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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 2007
 Commission
    
    Name of Registrants, State of Incorporation,
    
    I.R.S. EmployerFile Number
    
    Address and Telephone Number
    
    Identification No.001-32462
    
    PNM Resources, Inc.
    
    85-0468296(A New Mexico Corporation)Alvarado SquareAlbuquerque, New Mexico 87158(505) 241-2700001-06986
    
    Public Service Company of New Mexico
    
    85-0019030(A New Mexico Corporation)Alvarado SquareAlbuquerque, New Mexico 87158(505) 241-2700002-97230
    
    Texas-New Mexico Power Company
    
    75-0204070(A Texas Corporation)4100 International Plaza,P.O. Box 2943Fort Worth, Texas 76113(817) 731-0099
 þ o
 o þ
   þ o o
  o o þ
 o þ
    PNM AND TNMP MEET THE CONDITIONS SET FORTH IN GENERAL INSTRUCTIONS (H) (1) (a) AND (b) OF FORM
10-Q AND ARE THEREFORE FILING THIS FORM WITH THE REDUCED DISCLOSURE FORMAT PURSUANT TO GENERAL
INSTRUCTION (H) (2).




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##### 



PNM RESOURCES, INC. AND SUBSIDIARIES
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARY
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
 INDEX
 Page No.GLOSSARY
    
    
    1PART I. FINANCIAL INFORMATIONITEM 1. FINANCIAL STATEMENTS (Unaudited)PNM RESOURCES, INC. AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
    
    
    4CONDENSED CONSOLIDATED BALANCE SHEETS
    
    
    5CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
    
    
    7CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
    
    
    9PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARYCONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
    
    
    10CONDENSED CONSOLIDATED BALANCE SHEETS
    
    
    11CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
    
    
    13CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
    
    
    15TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
    
    
    16CONDENSED CONSOLIDATED BALANCE SHEETS
    
    
    17CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
    
    
    19CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
    
    
    21NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    
    
    22ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
    
    
    63ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
    
    
    94ITEM 4. CONTROLS AND PROCEDURES
    
    
    100PART
II. OTHER INFORMATIONITEM 1. LEGAL PROCEEDINGS
    
    
    102ITEM 1A. RISK FACTORS
    
    
    102ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
    
    
    102ITEM 6. EXHIBITS
    
    
    103SIGNATURE
    
    
    104Exhibit 2.1Exhibit 4.23Exhibit 12.1Exhibit 12.2Exhibit 31.1Exhibit 31.2Exhibit 31.3Exhibit 31.4Exhibit 31.5Exhibit 31.6Exhibit 32.1Exhibit 32.2Exhibit 32.3Exhibit 32.4Exhibit 32.5Exhibit 32.6
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GLOSSARY
 Definitions:Afton
    
    Afton Generating StationALJ
    
    Administrative Law JudgeAltura
    
    Altura Power L.P.APS
    
    Arizona Public Service CompanyAvistar
    
    Avistar, Inc.BART
    
    Best Available Retrofit TechnologyBoard
    
    Board of Directors of PNMRBTU
    
    British Thermal UnitCal PX
    
    California Power ExchangeCal ISO
    
    California Independent System OperatorCascade
    
    Cascade Investment, L.L.C.Company
    
    PNM Resources, Inc. and SubsidiariesConstellation
    
    Constellation Energy Commodities Group, Inc.CTC
    
    Competition Transition ChargeDecatherm
    
    Million BTUsEaR
    
    Earnings at RiskECJV
    
    ECJV Holdings, LLCECMT
    
    EnergyCo Marketing and Trading, LLCEEI
    
    Edison Electric InstituteEIP
    
    Eastern Interconnection ProjectEITF
    
    Emerging Issues Task ForceEnergyCo
    
    EnergyCo, LLC, a joint venture between PNMR and ECJVEPA
    
    United States Environmental Protection AgencyERCOT
    
    Electric Reliability Council of TexasESI
    
    Electric Service IdentifierESPP
    
    Employee Stock Purchase PlanFASB
    
    Financial Accounting Standards BoardFCPSP
    
    First Choice Power Special Purpose, L.P.FERC
    
    Federal Energy Regulatory CommissionFIN
    
    FASB Interpretation NumberFIP
    
    Federal Implementation PlanFirst Choice
    
    First Choice Power, L. P. and SubsidiariesFour Corners
    
    Four Corners Power PlantGAAP
    
    Generally Accepted Accounting Principles in the United States of AmericaGWh
    
    Gigawatt hoursISO
    
    Independent System OperatorLuna
    
    Luna Energy FacilityMD&A
    
    Managements Discussion and Analysis of Financial Condition and Results of OperationsMMBTUs
    
    Million BTUsMoodys
    
    Moodys Investor Services, Inc.MW
    
    MegawattMWh
    
    Megawatt HourNavajo Acts
    
    Navajo Nation Air Pollution Prevention and Control Act, the Navajo Nation Safe Drinking Water Act, and the Navajo Nation Pesticide Act
  1




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Definitions:NDT
    
    Nuclear Decommissioning Trusts for PVNGSNinth Circuit
    
    United States Court of Appeals for the Ninth CircuitNMED
    
    New Mexico Environment DepartmentNMPRC
    
    New Mexico Public Regulation CommissionNOPR
    
    Notice of Proposed RulemakingNSPS
    
    New Source Performance StandardsNSR
    
    New Source ReviewNYMEX
    
    New York Mercantile ExchangeOATT
    
    Open Access Transmission TariffO&M
    
    Operations and MaintenancePCRBs
    
    Pollution Control Revenue BondsPGAC
    
    Purchased Gas Adjustment ClausePG&E
    
    Pacific Gas and Electric Co.PNM
    
    Public Service Company of New Mexico and SubsidiaryPNM Facility
    
    PNMs $400 Million Unsecured Revolving Credit FacilityPNMR
    
    PNM Resources, Inc. and SubsidiariesPNMR Facility
    
    PNMRs $600 Million Unsecured Revolving Credit FacilityPPA
    
    Power Purchase AgreementPSA
    
    Power Supply AgreementPSD
    
    Prevention of Significant DeteriorationPUCT
    
    Public Utility Commission of TexasPVNGS
    
    Palo Verde Nuclear Generating StationREC
    
    Renewable Energy CertificatesREP
    
    Retail Electricity ProviderRMC
    
    Risk Management CommitteeRTO
    
    Regional Transmission OrganizationSDG&E
    
    San Diego Gas and Electric CompanySEC
    
    United States Securities and Exchange CommissionSFAS
    
    FASB Statement of Financial Accounting StandardsSJCC
    
    San Juan Coal CompanySJGS
    
    San Juan Generating StationSOAH
    
    State Office of Administrative HearingsS&P
    
    Standard and Poors Ratings ServicesTECA
    
    Texas Electric Choice ActTNMP
    
    Texas-New Mexico Power Company and SubsidiariesTNP
    
    TNP Enterprises, Inc. and SubsidiariesThroughput
    
    Volumes of gas delivered, whether or not owned by the CompanyTwin Oaks
    
    Assets of Twin Oaks Power, L.P. and Twin Oaks Power III, L.P.VaR
    
    Value at Risk
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Accounting Pronouncements (as amended) :
 EITF 03-11
    
    EITF Issue No. 03-11 Reporting Realized Gains and Losses on Derivative
Instruments that are Subject to FASB Statement No. 133 and Not
Held for Trading PurposesEITF 03-13
    
    EITF Issue No. 03-13 Applying the Conditions in Paragraph 42 of FASB
Statement No. 144 in Determining Whether to Report Discontinued OperationsFIN 48
SAB 108
    
    FIN No. 48 Accounting for Uncertainty in Income Taxes
SEC Staff Accounting Bulletin No. 108 Considering the Effects of Prior
Year Misstatements when Quantifying Misstatements in Current Year
Financial StatementsSFAS 5
    
    SFAS No. 5 Accounting for ContingenciesSFAS 57
    
    SFAS No. 57 Related Party DisclosuresSFAS 71
    
    SFAS No. 71 Accounting for Effects of Certain Types of RegulationSFAS 128
    
    SFAS No. 128 Earnings per ShareSFAS 133
    
    SFAS No. 133 Accounting for Derivative Instruments and Hedging ActivitiesSFAS 141
    
    SFAS No. 141 Business CombinationsSFAS 144
    
    SFAS No.144 Accounting for the Impairment or Disposal of Long-Lived
AssetsSFAS 149
    
    SFAS No. 149 Amendment of Statement 133 on Derivative Instruments and
Hedging ActivitiesSFAS 154
    
    SFAS No. 154 Accounting Changes and Error Corrections
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PART I. FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 
 PNM RESOURCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
 Three Months Ended June 30,
    
    
    Six Months Ended June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006(As Restated,
    
    
    
    
    
    (As Restated,See Note 16)
    
    
    
    
    
    See Note 16)(In thousands, except share information)Operating Revenues:Electric
    
    $
    505,376
    
    
    $
    477,603
    
    
    $
    942,183
    
    
    $
    925,819Gas
    
    
    75,136
    
    
    
    68,869
    
    
    
    291,620
    
    
    
    276,345Other
    
    
    169
    
    
    
    197
    
    
    
    379
    
    
    
    306Total operating revenues
    
    
    580,681
    
    
    
    546,669
    
    
    
    1,234,182
    
    
    
    1,202,470Operating Expenses:Cost of energy sold
    
    
    356,533
    
    
    
    306,500
    
    
    
    735,053
    
    
    
    732,472Administrative and general
    
    
    64,341
    
    
    
    66,311
    
    
    
    135,547
    
    
    
    131,616Energy production costs
    
    
    52,256
    
    
    
    44,038
    
    
    
    100,080
    
    
    
    81,949Depreciation and amortization
    
    
    39,695
    
    
    
    37,953
    
    
    
    80,137
    
    
    
    72,283Transmission and distribution costs
    
    
    22,194
    
    
    
    21,314
    
    
    
    44,761
    
    
    
    40,364Taxes other than income taxes
    
    
    19,003
    
    
    
    18,261
    
    
    
    37,623
    
    
    
    35,225Total operating expenses
    
    
    554,022
    
    
    
    494,377
    
    
    
    1,133,201
    
    
    
    1,093,909Operating income
    
    
    26,659
    
    
    
    52,292
    
    
    
    100,981
    
    
    
    108,561Other Income and Deductions:Interest income
    
    
    7,041
    
    
    
    8,916
    
    
    
    17,829
    
    
    
    19,067Gains on investments held by NDT
    
    
    2,957
    
    
    
    1,158
    
    
    
    3,001
    
    
    
    2,054Other income
    
    
    1,890
    
    
    
    764
    
    
    
    3,929
    
    
    
    3,035Equity in net earnings of EnergyCo
    
    
    2,272
    
    
    
    
    
    
    
    1,610
    
    
    
    Carrying charges on regulatory assets
    
    
    
    
    
    
    2,004
    
    
    
    
    
    
    
    3,977Other deductions
    
    
    (5,530
    )
    
    
    (2,497
    )
    
    
    (6,518
    )
    
    
    (4,013
    )Net other income and deductions
    
    
    8,630
    
    
    
    10,345
    
    
    
    19,851
    
    
    
    24,120Interest Charges:Interest on long-term debt
    
    
    18,734
    
    
    
    24,267
    
    
    
    42,743
    
    
    
    46,798Other interest charges
    
    
    11,158
    
    
    
    12,231
    
    
    
    24,996
    
    
    
    18,263Total interest charges
    
    
    29,892
    
    
    
    36,498
    
    
    
    67,739
    
    
    
    65,061Earnings before Income Taxes
    
    
    5,397
    
    
    
    26,139
    
    
    
    53,093
    
    
    
    67,620Income Taxes (Benefit) (See Note 15)
    
    
    (14,975
    )
    
    
    10,024
    
    
    
    2,923
    
    
    
    25,372Preferred Stock Dividend Requirements of
Subsidiary
    
    
    132
    
    
    
    132
    
    
    
    264
    
    
    
    264Net Earnings
    
    $
    20,240
    
    
    $
    15,983
    
    
    $
    49,906
    
    
    $
    41,984Net Earnings per Common Share (see Note 5):Basic
    
    $
    0.26
    
    
    $
    0.23
    
    
    $
    0.65
    
    
    $
    0.61Diluted
    
    $
    0.26
    
    
    $
    0.23
    
    
    $
    0.64
    
    
    $
    0.61Dividends Declared per Common Share
    
    $
    0.23
    
    
    $
    0.22
    
    
    $
    0.46
    
    
    $
    0.44
   4




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PNM RESOURCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
 June 30,
    
    
    December 31,2007
    
    
    2006(In thousands)ASSETSCurrent Assets:Cash and cash equivalents
    
    $
    58,050
    
    
    $
    123,419Special deposits
    
    
    1,094
    
    
    
    5,146Accounts receivable, net of allowance for uncollectible
accounts of $6,436 and $6,899
    
    
    137,951
    
    
    
    168,126Unbilled revenues
    
    
    100,311
    
    
    
    116,878Other receivables
    
    
    99,091
    
    
    
    73,744Inventories
    
    
    58,963
    
    
    
    63,329Regulatory assets
    
    
    12,321
    
    
    
    17,507Derivative instruments
    
    
    91,600
    
    
    
    59,312Income taxes receivable
    
    
    50,960
    
    
    
    65,210Other current assets
    
    
    73,667
    
    
    
    63,414Total current assets
    
    
    684,008
    
    
    
    756,085Other Property and Investments:Investment in PVNGS lessor notes
    
    
    203,862
    
    
    
    257,659Equity investment in EnergyCo
    
    
    198,144
    
    
    
    Investments held by NDT
    
    
    136,424
    
    
    
    123,143Other investments
    
    
    54,996
    
    
    
    46,577Non-utility assets, net of accumulated depreciation of $1,291 and $1,365
    
    
    7,084
    
    
    
    7,565Total other property and investments
    
    
    600,510
    
    
    
    434,944Utility Plant:Electric plant in service
    
    
    3,743,584
    
    
    
    4,263,068Gas plant in service
    
    
    751,736
    
    
    
    721,168Common plant in service and plant held for future use
    
    
    123,616
    
    
    
    157,0644,618,936
    
    
    
    5,141,300Less accumulated depreciation and amortization
    
    
    1,662,465
    
    
    
    1,639,1562,956,471
    
    
    
    3,502,144Construction work in progress
    
    
    312,161
    
    
    
    230,871Nuclear fuel, net of accumulated amortization of $20,353 and $14,008
    
    
    35,263
    
    
    
    28,844Net utility plant
    
    
    3,303,895
    
    
    
    3,761,859Deferred Charges and Other Assets:Regulatory assets
    
    
    545,739
    
    
    
    553,564Pension asset
    
    
    10,163
    
    
    
    8,853Goodwill
    
    
    494,513
    
    
    
    495,738Other intangible assets, net of accumulated amortization of $2,707 and $2,052
    
    
    76,547
    
    
    
    102,202Derivative instruments
    
    
    27,548
    
    
    
    39,886Other deferred charges
    
    
    50,030
    
    
    
    77,703Total deferred charges and other assets
    
    
    1,204,540
    
    
    
    1,277,946$
    5,792,953
    
    
    $
    6,230,834
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PNM RESOURCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
 June 30,
    
    
    December 31,2007
    
    
    2006(In thousands, except share information)LIABILITIES AND STOCKHOLDERS EQUITYCurrent Liabilities:Short-term debt
    
    $
    559,670
    
    
    $
    764,345Current installments of long-term debt
    
    
    148,935
    
    
    
    3,298Accounts payable
    
    
    167,512
    
    
    
    214,229Accrued interest and taxes
    
    
    58,379
    
    
    
    98,789Regulatory liabilities
    
    
    17,577
    
    
    
    1,172Derivative instruments
    
    
    105,840
    
    
    
    68,575Other current liabilities
    
    
    114,052
    
    
    
    225,653Total current liabilities
    
    
    1,171,965
    
    
    
    1,376,061Long-term Debt
    
    
    1,531,850
    
    
    
    1,765,907Deferred Credits and Other Liabilities:Accumulated deferred income taxes
    
    
    579,586
    
    
    
    586,283Accumulated deferred investment tax credits
    
    
    28,531
    
    
    
    30,236Regulatory liabilities
    
    
    392,570
    
    
    
    389,330Asset retirement obligations
    
    
    63,789
    
    
    
    61,338Accrued pension liability and postretirement benefit cost
    
    
    131,126
    
    
    
    134,799Derivative instruments
    
    
    19,632
    
    
    
    14,581Other deferred credits
    
    
    135,797
    
    
    
    155,860Total deferred credits and other liabilities
    
    
    1,351,031
    
    
    
    1,372,427Total liabilities
    
    
    4,054,846
    
    
    
    4,514,395Commitments and Contingencies (See Note 9)Cumulative Preferred Stock of Subsidiary
without mandatory redemption requirements ($100 stated value,
10,000,000 shares authorized; issued and outstanding 115,293 shares)
    
    
    11,529
    
    
    
    11,529Common Stockholders Equity:Common stock outstanding (no par value, 120,000,000 shares authorized;
issued and outstanding 76,719,731 and 76,648,472 shares)
    
    
    1,039,530
    
    
    
    1,040,451Accumulated other comprehensive income, net of income tax
    
    
    17,599
    
    
    
    28,909Retained earnings
    
    
    669,449
    
    
    
    635,550Total common stockholders equity
    
    
    1,726,578
    
    
    
    1,704,910$
    5,792,953
    
    
    $
    6,230,834
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PNM RESOURCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 Six Months Ended June 30,2007
    
    
    2006(As Restated,See Note 16)(In thousands)Cash Flows From Operating Activities:Net earnings
    
    $
    49,906
    
    
    $
    41,984Adjustments to reconcile net earnings to
net cash flows from operating activities:Depreciation and amortization
    
    
    97,093
    
    
    
    79,651Allowance for equity funds used during construction
    
    
    (876
    )
    
    
    (73
    )Deferred income tax expense (benefit)
    
    
    13,062
    
    
    
    (7,920
    )Equity in net earnings of EnergyCo
    
    
    (1,610
    )
    
    
    Net unrealized losses on derivatives
    
    
    7,940
    
    
    
    1,864Realized gains on investments held by NDT
    
    
    (3,001
    )
    
    
    (2,054
    )Realized loss on Altura contribution
    
    
    3,637
    
    
    
    Impairment loss on intangible assets
    
    
    3,380
    
    
    
    Carrying charges on regulatory assets and liabilities
    
    
    (513
    )
    
    
    (4,922
    )Amortization of fair value of acquired Twin Oaks sales contract
    
    
    (35,073
    )
    
    
    (16,878
    )Stock based compensation expense
    
    
    5,250
    
    
    
    5,513Excess tax benefit from stock-based payment arrangements
    
    
    (8
    )
    
    
    (908
    )Other, net
    
    
    (561
    )
    
    
    (9
    )Changes in certain assets and liabilities:Accounts receivable
    
    
    23,680
    
    
    
    55,214Unbilled revenues
    
    
    16,567
    
    
    
    17,047Regulatory assets
    
    
    (1,752
    )
    
    
    20,878Other assets
    
    
    (2,792
    )
    
    
    (7,819
    )Accrued pension liability and postretirement benefit costs
    
    
    (4,549
    )
    
    
    (5,409
    )Accounts payable
    
    
    (42,325
    )
    
    
    (88,716
    )Accrued interest and taxes
    
    
    (14,709
    )
    
    
    35,402Deferred credits
    
    
    (17,567
    )
    
    
    (9,168
    )Other liabilities
    
    
    (7,987
    )
    
    
    (2,234
    )Net cash flows from operating activities
    
    
    87,192
    
    
    
    111,443Cash Flows From Investing Activities:Utility plant additions
    
    
    (213,070
    )
    
    
    (128,568
    )Proceeds from sales of investments held by NDT
    
    
    62,697
    
    
    
    45,534Purchases of investments held by NDT
    
    
    (66,903
    )
    
    
    (45,738
    )Proceeds from sales of utility plant
    
    
    25,041
    
    
    
    Return of principal on PVNGS lessor notes
    
    
    11,953
    
    
    
    11,297Investments in EnergyCo
    
    
    (2,540
    )
    
    
    Distributions from EnergyCo
    
    
    362,275
    
    
    
    Twin Oaks acquisition
    
    
    
    
    
    
    (481,015
    )Other, net
    
    
    (6,977
    )
    
    
    2,309Net cash flows from investing activities
    
    
    172,476
    
    
    
    (596,181
    )
   7




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PNM RESOURCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 Six Months Ended June 30,2007
    
    
    2006(As Restated,See Note 16)(In thousands)Cash Flows From Financing Activities:Short-term borrowings (repayments), net
    
    
    (204,675
    )
    
    
    510,300Long-term borrowings
    
    
    20,000
    
    
    
    Redemption of long-term debt
    
    
    (100,500
    )
    
    
    Issuance of common stock
    
    
    2,127
    
    
    
    10,511Proceeds from stock option exercise
    
    
    10,773
    
    
    
    4,878Purchase of common stock to satisfy stock awards
    
    
    (17,693
    )
    
    
    (6,843
    )Excess tax benefits from stock-based payment arrangements
    
    
    8
    
    
    
    908Dividends paid
    
    
    (34,766
    )
    
    
    (29,029
    )Other, net
    
    
    (311
    )
    
    
    (296
    )Net cash flows from financing activities
    
    
    (325,037
    )
    
    
    490,429Change in Cash and Cash Equivalents
    
    
    (65,369
    )
    
    
    5,691Cash and Cash Equivalents Beginning of Period
    
    
    123,419
    
    
    
    68,199Cash and Cash Equivalents End of Period
    
    $
    58,050
    
    
    $
    73,890Supplemental Cash Flow Disclosures:Interest paid, net of capitalized interest
    
    $
    58,323
    
    
    $
    67,495Income taxes paid (refunded), net
    
    $
    
    
    
    $
    (11,586
    )Supplemental schedule of noncash investing and financing activities:As of June 1, 2007, PNMR contributed its ownership of Altura to EnergyCo at a fair value of $549.6 million after an
adjustment for working capital changes. See Note 11. In conjunction with the contribution, PNMR removed Alturas
assets and liabilities from its balance sheet as follows:Current assets
    
    $
    22,529Utility plant, net
    
    
    575,906Deferred charges
    
    
    46,018Total assets contributed
    
    
    644,453Current liabilities
    
    
    63,268Deferred credits and other liabilities
    
    
    37,005Total liabilities contributed
    
    
    100,273Other comprehensive income
    
    
    (12,651
    )Total liabilities and OCI contributed
    
    
    87,622Net contribution to EnergyCo
    
    $
    556,831Utility plant purchased through assumption of long-term debt that offsets a portion of investment in PVNGS lessor notes
and is eliminated in consolidation. See Note 2.
    
