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, 2012



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)
	Alvarado Square
	Albuquerque, New Mexico 87158
	(505) 241-2700

001-06986	Public Service Company of New Mexico	85-0019030
	(A New Mexico Corporation)
	Alvarado Square
	Albuquerque, New Mexico 87158
	(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 Act).

Large accelerated

filer

Accelerated

filer

Non-accelerated

filer

Smaller Reporting Company

PNMR

PNM

TNMP

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 26, 2012, 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 26, 2012 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 26, 2012 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.

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.
GLOSSARY	4
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
PNM RESOURCES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Earnings	6
Condensed Consolidated Statements of Comprehensive Income	7
Condensed Consolidated Statements of Cash Flows	8
Condensed Consolidated Balance Sheets	10
Condensed Consolidated Statement of Changes in Equity	12
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
Condensed Consolidated Statements of Earnings (Loss)	13
Condensed Consolidated Statements of Comprehensive Income (Loss)	14
Condensed Consolidated Statements of Cash Flows	15
Condensed Consolidated Balance Sheets	17
Condensed Consolidated Statement of Changes in Equity	19
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
Condensed Consolidated Statements of Earnings	20
Condensed Consolidated Statements of Comprehensive Income	21
Condensed Consolidated Statements of Cash Flows	22
Condensed Consolidated Balance Sheets	23
Condensed Consolidated Statement of Changes in Common Stockholder's Equity	25
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS	26
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	63
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	85
ITEM 4. CONTROLS AND PROCEDURES	89
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS	89
ITEM 1A. RISK FACTORS	90
ITEM 6. EXHIBITS	90
SIGNATURE	92

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
BART		Best Available Retrofit Technology
BHP		BHP Billiton, Ltd, the Parent of SJCC
Board		Board of Directors of PNMR
CAA		Clean Air Act
CCB		Coal Combustion Byproducts
CO₂		Carbon Dioxide
CTC		Competition Transition Charge
D.C. Circuit		U.S. Court of Appeals for the District of Columbia Circuit
Decatherm		Million British Thermal Units
Delta		Delta-Person Generating Station
DOE		United States Department of Energy
DOI		United States Department of Interior
ECJV		ECJV Holdings, LLC, a wholly owned subsidiary of Cascade Investment, L.L.C.
EIB		New Mexico Environmental Improvement Board
EIP		Eastern Interconnection Project
EPA		United States Environmental Protection Agency
ERCOT		Electric Reliability Council of Texas
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
GEaR		Gross Earnings at Risk
GHG		Greenhouse Gas Emissions
GWh		Gigawatt hours
IBEW		International Brotherhood of Electrical Workers, Local 611
IRP		Integrated Resource Plan
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
Moody’s		Moody’s Investor Services, Inc.
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 Corporation
NMAG		New Mexico Attorney General

Table of Contents



NMED		New Mexico Environment Department
NMIEC		New Mexico Industrial Energy Consumers Inc.
NMPRC		New Mexico Public Regulation Commission
NOI		Notice of Inquiry
NOPR		Notice of Proposed Rulemaking
NOx		Nitrogen Oxides
NRC		United States Nuclear Regulatory Commission
NSPS		New Source Performance Standards
NSR		New Source Review
O&M		Operations and Maintenance
OCI		Other Comprehensive Income
OPEB		Other Post Employment Benefits
Optim Energy		Optim Energy, LLC, a limited liability company, formerly known as EnergyCo, LLC
OSM		United States Office of Surface Mining Reclamation and Enforcement
PCRBs		Pollution Control Revenue Bonds
PNM		Public Service Company of New Mexico and Subsidiaries, a wholly owned subsidiary of PNMR
PNM Revolving Credit Facility		PNM's $400.0 Million Unsecured Revolving Credit Facility
PNMR		PNM Resources, Inc. and Subsidiaries
PNMR Revolving Credit Facility		PNMR's $300.0 Million Unsecured Revolving Credit 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
RFP		Request for Proposal
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
S&P		Standard and Poor’s Ratings Services
TECA		Texas Electric Choice Act
Tenth Circuit		U.S. Court of Appeals for the Tenth Circuit
TNMP		Texas-New Mexico Power Company and Subsidiaries, a wholly owned subsidiary of TNP
TNMP Revolving Credit Facility		TNMP’s $75.0 Million Revolving Credit Facility
TNP		TNP Enterprises, Inc. and Subsidiaries, a wholly owned subsidiary of PNMR
Valencia		Valencia Energy Facility
VaR		Value at Risk

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,
	2012			2011			2012			2011
	(In thousands, except per share amounts)
Electric Operating Revenues	$	390,411		$	549,498		$	1,019,646		$	1,352,747
Operating Expenses:
Cost of energy	110,777			250,854			297,342			582,814
Administrative and general	45,283			69,755			135,371			197,016
Energy production costs	40,365			39,730			131,546			135,510
Regulatory disallowances	—			—			—			21,402
Depreciation and amortization	42,820			42,370			122,289			119,115
Transmission and distribution costs	17,082			17,925			50,896			52,962
Taxes other than income taxes	15,934			20,580			45,218			50,564
Total operating expenses	272,261			441,214			782,662			1,159,383
Operating income	118,150			108,284			236,984			193,364
Other Income and Deductions:
Interest income	3,130			3,748			9,808			12,010
Gains (losses) on investments held by NDT	5,716			(4,109		)	9,376			7,688
Other income	2,484			1,755			6,991			3,559
Other deductions	(3,451		)	(4,685		)	(10,719		)	(11,638		)
Net other income (deductions)	7,879			(3,291		)	15,456			11,619
Interest Charges	30,515			31,124			90,280			92,251
Earnings before Income Taxes	95,514			73,869			162,160			112,732
Income Taxes	33,538			25,964			54,609			37,206
Net Earnings	61,976			47,905			107,551			75,526
(Earnings) Attributable to Valencia Non-controlling Interest	(3,980		)	(4,111		)	(10,699		)	(10,764		)
Preferred Stock Dividend Requirements of Subsidiary	(132		)	(132		)	(396		)	(396		)
Net Earnings Attributable to PNMR	$	57,864		$	43,662		$	96,456		$	64,366
Net Earnings Attributable to PNMR per Common Share:
Basic	$	0.73		$	0.48		$	1.21		$	0.70
Diluted	$	0.72		$	0.48		$	1.20		$	0.70
Dividends Declared per Common Share	$	0.145		$	0.125		$	0.435		$	0.375

