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TXNM Energy
TXNM
#2957
Rank
โ‚ฌ5.11 B
Marketcap
๐Ÿ‡บ๐Ÿ‡ธ United States
Country
49,62ย โ‚ฌ
Share price
0.05%
Change (1 day)
1.60%
Change (1 year)
๐Ÿ”‹ Electricity๐Ÿšฐ Utility companies โšก Energy
Categories
  1. TXNM Energy
  2. Quarterly Reports (10-Q)
  3. Financial Year FY2026 Q2

TXNM Energy - 10-Q quarterly report FY2026 Q2


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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q
(Mark One)
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2026

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to _________

Name of Registrant, State of Incorporation, Address Of Principal Executive Offices, Telephone Number, Commission File No., IRS Employer Identification No.
TXNM Energy, Inc.
(A New Mexico Corporation)
414 Silver Ave. SW
Albuquerque, New Mexico 87102-3289
Telephone Number - (505) 241-2700
Commission File No. - 001-32462
IRS Employer Identification No. - 85-0468296

Public Service Company of New Mexico
(A New Mexico Corporation)
414 Silver Ave. SW
Albuquerque, New Mexico 87102-3289
Telephone Number - (505) 241-2700
Commission File No. - 001-06986
IRS Employer Identification No. - 85-0019030

Texas-New Mexico Power Company
(A Texas Corporation)
577 N. Garden Ridge Blvd.
Lewisville, Texas 75067
Telephone Number - (972) 420-4189
Commission File No. - 002-97230
IRS Employer Identification No. - 75-0204070


Securities registered pursuant to Section 12(b) of the Act:
Registrant
Title of each class
Trading Symbol(s)
Name of exchange on which registered
TXNM Energy, Inc.
Common Stock, no par value
TXNM
New York Stock Exchange

Indicate by check mark whether each registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
TXNM Energy, Inc. (“TXNM”)
Yes
☑
No
☐
Public Service Company of New Mexico (“PNM”)
Yes
☑
No
☐
Texas-New Mexico Power Company (“TNMP”)
Yes
☐
No
☑

(NOTE: As a voluntary filer, not subject to the filing requirements, TNMP filed all reports under Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months.)





Indicate by check mark whether each registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
TXNM
Yes
☑
No
☐
PNM
Yes
☑
No
☐
TNMP
Yes
☑
No
☐

Indicate by check mark whether registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated
filer
Non-accelerated filer
Smaller reporting company
Emerging growth company
TXNM
☑
☐
☐
☐
☐
Large accelerated filer
Accelerated
filer
Non-accelerated filer
Smaller reporting company
Emerging growth company
PNM
☐
☐
☑
☐
☐
Large accelerated filer
Accelerated
filer
Non-accelerated filer
Smaller reporting company
Emerging growth company
TNMP
☐
☐
☑
☐
☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether any of the registrants is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐   No ☑

As of July 24, 2026, 103,046,111 shares of common stock, no par value per share, of TXNM were outstanding.

The total number of shares of common stock of PNM, no par value per share, outstanding as of July 24, 2026, was 39,117,799 all held by TXNM (and none held by non-affiliates).

The total number of shares of common stock of TNMP, $10 par value per share, outstanding as of July 24, 2026, was 6,358 all held indirectly by TXNM (and none held by non-affiliates).

PNM AND TNMP MEET THE CONDITIONS SET FORTH IN GENERAL INSTRUCTIONS (H) (1) (a) AND (b) OF FORM 10-Q AND ARE THEREFORE FILING THIS FORM WITH THE REDUCED DISCLOSURE FORMAT PURSUANT TO GENERAL INSTRUCTION (H) (2).

This combined Form 10-Q is separately filed by TXNM, PNM, and TNMP.  Information contained herein relating to any individual registrant is filed by such registrant on its own behalf.  Each registrant makes no representation as to information relating to the other registrants.  When this Form 10-Q is incorporated by reference into any filing with the SEC made by TXNM, PNM, or TNMP, as a registrant, the portions of this Form 10-Q that relate to each other registrant are not incorporated by reference therein.


2

TXNM ENERGY, INC. AND SUBSIDIARIES
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES

INDEX
Page No.
4
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
TXNM ENERGY, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Earnings
7
Condensed Consolidated Statements of Comprehensive Income
8
Condensed Consolidated Statements of Cash Flows
9
Condensed Consolidated Balance Sheets
11
Condensed Consolidated Statements of Changes in Equity
13
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
Condensed Consolidated Statements of Earnings
14
Condensed Consolidated Statements of Comprehensive Income
15
Condensed Consolidated Statements of Cash Flows
16
Condensed Consolidated Balance Sheets
18
Condensed Consolidated Statements of Changes in Equity
20
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
Condensed Consolidated Statements of Earnings
21
Condensed Consolidated Statements of Cash Flows
22
Condensed Consolidated Balance Sheets
23
Condensed Consolidated Statements of Changes in Common Stockholder’s Equity
25
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
26
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
75
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
107
ITEM 4. CONTROLS AND PROCEDURES
109
ITEM 1. LEGAL PROCEEDINGS
110
ITEM 1A. RISK FACTORS
110
ITEM 5. OTHER INFORMATION
110
ITEM 6. EXHIBITS
110
112

3

GLOSSARY
Definitions:  
2024 Rate ChangePNM’s request for a general increase in electric rates filed with the NMPRC on December 5, 2022, using a calendar year 2024 FTY
2025 Rate Request
PNM’s request for a general increase in electric rates filed with the NMPRC on June 14, 2024, using a FTY beginning July 1, 2025
2028 Resource Application
PNM’s November 22, 2024, application with the NMPRC for approval of resources to be available for the 2028 summer peak
ACE RuleAffordable Clean Energy Rule
AFUDCAllowance for Funds Used During Construction
AOCIAccumulated Other Comprehensive Income
APSArizona Public Service Company, the operator and a co-owner of PVNGS and Four Corners
AROAsset Retirement Obligation
ASUAccounting Standards Update
BESSBattery Energy Storage System
Blackstone Infrastructure
Blackstone Infrastructure Partners L.P.
Board
Board of Directors of TXNM
CAAClean Air Act
CAISOCalifornia Independent System Operator
Carbon Pollution Standards
Carbon Pollution Standards established by the EPA on August 3, 2015
CCNCertificate of Convenience and Necessity
CCRCoal Combustion Residuals
CCS
Carbon Capture and Storage/Sequestration
CIACContributions in Aid of Construction
CO2
Carbon Dioxide
CODM
Chief Operating Decision Maker
Community Solar Act
Senate Bill 84 effective June 18, 2021
Convertible Notes
TXNM’s $549.8 million junior subordinated convertible notes issued on June 10, 2024, and June 21, 2024
DC CircuitUnited States Court of Appeals for the District of Columbia Circuit
DCRF TNMP’s applications for a distribution cost recovery factor
DOEUnited States Department of Energy
EDAM
Extended Day Ahead Market
EEI
Edison Electric Institute, an association representing all U.S. investor-owned electric companies
Effective Time
The time the Merger is consummated
EGUElectric Generating Unit
EIMWestern Energy Imbalance Market developed and operated by CAISO
ELGEffluent Limitation Guidelines
Energy Transition Charge(s)Rate rider established to collect non-bypassable customer charges for repayment of the ETBC I Securitized Bonds
EPAUnited States Environmental Protection Agency
ERCOTElectric Reliability Council of Texas
ESA(s)
Energy Storage Agreement(s)
ETAThe New Mexico Energy Transition Act
ETBC I
PNM Energy Transition Bond Company I, LLC, formed on August 25, 2023
ETBC I Securitized Bonds
On November 15, 2023, ETBC I issued $343.2 million aggregate principal amount of its senior secured energy transition bonds, Series A in two tranches
EUEAThe New Mexico Efficient Use of Energy Act
EV
Electric Vehicle
Exchange Act
Securities Exchange Act of 1934, as amended
FASBFinancial Accounting Standards Board
FCCFederal Communications Commission
FERC
Federal Energy Regulatory Commission
FIP
Federal Implementation Plan
FMB
First Mortgage Bond
Four CornersFour Corners Power Plant
Four Corners CSAFour Corners’ coal supply contract with NTEC
FPPACFuel and Purchased Power Adjustment Clause
FTYFuture Test Year
4

GAAPGenerally Accepted Accounting Principles in the United States of America
GHG
Greenhouse Gas
Grid Modernization Plan
PNM’s NMPRC approved plan for grid modernization that includes investments of approximately $344 million for the first six years of a broader 11-year strategy
GWhGigawatt hours
HSRHart-Scott-Rodino Antitrust Improvements Act
INDCIntended Nationally Determined Contribution
IRA
Inflation Reduction Act of 2022
IRPIntegrated Resource Plan
IRSInternal Revenue Service
ISFSI
Independent Spent Fuel Storage Installation
kVKilovolt
KWKilowatt
KWhKilowatt Hour
MD&AManagement’s Discussion and Analysis of Financial Condition and Results of Operations
Merger
The merger of TXNM pursuant to the Merger Agreement, with TXNM surviving as a direct, wholly-owned subsidiary of Parent (an affiliate of Blackstone Infrastructure Partners L.P.)
Merger Agreement
The Agreement and Plan of Merger, dated May 18, 2025, by and among TXNM, Parent, and Merger Sub
Merger SubTroy Merger Sub Inc., a New Mexico corporation, direct subsidiary of Parent and affiliate of Blackstone Infrastructure Partners L.P., which will merge with and into TXNM at the Effective Time of the Merger
MetaMeta Platforms, Inc., formerly known as Facebook Inc.
MMBTU
Million British Thermal Units
Moody’sMoody’s Investor Services, Inc.
MWMegawatt
MWhMegawatt Hour
NAAQSNational Ambient Air Quality Standards
NAV
Net asset value
NDTNuclear Decommissioning Trusts for PVNGS
NM
New Mexico
NM 2016 Rate CaseRequest for a General Increase in Electric Rates Filed by PNM on December 7, 2016
NMEDNew Mexico Environment Department
NMMMDThe Mining and Minerals Division of the New Mexico Energy, Minerals and Natural Resources Department
NMPRCNew Mexico Public Regulation Commission
NOPRNotice of Proposed Rulemaking
NOxNitrogen Oxides
NPDESNational Pollutant Discharge Elimination System
NRC
United States Nuclear Regulatory Commission
NTECNavajo Transitional Energy Company, LLC, an entity owned by the Navajo Nation
OBBBA
One Big Beautiful Bill Act of 2025
OCIOther Comprehensive Income
OPEBOther Post-Employment Benefits
OSMUnited States Office of Surface Mining Reclamation and Enforcement
Parent
Troy ParentCo LLC, a Delaware limited liability company and an affiliate of Blackstone Infrastructure Partners L.P.
Paris AgreementA legally binding international treaty on climate change adopted on December 12, 2015
Pattern WindPattern New Mexico Wind, LLC, an affiliate of Western Spirit and Pattern Development
PCRBsPollution Control Revenue Bonds
PEP
Performance Equity Plan
PMParticulate Matter
PNMPublic Service Company of New Mexico and Subsidiaries
PNM New Mexico Credit FacilityPNM’s $40.0 million Unsecured Revolving Credit Facility
PNM 2025 Term Loan
PNM’s $195.0 Million Unsecured Term Loan issued on January 21, 2025
PNM April 2025 Note Purchase Agreement
PNM’s agreement for sale of PNM’s April 2025 SUNs
PNM April 2025 SUNs
PNM’s $300.0 million Senior Unsecured Notes issued on April 23, 2025
PNM Revolving Credit FacilityPNM’s $400.0 million Unsecured Revolving Credit Facility
5

PNMR DevelopmentPNMR Development and Management Company, an unregulated wholly-owned subsidiary of TXNM
PPAPower Purchase Agreement
PUCTPublic Utility Commission of Texas
PVNGSPalo Verde Nuclear Generating Station
RD
Recommended Decision
REANew Mexico’s Renewable Energy Act of 2004
RECsRenewable Energy Certificates
REP(s)Retail Electricity Provider
RFP
Request for Proposal
ROEReturn on Equity
RPSRenewable Energy Portfolio Standard
S&PStandard and Poor’s Ratings Services
SECUnited States Securities and Exchange Commission
Securities Act
Securities Act of 1933, as amended
Securitized BondsEnergy transition bonds
SIPState Implementation Plan
SJGSSan Juan Generating Station
SO2
Sulfur Dioxide
SOFRSecured Overnight Financing Rate
SRP
TNMP’s System Resiliency Plan
SUNsSenior Unsecured Notes
TCJA
Federal tax reform legislation enacted on December 22, 2017, commonly referred to as the Tax Cuts and Jobs Act
TCOSTransmission Cost of Service
TECATexas Electric Choice Act
TEPTransportation Electrification Program
TNMPTexas-New Mexico Power Company and Subsidiaries
TNMP 2018 Rate CaseTNMP’s General Rate Case Application filed on May 30, 2018
TNMP February 2025 Bonds
TNMP’s First Mortgage Bonds issued under the TNMP February 2025 Bond Purchase Agreement
TNMP February 2025 Bond Purchase Agreement
TNMP’s Agreement for the sale of an aggregate $140.0 Million of TNMP February 2025 Bonds
TNMP Revolving Credit FacilityTNMP’s $300.0 million Secured Revolving Credit Facility
TNPTNP Enterprises, Inc. and Subsidiaries
TSA(s)
Transmission Service Agreement(s)
TXNM
TXNM Energy, Inc. formerly known as PNM Resources, Inc. (“PNMR”)
TXNM Revolving Credit Facility
TXNM’s $300.0 million Unsecured Revolving Credit Facility
U.S.The United States of America
U.S. Supreme Court
United States Supreme Court
ValenciaValencia Energy Facility
VIEVariable Interest Entity
WACCWeighted average cost of capital
Western Spirit Line
An approximately 150-mile 345-kV transmission line
WestmorelandWestmoreland Coal Company
WFB LOC FacilityLetter of credit arrangements with Wells Fargo Bank, N.A., entered into in August 2020
WSJ LLCWestmoreland San Juan Mining, LLC, a subsidiary of Westmoreland Mining Holdings, LLC, and current owner of San Juan Coal Company

6

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

TXNM ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)

Three Months Ended June 30,Six Months Ended June 30,
2026202520262025
(In thousands, except per share amounts)
Electric Operating Revenues$548,554 $502,420 $1,053,536 $985,212 
Operating Expenses:
Cost of energy164,139 167,622 330,631 336,804 
Administrative and general64,868 75,991 131,781 136,760 
Energy production costs25,340 26,081 49,743 50,627 
Depreciation and amortization114,631 105,235 226,954 209,786 
Transmission and distribution costs25,377 26,461 51,264 51,966 
Taxes other than income taxes30,897 28,329 62,850 54,679 
Total operating expenses425,252 429,719 853,223 840,622 
Operating income123,302 72,701 200,313 144,590 
Other Income and Deductions:
Interest income4,179 3,872 7,746 8,119 
Gains on investment securities24,414 23,556 15,470 22,315 
Other income8,111 5,704 14,968 10,433 
Other (deductions)(2,997)(6,481)(4,897)(8,739)
Net other income and deductions33,707 26,651 33,287 32,128 
Interest Charges69,343 72,013 137,938 135,564 
Earnings before Income Taxes87,666 27,339 95,662 41,154 
Income Taxes12,276 1,326 12,267 2,344 
Net Earnings 75,390 26,013 83,395 38,810 
(Earnings) Attributable to Valencia Non-controlling Interest(3,994)(4,305)(8,130)(8,047)
Preferred Stock Dividend Requirements of Subsidiary(132)(132)(264)(264)
Net Earnings Attributable to TXNM
$71,264 $21,576 $75,001 $30,499 
Net Earnings Attributable to TXNM per Common Share:
Basic$0.64 $0.22 $0.68 $0.32 
Diluted$0.64 $0.22 $0.67 $0.32 
Dividends Declared per Common Share$0.4225 $0.4075 $0.8450 $0.8150 

The accompanying notes, as they relate to TXNM, are an integral part of these condensed consolidated financial statements.


7
TXNM ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)

Three Months Ended June 30,Six Months Ended June 30,
2026202520262025
(In thousands)
Net Earnings$75,390 $26,013 $83,395 $38,810 
Other Comprehensive Income:
Unrealized Gains on Available-for-Sale Debt Securities:
Net increase in unrealized holding gains arising during the period, net of income tax (expense) of $(17), $(60), $(17), and $(128)
49 177 50 376 
Reclassification adjustment for (gains) included in net earnings, net of income tax expense of $27, $51, $65, and $86
(79)(150)(191)(252)
Pension Liability Adjustment:
Reclassification adjustment for amortization of experience losses recognized as net periodic benefit cost, net of income tax (benefit) of $(150), $(349), $(367), and $(698)
440 1,026 1,078 2,051 
Fair Value Adjustment for Cash Flow Hedges:
Change in fair market value, net of income tax (expense) benefit of $0 $633, $0, and $633
— (1,860)— (1,860)
Reclassification adjustment for amortization of losses recognized in net earnings, net of income tax (expense) benefit of $(12), $0, $(24), and $0
35 — 70 — 
Total Other Comprehensive Income
445 (807)1,007 315 
Comprehensive Income75,835 25,206 84,402 39,125 
Comprehensive (Income) Attributable to Valencia Non-controlling Interest(3,994)(4,305)(8,130)(8,047)
Preferred Stock Dividend Requirements of Subsidiary(132)(132)(264)(264)
Comprehensive Income Attributable to TXNM
$71,709 $20,769 $76,008 $30,814 

The accompanying notes, as they relate to TXNM, are an integral part of these condensed consolidated financial statements.

8


TXNM ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

Six Months Ended June 30,
20262025
(In thousands)
Cash Flows From Operating Activities:
Net earnings$83,395 $38,810 
Adjustments to reconcile net earnings to net cash flows from operating activities:
Depreciation and amortization253,039 235,245 
Deferred income tax expense11,123 1,796 
Losses on investment securities
(15,470)(22,315)
Stock based compensation expense4,278 5,266 
Allowance for equity funds used during construction(10,756)(5,266)
Other, net2,189 1,753 
Changes in certain assets and liabilities:
Accounts receivable and unbilled revenues(18,510)(30,921)
Materials, supplies, and fuel stock(12,478)(4,313)
Other current assets(63,473)(20,651)
Other assets(59,518)(8,211)
Accounts payable(2,879)(3,669)
Accrued interest and taxes7,985 (19,588)
Other current liabilities15,766 (17,140)
Other liabilities28,328 (6,001)
Net cash flows from operating activities223,019 144,795 
Cash Flows From Investing Activities:
Additions to utility plant and non-utility plant(577,560)(608,800)
Proceeds from sales of investment securities329,672 198,728 
Purchases of investment securities(333,215)(201,174)
Other, net75 (53)
Net cash flows used in investing activities(581,028)(611,299)

The accompanying notes, as they relate to TXNM, are an integral part of these condensed consolidated financial statements.
9

TXNM ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

Six Months Ended June 30,
20262025
(In thousands)
Cash Flows From Financing Activities:
Short-term borrowings$1,856,250 $1,398,900 
Repayments of short-term borrowings(1,554,650)(1,662,500)
Long-term borrowings— 1,719,300 
Repayment of long-term debt(3,601)(1,442,706)
Issuance of common stock
123,297 645,309 
Awards of common stock(6,365)(8,249)
Dividends paid(93,057)(75,781)
Valencia’s transactions with its owner(4,172)(8,918)
Transmission interconnection and security deposit arrangements44,954 21,215 
Refunds paid under transmission interconnection and security deposit arrangements(6,363)(95,028)
Debt issuance costs and other, net(3,252)(9,599)
Net cash flows from financing activities353,041 481,943 
Change in Cash, Cash Equivalents, and Restricted Cash
(4,968)15,439 
Cash, Cash Equivalents, and Restricted Cash at Beginning of Period
31,953 22,085 
Cash, Cash Equivalents, and Restricted Cash at End of Period
$26,985 $37,524 
Restricted Cash included in Other Current Assets and Other Deferred Charges on Condensed Consolidated Balance Sheets:
At beginning of period$13,697 $17,587 
At end of period$12,395 $15,354 
Supplemental Cash Flow Disclosures:
Interest paid, net of amounts capitalized$119,999 $132,849 
Income taxes paid, net$2,048 $2,350 
Supplemental schedule of noncash investing activities:
Decrease in accrued plant additions$45,576 $53,154 

The accompanying notes, as they relate to TXNM, are an integral part of these condensed consolidated financial statements.

10


TXNM ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)

June 30,
2026		December 31,
2025
(In thousands)
ASSETS
Current Assets:
Cash and cash equivalents$14,590 $18,256 
Accounts receivable, net of allowance for credit losses of $1,573 and $1,394
145,410 151,804 
Unbilled revenues90,358 68,214 
Other receivables67,064 53,875 
Materials, supplies, and fuel stock193,794 181,316 
Regulatory assets91,215 41,785 
Prepaid assets32,582 28,946 
Income taxes receivable9,230 8,322 
Other current assets16,107 12,144 
Total current assets660,350 564,662 
Other Property and Investments:
Investment securities513,644 505,655 
Other investments228 302 
Non-utility property, net44,074 40,729 
Total other property and investments557,946 546,686 
Utility Plant:
Plant in service and plant held for future use
11,902,839 11,592,121 
Less accumulated depreciation and amortization3,131,594 3,010,588 
8,771,245 8,581,533 
Construction work in progress787,263 653,206 
Nuclear fuel, net of accumulated amortization of $25,206 and $27,953
77,937 76,696 
Net utility plant9,636,445 9,311,435 
Deferred Charges and Other Assets:
Regulatory assets933,240 939,249 
Goodwill278,297 278,297 
Operating lease right-of-use assets, net of accumulated amortization47,935 108,517 
Other deferred charges393,709 310,439 
Total deferred charges and other assets1,653,181 1,636,502 
$12,507,922 $12,059,285 

The accompanying notes, as they relate to TXNM, are an integral part of these condensed consolidated financial statements.

11


TXNM ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)

June 30,
2026		December 31,
2025
(In thousands, except share information)
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Short-term debt$483,000 $181,400 
Current installments of long-term debt (includes $7,509 and $7,303 related to ETBC I)
227,817 302,538 
Accounts payable194,608 243,062 
Customer deposits7,025 6,893 
Accrued interest and taxes132,907 124,014 
Regulatory liabilities14,944 11,022 
Operating lease liabilities7,109 8,969 
Dividends declared132 46,151 
Transmission interconnection arrangement liabilities16,745 15,878 
Other current liabilities100,370 77,610 
Total current liabilities1,184,657 1,017,537 
Long-term Debt, net of Unamortized Premiums, Discounts, and Debt Issuance Costs (includes $320,779 and $324,531 related to ETBC I)
5,187,896 5,116,026 
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes990,599 961,230 
Regulatory liabilities781,084 757,319 
Asset retirement obligations258,431 255,097 
Accrued pension liability and postretirement benefit cost6,653 6,736 
Operating lease liabilities34,773 96,735 
Other deferred credits449,892 389,070 
Total deferred credits and other liabilities2,521,432 2,466,187 
Total liabilities8,893,985 8,599,750 
Commitments and Contingencies (Note 11)
Cumulative Preferred Stock of Subsidiary
without mandatory redemption requirements ($100 stated value; 10,000,000 shares authorized; issued and outstanding 115,293 shares)
11,529 11,529 
Equity:
TXNM common stockholders’ equity:
Common stock (no par value; 200,000,000 shares authorized; issued and outstanding 111,045,010 and 108,921,356 shares)
2,685,140 2,563,930 
Accumulated other comprehensive income (loss), net of income taxes(25,809)(26,816)
Retained earnings895,131 866,904 
Total TXNM common stockholders’ equity
3,554,462 3,404,018 
Non-controlling interest in Valencia47,946 43,988 
Total equity3,602,408 3,448,006 
$12,507,922 $12,059,285 

The accompanying notes, as they relate to TXNM, are an integral part of these condensed consolidated financial statements.

12
TXNM ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(Unaudited)

Attributable to TXNMNon-
controlling
Interest
in Valencia
Common
Stock		AOCIRetained
Earnings		Total TXNM Common Stockholders’ EquityTotal
Equity
(In thousands)
Balance at March 31, 2026$2,667,342 $(26,254)$823,867 $3,464,955 $48,597 $3,513,552 
Net earnings before subsidiary preferred stock dividends
— — 71,396 71,396 3,994 75,390 
Total other comprehensive income
— 445 — 445 — 445 
Subsidiary preferred stock dividends
— — (132)(132)— (132)
Awards of common stock
(980)— — (980)— (980)
Issuance of common stock19,610 — — 19,610 — 19,610 
Stock based compensation expense
(832)— — (832)— (832)
Valencia’s transactions with its owner
— — — — (4,645)(4,645)
Balance at June 30, 2026$2,685,140 $(25,809)$895,131 $3,554,462 $47,946 $3,602,408 
Balance at December 31, 2025$2,563,930 $(26,816)$866,904 $3,404,018 $43,988 $3,448,006 
Net earnings before subsidiary preferred stock dividends
— — 75,265 75,265 8,130 83,395 
Total other comprehensive income
— 1,007 — 1,007 — 1,007 
Subsidiary preferred stock dividends
— — (264)(264)— (264)
Dividends declared on common stock
— — (46,774)(46,774)— (46,774)
Awards of common stock
(6,365)— — (6,365)— (6,365)
Issuance of common stock123,297 — — 123,297 — 123,297 
Stock based compensation expense
4,278 — — 4,278 — 4,278 
Valencia’s transactions with its owner
— — — — (4,172)(4,172)
Balance at June 30, 2026$2,685,140 $(25,809)$895,131 $3,554,462 $47,946 $3,602,408 

Balance at March 31, 2025$1,721,109 $(74,586)$857,812 $2,504,335 $46,372 $2,550,707 
Net earnings before subsidiary preferred stock dividends
— — 21,708 21,708 4,305 26,013 
Total other comprehensive income (loss)
— (807)— (807)— (807)
Subsidiary preferred stock dividends
— — (132)(132)— (132)
Awards of common stock
(1,942)— — (1,942)— (1,942)
Issuance of common stock645,309 645,309 645,309 
Stock based compensation expense
2,294 — — 2,294 — 2,294 
Valencia’s transactions with its owner
— — — — (4,648)(4,648)
Balance at June 30, 2025$2,366,770 $(75,393)$879,388 $3,170,765 $46,029 $3,216,794 
Balance at December 31, 2024
$1,724,444 $(75,708)$887,649 $2,536,385 $46,900 $2,583,285 
Net earnings before subsidiary preferred stock dividends
— — 30,763 30,763 8,047 38,810 
Total other comprehensive income
— 315 — 315 — 315 
Subsidiary preferred stock dividends
— — (264)(264)— (264)
Dividends declared on common stock
— — (38,760)(38,760)— (38,760)
Awards of common stock
(8,249)— — (8,249)— (8,249)
Issuance of common stock645,309 — — 645,309 — 645,309 
Stock based compensation expense
5,266 — — 5,266 — 5,266 
Valencia’s transactions with its owner
— — — — (8,918)(8,918)
Balance at June 30, 2025$2,366,770 $(75,393)$879,388 $3,170,765 $46,029 $3,216,794 

The accompanying notes, as they relate to TXNM, are an integral part of these condensed consolidated financial statements.
13

PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
A WHOLLY-OWNED SUBSIDIARY OF TXNM ENERGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)

Three Months Ended June 30,Six Months Ended June 30,
2026202520262025
(In thousands)
Electric Operating Revenues$361,116 $338,372 $691,127 $671,752 
Operating Expenses:
Cost of energy120,181 124,336 243,246 255,290 
Administrative and general59,634 59,526 121,059 117,136 
Energy production costs25,340 26,081 49,743 50,627 
Depreciation and amortization65,310 60,778 129,420 120,581 
Transmission and distribution costs15,374 15,750 33,316 31,576 
Taxes other than income taxes16,294 15,262 33,219 28,565 
Total operating expenses302,133 301,733 610,003 603,775 
Operating income58,983 36,639 81,124 67,977 
Other Income and Deductions:
Interest income3,911 3,729 7,411 7,946 
Gains on investment securities24,414 23,556 15,470 22,315 
Other income4,028 3,561 7,260 5,363 
Other (deductions)(2,876)(4,301)(3,964)(5,819)
Net other income and deductions29,477 26,545 26,177 29,805 
Interest Charges32,335 31,975 65,364 61,791 
Earnings before Income Taxes56,125 31,209 41,937 35,991 
Income Taxes6,233 2,410 3,659 2,373 
Net Earnings49,892 28,799 38,278 33,618 
(Earnings) Attributable to Valencia Non-controlling Interest(3,994)(4,305)(8,130)(8,047)
Net Earnings Attributable to PNM45,898 24,494 30,148 25,571 
Preferred Stock Dividend Requirements(132)(132)(264)(264)
Net Earnings Available for PNM Common Stock$45,766 $24,362 $29,884 $25,307 

The accompanying notes, as they relate to PNM, are an integral part of these condensed consolidated financial statements.

14
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
A WHOLLY-OWNED SUBSIDIARY OF TXNM ENERGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)

Three Months Ended June 30,Six Months Ended June 30,
2026202520262025
(In thousands)
Net Earnings (Losses)
$49,892 $28,799 $38,278 $33,618 
Other Comprehensive Income:
Unrealized Gains on Available-for-Sale Debt Securities:
Net increase in unrealized holding gains arising during the period, net of income tax (expense) of $(17), $(60), $(17), and $(128)
49 177 50 376 
Reclassification adjustment for (gains) included in net earnings, net of income tax expense of $27, $51, $65, and $86
(79)(150)(191)(252)
Pension Liability Adjustment:
Reclassification adjustment for amortization of experience losses recognized as net periodic benefit cost, net of income tax (benefit) of $(150), $(349), $(367), and $(698)
440 1,026 1,078 2,051 
Total Other Comprehensive Income
410 1,053 937 2,175 
Comprehensive Income (Loss)
50,302 29,852 39,215 35,793 
Comprehensive (Income) Attributable to Valencia Non-controlling Interest(3,994)(4,305)(8,130)(8,047)
Comprehensive Income (Loss) Attributable to PNM
$46,308 $25,547 $31,085 $27,746 

The accompanying notes, as they relate to PNM, are an integral part of these condensed consolidated financial statements.

15


PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
A WHOLLY-OWNED SUBSIDIARY OF TXNM ENERGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

Six Months Ended June 30,
20262025
(In thousands)
Cash Flows From Operating Activities:
Net earnings$38,278 $33,618 
Adjustments to reconcile net earnings to net cash flows from operating activities:
Depreciation and amortization148,577 134,216 
Deferred income tax expense3,659 2,439 
Losses on investment securities
(15,470)(22,315)
Allowance for equity funds used during construction(5,562)(3,095)
Other, net2,554 1,900 
Changes in certain assets and liabilities:
Accounts receivable and unbilled revenues(6,518)(21,040)
Materials, supplies, and fuel stock1,207 (375)
Other current assets(11,606)(10,205)
Other assets(36,654)1,463 
Accounts payable(3,045)(14,257)
Accrued interest and taxes7,610 4,457 
Other current liabilities41,341 9,661 
Other liabilities6,739 (15,943)
Net cash flows from operating activities171,110 100,524 
Cash Flows From Investing Activities:
Utility plant additions(318,267)(272,669)
Proceeds from sales of investment securities329,672 198,728 
Purchases of investment securities(333,215)(201,174)
Other, net73 (62)
Net cash flows used in investing activities(321,737)(275,177)

The accompanying notes, as they relate to PNM, are an integral part of these condensed consolidated financial statements.

16


PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
A WHOLLY-OWNED SUBSIDIARY OF TXNM ENERGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

Six Months Ended June 30,
20262025
(In thousands)
Cash Flows From Financing Activities:
Short-term borrowings$703,800 $627,700 
Repayments of short-term borrowings(667,600)(756,900)
Long-term borrowings— 495,000 
Repayment of long-term debt(3,601)(107,406)
Equity contribution from parent105,000 — 
Dividends paid(264)(264)
Valencia’s transactions with its owner(4,172)(8,918)
Transmission interconnection and security deposit arrangements25,854 2,415 
Refunds paid under transmission interconnection and security deposit arrangements(2,604)(74,278)
Debt issuance costs and other, net(1,296)(2,654)
Net cash flows from financing activities155,117 174,695 
Change in Cash, Cash Equivalents, and Restricted Cash
4,490 42 
Cash, Cash Equivalents, and Restricted Cash at Beginning of Period
13,716 20,285 
Cash, Cash Equivalents, and Restricted Cash at End of Period
$18,206 $20,327 
Restricted Cash included in Other Current Assets and Other Deferred Charges on Condensed Consolidated Balance Sheets:
At beginning of period$13,697 $17,587 
At end of period$12,395 $15,354 
Supplemental Cash Flow Disclosures:
Interest paid, net of amounts capitalized$62,074 $53,933 
Income taxes paid, net$— $— 
Supplemental schedule of noncash investing activities:
Decrease (increase) in accrued plant additions$(448)$11,569 

The accompanying notes, as they relate to PNM, are an integral part of these condensed consolidated financial statements.

17


PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
A WHOLLY-OWNED SUBSIDIARY OF TXNM ENERGY, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)

June 30,
2026		December 31,
2025
(In thousands)
ASSETS
Current Assets:
Cash and cash equivalents$5,811 $19 
Accounts receivable, net of allowance for credit losses of $1,573 and $1,394
103,251 115,910 
Unbilled revenues64,941 48,524 
Other receivables22,470 33,422 
Affiliate receivables8,747 17,360 
Materials, supplies, and fuel stock144,456 145,663 
Regulatory assets19,201 8,499 
Prepaid assets22,034 18,502 
Income taxes receivable13,132 13,132 
Other current assets10,881 12,109 
Total current assets414,924 413,140 
Other Property and Investments:
Investment securities513,644 505,655 
Other investments228 302 
Non-utility property, net16,192 17,572 
Total other property and investments530,064 523,529 
Utility Plant:
Plant in service and plant held for future use
7,486,643 7,260,670 
Less accumulated depreciation and amortization2,278,270 2,201,687 
5,208,373 5,058,983 
Construction work in progress408,151 371,119 
Nuclear fuel, net of accumulated amortization of $25,206 and $27,953
77,937 76,696 
Net utility plant5,694,461 5,506,798 
Deferred Charges and Other Assets:
Regulatory assets820,449 832,791 
Goodwill51,632 51,632 
Operating lease right-of-use assets, net of accumulated amortization47,136 107,986 
Other deferred charges319,256 252,256 
Total deferred charges and other assets1,238,473 1,244,665 
$7,877,922 $7,688,132 

The accompanying notes, as they relate to PNM, are an integral part of these condensed consolidated financial statements.

18


PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
A WHOLLY-OWNED SUBSIDIARY OF TXNM ENERGY, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)

June 30,
2026		December 31,
2025
(In thousands, except share information)
LIABILITIES AND STOCKHOLDER’S EQUITY
Current Liabilities:
Short-term debt$215,000 $178,800 
Current installments of long-term debt (includes $7,509 and $7,303 related to ETBC I)
227,817 302,538 
Accounts payable147,814 150,411 
Affiliate payables37,153 18,366 
Customer deposits7,025 6,893 
Accrued interest and taxes63,821 56,211 
Regulatory liabilities14,944 8,430 
Operating lease liabilities6,989 8,913 
Dividends declared132 132 
Transmission interconnection arrangement liabilities16,745 15,878 
Other current liabilities62,396 41,737 
Total current liabilities799,836 788,309 
Long-term Debt, net of Unamortized Premiums, Discounts, and Debt Issuance Costs (includes $320,779 and $324,531 related to ETBC I)
2,631,441 2,559,359 
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes834,008 813,528 
Regulatory liabilities488,204 488,406 
Asset retirement obligations257,656 254,353 
Accrued pension liability and postretirement benefit cost6,653 6,736 
Operating lease liabilities34,074 96,246 
Other deferred credits233,074 227,998 
Total deferred credits and liabilities1,853,669 1,887,267 
Total liabilities5,284,946 5,234,935 
Commitments and Contingencies (Note 11)
Cumulative Preferred Stock
without mandatory redemption requirements ($100 stated value; 10,000,000 shares authorized; issued and outstanding 115,293 shares)
11,529 11,529 
Equity:
PNM common stockholder’s equity:
Common stock (no par value; 40,000,000 shares authorized; issued and outstanding 39,117,799 shares)
1,831,218 1,726,218 
Accumulated other comprehensive income (loss), net of income taxes(24,766)(25,703)
Retained earnings727,049 697,165 
Total PNM common stockholder’s equity2,533,501 2,397,680 
Non-controlling interest in Valencia47,946 43,988 
Total equity2,581,447 2,441,668 
$7,877,922 $7,688,132 
The accompanying notes, as they relate to PNM, are an integral part of these condensed consolidated financial statements.
19
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
A WHOLLY-OWNED SUBSIDIARY OF TXNM ENERGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(Unaudited)

Attributable to PNM
Total PNM
Common
Stockholder’s
Equity		Non-
controlling
 Interest in Valencia
Common
Stock		AOCIRetained
Earnings		Total
Equity
(In thousands)
Balance at March 31, 2026$1,831,218 $(25,176)$681,283 $2,487,325 $48,597 $2,535,922 
Net earnings— — 45,898 45,898 3,994 49,892 
Total other comprehensive income
— 410 — 410 — 410 
Dividends declared on preferred stock— — (132)(132)— (132)
Valencia’s transactions with its owner— — — — (4,645)(4,645)
Balance at June 30, 2026$1,831,218 $(24,766)$727,049 $2,533,501 $47,946 $2,581,447 
Balance at December 31, 2025$1,726,218 $(25,703)$697,165 $2,397,680 $43,988 $2,441,668 
Net earnings— — 30,148 30,148 8,130 38,278 
Total other comprehensive income
— 937 — 937 — 937 
Dividends declared on preferred stock— — (264)(264)— (264)
Equity contribution from parent105,000 — — 105,000 — 105,000 
Valencia’s transactions with its owner— — — — (4,172)(4,172)
Balance at June 30, 2026$1,831,218 $(24,766)$727,049 $2,533,501 $47,946 $2,581,447 
Balance at March 31, 2025$1,602,918 $(74,586)$611,033 $2,139,365 $46,372 $2,185,737 
Net earnings— — 24,494 24,494 4,305 28,799 
Total other comprehensive income
— 1,053 — 1,053 — 1,053 
Dividends declared on preferred stock— — (132)(132)— (132)
Valencia’s transactions with its owner— — — — (4,648)(4,648)
Balance at June 30, 2025$1,602,918 $(73,533)$635,395 $2,164,780 $46,029 $2,210,809 
Balance at December 31, 2024$1,602,918 $(75,708)$610,088 $2,137,298 $46,900 $2,184,198 
Net earnings— — 25,571 25,571 8,047 33,618 
Total other comprehensive income
— 2,175 — 2,175 — 2,175 
Dividends declared on preferred stock— — (264)(264)— (264)
Valencia’s transactions with its owner— — — — (8,918)(8,918)
Balance at June 30, 2025$1,602,918 $(73,533)$635,395 $2,164,780 $46,029 $2,210,809 


The accompanying notes, as they relate to PNM, are an integral part of these condensed consolidated financial statements.
20

TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
A WHOLLY-OWNED SUBSIDIARY OF TXNM ENERGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)

Three Months Ended June 30,Six Months Ended June 30,
2026202520262025
(In thousands)
Electric Operating Revenues$187,438 $164,048 $362,409 $313,460 
Operating Expenses:
Cost of energy43,958 43,286 87,385 81,514 
Administrative and general13,570 14,994 28,868 27,035 
Depreciation and amortization39,572 34,926 78,136 70,139 
Transmission and distribution costs10,003 10,711 17,948 20,390 
Taxes other than income taxes12,751 11,444 25,850 22,948 
Total operating expenses119,854 115,361 238,187 222,026 
Operating income67,584 48,687 124,222 91,434 
Other Income and Deductions:
Interest income367 159 535 313 
Other income3,783 1,764 7,088 4,284 
Other (deductions)271 (229)(35)(497)
Net other income and deductions4,421 1,694 7,588 4,100 
Interest Charges22,030 23,942 43,431 41,264 
Earnings before Income Taxes49,975 26,439 88,379 54,270 
Income Taxes10,041 5,471 17,755 11,019 
Net Earnings$39,934 $20,968 $70,624 $43,251 

The accompanying notes, as they relate to TNMP, are an integral part of these condensed consolidated financial statements.


