PNM 6.30.2013 10-Q
Table of Contents

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

FORM 10-Q

(Mark One)
 [X]
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2013

Commission File
 
Name of Registrants, State of Incorporation,
 
I.R.S. Employer
 Number
 
 Address and Telephone Number
 
 Identification No.
001-32462
 
PNM Resources, Inc.
 
85-0468296
 
 
(A New Mexico Corporation)
 
 
 
 
414 Silver Ave. SW
 
 
 
 
Albuquerque, New Mexico 87102-3289
 
 
 
 
(505) 241-2700
 
 
 
 
 
 
 
001-06986
 
Public Service Company of New Mexico
 
85-0019030
 
 
(A New Mexico Corporation)
 
 
 
 
414 Silver Ave. SW
 
 
 
 
Albuquerque, New Mexico 87102-3289
 
 
 
 
(505) 241-2700
 
 
 
 
 
 
 
002-97230
 
Texas-New Mexico Power Company
 
75-0204070
 
 
(A Texas Corporation)
 
 
 
 
577 N. Garden Ridge Blvd.
 
 
 
 
Lewisville, Texas 75067
 
 
 
 
(972) 420-4189
 
 

Indicate by check mark whether each 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.
 
PNM Resources, Inc. (“PNMR”)
YES
ü
NO
 
 
Public Service Company of New Mexico (“PNM”)
YES
ü
NO
 
 
Texas-New Mexico Power Company (“TNMP”)
YES
 
NO
ü

(NOTE: As a voluntary filer, not subject to the filing requirements, TNMP filed all reports under Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months.)

Indicate by check mark whether each registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

 
PNMR
YES
ü
NO
 
 
PNM
YES
ü
NO
 
 
TNMP
YES
ü
NO
 




Table of Contents

Indicate by check mark whether registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer or a smaller reporting company (as defined in Rule 12b-2 of the Exchange Act).

 
 
Large accelerated
filer
 
Accelerated
filer
 
Non-accelerated
filer
 
Smaller Reporting Company
 
PNMR
 
ü
 
 
 
   
 
 
 
   
 
 
 
   
 
 
PNM
 
   
 
 
 
   
 
 
 
ü
 
 
 
   
 
 
TNMP
 
   
 
 
 
   
 
 
 
ü
 
 
 
   
 


Indicate by check mark whether any of the registrants is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES     NO ü

As of July 26, 2013, 79,653,624 shares of common stock, no par value per share, of PNMR were outstanding.

The total number of shares of common stock of PNM outstanding as of July 26, 2013 was 39,117,799 all held by PNMR (and none held by non-affiliates).

The total number of shares of common stock of TNMP outstanding as of July 26, 2013 was 6,358 all held indirectly by PNMR (and none held by non-affiliates).

PNM AND TNMP MEET THE CONDITIONS SET FORTH IN GENERAL INSTRUCTIONS (H) (1) (a) AND (b) OF FORM 10-Q AND ARE THEREFORE FILING THIS FORM WITH THE REDUCED DISCLOSURE FORMAT PURSUANT TO GENERAL INSTRUCTION (H) (2).

This combined Form 10-Q is separately filed by PNMR, PNM, and TNMP.  Information contained herein relating to any individual registrant is filed by such registrant on its own behalf.  Each registrant makes no representation as to information relating to the other registrants.  When this Form 10-Q is incorporated by reference into any filing with the SEC made by PNMR, PNM, or TNMP, as a registrant, the portions of this Form 10-Q that relate to each other registrant are not incorporated by reference therein.



2

Table of Contents

PNM RESOURCES, INC. AND SUBSIDIARIES
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES

INDEX

 
Page No.
 
 
 
 
 
 


3

Table of Contents

GLOSSARY

Definitions:
  
 
Afton
 
Afton Generating Station
AFUDC
 
Allowance for Funds Used During Construction
ALJ
  
Administrative Law Judge
AMS
 
Advanced Meter System
AOCI
  
Accumulated Other Comprehensive Income
APS
  
Arizona Public Service Company, which is the operator and a co-owner of PVNGS and Four Corners
BACT
  
Best Available Control Technology
BART
  
Best Available Retrofit Technology
BHP
  
BHP Billiton, Ltd, the parent of SJCC
Board
  
Board of Directors of PNMR
BTU
  
British Thermal Unit
CAA
 
Clean Air Act
CCB
  
Coal Combustion Byproducts
CCN
 
Certificate of Convenience and Necessity
CO2
  
Carbon Dioxide
D.C. Circuit
 
United States Court of Appeals for the District of Columbia Circuit
Delta
  
Delta-Person Generating Station
DOE
  
United States Department of Energy
DOI
  
United States Department of Interior
EIB
  
New Mexico Environmental Improvement Board
EIP
  
Eastern Interconnection Project
EPA
  
United States Environmental Protection Agency
ERCOT
  
Electric Reliability Council of Texas
ESA
 
Endangered Species Act
Exchange Act
 
Securities Exchange Act of 1934
FASB
  
Financial Accounting Standards Board
FERC
  
Federal Energy Regulatory Commission
FIP
  
Federal Implementation Plan
Four Corners
  
Four Corners Power Plant
FPPAC
  
Fuel and Purchased Power Adjustment Clause
GAAP
  
Generally Accepted Accounting Principles in the United States of America
Gallup
 
City of Gallup, New Mexico
GHG
  
Greenhouse Gas Emissions
GWh
  
Gigawatt hours
IBEW
  
International Brotherhood of Electrical Workers
IRP
 
Integrated Resource Plan
IRS
 
Internal Revenue Service
KW
  
Kilowatt
KWh
  
Kilowatt Hour
Lordsburg
  
Lordsburg Generating Station
Luna
  
Luna Energy Facility
MD&A
  
Management’s Discussion and Analysis of Financial Condition and Results of Operations
MMBTU
  
