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EX-32.3 - EXHIBIT 32.3 - PNM RESOURCES INCpnm6302018ex323.htm
EX-32.2 - EXHIBIT 32.2 - PNM RESOURCES INCpnm6302018ex322.htm
EX-32.1 - EXHIBIT 32.1 - PNM RESOURCES INCpnm6302018ex321.htm
EX-31.6 - EXHIBIT 31.6 - PNM RESOURCES INCpnm6302018ex316.htm
EX-31.5 - EXHIBIT 31.5 - PNM RESOURCES INCpnm6302018ex315.htm
EX-31.4 - EXHIBIT 31.4 - PNM RESOURCES INCpnm6302018ex314.htm
EX-31.3 - EXHIBIT 31.3 - PNM RESOURCES INCpnm6302018ex313.htm
EX-31.2 - EXHIBIT 31.2 - PNM RESOURCES INCpnm6302018ex312.htm
EX-31.1 - EXHIBIT 31.1 - PNM RESOURCES INCpnm6302018ex311.htm
EX-12.3 - EXHIBIT 12.3 - PNM RESOURCES INCpnm6302018ex123.htm
EX-12.2 - EXHIBIT 12.2 - PNM RESOURCES INCpnm6302018ex122.htm
EX-12.1 - EXHIBIT 12.1 - PNM RESOURCES INCpnm6302018ex121.htm

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

FORM 10-Q

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

For the quarterly period ended June 30, 2018

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

Indicate by check mark whether each registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.
 
PNM Resources, Inc. (“PNMR”)
YES
ü
NO
 
 
Public Service Company of New Mexico (“PNM”)
YES
ü
NO
 
 
Texas-New Mexico Power Company (“TNMP”)
YES
 
NO
ü

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

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

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





Indicate by check mark whether registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 
Large accelerated
filer
 
Accelerated
filer
 
Non-accelerated
filer (Do not check if a smaller reporting company)
 
Smaller reporting company
 
Emerging growth company
PNMR
 
ü
 
 
 
   
 
 
 
   
 
 
 
   
 
 
 
   
 
PNM
 
   
 
 
 
   
 
 
 
ü
 
 
 
   
 
 
 
 
 
TNMP
 
   
 
 
 
   
 
 
 
ü
 
 
 
   
 
 
 
 
 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. £

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

As of July 25, 2018, 79,653,624 shares of common stock, no par value per share, of PNMR were outstanding.

The total number of shares of common stock of PNM outstanding as of July 25, 2018 was 39,117,799 all held by PNMR (and none held by non-affiliates).

The total number of shares of common stock of TNMP outstanding as of July 25, 2018 was 6,358 all held indirectly by PNMR (and none held by non-affiliates).

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

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



2


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

INDEX

 
Page No.
 
 
 
 
 
 
ITEM 5. OTHER INFORMATION


3


GLOSSARY
 
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
AMI
 
Advanced Metering Infrastructure
AMS
 
Advanced Meter System
AOCI
  
Accumulated Other Comprehensive Income
APS
  
Arizona Public Service Company, the operator and a co-owner of PVNGS and Four Corners
ARP
 
Alternative Revenue Program
ASU
 
Accounting Standards Update
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 of Directors of PNMR
BTMU
 
MUFG Bank Ltd., formerly The Bank of Tokyo-Mitsubishi UFJ, Ltd.
BTMU Term Loan Agreement
 
NM Capital’s $125.0 Million Unsecured Term Loan
CAA
 
Clean Air Act
CCB
  
Coal Combustion Byproducts
CCN
 
Certificate of Convenience and Necessity
CO2
  
Carbon Dioxide
CSA
 
Coal Supply Agreement
CTC
  
Competition Transition Charge
DC Circuit
 
United States Court of Appeals for the District of Columbia Circuit
DOE
  
United States Department of Energy
DOI
  
United States Department of Interior
EGU
 
Electric Generating Unit
EIS
 
Environmental Impact Study
EPA
  
United States Environmental Protection Agency
ERCOT
  
Electric Reliability Council of Texas
ESA
 
Endangered Species 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
FIP
  
Federal Implementation Plan
Four Corners
  
Four Corners Power Plant
Four Corners CSA
 
Four Corners Power Plant Coal Supply Agreement
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
 