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

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PNM RESOURCES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)



	Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2011			2012			2011
	(In thousands)
Net Earnings	$	61,976		$	47,905		$	107,551		$	75,526
Other Comprehensive Income (Loss):
Unrealized Gain on Investment Securities:
Unrealized holding gains (losses) arising during the period, net of income tax (expense) of $(4,972), $1,123, $(15,409), and $(8,157)	7,587			(1,713		)	23,511			12,448
Reclassification adjustment for (gains) included in net earnings, net of income tax expense of $4,248, $1,593, $12,786, and $11,555	(6,481		)	(2,431		)	(19,509		)	(17,632		)
Changes in unrecognized amounts of pension and postretirement benefits, net of income tax (expense) benefit of $(476), $(425), $(1,428), and $176	727			648			2,181			(318		)
Fair Value Adjustment for Cash Flow Hedges:
Change in fair market value, net of income tax (expense) benefit of $51, $123, $150, and $441	(92		)	(219		)	(270		)	(781		)
Reclassification adjustment for (gains) losses included in net earnings, net of income tax expense (benefit) of $(16), $(827), $(47), and $(1,129)	29			1,493			85			2,036
Total Other Comprehensive Income (Loss)	1,770			(2,222		)	5,998			(4,247		)
Comprehensive Income	63,746			45,683			113,549			71,279
Comprehensive (Income) Attributable to Valencia Non-controlling Interest	(3,980		)	(4,111		)	(10,699		)	(10,764		)
Preferred Stock Dividend Requirements of Subsidiary	(132		)	(132		)	(396		)	(396		)
Comprehensive Income Attributable to PNMR	$	59,634		$	41,440		$	102,454		$	60,119

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

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PNM RESOURCES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)



	Nine Months Ended September 30,
	2012			2011
	(In thousands)
Cash Flows From Operating Activities:
Net earnings	$	107,551		$	75,526
Adjustments to reconcile net earnings to net cash flows from operating activities:
Depreciation and amortization	153,992			151,984
Bad debt expense	2,458			20,120
Deferred income tax expense	55,141			43,167
Net unrealized (gains) losses on derivatives	3,076			(5,869		)
Realized (gains) on investments held by NDT	(9,376		)	(7,688		)
Stock based compensation expense	2,748			4,302
Regulatory disallowances	—			21,402
Other, net	(4,495		)	991
Changes in certain assets and liabilities:
Accounts receivable and unbilled revenues	(31,550		)	(88,462		)
Materials, supplies, and fuel stock	(6,769		)	(985		)
Other current assets	(4,225		)	(2,901		)
Other assets	(9,499		)	(3,310		)
Accounts payable	3,973			13,781
Interest and taxes	22,336			33,049
Other current liabilities	(21,681		)	(12,919		)
Proceeds from governmental grants	21,567			—
Other liabilities	(80,248		)	(43,691		)
Net cash flows from operating activities	204,999			198,497

Cash Flows From Investing Activities:
Additions to utility and non-utility plant	(214,743		)	(236,275		)
Proceeds from sales of investments held by NDT	136,305			121,202
Purchases of investments held by NDT	(138,658		)	(122,174		)
Proceeds from sale of First Choice	4,034			—
Return of principal on PVNGS lessor notes	23,455			32,274
Proceeds from sales of utility plant	1,367			—
Other, net	260			145
Net cash flows from investing activities	(187,980		)	(204,828		)

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

Table of Contents

PNM RESOURCES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)



	Nine Months Ended September 30,
	2012			2011
	(In thousands)
Cash Flows From Financing Activities:
Short-term borrowings (repayments), net	30,700			67,000
Long-term borrowings	20,000			50,000
Repayment of long-term debt	(20,000		)	(50,000		)
Proceeds from stock option exercise	10,301			2,570
Purchases to satisfy awards of common stock	(21,930		)	(5,288		)
Dividends paid	(33,454		)	(34,690		)
Valencia’s transactions with its owner	(12,034		)	(11,972		)
Proceeds from transmission interconnection agreements	983			1,246
Repayment of transmission interconnection agreements	(1,169		)	(4,637		)
Other, net	(151		)	2,458
Net cash flows from financing activities	(26,754		)	16,687

Change in Cash and Cash Equivalents	(9,735		)	10,356
Cash and Cash Equivalents at Beginning of Period	15,091			15,404
Cash and Cash Equivalents at End of Period	$	5,356		$	25,760

Supplemental Cash Flow Disclosures:
Interest paid, net of amounts capitalized	$	64,040		$	64,130
Income taxes paid (refunded), net	$	5,302		$	(3,744	)

Supplemental schedule of noncash financing activities:
Liability incurred for purchase of Convertible Preferred Stock, Series A				$	73,475