Million BTUs
Moody’s
  
Moody’s Investor Services, Inc.
MW
  
Megawatt
MWh
  
Megawatt Hour

4

Table of Contents

NAAQS
 
National Ambient Air Quality Standards
Navajo Acts
  
Navajo Nation Air Pollution Prevention and Control Act, Navajo Nation Safe Drinking Water Act, and Navajo Nation Pesticide Act
NDT
  
Nuclear Decommissioning Trusts for PVNGS
NEC
 
Navopache Electric Cooperative, Inc.
NERC
  
North American Electric Reliability Council
Ninth Circuit
  
United States Court of Appeals for the Ninth Circuit
NMAG
  
New Mexico Attorney General
NMED
  
New Mexico Environment Department
NMIEC
  
New Mexico Industrial Energy Consumers Inc.
NMPRC
  
New Mexico Public Regulation Commission
NOx
  
Nitrogen Oxides
NOI
 
Notice of Inquiry
NOPR
 
Notice of Proposed Rulemaking
NRC
  
United States Nuclear Regulatory Commission
NSPS
  
New Source Performance Standards
NSR
  
New Source Review
OCI
  
Other Comprehensive Income
OPEB
  
Other Post Employment Benefits
OSM
 
United States Office of Surface Mining Reclamation and Enforcement
PNM
  
Public Service Company of New Mexico and Subsidiaries
PNM Revolving Credit Facility
 
PNM's $400.0 Million Unsecured Revolving Credit Facility
PNM Term Loan Agreement
  
PNM's $75.0 Million Unsecured Term Loan Facility
PNMR
  
PNM Resources, Inc. and Subsidiaries
PNMR Revolving Credit Facility
 
PNMR's $300.0 Million Unsecured Revolving Credit Facility
PNMR Term Loan Agreement
  
PNMR's $100.0 Million Unsecured Term Loan Facility
PPA
  
Power Purchase Agreement
PSD
  
Prevention of Significant Deterioration
PUCT
  
Public Utility Commission of Texas
PV
  
Photovoltaic
PVNGS
  
Palo Verde Nuclear Generating Station
RCRA
  
Resource Conservation and Recovery Act
RCT
  
Reasonable Cost Threshold
REA
 
New Mexico's Renewable Energy Act of 2004
REC
  
Renewable Energy Certificates
REP
  
Retail Electricity Provider
RMC
  
Risk Management Committee
RPS
  
Renewable Energy Portfolio Standard
SCE
  
Southern California Edison Company
SCR
 
Selective Catalytic Reduction
SEC
  
United States Securities and Exchange Commission
SIP
  
State Implementation Plan
SJCC
  
San Juan Coal Company
SJGS
  
San Juan Generating Station
SNCR
 
Selective Non-Catalytic Reduction
SO2
  
Sulfur Dioxide
SPS
  
Southwestern Public Service Company

5

Table of Contents

S&P
  
Standard and Poor’s Ratings Services
TECA
  
Texas Electric Choice Act
Tenth Circuit
 
United States Court of Appeals for the Tenth Circuit
TNMP
  
Texas-New Mexico Power Company and Subsidiaries
TNMP Revolving Credit Facility
  
TNMP's $75.0 Million Revolving Credit Facility
TNP
 
TNP Enterprises, Inc. and Subsidiaries
Tri-State
  
Tri-State Generation and Transmission Association, Inc.
Valencia
  
Valencia Energy Facility
VaR
  
Value at Risk
WEG
 
WildEarth Guardians


6

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS


PNM RESOURCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2013
 
2012
 
2013
 
2012
 
(In thousands, except per share amounts)
Electric Operating Revenues 
$
347,599

 
$
323,860

 
$
665,263

 
$
629,234

Operating Expenses:

 
 
 

 

Cost of energy
105,659

 
94,719

 
210,365

 
186,565

Administrative and general
43,139

 
45,289

 
87,829

 
90,089

Energy production costs
46,831

 
46,053

 
90,404

 
91,182

Depreciation and amortization
41,639

 
41,054

 
82,446

 
79,468

Transmission and distribution costs
17,148

 
17,565

 
33,443

 
33,814

Taxes other than income taxes
15,316

 
14,074

 
32,205

 
29,281

Total operating expenses
269,732

 
258,754

 
536,692

 
510,399

Operating income
77,867

 
65,106

 
128,571

 
118,835

Other Income and Deductions:
 
 
 
 
 
 
 
Interest income
2,833

 
3,386

 
5,467

 
6,678

Gains (losses) on investments held by NDT
3,272

 
(795
)
 
4,805

 
3,660

Other income
2,555

 
1,862

 
4,265

 
4,507

Other (deductions)
(4,194
)
 
(2,716
)
 
(7,546
)
 
(7,268
)
Net other income (deductions)
4,466

 
1,737

 
6,991

 
7,577

Interest Charges
30,616

 
30,198

 
61,914

 
59,765

Earnings before Income Taxes
51,717

 
36,645

 
73,648

 
66,647

Income Taxes
20,334

 
11,546

 
28,303

 
21,071

Net Earnings
31,383

 
25,099

 
45,345

 
45,576

(Earnings) Attributable to Valencia Non-controlling Interest
(3,573
)
 
