PNM Resources Reports Strong Third-Quarter Earnings

PNM Resources (NYSE: PNM)

2009 THIRD-QUARTER SUMMARY

• Quarterly GAAP (generally accepted accounting principles) earnings of $0.59 per diluted share, compared with losses of $0.06 per diluted share in 2008
• Quarterly ongoing earnings of $0.63 per diluted share, compared with $0.27 per diluted share in 2008

YEAR-TO-DATE SUMMARY

• Year-to-date GAAP earnings of $1.61 per diluted share, compared with losses of $2.42 per diluted share in 2008
• Year-to-date ongoing earnings of $0.94 per diluted share, compared with $0.24 per diluted share in 2008

PNM Resources (NYSE: PNM) today reported unaudited 2009 third-quarter consolidated GAAP earnings of $54.2 million, or $0.59 per diluted share, compared with losses of $5.5 million, or $0.06 per diluted share, in 2008.

Unaudited, consolidated ongoing quarterly earnings were $57.8 million, or $0.63 per diluted share, compared with $23.6 million, or $0.27 per diluted share, in 2008. Reconciliations of GAAP to non-GAAP measures are shown in the attached schedules 1 through 8.

“Early last year we provided a checklist with nine primary goals that needed to be achieved in order to restore PNM Resources’ value. We are pleased to report that our third-quarter and year-to-date results reflect significant progress made in many areas,” said Jeff Sterba, PNM Resources chairman and CEO.

“Specific to the third quarter, financial results were driven by strong performance at our Texas unregulated retail subsidiary, First Choice Power, and reduced overall interest expense, which will help us improve our credit metrics,” Sterba said.

“While considerable achievements already have been accomplished this year, drivers such as economic conditions – and consumers’ response to those conditions – uncertain power markets, utility cost pressures, climate change mandates and the continuing need for adequate and timely regulatory recovery will pose challenges for PNM Resources and our industry into 2010 and beyond.”

Sterba said quarterly retail energy sales and use-per-customer statistics suggest the impact of the 2008-2009 recession has stabilized. “While we still are seeing load loss in our New Mexico service territory, the trend is improving,” he said.

Adjusted for weather, quarterly PNM retail load decreased 2.5 percent and residential use-per-customer increased slightly by 0.1 percent, comparing 2009 with 2008. For TNMP, quarterly retail load increased 6.1 percent and residential use-per-customer increased 7.7 percent in 2009 compared with the same period last year. Adjusted for the impacts of Hurricane Ike, which greatly reduced consumption in September 2008, TNMP load increased slightly by 0.6 percent and residential use-per-customer increased by 2.1 percent.

YEAR-TO-DATE RESULTS

For the first nine months of 2009, PNM Resources reported unaudited consolidated GAAP earnings of $147.5 million, or $1.61 per diluted share, compared with losses of $197.6 million, or $2.42 per diluted share, in 2008. GAAP results in 2009 reflect various non-recurring items recorded primarily in the first quarter, including the $71.7 million after-tax gain from the sale of the company’s natural gas operations. In 2008, year-to-date GAAP results included impairment charges of $147.7 million.

Unaudited, consolidated ongoing earnings for the first nine months of the year were $86.4 million, or $0.94 per diluted share, compared with $19.3 million, or $0.24 per diluted share, in 2008. Year-to-date results in 2008 included PNM gas operations ongoing earnings of $15.0 million, or $0.18 per diluted share. Prior to being sold in January, PNM gas operations contributed $7.6 million, or $0.08 per diluted share, to consolidated earnings.

QUARTERLY SEGMENT REPORTING OF EARNINGS

Regulated Operations

PNM – a vertically integrated electric utility in New Mexico with distribution, transmission and generation assets.

• PNM reported ongoing earnings of $31.7 million, or $0.35 per diluted share, compared with $28.7 million, or $0.33 per diluted share, in 2008. GAAP earnings were $30.8 million, or $0.33 per diluted share, compared with $15.8 million, or $0.18 per diluted share, in 2008.
• Higher retail rates implemented in July and lower interest expense were offset partially by reduced customer demand and lower pension income.

TNMP – an electric transmission and distribution utility in Texas.

• TNMP reported ongoing earnings of $5.5 million, or $0.06 per diluted share, compared with $8.2 million, or $0.10 per diluted share, in 2008. GAAP earnings were $6.2 million, or $0.07 per diluted share, compared with $8.1 million, or $0.09 per diluted share, in 2008.
• Earnings were negatively affected by higher interest costs associated with $315.5 million of refinanced debt. These higher costs are reflected in the new TNMP rates that went into effect Sept. 1. Other factors that negatively affected earnings include lower pension income and higher operating expenses.

