2Aug. 12, 2008: Preliminary & Unaudited
Non-GAAP Financial MeasuresPNM 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.
Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995Statements made in this presentation 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 orEnergyCo 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 theEnergyCo 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.
Safe Harbor & Non-GAAP
4Aug. 12, 2008: Preliminary & Unaudited
Highlights
Successful financing actions in tough marketIssued total of $700M in PNM Resources and PNM senior notesTNMP secured $150M short-term loan to redeem senior notesExpanded PNM credit facilities to ensure adequate liquidityResulted in higher financing costs of $18M
Focus on regulated business beginning to show resultsPNM Electric $34.4M rate increase, emergency FPPAC for a period of up to two years or next rate caseTNMP providing stable performanceStrong coal plant availability, Palo Verde continues to improve
Terminated agreement to purchase Cap Rock Energy, additional $15M at close of PNM Gas sale
EnergyCo benefited from market conditions and strong plant availabilityWill not proceed with Twin Oaks 3 permit
5Aug. 12, 2008: Preliminary & Unaudited
First Choice Power
PNM Resources pursuing strategic options for First Choice Power
Goal: Maximize shareholder valueRemain committed to ERCOT market
First Choice Power will execute conservative strategy Margin preservation
Customer retention
First Choice Power continuing commitment to serving customers
6Aug. 12, 2008: Preliminary & Unaudited
ConsiderationsConsiderations
Pending sale of PNM Gas
Evaluation of strategic alternatives for First Choice Power
Focus on restoring financial health of PNM
Dividend ActionDividend Action
46% Reduction
Annual indicated dividend rate: $0.50
Maintain target payout policy of 50% to 60% of consolidated earnings
Re-Aligning Dividend
7Aug. 12, 2008: Preliminary & Unaudited
2nd quarter results below expectationsRegulated utilities on path for improvementEnergyCo performed betterVolatile ERCOT market significantly affected FCP performanceNon-cash impairment charges reflected in GAAP earnings
Q2 2008 Q2 2007GAAP EPS ($1.76) $0.26Includes impairment charge ($1.73)
Ongoing EPS ($0.09) $0.19
2nd Quarter Earnings
8Aug. 12, 2008: Preliminary & Unaudited
Utility Operations
Pat Vincent-CollawnPresident & Chief Operating Officer
9Aug. 12, 2008: Preliminary & Unaudited
Improving Utility Performance
PNM’s new electric ratesEmergency FPPAC provide foundation for future earnings
New fuel clause meets NMPRC criteria (Rule 550)• Cost of fuel and purchased power are significant percentage of total
cost of service• Cost of fuel and purchased power which, periodically fluctuate and
can not be precisely determined in a rate case• The utility's fuel and purchased power policies and practices are
designed to assure that electric power is generated and purchased at lowest reasonable cost
Three ongoing focus areas to improve regulated returns:Continue O&M cost managementMaintain power plant availability, top quartile T&D reliabilityRegulatory strategy
10Aug. 12, 2008: Preliminary & Unaudited
Plant Availability Strengthening
Baseload Plant Equivalent Availability Factor
Improved San Juan outage execution
Strong summer reliability at coal and nuclear facilities
Addition of the emergency FPPAC reduces earnings volatility
66.7%76.3%
92.2% 94.5%
Q1 April/May June July
11Aug. 12, 2008: Preliminary & Unaudited
Implementing Regulatory Strategy
PNM ElectricNew electric rates and emergency FPPAC in placeFile new rate case in Q3 for 2009 implementationFile PNM Electric Integrated Resource Plan in Sept.
TNMPFile rate case in Q3 for 2009 implementation
PNM Gas Operations SaleStaff/intervenor testimony due Aug. 13Hearing begins Sept. 12Recommended decision expected mid Oct. – Nov.Final order expected in Nov.Target for closing Dec. 31
12Aug. 12, 2008: Preliminary & Unaudited
Financial Results
Chuck EldredExecutive Vice President & CFO
13Aug. 12, 2008: Preliminary & Unaudited
2nd Quarter 2008 (Ongoing )
First Choice
Q2 2007
Q2 2008
TNMP
Corp/Other
EnergyCo$0.19
($0.09)
$0.01
($0.06)
$0.02$0.03
($0.01)Altura(1)
PNMGas
($0.23)PNM
Electric
($0.04)
(1) The Altura segment consisted of the Twin Oaks Power Plant which was contributed to EnergyCo in June 2007.
