and (E) take all reasonable actions and make all reasonable efforts to effect such Semi-Annual True-Up Adjustment and to enforce the provisions of the Energy Transition Act and the Financing Order.  The Servicer shall implement the revised Series Charges, if any, resulting from such Semi-Annual True-Up Adjustment as of the Semi-Annual True-Up Adjustment Date.

(ii)           Optional Interim True-Up Adjustments and Filings. In addition to the Semi-Annual True-Up Adjustments described in Section 4.01(b)(i), the Servicer may initiate an Optional Interim True-Up Adjustment (in the same manner as provided for the Semi-Annual True-Up Adjustments) at any time if the Servicer forecasts that Energy Transition Charge Collections during the current or succeeding Remittance Period will be insufficient (A) to make all scheduled payments of Periodic Principal and interest due in respect of any Energy Transition Bonds on a timely basis during such Remittance Period, (B) to pay Operating Expenses on a timely basis and (C) to replenish any draws on the Capital Subaccount.

7

(iii)           Non-standard True-Up Adjustments and Filings.  In the event that the Servicer determines that a Non-standard True-Up Adjustment is required at any time to be effective in connection with a base rate change that includes any change in the cost allocation among customers used in determining the Series Charges, the Servicer shall promptly (A) recalculate the Series Charges to reallocate the Series Charges among customers in accordance with the procedures for Non-standard True-Up Adjustments set forth in the Financing Order; (B) make all required public notices and other filings with the Commission to reflect the revised Series Charges, including any Amendatory Schedule; and (C) take all reasonable actions and make all reasonable efforts to effect such Non-standard True-Up Adjustment and to enforce the provisions of the Energy Transition Act and the Financing Order.  The Servicer shall implement the revised Series Charges, if any, resulting from such Non-standard True-Up Adjustment on the date the Non-standard True-Up Adjustment becomes effective.  For the avoidance of doubt, no Semi-Annual True-Up Adjustment or Optional Interim True-Up Adjustment shall be considered a Non-standard True-Up Adjustment solely because Series Charges are allocated under such Semi-Annual True-Up Adjustment or Optional Interim True-Up Adjustment in the same manner as in a preceding Non-standard True-Up Adjustment.

(c)            Reports.

(i)             Notification of Amendatory Schedule Filings and True-Up Adjustments.  Whenever the Servicer files an Amendatory Schedule with the Commission or implements revised Series Charges with notice to the Commission without filing an Amendatory Schedule if permitted by the Financing Order, the Servicer shall send a copy of such filing or notice (together with a copy of all notices and documents that, in the Servicer’s reasonable judgment, are material to the adjustments effected by such Amendatory Schedule or notice) to the Issuer, the Indenture Trustee and the Rating Agencies concurrently therewith.  If, for any reason any revised Series Charges are not implemented and effective on the applicable date set forth herein, the Servicer shall notify the Issuer, the Indenture Trustee and each Rating Agency by the end of the second Servicer Business Day after such applicable date.

(ii)            Semi-Annual Servicer’s Certificate.  Not later than five Servicer Business Days prior to each Payment Date or Special Payment Date, the Servicer shall deliver a written report substantially in the form of Exhibit C (the “Semi-Annual Servicer’s Certificate”) to the Issuer, the Indenture Trustee and the Rating Agencies, which shall include all of the following information (to the extent applicable and including any other information so specified in the Series Supplement) as to the Series A Bonds with respect to such Payment Date or Special Payment Date or the period since the previous Payment Date, as applicable:

(A)          the amount of the payment to Holders allocable to principal, if any;

(B)           the amount of the payment to Holders allocable to interest;

8

(C)          the aggregate Outstanding Amount of the Series A Bonds, before and after giving effect to any payments allocated to principal reported under Section 4.01(c)(ii)(A);

(D)           the difference, if any, between the amount specified in Section 4.01(c)(ii)(C) and the Outstanding Amount specified in the Expected Amortization Schedule;

(E)           any other transfers and payments to be made on such Payment Date or Special Payment Date, including amounts paid to the Indenture Trustee and to the Servicer; and

(F)           the amounts on deposit in the Capital Subaccount and the Excess Funds Subaccount, after giving effect to the foregoing payments.

(iii)           Reports to Customers.

(A)          After each revised Series Charge has gone into effect pursuant to a True-Up Adjustment, the Servicer shall, to the extent and in the manner and time frame required by any applicable Commission Regulations, cause to be prepared and delivered to Customers any required notices announcing such revised Series Charges.

(B)           The Servicer shall comply with the requirements of the Financing Order with respect to the filing of the Energy Transition Rate Schedule to ensure that the Series Charges are separate and apart from the Servicer’s other charges and appear as a separate line item on the Bills sent to Customers.

Section 4.02          Limitation of Liability.

(a)            The Issuer and the Servicer expressly agree and acknowledge that:

(i)             In connection with any True-Up Adjustment, the Servicer is acting solely in its capacity as the servicing agent hereunder.

(ii)            None of the Servicer, the Issuer or the Indenture Trustee is responsible in any manner for, and shall have no liability whatsoever as a result of, any action, decision, ruling or other determination made or not made, or any delay (other than any delay resulting from the Servicer’s failure to make any filings required by Section 4.01 in a timely and correct manner or any breach by the Servicer of its duties under this Servicing Agreement that adversely affects the Series Property or the True-Up Adjustments), by the Commission in any way related to the Series Property or in connection with any True-Up Adjustment, the subject of any filings under Section 4.01, any proposed True-Up Adjustment or the approval of any revised Series Charges and the scheduled adjustments thereto.

(iii)           Except to the extent that the Servicer is liable under Section 6.02, the Servicer shall have no liability whatsoever relating to the calculation of any revised Series Charges and the scheduled adjustments thereto, including as a result of any inaccuracy of any of the assumptions made in such calculation regarding expected customer count, energy usage volume and demand and the timing of collections, write-offs and estimated expenses and fees of the Issuer, so long as the Servicer has acted in good faith and has not acted in a grossly negligent manner in connection therewith, nor shall the Servicer have any liability whatsoever as a result of any Person, including the Holders, not receiving any payment, amount or return anticipated or expected or in respect of any Series A Bond.

9

(b)           Notwithstanding the foregoing, this Section 4.02 shall not relieve the Servicer of liability for any misrepresentation by the Servicer under Section 6.01 or for any breach by the Servicer of its other obligations under this Servicing Agreement.

ARTICLE V
THE ENERGY TRANSITION PROPERTY

Section 5.01          Custody of Energy Transition Property Records.  To assure uniform quality in servicing the Series Property and to reduce administrative costs, the Issuer hereby revocably appoints the Servicer, and the Servicer hereby accepts such appointment, to act as the agent of the Issuer as custodian of any and all documents and records that the Servicer shall keep on file, in accordance with its customary procedures, relating to the Series Property, including copies of the Financing Order and Amendatory Schedules relating thereto and all documents filed with the Commission in connection with any True-Up Adjustment and computational records relating thereto (collectively for the Series A Bonds, the “Energy Transition Property Records”), which are hereby constructively delivered to the Indenture Trustee, as pledgee of the Issuer with respect to all Series Property.

Section 5.02          Duties of Servicer as Custodian.

(a)            Safekeeping.  The Servicer shall hold the Energy Transition Property Records on behalf of the Issuer and the Indenture Trustee and maintain such accurate and complete accounts, records and computer systems pertaining to the Energy Transition Property Records as shall enable the Issuer and the Indenture Trustee, as applicable, to comply with this Servicing Agreement, the Sale Agreement and the Indenture.  In performing its duties as custodian, the Servicer shall act with reasonable care, using that degree of care and diligence that the Servicer exercises with respect to comparable assets that the Servicer services for itself or, if applicable, for others.  The Servicer shall promptly report to the Issuer, the Indenture Trustee and the Rating Agencies any failure on its part to hold the Energy Transition Property Records and maintain its accounts, records and computer systems as herein provided and promptly take appropriate action to remedy any such failure.  Nothing herein shall be deemed to require an initial review or any periodic review by the Issuer or the  Indenture Trustee of the Energy Transition Property Records.  The Servicer’s duties to hold the Energy Transition Property Records set forth in this Section 5.02, to the extent the Energy Transition Property Records have not been previously transferred to a successor Servicer pursuant to ARTICLE VII, shall terminate one year and one day after the earlier of (i) the date on which the Servicer is succeeded by a successor Servicer in accordance with ARTICLE VII and (ii) the first date on which no Series A Bonds are Outstanding.

(b)          Maintenance of and Access to Records.  The Servicer shall maintain the Energy Transition Property Records at 414 Silver Ave. SW, Albuquerque, New Mexico 87102, or at such other office as shall be specified to the Issuer and the Indenture Trustee by written notice at least 30 days prior to any change in location.  The Servicer shall make available for inspection, audit and copying to the Issuer and the Indenture Trustee or their respective duly authorized representatives, attorneys or auditors the Energy Transition Property Records at such times during normal business hours as the Issuer or the Indenture Trustee shall reasonably request and that do not unreasonably interfere with the Servicer’s normal operations.  Nothing in this Section 5.02(b) shall affect the obligation of the Servicer to observe any applicable law (including any Commission Regulation) prohibiting disclosure of information regarding Customers, and the failure of the Servicer to provide access to such information as a result of such obligation shall not constitute a breach of this Section 5.02(b).

10

(c)            Release of Documents.  Upon instruction from the Indenture Trustee in accordance with the Indenture, the Servicer shall release any Energy Transition Property Records to the Indenture Trustee, the Indenture Trustee’s agent or the Indenture Trustee’s designee, as the case may be, at such place or places as the Indenture Trustee may designate, as soon as practicable.  Nothing in this Section 5.02(c) shall affect the obligation of the Servicer to observe any applicable law (including any Commission Regulation) prohibiting disclosure of information regarding Customers, and the failure of the Servicer to provide access to such information as a result of such obligation shall not constitute a breach of this Section 5.02(c).

(d)           Defending Series Property Against Claims.  To the extent not undertaken by the Seller pursuant to Section 4.08 of the Sale Agreement, the Servicer shall, on behalf of the Issuer and the Holders, institute any action or proceeding necessary to compel performance by the Commission or the State of New Mexico of any of their obligations or duties under the Energy Transition Act and the Financing Order, including defending against or instituting and pursuing legal actions and appearing or testifying at hearings or similar proceedings, as may be reasonably necessary to attempt to block or overturn any attempts to cause a repeal of, modification of or supplement to the Energy Transition Act or the Financing Order, or the rights of holders of Series Property by legislative enactment, constitutional amendment or other means that would be adverse to Holders or any series of Energy Transition Bonds. In any proceedings related to the exercise of the power of eminent domain by any municipality to acquire a portion of Public Service Company of New Mexico’s distribution facilities, the Servicer will assert that the court ordering such condemnation must treat such municipality as a successor to Public Service Company of New Mexico under the Energy Transition Act and the Financing Order. The costs of any such action shall be payable as an Operating Expense in accordance with the priorities set forth in Section 8.02(d) of the Indenture and any additional indenture. The Servicer’s obligations pursuant to this Section 5.02 shall survive and continue notwithstanding the fact that the payment of Operating Expenses pursuant to Section 8.02 of the Indenture and any supplemental indenture may be delayed; provided, that, the Servicer is obligated to institute and maintain such action or proceedings only if it is being reimbursed on a current basis for its costs and expenses in taking such actions in accordance with Section 8.02 of the Indenture and any additional indenture, and is not required to advance its own funds to satisfy these obligations.

Section 5.03          Custodian’s Indemnification.  The Servicer as custodian shall indemnify the Issuer, any Independent Manager and the Indenture Trustee (for itself and for the benefit of the Holders) and each of their respective officers, directors, employees and agents for, and defend and hold harmless each such Person from and against, any and all liabilities, obligations, losses, damages, payments and claims, and reasonable costs or expenses, of any kind whatsoever (including the fees, expenses and costs incurred in connection with any action, claim or suit brought to enforce the indemnification obligations of the Servicer hereunder)(collectively, “Indemnified Losses”) that may be imposed on, incurred by or asserted against each such Person as the result of any grossly negligent act or omission in any way relating to the maintenance and custody by the Servicer, as custodian, of the Energy Transition Property Records; provided, however, that the Servicer shall not be liable for any portion of any such amount resulting from the willful misconduct, bad faith or gross negligence of the Issuer, any Independent Manager or the Indenture Trustee, as the case may be. Indemnification under this Section 5.03 shall survive resignation or removal of the Indenture Trustee or any Independent Manager and shall include reasonable out-of-pocket fees and expenses of investigation and litigation (including reasonable attorneys’ fees and expenses).

11

Section 5.04           Effective Period and Termination.  The Servicer’s appointment as custodian shall become effective as of the Series Closing Date and shall continue in full force and effect until terminated pursuant to this Section 5.04. If the Servicer shall resign as Servicer in accordance with the provisions of this Servicing Agreement or if all of the rights and obligations of the Servicer shall have been terminated under Section 7.01, the appointment of the Servicer as custodian shall be terminated effective as of the date on which the termination or resignation of the Servicer is effective.  Additionally, if not sooner terminated as provided above, the Servicer’s obligations as custodian shall terminate one year and one day after the date on which no Series A Bonds are Outstanding.

ARTICLE VI
THE SERVICER

Section 6.01          Representations and Warranties of Servicer.  The Servicer makes the following representations and warranties, as of the Series Closing Date, and as of such other dates as expressly provided in this Section 6.01, on which the Issuer and the Indenture Trustee are deemed to have relied in entering into this Servicing Agreement relating to the servicing of the Series Property.  The representations and warranties shall survive the execution and delivery of this Servicing Agreement, the sale of the Series Property and the pledge thereof to the Indenture Trustee pursuant to the Indenture.

(a)            Organization and Good Standing.  The Servicer is duly organized, validly existing and is in good standing under the laws of the state of its organization, with requisite corporate power and authority to own its properties, to conduct its business as such properties are currently owned and such business is presently conducted by it, to service the Series Property and hold the records related to the Series Property, and to execute, deliver and carry out the terms of this Servicing Agreement.

(b)            Due Qualification.  The Servicer is duly qualified to do business, is in good standing and has obtained all necessary licenses and approvals in all jurisdictions in which the ownership or lease of property or the conduct of its business (including the servicing of the Series Property as required under this Servicing Agreement) requires such qualifications, licenses or approvals (except where a failure to qualify would not be reasonably likely to have a material adverse effect on the Servicer’s business, operations, assets, revenues or properties or to its servicing of the Series Property).

12

(c)            Power and Authority.  The execution, delivery and performance of the terms of this Servicing Agreement have been duly authorized by all necessary corporate action on the part of the Servicer under its organizational or governing documents and laws.

(d)           Binding Obligation.  This Servicing Agreement constitutes a legal, valid and binding obligation of the Servicer enforceable against the Servicer in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and other laws relating to or affecting creditors’ rights generally from time to time in effect and to general principles of  equity (including concepts of materiality, reasonableness, good faith and fair dealing), regardless of whether considered in a proceeding in equity or at law.

(e)            No Violation.  The consummation of the transactions contemplated by this Servicing Agreement do not: (i) conflict with, result in any breach of or constitute (with or without notice or lapse of time) a default under the Servicer’s organizational documents or any indenture or other agreement or instrument to which the Servicer is a party or by which it or any of its property is bound; (ii) result in the creation or imposition of any Lien upon the Servicer’s properties pursuant to the terms of any such indenture or agreement or other instrument (other than any Lien that may be granted under the Basic Documents); or (iii) violate any existing law or any existing order, rule or regulation applicable to the Servicer of any Governmental Authority having jurisdiction over the Servicer or its properties.

(f)            No Proceedings.  To the Servicer’s knowledge, there are no proceedings or investigations pending or, to the Servicer’s knowledge, threatened against the Servicer before any court, federal or state regulatory body, administrative agency or other governmental instrumentality having jurisdiction over the Servicer or its properties: (i) seeking to prevent issuance of the Series A Bonds or the consummation of the transactions contemplated by this Servicing Agreement or any of the other Basic Documents, or, if applicable, any supplement to the Indenture or amendment to the Sale Agreement; (ii) seeking any determination or ruling that could reasonably be expected to materially and adversely affect the performance by the Servicer of its obligations under, or the validity or enforceability against the Servicer of, this Servicing Agreement or any of the other Basic Documents or, if applicable, any supplement to the Indenture or amendment to the Sale Agreement; or (iii) relating to the Servicer and which could reasonably be expected to materially and adversely affect the treatment of the Series A Bonds for federal or state income, gross receipts or franchise tax purposes;

(g)            Approvals.  No governmental approvals, authorizations, consents, orders or other actions or filings with any Governmental Authority are required for the Servicer to execute, deliver and perform its obligations under the Servicing Agreement except those that have previously been obtained or made, those that are required to be made by the Servicer in the future pursuant to Article IV and those that the Servicer may need to file in the future to continue the effectiveness of any financing statements; and

(h)           Reports and Certificates.  Each report and certificate delivered in connection with any filing made to the Commission by the Servicer on behalf of the Issuer with respect to the Series Charges or True-Up Adjustments will constitute a representation and warranty by the Servicer that each such report or certificate, as the case may be, is true and correct in all material respects; provided, however, that, to the extent any such report or certificate is based in part upon or contains assumptions, forecasts or other predictions of future events, the representation and warranty of the Servicer with respect thereto will be limited to the representation and warranty that such assumptions, forecasts or other predictions of future events are reasonable based upon historical performance (and facts known to the Servicer on the date such report or certificate is delivered). 

13

The Servicer, the Indenture Trustee and the Issuer are not responsible as a result of any action, decision, ruling or other determination made or not made, or any delay (other than any delay resulting from the Servicer’s failure to make any filings with the Commission required by this Servicing Agreement in a timely and correct manner or any breach by the Servicer of its duties under the Servicing Agreement that adversely affects the Series Property or the True-Up Adjustments), by the Commission in any way related to the Series Property or in connection with any True-Up Adjustment, the subject of any such filings, any proposed True-Up Adjustment or the approval of any revised Series Charges and the scheduled adjustments thereto. Except to the extent that the Servicer otherwise is liable under the provisions of this Servicing Agreement, the Servicer shall have no liability whatsoever relating to the calculation of any revised Energy Transition Charges and the scheduled adjustments thereto, including as a result of any inaccuracy of any of the assumptions made in such calculations, so long as the Servicer has acted in good faith and has not acted in a grossly negligent manner in connection therewith, nor shall the Servicer have any liability whatsoever as a result of any person or entity, including the Holders, not receiving any payment, amount or return anticipated or expected or in respect of any Energy Transition Bond generally.

Section 6.02          Indemnities of Servicer; Release of Claims.  The Servicer shall be liable in accordance herewith only to the extent of the obligations specifically undertaken by the Servicer under this Servicing Agreement.

(a)            The Servicer shall indemnify the Issuer, the Indenture Trustee (for itself and for the benefit of the Holders) and the Independent Manager and each of their respective trustees, officers, directors, employees and agents (each, an “Indemnified Party”), for, and defend and hold harmless each such Person from and against, any and all Indemnified Losses imposed on, incurred by or asserted against any such Person as a result of (i) the Servicer’s willful misconduct, bad faith or gross negligence in the performance of, or reckless disregard of, its duties or observance of its covenants under the Servicing Agreement, (ii) the Servicer’s material breach of any of its representations or warranties that results in a Servicer Default under this Servicing Agreement; and (iii) litigation and related expenses relating to the Servicer’s status and obligations as Servicer (other than any proceeding the Servicer is required to institute under this Servicing Agreement), except to the extent of Indemnified Losses either resulting from the willful misconduct, bad faith or gross negligence of such Person seeking indemnification hereunder or resulting from a breach of a representation or warranty made by such Person seeking indemnification hereunder in any of the Basic Documents that gives rise to the Servicer’s breach.

(b)           For purposes of Section 6.02(a), in the event of the termination of the rights and obligations of Public Service Company of New Mexico (or any successor thereto pursuant to Section 6.03) as Servicer pursuant to Section 7.01, or a resignation by such Servicer pursuant to this Servicing Agreement, such Servicer shall be deemed to be the Servicer pending appointment of a successor Servicer pursuant to Section 7.02.

14

(c)           Indemnification under this Section 6.02 shall survive any repeal of, modification of, or supplement to, or judicial invalidation of, the Energy Transition Act or the Financing Order and shall survive the resignation or removal of the Indenture Trustee or any Independent Manager or the termination of this Servicing Agreement and shall include reasonable out-of-pocket fees and expenses of investigation and litigation (including reasonable attorneys’ fees and expenses, including the fees, expenses and costs incurred in connection with any action, claim or suit brought to enforce the indemnification obligations of the Servicer hereunder).

(d)           Except to the extent expressly provided in this Servicing Agreement or the other Basic Documents (including the Servicer’s claims with respect to the Servicing Fee and the payment of the purchase price of Series Property), the Servicer hereby releases and discharges the Issuer, any Independent Manager and the Indenture Trustee, and each of their respective officers, directors and agents (collectively, the “Released Parties”), from any and all actions, claims and demands whatsoever, whenever arising, which the Servicer, in its capacity as Servicer or otherwise, shall or may have against any such Person relating to the Series Property or the Servicer’s activities with respect thereto, other than any actions, claims and demands arising out of the willful misconduct, bad faith or gross negligence of the Released Parties.

(e)           The Servicer shall not be required to indemnify an Indemnified Party for any amount paid or payable by such Indemnified Party in the settlement of any action, proceeding or investigation without the written consent of the Servicer, which consent shall not be unreasonably withheld.  Promptly after receipt by an Indemnified Party of notice (or, in the case of the Indenture Trustee, receipt of notice by a Responsible Officer of the Indenture Trustee only) of the commencement of any action, proceeding or investigation, such Indemnified Party shall, if a claim in respect thereof is to be made against the Servicer under this Section 6.02, notify the Servicer in writing of the commencement thereof.  Failure by an Indemnified Party to so notify the Servicer shall relieve the Servicer from the obligation to indemnify and hold harmless such Indemnified Party under this Section 6.02 only to the extent that the Servicer suffers actual prejudice as a result of such failure.  With respect to any action, proceeding or investigation brought by a third party for which indemnification may be sought under this Section 6.02, the Servicer shall be entitled to conduct and control, at its expense and with counsel of its choosing that is reasonably satisfactory to such Indemnified Party, the defense of any such action, proceeding or investigation (in which case the Servicer shall not thereafter be responsible for the fees and expenses of any separate counsel retained by the Indemnified Party except as set forth below); provided, that the Indemnified Party shall have the right to participate in such action, proceeding or investigation through counsel chosen by it and at its own expense.  Notwithstanding the Servicer’s election to assume the defense of any action, proceeding or investigation, the Indemnified Party shall have the right to employ separate counsel (including local counsel), and the Servicer shall bear the reasonable fees, costs and expenses of such separate counsel, if (i) the defendants in any such action include both the Indemnified Party and the Servicer and the Indemnified Party shall have reasonably concluded that there may be legal defenses available to it that are different from or additional to those available to the Servicer, (ii) the Servicer shall not have employed counsel reasonably satisfactory to the Indemnified Party to represent the Indemnified Party within a reasonable time after notice of the institution of such action, (iii) the Servicer shall authorize the Indemnified Party to employ separate counsel at the expense of the Servicer or (iv) in the case of the Indenture Trustee, such action exposes the Indenture Trustee to a material risk of criminal liability or forfeiture or a Servicer Default has occurred and is continuing.  Notwithstanding the foregoing, the Servicer shall not be obligated to pay for the fees, costs and expenses of more than one separate counsel for the Indemnified Parties other than one local counsel, if appropriate.  The Servicer will not, without the prior written consent of the Indemnified Party, settle or compromise or consent to the entry of any judgment with respect to any pending or threatened claim, action, suit or proceeding in respect of which indemnification may be sought under this Section 6.02 (whether or not the Indemnified Party is an actual or potential party to such claim or action) unless such settlement, compromise or consent includes an unconditional release of the Indemnified Party from all liability arising out of such claim, action, suit or proceeding.

15

Section 6.03           Binding Effect of Servicing Obligations.  The obligations to continue to provide service and to collect and account for Series Charges will be binding upon the Servicer, any Successor and any other entity that provides distribution services to a Person that is a New Mexico customer of Public Service Company of New Mexico or any Successor so long as the Series Charges have not been fully collected and posted.  Any Person (a) into which the Servicer may be merged, converted or consolidated and that is a Permitted Successor, (b) that may result from any merger, conversion or consolidation to which the Servicer shall be a party and that is a Permitted Successor, (c) that may succeed to the properties and assets of the Servicer substantially as a whole and that is a Permitted Successor or (d) that otherwise is a Permitted Successor, which Person in any of the foregoing cases executes an agreement of assumption to perform all of the obligations of the Servicer hereunder, shall be the successor to the Servicer under this Servicing Agreement without further act on the part of any of the parties to this Servicing Agreement; provided, however, that (i) immediately after giving effect to such transaction, no representation or warranty made pursuant to Section 6.01 shall have been breached and no Servicer Default and no event that, after notice or lapse of time, or both, would become a Servicer Default shall have occurred and be continuing, (ii) the Servicer shall have delivered to the Issuer and the Indenture Trustee an Officer’s Certificate and an Opinion of Counsel from external counsel stating that such consolidation, conversion, merger or succession and such agreement of assumption complies with this Section 6.03 and that all conditions precedent, if any, provided for in this Servicing Agreement relating to such transaction have been complied with, (iii) the Servicer shall have delivered to the Issuer, the Indenture Trustee and the Rating Agencies an Opinion of Counsel from external counsel of the Servicer either (A) stating that, in the opinion of such counsel, all filings to be made by the Servicer, including filings with the Commission pursuant to the Energy Transition Act and the UCC, have been executed and filed and are in full force and effect that are necessary to fully preserve, perfect and maintain the priority of the interests of the Issuer and the Liens of the Indenture Trustee in the Series Property and reciting the details of such filings or (B) stating that, in the opinion of such counsel, no such action shall be necessary to preserve and protect such interests, (iv) the Servicer shall have delivered to the Issuer, the Indenture Trustee and the Rating Agencies an Opinion of Counsel from independent tax counsel stating that, for U.S. federal income tax purposes, such consolidation, conversion, merger or succession and such agreement of assumption will not result in a material adverse U.S. federal income tax consequence to the Issuer or the Holders of Series A Bonds and (v) the Servicer shall have given the Rating Agencies prior written notice of such transaction.  When any Person (or more than one Person) acquires the properties and assets of the Servicer substantially as a whole or otherwise becomes the successor, by merger, conversion, consolidation, sale, transfer, lease or otherwise, to all or substantially all the assets of the Servicer in accordance with the terms of this Section 6.03, then, upon satisfaction of all of the other conditions of this Section 6.03, the preceding Servicer shall automatically and without further notice be released from all its obligations hereunder (except for responsibilities for its actions prior to such release).

16

Section 6.04           Limitation on Liability of Servicer and Others.

(a)            Except as otherwise provided under this Servicing Agreement, neither the Servicer nor any of the directors, officers, employees or agents of the Servicer shall be liable to the Issuer or any other Person for any action taken or for refraining from the taking of any action pursuant to this Servicing Agreement or for good faith errors in judgment; provided, however, that this provision shall not protect the Servicer or any such Person against any liability that would otherwise be imposed by reason of gross negligence, recklessness or willful misconduct in the performance of duties or by reason of reckless disregard of obligations and duties under this Servicing Agreement.  The Servicer and any director, officer, employee or agent of the Servicer may rely in good faith on the advice of counsel reasonably acceptable to the Indenture Trustee or on any document of any kind, prima facie properly executed and submitted by any Person, respecting any matters arising under this Servicing Agreement.

(b)           Except as provided in this Servicing Agreement, including Section 5.02(d), the Servicer shall not be under any obligation to appear in, prosecute or defend any legal action relating to the Series Property that is not directly related to one of the Servicer’s enumerated duties in this Servicing Agreement or related to its obligation to pay indemnification, and that in its reasonable opinion may cause it to incur any expense or liability; provided, however, that the Servicer may, in respect of any Proceeding, undertake any action that it is not specifically identified in this Servicing Agreement as a duty of the Servicer but that the Servicer reasonably determines is necessary or desirable in order to protect the rights and duties of the Issuer or the Indenture Trustee under this Servicing Agreement and the interests of the Holders and Customers under this Servicing Agreement.

Section 6.05          Public Service Company of New Mexico Not to Resign as Servicer.  Subject to the provisions of Section 6.03, Public Service Company of New Mexico shall not resign from the obligations and duties imposed on it as Servicer under this Servicing Agreement except upon either (a) a determination by Public Service Company of New Mexico that the performance of its duties under this Servicing Agreement shall no longer be permissible under applicable law, or (b) satisfaction of the following: (i) the Rating Agency Condition shall have been satisfied and (ii) the Commission shall have approved of such resignation. Notice of any such determination permitting the resignation of Public Service Company of New Mexico shall be communicated to the Issuer, the Commission, the Indenture Trustee and each Rating Agency at the earliest practicable time (and, if such communication is not in writing, shall be confirmed in writing at the earliest practicable time), and any such determination shall be evidenced by an Opinion of Counsel to such effect delivered to the Issuer, the Commission and each Indenture Trustee concurrently with or promptly after such notice. No such resignation shall become effective until a Successor Servicer has assumed the servicing obligations and duties hereunder of the Servicer in accordance with Section 7.02.

17

Section 6.06           Servicing Compensation.

(a)            In consideration for its services hereunder, until the Collection in Full of the Charges, the Servicer shall receive an annual fee (the “Servicing Fee”) in an amount equal to (i) 0.05% of the aggregate initial principal amount of all Series A Bonds for so long as Public Service Company of New Mexico or an Affiliate of Public Service Company of New Mexico is the Servicer or (ii) if Public Service Company of New Mexico or any of its Affiliates is not the Servicer, an amount agreed upon by the Successor Servicer and the Indenture Trustee, provided, that the annual Servicing Fee shall not exceed 0.60% of the aggregate initial principal amount of all Series A Bonds, unless the Commission has approved the appointment of the Successor Servicer or the Commission does not act to either approve or disapprove such appointment on or before the date which is 45 days after notice of the proposed appointment of the Successor Servicer is provided to the Commission in the same manner substantially as provided in Section 8.01(c).  The Servicing Fee owing shall be calculated based on the initial principal amount of the Series A Bonds and shall be paid semi-annually, with half of the Servicing Fee being paid on each Payment Date, except for the amount of the Servicing Fee to be paid on the first Payment Date in which the Servicing Fee then due will be calculated based on the number of days that this Servicing Agreement has been in effect. In addition, the Servicer shall be entitled to be reimbursed by the Issuer for filing fees and fees and expenses for attorneys, accountants, printing or other professional services retained by the Issuer and paid for by the Servicer (or procured by the Servicer on behalf of the Issuer and paid for by the Servicer) to meet the Issuer’s obligations under the Basic Documents (“Reimbursable Expenses”). Except for such Reimbursable Expenses, the Servicer shall be required to pay all other costs and expenses incurred by the Servicer in performing its activities hereunder (but, for the avoidance of doubt, excluding any such costs and expenses incurred by Public Service Company of New Mexico in its capacity as Administrator). It is expressly acknowledged that the payment of fees to the Rating Agencies shall be at the expense of the Issuer and that, if the Servicer advances such payments to the Rating Agencies, the Issuer shall reimburse the Servicer for any such advances.

(b)            The Servicing Fee set forth in Section 6.06(a) shall be paid to the Servicer by the Indenture Trustee, on each Payment Date in accordance with the priorities set forth in Section 8.02(e) of the Indenture, by wire transfer of immediately available funds from the Collection Account to an account designated by the Servicer.  Any portion of the Servicing Fee not paid on any such date shall be added to the Servicing Fee payable on the subsequent Payment Date.  In no event shall the Indenture Trustee be liable for the payment of any Servicing Fee or other amounts specified in this Section 6.06; provided, that this Section 6.06 does not relieve the Indenture Trustee of any duties it has to allocate funds for payment for such fees under Section 8.02 of the Indenture.

(c)            The Servicer and the Issuer acknowledge and agree that the Servicer’s actual collections of Series Charges on some days might exceed the Servicer’s deemed collections, and that the Servicer’s actual collections of Series Charges on other days might be less than the Servicer’s deemed collections. The Servicer and the Issuer further acknowledge and agree that the amount of these variances are likely to be small and are not likely to be biased in favor of over-remittances or under-remittances. Consequently, so long as the Servicer faithfully makes all daily remittances based on weighted average days sales outstanding, as provided for herein, the Servicer and the Issuer agree that no actual or deemed investment earnings shall be payable in respect of such over-remittances or under-remittances. However, the Servicer shall remit at least annually to the Indenture Trustee, for the benefit of the Issuer, any late charges received from Customers in respect of Series Charges.

18

(d)           The foregoing Servicing Fee constitutes a fair and reasonable compensation for the obligations to be performed by the Servicer.  Such Servicing Fee shall be determined without regard to the income of the Issuer, shall not be deemed to constitute distributions to the recipient of any profit, loss or capital of the Issuer and shall be considered a fixed Operating Expense of the Issuer subject to the limitations on such expenses set forth in the Financing Order.

(e)            Any services required for or contemplated by the performance of the above-referenced services by the Servicer to be provided by unaffiliated third parties may, if provided for or otherwise contemplated by the Financing Order and if the Issuer deems it necessary or desirable, be arranged by the Issuer or by the Servicer at the direction (which may be general or specific) of the Issuer. Costs and expenses associated with the contracting for such third-party professional services may be paid directly by the Issuer or paid by the Servicer and reimbursed by the Issuer in accordance with Section 6.06(a), or otherwise as the Servicer and the Issuer may mutually arrange.

Section 6.07          Compliance with Applicable Law.  The Servicer covenants and agrees, in servicing the Series Property, to comply in all material respects with all laws applicable to, and binding upon, the Servicer and relating to the Series Property, the noncompliance with which would have a material adverse effect on the value of the Series Property; provided, however, that the foregoing is not intended to, and shall not, impose any liability on the Servicer for noncompliance with any Requirement of Law that the Servicer is contesting in good faith in accordance with its customary standards and procedures. 

Section 6.08          Access to Certain Records and Information Regarding Series Property.  The Servicer shall provide to the Indenture Trustee access to the Energy Transition Property Records for the Series A Bonds as is reasonably required for the Indenture Trustee to perform its duties and obligations under the Indenture and the other Basic Documents and shall provide access to such records to the Holders as required by applicable law.  Access shall be afforded without charge, but only upon reasonable request and during normal business hours at the offices of the Servicer.  Nothing in this Section 6.08 shall affect the obligation of the Servicer to observe any applicable law (including any Commission Regulation) prohibiting disclosure of information regarding Customers, and the failure of the Servicer to provide access to such information as a result of such obligation shall not constitute a breach of this Section 6.08.

Section 6.09          Appointments.  The Servicer may at any time appoint any Person to perform all or any portion of its obligations as Servicer hereunder; provided, however, that, unless such Person is an Affiliate of Public Service Company of New Mexico, the Rating Agency Condition shall have been satisfied in connection therewith; provided, further, that the Servicer shall remain obligated and be liable under this Servicing Agreement for the servicing and administering of the Series Property in accordance with the provisions hereof without diminution of such obligation and liability by virtue of the appointment of such Person and to the same extent and under the same terms and conditions as if the Servicer alone were servicing and administering the Series Property.  The fees and expenses of any such Person shall be as agreed between the Servicer and such Person from time to time, and none of the Issuer, the Indenture Trustee, the Holders or any other Person shall have any responsibility therefor or right or claim thereto.  Any such appointment shall not constitute a Servicer resignation under Section 6.05.

19

Section 6.10           No Servicer Advances.  The Servicer shall not make any advances of interest on or principal of the Series A Bonds.

Section 6.11           Remittances.

(a)           The Energy Transition Charge Collections on any Servicer Business Day (the “Daily Remittance”) shall be calculated according to the procedures set forth in Exhibit A and remitted by the Servicer as soon as reasonably practicable to the General Subaccount of the Collection Account but in no event later than two Servicer Business Days following such Servicer Business Day.  Prior to each remittance to the General Subaccount of the Collection  Account pursuant to this Section 6.11, the Servicer shall provide written notice (which may be via electronic means, including electronic mail) to the Indenture Trustee and, upon request, to the Issuer of each such remittance (including the exact dollar amount to be remitted).  The Servicer shall also, promptly upon receipt, remit to the Collection Account any other proceeds of the Collateral that it may receive from time to time.  Reconciliations of bank statements shall be as set forth in Exhibit A.

(b)           The Servicer agrees and acknowledges that it holds all Energy Transition Charge Payments collected by it and any other proceeds for the Collateral received by it for the benefit of the Indenture Trustee and the Holders and that all such amounts will be remitted by the Servicer in accordance with this Section 6.11 without any surcharge, fee, offset, charge or other deduction except for any interest earnings permitted by Section 6.06.  The Servicer further agrees not to make any claim to reduce its obligation to remit all Energy Transition Charge Payments collected by it in accordance with this Servicing Agreement.

(c)            Unless otherwise directed to do so by the Issuer, the Servicer shall be responsible for selecting Eligible Investments in which the funds in the Collection Account shall be invested pursuant to Section 8.03 of the Indenture.

Section 6.12          Maintenance of Operations.  Subject to Section 6.03, Public Service Company of New Mexico agrees to continue, unless prevented by circumstances beyond its control, to operate its electric distribution system to provide service so long as it is acting as the Servicer under this Servicing Agreement.

ARTICLE VII
DEFAULT

Section 7.01           Servicer Default.  If any one or more of the following events (a “Servicer Default”) shall occur and be continuing:

(a)            any failure by the Servicer to remit to the Collection Account on behalf of the Issuer any required remittance that shall continue unremedied for a period of five Business Days after written notice of such failure is received by the Servicer from the Issuer or the Indenture Trustee or after discovery of such failure by a Responsible Officer of the Servicer;

20

(b)           any failure on the part of the Servicer or, so long as the Servicer is Public Service Company of New Mexico or an Affiliate thereof, any failure on the part of Public Service Company of New Mexico, as the case may be, duly to observe or to perform in any material respect any covenants or agreements of the Servicer or Public Service Company of New Mexico, as the case may be, set forth in this Servicing Agreement (other than as provided in Section 7.01(a) or Section 7.01(c)) or any other Basic Document to which it is a party, which failure shall (i) materially and adversely affect the rights of the Holders and (ii) continue unremedied for a period of 60 days after the date on which (A) written notice of such failure, requiring the same to be remedied, shall have been given to the Servicer or Public Service Company of New Mexico, as the case may be, by the Issuer (with a copy to the Indenture Trustee) or to the Servicer or Public Service Company of New Mexico, as the case may be, by the Indenture Trustee or (B) such failure is discovered by a Responsible Officer of the Servicer;

(c)           any failure by the Servicer duly to perform its obligations under Section 4.01(b) in the time and manner set forth therein, which failure continues unremedied for a period of five Business Days;

(d)           any representation or warranty made by the Servicer in this Servicing Agreement or any other Basic Document shall prove to have been incorrect in a material respect when made, which has a material adverse effect on the Holders and which material adverse effect continues unremedied for a period of 60 days after the date on which (i) written notice thereof, requiring the same to be remedied, shall have been delivered to the Servicer (with a copy to the Indenture Trustee) by the Issuer or the Indenture Trustee or (ii) such failure is discovered by a Responsible Officer of the Servicer; or

(e)           an Insolvency Event occurs with respect to the Servicer or Public Service Company of New Mexico;

then, and in each and every case, so long as the Servicer Default shall not have been remedied,the Indenture Trustee shall, upon the instruction of Holders evidencing a majority of the Outstanding Amount of the Series A Bonds, subject to the terms of any intercreditor agreement executed in connection with any additional energy transition bonds, by notice then given in writing to the Servicer (and to the Indenture Trustee if given by the Holders) (a “Termination Notice”), terminate all the rights and obligations (other than the obligations set forth in Section 6.02 and the obligation under Section 7.02 to continue performing its functions as Servicer until a successor Servicer is appointed) of the Servicer under this Servicing Agreement.  In addition, upon a Servicer Default described in Section 7.01(a), the Holders and the Indenture Trustee as financing parties under the Energy Transition Act (or any of their representatives) shall be entitled to apply to the Commission or a court of appropriate jurisdiction for an order for sequestration and payment of revenues arising with respect to the Series Property.  On or after the receipt by the Servicer of a Termination Notice, all authority and power of the Servicer under this Servicing Agreement, whether with respect to the Series A Bonds, the Series Property, the Series Charges or otherwise, shall, without further action, pass to and be vested in such successor Servicer as may be appointed under Section 7.02; and, without limitation, the Indenture Trustee is hereby authorized and empowered to execute and deliver, on behalf of the predecessor Servicer, as attorney-in-fact or otherwise, any and all documents and other instruments, and to do or accomplish all other acts or things necessary or appropriate to effect the purposes of such Termination Notice, whether to complete the transfer of the Energy Transition Property Records and related documents, or otherwise.  The predecessor Servicer shall cooperate with the successor Servicer, the Issuer and the Indenture Trustee in effecting the termination of the responsibilities and rights of the predecessor Servicer under this Servicing Agreement, including the transfer to the successor Servicer for administration by it of all Energy Transition Property Records and all cash amounts that shall at the time be held by the predecessor Servicer for remittance, or shall thereafter be received by it with respect to the Series Property or the Series Charges.  As soon as practicable  after receipt by the Servicer of such Termination Notice, the Servicer shall deliver the Energy Transition Property Records to the successor Servicer.  In case a successor Servicer is appointed as a result of a Servicer Default, all reasonable costs and expenses (including reasonable attorneys’ fees and expenses) incurred in connection with transferring the Energy Transition Property Records to the successor Servicer and amending this Servicing Agreement to reflect such succession as Servicer pursuant to this Section 7.01 shall be paid by the predecessor Servicer upon presentation of reasonable documentation of such costs and expenses.  Termination of Public Service Company of New Mexico as Servicer shall not terminate Public Service Company of New Mexico’s rights or obligations under the Sale Agreement (except rights thereunder deriving from its rights as the Servicer hereunder).

21

Section 7.02           Appointment of Successor.