21

TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
A WHOLLY-OWNED SUBSIDIARY OF TXNM ENERGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

Six Months Ended June 30,
20262025
(In thousands)
Cash Flows From Operating Activities:
Net earnings$70,624 $43,251 
Adjustments to reconcile net earnings to net cash flows from operating activities:
Depreciation and amortization78,593 75,899 
Deferred income tax expense
18,235 10,464 
Allowance for equity funds used during construction and other, net(5,561)(2,319)
Changes in certain assets and liabilities:
Accounts receivable and unbilled revenues(11,992)(9,880)
Materials and supplies(13,685)(3,938)
Other current assets(51,467)(11,469)
Other assets(11,604)(4,716)
Accounts payable20 8,036 
Accrued interest and taxes(14,161)(23,947)
Other current liabilities4,072 13,888 
Other liabilities15,458 6,994 
Net cash flows from operating activities78,532 102,263 
Cash Flows From Investing Activities:
Utility plant additions(216,504)(317,739)
Net cash flows used in investing activities(216,504)(317,739)
Cash Flows From Financing Activities:
Short-term borrowings524,300 264,600 
Repayments of short-term borrowings(415,800)(416,200)
Long-term borrowings— 1,224,300 
Repayment of long-term debt— (1,084,300)
Equity contribution from parent— 250,000 
Transmission interconnection and security deposit arrangements19,100 18,800 
Refunds paid under transmission interconnection and security deposit arrangements(3,760)(20,750)
Debt issuance costs and other, net(1,071)(5,207)
Net cash flows from financing activities122,769 231,243 
Change in Cash and Cash Equivalents(15,203)15,767 
Cash and Cash Equivalents at Beginning of Period15,251 233 
Cash and Cash Equivalents at End of Period$48 $16,000 
Supplemental Cash Flow Disclosures:
Interest paid, net of amounts capitalized$41,193 $46,365 
Income taxes paid, net$2,048 $2,350 
Supplemental schedule of noncash investing activities:
Decrease in accrued plant additions$24,016 $44,636 

The accompanying notes, as they relate to TNMP, are an integral part of these condensed consolidated financial statements.
22


TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
A WHOLLY-OWNED SUBSIDIARY OF TXNM ENERGY, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)

June 30,
2026		December 31,
2025
(In thousands)
ASSETS
Current Assets:
Cash and cash equivalents$48 $15,251 
Accounts receivable42,159 35,894 
Unbilled revenues25,417 19,690 
Other receivables46,476 22,633 
Affiliate receivables— 565 
Materials and supplies49,338 35,653 
Regulatory assets72,014 33,286 
Prepaid and other current assets6,242 5,603 
Total current assets241,694 168,575 
Other Property and Investments:
Non-utility property, net26,006 21,153 
Total other property and investments26,006 21,153 
Utility Plant:
Plant in service and plant held for future use4,154,633 4,065,890 
Less accumulated depreciation and amortization719,274 679,035 
3,435,359 3,386,855 
Construction work in progress347,423 254,810 
Net utility plant3,782,782 3,641,665 
Deferred Charges and Other Assets:
Regulatory assets112,791 106,458 
Goodwill226,665 226,665 
Operating lease right-of-use assets, net of accumulated amortization331 39 
Other deferred charges33,415 23,163 
Total deferred charges and other assets373,202 356,325 
$4,423,684 $4,187,718 

The accompanying notes, as they relate to TNMP, are an integral part of these condensed consolidated financial statements.
23


TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
A WHOLLY-OWNED SUBSIDIARY OF TXNM ENERGY, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)

June 30,
2026		December 31,
2025
(In thousands, except share information)
LIABILITIES AND STOCKHOLDER’S EQUITY
Current Liabilities:
Short-term debt$108,500 $— 
Accounts payable33,448 57,444 
Affiliate payables12,255 8,100 
Accrued interest and taxes57,969 72,129 
Regulatory liabilities— 2,592 
 Operating lease liabilities76 15 
Other current liabilities14,526 14,618 
Total current liabilities226,774 154,898 
Long-term Debt, net of Unamortized Premiums, Discounts, and Debt Issuance Costs1,672,334 1,672,267 
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes248,998 229,375 
Regulatory liabilities292,880 268,913 
Asset retirement obligations775 744 
Operating lease liabilities257 24 
Other deferred credits171,563 122,018 
Total deferred credits and other liabilities714,473 621,074 
Total liabilities2,613,581 2,448,239 
Commitments and Contingencies (Note 11)
Common Stockholder’s Equity:
Common stock ($10 par value; 12,000,000 shares authorized; issued and outstanding 6,358 shares)
64 64 
Paid-in-capital1,120,066 1,120,066 
Retained earnings689,973 619,349 
Total common stockholder’s equity1,810,103 1,739,479 
$4,423,684 $4,187,718 

The accompanying notes, as they relate to TNMP, are an integral part of these condensed consolidated financial statements.

24
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
A WHOLLY-OWNED SUBSIDIARY OF TXNM ENERGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN COMMON STOCKHOLDER’S EQUITY
(Unaudited)

Common StockPaid-in CapitalRetained EarningsTotal Common Stockholder’s Equity
(In thousands)
Balance at March 31, 2026$64 $1,120,066 $650,039 $1,770,169 
Net earnings— — 39,934 39,934 
Balance at June 30, 2026$64 $1,120,066 $689,973 $1,810,103 
Balance at December 31, 2025$64 $1,120,066 $619,349 $1,739,479 
Net earnings— — 70,624 70,624 
Balance at June 30, 2026$64 $1,120,066 $689,973 $1,810,103 

Balance at March 31, 2025$64 $870,066 $517,342 $1,387,472 
Net earnings— — 20,968 20,968 
Equity contribution from parent— 250,000 — 250,000 
Balance at June 30, 2025$64 $1,120,066 $538,310 $1,658,440 
Balance at December 31, 2024$64 $870,066 $495,059 $1,365,189 
Net earnings— — 43,251 43,251 
Equity contribution from parent— 250,000 — 250,000 
Balance at June 30, 2025$64 $1,120,066 $538,310 $1,658,440 


The accompanying notes, as they relate to TNMP, are an integral part of these condensed consolidated financial statements.
25

TXNM ENERGY, INC. AND SUBSIDIARIES
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

(1)    Significant Accounting Policies and Responsibility for Financial Statements

Financial Statement Preparation

In the opinion of management, the accompanying unaudited interim Condensed Consolidated Financial Statements reflect all normal and recurring accruals and adjustments that are necessary to present fairly the consolidated financial position at June 30, 2026, and December 31, 2025, and the consolidated results of operations, comprehensive income, and cash flows for the six months ended June 30, 2026 and 2025. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could ultimately differ from those estimated. Weather causes the Company’s results of operations to be seasonal in nature and the results of operations presented in the accompanying Condensed Consolidated Financial Statements are not necessarily representative of operations for an entire year.

The Notes to Condensed Consolidated Financial Statements include disclosures for TXNM, PNM, and TNMP. This report uses the term “Company” when discussing matters of common applicability to TXNM, PNM, and TNMP. Discussions regarding only TXNM, PNM, or TNMP are so indicated.

On May 18, 2025, TXNM, Parent, and Merger Sub, entered into the Merger Agreement, pursuant to which Merger Sub will merge with and into TXNM, with TXNM surviving the Merger as a direct, wholly-owned subsidiary of Parent. Parent and Merger Sub are affiliates of Blackstone Infrastructure. See Note 17.

These Condensed Consolidated Financial Statements are unaudited. Certain information and note disclosures normally included in the annual audited Consolidated Financial Statements have been condensed or omitted, as permitted under the applicable rules and regulations. Readers of these financial statements should refer to TXNM’s, PNM’s, and TNMP’s audited Consolidated Financial Statements and Notes thereto that are included in their respective 2025 Annual Reports on Form 10-K.

GAAP defines subsequent events as events or transactions that occur after the balance sheet date but before financial statements are issued or are available to be issued. Based on their nature, magnitude, and timing, certain subsequent events may be required to be reflected at the balance sheet date and/or required to be disclosed in the financial statements. The Company has evaluated subsequent events accordingly.

Principles of Consolidation

The Condensed Consolidated Financial Statements of each of TXNM, PNM, and TNMP include their accounts and those of subsidiaries in which that entity owns a majority voting interest. PNM also consolidates Valencia and ETBC I. See Note 6. PNM owns undivided interests in several jointly-owned power plants and records its pro-rata share of the assets, liabilities, and expenses for those plants. The agreements for the jointly-owned plants provide that if an owner were to default on its payment obligations, the non-defaulting owners would be responsible for their proportionate share of the obligations of the defaulting owner. In exchange, the non-defaulting owners would be entitled to their proportionate share of the generating capacity of the defaulting owner. There have been no such payment defaults under any of the agreements for the jointly-owned plants.

PNMR Services Company expenses, which represent costs that are primarily driven by corporate level activities, are charged to the business segments. These services are billed at cost and are reflected as general and administrative expenses in the business segments. Other significant intercompany transactions between TXNM, PNM, and TNMP include interest and income tax sharing payments, as well as equity transactions. See Note 15. All intercompany transactions and balances have been eliminated.

Dividends on Common Stock

Dividends on TXNM’s common stock are declared by the Board. The timing of the declaration of dividends is dependent on the timing of meetings and other actions of the Board. The Board declared dividends on common stock attributable to the second quarter of 2026 of $0.4225 per share in July 2026 and declared dividends on common stock attributable to the second quarter of 2025 of $0.4075 per share in July 2025, which are reflected as Dividends Declared per Common Share on the TXNM Condensed Consolidated Statement of Earnings.

TXNM did not make any cash equity contributions to TNMP in the three and six months ended June 30, 2026. TXNM made $250.0 million in cash equity contributions to TNMP in the three and six months ended June 30, 2025. TXNM made $0
26

TXNM ENERGY, INC. AND SUBSIDIARIES
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
and $105.0 million in cash equity contributions to PNM in the three and six months ended June 30, 2026. TXNM did not make any cash equity contributions to PNM in the three and six months ended June 30, 2025. Neither PNM nor TNMP declared or paid any cash dividends on their common stock to TXNM in the three and six months ended June 30, 2026, and 2025.

New Accounting Pronouncements

Information concerning recently issued accounting pronouncements that have not yet been adopted by the Company is presented below. The Company does not expect difficulty in adopting these standards by their required effective dates.

Accounting Standards Update 2024-03 - Income Statement (Subtopic 220-40): Reporting Comprehensive Income - Expense Disaggregation Disclosures

In November 2024, the FASB issued ASU 2024-03 that will require disclosure, in the notes to the financial statements, of specified information about certain costs and expenses at each interim and annual period. Disclosures should include amounts for purchases of inventory, employee compensation, depreciation, and intangible asset amortization; certain amounts that are already required to be disclosed under GAAP in the same disclosure as other disaggregation requirements; qualitative descriptions of the amounts remaining in relevant expense categories that are not disaggregated; and the total amount of selling expenses including the entity’s definition of selling expenses. In January 2025, ASU 2025-01 was issued to clarify that the amendments of ASU 2024-03 are effective for public business entities for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. The Company expects to adopt the disclosure requirements of ASU 2024-03 with its Annual Report on Form 10-K for the year ended December 31, 2027.

Accounting Standards Update 2025-06 – Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software

In September 2025, the FASB issued ASU 2025-06 that updates the internal-use software guidance in subtopic 350-40 including the removal of all references to prescriptive and sequential developmental stages referred to as “project stages” throughout the subtopic. The new guidance requires an entity to start capitalizing software costs when management has authorized and committed to funding the project and it is probable that the project will be completed and used to perform the function it was intended for (referred to as the “probable-to-complete recognition threshold”). During the evaluation of the probable-to-complete recognition threshold, the entity is required to consider whether there is significant uncertainty associated with the development activities of the software. The amendments in this update are effective for all entities for annual reporting periods beginning after December 15, 2027, and interim reporting periods within those annual reporting periods. Early adoption is permitted as of the beginning of an annual reporting period. The amendments in this update permit an entity to apply the new guidance using a prospective transition approach, a modified transition approach (based on the status of a project and whether software costs were capitalized before the date of adoption), or a full retrospective transition approach. The Company has not yet determined which approach to adopt nor the impact that the new guidance will have on the accounting for its internal-use software projects.

Accounting Standards Update 2025-11 – Interim reporting (Subtopic 270): Narrow-Scope Improvements

In December 2025, the FASB issued ASU 2025-11 which clarifies and consolidates interim disclosure requirements. The ASU requires disclosure of material events occurring after the end of the last annual period and provides a comprehensive list of interim disclosures across multiple ASC Topics. The amendment is principle based and is modeled after previous SEC disclosure requirements, which is intended to help entities determine whether disclosures, not specified in Topic 270, should be provided in interim reporting periods. The amendment is effective for public business entities for interim reporting periods beginning after December 15, 2027. Early adoption is permitted. The Company is still evaluating the new standard.

Accounting Standards Update 2026-02 - Environmental Credits and Environmental Credit Obligations (Topic 818)

In May 2026, the FASB issued ASU 2026-02 which improves the financial accounting for and disclosure of environmental credits and environmental credit obligations. The ASU provides recognition, measurement, presentation, and disclosure requirements for all entities that generate, purchase, or receive environmental credits or have a regulatory compliance obligation that may be settled with environmental credits. The amendments in this update are effective for public business entities for annual reporting periods beginning after December 15, 2027, and interim reporting periods within those annual reporting periods. Early adoption is permitted as of the beginning of an annual reporting period. The Company is still evaluating the new standard.

27

TXNM ENERGY, INC. AND SUBSIDIARIES
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(2)     Segment Information

TXNM has three reportable segments, namely PNM, TNMP, and Corporate and Other. The accounting policies of the segments are the same as those described in the summary of significant accounting policies. The measure of profitability used by the CODM is Segment earnings (loss) attributable to TXNM, as presented below. The CODM uses this measure of profitability to allocate resources for each segment predominantly in the annual budget and forecasting process. The CODM considers budget to actual variances on a regular basis when making decisions about allocating capital and operational expense funding to the segments. TXNM’s CODM is its current President and Chief Executive Officer (“CEO”) who is also the CEO of the PNM and TNMP segments.

PNM

PNM’s electric utility operations are subject to traditional rate regulation by the NMPRC. PNM provides integrated electricity services that include the generation, transmission, and distribution of electricity for retail electric customers in New Mexico; the generation and sale of electricity into the wholesale market, which includes the asset optimization of PNM’s jurisdictional capacity, as well as providing transmission services to third parties. FERC has jurisdiction over wholesale power and transmission rates. PNM’s operations also include the results of ETBC I since its formation in 2023.

TNMP

TNMP is an electric utility providing services in Texas under the TECA. TNMP’s operations are subject to traditional rate regulation by the PUCT. TNMP provides transmission and distribution services at regulated rates to various REPs that, in turn, provide retail electric service to consumers within TNMP’s service area. TNMP also provides transmission services at regulated rates to other utilities that interconnect with TNMP’s facilities.

Corporate and Other

The Corporate and Other segment includes TXNM holding company activities, primarily related to corporate level debt and PNMR Services Company. Eliminations of intercompany transactions are reflected in the Corporate and Other segment. The following tables present summarized financial information for TXNM by segment. PNM and TNMP each operate in only one segment. Therefore, tabular segment information is not presented for PNM and TNMP.

TXNM SEGMENT INFORMATION
PNMTNMPCorporate
and Other
TXNM
(In thousands)
Three Months Ended June 30, 2026
Electric operating revenues$361,116 $187,438 $— $548,554 
Cost of energy
Fuel burn18,682 — — 18,682 
Purchases for resale94,225 — — 94,225 
Transmission by others7,274 43,958 — 51,232 
Significant segment expenses
Administrative and general - direct19,202 (1,034)37,426 55,594 
Administrative and general - corporate allocation32,050 13,712 (45,762)— 
Customer related expenses8,382 892 — 9,274 
Energy production costs25,340 — — 25,340 
Depreciation and amortization65,310 39,572 9,749 114,631 
Transmission and distribution costs15,374 10,003 — 25,377 
Taxes other than income taxes16,294 12,751 1,852 30,897 
Total operating expenses302,133 119,854 3,265 425,252 
Net other income and (deductions)29,477 4,421 (191)33,707 
Interest charges(32,335)(22,030)(14,978)(69,343)
Income taxes (benefit)6,233 10,041 (3,998)12,276 
Valencia non-controlling interest(3,994)— — (3,994)
Subsidiary preferred stock dividends(132)— — (132)
Segment earnings (loss) attributable to TXNM$45,766 $39,934 $(14,436)$71,264 
28

TXNM ENERGY, INC. AND SUBSIDIARIES
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
PNMTNMPCorporate
and Other
TXNM
(In thousands)
Six Months Ended June 30, 2026
Electric operating revenues$691,127 $362,409 $— $1,053,536 
Cost of energy
Fuel burn60,304 — — 60,304 
Purchases for resale168,042 — — 168,042 
Transmission by others14,900 87,385 — 102,285 
Significant segment expenses
Administrative and general - direct38,973 (1,029)75,818 113,762 
Administrative and general - corporate allocation65,728 28,236 (93,964)— 
Customer related expenses16,358 1,661 — 18,019 
Energy production costs49,743 — — 49,743 
Depreciation and amortization129,420 78,136 19,398 226,954 
Transmission and distribution costs33,316 17,948 — 51,264 
Taxes other than income taxes33,219 25,850 3,781 62,850 
Total operating expenses610,003 238,187 5,033 853,223 
Net other income and (deductions)26,177 7,588 (478)33,287 
Interest charges(65,364)(43,431)(29,143)(137,938)
Income taxes (benefit)3,659 17,755 (9,147)12,267 
Valencia non-controlling interest(8,130)— — (8,130)
Subsidiary preferred stock dividends(264)— — (264)
Segment earnings (loss) attributable to TXNM$29,884 $70,624 $(25,507)$75,001 
At June 30, 2026:
Total Assets$7,877,922 $4,423,684 $206,316 $12,507,922 
Goodwill$51,632 $226,665 $— $278,297 
PNMTNMPCorporate
and Other
TXNM
(In thousands)
Three Months Ended June 30, 2025
Electric operating revenues$338,372 $164,048 $— $502,420 
Cost of energy
Fuel burn29,927 — — 29,927 
Purchases for resale88,870 — — 88,870 
Transmission by others5,539 43,286 — 48,825 
Significant segment expenses
Administrative and general - direct16,603 134 50,910 67,647 
Administrative and general - corporate allocation35,317 14,110 (49,427)— 
Customer related expenses7,606 750 (12)8,344 
Energy production costs26,081 — — 26,081 
Depreciation and amortization60,778 34,926 9,531 105,235 
Transmission and distribution costs15,750 10,711 — 26,461 
Taxes other than income taxes15,262 11,444 1,623 28,329 
Total operating expenses301,733 115,361 12,625 429,719 
​
Net other income and (deductions)26,545 1,694 (1,588)26,651 
Interest charges(31,975)(23,942)(16,096)(72,013)
Income taxes (benefit)2,410 5,471 (6,555)1,326 
Valencia non-controlling interest(4,305)— — (4,305)
Subsidiary preferred stock dividends(132)— — (132)
Segment earnings (loss) attributable to TXNM$24,362 $20,968 $(23,754)$21,576 
29

TXNM ENERGY, INC. AND SUBSIDIARIES
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
PNMTNMPCorporate
and Other
TXNM
(In thousands)
Six Months Ended June 30, 2025
Electric operating revenues$671,752 $313,460 $— $985,212 
Cost of energy
Fuel burn56,468 — — 56,468 
Purchases for resale186,105 — — 186,105 
Transmission by others12,717 81,514 — 94,231 
Significant segment expenses
Administrative and general - direct34,469 (1,918)87,480 120,031 
Administrative and general - corporate allocation67,405 27,486 (94,891)— 
Customer related expenses15,262 1,467 — 16,729 
Energy production costs50,627 — — 50,627 
Depreciation and amortization120,581 70,139 19,066 209,786 
Transmission and distribution costs31,576 20,390 — 51,966 
Taxes other than income taxes28,565 22,948 3,166 54,679 
Total operating expenses603,775 222,026 14,821 840,622 
​
Net other income and (deductions)29,805 4,100 (1,777)32,128 
Interest charges(61,791)(41,264)(32,509)(135,564)
Income taxes (benefit)2,373 11,019 (11,048)2,344 
Valencia non-controlling interest(8,047)— — (8,047)
Subsidiary preferred stock dividends(264)— — (264)
Segment earnings (loss) attributable to TXNM$25,307 $43,251 $(38,059)$30,499 
At June 30, 2025:
Total Assets$7,593,440 $3,923,342 $158,482 $11,675,264 
Goodwill$51,632 $226,665 $— $278,297 

Significant Segment Expenses

Reflected above are certain additional categories of operating expenses that are regularly provided to the CODM. Cost of energy consists primarily of fuel and purchase power costs for PNM and costs charged by third-party transmission providers for TNMP. Administrative and general - direct expenses are those that are incurred directly by the segment while Administrative and general - corporate allocation are those costs that are incurred by the Corporate and Other segment and allocated to the utilities based on the nature of the cost incurred. Administrative and general - corporate allocation is eliminated in the Corporate and Other segment. Customer related expenses include meter reading, customer service, and bad debt expenses.

30

TXNM ENERGY, INC. AND SUBSIDIARIES
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(3)   Accumulated Other Comprehensive Income (Loss)

Information regarding accumulated other comprehensive income (loss) for the six months ended June 30, 2026, and 2025 is as follows:
Accumulated Other Comprehensive Income (Loss)
PNMCorporate and Other
TXNM
Unrealized
Gains on
Available-for-Sale Debt
Securities		Pension
Liability
Adjustment		Fair Value
Adjustment
for Cash
Flow Hedges
TotalTotal
(In thousands)
Balance at December 31, 2025
$218 $(25,921)$(25,703)$(1,113)$(26,816)
Amounts reclassified from AOCI (pre-tax)
(256)1,445 1,189 94 1,283 
Income tax impact of amounts reclassified
65 (367)(302)(24)(326)
Other OCI changes (pre-tax)
67 — 67 — 67 
Income tax impact of other OCI changes
(17)— (17)— (17)
Net after-tax change
(141)1,078 937 70 1,007 
Balance at June 30, 2026$77 $(24,843)$(24,766)$(1,043)$(25,809)

Balance at December 31, 2024
$214 $(75,922)$(75,708)$— $(75,708)
 Amounts reclassified from AOCI (pre-tax)
(338)2,749 2,411 — 2,411 
Income tax impact of amounts reclassified
86 (698)(612)— (612)
 Other OCI changes (pre-tax)
504 — 504 (2,493)(1,989)
Income tax impact of other OCI changes
(128)— (128)633 505 
Net after-tax change
124 2,051 2,175 (1,860)315 
Balance at June 30, 2025$338 $(73,871)$(73,533)$(1,860)$(75,393)

The Condensed Consolidated Statements of Earnings include pre-tax amounts reclassified from AOCI related to Unrealized Gains on Available-for-Sale Debt Securities in (losses) on investment securities and Fair Value Adjustment for Cash Flow Hedges in interest charges. The income tax impacts of all amounts reclassified from AOCI are included in income taxes in the Condensed Consolidated Statements of Earnings.

(4)    Earnings Per Share

Basic earnings per share is computed by dividing net earnings attributable to TXNM by the weighted average number of common shares outstanding during the period. Diluted earnings per share was computed by dividing net earnings attributable to TXNM by the diluted weighted average number of common shares outstanding during the period. Diluted earnings per share reflect the potential dilution that could occur if securities or other agreements to issue common stock were settled. TXNM applies the treasury stock method for restricted stock and the if-converted method is applied in determining the dilutive effect of the potential conversion of eligible Convertible Notes.
31

TXNM ENERGY, INC. AND SUBSIDIARIES
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Information regarding the computation of earnings per share is as follows:

Three Months Ended
Six Months Ended
June 30,June 30,
2026202520262025
(In thousands, except per share amounts)
Net Earnings Attributable to TXNM
$71,264 $21,576 $75,001 $30,499 
Average Number of Common Shares:
Outstanding during period
110,925 95,793 110,235 94,235 
    Vested awards of restricted stock
257 339 286 348 
Average Shares – Basic
111,182 96,132 110,521 94,583 
Dilutive Effect of Common Stock Equivalents:
Restricted stock50 65 37 54 
Convertible Notes
— — 1,494 — 
Average Shares – Diluted
111,232 96,197 112,052 94,637 
Net Earnings Per Share of Common Stock:
Basic$0.64 $0.22 $0.68 $0.32 
Diluted$0.64 $0.22 $0.67 $0.32 

(5)   Electric Operating Revenues

TXNM is an investor-owned holding company with two regulated utilities providing electricity and electric services in New Mexico and Texas. TXNM’s electric utilities are PNM and TNMP. Additional information concerning electric operating revenue is contained in Note 4 of the Notes to Consolidated Financial Statements in the 2025 Annual Reports on Form 10-K.

Accounts Receivable and Allowance for Credit Losses

Accounts receivable consists primarily of trade receivables from customers. In the normal course of business, credit is extended to customers on a short-term basis. The Company estimates the allowance for credit losses on trade receivables based on historical experience and estimated default rates. Accounts receivable balances are reviewed monthly, adjustments to the allowance for credit losses are made as necessary and amounts that are deemed uncollectible are written off. In addition to the allowance for credit losses on trade receivables, the Company has evaluated other receivables for potential credit related losses. These balances include potential exposures for other non-retail utility services. In both the three and six months ended June 30, 2026 and 2025, there were no estimated credit losses related to these transactions.

Contract Balances

Performance obligations related to contracts with customers are typically satisfied when the energy is delivered, and the customer or end-user utilizes the energy. Accounts receivable from customers represents amounts billed, including amounts under Alternative Revenue Programs (“ARP”). For PNM, accounts receivable reflected on the Condensed Consolidated Balance Sheets, net of allowance for credit losses, includes $103.0 million at June 30, 2026, and $115.9 million at December 31, 2025, resulting from contracts with customers. All of TNMP’s accounts receivable result from contracts with customers.

Contract assets are an entity’s right to consideration in exchange for goods or services that the entity has transferred to a customer when that right is conditioned on something other than the passage of time (for example, the entity’s future performance). Upon the completion of the Western Spirit Line, PNM entered into a TSA with Pattern Wind under an incremental tariff rate approved by FERC. The terms of the agreement provide for a financing component that benefits the customer. As such, the revenue that PNM recognizes will be in excess of the consideration received at the beginning of the service term resulting in a contract asset. The balance of the contract asset is $46.0 million at June 30, 2026, and $41.3 million at December 31, 2025. This contract asset is presented in Other deferred charges on the Condensed Consolidated Balance Sheets.


32

TXNM ENERGY, INC. AND SUBSIDIARIES
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Disaggregation of Revenues

A disaggregation of revenues from contracts with customers by the type of customer is presented in the table below.

PNMTNMP
TXNM
Three Months Ended June 30, 2026(In thousands)
Electric Operating Revenues:
Contracts with customers:
Retail electric revenue
Residential$130,305 $62,908 $193,213 
Commercial110,831 46,368 157,199 
Industrial43,201 14,834 58,035 
Public authority5,291 2,294 7,585 
Economy energy service3,279 — 3,279 
Transmission40,742 44,216 84,958 
Wholesale energy sales
11,171 — 11,171 
Miscellaneous2,007 1,064 3,071 
Total revenues from contracts with customers
346,827 171,684 518,511 
Alternative revenue programs8,063 15,754 23,817 
Other electric operating revenues 6,226 — 6,226 
Total Electric Operating Revenues
$361,116 $187,438 $548,554 
Six Months Ended June 30, 2026
Electric Operating Revenues:
Contracts with customers:
Retail electric revenue
Residential$250,457 $115,995 $366,452 
Commercial206,205 92,090 298,295 
Industrial82,071 31,136 113,207 
Public authority9,663 4,481 14,144 
Economy energy service6,521 — 6,521 
Transmission80,114 89,881 169,995 
Wholesale energy sales
31,384 — 31,384 
Miscellaneous3,996 2,303 6,299 
Total revenues from contracts with customers
670,411 335,886 1,006,297 
Alternative revenue programs12,183 26,523 38,706 
Other electric operating revenues8,533 — 8,533 
Total Electric Operating Revenues
$691,127 $362,409 $1,053,536 

33

TXNM ENERGY, INC. AND SUBSIDIARIES
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

PNMTNMPTXNM
Three Months Ended June 30, 2025
Electric Operating Revenues:
Contracts with customers:
Retail electric revenue
Residential$120,009 $54,176 $174,185 
Commercial111,840 44,459 156,299 
Industrial34,659 14,305 48,964 
Public authority5,694 1,988 7,682 
Economy energy service6,762 — 6,762 
Transmission36,352 41,279 77,631 
Wholesale energy sales
19,895 — 19,895 
Miscellaneous1,448 952 2,400 
Total revenues from contracts with customers
336,659 157,159 493,818 
Alternative revenue programs245 6,889 7,134 
Other electric operating revenues1,468 — 1,468 
Total Electric Operating Revenues
$338,372 $164,048 $502,420 
Six Months Ended June 30, 2025
Electric Operating Revenues:
Contracts with customers:
Retail electric revenue
Residential$244,563 $102,957 $347,520 
Commercial213,999 91,421 305,420 
Industrial68,291 25,851 94,142 
Public authority10,712 3,982 14,694 
Economy energy service17,998 — 17,998 
Transmission71,369 81,498 152,867 
Wholesale energy sales
36,824 — 36,824 
Miscellaneous2,860 1,906 4,766 
Total revenues from contracts with customers
666,616 307,615 974,231 
Alternative revenue programs2,391 5,845 8,236 
Other electric operating revenues2,745 — 2,745 
Total Electric Operating Revenues
$671,752 $313,460 $985,212 

(6)     Variable Interest Entities

How an enterprise evaluates and accounts for its involvement with variable interest entities focuses primarily on whether the enterprise has the power to direct the activities that most significantly impact the economic performance of a VIE. This evaluation requires continual reassessment of the primary beneficiary of a VIE. Additional information concerning PNM’s VIEs is contained in Note 10 of the Notes to Consolidated Financial Statements in the 2025 Annual Reports on Form 10-K.

Valencia

PNM has a PPA to purchase all of the electric capacity and energy from Valencia, a 155 MW natural gas-fired power plant near Belen, New Mexico, through May 2028. In May 2025, the NMPRC approved a new PPA for 167 MW, through 2039, in connection with the 2028 Resource Application. A third party built, owns, and operates the facility while PNM is the sole purchaser of the electricity generated. PNM is obligated to pay fixed operation and maintenance and capacity charges in addition to variable operation and maintenance charges. For the three and six months ended June 30, 2026, PNM paid $5.2 million and $10.4 million for fixed charges and $0.4 million and $1.4 million for variable charges. For the three and six months ended June 30, 2025, PNM paid $5.0 million and $9.9 million for fixed charges and $0.9 million and $1.4 million for variable charges. PNM does not have any other financial obligations related to Valencia. The assets of Valencia can only be used to
34

TXNM ENERGY, INC. AND SUBSIDIARIES
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
satisfy its obligations and creditors of Valencia do not have any recourse against PNM’s assets. During the term of the original PPA, PNM has the option, under certain conditions, to purchase and own up to 50% of the plant or the VIE. The original PPA specifies that the purchase price would be the greater of 50% of book value reduced by related indebtedness or 50% of fair market value.

PNM sources fuel for the plant, controls when the facility operates through its dispatch, and receives the entire output of the plant, which factors directly and significantly impact the economic performance of Valencia. Therefore, PNM has concluded that the third-party entity that owns Valencia is a VIE and that PNM is the primary beneficiary of the entity since PNM has the power to direct the activities that most significantly impact the economic performance of Valencia and will absorb the majority of the variability in the cash flows of the plant. As the primary beneficiary, PNM consolidates Valencia in its financial statements. Accordingly, the assets, liabilities, operating expenses, and cash flows of Valencia are included in the Condensed Consolidated Financial Statements of PNM although PNM has no legal ownership interest or voting control of the VIE. The assets and liabilities of Valencia are set forth below and are not shown separately on the Condensed Consolidated Balance Sheets. The owner’s equity and net income of Valencia are considered attributable to non-controlling interest.

Summarized financial information for Valencia is as follows:

Results of Operations
Three Months Ended June 30,Six Months Ended June 30,
2026202520262025
(In thousands)
Operating revenues
$5,648 $5,926 $11,781 $11,348 
Operating expenses
1,654 1,621 3,651 3,301 
Earnings attributable to non-controlling interest
$3,994 $4,305 $8,130 $8,047 

Financial Position
June 30,December 31,
20262025
(In thousands)
Current assets$3,433 $3,205 
Net property, plant, and equipment
45,130 41,570 
Total assets
48,563 44,775 
Current liabilities617 787 
Owners’ Equity – Non-controlling Interest
$47,946 $43,988 

Westmoreland San Juan Mining, LLC

As discussed in the subheading Coal Supply in Note 11, PNM and Westmoreland San Juan Mining, LLC (“WSJ LLC”), a subsidiary of Westmoreland Mining Holdings, LLC have agreements under which mine reclamation services for SJGS will be provided.

TXNM has $19.3 million in letters of credit outstanding to facilitate the issuance of reclamation bonds. The letters of credit support results in TXNM having a variable interest in WSJ LLC since TXNM is subject to possible loss in the event performance by TXNM is required under the letters of credit support. TXNM considers the possibility of loss under the letters of credit support to be remote since the purpose of posting the bonds is to provide assurance that WSJ LLC performs the required reclamation of the mine site in accordance with applicable regulations and the reclamation services agreement provides WSJ LLC the ability to recover the cost of reclamation. As discussed in Note 11, each of the SJGS participants has established and actively fund trusts to meet future reclamation obligations.
WSJ LLC is considered a VIE.  TXNM’s analysis of its arrangements with WSJ LLC concluded that WSJ LLC has the ability to direct its reclamation services, which are the factors that most significantly impact the economic performance of WSJ LLC.  Other than PNM being able to monitor the reclamation activities, the reclamation services were solely under the control of WSJ LLC, including developing reclamation plans, hiring personnel, and incurring operating and maintenance expenses. Neither TXNM nor PNM has any ability to direct or influence the reclamation activities.  PNM’s involvement through the
35

TXNM ENERGY, INC. AND SUBSIDIARIES
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
reclamation services agreement is a protective right rather than a participating right, and WSJ LLC still has the power to direct the activities that most significantly impact the economic performance of WSJ LLC.  If WSJ LLC performs reclamation services more efficiently than anticipated, its economic performance will improve.  Conversely, if WSJ LLC does not perform reclamation services as efficiently as anticipated, its economic performance will be negatively impacted.  Accordingly, TXNM believes WSJ LLC is the primary beneficiary and, therefore, WSJ LLC is not consolidated by either TXNM or PNM. The amounts outstanding under the letters of credit support continue to be TXNM’s maximum exposure to loss from the VIE at June 30, 2026.

ETBC I

ETBC I is a wholly-owned, special purpose subsidiary of PNM that was formed in August 2023 for the limited purpose of purchasing, owning, and administering energy transition property, issuing securitized bonds, and performing related activities authorized by the NMPRC. On November 15, 2023, ETBC I issued the ETBC I Securitized Bonds and used the proceeds to purchase energy transition property from PNM. The energy transition property purchased includes the right to impose, bill, collect, and adjust a non-bypassable energy transition charge from all PNM retail customers until the ETBC I Securitized Bonds are paid in full and all allowed financing costs have been recovered. The ETBC I Securitized Bonds are secured by the energy transition property, and cash collections from the Energy Transition Charges are the sole source of funds to satisfy the debt obligation. The bondholders have no recourse to PNM.

PNM acts as the servicer of the energy transition property on behalf of ETBC I and is responsible for metering, calculating, billing, and collecting the Energy Transition Charges. On behalf of ETBC I, PNM is required to remit all collections of the Energy Transition Charges to the trustee for the ETBC I Securitized Bonds. PNM has the power to direct the activities that most significantly impact the economic performance of ETBC I and will absorb the majority of the variability in the cash flows of the entity. As the primary beneficiary, PNM consolidates ETBC I in its financial statements. Accordingly, the assets, liabilities, operating expenses, and cash flows of ETBC I are included in the Consolidated Financial Statements of PNM.

The following tables summarize the impact of ETBC I on PNM’s Financial Statements:

Results of Operations
Three Months Ended June 30,Six Months Ended June 30,
2026202520262025
(In thousands)
Electric Operating Revenues
$6,649 $6,609 $13,383 $13,408 
Depreciation and amortization
1,824 1,724 3,623 3,424 
Interest Charges
4,847 4,947 9,719 9,918 
Other
(22)(62)41 66 
Net Earnings
$— $— $— $— 

Financial Position
June 30, 2026December 31, 2025
(In thousands)
Restricted cash (included in Other current assets)
$10,655 $11,954 
Restricted cash (included in Other deferred charges)
1,740 1,743 
Securitized Cost (included in Regulatory assets - Deferred)
325,511 329,134 
Current installments of long-term debt
7,509 7,303 
Accrued interest and taxes
7,230 7,306 
Regulatory liabilities - Current
1,878 3,009 
Long-term Debt
320,779 324,531 

36

TXNM ENERGY, INC. AND SUBSIDIARIES
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(7)    Fair Value of Derivative and Other Financial Instruments

Additional information concerning energy related derivative contracts and other financial instruments is contained in Note 9 of the Notes to Consolidated Financial Statements in the 2025 Annual Reports on Form 10-K.

Fair value is defined as the price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Fair value is based on current market quotes as available and is supplemented by modeling techniques and assumptions made by the Company to the extent quoted market prices or volatilities are not available. External pricing input availability varies based on commodity location, market liquidity, and term of the agreement. Valuations of derivative assets and liabilities take into account nonperformance risk, including the effect of counterparties’ and the Company’s credit risk. The Company regularly assesses the validity and availability of pricing data for its derivative transactions. Although the Company uses its best judgment in estimating the fair value of these instruments, there are inherent limitations in any estimation technique.

Energy Related Derivative Contracts
Overview

The primary objective for the use of commodity derivative instruments, including energy contracts, options, swaps, and futures, is to manage price risk associated with forecasted purchases of energy and fuel used to generate electricity, as well as managing anticipated generation capacity in excess of forecasted demand from existing customers. PNM’s energy related derivative contracts manage commodity risk. TNMP does not enter into energy related derivative contracts.

PNM enters into agreements for the purchase and sale of power from third parties. As PNM is required to meet the demand and energy needs of its customers, PNM may be exposed to market risk for the needs of its customers not covered under the FPPAC.

PNM’s operations are managed primarily through a net asset-backed strategy, whereby PNM’s aggregate net open forward contract position is covered by its forecasted excess generation capabilities or market purchases. PNM could be exposed to market risk if its generation capabilities were to be disrupted or if its load requirements were to be greater than anticipated. If all or a portion of load requirements were required to be covered as a result of such unexpected situations, commitments would have to be met through market purchases.