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

Table of Contents

PNM RESOURCES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)



	September 30, 2012		December 31, 2011
	(In thousands)
ASSETS
Current Assets:
Cash and cash equivalents	$	5,356	$	15,091
Accounts receivable, net of allowance for uncollectible accounts of $1,931 and $1,778	119,887		87,794
Unbilled revenues	54,399		57,401
Other receivables	43,418		71,069
Materials, supplies, and fuel stock	61,000		54,231
Regulatory assets	47,899		44,993
Commodity derivative instruments	1,184		3,713
Income taxes receivable	100,802		95,130
Other current assets	38,467		33,397
Total current assets	472,412		462,819
Other Property and Investments:
Investment in PVNGS lessor notes	54,666		79,049
Investments held by NDT	186,839		168,851
Other investments	9,977		12,207
Non-utility property, net of accumulated depreciation of $137 and $120	4,615		4,631
Total other property and investments	256,097		264,738
Utility Plant:
Plant in service and plant held for future use	5,223,543		5,120,167
Less accumulated depreciation and amortization	1,766,689		1,705,520
	3,456,854		3,414,647
Construction work in progress	148,313		132,420
Nuclear fuel, net of accumulated amortization of $50,106 and $36,411	86,496		80,067
Net utility plant	3,691,663		3,627,134
Deferred Charges and Other Assets:
Regulatory assets	468,991		482,155
Goodwill	278,297		278,297
Other deferred charges	92,747		89,470
Total deferred charges and other assets	840,035		849,922
	$	5,260,207	$	5,204,613

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

Table of Contents

PNM RESOURCES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)



	September 30, 2012			December 31, 2011
	(In thousands, except share information)
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Short-term debt	$	113,400		$	82,700
Current installments of long-term debt	2,387			2,387
Accounts payable	81,463			103,139
Customer deposits	17,655			15,971
Accrued interest and taxes	82,169			53,114
Commodity derivative instruments	1,888			1,632
Dividends declared	11,680			10,089
Current portion of accumulated deferred income taxes	9,080			9,080
Other current liabilities	73,269			95,156
Total current liabilities	392,991			373,268
Long-term Debt	1,672,124			1,671,626
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes	705,945			645,099
Accumulated deferred investment tax credits	14,101			15,771
Regulatory liabilities	438,377			418,098
Asset retirement obligations	84,191			79,233
Accrued pension liability and postretirement benefit cost	129,858			224,766
Commodity derivative instruments	2,770			2,437
Other deferred credits	94,749			106,378
Total deferred credits and other liabilities	1,469,991			1,491,782
Total liabilities	3,535,106			3,536,676
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)	1,183,886			1,193,191
Accumulated other comprehensive income (loss), net of income taxes	(60,858		)	(66,856		)
Retained earnings	509,456			447,650
Total PNMR common stockholders’ equity	1,632,484			1,573,985
Non-controlling interest in Valencia	81,088			82,423
Total equity	1,713,572			1,656,408
	$	5,260,207		$	5,204,613

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

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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			Non- controlling Interest in Valencia			Total Equity
	(In thousands)
Balance at December 31, 2011	$	1,193,191		$	(66,856	)	$	447,650		$	1,573,985		$	82,423		$	1,656,408
Proceeds from stock option exercise	10,301			—			—			10,301			—			10,301
Purchases to satisfy awards of common stock	(21,930		)	—			—			(21,930		)	—			(21,930		)
Excess tax (shortfall) from stock-based payment arrangements	(424		)	—			—			(424		)	—			(424		)
Stock based compensation expense	2,748			—			—			2,748			—			2,748
Valencia’s transactions with its owner	—			—			—			—			(12,034		)	(12,034		)
Net earnings before subsidiary preferred stock dividends	—			—			96,852			96,852			10,699			107,551
Subsidiary preferred stock dividends	—			—			(396		)	(396		)	—			(396		)
Total other comprehensive income	—			5,998			—			5,998			—			5,998
Dividends declared on common stock	—			—			(34,650		)	(34,650		)	—			(34,650		)
Balance at September 30, 2012	$	1,183,886		$	(60,858	)	$	509,456		$	1,632,484		$	81,088		$	1,713,572

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

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,
	2012			2011			2012			2011
	(In thousands)
Electric Operating Revenues	$	321,731		$	323,760		$	832,242		$	797,232
Operating Expenses:
Cost of energy	99,217			108,708			263,009			279,419
Administrative and general	41,150			37,916			120,857			110,833
Energy production costs	40,365			39,730			131,546			135,510
Regulatory disallowances	—			—			—			17,479
Depreciation and amortization	24,437			25,058			72,017			71,691
Transmission and distribution costs	11,172			11,848			33,679			35,357
Taxes other than income taxes	8,417			12,586			25,386			30,323
Total operating expenses	224,758			235,846			646,494			680,612
Operating income	96,973			87,914			185,748			116,620
Other Income and Deductions:
Interest income	3,173			3,770			9,938			12,052
Gains (losses) on investments held by NDT	5,716			(4,109		)	9,376			7,688
Other income	1,176			1,179			4,378			1,921
Other deductions	(1,682		)	(2,643		)	(4,553		)	(5,480		)
Net other income (deductions)	8,383			(1,803		)	19,139			16,181
Interest Charges	19,230			18,487			56,652			54,593
Earnings before Income Taxes	86,126			67,624			148,235			78,208
Income Taxes	31,235			25,052			51,929			26,574
Net Earnings	54,891			42,572			96,306			51,634
(Earnings) Attributable to Valencia Non-controlling Interest	(3,980		)	(4,111		)	(10,699		)	(10,764		)
Net Earnings Attributable to PNM	50,911			38,461			85,607			40,870
Preferred Stock Dividends Requirements	(132		)	(132		)	(396		)	(396		)
Net Earnings Available for PNM Common Stock	$	50,779		$	38,329		$	85,211		$	40,474