(a)           Upon the Servicer’s receipt of a Termination Notice pursuant to Section 7.01 or the Servicer’s resignation or removal in accordance with the terms of this Servicing Agreement, the predecessor Servicer shall continue to perform its functions as Servicer under this Servicing Agreement and shall be entitled to receive the requisite portion of the Servicing Fee, until a successor Servicer shall have assumed in writing the obligations of the Servicer hereunder as described below.  In the event of the Servicer’s removal or resignation hereunder, the Indenture Trustee may, at the written direction and with the consent of the Holders of a majority of the Outstanding Amount of the Series A Bonds shall, appoint a successor Servicer with the Issuer’s prior written consent thereto (which consent shall not be unreasonably withheld), and the successor Servicer shall accept its appointment by a written assumption in form reasonably acceptable to the Issuer and the Indenture Trustee and provide prompt written notice of such assumption to the Issuer and the Rating Agencies.  If, within 30 days after the delivery of the Termination Notice, a new Servicer shall not have been appointed, the Indenture Trustee may, at the direction of the Holders of a majority of the Series A Bonds, petition the Commission or a court of competent jurisdiction to appoint a successor Servicer under this Servicing Agreement.  A Person shall qualify as a successor Servicer only if (i) such Person is permitted under Commission Regulations to perform the duties of the Servicer, (ii) the Rating Agency Condition shall have been satisfied and (iii) such Person enters into a servicing agreement with the Issuer having substantially the same provisions as this Servicing Agreement.  In no event shall the Indenture Trustee be liable for its appointment of a successor Servicer.  The Indenture Trustee’s expenses incurred under this Section 7.02(a) shall be at the sole expense of the Issuer and payable from the Collection Account as provided in Section 8.02 of the Indenture.

(b)           Upon appointment, the successor Servicer shall be the successor in all respects to the predecessor Servicer and shall be subject to all the responsibilities, duties and liabilities arising thereafter placed on the predecessor Servicer and shall be entitled to the Servicing Fee and all the rights granted to the predecessor Servicer by the terms and provisions of this Servicing Agreement.

22

Section 7.03           Waiver of Past Defaults.  The Indenture Trustee, with the written consent of the Holders evidencing a majority of the Outstanding Amount of the Series A Bonds, may waive in writing any default by the Servicer in the performance of its obligations hereunder and its consequences, except a default in making any required deposits to the Collection Account in accordance with this Servicing Agreement.  Upon any such waiver of a past default, such default shall cease to exist, and any Servicer Default arising therefrom shall be deemed to have been remedied for every purpose of this Servicing Agreement.  No such waiver shall extend to any subsequent or other default or impair any right consequent thereto.  Promptly after the execution of any such waiver, the Servicer shall furnish copies of such waiver to each of the Rating Agencies.

Section 7.04           Notice of Servicer Default.  The Servicer shall deliver to the Issuer, the Indenture Trustee and the Rating Agencies, promptly after having obtained knowledge thereof, but in no event later than five Business Days thereafter, written notice of any event that, with the giving of notice or lapse of time, or both, would become a Servicer Default under Section 7.01.

Section 7.05           Cooperation with Successor.  The Servicer covenants and agrees with the Issuer that it will, on an ongoing basis, cooperate with the successor Servicer and provide whatever information is, and take whatever actions are, reasonably necessary to assist the successor Servicer in performing its obligations hereunder.

ARTICLE VIII
MISCELLANEOUS PROVISIONS

Section 8.01           Amendment.

(a)           This Servicing Agreement may be amended in writing by the Servicer and the Issuer with the prior written consent of the Indenture Trustee and the satisfaction of the Rating Agency Condition; provided, that any such amendment may not adversely affect the interest of any Holder in any material respect without the consent of the Holders of a majority of the Outstanding Amount.  Promptly after the execution of any such amendment or consent, the Issuer shall furnish copies of such amendment or consent to each of the Rating Agencies.

(b)           Prior to the execution of any amendment to this Servicing Agreement, the Issuer and the Indenture Trustee shall be entitled to receive and conclusively rely upon an Opinion of Counsel of external counsel stating that such amendment is authorized and permitted by this Servicing Agreement and all conditions precedent, if any, provided for in this Servicing Agreement relating to such amendment have been satisfied and upon the Opinion of Counsel from external counsel referred to in Section 3.01(c)(i).  The Issuer and the Indenture Trustee may, but shall not be obligated to, enter into any such amendment that affects their own rights, duties, indemnities or immunities under this Servicing Agreement or otherwise.

Section 8.02           Maintenance of Accounts and Records.

(a)           The Servicer shall maintain accounts and records as to the Series Property accurately and in accordance with its standard accounting procedures and in sufficient detail to permit reconciliation between Energy Transition Charge Payments received by the Servicer and Energy Transition Charge Collections from time to time deposited in the Collection Account.

23

(b)           The Servicer shall permit the Indenture Trustee and its agents at any time during normal business hours, upon reasonable notice to the Servicer and to the extent it does not unreasonably interfere with the Servicer’s normal operations, to inspect, audit and make copies of and abstracts from the Servicer’s records regarding the Series Property and the Series Charges.  Nothing in this Section 8.02(b) shall affect the obligation of the Servicer to observe any applicable law (including any Commission Regulation) prohibiting disclosure of information regarding Customers, and the failure of the Servicer to provide access to such information as a result of such obligation shall not constitute a breach of this Section 8.02(b).

Section 8.03           Notices.  Any notice, report or other communication given hereunder shall be in writing and shall be effective (i) upon receipt when sent through the mails, registered or certified mail, return receipt requested, postage prepaid, with such receipt to be effective the date of delivery indicated on the return receipt, (ii) upon receipt when sent by an overnight courier, (iii) on the date personally delivered to an authorized officer of the party to which sent or (iv) on the date transmitted by facsimile or other electronic transmission with a confirmation of receipt in all cases, addressed as follows:

(a)           in the case of the Servicer, to Public Service Company of New Mexico, at 414 Silver Ave. SW, Albuquerque, New Mexico 87102, Attention: President, Telephone (505) 241-2700, Email: treasury@pnmresources.com;

(b)           in the case of the Issuer, to PNM Energy Transition Bond Company I, LLC, at at 414 Silver Ave. SW, Albuquerque, New Mexico 87102, Attention: Senior Vice President, General Counsel or Secretary, Telephone: (505) 241-2700, Email: treasury@pnmresources.com;

(c)            in the case of the Indenture Trustee, to the Corporate Trust Office;

(d)           in the case of Moody’s, to Moody’s Investor Services, Inc., ABS/RMBS Monitoring Department, 25th Floor, 7 World Trade Center, 250 Greenwich Street, New York, New York, Email: servicereports@moodys.com;

(e)            in the case of S&P, to S&P Global Ratings, a division of S&P Global Inc., Structured Credit Surveillance, 55 Water Street, New York, New York 10041, Telephone: (212) 438-8991, Email: servicer_reports@spglobal.com (all such notices to be delivered to S&P in writing by email); and

(f)            in the case of the Commission, at New Mexico Public Regulation Commission, at 1120 Paseo De Peralta, Santa Fe, New Mexico 87501, Telephone: (888) 427-5772.

Each Person listed above may, by notice given in accordance herewith to the other Persons listed above, designate any further or different address to which subsequent notices, reports and other communications shall be sent.

Section 8.04           Assignment.  Notwithstanding anything to the contrary contained herein, except as provided in Section 6.03 and as provided in the provisions of this Servicing Agreement concerning the resignation of the Servicer, this Servicing Agreement may not be assigned by the Servicer. 

24

Section 8.05           Limitations on Rights of Others.  The provisions of this Servicing Agreement are solely for the benefit of the Servicer, the Issuer and, to the extent provided herein or in the other Basic Documents, the Indenture Trustee and the Holders, and the other Persons expressly referred to herein, and such Persons shall have the right to enforce the relevant provisions of this Servicing Agreement.  Nothing in this Servicing Agreement, whether express or implied, shall be construed to give to any other Person any legal or equitable right, remedy or claim in the Series Property or the Collateral or under or in respect of this Servicing Agreement or any covenants, conditions or provisions contained herein.  Notwithstanding anything to the contrary contained herein, for the avoidance of doubt, any right, remedy or claim to which any Customer may be entitled pursuant to the Financing Order and to this Servicing Agreement may be asserted or exercised only by the Commission (or by its counsel in the name of the Commission) for the benefit of such Customer.

Section 8.06          Severability.  Any provision of this Servicing Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remainder of such provision (if any) or the remaining provisions hereof (unless such a construction shall be unreasonable), and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

Section 8.07          Separate Counterparts.  This Servicing Agreement may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument. The words “execution,” “signed,” “delivery,” and words of like import in or relating to this Servicing Agreement or any document to be signed in connection with this Servicing Agreement shall be deemed to include electronic signatures, deliveries or the keeping of records in electronic form, each of which shall be of the same legal effect, validity or enforceability as a manually executed signature, physical delivery thereof or the use of a paper-based recordkeeping system, as the case may be, and the parties hereto consent to conduct the transactions contemplated hereunder by electronic means.

Section 8.08          Governing Law.  This Servicing Agreement shall be governed by and construed in accordance with the laws of the State of New Mexico, without reference to its conflict of law provisions, and the obligations, rights and remedies of the parties hereunder shall be determined in accordance with such laws.

Section 8.09          Assignment to Indenture Trustee.  The Servicer hereby acknowledges and consents to the assignment and grant of a security interest by the Issuer to the Indenture Trustee for the benefit of the Secured Parties pursuant to the Indenture of any or all of the Issuer’s rights hereunder.  In no event shall the Indenture Trustee have any liability for the representations, warranties, covenants, agreements or other obligations of the Issuer hereunder or in any of the certificates delivered pursuant hereto, as to all of which any recourse shall be had solely to the assets of the Issuer subject to the availability of funds therefor under Section 8.02 of the Indenture.

Section 8.10          Nonpetition Covenants.  Notwithstanding any prior termination of this Servicing Agreement or the Indenture, the Servicer shall not, prior to the date that is one year and one day after the satisfaction and discharge of the Indenture, acquiesce, petition or otherwise invoke or cause the Issuer to invoke or join with any Person in provoking the process of any Governmental Authority for the purpose of commencing or sustaining an involuntary case against the Issuer under any U.S. federal or state bankruptcy, insolvency or similar law or appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator or other similar official of the Issuer for any substantial part of the property of the Issuer or ordering the dissolution, winding up or liquidation of the affairs of the Issuer.

25

Section 8.11          Limitation of Liability.  It is expressly understood and agreed by the parties hereto that this Servicing Agreement is executed and delivered by the Indenture Trustee, not individually or personally but solely as Indenture Trustee in the exercise of the powers and authority conferred and vested in it, and that the Indenture Trustee, in acting hereunder, is entitled to all rights, benefits, protections, immunities and indemnities accorded to it under the Indenture.

Section 8.12          Rule 17g-5 Compliance.  The Servicer agrees that any notice, report, request for satisfaction of the Rating Agency Condition, document or other information provided by the Servicer to any Rating Agency under this Servicing Agreement or any other Basic Document to which it is a party for the purpose of determining the initial credit rating of the Series A Bonds or undertaking credit rating surveillance of the Series A Bonds with any Rating Agency, or satisfy the Rating Agency Condition, shall be substantially concurrently posted by the Servicer on the 17g-5 Website.

Section 8.13          Indenture Trustee Actions.  In acting hereunder, the Indenture Trustee shall have the rights, protections and immunities granted to it under the Indenture.

{SIGNATURE PAGE FOLLOWS}

26

IN WITNESS WHEREOF, the parties hereto have caused this Servicing Agreement to be duly executed by their respective officers as of the day and year first above written.

PNM ENERGY TRANSITION BOND COMPANY I, LLC,
as Issuer
By:
	Name:
	Title:
PUBLIC SERVICE COMPANY OF NEW MEXICO,
as Servicer
By:
	Name:
	Title:

ACKNOWLEDGED AND ACCEPTED:
U.S. BANK TRUST COMPANY,
NATIONAL ASSOCIATION,
as Indenture Trustee
By:
	Name:
	Title:

Signature Page to Energy Transition Property Servicing Agreement

EXHIBIT A

SERVICING PROCEDURES

The Servicer agrees to comply with the following servicing procedures:

SECTION 1.           Definitions.

(a)           Capitalized terms used herein and not otherwise defined herein shall have the meanings ascribed to such terms in the Servicing Agreement (the “Agreement”).

(b)           Whenever used in this Annex I, the following words and phrases shall have the following meanings:

“Demand-Billed Customer” means any Customer in an Energy Transition Rate Class for which the Energy Transition Charges are determined on the basis that involves the measurement of demand.

“Usage-Billed Customer” means any Customer in an Energy Transition Rate Class for which the Energy Transition Charges are determined on the basis that involves the measurement of kWh usage.

SECTION 2.           Data Acquisition.

(a)           Installation and Maintenance of Meters.  The Servicer shall cause to be installed, replaced and maintained meters in accordance with the Servicer Policies and Practices.

(b)           Meter Reading.  In accordance with the Servicer Policies and Practices, the Servicer shall obtain usage measurements for each Usage-Billed Customer or determine any Usage-Billed Customer’s usage on the basis of estimates in accordance with Commission Regulations.

(c)            Cost of Metering.  The Issuer shall not be obligated to pay any costs associated with the metering duties set forth in this Section 2, including the costs of installing, replacing and maintaining meters, nor shall the Issuer be entitled to any credit against the Servicing Fee for any cost savings realized by the Servicer as a result of new metering and/or billing technologies.

SECTION 3.           Usage and Bill Calculation.

The Servicer shall obtain a calculation of each Usage-Billed Customer’s usage (which may be based on data obtained from such Customer’s meter read or on usage estimates determined in accordance with Commission Regulations) in accordance with the Servicer Policies and Practices and shall determine therefrom Billed Energy Transition Charges for the Series A Bonds with respect to such Usage-Billed Customers. The Servicer shall calculate each Demand-Billed Customer’s demand in accordance with the Servicer Policies and Practices and shall determine therefrom Billed Energy Transition Charges for the Series A Bonds with respect to such Demand-Billed Customers.

E-A-1

SECTION 4.           Billing.

(a)           Commencement of Billing.  The Servicer shall implement the Series Charges as provided in the Financing Order and shall thereafter bill each Customer for each Customer’s Billed Energy Transition Charges for the Series A Bonds in accordance with the provisions of this Section 4.

(b)           Frequency of Bills; Billing Practices.  In accordance with the Servicer Policies and Practices, the Servicer shall generate and issue a Bill to each Customer. In the event that the Servicer makes any material modification to the Servicer Policies and Practices, it shall notify the Issuer, the Indenture Trustee and the Rating Agencies as soon as practicable, and in no event later than 60 Servicer Business Days after such modification goes into effect, but the Servicer may not make any modification that will materially adversely affect the Holders.

(c)            Format.

(i)            The Customer’s Bill will contain a separate line item identifying the monthly charge representing the Series Property. The Customer’s Bill shall contain in text or in a footnote, text substantially to the effect that the monthly charge representing Series Property has been approved by the Financing Order, and that a portion of the monthly charge is being collected by the Servicer, as servicer, on behalf of the Issuer as owner of the Series Property.

(ii)           The Servicer shall conform to such requirements in respect of the format, structure and text of Bills delivered to Customers as Commission Regulations shall from time to time prescribe. To the extent that Bill format, structure and text are not prescribed by applicable law or by Commission Regulations, the Servicer shall, subject to clause (i) of this subsection (c), determine the format, structure and text of all Bills in accordance with its reasonable business judgment, the Servicer Policies and Practices and historical practice.

(d)           Delivery.  Except as provided in the next sentence, the Servicer shall deliver all Bills to Customers (i) by United States mail in such class or classes as are consistent with the Servicer Policies and Practices or (ii) by any other means, whether electronic or otherwise, that the Servicer may from time to time use in accordance with the Servicer Policies and Practices. The Servicer shall pay from its own funds all costs of issuance and delivery of all Bills that it renders, including printing and postage costs as the same may increase or decrease from time to time.

SECTION 5. Customer Service Functions.

The Servicer shall handle all Customer inquiries and other Customer service matters according to the Servicer Policies and Practices.

SECTION 6. Collections; Payment Processing; Remittance.

(a)            Collection Efforts, Policies, Procedures.

(i)            The Servicer shall collect Billed Energy Transition Charges for the Series A Bonds (including late charges in respect of Series Charges) from Customers as and when the same become due in accordance with such collection procedures as it follows with respect to comparable assets that it services for itself or others including, in accordance with Commission Regulations and the Servicer Policies and Practices, that:

(A)          The Servicer shall prepare and deliver overdue notices to Customers.

E-A-2

(B)           The Servicer shall deliver past-due and shut-off notices.

(C)           The Servicer may employ the assistance of collection agents.

(D)           The Servicer shall apply Customer deposits to the payment of delinquent accounts.

(ii)           The Servicer shall not waive any late payment charge or any other fee or charge relating to delinquent payments, if any, or waive, vary or modify any terms of payment of any amounts payable by a Customer, in each case unless such waiver or action: (A) would be in accordance with the Servicer Policies and Practices and (B) would comply in all material respects with applicable law.

(iii)           The Servicer shall accept payment from Customers in respect of Billed Energy Transition Charges for the Series A Bonds in such forms and methods and at such times and places in accordance with the Servicer Policies and Practices.

(b)            Payment Processing; Allocation; Priority of Payments.  The Servicer shall post all payments received to Customer accounts as promptly as practicable, and, in any event, substantially all payments shall be posted no later than two Servicer Business Days after receipt.

(c)           Investment of Estimated Energy Transition Charge Payments Received.  Prior to remittance on the applicable remittance date, the Servicer may invest estimated Energy Transition Charges Payments at its own risk and for its own benefit, and such investments and funds shall not be required to be segregated from the other investments and funds of the Servicer.

(d)            Calculation of Daily Remittance.

(i)            The Servicer will remit Series Charges directly to the Indenture Trustee pursuant to Section 6.11 of the Servicing Agreement. The Servicer will remit Series Charges based on estimated collections using a weighted average balance of days outstanding (“ADO”) on Public Service Company of New Mexico’s retail bills. Energy Transition Charge Collections for the Series A Bonds remitted will represent the charges estimated to be received for any period based upon the ADO and an estimated system-wide write-off percentage.

(ii)            The Energy Transition Charge Collections for the Series A Bonds will be remitted by the Servicer to the Indenture Trustee as soon as reasonably practicable to the General Subaccount of the Collection Account on each Servicer Business Day, but in no event later than two Servicer Business Days following such Servicer Business Day. Estimated daily Energy Transition Charge Collections for the Series A Bonds will be remitted to the Indenture Trustee on each Servicer Business Day based upon the ADO and estimated write-offs. Each day on which those remittances are made is referred to as a daily remittance date.

E-A-3

(iii)           No less often than annually, the Servicer will reconcile remittances of estimated Energy Transition Charge Collections for the Series A Bonds with actual Energy Transition Charge Payments for the Series A Bonds received by the Servicer and remitted to the Indenture Trustee to more accurately reflect the amount of Billed Energy Transition Charges for the Series A Bonds that should have been remitted, based on ADO and the actual system-wide write-off percentage.  To the extent the remittances of estimated payments arising from the Series Charges exceed the amounts that should have been remitted based on actual system-wide write-offs, the Servicer will be entitled to withhold the excess amount from any subsequent remittance to the Indenture Trustee until the balance of such excess is reduced to zero.  To the extent the remittances of estimated payments arising from the Series Charges are less than the amount that should have been remitted based on actual system wide write-offs, the Servicer will remit the amount of the shortfall to the Indenture Trustee within two Servicer Business Days.  Although the Servicer will remit estimated Energy Transition Charge Collections for the Series A Bonds to the Indenture Trustee, the Servicer will not be obligated to make any payments on the Series A Bonds.

(iv)          At least annually, the Servicer also will remit to the Indenture Trustee, for the benefit of the Issuer, any late charges received from Customers with respect to the Series Charges.

(v)           The Servicer agrees and acknowledges that it holds all Energy Transition Charge Collections for the Series A Bonds received by it and any other proceeds for the Collateral received by it for the benefit of the Indenture Trustee and the Holders and that all such amounts will be remitted by the Servicer without any surcharge, fee, offset, charge or other deduction.  The Servicer further agrees not to make any claim to reduce its obligation to remit all Energy Transition Charge Payments for the Series A Bonds collected by it in accordance with the Servicing Agreement.

(e)            Partial Collections.  Upon a partial payment of amounts billed, including amounts billed under special contracts, such partial payments shall be allocated in accordance with applicable Commission requirements and any other requirements of applicable law. As of the date of this Servicing Agreement, (a) the Servicer allocates payments received (i) first, to past-due amounts, (ii) second, to customer deposit requirements, (iii) third, to current customer charges, and (iv) fourth, to charges previously written-off, and (b) for amounts billed on the same date, charges are credited based on a priority waterfall, with late payment charges being credited first, Series Charges being credited second, and other charges being credited therafter in the priority waterfall. In accordance with the Financing Order, if more than one series of energy transition bonds (as defined in the Energy Transition Act) are outstanding, partial payments allocable to energy transition charges (as defined in the Energy Transition Act) shall be allocated pro rata based upon the amount of energy transition charges owing with respect to each series.

(f)            No Advances.  The Servicer shall not be obligated to advance any of its own funds to the Issuer.

E-A-4

EXHIBIT B

FORM OF MONTHLY SERVICER’S CERTIFICATE

See Attached

E-B-1

MONTHLY SERVICER’S CERTIFICATE

PNM ENERGY TRANSITION BOND COMPANY I, LLC

$[________] Series A Senior Secured Energy Transition Bonds

Pursuant to Section 3.01(b) of the Energy Transition Property Servicing Agreement dated as of [_________] by and between Public Service Company of New Mexico, as Servicer, and PNM Energy Transition Bond Company I, LLC, as Issuer (the “Servicing Agreement”), the Servicer does hereby certify as follows:

Capitalized terms used but not defined in this Monthly Servicer’s Certificate have their respective meanings as set forth in the Servicing Agreement.  References herein to certain sections and subsections are references to the respective sections or subsections of the Servicing Agreement.

For the Monthly Period: [MONTH, YEAR]

Billings:

Customer Class ETC Rate in effect ETCs Billed During Month

Estimated Collections and Remittances:

  Customer Class Estimated Collections During Month⁽¹⁾ Remittances to Indenture Trustee

(1)           Based on estimated Weighted Average Days Sales Outstanding of {        } days and estimated net charge-offs of {        }%.

Executed as of this {        } day of {               } 20{    }.

Capitalized terms used but not defined in this Monthly Servicer’s Certificate have their respective meanings as set forth in the Servicing Agreement.  References herein to certain sections and subsections are references to the respective sections or subsections of the Servicing Agreement.

E-B-2

PUBLIC SERVICE COMPANY OF NEW MEXICO,
as Servicer
By:
	Name:
	Title:

CC:          PNM Energy Transition Bond Company I, LLC

E-B-3

EXHIBIT C

FORM OF SEMI-ANNUAL SERVICER’S CERTIFICATE

See attached

E-C-1

SEMI-ANNUAL SERVICER’S CERTIFICATE

Pursuant to Section 4.01(c)(ii) of the Energy Transition Property Servicing Agreement, dated as of [___________], 2023 (the “Servicing Agreement”), by and between PUBLIC SERVICE COMPANY OF NEW MEXICO, as servicer (the “Servicer”), and PNM ENERGY TRANSITION BOND COMPANY I, LLC, the Servicer does hereby certify, for the {               }, 20{    } Payment Date (the “Current Payment Date”), as follows:

Capitalized terms used but not defined herein have their respective meanings as set forth in the Servicing Agreement.  References herein to certain sections and subsections are references to the respective sections of the Servicing Agreement or the Indenture, as the context indicates.

Collection Periods: {               } to {               }

Payment Date: {               }, 20{    }

1.             Collections Allocable and Aggregate Amounts Available for the Current Payment Date:

i.	Remittances for the {               } Collection Period	$	{	}
ii.	Remittances for the {               } Collection Period	$	{	}
iii.	Remittances for the {               } Collection Period	$	{	}
iv.	Remittances for the {               } Collection Period	$	{	}
v.	Remittances for the {               } Collection Period	$	{	}
vi.	Remittances for the {               } Collection Period	$	{	}
vii.	Investment Earnings on Capital Subaccount	$	{	}
viii.	Investment Earnings on Excess Funds Subaccount	$	{	}
ix.	Investment Earnings on General Subaccount	$	{	}
x.	General Subaccount Balance (sum of i through ix above)	$	{	}
xi.	Excess Funds Subaccount Balance as of prior Payment Date	$	{	}
xii.	Capital Subaccount Balance as of prior Payment Date	$	{	}
xiii.	Collection Account Balance (sum of xi through xii above)	$	{	}

2.             Outstanding Amounts of as of prior Payment Date:

i.	Series A Bonds - {A-1} Outstanding Amount	$	{	}
ii.	Series A Bonds - {A-2} Outstanding Amount	$	{	}
iii.	Aggregate Outstanding Amount of all Series A Bonds	$	{	}

E-C-2

3.             Required Funding/Payments as of Current Payment Date:

	Principal	Principal Due
i.	Series A Bonds - {A-1}	$	{	}
ii.	Series A Bonds - {A-2}	$	{	}
iii.	All Series A Bonds	$	{	}

   Interest

Tranche	Interest Rate		Days in Interest Period(1)		Principal Balance			Interest Due
iv. Series A Bonds - {A-1}	{	}%	{	}	$	{	}	$	{	}
v. Series A Bonds - {A-2}	{	}%	{	}	$	{	}	$	{	}

vi. All Series A Bonds $ {            }

	Required Level			Funding Required
ix.            Capital Subaccount	$	{	}	$	{	}

4.             Allocation of Remittances as of Current Payment Date Pursuant to 8.02(e) of Indenture:

i. Trustee Fees and Expenses; Indemnity Amounts	$	{	}
ii. Servicing Fee	$	{	}
iii. Administration Fee	$	{	}
iv. Operating Expenses	$	{	}

Series A Bonds	Aggregate			Per $1,000 of Original Principal Amount
v. Semi-Annual Interest (including any past-due for prior periods)				$	{	}
1. Series A Bonds - {A-1}Interest Payment	$	{	}	$	{	}
2. Series A Bonds - {A-2} Interest Payment	$	{	}	$	{	}
	$	{	}
vi. Principal Due and Payable as a Result of an Event of Default or on Final Maturity Date							$	{	}
1. Series A Bonds - {A-1} Interest Payment	$	{	}	$	{	}
2. Series A Bonds - {A-2} Interest Payment	$	{	}	$	{	}
	$	{	}
vii. Semi-Annual Principal							$	{	}
1. Series A Bonds - {A-1} Interest Payment	$	{	}	$	{	}
2. Series A Bonds - {A-2} Interest Payment	$	{	}	$	{	}

(1)On 30/360 day basis for initial payment date; otherwise use one-half of annual rate.

	$	{	}
viii. Other unpaid Operating Expenses				$	{	}
ix. Funding of Capital Subaccount (to required level)				$	{	}
x. Capital Subaccount Return to Public Service Company of New Mexico				$	{	}
xi. Deposit to Excess Funds Subaccount				$	{	}
xii. Released to Issuer upon Retirement of all Series A Bonds				$	{	}
xiii. Aggregate Remittances as of Current Payment Date				$	{	}

E-C-3

5.             Outstanding Amount and Collection Account Balance as of Current Payment Date (after giving effect to payments to be made on such Payment Date):

i.	Series A Bonds - {A-1}	$	{	}
ii.	Series A Bonds - {A-2}	$	{	}
iii.	Aggregate Outstanding Amount of all Series A Bonds	$	{	}
iv.	Excess Funds Subaccount Balance	$	{	}
v.	Capital Subaccount Balance	$	{	}
vi.	Aggregate Collection Account Balance	$	{	}

6.             Subaccount Withdrawals as of Current Payment Date (if applicable, pursuant to Section 8.02(e) of Indenture):

i.	Excess Funds Subaccount	$	{	}
ii.	Capital Subaccount	$	{	}
iii.	Total Withdrawals	$	{	}

7.             Shortfalls in Interest and Principal Payments as of Current Payment Date:

i.	Semi-annual Interest
	Series A Bonds - {A-1} Interest Payment	$	{	}
	Series A Bonds - {A-2} Interest Payment	$	{	}
	Total	$	{	}
ii.	Semi-annual Principal
	Series A Bonds - {A-1}Principal Payment	$	{	}
	Series A Bonds - {A-2} Principal Payment	$	{	}
	Total	$	{	}

E-C-4

8.             Shortfalls in Payment of Return on Invested Capital as of Current Payment Date:

i. Return on Invested Capital $ {                }

9.             Shortfalls in Required Subaccount Levels as of Current Payment Date:

i. Capital Subaccount $ {                }

IN WITNESS WHEREOF, the undersigned has duly executed and delivered this Semi-Annual Servicer’s Certificate this {        } day of {               }, 20{    }.

PUBLIC SERVICE COMPANY OF NEW MEXICO,
as Servicer
By:
	Name:
	Title:

E-C-5

EXHIBIT D

FORM OF SERVICER CERTIFICATE

See attached

E-D-1

SERVICER CERTIFICATE

The undersigned hereby certifies that the undersigned is the duly elected and acting {            } of PUBLIC SERVICE COMPANY OF NEW MEXICO, as servicer (the “Servicer”) under the Energy Transition Property Servicing Agreement dated as of [________], 2023 (the “Servicing Agreement”) by and between the Servicer and PNM ENERGY TRANSITION BOND COMPANY I, LLC, and further certifies that:

1.             The undersigned is responsible for assessing the Servicer’s compliance with the servicing criteria set forth in Item 1122(d) of Regulation AB (the “Servicing Criteria”).

2.             With respect to each of the Servicing Criteria, the undersigned has made the following assessment of the Servicing Criteria in accordance with Item 1122(d) of Regulation AB, with such discussion regarding the performance of such Servicing Criteria during the fiscal year covered by the Sponsor’s annual report on Form 10-K:

Regulation AB Reference	Servicing Criteria	Assessment
General Servicing Considerations
1122(d)(1)(i)	Policies and procedures are instituted to monitor any performance or other triggers and events of default in accordance with the transaction agreements.	Applicable; assessment below.
1122(d)(1)(ii)	If any material servicing activities are outsourced to third parties, policies and procedures are instituted to monitor the third party’s performance and compliance with such servicing activities.	Not applicable; no servicing activities were outsourced.
1122(d)(1)(iii)	Any requirements in the transaction agreements to maintain a back-up servicer for pool assets are maintained.	Not applicable; transaction agreements do not provide for a back-up servicer.
1122(d)(1)(iv)	A fidelity bond and errors and omissions policy is in effect on the party participating in the servicing function throughout the reporting period in the amount of coverage required by and otherwise in accordance with the terms of the transaction agreements.	Not applicable; transaction agreements do not require a fidelity bond or errors and omissions policy.
1122(d)(1)(v)	Aggregation of information, as applicable, is mathematically accurate and the information conveyed accurately reflects the information.	Applicable
Cash Collection and Administration
1122(d)(2)(i)	Payments on pool assets are deposited into the appropriate custodial bank accounts and related bank clearing accounts no more than two business days following receipt, or such other number of days specified in the transaction agreements.	Applicable.
1122(d)(2)(ii)	Disbursements made via wire transfer on behalf of an obligor or to an investor are made only by authorized personnel.	Applicable.

E-D-2

Regulation AB Reference	Servicing Criteria	Assessment
1122(d)(2)(iii)	Advances of funds or guarantees regarding collections, cash flows or distributions, and any interest or other fees charged for such advances, are made, reviewed and approved as specified in the transaction agreements.	Applicable; no advances by the Servicer are permitted under the transaction agreements, except for payments of certain indemnities.
1122(d)(2)(iv)	The related accounts for the transaction, such as cash reserve accounts or accounts established as a form of overcollateralization, are separately maintained (e.g., with respect to commingling of cash) as set forth in the transaction agreements.	Applicable, but no current assessment is required since the related accounts are maintained by the Indenture Trustee.
1122(d)(2)(v)	Each custodial account is maintained at a federally insured depository institution as set forth in the transaction agreements. For purposes of this criterion, “federally insured depository institution” with respect to a foreign financial institution means a foreign financial institution that meets the requirements of Rule 13k-1(b)(1) under the Exchange Act.	Applicable, but no current assessment required; all “custodial accounts” are maintained by the Indenture Trustee.
1122(d)(2)(vi)	Unissued checks are safeguarded so as to prevent unauthorized access.	Not applicable; all payments made by wire transfer.
1122(d)(2)(vii)	Reconciliations are prepared on a monthly basis for all asset-backed securities related bank accounts, including custodial accounts and related bank clearing accounts. These reconciliations are: (A) mathematically accurate; (B) prepared within 30 calendar days after the bank statement cutoff date, or such other number of days specified in the transaction agreements; (C) reviewed and approved by someone other than the person who prepared the reconciliation; and (D) contain explanations for reconciling items. These reconciling items are resolved within 90 calendar days of their original identification, or such other number of days specified in the transaction agreements.	Applicable; assessment below.
Investor Remittances and Reporting
1122(d)(3)(i)	Reports to investors, including those to be filed with the SEC, are maintained in accordance with the transaction agreements and applicable SEC requirements. Specifically, such reports: (A) are prepared in accordance with timeframes and other terms set forth in the transaction agreements; (B) provide information calculated in accordance with the terms specified in the transaction agreements; (C) are filed with the SEC as required by its rules and regulations; and (D) agree with investors’ or the trustee’s records as to the total unpaid principal balance and number of pool assets serviced by the servicer.	Applicable; assessment below.

E-D-3

Regulation AB Reference	Servicing Criteria	Assessment
1122(d)(3)(ii)	Amounts due to investors are allocated and remitted in accordance with timeframes, distribution priority and other terms set forth in the transaction agreements.	Not applicable; investor records maintained by the Indenture Trustee.
1122(d)(3)(iii)	Disbursements made to an investor are posted within two business days to the servicer’s investor records, or such other number of days specified in the transaction agreements.	Applicable.
1122(d)(3)(iv)	Amounts remitted to investors per the investor reports agree with cancelled checks, or other form of payment, or custodial bank statements.	Applicable; assessment below.
Pool Asset Administration
1122(d)(4)(i)	Collateral or security on pool assets is maintained as required by the transaction agreements or related pool asset documents.	Applicable; assessment below.
1122(d)(4)(ii)	Pool assets and related documents are safeguarded as required by the transaction agreements.	Applicable; assessment below.
1122(d)(4)(iii)	Any additions, removals or substitutions to the asset pool are made, reviewed and approved in accordance with any conditions or requirements in the transaction agreements.	Not applicable; no removals or substitutions of Energy Transition Property are contemplated or allowed under the transaction documents.
1122(d)(4)(iv)	Payments on pool assets, including any payoffs, made in accordance with the related pool asset documents are posted to the servicer’s obligor records maintained no more than two business days after receipt, or such other number of days specified in the transaction agreements, and allocated to principal, interest or other items (e.g., escrow) in accordance with the related pool asset agreements.	Applicable; assessment below.
1122(d)(4)(v)	The servicer’s records regarding the pool assets agree with the servicer’s records with respect to an obligor’s unpaid principal balance.	Not applicable; because underlying obligation (Energy Transition Charge) is not an interest-bearing instrument.
1122(d)(4)(vi)	Changes with respect to the terms or status of an obligor’s pool assets (e.g., loan modifications or re-agings) are made, reviewed and approved by authorized personnel in accordance with the transaction agreements and related pool asset documents.	Applicable; assessment below.
1122(d)(4)(vii)	Loss mitigation or recovery actions (e.g., forbearance plans, modifications and deeds in lieu of foreclosure, foreclosures and repossessions, as applicable) are initiated, conducted and concluded in accordance with the timeframes or other requirements established by the transaction agreements.	Applicable; limited assessment below. Servicer actions governed by Commission regulations.

E-D-4

Regulation AB Reference	Servicing Criteria	Assessment
1122(d)(4)(viii)	Records documenting collection efforts are maintained during the period a pool asset is delinquent in accordance with the transaction agreements. Such records are maintained on at least a monthly basis, or such other period specified in the transaction agreements, and describe the entity’s activities in monitoring delinquent pool assets, including, for example, phone calls, letters and payment rescheduling plans in cases where delinquency is deemed temporary (e.g., illness or unemployment).	Applicable, but does not require assessment since no explicit documentation requirement with respect to delinquent accounts are imposed under the transaction agreements due to availability of “true-up” mechanism; and any such documentation is maintained in accordance with applicable New Mexico commission rules and regulations..
1122(d)(4)(ix)	Adjustments to interest rates or rates of return for pool assets with variable rates are computed based on the related pool asset documents.	Not applicable; Energy Transition Charges are not interest-bearing instruments.
1122(d)(4)(x)	Regarding any funds held in trust for an obligor (such as escrow accounts): (A) such funds are analyzed, in accordance with the obligor’s pool asset documents, on at least an annual basis, or such other period specified in the transaction agreements; (B) interest on such funds is paid, or credited, to obligors in accordance with applicable pool asset documents and state laws; and (C) such funds are returned to the obligor within 30 calendar days of full repayment of the related pool assets, or such other number of days specified in the transaction agreements.	Not applicable.
1122(d)(4)(xi)	Payments made on behalf of an obligor (such as tax or insurance payments) are made on or before the related penalty or expiration dates, as indicated on the appropriate bills or notices for such payments, provided that such support has been received by the servicer at least 30 calendar days prior to these dates, or such other number of days specified in the transaction agreements.	Not applicable; Servicer does not make payments on behalf of obligors.
1122(d)(4)(xii)	Any late payment penalties in connection with any payment to be made on behalf of an obligor are paid from the servicer’s funds and not charged to the obligor, unless the late payment was due to the obligor’s error or omission.	Not applicable; Servicer cannot make advances of its own funds on behalf of customers under the transaction agreements.
1122(d)(4)(xiii)	Disbursements made on behalf of an obligor are posted within two business days to the obligor’s records maintained by the servicer, or such other number of days specified in the transaction agreements.	Not applicable; Servicer cannot make advances of its own funds on behalf of customers to pay principal or interest on the bonds.

E-D-5

Regulation AB Reference	Servicing Criteria	Assessment
1122(d)(4)(xiv)	Delinquencies, charge-offs and uncollectible accounts are recognized and recorded in accordance with the transaction agreements.	Applicable; assessment below.
1122(d)(4)(xv)	Any external enhancement or other support, identified in Item 1114(a)(1) through (3) or Item 1115 of Regulation AB, is maintained as set forth in the transaction agreements.	Not applicable; no external enhancement is required under the transaction agreements.

3.             To the best of the undersigned’s knowledge, based on such review, the Servicer is in compliance in all material respects with the applicable servicing criteria set forth above as of and for the period ended the end of the fiscal year covered by the Issuer’s annual report on Form 10-K.  {If not true, include description of any material instance of noncompliance.}

4.             {[               ], an independent registered public accounting firm, has issued an attestation report on the Servicer’s assessment of compliance with the applicable servicing criteria as of and for the period ended the end of the fiscal year covered by the Issuer’s annual report on Form 10-K.}

5.             Capitalized terms used but not defined herein have their respective meanings as set forth in the Servicing Agreement.

Executed as of this {         } day of {              }, 20{    }.

PUBLIC SERVICE COMPANY OF NEW MEXICO,
as Servicer
By:
	Name:
	Title:

E-D-6

EXHIBIT E

FORM OF CERTIFICATE OF COMPLIANCE

See attached

E-E-1

CERTIFICATE OF COMPLIANCE

The undersigned hereby certifies that the undersigned is the duly elected and acting {          } of PUBLIC SERVICE COMPANY OF NEW MEXICO, as servicer (the “Servicer”) under the Energy Transition Property Servicing Agreement dated as of [__________], 2023 (the “Servicing Agreement”) by and between the Servicer and PNM ENERGY TRANSITION BOND COMPANY I, LLC, and further certifies that:

1.             A review of the activities of the Servicer and of its performance under the Servicing Agreement during the twelve months ended {          }, 20{  } has been made under the supervision of the undersigned pursuant to Section 3.03 of the Servicing Agreement.

2.             To the undersigned’s knowledge, based on such review, the Servicer has fulfilled all of its obligations in all material respects under the Servicing Agreement throughout the twelve months ended {          }, 20{  }, except as set forth on EXHIBIT A hereto.

Executed as of this {    } day of {          }, 20{  }.

PUBLIC SERVICE COMPANY OF NEW MEXICO,
as Servicer
By:
	Name:
	Title:

E-E-2

EXHIBIT A
TO
CERTIFICATE OF COMPLIANCE

LIST OF SERVICER DEFAULTS

The following Servicer Defaults, or events that with the giving of notice, the lapse of time, or both, would become Servicer Defaults, known to the undersigned occurred during the twelve months ended {          }, 20{  }:

Nature of Default	Status
{          }	{          }

E-E-3

EXHIBIT F

EXPECTED AMORTIZATION SCHEDULE

See Attached

EXPECTED AMORTIZATION SCHEDULE

Outstanding Principal Balance Per Series A Bond

Semi-Annual
Payment Date Series A Bonds
A-1 Series A Bonds
A-2

EXPECTED SINKING FUND SCHEDULE

Outstanding Principal Balance Per Series A Bond

Semi-Annual
Payment Date Series A Bonds
A-1 Series A Bonds
A-2

EX-10.2

Exhibit 10.2

ENERGY TRANSITION PROPERTY PURCHASE AND SALE AGREEMENT

by and between

PNM ENERGY TRANSITION BOND COMPANY I, LLC,

Issuer

and

PUBLIC SERVICE COMPANY OF NEW MEXICO,

Seller

Acknowledged and Accepted by

U.S. BANK TRUST COMPANY, NATIONAL ASSOCIATION, as Indenture Trustee

Dated as of [_____________], 2023

TABLE OF CONTENTS

ARTICLE I. DEFINITIONS AND RULES OF CONSTRUCTION		1
SECTION 1.01.	Definitions and Rules of Construction	1
ARTICLE II. CONVEYANCE OF SERIES PROPERTY		1
SECTION 2.01.	Conveyance of Series Property	1
SECTION 2.02.	Conditions to Conveyance of Series Property	2
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF SELLER		3
SECTION 3.01.	Organization and Good Standing	4
SECTION 3.02.	Due Qualification	4
SECTION 3.03.	Power and Authority	4
SECTION 3.04.	Binding Obligation	4
SECTION 3.05.	No Violation	4
SECTION 3.06.	No Proceedings	4
SECTION 3.07.	Approvals	5
SECTION 3.08.	The Series Property	5
SECTION 3.09.	Limitations on Representations and Warranties	8
ARTICLE IV. COVENANTS OF THE SELLER		8
SECTION 4.01.	Existence	8
SECTION 4.02.	No Liens	8
SECTION 4.03.	Use of Proceeds	9
SECTION 4.04.	Delivery of Collections	9
SECTION 4.05.	Notice of Liens	9
SECTION 4.06.	Compliance with Law	9
SECTION 4.07.	Covenants Related to Series A Bonds and Series Property	9
SECTION 4.08.	Protection of Title	10
SECTION 4.09.	Nonpetition Covenants	11
SECTION 4.10.	Taxes	11
SECTION 4.11.	Notice of Breach to Rating Agencies, Etc.	11
SECTION 4.12.	Filing Requirements	11
SECTION 4.13.	Further Assurances	11
SECTION 4.14.	Intercreditor Agreement	11

ARTICLE V. THE SELLER		12
SECTION 5.01.	Liability of Seller; Indemnities	12
SECTION 5.02.	Merger, Conversion or Consolidation of, or Assumption of the Obligations of, Seller	14
SECTION 5.03.	Limitation on Liability of Seller and Others	15
ARTICLE VI. MISCELLANEOUS PROVISIONS		15
SECTION 6.01.	Amendment	15
SECTION 6.02.	Notices	16
SECTION 6.03.	Assignment	16
SECTION 6.04.	Limitations on Rights of Third Parties	16
SECTION 6.05.	Severability	16
SECTION 6.06.	Separate Counterparts	17
SECTION 6.07.	Governing Law	17
SECTION 6.08.	Assignment to Indenture Trustee	17
SECTION 6.09.	Limitation of Liability	17
SECTION 6.10.	Waivers	17

EXHIBIT

Exhibit A Form of Bill of Sale

APPENDIX

Appendix A Definitions and Rules of Construction

This ENERGY TRANSITION PROPERTY PURCHASE AND SALE AGREEMENT, dated as of [______], 2023, is by and between PNM ENERGY TRANSITION BOND COMPANY I, LLC, a Delaware limited liability company (the “Issuer”), and PUBLIC SERVICE COMPANY OF NEW MEXICO (the “Seller”), a New Mexico corporation, and acknowledged and accepted by U.S. BANK TRUST COMPANY, NATIONAL ASSOCIATION, a national banking association, as indenture trustee (the “Indenture Trustee”).

