Table of the reporting unit with its carrying value, including goodwill. If as a result of this analysis, the entity concludes there is an indication of impairment in a reporting unit having goodwill, GAAP currently requires the entity to perform the second step of the impairment analysis, determining the amount of goodwill impairment to be recorded. The amount is calculated by comparing the implied fair value of the goodwill to its carrying amount. This exercise would require the entity to allocate the fair value determined in step one to the individual assets and liabilities of the reporting unit. Any remaining fair value would be the implied fair value of goodwill on the testing date. To the extent the recorded amount of goodwill of a reporting unit exceeds the implied fair value determined in step two, an impairment loss would be reflected in results of operations. As further discussed under New Accounting Pronouncements in Note 1, a new accounting pronouncement changes how a goodwill impairment is determined by eliminating the second step of the quantitative impairment analysis.Contents

For its annual evaluations performed as of April 1, 2018, PNMR performed a quantitative analysis for the PNM reporting unit and a qualitative analysis for the TNMP reporting unit. For the quantitative analyses, a discounted cash flow methodology was primarily used to estimate the fair value of the PNM reporting unit. This analysis requires significant judgments, including estimation of future cash flows, which is dependent on internal forecasts, estimation of long-term growth rates for the business, and determination of appropriate weighted average cost of capital for the reporting unit. Changes in these estimates and assumptions could materially affect the determination of fair value and the conclusion of impairment. The April 1, 2018 quantitative evaluations indicated the fair value of the PNM reporting unit, which has goodwill of $51.6 million, exceeded its carrying value by approximately 19%. The 2018 qualitative analysis for the TNMP reporting unit was performed by considering changes in expectations of future financial performance since the April 1, 2016 quantitative analysis that indicated the fair value of the TNMP reporting unit, which has goodwill of $226.7 million, exceeded its carrying value by approximately 32% as well as by considering the results of the April 1, 2017 qualitative analysis. The 2018 analysis considered events specific to TNMP such as the potential impacts of legal and regulatory matters discussed in Note 11 and Note 12. Both the PNM quantitative analysis and the TNMP qualitative analysis considered market and macroeconomic factors including changes in growth rates, changes in the WACC, and changes in discount rates. The Company also evaluated its stock price relative to historical performance, industry peers, and to major market indices, including an evaluation of the Company’s market capitalization relative to the carrying value of its reporting units. Based on an evaluation of these and other factors, the Company determined it was not more likely than not that the April 1, 2018 carrying values of PNM or TNMP exceed their fair values.

For its annual evaluations performed as of April 1, 2019, PNMR performed qualitative analyses for both the PNM and TNMP reporting units. The qualitative analysis was performed by considering changes in the Company’s expectations of future financial performance since the April 1, 2018 quantitative analysis performed for PNM, as well as the quantitative analysis performed for TNMP at April 1, 2016 and the qualitative analyses through April 1, 2018. This analysis considered Company specific events such as the potential impacts of legal and regulatory matters discussed in Note 11 and Note 12, including potential outcomes in PNM’s SJGS Abandonment Application, the impacts of the NM Supreme Court’s decision in the appeal of the NM 2015 Rate Case, and other potential impacts of changes in PNM’s resource needs based on PNM’s 2017 IRP. The qualitative analysis also considered market and macroeconomic factors including changes in growth rates, changes in the WACC, and changes in discount rates. The Company also evaluated its stock price relative to historical performance, industry peers, and to major market indices, including an evaluation of the Company’s market capitalization relative to the carrying value of its reporting units. Based on an evaluation of these and other factors, the Company determined it was not more likely than not that the April 1, 2019 carrying values of PNM or TNMP exceeded their fair values.

PNMR periodically updates its quantitative analysis for both PNM and TNMP. The use of a quantitative approach in a given period in not necessarily an indication that a potential impairment has been identified under a qualitative approach. The annual evaluations performed as of April 1, 2019 and 2018 did not indicate impairments of the goodwill of any of PNMR’s reporting units. Since the April 1, 2019 annual evaluation, there have been no indications that the fair values of the reporting units with recorded goodwill have decreased below their carrying values.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations for PNMR is presented on a combined basis, including certain information applicable to PNM and TNMP. The MD&A for PNM and TNMP is presented as permitted by Form 10-Q General Instruction H(2). This report uses the term “Company” when discussing matters of common applicability to PNMR, PNM, and TNMP. A reference to a “Note” in this Item 2 refers to the accompanying Notes to Condensed Consolidated Financial Statements (Unaudited) included in Item 1, unless otherwise specified. Certain of the tables below may not appear visually accurate due to rounding.

MD&A FOR PNMR

EXECUTIVE SUMMARY

Overview and Strategy

PNMR is a holding company with two regulated utilities serving approximately ~~785,000~~791,000 residential, commercial, and industrial customers and end-users of electricity in New Mexico and Texas. PNMR’s electric utilities are PNM and TNMP.

Strategic Goals

PNMR is focused on achieving three key strategic goals:

•Earning authorized returns on regulated businesses

•Delivering at or above industry-average earnings and dividend growth

•Maintaining ~~solid~~ investment grade credit ratings

In conjunction with these goals, PNM and TNMP are dedicated to:

•Maintaining strong employee safety, plant performance, and system reliability

•Delivering a superior customer experience

•Demonstrating environmental stewardship in business operations, including transitioning to an emissions-free generating portfolio by 2040

•Supporting the communities in their service territories

Earning Authorized Returns on Regulated Businesses

PNMR’s success in accomplishing its strategic goals is highly dependent on two key factors: fair and timely regulatory treatment for its utilities and the utilities’ strong operating performance. The Company has multiple strategies to achieve favorable regulatory treatment, all of which have as their foundation a focus on the basics: safety, operational excellence, and customer satisfaction, while engaging stakeholders to build productive relationships. Both PNM and TNMP seek cost recovery for their investments through general rate cases, interim cost of service filings, and various rate riders.

Fair and timely rate treatment from regulators is crucial to PNM and TNMP in earning their allowed returns and critical for PNMR to achieve its strategic goals. PNMR believes that earning allowed returns is viewed positively by credit rating agencies and that improvements in the Company’s ratings could lower costs to utility customers.

Additional information about rate filings is provided in Note 17 of the Notes to Consolidated Financial Statements in the ~~2018~~2019 Annual Reports on Form 10-K and in Note 12.

State Regulation

The rates PNM and TNMP charge retail customers are subject to traditional rate regulation by the NMPRC, FERC, and the PUCT.

New Mexico 2015 Rate Case – On September 28, 2016, the NMPRC issued an order that authorized PNM to implement an increase in base non-fuel rates of $61.2 million for New Mexico retail customers, effective for bills sent after September 30, 2016. This order was on PNM’s application for a general increase in retail electric rates (the “NM 2015 Rate Case”) filed in August 2015. ~~PNM’s application requested an increase in base non-fuel revenues of $121.5 million based on a future test year (“FTY”) beginning October 1, 2015.~~

~~On September 28, 2016, the NMPRC issued an~~The NMPRC's order ~~in the case that~~ included a determination that PNM was imprudent in purchasing ~~64.1 MW of previously~~certain leased capacity in PVNGS Unit 2, extending ~~the leases for 114.6 MW of~~other PVNGS leased capacity, ~~of PVNGS Units 1 and 2,~~ and installing BDT environmental controls equipment on ~~SJGS Units 1 and 4. Major components~~SJGS.

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PNM appealed the ~~difference between the increase in non-fuel revenues approved in the order and PNM’s request, included:~~

~~A ROE of 9.575%, compared~~NMPRC's imprudence findings to ~~the 10.5% requested by PNM~~

Inclusion of the January 2016 purchase of the assets underlying three leases of capacity, totaling 64.1 MW of PVNGS Unit 2 at an initial rate base value of $83.7 million, compared to PNM’s request for recovery of the fair market value purchase price of $163.3 million; and disallowance of the recovery of the undepreciated costs of capitalized improvements made during the period the 64.1 MW was being leased by PNM, which costs totaled $43.8 million when the order was issued

Disallowance of recovery of the costs associated with converting SJGS Units 1 and 4 to BDT, which is required by the NSR permit for SJGS; PNM’s share of the costs of installing the BDT equipment was $52.3 million, $40.0 million of which PNM requested be included in rate base in the NM 2015 Rate Case

Disallowance of the recovery of any future contributions for PVNGS decommissioning costs related to the 64.1 MW of capacity in PVNGS Unit 2 purchased in January 2016 and the 114.6 MW of the leased capacity in PVNGS Units 1 and 2 that were extended for eight years beginning January 15, 2015 and 2016 (Note 13)

~~On September 30, 2016, PNM filed a notice of appeal with~~ the NM Supreme ~~Court regarding the order in the NM 2015 Rate Case.~~Court. Specifically, PNM appealed the NMPRC’s determination that PNM was imprudent in certain matters in the case, including the disallowance of the full purchase price of ~~the~~ 64.1 MW of capacity in PVNGS Unit 2, the undepreciated costs of capitalized improvements made during the period the 64.1 MW of capacity was leased by PNM, the costs of converting SJGS Units 1 and 4 to BDT, and future contributions for PVNGS decommissioning attributable to 64.1 MW of purchased capacity and the 114.6 MW of capacity under the extended leases. NEE, NMIEC, and ABCWUA filed notices of cross-appeal to PNM’s appeal. The issues appealed by the various cross-appellants included, among other things, the NMPRC allowing PNM to recover any of the costs of the lease extensions for the 114.6 MW of PVNGS Units 1 and 2 and any of the purchase price for the 64.1 MW in PVNGS Unit 2, as well as the costs incurred under the Four Corners CSA and the inclusion of the “prepaid pension asset” in rate base.

During the pendency of the appeal, PNM evaluated the accounting consequences of the order in the NM 2015 Rate Case and the related appeals to the NM Supreme Court as required under GAAP. These evaluations indicated that it was reasonably possible that PNM would be successful on the issues it was appealing but would not be provided capital cost recovery until the NMPRC acted on a decision of the NM Supreme Court. PNM also evaluated the accounting consequences of the issues being appealed by the cross-appellants and concluded that the issues raised in the cross-appeals did not have substantial merit.

In accordance with GAAP, PNM periodically updated its estimate of the amount of time necessary for the NM Supreme Court to render a decision and for the NMPRC to take action on any remanded issues. As a result of these evaluations, through March 31, 2019, PNM recorded accumulated pre-tax impairments of its capital investments subject to the appeal in the amount of $19.7 million.

On May ~~16,~~ 2019, the NM Supreme Court issued its decision on the matters that had been appealed in the NM 2015 Rate Case. The NM Supreme Court ~~rejected the matters appealed by the cross-appellants and~~upheld all ~~but one~~ of the ~~matters appealed by PNM, and affirmed~~decisions in the NMPRC’s disallowance of a portion of the purchase price of the 64.1 MW of capacity in PVNGS Unit 2, the undepreciated costs of capital improvements made during the time that the 64.1 MW capacity was leased by PNM, and the costs to install BDT at SJGS Units 1 and 4. The NM Supreme Court ruled that the NMPRC’sNMPRC's order except for their decision to permanently disallow recovery of future decommissioning costs related to the ~~64.1 MW of PVNGS Unit 2~~purchased and ~~the 114.6 MW of PVNGS Units 1 and 2,~~extended leases because PNM was deprived ~~PNM~~ of its rights to due process of law and remanded the case to the NMPRC for further ~~proceedings consistent with the Court’s findings. On July 17, 2019,~~proceedings. In January 2020, the NMPRC ~~heard oral argument from parties~~issued its order in ~~the case. At oral argument, parties presented various positions ranging from re-litigating the value of PVNGS resources determined by the NMPRC and affirmed by~~response to the NM Supreme ~~Court~~Court’s remand that reaffirmed its September 2016 order except for the decision to ~~re-affirming the NMPRC’s final order with a single modification to address~~permanently disallow recovery of certain future ~~PVNGS~~ decommissioning costs related to PVNGS Units 1 and 2. The NMPRC indicated that PNM’s ability to recover these costs will be addressed in a future ~~case. PNM cannot predict~~proceeding and closed the ~~outcome of this matter.~~NM 2015 Rate Case docket.

As a result of the NM Supreme Court’s ruling, PNM recorded a pre-tax impairment of $149.3 million as of June 30, 2019 which is reflected as regulatory disallowances and restructuring costs in the Condensed Consolidated Statements of Earnings. ~~The~~

~~impairment~~This amount reflects capital costs not previously impaired during the pendency of the appeal related to PNM's purchase of 64.1 MW, in PVNGS Unit 1, undepreciated capital improvements made during the period such interests had been leased, and investments in BDT environmental controls equipment on SJGS Units 1 and 4. The impairment was offset by tax impacts of $45.7 million which are reflected as income taxes on the Condensed Consolidated Statements of Earnings. ~~See Note 12.~~

New Mexico 2016 Rate Case – OnIn January ~~16,~~ 2018, the NMPRC ~~issued an order~~approved a settlement agreement that authorized PNM to implement an increase in base non-fuel rates of $10.3 million. PNM implemented 50% of the approved increase for service rendered, rather than bills sent, beginning February 1, 2018 and implemented the rest of the increase for service rendered beginning January 1, 2019. This order was on PNM’s application for a general increase in retail electric rates (the “NM 2016 Rate Case”) filed in December 2016. PNM’s December 2016 application requested an increase in base non-fuel revenues of $99.2 million based on a FTY beginning January 1, 2018. The primary drivers of PNM’s revenue deficiency included implementation of modifications to PNM’s resource portfolio, which were approved by the NMPRC in December 2015 as part of the SJGS regional haze compliance plan, infrastructure investments, including environmental upgrades at Four Corners, declines in forecasted energy sales due to successful energy efficiency programs and other economic factors, and updates to FERC/retail jurisdictional allocations.

After extensive settlement negotiations and public proceedings, the NMPRC issued a Revised Order Partially Adopting Certification of Stipulation dated January 10, 2018 (the “Revised Order”). The key terms of the Revised Order include:

~~A revenue increase totaling~~ $10.3 million, which includes a reduction to reflect the impact of the decrease in the federal corporate income tax rate and updates to PNM’s cost of debt (aggregating ~~an estimated~~ $47.6 million annually). This order was on PNM's application for a general increase in retail electric rates filed in December 2016 (the "NM 2016 Rate Case"). The key terms of the order include:

•A ROE of 9.575% ~~compared~~

•A requirement to ~~the 10.125% requested by PNM~~

~~Returning~~return to customers over a three-year period the benefit of the reduction in the New Mexico corporate income tax rate to the extent attributable to PNM’s retail operations (Note 14)

~~Disallowing~~•A disallowance of PNM’s ability to collect an equity return on certain investments aggregating $148.1 million at Four Corners, but allowing recovery of a debt-only return

•An agreement to not implement non-fuel base rate changes, other than changes related to PNM’s rate riders, with an effective date prior to January 1, 2020

•A ~~decision~~requirement to ~~defer future consideration regarding~~consider the prudency of PNM’s decision to continue its participation in Four Corners ~~to a future proceeding~~in PNM's next general rate case filing

PNM implemented 50% of the approved increase for service rendered beginning February 1, 2018 and implemented the rest of the increase for service rendered beginning January 1, 2019. This matter is now concluded.

TNMP 2018 Rate Case – On December 20, 2018, the PUCT approved a settlement stipulation allowing TNMP to increase annual base rates by $10.0 million based on a ROE of 9.65%, a cost of debt of 6.44%, and a capital structure comprised of 55% debt and 45% equity. Under the approved settlement stipulation TNMP was granted authority to integrate revenues previously recorded under the AMS rider, as well as other unrecovered AMS costs, into base rates; establish a new rider to recover Hurricane Harvey restoration costs, net of amounts owed to customers as a result of the reduction in the federal corporate income tax rate in 2018; and to update depreciation rates. In addition, the approved settlement stipulation allows TNMP to refund the regulatory liability recorded at December 31, 2017 related to federal tax reform to customers and reflects the reduction in the federal corporate income tax rate to 21%. New rates under the TNMP 2018 Rate Case became effective January 1, 2019.

TNMP’s original application, which was filed with the PUCT on May 30, 2018, requested an annual increase to base rates of $25.9 million based on a ROE of 10.5%, a cost of debt of 7.2%, and a capital structure comprised of 50% debt and 50% equity.

Advanced Metering – TNMP completed its mass deployment of advanced meters across its service territory in 2016 and has installed more than 242,000 advanced meters. ~~As discussed above, beginning~~Beginning in 2019 the majority of costs associated with TNMP’s AMS program are being recovered through base rates.

In February 2016, PNM filed an application with the NMPRC requesting approval of a project to replace its existing customer metering equipment with Advanced Metering Infrastructure (“AMI”), which was denied. As ordered by the NMPRC, PNM’s ~~next~~2020 filing for energy efficiency ~~plan filing will include~~programs to be offered in 2021, 2022, and 2023 includes a proposal for an AMI pilot project.

Rate Riders and Interim Rate Relief – The PUCT has approved mechanisms that allow TNMP to recover capital invested in transmission and distribution projects without having to file a general rate case. The NMPRC has approved PNM recovering fuel costs through the FPPAC, as well as rate riders for renewable energy and energy efficiency. These mechanisms

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allow for more timely recovery of investments.

~~Cost Recovery Related to Joining the EIM –~~ ~~In 2018, PNM completed~~On April 6, 2020, TNMP filed its first application for a ~~cost-benefit analysis~~periodic distribution rate adjustment (the "2020 DCOS"). TNMP's 2020 DCOS application requests an increase in annual distribution revenues of $14.7 million and that indicated PNM’s participation in the California Independent System Operator (“CAISO”) Western Energy Imbalance Market (“EIM”) would provide substantial benefits to retail customers. In August 2018, PNM filed an application with the NMPRC requesting, among other things, to recover the cost of initial capital investments and authorization to establish a regulatory asset to recover other expenses that would be incurred in order to join the EIM. PNM’s application proposed recovery of the costs incurred to join the EIM beginning on the effective date of new rates go into effect beginning in ~~PNM’s next general rate case and that~~September 2020. See Note 12. TNMP cannot predict the ~~benefits~~outcome of participating in the EIM be credited to retail customers through PNM’s existing FPPAC. In December 2018, the NMPRC issued an order approving the establishment of a regulatory asset to recover PNM’s cost of joining the EIM, which was subsequently vacated based on challenges by certain parties. In March 2019, the NMPRC issued a revised order approving the Hearing Examiner’s recommendation to defer certain rate making issues, including but not limited to implementation and ongoing EIM costs and savings, the prudence and reasonableness of costs included in a regulatory asset, and the period over which costs would be charged to customers until PNM’s next general rate case filing. In April 2019, the NMPRC issued an order clarifying that the CAISO quarterly benefits reports may be used to support the benefits of participating in the EIM. PNM anticipates it will begin participating in the EIM in April 2021.this matter.

FERC Regulation

Rates PNM charges wholesale transmission customers and wholesale generation customers are subject to traditional rate regulation by FERC. Rates charged to wholesale electric transmission customers are based on a formula rate mechanism pursuant to which rates for wholesale transmission service are calculated annually in accordance with an approved formula. The formula includes updating cost of service components, including investment in plant and operating expenses, based on information contained in PNM’s annual financial report filed with FERC, as well as including projected transmission capital projects to be placed into service in the following year. The projections included are subject to true-up. Certain items, including changes to return on equity and depreciation rates, require a separate filing to be made with FERC before being included in the formula rate.

