PNM Resources, Inc.

PNM

US69349H1077

Electric Utilities

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Apr. 15	Barclays Adjusts Price Target on PNM Resources to $43 From $40, Keeps Overweight Rating	MT
Apr. 01	PNM Resources, Inc. Enters into a Twelfth Amendment to and Restatement of Credit Agreement Amending and Restating its $300.0 Million Revolving Credit Agreement	CI

PNM RESOURCES INC MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-K)

March 01, 2022 at 05:48 pm EST

The following Management's Discussion and Analysis of Financial Condition and
Results of Operations for PNMR is presented on a combined basis, including
certain information applicable to PNM and TNMP. This report uses the term
"Company" when discussing matters of common applicability to PNMR, PNM, and
TNMP. The MD&A for PNM and TNMP is presented as permitted by Form 10-K General
Instruction I (2) as amended by the FAST Act. For additional information related
to the earliest of the two years presented please refer to the Company's 2020
Annual Report on Form 10-K. A reference to a "Note" in this Item 7 refers to the
accompanying Notes to Consolidated Financial Statements included in Part II,
Item 8, unless otherwise specified. Certain of the tables below may not appear
visually accurate due to rounding.

                                 MD&A FOR PNMR

                               EXECUTIVE SUMMARY
Overview and Strategy

PNMR is a holding company with two regulated utilities serving approximately
806,000 residential, commercial, and industrial customers and end-users of
electricity in New Mexico and Texas. PNMR's electric utilities are PNM and TNMP.
PNMR strives to create a clean and bright energy future for customers,
communities, and shareholders. PNMR's strategy and decision-making are focused
on safely providing reliable, affordable, and environmentally responsible power
built on a foundation of Environmental, Social and Governance (ESG) principles.

Recent Developments

Merger

On October 20, 2020, PNMR, Avangrid and Merger Sub entered into the Merger
Agreement pursuant to which Merger Sub will merge with and into PNMR, with PNMR
surviving the Merger as a wholly-owned subsidiary of Avangrid. The proposed
Merger has been unanimously approved by the Boards of Directors of PNMR,
Avangrid and Merger Sub and approved by PNMR shareholders at the Special Meeting
of Shareholders held on February 12, 2021.

Pursuant to the Merger Agreement, each issued and outstanding share of the
common stock of PNMR (other than (i) the issued shares of PNMR common stock that
are owned by Avangrid, Merger Sub, PNMR or any wholly-owned subsidiary of
Avangrid or PNMR, which will be automatically cancelled at the Effective Time
and (ii) shares of PNMR common stock outstanding immediately prior to the
Effective Time and held by a holder who has not voted in favor of, or consented
in writing to, the Merger who is entitled to, and who has demanded, payment for
fair value of such shares) at the Effective Time will be converted into the
right to receive $50.30 in cash.

The Merger Agreement provided that it may be terminated if the Effective Time
shall not have occurred by the End Date; however, either PNMR or Avangrid could
extend the End Date to April 20, 2022 if all conditions to closing have been
satisfied other than the obtaining of all required regulatory approvals. On
December 8, 2021, the NMPRC issued an order rejecting the stipulation agreement
relating to the Merger and the approval of the Merger from the NMPRC has not yet
been obtained.

In light of the NMPRC ruling, on January 3, 2022, PNMR, Avangrid and Merger Sub
entered into an Amendment to the Merger Agreement pursuant to which PNMR and
Avangrid each agreed to extend the End Date to April 20, 2023. The parties
acknowledge in the Amendment that the required regulatory approval from the
NMPRC has not been obtained and that the parties have reasonably determined that
such outstanding approval will not be obtained by April 20, 2022. As amended,
the Merger Agreement may be terminated by each of PNMR and Avangrid under
certain circumstances, including if the Merger is not consummated by April 20,
2023.

With respect to the NMPRC proceedings, on April 20, 2021, the Joint Applicants,
the NMAG, WRA, the International Brotherhood of Electrical Workers Local 611,
Dine, Nava Education Project, the San Juan Citizens Alliance and To Nizhoni Ani,
had entered into a stipulation and agreement in the Joint Application for
approval of Merger pending before the NMPRC. Subsequently, CCAE, Onward Energy
Holdings LLC, Walmart Inc., Interwest Energy Alliance, M-S-R Power and the
Incorporated County of Los Alamos joined an amended stipulation. An evidentiary
hearing was held in August 2021. On November 1, 2021, a Certification of
Stipulation was issued by the hearing examiner, which recommended against
approval of the amended stipulation. On December 8, 2021, the NMPRC issued an
order adopting the Certification of Stipulation, rejecting the amended
stipulation reached by the parties. On January 3, 2022, PNMR and Avangrid filed
a notice of appeal with the NM Supreme Court. On February 2, 2022, PNMR and
Avangrid filed a statement of issues outlining the argument for appeal.

With respect to other regulatory proceedings related to the Merger, in January
2021, the FTC notified PNMR and Avangrid that early termination of the waiting
period under the HSR Act in connection with the Merger was granted. In February
2021, CFIUS completed its review of the Merger and concluded that there are no
unresolved national security concerns with respect to the Merger. In March 2021,
PNMR and Avangrid received FCC approval of the transfer of operating
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licenses related to the Merger. In April 2021, FERC issued an order authorizing
the Merger. In May 2021, the PUCT issued an order authorizing the Merger, and
the NRC approved the Merger. As a result of the delay in closing of the Merger
due to the need to obtain NMPRC approval, PNMR and Avangrid are required to make
a new filing under the HSR Act and request extensions of approvals previously
received from the FCC and NRC. On February 9, 2022, the request for extension
was filed with the NRC. On February 24, 2022, the requests for a 180-day
extension were granted by the FCC. No additional filings will be required with
CFIUS, FERC or the PUCT.

Consummation of the Merger remains subject to the satisfaction or waiver of
certain customary closing conditions, including, without limitation, the absence
of any material adverse effect on PNMR, the receipt of required regulatory
approval from the NMPRC, and the agreements relating to the divestiture of Four
Corners being in full force and effect and all applicable regulatory filings
associated therewith being made. The agreement relating to the divestiture of
Four Corners has been entered into and is in full force and effect and related
filings have been made with the NMPRC.

EIM



On April 1, 2021, PNM joined and began participating in the EIM. The EIM is a
real-time wholesale energy trading market operated by the CAISO that enables
participating electric utilities to buy and sell energy. The EIM aggregates the
variability of electricity generation and load for multiple balancing authority
areas and utility jurisdictions. In addition, the EIM facilitates greater
integration of renewable resources through the aggregation of flexible resources
by capturing diversity benefits from the expanding geographic footprint and the
expanded potential uses for those resources. PNM completed a cost-benefit
analysis, which indicated participation in the EIM would provide substantial
benefits to retail customers. In 2018, PNM filed an application with the NMPRC
requesting, among other things, to recover initial capital investments and
authorization to establish a regulatory asset to recover other expenses that
would be incurred in order to join the EIM. The NMPRC approved the establishment
of a regulatory asset but deferred certain rate making issues, including but not
limited to issues related to implementation and ongoing EIM costs and savings,
the prudence and reasonableness of costs to be included in the regulatory asset,
and the period over which costs would be charged to customers until PNM's next
general rate case filing. PNM has already experienced $12.5 million of costs
savings to customers through participation in the EIM. See Note 17.

Texas Winter Storm



In mid-February 2021, Texas experienced a severe winter storm delivering the
coldest temperatures in 100 years for many parts of the state. As a result, the
ERCOT market was not able to deliver sufficient generation load to the grid
resulting in significant, statewide outages as ERCOT directed transmission
operators to curtail thousands of firm load megawatts. TNMP complied with ERCOT
directives to curtail the delivery of electricity in its service territory and
did not experience significant outages on its system outside of the ERCOT
directed curtailments. TNMP has deferred bad debt expense from defaulting REPs
to a regulatory asset totaling $0.8 million at December 31, 2021, and will seek
recovery in a general rate case. At this time, the Company does not expect
significant financial impacts related to this event. For additional information
on the Texas winter storm, see Note 16.

Financial and Business Objectives

PNMR is focused on achieving three key financial objectives:

•Earning authorized returns on regulated businesses •Delivering at or above industry-average earnings and dividend growth •Maintaining investment grade credit ratings

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



•Maintaining strong employee safety, plant performance, and system reliability
•Delivering a superior customer experience
•Demonstrating environmental stewardship in business operations, including
transitioning to an emissions-free generating portfolio by 2040
•Supporting the communities in their service territories

Earning Authorized Returns on Regulated Businesses



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

Fair and timely rate treatment from regulators is crucial to PNM and TNMP in
earning their allowed returns and critical for PNMR to achieve its financial
objectives. PNMR believes that earning allowed returns is viewed positively by
credit rating
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agencies and that improvements in the Company's ratings could lower costs to
utility customers. Additional information about rate filings is provided in Note
17.

State Regulation

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

New Mexico 2016 Rate Case - In January 2018, the NMPRC approved a settlement
agreement that authorized PNM to implement an increase in base non-fuel rates of
$10.3 million, which included a reduction to reflect the impact of the decrease
in the federal corporate income tax rate and updates to PNM's cost of debt
(aggregating $47.6 million annually). This order was on PNM's application for a
general increase in retail electric rates filed in December 2016 (the "NM 2016
Rate Case"). The key terms of the order include:

•A ROE of 9.575%
•A requirement to return to customers over a three-year period the benefit of
the reduction in the New Mexico corporate income tax rate to the extent
attributable to PNM's retail operations (Note 18)
•A disallowance of PNM's ability to collect an equity return on certain
investments aggregating $148.1 million at Four Corners, but allowing recovery of
a debt-only return
•An agreement to not implement non-fuel base rate changes, other than changes
related to PNM's rate riders, with an effective date prior to January 1, 2020
•A requirement to consider the prudency of PNM's decision to continue its
participation in Four Corners in PNM's next general rate case filing

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



On December 29, 2020, Sierra Club filed a motion to re-open the NM 2016 Rate
Case. The motion requests that the NMPRC re-open the NM 2016 Rate Case for the
limited purpose of conducting a prudence review of certain Four Corners capital
expenditures that the NMPRC deferred in its order approving the settlement
agreement. Alternatively, Sierra Club requested that the deferred prudence
review be conducted, and given weight as appropriate, in the Four Corners
Abandonment Application. On February 10, 2021, the NMPRC rejected Sierra Club's
motion to re-open the NM 2016 Rate Case and stated that issues on whether the
terms of the ETA provide an opportunity for consideration of prudence for Four
Corners undepreciated investments included in a financing order or what effects
the rates approved in the NM 2016 Rate Case may have on determining energy
transition cost should be considered in the Four Corners Abandonment
Application. For additional information on the Four Corners Abandonment
Application see Note 17.

2020 Decoupling Petition - On May 28, 2020, PNM filed a petition for approval of
a rate adjustment mechanism that would decouple the rates of its residential and
small power rate classes. Decoupling is a rate design principle that severs the
link between the recovery of fixed costs of the utility through volumetric
charges. If approved, customer bills would not be impacted until January 1,
2022. On October 2, 2020, PNM requested an order to vacate the public hearing
and stay the proceeding until the NMPRC decides whether to entertain a petition
to issue a declaratory order resolving the issues raised in the motions to
dismiss. On October 7, 2020, the hearing examiner approved PNM's request to stay
the proceeding and vacate the public hearing and on October 30, 2020 PNM filed a
petition for declaratory order asking the NMPRC to issue an order finding that
full revenue decoupling is authorized by the EUEA. On March 17, 2021, the NMPRC
issued an order granting PNM's petition for declaratory order which commences a
proceeding to address petitions. Oral arguments were made on July 15, 2021. On
January 14, 2022, the hearing examiner issued a recommended decision
recommending the NMPRC find that the EUEA does not mandate the NMPRC to
authorize or approve a full decoupling mechanism, defining full decoupling as
limited to energy efficiency and load management measures and programs. The
recommended decision also states that a utility may request approval of a rate
adjustment mechanism to remove regulatory disincentives to energy efficiency and
load management measures and programs through a stand-alone petition, as part of
the utility's triennial energy efficiency application or a general rate case and
that PNM is not otherwise precluded from petitioning for a rate adjustment
mechanism prior to its next general rate case. Finally, the recommended decision
stated that the EUEA does not permit the NMPRC to reduce a utility's ROE based
on approval of a disincentive removal mechanism founded on removing regulatory
disincentives to energy efficiency and load management measures and programs.
The recommended decision does not specifically prohibit a downward adjustment to
a utility's capital structure, based on approval of a disincentive removal
mechanism. See Note 17. PNM cannot predict the outcome of this matter.

PVNGS Leased Interest Abandonment Application - On April 2, 2021, PNM filed the
PVNGS Leased Interest Abandonment Application. In the application, PNM requested
NMPRC authorization to decertify and abandon its Leased Interest and to create
regulatory assets for the associated remaining undepreciated investments with
consideration of cost recovery of the undepreciated investments in a future rate
case. PNM also sought NMPRC approval to sell and transfer the PNM-owned assets
and nuclear fuel supply associated with the Leased Interest to SRP, which will
be acquiring the Leased Interest from the lessors upon termination of the
existing leases. In addition, PNM sought NMPRC approval for a 150 MW
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solar PPA combined with a 40 MW battery storage agreement and a stand-alone 100
MW battery storage agreement to replace the Leased Interest. To ensure system
reliability and load needs are met in 2023, when a majority of the leases
expire, PNM also requested NMPRC approval for a 300 MW solar PPA combined with a
150 MW battery storage agreement. On August 25, 2021, the NMPRC issued an order
confirming PNM requires no further NMPRC authority to abandon the PVNGS Leased
Interest and to sell and transfer the PNM-owned assets and nuclear fuel supply
associated with the Leased Interest to SRP. The order bifurcated the issue of
approval of the two PPAs and three battery storage agreements into a separate
docket so it may proceed expeditiously and deferred a ruling on the other
issues. On February 16, 2022, the NMPRC approved the two PPAs and three battery
storage agreements. For additional information on PNM's Leased Interest and the
associated abandonment application see Note 16 and Note 17.

Advanced Metering - Currently, TNMP has approximately 262,000 advanced meters
across its service territory. Beginning in 2019, the majority of costs
associated with TNMP's AMS program are being recovered through base rates. On
July 14, 2021, TNMP filed a request with the PUCT to consider and approve its
final reconciliation of the costs spent on the deployment of AMS from April 1,
2018 through December 31, 2018 of $9.0 million and approve appropriate carrying
charges until full collection. On September 13, 2021, the PUCT Staff filed a
recommendation for approval of TNMP's application for substantially all costs.
On October 2, 2020, TNMP filed an application with the PUCT for authorization to
implement necessary technological upgrades of approximately $46 million to its
AMS program by November 2022. On January 14, 2021, the PUCT approved TNMP's
application. TNMP will seek recovery of the investment associated with the
upgrade in a future general rate proceeding or DCOS filing.

In February 2016, PNM filed an application with the NMPRC requesting approval of
a project to replace its existing customer metering equipment with Advanced
Metering Infrastructure ("AMI"), which was denied. As ordered by the NMPRC,
PNM's 2020 filing for energy efficiency programs to be offered in 2021, 2022,
and 2023 included a proposal for an AMI pilot project, although PNM did not
recommend the proposal due to the limited benefits that are cost-effective under
a pilot structure. On September 17, 2020, the hearing examiner in the energy
efficiency case issued a recommended decision recommending that PNM's proposed
2021 energy efficiency and load management program be approved, with the
exception of the proposed AMI pilot program. On October 28, 2020, the NMPRC
approved the recommended decision.

Rate Riders and Interim Rate Relief - The PUCT has approved mechanisms that
allow TNMP to recover capital invested in transmission and distribution projects
without having to file a general rate case. The PUCT also approved rate riders
that allow TNMP to recover amounts related to energy efficiency and third-party
transmission costs. The NMPRC has approved PNM recovering fuel costs through the
FPPAC, as well as rate riders for renewable energy, energy efficiency, and the
TEP. These mechanisms allow for more timely recovery of investments.

FERC Regulation



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

In May 2019, PNM filed an application with FERC requesting approval to purchase
and provide transmission service on the Western Spirit Line. All necessary
approvals were obtained. In December 2021, PNM completed the purchase of the
Western Spirit Line and service under related transmission agreements was
initiated using an incremental rate that is separate from the formula rate
mechanism described above. See Note 17.

On March 12, 2021, PNM filed four unexecuted TSAs with FERC totaling 145 MW with
Leeward. The unexecuted TSAs provide long-term firm, point-to-point transmission
service on PNM's transmission system. The unexecuted TSAs are based on the
pro-forma transmission service agreements with certain non-conforming provisions
under Attachment A of PNM's OATT and include PNM's OATT rate. PNM filed the
unexecuted TSAs at the request of Leeward because the parties were unable to
reach an agreement on the terms and conditions for transmission service. On May
11, 2021, FERC issued an order accepting PNM's four unexecuted TSAs based on
PNM's proposed pricing scheme included in its OATT rate. On June 10, 2021,
Pattern Wind and Leeward both filed a request for rehearing of the FERC Order.
On September 10, 2021, Leeward filed a petition in the United States District
Court for the District of Columbia for review of FERC's order accepting PNM's
four unexecuted TSAs. On November 15, 2021, FERC issued an order denying the
rehearing. On December 3, 2021, Leeward filed an Unopposed Motion for Voluntary
Dismissal with the United States District Court for the District of Columbia of
its petition for review. PNM is unable to predict the outcome of this matter.
See Note 17.