RECITALS

WHEREAS, the Issuer desires to purchase the Series Property created pursuant to the Energy Transition Act;

WHEREAS, the Seller is willing to sell its rights and interests under the Financing Order to the Issuer, whereupon such rights and interests will become the Series Property;

WHEREAS, the Issuer, in order to finance the purchase of the Series Property, will issue the Series A Bonds under the Indenture; and

WHEREAS, the Issuer, to secure its obligations under the Series A Bonds and the Indenture, will pledge, among other things, all right, title and interest of the Issuer in and to the Series Property and this Sale Agreement to the Indenture Trustee for the benefit of the Secured Parties.

NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, the parties hereto agree as follows:

ARTICLE I.
DEFINITIONS AND RULES OF CONSTRUCTION

SECTION 1.01.      Definitions and Rules of Construction. Capitalized terms used but not otherwise defined in this Sale Agreement shall have the respective meanings given to such terms in Appendix A of the Indenture dated as of the date hereof (as amended, modified or supplemented from time to time in accordance with the provisions thereof, the “Indenture”), among the Issuer, the Indenture Trustee and U.S. Bank National Association, in its capacity as securities intermediary. Not all terms defined in Appendix A of the Indenture are used in this Sale Agreement. The rules of construction set forth in Appendix A of the Indenture shall apply to this Sale Agreement.

ARTICLE II.
CONVEYANCE OF SERIES PROPERTY

SECTION 2.01.      Conveyance of Series Property.

(a)            In consideration of the Issuer’s delivery to or upon the order of the Seller of $[___________], subject to the conditions specified in Section 2.02, the Seller does hereby irrevocably sell, transfer, assign, set over and otherwise convey to the Issuer, without recourse or warranty, except as set forth herein, all right, title and interest of the Seller in, to and under the Series Property (such sale, transfer, assignment, setting over and conveyance of the Series Property includes, to the fullest extent permitted by the Energy Transition Act and the New Mexico UCC, the assignment of all revenues or other proceeds of or arising from the Series Charges related to the Series Property, as the same may be adjusted from time to time pursuant to the Financing Order and the Energy Transition Act). Such sale, transfer, assignment, setting over and conveyance is hereby expressly stated to be a sale or other absolute transfer and, pursuant to Section 62-18-14(A) of the Energy Transition Act, shall be treated as an absolute transfer and true sale and not as a pledge of or secured transaction relating to the Seller’s right, title, and interest in, to, and under the Series Property. The Seller and the Issuer agree that after giving effect to the sale, transfer, assignment, setting over and conveyance contemplated hereby the Seller has no right, title or interest in, to or under the Series Property to which a security interest could attach because (i) it has sold, transferred, assigned, set over and conveyed all right, title and interest in and to the Series Property to the Issuer, (ii) as provided in Section 62-18-14 of the Energy Transition Act, all right, title and interest shall have passed to the Issuer and (iii) as provided in Section 62-18-14(B) of the Energy Transition Act, appropriate financing statements shall have been filed and such transfer is perfected against all third parties, except creditors holding a prior security interest, ownership interest or assignment in the Series Property previously perfected in accordance with Section 62-18-13 of the Energy Transition Act. If such sale, transfer, assignment, setting over and conveyance is held by any court of competent jurisdiction not to be an absolute transfer and true sale as provided in Section 62-18-14(A) of the Energy Transition Act, then such sale, transfer, assignment, setting over and conveyance shall be treated as a pledge of the Series Property and as the creation of a security interest (within the meaning of the Energy Transition Act and the UCC) in the Series Property and, without prejudice to its position that it has absolutely transferred all of its rights in the Series Property to the Issuer, the Seller hereby grants a security interest in the Series Property to the Issuer (and to the Indenture Trustee for the benefit of the Secured Parties) to secure their respective rights under the Basic Documents to receive the Series Charges and all other Series Property.

(b)            Subject to Section 2.02, the Issuer does hereby purchase the Series Property from the Seller for the consideration set forth in Section 2.01(a).

SECTION 2.02.      Conditions to Conveyance of Series Property. The obligation of the Seller to sell, and the obligation of the Issuer to purchase, Series Property on the Series Closing Date shall be subject to the satisfaction or waiver of each of the following conditions:

(a)            on or prior to the Series Closing Date, the Seller shall have delivered to the Issuer a duly executed Bill of Sale identifying and conveying the Series Property on the Series Closing Date;

(b)            on or prior to the Series Closing Date, the Seller shall have obtained the Financing Order creating the Series Property;

(c)            as of the Series Closing Date, the Seller is not insolvent and will not have been made insolvent by such sale and the Seller is not aware of any pending insolvency with respect to itself;

(d)            as of the Series Closing Date, (i) the representations and warranties of the Seller in this Sale Agreement must be true and correct with the same force and effect as if made on that date (except to the extent they relate to an earlier date), (ii) no breach of any covenant or agreement of the Seller contained in this Sale Agreement has occurred and is continuing and (iii) no Servicer Default shall have occurred and be continuing;

(e)            as of the Series Closing Date, (i) the Issuer shall have sufficient funds available to pay the purchase price for the Series Property to be conveyed on such date and (ii) all conditions to the issuance of the Series A Bonds intended to provide such funds set forth in the Indenture and the applicable Series Supplement shall have been satisfied or waived;

2

(f)            on or prior to the Series Closing Date, the Seller shall have taken all action required to transfer to the Issuer ownership of the Series Property on such date, free and clear of all Liens other than Liens created by the Issuer pursuant to the Basic Documents and to perfect such transfer, including filing any statements or filings under the Energy Transition Act or the New Mexico UCC; and the Issuer or the Servicer, on behalf of the Issuer, shall have taken any action required for the Issuer to grant the Indenture Trustee a Lien and first priority perfected security interest in the Collateral and maintain such security interest as of the Series Closing Date;

(g)            the Seller shall have received and delivered to the Rating Agencies and the Issuer any Opinions of Counsel required by the Rating Agencies;

(h)            the Seller shall have received and delivered to the Issuer and the Indenture Trustee an opinion or opinions of outside tax counsel (as selected by the Seller, and in form and substance reasonably satisfactory to the Issuer) to the effect that (i) the Issuer will not be subject to U.S. federal income tax as an entity separate from its sole owner and that the Series A Bonds will be treated as debt of the Issuer’s sole owner for U.S. federal income tax purposes and (ii) for U.S. federal income tax purposes, the Seller will not be treated as recognizing gross income upon the issuance of the Series A Bonds;

(i)            on and as of the Series Closing Date, each of the Certificate of Formation, the LLC Agreement, the Servicing Agreement, this Sale Agreement, the Indenture, the Series Supplement, the Financing Order and the Energy Transition Act shall be in full force and effect;

(j)            the Seller shall have delivered to the Indenture Trustee and the Issuer an Officer’s Certificate confirming the satisfaction of each condition precedent specified in this Section 2.02;

(k)            the Seller shall have received the purchase price for the Series Property.

ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF SELLER

Subject to Section 3.09, the Seller makes the following representations and warranties, as of the Series Closing Date, and the Seller acknowledges that the Issuer has relied thereon in acquiring the Series Property. The representations and warranties shall survive the sale and transfer of Series Property to the Issuer and the pledge thereof to the Indenture Trustee pursuant to the Indenture. The Seller agrees that (i) the Issuer may assign the right to enforce the following representations and warranties to the Indenture Trustee and (ii) the following representations and warranties inure to the benefit of the Issuer and the Indenture Trustee.

3

SECTION 3.01.      Organization and Good Standing. The Seller is a corporation duly organized, validly existing and in good standing under the laws of the state of New Mexico, with requisite power and authority to own its properties and conduct its business as of the Series Closing Date.

SECTION 3.02.      Due Qualification. The Seller is duly qualified to do business and is in good standing, and has obtained all necessary licenses and approvals, in all jurisdictions in which the ownership or lease of property or the conduct of its business shall require such qualifications, licenses or approvals (except where the failure to so qualify or obtain such licenses and approvals would not be reasonably likely to have a material adverse effect on the Seller’s business, operations, assets, revenues or properties, the Series Property, the Issuer or the Series A Bonds).

SECTION 3.03.      Power and Authority. The Seller has the requisite corporate power and authority to execute and deliver this Sale Agreement and to carry out its terms. The Seller has full corporate power and authority to own the Series Property and to sell and assign the Series Property to the Issuer and the Seller has duly authorized such sale and assignment to the Issuer by all necessary corporate action. The execution, delivery and performance of obligations under this Sale Agreement have been duly authorized by all necessary corporate action on the part of the Seller under its organizational documents and laws.

SECTION 3.04.      Binding Obligation. This Sale Agreement constitutes a legal, valid and binding obligation of the Seller, enforceable against the Seller in accordance with its terms, subject to bankruptcy, receivership, insolvency, reorganization, moratorium or other laws affecting creditors’ rights generally from time to time in effect and to general principles of equity (including concepts of materiality, reasonableness, good faith and fair dealing), regardless of whether considered in a proceeding in equity or at law.

SECTION 3.05.      No Violation. The consummation of the transactions contemplated by this Sale Agreement and the fulfillment of the terms hereof do not: (a) conflict with, result in any breach of any of the terms and provisions of, or constitute (with or without notice or lapse of time) a default under, the Seller’s organizational documents or any indenture, or other material agreement or instrument to which the Seller is a party or by which it is bound; or (b) result in the creation or imposition of any Lien upon any of the Seller’s properties pursuant to the terms of any such indenture, agreement or other instrument (other than any Lien that may be granted in the Issuer’s favor or any Lien under the Basic Documents or any Liens created by the Issuer pursuant to the Energy Transition Act) or violate any existing law or any order, rule or regulation applicable to the Seller issued by any Governmental Authority having jurisdiction over the Seller or its properties.

SECTION 3.06.      No Proceedings. There are no proceedings pending or, to the Seller’s knowledge, investigations pending or threatened or proceedings threatened, before any Governmental Authority having jurisdiction over the Seller or its properties: (a) asserting the invalidity of the Basic Documents, the Series A Bonds, the Energy Transition Act or the Financing Order; (b) seeking to prevent the issuance of the Series A Bonds or the consummation of any of the transactions contemplated by the Basic Documents; (c) seeking a determination or ruling that could reasonably be expected to materially and adversely affect the performance by the Seller of its obligations under, or the validity or enforceability of, the Basic Documents, the Series A Bonds or the Financing Order; or (d) challenging the Seller’s treatment of the Series A Bonds as debt of the Seller for U.S. federal income tax purposes.

4

SECTION 3.07.      Approvals. No governmental approvals, authorizations, consents, orders or other actions or filings, other than filings under the Energy Transition Act or with the New Mexico Secured Transaction Registry or the UCC of Delaware, are required for the Seller to execute, deliver and perform its obligations under this Sale Agreement except those which have previously been obtained or made or are required to be made by the Servicer in the future pursuant to the Servicing Agreement. The Seller has provided the Commission with a copy of each registration statement, prospectus, Current Report on Form 8-K or other filing made with the SEC as part of the transactions contemplated hereby.

SECTION 3.08.      The Series Property.

(a)            Information. Subject to Section 3.08(h), at the Series Closing Date, all written information, as amended or supplemented from time to time, provided by the Seller to the Issuer with respect to the Series Property (including the Expected Amortization Schedule, the Expected Sinking Fund Schedule and the Financing Order) is true and correct in all material respects.

(b)            True-Sale and Absolute Transfer. It is the intention of the parties hereto that the transfer, sale, assignment and conveyance of the Series Property herein contemplated constitutes a sale or other absolute transfer of all of the Seller’s right, title and interest in the Series Property to the Issuer; upon the execution and delivery of this Sale Agreement and the Bill of Sale on the Series Closing Date, the Series Property shall be validly transferred, sold and assigned to the Issuer and the Seller will have no right, title or interest in the Series Property and the Series Property would not be part of the estate of the Seller as debtor in the event of a filing of a bankruptcy petition by or against the Seller under any bankruptcy law. The Seller hereby represents that no portion of the Series Property has been sold, transferred, assigned, pledged or otherwise conveyed by the Seller to any Person other than the Issuer, and, to the Seller’s knowledge (after due inquiry), no security agreement, financing statement or equivalent security or lien instrument listing the Seller as debtor covering all or a portion of the Series Property is on file or of record in any jurisdiction, except such as may have been filed or recorded in favor of the Issuer or the Indenture Trustee in connection with the Basic Documents.

(c)            Title. The Seller is the sole owner of the Series Property sold to the Issuer on the Series Closing Date and such sale is made free and clear of all Liens other than Liens created by the Issuer pursuant to the Indenture and the Series Supplement. All actions or filings, including filings under the Energy Transition Act and the UCC, necessary to give the Issuer a valid ownership interest in the Series Property and to grant the Indenture Trustee a first priority perfected security interest in the Series Property, free and clear of all Liens of the Seller or any other Person have been taken or made.

5

(d)            Financing Order; Other Approvals. On the Series Closing Date, under the laws of the State of New Mexico (including the Energy Transition Act) and the United States in effect on the Series Closing Date: (i) the Financing Order pursuant to which the Series Property has been created is in full force and effect and is Final; (ii) as of the issuance of the Series A Bonds, the Series A Bonds are entitled to the protections provided by the Energy Transition Act and, accordingly, the Financing Order and the Series Charges are not revocable by the Commission; (iii) revisions to Public Service Company of New Mexico’s electric tariff to implement the Series Charges shall be filed not later than 15 days after the Series Closing Date and, in accordance with the Energy Transition Act, the Series Charges will become effective 15 days after such filing, such revisions shall be consistent with the Financing Order, and, pursuant to the Energy Transition Act, any electric tariff implemented consistent with a Financing Order issued by the Commission is not subject to modification by the Commission except for True-Up Adjustments made in accordance with the Energy Transition Act; (iv) the process by which the Financing Order creating the Series Property was adopted and approved complies with all applicable laws, rules and regulations; (v) the Financing Order is not subject to appeal and is legally enforceable, and the process by which it was issued complied with all applicable laws, rules and regulations and (vi) no Governmental Approvals, authorizations, consents, orders or other actions or filings, other than filings under the Energy Transition Act or the UCC of New Mexico or Delaware, are required for the Seller to executed, deliver and perform its obligations under this Sale Agreement except those which have previously been obtained or made or are required to be made by the Servicer in the future pursuant to the Servicing Agreement.

(e)            State Action. Under the Energy Transition Act, the State of New Mexico may not take or permit any action that would impair the value of the Series Property or reduce or alter, except for the True-Up Adjustment, or reduce, alter or impair the Series Charges to be imposed, collected and remitted to the Issuer, for the benefit of the Holders of the Series A Bonds until the principal of, interest on, and redemption premium (if any) or other charges incurred in connection with the Series A Bonds are paid in full. Furthermore, under the contract clauses of the Constitution of the State of New Mexico and the United States Constitution, the State of New Mexico, including the Commission, could not take any action of a legislative character, including repeal or amendment of the Energy Transition Act or the Financing Order that substantially impairs the value of the Series Property or substantially reduces or alters, except for the True-Up Adjustment, or substantially impairs the Series Charges to be imposed, collected and remitted to the Issuer for the benefit of the Holders of the Series A Bonds, unless such action is a reasonable exercise of the State of New Mexico’s sovereign powers and of a character reasonable and appropriate to further a significant and legitimate public purpose and, under the takings clauses of the constitution of the State of New Mexico and the United States Constitution, the State of New Mexico, including the Commission, could not repeal or amend the Energy Transition Act or the Financing Order or take any other action in contravention of the State Pledge, without paying just compensation to the Holders of the Series A Bonds, as determined by a court of competent jurisdiction, if such action constitutes a permanent appropriation of a substantial property interest of the Holders of the Series A Bonds in the Series Property and deprives the Holders of the Series A Bonds of their reasonable expectations arising from their investment in the Series A Bonds. However, there is no assurance that, even if a court were to award just compensation, it would be sufficient to pay the full amount of principal of, interest on and redemption premium (if any) on the Series A Bonds.

6

(f)            Assumptions. On the Series Closing Date, based upon the information available to the Seller on such date, the assumptions used in calculating the Series Charges are reasonable and are made in good faith. Notwithstanding the foregoing, the Seller makes no representation or warranty, express or implied, that amounts actually collected arising from those Series Charges will in fact be sufficient to meet the payment obligations on the related Series A Bonds or that the assumptions used in calculating such Series Charges will in fact be realized.

(g)            Creation of Series Property.

(i)            For purposes of the Energy Transition Act, the Series Property constitutes a present property right that will continue to exist until the Series A Bonds issued pursuant to the Financing Order and all Financing Costs of the Series A Bonds are paid in full; and

(ii)            the Series Property consists of (A) all rights and interest of the Seller under the Financing Order, including the right to impose, charge, collect and receive Series Charges in an amount necessary to provide for full payment and recovery of all Energy Transition Costs identified in the Financing Order; (B) the right under the Financing Order to obtain True-Up Adjustments of the Series Charges; and (C) all revenues or other proceeds arising out of the rights and interests described in (A) and (B).

(h)            Nature of Representations and Warranties. The representations and warranties set forth in this Section 3.08, insofar as they involve conclusions of law, are made not on the basis that the Seller purports to be a legal expert or to be rendering legal advice, but rather to reflect the parties’ good faith understanding of the legal basis on which the parties are entering into this Sale Agreement and the other Basic Documents and the basis on which the Holders are purchasing the Series A Bonds, and to reflect the parties’ agreement that, if such understanding turns out to be incorrect or inaccurate, the Seller will be obligated to indemnify the Issuer and its permitted assigns (to the extent required by and in accordance with Section 5.01), and that the Issuer and its permitted assigns will be entitled to enforce any rights and remedies under the Basic Documents on account of such inaccuracy to the same extent as if the Seller had breached any other representations or warranties hereunder.

(i)            Prospectus. As of the date hereof, the information describing the Seller under the caption “Public Service Company of New Mexico’s Review of Energy Transition Property” and “Public Service Company of New Mexico—The Depositor, Sponsor, Seller and Initial Servicer” in the prospectus dated [______], 2023 relating to the Series A Bonds is true and correct in all material respects.

(j)            Solvency. After giving effect to the sale of the Series Property hereunder, the Seller:

(i)            is solvent and expects to remain solvent;

(ii)           is adequately capitalized to conduct its business and affairs considering its size and the nature of its business and intended purpose;

7

(iii)          is not engaged in nor does it expect to engage in a business for which its remaining property represents unreasonably small capital;

(iv)          reasonably believes that it will be able to pay its debts as they come due; and

(v)           is able to pay its debts as they mature and does not intend to incur, or believes that it will not incur, indebtedness that it will not be able to repay at its maturity.

(k)            No Court Order. There is no order by any court providing for the revocation, alteration, limitation or other impairment of the Energy Transition Act, the Financing Order, the Series Property or the Series Charges or any rights arising under any of them or that seeks to enjoin the performance of any obligations under the Financing Order.

(l)            Survival of Representations and Warranties The representations and warranties set forth in this Section 3.08 shall survive the execution and delivery of this Sale Agreement and may not be waived by any party hereto except pursuant to a written agreement executed in accordance with Article VI and as to which the Rating Agency Condition has been satisfied.

SECTION 3.09.      Limitations on Representations and Warranties. Without prejudice to any of the other rights of the parties, the Seller will not be in breach of any representation or warranty as a result of a change in law by means of any legislative enactment, constitutional amendment or voter referendum. Notwithstanding anything in this Sale Agreement to the contrary, the Seller makes no representation that amounts collected will be sufficient to meet the obligations on the Series A Bonds.

ARTICLE IV.
COVENANTS OF THE SELLER

SECTION 4.01.      Existence. Subject to Section 5.02, so long as any of the Series A Bonds are Outstanding, the Seller (a) will keep in full force and effect its existence and remain in good standing or equivalent status under the laws of the jurisdiction of its organization and (b) will obtain and preserve its qualifications to do business in each jurisdiction in which such qualification is or will be necessary to protect the validity and enforceability of this Sale Agreement and each other instrument or agreement to which the Seller is a party necessary to the proper administration of this Sale Agreement and the transactions contemplated hereby.

SECTION 4.02.      No Liens. Except for the conveyances under this Sale Agreement or any Lien for the benefit of the Issuer, the Holders of the Series A Bonds or the Indenture Trustee, the Seller will not sell, pledge, assign or transfer to any other Person, or grant, create, incur, assume or suffer to exist any Lien on, any of the Series Property, or any interest therein. The Seller will not at any time assert any Lien against or with respect to any Series Property, and will defend the right, title and interest of the Issuer and of the Indenture Trustee, on behalf of the Secured Parties, in, to and under the Series Property against all claims of third parties claiming through or under the Seller.

8

SECTION 4.03.      Use of Proceeds. The Seller will use the proceeds of the sale of the related Series Property in accordance with the Financing Order.

SECTION 4.04.      Delivery of Collections. In the event that the Seller receives any Energy Transition Charge Charge Collections or other payments in respect of the Series Charges or the proceeds thereof, other than in its capacity as the Servicer, the Seller agrees to pay to the Servicer, on behalf of the Issuer, all payments received by it in respect thereof as soon as practicable after receipt thereof. Prior to such remittance to the Servicer by the Seller, the Seller agrees that such amounts are held by it in trust for the Issuer and the Indenture Trustee.

SECTION 4.05.      Notice of Liens. The Seller shall notify the Issuer and the Indenture Trustee promptly after becoming aware of any Lien on any of the Series Property, other than the conveyances hereunder and any Lien pursuant to the Basic Documents, including the Lien in favor of the Indenture Trustee for the benefit of the Holders of the Series A Bonds.

SECTION 4.06.      Compliance with Law. The Seller hereby agrees to comply with its organizational or governing documents and all laws, treaties, rules, regulations and determinations of any Governmental Authority applicable to it, except to the extent that failure to so comply would not materially adversely affect the Issuer’s or the Indenture Trustee’s interests in the Series Property under any of the Basic Documents to which the Seller is party or of Seller’s performance of its material obligations under this Sale Agreement or under any of the other Basic Documents to which it is a party.

SECTION 4.07.      Covenants Related to Series A Bonds and Series Property.

(a)            So long as any of the Series A Bonds are Outstanding, the Seller shall treat the Series Property as the Issuer’s property for all purposes other than financial accounting or tax purposes.

(b)            So long as any of the Series A Bonds are Outstanding, the Seller shall treat such Series A Bonds as debt of the Issuer and not that of the Seller, except for financial accounting and tax purposes. For U.S. federal income tax purposes and, to the extent consistent with applicable state, local and other tax law, for purposes of state, local or other taxes, so long as any of the Series A Bonds are Outstanding, the Seller agrees to treat such Series A Bonds as indebtedness of the Seller (as the sole owner of the Issuer) secured by the Collateral unless otherwise required by appropriate taxing authorities.

(c)            So long as any of the Series A Bonds are Outstanding, the Seller shall disclose in its financial statements that the Issuer and not the Seller is the owner of the Series Property and that the assets of the Issuer are not available to pay creditors of the Seller or its Affiliates (other than the Issuer).

(d)            So long as any of the Series A Bonds are Outstanding, the Seller shall not own or purchase any Series A Bonds.

(e)            So long as the Series A Bonds are Outstanding, the Seller shall disclose the effects of all transactions between the Seller and the Issuer in accordance with generally accepted accounting principles.

9

(f)            The Seller agrees that, upon the sale by the Seller of the Series Property to the Issuer pursuant to this Sale Agreement, (i) to the fullest extent permitted by law, including applicable Commission Regulations and the Energy Transition Act, the Issuer shall have all of the rights originally held by the Seller with respect to the Series Property, including the right (subject to the terms of the Servicing Agreement) to exercise any and all rights and remedies to collect any amounts payable by any Customer in respect of the Series Property, notwithstanding any objection or direction to the contrary by the Seller (and the Seller agrees not to make any such objection or to take any such contrary action) and (ii) any payment by any Customer directly to the Issuer shall discharge such Customer’s obligations, if any, in respect of the Series Property to the extent of such payment, notwithstanding any objection or direction to the contrary by the Seller.

(g)            So long as any of the Series A Bonds are Outstanding, (i) in all proceedings relating directly or indirectly to the Series Property, the Seller shall affirmatively certify and confirm that it has sold all of its rights and interests in and to such property (other than for financial accounting or tax purposes), (ii) the Seller shall not make any statement or reference in respect of the Series Property that is inconsistent with the ownership interest of the Issuer (other than for financial accounting or tax purposes), (iii) the Seller shall not take any action in respect of the Series Property except solely in its capacity as the Servicer thereof pursuant to the Servicing Agreement or as otherwise contemplated by the Basic Documents, and (iv) neither the Seller nor the Issuer shall take any action, file any tax return or make any election inconsistent with the treatment of the Issuer, for U.S. federal income tax purposes and, to the extent consistent with applicable state tax law, state income and franchise tax purposes, as a disregarded entity that is not separate from the Seller (or, if relevant, from another sole owner of the Issuer).

SECTION 4.08.      Protection of Title. The Seller shall execute and file such filings, including filings with the New Mexico Secured Transaction Registry pursuant to the Energy Transition Act, and cause to be executed and filed such filings, all in such manner and in such places as may be required by law to fully preserve, maintain, protect and perfect the ownership interest of the Issuer, and the back-up precautionary security interest of the Issuer pursuant to Section 2.01, and the first priority security interest of the Indenture Trustee in the Series Property, including all filings (including but not limited to continuation statements) required under the Energy Transition Act and the UCC relating to the transfer of the ownership of the rights and interest in the Series Property by the Seller to the Issuer or the pledge of the Issuer’s interest in the Series Property to the Indenture Trustee. The Seller shall deliver or cause to be delivered to the Issuer and the Indenture Trustee file-stamped copies of, or filing receipts for, any document filed as provided above, as soon as available following such filing. The Seller shall institute any action or proceeding necessary to compel performance by the Commission, the State of New Mexico or any of their respective agents of any of their obligations or duties under the Energy Transition Act or the Financing Order and the Seller agrees to take such legal or administrative actions, including defending against or instituting and pursuing legal actions and appearing or testifying at hearings or similar proceedings, in each case as may be reasonably necessary (a) to seek to protect the Issuer and the Secured Parties from claims, state actions or other actions or proceedings of third parties that, if successfully pursued, would result in a breach of any representation set forth in Article III or any covenant set forth in Article IV and (b) to seek to block or overturn any attempts to cause a repeal of, modification of or supplement to the Energy Transition Act or the Financing Order, or the rights of Holders of the Series A Bonds by legislative enactment or constitutional amendment that would be materially adverse to the Issuer or the Secured Parties or that would otherwise cause an impairment of the rights of the Issuer or the Secured Parties. The costs of any such actions or proceedings undertaken by the Seller will be reimbursed by the Issuer as an Operating Expense.

10

SECTION 4.09.      Nonpetition Covenants. Notwithstanding any prior termination of this Sale Agreement or the Indenture, the Seller shall not, prior to the date that is one year and one day after the termination of the Indenture and payment in full of the Series A Bonds or any other amounts owed under the Indenture or the Series Supplement, petition or otherwise invoke or cause the Issuer to invoke the process of any Governmental Authority for the purpose of commencing or sustaining a voluntary case against the Issuer under any U.S. federal or state bankruptcy, insolvency or similar law, appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator or other similar official or any substantial part of the property of the Issuer, or ordering the winding up or liquidation of the affairs of the Issuer.

SECTION 4.10.      Taxes. So long as any of the Series A Bonds are outstanding, the Seller shall, and shall cause each of its Affiliates to, pay all material taxes, assessments and governmental charges imposed upon it or any of its properties or assets or with respect to any of its franchises, business, income or property before any penalty accrues thereon if the failure to pay any such taxes, assessments and governmental charges would, after any applicable grace periods, notices or other similar requirements, result in a Lien on the Series Property; provided, that no such tax need be paid if the Seller or one of its Affiliates is contesting the same in good faith by appropriate proceedings promptly instituted and diligently conducted and if the Seller or such Affiliate has established appropriate reserves as shall be required in conformity with generally accepted accounting principles.

SECTION 4.11.      Notice of Breach to Rating Agencies, Etc. Promptly after obtaining knowledge thereof, in the event of a breach in any material respect (without regard to any materiality qualifier contained in such representation, warranty or covenant) of any of the Seller’s representations, warranties or covenants contained herein, the Seller shall promptly notify the Issuer, the Indenture Trustee and the Rating Agencies of such breach. For the avoidance of doubt, any breach that would adversely affect scheduled payments on the Series A Bonds will be deemed to be a material breach for purposes of this Section 4.11.

SECTION 4.12.      Filing Requirements. The Seller shall comply with all filing requirements, including any post-closing filings, in accordance with the Financing Order and the Energy Transition Act.

SECTION 4.13.      Further Assurances. Upon the request of the Issuer, the Seller shall execute and deliver such further instruments and do such further acts as may be reasonably necessary to carry out the provisions and purposes of this Sale Agreement.

SECTION 4.14.      Intercreditor Agreement. The Seller shall not become a party to any (i) trade receivables purchase and sale agreement or similar arrangement under which it sells all or any portion of its accounts receivables owing from New Mexico electric distribution customers unless the Indenture Trustee, the Seller and the other parties to such additional arrangement shall have (A) entered into an intercreditor agreement in connection therewith, substantially in the form of Exhibit D to the Indenture, with such changes as may be agreed among the parties thereto so long as such changes do not materially and adversely affect any Holder’s rights in and to any Collateral or otherwise under the Indenture, and (B) the terms of the documentation evidencing such trade receivables purchase and sale arrangement or similar arrangement shall expressly exclude Series Property (including Series Charges) from any receivables or other assets pledged or sold under such arrangement or (ii) sale agreement selling to any Affiliate property consisting of charges similar to the Series Charges sold pursuant to this Sale Agreement, payable by Customers pursuant to the Energy Transition Act or any similar law, unless (A) the Seller and the other parties to such arrangement shall have entered into an intercreditor agreement as described in (i)(A) above and (B) the Rating Agency Condition shall have been satisfied.

11

ARTICLE V.
THE SELLER

SECTION 5.01.      Liability of Seller; Indemnities.

(a)            The Seller shall be liable in accordance herewith only to the extent of the obligations specifically undertaken by the Seller under this Sale Agreement.

(b)            The Seller shall indemnify the Issuer and the Indenture Trustee (for the benefit of the Secured Parties) and each of their respective officers, directors, employees, trustees, managers and agents for, and defend and hold harmless each such Person from and against, any and all taxes (other than taxes imposed on Holders as a result of their ownership of a Series A Bond) that may at any time be imposed on or asserted against any such Person as a result of the sale and assignment of the Series Property to the Issuer, including any franchise, sales, gross receipts, general corporation, tangible personal property, privilege or license taxes, but excluding any taxes imposed as a result of a failure of such Person to withhold or remit taxes with respect to payments on any Series A Bond, it being understood that the Holders shall be entitled to enforce their rights against the Seller under this Section 5.01(b) solely through a cause of action brought for their benefit by the Indenture Trustee as set forth in the Indenture.

(c)            The Seller shall indemnify the Issuer and the Indenture Trustee (for the benefit of the Secured Parties) and each of their respective officers, directors, employees, trustees, managers and agents for, and defend and hold harmless each such Person from and against, any and all taxes (other than taxes imposed on Holders as a result of their ownership of a Series A Bond) that may at any time be imposed on or asserted against any such Person as a result of the Issuer’s ownership and assignment of the Series Property, the issuance and sale by the Issuer of the Series A Bonds or the other transactions contemplated in the Basic Documents, including any franchise, sales, gross receipts, general corporation, tangible personal property, privilege or license taxes, but excluding any taxes imposed as a result of a failure of such Person to withhold or remit taxes with respect to payments on any Series A Bond.

(d)            The Seller shall indemnify the Issuer, the Indenture Trustee (for the benefit of the Secured Parties) and each of their respective officers, directors, employees and agents for, and defend and hold harmless each such Person from and against, all Losses that may be imposed on, incurred by or asserted against each such Person, in each such case, as a result of the Seller’s breach of any of its representations, warranties or covenants contained in this Sale Agreement.

12

(e)            Indemnification under Sections 5.01(b), 5.01(c), 5.01(d) and 5.01(f) shall include reasonable out-of-pocket fees and expenses of investigation and litigation (including reasonable attorneys’ fees and expenses, including such fees and expenses incurred in connection with enforcing the indemnification obligations of the Seller hereunder).

(f)            The Seller shall indemnify the Indenture Trustee (for itself) and each Independent Manager, and any of their respective officers, directors, employees and agents (each, an “Indemnified Person”), for, and defend and hold harmless each such Person from and against, any and all Losses incurred by any of such Indemnified Persons as a result of the Seller’s breach of any of its representations and warranties or covenants contained in this Sale Agreement, except to the extent of Losses either resulting from the willful misconduct, bad faith or gross negligence of such Indemnified Person or resulting from a breach of a representation or warranty made by such Indemnified Person in any of the Basic Documents that gives rise to the Seller’s breach. The Seller shall not be required to indemnify an Indemnified Person for any amount paid or payable by such Indemnified Person in the settlement of any action, proceeding or investigation without the prior written consent of the Seller, which consent shall not be unreasonably withheld. Promptly after receipt by an Indemnified Person of notice of the commencement of any action, proceeding or investigation, such Indemnified Person shall, if a claim in respect thereof is to be made against the Seller under this Section 5.01(f), notify the Seller in writing of the commencement thereof. Failure by an Indemnified Person to so notify the Seller shall relieve the Seller from the obligation to indemnify and hold harmless such Indemnified Person under this Section 5.01(f) only to the extent that the Seller suffers actual prejudice as a result of such failure. With respect to any action, proceeding or investigation brought by a third party for which indemnification may be sought under this Section 5.01(f), the Seller shall be entitled to conduct and control, at its expense and with counsel of its choosing that is reasonably satisfactory to such Indemnified Person, the defense of any such action, proceeding or investigation (in which case the Seller shall not thereafter be responsible for the fees and expenses of any separate counsel retained by the Indemnified Person except as set forth below); provided, that the Indemnified Person shall have the right to participate in such action, proceeding or investigation through counsel chosen by it and at its own expense. Notwithstanding the Seller’s election to assume the defense of any action, proceeding or investigation, the Indemnified Person shall have the right to employ separate counsel (including local counsel), and the Seller shall bear the reasonable fees, costs and expenses of such separate counsel if (i) the defendants in any such action include both the Indemnified Person and the Seller and the Indemnified Person shall have reasonably concluded that there may be legal defenses available to it that are different from or additional to those available to the Seller, (ii) the Seller shall not have employed counsel reasonably satisfactory to the Indemnified Person to represent the Indemnified Person within a reasonable time after notice of the institution of such action, (iii) the Seller shall authorize the Indemnified Person to employ separate counsel at the expense of the Seller or (iv) in the case of the Indenture Trustee, such action exposes the Indenture Trustee to a material risk of criminal liability or forfeiture or a Servicer Default has occurred and is continuing. Notwithstanding the foregoing, the Seller shall not be obligated to pay for the fees, costs and expenses of more than one separate counsel for the Indemnified Persons other than one local counsel, if appropriate.

13

(g)            The Seller shall indemnify the Servicer (if the Servicer is not the Seller) for the costs of any action instituted by the Servicer pursuant to Section 5.02(d) of the Servicing Agreement that are not paid as Operating Expenses in accordance with the priorities set forth in Section 8.02(e) of the Indenture.

(h)            The remedies provided in this Sale Agreement are the sole and exclusive remedies against the Seller for breach of its representations and warranties in this Sale Agreement.

(i)            Indemnification under this Section 5.01 shall survive any repeal of, modification of, or supplement to, or judicial invalidation of, the Energy Transition Act or the Financing Order and shall survive the resignation or removal of the Indenture Trustee or the termination of this Sale Agreement and will rank pari passu with other general, unsecured obligations of the Seller. The Seller shall not indemnify any party under this Section 5.01 for any changes in law after the Series Closing Date, whether such changes in law are effected by means of any legislative enactment, any constitutional amendment or any final and non-appealable judicial decision.

SECTION 5.02.      Merger, Conversion or Consolidation of, or Assumption of the Obligations of, Seller. Any Person (a) into which the Seller may be merged or consolidated and which succeeds to all or substantially all of the electric distribution business of the Seller, (b) which results from the division of the Seller into two or more Persons and which succeeds to all or substantially all of the electric distribution business of the Seller, (c) which may result from any merger or consolidation to which the Seller shall be a party and which succeeds to all or substantially all of the electric distribution business of the Seller, (d) which may succeed to the properties and assets of the Seller substantially as a whole and which succeeds to all or substantially all of the electric distribution business of the Seller, or (e) which may otherwise succeed to all or substantially all of the electric distribution business of the Seller, which Person in any of the foregoing cases executes an agreement of assumption to perform every obligation of the Seller under this Sale Agreement, shall be the successor to the Seller hereunder without the execution or filing of any document or any further act by any of the parties to this Sale Agreement; provided, however, that: (i) immediately after giving effect to such transaction, no representation or warranty made pursuant to Article III shall have been breached and no Servicer Default, and no event that, after notice or lapse of time, or both, would become a Servicer Default, shall have occurred and be continuing, (ii) the Seller shall have delivered to the Issuer and the Indenture Trustee an Officer’s Certificate and an Opinion of Counsel each stating that such consolidation, reorganization, merger or succession and such agreement of assumption comply with this Section 5.02 and that all conditions precedent, if any, provided for in this Sale Agreement relating to such transaction have been complied with, (iii) the Seller shall have delivered to the Issuer and the Indenture Trustee an Opinion of Counsel stating that, in the opinion of such counsel, either (A) all filings to be made by the Seller or the Seller, in its capacity as Seller or as Servicer, including filings under the Energy Transition Act with the New Mexico Secured Transaction Registry and the UCC, that are necessary or advisable to fully preserve and protect the respective interests of the Issuer and the Indenture Trustee in the Series Property have been executed and filed, and reciting the details of such filings, or (B) no such action is necessary to preserve and protect such interests, (iv) the Seller shall have given the Rating Agencies prior written notice of such transaction and (v) the Seller shall have delivered to the Issuer, the Indenture Trustee and the Rating Agencies an Opinion of Counsel from external tax counsel stating that, for U.S. federal income tax purposes, such consolidation, conversion, merger or succession and such agreement of assumption will not result in a material U.S. federal income tax consequence to the Issuer, the Seller, the Indenture Trustee or the Holders of Series A Bonds. When any Person (or more than one Person) acquires the properties and assets of the Seller substantially as a whole or otherwise becomes the successor, whether by merger, conversion, consolidation, sale, transfer, lease, management contract or otherwise, to all or substantially all of the assets of the Seller in accordance with the terms of this Section 5.02, then, upon satisfaction of all of the other conditions of this Section 5.02, the preceding Seller shall automatically and without further notice be released from all of its obligations hereunder.

14

SECTION 5.03.      Limitation on Liability of Seller and Others. The Seller and any director, officer, employee or agent of the Seller may rely in good faith on the advice of counsel or on any document of any kind, prima facie properly executed and submitted by any Person, respecting any matters arising hereunder. Subject to Section 4.08, the Seller shall not be under any obligation to appear in, prosecute or defend any legal action that is not incidental to its obligations under this Sale Agreement and that in its opinion may involve it in any expense or liability.

ARTICLE VI.
MISCELLANEOUS PROVISIONS

SECTION 6.01.      Amendment.

This Sale Agreement may be amended in writing by the Seller and the Issuer with (a) the prior written consent of the Indenture Trustee (b) the satisfaction of the Rating Agency Condition and (c) if any amendment would adversely affect in any material respect the interest of any Holder of the Series A Bonds, the consent of a majority of the Holders of each affected Tranche of Series A Bonds. In determining whether a majority of Holders of the Series A Bonds have consented, Series A Bonds owned by the Issuer or any Affiliate of the Issuer shall be disregarded, except that, in determining whether the Indenture Trustee shall be protected in relying upon any such consent, the Indenture Trustee shall only be required to disregard any Series A Bonds it actually knows to be so owned. Promptly after the execution of any such amendment or consent, the Issuer shall furnish copies of such amendment or consent to each of the Rating Agencies.

Prior to the execution of any amendment to this Sale Agreement, the Issuer and the Indenture Trustee shall be entitled to receive and rely upon (i) an Opinion of Counsel, from external counsel of the Seller stating that the execution of such amendment is authorized and permitted by this Sale Agreement and that all conditions precedent provided for in this Sale Agreement relating to such amendment have been complied with and (ii) the Opinion of Counsel referred to in Section 3.01(c)(i) of the Servicing Agreement. The Issuer and the Indenture Trustee may, but shall not be obligated to, enter into any such amendment that affects the Indenture Trustee’s own rights, duties or immunities under this Sale Agreement or otherwise.

