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

                                    FORM 10-Q

(Mark One)
(X)      COMBINED QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
         SECURITIES EXCHANGE ACT OF 1934
                  For the quarterly period ended June 30, 1998

                                     or

(  )     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES 
         EXCHANGE ACT OF 1934
                  For the transition period from           to


--------------------------------------------------------------------------------
                         Commission File Number: 1-8847

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

        Texas                                           75-1907501
(State of incorporation)              (I.R.S. employer identification number)

        4100 International Plaza, P. O. Box 2943, Fort Worth, Texas 76113
              (Address and zip code of principal executive offices)

         Registrant's telephone number, including area code 817-731-0099

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 \ \

TNP Enterprises, Inc. had 13,262,850 shares of common stock outstanding as of 
August 12, 1998.

--------------------------------------------------------------------------------
                         Commission File Number: 2-97230

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

        Texas                                           75-0204070
(State of incorporation)              (I.R.S. employer identification number)

        4100 International Plaza, P. O. Box 2943, Fort Worth, Texas 76113
              (Address and zip code of principal executive offices)

         Registrant's telephone number, including area code 817-731-0099

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 \ \

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


<PAGE>


                     TNP Enterprises, Inc. And Subsidiaries
                 Texas New-Mexico Power Company And Subsidiaries
   Combined Quarterly Report on Form 10-Q for the period ended June 30, 1998

         This Combined  Quarterly Report on Form 10-Q is filed separately by TNP
Enterprises,  Inc., and Texas-New  Mexico Power Company.  Texas-New Mexico Power
Company makes no representation  as to information  relating to TNP Enterprises,
Inc., except as it may relate to Texas-New Mexico Power Company, or to any other
affiliate or subsidiary of TNP Enterprises, Inc.

                                TABLE OF CONTENTS

                          PART I. FINANCIAL INFORMATION

Item 1.    Financial Statements.

     TNP Enterprises, Inc. (TNP) and Subsidiaries:

       Consolidated Statements of Income
       Three and Six Month Periods Ended June 30, 1998, and 1997           3

       Consolidated Statements of Cash Flows
       Six Month Periods Ended June 30, 1998, and 1997                     4

       Consolidated Balance Sheets
       June 30, 1998, and December 31, 1997                                5

       Texas-New Mexico Power Company (TNMP) and Subsidiaries:

       Consolidated Statements of Income
       Three and Six Month Periods Ended June 30, 1998, and 1997           6

       Consolidated Statements of Cash Flows
       Six Month Periods Ended June 30, 1998, and 1997                     7

       Consolidated Balance Sheets
       June 30, 1998, and December 31, 1997                                8

     Notes to Consolidated Financial Statements                            9

  Item 2.  Management's Discussion and Analysis of Financial Condition
           and Results of Operations.                                     10


                                        PART II. OTHER INFORMATION

  Item 1.  Legal Proceedings.                                             14

  Item 4.  Submission of Matters to a Vote of Security Holders.           14

  Item 6.  Exhibits and Reports on Form 8-K.                              14
           (a)   Exhibit Index                                            14
           (b)   Reports on Form 8-K                                      14
  Statement Regarding Forward Looking Information                         14
  Signature page                                                          15

<PAGE>
<TABLE>
<CAPTION>



                     TNP ENTERPRISES, INC. AND SUBSIDIARIES
                    CONSOLIDATED STATEMENTS OF INCOME (LOSS)
                                   (Unaudited)



                                                                       Three Months Ended                 Six Months Ended
                                                                            June 30,                          June 30,
                                                               ---------------------------------  ---------------------------------
                                                                    1998             1997              1998              1997
                                                               ---------------  ----------------  ---------------   ---------------
                                                                               (In thousands except per share amounts)  
<S>                                                            <C>              <C>               <C>               <C>   
OPERATING REVENUES                                             $      143,951   $       133,338   $      269,350    $      260,185
                                                               ---------------  ----------------  ---------------   ---------------
OPERATING EXPENSES:
  Purchased power                                                      65,245            54,873          122,755           113,220
  Fuel                                                                 10,325             9,884           18,284            19,853
  Other operating and general expenses                                 26,939            23,156           48,908            42,894
  Depreciation                                                         10,179             9,742           20,056            19,369
  Taxes other than income taxes                                         8,851             7,965           16,581            15,904
  Income taxes                                                          3,720             4,669            6,086             6,548
                                                               ---------------  ----------------  ---------------   ---------------
       Total operating expenses                                       125,259           110,289          232,670           217,788
                                                               ---------------  ----------------  ---------------   ---------------
NET OPERATING INCOME                                                   18,692            23,049           36,680            42,397
                                                               ---------------  ----------------  ---------------   ---------------
OTHER INCOME:
  Other income and deductions, net                                        104               255              468               459
  Income taxes                                                            221                24               55                23
                                                               ---------------  ----------------  ---------------   ---------------
       Other income, net of taxes                                         325               279              523               482
                                                               ---------------  ----------------  ---------------   ---------------
INCOME BEFORE INTEREST CHARGES                                         19,017            23,328           37,203            42,879
                                                               ---------------  ----------------  ---------------   ---------------
INTEREST CHARGES:
  Interest on long-term debt                                           12,541            13,408           25,039            26,914
  Other interest and amortization of debt-related costs                 1,055             1,049            2,117             2,054
                                                               ---------------  ----------------  ---------------   ---------------
       Total interest charges                                          13,596            14,457           27,156            28,968
                                                               ---------------  ----------------  ---------------   ---------------
INCOME FROM CONTINUING OPERATIONS                                       5,421             8,871           10,047            13,911

