PNM 9.30.2013 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 September 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 October 25, 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 October 25, 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 October 25, 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
CTC
  
Competition Transition Charge
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
First Choice
  
FCP Enterprises, Inc. and Subsidiaries
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.

4

Table of Contents

MW
  
Megawatt
MWh
  
Megawatt Hour
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

5

Table of Contents

SO2
  
Sulfur Dioxide
SPS
  
Southwestern Public Service Company
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 September 30,
 
Nine Months Ended September 30,
 
2013
 
2012
 
2013
 
2012
 
(In thousands, except per share amounts)
Electric Operating Revenues 
$
399,730

 
$
390,411

 
$
1,064,993

 
$
1,019,646

Operating Expenses:

 
 
 

 

Cost of energy
114,674

 
110,777

 
325,039

 
297,342

Administrative and general
46,915

 
45,283

 
134,744

 
135,371

Energy production costs
41,142

 
40,365

 
131,546

 
131,546

Regulatory disallowances
1,735

 

 
1,735

 

Depreciation and amortization
42,743

 
42,820

 
125,189

 
122,289

Transmission and distribution costs
17,248

 
17,082

 
50,690

 
50,896

Taxes other than income taxes
17,534

 
15,934

 
49,739

 
45,218

Total operating expenses
281,991

 
272,261

 
818,682

 
782,662

Operating income
117,739

 
118,150

 
246,311

 
236,984

Other Income and Deductions:
 
 
 
 
 
 
 
Interest income
2,264

 
3,130

 
7,731

 
9,808

Gains on investments held by NDT
2,190

 
5,716

 
6,995

 
9,376

Other income
3,252

 
2,484

 
7,517

 
6,991

Other (deductions)
(5,970
)
 
(3,451
)
 
(13,516
)
 
(10,719
)
Net other income (deductions)
1,736

 
7,879

 
8,727

 
15,456

Interest Charges
30,365

 
30,515

 
92,279

 
90,280

Earnings before Income Taxes
89,110

 
95,514

 
162,759

 
162,160

Income Taxes
30,296

 
33,538

 
58,600

 
54,609

Net Earnings
58,814

 
61,976

 
104,159

 
107,551

(Earnings) Attributable to Valencia Non-controlling Interest
(4,127
)
 
(3,980
)
 
(10,904
)
 
(10,699
)
Preferred Stock Dividend Requirements of Subsidiary
(132
)
 
(132
)
 
(396
)
 
(396
)
Net Earnings Attributable to PNMR
$
54,555

 
$
57,864

 
$
92,859

 
$
96,456

Net Earnings Attributable to PNMR per Common Share:
 
 
 
 
 
 
 
Basic
$
0.68

 
$
0.73

 
$
1.16

 
$
1.21

Diluted
$
0.68

 
$
0.72

 
$
1.15

 
$
1.20

Dividends Declared per Common Share
$
0.165

 
$
0.145

 
$
0.495

 
$
0.435


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 September 30,
 
Nine Months Ended September 30,
 
2013
 
2012
 
2013
 
2012
 
(In thousands)
Net Earnings
$
58,814

 
$
61,976

 
$
104,159

 
$
107,551

Other Comprehensive Income:
 
 
 
 
 
 
 
Unrealized Gain on Investment Securities:
 
 
 
 
 
 
 
Unrealized holding gains arising during the period, net of income tax (expense) of $(4,143), $(4,972), $(7,544) and $(15,409)
6,322

 
7,587

 
11,512

 
23,511

Reclassification adjustment for (gains) included in net earnings, net of income tax expense of $925, $4,248, $3,639 and $12,786
(1,411
)
 
(6,481
)
 
(5,551
)
 
(19,509
)
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), $(1,893) and $(1,428)
960

 
727

 
2,880

 
2,181

Fair Value Adjustment for Cash Flow Hedges:
 
 
 
 
 
 
 
Change in fair market value, net of income tax (expense) benefit of $128, $51, $127 and $150
(238
)
 
(92
)
 
(236
)
 
(270
)
Reclassification adjustment for (gains) losses included in net earnings, net of income tax expense (benefit) of $(19), $(16), $(54) and $(47)
35