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

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 September 30,						Nine Months Ended September 30,
	2012			2011			2012			2011
	(In thousands)
Net Earnings	$	54,891		$	42,572		$	96,306		$	51,634
Other Comprehensive Income (Loss):
Unrealized Gain on Investment Securities:
Unrealized holding gains arising during the period, net of income tax (expense) of $(4,972), $1,123, $(15,409), and $(8,157)	7,587			(1,713		)	23,511			12,448
Reclassification adjustment for (gains) included in net earnings, net of income tax expense of $4,248, $1,593, $12,786 and $11,555	(6,481		)	(2,431		)	(19,509		)	(17,632		)
Change in unrecognized amounts of pension and postretirement benefits, net of income tax (expense) benefit of $(476), $(423), $(1,428), and $9	727			646			2,181			(13		)
Fair Value Adjustment for Cash Flow Hedges:
Reclassification adjustment for (gains) losses included in net earnings, net of income tax expense (benefit) of $0, $0, $0, and $(11)	—			—			—			17
Total Other Comprehensive Income (Loss)	1,833			(3,498		)	6,183			(5,180		)
Comprehensive Income	56,724			39,074			102,489			46,454
Comprehensive (Income) Attributable to Valencia Non-controlling Interest	(3,980		)	(4,111		)	(10,699		)	(10,764		)
Comprehensive Income Attributable to PNM	$	52,744		$	34,963		$	91,790		$	35,690

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

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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,
	2012			2011
	(In thousands)
Cash Flows From Operating Activities:
Net earnings	$	96,306		$	51,634
Adjustments to reconcile net earnings to net cash flows from operating activities:
Depreciation and amortization	97,086			97,918
Deferred income tax expense	52,558			33,835
Net unrealized (gains) losses on derivatives	3,076			(4,120		)
Realized (gains) on investments held by NDT	(9,376		)	(7,688		)
Regulatory disallowances	—			17,479
Other, net	(1,005		)	3,228
Changes in certain assets and liabilities:
Accounts receivable and unbilled revenues	(26,183		)	(25,871		)
Materials, supplies, and fuel stock	(6,404		)	(974		)
Other current assets	(6,942		)	1,626
Other assets	(9,425		)	8,187
Accounts payable	2,353			(2,013		)
Interest and taxes	80,418			18,186
Other current liabilities	(9,850		)	(4,173		)
Proceeds from governmental grants	21,567			—
Other liabilities	(75,629		)	(45,417		)
Net cash flows from operating activities	208,550			141,837

Cash Flows From Investing Activities:
Utility plant additions	(144,571		)	(185,402		)
Proceeds from sales of NDT investments	136,305			121,202
Purchases of NDT investments	(138,658		)	(122,174		)
Return of principal on PVNGS lessor notes	23,455			32,274
Other, net	(720		)	496
Net cash flows from investing activities	(124,189		)	(153,604		)

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

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)



	Nine Months Ended September 30,
	2012			2011
	(In thousands)
Cash Flows From Financing Activities:
Short-term borrowings (repayments), net	(66,000		)	67,000
Long-term borrowings	20,000			—
Repayment of long-term debt	(20,000		)	—
Valencia’s transactions with its owner	(12,034		)	(11,972		)
Proceeds from transmission interconnection arrangements	983			1,246
Repayment of transmission interconnection arrangements	(1,169		)	(4,637		)
Dividends paid	(18,076		)	(47,730		)
Other, net	(151		)	2,558
Net cash flows from financing activities	(96,447		)	6,465

Change in Cash and Cash Equivalents	(12,086		)	(5,302		)
Cash and Cash Equivalents at Beginning of Period	12,307			10,336
Cash and Cash Equivalents at End of Period	$	221		$	5,034

Supplemental Cash Flow Disclosures:
Interest paid, net of amounts capitalized	$	43,167		$	40,582
Income taxes paid (refunded), net	$	(63,114	)	$	(1,539	)

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

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, 2012		December 31, 2011
	(In thousands)
ASSETS
Current Assets:
Cash and cash equivalents	$	221	$	12,307
Accounts receivable, net of allowance for uncollectible accounts of $1,931 and $1,778	94,315		68,661
Unbilled revenues	46,998		48,928
Other receivables	42,454		65,465
Affiliate receivables	8,930		8,912
Materials, supplies, and fuel stock	57,925		51,521
Regulatory assets	46,940		44,480
Commodity derivative instruments	1,184		3,713
Income taxes receivable	66,374		128,858
Other current assets	33,144		26,776
Total current assets	398,485		459,621
Other Property and Investments:
Investment in PVNGS lessor notes	54,666		79,049
Investments held by NDT	186,839		168,851
Other investments	3,985		2,900
Non-utility property	976		976
Total other property and investments	246,466		251,776
Utility Plant:
Plant in service and plant held for future use	4,075,995		4,009,873
Less accumulated depreciation and amortization	1,342,958		1,305,754
	2,733,037		2,704,119
Construction work in progress	120,303		116,030
Nuclear fuel, net of accumulated amortization of $50,106 and $36,411	86,496		80,067
Net utility plant	2,939,836		2,900,216
Deferred Charges and Other Assets:
Regulatory assets	352,871		352,387
Goodwill	51,632		51,632
Other deferred charges	84,041		79,655
Total deferred charges and other assets	488,544		483,674
	$	4,073,331	$	4,095,287