    $
    41,152
   8




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##### Table of Contents



PNM RESOURCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006(As Restated,
    
    
    
    
    
    (As Restated,See Note 16)
    
    
    
    
    
    See Note 16)(In thousands)Net Earnings
    
    $
    20,240
    
    
    $
    15,983
    
    
    $
    49,906
    
    
    $
    41,984Other Comprehensive Income:Unrealized gain (loss) on investment securities:Unrealized holding gains (losses) arising during the period,
net of income tax (expense) benefit of $(2,230),
$154, $(3,486) and $(6,953)
    
    
    3,403
    
    
    
    (236
    )
    
    
    5,320
    
    
    
    10,610Reclassification adjustment for (gains) included in net
earnings,
net of income tax expense of $787, $606, $1,058 and $427
    
    
    (1,201
    )
    
    
    (924
    )
    
    
    (1,614
    )
    
    
    (652
    )Fair value adjustment for designated cash flow hedges:Change in fair market value, net of income tax expense
(benefit)
of $(1,387), $2,577, $10,795 and $8,177
    
    
    1,996
    
    
    
    (5,130
    )
    
    
    (16,578
    )
    
    
    (13,612
    )Reclassification adjustment for (gains) losses included in
net earnings, net of income tax (expense) benefit of
$288, $(2,059), $(962) and $2,619
    
    
    (454
    )
    
    
    3,723
    
    
    
    1,562
    
    
    
    (3,925
    )Total Other Comprehensive Income (Loss)
    
    
    3,744
    
    
    
    (2,567
    )
    
    
    (11,310
    )
    
    
    (7,579
    )Total Comprehensive Income
    
    $
    23,984
    
    
    $
    13,416
    
    
    $
    38,596
    
    
    $
    34,405
   9




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##### Table of Contents



PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARY
A WHOLLY OWNED SUBSIDIARY OF PNM RESOURCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
 Three Months Ended June 30,
    
    
    Six Months Ended June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006(As Restated,
    
    
    
    
    
    (As Restated,See Note 16)
    
    
    
    
    
    See Note 16)(In thousands)Operating Revenues:Electric
    
    $
    300,307
    
    
    $
    259,298
    
    
    $
    540,632
    
    
    $
    570,765Gas
    
    
    75,136
    
    
    
    68,869
    
    
    
    291,620
    
    
    
    276,345Total operating revenues
    
    
    375,443
    
    
    
    328,167
    
    
    
    832,252
    
    
    
    847,110Operating Expenses:Cost of energy sold
    
    
    230,414
    
    
    
    185,410
    
    
    
    495,295
    
    
    
    524,672Administrative and general
    
    
    42,866
    
    
    
    40,520
    
    
    
    87,248
    
    
    
    81,648Energy production costs
    
    
    43,330
    
    
    
    42,404
    
    
    
    84,159
    
    
    
    80,315Depreciation and amortization
    
    
    26,202
    
    
    
    24,289
    
    
    
    52,558
    
    
    
    49,144Transmission and distribution costs
    
    
    17,244
    
    
    
    15,916
    
    
    
    34,885
    
    
    
    30,223Taxes other than income taxes
    
    
    10,021
    
    
    
    8,414
    
    
    
    18,707
    
    
    
    17,727Total operating expenses
    
    
    370,077
    
    
    
    316,953
    
    
    
    772,852
    
    
    
    783,729Operating income
    
    
    5,366
    
    
    
    11,214
    
    
    
    59,400
    
    
    
    63,381Other Income and Deductions:Interest income
    
    
    6,650
    
    
    
    8,670
    
    
    
    15,352
    
    
    
    18,023Gains on investments held by NDT
    
    
    2,957
    
    
    
    1,158
    
    
    
    3,001
    
    
    
    2,054Other income
    
    
    1,072
    
    
    
    547
    
    
    
    2,227
    
    
    
    1,479Other deductions
    
    
    (1,907
    )
    
    
    (1,504
    )
    
    
    (2,516
    )
    
    
    (2,355
    )Net other income and deductions
    
    
    8,772
    
    
    
    8,871
    
    
    
    18,064
    
    
    
    19,201Interest Charges:Interest on long-term debt
    
    
    11,956
    
    
    
    13,167
    
    
    
    24,393
    
    
    
    25,026Other interest charges
    
    
    3,683
    
    
    
    1,732
    
    
    
    7,338
    
    
    
    3,293Total interest charges
    
    
    15,639
    
    
    
    14,899
    
    
    
    31,731
    
    
    
    28,319Earnings (Loss) before Income Taxes
    
    
    (1,501
    )
    
    
    5,186
    
    
    
    45,733
    
    
    
    54,263Income Taxes (Benefit)
    
    
    (690
    )
    
    
    2,190
    
    
    
    17,664
    
    
    
    21,163Net Earnings (Loss)
    
    
    (811
    )
    
    
    2,996
    
    
    
    28,069
    
    
    
    33,100Preferred Stock Dividend Requirements
    
    
    132
    
    
    
    132
    
    
    
    264
    
    
    
    264Net Earnings (Loss) Available for
Common Stock
    
    $
    (943
    )
    
    $
    2,864
    
    
    $
    27,805
    
    
    $
    32,836
   10




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##### Table of Contents



PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARY
A WHOLLY OWNED SUBSIDIARY OF PNM RESOURCES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
 June 30,
    
    
    December 31,2007
    
    
    2006(In thousands)ASSETSCurrent Assets:Cash and cash equivalents
    
    $
    1,430
    
    
    $
    11,886Special deposits
    
    
    774
    
    
    
    376Accounts receivable, net of allowance for uncollectible accounts of
$1,571 and $1,788
    
    
    107,545
    
    
    
    122,648Unbilled revenues
    
    
    45,339
    
    
    
    81,166Other receivables
    
    
    79,619
    
    
    
    62,040Affiliate accounts receivable
    
    
    1,166
    
    
    
    8,905Inventories
    
    
    57,052
    
    
    
    51,801Regulatory assets
    
    
    12,321
    
    
    
    17,507Income taxes receivable
    
    
    
    
    
    
    13,222Derivative instruments
    
    
    38,459
    
    
    
    27,750Other current assets
    
    
    54,515
    
    
    
    51,231Total current assets
    
    
    398,220
    
    
    
    448,532Other Property and Investments:Investment in PVNGS lessor notes
    
    
    245,014
    
    
    
    257,659Investments held by NDT
    
    
    136,424
    
    
    
    123,143Other investments
    
    
    26,510
    
    
    
    15,634Non-utility property
    
    
    976
    
    
    
    966Total other property and investments
    
    
    408,924
    
    
    
    397,402Utility Plant:Electric plant in service
    
    
    2,890,200
    
    
    
    2,742,795Gas plant in service
    
    
    751,736
    
    
    
    721,168Common plant in service and plant held for future use
    
    
    18,237
    
    
    
    72,8063,660,173
    
    
    
    3,536,769Less accumulated depreciation and amortization
    
    
    1,373,124
    
    
    
    1,279,3492,287,049
    
    
    
    2,257,420Construction work in progress
    
    
    294,565
    
    
    
    191,403Nuclear fuel, net of accumulated amortization of $20,353 and $14,008
    
    
    35,263
    
    
    
    28,844Net utility plant
    
    
    2,616,877
    
    
    
    2,477,667Deferred Charges and Other Assets:Regulatory assets
    
    
    406,299
    
    
    
    410,979Derivative instruments
    
    
    19,837
    
    
    
    12,504Goodwill
    
    
    102,601
    
    
    
    Other deferred charges
    
    
    65,304
    
    
    
    66,465Total deferred charges and other assets
    
    
    594,041
    
    
    
    489,948$
    4,018,062
    
    
    $
    3,813,549
   11




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##### Table of Contents



PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARY
A WHOLLY OWNED SUBSIDIARY OF PNM RESOURCES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
 June 30,
    
    
    December 31,2007
    
    
    2006(In thousands, except share information)LIABILITIES AND STOCKHOLDERS EQUITYCurrent Liabilities:Short-term debt
    
    $
    242,070
    
    
    $
    251,300Accounts payable
    
    
    81,556
    
    
    
    138,577Affiliate accounts payable
    
    
    14,958
    
    
    
    16,898Accrued interest and taxes
    
    
    47,650
    
    
    
    41,340Regulatory liabilities
    
    
    17,577
    
    
    
    1,172Derivative instruments
    
    
    55,735
    
    
    
    43,096Other current liabilities
    
    
    69,166
    
    
    
    82,262Total current liabilties
    
    
    528,712
    
    
    
    574,645Long-term Debt
    
    
    1,005,639
    
    
    
    987,205Deferred Credits and Other Liabilities:Accumulated deferred income taxes
    
    
    394,973
    
    
    
    368,256Accumulated deferred investment tax credits
    
    
    28,207
    
    
    
    29,404Regulatory liabilities
    
    
    351,578
    
    
    
    335,196Asset retirement obligations
    
    
    63,076
    
    
    
    60,493Accrued pension liability and postretirement benefit cost
    
    
    126,187
    
    
    
    129,595Derivative instruments
    
    
    11,560
    
    
    
    14,100Other deferred credits
    
    
    104,073
    
    
    
    112,990Total deferred credits and liabilities
    
    
    1,079,654
    
    
    
    1,050,034Total liabilities
    
    
    2,614,005
    
    
    
    2,611,884Commitments and Contingencies (See Note 9)Cumulative Preferred Stock
without mandatory redemption requirements ($100 stated value,
10,000,000 authorized; issued and outstanding 115,293 shares)
    
    
    11,529
    
    
    
    11,529Common Stockholders Equity:Common stock outstanding (no par value, 40,000,000 shares authorized;
issued and outstanding 39,117,799 shares)
    
    
    932,522
    
    
    
    765,500Accumulated other comprehensive income, net of income tax
    
    
    15,685
    
    
    
    8,761Retained earnings
    
    
    444,321
    
    
    
    415,875Total common stockholders equity
    
    
    1,392,528
    
    
    
    1,190,136$
    4,018,062
    
    
    $
    3,813,549
   12




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##### Table of Contents



PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARY
A WHOLLY OWNED SUBSIDIARY OF PNM RESOURCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 Six Months Ended June 30,2007
    
    
    2006(As Restated,See Note 16)(In thousands)Cash Flows From Operating Activities:Net earnings
    
    $
    28,069
    
    
    $
    33,100Adjustments to reconcile net earnings to
net cash flows from operating activities:Depreciation and amortization
    
    
    66,320
    
    
    
    58,311Allowance for equity funds used during construction
    
    
    (755
    )
    
    
    1Deferred income tax (benefit)
    
    
    (138
    )
    
    
    (15,059
    )Net unrealized losses on derivatives
    
    
    10,896
    
    
    
    1,967Realized gains on investments held by NDT
    
    
    (3,001
    )
    
    
    (2,054
    )Carrying charges on regulatory assets and liabilities
    
    
    (513
    )
    
    
    (1,829
    )Other, net
    
    
    80
    
    
    
    (4,075
    )Changes in certain assets and liabilities, net of amounts acquired:Accounts receivable
    
    
    25,047
    
    
    
    69,659Unbilled revenues
    
    
    39,358
    
    
    
    35,646Regulatory assets
    
    
    (1,253
    )
    
    
    22,960Other assets
    
    
    8,718
    
    
    
    (16,075
    )Accrued pension liability and postretirement benefit costs
    
    
    (2,822
    )
    
    
    (2,869
    )Accounts payable
    
    
    (59,844
    )
    
    
    (100,340
    )Accrued interest and taxes
    
    
    16,975
    
    
    
    33,560Deferred credits
    
    
    (17,398
    )
    
    
    (8,661
    )Other liabilities
    
    
    (5,077
    )
    
    
    (3,713
    )Net cash flows from operating activities
    
    
    104,662
    
    
    
    100,529Cash Flows From Investing Activities:Utility plant additions
    
    
    (149,648
    )
    
    
    (100,008
    )Proceeds from sales of investments held by NDT
    
    
    62,697
    
    
    
    45,534Purchases of investments held by NDT
    
    
    (66,903
    )
    
    
    (45,738
    )Proceeds from sales of utility plant
    
    
    25,041
    
    
    
    Return of principal on PVNGS lessor notes
    
    
    11,953
    
    
    
    11,297Other, net
    
    
    (10,774
    )
    
    
    6,601Net cash flows from investing activities
    
    
    (127,634
    )
    
    
    (82,314
    )
   13




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##### Table of Contents



PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARY
A WHOLLY OWNED SUBSIDIARY OF PNM RESOURCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 Six Months Ended June 30,2007
    
    
    2006(As Restated,See Note 16)(In thousands)Cash Flows From Financing Activities:Short-term borrowings (repayments), net
    
    
    (7,179
    )
    
    
    (28,000
    )Long-term borrowings
    
    
    20,000
    
    
    
    Dividends paid
    
    
    (264
    )
    
    
    (264
    )Other, net
    
    
    (41
    )
    
    
    79Net cash flows from financing activities
    
    
    12,516
    
    
    
    (28,185
    )Change in Cash and Cash Equivalents
    
    
    (10,456
    )
    
    
    (9,970
    )Cash and Cash Equivalents at Beginning of Period
    
    
    11,886
    
    
    
    12,690Cash and Cash Equivalents at End of Period
    
    $
    1,430
    
    
    $
    2,720Supplemental Cash Flow Disclosures:Interest paid, net of capitalized interest
    
    $
    29,758
    
    
    $
    30,193Income taxes paid, net
    
    $
    
    
    
    $
    457Supplemental schedule of noncash investing and financing activities:As of January 1, 2007, TNMP transferred its New Mexico operational assets and liabilities to PNMR through
a redemption of TNMPs common stock. PNMR contemporaneously contributed the TNMP New Mexico operational
assets and liabilities to PNM. (See Note 14).Current assets
    
    $
    15,444Other property and investments
    
    
    12Utility plant, net
    
    
    96,610Goodwill
    
    
    102,601Deferred charges
    
    
    1,794Total assets transferred from TNMP
    
    
    216,461Current liabilities
    
    
    17,313Long-term debt
    
    
    1,065Deferred credits and other liabilities
    
    
    31,060Total liabilities transferred from TNMP
    
    
    49,438Net assets transferred  increase in common stockholders equity
    
    $
    167,023
   14




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##### Table of Contents



PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARY
A WHOLLY OWNED SUBSIDIARY OF PNM RESOURCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006(As Restated,
    
    
    
    
    
    (As Restated,See Note 16)
    
    
    
    
    
    See Note 16)(In thousands)Net Earnings (Loss) Available for Common Stock
    
    $
    (943
    )
    
    $
    2,864
    
    
    $
    27,805
    
    
    $
    32,836Other Comprehensive Income (Loss):Unrealized gain (loss) on investment securities:Unrealized holding gains (losses) arising during the period,
net of income tax (expense) benefit of $(2,230), $154,
$(3,486) and $(6,953)
    
    
    3,403
    
    
    
    (236
    )
    
    
    5,320
    
    
    
    10,610Reclassification adjustment for (gains) included in net earnings,
net of income tax expense of $787, $606, $1,058 and $427
    
    
    (1,201
    )
    
    
    (924
    )
    
    
    (1,614
    )
    
    
    (652
    )Fair value adjustment for designated cash flow hedges:Change in fair market value, net of income tax (benefit)
of $(723), $606, $(1,511) and $6,563
    
    
    1,103
    
    
    
    (926
    )
    
    
    2,305
    
    
    
    (10,015
    )Reclassification adjustment for (gains) losses included in net
earnings,
net of income tax (expense) benefit of $236, $3, $(599)
and $2,869
    
    
    (361
    )
    
    
    (4
    )
    
    
    913
    
    
    
    (4,378
    )Total Other Comprehensive Income (Loss)
    
    
    2,944
    
    
    
    (2,090
    )
    
    
    6,924
    
    
    
    (4,435
    )Total Comprehensive Income
    
    $
    2,001
    
    
    $
    774
    
    
    $
    34,729
    
    
    $
    28,401
   15




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##### Table of Contents



TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
A WHOLLY OWNED SUBSIDIARY OF PNM RESOURCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
 Three Months Ended June 30,
    
    
    Six Months Ended June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006(In thousands)Electric Operating Revenues
    
    $
    43,536
    
    
    $
    39,696
    
    
    $
    84,464
    
    
    $
    75,244Operating Expenses:Cost of energy sold
    
    
    7,221
    
    
    
    7,145
    
    
    
    14,392
    
    
    
    13,594Administrative and general
    
    
    7,361
    
    
    
    7,848
    
    
    
    16,263
    
    
    
    17,061Depreciation and amortization
    
    
    7,041
    
    
    
    6,337
    
    
    
    14,041
    
    
    
    12,512Transmission and distribution costs
    
    
    4,945
    
    
    
    4,463
    
    
    
    9,868
    
    
    
    8,208Taxes other than income taxes
    
    
    5,413
    
    
    
    5,482
    
    
    
    10,238
    
    
    
    10,672Total operating expenses
    
    
    31,981
    
    
    
    31,275
    
    
    
    64,802
    
    
    
    62,047Operating income
    
    
    11,555
    
    
    
    8,421
    
    
    
    19,662
    
    
    
    13,197Other Income and Deductions:Interest income
    
    
    776
    
    
    
    81
    
    
    
    864
    
    
    
    336Other income
    
    
    770
    
    
    
    85
    
    
    
    1,046
    
    
    
    253Carrying charges on regulatory assets
    
    
    
    
    
    
    2,004
    
    
    
    
    
    
    
    3,977Other deductions
    
    
    (46
    )
    
    
    (20
    )
    
    
    (73
    )
    
    
    (43
    )Net other income and deductions
    
    
    1,500
    
    
    
    2,150
    
    
    
    1,837
    
    
    
    4,523Interest Charges:Interest on long-term debt
    
    
    6,153
    
    
    
    6,432
    
    
    
    12,585
    
    
    
    12,864Other interest charges
    
    
    718
    
    
    