Delivering At or Above Industry-Average Earnings and Dividend Growth

PNMR's financial objective to deliver at or above industry-average earnings and dividend growth enables investors to


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realize the value of their investment in the Company's business. Earnings growth
is based on ongoing earnings, which is a non-GAAP financial measure that
excludes from GAAP earnings certain non-recurring, infrequent, and other items
that are not indicative of fundamental changes in the earnings capacity of the
Company's operations. PNMR uses ongoing earnings to evaluate the operations of
the Company and to establish goals, including those used for certain aspects of
incentive compensation, for management and employees.

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

Under the terms of the Merger Agreement, PNMR has agreed not to declare, set
aside, make or pay any dividend or other distribution, payable in cash, stock,
property or otherwise, with respect to any of its equity securities, or make any
other actual, constructive or deemed distribution in respect of any equity
securities (except (i) PNMR may continue the declaration and payment of planned
regular quarterly cash dividends on PNMR common stock for each quarterly period
ended after the date of the Merger Agreement, which for any fiscal quarter in
2022 shall not exceed $0.3475, with usual record and payment dates in accordance
with past dividend practice, and (ii) for any cash dividend or cash distribution
by a wholly-owned subsidiary of PNMR to PNMR or another wholly-owned subsidiary
of PNMR).

The Board approved the following increases in the indicated annual common stock
dividend:

                          Approval Date       Percent Increase
                        December 2020                    6.5  %
                        February 2022                    6.1  %

Maintaining Investment Grade Credit Ratings



The Company is committed to maintaining investment grade credit ratings in order
to reduce the cost of debt financing and to help ensure access to credit
markets, when required. On February 10, 2022, Moody's downgraded TNMP's issuer
rating from A3 to Baa1 and changed the outlook from negative to stable. See the
subheading Liquidity included in the full discussion of Liquidity and Capital
Resources below for the specific credit ratings for PNMR, PNM, and TNMP. All of
the credit ratings issued by both Moody's and S&P on the Company's debt continue
to be investment grade.

Business Focus

To achieve its business objectives, focus is directed in key areas: Safe,
Reliable and Affordable Power; Utility Plant and Strategic Investments;
Environmentally Responsible Power; and Customer, Stakeholders, and Community
Engagement. The Company works closely with its stakeholders to ensure that
resource plans and infrastructure investments benefit from robust public
dialogue and balance the diverse needs of our communities. Equally important is
the focus of PNMR's utilities on customer satisfaction and community engagement.

Safe, Reliable, and Affordable Power



Safety is the first priority of our business and a core value of the Company.
PNMR utilizes a Safety Management System to provide clear direction, objectives
and targets for managing safety performance and minimizing risks and empowers
employees to "Be the Reason Everyone Goes Home Safe".

PNMR measures reliability and benchmark performance of PNM and TNMP against
other utilities using industry-standard metrics, including System Average
Interruption Duration Index ("SAIDI") and System Average Interruption Frequency
Index ("SAIFI"). PNM's and TNMP's investment plans include projects designed to
support reliability and reduce the amount of time customers are without power.

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

The Company continues to closely monitor developments and has taken and
continues to take steps to mitigate the potential risks related to the COVID-19
pandemic. The Company has assessed and updated its existing business continuity
plans in response to the impacts of the pandemic through crisis team meetings
and working with other utilities and operators. It has identified its critical
workforce, staged backups and limited access to control rooms and critical
assets. The Company has worked to protect the safety of its employees using a
number of measures, including minimizing exposure to other employees
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and the public and supporting flexible arrangements for all applicable job
functions. The Company is also working with its suppliers to manage the impacts
to its supply chain and remains focused on the integrity of its information
systems and other technology systems used to run its business. However, the
Company cannot predict the extent or duration of the ongoing COVID-19 pandemic,
its effects on the global, national or local economy, or on the Company's
financial position, results of operations, and cash flows. The Company will
continue to monitor developments related to COVID-19 and will remain focused on
protecting the health and safety of its customers, employees, contractors, and
other stakeholders, and on its objective to provide safe, reliable, affordable
and environmentally responsible power. As discussed in Note 17, both PNM and
TNMP suspended disconnecting certain customers for past due bills, waived late
fees during the pandemic, and have been provided regulatory mechanisms to
recover these and other costs resulting from COVID-19. See additional discussion
below regarding the Company's customer, community, and stakeholder engagement in
response to COVID-19 and in Item 1A. Risk Factors.

Utility Plant and Strategic Investments



Utility Plant Investments - During the 2020 and 2021 periods, PNM and TNMP
together invested $1.6 billion in utility plant, including substations, power
plants, nuclear fuel, and transmission and distribution systems. New Mexico's
clean energy future depends on a reliable, resilient, secure grid to deliver an
evolving mix of energy resources to customers. PNM has launched a capital
initiative, which emphasizes new investments in its transmission and
distribution infrastructure with three primary objectives: delivering clean
energy, enhancing customer satisfaction and increasing grid resilience. Projects
are aimed at advancing the infrastructure beyond its original architecture to a
more flexible and redundant system accommodating growing amounts of intermittent
and distributed generation resources and integrating evolving technologies that
provide long-term customer value. See the subheading Capital Requirements
included in the full discussion of Liquidity and Capital Resources below for
additional discussion of the Company's projected capital requirements.

Strategic Investments - In 2017, PNMR Development and AEP OnSite Partners
created NMRD to pursue the acquisition, development, and ownership of renewable
energy generation projects, primarily in the state of New Mexico. Abundant
renewable resources, large tracts of affordable land, and strong government and
community support make New Mexico a favorable location for renewable generation.
New Mexico ranks third in the Nation for energy potential from solar power
according to the Nebraska Department of Energy & Energy Sun Index and ranks
third in the Nation for land-based wind capacity according to the U.S. Office of
Energy Efficiency and Renewable Energy. PNMR Development and AEP OnSite Partners
each have a 50% ownership interest in NMRD. Through NMRD, PNMR anticipates being
able to provide additional renewable generation solutions to customers within
and surrounding its regulated jurisdictions through partnering with a subsidiary
of one of the United States' largest electric utilities. As of December 31,
2021, NMRD's renewable energy capacity in operation was 135.1 MW, which includes
130 MW of solar-PV facilities to supply energy to the Meta data center located
within PNM's service territory, 1.9 MW to supply energy to Columbus Electric
Cooperative located in southwest New Mexico, 2.0 MW to supply energy to the
Central New Mexico Electric Cooperative, and 1.2 MW of solar-PV facilities to
supply energy to the City of Rio Rancho, New Mexico. In addition, PNM's February
8, 2021 application with the NMPRC for approval to service the Meta data center
includes construction of a 50 MW solar facility owned by NMRD, which is expected
to be operational in 2023. See Note 17. NMRD actively explores opportunities for
additional renewable projects, including large-scale projects to serve future
data centers and other customer needs.

Integrated Resource Plan



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

NMPRC rules required PNM to file its 2020 IRP in July 2020. In April 2020, the
NMPRC approved PNM 's request to extend the deadline to file its 2020 IRP until
six months after the NMPRC issues a final order approving replacement resources
in PNM's SJGS Abandonment Application. On January 29, 2021, PNM filed its 2020
IRP. The plan focuses on a carbon-free electricity portfolio by 2040 that would
eliminate coal at the end of 2024. This includes replacing the power from San
Juan with a mix of approved carbon-free resources and the plan to exit Four
Corners at the end of 2024. The plan highlights the need for additional
investments in a diverse set of resources, including renewables to supply
carbon-free power, energy storage to balance supply and demand, and efficiency
and other demand-side resources to mitigate load growth. See additional
discussion regarding PNM's 2020 IRP filing in Note 17.

Environmentally Responsible Power

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

•Developing strategies to provide reliable and affordable power while transitioning to a 100% emissions-free generating portfolio by 2040 •Preparing PNM's system to meet New Mexico's increasing renewable energy requirements as cost-effectively as possible •Increasing energy efficiency participation

PNMR's corporate website (www.pnmresources.com) includes a dedicated section providing key environmental and other sustainability information related to PNM's and TNMP's operations and other information that collectively demonstrates


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the Company's commitment to ESG principles. This information highlights plans
for PNM to be coal-free by 2024 (subject to regulatory approval) and to achieve
an emissions-free generating portfolio by 2040.

In February 2022 PNM named its first Chief Environmental Officer. The Chief
Environmental Officer will be responsible for developing and implementing the
Company's business strategy and positions on environmental and sustainability
policy issues and will be charged with establishing organization-wide policies,
strategies, goals, objectives and programs that advance sustainability and
ensure compliance with regulations. The role will serve as the Company's primary
contact with various regulatory and stakeholder agencies on environmental
matters. In addition, the role will lead environmental justice work,
incorporating impacts to tribal, worker and affected communities and advance ESG
reporting.

On September 21, 2020, PNM announced an agreement to partner with Sandia
National Laboratories in research and development projects focused on energy
resiliency, clean energy, and national security. The partnership demonstrates
PNMR's commitment to ESG principles and its support of projects that further its
emissions-free generation goals and plans for a reliable, resilient, and secure
grid to deliver New Mexico's clean energy future.

The Energy Transition Act ("ETA")



On June 14, 2019, Senate Bill 489, known as the ETA, became effective. The ETA
amends the REA and requires utilities operating in New Mexico to have renewable
portfolios equal to 20% by 2020, 40% by 2025, 50% by 2030, 80% by 2040, and 100%
zero-carbon energy by 2045. The ETA also amends sections of the REA to allow for
the recovery of undepreciated investments and decommissioning costs related to
qualifying EGUs that the NMPRC has required be removed from retail
jurisdictional rates, provided replacement resources to be included in retail
rates have lower or zero-carbon emissions. The ETA provides for a transition
from fossil-fueled generating resources to renewable and other carbon-free
resources by allowing utilities to issue securitized bonds, or "energy
transition bonds," related to the retirement of certain coal-fired generating
facilities to qualified investors. PNM expects the ETA will have a significant
impact on PNM's future generation portfolio, including PNM's planned retirement
of SJGS in 2022 and the planned Four Corners exit in 2024. PNM cannot predict
the full impact of the ETA on potential future generating resource abandonment
and replacement filings with the NMPRC.

SJGS Abandonment Application - On July 1, 2019, PNM filed a Consolidated
Application for the Abandonment and Replacement of SJGS and Related Securitized
Financing Pursuant to the ETA (the "SJGS Abandonment Application"). The SJGS
Abandonment Application sought NMPRC approval to retire PNM's share of SJGS in
mid-2022, and for approval of replacement resources and the issuance of
approximately $361 million of Securitized Bonds as provided by the ETA. The
application included several replacement resource scenarios including PNM's
recommended replacement scenario, which is consistent with PNM's goal of having
a 100% emissions-free generating portfolio by 2040 and would have provided cost
savings to customers while preserving system reliability.

The NMPRC issued an order requiring the SJGS Abandonment Application be
considered in two proceedings: one addressing SJGS abandonment and related
financing and the other addressing replacement resources but did not
definitively indicate if the abandonment and financing proceedings would be
evaluated under the requirements of the ETA. After several requests for
clarification and legal challenges, in January 2020, the NM Supreme Court ruled
the NMPRC is required to apply the ETA to all aspects of PNM's SJGS Abandonment
Application, and that any previous NMPRC orders inconsistent with their ruling
should be vacated.

In February 2020, the hearing examiners issued two recommended decisions
recommending approval of PNM's proposed abandonment of SJGS, subject to approval
of the separate replacement resources proceeding, and approval of PNM's proposed
financing order to issue Securitized Bonds.  The hearing examiners recommended,
among other things, that PNM be authorized to abandon SJGS by June 30, 2022, to
issue Securitized Bonds of up to $361 million, and to establish the Energy
Transition Charge. The hearing examiners recommended an interim rate rider
adjustment upon the start date of the Energy Transition Charge to provide
immediate credits to customers for the full value of PNM's revenue requirement
related to SJGS until those reductions are reflected in base rates. In addition,
the hearing examiners recommended PNM be granted authority to establish
regulatory assets to recover costs that PNM will pay prior to the issuance of
the Securitized Bonds, including costs associated with the bond issuances as
well as for severances, job training, and economic development funds. On April
1, 2020, the NMPRC unanimously approved the hearing examiners' recommended
decisions regarding the abandonment of SJGS and the Securitized Bonds. On April
10, 2020, CFRE and NEE filed a notice of appeal with the NM Supreme Court of the
NMPRC's approval of PNM's request to issue securitized financing under the ETA.
On January 10, 2022, the NM Supreme Court issued its decision rejecting CFRE's
and NEE's constitutional challenges to the ETA and affirmed the NMPRC final
order.

On June 24, 2020, the hearing examiners issued a second recommended decision on
PNM's request for approval of replacement resources that addressed the entire
portfolio of replacement resources. On July 29, 2020 the NMPRC issued an order
approving resource selection criteria identified in the ETA that include PPA's
for 650 MW of solar and 300 MW of battery storage. Throughout 2021 and
continuing into 2022, PNM provided notices of delays and status updates to the
NMPRC for the approved SJGS replacement resource projects, which coupled with
the abandonment of SJGS Units 1 and 4 present a risk that PNM will have
insufficient operational resources to meet the 2022 summer peak to reliably
serve its customers. PNM
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entered into three agreements to purchase power from third parties in the second
half of 2021 to minimize potential impacts to customers and on February 17,
2022, PNM provided a notice and request with the NMPRC that PNM had obtained
agreement from the SJGS owners and WSJ LLC to extend operation of Unit 4 until
September 30, 2022. SJGS Unit 4 will provide 327 MW of capacity and improve
PNM's projected system reserve margin to meet the 2022 summer peak. On February
23, 2022, the NMPRC issued an order finding that PNM did not require NMPRC
approval to extend operation of SJGS Unit 4 for an additional three-month
period. On February 25, 2022, the amended SJGS participation agreement was filed
with FERC. See additional discussion of the ETA and PNM's San Juan Abandonment
Application in Notes 16 and 17.

Four Corners Abandonment Application - On January 8, 2021, PNM filed the Four
Corners Abandonment Application, which seeks NMPRC approval to exit PNM's 13%
share of Four Corners as of December 31, 2024, and issuance of approximately
$300 million of energy transition bonds as provided by the ETA. As ordered by
the hearing examiner in the case, PNM filed an amended application and testimony
on March 15, 2021. The amended application provided additional information to
support PNM's request, provided background on the NMPRC's consideration of the
prudence of PNM's investment in Four Corners in the NM 2016 Rate Case and
explained how the proposed sale and abandonment provides a net public benefit.
On December 15, 2021, the NMPRC issued a final order denying approval of the
Four Corners Abandonment Application and the corresponding request for issuance
of securitized financing. On December 22, 2021, PNM filed a Notice of Appeal
with the NM Supreme Court of the NMPRC decision to deny the application. See
additional discussion of the ETA and PNM's Four Corners Abandonment Application
in Notes 16 and 17.

PNM enhanced its plan to exit Four Corners and emphasized its ESG strategy to
reduce carbon emissions on March 12, 2021 with an announcement for additional
plans for seasonal operations at Four Corners beginning in the fall of 2023,
subject to the necessary approvals. The solution for seasonal operations ensures
the plant will be available to serve each owners' customer needs during times of
peak energy use while minimizing operations during periods of low demand. This
approach results in an estimated annual 20 to 25 percent reduction in carbon
emissions at the plant and retains jobs and royalty payments for the Navajo
Nation.

The Community Solar Act



On June 18, 2021, Senate Bill 84, known as the Community Solar Act, became
effective. The Community Solar Act establishes a program that allows for the
development of community solar facilities and provides customers of a qualifying
utility with the option of accessing solar energy produced by a community solar
facility in accordance with the Community Solar Act. The NMPRC is charged with
administering the Community Solar Act program, establishing a total maximum
capacity of 200 MW community solar facilities (applicable until November 2024)
and allocating proportionally to the New Mexico electric investor-owned
utilities and participating cooperatives. As required under the Community Solar
Act, the NMPRC opened a docket on May 12, 2021 to adopt rules to establish a
community solar program no later than April 1, 2022. See Note 17.

Electric Vehicles



PNMR is building upon its ESG goal of 100% emissions-free generation by 2040
with plans for additional emissions reductions through the electrification of
its vehicle fleet. Growing the number of electric vehicles within the Company's
fleet will benefit the environment and lower fuel costs furthering the
commitment to ESG principles. Under the commitment, existing fleet vehicles will
be replaced as they are retired with an increasing percentage of electric
vehicles. The new goals call for 25% of all light duty fleet purchases to be
electric by 2025 and 50% to be electric by 2030.

