UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D. C. 20549

                                   ___________


                                    FORM 10-K

                        FOR ANNUAL AND TRANSITION REPORTS
                     PURSUANT TO SECTIONS 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934


(X)  COMBINED  ANNUAL REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THE  SECURITIES
     EXCHANGE ACT OF 1934 For the fiscal year ended DECEMBER 31, 1997

                                       OR

( )  TRANSITION  REPORT  PURSUANT  TO  SECTION  13 OR  15(d)  OF THE  SECURITIES
     EXCHANGE ACT OF 1934

     For the transition period from _________ to __________

________________________________________________________________________________

                              TNP ENTERPRISES, INC.
             (Exact name of registrant as specified in its charter)

                           4100 International Plaza,
                               P. O. Box 2943,                   Commission File
     Texas                 Fort Worth, Texas 76113                Number: 1-8847
   -----------           ---------------------------              --------------
   (State of             (Address and zip code of  
  incorporation)        principal executive offices)
 
     Telephone number, including area code: 817-731-0099     75-1907501
                                            ------------     ----------
                                                             (I.R.S. employer
                                                             identification no.)
Securities registered pursuant to Section 12(b) of the Act:
                           Shares Outstanding              Name of each exchange
 Title of each class       on January 30, 1998              on which registered 
---------------------      -------------------             ---------------------

Common stock, no par value       13,184,489              New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:  None

     Indicate  by check mark  whether the  registrant  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days. Yes \X\  No \ \

     Indicate by check mark if disclosure of delinquent  filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. \X\

     The aggregate  market value of TNP  Enterprises,  Inc. common stock held by
nonaffiliates on January 30, 1998, was $435,870,418  based on the common stock's
closing  price on the New York  Stock  Exchange  on the same date of $33.44  per
share.
             ______________________________________________________

                         TEXAS-NEW MEXICO POWER COMPANY
             (Exact name of registrant as specified in its charter)

                            4100 International Plaza, 
                                 P. O. Box 2943,                 Commission File
   Texas                     Fort Worth, Texas 76113             Number: 2-97230
 ----------                  ------------------------            ---------------
(State of                    (Address and zip code of
incorporation)              principal executive offices)      

    Telephone number, including area code: 817-731-0099          75-0204070
                                           ------------          ----------
                                                             (I.R.S. employer
                                                             identification no.)

Securities registered pursuant to Section 12(b) of the Act:  None

Securities registered pursuant to Section 12(g) of the Act: 
                                                           Name of each exchange
Title of each class                                         on which registered 
-------------------                                         --------------------

First mortgage bonds: Series M, 8.7% 
due 2006 and Series U, 9.25% due 2000                              None

Secured debentures: 12.5% due 1999; Series A,
10.75% due 2003                                                    None

     Indicate  by check mark  whether the  registrant  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days. Yes \X\  No \ \


     Indicate by check mark if disclosure of delinquent  filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. \X\

TNP Enterprises,  Inc. holds all 10,705  outstanding  common shares of Texas-New
Mexico Power Company.
                                                                                
________________________________________________________________________________

                       DOCUMENTS INCORPORATED BY REFERENCE
    Document                                             Part Where Incorporated
    --------                                             -----------------------

Proxy Statement for 1998 Annual Meeting of 
Holders of TNP Enterprises, Inc. Common Stock                       III


<PAGE>
                      TNP ENTERPRISES INC. AND SUBSIDIARIES
                 TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES

Combined Annual Report on Form 10-K for the Fiscal Year Ended December 31, 1997

     This  combined  annual  report  on Form  10-K is  filed  separately  by TNP
Enterprises,  Inc. and Texas-New Mexico Power Company.  Information contained in
this  report  relating  to  Texas-New  Mexico  Power  Company  is  filed  by TNP
Enterprises,  Inc. and  separately by Texas-New  Mexico Power Company on its own
behalf. Texas-New Mexico Power Company makes no representation as to information
relating to TNP Enterprises, Inc. or to any other affiliate or subsidiary of TNP
Enterprises, Inc., except as it may relate to Texas-New Mexico Power Company.

                                TABLE OF CONTENTS


Glossary of Terms...........................................................   3

                                     Part I
Item 1.   BUSINESS..........................................................   4
          Introduction......................................................   4
          TNMP's Service Areas..............................................   4
          Seasonality of Business...........................................   5
          Sources of Energy.................................................   5
          Government Regulation.............................................   6
          Employees and Executive Officers..................................   6
Item 2.   PROPERTIES........................................................   8
          Generating Facilities.............................................   8
          Transmission and Distribution Facilities..........................   8
          Administrative and Service Facilities.............................   8
Item 3.   LEGAL PROCEEDINGS.................................................   8
Item 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS...............   8

                                     Part II

Item 5.   MARKET FOR REGISTRANTS' COMMON EQUITY
          AND RELATED STOCKHOLDER MATTERS...................................   9
Item 6.   SELECTED FINANCIAL DATA...........................................  10
Item 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
          CONDITION AND RESULTS OF OPERATIONS...............................  12
          Competitive Conditions............................................  12
          Results of Operations.............................................  13
          Liquidity and Capital Resources...................................  16
          Other Matters.....................................................  17
Item 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK........  17
Item 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.......................  18
          TNP Enterprises, Inc. and Subsidiaries............................  22
          Texas-New Mexico Power Company and Subsidiaries...................  27
          Notes to Consolidated Financial Statements........................  32
          Selected Quarterly Consolidated Financial Data....................  43
Item 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
          ACCOUNTING AND FINANCIAL DISCLOSURE...............................  43

                                    Part III

Item 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT................  44
          Directors.........................................................  44
          Executive Officers................................................  44
Item 11.  EXECUTIVE COMPENSATION............................................  44
Item 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT....  44
Item 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS....................  44

                                     Part IV

Item 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K...  44


<PAGE>
                      TNP ENTERPRISES INC. AND SUBSIDIARIES
                 TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES

Combined Annual Report on Form 10-K for the Fiscal Year Ended December 31, 1997


                                Glossary of Terms

     As used in this combined report, the following abbreviations,  acronyms, or
capitalized terms have the meanings set forth below:

Abbreviation, Acronym,
or Capitalized Term                          Meaning
----------------------                       -------

AFUDC ............ Allowance for borrowed funds used during construction
Bond Indenture ... Document pursuant to which FMBs are issued
Clear Lake ....... Clear Lake Cogeneration Limited Partnership
EPE .............. El Paso Electric Company
EPS .............. Earnings (loss) per share of common stock
ERCOT ............ Electric Reliability Council of Texas
FWI .............. Facility Works, Inc., a wholly owned subsidiary of TNP
FERC ............. Federal Energy Regulatory Commission
FMB(s) ........... One or more First Mortgage Bonds issued by TNMP
GWH .............. Gigawatt-Hours
IRS .............. Internal Revenue Service
ITC .............. Investment Tax Credits
KWH .............. Kilowatt-Hours
MW ............... Megawatts
MWH .............. Megawatt-Hours
NMPUC ............ New Mexico Public Utility Commission
PPM .............. PPM America, Inc.
PUCT ............. Public Utility Commission of Texas
SPS .............. Southwestern Public Service Company
SFAS ............. Statement of Financial Accounting Standards
TEP .............. Tucson Electric Power Company
TGC .............. Texas Generating Company, a wholly owned subsidiary of TNMP
TGC II ........... Texas Generating Company II, a wholly owned subsidiary of
                   TNMP
TNP One .......... A two-unit,  lignite-fueled,  circulating fluidized-bed 
                   generating plant located in Robertson County, Texas
TNMP ............. Texas-New Mexico Power Company, a wholly owned subsidiary of 
                   TNP
TNP .............. TNP Enterprises, Inc.
TU ............... Texas Utilities Electric Company
Unit 1 ........... The first electric generating unit of TNP One
Unit 2 ........... The second electric generating unit of TNP One

Statement Regarding Forward Looking Information

     The discussions in this document that are not historical facts,  including,
but  not  limited  to,  the  outcome  of  current  and  future   rate/regulatory
proceedings,  the continued  application  of regulatory  accounting  principles,
future cash flows and the potential  recovery of stranded costs,  are based upon
current expectations. Actual results may differ materially. Among the facts that
could  cause  the  results  to  differ  materially  from  expectations  are  the
following:  legislation  in the states TNMP serves  affecting the  regulation of
TNMP's  business;  changes in regulations  affecting TNP and TNMP's  businesses;
results of regulatory  proceedings  affecting TNP and TNMP's operations;  future
acquisitions   or  strategic   partnerships;   general   business  and  economic
conditions;  negotiations  regarding  TNMP's  proposal  regarding  transition to
competition in its Texas service area; and other factors  described from time to
time in TNP's  and  TNMP's  reports  filed  with  the  Securities  and  Exchange
Commission.  TNP and TNMP wish to caution readers not to place undue reliance on
any such  forward  looking  statements,  which are made  pursuant to the Private
Securities Litigation Reform Act of 1995 and, as such, speak only as of the date
made.


<PAGE>
                                     PART I
                                     ------

Item 1.      BUSINESS.

Introduction

     TNP was  organized  as a holding  company  in 1983 and  transacts  business
through  its  subsidiaries.  TNMP is a public  utility  engaged  in  generating,
purchasing, transmitting,  distributing, and selling electricity to customers in
Texas and New Mexico.  TNMP's  predecessor  was organized in 1925.  TNMP has two
subsidiaries,  TGC and TGC II, both of which were organized to facilitate TNMP's
acquisitions of TNP One, Unit 1 and Unit 2, in 1990 and 1991, respectively.

     FWI is a wholly owned  subsidiary of TNP that began operations in 1996. FWI
provides integrated mechanical,  electrical, plumbing, and other maintenance and
repair services to commercial  customers in Texas  metropolitan  areas.  FWI was
engaged in construction  activities in 1996 and 1997; however,  this segment was
discontinued in late 1997. The impact of these discontinued  operations to TNP's
results of operations  are described in Item 7, "Results of  Operations--Overall
Results," and Note 4.
 
     TNP, TNMP, TGC, TGC II and FWI are all Texas corporations.  Their executive
offices are located at 4100  International  Plaza,  P.O.  Box 2943,  Fort Worth,
Texas  76113  and the  telephone  number  is (817)  731-0099.  Unless  otherwise
indicated,   all  financial  information  in  this  report  is  presented  on  a
consolidated basis.

TNMP's Service Areas

     TNMP provides  electric  service to 85 Texas and New Mexico  municipalities
and adjacent rural areas with more than 222,000 customers.  TNMP's service areas
are  organized  into  three  operating  regions:  the  Gulf  Coast  Region,  the
North-Central  Region,  and the Mountain  Region.  In addition,  power marketing
activities  represent an emerging opportunity for TNMP.  Additional  information
regarding   power   marketing   sales  is  provided  in  Item  7,   "Results  of
Operations--Operating Revenues."

   Gulf Coast Region

     The Gulf Coast Region  includes the area along the Texas Gulf Coast between
Houston  and  Galveston.  The oil  and  petrochemical  industries,  agricultural
industry and general commercial activity in the Houston area support the economy
of this area.

   North-Central Region

     The North-Central Region extends from Lewisville,  Texas, which is 10 miles
north of Dallas-Fort Worth International  Airport,  to municipalities  along the
Red  River.   TNMP  provides  electric  service  to  a  variety  of  commercial,
agricultural  and petroleum  industry  customers in this area.  This region also
includes  municipalities  and  communities  south and west of Fort  Worth.  This
area's economy depends largely on agriculture  and, to a lesser extent,  tourism
and oil production.

   Mountain Region

     The Mountain  Region  includes  areas in southwest  and  south-central  New
Mexico.   This  region's   economy  is  primarily   dependent  upon  mining  and
agriculture.  Copper  mines are the major  industrial  customers in this region.
This  region also  includes  the area in far west Texas  between  Midland and El
Paso.  The economy in this area is based  primarily  on oil and gas  production,
agriculture, and food processing.

     TNMP's sales in all regions are primarily to retail customers. TNMP's power
marketing  sales  represent  resale of electricity  to customers  outside TNMP's
system.  Revenues  contributed  by each  operating  sector and its percentage of
total operating revenues in 1997, 1996, and 1995, respectively, are set forth in
the following table. No single customer accounted for more than 10% of operating
revenues during the years presented in the table.

<TABLE>
<CAPTION>
                           Operating Revenues ($000s)

          Sector                   1997                         1996                          1995         
     ---------------      --------------------          -----------------------       -----------------------
<S>                       <C>           <C>             <C>               <C>         <C>               <C>  
     Gulf Coast           $  315,596     54.3%          $  269,535        53.6%       $  250,165        51.5%
     North-Central           144,098     24.8              134,236        26.7           130,200        26.8
     Panhandle                     -        -                    -           -             7,322         1.5
     Mountain                107,243     18.5               98,966        19.7            98,136        20.2
     Power Marketing          13,756      2.4                    -           -                 -           -
                          ----------    ------          ----------       ------       ----------       ------
        Total             $  580,693    100.0%          $  502,737       100.0%       $  485,823       100.0%
                          ==========    ======          ==========       ======       ==========       ======

</TABLE>

<PAGE>
   Franchises and Certificates of Public Convenience and Necessity

     TNMP holds 83  franchises  with terms  ranging  from 20 to 50 years and two
franchises with indefinite terms from the 85 municipalities to which it provides
electric  service.  These  franchises  will expire on various dates from 1998 to
2039.  Three Texas  franchises,  composing  28% of total company  revenues,  are
scheduled  to expire in 1998 and 1999.  However,  Texas law does not  require an
electric utility to execute a franchise  agreement with a Texas  municipality to
be  entitled to provide or continue  to provide  electrical  service  within the
municipality. A franchise agreement documents the mutually agreeable terms under
which the service will be provided. TNMP intends to negotiate and execute new or
amended franchise agreements to be effective before existing franchises expire.

     TNMP also holds  PUCT  certificates  of public  convenience  and  necessity
covering all Texas areas that TNMP serves. These certificates include terms that
are  customary  in the public  utility  industry.  TNMP  generally  has not been
required to have  certificates  of public  convenience  and necessity to provide
electric power in New Mexico.

Seasonality of Business

     TNMP experiences  increased sales and operating  revenues during the summer
months as a result of increased air conditioner  usage in hot weather.  In 1997,
approximately  42% of annual revenues were recorded in June, July,  August,  and
September.

Sources of Energy

     TNMP owns one 300 MW lignite-fueled  generating  facility,  TNP One. During
1997, TNP One provided  approximately  20% of TNMP's total energy  requirements.
Power generated at TNP One is transmitted over TNMP's own transmission  lines to
other utilities'  transmission systems for delivery to TNMP's Texas service area
systems. To maintain a reliable power supply for its customers and to coordinate
interconnected operations, TNMP is a member of the ERCOT and the Western Systems
Coordinating Council.

     TNMP purchases the remainder of its electricity from various suppliers with
diversified  fuel sources.  During 1997,  approximately  81% of the purchases of
power were made under firm contracts, while 19% was purchased through short-term
spot market  purchases.  The availability and cost of purchased power to TNMP is
subject to changes in supplier  costs,  regulations  and laws,  fuel costs,  and
other  factors.  TNMP  continues  to  pursue  various  opportunities  to  reduce
purchased power costs.

     The  following  table  sets forth  certain  information  concerning  TNMP's
sources of electric energy in 1997.

<TABLE>
<CAPTION>
                                                 Year Contract      Percent of
                                                   Expires       Energy Provided
                                                 -------------   ---------------
    TEXAS
    -----
    Generation
<S>                                                  <C>               <C>
    TNP One....................................        -                26%

    Purchased Power
    Texas Utilities (1)........................      2002               20
    Clear Lake Cogeneration L.P................      2004               16
    Other (primarily cogenerators).............      Various            38
                                                                       ----
      Total                                                            100%
                                                                       ====
    NEW MEXICO
    ----------
    Purchased Power
    Public Service Co. of New Mexico(2)........      1999               12%
    El Paso Electric Co........................      2002               12
    New Century Energy Co. ....................      2001               15
    Other (primarily short-term contracts) (3).         -               61
                                                                       ----
      Total                                                            100%
                                                                       ====
</TABLE>

     (1) During December 1997, TNMP executed a new agreement with TU as 
         described in Note 10.
     (2) TNMP has notified PNM of its intent to cease  purchasing full power and
         energy  requirements  effective January 1, 1999, under the existing 
         agreement.
     (3) Suppliers under the short-term contracts include Tucson Electric Power 
         Co., Public Service Co. of New Mexico, El Paso Electric Co. and New 
         Century Energy Co.

     Management   believes  that  current  supply   arrangements  and  available
capacities on the wholesale  market are adequate to satisfy  TNMP's  foreseeable
power requirements.

<PAGE>
   Recovering Purchased Power and Fuel Costs

     During 1997, a  significant  portion of purchased  power costs in the Texas
jurisdiction  was recovered  from TNMP  customers  through a power cost recovery
adjustment  clause  authorized by the PUCT.  The clause  enables TNMP to recover
this significant component of operating expenses within two months of billing by
its suppliers.  In New Mexico,  a similar  clause was used to recover  purchased
power  costs  through   April  1997.  As  explained  in  Item  7,   "Competitive
Conditions",  TNMP implemented  Community ChoiceR in New Mexico effective May 1,
1997. This plan freezes rates (including the recovery of purchased power) during
the succeeding three-year transition period.

     Fuel costs are recovered from TNMP's Texas  customers  through a fixed fuel
recovery  factor  approved by the PUCT.  The fixed fuel recovery  factor and the
related  fuel  reconciliation  filed  with  the PUCT  are  described  in Item 7,
"Pass-Through Expenses--Fuel," and Note 2, respectively.

Government Regulation

     TNMP is subject to PUCT and NMPUC regulation.  Some of its activities, such
as issuing  securities,  are also subject to FERC regulation.  Recent regulatory
developments  are  changing  competitive  conditions  in  the  electric  utility
industry. These changes are discussed in Item 7, "Competitive Conditions."

     In addition to regulation as a utility,  TNMP's facilities are regulated by
the  Environmental  Protection  Agency  and Texas and New  Mexico  environmental
agencies.  TNP One  uses  environmentally  superior  circulating  fluidized  bed
technology that eliminates the need for expensive  scrubbers.  TNMP was allotted
sufficient  emission allowances to comply with the Clean Air Act of 1990 through
the year 2000.  During 1997,  1996, and 1995, TNMP incurred  expenses related to
air,  water,  and solid waste  pollution  abatement  (including  ash removal) of
approximately $5.0 million, $6.1 million, and $5.5 million, respectively.

Employees And Executive Officers

     At December 31, 1997, TNMP had 811 employees and FWI had 494 employees. The
employees are not  represented by a union or covered by a collective  bargaining
agreement.  Management  believes  relations with its employees are good.  During
1998,  FWI's  employee  count is expected to decrease  significantly  due to its
discontinued construction segment as explained in Note 4.

     Executive  officers  of TNP and  TNMP,  who  are  elected  annually  by the
respective boards of directors and serve at the discretion of the boards, are as
follows:

   Name                   Age   Position with TNP
   ----                   ---   -----------------

   Kevern R. Joyce         51   Chairman, President, & Chief Executive Officer
   Jack V. Chambers, Jr.   48   Senior Vice President
   Manjit S. Cheema        43   Senior Vice President & Chief Financial Officer
   John P. Edwards         55   Senior Vice President
   Ralph Johnson           54   Senior Vice President
   W. Douglas Hobbs        54   Vice President - Business Development
   John A. Montgomery      36   Vice President
   Michael D. Blanchard    47   Vice President & General Counsel
   Patrick L. Bridges      39   Treasurer
   Scott Forbes            40   Controller
   Paul W. Talbot          41   Corporate Secretary

   Name                   Age   Position with TNMP
   ----                   ---   ------------------

   Kevern R. Joyce         51   Chairman, President, & Chief Executive Officer
   Jack V. Chambers, Jr.   48   Senior Vice President & Chief Customer Officer
   Manjit S. Cheema        43   Senior Vice President & Chief Financial Officer
   John P. Edwards         55   Senior Vice President - Corporate Relations
   Ralph Johnson           54   Senior Vice President - Power Resources
   Dennis R. Cash          44   Vice President - Human Resources
   Allan B. Davis          60   Vice President & Regional Customer Officer
   Melissa D. Davis        40   Vice President & Regional Customer Officer
   Larry W. Dillon         43   Vice President & Regional Customer Officer
   Michael D. Blanchard    47   Vice President & General Counsel
   Patrick L. Bridges      39   Treasurer
   Scott Forbes            40   Controller
   Paul W. Talbot          41   Corporate Secretary

     Kevern R. Joyce  joined TNP and TNMP in April 1994 as  President  and Chief
Executive Officer. He became Chairman in April 1995. From 1992 until April 1994,
Mr. Joyce served as Senior Vice President and Chief Operating Officer of TEP.

     Jack V.  Chambers has served as Senior Vice  President  and Chief  Customer
Officer of TNMP since 1994 and as Senior Vice President of TNP since April 1996.
He was TNMP's Sector Vice President - Revenue Production from 1990 to 1994.

     Manjit S. Cheema  joined TNMP in June 1994.  He was  Treasurer of TNMP from
June 1994 until  September  1995. In December  1994, he became Vice  President &
Chief Financial Officer of TNP and TNMP. He became Senior Vice President & Chief
Financial  Officer of TNMP in July 1996 and became Senior Vice President & Chief
Financial  Officer  of TNP in May 1997.  From March 1990 until he joined TNP and
TNMP, Mr. Cheema was Assistant  Treasurer and Manager of Financial  Planning and
Budgeting for TEP.

     John P. Edwards joined TNMP and TNP in July 1996 as Senior Vice President -
Corporate Relations. From October 1994 until joining TNMP and TNP, he was Senior
Vice  President/Customer  Group and  Special  Assistant  to the Chief  Operating
Officer,  Tennessee Valley Authority.  His primary responsibilities were general
administrative   in  nature   for  TVA's   transmission   operations,   customer
relationships,  rate and regulatory affairs.  From July 1990 until October 1994,
he  was   President/CEO   of  Old   Dominion   Electric   Cooperative   and  the
Virginia-Maryland-Delaware Association of Electric Cooperatives.