15

SECTION 6.02.      Notices. Any notice, report or other communication given hereunder shall be in writing and shall be effective (i) upon receipt when sent through the mails, registered or certified mail, return receipt requested, postage prepaid, with such receipt to be effective the date of delivery indicated on the return receipt, (ii) upon receipt when sent by an overnight courier, (iii) on the date personally delivered to an authorized officer of the party to which sent or (iv) on the date transmitted by facsimile or other electronic transmission with a confirmation of receipt in all cases, addressed as follows:

(a)            in the case of the Seller, to Public Service Company of New Mexico, at 414 Silver Ave. SW, Albuquerque, New Mexico 87102, Attention: President, Telephone: (505) 241-2700, Email: treasury@pnmresources.com;

(b)            in the case of the Issuer, to PNM Energy Transition Bond Company I, LLC, at 414 Silver Ave. SW, Albuquerque, New Mexico 87102, Attention: Senior Vice President, General Counsel and Secretary, Telephone: (505) 241-2700, Email: treasury@pnmresources.com;

(c)            in the case of the Indenture Trustee, to the Corporate Trust Office;

(d)            in the case of Moody’s, to Moody’s Investor Services, Inc., ABS/RMBS Monitoring Department, 25th Floor, 7 World Trade Center, 250 Greenwich Street, New York, New York, Email: servicereports@moodys.com; and

(e)            in the case of S&P, to S&P Global Ratings, a division of S&P Global Inc., Structured Credit Surveillance, 55 Water Street, New York, New York 10041, Telephone: (212) 438-8991, Email: servicer_reports@spglobal.com (all such notices to be delivered to S&P in writing by email).

Each Person listed above may, by notice given in accordance herewith to the other Persons listed above, designate any further or different address to which subsequent notices, reports and other communications shall be sent.

SECTION 6.03.      Assignment. Notwithstanding anything to the contrary contained herein, except as provided in Section 5.02, this Sale Agreement may not be assigned by the Seller.

SECTION 6.04.      Limitations on Rights of Third Parties. The provisions of this Sale Agreement are solely for the benefit of the Seller, the Issuer, the Indenture Trustee (for the benefit of the Secured Parties) and the other Persons expressly referred to herein, and such Persons shall have the right to enforce the relevant provisions of this Sale Agreement. Nothing in this Sale Agreement, whether express or implied, shall be construed to give to any other Person any legal or equitable right, remedy or claim in the Series Property or under or in respect of this Sale Agreement or any covenants, conditions or provisions contained herein.

SECTION 6.05.      Severability. Any provision of this Sale Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remainder of such provision (if any) or the remaining provisions hereof (unless such construction shall be unreasonable), and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

16

SECTION 6.06.      Separate Counterparts. This Sale Agreement may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument. The words “execution,” “signed,” “delivery,” and words of like import in or relating to this Sale Agreement or any document to be signed in connection with this Sale Agreement shall be deemed to include electronic signatures, deliveries or the keeping of records in electronic form, each of which shall be of the same legal effect, validity or enforceability as a manually executed signature, physical delivery thereof or the use of a paper-based recordkeeping system, as the case may be, and the parties hereto consent to conduct the transactions contemplated hereunder by electronic means.

SECTION 6.07.      Governing Law. This Sale Agreement shall be construed in accordance with the laws of the State of New Mexico, without reference to its conflict of law provisions, and the obligations, rights and remedies of the parties hereunder shall be determined in accordance with such laws.

SECTION 6.08.      Assignment to Indenture Trustee. The Seller hereby acknowledges and consents to any mortgage, pledge, assignment and grant of a security interest by the Issuer to the Indenture Trustee pursuant to the Indenture for the benefit of the Secured Parties of all right, title and interest of the Issuer in, to and under this Sale Agreement, the Series Property and the revenues or other proceeds thereof and the assignment of any or all of the Issuer’s rights hereunder to the Indenture Trustee for the benefit of the Secured Parties. Notwithstanding such pledge, in no event shall the Indenture Trustee have any liability for the representations, warranties, covenants, agreements or other obligations of the Issuer hereunder or in any of the certificates, notices or agreements delivered pursuant hereto, as to all of which recourse shall be had solely to the assets of the Issuer.

SECTION 6.09.      Limitation of Liability. It is expressly understood and agreed by the parties hereto that this Sale Agreement is executed and delivered by the Indenture Trustee, not individually or personally but solely as Indenture Trustee on behalf of the Secured Parties, in the exercise of the powers and authority conferred and vested in it. The Indenture Trustee in acting hereunder is entitled to all rights, benefits, protections, immunities and indemnities accorded to it under the Indenture.

SECTION 6.10.      Waivers. Any term or provision of this Sale Agreement may be waived, or the time for its performance may be extended, by the party or parties entitled to the benefit thereof; provided, however, that no such waiver delivered by the Issuer shall be effective unless the Indenture Trustee has given its prior written consent thereto. Any such waiver shall be validly and sufficiently authorized for the purposes of this Sale Agreement if, as to any party, it is authorized in writing by an authorized representative of such party, with prompt written notice of any such waiver to be provided to the Rating Agencies. The failure of any party hereto to enforce at any time any provision of this Sale Agreement shall not be construed to be a waiver of such provision, nor in any way to affect the validity of this Sale Agreement or any part hereof or the right of any party thereafter to enforce each and every such provision. No waiver of any breach of this Sale Agreement shall be held to constitute a waiver of any other or subsequent breach.

{REMAINDER OF PAGE INTENTIONALLY LEFT BLANK}

17

IN WITNESS WHEREOF, the parties hereto have caused this Sale Agreement to be duly executed by their respective officers as of the day and year first above written.

PNM ENERGY TRANSITION BOND COMPANY I, LLC
as Issuer
By:
	Name:
	Title:
PUBLIC SERVICE COMPANY OF NEW MEXICO
as Seller
By:
	Name:
	Title:

ACKNOWLEDGED AND ACCEPTED:
U.S. BANK TRUST COMPANY, NATIONAL ASSOCIATION, as Indenture Trustee
By:
	Name:
	Title:

Signature Page to Energy Transition Property Purchase and Sale Agreement

18

EXHIBIT A

FORM OF BILL OF SALE

See attached

19

BILL OF SALE

This Bill of Sale is being delivered pursuant to the Energy Transition Property Purchase and Sale Agreement, dated as of [________], 2023 (the “Sale Agreement”), by and between Public Service Company of New Mexico (the “Seller”) and PNM Energy Transition Bond Company I, LLC (the “Issuer”). All capitalized terms used but not otherwise defined herein shall have the respective meanings ascribed to such terms in the Sale Agreement.

In consideration of the Issuer’s delivery to or upon the order of the Seller of $[_______], the Seller does hereby irrevocably sell, transfer, assign, set over and otherwise convey to the Issuer, without recourse or warranty, except as set forth in the Sale Agreement, all right, title and interest of the Seller in and to the Series Property created or arising under the Financing Order dated April 1, 2020 issued by the New Mexico Public Regulation Commission under the Energy Transition Act (such sale, transfer, assignment, setting over and conveyance of the Series Property includes, to the fullest extent permitted by the Energy Transition Act, the rights and interests of the Seller under the Financing Order, including the right of the Seller and any Successor or assignee of the Seller to impose, charge, collect and receive Series Charges in an amount necessary to provide for full payment and recovery of all Energy Transition Costs identified in the Financing Order, the right under the Financing Order to obtain True-Up Adjustments of the Series Charges, and all revenue or other proceeds arising out of the rights and interests created under the Financing Order). Such sale, transfer, assignment, setting over and conveyance is hereby expressly stated to be a sale or other absolute transfer and, pursuant to Section 62-18-14(A) of the Energy Transition Act, shall be treated as an absolute transfer and true sale and not as a pledge of or secured transaction relating to the Seller’s right, title, and interest in, to, and under the Series Property. The Seller and the Issuer agree that after giving effect to the sale, transfer, assignment, setting over and conveyance contemplated hereby the Seller has no right, title or interest in, to, or under the Series Property to which a security interest could attach because (i) it has sold, transferred, assigned, set over and conveyed all right, title and interest in and to the Series Property to the Issuer, (ii) as provided in Section 62-18-14 of the Energy Transition Act, all right, title and interest shall have passed to the Issuer and (iii) as provided in Section 62-18-14(B) of the Energy Transition Act, appropriate financing statements have been filed and such transfer is perfected against all third parties, except creditors holding a prior security interest, ownership interest or assignment in the Series Property previously perfected in accordance with Section 62-18-13 of the Energy Transition Act. If such sale, transfer, assignment, setting over and conveyance is held by any court of competent jurisdiction not to be an absolute transfer and true sale as provided in Section 62-18-14(A) of the Energy Transition Act, then such sale, transfer, assignment, setting over and conveyance shall be treated as a pledge of the Series Property and as the creation of a security interest (within the meaning of the Energy Transition Act and the UCC) in the Series Property and, without prejudice to its position that it has absolutely transferred all of its rights in the Series Property to the Issuer, the Seller hereby grants a security interest in the Series Property to the Issuer (and to the Indenture Trustee for the benefit of the Secured Parties) to secure their respective rights under the Basic Documents to receive the Series Charges and all other Series Property.

The Issuer does hereby purchase the Series Property from the Seller for the consideration set forth in the preceding paragraph.

20

Each of the Seller and the Issuer acknowledges and agrees that the purchase price for the Series Property sold pursuant to this Bill of Sale and the Sale Agreement is equal to its fair market value at the time of sale.

The Seller confirms that (i) each of the representations and warranties on the part of the Seller contained in the Sale Agreement are true and correct in all respects on the date hereof as if made on the date hereof and (ii) each condition precedent that must be satisfied under Section 2.02 of the Sale Agreement has been satisfied upon or prior to the execution and delivery of this Bill of Sale by the Seller.

This Bill of Sale may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument.

This Bill of Sale shall be construed in accordance with the laws of the State of New Mexico, without reference to its conflict of law provisions, and the obligations, rights and remedies of the parties hereunder shall be determined in accordance with such law.

21

IN WITNESS WHEREOF, the Seller and the Issuer have duly executed this Bill of Sale as of this [] day of [], 2023.

PNM ENERGY TRANSITION BOND COMPANY I, LLC,
as Issuer
By:
	Name:
	Title:
PUBLIC SERVICE COMPANY OF NEW MEXICO,
as Seller
By:
	Name:
	Title:

22

EX-10.3

Exhibit 10.3

ADMINISTRATION AGREEMENT

This ADMINISTRATION AGREEMENT, dated as of [●], 2023, is entered into by and between Public Service Company of New Mexico, a New Mexico corporation, as administrator, and PNM Energy Transition Bond Company I, LLC, a Delaware limited liability company (the “Issuer”).

Capitalized terms used but not otherwise defined in this Administration Agreement shall have the respective meanings given to such terms in Appendix A of the Indenture dated as of the date hereof (as amended, modified or supplemented from time to time in accordance with the provisions thereof, the “Indenture”), among the Issuer, U.S. Bank Trust Company, National Association, in its capacity as indenture trustee (the “Indenture Trustee”), and U.S. Bank National Association, in its capacity as securities intermediary. Not all terms defined in Appendix A of the Indenture are used in this Administration Agreement. The rules of construction set forth in Appendix A of the Indenture shall apply to this Administration Agreement.

W I T N E S S E T H:

WHEREAS, the Issuer is issuing Energy Transition Bonds pursuant to the Indenture and the Series Supplement dated the date hereof;

WHEREAS, the Issuer has entered into certain agreements in connection with the issuance of Energy Transition Bonds, including (a) the Indenture, (b) the Servicing Agreement, (c) the Sale Agreement and (d) the other Basic Documents to which the Issuer is a party relating to the Energy Transition Bonds;

WHEREAS, pursuant to the Basic Documents, the Issuer is required to perform certain duties in connection with the Basic Documents, the Energy Transition Bonds and the Collateral pledged to the Indenture Trustee pursuant to the Indenture and Series Supplement dated the date hereof;

WHEREAS, the Issuer has no employees, other than its officers and managers, and does not intend to hire any employees, and consequently desires to have the Administrator perform certain of the duties of the Issuer referred to above and to provide such additional services consistent with the terms of this Administration Agreement and the other Basic Documents as the Issuer may from time to time request; and

WHEREAS, the Administrator has the capacity to provide the services and the facilities required thereby and is willing to perform such services and provide such facilities for the Issuer on the terms set forth herein;

NOW, THEREFORE, in consideration of the mutual covenants contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

Section 1.              Duties of the Administrator; Management Services. The Administrator hereby agrees to provide the following corporate management services to the Issuer and to cause third parties to provide professional services required for or contemplated by such services in accordance with the provisions of this Administration Agreement:

1

(a)            furnish the Issuer with ordinary clerical, bookkeeping and other corporate administrative services necessary and appropriate for the Issuer, including the following services:

(i)            maintain at the Premises (as defined below) general accounting records of the Issuer (the “Account Records”), subject to year-end audit, in accordance with generally accepted accounting principles, separate and apart from its own accounting records, prepare or cause to be prepared such quarterly and annual financial statements as may be necessary or appropriate and arrange for year-end audits of the Issuer’s financial statements by the Issuer’s independent accountants;

(ii)           prepare and, after execution by the Issuer, file with the SEC and any applicable state agencies documents required to be filed by the Issuer with the SEC and any applicable state agencies, including periodic reports required to be filed under the Exchange Act;

(iii)          prepare for execution by the Issuer and cause to be filed such income, franchise or other tax returns of the Issuer as shall be required to be filed by applicable law (the “Tax Returns”) and cause to be paid on behalf of the Issuer from the Issuer’s funds any taxes required to be paid by the Issuer under applicable law;

(iv)         prepare or cause to be prepared for execution by the Issuer’s Managers minutes of the meetings of the Issuer’s Managers and such other documents deemed appropriate by the Issuer to maintain the separate limited liability company existence and good standing of the Issuer (the “Company Minutes”) or otherwise required under the Basic Documents (together with the Account Records, the Tax Returns, the Company Minutes, the LLC Agreement and the Certificate of Formation, the “Issuer Documents”) and any other documents deliverable by the Issuer thereunder or in connection therewith; and

(v)          hold, maintain and preserve at the Premises (or such other place as shall be required by any of the Basic Documents) executed copies (to the extent applicable) of the Issuer Documents and other documents executed by the Issuer thereunder or in connection therewith;

(b)            take such actions on behalf of the Issuer as are necessary or desirable for the Issuer to keep in full effect its existence, rights and franchises as a limited liability company under the laws of the State of Delaware and obtain and preserve its qualification to do business in each jurisdiction in which it becomes necessary to be so qualified;

(c)            take such actions on the behalf of the Issuer as are necessary for the issuance and delivery of Energy Transition Bonds;

(d)            provide for the performance by the Issuer of its obligations under each of the Basic Documents, and prepare, or cause to be prepared, all documents, reports, filings, instruments, notices, certificates and opinions that it shall be the duty of the Issuer to prepare, file or deliver pursuant to the Basic Documents;

(e)            to the full extent allowable under applicable law, enforce each of the rights of the Issuer under the Basic Documents, at the direction of the Indenture Trustee;

(f)            provide for the defense, at the direction of the Issuer’s Managers, of any action, suit or proceeding brought against the Issuer or affecting the Issuer or any of its assets;

2

(g)            provide office space (the “Premises”) for the Issuer and such reasonable ancillary services as are necessary to carry out the obligations of the Administrator hereunder, including telecopying, duplicating and word processing services;

(h)            undertake such other administrative services as may be appropriate, necessary or requested by the Issuer;

(i)             provide the Indenture Trustee with copies of the filings by the Issuer under the Exchange Act; and

(j)             provide such other services as are incidental to the foregoing or as the Issuer and the Administrator may agree.

In providing the services under this Section 1 and as otherwise provided under this Administration Agreement, the Administrator will not knowingly take any actions on behalf of the Issuer that (i) the Issuer is prohibited from taking under the Basic Documents, or (ii) would cause the Issuer to be in violation of any U.S. federal, state or local law or the LLC Agreement.

In performing its duties hereunder, the Administrator shall use the same degree of care and diligence that the Administrator exercises with respect to performing such duties for its own account and, if applicable, for others.

Section 2.              Compensation. As compensation for the performance of the Administrator’s obligations under this Administration Agreement (including the compensation of Persons serving as Manager(s), other than the Independent Manager(s), and officers of the Issuer, but, for the avoidance of doubt, excluding the performance by PNM of its obligations in its capacity as Servicer), the Administrator shall be entitled to $50,000 annually (the “Administration Fee”), payable by the Issuer in full on the first Payment Date following the issuance of the Energy Transition Bonds and every second Payment Date thereafter. In addition, the Administrator shall be entitled to be reimbursed by the Issuer for all costs and expenses of services performed by unaffiliated third parties and actually incurred by the Administrator in connection with the performance of its obligations under this Administration Agreement in accordance with Section 3 (but, for the avoidance of doubt, excluding any such costs and expenses incurred by PNM in its capacity as Servicer), to the extent that such costs and expenses are supported by invoices or other customary documentation and are reasonably allocated to the Issuer (“Reimbursable Expenses”).

Section 3.              Third Party Services. Any services required for or contemplated by the performance of the above-referenced services by the Administrator to be provided by unaffiliated third parties (including independent accountants’ fees and counsel fees) may, if provided for or otherwise contemplated by a Financing Order and if the Issuer deems it necessary or desirable, be arranged by the Issuer or by the Administrator at the direction (which may be general or specific) of the Issuer. Costs and expenses associated with the contracting for such third-party professional services may be paid directly by the Issuer or paid by the Administrator and reimbursed by the Issuer in accordance with Section 2, or otherwise as the Administrator and the Issuer may mutually arrange.

Section 4.              Additional Information to be Furnished to the Issuer. The Administrator shall furnish to the Issuer from time to time such additional information regarding the Collateral or the Collateral, as applicable, and as the Issuer shall reasonably request.

Section 5.              Independence of the Administrator. For all purposes of this Administration Agreement, the Administrator shall be an independent contractor and shall not be subject to the supervision of the Issuer with respect to the manner in which it accomplishes the performance of its obligations hereunder. Unless expressly authorized by the Issuer, the Administrator shall have no authority, and shall not hold itself out as having the authority, to act for or represent the Issuer in any way and shall not otherwise be deemed an agent of the Issuer.

3

Section 6.              No Joint Venture. Nothing contained in this Administration Agreement (a) shall constitute the Administrator and the Issuer as partners or co-members of any partnership, joint venture, association, syndicate, unincorporated business or other separate entity, (b) shall be construed to impose any liability as such on either of them or (c) shall be deemed to confer on either of them any express, implied or apparent authority to incur any obligation or liability on behalf of the other.

Section 7.              Other Activities of Administrator. Nothing herein shall prevent the Administrator or any of its members, managers, officers, employees or Affiliates from engaging in other businesses or, in its sole discretion, from acting in a similar capacity as an administrator for any other Person even though such Person may engage in business activities similar to those of the Issuer.

Section 8.              Term of Agreement; Resignation and Removal of Administrator.

(a)            This Administration Agreement shall continue in force until the payment in full of all Energy Transition Bonds and any other amount that may become due and payable under the Indenture, upon which event this Administration Agreement shall automatically terminate.

(b)            Subject to Section 8(e) and Section 8(f), the Administrator may resign its duties hereunder by providing the Issuer and the Rating Agencies with at least 60 days’ prior written notice.

(c)            Subject to Section 8(e) and Section 8(f), the Issuer may remove the Administrator without cause by providing the Administrator and the Rating Agencies with at least 60 days’ prior written notice.

(d)            Subject to Section 8(e) and Section 8(f), at the sole option of the Issuer, the Administrator may be removed immediately upon written notice of termination from the Issuer to the Administrator and the Rating Agencies if any of the following events shall occur:

(i)            the Administrator shall default in the performance of any of its duties under this Administration Agreement and, after notice of such default, shall fail to cure such default within ten days (or, if such default cannot be cured in such time, shall (A) fail to give within ten days such assurance of cure as shall be reasonably satisfactory to the Issuer and (B) fail to cure such default within 30 days thereafter);

(ii)           a court of competent jurisdiction shall enter a decree or order for relief, and such decree or order shall not have been vacated within 60 days, in respect of the Administrator in any involuntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or such court shall appoint a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official for the Administrator or any substantial part of its property or order the winding-up or liquidation of its affairs; or

(iii)          the Administrator shall commence a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, shall consent to the entry of an order for relief in an involuntary case under any such law, shall consent to the appointment of a receiver, liquidator, assignee, trustee, custodian, sequestrator or similar official for the Administrator or any substantial part of its property, shall consent to the taking of possession by any such official of any substantial part of its property, shall make any general assignment for the benefit of creditors or shall fail generally to pay its debts as they become due.

4

The Administrator agrees that if any of the events specified in Section 8(d)(ii) or Section 8(d)(iii) shall occur, it shall give written notice thereof to the Issuer and the Indenture Trustee as soon as practicable but in any event within seven days after the happening of such event.

(e)            No resignation or removal of the Administrator pursuant to this Section 8 shall be effective until a successor Administrator has been appointed by the Issuer, the Rating Agency Condition shall have been satisfied with respect to the proposed appointment, and such successor Administrator has agreed in writing to be bound by the terms of this Administration Agreement in the same manner as the Administrator is bound hereunder.

(f)            The appointment of any successor Administrator shall be effective only after satisfaction of the Rating Agency Condition with respect to the proposed appointment.

Section 9.              Action upon Termination, Resignation or Removal. Promptly upon the effective date of termination of this Administration Agreement pursuant to Section 8(a), the resignation of the Administrator pursuant to Section 8(b) or the removal of the Administrator pursuant to Section 8(c) or Section 8(d), the Administrator shall be entitled to be paid a pro-rated portion of the annual fee described in Section 2 through the date of termination and all Reimbursable Expenses incurred by it through the date of such termination, resignation or removal. The Administrator shall forthwith upon such termination pursuant to Section 8(a) deliver to the Issuer all property and documents of or relating to the Collateral then in the custody of the Administrator. In the event of the resignation of the Administrator pursuant to Section 8(b) or the removal of the Administrator pursuant to Section 8(c) or Section 8(d), the Administrator shall cooperate with the Issuer and take all reasonable steps requested to assist the Issuer in making an orderly transfer of the duties of the Administrator.

Section 10.            Administrator’s Liability.  Except as otherwise provided herein, the Administrator assumes no liability other than to render or stand ready to render the services called for herein, and neither the Administrator nor any of its members, managers, officers, employees or Affiliates shall be responsible for any action of the Issuer or any of the members, managers, officers, employees or Affiliates of the Issuer (other than the Administrator itself). The Administrator shall not be liable for nor shall it have any obligation with regard to any of the liabilities, whether direct or indirect, absolute or contingent, of the Issuer or any of the members, managers, officers, employees or Affiliates of the Issuer (other than the Administrator itself).

Section 11.            Indemnity.

(a)            Subject to the priority of payments set forth in the Indenture, the Issuer shall indemnify the Administrator and its shareholders, directors, officers, employees and Affiliates against all losses, claims, damages, penalties, judgments, liabilities and expenses (including all expenses of litigation or preparation therefor whether or not the Administrator is a party thereto) that any of them may pay or incur arising out of or relating to this Administration Agreement and the services called for herein; provided, however, that such indemnity shall not apply to any such loss, claim, damage, penalty, judgment, liability or expense resulting from the Administrator’s gross negligence or willful misconduct in the performance of its obligations hereunder.

5

(b)            The Administrator shall indemnify the Issuer and its members, managers, officers and employees against all losses, claims, damages, penalties, judgments, liabilities and expenses (including all expenses of litigation or preparation therefor whether or not the Issuer is a party thereto) that any of them may incur as a result of the Administrator’s gross negligence or willful misconduct in the performance of its obligations hereunder.

Section 12.            Notices. Any notice, report or other communication given hereunder shall be in writing and shall be effective (i) upon receipt when sent through the mails, registered or certified mail, return receipt requested, postage prepaid, with such receipt to be effective the date of delivery indicated on the return receipt, (ii) upon receipt when sent by an overnight courier, (iii) on the date personally delivered to an authorized officer of the party to which sent or (iv) on the date transmitted by facsimile or other electronic transmission with a confirmation of receipt in all cases, addressed as follows:

(a)            if to the Issuer, to PNM Energy Transition Bond Company I, LLC, at 414 Silver Ave. SW, Albuquerque, New Mexico 87102-3289, Attention: President, Telephone: (505) 241-2700, Email: treasury@pnmresources.com;

(b)            if to the Administrator, to Public Service Company of New Mexico, at 414 Silver Ave. SW, Albuquerque, New Mexico 87102-3289, Attention: Senior Vice President, General Counsel or Secretary, Telephone: (505) 241-2700, Email: treasury@pnmresources.com; and

(c)            if to the Indenture Trustee, to the Corporate Trust Office.

Each party hereto may, by notice given in accordance herewith to the other party or parties hereto, designate any further or different address to which subsequent notices, reports and other communications shall be sent.

Section 13.            Amendments.

(a)            This Administration Agreement may be amended from time to time by a written amendment duly executed and delivered by each of the Issuer and the Administrator, with the prior written consent of the Indenture Trustee (at the written direction of holders of a majority of the Outstanding Amount of the Energy Transition Bonds) and the satisfaction of the Rating Agency Condition; provided, that any such amendment may not adversely affect the interest of any Holder in any material respect without the consent of the Holders of a majority of the outstanding principal amount of all Energy Transition Bonds. Promptly after the execution of any such amendment or consent, the Issuer shall furnish copies of such amendment or consent to each of the Rating Agencies.

Section 14.            Successors and Assigns. This Administration Agreement may not be assigned by the Administrator unless such assignment is previously consented to in writing by the Issuer and the Indenture Trustee and subject to the satisfaction of the Rating Agency Condition in connection therewith. Any assignment with such consent and satisfaction, if accepted by the assignee, shall bind the assignee hereunder in the same manner as the Administrator is bound hereunder. Notwithstanding the foregoing, this Administration Agreement may be assigned by the Administrator without the consent of the Issuer or the Indenture Trustee and without satisfaction of the Rating Agency Condition to a corporation or other organization that is a successor (by merger, reorganization, consolidation or purchase of assets) to the Administrator, including any Permitted Successor; provided, that such successor or organization executes and delivers to the Issuer an agreement in which such corporation or other organization agrees to be bound hereunder by the terms of said assignment in the same manner as the Administrator is bound hereunder. Subject to the foregoing, this Administration Agreement shall bind any successors or assigns of the parties hereto. Upon satisfaction of all of the conditions of this Section 14, the preceding Administrator shall automatically and without further notice be released from all of its obligations hereunder.

6

Section 15.            Governing Law. This Administration Agreement shall be construed in accordance with the laws of the State of New Mexico, without reference to its conflict of law provisions, and the obligations, rights and remedies of the parties hereunder shall be determined in accordance with such laws.

Section 16.            Counterparts. This Administration Agreement may be executed in counterparts, each of which when so executed shall be an original, but all of which together shall constitute but one and the same Administration Agreement. The words “execution,” “signed,” “delivery,” and words of like import in or relating to this Administration Agreement or any document to be signed in connection with this Administration Agreement shall be deemed to include electronic signatures, deliveries or the keeping of records in electronic form, each of which shall be of the same legal effect, validity or enforceability as a manually executed signature, physical delivery thereof or the use of a paper-based recordkeeping system, as the case may be, and the parties hereto consent to conduct the transactions contemplated hereunder by electronic means.

Section 17.            Severability. Any provision of this Administration Agreement that is prohibited or unenforceable in any jurisdiction shall be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

Section 18.            Nonpetition Covenant. Notwithstanding any prior termination of this Administration Agreement, the Administrator covenants that it shall not, prior to the date that is one year and one day after payment in full of all Energy Transition Bonds, acquiesce, petition or otherwise invoke or cause the Issuer to invoke the process of any court or government authority for the purpose of commencing or sustaining an involuntary case against the Issuer under any U.S. federal or state bankruptcy, insolvency or similar law or appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator or other similar official of the Issuer or any substantial part of its property or ordering the winding up or liquidation of the affairs of the Issuer.

Section 19.            Assignment to Indenture Trustee. The Administrator hereby acknowledges and consents to any mortgage, pledge, assignment and grant of a security interest by the Issuer to the Indenture Trustee for the benefit of the Secured Parties pursuant to the Indenture of any or all of the Issuer’s rights hereunder and the assignment of any or all of the Issuer’s rights hereunder to the Indenture Trustee for the benefit of the Secured Parties. The Indenture Trustee shall be a third-party beneficiary of this Administration Agreement and is entitled to enforce the provisions hereof as if it were a party hereto.

{REMAINDER OF PAGE INTENTIONALLY LEFT BLANK}

7

IN WITNESS WHEREOF, the parties have caused this Administration Agreement to be duly executed and delivered as of the day and year first above written.

PNM ENERGY TRANSITION BOND COMPANY I, LLC,
as Issuer
By:
	Name:
	Title:
PUBLIC SERVICE COMPANY OF NEW MEXICO,
as Administrator
By:
	Name:
	Title:

Signature Page to Administration Agreement

8

EX-99.2

Exhibit 99.2

Troutman Pepper Hamilton Sanders LLP 600 Peachtree Street NE, Suite 3000 Atlanta, GA 30308-2216   troutman.com

[____________], 2023

To: The persons listed on Exhibit A attached hereto

Re: Opinion Concerning Federal Constitutional Issues Pertaining to Energy Transition Bonds, Series A of PNM Energy Transition Bond Company I, LLC

Ladies and Gentlemen,

We have acted as special counsel for Public Service Company of New Mexico (“PNM”), a New Mexico corporation, and PNM Energy Transition Bond Company I, LLC, a Delaware limited liability company (the “Issuing Entity” or “SPE”), in connection with the Registration Statement on Form SF-1 (File Nos. 333-274433 and 333-274433-01) filed on September 8, 2023, as amended by Amendment No. 1 filed on October 13, 2023 (together, the “Registration Statement”), by PNM and the Issuing Entity with the Securities and Exchange Commission pursuant to the Securities Act of 1933, as amended, with respect to the proposed issuance by the Issuing Entity of its Energy Transition Bonds, Series A (the “Bonds”).

The Issuing Entity is issuing the Bonds pursuant to the Final Order on Request for Issuance of a Financing Order, Case No. 19-00018-UT (April 1, 2020), which incorporates Recommended Decision on PNM’s Request for Issuance of a Financing Order, Case No. 19-00018-UT (February 21, 2020) (collectively the “Financing Order”) issued pursuant to New Mexico Statutes Annotated § 62-18-5 (2019) and related provisions of the Energy Transition Act, N.M.S.A. 1978 § 62-18-1 (2019) et seq. (the “Energy Transition Act”), by the New Mexico Public Regulation Commission (“NMPRC”) providing for the financing of the costs associated with certain energy transition activities (“energy transition costs”) with the proceeds of “energy transition bonds,” as defined and authorized by the Energy Transition Act and Financing Order. We have also reviewed (a) the Order on Remand Adopting Uncontested Stipulation, dated September 21, 2023, issued by the NMPRC (the “2023 NMPRC Order”), which order affirmed, among other things, (1) the validity of the Financing Order and the authorizations and approvals granted to PNM therein, including the Financing Order’s determination of its irrevocability and PNM’s ongoing authority to cause the issuance of up to $360.1 million of energy transition bonds pursuant to the Financing Order, and (2) the non-impairment pledge pursuant to the Financing Order and the Energy Transition Act, and (b) the Agreement for Stipulated Dismissal among PNM and the other parties named therein and filed with the New Mexico Supreme Court on September 22, 2023.

Page 2

Consistent with the Energy Transition Act, the Financing Order authorizes the formation of the Issuing Entity as a special purpose entity solely authorized to engage in the approved financing related activities and for the exclusive purpose of acquiring “energy transition property” and financing such acquisition through issuing “energy transition bonds,” each as defined by the Financing Order and the Energy Transition Act, and performing other activities relating thereto or otherwise authorized by the Financing Order, including receipt of non-bypassable energy transition charges and revenues as defined by and prescribed by the Energy Transition Act and Financing Order and application of those funds to service and retire the energy transition bonds and related expenditures specifically authorized by the Financing Order and the Energy Transition Act. The Energy Transition Act defines energy transition property to mean “the rights and interests of a qualifying utility or an assignee under a financing order, including the right to impose, charge, collect and receive energy transition charges in an amount necessary to provide for full payment and recovery of all energy transition costs identified in the financing order, including all revenues or other proceeds arising from those rights and interests.” N.M.S.A.§ 62-18-2 I (2019). Under the Energy Transition Act, an “energy transition bond” is defined as “a bond or other evidence of indebtedness or ownership that is issued by a qualifying utility or an assignee pursuant to a financing order, the proceeds of which are secured by or payable from energy transition property and that are non-recourse to the qualifying utility.” N.M.S.A.§ 62-18-2 F(2019). The Energy Transition Act also provides that “[a]ll energy transition property created in a financing order shall continue to exist until the energy transition bonds issued and all related financing costs pursuant to a financing order are paid in full.” N.M.S.A. § 62-18-12 B(2019). Further the Energy Transition Act defines an “energy transition charge” to mean “ a non-bypassable charge paid by all customers of a qualifying utility for the recovery of energy transition costs”¹ and a “non-bypassable” charge to mean “that the payment of an energy transition charge may not be avoided by an electric service customer located within a utility service area and shall be paid by the customer that receives electric delivery service from the qualifying utility imposing the charge for as long as the energy transition bonds secured by the charge are outstanding and the related financing costs have not been recovered in full.” N.M.S.A. § 62-18-2 G (2019) and N.M.S.A § 62-18-2 P (2019).

¹ N.M.S.A § 62-18-2 H (2019) defines “energy transition cost” to mean “the sum of:

(1) financing costs;

(2) abandonment costs, which for a qualifying generating facility shall not exceed the lower of three hundred seventy-five million dollars ($375,000,000) or one hundred fifty percent of the undepreciated investment in a qualifying generating facility being abandoned, as of the date of the abandonment. The abandonment costs subject to this limitation shall include:

(a) up to thirty million dollars ($30,000,000) per qualifying generating facility in costs not previously collected from the qualifying utility’s customers for plant decommissioning and mine reclamation costs, subject to any limitations ordered by the commission prior to January 1, 2019 and affirmed by the New Mexico supreme court prior to the effective date of the Energy Transition Act, associated with the abandoned qualifying generating facility;

(b) up to twenty million dollars ($20,000,000) per qualifying generating facility in costs for severance and job training for employees losing their jobs as a result of an abandoned qualifying generating facility and any associated mine that only services the abandoned qualifying generating facility;

(c) undepreciated investments as of the date of abandonment on the qualifying utility’s books and records in a qualifying generating facility that were either being recovered in rates as of January 1, 2019 or are otherwise found to be recoverable through a court decision; and

(d) other undepreciated investments in a qualifying generating facility incurred to comply with law, whether established by statute, court decision or rule, or necessary to maintain the safe and reliable operation of the qualifying generating facility prior to the facility’s abandonment;

(3) any other costs required to comply with changes in law enacted after January 1, 2019 incurred by the qualifying utility at the qualifying generating facility; and

(4) payments required pursuant to Section 16 [62-18-16 N.M.S.A. 1978] of the Energy Transition Act…”

“Financing costs” are defined by N.M.S.A. § 62-18-2 K (2019) to mean “the cost incurred by the qualifying utility or an assignee to issue and administer energy transition bonds, including:

Page 3

Pursuant to the Financing Order, the Issuing Entity is issuing the Bonds under an indenture, dated as of the date hereof (the “Base Indenture”), among the Issuing Entity, U.S. Bank Trust Company, National Association, as indenture trustee (the “Indenture Trustee”), and U.S. Bank National Association, as securities intermediary (the “Securities Intermediary”), and a series supplement thereto, dated as of the date hereof (together with the Base Indenture, the “Indenture”) among the Issuing Entity, the Indenture Trustee and the Securities Intermediary. Pursuant to an energy transition property purchase and sale agreement, dated as of the date hereof, between PNM and the Issuing Entity, PNM sold, assigned and transferred to the Issuing Entity the energy transition property created pursuant to the Financing Order (the “Energy Transition Property”), which includes the right to impose, collect and receive the non-bypassable energy transition charges authorized in the Financing Order (the “Energy Transition Charges”). Under the Indenture, the Indenture Trustee holds, among other things, the Energy Transition Property as collateral security for the payment of the Bonds. The Financing Order provides that the Bonds are energy transition bonds, the Energy Transition Property is energy transition property, and the Energy Transition Charges are energy transition charges, in each case, within the meaning of the Energy Transition Act.

The Financing Order finds that, among the credit enhancements for the Bonds enacted by the Energy Transition Act, the State of New Mexico has pledged, for the benefit and protection of bondholders, that it will not take or permit any action that would impair the value of energy transition property, or, except for the above-referenced true-up adjustment expressly allowed by the Energy Transition Act, reduce, alter, or impair the energy transition charges to be imposed, collected and remitted to bondholders, until the principal, interest and premium, and any other charges incurred and contracts to be performed in connection with the related energy Transition bonds have been paid and performed in full.

(1) payment of the fee authorized pursuant to Subsection L of Section 5 [62-18-5 N.M.S.A. 1978] of the Energy Transition Act;

(2) principal, interest, acquisition, defeasance and redemption premiums that are payable on energy transition bonds;

(3) any payment required under an ancillary agreement and any amount required to fund or replenish a reserve account or other account established under any indenture, ancillary agreement or other financing document relating to the energy transition bonds;

(4) any costs, fees and expenses related to issuing, supporting, repaying, servicing and refunding energy transition bonds, the application for a financing order, including related state board of finance expenses, or obtaining an order approving abandonment of a qualifying generating facility;

(5) any costs, fees and related expenses incurred relating to any existing secured or unsecured obligation of a qualifying utility or an affiliate of a qualifying utility that are necessary to obtain any consent, release, waiver or approval from any holder of such an obligation to permit a qualifying utility to issue or cause the issuance of energy transition bonds;

(6) any taxes, fees, charges or other assessments imposed on energy transition bonds;

(7) preliminary and continuing costs associated with subsequent financing; and

(8) any other related costs approved for recovery in the financing order….”

Page 4

Specifically, in Paragraph 41 of the Financing Order the NMPRC found that its Financing Order constitutes a financing order within the meaning of Section 2(L) of the Energy Transition Act, authorizing the issuance of energy transition bonds, the imposition, collection, and periodic adjustments of the energy transition charge, and creating energy transition property all in accordance with the Energy Transition Act. The NMPRC further found its Financing Order complies with the provisions of Section 5 of the Energy Transition Act [N.M.S.A. § 62-18-5(2019)] and gives rise to the rights, interests, obligations and duties as expressed in the Energy Transition Act. The NMPRC further found “ [i]t is the Commission’s express intention to give rise to those [N.M.S.A. § 62-18-5 (2019)] rights, interests, obligations and duties by issuing this Financing Order.” Id.

In Paragraph 42 of the Financing Order the NMPRC further found as follows:

This Financing Order is irrevocable, and the Commission shall not reduce, impair, postpone or terminate the Energy Transition Charges approved in this Financing Order, the Energy Transition Property or the collection or recovery of energy transition revenues, including recovery of the Ongoing Financing Costs through the Energy Transition Charges.

Paragraph 46 of the Financing Order further finds and pledges as follows:

In accordance with Section 19 of the [Energy Transition Act], the Commission pledges to and agrees with holders of the Energy Transition Bonds, the SPE and the Indenture Trustee that the Commission shall not take or permit any action that impairs the value of the Energy Transition Property, except as allowed pursuant to Section 6 of the [Energy Transition Act]², or reduces, alters or impairs Energy Transition Charges that are imposed, collected and remitted for the benefit of the holders of the Energy Transition Bonds, the SPE and the Indenture Trustee, until the entire principal of, interest on and redemption premium on the Energy Transition Bonds, all financing costs and all amounts to be paid to the SPE or a financing party under an ancillary agreement are paid in full and performed in full. The SPE is permitted to include this pledge in the Energy Transition Bonds and any ancillary agreements and documentation related to the issuance and marketing of the Energy Transition Bonds.

² Section 6 of the Energy Transition Act, N.M.S.A. § 62-18-6 (2019) provides a procedure for periodic true-ups of the non-bypassable charge to timely collect the authorized energy transition costs. Subsection H provides “[n]o adjustment pursuant to this section, and no proceeding held pursuant to this section, shall affect the irrevocability of the financing order pursuant to Section 7 [62-18-7 NMSA 1978] of the Energy Transition Act.”

Page 5

The referenced Section 19 of the Energy Transition Act provides as follows:

A. The state pledges to and agrees with the bondholders, any assignee and any financing parties that the state shall not take or permit any action that impairs the value of energy transition property, except as allowed pursuant to Section 6 of the Energy Transition Act³, or reduces, alters or impairs energy transition charges that are imposed, collected and remitted for the benefit of the bondholders, any assignee and any financing parties, until the entire principal of, interest on and redemption premium on the energy transition bonds, all financing costs and all amounts to be paid to an assignee or financing party under an ancillary agreement are paid in full and performed in full.

B. Any person who issues energy transition bonds is permitted to include the pledge specified in Subsection A of this section in the energy transition bonds, ancillary agreements and documentation related to the issuance and marketing of the energy transition bonds.

N.M.S.A. § 62-18-19(2019) (together with Paragraph 46 of the Financing Order, the “State Pledge.”)

The Financing Order expressly authorizes the Issuer to include the State Pledge in each of the Bonds, ancillary agreements and documentation relating to the issuance and marketing of the energy transition bonds. The New Mexico Supreme Court upheld the constitutionality of the Energy Transition Act under New Mexico law in State ex rel. Egolf v. N.M. Pub. Regulation Comm'n, 476 P. 3d 896 (N.M. 2020), and affirmed the Financing Order upon judicial review in Citizens for Fair Rates v. N.M. Pub. Regulation Comm'n, 505 P.3d 1138 (N.M. 2022). [In the 2023 NMPRC Order, the NMPRC reaffirmed the State Pledge.]

For the purposes of our opinions herein we assume the Issuing Entity is duly constituted and the relevant transactions described above have occurred in compliance with the Financing Order and the Energy Transition Act, that the Energy Transition Act is valid and that the evidences of indebtedness, securities, and agreements related to the subject financing are duly issued, executed, valid and binding in all pertinent respects.

I. QUESTIONS PRESENTED AND OPINIONS

You have requested our opinions as to:

(1)            Whether the State Pledge would be held by a court of competent jurisdiction to create a contractual relationship between the State of New Mexico and the holders of the Bonds (the “Bondholders”) for purposes of the “Contract Clause” of the United States Constitution, U.S. Const. art. 1, § 10, cl.1;

³ N.M.S.A. § 62-18-6 (2019). See note 2, supra.