14Aug. 12, 2008: Preliminary & Unaudited
PNM Electric 2nd Quarter (Ongoing )
Improved Plant Availability
Rate Relief(Base + Fuel
Clause)
Q2 2007 Q2 2008
Lower SO2Sales
Other
Financing Costs
$0.09
$0.05
($0.02)
($0.03)
$0.01$0.04
$0.08
($0.10)
Sales Growth
($0.02)
Nuclear Decom.
Trust
15Aug. 12, 2008: Preliminary & Unaudited
First Choice Power 2nd Quarter
Supply costs &
retail rates
Q2 2007
Q2 2008
Bad Debt
O&M
$10.2
($18.6)
($4.4)
($4.9)
($16.4)
Other
($3.1)
Actions taken:Revised hedging strategy to limit supply cost exposureUpdated retail pricing and improved processes to ensure adequate recovery of supply cost
On-Going EBITDA(in millions)
16Aug. 12, 2008: Preliminary & Unaudited
Non-Cash Impairment Charges
Accounting rules require yearly intangible asset impairment testing. Tests conducted in the 2nd quarter
Book value exceeds market value when measured against current stock price
Non cash impairment charges impacted GAAP EPS ($1.73)
EnergyCo (1)
(PNMR share) $7.1M
Total PNMR $570.9M $140.7 M
TNMP $261.1M $34.5M
FCP $207.0M
$102.8MPNM
$48.0M
$51.1M
Recorded intangible asset
valuesAs of 03/31/08
After-taxImpairment
Charge
(1)EnergyCo recorded a non-cash intangible impairment of $21.8M for the termination of the Twin Oaks permitting process.
17Aug. 12, 2008: Preliminary & Unaudited
2008 Guidance (Ongoing)
(1) Segment ranges are risk adjusted at consolidated level, and as a result, segments are not additive.(2) PNM Electric impacted by: higher financing costs ($0.12/share), reduced load growth (~$0.05)
and losses associated with Palo Verde decommissioning trust (~$0.05) (3) Assumes PNM Gas sale closes 12/31/08
Ongoing EPS08/12/08
2008 Outlook (1)
Provided 02/11/082008 Outlook (1)
Consolidated $0.13 - $0.280.05 – 0.09 (2)
0.22 – 0.24
0.26 – 0.28 (3)
(0.07) – 0.01
(0.02) – 0.02
(0.34) – (0.32)
PNM Electric
$0.54 - $0.840.19 – 0.34
0.18 – 0.21
0.20 – 0.24
0.25 – 0.38
(0.04) – 0.02
TNMP
PNM Gas
First Choice
EnergyCo
Corp/Other (0.29) – (0.27)
Reflects outcome of PNM Electric rate
case
Ongoing EBITDA (in millions)
08/12/082008 Outlook
Provided 02/11/082008 Outlook
First Choice ($5) – $5
$60 – $70EnergyCo -100%
$44
$60 – $70
18Aug. 12, 2008: Preliminary & Unaudited
2009 Outlook (Ongoing)
2009 Original EPS Outlook (02/11/08) $0.84 – $1.14
Changes:
Additional financing costs (0.15) – (0.14)
First Choice Power (reduced sales volume) (0.19) – (0.17)
Cap Rock -Terminated Purchase (0.05) – (0.08)
Current EPS Outlook $0.45 - $0.75
Reflects outcome of
PNM Electric rate case
2009 outlook excludes impact of Q3 2008 PNM & TNMP rate cases
Updated 2009 outlook will be provided with 4th Quarter 2008 results
Ongoing EBITDA (in millions)
08/12/082009 Outlook
Provided 02/11/082009 Outlook
First Choice $25 – $35
$100 – $110EnergyCo -100%
$50 - $60
$100 – $110
Ongoing EPS
19Aug. 12, 2008: Preliminary & Unaudited
Projected Sources/Uses of Cash
(1)
(1) Includes cash received from Palo Verde 3 toll, which is reported as cash from financing.