OnIn May ~~10,~~ 2019, PNM filed an application with FERC requesting approval to ~~transmit energy generated from new wind generation facilities using~~purchase a new 165-mile long ~~345 kV~~345-kV transmission line and related facilities (the “Western Spirit Line”). Under related agreements, ~~which are subject~~PNM will provide transmission service to ~~NMPRC and FERC approval, the Western Spirit Line will be purchased by PNM to serve~~ approximately 800 MW of new wind generation to be located in eastern New Mexico beginning in ~~2021. FERC approved PNM’s request to provide transmission to the facilities~~2021 using an incremental ~~rate based on construction~~rate. All necessary regulatory approvals for PNM to purchase and ~~other ongoing costs for the line, including adjustments for construction costs funded by the customer, effective July 9, 2019. Approval of PNM’s planned purchase of~~provide transmission service from the Western Spirit Line ~~is pending. PNM cannot predict the outcome of this matter. See Note 12.~~have been obtained.

~~The low natural gas price environment resulted in market prices for power being substantially lower than what~~ PNM ~~is able to offer wholesale generation customers under the cost of service model that FERC requires PNM to use. Consequently, PNM decided to stop pursuing wholesale generation contracts and currently~~ has no full-requirements wholesale generation customers.

Delivering At or Above Industry-Average Earnings and Dividend Growth

PNMR’s strategic goal to deliver at or above industry-average earnings and dividend growth enables investors to realize the value of their investment in the Company’s business. PNMR’s current target is 5% to 6% earnings and dividend growth for the period ~~2019~~2020 through 2023. Earnings growth is based on ongoing earnings, which is a non-GAAP financial measure that excludes from GAAP earnings certain non-recurring, infrequent, and other items that are not indicative of fundamental changes in the earnings capacity of the Company’s operations. PNMR uses ongoing earnings to evaluate the operations of the Company and to establish goals, including those used for certain aspects of incentive compensation, for management and employees.

PNMR targets a dividend payout ratio in the 50% to 60% range of its ongoing earnings. PNMR expects to provide at or above industry-average dividend growth in the near-term and to manage the payout ratio to meet its long-term target. The Board will continue to evaluate the dividend on an annual basis, considering sustainability and growth, capital planning, and industry standards. The Board approved the following increases in the indicated annual common stock dividend:



Approval Date		Percent Increase
~~December 2015~~		10	%
~~December 2016~~		10	%
~~December 2017~~		9	%



December 2017		9%
December 2018		99%
December 2019	%	6%

Maintaining ~~Solid~~ Investment Grade Credit Ratings

The Company is committed to maintaining ~~solid~~ investment grade credit ratings in order to reduce the cost of debt financing and to help ensure access to credit markets, when required. See the subheading Liquidity included in the full discussion of Liquidity and Capital Resources below for the specific credit ratings for PNMR, PNM, and TNMP. ~~Currently, all~~On April 6, 2020, S&P downgraded the ratings for PNMR, PNM, and TNMP one notch and affirmed TNMP's first mortgage bond rating. All of the credit ratings issued by both Moody’s and S&P on the Company’s debt ~~are~~continue to be investment grade.

Business and Strategic Focus

PNMR strives to create enduring value for customers, communities, and shareholders. PNMR’s strategy and decision-making are focused on safely providing reliable, affordable, and environmentally responsible power. The Company works closely with ~~customers,~~its stakeholders ~~legislators, and regulators~~ to ensure that resource plans and infrastructure investments benefit from robust public dialogue and balance the diverse needs of our communities. Equally important is the focus of PNMR’s utilities on customer satisfaction and community engagement.

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Safe, Reliable, and Affordable Power

PNMR and its utilities are aware of the important roles they play in enhancing economic vitality in their service territories. Management believes that maintaining strong and modern electric infrastructure is critical to ensuring reliability and supporting economic growth. When contemplating expanding or relocating their operations, businesses consider energy affordability and reliability to be important factors. PNM and TNMP strive to balance service affordability with infrastructure investment to maintain a high level of electric reliability and to deliver a safe and superior customer experience. Investing in PNM’s and TNMP’s infrastructure is critical to ensuring reliability and meeting future energy needs. Both utilities have long-established records of providing customers with safe and reliable electric service.

In early 2020, the novel coronavirus ("COVID-19"), resulted in President Trump declaring a pandemic in the U.S. The Company is closely monitoring developments and is taking steps to mitigate the potential risks related to the COVID-19 pandemic. The Company has assessed and updated its existing business continuity plans in response to the impacts of the pandemic through crisis team meetings and working with other utilities and operators. It has identified its critical workforce, staged backups and limited access to control rooms and critical assets. The Company has worked to protect the safety of its employees using a number of measures, including minimizing exposure to other employees and the public and mandating work-from-home and flexible arrangements for all applicable job functions. The Company is also working with its suppliers to understand the potential impacts to its supply chain and remains focused on the integrity of its information systems and other technology systems used to run its business. However, the Company cannot predict the extent or duration of the outbreak, its effects on the global, national or local economy, or on the Company's financial position, results of operations, and cash flows. The Company will continue to monitor developments related to COVID-19 and will remain focused on protecting the health and safety of its customers, employees, contractors, and other stakeholders, and on its objective to provide safe, reliable, affordable and environmentally responsible power. As discussed in Note 12, both PNM and TNMP have suspended disconnecting certain customers for past due bills and waived late fees during the pandemic and are seeking or have been provided regulatory mechanisms to recover these and other costs resulting from COVID-19. See additional discussion below regarding the Company's customer, community, and stakeholder engagement in response to COVID-19 and in Item 1A. Risk Factors.

Utility Plant and Strategic Investments

Utility Plant Investments – During the ~~2016~~2017 to ~~2018~~2019 period, PNM and TNMP together invested ~~$1,501.7 million~~$1.5 billion in utility plant, including substations, power plants, nuclear fuel, and transmission and distribution systems. During 2018 and 2019, PNM ~~will construct~~constructed an additional 50 MW of PNM-owned solar-PV facilities, which were approved by the NMPRC in PNM’s 2018 renewable energy procurement plan. The 50 MW solar-PV facilities are expected to be placed in commercial operations by December 2019 at a cost not to exceed $73.0 million. In late 2018, PNM became the first utility to install a new type of protective relay on its high-voltage transmission lines, which help to ensure the reliability of PNM’s electrical system. On May 1, 2019, PNM executed an agreement to purchase the Western Spirit Line, ~~subject to NMPRC~~which has been approved by FERC and ~~FERC approval.~~the NMPRC. Under the agreement, subject to certain conditions being met prior to closing, PNM will purchase the Western Spirit Line upon its expected commercial operation date in 2021 at a net cost ~~including customer reimbursements,~~ of approximately $285 ~~million.~~million, including customer reimbursements. PNM’s SJGS Abandonment Application requests NMPRC approval of a replacement resource scenario that would result in PNM investing approximately $298 million to construct and own a new 280 MW gas-fired generation facility to be located at the existing SJGS site, 70 MW of battery storage facilities, and other transmission upgrades to replace PNM’s capacity in SJGS. See the subheading Capital Requirements included in the full discussion of Liquidity and Capital Resources below for additional discussion of the Company’s projected capital requirements.

Strategic Investments – In 2017, PNMR Development and AEP OnSite Partners created NMRD to pursue the acquisition, development, and ownership of renewable energy generation projects, primarily in the state of New Mexico. Abundant renewable resources, large tracts of affordable land, and strong government and community support make New Mexico a favorable location for renewable generation. New Mexico ~~has~~ranks 3^rd in the 2^nd ~~highest technical~~nation for energy potential from solar power according to the Nebraska Department of Energy & Energy Sun Index and ranks 3rd in the ~~48 contiguous states for utility scale solar photovoltaics as noted in 2015 by the National Renewable Energy Laboratory, while New Mexico is 6~~^th ~~for technical potential~~nation for land-based ~~wind.~~wind capacity according to the U.S. Office of Energy Efficiency and Renewable Energy. PNMR Development and AEP OnSite Partners each have a 50% ownership interest in NMRD. Through NMRD, PNMR anticipates being able to provide additional renewable generation solutions to customers within and surrounding its regulated jurisdictions through partnering with a subsidiary of one of the United States’ largest electric utilities. ~~The formation~~As of this joint venture provides a more efficient use of PNMR’s capital to support new renewable investment opportunities while maintaining the necessary capital to support investments required by regulated jurisdictions.March 31, 2020, NMRD’s ~~current~~ renewable energy capacity in operation ~~is 33.9~~was 85.1 MW, which includes 3080 MW of solar-PV facilities ~~required~~ to supply energy to the Facebook data center located within PNM’s service territory, 1.9 MW to supply energy to Columbus Electric Cooperative located in southwest New Mexico, ~~and~~ 2.0 MW to supply energy to the Central New Mexico Electric ~~Cooperative. In July 2019, NMRD entered into agreements to provide power from~~Cooperative, and 1.2 MW of solar-PV facilities ~~which are expected~~ to ~~be placed in commercial operation in the second half of 2019,~~supply energy to the City of Rio Rancho, New Mexico. ~~In August 2018, the~~The NMPRC has approved PNM’s request to enter into ~~two~~an additional

25-year ~~PPAs~~PPA to purchase renewable energy and RECs from an aggregate of approximately ~~100~~50 MW of capacity from ~~two~~ solar-PV facilities to be constructed by NMRD to supply power to the Facebook data center. These facilities are expected to ~~be in~~begin commercial operation by June 2020.~~See Note 12.~~ NMRD actively explores opportunities for additional renewable projects, including large-scale projects to serve future data centers and other customer needs.

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Integrated Resource Plan

NMPRC rules require that investor-owned utilities file an IRP every three years. The IRP is required to cover a 20~~-year~~20-year planning period and contain an action plan covering the first four years of that period.

PNM filed its 2017 IRP on July 3, 2017. The 2017 IRP analyzed several scenarios utilizing assumptions that PNM continues service from its SJGS capacity beyond mid-2022 and that PNM retires its capacity after mid-2022. Key findings of the 2017 IRP ~~include:~~

~~Retiring~~included, among other things, that retiring PNM’s share of SJGS in 2022 ~~after the expiration of the current operating~~ and ~~coal supply agreements~~exiting ownership in Four Corners in 2031 would provide long-term cost savings for PNM’s customers

~~PNM exiting its ownership interest in Four Corners after its current coal supply agreement expires in 2031 would also provide long-term cost savings for customers~~

~~The~~ and that the best mix of new resources to replace the retired coal generation would include solar energy and flexible natural gas-fired peaking ~~capacity; the mix could include~~capacity as well as energy storage, if the economics support it, and wind energy provided additional transmission capacity becomes ~~available~~

~~Significant increases in future wind energy supplies will likely require new transmission capacity to be built from eastern New Mexico to PNM’s service territory~~

available. The 2017 IRP also indicated that PNM should retain the currently leased capacity in ~~PVNGS, which would avoid replacement with carbon-emitting generation~~

~~PNM should continue to develop and implement energy efficiency and demand management programs~~

~~PNM should assess the costs and benefits of participating in the California Independent System Operator Western Energy Imbalance Market~~

~~PNM should analyze its current Reeves Station to consider possible technology improvements to phase out the older generators and replace them with new, more flexible supplies or energy storage~~

In December 2018, the NMPRC issued an order accepting PNM’s 2017 IRP as compliant with applicable statute and NMPRC rules. In January 2019, The Board of the County of Commissioners for San Juan County, New Mexico, the City of Farmington, New Mexico, and other parties filed a Notice of Appeal with the NM Supreme Court regarding the NMPRC’s final order in PNM’s 2017 IRP. In addition, NEE submitted a motion requesting the NMPRC reconsider its acceptance of PNM’s 2017 IRP filing alleging informational inadequacy and deficiencies in PNM’s filing, which was deemed denied. In February 2019, NEE filed a motion with the NM Supreme Court to intervene in the appeal and to seek remand of the matter to the NMPRC. The NM Supreme Court denied NEE’s motion to remand the case and, subsequent to a motion by parties, dismissed the appeal.

PVNGS. See additional discussion regarding PNM’s leased capacity in PVNGS in Note 13, including PNM's June 15, 2020 deadline to provide irrevocable notice of its intent to purchase or return the assets underlying the extended PVNGS Units 1 and 2 leases, as well as PNM’s 2017 IRP and ~~PNM’s July 1, 2019~~the SJGS Abandonment Application ~~below and~~ in Note 12.

In the third quarter of 2019, PNM initiated its 2020 IRP process which will cover the 20-year planning period from 2019 through 2039. Consistent with historical practice, PNM has provided notice to various interested parties and has hosted a series of public advisory presentations. NMPRC rules require PNM to file its 2020 IRP in July 2020. In March 2020, PNM filed a request to extend the deadline to file its 2020 IRP until six months after the NMPRC issues a final order approving replacement resources PNM's SJGS Abandonment Application. In April 2020, the NMPRC approved PNM's request for extension. PNM will continue to seek input from interested parties as a part of this process. PNM cannot predict the outcome of this matter.

Environmentally Responsible Power

PNMR has a long-standing record of environmental stewardship. PNM’s environmental focus is in three key areas:

•Developing strategies to provide reliable and affordable power while transitioning to a 100% emissions-free generating portfolio by 2040

•Preparing PNM’s system to meet New Mexico’s increasing renewable energy requirements as cost-effectively as possible

•Increasing energy efficiency participation

PNMR’s Sustainability Portal provides key environmental and sustainability information related to PNM’s and TNMP’s operations and is available at http://www.pnmresources.com/about-us/sustainability-portal.aspx. The portal also contains a Climate Change Report, which outlines plans for PNM to be coal-free by 2031 (subject to regulatory approval). and to have an emissions-free generating portfolio by 2040.

The Energy Transition Act (“ETA”)

On June 14, 2019, Senate Bill 489, known as the ETA, became effective. Prior to the enactment of the ETA, the REA established a mandatory RPS requiring utilities to acquire a renewable energy portfolio equal to 10% of retail electric sales by 2011, 15% by 2015, and 20% by 2020. The ETA amends the REA and requires utilities operating in New Mexico to have renewable portfolios equal to 20% by 2020, 40% by 2025, 50% by 2030, 80% by 2040, and 100% zero-carbon energy by 2045. The ETA also amends sections of the REA to allow for the recovery of undepreciated investments and decommissioning costs related to qualifying EGUs that the NMPRC has required be removed from retail jurisdictional rates, provided replacement resources to be included in retail rates have lower or zero-carbon emissions. The ETA provides for a transition from fossil-fueled generating resources to renewable and other carbon-free resources by allowing utilities to issue securitized bonds, or “energy transition bonds,” related to the retirement of certain coal-fired generating facilities to qualified investors. Proceeds from the energy transition bonds must be used to provide utility service to customers and for other costs as defined by the ETA. These costs may include coal mine and plant decommissioning that have not yet been charged to customers. Proceeds from energy transition bonds may also be used to fund severances to employees of the retired facility and related coal mine, and to promote economic development, education and job training in areas impacted by the retirement of the coal-fired facilities. The ETA requires the NMPRC to prioritize replacement resources in a manner intended to mitigate the economic impact to communities affected by these plant retirements. See additional discussion of the ETA in Note 16 of the Notes to Consolidated Financial Statements in the 2019 Annual Reports on Form 10-K and below in PNM’s SJGS Abandonment ~~Application in Notes 11 and 12.~~Application.

PNM expects the ETA will have a significant impact on PNM’s future generation portfolio, including PNM’s planned retirement of SJGS in 2022. PNM cannot predict the full impact of the ETA or the outcome of its pending and potential future generating resource abandonment and replacement filings with the NMPRC.

SJGS

SJGS Abandonment Application – As discussed in Note ~~16 of the Notes to the Consolidated Financial Statements in the 2018 Annual Reports~~12, on Form 10-K, PNM submitted the December 2018 Compliance Filing to the NMPRC on December 31, 2018 indicating that, consistent with the conclusions reached in PNM’s 2017 IRP, PNM’s customers would benefit from the retirement of PNM’s share of SJGS (subject to future NMPRC approval) after the current SJGS CSA expires in mid-2022. In January 2019, the NMPRC issued an order initiating a proceeding and requiring PNM to submit an application for the abandonment of PNM’s share of SJGS in 2022 and for replacement resources by March 1, 2019. The NMPRC’s January 2019 order was subsequently stayed by the NM Supreme Court pending review of PNM’s petition in the matter. On June 26, 2019, the NM Supreme Court lifted the stay and denied PNM’s petition without discussion. See additional discussion of PNM’s December 2018 Compliance Filing in Note 11.

On July 1, 2019, PNM filed a Consolidated Application for the Abandonment and Replacement of SJGS and Related Securitized Financing Pursuant to the ETA (the “SJGS Abandonment

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Application”). The SJGS Abandonment Application seeks NMPRC approval to retire PNM’s share of SJGS in mid-2022, and for approval of replacement resources and the issuance of approximately $361 million of energy transition bonds as provided by the ETA. The application includes several replacement resource scenarios including PNM’s recommended replacement scenario, which is consistent with PNM’s goal of having a 100% emissions-free generating portfolio by 2040 and would provide cost savings to customers while preserving system reliability. The application includes three other replacement resource scenarios that would place a greater amount of resources in the San Juan area, or result in no new fossil-fueled generating facilities, or no battery storage facilities being added to PNM’s ~~generation~~ portfolio. ~~Each of these alternative~~When compared to PNM's recommended replacement resource scenario, the three alternative resource scenarios isare expected to result in increased costs to customers and the two alternative resource scenarios that result in ~~lower~~no new fossil-fueled generating facilities are expected to not provide adequate system ~~reliability when compared to PNM’s recommended replacement resource scenario. See additional discussion of the SJGS Abandonment Application in Note 12.~~reliability.

~~On July 10, 2019, the~~The NMPRC issued an order requiring the SJGS Abandonment Application be considered in two ~~proceedings,~~proceedings: one addressing SJGS abandonment and related financing and the other addressing replacement ~~resources. The NMPRC indicated that PNM’s July 1, 2019 filing is responsive to the January 30, 2019 order~~resources but did not definitively indicate if the abandonment and financing proceedings ~~will~~would be evaluated under the requirements of the ETA. The NMPRC’s July 10, 2019 order also extended the deadline to issue the abandonment and financing order to nine months and to issue the replacement resources order to 15 months. ~~On July 22, 2019, Western Resource Advocates filed a motion~~After several requests for clarification ~~reconsideration,~~ and ~~request for oral argument with~~legal challenges, in January 2020, the ~~NMPRC. The motion requested~~NM Supreme Court ruled the NMPRC ~~clarify whether it intends to evaluate the abandonment and financing proceeding under the requirements of the ETA and, in the event the NMPRC does not intend~~is required to apply the ETA to all aspects of PNM’s SJGS Abandonment Application, and that any previous NMPRC orders inconsistent with their ruling should be vacated. Hearings on the abandonment and securitized financing ~~proceeding, to reconsider its decision~~proceedings were held in December 2019 and ~~to provide parties an opportunity to present oral arguments~~hearings on ~~the matter. The NMPRC chair responded on July 24, 2019, indicating that~~replacement resources were held in January 2020.

