PNM Resources Announces Second Quarter Results, Steps to Strengthen Financial Position

PNM Resources Announces Second Quarter Results, Steps to Strengthen Financial
Position
Volatile Texas market affects First Choice Power

ALBUQUERQUE, N.M., Aug. 11 /PRNewswire-FirstCall/ -- PNM Resources
(NYSE: PNM) today reported unaudited 2008 second quarter consolidated GAAP
losses of $143.5 million, or $1.76 per diluted share, compared with earnings
of $20.2 million, or $0.26 per diluted share, during the same period in 2007.
Unaudited, consolidated quarterly ongoing losses were $7.4 million, or $0.09
per diluted share, compared with earnings of $15.1 million, or $0.19 per
diluted share in 2007. Reconciliations of GAAP to non-GAAP measures are shown
in the attached schedules 1-11.
GAAP earnings include non-cash impairment charges totaling $140.7 million,
after income tax impacts. The charges, which are the result of the annual
review of the fair market value of intangible assets, primarily goodwill, were
recorded at three subsidiaries - PNM, TNMP and First Choice Power. The
charges do not impact liquidity or the rate bases of PNM and TNMP. EnergyCo
has decided not to pursue expansion of the Twin Oaks Power facility, which
also resulted in an impairment charge.
Quarterly earnings also were affected by the performance of First Choice
Power and the impact of volatile prices and higher purchased power costs
within the Electric Reliability Council of Texas market.
"Excluding the impairment charges, we saw improved performance at PNM in
June as new electric rates and the emergency fuel clause went into effect,"
said Jeff Sterba, PNM Resources chairman and CEO. "Our baseload power plants
continue to show better availability and TNMP had a solid quarter. Our
disappointing second quarter and year-to-date results also are associated with
First Choice Power, which struggled in the Texas market, given volatile
natural gas and wholesale power prices.
"After a comprehensive review of our overall business, we have decided to
pursue strategic alternatives for First Choice Power," Sterba said. "We remain
committed to the Texas market structure and believe in the First Choice Power
business model. However, given the challenges we face in restoring financial
health to our PNM utility subsidiary, we believe First Choice Power could have
more value to another market participant.
"Considering the pending sale of the gas business, our First Choice Power
strategy and as we work to restore the PNM utility to financial health, the
PNM Resources Board of Directors has reduced the indicated annual dividend
payment to $0.50 per share, from $0.92 per share," Sterba said. "While this
was not an easy decision to make, it is a prudent step to improve our
liquidity and set a new foundation for long-term value creation."
SECOND QUARTER PERFORMANCE SUMMARY
Price volatility in ERCOT's energy market, a change in customer mix to
lower-margin customers, higher bad-debt and increased operations costs
significantly affected First Choice Power, which recorded quarterly losses of
$0.16 per diluted share.
PNM electric reported improved performance in June as a result of the
implementation of new electric rates and the emergency fuel and purchased
power adjustment clause. Availability at PNM's base load facilities continued
to improve, despite an extended planned outage of Unit 2 at the Palo Verde
Nuclear Generating Station, which had an equivalent availability factor of
73.1 percent, compared with 73.6 percent in 2007. The San Juan Generating
Station reported an EAF of 91.6 percent, compared with 89.1 percent in 2007.
The Four Corners Plant reported an EAF of 59.0 percent, compared with 53.8
percent during the same period last year.
Consolidated GAAP earnings reflect non-cash charges for impairment of
intangible assets recorded at PNM of $51.1 million, TNMP of $34.5 million and
First Choice Power of $48.0 million. These charges were a result of the
company's annual second quarter impairment assessment. GAAP earnings also were
reduced $7.1 million for the after-tax amount of PNM Resources' 50-percent
share of impairment charges recorded at EnergyCo, which were the result of
EnergyCo's strategic decision not to pursue the expansion of the Twin Oaks
Power plant.
YEAR-TO-DATE PERFORMANCE SUMMARY
For the first six months of 2008, PNM Resources reported unaudited
consolidated GAAP losses of $192.1 million, or $2.42 per diluted share,
compared with earnings of $49.9 million, or $0.64 per diluted share, during
the same period in 2007.
Year-to-date unaudited, consolidated ongoing losses were $4.1 million, or
$0.05 per diluted share, compared with earnings of $44.8 million, or $0.57 per
diluted share, during the same period in 2007.
QUARTERLY SEGMENT REPORTING OF EARNINGS
Regulated Operations
PNM Electric - a vertically integrated electric utility in New Mexico with
distribution, transmission and generation assets. -- PNM Electric reported
ongoing earnings of $4.1 million, or $0.05 per
diluted share, compared with ongoing earnings of $6.9 million, or
$0.09 per diluted share, in 2007. GAAP losses were $47.1 million, or
$0.58 per diluted share (including an impairment charge of $51.1
million), compared with earnings of $0.6 million, or $0.01 per diluted
share, in 2007.
-- The implementation of higher electric rates on May 1 and the emergency
fuel and purchased power cost adjustment clause on June 2 increased
gross margin by $11.5 million. Reduced sales of SO2 credits, and
higher financing costs reduced earnings.
-- Gross margin associated with the company's unregulated power plants -
Palo Verde Unit 3, the Luna Energy Facility and the Lordsburg
Generating Station - was $14.9 million in 2008, compared with $10.5
million in 2007, based on the Palo Verde Unit 3 forward sales
agreement and a higher average price of short-term power sales.
-- Prior to the implementation of new rates and the fuel clause, planned
outages at Palo Verde and Four Corners partially offset the benefits
of off-system sales resulting from increased San Juan availability and
the addition of the Afton Generating Station.

TNMP - a transmission and distribution company in Texas.
-- TNMP reported ongoing earnings of $5.7 million, or $0.07 per diluted
share, compared with $4.2 million, or $0.05 per diluted share, in
2007. GAAP losses were $28.8 million, or $0.35 per diluted share
(including an impairment charge of $34.5 million), compared with
earnings of $4.2 million, or $0.05 per diluted share, in 2007.
-- Ongoing earnings were improved by reduced interest expense, modest
load growth and the expiration of synergy givebacks related to PNM
Resources' 2005 acquisition. These benefits were offset partially by
reduced collections resulting from lower carrying charges related to
the competitive transition costs.

