Capitalization

Information concerning financing activities is contained in Note 6 of Notes to Consolidated Financial Statements in the 2010 Annual Reports on Form 10-K.

Short-term Debt

At June 30, 2011, PNMR and PNM had revolving credit facilities with financing capacities of $542.0 million under the PNMR Facility and $386.0 million under the PNM Facility that primarily expire in August 2012. The financing capacities of the PNMR Facility and the PNM Facility will reduce by $25.0 million and $18.0 million in August 2011 according to their terms. The Company does not believe the scheduled reduction in the facilities will have a significant impact on PNMR’s and PNM’s liquidity. In addition, PNMR has a local line of credit amounting to $5.0 million that expires in August 2012. TNMP has a revolving credit facility with financing capacity of $75.0 million under the TNMP Revolving Credit Facility that expires in December 2015. At June 30, 2011, the weighted average interest rate was 1.44% for the PNMR Facility and 0.84% for the PNM Facility. Short-term debt outstanding consists of:



	June 30,		December 31,
Short-term Debt	2011		2010
	(In thousands)
PNM – Revolving credit facility	$	273,000	$	190,000
TNMP – Revolving credit facility	—		—
PNMR
Revolving credit facility	31,000		32,000
Local lines of credit	—		—
	$	304,000	$	222,000

At August 2, 2011, PNMR, PNM, and TNMP had $455.1 million, $58.8 million, and $74.7 million of availability under their respective revolving credit facilities and local lines of credit, including reductions of availability due to outstanding letters of credit. Total availability at August 2, 2011, on a consolidated basis, was $588.6 million for PNMR. At August 2, 2011, PNMR and PNM had invested cash of $10.3 million and $10.7 million. TNMP had no such investments.

As of June 30, 2011, TNMP had outstanding borrowings of $7.0 million from PNMR under its intercompany loan agreement. At August 2, 2011, TNMP had outstanding borrowings of $5.0 million under its intercompany loan agreement with PNMR.

Financing Activities

In March 2009, TNMP entered into and borrowed $50.0 million under a loan agreement with Union Bank, N. A. (the “2009 Term Loan Agreement”). Through hedging arrangements, TNMP established fixed interest rates for the 2009 Term Loan Agreement of 6.05% for the first three years and 6.30% thereafter. In January 2010, the relationship was modified to reduce the fixed interest rate to 4.80% through March 31, 2012 and to 5.05% thereafter. This hedge is accounted for as a cash-flow hedge and the June 30, 2011 pre-tax fair value of $2.1 million is included in other current liabilities, except for $1.0 million included in other deferred credits, and in AOCI on the Condensed Consolidated Balance Sheets. The hedge’s December 31, 2010 pre-tax fair value of $1.9 million is included in other current liabilities, except for $0.8 million included in other deferred credits, and in AOCI. Amounts reclassified from AOCI are included in interest charges. The fair value determinations were made using Level 2 inputs under GAAP and were determined using forward LIBOR curves under the mid-market convention to discount cash flows over the remaining term of the swap agreements.

Convertible Preferred Stock

In November 2008, PNMR issued 477,800 shares of Series A convertible preferred stock. The Series A convertible preferred stock is convertible into PNMR common stock at a ratio of 10 shares of common stock for each share of preferred stock. The Series A convertible preferred stock is entitled to receive dividends equivalent to any dividends paid on PNMR common stock as if the preferred stock had been converted into common stock. The Series A convertible preferred stock is entitled to vote on all matters voted upon by common stockholders, except for the election of the Board. In the event of liquidation of PNMR, preferred holders would receive a preference of $0.10 per common share equivalent. After that preference, common holders would receive an equivalent liquidation preference per share and all remaining distributions would be shared ratably between common and preferred holders using the number of shares of common stock into which the Series A convertible preferred stock is convertible. The terms of the Series A convertible preferred stock result in it being substantially equivalent to common stock. Therefore, for earnings per share purposes the number of common shares into which the Series A convertible preferred stock is convertible is included in the weighted average number of common shares outstanding. Similarly, dividends on the Series A convertible preferred stock are considered to be common dividends in the accompanying Condensed Consolidated Financial Statements.