Integrated Resource Plan
IRS
  
Internal Revenue Service
ISFSI
 
Independent Spent Fuel Storage Installation
KW
  
Kilowatt
KWh
  
Kilowatt Hour
La Luz
  
La Luz Generating Station

4


LIBOR
  
London Interbank Offered Rate
Lightning Dock Geothermal
 
Lightning Dock geothermal power facility, also known as the Dale Burgett Geothermal Plant
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 British Thermal Units
Moody’s
  
Moody’s Investor Services, Inc.
MW
  
Megawatt
MWh
  
Megawatt Hour
NAAQS
 
National Ambient Air Quality Standards
Navajo Acts
  
Navajo Nation Air Pollution Prevention and Control Act, Navajo Nation Safe Drinking Water Act, and Navajo Nation Pesticide Act
NDT
  
Nuclear Decommissioning Trusts for PVNGS
NEC
 
Navopache Electric Cooperative, Inc.
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 Capital
 
NM Capital Utility Corporation, an unregulated wholly-owned subsidiary of PNMR
NM District Court
 
United States District Court for the District of New Mexico
NM Supreme Court
 
New Mexico Supreme Court
NMAG
  
New Mexico Attorney General
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
NO2
 
Nitrogen Dioxide
NOx
  
Nitrogen Oxide
NOPR
 
Notice of Proposed Rulemaking
NPDES
 
National Pollutant Discharge Elimination System
NRC
  
United States Nuclear Regulatory Commission
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 2016 Term Loan Agreement
 
PNM’s $175.0 Million Unsecured Term Loan
PNM 2017 New Mexico Credit Facility
 
PNM’s $40.0 Million Unsecured Revolving Credit Facility
PNM 2017 Senior Unsecured Note Agreement
 
PNM’s Agreement for the sale of Senior Unsecured Notes, aggregating $450.0 million
PNM 2017 Term Loan Agreement
 
PNM’s $200.0 Million Unsecured Term Loan

5


PNM 2018 SUNs
 
PNM’s Senior Unsecured Notes to be issued under the PNM 2017 Senior Unsecured Note Agreement
PNM Revolving Credit Facility
 
PNM’s $400.0 Million Unsecured Revolving Credit Facility
PNMR
  
PNM Resources, Inc. and Subsidiaries
PNMR 2015 Term
Loan Agreement
 
PNMR’s $150.0 Million Three-Year Unsecured Term Loan
PNMR 2016 One-Year Term Loan
 
PNMR’s $100.0 Million One-Year Unsecured Term Loan
PNMR 2016 Two-Year Term Loan
 
PNMR’s $100.0 Million Two-Year Unsecured Term Loan
PNMR 2018 SUNs
 
PNMR’s $300.0 Million Aggregate Principal Amount of Senior Unsecured Notes due 2021
PNMR Development
 
PNMR Development and Management Company, an unregulated wholly-owned subsidiary of PNMR
PNMR Development Revolving Credit Facility
 
PNMR Development’s $24.5 Million Unsecured Revolving Credit Facility
PNMR Revolving Credit Facility
 
PNMR’s $300.0 Million Unsecured Revolving Credit Facility
PPA
  
Power Purchase Agreement
PSD
  
Prevention of Significant Deterioration
PUCT
  
Public Utility Commission of Texas
PV
  
Photovoltaic
PVNGS
  
Palo Verde Nuclear Generating Station
RCRA
  
Resource Conservation and Recovery Act
RCT
  
Reasonable Cost Threshold
REA
 
New Mexico’s Renewable Energy Act of 2004
REC
  
Renewable Energy Certificates
Red Mesa Wind
 
Red Mesa Wind Energy Center
REP
  
Retail Electricity Provider
RFP
 
Request For Proposal
Rio Bravo
 
Rio Bravo Generating Station
ROE
 
Return on Equity
RPS
  
Renewable Energy Portfolio Standard
S&P
  
Standard and Poor’s Ratings Services
SCR
 
Selective Catalytic Reduction
SEC
  
United States Securities and Exchange Commission
SIP
  
State Implementation Plan
SJCC
  
San Juan Coal Company
SJGS
  
San Juan Generating Station
SJGS CSA
 
San Juan Generating Station Coal Supply Agreement
SJGS RA
 
San Juan Project Restructuring Agreement
SJPPA
 
San Juan Project Participation Agreement
SNCR
 
Selective Non-Catalytic Reduction
SO2
  
Sulfur Dioxide
SOx
 
Sulfur Oxide
SPS
  
Southwestern Public Service Company
SRP
  
Salt River Project
SUNs
 
Senior Unsecured Notes
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 on May 30, 2018
TNMP 2018 Term Loan Agreement
 