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

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, 2012			December 31, 2011
	(In thousands, except share information)
LIABILITIES AND STOCKHOLDER’S EQUITY
Current Liabilities:
Short-term debt	$	—		$	66,000
Accounts payable	64,213			82,619
Affiliate payables	11,922			14,592
Customer deposits	17,655			15,971
Accrued interest and taxes	51,092			32,111
Commodity derivative instruments	1,888			1,632
Dividends declared	16,885			132
Current portion of accumulated deferred income taxes	16,562			16,562
Other current liabilities	53,219			60,944
Total current liabilities	233,436			290,563
Long-term Debt	1,215,569			1,215,540
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes	562,534			504,419
Accumulated deferred investment tax credits	14,101			15,771
Regulatory liabilities	390,563			373,703
Asset retirement obligations	83,337			78,425
Accrued pension liability and postretirement benefit cost	125,840			213,688
Commodity derivative instruments	2,770			2,437
Other deferred credits	83,514			94,700
Total deferred credits and liabilities	1,262,659			1,283,143
Total liabilities	2,711,664			2,789,246
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	(60,615		)	(66,798		)
Retained earnings	267,889			217,111
Total PNM common stockholder’s equity	1,269,050			1,212,089
Non-controlling interest in Valencia	81,088			82,423
Total equity	1,350,138			1,294,512
	$	4,073,331		$	4,095,287

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

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
	Common Stock		AOCI			Retained Earnings									Total Equity
	(In thousands)
Balance at December 31, 2011	$	1,061,776	$	(66,798	)	$	217,111		$	1,212,089		$	82,423		$	1,294,512
Valencia’s transactions with its owner	—		—			—			—			(12,034		)	(12,034		)
Net earnings	—		—			85,607			85,607			10,699			96,306
Total other comprehensive income	—		6,183			—			6,183			—			6,183
Dividends declared on preferred stock	—		—			(396		)	(396		)	—			(396		)
Dividends declared on common stock	—		—			(34,433		)	(34,433		)	—			(34,433		)
Balance at September 30, 2012	$	1,061,776	$	(60,615	)	$	267,889		$	1,269,050		$	81,088		$	1,350,138

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

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,
	2012			2011			2012			2011
	(In thousands)
Electric Operating Revenues:
Non-affiliates	$	68,680		$	54,787		$	187,404		$	150,175
Affiliate	—			12,196			—			30,608
Total electric operating revenues	68,680			66,983			187,404			180,783
Operating Expenses:
Cost of energy	11,560			10,307			34,333			30,719
Administrative and general	10,130			9,998			30,700			29,798
Regulatory disallowances	—			—			—			3,923
Depreciation and amortization	13,819			12,674			37,173			33,662
Transmission and distribution costs	5,910			6,072			17,217			17,597
Taxes other than income taxes	6,291			6,381			16,322			16,113
Total operating expenses	47,710			45,432			135,745			131,812
Operating income	20,970			21,551			51,659			48,971
Other Income and Deductions:
Interest income	—			1			1			1
Other income	771			418			1,708			1,068
Other deductions	(405		)	(105		)	(464		)	(181		)
Net other income (deductions)	366			314			1,245			888
Interest Charges	7,047			7,276			21,214			21,880
Earnings Before Income Taxes	14,289			14,589			31,690			27,979
Income Taxes	5,205			5,721			11,577			10,845
Net Earnings	$	9,084		$	8,868		$	20,113		$	17,134

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

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,
	2012			2011			2012			2011
	(In thousands)
Net Earnings	$	9,084		$	8,868		$	20,113		$	17,134
Other Comprehensive Income (Loss):
Change in unrecognized amounts of pension and postretirement benefits, net of income tax (expense) benefit of $0, $(1), $0, and $169	—			2			—			(305		)
Fair Value Adjustment for Cash Flow Hedges:
Change in fair market value, net of income tax (expense) benefit of $51, $110, $150, and $382	(92		)	(198		)	(270		)	(689		)
Reclassification adjustment for losses included in net earnings, net of income tax expense (benefit) of $(16), $(850), $(47), and $(1,052)	29			1,535			85			1,900
Total Other Comprehensive Income (Loss)	(63		)	1,339			(185		)	906
Comprehensive Income	$	9,021		$	10,207		$	19,928		$	18,040

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

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,
	2012			2011
	(In thousands)
Cash Flows From Operating Activities:
Net earnings	$	20,113		$	17,134
Adjustments to reconcile net earnings to net cash flows from operating activities:
Depreciation and amortization	41,222			36,352
Deferred income tax expense	11,337			9,981
Regulatory disallowances	—			3,923
Other, net	(275		)	(69		)
Changes in certain assets and liabilities:
Accounts receivable and unbilled revenues	(5,367		)	(8,751		)
Materials and supplies	(365		)	124
Other current assets	(709		)	(1,547		)
Other assets	(498		)	(2,985		)
Accounts payable	(358		)	1,858
Interest and taxes	4,860			4,277
Other current liabilities	1,980			2,383
Other liabilities	(3,411		)	(1,101		)
Net cash flows from operating activities	68,529			61,579
Cash Flows From Investing Activities:
Additions to utility and non-utility plant	(61,168		)	(44,214		)
Proceeds from sales of utility plant	1,367			—
Net cash flows from investing activities	(59,801		)	(44,214		)
Cash Flow From Financing Activities:
Short-term borrowings (repayments), net – affiliate	2,300			(1,200		)
Long-term borrowings	—			50,000
Repayment of long-term debt	—			(50,000		)
Dividends paid	(11,028		)	(7,066		)
Other, net	—			(100		)
Net cash flows from financing activities	(8,728		)	(8,366		)