In February 2020, the Hearing Examiners ~~assigned~~issued two recommended decisions recommending approval of PNM’s proposed abandonment of SJGS, subject to approval of the separate replacement resources proceeding,

~~will address the~~ and approval of PNM’s proposed financing order to issue ~~of law applicable to the approvals sought by PNM in the scheduling orders.~~Securitized Bonds. The Hearing Examiners recommended, among other things, that PNM be authorized to abandon SJGS by June 30, 2022, to issue Securitized Bonds of up to $361 million, and to establish a rate rider to collect non-bypassable customer charges for repayment of the bonds (the “Energy Transition Charge”). The Hearing Examiners recommended an interim rate rider adjustment upon the start date of the Energy Transition Charge to provide immediate credits to customers for the full value of PNM’s revenue requirement related to SJGS until those reductions are reflected in base rates. In addition, the Hearing Examiners recommended PNM be granted authority to establish regulatory assets to recover costs that PNM will pay prior to the issuance of the Securitized Bonds, including costs associated with the bond issuances as well as for severances, job training, and economic development funds.

On February 21, 2020, the Hearing Examiners recommended the NMPRC approve PNM's proposed abandonment of SJGS, subject to approval of the replacement resources and financing orders to issue Securitized Bonds. On March 27, 2020, the Hearing Examiners issued ~~procedural orders setting~~ a ~~public hearing on SJGS abandonment and~~partial recommended decision related ~~financing for December 10, 2019, a hearing on PNM’s proposed~~to PNM's requested replacement resources. The Hearing Examiners recommended the NMPRC approve PNM's requested PPA replacement resources ~~on December 2, 2019,~~related to 350 MW of solar-PV facilities and ~~a hearing on~~60 MW of battery storage facilities. On April 1, 2020, the ~~remaining replacement resources on March 2, 2020. The procedural orders also require PNM to file legal brief by August 23, 2019~~NMPRC unanimously approved the Hearing Examiners' recommended decisions regarding the extent to which the state constitution might prevent the ETA from applying to the issues in each case, that parties file responses to PNM’s legal briefs by October 18, 2019, and that parties may file testimony on the merits of their claims regarding SJGS abandonment and replacement resources if the ETA is ultimately determined to not apply to PNM’s application. On July 29, 2019, Western Resource Advocates filed a motion for interlocutory appeal of the July 24, 2019 order indicating that the procedural order will not provide parties adequate time to determine the applicability of the ETA and requesting an expedited decision from the NMPRC stating their intent to review the proceedings under the requirements of the ETA or under prior law. On August 1, 2019, the NMPRC issued a procedural order requiring responses to the interlocutory appeal by August 9, 2019.

~~The financial impact of an early retirement~~ of SJGS and the Securitized Bonds. On April 29, 2020, the NMPRC ~~approval process are influenced by many factors outside of PNM’s control, including~~issued an order declining to bifurcate a determination on replacement resources and deferring final consideration until the ~~economic impact~~issuance of a ~~potential SJGS abandonment~~comprehensive recommended decision addressing the entire portfolio of replacement resources. The NMPRC is required to issue an order on the ~~area surrounding the plant and the related mine, as well as the overall political and economic conditions of New Mexico.~~SJGS replacement resources by September 2020. PNM ~~believes that the ETA applies to all aspects of the SJGS Abandonment Application but~~ cannot predict the outcome of ~~this matter.~~its request for NMPRC approval of replacement resources.

Pursuant to the NMPRC's April 1, 2020 order approving the abandonment of SJGS and the related issuance of Securitized Bonds, PNMR recorded obligations totaling $38.1 million for estimated severances and other costs resulting from the planned retirement of SJGS in 2022, and for expected funding to state agencies for economic development and workforce training upon the issuance of the Securitized Bonds. This obligation is reflected in other deferred credits and as a corresponding deferred regulatory asset on PNMR's Condensed Consolidated Balance Sheets as of March 31, 2020. These estimates may be adjusted in future periods as the Company refines its expectations. See additional discussion of PNM's SJGS Abandonment Application and the related challenges filed with the NM Supreme Court in Note 12.

Other Environmental Matters – In addition to the regional haze rule and the ETA, SJGS and Four Corners may be required to comply with other rules that affect coal-fired generating units. OnIn March ~~28,~~ 2017, President Trump issued an Executive Order on Energy Independence. The order sets out two general policies: promote clean and safe development of energy resources, while avoiding regulatory burdens, and ensure electricity is affordable, reliable, safe, secure, and clean. The order rescinds various actions undertaken by the previous administration and directed the EPA Administrator to review and if appropriate suspend, revise, or rescind the Clean Power Plan, as well as other environmental regulations. On October 10, 2017, EPA issued a proposal to repeal the Clean Power Plan based on a legal interpretation of the CAA under which the Clean Power Plan exceeded EPA’s statutory authority. On August 31, 2018, EPA published a proposed rule, informally known as the Affordable Clean Energy rule, to replace the Clean Power Plan. On June 19, 2019, EPA released the final Affordable Clean Energy rule. EPA is taking three separate actions in the final rule: (1) ~~finalizes the repeal of~~repealing the Clean Power Plan; (2) ~~finalizes~~promulgating the Affordable Clean Energy rule; and ~~3) revises~~(3) revising the implementing regulations for all emission guidelines issued under Clean Air Act Section 111(d) which, among other things, extends the deadline for state plans and the timing of ~~state plans. The final rule is very similar to the August 2018 proposed rule.~~EPA's approval process. EPA set the Best System of Emissions Reduction (“BSER”) for existing coal-fired power plants as heat rate efficiency improvements based on a range of ~~"candidate technologies"~~“candidate technologies” that can be applied inside the fence-line. Rather than setting a specific numerical standard of performance, ~~EPA's~~EPA’s rule ~~would have~~directs states to determine which of

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the candidate technologies to apply to each coal-fired unit and establish standards of performance based on the degree of emission reduction achievable based on the application of BSER. ~~States will have three years from when the~~The final rule ~~is finalized~~requires states to submit a plan to EPA by July 8, 2022 and then ~~the~~ EPA has one year to approve the plan. If states do not submit a plan or their submitted plan is not acceptable, EPA will have two years to develop a federal plan. The rule is not expected to impact SJGS since EPA’s final approval of a state SIP would occur after the planned shutdown of SJGS in 2022 (subject to NMPRC approval). The Company is reviewing the rule with respect to impacts to Four ~~Corners Power Plant.~~Corners. See Note 11.

~~In addition, on~~On December 20, 2018, EPA published in the Federal Register a proposed rule that would revise the ~~carbon pollution standards~~Carbon Pollution Standards rule issued in October 2015 for certain ~~fossil fueled~~fossil-fueled power plants. The proposal would revise the emissions standards for new, reconstructed, or modified coal-fired EGUs to make them less stringent. PNM does not expect SJGS or Four Corners will be subject to the ~~carbon pollution standards~~Carbon Pollution Standards rule that EPA has proposed to revise.

PNM’s review of the GHG emission reductions standards under the Affordable Clean Energy rule and the revised proposed ~~carbon pollution standards~~Carbon Pollution Standards rule is ongoing. The Affordable Clean Energy rule has been challenged by several parties and may be impacted by further litigation. As discussed above, SJGS ~~and Four Corners~~ may also be required to comply with additional CO₂emissions restrictions issued by the New Mexico Environmental Improvement Board pursuant to the recently enacted ETA. PNM cannot predict the impact these standards may have on its operations or a range of the potential costs of compliance, if any.

~~Major environmental upgrades on each of the units at SJGS have significantly reduced emissions of NOx, SO~~₂, particulate matter, and mercury. Because of environmental upgrades completed in 2009, SJGS has a mercury removal efficiency of 98% and mercury emissions are well below the mercury limit imposed by EPA in the 2012 Mercury and Air Toxics Standards. Between 2006 and 2018, SJGS has reduced emissions of NOx by 77%, SO₂ ~~by 92%, particulate matter by 88%, and mercury by 99%. In addition, the installation of SCRs at Four Corners significantly reduces emissions from the facility.~~

Renewable Energy

PNM’s renewable procurement strategy includes utility-owned solar capacity, as well as wind and geothermal energy purchased under PPAs. As of ~~June 30, 2019,~~March 31, 2020, PNM has ~~127~~157 MW of utility-owned solar capacity in operation. In addition, PNM purchases power from a customer-owned distributed solar generation program that had an installed capacity of ~~113.1~~133.0 MW at ~~June 30, 2019.~~March 31, 2020. PNM also owns the 500 KW PNM Prosperity Energy Storage ~~Project, which uses advanced batteries to store solar power and dispatch the energy either during high-use periods or when solar production is limited.~~Project. The project was one of the first combinations of battery storage and solar-PV energy in the nation and involved extensive research and development of advanced grid concepts. The facility also was the nation’s first solar storage facility fully integrated into a utility’s power grid. PNM also purchases the output from New Mexico Wind, a 204 MW wind facility, and the output of Red Mesa Wind, an existing 102 MW wind energy center. PNM's 2020 renewable energy procurement plan was approved by the NMPRC in January 2020 and includes a PPA to procure 140 MW of renewable energy and RECs from La Joya Wind beginning in 2021. The majority of these renewable resources are key means for PNM to meet the RPS and related regulations that require PNM to achieve prescribed levels of energy sales from renewable sources, including those set by the recently enacted ETA, without exceeding cost requirements. If approved by the NMPRC, PNM’s recommended resource scenario to replace the planned retirement of SJGS would result in PNM executing PPAs to purchase renewable energy and RECs from a total of 350 MW of solar-PV facilities and to procure energy from and construct a total of 130 MW of battery storage facilities. ~~If approved, PNM would procure power under a PPA from one of the United States’ largest solar facilities and would have the nation’s highest percentage of battery storage capacity integration.~~

The majority of these renewable resources are key means for PNM to meet the RPS and related regulations that require PNM to achieve prescribed levels of energy sales from renewable sources, including those set by the recently enacted ETA, without exceeding cost requirements. PNM makes renewable procurements consistent with the plans approved by the NMPRC. PNM’s 2018 renewable energy procurement plan meets RPS and diversity requirements for 2018 and 2019 and includes additional procurements of wind, geothermal, and solar-PV capacity. PNM’s 2019 renewable energy procurement plan meets RPS and diversity requirements for 2019 and 2020 and does not include any significant new procurements. PNM’s 2020 renewable energy procurement plan requests NMPRC approval to procure 140 MW of renewable energy and RECs from La Joya Wind beginning in 2021.

As discussed in Strategic Investments above, PNM is currently purchasing the output of 3080 MW of solar capacity from NMRD that is used to serve athe Facebook data center. PNM has entered into three separate 25-year PPAs to purchase renewable energy and RECs to be used by PNM to supply additional renewable power to the Facebook data center. These PPAs include the purchase of ~~the~~ power and RECs from a 50 MW wind project, which was placed in commercial operation in November 2018, a 166 MW wind project to be operational in November 2020, and a 50 MW ~~solar~~solar-PV project to be operational in December 2021. In August 2018, the NMPRC approved PNM’s request to enter into two additional 25-year PPAs to purchase renewable energy and RECs from an aggregate of approximately 100 MW of capacity from two solar-PV facilities to be constructed by NMRD to supply power to ~~Facebook. These~~Facebook, Inc. The first 50 MW of these facilities ~~are~~began commercial operations in November 2019 and the remaining capacity is expected to begin commercial operation by June 2020. ~~See Note 12.~~

On May 31, 2019, PNM filed an application with the NMPRC for approval of a program under which qualified governmental and large commercial customers could participate in a voluntary renewable energy procurement ~~program.~~ program ("PNM ~~proposes to recover~~Solar Direct"). The costs of the program would be recovered directly from subscribing customers through a rate ~~rider. If approved by~~rider, including the ~~NMPRC, PNM would~~costs to procure renewable energy from 50 MW of solar-PV facilities under a 15-year PPA. ~~PNM had fully subscribed~~These facilities are expected to be placed in commercial operation by March 31, 2021. In March 2020, the ~~entire output of~~NMPRC approved PNM's application, including the ~~50 MW facilities at the time of the filing. PNM cannot predict the outcome of this matter.~~rate rider and PPA.

PNM will continue to procure renewable resources while balancing the impact to customers’ electricity costs in order to meet New Mexico’s escalating RPS and carbon-free resource requirements.

Energy Efficiency

Energy efficiency plays a significant role in helping to keep customers’ electricity costs low while meeting their energy needs and is one of the Company’s approaches to supporting environmentally responsible power. PNM’s and TNMP’s energy efficiency and load management portfolios continue to achieve robust results. In ~~2018,~~2019, incremental energy saved as a result of new participation in PNM’s portfolio of energy efficiency programs ~~was~~is estimated to be approximately 7265 GWh. This is equivalent to the annual consumption of approximately ~~10,300~~9,500 homes in PNM’s service territory. PNM’s load management and

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annual energy efficiency programs also help lower peak demand requirements. In ~~2018,~~2019, TNMP’s incremental energy saved as a result of new participation in TNMP’s energy efficiency programs ~~was~~is estimated to be approximately 1716 GWh. This is equivalent to the annual consumption of approximately ~~1,500~~1,285 homes in TNMP’s service territory. In April 2018, TNMP received the “Partner of the Year Energy Efficiency Delivery Award” for its High-Performance Homes Program.

As discussed above, in April 2020, PNM filed an application for energy efficiency and load management programs to be offered in 2021, 2022, and 2023. The proposed program also requests an AMI pilot program. PNM cannot predict the outcome of this matter.

Water Conservation and Solid Waste Reduction

PNM continues its efforts to reduce the amount of fresh water used to make electricity (about ~~20%~~35% more efficient than in 2007). Continued growth in PNM’s fleet of solar and wind energy sources, energy efficiency programs, and innovative uses of gray water and air-cooling technology have contributed to this reduction. Water usage has continued to decline as PNM has substituted less fresh-water-intensive generation resources to replace SJGS Units 2 and 3 starting in 2018, as water consumption at that plant has been reduced by approximately 50%. Focusing on responsible stewardship of New Mexico’s scarce water resources improves PNM’s water-resilience in the face of persistent drought and ever-increasing demands for water to spur the growth of New Mexico’s economy.

In addition to the above areas of focus, the Company is working to reduce the amount of solid waste going to landfills through increased recycling and reduction of waste. In ~~2018, 19~~2019, 16 of the Company’s 23 facilities met the solid waste diversion goal of a 65% diversion rate. The Company expects to continue to do well in this area in the future.

Customer, Stakeholder, and Community Engagement

The Company strives to deliver a superior customer experience. Through outreach, collaboration, and various community-oriented programs, the Company has demonstrated a commitment to building productive relationships with stakeholders, including customers, community partners, regulators, intervenors, legislators, and shareholders. PNM continues to focus its efforts to enhance the customer experience through customer service improvements, including enhanced customer service engagement options, strategic customer ~~engagement,~~outreach, and improved communications. These efforts are supported by market research to understand the varying needs of customers, identifying and establishing valued services and programs, and proactively communicating and engaging with customers.

The Company has leveraged a number of communications channels and strategic content to better serve and engage its many stakeholders. PNM’s website www.pnm.com, provides the details of major regulatory filings, including general rate requests, as well as the background on PNM’s efforts to maintain reliability, keep prices affordable, and protect the environment. The Company’s website is also a resource for information about PNM’s operations and community outreach efforts, including plans for building a sustainable energy future for New Mexico and to transition to an emissions-free generating portfolio by 2040. PNM has also leveraged social media in communications with customers on various topics such as education, outage alerts, safety, customer service, and PNM’s community partnerships in philanthropic projects.

As discussed above, PNMR also has a dedicated Sustainability Portal on its corporate website, www.pnmresources.com, to provide additional information regarding the Company’s environmental and other sustainability efforts. The site provides the key corporate governance and sustainability information related to the operations of PNM and TNMP. In January 2018, PNM added a Climate Change Report to this portal. The portal also includes information presented under the additional headings: Environment, Generation Portfolio, Social, Economic, and Governance.

With reliability being the primary role of a transmission and distribution service provider in Texas’ deregulated market, TNMP continues to focus on keeping end-users updated about interruptions and to encourage consumer preparation when severe weather is forecasted. In August 2017, Hurricane Harvey made landfall in the gulf coast region and TNMP employees worked to restore power safely and efficiently for affected customers. In addition, PNMR made donations to support relief and restoration efforts in the gulf coast region. TNMP employees who were impacted by Hurricane Harvey were provided emergency crisis funds supported by the PNM Resources Foundation and other employee donations.

Local relationships and one-on-one communications remain two of the most valuable ways both PNM and TNMP connect with their stakeholders. Both companies maintain long-standing relationships with governmental representatives and key electricity consumers to ensure that these stakeholders are updated on Company investments and initiatives. Key electricity consumers also have dedicated Company contacts that support their important service needs.

PNMR has a long tradition of supporting the communities it serves in New Mexico and Texas. The Company demonstrates its core value of caring through the PNM Resources Foundation, corporate giving, employee volunteerism, and PNM’s low-income assistance programs. In addition to the extensive engagement both PNM and TNMP have with nonprofit organizations in their communities, the PNM Resources Foundation provides more than $1 million in grant funding each year across New Mexico and Texas. These grants help nonprofits innovate or sustain programs to grow and develop business, develop and implement environmental programs, and provide educational opportunities. ~~PNMR also provides employee matching~~Beginning in 2020, the PNM Resources Foundation will fund grants with a three-year focus on decreasing homelessness, increasing access to affordable housing, reducing carbon emissions, and ~~volunteer grants for various purposes.~~community safety with an emphasis on COVID-19 programs in 2020.

~~Over~~During the ~~past six~~three years ending December 2019, the Company has contributed ~~a total of more than $7.0~~approximately $6.2 million to civic, educational, environmental, low income, and economic development organizations. PNMR is proud to support programs and organizations that enrich the quality of life for the people in its service territories and communities. One of PNM’s most

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important outreach programs is tailored for low-income customers. In ~~2018,~~2019, PNM hosted 5046 community events throughout its service territory to connect low-income customers with nonprofit community service providers offering support and help with such needs as water and gas utility bills, food, clothing, medical programs, and services for seniors. Additionally, through its Good Neighbor Fund, PNM provided ~~$0.5~~$0.4 million of assistance with electric bills to ~~3,811~~3,734 families in ~~2018~~2019 and offered financial literacy training to further support customers. In response to the recent COVID-19 crisis, in early 2020 the PNM Resources Foundation awarded $0.4 million to nonprofits in New Mexico and Texas to assist with work being done on the front lines of the pandemic, with a focus on helping people currently experiencing homelessness during the shelter-in-place directives and seniors.