Unregulated Operations

First Choice Power – an unregulated retail electric provider in Texas.

• First Choice Power reported ongoing earnings of $18.3 million, or $0.20 per diluted share, compared with losses of $3.0 million, or $0.03 per diluted share, in 2008. GAAP earnings were $17.1 million, or $0.19 per diluted share, compared with 2008 losses of $16.5 million, or $0.19 per diluted share.
• Lower purchased power prices significantly improved average retail margins during the quarter. A 5.3 percent decline in electricity sales offset some of the positive pricing impacts. Quarterly bad-debt expense decreased from $10.3 million in 2008 to $9.1 million in 2009. Lower customer default rates and better management of outstanding accounts receivable contributed to lower 2009 bad debt expense compared with 2008.

Optim Energy – jointly owned by PNM Resources and a subsidiary of Cascade Investment, L.L.C., Optim Energy owns three generating assets in Texas, totaling nearly 1,200 megawatts.

• PNM Resources' equity in Optim Energy net ongoing earnings was $4.5 million, or $0.05 per diluted share, compared with $0.2 million in 2008. PNM Resources' equity in the net GAAP earnings of Optim Energy was $4.2 million, or $0.04 per diluted share, compared with 2008 losses of $0.9 million, or $0.01 per diluted share.
• PNM Resources' share of Optim Energy's ongoing EBITDA was $14.3 million, compared with $5.4 million in 2008. Improved financial performance resulted from the addition of Cedar Bayou 4, favorable hedged positions, Twin Oaks Power fuel savings and operational cost reductions.
• Twin Oaks had an equivalent availability factor of 98.5 percent during the quarter. Availability factors for Altura Cogen and Cedar Bayou 4 were 99.0 percent and 95.5 percent, respectively.

Corporate/Other – a segment that reflects costs at the PNM Resources holding company, mainly comprised of interest expense related to debt. For the purposes of this news release, the Corporate/Other segment excludes the quarterly contribution of Optim Energy reported above.

• Corporate/Other reported ongoing losses of $2.1 million, or $0.03 per diluted share, compared with 2008 ongoing losses of $6.3 million, or $0.08 per diluted share. GAAP losses were $2.6 million, or $0.03 per diluted share, compared with GAAP losses of $11.3 million, or $0.13 per diluted share in 2008.
• Less outstanding debt, lower short-term debt interest rates and the repurchase of certain senior unsecured notes reduced ongoing financing costs by $6.7 million.

2009 EARNINGS OUTLOOK

PNM Resources today updated its 2009 earnings outlook range. Management now expects ongoing earnings to be in the range of $0.76 to $0.81 per diluted share. The previous range was $0.40 to $0.55 per diluted share. The increase in the range was driven largely by First Choice Power’s financial performance. Management will discuss the outlook in more detail during the third-quarter earnings call.

THIRD-QUARTER EARNINGS CALL: 9 A.M. EDT TODAY

PNM Resources will discuss third-quarter earnings results and the 2009 earnings outlook during a live conference call and Web cast today at 9 a.m. EDT. Speaking on the call will be Jeff Sterba, PNM Resources chairman and CEO; Pat Vincent-Collawn, PNM Resources president and COO; and Chuck Eldred, PNM Resources executive vice president and CFO.

A live webcast of the call will be archived at http://www.pnmresources.com/investors/events.cfm. Listeners are encouraged to visit the Web site at least 30 minutes before the event to register, download and install any necessary audio software.

Investors, analysts and other participants can listen to the live conference call by dialing (877) 440-5791 (toll free) or (719) 325-4868 (toll) five to 10 minutes prior to the event and referencing “the PNM Resources earnings conference call.” A telephone replay will be available at noon Eastern until midnight Nov. 5 by dialing (888) 203-1112 (toll free) or (719) 457-0820 and using confirmation code 3529459.

MANAGEMENT TO PRESENT AT EEI FINANCIAL CONFERENCE

PNM Resources management will conduct a presentation during the annual Edison Electric Institute Financial Conference in Hollywood, Florida. The presentation will be webcast live at 9 a.m. Eastern on Tuesday, Nov. 3. Interested parties can access all of the EEI webcasts at: http://phx.corporate-ir.net/phoenix.zhtml?c=130144&p=conferenceAgenda&id=2471665&day=1.

