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

                                    FORM 10-Q

(Mark One)
(X)      COMBINED QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
         SECURITIES EXCHANGE ACT OF 1934
                  For the quarterly period ended June 30, 1999

                                       or

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


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

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

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

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

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

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

TNP Enterprises, Inc. had  13,415,566  shares of common stock  outstanding as of
August 3, 1999.

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

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

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

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

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

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

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


<PAGE>

                     TNP Enterprises, Inc. And Subsidiaries
                 Texas-New Mexico Power Company and Subsidiaries
    Combined Quarterly Report on Form 10-Q for the period ended June 30, 1999

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

                                TABLE OF CONTENTS

                          PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.

        TNP Enterprises, Inc. (TNP) and Subsidiaries:

           Consolidated Statements of Income
           Three and Six Month Periods Ended June 30, 1999, and 1998           3

           Consolidated Statements of Cash Flows
           Six Month Periods Ended June 30, 1999, and 1998                     4

           Consolidated Balance Sheets
           June 30, 1999, and December 31, 1998                                5

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

           Consolidated Statements of Income
           Three and Six Month Periods Ended June 30, 1999, and 1998           6

           Consolidated Statements of Cash Flows
           Six Month Periods Ended June 30, 1999, and 1998                     7

           Consolidated Balance Sheets
           June 30, 1999, and December 31, 1998                                8

           Notes to Consolidated Financial Statements                          9

  Item 2.  Management's Discussion and Analysis of Financial Condition
           and Results of Operations.                                         13


                           PART II. OTHER INFORMATION

  Item 1.  Legal Proceedings.                                                 19

  Item 6.  Exhibits and Reports on Form 8-K.                                  19

           (a)   Exhibit Index                                                19

           (b)   Reports on Form 8-K                                          19

  Statement Regarding Forward Looking Information                             19

  Signature page                                                              19






<PAGE>
<TABLE>
<CAPTION>
                     TNP ENTERPRISES, INC. AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF INCOME
                                   (Unaudited)

                                                                      Three Months Ended                 Six Months Ended
                                                                           June 30,                          June 30,
                                                              ---------------------------------------------------------------------
                                                                  1999               1998             1999               1998
                                                              --------------     --------------  ---------------    ---------------
<S>                                                           <C>                <C>             <C>                <C>
                                                                            (In thousands except per share amounts)

OPERATING REVENUES                                            $    144,027       $    142,099    $     262,153      $     268,036
                                                              --------------     --------------  ---------------    ---------------

OPERATING EXPENSES:
  Purchased power and fuel                                          66,982             74,558          124,354            141,383
  Other operating and maintenance                                   28,608             25,485           52,432             45,869
  Depreciation                                                       9,513              9,005           19,487             18,877
  Charge for recovery of stranded plant (Note 3)                     1,903              1,160            5,653              1,160
  Taxes other than income taxes                                      8,285              8,850           16,285             16,576
  Income taxes                                                       6,561              3,940            7,274              6,579
                                                              --------------     --------------  ---------------    ---------------
       Total operating expenses                                    121,852            122,998          225,485            230,444
                                                              --------------     --------------  ---------------    ---------------
  NET OPERATING INCOME                                              22,175             19,101           36,668             37,592
                                                              --------------     --------------  ---------------    ---------------
OTHER INCOME:
  Other income and deductions, net                                     777                104              939                468
  Income taxes                                                         180                221              298                 55
                                                              --------------     --------------  ---------------    ---------------
       Other income, net of taxes                                      957                325            1,237                523
                                                              --------------     --------------  ---------------    ---------------

INCOME BEFORE INTEREST CHARGES                                      23,132             19,426           37,905             38,115
                                                              --------------     --------------  ---------------    ---------------
INTEREST CHARGES:
  Interest on long-term debt                                         9,688             12,542           19,912             25,039
  Other interest and amortization of debt-related costs              1,041              1,053            2,457              2,115
                                                              --------------     --------------  ---------------    ---------------
       Total interest charges                                       10,729             13,595           22,369             27,154
                                                              --------------     --------------  ---------------    ---------------

INCOME FROM CONTINUING OPERATIONS                                   12,403              5,831           15,536             10,961

Loss from discontinued nonregulated operations (Note 4)                  -              6,598                -              7,102
                                                              --------------     --------------  ---------------    ---------------

NET INCOME (LOSS)                                                   12,403               (767)          15,536              3,859
Dividends on preferred stock and other                                 (94)                38              (58)                76
                                                              --------------     --------------  ---------------    ---------------

INCOME (LOSS) APPLICABLE TO COMMON STOCK                      $     12,497       $       (805)   $      15,594      $       3,783
                                                              ==============     ==============  ===============    ===============


EARNINGS (LOSS) PER SHARE OF COMMON STOCK
Earnings from continuing operations                           $       0.93       $       0.44    $        1.17      $        0.83
Loss from discontinued nonregulated operations                           -              (0.50)               -              (0.54)
                                                              --------------     --------------  ---------------    ---------------
EARNINGS (LOSS) PER SHARE                                     $       0.93       $      (0.06)   $        1.17      $        0.29
                                                              ==============     ==============  ===============    ===============
DIVIDENDS PER SHARE OF COMMON STOCK                           $       0.29       $       0.27    $        0.58      $        0.54
                                                              ==============     ==============  ===============    ===============

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING                          13,398             13,240           13,372             13,214
                                                              ==============     ==============  ===============    ===============



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


</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                     TNP ENTERPRISES, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)

                                                                                  Six Months Ended
                                                                                      June 30
                                                                           -------------------------------
                                                                               1999             1998
                                                                           --------------   --------------
                                                                                   (In thousands)
<S>                                                                        <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES:                                      $    235,599     $    279,467
  Purchased power                                                              (108,928)        (119,963)
  Fuel costs paid                                                               (16,373)         (17,549)
  Cash paid for payroll and to other suppliers                                  (51,345)         (64,098)
  Interest paid, net of amounts capitalized                                     (16,507)         (26,162)
  Income taxes refunded (paid)                                                    3,391           (1,788)
  Other taxes paid                                                              (22,886)         (21,496)
  Other operating cash receipts and payments, net                                    (7)             506
                                                                           --------------   --------------
NET CASH FROM OPERATING ACTIVITIES                                               22,944           28,917
                                                                           --------------   --------------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Additions to utility plant                                                    (21,277)         (17,066)
  Additions to other property and nonregulated investments                            -              300
  Withdrawals from (deposits to) escrow account                                   1,952                -
                                                                           --------------   --------------
NET CASH USED IN INVESTING ACTIVITIES                                           (19,325)         (16,766)
                                                                           --------------   --------------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Dividends paid on preferred and common stocks                                  (7,817)          (7,221)
  Common stock issuances                                                          3,956            3,957
  Borrowings from (repayments to) revolving credit facilities - net             (43,500)               -
  Issuances:
     Senior notes, net of discount                                              174,164                -
  Deferred expenses associated with financings                                   (1,577)               -
  Redemptions:
     Preferred stock, net of gain                                                (1,100)               -
     Secured debentures                                                        (130,000)               -
     Other long-term debt                                                             -             (104)
                                                                           --------------   --------------
NET CASH USED IN FINANCING ACTIVITIES                                            (5,874)          (3,368)
                                                                           --------------   --------------

NET CHANGE IN CASH AND CASH EQUIVALENTS                                          (2,255)            8,782
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                                 12,216            15,877
                                                                           --------------   --------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD                                 $      9,961     $      24,659
                                                                           ==============   ==============

RECONCILIATION OF NET INCOME TO NET
     CASH FROM OPERATING ACTIVITIES:                                       $     15,536     $       3,859
  Adjustments to reconcile net income to net cash from operating activities:
     Depreciation                                                                19,487            18,877
     Charge for recovery of stranded plant                                        5,653             1,160
     Amortization of debt-related costs and other deferred charges                2,370             1,881
     Allowance for funds used during construction                                  (382)              (15)
     Deferred income taxes                                                       (1,896)            2,382
     Investment tax credits                                                       3,599              (363)