Volunteerism is an important facet of the PNMR culture. The mission of the PNMR Corporate Volunteer Group is to help make the communities ~~in which~~ PNMR serves safer, stronger, smarter, and more vibrant. In ~~2018,~~2019, PNM and TNMP employees and retirees contributed ~~approximately 11,500~~over 13,300 volunteer hours serving their local ~~communities.~~communities by supporting at least 250 organizations. Company volunteers participate in an annual Day of Service at nonprofits across New Mexico and Texas. Employees and retirees also ~~actively~~ participate on a variety of nonprofit boards ~~in educational, economic,~~ and ~~environmental forums, as well as safety seminars.~~independent volunteer activities throughout the year. PNMR employees ~~are,~~want to make the Company the best place to work by connecting and growing with others to realize their objectives. By doing this the Company hopes to increase customer satisfaction. To assist with COVID-19 efforts, PNMR donated to the Emergency Action Fund in ~~large part, responsible for~~partnership with Albuquerque Community Foundation and United Way of Central New Mexico to benefit approximately twenty nonprofits and small businesses facing challenges due to cancelled fundraising events. In addition, PNM and TNMP Community Crews have assisted in efforts to safely deliver food and other supplies to assist teachers and others providing continued education at home, especially to those without access to computers and the ~~success of the Company’s customer, stakeholder, and community outreach.~~internet.

Economic Factors

PNM – In the three ~~and six~~ months ended ~~June 30, 2019~~,March 31, 2020, PNM experienced ~~a decrease~~an increase in weather-normalized retail load of ~~1.3% and 0.1%~~1.1% compared to ~~2018. PNM’s retail load decreased year-over-year~~2019. PNM did not experience significant impacts in customer usage during the first quarter of 2020 as a result of ~~mild weather conditions~~COVID-19. PNM expects to see increased residential customer usage offset by a decrease in the ~~second quarter of 2019~~commercial customer class when compared to ~~hotter than average temperatures in the second quarter~~2019 as a result of 2018. Economic conditions in Albuquerque continue to have a positive trend in 2019 with more announcements of businesses moving to the state or expanding and both the private and public sectors adding jobs. Following the announcement of Netflix, Inc. coming to New Mexico ~~last year, NBCUniversal announced in June 2019 a 10-year venture in Albuquerque, New Mexico. In addition, Sandia National Laboratories announced in May 2019 that it plans~~state restrictions related to ~~hire 1,900 employees by year-end,~~COVID-19 and ~~another of PNM’s customers announced that it plans~~does not currently expect significant impacts to ~~add over 300 jobs in central New Mexico.~~its other customer classes.

TNMP – In the three ~~and six~~ months ended ~~June 30, 2019,~~March 31, 2020, TNMP experienced a decrease in volumetric weather-normalized retail load of ~~0.9% and 1.3%~~0.2% compared to ~~2018. Demand-based~~2019. Weather-normalized demand-based load, excluding retail transmission customers, increased ~~4.1% and 3.7%~~2.7% in the three ~~and six~~ months ended ~~June 30, 2019~~March 31, 2020 compared to ~~2018.~~2019. TNMP ~~continues~~expects to ~~experience increases~~see increased volumetric usage related to residential consumers offset by decreases in ~~new service requests, although~~its demand based commercial consumer class as a result of impacts related to COVID-19.

The Company is unable to determine the ~~timing~~duration or final impacts from COVID-19 as discussed in more detail in Item 1A. Risk Factors. The Company expects that some of ~~some interconnections~~the negative impacts to customer usage at PNM and TNMP will be offset by reduced operations and maintenance expenses resulting from the Company's efforts to maintain social distancing and that ~~were expected this year have been delayed.~~these costs could be further reduced if the economic impacts of COVID-19 persist into the summer. However, if current economic conditions extend through the summer and beyond, the Company may be required to implement additional measures such as further reducing or delaying operating and maintenance expenses and planned capital expenditures.

Results of Operations

Net earnings (loss) attributable to PNMR were ~~($57.2)~~$(15.3) million, or ~~($0.72)~~$(0.19) per diluted share in the ~~six~~three months ended ~~June 30, 2019~~March 31, 2020 compared to ~~$53.2~~$18.7 million, or ~~$0.67~~$0.23 per diluted share in ~~2018.~~2019. Among other things, earnings in the ~~six~~three months ended ~~June 30, 2019~~March 31, 2020 benefited from ~~additional revenues due to retail~~higher earnings on PNM's renewable rate ~~increases approved in PNM’s NM 2016 Rate Case~~rider, higher customer usage at PNM, including the leap-year impact, higher transmission rates and ~~TNMP’s 2018 Rate Case, higher~~ demand-based ~~revenues~~usage at TNMP, ~~higher income from investment securities held in the NDT~~lower operational and ~~coal mine reclamation trusts,~~maintenance expenses, including lower employee related expense at PNM and TNMP, and lower plant maintenance costs at PNM, and lower interest ~~expense~~charges at ~~PNM.~~TNMP. These increases were more than offset by ~~mild~~milder weather conditions at PNM and TNMP, regulatory disallowances resulting from the NM Supreme Court’s May 2019 opinion in PNM’s appeal of the NMPRC’s decisions in the NM 2015 Rate Case, lower transmission cost of service revenues as a result of a reallocation of costs in TNMP’s 2018 Rate Case, higher employee related expenses at PNM and TNMP, increased depreciation and property taxes due to increased plant in service at PNM and TNMP, ~~as well as increased depreciation rates resulting from TNMP’s 2018 Rate Case,~~ and ~~lower interest income~~losses on ~~the Westmoreland Loan at PNMR.~~PNM's PVNGS and coal mine reclamation investment securities. Additional information on factors impacting results of operations for each segment is discussed below under Results of Operations.

Liquidity and Capital Resources

PNMR and PNM have revolving credit facilities with capacities of $300.0 million and $400.0 million ~~and~~that currently expire in October 2023. Both facilities provide for short-term borrowings and letters of credit and can be extended through October 2024, subject to approval by a majority of the lenders. In addition, PNM has a $40.0 million revolving credit facility ~~which expires in December 2022,~~ with banks having a significant presence in New Mexico, which expires in December 2022, and TNMP has a $75.0 million revolving credit facility, which expires in September 2022. ~~On February 22, 2019,~~ PNMR Development ~~amended its~~has a revolving credit facility ~~to increase the~~with a capacity ~~to $25.0 million and to extend its expiration date to February 24, 2020. On July 22, 2019, PNMR Development amended its revolving credit facility to increase the capacity to~~of $40.0 million, with the option to further increase the capacity up to $50.0 million upon 15-days advance ~~notice. The facility will continue to have an expiration date of~~notice, that expires in February ~~24, 2020.~~2021. The PNMR Development Revolving Credit Facility bears interest at a variable rate and contains terms similar to the PNMR Revolving Credit Facility. Total availability for PNMR on a consolidated basis was ~~$692.7~~$670.0 million at ~~July 26, 2019.~~

Table of Contents

May 1, 2020. The Company utilizes these credit facilities and cash flows from operations to provide funds for both construction and operational expenditures. PNMR also has intercompany loan agreements with each of its subsidiaries.

PNMR projects that its consolidated capital requirements, consisting of construction expenditures, capital contributions for PNMR Development’s 50% ownership interest in NMRD, and dividends, will total ~~$4,046.7 million~~$4.4 billion for ~~2019-2023,~~2020 - 2024, including amounts expended through ~~June 30, 2019.~~March 31, 2020. The construction expenditures include estimated amounts for ~~50 MW of new solar facilities included in PNM’s 2018 renewable energy procurement plan,~~ an anticipated expansion of PNM’s transmission system, including the planned purchase of ~~a 165-mile 345 kV transmission line,~~the Western Spirit Line, and proposed replacement generation resources included in PNM’s SJGS Abandonment Application.

In January 2020, PNMR entered into agreements to sell approximately 6.2 million shares of PNMR common stock under forward purchase arrangements (the “PNMR 2020 Forward Equity Sale Agreements”). Under the PNMR 2020 Forward Equity Sale Agreements, PNMR has the option to physically deliver, cash settle, or net share settle all or a portion of PNMR common stock on or before a date that is 12 months from their effective dates. PNMR did not initially receive any proceeds upon execution of these agreements. The initial forward sales price of $47.21 per share is subject to adjustments based on net interest rate factor and by expected future dividends on PNMR’s common stock. PNMR expects to physically settle all shares under the agreements on or before January 7, 2021. See Note 9.

On ~~January 18, 2019,~~April 15, 2020, PNM entered into the PNM 2020 Term Loan and used the proceeds to prepay the PNM 2019 $250.0 million ~~PNM 2019~~ Term Loan, ~~which bears interest at a variable rate and must be repaid~~without penalty. As discussed below, on ~~or before July 17, 2020. Proceeds~~April 30, 2020, PNM used $100.0 million of proceeds from ~~this issuance were used to repay~~ the PNM ~~2017 Term Loan, short-term borrowings under~~2020 SUNs to prepay without penalty an equal amount of the PNM ~~Revolving Credit Facility, and for general corporate purposes.~~ 2020 Term Loan.

See discussion of ~~PNM’s SJGS Abandonment Application in Note 12, which includes a~~the NMPRC's April 1, 2020 approval of PNM's request to issue approximately $361 million of ~~energy transition bonds~~Securitized Bonds upon the ~~proposed~~ retirement of SJGS in ~~2022.~~2022, and the related appeal of that order to the NM Supreme Court in Note 12.

After considering the effects of these financings and the Company's short-term liquidity position as of May 1, 2020, the Company has consolidated maturities of long-term and short-term debt aggregating ~~$535.3~~approximately $718 million ~~in the period from July 1, 2019~~ through ~~July~~May 31, ~~2020, and an additional $140.0 million that will mature by December 31, 2020.~~2021. In addition to internal cash generation, the Company anticipates that it will be necessary to obtain additional long-term financing in the form of debt refinancing, new debt issuances, and/or new equity in order to fund its capital requirements during the ~~2019-2023~~2020-2024 period. The Company currently believes that its internal cash generation, existing credit arrangements, and access to public and private capital markets will provide sufficient resources to meet the Company’s capital requirements for at least the next twelve months. The Company is in compliance with its debt covenants.

RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with the Condensed Consolidated Financial Statements and Notes thereto. Trends and contingencies of a material nature are discussed to the extent known. Refer also to Disclosure Regarding Forward Looking Statements and to Part II, Item 1A. Risk Factors.

Table of Contents

A summary of net earnings attributable to PNMR is as follows:


	Three Months Ended March 31,
	2020		2019		Change
	(In millions, except per share amounts)
Net earnings (loss) attributable to PNMR	$	(15.3)	$	18.7	$	(34.0)
Average diluted common and common equivalent shares⁽¹⁾	79.9		80.0		(0.1)
Net earnings attributable to PNMR per diluted share	$	(0.19)	$	0.23	$	(0.42)

Three Months Ended June 30, Six Months Ended June 30,
2019 2018 Change 2019 2018 Change
(In millions, except per share amounts)
Net earnings (loss) attributable to PNMR $ (75.9 ) $ 38.2
$ (114.1 ) $ (57.2 ) $ 53.2
$ (110.4 )
Average diluted common and common equivalent shares⁽¹⁾
79.9
80.0
(0.1 ) 79.9
80.0
(0.1 )
Net earnings (loss) attributable to PNMR per diluted share $ (0.95 ) $ 0.48
$ (1.43 ) $ (0.72 ) $ 0.67
$ (1.39 )

⁽¹⁾ Excludes ~~the impact of potentially dilutive~~anti-dilutive shares ~~that, if included, would be anti-dilutive~~ for the three ~~and six~~ months ~~ended June 30, 2019 (Note 4).~~ending March 31, 2020.

The components of the change in net earnings attributable to PNMR are:



	Three Months Ended
	March 31, 2020
	(In millions)
PNM	$	(35.1)
TNMP	3.0

Corporate and Other	(1.9)
Net change	$	(34.0)

Three Months Ended Six Months Ended
June 30, 2019 June 30, 2019
(In millions)
PNM $ (113.4 ) $ (102.1 )
TNMP (0.1 ) (5.4 )
Corporate and Other (0.5 ) (2.8 )
Net change $ (114.1 ) $ (110.4 )

Information regarding the factors impacting PNMR’s operating results by segment are set forth below.

Segment Information

The following discussion is based on the segment methodology that PNMR’s management uses for making operating decisions and assessing performance of its various business activities. See Note 2 for more information on PNMR’s operating segments.

PNM

PNM defines utility margin as electric operating revenues less cost of energy, which consists primarily of fuel and purchase power costs. PNM believes that utility margin provides a more meaningful basis for evaluating operations than electric operating revenues since substantially all fuel and purchase power costs are offset in revenues as those costs are passed through to customers under PNM’s FPPAC. Utility margin is not a financial measure required to be presented under GAAP and is considered a non-GAAP measure.

The following table summarizes the operating results for PNM:


	Three Months Ended March 31,
	2020		2019		Change
	(In millions)
Electric operating revenues	$	248.1	$	269.3	$	(21.2)
Cost of energy	74.5		99.3		(24.8)
Utility margin	173.6		170.0		3.6
Operating expenses	98.6		106.5		(7.9)
Depreciation and amortization	41.4		39.2		2.2
Operating income	33.6		24.3		9.3
Other income (deductions)	(30.5)		18.0		(48.5)
Interest charges	(17.6)		(18.4)		0.8
Segment earnings (loss) before income taxes	(14.6)		23.9		(38.5)
Income (taxes) benefit	2.4		(2.0)		4.3
Valencia non-controlling interest	(3.7)		(2.8)		(0.9)
Preferred stock dividend requirements	(0.1)		(0.1)		—
Segment earnings	$	(16.1)	$	19.0	$	(35.1)

Three Months Ended June 30, Six Months Ended June 30,
2019 2018 Change 2019 2018 Change
(In millions)
Electric operating revenues $ 238.2
$ 264.5
$ (26.3 ) $ 507.5
$ 500.7
$ 6.8
Cost of energy 58.9
66.4
(7.5 ) 158.2
137.2
21.0
     Utility margin 179.4
198.2
(18.8 ) 349.3
363.6
(14.3 )
Operating expenses 255.5
107.1
148.4
362.0
207.6
154.4
Depreciation and amortization 39.8
38.2
1.6
79.0
74.8
4.2
     Operating income (loss) (116.0 ) 52.9
(168.9 ) (91.7 ) 81.2
(172.9 )
Other income (deductions) 7.7
0.2
7.5
25.7
3.9
21.8
Interest charges (18.5 ) (20.0 ) 1.5
(36.9 ) (40.8 ) 3.9
     Segment earnings (loss) before income taxes (126.8 ) 33.1
(159.9 ) (102.8 ) 44.3
(147.1 )
Income (taxes) benefit 43.5
(2.3 ) 45.8
41.5
(2.0 ) 43.5
Valencia non-controlling interest (3.5 ) (4.1 ) 0.6
(6.3 ) (7.8 ) 1.5
Preferred stock dividend requirements (0.1 ) (0.1 ) —
(0.3 ) (0.3 ) —
Segment earnings (loss) $ (86.9 ) $ 26.5
$ (113.4 ) $ (67.9 ) $ 34.2
$ (102.1 )

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The following table shows total GWh sales, including the impacts of weather, by customer class and average number of customers:

Three Months Ended June 30, Six Months Ended June 30,
Percentage Percentage
2019 2018 Change 2019 2018 Change
(Gigawatt hours, except customers)
Residential 660.6
747.4
(11.6 )% 1,456.2
1,499.1
(2.9 )%
Commercial 933.7
1,017.1
(8.2 ) 1,761.9
1,851.5
(4.8 )
Industrial 266.2
210.1
26.7
516.3
415.8
24.2
Public authority 54.2
61.2
(11.4 ) 103.8
111.5
(6.9 )
Economy energy service ⁽¹⁾
163.9
172.3
(4.9 ) 320.8
343.0
(6.5 )
Other sales for resale 484.4
479.2
1.1
1,359.1
1,160.2
17.1
2,563.0
2,687.3
(4.6 )% 5,518.1
5,381.1
2.5 %
Average retail customers (thousands) 529.6
525.8
0.7 % 529.3
525.3
0.8 %


	Three Months Ended March 31,
			Percentage
	2020	2019	Change
	(Gigawatt hours, except customers)
Residential	768.2	795.5	(3.4)	%
Commercial	838.7	828.2	1.3
Industrial	334.3	250.0	33.7
Public authority	48.5	49.6	(2.2)
Economy energy service ⁽¹⁾	166.5	156.9	6.1

Other sales for resale	605.2	874.7	(30.8)
	2,761.4	2,954.9	(6.5)	%
Average retail customers (thousands)	533.0	529.1	0.8	%

⁽¹⁾ PNM purchases energy for a large customer on the customer’s behalf and delivers the energy to the customer’s location through PNM’s transmission system. PNM charges the customer for the cost of the energy as a direct pass through to the customer with only a minor impact in utility margin resulting from providing ancillary services.