($ in millions)Cash Inflows
Cash from operations $450PNM Gas sale (after tax) 463Equity-linked securities 347Cap Rock termination fee (after tax) 9
Total Inflows $1,269
Cash OutflowsCapital spending $713Cap Rock Energy -Current dividends 103
Total Outflows $816
Amount remaining for other corporate uses $453
Remaining availability of credit facilities and cash as of 08/04/08 $1.2 Billion
Cash Inflows & Outflows (Before Financing)
2008 & 2009
(1)
20Aug. 12, 2008: Preliminary & Unaudited
Achieve annual O&M reduction of at least $35 millionOn track to achieve savings
Continue disciplined growth of First Choice Power retail business
Opportunistically expand EnergyCo’s asset/trading position in ERCOT
Close the sale of NM gas business in the 4th quarter
Close the acquisition of Cap Rock Energy in the 4th quarter
Ensure Palo Verde’s return to premier operating status within 24 months
Complete scheduled environmental upgrades at San Juan Unit 3 by Apr. and Unit 1 by Nov.
Further evaluate PNM electric rate relief action, pending outcome of current rate case
On track: NMPRC hearing scheduled to begin on Sept. 12
Terminated agreement, PNM Resources to receive $15M at close of PNM Gas sale
On track: Regulatory performance improving, focusing on plant operations
Disappointing YTD results; pursuing strategic alternatives to maximize value
On track: Cedar Bayou construction on schedule
On track: Unit 3 complete, Unit 1 on schedule
PNM electric rate case to be filed Q3 2008TNMP rate case to be filed Q3 2008
Checklist of 2008 Objectives
22Aug. 12, 2008: Preliminary & Unaudited
Quarter EPS by Segment (Ongoing)
Three months ended June 30,
2008 2007 +/-Total Diluted EPS ($0.09) $0.19 ($0.28)
PNM Electric $0.05 $0.09 ($0.04)
TNMP Electric $0.07 $0.05 $0.02
PNM Gas $0.00 ($0.03) $0.03
First Choice ($0.16) $0.07 ($0.23)
EnergyCo $0.03 $0.02 $0.01
Altura $0.00 $0.06 ($0.06)
Corp/Other ($0.08) ($0.07) ($0.01)
23Aug. 12, 2008: Preliminary & Unaudited
Quarter EPS by Segment (GAAP)
Three months ended June 30,
2008 2007 +/-Total Diluted EPS ($1.76) $0.26 ($2.02)
PNM Electric ($0.58) $0.01 ($0.59)
TNMP Electric ($0.35) $0.05 ($0.40)
PNM Gas $0.04 ($0.02) $0.06
First Choice ($0.74) $0.08 ($0.82)
EnergyCo ($0.03) $0.02 ($0.05)
Altura $0.00 $0.06 ($0.06)
Corp/Other ($0.10) $0.06 ($0.16)
24Aug. 12, 2008: Preliminary & Unaudited
YTD EPS by Segment (Ongoing)
Six months ended June 30,
2008 2007 +/-Total Diluted EPS ($0.05) $0.57 ($0.62)
PNM Electric ($0.13) $0.24 ($0.37)
TNMP Electric $0.12 $0.07 $0.05
PNM Gas $0.24 $0.16 $0.08
First Choice ($0.14) $0.16 ($0.30)
EnergyCo $0.03 $0.01 $0.02
Altura $0.00 $0.08 ($0.08)
Corp/Other ($0.17) ($0.15) ($0.02)
25Aug. 12, 2008: Preliminary & Unaudited
YTD EPS by Segment (GAAP)
Six months ended June 30,