Cash flows impacted by changes in current assets and liabilities:
     Deferred fuel costs                                                         (4,830)             (223)
     Accounts payable                                                            (1,862)             (794)
     Accrued interest                                                             3,648            (4,837)
     Accrued taxes                                                                  856             4,424
     Reserve for customer refund                                                (10,725)            5,416
     Changes in other current assets and liabilities                             (8,921)           (2,386)
Other, net                                                                          411              (464)
                                                                           --------------   --------------
NET CASH FROM OPERATING ACTIVITIES                                         $     22,944     $      28,917
                                                                           ==============   ==============



The  accompanying  notes are an integral  part of these  consolidated  financial
statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                     TNP ENTERPRISES, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS

                                                                            June 30, 1999        December 31,
                                                                             (Unaudited)            1998
                                                                           ----------------    ----------------
                                                                                     (In thousands)
<S>                                                                        <C>                 <C>

UTILITY PLANT:
  Electric plant                                                           $     1,263,813     $     1,260,147
  Construction work in progress                                                     11,372               6,294
                                                                           ----------------    ----------------
            Total                                                                1,275,185           1,266,441
  Less accumulated depreciation                                                    349,862             343,562
                                                                           ----------------    ----------------
            Net utility plant                                                      925,323             922,879
                                                                           ----------------    ----------------
OTHER PROPERTY AND INVESTMENTS, at cost                                              8,916              10,384
                                                                           ----------------    ----------------
CURRENT ASSETS:
  Cash and cash equivalents                                                          9,961              12,216
  Accounts receivable                                                                5,646               5,955
  Inventories, at lower of average cost or market:
       Fuel                                                                            513                 677
       Materials and supplies                                                        4,702               4,567
  Deferred fuel costs                                                                6,506               1,676
  Accumulated deferred income taxes                                                    384               2,235
  Other current assets                                                               3,986               4,403
                                                                           ----------------    ----------------
            Total current assets                                                    31,698              31,729
                                                                           ----------------    ----------------
REGULATORY TAX ASSETS                                                                2,405                 -
DEFERRED CHARGES                                                                    26,924              28,773
                                                                           ----------------    ----------------
                                                                           $       995,266     $       993,765
                                                                           ================    ================
CAPITALIZATION AND LIABILITIES

CAPITALIZATION:
  Common shareholders' equity:
       Common stock - no par value per share.  Authorized 50,000,000
            shares; issued 13,412,615 shares in 1999 and 13,293,996
            in 1998                                                        $       196,473     $       192,518
       Retained earnings                                                           123,614             115,776
                                                                           ----------------    ----------------
            Total common shareholders' equity                                      320,087             308,294

  Preferred stock                                                                    1,844               3,060
  Long-term debt, less current maturities                                          459,702             459,000
                                                                           ----------------    ----------------
            Total capitalization                                                   781,633             770,354
                                                                           ----------------    ----------------
CURRENT LIABILITIES:
  Accounts payable                                                                  26,149              28,011
  Accrued interest                                                                   8,668               5,020
  Accrued taxes                                                                     15,146              14,290
  Customers' deposits                                                                3,972               3,609
  Reserve for customer refunds                                                         246              10,971
  Other current liabilities                                                         15,163              25,202
                                                                           ----------------    ----------------
            Total current liabilities                                               69,344              87,103
                                                                           ----------------    ----------------

REGULATORY TAX LIABILITIES                                                             -                   957
ACCUMULATED DEFERRED INCOME TAXES                                                  101,850              97,346
ACCUMULATED DEFERRED INVESTMENT TAX CREDITS                                         21,523              20,916
DEFERRED CREDITS (Note 3)                                                           20,916              17,089
COMMITMENTS AND CONTINGENCIES (Note 6)
                                                                           ----------------    ----------------
                                                                           $       995,266     $       993,765
                                                                           ================    ================







The  accompanying  notes are an integral  part of these  consolidated  financial
statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                 TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
              (a wholly owned subsidiary of TNP Enterprises, Inc.)
                        CONSOLIDATED STATEMENTS OF INCOME
                                   (Unaudited)

                                                                    Three Months Ended                    Six Months Ended
                                                                         June 30,                             June 30,
                                                               --------------------------            -------------------------
                                                              1999                1998              1999               1998
                                                           ----------          ----------        ----------         ----------
                                                                                        (In thousands)
<S>                                                        <C>                 <C>               <C>                <C>

OPERATING REVENUES                                         $  144,014          $  142,085        $  262,125         $  268,016
                                                           ----------          ----------        ----------         ----------
OPERATING EXPENSES:
  Purchased power and fuel                                     66,982              74,558           124,354            141,383
  Other operating and maintenance                              26,321              24,538            49,344             43,809
  Depreciation                                                  9,513               9,004            19,487             18,876
  Charge for recovery of stranded plant (Note 3)                1,903               1,160             5,653              1,160
  Taxes other than income taxes                                 8,172               8,738            16,052             17,122
  Income taxes                                                  7,540               4,143             8,584              6,946
                                                           ----------          ----------        ----------         ----------
       Total operating expenses                               120,431             122,141           223,474            229,296
                                                           ----------          ----------        ----------         ----------

NET OPERATING INCOME                                           23,583              19,944            38,651             38,720
                                                           ----------          ----------        ----------         ----------

OTHER INCOME:
  Other income and deductions, net                              1,026                 (25)            1,100                170
  Income taxes                                                     90                 221               232                128
                                                           ----------          ----------        ----------         -----------
       Other income, net of taxes                               1,116                 196             1,332                298
                                                           ----------          ----------        ----------         -----------

INCOME BEFORE INTEREST CHARGES                                 24,699              20,140            39,983             39,018
                                                           ----------          ----------        ----------         -----------

INTEREST CHARGES:
  Interest on long-term debt                                    9,462              12,542            19,516             25,039
  Other interest and amortization of debt-related costs         1,041               1,053             2,457              2,115
                                                           ----------          ----------        ----------         -----------
       Total interest charges                                  10,503              13,595            21,973             27,154
                                                           ----------          ----------        ----------         -----------

NET INCOME                                                     14,196               6,545            18,010             11,864
Dividends on preferred stock and other                            (94)                 38               (58)                76
                                                           ----------          ----------        ----------         -----------

INCOME APPLICABLE TO COMMON STOCK                          $   14,290          $    6,507        $   18,068         $   11,788
                                                           ==========          ==========        ==========         ==========





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


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

                                                                          Six Months Ended
                                                                              June 30
                                                                  --------------------------------
                                                                      1999              1998
                                                                  --------------    --------------
                                                                           (In thousands)
<S>                                                               <C>               <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Cash received from customers                                    $    233,573      $     265,989
  Purchased power                                                     (108,928)          (119,963)
  Fuel costs paid                                                      (16,373)           (17,549)
  Cash paid for payroll and to other suppliers                         (41,398)           (38,279)
  Interest paid, net of amounts capitalized                            (16,166)           (26,154)
  Income taxes refunded (paid)                                           3,391              2,206
  Other taxes paid                                                     (22,409)           (21,963)
  Other operating cash receipts and payments, net                          (36)               173
                                                                  --------------    --------------
NET CASH FROM OPERATING ACTIVITIES                                      31,654             44,460
                                                                  --------------    --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Additions to utility plant                                           (21,051)           (16,955)
  Withdrawal from (deposits to) escrow account                           1,903                  -
                                                                  --------------    --------------
CASH FLOWS USED IN INVESTING ACTIVITIES                                (19,148)           (16,955)
                                                                  --------------    --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Dividends paid on preferred and common stocks                            (61)           (13,676)
  Borrowings from (repayments to) revolving credit facilities, net     (54,000)                 -
  Issuances:
     Senior notes, net of discount                                     174,164                  -
  Deferred expenses associated with financings                          (1,577)                 -
  Redemptions:
     Preferred stock, net of gain                                       (1,100)                 -
     Secured debentures                                               (130,000)                 -
                                                                  --------------    --------------
NET CASH PROVIDED BY FINANCING ACTIVITIES                              (12,574)           (13,676)
                                                                  --------------    --------------
NET CHANGE IN CASH AND CASH EQUIVALENTS                                    (68)            13,829
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                         7,977              2,772
                                                                  --------------    --------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD                        $      7,909      $      16,601
                                                                  ==============    ==============