    829
    
    
    
    1,364
    
    
    
    1,632Total interest charges
    
    
    6,871
    
    
    
    7,261
    
    
    
    13,949
    
    
    
    14,496Earnings before Income Taxes
    
    
    6,184
    
    
    
    3,310
    
    
    
    7,550
    
    
    
    3,224Income taxes
    
    
    1,950
    
    
    
    2,101
    
    
    
    2,378
    
    
    
    1,330Net Earnings from Continuing Operations
    
    
    4,234
    
    
    
    1,209
    
    
    
    5,172
    
    
    
    1,894Discontinued Operations, net of income tax
expense (benefit) of $0, $(16), $0
and $987
    
    
    
    
    
    
    1,627
    
    
    
    
    
    
    
    2,098Net Earnings
    
    $
    4,234
    
    
    $
    2,836
    
    
    $
    5,172
    
    
    $
    3,992
   16




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##### Table of Contents



TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
A WHOLLY OWNED SUBSIDIARY OF PNM RESOURCES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
 June 30,
    
    
    December 31,2007
    
    
    2006(In thousands)ASSETSCurrent Assets:Cash and cash equivalents
    
    $
    34
    
    
    $
    2,542Special deposits
    
    
    50
    
    
    
    Accounts receivable, net of allowance for uncollectible accounts
of $0 and $31
    
    
    8,757
    
    
    
    10,317Unbilled revenues
    
    
    3,018
    
    
    
    6,000Affiliate accounts receivable
    
    
    7,680
    
    
    
    Other receivables
    
    
    5,483
    
    
    
    1,515Inventories
    
    
    1,670
    
    
    
    1,509Federal income tax receivable
    
    
    38,018
    
    
    
    40,473Other current assets
    
    
    803
    
    
    
    944Total current assets
    
    
    65,513
    
    
    
    63,300Other Property and Investments:Other investments
    
    
    554
    
    
    
    511Non-utility property, net of accumulated depreciation of $0 and $3
    
    
    2,111
    
    
    
    2,120Total other property and investments
    
    
    2,665
    
    
    
    2,631Utility Plant:Electric plant in service
    
    
    770,630
    
    
    
    925,538Common plant in service and plant held for future use
    
    
    488
    
    
    
    589771,118
    
    
    
    926,127Less accumulated depreciation and amortization
    
    
    264,203
    
    
    
    326,404506,915
    
    
    
    599,723Construction work in progress
    
    
    10,242
    
    
    
    13,799Net utility plant
    
    
    517,157
    
    
    
    613,522Deferred Charges and Other Assets:Stranded costs
    
    
    87,962
    
    
    
    89,949Carrying charges on stranded costs
    
    
    40,652
    
    
    
    41,584Other regulatory assets
    
    
    10,826
    
    
    
    11,052Goodwill
    
    
    260,144
    
    
    
    363,764Pension asset
    
    
    10,163
    
    
    
    8,853Other deferred charges
    
    
    6,919
    
    
    
    9,205Total deferred charges and other assets
    
    
    416,666
    
    
    
    524,407$
    1,002,001
    
    
    $
    1,203,860
   17




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TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
A WHOLLY OWNED SUBSIDIARY OF PNM RESOURCES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
 June 30,
    
    
    December 31,2007
    
    
    2006(In thousands, except share information)LIABILITIES AND STOCKHOLDERS EQUITYCurrent Liabilities:Short-term debt  affiliate
    
    $
    27,200
    
    
    $
    Current installments of long-term debt
    
    
    148,935
    
    
    
    2,523Accounts payable
    
    
    3,001
    
    
    
    11,332Affiliate accounts payable
    
    
    4,303
    
    
    
    15,673Accrued interest and taxes
    
    
    15,900
    
    
    
    23,110Other current liabilities
    
    
    3,646
    
    
    
    7,579Total current liabilties
    
    
    202,985
    
    
    
    60,217Long-term Debt
    
    
    167,451
    
    
    
    420,546Deferred Credits and Other Liabilities:Accumulated deferred income taxes
    
    
    126,164
    
    
    
    145,641Accumulated deferred investment tax credits
    
    
    324
    
    
    
    832Regulatory liabilities
    
    
    40,992
    
    
    
    54,134Accrued pension liability and postretirement benefit cost
    
    
    4,939
    
    
    
    5,203Other deferred credits
    
    
    2,916
    
    
    
    2,668Total deferred credit and other liabilities
    
    
    175,335
    
    
    
    208,478Total liabilities
    
    
    545,771
    
    
    
    689,241Commitments and Contingencies (See Note 9)Common Stockholders Equity:Common stock outstanding ($10 par value, 12,000,000 shares authorized;
issued and outstanding 6,358 and 9,615 shares)
    
    
    64
    
    
    
    96Paid-in-capital
    
    
    427,320
    
    
    
    492,812Accumulated other comprehensive income, net of income tax
    
    
    562
    
    
    
    562Retained earnings
    
    
    28,284
    
    
    
    21,149Total common stockholders equity
    
    
    456,230
    
    
    
    514,619$
    1,002,001
    
    
    $
    1,203,860
   18




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TEXAS-NEW MEXICO POWER COMPANY
A WHOLLY OWNED SUBSIDIARY OF PNM RESOURCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 Six Months Ended June 30,2007
    
    
    2006(In thousands)Cash Flows From Operating Activities:Net earnings
    
    $
    5,172
    
    
    $
    3,992Adjustments to reconcile net earnings to
net cash flows from operating activities:Depreciation and amortization
    
    
    13,873
    
    
    
    16,386Rate case amortization
    
    
    1,851
    
    
    
    Allowance for equity funds used during construction
    
    
    (121
    )
    
    
    (74
    )Deferred income tax expense (benefit)
    
    
    (2,205
    )
    
    
    (438
    )Carrying charges on deferred stranded costs
    
    
    
    
    
    
    (3,978
    )Interest on retail competition transition obligation
    
    
    
    
    
    
    885Other, net
    
    
    (572
    )
    
    
    (1,035
    )Changes in certain assets and liabilities:Accounts receivable
    
    
    (8,137
    )
    
    
    2,154Unbilled revenues
    
    
    (549
    )
    
    
    (2,497
    )Other assets
    
    
    (1,156
    )
    
    
    1,792Accrued pension liability and postretirement benefit costs
    
    
    (554
    )
    
    
    Accounts payable
    
    
    (5,508
    )
    
    
    (307
    )Accrued interest and taxes
    
    
    (2,422
    )
    
    
    (2,838
    )Change in affiliate accounts
    
    
    (11,435
    )
    
    
    9,046Other liabilities
    
    
    (1,445
    )
    
    
    (1,805
    )Net cash flows from operating activities
    
    
    (13,208
    )
    
    
    21,283Cash Flows From Investing Activities:Utility plant additions
    
    
    (17,249
    )
    
    
    (18,930
    )Other, net
    
    
    
    
    
    
    69Net cash flows from investing activities
    
    
    (17,249
    )
    
    
    (18,861
    )
   19




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TEXAS-NEW MEXICO POWER COMPANY
A WHOLLY OWNED SUBSIDIARY OF PNM RESOURCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 Six Months Ended June 30,2007
    
    
    2006(In thousands)Cash Flow From Financing Activities:Short-term debt  affiliate
    
    
    27,200
    
    
    
    Redemption of long-term debt
    
    
    (100,500
    )
    
    
    Equity contribution by parent
    
    
    101,249
    
    
    
    Other, net
    
    
    
    
    
    
    82Net cash flows from financing activites
    
    
    27,949
    
    
    
    82Change in Cash and Cash Equivalents
    
    
    (2,508
    )
    
    
    2,504Cash and Cash Equivalents Beginning of Period
    
    
    2,542
    
    
    
    16,228Cash and Cash Equivalents End of Period
    
    $
    34
    
    
    $
    18,732Supplemental Cash Flow Disclosures:Interest paid, net of capitalized interest
    
    $
    14,127
    
    
    $
    12,749Income taxes paid, net
    
    $
    
    
    
    $
    Supplemental schedule of noncash investing and financing activities:As of January 1, 2007, TNMP transferred its New Mexico operational
assets and liabilities to PNMR through a redemption of TNMPs
common stock. PNMR contemporaneously contributed the TNMP New
Mexico operational assets and liabilities to PNM. (See Note 14).Current assets
    
    $
    15,444Other property and investments
    
    
    12Utility plant, net
    
    
    96,610Goodwill
    
    
    102,601Deferred charges
    
    
    1,794Total assets transferred to PNM
    
    
    216,461Current liabilities
    
    
    17,313Long-term debt
    
    
    1,065Deferred credits and other liabilities
    
    
    31,060Total liabilities transferred to PNM
    
    
    49,438Net assets transferred  common stock redeemed
    
    $
    167,023
   20




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TEXAS-NEW MEXICO POWER COMPANY
A WHOLLY OWNED SUBSIDIARY OF PNM RESOURCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006(In thousands)Net Earnings and
Total Comprehensive
Income
    
    $
    4,234
    
    
    $
    2,836
    
    
    $
    5,172
    
    
    $
    3,992
   21




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##### Table of Contents



PNM RESOURCES, INC. AND SUBSIDIARIES
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARY
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (1) Significant Accounting Policies and Responsibility for Financial Statements
 Financial Statement Preparation
   Principles of Consolidation
  Presentation
   
  22




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PNM RESOURCES, INC. AND SUBSIDIARIES
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARY
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (2) Acquisitions and Disposition
     (3) Segment Information
   23




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PNM RESOURCES, INC. AND SUBSIDIARIES
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARY
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 REGULATED OPERATIONS
 PNM Electric
  TNMP Electric
   PNM Gas
   24




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PNM RESOURCES, INC. AND SUBSIDIARIES
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARY
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 UNREGULATED OPERATIONS
 Wholesale
  First Choice
  EnergyCo
   25




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##### Table of Contents



PNM RESOURCES, INC. AND SUBSIDIARIES
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARY
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 CORPORATE AND OTHER
     26




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PNM RESOURCES, INC. AND SUBSIDIARIES
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARY
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 PNMR SEGMENT INFORMATION
 Regulated
    
    
    UnregulatedPNM
    
    
    TNMP
    
    
    
    
    
    
    
    
    
    
    First
    
    
    Corporate2007
    
    Electric (d)
    
    
    Electric (d)
    
    
    PNM Gas
    
    
    Wholesale
    
    
    Choice
    
    
    and Other
    
    
    Consolidated(In thousands)Three Months Ended June 30, 2007:Operating revenues
    
    $
    169,744
    
    
    $
    26,480
    
    
    $
    75,136
    
    
    $
    185,697
    
    
    $
    150,002
    
    
    $
    (26,378
    )(a)
    
    $
    580,681Intersegment revenues
    
    
    1,396
    
    
    
    17,056
    
    
    
    49
    
    
    
    8,363
    
    
    
    31
    
    
    
    (26,895
    )
    
    
    Total revenues
    
    
    171,140
    
    
    
    43,536
    
    
    
    75,185
    
    
    
    194,060
    
    
    
    150,033
    
    
    
    (53,273
    )
    
    
    580,681Cost of energy
    
    
    65,881
    
    
    
    7,221
    
    
    
    45,095
    
    
    
    165,639
    
    
    
    125,863
    
    
    
    (53,166
    )(a)
    
    
    356,533Intersegment energy transfer
    
    
    3,628
    
    
    
    
    
    
    
    
    
    
    
    (3,628
    )
    
    
    
    
    
    
    
    
    
    
    Gross margin
    
    
    101,631
    
    
    
    36,315
    
    
    
    30,090
    
    
    
    32,049
    
    
    
    24,170
    
    
    
    (107
    )
    
    
    224,148Operating expenses
    
    
    73,577
    
    
    
    17,719
    
    
    
    25,921
    
    
    
    19,225
    
    
    
    12,961
    
    
    
    8,391
    (b)
    
    
    157,794Depreciation and amortization
    
    
    16,387
    
    
    
    7,041
    
    
    
    6,064
    
    
    
    6,187
    
    
    
    470
    
    
    
    3,546
    
    
    
    39,695Operating income
    
    
    11,667
    
    
    
    11,555
    
    
    
    (1,895
    )
    
    
    6,637
    
    
    
    10,739
    
    
    
    (12,044
    )
    
    
    26,659Interest income
    
    
    5,654
    
    
    
    776
    
    
    
    (543
    )
    
    
    1,298
    
    
    
    534
    
    
    
    (678
    )
    
    
    7,041Equity in earnings of EnergyCo
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,272
    
    
    
    2,272Other income (deductions)
    
    
    1,045
    
    
    
    724
    
    
    
    50
    
    
    
    998
    
    
    
    8
    
    
    
    (3,640
    )
    
    
    (815
    )Net interest charges
    
    
    (9,367
    )
    
    
    (6,871
    )
    
    
    (2,938
    )
    
    
    (6,576
    )
    
    
    (1,061
    )
    
    
    (3,079
    )
    
    
    (29,892
    )Segment earnings before taxes
    
    
    8,999
    
    
    
    6,184
    
    
    
    (5,326
    )
    
    
    2,357
    
    
    
    10,220
    
    
    
    (17,169
    )
    
    
    5,265Income taxes (benefit)
    
    
    3,563
    
    
    
    1,950
    
    
    
    (2,109
    )
    
    
    933
    
    
    
    3,854
    
    
    
    (23,166)
    (b,c)
    
    
    (14,975
    )Segment net earnings (loss)
    
    $
    5,436
    
    
    $
    4,234
    
    
    $
    (3,217
    )
    
    $
    1,424
    
    
    $
    6,366
    
    
    $
    5,997
    
    
    $
    20,240Six Months Ended June 30, 2007:Operating revenues
    
    $
    337,619
    
    
    $
    50,641
    
    
    $
    291,620
    
    
    $
    311,564
    
    
    $
    285,520
    
    
    $
    (42,782
    )(a)
    
    $
    1,234,182Intersegment revenues
    
    
    3,634
    
    
    
    33,823
    
    
    
    97
    
    
    
    17,047
    
    
    
    78
    
    
    
    (54,679
    )
    
    
    Total revenues
    
    
    341,253
    
    
    
    84,464
    
    
    
    291,717
    
    
    
    328,611
    
    
    
    285,598
    
    
    
    (97,461
    )
    
    
    1,234,182Cost of energy
    
    
    132,383
    
    
    
    14,392
    
    
    
    206,808
    
    
    
    241,986
    
    
    
    236,679
    
    
    
    (97,195
    )(a)
    
    
    735,053Intersegment energy transfer
    
    
    (2,030
    )
    
    
    
    
    
    
    
    
    
    
    2,030
    
    
    
    
    
    
    
    
    
    
    
    Gross margin
    
    
    210,900
    
    
    
    70,072
    
    
    
    84,909
    
    
    
    84,595
    
    
    
    48,919
    
    
    
    (266
    )
    
    
    499,129Operating expenses
    
    
    146,213
    
    
    
    36,369
    
    
    
    51,533
    
    
    
    44,926
    
    
    
    28,118
    
    
    
    10,852
    (b)
    
    
    318,011Depreciation and amortization
    
    
    32,772
    
    
    
    14,041
    
    
    
    12,245
    
    
    
    13,946
    
    
    
    941
    
    
    
    6,192
    
    
    
    80,137Operating income
    
    
    31,915
    
    
    
    19,662
    
    
    
    21,131
    
    
    
    25,723
    
    
    
    19,860
    
    
    
    (17,310
    )
    
    
    100,981Interest income
    
    
    11,771
    
    
    
    864
    
    
    
    453
    
    
    
    2,736
    
    
    
    1,017
    
    
    
    988
    
    
    
    17,829Equity in earnings of EnergyCo
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,610
    
    
    
    1,610Other income (deductions)
    
    
    1,182
    
    
    
    973
    
    
    
    172
    
    
    
    1,296
    
    
    
    (34
    )
    
    
    (3,441
    )
    
    
    148Net interest charges
    
    
    (19,186
    )
    
    
    (13,949
    )
    
    
    (5,954
    )
    
    
    (15,717
    )
    
    
    (1,176
    )
    
    
    (11,757
    )
    
    
    (67,739
    )Segment earnings before taxes
    
    
    25,682
    
    
    
    7,550
    
    
    
    15,802
    
    
    
    14,038
    
    
    
    19,667
    
    
    
    (29,910
    )
    
    
    52,829Income taxes (benefit)
    
    
    10,168
    
    
    
    2,378
    
    
    
    6,256
    
    
    
    5,557
    
    
    
    7,419
    
    
    
    (28,855)
    (b,c)
    
    
    2,923Segment net earnings (loss)
    
    $
    15,514
    
    
    $
    5,172
    
    
    $
    9,546
    
    
    $
    8,481
    
    
    $
    12,248
    
    
    $
    (1,055
    )
    
    $
    49,906At June 30, 2007:Total Assets
    
    $
    2,431,469
    
    
    $
    989,641
    
    
    $
    663,498
    
    
    $
    360,509
    
    
    $
    408,702
    
    
    $
    939,134
    
    
    $
    5,792,953Goodwill
    
    $
    102,601
    
    
    $
    260,144
    
    
    $
    
    
    
    $
    
    
    
    $
    131,768
    
    
    $
    
    
    
    $
    494,513
  27




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##### Table of Contents



PNM RESOURCES, INC. AND SUBSIDIARIES
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARY
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 PNMR SEGMENT INFORMATION
 Regulated
    
    
    UnregulatedPNM
    
    
    TNMP
    
    
    
    
    
    
    
    
    
    
    First
    
    
    Corporate2006
    
    Electric (d)
    
    
    Electric (d)
    
    
    PNM Gas
    
    
    Wholesale
    
    
    Choice
    
    
    and Other
    
    
    Consolidated(In thousands)Three Months Ended June 30, 2006:Operating revenues
    
    $
    144,080
    
    
    $
    43,437
    
    
    $
    68,869
    
    
    $
    141,820
    
    
    $
    154,908
    
    
    $
    (6,445
    )(a)
    
    $
    546,669Intersegment revenues
    
    
    2,256
    
    
    
    18,019
    
    
    
    92
    
    
    
    12,674
    
    
    
    
    
    
    
    (33,041
    )
    
    
    Total revenues
    
    
    146,336
    
    
    
    61,456
    
    
    
    68,961
    
    
    
    154,494
    
    
    
    154,908
    
    
    
    (39,486
    )
    
    
    546,669Cost of energy
    
    
    43,308
    
    
    
    22,652
    
    
    
    42,168
    
    
    
    119,869
    
    
    
    118,073
    
    
    
    (39,570
    )(a)
    
    
    306,500Intersegment energy transfer
    
    
    8,524
    
    
    
    
    
    
    
    
    
    
    
    (8,524
    )
    
    
    
    
    
    
    
    
    
    
    Gross margin
    
    
    94,504
    
    
    
    38,804
    
    
    
    26,793
    
    
    
    43,149
    
    
    
    36,835
    
    
    
    84
    
    
    
    240,169Operating expenses
    
    
    66,887
    
    
    
    20,957
    
    
    
    25,881
    
    
    
    18,380
    
    
    
    15,367
    
    
    
    2,452
    (e)
    
    
    149,924Depreciation and amortization
    
    
    14,316
    
    
    
    7,831
    
    
    
    5,994
    
    
    
    7,155
    
    
    
    510
    
    
    
    2,147
    
    
    
    37,953Operating income
    
    
    13,301
    
    
    
    10,016
    
    
    
    (5,082
    )
    
    
    17,614
    
    
    
    20,958
    
    
    
    (4,515
    )
    
    
    52,292Interest income
    
    
    6,626
    
    
    
    81
    
    
    
    468
    
    
    
    1,323
    
    
    
    116
    
    
    
    302
    
    
    
    8,916Other income (deductions)
    
    
    216
    
    
    
    2,097
    
    
    
    (11
    )
    
    
    330
    
    
    
    (225
    )
    
    
    (1,110
    )
    
    
    1,297Net interest charges
    
    
    (8,946
    )
    
    
    (7,271
    )
    
    
    (3,091
    )
    
    
    (9,512
    )
    
    
    (248
    )
    
    
    (7,430
    )
    
    
    (36,498
    )Segment earnings before income
taxes
    
    
    11,197
    
    
    
    4,923
    
    
    
    (7,716
    )
    
    
    9,755
    
    
    
    20,601
    
    
    
    (12,753
    )
    