TNMP’s $20.0 Million Unsecured Two-Year Term Loan

6


TNMP Revolving Credit Facility
  
TNMP’s $75.0 Million Secured Revolving Credit Facility
TNP
  
TNP Enterprises, Inc. and Subsidiaries
Tri-State
  
Tri-State Generation and Transmission Association, Inc.
Tucson
  
Tucson Electric Power Company
UAMPS
  
Utah Associated Municipal Power Systems
US Supreme Court
 
United States Supreme Court
Valencia
  
Valencia Energy Facility
VaR
  
Value at Risk
VIE
 
Variable Interest Entity
WACC
  
Weighted Average Cost of Capital
WEG
 
WildEarth Guardians
Westmoreland
 
Westmoreland Coal Company
Westmoreland Loan
 
$125.0 Million of funding provided by NM Capital to WSJ
WSJ
 
Westmoreland San Juan, LLC, an indirect wholly-owned subsidiary of Westmoreland

7


PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS


PNM RESOURCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2018
 
2017
 
2018
 
2017
 
(In thousands, except per share amounts)
Electric Operating Revenues: 
 
 
 
 
 
 
 
Contracts with customers
$
338,659

 
$
326,586

 
$
642,010

 
$
623,777

Alternative revenue programs
5,660

 
8,920

 
6,584

 
13,499

Other electric operating revenue
7,994

 
26,814

 
21,597

 
55,222

Total electric operating revenues
352,313

 
362,320

 
670,191

 
692,498

Operating Expenses:

 
 
 

 

Cost of energy
87,711

 
104,267

 
180,267

 
207,070

Administrative and general
43,355

 
42,984

 
91,638

 
88,379

Energy production costs
41,888

 
34,393

 
77,238

 
66,180

Regulatory disallowances and restructuring costs
1,794

 

 
1,794

 

Depreciation and amortization
60,063

 
57,625

 
118,785

 
114,008

Transmission and distribution costs
18,450

 
17,031

 
35,406

 
33,508

Taxes other than income taxes
19,723

 
18,777

 
39,602

 
38,012

Total operating expenses
272,984

 
275,077

 
544,730

 
547,157

Operating income
79,329

 
87,243

 
125,461

 
145,341

Other Income and Deductions:
 
 
 
 
 
 
 
Interest income
4,339

 
3,885

 
8,462

 
8,766

Gains (losses) on investment securities
(1,670
)
 
5,663

 
(1,382
)
 
12,324

Other income
4,796

 
3,450

 
8,265

 
8,351

Other (deductions)
(5,868
)
 
(5,042
)
 
(7,243
)
 
(10,663
)
Net other income and deductions
1,597

 
7,956

 
8,102

 
18,778

Interest Charges
33,321

 
32,332

 
66,376

 
64,031

Earnings before Income Taxes
47,605

 
62,867

 
67,187

 
100,088

Income Taxes
5,156

 
21,636

 
5,939

 
32,411

Net Earnings
42,449

 
41,231

 
61,248

 
67,677

(Earnings) Attributable to Valencia Non-controlling Interest
(4,109
)
 
(3,544
)
 
(7,786
)
 
(6,996
)
Preferred Stock Dividend Requirements of Subsidiary
(132
)
 
(132
)
 
(264
)
 
(264
)
Net Earnings Attributable to PNMR
$
38,208

 
$
37,555

 
$
53,198

 
$
60,417

Net Earnings Attributable to PNMR per Common Share:
 
 
 
 
 
 
 
Basic
$
0.48

 
$
0.47

 
$
0.67

 
$
0.76

Diluted
$
0.48

 
$
0.47

 
$
0.67

 
$
0.75

Dividends Declared per Common Share
$
0.2650

 
$
0.2425

 
$
0.5300

 
$
0.4850


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



8


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

 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2018
 
2017
 
2018
 
2017
 
(In thousands)
Net Earnings
$
42,449

 
$
41,231

 
$
61,248

 
$
67,677

Other Comprehensive Income:
 
 
 
 
 
 
 
Unrealized Gains on Available-for-Sale Securities:
 
 
 
 
 
 
 
Unrealized holding gains arising during the period, net of income tax (expense) of $(91), $(2,777), $(374), and $(5,783)
266

 
4,378

 
1,098

 
9,120

Reclassification adjustment for (gains) included in net earnings, net of income tax expense of $126, $1,629, $794, and $2,701
(371
)
 
(2,569
)
 