To demonstrate PNMR's commitment to increase the electrification of vehicles in
its service territory, PNM filed a TEP with the NMPRC on December 18, 2020. The
TEP supports customer adoption of electric vehicles by focusing on addressing
the barriers to electric vehicle adoption and encourage use. PNM's proposed
program budget will be dedicated to low and moderate income customers by
providing rebates to both residential and non-residential customers towards the
purchase of chargers and/or behind-the-meter infrastructure. On November 10,
2021, the NMPRC issued a final order approving PNM's TEP program. See Note 17.

In December 2021, PNM announced that it will be joining the National Electric
Highway Coalition, which plans to build fast-charging ports along major U.S.
travel corridors. The coalition, with approximately 50 investor-owned electric
companies is committed to providing electric vehicle (EV) fast charging ports
that will allow the public to drive EVs with confidence throughout the country's
major roadways by the end of 2023.

Other Environmental Matters



Four Corners may be required to comply with environmental rules that affect
coal-fired generating units, including regional haze rules and the ETA. On June
19, 2019, EPA repealed the Clean Power Plan, promulgated the ACE Rule, and
revised the implementing regulations for all emission guidelines issued under
the CAA Section 111(d). On January 19, 2021, the DC Circuit issued an opinion
vacating and remanding the ACE Rule, holding that it was based on a
misconstruction of Section 111(d) of the Clean Air Act, but stayed its mandate
for vacatur of the repeal of the Clean Power Plan to ensure that the
now-outdated rule would not become effective. The U.S. Supreme Court granted
four petitions for certiorari seeking review of
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the DC Circuit's decision, and oral arguments in the case were held on February
28, 2022. A decision is expected in June 2022. In addition, on January 27, 2021,
President Biden signed an executive order requiring a review of environmental
regulations issued under the Trump Administration, which will include a review
of the ACE rule.

Renewable Energy

PNM's renewable procurement strategy includes utility-owned solar capacity, as
well as solar, wind, and geothermal energy purchased under PPAs. As of December
31, 2021, PNM has 158 MW of utility-owned solar capacity in operation. In
addition, PNM purchases power from a customer-owned distributed solar generation
program that had an installed capacity of 201.2 MW at December 31, 2021. PNM
also owns the 500 KW PNM Prosperity Energy Storage Project. The project was one
of the first combinations of battery storage and solar-PV energy in the nation
and involved extensive research and development of advanced grid concepts. The
facility also was the nation's first solar storage facility fully integrated
into a utility's power grid. PNM also purchases the output from New Mexico Wind,
a 200 MW wind facility, and the output of Red Mesa Wind, an existing 102 MW wind
energy center. PNM's 2020 renewable energy procurement plan was approved by the
NMPRC in January 2020 and includes a PPA to procure 140 MW of renewable energy
and RECs from La Joya Wind II that became operational in June 2021. The NMPRC
approved the portfolio to replace the planned retirement of SJGS resulting in
PNM executing solar PPAs of 650 MW combined with 300 MW of battery storage
agreements. In addition, the PVNGS Leased Interest Abandonment Application
approved by the NMPRC includes solar PPAs of 450 MW combined with 290 MW of
battery storage agreements. The majority of these renewable resources are key
means for PNM to meet the RPS and related regulations that require PNM to
achieve prescribed levels of energy sales from renewable sources, including
those set by the recently enacted ETA, without exceeding cost requirements.

As discussed in Strategic Investments above, PNM is currently purchasing the
output of 130 MW of solar capacity from NMRD that is used to serve the Meta data
center which includes two 25-year PPAs to purchase renewable energy and RECs
from an aggregate of approximately 100 MW of capacity from two solar-PV
facilities constructed by NMRD to supply power to Meta, Inc. The first 50 MW of
these facilities began commercial operations in November 2019 and the second 50
MW facility began commercial operations in July 2020. Additionally, PNM has
entered into three separate 25-year PPAs to purchase renewable energy and RECs
to be used by PNM to supply additional renewable power to the Meta data center.
These PPAs include the purchase of power and RECs from a 50 MW wind project,
which was placed in commercial operation in November 2018, a 166 MW wind project
which became operational in February 2021, and a 50 MW solar-PV project to be
operational in 2022. In addition, the NMPRC issued an order that will allow PNM
to service the Meta data center for an additional 190 MW of solar PPA combined
with 50 MW of battery storage and a 50 MW solar PPA expected to be operational
in 2023. See Note 17.

In March 2020, the NMPRC approved the PNM Solar Direct program under which
qualified governmental and large commercial customers could participate in a
voluntary renewable energy procurement program. The costs of the program would
be recovered directly from subscribing customers through a rate rider, including
the costs to procure renewable energy from 50 MW of solar-PV facilities under a
15-year PPA. These facilities are expected to be placed in commercial operation
in 2022.

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

Energy Efficiency



Energy efficiency plays a significant role in helping to keep customers'
electricity costs low while meeting their energy needs and is one of the
Company's approaches to supporting environmentally responsible power. PNM's and
TNMP's energy efficiency and load management portfolios continue to achieve
robust results. In 2021, incremental energy saved as a result of new
participation in PNM's portfolio of energy efficiency programs is estimated to
be approximately 95 GWh. This is equivalent to the annual consumption of
approximately 11,245 homes in PNM's service territory. PNM's load management and
annual energy efficiency programs also help lower peak demand requirements. As
discussed above, in April 2020, PNM filed an application for energy efficiency
and load management programs to be offered in 2021, 2022, and 2023. On September
17, 2020, the hearing examiner in the case issued a recommended decision
recommending that PNM's proposed 2021 energy efficiency and load management
program be approved, with the exception of the proposed AMI pilot program. On
October 28, 2020, the NMPRC issued an order adopting the recommended decision in
its entirety. In 2021, TNMP's incremental energy saved as a result of new
participation in TNMP's energy efficiency programs is estimated to be
approximately 19 GWh. This is equivalent to the annual consumption of
approximately 2,469 homes in TNMP's service territory. TNMP's High-Performance
Homes residential new construction energy efficiency program was honored for the
sixth year in a row by ENERGY STAR. This recognition includes the program's
fourth straight Partner of the Year Sustained Excellence Award. For information
on PNM's and TNMP's energy efficiency filing with the NMPRC and PUCT see Note
17.

Water Conservation and Solid Waste Reduction

PNM continues its efforts to reduce the amount of fresh water used to make electricity (about 35% more efficient than in 2007). Continued growth in PNM's fleet of solar and wind energy sources, energy efficiency programs, and innovative uses


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of gray water and air-cooling technology have contributed to this reduction.


 Water usage has continued to decline as PNM has substituted less
fresh-water-intensive generation resources to replace SJGS Units 2 and 3
starting in 2018, as water consumption at that plant has been reduced by
approximately 50%.  As the Company moves forward with its mission to achieve
100% carbonfree generation by 2040, it expects that more significant water
savings will be gained. PNM has set a goal to reduce freshwater use 80% by 2035
and 90% by 2040 from 2005 levels. Focusing on responsible stewardship of New
Mexico's scarce water resources improves PNM's water-resilience in the face of
persistent drought and ever-increasing demands for water to spur the growth of
New Mexico's economy.

In addition to the above areas of focus, the Company is working to reduce the
amount of solid waste going to landfills through increased recycling and
reduction of waste. In 2021, 18 of the Company's 23 facilities met the solid
waste diversion goal of a 65% diversion rate. The Company expects to continue to
do well in this area in the future.

Customer, Stakeholder, and Community Engagement



Another key element of the Company's commitment to ESG principles is fostering
relationships with its customers, stakeholders, and communities. The Company
strives to deliver a superior customer experience. Through outreach,
collaboration, and various community-oriented programs, the Company has
demonstrated a commitment to building productive relationships with
stakeholders, including customers, community partners, regulators, intervenors,
legislators, and shareholders. In December 2021, PNM Resources was named for the
second consecutive year to Newsweek's list of America's Most Responsible
Companies highlighting companies in areas of ESG. PNM continues to focus its
efforts to enhance the customer experience through customer service
improvements, including enhanced customer service engagement options, strategic
customer outreach, and improved communications. These efforts are supported by
market research to understand the varying needs of customers, identifying and
establishing valued services and programs, and proactively communicating and
engaging with customers. As a result, PNM continues to experience steady
performance in customer satisfaction in both the J.D. Power Electric Utility
Residential Customer Satisfaction StudySM and its own proprietary relationship
surveys. In the 2021 fourth quarter J.D. Power overall customer satisfaction
results PNM outperformed the West Midsize industry average by one point.

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

With reliability being the primary role of a transmission and distribution
service provider in Texas' deregulated market, TNMP continues to focus on
keeping end-users updated about interruptions and to encourage consumer
preparation when severe weather is forecasted. In the third quarter of 2021,
TNMP provided a 30-person team in support of another utility that experienced
significant damage to their transmission and distribution system as a result of
Hurricane Ida. TNMP has been honored by the Edison Electric Institute four times
since 2012 for its assistance to out-of-state utilities affected by hurricanes.
TNMP has also been honored twice for hurricane response in its own territory.

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

Another demonstration of the Company's commitment to ESG principles is the
Company's tradition of supporting the communities it serves in New Mexico and
Texas. This support extends beyond corporate giving and financial donations from
the PNM Resources Foundation to also include collaborations on community
projects, customer low-income assistance programs, and employee volunteerism. In
response to COVID-19, additional efforts were made in each of these areas and
exhibit the Company's core value of caring for its customers and communities.

During the three years ending December 31, 2021, corporate giving contributed
$10.4 million to civic, educational, environmental, low income, and economic
development organizations. PNMR recognizes its responsibility to support
programs and organizations that enrich the quality of life across its service
territories and seeks opportunities to further demonstrate its commitment in
these areas as needs arise. In response to COVID-19 community needs, PNMR
donated to an Emergency Action Fund in partnership with key local agencies to
benefit approximately ninety nonprofits and small businesses facing challenges
due to lack of technology, shifting service needs, and cancelled fundraising
events. Additionally, employee teams have supported first responders and other
front-line workers through the delivery of food and other supplies often
procured from local businesses struggling during stay-at-home orders. PNM also
donated to the Pueblo Relief Fund and delivered personal protective supplies to
pueblo areas and tribal nations throughout New Mexico. While its service
territory does not include the Navajo Nation, PNM's operations include
generating facilities and employees in this region that has been
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disproportionately affected by the pandemic. In response, employee teams focused
efforts to this region and also provided available supplies of personal
protective equipment. PNM has also collaborated with the Navajo Tribal Utility
Authority Wireless ("NTUAW") to set up wireless "hot spots" throughout the
Navajo Nation in areas without internet access to assist first responders and
support continued education opportunities amidst school closures. These actions
supplement PNM's continued support for the Navajo Nation. The PNM Navajo Nation
Workforce Training Scholarship Program provides support for Navajo tribal
members and encourages the pursuit of education and training in existing and
emerging jobs in the communities in which they live. In 2019, PNM invested an
additional $500,000 into this scholarship program to further assist in the
development and education of the Navajo Nation workforce. PNM has invested in
paid summer college engineering internship programs for American Indian students
available in the greater Albuquerque area and established the PNM Pueblo
Education Scholarship Endowment to invest in higher education for Native
American Pueblo Indian students. PNM also continues to partner in the Light up
Navajo project, piloted in 2019 and modeled after mutual aid to connect homes
without electricity to the power grid. In a more active role in 2021, PNM also
partnered with key local organizations to initiate funding for programs focused
on diversity, equity and inclusion.

Another important outreach program is tailored for low-income customers and
includes the PNM Good Neighbor Fund to provide customer assistance with their
electric utility bills. COVID-19 has increased the needs of these customers
along with customers who may not otherwise need to seek assistance. In addition
to the suspension of residential customer disconnection from April 2020 through
August 2021 and the expansion of customer payment plans, PNM responded with
increased communications through media outlets and customer outreach to connect
customers with nonprofit community service providers offering financial
assistance, food, clothing, medical programs, and services for seniors. As a
result of these communication efforts, 4,147 families in need received emergency
assistance through the PNM Good Neighbor Fund during 2021. Additionally, PNM has
worked closely with the New Mexico Department of Finance and Administration to
implement strategies ensuring customers receive rent benefits, including utility
bill assistance, from the Emergency Rental Assistance Program ("ERAP"). As a
result of these efforts, the ERAP has paid over $6 million in customer arrears
since the launch of the program in March 2021.

Additionally, as a part of corporate giving, on October 1, 2020, PNM introduced
$2.0 million in funding for new COVID Customer Relief Programs to support
income-qualified residential customers and small business customers who have
been impacted by the financial challenges created by COVID-19 and have past due
electric bills. Qualified customers that pay a portion of their past-due balance
can receive assistance toward their remaining balance.

Volunteerism is also an important facet of employee culture, keeping our
communities safer, stronger, smarter and more vibrant. In 2021, new programs
were launched to provide employees with COVID-safe projects through virtual,
hybrid, and limited group gatherings. Employees and nonprofits remained
resilient, creative, and innovative and responded to community need and
selflessly gave their time and talents to organizations throughout New Mexico
and Texas completing 8,741 volunteer hours with nonprofits and other community
organizations. Volunteers also participate in a company-wide annual Day of
Service at nonprofits across New Mexico and Texas along with participation on a
variety of nonprofit boards and independent volunteer activities throughout the
year. In addition, the Company facilitated employee and customer Earth Day
cleanups across PNM's service territory resulting in over 2,200 gallons of trash
collected.

In addition to the extensive engagement both PNM and TNMP have with nonprofit
organizations in their communities, the PNM Resources Foundation provides nearly
$1.6 million in grant funding each year across New Mexico and Texas. These
grants help nonprofits innovate or sustain programs to grow and develop
business, develop and implement environmental programs, and provide educational
opportunities. Beginning in 2020, the PNM Resources Foundation is funding grants
with a three-year focus on decreasing homelessness, increasing access to
affordable housing, reducing carbon emissions, and increasing community safety
with an emphasis on COVID-19 programs. As part of this emphasis, $0.5 million is
awarded annually to nonprofits in New Mexico and Texas to assist with work being
done on the front lines of the pandemic for community safety, with a focus on
helping senior citizens and people currently experiencing homelessness during
the shelter-in-place directives. The PNM Resources Foundation continued to
expand its matching donation program to offer 2-to-1 matching on employee
donations made to social justice nonprofits and increased the annual amount of
matching donations available to each of its employees. PNM Resources Foundation
awarded $0.3 million of additional grants to non-profits supporting TNMP
communities following the winter storm in February 2021.

Economic Factors



PNM - In 2021, PNM experienced a decrease in weather normalized residential load
of 0.9%, more than offset by an increase in weather normalized commercial load
of 4.4% compared to 2020, signaling a return to pre-COVID-19 levels. PNM did not
experience significant impacts to its other customer classes.

TNMP - In 2021, TNMP experienced a decrease in volumetric weather normalized
retail load of 0.8% compared to 2020. Weather normalized demand-based load,
excluding retail transmission consumers, increased 1.8% in 2021 compared to
2020. The shift back to lower volumetric weather normalized retail load and
higher weather normalized demand-based commercial and industrial load reflects a
return to pre-COVID-19 trends.

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Although the Company has experienced signs of recovery from state restrictions
related to COVID-19, it is unable to determine the duration or final impacts
from COVID-19 as discussed in more detail in Item 1A Risk Factors. The Company
has not experienced, nor does it expect significant negative impacts to customer
usage at PNM and TNMP resulting from the economic impacts of COVID-19. However,
if current economic conditions worsen, the Company may be required to implement
additional measures such as reducing or delaying operating and maintenance
expenses and planned capital expenditures.

Results of Operations



Net earnings attributable to PNMR were $195.8 million, or $2.27 per diluted
share in the year ended December 31, 2021 compared to $172.8 million, or $2.15
per diluted share in 2020. Among other things, earnings in 2021 benefited from
higher weather normalized retail load at PNM, higher demand-based load at TNMP,
higher transmission rates at PNM and TNMP, higher distribution rates at TNMP,
lower surface mine reclamation expense and lower accretion expense at PNM, lower
interest expense at PNM and Corporate and Other, higher equity AFUDC at PNM, and
lower costs related to the Merger at Corporate and Other. These increases were
partially offset by milder weather conditions at PNM and TNMP, lower volumetric
load at TNMP, increased operational and maintenance expense, including higher
plant maintenance and administrative costs at PNM, higher employee related,
outside service and vegetation management expense at PNM and TNMP, increased
depreciation and property taxes at PNM and TNMP due to increased plant in
service, higher interest charges at TNMP, and decreased performance on PNM's NDT
and coal mine reclamation investment securities. Diluted earnings per share
increased in 2021 due to higher net earnings, partially offset by the dilutive
impact of additional shares issued under the PNMR 2020 Forward Equity Sale
Agreements on December 15, 2020. Additional information on factors impacting
results of operations for each segment is discussed below under Results of
Operations.