     Ralph  Johnson  joined TNMP and TNP as Vice  President in January 1995 as a
consultant  and became Vice  President in February  1995.  In July 1996,  he was
named  Senior Vice  President - Power  Resources  of TNMP.  In May 1997,  he was
appointed Senior Vice President at TNP. From March 1991 until he joined TNMP and
TNP, Mr.  Johnson was Assistant  General  Manager for Tri-State  Generation  and
Transmission  Cooperative  in  Denver,  Colorado,  which  sells  power  to rural
electric cooperatives.

     W. Douglas Hobbs was appointed as Vice President - Business  Development of
TNP in May 1997.  He was Vice  President  -  Business  Development  of TNMP from
February  1997 to May 1997. He was a TNMP Vice  President and Regional  Customer
Officer  from April 1994 to February  1997.  He served as TNP One Plant  Manager
from April 1992 to 1994.

     John A.  Montgomery  became  President of FWI in April 1996.  From December
1995 to January 1997, he served as TNMP's Vice President - Marketing.  He became
Vice President of TNP in April 1996. From February 1994 until he joined TNMP, he
served as Director of  Marketing  and Regional  Marketing  Director of Greyhound
Lines,  Inc., a bus transportation  company.  From August 1990 to February 1994,
Mr.  Montgomery  was  President of Viva Brands  International,  Inc., a tropical
fruit beverage company that he founded.

     Michael D. Blanchard  became Vice President and General Counsel of TNMP and
TNP in February 1998. He was Corporate Secretary and General Counsel of TNMP and
TNP from 1987 to February 1998.

     Patrick L.  Bridges was  appointed  Treasurer  of TNP and TNMP in September
1995. He served as TNMP's  Director - Finance from 1994 to September  1995,  and
served as the Assistant Treasurer from 1993 to September 1995.

     Scott  Forbes  was  appointed  Controller  of TNMP  in  February  1997  and
appointed  Controller of TNP in May 1997.  From September 1996 to February 1997,
he was Manager - Financial Systems and Reporting. From January 1994 to September
1996 he was Manager - Financial  Reporting  and  Accounting  Policy with Entergy
Services,  Inc.  From 1991 to 1993 he was  Manager -  Regulatory  and  Financial
Reporting with Gulf States Utilities Company.

     Paul W. Talbot was elected Corporate  Secretary of TNP and TNMP in February
1998. He has been Senior Counsel of TNMP since August 1996. Before joining TNMP,
he was in the private practice of law in Dallas, Texas for more than ten years.

     Dennis R. Cash has served TNMP as Vice  President - Human  Resources  since
1994.  From  1990  until  1994  he was  General  Manager  - or  Manager  - Human
Resources.

     Allan B. Davis has been a TNMP Vice President and Regional Customer Officer
since 1994.  From 1991 to 1994, he was TNMP's Vice  President - Chief  Engineer,
Chief Engineer, or Assistant Chief Engineer.
 
     Melissa D. Davis became a TNMP Vice President and Regional Customer Officer
in  February  1997.  From  September  1995  to  February  1997  she  was  TNMP's
Controller. From 1994 to September 1995, she was Director - Financial Accounting
and Assistant Controller of TNMP. She served as Division Accounting Manager from
1991 to 1994.

     Larry W.  Dillon  has been a TNMP  Vice  President  and  Regional  Customer
Officer  since  1994.  From  1993  to  1994,  he was  TNMP's  Vice  President  -
Operations.

<PAGE>
Item 2.      PROPERTIES.

     Substantially  all of TNMP's real and personal  property  secures its FMBs.
Substantially all of TNMP's real and personal property in Texas also secures its
revolving credit  facilities and debentures.  TNMP's long-term debt is described
in Note 7.

Generating Facilities

     TNP  One  is  a  two-unit,  lignite-fueled  generating  plant,  located  in
Robertson County,  Texas. TNP One generates power for TNMP's Texas service areas
and operates as a base load facility.

Transmission and Distribution Facilities

     Management  believes that TNMP's  transmission and distribution  facilities
are of sufficient  capacity to serve  existing  customers  adequately and can be
extended and expanded to serve customer growth for the foreseeable future. These
facilities  primarily  consist of overhead and underground  lines,  substations,
transformers,  and  meters.  TNMP  generally  constructs  its  transmission  and
distribution  facilities  on easements  or public  rights of way and not on real
property held in fee simple.

Administrative and Service Facilities

     TNP's,  TNMP's and FWI's  corporate  headquarters  are located in an office
building in Fort Worth, Texas. Space in this building is leased through 2003.

     TNMP owns or  leases  local  offices  in 37 of the  municipalities  that it
serves. TNMP owns 14 construction/service centers in Texas and New Mexico.

Item 3.      LEGAL PROCEEDINGS.

     TNMP is the  defendant  in a suit styled  Clear Lake  Cogeneration  Limited
Partnership vs.  Texas-New  Mexico Power Company,  pending in the 234th District
Court of Harris County,  Texas. This lawsuit and a parallel  proceeding  pending
before the PUCT  arose out of  disagreements  between  the  limited  partnership
(Clear  Lake)  and TNMP  over the  interpretation  of  certain  provisions  of a
purchased  power agreement  under which TNMP purchases  cogenerated  electricity
from Clear Lake.  Clear Lake disputes  several charges for which TNMP has billed
Clear  Lake,  alleges  that  TNMP has  failed to abide by  contractual  language
concerning several issues, and seeks in the lawsuit approximately $15 million in
damages.  TNMP has moved for summary  judgment in the  lawsuit,  which is in the
discovery  phase.  TNMP is  vigorously  contesting  the  lawsuit  and  the  PUCT
proceeding.  The ultimate  disposition is not expected to have a material effect
on TNMP's results of operations.

     TNMP is the  defendant  in a suit  styled  Phillips  Petroleum  Company vs.
Texas-New  Mexico Power  Company,  pending in the 149th State  District Court of
Brazoria County,  Texas. The suit is based on events surrounding an interruption
of electricity to a petroleum  refinery and related  facilities that occurred in
May 1997.  Phillips is seeking  the  recovery  of  approximately  $36 million in
damages  arising  from the  interruption.  TNMP is  vigorously  contesting  this
lawsuit,  which is in the  discovery  phase.  The  ultimate  disposition  is not
expected to have a material effect on TNMP's results of operations.

     The lawsuit in a state district court in New Mexico styled El Paso Electric
Company vs. Texas-New Mexico Power Company has been dismissed.

     Information  regarding additional  regulatory and legal matters is provided
in Notes 2 and 10.

Item 4.      SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

     No  matters  were  submitted  to a vote of  security  holders in the fourth
quarter of 1997.

<PAGE>
                                     PART II
                                     -------

Item 5.  MARKET FOR REGISTRANTS' COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

     TNP's  common  stock is traded  on the New York  Stock  Exchange  under the
symbol  "TNP." The high and low prices of, and the amount of dividends  declared
and paid on,  TNP's  common  stock  during each quarter in 1997 and 1996 were as
follows:

                                                                     TNP
                             Market Price Range                   Dividends
                  --------------------------------------            Paid
                          1997                1996
                  -------------------  -----------------      --------------
    Quarter         high       low       high       low        1997    1996
    -------       --------- ---------  -------  -------       ------ -------
    First         $27 3/4   $21 3/8    $23 1/4  $18 1/2       $0.245 $ 0.22
    Second         24        18 7/8     28 5/8   22            0.245   0.22
    Third          25 15/16  22 15/16   28 1/8   23            0.245   0.245
    Fourth         33 3/4    24 7/16    28 1/8   24 1/2        0.27    0.245
                                                              ------ -------
                                                              $1.005 $ 0.930
                                                              ====== =======

     As of January 31, 1998,  there were  approximately  4,830 record holders of
TNP common stock.

     TNP holds all 10,705  outstanding  common  shares of TNMP.  During 1997 and
1996, TNMP paid common dividends to TNP as follows:

                                  TNMP Dividends Paid ($000's)
                                  ----------------------------
                  Quarter          1997                1996
                  -------        ---------           ---------
                   First         $   9,000           $   2,400
                   Second           11,800               2,400
                   Third             9,500               2,700
                   Fourth           14,000               3,200
                                 ---------           ---------
                     Total       $  44,300           $  10,700
                                 =========           =========


<PAGE>
<TABLE>
<CAPTION>
Item 6.  SELECTED FINANCIAL DATA.

     The following table sets forth selected financial data of TNP and TNMP for 1993 through 1997.

                                                            1997            1996            1995            1994           1993
                                                       --------------  -------------   -------------   -------------  --------------
TNP ENTERPRISES, INC.                                        (In thousands except per share amounts and percentages)
Consolidated results
<S>                                                    <C>             <C>             <C>             <C>            <C>          
    Operating revenues                                 $     585,234   $    502,737    $    485,823    $    477,989   $     474,242
    Income (loss) from continuing operations before
      the cumulative effect of change in accounting    $      40,455   $     26,150    $     33,060    $    (17,441)  $      11,605
    Net income (loss)                                  $      29,678   $     23,053    $     41,505    $    (17,441)  $      11,605
Total assets                                           $     991,926   $  1,006,784    $  1,030,433    $  1,054,488   $   1,086,938
Common shares outstanding
    Weighted average                                          13,083         11,465          10,901          10,750          10,641
    End of year                                               13,133         13,006          10,920          10,866          10,696
Per share of common stock
    Earnings (loss) from continuing operations before
      the cumulative effect of change in accounting    $        3.08   $       2.27    $       2.98    $      (1.70)  $        1.01
    Earnings (loss)                                    $        2.26   $       2.00    $       3.75    $      (1.70)  $        1.01
    Cash dividends declared                            $       1.005   $       0.93    $       0.82    $       1.22   $        1.63
    Book value                                         $       22.71   $      21.41    $      19.91    $      17.01   $       19.97
Capitalization
    Common shareholders' equity                        $     298,241   $    278,474    $    217,457    $    184,869   $     213,627
    Preferred stock                                            3,240          3,420           3,600           8,680           9,560
    Long-term debt, less current maturities                  478,041        533,964         611,925         682,832         678,994
                                                       --------------  -------------   -------------   -------------  --------------
       Total capitalization                            $     779,522   $    815,858    $    832,982    $    876,381   $     902,181
                                                       ==============  =============   =============   =============  ==============
Capitalization ratios
    Common shareholders' equity                                 38.3%          34.1%           26.1%           21.1%           23.7%
    Preferred stock                                              0.4            0.4             0.4             1.0             1.1
    Long-term debt, less current maturities                     61.3           65.5            73.5            77.9            75.2
                                                       --------------  -------------   -------------   -------------  --------------
       Total capitalization                                    100.0%         100.0%          100.0%          100.0%          100.0%
                                                       ==============  =============   =============   =============  ==============


TEXAS-NEW MEXICO POWER COMPANY
Consolidated results
    Operating revenues                                 $     580,693   $    502,737    $    485,823    $    477,989   $     474,242
    Income (loss) before the cumulative effect
      of change in accounting                          $      43,918   $     26,862    $     33,364    $    (16,634)  $      11,523
    Net income (loss)                                  $      43,918   $     26,862    $     41,809    $    (16,634)  $      11,523
Total assets                                           $     967,006   $  1,002,157    $  1,024,943    $  1,043,178   $   1,076,820
Capitalization
    Common shareholder's equity                        $     287,021   $    287,548    $    224,351    $    185,777   $     214,184
    Preferred stock                                            3,240          3,420           3,600           8,680           9,560
    Long-term debt, less current maturities                  477,900        533,800         611,925         682,832         678,994
                                                       --------------  -------------   -------------   -------------  --------------
       Total capitalization                            $     768,161   $    824,768    $    839,876    $    877,289   $     902,738
                                                       ==============  =============   =============   =============  ==============
Capitalization ratios
    Common shareholder's equity                                 37.4%          34.9%           26.7%           21.2%           23.7%
    Preferred stock                                              0.4            0.4             0.4             1.0             1.1
    Long-term debt, less current maturities                     62.2           64.7            72.9            77.8            75.2
                                                       --------------  -------------   -------------   -------------  --------------
       Total capitalization                                    100.0%         100.0%          100.0%          100.0%          100.0%
                                                       ==============  =============   =============   =============  ==============



</TABLE>


<PAGE>
<TABLE>
<CAPTION>
                         TEXAS-NEW MEXICO POWER COMPANY
                          SELECTED OPERATING STATISTICS

                                                   1997              1996             1995             1994             1993
                                               --------------   ---------------  ---------------  ---------------  ---------------

Operating revenues (in thousands):
<S>                                            <C>              <C>              <C>              <C>              <C>           
    Residential                                $     211,398    $      206,748   $      200,455   $      194,933   $      193,484
    Commercial                                       155,539           150,034          148,908          141,886          138,680
    Industrial                                       170,169           129,972          113,728          122,714          124,474
    Other                                             29,831            15,983           22,732           18,456           17,604
    Power Marketing                                   13,756                 -                -                -                -
                                               --------------   ---------------  ---------------  ---------------  ---------------
         Total                                 $     580,693    $      502,737   $      485,823   $      477,989   $      474,242
                                               ==============   ===============  ===============  ===============  ===============

Sales (MWH):
    Residential                                    2,251,119         2,230,558        2,141,553        2,085,621        2,047,360
    Commercial                                     1,772,591         1,725,650        1,681,130        1,618,840        1,567,083
    Industrial                                     5,523,907         3,797,776        2,704,159        2,652,844        2,567,552
    Other                                            107,847           108,039          113,985          114,190          104,882
    Power Marketing                                  494,705                 -                -                -                -
                                               --------------   ---------------  ---------------  ---------------  ---------------
         Total                                    10,150,169         7,862,023        6,640,827        6,471,495        6,286,877
                                               ==============   ===============  ===============  ===============  ===============

Number of customers (at year end):
    Residential                                      192,005           187,796          183,863          185,364          181,298
    Commercial                                        30,289            29,864           29,361           30,624           30,235
    Industrial                                           139               135              136              142              141
    Other                                                222               224              244              237              237
    Power Marketing                                       16                 -                -                -                -
                                               --------------   ---------------  ---------------  ---------------  ---------------
         Total                                       222,671           218,019          213,604          216,367          211,911
                                               ==============   ===============  ===============  ===============  ===============

Revenue statistics:
    Average annual use per residential
      customer (KWH)                                  11,835            11,973           11,476           11,354           11,362
    Average annual revenue per residential
      customer (dollars)                               1,111             1,110            1,074            1,061            1,067
    Average revenue per KWH sold
      per residential customer (cents)                  9.39              9.27             9.36             9.35             9.45
    Average revenue per KWH sold
      total sales (cents)                               5.72              6.39             7.32             7.39             7.54

Net generation and purchases (MWH):
    Generated                                      2,089,448         2,296,056        2,351,000        2,336,830        2,363,493
    Purchased                                      8,443,990         5,769,173        4,612,186        4,472,306        4,385,697
                                               --------------   ---------------  ---------------  ---------------  ---------------
       Total                                      10,533,438         8,065,229        6,963,186        6,809,136        6,749,190
                                               ==============   ===============  ===============  ===============  ===============

Average cost per KWH purchased (cents)                  3.09              3.51             3.87             4.35             4.56

Employees (year-end)
    Texas-New Mexico Power Company                       811               819              858              894            1,051
    Facility Works                                       494               116                -                -                -


</TABLE>

<PAGE>
Item 7. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND 
         RESULTS OF OPERATIONS.

           SIGNIFICANT EVENTS AND KNOWN TRENDS AFFECTING TNP AND TNMP

Competitive Conditions

     The  electric   utility  industry   continues  its  transition   toward  an
environment  of increased  competition  for energy  generation.  The portions of
operations  pertaining to transmission and distribution are expected to continue
to  be  regulated.  Pressures  that  underlie  the  movement  toward  increasing
competition  are numerous and complex.  They include  legislative and regulatory
changes,  technological  advances,  consumer  demands,  greater  availability of
natural  gas,   environmental   needs,  and  other  factors.   The  increasingly
competitive  environment presents opportunities to compete for new customers, as
well as the risk of loss of existing customers.

     The most  significant  effect  of  competition  on  TNMP,  as well as other
utilities,  will be the ability to recover potential  stranded costs.  "Stranded
costs" is the difference between what it costs TNMP to provide energy and what a
customer  would be  willing  to pay for  energy  in a  competitive  market.  The
inability to recover a  significant  portion of stranded  costs would  adversely
impact TNP's and TNMP's financial condition. In Texas, TNMP's potential stranded
cost relates to TNP One, its 300 MW generating  unit,  and could  potentially be
more than $270 million. In New Mexico, TNMP's potential stranded cost relates to
its fixed purchased  power  contracts and could  potentially be $3 million to $9
million.

     The following discusses TNMP's strategy to transition to competition and to
provide TNMP the ability to recover its  potential  stranded  costs in Texas and
New  Mexico.  Although  the final  resolution  and  magnitude  of this  issue is
uncertain,  management  realizes it is possible that  shareholders may share the
financial burden of stranded costs with customers.

   Texas Rate Filing and Transition to Competition Plan

     In December  1996,  certain cities in the Texas Gulf Coast area (Gulf Coast
Cities) served by TNMP passed  resolutions  requiring TNMP to file complete rate
information  with  those  cities.  On July 31,  1997,  TNMP  filed the  required
traditional  rate  information with the Gulf Coast Cities based on the test year
ended  December  31,  1996.  Agreements  with the cities  provide  that any rate
reduction  resulting  from the  traditional  rate  filing  required  by the city
ordinances will be placed into effect  retroactive to May 15, 1997. Based on its
analysis, TNMP believes the filing supports the reasonableness of TNMP's current
rates.

     Simultaneous  with  the  Gulf  Coast  Cities  rate  filing,  TNMP  filed  a
transition to  competition  plan with the PUCT and all of its Texas  cities.  On
December 22, 1997, TNMP and the staff of the PUCT, along with other signatories,
reached an agreement on TNMP's  proposed  transition to  competition  plan.  The
agreement  proposes  a  five-year  transition  period,  with a  series  of  rate
reductions for  residential and commercial  customers  beginning in 1998. At the
end of the transition period,  TNMP's Texas customers would be allowed to choose
their  energy  supplier.  The  agreement  provides the  opportunity  for TNMP to
recover a portion of its stranded  costs during the  transition  period by using
accelerated recovery of its investment in TNP One. Also, the agreement specifies
an earnings cap mechanism  that provides  earnings in excess of the earnings cap
to be applied by TNMP to recover stranded costs or refunded to customers.  Also,
the  agreement  establishes  a  competitive  transition  charge to  recover  any
stranded  cost  that  remains  at the  end of the  transition  period  over  the
subsequent five years. TNMP will continue working with other interested  parties
to obtain their approval before  forwarding this agreement to the PUCT for their
approval. PUCT approval is expected by mid-1998.

   New Mexico Community Choice

     Following  NMPUC  approval on April 11, 1997,  TNMP  implemented  Community
Choice,  its plan for  transition  to  competition  for its New  Mexico  service
territory effective May 1, 1997. The plan provides TNMP's customers the right to
choose their energy  provider  after a three-year  transition  period.  The plan
freezes rates  (including the recovery of purchased power) during the transition
period,  and  allows  for  customer  aggregation  based on market  forces.  TNMP
believes the plan will allow it to recover its potential  stranded  costs in New
Mexico; however, the actual recovery and amount of potential stranded costs will
depend on the future market and price for energy through May 1, 2000.

   Impact of Competition on TNMP

     In addition to pursuing the  satisfactory  resolution of the stranded costs
issue,  TNMP is pursuing  strategies to retain and attract new  customers.  TNMP
believes  that current  competitive  developments  on the  wholesale  market are
benefiting  TNMP and its  customers.  Because TNMP  purchases much of its power,
TNMP can take  advantage of lower overall  wholesale  power pricing , additional
market  flexibility,  and new  options  in  obtaining  purchased  power.  TNMP's
competitive  position  has  been  strengthened  with  the PUCT  open  access  to
transmission rule.  Management believes TNMP's revenue growth  opportunities are
through an increased customer base and new services.

     TNMP serves a market niche of smaller to medium sized communities. Only two
of the 85  communities  in TNMP's  service  area have  populations  in excess of
50,000.

   Texas Transmission Access

     During 1996, the PUCT passed a wholesale  transmission  access rule,  which
went into  effect on  January  1,  1997,  in order to  increase  competition  in
wholesale  energy sales within Texas.  The new rule  established  an Independent
System  Operator for the ERCOT  transmission  system,  and a regional  method of
transmission pricing,  terms and conditions.  As discussed in "MD&A - Results of
Operations," the new rule had a favorable impact on TNMP's earnings.


   Unregulated Operations

     TNP also plans to address the  effects of  competition  on the  traditional
utility business by expanding earnings through  unregulated  operations.  During
1998,  FWI,  TNP's  unregulated  wholly owned  subsidiary,  intends to establish
itself in the maintenance  and repair services  business and focus on commercial
customers in Texas  metropolitan  areas.  Through the end of 1997,  TNP has made
modest  investments  in  unregulated  activities,  in addition to FWI,  and will
continue to evaluate unregulated  investment and joint venture  opportunities in
additional energy-related businesses.



Results of Operations

   Overall Results

     Income  applicable to common stock was $29.5 million for 1997,  compared to
$22.9  million  in  1996.  The  1997  results   included  the  effect  of  FWI's
discontinued  operations  of $10.8  million.  The 1996  results  included a $3.1
million loss  associated with FWI's  discontinued  operations and a $1.3 million
after tax charge for the settlement of litigation  associated  with the Series T
FMB  retirement  in 1995.  Exclusive of one-time  items,  the 1997 earnings were
$40.3 million,  a $13.0 million  improvement as compared to the 1996 earnings of
$27.3 million.

     Income  applicable to common stock was $40.9  million in 1995.  Results for
1995 included a number of one-time items consisting of the cumulative  effect of
the change in accounting  for unbilled  revenues of $8.4 million (see Note 3), a
gain on sale of the Texas Panhandle  properties of $9.5 million, and recognition
of deferred  revenues  related to a favorable IRS private  letter ruling of $3.0
million.  Excluding the one-time  items,  1996 earnings were $7.4 million higher
than 1995 earnings of $19.9 million.