(2,332
)
 
(4,260
)
Pension Liability Adjustment:
 
 
 
 
 
 
 
Reclassification adjustment for amortization of experience (gains) losses recognized as net periodic benefit cost, net of income tax expense (benefit) of $(482), $(626), $(962), and $(1,252)
1,415

 
987

 
2,826

 
1,974

Fair Value Adjustment for Cash Flow Hedges:
 
 
 
 
 
 
 
Change in fair market value, net of income tax (expense) benefit of $(143), $40, $(615), and $112
419

 
(63
)
 
1,805

 
(176
)
Reclassification adjustment for (gains) losses included in net earnings, net of income tax expense (benefit) of $(12), $(82), $1, and $(125)
34

 
130

 
(6
)
 
198

Total Other Comprehensive Income
1,763

 
2,863

 
3,391

 
6,856

Comprehensive Income
44,212

 
44,094

 
64,639

 
74,533

Comprehensive (Income) Attributable to Valencia Non-controlling Interest
(4,109
)
 
(3,544
)
 
(7,786
)
 
(6,996
)
Preferred Stock Dividend Requirements of Subsidiary
(132
)
 
(132
)
 
(264
)
 
(264
)
Comprehensive Income Attributable to PNMR
$
39,971

 
$
40,418

 
$
56,589

 
$
67,273


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


9


PNM RESOURCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
Six Months Ended June 30,
 
2018
 
2017
 
(In thousands)
Cash Flows From Operating Activities:
 
 
 
Net earnings
$
61,248

 
$
67,677

Adjustments to reconcile net earnings to net cash flows from operating activities:
 
 
 
Depreciation and amortization
137,020

 
131,861

Deferred income tax expense
5,888

 
32,443

Net unrealized (gains) losses on commodity derivatives
(56
)
 
939

(Gains) losses on investment securities
1,382

 
(12,324
)
Stock based compensation expense
3,325

 
4,561

Regulatory disallowances and restructuring costs
1,794

 

Allowance for equity funds used during construction
(4,641
)
 
(3,465
)
Other, net
1,595

 
1,056

Changes in certain assets and liabilities:
 
 
 
Accounts receivable and unbilled revenues
(17,130
)
 
(12,204
)
Materials, supplies, and fuel stock
(8,282
)
 
969

Other current assets
(16,130
)
 
1,613

Other assets
2,603

 
3,186

Accounts payable
(21,229
)
 
(2,052
)
Accrued interest and taxes
(4,865
)
 
(6,802
)
Other current liabilities
(1,516
)
 
(2,498
)
Other liabilities
(7,106
)
 
(4,341
)
Net cash flows from operating activities
133,900

 
200,619

 
 
 
 
Cash Flows From Investing Activities:
 
 
 
Additions to utility and non-utility plant
(245,587
)
 
(230,882
)
Proceeds from sales of investment securities
794,088

 
358,045

Purchases of investment securities
(797,271
)
 
(359,853
)
Principal repayments on Westmoreland Loan
56,640

 
19,180

Investments in NMRD
(8,000
)
 

Other, net
(120
)
 
143

Net cash flows from investing activities
(200,250
)
 
(213,367
)

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

10


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

 
Six Months Ended June 30,
 
2018
 
2017
 
(In thousands)
Cash Flows From Financing Activities:
 
 
 
Revolving credit facilities borrowings (repayments), net
(22,800
)
 
86,400

Long-term borrowings
709,652

 
57,000

Repayment of long-term debt
(550,137
)
 
(77,447
)
Proceeds from stock option exercise
924

 
1,574

Awards of common stock
(12,268
)
 
(13,166
)
Dividends paid
(42,480
)
 
(38,896
)
Valencia’s transactions with its owner
(8,381
)
 
(7,731
)
Amounts received under transmission interconnection arrangements

 
11,419

Refunds paid under transmission interconnection arrangements
(1,661
)
 
(8,783
)
Debt issuance costs and other, net
(5,584
)
 
(951
)
Net cash flows from financing activities
67,265

 
9,419

 
 
 
 
Change in Cash, Restricted Cash, and Equivalents
915

 
(3,329
)
Cash, Restricted Cash, and Equivalents at Beginning of Period
3,974

 
5,522

Cash, Restricted Cash, and Equivalents at End of Period
$
4,889

 
$
2,193

 
 
 
 
Restricted Cash Included in Other Current Assets on Condensed Consolidated Balance Sheets:
 
 
 