Operating Results – Three ~~months ended June 30, 2019~~Months Ended March 31, 2020 compared to ~~2018~~2019

The following table summarizes the significant changes to utility margin:


		Three Months Ended March 31, 2020
		Change
Utility margin:				(In millions)


	Retail customer usage/load –Weather normalized KWh sales increased 1.1%, due to increased sales to industrial customers	$	0.6
	Weather – Colder weather in 2019; heating degree days were 10.8% lower in 2020	(2.2)
	Leap Year –Increase in revenue due to additional day in 2020	1.8
	Transmission –Increase primarily due to the addition of new customers	0.8



	Rate riders –Includes energy efficiency and the renewable energy rider, which is partially offset in depreciation and amortization below	2.1

	Other	0.5
	Net Change	$	3.6

Three Months Ended
June 30, 2019
Change
Utility margin: (In millions)

Rate relief – Additional revenue due to rate increase approved by the NMPRC effective February 1, 2018 (Note 12)
$ 1.4

Retail customer usage/load – Weather normalized KWh sales decreased 1.3%, primarily due to decreased sales to commercial customers
(2.3 )

Weather – Milder weather in 2019; cooling degree days were 52.8% lower in the second quarter
(14.2 )

Transmission – Decrease due to lower revenues under formula transmission rates, partially offset by the addition of new customers
(1.8 )

Rate riders – Includes renewable energy, fuel clause and energy efficiency riders
(1.2 )
Other (0.7 )
Net Change $ (18.8 )

The following tables summarize the primary drivers for changes in operating expenses, depreciation and amortization, other income (deductions), interest charges, and income taxes:


		Three Months Ended March 31, 2020
		Change
Operating expenses:				(In millions)

	Lower plant maintenance costs at SJGS, PVNGS, and gas-fired plants, partially offset by higher costs at Four Corners	$	(1.6)


	Regulatory disallowance resulting from the NMPRC’s September 28, 2016 order in PNM’s NM 2015 Rate Case (Note 12)	(1.3)

	Lower employee related, and outside service expenses	(4.5)





	Other	(0.5)
	Net Change	$	(7.9)

Table of Contents

Three Months Ended
June 30, 2019
Change
Operating expenses: (In millions)

Higher plant maintenance costs at SJGS and gas-fired plants, partially offset by lower plant maintenance costs at Four Corners and PVNGS $ 1.1
Higher capitalized administrative and general expenses due to higher construction spending (0.5 )
Regulatory disallowance resulting from the NM Supreme Court’s May 2019 decision in PNM’s appeal of the NM 2015 Rate Case (Note 12) 147.5
Higher employee related, outside service, and vegetation management expenses 2.1
Other (1.8 )
Net Change $ 148.4


		Three Months Ended March 31, 2020
		Change

Depreciation and amortization:				(In millions)

	Increased utility plant in service, including solar facilities under the renewable rider	$	2.0
	Other	0.2
	Net Change	$	2.2





Other income (deductions):

	Lower gains on investment securities in the NDT and coal mine reclamation trusts	$	(46.9)
	Lower equity AFUDC	(0.8)


	Lower interest income related to investment securities in the NDT and coal mine reclamation trusts	(0.1)

	Higher pension and OPEB non-service cost expense	(0.7)
	Net Change	$	(48.5)





Interest charges:




	Lower interest on term loan agreements	$	0.2
	Interest on deposit by PNMR Development for transmission interconnections, which is offset in Corporate and Other	0.9
	Other	(0.3)
	Net Change	$	0.8





Income (taxes) benefits:

	Lower segment earnings before income taxes	$	10.0
	Changes in the anticipated effective tax rate, including amortization of excess deferred income taxes (Note 14)	(5.8)


	Other	0.1
	Net Change	$	4.3

Depreciation and amortization:

Increased utility plant in service $ 1.3
Other 0.3
Net Change $ 1.6

Other income (deductions):

Higher gains on investment securities in the NDT and coal mine reclamation trusts $ 6.3
Higher interest income and lower trust expenses related to investment securities in the NDT and coal mine reclamation trusts 1.8
Other (0.6 )
Net Change $ 7.5

Three Months Ended
June 30, 2019
Change
Interest charges: (In millions)

Lower interest on $350.0 million of SUNs refinanced in May 2018 $ 2.0
Lower interest on $100.0 million of SUNs refinanced in August 2018 0.8
Lower debt AFUDC (0.3 )
Higher interest on term loan agreements (0.7 )
Interest on deposit by PNMR Development for potential transmission interconnections, which is offset in Corporate and Other (Note 9) (0.3 )
Net Change $ 1.5

Income taxes:

Lower segment earnings before income taxes $ 40.5
Amortization of excess deferred income taxes due to lower segment earnings before income taxes, excluding discrete items (1.8 )
Reversal of excess deferred income taxes resulting from regulatory disallowances in the NM 2015 Rate Case (Note 12) 7.5
Other (0.4 )
Net Change $ 45.8

~~Operating Results~~ – ~~Six months ended June 30, 2019 compared to 2018~~Table of Contents

~~The following table summarizes the significant changes to utility margin:~~

Six Months Ended
June 30, 2019
Change
Utility margin: (In millions)

Rate relief – Additional revenue due to rate increase approved by the NMPRC effective February 1, 2018 (Note 12)
$ 3.1

Retail customer usage/load - Weather normalized KWh sales decreased 0.1% due to decreased sales to commercial customers, partially offset by increased sales to residential and industrial customers
(1.0 )

Weather – Milder weather in 2019; cooling degree days were 52.8% lower in the second quarter, offset by colder weather in the first quarter
(11.2 )

Transmission – Decrease due to lower revenues under formula transmission rates, partially offset by the addition of new customers
(0.6 )

Rate riders – Includes renewable energy, fuel clause and energy efficiency riders
(4.0 )
Other (0.6 )
Net Change $ (14.3 )

~~The following tables summarize the primary drivers for changes in operating expenses, depreciation and amortization, other income (deductions), interest charges, and income taxes:~~

Six Months Ended
June 30, 2019
Change
Operating expenses: (In millions)

Higher plant maintenance costs at SJGS and gas-fired plants, partially offset by lower plant maintenance costs at Four Corners and PVNGS $ 0.8
Higher capitalized administrative and general expenses due to higher construction spending in 2019 (0.7 )
Accelerated recovery of SNCR technology on SJGS Units 1 and 4 0.3
Regulatory disallowance resulting from the NM Supreme Court’s May 2019 decision in PNM’s appeal of the NM 2015 Rate Case (Note 12) 148.8
Higher employee related, outside service, and vegetation management expenses 6.0
Other (0.8 )
Net Change $ 154.4

Depreciation and amortization:

Increased utility plant in service $ 3.0
Higher depreciation resulting from amortization of stranded costs associated with the retirement of SJGS Units 2 and 3 0.5
Other 0.7
Net Change $ 4.2

Other income (deductions):

Higher gains on investment securities in the NDT and coal mine reclamation trusts $ 20.0
Higher interest income and lower trust expenses related to investment securities in the NDT and coal mine reclamation trusts 2.4
Other (0.6 )
Net Change $ 21.8

Interest charges:

Lower interest on $350.0 million of SUNs refinanced in May 2018 $ 5.9
Lower interest on $100.0 million of SUNs refinanced in August 2018 1.6
Lower debt AFUDC (1.0 )
Higher interest on term loan agreements (1.4 )
Interest on deposit by PNMR Development for potential transmission interconnections, which is offset in Corporate and Other (Note 9) (1.2 )
Net Change $ 3.9

Income taxes:

Lower segment earnings before income taxes $ 37.0
Amortization of excess deferred income taxes due to lower segment earnings before income taxes, excluding discrete items (0.1 )
Reversal of excess deferred income taxes resulting from regulatory disallowances in the NM 2015 Rate Case (Note 12) 7.5
Increase due to lower excess tax benefits related to stock compensation awards (Note 8) (0.5 )
Other (0.4 )
Net Change $ 43.5

TNMP

TNMP defines utility margin as electric operating revenues less cost of energy, which consists of costs charged by third-party transmission providers. TNMP believes that utility margin provides a more meaningful basis for evaluating operations than electric operating revenues since all third-party transmission costs are passed on to consumers through a transmission cost recovery factor. Utility margin is not a financial measure required to be presented under GAAP and is considered a non-GAAP measure.

The following table summarizes the operating results for TNMP:


	Three Months Ended March 31,
	2020		2019		Change
	(In millions)
Electric operating revenues	$	85.5	$	80.3	$	5.2
Cost of energy	24.2		22.3		1.9
Utility margin	61.3		58.0		3.3
Operating expenses	25.1		25.2		(0.1)
Depreciation and amortization	21.8		20.2		1.6
Operating income	14.3		12.6		1.7
Other income (deductions)	0.6		0.6		—
Interest charges	(7.2)		(8.8)		1.6
Segment earnings before income taxes	7.7		4.4		3.3
Income (taxes)	(0.6)		(0.3)		(0.3)
Segment earnings	$	7.1	$	4.1	$	3.0

Three Months Ended June 30, Six Months Ended June 30,
2019 2018 Change 2019 2018 Change
(In millions)
Electric operating revenues $ 92.0
$ 87.8
$ 4.2
$ 172.3
$ 169.4
$ 2.9
Cost of energy 24.9
21.4
3.5
47.2
43.1
4.1
Utility margin 67.1
66.5
0.6
125.1
126.3
(1.2 )
Operating expenses 24.0
23.5
0.5
49.3
48.5
0.8
Depreciation and amortization 20.5
16.1
4.4
40.7
32.5
8.2
Operating income 22.6
26.8
(4.2 ) 35.2
45.4
(10.2 )
Other income (deductions) 0.7
0.8
(0.1 ) 1.3
1.9
(0.6 )
Interest charges (6.6 ) (7.8 ) 1.2
(15.4 ) (15.5 ) 0.1
Segment earnings before income taxes 16.7
19.9
(3.2 ) 21.1
31.7
(10.6 )
Income (taxes) (1.5 ) (4.5 ) 3.0
(1.8 ) (7.0 ) 5.2
Segment earnings $ 15.3
$ 15.4
$ (0.1 ) $ 19.4
$ 24.8
$ (5.4 )

The following table shows total sales, including the impacts of weather, by retail tariff consumer class and average number of consumers:

Three Months Ended June 30, Six Months Ended June 30,
Percentage Percentage
2019 2018 Change 2019 2018 Change
Volumetric load ⁽¹⁾ (GWh)

Residential 736.4
790.2
(6.8 )% 1,355.1
1,447.0
(6.4 )%
Commercial and other 7.6
7.9
(3.8 ) 15.4
16.0
(3.8 )
Total volumetric load 744.0
798.1
(6.8 )% 1,370.5
1,463.0
(6.3 )%
Demand-based load ⁽²⁾(MW)
4,587.5
4,342.7
5.6 % 9,309.5
8,652.9
7.6 %
Average retail consumers (thousands) ⁽³⁾
255.0
251.2
1.5 % 254.4
250.6
1.5 %


	Three Months Ended March 31,
			Percentage
	2020	2019	Change
Volumetric load ⁽¹⁾ (GWh)
Residential	598.7	618.7	(3.2)	%
Commercial and other	8.0	7.9	1.3	%


Total volumetric load	606.7	626.6	(3.2)	%
Demand-based load ⁽²⁾(MW)	4,896.5	4,721.9	3.7	%
Average retail consumers (thousands) ⁽³⁾	257.1	253.8	1.3	%

⁽¹⁾Volumetric load consumers are billed on KWh usage.

⁽²⁾ Demand-based load includes consumers billed on monthly KW peak and also includes retail transmission customers that are primarily billed under TNMP’s rate riders.

⁽³⁾TNMP provides transmission and distribution services to REPs that provide electric service to their customers in TNMP’s service territories. The number of consumers above represents the customers of these REPs. Under TECA, consumers in Texas have the ability to choose any REP to provide energy.

Table of Contents

Operating Results ~~��~~– Three ~~months ended June 30, 2019~~Months Ended March 31, 2020 compared to ~~2018~~2019

The following table summarizes the significant changes to utility margin:


		Three Months Ended March 31, 2020
		Change
Utility margin:				(In millions)


	Rate relief – Transmission cost of service rate increases in March 2019, September 2019, and March 2020	$	4.0
	Retail customer usage/load –Weather normalized KWh sales decreased 0.2%, offset by an increase of 1.3% in the average number of retail consumers and the leap-year impact	—
	Demand-based customer usage/load – Higher demand-based revenues for large commercial and industrial customers; weather normalized billed demand excluding retail transmission customers increased 2.7%	0.7
	Weather – Milder weather in 2020; heating degree days were 23.4% lower in 2020	(1.0)
	Rate Riders – Impacts of rate riders, including the CTC surcharge, energy efficiency rider, rate case expense rider, and transmission cost recovery factor	(0.2)

	Other	(0.2)
	Net Change	$	3.3

Three Months Ended
June 30, 2019
Change
Utility margin: (In millions)

Retail rate relief – TNMP 2018 Rate Case retail rate increase effective January 1, 2019, including integration of amounts previously recovered in the AMS rate rider and the impact of rate design changes between customer classes (Note 12)
$ 1.3

Transmission rate relief - Increase in transmission cost of service rates primarily resulting from current year filings, net of changes resulting from the TNMP 2018 Rate Case (Note 12)
0.8

Retail customer usage/load – Weather normalized KWh sales decreased 0.9%; the average number of retail consumers increased 1.5%
(0.1 )

Demand-based customer usage/load - Higher demand-based revenues for large commercial and industrial customers; billed demand excluding retail transmission customers increased 4.1%.
0.7

Weather – Milder weather in 2019; cooling degree days were 7.5% lower in 2019 resulting from warmer weather in 2018
(1.1 )

Rate Riders – Impacts of rate riders, including the CTC surcharge, energy efficiency rider, and transmission cost recovery factor
(1.0 )
Net Change $ 0.6

The following tables summarize the primary drivers for changes in operating expenses, depreciation and amortization, other income (deductions), interest charges, and income taxes:


		Three Months Ended March 31, 2020
		Change
Operating expenses:				(In millions)


	Lower employee related expenses	$	(0.9)
	Higher vegetation management expenses	0.2
	Lower capitalization of administrative and general and other expenses due to lower construction expenditures	0.1
	Higher property taxes due to increased utility plant in service	0.5

	Net Change	$	(0.1)





Depreciation and amortization:

	Increased utility plant in service	$	1.7



	Net Change	$	1.7





Other income (deductions):


	Lower equity AFUDC	$	(0.1)

	Other	0.1
	Net Change	$	—

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Three Months Ended
June 30, 2019
Change
Operating expenses: (In millions)

Higher employee related expenses $ 0.4
Higher property taxes due to increased utility plant in service 0.1
Net Change $ 0.5

Depreciation and amortization:

Increased utility plant in service $ 1.4
Higher depreciation rates approved in the TNMP 2018 Rate Case 2.2
Amortization of AMS and Hurricane Harvey regulatory assets approved in the TNMP 2018 Rate Case 0.7
Other 0.1
Net Change $ 4.4

Other income (deductions):

Higher equity AFUDC $ 0.2
Lower CIAC (0.3 )
Net Change $ (0.1 )

Three Months Ended
June 30, 2019
Change
Interest charges: (In millions)

Repayment of $172.3 million 9.50% first mortgage bonds in April 2019 (Note 9) $ 4.2
Issuance of $225.0 of long-term debt in March 2019 (Note 9) (2.2 )
Issuance of $60.0 million of long-term debt in June 2018 (0.6 )
Issuance of $20.0 million term loan in July 2018 and $15.0 million in December 2018 (0.3 )
Other 0.1
Net Change $ 1.2

Income taxes:

Lower segment earnings before income taxes $ 0.7
Amortization of excess deferred federal income taxes (Note 14) 2.5
Other (0.2 )
Net Change $ 3.0


		Three Months Ended March 31, 2020
		Change
Interest charges:				(In millions)


	Repayment of $172.3 million 9.50% first mortgage bonds in April 2019	$	4.3
	Issuance of $225.0 million first mortgage bonds in March 2019	(2.2)
	Issuance of $80.0 million first mortgage bonds in July 2019	(0.7)
	Repayment of $35.0 million term loan in December 2019	0.3
	Lower debt AFUDC	(0.1)
	Net Change	$	1.6

~~Operating Results~~ – ~~Six months ended June 30, 2019 compared to 2018~~





Income (taxes) benefits:

	Higher segment earnings before income taxes	$	(0.6)
	Other	0.3

	Net Change	$	(0.3)

~~The following table summarizes the significant changes to utility margin:~~

Six Months Ended
June 30, 2019
Change
Utility margin: (In millions)

Retail rate relief – TNMP 2018 Rate Case retail rate increase effective January 1, 2019, including integration of amounts previously recovered in the AMS rate rider and the impact of rate design changes between customer classes (Note 12)
$ 2.5

Transmission rate relief - Decrease in transmission cost of service rates primarily resulting from the TNMP 2018 Rate Case offset by current year filings
(1.7 )

Retail customer usage/load – Weather normalized KWh sales decreased 1.3%; the average number of retail consumers increased 1.5%
(0.5 )

Demand-based customer usage/load - Higher demand-based revenues for large commercial and industrial customers; billed demand excluding retail transmission customers increased 3.7%.
1.4

Weather – Milder weather in 2019; heating degree days were 18.6% lower in January 2019 resulting from unusually cold weather in January 2018; the mind weather trend continued in the second quarter of 2019 and cooling degree days were 12.6% lower year-to-date in 2019 resulting from warmer weather in 2018
(1.9 )

Rate Riders – Impacts of rate riders, including the CTC surcharge, energy efficiency rider, and transmission cost recovery factor
(1.0 )
Net Change $ (1.2 )

~~The following tables summarize the primary drivers for changes in operating expenses, depreciation and amortization, other income (deductions), interest charges, and income taxes:~~

Six Months Ended
June 30, 2019
Change
Operating expenses: (In millions)

Higher employee related expenses $ 1.3
Higher capitalization of administrative and general expenses due to higher construction expenditures (1.0 )
Higher property taxes due to increased utility plant in service 0.5
Lower vegetation management expenses (0.4 )
Other 0.4
Net Change $ 0.8

Depreciation and amortization:

Increased utility plant in service $ 2.3
Higher depreciation rates approved in the TNMP 2018 Rate Case 4.5
Higher amortization of AMS and Hurricane Harvey regulatory assets approved in the TNMP 2018 Rate Case (Note 12) 1.2
Other 0.2
Net Change $ 8.2

Other income (deductions):

Lower equity AFUDC $ (0.1 )
Lower CIAC (0.5 )
Net Change $ (0.6 )

Interest charges:

Repayment of $172.3 million 9.50% first mortgage bonds in April 2019 (Note 9) $ 4.2
Issuance of $225.0 of long-term debt in March 2019 (Note 9) (2.3 )
Issuance of $60.0 million of long-term debt in June 2018 (1.2 )
Issuance of $20.0 million term loan in July 2018 and $15.0 million in December 2018 (0.6 )
Net Change $ 0.1

Income taxes:

Lower segment earnings before income taxes $ 2.2
Amortization of excess deferred federal income taxes (Note 14) 3.2
Other (0.2 )
Net Change $ 5.2

Corporate and Other

The table below summarizes the operating results for Corporate and Other:


	Three Months Ended March 31,
	2020		2019		Change
	(In millions)
Electric operating revenues	$	—	$	—	$	—
Cost of energy	—		—		—
Utility margin	—		—		—
Operating expenses	(5.5)		(5.8)		0.3
Depreciation and amortization	5.7		5.9		(0.2)
Operating income (loss)	(0.2)		(0.2)		—
Other income (deductions)	(0.6)		(0.8)		0.2
Interest charges	(5.6)		(4.5)		(1.1)
Segment earnings (loss) before income taxes	(6.5)		(5.4)		(1.1)
Income (taxes) benefit	0.2		1.0		(0.8)
Segment earnings (loss)	$	(6.3)	$	(4.4)	$	(1.9)

Three Months Ended June 30, Six Months Ended June 30,
2019 2018 Change 2019 2018 Change
(In millions)
Electric operating revenues $ —
$ —
$ —
$ —
$ —
$ —
Cost of energy —
—
—
—
—
—
Utility margin —
—
—
—
—
—
Operating expenses (5.5 ) (5.4 ) (0.1 ) (11.3 ) (10.4 ) (0.9 )
Depreciation and amortization 5.8
5.7
0.1
11.7
11.4
0.3
Operating income (loss) (0.2 ) (0.4 ) 0.2
(0.4 ) (1.1 ) 0.7
Other income (deductions) (0.1 ) 0.5
(0.6 ) (1.0 ) 2.2
(3.2 )
Interest charges (4.7 ) (5.5 ) 0.8
(9.2 ) (10.0 ) 0.8
Segment earnings (loss) before income taxes (5.1 ) (5.4 ) 0.3
(10.5 ) (8.9 ) (1.6 )
Income (taxes) benefit 0.8
1.7
(0.9 ) 1.9
3.0
(1.1 )
Segment earnings (loss) $ (4.2 ) $ (3.7 ) $ (0.5 ) $ (8.6 ) $ (5.8 ) $ (2.8 )

Corporate and Other operating expenses shown above are net of amounts allocated to PNM and TNMP under shared services agreements. ~~The change in depreciation and amortization expense primarily relates to additions to computer software.~~ Substantially all depreciation and amortization expense and other income (deductions) are offset in operating expenses as a result of allocation of these costs to other business segments.