Loss from discontinued operations, net of taxes (Note 2)                6,188             1,440            6,188             2,370
                                                               ---------------  ----------------  ---------------   ---------------
NET INCOME (LOSS)                                                        (767)            7,431            3,859            11,541
Dividends on preferred stock                                               38                40               76                80
                                                               ---------------  ----------------  ---------------   ---------------
INCOME (LOSS) APPLICABLE TO COMMON STOCK                                 (805)            7,391            3,783            11,461

                                                               ===============  ================  ===============   ===============
EARNINGS (LOSS) PER SHARE OF COMMON STOCK:
  Earnings from continuing operations                          $         0.41   $          0.67   $         0.76    $         1.07
  Loss from discontinued nonregulated operations                        (0.47)            (0.11)           (0.47)            (0.19)
                                                               ===============  ================  ===============   ===============
  EARNING PER SHARE                                            $        (0.06)  $          0.56   $         0.29    $         0.88
                                                               ===============  ================  ===============   ===============
DIVIDENDS PER SHARE OF COMMON STOCK                            $         0.27   $         0.245   $         0.54    $         0.49
                                                               ===============  ================  ===============   ===============

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING                             13,240            13,069           13,214            13,047
                                                               ===============  ================  ===============   ===============

</TABLE>



The  accompanying  notes are an integral  part of these  consolidated  financial
statements.

<PAGE>
<TABLE>
<CAPTION>

                                           TNP ENTERPRISES, INC. AND SUBSIDIARIES
                                            CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                         (Unaudited)


                                                                                             Six Months Ended
                                                                                                 June 30,                   
                                                                                 ----------------------------------------
                                                                                        1998                  1997            
                                                                                  -----------------    -------------------
                                                                                                  (In thousands)            
<S>                                                                               <C>                  <C>  
CASH FLOWS FROM OPERATING ACTIVITIES:
  Cash received from customers                                                     $       279,467     $          263,391      
  Purchased power                                                                         (119,963)              (110,338)    
  Fuel costs paid                                                                          (17,549)               (18,513)  
  Cash paid for payroll and to other suppliers                                             (64,098)               (61,068) 
  Interest paid, net of amounts capitalized                                                (26,162)               (31,875)
  Income taxes paid                                                                         (1,788)                  (705)  
  Other taxes paid                                                                         (21,496)               (21,237) 
  Other operating cash receipts and payments, net                                              506                  1,126   
                                                                                  -----------------    ------------------- 

NET CASH PROVIDED BY OPERATING ACTIVITIES                                                   28,917                 20,781   
                                                                                  -----------------    ------------------- 

CASH FLOWS FROM INVESTING ACTIVITIES:
  Additions to utility plant                                                               (17,066)               (13,068)
  Additions to other property and nonregulated investments                                     300                 (2,015)  
                                                                                  -----------------    ------------------- 

NET CASH USED IN INVESTING ACTIVITIES                                                      (16,766)               (15,083)    
                                                                                  -----------------    -------------------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Dividends paid on preferred and common stocks                                             (7,221)                (6,482)     
  Borrowings under revolving credit facilities                                                  -                 108,000 
  Common stock issuances                                                                     3,957                  2,633     
  Redemptions:
     Other long-term debt                                                                     (104)                   (61)
     Obligation - FWI investment aquisition                                                     -                    (300) 
     First mortgage bonds                                                                       -                (100,800) 
                                                                                  -----------------    ------------------- 

NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES                                        (3,368)                  2,990     
                                                                                  -----------------    -------------------

NET CHANGE IN CASH AND CASH EQUIVALENTS                                                      8,782                  8,688 
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                                            15,877                  8,387   
                                                                                  -----------------    -------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD                                        $         24,659     $           17,075   
                                                                                  =================    =================== 

RECONCILIATION OF NET INCOME TO NET
     CASH PROVIDED BY OPERATING ACTIVITIES:
  Net income                                                                      $          3,859     $           11,541  

activities:
     Depreciation                                                                           20,056                 19,447       
     Amortization of debt-related costs and other deferred charges                           1,881                  1,926 
     Allowance for borrowed funds used during construction                                     (15)                   (23) 
     Deferred income taxes                                                                   2,382                  2,727 
     Investment tax credits                                                                   (363)                    19 

Cash flows impacted by changes in current assets and liabilities:
     Deferred purchased power and fuel costs                                                  (223)                 1,540 
     Accrued interest                                                                         (794)                (4,810)
     Accrued taxes                                                                          (4,837)                (3,472)
     Accounts payable                                                                        4,424                  3,570 
     Revenues subject to refund                                                              5,416                     -
     Changes in other current assets and liabilities                                        (2,386)               (10,996)
Other, net                                                                                    (483)                  (688)   
                                                                                  -----------------    -------------------  

NET CASH PROVIDED BY OPERATING ACTIVITIES                                         $         28,917     $           20,781  
                                                                                  =================    ===================   



</TABLE>

The  accompanying  notes are an integral  part of these  consolidated  financial
statements.