At beginning of period
$

 
$
1,000

At end of period
$

 
$

 
 
 
 
Supplemental Cash Flow Disclosures:
 
 
 
Interest paid, net of amounts capitalized
$
59,626

 
$
59,982

Income taxes paid (refunded), net
$
842

 
$
625

 
 
 
 
Supplemental schedule of noncash investing activities:
 
 
 
(Increase) decrease in accrued plant additions
$
17,303

 
$
1,279


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


11


PNM RESOURCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
 
June 30,
2018
 
December 31,
2017
 
(In thousands)
ASSETS
 
 
 
Current Assets:
 
 
 
Cash and cash equivalents
$
4,889

 
$
3,974

Accounts receivable, net of allowance for uncollectible accounts of $1,189 and $1,081
89,158

 
90,473

Unbilled revenues
70,904

 
54,055

Other receivables
24,338

 
17,582

Current portion of Westmoreland Loan

 
3,576

Materials, supplies, and fuel stock
74,785

 
66,502

Regulatory assets
6,586

 
2,933

Commodity derivative instruments
1,094

 
1,088

Income taxes receivable
7,670

 
6,879

Other current assets
51,818

 
47,358

Total current assets
331,242

 
294,420

Other Property and Investments:
 
 
 
Long-term portion of Westmoreland Loan

 
53,064

Investment securities
323,105

 
323,524

Equity investment in NMRD
24,761

 
16,510

Other investments
373

 
503

Non-utility property
3,404

 
3,404

Total other property and investments
351,643

 
397,005

Utility Plant:
 
 
 
Plant in service and held for future use
7,438,356

 
7,238,285

Less accumulated depreciation and amortization
2,648,684

 
2,592,692

 
4,789,672

 
4,645,593

Construction work in progress
220,065

 
245,933

Nuclear fuel, net of accumulated amortization of $43,309 and $43,524
90,962

 
88,701

Net utility plant
5,100,699

 
4,980,227

Deferred Charges and Other Assets:
 
 
 
Regulatory assets
588,971

 
600,672

Goodwill
278,297

 
278,297

Commodity derivative instruments
3,014

 
3,556

Other deferred charges
96,223

 
91,926

Total deferred charges and other assets
966,505

 
974,451

 
$
6,750,089

 
$
6,646,103


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


12


PNM RESOURCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
 
June 30,
2018
 
December 31,
2017
 
(In thousands, except share information)
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
Current Liabilities:
 
 
 
Short-term debt
$
282,600

 
$
305,400

Current installments of long-term debt
471,690

 
256,895

Accounts payable
82,851

 
121,383

Customer deposits
10,919

 
11,028

Accrued interest and taxes
58,283

 
62,357

Regulatory liabilities

 
2,309

Commodity derivative instruments
1,416

 
1,182

Dividends declared
132

 
21,240

Other current liabilities
54,259

 
53,850

Total current liabilities
962,150

 
835,644

Long-term Debt, net of Unamortized Premiums, Discounts, and Debt Issuance Costs
2,122,352

 
2,180,750

Deferred Credits and Other Liabilities:
 
 
 
Accumulated deferred income taxes
566,084

 
547,210

Regulatory liabilities
928,706

 
933,578

Asset retirement obligations
152,300

 
146,679

Accrued pension liability and postretirement benefit cost
84,934

 
94,003

Commodity derivative instruments
3,014

 
3,556

Other deferred credits
130,705

 
131,706

Total deferred credits and other liabilities
1,865,743

 
1,856,732

Total liabilities
4,950,245

 
4,873,126

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 (no par value; 120,000,000 shares authorized; issued and outstanding 79,653,624 shares)
1,149,646

 
1,157,665

Accumulated other comprehensive income (loss), net of income taxes
(103,757
)
 
(95,940
)
Retained earnings
676,826

 
633,528

Total PNMR common stockholders’ equity
1,722,715

 
1,695,253

Non-controlling interest in Valencia
65,600

 
66,195

Total equity
1,788,315

 
1,761,448

 
$
6,750,089

 
$
6,646,103

 
 
 
 

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


13


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

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



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



14



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

 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2018
 
2017
 
2018
 
2017
 
(In thousands)
Electric Operating Revenues: 
 
 
 
 
 
 
 
Contracts with customers
$
254,728

 
$
246,402

 
$
477,291

 
$
468,465

Alternative revenue programs
1,789

 
2,881

 
1,854

 
3,968

Other electric operating revenue
7,994

 
26,814

 
21,597

 
55,222

Total electric operating revenues
264,511

 
276,097

 
500,742

 
527,655

Operating Expenses:
 