Operating Results – Three ~~months ended June 30, 2019~~Months Ended March 31, 2020 compared to ~~2018~~2019

The following tables summarize the primary drivers for changes in other income (deductions), interest charges, and income taxes:


		Three Months Ended March 31, 2020
		Change
Other income (deductions):				(In millions)

	Higher equity method investment income from NMRD	$	0.1



	Other	0.1
	Net Change	$	0.2

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Three Months Ended
June 30, 2019
Change
Other income (deductions): (In millions)

Decrease in interest income on the Westmoreland Loan $ (1.0 )
Decrease in donations and other contributions 0.4
Net Change $ (0.6 )

Interest charges:

Issuance of $90.0 million PNMR Development Term Loan in November 2018 (0.8 )
Higher short-term borrowings (0.1 )
Issuance of $50.0 million PNMR 2018 Two-Year Term Loan (0.4 )
Repayment of $100.0 million PNMR 2016 Two-Year Term Loan 0.7
Repayment of the BTMU Term Loan in May 2018 1.1
Elimination of intercompany interest (Note 9) 0.3
Net Change $ 0.8

Income taxes:

Impact of difference in effective tax rates used by PNMR and its subsidiaries in the calculation of income taxes in interim periods $ (0.8 )
Lower segment loss before income taxes (0.1 )
Net Change $ (0.9 )


		Three Months Ended March 31, 2020
		Change
Interest charges:				(In millions)



	Lower interest on term loans	$	0.5


	Higher short-term borrowings	(0.7)
	Elimination of intercompany interest	(0.9)

	Net Change	$	(1.1)

~~Operating Results~~ – ~~Six months ended June 30, 2019 compared to 2018~~





Income (taxes) benefits:

	Impact of difference in effective tax rates used by PNMR and its subsidiaries in the calculation of income taxes in interim periods	$	(1.3)
	Higher segment loss before income taxes	0.3
	Other	0.2
	Net Change	$	(0.8)

~~The following tables summarize the primary drivers for changes in other income (deductions), interest charges, and income taxes:~~

Six Months Ended
June 30, 2019
Change
Other income (deductions): (In millions)

Decrease in interest income on the Westmoreland Loan $ (2.7 )
Increase in donations and other contributions (0.1 )
Other (0.4 )
Net Change $ (3.2 )

Interest charges:

Issuance of $300.0 million PNMR 2018 SUNs in March 2018 $ (1.8 )
Issuance of $90.0 million PNMR Development Term Loan in November 2018 (1.5 )
Issuance of $50.0 million PNMR 2018 Two-Year Term Loan (0.8 )
Lower short-term borrowings 0.3
Repayment of $150.0 million PNMR 2015 Term Loan in March 2018 0.8
Repayment of $100.0 million PNMR 2016 Two-Year Term Loan 1.1
Repayment of the BTMU Term Loan in May 2018 1.8
Elimination of intercompany interest (Note 9) 1.2
Other (0.3 )
Net Change $ 0.8

Income taxes:

Impact of difference in effective tax rates used by PNMR and its subsidiaries in the calculation of income taxes in interim periods $ (1.7 )
Larger segment loss before income taxes 0.4
Other 0.2
Net Change $ (1.1 )

LIQUIDITY AND CAPITAL RESOURCES

Statements of Cash Flows

The changes in PNMR’s cash flows for the ~~six~~three months ended ~~June 30, 2019~~March 31, 2020 compared to ~~June 30, 2018~~March 31, 2019 are summarized as follows:


	Six Months Ended June 30,										Three Months Ended March 31,
	2019			2018			Change				2020		2019		Change
	(In millions)										(In millions)
Net cash flows from:										Net cash flows from:
Operating activities	$	171.9		$	133.9		$	38.0		Operating activities	$	93.8	$	104.7	$	(10.9)
Investing activities	(312.1		)	(200.3		)	(111.8		)	Investing activities	(152.8)		(151.9)		(0.9)
Financing activities	142.4			67.3			75.1			Financing activities	71.5		225.2		(153.7)
Net change in cash and cash equivalents	$	2.1		$	0.9		$	1.2		Net change in cash and cash equivalents	$	12.4	$	178.0	$	(165.6)

Cash Flows from Operating Activities

Changes in PNMR’s cash flow from operating activities result from net earnings, adjusted for items impacting earnings that do not provide or use cash. See Results of Operations above. Certain changes in assets and liabilities resulting from normal operations, including the effects of the seasonal nature of the Company’s operations, also impact operating cash flows.

Cash Flows from Investing Activities

The changes in PNMR’s cash flows from investing activities relate primarily to changes in utility plant additions. Cash flows from investing activities ~~also~~ include purchases and sales of investment securities in the NDT and coal mine reclamation trusts ~~including activity to rebalance the investment portfolio in early 2018. In addition, cash flows from investing activities include~~as well as activity related to ~~the Westmoreland Loan, which was paid in full in May 2018, and~~ NMRD. Major components of PNMR’s cash inflows and (outflows) from investing activities are shown below:

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	Six Months Ended June 30,										Three Months Ended March 31,
	2019			2018			Change				2020		2019		Change
Cash (Outflows) for Utility Plant Additions	(In millions)									Cash (Outflows) for Utility Plant Additions	(In millions)
PNM:										PNM:
Generation	$	(36.3	)	$	(35.8	)	$	(0.5	)	Generation	$	(11.5)	$	(22.1)	$	10.6
Renewables	(31.7		)	—			(31.7		)	Renewables	—		(18.5)		18.5
Transmission and distribution	(78.2		)	(63.7		)	(14.5		)	Transmission and distribution	(50.2)		(29.2)		(21.0)
Four Corners SCRs	—			(6.9		)	6.9

Nuclear fuel	(11.7		)	(13.9		)	2.2			Nuclear fuel	(8.9)		(6.1)		(2.8)
											(70.6)		(75.9)		5.3
	(157.9		)	(120.3		)	(37.6		)
TNMP:										TNMP:
Transmission	(47.1		)	(51.2		)	4.1			Transmission	(16.3)		(27.5)		11.2
Distribution	(77.3		)	(64.2		)	(13.1		)	Distribution	(44.1)		(31.1)		(13.0)
	(124.4		)	(115.4		)	(9.0		)
											(60.4)		(58.6)		(1.8)

Corporate and Other:										Corporate and Other:
Computer hardware and software	(10.8		)	(9.9		)	(0.9		)	Computer hardware and software	(9.2)		(7.4)		(1.8)

Total cash (outflows) for additions to utility plant	$	(293.1	)	$	(245.6	)	$	(47.5	)	Total cash (outflows) for additions to utility plant	$	(140.2)	$	(141.9)	$	1.7


Other Cash Flows from Investing Activities										Other Cash Flows from Investing Activities
Proceeds from sales of investment securities	$	234.0		$	794.1		$	(560.1	)	Proceeds from sales of investment securities	$	149.4	$	74.5	$	74.9
Purchases of investment securities	(239.6		)	(797.3		)	557.7			Purchases of investment securities	(152.1)		(77.4)		(74.7)
Principal payments on the Westmoreland Loan	—			56.6			(56.6		)

Investments in NMRD	(13.3		)	(8.0		)	(5.3		)	Investments in NMRD	(10.0)		(7.0)		(3.0)
Other, net	(0.1		)	(0.1		)	—			Other, net	0.1		(0.1)		0.2
Total cash (outflows) from investing activities	$	(312.1	)	$	(200.3	)	$	(111.8	)	Total cash (outflows) from investing activities	$	(152.8)	$	(151.9)	$	(0.9)

Cash Flow from Financing Activities

The changes in PNMR’s cash flows from financing activities include:

•Short-term borrowings increased ~~$106.5~~$115.5 million in ~~2019~~2020 compared to a decrease of ~~$22.8~~$12.1 million in ~~2018,~~2019, resulting in a net increase in cash flows from financing activities of ~~$129.3~~$127.6 million

•In 2019, PNM borrowed $250.0 million under the PNM 2019 Term Loan and used the proceeds to repay the $200.0 million PNM 2017 Term Loan

•In 2019, TNMP issued $225.0 million of TNMP 2019 Bonds ~~used the proceeds to repay TNMP’s $172.3 million 9.50% first mortgage bonds~~

~~In 2018, PNMR issued $300.0 million aggregate principal amount of 3.250% SUNs and used the proceeds to repay the $150.0 million PNMR 2015 Term Loan Agreement and to reduce short-term borrowings~~

~~In 2018, PNM issued $350.0 million of SUNs and repaid $350.0 million of 7.95% of SUNs~~

~~NM Capital made principal payments on the BTMU Term Loan Agreement of $50.1 million in 2018~~

~~In 2018, TNMP issued $60.0 million of 3.85% first mortgage bonds and used the proceeds to reduce short-term debt~~

Financing Activities

See Note 7 of the Notes to Consolidated Financial Statements in the ~~2018~~2019 Annual Reports on Form 10-K and Note 9 for additional information concerning the Company’s financing activities. PNM must obtain NMPRC approval for any financing transaction having a maturity of more than 18 months. In addition, PNM files its annual short-term financing plan with the NMPRC. The Company’s ability to access the credit and capital markets at a reasonable cost is largely dependent upon its:

•Ability to earn a fair return on equity

•Results of operations

•Ability to obtain required regulatory approvals

•Conditions in the financial markets

•Credit ratings

The Company is closely monitoring developments and is taking steps to mitigate the potential risks related to COVID-19. The Company currently believes it has adequate liquidity but cannot predict the extent or duration of the outbreak, its effects on the global, national or local economy, including the Company's ability to access capital in the financial markets, or on the Company's financial position, results of operations, and cash flows.

Each of the Company’s revolving credit facilities and term loans contain a single financial covenant that requires the maintenance of a debt-to-capitalization ratio. For the PNMR and PNMR Development agreements, this ratio must be maintained at less than or equal to 70%, and for the PNM and TNMP agreements this ratio must be maintained at less than or equal to 65%. The Company’s revolving credit facilities and term loans generally also contain customary covenants, events of default, cross-default provisions, and change-of-control provisions. The Company is in compliance with its debt covenants.

On October 21, 2016, PNMR entered into letter of credit arrangements with JPMorgan Chase Bank, N.A. (the “JPM LOC Facility”) under which letters of credit aggregating $30.3 million were issued to facilitate the posting of reclamation

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bonds, which WSJ LLC is required to post in connection with permits relating to the operation of the San Juan ~~mine (Note 11).~~mine. See Notes 10 and 11.

OnAs discussed in Note 9, in January ~~18, 2019,~~2020, PNMR entered into forward sale agreements to sell approximately 6.2 million shares of PNMR common stock. The initial forward sale price of $47.21 per share is subject to adjustments based on a net interest rate factor and by expected future dividends paid on PNMR common stock as specified in the forward sale agreements. PNMR did not initially receive any proceeds upon the execution of these agreements and, except in certain specified circumstances, has the option to elect physical, cash, or net share settlement on or before the date that is 12 months from their effective dates. PNMR expects to physically settle all shares under the agreements on or before January 7, 2021.

In April 2020, PNM entered into athe $250.0 million ~~term loan agreement (the “PNM 2019~~PNM 2020 Term ~~Loan”) among PNM, the lenders identified therein,~~Loan and ~~U.S. Bank N.A., as administrative agent. PNM~~ used the proceeds to prepay the PNM 2019 $250.0 million Term Loan, without penalty. As discussed below, on April 30, 2020, PNM used $100.0 million of proceeds from the PNM 2020 SUNs to prepay without penalty an equal amount of the PNM ~~2019~~2020 Term Loan to repay the PNM 2017 Term Loan, to reduce short-term borrowings under the PNM Revolving Credit Facility, and for general corporate purposes. The PNM 2019 Term Loan bears interest at a variable rate and must be repaid on or before July 17, 2020.Loan.

On ~~February 26, 2019,~~April 24, 2020, TNMP entered into the TNMP ~~2019~~2020 Bond Purchase Agreement with institutional investors for the sale of ~~$305.0~~$185.0 million aggregate principal amount of four series of TNMP first mortgage bonds (the ~~“TNMP 2019 Bonds”~~"TNMP 2020 Bonds") offered in private placement transactions. ~~Under the TNMP 2019 Bond Purchase Agreement,~~ TNMP issued ~~$225.0~~$110.0 million of ~~the~~ TNMP ~~2019~~2020 Bonds on March 29, 2019 (at fixed annual interest rates ranging from 3.79% to 4.06% for terms ranging from 15 to 25 years) and used the proceeds to repay TNMP’s $172.3 million 9.50% first mortgage bonds at their maturity on April 1, 2019, as well as to repay borrowings under the TNMP Revolving Credit Facility and for general corporate purposes. TNMP issued the remaining $80.0 million of the TNMP 2019 Bonds on July 1, 2019 (at a fixed annual interest rate of 3.60% for a term of ten years)24, 2020 and used the proceeds to repay borrowings under the TNMP Revolving Credit Facility and for ~~general~~other corporate purposes. TNMP will issue the remaining $75.0 million of TNMP 2020 Bonds on or before July 15, 2020 and will use the proceeds from that issuance to repay borrowings under the TNMP Revolving Credit Facility and for other corporate purposes. The issuance of the remaining TNMP 2020 Bonds is subject to the satisfaction of customary conditions, and the TNMP 2020 Bonds are subject to continuing compliance with the representations, warranties and covenants of the TNMP 2020 Bond Purchase Agreement. The terms of the TNMP ~~2019 Bonds contain~~2020 Bond Purchase Agreement include customary covenants, including a covenant that requires TNMP to maintain a debt-to-capitalization ratio of less than or equal to 65%, customary events of default, a cross-default provision, and a change-of-control provision. TNMP will have the right to redeem any or all of the TNMP ~~2019~~2020 Bonds prior to their respective maturities, subject to payment of a customary make-whole premium.

On April 30, 2020, PNM issued $200.0 million aggregate principal amount of PNM 2020 SUNs offered in private placement transactions. PNM used $100.0 million of proceeds from the PNM 2020 SUNs to repay an equal amount of the PNM 2020 Term Loan. The remaining $100.0 million of the PNM 2020 SUNs was used to repay borrowings on the PNM Revolving Credit Facility and for other corporate purposes. The PNM 2020 Note Purchase Agreement includes customary covenants, including a covenant that requires PNM to maintain a debt-to-capitalization ratio of less than or equal to 65%, customary events of default, including a cross-default provision, and covenants regarding parity of financial covenants, liens and guarantees with respect to PNM’s material credit facilities. In ~~accordance with GAAP, borrowings under~~ the ~~$172.3 million 9.50% TNMP first mortgage bonds are reflected as being long-term in~~event of a change of control, PNM will be required to offer to prepay the ~~Condensed Consolidated Balance Sheets~~PNM 2020 SUNs at ~~December 31, 2018 since TNMP demonstrated its intent and ability~~par. PNM has the right to ~~re-finance~~redeem any or all of the ~~agreement on~~PNM 2020 SUNs prior to their maturities, subject to payment of a ~~long-term basis.~~customary make-whole premium.

See discussion of the NMPRC's April 1, 2020 approval of PNM’s request to issue up to $361 million of Securitized Bonds in the SJGS Abandonment Application, and the related appeal to the NM Supreme Court in Note ~~12, which includes a request to issue approximately $361 million of energy transition bonds, as provided by the ETA, upon the proposed retirement of SJGS in 2022.~~12.

In 2017, PNMR entered into three separate four-year hedging agreements whereby it effectively established fixed interest rates on three separate tranches, each of $50.0 million, of its variable rate debt. The hedging agreements effectively fix interest rates on the aggregate $150.0 million of short-term debt at rates of 1.926%, 1.823%, and 1.629%, plus customary spreads over LIBOR, and are subject to changes if there is a change in PNMR’s credit rating.

Capital Requirements

PNMR’s total capital requirements consist of construction expenditures, cash dividend requirements for PNMR common stock and PNM preferred stock, and capital contributions for PNMR Development’s 50% ownership interest in NMRD. Key activities in PNMR’s current construction program include:

•Upgrading and replacing generation resources ~~including expenditures for compliance with environmental requirements~~ and for renewable energy resources

•Expanding the electric transmission and distribution systems

•Purchasing nuclear fuel

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Projected capital requirements, including amounts expended through ~~June 30, 2019,~~March 31, 2020, are:


	2020		2021-2024		Total
	(In millions)
Construction expenditures	$	826.4	$	3,004.6	$	3,831.0
Capital contributions to NMRD	27.0		—		27.0
Dividends on PNMR common stock	98.0		422.3		520.3
Dividends on PNM preferred stock	0.5		2.1		2.6
Total capital requirements	$	951.9	$	3,429.0	$	4,380.9

2019 2020-2023 Total
(In millions)
Construction expenditures $ 605.2
$ 2,913.4
$ 3,518.6
Capital contributions to NMRD 29.9
33.6
63.5
Dividends on PNMR common stock 92.4
369.6
462.0
Dividends on PNM preferred stock 0.5
2.1
2.6
Total capital requirements $ 728.0
$ 3,318.7
$ 4,046.7

The construction expenditure estimates are under continuing review and subject to ongoing adjustment, as well as to Board review and approval. The construction expenditures above include ~~$60.0 million for 50 MW of new solar facilities included in PNM’s 2018 renewable energy procurement plan, and approximately $131.3~~$91.8 million in ~~2019-2020~~2020-2021 for anticipated expansions of PNM’s transmission ~~system. Also included in the table above is~~system and a net ~~amount~~investment of approximately $285 million ~~in 2021 for~~resulting from PNM’s ~~May 1, 2019~~ agreement to purchase ~~a 165-mile 345 kV transmission line and to construct associated facilities (the “Western~~the Western Spirit ~~Line”),~~Line, subject to ~~NMPRC and FERC approval.~~certain conditions being met prior to closing. Also included in the table above are approximately $298 million in 2020-2022 for ~~proposed~~PNM's recommended SJGS replacement ~~generation resources~~resource scenario included in ~~PNM’s~~the SJGS Abandonment Application as discussed in Note 12. Not included in the table above are potential incremental expenditures for new customer growth in New Mexico and Texas, and other transmission and renewable energy expansion in New Mexico. The ability of PNMR to pay dividends on its common stock is dependent upon the ability of PNM and TNMP to ~~be able to~~ pay dividends to PNMR. Note 56 of the Notes to Consolidated Financial Statements in the ~~2018~~2019 Annual Reports on Form 10-K describes regulatory and contractual restrictions on the payment of dividends by PNM and TNMP.

During the ~~six~~three months ended ~~June 30, 2019~~,March 31, 2020, PNMR met its capital requirements and construction expenditures through cash generated from operations, as well as its liquidity arrangements and the borrowings discussed in Financing Activities above.

In addition to the capital requirements for construction expenditures and dividends, the Company has long-term debt and term loans that must be paid or refinanced at maturity. ~~The $150.0 million PNMR 2018 One-Year Term Loan will mature in December 2019.~~ PNM has $100.3 million of long-term debt that must be repriced by June ~~2020 and~~2020. In addition, the ~~$250.0~~$90.0 million ~~PNM 2019~~PNMR Development Term Loan matures in ~~July 2020. In addition,~~November 2020, the ~~$35.0~~$50.0 million ~~TNMP~~PNMR 2018 Two-Year Term Loan matures in ~~July 2020. The Company has no other long-term debt due through August 31, 2020.~~December 2020, and the $300.0 million PNMR 2018 SUNs mature on March 9, 2021. Note 7 of the Notes to Consolidated Financial Statements in the ~~2018~~2019 Annual Reports on Form 10-K contains additional information about the maturities of long-term debt. The Company anticipates that funds to repay long-term debt maturities and term loans will come from entering into new arrangements similar to the existing agreements, borrowing under the revolving credit facilities, issuance of new long-term debt or equity in the public or private capital markets, or a combination of these sources. The Company has from time to time refinanced or repurchased portions of its outstanding debt before scheduled maturity. PNM has $36.0 million of PCRBs that became callable at par on January 1, 2020 and an additional $266.5 million of PCRBs that will become callable at par on June 1, 2020. Depending on market conditions, the Company may refinance ~~other~~these debt issuances or make additional debt repurchases in the future.