Unregulated Operations
First Choice Power - a competitive retail electric provider in the
Electric Reliability Council of Texas. -- First Choice Power reported
ongoing EBITDA of $(18.6) million,
compared with ongoing EBITDA of $10.2 million in 2007.
-- First Choice Power reported ongoing losses of $13.0 million, or $0.16
per diluted share, compared with earnings of $5.3 million, or $0.07
per diluted share, in 2007. GAAP losses were $60.4 million, or $0.74
per diluted share (including an impairment charge of $48.0 million),
compared with earnings of $6.4 million, or $0.08 per diluted share, in
2007. Due to the timing and complexity of the calculations regarding
the impairment of goodwill at First Choice Power, an estimate was
recorded and might be revised at a later time, as allowed by
accounting rules.
-- Reduced retail margins as a result of extremely volatile supply costs
and transmission constraints within ERCOT, higher operating costs and
higher bad debt expense significantly affected ongoing earnings.
-- Quarterly average retail margins were approximately $3 per megawatt-
hour, compared with approximately $21 per megawatt-hour in 2007.

EnergyCo - jointly owned by PNM Resources and a subsidiary of Cascade
Investment, L.L.C., EnergyCo owns two generating assets - the coal-fired Twin
Oaks Power facility and the natural gas-fired Altura Cogen facility - a is one
of the developers of a fourth unit at the Cedar Bayou Generating Station --
PNM Resources' share of EnergyCo's ongoing EBITDA was $11.5 million.
-- PNM Resources' equity in ongoing net earnings of EnergyCo was $2.7
million, or $0.03 per diluted share, compared with earnings of $1.4
million, or $0.02 per diluted share, in 2007.
-- PNM Resources' equity in the GAAP net losses of EnergyCo was $1.9
million, or $0.03 per diluted share (including PNM Resources' share of
an impairment charge of $7.1 million as a result of the Twin Oaks
decision), compared with earnings of $1.4 million, or $0.02 per
diluted share, in 2007.
-- Twin Oaks had an EAF of 95.4 percent. Altura Cogen produced an
availability factor of 98.2 percent during the quarter.

Corporate/Other - a business segment that reflects costs at the PNM
Resources holding company, comprised mainly of interest expense related to
certain short- and long-term debt and existing hybrid securities. --
Corporate/Other reported ongoing losses of $6.7 million, or $0.08 per
diluted share, compared with losses of $5.3 million, or $0.07 per
diluted share, in 2007. GAAP losses were $8.0 million, or $0.10 per
diluted share, compared with earnings of $4.7 million or $0.06 per
diluted share in 2007.
-- GAAP earnings in 2007 reflected a one-time, $16 million favorable
decision by the Internal Revenue Service.
-- Results were affected by increased financing charges resulting from
additional debt and the remarketing of the debt component of equity-
liked units at a higher interest rate.

Discontinued Operations
PNM Gas: A natural gas utility with distribution and transmission assets.
-- PNM Gas reported ongoing losses of $0.1 million, compared with losses
of $2.0 million, or $0.03 per diluted share, in 2007. PNM Gas reported
GAAP earnings of $2.8 million, or $0.04 per diluted share, compared
with losses of $1.6 million, or $0.02 per diluted share, in 2007.
-- Improved results reflected a full quarter's benefit of increased
delivery rates, which went into effect in July 2007.

