Meeting Business Objectives

TXNM’s key financial goals are to earn authorized returns on its regulated businesses, deliver above-average long-term earnings growth with a 50-60% dividend payout ratio, and maintain investment grade credit ratings. To achieve these objectives, the company focuses on five strategic areas: safe and reliable power, utility plant investments, superior customer experience, environmentally responsible power, and stakeholder engagement.

Safe, Reliable, and Affordable Power

Safety is the top priority, with TXNM using a safety management system to empower employees and minimize risks. TXNM measures reliability using industry standard metrics and invests in projects to support reliability and reduce outages. The company balances affordability and infrastructure investment to ensure reliable service and support economic growth in its service areas.

TXNM’s utility PNM participates in the Energy Imbalance Market (EIM) to access more flexible resources and integrate renewable energy. PNM also plans to join the Extended Day-Ahead Market (EDAM) in 2027. Additionally, PNM joined the Western Resource Adequacy Program (WRAP) in 2023 to coordinate regional resource availability.

Utility Plant Investments

TXNM invested $2.3 billion in transmission, distribution, substations, power plants, and nuclear fuel from 2023-2024. Investment plans emphasize new transmission and distribution infrastructure to support growing demand and deliver clean energy. TNMP’s investments support high growth in its Texas service territory, while PNM’s investments modernize the grid to accommodate more renewable and distributed generation.

Superior Customer Experience

TNMP focuses on keeping customers informed about outages and providing a user-friendly outage map. TNMP was recognized with an Edison Electric Institute Emergency Response Award in 2025 for its restoration efforts.

PNM engages with customers through advisory councils to improve relationships and gain insights. PNM has also enhanced digital payment options, customer communications, and bill design to improve transparency and usability. While industry customer satisfaction has declined, PNM’s ranking has remained stable.

PNM is also addressing energy affordability by promoting low-income energy efficiency and assistance programs.

Environmentally Responsible Power

TXNM has a long-standing commitment to environmental stewardship. PNM’s key environmental focus areas are transitioning to 100% carbon-free generation by 2040, meeting New Mexico’s renewable energy requirements, and increasing energy efficiency.

The Inflation Reduction Act provides benefits for TXNM through extended clean energy tax credits. TXNM is also building an electric vehicle fleet, with 25% of light duty purchases to be electric by 2025 and 50% by 2030.

PNM’s renewable energy capacity, including utility-owned and contracted resources, totals 2,779 MW as of March 2025. PNM plans to add another 910 MW of renewable and storage capacity by 2026. PNM’s energy efficiency programs saved an estimated 86 GWh in 2024, equivalent to the annual consumption of 11,891 homes.

TXNM is also focused on reducing water usage and solid waste at its facilities.

Stakeholder and Community Engagement

TXNM is committed to fostering relationships with customers, stakeholders, and communities. The company utilizes various communication channels, including websites, social media, and in-person outreach, to engage with stakeholders.

TXNM and its foundations provided $9 million in corporate giving and $1.3 million in annual grant funding over the past three years. The company has also responded to natural disasters by donating to emergency funds and increasing employee assistance.

PNM stands out for its dedicated tribal relations office, workforce training programs, and partnerships to bring electricity to Navajo homes. Employee volunteerism is a core part of TXNM’s community engagement.

Financial Performance

Net earnings attributable to TXNM were $8.9 million ($0.10 per share) in Q1 2025, down from $47.2 million ($0.52 per share) in Q1 2024. The decrease was primarily due to lower performance on investment securities, higher operating expenses, and increased interest charges, partially offset by higher transmission and distribution rates, demand-based load, and weather-normalized retail load.

Liquidity and Capital Resources

As of March 31, 2025, TXNM had $585.5 million in available liquidity through its revolving credit facilities. The company projects $8.6 billion in capital requirements from 2025-2029 for utility plant investments and dividends.

TXNM plans to fund these requirements through a combination of internal cash generation, existing credit arrangements, and access to public and private capital markets. The company believes it has sufficient liquidity for the next 12 months but may need additional long-term financing in the form of debt and/or equity to fund its capital program.

TXNM’s credit ratings remain investment grade, which helps ensure access to capital markets and reduce borrowing costs. The company is closely monitoring macroeconomic conditions, including actions by the Federal Reserve and geopolitical activity, that could impact capital markets and its financial position.

Regulatory Environment

TNMP benefits from a regulatory framework in Texas that encourages grid investments through timely recovery mechanisms outside of general rate cases. Recent Texas legislation also supports reliability and resilience investments.

In New Mexico, recent legislation like the Energy Transition Act and Grid Modernization Plan provide a supportive regulatory environment for PNM’s transition to clean energy and grid investments. PNM also participates in the Integrated Resource Plan process to plan its future generation mix.

Economic Factors

TNMP experienced a 1.0% increase in weather-normalized retail load and a 2.2% increase in weather-normalized demand-based load in Q1 2025. Data center load increased 105.6%.

PNM saw a 1.0% increase in weather-normalized residential load, a 1.6% increase in commercial load, and a 20.5% increase in industrial load in Q1 2025.

TXNM is monitoring the potential impacts of macroeconomic conditions, Federal Reserve actions, and geopolitical activity on capital markets and customer usage, but has not experienced significant negative impacts so far.

Risks and Challenges

TXNM faces a variety of risks, including regulatory uncertainty, severe weather events, climate change regulations, cybersecurity threats, and commodity price volatility. The company closely manages these risks through its risk management policies and procedures.

Potential climate change impacts, such as water scarcity and wildfires, could disrupt operations and increase costs. TXNM is taking steps to reduce greenhouse gas emissions and adapt to climate change, but the long-term financial impacts remain uncertain.

Overall, TXNM is focused on executing its strategic priorities to deliver safe, reliable, and affordable power, invest in its infrastructure, provide a superior customer experience, and operate in an environmentally responsible manner. By maintaining its financial discipline and regulatory relationships, the company aims to achieve its key financial objectives and create long-term value for shareholders.