     The following  table sets forth results of operations  for 1997,  1996, and
1995 and the impact of one-time items:

<TABLE>
<CAPTION>
                                                            1997                   1996                    1995
                                                    -----------------      ---------------------     ------------------
                                                    Amount        EPS        Amount        EPS        Amount       EPS
                                                    ---------  -------     ----------  ---------    ---------   -------
                                                                    (In thousands except per share amounts)
Income applicable to common
<S>                                                 <C>        <C>         <C>         <C>          <C>         <C>   
    stock before one-time items..................   $  40,297  $  3.08     $  27,283   $   2.38     $ 19,908    $ 1.83
                                                    ---------  --------    ----------  ---------    ---------   -------
One-time items, net of income taxes:
    Discontinued operations of FWI...............    (10,777)    (0.82)       (3,097)     (0.27)           -         -
    Series T litigation settlement...............          -         -        (1,300)     (0.11)           -         -
    Cumulative effect of change in accounting....          -         -             -          -        8,445      0.77
    Gain on sale of Texas Panhandle properties...          -         -             -          -        9,479      0.87
    Recognition of deferred revenues............           -         -             -          -        3,018      0.28
                                                    ---------  --------    ----------  ---------    ---------   -------
       Total one-time items, net................     (10,777)    (0.82)       (4,397)     (0.38)      20,942      1.92
                                                    ---------  --------    ----------  ---------    ---------   -------
Income applicable to common stock...............    $ 29,520   $  2.26     $  22,886   $   2.00     $ 40,850    $ 3.75
                                                    =========  ========    ==========  =========    =========   =======
</TABLE>

     During 1997 and 1996,  FWI's operations  included  construction and service
activities.  In late 1997,  management  reevaluated FWI's strategy and adopted a
revised  strategy to  concentrate on service and  maintenance  activities and to
discontinue the construction segment.  Management believes this course of action
should improve FWI's competitive  position within its industry and improve FWI's
financial  strength.  See  Note  4  for  additional  information  regarding  the
discontinued operations.

     The operations of TNMP currently  represent most of TNP's  operations.  The
following   discussion  focuses  on  TNMP's  operations,   except  where  stated
otherwise.

<PAGE>
   Operating Revenues

     The following  table  summarizes the  components of operating  revenues (in
thousands).

<TABLE>
<CAPTION>
                                                                                          Increase (Decrease)
                                                                                          -------------------
                                                 1997         1996         1995        '97 v. '96   '96 v. '95
                                             ----------   ----------   -----------     ----------   -----------
<S>                                          <C>          <C>          <C>             <C>          <C>       
Operating revenues                           $ 580,693    $ 502,737    $  485,823      $  77,956    $   16,914

 Effect of recognizing deferred
  revenue from private letter ruling                 -            -        (4,128)             -         4,128
                                             ----------   ----------   -----------     ----------   -----------
     Subtotal                                  580,693      502,737       481,695         77,956        21,042

Pass-through items                             299,281      244,889       228,903         54,392        15,986
                                             ----------   ----------   -----------     ----------   -----------
Base revenues                                $ 281,412    $ 257,848    $  252,792      $  23,564    $    5,056
                                             ==========   ==========   ===========     ==========   ===========


</TABLE>

     Pass-through  items are the portion of operating revenues that recover from
customers the costs of purchased  power,  fuel, and standby  power.  These items
affect customer rates but do not affect operating  income.  Annual variances are
discussed in "Results of Operations--Operating Expenses."

     The following table summarizes the components of the base revenues increase
from 1996 to 1997 (in thousands).

<TABLE>
<CAPTION>

<S>                                                               <C>       
           Customer growth                                        $    3,905
           Price - sales mix and other                                   400
           Weather related                                              (360)
           Industrial - economy rate sales                             5,950
           Industrial - firm rate sales                               (2,359)
           Power marketing sales                                       2,307
           Non industrial standby revenues                             1,845
           Transmission revenue                                        8,251
           Unbilled revenue and other                                  3,625
                                                                 ---------------
               Base revenues increase                            $    23,564
                                                                 ===============
</TABLE>

     The base revenue  increase of $23.6 million during 1997 resulted  primarily
from  implementing  the new  transmission  access rules  during 1997,  growth in
residential and commercial customers,  and a full year benefit from operation of
the control area. TNMP implemented a control area in Texas on July 31, 1996. The
control  area is an  electrical  system  that  enables  TNMP to  instantaneously
balance its system  resources  with loads.  Implementation  of the control  area
enabled  TNMP to enhance  its  industrial  economy  rate  sales,  non-industrial
standby  revenues,  and power marketing  sales.  The control area also permitted
TNMP to  replace  standby  power  for TNP One  with  the  purchase  of  planning
reserves.

     The base revenue  increase of $5.1 million during 1996 was  attributable to
increased  residential,  commercial,  and economy  rate  industrial  sales,  and
additional base revenues  provided by the control area. The overall increase was
partially  offset by a reduction in firm rate industrial sales and lower margins
on the industrial economy rate sales.

     The  components  of GWH  sales  for 1997 and  1996  are  summarized  in the
following table:

<TABLE>
<CAPTION>
                                                   1997          1996     Variance        %
                                                  -----         -----     --------       ----
<S>                                              <C>            <C>         <C>        <C>
         Residential                              2,251         2,230          21        0.9
         Commercial                               1,772         1,726          46        2.7
         Industrial:
           Firm                                   1,080         1,295        (215)     (16.6)
           Economy                                4,444         2,503       1,941       77.5
         Power marketing                            495             -         495          *
         Other                                      108           108           -          -
                                                 ------         -----       -----      -----
               Total GWH sales                   10,150         7,862       2,288       29.1
                                                 ======         =====       =====      =====

         * Variance greater than 100%
</TABLE>

     The increase in GWH sales resulted primarily from a substantial increase in
industrial  economy sales.  During the second quarter of 1996, TNMP entered into
new sales agreements with two cogeneration customers. The new economy rate sales
are at significantly  lower margins than traditional firm rate industrial sales.
The 1997 sales  results  reflect a full year  impact  from the two  cogeneration
customers.  Also  contributing  to the sales  increase were  increased  sales to
residential and commercial customers, and the addition of power marketing sales.
Residential and commercial  sales  increased  during 1997 due to steady customer
growth.  TNMP  significantly  increased the resale of  electricity to off-system
customers beginning in mid-1997.  These power marketing sales are generally made
at low margins.  TNMP views power  marketing as a new business  opportunity  and
expects its sales to grow in 1998.

     Currently,  TNMP may not  increase  its base rates in Texas  prior to March
1999  except in  certain  extraordinary  circumstances  pursuant  to a rate case
settlement  approved by the PUCT in October 1994.  As discussed in  "Competitive
Conditions--Texas  Rate Filing and Transition to  Competition  Plan" and Note 2,
TNMP reached an agreement  with the staff of the PUCT and other  signatories  on
December 22, 1997, regarding TNMP's proposed transition to competition plan. The
agreement  proposes  a five  year  transition  period,  with a  series  of  rate
reductions  for  residential  and  commercial  customers  beginning in 1998. The
agreement provides for TNMP to recover a portion of its potential stranded costs
during the transition  period and to recover the remainder through a competitive
transition  charge at the end of the transition  period over the subsequent five
years. This agreement is subject to approval by the PUCT.

     As discussed in "Competitive  Conditions--New  Mexico Community Choice" and
Note 2, TNMP implemented its Community Choice plan in New Mexico on May 1, 1997.
The plan provides  TNMP's  customers  the right to choose their energy  provider
after a three-year  transition  period and freezes rates (including the recovery
of purchased power) during the transition  period.  The rates represent a slight
reduction as compared to rates in effect at December 1997.  Management  believes
the  implemented  rates  will not have a  material  adverse  effect on TNP's and
TNMP's financial condition.

     As of February  1, 1998,  TNMP  received  notification  that a  significant
customer in Texas will replace the power previously  provided by TNMP with power
from a cogeneration  plant built by a third party wholesale power producer.  The
plant is scheduled to commence  operations  in the first  quarter of 1998.  This
customer  provided sales of 629 GWH and annual revenues of $28.3 million in 1997
($10.1 million in base revenues). TNMP has an agreement with the wholesale power
producer to continue  providing certain services to the cogeneration  plant. The
base revenues from this agreement are expected to be $0.5 million annually.

     TNMP had received notice from a large industrial  customer in New Mexico to
terminate its contract.  This  customer  provided  sales of 1,098 GWH and annual
revenues  of  $34.7  million  in 1997  ($8.1  million  in base  revenues).  TNMP
renegotiated with this customer to continue providing full service until the end
of the New Mexico Community Choice transition period (April 30, 2000). After the
end of the transition  period,  TNMP will provide firm  transmission  service to
this customer,  and this customer can purchase its KWH  requirements on the open
market. Currently, TNMP is this customer's lowest cost U.S. electric supplier.

   Operating Expenses

     Operating  expenses for 1997 were $79.7  million  higher than in 1996,  due
primarily to higher pass-through expenses and income taxes.

     Operating  expenses for 1996 were $20.7  million  higher than in 1995,  due
primarily to higher pass-through expenses, property taxes and franchise taxes.

 
   Pass-Through Expenses

     The following table summarizes the components of pass-through  expenses (in
thousands).
 
<TABLE>
<CAPTION>
                                                                                        Increase (Decrease)
                                                                                        -------------------
                                                 1997         1996         1995      '97 v. '96        '96 v. '95
                                             ----------  ------------   -----------  -----------     -------------
Pass-through expenses:
<S>                                          <C>         <C>            <C>          <C>             <C>         
   Purchased power                           $ 259,605   $   196,481    $  178,465   $   63,124      $     18,016
   Fuel                                         39,676        45,300        44,828       (5,624)              472
   Standby power                                     -         3,108         5,610       (3,108)           (2,502)
                                             ----------  ------------   -----------  -----------     -------------
Total                                        $ 299,281   $   244,889    $  228,903   $   54,392      $     15,986
                                             ==========  ============   ===========  ===========     =============
</TABLE>

     Purchased Power.  During 1997,  purchased power expense  increased by $63.1
million due to additional  MWH's purchased to meet increased sales  requirements
from the agreements  negotiated with the two  cogeneration  customers during the
second quarter of 1996.

     During 1996,  purchased  power expense  increased by $18 million due to the
increased purchases to meet increased sales requirements,  primarily for the two
cogeneration customers.

     Purchased power costs represent TNMP's largest operating expense.  Based on
current contracts, TU continues as TNMP's largest supplier of purchased power in
Texas and is TNMP's  highest  priced  supplier.  As  described  in Note 10, TNMP
entered into a new agreement to continue  purchasing  power from TU through June
30, 2002. TNMP expects a $22.4 million reduction in purchased power expense over
the remaining life of this new agreement as compared to the existing  agreement.
Management  expects,  as a  result  of the  developing  competition  within  the
wholesale power market,  to enter into other new  arrangements for such capacity
and energy on terms that are more favorable for its customers.

     Fuel. Fuel expense in 1997 decreased $5.6 million, excluding amounts of non
pass-through fuel expenditures,  as compared to 1996. The decrease resulted from
an extended planned outage at TNP One and increased  economy sales. No fuel cost
recovery is included in industrial economy rate sales.

     Fuel  expense is directly  related to the fixed fuel  recovery  factor last
approved by the PUCT in connection with the 1994 Texas rate case settlement. The
majority of TNMP's fuel expense is recovered in revenues and any difference from
actual costs is deferred  until a new factor is  established.  On June 30, 1997,
TNMP filed a  reconciliation  of fuel expenses for the period from September 30,
1993 to December 31, 1996, with the PUCT. At the beginning of the reconciliation
period,  TNMP had a cumulative  under-recovery  of $11  million,  and had a $4.4
million  under-recovery  as of  the  end  of the  reconciliation  period.  As of
December 31, 1997, the under-recovered fuel amount was $0.1 million. The related
fuel reconciliation filed with the PUCT is described in Note 2.

<PAGE>
   Other Operating Expenses

     Other operating expenses in 1997 were comparable to 1996. Cost savings from
reduced  standby  expenses  resulting  from  implementation  of the control area
offset a $2.0 increase in the Texas transmission expenses.

     Other operating expenses were $2.0 million higher in 1996 than in 1995. The
increase  is  due  to  higher  payroll  and  payroll  related  items,  incentive
compensation  and the reserve  associated  with the  settlement  of Series T FMB
litigation.  These  increases were offset in part by reduced standby power costs
resulting from the implementation of the control area in July 1996, as discussed
in "Operating Revenues."

   Interest Charges

     During 1997,  interest charges decreased $12.5 million due primarily to the
retirement  of Series T FMBs in January 1997 and applying  strong cash flow from
operations  to reduce debt  levels.  The 11.25%  Series T FMBs were retired with
lower cost borrowings from the credit facilities and an equity contribution from
TNP in late 1996, resulting from its common stock sale.

     During 1996 interest charges decreased $4.6 million due to the reduction in
the amount of debt and lower  interest  rates on the credit  facilities.  During
1996  TNMP  retired  $91.7  million  of FMBs  and  reduced  the  average  amount
outstanding  under the credit  facilities.  Partially  offsetting the reductions
discussed  above  were  interest  charges  of $1.3  million  payable  to the IRS
associated  with the  resolution  of  outstanding  tax audits for the years 1990
through 1994.

     Interest  charges are  expected to continue to decrease  during 1998 due to
reduced levels of overall  long-term  debt and reduced  interest rate margins on
the credit facilities.


Liquidity and Capital Resources

   Sources of Liquidity

     The main  sources  of  liquidity  for TNP are cash  flow  from  operations,
borrowings from credit facilities and sale of additional common stock.

     TNP's cash flow from operations  totaled $103.9 million,  $65.2 million and
$88.4 million in 1997, 1996, and 1995. Cash flow from operations continues to be
strong,  and  increased in 1997 due to increased  base  revenues as described in
"Results of  Operations--Operating  Revenues,"  and the  one-time  factoring  of
unbilled  accounts  receivables,  which  contributed  $20.5 million to 1997 cash
flow.  Cash flow from  operations had decreased in 1996 due to increased  income
tax payments. TNMP's cash flow from operations mirrored that of TNP.

     TNMP has two  existing  credit  facilities  with  $150  million  of  unused
borrowings available, as of December 31, 1997.
 
     TNP reserved 1 million shares of common stock for issuance through a direct
stock  purchase  plan  which  began in 1997.  The plan is  designed  to  provide
investors  with a  convenient  method to purchase  shares of TNP's  common stock
directly from the company and to reinvest cash dividends.  The plan has replaced
TNP's prior  dividend  reinvestment  plan. As of January 26, 1998, the remaining
reserve for direct stock purchase plan was 967,000 shares.

   Capital Resources

     TNP's and TNMP's capital structure continued to improve during 1997 as TNMP
was able to reduce  debt due to  continued  strong  earnings  for the year.  The
equity portion of TNP's capital  structure  increased from 34.1% at December 31,
1996,  to 38.3% at December  31,  1997.  Conversely,  the  long-term  debt ratio
decreased  from 65.5% to 61.3% for the same  period.  TNMP  experienced  similar
results with its capital ratios.

     TNMP's  capital  requirements  through 2002 are  projected to be as follows
(amounts in millions):

<TABLE>
<CAPTION>
                                                              1998       1999        2000     2001        2002
                                                            -------   --------    --------  -------    -------

<S>                                                         <C>       <C>         <C>       <C>        <C>    
     FMB and secured debenture maturities (see Note 7)      $    .1   $  130.1    $  100.1  $    .1    $    .1
     Capital expenditures                                      32.1       36.4        36.5     37.4       39.0
                                                            -------   --------    --------  -------    -------
       Total capital requirements                           $  32.2   $  166.5    $  136.6  $  37.5    $  39.1
                                                            =======   ========    ========  =======    =======
</TABLE>

     TNMP believes that cash flow from operations and periodic  borrowings under
the credit  facilities will be sufficient to meet working  capital  requirements
and planned capital requirements through 1998.

<PAGE>
Other Matters

Application of SFAS 71

     As a result of the  Energy  Policy Act of 1992 and  actions  of  regulatory
commissions,  the electric  utility  industry is moving toward a combination  of
competition and a modified regulatory  environment.  TNMP's financial statements
currently  reflect  assets  and costs  based on  current  cost-based  ratemaking
regulations  in accordance  with SFAS 71,  Accounting for the Effects of Certain
Types of  Regulation.  Continued  applicability  of SFAS 71 to TNMP's  financial
statements   requires  that  rates  set  by  an   independent   regulator  on  a
cost-of-service basis can actually be charged to and collected from customers.

     In the event that all or a portion of a utility's  operations cease to meet
those  criteria for various  reasons,  including  deregulation,  a change in the
method  of  regulation,  or a  change  in the  competitive  environment  for the
utilities  regulated  service,  the utility will have to discontinue SFAS 71 for
that  portion of  operations.  That  discontinuation  would be  reported  by the
write-off of unrecoverable regulatory assets and liabilities.

     As discussed in Note 2, as a result of the Community  Choice program in New
Mexico,  TNMP  discontinued  the application of SFAS 71 to its  generation/power
supply  operations in New Mexico during 1997.  The  discontinuing  of regulatory
accounting  principles  had no effect on TNMP's  financial  condition.  Also, as
discussed  in Note 2, TNMP has reached an  agreement  with the staff of the PUCT
and other signatories  regarding TNMP's proposed transition to competition plan.
This agreement, subject to PUCT approval, would result in TNMP discontinuing the
application of SFAS 71 to its  generation/power  supply  operations in Texas. If
the plan is approved  without  significant  modification,  the  discontinuing of
regulatory  accounting  principles is not expected to have a material  effect on
TNMP's financial  condition.  Management believes that, as of December 31, 1997,
and for the foreseeable future, TNMP's transmission and distribution  operations
continue to follow SFAS 71.

   Earnings Per Share

     The  Financial  Accounting  Standards  Board issued SFAS 128,  Earnings per
Share, which became effective for financial statements ending December 31, 1997.
SFAS 128 requires the calculation of basic and diluted earnings per share. Basic
earnings per share is computed by dividing income  applicable to common stock by
the weighted  average  number of common  shares  outstanding  during the period.
Diluted  earnings per share is computed by dividing income  applicable to common
stock by the weighted  average  number of common shares  outstanding  and common
stock equivalents. The difference in current year basic and diluted earnings per
share  for  TNP is  immaterial,  and,  therefore,  diluted  earnings  per  share
information  is not  presented.  The  application  of SFAS 128  resulted in 1996
earnings per share to be increased by $0.02.

Year 2000 Impact to Systems

     TNP has conducted  extensive  studies to analyze the impact of Year 2000 to
all computerized systems.  Based on these studies, it has devised, and is in the
early stages of implementing,  a plan to address the affected systems.  The plan
incorporates  replacing outdated systems,  upgrading to new vendor releases, and
purchasing  additional hardware during the next two years. The expected costs to
implement  this plan  during the next two years are $7.2  million.  TNP does not
expect  these  expenditures  to  have  a  material  impact  on  its  results  of
operations. TNP expects to address the most critical systems during 1998.

Item 7A.     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

     TNP's and  TNMP's  involvement  in the  trading  of market  risk  sensitive
instruments is minimal and does not have a material  impact to either  company's
financial condition or results of operations.


<PAGE>
Item 8.      FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

                    Report of Independent Public Accountants
                    ----------------------------------------


To the Shareholders and Board of Directors of TNP Enterprises, Inc.:

     We  have  audited  the  accompanying  consolidated  balance  sheet  of  TNP
Enterprises, Inc. (the "Company") (a Texas corporation) as of December 31, 1997,
and the related consolidated statements of income,  shareholders' investment and
cash  flows  for  the  year  then  ended.  These  financial  statements  are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these financial statements based on our audit.

     We conducted  our audit in  accordance  with  generally  accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

     In our opinion,  the financial statements referred to above present fairly,
in all material  respects,  the financial position of the Company as of December
31, 1997, and the results of its operations and its cash flows for the year then
ended in conformity with generally accepted accounting principles.




                                                  Arthur Andersen LLP

     Fort Worth, Texas
     February 13, 1998


<PAGE>
                    Report of Independent Public Accountants
                    ----------------------------------------


To the Shareholder and Board of Directors of Texas-New Mexico Power Company:

     We have audited the  accompanying  consolidated  balance sheet of Texas-New
Mexico Power Company (the  "Company") (a Texas  corporation)  as of December 31,
1997,  and  the  related  consolidated   statements  of  income,   shareholder's
investment and cash flows for the year then ended.  These  financial  statements
are the  responsibility of the Company's  management.  Our  responsibility is to
express an opinion on these financial statements based on our audit.

     We conducted  our audit in  accordance  with  generally  accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

     In our opinion,  the financial statements referred to above present fairly,
in all material  respects,  the financial position of the Company as of December
31, 1997, and the results of its operations and its cash flows for the year then
ended in conformity with generally accepted accounting principles.


                                                  Arthur Andersen LLP

Fort Worth, Texas
February 13, 1998


<PAGE>
                          Independent Auditors' Report
                          ----------------------------


The Board of Directors and Shareholders
TNP Enterprises, Inc.:

We have audited the  accompanying  consolidated  balance  sheet and statement of
capitalization  of TNP  Enterprises,  Inc. and  subsidiaries  as of December 31,
1996, and the related  consolidated  statements of income,  common shareholders'
equity  and cash  flows  for  each of the  years in the  two-year  period  ended
December  31,   1996.   These   consolidated   financial   statements   are  the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all material  respects,  the financial  position of TNP Enterprises,
Inc.  and  subsidiaries  as of  December  31,  1996,  and the  results  of their
operations  and their  cash flows for each of the years in the  two-year  period
ended  December 31, 1996,  in  conformity  with  generally  accepted  accounting
principles.

As discussed in Note 3 to the  consolidated  financial  statements,  the Company
changed its method of accounting for operating revenues in 1995.