 
29

 
99

 
85

Total Other Comprehensive Income
5,668

 
1,770

 
8,704

 
5,998

Comprehensive Income
64,482

 
63,746

 
112,863

 
113,549

Comprehensive (Income) Attributable to Valencia Non-controlling Interest
(4,127
)
 
(3,980
)
 
(10,904
)
 
(10,699
)
Preferred Stock Dividend Requirements of Subsidiary
(132
)
 
(132
)
 
(396
)
 
(396
)
Comprehensive Income Attributable to PNMR
$
60,223

 
$
59,634

 
$
101,563

 
$
102,454


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


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Table of Contents


PNM RESOURCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
Nine Months Ended September 30,
 
2013
 
2012
 
(In thousands)
Cash Flows From Operating Activities:
 
 
 
Net earnings
$
104,159

 
$
107,551

Adjustments to reconcile net earnings to net cash flows from operating activities:
 
 
 
Depreciation and amortization
157,856

 
153,992

Deferred income tax expense
57,878

 
55,141

Net unrealized (gains) losses on commodity derivatives
(5,858
)
 
3,076

Realized (gains) on investments held by NDT
(6,995
)
 
(9,376
)
Stock based compensation expense
4,315

 
2,748

Regulatory disallowances
1,735

 

Other, net
1,444

 
(2,037
)
Changes in certain assets and liabilities:
 
 
 
Accounts receivable and unbilled revenues
(23,731
)
 
(31,550
)
Materials, supplies, and fuel stock
(724
)
 
(6,769
)
Other current assets
(6,667
)
 
(4,225
)
Other assets
21,656

 
(9,499
)
Accounts payable
(17,786
)
 
3,973

Accrued interest and taxes
126,218

 
22,336

Other current liabilities
(32,111
)
 
(21,681
)
Proceeds from governmental grants

 
21,567

Other liabilities
(70,379
)
 
(80,248
)
Net cash flows from operating activities
311,010

 
204,999

 
 
 
 
Cash Flows From Investing Activities:
 
 
 
Additions to utility and non-utility plant
(233,928
)
 
(214,743
)
Proceeds from sales of investments held by NDT
179,336

 
136,305

Purchases of investments held by NDT
(181,401
)
 
(138,658
)
Proceeds from sale of First Choice

 
4,034

Return of principal on PVNGS lessor notes
23,357

 
23,455

Other, net
1,210

 
1,627

Net cash flows from investing activities
(211,426
)
 
(187,980
)

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)

 
Nine Months Ended September 30,
 
2013
 
2012
 
(In thousands)
Cash Flows From Financing Activities:
 
 
 
Short-term borrowings (repayments), net
(46,700
)
 
30,700

Long-term borrowings
75,000

 
20,000

Repayment of long-term debt
(26,037
)
 
(20,000
)
Cash paid in debt exchange
(13,048
)
 

Proceeds from stock option exercise
3,500

 
10,301

Awards of common stock
(12,429
)
 
(21,930
)
Dividends paid
(38,233
)
 
(33,454
)
Valencia's transactions with its owner
(13,477
)
 
(12,034
)
Other, net
(3,706
)
 
(337
)
Net cash flows from financing activities
(75,130
)
 
(26,754
)
 
 
 
 
Change in Cash and Cash Equivalents
24,454

 
(9,735
)
Cash and Cash Equivalents at Beginning of Period
8,985

 
15,091

Cash and Cash Equivalents at End of Period
$
33,439

 
$
5,356

 
 
 
 
Supplemental Cash Flow Disclosures:
 
 
 
Interest paid, net of amounts capitalized
$
71,824

 
$
64,040

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)
 
September 30,
2013
 
December 31,
2012
 
(In thousands)
ASSETS
 
 
 
Current Assets:
 
 
 
Cash and cash equivalents
$
33,439

 
$
8,985

Accounts receivable, net of allowance for uncollectible accounts of $1,391 and $1,751
110,937

 
87,093

Unbilled revenues
55,155

 
57,266

Other receivables
53,681

 
53,332

Materials, supplies, and fuel stock
60,367

 
59,643

Regulatory assets
38,511

 
39,120

Commodity derivative instruments
5,743

 
3,785

Income taxes receivable
5,283

 
101,477

Other current assets
37,404

 
31,490

Total current assets
400,520

 
442,191

Other Property and Investments:
 