    
    26,007Income taxes (benefit)
    
    
    4,433
    
    
    
    2,086
    
    
    
    (3,055
    )
    
    
    3,873
    
    
    
    7,321
    
    
    
    (4,634
    )(e)
    
    
    10,024Segment net earnings (loss)
    
    $
    6,764
    
    
    $
    2,837
    
    
    $
    (4,661
    )
    
    $
    5,882
    
    
    $
    13,280
    
    
    $
    (8,119
    )
    
    $
    15,983Six Months Ended June 30, 2006:Operating revenues
    
    $
    280,676
    
    
    $
    90,406
    
    
    $
    276,345
    
    
    $
    306,131
    
    
    $
    259,990
    
    
    $
    (11,078
    )(a)
    
    $
    1,202,470Intersegment revenues
    
    
    4,438
    
    
    
    33,735
    
    
    
    141
    
    
    
    27,851
    
    
    
    
    
    
    
    (66,165
    )
    
    
    Total revenues
    
    
    285,114
    
    
    
    124,141
    
    
    
    276,486
    
    
    
    333,982
    
    
    
    259,990
    
    
    
    (77,243
    )
    
    
    1,202,470Cost of energy
    
    
    88,782
    
    
    
    49,823
    
    
    
    199,859
    
    
    
    262,746
    
    
    
    208,408
    
    
    
    (77,146
    )(a)
    
    
    732,472Intersegment energy transfer
    
    
    3,346
    
    
    
    
    
    
    
    
    
    
    
    (3,346
    )
    
    
    
    
    
    
    
    
    
    
    Gross margin
    
    
    192,986
    
    
    
    74,318
    
    
    
    76,627
    
    
    
    74,582
    
    
    
    51,582
    
    
    
    (97
    )(e)
    
    
    469,998Operating expenses
    
    
    134,366
    
    
    
    42,489
    
    
    
    50,971
    
    
    
    30,165
    
    
    
    28,545
    
    
    
    2,618
    
    
    
    289,154Depreciation and amortization
    
    
    29,288
    
    
    
    15,563
    
    
    
    11,914
    
    
    
    10,316
    
    
    
    1,008
    
    
    
    4,194
    
    
    
    72,283Operating income
    
    
    29,332
    
    
    
    16,266
    
    
    
    13,742
    
    
    
    34,101
    
    
    
    22,029
    
    
    
    (6,909
    )
    
    
    108,561Interest income
    
    
    13,137
    
    
    
    336
    
    
    
    1,733
    
    
    
    2,602
    
    
    
    508
    
    
    
    751
    
    
    
    19,067Other income (deductions)
    
    
    414
    
    
    
    4,226
    
    
    
    90
    
    
    
    1,036
    
    
    
    (235
    )
    
    
    (742
    )
    
    
    4,789Net interest charges
    
    
    (17,543
    )
    
    
    (14,498
    )
    
    
    (6,088
    )
    
    
    (13,333
    )
    
    
    (472
    )
    
    
    (13,127
    )
    
    
    (65,061
    )Segment earnings before income
taxes
    
    
    25,340
    
    
    
    6,330
    
    
    
    9,477
    
    
    
    24,406
    
    
    
    21,830
    
    
    
    (20,027
    )
    
    
    67,356Income taxes (benefit)
    
    
    10,032
    
    
    
    2,325
    
    
    
    3,752
    
    
    
    9,673
    
    
    
    7,760
    
    
    
    (8,170
    )(e)
    
    
    25,372Segment net earnings (loss)
    
    $
    15,308
    
    
    $
    4,005
    
    
    $
    5,725
    
    
    $
    14,733
    
    
    $
    14,070
    
    
    $
    (11,857
    )
    
    $
    41,984At June 30, 2006:Total Assets
    
    $
    1,935,934
    
    
    $
    1,131,593
    
    
    $
    616,678
    
    
    $
    1,082,632
    
    
    $
    374,640
    
    
    $
    596,066
    
    
    $
    5,737,543Goodwill
    
    $
    
    
    
    $
    363,764
    
    
    $
    
    
    
    $
    
    
    
    $
    131,677
    
    
    $
    
    
    
    $
    495,441
  28




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##### Table of Contents



PNM RESOURCES, INC. AND SUBSIDIARIES
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARY
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 PNM SEGMENT INFORMATION
 PNM
    
    
    PNM
    
    
    PNM2007
    
    Electric (d)
    
    
    Gas
    
    
    Wholesale
    
    
    Other
    
    
    Consolidated(In thousands)Three Months Ended June 30, 2007:Operating revenues
    
    $
    169,744
    
    
    $
    75,136
    
    
    $
    157,104
    
    
    $
    (26,541
    )(a)
    
    $
    375,443Intersegment revenues
    
    
    1,396
    
    
    
    49
    
    
    
    8,364
    
    
    
    (9,809
    )
    
    
    Total revenues
    
    
    171,140
    
    
    
    75,185
    
    
    
    165,468
    
    
    
    (36,350
    )(a)
    
    
    375,443Cost of energy
    
    
    65,881
    
    
    
    45,095
    
    
    
    155,742
    
    
    
    (36,304
    )
    
    
    230,414Intersegment energy transfer
    
    
    3,628
    
    
    
    
    
    
    
    (3,628
    )
    
    
    
    
    
    
    Gross margin
    
    
    101,631
    
    
    
    30,090
    
    
    
    13,354
    
    
    
    (46
    )
    
    
    145,029Operating expenses
    
    
    73,577
    
    
    
    25,921
    
    
    
    14,159
    
    
    
    (196
    )
    
    
    113,461Depreciation and amortization
    
    
    16,387
    
    
    
    6,064
    
    
    
    3,113
    
    
    
    638
    
    
    
    26,202Operating income
    
    
    11,667
    
    
    
    (1,895
    )
    
    
    (3,918
    )
    
    
    (488
    )
    
    
    5,366Interest income
    
    
    5,654
    
    
    
    (543
    )
    
    
    1,270
    
    
    
    269
    
    
    
    6,650Other income (deductions)
    
    
    1,045
    
    
    
    50
    
    
    
    997
    
    
    
    (102
    )
    
    
    1,990Net interest charges
    
    
    (9,367
    )
    
    
    (2,938
    )
    
    
    (3,552
    )
    
    
    218
    
    
    
    (15,639
    )Segment earnings before income taxes
    
    
    8,999
    
    
    
    (5,326
    )
    
    
    (5,203
    )
    
    
    (103
    )
    
    
    (1,633
    )Income taxes (benefit)
    
    
    3,563
    
    
    
    (2,109
    )
    
    
    (2,060
    )
    
    
    (84
    )
    
    
    (690
    )Segment net earnings (loss)
    
    $
    5,436
    
    
    $
    (3,217
    )
    
    $
    (3,143
    )
    
    $
    (19
    )
    
    $
    (943
    )Six Months Ended June 30, 2007:Operating revenues
    
    $
    337,619
    
    
    $
    291,620
    
    
    $
    246,168
    
    
    $
    (43,155
    )(a)
    
    $
    832,252Intersegment revenues
    
    
    3,634
    
    
    
    97
    
    
    
    17,048
    
    
    
    (20,779
    )
    
    
    Total revenues
    
    
    341,253
    
    
    
    291,717
    
    
    
    263,216
    
    
    
    (63,934
    )
    
    
    832,252Cost of energy
    
    
    132,383
    
    
    
    206,808
    
    
    
    219,923
    
    
    
    (63,819
    )(a)
    
    
    495,295Intersegment energy transfer
    
    
    (2,030
    )
    
    
    
    
    
    
    2,030
    
    
    
    
    
    
    
    Gross margin
    
    
    210,900
    
    
    
    84,909
    
    
    
    41,263
    
    
    
    (115
    )
    
    
    336,957Operating expenses
    
    
    146,213
    
    
    
    51,533
    
    
    
    27,600
    
    
    
    (347
    )
    
    
    224,999Depreciation and amortization
    
    
    32,772
    
    
    
    12,245
    
    
    
    6,263
    
    
    
    1,278
    
    
    
    52,558Operating income
    
    
    31,915
    
    
    
    21,131
    
    
    
    7,400
    
    
    
    (1,046
    )
    
    
    59,400Interest income
    
    
    11,771
    
    
    
    453
    
    
    
    2,591
    
    
    
    537
    
    
    
    15,352Other income (deductions)
    
    
    1,182
    
    
    
    172
    
    
    
    1,295
    
    
    
    (201
    )
    
    
    2,448Net interest charges
    
    
    (19,186
    )
    
    
    (5,954
    )
    
    
    (7,194
    )
    
    
    603
    
    
    
    (31,731
    )Segment earnings before income taxes
    
    
    25,682
    
    
    
    15,802
    
    
    
    4,092
    
    
    
    (107
    )
    
    
    45,469Income taxes (benefit)
    
    
    10,168
    
    
    
    6,256
    
    
    
    1,620
    
    
    
    (380
    )
    
    
    17,664Segment net earnings
    
    $
    15,514
    
    
    $
    9,546
    
    
    $
    2,472
    
    
    $
    273
    
    
    $
    27,805At June 30, 2007:Total assets
    
    $
    2,451,206
    
    
    $
    671,002
    
    
    $
    362,912
    
    
    $
    532,942
    
    
    $
    4,018,062Goodwill
    
    $
    102,601
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    102,601
  29




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##### Table of Contents



PNM RESOURCES, INC. AND SUBSIDIARIES
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARY
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 PNM SEGMENT INFORMATION
 PNM
    
    
    PNM
    
    
    PNM2006
    
    Electric (d)
    
    
    Gas
    
    
    Wholesale
    
    
    Other
    
    
    Consolidated(In thousands)Three Months Ended June 30, 2006:Operating revenues
    
    $
    144,080
    
    
    $
    68,869
    
    
    $
    109,063
    
    
    $
    (6,642
    )(a)
    
    $
    315,370Intersegment revenues
    
    
    2,133
    
    
    
    92
    
    
    
    
    
    
    
    (2,225
    )
    
    
    Affiliated sales
    
    
    123
    
    
    
    
    
    
    
    12,674
    
    
    
    
    
    
    
    12,797Total revenues
    
    
    146,336
    
    
    
    68,961
    
    
    
    121,737
    
    
    
    (8,867
    )
    
    
    328,167Cost of energy
    
    
    43,308
    
    
    
    42,168
    
    
    
    108,756
    
    
    
    (8,822
    )(a)
    
    
    185,410Intersegment energy transfer
    
    
    8,524
    
    
    
    
    
    
    
    (8,524
    )
    
    
    
    
    
    
    Gross margin
    
    
    94,504
    
    
    
    26,793
    
    
    
    21,505
    
    
    
    (45
    )
    
    
    142,757Operating expenses
    
    
    66,887
    
    
    
    25,881
    
    
    
    14,928
    
    
    
    (442
    )
    
    
    107,254Depreciation and amortization
    
    
    14,316
    
    
    
    5,994
    
    
    
    3,191
    
    
    
    788
    
    
    
    24,289Operating income
    
    
    13,301
    
    
    
    (5,082
    )
    
    
    3,386
    
    
    
    (391
    )
    
    
    11,214Interest income
    
    
    6,626
    
    
    
    468
    
    
    
    1,276
    
    
    
    300
    
    
    
    8,670Other income (deductions)
    
    
    216
    
    
    
    (11
    )
    
    
    315
    
    
    
    (451
    )
    
    
    69Net interest charges
    
    
    (8,946
    )
    
    
    (3,091
    )
    
    
    (3,842
    )
    
    
    980
    
    
    
    (14,899
    )Segment earnings before income
taxes
    
    
    11,197
    
    
    
    (7,716
    )
    
    
    1,135
    
    
    
    438
    
    
    
    5,054Income taxes (benefit)
    
    
    4,433
    
    
    
    (3,055
    )
    
    
    450
    
    
    
    362
    
    
    
    2,190Segment net earnings (loss)
    
    $
    6,764
    
    
    $
    (4,661
    )
    
    $
    685
    
    
    $
    76
    
    
    $
    2,864Six Months Ended June 30, 2006:Operating revenues
    
    $
    280,676
    
    
    $
    276,345
    
    
    $
    273,374
    
    
    $
    (11,383
    )(a)
    
    $
    819,012Intersegment revenues
    
    
    4,191
    
    
    
    141
    
    
    
    
    
    
    
    (4,332
    )
    
    
    Affiliated sales
    
    
    247
    
    
    
    
    
    
    
    27,851
    
    
    
    
    
    
    
    28,098Total revenues
    
    
    285,114
    
    
    
    276,486
    
    
    
    301,225
    
    
    
    (15,715
    )
    
    
    847,110Cost of energy
    
    
    88,782
    
    
    
    199,859
    
    
    
    251,633
    
    
    
    (15,602
    )(a)
    
    
    524,672Intersegment energy transfer
    
    
    3,346
    
    
    
    
    
    
    
    (3,346
    )
    
    
    
    
    
    
    Gross margin
    
    
    192,986
    
    
    
    76,627
    
    
    
    52,938
    
    
    
    (113
    )
    
    
    322,438Operating expenses
    
    
    134,366
    
    
    
    50,971
    
    
    
    26,713
    
    
    
    (2,137
    )
    
    
    209,913Depreciation and amortization
    
    
    29,288
    
    
    
    11,914
    
    
    
    6,352
    
    
    
    1,590
    
    
    
    49,144Operating income
    
    
    29,332
    
    
    
    13,742
    
    
    
    19,873
    
    
    
    434
    
    
    
    63,381Interest income
    
    
    13,137
    
    
    
    1,733
    
    
    
    2,555
    
    
    
    598
    
    
    
    18,023Other income (deductions)
    
    
    414
    
    
    
    90
    
    
    
    1,021
    
    
    
    (611
    )
    
    
    914Net interest charges
    
    
    (17,543
    )
    
    
    (6,088
    )
    
    
    (7,663
    )
    
    
    2,975
    
    
    
    (28,319
    )Segment earnings before income
taxes
    
    
    25,340
    
    
    
    9,477
    
    
    
    15,786
    
    
    
    3,396
    
    
    
    53,999Income taxes
    
    
    10,032
    
    
    
    3,752
    
    
    
    6,250
    
    
    
    1,129
    
    
    
    21,163Segment net earnings
    
    $
    15,308
    
    
    $
    5,725
    
    
    $
    9,536
    
    
    $
    2,267
    
    
    $
    32,836At June 30, 2006:Total assets
    
    $
    1,943,340
    
    
    $
    616,678
    
    
    $
    410,579
    
    
    $
    485,720
    
    
    $
    3,456,317
  30




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##### Table of Contents



PNM RESOURCES, INC. AND SUBSIDIARIES
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARY
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 TNMP SEGMENT INFORMATION
   (a)
    
    Reflects EITF 03-11 impact of $26.5 million and $6.6 million for the three months
ended June 30, 2007 and 2006 and $43.2 million and $11.4 million for the six months ended
June 30, 2007 and 2006.(b)
    
    For the three months and six months ended June 30, 2007, includes EnergyCo
formation costs of $3.0 million and $4.2 million, impairment loss on Twin Oaks intangible
assets of $3.4 million and $3.4 million, and a loss related to the contribution of Altura
to EnergyCo of $3.6 million and $3.6 million (all included in operating expenses) and an
income tax benefit of $4.0 million and $4.4 million (included in income taxes).(c)
    
    Includes an income tax benefit of $16.0 million for the settlement with the IRS on
previously unrecognized income tax benefits. See Note 15.(d)
    
    Operations and assets, including goodwill, transferred from TNMP Electric to PNM
Electric on January 1, 2007 are included in PNM Electric and excluded from TNMP Electric
in 2007, and excluded from PNM Electric and included in TNMP Electric in 2006.(e)
    
    For the three months and six months ended June 30, 2006, includes TNP and Twin Oaks
acquisition integration costs of $1.8 million and $2.8 million and an income tax benefit
of $0.7 million and $1.1 million in income taxes.
 (4) Energy Related Derivative Contracts
 OVERVIEW
     31




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##### Table of Contents



PNM RESOURCES, INC. AND SUBSIDIARIES
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARY
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
     32




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##### Table of Contents



PNM RESOURCES, INC. AND SUBSIDIARIES
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARY
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 PNMR
  June 30,
    
    
    December 31,
    
    
    June 30,
    
    
    December 31,2007
    
    
    2006
    
    
    2007
    
    
    2006Type of Derivative
    
    Mark-to-Market Instruments
    
    
    Hedge Instruments(In thousands)Current AssetsEnergy contracts
    
    $
    26,686
    
    
    $
    17,773
    
    
    $
    1,489
    
    
    $
    7,208Gas fixed-for-float swaps and futures
    
    
    56,341
    
    
    
    21,875
    
    
    
    2,778
    
    
    
    4,655Options
    
    
    4,294
    
    
    
    4,032
    
    
    
    12
    
    
    
    PGAC portion of options, swaps and hedges
    
    
    
    
    
    
    
    
    
    
    6,831
    
    
    
    16,748Total current assets
    
    
    87,321
    
    
    
    43,680
    
    
    
    11,110
    
    
    
    28,611Deferred ChargesEnergy contracts
    
    
    4,335
    
    
    
    2,666
    
    
    
    
    
    
    
    26,991Gas fixed-for-float swaps
    
    
    17,521
    
    
    
    7,288
    
    
    
    2,943
    
    
    
    1,872Options
    
    
    2,749
    
    
    
    1,028
    
    
    
    
    
    
    
    PGAC portion of options, swaps and hedges
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,337Total deferred charges
    
    
    24,605
    
    
    
    10,982
    
    
    
    2,943
    
    
    
    32,200Total Assets
    
    
    111,926
    
    
    
    54,662
    
    
    
    14,053
    
    
    
    60,811Current LiabilitiesEnergy contracts
    
    
    (37,286
    )
    
    
    (16,499
    )
    
    
    
    
    
    
    Gas fixed-for-float swaps
    
    
    (51,499
    )
    
    
    (21,518
    )
    
    
    (1,339
    )
    
    
    (6,845
    )Options
    
    
    (10,035
    )
    
    
    (4,003
    )
    
    
    (91
    )
    
    
    (109
    )PGAC portion of options, swaps and hedges
    
    
    
    
    
    
    
    
    
    
    (6,831
    )
    
    
    (16,748
    )Total current liabilities
    
    
    (98,820
    )
    
    
    (42,020
    )
    
    
    (8,261
    )
    
    
    (23,702
    )Long-term LiabilitiesEnergy contracts
    
    
    (9,499
    )
    
    
    (7,472
    )
    
    
    (1,666
    )
    
    
    (154
    )Gas fixed-for-float swaps
    
    
    (4,183
    )
    
    
    (862
    )
    
    
    (387
    )
    
    
    (1,915
    )Options
    
    
    (3,898
    )
    
    
    (842
    )
    
    
    
    
    
    
    PGAC portion of options, swaps and hedges
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,337
    )Total long-term liabilities
    
    
    (17,580
    )
    
    
    (9,176
    )
    
    
    (2,053
    )
    
    
    (5,406
    )Total Liabilities
    
    
    (116,400
    )
    
    
    (51,196
    )
    
    
    (10,314
    )
    
    
    (29,108
    )Net Total Assets and Liabilities
    
    $
    (4,474
    )
    
    $
    3,466
    
    
    $
    3,739
    
    
    $
    31,703
  33




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##### Table of Contents



PNM RESOURCES, INC. AND SUBSIDIARIES
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARY
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 PNM
  June 30,
    
    
    December 31,
    
    
    June 30,
    
    
    December 31,2007
    
    
    2006
    
    
    2007
    
    
    2006Type of Derivative
    
    Mark-to-Market Instruments
    
    
    Hedge Instruments(In thousands)Current AssetsEnergy contracts
    
    $
    13,803
    
    
    $
    16,374
    
    
    $
    1,489
    
    
    $
    1,057Gas fixed-for-float swaps
    
    
    17,908
    
    
    
    1,950
    
    
    
    2,755
    
    
    
    1,615Options
    
    
    2,505
    
    
    
    2,986
    
    
    
    
    
    
    
    PGAC portion of options, swaps and hedges
    
    
    
    
    
    
    
    
    
    
    6,831
    
    
    
    16,748Total current assets
    
    
    34,216
    
    
    
    21,310
    
    
    
    11,075
    
    
    
    19,420Deferred ChargesEnergy contracts
    
    
    372
    
    
    