<PAGE>
<TABLE>
<CAPTION>

                     TNP ENTERPRISES, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS

                                                                              June 30, 1998                  December 31,
                                                                               (Unaudited)                       1997
                                                                          -----------------------         -------------------
                                                                                             (In thousands)
<S>                                                                       <C>                             <C>
ASSETS

UTILITY PLANT:
  Electric plant                                                                   $   1,240,461                   1,235,257
  Construction work in progress                                                            4,540                       2,281
                                                                          -----------------------         -------------------
            Total                                                                      1,245,001                   1,237,538
  Less accumulated depreciation                                                          323,613                     314,270
                                                                          -----------------------         -------------------
            Net utility plant                                                            921,388
                                                                                                                     923,268
                                                                          -----------------------         -------------------

OTHER PROPERTY AND INVESTMENTS, at cost                                                    5,258                       5,704
                                                                          -----------------------         -------------------

CURRENT ASSETS:
  Cash and cash equivalents                                                               24,659                      15,877
  Accounts receivable                                                                      8,395                       8,585
  Inventories, at lower of average cost or market:
       Fuel                                                                                  713                         483
       Materials and supplies                                                              4,424                       4,440
  Deferred purchased power and fuel costs                                                  2,793                       2,570
  Accumulated deferred income taxes                                                        1,346                       1,707
  Other current assets                                                                     1,304                         982
                                                                          -----------------------         -------------------
            Total current assets                                                          43,634                      34,644
                                                                          -----------------------         -------------------
DEFERRED CHARGES                                                                          24,950                      28,310
                                                                          -----------------------         -------------------
                                                                                  $      995,230            $        991,926
                                                                          =======================         ===================
CAPITALIZATION AND LIABILITIES

CAPITALIZATION:
  Common shareholders' equity:
       Common stock - no par value per share.  Authorized 50,000,000
         shares; issued 13,255,215 shares in 1998 and 13,132,821 in 1997          $      191,120            $        187,163
       Retained earnings                                                                 107,716                     111,078
                                                                          -----------------------         -------------------
            Total common shareholders' equity                                            298,836                     298,241

  Preferred stock                                                                          3,240                       3,240
  Long-term debt, less current maturities                                                347,936                     478,041
                                                                          -----------------------         -------------------
            Total capitalization                                                         650,012                     779,522
                                                                          -----------------------         -------------------
CURRENT LIABILITIES:
  Current maturities of long-term debt                                                   130,100                         100
  Accounts payable                                                                        31,459                      27,035
  Accrued interest                                                                         6,529                       7,323
  Accrued taxes                                                                           12,752                      17,589
  Customers' deposits                                                                      3,620                       3,249
  Revenues subject to refund (Note 3)                                                      5,416                         -
  Other current liabilities                                                               24,254                      26,665
                                                                          -----------------------         -------------------
            Total current liabilities                                                    214,130                      81,961
                                                                          -----------------------         -------------------

REGULATORY TAX LIABILITIES                                                                 3,216                       6,318
ACCUMULATED DEFERRED INCOME TAXES                                                         89,248                      85,250
ACCUMULATED DEFERRED INVESTMENT TAX CREDITS                                               20,700                      21,149
DEFERRED CREDITS                                                                          17,924                      17,726
COMMITMENTS AND CONTINGENCIES (Notes 3, 4 and 5)
                                                                          -----------------------         -------------------
                                                                                  $      995,230            $        991,926
                                                                          =======================         ===================


</TABLE>

The  accompanying  notes are an integral  part of these  consolidated  financial
statements.

<PAGE>
<TABLE>
<CAPTION>

                 TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
              (a wholly owned subsidiary of TNP Enterprises, Inc.)
                        CONSOLIDATED STATEMENTS OF INCOME
                                   (Unaudited)

                                                          Three Months Ended                      Six Months Ended
                                                               June 30,                               June 30,
                                                --------------------------------------  --------------------------------------
                                                                                (In thousands)
                                                      1998                1997                1998                 1997
    
                                                -----------------   ------------------  ------------------   -----------------
<S>                                             <C>                 <C>                 <C>                  <C>                
OPERATING REVENUES                                $      143,097      $       132,361      $      267,672      $      258,584
                                                -----------------   ------------------  ------------------   -----------------
OPERATING EXPENSES:
  Purchased power                                         65,245               54,873             122,755             113,219
  Fuel                                                    10,325                9,884              18,284              19,853
  Other operating and general expenses                    24,538               21,447              43,809              40,217
  Depreciation of utility plant                           10,164                9,725              20,036              19,335
  Taxes other than income taxes                            8,738                7,813              17,122              15,608
  Income taxes                                             4,143                4,972               6,946               7,037
                                                -----------------   ------------------  ------------------   -----------------
       Total operating expenses                          123,153              108,714             228,952             215,269
                                                -----------------   ------------------  ------------------   -----------------

NET OPERATING INCOME                                      19,944               23,647              38,720              43,315
                                                -----------------   ------------------  ------------------   -----------------
OTHER INCOME:
  Other income and deductions, net                           (26)                 192                 170                 351
  Income taxes                                               221                   25                 128                  23
                                                -----------------   ------------------  ------------------   -----------------
       Other income, net of taxes                            195                  217                 298                 374
                                                -----------------   ------------------  ------------------   -----------------

INCOME BEFORE INTEREST CHARGES                            20,139               23,864              39,018              43,689
                                                -----------------   ------------------  ------------------   -----------------

INTEREST CHARGES:
  Interest on long-term debt                              12,541               13,408              25,039              26,914
  Other interest and amortization of
debt-related costs                                         1,053                1,049               2,115               2,054
                                                -----------------   ------------------  ------------------   -----------------
       Total interest charges                             13,594               14,457              27,154              28,968
                                                -----------------   ------------------  ------------------   -----------------

NET INCOME                                                 6,545                9,407              11,864              14,721
Dividends on preferred stock                                  38                   40                  76                  80
                                                -----------------   ------------------  ------------------   -----------------

INCOME APPLICABLE TO COMMON STOCK               $          6,507    $           9,367   $          11,788    $         14,641
                                                =================   ==================  ==================   =================

</TABLE>


The  accompanying  notes are an integral  part of these  consolidated  financial
statements.

