Management’s Discussion and Analysis of Financial Condition and Results of Operations
Merger
The merger of TXNM pursuant to the Merger Agreement, with TXNM surviving as a direct, wholly-owned subsidiary of Parent (an affiliate of Blackstone Infrastructure Partners L.P.)
Merger Agreement
The Agreement and Plan of Merger, dated May 18, 2025, by and among TXNM, Parent, and Merger Sub
Merger Sub
Troy Merger Sub Inc., a New Mexico corporation, direct subsidiary of Parent and affiliate of Blackstone Infrastructure Partners L.P., which will merge with and into TXNM at the Effective Time of the Merger
Meta
Meta Platform, Inc., formerly known as Facebook Inc.
MMBTU
Million BTUs
Table of Contents
Moody’s
Moody’s Investor Services, Inc.
Megawatt
MWh
Megawatt Hour
NAAQS
National Ambient Air Quality Standards
NDT
Nuclear Decommissioning Trusts for PVNGS
NEE
New Energy Economy
NERC
North American Electric Reliability Corporation
New Mexico Wind
New Mexico Wind Energy Center
NM 2015 Rate Case
Request for a General Increase in Electric Rates Filed by PNM on August 27, 2015
NM 2016 Rate Case
Request for a General Increase in Electric Rates Filed by PNM on December 7, 2016
NM Supreme Court
New Mexico Supreme Court
NMED
New Mexico Environment Department
NMMMD
The Mining and Minerals Division of the New Mexico Energy, Minerals and Natural Resources Department
NMPRC
New Mexico Public Regulation Commission
NMRD
NM Renewable Development, LLC, owned 50% each by PNMR Development and AEP OnSite Partners, LLC
NOx
Nitrogen Oxides
NPDES
National Pollutant Discharge Elimination System
NRC
United States Nuclear Regulatory Commission
NTEC
Navajo Transitional Energy Company, LLC, an entity owned by the Navajo Nation
OATT
Open Access Transmission Tariff
OBBBA
One Big Beautiful Bill Act of 2025
OCI
Other Comprehensive Income
OMB
Office of Management and Budget
OPEB
Other Post-Employment Benefits
OSM
United States Office of Surface Mining Reclamation and Enforcement
Parent
Troy ParentCo LLC, a Delaware limited liability company and an affiliate of Blackstone Infrastructure Partners L.P.
Paris Agreement
A legally binding international treaty on climate change adopted on December 12, 2015
Pattern Wind
Pattern New Mexico Wind, LLC, an affiliate of Western Spirit and Pattern Development
PBO
Projected Benefit Obligation
PCRBs
Pollution Control Revenue Bonds
Particulate Matter
PNM
Public Service Company of New Mexico and Subsidiaries
PNM New Mexico Credit Facility
PNM’s $40.0 million Unsecured Revolving Credit Facility
PNM 2021 Note Purchase Agreement
PNM’s Agreement for the sale of PNM’s 2021 SUNs
PNM 2021 SUNs
PNM’s $160.0 million Senior Unsecured Notes issued on July 14, 2021
PNM 2021 Term Loan
PNM’s $75.0 million 18-month Unsecured term loan that was repaid on August 5, 2022
PNM 2022 Delayed- Draw Term Loan
PNM’s $225.0 million Unsecured term loan that matured February 5, 2024
PNM 2023 Note Purchase Agreement
PNM’s agreement for sale of PNM’s 2023 SUNs
PNM 2023 SUNs
PNM’s $200.0 million aggregate principal amount of two series of Senior Unsecured Notes issued on April 28, 2023
PNM 2024 Term Loan
PNM’s $200.0 million term loan that matured November 10, 2025
PNM 2025 Term Loan
PNM’s $195.0 million term loan that matures July 21, 2026
PNM April 2025 Note Purchase Agreement
PNM’s agreement for sale of PNM’s April 2025 SUNs
PNM April 2025 SUNs
PNM’s $300.0 million aggregate principal amount of two series of Senior Unsecured Notes issued on April 23, 2025
PNM July 2025 Note Purchase Agreement
PNM’s agreement for sale of PNM’s July 2025 SUNs
PNM July 2025 SUNs
PNM’s $350.0 million aggregate principal amount of two series of Senior Unsecured Notes issued on July 31, 2025
PNM November 2025 Term Loan
PNM’s $120.0 million term loan that matures on May 10, 2027
PNM Revolving Credit Facility
PNM’s $400.0 million Unsecured Revolving Credit Facility
Table of Contents
PNM September 2021 Note Purchase Agreement
PNM’s agreement for the sale of PNM’s September 2021 SUNs
PNM September 2021 SUNs
PNM’s $150.0 million Senior Unsecured Notes issued on December 2, 2021
PNMR Development