Commodity Risk

Marketing and procurement of energy often involve market risks associated with managing energy commodities and establishing positions in the energy markets, primarily on a short-term basis. PNM routinely enters into various derivative instruments such as forward contracts, option agreements, and price basis swap agreements to economically hedge price and volume risk on power commitments and fuel requirements and to minimize the effect of market fluctuations. PNM monitors the market risk of its commodity contracts in accordance with approved risk and credit policies.

Accounting for Derivatives

Under derivative accounting and related rules for energy contracts, PNM accounts for its various instruments for the purchase and sale of energy, which meet the definition of a derivative, based on PNM’s intent. During the six months ended June 30, 2026, and the year ended December 31, 2025, PNM was not hedging its exposure to the variability in future cash flows from commodity derivatives through designated cash flow hedges. The derivative contracts recorded at fair value that do not qualify or are not designated for cash flow hedge accounting are classified as economic hedges. Economic hedges are defined as derivative instruments, including long-term power agreements, used to economically hedge generation assets, purchased power and fuel costs, and customer load requirements. Changes in the fair value of economic hedges are reflected in Operating income on the Condensed Consolidated Statements of Earnings and are presented in Electric Operating Revenues and Cost of energy according to the intent of the hedge. PNM also uses such instruments under an NMPRC-approved hedging plan to manage fuel and purchased power costs related to customers covered by its FPPAC. Changes in the fair value of instruments covered by its FPPAC are recorded as Regulatory assets and Regulatory liabilities on the Condensed Consolidated Balance Sheets. The cash impacts of settled derivatives are recorded as operating activities or financing activities on the Condensed Consolidated Statement of Cash Flows consistent with the classification of the hedged transaction. PNM has no trading transactions.

37

TXNM ENERGY, INC. AND SUBSIDIARIES
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Commodity Derivatives

During 2025, PNM had three agreements to purchase a total of 250 MW for the period of July 1, 2025, through August 31, 2025, in order to ensure that customer demand during the 2025 summer peak load period was met. All of these agreements were related to customers covered by the FPPAC. There were no active commodity derivative agreements as of June 30, 2026, or December 31, 2025.

At June 30, 2026 and December 31, 2025, PNM also had no commodity derivative instruments, considered economic hedges, that did not pertain to the NMPRC-approved hedging plan discussed above.

At June 30, 2026 and December 31, 2025, PNM had no amounts recognized for the legal right to reclaim cash collateral, no amounts posted as cash collateral under margin arrangements, and there were no obligations to return cash collateral.
Non-Derivative Financial Instruments

The carrying amounts reflected on the Condensed Consolidated Balance Sheets approximate fair value for cash, receivables, and payables due to the short period of maturity. Investment securities are carried at fair value. Investment securities consist of PNM assets held in the NDT for its share of decommissioning costs of PVNGS, a trust for PNM’s share of decommissioning costs at SJGS, and trusts for PNM’s share of final reclamation costs related to the coal mines serving SJGS and Four Corners. See Note 11. At June 30, 2026 and December 31, 2025, the fair value of investment securities included $445.2 million and $426.4 million for the NDT, $3.4 million and $6.0 million for the SJGS decommissioning trust, and $65.0 million and $73.2 million for the coal mine reclamation trusts.

PNM records a realized loss as an impairment for any available-for-sale debt security that has a fair value that is less than its carrying value. At June 30, 2026 and December 31, 2025, PNM had no available-for-sale debt securities for which carrying value exceeded fair value, where the impairments were considered to be “other than temporary” and included in AOCI rather than recognized in earnings. All gains and losses resulting from sales and changes in the fair value of equity securities are recognized immediately in earnings. Gains and losses recognized on the Condensed Consolidated Statements of Earnings related to investment securities in the NDT, SJGS decommissioning, and coal mine reclamation trusts are presented in the following table:
Three Months EndedSix Months Ended
June 30,June 30,
2026202520262025
(In thousands)
Equity securities:
Net gains from equity securities sold
$8,320 $6,940 $16,266 $13,932 
Net gains (losses) on equity securities still held16,114 16,616 (756)8,373 
Total net gains on equity securities24,434 23,556 15,510 22,305 
Available-for-sale debt securities:
Net gains (losses) on debt securities
(20)— (40)10 
Net gains on investment securities$24,414 $23,556 $15,470 $22,315 

The proceeds and gross realized gains and losses on the disposition of securities held in the NDT, SJGS decommissioning trust, and coal mine reclamation trusts are shown in the following table. Realized gains and losses are determined by specific identification of costs of securities sold. Gross realized losses shown below exclude the (increase)/decrease in realized impairment losses of less than $0.1 million for the three and six months ended June 30, 2026, and zero for both the three and six months ended June 30, 2025.

Three Months Ended
Six Months Ended
June 30,June 30,
2026202520262025
(In thousands)
Proceeds from sales
$219,597 $108,625 $329,671 $198,728 
Gross realized gains
29,350 7,859 37,798 15,541 
Gross realized (losses)
(21,029)(919)(21,531)(1,609)
38

TXNM ENERGY, INC. AND SUBSIDIARIES
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

At June 30, 2026, the available-for-sale debt securities held by PNM, had the following final maturities:

Fair Value
(In thousands)
Within 1 year
$24,477 
After 1 year through 5 years
15,909 
$40,386 

Fair Value Disclosures

The Company determines the fair values of its derivative and other financial instruments based on the hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. There are three levels of inputs that may be used to measure fair value. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 3 inputs are unobservable inputs for the asset or liability.

For investment securities, Level 2 fair values are provided by fund managers utilizing a pricing service. For Level 2 fair values, the pricing provider predominantly uses the market approach using bid side market values based upon a hierarchy of information for specific securities or securities with similar characteristics. Fair values of Level 2 investments in mutual funds are equal to NAV. For commodity derivatives, Level 2 fair values are determined based on market observable inputs, which are validated using multiple broker quotes, including forward price, volatility, and interest rate curves to establish expectations of future prices. Credit valuation adjustments are made for estimated credit losses based on the overall exposure to each counterparty. For the Company’s long-term debt, Level 2 fair values are provided by an external pricing service. The pricing service primarily utilizes quoted prices for similar debt in active markets when determining fair value. Management of the Company independently verifies the information provided by pricing services. Uncategorized investments include common/collective investment trusts and real estate funds which are measured at NAV at the end of each reporting period. Financial statements are received for each fund and reviewed by the Company quarterly with audited financial statements received and reviewed on an annual basis. Fair value for these funds is measured using a practical expedient provided under GAAP that allows the NAV per share to be used as fair value for investments in certain entities that do not have readily determinable fair values and are considered to be investment companies. Investments valued using this practical expedient are not required to be presented within the GAAP fair value hierarchy. Items recorded at fair value by PNM on the Condensed Consolidated Balance Sheets are presented below by level of the fair value hierarchy along with gross unrealized gains on investments in available-for-sale debt securities:
GAAP Fair Value Hierarchy
TotalQuoted Prices in Active Markets for Identical Assets (Level 1)Significant Other Observable Inputs (Level 2)Unrealized Gains
(In thousands)
June 30, 2026
Cash and cash equivalents$36,528 $36,528 $— 
Equity securities:
Corporate stocks, common127,776 127,776 — 
Mutual funds and other210,638 210,638 — 
Available-for-sale debt securities:
     U.S. government36,512 36,512 — $88 
     Corporate and other3,874 3,874 23 
Investments categorized within the fair value hierarchy
$415,328 $411,454 $3,874 $111 
Uncategorized collective investment trust
45,877 
Real estate funds38,511 
Hedge funds13,928 
Total investment securities$513,644 
39

TXNM ENERGY, INC. AND SUBSIDIARIES
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
TotalQuoted Prices in Active Markets for Identical Assets (Level 1)Significant Other Observable Inputs (Level 2)Unrealized Gains
(In thousands)
December 31, 2025
Cash and cash equivalents$33,469 $33,469 $— 
Equity securities:
Corporate stocks, common154,790 154,790 — 
Mutual funds and other202,995 202,995 — 
Available-for-sale debt securities:
     U.S. government30,619 30,619 — $227 
     Corporate and other5,731 — 5,731 102 
Investments categorized within the fair value hierarchy
$427,604 $421,873 $5,731 $329 
Uncategorized collective investment trust
45,144 
Real estate funds20,307 
Hedge funds12,600 
Total investment securities
$505,655 

The carrying amounts and fair values of long-term debt, all of which are considered Level 2 fair value measurements and are not recorded at fair value on the Condensed Consolidated Balance Sheets, are presented below:

Carrying AmountFair Value
June 30, 2026(In thousands)
TXNM
$5,415,713 $5,461,759 
PNM2,859,258 2,745,759 
TNMP1,672,334 1,647,374 
December 31, 2025
TXNM
$5,418,564 $5,506,722 
PNM2,861,897 2,757,316 
TNMP1,672,267 1,662,457 

The carrying amount and fair value of the Company’s other investments presented on the Condensed Consolidated Balance Sheets are not material and not shown in the above table.

(8)    Stock-Based Compensation

TXNM has various stock-based compensation programs, which provide restricted stock awards, that are performance-based and time-based, under the PEP. Although certain PNM and TNMP employees are eligible to participate in the TXNM plans, PNM and TNMP do not have separate employee stock-based compensation plans. Performance stock awards granted under the PEP are awarded for a three-year, overlapping performance period. Performance stock awards with performance periods ended or ending in 2028 do not include market targets. Performance stock awards with performance periods ending in 2026 and 2027 are subject to achieving both performance and market targets. Other awards of restricted stock are only subject to time-based vesting requirements. Additional information concerning stock-based compensation under the PEP is contained in Note 12 of the Notes to Consolidated Financial Statements in the 2025 Annual Reports on Form 10-K.

Restricted stock under the PEP refers to awards of stock subject to vesting, performance, or market conditions rather than to shares with contractual post-vesting restrictions. Generally, the awards vest ratably over three years from the grant date of the award. However, awards with performance or market conditions vest upon satisfaction of those conditions. In addition, plan provisions provide that upon retirement, participants become 100% vested in certain stock awards. The vesting period for awards of restricted stock to non-employee members of the Board is one-year.

40

TXNM ENERGY, INC. AND SUBSIDIARIES
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The stock-based compensation expense related to restricted stock awards without performance or market conditions to participants that are retirement eligible on the grant date is recognized immediately at the grant date and is not amortized. Compensation expense for other such awards is amortized over the shorter of the requisite vesting period or the period until the participant becomes retirement eligible. Compensation expense for performance-based shares is recognized ratably over the performance period as required service is provided and is adjusted periodically to reflect the level of achievement expected to be attained. Compensation expense related to market-based shares is recognized ratably over the measurement period, regardless of the actual level of achievement, provided the employees meet their service requirements. At June 30, 2026, TXNM had unrecognized expense related to stock awards of $9.4 million, which is expected to be recognized over an average of 1.95 years.

The grant date fair value for restricted stock and stock awards with internal TXNM performance targets is determined based on the market price of TXNM common stock on the date of the agreements reduced by the present value of future dividends that will not be received prior to vesting. The grant date fair value is applied to the total number of shares that are anticipated to vest, although the number of performance shares that ultimately vest cannot be determined until after the performance periods end. The grant date fair value of stock awards with market targets were determined using Monte Carlo simulation models, which provide grant date fair values that include an expectation of the number of shares to vest at the end of the measurement period. The following table summarizes the weighted-average assumptions used to determine the awards grant date fair value:
Six Months Ended June 30,
Restricted Shares and Performance Based Shares20262025
Expected quarterly dividends per share$0.4225 $0.4075 
Risk-free interest rate3.47 %4.00 %
Market-Based Shares
Dividend yieldN/A3.12%
Expected volatilityN/A15.67%
Risk-free interest rateN/A4.12%

The following table summarizes activity in restricted stock awards, including performance-based and market-based shares for the six months ended June 30, 2026:
Restricted Stock
SharesWeighted-
Average
Grant Date Fair Value
Outstanding at December 31, 2025
227,804 $42.30 
Granted
117,999 53.80 
Released(107,991)43.01 
Forfeited
(650)47.11 
Outstanding at June 30, 2026237,162 $47.69 

Included, as granted and released, in the table above are 6,297 of restricted stock awards for participants who retired and immediately vested. Excluded from the table above are 242,177, 195,119, and 205,671 shares for the three-year performance periods ending in 2026, 2027, and 2028 that will be awarded if all performance and market criteria are achieved at maximum levels and all executives remain eligible.

The following table provides additional information concerning restricted stock activity, including performance-based and market-based shares:
Six Months Ended June 30,
Restricted Stock20262025
Weighted-average grant date fair value$53.80 $47.61 
Total fair value of restricted shares that vested (in thousands)$6,366 $6,374 
41

TXNM ENERGY, INC. AND SUBSIDIARIES
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(9)   Financing

The Company’s financing strategy includes both short-term and long-term borrowings and the issuance of equity securities. The Company utilizes short-term revolving credit facilities, as well as cash flows from operations, to provide funds for both construction and operating expenditures. Depending on market and other conditions, the Company will periodically sell long-term debt, enter into term loan arrangements, or enter into equity arrangements and use the proceeds to reduce borrowings under the revolving credit facilities and commercial paper or refinance other debt. Each of the Company’s revolving credit facilities, term loans, and other debt agreements contain a single financial covenant that requires the maintenance of a debt-to-capitalization ratio. For the TXNM 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. 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. Additional information concerning financing activities is contained in Note 7 of the Notes to Consolidated Financial Statements in the 2025 Annual Reports on Form 10-K.

On February 28, 2025, TXNM filed a shelf registration that provides for the issuance of various types of debt and equity securities. The TXNM shelf registration statement expires in February 2028.

At December 31, 2025, PNM had a shelf registration statement, which was set to expire in May 2026, with capacity for the issuance of up to $650.0 million of SUNs. On February 20, 2026, PNM filed a post-effective amendment to the registration statement to deregister any and all securities that remained unsold, effectively terminating all offerings of the securities pursuant to the registration statement.

Financing Activities

On July 21, 2026, PNM entered into a $195.0 million term loan agreement (the “PNM 2026 Term Loan”), among PNM, the lenders party thereto and Canadian Imperial Bank of Commerce, New York Branch, as administrative agent. PNM used the proceeds of the PNM 2026 Term Loan to repay borrowings under the PNM 2025 Term Loan (defined below) which matured on July 21, 2026. Borrowings under the PNM 2026 Term Loan must be repaid on or before January 21, 2028.

On July 17, 2026, TXNM entered into a $400.0 million delayed-draw term loan agreement (the “TXNM 2026 Delayed-Draw Term Loan”, among TXNM and Wells Fargo Bank, National Association, as administrative agent. Draws on the TXNM 2026 Delayed-Draw Term Loan bear interest at a variable rate, and mature on January 17, 2029. On July 22, 2026, TXNM drew the full amount available under the TXNM 2026 Delayed-Draw Term Loan and used such amount to fully repay the $400.0 million previously received under the May 2025 Stock Purchase Agreement (defined below). See Note 12.

On May 1, 2026, TXNM, PNM, and TNMP each established commercial paper programs (respectively, the “TXNM Commercial Paper Program”, the “PNM Commercial Paper Program”, the “TNMP Commercial Paper Program”, and collectively the “Programs”) pursuant to which they may issue from time to time short-term, unsecured commercial paper notes (respectively, the “TXNM Commercial Paper Notes”, the “PNM Commercial Paper Notes”, the “TNMP Commercial Paper Notes”, and collectively the “Notes”) under the exemption from registration contained in Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”). Amounts available under the Programs may be borrowed, repaid and re-borrowed from time to time, with the aggregate face or principal amount of the Notes outstanding under the Programs at any time not to exceed $300.0 million for TXNM, $400.0 million for PNM, and $300.0 million for TNMP. The Notes will have maturities of up to 364 days from the date of issue and net proceeds will be used for general corporate purposes. Each of TXNM, PNM and TNMP have agreed to maintain, at all times, unused available borrowing capacity under their respective revolving credit agreements (except for the PNM New Mexico Credit Agreement) in an amount at least equal to the amount of Notes outstanding at any time. See Short-term debt below for balances outstanding as of June 30, 2026.

On March 3, 2026, TXNM entered into a distribution agreement (the “Distribution Agreement”) with BofA Securities, Inc., MUFG Securities Americas Inc., and Scotia Capital (USA) Inc., as sales agents and Bank of America, N.A., MUFG Securities EMEA plc, and The Bank of Nova Scotia, as forward purchasers, pursuant to which the Company may sell, from time to time, up to an aggregate sales price of $125.0 million of its common stock, no par value, through the sales agents (the “TXNM 2026 ATM Program”). Sales of the shares made pursuant to the Distribution Agreement, if any, may be made in “at the market offerings” as defined in Rule 415 of the Securities Act. TXNM did not initially receive any proceeds upon the execution of this agreement.

42

TXNM ENERGY, INC. AND SUBSIDIARIES
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Beginning on March 3, 2026, TXNM sold, through the sales agents listed above, an aggregate of 2,123,544 shares of TXNM common stock as set forth in the table below and used the proceeds to make cash equity contributions to PNM and for other corporate purposes.

Gross cash proceeds shown below were reduced by $1.3 million in issuance costs resulting in net cash proceeds of $123.7 million.
Settlement date
Shares
Settlement price
Settlement amount
(in thousands)
March 4, 2026219,722 $58.97 $12,957 
March 5, 2026267,770 58.99 15,796
March 6, 2026219,199 58.91 12,913
March 9, 2026226,420 58.65 13,280
March 9, 2026102,324 58.86 6,023
March 10, 2026144,796 58.80 8,514
March 11, 2026175,000 58.70 10,273
March 11, 2026132,415 58.84 7,791
March 12, 2026186,448 58.63 10,931
March 18, 202691,872 58.54 5,379
March 23, 202619,935 58.28 1,162
May 18, 2026295,300 59.15 17,467
May 19, 202642,343 59.35 2,513
2,123,544 $124,999 

At December 31, 2025, TXNM had $550.0 million aggregate principal amount of Convertible Notes outstanding. The Convertible Notes are unsecured obligations of the Company and rank junior and subordinate in right of payment to the prior payment in full of the Company’s existing and future senior indebtedness. The Convertible Notes bear interest at a rate of 5.75% per year, payable semi-annually in arrears on June 1 and December 1, and mature on June 1, 2054, unless earlier converted, redeemed, or repurchased in accordance with their terms. Additional details related to the Convertible Notes may be found in Note 7 of the Notes to Consolidated Financial Statements in the 2025 Annual Reports on Form 10-K.

On January 2, 2026, TXNM notified holders of the Convertible Notes that the Convertible Notes were convertible, at the option of the holders, over a period beginning on January 1, 2026, and ending at the close of business on March 31, 2026, (the “First Quarter 2026 Conversion Period”). The Convertible Notes were convertible at a conversion rate of 22.5248 shares of common stock per $1,000 principal amount of Convertible Notes, which was equivalent to a conversion price of approximately $44.40 per share of common stock. On March 26, 2026, the conversion rate was increased to 22.5382 shares of common stock per $1,000 principal amount of Convertible Notes, which is equivalent to a conversion price of approximately $44.37 per share of common stock.

On March 31, 2026, it was determined that the Convertible Notes would once again become convertible. On March 31, 2026, TXNM notified holders of the Convertible Notes that the Convertible Notes are convertible, at the option of the holders, over a period beginning on April 1, 2026, and ending at the close of business on June 30, 2026, (the “Second Quarter 2026 Conversion Period”). On April 27, 2026, the conversion rate for the Convertible Notes was increased to 22.5517 shares of common stock per $1,000 principal amount of Convertible Notes, which is equivalent to a conversion price of approximately $44.34 per share of common stock.

With respect to the First Quarter 2026 Conversion Period and the Second Quarter 2026 Conversion Period, the Convertible Notes became convertible at the option of the holders because the last reported sale price of TXNM’s common stock, for at least 20 trading days during the period of 30 consecutive trading days ending on, and including, the last trading day of the preceding calendar quarter, was greater than or equal to 130% of the conversion price in effect on each applicable trading day during such 30 consecutive trading day period.

During the First and Second Quarter Conversion Periods, holders of approximately $0.2 million of Convertible Notes elected to convert their notes. For each $1,000 principal amount of Convertible Notes converted, the holders receive $1,000 principal amount of non-convertible 5.75% junior subordinated notes, due 2054 and shares of TXNM common stock with respect to the conversion value based on the trading price over a 60-trading day observation period. As of June 30, 2026, $549.8 million Convertible Notes remain outstanding.
43

TXNM ENERGY, INC. AND SUBSIDIARIES
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

On July 31, 2025, PNM entered into an agreement (the “PNM July 2025 Note Purchase Agreement”) with institutional investors for the sale and issuance of $350.0 million aggregate principal amount of two series of SUNs (the “PNM July 2025 SUNs”) offered in private placement transactions. The PNM July 2025 SUNs were issued on July 31, 2025. PNM issued $200.0 million of the PNM July 2025 SUNs at 5.47%, due July 31, 2031, and another $150.0 million at 6.03%, due July 31, 2036. PNM used the proceeds from the PNM July 2025 SUNs to repay the PNM $250.0 million SUNs and for general corporate purposes. The PNM July 2025 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 July 2025 SUNs at par. Although there are customary change of control provisions in the PNM debt agreements, the change of control provisions in the agreements, including the PNM July 2025 Note Purchase Agreement, will not be triggered by the closing of the Merger. PNM has the right to redeem any or all of the PNM July 2025 SUNs prior to their maturities, subject to payment of a customary make-whole premium.

On July 21, 2025, TNMP entered into an agreement with institutional investors for the sale of $1,084.3 million aggregate principal amount of six series of TNMP first mortgage bonds (the “TNMP July 2025 FMBs”) offered in private placement transactions. TNMP issued the bonds on July 21, 2025, with the following terms:
Principal Amount
Interest Rate
Due Date
(in thousands)
$245,000 4.83 %
July 31, 2030
245,000 5.12 
July 31, 2032
240,000 5.44 
July 31, 2035
100,000 5.54 
July 31, 2037
154,300 5.93 
July 31, 2045
100,000 6.02 
July 31, 2055
$1,084,300 

The proceeds were used to repay borrowings under the TNMP Merger Backstop Term Loan (defined below). The TNMP July 2025 FMBs are subject to continuing compliance with the covenants set forth in the governing supplemental indentures. In the event of certain changes of control of TNMP, TNMP will be required to offer to prepay the TNMP July 2025 FMBs at par. Although there are customary change of control provisions in the TNMP July 2025 FMBs, the change of control provisions will not be triggered by the closing of the Merger. TNMP has the right to redeem any or all of the TNMP July 2025 FMBs prior to their maturity, subject to payment of a customary make-whole premium.

At June 30, 2025, TXNM had a series of treasury lock agreements, with terms ranging from 5 years to 30 years, aggregating a total notional amount of $730.0 million to reduce interest rate exposure on the TNMP July 2025 FMBs that were issued in July 2025. The treasury lock agreements had an average fixed rate of 4.18% and TXNM designated them as cash flow hedges, measured at fair value, which were recorded as a loss of $2.5 million in Other current liabilities at June 30, 2025. Fair values, provided by an external pricing service, were determined using Level 2 inputs of quoted prices for similar agreements in active markets. On July 1, 2025, TXNM terminated all of the treasury lock agreements, realizing a pre-tax net loss of $1.6 million recorded in Accumulated other comprehensive income. The loss will be amortized through interest expense over a range of 5 to 30 years, in accordance with the terms of the TNMP July 2025 FMBs issued July 21, 2025.

On June 24, 2025, TXNM entered into an agreement whereby TXNM sold, in a private placement transaction, and the purchasers named therein agreed to purchase 3,615,003 shares of TXNM common stock for a purchase price of $55.325 per share (for an aggregate amount of approximately $200 million). The closing of the issuance occurred on June 27, 2025. TXNM used the proceeds to repay an equal amount under the TXNM 2023 Term Loan. TXNM granted the purchasers customary registration rights with respect to the shares, pursuant to which TXNM registered the shares for resale with the SEC on August 8, 2025.

The documents governing an aggregate $1,505.0 million of TNMP’s outstanding FMBs (“TNMP FMBs”) obligated TNMP to offer (the “Offer”), within 30 business days following the signing of the Merger Agreement, to prepay all outstanding TNMP FMBs at 100% of the principal amount, plus accrued and unpaid interest thereon, but without any make-whole amount or other premium. On June 14, 2025, the Offer expired and $1,084.3 million in aggregate principal amount of the bonds were validly tendered. TNMP accepted for purchase all validly tendered bonds. On June 24, 2025, holders whose bonds were validly tendered and accepted for purchase received 100% of the aggregate principal amount of bonds prepaid plus accrued and unpaid interest using funds drawn under the TNMP Merger Backstop Term Loan, discussed below. On November 6, 2025,
44

TXNM ENERGY, INC. AND SUBSIDIARIES
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
TNMP entered into an agreement and supplemental indenture to amend the documents governing $417.7 million of TNMP FMBs. The supplemental indenture amends the requirement for TNMP to provide certain financial reports and amends the definition of change of control under certain supplemental indentures such that TNMP will no longer be required to make an offer to prepay the aggregate $417.7 million TNMP FMBs upon closing of the Merger.

The documents governing an aggregate $3.0 million of TNMP FMBs still require TNMP to make another offer, within 30 business days of closing of the Merger, to prepay the remaining outstanding TNMP FMBs, totaling $3.0 million, 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.

The information in this Form 10-Q 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.

On May 27, 2025, TXNM physically settled all shares under the TXNM 2024 ATM Program by issuing 1,104,641 shares to the forward purchasers, aggregating net proceeds of $49.6 million, including $0.5 million for equity issuance costs. TXNM used the proceeds from the settled shares to repay borrowings under the TXNM Revolving Credit Facility. Following this settlement, no additional shares of TXNM’s common stock remain subject to future settlement under the TXNM 2024 ATM Program.

On May 18, 2025, the execution of the Merger Agreement constituted a “Change of Control” under certain TXNM and TNMP debt agreements. Under each of the specified debt agreements, a “Change of Control” constituted an “Event of Default,” pursuant to which the lender parties thereto had the right to accelerate the indebtedness under the debt agreements. The definition of Change of Control under the PNM debt agreements and PNM note purchase agreements were not triggered by the execution of the Merger Agreement.

On May 23, 2025, TXNM and TNMP entered into amendments in connection with the TXNM Revolving Credit Facility, TXNM 2023 Term Loan, WFB LOC Facility, and TNMP Revolving Credit Facility with the lender parties thereto (the “Lender Consents”) to (i) amend the definition of “Change of Control” in such agreements such that the entry into the Merger Agreement would not constitute a Change of Control and (ii) waive the Event of Default arising from entry into the Merger Agreement. The amended Change of Control definition under the TXNM and TNMP debt agreements will, however, be triggered again upon the closing of the Merger. On December 19, 2025, TXNM and TNMP entered into another amendment which provided, among other administrative updates, that the closing of the Merger shall not be deemed to be a change of control under the terms of the TXNM Revolver and TNMP Revolver which would otherwise result in an event of default thereunder. The Change of Control provisions in the PNM debt agreements are not triggered by the close of the Merger.

To ensure sufficient liquidity pending the Lender Consents, on May 18, 2025, TXNM entered into a $910.0 million 364-day revolving credit facility (the “TXNM Merger Backstop Revolving Facility”) between TXNM, the lenders party thereto, and Wells Fargo Bank, National Association, as administrative agent. The TXNM Merger Backstop Revolving Facility was available to provide liquidity in the event the Company was unable to obtain the Lender Consents. On May 19, 2025, TXNM borrowed approximately $4.0 million under the TXNM Merger Backstop Revolving Facility and subsequently repaid the entire balance by May 21, 2025. The TXNM Merger Backstop Revolving Facility expired according to its terms as TXNM did not make any additional borrowings thereunder by the commitment termination date of May 23, 2025, and the Company was able to obtain the Lender Consents.

On May 18, 2025, concurrent with the execution of the TXNM Merger Backstop Revolving Facility, TNMP entered into a $1,505.0 million 364-day delayed-draw term loan (the “TNMP Merger Backstop Term Loan”) between TNMP, the lenders party thereto, and Wells Fargo Bank, National Association, as administrative agent. The TNMP Merger Backstop Term Loan was available to provide liquidity to repurchase TNMP’s FMBs that were tendered for prepayment pursuant to the Offer. Borrowings under the TNMP Merger Backstop Term Loan were short-term in nature and bore interest at a variable rate. On July 21, 2025, TNMP issued the TNMP July 2025 FMBs and used the proceeds to repay the outstanding principal balance under the TNMP Merger Backstop Term Loan on July 22, 2025, terminating that agreement.

On May 18, 2025, concurrent with the execution of the Merger Agreement, TXNM entered into an agreement (the “May 2025 Stock Purchase Agreement”) whereby TXNM sold, in a private placement transaction, 8,000,000 shares of TXNM common stock for a purchase price of $50.00 per share (aggregating $400.0 million). The consummation of the May 2025
45

TXNM ENERGY, INC. AND SUBSIDIARIES
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Stock Purchase Agreement occurred on June 2, 2025. TXNM used the proceeds to make a cash equity contribution of $160.0 million to TNMP, to repay borrowings under the TXNM Revolving Credit Facility, and for general corporate purposes. On July 2, 2026, the NMPRC ruled that the May 2025 Stock Purchase Agreement is void and of no effect. See Note 12.

On May 16, 2025, TXNM paid the remaining balance due under its TXNM 2021 Delayed Draw Term Loan in accordance with its terms.

On April 23, 2025, PNM entered into an agreement (the “PNM April 2025 Note Purchase Agreement”) with institutional investors for the sale and issuance of $300.0 million aggregate principal amount of two series of SUNs (the “PNM April 2025 SUNs”) offered in private placement transactions. The PNM April 2025 SUNs were issued on April 23, 2025. PNM issued $125.0 million of the PNM April 2025 SUNs at 5.75%, due June 1, 2032, and another $175.0 million at 6.13%, due June 1, 2037. PNM used proceeds from the PNM April 2025 SUNs for the repayment of existing indebtedness, funding of capital expenditures, and general corporate purposes. The PNM April 2025 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 April 2025 SUNs at par. Although there are customary change of control provisions in the PNM debt agreements, the change of control provisions in the agreements, including the PNM April 2025 Note Purchase Agreement, are not triggered by the closing of the Merger. PNM has the right to redeem any or all of the PNM April 2025 SUNs prior to their maturities, subject to payment of a customary make-whole premium.

On February 14, 2025, TNMP entered into an agreement (the “TNMP February 2025 Bond Purchase Agreement”) with institutional investors for the sale and issuance of $140.0 million aggregate principal amount of first mortgage bonds (the “TNMP February 2025 Bonds”) offered in private placement transactions. TNMP issued all $140.0 million of the TNMP February 2025 Bonds on February 14, 2025, at a 5.19% interest rate, due April 1, 2031. The proceeds were used to repay borrowings under the TNMP Revolving Credit Facility, for funding of capital expenditures, and for other corporate purposes. The TNMP February 2025 Bonds are subject to continuing compliance with the representations, warranties, and covenants set forth in the supplemental indentures governing the TNMP February 2025 Bonds. The terms of the supplemental indentures governing the TNMP February 2025 Bonds include the customary covenants discussed above. The definition of change of control in the supplemental indentures governing the TNMP February 2025 Bonds were triggered by the execution of the Merger Agreement and the TNMP February 2025 Bonds were included in an offer to prepay, with $40.0 million validly tendered by the bondholders and accepted for purchase by TNMP in July 2025. The definition of change of control for the remaining $100.0 million of TNMP February 2025 Bonds was successfully amended and will not be triggered by the close of the Merger. TNMP has the right to redeem any or all of the TNMP February 2025 Bonds prior to their maturity, subject to payment of a customary make-whole premium.

On January 21, 2025, PNM entered into a $195.0 million term loan agreement (the “PNM 2025 Term Loan”), among PNM, the lenders party thereto and Canadian Imperial Bank of Commerce, New York Branch, as administrative agent. PNM used the proceeds of the PNM 2025 Term Loan to repay borrowings under the PNM Revolving Credit Facility and the PNM New Mexico Credit Facility, and for general corporate purposes. The PNM 2025 Term Loan bears interest at a variable rate, which was 4.65% at June 30, 2026, and was repaid on July 21, 2026, with the proceeds from the PNM 2026 Term Loan.

Short-term Debt and Liquidity

As of June 30, 2026, the TXNM Revolving Credit Facility had a financing capacity of $300.0 million, and the PNM Revolving Credit Facility had a financing capacity of $400.0 million. Each of these facilities matures on March 29, 2030, and contains one one-year extension option that, if exercised, would extend the maturity to March 2031, subject to approval by a majority of the lenders. On December 19, 2025, when the first extension option was exercised, one lender in each of the revolving credit facilities failed to agree to the extension. As a result, effective March 30, 2029, the TXNM Revolving Credit Facility capacity will adjust to $265.4 million, and the PNM Revolving Credit Facility capacity will adjust to $354.1 million. PNM also has the $40.0 million PNM New Mexico Credit Facility with a maturity of May 31, 2030. As of June 30, 2026, the TNMP Revolving Credit Facility has a capacity of $300.0 million and is secured by $300.0 million aggregate principal amount of TNMP first mortgage bonds and has a maturity of March 29, 2030, with one one-year extension option that, if exercised, would extend the maturity to March 2031, subject to approval by a majority of the lenders. On December 19, 2025, when the first extension option was exercised, one lender failed to agree to the extension and as a result, effective March 30, 2029, the TNMP Revolving Credit Facility capacity will adjust to $277.0 million. As discussed above, Notes issued under the Commercial Paper Programs, effectively reduce the available capacity on each of the revolving credit facilities, except the PNM New Mexico Credit Facility. Variable interest rates under the TXNM, PNM, and TNMP revolving credit facilities and Notes issued under the Commercial Paper Programs are based on SOFR.

46

TXNM ENERGY, INC. AND SUBSIDIARIES
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Short-term debt outstanding consists of:

June 30, 2026December 31, 2025
Balance Outstanding
Weighted Average Interest Rate
Balance Outstanding
Weighted Average Interest Rate
(In thousands)
(In thousands)
PNM:
PNM Revolving Credit Facility$175,000 4.90%$138,800 5.04%
PNM New Mexico Credit Facility40,000 5.0040,000 5.08
215,000 178,800 
TNMP:
TNMP Revolving Credit Facility93,500 4.52— —
TNMP Commercial Paper Notes15,000 4.10— —
108,500 — 
TXNM:
TXNM Revolving Credit Facility115,400 5.152,600 5.16
TXNM Commercial Paper Notes44,100 4.19— —
$483,000 $181,400 

In addition to the above borrowings, TXNM, PNM, and TNMP had letters of credit outstanding of $3.1 million, zero, and zero at June 30, 2026, that reduce the available capacity under their respective revolving credit facilities. TXNM also had $19.3 million of letters of credit outstanding under the WFB LOC Facility. The above table excludes intercompany debt. As of June 30, 2026 and December 31, 2025, neither PNM nor TNMP had any intercompany borrowings from TXNM.

PNM has $3.7 million and $3.8 million in scheduled principal payments due for the ETBC I Securitized Bonds in August 2026 and February 2027. PNM also has $100.3 million of 0.875% PCRBs outstanding with a mandatory tender date of October 1, 2026, and $120.0 million under the PNM November 2025 Term Loan due in May 2027. The Company’s debt arrangements have various maturities and expiration dates. Additional information on debt maturities is contained in Note 7 of the Notes to Consolidated Financial Statements in the 2025 Annual Reports on Form 10-K.

(10)   Pension and Other Postretirement Benefit Plans

TXNM and its subsidiaries maintain qualified defined benefit pension plans, postretirement benefit plans providing medical and dental benefits, and executive retirement programs (collectively, the “PNM Plans” and “TNMP Plans”). TXNM maintains the legal obligation for the benefits owed to participants under these plans. The periodic costs or income of the PNM Plans and TNMP Plans are included in regulated rates to the extent attributable to regulated operations. The Company presents the service cost component of its net periodic benefit costs in administrative and general expenses and the non-service costs components in other income (deductions), net of amounts capitalized or deferred to regulatory assets and liabilities, on the Condensed Consolidated Statements of Earnings. PNM and TNMP receive a regulated return on the amounts funded for pension and OPEB plans in excess of accumulated periodic cost or income to the extent included in retail rates (a “prepaid pension asset”).

Additional information concerning pension and OPEB plans is contained in Note 11 of the Notes to Consolidated Financial Statements in the 2025 Annual Reports on Form 10-K. Annual net periodic benefit cost for the plans is actuarially determined using the methods and assumptions set forth in that note and is recognized ratably throughout the year. Differences between TNMP’s annual net periodic costs (income) and amounts included in its regulated rates are deferred to regulatory assets or liabilities, for recovery or refund in future rate proceedings.

47

TXNM ENERGY, INC. AND SUBSIDIARIES
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
PNM Plans

The following table presents the components of the PNM Plans’ net periodic benefit cost:

Three Months Ended June 30,
Pension Plan
OPEB Plan
Executive Retirement Program
202620252026202520262025
(In thousands)
Components of Net Periodic Benefit Cost
Service cost
$— $— $— $— $— $— 
Interest cost
3,822 5,385 537 566 103 122 
Expected return on plan assets
(5,608)(7,459)(1,349)(1,384)— — 
Amortization of net loss
2,593 3,124 — — 34 47 
Amortization of prior service cost
— — — — — — 
Net Periodic Benefit Cost (Income)
$807 $1,050 $(812)$(818)$137 $169 
Six Months Ended June 30,
Pension Plan
OPEB Plan
Executive Retirement Program
202620252026202520262025
(In thousands)
Components of Net Periodic Benefit Cost
Service cost
$— $— $— $— $— $— 
Interest cost
7,644 10,770 1,074 1,133 206 244 
Expected return on plan assets
(11,217)(14,917)(2,699)(2,768)— — 
Amortization of net loss
5,186 6,247 — — 68 94 
Amortization of prior service cost
— — — — — — 
Net Periodic Benefit Cost (Income)
$1,613 $2,100 $(1,625)$(1,635)$274 $338 

PNM did not make any contributions to its pension plan trust in the three and six months ended June 30, 2026 and 2025 and does not anticipate making any contributions to the pension plan in the remaining months of 2026 through 2030 based on current law, funding requirements, and estimates of portfolio performance. Funding assumptions were developed using a discount rate of 5.5%. Actual amounts to be funded in the future will be dependent on the actuarial assumptions at that time, including the appropriate discount rate. PNM may make additional contributions at its discretion. PNM did not make any cash contributions to the OPEB trust in the three and six months ended June 30, 2026 and 2025, however, a portion of the disbursements attributable to the OPEB trust is paid by PNM and are therefore considered to be contributions to the OPEB plan. Payments by PNM on behalf of the PNM OPEB plan were $0.9 million and $1.4 million for the three and six months ended June 30, 2026, and $0.1 million for the three and six months ended June 30, 2025. These payments are expected to total $3.2 million in 2026 and $11.2 million for 2027-2030. Disbursements under the executive retirement program, which are funded by PNM and considered to be contributions to the plan, were $0.2 million and $0.5 million in the three and six months ended June 30, 2026, and $0.2 million and $0.6 million in the three and six months ended June 30, 2025, and are expected to total $1.1 million during 2026 and $3.8 million for 2027-2030.
48

TXNM ENERGY, INC. AND SUBSIDIARIES
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
TNMP Plans

The following table presents the components of the TNMP Plans’ net periodic benefit cost:

Three Months Ended June 30,
Pension Plan
OPEB Plan
2026202520262025
(In thousands)
Components of Net Periodic Benefit Cost
Service cost
$— $— $5 $4 
Interest cost
481 536 87 93 
Expected return on plan assets
(739)(733)(108)(120)
Amortization of net (gain) loss
210 168 (89)(124)
Amortization of prior service cost
— — 8 — 
Net Periodic Benefit Cost (Income)
$(48)$(29)$(97)$(147)
Six Months Ended June 30,
Pension Plan
OPEB Plan
2026202520262025
(In thousands)
Components of Net Periodic Benefit Cost
Service cost
$— $— $9 $8 
Interest cost
962 1,072 174 186 
Expected return on plan assets
(1,478)(1,466)(216)(240)
Amortization of net (gain) loss
421 336 (177)(248)
Amortization of prior service cost
— — 17 — 
Net Periodic Benefit Cost (Income)
$(95)$(58)$(193)$(294)
TNMP did not make any contributions to its pension plan trust in the three and six months ended June 30, 2026 and 2025 and does not anticipate making any contributions to the pension plan in the remaining months of 2026 through 2030 based on current law, funding requirements, and estimates of portfolio performance. Funding assumptions were developed using a discount rate of 5.5% in 2026. Actual amounts to be funded in the future will depend on the actuarial assumptions at that time, including the appropriate discount rate. TNMP may make additional contributions at its discretion. TNMP did not make any contributions to the OPEB trust in the three and six months ended June 30, 2026 and 2025 and does not expect to make any contributions to the OPEB trust during the period 2026-2030.