 
 
 
 
 
 
Cost of energy
66,361

 
82,952

 
137,163

 
164,268

Administrative and general
40,922

 
39,798

 
84,648

 
80,708

Energy production costs
41,888

 
34,393

 
77,238

 
66,180

Regulatory disallowances and restructuring costs
1,794

 

 
1,794

 

Depreciation and amortization
38,213

 
36,448

 
74,840

 
72,464

Transmission and distribution costs
10,993

 
10,175

 
20,820

 
20,094

Taxes other than income taxes
11,461

 
11,029

 
23,069

 
22,169

Total operating expenses
211,632

 
214,795

 
419,572

 
425,883

Operating income
52,879

 
61,302

 
81,170

 
101,772

Other Income and Deductions:
 
 
 
 
 
 
 
Interest income
3,381

 
1,858

 
5,868

 
4,675

Gains (losses) on investment securities
(1,670
)
 
5,663

 
(1,382
)
 
12,324

Other income
2,292

 
2,665

 
4,684

 
6,508

Other (deductions)
(3,768
)
 
(4,566
)
 
(5,229
)
 
(9,526
)
Net other income and deductions
235

 
5,620

 
3,941

 
13,981

Interest Charges
19,988

 
20,931

 
40,818

 
41,943

Earnings before Income Taxes
33,126

 
45,991

 
44,293

 
73,810

Income Taxes
2,345

 
15,515

 
1,997

 
23,223

Net Earnings
30,781

 
30,476

 
42,296

 
50,587

(Earnings) Attributable to Valencia Non-controlling Interest
(4,109
)
 
(3,544
)
 
(7,786
)
 
(6,996
)
Net Earnings Attributable to PNM
26,672

 
26,932

 
34,510

 
43,591

Preferred Stock Dividends Requirements
(132
)
 
(132
)
 
(264
)
 
(264
)
Net Earnings Available for PNM Common Stock
$
26,540

 
$
26,800

 
$
34,246

 
$
43,327


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


15


PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
A WHOLLY-OWNED SUBSIDIARY OF PNM RESOURCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2018
 
2017
 
2018
 
2017
 
(In thousands)
Net Earnings
$
30,781

 
$
30,476

 
$
42,296

 
$
50,587

Other Comprehensive Income:
 
 
 
 
 
 
 
Unrealized Gains on Available-for-Sale Securities:
 
 
 
 
 
 
 
Unrealized holding gains arising during the period, net of income tax (expense) of $(91), $(2,777), $(374), and $(5,783)
266

 
4,378

 
1,098

 
9,120

Reclassification adjustment for (gains) included in net earnings, net of income tax expense of $126, $1,629, $794, and $2,701
(371
)
 
(2,569
)
 
(2,332
)
 
(4,260
)
Pension Liability Adjustment:
 
 
 
 
 
 
 
Reclassification adjustment for amortization of experience (gains) losses recognized as net periodic benefit cost, net of income tax expense (benefit) of $(482), $(626), $(962), and $(1,252)
1,415

 
987

 
2,826

 
1,974

Total Other Comprehensive Income
1,310

 
2,796

 
1,592

 
6,834

Comprehensive Income
32,091

 
33,272

 
43,888

 
57,421

Comprehensive (Income) Attributable to Valencia Non-controlling Interest
(4,109
)
 
(3,544
)
 
(7,786
)
 
(6,996
)
Comprehensive Income Attributable to PNM
$
27,982

 
$
29,728

 
$
36,102

 
$
50,425


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


16


PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
A WHOLLY-OWNED SUBSIDIARY OF PNM RESOURCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
Six Months Ended June 30,
 
2018
 
2017
 
(In thousands)
Cash Flows From Operating Activities:
 
 
 
Net earnings
$
42,296

 
$
50,587

Adjustments to reconcile net earnings to net cash flows from operating activities:
 
 
 
Depreciation and amortization
90,713

 
88,864

Deferred income tax expense
2,342

 
23,685

Net unrealized (gains) losses on commodity derivatives
(56
)
 
939

(Gains) losses on investment securities
1,382

 
(12,324
)
Regulatory disallowances and restructuring costs
1,794

 

Allowance for equity funds used during construction
(3,879
)
 
(3,331
)
Other, net
1,595

 
1,053

Changes in certain assets and liabilities:
 
 
 