PNMR Development and Management Company, an unregulated wholly-owned subsidiary of TXNM
PPA
Power Purchase Agreement
PSPS Plan
PNM’s Public Safety Power Shutoff Plan filed with the NMPRC on May 1, 2024
PUCT
Public Utility Commission of Texas
Photovoltaic
PVNGS
Palo Verde Nuclear Generating Station
PVNGS Leased Interest Abandonment Application
Application with the NMPRC requesting approval for the decertification and abandonment of 114MW of leased PVNGS capacity
RCT
Reasonable Cost Threshold
Recommended Decision
REA
New Mexico’s Renewable Energy Act of 2004
RECs
Renewable Energy Certificates
Red Mesa Wind
Red Mesa Wind Energy Center
REP
Retail Electricity Provider
RFP
Request For Proposal
Rio Bravo
Rio Bravo Generating Station, formerly known as Delta
ROE
Return on Equity
RPS
Renewable Energy Portfolio Standard
Standard and Poor’s Ratings Services
SCE
Southern California Edison Company
SCPPA
Southern California Public Power Authority
SEC
United States Securities and Exchange Commission
Securities Act
The Securities Act of 1933, as amended
Securitized Bonds
Energy transition bonds
SIP
State Implementation Plan
SJCC
San Juan Coal Company
SJGS
San Juan Generating Station
SJGS Abandonment Application
PNM’s July 1, 2019, consolidated application seeking NMPRC approval to retire PNM’s share of SJGS in 2022, for related replacement generating resources, and for the issuance of Securitized Bonds under the ETA
SJGS CSA
San Juan Generating Station Coal Supply Agreement
Sulfur Dioxide
SOFR
Secured Overnight Financing Rate
SRP
Salt River Project
SUNs
Senior Unsecured Notes
Tax Act
Federal tax reform legislation enacted on December 22, 2017, commonly referred to as the Tax Cuts and Jobs Act
TCEQ
Texas Commission on Environmental Quality
TCOS
Transmission Cost of Service
TECA
Texas Electric Choice Act
TEP
Transportation Electrification Program
TNMP
Texas-New Mexico Power Company and Subsidiaries
TNMP 2018 Rate Case
TNMP’s General Rate Case Application filed on May 30, 2018
TNMP 2023 Bonds
TNMP’s FMBs to be issued under the TNMP 2023 Bond Purchase Agreement
TNMP 2023 Bond Purchase Agreement
TNMP’s agreement for the sale of an aggregate $185.0 million of two series of TNMP’s 2023 Bonds
TNMP 2024 Bonds
TNMP’s FMBs to be issued under the TNMP 2024 Bond Purchase Agreement
TNMP 2024 Bond Purchase Agreement
TNMP’s agreement for the sale of an aggregate $285.0 million of four series of TNMP’s 2024 Bonds
TNMP Base Rate Review
TNMP’s general rate review application filed with the PUCT in November 2025
TNMP February 2025 Bonds
TNMP’s FMBs to be issued under the TNMP February 2025 Bond Purchase Agreement
Table of Contents
TNMP February 2025 Bond Purchase Agreement
TNMP’s agreement for the sale of an aggregate $140.0 million of TNMP’s February 2025 Bonds
TNMP FMBs
TNMP’s $1,505.0 million in outstanding FMBs
TNMP July 2025 Bond Purchase Agreement
TNMP’s agreement for the sale of an aggregate $1,084.3 million of six series of TNMP’s July 2025 FMBs
TNMP July 2025 FMBs
TNMP’s FMBs to be issued under the TNMP July 2025 Bond Purchase Agreement
TNMP Merger Backstop Term Loan
TNMP’s $1,505.0 million, 364-day delayed-draw term loan that terminated on July 22, 2025
TNMP November 2025 Bond Purchase
TNMP’s agreement for the sale of an aggregate $70.0 million of TNMP’s November 2025 FMBs
TNMP November 2025 FMBs
TNMP’s FMBs to be issued under the TNMP November 2025 Bond Purchase Agreement
TNMP Revolving Credit Facility
TNMP’s $200.0 million Secured Revolving Credit Facility
TNP
TNP Enterprises, Inc. and Subsidiaries
TOD
Time of Day
Tucson
Tucson Electric Power Company
TXNM
TXNM Energy, Inc. formerly known as PNM Resources, Inc. (“PNMR”)
TXNM 2021 Delayed-Draw Term Loan
TXNM’s $1.0 billion delayed-draw term loan that matured on May 18, 2025
TXNM 2022 ATM Program
TXNM’s distribution agreement pursuant to which the Company issued and sold an aggregate sales price of $200.0 million of TXNM common stock, no par value, through the sales agents
TXNM 2023 Term Loan
TXNM $500.0 million term loan that matures on June 30, 2026
TXNM 2024 ATM Program
TXNM’s distribution agreement pursuant to which the Company issued and sold an aggregate sales price of $300.0 million of TXNM common stock, no par value, through the sales agents