RECONCILIATION OF NET INCOME TO NET
     CASH FROM OPERATING ACTIVITIES:
  Net income                                                      $     18,010      $      11,864
  Adjustments to reconcile net income to net cash from operating
  activities:
     Depreciation of utility plant                                      19,487             18,876
     Charge for recovery of stranded plant                               5,653              1,160
     Amortization of debt-related costs and other deferred               2,370              1,881
     Allowance for funds used during construction                         (382)               (15)
     Deferred income taxes                                                (289)             4,032
     Investment tax credits                                              3,543               (363)

Cash flows impacted by changes in current assets and liabilities:
     Deferred fuel costs                                                (4,830)              (223)
     Accounts payable                                                   (1,258)             5,622
     Accrued interest                                                    3,593               (795)
     Accrued taxes                                                       2,707               (897)
     Reserve for customer refund                                       (10,725)             5,416
     Changes in other current assets and liabilities                    (4,822)            (4,386)
Other, net                                                              (1,403)             2,288
                                                                  --------------    --------------
NET CASH FROM OPERATING ACTIVITIES                                $     31,654      $      44,460
                                                                  ==============    ==============




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


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


                                                                           June 30, 1999       December 31,
                                                                            (Unaudited)            1998
                                                                          ----------------    ----------------
                                                                                    (In thousands)
<S>                                                                      <C>                 <C>
ASSETS

UTILITY PLANT:
  Electric plant                                                          $     1,263,744     $     1,260,099
  Construction work in progress                                                    11,372               6,294
                                                                          ----------------    ----------------
            Total                                                               1,275,116           1,266,393
  Less accumulated depreciation                                                   349,862             343,562
                                                                          ----------------    ----------------
            Net utility plant                                                     925,254             922,831
                                                                          ----------------    ----------------
OTHER PROPERTY AND INVESTMENTS, at cost                                               213               2,116
                                                                          ----------------    ----------------
CURRENT ASSETS:
  Cash and cash equivalents                                                         7,909               7,977
  Accounts receivable                                                               1,981                 923
  Inventories, at lower of average cost or market:
       Fuel                                                                           513                 677
       Materials and supplies                                                       4,702               4,567
  Deferred fuel costs                                                               6,506               1,676
  Other current assets                                                              3,571               4,093
                                                                          ----------------    ----------------
            Total current assets                                                   25,182              19,913
                                                                          ----------------    ----------------

REGULATORY TAX ASSETS                                                               2,405                 -
DEFERRED CHARGES                                                                   26,831              28,706
                                                                          ----------------    ----------------
                                                                          $       979,885     $       973,566
                                                                          ================    ================
CAPITALIZATION AND LIABILITIES

CAPITALIZATION:
  Common shareholder's equity:
       Common stock, $10 par value per share.
            Authorized 12,000,000 shares; issued 10,705 shares            $           107     $           107
       Capital in excess of par value                                             222,149             222,149
       Retained earnings                                                           97,907              79,840
                                                                          ----------------    ----------------
            Total common shareholder's equity                                     320,163             302,096
  Redeemable cumulative preferred stock                                             1,844               3,060
  Long-term debt, less current maturities                                         440,202             450,000
                                                                          ----------------    ----------------
            Total capitalization                                                  762,209             755,156
                                                                          ----------------    ----------------
CURRENT LIABILITIES:
  Accounts payable                                                                 25,630              26,888
  Accrued interest                                                                  8,597               5,004
  Accrued taxes                                                                    23,156              20,449
  Customers' deposits                                                               3,972               3,609
  Accumulated deferred income taxes                                                 1,295                 649
  Reserve for customer refunds                                                        246              10,971
  Other current liabilities                                                        12,398              17,076
                                                                          ----------------    ----------------
            Total current liabilities                                              75,294              84,646
                                                                          ----------------    ----------------
REGULATORY TAX LIABILITIES                                                            -                   957
ACCUMULATED DEFERRED INCOME TAXES                                                  97,190              93,378
ACCUMULATED DEFERRED INVESTMENT TAX CREDITS                                        24,860              22,729
DEFERRED CREDITS (Note 3)                                                          20,332              16,700
COMMITMENTS AND CONTINGENCIES (Note 6)
                                                                          ----------------    ----------------
                                                                          $       979,885     $       973,566
                                                                          ================    ================

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


</TABLE>
<PAGE>

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


Note 1.  Interim Financial Statements

         The interim consolidated  financial statements of TNP and subsidiaries,
and TNMP and subsidiaries are unaudited, and contain all adjustments (consisting
primarily of normal  recurring  accruals)  necessary for a fair statement of the
results for the interim periods  presented.  Results for interim periods are not
necessarily  indicative  of  results  to be  expected  for a  full  year  or for
previously reported periods due in part to seasonal revenue fluctuations.  It is
suggested that these  consolidated  financial  statements be read in conjunction
with the audited consolidated financial statements and notes thereto included in
TNP's and TNMP's 1998 Combined Annual Report on Form 10-K.

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

Note 2.  Acquisition

         TNP, SW  Acquisition,  L.P. (SW), a limited  partnership  organized and
existing under the laws of Texas,  and ST Acquisition  Corp. (ST Corp.), a Texas
corporation  wholly  owned by SW, have  entered  into an  Agreement  and Plan of
Merger,  dated as of May 24, 1999 (the Merger  Agreement),  which provides for a
merger of TNP with and into ST Corp.,  with TNP being the surviving  corporation
(the Merger).  Under the terms of the Merger  Agreement,  which was  unanimously
approved  by TNP's board of  directors,  each  issued and  outstanding  share of
common stock of TNP will be canceled and converted  automatically into the right
to receive  $44.00 in cash.  The Merger will  convert  TNP from a listed  public
corporation to a privately owned corporation.

         TNP  expects  the  Merger to close by the end of the first  quarter  of
2000. The Merger Agreement is subject to financing, and requires approval by TNP
shareholders and approval or regulatory  review by the Federal Energy Regulatory
Commission (FERC), the Department of Justice,  and state regulators in Texas and
New Mexico.  A special meeting of shareholders has been called for September 22,
1999.  The  purpose  of the  meeting  is to  consider  and  vote  on the  Merger
Agreement.  The  record  date for this  meeting  is  August 3,  1999.  The proxy
statement related to the special meeting will be mailed to shareholders the week
of August 9.

         On July 9, 1999,  TNMP and SW filed a joint  application  with the FERC
seeking approval of the Merger.  Simultaneously,  TNMP filed an application with
the FERC seeking approval of a Backstop Credit Facility (Credit Facility).  As a
result of the  Merger,  TNMP must offer to  repurchase  certain  existing  debt.
Should holders of this debt accept TNMP's  repurchase  offer,  proceeds from the
Credit Facility would fund the repurchase.

         On July 15,  1999,  TNP and TNMP filed an  application  with the Public
Utility  Commission of Texas (PUCT) seeking a  determination  that the Merger is
consistent with the public interest.  Also on July 15, TNMP filed an application
with the New Mexico Public Regulation  Commission  (NMPRC) seeking to obtain all
approvals and authorizations necessary to consummate the Merger.

Note 3.  Regulatory Matters

   Texas

         New  Legislation.  On June 18, 1999, new legislation  that  establishes
competition in the Texas electric  utility  industry became law,  retroactive to
January 1, 1999. The new  legislation  will  implement  retail  competition  for
customers in most areas of Texas on January 1, 2002. Among other provisions, the
new legislation:

             * Freezes base rates through December 31, 2001, based on the levels
               in effect on September 1, 1999 adjusted for changes in  the fixed
               fuel factor which passes through fuel and  purchased power energy
               costs to customers.