(11)   Commitments and Contingencies

Merger-Related Litigation

Counsel for TXNM has received a number of demand letters from certain law firms on behalf of individuals who are purported TXNM shareholders, accompanied by draft complaints naming TXNM and its directors as defendants and alleging that TXNM’s preliminary proxy statement with respect to the Merger omitted or misrepresented certain material information. Such draft complaints include a request for injunctive relief with respect to the TXNM shareholder vote to approve, and the closing of, the Merger, as well as other remedies, including counsel fees. In August 2025, reported shareholders filed complaints in New York state court alleging disclosure violations and seeking injunctive relief. TXNM believes that the allegations set forth in the demand letters, draft complaints, and complaints are without merit and will defend against such actions vigorously.

Overview
There are various claims and lawsuits pending against the Company. In addition, the Company is subject to federal, state, and local environmental laws and regulations and periodically participates in the investigation and remediation of various sites. In addition, the Company periodically enters into financial commitments in connection with its business operations. Also, the Company is involved in various legal and regulatory proceedings in the normal course of its business. See Note 12. It
49

TXNM ENERGY, INC. AND SUBSIDIARIES
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
is not possible at this time for the Company to determine fully the effect of all litigation and other legal and regulatory proceedings on its financial position, results of operations, or cash flows.

With respect to some of the items listed below, the Company has determined that a loss is not probable or that, to the extent probable, cannot be reasonably estimated. In some cases, the Company is not able to predict with any degree of certainty the range of possible loss that could be incurred. The Company assesses legal and regulatory matters based on current information and makes judgments concerning their potential outcome, giving due consideration to the nature of the claim, the amount and nature of any damages sought, and the probability of success. Such judgments are made with the understanding that the outcome of any litigation, investigation, or other legal proceeding is inherently uncertain. The Company records liabilities for matters where it is probable a loss has been incurred, and the amount of loss is reasonably estimatable. The actual outcomes of the items listed below could ultimately differ from the judgments made and the differences could be material. The Company cannot make any assurances that the amount of reserves or potential insurance coverage will be sufficient to cover the cash obligations that might be incurred as a result of litigation or regulatory proceedings. Except as otherwise disclosed, the Company does not expect that any known lawsuits, environmental costs, or commitments will have a material effect on its financial condition, results of operations, or cash flows.

Additional information concerning commitments and contingencies is contained in Note 16 of the Notes to Consolidated Financial Statements in the 2025 Annual Reports on Form 10-K.

Commitments and Contingencies Related to the Environment

Nuclear Spent Fuel and Waste Disposal

Nuclear power plant operators are required to enter into spent fuel disposal contracts with the DOE that require the DOE to accept and dispose of all spent nuclear fuel and other high-level radioactive wastes generated by domestic power reactors. Although the Nuclear Waste Policy Act required the DOE to develop a permanent repository for the storage and disposal of spent nuclear fuel by 1998, the DOE announced that it would not be able to open the repository by 1998 and sought to excuse its performance of these requirements. In November 1997, the DC Circuit issued a decision preventing the DOE from excusing its own delay but refused to order the DOE to begin accepting spent nuclear fuel. Based on this decision and the DOE’s delay, a number of utilities, including APS (on behalf of itself and the other PVNGS owners, including PNM), filed damages actions against the DOE in the Court of Federal Claims. The lawsuits filed by APS alleged that damages were incurred due to DOE’s continuing failure to remove spent nuclear fuel and high-level waste from PVNGS. APS and the DOE entered into a settlement agreement, subsequently extended, that established a process for the payment of claims for costs incurred through December 31, 2025. Under the settlement agreement, APS must submit claims annually for payment of allowable costs. APS is currently in the process of extending the settlement to cover costs paid through December 31, 2028. PNM records estimated claims on a quarterly basis. The benefit from the claims is passed through to customers under the FPPAC.

PNM estimates that it will incur approximately $55.6 million (in 2023 dollars) for its share of the costs related to the on-site interim storage of spent nuclear fuel at PVNGS for the remaining term of the operating licenses. PNM accrues these costs as a component of fuel expense as the nuclear fuel is consumed. At June 30, 2026 and December 31, 2025, PNM had a liability for interim storage costs of $16.4 million and $15.5 million, which is included in other deferred credits.

PVNGS has sufficient capacity at its on-site Independent Spent Fuel Storage Installation (“ISFSI”) to store all of the nuclear fuel that will be irradiated during the initial operating license period, which ends in December 2027.  Additionally, PVNGS has sufficient capacity at its on-site ISFSI to store a portion of the fuel that will be irradiated during the period of extended operation, which ends in November 2047.  If uncertainties regarding the U.S. Government’s obligation to accept and store spent fuel are not favorably resolved, APS will evaluate alternative storage solutions that may obviate the need to expand the ISFSI to accommodate all of the fuel that will be irradiated during the period of extended operation.

The New Mexico Energy Transition Act

The New Mexico Energy Transition Act (“ETA”) sets a statewide standard that requires investor-owned electric utilities to have specified percentages of their electric-generating portfolios be from renewable and zero-carbon generating resources. The passage of the ETA amended the REA to require utilities operating in New Mexico to have renewable portfolios equal to 50% by 2030, 80% by 2040, and 100% zero-carbon energy by 2045. The amendments also allow for the recovery of undepreciated investments and decommissioning costs related to qualifying EGUs that the NMPRC has required be removed
50

TXNM ENERGY, INC. AND SUBSIDIARIES
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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 review and approve utilities’ annual renewable portfolio plans to ensure compliance with the RPS. Also pursuant to the ETA, the NM Environmental Improvement Board adopted standards of performance that limit CO2 emissions to no more than 1,100 lbs. per MWh beginning January 1, 2023, for new and existing coal-fired EGUs with original installed capacities exceeding 300 MW.

The ETA provides for a transition from fossil-fuel generation resources to renewable and other carbon-free resources through certain provisions relating to the abandonment of coal-fired generating facilities. These provisions include the use of energy transition bonds to finance certain costs of abandoning coal-fired facilities that are retired prior to January 1, 2023, for facilities operated by a “qualifying utility,” or prior to January 1, 2032, for facilities that are not operated by a qualifying utility. The amount of energy transition bonds that can be issued to recover abandonment costs is limited to the lesser of $375.0 million or 150% of the undepreciated investment of the facility as of the abandonment date. Proceeds provided by 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 plant decommissioning and coal mine reclamation costs provided those costs have not previously been recovered from customers or disallowed by the NMPRC or by a court order. Proceeds from energy transition bonds may also be used to fund severances for employees of the retired facility and related coal mine and to promote economic development, education and job training in areas impacted by the retirement of the coal-fired facilities. Energy transition bonds must be issued under a NMPRC-approved financing order, are secured by “energy transition property,” are non-recourse to the issuing utility, and are repaid by a non-bypassable charge paid by all customers of the issuing utility. These customer charges are subject to an adjustment mechanism designed to provide for timely and complete payment of principal and interest due under the energy transition bonds.

The ETA also provides that utilities must obtain NMPRC approval of competitively procured replacement resources that shall be evaluated based on their cost, economic development opportunity, ability to provide jobs with comparable pay and benefits to those lost upon retirement of the facility, and that do not exceed emissions thresholds specified in the ETA. In determining whether to approve replacement resources, the NMPRC must give preference to resources with the least environmental impacts, those with higher ratios of capital costs to fuel costs, and those located in the school district of the abandoned facility. The ETA also provides for the procurement of energy storage facilities and gives utilities discretion to maintain, control, and operate these systems to ensure reliable and efficient service.

The ETA has had and will have a significant impact on PNM’s future generation portfolio, including PNM’s retirement of SJGS in 2022. PNM cannot predict the full impact of the ETA with respect to Four Corners or the outcome of its future generating resource abandonment and replacement resource filings with the NMPRC.

The Clean Air Act

Regional Haze

Pursuant to the CAA, states are required to establish goals for improving visibility in national parks and wilderness areas (also known as Class I areas) and to develop long-term strategies for reducing emissions of air pollutants that cause visibility impairment in their own states and for preventing degradation in other states. States must establish a series of interim goals to ensure continued progress by adopting a new SIP every ten years. In the first SIP planning period, states were required to conduct Best Available Retrofit Technology determinations for certain covered facilities, including utility boilers, built between 1962 and 1977 that have the potential to emit more than 250 tons per year of visibility impairing pollution. For all future SIP planning periods, states must evaluate whether additional emissions reduction measures may be needed to continue making reasonable progress toward natural visibility conditions.

SIPs for the second planning period were due in July 2021, which deadline NMED was unable to meet. During NMED’s preparation of the SIP for the second compliance period, PNM was notified that a regional haze four-factor analysis for SJGS was not required since PNM retired its share of SJGS in 2022. On August 30, 2022, EPA published in the Federal Register an official “Finding of Failure to Submit” for states, including New Mexico, that have not yet submitted a round 2 regional haze SIP. This action by EPA started a two-year clock for it to issue a FIP which deadline has now passed. NMED petitioned the NM Environmental Improvement Board to adopt a proposed SIP and submitted a final revised plan to the NM Environmental Improvement Board on March 3, 2025. PNM submitted comments on the proposed SIP in response to a request for comments by NMED. The NM Environmental Improvement Board held a public hearing from April 28 to April 30, 2025. On December 8, 2025, the NM Environmental Improvement Board adopted the proposed SIP and final rule. No PNM generating stations were identified as reasonable progress units under the adopted SIP indicating that no additional emissions
51

TXNM ENERGY, INC. AND SUBSIDIARIES
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
reductions measures may be necessary at this time. On March 11, 2026, the NMED submitted a SIP revision for the second planning period requesting approval by EPA.

On March 12, 2025, as part of EPA’s list of 31 deregulatory actions, EPA announced it would restructure the Regional Haze Program. On October 2, 2025, EPA published an advanced notice of proposed rulemaking to solicit information from the public to help develop regulatory changes on the implementation and structure of the Regional Haze Rule (“RHR”). The advanced notice itself does not impose any requirements but requests input on how EPA can revise the RHR to streamline regulatory requirements impacting states’ visibility improvement obligations. Comments were due December 1, 2025.

Carbon Dioxide Emissions

In 2015, EPA established standards to limit CO2 emissions from power plants, including (1) Carbon Pollution Standards for new, modified, and reconstructed power plants; and (2) the Clean Power Plan for existing power plants. Challengers successfully petitioned the U.S. Supreme Court for a stay of the Clean Power Plan. In 2019, EPA repealed the Clean Power Plan, promulgated the ACE Rule, and revised the implementing regulations for all emission guidelines. 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., vacating the ACE Rule.

Numerous parties sought review by the U.S. Supreme Court, and on June 30, 2022, the U.S. Supreme Court held that the “generation shifting” approach in the Clean Power Plan exceeded the powers granted to EPA by Congress. Of broader significance in administrative law, the Court’s opinion expressly invoked the “major question” doctrine, which requires rules involving issues of “vast economic or political significance” to be supported by clear statutory authorization. In cases where there is no clear statement of authority, courts need not defer to the agency’s statutory interpretation on “major questions.” The decision sets legal precedent for future rulemakings by EPA and other federal regulatory agencies whereby the agencies’ authority may be limited based upon similar reasoning.

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 reconsideration of the rule has concluded.

In 2024, EPA adopted regulatory actions under CAA Sections 111(b) and (d) to replace the Clean Power Plan and the ACE Rule. The final rules include revised new source performance standards under Section 111(b) for all new natural gas-fired combustion turbines and emission guidelines under Section 111(d) requiring states to develop standards of performance for GHG emissions from existing fossil-fuel-fired electric steam generating units. In the final rules, EPA determined that the standards for existing coal- or gas-fired steam generating units must be based on the use of either CCS (long-term), natural gas co-firing (medium-term), or exempt from the rule via early retirement. The standards for new combustion turbines must be based on CCS (base load), efficient simple cycle design (intermediate load), or lower-emitting fuels (low load). Over a dozen states, several industry groups and some power companies and labor unions filed challenges to the rule at the DC Circuit, which heard oral arguments on December 6, 2024. However, President Trump issued several executive orders on January 20, 2025, directing his Administration to review all agency actions and suspend, revise, or rescind those identified as imposing an undue burden on domestic energy resources. On March 12, 2025, as part of EPA’s reconsideration of 31 environmental regulations, EPA announced the agency will reconsider the previous Administration’s regulations on GHG standards and guidelines for power plants. On June 17, 2025, EPA published a proposed rule in the Federal Register with two alternatives to repeal or revise the GHG emission standards for EGUs. EPA primarily proposes to find that GHG emissions from fossil fuel-fired power plants “do not contribute significantly to dangerous air pollution” under the meaning of CAA Section 111, which would preclude EPA from regulating GHG emissions from those plants. As a result, EPA is proposing to repeal all GHG standards for the power sector promulgated under CAA Section 111 in both 2015 and 2024. EPA also proposed, in the alternative, to find that CCS is not adequately demonstrated and that neither CCS nor gas co-firing are the best system of emission reduction for GHG emissions from power plants, which findings also support repeal of those specific requirements from the rules adopted in 2024. Comments were due by September 15, 2025, and EPA had indicated it intended to finalize the proposed rule in 2026.

Because the CAA 111 rule does not contain provisions for existing natural gas units, on March 26, 2024, EPA announced it was opening a non-regulatory docket and issued framing questions to gather input about ways to design a stronger, more durable approach to GHG regulation of existing gas combustion turbines. The docket was open for public comment from March 26, 2024 to May 28, 2024, and the agency held a policy forum to bring stakeholders together to share ideas with EPA and others. Under the Trump Administration, EPA is unlikely to propose a rule based on this non-regulatory docket.

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In 2021, President Biden signed an extensive executive order aimed at addressing climate change concerns domestically and internationally. The order was intended to build on the initial climate-related actions the Biden Administration took on January 20, 2021. It addressed a wide range of issues, including establishing climate change concerns as an essential element of U.S. foreign and security policy, identifying a process to determine the U.S. INDC under the Paris Agreement, and establishing a Special Presidential Envoy for Climate that would sit on the National Security Council. 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 joined President Biden’s other climate goals which included a carbon pollution-free power sector by 2035 and a net-zero emissions economy by no later than 2050. In an executive order issued on January 20, 2025, President Trump ordered his Administration to withdraw the U.S. from the Paris Agreement and from any agreement, pact, accord, or similar commitment made under the United Nations Framework Convention on Climate Change.

On August 1, 2025, EPA published a proposal to rescind the 2009 final rule commonly known as the Endangerment Finding. In the Endangerment Finding, EPA found that current and projected atmospheric concentrations of the well-mixed combination of six GHGs threaten public health and welfare, and that the combined emissions of these GHGs from new motor vehicles and engines contribute to the GHG pollution that threatens public health and welfare. On February 12, 2026, the rule was finalized as proposed, repealing all GHG emission standards for certain vehicles and engines promulgated on the basis of the Endangerment Finding. While the Endangerment Finding did not directly impose any requirements on EGUs, EPA cited the Endangerment Finding as a basis for its authority to regulate GHG emissions from EGUs under CAA Section 111.

PNM’s review of the GHG emission reductions standards that have or may occur as a result of legislation or regulation is ongoing. We are currently determining what impact, if any, the final rules will have on our business, results of operations, and financial condition.

National Ambient Air Quality Standards (“NAAQS”)

The CAA requires EPA to set NAAQS for pollutants reasonably anticipated to endanger public health or welfare. EPA has set NAAQS for certain pollutants, including NOx, SO2, ozone, and particulate matter.

NOx Standard – In 2018, EPA published the final rule to retain the current primary health-based NOx standards of which NO2 is the constituent of greatest concern and is the indicator for the primary NAAQS. EPA concluded that the current 1-hour and annual primary NO2 standards are requisite to protect public health with an adequate margin of safety. The rule became effective on May 18, 2018. The State of New Mexico has attained the current NOx NAAQS standards.

SO2 Standard – In 2019, EPA announced its final decision to retain, without changes, the primary health-based NAAQS for SO2. Specifically, EPA retained the current 1-hour standard for SO2, which is 75 parts per billion, based on the 3-year average of the 99th percentile of daily maximum 1-hour SO2 concentrations. In 2021, EPA published in the Federal Register the initial air quality designations for all remaining areas not yet designated under the 2010 SO2 Primary NAAQS. All areas of New Mexico have been designated attainment/unclassifiable through four rounds of designations by EPA.

Ozone Standard – In 2015, EPA finalized the new ozone NAAQS and lowered both the primary and secondary 8-hour standard from 75 to 70 parts per billion. With ozone standards becoming more stringent, fossil-fueled generation units will come under increasing pressure to reduce emissions of NOx and volatile organic compounds since these are the pollutants that form ground-level ozone. During 2017 and 2018, EPA released rules establishing area designations for ozone. In those rules, San Juan County, New Mexico, where Four Corners is located, is designated as attainment/unclassifiable and only a small area in Doña Ana County, New Mexico is designated as marginal non-attainment. Although Afton Generating Station is located in Doña Ana County, it is not located within the small area designated as non-attainment for the 2015 ozone standard.

PNM does not believe there will be material impacts to its facilities because of the non-attainment designation of the small area within Doña Ana County. Until EPA approves attainment designations for the Navajo Nation and releases a proposal to implement the revised ozone NAAQS, PNM is unable to predict what impact the adoption of these standards may have on Four Corners. On July 13, 2020, EPA proposed to retain the existing ozone NAAQS based on a review of the full body of currently available scientific evidence and exposure/risk information, but on August 21, 2023, EPA announced an entirely new review of the ozone standard. PNM cannot predict the outcome of this matter.

In 2019, EPA issued findings that several states, including New Mexico, had failed to submit interstate transport SIPs for the 2015 8-hour ozone NAAQS, triggering an obligation for EPA to issue a FIP within two years. In response, NMED
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submitted a Good Neighbor SIP on July 27, 2021, that demonstrates that there are no significant contributions from New Mexico to downwind problems in meeting the federal ozone standard. On March 15, 2023, EPA Administrator Regan signed a final action imposing a FIP on multiple states but did not include a FIP for New Mexico because the most updated modeling available at the time of the proposal confirmed the state did not contribute to downwind ozone nonattainment or maintenance areas. However, the updated modeling EPA used in the final rule indicated that New Mexico may be significantly contributing to one or more non-attainment or maintenance areas. In light of that modeling result, on February 16, 2024, the EPA published a proposed rule partially disapproving the SIPs for New Mexico and four other states (Arizona, Iowa, Kansas, and Tennessee) and expanding the Good Neighbor FIP to apply to these states. The FIP aspect of the proposed rule would have required fossil fuel-fired power plants in these five states to participate in an allowance-based ozone season NOx emissions trading program beginning in 2025, but the outgoing Biden Administration did not finalize the rule. On March 10, 2025, in the DC Circuit, the EPA filed a motion for voluntary remand of its ozone interstate transport FIP for the 2015 ozone NAAQS to reconsider the rule and had anticipated completing a new rulemaking by Fall 2026. In addition, EPA has now reconsidered the policies underlying its Good Neighbor rule, and, on January 30, 2026, EPA issued a proposed rule to approve New Mexico’s SIP submission because it will not contribute significantly to nonattainment or interfere with maintenance of the 2015 8-hour ozone NAAQS in any other state. If finalized, the EPA will withdraw the prior proposed partial SIP disapproval.

PM Standard – In 2023, EPA published, in the Federal Register, a proposal to lower the annual fine PM standard to between 9-10 µg/m3 but retain the rest of its PM standards, including the current daily fine PM standard, the daily coarse PM standard, and the secondary PM standards. The final rule was published on March 6, 2024, lowering the primary annual PM 2.5 NAAQS to 9 ug/m3, and became effective May 6, 2024. States will have until March 2032 to attain compliance with the new standard for any areas designated as nonattainment. This implementation process also applies to the Albuquerque-Bernalillo County Environmental Health Department who may combine efforts with NMED. However, even before any designations are made, the new standard is effective for conducting required modeling for permit applications and revisions. The lower standard is expected to result in new nonattainment areas throughout the country and could prompt additional PM control requirements, but PNM cannot predict the impacts of the outcome of future rulemaking. The PM standard was challenged in the D.C. Circuit, and, following the change in administration, EPA filed a motion for voluntary vacatur of the rule, but the court denied that motion and upheld the new standard on June 26, 2026. The Northern District of California has ordered EPA to promulgate final designations for all areas of the country no later than February 6, 2027.

Cooling Water Intake Structures

In 2014, EPA issued a rule establishing national standards for certain cooling water intake structures at existing power plants and other facilities under the Clean Water Act to protect fish and other aquatic organisms by minimizing impingement mortality (the capture of aquatic wildlife on intake structures or against screens) and entrainment mortality (the capture of fish or shellfish in water flow entering and passing through intake structures).

To minimize impingement mortality, the rule provides operators of facilities, such as Four Corners, seven options for meeting Best Technology Available (“BTA”) standards for reducing impingement. The permitting authority must establish the BTA for entrainment on a site-specific basis, taking into consideration an array of factors, including endangered species and social costs and benefits. Affected sources must submit source water baseline characterization data to the permitting authority to assist in the BTA determination. Compliance deadlines under the rule are tied to permit renewals, including any subject to a schedule of compliance established by the permitting authority in the permit itself.

In 2018, several environmental groups sued EPA Region IX in the U.S. Court of Appeals for the Ninth Circuit over EPA’s failure to timely reissue the Four Corners NPDES permit. The petitioners asked the court to issue a writ of mandamus compelling EPA Region IX to take final action on the pending NPDES permit by a reasonable date. EPA subsequently reissued the NPDES permit. The permit did not contain conditions related to the cooling water intake structure rule, because EPA determined that the facility had achieved BTA for both impingement and entrainment by operating a closed-cycle recirculation system. Several environmental groups filed a petition for review with EPA’s Environmental Appeals Board (“EAB”) concerning the reissued permit. The environmental groups alleged that the permit was reissued in contravention of the Clean Water Act and did not contain limits or conditions required by EPA’s ELG applicable to Four Corners or EPA’s cooling water intake structures rule, among others. EPA withdrew the Four Corners NPDES permit in order to examine the issues raised by the environmental groups and then issued an updated NPDES permit in 2019. The permit was once again appealed to the EAB and was stayed before the effective date, but the EAB issued an order denying the petition for review on September 30, 2020. Thereafter, the Regional Administrator of the EPA signed a notice of final permit decision, and the NPDES permit was issued on November 9, 2020. The permit became effective December 1, 2020. On January 22, 2021, the environmental groups filed a petition for review of the EAB’s decision with the U.S. Court of Appeals for the Ninth Circuit. The September 2019 permit
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remained in effect pending the outcome of this appeal. On March 21, 2022, EPA provided notice in the Federal Register of a proposed settlement agreement with the environmental groups. The parties subsequently executed the settlement agreement as of May 2, 2022. Under the settlement, the lawsuit was administratively closed through September 6, 2023, during which time a third-party consultant spent 12 months sampling discharges from Four Corners and EPA spent three months completing an analysis. On December 1, 2023, EPA issued a modification, effective December 31, 2023, to the NPDES permit that had been issued on November 9, 2020. The modification applies to permit elements related to effluent discharge. PNM cannot predict whether the analysis required to be performed by EPA under the settlement agreement will result in further changes to the NPDES permit but does not anticipate that it will have a material impact on PNM’s financial position, results of operations, or cash flows.

Effluent Limitation Guidelines

In 2013, EPA published proposed revised wastewater ELG establishing technology-based wastewater discharge limitations for fossil fuel-fired electric power plants.  EPA signed the final Steam Electric ELG rule in 2015. The final rule, which became effective on January 4, 2016, phased in the new, more stringent requirements in the form of effluent limits for arsenic, mercury, selenium, and nitrogen for wastewater discharged from wet scrubber systems and zero discharge of pollutants in ash transport water that must be incorporated into plants’ NPDES permits. The 2015 rule required each plant to comply between 2018 and 2023 depending on when it needed a new or revised NPDES permit.

The Steam Electric ELG rule was challenged in the U.S. Court of Appeals for the Fifth Circuit by numerous parties. In 2017, EPA signed a notice indicating its intent to reconsider portions of the rule, and the Fifth Circuit issued an order severing the issues under reconsideration and holding the case in abeyance as to those issues. However, the court allowed challenges to other portions of the rule to proceed. In 2019, the Fifth Circuit granted those challenges and issued an opinion vacating several portions of the rule, specifically those related to legacy wastewater and leachate, for which the court deemed the standards selected by EPA to be arbitrary and capricious.

In 2017, EPA published a final rule for postponement of certain compliance dates. The rule postponed the earliest date on which compliance with the ELG for regulated waste streams would be required from November 1, 2018 until November 1, 2020. In 2019, EPA published a proposed rule revising the original ELG while maintaining the compliance dates. In 2020, EPA published in the Federal Register the final Steam Electric ELG and Standards for the Steam Electric Power Generating Point Source Category, revising the final 2015 guidelines for both flue gas desulfurization wastewater and bottom ash transport water. The 2020 rule required compliance with new limits as soon as possible on or after October 13, 2021, but no later than December 31, 2025.

In 2021, EPA published notice that it would undertake a supplemental rulemaking to revise the ELG after completing its review of the rules reconsidered in 2020. As part of this process, EPA committed to determine whether more stringent limitations and standards would be appropriate. On March 29, 2023, EPA published the proposed ELG Rule in the Federal Register. The proposed rule included stricter limitations for wastewater discharges for coal-fired facilities but allowed for flexibilities for those coal-powered facilities that would decommission or repower by December 31, 2028, to December 31, 2032.

On May 9, 2024, EPA published a final rule to further revise the ELG. This final supplemental rule updated the technology-based limitations applicable to flue gas desulfurization wastewater, bottom ash transport water, and legacy wastewater at existing sources, as well as combustion residual leachate at new and existing sources. The 2024 rule was challenged in the U.S. Court of Appeals for the Eighth Circuit, but the court denied motions for a stay, so the rule remains in effect. On March 12, 2025, EPA announced it would reconsider the ELGs for the steam electric power generating industry. On October 2, 2025, EPA published proposed and direct final rules for extension of deadlines and other provisions. Comments were due November 3, 2025. On November 28, 2025, EPA withdrew the direct final rule due to adverse comments and on December 31, 2025, published a final rule revising various deadlines and other provisions in the 2024 rule. On March 9, 2026, EPA sent a proposed rule to Office of Management and Budget reconsidering the technology-based effluent limitations and standards promulgated in 2024. On May 18, 2026, EPA published its proposed rule revising ELGs for unmanaged combustion residual leachate. Comments were due June 17, 2026. The final rule is expected to be published in March 2027.

Reeves Station discharges cooling tower blowdown to a publicly owned treatment plant and no longer holds an NPDES permit; therefore, it is expected that no ELG requirements will be imposed.

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See “Cooling Water Intake Structures” above for additional discussion of Four Corners’ current NPDES permit. Four Corners may be required to change equipment and operating practices affecting boilers and ash handling systems, as well as change its waste disposal techniques during the next NPDES permit renewal. PNM is unable to predict the outcome of these matters or a range of the potential costs of compliance.

Santa Fe Generating Station

PNM and NMED are parties to agreements under which PNM has installed a remediation system to treat water from a City of Santa Fe municipal supply well and an extraction well to address gasoline contamination in the groundwater at the site of PNM’s former Santa Fe Generating Station and service center. A 2008 NMED site inspection report states that neither the source nor extent of contamination at the site has been determined and that the source may not be the former Santa Fe Generating Station. During 2013 and 2014, PNM and NMED collected additional samples that showed elevated concentrations of nitrate and volatile organic compounds in some of the monitoring wells at the site. In addition, one monitoring well contained free-phase hydrocarbon products. PNM collected a sample of the product for “fingerprint” analysis. The results of this analysis indicated the product was a mixture of older and newer fuels. The presence of newer fuels in the sample suggests the hydrocarbon product likely originated from off-site sources. In 2015, PNM and NMED entered into a memorandum of understanding to address changing groundwater conditions at the site under which PNM agreed to continue hydrocarbon investigation under the supervision of NMED. Qualified costs are eligible for payment through the New Mexico Corrective Action Fund (“CAF”), which is administered by the NMED Petroleum Storage Tank Bureau. In 2019, PNM received notice from NMED that an abatement plan for the site is required to address concentrations of previously identified compounds, unrelated to those discussed above, found in the groundwater. NMED approved PNM’s abatement plan proposal, which covers field work and reporting.

Additional monitoring well installations along with periodic groundwater sampling and reporting under NMED-approved CAF and abatement plan requirements have continued and support PNM’s contention that off-site sources have impacted, and are continuing to impact, the local groundwater in the vicinity of the former Santa Fe Generating Station.

The City of Santa Fe has stopped operating its well at the site, which is needed for PNM’s groundwater remediation system to operate. As a result, PNM has stopped performing remediation activities at the site. However, PNM’s monitoring and other abatement activities at the site are ongoing and will continue until the groundwater meets applicable federal and state standards or until NMED determines that remediation is not required, whichever is earlier. PNM is also in communications with the City of Santa Fe to determine when operations at the site might resume. PNM is not able to assess the duration of this project or estimate the impact on its obligations if PNM is required to resume groundwater remediation activities at the site. PNM is unable to predict the outcome of these matters.

Coal Combustion Residuals Waste Disposal

CCRs consisting of fly ash, bottom ash, and gypsum generated from coal combustion and emission control equipment at SJGS have been disposed of in the surface mine pits adjacent to the plant. SJGS does not operate any onsite CCR impoundments or landfills. The NMMMD currently regulates mine reclamation activities at the San Juan mine, including placement of CCRs in the surface mine pits, with federal oversight by the OSM. APS disposes of CCRs in onsite ponds and dry storage areas at Four Corners.  Ash management at Four Corners is regulated by EPA and the New Mexico State Engineer’s Office.

EPA’s 2015 coal ash rule included a non-hazardous waste determination for coal ash and sets minimum criteria for existing and new CCR landfills and surface impoundments. In 2016, the Water Infrastructure Improvements for the Nation Act (the “WIIN Act”) was signed into law to address critical water infrastructure needs in the U.S. and contained a number of provisions related to CCRs. Among other things, the WIIN Act allowed, but did not require, states to develop and submit CCR permit programs for EPA approval, provided flexibility for states to incorporate EPA’s 2015 rule for CCRs or develop other criteria that are at least as protective as EPA’s rule, and required EPA to approve state permit programs within 180 days of submission by the state. Because states are not required to implement their own CCR permit programs, EPA was required to develop a federal permit program in states that chose not to implement a program, subject to congressional funding. Until state or federal permit programs are in effect, the 2015 rule continues to be self-implementing in nature, subject to enforcement by EPA or citizen groups. For facilities located within the boundaries of Native American reservations, such as the Navajo Nation where Four Corners is located, EPA is required to develop a federal permit program regardless of appropriated funds.

In 2018, EPA published a rule that constitutes “Phase One, Part One” of its ongoing reconsideration and revision of the 2015 CCR rule. The final Phase One, Part One rule extended the deadline to allow EGUs with unlined impoundments or that
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fail to meet the uppermost aquifer requirement to continue to receive coal ash until October 31, 2020, which was again extended by subsequent amendments. The rule also authorized a “Participating State Director” or EPA to approve suspension of groundwater monitoring requirements and to issue certifications related to the location restrictions, design criteria, groundwater monitoring, remedy selection and implementation. The rule also modified groundwater protection standards for certain constituents, which include cobalt, molybdenum, lithium, and lead without a maximum contamination level.

In 2019, EPA published a second round of proposed revisions, which are commonly referred to as the “Phase Two” revisions, to address reporting and accessibility to public information, “CCR piles” and “beneficial use” definitions, and the requirements for management of CCR piles. EPA reopened and extended the Phase Two comment period several times. To date, EPA has not yet finalized provisions in Phase Two related to beneficial use of CCR and CCR piles.

Since its Phase Two proposal, EPA has finalized three other rules addressing various CCR rule provisions. In 2020, EPA promulgated its proposed Holistic Approach to Closure Part A (“Part A”), which set forth a new deadline of April 11, 2021, for companies to initiate closure of unlined CCR impoundments. In accordance with the DC Circuit’s vacatur of portions of the 2015 CCR Rule, Part A also changed the classification of compacted soil-lined or clay-lined surface impoundments from “lined” to “unlined”, triggering closure or retrofit requirements for those impoundments. In addition, Part A delineated a process for owners/operators to submit requests for alternative closure deadlines.

EPA also issued the Holistic Approach to Closure Part B (“Part B”) in 2020, which delineated the process for owners/operators to submit alternate liner demonstrations for clay-lined surface impoundments that could otherwise meet applicable requirements. This rule did not include beneficial use of CCR for closure, which EPA explained would be addressed in subsequent rulemaking actions. On May 18, 2023, EPA published a proposed rule establishing the regulatory requirements for inactive surface impoundments at inactive facilities and a new category of regulated unit called a CCR management unit (“CCRMU”), including groundwater monitoring, corrective action, closure, and post-closure care requirements for all CCR management units (regardless of how or when that CCR was placed), and several technical corrections to the existing regulations. Comments on the proposed rule were due July 17, 2023.

On May 8, 2024, EPA published a final rule that extended federal CCR regulatory requirements to (1) inactive CCR surface impoundments at inactive utilities and (2) CCRMU, including CCR impoundments and landfills that closed prior to the effective date of the 2015 CCR rule, inactive CCR landfills, and other areas where CCR was managed directly on the land (“Legacy Rule”). The Legacy Rule became effective on November 8, 2024. EPA included deferral options for smaller CCRMU containing between one and 1,000 tons of CCR, CCRMU located beneath critical infrastructure or large buildings or structures vital to the continuation of current site activities, and CCRMU that closed prior to the effective date of the new rule (subject to certain eligibility conditions). EPA also codified the controversial definitions of infiltration and liquids that were litigated in the DC Circuit. Six petitions for review of the Legacy Rule were filed and were consolidated into one case by the DC Circuit. The Utility Solid Waste Activities Group, of which TXNM is a member, is a petitioner jointly with the National Rural Electric Cooperative Association, and American Public Power Association. The U.S. Supreme Court denied a requested stay of the rule by East Kentucky Power Cooperative. The DC Circuit agreed to hold the case in abeyance pending the outcome of EPA’s reconsideration of the Legacy Rule, with status reports due on March 16, 2026, and at 90-day intervals thereafter. On July 22, 2025, EPA published a final rule and companion proposal revising the compliance deadlines for CCRMU requirements under the Legacy Rule. In September 2025, EPA withdrew the direct final rule due to adverse comments but subsequently issued a final extension rule on February 6, 2026, delaying the deadline to complete the “Facility Evaluation Report Part 1” until February 9, 2027, and extending all subsequent deadlines, as well. The final extension rule was published in the Federal Register on February 10, 2026. On April 13, 2026, EPA published proposed Legacy Rule/CCRMU Amendments that, among other things, would rescind all the requirements related to CCRMU and authorize site-specific tailoring of certain rule requirements through federal permits or approved state permits. The comment period for that proposal ended June 29, 2026.

As of the effective date of the Legacy Rule, one CCRMU was identified at SJGS. SJGS is required, at a minimum, to conduct a two-part evaluation of historic and current CCRMUs with reporting due dates of February 9, 2027, and February 8, 2028 (based on the new final extension rule), with each report posted to a company website by the due date.

At this time, PNM is still evaluating the financial impacts of this final regulation for Four Corners. Initial CCRMU site surveys and final site investigation reports are expected to be finalized by February 9, 2027. Based on the information available to the Company at this time, PNM cannot reasonably estimate the fair value of the entire CCRMU ARO. PNM cannot predict the outcome of the CCRMU site evaluations and investigations, or how these outcomes might affect the associated costs, which might have a material impact on PNM’s operations, financial position, or cash flows.

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In 2020, EPA published a proposed rule establishing a federal permitting program for the handling of CCR within the boundaries of Native American reservations and in states without their own federally authorized state programs. Permits for units within the boundaries of Native American reservations would be due 18 months after the effective date of the rule. EPA has not yet finalized the federal permitting program rule. On May 8, 2026, EPA published a notice reopening the comment period on the proposed federal CCR permit program. Comments are due July 29, 2026. EPA has coordinated with the affected permits for the three facilities with CCR disposal units located on Native American lands. PNM cannot predict the outcome of EPA’s rulemaking activity or the outcome of any related litigation, and whether or how such a ruling would affect operations at Four Corners. Separately, on July 13, 2026, EPA issued an advance notice of proposed rulemaking to solicit comments on a potential federal general permit option for CCR facilities. The comment period ends on October 13, 2026.

EPA’s CCR rule does not cover mine placement of coal ash. In the preamble to its 2015 rule, EPA explained that the OSM and, as necessary, EPA would address the management of CCR in mine fills in a separate regulatory action, recognizing OSM’s expertise in this area. EPA’s decision to defer to OSM was based on a recommendation from the National Academy of Sciences (“NAS”), which was commissioned by Congress in 2006 to investigate the health, safety and environmental risks associated with the use of CCR for mine reclamation. The NRC report recommended that enforceable federal standards be established for the disposal of CCR in mine fills to ensure that states have specific authority and that states implement adequate safeguards. In 2007, OSM published an advance notice of proposed rulemaking on the placement of CCR at mine sites. In that notice, OSM explained its intent to develop the proposed regulations based on its existing authority under the Surface Mining Control and Reclamation Act. Since 2007, however, OSM has not taken any further action to advance this rulemaking. PNM cannot predict the outcome of OSM’s proposed rulemaking regarding CCR regulation, including mine placement of CCRs, or whether OSM’s actions will have a material impact on PNM’s operations, financial position, or cash flows.

As noted above, SJGS did not operate any onsite CCR impoundments or landfills that are regulated under the 2015 CCR rule, and as of November 8, 2024, identified only one CCRMU that would potentially be regulated under the Legacy Rule. The CCR has since been removed from that unit and PNM will conduct the requisite site investigation reports. PNM would seek recovery from its retail customers of all CCR costs for jurisdictional assets that are ultimately incurred.

Utilities that own or operate CCR disposal units, such as those at Four Corners, as indicated above, were required to collect sufficient groundwater sampling data to initiate a detection monitoring program.  Four Corners completed the analysis for its CCR disposal units, which identified several units that needed corrective action. Four Corners continues to gather additional groundwater data and perform remedial evaluations and activities. At this time, PNM does not anticipate its share of the cost to complete these corrective actions to close the CCR disposal units, or to gather and perform remedial evaluations on groundwater at Four Corners, will have a significant impact on its operations, financial position, or cash flows.