Management also will meet with industry analysts and investors Sunday, Nov. 1 through Tuesday, Nov. 3. Supporting material for the investor meetings will be available beginning Nov. 1 on PNM Resources’ Web site at http://pnm.client.shareholder.com/investors/events.cfm.

E-MAIL ALERTS, RSS FEEDS AVAILABLE

PNM Resources encourages analysts, investors and other interested parties to visit www.PNMResources.com and register to automatically receive company financial information by e-mail. Once registered, participants can choose from a menu to automatically receive requested information, including news releases, notices of webcasts and filings with the U.S. Securities and Exchange Commission. Participants can unsubscribe at any time and will not receive information that was not requested.

Interested parties also can register to automatically receive feeds through Really Simple Syndication, or RSS, a format designed for sharing updated web content such as headlines. An RSS feed automatically highlights fresh material from the PNM Resources Web site so registrants don’t have to repeatedly check the site for updates. To sign up for e-mail alerts and RSS feeds, visit www.PNMResources.com, enter the Investor Relations section and click on the icons at the bottom of the page.

Background:

PNM Resources (NYSE: PNM) is an energy holding company based in Albuquerque, N.M., with 2008 consolidated operating revenues from continuing and discontinued operations of $2.5 billion. Through its utility and energy subsidiaries, PNM Resources has more than 2,680 megawatts of generation resources and serves electricity to more than 884,000 homes and businesses in New Mexico and Texas. The company also has a 50-percent ownership of Optim Energy, which owns nearly 1,200 megawatts of generation resources. For more information, visit the company’s Web site at 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 PNM Resources', PNM's, or TNMP's (collectively, the "Companies") 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 the Companies assume no obligation to update this information. Because actual results may differ materially from those expressed or implied by these forward-looking statements, the Companies caution readers not to place undue reliance on these statements. The Companies' 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 conditions affecting the Companies' ability to access the financial markets or Optim Energy's access to additional debt financing following the utilization of its existing credit facility, including actions by ratings agencies affecting the Companies' credit ratings; the recession, its consequent extreme disruption in the credit markets, and its impacts on the electricity usage of the Companies’ customers; state and federal regulatory and legislative decisions and actions, including appeals of prior regulatory proceedings; the ability of PNM to meet the renewable energy requirements established by the New Mexico Public Regulation Commission, including the resource diversity requirement, within the specified cost parameters, and the Company’s ability to obtain federal and/or state funding and incentives for the development of alternative or renewable energy; the performance of generating units, including the Palo Verde Nuclear Generating Station, the San Juan Generating Station, the Four Corners Plant, and Optim Energy generating units, and transmission systems; the risk that Optim Energy desires to expand its generation capacity but is unable to identify and implement profitable acquisitions, or that PNM Resources and ECJV will not agree to make additional capital contributions to Optim Energy; the potential unavailability of cash from PNM Resources' subsidiaries or Optim Energy due to regulatory, statutory or contractual restrictions; the impacts of the decline in the values of marketable equity securities on the trust funds maintained to provide nuclear decommissioning funding and pension and other postretirement benefits, including the levels of funding and expense; the ability of First Choice Power to attract and retain customers and collect amounts billed; changes in Electric Reliability Council of Texas protocols; changes in the cost of power acquired by First Choice Power; collections experience; insurance coverage available for claims made in litigation; fluctuations in interest rates; weather; water supply; changes in fuel costs; availability of fuel supplies; uncertainty regard the requirements and related costs of decommissioning power plants owned or partially owned by PNM and Optim Energy and coal mines supplying certain PNM power plants as well as the ability to recover decommissioning costs through charges to customers; the risk that replacement power costs incurred by PNM related to not meeting the specified capacity factor for its generating units under its Emergency Fuel and Purchase Power Cost Adjustment Clause will not be approved by the New Mexico Public Regulation Commission; the risk that PNM may not be able to renew rights-of-way on Native American lands or that the costs of rights-of-way are not allowed to be recovered through rates charged to customers; 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; the risk that the resolution of the bankruptcy of the Lyondell Chemical Company results in significant adverse impacts on the operations of the Altura Cogen facility and Optim Energy; changes in the competitive environment in the electric industry; the risk that the Companies and Optim Energy 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, transmission, distribution, and other projects, including construction delays and unanticipated cost overruns; the outcome of legal proceedings; 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 and ongoing earnings per diluted share (or ongoing diluted earnings per share) and EBITDA (earnings before interest charges, income taxes, depreciation and amortization) 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.