Page 6

(2)            whether Bondholders (or the Trustee on their behalf) would be successful in in challenging under the Contract Clause the constitutionality of legislation passed by the New Mexico Legislature (“Legislature”) that becomes law or any action of the NMPRC⁴ exercising legislative powers (collectively referred to herein as “Legislative Action”) prior to the time that the Bonds and related financing costs are fully paid and discharged that in either case limits, alters, impairs or reduces the value of the Energy Transmission Charges or the Energy Transition Property provided for by the Financing Order;

(3)            whether a federal court would grant preliminary injunctive relief or permanent injunctive relief under federal law to prevent implementation of Legislative Action that limits, alters, impairs or reduces the value of the Energy Transition Property or the Energy Transition Charges; and

(4)            whether a court of competent jurisdiction would hold, under the “Takings Clause” of the Fifth Amendment to the United States Constitution, U.S. Const. amend. V, as made applicable to the States by the Fourteenth Amendment to the United States Constitution, U.S. Const. amend. XIV, that the State could not take any action in contravention of the State Pledge without paying just compensation to the Bondholders if doing so (a) constituted a permanent appropriation of the property interest of bondholders in the Bonds or the Energy Transition Property or a denial of all economically beneficial or productive use of the Energy Transition Property; (b) destroyed the Energy Transition Property; or (c) substantially limited, altered, impaired or reduced the value of the Energy Transition Property in a manner that inflicts a severe economic impact on such bondholders and unduly interferes with their reasonable expectations, unless adequate provision shall be made by law for the protection of the bondholders.

Based upon our review of the pertinent statutory and constitutional provisions and relevant reported decisions, and subject to the qualifications, limitations and assumptions (including the assumption that any impairment would be substantial) set forth in this letter, it is our opinion that:

(1)            a court of competent jurisdiction, in a properly prepared and presented case, would conclude that the State Pledge creates a contractual relationship between the Bondholders and the State for purposes of the Contract Clause;

(2)            a court of competent jurisdiction, in a properly prepared and presented case, would conclude, that, absent a demonstration by the State that a substantial impairment of such contract is reasonable and necessary to further a significant and legitimate public purpose, the Bondholders (or the Trustee acting on their behalf) could successfully challenge under the Contract Clause the constitutionality of Legislative Action subsequently enacted, determined by such court to limit, alter, impair or reduce the value of the Energy Transition Charges, the Energy Transition Property, the Financing Order and all rights thereunder or ownership thereof or security interest therein so as to cause a substantial impairment of the Bond obligations prior to the time that the Bonds and related financing costs are fully paid and discharged;

⁴ Each opinion reference to the NMPRC includes any state agency that is a successor to the NMPRC exercising legislative authority (i.e., rulemaking authority).

Page 7

(3)            a court of competent jurisdiction, in a properly prepared and presented case, would conclude that it has the authority and discretion to grant preliminary injunctive relief pending a determination of the merits of the Contract Clause claim, and permanent injunctive relief, and would exercise that discretion in accordance with well-established equitable factors authorizing such relief; although sound and substantial arguments might support the granting of preliminary injunctive relief or permanent injunctive relief to prevent implementation of any law determined to limit, alter, impair or reduce the value of the Energy Transition Charge or the Energy Transition Property in violation of the federal Contract Clause, the decision to do so will be in the discretion of the court requested to take such action, which will be exercised on the basis of the considerations discussed in this opinion letter; and

(4)            there are sufficient legal grounds for a court of competent jurisdiction to require the State to pay just compensation to Bondholders if the State’s repeal or amendment in contravention of the State Pledge, after the Bonds are issued but before the Bonds are fully paid, (a) constituted a permanent appropriation of the property interest of bondholders in the Bonds or the Energy Transition Property or a denial of all economically beneficial or productive use of the Energy Transition Property; (b) destroyed the Energy Transition Property; or (c) substantially limited, altered, impaired or reduced the value of the Energy Transition Property in a manner that inflicts a severe economic impact on such bondholders and unduly interferes with their reasonable expectations, unless adequate provision shall be made by law for the protection of the bondholders.

This opinion is limited to the federal laws of the United States of America. Courts apply the Contract Clause and the Takings Clause on a case-by-case basis, applying the pertinent constitutional text and relevant judicial precedent to the specific facts before the courts. A ruling on preliminary or permanent injunctive relief also depends upon the specific facts and circumstances before a court. We further note that we are not aware of any reported controlling judicial precedents that are directly on point. Our analysis therefore necessarily represents a reasoned application of the pertinent constitutional and statutory provisions informed by judicial decisions involving similar or analogous circumstances. Moreover, the application of equitable principles, including the determination whether to grant or deny preliminary or permanent injunctive relief, is subject to the discretion of the court being asked to grant such relief. We cannot predict the facts and circumstances that will be present in the future and may be relevant to the exercise of such discretion or the determination of the merits. Our opinion is neither a guarantee of the outcome nor a recommendation as to the forum⁵ or form of relief to seek. The recipients of this letter should take these considerations into account in analyzing the risks associated with the subject transaction.

⁵ The “Supremacy Clause” of the United States Constitution, U.S. Const., art. VI, cl. 2, requires state courts to apply the United States Constitution to matters arising under their jurisdiction. See, e.g., Testa v. Katt, 330 U.S. 386, 394 (1947). With respect to the availability of injunctive relief, our opinion solely addresses the standards applied by federal courts. We express no opinion as to the preferable forum.

Page 8

II. ANALYSIS OF THE CONTRACT CLAUSE

The Contract Clause of the United States Constitution (“[n]o State shall . . . pass any . . . Law impairing the Obligation of Contracts”)⁶ restricts the power of States to disrupt contractual arrangements if (1) the state law operates as a substantial impairment of a contractual relationship and (2) the state law is not drawn in an appropriate and reasonable way that advances “significant and legitimate public purpose.” Sveen v. Melin, ___ U.S. ___, 138 S. Ct. 1815, 1821–22 (2018) (quoting Energy Reserves Grp., Inc. v. Kansas Power & Light Co., 459 U.S. 400, 411–12 (1983)); see also United States Trust Co. v. New Jersey, 431 U.S. 1, 15, 21–22 (1977)(“U.S. Trust”).⁷

A. Substantial State Law Impairment of a Contractual Obligation

The United States Supreme Court addresses the question of whether state Legislative Action results in a substantial state law impairment of contractual obligations in terms of three elements: whether there was a contract, whether a change in state law has impaired contractual obligations, and whether the impairment is substantial. See General Motors Corp. v. Romein, 503 U.S. 181, 186 (1992); see also Energy Reserves Grp., 459 U.S. at 410; Allied Structural Steel Co. v. Spannaus, 438 U.S. 234, 244 (1978); In Re Walker, 959 F.2d.894,899 (10th Cir. 1992). ⁸.

1. Contractual Relationship between Bondholders and the State of New Mexico

Whether a contractual relationship and resulting obligations exists within the meaning of the Contract Clause is a federal question to be determined in accordance with judicially established standards. General Motors Corp. v. Romein, 503 U.S. 181, 187 (1992); Irving Trust Co. v. Day, 314 U.S. 556, 561 (1942); Indiana ex rel. Anderson v. Brand, 303 U.S. 95, 100 (1938); Appelby v. City of New York, 241 U.S. 364, 380 (1926).

Although the deliberations resulting in inclusion of the Contract Clause in the Constitution reflect disapproval of state laws absolving debts incurred during the Revolutionary War, the scope of the Contract Clause extends to all contracts, including contracts between private parties and contracts between a state and private parties. See U.S. Trust, 431 U.S. at 15. See also Trs. of Dartmouth College v. Woodward, 17 U.S. (4 Wheat.) 518, 651 (1819); Fletcher v. Peck, 10 U.S. (6 Cranch) 87, 137–139 (1810); Sveen, 138 S.Ct. at 1821; Keystone Bituminous Coal Assn. v. DeBenedictis, 480 U.S. 470, 502–503 (1987); Allied Structural Steel, 438 U.S. at 244–245, n. 16.

⁶ U. S. Const., art. I, § 10, cl. 1 provides in full: “No State shall enter into any Treaty, Alliance, or Confederation; grant Letters of Marque and Reprisal; coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts; pass any Bill of Attainder, ex post facto Law, or Law impairing the Obligation of Contracts, or grant any Title of Nobility.”

⁷ Energy Reserves Group states the required analysis as having three elements: whether the legislative action operates as a substantial impairment of a contractual relationship; if so, then whether the legislative action is justified by a significant and legitimate public purpose; and, if so, whether the adjustment of the rights and responsibilities of the contracting parties is reasonable and appropriate to the public purpose behind the legislative action. 459 U.S. at 411–12; Stillman v. Teachers Ins. & Annuity Ass'n College Ret. Equities Fund, 343 F.3d 1311,1321 (10th Cir. 2003); In Re Walker, 959 F.2d. 894, 899 (10th Cir. 1992). Our opinion addresses each of these elements. Whether articulated as a three-part or two-part test, however, the substance of the inquiry is the same. Melendez v. City of New York, 16 F.4th 992, 1031 (2d Cir. 2021).

⁸ The United States District Court in New Mexico is located within the geographic boundary of the United States Court of Appeals for the Tenth Circuit, whose decisions are considered controlling precedent within that circuit.

Page 9

The Supreme Court recognizes that the fundamental purpose of the Contract Clause is “to encourage trade and credit by promoting confidence in the stability of contractual obligations. . . .” U.S. Trust, 431 U.S. at 15 (citing Home Building & Loan Ass’n v. Blaisdell, 290 U.S. 398, 427–28 (1934)). A unilateral expectation arising from state law does not result in a contractual obligation protected by the Contract Clause against changes in state law. Id. at 22. In General Motors Corp. v. Romein, an employer won a hard fought appeal concerning the proper construction of an employee benefits coordination law in state court only to have the state legislature amend the statute. 503 U.S. 181, 187 (1992). The Supreme Court found the state never to have made a contractual commitment to employers to refrain from changing the law. Id. at 187. Because state legislatures generally enact laws to establish policy, the enactment of a contractual commitment is unusual and will not be implied. Nat’l R. Passenger Corp. v. Atchison Topeka & Santa Fe R. Co., 470 U.S. 451, 466 (1985). Despite the “principal function of a legislature” being “to make laws which declare the policy of the state and are subject to repeal,” nevertheless a “legislative enactment may contain provisions which, when accepted as the basis of action by individuals, become contracts.” Anderson, 303 U.S. at 100. For legislation to create a contractual obligation between the state and private parties, the legislation must include an adequate expression of an actual intent to create a contractual obligation. Nat’l Rail Passenger, 470 U.S. at 467–68.

Thus, for example, statutes establishing tenure of public school teachers typically express a legislative policy which the legislature is free to change without consequence under the Contract Clause.⁹ In Anderson, however, the State of Indiana enacted state teacher tenure laws committing to employment terms in express contractual language, and, accordingly, those commitments have been protected from substantial impairment by federal courts applying the Contract Clause. 303 U.S. at 100. With respect to the legal standard to find the existence of a legislated contractual obligation, U.S. Trust provides the following guidance: “In general, a statute is itself treated as a contract when the language and circumstances evince a legislative intent to create private rights of a contractual nature enforceable against the State.” 431 U.S. at 18, n 14.

The Energy Transition Act includes an express statement of the intent of the State of New Mexico to create an obligation to refrain from impairment of security for the Bonds:

A. The state pledges to and agrees with the bondholders, any assignee and any financing parties that the state shall not take or permit any action that impairs the value of energy transition property, except as allowed pursuant to Section 6 of the Energy Transition Act¹⁰, or reduces, alters or impairs energy transition charges that are imposed, collected and remitted for the benefit of the bondholders, any assignee and any financing parties, until the entire principal of, interest on and redemption premium on the energy transition bonds, all financing costs and all amounts to be paid to an assignee or financing party under an ancillary agreement are paid in full and performed in full.

⁹ Phelps v. Bd. of Educ. of West N.Y., 300 U.S. 319, 323 (1937), is an example of a tenure statute that merely enacted a policy subject to legislative revision.

¹⁰ N.M.S.A. § 62-18-6 (2019). See note 2, supra.

Page 10

B. Any person who issues energy transition bonds is permitted to include the pledge specified in Subsection A of this section in the energy transition bonds, ancillary agreements and documentation related to the issuance and marketing of the energy transition bonds.

N.M.S.A. § 62-18-19(2019).

The foregoing commitments are further affirmed in Paragraphs 42 and 46 of the Financing Order, [and are reaffirmed in the 2023 NMPRC Order]. Although the statutory and NMPRC commitments constituting the State Pledge does not use the term “contract” it expresses an equivalent formal commitment to be bound with respect to obligations incurred pursuant to the Energy Transaction Act and the Financing Order. A “pledge” in this context is “a binding promise or agreement to do or forbear.” Webster’s New Collegiate Dictionary 882 (G.C. Merriam Co., 1975). The State Pledge is similar to the language in issue in U.S. Trust. In U.S. Trust, port authority financing legislation enacted by New York and New Jersey provided that the two states “covenant and agree with each other and with the holders of any affected bonds” that the Port Authority would not “apply any of the . . . revenues or reserves . . . pledged in whole or in part as security for such bonds, for any railroad purposes whatsoever other than permitted purposes hereinafter set forth.” 431 U.S. at 9–10. The Supreme Court found “[t]he intent to make a contract is clear from the statutory language: ‘The 2 States covenant and agree with each other and with the holders of any affected bonds. .. . .’” Id. at 18. The intent to make a contract is no less clear from the language of the State Pledge. The term “covenant” used in the legislation U.S. Trust addressed has the same signification and meaning as the term “pledge” in the State Pledge: a “binding agreement.” Webster’s New Collegiate Dictionary 262 (G.C. Merriam Co., 1975).

The State Pledge also serves the same contractual function as part of the consideration or quid pro quo for investment as did the states’ covenant in U.S. Trust. Both induce investment on favorable terms in return for the states’ express undertakings and are examples of legislative enactments containing provisions which, “when accepted as the basis of action by individuals, become contracts.” Anderson, 303 U.S. at 100. The operative language in the Energy Transition Act is as follows: “[t]he state pledges to and agrees with the bondholders, any assignee and any financing parties ….” N.M.S.A. § 62-18-19 A (2019). Through N.M.S.A.§ 16-18-2 B(12), the Energy Transition Act requires a commitment by the utility to undertake to achieve financing of the energy transition costs consistent with a “lowest cost objective”─ “that the structuring, marketing and pricing of energy transition bonds results in the lowest energy transition charges consistent with prevailing market conditions at the time of pricing of energy transition bonds and the structure and terms of energy transition bonds approved pursuant to the financing order.” N.M.S.A.§ 62-18-2 N. See also N.M.S.A. § 62-18-4 B(5) (qualified securities firm documenting proposed financing “satisfies the current published AAA rating or equivalent rating criteria”). U.S. Trust found the function of the states’ covenant was to secure “marketability of Port Authority bonds.” 431 U.S.at 18. The State Pledge serves the substantially same function as the states’ covenant in U.S. Trust of contributing to the marketability of the bonds through providing security of payment. Id. at 19.

Page 11

U.S. Trust and precedent following it indicate a court will find the relevant New Mexico statutory provisions sufficient to create a contractual relationship between the Bondholders and the State of New Mexico. Shortly after U. S. Trust was decided, the New York Court of Appeals relied upon the decision to apply the Contract Clause to invalidate a state statute revoking an authorized toll increase and imposing a new restrictive procedure for toll increases because New York had enacted a statutory pledge not to interfere with authorized toll increases and not to limit or alter the rights vested in the authority to the detriment of bondholders. Patterson v. Carey, 363 N.E. 2d 1146, 1152–53 (1977). In Patterson, the tolls were the sole source of revenue for repayment of the bonds issued to finance the highway, consistent with the Energy Transition Property and Energy Transition Charges serving as the sole source of repayment for the Bonds. Id. at 1150–51. Although a decision of the New York Court of Appeals is only persuasive authority, the decision of the State of New Mexico to enact a statutory structure and state pledge language similar to prominent examples previously found to create a contractual obligation “evince[s] a legislative intent to create private rights of a contractual nature enforceable against the State,” U.S. Trust, 431 U.S. at 17–18, and provides “an adequate expression of an actual intent” to enter into a contractual relationship with Bondholders. Nat’l R. Passenger, 470 U.S. at 467–68 (quoting Wis. & Mich. R. Co. v. Powers, 191 U.S. 379, 386–87(1903)).

In reaching our opinion concerning the existence of a contract under the Contract Clause, we have considered the “reserved powers” doctrine. That doctrine concerns alleged contracts where the state purportedly binds itself to waive inherent attributes of its sovereign status, including the ability to exercise the power of eminent domain and the authority to exercise its legislative authority to enact laws for the public health, safety, and welfare (the “police power” of the state). A state contract purporting to contract away the state’s reserved powers is void. U.S. Trust, 431 U.S. at 23.

In U.S. Trust the Court considered the scope of the “reserved powers” doctrine and held the doctrine does not prevent a state government from entering into binding financial obligations such as the covenant restricting the use of bond proceeds in order to preserve liquidity and bondholder security: “Whatever the propriety of a State's binding itself to a future course of conduct in other contexts, the power to enter into effective financial contracts cannot be questioned.” Id. at 24.

The State Pledge serves to protect investment in bonds issued by a private special purpose entity, not a state political subdivision, authority or agency. But the Bonds are only issued when approved by the state in accordance with statutory standards designed to advance a public goal through funding Energy Transition Costs contingent on the abandonment of substantial interests in coal-fired generation in furtherance of the State of New Mexico’s furtherance of energy transition and mitigation of adverse environmental and social impacts of the coal-fired power plant abandonment furthering the energy transition in New Mexico. See N.M.S.A § 62-18-2 H(2) (2019), quoted at n. 1, supra. The Bonds are issued by a limited special purpose entity existing for the authorized financing purpose only and acting as directed by state law including the Finance Order. Financing Order at 118, Par. 20. In our view, the financial nature of the commitment by the State is the determining factor in the analysis under the police powers, not the nature of the entity that is the debt obligor. See Patterson, 363 N.E. 2d at 1152–53 (public benefit corporation issued debt, not a state agency or political subdivision).

Page 12

A court applying the Contract Clause will likely consider New Mexico’s establishment of a self-liquidating Energy Transition Cost financing mechanism assured by the State Pledge to intrude no more on the state’s reserved powers, including police power or eminent domain authority, than the statutory financial covenant enforced against repeal by the Supreme Court in U.S. Trust. The protected value of the energy transition property is simply the expected stream of payments to service and retire the bonded debt: “All energy transition property created in a financing order shall continue to exist until the energy transition bonds issued and all related financing costs pursuant to a financing order are paid in full.” N.M.S.A.§ 62-18-12 B (2019). The Energy Transition Charges are designed solely to the end of recovery of those costs. N.M.S.A.§ 62-18-6 (2019). We are of the view that a court would find the State Pledge to be sufficiently analogous to the “purely financial” state promise addressed by U.S. Trust so that it “may not be said automatically to fall within the reserved powers that cannot be contracted away . . . and thus not necessarily a compromise of the State’s reserved powers.” 431 U.S. at 24–25. Based upon its plain meaning and statutory and factual context, the State Pledge satisfies the legal standards of an unmistakably clear and constitutionally permissible contractual commitment by the State no less than the financial covenants at issue in U.S. Trust.¹¹

2. A Change in State Law Impairing a Contractual Obligation

In Blaisdell, the Supreme Court summarized the standard for finding a change in state law to constitute an impairment of the obligations of a contract, stating that “the obligations of a contract are impaired by a law which renders them invalid, or releases or extinguishes them” and also by “laws which without destroying contracts derogate from substantial contractual rights.” Blaisdell, 290 U.S. at 431–32 (citations omitted). The Court noted various outcomes when the change in law modified or eliminated a specific contractual remedy. Blaisdell at Id. at 432–33. The question of whether a challenged Legislative Action will be found to impair a contractual obligation necessarily will turn upon the extent the specific Legislative Action is inconsistent with the State Pledge and the provisions of the Energy Transition Act incorporated within the State Pledge. The example of revocation of covenants providing assurances of payment of bonded obligations referenced in U.S. Trust, discussed supra, and Von Hoffman v. City of Quincy are examples where the question of technical impairment was not in doubt and the court moved quickly to the question of whether it was a substantial impairment. 71 U.S. 531, 554–55 (1867) (finding statutory covenant to exercise municipal taxation power to fund repayment of bonds to create an enforceable obligation protected by the Contracts Clause and finding constitutional impairment by rejecting the use of the characterization of the covenant to increase taxes as a mere remedy and therefore not part of the core contractual bargain); U.S. Trust, 431 U.S. at 19 (holding the credit support provided by a covenant restricting certain expenditures was not mere surplusage but instead established a substantial contractual obligation).

¹¹ In order for a federal court to proceed on a complaint it must have jurisdiction over a ripe case or controversy between a plaintiff with standing to sue and a defendant subject to suit. Our Opinion assumes that either Bondholders or their Trustee could establish standing and a ripe case or controversy. We also assume the facts giving rise to the Contract Clause claim and desired relief permit a well-pleaded complaint to establish federal jurisdiction, such as under the general federal question jurisdiction of U.S. District Courts, 28 U.S.C.§ 1331. U.S. ex. rel. Holmes v. Consumers Ins. Group, 279 F. 3d 1245,1249 (10th Cir. 2002). See also Elliott v. Bd. of Sch. Trs. of Madison Consolidated Schs., 876 F. 3d 926, 931-32 (7th Cir. 2017); Lipscomb v. Columbus Mun. Separate Sch. Dist., 269 F.3d 494, 512 (5th Cir 2001) (finding federal question jurisdiction).

Page 13

Regardless of the form of the change in law, a claim under the Contract Clause must challenge a law passed after the obligation of the contract in question has been created. General Motors, 503 U.S. at 186 (1992). An alleged misapplication of law existing at the time of entry into the contract presents no basis for a claim under the Contracts Clause. New Orleans Waterworks Co. v. Louisiana Sugar Ref. Co., 125 U.S. 18, 30 (1888) (“[N]ot only must the obligation of a contract have been impaired, but it must have been impaired by a law of the State. The prohibition is aimed at the legislative power of the State, and not at the decisions of its courts, or the acts of administrative or executive boards or officers, or the doings of corporations or individuals.”) The law, however, may issue from an agency of the state such as the NMPRC acting pursuant to delegated legislative authority. Ross v. Oregon, 227 U.S. 150, 162–63 (1913) (citations omitted) (construing Ex Post Facto Clause relying on Contract Clause precedent). A complaint seeking relief under the Contracts Clause based upon a NMPRC decision, as opposed to the Legislature’s passage of an amendment or repeal of the Energy Transition Act, would need to allege that the NMPRC acted in a legislative capacity in substantially impairing the obligations of the Bonds issued subject to the State Pledge, such as by adopting a rule antithetical to the State Pledge, as opposed to making an error of a ministerial nature in carrying out its statutory obligations under the Energy Transition Act. We are not able to opine that the NMPRC’s well defined administrative duties under the Energy Transition Act would constitute legislative activity within the Contract Clause because their purpose is “not to prescribe a new law for the future, but only to apply to a completed transaction laws which were in force at the time.” 227 U.S. at 163.¹²

¹² In Grant Trunk W. Ry. Co. v. R.R. Comm’n of Ind., 221 U.S. 400 (1911), the Court rejected a claim challenging a state railroad commission order requiring an interlocking interconnection to further safety of two railroads in accordance with a statute enacted after the railroads had entered into contracts concerning their safety signaling responsibilities and costs. The Court found the orders themselves to have force and effect of law and therefore could be the basis for a complaint based upon an alleged violation of the Contract Clause but found against the railroad plaintiffs on the merits based on the scope of the legislation being beyond the contemplation of the contracts even though each involved safety for their intersecting lines. In dicta, the Court stated that it did not want its ruling to create the impression that a contract of broader scope would have been the basis for an impairment claim based upon a statute mandating a specific cost allocation for a specific safety improvement. This case is distinguishable because it did not involve a non-utility special purpose entity created under state law expressly pledging to preserve a specific form of credit support or cost recovery.

Page 14

3. Substantial Nature of Impairment

In answering the question of whether the Legislative Act causes a substantial impairment of a contractual obligation, the Supreme Court “has considered the extent to which the law undermines the contractual bargain, interferes with a party’s reasonable expectations, and prevents the party from safeguarding or reinstating his rights.” Sveen, 138 S. Ct. at 1821 (citations omitted); see also Allied Structural Steel, 438 U.S. at 244, 246; Texaco, Inc. v. Short, 454 U.S. 516, 531 (1982); El Paso v. Simmons, 379 U.S. 497, 514–15 (1965). As discussed below, where the legislative modification of contractual rights occurs in the context of a regulated industry, such as electric utilities or banks, the Court is less inclined to find a substantial impairment of contractual obligations because the contracting parties accepted from the outset that their contract was subject to the Legislative Action. The Energy Transition Act and Financing Order establish the Issuing Entity solely as a separate trust financing vehicle with no public service or public utility service obligations and without NMPRC regulation or oversight apart from the administration of the statutory provisions in accordance with the Financing Order and the Energy Transition Act. Despite this separation of the financing and payment obligations from utility service and rate regulation, each payor of the Energy Transition Charges is a distribution customer of the regulated utility and the NMPRC retains its jurisdiction over the public utility affiliate of the Issuing Entity. Whether these factors might affect the determination of when certain Legislative Action constitutes a substantial impairment would likely depend on the nature of the Legislative Action, particularly the extent to which it is directed to the Issuing Entity and its obligations subject to the State Pledge, the extent to which it was squarely inconsistent with the State Pledge and its anticipated practical effect upon performance consistent with the State Pledge.

In applying the Contract Clause to preserve the statutory security terms of the bonded debt of a state authority against repeal, U.S. Trust recognized, as had Blaisdell, that a substantial impairment can be one that derogates from substantial contract rights, such as security provisions even if the result does not render the creditor’s interest worthless. In U.S. Trust, the effect of the repeal of the covenant limiting subsidies of mass transit was difficult to quantify because the securities recovered much of their price following an initial decline in value and retained an “A” rating. 431 U.S. at 18–19. U.S. Trust distinguished the Port Authority bonds case from circumstances where one form of credit enhancement or statutory creditor remedy is substituted for another credit enhancement or creditor remedy, or a statute permits an insolvent debtor to reorganize with the intent of benefitting creditors and discharging debt obligations. 431 U.S. at 19, n.17, 27–78 (citing Faitoute Iron & Steel Co. v. City of Asbury Park, 316 U.S. 502, 504, 511, 513 (1942)), and found a substantial impairment of concern:

As a security provision, the covenant was not superfluous; it limited the Port Authority's deficits and thus protected the general reserve fund from depletion. Nor was the covenant merely modified or replaced by an arguably comparable security provision. Its outright repeal totally eliminated an important security provision and thus impaired the obligation of the States' contract.

Page 15

Id. at 19.

The determination of whether a particular Legislative Action constitutes a substantial impairment of a particular contract is a fact-intensive analysis, and nothing in this letter expresses any opinion as to how a court would resolve the “substantial impairment” issue with respect to the Financing Order, the Energy Transition Act, or the Bonds, vis-à-vis a particular Legislative Action. Accordingly, we have assumed for purposes of this letter that any impairment resulting from a challenged Legislative Action would be substantial.

B. Whether the Law is Drawn in an Appropriate and Reasonable Way that Advances a Significant and Legitimate Public Purpose

If the foregoing analysis leads to a conclusion that the state Legislative Action substantially impairs a contractual obligation, the inquiry turns towards the means and ends of the state Legislative Action in order to determine “whether the state law is drawn in an appropriate and reasonable way to advance a significant and legitimate public purpose.” Sveen, 138 S.Ct. at 1821 (quoting Energy Reserves Group, 438 U.S. at 411–412); see also U.S. Trust, 431 U.S. at 22 (Laws “adjusting the rights and responsibilities of contracting parties must be upon reasonable conditions and of a character appropriate to the public purpose justifying its adoption”) U.S. Trust explained why the Contracts Clause provides no absolute protection of contracts from the effects of state legislation as follows:

Although the Contract Clause appears literally to proscribe "any" impairment, this Court observed in Blaisdell that "the prohibition is not an absolute one and is not to be read with literal exactness like a mathematical formula." 290 U.S., at 428, 54 S.Ct., at 236. 290 U.S., at 428, 54 S.Ct., at 236.Thus, a finding that there has been a technical impairment is merely a preliminary step in resolving the more difficult question whether that impairment is permitted under the Constitution. In the instant case, as in Blaisdell, we must attempt to reconcile the strictures of the Contract Clause with the "essential attributes of sovereign power," id., at 435, 54 S.Ct. at 239, necessarily reserved by the States to safeguard the welfare of their citizens. Id., at 434-440, 54 S.Ct. at 238-240.

431 U.S. at 21, 25 (“As with laws impairing the obligations of private contracts, an impairment [of a state contract] may be constitutional if it is reasonable and necessary to serve an important public purpose.”)

Page 16

In the Blaisdell decision, the Court upheld a state law instituting an emergency moratorium on mortgage foreclosures during the Great Depression. In finding that the temporary legislative impairment of mortgage foreclosure rights did not violate the Contract Clause, the Court specifically relied upon the state’s residual authority “to safeguard the vital interests of its people” and five additional factors: (1) a state legislative finding of an emergency need to protect homeowners, (2) the challenged law protected a basic societal interest, not a favored group, (3)  the relief was appropriately tailored to the emergency that it was designed to meet, (4) the imposed conditions were reasonable, and (5) the legislation was limited to the duration of the emergency. 290 U.S. at 434, 443-447. Subsequent decisions affirmed state legislation of a non-emergency nature modifying private contractual rights based upon proof of a public purpose and the legislative amendment being responsive to that purpose, but on occasion struck down as unconstitutional state laws with a disproportionate adverse effect on creditors. Veix v. Sixth Ward Bldg. & Loan Ass’n, is notable because it upheld a non-emergency statutory revision of the right to redeem savings and loan ownership shares. 310 U.S. 32 (1940). The Court relied upon older authority, which affirmed statutes providing for modification of utility contract rates, and the fact that savings and loan associations had been subject to continuous statutory regulation from the outset of the industry, indicating a heightened role for legislative action and a lower expectation of absolute freedom of contract. Id. None of these decisions addressed an express covenant with the state itself such as is presented by the State Pledge.

In U.S. Trust, the Court applied stricter scrutiny to the state law repealing the covenant restricting certain uses of Port Authority revenues, finding that the “the scope of the State's reserved power depends on the nature of the contractual relationship with which the challenged law conflicts.” 431 U.S. at 21–22. The Court found that a stricter test should apply to financial contracts where the state is a party, a conclusion reflecting a strong tendency in Supreme Court decisions to uphold financial covenants in financings sponsored by state government. The decision stated that stricter scrutiny is needed because the state is an interested party and therefore has a fiscal incentive to enact measures to its advantage—a rationale the dissenting opinion questioned, noting the absence of prior authority adopting that rationale. Id. at 59 (Brennan, J., dissenting). The Court has noted that “[i]n almost every case, the Court has held a governmental unit to its contractual obligations when it enters financial or other markets.” Energy Reserves Group, 438 U.S. at 412; see also U.S. Trust, 431 U.S. at 22 (“[T]he Court has regularly held that the States are bound by their debt contracts.”).

In U.S. Trust, involving contracts to which the state was a party, the Court viewed the policy of encouraging mass transit to be (i) a policy that existed prior to the original Port Authority financing act creating the covenant restricting expenditures for mass transportation, (ii) not to constitute an emergency, and (iii) not warranting as reasonably necessary the total repeal of the covenant. U.S. Trust, 431 U.S. at 30–32. The Supreme Court reversed the New Jersey Supreme Court’s ruling finding the repeal of the bond covenant to be an appropriate exercise of the police power, finding it instead to violate the Contract Clause. While we cannot guarantee that the stricter scrutiny applied in U.S. Trust will be applied to Legislative Action in derogation of the pertinent Energy Transition Act provisions here—even absent the full degree of scrutiny U.S. Trust applied to laws impairing the obligations of contracts made by the state supporting state authority financings—U.S. Trust reaffirms that the Contract Clause provides meaningful review of state Legislative Action that substantially impairs the obligations of contracts made by the state under a standard requiring that Legislative Action “adjusting the rights and responsibilities of contracting parties must be upon reasonable conditions and of a character appropriate to the public purpose justifying its adoption.” Id. at 22.

Page 17

Addressing whether a state law enlarging upon private contractual obligations potentially impairs the obligations of those contracts, the Supreme Court applied the Contracts Clause in Allied Structural Steel to invalidate a Minnesota law imposing upon a narrowly defined class of employers’ pension funding obligations, which exceeded the class’s contractual obligations triggered by a plant closure and relocation out-of-state. 438 U.S. at 234. First, the Court found the state law to have an unquestionable impact upon the employer’s contractual relations with its employees and “substantially altered those relationships by superimposing pension obligations upon the company conspicuously beyond those that it had voluntarily agreed to undertake.” Id. at 241. After reaffirming the necessity to apply the Contract Clause in light of the reserved police powers of the State, the Court reaffirmed the general standard of review of Legislative Action articulated in U.S. Trust:

Despite the customary deference courts give to state laws directed to social and economic problems, [legislation] adjusting the rights and responsibilities of contracting parties must be upon reasonable conditions and of a character appropriate to the public purpose justifying its adoption.

Id. at 243 (quoting U.S. Trust, 431 U.S. at 22.)¹³

Allied Structural Steel then explained the effect of the significance of impairment upon the standard of review as follows

The severity of the impairment measures the height of the hurdle the state legislation must clear. Minimal alteration of contractual obligations may end the inquiry at its first stage. Severe impairment, on the other hand, will push the inquiry to a careful examination of the nature and purpose of the state legislation. The severity of an impairment of contractual obligations can be measured by the factors that reflect the high value the Framers placed on the protection of private contracts. Contracts enable individuals to order their personal and business affairs according to their particular needs and interests. Once arranged, those rights and obligations are binding under the law, and the parties are entitled to rely on them.

Id. at 245 (footnote omitted).¹⁴

¹³ Allied Structural Steel also noted U.S. Trust applied stricter scrutiny to a state law modifying its own contracts. 438 U.S. at 244, n15.

¹⁴ The Supreme Court references El Paso v. Simmons, 379 U.S. 497 (1965), as a case where there was no substantial impairment. Allied Structural Steel, 438 U.S. at 245, n. 14, 17.

Page 18

In Energy Reserves Group, the Court restated the framework of Contract Clause analysis as first finding whether a new law substantially impairs a contractual relationship, and then ascertaining whether a significant and legitimate public purpose supports the regulation, such as remedying a broad and general social or economic problem in order to assure “that the State is exercising its police power, rather than providing a benefit to special interests.” 459 U.S. at 412 (footnote omitted) (citing U.S. Trust, 431 U.S. at 22; Allied Structural Steel, 438 U.S. at 247, 249). Once the burden of showing a significant and legitimate public purpose is satisfied, the final stage of the analysis follows:

Once a legitimate public purpose has been identified, the next inquiry is whether the adjustment of ‘the rights and responsibilities of contracting parties [is based] upon reasonable conditions and [is] of a character appropriate to the public purpose justifying [the legislation's] adoption.” United States Trust Co., 431 U.S., at 22, 97 S. Ct., at 1518. Unless the State itself is a contracting party, see id., at 23, 97 S. Ct., at 1518, … ‘[as] is customary in reviewing economic and social regulation, … courts properly defer to legislative judgment as to the necessity and reasonableness of a particular measure."

459 U.S. at 412–13 (footnote omitted) (citing U.S. Trust, 431 U.S. at 22– 23).¹⁵

Energy Reserves Group did not reach either of the final two steps of this tripartite analysis. Instead, the Court found that the challenged state law restricting the application of price escalation clauses in the context of changing federal energy regulation was not a substantial impairment of contractual obligations. Energy Reserves Group, 459 U.S. at 413–16. The overall intent of the clauses as negotiated was to permit changes in regulated prices to be recognized, not to permit unregulated pricing, and the contracts expressly provided for adjustments reflecting changes in state and federal law. Id. Although expressing a tripartite inquiry, Energy Reserves Group does not undertake to alter previously established substantive standards. Id.

¹⁵ The Court noted the distinction between laws affecting the obligations of purely private contracts and those relieving the state of its contractual obligations as follows: “In United States Trust Co., but not in Allied Structural Steel Co., the State was one of the contracting parties. When a State itself enters into a contract, it cannot simply walk away from its financial obligations. In almost every case, the Court has held a governmental unit to its contractual obligations when it enters financial or other markets.” Energy Reserves Grp., 459 U.S. at 412, n. 14; see also U.S. Trust., 431 U.S., at 25–28; W. B. Worthen Co. v. Kavanaugh, 295 U.S. 56 (1935); Murray v. Charleston, 96 U.S. 432 (1878); but see Faitoute Iron & Steel, 316 U.S. 502 (1942). “When the State is a party to the contract, ‘complete deference to a legislative assessment of reasonableness and necessity is not appropriate because the State's self-interest is at stake.’” Energy Reserves Grp., 459 U.S. at 412, n. 14 (quoting U.S. Trust, 431 U.S. at 26). “In the present case, of course, the stricter standard of United States Trust Co. does not apply because Kansas has not altered its own contractual obligations.” Id. (contrasting Faitoute Iron & Steel, 316 U.S. 502 (1942), which involved a state municipal receivership law applied to an insolvent municipality and found to benefit creditors). In the context of a Due Process Clause claim against the federal government, the Tenth Circuit Court of Appeals acknowledged the stricter scrutiny of legislation abrogating the government’s own contractual commitments in Sheridan Square Partnership v. United States, 66 F.3d 1105, 1108 (10th Cir. 1995) (“Notwithstanding our usual deference to congressional enactments, we review economic legislation with particular scrutiny when a government attempts to redefine or abrogate its own contractual relationships.”).

Page 19

Once a substantial impairment of the contractual obligations is shown, the resolution of whether the Contracts Clause prohibits the Legislative Action requires a fact-specific determination predicated upon the nature of the Legislative Action, specifically the public purpose it serves, the materiality and severity of the contractual modification, and how the advancement of the public purpose relates to the modification to contractual rights. In Re Walker, 959 F.2d 894, 899-900 (10th Cir. 1992). If Legislative Action imposes a severe impairment plainly contrary to the State Pledge, substantial authority supports application of stricter judicial scrutiny than would be applied to laws advancing valid public purposes that have a limited, more incidental effect altering the obligations of contracts between private parties.

For these reasons and subject to the qualifications and assumptions stated in this letter it is our opinion that a court of competent jurisdiction, in a properly prepared and presented case:

(1)            would conclude that the State Pledge creates a contractual relationship between the Bondholders and the State for purposes of the Contract Clause; and

(2)            would conclude, absent a demonstration by the State that a substantial impairment is reasonable and necessary to further a significant and legitimate public purpose, the Bondholders (or the Trustee acting on their behalf) could successfully challenge under the Contract Clause the constitutionality of Legislative Action subsequently enacted, determined by such court to limit, alter, impair or reduce the value of the Energy Transition Charges or Energy Transition Property so as to cause a substantial impairment of the Bond obligations prior to the time that the Bonds and related financing costs are fully paid and discharged.

III. ANALYSIS OF FEDERAL INJUNCTIVE RELIEF FOR CONTRACT CLAUSE CLAIMS

A United States District Court has the authority and discretion to grant preliminary injunctive relief pending a determination of the merits of a Contract Clause claim in accordance with well-established equitable factors authorizing preliminary injunctive relief. The federal district court also has the authority and discretion to grant permanent injunctive relief in accordance with well-established factors authorizing such relief.¹⁶ To the extent the State of New Mexico itself is protected by sovereign immunity from an action in federal court for an act in violation of the Contract Clause, any suit for injunctive relief would likely be brought directly against individual state officials. In Ex Parte Young, the U.S. Supreme Court held that a federal court may issue an injunction to compel a state agent’s obedience to federal law. 209 U.S. 123 (1908). Alden v. Maine, 527 U.S. 706 (1999) (confirming continued validity of Ex Parte Young). The application of Ex Parte Young requires a straightforward inquiry into whether the complaint alleges an ongoing violation of federal law and seeks relief properly characterized as prospective (i.e., injunctive relief rather than monetary damages). Verizon Md. Inc. v. Public Serv. Comm'n of Md., 535 U.S. 635, 645 (2002); see also MCI Telecomm. Corp. v. PSC, 216 F.3d 929, 939 (10th 2000); ANR Pipeline Co. v. Lafaver, 150 F3d 1178, 1188-89 (10th Cir. 1998), overruled on other grounds by Hill v. Kemp, 478 F.3d 1236, 1259 (10th Cir.2007).

¹⁶ Federal law would govern an action for injunctive relief brought in a federal court. Applicable state law would govern an action for injunctive relief brought in a state court. Our opinion is limited to federal law and thus is limited to an action for injunctive relief brought in a federal court with respect to a claim under the Contract Clause.

Page 20

Turning first to preliminary injunctive relief, the United States Supreme Court requires federal courts to adhere to the principle that a “preliminary injunction is an extraordinary remedy never awarded as of right.” Winter v. NRDC, Inc., 555 U.S. 7, 24 (2008). A plaintiff seeking a preliminary injunction must establish likelihood of success on the merits, the likelihood plaintiff will suffer irreparable harm in the absence of preliminary relief, that the balance of equities tips in plaintiff’s favor, and that an injunction is in the public interest. Id. at 20.¹⁷ See also Otero Savings & Loan Ass'n v. Federal Reserve Bank, 665 F.2d 275, 278 (10th Cir. 1981). In determining whether to issue a preliminary injunction the court must balance the competing claims of injury and must consider the effect on each party of the granting or withholding of the requested relief. Winter, 555 U.S. at 24. See also Mrs. Fields Franchising, LLC v. MFGPC, 941 F. 3d 1221,1232 (10th Cir. 2019). In accord with Winter, the Tenth Circuit Court of Appeals has repeatedly affirmed a preliminary injunction remedy is an extraordinary remedy, not granted as of right and the exception, rather than the rule. Harmon v. City of Norman, 981 F.3d 1146 (10th Cir. 2020). See also Citizen Band Potawatomi Indian Tribe v. Enter. Mgmt. Consultants, Inc., 883 F2d 886,888 (10th Cir. 1988).