Other Commitments and Contingencies
Coal Supply

Four Corners

APS purchases all of Four Corners’ coal requirements from NTEC, an entity owned by the Navajo Nation, under the Four Corners CSA that expires in 2031. The coal comes from reserves located within the Navajo Nation. The contract provides for pricing adjustments over its term based on economic indices and certain minimum payments that may be required if no deliveries of coal are taken. PNM’s share of the coal costs is being recovered through the FPPAC. See additional discussion of the Four Corners CSA in Note 17 of the Notes to Consolidated Financial Statements in the 2025 Annual Reports on Form 10-K.

Coal Mine Reclamation

As indicated under Coal Combustion Residuals Waste Disposal above, SJGS disposed of CCRs in the surface mine pits adjacent to the plant and Four Corners disposes of CCRs in ponds and dry storage areas.

Under the terms of the SJGS CSA, PNM and the other SJGS owners are obligated to compensate WSJ LLC for all reclamation costs associated with the supply of coal from the San Juan mine. PNM and Westmoreland have entered into an agreement under which mine reclamation services for SJGS would be provided.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
A mine reclamation cost study was completed in the third quarter of 2025, and PNM and Westmoreland amended the mine reclamation services agreement to update the capital recovery charges due in each year from 2025 through 2028, which resulted in a minor increase in overall reclamation costs.

PNM’s estimate of the costs necessary to reclaim the mine that serves SJGS is subject to many assumptions, including the timing of reclamation, generally accepted practices at the time reclamation activities occur, and current inflation and discount rates. PNM cannot predict the ultimate cost to reclaim the mine that serves SJGS and would seek to recover all costs related to reclaiming the underground mine from its customers but could be exposed to additional loss related to surface mine reclamation. In connection with certain mining permits relating to the operation of the San Juan mine, Westmoreland was required to post reclamation bonds of $118.7 million with the NMMMD. In order to facilitate the posting of reclamation bonds by sureties on behalf of Westmoreland, TXNM entered into the WFB LOC Facility under which letters of credit aggregating $19.3 million are outstanding as of June 30, 2026.

In 2025, APS provided an update to the cumulative MMBTU consumption for Four Corners for the purpose of allocating final mine reclamation costs. Based on the consumption outlook, PNM’s forecasted share of final reclamation costs was reduced from 9.755% to 9.096%. As a result, PNM recorded a decrease in the liability related to the surface mine.

Based on the most recent estimates, PNM’s remaining payments as of June 30, 2026, for mine reclamation, in future dollars, are estimated to be $21.6 million for the surface mines at both SJGS and Four Corners and $63.1 million for the underground mine at SJGS. At June 30, 2026 and December 31, 2025, liabilities, in current dollars, of $12.8 million and $20.8 million for surface mine reclamation and $56.3 million and $55.2 million for underground mine reclamation were recorded in other deferred credits.

The SJGS owners are parties to a reclamation trust funds agreement to provide financial assurance for post-term coal mine reclamation obligations. The trust funds agreement requires each owner to enter into an individual trust agreement with a financial institution as trustee, create an irrevocable reclamation trust, and meet year-end funding targets set by funding curves that are approved by the SJGS ownership. PNM began using its mine reclamation trust to pay for final mine reclamation costs in April 2023. Because the trust agreement requires meeting specific funding targets at year end, it may be necessary for PNM to make additional contributions to meet those targets. PNM contributed $7.0 million in 2025. Based on PNM’s reclamation trust fund balance at June 30, 2026, current forecasts, and current funding curve targets, PNM anticipates contributing $2.0 million in 2026 and anticipates making contributions of $0.4 million in 2027 and $4.7 million in 2028.

Under the Four Corners CSA, PNM is required to fund its share of estimated final reclamation costs in annual installments into an irrevocable escrow account solely dedicated to the final reclamation cost of the surface mine at Four Corners. PNM did not make any contributions in 2025 and anticipates contributing $0.5 million per year for 2026, 2027 and 2028.

PNM recovers from retail customers’ reclamation costs associated with the underground mine. However, the NMPRC capped the amount collected from retail customers for final reclamation of the surface mines at $100.0 million for both SJGS and Four Corners. If future estimates increase the liability for surface mine reclamation, the excess would be expensed at that time. The impacts of changes in New Mexico state law as a result of the enactment of the ETA and regulatory determinations made by the NMPRC may also affect PNM’s financial position, results of operations, and cash flows. PNM is currently unable to determine the outcome of these matters.

SJGS Decommissioning

In 2021, the San Juan County Commission approved the Coal-Fired Electricity Generating Facility Demolition and Remediation Ordinance (“Ordinance 121”), requiring the full demolition of SJGS upon its complete and permanent closure. Ordinance 121 required the SJGS owners to submit a proposed demolition and remediation plan no later than three months after SJGS was retired. PNM and the other SJGS entered into the San Juan Decommissioning and Trust Funds Agreement, which requires PNM to fund its ownership share of final decommissioning costs into an irrevocable trust. Under the agreement, PNM is required to make funding contributions of which the amount and timing are subject to revised decommissioning cost studies and agreement among the SJGS owners. PNM began using its decommissioning trust to pay for demolition and decommissioning costs in October 2023. PNM has posted a surety bond in the amount of $46.0 million in connection with certain environmental decommissioning obligations and must maintain the bond or other financial assurance until those obligations are satisfied. The surety bond only represents a liability if the SJGS owners fail to deliver on its contractual liability.
59

TXNM ENERGY, INC. AND SUBSIDIARIES
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

PNM records its share of the SJGS decommissioning obligation as an ARO on its Condensed Consolidated Balance Sheets. Studies on the decommissioning costs of SJGS are performed periodically and revisions to the ARO liability are recorded.

On July 29, 2025, PNM received a letter from the NMED indicating that the NMED designated PNM as a responsible party and requiring a Stage 1 Abatement Plan (“S1AP”) proposal for SJGS for groundwater and soil contamination associated with former operations at SJGS. On November 26, 2025, PNM submitted the S1AP to NMED that was approved on February 9, 2026. The S1AP estimates site investigation and monitoring to be completed by the first quarter of 2027. PNM is currently conducting site investigations, groundwater sampling, and monitoring detailed in the S1AP.

PVNGS Liability and Insurance Matters

Public liability for incidents at nuclear power plants is governed by the Price-Anderson Nuclear Industries Indemnity Act, which limits the liability of nuclear reactor owners to the amount of insurance available from both commercial sources and an industry-wide retrospective payment plan. The insurance limit is subject to an adjustment every five years based upon the aggregate percentage change in the Consumer Price Index. The most recent adjustment took effect on January 1, 2024. As of that date, in accordance with this act, the PVNGS participants are insured against public liability exposure for a nuclear incident up to $16.3 billion per occurrence. PVNGS maintains the maximum available nuclear liability insurance in the amount of $500 million, which is provided by American Nuclear Insurers. The remaining $15.8 billion is provided through a mandatory industry-wide retrospective assessment program. If losses at any nuclear power plant covered by the program exceed the accumulated funds, PNM could be assessed retrospective premium adjustments. The maximum retrospective premium per reactor under the program for each nuclear liability incident is $165.9 million, subject to a maximum annual premium of $24.7 million per incident. Based on PNM’s ownership interest in the three units, PNM’s maximum retrospective premium per incident for all three units is $12.1 million, with a maximum annual payment limitation of $1.8 million, to be adjusted periodically for inflation.

The PVNGS participants maintain insurance for damage to and decontamination of property at PVNGS in the aggregate amount of $2.8 billion, a substantial portion of which must first be applied to stabilization and decontamination. These coverages are provided by Nuclear Electric Insurance Limited (“NEIL”). If NEIL’s losses in any policy year exceed accumulated funds, PNM is subject to retrospective premium adjustments of $5.0 million. The insurance coverage discussed in this and the previous paragraph are subject to certain policy conditions, sublimits, and exclusions.

(12)   Regulatory and Rate Matters

The Company is involved in various regulatory matters, some of which contain contingencies that are subject to the same uncertainties as those described in Note 11. Additional information concerning regulatory and rate matters is contained in Note 17 of the Notes to Consolidated Financial Statements in the 2025 Annual Reports on Form 10-K.

TXNM

Merger Proceedings

On August 25, 2025, TXNM filed applications for approval of its proposed Merger with Blackstone Infrastructure (Note 17) with the NMPRC, PUCT, and FERC. In addition to strong governance and oversight provisions, the applications include the following benefits for PNM and TNMP’s customers:

Application to the NMPRC

•$105.0 million in retail rate credits to be paid over four years
•$10.0 million in additional contributions to the PNM Good Neighbor Fund to be paid over 10 years
•$35.0 million in economic development funding to be paid over 10 years
•$25.0 million commitment to innovative technologies to support New Mexico’s transition to carbon-free energy
•PNM’s continued strong community involvement and charitable giving

The NMPRC does not have a statutory timeframe for consideration of the application. On December 5, 2025, the deadline for intervention passed with 19 parties intervening in the matter.

60

TXNM ENERGY, INC. AND SUBSIDIARIES
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
On February 6, 2026, a motion and brief for order was filed, directing the applicants to show cause and for other relief in the pending application with the NMPRC. The motion alleges that the purchase of $400.0 million of TXNM common stock violated Section 62-6-12 of the Public Utility Act because PNM did not receive prior approval of the purchase from the NMPRC. TXNM and PNM believe that the allegations in the motion do not constitute a violation of the Public Utility Act and filed responses in opposition to the motion on February 18, 2026. On March 11, 2026, the NMPRC hearing examiners issued an order granting the February 2, 2026, motion to direct the applicants to show cause regarding the $400.0 million purchase of TXNM common stock. The order initiates a formal investigation to determine whether the stock acquisition violated Section 62-6-12 of the Public Utility Act and any legal and practical consequences of such violation.

On March 16, 2026, a status conference was held to determine whether or not this matter warranted a delay in the procedural schedule of the pending Merger application including the evidentiary hearing initially scheduled for May 4-15, 2026. On March 17, 2026, the NMPRC issued a final order staying the procedural schedule and deadlines related to the pending Merger application and ordered a scheduling conference to be held on May 6, 2026. The NMPRC also issued a final order in the show cause motion, for which a public hearing was held on April 30, 2026. On May 5, 2026, the NMPRC issued an Order vacating the scheduling conference and on May 8, 2026, the NMPRC issued a revised procedural schedule setting the hearing for August 17-28, 2026.

On June 8, 2026, the Hearing Examiners issued a RD concluding that the purchase of $400.0 million of TXNM common stock violated Section 62-6-12 of the Public Utility Act because it occurred without prior NMPRC approval. Applicants are required to submit a detailed compliance plan within 45 days of receiving a Final Order to show how the transaction will be unwound ensuring ratepayers are fully protected from all impacts. On July 2, 2026, the NMPRC issued a Final Order largely adopting the RD and imposing a $100,000 penalty on TXNM for the violation. Additionally, the NMPRC has stayed the procedural schedule in the Merger application. The Company cannot predict the outcome of this matter.

On July 27, 2026, TXNM filed its compliance filing with the NMPRC detailing the unwinding of the May 2025 Stock Purchase Agreement by cancelling the 8,000,000 shares of TXNM common stock sold as of July 2, 2026, drawing on the $400.0 million TXNM 2026 Delayed-Draw Term Loan, and repaying the aggregate $400.0 million received in the May 2025 Stock Purchase Agreement (Note 9). The NMPRC and other parties may take 30 days to review the compliance filing and respond as to whether the action taken to unwind the May 2025 Stock Purchase Agreement adequately protects ratepayers from the consequences of effectuating the void status. TXNM intends to issue shares of TXNM common stock to repay the $400.0 million TXNM 2026 Delayed-Draw Term Loan through either publicly registered offerings or private placement transactions. On July 31, 2026, TXNM filed a petition with the NMPRC for a declaratory order that the proposed equity transactions do not require prior NMPRC approval and requested that the NMPRC expedite approval of the petition. The Company cannot predict the outcome of this matter.

Application to the PUCT

•Rate credits of $35.0 million to be paid over four years
•$10.0 million in economic development funding to be paid over 10 years
•$5.0 million in additional community support over 10 years to enhance charitable giving

On December 11, 2025, TXNM and Blackstone Infrastructure reached a unanimous settlement with parties in its Merger proceeding filed with the PUCT. Terms of the settlement include additional financial oversight, corporate governance and regulatory protections that favor local communities and the current workforce. Additionally, the settlement removed the $10.0 million in economic development and the $5.0 million in charitable giving and increased the rate credits from $35.0 million to $45.5 million to be paid over four years. The settlement was approved by the PUCT on February 6, 2026.

Application to the FERC

In October 2025, a protest was filed arguing that the proposed Merger posed significant risk of unlawful cross-subsidization, especially benefitting Blackstone Infrastructure’s data centers and energy affiliates, and could harm competition, rates, and regulatory oversight. On February 20, 2026, FERC approved the proposed Merger concluding that there is no adverse effect on competition, no adverse rate impacts, and no regulatory gap. FERC rejected claims related to data centers, private equity ownership, and speculative cross-subsidization relying on existing state ring-fencing protections in New Mexico and Texas. On March 23, 2026, a request for rehearing was filed concerning FERC’s February 20, 2026, approval of the proposed Merger. The request is based on the recent developments in the application before the NMPRC and the show cause order, discussed above. The request argues that this procedural uncertainty may justify FERC’s reconsideration. On April 23, 2026, FERC issued a notice of denial of rehearing by operation of law and providing further consideration. On July 17, 2026, a
61

TXNM ENERGY, INC. AND SUBSIDIARIES
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
motion was filed seeking to notify FERC of the NMPRC’s July 2, 2026, Final Order in the show cause proceeding and asking FERC to consider that order in connection with the pending rehearing request. FERC has not yet issued an order addressing the merits of the rehearing request. The Company cannot predict the outcome of this matter.

PNM

New Mexico General Rate Case

2025 Rate Request

In June 2024, PNM filed an application with the NMPRC for a general increase in retail electric rates. The proposed base rate changes would be implemented in two phases, with the first phase effective July 1, 2025 and the second phase effective January 1, 2026. In November 2024, PNM filed an unopposed comprehensive stipulation with the NMPRC that was approved on May 15, 2025, with the base rate changes becoming effective July 1, 2025 and April 1, 2026. Key components agreed upon by the signatories may be found in Note 17 of the Notes to Consolidated Financial Statements in the 2025 Annual Reports on Form 10-K. This matter is now concluded.

Renewable Energy Portfolio Standard

As discussed in Note 11, the ETA amends the REA including removal of diversity requirements and certain customer caps and exemptions relating to the application of the RPS under the REA. The REA provides for streamlined proceedings for approval of utilities’ renewable energy procurement plans, assures that utilities recover costs incurred consistent with approved procurement plans, and requires the NMPRC to establish a Reasonable Cost Threshold (“RCT”) for the procurement of renewable resources to prevent excessive costs being added to rates. The ETA sets a RCT of $60 per MWh, adjusted for inflation, using an average annual levelized resource cost basis. PNM makes renewable procurements consistent with the NMPRC approved plans and recovers certain renewable procurement costs from customers through the renewable energy rider billed on a KWh basis.

The following sets forth PNM’s revenue recorded under the renewable energy rider:
Revenues Recorded
Effective date
January 1,
Annual Revenue Collection
Three months ended June 30,Six months ended June 30,
(In millions)
2025$58.7$14.6$31.6
202654.316.632.2

Under the renewable rider, if PNM’s earned rate of return on jurisdictional equity in a calendar year, adjusted for items not representative of normal operations, exceeds the NMPRC-approved rate by 0.5%, PNM is required to refund the excess to customers during May through December of the following year. PNM did not exceed such limitation in 2025. On May 28, 2026, PNM filed its application, requesting to collect $53.0 million for 2027 costs beginning on January 1, 2027.

Energy Efficiency and Load Management

On April 15, 2026, PNM filed its application with the NMPRC for energy efficiency and load management programs to be offered in 2027, 2028, and 2029 (the “2027 Plan”) in compliance with the EUEA. The 2027 Plan proposed to continue ten existing energy efficiency programs with modifications and total annual budgets of $45.6 million in 2027, $47.6 million in 2028, and $48.8 million in 2029. The application also sought approval of an annual base incentive of 7.1% of the portfolio budget and a sliding scale that provides additional incentive for additional energy saved as a percentage of program cost, up to the maximum allowed by the energy efficiency rule which for PNM is 10.54%. PNM cannot predict the outcome of this matter.

Integrated Resource Plans

NMPRC rules require that investor-owned utilities file an IRP every three years that covers a 20-year planning period and contains an action plan covering the first three years of that period. The IRP establishes a collaborative facilitated process for a utility and stakeholders to agree on a statement of need for potential new or additional resources, as well as an action plan to guide procurement or development of resources to meet the stated need. A most-cost-effective portfolio of resources shall be derived from the statement of need analysis. The statement of need and action plan must be accepted before the utility begins
62

TXNM ENERGY, INC. AND SUBSIDIARIES
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
the resource solicitation process pursuant to the IRP Rule. Following acceptance of the statement of need and action plan, a utility will provide the NMPRC and intervenors drafts of the RFP and a timeline for issuing, receiving, evaluating, and ranking bids. The NMPRC will then appoint an Independent Monitor (“IM”) to oversee the RFP process, which allows for parties and the IM to comment on the RFP consistency with the IRP, after which the utility issues the RFP. Within 120 days of receiving bids the utility shall provide the IM with results including pricing and non-price evaluation criteria, ranking of bids, chosen portfolio and alternatives that also meet the needs; the IM then rules on the fairness of the RFP execution. Acceptance of the statement of need and action plan will not constitute a finding of prudency or pre-approval of costs associated with the additional resources. Following the RFP and IM processes, the utility may apply for approvals, and any costs incurred to implement the action plan will be considered in a general rate case and/or resource acquisition proceeding.

2023 IRP

On December 15, 2023, PNM filed its 2023 IRP with a continued focus on a carbon-free energy system by 2040. See Note 17 of the Notes to Consolidated Financial Statements in the 2025 Annual Reports on Form 10-K for details related to the filing.

On December 30, 2024, PNM issued its 2029-2032 RFP for at least 900 MW of new energy resources to come online between 2029 and 2032, with at least 500 MW needed by 2030. The RFP is consistent with the needs identified in PNM’s 2023 IRP, which identified a range of 900 to 2,900 MW of new capacity needed by 2032, depending on the type of resources selected. The 2029-2032 RFP is anticipated to identify potential replacement resources for PNM’s current natural gas generation capacity as well as PNM’s ownership interest in Four Corners. On January 2, 2026, PNM filed a Notice of Material Event for the 2023 IRP to inform the NMPRC of its intent to issue a supplemental RFP for gas-fired resources in response to new customer requirements that have accelerated and increased energy demands beyond previously forecasted resources. On February 4, 2026, the IM appointed to the 2029-2032 RFP concluded that PNM appropriately evaluated the bids, made reasonable portfolio selection decisions, and overall, the RFP process was conducted in a fair, transparent manner that was in compliance with regulatory requirements. On March 6, 2026, PNM filed its draft supplemental RFP for the additional resources anticipated. On April 4, 2026, the IM issued a design report on PNM’s draft supplemental RFP which contained targeted modifications to improve transparency, expand participation, and strengthen competitive neutrality within the class of eligible firm resources. PNM filed responses to the IM design report and issued a supplemental RFP on May 1, 2026.

On May 29, 2026, PNM filed its 2029-2032 Resource Portfolio Application with the NMPRC. The application seeks approval of a balanced portfolio that includes:

•800 MW of wind PPAs
•240 MW of solar PPAs
•610 MW of battery storage ESAs
•40 MW of dispatchable natural gas generation (expansion of PNM-owned capacity)
•Abandonment and exit of PNM’s interest in Four Corners in 2031

The application also includes a request for an accounting order under SB 170 (discussed below) for certain resources associated with future economic development and gives notice that PNM intends to extend operations of the existing Reeves Generating Station through the end of 2044 to provide additional resource assurance. The proposed portfolio addresses projected resource shortfalls beginning in 2029, driven by load growth and the need to replace capacity as PNM exits Four Corners. As a result, PNM has requested that the NMPRC adhere to the six-month review timeline for PPAs and ESA and to expedite the review of the natural gas project. PNM cannot predict the outcome of this matter.

Grid Modernization Plan

In October 2022, in compliance with New Mexico Grid Modernization Statute, PNM filed its Grid Modernization Plan with the NMPRC. The projects included in the application improve customers’ ability to customize their use of energy and ensure that customers, including low-income customers, are a top priority and will receive benefits consistent with the Grid Modernization Statute. PNM’s proposal to modernize its electricity grid through infrastructure and technology improvements also increases the efficiency, reliability, resilience, and security of PNM’s electric system. PNM’s application included grid modernization investments of approximately $344 million for the first six years of a broader 11-year strategy. The approved rate rider will recover capital costs, operating expenses, and taxes associated with the investments included in the Grid Modernization Plan. On October 17, 2024, the NMPRC issued a final order largely approving PNM’s application with minor modifications.
63

TXNM ENERGY, INC. AND SUBSIDIARIES
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

On June 20, 2025, PNM filed its first annual Grid Modernization Plan review to provide updates on year one implementation progress and outline planned activities for year two, in alignment with regulatory expectations. Additionally, PNM has updated key portions of the forecasted strategy including increasing investments from approximately $344 million to $367 million in the first six years, while decreasing projected operations and maintenance costs by approximately 18%. On February 26, 2026, the NMPRC approved PNM’s first annual Grid Modernization Review and the updated year two revenue requirement. This matter is now concluded.

On March 2, 2026, PNM filed its first annual Grid Modernization Plan reconciliation filing to reconcile the year one actual revenue requirement to the approved revenue requirement. On March 16, 2026, PNM filed the advice notice for the rider to collect the year one revenue requirement of $7.7 million with an effective date of April 15, 2026. The advice notice became effective on April 15, 2026, by operation of law.

In February 2025, the NMPRC issued a NOPR proposing a rule within the Grid Modernization Statute requiring electric utilities to file a grid plan every three years to establish transparency in distribution planning and assessment of the current and future grid system for areas of potential expansions, upgrades, and grid enhancing technologies that would improve system reliability, resiliency, and wildfire prevention. On January 30, 2026, the NMPRC issued an order directing PNM to file a one-time distribution system plan by October 1, 2026, that will act as a pilot for future formal planning and will undergo full NMPRC review under the existing Grid Modernization Statute. In a clarification order issued on March 13, 2026, the NMPRC gave PNM the discretion to treat the upcoming filing, due October 1, 2026, as an informational filing for acceptance or as a request for review and approval by the NMPRC.

On April 10, 2026, PNM filed its second annual Grid Modernization Plan review to provide updates on implementation progress, costs, and revenue requirements for years two through six. In the filing, PNM requested approval of updated year three costs and revenue requirement estimates, including the presumption of reasonableness, authorization of capital treatment of software as a service costs for years two through six, and issuance of a final order no later than October 15, 2026. On May 1, 2026, a procedural order was issued scheduling an evidentiary hearing for August 11-12, 2026.
Transportation and Electrification Program (TEP)
On June 1, 2026, PNM filed its 2027-2029 TEP with the NMPRC, requesting approval of a $32.9 million total three-year budget and continuation of the current TEP Rider. Approximately 40% of the budget, $13.2 million, will be dedicated to low-income customers and underserved communities. PNM cannot predict the outcome of this matter.
BESS Project

On August 6, 2025, PNM filed an application with the NMPRC for approval of a CCN to construct, own, and operate 30 MWs of energy storage. The application consists of 6 MW batteries to be constructed at five existing PNM-owned solar facilities located in Otero County, San Miguel County, Luna County and two sites in Valencia County. PNM estimates that the BESS Project will cost $78.7 million and will assist in serving our summer peak season when operational. PNM expects to seek recovery of these costs in a future rate case. On March 10, 2026, the hearing examiner issued an RD recommending approval of the CCN that was approved in a final order issued by the NMPRC on April 10, 2026. This matter is now concluded.

SB 170 Projects

The enactment of Senate Bill 170 (“SB 170”) allows a utility to defer costs of economic development projects that serve sites certified by the New Mexico Economic Development Department (“NMEDD”). On December 29, 2025, PNM filed an application with the NMPRC for approval of two economic development projects including the Westpointe and Mesa Del Sol Substations and the issuance of an accounting order to defer the costs of the projects as regulatory assets. The projects are estimated to cost $165.5 million and are expected to be reviewed in a future rate proceeding. On March 13, 2026, the NMPRC voted to approve PNM’s application for the economic development projects and issued an accounting order, concluding this matter. The projects remain subject to NMPRC review for necessity and prudence in a future rate proceeding.

Rio Puerco-Pajarito-Prosperity CCN

On December 30, 2025, PNM filed an application with the NMPRC for approval of a CCN and a determination for a new right-of-way. The CCN encompasses a new 345 kV transmission line, existing station expansions, and a new substation.
64

TXNM ENERGY, INC. AND SUBSIDIARIES
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
This project aims to enhance reliability and resilience in the Albuquerque area, facilitate the integration of renewable energy, and support economic development. On February 13, 2026, the NMPRC dismissed the application without prejudice and on February 25, 2026, PNM filed a new application for approval of the CCN providing additional clarity and more information on the project. The estimated cost of the project is approximately $247 million and is expected to be reviewed in a future rate proceeding. On March 12, 2026, the Hearing Examiner issued a procedural order setting a public hearing for August 26, 2026. On July 24, 2026, the hearing examiner issued a RD approving PNM’s request for determination of a new right-of-way for the Rio Puerco-Pajarito-Prosperity 345kV transmission line project. The RD is limited to the right-of-way determination and does not address project need, routing, costs, ratemaking treatment, or the requested CCN. PNM cannot predict the outcome of this matter.

TNMP

TNMP Base Rate Review

On November 14, 2025, TNMP filed a general rate proceeding with the PUCT (the “TNMP Base Rate Review”) requesting recovery of $2.8 billion of rate base as of June 30, 2025, a requested ROE of 10.4%, and a 47.54% equity ratio. The TNMP Base Rate Review also includes increases in operations and maintenance expenses that are not recovered through semi-annual TCOS and DCRF filings, excludes increases in interest expense resulting from refinancing of debt associated with the proposed Merger, and requests recovery of $20.5 million associated with Hurricane Beryl restoration costs over a five-year period. If approved by the PUCT, the new rates are expected to become effective in mid-2026. A hearing on the merits was set for March 9-12, 2026. On March 6, 2026, TNMP, on behalf of all parties to the proceeding, filed a motion to abate the procedural schedule on the merits of continuing their efforts to reach a full resolution and settlement. On March 9, 2026, the hearing was cancelled. On May 29, 2026, TNMP and all parties to the proceeding reached a settlement and filed an unopposed stipulation (the “Stipulation”) with the PUCT. The Stipulation agreed to TNMP’s recovery of $2.8 billion of rate base, a ROE of 9.65% and a 45% equity ratio. Final rates in the Stipulation are effective 45 days from the PUCT’s Final Order and TNMP will establish a surcharge to recover interim rates after the PUCT’s Final Order in the proceeding. On July 30, 2026, the PUCT issued its Final Order approving the Stipulation.

Large Load Interconnection Rulemaking

In July 2025, PUCT Staff opened a rulemaking project to implement large load interconnection standards required by Texas legislation. The legislation directs the PUCT to establish standards for interconnecting large load customers in the ERCOT region in a manner that supports business development, minimizes the risk of stranded infrastructure costs, and maintains system reliability. TNMP participated in a workshop on this initiative in January 2026. On February 6, 2026, the PUCT adopted Rule 25.370, which requires the power demands of large load customers of 75 MW or more, to be incorporated into ERCOT’s Regional Transmission Plan and resource adequacy assessments. The rule establishes thresholds and criteria for identifying large load customers and requires them to demonstrate verifiable progress toward site control, financing, and towards state and local regulatory approvals. Large load customers must also provide attestations to transmission and distribution service providers confirming the status and timeline of their project load ramp schedules. Since the rule’s effectiveness and the establishment of “batch zero” by ERCOT, TNMP has experienced an increase in transmission interconnection requests. As of June 30, 2026, TNMP has $29.5 million in deposits recorded in Other deferred credits on its Condensed Consolidated Balance Sheet.

Sales and Use Tax Refunds

On March 12, 2025, TNMP filed a refund claim with the Texas Comptroller’s office for overpaid sales and use taxes primarily related to asset purchases. The $34.6 million refund claim covers periods from January 2022 to October 2024, and amounts received, net of consultant fees, are expected to be applied to 2025 TNMP capital projects. On September 22, 2025, TNMP received the requested refund net of $7.5 million in consultant fees; $24.7 million was applied to 2025 TNMP capital projects; $2.1 million to offset related interest expense; and $0.3 million for other related expenses. On October 15, 2025, TNMP filed another refund claim for $5.1 million for overpaid sales and use taxes primarily related to asset purchases covering the period from November 2024 through February 2025. On June 25, 2026, the Texas Comptroller’s Office issued an adjustment report indicating that the refund claim had been approved and interest would be accruing at a daily rate until paid. TNMP expects to receive the requested refund net of $1.1 million in consultant fees and apply $3.8 million to capital projects with the remaining $0.2 million to offset related interest expense.


65

TXNM ENERGY, INC. AND SUBSIDIARIES
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Transmission Cost of Service Rates

TNMP can update its TCOS rates twice per year to reflect changes in its invested capital although updates are not allowed while a general rate case is in process. Updated rates reflect the addition and retirement of transmission facilities, including appropriate depreciation, federal income tax and other associated taxes, and the approved rate of return on such facilities. The following sets forth TNMP’s recent interim transmission cost rate increases:

Effective DateApproved Increase in Rate BaseAnnual Increase in Revenue
(In millions)
March 15, 2024$97.4 $13.1 
September 20, 202420.6 3.9 
March 25, 202583.5 11.5 
September 19, 202587.4 12.3 

Periodic Distribution Rate Adjustment

PUCT rules permit interim rate adjustments twice per year to reflect changes in investments in distribution assets. Additionally, a DCRF may be filed during a pending rate case proceeding as long as that DCRF request is not filed until the 185th day after the rate case proceeding was initiated. The following sets forth TNMP’s recent interim distribution rate increases:

Effective DateApproved Increase in Rate BaseAnnual Increase in Revenue
(In millions)
September 1, 2023$157.0 $14.5 
July 28, 2024205.9 15.6 
November 17, 202443.7 7.7 
June 29, 2025176.6 25.0 
December 29, 202518.9 1.8 

HB 5247

On June 20, 2025, Texas House Bill 5247 (“HB 5247”) was signed into law by Governor Gregg Abbott. HB 5247, which took effect immediately, added Section 36.216 to the Public Regulatory Act (“PURA 36.216”), authorizing certain electric utilities with total capital expenditures that exceeded 300 percent of annual depreciation in a calendar year, to elect, in the following calendar year, to file a single, annual proceeding to adjust nonfuel rates on a system-wide basis to reflect changes in transmission and distribution rates previously authorized under certain other interim rate mechanisms. A utility seeking to make this election under PURA 36.216 is required to file a notice with the PUCT informing them of its intent and provide supporting documentation of the applicable capital expenditures at least 60 days before filing the single, annual proceeding and correspondingly must notify the PUCT if the utility determines that it no longer qualifies for continued use of the election. Management has evaluated the application of HB 5247 and PURA 36.216 and determined that TNMP qualifies as the type of electric utility that would be eligible for the election. Upon completion of its general rate proceeding discussed above, TNMP expects to make its first comprehensive filing under Section 36.216 with a view towards recovering costs associated with eligible transmission and distribution investments that were placed into service after December 31, 2024, and that are not currently reflected in rates. In the interim, TNMP is recognizing a regulatory asset for costs associated with eligible transmission and distribution capital investments and is offsetting depreciation, property tax expense, and carrying costs within alternative revenue. At June 30, 2026, and December 31, 2025, the regulatory asset associated with these costs totaled $36.8 million and $17.5 million.

Energy Efficiency

TNMP recovers the costs of its energy efficiency programs through an energy efficiency cost recovery factor (“EECRF”), which includes projected program costs, under and over collected costs from prior years, rate case expenses, and performance bonuses (if programs exceed mandated savings goals). On May 30, 2025, TNMP filed its request to adjust the
66

TXNM ENERGY, INC. AND SUBSIDIARIES
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
EECRF to reflect changes in costs for 2026. On November 14, 2025, the total amount requested of $8.1 million, which includes a performance bonus of $2.5 million, based on TNMP’s energy efficiency achievements in 2024, was approved and took effect March 1, 2026. On May 29, 2026, TNMP filed its request to adjust the EECRF to reflect changes in costs for 2027. The total amount requested was $9.5 million, which includes a performance bonus of $1.2 million based on TNMP’s energy efficiency achievements in 2025. The case is pending review by the PUCT.

System Resiliency Plan (“SRP”)

In 2023, the Texas Legislature enacted House Bill No. 2555 (“HB 2555”), permitting an electric utility to seek approval of, and cost recovery for, a system resiliency plan. On August 28, 2024, TNMP filed its first SRP with the PUCT designed to benefit customers through enhanced resiliency of its distribution system, as intended under HB 2555. The SRP includes approximately $600 million of capital investments and approximately $151 million of other related costs over three years and was developed using a comprehensive and data-driven approach which evaluated various types of resiliency events posing material risk to the safe and reliable operation of TNMP’s distribution system. TNMP’s service territory includes non-contiguous areas across different regions of Texas, ranging from small communities and rural areas to communities around large metropolitan areas, each with unique risks. Investments in the SRP are prioritized based on customer benefit, physical protection of infrastructure, foundational investments in operational and cybersecurity technologies, and wildfire risk reduction and are focused on lower-performing areas in the context of reliability. Eight different resiliency measures are outlined in the SRP with associated programs and infrastructure impacts to improve the system’s ability to prevent, withstand, mitigate and/or more promptly recover from resiliency events: distribution system resiliency, distribution system protection modernization, vegetation management, wildfire mitigation, flood mitigation, enhanced operations system technology, cybersecurity, and physical security resiliency. Recovery of investments and costs are permissible primarily through DCRF filings, with deferral of depreciation and other certain expenses until recovery begins.

On December 11, 2024, TNMP filed an unopposed settlement with the PUCT. The settlement includes $565.8 million of capital investments over 2025 through 2027, reflecting 94% of TNMP’s proposed plan investments. The settlement also encompasses $128.2 million of operations and maintenance expenses associated with several programs, including vegetation management and wildfire mitigation. On March 26, 2025, TNMP received the final order from the PUCT which included modifications reflecting capital investments of $545.8 million and $86.1 million of operating and maintenance costs. As of June 30, 2026 and December 31, 2025, TNMP incurred $26.7 million and $10.6 million of operating and maintenance costs, all of which have been recorded as a Regulatory Asset on the Condensed Consolidated Balance Sheets. TNMP will seek collection of such costs in a future regulatory proceeding.

(13)     Lease Commitments

The Company leases office buildings, vehicles, energy storage facilities, and other equipment. In addition, certain rights-of-way agreements are classified as leases. All of the Company’s leases with terms in excess of one year are recorded on the balance sheet by recording a present value lease liability and a corresponding right-of-use asset. Operating lease expense is recognized within operating expenses according to the use of the asset on a straight-line basis. Financing lease costs, which are comprised primarily of fleet and office equipment leases commencing after January 1, 2019, are recognized by amortizing the right-of-use asset on a straight-line basis and by recording interest expense on the lease liability. Financing lease right-of-use assets amortization is reflected in depreciation and amortization and interest on financing lease liabilities is reflected as interest charges on the Company’s Condensed Consolidated Statements of Earnings. See additional discussion of the Company’s leasing activities in Note 8 of the Notes to Consolidated Financial Statements in the 2025 Annual Reports on Form 10-K.

Land Easements and Rights-of-Way

Many of PNM’s electric transmission and distribution facilities are located on lands that require the grant of rights-of-way from governmental entities, Native American tribes, or private parties. PNM has completed several renewals of rights-of-way, the largest of which is a renewal with the Navajo Nation. PNM is obligated to pay the Navajo Nation annual payments of $6.0 million, subject to adjustment each year based on the Consumer Price Index, through 2029. PNM’s April 2026 payment for the amount due under the Navajo Nation right-of-way lease was $9.1 million, which included amounts due under the Consumer Price Index adjustment. Changes in the Consumer Price Index subsequent to January 1, 2019, are considered variable lease payments.

PNM has other prepaid rights-of-way agreements that are not accounted for as leases or recognized as a component of plant in service. PNM reflects the unamortized balance of these prepayments in other deferred charges on the Condensed Consolidated Balance Sheets and recognizes amortization expense associated with these agreements in the Condensed
67

TXNM ENERGY, INC. AND SUBSIDIARIES
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Consolidated Statement of Earnings over their term. As of June 30, 2026 and December 31, 2025, the unamortized balance of these rights-of-ways was $90.2 million and $69.2 million. PNM recognized amortization expense associated with these agreements of $1.1 million and $2.3 million in the three and six months ended June 30, 2026, and $1.2 million and $2.2 million in the three and six months ended June 30, 2025.

Fleet Vehicles and Equipment

Fleet vehicle and equipment leases commencing on or after January 1, 2019, are classified as financing leases. Fleet vehicle and equipment leases existing as of December 31, 2018, are classified as operating leases. The Company’s fleet vehicle and equipment lease agreements include non-lease components for insignificant administrative and other costs that are billed over the life of the agreement. At June 30, 2026, residual value guarantees on fleet vehicle, and equipment leases are $0.6 million, $0.5 million, and $1.1 million for PNM, TNMP, and TXNM Consolidated.

Energy Storage Agreements

The Company has ESAs with fixed payments over the life of the agreements, that are accounted for as operating leases, for which the Company records the initial lease liabilities and corresponding right-of-use assets. The Company also has ESAs with monthly payments that vary, depending on the available capacity of the energy storage facility, that are also accounted for as operating leases. However, due to the variable nature of the consideration, these agreements do not require a lease liability or a right-of-use asset to be recorded upon inception. Expenses for this type of lease are reflected in variable lease expense in the tables below. During the first quarter of 2026, one existing fixed payment ESA was amended to variable payments based on available capacity, resulting in a $57.2 million retirement of unamortized right-of-use assets and associated lease liabilities. In addition, the Company has elected to separate lease components from non-lease components for ESAs and accordingly does not include non-lease components in the measurement of the lease liability or right-of-use asset. The non-lease components, which are not included in the measurement of the lease liability or the corresponding right-of-use asset, comprise 25.5% of the value of the agreements.

Information related to the Company’s operating leases recorded on the Condensed Consolidated Balance Sheets is presented below:
June 30, 2026December 31, 2025
PNMTNMP
TXNM
PNMTNMP
TXNM
(In thousands)
Operating leases:
Operating lease assets, net of amortization$47,136 $331 $47,935 $107,986 $39 $108,517 
Current portion of operating lease liabilities6,989 76 7,109 8,913 15 8,969 
Long-term portion of operating lease liabilities34,074 257 34,773 96,246 24 96,735 

As discussed above, the Company classifies its fleet vehicle and equipment leases and its office equipment leases commencing on or after January 1, 2019 as financing leases.