<PAGE>
<TABLE>
<CAPTION>



                 TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
              (a wholly owned subsidiary of TNP Enterprises, Inc.)
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)

                                                                                           Six Months Ended
                                                                                               June 30,
                                                                           -------------------------------------------------
                                                                                   1998                       1997
                                                                           ----------------------     ---------------------
                                                                                            (In thousands)
<S>                                                                        <C>                        <C>    
CASH FLOWS FROM OPERATING ACTIVITIES:
  Cash received from customers                                                           265,989                   259,545
  Purchased power                                                                       (119,963)                 (110,338)
  Fuel costs paid                                                                        (17,549)                  (18,513)
  Cash paid for payroll and to other suppliers                                           (38,279)                  (49,221)
  Interest paid, net of amounts capitalized                                              (26,154)                  (31,875)
  Income taxes paid
                                                                                           2,206                       (79)
  Other taxes paid                                                                       (21,963)                  (21,360)
  Other operating cash receipts and payments, net                                                                    1,036
                                                                                             173
                                                                           ----------------------     ---------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES                                                                           29,195
                                                                                          44,460
                                                                           ----------------------     ---------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Additions to utility plant                                                             (16,955)                  (13,068)
  Withdrawal from escrow account                                                               -                     1,670
                                                                            ----------------------     ---------------------
CASH FLOWS USED IN INVESTING ACTIVITIES                                                  (16,955)                  (11,398)
                                                                           ----------------------     ---------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Dividends paid on preferred and common stocks                                          (13,676)                  (20,880)
  Borrowings under revolving credit facilities                                                -                    108,000
  First mortgage bond redemption                                                              -                   (100,800)
                                                                           ----------------------     ---------------------
NET CASH USED IN FINANCING ACTIVITIES                                                    (13,676)                  (13,680)
                                                                           ----------------------     ---------------------
NET CHANGE IN CASH AND CASH EQUIVALENTS                                                   13,829                     4,117
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                                           2,772                     5,115
                                                                           ----------------------     ---------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD                                   $            16,601         $           9,232
                                                                           ======================     =====================
RECONCILIATION OF NET INCOME TO NET
     CASH PROVIDED BY OPERATING ACTIVITIES:
  Net income                                                                 $            11,864          $         14,721
  Adjustments to reconcile net income to net cash 
  provided by operating activities:
     Depreciation of utility plant                                                        20,026                    19,335
     Amortization of debt-related costs and other deferred charges                         1,881                     1,926
     Allowance for borrowed funds used during construction                                   (15)                      (23)
     Deferred income taxes                                                                 4,032                     3,697
        Investment tax credits                                                              (363)                      216

Cash flows impacted by changes in current assets and liabilities:
     Deferred purchased power and fuel costs                                                (223)                   (1,552)
     Accounts payable                                                                      5,622                     5,622
     Accrued interest                                                                       (795)                     (795)
     Accrued taxes                                                                          (897)                     (897)
     Revenues subject to refund                                                            5,416                        -
     Changes in other current assets and liabilities                                      (4,386)                    3,106
Other, net                                                                                 2,288                   (16,161)
                                                                           ----------------------     ---------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES                                    $            44,460          $         29,195
                                                                           ======================     =====================

</TABLE>


The  accompanying  notes are an integral  part of these  consolidated  financial
statements.

<PAGE>
<TABLE>
<CAPTION>

              TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
          (a wholly owned subsidiary of TNP Enterprises, Inc.)
                    CONSOLIDATED BALANCE SHEETS

                                                                    June 30, 1998            December 31,
                                                                     (Unaudited)                 1997
                                                                   ----------------        -----------------
                                                                                (In thousands)
<S>                                                                <C>                     <C>    
ASSETS

UTILITY PLANT:
  Electric plant                                                         1,240,375                1,235,239
  Construction work in progress                                              4,540                    2,281
                                                                    ---------------        -----------------
            Total                                                        1,244,915                1,237,520
  Less accumulated depreciation                                            323,613                  314,270
                                                                    ---------------        -----------------
            Net utility plant                                              921,302                  923,250
                                                                    ---------------        -----------------
OTHER PROPERTY AND INVESTMENTS, at cost                                        214                      214
                                                                    ---------------        -----------------

CURRENT ASSETS:
  Cash and cash equivalents                                                 16,601                    2,772
  Accounts receivable                                                        1,845                    2,342
  Inventories, at lower of average cost or market:
       Fuel                                                                    713                      483
       Materials and supplies                                                4,424                    4,440
  Deferred purchased power and fuel costs                                    2,793                    2,570
  Accumulated deferred income taxes                                          1,346                    1,707
  Other current assets                                                         412                      222
                                                                    ---------------        -----------------
            Total current assets                                            28,134                   14,536
                                                                    ---------------        -----------------
DEFERRED CHARGES                                                            23,797                   29,006
                                                                    ---------------        -----------------
                                                                           973,447                  967,006
                                                                    ===============        =================

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                  222,146
       Retained earnings                                                    62,956                   64,768
                                                                    ---------------        -----------------
            Total common shareholder's equity                              285,209                  287,021

  Redeemable cumulative preferred stock                                      3,240                    3,240
  Long-term debt, less current maturities                                  347,900                  477,900
                                                                    ---------------        -----------------
            Total capitalization                                           636,349                  768,161
                                                                    ---------------        -----------------
CURRENT LIABILITIES:
  Current maturities of long-term debt                                     130,100                      100
  Accounts payable                                                          30,481                   24,859
  Accrued interest                                                           6,528                    7,323
  Accrued taxes                                                             16,854                   17,751
  Customers' deposits                                                        3,620                    3,249
  Revenues subject to refund (Note 3)                                        5,416                       -
  Other current liabilities                                                 14,298                   19,148
                                                                    ---------------        -----------------
            Total current liabilities                                      207,297                   72,430
                                                                    ---------------        -----------------

REGULATORY TAX LIABILITIES                                                   3,216                    6,318
ACCUMULATED DEFERRED INCOME TAXES                                           86,901                   81,085
ACCUMULATED DEFERRED INVESTMENT TAX CREDITS                                 21,786                   21,286
DEFERRED CREDITS                                                            17,898                   17,726
COMMITMENTS AND CONTINGENCIES (Notes 3, 4, and 5)
                                                                    ---------------        -----------------
                                                                           973,447                  967,006
                                                                    ===============        =================
</TABLE>





The  accompanying  notes are an integral  part of these  consolidated  financial
statements.