 
 
Investment in PVNGS lessor notes
32,542

 
54,325

Investments held by NDT
207,483

 
188,971

Other investments
6,725

 
9,139

Non-utility property, net of accumulated depreciation of $143 and $131
4,475

 
4,487

Total other property and investments
251,225

 
256,922

Utility Plant:
 
 
 
Plant in service and plant held for future use
5,431,680

 
5,313,796

Less accumulated depreciation and amortization
1,839,481

 
1,774,223

 
3,592,199

 
3,539,573

Construction work in progress
175,410

 
125,287

Nuclear fuel, net of accumulated amortization of $52,876 and $42,644
79,458

 
81,627

Net utility plant
3,847,067

 
3,746,487

Deferred Charges and Other Assets:
 
 
 
Regulatory assets
551,607

 
555,577

Goodwill
278,297

 
278,297

Commodity derivative instruments
4,284

 
352

Other deferred charges
95,814

 
92,757

Total deferred charges and other assets
930,002

 
926,983

 
$
5,428,814

 
$
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)
 
September 30,
2013
 
December 31,
2012
 
(In thousands, except share information)
LIABILITIES AND STOCKHOLDERS' EQUITY
 
 
 
Current Liabilities:
 
 
 
Short-term debt
$
112,000

 
$
158,700

Current installments of long-term debt
52,530

 
2,530

Accounts payable
76,309

 
99,177

Customer deposits
14,171

 
18,176

Accrued interest and taxes
82,801

 
52,003

Regulatory liabilities
1,218

 
15,173

Commodity derivative instruments
1,017

 
1,000

Dividends declared
13,271

 
11,679

Current portion of accumulated deferred income taxes
258

 
258

Other current liabilities
62,018

 
75,407

Total current liabilities
415,593

 
434,103

Long-term Debt
1,696,311

 
1,669,760

Deferred Credits and Other Liabilities:
 
 
 
Accumulated deferred income taxes
743,828

 
701,545

Accumulated deferred investment tax credits
12,598

 
14,242

Regulatory liabilities
456,634

 
423,460

Asset retirement obligations
93,519

 
85,893

Accrued pension liability and postretirement benefit cost
147,442

 
224,565

Commodity derivative instruments
1,347

 
1,933

Other deferred credits
106,554

 
116,523

Total deferred credits and other liabilities
1,561,922

 
1,568,161

Total liabilities
3,673,826

 
3,672,024

Commitments and Contingencies (See Note 10)


 


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)
1,177,686

 
1,182,819

Accumulated other comprehensive income (loss), net of income taxes
(72,926
)
 
(81,630
)
Retained earnings
560,429

 
506,998

Total PNMR common stockholders' equity
1,665,189

 
1,608,187

Non-controlling interest in Valencia
78,270

 
80,843

Total equity
1,743,459

 
1,689,030

 
$
5,428,814

 
$
5,372,583

 
 
 
 

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


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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
3,500

 

 

 
3,500

 

 
3,500

Awards of common stock
(12,429
)
 

 

 
(12,429
)
 

 
(12,429
)
Excess tax (shortfall) from stock-based payment arrangements
(519
)
 

 

 
(519
)
 

 
(519
)
Stock based compensation expense
4,315

 

 

 
4,315

 

 
4,315

Valencia's transactions with its owner

 

 

 

 
(13,477
)
 
(13,477
)
Net earnings before subsidiary preferred stock dividends

 

 
93,255

 
93,255

 
10,904

 
104,159

Subsidiary preferred stock dividends

 

 
(396
)
 
(396
)
 

 
(396
)
Total other comprehensive income

 
8,704

 

 
8,704

 

 
8,704

Dividends declared on common stock

 

 
(39,428
)
 
(39,428
)
 

 
(39,428
)
Balance at September 30, 2013
$
1,177,686

 
$
(72,926
)
 
$
560,429

 
$
1,665,189

 
$
78,270

 
$
1,743,459



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



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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 September 30,
 