Liquidity and Capital Resources



PNMR and PNM have revolving credit facilities with capacities of $300.0 million
and $400.0 million that currently expire in October 2023. Both facilities
provide for short-term borrowings and letters of credit and can be extended
through October 2024, subject to approval by a majority of the lenders. In
addition, PNM has a $40.0 million revolving credit facility with banks having a
significant presence in New Mexico that expires in December 2022, and TNMP has a
$75.0 million revolving credit facility, which expires in September 2022 and
contains two one-year extension options, subject to approval by a majority of
the lenders. Total availability for PNMR on a consolidated basis was $799.8
million at February 18, 2022. The Company utilizes these credit facilities and
cash flows from operations to provide funds for both construction and
operational expenditures. PNMR also has intercompany loan agreements with each
of its subsidiaries.

PNMR projects that its consolidated capital requirements, consisting of construction expenditures and dividends, will total $4.8 billion for 2022-2026. These construction expenditures include expenditures for PNM's capital initiative that includes investments in transmission and distribution infrastructure to deliver clean energy, enhance customer satisfaction, and increase grid resilience.



To fund capital spending requirements to meet growth that balances earnings
goals, credit metrics and liquidity needs, the Company has entered into a number
of other financing arrangements in 2021. For further discussion on these
financing arrangements see Liquidity and Capital Resources discussion below as
well as Note 7.

After considering the effects of these financings and the Company's short-term
liquidity position as of February 18, 2022, the Company has consolidated
maturities of long-term and short-term debt aggregating $194.7 million in the
period from January 1, 2022 through February 28, 2023. In addition to internal
cash generation, the Company anticipates that it will be necessary to obtain
additional long-term financing in the form of debt refinancing, new debt
issuances, and/or new equity in order to fund its capital requirements during
the 2022-2026 period. The Company currently believes that its internal cash
generation, existing credit arrangements, and access to public and private
capital markets will provide sufficient resources to meet the Company's capital
requirements for at least the next twelve months. As of December 31, 2021 and
February 18, 2022, the Company was in compliance with its debt covenants.

                             RESULTS OF OPERATIONS

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


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



                                                      Year Ended December 31,                            Change
                                                      2021                   2020                       2021/2020
                                                 (In millions, except per share amounts)
Net earnings attributable to PNMR             $           195.8          $    172.8                 $         23.0
Average diluted common and common equivalent
shares                                                     86.1                80.3                            5.8
Net earnings attributable to PNMR per diluted
share                                         $            2.27          $     2.15                 $         0.12



The components of the changes in net earnings attributable to PNMR by segment
are:

                                                   Change
                                                 2021/2020
                                               (In millions)
                       PNM                    $         10.0
                       TNMP                              5.3

                       Corporate and Other               7.7
                        Net change            $         23.0

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



Segment Information

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

PNM

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

The following table summarizes the operating results for PNM:


                                                 Year Ended December 31,                   Change
                                                   2021               2020               2021/2020
                                                         (In millions)
   Electric operating revenues             $     1,362.0           $ 1,139.8            $    222.2
   Cost of energy                                  531.8               345.2                 186.6
   Utility margin                                  830.2               794.7                  35.5
   Operating expenses                              438.4               414.4                  24.0
   Depreciation and amortization                   170.4               165.3                   5.1
   Operating income                                221.5               214.9                   6.6
   Other income (deductions)                        28.4                31.6                  (3.2)
   Interest charges                                (51.4)              (64.6)                 13.2
   Segment earnings before income taxes            198.6               181.9                  16.7
   Income (taxes)                                  (27.0)              (21.9)                 (5.1)
   Valencia non-controlling interest               (15.5)              (14.0)                 (1.5)
   Preferred stock dividend requirements            (0.5)               (0.5)                    -
   Segment earnings                        $       155.5           $   145.5            $     10.0


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



                                                                    Year Ended December 31,                                    Percent Change
                                                            2021                                 2020                            2021/2020
                                                                 (Gigawatt hours, except customers)
Residential                                                3,339.5                                3,438.4                                   (2.9) %
Commercial                                                 3,500.4                                3,404.6                                    2.8
Industrial                                                 1,592.3                                1,412.6                                   12.7
Public authority                                             226.1                                  245.4                                   (7.9)
Economy service (1)                                          504.7                                  444.9                                   13.4

Other sales for resale (2)                                 5,447.9                                2,556.2                                  113.1
                                                          14,610.9                               11,502.1                                   27.0  %
Average retail customer (thousands)                          540.0                                  535.2                                    0.9  %


(1)PNM purchases energy for a large customer on the customer's behalf and
delivers the energy to the customer's location through PNM's transmission
system. PNM charges the customer for the cost of the energy as a direct pass
through to the customer with only a minor impact in utility margin resulting
from providing ancillary services.
(2)Increase in other sales for resale is the result of participation in the EIM
beginning in April 2021. See Note 4 and Note 17.

Operating results - 2021 compared to 2020

The following table summarizes the significant changes to utility margin:



                                                            Year Ended December 31, 2021
                                                                       Change
Utility margin:                                                     (In millions)

            Retail customer usage/load - Weather
            normalized retail KWh sales increased 4.4%,
            for commercial customers, partially offset
            by decreased sales to residential customers
            of 0.9%                                        $                         6.1
            Weather - Slightly milder than normal
            weather in 2021 compared to significantly
            warmer weather in 2020; cooling degree days
            were 11.0% lower and heating degree days
            were 9.7% lower in 2021                                                (10.3)
            Leap Year - Decrease in revenue due to
            additional day in 2020                                                  (1.8)
            Transmission - Increase primarily due to
            higher revenue under formula transmission
            rates, the addition of new customers, and
            higher volumes                                                          26.8
            Rate riders - Includes renewable energy,
            fuel clause, and energy efficiency riders
            which are partially offset in operating
            expense                                                                  8.6
            Coal mine reclamation - Lower expense on
            surface mine reclamation in 2021 and the
            2020 remeasurement of PNM's obligation for
            Four Corners and SJGS coal mine reclamation
            (Note 16)                                                                5.5
            Other                                                                    0.6
            Net Change                                     $                        35.5




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

                                                            Year Ended December 31, 2021
                                                                       Change
Operating expenses:                                                 (In millions)



               Higher plant maintenance and
               administrative costs at SJGS, Four
               Corners and gas-fired plants, partially
               offset by lower costs at PVNGS              $                         4.8

               Higher property taxes due to increases
               in utility plant in service, partially
               offset by favorable settlement of
               property values                                                       0.7
               Higher employee related, outside
               services, and vegetation management
               expenses                                                             12.5
               Higher energy efficiency and renewable
               rider expenses offset in utility margin                               4.8
               2021 non-retail credit loss                                           1.0
               2021 regulatory disallowance and
               restructuring costs, primarily resulting
               from the PVNGS Leased Interest
               Abandonment Application                                               1.2
               2020 remeasurement of coal mine
               reclamation costs associated with
               ownership restructuring of SJGS and Four
               Corners (Note 16)                                                    (1.1)
               Other                                                                 0.1
               Net Change                                  $                        24.0

Depreciation and amortization:



                   Increased utility plant in service                              $ 6.8

                   Lower accretion expense for PVNGS plant decommissioning AROs
                   resulting from 2020 study                                        (2.0)
                   Other                                                             0.3

                   Net Change                                                      $ 5.1


Other income (deductions):

                  Decreased performance on investment securities in the NDT
                  and coal mine reclamation trusts                                $ (4.8)
                  Higher equity AFUDC                                                2.9
                  Higher trust expenses partially offset by higher interest
                  income related to investment securities in the NDT and coal
                  mine reclamation trusts                                           (1.0)
                  2020 donation to the COVID Customer Relief Program                 2.0
                  2021 donations including establishment of the PNM Pueblo
                  Education Scholarship Endowment                                   (3.0)
                  Other                                                              0.7
                  Net Change                                                      $ (3.2)


Interest charges:

            Issuance of $200.0 million of SUNs in April 2020                      $ (2.3)
            Refinancing of $160.0 million of SUNs in July 2021                       1.8
            Issuance of $150.0 million of SUNs in December 2021                     (0.3)
            Lower interest on term loans                                             4.6
            Lower interest on remarketed PCRBs                                       8.2
            Higher debt AFUDC including amounts resulting from 2020 FERC


audit       0.4
            Other                                                                    0.8
            Net Change                                                            $ 13.2


 Income (taxes) benefits:



                Higher segment earnings before income taxes                       $ (3.9)
                Lower non-deductible compensation                                    1.2

                Lower amortization of state excess deferred income taxes (Note
                18)                                                                 (6.2)

                Lower amortization of state net operating loss regulatory
                asset                                                                1.4
                Other                                                                2.4
                Net Change                                                        $ (5.1)


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TNMP



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

The following table summarizes the operating results for TNMP:



                                                Year Ended December 31,                    Change
                                                   2021                2020              2021/2020
                                                        (In millions)
   Electric operating revenues            $      417.9               $


383.2            $     34.7
   Cost of energy                                113.1                 102.1                  11.0
   Utility margin                                304.8                 281.1                  23.7
   Operating expenses                            114.2                 104.9                   9.3
   Depreciation and amortization                  90.4                  87.8                   2.6
   Operating income                              100.1                  88.5                  11.6
   Other income (deductions)                       5.4                   6.8                  (1.4)
   Interest charges                              (33.7)                (30.4)                 (3.3)
   Segment earnings before income taxes           71.8                  64.9                   6.9
   Income (taxes)                                 (7.9)                 (6.3)                 (1.6)
   Segment earnings                       $       63.9               $  58.6            $      5.3

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



                                                                 Year Ended December 31,                               Percentage Change
                                                          2021                             2020                            2021/2020
Volumetric load (1) (GWh)
Residential                                                3,018.3                           3,069.6                                (1.7) %
Commercial and other                                          39.9                              31.5                                26.7  %
Total volumetric load                                      3,058.2                           3,101.1                                (1.4) %
Demand-based load (2) (MW)                                21,176.9                          20,061.5                                 5.6  %
Average retail consumers (thousands) (3)                     263.5                             258.8                                 1.8  %


(1)Volumetric load consumers are billed on KWh usage.
(2)Demand-based load includes consumers billed on a monthly KW peak and retail
transmission customers that are primarily billed under rate riders.
(3)TNMP provides transmission and distribution services to REPs that provide
electric service to customers in TNMP's service territories. The number of
consumers above represents the customers of these REPs. Under TECA, consumers in
Texas have the ability to choose any REP to provide energy.


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Operating results - 2021 compared to 2020

The following table summarizes the significant changes to utility margin:



                                                             Year Ended December 31, 2021
                                                                        Change
Utility margin:                                                      (In millions)

            Transmission rate relief/load - Transmission
            cost of service rate increases in March
            2020, October 2020, March 2021, and
            September 2021, partially offset by lower
            wholesale transmission demand-based sales       $                        15.7
            Distribution rate relief - Distribution cost
            of service rate established in September
            2020 and increased in September 2021                                     13.9
            Volumetric-based customer usage/load -
            Weather normalized KWh sales decreased 0.8%
            in addition to the leap-year impact; the
            average number of retail consumers increased
            2.8%                                                                     (0.4)
            Demand based customer usage/load - Weather
            normalized demand-based MW sales for large
            commercial and industrial customers
            excluding retail transmission customers
            increased 1.8%                                                            1.1
            Weather - Milder weather in 2021; cooling
            degree days were 2.6% lower in 2021                                      (0.2)
            Rate riders and other - Impacts of rate
            riders, including the CTC surcharge which
            ended in August 2020, energy efficiency
            rider, rate case expense rider and
            transmission cost recovery factor, which are
            offset in operating expense and depreciation
            and amortization                                                         (6.4)

            Net Change                                      $                        23.7



The following tables summarize the primary drivers for operating expenses,
depreciation and amortization, other income (deductions), interest charges, and
income taxes:
                                                            Year Ended December 31, 2021
                                                                       Change
Operating expenses:                                                 (In millions)

               Higher employee related, outside service
               expenses and vegetation management
               expenses                                    $                         5.3
               Higher property tax due to increased
               utility plant in service                                              3.2
               Higher capitalization of administrative
               and general and other expenses due to
               higher construction expenditures                                     (1.2)

               Higher amortization of rate case
               expenses offset in utility margin                                     0.2
               Other                                                                 1.8
               Net Change                                  $                         9.3


   Depreciation and amortization:

                     Increased utility plant in service                          $ 9.6
                     Decreased amortization of CTC offset in utility margin       (7.0)

                     Net Change                                                  $ 2.6


                    Other income (deductions):

                                      Lower equity AFUDC      $ (1.0)
                                      Lower CIAC                (0.4)

                                      Net Change              $ (1.4)


  Interest charges:

              Issuance of $185.0 million of first mortgage bonds in 2020        $ (2.4)
              Issuance of $65.0 million first mortgage bonds in 2021              (0.6)

              Other                                                               (0.3)
              Net Change                                                        $ (3.3)



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                                                            Year Ended December 31, 2021
                                                                       Change
Income (taxes) benefits:                                            (In millions)



               Higher segment earnings before income
               taxes                                       $                        (1.4)

               Other                                                                (0.2)
               Net Change                                  $                        (1.6)



Corporate and Other

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



                                                          Year Ended December 31,                         Change
                                                         2021                  2020                     2021/2020
                                                                  (In millions)
Total revenues                                      $          -          $         -                $           -
Cost of energy                                                 -                    -                            -
Utility margin                                                 -                    -                            -
Operating expenses                                          (9.8)                (4.4)                        (5.4)
Depreciation and amortization                               23.3                 22.5                          0.8
Operating income (loss)                                    (13.5)               (18.1)                         4.6

Other income (deductions)                                   (0.7)                (1.4)                         0.7
Interest charges                                           (11.8)               (19.4)                         7.6
Segment earnings (loss) before income taxes                (25.9)               (38.8)                        12.9
Income (taxes) benefit                                       2.3                  7.5                         (5.2)
Segment earnings (loss)                             $      (23.6)         $     (31.3)               $         7.7



Corporate and Other operating expenses shown above are net of amounts allocated
to PNM and TNMP under shared services agreements. The amounts allocated include
certain expenses shown as depreciation and amortization and other income
(deductions) in the table above. The change in operating expenses includes a
decrease of $4.7 million in costs related to the Merger that were not allocated
to PNM or TNMP. Substantially all depreciation and amortization expense is
offset in operating expenses as a result of allocation of these costs to other
business segments.

Operating results - 2021 compared to 2020

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



                                                                 Year Ended December 31,
                                                                          2021
                                                                         Change
 Other income (deductions):                                           (In millions)



                   Decrease in donations and other
                   contributions                               $                     0.4

                   Other                                                             0.3
                   Net Change                                  $                     0.7



           Interest charges:

                       Higher interest on term loans                   $ (3.0)
                       Repayment of PNMR 2018 SUNs in March 2021          8.5
                       Lower interest on short term borrowings            2.1

                       Net Change                                      $  7.6



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                                                            Year Ended December 31, 2021
                                                                       Change
 Income (taxes) benefits:                                          (In millions)



                Lower segment loss before income taxes    $                         (3.3)

                Higher state income tax effective rate                              (1.6)
                Tax credit impairment                                               (1.0)
                Higher investment tax credit
                amortization                                                         0.4
                Lower non-deductible merger related
                costs                                                                0.3
                Net Change                                $                         (5.2)



                        LIQUIDITY AND CAPITAL RESOURCES

Statements of Cash Flows

The information concerning PNMR's cash flows is summarized as follows:



                                                 Year Ended December 31,                    Change
                                                    2021                2020              2021/2020
                                                         (In millions)
 Net cash flows from:
 Operating activities                      $      547.9               $ 485.7            $     62.2
 Investing activities                            (952.3)               (733.8)               (218.5)
 Financing activities                             357.6                 292.2                  65.4
 Net change in cash and cash equivalents   $      (46.8)              $  44.1            $    (90.9)

Cash Flows from Operating Activities



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

Cash Flows from Investing Activities



The changes in PNMR's cash flows from investing activities relate primarily to
changes in utility plant additions. Cash flows from investing activities also
include activity related to the purchase of the Western Spirit Line, Four
Corners Purchase and Sale Agreement, and NMRD. Major components of PNMR's cash
inflows and (outflows) from investing activities are shown below:

                                                           Year Ended December 31,                       Change
                                                           2021                 2020                   2021/2020
    Cash (Outflows) for Utility Plant Additions                    (In millions)
PNM:
Generation                                           $       (53.3)         $    (35.0)               $   (18.3)

Transmission and distribution                               (527.4)             (276.1)                  (251.3)
Nuclear fuel                                                 (21.5)              (24.0)                     2.5
                                                            (602.2)             (335.1)                  (267.1)
TNMP:
Transmission                                                (128.2)             (122.9)                    (5.3)
Distribution                                                (183.7)             (198.6)                    14.9
                                                            (311.9)             (321.5)                     9.6
Corporate and Other:
Computer hardware and software                               (20.9)              (22.4)                     1.5
                                                            (935.0)             (679.0)                  (256.0)
     Other Cash Flows from Investing Activities
Proceeds from sales of investment securities                 459.9               591.0                   (131.1)
Purchases of investment securities                          (477.7)             (607.6)                   129.9
Investments in NMRD                                              -               (23.3)                    23.3
Distributions from NMRD                                        0.6                   -                      0.6
Other, net                                                    (0.1)              (14.9)                    14.8
                                                             (17.3)              (54.8)                    37.5
Net cash flows from investing activities             $      (952.3)         $   (733.8)               $  (218.5)