(3,455
)
 
(6,777
)
 
(6,720
)
Preferred Stock Dividend Requirements of Subsidiary
(132
)
 
(132
)
 
(264
)
 
(264
)
Net Earnings Attributable to PNMR
$
27,678

 
$
21,512

 
$
38,304

 
$
38,592

Net Earnings Attributable to PNMR per Common Share:
 
 
 
 
 
 
 
Basic
$
0.35

 
$
0.27

 
$
0.48

 
$
0.48

Diluted
$
0.34

 
$
0.27

 
$
0.48

 
$
0.48

Dividends Declared per Common Share
$
0.165

 
$
0.145

 
$
0.330

 
$
0.290


The accompanying notes, as they relate to PNMR, are an integral part of these financial statements.



7

Table of Contents

PNM RESOURCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)

 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2013
 
2012
 
2013
 
2012
 
(In thousands)
Net Earnings
$
31,383

 
$
25,099

 
$
45,345

 
$
45,576

Other Comprehensive Income:
 
 
 
 
 
 
 
Unrealized Gain on Investment Securities:
 
 
 
 
 
 
 
Unrealized holding gains arising during the period, net of income tax (expense) of $(290), $(3,022), $(3,401) and $(10,437)
443

 
4,611

 
5,190

 
15,924

Reclassification adjustment for (gains) included in net earnings, net of income tax expense of $2,185, $4,992, $2,714 and $8,538
(3,333
)
 
(7,617
)
 
(4,140
)
 
(13,028
)
Pension Liability Adjustment:
 
 
 
 
 
 
 
Reclassification adjustment for amortization of experience (gain) loss recognized as net periodic benefit cost, net of income tax expense (benefit) of $(631), $(476), $(1,262) and $(952)
960

 
727

 
1,920

 
1,454

Fair Value Adjustment for Cash Flow Hedges:
 
 
 
 
 
 
 
Change in fair market value, net of income tax (expense) benefit of $3, $40, $(1) and $99
(6
)
 
(72
)
 
2

 
(178
)
Reclassification adjustment for (gains) losses included in net earnings, net of income tax expense (benefit) of $(18), $(16), $(35) and $(31)
33

 
29

 
64

 
56

Total Other Comprehensive Income (Loss)
(1,903
)
 
(2,322
)
 
3,036

 
4,228

Comprehensive Income
29,480

 
22,777

 
48,381

 
49,804

Comprehensive (Income) Attributable to Valencia Non-controlling Interest
(3,573
)
 
(3,455
)
 
(6,777
)
 
(6,720
)
Preferred Stock Dividend Requirements of Subsidiary
(132
)
 
(132
)
 
(264
)
 
(264
)
Comprehensive Income Attributable to PNMR
$
25,775

 
$
19,190

 
$
41,340

 
$
42,820


The accompanying notes, as they relate to PNMR, are an integral part of these financial statements.


8

Table of Contents


PNM RESOURCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
Six Months Ended June 30,
 
2013
 
2012
 
(In thousands)
Cash Flows From Operating Activities:
 
 
 
Net earnings
$
45,345

 
$
45,576

Adjustments to reconcile net earnings to net cash flows from operating activities:
 
 
 
Depreciation and amortization
103,914

 
99,971

Deferred income tax expense
27,797

 
21,354

Net unrealized (gains) losses on derivatives
1,729

 
1,978

Realized (gains) on investments held by NDT
(4,805
)
 
(3,660
)
Stock based compensation expense
3,198

 
1,435

Other, net
313

 
(820
)
Changes in certain assets and liabilities:
 
 
 
Accounts receivable and unbilled revenues
(23,021
)
 
(20,901
)
Materials, supplies, and fuel stock
(159
)
 
(5,250
)
Other current assets
3,870

 
(12,021
)
Other assets
6,356

 
(6,659
)
Accounts payable
(7,424
)
 
(4,882
)
Accrued interest and taxes
93,077

 
(9,944
)
Other current liabilities
(21,310
)
 
(3,016
)
Proceeds from governmental grants

 
21,567

Other liabilities
(68,972
)
 
(83,432
)
Net cash flows from operating activities
159,908

 
41,296

 
 
 
 
Cash Flows From Investing Activities:
 
 
 
Additions to utility and non-utility plant
(153,512
)
 
(156,796
)
Proceeds from sales of investments held by NDT
76,106

 
45,787

Purchases of investments held by NDT
(77,868
)
 
(47,313
)
Return of principal on PVNGS lessor notes
10,965

 
12,632

Other, net
1,240

 
3,687

Net cash flows from investing activities
(143,069
)
 
(142,003
)

The accompanying notes, as they relate to PNMR, are an integral part of these financial statements.

