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Financing | 9 Months Ended
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Sep. 30, 2018
Debt Disclosure [Abstract] |
Financing | Financing The Company’s financing strategy includes both short-term and long-term borrowings. 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 or enter into term loan arrangements and use the proceeds to reduce borrowings under the revolving credit facilities or refinance other debt. Prior to July 2018, each of the Company’s revolving credit facilities and term loans contained a single financial covenant, which required the maintenance of a debt-to-capitalization ratio of less than or equal to 65%. In July 2018, the PNMR Revolving Credit Facility, the PNMR 2016 One-Year Term Loan (as extended), the PNMR 2016 Two-Year Term Loan, and the PNMR Development Revolving Credit Facility were each amended such that PNMR is now required to maintain a debt-to-capitalization ratio of less than or equal to 70%. The debt-to-capitalization ratio requirement remains at less than or equal to 65% for PNM and TNMP agreements. The Company’s revolving credit facilities and term loans 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 short-term financing plan with the NMPRC. Additional information concerning financing activities is contained in Note 6 of the Notes to Consolidated Financial Statements in the 2017 Annual Reports on Form 10-K. Financing Activities As discussed in Note 11, NM Capital, a wholly-owned subsidiary of PNMR, entered into a $125.0 million term loan agreement (the “BTMU Term Loan Agreement”) with BTMU, as lender and administrative agent, as of February 1, 2016. The BTMU Term Loan Agreement had a maturity date of February 1, 2021 and bore interest at a rate based on LIBOR plus a customary spread. PNMR, as parent company of NM Capital, guaranteed NM Capital’s obligations to BTMU. NM Capital utilized the proceeds of the BTMU Term Loan Agreement to provide funding of $125.0 million (the “Westmoreland Loan”) to a ring-fenced, bankruptcy-remote, special-purpose entity subsidiary of Westmoreland to finance Westmoreland’s purchase of SJCC. See Note 6. The BTMU Term Loan Agreement required that NM Capital utilize all amounts, less taxes and fees, it received under the Westmoreland Loan to repay the BTMU Term Loan Agreement. On May 22, 2018, the full principal outstanding under the Westmoreland Loan of $50.1 million was repaid. NM Capital used a portion of the proceeds to repay all remaining principal of $43.0 million owed under the BTMU Term Loan Agreement. These payments effectively terminated the loan agreements. In addition, PNMR’s guarantee of NM Capital’s obligations was also effectively terminated. On October 21, 2016, PNMR entered into letter of credit arrangements with JPMorgan Chase Bank, N.A. (the “JPM LOC Facility”) under which letters of credit aggregating $30.3 million were issued to facilitate the posting of reclamation bonds, which SJCC is required to post in connection with permits relating to the operation of the San Juan mine (Note 11). On July 28, 2017, PNM entered into an agreement (the “PNM 2017 Senior Unsecured Note Agreement”) with institutional investors for the sale of $450.0 million aggregate principal amount of SUNs (the “PNM 2018 SUNs”) offered in private placement transactions. On May 14, 2018, PNM issued $350.0 million of the PNM 2018 SUNs under that agreement and used the proceeds to repay an equal amount of PNM’s 7.95% SUNs that matured on May 15, 2018. On July 31, 2018, PNM issued the remaining $100.0 million of the PNM 2018 SUNs and used the proceeds to repay an equal amount of PNM’s 7.50% SUNs on August 1, 2018. The PNM 2017 Senior Unsecured Note Agreement includes customary covenants, including a covenant that requires PNM to maintain a debt-to-capitalization ratio of less than or equal to 65%, customary events of default, including a cross-default provision, and covenants regarding parity of financial covenants, liens and guarantees with respect to PNM’s material credit facilities. In the event of a change of control, PNM will be required to offer to prepay the PNM 2018 SUNs at par. PNM will have the right to redeem any or all of the PNM 2018 SUNs prior to their respective maturities, subject to payment of a customary make-whole premium. Information concerning the maturities and interest rates on the PNM 2018 SUNs is as follows:
Funding |  | Maturity |  | Principal |  | Interest
Date |  | Date |  | Amount |  | Rate
|  |  |  | (In millions) |  |
May 14, 2018 |  | May 15, 2023 |  | $ | 55.0 |  |  | 3.15 | %
May 14, 2018 |  | May 15, 2025 |  | 104.0 |  |  | 3.45 | %
May 14, 2018 |  | May 15, 2028 |  | 88.0 |  |  | 3.68 | %
May 14, 2018 |  | May 15, 2033 |  | 38.0 |  |  | 3.93 | %
May 14, 2018 |  | May 15, 2038 |  | 45.0 |  |  | 4.22 | %
May 14, 2018 |  | May 15, 2048 |  | 20.0 |  |  | 4.50 | %
|  |  |  | 350.0 |  |  |
July 31, 2018 |  | August 1, 2028 |  | 15.0 |  |  | 3.78 | %
July 31, 2018 |  | August 1, 2048 |  | 85.0 |  |  | 4.60 | %
|  |  |  | 100.0 |  |  |
|  |  |  | $ | 450.0 |  |  |
On March 9, 2018, PNMR issued $300.0 million aggregate principal amount of 3.250% SUNs (the “PNMR 2018 SUNs”), which mature on March 9, 2021. The proceeds from the offering were used to repay the $150.0 million PNMR 2015 Term Loan Agreement and to reduce borrowings under the PNMR Revolving Credit Facility. On April 9, 2018, PNMR Development deposited $68.2 million with PNM related to potential transmission network interconnections, which is shown as a cash inflow from financing activities on PNM’s Condensed Consolidated Statements of Cash Flows. PNM used the deposit to repay intercompany borrowings. PNM is required to pay interest to PNMR Development to the extent work under the interconnections has not been performed. During the three and nine months ended September 30, 2018, PNM recognized $0.8 million and $1.5 million of interest expense under the agreement. At September 30, 2018, PNM’s remaining obligation under the interconnection agreement with PNMR Development of $68.2 million, excluding unpaid interest, is reflected in other deferred credits on PNM’s Condensed Consolidated Balance Sheets. As required by GAAP, all intercompany transactions related to this deposit have been eliminated on PNMR’s Condensed Consolidated Financial Statements. On June 28, 2018, TNMP entered into an agreement, under which TNMP issued $60.0 million aggregate principal amount of 3.85% first mortgage bonds, due 2028. On July 25, 2018, TNMP entered into a $20.0 million term loan agreement (the “TNMP 2018 Term Loan Agreement”) that bears interest at a variable rate and has a maturity of July 25, 2020. TNMP used the proceeds from these issuances to repay short-term borrowings and for TNMP’s general corporate purposes. At September 30, 2018, variable interest rates were 3.03% on the $100.0 million PNMR 2016 Two-Year Term Loan, which matures in December 2018, 2.98% on the $200.0 million PNM 2017 Term Loan Agreement, which matures in January 2019, and 2.94% on the $20.0 million TNMP 2018 Term Loan Agreement, which matures in July 2020. Short-term Debt and Liquidity Currently, the PNMR Revolving Credit Facility has a financing capacity of $300.0 million and the PNM Revolving Credit Facility has a financing capacity of $400.0 million. Both facilities currently expire on October 22, 2022, but contain options to be extended through October 2024. However, one lender whose current commitment is $10.0 million under the PNMR Revolving Credit Facility and $40.0 million under the PNM Revolving Credit Facility, did not agree to extend its commitments beyond October 31, 2020. Unless one or more of the other current lenders or a new lender assumes the commitments of the non-extending lender, the financing capacities will be reduced to $290.0 million for the PNMR Revolving Credit Facility and $360.0 million for the PNM Revolving Credit Facility beginning on November 1, 2020. PNM also has the $40.0 million PNM 2017 New Mexico Credit Facility that expires on December 12, 2022. The TNMP Revolving Credit Facility is a $75.0 million revolving credit facility secured by $75.0 million aggregate principal amount of TNMP first mortgage bonds and matures on September 23, 2022. In July 2018, the PNMR Revolving Credit Facility was amended to provide for two one-year extension options, subject to approval by a majority of the lenders. In October 2018, and after receiving NMPRC approval, the PNM Revolving Credit Facility was amended to add two one-year extension options, subject to approval by a majority of the lenders. On February 26, 2018, PNMR Development entered into a revolving credit facility with Wells Fargo Bank, National Association, as lender, which allows PNMR Development to borrow up to $24.5 million on a revolving credit basis and also provides for the issuance of letters of credit. The facility expires on February 25, 2019, bears interest at a variable rate, and contains terms similar to the PNMR Revolving Credit Facility. PNMR has guaranteed the obligations of PNMR Development under the facility. PNMR Development uses the facility to finance its participation in NMRD and other activities. Short-term debt outstanding consisted of:
|  | September 30, |  | December 31,
Short-term Debt |  | 2018 |  | 2017
|  | (In thousands)
PNM: |  |  |  |
PNM Revolving Credit Facility |  | $ | — |  |  | $ | 39,800 |
PNM 2017 New Mexico Credit Facility |  | — |  |  | — |
|  | — |  |  | 39,800 |
TNMP Revolving Credit Facility |  | 17,500 |  |  | — |
PNMR: |  |  |  |
PNMR Revolving Credit Facility |  | 120,600 |  |  | 165,600 |
PNMR 2016 One-Year Term Loan (as extended) |  | 100,000 |  |  | 100,000 |
PNMR Development Revolving Credit Facility |  | 24,500 |  |  | — |
|  | $ | 262,600 |  |  | $ | 305,400 |
At September 30, 2018, the weighted average interest rate was 3.34% for the PNMR Revolving Credit Facility, 2.99% for the TNMP Revolving Credit Facility, 3.07% for the PNMR Development Revolving Credit Facility, and 3.02% for the PNMR 2016 One-Year Term Loan (as extended). In addition to the above borrowings, PNMR, PNM, and TNMP had letters of credit outstanding of $4.7 million, $2.5 million, and $0.1 million at September 30, 2018 that reduce the available capacity under their respective revolving credit facilities. The above table excludes intercompany debt. As of September 30, 2018 and December 31, 2017, TNMP had $4.1 million and zero of intercompany borrowings from PNMR. In 2017, PNMR entered into three separate four-year hedging agreements whereby it effectively established fixed interest rates of 1.926%, 1.823%, and 1.629%, plus customary spreads over LIBOR, subject to change if there is a change in PNMR’s credit rating, for three separate tranches, each of $50.0 million, of its variable rate debt. These hedge agreements are accounted for as cash flow hedges. These hedge agreements had fair value gains totaling $4.0 million at September 30, 2018 that is included in other deferred charges and $1.4 million at December 31, 2017 that is included in other current assets on the Condensed Consolidated Balance Sheets. The fair values were determined using Level 2 inputs under GAAP, including using forward LIBOR curves under the mid-market convention to discount cash flows over the remaining term of the agreement. At October 30, 2018, PNMR, PNM, TNMP, and PNMR Development had availability of $168.8 million, $397.5 million, $47.4 million, and none under their respective revolving credit facilities, including reductions of availability due to outstanding letters of credit, and PNM had $40.0 million of availability under the PNM New Mexico Credit Facility. Total availability at October 30, 2018, on a consolidated basis, was $653.7 million for PNMR. As of October 30, 2018, PNM and TNMP had borrowings from PNMR under their intercompany loan agreements of zero and $5.4 million. At October 30, 2018, PNMR, PNM, and TNMP had invested cash of $0.9 million, $55.3 million, and none. The Company’s debt arrangements have various maturities and expiration dates. These maturities include the $200.0 million PNM 2017 Term Loan Agreement, which matures on January 18, 2019. TNMP has $172.3 million of first mortgage bonds that are due in April 2019. The $100.0 million PNMR 2016 One-Year Term Loan (as extended) matures on December 14, 2018 and the $100.0 million PNMR 2016 Two-Year Term Loan matures on December 21, 2018. The Company has no other long-term debt due through September 30, 2019. The $24.5 million PNMR Development Revolving Credit Facility expires on February 25, 2019. Additional information on debt maturities is contained in Note 6 of the Notes to Consolidated Financial Statements in the 2017 Annual Reports on Form 10-K.

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- Definition The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 470 -URI http://asc.fasb.org/topic&trid=2208564 + Details
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