<PAGE>


                      TNP Enterprises Inc. and Subsidiaries
                 Texas-New Mexico Power Company and Subsidiaries
                   Notes to Consolidated Financial Statements


Note 1.  Interim Financial Statements

         The interim consolidated  financial statements of TNP and subsidiaries,
and TNMP and subsidiaries are unaudited, and contain all adjustments (consisting
primarily of normal  recurring  accruals)  necessary for a fair statement of the
results for the interim periods  presented.  Results for interim periods are not
necessarily  indicative  of  results  to be  expected  for a  full  year  or for
previously reported periods due in part to seasonal revenue fluctuations.  It is
suggested that these  consolidated  financial  statements be read in conjunction
with the audited consolidated financial statements and notes thereto included in
TNP's and TNMP's 1997 Combined Annual Report on Form 10-K.

         Prior  period   statements  have  been  reclassified  in  order  to  be
consistent with current period presentation.  The reclassification had no effect
on net income or common shareholders equity.

Note 2.  Discontinued Nonregulated Operations

         As discussed in TNP's and TNMP's 1997  Combined  Annual  Report on Form
10-K, TNP discontinued  the  construction  segment of Facility Works Inc. (FWI),
TNP's wholly owned unregulated  subsidiary,  in late 1997. TNP's 1997 results of
operations included a $10.8 million loss, net of taxes, related to discontinuing
FWI's construction operations.  This amount included both actual 1997 losses and
$4.5  million of losses that were  projected  to occur in 1998 as FWI phased out
its  construction  activities.  Actual 1998 losses  have been  greater  than the
original  projections.  Therefore,  FWI has reassessed the costs to complete the
remaining  construction  jobs. In the second  quarter of 1998, FWI recognized an
additional loss of $6.2 million,  net of taxes,  or $0.47 per share,  related to
the discontinuance of its construction activities.

         FWI is continuing to operate the service and maintenance segment of its
business. The losses incurred by FWI's construction segment during the first two
quarters of 1997 have been reclassified as losses from discontinued operations.

Note 3.  Regulatory Matters

   Texas Transition Plan

         On July 22,  1998,  the  Public  Utility  Commission  of  Texas  (PUCT)
approved TNMP's proposed transition to competition plan (Texas Transition Plan).
A written  order  documenting  the PUCT's  approval  is  expected  by the end of
August.  The plan  includes a number of  provisions  that will impact the TNMP's
financial  results.  First,  TNMP will  implement  a series of  residential  and
commercial rate reductions  totaling 9% and 3%, respectively, during a five-year
transition  period.  The first rate  reductions for  residential  and commercial
customers of 3% and 1%, respectively, became effective retroactive to January 1,
1998.  Second,  TNMP's  earnings  on its Texas  operations  are capped at 11.25%
return on equity,  less assumed discounts on industrial rates,  which, for 1998,
are $4.1 million. Texas earnings in excess of the cap will be applied by TNMP to
recover  stranded  costs  related  to its  generation  investment  (TNP  One) or
refunded to customers,  according to guidelines set by the PUCT. Third, the plan
includes a cap on operating  and  maintenance  expenses  applicable to its Texas
operations based on cost incurred per customer in 1996. Fourth, TNMP will record
$15  million  additional  depreciation  annually  during  1999-2002  to mitigate
stranded costs. Finally, the fixed fuel factor has been increased to include the
energy-related  portion of purchased power costs, at annualized 1996 levels. The
demand  portion of purchased  power costs has been included in base rates.  As a
result of this  change,  the demand  portion of  purchased  power  costs will no
longer be passed directly through to TNMP's  customers.  The difference  between
purchased  power demand costs incurred by TNMP, and demand costs  recovered from
customers will be reflected in TNMP's operating income.

         Absent legislation  implementing retail competition prior to the end of
the five year  transition  period,  TNMP shall file with the PUCT, at the end of
the  transition  period,  a proposal to  voluntarily  implement  retail  access,
contingent  upon the approval of an  appropriate  mechanism  for recovery of any
remaining stranded costs.

         During the six months  ended June 30, 1998,  the results of  operations
are affected by one-time charges of $3.2 million, or $0.24 per share, related to
the  implementation  of the Texas  Transition  Plan. The charges  consist of the
write-off of previously deferred  transition plan expenses of $2.2 million,  net
of taxes, and customer refunds of $1.0 million, net of taxes. Earnings were also
reduced by $1.4 million,  or $0.11 per share, due to the  implementation  of the
earnings cap.  TNMP  accounted for this  reduction by equally  applying  amounts
toward  additional  depreciation  and provision  for rate refund,  following the
guidelines set by the PUCT.


<PAGE>



Note 4.           Accounting for the Effects of Regulation

         TNMP's financial statements currently reflect assets and costs based on
current  cost-based  ratemaking  regulations  in  accordance  with  Statement of
Financial  Accounting  Standards No. 71 (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.