As Winter confirmed, securing a preliminary injunction restraining the effectiveness of Legislative Action alleged to substantially impair contractual obligations will require the plaintiffs to demonstrate a likelihood of success on the merits. 555 U.S. at 20; see also Denver Homeless out Loud v. Denver, 32 F.4th 1259, 1277 (10th Cir. 2022); Petersen v. Kunkel, 492 F. Supp. 3d 1183, 1192 (D.N. Mex. 2020). The plaintiffs would need to demonstrate that they had standing to proceed based upon actual or threatened injury proximately resulting from the alleged impairment of a vested contractual right. Dodge v. Bd. of Educ., 5 N.E.2d 84, 86, 88 (1936), aff’d 302 U.S. 74 (1937). In Exxon Corp. v. Eagerton, the claim failed because the plaintiffs were not beneficiaries of the allegedly impaired obligation. 462 U.S. 176, 187–89 (1983).

Plaintiffs would also need to allege the threatened injury resulted from Legislative Action. Barrows v. Jackson, 346 U.S. 249, 260 (1953) (The Contract Clause “is directed against legislative action only.").

¹⁷ As applied in the 10th Circuit, the movant must carry its burden of proof for each of the four requirements for a preliminary injunction: (1) the movant is substantially likely to succeed on the merits; (2) the movant will suffer irreparable injury if the injunction is denied; (3) the movant’s threatened injury outweighs the injury the opposing party will suffer under the injunction; and (4) the injunction would not be adverse to the public interest. E.g., New Mexico Dep’t of Fish & Game vs. U.S. Dep’t of the Interior, 854 F.3d 1236, 1245-46 (10th Cir. 2017); Diné Citizens Against Ruining Our Env’t v. Jewell, 839 F.3d 1276, 1282 (10th Cir. 2016).

Page 21

Within the federal judicial system injunctive relief is always predicated upon showing a threat of irreparable harm and an absence of adequate legal remedies. Winter, 555 U.S. at 20; Beacon Theaters v. Westover, 359 U.S. 500, 506–07 (1959). An injury generally is not irreparable if compensatory relief (i.e., money damages) would be adequate. E.g., Tri-State Generation & Transmission Ass’n, Inc. v. Shoshone River Power, Inc., 805 F.2d 351, 355 (10th Cir. 1986). But absent a State waiver of immunity, money damages would be unavailable to redress the harm to Holders from the Legislative Action, supporting the inadequacy of relief available in a federal court.¹⁸ In such a case, the plaintiffs may be able readily to demonstrate not just a delay in receipt of interest payments until a final judgment, but the absence of any legal remedy (i.e., damages),¹⁹ and therefore irreparable harm, because the Eleventh Amendment generally prevents federal courts from imposing remedies that impinge on state treasuries absent a waiver of sovereign immunity. Virginia Office for Prot. & Advocacy v. Stewart, 563 U.S. 247, 253–54 (2011); Hans v. Louisiana, 134 U.S. 1, 20 (1890). If sovereign immunity were not a bar to monetary damages, depending on the nature of the State’s action in violation of the State Pledge, the availability of an adequate remedy at law may be limited by the difficulty in calculating damages.²⁰ The remaining equitable factors affecting the appropriateness of preliminary injunctive relief are highly fact specific, turning upon the facts and circumstances of the specific Legislative Action, its practical effect and the practical effect of either granting or not granting preliminary relief.

The only difference in the legal standard applicable to permanent injunctive relief and preliminary injunctive relief is permanent injunctive relief requires the plaintiff to prevail on the merits. eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388, 391 (2008).

¹⁸ But see, e.g., Roland Mach. Co. v. Dresser Indus., Inc., 749 F.2d 380, 386 (7th Cir. 1984) (holding that a delay in receipt of scheduled payments until final judgment does not present the type of irreparable harm that a preliminary injunction seeks to prevent, absent countervailing circumstances).

¹⁹ Chamber of Com. of U.S. v. Edmondson, 594 F.3d 742, 756, 770–71 (10th Cir. 2010) (associations’ members were likely to suffer irreparable harm from compliance costs related to state law that might total more than $1,000 per business per year because such costs were unrecoverable as damages due to sovereign immunity); Entergy Nuclear Vt. Yankee, LLC v. Shumlin, 733 F.3d 393, 423 (2d Cir. 2013) (injunction supported in part because money damages unavailable to movant because of state immunity under Eleventh Amendment); KPMG LLP v. United States, 139 Fed.Cl. 533, 537 (Fed. Cl. 2018) (“[a]s a general principle, where plaintiff has no ability to recoup lost profits against the United States, the harm to the plaintiff is irreparable”); E. Bay Sanctuary Covenant v. Biden, 993 F.3d 640, 677 (9th Cir. 2021) (where parties cannot typically recover monetary damages flowing from their injury economic harm can be considered irreparable); Odebrecht Const., Inc. v. Secretary, Florida Dept. of Transp., 715 F3d 1268, 1289 (11th Cir. 2013); Entergy, Arkansas, Inc. v. Nebraska, 210 F3d 887, 899–900 (8th Cir. 2000) (chances for a preliminary injunction may be “heightened” where relief in the form of money damages is barred by the government’s sovereign immunity); but see Black United Fund of N.J., Inc. v. Kean, 763 F.2d 156, 161 (3d Cir. 1985) (“[t]hat the Eleventh Amendment may pose an obstacle to recovery of damages in the federal court does not transform money loss into irreparable injury for equitable purposes”).

²⁰ See U.S. Trust, 431 U.S. at 19 (“[N]o one can be sure precisely how much financial loss the bondholders suffered” from the repeal of the state pledge.).

Page 22

A United States District Court considering a complaint seeking injunctive relief against a NMPRC decision establishing an allegedly unlawful and inadequate Energy Transition Charge based upon the Contracts Clause or Takings Clause would also be required to determine whether the Johnson Act, 28 U.S.C.§ 1342,²¹ restricts its authority to issue injunctive relief. The Johnson Act restriction only applies to an “order affecting rates chargeable by a public utility and made by a State administrative agency or a rate-making body of a State political subdivision,” and applies only if all its enumerated conditions are satisfied. Alabama Public Serv. Comm’n v. Southern Ry. Corp., 341 U.S. 316, 350 (1951); Williams v. Professional Transp. Inc., 284 F. 3d 607, 612 (4th Cir. 2002).²² Because the state authorized financing resulting in the issuance of the Bonds depends upon securities markets and therefore interstate commerce, an agency order threatening substantial impairment of the contractual obligations pertaining to the Bonds and the State Pledge likely would have a meaningful effect on interstate commerce and accordingly would fail the 28 U.S.C. § 1342(2) condition that “the order does not interfere with interstate commerce” rendering the Johnson Act prohibition of injunctive relief inapplicable. Nucor Corp. v. Nebraska Public Power Dist., 891 F.2d 1343, 1348 (8th Cir. 1989) (applying 28 U.S.C. § 1342(2) to affirm injunctive relief based upon effect on interstate commerce).

Because the core intent of the Contract Clause is “to encourage trade and credit by promoting confidence in the stability of contractual relations”²³ and the State of New Mexico has by legislation expressly insulated the Bonds from the financial and business risks (including regulatory risks) of the public utility affiliate of the Issuing Entity for the express purpose of relying on financial markets to secure the lowest cost financing feasible for the Bonds, a court will likely find the Johnson Act inapplicable to an injunction restraining state implementation of Legislative Action revoking or otherwise materially inconsistent with the State Pledge provided the other elements essential to equitable relief are demonstrated.

In conclusion, assuming Legislative Action substantially impairing obligations undertaken pursuant to and protected by the Energy Transition Act, coincided with an absence of a waiver of sovereign immunity and the Legislative Action provided no means for monetary compensation for threatened and probable losses²⁴, an established process exists, defined by well-settled legal and equitable standards, for Bondholders (or their Trustee) to bring an action in a federal District Court seeking and, upon satisfying those standards and subject to the equitable discretion of the court, obtaining preliminary and permanent injunctive relief. Although sound and substantial arguments might support the granting of preliminary and permanent injunctive relief to prevent implementation of any law determined to limit, alter, impair or reduce the value of the Energy Transition Charge or the Energy Transition Property in violation of the federal Contract Clause, the decision to do so will be in the discretion of the court requested to take such action, which will be exercised on the basis of the considerations discussed above.

²¹ “The district courts shall not enjoin, suspend or restrain the operation of, or compliance with, any order affecting rates chargeable by a public utility and made by a State administrative agency or a rate-making body of a State political subdivision, where: (1) Jurisdiction is based solely on diversity of citizenship or repugnance of the order to the Federal Constitution; and, (2) The order does not interfere with interstate commerce; and, (3) The order has been made after reasonable notice and hearing; and, (4) A plain, speedy and efficient remedy may be had in the courts of such State.” 28 U.S.C.§ 1342.

²² As these authorities hold, if the injunction is directed against state action other than an “order affecting rates chargeable by a public utility and made by a State administrative agency or a rate-making body of a State political subdivision,” the Johnson Act restriction has no applicability. The Issuing Entity provides no public utility services and has been found not to constitute a public utility. Financing Order at 7, 40. Public Service Company of New Mexico’s authority to bill and collect the Energy Transition Charges from its customers is solely in its role as a servicer for the Issuing Entity. Financing Order Par. 19 at 61-62.

²³ U.S. Trust, 431 U.S. at 16.

²⁴ In the event a waiver of sovereign immunity or another mechanism makes monetary relief available, the ability to demonstrate irreparable harm arising from the need to seek the compensation offered or delay in recovery becomes more problematic and fact dependent.

Page 23

For these reasons and subject to the qualifications and assumptions stated in this letter we reach the opinions stated in response to Question 3.

III. TAKINGS CLAUSE ANALYSIS

The Takings Clause of the Fifth Amendment to the United States Constitution (“Nor shall private property be taken for public use, without just compensation”) applies to prohibit violative state action through the Fourteenth Amendment to the United States Constitution. Penn Central Transportation Co. v. New York City, 438 U.S. 104, 122 (1978); Chicago, Burlington & Quincy R.R. Co. v. Chicago, 166 U.S. 226, 235–41(1897). Persons may seek relief for violations of the Takings Clause through actions brought in federal court pursuant to the Civil Rights Act 42 U.S.C. § 1983 and 28 U.S.C. § 1343, in addition to general federal question jurisdiction, 28 U.S.C.§ 1331.

The purpose of forbidding uncompensated takings of private property for public use²⁵ is “to bar Government from forcing some people alone to bear public burdens which, in all fairness and justice, should be borne by the public as a whole.” Armstrong v. United States, 364 U.S. 40, 49 (1960). While the Takings Clause reads initially as a broad prohibition, its effect is to authorize the federal and state governments to take private property for a public purpose conditioned upon the payment of just compensation. First English Evangelical Lutheran Church v. Los Angeles Cnty., 482 U.S. 304, 316, n.9 (1987) (The Takings Clause “is designed not to limit the governmental interference with property rights per se, but rather to secure compensation in the event of otherwise proper interference amounting to a taking.”)

The question of just compensation addresses “what has the owner lost, not what has the taker gained.” Boston Chamber of Com. v. Boston, 217 U.S. 189, 195 (1910). The pecuniary value of the loss is usually gauged by the extent to which the taking deprived the owner of his ownership or dominion interest in his property, measured by the value of the property at the time of the taking. Kirby Forest Indus., Inc. v. United States, 467 U.S. 1, 5 (1984).

²⁵ The initial determination of whether a taking is a public use is for the legislature to make, Hawaii Hous. Auth. v. Midkiff, 467 U.S. 229, 239–40 (1984), and federal courts afford substantial deference to these determinations “unless the use be palpably without reasonable foundation.” United States v. Gettysburg Elec. Ry. Co., 160 U.S. 668, 680 (1896); see also Berman v. Parker, 348 U.S. 26, 31–33(1954); Old Dominion Land Co. v. United States, 269 U.S. 55, 66 (1925); Wisconsin Cent.,95 F. 3d at 1367.

Page 24

The Supreme Court recognizes a categorical obligation for the government to compensate a property owner when it imposes a permanent physical invasion of the property. Lingle v. Chevron USA, Inc., 544 U.S. 528, 538 (2005); Loretto v. Teleprompter Manhattan CATV Corp., 458 U.S. 419 (1982). A second categorical requirement for compensation arises when state regulatory impositions completely deprive an owner of “all economically beneficial us[e]” of her property. Lucas v. South Carolina Coastal Council, 505 U.S. 1003, 1019 (1992) (emphasis in original). The Court held in Lucas that the government must pay just compensation for such “total regulatory takings,” except to the extent that “background principles of nuisance and property law” independently restrict the owner's intended use of the property. 505 U.S. at 1026–1032.²⁶

In additional to tangible property²⁷, the United States Supreme Court has found contract rights and other intangible rights may constitute “property” within the meaning of the Takings Clause. Lynch v. United States, 292 U.S. 571, 579 (1934) (holding valid contracts are property within meaning of the Taking Clause); James v. Campbell, 104 U.S. 356, 358 (1882) (treating government appropriation of patent rights as equivalent to physical taking); see also U.S. Trust, 431 U.S. at 19, n.16. The Energy Transition Act provides that it creates a property right in energy transition property in addition to the contractual rights established for the repayment of indebtedness.²⁸

In Pennsylvania Coal Co. v. Mahon, 260 U.S. 393 (1922), the Supreme Court expanded its interpretation of the protection of the Takings Clause to more than direct appropriations of property, holding that compensation was also required for a “regulatory taking,” meaning a government restriction on the use of property that went “too far.” 260 U.S. at 415; see also Lucas, 505 U.S. 1003, 1019 (1992). In Penn Central, the Court explained that the test for when regulatory impositions become a taking, as opposed to merely a change in law that members of the public must accept without compensation, requires an “ad hoc” factual consideration of factors such as the economic impact of the regulation on the affected party, its interference with reasonable investment-backed expectations, and the character of the government action, such as whether the alleged taking amounts to a physical invasion or instead affects property interests through “some public program adjusting the benefits and burdens of economic life to promote the common good.” 434 U.S. at 124. For example, in Connolly v. Pension Benefits Guar. Corp., a new statutory imposition of pension funding obligations adjusting contract rights was found to be the latter and not sufficient to constitute a “taking” of contract rights. 475 U.S. 211, 224 (1986). In Ruckelshaus v. Monsanto Co., when federal regulations imposed a requirement to make trade secrets public as part of pesticide licensing process a claim for a taking could only be made for trade secrets where the applicant had a “distinct investment-backed expectation.” 476 U.S. 986, 1003–1004 (1984).

²⁶ The Supreme Court has recognized an exception to the requirement of compensation when a taking by the government is necessitated by an imminent emergency requiring immediate government action, including the destruction of physical facilities about to be captured by an enemy, or about to contribute to a fire. United States v. Caltex (Philippines), Inc, 344 U.S. 149, 154 (1952) (destruction required by World War II military necessity to avoid enemy capture and use of strategic facilities foreclosed any requirement of compensation); Bowditch v. Boston, 101 U.S. 16, 18–19 (1879) (invoking common law to find government immunity applies to destroying property to prevent imminent fueling of an ongoing fire). The exception has not been extended to intangible financial property.

²⁷ The government’s categorical duty under the Fifth Amendment to pay just compensation when it physically takes possession of an interest in property for public use applies to personal as well as real property. Horne v. Department of Agriculture, 576 U.S. 351, 357 (2015) (physical taking of bulk fruit).

²⁸ The Supreme Court recognizes “[property] interests . . . are not created by the Constitution. Rather, they are created and their dimensions are defined by existing rules or understandings that stem from an independent source such as state law.” Webb's Fabulous Pharmacies, Inc. v. Beckwith, 449 U.S. 155, 161 (1980) (quoting Board of Regents v. Roth, 408 U.S. 564, 577 (1972)) (internal punctuation omitted).

Page 25

As we have previously opined, certain impairments of the obligations of the State Pledge by Legislative Action may give rise to a claim under the Contracts Clause even though those impairments may affect only certain security arrangements under the affected agreements or the State Pledge. Not every impairment of the obligations of a contract will constitute a taking of property under the Takings Clause, and some regulation that does not constitute a taking within the Takings Clause may nonetheless substantially impair the obligations of a contract.

If state action (either legislative change or administrative agency action under color of state law), substantially revokes or alters the Bondholders’ rights under the relevant evidences of indebtedness and related agreements or the rights established by the Energy Transition Financing Statute and protected under the State Pledge so as to either completely deprive Bondholders of all economically beneficial use of the Securitization Property or unduly interfere with the reasonable expectations of the Bondholders arising from their investment in the Bonds, the Bondholders would suffer a taking within the meaning of the Takings Clause under United States Supreme Court precedent. Lingle v. Chevron USA, 544 U.S.528, 538–39 (2005) (reaffirming these legal standards as articulated by Penn Central and Lucas).

The courts of New Mexico exercise jurisdiction over claims seeking just compensation from the State of New Mexico for state takings in violation of the Takings Clause. Manning v. Mining and Minerals Division of the Energy, Minerals and Natural Resources Department, 144 P.3d 87 (N.Mex. 2006). The Tenth Circuit Court of Appeals holds federal district courts lack jurisdiction to hear Takings Clause claims for monetary compensation against states, at least when the relevant state makes its courts available to provide monetary relief for takings in violation of the Takings Clause, applying the restriction of federal court jurisdiction imposed by the Eleventh Amendment as construed by Edelman v. Jordan, 415 U.S. 651, 662-63(1974). See Williams v. Utah Department of Corrections, 928 F.3d 1209,1213-14 (10th Cir. 2019) (following other circuit courts of appeals in distinguishing contrary precedent concerning claims not subject to the Eleventh Amendment restriction of federal court authority). Under the foregoing authorities, a New Mexico state court would provide the judicial forum for seeking monetary compensation from the State of New Mexico based on a Takings Clause claim. There can be no assurance, however, that any such award of just compensation would be sufficient to pay the full amount of principal of and interest on the Bonds.

Page 26

Based upon our review of the pertinent statutory and constitutional provisions and relevant reported decisions, and subject to the qualifications, limitations and assumptions set forth in this letter, it is our opinion that there are sufficient legal grounds for a court of competent jurisdiction, in a properly prepared and presented case to require the State to pay just compensation to Bondholders if the State’s repeal or amendment in contravention of the State Pledge, after the Bonds are issued but before the Bonds are fully paid, (a) constituted a permanent appropriation of the property interest of bondholders in the Bonds or the Energy Transition Property or a denial of all economically beneficial or productive use of the Energy Transition Property; (b) destroyed the Energy Transition Property; or (c) substantially limited, altered, impaired or reduced the value of the Energy Transition Property in a manner that inflicts a severe economic impact on such bondholders and unduly interferes with their reasonable expectations, unless adequate provision shall be made by law for the protection of the bondholders.

*          *          *

While a copy of this opinion letter may be posted to an internet website required under Rule 17g-5 under the Securities and Exchange Act of 1934, as amended, and maintained by Public Service Company of New Mexico solely for the purpose of complying with such rule, this opinion letter is solely for the benefit of the recipients identified in Schedule A to this opinion letter in connection with the transactions described supra and may not be quoted, used or relied upon by, nor may copies be delivered to, any other person (including without limitation, any governmental or regulatory agency and all purchasers of Bonds other than the underwriters named in the Underwriting Agreement), nor may such recipients rely on this letter for any other purpose, without our prior written consent.

We hereby consent to the filing of this opinion letter as an exhibit to the report on Form 8-K filed on the date hereof relating to the Registration Statement filed with the Securities and Exchange Commission, and to all references to our firm included in or made a part thereof. In giving the foregoing consents, we do not thereby admit that we are within the category of persons whose consent is required under Section 7 of the Securities Act of 1933, as amended, or the related rules and regulations.  We assume no obligation to update or supplement this opinion letter to reflect any facts or circumstances which may hereafter come to our attention with respect to the opinions or statements expressed above, including any changes in applicable law which may hereafter occur.

Very truly yours,

Troutman Pepper Hamilton Sanders LLP

Page 27

EXHIBIT A

Addressees

U.S. Bank Trust Company, National Association, as Indenture Trustee

190 S. LaSalle Street, 7^th Floor

Chicago, Illinois 60603

U.S. Bank National Association, as Securities Intermediary

190 S. LaSalle Street, 7^th Floor

Chicago, Illinois 60603

Moody’s Investors Service, Inc.

25^th Floor, 7 World Trade Center

250 Greenwich Street

New York, New York 10007

Attention: ABS/RMBS Monitoring Department

S&P Global Ratings

55 Water Street

New York, New York 10041

Attention: Structured Credit Surveillance

To each of the following, for itself and as Representatives of the Underwriters of the Bonds:

RBC Capital Markets, LLC

Brookfield Place

200 Vesey Street, 8th Floor

New York, New York 10281

Citigroup Global Markets Inc.

388 Greenwich Street, 6^th Floor

New York, New York 10013

EX-99.3

Exhibit 99.3

[MILLER STRATVERT P.A. LETTERHEAD]

[_____________], 2023

To: The persons listed on Exhibit A attached hereto

Re: Opinion Concerning New Mexico Constitutional Issues Pertaining to Energy Transition Bonds, Series A of PNM Energy Transition Bond Company I, LLC

Ladies and Gentlemen,

We have acted as New Mexico counsel for Public Service Company of New Mexico (“PNM”), a New Mexico corporation, and PNM Energy Transition Bond Company I, LLC, a Delaware limited liability company (the “Issuer”), in connection with the Registration Statement on Form SF-1 (File Nos. 333-274433 and 333-274433-01) filed on September 8, 2023, and amended by Amendment No. 1 thereto filed on October [__], 2023, by PNM and the Issuer with the Securities and Exchange Commission pursuant to the Securities Act of 1933, as amended, with respect to the proposed issuance by the Issuing Entity of its Energy Transition Bonds, Series A (the “Bonds”). Capitalized terms used but not otherwise defined herein shall have the meanings set forth in the [TBD], dated as of [________], 2023, among PNM, the Issuer and the underwriters named therein.

The Issuer is issuing the Bonds pursuant to the Financing Order¹ approved by the New Mexico Public Regulation Commission (“Commission”) in NMPRC Case No. 19-00018-UT. The Financing Order was approved by the Commission in accordance with the Energy Transition Act.² We have also reviewed (a) the Order on Remand Adopting Uncontested Stipulation, dated September 21, 2023, issued by the Commission (the “2023 NMPRC Order”), which affirmed, among other things: (1) the validity of the Financing Order and the authorizations and approvals granted to PNM therein, including the Financing Order’s determination of its irrevocability and PNM’s ongoing authority to cause the issuance of up to $360.1 million of energy transition bonds pursuant to the Financing Order, and (2) the non-impairment pledge pursuant to the Financing Order and the ETA, and (b) the [Order of Dismissal and Mandate] issued by the New Mexico Supreme Court on [______], 2023, in Public Serv. Co. of N.M. v. N.M. Pub. Regulation Comm’n, Case No. S-1-SC-39440, involving an appeal of the Commission’s Final Order Adopting Recommended Decision with Additions, Case No. 19-00018-UT (in the Matter of Abandonment of San Juan Generating Station) (June 29, 2022) (“Show Cause Order”). The 2023 NMPRC Order resolved the Show Case Order and the related appeal in Case No. S-1-SC-39440.

¹ Final Order on Request for Issuance of a Financing Order, Case No. 19-00018-UT (April 1, 2020), approving and adopting Recommended Decision on PNM’s Request for Issuance of a Financing Order, Case No. 19-00018-UT (Feb. 21, 2020) (collectively, “Financing Final Order”).

² NMSA 1978, §§ 62-18-1 to -23 (2019).

PNM and the Issuer have requested that we furnish our opinion to you as to whether, in a properly prepared and presented case:

1.            A court of competent jurisdiction applying New Mexico law would conclude:

(a) that the State Pledge (as defined below) constitutes a contractual relationship between the Bondholders and the State of New Mexico; and

(b) under applicable State of New Mexico constitutional principles relating to the impairment of contracts, that, absent a demonstration by the State of New Mexico that a substantial impairment of that contract is reasonable and necessary to further a significant and legitimate public purpose, the bondholders could successfully challenge under the New Mexico contract clause the constitutionality of legislative action that alters, impairs, or reduces the value of energy transition property or energy transition charges prior to the Bonds and any other costs are fully paid and discharged.;

2.            A court of competent jurisdiction applying New Mexico law would conclude that the State of New Mexico would be required to pay just compensation to the Bondholders if the State of New Mexico, undertook any action in contravention of the State Pledge that: (a) constituted a permanent appropriation of a substantial property interest of the Bondholders in the Bonds or the Energy Transition Property or denied all of or substantially all of the practical use of the Energy Transition Property; (b) destroyed the Energy Transition Property, other than in response to emergency conditions; or (c) substantially altered, impaired or reduced the Energy Transition Property in a manner that inflicts a severe economic impact on such Bondholders and unduly interferes with their reasonable expectations, unless adequate provisions were made by law for the protection of Bondholders;

3.            A court of competent jurisdiction applying New Mexico law would conclude that: (i) the Energy Transition Act has been duly enacted by the New Mexico legislature in accordance with all applicable laws and is in full force and effect; (ii) the effectiveness or constitutionality of the Energy Transition Act under the Constitution of the State of New Mexico (insofar as it relates to the Bonds and to the Transaction) was, to the best of our knowledge as of [           ], 2023, not the subject of any pending appeal or litigation (although we cannot assure you that a lawsuit challenging the validity of the Energy Transition Act will not be filed in the future or that, if filed, will not be successful); and (iii) if the constitutionality of the Energy Transition Act were challenged, a New Mexico Court applying New Mexico substantive law would conclude under applicable State of New Mexico constitutional principles that the Energy Transition Act is constitutional; and

4.            Any attempt by the State of New Mexico or any agency or instrumentality of the State of New Mexico to repeal or amend the Energy Transition Act or the Financing Order or to take other action in a manner that alters the rights of the Bondholders would be subject to a preliminary injunction if a state court in New Mexico hearing a request therefor finds (i) that the party requesting such injunctive relief has a likelihood of success on the merits, (ii) that such party will suffer irreparable harm if the preliminary injunctive relief is not granted, (iii) that no adequate, alternative remedy at law exists and (iv) that the issuance of such injunctive relief would not adversely affect the public interest; further, upon final adjudication of the challenged repeal, amendment or other action, the alleged wrongful conduct would be subject to a permanent injunction if the petitioning party succeeds on the merits and the Court hearing a request therefor makes the findings set forth in clauses (ii) through (iv).

2

5.            A court of competent jurisdiction applying New Mexico law would conclude that the Energy Transition Act is not subject to referendum as provided in Article IV, Section 1 of the New Mexico Constitution.

The following provisions of the Energy Transition Act (“ETA”), NMSA 1978, §§ 62-18-1 to -23 (2019, as amended through 2023) are particularly relevant for the opinions we have been asked to provide:

NMSA 1978, § 62-18-19 (2019):

A.           The state pledges to and agrees with the bondholders, any assignee and any financing parties that the state shall not take or permit any action that impairs the value of energy transition property, except as allowed pursuant to Section 6 of the Energy Transition Act, or reduces, alters or impairs energy transition charges that are imposed, collected and remitted for the benefit of the bondholders, any assignee and any financing parties, until the entire principal of, interest on and redemption premium on the energy transition bonds, all financing costs and all amounts to be paid to an assignee or financing party under an ancillary agreement are paid in full and performed in full.

B.            Any person who issues energy transition bonds is permitted to include the pledge specified in Subsection A of this section in the energy transition bonds, ancillary agreements and documentation related to the issuance and marketing of the energy transition bonds.

NMSA 1978, § 62-18-7 (2019). The provisions of NMSA 1978, § 62-18-7 (2019) are referred to herein as the “State Pledge”:

A.           A financing order is irrevocable and the commission shall not reduce, impair, postpone or terminate the energy transition charges approved in the financing order, the energy transition property or the collection or recovery of energy transition revenues.

NMSA 1978, § 62-18-9 (2019):

A.           A financing order shall remain in effect until the energy transition bonds issued pursuant to the financing order and any related financing costs have been paid in full.

3

NMSA 1978, § 62-18-12 (2019):

A.           Energy transition property that is created in a financing order shall constitute an existing, present property right, notwithstanding that the imposition and collection of energy transition charges depend on the qualifying utility continuing to provide electric energy or continuing to perform its service functions relating to the collection of energy transition charges or on the level of future energy consumption. Energy transition property shall exist whether or not the energy transition revenues have been billed, have accrued or have been collected and notwithstanding that the value or amount of the energy transition property is dependent on the future provision of electric energy or service to customers by the qualifying utility.

B.           All energy transition property created in a financing order shall continue to exist until the energy transition bonds issued and all related financing costs pursuant to a financing order are paid in full.

NMSA 1978, § 62-18-22 (2019).

Effective on the date that energy transition bonds are first issued under the Energy Transition Act, if any provision of that act is invalidated, superseded, replaced, repealed or expires for any reason, that occurrence shall not affect the validity of any action allowed pursuant to that act that is taken by the commission, a qualifying utility, an assignee or any other person, a collection agent, a financing party, a bondholder or a party to an ancillary agreement and, to prevent the impairment of energy transition bonds issued or authorized in a financing order issued pursuant to the Energy Transition Act, any such action shall remain in full force and effect with respect to all energy transition bonds issued or authorized in a financing order pursuant to the Energy Transition Act before the date that such provision is held to be invalid or is invalidated, superseded, replaced, repealed or expires for any reason.

Based upon our review of the pertinent statutory and constitutional provisions and relevant reported judicial decisions, and subject to the qualifications, limitations and assumptions set forth in this letter, it is our opinion that in a properly prepared and presented case:

1.            A court of competent jurisdiction applying New Mexico law would conclude:

(a) that the State Pledge constitutes a contractual relationship between the Bondholders and the State of New Mexico; and

(b) under applicable State of New Mexico constitutional principles relating to the impairment of contracts, that, absent a demonstration by the State of New Mexico that a substantial impairment of that contract is reasonable and necessary to further a significant and legitimate public purpose, the bondholders could successfully challenge under the New Mexico contract clause the constitutionality of legislative action that alters, impairs, or reduces the value of energy transition property or energy transition charges prior to the Bonds and any other costs are fully paid and discharged;

4

2.            A court of competent jurisdiction applying New Mexico law would conclude that the State of New Mexico would be required to pay just compensation to the Bondholders if the State of New Mexico, undertook any action in contravention of the State Pledge that: (a) constituted a permanent appropriation of a substantial property interest of the Bondholders in the Bonds or the Energy Transition Property or denied all of or substantially all of the practical use of the Energy Transition Property; (b) destroyed the Energy Transition Property, other than in response to emergency conditions; or (c) substantially altered, impaired or reduced the Energy Transition Property in a manner that inflicts a severe economic impact on such Bondholders and unduly interferes with their reasonable expectations, unless adequate provisions were made by law for the protection of Bondholders;

3.            A court of competent jurisdiction applying New Mexico law would conclude that: (i) the Energy Transition Act has been duly enacted by the New Mexico legislature in accordance with all applicable laws and is in full force and effect; (ii) the effectiveness or constitutionality of the Energy Transition Act under the Constitution of the State of New Mexico (insofar as it relates to the Bonds and to the Transaction) was, to the best of our knowledge as of [           ], 2023, not the subject of any pending appeal or litigation (although we cannot assure you that a lawsuit challenging the validity of the Energy Transition Act will not be filed in the future or that, if filed, will not be successful); and (iii) if the constitutionality of the Energy Transition Act were challenged, an New Mexico Court applying New Mexico substantive law would conclude under applicable State of New Mexico constitutional principles that the Energy Transition Act is constitutional; and

4.            Any attempt by the State of New Mexico or any agency or instrumentality of the State of New Mexico to repeal or amend the Energy Transition Act or the Financing Order or to take other action in a manner that alters the rights of the Bondholders would be subject to preliminary injunction if a state court in New Mexico hearing a request therefor finds (i) that the party requesting such injunctive relief has a likelihood of success on the merits, (ii) that such party will suffer irreparable harm if the preliminary injunctive relief is not granted, (iii) that no adequate, alternative remedy at law exists and (iv) that the issuance of such injunctive relief would not adversely affect the public interest; further, upon final adjudication of the challenged repeal, amendment or other action, the alleged wrongful conduct would be subject to a permanent injunction if the petitioning party succeeds on the merits and the Court hearing a request therefor makes the findings set forth in clauses (ii) through (iv).

5.            A New Mexico Court would conclude that the Energy Transition Act is not subject to referendum as provided in Article 4, Section 1 of the New Mexico Constitution.

5

I.            THE NEW MEXICO CONTRACT CLAUSE

Article II, Section 19 of the New Mexico Constitution provides: “No ex post facto law, bill of attainder nor law impairing the obligation of contracts shall be enacted by the legislature.” In evaluating whether a legislative action violates the New Mexico Contract Clause, New Mexico courts generally will apply the same methodology the United States Supreme Court employs to examine challenges under the federal Contract Clause. See Los Quatros, Inc. v. State Farm Life Ins. Co., 1990-NMSC-082, ¶¶ 23, 35, 110 N.M. 750, 800 P.2d 184. Where the State is a party to the contract, thus implicating its own self-interest, the court generally will not defer to legislative judgment, as is customary in reviewing economic and social regulation. See U.S. Tr. Co. of N.Y. v. New Jersey, 431 U.S. 1, 22-23 (1977); accord Los Quatros, Inc., 1990-NMSC-082, ¶ 26.

The Court will first determine whether a contractual relationship exists. Whitely v. N.M. State Pers. Bd., 1993-NMSC-019, ¶ 9, 115 N.M. 308, 850 P.2d 1011. If so, the “the threshold inquiry is whether the state law has, in fact, operated as a substantial impairment of [the] contractual relationship.” Los Quatros, Inc., 1990-NMSC-082, ¶ 27 (internal quotation marks and quoted authority omitted).

If the answer to the threshold inquiry is that the state regulation does indeed constitute a substantial impairment, the state must have a significant and legitimate public purpose behind the regulation, so that there is some guarantee that the state is exercising its police power, rather than providing a benefit to special interests. Finally, once a legitimate public purpose has been identified, the reviewing court must determine whether the adjustment of the rights and responsibilities of contracting parties is based upon reasonable conditions and is of a character appropriate to the public purpose justifying the legislation’s adoption.

Id. ¶ 28 (internal quotation marks, quoted authority, alterations, and citations omitted); see also Temple Baptist Church, Inc. v. City of Albuquerque, 1982-NMSC-055, ¶¶ 43-44, 98 N.M. 138, 646 P.2d 565 (concluding that sign ordinance was legitimate exercise of City’s police power and thus did not unconstitutionally impair the obligation of contract).

A.           Existence of a Contractual Relationship

“A prerequisite to a finding that a contract obligation is unconstitutionally impaired is proof of the existence of a contract, the benefits of which are somehow denied to the claimant due to the effect of legislation or other governmental action.” Whitely, 1993-NMSC-019, ¶ 9. “Contractual rights are not created by statute unless the language of the statute and the circumstances . . . manifest a legislative intent to create private rights of a contractual nature enforceable against the State.” Id. ¶ 10 (internal quotation marks and quoted authority omitted); see also Pierce v. State, 1996-NMSC-001, ¶ 17, 121 N.M. 212, 910 P.2d 288 (“We will find that a statute confers contractual rights when the language expressly so states, or the statute by clear and unambiguous terms indicates that the State specifically entered into a bargain with a party in fact as found in their language or by implication from other circumstances, as affected by rules of law.” (Internal quotation marks and quoted authority omitted.)). To determine if a contract exists, the court will apply well-known tenets of statutory construction.

6

In addressing issues of statutory interpretation, [the court] must determine and effectuate the intent of the legislature, using the plain language of the statute as the primary indicator of legislative intent. The words of a statute, including terms not statutorily defined, should be given their ordinary meaning absent clear and express legislative intention to the contrary. No part of a statute should be construed so that it is rendered surplusage.

Whitely, 1993-NMSC-019, ¶ 5 (citations omitted). “[The court] will find a contract only where the language is clear and unambiguous, and [the court] will resolve any uncertainty in favor of finding no contract;” the court will “decline to imply private contractual rights enforceable against the State.” Pierce, 1996-NMSC-001, ¶¶ 30, 41. “To do so would play havoc with basic principles of contract law, traditional contract clause analysis and, most importantly, the fundamental legislative prerogative to reserve to itself the implicit power of statutory amendment and modification.” Id. ¶ 41. (Internal quotation marks and quoted authority omitted.).

In Hayner v. Board of Commissioners of Dona Ana County, the New Mexico Supreme Court affirmed a writ of mandamus where the petitioner challenged the County’s failure to levy a tax for the purpose of paying wild animal bounties as required by statute. 1924-NMSC-013, ¶¶ 1, 4-5, 29 N.M. 311, 222 P. 657. The Court did not quote the specific statutory language but nonetheless concluded:

The Legislature through the sections of the Code above mentioned had offered to pay to every one a certain bounty upon specified wild animals. The animals had been killed, and evidence thereof had been presented to the county clerk of the county as provided by the statute, and certificates of indebtedness had been issued to various persons, to the right of whom the appellee had succeeded, and others similarly situated held such certificates. The offering of this reward and the performance by the various people of the conditions mentioned in the statute constituted a contract between the county of Doña Ana and the respective persons concerned. Thereby vested rights arose between the parties and the county. To allow the repeal of the statute under which these rights became vested to operate to destroy the right would be to impair the obligation of the contract between the parties, and would be violative of the Constitution of the United States (article 1, § 10, cl. 1) as well as section 19 of article 2 of the state Constitution. That such a right may not be taken away by legislation.

Id. ¶ 3. The Court stated: “[T]he bounty already earned must be held to be secured against legislative invasion” and that repeal of the statute “cannot be allowed to operate to defeat rights already vested in persons who had performed the conditions mentioned in the statute.” Id. ¶¶ 4-5; see also Rubalcava v. Garst, 1949-NMSC-035, ¶¶ 11-12, 53 N.M. 295, 206 P.2d 1154 (holding that legislation requiring that contracts to make bequests must be written to be enforceable unconstitutionally impaired vested rights in oral contract to make bequest which was fully performed and otherwise enforceable before effective date of legislation).

7

In contrast, the New Mexico appellate courts have been reluctant to find a contractual relationship in cases regarding employee benefits and the like set forth by statute. See, e.g., Whitely, 1993-NMSC-019, ¶¶ 10-11 (concluding that statute stating that “[a]t the time of transfer, the juvenile probation officers, support staff and chiefs shall retain their current classification and salary” did not create contract). “It is well established that statutes fixing the compensation or terms of public employment are presumed merely to establish public policy subject to legislative revision, and not create contractual or vested rights.” Id. The Court rejected a finding of any continuing right to future accruals of annual leave at previous statutory rates because “[c]ontractual rights are not created by statute unless the language of the statute and the circumstances . . . manifest a legislative intent to create private rights of a contractual nature enforceable against the State.” Id. (Internal quotation marks and citation omitted); see also Pierce, 1996-NMSC-001, ¶ 47 (finding no private rights of retirees to tax exemptions on retirement income after prior tax exemption statute was repealed, on theory that “principal function of a legislature is not to make contracts, but to make laws that establish the policy of the state” (Internal quotation marks and citation omitted.)); Yates v. Hawkins, 1942-NMSC-029, ¶¶ 1, 17-18, 46 N.M. 249, 126 P.2d 476 (concluding no contract existed between State and former land owner after State acquired title for tax delinquency and former land owner did not attempt to redeem during redemption period: “We do not see how there could possibly be a contract between the former owner and the State that could be violated or impaired by the provisions of the 1939 Act. In the passage of the 1937 Tax Act the Legislature said, in effect, that after the State has acquired title the former owner may repurchase the property upon certain terms and conditions. This in itself could not be construed as a contract, but at most simply an offer to the former owner or an act of grace, having none of the essential elements of a binding contract.”)).

Section 62-18-19 provides:

A. The state pledges to and agrees with the bondholders, . . . that the state shall not take or permit any action that impairs the value of energy transition property, except as allowed pursuant to Section 6 of the Energy Transition Act, or reduces, alters or impairs energy transition charges that are imposed, collected and remitted for the benefit of the bondholders, any assignee and any financing parties, until the entire principal of, interest on and redemption premium on the energy transition bonds, all financing costs and all amounts to be paid to an assignee or financing party under an ancillary agreement are paid in full and performed in full.

B. Any person who issues energy transition bonds is permitted to include the pledge specified in Subsection A of this section in the energy transition bonds, ancillary agreements and documentation related to the issuance and marketing of the energy transition bonds.

While the plain language of the statute does not mention “contract,” the statute contains an express pledge and agreement by the State and its Legislature to forgo legislative action that might impair rights under the ETA “until the entire principal of, interest on and redemption premium on the energy transition bonds, all financing costs and all amounts to be paid to an assignee or financing party under an ancillary agreement are paid in full and performed in full.” Id. Subsection B also contemplates reliance upon this pledge by “[a]ny person who issues energy transition bonds.” Id. This does not appear to be simply an articulation of policy, but rather constitutes a pledge by the State to not impair rights accrued and actions taken under the ETA. As in Hayner, the State’s pledge and the parties’ performance pursuant to the ETA appears to constitute a contract subject to the constitutional prohibition against legislative impairment. 1924-NMSC-013, ¶ 3.

8

The United States Supreme Court’s analysis in United States Trust Co. of New York supports this construction. 431 U.S. 1 (1977). In that case, the Supreme Court found a clear intent to create a contract in a covenant between New Jersey, New York, and certain bondholders that restricted the ability of the Port Authority of New York and New Jersey to subsidize rail transportation. 431 U.S. at 18. The statute stated:

The 2 States covenant and agree with each other and with the holders of any affected bonds . . . that so long as any of such bonds remain outstanding and unpaid and the holders thereof shall not have given their consent as provided in their contract with the port authority . . . neither the States nor the port authority . . . will apply any of the rentals, tolls, fares, fees, charges, revenues or reserves, which have been or shall be pledged in whole or in part as security for such bonds, for any railroad purposes whatsoever other than permitted purposes hereinafter set forth.

Id. at 9-10 (emphasis added). Based on this provision and upon finding that the purpose of the covenant was to invoke the protection of the federal contract clause, the Court had “no doubt” that the covenant represented a contractual obligation of the two States. See id. at 18.

Under a plain reading of these two statutes, no material distinction appears between a pledge and a covenant. Section 62-18-19 provides that the State “pledges to and agrees with the bondholders” to refrain from taking certain actions that would impair the energy transition property or charges. It also recognizes that investors will rely on its terms. See § 62-18-19(B). These provisions suggest that the Legislature intended the State Pledge to constitute a contractual commitment. Accordingly, the State has held itself out directly to bondholders as pledging and agreeing not to take any action that impairs the energy transition property or charge and should reasonably anticipate that bondholders and others would rely on that pledge by the State.