                                                  KPMG Peat Marwick LLP


Fort Worth, Texas
January 30, 1997
 

<PAGE>
                          Independent Auditors' Report
                          ----------------------------


The Board of Directors
Texas-New Mexico Power Company:

We have audited the  accompanying  consolidated  balance  sheet and statement of
capitalization  of Texas-New  Mexico Power Company (a wholly owned subsidiary of
TNP Enterprises, Inc.) and subsidiaries as of December 31, 1996, and the related
consolidated  statements of income,  common  shareholder's equity and cash flows
for each of the years in the  two-year  period ended  December  31, 1996.  These
consolidated  financial  statements  are  the  responsibility  of the  Company's
management.  Our  responsibility is to express an opinion on these  consolidated
financial statements based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all material  respects,  the financial  position of Texas-New Mexico
Power Company and subsidiaries as of December 31, 1996, and the results of their
operations  and their  cash flows for each of the years in the  two-year  period
ended  December 31, 1996,  in  conformity  with  generally  accepted  accounting
principles.

As discussed in Note 3 to the  consolidated  financial  statements,  the Company
changed its method of accounting for operating revenues in 1995.



                                                KPMG Peat Marwick LLP


Fort Worth, Texas
January 30, 1997

<PAGE>
<TABLE>
<CAPTION>
                     TNP ENTERPRISES, INC. AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF INCOME
                        For the Years Ended December 31,


                                                        1997               1996               1995
                                                  -----------------  -----------------  -----------------
                                                          (In thousands except per share amounts)

<S>                                               <C>                <C>                <C>             
OPERATING REVENUES                                $        585,234   $        502,737   $        485,823
                                                  -----------------  -----------------  -----------------

OPERATING EXPENSES:
  Purchased power                                          261,043            196,481            178,465
  Fuel                                                      41,730             47,201             48,898
  Other operating and maintenance                           94,075             84,417             82,833
  Depreciation                                              38,936             38,172             37,850
  Taxes other than income taxes                             33,696             33,256             28,865
  Income taxes                                              20,108             10,375             12,317
                                                  -----------------  -----------------  -----------------
       Total operating expenses                            489,588            409,902            389,228
                                                  -----------------  -----------------  -----------------

NET OPERATING INCOME                                        95,646             92,835             96,595
                                                  -----------------  -----------------  -----------------

OTHER INCOME:
  Gain on sale of Texas Panhandle properties                     -                  -             14,583
  Other income and deductions, net                           1,466              1,956              1,245
  Income taxes                                                 257                722             (5,403)
                                                  -----------------  -----------------  -----------------
       Other income, net of taxes                            1,723              2,678             10,425
                                                  -----------------  -----------------  -----------------

INCOME BEFORE INTEREST CHARGES                              97,369             95,513            107,020
                                                  -----------------  -----------------  -----------------
INTEREST CHARGES:
  Interest on long-term debt                                52,557             64,654             70,544
  Other interest and amortization of debt-related 
    costs                                                    4,357              4,709              3,416
                                                  -----------------  -----------------  -----------------
       Total interest charges                               56,914             69,363             73,960
                                                  -----------------  -----------------  -----------------

INCOME FROM CONTINUING OPERATIONS BEFORE
  THE CUMULATIVE EFFECT OF ACCOUNTING CHANGE                40,455             26,150             33,060

Loss from discontinued nonregulated operations, 
  net of taxes (note 4)                                     10,777              3,097                  -
                                                  -----------------  -----------------  -----------------

INCOME BEFORE THE CUMULATIVE EFFECT OF
  CHANGE IN ACCOUNTING                                      29,678             23,053             33,060

Cumulative effect of change in accounting for 
  unbilled revenues, net of taxes (note 3)                       -                  -              8,445
                                                  -----------------  -----------------  -----------------

NET INCOME                                                  29,678             23,053             41,505
Dividends on preferred stock                                   158                167                655
                                                  -----------------  -----------------  -----------------

INCOME APPLICABLE TO COMMON STOCK                 $         29,520   $         22,886   $         40,850
                                                  =================  =================  =================


EARNINGS PER SHARE OF COMMON STOCK:
  Earnings from continuing operations before the
    cumulative effect of accounting change        $           3.08    $          2.27    $           2.98
  Loss from discontinued nonregulated operations             (0.82)             (0.27)                 -
  Earnings from cumulative effect of change in 
    accounting                                                   -                  -               0.77
                                                  -----------------  -----------------  -----------------
  EARNINGS PER SHARE                              $           2.26   $           2.00   $           3.75
                                                  =================  =================  =================

DIVIDENDS PER SHARE OF COMMON STOCK               $          1.005   $           0.93   $           0.82
                                                  =================  =================  =================

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING                  13,083             11,465             10,901
                                                  =================  =================  =================



The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>


<PAGE>
<TABLE>
<CAPTION>
                     TNP ENTERPRISES, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                        For the Years Ended December 31,

                                                       1997                1996               1995
                                                  ----------------   ------------------ -----------------
                                                                       (In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                               <C>                <C>                           <C>    
  Cash received from sales to customers           $       625,032    $         505,307  $        481,470
  Purchased power                                        (262,107)            (198,696)         (172,486)
  Fuel costs paid                                         (37,447)             (45,576)          (44,781)
  Cash paid for payroll and to other suppliers           (125,188)             (75,138)          (76,735)
  Interest paid, net of amounts capitalized               (57,337)             (69,247)          (68,484)
  Income taxes paid                                        (9,089)             (15,684)           (1,095)
  Other taxes paid                                        (32,990)             (32,243)          (30,556)
  Other operating cash receipts and payments, net           2,979               (3,522)            1,043
                                                  ----------------   ------------------ -----------------
NET CASH PROVIDED BY OPERATING ACTIVITIES                 103,853               65,201            88,376
                                                  ----------------   ------------------ -----------------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Additions to utility plant                              (28,232)             (28,006)          (28,689)
  Additions to other property and nonregulated 
    investments                                            (1,777)              (2,771)                -
  Net proceeds from sale of Texas Panhandle 
    properties                                                  -                    -            29,009
  Maturities of temporary investments                           -                    -             5,590
                                                  ----------------   ------------------ -----------------
NET CASH PROVIDED BY (USED IN) INVESTING 
  ACTIVITIES                                              (30,009)             (30,777)            5,910
                                                  ----------------   ------------------ -----------------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Dividends paid on preferred and common stocks           (13,305)             (10,866)           (9,616)
  Common stock issuances                                    3,392               48,798               856
  Borrowings from (repayments to) revolving 
    credit facilities - net                                45,000               12,000           (42,272)
  Other long-term debt issuances                                -                  202                 -
  Deferred expenses associated with financings                  -                 (588)           (2,096)
  Redemptions:
     Obligation - FWI investment aquisition                  (300)                   -                 -
     Other long-term debt                                     (61)                   -                 -
     Preferred stock                                         (180)                (180)           (5,080)
     First mortgage bonds                                (100,900)             (96,508)          (30,270)
                                                  ----------------   ------------------ -----------------
NET CASH USED IN FINANCING ACTIVITIES                     (66,354)             (47,142)          (88,478)
                                                  ----------------   ------------------ -----------------

NET CHANGE IN CASH AND CASH EQUIVALENTS                     7,490              (12,718)            5,808
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD            8,387               21,105            15,297
                                                  ----------------   ------------------ -----------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD        $        15,877    $           8,387  $         21,105
                                                  ================   ================== =================

RECONCILIATION OF NET INCOME TO NET
     CASH PROVIDED BY OPERATING ACTIVITIES:
  Net income                                      $        29,678    $          23,053  $         41,505
  Adjustments to reconcile net income to net 
    cash provided by operating activities:
     Cumulative effect of change in accounting 
       for unbilled revenues, net of taxes                      -                    -            (8,445)
     Gain on sale of Texas Panhandle properties                 -                    -           (14,583)
     Recognition of deferred revenues                           -                    -            (4,782)
     Depreciation                                          38,936               38,170            37,850
     Amortization of debt-related costs and 
       other deferred charges                               3,184                3,329             4,952
     Allowance for borrowed funds used during 
       construction                                           (47)                 (99)             (162)
     Deferred income taxes                                  9,064                 (193)            5,256
     Investment tax credits                                (1,813)                (380)            1,679

Cash flows impacted by changes in current assets 
  and liabilities:
     Deferred purchased power and fuel costs                  995                5,696             5,997
     Accrued interest                                      (3,556)              (3,103)            2,289
     Accrued taxes                                         (1,244)              (7,372)            8,483
     Changes in other current assets and
       liabilities                                         25,099               (1,507)            8,826
Other, net                                                  3,557                7,607              (489)
                                                  ----------------   ------------------ -----------------
NET CASH PROVIDED BY OPERATING ACTIVITIES         $       103,853    $          65,201  $         88,376
                                                  ================   ================== =================


The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>


<PAGE>
<TABLE>
<CAPTION>
                     TNP ENTERPRISES, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                                  December 31,

                                                        1997                1996
                                                  ---------------     ----------------
                                                            (In thousands)
ASSETS

UTILITY PLANT:
<S>                                               <C>                 <C>            
  Electric plant                                  $    1,235,257      $     1,215,355
  Construction work in progress                            2,281                  906
                                                  ---------------     ----------------
            Total                                      1,237,538            1,216,261
  Less accumulated depreciation                          314,270              282,322
                                                  ---------------     ----------------
            Net utility plant                            923,268              933,939
                                                  ---------------     ----------------

OTHER PROPERTY AND INVESTMENTS, at cost                    5,704                3,927
                                                  ---------------     ----------------

CURRENT ASSETS:
  Cash and cash equivalents                               15,877                8,387
  Receivables:
       Customer                                            7,380               16,362
       Other                                               1,205                  594
  Inventories, at lower of average cost or market:
       Fuel                                                  483                  367
       Materials and supplies                              4,440                6,384
  Deferred purchased power and fuel costs                  2,570                3,565
  Accumulated deferred income taxes                        1,707                1,937
  Other current assets                                       982                  527
                                                  ---------------     ----------------
            Total current assets                          34,644               38,123
                                                  ---------------     ----------------

DEFERRED CHARGES                                          28,310               30,795
                                                  ---------------     ----------------
                                                  $      991,926      $     1,006,784
                                                  ===============     ================
CAPITALIZATION AND LIABILITIES

CAPITALIZATION:
  Common shareholders' equity:
       Common stock - no par value per share.
            Authorized 50,000,000
            shares; issued 13,132,821 shares 
            in 1997 and 13,006,492 in 1996        $      187,163      $       183,771
       Retained earnings                                 111,078               94,703
                                                  ---------------     ----------------
            Total common shareholders' equity            298,241              278,474
 
  Preferred stock                                          3,240                3,420
  Long-term debt, less current maturities                478,041              533,964
                                                  ---------------     ----------------
            Total capitalization                         779,522              815,858
                                                  ---------------     ----------------

CURRENT LIABILITIES:
  Current maturities of long-term debt                       100                  138
  Accounts payable                                        27,035               28,446
  Accrued interest                                         7,323               10,879
  Accrued taxes                                           17,589               18,833
  Customers' deposits                                      3,249                2,662
  Other current liabilities                               26,665               11,797
                                                  ---------------     ----------------
            Total current liabilities                     81,961               72,755
                                                  ---------------     ----------------

REGULATORY TAX LIABILITIES                                 6,318               10,963
ACCUMULATED DEFERRED INCOME TAXES                         85,250               74,844
ACCUMULATED DEFERRED INVESTMENT TAX CREDITS               21,149               19,734
DEFERRED CREDITS                                          17,726               12,630
COMMITMENTS AND CONTINGENCIES (Notes 1, 2, 
  and 10)                                         ---------------     ----------------
                                                  $      991,926      $     1,006,784
                                                  ===============     ================



The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>


<PAGE>
<TABLE>
<CAPTION>

                     TNP ENTERPRISES, INC. AND SUBSIDIARIES
                    CONSOLIDATED STATEMENTS OF CAPITALIZATION
                                  December 31,
     
                                                                                         1997                1996
                                                                                     --------------     ---------------
                                                                                            (In thousands)
COMMON SHAREHOLDERS' EQUITY
---------------------------
    Common stock with no par value per share
        Authorized shares - 50,000,000
        Outstanding shares - 13,132,821 in 
<S>                                                                                  <C>                <C>           
          1997 and 13,006,492 in 1996                                                $     187,163      $      183,771
    Retained earnings                                                                      111,078              94,703
                                                                                     --------------     ---------------
           Total common shareholders' equity                                               298,241             278,474
                                                                                     --------------     ---------------


PREFERRED STOCK
---------------
    Preferred stock with no par value
        Authorized shares - 5,000,000
        Outstanding shares - None

    Redeemable cumulative preferred stock of TNMP with $100 par value
        Authorized shares - 1,000,000


                                Redemption
                              price at TNMP's              Outstanding shares
                                  option                   1997      1996
                                  ------                   ----      ----
<S>                         <C>      <C>                 <C>         <C>         
        Series B            4.65%    $ 100.00            20,400      21,600                  2,040               2,160
        Series C            4.75%      100.00            12,000      12,600                  1,200               1,260
                                                        --------- ----------         --------------     ---------------
           Total redeemable cumulative preferred stock   32,400      34,200                  3,240               3,420
                                                        --------- ----------         --------------     ---------------


LONG-TERM DEBT
--------------
    FIRST MORTGAGE BONDS
<S>                         <C>      <C>                                             
        Series M            8.7  due 2006                                                    8,000                8,100
        Series T           11.2  due 1997                                                        -              100,800
        Series U            9.2  due 2000                                                  100,000              100,000

    SECURED DEBENTURES
        12.50% due 1999                                                                    130,000              130,000
        Series A 10.75% due 2003                                                           140,000              140,000

    REVOLVING CREDIT FACILITIES
        1995 Facility                                                                            -                   -
        1996 Facility                                                                      100,000              55,000

    OTHER                                                                                      141                 202
                                                                                     --------------     ---------------
           Total long-term debt                                                            478,141             534,102
            Less current maturities                                                           (100)               (138)
                                                                                     --------------     ---------------
           Total long-term debt, less current maturities                                   478,041             533,964
                                                                                     --------------     ---------------

TOTAL CAPITALIZATION                                                                 $     779,522      $      815,858
                                                                                     ==============     ===============



The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>


<PAGE>
<TABLE>
<CAPTION>
                     TNP ENTERPRISES, INC. AND SUBSIDIARIES
             CONSOLIDATED STATEMENTS OF COMMON SHAREHOLDERS' EQUITY
                        For the Years Ended December 31,


                                                                       Common Shareholders' Equity
                                                       ------------------------------------------------------------
                                                              Common Stock           Retained
                                                         Shares         Amount       Earnings         Total
                                                       ------------  -------------  -------------  --------------
                                                                            (In thousands)                       
YEAR ENDED DECEMBER 31, 1995
<S>                                                       <C>        <C>            <C>            <C>          
     Balance at January 1, 1995                             10,866   $    134,117   $     50,752   $     184,869
     Net income                                                  -              -         41,505          41,505
     Dividends on preferred stock                                -              -           (655)           (655)
     Dividends on common stock - $0.82 per share                 -              -         (8,938)         (8,938)
     Sale of common stock                                       54            856              -             856
     Retirement of preferred stock                               -              -           (180)           (180)
                                                       ------------  ------------- --------------  --------------
        Balance at December 31, 1995                        10,920        134,973         82,484         217,457

YEAR ENDED DECEMBER 31, 1996
     Net income                                                  -              -         23,053          23,053
     Dividends on preferred stock                                -              -           (167)           (167)
     Dividends on common stock - $0.93 per share                 -              -        (10,699)        (10,699)
     Sale of common stock                                    2,086         48,798              -          48,798
     Retirement of preferred stock                               -              -             32              32
                                                       ------------  ------------- --------------  --------------
        Balance at December 31, 1996                        13,006        183,771         94,703         278,474

YEAR ENDED DECEMBER 31, 1997
     Net income                                                  -              -         29,678          29,678
     Dividends on preferred stock                                -              -           (158)           (158)
     Dividends on common stock - $1.005 per share                -              -        (13,158)        (13,158)
     Sale of common stock                                      127          3,392              -           3,392
     Retirement of preferred stock                               -              -             13              13
                                                       ------------  ------------- --------------  --------------
        Balance at December 31, 1997                        13,133   $    187,163  $     111,078   $     298,241
                                                       ============  ============= ==============  ==============



The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>


<PAGE>
<TABLE>
<CAPTION>
                 TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
              (a wholly owned subsidiary of TNP Enterprises, Inc.)
                        CONSOLIDATED STATEMENTS OF INCOME
                        For the Years Ended December 31,


                                                                 1997              1996              1995
                                                            ----------------  ----------------  ----------------
                                                                               (In thousands)

<S>                                                         <C>               <C>               <C>            
OPERATING REVENUES                                          $       580,693   $       502,737   $       485,823
                                                            ----------------  ----------------  ----------------

OPERATING EXPENSES:
  Purchased power                                                   261,043           196,481           178,465
  Fuel                                                               41,730            47,201            48,898
  Other operating and maintenance                                    84,294            83,948            82,833
  Depreciation of utility plant                                      38,851            38,170            37,850
  Taxes other than income taxes                                      33,260            32,727            28,865
  Income taxes                                                       22,062            10,333            12,317
                                                            ----------------  ----------------  ----------------
       Total operating expenses                                     481,240           408,860           389,228
                                                            ----------------  ----------------  ----------------

NET OPERATING INCOME                                                 99,453            93,877            96,595
                                                            ----------------  ----------------  ----------------

OTHER INCOME:
  Gain on sale of Texas Panhandle properties                              -                 -            14,583
  Other income and deductions, net                                    1,120             1,626             1,470
  Income taxes                                                          257               722            (5,324)
                                                            ----------------  ----------------  ----------------
       Other income, net of taxes                                     1,377             2,348            10,729
                                                            ----------------  ----------------  ----------------

INCOME BEFORE INTEREST CHARGES                                      100,830            96,225           107,324
                                                            ----------------  ----------------  ----------------

INTEREST CHARGES:
  Interest on long-term debt                                         52,557            64,654            70,544
  Other interest and amortization of debt-related costs               4,355             4,709             3,416
                                                            ----------------  ----------------  ----------------
       Total interest charges                                        56,912            69,363            73,960
                                                            ----------------  ----------------  ----------------

INCOME BEFORE THE CUMULATIVE EFFECT
  OF CHANGE IN ACCOUNTING                                            43,918            26,862            33,364
Cumulative effect of change in accounting for
  unbilled revenues, net of taxes (note 3)                                -                 -             8,445
                                                            ----------------  ----------------  ----------------

NET INCOME                                                           43,918            26,862            41,809
Dividends on preferred stock                                            158               167               655
                                                            ----------------  ----------------  ----------------

INCOME APPLICABLE TO COMMON STOCK                           $        43,760   $        26,695   $        41,154
                                                            ================  ================  ================



The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>


<PAGE>
<TABLE>
<CAPTION>
                 TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
              (a wholly owned subsidiary of TNP Enterprises, Inc.)
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                        For the Years Ended December 31,

                                                                            1997              1996             1995
                                                                       ----------------   --------------  ---------------
                                                                                         (In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                                    <C>                <C>             <C>           
  Cash received from sales to customers                                $       606,803    $     502,954   $      481,470
  Purchased power                                                             (262,107)        (198,696)        (172,486)
  Fuel costs paid                                                              (37,447)         (45,576)         (44,781)
  Cash paid for payroll and to other suppliers                                 (86,607)         (75,807)         (76,793)
  Interest paid, net of amounts capitalized                                    (57,331)         (69,236)         (68,484)
  Income taxes paid                                                             (8,464)         (14,242)          (1,199)
  Other taxes paid                                                             (32,980)         (31,219)         (30,054)
  Other operating cash receipts and payments, net                                2,600            1,135              639
                                                                       ----------------   --------------  ---------------

NET CASH PROVIDED BY OPERATING ACTIVITIES                                      124,467           69,313           88,312
                                                                       ----------------   --------------  ---------------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Additions to utility plant                                                   (27,942)         (28,006)         (28,689)
  Net proceeds from sale of Texas Panhandle properties                               -                -           29,009
  Withdrawals from (deposits to) escrow account                                  1,670           (1,669)               -
                                                                       ----------------   --------------  ---------------

CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES                          (26,272)         (29,675)             320
                                                                       ----------------   --------------  ---------------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Dividends paid on preferred and common stocks                                (44,458)         (10,867)          (3,078)
  Equity contribution from TNP Enterprises                                           -           47,170                -
  Borrowings from (repayments to) revolving credit facilities - net             45,000           12,000          (42,272)
  Deferred expenses associated with financings                                       -             (588)          (2,096)
  Redemptions:
    First mortgage bonds                                                      (100,900)         (96,508)         (30,270)
    Preferred stock                                                               (180)            (180)          (5,080)
                                                                       ----------------   --------------  ---------------

NET CASH USED IN FINANCING ACTIVITIES                                         (100,538)         (48,973)         (82,796)
                                                                       ----------------   --------------  ---------------

NET CHANGE IN CASH AND CASH EQUIVALENTS                                         (2,343)          (9,335)           5,836
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                                 5,115           14,450            8,614
                                                                       ----------------   --------------  ---------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD                             $         2,772    $       5,115   $       14,450
                                                                       ================   ==============  ===============

RECONCILIATION OF NET INCOME TO NET
     CASH PROVIDED BY OPERATING ACTIVITIES:
  Net income                                                           $        43,918    $      26,862   $       41,809
  Adjustments to reconcile net income to net cash provided by 
    operating activities:
     Cumulative effect of change in accounting for unbilled 
       revenues, net of taxes                                                        -                -           (8,445)
     Gain on sale of Texas Panhandle properties                                      -                -          (14,583)
     Recognition of deferred revenues                                                -                -           (4,782)
     Depreciation of utility plant                                              38,851           38,170           37,850
     Amortization of debt-related costs and other deferred charges               3,184            3,329            4,952
     Allowance for borrowed funds used during construction                         (47)             (99)            (162)
     Deferred income taxes (excluding the effect of change in 
       accounting)                                                              14,584            1,140            5,132
     Investment tax credits                                                     (1,813)            (111)           1,691