Nine Months Ended September 30,
 
2013
 
2012
 
2013
 
2012
 
(In thousands)
Electric Operating Revenues
$
326,026

 
$
321,731

 
$
863,609

 
$
832,242

Operating Expenses:
 
 
 
 
 
 
 
Cost of energy
100,200

 
99,217

 
283,715

 
263,009

Administrative and general
40,679

 
41,150

 
116,058

 
120,857

Energy production costs
41,142

 
40,365

 
131,546

 
131,546

Regulatory disallowances
1,735

 

 
1,735

 

Depreciation and amortization
25,879

 
24,437

 
77,763

 
72,017

Transmission and distribution costs
11,686

 
11,172

 
33,420

 
33,679

Taxes other than income taxes
9,488

 
8,417

 
28,613

 
25,386

Total operating expenses
230,809

 
224,758

 
672,850

 
646,494

Operating income
95,217

 
96,973

 
190,759

 
185,748

Other Income and Deductions:
 
 
 
 
 
 
 
Interest income
2,298

 
3,173

 
7,839

 
9,938

Gains on investments held by NDT
2,190

 
5,716

 
6,995

 
9,376

Other income
2,396

 
1,176

 
5,269

 
4,378

Other (deductions)
(2,375
)
 
(1,682
)
 
(5,287
)
 
(4,553
)
Net other income (deductions)
4,509

 
8,383

 
14,816

 
19,139

Interest Charges
20,124

 
19,230

 
59,971

 
56,652

Earnings before Income Taxes
79,602

 
86,126

 
145,604

 
148,235

Income Taxes
27,652

 
31,235

 
49,184

 
51,929

Net Earnings
51,950

 
54,891

 
96,420

 
96,306

(Earnings) Attributable to Valencia Non-controlling Interest
(4,127
)
 
(3,980
)
 
(10,904
)
 
(10,699
)
Net Earnings Attributable to PNM
47,823

 
50,911

 
85,516

 
85,607

Preferred Stock Dividends Requirements
(132
)
 
(132
)
 
(396
)
 
(396
)
Net Earnings Available for PNM Common Stock
$
47,691

 
$
50,779

 
$
85,120

 
$
85,211


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


14

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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 September 30,
 
Nine Months Ended September 30,
 
2013
 
2012
 
2013
 
2012
 
(In thousands)
Net Earnings
$
51,950

 
$
54,891

 
$
96,420

 
$
96,306

Other Comprehensive Income:
 
 
 
 
 
 
 
Unrealized Gain on Investment Securities:
 
 
 
 
 
 
 
Unrealized holding gains arising during the period, net of income tax (expense) of $(4,143), $(4,972), $(7,544) and $(15,409)
6,322

 
7,587

 
11,512

 
23,511

Reclassification adjustment for (gains) included in net earnings, net of income tax expense of $925, $4,248, $3,639 and $12,786
(1,411
)
 
(6,481
)
 
(5,551
)
 
(19,509
)
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), $(1,893) and $(1,428)
960

 
727

 
2,880

 
2,181

Total Other Comprehensive Income
5,871

 
1,833

 
8,841

 
6,183

Comprehensive Income
57,821

 
56,724

 
105,261

 
102,489

Comprehensive (Income) Attributable to Valencia Non-controlling Interest
(4,127
)
 
(3,980
)
 
(10,904
)
 
(10,699
)
Comprehensive Income Attributable to PNM
$
53,694

 
$
52,744

 
$
94,357

 
$
91,790


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


15

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PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
A WHOLLY OWNED SUBSIDIARY OF PNM RESOURCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
Nine Months Ended September 30,
 
2013
 
2012
 
(In thousands)
Cash Flows From Operating Activities:
 
 
 
Net earnings
$
96,420

 
$
96,306

Adjustments to reconcile net earnings to net cash flows from operating activities:
 
 
 
Depreciation and amortization
104,161

 
97,086

Deferred income tax expense
49,870

 
52,558

Net unrealized (gains) losses on commodity derivatives
(5,858
)
 
3,076

Realized (gains) on investments held by NDT
(6,995
)
 
(9,376
)
Regulatory disallowances
1,735

 

Other, net
(1,282
)
 
(1,005
)
Changes in certain assets and liabilities:
 