Additional provisions of the ETA support this conclusion. Section 62-18-7(A) provides that “[a] financing order is irrevocable and the commission shall not reduce, impair, postpone or terminate the energy transition charges approved in the financing order, the energy transition property or the collection or recovery of energy transition revenues.” And such “financing order shall remain in effect until the energy transition bonds issued pursuant to the financing order and any related financing costs have been paid in full.” Section 62-18-9(A). This language mirrors the intent of the State Pledge and extends any limits on the State to the Commission “until the energy transition bonds issued pursuant to the financing order . . . have been paid in full.” Id. Similarly, the “[e]nergy transition property that is created in a financing order shall constitute an existing, present property right . . . [and] shall continue to exist until the energy transition bonds issued and all related financing costs pursuant to a financing order are paid in full.” Section 62-18-12(A), (B). The Legislature further stated:

Effective on the date that energy transition bonds are first issued under the Energy Transition Act, if any provision of that act is invalidated, superseded, replaced, repealed or expires for any reason, that occurrence shall not affect the validity of any action allowed pursuant to that act that is taken by the commission, a qualifying utility, an assignee or any other person, a collection agent, a financing party, a bondholder or a party to an ancillary agreement and, to prevent the impairment of energy transition bonds issued or authorized in a financing order issued pursuant to the Energy Transition Act, any such action shall remain in full force and effect with respect to all energy transition bonds issued or authorized in a financing order pursuant to the Energy Transition Act before the date that such provision is held to be invalid or is invalidated, superseded, replaced, repealed or expires for any reason.

9

Section 62-18-22. Together, all of these provisions strongly suggest the State’s intent to be contractually bound by its pledge and to refrain from taking any action that would otherwise impair or infringe upon the Energy Transition Property or Energy Transition Charges.

B.           Existence of a Substantial Impairment

If a court determines that a contractual relationship exists, it will evaluate “whether the state law has, in fact, operated as a substantial impairment of [the] contractual relationship.” Los Quatros, Inc., 1990-NMSC-082, ¶ 27 (internal quotation marks and quoted authority omitted); see also id., ¶ 35 (“We see no reason why th[e] evaluation [of a claim under the New Mexico Contract Clause] should be performed using a different approach than that employed by the United States Supreme Court in federal Contract Clauses cases.”). “The severity of the impairment is said to increase the level of scrutiny to which the legislation will be subjected.” Id. (alterations, internal quotation marks, and citations omitted). “[A]n increasingly severe impairment must be justified by an increasingly important public purpose.” Id. ¶ 30. However, even slight impairment could be constitutionally suspect “if there were no legitimate public purpose behind the impairing statute.” Id. (emphasis in original).

In Los Quatros, Inc., the New Mexico Supreme Court considered whether a statute stating that “[t]here shall be no enforcement of a prepayment penalty in said mortgages” “unconstitutionally impairs” real property loan contracts that contained pre-payment prohibitions. 1990-NMSC-082, ¶ 1. The Court determined that “at least a significant (and perhaps a substantial) impairment of a contractual relationship” existed. Id. ¶ 29. However, the Court was “not impressed that this frustration of the lender’s expectations is unduly severe, particularly when [it] consider[ed] that the industry here - the banking industry - has long been extensively regulated.” Id. The Court then considered the impairment against the statute’s public purpose, promoting the alienability of land, and found the statute “sufficiently tailored to accomplishment of its purpose to withstand an attack on its constitutionality.” Id. ¶¶ 30-32.

The Supreme Court in Hayner, as discussed above, found unconstitutional impairment of a contract when the statute mandating a tax levy was repealed. 1924-NMSC-013, ¶¶ 2-3. This case pre-dates Los Quatros, Inc. by sixty-six years and did not consider questions of public purpose. See id. Rather, the Court found a contract between the county and the persons seeking payment on wild animal bounties and that “vested rights arose between the parties and the county.” Id. ¶ 3; see also Pierce, 1996-NMSC-001, ¶ 17 (“[C]ontractual rights may create a vested right.”).

10

Without a specific legislative action to consider, nothing in this letter can express any opinion as to how a court would rule on whether it would impair the State Pledge. That question is fact specific and would necessarily depend on the precise content of the action.

C.           Balancing Impairment with Public Purpose

If the court finds a substantial impairment, it will consider the public purpose of the arguably offending statute and balance the two.

If the answer to the threshold inquiry is that the state regulation does indeed constitute a substantial impairment, the state must have a significant and legitimate public purpose behind the regulation, so that there is some guarantee that the state is exercising its police power, rather than providing a benefit to special interests. Finally, once a legitimate public purpose has been identified, the reviewing court must determine whether the adjustment of the rights and responsibilities of contracting parties is based upon reasonable conditions and is of a character appropriate to the public purpose justifying the legislation’s adoption.

Los Quatros, Inc., 1990-NMSC-082, ¶ 28 (internal quotation marks, quoted authority, and notation of alterations omitted). Without a public purpose, even legislation that operates as a slight impairment may be constitutionally suspect. See id. ¶ 30. “[A]n increasingly severe impairment must be justified by an increasingly important public purpose.” Id.

In Los Quatros, Inc., the Court determined that the public purpose of the statute precluding enforcement of prepayment penalties was the alienability of land, a basic societal interest. See id. ¶ 31. Such purpose was neither insignificant nor illegitimate. See id. Noting New Mexico’s presumption of constitutionality, the Court continued that “as to the existence of reasonable conditions and a character appropriate to the public purpose . . . we think the legislation here is sufficiently tailored to accomplishment of its purpose to withstand an attack on its constitutionality.” Id. ¶ 32.

D.           Balancing Test is a Factual Inquiry

The balancing of substantial impairment with any proposed public purpose is a factual inquiry, and any outcome of a challenge to legislative action under the New Mexico Contract Clause will depend on the particular facts at issue. See id. ¶ 30. Such balancing

necessarily places legislative enactments at the mercy of judges’ views as to the importance of the measures the legislature enacts, but such is the nature of judicial review. If the constitutional prohibition is not to be applied with literal exactness, the fate of legislation must necessarily depend on how the courts perform the often difficult task of balancing the importance of the legislation against the infringement of the interests protected by the Constitution.

Id. (internal quotation marks and quoted authority omitted).

11

No way exists to predict or describe the precise form a future legislative action could take, the circumstances under which it might be enacted, or the public purpose behind its enactment. The form, nature, and facts surrounding litigation that might arise to challenge a legislative action are also unpredictable. Thus, whether a court would determine that a future legislative action would be an unconstitutional impairment of the State Pledge, and whether such a legislative action would be viewed as a reasonable and necessary means to address a legitimate public purpose, cannot reasonably be predicted at this time.

E.            Opinion on New Mexico Contract Clause

Based on our review of relevant judicial authority, as discussed in this opinion, but subject to the qualifications, limitations and assumptions set forth herein, it is our opinion that in a properly prepared and presented case before a court of competent jurisdiction applying New Mexico law:

a. the court would conclude that the State Pledge constitutes a contractual relationship between the bondholders and the State for purposes of the New Mexico Contract Clause; and

b. absent a demonstration by the State that a substantial impairment of that contract is reasonable and necessary to further a significant and legitimate public purpose, the bondholders could successfully challenge under the New Mexico contract clause the constitutionality of legislative action that alters, impairs, or reduces the value of energy transition property or energy transition charges prior to the Bonds and any other costs are fully paid and discharged.

II.            AVAILABILITY OF INJUNCTIVE RELIEF

A preliminary or permanent injunction may provide the most effective remedy to foreclose any attempt by the State of New Mexico or any agency or instrumentality of the State to repeal or amend the ETA or the Financing Order or to take other action in a manner that alters, impairs, or reduces the rights of the bondholders in violation of the Contract Clause. See Rule 1-066 NMRA. Injunctive relief is an equitable remedy, meaning that the power to grant it “lies within the sound discretion of the trial court.” Wild Horse Observers Ass’n, Inc. v. N.M. Livestock Bd., 2022-NMCA-061, ¶ 33, 519 P.3d 74.

Injunctions can be either preliminary or permanent, depending on whether the court grants them at the start of litigation or after a trial on the merits, respectively. See Insure N.M., LLC v. McGonigle, 2000-NMCA-018, ¶ 9, 128 N.M. 611, 995 P.2d 1053. “[A] significant difference [exists] between a preliminary and a permanent injunction that may warrant different considerations by a trial court.” Id. “A preliminary injunction does not determine the merits of the case, nor does it determine controverted facts.” Id. “The object of the preliminary injunction is to preserve the status quo pending the litigation of the merits. This is quite different from finally determining the cause itself.” Id. (internal quotation marks and quoted authority omitted).

To obtain a preliminary injunction, a plaintiff must show that (1) the plaintiff will suffer irreparable injury unless the injunction is granted; (2) the threatened injury outweighs any damage the injunction might cause the defendant; (3) issuance of the injunction will not be adverse to the public’s interest; and (4) there is a substantial likelihood plaintiff will prevail on the merits.

12

LaBalbo v. Hymes, 1993-NMCA-010, ¶ 11, 115 N.M. 314, 850 P.2d 1017; see also Grisham v. Romero, 2021-NMSC-009, ¶¶ 19-20, 483 P.3d 545 (applying these factors to grant of temporary restraining order). “[W]here injunctive relief is the ultimate relief sought, or where such relief is affirmative—not merely a maintenance of the status quo—the plaintiff ‘must satisfy a heightened burden’ of proof,” and therefore must demonstrate these factors “weigh heavily and compellingly” in the movant’s favor. Id. ¶ 20 (internal quotation marks and quoted authority omitted). A district court may enter a permanent injunction as a final judgment after considering additional evidence. Insure N.M., 2000-NMCA-018, ¶ 10.

A. Irreparable Harm and Inadequate Remedy at Law

“Injunctions are harsh and drastic remedies that should issue only in extreme cases of pressing necessity and only where there is no adequate remedy at law.” Id. ¶ 7 (internal quotation marks, quoted authority, and alterations omitted). “The phrases ‘irreparable injury’ and ‘no adequate and complete remedy at law’ tend to overlap. An injury that is irreparable is without adequate remedy at law.” State ex rel. State Highway & Transp. Dep’t of N.M. v. City of Sunland Park, 2000-NMCA-044, ¶ 19, 129 N.M. 151, 3 P.3d 128. Injunctive relief is not available when money damages are reasonably ascertainable. See Orion Tech. Res., LLC v. Los Alamos Nat’l Sec., LLC, 2012-NMCA-097, ¶¶ 27-33, 287 P.3d 967.

To challenge a government action for violating the Contract Clause by altering, impairing, or reducing the rights of the bondholders, an injunction may be available because no other remedy exists at law. In a suit against the government for violating the Contract Clause, the defense of sovereign immunity would likely apply for any claim requesting money damages. A claim for money damages under the Contracts Clause “is barred by sovereign immunity because the Contracts Clause does not provide for claims for money damages.” Manning v. N.M. Mining & Min. Div., 2006-NMSC-027, ¶ 50, 140 N.M. 528, 144 P.3d 87. The New Mexico Supreme Court contrasted Manning to a United States Supreme Court case where the Supreme Court concluded that sovereign immunity does not bar a claim for declaratory judgment, as opposed to money damages. See id. ¶ 50 n.7. Though Manning contemplates the federal constitution Contract Clause, our Supreme Court has indicated that a court should not treat the State Contract Clause differently. See Los Quatros, Inc., 1990-NMSC-082, ¶ 35 (“[W]e merely hold that federal Contract Clause jurisprudence will, in general, be applicable in determining whether a particular state law violates the Contract Clause of our state Constitution.”). Thus, even if the amount of money damages is reasonably ascertainable with respect to the value of the Bonds, that remedy would be unavailable in a claim for violation of the Contract Clause. Accordingly, no adequate remedy at law for a Contract Clause violation would exist, leaving injunctive relief as a viable alternative.

13

B. Balance of Equities and Hardships

New Mexico courts often rephrase the second and third elements of the grant of a preliminary injunction—the threatened injury to defendants and possible adversity to the public interest—when talking about the grant of a permanent injunction. “In determining whether to grant injunctive relief, a district court must consider a number of factors and balance the equities and hardships.” Wild Horse Observers Ass’n, Inc., 2022-NMCA-061, ¶ 33 (internal quotation marks and quoted authority omitted).

Some of these factors include: (1) the character of the interest to be protected; (2) the relative adequacy to the plaintiff of an injunction, when compared to other remedies; (3) interests of third parties; (4) the practicability of granting and enforcing the order; and (5) the relative hardship likely to result to the defendant if granted and to the plaintiff if denied.

Id.; see also Allred v. N.M. Dep’t of Transp., 2017-NMCA-019, ¶ 36, 388 P.3d 998.

A fact intensive inquiry such as this makes it difficult to predict an outcome from a court. However, any court would likely note the inequity of depriving bondholders of their fairly bargained-for and purchased rights in their securities. Bondholders who contract with the government for the purchase of securities deserve to have their reliance on those securities ultimately fulfilled. At the risk of erasure of those rights without remedy, a court could find that the balance of equities and hardships falls in favor of granting the injunction.

C. Likelihood of Success on the Merits

The final element for a preliminary injunction requires a “substantial likelihood plaintiff will prevail on the merits.” LaBalbo, 1993-NMCA-010, ¶ 11. This means that the plaintiff must demonstrate that a substantial chance of success exists that the government action satisfies all four elements and, moreover, must demonstrate the factors weigh heavily and compellingly in their favor. See Romero, 2021-NMSC-009, ¶ 22. This heavily fact-dependent determination “lies within the sound discretion of the trial court.” Wild Horse Observers Ass’n, Inc., 2022-NMCA-061, ¶ 33 (internal quotation marks and quoted authorities omitted). These factors could easily weigh heavily in a potential plaintiff’s favor, but this determination is not entirely certain given the broad discretion of the district court in such a matter.

D. Opinion

Based on our review of applicable precedent and authority, it is our opinion that sound and substantial arguments would support granting preliminary and permanent injunctive relief to prevent any governmental interference designed to alter, impair, or reduce the value of the Energy Transition Charges, the terms of the indenture or Bonds, or the rights and remedies of the bondholders so as to substantially affect the security of the Bonds. Though such a determination would lie in the discretion of the court, see id., an injured party could still bring a substantially supported claim to vindicate their rights.

14

III.            NEW MEXICO TAKINGS CLAUSE

The New Mexico Takings Clause (also referred to herein as the “Takings Clause”) provides: “Private property shall not be taken or damaged for public use without just compensation.” N.M. Const. art. II, § 20. “In evaluating claims under Article II, Section 20, we turn to both state and federal cases for guidance, since our state Constitution provides similar protection to the Takings Clause in Amendment V of the United States Constitution.” State v. Wilson, 2021-NMSC-022, ¶ 25, 489 P.3d 925 (internal quotation marks and quoted authority omitted). “The only difference between [the New Mexico] takings clause and the federal takings clause is the inclusion of the words ‘or damaged’ in the New Mexico Constitution. Although our cases have pointed out that the ‘or damaged’ provision allows compensation when an actual taking has not occurred, our jurisprudence in this area does not materially vary from federal jurisprudence.” New Mexicans for Free Enter. v. City of Santa Fe, 2006-NMCA-007, ¶ 52, 138 N.M. 785, 126 P.3d 1149 (Citation omitted). The Takings Clause “prevents the government from taking private property, overtly or through regulation, without justly compensating the lawful owner.” Manning, 2006-NMSC-027, ¶ 10. “The constitutional framers selected just compensation as their specific remedy for enforcement of that right.” Id.

“Takings jurisprudence distinguishes between physical takings and regulatory takings.” Wilson, 2021-NMSC-022, ¶ 26. “Physical takings are categorically compensable and occur whenever the government acquires private property for a public purpose, whether the acquisition is the result of a condemnation proceeding or a physical appropriation.” Id. (internal quotation marks and quoted authority omitted). “Regulatory takings may occur when government regulation prohibits a property owner from making certain uses of her private property.” Id.

The general rule is that a regulation which imposes a reasonable restriction on the use of private property will not constitute a “taking” of that property if the regulation is (1) reasonably related to a proper purpose and (2) does not unreasonably deprive the property owner of all, or substantially all, of the beneficial use of his property.

Temple Baptist Church, Inc., 1982-NMSC-055, ¶ 27. “If a regulatory taking [of land] has occurred, [for example,] an action [would lie] for inverse condemnation.” Moongate Water Co., Inc. v. City of Las Cruces, 2013-NMSC-018, ¶ 18, 302 P.3d 405.

As a threshold issue, the Takings Clause requires a protected property interest. Premier Tr. of Nev., Inc. v. City of Albuquerque, 2021-NMCA-004, ¶¶ 14-15, 482 P.3d 1261. Constitutional analysis of a property right will look to the proverbial “bundle of rights” that is commonly characterized as property, rather than the property itself. Id. ¶ 15. “[O]nly persons with an ownership interest capable of being taken or damaged would appear to have standing to raise issues about the basic features of such an action.” City of Sunland Park v. Santa Teresa Servs. Co., 2003-NMCA-106, ¶ 48, 134 N.M. 243, 75 P.3d 843.

15

A. Evidence of a Protected Property Interest

Though most New Mexico jurisprudence analyzes physical property, courts have considered intangible property to be protected property under the Takings Clause. See Leigh v. Village of Los Lunas, 2005-NMCA-025, ¶¶ 1, 8, 137 N.M. 119, 108 P.3d 525 (applying Takings Clause analysis to a restrictive covenant); see also Premier Tr. of Nev., Inc., 2021-NMCA-004, ¶ 15 n.5 (“We assume without deciding for purposes of our analysis that Premier’s excess [impact development fee] credits constitute a property right protected by the Takings Clause.”); Moongate Water Co., 2013-NMSC-018, ¶ 16 (“Even though Moongate’s [certificate of public convenience] does not prevent Las Cruces from providing service in the certificated area, this does not necessarily preclude the possibility that Las Cruces effectuated a taking in doing so.”); Medrow v. N.M. Pub. Educ. Dep’t, No. A-1-CA-36959, 2020 WL 4731939, at ¶ 11 (N.M. Ct. App. Aug. 10, 2020) (“As we see it, it is Medrow’s right to use that [contractually accrued] leave that represents the property at issue. . . and we furthermore assume without deciding that that right is ‘property’ in the takings sense.” (Citations omitted.)). This treatment is consistent with New Mexico’s analytic focus on the proverbial bundle of property rights rather than physical property itself. Premier Tr. of Nev., Inc., 2021-NMCA-004, ¶ 15.

The threshold inquiry in a takings claim is whether a claimant has a protected property interest. “[I]f a claimant has no property right protected by the Takings Clause, then its takings claim necessarily fails.” Id. ¶ 14. The New Mexico Supreme Court has described a property interest as one that requires the claimant to have “a legitimate claim of entitlement to it,” as opposed to a “a unilateral expectation” or “an abstract need or desire” for the property. N.M. Dep’t of Workforce Sols. v. Garduño, 2016-NMSC-002, ¶ 13, 363 P.3d 1176 (quoting Bd. of Regents of State Colls. v. Roth, 408 U.S. 564, 577 (1972)).

Courts also describe protected property interests under the Takings Clause as vested property interests. See New Mexicans for Free Enter. v. City of Santa Fe, 2006-NMCA-007, ¶¶ 53–54 (finding that a minimum wage law did not violate the Takings Clause because “the wage rate in contracts for labor is generally not considered a vested property right of the employer”). “A ‘vested right’ is the power to do certain actions or possess certain things lawfully, and is substantially a property right, and may be created either by common law, by statute, or by contract.” Rubalcava, 1949-NMSC-035, ¶ 10. The New Mexico Supreme Court has said that the Court “look[s] to state law, the legal authority that defines the scope of property rights” in determining rights protected by the Constitution and due process. Bartlett v. Cameron, 2014-NMSC-002, ¶ 14, 316 P.3d 889; see also Premier Tr. of Nev., Inc., 2021-NMCA-004, ¶ 17.

The ETA states that the Energy Transition Property is “an existing, present property right.” Section 62-18-12(A). The ETA provides in pertinent part:

A. Energy transition property that is created in a financing order shall constitute an existing, present property right, notwithstanding that the imposition and collection of energy transition charges depend on the qualifying utility continuing to provide electric energy or continuing to perform its service functions relating to the collection of energy transition charges or on the level of future energy consumption. Energy transition property shall exist whether or not the energy transition revenues have been billed, have accrued or have been collected and notwithstanding that the value or amount of the energy transition property is dependent on the future provision of electric energy or service to customers by the qualifying utility.

16

B. All energy transition property created in a financing order shall continue to exist until the energy transition bonds issued and all related financing costs pursuant to a financing order are paid in full.

(Emphasis added.). The ETA exemplifies an expressly created property right, unlike where legislation is merely implementing public policy. See Bartlett, 2014-NMSC-002, ¶ 19 (“Unless we are satisfied that the Legislature intends to create a property right, this Court presumes that the Legislature is implementing public policy when it enacts a statute, policy which it is free to change in the future.”).

Adequate support exists for the argument that bondholders have a protected or vested property interest in the Bonds and the Energy Transition Property under the accepted definition of property rights used in New Mexico. The Bonds and the Energy Transition Property constitute a form of intangible property comprised of contractual and other rights, including a right to collect the Energy Transition Charge as needed to amortize the Bonds. New Mexico jurisprudence indicates that these property rights would be protected if claimants held a legitimate claim of entitlement, and the plain language of the ETA supports the conclusion that the bondholders have a present property right in the Energy Transition Property.

C. Whether a Taking Has Occurred

After determining that a property interest exists, courts next turn to whether the state action constituted a “taking” for which just compensation is due under the Takings Clause. As noted, New Mexico courts generally recognize physical and regulatory takings. See Wilson, 2021-NMSC-022, ¶ 26. “Physical takings are categorically compensable and occur whenever the government acquires private property for a public purpose, whether the acquisition is the result of a condemnation proceeding or a physical appropriation.” Id. (internal quotation marks and quoted authority omitted).

“Regulatory takings may occur when government regulation prohibits a property owner from making certain uses of her private property.” Id. (alteration and citation omitted). “A regulatory taking . . . occurs when the government regulates the use of land, but does not condemn it, i.e., take title to the property.” Moongate Water Co., 2013-NMSC-018, ¶ 18. As noted:

The general rule is that a regulation which imposes a reasonable restriction on the use of private property will not constitute a “taking” of that property if the regulation is (1) reasonably related to a proper purpose and (2) does not unreasonably deprive the property owner of all, or substantially all, of the beneficial use of his property.

17

Temple Baptist Church, Inc., 1982-NMSC-055, ¶ 27. However, the New Mexico Supreme Court has cast significant doubt on the possibility that a regulation could constitute a taking where it did not deprive an owner of substantially all beneficial use of the property, even if the regulation satisfied the first prong of the test to demonstrate a taking, i.e., the regulation was unrelated to a proper purpose . See Est. & Heirs of Sanchez v. Cnty. of Bernalillo, 1995-NMSC-058, ¶¶ 8-9, 12, 120 N.M. 395, 902 P.2d 550. Courts in New Mexico have included the proper purpose of a government action as part of the takings analysis once, but without further comment. See Stuckey’s Stores, Inc. v. O’Cheskey, 1979-NMSC-060, ¶¶ 32-33, 93 N.M. 312, 600 P.2d 258. In practice, in determining whether a regulatory taking has occurred, courts heavily focus on the second prong of the test, whether the government action “unreasonably deprive[s] the property owner of all, or substantially all, of the beneficial use of [the] property.” Temple Baptist Church, Inc, 1982-NMSC-055, ¶ 27; see also Premier Tr. of Nev., Inc., 2021-NMCA-004, ¶ 24.

In Premier Trust of Nevada, Inc., the New Mexico Court of Appeals held that while Premier Trust potentially did have a property interest in government granted fee credits, Premier did not have a property interest in static market conditions supportive of a viable takings claim. 2021-NMCA-004, ¶¶ 14-18. Moreover, the credits’ loss in market value caused by Albuquerque’s change in city impact fee ordinance did not constitute a taking because Premier did not lose “all or substantially all of the beneficial use of its excess credits.” Id. ¶ 24. The Court remarked that “[s]uch a loss in value, unaccompanied by the deprivation of other strands in the property rights bundle, . . . has been held insufficient to make out a regulatory takings claim under controlling New Mexico precedent.” Id.

The New Mexico Supreme Court held in Moongate Water Co. that a public utility did not suffer a taking when the City of Las Cruces serviced annexed areas with water despite the utility’s certificate of public convenience and necessity. 2013-NMSC-018, ¶ 1. The Supreme Court reasoned that the municipality had the right to service the area, and moreover, that the utility had failed to demonstrate actual losses when the utility had not built infrastructure or engaged with any customers in the area. Id. ¶¶ 21-23. In contrast, in Leigh, the Court of Appeals held that the Village of Los Lunas constructing a retention pond in violation of a neighborhood restrictive covenant constituted a taking because the pond’s construction diminished the value of properties benefited by the covenant. 2005-NMCA-025, ¶ 1. In Leigh, the claimant had a protected property right, the restrictive covenant, that was more than a mere contract right. See id. ¶¶ 8, 10-11. Restrictive covenants “constitute valuable property rights, and their taking requires compensation.” Id. ¶ 8.

The intangible nature of the Energy Transition Bonds and the Energy Transition Property means that any taking would occur through legislative action or other governmental action rather than a physical occupation. Therefore, any potential government action would constitute a regulatory taking.

The Bonds are amortized from funds derived from the Energy Transition Charges and other Energy Transition Property. If the State enacted legislation completely repealing the Energy Transition Charge, then it would have effectively eliminated the revenue source of the payments due to the Bonds. The same would be true if the Public Regulation Commission issued an order prohibiting the collection of the Energy Transition Charge. In such a case, a persuasive argument could be made that the State had denied the bondholders all or substantially all practical uses of their property. See Temple Baptist Church, Inc., 1982-NMSC-055, ¶ 27. If the impact of a legislative action or other governmental action were less severe, the argument would not be as strong, but the inquiry would be the same: whether the action denied the bondholders all or substantially all practical uses of their property. If the Energy Transition Charge or the Energy Transition Property were to be substantially impacted by a legislative action or other governmental action, payment of the Bonds could become uncertain, the marketability of the Bonds could be negatively affected, and the bondholders’ rights and remedies could be reduced. If such an action denied the bondholders all or substantially all practical uses of their property, a court would have a basis to find an unconstitutional regulatory taking.

18

Ultimately, the character of any future legislative action or other governmental action cannot be known at this time, nor can the circumstances in which the action is adopted. In light of that uncertainty, the foregoing analysis reflects the framework a court would apply to determine whether a taking has occurred under the New Mexico Takings Clause.

D. Just Compensation

“The New Mexico Takings Clause provides that ‘private property shall not be taken or damaged for public use without just compensation.’” Premier Tr. of Nev., Inc., 2021-NMCA-004, ¶ 11 (quoting N.M. Const. art. II, § 20). “In permanent total takings cases, New Mexico awards condemnees the fair market value of the property taken as of the date of the taking.” Primetime Hosp., Inc., 2009-NMSC-011 ¶ 15, 146 N.M. 1, 206 P.3d 112. “In partial takings cases, NMSA 1978, Section 42A-1-26 (1981[, as amended through 2023]) provides that ‘the measure of compensation and damages resulting from the taking shall be the difference between the fair market value of the entire property immediately before the taking and the fair market value of the property remaining immediately after the taking.’” Id.

The bondholders would be entitled to just compensation in the event of legislative or governmental action that amounts to a taking of the Bonds, the Energy Transition Property, or the Energy Transition Charge. Just compensation would be measured as to the value of the property lost by the bondholders by the taking, which would depend on the nature of the legislative action.

E. Opinion

Based on a review of relevant precedent and authority, it is our opinion that in a properly prepared and presented case before a court of competent jurisdiction³ applying New Mexico law, the court would conclude that the New Mexico Takings Clause requires the State to pay just compensation to the bondholders if any State action in contravention of the State Pledge, after the Bonds are issued but before they are fully paid, (i) constituted a permanent appropriation of a substantial portion of the property interest of the Bondholders in the Bonds or the Energy Transition Property or denial of all or substantially all practical uses of the Energy Transition Property; (ii) destroyed the Energy Transition Property, other than in response to emergency conditions; or (iii) substantially altered, impaired, or reduced the value of the Energy Transition Property in a manner that inflicts a severe economic impact on such bondholders and unduly interferes with their reasonable expectations, unless adequate provisions were made by law for the protection of bondholders.

³ The courts of New Mexico exercise jurisdiction over claims seeking just compensation from the State of New Mexico for state takings in violation of the federal takings clause in Amendment V of the United States Constitution. Manning v. N.M. Mining & Min. Div., 2006-NMSC-027, ¶ 50, 140 N.M. 528, 144 P.3d 87. The Tenth Circuit Court of Appeals holds federal district courts lack jurisdiction to hear federal takings clause claims for monetary compensation against states, at least when the relevant state makes its courts available to provide monetary relief for takings in violation of the federal takings clause, applying the restriction of federal court jurisdiction imposed by the Eleventh Amendment as construed by Edelman v, Jordan, 415 U.S. 651,662-63 (1974. See Williams v. Utah Department of Corrections, 928 F.3d 1209, 1213-14 (10th Cir. 2019) (following other circuit courts of appeals in distinguishing contrary precedent concerning claims not subject to the Eleventh Amendment restriction of federal court authority). Under the foregoing authorities, a New Mexico state court would provide the judicial forum for seeking monetary compensation from the State of New Mexico based on a federal takings clause claim. There can be no assurance, however, that any such award of just compensation would be sufficient to pay the full amount of principal of and interest on the Bonds.

19

IV.            REFERENDUM

A.           Whether Deadline for Referendum has Passed

The New Mexico Constitution provides New Mexico voters an opportunity to launch a referendum and seek to repeal a law if certain requirements, both statutory and constitutional, are met. N.M. Const. art. IV, § 1; see also NMSA 1978, §§ 1-17-1 to -14 (1969, as amended through 2023). Article IV, Section 1 of the New Mexico Constitution provides in pertinent part:

The people reserve the power to disapprove, suspend and annul any law enacted by the legislature, except general appropriation laws; laws providing for the preservation of the public peace, health or safety; for the payment of the public debt or interest thereon, or the creation or funding of the same, except as in this constitution otherwise provided; for the maintenance of the public schools or state institutions, and local or special laws. Petitions disapproving any law other than those above excepted, enacted at the last preceding session of the legislature, shall be filed with the secretary of state not less than four months prior to the next general election. Such petitions shall be signed by not less than ten per centum of the qualified electors of each of three-fourths of the counties and in the aggregate by not less than ten per centum of the qualified electors of the state, as shown by the total number of votes cast at the last preceding general election. The question of the approval or rejection of such law shall be submitted by the secretary of state to the electorate at the next general election; and if a majority of the legal votes cast thereon, and not less than forty per centum of the total number of legal votes cast at such general election, be cast for the rejection of such law, it shall be annulled and thereby repealed with the same effect as if the legislature had then repealed it, and such repeal shall revive any law repealed by the act so annulled; otherwise, it shall remain in force unless subsequently repealed by the legislature. If such petition or petitions be signed by not less than twenty-five per centum of the qualified electors under each of the foregoing conditions, and be filed with the secretary of state within ninety days after the adjournment of the session of the legislature at which such law was enacted, the operation thereof shall be thereupon suspended and the question of its approval or rejection shall be likewise submitted to a vote at the next ensuing general election. If a majority of the votes cast thereon and not less than forty per centum of the total number of votes cast at such general election be cast for its rejection, it shall be thereby annulled; otherwise, it shall go into effect upon publication of the certificate of the secretary of state declaring the result of the vote thereon. It shall be a felony for any person to sign any such petition with any name other than his own, or to sign his name more than once for the same measure, or to sign such petition when he is not a qualified elector in the county specified in such petition; provided, that nothing herein shall be construed to prohibit the writing thereon of the name of any person who cannot write, and who signs the same with his mark. The legislature shall enact laws necessary for the effective exercise of the power hereby reserved.

20

N.M. Const. art. IV, § 1 (Emphasis added.)

The Legislature enacted the ETA in 2019. The express language of Article IV, Section 1 states that “[p]etitions disapproving any law other than those above excepted, enacted at the last preceding session of the legislature, shall be filed with the secretary of state not less than four months prior to the next general election.” As such, because there was a general election in [2020], the time prescribed by the New Mexico Constitution allowing for a challenge to the ETA by referendum has passed.

B.           Whether the ETA is a “Special Law” and Exempt from Referendum

Article IV, Section 1 provides that certain laws or types of law are exempt from the referendum process:

The people reserve the power to disapprove, suspend and annul any law enacted by the legislature, except general appropriation laws; laws providing for the preservation of the public peace, health or safety; for the payment of the public debt or interest thereon, or the creation or funding of the same, except as in this constitution otherwise provided; for the maintenance of the public schools or state institutions, and local or special laws.

N.M. Const. art. IV, § 1.

A “special law” is “generally defined as legislation written in terms which make[] it applicable only to named individuals or determinative situations. In contrast a law is considered general in nature if the subject of the statute may apply to, and affect the people of, every political subdivision of the state.” Thompson v. McKinley Cnty., 1991-NMSC-076, ¶ 5, 112 N.M. 425, 816 P.2d 494 (internal quotation marks, quoted authority, and original alterations omitted).

21

The New Mexico Supreme Court has determined that the ETA falls within the category of “special laws.” See Citizens for Fair Rates & the Env’t v. N.M. Pub. Regul. Comm’n (“Citizens”), 2022-NMSC-010, ¶ 68, 503 P.3d 1138. (“We are of the view that the classification drawn by the [ETA] is special, but is not so devoid of reason that the classification amounts to mere caprice.” (Internal quotation marks, quoted authority, and original alterations omitted.)). The New Mexico Supreme Court stated:

Although the language of the ETA is general, in practice the Act only applies to a limited class of public utilities abandoning coal-fired generating facilities in New Mexico. Given the unique nature of the class and issues involved, the Legislature could reasonably conclude that the circumstances surrounding a public utility’s abandonment of its coal-fired generating facilities are of such a special character that a general law could not be made to apply.

Id.

The New Mexico Supreme Court has also rejected that the ETA violates the constitutional proscription against “special laws.” Id. (“We therefore reject this constitutional challenge to the ETA.”) Article IV, Section 24 of the New Mexico Constitution sets out the areas in which “special” laws are not permitted.⁴ “Article IV, Section 24 of the New Mexico Constitution prohibits special legislation ‘where a general law can be made applicable.’ It does not exclude special legislation, however, when a law is required and general legislation cannot apply.” Thompson, 1991-NMSC-076, ¶¶ 3-4 (quoting N.M. Const. art. IV § 24); see also Citizens, 2022-NMSC-010, ¶ 68 (“There is nothing in the Constitution which would invalidate a legislative act merely because it is special in character provided a local situation exists which under particular facts makes a general law inapplicable.” (Internal quotation marks and quoted authority omitted.)).

⁴ Article IV Section 24 of the New Mexico Constitution provides:

The legislature shall not pass local or special laws in any of the following cases: regulating county, precinct or district affairs; the jurisdiction and duties of justices of the peace, police magistrates and constables; the practice in courts of justice; the rate of interest on money; the punishment for crimes and misdemeanors; the assessment or collection of taxes or extending the time of collection thereof; the summoning and impaneling of jurors; the management of public schools; the sale or mortgaging of real estate of minors or others under disability; the change of venue in civil or criminal cases. Nor in the following cases: granting divorces; laying out, opening, altering or working roads or highways, except as to state roads extending into more than one county, and military roads; vacating roads, town plats, streets, alleys or public grounds; locating or changing county seats, or changing county lines, except in creating new counties; incorporating cities, towns or villages, or changing or amending the charter of any city, town or village; the opening or conducting of any election or designating the place of voting; declaring any person of age; chartering or licensing ferries, toll bridges, toll roads, banks, insurance companies or loan and trust companies; remitting fines, penalties, forfeitures or taxes; or refunding money paid into the state treasury, or relinquishing, extending or extinguishing, in whole or in part, any indebtedness or liability of any person or corporation, to the state or any municipality therein; creating, increasing or decreasing fees, percentages or allowances of public officers; changing the laws of descent; granting to any corporation, association or individual the right to lay down railroad tracks or any special or exclusive privilege, immunity or franchise, or amending existing charters for such purpose; changing the rules of evidence in any trial or inquiry; the limitation of actions; giving effect to any informal or invalid deed, will or other instrument; exempting property from taxation; restoring to citizenship any person convicted of an infamous crime; the adoption or legitimizing of children; changing the name of persons or places; and the creation, extension or impairment of liens. In every other case where a general law can be made applicable, no special law shall be enacted.

22

C.           Opinion

Based on our review of the judicial authority, the referendum process as to the ETA would not be available to New Mexico voters. Not only has the time to invoke the referendum process expired, but the New Mexico Supreme Court has concluded that the ETA is a “special law,” which the New Mexico Constitution exempts from the referendum process afforded.

V.            CONSTITUTIONALITY OF THE ETA

The New Mexico Supreme Court has stated that it “will uphold a statute unless [it] is satisfied beyond all reasonable doubt that the Legislature went outside the bounds fixed by the Constitution in enacting the challenged legislation.” Citizens, 2022-NMSC-010, ¶ 15 (internal quotation marks and quoted authority omitted). The Court will “not inquire into the wisdom or policy of an act of the Legislature, and the burden of establishing that the statute is invalid rests on the party challenging the constitutionality of the statute.” Id. (internal quotation marks, quoted authority, and ellipsis omitted). The Court will avoid deciding constitutional questions unless required to do so. Id. ¶ 30.

The ETA was enacted in 2019 and has been subject to constitutional challenge before the New Mexico Supreme Court by organizations representing energy consumers. See id. ¶ 1. We are not aware of any pending litigation regarding the ETA and its constitutionality.

In Citizens, the Supreme Court considered multiple “facial” challenges to the constitutionality of the ETA and rejected them in toto. Id. ¶¶ 4-5. In a “facial” challenge to the constitutionality of a statute as presented, “[the Court will] consider only the text of the statute itself, not its application. But in an as-applied challenge, [the Court] consider[s] the facts of the case to determine whether application of the statute even if facially valid deprived the challenger of a protected right.” Id. ¶ 15 (internal quotation marks and quoted authority omitted).

A.           Due Process

The New Mexico Supreme Court has rejected both a substantive and procedural due process challenge to the ETA based on the argument that the “ETA deprives energy consumers of due process by allowing a qualifying public utility to recover its energy transition costs without Commission oversight.” Id. ¶ 32. Article II, Section 18 of the New Mexico Constitution provides in pertinent part: “No person shall be deprived of life, liberty or property without due process of law; nor shall any person be denied equal protection of the laws.”

To assert a claim for procedural due process, a “challenger to the legislation must establish that the challenger was deprived of a legitimate liberty or property interest and that the challenger was not afforded adequate procedural protections in connection with the deprivation.” Citizens, 2022-NMSC-010, ¶ 33 (internal quotation marks, quoted omitted, and brackets omitted). The court will consider each claim on a case-by-case basis and will balance the following elements in determining what process is due in an administrative hearing:

23

(1) the private interest that will be affected by the official action; (2) the risk of an erroneous deprivation of such interest through the procedures used, and the probable value, if any, of additional or substitute procedural safeguards; and (3) the government’s interest, including the function involved and the fiscal and administrative burdens that the additional or substitute procedural requirement would entail.

Id. (quoted authority omitted).

To assert such a claim, the party must possess a cognizable property or liberty interest. See id. ¶ 34. The Supreme Court stated: “Energy consumers generally do not possess a claim of entitlement to utility property or a right to any fixed utility rate.” Id. (citing State v. Mountain States Tel. & Tel. Co., 1950-NMSC-055, ¶¶ 13-24, 54 N.M. 315, 224 P.2d 155 (“[I]t is generally held . . . that the remedy of the public is an appeal to the legislature or its delegated authority for redress or protection against unreasonably high rates. The theory is that the legislature is acting for the people; and that no (property right) is involved.” (Citations omitted.)); Gas Co. of N.M. v. N.M. Pub. Serv. Comm’n, 1984-NMSC-002, ¶ 13, 100 N.M. 740, 676 P.2d 817 (“[A] utility customer is not a partner or beneficiary of the utility . . . By paying bills for service [customers] do not acquire any interest, legal or equitable, in the property used for their convenience or in the funds of the company.” (Internal quotation marks and citation omitted.)). Nonetheless, the Court recognized that NMSA 1978, Section 62-3-1(B) (2008) accords to energy consumers an entitlement to “reasonable and proper service at fair, just and reasonable rates.” Citizens, 2022-NMSC-010, ¶ 35. “In light of this statutorily created interest,” the Court noted energy consumers are entitled to “reasonable notice and opportunity to be heard and present any claim or defense in proceedings before the Commission.” Id. (internal quotation marks and quoted authority omitted).

Rejecting the energy consumers’ claims, the Court reasoned:

The ETA provides that “[t]he [C]ommission may approve an application for a financing order without a formal hearing if no protest establishing good cause for a formal hearing is filed within thirty days of . . . when notice is given of the filing.” Section 62-18-5(A). While Section 62-18-5(A) is not a model of clarity, the ETA as written contemplates that energy consumers will be given sufficient notice of the utility’s application and a meaningful opportunity to be heard upon lodging a “protest establishing good cause for a formal hearing” in front of the Commission. Id.  In the language of the ETA, we see nothing discordant with the procedural requirements of due process. In fact, New Energy and several other objecting parties representing the rights of energy consumers participated extensively in these abandonment proceedings and presented various claims and defenses. As such, we reject New Energy’s procedural due process challenge to the ETA.

24

Id. ¶ 36.

As to the substantive due process claims, the energy consumers had alleged that the hearings held pursuant to the ETA would not provide energy consumers with a meaningful opportunity to be heard because the Commission’s findings would be limited to the elements defined in the ETA. Id. ¶ 37. The energy consumers argued that the ETA did not permit the Commission to review a utility’s estimated energy transition costs before issuing a financing order, and that this supposed limitation on the Commission’s authority violated due process and equal protection. See id.

Construing the energy consumers’ challenge as a challenge to the ETA itself, the Court concluded that the ETA is “economic regulation” that does not implicate important or fundamental rights and reviewed it using a rational basis standard. See id. ¶¶ 38-39. “Under rational basis review, the challenger must demonstrate that the legislation is not rationally related to a legitimate government purpose. In reviewing substantive due process challenges under the United States Constitution, we follow the federal rational basis test which only requires a reviewing court to divine the existence of a conceivable rational basis to uphold legislation against a constitutional challenge.” Id. (internal quotation marks and citation omitted). Under the New Mexico Constitution, the Court applies a “modified rational basis standard . . . as [the Court is] cognizant of [its] constitutional duty to protect discrete groups of New Mexicans from arbitrary discrimination by political majorities and powerful special interests.” Id. ¶ 40 (internal quotation marks and quoted authority omitted).