Information related to the Company’s financing leases recorded on the Condensed Consolidated Balance Sheets is presented below:
June 30, 2026December 31, 2025
PNMTNMP
TXNM
PNMTNMP
TXNM
(In thousands)
Financing leases:
Non-utility property$31,350 $38,985 $71,870 $30,555 $33,344 $65,366 
Accumulated depreciation(15,254)(15,106)(31,089)(13,079)(14,319)(27,928)
Non-utility property, net16,096 23,879 40,781 17,476 19,025 37,438 
Other current liabilities$5,771 $7,795 $13,946 $5,764 $6,604 $12,743 
Other deferred credits10,358 16,135 26,950 11,740 12,456 24,786 


68

TXNM ENERGY, INC. AND SUBSIDIARIES
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Information concerning the weighted average remaining lease terms and the weighted average discount rates used to determine the Company’s lease liabilities is presented below:

June 30, 2026December 31, 2025
PNMTNMP
TXNM
PNMTNMP
TXNM
Weighted average remaining lease term (years):
Operating leases11.284.2411.1915.642.6315.60
Financing leases3.413.713.563.753.483.59
Weighted average discount rate:
Operating leases5.18 %4.31 %5.18 %5.55 %5.39 %5.55 %
Financing leases5.36 %5.47 %5.42 %5.33 %5.43 %5.37 %

Information for the components of lease expense is as follows:

Three Months Ended June 30, 2026Six Months Ended June 30, 2026
PNMTNMP
TXNM
PNMTNMP
TXNM
(In thousands)
Operating lease cost:
Energy storage leases
$395 $— $395 $1,250 $— $1,250 
Other operating leases1,902 23 1,943 3,752 46 3,835 
Amounts capitalized— — — — — — 
Total operating lease expense2,297 23 2,338 5,002 46 5,085 
Financing lease cost:
Amortization of right-of-use assets1,529 2,121 3,751 3,049 4,099 7,345 
Interest on lease liabilities225 338 574 460 626 1,108 
Amounts capitalized(1,224)(2,015)(3,239)(2,412)(3,873)(6,285)
Total financing lease expense530 444 1,086 1,098 852 2,169 
Variable lease expense19,844 — 19,844 35,186 — 35,186 
Short-term lease expense190 7 205 365 16 400 
Total lease expense for the period$22,861 $474 $23,473 $41,651 $914 $42,840 

Three Months Ended June 30, 2025Six Months Ended June 30, 2025
PNMTNMP
TXNM
PNMTNMP
TXNM
(In thousands)
Operating lease cost:
Energy storage leases
$5,084 $— $5,084 $10,167 $— $10,167 
Other operating leases
1,863 131 2,012 3,726 285 4,048 
Amounts capitalized(11)(106)(117)(22)(236)(258)
Total operating lease expense6,936 25 6,979 13,871 49 13,957 
Financing lease cost:
Amortization of right-of-use assets1,230 1,549 2,864 2,431 2,843 5,452 
Interest on lease liabilities184 213 411 364 357 750 
Amounts capitalized(898)(1,455)(2,354)(1,778)(2,650)(4,428)
Total financing lease expense516 307 921 1,017 550 1,774 
Variable lease expense6,579 — 6,579 13,135 — 13,135 
Short-term lease expense178 8 198 369 12 423 
Total lease expense for the period$14,209 $340 $14,677 $28,392 $611 $29,289 


69

TXNM ENERGY, INC. AND SUBSIDIARIES
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Supplemental cash flow information related to the Company’s leases is as follows:

Six Months EndedSix Months Ended
June 30, 2026June 30, 2025
PNMTNMP
TXNM
PNMTNMP
TXNM
(In thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases$8,247 $44 $8,326 $17,114 $27 $17,173 
Operating cash flows from financing leases147 140 309 131 97 256 
Finance cash flows from financing leases948 707 1,849 884 447 1,499 
Non-cash information related to right-of-use assets obtained in exchange for lease obligations:
Operating leases additions
$— $331 $331 $49 $9 $58 
Operating leases retirements
(385)— (385)— (271)(271)
Financing leases1,681 8,994 10,744 2,789 5,855 8,848 

Capitalized lease costs are reflected as investing activities on the Company’s Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2026 and 2025.

Future expected lease payments are shown below:

As of June 30, 2026
PNMTNMP
TXNM
Operating
Operating
Financing
Energy Storage
Other
FinancingOperatingFinancing
Energy Storage
Other
(In thousands)
Remainder of 2026
$3,510 $891 $98 $4,684 $44 $8,407 $891 $177 
2027
5,606 1,783 7,049 7,785 87 13,789 1,783 7,206 
2028
4,101 1,783 7,052 6,129 83 10,443 1,783 7,208 
2029
2,582 1,783 7,039 4,655 74 7,297 1,783 7,188 
2030
1,070 1,783 164 2,038 76 3,112 1,783 317 
Later years746 22,604 3,497 1,025 — 1,771 22,604 3,772 
Total minimum lease payments17,615 30,627 24,899 26,316 364 44,819 30,627 25,868 
Less: Imputed interest1,486 11,705 2,759 2,386 31 3,923 11,705 2,908 
Lease liabilities
$16,129 $18,922 $22,140 $23,930 $333 $40,896 $18,922 $22,960 

The above table includes $15.5 million, $20.1 million, and $35.8 million for PNM, TNMP, and TXNM at June 30, 2026, for expected future payments on fleet vehicle and equipment leases that could be avoided if the leased assets were returned and the lessor is able to recover estimated market value for the equipment from third parties.

At June 30, 2026, the Company has an ESA that has been executed with a lease component that has not yet commenced. The lease component begins in 2029, expires in 2044, and will be recognized as a lease asset and liability upon the commencement. The expected total fixed consideration to be paid for this arrangement, which includes non-lease payments, is approximately $94.3 million over the 20-year term of the agreement.

(14)   Income Taxes
The Company makes an estimate of its anticipated effective tax rate for the year as of the end of each quarterly period within its fiscal year. In interim periods, income tax expense is calculated by applying the anticipated annual effective tax rate to year-to-date earnings before income taxes. Certain unusual or infrequently occurring items are excluded from the estimated annual rate calculation. Such items include regulatory disallowances, Merger-related costs, and excess tax benefits or deficiencies related to stock awards. At June 30, 2026, TXNM, PNM, and TNMP estimated their effective income tax rates for
70

TXNM ENERGY, INC. AND SUBSIDIARIES
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
the year ended December 31, 2026, would be 15.11%, 12.44%, and 20.24%. The primary difference between the statutory income tax rates and the effective tax rates is the effect of the reduction in income tax expense resulting from the amortization of excess deferred federal income taxes.

During the six months ended June 30, 2026, income tax expense calculated by applying the expected annual effective income tax rate to earnings before income taxes was further decreased by excess tax benefits related to stock awards of $0.4 million for TXNM, of which $0.3 million was allocated to PNM and $0.1 million was allocated to TNMP and by tax benefits on Merger-related costs of $1.4 million for TXNM, of which $0.5 million was allocated to PNM and an immaterial amount was allocated to TNMP.

Beginning February 2018, PNM’s NM 2016 Rate Case reflected the reduction in the federal corporate income tax rate resulting from enactment of legislation commonly known as the Tax Cuts and Jobs Act (the “TCJA”), including amortization of excess deferred federal income taxes. In accordance with the order in that case, PNM is returning the protected portion of excess deferred federal income taxes to customers over the average remaining life of plant in service as of December 31, 2017, and had been returning the unprotected portion of excess deferred federal income taxes to customers over a period of approximately twenty-three years. Pursuant to the final order in the 2024 Rate Change, the remaining balance of $62.7 million of unprotected excess deferred income taxes is being returned over a four-year period. The approved settlement in the TNMP 2018 Rate Case includes a reduction in customer rates to reflect the impacts of the TCJA beginning on January 1, 2019. TXNM, PNM, and TNMP will amortize federal excess deferred income taxes of $26.2 million, $23.5 million, and $2.7 million in 2026. See additional discussion of the impacts of the TCJA in Note 18 of the Notes to Consolidated Financial Statements in the 2025 Annual Reports on Form 10-K.

On July 4, 2025, changes in U.S. federal income tax laws were enacted through the OBBBA. The OBBBA generally extended and made permanent the changes from the TCJA, including maintaining the 21% corporate tax rate, interest deductibility for regulated electric utilities, and state and local tax deductibility. The OBBBA also accelerated the phase-out of certain Inflation Reduction Act of 2022 energy tax credits and restricts the availability of credits for “foreign entities of concern.” As a result, TXNM anticipates potentially higher costs associated with any future renewable energy development but does not expect other aspects of the OBBBA to have a material impact on its financial statements.

(15)   Related Party Transactions

TXNM, PNM, and TNMP are considered related parties, as is PNMR Services Company, a wholly-owned subsidiary of TXNM that provides corporate services to TXNM and its subsidiaries in accordance with shared services agreements. These services are billed at cost on a monthly basis to the business units. The table below summarizes the nature and amount of related party transactions of TXNM, PNM, and TNMP:
Three Months EndedSix Months Ended
June 30,June 30,
2026202520262025
(In thousands)
Services billings:
TXNM to PNM
$32,050 $35,317 $65,728 $67,404 
TXNM to TNMP
13,712 14,109 28,236 27,485 
PNM to TNMP72 86 134 165 
TNMP to TXNM
21 28 42 56 
TNMP to PNM
— — — — 
Interest billings:
TXNM to PNM
24 76 63 84 
PNM to TXNM
110 132 225 265 
TXNM to TNMP
8 41 23 186 

(16)     Goodwill

The excess purchase price over the fair value of the assets acquired and the liabilities assumed by TXNM for its 2005 acquisition of TNP was recorded as goodwill and was pushed down to the businesses acquired. In 2007, the TNMP assets that were included in its New Mexico operations, including goodwill, were transferred to PNM. TXNM’s reporting units that currently have goodwill are PNM and TNMP. The Company evaluates its goodwill for impairment annually at the reporting unit level or more frequently if circumstances indicate that the goodwill may be impaired. Application of the impairment test requires judgment, including the identification of reporting units, assignment of assets and liabilities to reporting units, and determination of the fair value of each reporting unit.
71

TXNM ENERGY, INC. AND SUBSIDIARIES
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

In certain circumstances an entity may perform a qualitative analysis to conclude that the goodwill of a reporting unit is not impaired. Under a qualitative assessment an entity considers macroeconomic conditions, industry and market considerations, cost factors, overall financial performance, other relevant entity-specific events affecting a reporting unit, as well as whether a sustained decrease (both absolute and relative to its peers) in share price has occurred. An entity considers the extent to which each of the adverse events and circumstances identified could affect the comparison of a reporting unit’s fair value with its carrying amount. An entity places more weight on the events and circumstances that most affect a reporting unit’s fair value or the carrying amount of its net assets. An entity also considers positive and mitigating events and circumstances that may affect its determination of whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. An entity evaluates, on the basis of the weight of evidence, the significance of all identified events and circumstances in the context of determining whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. A quantitative analysis is not required if, after assessing events and circumstances, an entity determines that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount.

In other circumstances, an entity may perform a quantitative analysis to reach the conclusion regarding impairment with respect to a reporting unit. An entity may choose to perform a quantitative analysis without performing a qualitative analysis and may perform a qualitative analysis for certain reporting units, but a quantitative analysis for others. The first step of the quantitative impairment test requires an entity to compare the fair value of the reporting unit with its carrying value, including goodwill. If, as a result of this analysis, the entity concludes there is an indication of impairment in a reporting unit having goodwill, the entity is required to perform the second step of the impairment analysis, determining the amount of goodwill impairment to be recorded. The amount is calculated by comparing the implied fair value of the goodwill to its carrying amount. This exercise would require the entity to allocate the fair value determined in step one to the individual assets and liabilities of the reporting unit. Any remaining fair value would be the implied fair value of goodwill on the testing date. To the extent the recorded amount of goodwill of a reporting unit exceeds the implied fair value determined in step two, an impairment loss would be reflected in results of operations.

TXNM periodically updates its quantitative analysis for both PNM and TNMP. The use of a quantitative approach in a given period is not necessarily an indication that a potential impairment has been identified under a qualitative approach. When TXNM performs a quantitative analysis for PNM or TNMP, a discounted cash flow methodology is primarily used to estimate the fair value of the reporting unit. This analysis requires significant judgments, including estimations of future cash flows, which is dependent on internal forecasts, estimations of long-term growth rates for the business, and determination of appropriate weighted average cost of capital for the reporting unit. Changes in these estimates and assumptions could materially affect the determination of fair value and the conclusion of impairment. When TXNM performs a qualitative or quantitative analysis for PNM or TNMP, TXNM considers market and macroeconomic factors including changes in growth rates, changes in the WACC, and changes in discount rates. TXNM also evaluates its stock price relative to historical performance, industry peers, and to major market indices, including an evaluation of TXNM’s market capitalization relative to the carrying value of its reporting units.

For its annual evaluations performed as of April 1, 2026 and 2025, TXNM performed a qualitative analysis for both the PNM and TNMP reporting units. In addition to the typical considerations discussed above, the qualitative analysis considered changes in the Company’s expectations of future financial performance since the April 1, 2024, quantitative analysis performed for PNM, as well as the April 1, 2020, quantitative analysis and the previous qualitative analyses through April 1, 2024, performed for TNMP. This analysis considered Company-specific events such as the Merger, potential impacts of legal and regulatory matters discussed in Note 11 and Note 12, including the outcomes in the 2025 Rate Request, PNM’s Grid Modernization Plan, and TNMP’s System Resiliency Plan. Based on an evaluation of these and other factors, the Company determined it was not more likely than not that the April 1, 2026, carrying values of PNM and TNMP exceeded their fair value.

The quantitative analysis, discussed above, indicated that the fair value of the PNM reporting unit, which has goodwill of $51.6 million, exceeded its carrying value by approximately 54%. The qualitative analysis, in addition to the typical considerations discussed above, considered changes in the Company’s expectations of future financial performance since the April 1, 2020, quantitative analysis and the previous qualitative analyses through April 1, 2023, performed for TNMP. The April 1, 2020, quantitative evaluations indicated the fair value of the TNMP reporting unit, which has goodwill of $226.7 million, exceeded its carrying value by approximately 38%. This analysis considered events specific to TNMP such as the potential impacts of legal and regulatory matters discussed in Note 11 and Note 12. Based on an evaluation of these and other factors, the Company determined it was not more likely than not that the April 1, 2024, carrying values of PNM and TNMP exceeded their fair value. Since the April 1, 2024 annual evaluation, there have been no events, including the Merger, or indications that the fair values of the reporting units with recorded goodwill have decreased below their carrying values.


72

TXNM ENERGY, INC. AND SUBSIDIARIES
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(17)     Merger

On May 18, 2025, TXNM, Parent, and Merger Sub, entered into the Merger Agreement, pursuant to which Merger Sub will merge with and into TXNM, with TXNM surviving the Merger as a direct wholly-owned subsidiary of Parent. Parent and Merger Sub are affiliates of Blackstone Infrastructure.

Pursuant to the Merger Agreement, each issued and outstanding share of the common stock of TXNM (other than (i) the issued shares of TXNM common stock that are owned by TXNM, Parent, Merger Sub, or any other wholly-owned subsidiaries of Parent or TXNM, in each case, not held on behalf of third parties, which will be automatically cancelled at the Effective Time and (ii) shares of TXNM 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 in accordance with applicable New Mexico law) will, at the Effective Time, be converted into the right to receive $61.25 in cash, without interest.

The proposed Merger has been unanimously approved by the Board, and it was approved by a majority of the holders of outstanding shares of TXNM common stock, as of the applicable record date, at the special meeting held on August 28, 2025. On January 13, 2026, the waiting period under the HSR Act in connection with the Merger expired and on January 23, 2026, the FCC consented to the two transfers of control applications submitted by Parent and TXNM, including amendments to the applications to include additional FCC licenses that TXNM had obtained since the original application was filed. TXNM will continue to amend the transfer of control application filed with the FCC, or file a new application, for any new FCC licenses either acquired by TXNM, or its subsidiaries, from third parties or through spectrum assignment filed with the FCC. Consummation of the Merger is subject to the satisfaction or waiver of certain customary conditions, including the absence of any material adverse effect on TXNM, the absence of legal prohibition on the consummation of the Merger (a “Legal Restraint”), and absence of any agreement between Parent or TXNM and the FCC or Antitrust Division of the U.S. Department of Justice prohibiting the Merger, and the receipt of certain required regulatory approvals (including NMPRC and NRC). The Merger Agreement does not contain any financing condition. On August 25, 2025, TXNM filed applications for regulatory approvals to the NMPRC, PUCT, and FERC (Note 12). On February 6, 2026, the PUCT approved a unanimous settlement agreement filed by parties to the merger proceeding filed in December and on February 20, 2026, the FERC approved the proposed Merger. On April 24, 2026, TXNM filed its application for regulatory approval of the proposed Merger with the NRC.

The Merger Agreement may be terminated by each of TXNM and Parent under certain circumstances, including if the Merger is not consummated by the 15-month anniversary of the execution of the Merger Agreement (as extended, the “End Date”), so long as failure of the Merger to consummate on or before the End Date was not due to the breach of the Merger Agreement by such party, subject to an automatic extension of the End Date until December 31, 2026 and an additional three-month extension by mutual agreement of the parties, in each case if all of the conditions to the closing, other than the conditions related to obtaining regulatory approvals or the absence of a Legal Restraint, have been satisfied or waived. The Merger Agreement also provides for other customary termination rights for both Parent and TXNM. The Merger Agreement further provides that, upon termination of the Merger Agreement under certain specified circumstances, TXNM will be required to pay Parent a termination fee of $210.0 million plus certain costs and expenses. In addition, the Merger Agreement provides that (i) if the Merger Agreement is terminated by either party as a result of a Legal Restraint (solely in connection with required regulatory approvals), (ii) if the Merger Agreement is terminated by either party as a result of the Merger not being consummated by the End Date, (iii) the Merger Agreement is terminated by TXNM as a result of a breach of any representation or warranty or failure to perform by Parent, or Merger Sub that is not curable or timely cured or (iv) Parent fails to effect the closing when all closing conditions (other than those that by their nature are to be satisfied at closing) have been satisfied or waived and it is otherwise obligated to do so under the Merger Agreement and it further fails to consummate the closing within two business days after receiving notice from TXNM, then, in any such case, upon termination of the Merger Agreement, Parent will be required to pay TXNM a termination fee of $350.0 million (subject to the terms of the Waiver defined and described below) plus certain costs and expenses (the “Parent Termination Fee”).

On July 17, 2026, TXNM, Parent and Merger Sub entered into a Waiver (the “Waiver”) pursuant to Section 8.6 of the Merger Agreement. Pursuant to the Waiver, each of Parent and TXNM irrevocably waived its right to terminate the Merger Agreement and abandon the Merger pursuant to Section 8.1(c) of the Merger Agreement (relating to the failure of the Merger to occur by the End Date (as defined in the Merger Agreement)) prior to May 31, 2027 (such period, the “Waiver Period”). Each party further waived any right or claim to interpret the terms of the Merger Agreement, including references to the End Date, in a manner inconsistent with the Waiver Period. In addition, TXNM irrevocably waived $175.0 million of the $350.0 million Parent Termination Fee, such that the Parent Termination Fee, if and when payable, would be reduced to $175 million. This reduction does not affect certain cost and expense reimbursement or indemnification obligations of the parties under specified
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TXNM ENERGY, INC. AND SUBSIDIARIES
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
provisions of the Merger Agreement relating to access to information, debt financing cooperation, effect of termination, and expenses.

Parent and Merger Sub have obtained equity and debt financing commitments for the transactions contemplated by the Merger Agreement. Pursuant to an equity commitment letter dated May 18, 2025 (the “Equity Commitment Letter”), Blackstone Infrastructure committed to provide Parent, at the consummation of the Merger, with an equity contribution in the amount set forth therein. In addition, pursuant to debt commitment letters (“Debt Commitment Letters”) delivered to Merger Sub, Royal Bank of Canada, MUFG Bank, Ltd., BNP Paribas, Sumitomo Mitsui Banking Corporation and Canadian Imperial Bank of Commerce, New York Branch have agreed to provide debt financing to Merger Sub following the Closing on the terms and subject to the conditions set forth therein. The equity financing, when funded in accordance with the Equity Commitment Letter together with the debt financing when funded in accordance with the Debt Commitment Letters, will provide an amount that is sufficient to fund the (i) payment of the aggregate per share merger consideration, (ii) repayment, prepayment or discharge of certain obligations of the Company and its subsidiaries that would become due (after giving effect to the Merger) and are intended to be repaid at Closing and (iii) payment of all fees and expenses expected to be incurred at Closing in connection therewith. Additionally, following Closing, Parent and TXNM will have sufficient funds to repay, prepay or discharge certain other debt obligations of TXNM. In addition, Blackstone Infrastructure has executed and delivered a limited guarantee in favor of TXNM (the “Limited Guarantee”), pursuant to which Blackstone Infrastructure has guaranteed the obligations of Parent and Merger Sub to pay the Parent Termination Fee and certain other fees and expenses under the Merger Agreement. The Limited Guarantee is capped at $375.0 million.

Upon consummation of the Merger, the outstanding shares of TXNM common stock will be delisted from the New York Stock Exchange and deregistered under the Exchange Act.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations for TXNM is presented on a combined basis, including certain information applicable to PNM and TNMP. The MD&A for PNM and TNMP is presented as permitted by Form 10-Q General Instruction H(2). This report uses the term “Company” when discussing matters of common applicability to TXNM, PNM, and TNMP. A reference to a “Note” in this Item 2 refers to the accompanying Notes to Condensed Consolidated Financial Statements (Unaudited) included in Item 1, unless otherwise specified. Certain of the tables below may not appear visually accurate due to rounding.

MD&A FOR TXNM

EXECUTIVE SUMMARY

Overview

TXNM is a holding company with two regulated electric utilities, PNM and TNMP, serving approximately 846,000 residential, commercial, and industrial customers in New Mexico and Texas. TXNM strives to create a clean and bright energy future for customers, communities, and shareholders. TXNM’s strategy and decision-making are focused on safely providing reliable, affordable, and environmentally responsible power built on a foundation of sustainability.

Recent Developments

Merger

On May 18, 2025, TXNM, Parent, and Merger Sub (both Parent and Merger Sub are affiliates of Blackstone Infrastructure) entered into the Merger Agreement pursuant to which Merger Sub will merge with and into TXNM, with TXNM surviving the Merger as a direct, wholly-owned subsidiary of Parent. Pursuant to the Merger Agreement, each issued and outstanding share of the common stock of TXNM (other than those listed in Note 17) at the Effective Time will be converted into the right to receive $61.25 in cash, without interest.

The proposed Merger has been unanimously approved by the Board and was approved by the TXNM shareholders at a special meeting held on August 28, 2025. The waiting period under the HSR Act in connection with the Merger has expired without any objections or concerns having been raised, both the FCC and FERC approved the application, and the PUCT approved the unanimous settlement, satisfying four of the conditions to closing of the Merger Agreement. Consummation of the Merger remains subject to the satisfaction or waiver of certain customary conditions, including, without limitation, no Legal Restraint, and the receipt of certain required regulatory approvals (including the NMPRC and the NRC). TXNM has filed applications for regulatory approval of the Merger with the NMPRC (Note 12) and NRC. The Merger Agreement does not contain any financing condition and is currently expected to close in the first half of 2027.

On December 11, 2025, TXNM and Blackstone Infrastructure reached a unanimous settlement with parties in the Merger proceeding filed with the PUCT, that was approved on February 6, 2026. On February 20, 2026, FERC approved the proposed Merger rejecting claims related to data centers, private equity ownership, and speculative cross-subsidization relying on existing state ring-fencing protections in New Mexico and Texas. See Note 12.

Vision, Values, and Business Objectives
TXNM’s vision is to create a clean and bright energy future while fulfilling its purpose to work together with customers and communities to meet their energy needs. TXNM’s core values of Safety, Caring, and Integrity are the foundation for the Company’s business objectives focused on safety excellence and customer satisfaction, including reliability.

To reach these objectives, the Company is committed to:

•Preparing our workforce with the knowledge and skills to thrive in a customer-focused world
•Purposefully delivering an intentional customer experience that exceeds our evolving customer and stakeholder expectations
•Enabling an environmentally sustainable future and deploying technologically advanced solutions that empower and benefit customers
•Demonstrating the relationship between customer excellence and our dedicated focus on financial strength

Meeting the business objectives above will drive key financial results:

•Earning authorized returns on regulated businesses
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•Delivering long-term earnings growth, with a dividend payout ratio between 50 and 60 percent of earnings
•Maintaining investment grade credit ratings

Business Focus

To achieve the Company’s business objectives, focus is directed in key areas: Safe, Reliable and Affordable Power; Utility Plant Investments; Superior Customer Experience; Environmentally Responsible Power; and Stakeholder 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 TXNM’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. TXNM 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”.

TXNM 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.

TXNM 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.

PNM participates in the EIM, 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. PNM passes the cost savings achieved by participating in the EIM through to customers under PNM’s FPPAC. PNM also plans to join the EDAM, which is a voluntary day-ahead regional market that expands on CAISO’s EIM market, as early as 2027.

Utility Plant Investments

During the 2024 and 2025 periods, PNM and TNMP together invested $2.4 billion in utility plant, including transmission and distribution systems, substations, power plants, and nuclear fuel. Investment plans emphasize new investments in transmission and distribution infrastructure to support growing demand with grid reliability and resilience and to deliver clean energy. The Company has been improving the diversification of its rate base among regulatory jurisdictions, moving TNMP and FERC transmission rate base to over half of the consolidated rate base.

Investments at TNMP support the continued high growth across each region of its service territory. Economic growth across Texas continues to push the demands on TNMP’s system to new levels, including a new system peak in July 2026. In 2023, the Texas legislature passed a series of bills aimed at encouraging investments to enhance grid reliability and resilience, while the PUCT continues to develop rules in support of new legislation. TNMP will continue to submit filings for recovery of its investments, in accordance with these new rules, in addition to the existing rate recovery mechanisms. See the subheading under State Regulation and Legislation below.

Investments at PNM are aimed at supporting economic development and 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. New Mexico’s clean energy future depends on a reliable, resilient, secure grid to deliver an evolving mix of energy resources to customers. More recently, the 2029-2032 Resource portfolio application filed with the NMPRC is an integrated package of resources designed to ensure that PNM continues to provide safe, reliable, and cost-effective electric service while meeting anticipated load growth, including a new system peak in July 2026, and supporting the clean energy transition under New Mexico’s ETA. In addition, the CCN requesting approval of a new transmission line and the recent approval received to defer costs of two economic development projects filed under SB 170 support economic development in New Mexico. Similarly, projects included in the Grid Modernization Plan will improve customers’ ability to customize their use of energy and modernize PNM’s electric grid through infrastructure and technology improvements.

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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.

Superior Customer Experience

The Company strives to deliver a superior customer experience and includes customer satisfaction as a key performance metric. As a transmission and distribution service provider in Texas’ deregulated market, reliability is core to the customer experience and TNMP continues to focus on keeping end-users updated about interruptions and encouraging consumer preparation when severe weather is forecasted. In 2024, TNMP made significant strides in improving customer satisfaction related to power outages by providing a more user-friendly experience on TNMP’s outage map information system, making it easier for customers to access real-time outage information. In addition, TNMP introduced a new system that allows customers to receive outage alerts through multiple communication channels to enhance transparency and to ensure customers stay informed during outages. During the most recent winter storm, TNMP sent employees to assist in expanded vegetation support, helping crews address tree-related outages in remote or difficult-to-access areas and restoring power to those communities. In April 2026, TNMP was announced as an Emergency Response Award recipient by EEI. The Emergency Response Awards recognize recovery and assistance efforts of electric companies following service disruptions caused by extreme weather or other natural events.

PNM, as a vertically integrated utility in New Mexico, is focused on providing customers reliable, affordable and clean energy. PNM holds in-person engagements with residential and business customers through customer advisory councils to receive feedback on the programs and services offered. Additionally, PNM continues to focus its efforts on customer service improvements, including enhanced digital payment options, strategic customer outreach, and improved communications. To supplement its service, PNM has implemented programs regulated by the NMPRC to incentivize customers to address these issues through rebates and/or discounts, including Energy Efficiency, Transportation Electrification, Community Solar, and Time-of-Day pilot Programs. Increased incentives are provided to low-income customers to further encourage participation from households typically experiencing a higher energy burden. Additionally, PNM offers customer bill payment assistance through PNM Good Neighbor Fund and accepts employee and customer donations to supplement this fund. As a result of PNM’s efforts, 2,608 families in need received emergency assistance through the PNM Good Neighbor Fund for the six months ended June 30, 2026.

While the electric utility industry continues to experience declines in customer satisfaction, as measured by J.D. Power, PNM’s ranking in 2025 remained stable, reflecting the Company’s sustained efforts to improve the customer journey through a more seamless and customer-friendly experience. In early 2026, PNM refreshed its outage communications to push out more timely, transparent and customer-friendly information when a customer experiences a power outage. These communications were implemented for all customers with available contact information and follow a bill redesign implemented in 2025 to improve transparency and usability. Additional improvements are planned as a part of PNM’s approved Grid Modernization Plan.

PNM has also increased engagement in communities with inherent high fire risk, including enrollment in outage alerts, a series of town hall panel discussions with local community officials, newsletters and other mailings. In 2026, these efforts highlight a Public Safety Power Shutoff Alert System with varying status levels, similar to those for other emergencies (hurricanes, tornadoes, etc.) to provide customers with the necessary information to prepare for potential power outages as a last resort when extreme wildfire risks are present on our system.

Environmentally Responsible Power
TXNM 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% carbon-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

TXNM’s corporate website (www.txnmenergy.com) includes a dedicated section providing key environmental and other information related to PNM’s and TNMP’s operations, including information that collectively demonstrates the Company’s commitment to sustainability. This information highlights plans for PNM to be coal-free no later than 2031 and to achieve a carbon-free generating portfolio by 2040. Achieving our goal of carbon-free by 2040 is dependent on balancing reliability, cost considerations, and maturity of emerging technologies.

PNM’s Grid Modernization Plan is a major step forward in providing reliable, affordable and sustainable energy. As part of that plan, PNM will promote energy equity by installing technology like smart meters and making distribution upgrades in low-income areas first in order to allow lower-income customers to gain insights into their energy usage to improve
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affordability and create fairer access to energy. In addition, PNM’s Time-of-Day pilot incentivizes customers, through price signals, to use energy during the day when renewable generation is abundant.

The IRA provided benefits for TXNM and its customers by extending and enhancing clean energy incentives such as the investment tax credit and production tax credit. As the Company continues its transition away from carbon emitting sources, these credits may have reduced the cost of renewable investments. In addition, the IRA included a production tax credit for existing nuclear facilities that created an added benefit for PNM’s ownership in the carbon-free PVNGS. Other IRA provisions encouraged transportation electrification with EV credits and incentives for vehicle charging infrastructure. In July 2025, the OBBBA was enacted and it accelerated the phase-out of certain IRA energy tax credits and restricted the availability of credits for “foreign entities of concern”, as such term is used in the OBBBA. As a result, TXNM anticipates potentially higher costs associated with any future renewable energy development but does not expect other aspects of the OBBBA to have a material impact on its financial statements.

Electric Vehicles

TXNM’s sustainability goals include plans for additional emissions reductions through the electrification of its vehicle fleet. Growing the number of EVs within the Company’s fleet will benefit the environment and lower fuel costs furthering the commitment to sustainability. Under the commitment, existing fleet vehicles will be replaced as they are retired with an increasing percentage of EVs.

To demonstrate TXNM’s commitment to increase the electrification of vehicles in its service territory, PNM implemented its first TEP in 2022 and received approval of its 2024-2026 TEP in 2024. Since then, PNM has launched transportation electrification offerings that continue to support customer adoption of EVs by addressing barriers to adoption. PNM’s TEP program budget provides financial support to residential and non-residential customers towards the purchase of EV chargers and/or site make-ready costs, as well as customer education and outreach on EV-specific electricity rates to encourage charging during off-peak periods. More than 25% of the program budget is dedicated to low- and moderate-income customers to plan for an equitable transition to an electrified transportation sector.

PNM participates in 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 EV fast charging ports that will allow the public to drive EVs with confidence throughout the country’s major roadways. To support this initiative, PNM’s TEP program includes the installation of a charging network along major roadways in New Mexico. PNM filed its 2027-2029 TEP with the NMPRC on June 1, 2026.

Renewable Energy and Energy Storage
PNM’s utility-owned solar and energy storage capacity, as well as solar, energy storage, wind, and geothermal procurements from facilities in service as of June 30, 2026, have a total net generation capacity of 3,409 MW. In addition to PNM’s owned and third-party contracted solar facilities, PNM also has a customer distributed solar generation program that represented 387.4 MW at June 30, 2026. The NMPRC has approved plans for PNM to procure energy and RECs from additional resources to serve retail customers and a data center located in PNM’s service territory. PNM’s approved resources have a generation capacity of 1,318 MW. This includes approximately 280 MW of additional capacity under the Community Solar Act which will provide customers an additional option of accessing solar energy.
PNM will continue to seek approval to procure renewable resources as needed to meet forecasted peak load requirements to serve its customers and New Mexico’s RPS and carbon-free resource requirements, while balancing the impact to customers’ electricity costs.

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 2026, incremental energy saved as a result of participation in PNM’s portfolio of energy efficiency programs is estimated to be 87 GWh. This is equivalent to the annual consumption of approximately 12,056 homes in PNM’s service territory. PNM’s load management and energy efficiency programs also help lower peak demand requirements. In 2026, TNMP’s incremental energy saved as a result of participation in TNMP’s energy efficiency programs is estimated to be approximately 17 GWh. This is equivalent to the annual consumption of approximately 2,392 homes in TNMP’s service territory, estimated using a national average avoided emissions rate. TNMP’s high-performance homes residential new construction energy efficiency program has earned the Energy Star Partner of the Year award for 8 years, including 6 years receiving the Sustained Excellence Award, recognizing long-term commitment to fighting climate change and protecting public health through energy efficiency. In April 2026, PNM filed an application with the NMPRC for its energy efficiency and load management programs to be offered in its 2027 Plan (Note 12). In May 2026, TNMP filed its annual request with the PUCT to adjust its EECRF for changes in costs for 2027 (Note 12).

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Water Conservation and Solid Waste Reduction

PNM continues to make progress in its efforts to reduce the amount of fresh water used to make electricity. Continued growth in PNM’s solar and wind energy resources, energy efficiency programs, and innovative uses of 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. As the Company moves forward with its mission to achieve carbon-free generation, it expects that more significant water savings will be gained. Shutting down SJGS in 2022 and Four Corners in 2031 will allow the Company to reach our goals for reduced freshwater use at 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 2025, 18 of the Company’s 22 facilities met or exceeded the solid waste diversion goal of a 65% diversion rate.

Stakeholder and Community Engagement

The Company is committed to fostering relationships with its customers, stakeholders, and communities. 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. 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.

The Company utilizes a number of communications channels and strategic content to serve and engage its many stakeholders. PNM’s website 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 website is also a resource for information about PNM’s operations and community outreach efforts to customers on various topics such as education, outage alerts, safety, wildfire safety, customer service, community partnerships in philanthropic projects, and plans for building a sustainable energy future for New Mexico and to transition to a carbon-free generating portfolio. PNM also leverages social media to communicate about some of these topics with certain customers. TNMP’s website provides information on customized energy efficiency programs and TNMP rates, in addition to other community outreach information. As discussed above, TXNM’s corporate website includes a dedicated section providing additional information regarding the Company’s commitment to sustainability.

In July 2026, PUCT adopted a rule requiring utilities that own or operate power transmission or distribution facilities in wildfire risk areas, as defined by the Texas Division of Emergency Management to prepare and submit a wildfire mitigation plan (“WMP”) for approval. TNMP has filed a notice of intent to prepare and submit its WMP for approval on or before September 30, 2026.

Throughout 2025, PNM held in-person community events focused on wildfire safety and educating customers about the PSPS process and wildfire mitigation efforts to protect the public. These gatherings are designed to share critical information, coordinate with local resources, and listen to feedback from local communities. PNM hosted four events in High Fire Risk Areas (“HFRA”) across New Mexico in 2025 and expects to host similar events in 2026. In addition, PNM included local emergency managers in its periodic meetings referred to as “wildfire tabletops” in 2025. Each of these engagements builds and strengthens our preparedness as a Company for wildfire prevention and response.

TXNM has a long tradition of supporting the communities that it serves in New Mexico and Texas. During the three years ended December 31, 2025, TXNM, through corporate giving, contributed $8.7 million to civic, educational, environmental, tribal, low income, and economic development organizations. Additionally, the PNM Resources Foundation (the “Foundation”) has provided an annual average of $1.2 million in grant funding over the past three years across New Mexico and Texas. Throughout 2025, the Foundation focused on grants for wellness and athletic activities within the community and grants for the environment. These grants help nonprofits innovate or sustain programs to grow and develop their missions, develop and implement environmental programs, and provide educational opportunities. The Foundation continues to expand its matching and volunteer grant programs and the annual amount of matching donations available to each of its employees. The Foundation has also approved an increase to the amount awarded to employees through the employee crisis management fund, which provides our employees with financial support for basic living needs during catastrophic emergencies and times of crises. The Company collaborated with community foundations to help support the effort and direct funds where they were most needed for those who have been affected by the wildfires, floods and hurricanes in surrounding communities in addition to supporting law enforcement and first responders.

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TXNM 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 community needs, TXNM partners with other corporate funders to support nonprofits and small businesses. TXNM also collaborates on community projects, low-income customer assistance programs, and employee volunteerism.

PNM stands out as one of the few investor-owned utilities operating a tribal relations office, which is focused on serving and collaborating with 18 of the 23 sovereign nations in New Mexico and the Southwest. PNM created the Navajo Nation Workforce Training Scholarship Program to provide support for Navajo tribal members and to encourage the pursuit of education and training in existing and emerging jobs in the communities in which they live. PNM has invested in paid summer college engineering internship programs for American Indian students in the greater Albuquerque area, established the PNM Pueblo Education Scholarship and Endowment to invest in higher education for Native American Indian students, and supported the development of an entrepreneur complex located in Albuquerque and operated by the Indian Pueblo Cultural Center. PNM continues to partner with the Navajo Nation in the Light Up Navajo project, piloted in 2019 and modeled as a mutual aid project to connect Navajo homes without electricity to the power grid. PNM is one of 44 utilities across 16 states to participate in improving the quality of life for families by bringing electricity to over 1,000 homes since inception of the project. PNM has also partnered with New Mexico universities to enhance intern programs and developed a business coalition model to drive economic development through intern partnerships.

Employee volunteers are the lifeblood of a healthy corporate culture. Community giving through volunteers’ time and effort is at the heart of employee engagement. Throughout 2025, the Company held large-scale volunteer events, working alongside nonprofits, schools, and vulnerable communities throughout New Mexico and Texas. More than 640 employees in both states participated in the annual “Day of Service,” a workday event encouraging employee volunteerism and serving more than 40 organizations. Throughout the year, employees volunteer their time generously through independent volunteer activities and board participation. Employees strengthen community resilience by giving more than 4,000 volunteer hours each year to support the health, safety, and well-being of diverse communities.

Financial Focus

Earning Authorized Returns on Regulated Businesses

TXNM’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. The rates PNM and TNMP charge customers are subject to traditional rate regulation by the NMPRC, FERC, and the PUCT. Additional information about rate filings is provided in Note 17 of the Notes to Consolidated Financial Statements in the 2025 Annual Reports on Form 10-K.

Fair and timely rate treatment from regulators is crucial to PNM and TNMP in earning their allowed returns and critical for TXNM to achieve its financial objectives. TXNM believes that earning allowed returns is viewed positively by credit rating agencies and that improvements in the Company’s ratings could lower costs for utility customers.

State Regulation and Legislation

TNMP

In the 2023 and 2025 Texas Legislative sessions several bills were passed to support utility reliability and resiliency by encouraging and protecting utility infrastructure investments. Under the new legislation, TNMP filed its 2025-2027 SRP in August 2024 and filed an unopposed settlement with the PUCT in December 2024 that was approved with slight modifications in March 2025. Other bills directed ERCOT to develop reliability plans for the Permian Basin which resulted in the need for additional investments in the West Texas service territory and to establish standards for interconnecting large load customers in the region. In 2025, HB 5247 was passed, which immediately authorized certain utilities, including TNMP, to offset depreciation, property tax expenses, and carrying costs with alternative revenue and recognize a regulatory asset for qualifying investments that are not currently reflected in rates, until the following year in which they would file a single, annual proceeding with the PUCT. In February 2026, PUCT adopted a rule to ensure the power demands of large load customers of 75 MW or more, be incorporated into ERCOT’s Regional Transmission Plan and resource adequacy assessments. These pieces of legislation demonstrate that Texas continues to encourage utility investment and prioritizes timely rate recovery. TNMP will look to prioritize investments aligned with these measures that improve the quality of service for current and future customers and anticipates submitting annual filings in accordance with the rule.