Cash flows impacted by changes in current assets and liabilities:
     Deferred purchased power and fuel costs                                       995            5,696            5,997
     Accrued interest                                                           (3,556)          (3,103)           2,289
     Accrued taxes                                                                 850           (8,429)           8,432
     Changes in other current assets and liabilities                            24,751              786            8,862
Other, net                                                                       2,750            5,072             (730)
                                                                       ----------------   --------------  ---------------

NET CASH PROVIDED BY OPERATING ACTIVITIES                              $       124,467    $      69,313   $       88,312
                                                                       ================   ==============  ===============



The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>


<PAGE>
<TABLE>
<CAPTION>
                 TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
              (a wholly owned subsidiary of TNP Enterprises, Inc.)
                           CONSOLIDATED BALANCE SHEETS
                                  December 31,


                                                                  1997                1996
                                                            ---------------     ----------------
                                                                      (In thousands)
ASSETS

UTILITY PLANT:
<S>                                                         <C>                  <C>           
  Electric plant                                            $    1,235,239       $    1,215,355
  Construction work in progress                                      2,281                  906
                                                            ---------------     ----------------
            Total                                                1,237,520            1,216,261
  Less accumulated depreciation                                    314,270              282,322
                                                            ---------------     ----------------
            Net utility plant                                      923,250              933,939
                                                            ---------------     ----------------

OTHER PROPERTY AND INVESTMENTS, at cost                                214                1,884
                                                            ---------------     ----------------

CURRENT ASSETS:
  Cash and cash equivalents                                          2,772                5,115
  Receivables:
       Customer                                                        460               15,521
       Other                                                         1,882                1,196
  Inventories, at lower of average cost or market:
       Fuel                                                            483                  367
       Materials and supplies                                        4,440                6,384
  Deferred purchased power and fuel costs                            2,570                3,565
  Accumulated deferred income taxes                                  1,707                1,937
  Other current assets                                                 222                  128
                                                            ---------------     ----------------
            Total current assets                                    14,536               34,213
                                                            ---------------     ----------------

DEFERRED CHARGES                                                    29,006               32,121
                                                            ---------------     ----------------
                                                            $      967,006      $     1,002,157
                                                            ===============     ================
CAPITALIZATION AND LIABILITIES

CAPITALIZATION:
  Common shareholder's equity:
       Common stock, $10 par value per share
            Authorized 12,000,000 shares; issued 10,705 
              shares                                        $          107      $           107
       Capital in excess of par value                              222,146              222,133
       Retained earnings                                            64,768               65,308
                                                            ---------------     ----------------
            Total common shareholder's equity                      287,021              287,548
 
  Redeemable cumulative preferred stock                              3,240                3,420
  Long-term debt, less current maturities                          477,900              533,800
                                                            ---------------     ----------------
            Total capitalization                                   768,161              824,768
                                                            ---------------     ----------------

CURRENT LIABILITIES:
  Current maturities of long-term debt                                 100                  100
  Accounts payable                                                  24,859               27,254
  Accrued interest                                                   7,323               10,879
  Accrued taxes                                                     17,751               16,901
  Customers' deposits                                                3,249                2,662
  Other current liabilities                                         19,148               10,993
                                                            ---------------     ----------------
            Total current liabilities                               72,430               68,789
                                                            ---------------     ----------------

REGULATORY TAX LIABILITIES                                           6,318               10,963
ACCUMULATED DEFERRED INCOME TAXES                                   81,085               65,860
ACCUMULATED DEFERRED INVESTMENT TAX CREDITS                         21,286               19,164
DEFERRED CREDITS                                                    17,726               12,613
COMMITMENTS AND CONTINGENCIES (Notes 1, 2, and 10)
                                                            ---------------     ----------------
                                                            $      967,006      $     1,002,157
                                                            ===============     ================



The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>


<PAGE>
<TABLE>
<CAPTION>
                 TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
              (a wholly owned subsidiary of TNP Enterprises, Inc.)
                    CONSOLIDATED STATEMENTS OF CAPITALIZATION
                                  December 31,

                                                                                              1997               1996
                                                                                        ---------------    ----------------
                                                                                                   (In thousands)
COMMON SHAREHOLDER'S EQUITY
---------------------------
<S>                                                                                     <C>                <C>
     Common stock, $10 par value per share
        Authorized shares - 12,000,000
        Outstanding shares - 10,705                                                     $          107     $            107
     Capital in excess of par value                                                            222,146              222,133
     Retained earnings                                                                          64,768               65,308
                                                                                        ---------------    ----------------
           Total common shareholder's equity                                                   287,021              287,548
                                                                                        ---------------    ----------------


PREFERRED STOCK
---------------
     Redeemable cumulative preferred stock with $100 par value
        Authorized shares - 1,000,000

                                 Redemption
                               price at TNMP's                   Outstanding shares
                                   option                        1997       1996
                                   ------                        ----       ----
<S>                          <C>        <C>                    <C>          <C>          
        Series B             4.65%      $ 100.00               20,400       21,600               2,040               2,160
        Series C             4.75%        100.00               12,000       12,600               1,200               1,260
                                                            ----------  -----------     ---------------    ----------------
           Total redeemable cumulative preferred stock         32,400       34,200               3,240               3,420
                                                            ----------  -----------     ---------------    ----------------


LONG-TERM DEBT
--------------
     FIRST MORTGAGE BONDS
<S>                          <C>      <C>                                                      <C>                 <C>  
        Series M             8.7  due 2006                                                       8,000               8,100
        Series T            11.2  due 1997                                                           -             100,800
        Series U             9.2  due 2000                                                     100,000             100,000

     SECURED DEBENTURES
        12.50% due 1999                                                                        130,000             130,000
        Series A 10.75% due 2003                                                               140,000             140,000

     REVOLVING CREDIT FACILITIES
        1995 Facility                                                                                -                   -
        1996 Facility                                                                          100,000              55,000
                                                                                        ---------------    ----------------
           Total long-term debt                                                                478,000             533,900
            Less current maturities                                                               (100)               (100)
                                                                                        ---------------    ----------------
           Total long-term debt, less current maturities                                       477,900             533,800
                                                                                        ---------------    ----------------

TOTAL CAPITALIZATION                                                                    $      768,161     $       824,768
                                                                                        ===============    ================



The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>


<PAGE>
<TABLE>
<CAPTION>
                TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
              (a wholly owned subsidiary of TNP Enterprises, Inc.)
             CONSOLIDATED STATEMENTS OF COMMON SHAREHOLDER'S EQUITY
                        For the Years Ended December 31,


                                                                          Common Shareholder's Equity
                                                     -----------------------------------------------------------------------
                                                                                  Capital in
                                                            Common Stock          Excess of       Retained
                                                       Shares        Amount       Par Value       Earnings        Total
                                                     ------------ -------------  -------------  -------------  -------------
                                                                                 (In thousands)
YEAR ENDED DECEMBER 31, 1995
<S>                                                          <C>  <C>            <C>            <C>            <C>
     Balance at January 1, 1995                               11  $        107   $    175,111   $     10,559   $    185,777
     Net income                                                -             -              -         41,809         41,809
     Dividends on preferred stock                              -             -              -           (655)          (655)
     Dividends on common stock                                 -             -              -         (2,400)        (2,400)
     Retirement of preferred stock                             -             -           (180)             -           (180)
                                                     ------------ -------------  -------------  -------------  -------------
        Balance at December 31, 1995                          11           107        174,931         49,313        224,351

YEAR ENDED DECEMBER 31, 1996
     Net income                                                -             -              -         26,862         26,862
     Dividends on preferred stock                              -             -              -           (167)          (167)
     Dividends on common stock                                 -             -              -        (10,700)       (10,700)
     Equity contribution from TNP Enterprises                  -             -         47,170              -         47,170
     Retirement of preferred stock                             -             -             32              -             32
                                                     ------------ -------------  -------------  -------------  -------------
        Balance at December 31, 1996                          11           107        222,133         65,308        287,548

YEAR ENDED DECEMBER 31, 1997
     Net income                                                -             -              -         43,918         43,918
     Dividends on preferred stock                              -             -              -           (158)          (158)
     Dividends on common stock                                 -             -              -        (44,300)       (44,300)
     Retirement of preferred stock                             -             -             13              -             13
                                                     ------------ -------------  -------------  -------------  -------------
        Balance at December 31, 1997                          11  $        107   $    222,146   $     64,768   $     287,021
                                                     ============ =============  =============  =============  =============



The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
<PAGE>
                     TNP ENTERPRISES, INC. AND SUBSIDIARIES
                 TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements

 Note 1.  Summary of Significant Accounting Policies

   General Information

     The consolidated  financial  statements of TNP and subsidiaries include the
accounts of TNP and its wholly owned subsidiaries,  TNMP, FWI, and TNP Operating
Company. The consolidated  financial statements of TNMP and subsidiaries include
the  accounts  of TNMP and its wholly  owned  subsidiaries,  TGC and TGC II. All
intercompany transactions and balances have been eliminated in consolidation.

     TNMP is TNP's  principal  operating  subsidiary.  TNMP is a public  utility
engaged in  generating,  purchasing,  transmitting,  distributing,  and  selling
electricity  in  Texas  and New  Mexico.  TNMP is  subject  to  PUCT  and  NMPUC
regulation. Some of TNMP's activities, including the issuance of securities, are
subject  to FERC  regulation,  and its  accounting  records  are  maintained  in
accordance with FERC's Uniform System of Accounts.

     The use of estimates is required to prepare  TNP's and TNMP's  consolidated
financial   statements  in  conformity   with  generally   accepted   accounting
principles.  Management  believes  that  estimates  are  essential  and will not
materially differ from actual results. However,  adjustments may be necessary in
the future to the extent that future  estimates or actual  results are different
from the estimates used in the 1997 financial statements.

   Accounting for the Effects of Regulation

     Electric  utilities  operate in a highly regulated  environment.  TNP's and
TNMP's  consolidated  financial  statements  reflect the  application of certain
accounting standards,  including SFAS 71, "Accounting for the Effects of Certain
Types of Regulation,"  which provide for recognition of the economic  effects of
rate  regulation.  Among these effects are the recognition of regulatory  assets
and liabilities.  Regulatory assets represent  revenues  associated with certain
costs  that are  expected  to be  recovered  from  customers  in  future  rates.
Regulatory  liabilities are costs  previously  collected from customers or other
amounts that reduce  future  rates.  The following  table  summarizes  TNP's and
TNMP's regulatory assets and liabilities as of December 31, 1997 and 1996.

<TABLE>
<CAPTION>
                                                                                  1997                 1996
                                                                                  ----                 ----
                                                                                       (In thousands)
              Regulatory Assets:
<S>                                                                             <C>                 <C>      
                Deferred purchased power and fuel costs                         $  2,570            $   3,565
                Deferred charges:
                  Losses on reacquired debt                                        8,621               10,000
                Rate case expenses                                                 3,638                3,743
                  Deferred accounting amounts                                      4,026                4,157
                                                                                --------            ---------
                     Total                                                      $ 18,855            $  21,465
                                                                                ========            =========
 
              Regulatory Liabilities:

                Income tax related                                              $  6,318            $  10,963
                                                                                ========            =========
</TABLE>

     Federal and state  legislators and regulatory  authorities  have adopted or
are considering a number of changes that are significantly impacting competitive
conditions  in  the  electric  utility  industry,   such  as  the  emergence  of
independent power producers, wholesale transmission access, and retail wheeling.
If recovery of costs through rates becomes uncertain or unlikely, whether due to
legislative  or  regulatory  changes,  competition,  or  otherwise,   accounting
standards such as SFAS 71 may no longer apply to TNP and TNMP. As a result,  TNP
and TNMP could be  required  to write off all or a portion  of their  regulatory
assets  and  liabilities.   Moreover,  to  the  extent  that  future  rates  are
insufficient  to  recover  costs,  additional  write  downs  could be  required.
Management of TNP and TNMP are currently  unable to predict the ultimate outcome
of changes in the electric  utility industry and whether the outcome will have a
significant  effect on their  consolidated  financial  position  and  results of
operations.  However,  based upon current regulatory conditions in the states in
which TNMP  operates,  management  believes it probable that TNMP will continue,
for the foreseeable  future,  to meet the criteria for continued  application of
SFAS 71 to its transmission and distribution portions of its business.  See Note
2 for information regarding the Texas transition to competition plan and the New
Mexico Community Choice plan. Based on those plans it is probable that TNMP will
recover from customers the regulatory assets included in the table above.

<PAGE>
   Utility Plant

     Utility  plant is  stated  at the  historical  cost of  construction  which
includes labor,  materials,  indirect  charges for such items as engineering and
administrative costs, and AFUDC. Property repairs and replacement of minor items
are charged to operating  expenses;  major  replacements  and  improvements  are
capitalized to utility plant.

     AFUDC is a noncash item designed to enable a utility to capitalize interest
costs during periods of construction.  Established  regulatory  practices enable
TNMP to recover these costs from ratepayers.  The composite rates used for AFUDC
were 6.0%, 6.0%, and 8.0% in 1997, 1996, and 1995, respectively.

     The costs of  depreciable  units of plant  retired  or  disposed  of in the
normal course of business are  eliminated  from utility plant  accounts and such
costs  plus  removal   expenses   less   salvage  are  charged  to   accumulated
depreciation.  When  complete  operating  units  are  disposed  of,  appropriate
adjustments  are made to accumulated  depreciation,  and the resulting  gains or
losses, if any, are recognized.

     Depreciation is provided on a  straight-line  method based on the estimated
lives of the properties as indicated by periodic depreciation studies. A portion
of depreciation of  transportation  equipment used in construction is charged to
utility plant accounts in accordance with the equipment's use. Depreciation as a
percentage of average  depreciable  cost was 3.3%, 3.2%, and 3.3% in 1997, 1996,
and 1995, respectively.

   Cash Equivalents

     All highly liquid debt  instruments with maturities of three months or less
when purchased are considered cash equivalents.

   Customer Receivables and Operating Revenues

     TNMP  accrues  estimated  revenues  for energy  delivered  since the latest
billing. Prior to January 1, 1995, TNMP recognized revenue when billed. See Note
3 for the effects of the change in  recognizing  revenues  from cycle billing to
the accrual method in 1995.

     TNMP sells customer receivables to an unaffiliated company on a nonrecourse
basis.

   Purchased Power and Fuel Costs

     Electric rates include estimates of purchased power and fuel costs incurred
by TNMP in purchasing or generating  electricity.  In TNMP's Texas jurisdiction,
differences between amounts collected and allowable costs are generally recorded
either as purchased power subject to refund or deferred purchased power and fuel
costs in accordance with regulatory ratemaking policy. See Note 2 for changes in
the recovery of purchased power costs,  resulting from the implementation of New
Mexico Community Choice.

   Deferred Charges

     Expenses  incurred  in issuing  long-term  debt and  related  discount  and
premium are amortized on a straight-line  basis over the lives of the respective
issues.

     Included in deferred  charges are other assets that are expected to benefit
future periods and certain costs that are deferred for  ratemaking  purposes and
amortized over periods allowed by regulatory authorities.

   Derivatives

     Premiums paid for an interest  rate collar will be amortized  over the term
of the related agreement.  Unamortized premiums are included in Deferred Charges
in the  consolidated  balance  sheets.  Amounts to be received or paid under the
agreement  will be  recognized  on the accrual  basis as a component of interest
expense.

   Income Taxes

     TNP files a  consolidated  federal  income tax  return  that  includes  the
consolidated  operations  of TNMP and its  subsidiaries.  The  amounts of income
taxes recognized in TNMP's accompanying  consolidated  financial statements were
computed as if TNMP and its subsidiaries filed a separate  consolidated  federal
income tax return.

     ITC  amounts  utilized in the federal  income tax return are  deferred  and
amortized to earnings  ratably over the  estimated  service lives of the related
assets.

<PAGE>
   Fair Values of Financial Instruments

     Fair  values  of cash  equivalents,  temporary  investments,  and  customer
receivables approximated the carrying amounts because of the short maturities of
those instruments.

     The estimated fair values of long-term debt and preferred  stock were based
on quoted market prices of the same or similar issues. The estimated fair values
of long-term debt and preferred stock were as follows:

<TABLE>
<CAPTION>
                                       December 31, 1997                   December 31, 1996      
                                 -----------------------------       ------------------------------
                                 Carrying Amount   Fair Values       Carrying Amount    Fair Values
                                 ---------------   -----------       ---------------    -----------
                                                          (In thousands)
<S>                               <C>                <C>               <C>              <C>      
          Long-term debt          $ 478,000          $505,400          $ 533,900        $ 564,000
          Preferred stock             3,240             2,653              3,420            1,500
          Interest rate collar          262               235                295              180
</TABLE>


   Common Stock

     At December 31, 1997,  170,495  shares of TNP's common stock were  reserved
for issuance to TNMP's 401(k) plan. Additionally, at January 26, 1998, 1,224,056
shares of TNP's common stock were reserved for  subsequent  issuance under other
stock compensation or shareholder plans.

   Shareholder Rights Plan

     TNP has a  shareholder  rights  plan  that is  designed  to  protect  TNP's
shareholders  from coercive  takeover  tactics and inadequate or unfair takeover
bids. The rights plan provides for the  distribution of one right for each share
of TNP's  common  stock  currently  outstanding  or  issued  until  the close of
business on November 4, 1998.

     Upon the occurrence of certain events, each right entitles a shareholder to
elect to purchase one share of common  stock at $45 per share or, under  certain
circumstances,  shares of common stock at half the then-current  market price or
to receive TNP common stock or other securities  having an aggregate value equal
to the excess of (i) the value of the common  stock or other  securities  on the
date the rights are  exercised  over (ii) the cash  payment that would have been
payable upon exercise of the rights if cash payment had been elected.

     Until certain  triggering events occur, the rights will trade together with
TNP's common stock and separate rights  certificates  will not be issued.  Among
the triggering events are the acquisition by a person or group of 10% or more of
TNP's outstanding common stock or the commencement of a tender or exchange offer
that, upon consummation, would result in a person or group of persons owning 15%
or more of TNP's  outstanding  common stock. The rights expire November 4, 1998,
unless earlier redeemed or exchanged by TNP, and have had no effect on EPS.

   Stock-Based Compensation

     As discussed in Note 5, TNP has an equity based incentive compensation plan
that  awards  stock-based  compensation.  In 1995  the  FASB  issued  SFAS  123,
Accounting for Stock-Based Compensation, that changes the method for calculating
expenses  associated  with  stock-based  compensation.  SFAS 123,  which  became
effective for 1996, also allows companies to retain the approach as set forth in
APB Opinion 25, Accounting for Stock Issued to Employees,  for measuring expense
for its  stock-based  compensation.  TNMP has  elected to  continue to apply the
provisions  of APB  Opinion  25 in  calculating  stock-based  compensation.  The
application  of SFAS 123  would  have had no effect  on the  amount  of  expense
associated with its stock-based compensation.

   Reclassification

     Certain  amounts in 1996 were  restated to conform  with the 1997 method of
presentation.  In accordance with SFAS 128, 1996 earnings per share was restated
and resulted in an increase of $0.02 per share.


Note 2.  Regulatory Matters


     As the  electric  utility  industry  continues  its  transition  toward  an
environment of increased competition, the most significant effect of competition
on TNMP, as well as other  utilities,  will be the ability to recover  potential
stranded  costs.  "Stranded  costs" is the difference  between what it currently
costs  TNMP to provide  energy  and what a customer  would be willing to pay for
such service in a  competitive  market.  The  inability to recover a significant
portion of stranded  costs would  adversely  impact  TNP's and TNMP's  financial
condition.  In Texas, TNMP's potential stranded cost relates to TNP One, its 300
MW generating  unit,  and could  potentially  be more than $270 million.  In New
Mexico,  TNMP's  potential  stranded cost relates to its fixed  purchased  power
contracts and could potentially be $3 million to $9 million.

     The following  discusses  TNMP's  strategy to transition to competition and
provides TNMP the ability to recover its potential  stranded  costs in Texas and
New Mexico.

   Texas Rate Filing and Transition to Competition Plan

     In December  1996,  certain cities in the Texas Gulf Coast area (Gulf Coast
Cities) served by TNMP passed  resolutions  requiring TNMP to file complete rate
information  with  those  cities.  On July 31,  1997,  TNMP  filed the  required
traditional  rate  information,  based on the test year ended December 31, 1996,
with the Gulf Coast  Cities.  Agreements  with the cities  provide that any rate
reduction  resulting from the city  ordinances  requiring the  traditional  rate
filing will be placed  into effect  retroactive  to May 15,  1997.  Based on its
analysis, TNMP believes the filing supports the reasonableness of TNMP's current
rates.

     Simultaneous  with  the  Gulf  Coast  Cities  rate  filing,  TNMP  filed  a
transition to  competition  plan with the PUCT and all of its Texas  cities.  On
December 22, 1997, TNMP and the staff of the PUCT, along with other  signatories
reached an agreement on TNMP's  proposed  transition to  competition  plan.  The
agreement  proposes  a  five-year  transition  period,  with a  series  of  rate
reductions for  residential and commercial  customers  beginning in 1998. At the
end of the transition period,  TNMP's Texas customers would be allowed to choose
their  energy  supplier.  The  agreement  provides the  opportunity  for TNMP to
recover a portion of its stranded  costs during the  transition  period by using
additional  depreciation on TNP One and applying a portion of earnings in excess
of an  earnings  cap amount.  Also,  the  agreement  establishes  a  competitive
transition  charge to recover any  stranded  cost that remains at the end of the
transition  period over the subsequent  five years.  TNMP will continue  working
with other  interested  parties to obtain their approval before  forwarding this
agreement  to PUCT for their  approval.  PUCT  approval is expected by mid-1998.
This agreement, subject to PUCT approval, would result in TNMP discontinuing the
application of SFAS 71 to its  generation/power  supply  operations in Texas. If
the plan is approved without  significant  modification,  the discontinuation of
regulatory  accounting  principles is not expected to have a material  effect on
TNMP's financial  condition.  The  transmission  and distribution  operations in
Texas will continue to follow SFAS 71.