ONGOING EARNINGS GUIDANCE
Management previously provided two earnings per diluted share ranges each
for 2008 and 2009. One range detailed obtaining no rate recovery for PNM and
the other assumed obtaining 100 percent recovery of the requested rate case
and fuel clause. As a result of year-to-date performance, the actual outcome
of the PNM rate case and changes to other known key drivers, such as higher
interest expense and projected First Choice Power performance, PNM Resources
management now estimates 2008 earnings per diluted share will be between $0.13
and $0.28.
For 2009, only known adjustments are included in the preliminary range.
Known adjustments that are expected to affect the preliminary range are
approximately ($0.36) to reflect the PNM rate case outcome, ($0.17) to ($0.19)
to reflect reduced performance at First Choice Power, ($0.14) to ($0.15) for
additional financing costs, and ($0.05) to ($0.08) due to the termination of
the Cap Rock Energy acquisition. These known adjustments result in a
preliminary 2009 guidance range of $0.45 to $0.75. The preliminary range does
not include any assumptions regarding the PNM and TNMP rate cases that will be
filed during the third quarter.
BOARD DECLARES COMMON STOCK DIVIDEND PAYMENT
The PNM Resources Board of Directors today declared the regular quarterly
dividend on common stock of $0.125 per share, which represents a reduction of
46 percent from the previous quarter. The company's indicated annual rate is
$0.50 per share. The dividend is payable Aug. 28, 2008, to shareholders of
record as of Aug. 21, 2008. The payout reduction is designed to improve the
company's liquidity and better align the dividend yield with industry
averages.
VINCENT-COLLAWN TO TAKE ON ROLES OF PRESIDENT AND COO
Sterba today also announced the appointment of Pat Vincent-Collawn to the
position of president and chief operating officer of PNM Resources. Vincent-
Collawn formerly was utilities president.
"Pat is making a real difference in our company and this will expand her
opportunity to positively impact our business," said Sterba, who will continue
to serve as chairman and CEO.
SECOND QUARTER FORM 10-Q
Developments outlined above have only recently been finalized and need to
be reflected in the Quarterly Report on Form 10-Q for the quarterly period
ended June 30, 2008. Accordingly, PNM Resources is today filing a
Notification of Late Filing with the SEC and will file its second quarter Form
10-Q within five days of the original due date, which will constitute a timely
filing under the SEC rules.
SECOND QUARTER EARNINGS CALL: TUESDAY, AUG. 12, 2008 - 9 AM EDT
PNM Resources will discuss second quarter earnings results during a live
conference call and Web cast Tuesday, Aug. 12, 2008, at 9 a.m. EDT. Speaking
on the call will be Jeff Sterba, PNM Resources chairman and CEO; Chuck Eldred,
executive vice president; and Pat Vincent-Collawn, president and chief
operating officer.
Investors, analysts and other participants can listen to the live
conference call by dialing 877-419-6603 (toll free) or 719-325-4893 (toll)
and referencing "the PNM Resources earnings call." A telephone replay will be
available at noon EDT until midnight Aug. 15 by dialing 888-203-1112 (toll
free) or 719-457-0820 and using confirmation code 2087724. A live Web cast of
the call will be available at
http://www.pnmresources.com/investors/events.cfm.
Background:
PNM Resources (NYSE: PNM) is an energy holding company based in
Albuquerque, N.M., with 2007 consolidated operating revenues from continuing
and discontinued operations of $2.4 billion. Through its utility and energy
subsidiaries, PNM Resources serves electricity to more than 859,000 homes and
businesses in New Mexico and Texas and natural gas to more than 495,000
customers in New Mexico. Its utility subsidiaries are PNM and Texas-New Mexico
Power. Another subsidiary is First Choice Power, a deregulated competitive
retail electric provider in Texas. With generation resources of approximately
2,700 megawatts, PNM Resources and its subsidiaries market power throughout
the Southwest, Texas and the West. In addition, the company has a 50-percent
ownership of EnergyCo, which owns approximately 920 megawatts of generation.
For more information, visit www.PNMResources.com.
Safe Harbor Statement under the Private Securities Litigation Reform Act
of 1995
Statements made in this news release that relate to future events or
PNMR's, PNM's, or TNMP's (collectively, "Issuers") expectations, projections,
estimates, intentions, goals, targets and strategies, are made pursuant to the
Private Securities Litigation Reform Act of 1995. Readers are cautioned that
all forward-looking statements are based upon current expectations and
estimates and Issuers assume no obligation to update this information. Because
actual results may differ materially from those expressed or implied by these
forward-looking statements, Issuers caution readers not to place undue
reliance on these statements. Issuers' business, financial condition, cash
flow and operating results are influenced by many factors (which are often
beyond their control) that can cause actual results to differ from those
expressed or implied by the forward-looking statements. These factors include
the risk that conditions affecting Issuers' ability to access the financial
markets, including actions by ratings agencies affecting the Issuers' credit
ratings, EnergyCo's access to additional debt financing following the
utilization of its existing credit facility, state and federal regulatory and
legislative decisions and actions, the risk that the closing of the pending
sale of the PNM natural gas utility may not occur due to regulatory or other
reasons, outcome of the decision to pursue strategic alternatives for First
Choice Power and of not successfully implementing such alternatives, the
performance of generating units and transmission systems, including PVNGS,
SJGS, Four Corners, and EnergyCo generating units, and transmission systems,
the risk that EnergyCo is unable to identify and implement profitable
acquisitions, including development of the Cedar Bayou IV Generating Station,
that PNMR and ECJV will not agree to make additional capital contributions to
EnergyCo, the potential unavailability of cash from PNMR's subsidiaries or
EnergyCo due to regulatory, statutory or contractual restrictions, the
decision by the Texas Supreme Court whether or not to review the PUCT order in
the stranded cost true-up proceeding and the outcome of any such review if
granted, the ability of First Choice Power to attract and retain customers,
changes in ERCOT protocols, changes in the cost of power acquired by First
Choice Power, finalization of the goodwill impairment analysis, collections
experience, insurance coverage available for claims made in litigation,
fluctuations in interest rates, weather, water supply, changes in fuel costs,
the risk that PNM Electric may incur fuel and purchased power costs that
exceed the cap allowed under its Emergency FPPAC, availability of fuel
supplies, the effectiveness of risk management and commodity risk
transactions, seasonality and other changes in supply and demand in the market
for electric power, variability of wholesale power prices and natural gas
prices, volatility and liquidity in the wholesale power markets and the
natural gas markets, uncertainty regarding the ongoing validity of government
programs for emission allowances, changes in the competitive environment in
the electric and natural gas industries, the ability to secure long-term power
sales, the risk that the Issuers and EnergyCo may have to commit to
substantial capital investments and additional operating costs to comply with
new environmental control requirements including possible future requirements
to address concerns about global climate change, the risks associated with
completion of generation, including pollution control equipment at SJGS and
the EnergyCo Cedar Bayou IV Generating Station, transmission, distribution,
and other projects, including construction delays and unanticipated cost
overruns, the outcome of legal proceedings, including pending appeals of PNM's
electric and gas rate cases and the Emergency FPPAC, changes in applicable
accounting principles, and the performance of state, regional, and national
economies.
Non-GAAP Financial Measures
PNM Resources ("the Company") uses ongoing earnings, ongoing earnings per
diluted share (or ongoing diluted earnings per share), EBITDA and ongoing
EBITDA to evaluate the operations of the Company and to establish goals for
management and employees. While the Company believes these financial measures
are appropriate and useful for investors, they are not measures presented in
accordance with generally accepted accounting principles in the U.S. (GAAP).
The Company does not intend for these measures, or any piece of these
measures, to represent any financial measure as defined by GAAP. Furthermore,
the Company's calculations of these measures as presented may or may not be
comparable to similarly titled measures used by other companies.

PNM Resources
Schedule 1
2008 Reconciliation of Ongoing to GAAP Earnings
(Unaudited)

Quarter Ended June 30, 2008
(in thousands)
PNM TNMP Utilities
Electric Electric PNM Gas

Ongoing Earnings (Loss) $4,058 $5,679 $(114)

Non-Recurring Items
Business Improvement Plan 39 (5) (71)
Afton writedown (1,199) - -
FIN 48 Interest (1,922) 29 6
Impairment of intangible assets (51,143) (34,456) -
Depreciation on gas assets - - 3,246
Speculative trading - - -
Unrealized impairments of NDT
securities 147 - -
Gain on sale of merchant portfolio 1,749 - -
Economic mark-to-market hedges 1,131 - (307)
Total Non-Recurring Items (51,198) (34,432) 2,874

GAAP Earnings (Loss) from Continuing
Operations (47,140) (28,753)
GAAP Earnings (Loss) from
Discontinued Operations 2,760
GAAP Net Earnings (Loss) $(47,140) $(28,753) $2,760

EnergyCo Corp/
FCP (50%) Other PNMR

Ongoing Earnings (Loss) $(13,012) $2,719 $(6,705) $(7,375)