Beyond legislative actions, the regulatory framework in Texas strongly encourages investments into the grid by providing timely recovery through rate mechanisms outside of general rate cases. 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
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PUCT also approved rate riders that allow TNMP to recover amounts related to energy efficiency and third-party transmission costs. TNMP also has approximately 285,000 advanced meters across its service territory, the costs of which are being recovered through base rates.

TNMP Base Rate Review

In November 2025, TNMP filed the TNMP Base Rate Review with the PUCT, requesting recovery of $2.8 billion of rate base, a requested ROE of 10.4%, and a 47.54% equity ratio. The TNMP Base Rate Review also includes increases in operations and maintenance expenses that are not recovered through semi-annual TCOS and DCRF filings, excludes increases in interest expense resulting from refinancing of debt associated with the proposed Merger, and requests recovery of $20.5 million associated with Hurricane Beryl restoration costs over a five-year period. If approved by the PUCT, the new rates are expected to become effective in mid-2026. On May 29, 2026, TNMP filed an unopposed stipulation and settlement agreement with the PUCT that was approved in a Final Order issued on July 30, 2026. See Note 12.

PNM

The 2025 New Mexico Legislative session included several bills that were passed to support economic development, clean energy, grid modernization, and wildfire preparedness. Among the bills passed were companion bills: New Mexico Senate Bill 169 (the “Site Readiness Bill”) and New Mexico Senate Bill 170 (the “Power Readiness Bill”).

The Site Readiness Bill creates a dedicated funding mechanism and a structured process for identifying, assessing, and preparing strategic economic development sites across the state, designed to position New Mexico to compete with other states actively investing in site readiness. It appropriates approximately $24 million for the site readiness fund for site-characterization studies of proposed economic development sites and site preparations of strategic economic development sites. The Site Readiness Bill also creates the Strategic Economic Development Site Advisory Committee to advise the New Mexico Economic Development Department (“NMEDD”) in selecting sites and awarding funding.

The Power Readiness Bill is intended to reduce risk, lead times, and regulatory uncertainty in acquiring additional generation resources and in building large-scale infrastructure needed to competitively serve economic development customers that create jobs. It allows a public utility to annually increase generation capacity by up to 10% of the public utility’s total system peak load. The Power Readiness Bill also shortens the time for regulatory approval of CCN filings for new, major infrastructure and allows a public utility to defer costs of economic development projects, placing them into a regulatory asset until a customer signs a contract or begins taking service. In March 2026, PNM received approval to defer costs of two economic development projects under the Power Readiness Bill; the Westpointe and Mesa Del Sol Substations (See Note 12).

The New Mexico Energy Transition Act (“ETA”)

The passage of the ETA amended the REA to require utilities operating in New Mexico to have renewable portfolios equal to 50% by 2030, 80% by 2040, and 100% zero-carbon energy by 2045. Those amendments also 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 related to the retirement of certain coal-fired generating facilities to qualified investors. See additional discussion of the ETA in Notes 16 and 17 of the Notes to Consolidated Financial Statements in the 2025 Annual Reports on Form 10-K and the issuance of the ETBC I Securitized Bonds in Note 7 of the Notes to Consolidated Financial Statements in the 2025 Annual Reports on Form 10-K.

Grid Modernization Plan

In October 2024, the NMPRC approved PNM’s Grid Modernization Plan which will improve customers’ ability to customize their use of energy and benefit from the electricity grid consistent with the Grid Modernization Statute. PNM’s plan to modernize its electricity grid through infrastructure and technology improvements includes installing technology like smart meters and making distribution upgrades in low-income areas first in order to allow lower-income customers to gain insights into their energy usage to improve affordability and create fairer access to energy. The approved plan includes grid modernization investments of approximately $344 million for the first six years of a broader 11-year strategy. The approved rate rider will recover capital costs, operating expenses, and taxes associated with the investments included in the plan. In June 2025, the Grid Modernization Plan was updated to reflect an increase in investments from approximately $344 million to $367 million in the first six years and a decrease in projected operations and maintenance costs of approximately 18%. See Note 12.

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 three years of that period. PNM’s accepted 2023 IRP maintains a continued focus on a carbon-free energy system by 2040. The plan highlights the need for a significant sustained addition of
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resources over the next two decades, replacing retiring or expiring capacity and meeting concurrent load growth, while reducing the carbon intensity of PNM’s portfolio.

In December 2024, PNM issued its 2029-2032 RFP for at least 900 MW of new energy resources to come online between 2029 and 2032, with at least 500 MW needed by 2030, and is anticipated to identify potential replacement resources for PNM’s current natural gas generation capacity as well as PNM’s ownership interest in Four Corners. In May 2026, PNM filed its 2029-2032 Resource Portfolio Application with the NMPRC, requesting 1,650 MW of new energy resources and its abandonment and exit of its ownership interest in Four Corners in 2031. See Note 12.

In the fourth quarter of 2025, PNM initiated its 2026 IRP process which will cover the 20-year planning period from 2026 through 2046. Consistent with historical practice, PNM is receiving public input from interested parties as part of this process. PNM expects to file its 2026 IRP with the NMPRC on or before September 1, 2026.

PNM Rate Riders and other

The NMPRC has approved PNM recovering fuel costs through the FPPAC, as well as rate riders for renewable energy, energy efficiency, Grid Modernization, 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, 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.

Delivering Long-Term Earnings Growth

TXNM’s financial objective to deliver long-term earnings growth, enables investors to 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. TXNM 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.

TXNM targets a dividend payout ratio in the 50% to 60% range of its ongoing earnings. The Board will continue to evaluate the dividend on an annual basis, considering sustainability and growth, capital planning, and industry standards. The Board approved the following increases in the indicated annual common stock dividend:

Approval DatePercent Increase
December 2024
5.2%
December 2025
3.7%

Under the terms of the Merger Agreement, TXNM 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 dividend or distribution in respect of any of its equity securities (except (i) TXNM may continue the declaration and payment of regular quarterly cash dividends on TXNM common stock for each quarterly period ending after the date of the Merger Agreement, in an amount not to exceed $0.4275 in 2026, with usual record and payment dates for such quarterly dividends in accordance with past dividend practice, (ii) for any cash dividend or cash distribution by a wholly-owned subsidiary of TXNM to TXNM or another wholly-owned subsidiary of TXNM, and (iii) a “stub period” dividend to holders of record of TXNM common stock as of immediately prior to the Effective Time equal to the product of (1) the number of days from the record date for payment of the last quarterly dividend paid by TXNM prior to the Effective Time, multiplied by (2) a daily dividend rate determined by dividing the amount of the last quarterly dividend paid prior to the Effective Time by ninety-one).

Maintaining Investment Grade Credit Ratings

The Company is committed to maintaining investment grade issuer credit ratings in order to reduce the cost of debt financing and to help ensure access to credit markets, when required. On January 15, 2024, S&P revised TXNM, PNM, and
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TNMP’s outlook to stable from positive. See the subheading Liquidity included in the full discussion of Liquidity and Capital Resources below for the specific credit ratings for TXNM, PNM, and TNMP. All of the credit ratings issued by both Moody’s and S&P on the Company’s senior debt continue to be investment grade.

Economic Factors

TNMP – In the three and six months ended June 30, 2026, TNMP experienced an increase in volumetric weather normalized retail load of 4.3% and 1.4% compared to 2025. Weather normalized demand-based load, excluding retail transmission consumers, increased 5.8% and 4.5% in the three and six months ended June 30, 2026, compared to 2025. Data center load, including distribution and transmission, has decreased 24.6% and 21.4% in the three and six months ended June 30, 2026 compared to 2025.

PNM – In the three and six months ended June 30, 2026, PNM experienced an increase of 1.3% and a decrease of 0.8% in weather normalized residential load compared to 2025. Weather normalized commercial load increased 1.5% and decreased 0.7% in the three and six months ended June 30, 2026 compared to 2025. Industrial load increased 5.5% and 4.5% in the three and six months ended June 30, 2026 compared to 2025.

The Company is closely monitoring the impacts on the capital markets of various macroeconomic conditions, including actions by the Federal Reserve to address inflationary concerns or other market conditions, and geopolitical activity. The Company has not experienced, nor does it expect to experience significant negative impacts to customer usage at PNM and TNMP resulting from these economic impacts. 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 TXNM were $75.0 million, or $0.67 per diluted share, in the six months ended June 30, 2026, compared to $30.5 million, or $0.32 per diluted share, in 2025. Among other things, earnings in the six months ended June 30, 2026, benefited from higher transmission and distribution rates at TNMP, impacts of revenues recorded under HB 5247 at TNMP, increased revenue at PNM approved in the 2025 Rate Change, and higher transmission margin at PNM. These increases were partially offset by higher operating expenses at PNM and TNMP, increased depreciation, property taxes, and interest expense at PNM and TNMP due to increased plant in service, capacity arrangements at PNM, milder weather at PNM and TNMP, and decreased performance of investment securities in the NDT and coal mine reclamation trusts at PNM. Additional information on factors impacting results of operations for each segment is discussed below under Results of Operations.

Liquidity and Capital Resources

As of June 30, 2026, TXNM, PNM, and TNMP had revolving credit facilities with capacities of $300.0 million, $440.0 million, and $300.0 million. Total availability for TXNM on a consolidated basis was $512.9 million at July 24, 2026. The Company utilizes the revolving credit facilities and notes outstanding under the commercial paper program that are backed by the revolving credit facilities, except the PNM New Mexico Credit Facility, and cash flows from operations to provide funds for both construction and operational expenditures. TXNM also has intercompany loan agreements with each of its subsidiaries.

TXNM projects that its consolidated capital requirements, consisting of construction expenditures and dividends, will total $11.1 billion for 2026 - 2030, including amounts expended through June 30, 2026. These construction expenditures may change due to incremental expenditures for new customer growth and other transmission and renewable energy expansion. TNMP’s investments support continued high growth in system demand across TNMP’s service territories and growing encouragement for infrastructure investments from the Texas legislature to support grid reliability and resilience. PNM’s capital initiatives include investments in generation, transmission, and distribution infrastructure to deliver clean energy, support customer growth, enhance customer satisfaction, and increase grid resilience. Construction expenditures also include investments proposed in PNM’s Grid Modernization Plan and TNMP’s SRP.

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. A complete listing of outstanding financing arrangements is contained in Note 7 of the Notes to Consolidated Financial Statements in the 2025 Annual Reports on Form 10-K and details for current financing activity is contained in Note 9.

After considering the effects of these financings and the Company’s short-term liquidity position as of July 24, 2026, the Company has consolidated maturities of long-term and short-term debt aggregating approximately $751.8 million through July 2027. 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, including those provided for under the Merger Agreement, in order to fund its capital requirements during the 2026-2030 period. The Company currently believes that
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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 June 30, 2026 and July 24, 2026, the Company was in compliance with its debt covenants.

RESULTS OF OPERATIONS

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

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

 
Three Months Ended June 30,Six Months Ended June 30,
 
20262025Change20262025Change
 
(In millions, except per share amounts)
Net earnings attributable to TXNM
$71.3 $21.6 $49.7 $75.0 $30.5 $44.5 
Average diluted common and common equivalent shares
111.2 96.2 15.0 112.1 94.6 17.5 
Net earnings attributable to TXNM per diluted share
$0.64 $0.22 $0.42 $0.67 $0.32 $0.35 

The components of the change in net earnings attributable to TXNM are:

Three Months EndedSix Months Ended
June 30, 2026June 30, 2026
(In millions)
TNMP$18.9 $27.3 
PNM21.4 4.6 
Corporate and Other9.4 12.6 
Net change$49.7 $44.5 

Information regarding the factors impacting TXNM’s operating results by segment are set forth below.

Segment Information

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

TNMP

Non-GAAP Financial Measures

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 consumers through a transmission cost recovery factor. Utility margin is not a financial measure required to be presented and is considered a non-GAAP measure. TNMP does not intend for utility margin to represent any financial measure as defined by GAAP; however, the calculation of utility margin, as presented, most closely compares to gross margin as defined by GAAP. Reconciliations between utility margin and gross margin are presented below.

Three Months Ended June 30,Six Months Ended June 30,
20262025Change
2026
2025
Change
(In millions)
Gross margin$93.9 $75.1 $18.8 $178.9 $141.4 $37.5 
Transmission and distribution costs10.0 10.7 (0.7)17.9 20.4 (2.5)
Depreciation and amortization39.6 34.9 4.7 78.1 70.1 8.0 
Utility margin$143.5 $120.8 $22.7 $275.0 $231.9 $43.1 


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The following table summarizes the operating results for TNMP:

Three Months Ended June 30,Six Months Ended June 30,
20262025
Change
20262025Change
(In millions)
Electric operating revenues
$187.4 $164.0 $23.4 $362.4 $313.5 $48.9 
Cost of energy
44.0 43.3 0.7 87.4 81.5 5.9 
Utility margin
143.5 120.8 22.7 275.0 231.9 43.1 
Operating expenses
36.3 37.1 (0.8)72.7 70.4 2.3 
Depreciation and amortization
39.6 34.9 4.7 78.1 70.1 8.0 
Operating income
67.6 48.7 18.9 124.2 91.4 32.8 
Other income
4.4 1.7 2.7 7.6 4.1 3.5 
Interest charges
(22.0)(23.9)1.9 (43.4)(41.3)(2.1)
Segment earnings before income taxes
50.0 26.4 23.6 88.4 54.3 34.1 
Income (taxes)
(10.0)(5.5)(4.5)(17.8)(11.0)(6.8)
Segment earnings
$39.9 $21.0 $18.9 $70.6 $43.3 $27.3 

The following table shows total sales, including the impacts of weather, by retail tariff consumer class and average number of consumers:
Three Months Ended June 30,Six Months Ended June 30,
Percentage
Percentage
20262025
Change
20262025
Change
Volumetric load (1) (GWh)
Residential
837.1 837.0 — %1,490.8 1,546.2 (3.6)%
Commercial and other
12.5 11.5 8.7 24.8 23.6 5.1 
Total volumetric load
849.6 848.5 0.1 %1,515.6 1,569.8 (3.5)%
Demand-based load (2) (MW)
8,872.2 9,435.8 (6.0)%17,897.5 18,831.6 (5.0)%
Average retail consumers (thousands) (3)
285.5 281.4 1.5 %285.0 280.9 1.5 %

(1) Volumetric load consumers are billed on KWh usage.
(2) Demand-based load includes consumers billed on monthly KW peak and also includes 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.

Operating Results – Three Months Ended June 30, 2026, compared to 2025

The following table summarizes the significant changes to gross margin:
Three Months
Ended
June 30, 2026
Change
Gross margin:
(In millions)
Utility margin (see below)
$22.7 
Depreciation and amortization (see below)(4.7)
Lower vegetation management and outside services expense, partially offset by higher employee related expense, excluding administrative costs0.7 
Other 0.1 
Net Change
$18.8 


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The following table summarizes the significant changes to utility margin:
Three Months
Ended
June 30, 2026
Change
Utility margin:
(In millions)
Transmission rate relief/load – Transmission cost of service rate increase in September 2025 and a decrease in ERCOT approved demand in May 2025
$4.2 
Distribution rate relief – Distribution cost of service rate increases in June 2025 and December 2025
6.0 
Volumetric-based consumer usage/load – Weather normalized KWh sales increased 4.3%; the average number of volumetric consumers increased 1.5%
1.2 
Demand-based consumer usage/load – Weather normalized demand-based MW sales for large commercial and industrial consumers excluding retail transmission consumers increased 5.8%
1.8 
Weather – Milder weather in the second quarter of 2026
(1.1)
Rate relief - Increase in revenue due to interim base rates pending final order Note 12
1.6 
Impacts of revenues recorded under HB 5247 Note 1210.9 
Decrease in deferral of excess deferred income tax benefits refunded through base rates(0.3)
Rate Riders and other – Includes transmission cost recovery factor and energy efficiency rider which are partially offset in operating expenses
(1.6)
Net Change
$22.7 

The following tables summarize the primary drivers for changes in operating expenses, depreciation and amortization, other income (deductions), interest charges, and income taxes:
Three Months
Ended
June 30, 2026
Change
Operating expenses:
(In millions)
Lower employee related, outside services and vegetation management expense$(2.4)
Lower capitalization of administrative and general expenses due to lower construction expenditures
0.8 
Higher allocated depreciation and amortization expense from Corporate and Other
0.3
Higher property tax due to increased utility plant in service
1.0 
Other
(0.5)
Net Change
$(0.8)

Depreciation and amortization:
Increased utility plant in service
$4.5 
Other
0.2 
Net Change
$4.7 

Other income (deductions):
Higher CIAC$0.8 
Higher equity AFUDC1.0 
Interest on Texas Sales and Use Tax refund
0.2 
Other
0.7 
Net Change
$2.7 
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Three Months
Ended
June 30, 2026
Change
Interest charges:
(In millions)
TNMP Merger Backstop Term Loan in June 2025 (Note 9)$1.3 
Loss on reacquired debt in June 20255.3 
Interest on FMBs
(5.4)
Lower interest on short-term borrowings
0.8 
Lower debt AFUDC
(0.4)
Lower interest on transmission interconnection and security deposit arrangements
0.2 
Other
0.1 
Net Change
$1.9 

Income (taxes) benefits:
Higher segment earnings before income taxes
$(4.9)
Higher amortization of excess deferred income taxes
0.2 
Other
0.2 
Net Change
$(4.5)

Operating Results – Six Months Ended June 30, 2026 compared to 2025

The following table summarizes the significant changes to gross margin:
Six Months
Ended
June 30, 2026
Change
Gross margin:
(In millions)
Utility margin (see below)
$43.1 
Depreciation and amortization (see below)(8.0)
Lower vegetation management and outside services expense, partially offset by higher employee related expense, excluding administrative costs2.4 
Net Change
$37.5 

The following table summarizes the significant changes to utility margin:
Six Months
Ended
June 30, 2026
Change
Utility margin:
(In millions)
Transmission rate relief/load – Transmission cost of service rate increases in March 2025 and September 2025, and a decrease in ERCOT approved demand in May 2025
$9.5 
Distribution rate relief – Distribution cost of service rate increases in June 2025 and December 2025
11.2 
Volumetric-based consumer usage/load – Weather normalized KWh sales increased 1.4%; the number of volumetric consumers increased 1.5%
1.3 
Demand-based consumer usage/load – Weather normalized demand-based MW sales for large commercial and industrial consumers excluding retail transmission consumers increased 4.5%
2.0 
Weather – Milder weather in 2026
(2.4)
Rate relief - Increase in revenue due to interim base rates pending final order Note 12
1.6 
Impacts of revenues recorded under HB 5247 Note 1219.2 
Increase in deferral of excess deferred income tax benefits refunded through base rates1.1 
Rate Riders and other – Includes transmission cost recovery factor and energy efficiency rider which are partially offset in operating expenses
(0.4)
Net Change
$43.1 
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The following tables summarize the primary drivers for changes in operating expenses, depreciation and amortization, other income (deductions), interest charges, and income taxes:
Six Months
Ended
June 30, 2026
Change
Operating expenses:
(In millions)
Lower employee related, outside services and vegetation management expense
$(4.3)
Higher property taxes due to increased utility plant in service2.4
Lower capitalization of administrative and general expenses due to lower construction expenditures
4.2 
Higher allocated depreciation and amortization expense from Corporate and Other
0.7 
Lower insurance premiums(0.4)
Other
(0.3)
Net Change
$2.3 

Depreciation and amortization:
Increased utility plant in service
$7.8 
Other
0.2 
Net Change
$8.0 

Other income (deductions):
Lower CIAC
$(0.6)
Higher equity AFUDC
3.0 
Interest on Texas Sales and Use Tax refund
0.2 
Other
0.9 
Net Change
$3.5 

Interest charges:
TNMP Merger Backstop Term Loan in June 2025 (Note 9)$1.3 
Loss on reacquired debt in June 2025
5.3 
Interest on FMBs
(10.9)
Lower interest on short-term borrowings2.5 
Lower debt AFUDC(1.2)
Lower interest on transmission interconnection and security deposit arrangements
0.6 
Other0.3 
Net Change
$(2.1)

Income (taxes) benefits:
Higher segment earnings before income taxes
$(7.2)
Higher amortization of excess deferred federal income taxes
0.2 
Other0.2 
Net Change
$(6.8)
PNM

Non-GAAP Financial Measures

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 and is
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considered a non-GAAP measure. PNM does not intend for utility margin to represent any financial measure as defined by GAAP however, the calculation of utility margin, as presented, most closely compares to gross margin as defined by GAAP.
Reconciliations between utility margin and gross margin are presented below.

Three Months Ended June 30,Six Months Ended June 30,
20262025Change20262025Change
(In millions)
Gross margin$134.9 $111.4 $23.5 $235.4 $213.7 $21.7 
Energy production costs25.3 26.1 (0.8)49.7 50.6 (0.9)
Transmission and distribution costs15.4 15.8 (0.4)33.3 31.6 1.7 
Depreciation and amortization65.3 60.8 4.5 129.4 120.6 8.8 
Utility margin$240.9 $214.0 $26.9 $447.9 $416.5 $31.4 

The following table summarizes the operating results for PNM:

Three Months Ended June 30,Six Months Ended June 30,
20262025
Change
20262025Change
(In millions)
Electric operating revenues
$361.1 $338.4 $22.7 $691.1 $671.8 $19.3 
Cost of energy
120.2 124.3 (4.1)243.2 255.3 (12.1)
     Utility margin
240.9 214.0 26.9 447.9 416.5 31.4 
Operating expenses
116.6 116.6 — 237.3 227.9 9.4 
Depreciation and amortization
65.3 60.8 4.5 129.4 120.6 8.8 
     Operating income
59.0 36.6 22.4 81.1 68.0 13.1 
Other income (deductions)
29.5 26.5 3.0 26.2 29.8 (3.6)
Interest charges
(32.3)(32.0)(0.3)(65.4)(61.8)(3.6)
     Segment earnings before income taxes
56.1 31.2 24.9 41.9 36.0 5.9 
Income (taxes) benefit
(6.2)(2.4)(3.8)(3.7)(2.4)(1.3)
Valencia non-controlling interest
(4.0)(4.3)0.3 (8.1)(8.0)(0.1)
 Preferred stock dividend requirements
(0.1)(0.1)— (0.3)(0.3)— 
Segment earnings (losses)
$45.8 $24.4 $21.4 $29.9 $25.3 $4.6 

The following table shows total GWh sales, including the impacts of weather, by customer class and average number of customers:
Three Months Ended June 30,Six Months Ended June 30,
Percentage
Percentage
20262025
Change
20262025
Change
(Gigawatt hours, except customers)
Residential
784.1 772.1 1.6 %1,508.6 1,544.8 (2.3)%
Commercial
919.8 899.6 2.2 1,742.5 1,752.6 (0.6)
Industrial (1)
713.6 599.2 19.1 1,377.1 1,183.7 16.3 
Public authority
52.8 56.4 (6.4)94.2 104.2 (9.6)
Economy energy service (2)
93.8 99.1 (5.3)180.3 248.8 (27.5)
Other sales for resale (3)
1,169.9 1,111.7 5.2 2,289.9 2,008.8 14.0 
3,734.0 3,538.1 5.5 %7,192.6 6,842.9 5.1 %
Average retail customers (thousands)
559.9 556.3 0.6 %559.6 555.9 0.7 %
(1) Includes energy provided by PNM for renewable energy resources to match the energy and capacity requirements of the Meta data center. PNM purchases renewable energy which is passed through to Meta under a rate rider. A special service rate is applied to Meta’s energy consumption in those hours of the month when their consumption exceeds the energy production from the renewable resources.
(2) 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.
(3) Includes sales for resale activity resulting from PNM’s participation in the EIM.


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Operating Results – Three Months Ended June 30, 2026, compared to 2025

The following table summarizes the significant changes to gross margin:
Three Months
Ended
June 30, 2026
Change
Gross margin:
(In millions)
Utility margin (see below)
$26.9 
Depreciation and amortization (see below)(4.5)
Lower plant maintenance costs at gas fired plants, partially offset by higher costs at PVNGS and Four Corners0.1 
Lower outside services and employee related expenses, partially offset by higher vegetation management expenses, excluding administrative costs0.6 
Other
0.4 
Net Change
$23.5 

The following table summarizes the significant changes to utility margin:
Three Months
Ended
June 30, 2026
Change
Utility margin:
(In millions)
Retail customer usage/load – Weather normalized retail KWh sales increased 1.3% for residential customers, 1.5% for commercial customers and 5.5% for industrial customers
$2.7 
Weather – Warmer weather in the second quarter of 2026
1.1 
Rate relief – Increase in revenue approved in 2025 Rate Request
21.5 
Transmission – Increase in revenues primarily due to higher formula rates and volumes, partially offset by lower market prices and higher expenses
7.0 
Capacity arrangements – Additional energy storage agreements starting in the fourth quarter of 2025 and the first quarter of 2026 partially offset with a sales agreement in 2026
(5.0)
Rate riders and other – Includes renewable energy, FPPAC, energy efficiency, energy transition charge, grid modernization, and transportation electrification riders which are partially offset in operating expenses, depreciation and amortization, other income (deductions), and interest charges
(0.4)
Net Change
$26.9 

The following tables summarize the primary drivers for changes in operating expenses, depreciation and amortization, other income (deductions), interest charges, and income taxes:
Three Months
Ended
June 30, 2026
Change
Operating expenses:
(In millions)
Higher costs at PVNGS and Four Corners, partially offset by lower costs at gas fired plants$0.3 
Lower outside services expense, partially offset by higher employee related and vegetation management expense(0.2)
Higher property taxes associated with increased utility plant in service
0.5 
Lower allocated charitable contributions from Corporate and Other related to the 2025 Rate Request
(1.5)
Higher costs associated with rate riders included in utility margin
1.1 
Higher allocated depreciation and amortization expense from Corporate and Other
0.5 
Other(0.7)
Net Change
$— 

90
Three Months
Ended
June 30, 2026
Change
Depreciation and amortization:
(In millions)
Increased utility plant in service $3.3 
Amortization related to grid modernization costs, offset in utility margin1.1 
Other0.1 
Net Change$4.5 

Other income (deductions):
Increased performance on investment securities in the NDT and coal mine reclamation trusts$0.9 
Lower expenses related to investment securities in the NDT and coal mine reclamation trust, partially offset by lower interest income
0.8 
Higher equity AFUDC
1.1 
Other
0.2 
Net Change$3.0 

Interest charges:
Lower interest on term loans
$1.7 
Interest on SUNs
(3.2)
Lower interest on short-term borrowings
0.5 
Lower interest on transmission interconnection and security deposit arrangements
0.5 
Other
0.2 
Net Change$(0.3)

Income (taxes) benefits:
Higher segment earnings before income taxes
$(6.4)
Higher amortization of federal excess deferred income taxes2.1 
Other0.5 
Net Change$(3.8)


Operating Results – Six Months Ended June 30, 2026 compared to 2025

The following table summarizes the significant changes to gross margin:
Six Months
Ended
June 30, 2026
Change
Gross margin:
(In millions)
Utility margin (see below)
$31.4 
Depreciation and amortization (see below)(8.8)
Lower plant maintenance costs at gas fired plants and Four Corners, partially offset by higher costs at PVNGS0.1 
Higher vegetation management expense, partially offset by lower outside services and employee related expenses, excluding administrative costs(1.2)
Other
0.2 
Net Change
$21.7 


91
The following table summarizes the significant changes to utility margin:
Six Months
Ended
June 30, 2026
Change
Utility margin:
(In millions)
Retail customer usage/load – Weather normalized retail KWh sales increased 4.5% for industrial customers and decreased 0.8% for residential customers and 0.7% for commercial customers
$0.1 
Weather – Milder weather in 2026
(2.6)
Rate relief – Increase in revenue approved in 2025 Rate Request
34.2 
Transmission – Increase in revenues primarily due to higher formula rates and volumes, partially offset by lower market prices and higher expenses
11.2 
Capacity arrangements – Additional energy storage agreements starting in the fourth quarter of 2025 and the first quarter of 2026 partially offset with a sales agreement in 2026
(11.4)
Rate riders and other – Includes renewable energy, FPPAC, energy efficiency, energy transition charge, grid modernization, and transportation electrification riders which are partially offset in operating expenses, depreciation and amortization, other income (deductions), and interest charges
(0.1)
Net Change
$31.4 

The following tables summarize the primary drivers for changes in operating expenses, depreciation and amortization, other income (deductions), interest charges, and income taxes:
Six Months
Ended
June 30, 2026
Change
Operating expenses:
(In millions)
Higher costs at PVNGS partially offset by lower costs at Four Corners and gas fired plants$0.5 
Higher employee related and vegetation management expense4.7 
Higher property taxes associated with increased utility plant in service
3.7 
Higher allocated depreciation and amortization expense from Corporate and Other
1.1 
Lower allocated charitable contributions from Corporate and Other related to the 2025 Rate Request(1.5)
Higher costs associated with rate riders included in utility margin
1.3 
Other
(0.4)
Net Change
$9.4 

Depreciation and amortization:
Increased utility plant in service$7.4 
Amortization related to grid modernization costs, offset in utility margin
1.1 
Other0.3 
Net Change$8.8 

Other income (deductions):
Decreased performance on investment securities in the NDT and coal mine reclamation trusts$(6.8)
Lower expenses related to investment securities in the NDT and coal mine reclamation trust, partially offset by lower interest income
1.1 
Higher equity AFUDC2.4 
Other
(0.3)
Net Change$(3.6)

92
Six Months
Ended
June 30, 2026
Change
Interest charges:
(In millions)
Lower interest on term loans$2.8 
Interest on SUNs
(9.4)
Lower interest on short-term borrowings1.8 
Lower interest on transmission interconnection and security deposit arrangements
1.2 
Net Change$(3.6)

Income (taxes) benefits:
Higher segment earnings before income taxes
$(1.5)
Other
0.2 
Net Change$(1.3)

Corporate and Other

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

Three Months Ended June 30,Six Months Ended June 30,
20262025
Change
20262025
Change
(In millions)
Electric operating revenues
$— $— $— $— $— $— 
Cost of energy
— — — — — — 
   Utility margin— — — — — — 
Operating expenses
(6.5)3.1 (9.6)(14.4)(4.2)(10.2)
Depreciation and amortization
9.7 9.5 0.2 19.4 19.1 0.3 
   Operating (loss)
(3.3)(12.6)9.3 (5.0)(14.8)9.8 
Other income (deductions)
(0.2)(1.6)1.4 (0.5)(1.8)1.3 
Interest charges
(15.0)(16.1)1.1 (29.1)(32.5)3.4 
Segment (loss) before income taxes(18.4)(30.3)11.9 (34.7)(49.1)14.4 
Income (taxes) benefit
4.0 6.6 (2.6)9.1 11.0 (1.9)
Segment (loss)
$(14.4)$(23.8)$9.4 $(25.5)$(38.1)$12.6 

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 expense for the three and six months ended June 30, 2026, includes decreases of $10.6 million and $11.4 million for costs related to the Merger. 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 – Three Months Ended June 30, 2026 compared to 2025
The following tables summarize the primary drivers for changes in other income (deductions), interest charges, and income taxes:
Three Months
Ended
June 30, 2026
Change
Other income (deductions):
(In millions)
Lower charitable contributions allocated to PNM
$1.5 
Lower income at PNMR Development
(0.1)
Net Change$1.4 

93
Three Months
Ended
June 30, 2026
Change
Interest charges:
(In millions)
Lower interest on short-term borrowings
$0.7 
Lower interest on term loans
6.4 
Issuance of $350.0 million Jr. Subordinated Notes in December 2025
(6.1)
Other0.1 
Net Change
$1.1 

Income (taxes) benefits:
Lower segment loss before income taxes
$(3.0)
Impact of difference in effective tax rates used by TXNM and its subsidiaries in the calculation of income taxes in interim periods
0.4 
Net Change$(2.6)


Operating Results – Six Months Ended June 30, 2026 compared to 2025
The following tables summarize the primary drivers for changes in other income (deductions), interest charges, and income taxes:
Six Months
Ended
June 30, 2026
Change
Other income (deductions):
(In millions)
Lower charitable contributions allocated to PNM$1.5 
Lower income at PNMR Development(0.2)
Net Change$1.3 

Interest charges:
Lower interest on short-term borrowings
$2.3 
Lower interest on term loans
13.1 
Issuance of $350.0 million Jr. Subordinated Notes in December 2025
(12.3)
Other0.3 
Net Change$3.4 

Income (taxes) benefits:
Lower segment loss before income taxes
$(3.7)
Impact of difference in effective tax rates used by TXNM and its subsidiaries in the calculation of income taxes in interim periods
1.6 
Other0.2 
Net Change$(1.9)

94
LIQUIDITY AND CAPITAL RESOURCES

Statements of Cash Flows

The changes in TXNM’s cash flows for the six months ended June 30, 2026, compared to June 30, 2025, are summarized as follows:
Six Months Ended June 30,
20262025Change
(In millions)
Net cash flows from (used in):
  Operating activities$223.0 $144.8 $78.2 
  Investing activities(581.0)(611.3)30.3 
  Financing activities353.0 481.9 (128.9)
Net change in cash, cash equivalents, and restricted cash
$(5.0)$15.4 $(20.4)

Cash Flows from Operating Activities

Changes in TXNM’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 TXNM’s cash flows used in investing activities relate primarily to changes in utility plant additions. Cash flows from investing activities include purchases and sales of investment securities in the NDT, SJGS decommissioning trust, and coal mine reclamation trusts. Major components of TXNM’s cash inflows and (outflows) from investing activities are shown below:

Six Months Ended June 30,
20262025Change
Cash (Outflows) for Utility Plant Additions(In millions)
PNM:
Generation$(126.2)$(60.5)$(65.7)
Transmission and distribution(166.6)(200.5)33.9 
Grid Modernization Plan
(16.4)— (16.4)
Nuclear fuel(9.1)(11.7)2.6 
(318.3)(272.7)(45.6)
TNMP:
Transmission(75.4)(144.1)68.7 
Distribution(90.1)(173.6)83.5 
SRP
(51.0)— (51.0)
(216.5)(317.7)101.2 
Corporate and Other:
Computer hardware, software, general services, and other
(42.8)(18.4)(24.4)
(577.6)(608.8)31.2 
Other Cash Flows from Investing Activities
Proceeds from sales of investment securities$329.7 $198.7 $131.0 
Purchases of investment securities(333.2)(201.2)(132.0)
Other, net0.1 — 0.1 
(3.4)(2.5)(0.9)
Net cash flows used in investing activities$(581.0)$(611.3)$30.3 

Cash Flows from Financing Activities

The changes in TXNM’s cash flows from financing activities include:

•Short-term borrowings increased $301.6 million in 2026 compared to an decrease of $263.6 million in 2025, resulting in a net increase in cash flows from financing activities of $565.2 million
•In 2026, TXNM sold 2,123,544 shares of TXNM common stock under the TXNM 2026 ATM Program aggregating $123.7 million and used the proceeds to make cash equity contributions to PNM and for other corporate purposes
95


Financing Activities

See Note 7 of the Notes to Consolidated Financial Statements in the 2025 Annual Reports on Form 10-K and Note 9 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 the impacts on the capital markets of other macroeconomic conditions, including actions by the Federal Reserve to address inflationary concerns or other market conditions, and geopolitical activity, including the potential impacts of tariffs. The Company currently believes it has adequate liquidity but cannot predict the effects of any of these macroeconomic conditions 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.

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 TXNM 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.

Pursuant to the TXNM 2026 ATM Program, TXNM sold an aggregate of 2,123,544 shares of TXNM common stock under the Distribution Agreement for net cash proceeds of $123.7 million. TXNM used the proceeds to pay cash equity contributions to PNM and for other corporate purposes. See Note 9.

On May 1, 2026, TXNM, PNM, and TNMP each established Programs pursuant to which they may issue, from time to time, Notes under the exemption from registration contained in Section 4(a)(2) of the Securities Act. Amounts available under the Programs may be borrowed, repaid and re-borrowed from time to time, with the aggregate face or principal amount of the Notes outstanding under the Programs at any time not to exceed $300.0 million for TXNM, $400.0 million for PNM, and $300.0 million for TNMP. The Notes will have maturities of up to 364 days from the date of issue and net proceeds will be used for general corporate purposes. Each of TXNM, PNM and TNMP have agreed to maintain, at all times, unused available borrowing capacity under their respective revolving credit agreements (except for the PNM New Mexico Credit Agreement) in an amount at least equal to the amount of Notes outstanding at any time. Notes outstanding under the Programs as of June 30, 2026 are $44.1 million for TXNM, zero for PNM, and $15.0 million for TNMP.

On July 17, 2026, TXNM entered into the TXNM 2026 Delayed-Draw Term Loan between TXNM and Wells Fargo Bank, National Association, as administrative agent. Draws on the TXNM 2026 Delayed-Draw Term Loan bear interest at a variable rate, and mature on January 17, 2029. TXNM drew the full amount available under the TXNM 2026 Delayed-Draw Term Loan on July 22, 2026, and used such amount to fully repay the $400.0 million previously received under the May 2025 Stock Purchase Agreement in connection with unwinding the transaction as a result of the NMPRC’s Final Order issued in the show cause matter (Note 12).

On July 21, 2026, PNM entered into the PNM 2026 Term Loan, among PNM, the lenders party thereto and Canadian Imperial Bank of Commerce, New York Branch, as administrative agent. PNM used the proceeds of the PNM 2026 Term Loan to repay borrowings under the PNM 2025 Term Loan which matured on July 21, 2026.

Capital Requirements

TXNM’s total capital requirements consist of construction expenditures and cash dividend requirements for TXNM common stock and PNM preferred stock.

Key activities in TXNM’s current construction program include:

•Investing in transmission and distribution infrastructure
•Upgrading generation resources and delivering clean energy
•Purchasing nuclear fuel
96

Projected capital requirements, including amounts expended through June 30, 2026, are:

2026
2027-2030
Total
(In millions)
Construction expenditures$1,566.9 $8,647.9 $10,214.8 
Dividends on TXNM common stock
184.1 736.3 920.4 
Dividends on PNM preferred stock0.5 2.1 2.6 
Total capital requirements$1,751.5 $9,386.3 $11,137.8 

The construction expenditure estimates are under continuing review and subject to ongoing adjustment, as well as to Board review and approval and in certain instances, require regulatory approval. The construction expenditures above include TNMP’s investments to support continued high growth in system demand across TNMP’s service territories and growing encouragement for infrastructure investments from the Texas legislature to support grid reliability and resilience. PNM’s capital initiatives include investments in generation, transmission, and distribution infrastructure to deliver clean energy, support customer growth, enhance customer satisfaction, and increase grid resilience. Construction expenditures also include investments in PNM’s Grid Modernization Plan and TNMP’s SRP. These investments provide for a more resilient, reliable, efficient, and decarbonized electric system. Construction expenditures included in the table above may change due to incremental expenditures for new customer growth in New Mexico and Texas, and other transmission and renewable energy expansion in New Mexico. The ability of TXNM to pay dividends on its common stock is dependent upon the ability of PNM and TNMP to pay dividends to TXNM and the Merger (See Note 17). See Note 6 of the Notes to the Consolidated Financial Statements in the 2025 Annual Reports on Form 10-K for a discussion of regulatory and contractual restrictions on the payment of dividends by PNM and TNMP.