   New Mexico Community Choice

     Following  NMPUC  approval on April 11, 1997,  TNMP  implemented  Community
Choice,  its plan for  transition  to  competition  for its New  Mexico  service
territory effective May 1, 1997. The plan provides TNMP's customers the right to
choose their energy  provider  after a three-year  transition  period.  The plan
freezes rates  (including the recovery of purchased power) during the transition
period,  and  allows  for  customer  aggregation  based on market  forces.  TNMP
believes the plan will allow it to recover its potential  stranded  costs in New
Mexico.

     As a result of the New  Mexico  Community  Choice  plan,  the power  supply
portion of TNMP's New Mexico  operations no longer qualifies for the application
of SFAS  71.  Accordingly,  in 1997,  TNMP  discontinued  regulatory  accounting
principles for the New Mexico power supply  operations.  The  discontinuation of
SFAS 71 had no effect on TNMP's  financial  statements  as of December 31, 1997.
The  transmission  and  distribution  operations  in New Mexico will continue to
follow SFAS 71.

   Fuel Reconciliation

     TNMP's  fixed  fuel  factor  remains  constant  until  changed as part of a
general  rate  case  or  fuel  reconciliation,   or  until  the  PUCT  orders  a
reconciliation  for any over or under  collections  of fuel costs.  TNMP filed a
reconciliation  of fuel  costs in June  1997,  for the  period of  October  1993
through December 1996. In January 1998, TNMP reached a stipulated agreement with
the staff of the PUCT and several other interested parties. The agreement, which
is subject to approval by the PUCT, specifies all fuel costs incurred during the
reconciliation  period  should be approved as reasonable  and  necessary  costs.
Also, the agreement does not propose a change to the fixed fuel factor; however,
it  specifies  the fuel factor is expected  to be  addressed  in the "Texas Rate
Filing and Transition to Competition Plan" described above.

Note 3.  Change in Accounting for Unbilled Revenues

     Effective  January 1, 1995,  TNMP  changed  its  method of  accounting  for
operating revenues from cycle billing to the accrual method. The change was made
in order to more closely match  revenues and expenses and more closely  conforms
to common utility industry practice. The cumulative effect of this change was to
recognize $12,993,000 of additional revenues ($8,445,000, net of taxes, or $0.77
per share).

Note 4.  Discontinued Nonregulated Operations

     Management, with approval from the Board of Directors, authorized a plan to
discontinue the  construction  activities of FWI in late 1997. FWI will continue
to operate its service and maintenance segment of its business.

     The pre-tax loss on  discontinued  operations  recognized  in 1997 of $16.3
million ($10.8 million,  net of taxes, or $0.82 per share) includes the net loss
on  the  construction  segment  and  costs  to  satisfy  remaining   contractual
obligations related to its discontinued construction operations of $9.5 million,
net of taxes, as well as disposal costs of $1.3 million, net of taxes. Since the
costs to dispose of the construction  segment are not  significant,  this amount
has been included in the 1997 loss on discontinued operations.  The construction
segment is expected to be fully  disposed of within one year.  During 1996,  FWI
had incurred a net loss from construction  segment of $3.1 million, or $0.27 per
share.



Note 5.  Employee Benefit Plans

   Pension Plan

     TNMP has a defined benefit pension plan covering  substantially  all of its
employees.   Benefits  are  based  on  an   employee's   years  of  service  and
compensation. TNMP's funding policy is to contribute the minimum amount required
by federal funding  standards.  The following table sets forth the plan's funded
status and amounts recognized in the consolidated balance sheets at December 31,
1997, and 1996.

<TABLE>
<CAPTION>
                                                                       1997           1996
                                                                    --------      ----------
                                                                          (In thousands)
         Actuarial present value of benefit obligations:
<S>                                                                 <C>           <C>       
             Vested benefit obligation                              $ 66,061      $   58,466
             Unvested benefit obligation                               4,803           4,539
                                                                    --------      ----------
                Accumulated benefit obligation                      $ 70,864      $   63,005
                                                                    ========      ==========

         Projected benefit obligation                               $ 76,316      $   66,406
         Unrecognized net asset                                           59              83
         Unrecognized prior service cost                               1,434           1,588
         Unrecognized net gain from past experience                   24,779          21,484
                                                                    --------      ----------
                                                                     102,588          89,561
         Plan assets (principally marketable securities)
           at estimated fair value                                    95,751          82,771
                                                                    --------      ----------
             Accrued pension costs (included in deferred
                credits in the consolidated balance sheets)         $  6,837      $    6,790
                                                                    ========      ==========

 
     Net pension costs were comprised of the following  components as determined
using the projected unit credit actuarial method:


                                                                       1997           1996           1995
                                                                    ---------     -----------    -----------
                                                                                 (In thousands)
         Service cost                                               $  1,371      $    1,425     $    1,071
         Interest cost on projected benefit obligation                 5,074           4,841          4,762
         Adjustment for actual return on plan assets                 (17,788)        (12,398)       (13,797)
         Net amortization and deferral                                11,390           6,207          7,607
                                                                    ---------     -----------    -----------
           Net pension costs                                        $     47      $       75     $     (357)
                                                                    =========     ===========    ===========
</TABLE>

     Assumptions  used in  accounting  for the pension  plan as of December  31,
1997, and 1996 were as follows:

                                                           1997            1996
                                                           ----            ----
         Discount rates                                    7.0%            7.75%
         Rates of increase in compensation levels          4.0%            4.0%
         Expected long-term rate of return on assets       9.5%            9.5%



   Postretirement Benefit Plan

     TNMP sponsors a health care plan that provides  postretirement  medical and
death  benefits to retirees who satisfied  minimum age and service  requirements
during employment.  TNMP recognizes the costs of postretirement  benefits on the
accrual  basis  during the periods  that  employees  render  service to earn the
benefits in accordance with SFAS 106, "Employers'  Accounting for Postretirement
Benefits Other Than  Pensions." TNMP has been permitted to recover through rates
the additional  costs  resulting from the adoption of SFAS 106. TNMP has a trust
fund dedicated to paying these postretirement benefits.

     The  following  table  sets  forth the plan's  funded  status  and  amounts
recognized in the consolidated balance sheets at December 31, 1997, and 1996.

<TABLE>
<CAPTION>
                                                                           1997             1996
                                                                        ----------      ----------
                                                                               (In thousands)
         Accumulated postretirement benefit obligation:
<S>                                                                     <C>             <C>      
             Retirees and dependents                                    $   7,615       $  13,060
             Active employees                                               3,036           4,244
                                                                        ----------      ----------
                Total benefits earned                                      10,651          17,304
         Plan assets (principally marketable securities)
           at estimated fair value                                          8,274           6,975
                                                                        ----------      ----------
         Accumulated postretirement benefit
           obligation in excess of plan assets                              2,377          10,329
         Unrecognized transition obligation                               (12,864)        (13,721)
         Unrecognized net gain from past experience                        14,168           6,998
                                                                        ----------      ----------
             Accrued postretirement benefit costs (included in
               deferred credits in the consolidated balance sheets)     $   3,681       $   3,606
                                                                        ==========      ==========

     Net   postretirement   benefit  costs  were   comprised  of  the  following
components:

                                                                           1997             1996         1995
                                                                         ---------       ---------     --------
                                                                                       (In thousands)
         <S>                                                             <C>             <C>           <C>    
         Service cost                                                    $    467        $    524      $   374
         Interest cost on postretirement benefit obligation                 1,253           1,259        1,265
         Reduction for actual return on plan assets                        (1,037)           (708)        (956)
         Net amortization and deferral                                      1,056             922        1,145
                                                                         ---------       ---------     --------
           Net postretirement benefit costs                              $  1,739        $  1,997      $ 1,828
                                                                         =========       =========     ========
</TABLE>

     The  transition  obligation is being  amortized  over a 20-year period that
began in 1993.  The  assumed  health  care cost trend  rate used to measure  the
expected  cost of  benefits  was 5.5% for 1997 and is assumed to trend  downward
slightly  each year to 4.3% for 2003 and  thereafter.  That  assumed rate has an
effect on the amounts reported. For example,  increasing the assumed health care
cost  trend  rates by one  percentage  point in each  year  would  increase  the
accumulated  postretirement  benefit  obligation  as of December  31,  1997,  by
$47,000 and the  aggregate of the service and interest  cost  components  of net
postretirement benefit cost for 1997 by $274,000.

     Additional  assumptions used in accounting for the  postretirement  benefit
plan as of December 31, 1997, and 1996, were as follows:

                                                         1997            1996
                                                       --------        -------- 
   Discount rates                                        7.0%            7.75%
   Expected rate of return on assets (net of taxes)      5.25%           5.7%

   Incentive Plans

     TNP and TNMP have  several  incentive  compensation  plans.  All  employees
participate in one or more of these plans.  Incentive  compensation  is based on
meeting key financial and operational performance goals such as cash value added
or earnings  per share,  operations  and  maintenance  costs per KWH, and system
reliability measures. Operating expenses for 1997, 1996, and 1995 included costs
for the various cash and equity plans of $6.0 million,  $4.8  million,  and $2.0
million, respectively.

   Other Employee Benefits

     TNMP has a 401(k)  plan  designed  to enhance  the other  retirement  plans
available to its employees.  Employees may invest their  contributions  in fixed
income securities,  mutual funds, or TNP common stock. TNMP's  contributions are
used to purchase  TNP common  stock,  which  employees  may later  convert  into
investments in other investment options.

     TNMP has employment  contracts with certain members of management and other
key  personnel.  The contracts  provide for lump sum  compensation  payments and
other  rights  in the  event of  termination  of  employment  or  other  adverse
treatment of such persons  following a "change in control" of TNP or TNMP.  Such
event is defined to include,  among  other  things,  substantial  changes in the
corporate structure, ownership, or board of directors of either entity.

     An excess  benefit  plan has been  provided for certain key  personnel  and
retired  employees.  The payment of benefits  under the excess  benefit  plan is
partially provided under an insurance policy arrangement for paying the benefits
that  generally  would have been provided by the pension and thrift plans except
for federal limitations.

<PAGE>
<TABLE>
<CAPTION>
Note 6.  Income Taxes

     Components of income taxes were as follows:

                                                       TNP                                    TNMP              
                                     -------------------------------------     ------------------------------------
                                        1997          1996       1995             1997        1996        1995
                                     ---------    -----------  -----------     ---------   -----------  -----------
                                                                     (In thousands)
Taxes on net operating income:
<S>                                  <C>          <C>          <C>             <C>         <C>          <C>       
    Federal - current                $ 10,730     $   10,240   $    3,108      $  9,140    $    8,596   $    3,108
    State - current                       428             86          507           428            86          507
    Federal - deferred                  7,134             49        6,700         9,963         1,381        6,700
    ITC adjustments                     1,816              -        2,002         2,531           270        2,002
                                     ---------    -----------  -----------     ---------   -----------  -----------
                                       20,108         10,375       12,317        22,062        10,333       12,317


Taxes on other income (loss):
    Federal - current                    (534)          (100)       7,170          (534)         (100)       7,203
    Federal - deferred                    687           (241)      (1,444)          687          (241)      (1,568)
    ITC adjustments                      (410)          (381)        (323)         (410)         (381)        (311)
                                     ---------    -----------  -----------     ---------   -----------  -----------
                                         (257)          (722)       5,403          (257)         (722)       5,324
                                     ---------    -----------  -----------     ---------   -----------  -----------

Taxes on loss from discontinued
 nonregulated operations (Note 4)      (5,526)        (1,658)           -             -             -            -

Taxes on cumulative effect
 of change in accounting,
 federal-deferred (Note 3)                  -              -        4,548             -             -        4,548
                                     ---------    -----------  -----------     ---------   -----------  -----------

    Total income taxes               $ 14,325     $    7,995   $   22,268      $ 21,805    $    9,611   $   22,189
                                     =========    ===========  ===========     =========   ===========  ===========


     The  amounts for total  income  taxes  differ from the amounts  computed by
applying  the  appropriate  federal  income tax rate to earnings  (loss)  before
income taxes for the following reasons:


                                                       TNP                                    TNMP
                                      ----------------------------------        ---------------------------------
                                         1997        1996        1995              1997        1996       1995
                                      ----------  ----------  ----------        ---------  -----------  ---------
                                                                     (In thousands)
<S>                                   <C>         <C>         <C>               <C>        <C>          <C>     
Tax at statutory tax rate             $  15,252   $  10,850   $  17,595         $ 22,854   $   12,735   $ 17,674
    Amortization of
      accumulated deferred ITC           (1,403)     (1,323)     (1,079)          (1,403)      (1,323)    (1,079)
    Amortization of
      excess deferred taxes                (141)       (143)       (160)            (141)        (143)      (318)
    State income taxes                      428          86         507              428           86        507
    ITC related to disallowance            (410)       (191)       (312)            (410)        (191)      (312)
    ITC adjustment                            -        (760)          -                -            -          -
    Taxes on cumulative effect 
      of change in accounting,
      federal- deferred (Note 3)              -           -       4,548                -            -      4,548
    Other, net                              599        (524)      1,169              477       (1,553)     1,169
                                      ----------  ----------  ----------        ---------  -----------  ---------
        Actual income taxes           $  14,325   $   7,995   $  22,268         $ 21,805   $    9,611   $ 22,189
                                      ==========  ==========  ==========        =========  ===========  =========

</TABLE>

<PAGE>
     The tax  effects of  temporary  differences  that gave rise to  significant
portions of net current and net noncurrent  deferred income taxes as of December
31, 1997, and 1996, are presented below.

<TABLE>
<CAPTION>

                                                                       TNP                           TNMP          
                                                          ---------------------------   ---------------------------
                                                              1997            1996           1997           1996
                                                          ------------   ------------   ------------   ------------
                                                                                (In thousands)
     Current deferred income taxes:
       Deferred tax assets:
<S>                                                       <C>            <C>            <C>            <C>        
         Unbilled revenues                                $     2,905    $     2,470    $     2,905    $     2,470
         Other                                                      -            663                           663
                                                          ------------   ------------   ------------   ------------
                                                                2,905          3,133          2,905          3,133
       Deferred tax liability:
         Deferred purchased power and fuel costs               (1,198)        (1,196)        (1,198)        (1,196)
                                                          ------------   ------------   ------------   ------------
           Current deferred income taxes, net             $     1,707    $     1,937    $     1,707    $     1,937
                                                          ============   ============   ============   ============

     Noncurrent deferred income taxes:
       Deferred tax assets:
         Minimum tax credit carryforwards                 $    27,414    $    27,445    $    34,377    $    34,703
         Federal regular tax net operating
           loss carryforwards                                       -              -              -          1,724
         ITC carryforwards                                      6,608         11,255          6,472         11,823
         Regulatory related items                              17,135         16,844         17,135         16,844
         Accrued employee benefit costs                         3,195          3,486          3,195          3,486
         Other                                                  3,449          1,263            700            696
                                                          ------------   ------------   ------------   ------------
                                                               57,801         60,293         61,879         69,276
                                                          ------------   ------------   ------------   ------------
       Deferred tax liabilities:
         Utility plant, principally due to
           depreciation and basis differences                (128,913)      (115,823)      (128,912)      (115,823)
         Deferred charges                                      (6,101)        (5,565)        (6,101)        (5,565)
         Regulatory related items                              (8,037)       (13,749)        (7,951)       (13,748)
                                                          ------------   ------------   ------------   ------------
                                                             (143,051)      (135,137)      (142,964)      (135,136)
                                                          ------------   ------------   ------------   ------------
             Noncurrent deferred income taxes, net        $   (85,250)   $   (74,844)   $   (81,085)   $   (65,860)
                                                          ============   ============   ============   ============

     Federal tax carryforwards as of December 31, 1997, were as follows:

                                                                                   TNP             TNMP
                                                                                --------         ---------
                                                                                      (In thousands)
           Minimum tax credits
<S>                                                                             <C>              <C>      
              Amount                                                            $ 27,414         $  34,377
              Expiration period                                                     None              None
           Investment tax credit
              Amount                                                            $  6,608         $   6,472
              Expiration period                                                     2005              2005

</TABLE>

     An Internal  Revenue Service (IRS) revenue agent involved in auditing TNP's
1990 and 1991  consolidated  federal  income tax returns  recommended,  in March
1995,  that a  private  letter  ruling  concerning  eligibility  of the  TNP One
generating  plant for investment tax credit (ITC) be revoked  retroactively.  On
July 29, 1997, TNP received  notification  from the IRS that revoked the private
letter  ruling.  However,  the IRS  simultaneously  granted full relief from the
effects of this  revocation  and has allowed  TNP to rely on the private  letter
ruling as issued.  The current ruling will have no material effect on the amount
of ITC previously recognized.



Note 7.  Long-Term Debt

   First Mortgage Bonds

     FMBs  issued  under the Bond  Indenture  are secured by  substantially  all
utility plant owned directly by TNMP. The Bond Indenture restricts cash dividend
payments on TNMP common stock as discussed in Note 9.

     TNMP has the ability to issue  additional  FMBs based on certain  financial
tests, or based on previously  retired FMBs. As of December 31, 1997, TNMP could
not issue any additional FMBs based on the required  financial  tests.  However,
TNMP also has the ability to issue  additional FMBs against  previously  retired
FMBs, as limited by an earnings test. As of December 31, 1997,  TNMP could issue
up to $91 million of FMBs.

   Secured Debentures

     TNMP's Series A, 10.75% secured debentures and 12.5% secured debentures are
secured with a first lien on a portion of Unit 1. The 12.5%  secured  debentures
are  also  secured  by a first  lien on a  portion  of  Unit 2.  TNMP's  secured
debenture  holders are also secured by second liens on substantially all utility
plant in Texas owned  directly  by TNMP.  The secured  debentures  also  contain
restrictions on dividends and asset dispositions.
 
   Revolving Credit Facilities

     TNMP has two credit  facilities,  the 1996 Facility and the 1995  Facility.
The 1996 Facility  provides for a total  commitment  of $100 million,  while the
1995 Facility provides for a total commitment of $150 million. The 1996 Facility
commitment  expires September 2001. The 1995 Facility  commitment will reduce to
$125 million on November 3, 1998,  and to $100 million on November 3, 1999,  and
will expire on November 3, 2000.  The  collateral  securing the 1996 Facility is
$100 million of  non-interest  bearing  (except upon default)  FMBs.  Collateral
securing the 1995  Facility is generally a first lien on a portion of TNP One, a
second lien on TNMP's first mortgage bond trust estate located in Texas, and $30
million of non-interest  bearing FMBs. This collateral  secures borrowings up to
$100 million.  Before increasing borrowings above $100 million, TNMP must pledge
additional  non-interest  bearing FMBs in an amount equal to the borrowings over
$100 million.

     Associated  with the 1996  Facility,  TNMP has a $50 million  interest rate
collar to mitigate  exposure to variable  interest rates.  The collar sets floor
and ceiling rates on the 90-day LIBOR rate at 5.25% and 7.50%, respectively. The
term of the interest rate collar is September 1997 through September 2000.

     TNMP has  sufficient  liquidity  to satisfy  the  possibility  of any known
contingencies.  Management  believes  cash flow  from  operations  and  periodic
borrowings under its two credit  facilities should be sufficient to meet working
capital requirements and planned capital expenditures at least through 1998.


     At December 31, 1997,  interest rate on borrowings  under the 1996 Facility
was 7.11% and would have been 7.26% on the 1995 Facility.  The composite average
borrowing rates under TNMP's credit facilities were 7.15% and 7.32% for 1997 and
1996,  respectively.  The interest rate margins on both facilities will decrease
as the ratings on TNMP's FMBs improve.

     Under specified  conditions,  TNMP's credit facilities restrict the payment
of cash dividends on TNMP common stock. The credit  facilities also prohibit the
sale, lease, transfer, or other disposition of assets other than in the ordinary
course of business.

   Maturities

     As of December 31, 1997, FMB and secured  debenture  maturities and sinking
fund requirements for the five years following 1997 are as follows:

                                              Secured          Total FMBs and
            Year             FMBs           Debentures       Secured Debentures
            ----         ----------       --------------     ------------------
                                          (In thousands)
            1998         $      100         $       -            $     100
            1999                100            130,000             130,100
            2000            100,100                 -              100,100
            2001                100                 -                  100
            2002                100                 -                  100

     At the end of 1997, $100 million was  outstanding  under the 1996 Facility,
which  matures in 2001.  TNMP had available  borrowing  capacity of $150 million
under the 1995 Facility.

     As of December  31,  1997,  FWI had  $141,000 of debt  associated  with the
purchase of vehicles.

<PAGE>
Note 8.  Redeemable Cumulative Preferred Stock


     If TNMP liquidates voluntarily or involuntarily, holders of preferred stock
have  preferences  equal to amounts payable on redemption or par,  respectively,
plus accrued  dividends.  TNMP's  charter  provides  that  additional  shares of
preferred  stock may not be issued unless  certain tests are met. As of December
31, 1997, $188 million of additional preferred stock could be issued.



Note 9.  Capital Stock and Dividends

    TNP

     In November 1997, TNP increased its quarterly dividend from $0.245 to $0.27
per share.

     In October  1996,  TNP issued 2 million  shares of common stock in a public
offering, with net proceeds of approximately $47,170,000.  The net proceeds were
transferred to TNMP as an equity contribution.


   TNMP

     The Bond Indenture  prohibits TNMP from paying cash dividends on its common
stock to TNP unless unrestricted retained earnings are available. As of December
31, 1997,  $56.8 million of  unrestricted  retained  earnings were available for
dividends.
 

Note 10.  Commitments and Contingencies

   Fuel Supply Agreement

     TNMP has an agreement with the Walnut Creek Mining Company for the purchase
of lignite through the remaining life of TNP One. Walnut Creek Mining Company is
jointly owned by Phillips Coal Company and Peter Kiewit Sons', Inc.

   Wholesale Purchased Power Agreements

     TNMP  purchases a  significant  portion of its electric  requirements  from
various wholesale suppliers.  These contracts are scheduled to expire in various
years through 2005.