Accounts receivable and unbilled revenues
(12,057
)
 
(8,846
)
Materials, supplies, and fuel stock
(7,071
)
 
1,591

Other current assets
(17,995
)
 
4,623

Other assets
8,296

 
8,539

Accounts payable
(13,050
)
 
(754
)
Accrued interest and taxes
(988
)
 
(1,520
)
Other current liabilities
(11,364
)
 
9,220

Other liabilities
(10,300
)
 
(6,949
)
Net cash flows from operating activities
71,658

 
155,377

 
 
 
 
Cash Flows From Investing Activities:
 
 
 
Utility plant additions
(120,287
)
 
(125,698
)
Proceeds from sales of investment securities
794,088

 
358,045

Purchases of investment securities
(797,271
)
 
(359,853
)
Other, net
131

 
143

Net cash flows from investing activities
(123,339
)
 
(127,363
)

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


17


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

 
Six Months Ended June 30,
 
2018
 
2017
 
(In thousands)
Cash Flows From Financing Activities:
 
 
 
Revolving credit facilities borrowings (repayments), net
(6,200
)
 
(23,000
)
Short-term borrowings (repayments) - affiliate, net
4,900

 

Long-term borrowings
350,000

 
57,000

Repayment of long-term debt
(350,000
)
 
(57,000
)
Dividends paid
(264
)
 
(264
)
Valencia’s transactions with its owner
(8,381
)
 
(7,731
)
Amounts received under transmission interconnection arrangements
68,200

 
11,419

Refunds paid under transmission interconnection arrangements
(1,661
)
 
(8,783
)
Debt issuance costs and other, net
(3,147
)
 
(953
)
Net cash flows from financing activities
53,447

 
(29,312
)
 
 
 
 
Change in Cash, Restricted Cash, and Equivalents
1,766

 
(1,298
)
Cash, Restricted Cash, and Equivalents at Beginning of Period
1,108

 
1,324

Cash, Restricted Cash, and Equivalents at End of Period
$
2,874

 
$
26

 
 
 
 
Restricted Cash Included in Other Current Assets on Condensed Consolidated Balance Sheets:
 
 
 
At beginning of period
$

 
$
1,000

At end of period
$

 
$

 
 
 
 
Supplemental Cash Flow Disclosures:
 
 
 
Interest paid, net of amounts capitalized
$
39,881

 
$
39,584

Income taxes paid (refunded), net
$

 
$

 
 
 
 
Supplemental schedule of noncash investing activities:
 
 
 
(Increase) decrease in accrued plant additions
$
(841
)
 
$
(5,392
)

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


18


PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
A WHOLLY-OWNED SUBSIDIARY OF PNM RESOURCES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
 
June 30,
2018
 
December 31,
2017
 
(In thousands)
ASSETS
 
 
 
Current Assets:
 
 
 
Cash and cash equivalents
$
2,874

 
$
1,108

Accounts receivable, net of allowance for uncollectible accounts of $1,189 and $1,081
62,677

 
67,227

Unbilled revenues
58,880

 
43,869

Other receivables
22,680

 
14,541

Affiliate receivables
9,037

 
9,486

Materials, supplies, and fuel stock
67,930

 
60,859

Regulatory assets
5,815

 
2,139

Commodity derivative instruments
1,094

 
1,088

Income taxes receivable
3,754

 
3,410

Other current assets
46,369

 
39,904

Total current assets
281,110

 
243,631

Other Property and Investments:
 
 
 
Investment securities
323,105

 
323,524

Other investments
153

 
283

Non-utility property
96

 
96

Total other property and investments
323,354

 
323,903

Utility Plant:
 
 
 
Plant in service and held for future use
5,672,141

 
5,501,070

Less accumulated depreciation and amortization
2,064,741

 
2,029,534

 
3,607,400

 
3,471,536

Construction work in progress
114,535

 
204,079

Nuclear fuel, net of accumulated amortization of $43,309 and $43,524
90,962

 
88,701

Net utility plant
3,812,897

 
3,764,316

Deferred Charges and Other Assets:
 
 
 
Regulatory assets
447,691

 
459,239

Goodwill
51,632

 
51,632

Commodity derivative instruments
3,014

 
3,556

Other deferred charges
74,579

 
75,286

Total deferred charges and other assets
576,916

 
589,713

 
$
4,994,277

 
$
4,921,563

 
 
 
 

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


19


PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
A WHOLLY-OWNED SUBSIDIARY OF PNM RESOURCES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
 