Change in Cash and Cash Equivalents	—			8,999
Cash and Cash Equivalents at Beginning of Period	1			1
Cash and Cash Equivalents at End of Period	$	1		$	9,000

Supplemental Cash Flow Disclosures:
Interest paid, net of amounts capitalized	$	13,074		$	14,474
Income taxes paid (refunded), net	$	1,848		$	3,250

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

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, 2012		December 31, 2011
	(In thousands)
ASSETS
Current Assets:
Cash and cash equivalents	$	1	$	1
Accounts receivable	25,572		19,133
Unbilled revenues	7,401		8,473
Other receivables	1,126		847
Materials and supplies	3,075		2,710
Regulatory assets	959		513
Current portion of accumulated deferred income taxes	2,273		2,272
Other current assets	1,426		694
Total current assets	41,833		34,643
Other Property and Investments:
Other investments	267		271
Non-utility property	2,240		2,240
Total other property and investments	2,507		2,511
Utility Plant:
Plant in service and plant held for future use	985,318		947,327
Less accumulated depreciation and amortization	338,600		323,123
	646,718		624,204
Construction work in progress	20,141		12,968
Net utility plant	666,859		637,172
Deferred Charges and Other Assets:
Regulatory assets	116,120		129,768
Goodwill	226,665		226,665
Other deferred charges	6,078		6,686
Total deferred charges and other assets	348,863		363,119
	$	1,060,062	$	1,037,445

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

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, 2012			December 31, 2011
	(In thousands, except share information)
LIABILITIES AND STOCKHOLDER’S EQUITY
Current Liabilities:
Short-term debt – affiliate	$	3,000		$	700
Accounts payable	8,055			12,263
Affiliate payables	2,258			1,314
Accrued interest and taxes	25,525			20,666
Other current liabilities	10,412			9,480
Total current liabilities	49,250			44,423
Long-term Debt	311,432			310,963
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes	170,552			159,197
Regulatory liabilities	47,814			44,395
Asset retirement obligations	737			699
Accrued pension liability and postretirement benefit cost	4,018			11,078
Other deferred credits	4,106			3,437
Total deferred credits and other liabilities	227,227			218,806
Total liabilities	587,909			574,192
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	405,366			416,394
Accumulated other comprehensive income (loss), net of income taxes	(243		)	(58		)
Retained earnings	66,966			46,853
Total common stockholder’s equity	472,153			463,253
	$	1,060,062		$	1,037,445

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

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, 2011	$	64	$	416,394		$	(58	)	$	46,853	$	463,253
Net earnings	—		—			—			20,113		20,113
Total other comprehensive income (loss)	—		—			(185		)	—		(185		)
Dividends declared on common stock	—		(11,028		)	—			—		(11,028		)
Balance at September 30, 2012	$	64	$	405,366		$	(243	)	$	66,966	$	472,153

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

Table of Contents

PNM RESOURCES, INC. AND SUBSIDIARIES

PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES

TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)


(1)	Significant Accounting Policies and Responsibility for Financial Statements

Financial Statement Preparation

In the opinion of management, the accompanying unaudited interim Condensed Consolidated Financial Statements reflect all normal and recurring accruals and adjustments that are necessary to present fairly the consolidated financial position at September 30, 2012 and December 31, 2011, consolidated results of operations and comprehensive income for the three and nine months ended September 30, 2012 and 2011, and consolidated cash flows for the nine months ended September 30, 2012 and 2011. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could ultimately differ from those estimated. The Notes to Condensed Consolidated Financial Statements include disclosures for PNMR, PNM, and TNMP. This report uses the term “Company” when discussing matters of common applicability to PNMR, PNM, and TNMP. Discussions regarding only PNMR, PNM, or TNMP are so indicated. Certain amounts in the 2011 Condensed Consolidated Financial Statements and Notes thereto have been reclassified to conform to the 2012 financial statement presentation.

These Condensed Consolidated Financial Statements are unaudited. Certain information and note disclosures normally included in the annual Consolidated Financial Statements have been condensed or omitted, as permitted under the applicable rules and regulations. Readers of these financial statements should refer to PNMR’s, PNM’s, and TNMP’s audited Consolidated Financial Statements and Notes thereto that are included in their respective 2011 Annual Reports on Form 10-K. Weather causes the Company’s results of operations to be seasonal in nature and the results of operations presented in the accompanying Condensed Consolidated Financial Statements are not necessarily representative of operations for an entire year.

GAAP defines subsequent events as events or transactions that occur after the balance sheet date but before financial statements are issued or are available to be issued. Based on their nature, magnitude, and timing, certain subsequent events may be required to be reflected at the balance sheet date and/or required to be disclosed in the financial statements. The Company has evaluated subsequent events as required by GAAP.

Principles of Consolidation

The Condensed Consolidated Financial Statements of each of PNMR, PNM, and TNMP include their accounts and those of subsidiaries in which that entity owns a majority voting interest. PNM also consolidates the PVNGS Capital Trust and Valencia. PNM owns undivided interests in several jointly-owned power plants and records its pro-rata share of the assets, liabilities, and expenses for those plants.

PNMR shared services' administrative and general expenses, which represent costs that are primarily driven by corporate level activities, are charged to the business segments. These services are billed at cost, except those billed to Optim Energy, which included a profit element. Other significant intercompany transactions between PNMR, PNM, and TNMP include transmission and distribution services; lease, interest, and income tax sharing payments; and dividends paid on common stock. All intercompany transactions and balances have been eliminated. See Note 12.

