Second Quarter Earnings Aug. 3, 2007 Jeff Sterba Chairman, President & CEO Chuck Eldred Executive...

Second Quarter EarningsAug. 3, 2007

Jeff SterbaChairman, President & CEO

Chuck Eldred Executive Vice President & CFO

Preliminary and unaudited2 Aug. 3, 2007

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995

Non-GAAP Financial MeasuresFor an explanation of the non-GAAP financial measures that appear on certain slides in this presentation (ongoing earnings, ongoing earnings per diluted share and EBITDA), as well as a reconciliation to GAAP measures, please refer to the Company's website as follows: http://www.pnmresources.com/fin

Statements made in this presentation that relate to future events or the Company’s expectations, projections, estimates, intentions, goals, targets and strategies are made pursuant to the Private Securities Litigation Reform Act of 1995. You are cautioned that all forward-looking statements are based upon current expectations and estimates and the Company assumes no obligation to update this information. Because actual results may differ materially from those expressed or implied by these forward-looking statements, the Company cautions you not to place undue reliance on these statements. The Company’s business, financial condition, cash flow and operating results are influenced by many factors, which are often beyond its control, that can cause actual results to differ from those expressed or implied by the forward looking statements. These factors include the risk that EnergyCo is unable to identify and implement profitable acquisitions, including development of the Cedar Bayou Generating Station and implementation of the acquisition of the Lyondell facility, or that the contribution of assets to EnergyCo by the Company may not be implemented as expected, the potential unavailability of cash from the Company’s subsidiaries or EnergyCo due to regulatory, statutory or contractual restrictions, the outcome of any appeals of the Public Utility Commission of Texas order in the stranded cost true-up proceeding, the ability of First Choice Power to attract and retain customers, changes in Electric Reliability Council of Texas protocols, changes in the cost of power acquired by First Choice Power, collections experience, insurance coverage available for claims made in litigation, fluctuations in interest rates, conditions affecting the Company’s or EnergyCo’s ability to access the financial markets, weather, water supply, changes in fuel costs, availability of fuel supplies, the effectiveness of risk management and commodity risk transactions, seasonality and other changes in supply and demand in the market for electric power, variability of wholesale power prices and natural gas prices, volatility and liquidity in the wholesale power markets and the natural gas markets, changes in the competitive environment in the electric and natural gas industries, the performance of generating units, including the Palo Verde Nuclear Generating Station, the San Juan Generating Station, the Four Corners Plant, and EnergyCo generating units, and transmission systems, the ability to secure long-term power sales, the risk that the Company and its subsidiaries and EnergyCo may have to commit to substantial capital investments and additional operating costs to comply with new environmental control requirements including possible future requirements to address concerns about global climate change, the risks associated with completion of generation, including pollution control equipment at the SJGS, the expansion of the Afton Generating Station, and the EnergyCo Cedar Bayou Generating Station, transmission, distribution, and other projects, including construction delays and unanticipated cost overruns, state and federal regulatory and legislative decisions and actions, the outcome of legal proceedings, changes in applicable accounting principles and the performance of state, regional and national economies. For a detailed discussion of the important factors that affect the Company and that could cause actual results to differ from those expressed or implied by the Company’s forward-looking statements, please see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s current and future Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q and the Company’s current and future Current Reports on Form 8-K, filed with the SEC.

Aug. 3, 20073Preliminary and unaudited

Highlights and Operational Review

2nd Quarter ongoing EPS $0.13, down from $0.25 in 2006

YTD ongoing EPS $0.52, down from $0.63 in 2006

Gas rate case appeal

Strong progress made on executing EnergyCo strategy

Lowering 2007 guidance


Quarter-over-Quarter EPS Variances

Ongoing EPS: 2nd Quarter 2006 $0.25

Variance:Plant Performance 0.08 Regulated Load Growth 0.03 Weather Impact on Regulated Electric Business (0.03) Dilution (0.03) Coal Costs (0.03) First Choice Power (1) (0.07)

Mark-to-Market (0.11) All Other Variances 0.04

Total Variance ($0.12)

Ongoing EPS: 2nd Quarter 2007 $0.13

(1) Excludes mark-to-market changes


2nd Quarter Plant Performance

48.1%

95.9%

72.1%

53.8%

89.1% 86.2%84.3%

93.2%

0%

20%

40%

60%

80%

100%

San Juan Four Corners Twin Oaks Palo Verde

Q2 2007 Q2 2006

Equivalent Availability Factor

Nuclear: 91%*Coal: 89%*

Lignite: 88%*

* Annual top quartile numbers from the North American Electricity Reliability Council


First Choice Power 2nd Quarter Performance Drivers

Negative drivers: Overall weighted average use per customer was 12% lower than

same period 2006– Milder weather– Change in customer mix

Realized unit gross margins were lower than same period in 2006, but still in line with targeted expectations of mid-$20’s/MWh