June 30,
2018
 
December 31,
2017
 
(In thousands, except share information)
LIABILITIES AND STOCKHOLDER’S EQUITY
 
 
 
Current Liabilities:
 
 
 
Short-term debt
$
33,600

 
$
39,800

Short-term debt - affiliate
4,900

 

Current installments of long-term debt
200,012

 
23

Accounts payable
64,885

 
77,094

Affiliate payables
8,186

 
22,875

Customer deposits
10,919

 
11,028

Accrued interest and taxes
33,301

 
33,945

Regulatory liabilities

 
784

Commodity derivative instruments
1,416

 
1,182

Dividends declared
132

 
132

Other current liabilities
34,910

 
31,633

Total current liabilities
392,261

 
218,496

Long-term Debt, net of Unamortized Premiums, Discounts, and Debt Issuance Costs
1,455,748

 
1,657,887

Deferred Credits and Other Liabilities:
 
 
 
Accumulated deferred income taxes
463,895

 
449,012

Regulatory liabilities
742,574

 
754,441

Asset retirement obligations
151,289

 
145,707

Accrued pension liability and postretirement benefit cost
78,184

 
86,124

Commodity derivative instruments
3,014

 
3,556

Other deferred credits
172,171

 
106,442

Total deferred credits and liabilities
1,611,127

 
1,545,282

Total liabilities
3,459,136

 
3,421,665

Commitments and Contingencies (Note 11)


 


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

 
11,529

Equity:
 
 
 
PNM common stockholder’s equity:
 
 
 
Common stock (no par value; 40,000,000 shares authorized; issued and outstanding 39,117,799 shares)
1,264,918

 
1,264,918

Accumulated other comprehensive income (loss), net of income taxes
(106,709
)
 
(97,093
)
Retained earnings
299,803

 
254,349

Total PNM common stockholder’s equity
1,458,012

 
1,422,174

Non-controlling interest in Valencia
65,600

 
66,195

Total equity
1,523,612

 
1,488,369

 
$
4,994,277

 
$
4,921,563


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

20


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



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

21



TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
A WHOLLY-OWNED SUBSIDIARY OF PNM RESOURCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2018
 
2017
 
2018
 
2017
 
(In thousands)
Electric Operating Revenues: 
 
 
 
 
 
 
 
Contracts with customers
$
83,931

 
$
80,184

 
$
164,719

 
$
155,312

Alternative revenue programs
3,871

 
6,039

 
4,730

 
9,531

Total Electric Operating Revenues 
87,802

 
86,223

 
169,449

 
164,843

Operating Expenses:
 
 
 
 
 
 
 
Cost of energy
21,350

 
21,315

 
43,104

 
42,802

Administrative and general
8,852

 
9,235

 
19,561

 
19,638

Depreciation and amortization
16,113

 
15,597

 
32,500

 
30,968

Transmission and distribution costs
7,457

 
6,856

 
14,586

 
13,414

Taxes other than income taxes
7,201

 
6,934

 
14,337

 
13,770

Total operating expenses
60,973

 
59,937

 
124,088

 
120,592

Operating income
26,829

 
26,286

 
45,361

 
44,251

Other Income and Deductions:
 
 
 
 
 
 
 
Other income
2,223

 
541

 
2,976

 
1,363

Other (deductions)
(1,391
)
 
(109
)
 
(1,060
)
 
(198
)
Net other income and deductions
832

 
432

 
1,916

 
1,165

Interest Charges
7,801

 
7,510

 
15,530

 
14,915

Earnings before Income Taxes
19,860

 
19,208

 
31,747

 
30,501

Income Taxes
4,493

 
7,004

 
6,968

 
10,693

Net Earnings
$
15,367

 
$
12,204

 
$
24,779

 
$
19,808


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



22


TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
A WHOLLY-OWNED SUBSIDIARY OF PNM RESOURCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
Six Months Ended June 30,
 
2018
 
2017
 
(In thousands)
Cash Flows From Operating Activities:
 
 
 
Net earnings
$
24,779

 
$
19,808

Adjustments to reconcile net earnings to net cash flows from operating activities:
 
 
 
Depreciation and amortization
33,390

 
31,877

Deferred income tax expense (benefit)
(900
)
 
4,894

Allowance for equity funds used during construction and other, net
(762
)
 
(130
)
Changes in certain assets and liabilities:
 
 
 
Accounts receivable and unbilled revenues
(5,073
)
 
(3,358
)
Materials and supplies
(1,211