<PAGE>


             *  Allows a utility  to  recover  100% of its  verifiable  stranded
                costs via several methods, including:

                *  Redirection of  depreciation - During 1998 - 2001, a  utility
                   may  redirect  all or a part of the  depreciation  related to
                   transmission  and  distribution   assets  to  its  generation
                   assets.
                *  Application  of  earnings  in excess of  an  allowed  rate of
                   return - During the freeze  period,  utilities'  earnings are
                   capped by the cost of capital  approved in the utility's most
                   recent rate proceeding  before the PUCT. For TNMP, the cap is
                   10.53%  return on rate  base.  Earnings  in excess of the cap
                   will be used to  reduce  the net  book  value  of  generation
                   assets.
                *  Securitization  - At any time  after the  start of the freeze
                   period,  a  utility  may  securitize  100% of its  regulatory
                   assets and up to 75% of its  estimated  stranded  costs,  and
                   recover those costs from its  customers  through a transition
                   charge approved by the PUCT.
                *  Assessing a competition transition  charge - After the freeze
                   period, stranded costs that have not been recovered by one of
                   the methods  above will be  recovered  through a  competition
                   transition  charge levied upon all retail  customers within a
                   utility's  geographical   certificated  service  area  as  it
                   existed on May 1, 1999.

             * Establishes  four  alternatives for quantifying  the final amount
               of  stranded  costs to be used in  establishing  the  competition
               transition  charge,  and  provides a  framework  for  reconciling
               estimated  stranded costs to the actual stranded costs quantified
               using those methods.
             * Requires  utilities   to   disaggregate   into   three   distinct
               businesses: generation, transmission and distribution, and retail
               energy provider.
             * Provides  that once  customer  choice begins on January 1, 2002,
               residential and small  commercial  customers who do not choose an
               alternative  provider  will  continue  to  be  served  by  TNMP's
               affiliate  retail  energy  provider  at a price which is 6% lower
               than the rate in effect on January 1, 1999, adjusted to reflect a
               fuel factor  that the PUCT shall  determine  as of  December  31,
               2001.

         Prior  to  the  new  legislation,  TNMP  had  been  operating  under  a
transition-to-competition  plan (Transition  Plan) approved by the PUCT in 1998.
The  Transition  Plan  provides  that it  will be  modified  to  conform  to any
legislation  enacting  competition in the electric utility  industry.  There are
provisions  of  the  new  legislation  that  conflict  with  provisions  of  the
Transition  Plan. In such  instances,  management  believes the new  legislation
supercedes  the  Transition  Plan.  TNMP will make a filing with the PUCT during
August  1999  that  sets  out  its  position  regarding  the  effect  of the new
legislation on the Transition Plan.  Management believes that any changes to the
Transition  Plan to reflect the new  legislation  will have a minimal  effect on
rates.  However,  such an outcome is subject to the PUCT  resolving  significant
uncertainties regarding the new legislation.

         TNP's  and  TNMP's  consolidated   financial   statements  reflect  the
application  of SFAS  71,  "Accounting  for the  Effects  of  Certain  Types  of
Regulation,"  which  provides for  recognition  of the economic  effects of rate
regulation.  The passage of the new legislation raises the issue of whether SFAS
71 should  continue  to be applied  to the  generation/power  supply  portion of
TNMP's Texas business. EITF 97-4,  "Deregulation of the Pricing of Electricity -
Issues  Related to the  Application  of SFAS  Statements No. 71 and 101," states
that application of SFAS 71 should stop "when deregulatory legislation is passed
or when a rate  order  (whichever  is  necessary  to  effect  the  change in the
jurisdiction)  that contains  sufficient detail for the enterprise to reasonably
determine  how the  transition  plan will  affect the  separable  portion of its
business  whose  pricing  is  being   deregulated  is  issued."  While  the  new
legislation provides the framework as to how competition will be implemented, it
delegates significant  authority to the PUCT to resolve uncertainties  regarding
implementation  of competition.  As a result,  currently TNMP cannot  reasonably
determine  how the new  legislation  will  affect  the  generation/power  supply
portion of its Texas  business,  and it will  continue  to apply SFAS 71 to that
portion of its business  until a reasonable  determination  of the impact of the
new legislation can be made.

         Management has calculated excess earnings for the six months ended June
30,  1999,  based on the  provisions  of the new  legislation.  The  calculation
resulted in a reduction to pre-tax  operating  income of $5.7 million ($0.26 per
share). The amounts  previously  recorded in the first quarter for stranded cost
recovery under the Transition  Plan have been  reclassified,  and along with the
excess earnings, are displayed in the income statement under the caption "Charge
for  recovery  of  stranded  plant"  and  included  in the  balance  sheet  as a
regulatory liability under the caption "Deferred Credits".

         Earnings  Monitoring  Report.  On May 17, 1999, TNMP filed its Electric
Investor-Owned  Utilities  Earnings  Report  (Earnings  Report)  with the  PUCT.
Simultaneously,  TNMP  filed  an  Addendum  to the  Earnings  Report  (Addendum)
detailing  TNMP's  calculation of excess  earnings under the Transition Plan for
the twelve months ended December 31, 1998. The Addendum showed that TNMP had not
earned  in  excess  of the  11.25%  return  on  equity  cap  established  in the
Transition  Plan. The Staff of the PUCT and the Office of Public Utility Counsel
are  reviewing  the  Addendum.  The  Transition  Plan  provides that persons may
challenge  the  Addendum  by filing a written  contest  within 90 days of TNMP's
filing with the PUCT.  If no such  contests  are filed,  the  Addendum  shall be
deemed approved.  Should a party contest the Addendum, the PUCT will establish a
schedule  allowing a Final  Order to be entered  within 90 days of the filing of
the contest.


<PAGE>



   New Mexico

         The New Mexico Legislature opened New Mexico's electric power market to
consumer choice with the passage of the Electric Utility Industry  Restructuring
Act of 1999 (the Act) in April 1999. The Act provides for the phase-in of retail
choice  beginning  January 1, 2001,  requires  utilities to  disaggregate  their
regulated  business  activities  from those that will be subject to competition,
and  guarantees  recovery of at least 50% of a utility's  stranded  costs over a
five-year  period.  On June 8, 1999, the NMPRC entered a Final Order terminating
TNMP's Community Choice(R) transition plan. By terminating Community Choice, the
NMPRC  placed  TNMP on the same  timetable  as other New Mexico  utilities  with
regard to retail  competition  and restored the  pass-through of purchased power
costs to customers.

         Under the Act,  utilities are guaranteed  recovery from customers of at
least 50% of their stranded costs over a five-year period.  Community Choice did
not define  stranded  costs,  nor their  recovery.  In addition,  the Act delays
competition to January 1, 2001.  Community Choice had specified May 1, 2000, for
the beginning of retail  choice.  As a result,  TNMP has reduced its accrual for
potential  stranded  costs in New Mexico from $3.4  million as of  December  31,
1998, to $2.1 million as of June 30, 1999.

         Community Choice provided for the filing of a rate case by TNMP on June
1, 1999. Notwithstanding the termination of Community Choice, TNMP and the NMPRC
Staff  agreed  that TNMP would file  information  that would  allow the Staff to
review the reasonableness of TNMP's rates.  Settlement talks between the parties
began, with the intent of reaching a settlement  without the necessity of filing
a rate case. The parties have reached a tentative  settlement  that resolves the
issues  between the parties,  and are preparing to submit the  settlement to the
NMPRC for approval.  The settlement calls for a decrease in TNMP's base rates of
$1.8  million,  or 6%. TNMP expects the NMPRC to act on the proposed  settlement
during the second half of 1999.