TXNM 2025 ATM Program
TXNM’s distribution agreement pursuant to which the Company issued and sold an aggregate sales price of $200.0 million of TXNM common stock, no par value, through the sales agents
TXNM 2025 Junior Subs
TXNM’s $350.0 million 7.00% Fixed-to-Fixed Reset Rate Junior Subordinated Notes due 2056
TXNM Merger Backstop Revolving Facility
TXNM’s $910.0 million 364-day revolving credit facility
TXNM Revolving Credit Facility
TXNM’s $300.0 million Unsecured Revolving Credit Facility
The Unites States of America
US Supreme Court
United States Supreme Court
Valencia
Valencia Energy Facility
VIE
Variable Interest Entity
WACC
Weighted Average Cost of Capital
Western Spirit Line
An approximately 150-mile 345-kV transmission line that PNM purchased in December 2021
Westmoreland
Westmoreland Coal Company
WFB LOC Facility
Letter of credit arrangements with Wells Fargo Bank, N.A., entered into in August 2020
WMP
PNM’s Wildfire Mitigation Plan filed with the NMPRC on May 1, 2024
WRAP
Western Resource Adequacy Program
WSJ
Westmoreland San Juan, LLC, an indirect wholly-owned subsidiary of Westmoreland
WSJ LLC
Westmoreland San Juan, LLC, a subsidiary of Westmoreland Mining Holdings, LLC, and current owner of SJCC
WSPP
Western Systems Power Pool
vii
Table of Contents
PART I
ITEM 1. BUSINESS
THE COMPANY
Overview
TXNM Energy, Inc. (“TXNM”), is a holding company with two regulated electric utilities, PNM and TNMP, serving approximately 842,000 residential, commercial, and industrial customers in New Mexico and Texas. TXNM was incorporated in the State of New Mexico in 2000.
Vision, Values and Business Objectives
TXNM’s vision is to create a clean and bright energy future while fulfilling its purpose to work together with customers and communities to meet their energy needs. TXNM’s core values of Safety, Caring and Integrity are the foundation for the Company’s business objectives focused on safety excellence and customer satisfaction, including reliability. To reach these objectives, the Company is committed to:
• Preparing our workforce with the knowledge and skills to thrive in a customer-focused world
• Purposefully delivering an intentional customer experience that exceeds our evolving customer and stakeholder expectations
• Enabling an environmentally sustainable future and deploying technologically advanced solutions that empower and benefit customers
• Demonstrating the relationship between customer excellence and our dedicated focus on financial strength
Meeting the business objectives above will drive key financial results:
• Earning authorized returns on regulated businesses
• Delivering at or above industry-average long-term earnings growth, with a dividend payout ratio between 50 and 60 percent of earnings
• Maintaining investment grade credit ratings
The Company believes that maintaining strong and modern electric infrastructure is critical to ensuring reliability and supporting economic growth. PNM and TNMP strive to balance service affordability with infrastructure investment to maintain a high level of electric reliability and to deliver a safe and superior customer experience.
Both PNM and TNMP seek cost recovery for their investments through general rate cases, periodic cost of service filings, and various rate riders. Additional information about rate filings is provided in Operations and Regulation below and in Note 17.
Other Information
These filings for TXNM, PNM, and TNMP include disclosures for each entity. For discussion purposes, this report uses the term “Company” when discussing matters of common applicability to TXNM, PNM, and TNMP. Discussions regarding only TXNM, PNM, or TNMP are so indicated. A reference to “MD&A” in this report refers to Part II, Item 7. – Management’s Discussion and Analysis of Financial Condition and Results of Operations. A reference to a “Note” refers to the accompanying Notes to Consolidated Financial Statements.
Financial information relating to amounts of revenue, net earnings, and total assets of reportable segments is contained in MD&A and Note 2.