     TU  is  TNMP's  largest   wholesaler  of  energy.   In  1997,  TU  supplied
approximately  39%  of  TNMP's  Texas  capacity  and  20% of  the  Texas  energy
requirements.  During 1995 TNMP notified TU of its intent to cease  purchasing a
significant  portion of the full requirements power and energy from TU effective
January 1, 1999. The TU Agreement  provided for certain  purchases through 2010.
Since  1995,  TNMP and TU have been  involved  in various  legal and  regulatory
appeals regarding  various terms of the TU Agreement.  In late 1997, TNMP and TU
entered into an agreement that resolves the appeals.  The  agreement,  effective
January 1, 1999, shortens the term of the previous agreement,  which now ends in
June  2002,  instead  of  May  2010,  and  reduces  the  expected  1999  minimum
contractual commitments by 80% of the projected 1998 levels. This is expected to
result  in a $22.4  million  reduction  in  purchased  power  expense  over  the
remaining life of the agreement as compared to the existing agreement.

     At December 31, 1997, TNMP had various outstanding  commitments for take or
pay agreements,  including the fuel supply agreement  discussed above.  Detailed
below are the fixed and  determinable  portion of the  obligations  (amounts  in
millions):

                                  1998     1999    2000     2001      2002
                                ------   ------   ------   ------   -------

  Purchased power agreements    $ 65.7   $ 24.4   $ 24.1   $ 13.9   $  5.4
  Fuel supply agreements          30.2     30.2     30.2     30.2     30.2
                                ------   ------   ------   ------   ------
    Total                       $ 95.9   $ 54.6   $ 54.3   $ 44.1   $ 35.6
                                ======   ======   ======   ======   ======

<PAGE>
   Significant Customer

     TNMP has received  notification  that a significant  customer in Texas will
replace the power  previously  provided  by TNMP with power from a  cogeneration
plant built by a third party wholesale power producer. The plant is scheduled to
commence  operations in the first quarter of 1998. This customer  provided sales
of 629 GWH and annual  revenues of $28.3 million in 1997 ($10.1  million in base
revenues).  TNMP has an agreement with the wholesale  power producer to continue
providing  certain  services to the  cogeneration  plant. The base revenues from
this agreement are expected to be $0.5 million annually.

   Legal Actions

     TNMP is the  defendant  in a suit styled  Clear Lake  Cogeneration  Limited
Partnership vs.  Texas-New  Mexico Power Company,  pending in the 234th District
Court of Harris  County,  Texas.  This  lawsuit and a parallel  proceeding  also
pending  before  the  PUCT  arose  out  of  disagreements  between  the  limited
partnership  (Clear Lake) and TNMP over the interpretation of certain provisions
of  a  purchased  power   agreement  under  which  TNMP  purchases   cogenerated
electricity  from Clear Lake. Clear Lake disputes several charges for which TNMP
has billed  Clear  Lake,  alleges  that TNMP has failed to abide by  contractual
language  concerning several issues, and seeks in the lawsuit  approximately $15
million in damages. TNMP has moved for summary judgment in the lawsuit, which is
in the discovery phase.  TNMP is vigorously  contesting the lawsuit and the PUCT
proceeding.  The ultimate  disposition is not expected to have a material effect
on TNMP's results of operations.

     TNMP is the  defendant  in a suit  styled  Phillips  Petroleum  Company vs.
Texas-New  Mexico Power  Company,  pending in the 149th State  District Court of
Brazoria County,  Texas. The suit is based on events surrounding an interruption
of electricity to a petroleum  refinery and related  facilities that occurred in
May 1997.  Phillips is seeking  the  recovery  of  approximately  $36 million in
damages  arising  from the  interruption.  TNMP is  vigorously  contesting  this
lawsuit,  which is in the  discovery  phase.  The  ultimate  disposition  is not
expected to have a material effect on TNMP's results of operations.

     See Note 2 for  information  regarding  the rate filing with the Texas Gulf
Coast Cities,  the  transition to  competition  plan filed with the PUCT and the
fuel reconciliation with the PUCT.

     TNMP is involved in various  claims and other legal actions  arising in the
ordinary  course  of  business.  In the  opinion  of  management,  the  ultimate
disposition  of these matters will not have a material  adverse effect on TNMP's
and TNP's consolidated financial position or results of operations.

<PAGE>
<TABLE>
<CAPTION>
                     TNP ENTERPRISES, INC. AND SUBSIDIARIES
                 Selected Quarterly Consolidated Financial Data

     The following  selected  quarterly  consolidated  financial data for TNP is
unaudited,  and, in the opinion of TNP's  management,  is a fair  summary of the
results of operations for such periods:

                                                            March 31      June 30     Sept. 30       Dec. 31
                                                           ----------   ----------   ----------   ----------
                                                                (In thousands except per share amounts)
1997

<S>                                                        <C>          <C>          <C>          <C>       
Operating revenues........................................ $  126,847   $  133,338   $  189,339   $  135,710
Net operating income......................................     19,348       23,049       36,486       16,763
Income from continuing operations.........................      5,040        8,871       22,736        3,808
Net income................................................      4,110        7,431       20,694       (2,557)
Earnings per share of common stock from
   continuing operations..................................      0.38         0.68          1.73         0.29
Earnings per share of common stock *......................      0.31         0.56          1.57        (0.20)
Dividends per share of common stock....................... $    0.245   $    0.245   $    0.245   $     0.27

Weighted average common shares outstanding................     13,025       13,069       13,092       13,128

1996

Operating revenues........................................ $   99,827   $  122,020   $  157,453   $  123,437
Net operating income......................................     17,638       25,143       31,050       19,004
Income from continuing operations.........................        559        7,956       15,152        2,483
Net income................................................        562        7,831       14,292          368
Earnings per share of common stock from
   continuing operations *................................      0.05         0.72          1.37         0.19
Earnings per share of common stock *......................      0.05         0.71          1.29         0.03
Dividends per share of common stock....................... $    0.22    $    0.22    $    0.245   $    0.245

Weighted average common shares outstanding................     10,936       10,994       11,015       12,955

</TABLE>

*    The  individual  quarters  may not add to the yearly  totals  since the per
     share  amounts  are based  upon the  average  number of shares  outstanding
     during each quarter.

     Generally,   the   variations   between   quarters   reflect  the  seasonal
fluctuations  of TNMP's  business.  Also,  the fourth  quarter  of 1996  results
reflect a $1.3  million  after  tax  charge  for the  settlement  of  litigation
associated with the Series T FMB retirement in 1995.

 


Item 9.  CHANGES  IN  AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
         FINANCIAL DISCLOSURE.

     None.

<PAGE>
                                    PART III
                                    --------

Item 10.     DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

Directors

     The  information  required by this item is  incorporated  by  reference  to
"Election  of  Directors"  and  "Security  Ownership of  Management  and Certain
Beneficial Owners" in the proxy statement relating to the 1998 Annual Meeting of
Holders of TNP Common Stock.

Executive Officers

     The  information  set forth under  "Employees and  Executives" in Part I is
incorporated here by reference.

Item 11.     EXECUTIVE COMPENSATION.*

Item 12.     SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.*

Item 13.     CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.*

*    The  information  required  by Items  11,  12,  and 13 is  incorporated  by
     reference to "Compensation of Executive Officers," "Election of Directors -
     Direct  Compensation,"  and "Security  Ownership of Management  and Certain
     Beneficial  Owners"  in the proxy  statement  relating  to the 1998  Annual
     Meeting of Holders of TNP Common Stock.


<TABLE>
<CAPTION>
                                     PART IV
                                     -------

Item 14.     EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.

(a)    The following financial statements are filed as part of this report:

                                                                                                                Page
<S>                                                                                                              <C>
       Reports of Independent Public Accountants..........................................................       18
       Independent Auditors' Reports......................................................................       20

       TNP
       Consolidated Statements of Income, Three Years Ended December 31, 1997.............................       22
       Consolidated Statements of Cash Flows, Three Years Ended December 31, 1997.........................       23
       Consolidated Balance Sheets, December 31, 1997, and 1996...........................................       24
       Consolidated Statements of Capitalization, December 31, 1997, and 1996.............................       25
       Consolidated Statements of Common Shareholders' Equity, Three Years
         Ended December 31, 1997..........................................................................       26
 
       TNMP
       Consolidated Statements of Income, Three Years Ended December 31, 1997.............................       27
       Consolidated Statements of Cash Flows, Three Years Ended December 31, 1997.........................       28
       Consolidated Balance Sheets, December 31, 1997, and 1996...........................................       29
       Consolidated Statements of Capitalization, December 31, 1997, and 1996.............................       30
       Consolidated Statements of Common Shareholder's Equity, Three Years
         Ended December 31, 1997..........................................................................       31
       Notes to Consolidated Financial Statements.........................................................       32
       Selected Quarterly Consolidated Financial Data - TNP...............................................       43

(b)  No reports on Form 8-K were filed during the last quarter of 1997.

(c)  The Exhibit Index on pages 46 - 51 is incorporated here by reference.

(d)  All financial statement schedules are omitted, as the required  information
     is not  applicable  or the  information  is presented  in the  consolidated
     financial statements or related Notes.
</TABLE>


<PAGE>
                                   SIGNATURES

     Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities
Exchange Act of 1934, the Registrants  have duly caused this report to be signed
on their behalf by the undersigned, thereunto duly authorized.

            TNP ENTERPRISES, INC. AND TEXAS-NEW MEXICO POWER COMPANY


Date:  March 18, 1998                By:  \s\ Manjit. S. Cheema
                                       ---------------------------------------
                                       Manjit S. Cheema, Senior Vice President
                                       & Chief Financial Officer


     Pursuant to the  requirements of the Securities  Exchange Act of 1934, this
report  has  been  signed  below  by the  following  persons  on  behalf  of the
Registrants and in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
                                                            Title                                            Date
                                                            -----                                            ----


<S>                                                                                                          <C>
By  \s\ Kevern R. Joyce                               Chairman, President, & Chief Executive Officer         3/18/98
    ----------------------------                                                                             ------
    Kevern R. Joyce


By  \s\ Manjit. S. Cheema                             Senior Vice President & Chief Financial Officer        3/18/98
    ----------------------------                      of TNMP and TNP                                        ------
    Manjit S. Cheema

By  \s\ Scott Forbes                                  Controller of TNMP & TNP                               3/18/98
    ----------------------------                                                                             ------
    Scott Forbes


By  \s\ R. Denny Alexander                            Director                                               3/18/98
    ----------------------------                                                                             ------
    R. Denny Alexander


By  \s\ John A. Fanning                               Director                                               3/18/98
    ----------------------------                                                                             ------
    John A. Fanning


By  \s\ Sidney M. Gutierrez                           Director                                               3/18/98
    ----------------------------                                                                             ------
    Sidney M. Gutierrez


By  \s\ J. R. Holland, Jr.                            Director                                               3/18/98
    ----------------------------                                                                             ------
    J. R. Holland, Jr.


By  \s\ Harris L. Kempner, Jr.                        Director                                               3/18/98
    ----------------------------                                                                             ------
    Harris L. Kempner, Jr.


By  \s\ Dr. Carol D. Smith Surles                     Director                                               3/18/98
    ----------------------------                                                                             ------
    Dr. Carol D. Smith Surles


By  \s\ Larry G. Wheeler                              Director                                               3/18/98
    ----------------------------                                                                             ------
    Larry G. Wheeler


By  \s\ Dennis H. Withers                             Director                                               3/18/98
    ----------------------------                                                                             ------
    Dennis H. Withers

</TABLE>

<PAGE>
                                  EXHIBIT INDEX
                                  -------------

     Exhibits filed with this report are denoted by "*."

Exhibit
   No.                              Description
-------                             -----------


TNP incorporates the following exhibits by reference to the exhibits and filings
noted in parenthesis.

3(a) - Articles of Incorporation  and Amendments  through March 6, 1984 (Exhibit
       3(a) to TNP 1984 Form S-14, File No. 2-89800).

3(b) - Amendment to Articles of Incorporation  filed September 25, 1984 (Exhibit
       3(b) to TNP 1984 Form 10-K, File No. 1-8847).

3(c) - Amendment to Articles of  Incorporation  filed  August 29, 1985  (Exhibit
       3(a) to TNP 1985 Form 10-K, File No. 1-8847).

3(d) - Amendment to Articles of  Incorporation  filed June 2, 1986 (Exhibit 3(a)
       to TNP 1986 Form 10-K, File No. 1-8847).

3(e) - Amendment to Articles of  Incorporation  filed May 10, 1988 (Exhibit 3(e)
       to TNP 1988 Form 10-K, File No. 1-8847).

3(f) - Amendment to Articles of  Incorporation  filed May 10, 1988 (Exhibit 3(f)
       to TNP 1988 Form 10-K, File No. 1-8847).

3(g) - Amendment to Articles of  Incorporation  filed December 27, 1988 (Exhibit
       3(g) to TNP 1988 Form 10-K, File No. 1-8847).

3(h) - Bylaws,  as amended  (Exhibit  3(h) to joint  1994 Form  10-K,  File Nos.
       1-8847 and 2-97230).

4(u) - Rights  Agreement and Form of Right  Certificate,  as amended,  effective
       November 13, 1990 (Exhibit 2.1 to TNP Form 8-A, File No. 1-8847).

*23  - Independent   Public   Accountants'   Consent  -  Arthur  Andersen  LLP.
       Independent Auditors' Consent - KPMG Peat Marwick LLP.

*27  - Financial Data Schedule for TNP.

TNMP  incorporates  the  following  exhibits by  reference  to the  exhibits and
filings noted in parenthesis.

3(i) - Restated Articles of Incorporation. (Exhibit 3(i) to TNMP 1996 10-K, File
       No. 2-97230)

3(ii)- Bylaws,  as amended  November 15, 1994  (Exhibit  3(hh) to TNMP 1994 Form
       10-K, File No. 2-97230).

*27  - Financial Data Schedule for TNMP.

TNP and TNMP incorporate the following exhibits by reference to the exhibits and
filings noted in parenthesis.

4(a) - Indenture  of  Mortgage  and Deed of Trust  dated as of November 1, 1944
       (Exhibit 2(d) to Community  Public  Service Co. ("CPS") 1978 Form S-7, 
       File No. 2-61323).

4(b) - Seventh  Supplemental  Indenture dated as of May 1, 1963 (Exhibit 2(k) to
       CPS Form S-7, File No. 2-61323).

4(c) - Eighth Supplemental  Indenture dated as of July 1, 1963 (Exhibit 2(1), to
       CPS Form S-7, File No. 2-61323).

4(d) - Ninth Supplemental Indenture dated as of August 1, 1965 (Exhibit 2(m), to
       CPS Form S-7, File No. 2-61323).

4(e) - Tenth  Supplemental  Indenture  dated as of May 1, 1966 (Exhibit 2(n), to
       CPS Form S-7, File No. 2-61323).

4(f) - Eleventh  Supplemental  Indenture  dated as of  October 1, 1969  (Exhibit
       2(o), to CPS Form S-7, File No. 2-61323).

4(g) - Twelfth Supplemental  Indenture dated as of May 1, 1971 (Exhibit 2(p), to
       CPS Form S-7, File No. 2-61323).

4(h) - Thirteenth Supplemental Indenture dated as of July 1, 1974 (Exhibit 2(q),
       to CPS Form S-7, File No. 2-61323).

4(i) - Fourteenth  Supplemental  Indenture  dated as of March 1, 1975  (Exhibit
       2(r), to CPS Form S-7, File No. 2-61323).

4(j) - Fifteenth  Supplemental  Indenture dated as of September 1, 1976 (Exhibit
       2(e), File No. 2-57034).

4(k) - Sixteenth  Supplemental  Indenture  dated as of November 1, 1981 (Exhibit
       4(x), File No. 2-74332).

4(l) - Seventeenth  Supplemental Indenture dated as of December 1, 1982 
       (Exhibit 4(cc), File No. 2-80407).

4(m) - Eighteenth  Supplemental Indenture dated as of September 1, 1983 
       Exhibit (a) to Form 10-Q of TNMP for the quarter ended September 30, 
       1983, File No. 1-4756).

4(n) - Nineteenth  Supplemental Indenture dated as of May 1, 1985 (Exhibit 
       4(v), File No. 2-97230).

4(o) - Twentieth  Supplemental  Indenture dated as of July 1, 1987 (Exhibit 
       4(o) to Form  10-K of TNMP  for the  year  ended  December  31,  1987,
       File No. 2-97230).

4(p) - Twenty-First  Supplemental  Indenture  dated as of July 1, 1989 
       (Exhibit 4(p) to Form 10-Q of TNMP for the  quarter  ended June 30,  
       1989, File No. 2-97230).

4(q) - Twenty-Second  Supplemental  Indenture  dated  as of  January  15,  
       1992 (Exhibit  4(q) to Form 10-K of TNMP for the year ended  December 
       31, 1991, File No. 2-97230).

4(r) - Twenty-Third  Supplemental  Indenture  dated as of  September  15,  
       1993 (Exhibit  4(r) to Form 10-K of TNMP for the year ended  December 
       31, 1993, File No. 2-97230).

4(s) - Twenty-Fourth  Supplemental  Indenture  dated  as of  November  3,  
       1995 (Exhibit  4(s) to Form 10-K of TNMP for the year ended  December 
       31, 1993, File No. 2-97230).

4(t) - Twenty-Fifth  Supplemental  Indenture  dated as of  September  10,  
       1996 (Exhibit  4(t) to Form 10-Q of TNMP for the  quarter  ended  
       September 30, 1996, File No. 2-97230).

4(u) - Indenture and Security  Agreement for 12 1/2% Secured Debentures dated
       as of  January 15,  1992  (Exhibit  4(r) to TNMP  1991  Form  10-K,  
       File No. 2-97230).

4(v) - Indenture and Security  Agreement for 10 3/4% Secured Debentures dated
       as of  September  15,  1993  (Exhibit  4(t) to TNMP 1993 Form  10-K,  
       File No. 2-97230).

                          Contracts Relating to TNP One
                          -----------------------------

10(a)-   Fuel Supply  Agreement,  dated November 18, 1987,  between  Phillips 
         Coal Company and TNMP (Exhibit 10(j) to TNMP 1987 Form 10-K, File 
         No.2-97230).

10(a)1 - Amendment  No. 1, dated as of April 1, 1988,  to Fuel Supply  Agreement
         dated  November 18, 1987,  between  Phillips Coal Company and TNMP 
         (Exhibit 10(a)1 to Joint 1994 Form 10-K, File Nos. 1-8847 and 2-97230).

10(a)2 - Amendment  No. 2, dated as of November 29, 1994,  between  Walnut Creek
         Mining Company and TNMP, to Fuel Supply  Agreement dated November 18, 
         1987, between Phillips Coal Company and TNMP,  (Exhibit 10(a)2 to joint
         1994 Form 10-K, File Nos. 1-8847 and 2-97230).

10(b)-   Unit 1 First  Amended and  Restated  Project  Loan and Credit  
         Agreement, dated as of January 8, 1992 (the "Unit 1 Credit Agreement"),
         among TNMP, TGC,  certain banks (the "Unit 1 Banks") and Chase 
         Manhattan Bank (National Association),  as Agent for the Unit 1 Banks
         (the "Unit 1 Agent"), (Exhibit 10(c) to TNMP 1991 Form 10-K , File No.
         2-97230).

10(b)1 - Participation  Agreement,  dated as of January 8, 1992,  among certain
         banks, Participants, and the Unit 1 Agent (Exhibit 10(c)1 to TNMP 1991
         Form 10-K, File No. 2-97230).

10(b)2 - Amendment  No. 1, dated as of September  21, 1993, to the Unit 1 Credit
         Agreement (Exhibit 10(b)2 to TNMP 1993 Form 10-K , File No. 2-97230).

10(c)-   Assignment  and Security  Agreement,  dated as of January 8, 1992,  
         among TGC and the Unit 1 Agent  (Exhibit 10(d) to TNMP 1991 Form 10-K ,
         File No. 2-97230).

10(d)-   Amended  and  Restated  Subordination  Agreement,  dated as of October 
         1, 1988, among TNMP,  Continental  Illinois National Bank and Trust 
         Company of Chicago and the Unit 1  Agent(Exhibit  10(uu) to TNMP 1988 
         Form 10-K, File No. 2-97230).

10(e)-   Unit 1  Mortgage  and  Deed of  Trust,  dated  as of  December  1,  
         1987, (Exhibit 10(ee) to TNMP 1987 Form 10-K , File No. 2-97230).

10(e)1 - Supplemental  Unit 1 Mortgage and Deed of Trust executed on January 27,
         1992, (Exhibit 10(g)4 to TNMP 1991 Form 10-K , File No. 2-97230).

10(e)2 - First TGC Modification and Extension Agreement, dated as of January 24,
         1992,  among the Unit 1 Banks,  the Unit 1 Agent,  TNMP,  and TGC  
         (Exhibit 10(g)1 to TNMP 1991 Form 10-K, File No. 2-97230).

10(e)3 - Second TGC  Modification and Extension  Agreement,  dated as of January
         27, 1992, among the Unit 1 Banks, the Unit 1 Agent,  TNMP, and TGC 
         (Exhibit 10(g)2 to TNMP 1991 Form 10-K, File No. 2-97230).

10(e)4 - Third TGC Modification and Extension Agreement, dated as of January 27,
         1992,  among the Unit 1 Banks,  the Unit 1 Agent,  TNMP,  and TGC  
         (Exhibit 10(g)3 to TNMP 1991 Form 10-K, File No. 2-97230).

10(e)5 - Fourth TGC Modification and Extension Agreement,  dated as of September
         29, 1993, among the Unit 1 Banks, the Unit 1 Agent,  TNMP, and TGC 
         (Exhibit 10(f)5 to TNMP 1993 Form 10-K, File No. 2-97230).

10(e)6 - Fifth TGC Modification and Extension  Agreement,  dated as of September
         29, 1993, among the Unit 1 Banks, the Unit 1 Agent,  TNMP, and TGC 
         (Exhibit 10(f)6 to TNMP 1993 Form 10-K, File No. 2-97230).

10(f)-   Indemnity  Agreement,  dated  December 1, 1987, by  Westinghouse,  CE 
         and Zachry, (Exhibit 10(ff) to TNMP 1987 Form 10-K, File No. 2-97230).