Note 4.  Discontinued Nonregulated Operations

         As discussed in TNP's and TNMP's 1998  Combined  Annual  Report on Form
10-K,  management  discontinued the remaining  operations of Facility Works Inc.
(FWI),  TNP's  wholly owned  unregulated  subsidiary,  in late 1998.  All losses
incurred by FWI during 1998 have been  reclassified as losses from  discontinued
operations.


Note 5.  Segment and Related Information

         In TNP's and TNMP's  1998  Combined  Annual  Report on Form  10-K,  TNP
reported two segments,  TNMP, which provides regulated electric service in Texas
and New Mexico,  and FWI, which before  operations were  discontinued,  provided
integrated  mechanical,  electrical,  plumbing and other  maintenance and repair
services to commercial customers in Texas metropolitan areas.

         The operations of TNMP have been separated into two segments, Texas and
New Mexico.  TNP manages the  segments  separately  to respond to the  differing
operational and regulatory climates in the two states.

         The following  tables present  information  about  profits,  losses and
assets of TNP's reportable segments (in thousands).  In the tables below, "Total
assets"  for Texas and New Mexico  includes  only net utility  plant.  All other
assets are included in All Other and Eliminations.

<TABLE>
<CAPTION>

                                          Three Months Ended June 30,         Six Months Ended June 30,
                                             1999              1998             1999             1998
                                            ------            ------           ------           ------
   Texas
<S>                                          <C>               <C>              <C>              <C>
   Operating revenues                 $    122,152       $  122,394        $  221,146        $  227,494
   Net income (loss)                        11,438            5,761            14,633             9,278
   Total assets at June 30, 1999
     and December 31, 1998                 841,697          839,771           841,697           839,771


   New Mexico

   Operating revenues                 $     21,861       $   19,691        $   40,979        $   40,522
   Net income (loss)                         2,758              784             3,377             2,586
   Total assets at June 30, 1999
     and December 31, 1998                  83,557           82,623            83,557            82,623



<PAGE>



                                          Three Months Ended June 30,         Six Months Ended June 30,
                                             1999              1998             1999             1998
                                            ------            ------           ------           ------
   All Other and Eliminations

   Operating revenues                 $         14       $       14       $        28        $       20
   Net income (loss)                        (1,793)          (7,312)           (2,474)           (8,005)
   Total assets at June 30, 1999
     and December 31, 1998                  70,012           71,371            70,012            71,371

   Consolidated

   Operating revenues                 $    144,027       $  142,099       $   262,153        $  268,036
   Net income (loss)                        12,403             (767)           15,536             3,859
   Total assets at June 30, 1999
     and December 31, 1998                 995,266          993,765           995,266           993,765
</TABLE>


Note 6.           Commitments and Contingencies

   Legal Proceedings

         Clear Lake.  TNMP and Clear Lake  Limited  Partnership  ("Clear  Lake")
agreed in March  1999 to settle  the  lawsuit  styled  Clear  Lake  Cogeneration
Limited  Partnership vs.  Texas-New  Mexico Power Company,  pending in the 234th
District  Court of Harris County,  Texas,  and the parallel  proceeding  pending
before the PUCT. These proceedings  arose out of disagreements  between TNMP and
Clear Lake over the  interpretation of certain terms of an agreement under which
TNMP purchases cogenerated electricity from Clear Lake.

         Under the  settlement,  TNMP,  Clear Lake,  and Calpine Power  Services
Company (an affiliate of Clear Lake) have entered into a revised purchased power
contract  effective  as of  October  1,  1998,  governing  energy  and  capacity
transactions between the parties. In addition,  TNMP agreed to pay Clear Lake $8
million, subject to PUCT approval of the settlement.

         On July 15,  1999,  the PUCT  approved the  settlement.  The PUCT order
ensures  that TNMP's  customers  will  realize the savings  associated  with the
revised  purchased  power  contract  between TNMP and Clear Lake. The order also
requires TNMP to defer recognition of the $8 million payment that TNMP will make
to Clear Lake as part of the settlement, and include amortization of the payment
in its  calculation  of excess  earnings over the life of the revised  purchased
power  contract.  TNMP  expects  the $8  million  payment  to occur in the third
quarter of 1999.

         Phillips  Petroleum.  TNMP is the  defendant in a suit styled  Phillips
Petroleum  Company vs. Texas-New Mexico Power Company,  filed on October 1, 1997
and pending in the 149th State District  Court of Brazoria  County,  Texas.  The
suit is  based  on  events  surrounding  an  interruption  of  electricity  to a
petroleum  refinery and related  facilities that occurred in May 1997.  Phillips
Petroleum   Company  is  seeking  the  recovery  of  damages  arising  from  the
interruption  and in May 1999 demanded  payment in the amount of $47.1  million.
TNMP's tariff approved by the PUCT contains  limitations against recovery of the
great majority of Phillip's alleged actual damages.  The Texas Supreme Court, in
another  matter,   has  recently  upheld  the   enforceability  of  such  tariff
limitations in litigation of this type; TNMP believes the ruling will operate to
substantially  limit any recovery of actual  damages by  Phillips,  in the event
that any are  awarded in this  matter.  In May 1999,  TNMP  filed a Third  Party
Petition  naming Sweeny  Cogeneration  Limited  Partnership as a defendant.  The
lawsuit is in the discovery stage. TNMP believes that it has insurance  coverage
on most of  Phillips'  claims  up to a total  of $31  million,  with a  $500,000
self-retention that has been charged to earnings.

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



<PAGE>



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

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

Results of Operations

         As discussed in Note 3, new legislation that establishes competition in
the Texas electric  utility  industry  became law in the second quarter of 1999.
The new legislation  includes a number of provisions  that  management  believes
supercede  provisions of the Transition  Plan. The impact of those provisions on
TNMP's financial results will be noted as necessary in the following discussion.

   Overall Results

         TNP had income  applicable  to common  stock of $12.5  million  for the
quarter  ended June 30,  1999  (current  quarter)  as compared to a loss of $0.8
million for the quarter ended June 30, 1998.  Earnings for the second quarter of
1998 included a one-time charge for costs related to implementing the Transition
Plan ($3.1  million) and the loss on FWI's  discontinued  operations.  Excluding
those unusual items, earnings for the second quarter of 1998 were $8.9 million.

         TNP had income  applicable to common stock of $15.6 million for the six
months ended June 30, 1999  (year-to-date),  as compared to $3.8 million for the
six months  ended June 30,  1998.  Excluding  the  unusual  items  noted  above,
earnings for the six months ended June 30, 1998, were $13.9 million.

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

         Under the new legislation,  TNMP's earnings on its Texas operations are
capped at a 10.53% return on rate base. TNMP will apply Texas earnings in excess
of the cap to recover  stranded  plant.  For the six months ended June 30, 1999,
TNMP recorded pre-tax excess earnings of $5.7 million ($0.26 per share). Amounts
recorded in the first  quarter of 1999 for recovery of stranded  plant under the
Transition  Plan have  been  reclassified  as  described  in Note 3. The  charge
results from TNMP's calculation of excess earnings for the six months ended June
30, 1999, based on the provisions of the new legislation.  In the  corresponding
period of 1998 TNMP recorded  pre-tax excess  earnings under the Transition Plan
of $2.3 million ($0.11 per share).  The $2.3 million was applied equally between
additional  depreciation  and  provision  for  rate  refund,  according  to PUCT
guidelines.   The  portion  of  1998  excess  earnings   applied  to  additional
depreciation has been reclassified as "Charge for recovery of stranded plant".

         TNMP's  income  applicable  to common  stock was $14.3  million for the
quarter  ended June 30, 1999,  as compared to $6.5 million for the quarter ended
June 30, 1998.  Excluding the effect of the 1998 Transition Plan costs discussed
earlier, earnings for the second quarter of 1998 were $9.6 million.