Dividends on Common Stock

Dividends on PNMR's common stock are declared by its Board. The timing of the declaration of dividends is dependent on the timing of meetings and other actions of the Board. This has historically resulted in dividends considered to be attributable to the second quarter of each year being declared through actions of the Board during the third quarter of the year. The Board declared dividends on common stock considered to be for the second quarter of $0.145 per share in July 2012 and $0.125 in July 2011, which are reflected as being in the second quarter within “Dividends Declared per Common Share” on the PNMR Condensed Consolidated Statements of Earnings. The Board declared dividends on common stock for the third quarter of $0.145 per share in September 2012 and $0.125 per share in September 2011, which are reflected as third quarter within "Dividends Declared per Common Share."

Table of Contents

PNM RESOURCES, INC. AND SUBSIDIARIES

PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES

TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

PNM declared a cash dividend on its common stock to PNMR of $16.8 million in September 2012, which was paid in October 2012, and declared and paid a dividend of $17.7 million in June 2012. PNM declared cash dividends on its common stock to PNMR of $39.1 million in December 2010, which was paid in January 2011, $4.6 million in March 2011, which was paid in April 2011, and $3.6 million in June 2011, which was paid in July 2011. TNMP declared and paid cash dividends to PNMR of $11.0 million in the nine months ended September 30, 2012 and $7.1 million in the nine months ended September 30, 2011. TNMP dividends were recorded as reductions of its paid-in-capital.


(2)	Segment Information

The following segment presentation is based on the methodology that management uses for making operating decisions and assessing performance of its various business activities. A reconciliation of the segment presentation to the GAAP financial statements is provided.

PNM Electric

PNM Electric includes the retail electric utility operations of PNM that are subject to traditional rate regulation by the NMPRC. PNM Electric provides integrated electricity services that include the generation, transmission, and distribution of electricity for retail electric customers in New Mexico. PNM Electric also includes the generation and sale of electricity into the wholesale market as well as providing transmission services to third parties. The sale of electricity includes the asset optimization of PNM's jurisdictional assets as well as the capacity excluded from retail rates. FERC has jurisdiction over wholesale and transmission rates.

TNMP Electric

TNMP Electric is an electric utility providing regulated transmission and distribution services in Texas under the TECA. TNMP's operations are subject to traditional rate regulation by the PUCT.

First Choice

First Choice, which was sold by PNMR on November 1, 2011 (Note 14), operated as a certified retail electric provider in Texas. First Choice provided electricity to residential, small commercial, and governmental customers. Although First Choice was regulated in certain respects by the PUCT, it was not subject to traditional rate regulation.

Corporate and Other

The Corporate and Other segment includes PNMR holding company activities, primarily related to corporate level debt and PNMR Services Company.

The following tables present summarized financial information for PNMR by segment. PNM and TNMP each operate in only one segment. Therefore, tabular segment information is not presented for PNM and TNMP.

Table of Contents

PNM RESOURCES, INC. AND SUBSIDIARIES

PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES

TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

PNMR SEGMENT INFORMATION



	PNM Electric			TNMP Electric			Corporate and Other			Consolidated
Three Months Ended September 30, 2012	(In thousands)
Electric operating revenues	$	321,731		$	68,680		$	—		$	390,411
Cost of energy	99,217			11,560			—			110,777
Margin	222,514			57,120			—			279,634
Other operating expenses	101,104			22,331			(4,771		)	118,664
Depreciation and amortization	24,437			13,819			4,564			42,820
Operating income	96,973			20,970			207			118,150
Interest income	3,173			—			(43		)	3,130
Other income (deductions)	5,210			366			(827		)	4,749
Net interest charges	(19,230		)	(7,047		)	(4,238		)	(30,515		)
Segment earnings (loss) before income taxes	86,126			14,289			(4,901		)	95,514
Income taxes (benefit)	31,235			5,205			(2,902		)	33,538
Segment earnings (loss)	54,891			9,084			(1,999		)	61,976
Valencia non-controlling interest	(3,980		)	—			—			(3,980		)
Subsidiary preferred stock dividends	(132		)	—			—			(132		)
Segment earnings (loss) attributable to PNMR	$	50,779		$	9,084		$	(1,999	)	$	57,864

Nine Months Ended September 30, 2012
Electric operating revenues	$	832,242		$	187,404		$	—		$	1,019,646
Cost of energy	263,009			34,333			—			297,342
Margin	569,233			153,071			—			722,304
Other operating expenses	311,468			64,239			(12,676		)	363,031
Depreciation and amortization	72,017			37,173			13,099			122,289
Operating income (loss)	185,748			51,659			(423		)	236,984
Interest income	9,938			1			(131		)	9,808
Other income (deductions)	9,201			1,244			(4,797		)	5,648
Net interest charges	(56,652		)	(21,214		)	(12,414		)	(90,280		)
Segment earnings (loss) before income taxes	148,235			31,690			(17,765		)	162,160
Income taxes (benefit)	51,929			11,577			(8,897		)	54,609
Segment earnings (loss)	96,306			20,113			(8,868		)	107,551
Valencia non-controlling interest	(10,699		)	—			—			(10,699		)
Subsidiary preferred stock dividends	(396		)	—			—			(396		)
Segment earnings (loss) attributable to PNMR	$	85,211		$	20,113		$	(8,868	)	$	96,456

At September 30, 2012:
Total Assets	$	4,073,331		$	1,060,062		$	126,814		$	5,260,207
Goodwill	$	51,632		$	226,665		$	—		$	278,297
Additions to utility and non-utility plant included in accounts payable	$	6,056		$	886		$	1,063		$	8,005