 
 
Accounts receivable and unbilled revenues
(14,123
)
 
(26,183
)
Materials, supplies, and fuel stock
(744
)
 
(6,404
)
Other current assets
(5,187
)
 
(6,942
)
Other assets
21,977

 
(9,425
)
Accounts payable
(4,953
)
 
2,353

Accrued interest and taxes
66,090

 
80,418

Other current liabilities
(43,935
)
 
(9,850
)
Proceeds from governmental grants

 
21,567

Other liabilities
(67,062
)
 
(75,629
)
Net cash flows from operating activities
190,114

 
208,550

 
 
 
 
Cash Flows From Investing Activities:
 
 
 
Utility plant additions
(164,669
)
 
(144,571
)
Proceeds from sales of NDT investments
179,336

 
136,305

Purchases of NDT investments
(181,401
)
 
(138,658
)
Return of principal on PVNGS lessor notes
23,357

 
23,455

Other, net
1,212

 
(720
)
Net cash flows from investing activities
(142,165
)
 
(124,189
)

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


16

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

 
Nine Months Ended September 30,
 
2013
 
2012
 
(In thousands)
Cash Flows From Financing Activities:
 
 
 
Short-term borrowings (repayments), net
(21,100
)
 
(66,000
)
Long-term borrowings
75,000

 
20,000

Repayment of long-term debt

 
(20,000
)
Valencia's transactions with its owner
(13,477
)
 
(12,034
)
Dividends paid
(68,424
)
 
(18,076
)
Other, net
(1,727
)
 
(337
)
Net cash flows from financing activities
(29,728
)
 
(96,447
)
 
 
 
 
Change in Cash and Cash Equivalents
18,221

 
(12,086
)
Cash and Cash Equivalents at Beginning of Period
3,958

 
12,307

Cash and Cash Equivalents at End of Period
$
22,179

 
$
221

 
 
 
 
Supplemental Cash Flow Disclosures:
 
 
 
Interest paid, net of amounts capitalized
$
49,984

 
$
43,167

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)
 
September 30,
2013
 
December 31,
2012
 
(In thousands)
ASSETS
 
 
 
Current Assets:
 
 
 
Cash and cash equivalents
$
22,179

 
$
3,958

Accounts receivable, net of allowance for uncollectible accounts of $1,391 and $1,751
84,613

 
69,876

Unbilled revenues
46,473

 
49,085

Other receivables
52,328

 
50,975

Affiliate receivables
8,827

 
9,050

Materials, supplies, and fuel stock
57,534

 
56,790

Regulatory assets
34,315

 
36,490

Commodity derivative instruments
5,743

 
3,785

Income taxes receivable
35,910

 
80,223

Other current assets
32,294

 
27,457

Total current assets
380,216

 
387,689

Other Property and Investments:
 
 
 
Investment in PVNGS lessor notes
32,542

 
54,325

Investments held by NDT
207,483

 
188,971

Other investments
4,380

 
4,034

Non-utility property
976

 
976

Total other property and investments
245,381

 
248,306

Utility Plant:
 
 
 
Plant in service and plant held for future use
4,217,120

 
4,133,532

Less accumulated depreciation and amortization
1,409,042

 
1,355,240

 
2,808,078

 
2,778,292

Construction work in progress
136,679

 
102,329

Nuclear fuel, net of accumulated amortization of $52,876 and $42,644
79,458

 
81,627

Net utility plant
3,024,215

 
2,962,248

Deferred Charges and Other Assets:
 
 
 
Regulatory assets
402,040

 
431,956

Goodwill
51,632

 
51,632

Commodity derivative instruments
4,284

 
352

Other deferred charges
84,702

 
81,724

Total deferred charges and other assets
542,658

 
565,664

 
$
4,192,470

 
$
4,163,907

 
 
 
 

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


18

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

 
$
21,100

Accounts payable
60,049

 
73,914

Affiliate payables
13,462

 
25,340

Customer deposits
14,171

 
18,176

Accrued interest and taxes
52,735

 
30,320

Regulatory liabilities
1,218

 
15,172

Commodity derivative instruments
1,017

 
1,000

Dividends declared
132

 
132

Current portion of accumulated deferred income taxes
3,447

 
3,447

Other current liabilities
40,041

 
54,150

Total current liabilities
186,272

 
242,751

Long-term Debt
1,290,608

 
1,215,579

Deferred Credits and Other Liabilities:
 