Non-Recurring Items
Business Improvement Plan - - (1,314) (1,351)
Afton writedown - - - (1,199)
FIN 48 Interest 66 - 12 (1,809)
Impairment of intangible assets (48,001) (7,090) - (140,690)
Depreciation on gas assets - - - 3,246
Speculative trading (1,248) (5) - (1,253)
Unrealized impairments of NDT
securities - - - 147
Gain on sale of merchant portfolio - - - 1,749
Economic mark-to-market hedges 1,776 2,449 - 5,049
Total Non-Recurring Items (47,407) (4,646) (1,302) (136,111)

GAAP Earnings (Loss) from
Continuing Operations (60,419) (1,927) (8,007) (146,246)
GAAP Earnings (Loss) from
Discontinued Operations 2,760
GAAP Net Earnings (Loss) $(60,419) $(1,927) $(8,007) $(143,486)

Ongoing earnings include earnings from discontinued operations and exclude
the impact of non-recurring items and net unrealized mark-to-market gains and
losses on economic hedges. Ongoing earnings also exclude gains and losses from
speculative trading activity and unrealized losses recorded as impairments of
assets held in the Nuclear Decommissioning Trust.

PNM Resources
Schedule 2
2008 Reconciliation of Ongoing to GAAP Earnings
(Unaudited)

Six Months Ended June 30, 2008
(in thousands)
Utilities
PNM TNMP
Electric Electric PNM Gas

Ongoing Earnings (Loss) $(10,382) $9,408 $19,176

Non-Recurring Items
Business Improvement Plan 280 (4) (79)
Afton writedown (1,199) - -
FIN 48 Interest (1,922) 29 6
Regulatory disallowances (18,273) - -
Impairment of intangible assets (51,143) (34,456) -
Depreciation on gas assets - - 6,429
Speculative trading - - -
Unrealized impairments of NDT
securities (1,055) - -
Gain on sale of merchant portfolio 3,083 - -
Economic mark-to-market hedges 6,362 - (272)
Total Non-Recurring Items (63,867) (34,431) 6,084

GAAP Earnings (Loss) from Continuing
Operations (74,249) (25,023)
GAAP Earnings (Loss) from
Discontinued Operations 25,260
GAAP Net Earnings (Loss) $(74,249) $(25,023) $25,260

EnergyCo Corp/
FCP (50%) Other PNMR

Ongoing Earnings (Loss) $(10,857) $2,541 $(13,971) $(4,085)

Non-Recurring Items
Business Improvement Plan - - (2,587) (2,390)
Afton writedown - - - (1,199)
FIN 48 Interest 66 - 12 (1,809)
Regulatory disallowances - - - (18,273)
Impairment of intangible assets (48,001) (7,090) - (140,690)
Depreciation on gas assets - - - 6,429
Speculative trading (31,533) (740) - (32,273)
Unrealized impairments of NDT
securities - - - (1,055)
Gain on sale of merchant
portfolio - - - 3,083
Economic mark-to-market hedges 5,841 (11,792) - 139
Total Non-Recurring Items (73,627) (19,622) (2,575) (188,038)

GAAP Earnings (Loss) from
Continuing Operations (84,484) (17,081) (16,546) (217,383)
GAAP Earnings (Loss) from
Discontinued Operations 25,260
GAAP Net Earnings (Loss) $(84,484) $(17,081) $(16,546) $(192,123)

Ongoing earnings include earnings from discontinued operations and exclude
the impact of non-recurring items and net unrealized mark-to-market gains and
losses on economic hedges. Ongoing earnings also exclude gains and losses from
speculative trading activity and unrealized losses recorded as impairments of
assets held in the Nuclear Decommissioning Trust.

PNM Resources
Schedule 3
2007 Reconciliation of Ongoing to GAAP Earnings
(Unaudited)

Quarter Ended June 30, 2007
(in thousands)
Utilities
PNM TNMP
Electric Electric PNM Gas

Ongoing Earnings (Loss) $6,941 $4,234 $(2,034)

Non-Recurring Items
JV formation costs - - -
Speculative trading - - -
Unrealized impairments of NDT
securities (62) - -
Economic mark-to-market hedges (6,234) - 446
Total Non-Recurring Items (6,296) - 446

GAAP Earnings (Loss) from Continuing
Operations 645 4,234
GAAP Earnings (Loss) from
Discontinued Operations (1,588)
GAAP Net Earnings (Loss) $645 $4,234 $(1,588)

EnergyCo Corp/
Altura FCP (50%) Other PNMR

Ongoing Earnings (Loss) $4,542 $5,284 $1,373 $(5,253) $15,087

Non-Recurring Items
JV formation costs - - - 9,921 9,921
Speculative trading - 1,082 - - 1,082
Unrealized impairments of NDT
securities - - - - (62)
Economic mark-to-market hedges - - - - (5,788)
Total Non-Recurring Items - 1,082 - 9,921 5,153

GAAP Earnings (Loss) from
Continuing Operations 4,542 6,366 1,373 4,668 21,828
GAAP Earnings (Loss) from
Discontinued Operations (1,588)
GAAP Net Earnings (Loss) $4,542 $6,366 $1,373 $4,668 $20,240

Ongoing earnings include earnings from discontinued operations and exclude
the impact of non-recurring items and net unrealized mark-to-market gains and
losses on economic hedges. Ongoing earnings also exclude gains and losses from
speculative trading activity and unrealized losses recorded as impairments of
assets held in the Nuclear Decommissioning Trust.