During the six months ended June 30, 2026, TXNM 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 $3.7 million and $3.8 million in scheduled principal payments due for the ETBC I Securitized Bonds in August 2026 and February 2027. PNM also has $100.3 million of 0.875% PCRBs outstanding with a mandatory tender date of October 1, 2026, and $120.0 million under the PNM November 2025 Term Loan due in May 2027. See Note 7 of the Notes to Consolidated Financial Statements in the 2025 Annual Reports on Form 10-K and Note 9 for additional information about the Company’s long-term debt and equity arrangements. 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.

Liquidity
TXNM’s liquidity arrangements include the $300.0 million TXNM Revolving Credit Facility, the $400.0 million PNM Revolving Credit Facility, and the $300.0 million TNMP Revolving Credit Facility. Each of these facilities matures on March 29, 2030, and contains a one-year extension option that, if exercised, would extend the maturity to March 2031, subject to approval by a majority of the lenders. On December 19, 2025, when the first extension options were exercised, one lender in each of the revolving credit facilities failed to agree to the extension. As a result, effective March 30, 2029, the TXNM Revolving Credit Facility capacity will adjust to $265.4 million, the PNM Revolving Credit Facility capacity will adjust to $354.1 million, and the TNMP Revolving Credit Facility capacity will adjust to $277.0 million. PNM also has the $40.0 million PNM New Mexico Credit Facility that matures on May 31, 2030. Variable interest rates under the TXNM, PNM, and TNMP revolving credit facilities are based on SOFR. 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. 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 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 may also issue Notes under the Commercial Paper Programs, further reducing the available capacity under each facility, except the PNM New Mexico Credit Facility. The Company utilizes these credit facilities, Notes, 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 may utilize Notes issued under its Commercial Paper Programs and 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 issue equity or long-term debt and use the proceeds to reduce the borrowings under the credit facilities or refinance other debt.
97
Information regarding the range of borrowings for each facility is as follows:

Three Months Ended June 30, 2026Six Months Ended June 30, 2026
Range of BorrowingsLowHighLowHigh
(In millions)
PNM:
PNM Revolving Credit Facility$60.0 $175.0 $60.0 $209.0 
PNM New Mexico Credit Facility40.0 40.0 40.0 40.0 
Commercial Paper Notes— 124.0 — 124.0 
TNMP:
TNMP Revolving Credit Facility— 95.9 — 95.9 
Commercial Paper Notes— 114.3 — 114.3 
TXNM:
TXNM Revolving Credit Facility19.0 115.4 — 115.4 
Commercial Paper Notes— 113.5 — 113.5 

At June 30, 2026, the weighted average interest rates on borrowings outstanding were 4.90% for the PNM Revolving Credit Facility, 5.00% for the PNM New Mexico Credit Facility, 4.52% for the TNMP Revolving Credit Facility, 4.10% for the TNMP Commercial Paper Notes, 5.15% for the TXNM Revolving Credit Facility, and 4.19% for the TXNM Commercial Paper Notes. There were no Notes outstanding under the PNM Commercial Paper Programs as of June 30, 2026.

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 as discussed above and in Note 9. The Company anticipates that additional long-term financing, in the form of debt and/or equity issuances, will be necessary to fund its capital requirements and to balance its capital structure during the 2026-2030 period. 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. Market conditions, such as rising interest rates, may raise the cost of borrowing under the Company’s current and future liquidity arrangements or other variable debt. In addition, 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.

As of July 24, 2026, ratings on the Company’s securities were as follows:

TXNM
PNMTNMP
S&P
Issuer ratingBBBBBBBBB+
Senior secured debt**A
Senior unsecured debtBBB-BBB*
Junior subordinated debt
BB+**
Preferred stock*BB+*
Moody’s
Issuer ratingBaa3Baa2Baa1
Senior secured debt**A2
Senior unsecured debtBaa3Baa2*
Junior subordinated debt
Ba1
**
* Not applicable

In its May 2025 credit opinion, S&P commented that it views the proposed Merger as credit supportive. S&P commented on the Final Order in the show cause proceeding in a July 2026 research report indicating that the resulting delay in the closing of the proposed Merger is a negative development but it does not immediately impact its ratings, as the impact on credit measures is viewed as temporary. In its June 2025 credit opinion, Moody’s commented that the announced terms of the proposed Merger are not expected to adversely affect the ratings or outlooks of TXNM or its two utility subsidiaries. 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.

98
A summary of liquidity arrangements as of July 24, 2026, is as follows:

PNM
TNMP
TXNM
Separate
TXNM
(In millions)
Financing capacity:
Revolving Credit Facility$400.0 $300.0 $300.0 $1,000.0 
PNM New Mexico Credit Facility
40.0 — — 40.0 
Total financing capacity
440.0 300.0 300.0 1,040.0 
Amounts outstanding as of July 24, 2026:
Commercial Paper Program
— — — — 
Revolving Credit Facility
180.0 107.0 197.0 484.0 
PNM New Mexico Credit Facility
40.0 — — 40.0 
Letters of credit
— — 3.1 3.1 
Total short-term debt and letters of credit
220.0 107.0 200.1 527.1 
Remaining availability as of July 24, 2026
$220.0 $193.0 $99.9 $512.9 
Invested cash as of July 24, 2026
$— $4.3 $1.5 $5.8 

In addition to the above, TXNM has $20.2 million of letters of credit issued. The above table excludes intercompany debt. As of July 24, 2026, PNM and TNMP had $46.3 million and $0 in borrowings from TXNM under their respective intercompany loan agreements. 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.

Other Material Cash Requirements

TXNM, PNM, and TNMP have contractual obligations for long-term debt, minimum lease payments, coal contracts, coal mine reclamation, nuclear decommissioning, SJGS plant decommissioning, pension and retiree medical contributions, and other long-term obligations. See MD&A – Other Material Cash Requirements in the 2025 Annual Reports on Form 10-K.

Contingent Provisions of Certain Obligations

As discussed in the 2025 Annual Reports on Form 10-K, TXNM, 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, TXNM, 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 contingent provisions also include contractual increases in the interest rate charged on certain of the Company’s short-term debt obligations in the event of a downgrade in credit ratings. 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.


99
Capital Structure

The capitalization tables below include the current maturities of long-term debt but does not include short-term debt or lease obligations as debt.
June 30,
2026		December 31,
2025
TXNM
TXNM common equity
39.6 %38.5 %
Preferred stock of subsidiary
0.1 0.2 
Long-term debt 1
60.3 61.3 
Total capitalization
100.0 %100.0 %
PNM
PNM common equity
46.9 %45.5 %
Preferred stock
0.2 0.2 
Long-term debt
52.9 54.3 
Total capitalization
100.0 %100.0 %
TNMP
Common equity
52.0 %51.0 %
Long-term debt
48.0 49.0 
Total capitalization
100.0 %100.0 %
1 TXNM’s long-term debt includes Convertible Notes, which receive 50% equity credit from ratings organizations.

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 the impacts of severe weather events, 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 impact these risks may have on the Company’s strategy. In addition, the Board approves certain procurements of 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 impact 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 at https://www.txnmenergy.com/sustainability/environment/climate_change_report that details the Company’s efforts to transition to a carbon-free generating portfolio.

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 included 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 environmental and climate analysis programs have also been useful in gaining a better understanding of energy and environmental policy and regulations, advanced clean energy technologies, decarbonization trends and climate impacts. In 2022, PNM joined EPRI’s Climate READi program which is a strategic initiative convening a global collaborative of electric utilities, thought leaders, scientific researchers and other key stakeholders to strengthen the power sector’s collective approach to managing climate risk to the power system. The program is a three-year initiative, through work across three concurrent workstreams, and PNM will benefit from the development of a first-of-its-kind comprehensive framework for managing physical climate risk and investment prioritization that was launched in May 2025.

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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 2024, GHG emissions associated with PNM’s interests in its fossil-fueled generating plants included approximately 1.5 million metric tons of CO2, which comprises the vast majority of PNM’s GHG emissions.

As of June 30, 2026, approximately 25% of PNM’s generating capacity, including resources owned, leased, or under PPAs, all of which is located within the U.S., consisted of coal or gas-fired generation that produces GHG emissions. As PNM shifts its generation to cleaner energy resources, the Company’s output of GHG emissions continues to decrease. 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 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 emissions.

PNM has several programs underway to reduce or offset GHG emissions from its generation resource portfolio, thereby reducing its exposure to climate change regulation. The shutdown of SJGS resulted in a reduction of GHG emissions for the entire station allowing PNM to attain GHG emissions reductions goals set forth by the ETA, discussed below.
PNM’s utility-owned solar and energy storage capacity, as well as solar, energy storage, wind, and geothermal procurements in service as of June 30, 2026, have a total net generation capacity of 3,409 MW. The NMPRC has approved plans for PNM to procure energy and RECs from additional resources to serve retail customers and a data center located in PNM’s service territory. PNM’s approved resource plans have a generation capacity of 1,318 MW. This includes approximately 280 MW of capacity under the Community Solar Act which will provide customers an additional option of accessing solar energy. PNM will continue to seek approval to procure renewable resources as needed to meet forecasted peak load requirements to serve its customers and New Mexico’s RPS and carbon-free resource requirements, while balancing the impact to customers’ electricity costs.

PNM also has a customer distributed solar generation program that represented 387.4 MW at June 30, 2026. PNM’s distributed solar programs will generate an estimated 774.8 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 were an estimated 9,008 GWh of electricity through 2025. Over the next 20 years, PNM projects energy efficiency and load management programs will provide the equivalent of approximately 12,900 GWh of electricity savings, which will avoid approximately 220,000 tons of CO2 based upon projected emissions from PNM’s portfolio of 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 include the use of sustainable, less variable groundwater supplies, and investments in technologies such as air cooling and cooling water recycling. These types of actions 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 and a public safety power shutoff plan. TNMP has also developed a wildfire mitigation plan. However, both PNM and TNMP remain at risk for wildfires outside of their control and the resulting damages in their service areas.

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EPA Regulation

In 2007, the U.S. Supreme Court held that EPA has the authority to regulate GHG emissions under the CAA, and in 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. These actions triggered new GHG permitting requirements for stationary sources, including the energy industry, under the Prevention of Significant Deterioration (“PSD”) and Title V program, although the U.S. Supreme Court held the CAA does not authorize EPA to require a source to obtain a PSD permit solely on the basis of its potential GHG emissions.

EPA also determined that its finding of endangerment requires it to issue performance standards under Section 111 of the CAA to regulate GHG emissions from new and existing stationary sources, including fossil fuel fired EGUs. Accordingly, in 2015, EPA issued Carbon Pollution Standards for new, modified, and reconstructed power plants (under Section 111(b)) and the Clean Power Plan for existing power plants (under Section 111(d)).

Multiple states, utilities, and trade groups challenged both the Carbon Pollution Standards for new sources and the Clean Power Plan for existing sources in separate cases, and the challengers successfully petitioned the U.S. Supreme Court for a stay of the Clean Power Plan.

In 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). 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. vacating the ACE Rule.

Numerous parties sought review by the U.S. Supreme Court, and on June 30, 2022, the Court held that the “generation shifting” approach in the Clean Power Plan exceeded the powers granted to EPA by Congress, though the Court did not address the related issue of whether Section 111 of the CAA only authorizes EPA to require measures that can be implemented entirely within the fence line at an individual source. Of broader significance in administrative law, the Court’s opinion expressly invoked the major questions doctrine, which requires rules involving issues of “vast economic or political significance,” to be supported by clear statutory authorization. In cases where there is no clear statement of authority, courts need not defer to the agency’s statutory interpretation on “major questions.” The decision sets legal precedent for future rulemakings by EPA and other federal regulatory agencies whereby the agency’s authority may be limited based upon similar reasoning.

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 reconsideration of the rule has concluded.

In 2024, EPA published in the Federal Register proposed regulatory actions under CAA Sections 111(b) and (d) to replace the Clean Power Plan and the ACE Rule and finalized the rules on May 9, 2024. The final rules include revised new source performance standards under Section 111(b) for all new natural gas-fired combustion turbines and emission guidelines under Section 111(d) requiring states to develop standards of performance for GHG emissions from existing fossil-fuel-fired electric steam generating units. In the final rules, EPA determined that the standards for existing coal- or gas-fired steam generating units must be based on the use of either CCS (long-term), natural gas co-firing (medium-term), or exempt from the rule via early retirement. The standards for new combustion turbines must be based on CCS (base load), efficient simple cycle design (intermediate load), or lower-emitting fuels (low load). Over a dozen states, several industry groups, and some power companies and labor unions have filed challenges to the rule at the DC Circuit. The DC Circuit heard oral arguments on December 6, 2024.

On January 20, 2025, President Trump signed an executive order entitled “Unleashing American Energy” directing all agencies, including EPA, to review all agency actions and suspend, revise, or rescind those identified as imposing an undue burden on domestic energy resources. The order also disbands the Interagency Working Group on the Social Cost of Greenhouse Gases, eliminates the “social cost of carbon” from consideration in any Federal permitting or regulatory decision, and expressly directs EPA to submit joint recommendations on the legality and continuing applicability of the 2009 endangerment finding for greenhouse gases. On June 17, 2025, EPA published a proposed rule in the Federal Register with two alternatives to repeal or revise the GHG emission standards for EGUs. EPA primarily proposes to find that GHG emissions from fossil fuel-fired power plants “do not contribute significantly to dangerous air pollution” under the meaning of CAA Section 111, which would preclude EPA from regulating GHG emissions from those plants. As a result, EPA is proposing to repeal all GHG standards for the power sector promulgated under CAA Section 111 in both 2015 and 2024. EPA also proposed in the alternative to find that CCS is not adequately demonstrated, and that neither CCS nor gas co-firing are the best system of emission reduction for GHG emissions from power plants, which findings also support repeal of those specific requirements from the rules adopted in 2024. Comments were due by September 15, 2025, and EPA intends to finalize the proposed rule in 2026.

On August 1, 2025, EPA published a proposal to rescind its 2009 final rule commonly known as the Endangerment Finding. In the Endangerment Finding, EPA found that current and projected atmospheric concentrations of the well-mixed
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combination of six GHGs threaten public health and welfare, and that the combined emissions of these GHGs from new motor vehicles and engines contribute to the GHG pollution that threatens public health and welfare. On February 12, 2026, the final rule was finalized as proposed, repealing all GHG emission standards for certain vehicles and engines promulgated on the basis of the Endangerment Finding. While the Endangerment Finding did not directly impose any requirements on EGUs, EPA has cited the Endangerment Finding as a basis for its authority to regulate GHG emissions from EGUs under CAA Section 111.

Federal Legislation

In July 2025, President Trump signed the OBBBA, significantly altering the landscape of climate action and clean energy initiatives in the United States. The legislation revises and, in some cases, phases out tax credits established under the IRA and includes restrictions on the availability of credits for “foreign entities of concern,” as such term is used in the OBBBA. Given the control of both houses of Congress by the Republican Party, no additional Federal legislation on climate change is expected during this Congress.

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.  PNM’s 2023 filing has a continued focus on a carbon-free energy system by 2040. The plan highlights the need for the significant sustained addition of resources over the next two decades, replacing retiring or expiring capacity, meeting concurrent load growth, while reducing the carbon intensity of PNM’s portfolio.

The ETA, among other things, requires that investor-owned utilities obtain specified percentages of their energy from renewable and carbon-free resources. The passage of the ETA amended the REA to require utilities operating in New Mexico to have renewable portfolios equal to 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 will manage compliance with the standards based upon existing generation resources and approved resource retirements and replacements. The ETA provides for a transition from fossil-fuel generating resources to renewable and other carbon-free resources by allowing investor-owned utilities to issue securitized bonds related to the retirement of coal-fired generating facilities to qualified investors.

The ETA has a significant impact on PNM’s future generation portfolio. In 2022, in compliance with the ETA, the NMED announced a new rulemaking, Carbon Dioxide Emission Standards for Electric Generating Facilities, to develop carbon emission standards for new and existing electric coal-fired generating facilities. In 2022, the rule was passed which adopts new carbon emission standards for new and existing coal-fired power plants. In compliance with the ETA, PNM filed its first CO2 Emissions Measurement and Compliance Annual Report on March 14, 2025.

In 2020, the NMPRC approved PNM’s San Juan abandonment application and for the issuance of securitized bonds consistent with the requirements of the ETA and in 2023 PNM issued the ETBC I Securitized Bonds. PNM cannot predict the full impact of the ETA with respect to Four Corners.

The State of California has enacted comprehensive climate-related disclosure laws that will require large entities doing business in the state to measure and disclose Scope 1 and Scope 2 GHG emissions beginning in 2026, Scope 3 GHG emissions beginning in 2027, and to publish biennial reports detailing climate-related financial risk beginning in January 2026. The State of California released proposed regulations in December 2025 with comments due in January 2026. The Company is closely monitoring developments to determine if any TXNM entity would be required to make disclosures under California law and the nature of any such required disclosures.

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
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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. 

In 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 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 U.S. to rejoin the Paris Agreement. The instrument was deposited with the United Nations on January 21, 2021, and the U.S. officially became a party to the Paris Agreement on February 19, 2021. On January 20, 2025, President Trump signed an executive order entitled “Putting America First in International Environmental Agreements,” directing the United States Ambassador to the United Nations to immediately submit formal written notification of the United States’ withdrawal from the Paris Agreement and any other agreement, pact, accord, or similar commitment made under the United Nations Framework Convention on Climate Change.

PNM has calculated GHG reductions that would result from scenarios that capture PNM’s retirement of its share of the SJGS in 2022 and assume exiting Four Corners in 2031 and PNM has set a goal to have a 100% carbon-free generating portfolio by 2040. Achieving our goal of carbon-free by 2040 is dependent on balancing reliability, cost-considerations, and maturity of emerging technologies. While the Company has not conducted an independent 2 Degree Scenario analysis, our commitment to becoming 100% carbon-free 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 degrees Celsius. In addition, as an investor-owned utility operating in the state of New Mexico, PNM is required to comply with the 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. INDC of 50% to 52% carbon emissions reduction by 2030.

PNM will continue to monitor the United States’ move to withdraw from 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 Company’s reputation as well as the economic viability of certain generating facilities. The ultimate consequences of increased stakeholder scrutiny related to 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.

Other Matters

See Notes 11 and 12 herein and Notes 16 and 17 of the Notes to Consolidated Financial Statements in the 2025 Annual Reports on Form 10-K for a discussion of commitments and contingencies and rate and regulatory matters.

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CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of financial statements in accordance with GAAP requires Company management to select and apply accounting policies that best provide the framework to report the results of operations and financial position for TXNM, PNM, and TNMP. The selection and application of those policies require management to make difficult, subjective, and/or complex judgments concerning reported amounts of revenue and expenses during the reporting period and the reported amounts of assets and liabilities at the date of the financial statements. As a result, there exists the likelihood that materially different amounts would be reported under different conditions or using different assumptions.

As of June 30, 2026, there have been no significant changes with regard to the critical accounting policies disclosed in TXNM’s, PNM’s, and TNMP’s 2025 Annual Reports on Forms 10-K. The policies disclosed included regulatory accounting, impairments, decommissioning and reclamation costs, pension and other postretirement benefits, accounting for contingencies, and income taxes.

MD&A FOR TNMP

RESULTS OF OPERATIONS

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

MD&A FOR PNM

RESULTS OF OPERATIONS

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

DISCLOSURE REGARDING FORWARD LOOKING STATEMENTS

Statements made in this filing that relate to future events or TXNM’s, PNM’s, or TNMP’s expectations, projections, estimates, intentions, goals, targets, and strategies are made pursuant to the Private Securities Litigation Reform Act of 1995. Readers are cautioned that all forward-looking statements are based upon current expectations and estimates and apply only as of the date of this report. TXNM, PNM, and TNMP assume no obligation to update this information.
Because actual results may differ materially from those expressed or implied by these forward-looking statements, TXNM, PNM, and TNMP caution readers not to place undue reliance on these statements. TXNM’s, PNM’s, and TNMP’s business, financial condition, cash flows, and operating results are influenced by many factors, which are often beyond their control, that can cause actual results to differ from those expressed or implied by the forward-looking statements.
These factors, which are neither presented in order of importance nor weighted, include:

•The failure of Parent to obtain any equity, debt, or other financing necessary to complete the Merger
•The expected timing and likelihood of completion of the pending Merger, including the timing, receipt and terms and conditions of any required governmental and regulatory approvals of the pending Merger that could reduce anticipated benefits or cause the parties to abandon the transaction
•The occurrence of any event, change or other circumstances that could give rise to the termination of the Merger Agreement, including in circumstances requiring TXNM to pay a termination fee
•The receipt of an unsolicited offer from another party to acquire our assets or capital stock that could interfere with the Merger
•The outcome of any legal proceedings, regulatory proceedings, or enforcement matters that may be instituted relating to the Merger
•Risks related to disruption of management time from ongoing business operations due to the proposed Merger
•The risk that the proposed transaction and its announcement could have an adverse effect on the ability of TXNM to retain and hire key personnel and maintain relationships with its customers and suppliers, and on its operating results and businesses generally
•The announcement and pendency of the Merger, during which TXNM is subject to certain operating restrictions, could have an adverse effect on TXNM’s businesses, results of operations, financial condition or cash flows
•The costs incurred to consummate the Merger
•The risk that the price of TXNM’s common stock may fluctuate during the pendency of the proposed transaction and may decline significantly if the proposed transaction is not completed
•The ability of PNM and TNMP to recover costs and earn allowed returns in regulated jurisdictions and the impact on service levels for PNM customers if the ultimate outcomes do not provide for the recovery of costs and operating and capital expenditures, as well as other impacts of federal or state regulatory and judicial actions
•The ability of the Company to successfully forecast and manage its operating and capital expenditures, including aligning expenditures with the revenue levels resulting from the ultimate outcomes of regulatory proceedings
•Uncertainty surrounding the status of PNM’s participation in jointly-owned generation projects
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•Uncertainty regarding the requirements and related costs of decommissioning power plants and reclamation of coal mines, as well as the ability to recover those costs from customers, including the potential impacts of current and future regulatory proceedings
•The impacts on the electricity usage of customers and consumers due to performance of state, regional, and national economies, energy efficiency measures, weather, seasonality, alternative sources of power, advances in technology, and other changes in supply and demand
•Uncertainty related to the potential for regulatory orders, legislation or rulemakings that provide for municipalization of utility assets or public ownership of utility assets, including generation resources, or which would delay or otherwise impact the procurement of necessary resources in a timely manner
•The Company’s ability to maintain its debt, including convertible debt, and access the financial markets in order to repay or refinance debt as it comes due and for ongoing operations and construction expenditures due to disruptions in the capital or credit markets, actions by ratings agencies, and fluctuations in interest rates resulting from any negative impacts from regulatory proceedings, actions by the Federal Reserve, entry into the Merger Agreement, geopolitical activity, including tariffs, or the risk of wildfires and storms
•The risks associated with the cost and completion of generation, transmission, distribution, and other projects, including uncertainty related to regulatory approvals and cost recovery, the ability of counterparties to meet their obligations under certain arrangements (including renewable energy resources, approved PPAs and ESAs), and supply chain or other outside support services that may be disrupted
•The potential unavailability of cash from TXNM’s subsidiaries due to regulatory, statutory, or contractual restrictions or subsidiary earnings or cash flows
•The performance of generating units, transmission systems, and distribution systems, which could be negatively affected by operational issues, fuel quality and supply chain issues (disruptions), unplanned outages, extreme weather conditions, wildfires, storms, terrorism, cybersecurity breaches, and other catastrophic events, including the costs the Company may incur to repair its facilities and/or the liabilities the Company may incur to third parties in connection with such issues beyond the extent of insurance coverage
•State and federal regulation or legislation relating to environmental matters and renewable energy requirements, the resultant costs of compliance, and other impacts on the operations and economic viability of PNM’s generating plants
•State and federal regulatory, legislative, executive, and judicial decisions and actions on ratemaking, tariffs, and taxes, including guidance related to the interpretation of changes in tax laws, the Inflation Reduction Act, the Infrastructure Investment and Jobs Act of 2021, the OBBBA, and other matters including a government shutdown and the cancellation of grants or related funding
•Risks related to climate change, including potential financial and reputational risks resulting from increased stakeholder scrutiny related to climate change, litigation, legislative and regulatory efforts to limit GHG, including the impacts of the ETA
•Employee workforce factors, including cost control efforts and issues arising out of collective bargaining agreements and labor negotiations with union employees
•Variability of prices and volatility and liquidity in the wholesale power and natural gas markets, including the impacts to transmission margins
•Changes in price and availability of fuel and water supplies, including the ability of the mine supplying coal to Four Corners and the companies involved in supplying nuclear fuel to provide adequate quantities of fuel
•Regulatory, financial, and operational risks inherent in the operation of nuclear facilities, including spent fuel disposal uncertainties
•The impacts of decreases in the values of marketable securities maintained in trusts to provide for decommissioning, reclamation, pension benefits, and other postretirement benefits, including potential increased volatility resulting from actions by the Federal Reserve to address inflationary concerns, and international developments
•Uncertainty surrounding counterparty performance and credit risk, including the ability of counterparties to supply fuel and perform reclamation activities and impacts to financial support provided to facilitate reclamation and decommissioning at SJGS
•The effectiveness of risk management regarding commodity transactions and counterparty risk
•The outcome of legal proceedings, including the extent of insurance coverage
•Changes in applicable accounting principles or policies

Any material changes to risk factors occurring after the filing of TXNM’s, PNM’s, and TNMP’s 2025 Annual Reports on Form 10-K are disclosed in Item 1A, Risk Factors, in Part II of this Form 10-Q.

For information about the risks associated with the use of derivative financial instruments, see Item 3. “Quantitative and Qualitative Disclosures About Market Risk.”

SECURITIES ACT DISCLAIMER

Certain securities described or cross-referenced in this report have not been registered under the Securities Act, or any state securities laws and may not be reoffered or sold in the United States absent registration or an applicable exemption from the registration requirements of the Securities Act and applicable state securities laws. This Form 10-Q does not constitute an offer to sell or the solicitation of an offer to buy any securities.
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WEBSITES
The TXNM website, www.txnmenergy.com, is an important source of Company information. New or updated information for public access is routinely posted.  TXNM encourages analysts, investors, and other interested parties to register on the website to automatically receive Company information by e-mail. This information includes news releases, notices of webcasts, and filings with the SEC. Participants will not receive information that was not requested and can unsubscribe at any time. Our corporate internet addresses are:
•TXNM: www.txnmenergy.com
•PNM: www.pnm.com
•TNMP: www.tnmp.com
 
TXNM’s corporate website includes a dedicated section providing key environmental and other information related to PNM’s and TNMP’s operations, including information that collectively demonstrates the Company’s commitment to sustainability. This information highlights plans for PNM to be coal-free no later than 2031 and to have a carbon-free generating portfolio by 2040.

The contents of these websites are not a part of this Form 10-Q. The SEC filings of TXNM, PNM, and TNMP, including annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, are accessible free of charge on the TXNM website as soon as reasonably practicable after they are filed with, or furnished to, the SEC. Reports filed with the SEC are available on its website, www.sec.gov. These reports are also available in print upon request from TXNM free of charge.
Also available on the Company’s website at https://www.txnmenergy.com/sustainability/governance/governance-documents.aspx and in print upon request from any shareholder are TXNM’s:
•Corporate Governance Principles
•Code of Ethics (Do the Right Thing – Principles of Business Conduct; Supplier Code of Conduct)
•Charters of the Audit and Ethics Committee, Nominating and Governance Committee, Compensation and Human Resources Committee, and Finance Committee
•Restated Articles of Incorporation and Bylaws
 
The Company will post amendments to or waivers from its code of ethics (to the extent applicable to the Company’s executive officers and directors) on its website.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company manages the scope of its various forms of market risk through a comprehensive set of policies and procedures with oversight by senior level management through the Risk Management Committee (“RMC”). The Board’s Finance Committee sets the risk limit parameters. The RMC has oversight over the risk control organization. The RMC is assigned responsibility for establishing and enforcing the policies, procedures, and limits and evaluating the risks inherent in proposed transactions on an enterprise-wide basis.

The RMC’s responsibilities include:

•Establishing policies regarding risk tolerance levels and activities in each of the business segments
•Approving new types of derivatives entered into for marketing and hedging
•Reviewing and approving hedging risk activities
•Establishing policies regarding counterparty credit exposure and limits
•Authorizing and delegating transaction limits
•Reviewing and approving controls and procedures for derivative activities
•Reviewing and approving models and assumptions used to calculate mark-to-market and market risk exposure
•Proposing risk limits to the Board’s Finance Committee for its approval
•Reporting to the Board’s Audit and Finance Committees on these activities

To the extent an open position exists, fluctuating commodity prices, interest rates, equity prices, and economic conditions can impact financial results and financial position, either favorably or unfavorably. As a result, the Company cannot predict with certainty the impact that its risk management decisions may have on its businesses, operating results, or financial position.

Commodity Risk

Information concerning accounting for derivatives and the risks associated with commodity contracts is set forth in Note 7, including a summary of the fair values of mark-to-market energy related derivative contracts included in the Condensed
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Consolidated Balance Sheets. During the six months ended June 30, 2026, and the year ended December 31, 2025, the Company had no commodity derivative instruments designated as cash flow hedging instruments.

Commodity contracts that met the definition of a derivative were recorded at fair value on the Condensed Consolidated Balance Sheets. In the six months ended June 30, 2026 and 2025, the effects of mark-to-market commodity derivative instruments had no impact to PNM’s net earnings and zero and $3.2 million of fair value losses have been recorded as a regulatory asset.

PNM may be exposed to changes in the market prices of electricity and natural gas for the positions in its wholesale portfolio not covered by the FPPAC. The Company manages risks associated with market fluctuations by utilizing various commodity instruments that may qualify as derivatives, including futures, forwards, options, and swaps. PNM uses such instruments to hedge its exposure to changes in the market prices of electricity and natural gas. PNM also uses such instruments under an NMPRC approved hedging plan, from time-to-time, to manage fuel and purchased power costs related to customers covered by its FPPAC.

Credit Risk

The Company is exposed to credit risk from its retail and wholesale customers, as well as the counterparties to derivative instruments. The Company conducts counterparty risk analysis across business segments and uses a credit management process to assess the financial conditions of counterparties. The following table provides information related to credit exposure by the credit worthiness (credit rating) and concentration of credit risk for wholesale counterparties, all of which will mature in less than two years.
Schedule of Credit Risk Exposure
June 30, 2026
Rating (1)
Credit Risk Exposure(2)
Number of Counter-parties >10%Net Exposure of Counter-parties >10%
(Dollars in thousands)
External ratings:
Investment grade$3,895 2$1,894 
Non-investment grade— —— 
Split ratings— —— 
Internal ratings:
Investment grade1,029 —— 
Non-investment grade— —— 
Total$4,924 $1,894 

(1)The rating “Investment Grade” is for counterparties, or a guarantor, with a minimum S&P rating of BBB- or Moody’s rating of Baa3. The category “Internal Ratings – Investment Grade” includes those counterparties that are internally rated as investment grade in accordance with the guidelines established in the Company’s credit policy.
(2)The Credit Risk Exposure is the gross credit exposure, including long-term contracts, forward sales, and short-term sales. The gross exposure captures the amounts from receivables/payables for realized transactions, delivered and unbilled revenues, and mark-to-market gains/losses. Gross exposures can be offset according to legally enforceable netting arrangements but are not reduced by posted credit collateral. At June 30, 2026, TXNM held no cash collateral to offset its credit exposure.

Net credit risk for the Company’s largest counterparty as of June 30, 2026, was $1.3 million. Other investments have no significant counterparty credit risk.

Interest Rate Risk

The majority of PNM’s and TNMP’s long-term debt is fixed-rate debt, which does not expose earnings to adverse changes in market interest rates. PNM and TNMP earnings are exposed to adverse changes in market interest rates when long-term debt must be refinanced, repriced or redeemed. TXNM’s debt and the revolving credit facilities of PNM and TNMP are exposed to interest rate risk to the extent variable interest rates continue to rise. The Company periodically makes plans to reduce its variable interest rate exposures through various instruments including fixed rate debt and equity and hedging arrangements and otherwise expects that it will be able to extend or replace variable rate debt under similar terms and conditions prior to their expirations. Variable interest rates under the TXNM, PNM, and TNMP revolving credit facilities, commercial paper notes, and term loans are based on SOFR.


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At July 24, 2026, variable rate debt balances and weighted average interest rates were as follows:

Variable Rate DebtWeighted Average Interest RateBalance OutstandingCapacity
(In thousands)
Short-term Debt:
TXNM Revolving Credit Facility
5.17 %$200,100 $300,000 
PNM Revolving Credit Facility4.93 180,000 400,000 
PNM New Mexico Credit Facility5.01 40,000 40,000 
TNMP Revolving Credit Facility4.55 107,000 300,000 
$527,100 $1,040,000 
Long-term Debt:
TXNM 2026 Term Loan5.02 %400,000 
PNM 2026 Term Loan4.57 195,000 
PNM November 2025 Term Loan
4.58 120,000 
$715,000 

The investments held by PNM in trusts for decommissioning and reclamation had an estimated fair value of $513.6 million at June 30, 2026, of which 7.9% were fixed-rate debt securities that subject PNM to risk of loss of fair value with increases in market interest rates. If interest rates were to increase by 50 basis points from their levels at June 30, 2026, the decrease in the fair value of the fixed-rate securities would be 0.36%, or $0.2 million.

PNM does not directly recover or return through rates any losses or gains on the securities, including equity investments discussed below, in the trusts for decommissioning and reclamation. However, the overall performance of these trusts does enter into the periodic determinations of expense and funding levels, which are factored into the rate making process to the extent applicable to regulated operations. PNM is at risk for shortfalls in funding of obligations due to investment losses, including those from the equity market risks discussed below, to the extent not ultimately recovered through rates charged to customers.

Equity Market Risk

The investments held by PNM in trusts for decommissioning and reclamation include certain equity securities at June 30, 2026. These equity securities expose PNM to losses in fair value should the market values of the underlying securities decline. Equity securities comprised 85% of the securities held by the trusts as of June 30, 2026. A hypothetical 10% decrease in equity prices would reduce the fair values of these funds by $43.7 million.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures

As of the end of the period covered by this quarterly report, each of TXNM, PNM, and TNMP conducted an evaluation, under the supervision and with the participation of its management, including its Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934). Based upon this evaluation, the Chief Executive Officer and the Chief Financial Officer of each of TXNM, PNM, and TNMP concluded that the disclosure controls and procedures are effective.

Changes in internal controls over financial reporting

There have been no changes in each of TXNM’s, PNM’s, and TNMP’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934) during the quarter ended June 30, 2026, that have materially affected, or are reasonably likely to materially affect, each of TXNM’s, PNM’s, and TNMP’s internal control over financial reporting.
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PART II. OTHER INFORMATION

None

ITEM 1. LEGAL PROCEEDINGS

See Notes 11 and 12 for information related to the following matters, for TXNM, PNM, and TNMP, incorporated in this item by reference.
Note 11

•TXNM – Merger Related Litigation

Note 12

•TXNM – Merger Related Regulatory Applications
•PNM – Integrated Resource Plans
•PNM – Grid Modernization Plan
•PNM - Transportation Electrification Program
•TNMP – Transmission Cost of Service Rates
•TNMP – Periodic Distribution Rate Adjustment

ITEM 1A. RISK FACTORS

As of the date of this report, there have been no material changes with regard to the Risk Factors disclosed in TXNM’s, PNM’s, and TNMP’s Annual Reports on Form 10-K for the year ended December 31, 2025.

ITEM 5. OTHER INFORMATION

During the six months ended June 30, 2026, no director or officer (as defined by Rule 16a-1(f) of the Exchange Act) of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.


ITEM 6. EXHIBITS
2.1
TXNM
Agreement and Plan of Merger, dated as of May 18, 2025, by and among TXNM Energy, Inc., Troy ParentCo LLC and Troy Merger Sub Inc. (incorporated by reference to Exhibit 2.1 to TXNM’s Current Report on Form 8-K filed May 19, 2025)
2.2TXNM
Waiver, dated as of July 17, 2026, by and among TXNM Energy, Inc., Troy ParentCo LLC, and Troy Merger Sub Inc. (incorporated by reference to Exhibit 10.1 to TXNM’s Current Report on Form 8-K filed July 20, 2026)
2.3TXNM
Letter Agreement, dated as of July 17, 2026, by and among TXNM Energy, Inc., Troy ParentCo LLC, Troy Merger Sub Inc., and Troy TopCo LP (incorporated by reference to Exhibit 10.2 to TXNM’s Current Report on Form 8-K filed July 20, 2026)
3.1
TXNM
Restated Articles of Incorporation of TXNM, as amended to date (incorporated by reference to Exhibit 3.1 to TXNM’s Current Report on Form 8-K filed August 5, 2024)
3.2PNM
Restated Articles of Incorporation of PNM, as amended through May 31, 2002 (incorporated by reference to Exhibit 3.1.1 to PNM’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2002)
3.3TNMP
Articles of Incorporation of TNMP, as amended through July 7, 2005 (incorporated by reference to Exhibit 3.1.2 to TNMP’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2005)
3.4
TXNM
Bylaws of TXNM, with all amendments to and including August 2, 2024 (incorporated by reference to Exhibit 3.2 to TXNM’s Current Report on Form 8-K filed August 5, 2024)
3.5PNM
Bylaws of PNM, with all amendments to and including July 1, 2022 (incorporated by reference to Exhibit 3.5 to PNM’s Current Report on Form 8-K filed July 1, 2022)
3.6TNMP
Bylaws of TNMP, with all amendments to and including June 18, 2013 (incorporated by reference to Exhibit 3.6 to TNMP’s Current Report on Form 8-K filed June 20, 2013)
10.1TXNM
Term Loan Agreement, dated July 17, 2026, by and among TXNM Energy, Inc., the lenders party thereto and Wells Fargo Bank, National Association, as Administrative Agent (incorporated by reference to Exhibit 10.3 to TXNM’s Current Report on Form 8-K filed July 20, 2026)
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Table of Contents
10.2PNM
Term Loan Agreement, dated July 21, 2026, among Public Service Company of New Mexico, the lender parties thereto and Canadian Imperial Bank of Commerce, New York Branch, as Administrative Agent (incorporated by reference to Exhibit 10.1 to PNM’s Current Report on Form 8-K filed July 21, 2026)
31.1
TXNM
Chief Executive Officer Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2
TXNM
Chief Financial Officer Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.3PNM
Chief Executive Officer Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.4PNM
Chief Financial Officer Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.5TNMP
Chief Executive Officer Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.6TNMP
Chief Financial Officer Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1
TXNM
Chief Executive Officer and Chief Financial Officer Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2PNM
Chief Executive Officer and Chief Financial Officer Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.3TNMP
Chief Executive Officer and Chief Financial Officer Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS
TXNM, PNM, and TNMP
XBRL Instance Document - The instance document does not appear in the interactive data file because XBRL tags are embedded within the Inline XBRL document
101.SCH
TXNM, PNM, and TNMP
Inline XBRL Taxonomy Extension Schema Document
101.CAL
TXNM, PNM, and TNMP
Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF
TXNM, PNM, and TNMP
Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB
TXNM, PNM, and TNMP
Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE
TXNM, PNM, and TNMP
Inline XBRL Taxonomy Extension Presentation Linkbase Document
104
TXNM, PNM, and TNMP
Cover Page Inline XBRL File (included in Exhibits 101)
111

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrants have duly caused this report to be signed on their behalf by the undersigned thereunto duly authorized.

TXNM ENERGY, INC.
PUBLIC SERVICE COMPANY OF NEW MEXICO
TEXAS-NEW MEXICO POWER COMPANY
(Registrants)
Date:July 31, 2026
/s/ Gerald R. Bischoff
Gerald R. Bischoff
Vice President and Corporate Controller
(Officer duly authorized to sign this report)







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