    2,666
    
    
    
    
    
    
    
    Gas fixed-for-float swaps
    
    
    14,108
    
    
    
    7,101
    
    
    
    2,943
    
    
    
    1,872Options
    
    
    2,414
    
    
    
    825
    
    
    
    
    
    
    
    PGAC portion of options, swaps and hedges
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,337Total deferred charges
    
    
    16,894
    
    
    
    10,592
    
    
    
    2,943
    
    
    
    5,209Total Assets
    
    
    51,110
    
    
    
    31,902
    
    
    
    14,018
    
    
    
    24,629Current LiabilitiesEnergy contracts
    
    
    (15,552
    )
    
    
    (10,928
    )
    
    
    
    
    
    
    Gas fixed-for-float swaps
    
    
    (28,653
    )
    
    
    (6,440
    )
    
    
    (231
    )
    
    
    (2,872
    )Options
    
    
    (5,709
    )
    
    
    (3,255
    )
    
    
    
    
    
    
    PGAC portion of options, swaps and hedges
    
    
    
    
    
    
    
    
    
    
    (6,831
    )
    
    
    (16,748
    )Total current liabilities
    
    
    (49,914
    )
    
    
    (20,623
    )
    
    
    (7,062
    )
    
    
    (19,620
    )Long-term LiabilitiesEnergy contracts
    
    
    (4,865
    )
    
    
    (7,472
    )
    
    
    (1,666
    )
    
    
    (154
    )Gas fixed-for-float swaps
    
    
    (877
    )
    
    
    (421
    )
    
    
    (387
    )
    
    
    (1,915
    )Options
    
    
    (3,765
    )
    
    
    (801
    )
    
    
    
    
    
    
    PGAC portion of options, swaps and hedges
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,337
    )Total long-term liabilities
    
    
    (9,507
    )
    
    
    (8,694
    )
    
    
    (2,053
    )
    
    
    (5,406
    )Total Liabilities
    
    
    (59,421
    )
    
    
    (29,317
    )
    
    
    (9,115
    )
    
    
    (25,026
    )Net Total Assets and Total Liabilities
    
    $
    (8,311
    )
    
    $
    2,585
    
    
    $
    4,903
    
    
    $
    (397
    )
  34




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##### Table of Contents



PNM RESOURCES, INC. AND SUBSIDIARIES
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARY
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (5) Earnings Per Share
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006(As
    
    
    
    
    
    (AsRestated,
    
    
    
    
    
    Restated,See note 16)
    
    
    
    
    
    See note 16)(In thousands, except per share amounts)Net Earnings
    
    $
    20,240
    
    
    $
    15,983
    
    
    $
    49,906
    
    
    $
    41,984Average Number of Common Shares Outstanding
    
    
    76,695
    
    
    
    68,852
    
    
    
    76,677
    
    
    
    68,819Dilutive effect of common stock equivalents (a):Stock options and restricted stock
    
    
    659
    
    
    
    520
    
    
    
    680
    
    
    
    492Equity-linked units
    
    
    1,439
    
    
    
    61
    
    
    
    1,089
    
    
    
    38Average Common and Common Equivalent
Shares
    
    
    78,793
    
    
    
    69,433
    
    
    
    78,446
    
    
    
    69,349Net Earnings per Share of Common Stock:Basic
    
    $
    0.26
    
    
    $
    0.23
    
    
    $
    0.65
    
    
    $
    0.61Diluted
    
    $
    0.26
    
    
    $
    0.23
    
    
    $
    0.64
    
    
    $
    0.61
 (a)
    
    Excludes the effect of average anti-dilutive common stock equivalents related to
out-of-the-money stock options of zero and 661,855 for the three months and zero and
736,869 for the six months ended June 30, 2007 and 2006, respectively.
  35




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##### Table of Contents



PNM RESOURCES, INC. AND SUBSIDIARIES
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARY
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (6) Stock-Based Compensation
  Stock Options
  Weighted-Weighted-
    
    
    Aggregate
    
    
    AverageAverage
    
    
    Intrinsic
    
    
    RemainingExercise
    
    
    Value
    
    
    Contract LifeOptions for PNMR Common Stock
    
    Shares
    
    
    Price
    
    
    (In thousands)
    
    
    (Years)Outstanding at beginning of period
    
    
    2,999,606
    
    
    $
    21.02Granted
    
    
    762,400
    
    
    $
    30.50Exercised
    
    
    (431,065
    )
    
    $
    20.45Forfeited
    
    
    (19,837
    )
    
    $
    27.18Outstanding at end of period
    
    
    3,311,104
    
    
    $
    23.24
    
    
    $
    15,063
    
    
    
    7.35Options exercisable at end of period
    
    
    1,898,008
    
    
    $
    19.73
    
    
    $
    15,292
    
    
    
    6.08Options available for future grant
    
    
    2,477,194
  Options for PNMR Common Stock
    
    2007
    
    
    2006(In thousands,except per share amounts)Weighted-average grant date fair value per share of options granted
    
    $
    4.70
    
    
    $
    3.87Total intrinsic value of options exercised during the period
    
    $
    4,847
    
    
    $
    2,556
  36




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##### Table of Contents



PNM RESOURCES, INC. AND SUBSIDIARIES
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARY
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 Restricted Stock
  Weighted-AverageNonvested Restricted
    
    
    
    
    
    Grant-DatePNMR Common Stock
    
    Shares
    
    
    Fair ValueNonvested at beginning of period
    
    
    161,769
    
    
    $
    24.55Granted
    
    
    102,400
    
    
    $
    28.78Vested
    
    
    (69,551
    )
    
    $
    23.35Nonvested at end of period
    
    
    194,618
    
    
    $
    26.09
   37




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##### Table of Contents



PNM RESOURCES, INC. AND SUBSIDIARIES
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARY
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (7) Capitalization
  Short-term Debt
   June 30,
    
    
    December 31,Short-term Debt
    
    2007
    
    
    2006(In thousands)PNMCommercial paper
    
    $
    188,370
    
    
    $
    251,300Revolving credit facility
    
    
    47,300
    
    
    
    Local lines of credit
    
    
    6,400
    
    
    
    242,070
    
    
    
    251,300PNMRCommercial paper
    
    
    317,600
    
    
    
    263,550Bridge loan
    
    
    
    
    
    
    249,495$
    559,670
    
    
    $
    764,345
   Long-term Debt
   38




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##### Table of Contents



PNM RESOURCES, INC. AND SUBSIDIARIES
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARY
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
   Stockholders Equity
  (8) Pension and Other Postretirement Benefit Plans
   39




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##### Table of Contents



PNM RESOURCES, INC. AND SUBSIDIARIES
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARY
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 PNM Plans
  Three Months Ended June 30,Other Postretirement
    
    
    Executive RetirementPension Plan
    
    
    Benefits
    
    
    Program2007
    
    
    2006
    
    
    2007
    
    
    2006
    
    
    2007
    
    
    2006(In thousands)Components of Net PeriodicBenefit Cost (Income)Service cost
    
    $
    36
    
    
    $
    126
    
    
    $
    632
    
    
    $
    678
    
    
    $
    14
    
    
    $
    14Interest cost
    
    
    7,953
    
    
    
    7,710
    
    
    
    1,928
    
    
    
    1,842
    
    
    
    272
    
    
    
    264Expected long-term return on assets
    
    
    (10,195
    )
    
    
    (10,139
    )
    
    
    (1,464
    )
    
    
    (1,355
    )
    
    
    
    
    
    
    Amortization of net loss
    
    
    972
    
    
    
    1,210
    
    
    
    1,461
    
    
    
    1,670
    
    
    
    24
    
    
    
    25Amortization of prior service cost
    
    
    79
    
    
    
    79
    
    
    
    (1,422
    )
    
    
    (1,422
    )
    
    
    3
    
    
    
    3Net periodic benefit cost (income)
    
    $
    (1,155
    )
    
    $
    (1,014
    )
    
    $
    1,135
    
    
    $
    1,413
    
    
    $
    313
    
    
    $
    306
 Six Months Ended June 30,Other Postretirement
    
    
    Executive RetirementPension Plan
    
    
    Benefits
    
    
    Program2007
    
    
    2006
    
    
    2007
    
    
    2006
    
    
    2007
    
    
    2006(In thousands)Components of Net PeriodicBenefit Cost (Income)Service cost
    
    $
    72
    
    
    $
    252
    
    
    $
    1,264
    
    
    $
    1,356
    
    
    $
    28
    
    
    $
    28Interest cost
    
    
    15,906
    
    
    
    15,420
    
    
    
    3,856
    
    
    
    3,684
    
    
    
    544
    
    
    
    527Expected long-term return on assets
    
    
    (20,389
    )
    
    
    (20,277
    )
    
    
    (2,927
    )
    
    
    (2,709
    )
    
    
    
    
    
    
    Amortization of net loss
    
    
    1,944
    
    
    
    2,420
    
    
    
    2,922
    
    
    
    3,340
    
    
    
    46
    
    
    
    50Amortization of prior service cost
    
    
    158
    
    
    
    158
    
    
    
    (2,844
    )
    
    
    (2,844
    )
    
    
    6
    
    
    
    6Net periodic benefit cost (income)
    
    $
    (2,309
    )
    
    $
    (2,027
    )
    
    $
    2,271
    
    
    $
    2,827
    
    
    $
    624
    
    
    $
    611
   40




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##### Table of Contents



PNM RESOURCES, INC. AND SUBSIDIARIES
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARY
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 TNMP Plans
  Three Months Ended June 30,Other Postretirement
    
    
    Executive RetirementPension Plan
    
    
    Benefits
    
    
    Program2007
    
    
    2006
    
    
    2007
    
    
    2006
    
    
    2007
    
    
    2006(In thousands)Components of Net PeriodicBenefit Cost (Income)Service cost
    
    $
    
    
    
    $
    
    
    
    $
    98
    
    
    $
    106
    
    
    $
    
    
    
    $
    Interest cost
    
    
    1,057
    
    
    
    1,085
    
    
    
    165
    
    
    
    178
    
    
    
    19
    
    
    
    19Expected long-term return on assets
    
    
    (1,710
    )
    
    
    (1,754
    )
    
    
    (114
    )
    
    
    (114
    )
    
    
    
    
    
    
    Amortization of net gain
    
    
    (2
    )
    
    
    
    
    
    
    (39
    )
    
    
    
    
    
    
    
    
    
    
    Amortization of prior service cost
    
    
    
    
    
    
    
    
    
    
    15
    
    
    
    15
    
    
    
    
    
    
    
    Net Periodic Benefit Cost (Income)
    
    $
    (655
    )
    
    $
    (669
    )
    
    $
    125
    
    
    $
    185
    
    
    $
    19
    
    
    $
    19
 Six Months Ended June 30,Other Postretirement
    
    
    Executive RetirementPension Plan
    
    
    Benefits
    
    
    Program2007
    
    
    2006
    
    
    2007
    
    
    2006
    
    
    2007
    
    
    2006(In thousands)Components of Net PeriodicBenefit Cost (Income)Service cost
    
    $
    
    
    
    $
    
    
    
    $
    196
    
    
    $
    212
    
    
    $
    
    
    
    $
    Interest cost
    
    
    2,114
    
    
    
    2,170
    
    
    
    330
    
    
    
    355
    
    
    
    38
    
    
    
    38Expected long-term return on assets
    
    
    (3,420
    )
    
    
    (3,508
    )
    
    
    (228
    )
    
    
    (228
    )
    
    
    
    
    
    
    Amortization of net gain
    
    
    (4
    )
    
    
    
    
    
    
    (78
    )
    
    
    
    
    
    
    
    
    
    
    Amortization of prior service cost
    
    
    
    
    
    
    
    
    
    
    30
    
    
    
    30
    
    
    
    
    
    
    
    Net Periodic Benefit Cost (Income)
    
    $
    (1,310
    )
    
    $
    (1,338
    )
    
    $
    250
    
    
    $
    369
    
    
    $
    38
    
    
    $
    38
   41




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##### Table of Contents



PNM RESOURCES, INC. AND SUBSIDIARIES
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARY
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 9) Commitments and Contingencies
 OVERVIEW
  COMMITMENTS AND CONTINGENCIES RELATED TO THE ENVIRONMENT
 PNM
 Renewable Portfolio Standard
    42




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##### Table of Contents



PNM RESOURCES, INC. AND SUBSIDIARIES
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARY
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 The Clean Air Act
 Regional Haze
 2 2 2
 New Source Review Rules
  Citizen Suit Under the Clean Air Act
   43




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##### Table of Contents



PNM RESOURCES, INC. AND SUBSIDIARIES
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARY
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
  Navajo Nation Environmental Issues
      Four Corners Federal Implementation Plan Litigation
    44




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##### Table of Contents



PNM RESOURCES, INC. AND SUBSIDIARIES
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARY
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
  Santa Fe Generating Station
    Coal Combustion Waste Disposal
  NRC Matters
   45




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##### Table of Contents



PNM RESOURCES, INC. AND SUBSIDIARIES
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARY
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
   46




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##### Table of Contents



PNM RESOURCES, INC. AND SUBSIDIARIES
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARY
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 OTHER COMMITMENTS AND CONTINGENCIES
 PNM
 PVNGS Liability and Insurance Matters
  San Juan River Adjudication
  Conflicts at San Juan Mine Involving Oil and Gas Leaseholders
  Western United States Wholesale Power Market
   47




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##### Table of Contents



PNM RESOURCES, INC. AND SUBSIDIARIES
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARY
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 California Refund Proceeding
   Pacific Northwest Refund Proceeding
   48




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##### Table of Contents



PNM RESOURCES, INC. AND SUBSIDIARIES
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARY
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 FERC Gaming Partnerships Order
   California Power Exchange and Pacific Gas and Electric Bankruptcies
   49




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##### Table of Contents



PNM RESOURCES, INC. AND SUBSIDIARIES
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARY
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 California Attorney General Complaint
  California Antitrust Litigation
  Regional Transmission Issues
 Transmission Services
   50




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##### Table of Contents



PNM RESOURCES, INC. AND SUBSIDIARIES
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARY
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
  FERC Office of Market Oversight and Investigations
   Natural Gas Royalties Qui Tam Litigation
     51




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##### Table of Contents



PNM RESOURCES, INC. AND SUBSIDIARIES
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARY
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 Biomass Project
  Valencia Energy Facility
   (10) Regulatory and Rate Matters
 PNMR
 Price-to-Beat Base Rate Reset
   52




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##### Table of Contents



PNM RESOURCES, INC. AND SUBSIDIARIES
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARY
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 Energy Agreement
    PNM
 Gas Rate Case
   53




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##### Table of Contents



PNM RESOURCES, INC. AND SUBSIDIARIES
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARY
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 Electric Rate Case
  Complaint Against Southwestern Public Service Company
   54




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##### Table of Contents



PNM RESOURCES, INC. AND SUBSIDIARIES
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARY
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 TNMP
 TNMP Competitive Transition Charge True-Up Proceeding
   Interest Rate for Calculating Carrying Charges on TNMPs Stranded Cost
  60-Day Rate Review
  (11) EnergyCo Joint Venture
   55




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##### Table of Contents



PNM RESOURCES, INC. AND SUBSIDIARIES
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARY
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
        56




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##### Table of Contents



PNM RESOURCES, INC. AND SUBSIDIARIES
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARY
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
  Three Months
    
    
    Six MonthsEnded
    
    
    EndedJune 30, 2007(In thousands)Operating revenues
    
    $
    14,366
    
    
    $
    14,366Operating expenses
    
    
    10,990
    
    
    
    12,314Net earnings
    
    $
    3,376
    
    
    $
    2,05250 percent of net earnings
    
    $
    1,688
    
    
    $
    1,026Amortization of basis difference in EnergyCo
    
    
    584
    
    
    
    584PNMR equity in net earnings of EnergyCo
    
    $
    2,272
    
    
    $
    1,610
 As of June 30,2007(In thousands)Current assets
    
    $
    38,074Deferred assets
    
    
    52,537Net utility plant
    
    
    573,508Total assets
    
    
    664,119Current liabilities
    
    
    55,877Long-term liabilities
    
    
    210,440Total liabilities
    
    
    266,317Owners equity
    
    $
    397,80250 percent of owners equity
    
    $
    198,901Less unamortized PNMR basis difference in EnergyCo
    
    
    757PNMR equity investment in EnergyCo
    
    $
    198,144
  57




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PNM RESOURCES, INC. AND SUBSIDIARIES
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARY
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (12) Related Party Transactions
   Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006(In thousands)Electricity, transmission and related
services billings:PNM to TNMP
    
    $
    
    
    
    $
    12,677
    
    
    $
    126
    
    
    $
    27,909TNMP to PNMR
    
    
    16,873
    
    
    
    17,880
    
    
    
    33,386
    
    
    
    33,167Shared services billings from PNMR to:PNM
    
    
    23,697
    
    
    
    30,759
    
    
    
    49,595
    
    
    
    62,376TNMP
    
    
    4,587
    
    
    
    8,948
    
    
    
    10,117
    
    
    
    18,288Services billings from PNMR to EnergyCo
    
    
    2,344
    
    
    
    
    
    
    
    3,414
    
    
    
    Income tax sharing payments from:PNM to PNMR
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    TNMP to PNMR
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
  58




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PNM RESOURCES, INC. AND SUBSIDIARIES
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARY
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (13) New Accounting Pronouncements
  (14) Discontinued Operations
     Three Months
    
    
    Six MonthsEnded
    
    
    EndedJune 30, 2006(In thousands)Operating revenues
    
    $
    21,760
    
    
    $
    48,897Operating expenses and other income
    
    
    20,149
    
    
    
    45,812Earnings from discontinued operations before income tax
    
    
    1,611
    
    
    
    3,085Income tax expense
    
    
    (16
    )
    
    
    987Earnings from discontinued operations
    
    $
    1,627
    
    
    $
    2,098
  59




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PNM RESOURCES, INC. AND SUBSIDIARIES
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARY
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
  January 1,2007(In thousands)Current assets
    
    $
    15,444Other property and investments
    
    
    12Utility plant, net
    
    
    96,610Goodwill
    
    
    102,601Deferred charges
    
    
    1,794Total assets transferred to PNM
    
    
    216,461Current liabilities
    
    
    17,313Long-term debt
    
    
    1,065Deferred credits and other liabilities
    
    
    31,060Total liabilities transferred to PNM
    
    
    49,438Net assets transferred between entities
    
    $
    167,023
 (15) Income Taxes
      60




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PNM RESOURCES, INC. AND SUBSIDIARIES
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARY
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
   (16) Restatement
      61




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PNM RESOURCES, INC. AND SUBSIDIARIES
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARY
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
  PNMR
 Three Months Ended June 30, 2006
    
    
    Six Months Ended June 30, 2006As Previously
    
    
    
    
    
    
    As PreviouslyReported
    
    
    As Restated
    
    
    Reported
    
    
    As Restated(In thousands, except per share amounts)
    
    
    (In thousands, except per share amounts)Consolidated Statements of EarningsEnergy production costs
    
    $
    43,714
    
    
    $
    44,038
    
    
    $
    81,301
    
    
    $
    81,949Net earnings*
    
    
    16,307
    
    
    
    15,983
    
    
    
    42,632
    
    
    
    41,984Net earnings per shareBasic
    
    
    0.24
    
    
    
    0.23
    
    
    
    0.62
    
    
    
    0.61Diluted
    
    
    0.23
    
    
    
    0.23
    
    
    
    0.61
    
    
    
    0.61Consolidated Statements of Cash FlowsDeferred credits**
    
    
    
    
    
    
    
    
    
    
    (9,816
    )
    
    
    (9,168
    )Consolidated Statements of Comprehensive Income (Loss)Total comprehensive income
    
    
    13,740
    
    
    
    13,416
    
    
    
    35,053
    
    
    
    34,405
 *
    
    Net earnings also appears in the Consolidated Statements of Cash Flows and Consolidated Statements of Comprehensive Income (Loss)**
    
    Deferred credits was combined into other liabilities in the June 30, 2006 Form 10-Q, as originally filed
 PNM
 Three Months Ended June 30, 2006
    
    
    Six Months Ended June 30, 2006As Previously
    
    
    
    
    
    
    As PreviouslyReported
    
    
    As Restated
    
    
    Reported
    
    
    As Restated(In thousands)
    
