Variable Interest Entities

6 Months Ended

Jun. 30, 2025

Variable Interest Entities [Abstract]

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 2024 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, 2025, PNM paid $5.0 million and $9.9 million for fixed charges and $0.9 million and $1.4 million for variable charges. For the three and six months ended June 30, 2024, PNM paid $5.1 million and $10.2 million for fixed charges and $0.4 million and $0.5 million for variable

charges. PNM does not have any other financial obligations related to Valencia. The assets of Valencia can only be used to 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,
	2025		2024		2025		2024
	(In thousands)
Operating revenues	$	5,926	$	5,476	$	11,348	$	10,665
Operating expenses	1,621		1,693		3,301		3,838

Earnings attributable to non-controlling interest	$	4,305	$	3,783	$	8,047	$	6,827


Financial Position
	June 30,		December 31,
	2025		2024
	(In thousands)
Current assets	$	3,592	$	3,095
Net property, plant, and equipment	42,990		44,411
Total assets	46,582		47,506
Current liabilities	553		606
Owners’ Equity – Non-controlling Interest	$	46,029	$	46,900

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 issued $30.3 million in letters of credit 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 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, 2025.

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,
	2025		2024		2025		2024
	(In thousands)
Electric Operating Revenues	$	6,609	$	5,811	$	13,408	$	11,756
Depreciation and amortization	1,724		821		3,424		1,643
Interest Charges	4,947		5,039		9,918		10,064
Other	(62)		(49)		66		49
Net Earnings	$	—	$	—	$	—	$	—


	Financial Position
	June 30, 2025		December 31, 2024
	(In thousands)
Regulatory assets - Current	$	—	$	—
Restricted cash (included in Other current assets)	13,610		15,838
Restricted cash (included in Other deferred charges)	1,744		1,748
Securitized Cost (included in Regulatory assets - Deferred)	332,655		336,079
Current installments of long-term debt	7,102		6,907
Accrued interest and taxes	7,380		7,452
Regulatory liabilities - Current	4,739		6,975
Long-term Debt	328,179		331,726