         As discussed in TNP's and TNMP's 1997  Combined  Annual  Report on Form
10-K,  TNMP  discontinued  the  application  of SFAS 71 to its  generation/power
supply operations in New Mexico during 1997, following adoption of the Community
Choice(R)  program.  This  discontinuation  had no effect  on  TNMP's  financial
condition.  As discussed in Note 3, the PUCT approved the Texas  Transition Plan
on July 22, 1998. Had the PUCT adopted TNMP's plan as originally proposed,  TNMP
would  have  discontinued  the  application  of SFAS 71 to its  generation/power
supply operations in Texas.  However, the PUCT modified TNMP's filed plan to the
extent that SFAS 71 remains applicable to TNMP's Texas  generation/power  supply
operations.  TNMP will  continue to apply SFAS 71 to its Texas  generation/power
supply  operations  until it  requests,  and the  PUCT  approves,  authority  to
implement retail competition,  as described in Note 3. Management believes that,
as of June 30, 1998, and for the foreseeable  future,  TNMP's  transmission  and
distribution operations continue to follow SFAS 71.


Note 5.           Commitments and Contingencies

   Legal Actions

         As discussed in TNP's and TNMP's 1997  Combined  Annual  Report on Form
10-K,  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 in Harris County,  Texas. A hearing on Motions for Summary  Judgment filed
by both parties is scheduled for August 24, 1998.

         As discussed in TNP's and TNMP's 1997  Combined  Annual  Report on Form
10-K,  TNMP is the  defendant in a suit styled  Phillips  Petroleum  Company vs.
Texas-New Mexico Power Company,  pending in the 149th District Court in Brazoria
County,  Texas.  As of the date of this  report,  there  have  been no  material
developments in this matter, which is in the discovery phase.


Item 2.  Management's Discussion and Analysis of Financial Condition and 
         Results of Operations (MD&A).

         The following discussion should be read in conjunction with the related
interim consolidated financial statements and notes.

Results Of Operations

   Overall Results

         TNP incurred a loss  applicable to common stock of $0.8 million for the
quarter  ended June 30, 1998  (current  quarter) as compared to earnings of $7.4
million  for the  quarter  ended  June 30,  1997.  Excluding  the  effect of two
one-time  items  discussed  below,  earnings  for the current  quarter were $8.6
million as compared to $8.8 million for the corresponding 1997 quarter.

         The  current  quarter   includes  the  effect  of  two  one-time  items
consisting of charges of $3.2 million related to the recent approval by the PUCT
of TNMP's  transition plan and an additional loss of $6.2 million  recognized as
FWI  continues to exit the  construction  business.  FWI  incurred  discontinued
construction  activity losses of $1.4 million and $2.4 million for the three and
six months ended June 30, 1997, respectively.

         TNP had earnings applicable to common stock of $3.8 million for the six
months ended June 30, 1998  (current six months),  as compared to $11.5  million
for the six months ended June 30, 1997.  Excluding the one-time items previously
discussed, earnings for the current six months were $13.2 million as compared to
$13.9 for the corresponding 1997 period.

         As discussed in Note 2, FWI adopted a revised  strategy in late 1997 to
concentrate  on  service  and   maintenance   activities  and   discontinue  its
construction segment. For the current quarter,  FWI's service segment incurred a
net loss of $0.4  million on  revenues  of $0.8  million as compared to the 1997
second  quarter  earnings of $24 thousand on revenues of $1.0  million.  For the
current six months, FWI's service segment incurred net losses of $0.9 million on
revenues of $1.7  million as compared to a net loss of $0.1  million on revenues
of $1.6 million for the corresponding 1997 period.

<PAGE>

         Since the  operations  of TNMP  (the  principal  subsidiary)  currently
represent most of TNP's operations,  the following  discussion focuses on TNMP's
operations unless noted otherwise.

   Operating Revenues

         The components of TNMP's  operating and base revenues are summarized in
the following tables (in thousands).
<TABLE>
<CAPTION>

                                                   Three Months Ended June 30,           Six Months Ended June 30,
                                                                         Increase                              Increase
                                                 1998         1997      (Decrease)        1998       1997     (Decrease)
                                              --------     ---------   ----------     ---------  ---------   ----------
<S>                                           <C>          <C>         <C>            <C>        <C>         <C>
         Operating revenues                   $ 143,097    $  132,361   $  10,736     $  267,672$   258,584   $   9,088

         Less direct costs                       75,083        64,585      10,498        140,258    132,127       8,131
                                               --------     ---------    --------      ---------    -------    --------

         Base revenues                        $  68,014    $   67,776   $     238     $  127,414$   126,457   $     957
                                               ========     =========    ========      =========    =======    ========
</TABLE>

<TABLE>
<CAPTION>

                           Base revenues
                           <S>                                          <C>                                   <C>      
                           Weather related                              $   7,355                             $   6,758
                           Reserve for rate refund                         (4,637)                               (5,416)
                           Customer growth                                  1,041                                 1,951
                           Industrial - economy rate sales                    487                                   869
                           Industrial - firm rate sales                    (1,714)                               (2,474)
                           Transmission revenue                            (2,119)                                   (5)
                           Price / sales mix and other                       (175)                                 (726)
                                                                         --------                              --------
                              Base revenues increase                    $     238                             $     957
                                                                         ========                              ========
</TABLE>

         Direct costs include  purchased power and fuel costs.  Explanations for
the second quarter and  year-to-date  variances are discussed  under "Results of
Operations -- Operating Expenses."

         Current quarter and year-to-date  base revenues  increased $0.2 million
and $1.0 million as compared to the corresponding 1997 periods.  Current quarter
base  revenues  increased  due to warmer  weather  than in 1997 and to  customer
growth.  Offsetting  this  increase  was the loss of a  significant  customer to
self-generation,  and impacts of approval of the Texas  Transition  Plan,  which
include  increasing the reserve for customer refunds and  implementation  of the
earnings cap, as discussed in Note 3.