This standard of review requires that the challenger demonstrate that “the legislation is not supported by a firm legal rationale or evidence in the record.” Id.  “In practical terms, our rational basis standard requires the challenger to bring forward record evidence, legislative facts, judicially noticeable materials, case law, or legal argument to prove that the challenged legislation is not rationally related to the articulated legitimate government purposes.” Id. (internal quotation marks, quoted authority, and alterations omitted).  The Court concluded that the energy consumers had not met this burden and stated it “fully disagree[d] with [the energy consumers’] assertion that the challenged legislation lacks a rational basis simply because the legislation is unique relative to other utility legislation or because it requires the Commission to issue a financing order once the Commission is satisfied that the utility has met the requirements of the ETA.” Id. ¶ 41. The Court stated:

The Legislature has declared that it is the “policy of the state” that utilities be regulated so “that reasonable and proper services shall be available at fair, just and reasonable rates” and so “that capital and investment may be encouraged and attracted so as to provide for . . . proper plants and facilities and demand-side resources for the rendition of service to the general public and to industry.” Section 62-3-1. We have explained that Section 62-3-1(B) expresses an intent to balance the interests of a utility and energy consumers, toward achieving rates that are neither unreasonably high so as to unjustly burden ratepayers with excessive rates nor unreasonably low so as to constitute a taking of property without just compensation or a violation of due process by preventing the utility from earning a reasonable rate of return on its investment. We have recognized that there is a significant zone of reasonableness in which rates are neither ratepayer extortion nor utility confiscation. In enacting the ETA, the Legislature decided that permitting a public utility to finance the energy transition costs associated with abandoning a coal-fired generating facility in the manner therein provided would promote the legitimate interests reflected in Section 62-3-1(B). [The energy consumers] may disagree, as a policy matter, with this legislative decision. But [the energy consumers’] policy disagreement does not lay the foundation for judicial interference on substantive due process grounds.

25

Id. ¶ 42 (some citations omitted).

The Court deferred to the validity of the statute, absent the challenger carrying the burden of persuasion. While each question presented under the due process clause will be fact dependent, a court will apply a modified rational basis standard under the New Mexico Constitution. The Supreme Court also recognized that policy disagreement, without some record evidence in support of such challenge, would not support judicial interference. See id. ¶¶ 42-43.

B.           Separation of Powers

Article III, Section 1 of the New Mexico Constitution provides in pertinent part:

The powers of the government of this state are divided into three distinct departments, the legislative, executive and judicial, and no person or collection of persons charged with the exercise of powers properly belonging to one of these departments, shall exercise any powers properly belonging to either of the others, except as in this constitution otherwise expressly directed or permitted.

“An unconstitutional infringement occurs when the action by one branch prevents another from accomplishing its constitutionally assigned function.” State ex rel. N.M. Jud. Standards Comm’n v. Espinosa, 2003-NMSC-017, ¶ 12, 134 N.M. 59, 73 P.3d 197. “It is duly established that the legislative branch makes the laws, the executive branch executes the laws, and our Constitution prohibits any branch of government from usurping the power of another branch.” N.M. Bldg. & Constr. Trades Council v. Dean, 2015-NMSC-023, ¶ 7, 353 P.3d 1212 (internal quotation marks and quoted authority omitted).

1.            Legislative powers

In Citizens, the Supreme Court also rejected a challenge to the ETA based on separation of powers grounds. 2022-NMSC-010, ¶¶ 44-48. The energy consumers had argued that the ETA invaded the Commission’s “responsibility for regulating public utilities” under Article XI, Section 2 of the New Mexico Constitution by purportedly eliminating the Commission’s authority to review and disallow a public utility’s energy transition costs for imprudence or unreasonableness. 2022-NMSC-010, ¶ 44. The Court focused on the role of the Commission as set by the New Mexico Constitution. See id. ¶ 45. “[T]he Commission is constitutionally tasked with the ‘responsibility for regulating public utilities as provided by law.’” Id. (quoting N.M. Const. art. XI, § 2 (emphasis added)). The Court in rejecting the challenge stated: “Thus, while the New Mexico Constitution delegates to the Commission the exclusive responsibility for carrying out public utility regulatory policy, the parameters of that policy are, in the first instance, for the Legislature to decide.” Id. ¶ 45. The Court reiterated that any legislation, though, must accord with the mandates of the Constitution. See id. ¶ 46.

26

The Court also rejected the energy consumers’ argument that the Legislature was constitutionally required to confer upon the Commission the authority to disallow, as imprudent, some or all of a utility’s energy transition costs. See id. ¶ 47. The Court stated that “the prudent investment theory is but one of many accepted ratemaking methodologies, and we have repeatedly recognized that the Commission is not bound to the use of any single formula or combination of formulae in determining rates.” Id. (internal quotation marks and quoted authority omitted).

2.            The Courts

One challenge the Court did not reach for inadequate briefing was whether Section 62-18-22 improperly constrains meaningful judicial review and thus violates separation of powers under Article III, Section 1 and Article VI, Section 1 of the New Mexico Constitution. See id. ¶ 29. Section 62-18-22 in pertinent part provides that “if any provision of [the ETA] is invalidated, superseded, replaced, repealed or expires for any reason, that occurrence shall not affect the validity of any action allowed pursuant to the [the ETA].” It is impossible to speculate regarding what arguments may have been made or how such challenge would be presented.

However, we note that considering the plain language of the statute, the only word that could be construed to contemplate court action is “invalidated.” The remainder refer to legislative action and would arguably not apply to court action as a court does not have the power to enact, supersede, or repeal legislation. Equally, assuming that the State Pledge constitutes a contract, such language permitting severance of any offending provision is not unusual, and any legislative action as to the ETA that would otherwise impair that contract would potentially run afoul of the Contract Clause, as discussed above.

C.           Other Constitutional Provisions

The energy consumers also challenged the ETA as violating Article IV, Section 34 of the New Mexico Constitution, claiming that the ETA interfered with pending litigation. Citizens, 2022-NMSC-010, ¶ 49. Article IV, Section 34 provides, “[n]o act of the legislature shall affect the right or remedy of either party, or change the rules of evidence or procedure, in any pending case.” The Court concluded that the ETA did not violate the constitutional provision because the energy consumers’ proposed cases were not voluntary abandonment proceedings initiated before the ETA came into effect. Id. ¶ 50. Likewise, other arguments regarding the Commission’s modified authority under NMSA 1978, Section 62-16-6(C) (2019) affecting pending litigation were unavailing as the Commission had not actually invoked its authority prior to the creation of the ETA. No such litigation could be pending. Id. ¶ 51.

With regard to the New Mexico Constitution’s Contract Clause, N.M. Const. art. II, § 19, the Court similarly rejected several arguments from the energy consumer that the ETA modified several agreements made by the Commission and interfered with the contractual or vested rights of consumers. Id. ¶ 53. Under the first step of Contract Clause analysis, the Court determined that the energy consumers failed to specify what part of the Commission’s agreements created either vested or contractual rights. Id. ¶¶ 54-58. In addition to the energy consumers’ failure to identify a valid right, the Court relied on its strong preference against inferring the creation of contractual rights by legislative action. Id. ¶ 55; see also Pierce, 1996-NMSC-001, ¶ 48.

27

The Court further rejected other arguments that the ETA violated Article IV, Section 16 of the New Mexico Constitution. Citizens, 2022-NMSC-010, ¶ 59. Article IV, Section 16 provides, in relevant part: “The subject of every bill shall be clearly expressed in its title, and no bill embracing more than one subject shall be passed except general appropriation bills and bills for the codification or revision of the laws.” The Court reiterated that the title of a bill is “sufficient if the title gives notice of the subject matter of the legislation and . . . if, applying every reasonable intendment in favor of its validity, it may be said that the subject of the legislative enactment is expressed in its title.” Id. ¶ 60. (alteration, internal quotation marks, and citations omitted). The Court determined that the lengthy proper title of the ETA as introduced in Senate Bill 489 provided adequate notice of the subject matter of the act so as not to contravene Article IV, Section 16 of the New Mexico Constitution. Id. ¶¶ 61-62; see also 2019 N.M. Laws, ch. 65.

The energy consumers’ argument that the ETA unconstitutionally amended other sections of New Mexico public utility law “by reference to its title only” were also rejected by the Court. Citizens, 2022-NMSC-010, ¶ 63. Article IV, Section 18 of the New Mexico Constitution provides: “No law shall be revised or amended, or the provisions thereof extended by reference to its title only; but each section thereof as revised, amended or extended shall be set out in full.” The energy consumers suggested that the ETA repealed or amended other components of New Mexico public utility law by mere implication, but the Court recognized that Article IV, Section 18 makes no such prohibition, even if disfavored. Id. ¶ 65; see also State ex rel. Taylor v. Mirabal, 1928-NMSC-056, ¶ 13, 33 N.M. 553, 273 P. 928. The Court also noted - without deciding - that the ETA could be read harmoniously with other provisions governing the Commission’s authority to regulate. Citizens, 2022-NMSC-010, ¶ 66.

In their final challenge, the energy consumers argued that the ETA was special legislation where a general law could be made applicable, contrary to Article IV, Section 24 of the New Mexico Constitution, because only PNM may qualify as a “qualifying utility” and only two facilities qualified as a “qualifying generating facility.” Id. ¶ 67; see also § 62-18-2(S), (T). The Court observed that due to the “unique nature of the class and issues involved” of this particular issue applying only to the “limited class of public utilities abandoning coal-fired generating facilities,” this issue was sufficiently specific such that a general law would not apply. Citizens, 2022-NMSC-010, ¶ 68. Accordingly, it was not a constitutionally improper use of special legislation. Id. ¶¶ 68.

Though it is unclear what type of constitutional challenge could be raised against the ETA, it is clear that many of the potential avenues have already been addressed and rejected by the New Mexico Supreme Court. It is possible that a plaintiff could bring a potentially novel factual situation to challenge the ETA, but it is our opinion that sound reason and argument supports the notion that the ETA is constitutional under New Mexico substantive law.

28

* * *

All of our opinions set forth herein are subject to the following qualifications, limitations, and assumptions:

1.            Our opinions herein are based on our evaluation of the existing judicial decisions and arguments related to the factual circumstances likely to exist at the time of a New Mexico Contract or Takings Clause challenge to a legislative action claimed to an impairment or taking of a bondholder’s property and are intended to express our belief as to the result of if existing judicial decisions are properly applied in a properly prepared and presented case. The prevailing law and circumstances assumed herein could change materially following the issuance of this opinion. We note that judicial analysis relating to the New Mexico Contract and Takings Clauses and the retroactive effect given to judicial decisions has typically proceeded on a case-by-case basis and that the courts’ determinations, in most instances, are strongly influenced by the facts and circumstances of the particular case. We further note that we are aware of no reported controlling judicial precedent directly on point. Our analysis is necessarily a reasoned application of judicial decisions. Moreover, the application of equitable principles (including the availability of injunctive relief or the issuance of a stay pending appeal) is subject to the discretion of the court asked to apply them. We cannot predict the facts and circumstances which will be present in the future and may be relevant to the exercise of such discretion. Consequently, there can be no assurance that a court will follow our reasoning or reach the conclusion which we believe current judicial precedent supports. Nor is there any assurance that any award of just compensation would be sufficient to pay the full amount of principal and interest on the bonds. It is our and your understanding that none of the foregoing opinions is intended to be a guarantee as to what a particular court would actually hold, rather each such opinion is only an expression as to the decision a court may reach if the issue were properly prepared and presented to it and the court followed what we believe to be the applicable legal principles under existing judicial precedent. The recipients of this letter should take these considerations into account in analyzing the risks associated with the subject transaction.

2.            Our opinions assume that a legislative action would substantially impair the Energy Transition Property, and by extension the Bonds secured by that property, if it significantly affects the amount of the Energy Transition Charges, impairs the ability to collect it, or otherwise prevents payment of the Bonds. The determination of whether particular legislative action constitutes a substantial impairment of a particular contract is a fact-specific analysis, and nothing in this letter expresses any opinion as to how a court would resolve the issue of “substantial impairment” with respect to the Energy Transition Property, the Energy Transition Charges, or the Bonds vis-à-vis a particular legislative action.

3.            Our opinions assume the Issuer is duly constituted and the relevant transactions described above have occurred in compliance with the Financing Order, that the ETA is valid, and that the evidences of indebtedness, securities, and agreements related to the subject financing are duly issued, executed, valid, and binding in all pertinent respects.

29

4.            The rights of the bondholders may be subject to bankruptcy, insolvency, reorganization, moratorium, and similar laws affecting creditors’ rights heretofore or hereafter enacted to the extent constitutionally applicable and their enforcement may also be subject to the exercise of judicial discretion in appropriate cases.

5.            This opinion letter is limited to the laws of the State of New Mexico, and we express no opinion and make no statement as to the laws of any other jurisdiction.

6.            This opinion letter is limited to the matters stated herein and no opinion is implied or may be inferred beyond the matters herein expressly stated. The opinions expressed herein are expressed and made as of the date hereof and we assume no obligation to update or supplement this opinion to reflect any facts or circumstances which may hereafter come to our attention with respect to the opinions expressed above, including any changes in applicable law or any judicial decisions which may hereafter occur. Without limiting the foregoing, we express no opinion as to any actions that may be required to be taken under any applicable law in order to create, perfect or maintain the perfection of any security interest referred to herein.

While a copy of this opinion letter may be posted to an internet website required under Rule 17g-5 under the Securities and Exchange Act of 1934, as amended, and maintained by PNM solely for the purpose of complying with such rule, this opinion letter is solely for the benefit of the recipients identified in Schedule A to this opinion letter in connection with the transactions described supra and may not be quoted, used or relied upon by, nor may copies be delivered to, any other person (including without limitation, any governmental or regulatory agency and all purchasers of Bonds other than the underwriters named in the Underwriting Agreement), nor may such recipients rely on this letter for any other purpose, without our prior written consent.

We hereby consent to the filing of this opinion letter as an exhibit to the Registration Statement filed with the Securities and Exchange Commission, and to all references to our firm included in or made a part thereof. In giving the foregoing consents, we do not thereby admit that we are within the category of persons whose consent is required under Section 7 of the Securities Act of 1933, as amended, or the related rules and regulations.  We assume no obligation to update or supplement this opinion letter to reflect any facts or circumstances which may hereafter come to our attention with respect to the opinions or statements expressed above, including any changes in applicable law which may hereafter occur.

Very truly yours,

Miller Stratvert P.A.

30

EXHIBIT A

Addressees

U.S. Bank Trust Company, National Association, as Indenture Trustee

190 S. LaSalle Street, 7^th Floor

Chicago, Illinois 60603

U.S. Bank National Association, as Securities Intermediary

190 S. LaSalle Street, 7^th Floor

Chicago, Illinois 60603

Moody’s Investors Service, Inc.

25^th Floor, 7 World Trade Center

250 Greenwich Street

New York, New York 10007

Attention: ABS/RMBS Monitoring Department

S&P Global Ratings

55 Water Street

New York, New York 10041

Attention: Structured Credit Surveillance

To each of the following, for itself and as Representatives of the Underwriters of the Bonds:

RBC Capital Markets, LLC

Brookfield Place

200 Vesey Street, 8th Floor

New York, New York 10281

Citigroup Global Markets Inc.

388 Greenwich Street, 6^th Floor

New York, New York 10013

31

EX-99.5

Exhibit 99.5

BEFORE THE NEW MEXICO PUBLIC REGULATION COMMISSION

IN THE MATTER OF PUBLIC SERVICE	)
COMPANY OF NEW MEXICO’S	)
ABANDONMENT OF SAN JUAN	)	Case No. 19-00018-UT
GENERATING STATION UNITS 1 AND 4	)
	)

ORDER ON REMAND ADOPTING UNCONTESTED STIPULATION

THIS MATTER comes before the Public Regulation Commission (“the Commission”) upon the Supreme Court’s Remand in Case No. S-1-SC-39440. For the reasons detailed below, the Commission issues this Order on Remand Adopting Uncontested Stipulation (“Order”).

BACKGROUND AND PROCEDURAL HISTORY

1.             The original proceedings in Case No. 19-00018-UT addressed two separate requests: PNM’s potential abandonment of San Juan Generating Station’s (“SJGS”) remaining Units 1 and 4; and PNM’s request for a financing order to issue energy transition bonds (“ETA Bonds”) under the Energy Transition Act (“ETA”). On April 1, 2020, the Commission issued its Final Order on Request for Issuance of a Financing Order, Case No. 19-00018-UT (April 1, 2020), approving and adopting Recommended Decision on PNM’s Request for Issuance of a Financing Order (together the “Financing Order”), and separately granted approval for the abandonment of the SJGS plant. Among other things, the Financing Order authorized PNM to securitize up to $360.1 million for the estimated recoverable costs associated with the abandonment of PNM’s remaining interest in the SJGS plant through the issuance of ETA Bonds. The Financing Order also authorized PNM to collect non-bypassable energy transition charges from customers to pay the debt service on the ETA Bonds over a 25-year period, subject to adjustment.

2.             Following hearings on the Joint Motion for Order to Show Cause and Enforce Financing Order filed on February 28, 2022 by WRA, CCAE and Prosperity Works, the designated Hearing Examiners issued the Recommended Decision in Show Cause Proceeding (“Show Cause RD”) on June 18, 2022, that recommended the Commission find and conclude that PNM had violated the Financing Order and the ETA because of PNM’s delay in issuing ETA Bonds so that bond issuance would coincide with the implementation of a proposed rate change in January 2024, rather than near the time of the SJGS plant abandonment.

3.             On June 29, 2022, the Commission issued the Show Cause Order adopting, with certain additions, the Show Cause RD’s recommended findings that the ETA and Financing Order contemplated that the ETA Bonds would be issued at or near the time of the abandonment of SJGS and that PNM’s departure from this timetable represented a new plan. As a result, the Commission ordered PNM to:

· issue immediate rate credits to customers to ensure “fair, just, and reasonable” rates based on annual revenue requirement amounts of $98.3 million set forth in the Table found on page 98 of the Show Cause RD, and totaling approximately $128 million;

· prepay and advance in full all monies that would be due to each state agency designated to receive a percentage of the Bond proceeds within thirty days of PNM’s receipt of those proceeds, pursuant to Section 62-18-16 of the ETA;

· file reports in this docket that contained a record of all of its costs incurred in the Show Cause Proceeding so that the prudence of those costs would be known and be subject to review in PNM’s forthcoming rate case; and

· file a compliance filing to enable a review of the prudence of PNM’s new changed plan made after the Financing Order that decided to delay bond issuance beyond the dates of the San Juan abandonment of Units 1 and 4, providing two benchmark dates to establish the interest rates that were in existence at the times of abandonment compared to the dates of actual bond issuance.

4.             On June 29, 2022, PNM requested an emergency stay of the rate credits, which was opposed by other parties and denied by the Commission on July 27, 2022.

5.             PNM permanently shut down SJGS Unit 1 on June 30, 2022 and Unit 4 on September 30, 2022.

6.             On June 30, 2022, PNM filed its Notice of Appeal of the Show Cause Order, docketing the Show Cause Appeal. Among the issues briefed by the parties to the Appeal are whether the rate credits ordered by the Commission are lawful; and whether the Commission has authority to interpret the Financing Order in a manner that would restrict, modify or revoke PNM’s authority to cause the ETA Bonds to be issued or to otherwise amend, modify or revoke the authorizations and approvals contained in the Financing Order; and whether the provisions of the Financing Order and ETA precluded PNM from delaying issuance of the ETA Bonds.

7.             On July 25, 2022, PNM requested that the Court issued an Emergency Stay in the Show Cause Appeal, which was opposed by the other parties. On September 2, 2022, the Court ordered an emergency stay of the portion of the Show Cause Final Order that required PNM to issue rate credits; and on November 4, 2022, the Court issued an Order that continued its stay of the rate credits pending the final resolution of the Appeal.

8.             On July 28, 2022, PNM pre-funded and advanced in full all monies to each state agency designated to receive a percentage of the ETA Bond proceeds pursuant to Section 62-18-16 of the ETA, in accordance with the Commission’s Show Cause Order. Previously on March 3, 2022, PNM pre-funded $8.88 million for severance and job training benefits for workers impacted by the closing of the San Juan Mine in accordance with Section 62-18-4. PNM’s compliance filing of August 15, 2022, demonstrates no further monies are due under those statutory provisions.

9.             On July 31, 2022, pursuant to Corrected Advice Notice No. 588, the rate credits related to SJGS Unit 1 became effective and PNM began issuing rate credits to customers. PNM issued $1.2 million in customer rate credits prior to receipt of the initial stay by the Court on September 2, 2022.

10.           PNM submitted compliance filings with the Commission regarding pre-funding of monies, issuance of rate credits and benchmark interest rate information through its submittal of verified compliance reports on August 24, September 6, October 14, and November 14, 2022, which document PNM’s compliance with those requirements of the Show Cause Final Order.

11.           On December 5, 2022, PNM filed a general rate case proposing new rates in Case No. 22-00270-UT (“Rate Case”). The suspension period set by the Commission for the proposed new rates expires on January 4, 2024. Among the issues pending in PNM’s Rate Case are the prudence review required by the Show Cause Final Order and certain SJGS ratemaking proposals by various parties that arise from the determinations contained in the Show Cause Final Order.

12.           On August 18, 2023, PNM and the intervening parties (the New Mexico Office of the Attorney General, Western Resource Advocates, New Energy Economy, New Mexico Affordable Reliable Energy Alliance, Albuquerque Bernalillo County Water Utility Authority, Coalition for Clean Affordable Energy, Prosperity Works, Bernalillo County, and Utility Division Staff (collectively, “the Parties”)) to the Show Cause Appeal filed the unopposed Remand Motion reflecting their agreement to settle all matters in the Show Cause Appeal pursuant to terms contained in this Order.

13.           The New Mexico Supreme Court remanded this matter to the Commission on September 14, 2023, for the Commission to take action consistent with the Court’s Order. The terms of the Settlement Agreement included with the unopposed Remand Motion are considered by the Commission to be an Uncontested Stipulation under NMAC 1.2.2.20.A(3), have been reformatted and added to conform with Commission rules but substantively are unchanged, and are incorporated in this Order and included as Attachment A.

FINDINGS AND CONCLUSIONS

14.           The remand and dismissal of the Show Cause Appeal under the terms filed with the Court result in a fair, just and reasonable resolution of the disputed appellate issues brought by PNM and warrant reconsideration of the Show Cause Final Order by the Commission. Further, the settlement of the Show Cause Proceedings and Appeal will result in rate credits to customers to ensure PNM’s current rates are fair, just and reasonable in light of the evidence in the record and the matters raised on appeal.

15.           The Parties, while not waiving their legal positions taken in the Show Cause proceedings and the Show Cause Appeal, agree that the unanimous and timely settlement of these matters is in the public interest. The Show Cause Order issued June 29, 2022, is superseded in its entirety by this Order and the Commission reaffirms its adoption and approval of the Show Cause RD except to the extent the recommended findings and conclusions contained therein are inconsistent with this Order.

16.           The Commission affirms the validity of the Financing Order and the authorizations and approvals granted PNM therein, including the Financing Order’s determination of its irrevocability. Specifically, that PNM has the ongoing authority to cause up to $360.1 million in ETA Bonds to be issued pursuant to the Financing Order, to sell the energy transition property created by the Financing Order and to impose, collect and adjust the related energy transition charges that repay the bonds. The Commission affirms the NMPRC’s pledge pursuant to Ordering Paragraph 46 of the Financing Order and NMSA 1978, Section 62-18-19.

17.           Pursuant to the Settlement Agreement, PNM is required to pay settlement rate credits to customers in a total amount of $115 million over a period of twelve months (“settlement rate credits”). The credit shall be identified on customer bills as the “San Juan ETA Settlement Credit”. This total amount shall be in addition to the amounts previously refunded by PNM prior to the Court’s stay. The total amount of $115 million for settlement rate credits is based on a reasonable settlement of the original refund amount ordered by the Commission and challenged on appeal together with undepreciated amounts associated with San Juan Generating Station investments remaining in PNM’s rates following each unit’s shut down, for the period of time from July 1, 2022 to December 31, 2023, to generally coincide with the implementation of new rates and the expiration of the suspension period for PNM’s proposed rates in the Rate Case.

18.           The settlement rate credits to customers shall commence within 30 days of the later of the date this Order is final and unappealed or the Court’s dismissal of the Show Cause Appeal. The settlement rate credit shall remain in effect until PNM has refunded the total amount of $115 million to customers. If the ETA Bonds are issued prior to new rates being established by the Commission, no additional rate adjustments will be required under the ETA or the Financing Order to offset those SJGS costs that are currently included in PNM’s rates.

19.           The payment by PNM of the settlement rate credits constitutes a fair and reasonable resolution of all ratemaking issues raised in the Show Cause proceedings, and any ratemaking treatment associated with the Show Cause proceedings proposed by any party in PNM’s Rate Case is therefore moot.

20.           PNM further is required to hold customers harmless for the difference, if any, for the actual weighted average coupon rate of the ETA bonds that exceeds 5.5%. Any cost associated with any premium or discount on the ETA Bond issuance will not be recoverable by PNM. The excess interest rate refund obligation shall not be deemed to impair the value of the energy transition property or the ETA Bonds or reduce the energy transition charges collected to repay the ETA Bonds. Excess interest rate refunds, if any, shall be issued over the ETA Bond repayment period if the actual weighted average coupon rate is more than 6.0%. If the actual weighted average coupon rate is less than 6.0%, PNM shall refund the net present value of the difference in the total annual payment (interest and principal), using a discount rate of 5.5%, as an additional component of the settlement rate credit and shall revise Corrected Rider No. 55 accordingly, if necessary, upon issuance of the ETA Bonds. PNM is required to submit a detailed report regarding the commercially reasonable efforts undertaken by PNM to obtain the lowest cos objective, within 30 days after issuance of the ETA bonds.

21.           The requirement for interest rate refunds, if any, constitutes a fair and complete resolution of the prudence review ordered in the Show Cause Order to be conducted in PNM’s Rate Case. Any proposals relating to that prudence review made by parties in the Rate Case are therefore moot.

22.           In connection with the issuance of the ETA Bonds, and in accordance with the Financing Order and Section 14 of the ETA, PNM shall sell, assign and transfer all of PNM’s rights to the energy transition property, including the right to impose, bill, collect and receive the energy transition charges, to the special purpose entity (the “SPE”) that will issue the ETA Bonds in a transaction that is an absolute transfer and true sale of the energy transition property. PNM’s obligation to provide the settlement rate credits and interest rate credits, if any, shall neither (i) impair the characterization of the sale, assignment and transfer of the energy transition property as an absolute transfer and true sale, or affect or impair the SPE’s ownership of the energy transition property or the SPE’s status as an entity that is separate from PNM, nor (ii) limit, alter, reduce or impair in any way the energy transition property or the imposition, collection and remittance of the energy transition charges authorized pursuant to the Financing Order, or any rights under the Financing Order.

23.           PNM should bear its costs in responding to the Show Cause Proceeding and Appeal, and those costs should not be recovered from customers.

24.           PNM will be reimbursed through the Bond proceeds for allowable costs under the ETA, including the monies PNM pre-funded and advanced to the state agencies designated to receive a percentage of the proceeds in Section 62-18-16 and for monies pre-funded for San Juan Mine workers’ severance and job training. Under no circumstances shall these costs be recovered from customers twice.

25.           As a result of this complete and unanimous resolution of this matter, including the Show Cause appeal, the parties have waived their right to any further appeals of this case and PNM and Intervenor-Appellees are ordered to immediately file with the Court a stipulated dismissal of PNM’s Show Cause appeal.

26.           The findings and conclusions and decretal paragraphs of this Order which incorporates the terms of the Settlement Agreement completely resolve the matters and issues disputed through the Show Cause proceedings as challenged by PNM in the Show Cause Appeal and render moot any related issues raised by parties to PNM’s 22-00270-UT Rate Case.

27.           The Commission incorporates the Show Cause RD, except where inconsistent with this Order, by reference as if fully set forth in this Order, and the statement of the case, discussion, and all findings of fact and conclusions of law and decretal paragraphs consistent with this Order are ADOPTED, APPROVED, and ACCEPTED as Findings and Conclusions and Decretal Paragraphs of the Commission to the extent they are consistent with the Findings and Conclusions and Decretal Paragraphs set forth herein.

28.           The Commission finds that as a Remand from the Supreme Court of a contentious appeal, and proposed settlement by all Parties of substantive issues in a longstanding case that significantly and immediately positively impacts ratepayers, this is an extraordinary case and there is good cause shown to forego a public hearing. 1.2.2.20.A(3) NMAC.

IT IS THEREFORE ORDERED:

A.            The Show Cause Final Order issued June 29, 2022, is hereby superseded in its entirety by this Order.

B.             The findings of fact and conclusions of law and decretal paragraphs contained in the Show Cause RD that are consistent with the Findings and Conclusions and Decretal Paragraphs of this Order are hereby ADOPTED, APPROVED, and ACCEPTED as orders of the Commission, and otherwise are hereby rejected where inconsistent with the Findings and Conclusions and Decretal Paragraphs contained in this Order.

C.             The terms of the Settlement Agreement incorporated in this Order as Attachment A are hereby ADOPTED, APPROVED, and ACCEPTED as orders of the Commission.

D.             Pursuant to the Financing Order, PNM has the ongoing authority to cause up to $360.1 million in ETA Bonds to be issued pursuant to the Financing Order, to sell the energy transition property created by the Financing Order and to impose, collect and adjust the related energy transition charges that repay the ETA Bonds. The Commission affirms its pledge pursuant to Ordering Paragraph 46 of the Financing Order and NMSA 1978, Section 62-18-19.

E.             Upon receipt of the ETA Bond proceeds, PNM shall be considered to have reimbursed itself from the Bond proceeds for the pre-funded monies advanced to state agencies and mine workers and to have fulfilled those requirements of the ETA.

F.             PNM shall calculate the rate tariff for the settlement rate credit and shall file a compliance settlement Advice Notice and supporting calculations within ten days of this Order, with an effective date of thirty days of this Order.

G.            The settlement Advice Notice shall terminate upon the full crediting to customers of the settlement rate credit in the amount of $115 million. PNM shall make a final compliance filing within 10 days of the termination of the settlement Advice Notice that demonstrates the total amount credited to customers for each rate class.

H.            Within ten days of the issuance of the authorized ETA Bonds, PNM shall make a compliance filing identifying the actual weighted average coupon rate for interest and shall calculate refunds owed by PNM, if any, to be paid to customers in accordance with this Order.

I.              PNM shall bear the costs in responding to the Show Cause Motion and Appeal at its sole expense, and those costs shall not be recovered from customers.

J.             The parties have waived their rights to any further appeals in this case and PNM and intervening parties to the Appeal shall immediately filed a stipulated dismissal with the Court to dismiss PNM’s Show Cause Appeal.

K.            This Order fully resolves any ETA Bond issuance, rate credits, rate treatment proposals and prudence issues raised during the course of PNM’s pending rate case in Case No. 22-00270-UT and those issues are moot and disposed of.

L.             This Order is effective immediately.

M.           This docket is closed.

N.             Copies of this Order shall be e-mailed to all persons on the attached Certificate of Service if their e-mail addresses are known, and otherwise shall be sent via regular mail.

ISSUED under the Seal of the Commission at Santa Fe, New Mexico, this 21^st day of September, 2023.

NEW MEXICO PUBLIC REGULATION COMMISSION

/s/ Gabriel Aguilera, electronically signed

GABRIEL AGUILERA, COMMISSIONER

/s/ James F. Ellison, Jr., electronically signed

JAMES F. ELLISON, JR., COMMISSIONER

/s/ Patrick J. O’Connell, electronically signed

PATRICK J. O’CONNELL, COMMISSIONER

Attachment A

Unopposed Comprehensive Settlement Agreement:
San Juan Generating Station Show Cause Proceedings,
NMPRC Case No. 19-00018-UT and S-1-SC-39440

Public Service Company of New Mexico ("PNM"), and Intervenors/Intervenor-Appellees New Mexico Office of the Attorney General ("NMAG"), Western Resource Advocates ("WRA"), New Energy Economy ("NEE"), New Mexico Affordable Reliable Energy Alliance ("NM AREA"), Albuquerque Bernalillo County Water Utility Authority ("ABCWUA"), Coalition for Clean Affordable Energy ("CCAE"), Prosperity Works and Utility Division Staff of the New Mexico Public Regulation Commission ("Staff') (collectively "Settlement Parties") desire to reach a complete and comprehensive resolution of those disputed issues decided by the New Mexico Public Regulation ("Commission") in Case No. 19-000180-UT ("Show Cause Proceeding") and appealed by PNM to the New Mexico Supreme Court in Case S-l-SC-39440 ("Show Cause Appeal"). The Settlement Parties further desire to resolve those limited rate and prudence issues pending in PNM' s rate case in Case No. 22-00270-UT ("Rate Case") that are related to the Show Cause Proceedings.

To fully and comprehensively resolve all disputes in the proceedings referenced above, the Settlement Parties enter into to this unopposed Comprehensive Settlement Agreement ("Settlement Agreement") and agree to the terms below (Settlement Terms"). The Settlement Parties intend that the Settlement Terms be approved through final and non-appealable action by the Commission in the form of a proposed settlement order on abeyance and remand of the Show Cause Appeal by the Court and the Settlement Agreement is contingent upon such action by the Commission; PNM and the other Settlement Parties will file a stipulated dismissal of the Show Cause Appeal immediately thereafter.

The Settlement Parties further intend that these Settlement Terms shall operate to eliminate related ratemaking and prudence issues in the PNM Rate Case pursuant to the orders of the Commission in the Show Cause Proceedings. The Settlement Terms are intended to remove any doubt or challenge regarding PNM's authority to cause the securitization of up to $360.1 million in energy transition costs relating to the shutdown of the San Juan Generating Station ("SJGS") through the issuance of Energy Transition Act bonds ("ETA Bonds") in accordance with the Financing Order issued April 1, 2020 in Case No. 19-00018-UT; and to ensure customers receive the benefits of the early shut down of SJGS contemplated by the Energy Transition Act ("ETA"). The Settlement Parties therefore agree and commit to the following Settlement Terms:

1. $115 million in refunds to be returned to customers through a settlement rate credit to be implemented thirty (30) days after the later of a non-appealable remand order from the Commission or dismissal of the Show Cause Appeal by the Supreme Court, to be paid out over twelve (12) months. The settlement rate credit shall be allocated on the same basis as the rate credits previously ordered by the Commission in its Final Order Adopting Recommended Decision with Additions in the Show Cause proceeding. PNM shall file a compliance advice notice revising Corrected Rider No. 55 to implement the settlement rate credit. The settlement rate credit shall be identified on customer bills as the "San Juan ETA Settlement Credit". PNM shall submit a compliance report at the end of the twelve-month period showing a full accounting of the amount of the rate credit issued to customers.

2. Customers shall be held harmless by PNM if the weighted average coupon rate of the ETA Bonds exceeds 5.5%. Any interest rate refunds owed by PNM will not be deemed to reduce or impair the ETA property or the ETA Bonds or impact energy transition charges. Any cost associated with any premium or discount on the ETA Bond issuance will not be recoverable by PNM. PNM will provide customer refunds for the difference in the total annual payment (interest and principal), if any, between the actual weighted average coupon rate and 5.5%. Excess interest rate refunds, if any, shall be issued over the ETA Bond repayment period if the actual weighted average coupon rate is more than 6.0%. If the actual weighted average coupon rate is less than 6.0%, PNM shall refund the net present value of the difference in the total annual payment (interest and principal) , using a discount rate of 5.5%, as an additional component of the settlement rate credit and shall revise Corrected Rider No. 55 accordingly, if necessary, upon issuance of the ETA Bonds. Within thirty (30) days from the issuance of the ETA Bonds, PNM shall submit to the Commission and serve on all parties in Case No. 19-00018-UT a detailed compliance report describing the commercially reasonable efforts PNM undertook to meet the lowest cost objective required by the ETA.

3. PNM has the ongoing authority to cause up to $360.1 million in ETA Bonds to be issued pursuant to the Financing Order, to sell the energy transition property created by the Financing Order and to impose, collect and adjust the related energy transition charges that repay the ETA Bonds.

2

4. Regarding the PNM Rate Case:

a. PNM shall withdraw its request for a regulatory asset associated with prefunding of ETA Section 16 state administered funds. This adjustment included carrying costs from August 2022 through December 2023. This equates to $120,509 on an annual revenue requirement basis ($1.37 million total).

b. PNM shall not receive cost recovery (through bond issuance or otherwise) for its legal costs for the Show Cause Proceeding and the Show Cause Appeal.

c. PNM and Intervenors agree that these Settlement Terms resolve all issues regarding the Show Cause Proceedings and related "prudence" questions, SJGS regulatory liability, and the legality and validity of the S ETA Bond issuance.

5. Upon receipt of the ETA Bond proceeds, PNM shall be considered to have reimbursed itself from the Bond proceeds for the pre-funded monies advanced to state agencies and mine workers and to have fulfilled those requirements of Sections 2(H)(2)(b) and 16 of the ETA. However, under no circumstances shall these costs be recovered from customers twice.

6. The Settlement Parties will jointly ask the Court to hold in abeyance the Show Cause Appeal and remand the matter to the Commission for consideration and action on a proposed settlement final order. The Joint Parties will also jointly move expeditiously to effectuate this settlement and the resolution of the associated issues in the Rate Case and the terms of the settlement and proposed settlement order shall be included in the joint motion(s) filed in the Rate Case.

7. The Settlement Parties, while not waiving their legal positions taken in the Show Cause Proceedings and the Show Cause Appeal, agree that the unanimous and timely settlement of these matters is in the public interest and that the Settlement Terms result in a fair and reasonable final outcome that removes uncertainty regarding litigation outcome. The Settlement Parties hereby waive their right to appeal any final order by the Commission approving the Settlement Terms as presented herein, without waiving any rights regarding the enforceability of the Settlement Agreement.

8. PNM shall not seek any amendment to the Financing Order unless it results in a lower ETC and adds no new costs to the amount financed.

9. This Settlement Agreement is subject to approval of the respective clients of each of undersigned counsel, which approvals will be sought expeditiously.

10. This Settlement Agreement applies to and shall be binding on the Settlement Parties and their respective assigns, successors in interest affiliate companies, partnerships, or corporations, parent entities, and independent subsidiaries, as applicable.

11. This Settlement Agreement may be executed by separate signatures on individual signature pages by counsel for the Settlement Parties, and such signatures may be executed through electronic approval and indicated by "// [attorney name]."

3

Dated this 16^th day August, 2023.

PUBLIC SERVICE COMPANY OF NEW MEXICO

/s/ Stacey J. Goodwin

Stacey J. Goodwin, Associate General Counsel

PNMR Services Company

Legal Department MS 0805

Albuquerque, NM 87158-0805

(505) 241-4927

Stacey.Goodwin@pnmresources.com

Richard L. Alvidrez

Miller Stratvert P.A.

500 Marquette NW, Suite 1100 P.O. Box 25687

Albuquerque, New Mexico 87125

(505) 842-1950

RAlvidrez@mstlaw.com

Attorneys for Public Service Company of New Mexico

NEW MEXICO PUBLIC REGULATION COMMISSION UTILITY DIVISION STAFF

/s/ Bradford Borman

Bradford Borman, Legal Division Director

P.O. Box 1269

Santa Fe, New Mexico 87504-1269

(505) 412-3502

Attorney for New Mexico Public Regulation Commission Utility Division Staff

ALBUQUERQUE BERNALILLO COUNTY WATER UTILITY AUTHORITY

/s/ Keith W. Herrmann

STELZNER, WINTER, WARBURTON,

FLORES & DAWES, P.A.

Post Office Box 528

Albuquerque, New Mexico 87103

(505) 938-7770

Email: nwinter@stelznerlaw.com

Email: kherrmann@stelznerlaw.com

Attorneys for Albuquerque Bernalillo County Water Utility Authority

COUNTY OF BERNALILLO

/s/ Jeffrey H. Albright

Jeffrey H. Albright, Attorney JAlbright Law, LLC

201 Third St. NW, Suite 500

Albuquerque, NM 87102-4388

(505) 926-4105 (Direct) JA@Jalblaw.com

Attorney for Bernalillo County

COALITION FOR CLEAN AND AFFORDABLE ENERGY

Charles De Saillan

25 Wildflower Way

Santa Fe, New Mexico 87506

(505) 819-9058

Desaillan.ccae@gmail.com

/s/ Cara R. Lynch

Cara R. Lynch

3105 San Joaquin Avenue SE

Albuquerque, New Mexico 87106

(505) 977-3025

Lynch.Cara.NM@gmail.com

Attorneys for Coalition for Clean Affordable Energy

NEW ENERGY ECONOMY

/s/Mariel Nanasi

Mariel Nanasi

300 E. Marcy Street

Santa Fe, New Mexico

(505) 469-4060

mariel@seedsbeneaththesnow.com

Attorney for New Energy Economy

NEW MEXICO AFFORDABLE RELIABLE ENERGY ALLIANCE

/s/ Kelly Gould

Kelly Gould, Esq.

The Gould Law Firm

P.O. Box 34127

Santa Fe, New Mexico 87594

(505) 690-1914

kelly@thegouldlawfirm.com

Peter J. Gould, Esq.

(505) 690-2966

peter@thegouldlawfirm.com

Attorneys for New Mexico Affordable Reliable Energy Alliance

NEW MEXICO OFFICE OF THE ATTORNEY GENERAL

/s/ James Grayson

James Grayson

Gideon Elliot, Utilities Bureau Chief

Aletheia V.P. Allen, Solicitor General

New Mexico Office of the Attorney General

408 Galisteo St.

Santa Fe, NM 87501

(505) 490-4865

jgrayson@nmag.gov

gelliot@nmag.gov

aallen@nmag.gov

Attorneys for the New Mexico Office of the Attorney General

PROSPERITY WORKS

/s/ Cara R. Lynch

Cara R. Lynch

3105 San Joaquin Ave SE Albuquerque, NM 87106

Lynch.Cara.NM@gmail.com

Attorney for Prosperity Works

WESTERN RESOURCE ADVOCATES

/s/ Cydnev Beadles

Steven S. Michel

Cydney Beadles

343 East Alameda Street

Santa Fe, NM 87501

cydney. beadles@westemresources.org

(505) 231-7042

stevensmichel@comcast.net

(505) 690-8733

Attorneys for Western Resource Advocates