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Cash Flow from Financing Activities

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



•Short-term borrowings increased $30.7 million in 2021 compared to a decrease of
$153.1 million in 2020, resulting in a net increase in cash flows from financing
activities of $183.8 million in 2021
•In 2021, PNMR had net amounts received under transmission interconnection
arrangements of $70.4 million compared to $5.5 million in 2020
•In 2020, PNM borrowed $250.0 million under the PNM 2020 Term Loan and used the
proceeds to repay the PNM 2019 $250.0 million Term Loan
•In 2020, PNM issued $200.0 million of PNM 2020 SUNs and used $100.0 million of
proceeds to pay $100.0 million of the PNM 2020 Term Loan. The remaining $100.0
million of proceeds from the PNM 2020 SUNs were used to repay borrowings on the
PNM Revolving Credit Facility and for other corporate purposes.
•In 2020, PNM prepaid without penalty the remaining $150.0 million balance of
the PNM 2020 Term Loan
•In 2020, PNM purchased PCRBs totaling $100.3 million that were subject to
mandatory tender on June 1, 2020, utilizing borrowings under the PNM Revolving
Credit Facility. On July 1, 2020, these bonds were remarketed to investors in
the weekly mode. On October 1, 2021, PNM converted these bonds to a fixed rate
and remarketed them to new investors.
•In 2020, PNM notified bondholders that it was calling PCRBs aggregating $302.5
million, purchased the bonds in lieu of redemption, and remarketed them to new
investors
•In 2020, TNMP issued $185.0 million of TNMP 2020 Bonds and used the proceeds to
reduce short-term debt and for other corporate purposes
•In 2020, PNMR physically settled all shares under the PNMR 2020 Forward Equity
Sale Agreements by issuing 6.2 million shares to the forward purchasers at a
price of $45.805 per share, aggregating net proceeds of $283.1 million
•In 2020, PNMR borrowed $150.0 million under the PNMR 2020 Term Loan and used
the proceeds to repay the $50.0 million PNMR 2018 Two-Year Term Loan and for
other corporate purposes
•In 2020, PNMR executed a $300.0 million delayed-draw term loan (the "PNMR 2020
Delayed-Draw Term Loan") and drew $80.0 million under its terms
•In 2020, the PNMR Development Term Loan was amended to reduce the balance by
$25.0 million
•In 2021, PNMR borrowed the remaining $220.0 million under the PNMR 2020
Delayed-Draw Term Loan and repaid $300.0 million SUNs
•In 2021, PNMR borrowed $900.0 million under the PNMR 2021 Delayed-Draw Term
Loan and repaid the $150.0 million PNMR 2019 Term Loan, the $300.0 million PNMR
2020 Delayed-Draw Term Loan, the $150.0 million PNMR 2020 Term Loan, $92.1
million in borrowings under the PNMR Revolving Credit Facility, $40.0 million in
borrowings under the PNMR Development Revolving Credit Facility, and the $65.0
million PNMR Development Term Loan
•In 2021, PNM entered into a $75.0 million term loan and used the funds to repay
the PNM 2019 $40.0 million Term Loan and for other corporate purposes
•In 2021, PNM issued $160.0 million of PNM 2021 SUNs and used the proceeds to
repay $160.0 million of PNM's 5.35% SUNs that were due October 2021
•In 2021, PNM remarketed $146.0 million of outstanding PCRBs to new investors
•In 2021, PNM issued $150.0 million aggregate principal amount of PNM September
2021 SUNs and used the proceeds to partially fund the purchase of the Western
Spirit Line
•In 2021, TNMP issued $65.0 million aggregate principal amount of TNMP 2021
Bonds and used the proceeds to repay existing debt and for other corporate
purposes

Financing Activities



See Note 7 for additional information concerning the Company's financing
activities. PNM must obtain NMPRC approval for any financing transaction having
a maturity of more than 18 months. In addition, PNM files its annual
informational financing filing and short-term financing plan with the NMPRC. The
Company's ability to access the credit and capital markets at a reasonable cost
is largely dependent upon its:

•Ability to earn a fair return on equity
•Results of operations
•Ability to obtain required regulatory approvals
•Conditions in the financial markets
•Credit ratings

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

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

In August 2020, PNMR entered into the WFB LOC Facility aggregating $30.3 million
that was issued to facilitate the posting of reclamation bonds currently held by
WSJ LLC (who assumed all the obligations of SJCC post-bankruptcy). The
reclamation bonds were required to be posted in connection with permits relating
to the operation of the San Juan mine. See Note 16.

As discussed in Note 7, at December 31, 2020, PNMR Development had $10.0 million
outstanding under the PNMR Development Revolving Credit Facility that was
expected to mature on February 23, 2021. On February 22, 2021, PNMR Development
extended the facility to January 31, 2022 but ultimately decided to terminate it
on May 18, 2021 as discussed below.

On December 31, 2020, PNMR had $300.0 million aggregate principal amount of
3.25% SUNs outstanding (the "PNMR 2018 SUNs"), which were set to mature on March
9, 2021. On December 22, 2020, PNMR entered into the $300.0 million PNMR 2020
Delayed-Draw Term Loan that was set to mature in January 2022 and drew $80.0
million to refinance existing indebtedness and for other corporate purposes. On
March 9, 2021, PNMR utilized the remaining $220.0 million of capacity under the
PNMR 2020 Delayed-Draw Term Loan to repay an equivalent amount of the PNMR 2018
SUNs. The remaining $80.0 million repayment of the PNMR 2018 SUNs was funded
through borrowings under the PNMR Revolving Credit Facility.

On May 18, 2021, PNMR entered into a $1.0 billion delayed-draw term loan
agreement (the "PNMR 2021 Delayed-Draw Term Loan"), among PNMR, the lenders
party thereto, and Wells Fargo Bank, N. A., as administrative agent. Initially
PNMR drew $850.0 million to repay and terminate existing indebtedness, including
the $150.0 million PNMR 2019 Term Loan, the $300.0 million PNMR 2020
Delayed-Draw Term Loan, the $150.0 million PNMR 2020 Term Loan, the $65.0
million PNMR Development Term Loan, and $40.0 million in borrowings under the
PNMR Development Revolving Credit Facility. Additionally, PNMR repaid the $92.1
million in borrowings under the PNMR Revolving Credit Facility. On December 2,
2021, PNMR drew an additional $50.0 million under the PNMR 2021 Delayed-Draw
Term Loan. Draws on the PNMR 2021 Delayed-Draw Term Loan bear interest at a
variable rate, which was 0.95% at December 31, 2021, and mature on May 18, 2023.
On January 24, 2022, PNMR drew the remaining $100.0 million available under the
PNMR 2021 Delayed-Draw Term Loan.

On June 18, 2021, PNM entered into a $75.0 million term loan (the "PNM 2021 Term
Loan") between PNM and Bank of America, N.A., as lender. The PNM 2021 Term Loan
was used to repay the PNM 2019 $40.0 million Term Loan and for other corporate
purposes. The PNM 2021 Term Loan bears interest at a variable rate, which was
0.93% at December 31, 2021 and matures on December 18, 2022.

On July 14, 2021, PNM entered into an agreement (the "PNM 2021 Note Purchase
Agreement") with institutional investors for the sale and issuance of $160.0
million aggregate principal amount of two series of senior unsecured notes (the
"PNM 2021 SUNs") offered in private placement transactions. The PNM 2021 SUNs
were issued on July 14, 2021. PNM issued $80.0 million of the PNM 2021 SUNs at
2.59%, due July 15, 2033, and another $80.0 million at 3.14%, due July 15, 2041.
Proceeds from the PNM 2021 SUNs were used to repay the total amount of $160.0
million of PNM's 5.35% SUNs, at par, earlier than their scheduled maturity of
October 1, 2021. The PNM 2021 Note Purchase Agreement includes the customary
covenants discussed above. In the event of a change of control, PNM will be
required to offer to prepay the PNM 2021 SUNs at par. Although there are
customary change of control provisions in the PNM debt agreements, the change of
control provisions in these agreements, including the PNM 2021 Note Purchase
Agreement, are not triggered by the closing of the Merger. PNM has the right to
redeem any or all of the PNM 2021 SUNs prior to their maturities, subject to
payment of a customary make-whole premium.

On July 14, 2021, TNMP entered into an agreement (the "TNMP 2021 Bond Purchase
Agreement") with institutional investors for the sale of $65.0 million aggregate
principal amount of one series of TNMP first mortgage bonds (the "TNMP 2021
Bonds") offered in private placement transactions. On August 16, 2021, TNMP
issued all $65.0 million of the TNMP 2021 Bonds at 2.44% with a maturity of
August 15, 2035 and used the proceeds to repay existing debt and for other
corporate purposes. The TNMP 2021 Bonds are subject to continuing compliance
with the representations, warranties and covenants set forth in the supplemental
indenture governing the TNMP 2021 Bonds. The terms of the supplemental indenture
governing the TNMP 2021 Bonds include the customary covenants discussed above.
In the event of a change of control, TNMP will be required to offer to prepay
the TNMP 2021 Bonds at par. However, the definition of change of control in the
supplemental indenture governing the TNMP 2021 Bonds will not be triggered by
the closing of the Merger. TNMP has the right to redeem any or all of the TNMP
2021 Bonds prior to their maturity, subject to payment of a customary make-whole
premium.

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On September 23, 2021, PNM entered into an agreement (the "PNM September 2021
Note Purchase Agreement") with institutional investors for the sale and issuance
of $150.0 million aggregate principal amount of two series of senior unsecured
notes (the "PNM September 2021 SUNs") offered in private placement transactions.
On December 2, 2021, PNM issued $50.0 million of the PNM September 2021 SUNs at
2.29%, due December 30, 2031, and another $100.0 million at 2.97%, due December
30, 2041. Proceeds from the PNM September 2021 SUNs were used for funding of
capital expenditures, including the purchase of the Western Spirit Line,
repayment of existing indebtedness, and for general corporate purposes. The PNM
September 2021 Note Purchase Agreement includes the customary covenants
discussed above. In the event of a change of control, PNM will be required to
offer to prepay the PNM September 2021 SUNs at par. Although there are customary
change of control provisions in the PNM debt agreements, the change of control
provisions in these agreements, including the PNM September 2021 Note Purchase
Agreement, are not triggered by the closing of the Merger. PNM has the right to
redeem any or all of the PNM September 2021 SUNs prior to their maturities,
subject to payment of a customary make-whole premium.

At December 31, 2020, PNM had $100.3 million of outstanding PNM Floating Rate
PCRBs. The PNM Floating Rate PCRBs bore interest at rates that were reset
weekly, giving investors the option to return the PCRBs for remarketing to new
investors upon 7 days' notice. On October 1, 2021, PNM converted the PNM
Floating Rate PCRBs to a fixed rate period and successfully remarketed them to
new investors ("PNM 2021 Fixed Rate PCRBs"). The PNM 2021 Fixed Rate PCRBs now
bear interest at 0.875% and are subject to mandatory tender on October 1, 2026.

At December 31, 2020, PNM had $146.0 million of outstanding PCRBs with a final
maturity of April 1, 2033. These PCRBs were subject to mandatory tender on
October 1, 2021 and were successfully remarketed to new investors on that date.
The $146.0 million PCRBs bear interest at a fixed rate of 2.15% until their
final maturity.

On October 20, 2020, the execution of the Merger Agreement constituted a "Change
of Control" under certain PNMR, TNMP, and PNMR Development debt agreements.
Under each of the specified debt agreements, a "Change of Control" constitutes
an "Event of Default," pursuant to which the lender parties thereto had the
right to accelerate the indebtedness under the debt agreements.

On October 26, 2020, PNMR, TNMP and PNMR Development entered into amendment
agreements with the lender parties thereto to amend the definition of "Change of
Control" such that the entry into the Merger Agreement would not constitute a
Change of Control and to waive the Event of Default arising from entry into the
Merger Agreement. On September 15, 2021, PNMR and TNMP and the lender parties
further amended the definition of "Change of Control" in the PNMR Revolving
Credit Facility and the TNMP Revolving Credit Facility such that the closing of
the Merger does not constitute a Change of Control under those facilities. The
Change of Control provisions in the PNM debt agreements, PNM note purchase
agreements, and TNMP 2021 Bond Purchase Agreement are not triggered by the
closing of the Merger and did not require amendment.

The documents governing TNMP's aggregate $750.0 million of outstanding 2014 to
2020 First Mortgage Bonds ("TNMP FMBs") obligated TNMP to offer, within 30
business days following the signing of the Merger Agreement, to prepay that
$750.0 million of outstanding TNMP FMBs at 100% of the principal amount, plus
accrued and unpaid interest thereon, but without any make-whole amount or other
premium. TNMP made such offer to prepay the TNMP FMBs in accordance with the
terms of the TNMP FMBs, and none of the holders of the TNMP FMBs accepted TNMP's
offer. The documents governing the 2014 to 2020 TNMP FMBs require TNMP to make
another offer, within 30 business days of closing of the Merger, to prepay all
outstanding TNMP FMBs at par. TNMP will make such offer to prepay the TNMP FMBs
in accordance with the terms of the TNMP FMBs; however, holders of the TNMP FMBs
are not required to tender their TNMP FMBs and may accept or reject such offer
to prepay. As discussed above, the supplemental indenture that governs the TNMP
2021 Bonds excludes the Merger from the definition of Change of Control.

The TNMP FMBs are not registered under the Securities Act and may not be offered
or sold in the United States absent registration or applicable exemption from
registration requirements and applicable state laws. The information in this
Annual Report on Form 10-K is for informational purposes only and is neither an
offer to purchase, nor a solicitation of an offer to sell, subscribe for or buy
any securities in any jurisdiction pursuant to the proposed transactions or
otherwise, nor shall there be any sale, issuance or transfer of securities in
any jurisdiction in contravention of applicable law. Similar to the offer to
prepay made after signing the Merger Agreement, the post-Merger closing offer to
prepay the TNMP FMBs will be made only pursuant to an offer to prepay, which
will set forth the terms and conditions of the offer to prepay.

In 2017, PNMR entered into three separate four-year hedging agreements that
effectively established fixed interest rates of 1.926%, 1.823%, and 1.629%, plus
customary spreads over LIBOR for three separate tranches, each of $50.0 million,
of its variable rate debt. On March 23, 2021, the 1.926% fixed interest rate
hedge agreement expired according to its terms and the remaining agreements
expired on May 23, 2021.

Capital Requirements

PNMR's total capital requirements consist of construction expenditures, cash dividend requirements for PNMR common stock and PNM preferred stock. Key activities in PNMR's current construction program include:


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•Investments in transmission and distribution infrastructure •Upgrading generation resources and delivering clean energy •Purchasing nuclear fuel

Projected capital requirements for 2022-2026 are:


                                                2022         2023-2026

Total


                                                           (In millions)

Construction expenditures $ 895.6 $ 3,295.9 $ 4,191.5

Dividends on PNMR common stock 119.3 477.2

596.5


          Dividends on PNM preferred stock         0.5            2.1

2.6

Total capital requirements $ 1,015.4 $ 3,775.2 $ 4,790.6





The construction expenditure estimates are under continuing review and subject
to ongoing adjustment, as well as to Board review and approval. The construction
expenditures above include expenditures for PNM's capital initiative that
includes investments in transmission and distribution infrastructure to deliver
clean energy, enhance customer satisfaction, and increase grid resilience. Not
included in the table above are incremental expenditures for new customer growth
in New Mexico and Texas, and other transmission and renewable energy expansion
in New Mexico. The ability of PNMR to pay dividends on its common stock is
dependent upon the ability of PNM and TNMP to be able to pay dividends to PNMR.
See Note 6 for a discussion of regulatory and contractual restrictions on the
payment of dividends by PNM and TNMP.

During the year ended December 31, 2021, PNMR met its capital requirements and
construction expenditures through cash generated from operations, as well as its
liquidity arrangements and the borrowings discussed in Financing Activities
above.

In addition to the capital requirements for construction expenditures and
dividends, the Company has long-term debt and term loans that must be paid or
refinanced at maturity. PNM has $104.5 million of PCRBs that must be refinanced
or repriced in June 2022 and the PNM 2021 $75.0 million Term Loan which matures
in December 2022. See Note 7 for additional information about the Company's
long-term debt and equity arrangements. Funds received from the issuance of
approximately 6.2 million shares of PNMR common stock in December 2020 under the
PNMR 2020 Forward Equity Sale Agreements were used to repay existing
indebtedness and for other corporate purposes. The Company may also enter into
new arrangements similar to the existing agreements, borrow under the revolving
credit facilities, or issue new long-term debt or equity in the public or
private capital markets, or a combination of these sources. The Company has from
time to time refinanced or repurchased portions of its outstanding debt before
scheduled maturity. Depending on market conditions, the Company may refinance
other debt issuances or make additional debt repurchases in the future.