10(g)-   Unit 1 Second  Lien  Mortgage  and Deed of Trust  dated as of December 
         1, 1987, (Exhibit 10(jj) to TNMP 1987 Form 10-K, File No. 2-97230).

10(g)1 - Correction Second Lien Mortgage and Deed of Trust, dated as of December
         1, 1987, (Exhibit 10(vv) to TNMP 1988 Form 10-K, File No. 2-97230).

10(g)2 - Second Lien  Mortgage  and Deed of Trust  Modification,  Extension  and
         Amendment  Agreement,  dated as of January 8, 1992 (Exhibit  10(i)2 to 
         TNMP 1991 Form 10-K, File No. 2-97230).

10(g)3 - TNMP Second Lien Mortgage Modification No. 2, dated as of September 21,
         1993 (Exhibit 10(h)3 to TNMP 1993 Form 10-K, File No. 2-97230).

10(h) -  Agreement  for  Conveyance  and  Partial  Release of Liens,  dated as 
         of December 1, 1987, by PFC and the Unit 1 Agent (Exhibit  10(kk) to 
         TNMP 1987 Form 10-K, File No. 2-97230).

10(i)-   Inducement  and  Consent  Agreement,  dated as of June 15,  1988,  
         among Phillips  Coal  Company,   Kiewit  Texas  Mining  Company,  TNMP,
         Phillips Petroleum  Company,  and Peter Kiewit Son's,  Inc.  (Exhibit
         10(nn) to TNMP 1988 Form 10-K, File No. 2-97230).

10(j)-   Assumption  Agreement,  dated as of October 1, 1988,  by TGC, in favor 
         of certain banks,  the Unit 1 Agent,  and the  Depositary,  as defined 
         therein (Exhibit 10(ww) to TNMP 1988 Form 10-K, File No. 2-97230).

10(k)-   Guaranty,  dated as of October 1, 1988, by TNMP of TGC obligations  
         under Unit 1 Credit  Agreement  (Exhibit  10(xx)  to TNMP 1988 Form 
         10-K of TNMP, File No. 2-97230).

10(l)-   First  Amended and  Restated  Facility  Purchase  Agreement,  dated as 
         of January  8, 1992,  between  TNMP and TGC  (Exhibit  10(n) to TNMP 
         1991 Form 10-K, 1991, File No. 2-97230).

10(m)-   Operating  Agreement,  dated as of October 1, 1988,  between TNMP and
         TGC (Exhibit 10(zz) to TNMP 1988 Form 10-K, File No. 2-97230).

10(n)-   Unit 2 First  Amended and  Restated  Project  Loan and Credit  
         Agreement, dated as of January 8, 1992 (the "Unit 2 Credit Agreement"),
         among  TNMP, TGC II,  certain banks (the "Unit 2  Banks") and The Chase
         Manhattan  Bank (National Association),  as Agent for the Unit 2 Banks 
         (the "Unit 2 Agent") (Exhibit 10(q) to TNMP 1991 Form 10-K, File No. 
         2-97230).

10(n)1 - Amendment  No. 1, dated as of September  21, 1993, to the Unit 2 Credit
         Agreement (Exhibit 10(o)1 to TNMP 1993 Form 10-K, File No. 2-97230).

10(o)-   Assignment  and Security  Agreement,  dated as of January 8, 1992,  
         among TGC II and the Unit 2 Agent (Exhibit 10(r) to TNMP 1991 Form 
         10-K, File No. 2-97230).

10(p)-   Assignment and Security  Agreement,  dated as of October 1, 1988, by 
         TNMP to the Unit 2 Agent  (Exhibit  10(jjj)  to TNMP  1988 Form  10-K, 
         File No. 2-97230).

10(q)-   Subordination  Agreement,  dated as of  October  1,  1988, among  TNMP,
         Continental  Illinois  National Bank and Trust Company of Chicago,  and
         the Unit 2 Agent (Exhibit 10(mmm) to TNMP 1988 Form 10-K, File No. 
         2-97230).

10(r)-   Unit 2 Mortgage  and Deed of Trust  dated as of October 1, 1988  
         (Exhibit 10(uuu) to TNMP 1988 Form 10-K, File No. 2-97230).

10(r)1 - First TGC II Modification and Extension Agreement,  dated as of January
         24,  1992,  among  the Unit 2 Banks,  the  Unit 2 Agent,  TNMP,  and 
         TGC II (Exhibit 10(u)1 to TNMP 1991 Form 10-K, File No. 2-97230).

10(r)2 - Second TGC II Modification and Extension Agreement, dated as of January
         27,  1992,  among  the  Unit 2 Banks,  the  Unit 2  Agent,  TNMP and 
         TGC II (Exhibit 10(u)2 to TNMP 1991 Form 10-K, File No. 2-97230).

10(r)3 - Third TGC II Modification and Extension Agreement,  dated as of January
         27,  1992,  among  the Unit 2 Banks,  the  Unit 2 Agent,  TNMP,  and 
         TGC II (Exhibit 10(u)3 to TNMP 1991 Form 10-K, File No. 2-97230).

10(r)4 - Fourth  TGC II  Modification  and  Extension  Agreement,  dated  as of
         September 29, 1993, among the Unit 2 Banks, the Unit 2 Agent, TNMP, and
         TGC II (Exhibit 10(s)4 to TNMP 1993 Form 10-K, File No. 2-97230).

10(r)5 - Fifth TGC II Modification and Extension Agreement, dated as of June 15,
         1994, among the Unit 2 Banks,  the Unit 2 Agent,  TNMP, and TGC II 
         (Exhibit 10(s)5  to TNMP  Form  10-Q  for  quarter  ended  June 30,  
         1994,  File No. 2-97230).

10(s)-   Release and Waiver of Liens and  Indemnity  Agreement,  dated  October 
         1, 1988, by  Westinghouse,  CE, and Zachry (Exhibit  10(vvv) to TNMP 
         1988 Form 10-K, File No. 2-97230).

10(t)-   Second  Lien  Mortgage  and Deed of Trust,  dated as of  October 1, 
         1988, (Exhibit 10(www) to TNMP 1988 Form 10-K, File No. 2-97230).

10(t)1 - Second Lien  Mortgage  and Deed of Trust  Modification,  Extension  and
         Amendment  Agreement,  dated as of January 8, 1992, (Exhibit 10(w)1 to 
         TNMP 1991 Form 10-K, File No. 2-97230).

10(t)2 - TNMP Second Lien Mortgage Modification No. 2, dated as of September 21,
         1993, (Exhibit 10(u)2 to TNMP 1993 Form 10-K, File No. 2-97230).

10(u)-   Intercreditor and Nondisturbance Agreement,  dated as of October 1,
         1988, among PFC, Texas PFC, Inc., TNMP,  certain  creditors,  as 
         defined therein, and the Collateral  Agent, as defined therein (Exhibit
         10(xxx) to TNMP 1988 Form 10-K, File No. 2-97230).

10(u)1 - Amendment  No. 1, dated as of January 8, 1992,  to  Intercreditor  and
         Nondisturbance Agreement,  (Exhibit 10(x)1 to TNMP 1991 Form 10-K, File
         No. 2-97230).

10(u)2 - Amendment No. 2, dated as of September 21, 1993, to  Intercreditor  and
         Nondisturbance  Agreement,  (Exhibit 10(v)2 to TNMP 1993 Form 10-K of 
         TNMP, File No. 2-97230).

10(v)-   Grant of Reciprocal  Easements and Declaration of Covenants  Running 
         with the Land, dated October 1, 1988,  between PFC and Texas PFC, Inc.
         (Exhibit 10(yyy) to TNMP 1988 Form 10-K, File No. 2-97230).

10(w)-   Non-Partition  Agreement,  dated as of May 30, 1990, among TNMP, TGC, 
         and the Unit 1 Agent (Exhibit  10(ss) to TNMP 1990 Form 10-K of TNMP,  
         File No. 2-97230).

10(x)-   Assumption  Agreement,  dated as of May 31,  1991,  by TGC II in favor 
         of certain banks,  the Unit 2 Agent,  and the  Depositary,  as defined 
         therein (Exhibit 10(kkk) to Amendment No. 1 to File No. 33-41903).

10(y)-   Guaranty,  dated as of May 31, 1991,  by TNMP,  for TGC II  obligations
         under the Unit 2 Credit  Agreement  (Exhibit  10(lll) to Amendment No. 
         1 to File No. 33-41903).

10(z)-   First  Amended and  Restated  Facility  Purchase  Agreement,  dated as 
         of January 8, 1992, between TNMP, and TGC II (Exhibit 10(dd) to TNMP 
         1991 Form 10-K, File No. 2-97230).

10(z)1 - Amendment  No. 1 to the Unit 2 First  Amended  and  Restated  Facility
         Purchase Agreement, dated as of September 21, 1993, between TNMP and 
         TGC II (Exhibit 10(aa)1 to TNMP 1993 Form 10-K, File No. 2-97230).

10(aa) - Operating Agreement,  dated as of May 31, 1991, between TNMP and TGC II
         (Exhibit 10(nnn) to Amendment No. 1 to File No. 33-41903).

10(bb) - Non-Partition Agreement,  dated as of May 31, 1991, among TNMP, TGC II,
         and the  Unit 2 Agent  (Exhibit  10(ppp)  to  Amendment  No.  1 to File
         No. 33-41903).

                          Contracts Relating to TNP One
                          -----------------------------

10(cc) - Revolving  Credit  Facility  Agreement,  dated as of November 3, 1995,
         among TNMP, certain lenders, and Chemical Bank, as Administrative Agent
         and Collateral  Agent.  (Exhibit  10(cc) to Form 10-K of TNP and TNMP 
         for 1996, File Nos. 1-8847 and 2-97230).

10(cc)1- Form of Guarantee and Pledge  Agreement,  dated as of November 3, 1995,
         between  TGC II, and  Chemical  Bank,  as  collateral  agent  (Exhibit 
         D to Revolving Credit Facility Agreement).  (Exhibit 10(cc)1 to Form 
         10-K of TNP and TNMP for 1996, File Nos. 1-8847 and 2-97230).

10(cc)2- Form of Bond Agreement,  dated as of November 3, 1995, between TNMP and
         Chemical Bank, as Collateral  Agent (Exhibit E to Revolving Credit 
         Facility Agreement).  (Exhibit  10(cc)2 to Form 10-K of TNP and TNMP 
         for 1996,  File Nos. 1-8847 and 2-97230).

10(cc)3- Form of Note Pledge  Agreement,  dated as of November 3, 1995,  between
         TNMP and Chemical Bank, as collateral  agent (Exhibit F to Revolving 
         Credit Facility  Agreement).  (Exhibit  10(cc)3  to Form  10-K of TNP 
         and TNMP for 1996, File Nos. 1-8847 and 2-97230).

10(cc)4- Form of Sixth TGC II Modification and Extension Agreement,  dated as of
         November 3, 1995,  among the Unit 2 Banks,  The Chase  Manhattan  Bank,
         as agent,  TNMP,  and  TGC II  (Exhibit  H to the  Revolving  Credit 
         Facility Agreement).  (Exhibit  10(cc)4 to Form 10-K of TNP and TNMP 
         for 1996,  File Nos. 1-8847 and 2-97230).

10(cc)5- Form of Second Lien Mortgage and Deed of Trust Modification,  Extension
         and  Amendment  Agreement No. 3, dated as of November 3, 1995 (Exhibit 
         I to the Revolving Credit Facility Agreement).  (Exhibit 10(cc)5 to 
         Form 10-K of TNP and TNMP for 1996, File Nos. 1-8847 and 2-97230).

10(cc)6- Form of  Assignment  and Amendment  Agreement,  dated as of November 3,
         1995,  among TNMP, TGC II, and Chemical Bank, as  administrative  agent
         and collateral  agent (Exhibit J to the Revolving  Credit Facility  
         Agreement). (Exhibit  10(cc)6 to Form 10-K of TNP and TNMP for 1996,  
         File Nos.  1-8847 and 2-97230).

10(cc)7- Form of  Assignment  of TGC II Mortgage  Lien,  dated as of November 3,
         1995, by The Chase  Manhattan  Bank as agent to Chemical Bank (Exhibit 
         K to the Revolving Credit Facility Agreement).  (Exhibit 10(cc)7 to 
         Form 10-K of TNP and TNMP for 1996, File Nos. 1-8847 and 2-97230).

10(cc)8- Form of Collateral Transfer of Notes, Rights and Interests, dated as of
         November 3, 1995,  between TNMP and Chemical Bank, as Administrative  
         Agent and as  Collateral  Agent  (Exhibit  L to  the  Revolving  Credit
         Facility Agreement).  (Exhibit  10(cc)8 to Form 10-K of TNP and TNMP 
         for 1996,  File Nos. 1-8847 and 2-97230).

10(cc)9- Form of Assignment of Second Lien Mortgage and Deed of Trust,  dated as
         of  November 3, 1995,  between  the Chase  Manhattan  Bank,  as Agent, 
         and Chemical  Bank,  as  agent  (Exhibit  M to the  Revolving  Credit  
         Facility Agreement).  (Exhibit  10(cc)9 to Form 10-K of TNP and TNMP 
         for 1996,  File Nos. 1-8847 and 2-97230).

10(cc)10-Form of Collateral Transfer of Notes,  Rights and Interests,  dated as
         of November 3, 1995,  between TNMP and  Chemical  Bank,  as  
         Administrative Agent and as Collateral  Agent (Exhibit N to the 
         Revolving  Credit Facility Agreement).  (Exhibit  10(cc)10 to Form 10-K
         of TNP and TNMP for 1996, File Nos. 1-8847 and 2-97230).

10(cc)11-Form of  Amendment  No.  1,  dated as of  November  3,  1995,  to the
         Assignment and Security  Agreement  between TNMP,  and The Chase  
         Manhattan Bank, as agent  (Exhibit O to the  Revolving  Credit  
         Agreement).  (Exhibit 10(cc)11  to Form  10-K of TNP and TNMP for 1996,
         File  Nos.  1-8847  and 2-97230).

                             Power Supply Contracts
                             ----------------------

10(dd) - Contract dated May 12, 1976,  between TNMP and Houston Lighting & Power
         Company (Exhibit 5(a), File No. 2-69353).

10(dd)1- Amendment,  dated January 4, 1989, to contract between TNMP and Houston
         Lighting & Power Company (Exhibit 10(cccc) to TNMP 1988 Form 10-K, File
         No.2-97230).

10(ee) - Amended and Restated Agreement for Electric Service dated May 14, 1990,
         between TNMP and Texas Utilities  Electric  Company (Exhibit 10(vv) to 
         TNMP 1990 Form 10-K, File No. 2-97230).

10(ee)1- Amendment,  dated April 19, 1993, to Amended and Restated Agreement for
         Electric  Service,  between  TNMP  and  Texas  Utilities  Electric  
         Company (Exhibit 10(ii)1  to 1993  Form  S-2,  Registration  Statement,
         File  No. 33-66232).

10(ff) - Contract  dated April 27, 1977,  between TNMP and West Texas  Utilities
         Company,  as amended  (Exhibit 10(e) of Form 8 applicable to TNMP 1986 
         Form 10-K, File No. 2-97230).

10(gg) - Contract  dated  April 29,  1987,  between  TNMP and El Paso  Electric
         Company  (Exhibit  10(f) of Form 8 applicable to TNMP 1986 Form 10-K,  
         File No. 2-97230).

10(hh) - Amended and Restated  Contract for  Electric  Service,  dated April 29,
         1988,  between  TNMP and Public  Service  Company  of New  Mexico  
         (Exhibit 10(zz)3 to Amendment No. 1 to File No. 33-41903).

10(ii) - Contract  dated  December  8,  1981,  between  TNMP and SPS as amended
         (Exhibit  10(h) of Form 8  applicable  to TNMP  1986  Form  10-K,  File
         No. 2-97230).

10(ii)1- Amendment,  dated  December 12, 1988, to contract  between TNMP and SPS
         (Exhibit 10(llll) to TNMP 1988 Form 10-K, File No. 2-97230).

10(ii)2- Amendment,  dated  December 12, 1990, to contract  between TNMP and SPS
         (Exhibit 19(t) to TNMP 1990 Form 10-K, File No. 2-97230).

10(jj) - Contract dated August 31, 1983,  between TNMP and Capitol  Cogeneration
         Company,  Ltd.  (Exhibit 10(i) of Form 8 applicable to TNMP 1986 Form 
         10-K, File No. 2-97230).

10(jj)1- Agreement  Substituting  a Party,  dated May 3,  1988,  among  Capitol
         Cogeneration Company, Ltd., Clear Lake Cogeneration Limited Partnership
         and TNMP (Exhibit 10(nnnn) to TNMP 1988 Form 10-K, File No. 2-97230).

10(jj)2- Letter  Agreements,  dated May 30, 1990,  and August 28, 1991,  between
         Clear Lake  Cogeneration  Limited  Partnership and TNMP (Exhibit 
         10(oo)2 to TNMP 1992 Form 10-K, File No. 2-97230).

10(jj)3- Notice of Extension Letter,  dated August 31, 1992,  between Clear Lake
         Cogeneration  Limited  Partnership  and TNMP (Exhibit  10(oo)3 to TNMP 
         1992 Form 10-K, File No. 2-97230).

10(jj)4- Scheduling  Agreement,  dated  September 15, 1992,  between Clear Lake
         Cogeneration  Limited  Partnership  and TNMP (Exhibit  10(oo)4 to TNMP 
         1992 Form 10-K, File No. 2-97230).

10(kk) - Interconnection  Agreement between TNMP and Plains Electric  Generation
         and  Transmission  Cooperative,  Inc. dated July 19, 1984 (Exhibit 
         10(j) of Form 8 applicable to TNMP 1986 Form 10-K, File No. 2-97230).

10(ll) - Interchange  Agreement  between TNMP and El Paso Electric Company dated
         April 29, 1987 (Exhibit  10(l) of Form 8 applicable to TNMP 1986 Form
         10-K, File No. 2-97230).

10(mm) - Amendment  No. 1, dated  November 21, 1994,  to  Interchange  Agreement
         between TNMP and El Paso Electric  Company  (Exhibit  10(nn)1 to joint 
         1994 Form 10-K, File Nos. 1-8847 and 2-97230).

10(nn) - DC Terminal  Participation  Agreement between TNMP and El Paso Electric
         Company  dated  December  8,  1981  as  amended  (Exhibit  10(m)  of 
         Form 8 applicable to TNMP 1986 Form 10-K, File No. 2-97230).

10(oo) - Agreement  for Purchase and Sale of Energy  effective as of May 1, 1996
         among TNMP, Amoco Chemical Company and Amoco Oil Company(Exhibit 10 
         (pp) to joint 1997 Form 10-K, File Nos. 1-8847 and 2-97230).

10(pp) - Agreement  dated  December  30,  1994  between  TNMP and Union  Carbide
         Corporation ("UCC") for Purchase of Capacity and Energy from UCC 
         (Exhibit 10(qq) to joint 1997 Form 10-K, File Nos. 1-8847 and 2-97230).

*10(qq)  Letter  agreement  dated  November  24,  1997  between  TNMP and  Texas
         Utilities Electric Company.

                              Management Contracts
                              --------------------

*10(rr)- Form of TNMP  Executive  Agreement  for  Severance  Compensation  Upon
         Change in Control and schedule of substantially identical agreements.

10(ss) - Agreement  dated March 25, 1994  between  Kevern Joyce and TNP and TNMP
         (Exhibit  10(tt) to TNP and TNMP  1994 Form  10-Q,  File  Nos.  1-8847 
         and 2-97230).

*10(tt)- Amendment  dated  February 16, 1998 to Agreement  dated March 25, 1994
         between Kevern Joyce and TNP and TNMP.

*10(uu)- Agreement dated February 16, 1998 between John Edwards and TNMP.

*10(vv)- Agreement dated February 16, 1998 between Ralph S. Johnson and TNMP.

*10(ww)- Form of TNP  Incentive  Compensation  Award  Agreement and schedule of
         substantially identical agreements.
 
*21  -   Subsidiaries of the Registrants.




<PAGE>
                                                                 Exhibit 21
                                                                 ----------
                   SUBSIDIARIES OF THE REGISTRANTS 
                   -------------------------------


Name                                       State of Incorporation
----                                       ----------------------

TNP
---

Texas-New Mexico Power Company                     Texas

Facility Works, Inc.                               Texas

TNP Operating Company                              Texas





TNMP
----

Texas Generating Company                           Texas

Texas Generating Company II                        Texas


<PAGE>
                                                                   Exhibit 23
 
                     TNP ENTERPRISES, INC. AND SUBSIDIARIES
                     --------------------------------------

                     Independent Public Accountants' Consent
                     ---------------------------------------

The Board of Directors
TNP Enterprises, Inc.:

As independent public accountants, we hereby consent to the incorporation of our
reports  included in this Form 10-K,  into TNP  Enterprises,  Inc.'s  previously
filed  Registration  Statements on Form S-8 (File nos. 2-93265 and 33-58897) and
Registration Statement on Form S-3 (No. 333-17835)


                                                      Arthur Andersen LLP


Fort Worth, Texas
March 18, 1998




<PAGE>
                                                                 Exhibit 23
 
                     TNP ENTERPRISES, INC. AND SUBSIDIARIES
                     --------------------------------------

                          Independent Auditors' Consent
                          -----------------------------

The Board of Directors
TNP Enterprises, Inc.:

We consent to  incorporation  by reference in the  Registration  Statement  (No.
333-17835)  on Form S-3 and in the  Registration  Statements  (Nos.  2-93265 and
33-58897) on Form S-8 of TNP  Enterprises,  Inc. of our report dated January 30,
1997, relating to the consolidated balance sheet and statement of capitalization
of TNP  Enterprises,  Inc. and  subsidiaries  as of December  31, 1996,  and the
related consolidated statements of income, common shareholders' equity, and cash
flows for each of the years in the  two-year  period  ended  December  31, 1996,
which report appears in the December 31, 1997, annual report on Form 10-K of TNP
Enterprises, Inc.

Our report refers to a change in the method of accounting for operating revenues
in 1995.


                                                        KPMG Peat Marwick LLP


Fort Worth, Texas
March 18, 1998