2008 2007 +/-Total Diluted EPS ($2.42) $0.64 ($3.06)
PNM Electric ($0.93) $0.19 ($1.12)
TNMP Electric ($0.32) $0.07 ($0.39)
PNM Gas $0.32 $0.16 $0.16
First Choice ($1.06) $0.16 ($1.22)
EnergyCo ($0.22) $0.01 ($0.23)
Altura $0.00 $0.08 ($0.08)
Corp/Other ($0.21) ($0.03) ($0.18)
26Aug. 12, 2008: Preliminary & Unaudited
2nd Quarter EBITDA (Ongoing)
Three months ended June 30,
2008 2007 +/-
Total EBITDA $57.8 $92.8 ($35.0)
PNM Electric $45.0 $44.8 $0.2
TNMP Electric $22.2 $20.0 $2.2
PNM Gas $3.4 $5.1 ($1.7)
First Choice ($18.6) $10.2 ($28.8)
Altura $0.0 $13.7 ($13.7)
Corp/Other $5.8 ($1.0) $6.8
(in millions)
EnergyCo - 100% $22.9 $6.0 $16.9
27Aug. 12, 2008: Preliminary & Unaudited
YTD EBITDA (Ongoing)
Six months ended June 30,
2008 2007 +/-
Total EBITDA $129.0 $218.7 ($89.7)
PNM Electric $57.0 $98.7 ($41.7)
TNMP Electric $41.6 $35.5 $6.1
PNM Gas $37.2 $37.8 ($0.6)
First Choice ($14.1) $22.0 ($36.1)
Altura $0.0 $26.2 ($26.2)
Corp/Other $7.3 ($1.5) $8.8
( in millions)
EnergyCo - 100% $38.1 $4.7 $33.4
28Aug. 12, 2008: Preliminary & Unaudited
First Choice Power 2nd Quarter(Ongoing )
Supply costs &
retail rates
Q2 2007
Q2 2008
Bad Debt
O&M
$0.07
($0.16)
($0.04)
($0.04)
($0.13)
Other
($0.02)
Actions taken:Revised hedging strategy to limit supply cost exposureUpdated retail pricing and improved processes to ensure adequate recovery of supply cost
29Aug. 12, 2008: Preliminary & Unaudited
Weather Data
Heating Degree DaysThree months ended June 30,
2008 2007 NormalPNM 370 338
TNMP 46 99 50
291
9971,113942TNMP
2,4002007
2,2162,466PNMNormal2008
Six months ended June 30,
Heating Degree Days
1,0159411,155TNMP
4122007
476478PNMNormal2008
Three months ended June 30,
Cooling Degree Days
1,0971,0521,268TNMP
4122007
476478PNMNormal2008
Six months ended June 30,
Cooling Degree Days
30Aug. 12, 2008: Preliminary & Unaudited
Liquidity Update
(in millions) PNM
Resources PNM TNMP PNM
Resources
(as of 08/04/08) Separate Separate Separate Consolidated
Revolving credit facility $ 600.0 $ 400.0 $ 200.0 $ 1,200.0
Local lines of credit $ 10.0 $ 8.5 $ 18.5
Delayed draw term loan $ 150.0 $ 150.0
Letters of Credit Agreement $ 100.0 $ 100.0
Bridge Facility $ 150.0 $ 150.0
Total Financing $ 610.0 $ 658.5 $ 350.0 $ 1,618.5
Total Short-term debt and letters of credit $ 357.2 $ 27.8 $ 151.5 $ 536.5
Remaining availability as of 08/04/08 $ 252.8 $ 630.7 $ 198.5 $ 1,082.0
Cash balances as of 08/04/08 $ 54.8 $ 54.4 $ - $ 109.2
Available Liquidity $ 307.6 $ 685.1 $ 198.5 $ 1,191.2
31Aug. 12, 2008: Preliminary & Unaudited
$241
$152$97
$54
$67
$72
$68 $140
$37
$42
$41 $68
$43
$21
2007 Actual 2008E 2009E
Existing generation & development TNMP PNM Electric T&D Gas Other
Capital Spending
$563
$564
$272
$300
$42
2008-2012
$372$357
$414
Includes AFUDC and capitalized interest.