    
    (In thousands)Consolidated Statements of EarningsEnergy production costs
    
    $
    42,080
    
    
    $
    42,404
    
    
    $
    79,667
    
    
    $
    80,315Net earnings*
    
    
    3,320
    
    
    
    2,996
    
    
    
    33,748
    
    
    
    33,100Net earnings available for common
stock**
    
    
    3,188
    
    
    
    2,864
    
    
    
    33,484
    
    
    
    32,836Consolidated Statements of Cash FlowsDeferred credits***
    
    
    
    
    
    
    
    
    
    
    (9,309
    )
    
    
    (8,661
    )Consolidated Statements of Comprehensive Income (Loss)Total comprehensive income
    
    
    1,098
    
    
    
    774
    
    
    
    29,049
    
    
    
    28,401
 *
    
    Net earnings also appears in the Consolidated Statements of Cash Flows**
    
    Net earnings available for common stock also appears in the Consolidated Statements of Comprehensive Income (Loss)***
    
    Deferred credits was combined into other liabilities in the June 30, 2006 Form 10-Q, as originally filed
  62




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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  MD&A FOR PNMR
 BUSINESS AND STRATEGY
 Overview
   EnergyCo Joint Venture
   
    
    Competitive retail energy sales;
    
    Development, operation and ownership of diverse generation assets; and
    
    Wholesale marketing and trading to optimize its assets.
  TNMP Asset Transfer to PNM
   63




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##### Table of Contents



RESULTS OF OPERATIONS
 Executive Summary
  Three Months Ended June 30,
    
    
    Six Months Ended June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006(In thousands, except per share amounts)Net earnings
    
    $
    20,240
    
    
    $
    15,983
    
    
    $
    49,906
    
    
    $
    41,984Average common and common
equivalent shares
    
    
    78,793
    
    
    
    69,433
    
    
    
    78,446
    
    
    
    69,349Net earnings per diluted share
    
    $
    0.26
    
    
    $
    0.23
    
    
    $
    0.64
    
    
    $
    0.61
  Three Months Ended
    
    
    Six Months EndedJune 30, 2007
    
    
    June 30, 2007(In millions)After-tax impactsIRS settlement
    
    $
    16.0
    
    
    $
    16.0Plant performance
    
    
    7.2
    
    
    
    10.9Regulated load growth and weather
    
    
    1.0
    
    
    
    7.3First Choice (excluding mark-to-market)
    
    
    (5.7
    )
    
    
    2.4Wholesale marketing activity
    
    
    0.2
    
    
    
    (6.3
    )Mark-to-market
    
    
    (8.6
    )
    
    
    (9.3
    )Coal costs
    
    
    (2.6
    )
    
    
    (4.8
    )Twin Oaks and EnergyCo
    
    
    (6.0
    )
    
    
    (6.8
    )Financing
    
    
    (0.8
    )
    
    
    (3.5
    )Other
    
    
    3.6
    
    
    
    2.0Net change in net earnings
    
    $
    4.3
    
    
    $
    7.9
  64




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Segment Information
     65




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##### Table of Contents



Regulated Operations
 PNM Electric
  Three Months Ended June 30,
    
    
    Six Months Ended June 30,2007
    
    
    2006
    
    
    Change
    
    
    %
    
    
    2007
    
    
    2006
    
    
    Change
    
    
    %(In millions)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (In millions)Total operating
revenues
    
    $
    171.1
    
    
    $
    146.3
    
    
    $
    24.8
    
    
    
    17.0
    
    
    $
    341.3
    
    
    $
    285.1
    
    
    $
    56.2
    
    
    
    19.7Cost of energy
    
    
    65.9
    
    
    
    43.3
    
    
    
    22.6
    
    
    
    52.1
    
    
    
    132.4
    
    
    
    88.8
    
    
    
    43.6
    
    
    
    49.1Intersegment energy
transfer
    
    
    3.6
    
    
    
    8.5
    
    
    
    (4.9
    )
    
    
    (57.4
    )
    
    
    (2.0
    )
    
    
    3.3
    
    
    
    (5.3
    )
    
    
    (160.7
    )Gross margin
    
    
    101.6
    
    
    
    94.5
    
    
    
    7.1
    
    
    
    7.5
    
    
    
    210.9
    
    
    
    193.0
    
    
    
    17.9
    
    
    
    9.3Operating expenses
    
    
    73.5
    
    
    
    66.9
    
    
    
    6.6
    
    
    
    10.0
    
    
    
    146.2
    
    
    
    134.4
    
    
    
    11.8
    
    
    
    8.8Depreciation and
amortization
    
    
    16.4
    
    
    
    14.3
    
    
    
    2.1
    
    
    
    14.5
    
    
    
    32.8
    
    
    
    29.3
    
    
    
    3.5
    
    
    
    11.9Operating income
    
    $
    11.7
    
    
    $
    13.3
    
    
    $
    (1.6
    )
    
    
    (12.3
    )
    
    $
    31.9
    
    
    $
    29.3
    
    
    $
    2.6
    
    
    
    8.8
  Three Months Ended June 30, 2007
    
    
    Six Months Ended June 30, 2007Total
    
    
    Gross
    
    
    Operating
    
    
    Total
    
    
    Gross
    
    
    OperatingRevenues
    
    
    Margin
    
    
    Income
    
    
    Revenues
    
    
    Margin
    
    
    Income(In millions)
    
    
    (In millions)Transfer of assets from
TNMP
    
    $
    21.8
    
    
    $
    6.3
    
    
    $
    1.6
    
    
    $
    48.9
    
    
    $
    12.7
    
    
    $
    3.0Weather
    
    
    (3.1
    )
    
    
    (1.6
    )
    
    
    (1.6
    )
    
    
    (0.2
    )
    
    
    (0.1
    )
    
    
    (0.1
    )Customer/load growth
    
    
    6.1
    
    
    
    1.9
    
    
    
    1.9
    
    
    
    6.9
    
    
    
    3.0
    
    
    
    3.0Plant performance
    
    
    
    
    
    
    4.9
    
    
    
    4.4
    
    
    
    
    
    
    
    8.1
    
    
    
    6.7Coal costs
    
    
    
    
    
    
    (3.6
    )
    
    
    (3.6
    )
    
    
    
    
    
    
    (6.8
    )
    
    
    (6.8
    )General operational
increases
    
    
    
    
    
    
    
    
    
    
    (1.7
    )
    
    
    
    
    
    
    
    
    
    
    (2.5
    )Other
    
    
    
    
    
    
    (0.8
    )
    
    
    (2.6
    )
    
    
    0.6
    
    
    
    1.0
    
    
    
    (0.7
    )Total increase (decrease)
    
    $
    24.8
    
    
    $
    7.1
    
    
    $
    (1.6
    )
    
    $
    56.2
    
    
    $
    17.9
    
    
    $
    2.6
  66




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Three Months Ended June 30,
    
    
    Six Months Ended June 30,2007
    
    
    2006
    
    
    Change
    
    
    %
    
    
    2007
    
    
    2006
    
    
    Change
    
    
    %(In millions, except customers)
    
    
    
    
    
    (In millions, except customers)Residential
    
    $
    58.4
    
    
    $
    52.0
    
    
    $
    6.4
    
    
    
    12.3
    
    
    $
    126.2
    
    
    $
    107.4
    
    
    $
    18.8
    
    
    
    17.6Commercial
    
    
    73.1
    
    
    
    65.6
    
    
    
    7.5
    
    
    
    11.5
    
    
    
    137.8
    
    
    
    122.7
    
    
    
    15.1
    
    
    
    12.4Industrial
    
    
    25.8
    
    
    
    15.6
    
    
    
    10.2
    
    
    
    65.4
    
    
    
    49.2
    
    
    
    30.3
    
    
    
    18.9
    
    
    
    62.3Transmission
    
    
    8.0
    
    
    
    7.2
    
    
    
    0.8
    
    
    
    11.6
    
    
    
    16.9
    
    
    
    14.2
    
    
    
    2.7
    
    
    
    18.6Other
    
    
    5.8
    
    
    
    5.9
    
    
    
    (0.1
    )
    
    
    (3.2
    )
    
    
    11.2
    
    
    
    10.5
    
    
    
    0.7
    
    
    
    4.9$
    171.1
    
    
    $
    146.3
    
    
    $
    24.8
    
    
    
    17.0
    
    
    $
    341.3
    
    
    $
    285.1
    
    
    $
    56.2
    
    
    
    19.7Average customers
(thousands)
    
    
    488.1
    
    
    
    428.6
    
    
    
    59.5
    
    
    
    13.9
    
    
    
    487.6
    
    
    
    427.3
    
    
    
    60.3
    
    
    
    14.1
  Three Months Ended June 30,
    
    
    Six Months Ended June 30,2007
    
    
    2006
    
    
    Change
    
    
    %
    
    
    2007
    
    
    2006
    
    
    Change
    
    
    %(Gigawatt hours)
    
    
    
    
    
    (Gigawatt hours)Residential
    
    
    704.9
    
    
    
    647.4
    
    
    
    57.5
    
    
    
    8.9
    
    
    
    1,525.6
    
    
    
    1,335.9
    
    
    
    189.7
    
    
    
    14.2Commercial
    
    
    992.6
    
    
    
    929.2
    
    
    
    63.4
    
    
    
    6.8
    
    
    
    1,869.5
    
    
    
    1,732.9
    
    
    
    136.6
    
    
    
    7.9Industrial
    
    
    494.2
    
    
    
    332.6
    
    
    
    161.6
    
    
    
    48.6
    
    
    
    964.5
    
    
    
    646.6
    
    
    
    317.9
    
    
    
    49.2Other
    
    
    63.4
    
    
    
    71.6
    
    
    
    (8.2
    )
    
    
    (11.4
    )
    
    
    119.8
    
    
    
    126.4
    
    
    
    (6.6
    )
    
    
    (5.3
    )2,255.1
    
    
    
    1,980.8
    
    
    
    274.3
    
    
    
    13.9
    
    
    
    4,479.4
    
    
    
    3,841.8
    
    
    
    637.6
    
    
    
    16.6
  Three Months Ended
    
    
    Six Months EndedJune 30, 2006
    
    
    June 30, 2006(Dollars in millions)Total revenues
    
    $
    21.8
    
    
    $
    48.9Cost of energy
    
    
    15.5
    
    
    
    36.2Gross margin
    
    
    6.3
    
    
    
    12.7Operating Expenses
    
    
    3.2
    
    
    
    6.6Depreciation and amortization
    
    
    1.5
    
    
    
    3.1Operating income
    
    $
    1.6
    
    
    $
    3.0Sales volumes (GWhs)
    
    
    308.4
    
    
    
    590.7Average customers (thousands)
    
    
    49.6
    
    
    
    49.6
  67




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68




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##### Table of Contents



TNMP Electric
  Three Months Ended June 30,
    
    
    Six Months Ended June 30,2007
    
    
    2006
    
    
    Change
    
    
    %
    
    
    2007
    
    
    2006
    
    
    Change
    
    
    %(In millions)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (In millions)Total operating
revenues
    
    $
    43.5
    
    
    $
    61.5
    
    
    $
    (18.0
    )
    
    
    (29.2
    )
    
    $
    84.5
    
    
    $
    124.1
    
    
    $
    (39.6
    )
    
    
    (32.0
    )Cost of energy
    
    
    7.2
    
    
    
    22.7
    
    
    
    (15.5
    )
    
    
    (68.1
    )
    
    
    14.4
    
    
    
    49.8
    
    
    
    (35.4
    )
    
    
    (71.1
    )Gross margin
    
    
    36.3
    
    
    
    38.8
    
    
    
    (2.5
    )
    
    
    (6.4
    )
    
    
    70.1
    
    
    
    74.3
    
    
    
    (4.2
    )
    
    
    (5.7
    )Operating expenses
    
    
    17.7
    
    
    
    21.0
    
    
    
    (3.3
    )
    
    
    (15.5
    )
    
    
    36.4
    
    
    
    42.4
    
    
    
    (6.0
    )
    
    
    (14.4
    )Depreciation and
amortization
    
    
    7.0
    
    
    
    7.8
    
    
    
    (0.8
    )
    
    
    (10.1
    )
    
    
    14.0
    
    
    
    15.6
    
    
    
    (1.6
    )
    
    
    (9.8
    )Operating income
    
    $
    11.6
    
    
    $
    10.0
    
    
    $
    1.6
    
    
    
    15.4
    
    
    $
    19.7
    
    
    $
    16.3
    
    
    $
    3.4
    
    
    
    20.9
  Three Months Ended June 30, 2007
    
    
    Six Months Ended June 30, 2007Total
    
    
    Gross
    
    
    Operating
    
    
    Total
    
    
    Gross
    
    
    OperatingRevenues
    
    
    Margin
    
    
    Income
    
    
    Revenues
    
    
    Margin
    
    
    Income(In millions)
    
    
    (In millions)Transfer of assets
to PNM
    
    $
    (21.8
    )
    
    $
    (6.3
    )
    
    $
    (1.6
    )
    
    $
    (48.9
    )
    
    $
    (12.7
    )
    
    $
    (3.0
    )Weather
    
    
    (1.8
    )
    
    
    (1.8
    )
    
    
    (1.8
    )
    
    
    (0.4
    )
    
    
    (0.4
    )
    
    
    (0.4
    )Customer/load growth
    
    
    0.6
    
    
    
    0.6
    
    
    
    0.6
    
    
    
    1.5
    
    
    
    1.5
    
    
    
    1.5PUCT order
    
    
    4.1
    
    
    
    4.1
    
    
    
    3.1
    
    
    
    7.9
    
    
    
    7.9
    
    
    
    6.0Transmission prices
    
    
    0.3
    
    
    
    0.3
    
    
    
    0.3
    
    
    
    0.7
    
    
    
    
    
    
    
    Other
    
    
    0.6
    
    
    
    0.6
    
    
    
    1.0
    
    
    
    (0.4
    )
    
    
    (0.5
    )
    
    
    (0.7
    )Total increase
(decrease)
    
    $
    (18.0
    )
    
    $
    (2.5
    )
    
    $
    1.6
    
    
    $
    (39.6
    )
    
    $
    (4.2
    )
    
    $
    3.4
  69




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Three Months Ended June 30,
    
    
    Six Months Ended June 30,2007
    
    
    2006(1)
    
    
    Change
    
    
    %
    
    
    2007
    
    
    2006(1)
    
    
    Change
    
    
    %(In millions, except customers)
    
    
    
    
    
    (In millions, except customers)Residential
    
    $
    15.6
    
    
    $
    20.7
    
    
    $
    (5.1
    )
    
    
    (24.3
    )
    
    $
    30.4
    
    
    $
    39.9
    
    
    $
    (9.5
    )
    
    
    (23.9
    )Commercial
    
    
    17.7
    
    
    
    21.9
    
    
    
    (4.2
    )
    
    
    (18.9
    )
    
    
    33.7
    
    
    
    42.5
    
    
    
    (8.8
    )
    
    
    (20.7
    )Industrial
    
    
    1.8
    
    
    
    9.3
    
    
    
    (7.5
    )
    
    
    (80.9
    )
    
    
    3.5
    
    
    
    22.7
    
    
    
    (19.2
    )
    
    
    (84.4
    )Other
    
    
    8.4
    
    
    
    9.6
    
    
    
    (1.2
    )
    
    
    (12.5
    )
    
    
    16.9
    
    
    
    19.0
    
    
    
    (2.1
    )
    
    
    (11.7
    )$
    43.5
    
    
    $
    61.5
    
    
    $
    (18.0
    )
    
    
    (29.2
    )
    
    $
    84.5
    
    
    $
    124.1
    
    
    $
    (39.6
    )
    
    
    (32.0
    )Average customers
(thousands)(2)
    
    
    225.3
    
    
    
    272.2
    
    
    
    (46.9
    )
    
    
    (17.2
    )
    
    
    225.3
    
    
    
    271.7
    
    
    
    (46.4
    )
    
    
    (17.1
    )
 (1)
    
    The customer class revenues and the average customer count have been reclassified to be consistent with the current year presentation.(2)
    
    Under TECA, customers of TNMP Electric in Texas have the ability to choose First Choice
or any other REP to provide energy. The average customers reported above include 130,762
and 146,549 customers of TNMP Electric for the three months ended June 30, 2007 and 2006 and
133,235 and 147,782 customers for the six months ended June 30, 2007 and 2006 who have
chosen First Choice as their REP. These customers are also included in the First Choice
segment.
  70




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Three Months Ended June 30,
    
    
    Six Months Ended June 30,2007
    
    
    2006(2)
    
    
    Change
    
    
    %
    
    
    2007
    
    
    2006(2)
    
    
    Change
    
    
    %(Gigawatt hours (1))
    
    
    
    
    
    (Gigawatt hours (1))Residential
    
    
    579.9
    
    
    
    710.4
    
    
    
    (130.5
    )
    
    
    (18.4
    )
    
    
    1,118.3
    
    
    
    1,238.3
    
    
    
    (120.0
    )
    
    
    (9.7
    )Commercial
    
    
    563.7
    
    
    
    774.4
    
    
    
    (210.7
    )
    
    
    (27.2
    )
    
    
    1,022.9
    
    
    
    1,255.0
    
    
    
    (232.1
    )
    
    
    (18.5
    )Industrial
    
    
    473.9
    
    
    
    462.0
    
    
    
    11.9
    
    
    
    2.6
    
    
    
    881.2
    
    
    
    1,018.1
    
    
    
    (136.9
    )
    
    
    (13.4
    )Other
    
    
    23.9
    
    
    
    31.8
    
    
    
    (7.9
    )
    
    
    (24.4
    )
    
    
    48.1
    
    
    
    60.7
    
    
    
    (12.6
    )
    
    
    (20.7
    )1,641.4
    
    
    
    1,978.6
    
    
    
    (337.2
    )
    
    
    (17.0
    )
    
    
    3,070.5
    
    
    
    3,572.1
    
    
    
    (501.6
    )
    
    
    (14.0
    )
 (1)
    
    The GWh sales reported above include 487.3 and 635.1 GWhs for the three months ended
June 30, 2007 and 2006 and 960.3 and 1,110.0 GWhs for the six months ended June 30,
2007 and 2006 used by customers of TNMP Electric respectively, who have chosen First
Choice as their REP. These GWhs are also included below in the First Choice segment.(2)
    
    The customer class sales have been reclassified to be consistent with current
year presentation.
      71




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PNM Gas
  Three Months Ended June 30,
    
    
    Six Months Ended June 30,2007
    
    
    2006
    
    
    Change
    
    
    %
    
    
    2007
    
    
    2006
    
    
    Change
    
    
    %(In millions)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (In millions)Total operating
revenues
    
    $
    75.2
    
    
    $
    69.0
    
    
    $
    6.2
    
    
    
    9.0
    
    
    $
    291.7
    
    
    $
    276.5
    
    
    $
    15.2
    
    
    
    5.5Cost of energy
    
    
    45.1
    
    
    
    42.2
    
    
    
    2.9
    
    
    
    6.9
    
    
    
    206.8
    
    
    
    199.9
    
    
    
    6.9
    
    
    
    3.5Gross margin
    
    
    30.1
    
    
    
    26.8
    
    
    
    3.3
    
    
    
    12.3
    
    
    
    84.9
    
    
    
    76.6
    
    
    
    8.3
    
    
    
    10.8Operating expenses
    
    
    25.9
    
    
    
    25.9
    
    
    
    
    
    
    
    0.2
    
    
    
    51.6
    
    
    
    51.0
    
    
    
    0.6
    
    
    
    1.1Depreciation and
amortization
    
    
    6.1
    
    
    
    6.0
    
    
    
    0.1
    
    
    
    1.2
    
    
    
    12.2
    
    
    
    11.9
    
    
    
    0.3
    
    
    
    2.8Operating income
    
    $
    (1.9
    )
    
    $
    (5.1
    )
    
    $
    3.2
    
    
    
    62.7
    
    
    $
    21.1
    
    
    $
    13.7
    
    
    $
    7.4
    
    
    
    53.8
  Three Months Ended June 30, 2007
    
    
    Six Months Ended June 30, 2007Total
    
    
    Gross
    
    
    Operating
    
    
    Total
    
    
    Gross
    
    
    OperatingRevenues
    
    
    Margin
    
    
    Income
    
    
    Revenues
    
    
    Margin
    
    
    Income(In millions)
    