Other Material Cash Requirements



In addition to the cash requirements for construction requirements and long-term
debt discussed above, the Company has other material cash requirements related
to long-term contractual obligations including minimum lease payments (Note 8),
coal contracts, coal mine reclamation, nuclear decommissioning, SJGS plant
decommissioning (Note 16), and pension and retiree medical contributions (Note
11).

Interest on long-term debt

Interest accrues on long-term debt agreements, at fixed rates, with the passage
of time and is typically paid semi-annually in accordance with the terms of the
debt agreement. Provided that long-term debt agreements are not prepaid or
refinanced before their expected maturities, payments of interest are expected
to total $85.0 million in 2022, $162.5 million in 2023 and 2024, $136.4 million
in 2025 and 2026, and $545.6 million in 2027 and thereafter.

Transmission service arrangements



PNM owns transmission lines that are interconnected with other utilities in
Arizona and Texas. PNM has executed long-term contracts with these other
utilities to receive service for the transmission of energy owned by PNM
utilizing the third-party transmission facilities. PNM generally receives
transmission services, which are regulated by FERC, from a third-party through
the other utilities' OATT or a specific contract. PNM has reserved firm capacity
on a long-term basis and is committed under the terms of the contracts. These
contracted obligations total $16.8 million in 2022, $17.5 million in 2023 and
2024, $2.8 million in 2025 and 2026, and $2.6 million in 2027 and thereafter.

Technology outsourcing

The Company has other technology services under long-term contracts. The obligations under these contracts total $7.0 million in 2022, $8.5 million in 2023 and 2024, and $0.3 million in 2025 and 2026.


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Liquidity



PNMR's liquidity arrangements include the $300.0 million PNMR Revolving Credit
Facility, the $400.0 million PNM Revolving Credit Facility, and the $75.0
million TNMP Revolving Credit Facility. The PNMR and PNM facilities currently
expire in October 2023 but can be extended through October 2024, subject to
approval by a majority of the lenders. The TNMP Revolving Credit Facility
matures in September 2022 and contains two one-year extension options, subject
to approval by a majority of the lenders. PNM also has the $40.0 million PNM
2017 New Mexico Credit Facility that expires in December 2022. The Company
believes the terms and conditions of these facilities are consistent with those
of other investment grade revolving credit facilities in the utility industry.
Variable interest rates under these facilities are based on LIBOR but contain
provisions which allow for the replacement of LIBOR with other widely accepted
interest rates. The Company expects that it will be able to extend or replace
these credit facilities under similar terms and conditions prior to their
expirations.

The revolving credit facilities and the PNM 2017 New Mexico Credit Facility
provide short-term borrowing capacity. The revolving credit facilities also
allow letters of credit to be issued. Letters of credit reduce the available
capacity under the facilities. The Company utilizes these credit facilities and
cash flows from operations to provide funds for both construction and
operational expenditures. The Company's business is seasonal with more revenues
and cash flows from operations being generated in the summer months. In general,
the Company relies on the credit facilities to be the initial funding source for
construction expenditures. Accordingly, borrowings under the facilities may
increase over time. Depending on market and other conditions, the Company will
periodically sell long-term debt and use the proceeds to reduce the borrowings
under the credit facilities. Information regarding the range of borrowings for
each facility is as follows:

                                              Three Months Ended                                Year Ended December 31
                                              December 31, 2021                         2021                              2020
       Range of Borrowings                  Low               High               Low             High             Low             High
                                                                                  (In millions)
PNM:
PNM Revolving Credit Facility           $       -          $   40.0          $    -            $ 40.0          $    -          $ 147.9
PNM 2017 New Mexico Credit
Facility                                        -                 -               -              10.0               -             40.0

TNMP Revolving Credit Facility                  -               1.1               -              70.0               -             74.9
PNMR Revolving Credit Facility                  -              54.9               -             134.5            10.0            203.5
PNMR Development Revolving Credit
Facility                                        -                 -               -              40.0               -             17.0

At December 31, 2021, the average interest rates were 1.61% for the PNMR Revolving Credit Facility, 1.35% for the PNM Revolving Credit Facility, and 0.85% for the TNMP Revolving Credit Facility. There were no borrowings outstanding under the PNM 2017 New Mexico Credit Facility at December 31, 2021.



The Company currently believes that its capital requirements for at least the
next twelve months can be met through internal cash generation, existing,
extended, or new credit arrangements, and access to public and private capital
markets. The Company anticipates that it will be necessary to obtain additional
long-term financing to fund its capital requirements and to balance its capital
structure during the 2022 - 2026 period, including interim financing to fund
construction of replacement resources prior to the issuance of the Securitized
Bonds included in PNM's SJGS Abandonment Application. This could include new
debt and/or equity issuances. To cover the difference in the amounts and timing
of internal cash generation and cash requirements, the Company intends to use
short-term borrowings under its current and future liquidity arrangements or
other short-term loans. However, if market conditions worsen, the Company may
not be able to access the capital markets or renew credit facilities when they
expire. Should that occur, the Company would seek to improve cash flows by
reducing capital expenditures and exploring other available alternatives.

  Currently, all of the credit ratings issued by both Moody's and S&P on the
Company's debt are investment grade. On February 10, 2022, Moody's downgraded
TNMP's issuer rating from A3 to Baa1 and changed the outlook from negative to
stable. Investors are cautioned that a security rating is not a recommendation
to buy, sell, or hold securities, that each rating is subject to revision or
withdrawal at any time by the rating organization, and that each rating should
be evaluated independently of any other rating.


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As of February 18, 2022, ratings on the Company's securities were as follows:

                                                PNMR      PNM       TNMP
                       S&P
                       Issuer rating            BBB       BBB       BBB+
                       Senior secured debt       *         *         A
                       Senior unsecured debt    BBB-      BBB        *

                       Preferred stock           *        BB+        *
                       Moody's
                       Issuer rating            Baa3      Baa2      Baa1
                       Senior secured debt       *         *         A2
                       Senior unsecured debt    Baa3      Baa2       *

                       * Not applicable


Investors are cautioned that a security rating is not a recommendation to buy,
sell, or hold securities, that each rating is subject to revision or withdrawal
at any time by the rating organization, and that each rating should be evaluated
independently of any other rating.

A summary of liquidity arrangements as of February 18, 2022, is as follows:



                                                                                   PNMR                       PNMR
                                                PNM              TNMP            Separate                 Consolidated
                                                                  (In millions)
Financing capacity:
Revolving Credit Facility                    $ 400.0          $  75.0          $   300.0                $       775.0
PNM 2017 New Mexico Credit Facility             40.0                -                  -                         40.0

Total financing capacity                     $ 440.0          $  75.0          $   300.0                $       815.0
Amounts outstanding as of February 18, 2022:
Revolving Credit Facility                    $     -          $  11.8          $       -                $        11.8
PNM 2017 New Mexico Credit Facility                -                -                  -                            -

Letters of credit                                  -                -                3.4                          3.4
Total short-term debt and letters of credit        -             11.8                3.4                         15.2
Remaining availability as of February 18,
2022                                         $ 440.0          $  63.2          $   296.6                $       799.8

Invested cash as of February 18, 2022 $ 1.0 $ -

$     0.9                $         1.9


In addition to the above, PNMR has $30.3 million of letters of credit
outstanding under the WFB LOC Facility. The above table excludes intercompany
debt. As of February 18, 2022, PNM had no intercompany borrowings and TNMP had
$45.5 million of intercompany borrowings from PNMR. PNMR Development had no
intercompany borrowings from PNMR and PNMR had $6.3 million in intercompany
borrowing from PNMR Development. The remaining availability under the revolving
credit facilities at any point in time varies based on a number of factors,
including the timing of collections of accounts receivables and payments for
construction and operating expenditures.

PNMR had an automatic shelf registration that provides for the issuance of various types of debt and equity securities that expired in March 2021. PNM has a shelf registration statement for up to $650.0 million of senior unsecured notes that expires in May 2023.

Off-Balance Sheet Arrangements



PNMR has no off-balance sheet arrangements that have or are reasonably likely to
have a current or future effect on its financial condition, changes in financial
condition, revenues or expenses, results of operations, liquidity, capital
expenditures or capital resources that are material to investors.

Contingent Provisions of Certain Obligations



PNMR, PNM, and TNMP have a number of debt obligations and other contractual
commitments that contain contingent provisions. Some of these, if triggered,
could affect the liquidity of the Company. In the unlikely event that the
contingent requirements were to be triggered, PNMR, PNM, or TNMP could be
required to provide security, immediately pay outstanding obligations, or be
prevented from drawing on unused capacity under certain credit agreements. The
most significant consequences resulting from these contingent requirements are
detailed in the discussion below.

The PNMR Revolving Credit Facility, PNM Revolving Credit Facility, PNM 2017 New
Mexico Credit Facility, and the TNMP Revolving Credit Facility contain "ratings
triggers," for pricing purposes only. If PNMR, PNM, or TNMP is downgraded or
upgraded by the ratings agencies, the result would be an increase or decrease in
interest cost. PNMR's facilities require that PNMR is to maintain a
debt-to-capitalization ratio of less than or equal to 70%. The
debt-to-capitalization ratio requirement remains at less than or equal to 65%
for the PNM and TNMP facilities. If these ratios were exceeded, the entity
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could be required to repay all borrowings under its facility, be prevented from
borrowing on the unused capacity under the facility and be required to provide
collateral for all outstanding letters of credit issued under the facility.

If a contingent requirement were to be triggered under the PNM facilities
resulting in an acceleration of the repayment of outstanding loans, a
cross-default provision in the PVNGS leases could occur if the accelerated
amount is not paid. If a cross-default provision is triggered, the PVNGS lessors
have the ability to accelerate their rights under the leases, including
acceleration of all future lease payments. The Company's revolving credit
facilities and term loan agreements also include cross-default provisions (Note
7).

PNM's standard purchase agreement for the procurement of natural gas for its
fuel needs contains a contingent requirement that could require PNM to provide
collateral for its gas purchase obligations if the seller were to reasonably
believe that PNM was unable to fulfill its payment obligations under the
agreement.

The master agreement for the sale of electricity in the WSPP contains a
contingent requirement that could require PNM to provide collateral if the
credit ratings on its debt falls below investment grade. The WSPP agreement also
contains a contingent requirement, commonly called a "material adverse change"
provision, which could require PNM to provide collateral if a material adverse
change in its financial condition or operations were to occur. Additionally, PNM
utilizes standard derivative contracts to financially hedge and trade energy.
These agreements contain contingent requirements that require PNM to provide
security if the credit rating on its debt falls below investment grade. The
Company believes its financing arrangements are sufficient to meet the
requirements of the contingent provisions. No conditions have occurred that
would result in any of the above contingent provisions being implemented.

Capital Structure

The capitalization tables below include the current maturities of long-term debt, but do not include short-term debt and do not include operating lease obligations as debt.


                                                       December 31,
                PNMR                                2021           2020
                PNMR common equity                    36.9  %      38.3  %
                Preferred stock of subsidiary          0.2          0.2
                Long-term debt                        62.9         61.5
                Total capitalization                 100.0  %     100.0  %
                PNM
                PNM common equity                     50.9  %      51.4  %
                Preferred stock                        0.3          0.3
                Long-term debt                        48.8         48.3
                Total capitalization                 100.0  %     100.0  %
                TNMP
                Common equity                         50.6  %      49.2  %
                Long-term debt                        49.4         50.8
                Total capitalization                 100.0  %     100.0  %



                        OTHER ISSUES FACING THE COMPANY
Climate Change Issues

Background

For the past several years, management has identified multiple risks and
opportunities related to climate change, including potential environmental
regulation, technological innovation, and availability of fuel and water for
operations, as among the most significant risks facing the Company. Accordingly,
these risks are overseen by the Board in order to facilitate more integrated
risk and strategy oversight and planning. Board oversight includes understanding
the various challenges and opportunities presented by these risks, including the
financial consequences that might result from enacted and potential federal
and/or state regulation of GHG; plans to mitigate these risks; and the impacts
these risks may have on the Company's strategy. In addition, the Board approves
certain procurements of environmental equipment, grid modernization
technologies, and replacement resources.

Management is also responsible for assessing significant risks, developing and
executing appropriate responses, and reporting to the Board on the status of
risk activities. For example, management periodically updates the Board on the
implementation of corporate environmental policy, and the Company's
environmental management systems, including the promotion of energy efficiency
programs, and the use of renewable resources.  The Board is also informed of the
Company's practices and procedures to assess the impacts of operations on the
environment. The Board considers issues associated with climate change, the
Company's GHG exposures, and the financial consequences that might result from
enacted and potential federal and/or state regulation of GHG. Management has
published, with Board oversight, a Climate Change Report available
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at http://www.pnmresources.com/about-us/sustainability-portal.aspx, that details
the Company's efforts to transition to an emissions-free generating portfolio by
2040.

As part of management's continuing effort to monitor climate-related risks and
assess opportunities, the Company has advanced its understanding of climate
change by participating in the "2 Degree Scenario" planning by participating in
the Electric Power Research Institute ("EPRI") Understanding Climate Scenarios &
Goal Setting Activities program. The program focused on characterizing and
analyzing the relationship of individual electric utility company's carbon
emissions and global temperature goals. Activities include analyzing the
scientific understanding of global emissions pathways that are consistent with
limiting global warming and providing insight to assist companies in developing
approaches to climate scenario planning. As PNM expands its sustainability
efforts, EPRI's program has also been useful in gaining a better understanding
of the Task Force on Climate-Related Financial Disclosures' ("TCFD")
recommendations for sustainability reporting. On November 19, 2019, TCFD
announced the formation of the TCFD Advisory Group on Climate-Related Guidance.
EPRI was invited to participate as one of seven members of the group that
provides guidance on implementing scenario analysis at the utility company level
and to assist in understanding how climate-related issues affect business
strategies.

The Company cannot anticipate or predict the potential long-term effects of climate change or climate change related regulation on its results of operations, financial position, or cash flows.

Greenhouse Gas Emissions Exposures



In 2020, GHG associated with PNM's interests in its fossil-fueled generating
plants included approximately 5.4 million metric tons of CO2, which comprises
the vast majority of PNM's GHG.

As of December 31, 2021, approximately 56% of PNM's generating capacity,
including resources owned, leased, and under PPAs, all of which is located
within the U.S., consisted of coal or gas-fired generation that produces GHG.
This reflects the retirement of SJGS Units 2 and 3 that occurred in December
2017 and the restructuring of ownership in SJGS Unit 4. These events reduced
PNM's entitlement in SJGS from 783 MW to 562 MW and caused the Company's output
of GHG to decrease when compared to 2017. Many factors affect the amount of GHG
emitted, including total electricity sales, plant performance, economic
dispatch, and the availability of renewable resources. For example, wind
generation performance from PNM's largest single renewable energy resource, New
Mexico Wind, varies each year as a result of highly seasonal wind patterns and
annual wind resource variability. Similarly, if PVNGS experienced prolonged
outages or if PNM's entitlement from PVNGS were reduced, PNM might be required
to utilize other power supply resources such as gas-fired generation, which
could increase GHG.

PNM has several programs underway to reduce or offset GHG from its generation
resource portfolio, thereby reducing its exposure to climate change regulation.
As described in Note 16, PNM received approval for the December 31, 2017
shutdown of SJGS Units 2 and 3 as part of its strategy to address the regional
haze requirements of the CAA. The shutdown of SJGS Units 2 and 3 resulted in a
reduction of GHG for the entire station of approximately 54% for 2018,
reflecting a reduction of 32% of GHG from the Company's owned interests in SJGS,
below 2005 levels. In 2020, PNM received authorization for a June 2022
abandonment of SJGS Units 1 and 4. In addition, PNM has filed the Four Corners
Abandonment Application with the NMPRC for approval to sell its ownership
interest in Four Corners by the end of 2024. On December 15, 2021, the NMPRC
rejected the hearing examiner's recommendations and issued an Order denying the
requested abandonment and financing related to the Four Corners Abandonment
application. On December 22, 2021, PNM filed a Notice of Appeal with the NM
Supreme Court and on January 21, 2022, PNM filed its Statement of Issues
regarding the appeal. See additional discussion of the SJGS and Four Corners
Abandonment in Note 17. Retiring PNM's share of SJGS and exiting participation
in Four Corners would further reduce PNM's GHG as those two coal-fired stations
represent approximately 86% of PNM's 2020 GHG emissions from generation.

