Segment Information

The following segment presentation is based on the methodology that management uses for making operating decisions and assessing performance of its various business activities. A reconciliation of the segment presentation to the GAAP financial statements is provided.

PNM

PNM includes the retail electric utility operations of PNM that 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. PNM also includes the generation and sale of electricity into the wholesale market, as well as providing transmission services to third parties. The sale of electricity includes the asset optimization of PNM’s jurisdictional capacity, as well as the capacity excluded from retail rates. FERC has jurisdiction over wholesale power and transmission rates.

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.

Corporate and Other

The Corporate and Other segment includes PNMR holding company activities, primarily related to corporate level debt and PNMR Services Company. The activities of PNMR Development and NM Capital are also included in Corporate and Other.

The following tables present summarized financial information for PNMR by segment. PNM and TNMP each operate in only one segment. Therefore, tabular segment information is not presented for PNM and TNMP.

PNMR SEGMENT INFORMATION



	PNM			TNMP			Corporate and Other			Consolidated
	(In thousands)
Three Months Ended June 30, 2017
Electric operating revenues	$	276,097		$	86,223		$	—		$	362,320
Cost of energy	82,952			21,315			—			104,267
Utility margin	193,145			64,908			—			258,053
Other operating expenses	97,533			23,025			(5,235		)	115,323
Depreciation and amortization	36,448			15,597			5,580			57,625
Operating income (loss)	59,164			26,286			(345		)	85,105
Interest income	1,858			—			2,027			3,885
Other income (deductions)	5,900			432			(123		)	6,209
Interest charges	(20,931		)	(7,510		)	(3,891		)	(32,332		)
Segment earnings (loss) before income taxes	45,991			19,208			(2,332		)	62,867
Income taxes (benefit)	15,515			7,004			(883		)	21,636
Segment earnings (loss)	30,476			12,204			(1,449		)	41,231
Valencia non-controlling interest	(3,544		)	—			—			(3,544		)
Subsidiary preferred stock dividends	(132		)	—			—			(132		)
Segment earnings (loss) attributable to PNMR	$	26,800		$	12,204		$	(1,449	)	$	37,555

Six Months Ended June 30, 2017
Electric operating revenues	$	527,655		$	164,843		$	—		$	692,498
Cost of energy	164,268			42,802			—			207,070
Utility margin	363,387			122,041			—			485,428
Other operating expenses	193,427			46,822			(9,894		)	230,355
Depreciation and amortization	72,464			30,968			10,576			114,008
Operating income (loss)	97,496			44,251			(682		)	141,065
Interest income	4,675			—			4,091			8,766
Other income (deductions)	13,582			1,165			(459		)	14,288
Interest charges	(41,943		)	(14,915		)	(7,173		)	(64,031		)
Segment earnings (loss) before income taxes	73,810			30,501			(4,223		)	100,088
Income taxes (benefit)	23,223			10,693			(1,505		)	32,411
Segment earnings (loss)	50,587			19,808			(2,718		)	67,677
Valencia non-controlling interest	(6,996		)	—			—			(6,996		)
Subsidiary preferred stock dividends	(264		)	—			—			(264		)
Segment earnings (loss) attributable to PNMR	$	43,327		$	19,808		$	(2,718	)	$	60,417

At June 30, 2017:
Total Assets	$	4,939,407		$	1,437,547		$	207,491		$	6,584,445
Goodwill	$	51,632		$	226,665		$	—		$	278,297



	PNM			TNMP			Corporate and Other			Consolidated
	(In thousands)
Three Months Ended June 30, 2016
Electric operating revenues	$	233,346		$	82,045		$	—		$	315,391
Cost of energy	61,367			19,996			—			81,363
Utility margin	171,979			62,049			—			234,028
Other operating expenses	97,617			23,777			(3,143		)	118,251
Depreciation and amortization	32,602			14,897			3,456			50,955
Operating income (loss)	41,760			23,375			(313		)	64,822
Interest income	5,518			—			4,676			10,194
Other income (deductions)	4,382			677			(268		)	4,791
Interest charges	(22,690		)	(7,473		)	(3,058		)	(33,221		)
Segment earnings before income taxes	28,970			16,579			1,037			46,586
Income taxes	9,177			6,071			386			15,634
Segment earnings	19,793			10,508			651			30,952
Valencia non-controlling interest	(3,744		)	—			—			(3,744		)
Subsidiary preferred stock dividends	(132		)	—			—			(132		)
Segment earnings attributable to PNMR	$	15,917		$	10,508		$	651		$	27,076

Six Months Ended June 30, 2016
Electric operating revenues	$	468,952		$	157,400		$	—		$	626,352
Cost of energy	133,811			39,921			—			173,732
Utility margin	335,141			117,479			—			452,620
Other operating expenses	205,619			46,144			(6,256		)	245,507
Depreciation and amortization	64,466			29,406			6,912			100,784
Operating income (loss)	65,056			41,929			(656		)	106,329
Interest income	7,040			—			6,775			13,815
Other income (deductions)	12,325			1,285			(1,335		)	12,275
Interest charges	(44,281		)	(14,841		)	(5,590		)	(64,712		)
Segment earnings (loss) before income taxes	40,140			28,373			(806		)	67,707
Income taxes (benefit)	12,788			10,408			(406		)	22,790
Segment earnings (loss)	27,352			17,965			(400		)	44,917
Valencia non-controlling interest	(7,031		)	—			—			(7,031		)
Subsidiary preferred stock dividends	(264		)	—			—			(264		)
Segment earnings (loss) attributable to PNMR	$	20,057		$	17,965		$	(400	)	$	37,622

At June 30, 2016:
Total Assets	$	4,775,481		$	1,339,525		$	245,450		$	6,360,456
Goodwill	$	51,632		$	226,665		$	—		$	278,297