         For the six months ended June 30,  TNMP's  income  applicable to common
stock was $18.1 million in 1999 as compared to $11.8 million in 1998.  Excluding
the effect of the 1998 Transition Plan costs discussed earlier, earnings for the
second quarter of 1998 were $14.9 million.

         The changes in TNMP's earnings for the quarter and the year-to-date are
attributable to the factors listed below (in millions):
<TABLE>
<CAPTION>


                                                                              Three Months        Six Months
                                                                                  Ended              Ended
                                                                                 6/30/99            6/30/99
                                                                                ---------          ---------
<S>                                                                           <C>                 <C>
           New Mexico stranded cost adjustment                                   $     1.9         $      1.3
           Other changes in base revenues                                              0.9               (3.3)
           Non-pass through purchased power and fuel expenses                          5.1               11.6
           Transmission expenses                                                      (3.1)              (5.1)
           Depreciation expenses                                                      (0.5)              (0.6)
           Charge for recovery of stranded plant                                      (0.7)              (4.5)
           Interest                                                                    3.1                5.2
           All other (including income tax effects on the items above)                (2.0)              (1.4)
                                                                              ------------      -------------
               Earnings increase excluding one-time items                              4.7                3.2
           One-time Transition Plan costs (including tax effects)                      3.1                3.1
                                                                              ------------      -------------
               Earnings increase including one-time items                        $     7.8         $      6.3
                                                                              ============      =============

</TABLE>
<PAGE>

<TABLE>
<CAPTION>


   Operating Revenues

         The  components of TNMP's base revenues are summarized in the following tables (in thousands).

                                                   Three Months Ended June 30,           Six Months Ended June 30,
                                                                         Increase                              Increase
                                                 1999         1998      (Decrease)        1999       1998     (Decrease)
                                               --------     ---------   ----------     ---------  ---------   ----------
<S>                                            <C>          <C>         <C>            <C>        <C>         <C>

         Operating revenues                   $ 144,014    $  142,085   $   1,929     $  262,125  $ 268,016   $  (5,891)

         Pass-through expenses                   43,961        46,399      (2,438)        82,273     87,750      (5,477)
                                              ---------    ----------   ---------     ----------  ---------   ---------

         Base revenues                        $ 100,053    $   95,686   $   4,367     $  179,852  $ 180,266   $    (414)
                                              =========    ==========   =========     ==========  =========   =========
</TABLE>
<TABLE>
<CAPTION>

         Pass-through  expenses  in Texas  include  fuel and the  energy-related portion of purchased  power.  In  New  Mexico,  the
composition  of  pass-through expenses  changed  on  July  1,  1999,  as  described  in  Note  3.  Details  of pass-through expenses
are discussed  under  "Results of Operations -- Operating Expenses."

         The following  table  summarizes  the components of the changes in base revenues in 1999 compared to 1998 (in thousands).
                           <S>                                          <C>                                   <C>

                           Base revenues
                           Weather related                              $  (1,803)                            $  (1,737)
                           Customer growth                                  1,851                                 2,798
                           1998 Transition Plan excess earnings             1,160                                 1,160
                           Industrial - firm rate sales                      (367)                               (1,948)
                           Clear Lake standby revenue                        (818)                               (1,635)
                           Other                                              894                                (1,928)
                                                                        ---------                             ---------
                             Other changes in base revenue                    917                                (3,290)
                           New Mexico stranded cost adjustment              1,888                                 1,314
                                                                        ---------                             ---------
                              Base revenues increase (decrease)
                                before one-time items                       2,805                                (1,976)
                           One-time Transition Plan refund                  1,562                                 1,562
                                                                        ---------                             ---------
                              Base revenues increase (decrease)         $   4,367                             $    (414)
                                                                        =========                             =========
</TABLE>
<TABLE>
<CAPTION>

         Base  revenues  increased  $4.4  million in the current  quarter due to Texas rate refunds accrued in 1998 pursuant to  the
Transition Plan, the reversal of accrued  stranded  costs in New Mexico as  discussed  in Note 3, and customer growth. Those factors
were  partially  offset by milder  weather in the second quarter  as  compared  to   1998,  and  the  absence  of  standby   revenue
payments resulting from the Clear Lake settlement.

         Year-to-date base revenues  decreased  $0.4  million from  the same period  in 1998.  The base  revenues  increase  in  the
second  quarter  was  offset  by decreases as a result of the Transition  Plan, loss of a significant industrial customer, and lower
revenues from a second significant industrial customer.

         The following table  summarizes the components of  gigawatt-hour (GWH) sales.

                                                   Three Months Ended June 30,               Six Months Ended June 30,
                                                                         Increase                               Increase
                                                 1999         1998      (Decrease)         1999       1998     (Decrease)
                                               --------     ---------   ---------      ----------  ---------   ----------
<S>                                            <C>          <C>         <C>            <C>         <C>         <C>
         GWH sales:
         Residential                                549           542           7          1,041      1,020            21
         Commercial                                 472           464           8            874        846            28
         Industrial:
           Firm                                     132           124           8            244        299           (55)
           Economy                                1,153         1,167         (14)         2,197      2,228           (31)
         Power marketing                             26           156        (130)            48        269          (221)
         Other                                       27            29          (2)            53         54            (1)
                                               --------     ---------    --------     ----------    -------   -----------

               Total GWH sales                    2,359         2,482        (123)         4,457      4,716          (259)
                                               ========     =========    ========     ==========    =======   ===========
</TABLE>


<PAGE>

<TABLE>
<CAPTION>


         Current quarter and  year-to-date  sales decreased 123 GWHs (or 5%) and 259 GWHs (or 5%),  respectively, as compared to the
corresponding 1998 periods. The current quarter decrease resulted  primarily  from reduced  off-system  sales.  This  was  partially
offset by increased  commercial  and  residential  sales as customer  growth  offset  the  effects  of milder  weather. Year-to-date
sales decreased for the same reasons, and due to the loss of a significant customer.

   Operating Expenses

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

                                                   Three Months Ended June 30,               Six Months Ended June 30,
                                                                         Increase                                Increase
                                                 1999         1998      (Decrease)          1999      1998      (Decrease)
                                               --------     ---------   ----------     ----------- ----------   ----------
<S>                                            <C>          <C>         <C>            <C>         <C>          <C>
         Purchased power and fuel expenses:
           Pass through expenses:
               Purchased power                $  35,749    $   36,524   $    (775)     $   67,099  $   70,103    $ (3,004)
               Fuel                               8,212         9,875      (1,663)         15,174      17,647      (2,473)
                                              ---------    ----------   ---------      ----------  ----------   ---------
                                                 43,961        46,399      (2,438)         82,273      87,750      (5,477)
                                              ---------    ----------   ---------      ----------  ----------   ---------
           Non-pass through expenses:
               Purchased power                   22,632        27,671      (5,039)         41,444      52,850     (11,406)
               Fuel                                 389           488         (99)            637         783        (146)
                                              ---------    ----------   ---------      ----------  ----------   ---------
                                                 23,021        28,159      (5,138)         42,081      53,633     (11,552)
                                              ---------    ----------   ---------      ----------  ----------   ---------

         Total                                   66,982        74,558      (7,576)        124,354     141,383     (17,029)

         Transmission expense                     5,801         2,694       3,107          10,406       5,288       5,118

         Depreciation expense                     9,513         9,004         509          19,487      18,876         611

         Charge for recovery of stranded plant    1,903         1,160         743           5,653       1,160       4,493

         Other operating expenses                20,520        21,844      (1,324)         38,938      38,521         417

         Income and other tax expenses           15,712        12,881       2,831          24,636      24,068         568
                                              ---------    ----------   ---------      ----------  ----------   ---------

         Operating expenses                   $ 120,431    $  122,141   $  (1,710)     $  223,474  $  229,296   $  (5,822)
                                              =========    ==========   =========      ==========  ==========   =========

         Overall,  current quarter and year-to-date operating expenses decreased by $1.7 million  and  $5.8  million,  respectively.
The decrease  reflects  lower purchased power costs partially offset by higher  transmission  expenses and  the charge for  recovery
of stranded plant discussed in Note 3.
</TABLE>

     Purchased Power and Fuel Expenses

         As discussed in Note 3, the NMPRC  terminated  Community  Choice in the
second  quarter.  Under  Community  Choice,  rates for  recovery  of New  Mexico
purchased  power costs were frozen,  except those charged to certain  industrial
customers.  The NMPRC order  terminating  Community Choice required TNMP to pass
through to all  customers New Mexico  purchased  power costs as of July 1, 1999.
Therefore,  operating  income will not be affected by changes in purchased power
costs, beginning July 1, 1999.