PNM Resources
Schedule 4
2007 Reconciliation of Ongoing to GAAP Earnings
(Unaudited)

Six Months Ended June 30, 2007
(in thousands)
Utilities
PNM TNMP
Electric Electric PNM Gas

Ongoing Earnings (Loss) $19,202 $5,172 $12,613

Non-Recurring Items
JV formation costs - - -
Speculative trading - - -
Unrealized impairments of NDT
securities (208) - -
Economic mark-to-market hedges (4,123) - 321
Total Non-Recurring Items (4,331) - 321

GAAP Earnings (Loss) from Continuing
Operations 14,871 5,172
GAAP Earnings (Loss) from
Discontinued Operations 12,934
GAAP Net Earnings (Loss) $14,871 $5,172 $12,934

EnergyCo Corp/
Altura FCP (50%) Other PNMR

Ongoing Earnings (Loss) $5,983 $12,417 $973 $(11,541) $44,819

Non-Recurring Items
JV formation costs - - - 9,266 9,266
Speculative trading - (1,069) - - (1,069)
Unrealized impairments of NDT
securities - - - - (208)
Economic mark-to-market hedges - 900 - - (2,902)
Total Non-Recurring Items - (169) - 9,266 5,087

GAAP Earnings (Loss) from
Continuing Operations 5,983 12,248 973 (2,275) 36,972
GAAP Earnings (Loss) from
Discontinued Operations 12,934
GAAP Net Earnings (Loss) $5,983 $12,248 $973 $(2,275) $49,906

Ongoing earnings include earnings from discontinued operations and exclude
the impact of non-recurring items and net unrealized mark-to-market gains and
losses on economic hedges. Ongoing earnings also exclude gains and losses from
speculative trading activity and unrealized losses recorded as impairments of
assets held in the Nuclear Decommissioning Trust.

PNM Resources
Schedule 5:
2008 Reconciliation of Ongoing to GAAP Earnings Per Share
(Unaudited)

Quarter Ended June 30, 2008
Utilities
PNM TNMP
Electric Electric PNM Gas

Ongoing Earnings (Loss) $0.05 $0.07 $-

Non-Recurring Items
Business Improvement Plan - - -
Afton writedown (0.01) - -
FIN 48 Interest (0.02) - -
Impairment of intangible assets (0.63) (0.42) -
Depreciation on gas assets - - 0.04
Speculative trading - - -
Unrealized impairments of NDT
securities - - -
Gain on sale of merchant portfolio 0.02 - -
Economic mark-to-market hedges 0.01 - -
Total Non-Recurring Items (0.63) (0.42) 0.04

GAAP Earnings (Loss) from Continuing
Operations (0.58) (0.35)
GAAP Earnings (Loss) from
Discontinued Operations 0.04
GAAP Net Earnings (Loss) $(0.58) $(0.35) $0.04

EnergyCo Corp/
FCP (50%) Other PNMR

Ongoing Earnings (Loss) $(0.16) $0.03 $(0.08) $(0.09)

Non-Recurring Items
Business Improvement Plan - - (0.02) (0.02)
Afton writedown - - - (0.01)
FIN 48 Interest - - - (0.02)
Impairment of intangible assets (0.59) (0.09) - (1.73)
Depreciation on gas assets - - - 0.04
Speculative trading (0.01) - - (0.01)
Unrealized impairments of NDT
securities - - - -
Gain on sale of merchant portfolio - - - 0.02
Economic mark-to-market hedges 0.02 0.03 - 0.06
Total Non-Recurring Items (0.58) (0.06) (0.02) (1.67)

GAAP Earnings (Loss) from Continuing
Operations (0.74) (0.03) (0.10) (1.80)
GAAP Earnings (Loss) from
Discontinued Operations 0.04
GAAP Net Earnings (Loss) $(0.74) $(0.03) $(0.10) $(1.76)

Average Shares Outstanding
(Basic and Diluted): 81,883,899

Ongoing earnings include earnings from discontinued operations and exclude
the impact of non-recurring items and net unrealized mark-to-market gains and
losses on economic hedges. Ongoing earnings also exclude gains and losses from
speculative trading activity and unrealized losses recorded as impairments of
assets held in the Nuclear Decommissioning Trust.

PNM Resources
Schedule 6:
2008 Reconciliation of Ongoing to GAAP Earnings Per Share
(Unaudited)

Six Months Ended June 30, 2008
Utilities
PNM TNMP
Electric Electric PNM Gas

Ongoing Earnings (Loss) $(0.13) $0.12 $0.24

Non-Recurring Items
Business Improvement Plan - - -
Afton writedown (0.02) - -
FIN 48 Interest (0.02) - -
Regulatory disallowances (0.23) - -
Impairment of intangible assets (0.64) (0.44) -
Depreciation on gas assets - - 0.08
Speculative trading - - -
Unrealized impairments of NDT
securities (0.01) - -
Gain on sale of merchant portfolio 0.04 - -
Economic mark-to-market hedges 0.08 - -
Total Non-Recurring Items (0.80) (0.44) 0.08

GAAP Earnings (Loss) from Continuing
Operations (0.93) (0.32)
GAAP Earnings (Loss) from
Discontinued Operations 0.32
GAAP Net Earnings (Loss) $(0.93) $(0.32) $0.32
Average Shares Outstanding
(Basic and Diluted): 79,415,752

EnergyCo Corp/
FCP (50%) Other PNMR

Ongoing Earnings (Loss) $(0.14) $0.03 $(0.17) $(0.05)

Non-Recurring Items
Business Improvement Plan - - (0.04) (0.04)
Afton writedown - - - (0.02)
FIN 48 Interest - - - (0.02)
Regulatory disallowances - - - (0.23)
Impairment of intangible assets (0.60) (0.09) - (1.77)
Depreciation on gas assets - - - 0.08
Speculative trading (0.39) (0.01) - (0.40)
Unrealized impairments of NDT
securities - - - (0.01)
Gain on sale of merchant portfolio - - - 0.04
Economic mark-to-market hedges 0.07 (0.15) - 0.00
Total Non-Recurring Items (0.92) (0.25) (0.04) (2.37)

GAAP Earnings (Loss) from Continuing
Operations (1.06) (0.22) (0.21) (2.74)
GAAP Earnings (Loss) from
Discontinued Operations 0.32
GAAP Net Earnings (Loss) $(1.06) $(0.22) $(0.21) $(2.42)
Average Shares Outstanding
(Basic and Diluted): 79,415,752

Ongoing earnings include earnings from discontinued operations and exclude
the impact of non-recurring items and net unrealized mark-to-market gains and
losses on economic hedges. Ongoing earnings also exclude gains and losses from
speculative trading activity and unrealized losses recorded as impairments of
assets held in the Nuclear Decommissioning Trust.