9

Table of Contents


PNM RESOURCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

 
Six Months Ended June 30,
 
2013
 
2012
 
(In thousands)
Cash Flows From Financing Activities:
 
 
 
Short-term borrowings (repayments), net
1,300

 
124,300

Long-term borrowings
75,000

 

Repayment of long-term debt
(9,445
)
 

Cash paid in debt exchange
(13,048
)
 

Proceeds from stock option exercise
11,345

 
5,410

Awards of common stock
(19,741
)
 
(12,674
)
Dividends paid
(24,958
)
 
(21,770
)
Valencia’s transactions with its owner
(8,675
)
 
(7,449
)
Other, net
(2,804
)
 
983

Net cash flows from financing activities
8,974

 
88,800

 
 
 
 
Change in Cash and Cash Equivalents
25,813

 
(11,907
)
Cash and Cash Equivalents at Beginning of Period
8,985

 
15,091

Cash and Cash Equivalents at End of Period
$
34,798

 
$
3,184

 
 
 
 
Supplemental Cash Flow Disclosures:
 
 
 
Interest paid, net of amounts capitalized
$
58,267

 
$
56,217

Income taxes paid (refunded), net
$
(95,472
)
 
$
5,302

 
 
 
 
Supplemental schedule of noncash financing activities:
 
 
 
Premium on long-term debt incurred in connection with debt exchange
$
23,249

 


The accompanying notes, as they relate to PNMR, are an integral part of these financial statements.


10

Table of Contents



PNM RESOURCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
 
June 30,
2013
 
December 31,
2012
 
(In thousands)
ASSETS
 
 
 
Current Assets:
 
 
 
Cash and cash equivalents
$
34,798

 
$
8,985

Accounts receivable, net of allowance for uncollectible accounts of $1,339 and $1,751
94,948

 
87,093

Unbilled revenues
71,410

 
57,266

Other receivables
39,651

 
53,332

Materials, supplies, and fuel stock
59,801

 
59,643

Regulatory assets
41,961

 
39,120

Commodity derivative instruments
2,870

 
3,785

Income taxes receivable
5,498

 
101,477

Other current assets
42,220

 
31,490

Total current assets
393,157

 
442,191

Other Property and Investments:
 
 
 
Investment in PVNGS lessor notes
43,410

 
54,325

Investments held by NDT
197,072

 
188,971

Other investments
7,426

 
9,139

Non-utility property, net of accumulated depreciation of $139 and $131
4,479

 
4,487

Total other property and investments
252,387

 
256,922

Utility Plant:
 
 
 
Plant in service and plant held for future use
5,385,946

 
5,313,796

Less accumulated depreciation and amortization
1,820,441

 
1,774,223

 
3,565,505

 
3,539,573

Construction work in progress
160,155

 
125,287

Nuclear fuel, net of accumulated amortization of $45,793 and $42,644
81,785

 
81,627

Net utility plant
3,807,445

 
3,746,487

Deferred Charges and Other Assets:
 
 
 
Regulatory assets
576,758

 
555,577

Goodwill
278,297

 
278,297

Commodity derivative instruments
202

 
352

Other deferred charges
95,660

 
92,757

Total deferred charges and other assets
950,917

 
926,983

 
$
5,403,906

 
$
5,372,583


The accompanying notes, as they relate to PNMR, are an integral part of these financial statements.


11

Table of Contents



PNM RESOURCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
 
June 30,
2013
 
December 31,
2012
 
(In thousands, except share information)
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
Current Liabilities:
 
 
 
Short-term debt
$
160,000

 
$
158,700

Current installments of long-term debt
52,530

 
2,530

Accounts payable
88,378

 
99,177

Customer deposits
15,153

 
18,176

Accrued interest and taxes
49,408

 
52,003

Regulatory liabilities
464

 
15,173

Commodity derivative instruments
1,621

 
1,000

Dividends declared
132

 
11,679

Current portion of accumulated deferred income taxes
258

 
258

Other current liabilities
76,646

 
75,407

Total current liabilities
444,590

 
434,103

Long-term Debt
1,711,153

 
1,669,760

Deferred Credits and Other Liabilities:
 
 
 
Accumulated deferred income taxes
709,186

 
701,545

Accumulated deferred investment tax credits
13,146

 
14,242

Regulatory liabilities
452,101

 
423,460

Asset retirement obligations
89,395

 
85,893

Accrued pension liability and postretirement benefit cost
152,193

 
224,565

Commodity derivative instruments
1,540

 
1,933

Other deferred credits
109,399

 
116,523

Total deferred credits and other liabilities
1,526,960

 
1,568,161

Total liabilities
3,682,703

 
3,672,024

Commitments and Contingencies (See Note 9)


 


Cumulative Preferred Stock of Subsidiary
 
 
 
without mandatory redemption requirements ($100 stated value; 10,000,000 shares authorized; issued and outstanding 115,293 shares)
11,529

 
11,529

Equity:
 
 
 
PNMR common stockholders’ equity:
 
 
 
Common stock outstanding (no par value; 120,000,000 shares authorized; issued and outstanding 79,653,624 shares)
1,177,163

 
1,182,819

Accumulated other comprehensive income (loss), net of income taxes
(78,594
)
 
(81,630
)
Retained earnings
532,160

 
506,998

Total PNMR common stockholders’ equity
1,630,729

 
1,608,187

Non-controlling interest in Valencia
78,945

 
80,843

Total equity
1,709,674

 
1,689,030

 
$
5,403,906

 
$
5,372,583

 
 
 
 

The accompanying notes, as they relate to PNMR, are an integral part of these financial statements.