         Another item that reduced current quarter base revenue, relative to the
second  quarter of 1997 was  transmission  revenue.  The PUCT passed a wholesale
transmission  access rule effective  January 1997. Due to the appeal of the rule
by other utilities,  TNMP did not begin recording its transmission  revenues and
expense  in  accordance  with the new rules  until the  second  quarter of 1997.
Therefore,  the second  quarter  of 1997  includes  six  months of  transmission
revenues.   Current  six-month   transmission   revenue  is  comparable  to  the
corresponding 1997 period.

         The following table  summarizes the components of  gigawatt-hour  (GWH)
sales.
<TABLE>
<CAPTION>

                                                   Three Months Ended June 30,               Six Months Ended June 30,
                                                                         Increase                               Increase
                                                 1998         1997      (Decrease)         1998       1997     (Decrease)
                                               --------     ---------   ----------     ----------  ---------   ----------
         <S>                                   <C>          <C>         <C>            <C>         <C>         <C>
         GWH sales:
         Residential                                542           450          92          1,020        944         76
         Commercial                                 464           421          43            846        801         45
         Industrial:
           Firm                                     124           287        (163)           299        554       (255)
           Economy                                1,167         1,084          83          2,228      2,145         83
         Other                                      185            38         147            323         93        230
                                               --------     ---------    --------     ----------    -------   --------

               Total GWH sales                    2,482         2,280         202          4,716      4,537        179
                                               ========     =========    ========     ==========    =======   ========
</TABLE>
<PAGE>

         Current quarter and  year-to-date  sales increased 202 GWHs (or 9%) and
179 GWHs (or 4%),  respectively,  as compared to the corresponding 1997 periods.
Residential  and  commercial  sales  increased due to warmer  weather during the
current quarter. Also contributing to the overall sales increase were sales from
power  marketing  activities,  which  began  in  mid-1997.  The  movement  of  a
significant  industrial  customer to self-generation  was the primary reason for
decreased firm industrial sales.

   Operating Expenses

         The following table summarizes the components of TNMP's total operating
expenses (in thousands).
<TABLE>
<CAPTION>

                                                   Three Months Ended June 30,               Six Months Ended June 30,
                                                                         Increase                                Increase
                                                 1998         1997      (Decrease)          1998      1997      (Decrease)
                                              --------      ---------   ----------     ----------- ----------   ----------
<S>                                           <C>           <C>         <C>            <C>         <C>          <C>                
         Direct expenses:
           Purchased power                    $  65,245     $  54,873   $  10,372      $  122,755  $  113,219    $  9,536
           Fuel                                   9,838         9,713         125          17,503      18,908      (1,405)
                                                -------      --------    --------       ---------   ---------     -------
         Total direct items                      75,083        64,586      10,498         140,258     132,127       8,131


         Other operating expenses                35,190        31,344       3,846          64,626      60,498       4,128

         Income and other tax expenses           12,881        12,785          96          24,068      22,645       1,423
                                               --------     ---------    --------       ---------   ---------     -------

         Operating expenses                   $ 123,154    $  108,714   $  14,440      $  228,952  $  215,270    $ 13,682
                                               ========       =======    ========       =========   =========     =======
</TABLE>

        Overall,  current quarter and year-to-date operating expenses increased
by $14.4 million and $13.7 million, respectively, due to increases to purchased
power expense and other operating expenses.

   Direct Expenses

         Direct expenses consist of purchased power and pass-through fuel costs.
Purchased  power  costs  include  both  demand  and  energy  charges.  The Texas
Transition  Plan,  discussed in Note 3,  includes  demand  charges for purchased
power in base rates.  Those demand charges are no longer passed through directly
to customers.  At June 30, 1998, the difference  between demand  purchased power
incurred  and  recovered  did not have a  material  effect on  TNMP's  financial
condition.

         Purchased  Power.  Purchased  power costs increased by $10.4 million in
the current quarter,  and by $9.5 million in the six months ended June 30, 1998,
as compared to the same periods in 1997.  The  increases  were due  primarily to
increased power requirements to meet higher GWH sales as explained above.

         Fuel.  The  majority  of TNMP's  monthly  fuel costs are  recovered  in
revenues  through a fixed fuel factor per KWH approved by the PUCT. TNMP records
as fuel  expense  the amount  collected  through  this fixed  fuel  factor.  Any
difference  between  the  amount  collected  and  actual  cost is  deferred  for
collection/refund  in future  periods.  Fuel costs for the current  quarter were
slightly  higher  as  compared  to the  corresponding  1997  quarter.  Increased
recovery of fuel costs from higher  residential and commercial sales were offset
by reduced firm industrial sales. The decrease of $1.4 million in fuel costs for
the six  months  ended  June 30,  1998,  was caused  primarily  by reduced  firm
industrial sales.


   Other Operating Expenses, Income and Other Tax Expenses

         Other  operating  expenses  for the current  quarter  and  year-to-date
increased by $3.8  million and $4.1  million,  respectively,  as compared to the
corresponding  1997  periods.  The  increase  resulted  from  the  write-off  of
previously deferred transition plan expenses of $3.3 million ($2.2 million,  net
of taxes), as discussed in Note 3.

         Current  quarter  income and other tax expenses were  comparable to the
corresponding 1997 period.  Income and other taxes increased $1.4 million during
the six months ended June 30, 1998,  over the same period in 1997. The increases
are due to higher  pre-tax  income,  higher state income  taxes,  and  franchise
taxes.

   Interest Expense

         Interest charges  decreased by $0.9 million for the quarter,  and $1.8.
million for the six months ended June 30, 1998, due to reduced debt levels under
the credit facilities discussed below.