         In the  second  quarter  of 1999,  purchased  power  and fuel  expenses
decreased  $7.6 million  from the level  incurred  during the second  quarter of
1998. For the  year-to-date,  purchased power and fuel expenses  decreased $17.0
million as compared to 1998.  Pass-through  expenses  accounted for $2.4 million
and $5.5 million of the decrease for the quarter and year-to-date, respectively,
while non pass-through expenses accounted for the remaining $5.2 million for the
quarter and $11.5  million for the  year-to-date.  The decrease  reflects  lower
overall GWH  requirements  due to lower  sales,  and lower  energy  costs due to
increased  purchases  of spot market  power in 1999 as compared to 1998.  In the
first six months of 1999,  the cost of energy  purchased  in the spot market was
significantly less than the cost of energy available from alternative sources of
supply.  In addition,  demand costs have  decreased,  due to the  replacement of
purchases from TXU with purchases from lower cost  providers.  Demand costs have
also decreased  because the rate under which TNMP purchases  capacity from Clear
Lake has been significantly reduced under the Clear Lake settlement.


<PAGE>



     Transmission Expenses

         Transmission  expenses  increased $3.1 million for the quarter and $5.1
million for the six months ended June 30, 1999,  as compared to the same periods
in  1998.  The  higher  expenses  were  due to  discontinued  reimbursements  in
accordance with the Clear Lake  settlement,  and a true up for the first half of
1999 based on a recently approved  allocation of transmission costs by the PUCT.
The  increased  transmission  expense  approved  by the PUCT  resulted  from the
termination of the majority of the TXU purchased power contract at the beginning
of 1999.  Terminating the contract has produced purchased power savings, but its
effects have been partially offset by the higher transmission  payments approved
by the PUCT.

     Depreciation Expenses

         Depreciation  expense  increased  by $0.5  million and $0.6 million for
the quarter and six months ended June 30, 1999, respectively,  compared to 1998.
The  increases are due to additions to  depreciable  plant  partially  offset by
lower depreciation rates established under the Transition Plan.

     Charge for Recovery of Stranded Plant

         Please see Note 3 and the section "Overall Results" for a discussion of
the excess earnings calculation under the new legislation in Texas.

     Other Operating Expenses, Income and Other Tax Expenses

         Other  operating  expenses  for TNMP  decreased by $1.3 million for the
current  quarter as compared to the  corresponding  1998  period.  The  decrease
resulted  from the  inclusion  in 1998 of $3.1  million of costs  related to the
original  adoption of the Transition Plan. Other operating  expenses for the six
months ended June 30, 1999, were comparable to corresponding 1998 period.

         Current  quarter  income and other tax expenses for TNMP increased $2.8
million compared to the  corresponding  1998 period,  and increased $0.6 million
during the six months  ended June 30,  1999,  over the same period in 1999.  The
increases are due to higher pre-tax income.

         Other operating  expenses for TNP include $1.5 million and $1.8 million
of costs  related to the  acquisition  discussed  in Note 2 for the  quarter and
year-to-date, respectively.

   Interest Expense

         Interest  charges  decreased  by $3.1  million for the quarter and $5.2
million  for the  year-to-date  from  1998  levels  due to TNMP's  January  1999
issuance of $175 million of 6.25% senior notes,  which  replaced $130 million of
12.5% secured debentures, and reduced debt levels of the credit facilities.

Financial Condition

   Liquidity

         Currently,  the main  sources of  liquidity  for TNP are cash flow from
operations  and  borrowings  from  credit  facilities.   TNP's  cash  flow  from
operations was lower for the current year-to-date than during the same period in
1998 due to lower receipts from customers.  This decrease was offset somewhat by
lower  payments for purchased  power and interest  costs.  The changes in TNMP's
cash flow from operations mirrored those of TNP.

         In January 1999,  TNMP issued $175 million of 6.25% Senior Notes due in
2009 and used the  proceeds to retire its 12.5%  secured  debentures  and reduce
outstanding  borrowings under the credit  facilities,  as discussed in TNP's and
TNMP's 1998 Combined Annual Report on Form 10-K.

         During the second quarter,  TNMP cancelled its  1995  Credit  Facility,
which had a total commitment of $100 million,  and  was scheduled  to expire  in
November 2000.

         TNMP has  sufficient  liquidity  to  satisfy  any known  contingencies.
Management believes cash flow from operations, the new debt described above, and
periodic  borrowings  under its remaining  revolving  credit  facility should be
sufficient to meet working capital requirements and planned capital expenditures
at least through 1999.


<PAGE>



Year 2000

         TNMP is actively  addressing  the Year 2000 issue (Y2K)  throughout its
operating and office environments. Many existing computer programs were designed
and  developed  to use only two digits to identify a year in the date field.  If
not addressed, these computer systems could fail, with possible material adverse
effects on TNMP's operations.

         In mid-1997 TNMP's  information  technology staff began to identify and
assess corporate  software  applications,  equipment and operating  systems.  In
early 1998, the project was expanded to include  professionals  from  throughout
the company to identify and assess embedded  systems.  TNMP's project to analyze
Y2K has included the following phases: identification, assessment,  remediation/
implementation and testing.

         In its  analysis  to  identify  and  assess  the Y2K  impact on company
systems,  TNMP has conducted  extensive  studies to analyze the impact of Y2K on
all operating  systems.  As a result of these studies,  TNMP has developed a Y2K
mitigation  plan. The plan requires TNMP to amend,  replace,  or upgrade most of
its primary  corporate  information  systems,  some of which were already  being
replaced  or  upgraded  pursuant  to a  previously  approved  plan to replace or
upgrade such systems.

         The following is a brief summary of the renovation and validation,  and
implementation  progress for the critical  business  areas of TNMP - generation,
transmission,   distribution,   energy  management,  and  corporate  information
systems.

         Generating  Units. TNMP owns one power plant, TNP One, which is located
in  Robertson  County,  Texas.  TNP One has two units  that burn  lignite as the
primary fuel source to generate power. The total lignite supply is provided from
a mine  adjacent to the power  plant.  TNMP plans to increase the coal supply to
provide for an additional six-week supply prior to January 1, 2000. The plant is
also capable of burning  natural gas, as well as various waste  products.  As of
June 30,  1999,  the TNP One  generation  plant has  completed  the  assessment,
testing and  remediation of all  mission-critical  facilities.  Such  facilities
include the Plant Control Computer,  which provides for most of the computerized
operations  of the boiler and turbine  controls,  and the  Continuous  Emissions
Monitoring System.

         Integrated  testing  of the  Plant  Control  Computer  at TNP  One  was
completed on Unit 1 in February 1999 and on Unit 2 in April 1999. The integrated
testing of the Plant Control Computer detected no Y2K problems.

         In late  1998,  tests of the  Continuous  Emissions  Monitoring  System
determined  that only  non-critical  Y2K issues  existed.  In April  1999,  TNMP
completed  upgrades to the  Continuous  Emissions  Monitoring  System  software.
Subsequent testing of the Continuous Emissions Monitoring System detected no Y2K
issues.