12

Table of Contents

PNM RESOURCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(Unaudited)

 
Attributable to PNMR
 
Non-
controlling
Interest
in Valencia
 
 
 
Common
Stock
 
AOCI
 
Retained
Earnings
 
Total PNMR Common Stockholder's Equity
 
 
Total
Equity
 
(In thousands)
Balance at December 31, 2012
$
1,182,819

 
$
(81,630
)
 
$
506,998

 
$
1,608,187

 
$
80,843

 
$
1,689,030

Proceeds from stock option exercise
11,345

 

 

 
11,345

 

 
11,345

Awards of common stock
(19,741
)
 

 

 
(19,741
)
 

 
(19,741
)
Excess tax (shortfall) from stock-based payment arrangements
(458
)
 

 

 
(458
)
 

 
(458
)
Stock based compensation expense
3,198

 

 

 
3,198

 

 
3,198

Valencia’s transactions with its owner

 

 

 

 
(8,675
)
 
(8,675
)
Net earnings before subsidiary preferred stock dividends

 

 
38,568

 
38,568

 
6,777

 
45,345

Subsidiary preferred stock dividends

 

 
(264
)
 
(264
)
 

 
(264
)
Total other comprehensive income

 
3,036

 

 
3,036

 

 
3,036

Dividends declared on common stock

 

 
(13,142
)
 
(13,142
)
 

 
(13,142
)
Balance at June 30, 2013
$
1,177,163

 
$
(78,594
)
 
$
532,160

 
$
1,630,729

 
$
78,945

 
$
1,709,674



The accompanying notes, as they relate to PNMR, are an integral part of these financial statements.



13

Table of Contents


PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
A WHOLLY OWNED SUBSIDIARY OF PNM RESOURCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)

 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2013
 
2012
 
2013
 
2012
 
(In thousands)
Electric Operating Revenues
$
279,690

 
$
260,094

 
$
537,583

 
$
510,510

Operating Expenses:
 
 
 
 
 
 
 
Cost of energy
91,855

 
83,235

 
183,514

 
163,792

Administrative and general
36,622

 
40,657

 
75,381

 
79,706

Energy production costs
46,836

 
46,053

 
90,402

 
91,182

Depreciation and amortization
26,051

 
23,946

 
51,884

 
47,580

Transmission and distribution costs
11,133

 
11,664

 
21,735

 
22,507

Taxes other than income taxes
8,891

 
7,870

 
19,125

 
16,969

Total operating expenses
221,388

 
213,425

 
442,041

 
421,736

Operating income
58,302

 
46,669

 
95,542

 
88,774

Other Income and Deductions:
 
 
 
 
 
 
 
Interest income
2,868

 
3,429

 
5,541

 
6,764

Gains (losses) on investments held by NDT
3,272

 
(795
)
 
4,805

 
3,660

Other income
1,559

 
1,370

 
2,872

 
3,203

Other (deductions)
(1,471
)
 
(1,564
)
 
(2,911
)
 
(2,868
)
Net other income (deductions)
6,228

 
2,440

 
10,307

 
10,759

Interest Charges
19,890

 
18,928

 
39,847

 
37,422

Earnings before Income Taxes
44,640

 
30,181

 
66,002

 
62,111

Income Taxes
14,943

 
9,841

 
21,532

 
20,694

Net Earnings
29,697

 
20,340

 
44,470

 
41,417

(Earnings) Attributable to Valencia Non-controlling Interest
(3,573
)
 
(3,455
)
 
(6,777
)
 
(6,720
)
Net Earnings Attributable to PNM
26,124

 
16,885

 
37,693

 
34,697

Preferred Stock Dividends Requirements
(132
)
 
(132
)
 
(264
)
 
(264
)
Net Earnings Available for PNM Common Stock
$
25,992

 
$
16,753

 
$
37,429

 
$
34,433


The accompanying notes, as they relate to PNM, are an integral part of these financial statements.


14

Table of Contents

PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
A WHOLLY OWNED SUBSIDIARY OF PNM RESOURCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2013
 
2012
 
2013
 
2012
 
(In thousands)
Net Earnings
$
29,697

 
$
20,340

 
$
44,470

 
$
41,417

Other Comprehensive Income:
 
 
 
 
 
 
 
Unrealized Gain on Investment Securities:
 
 
 
 
 
 
 
Unrealized holding gains arising during the period, net of income tax (expense) of $(290), $(3,022), $(3,401) and $(10,437)
443

 
4,611

 
5,190

 
15,924

Reclassification adjustment for (gains) included in net earnings, net of income tax expense of $2,185, $4,992, $2,714 and $8,538
(3,333
)
 
(7,617
)
 
(4,140
)
 
(13,028
)
Pension Liability Adjustment:
 
 
 
 
 
 
 
Reclassification adjustment for amortization of experience (gain) loss recognized as net periodic benefit cost, net of income tax expense (benefit) of $(631), $(476), $(1,262) and $(952)
960

 
727

 
1,920

 
1,454

Total Other Comprehensive Income (Loss)
(1,930
)
 
(2,279
)
 
2,970

 
4,350

Comprehensive Income
27,767

 
18,061

 
47,440

 
45,767

Comprehensive (Income) Attributable to Valencia Non-controlling Interest
(3,573
)
 
(3,455
)
 
(6,777
)
 
(6,720
)
Comprehensive Income Attributable to PNM
$
24,194

 
$
14,606

 
$
40,663

 
$
39,047


The accompanying notes, as they relate to PNM, are an integral part of these financial statements.