As of December 31, 2021, PNM owned or procured power under PPAs from 957 MW of
capacity from renewable generation resources. This is comprised of 158 MW of PNM
owned solar as well as wind, solar-PV, and geothermal facilities aggregating to
658 MW, 130 MW, and 11 MW. These agreements currently have expiration dates
beginning in January 2035 and extending through June 2045. The NMPRC has
approved PNM's request to enter into additional PPAs for renewable energy for an
additional 1,440 MW of energy from solar-PV facilities combined with 640 MW of
battery storage agreements with an anticipated 100 MW expected to come online in
2022. The entire portfolio of replacement resources approved by the NMPRC in
PNM's SJGS Abandonment Application includes replacement of SJGS capacity with
the procurement of 650 MW of solar PPAs combined with 300 MW of battery storage
agreements and the PVNGS Leased Interest Abandonment Application for solar PPAs
of 450 MW combined with 290 MW of battery storage agreements. In addition, the
NMPRC issued an order that will allow PNM to service a data center for an
additional 190 MW of solar PPA combined with 50 MW of battery storage and a 50
MW solar PPA expected to be operational in 2023. Approval of these renewable
energy and battery resources should further reduce any exposure to GHG emissions
risk. These estimates are subject to change due to underlying variables,
including changes in PNM's generation portfolio, supplier's ability to meet
contractual in-service dates and complex relationships between several factors.
See additional discussion of these resources in Notes 16 and 17.

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PNM also has a customer distributed solar generation program that represented
201.2 MW at December 31, 2021. PNM's distributed solar programs will generate an
estimated 402.4 GWh of emission-free solar energy available this year to offset
PNM's annual production from fossil-fueled electricity generation. PNM has
offered its customers a comprehensive portfolio of energy efficiency and load
management programs since 2007. PNM's cumulative savings from these programs was
approximately 5,924 GWh of electricity through 2021. Over the next 20 years, PNM
projects energy efficiency and load management programs will provide the
equivalent of approximately 9,500 GWh of electricity savings, which will avoid
at least 1.0 million metric tons of CO2 based upon projected emissions from
PNM's system-wide resources. These estimates are subject to change because of
the uncertainty of many of the underlying variables, including changes in PNM's
generation portfolio, demand for electricity, energy efficiency, and complex
relationships between those variables.

Because of PNM's dependence on fossil-fueled generation, legislation or
regulation that imposes a limit or cost on GHG could impact the cost at which
electricity is produced. While PNM expects to recover any such costs through
rates, the timing and outcome of proceedings for cost recovery are uncertain. In
addition, to the extent that any additional costs are recovered through rates,
customers may reduce their usage, relocate facilities to other areas with lower
energy costs, or take other actions that ultimately could adversely impact PNM.

Other Climate Change Risks



PNM's generating stations are located in the arid southwest. Access to water for
cooling for some of these facilities is critical to continued operations.
Forecasts for the impacts of climate change on water supply in the southwest
range from reduced precipitation to changes in the timing of precipitation. In
either case, PNM's generating facilities requiring water for cooling will need
to mitigate the impacts of climate change through adaptive measures. Current
measures employed by PNM generating stations such as air cooling, use of grey
water, improved reservoir operations, and shortage sharing arrangements with
other water users will continue to be important to sustain operations.

PNM's service areas occasionally experience periodic high winds and severe
thunderstorms. TNMP has operations in the Gulf Coast area of Texas, which
experiences periodic hurricanes and other extreme weather conditions. In
addition to potentially causing physical damage to Company-owned facilities,
which disrupts the ability to transmit and/or distribute energy, weather and
other events of nature can temporarily reduce customers' usage and demand for
energy. In addition, other events influenced by climate change, such as
wildfires, could disrupt Company operations or result in third-party claims
against the Company. PNM has enhanced its wildfire prevention efforts and
maintains a wildfire mitigation plan.

EPA Regulation



In April 2007, the US Supreme Court held that EPA has the authority to regulate
GHG under the CAA. This decision heightened the importance of this issue for the
energy industry.  In December 2009, EPA released its endangerment finding for
GHG from new motor vehicles, stating that the atmospheric concentrations of six
key greenhouse gases (CO2, methane, nitrous oxides, hydrofluorocarbons,
perfluorocarbons, and sulfur hexafluoride) endanger the public health and
welfare of current and future generations. In May 2010, EPA released the final
Prevention of Significant Deterioration ("PSD") and Title V Greenhouse Gas
Tailoring Rule to address GHG from stationary sources under the CAA permitting
programs. The purpose of the rule was to "tailor" the applicability of two
programs, the PSD construction permit and Title V operating permit programs, to
avoid impacting millions of small GHG emitters. On June 23, 2014, the US Supreme
Court found EPA lacked authority to "tailor" the CAA's unambiguous numerical
thresholds of 100 or 250 tons per year, and thus held EPA may not require a
source to obtain a PSD permit solely on the basis of its potential GHG. However,
the court upheld EPA's authority to apply the PSD program for GHG to "anyway"
sources - those sources that are required to comply with the PSD program for
other non-GHG pollutants.

On June 25, 2013, then President Obama announced his Climate Action Plan, which
outlined how his administration planned to cut GHG in the U.S., prepare the
country for the impacts of climate change, and lead international efforts to
combat and prepare for global warming. The plan proposed actions that would lead
to the reduction of GHG by 17% below 2005 levels by 2020.

On August 3, 2015, EPA responded to the Climate Action Plan by issuing (1) the
Carbon Pollution Standards for new, modified, and reconstructed power plants
(under Section 111(b)); and (2) the Clean Power Plan for existing power plants
(under Section 111(d)).

EPA's Carbon Pollution Standards for new sources (those constructed after
January 8, 2014) established separate standards for gas and coal-fired units
deemed achievable through the application of what EPA determined to be the BSER
demonstrated for each type of unit efficient natural gas combined cycle
technology for gas units, and partial carbon capture and sequestration for coal
units. The Clean Power Plan established numeric "emission standards" for
existing electric generating units based on emission reduction opportunities
that EPA deemed achievable using technical assumptions for three "building
blocks": efficiency improvements at coal-fired EGUs, displacement of affected
EGUs with renewable energy, and displacement of coal-fired generation with
natural gas-fired generation.

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Multiple states, utilities, and trade groups filed petitions for review in the
DC Circuit to challenge both the Carbon Pollution Standards for new sources and
the Clean Power Plan for existing sources in separate cases, and the challenges
successfully petitioned the US Supreme Court for a stay of the Clean Power Plan.
However, before the DC Circuit could issue an opinion regarding either the
Carbon Pollution Standards or the Clean Power Plan, President Trump took office
and his administration asked the court to hold both cases in abeyance while the
rules were re-evaluated, which the court granted.

On June 19, 2019, EPA repealed the Clean Power Plan, promulgated the ACE Rule,
and revised the implementing regulations for all emission guidelines issued
under CAA Section 111(d). EPA set the BSER for existing coal-fired power plants
as heat rate efficiency improvements based on a range of "candidate
technologies" to be applied inside the fence-line of an individual facility. The
ACE Rule was also challenged and, on January 19, 2021, the DC Circuit issued an
opinion in American Lung Association and American Public Health Association v.
EPA, et al. finding that EPA misinterpreted the CAA when it determined that the
language of section 111 unambiguously barred consideration of emissions
reductions options that were not applied at the source. As a result, the court
vacated the ACE Rule and remanded the record to EPA for further consideration
consistent with the court's opinion. While the D.C. Circuit rejected the ACE
Rule, it did not reinstate the Clean Power Plan. EPA filed a motion seeking a
partial stay of the mandate as to the repeal of the Clean Power Plan, to ensure
the court's order will not render effective the now out-of-date Clean Power
Plan. On February 22, 2021, the DC Circuit granted EPA's motion, indicating that
it would withhold issuance of the mandate with respect to the repeal of the
Clean Power Plan until EPA responds to the court's remand in a new rulemaking
action. EPA has indicated it is developing a proposed rule under CAA Section
111(d) to establish guidelines for CO2 emissions from existing EGUs. EPA expects
to publish the draft rule in the summer of 2022. On October 29, 2021, the US
Supreme Court granted four petitions for certiorari seeking review of the DC
Circuit's decision vacating the ACE Rule and the repeal of the Clean Power Plan.
Oral arguments in the US Supreme Court were held on February 28, 2022. A
decision is expected in June 2022. The US Supreme Court's decision will rule on
the extent of EPA's authority under CAA Section 111(d) to regulate GHGs from
existing fossil-fueled EGUs.

The litigation over the Carbon Pollution Standards remains held in abeyance, but
could be reactivated by the parties upon a determination by the court that the
Biden Administration is unlikely to finalize the revisions proposed in 2018 and
that reconsideration of the rule has concluded.

On January 20, 2021, President Biden signed an executive order "Protecting
Public Health and the Environment and Restoring Science to Tackle the Climate
Crisis," which instructs agency heads to review all Trump Administration actions
for inconsistency with the Biden Administration's policy "to listen to the
science; to improve public health and protect our environment; to ensure access
to clean air and water; to limit exposure to dangerous chemicals and pesticides;
to hold polluters accountable, including those who disproportionately harm
communities of color and low-income communities; to reduce greenhouse gas
emissions; to bolster resilience to the impacts of climate change; to restore
and expand our national treasures and monuments; and to prioritize both
environmental justice and the creation of the well-paying union jobs necessary
to deliver on these goals." Agency heads were directed to consider suspending,
revising or rescinding any action that is inconsistent with the stated policy.
Within 30 days of the executive order, agency heads submitted to OMB a
preliminary list of those actions being considered for suspension, revision or
rescission that would be completed by December 31, 2021, and would be subject to
OMB review. Within 90 days of the executive order, agency heads submitted to OMB
an updated list of such actions that would be completed by December 31, 2025.
EPA is reconsidering the ACE Rule pursuant to this executive order.

Federal Legislation

President Biden has indicated that climate change is a top priority for his
administration. A number of legislative proposals to address climate change are
already being considered in the Democratic-led U.S. House of Representatives,
but the thin majority held by the Democrats in the Senate may make enactment of
new laws to address climate change difficult. On April 22, 2021, at the Earth
Day Summit, as part of the U.S.'s re-entry into the Paris Agreement, President
Biden unveiled the goal to cut U.S. emissions by 50% - 52% from 2005 levels by
2030, nearly double the GHG emissions reduction target set by the Obama
Administration. The 2030 goal joins President Biden's other climate goals which
include a carbon pollution-free power sector by 2035 and a net-zero emissions
economy by no later than 2050.

State and Regional Activity



Pursuant to New Mexico law, each utility must submit an IRP to the NMPRC every
three years to evaluate renewable energy, energy efficiency, load management,
distributed generation, and conventional supply-side resources on a consistent
and comparable basis. The IRP is required to take into consideration risk and
uncertainty of fuel supply, price volatility, and costs of anticipated
environmental regulations when evaluating resource options to meet supply needs
of the utility's customers. The NMPRC requires that New Mexico utilities factor
a standardized cost of carbon emissions into their IRPs using prices ranging
between $8 and $40 per metric ton of CO2 emitted and escalating these costs by
2.5% per year. Under the NMPRC order, each utility must analyze these
standardized prices as projected operating costs. Reflecting the evolving nature
of this issue, the NMPRC order states that these prices may be changed in the
future to account for additional information or changed circumstances. Although
these prices may not reflect the costs that ultimately will be incurred, PNM is
required to use these prices for purposes of its IRP. In its 2020 filing for
Four Corners Abandonment, PNM analyzed resource portfolio plans for scenarios
that assumed Four Corners will operate through 2031 and for scenarios that
assumed PNM will exit Four Corners at
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the end of 2024. The key findings of the analysis include that exiting Four Corners in 2024 would provide long-term economic benefits to PNM's customers. See Note 17.



The ETA was signed into New Mexico state law and became effective on June 14,
2019. The ETA, among other things, requires that investor-owned utilities obtain
specified percentages of their energy from renewable and carbon-free resources.
Prior to the enactment of the ETA, the REA established a mandatory RPS requiring
utilities to acquire a renewable energy portfolio equal to 10% of retail
electric sales by 2011, 15% by 2015, and 20% by 2020. The ETA amends the REA and
requires utilities operating in New Mexico to have renewable portfolios equal to
40% by 2025, 50% by 2030, 80% by 2040, and 100% zero-carbon energy by 2045.
Under the ETA provisions, PNM will also be required to meet a generation
emission standard of no more than 400 lbs. of CO2 per MWh beginning in 2023 and
not more than 200 lbs. per MWh beginning in 2032. PNM takes this requirement
into account in its resource planning, and it is expected that the standards
will be met with the approved resource retirements and replacements. The ETA
provides for a transition from coal-fired generating resources to carbon-free
resources by allowing investor-owned utilities to issue securitized bonds, or
"energy transition bonds," related to the retirement of coal-fired generating
facilities to qualified investors. Proceeds from the energy transition bonds
must be used only for purposes related to providing utility service to customers
and to pay "energy transition costs" (as defined by the ETA). These costs may
include coal mine reclamation, plant decommissioning, and other costs that have
not yet been charged to customers or disallowed by the NMPRC or by a court
order. Proceeds provided by energy transition bonds may also be used to pay for
severances for employees of the retired coal-fired generating facility and
related coal mine, as well as to pay for job training, education, and economic
development. Energy transition bonds must be issued under a NMPRC financing
order and are paid by a non-bypassable charge paid by all customers of the
issuing utility. The ETA also amends sections of the REA to allow for the
recovery of undepreciated investments and decommissioning costs related to
qualifying EGUs that the NMPRC has required be removed from retail
jurisdictional rates, provided replacement resources to be included in retail
rates have lower or zero-carbon emissions. The ETA requires the NMPRC to
prioritize replacement resources in a manner intended to mitigate the economic
impact to communities affected by these plant retirements. See additional
discussion of the ETA in Note 16. PNM expects the ETA will have a significant
impact on PNM's future generation portfolio. In February 2020, the hearing
examiners assigned to the SJGS abandonment and financing proceedings issued
recommended decisions recommending approval of PNM's abandonment application and
for the issuance of Securitized Bonds consistent with the requirements of the
ETA. On April 1, 2020, the NMPRC approved the hearing examiners' recommendation
to approve PNM's application to retire its share of SJGS in 2022 and for the
issuance of Securitized Bonds. PNM has also requested approval of energy
transition bonds for the Four Corners Abandonment costs of that transition away
from coal-fired generation. On December 15, 2021, the NMPRC denied approval of
the Four Corners Abandonment Application and the corresponding request for
issuance of securitized financing. On December 22, 2021, PNM filed a Notice of
Appeal with the NM Supreme Court of the NMPRC decision to deny the application.
PNM cannot predict the full impact of the ETA or the outcome of the NM Supreme
Court decision with respect to the abandonment of Four Corners. See additional
discussion of PNM's SJGS and Four Corners Abandonment Applications in Note 17.

International Accords

The United Nations Framework Convention on Climate Change ("UNFCCC") is an
international environmental treaty that was negotiated at the 1992 United
Nations Conference on Environment and Development (informally known as the Earth
Summit) and entered into force in March 1994. The objective of the treaty is to
"stabilize greenhouse gas concentrations in the atmosphere at a level that would
prevent dangerous anthropogenic interference with the climate system." Parties
to the UNFCCC, including the U.S., have been meeting annually in Conferences of
the Parties ("COP") to assess progress in meeting the objectives of the UNFCCC.

On December 12, 2015, the Paris Agreement was finalized during the 2015 COP. The
aim of the Paris Agreement is to limit global temperature rise to two degrees
Celsius above pre-industrial levels. The agreement, which was agreed to by
approximately 200 parties, requires that countries submit INDCs. INDCs reflect
national targets and actions that arise out of national policies and elements
relating to oversight, guidance and coordination of actions to reduce emissions
by all countries. In November 2014, then President Obama announced the United
States' commitment to reduce GHG, on an economy-wide basis, by 26%-28% from 2005
levels by the year 2025. The U.S. INDC was part of an overall effort by the
former administration to have the U.S. achieve economy-wide reductions of around
80% by 2050. The former administration's GHG reduction target for the electric
utility industry was a key element of its INDC and was based on EPA's GHG
regulations for new, existing, and modified and reconstructed sources at that
time. Thresholds for the number of countries necessary to ratify or accede to
the Paris Agreement and total global GHG percentage were achieved on October 5,
2016 and the Paris Agreement entered into force on November 4, 2016. On June 1,
2017, President Trump announced that the U.S. would withdraw from the Paris
Agreement. As a result of the President's notice to the United Nations, the U.S.
officially withdrew from the Paris Agreement on November 4, 2020. On January 20,
2021, President Biden signed an instrument that will allow the United States to
rejoin the Paris Agreement on Climate Change. The instrument was deposited with
the United Nations on January 21, 2021, and the United States officially became
a party to the Agreement on February 19, 2021.

PNM has calculated GHG reductions that would result from scenarios that assume
PNM's scheduled retirement of its share of the SJGS in 2022 and would exit from
Four Corners in either 2024 or 2031 and PNM has set a goal to have a 100%
emissions-free generating portfolio by 2040. While the Company has not conducted
an independent 2 Degree Scenario analysis, our commitment to becoming 100%
emissions-free by 2040 produces a carbon emissions reduction pathway that tracks
within the ranges of climate scenario pathways that are consistent with limiting
the global warming average to less than 2
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degrees Celsius. In addition, as an investor-owned utility operating in the
state of New Mexico, PNM is required to comply with the recently enacted ETA,
which requires utilities' generating portfolio be 100% carbon-free by 2045. The
requirements of the ETA and the Company's goal compare favorably to the U.S. NDC
of 50% to 52% carbon emissions reduction by 2030 and the Biden Administration's
goal of net-zero carbon emissions economy-wide by 2050. On April 1, 2020, the
NMPRC approved PNM's application to retire its share of SJGS in 2022. PNM filed
for abandonment of Four Corners on January 8, 2021. See Note 17.