PNM Resources
Schedule 7:
2007 Reconciliation of Ongoing to GAAP Earnings Per Share
(Unaudited)

Quarter Ended June 30, 2007
Utilities
PNM TNMP
Electric Electric PNM Gas

Ongoing Earnings (Loss) $0.09 $0.05 $(0.03)

Non-Recurring Items
JV formation costs - - -
Speculative trading - - -
Unrealized impairments of NDT
securities - - -
Economic mark-to-market hedges (0.08) - 0.01
Total Non-Recurring Items (0.08) 0.00 0.01

GAAP Earnings (Loss) from Continuing
Operations 0.01 0.05
GAAP Earnings (Loss) from
Discontinued Operations (0.02)
GAAP Net Earnings (Loss) $0.01 $0.05 $(0.02)
Average Diluted Shares
Outstanding: 78,792,899

Altura FCP EnergyCo Corp/
(50%) Other PNMR

Ongoing Earnings (Loss) $0.06 $0.07 $0.02 $(0.07) $0.19

Non-Recurring Items
JV formation costs - - - 0.13 0.13
Speculative trading - 0.01 - - 0.01
Unrealized impairments of NDT
securities - - - - -
Economic mark-to-market hedges - - - - (0.07)
Total Non-Recurring Items 0.00 0.01 0.00 0.13 0.07

GAAP Earnings (Loss) from Continuing
Operations 0.06 0.08 0.02 0.06 0.28
GAAP Earnings (Loss) from Discontinued
Operations (0.02)
GAAP Net Earnings (Loss) $0.06 $0.08 $0.02 $0.06 $0.26
Average Diluted Shares
Outstanding: 78,792,899

Ongoing earnings include earnings from discontinued operations and exclude
the impact of non-recurring items and net unrealized mark-to-market gains and
losses on economic hedges. Ongoing earnings also exclude gains and losses from
speculative trading activity and unrealized losses recorded as impairments of
assets held in the Nuclear Decommissioning Trust.

PNM Resources
Schedule 8:
2007 Reconciliation of Ongoing to GAAP Earnings Per Share
(Unaudited)

Six Months Ended June 30, 2007
Utilities
PNM TNMP
Electric Electric PNM Gas

Ongoing Earnings (Loss) $0.24 $0.07 $0.16

Non-Recurring Items
JV formation costs - - -
Speculative trading - - -
Unrealized impairments of NDT
securities (0.00) - -
Economic mark-to-market hedges (0.05) - -
Total Non-Recurring Items (0.05) 0.00 0.00

GAAP Earnings (Loss) from Continuing
Operations 0.19 0.07
GAAP Earnings (Loss) from
Discontinued Operations 0.16
GAAP Net Earnings (Loss) $0.19 $0.07 $0.16
Average Diluted Shares
Outstanding: 78,446,067

Altura FCP EnergyCo Corp/
(50%) Other PNMR

Ongoing Earnings (Loss) $0.08 $0.16 $0.01 $(0.15) $0.57

Non-Recurring Items
JV formation costs - - - 0.12 0.12
Speculative trading - (0.01) - - (0.01)
Unrealized impairments of NDT
securities - - - - (0.00)
Economic mark-to-market hedges - 0.01 - - (0.04)
Total Non-Recurring Items 0.00 0.00 0.00 0.12 0.07

GAAP Earnings (Loss) from Continuing
Operations 0.08 0.16 0.01 (0.03) 0.48
GAAP Earnings (Loss) from Discontinued
Operations 0.16
GAAP Net Earnings (Loss) $0.08 $0.16 $0.01 $(0.03) $0.64
Average Diluted Shares
Outstanding: 78,446,067

Ongoing earnings include earnings from discontinued operations and exclude
the impact of non-recurring items and net unrealized mark-to-market gains and
losses on economic hedges. Ongoing earnings also exclude gains and losses from
speculative trading activity and unrealized losses recorded as impairments of
assets held in the Nuclear Decommissioning Trust.

PNM Resources
Schedule 9:
2008 Reconciliation of EnergyCo GAAP Net Income to Ongoing EBITDA
(Unaudited)

Calculation of EnergyCo Ongoing EBITDA June 30, 2008
Quarter Ended Six Months Ended
(in thousands)
GAAP Net Income $(5,602) $(56,608)
Adjustments (add back):
Interest expense 4,789 11,357
Income tax 91 (293)
Depreciation and amortization expense 7,659 15,227
Purchase accounting contract
amortizations 1,567 4,373
Losses on forward mark on economic
hedges (8,107) 39,035
Losses on speculative trading 16 2,448
Impairments of intangible assets 22,530 22,530
Ongoing EnergyCo EBITDA 22,943 38,069

50 percent of EBITDA (PNMR share) $11,472 $19,035

PNM Resources
Schedule 10:
2008 Reconciliation of GAAP Net Earnings to Ongoing EBITDA by Segment
(Unaudited)

(in millions)
Quarter Ended June 30, 2008
PNM TNMP PNM First Corporate PNMR
Electric Electric Gas Choice & Other Consolidated
GAAP Net Earnings
(Loss) ($47.1) ($28.8) $2.8 ($60.4) ($10.0) ($143.5)

Interest charges 17.6 4.4 3.6 0.3 9.7 35.6
Income taxes 2.4 3.4 1.8 (8.8) (7.5) (8.7)
Depreciation and
amortization 20.9 8.8 0.0 0.6 4.4 34.7

EBITDA (6.2) (12.2) 8.2 (68.3) (3.4) (81.9)

Ongoing adjustments 51.2 34.4 (4.8) 49.7 9.2 139.7

Ongoing EBITDA $45.0 $22.2 $3.4 ($18.6) $5.8 57.8

PNM Resources
Schedule 11:
2007 Reconciliation of GAAP Net Earnings to Ongoing EBITDA by Segment
(Unaudited)

(in millions)
Quarter Ended June 30, 2007
PNM TNMP PNM First Corporate PNMR
Electric Electric Gas Altura Choice & Other Consolidated

GAAP Net Earnings
(Loss) $0.6 $4.2 ($1.6) $4.5 $6.4 $6.1 $20.2

Interest charges 12.7 6.9 2.9 3.1 1.1 3.2 29.9
Income taxes 0.4 1.9 (1.0) 3.0 3.9 (23.2) (15.0)
Depreciation
and
amortization 20.7 7.0 5.5 3.1 0.5 2.9 39.7