15

Table of Contents



PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
A WHOLLY OWNED SUBSIDIARY OF PNM RESOURCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
Six Months Ended June 30,
 
2013
 
2012
 
(In thousands)
Cash Flows From Operating Activities:
 
 
 
Net earnings
$
44,470

 
$
41,417

Adjustments to reconcile net earnings to net cash flows from operating activities:
 
 
 
Depreciation and amortization
69,179

 
63,303

Deferred income tax expense
21,836

 
21,067

Net unrealized (gains) losses on derivatives
1,729

 
1,978

Realized (gains) on investments held by NDT
(4,805
)
 
(3,660
)
Other, net
(818
)
 
(545
)
Changes in certain assets and liabilities:
 
 
 
Accounts receivable and unbilled revenues
(15,841
)
 
(17,867
)
Materials, supplies, and fuel stock
(238
)
 
(5,152
)
Other current assets
4,299

 
(10,885
)
Other assets
6,196

 
(5,868
)
Accounts payable
(5,829
)
 
(7,112
)
Accrued interest and taxes
45,380

 
61,503

Other current liabilities
(23,523
)
 
10,095

Proceeds from governmental grants

 
21,567

Other liabilities
(69,059
)
 
(78,105
)
Net cash flows from operating activities
72,976

 
91,736

 
 
 
 
Cash Flows From Investing Activities:
 
 
 
Utility plant additions
(98,673
)
 
(111,344
)
Proceeds from sales of NDT investments
76,106

 
45,787

Purchases of NDT investments
(77,868
)
 
(47,313
)
Return of principal on PVNGS lessor notes
10,965

 
12,632

Other, net
1,213

 
1,372

Net cash flows from investing activities
(88,257
)
 
(98,866
)

The accompanying notes, as they relate to PNM, are an integral part of these financial statements.


16

Table of Contents



PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
A WHOLLY OWNED SUBSIDIARY OF PNM RESOURCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

 
Six Months Ended June 30,
 
2013
 
2012
 
(In thousands)
Cash Flows From Financing Activities:
 
 
 
Short-term borrowings (repayments), net
(21,100
)
 
20,400

Long-term borrowings
75,000

 

Valencia’s transactions with its owner
(8,675
)
 
(7,449
)
Dividends paid
(264
)
 
(17,944
)
Other, net
(1,169
)
 
984

Net cash flows from financing activities
43,792

 
(4,009
)
 
 
 
 
Change in Cash and Cash Equivalents
28,511

 
(11,139
)
Cash and Cash Equivalents at Beginning of Period
3,958

 
12,307

Cash and Cash Equivalents at End of Period
$
32,469

 
$
1,168

 
 
 
 
Supplemental Cash Flow Disclosures:
 
 
 
Interest paid, net of amounts capitalized
$
37,845

 
$
36,286

Income taxes paid (refunded), net
$
(44,999
)
 
$
(63,114
)

The accompanying notes, as they relate to PNM, are an integral part of these financial statements.


17

Table of Contents



PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
A WHOLLY OWNED SUBSIDIARY OF PNM RESOURCES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
 
June 30,
2013
 
December 31,
2012
 
(In thousands)
ASSETS
 
 
 
Current Assets:
 
 
 
Cash and cash equivalents
$
32,469

 
$
3,958

Accounts receivable, net of allowance for uncollectible accounts of $1,339 and $1,751
71,483

 
69,876

Unbilled revenues
62,298

 
49,085

Other receivables
38,529

 
50,975

Affiliate receivables
10,351

 
9,050

Materials, supplies, and fuel stock
57,027

 
56,790

Regulatory assets
35,559

 
36,490

Commodity derivative instruments
2,870

 
3,785

Income taxes receivable
35,528

 
80,223

Other current assets
37,991

 
27,457

Total current assets
384,105

 
387,689

Other Property and Investments:
 
 
 
Investment in PVNGS lessor notes
43,410

 
54,325

Investments held by NDT
197,072

 
188,971

Other investments
4,170

 
4,034

Non-utility property
976

 
976

Total other property and investments
245,628

 
248,306

Utility Plant:
 
 
 
Plant in service and plant held for future use
4,182,309

 
4,133,532

Less accumulated depreciation and amortization
1,395,722

 
1,355,240

 
2,786,587

 
2,778,292

Construction work in progress
128,507

 
102,329

Nuclear fuel, net of accumulated amortization of $45,793 and $42,644
81,785

 
81,627

Net utility plant
2,996,879

 
2,962,248

Deferred Charges and Other Assets:
 
 
 
Regulatory assets
422,124

 
431,956

Goodwill
51,632

 
51,632

Commodity derivative instruments
202

 
352

Other deferred charges
84,619

 
81,724

Total deferred charges and other assets
558,577

 
565,664

 
$
4,185,189

 
$
4,163,907

 
 
 
 

The accompanying notes, as they relate to PNM, are an integral part of these financial statements.


18

Table of Contents



PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
A WHOLLY OWNED SUBSIDIARY OF PNM RESOURCES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
 
June 30,
2013
 
December 31,
2012
 
(In thousands, except share information)
LIABILITIES AND STOCKHOLDER’S EQUITY
 
 
 
Current Liabilities:
 
 
 
Short-term debt
$

 
$
21,100

Accounts payable
68,902

 
73,914

Affiliate payables
18,159

 
25,340

Customer deposits
15,153

 
18,176

Accrued interest and taxes
31,544

 
30,320

Regulatory liabilities
464

 
15,172

Commodity derivative instruments
1,621

 
1,000

Dividends declared
132

 
132

Current portion of accumulated deferred income taxes
3,447

 
3,447

Other current liabilities
56,817

 
54,150

Total current liabilities
196,239

 
242,751

Long-term Debt
1,290,598

 
1,215,579

Deferred Credits and Other Liabilities:
 
 
 