Table of Contents

PNM RESOURCES, INC. AND SUBSIDIARIES

PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES

TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)



	PNM Electric			TNMP Electric			First Choice			Corporate and Other			Consolidated
Three Months Ended September 30, 2011	(In thousands)
Electric revenues from non-affiliates	$	323,760		$	54,787		$	170,999		$	(48	)	$	549,498
Intersegment revenues	—			12,196			—			(12,196		)	—
Total electric operating revenues	323,760			66,983			170,999			(12,244		)	549,498
Cost of energy	108,708			10,307			144,035			(12,196		)	250,854
Margin	215,052			56,676			26,964			(48		)	298,644
Other operating expenses	102,080			22,451			25,076			(1,617		)	147,990
Depreciation and amortization	25,058			12,674			346			4,292			42,370
Operating income (loss)	87,914			21,551			1,542			(2,723		)	108,284
Interest income	3,770			1			29			(52		)	3,748
Other income (deductions)	(5,573		)	313			(115		)	(1,664		)	(7,039		)
Net interest charges	(18,487		)	(7,276		)	(249		)	(5,112		)	(31,124		)
Segment earnings (loss) before income taxes	67,624			14,589			1,207			(9,551		)	73,869
Income taxes (benefit)	25,052			5,721			594			(5,403		)	25,964
Segment earnings (loss)	42,572			8,868			613			(4,148		)	47,905
Valencia non-controlling interest	(4,111		)	—			—			—			(4,111		)
Subsidiary preferred stock dividends	(132		)	—			—			—			(132		)
Segment earnings (loss) attributable to PNMR	$	38,329		$	8,868		$	613		$	(4,148	)	$	43,662

Nine Months Ended September 30, 2011
Electric revenues from non-affiliates	$	797,232		$	150,175		$	405,485		$	(145	)	$	1,352,747
Intersegment revenues	—			30,608			—			(30,608		)	—
Total electric operating revenues	797,232			180,783			405,485			(30,753		)	1,352,747
Cost of energy	279,419			30,719			303,285			(30,609		)	582,814
Margin	517,813			150,064			102,200			(144		)	769,933
Other operating expenses	329,502			67,431			67,693			(7,172		)	457,454
Depreciation and amortization	71,691			33,662			987			12,775			119,115
Operating income (loss)	116,620			48,971			33,520			(5,747		)	193,364
Interest income	12,052			1			63			(106		)	12,010
Other income (deductions)	4,129			887			(494		)	(4,913		)	(391		)
Net interest charges	(54,593		)	(21,880		)	(535		)	(15,243		)	(92,251		)
Segment earnings (loss) before income taxes	78,208			27,979			32,554			(26,009		)	112,732
Income taxes (benefit)	26,574			10,845			11,833			(12,046		)	37,206
Segment earnings (loss)	51,634			17,134			20,721			(13,963		)	75,526
Valencia non-controlling interest	(10,764		)	—			—			—			(10,764		)
Subsidiary preferred stock dividends	(396		)	—			—			—			(396		)
Segment earnings (loss) attributable to PNMR	$	40,474		$	17,134		$	20,721		$	(13,963	)	$	64,366

At September 30, 2011:
Total Assets	$	3,936,468		$	1,041,613		$	274,741		$	119,818		$	5,372,640
Goodwill	$	51,632		$	226,665		$	43,013		$	—		$	321,310
Additions to utility and non-utility plant included in accounts payable	$	6,811		$	4,672		$	106		$	253		$	11,842

Table of Contents

PNM RESOURCES, INC. AND SUBSIDIARIES

PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES

TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)


(3)	Variable Interest Entities

GAAP determines how an enterprise evaluates and accounts for its involvement with variable interest entities, including determining the primary beneficiary of a variable interest entity, by focusing primarily on whether the enterprise has the power to direct the activities that most significantly impact the economic performance of a variable interest entity. GAAP also requires continual reassessment of the primary beneficiary of a variable interest entity. Additional information concerning PNM's variable interest entities is contained in Note 9 of the Notes to Consolidated Financial Statements in the 2011 Annual Reports on Form 10-K.

PNM has a PPA to purchase all of the electric capacity and energy from Valencia, a 145 MW natural gas-fired power plant near Belen, New Mexico, through May 2028. A third-party built, owns, and operates the facility while PNM is the sole purchaser of the electricity generated. PNM is obligated to pay fixed O&M and capacity charges in addition to variable O&M charges under this PPA. For the three and nine months ended September 30, 2012, PNM paid $4.8 million and $14.0 million for fixed charges and $0.6 million and $0.9 million for variable charges. For the three and nine months ended September 30, 2011, PNM paid $4.6 million and $13.7 million for fixed charges and $0.9 million and $1.3 million for variable charges. PNM does not have any other financial obligations related to Valencia. The assets of Valencia can only be used to satisfy obligations of Valencia and creditors of Valencia do not have any recourse against PNM’s assets. PNM has concluded that the third party entity that owns Valencia is a variable interest entity and that PNM is the primary beneficiary of the entity under GAAP. As the primary beneficiary, PNM consolidates the entity in its financial statements. The assets and liabilities of Valencia set forth below are immaterial to PNM and, therefore, not shown separately on the Condensed Consolidated Balance Sheets. The owner's equity and net income of Valencia are considered attributable to non-controlling interest.

Summarized financial information for Valencia is as follows:

Results of Operations



Three Months Ended September 30,		Nine Months Ended September 30,
2012	2011	2012

TEXAS NEW MEXICO POWER CO 10-Q