         Distribution System. TNMP is primarily a distribution company. Over 600
suspect  distribution  system devices have been identified and are being tested.
As of June 30, 1999, TNMP has completed the assessment, testing, and remediation
of all mission-critical  distribution system devices.  TNMP is currently testing
the remaining devices, and anticipates  completing that testing by September 30,
1999.  TNMP is testing the devices that have external clock  functions.  Devices
that have no external clock function are being checked with the manufacturer and
TNMP is  reviewing  their  testing  of those  devices.  All of  TNMP's  critical
distribution substations have designs which contain redundant relaying or bypass
switching schemes to remove failed devices and equipment for normal  operations,
allowing for quick restoration of power to customers.

         Transmission  System.  TNMP has transmission  lines which are a part of
the transmission grid comprised within the Electric Reliability Council of Texas
(ERCOT).  The transmission  grid within ERCOT is operated by member utilities in
conjunction with an Independent System Operator.  TNMP has transmission lines in
New Mexico which are part of the Western  Systems  Coordinating  Council (WSCC).
TNMP is  participating on ERCOT's Year 2000 Technical Task Force and on the Year
2000   Operational   Preparedness   and  Planning  Task  Force.   TNMP  is  also
participating in all testing, drills and contingency planning done by ERCOT, the
Independent System Operator and the WSCC.

         As of June 30, 1999,  TNMP has completed the testing and remediation of
all transmission line electronic protective devices.


<PAGE>



         Supervisory  Control and Data  Acquisition  Systems  (SCADA) and Energy
Management Systems. TNMP has three SCADA systems in Texas and one in New Mexico.
A SCADA  system  reports on the  status of  protective  devices,  allows for the
remote control of these same devices, and reports and tracks critical power flow
information on the transmission and distribution  grids.  These systems are new,
having been upgraded in 1997 and 1998.

         As of June 30, 1999,  TNMP has  completed the  assessment,  testing and
remediation  on two of the Texas SCADA  systems.  TNMP has scheduled  integrated
testing of the third Texas SCADA system by the vendor for mid-August.

         TNMP is in the process of  replacing  the SCADA  system in  New Mexico,
which is not Year  2000  compliant,  with a Year  2000  compliant  system.  This
replacement is scheduled for completion by September 30, 1999.

         Information  Technology  Systems.  As of June 30, 1999,  100 percent of
TNMP's  infrastructure  supporting  its  business  systems  has been  tested and
verified  as Y2K ready.  TNMP has  completed  the upgrade of its  financial  and
accounting system to a Y2K compliant version. Integrated testing of the upgraded
financial  system was completed in May 1999, and the testing  confirmed that the
system  was Year  2000  compliant.  TNMP  expects  to  implement  and test a new
customer  information  system  during  the  third  quarter  of 1999,  and  other
corporate information systems directly related to TNMP's operations by September
1999. TNMP incorporates unit testing,  system testing,  integration  testing and
acceptance testing into the verification methodology.

         Y2K Remediation  Cost. The costs associated with TNMP's Y2K efforts are
expected to be  approximately  $10.2 million.  Approximately  $9 million of that
amount is to upgrade or  replace  various  information  technology  systems,  as
discussed above, as well as improve the infrastructure to support those systems.
As of  July  31,  1999,  TNMP  had  spent  approximately  $8.9  million  on  Y2K
remediation.  TNMP does not expect these costs to have a material  impact on its
financial  position  or results of  operations.  TNMP has in the past used,  and
expects to continue to use, cash flow from  operations to fund costs  associated
with Y2K.

         Third-Party  Vendors.  In addition to its own mitigation  plan, TNMP is
actively  working  with its key vendors and other third  parties with which TNMP
has a material  relationship to assist such parties in achieving compliance with
respect  to Y2K in those  systems  affecting  TNMP's  operations.  Such  parties
include  electric  power  providers  in Texas  and New  Mexico;  the  fuel,  ash
disposal,  and limestone  contractors at TNP One;  transmission and distribution
material  suppliers;  and banking  partners.  Although  TNMP  believes that such
persons are working  diligently to properly  address Y2K, TNMP cannot  guarantee
that these third-party  systems will be timely  converted,  or that a failure to
convert by another  company or a  conversion  that is  incompatible  with TNMP's
systems, would not have a material adverse effect on TNMP.

         Contingency  Plans. The primary operating  processes of TNMP's business
(e.g.,  the production,  transmission,  and  distribution of electric power) are
subject  to  contingencies  related to  weather,  equipment  failure,  and other
factors.  TNMP  has  completed  Y2K  contingency  plans by  adapting  previously
existing contingency plans.

         The Risks of the  Company's  Year 2000  Issues.  Based upon its current
assessment  and testing of the Y2K issue,  TNMP believes the  reasonably  likely
worst-case  Y2K  scenarios  would  have the  following  impacts  upon it and its
operations. With respect to its ability to provide energy to its customers, TNMP
believes that the reasonably likely worst-case scenario is for small,  localized
interruptions  of  electrical  service that are restored in a time frame that is
within  normal  service  levels.  With respect to services that are essential to
TNMP's operations,  such as customer service, business operations,  supplies and
emergency response  capabilities,  the reasonably likely worst-case  scenario is
for  minor  disruptions  of  essential  services  with  rapid  recovery  and all
essential information and processes ultimately recovered.

         While risks related to the third  parties' lack of Y2K readiness  could
materially  and adversely  affect  TNMP's  business,  results of operations  and
financial   condition,   TNMP  expects  its  Y2K  readiness  efforts  to  reduce
significantly  its  level of  uncertainty  about the  impact of third  party Y2K
issues on both its IT systems and non-IT systems.




<PAGE>


         PART II - OTHER INFORMATION

Item 1.  Legal Proceedings.

         See Note 6 for information regarding material legal proceedings.

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

(a)      Exhibits

         The following exhibits are filed with this report:

         27(a)    Financial Data Schedule for TNP.

         27(b)    Financial Data Schedule for TNMP.

(b)       Reports on Form 8-K:

             *    TNP  filed  a  report  on Form  8-K  dated  June 7,  1999,  to
                  disclose the proposed acquisition of TNP by SW and ST Corp.

             *    TNP filed a report  on Form 8-K  dated  August  10,  1999,  to
                  disclose  an  amendment  to the Merger  Agreement  and provide
                  documentation related to financing agreements for the Merger.


Statement Regarding Forward Looking Information

         The  discussions  in  this  document  that  are not  historical  facts,
including,   but  not  limited  to,  the  continued  application  of  regulatory
accounting principles,  future cash flows and the potential recovery of stranded
costs,  are  based  upon  current   expectations.   Actual  results  may  differ
materially.  Among the facts that could cause the  results to differ  materially
from expectations are the following:  interpretation of the legislation  enacted
in Texas,  and its effects on TNMP's business and rates; the effects of recently
passed  legislation in New Mexico on the regulation of TNMP's business;  changes
in  regulations  affecting  TNP's  and  TNMP's  businesses;  insurance  coverage
available  for claims made in  litigation;  the effect of a recent Texas Supreme
Court decision on the  limitations  of any actual  damages  awarded in currently
ongoing  litigation;  future  acquisitions  or strategic  partnerships;  general
business and economic  conditions,  and price fluctuations in the electric power
market;  the  effectiveness  of TNMP's Y2K  mitigation  plan, and the timely Y2K
compliance by TNP's and TNMP's vendors; and other factors described from time to
time in TNP's  and  TNMP's  reports  filed  with  the  Securities  and  Exchange
Commission.  TNP and TNMP wish to caution readers not to place undue reliance on
any such  forward  looking  statements,  which are made  pursuant to the Private
Securities Litigation Reform Act of 1995 and, as such, speak only as of the date
made.


                                   SIGNATURES

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


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


                            By \s\ MANJIT S. CHEEMA
                               -------------------------------------------------
                               Manjit S. Cheema
Date: August 11, 1999          Senior Vice President and Chief Financial Officer


                            By \s\ MICHAEL J. RICKETTS
                               -------------------------------------------------
                               Michael J. Ricketts
Date: August 11, 1999          Controller and as Chief Accounting Officer