Accumulated deferred income taxes
575,730

 
573,881

Accumulated deferred investment tax credits
13,146

 
14,242

Regulatory liabilities
405,972

 
379,841

Asset retirement obligations
88,508

 
85,042

Accrued pension liability and postretirement benefit cost
138,478

 
208,618

Commodity derivative instruments
1,540

 
1,933

Other deferred credits
90,042

 
95,585

Total deferred credits and liabilities
1,313,416

 
1,359,142

Total liabilities
2,800,253

 
2,817,472

Commitments and Contingencies (See Note 9)


 


Cumulative Preferred Stock
 
 
 
without mandatory redemption requirements ($100 stated value; 10,000,000 authorized; issued and outstanding 115,293 shares)
11,529

 
11,529

Equity:
 
 
 
PNM common stockholder’s equity:
 
 
 
Common stock outstanding (no par value; 40,000,000 shares authorized; issued and outstanding 39,117,799 shares)
1,061,776

 
1,061,776

Accumulated other comprehensive income (loss), net of income taxes
(78,444
)
 
(81,414
)
Retained earnings
311,130

 
273,701

Total PNM common stockholder’s equity
1,294,462

 
1,254,063

Non-controlling interest in Valencia
78,945

 
80,843

Total equity
1,373,407

 
1,334,906

 
$
4,185,189

 
$
4,163,907


The accompanying notes, as they relate to PNM, are an integral part of these financial statements.

19

Table of Contents





20

Table of Contents

PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
A WHOLLY OWNED SUBSIDIARY OF PNM RESOURCES, INC.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(Unaudited)
 
Attributable to PNM
 
 
 
 
 
 
 
 
 
Total PNM
Common
Stockholder’s
Equity
 
Non-
controlling
 Interest in Valencia
 
 
 
 
 
 
 
 
 
 
 
Common
Stock
 
AOCI
 
Retained
Earnings
 
 
 
Total
Equity
 
 
 
 
 
 
 
(In thousands)
Balance at December 31, 2012
$
1,061,776

 
$
(81,414
)
 
$
273,701

 
$
1,254,063

 
$
80,843

 
$
1,334,906

Valencia’s transactions with its owner

 

 

 

 
(8,675
)
 
(8,675
)
Net earnings

 

 
37,693

 
37,693

 
6,777

 
44,470

Total other comprehensive income

 
2,970

 

 
2,970

 

 
2,970

Dividends declared on preferred stock

 

 
(264
)
 
(264
)
 

 
(264
)
Balance at June 30, 2013
$
1,061,776

 
$
(78,444
)
 
$
311,130

 
$
1,294,462

 
$
78,945

 
$
1,373,407



The accompanying notes, as they relate to PNM, are an integral part of these financial statements.

21

Table of Contents


TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
A WHOLLY OWNED SUBSIDIARY OF PNM RESOURCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2013
 
2012
 
2013
 
2012
 
(In thousands)
Electric Operating Revenues
$
67,909

 
$
63,766

 
$
127,680

 
$
118,724

Operating Expenses:
 
 
 
 
 
 
 
Cost of energy
13,804

 
11,484

 
26,851

 
22,773

Administrative and general
10,686

 
10,103

 
21,804

 
20,570

Depreciation and amortization
12,279

 
12,066

 
23,960

 
23,353

Transmission and distribution costs
6,016

 
5,901

 
11,708

 
11,307

Taxes other than income taxes
5,457

 
5,315

 
10,636

 
10,031

Total operating expenses
48,242

 
44,869

 
94,959

 
88,034

Operating income
19,667

 
18,897

 
32,721

 
30,690

Other Income and Deductions:
 
 
 
 
 
 
 
Other income
609

 
448

 
946

 
937

Other (deductions)
(123
)
 
326

 
(252
)
 
(59
)
Net other income (deductions)
486

 
774

 
694

 
878

Interest Charges
6,759

 
7,069

 
14,005

 
14,167

Earnings before Income Taxes
13,394

 
12,602

 
19,410

 
17,401

Income Taxes
5,055

 
4,584

 
7,345

 
6,372

Net Earnings
$
8,339

 
$
8,018

 
$
12,065

 
$
11,029


The accompanying notes, as they relate to TNMP, are an integral part of these financial statements.



22

Table of Contents

TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
A WHOLLY OWNED SUBSIDIARY OF PNM RESOURCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2013
 
2012
 
2013
 
2012
 
(In thousands)
Net Earnings
$
8,339

 
$
8,018

 
$
12,065

 
$
11,029

Other Comprehensive Income (Loss):
 
 
 
 
 
 
 
Fair Value Adjustment for Cash Flow Hedges:
 
 
 
 
 
 
 
Change in fair market value, net of income tax (expense) benefit of $3, $40, $(1) and $99
(6
)
 
(72
)
 
2

 
(178
)
Reclassification adjustment for (gains) losses included in net earnings, net of income tax expense (benefit) of $(18), $(16), $(35) and $(31)
33

 
29

 
64

 
56

Total Other Comprehensive Income (Loss)
27

 
(43
)
 
66

 
(122
)
Comprehensive Income
$
8,366

 
$
7,975

 
$
12,131

 
$
10,907


The accompanying notes, as they relate to TNMP, are an integral part of these financial statements.