Liquidity

PNMR’s liquidity arrangements include the PNMR Revolving Credit Facility, the PNM Revolving Credit Facility, and the TNMP Revolving Credit Facility. The PNMR and PNM facilities currently expire onin October ~~22,~~ 2023 but can be extended through October 2024, subject to approval by a majority of the lenders. The $75.0 million TNMP Revolving Credit Facility matures in September 2022. PNM also has the $40.0 million PNM 2017 New Mexico Credit Facility that expires onin December ~~12,~~ 2022. The Company believes the terms and conditions of these facilities are consistent with those of other investment grade revolving credit facilities in the utility industry. The Company expects that it will be able to extend or replace these credit facilities under similar terms and conditions prior to their expirations.

~~On February 22, 2019,~~ PNMR Development ~~amended its~~has a $40.0 million revolving credit facility ~~to increase the capacity to $25.0 million and to extend the term until~~that expires on February ~~24, 2020. On July 22, 2019, the~~23, 2021. PNMR Development ~~Revolving Credit Facility was amended to increase the capacity to $40.0 million with~~has the option to further increase the capacity of this facility to $50.0 million upon 15-days ~~advance~~advanced notice. The ~~facility will continue to have the expiration date of February 24, 2020. The facility~~PNMR Development Revolving Credit Facility bears interest at a variable rate and contains terms similar to the PNMR Revolving Credit Facility. PNMR has guaranteed the obligations of PNMR Development under the facility. PNMR Development uses the facility to finance its participation in NMRD and for other ~~activities (Note 1).~~activities. See Note 16. The Company believes the terms and conditions of these facilities are consistent with those of other investment grade revolving credit facilities in the utility industry. Variable interest rates under these facilities are based on LIBOR but contain provisions which allow for the replacement of LIBOR with other widely accepted interest rates. The Company expects that it will be able to extend or replace these credit facilities under similar terms and conditions prior to their expirations.

The revolving credit facilities and the PNM 2017 New Mexico Credit Facility provide short-term borrowing capacity. The revolving credit facilities also allow letters of credit to be issued. Letters of credit reduce the available capacity under the facilities. The Company utilizes these credit facilities and cash flows from operations to provide funds for both construction and operational

expenditures. The Company’s business is seasonal with more revenues and cash flows from operations being generated in the summer months. In general, the Company relies on the credit facilities to be the initial funding source for

Table of Contents

construction expenditures. Accordingly, borrowings under the facilities may increase over time. Depending on market and other conditions, the Company will periodically sell long-term debt and use the proceeds to reduce the borrowings under the credit facilities.

Information regarding the range of borrowings for each facility is as follows:


	Three Months Ended June 30, 2019				Six Months Ended June 30, 2019					Three Months Ended March 31, 2020
Range of Borrowings	Low		High		Low		High		Range of Borrowings	Low		High
	(In millions)									(In millions)
PNM:									PNM:
PNM Revolving Credit Facility	$	—	$	27.2	$	—	$	40.0	PNM Revolving Credit Facility	$	30.0	$	63.2
PNM 2017 New Mexico Credit Facility	—		15.0		—		15.0		PNM 2017 New Mexico Credit Facility	10.0		30.0
TNMP Revolving Credit Facility	7.5		55.0		—		55.0		TNMP Revolving Credit Facility	16.6		70.0
PNMR Revolving Credit Facility	50.8		84.5		20.0		84.5		PNMR Revolving Credit Facility	110.5		188.6
PNMR Development Revolving Credit Facility	11.6		21.9		6.0		21.9



Registrant	Title of each class	Trading Symbol(s)	Name of exchange on which registered
PNM Resources, Inc.	Common Stock, no par value	PNM	New York Stock Exchange



	Page No.
GLOSSARY		4
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
PNM RESOURCES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Earnings (Loss)		78
Condensed Consolidated Statements of Comprehensive Income (Loss)		89
Condensed Consolidated Statements of Cash Flows		910
Condensed Consolidated Balance Sheets		1112
Condensed Consolidated Statements of Changes in Equity		1314
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
Condensed Consolidated Statements of Earnings (Loss)		1415
Condensed Consolidated Statements of Comprehensive Income (Loss)		1516
Condensed Consolidated Statements of Cash Flows		1617
Condensed Consolidated Balance Sheets		1819
Condensed Consolidated Statements of Changes in Equity		2021
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
Condensed Consolidated Statements of Earnings		2122

Condensed Consolidated Statements of Cash Flows		2223
Condensed Consolidated Balance Sheets		2324
Condensed Consolidated Statements of Changes in Common Stockholder’s Equity		2526
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS		2627
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		8276
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		~~118~~106
ITEM 4. CONTROLS AND PROCEDURES		~~120~~108
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS		~~120~~109
ITEM 1A. RISK FACTORS		~~121~~109
ITEM ~~6. EXHIBITS~~5. OTHER INFORMATION		~~121~~110
~~SIGNATURE~~ITEM 6. EXHIBITS		~~122~~110
SIGNATURE		112


Definitions:

~~Definitions:~~
~~2014 IRP~~	~~PNM’s 2014 IRP~~
2017 IRP		PNM’s 2017 IRP
ABCWUA			Albuquerque Bernalillo County Water Utility Authority

AEP OnSite Partners			AEP OnSite Partners, LLC, a subsidiary of American Electric Power, Inc.
Afton			Afton Generating Station
AFUDC			Allowance for Funds Used During Construction
~~AMS~~
AMI			Advanced Metering Infrastructure
AMS			Advanced Meter System
~~AOCI~~
AOCI			Accumulated Other Comprehensive Income
~~APS~~
APS			Arizona Public Service Company, the operator and a co-owner of PVNGS and Four Corners
~~ASU~~
ASU			Accounting Standards Update
~~BART~~August 2016 RD			Recommended Decision in PNM’s NM 2015 Rate Case issued by the Hearing Examiner on August 4, 2016
BART			Best Available Retrofit Technology
BDT			Balanced Draft Technology
~~Board~~
Board			Board of Directors of PNMR
BSER			Best System of ~~Emission~~Emissions Reduction Technology
~~BTMU~~			~~MUFG Bank Ltd., formerly the Bank of Tokyo-Mitsubishi UFJ, Ltd.~~
~~BTMU Term Loan~~			~~NM Capital’s $125.0 Million Unsecured Term Loan~~
~~CAA~~
CAA			Clean Air Act
CARES Act			Coronavirus Aid, Relief, and Economic Security Act
Casa Mesa Wind			Casa Mesa Wind Energy Center
CCN			Certificate of Convenience and Necessity
CCR			Coal Combustion Residuals
~~CIAC~~CFRE			Citizens for Fair Rates and the Environment
CIAC			Contributions in Aid of Construction
CO₂			Carbon Dioxide
CSA			Coal Supply Agreement
CTC			Competition Transition Charge
DC Circuit			United States Court of Appeals for the District of Columbia Circuit
~~December 2018 Compliance Filing~~			~~PNM’s December 31, 2018 filing with the NMPRC regarding SJGS~~
DOE			United States Department of Energy
DOI			United States Department of Interior
EGU			Electric Generating Unit
EIM			California Independent System Operator Western Energy Imbalance Market
EIS			Environmental Impact Study
EPA			United States Environmental Protection Agency
~~ESA~~
ERCOT			Electric Reliability Council of Texas
ESA			Endangered Species Act
ETA			The New Mexico Energy Transition Act
Exchange Act			Securities Exchange Act of 1934
Farmington			The City of Farmington, New Mexico
FASB			Financial Accounting Standards Board
FERC			Federal Energy Regulatory Commission

Four Corners			Four Corners Power Plant
~~FPPAC~~
FPPAC			Fuel and Purchased Power Adjustment Clause
FTY			Future Test Year
GAAP			Generally Accepted Accounting Principles in the United States of America
GHG			Greenhouse Gas Emissions
GWh			Gigawatt hours
~~IRP~~
IRC			Internal Revenue Code
IRP			Integrated Resource Plan
IRS			Internal Revenue Service
kV			~~Kilovolt~~
KWkV			Kilovolt
KW			Kilowatt
KWh			Kilowatt Hour
La Luz			La Luz Generating Station
LIBOR			London Interbank Offered Rate


Lordsburg
~~Lordsburg~~	Lordsburg Generating Station
Los Alamos		The Incorporated County of Los Alamos, New Mexico
Luna		Luna Energy Facility
MD&A		Management’s Discussion and Analysis of Financial Condition and Results of Operations
MMBTU		Million ~~BTUs~~British Thermal Units
Moody’s		Moody’s Investor Services, Inc.
MW
MW		Megawatts
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
~~NEE~~
NEE		New Energy Economy
NEPA		National Environmental Policy Act
NERC		North American Electric Reliability Corporation
New Mexico Wind		New Mexico Wind Energy Center
NM 2015 Rate Case		Request for a General Increase in Electric Rates Filed by PNM on August 27, 2015
NM 2016 Rate Case		Request for a General Increase in Electric Rates Filed by PNM on December 7, 2016
NM AREA		New Mexico Affordable Reliable Energy Alliance, formerly New Mexico Industrial Energy Consumers Inc.
NM Capital		NM Capital Utility Corporation, an unregulated wholly-owned subsidiary of PNMR, now known as New Mexico PPA Corporation
NM District Court		United States District Court for the District of New Mexico
NM Supreme Court		New Mexico Supreme Court
~~NMED~~
NMED		New Mexico Environment Department
~~NMIEC~~		~~New Mexico Industrial Energy Consumers Inc.~~
NMMMD		The Mining and Minerals Division of the New Mexico Energy, Minerals and Natural Resources Department
NMPRC		New Mexico Public Regulation Commission
NMRD		NM Renewable Development, LLC, owned 50% each by PNMR Development and AEP OnSite Partners, LLC
NOx		Nitrogen Oxides
NOPR		Notice of Proposed Rulemaking
NPDES		National Pollutant Discharge Elimination System
NRC		United States Nuclear Regulatory Commission
~~NSR~~NSPS		New Source Performance Standards
NSR		New Source Review
NTEC		Navajo Transitional Energy Company, LLC, an entity owned by the Navajo Nation
OCI		Other Comprehensive Income
OPEB		Other Post-Employment Benefits
OSM		United States Office of Surface Mining Reclamation and Enforcement

PCRBs		Pollution Control Revenue Bonds
PNM		Public Service Company of New Mexico and Subsidiaries



PNM 2017 New Mexico Credit Facility		PNM’s $40.0 Million Unsecured Revolving Credit Facility

PNM 2017 Term Loan		PNM’s $200.0 Million Unsecured Term Loan

PNM 2019 $40.0 Million Term Loan		PNM's $40.0 Million Unsecured Term Loan
PNM 2019 $250.0 Million Term Loan		PNM’s $250.0 Million Unsecured Term Loan, which was repaid on April 15, 2020

PNM 2020 Note Purchase Agreement		PNM's Agreement for the sale of PNM 2020 SUNs
PNM 2020 SUNs		PNM's $200.0 million Senior Unsecured Notes issued on April 30, 2020
PNM 2020 Term Loan		PNM’s $250.0 million Unsecured Term Loan issued on April 15, 2020, of which $100.0 million was repaid on April 30, 2020


PNM Revolving Credit Facility						PNM’s $400.0 Million Unsecured Revolving Credit Facility
PNMR						PNM Resources, Inc. and Subsidiaries



PNMR 2018 One-Year Term Loan						PNMR’s $150.0 Million One-Year Unsecured Term Loan
PNMR 2018 SUNS						PNMR’s $300.0 Million Senior Unsecured Notes issued on March 9, 2018
PNMR 2018 Two-Year Term Loan						PNMR’s $50.0 Million Two-Year Unsecured Term Loan
PNMR 2019 Term Loan						PNMR's $150.0 Million Two-Year Unsecured Term Loan
PNMR 2020 Forward Equity Sale Agreements						PNMR's Block Equity Sale of 6.2 million Shares of PNMR Common Stock with Forward Equity Sales Agreements
PNMR Development						PNMR Development and Management Company, an unregulated wholly-owned subsidiary of PNMR
PNMR Development Revolving Credit Facility						PNMR Development’s $40.0 Million Unsecured Revolving Credit Facility
PNMR Development Term Loan						PNMR Development’s $90.0 Million Unsecured Term Loan



☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


Lightning Dock Geothermal						Lightning Dock geothermal power facility, also known as the Dale Burgett Geothermal Plant



PNMR Revolving Credit Facility						PNMR’s $300.0 Million Unsecured Revolving Credit Facility
~~PPA~~
PPA						Power Purchase Agreement
~~PSD~~
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, as amended by the ETA
REC						Renewable Energy Certificates
Red Mesa Wind						Red Mesa Wind Energy Center
REP						Retail Electricity Provider

Rio Bravo						Rio Bravo Generating Station ~~formerly known as Delta~~
~~ROE~~RMC						Risk Management Committee
ROE						Return on Equity
RPS						Renewable Energy Portfolio Standard

S&P						Standard and Poor’s Ratings Services
~~SEC~~


SEC						United States Securities and Exchange Commission
SIP						State Implementation Plan
SJCC						San Juan Coal Company
SJGS						San Juan Generating Station
SJGS Abandonment Application						PNM’s July 1, 2019 consolidated application seeking NMPRC approval to retire PNM’s share of SJGS in 2022, for related replacement generating resources, and for the issuance of securitized bonds under the ETA
SJGS CSA						San Juan Generating Station Coal Supply Agreement
SJGS RA						San Juan Project Restructuring Agreement
~~SNCR~~
SNCR						Selective Non-Catalytic Reduction
SO₂						Sulfur Dioxide


Tax Act						Federal tax reform legislation enacted on December 22, 2017, commonly referred to as the Tax Cuts and Jobs Act
~~TECA~~
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 2018 Rate Case						TNMP’s General Rate Case Application Filed May 30, 2018
~~TNMP 2018 Term Loan~~						~~TNMP’s $35.0 Million Unsecured Term Loan~~
TNMP 2019 Bonds						TNMP’s First Mortgage Bonds issued under the TNMP 2019 Bond Purchase Agreement

TNMP ~~2019~~2020 Bond Purchase Agreement						An agreement under which TNMP ~~issued~~agreed to issue an aggregate of ~~$305.0~~$185.0 Million of First Mortgage Bonds in ~~2019~~2020
TNMP 2020 Bonds						TNMP's First Mortgage Bonds issued under the TNMP 2020 Bond Purchase Agreement


TNMP Revolving Credit Facility						TNMP’s $75.0 Million Secured Revolving Credit Facility
~~Tri-State~~
Tri-State						Tri-State Generation and Transmission Association, Inc.
Tucson						Tucson Electric Power Company
UAMPS						Utah Associated Municipal Power Systems

U.S						The United States of America
US Supreme Court						United States Supreme Court
Valencia						Valencia Energy Facility
~~VIE~~
VIE						Variable Interest Entity
~~WEG~~						~~WildEarth Guardians~~

Western Spirit Line						A 165-mile ~~345 kV~~345-kV transmission line that PNM has agreed to purchase, subject to ~~regulatory approval~~certain conditions being met prior to closing
Westmoreland						Westmoreland Coal Company
~~Westmoreland Loan~~						~~$125.0 Million of funding provided by NM Capital to WSJ~~
WSJ						Westmoreland San Juan, LLC, formerly an indirect wholly-owned subsidiary of Westmoreland, and former owner of SJCC
WSJ LLC						Westmoreland San Juan Mining, LLC, a subsidiary of Westmoreland Mining Holdings, LLC, and current owner of SJCC



	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
	(In thousands, except per share amounts)
Electric Operating Revenues:
Contracts with customers	$	314,917		$	338,659		$	630,614		$	642,010
Alternative revenue programs	5,844			5,660			6,480			6,584
Other electric operating revenue	9,467			7,994			42,778			21,597
Total electric operating revenues	330,228			352,313			679,872			670,191
Operating Expenses:
Cost of energy	83,782			87,711			205,408			180,267
Administrative and general	42,833			43,355			95,170			91,638
Energy production costs	42,905			41,888			77,977			77,238
Regulatory disallowances and restructuring costs	149,254			1,794			150,599			1,794
Depreciation and amortization	66,065			60,063			131,421			118,785
Transmission and distribution costs	19,195			18,450			35,872			35,406
Taxes other than income taxes	19,809			19,723			40,317			39,602
Total operating expenses	423,843			272,984			736,764			544,730
Operating income (loss)	(93,615		)	79,329			(56,892		)	125,461
Other Income and Deductions:
Interest income	3,460			4,339			7,048			8,462
Gains (losses) on investment securities	4,599			(1,670		)	18,613			(1,382		)
Other income	3,350			4,796			6,795			8,265
Other (deductions)	(3,117		)	(5,868		)	(6,369		)	(7,243		)
Net other income and deductions	8,292			1,597			26,087			8,102
Interest Charges	29,791			33,321			61,425			66,376
Earnings (Loss) before Income Taxes	(115,114		)	47,605			(92,230		)	67,187
Income Taxes (Benefits)	(42,831		)	5,156			(41,608		)	5,939
Net Earnings (Loss)	(72,283		)	42,449			(50,622		)	61,248
(Earnings) Attributable to Valencia Non-controlling Interest	(3,499		)	(4,109		)	(6,328		)	(7,786		)
Preferred Stock Dividend Requirements of Subsidiary	(132		)	(132		)	(264		)	(264		)
Net Earnings (Loss) Attributable to PNMR	$	(75,914	)	$	38,208		$	(57,214	)	$	53,198
Net Earnings (Loss) Attributable to PNMR per Common Share:
Basic	$	(0.95	)	$	0.48		$	(0.72	)	$	0.67
Diluted	$	(0.95	)	$	0.48		$	(0.72	)	$	0.67
Dividends Declared per Common Share	$	0.290		$	0.265		$	0.580		$	0.530


	March 31, 2020		December 31, 2019
	(In thousands)
ASSETS
Current Assets:
Cash and cash equivalents	$	16,249	$	3,833
Accounts receivable, net of allowance for credit losses of $1,414 and $1,163	83,089		85,889
Unbilled revenues	45,379		57,416
Other receivables	13,954		12,165

Materials, supplies, and fuel stock	74,124		77,929
Regulatory assets	7,355		7,373

Income taxes receivable	4,856		4,933

Other current assets	42,956		44,472
Total current assets	287,962		294,010
Other Property and Investments:

Investment securities	353,268		388,832
Equity investment in NMRD	75,203		65,159
Other investments	234		356
Non-utility property, net	16,177		12,459
Total other property and investments	444,882		466,806
Utility Plant:
Plant in service, held for future use, and to be abandoned	7,957,079		7,918,601
Less accumulated depreciation and amortization	2,755,566		2,713,503
	5,201,513		5,205,098
Construction work in progress	240,002		161,106
Nuclear fuel, net of accumulated amortization of $48,278 and $42,354	102,768		99,805
Net utility plant	5,544,283		5,466,009
Deferred Charges and Other Assets:
Regulatory assets	590,330		556,930
Goodwill	278,297		278,297
Operating lease right-of-use assets, net of accumulated amortization	124,717		131,212