$1,741
(in millions)
32Aug. 12, 2008: Preliminary & Unaudited
Power Plant Availability
73.6%
91.6%
59.0%
73.1%
53.8%
89.1%
San Juan Four Corners Palo VerdeQ2 2008 Q2 2007
Q1 200994
Q4 2009105
Q1 – Q2 2008
Time period
1005
Duration(in days)
Unit
Four Corners 2008/2009 Planned OutagesFour Corners 2008/2009 Planned Outages
Q4 2009362
Q2 2009
Q4 2008
Q2 2008
Time period
433
391
542
Duration(in days)
Unit Palo Verde 2008/2009 Planned OutagesPalo Verde 2008/2009 Planned Outages
Q1 2009
Q3 2008
Q1 2008
Time period
502
511
583
Duration(in days)
Unit San Juan 2008/2009 Planned OutagesSan Juan 2008/2009 Planned Outages
Equivalent Availability Factor
33Aug. 12, 2008: Preliminary & Unaudited
Twin Oaks EAF
EnergyCo Plant Availability
Duration(in days)
Time period
35 4Q-2008
Duration(in days)
Time period
7 Q1-2008
7 Q2-2008
19 Q4-2008
Twin OaksTwin Oaks
Altura CogenAltura Cogen
95.4%
98.2%
95.9% 96.1%
98.2%
85.6%
2008 Planned Outages
Q2 2008
Q2 2007
Jan-Jun 2008
Jan-Jun 2007
Q2 2008
Jan-Jun 2008
Altura Cogen AF
34Aug. 12, 2008: Preliminary & Unaudited
Name District Next Election
Party
Jason MarksChairman
District 1- Bernalillo 2008 Democrat
David King District 2- BernalilloSouthern Bernalillo & Santa Fe, Torrance Lincoln, Otero, DeBaca, Quay, Curry, Roosevelt, Chavez, Eddy, Lea
2010 Republican
Ben R. Lujan District 3- Taos, Rio Arriba, Colfax, Union, Mora, Harding, San Miguel, Guadalupe, Santa Fe
2008 Democrat
Carol K. Sloan District 4- San Juan, McKinley, Cibola, Sandoval, Bernalillo, Santa Fe, Socorro
2010 Democrat
Sandy JonesVice Chair
District 5- Valencia, Socorro, Catron, Sierra, Don Ana,Luna, Grant,Hidalgo, Lincoln, Otero
2010 Democrat
New Mexico PRC
35Aug. 12, 2008: Preliminary & Unaudited
PNM Electric Rate Case
NMPRC-Final Order PNM Filing
ROE 10.1% 10.75%
Revenue Requirement
$591.5 million $635.4 million1
Rate Base $1.2 billion $1.2 billion
Rate Increase $34.4 million2 $76.9 million1
Emergency Fuel Clause
$58M to $62M ~$72M
Summary of Final Order andPNM Filing
1Adjusted in supplemental and rebuttal testimony2As adjusted by NMPRC on 5/01/08
36Aug. 12, 2008: Preliminary & Unaudited
Emergency Fuel Clause
Awarded on May 22, 2008Emergency fuel clause:
Expires 24 months after the effective date of the rates established in this case, or on the effective date of new rates in the next PNM general rate case, whichever is soonerRecovery capped at $0.024972Requires PRC approval of replacement power costs that are the result of base load power plant capacity factors being below a weighted average of 86.4% Credits customers with 100 percent of the proceeds from off-system sales from jurisdictional resourcesIs based on the projected fuel and purchased power costs with the factor to be adjusted after six months
37Aug. 12, 2008: Preliminary & Unaudited
Utility Rate Base
Rate Base Last
Allowed
ROE Last
Allowed
Test Period 12-
month ended
Comments
Debt-Equity Ratio
Implemented 2007 ROE Results
PNM-Electric $1.2billion
10.1% Sept. 2006 Final order issued May 2008
48%-52% May 2008
TNMP-NM (transferred to
PNM)
$70million
10.0% Sept. 2004 Rates frozen through Dec. 2010
55%-45% NA
5.0% Regulated Return$1.4B Rate Base1
51.4% Common Equity
PNM-Gas $377 million
9.53% Dec. 2005 Final order issued 2007
48%-52% Implemented July 2007
5.2% Regulated Return$0.4B Rate Base51.8 Common Equity
TNMP-TX $402 million
10.25% Sept. 2004 Rates Frozen through
May 2007
60%-40% NA 6.7% Regulated Return2
$0.4B Rate Base 40.0% Common Equity
1Includes former TNMP-NM operations & 50% of Afton2 Financial return, for calculation details see PNMResources.com
*