 
 
Accumulated deferred income taxes
608,366

 
573,881

Accumulated deferred investment tax credits
12,598

 
14,242

Regulatory liabilities
409,444

 
379,841

Asset retirement obligations
92,614

 
85,042

Accrued pension liability and postretirement benefit cost
134,009

 
208,618

Commodity derivative instruments
1,347

 
1,933

Other deferred credits
87,417

 
95,585

Total deferred credits and liabilities
1,345,795

 
1,359,142

Total liabilities
2,822,675

 
2,817,472

Commitments and Contingencies (See Note 10)


 


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
(72,573
)
 
(81,414
)
Retained earnings
290,793

 
273,701

Total PNM common stockholder's equity
1,279,996

 
1,254,063

Non-controlling interest in Valencia
78,270

 
80,843

Total equity
1,358,266

 
1,334,906

 
$
4,192,470

 
$
4,163,907


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


19

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

 

 

 

 
(13,477
)
 
(13,477
)
Net earnings

 

 
85,516

 
85,516

 
10,904

 
96,420

Total other comprehensive income

 
8,841

 

 
8,841

 

 
8,841

Dividends declared on preferred stock

 

 
(396
)
 
(396
)
 

 
(396
)
Dividends declared on common stock

 

 
(68,028
)
 
(68,028
)
 

 
(68,028
)
Balance at September 30, 2013
$
1,061,776

 
$
(72,573
)
 
$
290,793

 
$
1,279,996

 
$
78,270

 
$
1,358,266



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

20

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 September 30,
 
Nine Months Ended September 30,
 
2013
 
2012
 
2013
 
2012
 
(In thousands)
Electric Operating Revenues
$
73,704

 
$
68,680

 
$
201,384

 
$
187,404

Operating Expenses:
 
 
 
 
 
 
 
Cost of energy
14,474

 
11,560

 
41,324

 
34,333

Administrative and general
10,641

 
10,130

 
32,446

 
30,700

Depreciation and amortization
13,850

 
13,819

 
37,810

 
37,173

Transmission and distribution costs
5,562

 
5,910

 
17,270

 
17,217

Taxes other than income taxes
6,923

 
6,291

 
17,558

 
16,322

Total operating expenses
51,450

 
47,710

 
146,408

 
135,745

Operating income
22,254

 
20,970

 
54,976

 
51,659

Other Income and Deductions:
 
 
 
 
 
 
 
Interest income

 

 

 
1

Other income
820

 
771

 
1,765

 
1,708

Other (deductions)
(104
)
 
(405
)
 
(356
)
 
(464
)
Net other income (deductions)
716

 
366

 
1,409

 
1,245

Interest Charges
6,655

 
7,047

 
20,661

 
21,214

Earnings before Income Taxes
16,315

 
14,289

 
35,724

 
31,690

Income Taxes
6,209

 
5,205

 
13,554

 
11,577

Net Earnings
$
10,106

 
$
9,084

 
$
22,170

 
$
20,113


The accompanying notes, as they relate to TNMP, 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 COMPREHENSIVE INCOME
(Unaudited)
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2013
 
2012
 
2013
 
2012
 
(In thousands)
Net Earnings
$
10,106

 
$
9,084

 
$
22,170

 
$
20,113

Other Comprehensive Income (Loss):
 
 
 
 
 
 
 
Fair Value Adjustment for Cash Flow Hedges:
 
 
 
 
 
 
 
Change in fair market value, net of income tax (expense) benefit of $128, $51, $127 and $150
(238
)
 
(92
)
 
(236
)
 
(270
)
Reclassification adjustment for (gains) losses included in net earnings, net of income tax expense (benefit) of $(19), $(16), $(54) and $(47)
35

 
29

 
99

 
85

Total Other Comprehensive Income (Loss)
(203
)
 
(63
)
 
(137
)
 
(185
)
Comprehensive Income
$
9,903

 
$
9,021

 
$
22,033

 
$
19,928


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 CASH FLOWS
(Unaudited)
 