PNM will continue to monitor the United States' participation in the Paris Agreement and other parties' involvement in these types of international accords, but the potential impact that such accords may have on the Company cannot be determined at this time.

Assessment of Legislative/Regulatory Impacts



The Company has assessed, and continues to assess, the impacts of climate change
legislation and regulation on its business.  This assessment is ongoing and
future changes arising out of the legislative or regulatory process could impact
the assessment significantly.  PNM's assessment includes assumptions regarding
specific GHG limits; the timing of implementation of these limits; the
possibility of a market-based trading program, including the associated costs
and the availability of emission credits or allowances; the development of
emission reduction and/or renewable energy technologies; and provisions for cost
containment. Moreover, the assessment assumes various market reactions such as
the price of coal and gas and regional plant economics.  These assumptions are,
at best, preliminary and speculative. However, based upon these assumptions, the
enactment of climate change legislation or regulation could, among other things,
result in significant compliance costs, including large capital expenditures by
PNM, and could jeopardize the economic viability of certain generating
facilities. See Notes 16 and 17.  While PNM currently expects the retirement of
SJGS in 2022 will provide savings to customers, the ultimate consequences of
climate change and environmental regulation could lead to increased costs to
customers and affect results of operations, cash flows, and financial condition
if the incurred costs are not fully recovered through regulated rates. Higher
rates could also contribute to reduced usage of electricity.  PNM's assessment
process is evolving and is too speculative at this time for a meaningful
prediction of the long-term financial impact.

Transmission Issues



At any given time, FERC has various notices of inquiry and rulemaking dockets
related to transmission issues pending. Such actions may lead to changes in FERC
administrative rules or ratemaking policy but have no time frame in which action
must be taken or a docket closed with no further action. Further, such notices
and rulemaking dockets do not apply strictly to PNM but will have industry-wide
effects in that they will apply to all FERC-regulated entities. PNM monitors and
often submits comments taking a position in such notices and rulemaking dockets
or may join in larger group responses. PNM often cannot determine the full
impact of a proposed rule and policy change until the final determination is
made by FERC and PNM is unable to predict the outcome of these matters.

Financial Reform Legislation



The Dodd-Frank Wall Street Reform and Consumer Protection Act ("Dodd-Frank
Reform Act"), enacted in July 2010, includes provisions that will require
certain over-the-counter derivatives, or swaps, to be centrally cleared and
executed through an exchange or other approved trading facility. It also
includes provisions related to swap transaction reporting and record keeping and
may impose margin requirements on swaps that are not centrally cleared. The U.S.
Commodity Futures Trading Commission ("CFTC") has published final rules defining
several key terms related to the act and has set compliance dates for various
types of market participants. The Dodd-Frank Reform Act provides exemptions from
certain requirements, including an exception to the mandatory clearing and swap
facility execution requirements for commercial end-users that use swaps to hedge
or mitigate commercial risk.  PNM has elected the end-user exception to the
mandatory clearing requirement. PNM expects to be in compliance with the
Dodd-Frank Reform Act and related rules within the time frames required by the
CFTC. However, as a result of implementing and complying with the Dodd-Frank
Reform Act and related rules, PNM's swap activities could be subject to
increased costs, including from higher margin requirements. At this time, PNM
cannot predict the ultimate impact the Dodd-Frank Reform Act may have on PNM's
financial condition, results of operations, cash flows, or liquidity.

Other Matters

See Notes 16 and 17 for a discussion of commitments and contingencies and rate and regulatory matters.


                   CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of financial statements in accordance with GAAP requires
management to apply accounting policies and to make estimates and judgments that
best provide the framework to report the results of operations and financial
position for PNMR, PNM, and TNMP. As a result, there exists the likelihood that
materially different amounts would be reported under different conditions or
using different assumptions. Management has identified the following accounting
policies that it deems critical to the portrayal of the financial condition and
results of operations and that involve significant subjectivity. The following
discussion provides information on the processes utilized by management in
making judgments and assumptions as they apply to its critical accounting
policies.


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Regulatory Accounting



The Company is subject to the provisions of GAAP for rate-regulated enterprises
and records assets and liabilities resulting from the effects of the ratemaking
process, which would not be recorded under GAAP for non-regulated entities.
Additional information concerning regulatory assets and liabilities is contained
in Note 13.

The Company continually evaluates the probability that regulatory assets and
liabilities will impact future rates and makes various assumptions in those
analyses. The expectations of future rate impacts are generally based on orders
issued by regulatory commissions or historical experience, as well as
discussions with applicable regulatory authorities. If future recovery or refund
ceases to be probable, the Company would be required to write-off the portion
that is not recoverable or refundable in current period earnings.

The Company has made adjustments to regulatory assets and liabilities that
affected its results of operations in the past due to changes in various factors
and conditions impacting future cost recovery. Based on its current evaluation,
the Company believes that future recovery of its regulatory assets is probable.

Impairments



Tangible long-lived assets are evaluated for impairment when events and
circumstances indicate that the assets might be impaired. These potential
impairment indicators include management's assessment of fluctuating market
conditions as a result of planned and scheduled customer purchase commitments;
future market penetration; changing environmental requirements; fluctuating
market prices resulting from factors including changing fuel costs and other
economic conditions; long-term weather patterns; and other market trends. The
amount of impairment recognized, if any, is the difference between the fair
value of the asset and the carrying value of the asset and would reduce both the
asset and current period earnings. Variations in the assessment of potential
impairment or in the assumptions used to calculate an impairment could result in
different outcomes, which could lead to significant effects on the Consolidated
Financial Statements. See Notes 16 and 17.

Goodwill is evaluated for impairment at least annually, or more frequently if
events and circumstances indicate that the goodwill might be impaired.
Impairment testing may be performed based on either a qualitative analysis or
quantitative analysis. Note 19 contains information on the impairment testing
performed by the Company on goodwill. For 2021, the Company utilized a
qualitative analysis for both the PNM and TNMP reporting units. No impairments
were indicated in the Company's annual goodwill testing, which was performed as
of April 1, 2021. Since the annual evaluation, there have been no indications
that the fair values of the reporting units with recorded goodwill have
decreased below the carrying values. The annual testing was based on certain
critical estimates and assumptions. Changes in the estimates or the use of
different assumptions could affect the determination of fair value and the
conclusion of impairment for each reporting unit.

Application of the qualitative goodwill impairment test requires evaluating
various events and circumstances to determine whether it is not more likely than
not that the fair value of a reporting unit is less than its carrying amount. As
a part of the Company's goodwill qualitative testing process for a reporting
unit, various factors that are specific to that reporting unit as well as
industry and macroeconomic factors are evaluated in order to determine whether
these factors are reasonably likely to have a material impact on the fair value
of the reporting unit. Examples of the factors that were considered in the
qualitative testing of the goodwill include the results of the most recent
quantitative impairment test, current and long-term forecasted financial
results, regulatory environment, credit rating, changes in the interest rate
environment, and operating strategy for the reporting unit.

Based on the analysis performed for the PNM and TNMP reporting units in 2021,
the Company concluded that there were no changes that were reasonably likely to
cause the fair value of the reporting units to be less than their carrying value
and determined that there was no impairment of goodwill. Although the Company
believes all relevant factors were considered in the qualitative impairment
analysis to reach the conclusion that goodwill is not impaired, significant
changes in any one of the assumptions could produce a significantly different
result potentially leading to the recording of an impairment that could have
significant impacts on the results of operations and financial position of the
Company.

Decommissioning and Reclamation Costs



PNM is only required to recognize and measure decommissioning liabilities for
tangible long-lived assets for which a legal obligation exists. Accounting for
decommissioning costs for nuclear and fossil-fuel generation involves
significant estimates related to costs to be incurred many years in the future
after plant closure. Decommissioning costs are based on site-specific estimates,
which are updated periodically and involve numerous judgments and assumptions,
including estimates of future decommissioning costs at current price levels,
inflation rates, and discount rates. Changes in these estimates could
significantly impact PNMR's and PNM's financial position, results of operations,
and cash flows. Nuclear decommissioning costs are based on estimates of the
costs for removing all radioactive and other structures at PVNGS. AROs,
including nuclear decommissioning costs, are discussed in Note 15. Nuclear
decommissioning costs represent approximately 62% of PNM's ARO liability. A 10%
increase in the estimates of future decommissioning costs at current price
levels would have increased the ARO liability by $10.0 million at December 31,
2021. PNM recognizes an expense and a corresponding liability for ultimate
decommissioning of PVNGS. See Note 17 for information concerning NMPRC's order
to address the recovery of decommissioning costs in a future proceeding.

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In connection with both the SJGS coal agreement and the Four Corners fuel
agreement, the owners are required to reimburse the mining companies for the
cost of contemporaneous reclamation, as well as the costs for final reclamation
of the coal mines.  The reclamation costs are based on periodic site-specific
studies that estimate the costs to be incurred in the future and are dependent
upon numerous assumptions, including estimates of future reclamation costs at
current price levels, inflation rates, and discount rates. A 10% increase in the
estimates of future reclamation costs at current price levels would have
increased the mine reclamation liability by $10.9 million at December 31, 2021.
PNM considers the contemporaneous reclamation costs part of the cost of its
delivered coal costs.  The NMPRC has capped the amount that can be collected
from ratepayers for final reclamation of the surface mines. If future estimates
increase the liability for surface mine reclamation, the excess would be
expensed at that time. See Note 16 for discussion of reclamation costs.

Pension and Other Postretirement Benefits



The Company maintains qualified defined benefit pension plans, postretirement
benefit plans providing medical and dental benefits, and executive retirement
programs. The net periodic benefit cost or income and the calculation of the
projected benefit obligations are recognized in the Company's financial
statements and depend on expected investment performance, the level of
contributions made to the plans, and employee demographics. These calculations
require the use of a number of actuarial assumptions and estimates. The most
critical of the actuarial assumptions are the expected long-term rate of return,
the discount rate, and projected health care cost trend rates. The Company
reviews and evaluates its actuarial assumptions annually and adjusts them as
necessary. Changes in the pension and OPEB assets and liabilities associated
with these factors are not immediately recognized as net periodic benefit cost
or income in results of operations, but are recognized in future years,
generally, over the remaining life of the plan. However, these factors could
have a significant impact on the financial position of the Company. Note 11
contains additional information about pension and OPEB obligations, including
assumptions utilized in the calculations and impacts of changes in certain of
those assumptions.

Accounting for Contingencies

The financial results of the Company may be affected by judgments and estimates
related to loss contingencies. Contingencies related to litigation and claims,
as well as environmental and regulatory matters, also require the use of
significant judgment and estimation. The Company attempts to take into account
all known factors regarding the future outcome of contingent events and records
an accrual for any contingent loss events that are both probable of occurring
and can be reasonably estimated based upon current available information.
However, the actual outcomes can vary from any amounts accrued which could have
a material effect on the results of operations and financial position of the
Company. See Note 16 and Note 17.

Income Taxes



The Company's income tax expense and related balance sheet amounts involve
significant judgment and use of estimates. Amounts of deferred income tax assets
and liabilities, current and noncurrent accruals, and determination of uncertain
tax positions involve judgment and estimates related to timing and probability
of the recognition of income and deductions by taxing authorities. In addition,
some temporary differences are accorded flow-through treatment by the Company's
regulators and impact the Company's effective tax rate. In assessing the
likelihood of the realization of deferred tax assets, management considers the
estimated amount and character of future taxable income. Significant changes in
these judgments and estimates could have a material impact on the results of
operations and financial position of the Company. Actual income taxes could vary
from estimated amounts due to the future impacts of various items, including
changes in income tax laws, the Company's forecasted financial condition and
results of operations in future periods, and the final review from taxing
authorities. See Note 18.

                                  MD&A FOR PNM
                             RESULTS OF OPERATIONS

PNM operates in only one reportable segment, as presented above in Results of
Operations for PNMR.

                                 MD&A FOR TNMP
                             RESULTS OF OPERATIONS

TNMP operates in only one reportable segment, as presented above in Results of Operations for PNMR.




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Latest news about PNM Resources, Inc.

Barclays Adjusts Price Target on PNM Resources to $43 From $40, Keeps Overweight Rating	Apr. 15	MT
PNM Resources, Inc. Enters into a Twelfth Amendment to and Restatement of Credit Agreement Amending and Restating its $300.0 Million Revolving Credit Agreement	Apr. 01	CI
PNM Resources, Inc. Announces Retirement of Patrick Apodaca as Senior Vice President and General Counsel	Mar. 27	CI
Iberdrola Focuses Investments on Networks, Expects Raised Shareholder Payouts -- Update	Mar. 21	DJ
Spain's Iberdrola set to build on grid power as renewables appeal wanes	Mar. 21	RE
Iberdrola Makes $2.5 Billion Bid to Take Full Ownership of Avangrid -- Update	Mar. 07	DJ
PNM Resources to Affirm 2024 Earnings Outlook	Mar. 04	MT
PNM Resources Keeps Quarterly Dividend at $0.3875 per Share, Payable May 10 to Investors of Record April 26	Mar. 01	MT
PNM Resources, Inc. Declares Regular Quarterly Dividend, Payable May 10, 2024	Mar. 01	CI
Sector Update: Energy Stocks Slump in Late Tuesday Afternoon Trading	Feb. 13	MT
Sector Update: Energy Stocks Decline in Tuesday Afternoon Trading	Feb. 13	MT
PNM Resources to Affirm 2024 Earnings Guidance	Feb. 13	MT
Barclays Initiates PNM Resources at Overweight Rating With $40 Price Target	Feb. 08	MT
Transcript : PNM Resources, Inc., 2023 Earnings Call, Feb 06, 2024	Feb. 06
PNM Resources' Q4 Non-GAAP Earnings Rise; 2024 Guidance Issued	Feb. 06	MT
PNM Resources, Inc. Reports Earnings Results for the Full Year Ended December 31, 2023	Feb. 06	CI
PNM Resources, Inc. Provides Consolidated Earnings Guidance for the Year 2024	Feb. 06	CI
RBC Cuts Price Target on PNM Resources to $43 From $50.30, Keeps Sector Perform Rating	Jan. 05	MT
News Highlights : Top Energy News of the Day	Jan. 05	DJ
North American Morning Briefing : S&P 500 Futures -2-	Jan. 04	DJ
Utilities Gain on Defensive Bias -- Utilities Roundup	Jan. 03	DJ
Mizuho Securities Downgrades PNM Resources to Neutral From Buy, Price Target is $41	Jan. 03	MT
Wells Fargo Upgrades PNM Resources to Overweight From Equalweight, Price Target is $44	Jan. 03	MT
News Highlights : Top Energy News of the Day	Jan. 03	DJ
US Equity Markets Close Lower Tuesday Ahead of Fed Meeting Minutes	Jan. 02	MT

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PNM Resources, Inc. is a holding company, which provides electric service to consumers in Texas-New Mexico Power Companyâs (TNMP). service territories. The Company with its two regulated utilities serving approximately 824,000 residential, commercial, and industrial customers and end users of electricity in New Mexico and Texas. The Companyâs electric utilities are Public Service Company of New Mexico (PNM), and TNMP. PNM is an electric utility, which provides electric generation, transmission, and distribution service to its rate-regulated customers. PNMâs retail electric service territory covers an area of north-central New Mexico, including the cities of Albuquerque, Rio Rancho and Santa Fe, and certain areas of southern New Mexico. Other services provided by PNM include wholesale transmission services to third parties. Other services provided by PNM include wholesale transmission services to third parties. TNMP provides transmission and distribution services in Texas.

Sector

Electric Utilities

Calendar

2024-04-29 - Q1 2024 Earnings Release

Related indices

Russell 2000

More about the company

Income Statement Evolution

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Ratings for PNM Resources, Inc.

Trading Rating

Investor Rating

ESG Refinitiv

B-

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Analysts' Consensus

Sell

Buy

Mean consensus

OUTPERFORM

Number of Analysts

Last Close Price

36.69 USD

Average target price

43.43 USD

Spread / Average Target

+18.37%

Consensus

EPS Revisions

Estimates Revisions

Quarterly earnings - Rate of surprise

Company calendar

Sector Other Electric Utilities

	1st Jan change	Capi.
PNM RESOURCES, INC.	-12.76%	3.31B
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DUKE ENERGY CORPORATION	+1.21%	75.7B
CONSTELLATION ENERGY CORPORATION	+61.11%	57.74B
AMERICAN ELECTRIC POWER COMPANY, INC.	+5.33%	44.71B
DOMINION ENERGY, INC.	+7.81%	42.41B
EXELON CORPORATION	+4.65%	37.66B
GE VERNOVA INC.	0.00%	37.19B

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