Positive drivers: Overall 8.4% increase in customers 15.7% decrease in operating expenses Increase in delivered volume to Commercial and Industrial customers


First Choice Power Looking Ahead

Regulatory uncertainty removed, partially mitigating issues with switch rates

Headroom is improving and expect continued good unit margins

July enrollments exceeded two times those in June

100% of total supply requirements are hedged for Q3

For Q4: 100% of fixed price sales requirements are hedged

– 50% of variable price sales requirements are hedged

Customer Information System conversion under way

Driving many enrollment and service calls to the web and IVR

Should positively impact both cost and customer levels


YTD Walk Across (ongoing)

$0.63

($0.04)

($0.12)

($0.08 )

($0.06)

($0.07)

$0.14

$0.09

$0.03

$0.00

$0.10

$0.20

$0.30

$0.40

$0.50

$0.60

$0.70

Load growth

and weather

Plant performance

Financing

Dilution

Coal costs

WholesaleMarketing

Activity

MtM

FCP

YTD 2006 YTD 2007

$0.52


YTD Mark-to-Market Changes2007 vs. 2006

FCP Strategy: Hedge wholesale supply associated with retail load and optimize hedged positions

Q2 Impact: MtM essentially flat in 2007. Unfavorable variance versus last year reflects non-recurrence of 2006’s gain.

PNM Strategy: Hedge 2007 uncertainty around plant performance with forward purchases of gas and electricity

Q3/Q4 Impact: MtM will reverse, however higher energy costs are expected due to fixed-price hedged position

YTD MtM Gain/(Loss) - $M EPS2007 2006 Fav/(Unf) Variance

PNM ($11.2) ($2.0) ($9.2) ($0.07)First Choice (0.2) 5.6 (5.8) (0.05) Total PNMR ($11.4) $3.6 ($15.0) ($0.12)

EPS ($0.09) $0.03 ($0.12)


YTD EPS by Segment (ongoing)

YTD 2007 YTD 2006 +/-

Total Diluted EPS $0.52 $0.63 ($0.11)

Regulated Operations:

PNM Electric $0.20 $0.22 ($0.02)

PNM Gas $0.12 $0.08 $0.04

TNMP Electric $0.07 $0.06 $0.01

Total Regulated $0.39 $0.36 $0.03

Unregulated Operations:

Wholesale $0.11 $0.21 ($0.10)

First Choice $0.16 $0.20 ($0.04)

EnergyCo $0.01 $0.00 $0.01

Total Unregulated $0.28 $0.41 ($0.13)

Corp/Other ($0.15) ($0.14) ($0.01)


2007 Guidance Update

$1.80 $2.00Original Guidance

1st HalfExpectations

$.85 - $.95

Shortfall primarily due to:Plant performance ~ $ (0.15) Higher coal costs ~ $ (0.05)Mark-to-market loss ~ $ (0.09)Gas rate case delay ~ $ (0.04)

1st HalfActual$.52

2nd HalfExpectations

$.95 - $1.05




1st HalfExpectations

$.85 - $.95

1st HalfActual$.52

2nd HalfExpectations

$.95 - $1.05

Drivers of ChangePlant performance ~ $ (0.07) Afton start-up ~ $ (0.04)Higher energy costs ~ $ (0.04)Gas rate increase ~ $ (0.02)

Revised 2nd HalfExpectations$.78 - $.88




Revised 2nd HalfExpectations$.78 - $.88

$1.30 $1.40Revised Guidance

1st HalfActual$.52


Other Guidance Assumptions

Equivalent Forced Outage Rate

5.4%

9.3%9.5%

5.0%

23.9%

8.2%7.0%8.0%

6.0%

San Juan Four Corners Palo Verde

Original Guidance 1st Half Actual

2nd Half Projections

EFOR Sensitivity (EPS)

2% EFOR

San Juan: $0.04

Four Corners: $0.01

Palo Verde: $0.02

2nd Half Price AssumptionsPermian gas: ~ $6.50/mmbtu

PV on-peak: ~$68/MWh

Gas Price Sensitivity10% change in gas & power prices

equates to EPS change of $.05

+-

+-

+-

+-


EnergyCo Strategy

LocationConstrained zonesPrimarily ERCOT

Long-term goal of regional diversity

Financial CriteriaStrong cash flow

5 yr. avg. cash on cash returns of 13%+

Unlevered IRR in excess of 8.5%

OperationsStrong on-siteoperating team

Reliable low-costtechnology

Contracts/HedgesTarget 50%+ of portfolio

Protect against price declines& capture value of volatility

Fuel Mix & Technology

Base load assets for stability

Peaking in load-serving areas

State-of-art emissioncontrols

Measured, disciplined growth

Seek strong cash flow over short-term

accretion

2007 Targeted EBITDA: $14 million($0.07 EPS to PNMR)


EnergyCo Development Project

Joint project with NRG Energy 550-MW unit at Cedar Bayou facility 275 MW available to EnergyCo by summer 2009 Existing site within Houston zone Approximate $390 million project costs(1) or $710/kW Use EnergyCo credit facility during construction $0.04 to $0.06 EPS accretion in first full year