Other deferred charges	104,648		105,510
Total deferred charges and other assets	1,097,992		1,071,949
	$	7,375,119	$	7,298,774



	June 30, 2019		December 31, 2018
	(In thousands)
ASSETS
Current Assets:
Cash and cash equivalents	$	4,226	$	2,122
Accounts receivable, net of allowance for uncollectible accounts of $1,178 and $1,406	83,669		92,800
Unbilled revenues	60,737		57,092
Other receivables	16,287		11,369
Materials, supplies, and fuel stock	74,490		71,834
Regulatory assets	5,533		4,534
Income taxes receivable	4,875		7,965
Other current assets	49,259		54,808
Total current assets	299,076		302,524
Other Property and Investments:
Investment securities	362,793		328,242
Equity investment in NMRD	40,002		26,564
Other investments	296		297
Non-utility property, net	7,943		3,404
Total other property and investments	411,034		358,507
Utility Plant:
Plant in service, held for future use, and to be abandoned	7,596,976		7,548,581
Less accumulated depreciation and amortization	2,649,617		2,604,177
	4,947,359		4,944,404
Construction work in progress	202,991		194,427
Nuclear fuel, net of accumulated amortization of $42,410 and $42,511	95,636		95,798
Net utility plant	5,245,986		5,234,629
Deferred Charges and Other Assets:
Regulatory assets	576,964		598,930
Goodwill	278,297		278,297
Operating lease right-of-use assets, net of accumulated amortization	143,876		—
Other deferred charges	93,434		92,664
Total deferred charges and other assets	1,092,571		969,891
	$	7,048,667	$	6,865,551


	March 31, 2020		December 31, 2019
	(In thousands, except share information)
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Short-term debt	$	300,600	$	185,100
Current installments of long-term debt	539,555		490,268
Accounts payable	95,194		103,118
Customer deposits	10,470		10,585
Accrued interest and taxes	65,908		76,815
Regulatory liabilities	2,916		505
Operating lease liabilities	29,693		29,068

Dividends declared	24,625		24,625

Other current liabilities	45,959		47,397
Total current liabilities	1,114,920		967,481
Long-term Debt, net of Unamortized Premiums, Discounts, and Debt Issuance Costs	2,468,720		2,517,449
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes	630,844		626,058
Regulatory liabilities	867,803		866,243
Asset retirement obligations	184,951		181,962
Accrued pension liability and postretirement benefit cost	91,146		95,037
Operating lease liabilities	95,573		105,512

Other deferred credits	222,064		185,753
Total deferred credits and other liabilities	2,092,381		2,060,565
Total liabilities	5,676,021		5,545,495
Commitments and Contingencies (Note 11)
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 (0 par value; 120,000,000 shares authorized; issued and outstanding 79,653,624 shares)	1,142,879		1,150,552
Accumulated other comprehensive income (loss), net of income taxes	(103,427)		(99,377)
Retained earnings	587,770		627,523
Total PNMR common stockholders’ equity	1,627,222		1,678,698
Non-controlling interest in Valencia	60,347		63,052
Total equity	1,687,569		1,741,750
	$	7,375,119	$	7,298,774


	Attributable to PNMR												Non- controlling Interest in Valencia
	Common Stock		AOCI		Retained Earnings		Total PNMR Common Stockholders’ Equity				Total Equity
	(In thousands)











Balance at December 31, 2019	$	1,150,552	$	(99,377)	$	627,523	$	1,678,698	$	63,052	$	1,741,750



Net earnings (loss) before subsidiary preferred stock dividends	—		—		(15,128)		(15,128)		3,729		(11,399)
Total other comprehensive income (loss)	—		(4,050)		—		(4,050)		—		(4,050)
Subsidiary preferred stock dividends	—		—		(132)		(132)		—		(132)
Dividends declared on common stock	—		—		(24,493)		(24,493)		—		(24,493)
Proceeds from stock option exercise	24		—		—		24		—		24
Awards of common stock	(11,498)		—		—		(11,498)		—		(11,498)

Stock based compensation expense	3,801		—		—		3,801		—		3,801
Valencia’s transactions with its owner	—		—		—		—		(6,434)		(6,434)



Balance at March 31, 2020	$	1,142,879	$	(103,427)	$	587,770	$	1,627,222	$	60,347	$	1,687,569













Balance at December 31, 2018	$	1,153,113	$	(108,684)	$	643,953	$	1,688,382	$	64,212	$	1,752,594
Net earnings before subsidiary preferred stock dividends	—		—		18,832		18,832		2,830		21,662
Total other comprehensive income	—		5,445		—		5,445		—		5,445
Subsidiary preferred stock dividends	—		—		(132)		(132)		—		(132)
Dividends declared on common stock	—		—		(23,099)		(23,099)		—		(23,099)
Proceeds from stock option exercise	930		—		—		930		—		930
Awards of common stock	(8,936)		—		—		(8,936)		—		(8,936)

Stock based compensation expense	3,257		—		—		3,257		—		3,257
Valencia’s transactions with its owner	—		—		—		—		(4,263)		(4,263)



Balance at March 31, 2019	$	1,148,364	$	(103,239)	$	639,554	$	1,684,679	$	62,779	$	1,747,458



Balance at March 31, 2018	$	1,150,516		$	(105,520	)	$	638,618		$	1,683,614		$	65,400		$	1,749,014
Net earnings before subsidiary preferred stock dividends	—			—			38,340			38,340			4,109			42,449
Total other comprehensive income	—			1,763			—			1,763			—			1,763
Subsidiary preferred stock dividends	—			—			(132		)	(132		)	—			(132		)
Proceeds from stock option exercise	122			—			—			122			—			122
Awards of common stock	(1,423		)	—			—			(1,423		)	—			(1,423		)
Stock based compensation expense	431			—			—			431			—			431
Valencia’s transactions with its owner	—			—			—			—			(3,909		)	(3,909		)
Balance at June 30, 2018	$	1,149,646		$	(103,757	)	$	676,826		$	1,722,715		$	65,600		$	1,788,315

Balance at December 31, 2017, as originally reported	$	1,157,665		$	(95,940	)	$	633,528		$	1,695,253		$	66,195		$	1,761,448
Cumulative effect adjustment (Note 7)	—			(11,208		)	11,208			—			—			—
Balance at January 1, 2018, as adjusted	1,157,665			(107,148		)	644,736			1,695,253			66,195			1,761,448
Net earnings before subsidiary preferred stock dividends	—			—			53,462			53,462			7,786			61,248
Total other comprehensive income	—			3,391			—			3,391			—			3,391
Subsidiary preferred stock dividends	—			—			(264		)	(264		)	—			(264		)
Dividends declared on common stock	—			—			(21,108		)	(21,108		)	—			(21,108		)
Proceeds from stock option exercise	924			—			—			924			—			924
Awards of common stock	(12,268		)	—			—			(12,268		)	—			(12,268		)
Stock based compensation expense	3,325			—			—			3,325			—			3,325
Valencia’s transactions with its owner	—			—			—			—			(8,381		)	(8,381		)
Balance at June 30, 2018	$	1,149,646		$	(103,757	)	$	676,826		$	1,722,715		$	65,600		$	1,788,315


	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, 2019	$	1,264,918	$	(99,055)	$	283,516	$	1,449,379	$	63,052	$	1,512,431


Net earnings (loss)	—		—		(15,925)		(15,925)		3,729		(12,196)
Total other comprehensive income (loss)	—		(2,531)		—		(2,531)		—		(2,531)
Dividends declared on preferred stock	—		—		(132)		(132)		—		(132)

Dividends declared on common stock	—		—		(40,654)		(40,654)		—		(40,654)
Valencia’s transactions with its owner	—		—		—		—		(6,434)		(6,434)





Balance at March 31, 2020	$	1,264,918	$	(101,586)	$	226,805	$	1,390,137	$	60,347	$	1,450,484









Balance at December 31, 2018	$	1,264,918	$	(110,422)	$	242,863	$	1,397,359	$	64,212	$	1,461,571
Net earnings	—		—		19,144		19,144		2,830		21,974
Total other comprehensive income	—		6,157		—		6,157		—		6,157
Dividends declared on preferred stock	—		—		(132)		(132)		—		(132)


Valencia’s transactions with its owner	—		—		—		—		(4,263)		(4,263)





Balance at March 31, 2019	$	1,264,918	$	(104,265)	$	261,875	$	1,422,528	$	62,779	$	1,485,307



Balance at March 31, 2018	$	1,264,918	$	(108,019	)	$	273,262		$	1,430,161		$	65,400		$	1,495,561
Net earnings	—		—			26,673			26,673			4,108			30,781
Total other comprehensive income	—		1,310			—			1,310			—			1,310
Dividends declared on preferred stock	—		—			(132		)	(132		)	—			(132		)
Valencia’s transactions with its owner	—		—			—			—			(3,908		)	(3,908		)
Balance at June 30, 2018	$	1,264,918	$	(106,709	)	$	299,803		$	1,458,012		$	65,600		$	1,523,612

Balance at December 31, 2017, as originally reported	$	1,264,918	$	(97,093	)	$	254,349		$	1,422,174		$	66,195		$	1,488,369
Cumulative effect adjustment (Note 7)	—		(11,208		)	11,208			—			—			—
Balance at January 1, 2018, as adjusted	1,264,918		(108,301		)	265,557			1,422,174			66,195			1,488,369
Net earnings	—		—			34,510			34,510			7,786			42,296
Total other comprehensive income	—		1,592			—			1,592			—			1,592
Dividends declared on preferred stock	—		—			(264		)	(264		)	—			(264		)
Valencia’s transactions with its owner	—		—			—			—			(8,381		)	(8,381		)
Balance at June 30, 2018	$	1,264,918	$	(106,709	)	$	299,803		$	1,458,012		$	65,600		$	1,523,612


	Common Stock		Paid-in Capital		Retained Earnings		Total Common Stockholder’s Equity
	(In thousands)





Balance at December 31, 2019	$	64	$	614,166	$	140,397	$	754,627
Net earnings	—		—		7,092		7,092


Dividends declared on common stock	—		—		(11,347)		(11,347)
Balance at March 31, 2020	$	64	$	614,166	$	136,142	$	750,372







Balance at December 31, 2018	$	64	$	534,166	$	139,863	$	674,093
Net earnings	—		—		4,098		4,098


Dividends declared on common stock	—		—		(10,713)		(10,713)
Balance at March 31, 2019	$	64	$	534,166	$	133,248	$	667,478



Balance at March 31, 2018	$	64	$	504,166	$	138,564		$	642,794
Net earnings	—		—		15,367			15,367
Dividends declared on common stock	—		—		(9,413		)	(9,413		)
Balance at June 30, 2018	$	64	$	504,166	$	144,518		$	648,748

Balance at December 31, 2017	$	64	$	504,166	$	130,175		$	634,405
Net earnings	—		—		24,779			24,779
Dividends declared on common stock	—		—		(10,436		)	(10,436		)
Balance at June 30, 2018	$	64	$	504,166	$	144,518		$	648,748


~~(1)~~	~~Significant Accounting Policies and Responsibility for Financial Statements~~



	Financial Position
	June 30,		December 31,
	2019		2018
	(In thousands)
Current assets	$	2,733	$	2,581
Net property, plant, and equipment	77,804		50,784
Total assets	80,537		53,365
Current liabilities	533		237
Owners’ equity	$	80,004	$	53,128


	PNM		TNMP		Corporate and Other		PNMR Consolidated
	(In thousands)

















Three Months Ended March 31, 2020
Electric operating revenues	$	248,133	$	85,489	$	—	$	333,622
Cost of energy	74,524		24,186		—		98,710
Utility margin	173,609		61,303		—		234,912
Other operating expenses	98,555		25,122		(5,476)		118,201
Depreciation and amortization	41,449		21,836		5,688		68,973
Operating income (loss)	33,605		14,345		(212)		47,738
Interest income	3,496		—		(73)		3,423
Other income (deductions)	(34,027)		561		(540)		(34,006)
Interest charges	(17,629)		(7,172)		(5,633)		(30,434)
Segment earnings (loss) before income taxes	(14,555)		7,734		(6,458)		(13,279)
Income taxes (benefit)	(2,359)		642		(163)		(1,880)
Segment earnings (loss)	(12,196)		7,092		(6,295)		(11,399)
Valencia non-controlling interest	(3,729)		—		—		(3,729)
Subsidiary preferred stock dividends	(132)		—		—		(132)
Segment earnings (loss) attributable to PNMR	$	(16,057)	$	7,092	$	(6,295)	$	(15,260)

At March 31, 2020:
Total Assets	$	5,260,528	$	1,913,270	$	201,321	$	7,375,119
Goodwill	$	51,632	$	226,665	$	—	$	278,297


	Accumulated Other Comprehensive Income (Loss)
	PNM										PNMR
	Unrealized						Fair Value
	Gains on						Adjustment
	Available-for-		Pension				for Cash
	Sale Debt		Liability				Flow
	Securities		Adjustment		Total		Hedges		Total
	(In thousands)


Balance at December 31, 2019	$	10,638	$	(109,693)	$	(99,055)	$	(322)	$	(99,377)
Amounts reclassified from AOCI (pre-tax)	(1,185)		2,075		890		(38)		852
Income tax impact of amounts reclassified	301		(527)		(226)		10		(216)
Other OCI changes (pre-tax)	(4,283)		—		(4,283)		(1,998)		(6,281)
Income tax impact of other OCI changes	1,088		—		1,088		507		1,595
Net after-tax change	(4,079)		1,548		(2,531)		(1,519)		(4,050)
Balance at March 31, 2020	$	6,559	$	(108,145)	$	(101,586)	$	(1,841)	$	(103,427)



Balance at December 31, 2017, as originally reported	$	13,169		$	(110,262	)	$	(97,093	)	$	1,153		$	(95,940	)
Cumulative effect adjustment (Note 7)	(11,208		)	—			(11,208		)	—			(11,208		)
Balance at January 1, 2018, as adjusted	1,961			(110,262		)	(108,301		)	1,153			(107,148		)
Amounts reclassified from AOCI (pre-tax)	(3,126		)	3,788			662			(7		)	655
Income tax impact of amounts reclassified	794			(962		)	(168		)	1			(167		)
Other OCI changes (pre-tax)	1,472			—			1,472			2,420			3,892
Income tax impact of other OCI changes	(374		)	—			(374		)	(615		)	(989		)
Net after-tax change	(1,234		)	2,826			1,592			1,799			3,391
Balance at June 30, 2018	$	727		$	(107,436	)	$	(106,709	)	$	2,952		$	(103,757	)











Balance at December 31, 2018	$	1,939	$	(112,361)	$	(110,422)	$	1,738	$	(108,684)
Amounts reclassified from AOCI (pre-tax)	(676)		1,851		1,175		270		1,445
Income tax impact of amounts reclassified	172		(470)		(298)		(68)		(366)
Other OCI changes (pre-tax)	7,078		—		7,078		(1,225)		5,853
Income tax impact of other OCI changes	(1,798)		—		(1,798)		311		(1,487)
Net after-tax change	4,776		1,381		6,157		(712)		5,445
Balance at March 31, 2019	$	6,715	$	(110,980)	$	(104,265)	$	1,026	$	(103,239)



	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2019			2018		2019			2018
	(In thousands, except per share amounts)
Net Earnings (Loss) Attributable to PNMR	$	(75,914	)	$	38,208	$	(57,214	)	$	53,198
Average Number of Common Shares:
Outstanding during period	79,654			79,654		79,654			79,654
Vested awards of restricted stock	263			211		251			208
Average Shares – Basic	79,917			79,865		79,905			79,862
Dilutive Effect of Common Stock Equivalents:⁽¹⁾
Stock options and restricted stock	—			114		—			134
Average Shares – Diluted	79,917			79,979		79,905			79,996
Net Earnings (Loss) Per Share of Common Stock:
Basic	$	(0.95	)	$	0.48	$	(0.72	)	$	0.67
Diluted⁽¹⁾	$	(0.95	)	$	0.48	$	(0.72	)	$	0.67


	Three Months Ended
	March 31,
	2020		2019
	(In thousands, except per share amounts)
Net Earnings (Loss) Attributable to PNMR	$	(15,260)	$	18,700
Average Number of Common Shares:
Outstanding during period	79,654		79,654
Vested awards of restricted stock	217		239
Average Shares – Basic	79,871		79,893
Dilutive Effect of Common Stock Equivalents:
Restricted stock	—		78
Average Shares – Diluted⁽¹⁾	79,871		79,971

Net Earnings (Loss) Per Share of Common Stock:
Basic	$	(0.19)	$	0.23
Diluted	$	(0.19)	$	0.23



















Three Months Ended March 31, 2019
Electric Operating Revenues:
Contracts with customers:
Retail electric revenue
Residential	$	107,302	$	30,432	$	137,734
Commercial	85,233		27,429		112,662
Industrial	14,747		5,616		20,363
Public authority	4,711		1,374		6,085
Economy energy service	6,922		—		6,922
Transmission	13,385		14,003		27,388
Miscellaneous	3,641		903		4,544
Total revenues from contracts with customers	235,941		79,757		315,698
Alternative revenue programs	66		570		636
Other electric operating revenues	33,311		—		33,311
Total Electric Operating Revenues	$	269,318	$	80,327	$	349,645



Three Months Ended June 30, 2018
Electric Operating Revenues:
Contracts with customers:
Retail electric revenue
Residential	$	99,508	$	31,315	$	130,823
Commercial	110,652		28,082		138,734
Industrial	14,597		4,184		18,781
Public authority	5,220		1,399		6,619
Economy energy service	6,378		—		6,378
Transmission	14,108		16,743		30,851
Miscellaneous	4,265		2,208		6,473
Total revenues from contracts with customers	254,728		83,931		338,659
Alternative revenue programs	1,789		3,871		5,660
Other electric operating revenues	7,994		—		7,994
Total Electric Operating Revenues	$	264,511	$	87,802	$	352,313

Six Months Ended June 30, 2018
Electric Operating Revenues:
Contracts with customers:
Retail electric revenue
Residential	$	196,676	$	60,581	$	257,257
Commercial	193,501		55,234		248,735
Industrial	28,056		8,489		36,545
Public authority	9,855		2,815		12,670
Economy energy service	13,666		—		13,666
Transmission	26,590		33,251		59,841
Miscellaneous	8,947		4,349		13,296
Total revenues from contracts with customers	477,291		164,719		642,010
Alternative revenue programs	1,854		4,730		6,584
Other electric operating revenues	21,597		—		21,597
Total Electric Operating Revenues	$	500,742	$	169,449	$	670,191


~~(7)~~	~~Fair Value of Derivative and Other Financial Instruments~~


	Economic Hedges
	March 31, 2020		December 31, 2019
	(In thousands)
Other current assets	$	1,095	$	1,089
Other deferred charges	1,275		1,507
	2,370		2,596

Other current liabilities	(1,095)		(1,089)
Other deferred credits	(1,275)		(1,507)
	(2,370)		(2,596)
Net	$	—	$	—

Economic Hedges

June 30, 2019

December 31, 2018