    
    (In millions)Gas prices
    
    $
    3.5
    
    
    $
    
    
    
    $
    
    
    
    $
    (16.9
    )
    
    $
    
    
    
    $
    Weather
    
    
    8.5
    
    
    
    1.9
    
    
    
    1.9
    
    
    
    32.2
    
    
    
    6.0
    
    
    
    6.0Customer growth/usage
    
    
    (2.2
    )
    
    
    (0.2
    )
    
    
    (0.2
    )
    
    
    6.2
    
    
    
    1.3
    
    
    
    1.3Mark-to-market gains
    
    
    0.7
    
    
    
    0.7
    
    
    
    0.7
    
    
    
    0.5
    
    
    
    0.5
    
    
    
    0.5Off-system activities
    
    
    (4.7
    )
    
    
    0.3
    
    
    
    0.3
    
    
    
    (7.0
    )
    
    
    0.1
    
    
    
    0.1Other
    
    
    0.4
    
    
    
    0.6
    
    
    
    0.5
    
    
    
    0.2
    
    
    
    0.4
    
    
    
    (0.5
    )Total increase (decrease)
    
    $
    6.2
    
    
    $
    3.3
    
    
    $
    3.2
    
    
    $
    15.2
    
    
    $
    8.3
    
    
    $
    7.4
  72




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Three Months Ended June 30,
    
    
    Six Months Ended June 30,2007
    
    
    2006
    
    
    Change
    
    
    %
    
    
    2007
    
    
    2006
    
    
    Change
    
    
    %(In millions, except customers)
    
    
    
    
    
    (In millions, except customers)Residential
    
    $
    48.4
    
    
    $
    38.5
    
    
    $
    9.9
    
    
    
    25.7
    
    
    $
    200.7
    
    
    $
    180.2
    
    
    $
    20.5
    
    
    
    11.4Commercial
    
    
    15.5
    
    
    
    13.4
    
    
    
    2.1
    
    
    
    15.7
    
    
    
    60.6
    
    
    
    57.4
    
    
    
    3.2
    
    
    
    5.7Industrial
    
    
    0.4
    
    
    
    1.5
    
    
    
    (1.1
    )
    
    
    (70.7
    )
    
    
    1.0
    
    
    
    2.3
    
    
    
    (1.3
    )
    
    
    (54.4
    )Transportation(1)
    
    
    3.4
    
    
    
    2.8
    
    
    
    0.6
    
    
    
    19.2
    
    
    
    8.4
    
    
    
    7.5
    
    
    
    0.9
    
    
    
    12.0Other
    
    
    7.5
    
    
    
    12.8
    
    
    
    (5.3
    )
    
    
    (41.1
    )
    
    
    21.0
    
    
    
    29.1
    
    
    
    (8.1
    )
    
    
    (28.4
    )$
    75.2
    
    
    $
    69.0
    
    
    $
    6.2
    
    
    
    9.0
    
    
    $
    291.7
    
    
    $
    276.5
    
    
    $
    15.2
    
    
    
    5.5Average customers
(thousands)
    
    
    490.5
    
    
    
    480.5
    
    
    
    10.0
    
    
    
    2.1
    
    
    
    491.2
    
    
    
    480.6
    
    
    
    10.6
    
    
    
    2.2
 (1)
    
    Customer-owned gas.
  Three Months Ended June 30,
    
    
    Six Months Ended June 30,2007
    
    
    2006
    
    
    Change
    
    
    %
    
    
    2007
    
    
    2006
    
    
    Change
    
    
    %(Thousands of Decatherms)
    
    
    
    
    
    (Thousands of Decatherms)Residential
    
    
    3,827
    
    
    
    3,058
    
    
    
    769
    
    
    
    25.1
    
    
    
    17,771
    
    
    
    15,020
    
    
    
    2,751
    
    
    
    18.3Commercial
    
    
    1,515
    
    
    
    1,391
    
    
    
    124
    
    
    
    8.9
    
    
    
    6,149
    
    
    
    5,557
    
    
    
    592
    
    
    
    10.7Industrial
    
    
    50
    
    
    
    195
    
    
    
    (145
    )
    
    
    (74.4
    )
    
    
    113
    
    
    
    267
    
    
    
    (154
    )
    
    
    (57.7
    )Transportation(1)
    
    
    10,149
    
    
    
    9,371
    
    
    
    778
    
    
    
    8.3
    
    
    
    20,949
    
    
    
    20,402
    
    
    
    547
    
    
    
    2.7Other
    
    
    500
    
    
    
    1,501
    
    
    
    (1,001
    )
    
    
    (66.7
    )
    
    
    1,826
    
    
    
    3,067
    
    
    
    (1,241
    )
    
    
    (40.5
    )16,041
    
    
    
    15,516
    
    
    
    525
    
    
    
    3.4
    
    
    
    46,808
    
    
    
    44,313
    
    
    
    2,495
    
    
    
    5.6
 (1)
    
    Customer-owned gas.
  73




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74




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##### Table of Contents



Unregulated Operations
 Wholesale
  Three Months Ended June 30,
    
    
    Six Months Ended June 30,2007
    
    
    2006
    
    
    Change
    
    
    %
    
    
    2007
    
    
    2006
    
    
    Change
    
    
    %(In millions)
    
    
    
    
    
    (In millions)Total operating
revenues
    
    $
    194.1
    
    
    $
    154.5
    
    
    $
    39.6
    
    
    
    25.6
    
    
    $
    328.6
    
    
    $
    334.0
    
    
    $
    (5.4
    )
    
    
    (1.6
    )Cost of energy
    
    
    165.6
    
    
    
    119.9
    
    
    
    45.7
    
    
    
    38.2
    
    
    
    242.0
    
    
    
    262.7
    
    
    
    (20.7
    )
    
    
    (7.9
    )Intersegment energy
transfer
    
    
    (3.5
    )
    
    
    (8.5
    )
    
    
    5.0
    
    
    
    57.4
    
    
    
    2.0
    
    
    
    (3.3
    )
    
    
    5.3
    
    
    
    160.7Gross margin
    
    
    32.0
    
    
    
    43.1
    
    
    
    (11.1
    )
    
    
    (25.7
    )
    
    
    84.6
    
    
    
    74.6
    
    
    
    10.0
    
    
    
    13.4Operating expenses
    
    
    19.2
    
    
    
    18.3
    
    
    
    0.9
    
    
    
    4.6
    
    
    
    45.0
    
    
    
    30.2
    
    
    
    14.8
    
    
    
    48.9Depreciation and
amortization
    
    
    6.2
    
    
    
    7.2
    
    
    
    (1.0
    )
    
    
    (13.5
    )
    
    
    13.9
    
    
    
    10.3
    
    
    
    3.6
    
    
    
    35.2Operating income
    
    $
    6.6
    
    
    $
    17.6
    
    
    $
    (11.0
    )
    
    
    (62.3
    )
    
    $
    25.7
    
    
    $
    34.1
    
    
    $
    (8.4
    )
    
    
    (24.6
    )
  Three Months Ended June 30, 2007
    
    
    Six Months Ended June 30, 2007Total
    
    
    Gross
    
    
    Operating
    
    
    Total
    
    
    Gross
    
    
    OperatingRevenues
    
    
    Margin
    
    
    Income
    
    
    Revenues
    
    
    Margin
    
    
    Income(In millions)
    
    
    (In millions)Twin Oaks
    
    $
    (4.2
    )
    
    $
    (2.9
    )
    
    $
    (3.6
    )
    
    $
    32.6
    
    
    $
    21.7
    
    
    $
    4.1Mark-to-market gains
(losses)
    
    
    9.7
    
    
    
    (13.3
    )
    
    
    (13.3
    )
    
    
    (17.5
    )
    
    
    (9.7
    )
    
    
    (9.7
    )Marketing activity
    
    
    30.5
    
    
    
    0.3
    
    
    
    0.3
    
    
    
    (25.7
    )
    
    
    (10.4
    )
    
    
    (10.4
    )Plant performance
    
    
    3.6
    
    
    
    5.8
    
    
    
    7.5
    
    
    
    5.1
    
    
    
    9.3
    
    
    
    11.3Coal costs
    
    
    
    
    
    
    (0.6
    )
    
    
    (0.6
    )
    
    
    
    
    
    
    (1.1
    )
    
    
    (1.1
    )General operational
increases
    
    
    
    
    
    
    
    
    
    
    0.1
    
    
    
    
    
    
    
    
    
    
    
    (1.1
    )Other
    
    
    
    
    
    
    (0.4
    )
    
    
    (1.4
    )
    
    
    0.1
    
    
    
    0.2
    
    
    
    (1.5
    )Total increase (decrease)
    
    $
    39.6
    
    
    $
    (11.1
    )
    
    $
    (11.0
    )
    
    $
    (5.4
    )
    
    $
    10.0
    
    
    $
    (8.4
    )
  75




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Three Months Ended June 30,
    
    
    Six Months Ended June 30,2007
    
    
    2006
    
    
    Change
    
    
    %
    
    
    2007
    
    
    2006
    
    
    Change
    
    
    %(In millions)
    
    
    
    
    
    (In millions)Long-term sales
    
    $
    77.5
    
    
    $
    73.9
    
    
    $
    3.6
    
    
    
    4.8
    
    
    $
    153.0
    
    
    $
    105.2
    
    
    $
    47.8
    
    
    
    45.5Short-term sales
    
    
    116.6
    
    
    
    80.6
    
    
    
    36.0
    
    
    
    44.7
    
    
    
    175.6
    
    
    
    228.8
    
    
    
    (53.2
    )
    
    
    (23.2
    )$
    194.1
    
    
    $
    154.5
    
    
    $
    39.6
    
    
    
    25.6
    
    
    $
    328.6
    
    
    $
    334.0
    
    
    $
    (5.4
    )
    
    
    (1.6
    )
  Three Months Ended June 30,
    
    
    Six Months Ended June 30,2007
    
    
    2006
    
    
    Change
    
    
    %
    
    
    2007
    
    
    2006
    
    
    Change
    
    
    %(Gigawatt hours)
    
    
    
    
    
    (Gigawatt hours)Long-term sales
    
    
    1,184.4
    
    
    
    1,102.4
    
    
    
    82.0
    
    
    
    7.4
    
    
    
    2,346.6
    
    
    
    1,680.9
    
    
    
    665.7
    
    
    
    39.6Short-term sales
    
    
    1,700.4
    
    
    
    1,569.1
    
    
    
    131.3
    
    
    
    8.4
    
    
    
    3,140.8
    
    
    
    3,789.9
    
    
    
    (649.1
    )
    
    
    (17.1
    )2,884.8
    
    
    
    2,671.5
    
    
    
    213.3
    
    
    
    8.0
    
    
    
    5,487.4
    
    
    
    5,470.8
    
    
    
    16.6
    
    
    
    0.3
  For the Period
    
    
    
    
    
    
    
    
    
    
    For the PeriodApril 1-
    
    
    April 18 -
    
    
    
    
    
    
    
    
    
    
    January 1-
    
    
    April 18 -May 31,
    
    
    June 30,
    
    
    
    
    
    
    
    
    
    
    May 31,
    
    
    June 30,2007
    
    
    2006
    
    
    Change
    
    
    %
    
    
    2007
    
    
    2006
    
    
    Change
    
    
    %(Dollars in millions)
    
    
    
    
    
    (Dollars in millions)Total operating
revenues
    
    $
    28.6
    
    
    $
    32.8
    
    
    $
    (4.2
    )
    
    
    (12.7
    )
    
    $
    65.4
    
    
    $
    32.8
    
    
    $
    32.6
    
    
    
    99.6Cost of energy
    
    
    9.9
    
    
    
    11.2
    
    
    
    (1.3
    )
    
    
    (10.9
    )
    
    
    22.1
    
    
    
    11.2
    
    
    
    10.9
    
    
    
    98.6Gross margin
    
    
    18.7
    
    
    
    21.6
    
    
    
    (2.9
    )
    
    
    (13.6
    )
    
    
    43.3
    
    
    
    21.6
    
    
    
    21.7
    
    
    
    100.2Operating expenses
    
    
    5.0
    
    
    
    3.4
    
    
    
    1.6
    
    
    
    46.8
    
    
    
    17.3
    
    
    
    3.4
    
    
    
    13.9
    
    
    
    401.9Depreciation and
amortization
    
    
    3.1
    
    
    
    4.0
    
    
    
    (0.9
    )
    
    
    (22.4
    )
    
    
    7.7
    
    
    
    4.0
    
    
    
    3.7
    
    
    
    93.9Operating income
    
    $
    10.6
    
    
    $
    14.2
    
    
    $
    (3.6
    )
    
    
    (25.8
    )
    
    $
    18.3
    
    
    $
    14.2
    
    
    $
    4.1
    
    
    
    28.8Sales Volumes (GWhs)
    
    
    427.9
    
    
    
    492.4
    
    
    
    (64.5
    )
    
    
    (13.1
    )
    
    
    915.9
    
    
    
    492.4
    
    
    
    423.5
    
    
    
    86.0
  76




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2
      77




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##### Table of Contents



First Choice
  Three Months Ended June 30,
    
    
    Six Months Ended June 30,2007
    
    
    2006
    
    
    Change
    
    
    %
    
    
    2007
    
    
    2006
    
    
    Change
    
    
    %(In millions)
    
    
    
    
    
    (In millions)Total operating revenues
    
    $
    150.0
    
    
    $
    154.9
    
    
    $
    (4.9
    )
    
    
    (3.1
    )
    
    $
    285.6
    
    
    $
    260.0
    
    
    $
    25.6
    
    
    
    9.8Cost of energy
    
    
    125.8
    
    
    
    118.1
    
    
    
    7.7
    
    
    
    6.6
    
    
    
    236.7
    
    
    
    208.4
    
    
    
    28.3
    
    
    
    13.6Gross margin
    
    
    24.2
    
    
    
    36.8
    
    
    
    (12.6
    )
    
    
    (34.4
    )
    
    
    48.9
    
    
    
    51.6
    
    
    
    (2.7
    )
    
    
    (5.2
    )Operating expenses
    
    
    13.0
    
    
    
    15.3
    
    
    
    (2.3
    )
    
    
    (15.7
    )
    
    
    28.1
    
    
    
    28.6
    
    
    
    (0.5
    )
    
    
    (1.5
    )Depreciation and
amortization
    
    
    0.5
    
    
    
    0.5
    
    
    
    
    
    
    
    (7.8
    )
    
    
    0.9
    
    
    
    1.0
    
    
    
    (0.1
    )
    
    
    (6.6
    )Operating income
    
    $
    10.7
    
    
    $
    21.0
    
    
    $
    (10.3
    )
    
    
    (48.8
    )
    
    $
    19.9
    
    
    $
    22.0
    
    
    $
    (2.1
    )
    
    
    (9.8
    )
  Three Months Ended June 30, 2007
    
    
    Six Months Ended June 30, 2007Total
    
    
    Gross
    
    
    Operating
    
    
    Total
    
    
    Gross
    
    
    OperatingRevenues
    
    
    Margin
    
    
    Income
    
    
    Revenues
    
    
    Margin
    
    
    Income(In millions)
    
    
    (In millions)Weather
    
    $
    (10.2
    )
    
    $
    (3.0
    )
    
    $
    (3.0
    )
    
    $
    (4.2
    )
    
    $
    (1.0
    )
    
    $
    (1.0
    )Customer mix/price
    
    
    6.7
    
    
    
    (8.8
    )
    
    
    (7.7
    )
    
    
    34.3
    
    
    
    2.8
    
    
    
    4.8Mark-to-market positions
    
    
    (2.1
    )
    
    
    (1.6
    )
    
    
    (1.6
    )
    
    
    (5.8
    )
    
    
    (5.8
    )
    
    
    (5.8
    )Bad debt expense
    
    
    
    
    
    
    
    
    
    
    (1.7
    )
    
    
    
    
    
    
    
    
    
    
    (1.9
    )Incentive-based
compensation
    
    
    
    
    
    
    
    
    
    
    1.9
    
    
    
    
    
    
    
    
    
    
    
    0.7Other operating expenses
    
    
    
    
    
    
    
    
    
    
    1.4
    
    
    
    
    
    
    
    
    
    
    
    (0.2
    )Other
    
    
    0.7
    
    
    
    0.8
    
    
    
    0.4
    
    
    
    1.3
    
    
    
    1.3
    
    
    
    1.3Total increase (decrease)
    
    $
    (4.9
    )
    
    $
    (12.6
    )
    
    $
    (10.3
    )
    
    $
    25.6
    
    
    $
    (2.7
    )
    
    $
    (2.1
    )
  78




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Three Months Ended June 30,
    
    
    Six Months Ended June 30,2007
    
    
    2006(1)
    
    
    Change
    
    
    %
    
    
    2007
    
    
    2006(1)
    
    
    Change
    
    
    %(In millions, except customers)
    
    
    
    
    
    (In millions, except customers)Residential
    
    $
    88.4
    
    
    $
    89.2
    
    
    $
    (0.8
    )
    
    
    (0.8
    )
    
    $
    174.0
    
    
    $
    148.8
    
    
    $
    25.2
    
    
    
    16.9Mass-market
    
    
    18.0
    
    
    
    23.7
    
    
    
    (5.7
    )
    
    
    (24.3
    )
    
    
    34.1
    
    
    
    42.5
    
    
    
    (8.4
    )
    
    
    (19.8
    )Mid-market
    
    
    37.8
    
    
    
    33.9
    
    
    
    3.9
    
    
    
    11.7
    
    
    
    68.4
    
    
    
    53.3
    
    
    
    15.1
    
    
    
    28.2Mark-to-market
(4)
    
    
    1.7
    
    
    
    3.8
    
    
    
    (2.1
    )
    
    
    (55.1
    )
    
    
    (0.3
    )
    
    
    5.5
    
    
    
    (5.8
    )
    
    
    (104.7
    )Other
    
    
    4.1
    
    
    
    4.3
    
    
    
    (0.2
    )
    
    
    (5.8
    )
    
    
    9.4
    
    
    
    9.9
    
    
    
    (0.5
    )
    
    
    (4.1
    )$
    150.0
    
    
    $
    154.9
    
    
    $
    (4.9
    )
    
    
    (3.1
    )
    
    $
    285.6
    
    
    $
    260.0
    
    
    $
    25.6
    
    
    
    9.8Actual customers
(thousands)
(2,3)
    
    
    249.5
    
    
    
    230.1
    
    
    
    19.4
    
    
    
    8.4
    
    
    
    249.5
    
    
    
    230.1
    
    
    
    19.4
    
    
    
    8.4
 (1)
    
    The customer class revenues and the customer counts have been reclassified to be
consistent with the current year presentation.(2)
    
    See note above in the TNMP Electric segment discussion about the impact of
TECA.(3)
    
    Due to the competitive nature of First Choices business, actual customer count
at June 30 is presented in the table above as a more representative business indicator
than the average customers that are shown in the table for TNMP customers.(4)
    
    Includes financial gas trading.
  79




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Three Months Ended June 30,
    
    
    Six Months Ended June 30,2007
    
    
    2006(2)
    
    
    Change
    
    
    %
    
    
    2007
    
    
    2006(2)
    
    
    Change
    
    
    %(Gigawatt hours (1))
    
    
    
    
    
    (Gigawatt hours (1))Residential
    
    
    638.0
    
    
    
    636.7
    
    
    
    1.3
    
    
    
    0.2
    
    
    
    1,252.9
    
    
    
    1,064.2
    
    
    
    188.7
    
    
    
    17.7Mass-market
    
    
    110.8
    
    
    
    160.6
    
    
    
    (49.8
    )
    
    
    (31.0
    )
    
    
    210.7
    
    
    
    281.6
    
    
    
    (70.9
    )
    
    
    (25.2
    )Mid-market
    
    
    329.7
    
    
    
    308.4
    
    
    
    21.3
    
    
    
    6.9
    
    
    
    589.6
    
    
    
    486.1
    
    
    
    103.5
    
    
    
    21.3Other
    
    
    8.0
    
    
    
    13.6
    
    
    
    (5.6
    )
    
    
    (41.6
    )
    
    
    17.2
    
    
    
    26.6
    
    
    
    (9.4
    )
    
    
    (35.3
    )1,086.5
    
    
    
    1,119.3
    
    
    
    (32.8
    )
    
    
    (2.9
    )
    