Cedar Bayou Generating Station Unit 4

(1) Excludes interest during construction


EnergyCo Update

(1) Online summer 2009

Purchased from Dynegy Acquisition completed Aug. 1 614 MW facility Two off-take contracts >400 MW available to market Purchase price: $467.5 million Slightly accretive in 2008

Altura Cogen (formerly Lyondell) EnergyCo’s Growing Portfolio1.Twin Oaks 305 MW2.Altura Cogen 614 MW3.Cedar Bayou 270 MW(1)

Total 1,189 MW

EnergyCo’s Growing Portfolio1.Twin Oaks 305 MW2.Altura Cogen 614 MW3.Cedar Bayou 270 MW(1)

Total 1,189 MW

1

23


Gas Rate Case

PNM Gas Rate Case

Order issued: June 29, 2007 Rate base: $377.3 million Cap Structure: 49/51 ROE: 9.53%

Appealed to state Supreme Court Filed a notice of appeal on July 30 Cross appeal due within 10 days PNM’s statement of issues due Aug. 29


Other Updates

Management Pat Vincent, Utilities President Jim Ferland, Senior Vice President of Energy Resources Bill Real retirement after 29 years Cindy McGill, Senior Vice President of Public Policy

PNM Electric Rate Case Schedule Sept. 4 Staff and intervener testimony due Oct. 1-8 Hearing Dec. 31 Recommended decision expected Feb. 21, 2008 Suspension period expires


Path Forward

Earn allowed regulated rate of return by addressing: Regulatory environment Legislative initiatives Operating efficiency Capital allocation

Achieve growth through unregulated investments: Focus on value of systems and portfolio optimization Apply conservative approach of future contributions to EnergyCo Seek long-term earnings and cash generation through EnergyCo

acquisitions


Questions and Answers


Second Quarter 2007

Appendix


GAAP-Ongoing Reconciliation

(in '000s)

Earnings EPS Earnings EPS Earnings EPS Earnings EPS

(in '000s) Diluted (in '000s) Diluted (in '000s) Diluted (in '000s) Diluted

Net Earnings Available to Common Shareholders 20,240$ 0.26$ 15,983$ 0.23$ 49,906$ 0.64$ 41,984$ 0.61$

Adjustments for Acquisition and Other

Non-Recurring Charges (net of income tax effects):

IRS Decision on Tax Liabilities (16,038) (0.20) - - (16,038) (0.20) - -

Acquisition Integration Costs - - 1,140 0.02 - - 1,709 0.03

Twin Oaks III Impairment 2,042 0.02 - - 2,042 0.02 - -

Loss on Contribution of Altura 2,197 0.03 - - 2,197 0.03 - -

J V Formation Costs 1,801 0.02 - - 2,543 0.03 - -

Total Adjustments* (9,998) (0.13) 1,140 0.02 (9,256) (0.12) 1,709 0.03

Net Ongoing Earnings Available to Common Shareholders 10,242$ 0.13$ 17,123$ 0.25$ 40,650$ 0.52$ 43,693$ 0.63$

Average Diluted Shares 78,793 69,433 78,446 69,349

*For segment presentation, all adjustments are included in the Corporate/Other segment

Quarter Ended June 30,

2007 2006

Year-to-Date June 30,

2007 2006


2nd Quarter EPS by Segment (ongoing)

Q2 2007 Q2 2006 +/-

Total Diluted EPS $0.13 $0.25 ($0.12)


PNM Electric $0.07 $0.10 ($0.03)

PNM Gas ($0.04) ($0.07) $0.03

TNMP Electric $0.05 $0.04 $0.01



Wholesale $0.02 $0.08 ($0.06)

First Choice $0.08 $0.19 ($0.11)

EnergyCo $0.02 $0.00 $0.02


Corp/Other ($0.07) ($0.09) $0.02


2nd Quarter Margin by SegmentQ2 2007 Q2 2006 +/-

Total Gross Margin $224.1 $240.2 ($16.1)


PNM Electric $101.6 $94.5 $7.1

PNM Gas $30.1 $26.8 $3.3

TNMP Electric $36.3 $38.8 ($2.5)



Wholesale $32.0 $43.1 ($11.1)

First Choice $24.2 $36.8 ($12.6)


Corp/Other ($0.1) $0.2 ($0.3)


2nd Quarter EBITDA by Segment(ongoing)