EBITDA 34.4 20.0 5.8 13.7 11.9 (11.0) 74.8

Ongoing
adjustments 10.4 0.0 (0.7) 0.0 (1.7) 10.0 18.0

Ongoing
EBITDA $44.8 $20.0 $5.1 $13.7 $10.2 ($1.0) 92.8

PNM RESOURCES, INC. AND SUBSIDIARIES
PRELIMINARY CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (LOSS)
(Unaudited)

Three Months Ended Six Months Ended
June 30, June 30,
2008 2007 2008 2007
(In thousands, except per share amounts)

Operating Revenues:
Electric $580,243 $505,400 $944,645 $942,234
Other 67 169 167 379
Total operating
revenues 580,310 505,569 944,812 942,613

Operating Expenses:
Cost of energy 398,698 311,465 633,079 528,277
Administrative and
general 59,392 50,600 106,754 108,927
Energy production
costs 45,557 51,674 96,761 99,056
Impairment of
goodwill and
other intangible
assets 136,179 - 136,179 -
Regulatory
disallowances - - 30,248 -
Depreciation and
amortization 34,650 34,222 68,686 69,063
Transmission and
distribution costs 15,110 14,953 28,486 29,608
Taxes other than
income
taxes 13,484 16,759 26,350 33,331
Total operating
expenses 703,070 479,673 1,126,543 868,262
Operating income
(loss) (122,760) 25,896 (181,731) 74,351

Other Income and
Deductions:
Interest income 4,412 7,583 9,942 17,375
Gains (losses) on
investments held by
NDT (677) 2,957 (4,382) 3,001
Other income 226 1,817 1,116 3,722
Equity in net
earnings
(loss) of EnergyCo (2,523) 2,272 (27,606) 1,610
Other deductions (3,199) (5,506) (7,081) (6,482)
Net other income and
deductions (1,761) 9,123 (28,011) 19,226

Interest Charges:
Interest on long-term
debt 24,197 15,836 43,105 36,899
Other interest
charges 7,823 11,158 16,750 24,996
Total interest
charges 32,020 26,994 59,855 61,895

Earnings (Loss)
before (156,541) 8,025 (269,597) 31,682

Income Taxes
(Benefit) (10,425) (13,935) (52,477) (5,554)

Preferred Stock
Dividend
Requirements of
Subsidiary 132 132 264 264

Earnings (Loss) from
Continuing Operations (146,248) 21,828 (217,384) 36,972

Earnings (Loss) from
Discontinued
Operations, net
of Income
Taxes (Benefit) of
$1,824, $(1,040),
$15,479 and $8,477 2,762 (1,588) 25,261 12,934

Net Earnings (Loss) $(143,486) $20,240 $(192,123) $49,906

Earnings (Loss) from
Continuing Operations
per Common Share:
Basic $(1.79) $0.28 $(2.74) $0.48
Diluted $(1.79) $0.28 $(2.74) $0.47
Net Earnings (Loss)
per Common Share:
Basic $(1.76) $0.26 $(2.42) $0.65
Diluted $(1.76) $0.26 $(2.42) $0.64

Dividends Declared
per Common Share $0.125 $0.230 $0.355 $0.460

The following table shows PNM Electric operating revenues by customer
class, including intersegment revenues and average number of customers:
Three Months Ended June 30,
2008 2007 Change %
(Dollars in millions)
Residential $66.6 $58.4 $8.2 14.0
Commercial 81.7 73.1 8.6 11.8
Industrial 25.4 25.8 (0.4) (1.6)
Transmission 6.2 6.5 (0.3) (4.6)
Other retail 6.6 5.8 0.8 13.8
Wholesale
long-term sales 47.4 34.3 13.1 38.2
Wholesale
short-term sales 152.2 96.4 55.8 57.9
$386.1 $300.3 $85.8 28.6
Average
customers
(thousands) 494.7 488.1 6.6 1.4

Six Months Ended June 30,
2008 2007 Change %
(Dollars in millions)
Residential $137.8 $126.2 $11.6 9.2
Commercial 149.2 137.8 11.4 8.3
Industrial 51.1 49.2 1.9 3.9
Transmission 11.5 13.1 (1.6) (12.2)
Other retail 11.9 11.0 0.9 8.2
Wholesale
long-term sales 82.6 61.9 20.7 33.4
Wholesale
short-term sales 194.6 141.5 53.1 37.5
$638.7 $540.7 $98.0 18.1
Average
customers
(thousands) 494.3 487.6 6.7 1.4

The following table shows PNM Electric GWh sales by customer class:

Three Months Ended June 30,
2008 2007 Change %
(Gigawatt hours)
Residential 718.2 704.9 13.3 1.9
Commercial 1,016.2 992.6 23.6 2.4
Industrial 410.4 494.2 (83.8) (17.0)
Other retail 71.2 63.4 7.8 12.3
Wholesale
long-term sales 773.1 631.2 141.9 22.5
Wholesale
short-term sales 1,089.8 1,286.8 (197.0) (15.3)
4,078.9 4,173.1 (94.2) (2.3)

Six Months Ended June 30,
2008 2007 Change %
(Gigawatt hours)
Residential 1,575.9 1,525.6 50.3 3.3
Commercial 1,926.6 1,869.5 57.1 3.1
Industrial 852.2 964.5 (112.3) (11.6)
Other retail 130.8 119.8 11.0 9.2
Wholesale
long-term sales 1,427.2 1,174.7 252.5 21.5
Wholesale
short-term sales 2,169.1 2,453.7 (284.6) (11.6)
8,081.8 8,107.8 (26.0) (0.3)

The following table shows TNMP Electric operating revenues by customer
class, including intersegment revenues, and average number of customers:
Three Months Ended June 30,
2008 2007 Change %
(Dollars in millions)
Residential $17.8 $15.6 $2.2 14.1
Commercial 18.8 17.7 1.1 6.2
Industrial 3.3 1.8 1.5 83.3
Other 7.2 8.4 (1.2) (14.3)
$47.1 $43.5 $3.6 8.3
Average
customers
(thousands(1)) 229.3 225.3 4.0 1.8

Six Months Ended June 30,
2008 2007 Change %
(Dollars in millions)
Residential $33.1 $30.4 $2.7 8.9
Commercial 35.5 33.7 1.8 5.3
Industrial 6.5 3.5 3.0 85.7
Other 14.2 16.9 (2.7) (16.0)
$89.3 $84.5 $4.8 5.7
Average
customers
(thousands(1)) 228.3 225.3 3.0 1.3

(1) Under TECA, customers of TNMP Electric in Texas have the ability to
choose First Choice or any other REP to provide energy. The average
customers reported above include (in thousands) 119.5 and 138.9 and
customers of TNMP Electric for the three months ended June 30, 2008
and 2007 and 121.9 and 141.4 customers for the six months ended June
30, 2008 and 2007 who have chosen First Choice as their REP. These
customers are also included in the First Choice segment.