    
    2,070.4
    
    
    
    1,858.5
    
    
    
    211.9
    
    
    
    11.4
 (1)
    
    See note above in the TNMP Electric segment discussion about the impact of TECA.(2)
    
    The customer class sales have been reclassified to be consistent with current
year presentation.
      80




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EnergyCo
  For thePeriod of June 1- June 30, 2007(In thousands)Operating revenue
    
    $
    14,366Cost of energy
    
    
    4,561Gross margin
    
    
    9,805Operating expenses
    
    
    2,767Depreciation and amortization
    
    
    1,528Operating income
    
    
    5,510Other income
    
    
    24Net interest charges
    
    
    (818
    )Net earnings
    
    $
    4,71650 percent of net earnings
    
    $
    2,358Amortization of basis difference in EnergyCo
    
    
    584PNMR equity in net earnings of EnergyCo
    
    $
    2,942
 Corporate and Other
     81




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PNMR Consolidated
      82




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##### Table of Contents



LIQUIDITY AND CAPITAL RESOURCES
 Statements of Cash Flows
  Six Months Ended June 30,2007
    
    
    2006
    
    
    Variance(In millions)Net cash flows from operating activities
    
    $
    87.2
    
    
    $
    111.5
    
    
    $
    (24.3
    )Net cash flows from investing activities
    
    
    172.4
    
    
    
    (596.2
    )
    
    
    768.6Net cash flows from financing activities
    
    
    (325.0
    )
    
    
    490.4
    
    
    
    (815.4
    )Net change in cash and cash equivalents
    
    $
    (65.4
    )
    
    $
    5.7
    
    
    $
    (71.1
    )
    Capital Requirements
 2
    83




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Liquidity
    84




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##### Table of Contents



PNM
    
    
    PNMR
    
    
    PNMRSeparate
    
    
    Separate
    
    
    Consolidated(In millions)Financing Capacity:Revolving credit facility
    
    $
    400.0
    
    
    $
    600.0
    
    
    $
    1,000.0Local lines of credit
    
    
    13.5
    
    
    
    15.0
    
    
    
    28.5Total financing capacity
    
    $
    413.5
    
    
    $
    615.0
    
    
    $
    1,028.5Commercial paper program maximum
    
    $
    300.0
    
    
    $
    400.0
    
    
    $
    700.0Amounts outstanding as of August 1, 2007:Commercial paper program
    
    $
    268.6
    
    
    $
    362.8
    
    
    $
    631.4Revolving credit facility
    
    
    
    
    
    
    
    
    
    
    Local lines of credit
    
    
    
    
    
    
    
    
    
    
    Total short-term debt outstanding
    
    
    268.6
    
    
    
    362.8
    
    
    
    631.4Letters of credit
    
    
    3.1
    
    
    
    30.5
    
    
    
    33.6Total short term-debt and letters of credit
    
    $
    271.7
    
    
    $
    393.3
    
    
    $
    665.0Remaining availability as of August 1, 2007
    
    $
    141.8
    
    
    $
    221.7
    
    
    $
    363.5
      85




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##### Table of Contents



PNMR
    
    PNM
    
    TNMPS&PSenior unsecured notes
    
    BBB-
    
    BBB
    
    BBBCommercial paper
    
    A3
    
    A3
    
    *MoodysSenior unsecured notes
    
    Baa3
    
    Baa2
    
    Baa3Commercial paper
    
    P3
    
    P2
    
    *Preferred stock
    
    *
    
    Ba1
    
    *
 *
    
    Not applicable
  Off-Balance Sheet Arrangements
  Commitments and Contractual Obligations
  Contingent Provisions of Certain Obligations
     86




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Capital Structure
  June 30,
    
    
    December 31,PNMR
    
    2007
    
    
    2006Common equity
    
    
    50.5
    %
    
    
    48.9
    %Preferred stock of subsidiary
    
    
    0.3
    %
    
    
    0.3
    %Long-term debt
    
    
    49.2
    %
    
    
    50.8
    %Total capitalization
    
    
    100.0
    %
    
    
    100.0
    %
 June 30,
    
    
    December 31,PNM
    
    2007
    
    
    2006Common equity
    
    
    57.8
    %
    
    
    54.4
    %Preferred stock
    
    
    0.5
    %
    
    
    0.5
    %Long-term debt
    
    
    41.7
    %
    
    
    45.1
    %Total capitalization
    
    
    100.0
    %
    
    
    100.0
    %
 June 30,
    
    
    December 31,TNMP
    
    2007
    
    
    2006Common equity
    
    
    59.1
    %
    
    
    54.9
    %Long-term debt
    
    
    40.9
    %
    
    
    45.1
    %Total capitalization
    
    
    100.0
    %
    
    
    100.0
    %
  87




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MD&A FOR PNM
 RESULTS OF OPERATIONS
 SIX MONTHS ENDED JUNE 30, 2007
COMPARED TO SIX MONTHS ENDED JUNE 30, 2006
   Six Months EndedJune 30, 2007(In millions)After-tax ImpactsTNMP asset transfer
    
    $
    2.1Plant performance
    
    
    10.9Mark-to-market
    
    
    (5.5
    )Coal costs
    
    
    (4.8
    )Wholesale marketing activity
    
    
    (6.3
    )Regulated load growth and weather
    
    
    6.2General operational increases
    
    
    (2.1
    )Financing
    
    
    (2.1
    )Other
    
    
    (3.4
    )Net change
    
    $
    (5.0
    )
   88




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MD&A FOR TNMP
 RESULTS OF OPERATIONS
 SIX MONTHS ENDED JUNE 30, 2007
COMPARED TO SIX MONTHS ENDED JUNE 30, 2006
    Six Months EndedJune 30, 2007(In millions)After-tax ImpactsDiscontinued operations
    
    $
    (2.1
    )Carrying Charges
    
    
    (2.6
    )PUCT order
    
    
    3.9Customer growth
    
    
    1.0Other
    
    
    1.0Net change
    
    $
    1.2
   89




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OTHER ISSUES FACING THE COMPANY
  Global Warming Issues
 2
  2
   CRITICAL ACCOUNTING POLICIES AND ESTIMATES
   90




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##### Table of Contents



NEW ACCOUNTING STANDARDS
  DISCLOSURE REGARDING FORWARD LOOKING STATEMENTS
   
    
    The risk that EnergyCo is unable to identify and implement profitable acquisitions, including development of the Cedar Bayou Generating Station and implementation of the
acquisition of the Lyondell facility, or that the contribution of assets to EnergyCo by
PNMR may not be implemented as expected, or that PNMR and ECJV will not agree to make
additional capital contributions to EnergyCo,
    
    The potential unavailability of cash from PNMRs subsidiaries or EnergyCo due to
regulatory, statutory or contractual restrictions,
    
    The outcome of any appeals of the PUCT order in the stranded cost true-up proceeding,
    
    The ability of First Choice to attract and retain customers,
    
    Changes in ERCOT protocols,
    
    Changes in the cost of power acquired by First Choice,
    
    Collections experience,
    
    Insurance coverage available for claims made in litigation,
    
    Fluctuations in interest rates,
    
    Conditions affecting the Companys ability to access the financial markets, or
EnergyCos access to additional debt financing following the utilization of its existing
credit facility,
    
    Weather,
    
    Water supply,
    
    Changes in fuel costs,
    
    Availability of fuel supplies,
    
    The effectiveness of risk management and commodity risk transactions,
    
    Seasonality and other changes in supply and demand in the market for electric power,
    
    Variability of wholesale power prices and natural gas prices,
    
    Volatility and liquidity in the wholesale power markets and the natural gas markets,
    
    Changes in the competitive environment in the electric and natural gas industries,
    
    The performance of generating units, including PVNGS, SJGS, Four Corners, and EnergyCo
generating units, and transmission systems,
    
    The ability to secure long-term power sales,
    
    The risk that the Company and its subsidiaries and EnergyCo may have to commit to
substantial capital investments and additional operating costs to comply with new
environmental control requirements including possible future requirements to address
concerns about global climate change,
  91




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##### Table of Contents




    
    The risks associated with completion of generation, including pollution control
equipment at SJGS, the
expansion of the Afton Generating Station, and the EnergyCo Cedar Bayou Generating Station,
transmission, distribution, and other projects, including construction delays and
unanticipated cost overruns,
    
    State and federal regulatory and legislative decisions and actions,
    
    The outcome of legal proceedings,
    
    Changes in applicable accounting principles, and
    
    The performance of state, regional, and national economies.
   SECURITIES ACT DISCLAIMER
   92




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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
       Accounting for Derivatives
  Commodity Risk
   93




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##### Table of Contents



June 30,
    
    
    December 31,2007
    
    
    2006(In thousands)Mark-to-market energy contracts:Current asset
    
    $
    87,321
    
    
    $
    43,680Long-term asset
    
    
    24,605
    
    
    
    10,982Total mark-to-market assets
    
    
    111,926
    
    
    
    54,662Current liability
    
    
    (98,820
    )
    
    
    (42,020
    )Long-term liability
    
    
    (17,580
    )
    
    
    (9,176
    )Total mark-to-market liabilities
    
    
    (116,400
    )
    
    
    (51,196
    )Net fair value of mark-to-market energy contracts
    
    $
    (4,474
    )
    
    $
    3,466
   94




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Six Months EndedJune 30,2007
    
    
    2006Mark-to-Market Instruments(In thousands)Sources of fair value gain (loss):Fair value at beginning of year
    
    $
    3,466
    
    
    $
    4,528Amount realized on contracts delivered during period
    
    
    2,823
    
    
    
    (4,108
    )Changes in fair value
    
    
    (10,763
    )
    
    
    2,244Net fair value at end of period
    
    $
    (4,474
    )
    
    $
    2,664Net change recorded as mark-to-market
    
    $
    (7,940
    )
    
    $
    (1,864
    )
  Fair Value at June 30, 2007
 Less than1 year
    
    
    1-3 Years
    
    
    4+ Years
    
    
    Total(In thousands)Net fair value at end of period
    
    $
    (11,499
    )
    
    $
    1,809
    
    
    $
    5,216
    
    
    $
    (4,474
    )
  Six Months EndedJune 30,2007
    
    
    2006Type of Derivative
    
    Hedge Instruments(In thousands)Change in fair value of energy contracts
    
    $
    (34,223
    )
    
    $
    (988
    )Change in fair value of gas fixed for float swaps
    
    
    6,228
    
    
    
    (19,694
    )Change in the fair value of options
    
    
    30
    
    
    
    (7,703
    )Net change in fair value
    
    $
    (27,965
    )
    
    $
    (28,385
    )
 Risk Management Activities
   95




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.
  96




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Credit Risk
  PNM Wholesale
  PNM Wholesale
Schedule of Credit Risk Exposure
June 30, 2007
 Net(b)
    
    
    Number
    
    
    ExposureNet
    
    
    of
    
    
    ofCredit
    
    
    Counter
    
    
    Counter-Risk
    
    
    -parties
    
    
    partiesRating (a)
    
    Exposure
    
    
    >10%
    
    
    >10%(Dollars in thousands)External ratings:Investment grade
    
    $
    85,365
    
    
    
    3
    
    
    $
    51,863Non-investment grade
    
    
    986
    
    
    
    
    
    
    
    Split
    
    
    25
    
    
    
    
    
    
    
    Internal ratings:Investment grade
    
    
    
    
    
    
    
    
    
    
    Non-investment grade
    
    
    917
    
    
    
    
    
    
    
    Total
    
    $
    87,293
    
    
    
    
    
    
    $
    51,863
 (a)
    
    The Ratingincluded in Investment Grade is for counterparties with a minimum S&P
rating of BBB- or Moodys rating of Baa3. If the counterparty has provided a guarantee
by a higher rated entity (e.g., its parent), determination is based on the rating of
its guarantor. The category Internal Ratings  Investment Grade includes those
counterparties that are internally rated as investment grade in accordance with the
guidelines established in the Companys credit policy.(b)
    
    The Net Credit Risk Exposure is the net credit exposure from PNM Wholesale
operations. This includes long-term contracts, forward sales and short-term sales. The
exposure captures the net amounts due to PNM from receivables/payables for realized
transactions, delivered and unbilled revenues, and mark-to-market gains/losses
(pursuant to contract terms). Exposures are offset according to legally enforceable
netting arrangements and reduced by credit collateral. Credit collateral includes cash
deposits, letters of credit and performance bonds received from counterparties.
Amounts are presented before those reserves that are determined on a portfolio basis.
  97




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PNM Wholesale
Maturity of Credit Risk Exposure
June 30, 2007
 Greater
    
    
    TotalLess than
    
    
    
    
    
    
    than
    
    
    NetRating
    
    2 Years
    
    
    2-5 Years
    
    
    5 Years
    
    
    Exposure(In thousands)External ratings:Investment grade
    
    $
    51,001
    
    
    $
    30,527
    
    
    $
    3,837
    
    
    $
    85,365Non-investment grade
    
    
    986
    
    
    
    
    
    
    
    
    
    
    
    986Split
    
    
    25
    
    
    
    
    
    
    
    
    
    
    
    25Internal ratings:Investment grade
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Non-investment grade
    
    
    917
    
    
    
    
    
    
    
    
    
    
    
    917Total
    
    $
    52,929
    
    
    $
    30,527
    
    
    $
    3,837
    
    
    $
    87,293
 
 First Choice
   Interest Rate Risk
   98




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Equity Market Risk
  Alternatives Investment Risk
   99




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ITEM 4. CONTROLS AND PROCEDURES
 PNMR
 Disclosure of controls and procedures.
  Changes in internal controls
  
    
    PNMR is currently designing and implementing monitoring controls for its equity
investment in EnergyCo to ensure that PNMR maintains its compliance with Section 404 of the
Sarbanes-Oxley Act of 2002. It is expected that this effort will continue through the end
of 2007.
  PNM
 Disclosure of controls and procedures
  Changes in internal controls
   100




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TNMP
 Disclosure of controls and procedures
  Changes in internal controls
   101




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PART II  OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
  
    
    Citizen Suit Under the Clean Air Act
    
    Navajo Nation Environmental Issues
    
    Four Corners Federal Implementation Plan Litigation
    
    Legal Proceedings discussed under the caption, Western United States Wholesale Power Market
    
    Natural Gas Royalties Qui Tam Litigation
    
    TNMP Competitive Transition Charge True-Up Proceeding
    
    San Juan River Adjudication
 
 ITEM 1A. RISK FACTORS
  
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
 Annual Meeting
   Votes Against orDirector
    
    Votes For
    
    
    WithheldTerms expiring in 2008:Adelmo E. Archuleta
    
    
    64,181,150
    
    
    
    6,204,301Julie A. Dobson
    
    
    64,185,592
    
    
    
    6,199,859Woody L. Hunt
    
    
    64,182,949
    
    
    
    6,202,502C. E. McMahen
    
    
    63,784,715
    
    
    
    6,600,736M. T. Pacheco
    
    
    70,214,216
    
    
    
    171,235R. M. Price
    
    
    60,351,592
    
    
    
    10,033,859B. S. Reitz
    
    
    70,214,050
    
    
    
    171,401Jeffry E. Sterba
    
    
    66,802,203
    
    
    
    3,583,248Joan B. Woodard
    
    
    70,218,959
    
    
    
    166,492
  Votes For
    
    Votes Against or Withheld
    
    Abstentions70,231,908
    
    99,434
    
    54,109
  102




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##### Table of Contents



ITEM 6. EXHIBITS
 2.1
    
    PNMR
    
    Contribution Agreement, dated as of June 1, 2007, among
EnergyCo, LLC, PNM Resources, and ECJV Holdings, LLC4.23
    
    PNM
    
    Seventh Supplemental Indenture, dated as of June 1, 2007,
to Indenture dated as of March 11, 1998, between PNM and
The Bank of New York Trust Company, N.A. (successor to
JPMorgan Chase Bank), as Trustee12.1
    
    PNMR
    
    Ratio of Earnings to Fixed Charges12.2
    
    PNMR
    
    Ratio of Earnings to Combined Fixed Charges and Preferred
Stock Dividends31.1
    
    PNMR
    
    Chief Executive Officer Certification Pursuant to Section
302 of the Sarbanes-Oxley Act of 200231.2
    
    PNMR
    
    Chief Financial Officer Certification Pursuant to Section
302 of the Sarbanes-Oxley Act of 200231.3
    
    PNM
    
    Chief Executive Officer Certification Pursuant to Section
302 of the Sarbanes-Oxley Act of 200231.4
    
    PNM
    
    Chief Financial Officer Certification Pursuant to Section
302 of the Sarbanes-Oxley Act of 200231.5
    
    TNMP
    
    Chief Executive Officer Certification Pursuant to Section
302 of the Sarbanes-Oxley Act of 200231.6
    
    TNMP
    
    Chief Financial Officer Certification Pursuant to Section
302 of the Sarbanes-Oxley Act of 200232.1
    
    PNMR
    
    Chief Executive Officer Certification Pursuant to Section
906 of the Sarbanes-Oxley Act of 200232.2
    
    PNMR
    
    Chief Financial Officer Certification Pursuant to Section
906 of the Sarbanes-Oxley Act of 200232.3
    
    PNM
    
    Chief Executive Officer Certification Pursuant to Section
906 of the Sarbanes-Oxley Act of 200232.4
    
    PNM
    
    Chief Financial Officer Certification Pursuant to Section
906 of the Sarbanes-Oxley Act of 200232.5
    
    TNMP
    
    Chief Executive Officer Certification Pursuant to Section
906 of the Sarbanes-Oxley Act of 200232.6
    
    TNMP
    
    Chief Financial Officer Certification Pursuant to Section
906 of the Sarbanes-Oxley Act of 2002
  103




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SIGNATURE
  PNM RESOURCES, INC.
PUBLIC SERVICE COMPANY OF NEW MEXICO
TEXAS-NEW MEXICO POWER COMPANY(Registrants)Date: August 14, 2007
    
    /s/ Thomas G. SategnaThomas G. Sategna
Vice President and Corporate Controller
(Officer duly authorized to sign this report)
  104




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EXHIBIT INDEX
 ExhibitNo.
    
    
    
    Description2.1
    
    PNMR
    
    Contribution Agreement, dated as of June 1, 2007, among
EnergyCo, LLC, PNM Resources, and ECJV Holdings, LLC4.23
    
    PNM
    
    Seventh Supplemental Indenture, dated as of June 1, 2007,
to Indenture dated as of March 11, 1998, between PNM and
The Bank of New York Trust Company, N.A. (successor to
JPMorgan Chase Bank), as Trustee12.1
    
    PNMR
    
    Ratio of Earnings to Fixed Charges12.2
    
    PNMR
    
    Ratio of Earnings to Combined Fixed Charges and Preferred
Stock Dividends31.1
    
    PNMR
    
    Chief Executive Officer Certification Pursuant to Section
302 of the Sarbanes-Oxley Act of 200231.2
    
    PNMR
    
    Chief Financial Officer Certification Pursuant to Section
302 of the Sarbanes-Oxley Act of 200231.3
    
    PNM
    
    Chief Executive Officer Certification Pursuant to Section
302 of the Sarbanes-Oxley Act of 200231.4
    
    PNM
    
    Chief Financial Officer Certification Pursuant to Section
302 of the Sarbanes-Oxley Act of 200231.5
    
    TNMP
    
    Chief Executive Officer Certification Pursuant to Section
302 of the Sarbanes-Oxley Act of 200231.6
    
    TNMP
    
    Chief Financial Officer Certification Pursuant to Section
302 of the Sarbanes-Oxley Act of 200232.1
    
    PNMR
    
    Chief Executive Officer Certification Pursuant to Section
906 of the Sarbanes-Oxley Act of 200232.2
    
    PNMR
    
    Chief Financial Officer Certification Pursuant to Section
906 of the Sarbanes-Oxley Act of 200232.3
    
    PNM
    
    Chief Executive Officer Certification Pursuant to Section
906 of the Sarbanes-Oxley Act of 200232.4
    
    PNM
    
    Chief Financial Officer Certification Pursuant to Section
906 of the Sarbanes-Oxley Act of 200232.5
    
    TNMP
    
    Chief Executive Officer Certification Pursuant to Section
906 of the Sarbanes-Oxley Act of 200232.6
    
    TNMP
    
    Chief Financial Officer Certification Pursuant to Section
906 of the Sarbanes-Oxley Act of 2002
  105