Financial Condition

   Liquidity

         Currently,  the main sources of  liquidity  for TNMP are cash flow from
operations  and  borrowings  from  credit  facilities.  TNMP's  cash  flow  from
operations was higher for the six months ended June 30, 1998, as compared to the
corresponding  1997 period.  Cash flow from  operations  increased due to higher
receipts from customers and lower interest  payments.  TNP's  consolidated  cash
flow from operations also was higher for the six months ended June 30, 1998, for
the same  reasons,  partially  offset by increased  expenses  for  non-regulated
activities. Currently, TNP's primary source of cash is dividends from TNMP.

         TNMP has two credit  facilities with a total commitment of $250 million
- the 1995 Facility ($150 million) and the 1996 Facility ($100  million).  As of
June 30, 1998, available unused credit under the 1995 Facility was $150 million,
subject to interest coverage and capitalization  tests. Under the 1995 Facility,
TNMP can borrow up to $100 million of the unused  commitment  with no additional
collateral  and borrow the remainder of the unused  commitment  ($50 million) by
pledging  first  mortgage  bonds  (FMBs) equal to the  principal  amount of such
borrowings.

         There is  currently no available  credit under the 1996  Facility.  The
interest rates under both facilities are based on the London  Interbank  Offered
Rate (LIBOR).  The interest rate margins on both facilities will decrease as the
ratings on TNMP's FMBs improve.

         TNMP has $130 million of secured  debentures due in January 1999.  TNMP
plans to refinance this debt with a combination  of borrowings  under the credit
facilities and new debt issuances.

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

Other Matters

         Year 2000

         As has  been  widely  reported,  the Year  2000  issue  (Y2K)  could be
materially  disruptive to business and could adversely  impact customers in ways
which cannot be determined at this time.

         TNP has conducted extensive studies to analyze the impact of Y2K to all
operating  systems.  As a  result  of these  studies,  TNP has  developed  a Y2K
mitigation plan. The plan requires TNP to amend, replace, or upgrade most of its
primary corporate information systems, some of which were already being replaced
or upgraded  pursuant to a previously  approved  plan to replace or upgrade such
systems.  Critical systems such as the financial management system, the customer
information system, and other corporate  information systems directly related to
company  operations  are  expected to be  installed  and  compliant by the third
quarter  of 1999.  TNP has  begun  testing  on many of the  operational  systems
throughout the company.  Following testing,  TNP will develop  contingency plans
for all high impact  components.  The incremental cost of compliance for the Y2K
issues is at least $9.8 million, but TNP does not expect the incremental cost to
have a material impact on the company's financial results.

         In addition to its own mitigation  plan,  TNP is actively  working with
its key vendors to assist in achieving Y2K compliance in those systems affecting
TNP's  operations.  Although  TNP  currently  believes  that its key vendors are
working  diligently to properly  address the Y2K issues,  TNP cannot assure that
these third party systems will be converted to Y2K compliance, or that a failure
to convert by another company,  or a conversion that is incompatible  with TNP's
systems, would not have a material adverse impact on TNP.



<PAGE>


         PART II - OTHER INFORMATION

Item 1.  Legal Proceedings.

Regulatory Matters

         See Note 3 for  information  regarding  the PUCT's  approval  of TNMP's
proposed transition to competition plan on July 22, 1998.

Legal Proceedings

         See Note 5 for information regarding material legal proceedings.

Item 4.  Submission of Matters to a Vote of Securities Holders.

         At the annual meeting of the Company's shareholders on May 4, 1998, the
shareholders  (i)  elected R.  Denny  Alexander, Kevern R. Joyce,  and Sidney M.
Gutierrez  as Class 1 directors,  and Larry G. Wheeler as Class 2 director,  all
for three-year  terms; and (ii) ratified the appointment of Arthur Andersen LLP,
Certified Independent Public Accountants, as independent auditors for 1998.

         The vote in the election of directors was as follows:

         R. Denny Alexander:        For:  11,058,812 Withheld:  122,139
         Kevern R. Joyce:           For:  11,043,953 Withheld:  136,998
         Sidney M. Gutierrez:       For:  11,048,758 Withheld:  132,193
         Larry G. Wheeler:          For:  11,043,965 Withheld:  136,986

         The  vote  in  the  ratification  of  Arthur  Andersen  LLP,  Certified
Independent  Public  Accountants,  as independent  auditors was 11,093,894  for,
52,269 against, and 34,788 abstaining.

Item 6.  Exhibits and Reports on Form 8-K.

(a)      Exhibits

         The following exhibits are filed with this report;

         27(a)    Financial Data Schedule for TNP.

         27(b)    Financial Data Schedule for TNMP.

(b)      Reports on Form 8-K - None


Statement Regarding Forward Looking Information

         The  discussions  in  this  document  that  are not  historical  facts,
including,   but  not  limited  to,  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's and TNMP's businesses;  results of regulatory  proceedings affecting TNP's
and TNMP's operations;  future acquisitions or strategic  partnerships;  general
business and economic  conditions;  changes in plans to refinance maturing debt;
the effectiveness of TNP's Y2K mitigation Plan, and the timely Y2K compliance by
TNP's and TNMP's vendors; 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>

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


                                   SIGNATURES

         Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
the  registrant  has duly  caused  this report to be signed on its behalf by the
undersigned thereunto duly authorized.


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


                         By \s\ MANJIT S. CHEEMA
                            ---------------------------------------------------
                            Manjit S. Cheema
Date: August 13, 1998       Senior Vice President and as Chief Financial Officer


                         By \s\ MICHAEL J. RICKETTS
                            ---------------------------------------------------
                            Michael J. Ricketts
Date: August 13, 1998       Controller and as Chief Accounting Officer