(in millions) Q2 2007 Q2 2006 +/-

Total EBITDA $84.8 $102.3 ($17.5)


PNM Electric $34.8 $34.5 $0.3

PNM Gas $3.7 $1.4 $2.3

TNMP Electric $20.1 $20.0 $0.1



Wholesale $15.1 $26.4 ($11.3)

First Choice $11.8 $21.4 ($9.6)

EnergyCo $2.3 $0.0 $2.3


Corp/Other ($3.0) ($1.4) ($1.6)


YTD Margin by SegmentYTD 2007 YTD 2006 +/-

Total Gross Margin $499.1 $470.0 $29.1


PNM Electric $210.9 $193.0 $17.9

PNM Gas $84.9 $76.6 $8.3

TNMP Electric $70.1 $74.3 $(4.2)



Wholesale $84.6 $74.6 $10.0

First Choice $48.9 $51.6 $(2.7)

Total Unregulated $133.5 $126.2 $7.3

Corp/Other ($0.3) $(0.1) ($0.2)


YTD EBITDA by Segment(ongoing)

(in millions) YTD 2007 YTD 2006 +/-

Total EBITDA $211.9 $207.5 $4.4


PNM Electric $77.6 $72.2 $5.4

PNM Gas $34.0 $27.5 $6.5

TNMP Electric $35.5 $36.4 ($0.9)



Wholesale $43.7 $48.1 ($4.4)

First Choice $21.8 $23.3 ($1.5)

EnergyCo $1.6 $0.0 $1.6


Corp/Other ($2.3) $0.0 ($2.3)


YTD Plant Performance

87.6%

59.2%

85.6%82.2%

66.9%

87.5%87.4%

92.4%

0%

20%

40%

60%

80%

100%

San Juan Four Corners Twin Oaks Palo Verde

YTD 2007 YTD 2006

Equivalent Availability Factor

Nuclear: 91%*Coal: 89%*

Lignite: 88%*

* Annual top quartile numbers from the North American Electricity Reliability Council


Heating-Degree Days

The heating-degree day (HDD) value is the accumulation in degrees that the daily mean temperature was below 65 degrees F. The cooling-degree day (CDD) value is the accumulation in degrees that the daily mean temperature was above 65 degrees F.

2007Q2

2006Q2

Normal

PNM 338 145 301

TNMP 99 4 57

2nd Quarter Weather Data

2007Q2

2006Q2

Normal

PNM 412 601 477

TNMP 941 1,182 1,011

Cooling-Degree Days


Heating-Degree Days

The heating-degree day (HDD) value is the accumulation in degrees that the daily mean temperature was below 65 degrees F. The cooling-degree day (CDD) value is the accumulation in degrees that the daily mean temperature was above 65 degrees F.

2007YTD

2006YTD

Normal

PNM 2,399 2,012 2,225

TNMP 1,112 730 1,049

YTD Weather Data

2007YTD

2006

YTDNormal

PNM 412 601 477

TNMP 1,052 1,309 1,091

Cooling-Degree Days


$76 $78

$32

$69

$56

$112

$112

$36

$36

$15

$59

$56

$32$32

$0

$50

$100

$150

$200

$250

$300

$350

$400

Q1 2007 Forecast Q2 2007 Forecast

Other

Gas

Electric T&D

New generation

Environmental enhancements

Nuclear fuel

Existing generation

Includes AFUDC and capitalized interest

2007 Capital Expenditures

$415

(In millions)

$386 Cap-ex increase reflects:

• Accelerated expenditures at San Juan

• Transfer of Twin Oaks to EnergyCo

• Additional environmental expenditures

• Forward nuclear fuel purchase


$263

$92

$202

$342

$736

$219

$137

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

$1,800

$2,000

2007 - 2011 Forecast

Other

Gas

Electric T&D

New generation

Environmental enhancements

Nuclear fuel

Existing generation

Includes AFUDC and capitalized interest

Five-Year Capital Expenditures

$1,991(In millions)


Utility Rate Base

Rate Base Last Allowed

ROE Last Allowed

Test Period

12-month ended

Filed Rate

Base

Filed ROE

Debt/Equity

Ratio

Proposed

Implementation

PNM Electric

$960 million

10.5%

Sept. 2006

$1.2 billion

10.75%

48%/52%

Q1 ‘08

PNM Gas

$377 million

9.53%

Dec. 2005

Final order issued June 2007

49%/51%

Implemented

July 2007

TNMP-TX

$402 million

10.25%

Sept. 2004

Rates frozen through 5/07

60%/40%

N/A

TNMP-NM Has transferred

to PNM

$70 million

10.0%

Sept. 2004

Rates frozen through 12/10

55%/45%

N/A

Second Quarter Earnings Aug. 3, 2007 Jeff Sterba Chairman, President & CEO Chuck Eldred Executive...

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