23

Table of Contents


TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
A WHOLLY OWNED SUBSIDIARY OF PNM RESOURCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
Six Months Ended June 30,
 
2013
 
2012
 
(In thousands)
Cash Flows From Operating Activities:
 
 
 
Net earnings
$
12,065

 
$
11,029

Adjustments to reconcile net earnings to net cash flows from operating activities:
 
 
 
Depreciation and amortization
26,034

 
25,885

Deferred income tax expense
4,348

 
6,247

Other, net
(10
)
 
(258
)
Changes in certain assets and liabilities:
 
 
 
Accounts receivable and unbilled revenues
(7,180
)
 
(3,034
)
Materials and supplies
79

 
(98
)
Other current assets
(4,082
)
 
(3,904
)
Other assets
590

 
(1,066
)
Accounts payable
807

 
2,987

Accrued interest and taxes
(1,517
)
 
(4,755
)
Other current liabilities
1,278

 
4,214

Other liabilities
886

 
(3,408
)
Net cash flows from operating activities
33,298

 
33,839

Cash Flows From Investing Activities:
 
 
 
Utility plant additions
(47,390
)
 
(39,595
)
Proceeds from sales of utility plant

 
1,367

Net cash flows from investing activities
(47,390
)
 
(38,228
)
Cash Flow From Financing Activities:
 
 
 
Short-term borrowings (repayments), net
25,000

 

Short-term borrowings (repayments) – affiliate, net
7,500

 
7,400

Cash paid in debt exchange
(13,048
)
 

Dividends paid
(3,726
)
 
(3,010
)
Other, net
(1,634
)
 
(1
)
Net cash flows from financing activities
14,092

 
4,389

 
 
 
 
Change in Cash and Cash Equivalents

 

Cash and Cash Equivalents at Beginning of Period
1

 
1
Cash and Cash Equivalents at End of Period
$
1

 
$
1

 
 
 
 
Supplemental Cash Flow Disclosures:
 
 
 
Interest paid, net of amounts capitalized
$
13,267

 
$
12,761

Income taxes paid, net
$
696

 
$
1,848

 
 
 
 
Supplemental schedule of noncash financing activities:
 
 
 
Premium on long-term debt incurred in connection with debt exchange
$
23,249

 
 

The accompanying notes, as they relate to TNMP, are an integral part of these financial statements.




24

Table of Contents



TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
A WHOLLY OWNED SUBSIDIARY OF PNM RESOURCES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
 
June 30,
2013
 
December 31,
2012
 
(In thousands)
ASSETS
 
 
 
Current Assets:
 
 
 
Cash and cash equivalents
$
1

 
$
1

Accounts receivable
23,465

 
17,217

Unbilled revenues
9,112

 
8,181

Other receivables
614

 
2,359

Materials and supplies
2,774

 
2,853

Regulatory assets
6,402

 
2,630

Current portion of accumulated deferred income taxes
1,131

 
1,131

Other current assets
2,037

 
1,107

Total current assets
45,536

 
35,479

Other Property and Investments:
 
 
 
Other investments
281

 
281

Non-utility property
2,240

 
2,240

Total other property and investments
2,521

 
2,521

Utility Plant:
 
 
 
Plant in service and plant held for future use
1,033,729

 
1,009,108

Less accumulated depreciation and amortization
340,091

 
339,315

 
693,638

 
669,793

Construction work in progress
24,658

 
19,801

Net utility plant
718,296

 
689,594

Deferred Charges and Other Assets:
 
 
 
Regulatory assets
154,634

 
123,621

Goodwill
226,665

 
226,665

Other deferred charges
8,276

 
8,349

Total deferred charges and other assets
389,575

 
358,635

 
$
1,155,928

 
$
1,086,229


The accompanying notes, as they relate to TNMP, are an integral part of these financial statements.

25

Table of Contents



TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
A WHOLLY OWNED SUBSIDIARY OF PNM RESOURCES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
 
June 30,
2013
 
December 31,
2012
 
(In thousands, except share information)
LIABILITIES AND STOCKHOLDER’S EQUITY
 
 
 
Current Liabilities:
 
 
 
Short-term debt
$
25,000

 
$

Short-term debt – affiliate
35,800

 
28,300

Current installments of long-term debt
50,000

 

Accounts payable
8,769

 
8,848

Affiliate payables
3,435

 
4,381

Accrued interest and taxes
28,974

 
30,491

Other current liabilities
10,882

 
8,854

Total current liabilities
162,860

 
80,874

Long-term Debt
286,238

 
311,589

Deferred Credits and Other Liabilities:
 
 
 
Accumulated deferred income taxes
168,200

 
163,710

Regulatory liabilities
45,693

 
43,619

Asset retirement obligations
763

 
732

Accrued pension liability and postretirement benefit cost
13,715

 
15,947

Other deferred credits
6,240

 
5,944

Total deferred credits and other liabilities
234,611

 
229,952

Total liabilities
683,709

 
622,415

Commitments and Contingencies (See Note 9)


 


Common Stockholder’s Equity:
 
 
 
Common stock outstanding ($10 par value; 12,000,000 shares authorized;
 
 
 
issued and outstanding 6,358 shares)
64

 
64

Paid-in-capital
390,366

 
390,366

Accumulated other comprehensive income (loss), net of income taxes
(150
)
 
(216
)
Retained earnings
81,939

 
73,600

Total common stockholder’s equity
472,219

 
463,814

 
$
1,155,928

 
$
1,086,229


The accompanying notes, as they relate to TNMP, are an integral part of these financial statements.


26

Table of Contents

TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
A WHOLLY OWNED SUBSIDIARY OF PNM RESOURCES, INC.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN COMMON STOCKHOLDER’S EQUITY
(Unaudited)
 
Common Stock
 
Paid-in Capital
 
AOCI
 
Retained Earnings
 
Total Common Stockholder's Equity
 
(In thousands)
Balance at December 31, 2012
$
64

 
$