Nine Months Ended September 30,
 
2013
 
2012
 
(In thousands)
Cash Flows From Operating Activities:
 
 
 
Net earnings
$
22,170

 
$
20,113

Adjustments to reconcile net earnings to net cash flows from operating activities:
 
 
 
Depreciation and amortization
40,946

 
41,222

Deferred income tax expense
3,901

 
11,337

Other, net
(13
)
 
(275
)
Changes in certain assets and liabilities:
 
 
 
Accounts receivable and unbilled revenues
(9,608
)
 
(5,367
)
Materials and supplies
20

 
(365
)
Other current assets
(2,420
)
 
(709
)
Other assets
36

 
(498
)
Accounts payable
(291
)
 
(358
)
Accrued interest and taxes
14,669

 
4,860

Other current liabilities
(1,946
)
 
1,980

Other liabilities
2,182

 
(3,411
)
Net cash flows from operating activities
69,646

 
68,529

Cash Flows From Investing Activities:
 
 
 
Utility plant additions
(67,400
)
 
(59,801
)
Net cash flows from investing activities
(67,400
)
 
(59,801
)
Cash Flow From Financing Activities:
 
 
 
Short-term borrowings (repayments), net
12,000

 

Short-term borrowings (repayments) – affiliate, net
4,800

 
2,300

Cash paid in debt exchange
(13,048
)
 

Dividends paid
(3,726
)
 
(11,028
)
Other, net
(2,117
)
 

Net cash flows from financing activities
(2,091
)
 
(8,728
)
 
 
 
 
Change in Cash and Cash Equivalents
155

 

Cash and Cash Equivalents at Beginning of Period
1

 
1
Cash and Cash Equivalents at End of Period
$
156

 
$
1

 
 
 
 
Supplemental Cash Flow Disclosures:
 
 
 
Interest paid, net of amounts capitalized
$
13,626

 
$
13,074

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.




23

Table of Contents



TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
A WHOLLY OWNED SUBSIDIARY OF PNM RESOURCES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
 
September 30,
2013
 
December 31,
2012
 
(In thousands)
ASSETS
 
 
 
Current Assets:
 
 
 
Cash and cash equivalents
$
156

 
$
1

Accounts receivable
26,324

 
17,217

Unbilled revenues
8,682

 
8,181

Other receivables
1,728

 
2,359

Materials and supplies
2,833

 
2,853

Regulatory assets
4,196

 
2,630

Current portion of accumulated deferred income taxes
1,131

 
1,131

Other current assets
1,816

 
1,107

Total current assets
46,866

 
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
1,048,474

 
1,009,108

Less accumulated depreciation and amortization
347,228

 
339,315

 
701,246

 
669,793

Construction work in progress
27,112

 
19,801

Net utility plant
728,358

 
689,594

Deferred Charges and Other Assets:
 
 
 
Regulatory assets
149,567

 
123,621

Goodwill
226,665

 
226,665

Other deferred charges
8,610

 
8,349

Total deferred charges and other assets
384,842

 
358,635

 
$
1,162,587

 
$
1,086,229


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)
 
September 30,
2013
 
December 31,
2012
 
(In thousands, except share information)
LIABILITIES AND STOCKHOLDER'S EQUITY
 
 
 
Current Liabilities:
 
 
 
Short-term debt
$
12,000

 
$

Short-term debt – affiliate
33,100

 
28,300

Current installments of long-term debt
50,000

 

Accounts payable
7,114

 
8,848

Affiliate payables
2,138

 
4,381

Accrued interest and taxes
45,160

 
30,491

Other current liabilities
9,614

 
8,854

Total current liabilities
159,126

 
80,874

Long-term Debt
286,128

 
311,589

Deferred Credits and Other Liabilities:
 
 
 
Accumulated deferred income taxes
167,674

 
163,710

Regulatory liabilities
46,754

 
43,619

Asset retirement obligations
778

 
732

Accrued pension liability and postretirement benefit cost
13,433

 
15,947

Other deferred credits
6,573

 
5,944

Total deferred credits and other liabilities
235,212

 
229,952

Total liabilities
680,466