The following table shows TNMP Electric GWh sales by customer class:

Three Months Ended June 30,
2008 2007 Change %
(Gigawatt hours (1))
Residential 637.4 579.9 57.5 9.9
Commercial 587.2 563.7 23.5 4.2
Industrial 516.6 473.9 42.7 9.0
Other 26.3 23.9 2.4 10.0
1,767.5 1,641.4 126.1 7.7

Six Months Ended June 30,
2008 2007 Change %
(Gigawatt hours (1))
Residential 1,175.9 1,118.3 57.6 5.2
Commercial 1,060.9 1,022.9 38.0 3.7
Industrial 1,059.7 881.2 178.5 20.3
Other 52.8 48.1 4.7 9.8
3,349.3 3,070.5 278.8 9.1

(1) The GWh sales reported above include 433.0 and 487.3 GWhs for the
three months ended June 30, 2008 and 2007 and 828.0 and 960.3 GWhs
for the six months ended June 30, 2008 and 2007 used by customers of
TNMP Electric, who have chosen First Choice as their REP. These GWhs
are also included below in the First Choice segment.

The following table shows PNM Gas operating revenues by customer class
included in earnings from discontinued operations within the presentation of
Condensed Consolidated Statements of Earnings (Loss) and average number of
customers:

Three Months Ended June 30,
2008 2007 Change %
(Dollars in millions)
Residential $59.2 $48.4 $10.8 22.3
Commercial 19.1 15.5 3.6 23.2
Industrial 1.3 0.4 0.9 225.0
Transportation(1) 3.7 3.4 0.3 8.8
Other 12.3 7.4 4.9 66.2
$95.6 $75.1 $20.5 27.3
Average
customers
(thousands) 496.3 490.5 5.8 1.2

Six Months Ended June 30,
2008 2007 Change %
(Dollars in millions)
Residential $215.7 $200.7 $15.0 7.5
Commercial 63.9 60.6 3.3 5.4
Industrial 2.1 1.0 1.1 110.0
Transportation(1) 9.8 8.4 1.4 16.7
Other 24.5 20.9 3.6 17.2
$316.0 $291.6 $24.4 8.4
Average
customers
(thousands) 497.2 491.2 6.0 1.2

(1) Customer-owned gas.

The following table shows PNM Gas throughput by customer class:

Three Months Ended June 30,
2008 2007 Change %
(Thousands of Decatherms)
Residential 3,747.6 3,826.8 (79.2) (2.1)
Commercial 1,477.1 1,515.0 (37.9) (2.5)
Industrial 136.0 50.1 85.9 171.5
Transportation(1) 9,192.8 10,149.2 (956.4) (9.4)
Other 957.4 499.5 457.9 91.7
15,510.9 16,040.6 (529.7) (3.3)

Six Months Ended June 30,
2008 2007 Change %
(Thousands of Decatherms)
Residential 18,035.1 17,770.9 264.2 1.5
Commercial 6,071.2 6,149.5 (78.3) (1.3)
Industrial 227.9 113.2 114.7 101.3
Transportation(1) 20,569.3 20,948.9 (379.6) (1.8)
Other 1,990.1 1,825.0 165.1 9.0
46,893.6 46,807.5 86.1 0.2

(1) Customer-owned gas.

The following table shows First Choice operating revenues by customer
class, including intersegment revenues, and actual number of customers:
Three Months Ended June 30,
2008 2007 Change %
(Dollars in millions)
Residential $109.7 $88.4 $21.3 24.1
Mass-market 13.7 18.0 (4.3) (23.9)
Mid-market 37.8 38.1 (0.3) (0.8)
Trading
gains
(losses) (1.9) (1.9) - -
Other 2.9 7.4 (4.5) (60.8)
$162.2 $150.0 $12.2 8.1
Actual
customers
(thousands)(1,2) 253.8 249.5 4.3 1.7

Six Months Ended June 30,
2008 2007 Change %
(Dollars in millions)
Residential 186.4 $174.0 $12.4 7.1
Mass-market 29.6 34.3 (4.7) (13.7)
Mid-market 73.4 69.0 4.4 6.4
Trading
gains
(losses) (49.0) (1.7) (47.3) 2,782.4
Other 6.0 10.0 (4.0) (40.0)
$246.4 $285.6 $(39.2) (13.7)
Actual
customers
(thousands)(1,2) 253.8 249.5 4.3 1.7

(1) See note above in the TNMP Electric segment discussion about the
impact of TECA.

(2) Due to the competitive nature of First Choice's business, actual
customer count at June 30 is presented in the table above as a more
representative business indicator than average customers.

The following table shows First Choice GWh electric sales by customer
class:

Three Months Ended June 30,
2008 2007 Change %
(Gigawatt hours(1))
Residential 709.1 638.0 71.1 11.1
Mass-market 68.2 111.1 (42.9) (38.6)
Mid-market 304.5 332.0 (27.5) (8.3)
Other 5.4 5.3 0.1 1.9
1,087.2 1,086.4 0.8 0.1

Six Months Ended June 30,
2008 2007 Change %
(Gigawatt hours(1))
Residential 1,272.8 1,252.9 19.9 1.6
Mass-market 163.0 211.4 (48.4) (22.9)
Mid-market 583.3 595.6 (12.3) (2.1)
Other 9.8 10.4 (0.6) (5.8)
2,028.9 2,070.3 (41.4) (2.0)

(1) See note above in the TNMP Electric segment discussion about the
impact of TECA.

SOURCE PNM Resources

Analysts, Gina Jacobi, +1-505-241-2211, or Analysts & Media, Frederick
Bermudez, +1-505-241-4831, both of PNM Resources