Proposed Merger with Blackstone Infrastructure
On May 18, 2025, TXNM, Parent, and Merger Sub (both Parent and Merger Sub are affiliates of Blackstone Infrastructure) entered into the Merger Agreement pursuant to which Merger Sub will merge with and into TXNM, with TXNM surviving the Merger as a direct, wholly-owned subsidiary of Parent. Pursuant to the Merger Agreement, each issued and outstanding share of the common stock of TXNM (other than those listed in Note 22) at the Effective Time will be converted into the right to receive $61.25 in cash, without interest.
The proposed Merger has been unanimously approved by the Board and was approved by the TXNM shareholders at a special meeting held on August 28, 2025. Consummation of the Merger remains subject to the satisfaction or waiver of certain customary conditions, including, without limitation, no Legal Restraint (as defined in Note 22), and the receipt of certain required regulatory approvals (including the PUCT, the NMPRC, FERC, the FCC, and the NRC). TXNM has filed applications for regulatory approval of the Merger with the NMPRC, PUCT, FERC, and FCC (Note 17). The Merger Agreement does not contain any financing condition and is currently expected to close in the second half of 2026.
Table of Contents
On December 11, 2025, TXNM and Blackstone Infrastructure reached a unanimous settlement with parties in the Merger proceeding filed with the PUCT, that was approved on February 6, 2026. On January 23, 2026, the FCC consented to the transfer of control and on February 20, 2026, the FERC approved the proposed Merger. See Note 17.
WEBSITES
The TXNM website is an important source of Company information. New or updated information for public access is routinely posted. TXNM encourages analysts, investors, and other interested parties to register on the website to automatically receive Company information by e-mail. This information includes news releases, notices of webcasts, and filings with the SEC. Participants will not receive information that was not requested and can unsubscribe at any time.
Our corporate websites are:
• TXNM: www.txnmenergy.co m
• PNM: www.pnm.com
• TNMP: www.tnmp.com
TXNM’s corporate website includes a dedicated section providing key environmental and other sustainability information related to PNM’s and TNMP’s operations.
The contents of these websites are not a part of this Form 10-K and the inclusion of our website address in this report is an inactive textual reference only. The SEC filings of TXNM, PNM, and TNMP, including annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, are accessible free of charge on the TXNM website as soon as reasonably practicable after they are filed with, or furnished to, the SEC. Reports filed with the SEC are available on its website, www.sec.gov . These reports are also available in print upon request from TXNM free of charge.
Also available on the Company’s website at https://www.txnmenergy.com/sustainability/governance/governance-documents and in print upon request from any shareholder are TXNM’s:
• Corporate Governance Principles
• Code of Ethics ( Do the Right Thing – Principles of Business Conduct; Supplier Code of Conduct )
• Charters of the Audit and Ethics Committee, Nominating and Governance Committee, Compensation and Human Capital Committee, and Finance Committee
• Restated Articles of Incorporation and Bylaws
The Company will post amendments to or waivers from its code of ethics (to the extent applicable to the Company’s executive officers and directors) on its website.
OPERATIONS AND REGULATION
Regulated Operations
Electric power demand is generally seasonal. Power consumption in both Texas and New Mexico increases during the hot summer months with revenues traditionally peaking during that period. The seasonality of demand for electricity in turn impacts the timing of plant maintenance and operating expense throughout the year. As a result, the quarterly operating results of TXNM and its operating subsidiaries vary throughout the year. In addition, unusually mild or extreme weather patterns may cause the overall operating results of the Company to fluctuate. See Notes 16 and 17 for additional information on rate cases and other regulatory matters.
TNMP
Operational Information
TNMP is a regulated utility operating and incorporated in the State of Texas. TNMP’s predecessor was organized in 1925. TNMP provides transmission and distribution services in Texas under the provisions of TECA and the Texas Public Utility Regulatory Act. TNMP is subject to traditional cost-of-service regulation with respect to rates and service under the jurisdiction of the PUCT and certain municipalities. TNMP’s transmission and distribution activities are solely within ERCOT, which is the independent system operator responsible for maintaining reliable operations for the bulk electric power supply system in most of Texas. Therefore, TNMP is not subject to traditional rate regulation by FERC. TNMP serves a market of small to medium sized communities, most of which have populations of less than 50,000. TNMP is the exclusive provider of transmission and distribution services in most areas it serves.
TNMP’s service territory consists of three non-contiguous areas. One portion of this territory extends from Lewisville, which is approximately 10 miles north of the Dallas-Fort Worth International Airport, eastward to municipalities near the Red River, and to communities north, west, and south of Fort Worth. The second portion of its service territory includes the area
Table of Contents
along the Texas Gulf Coast between Houston and Galveston, and the third portion includes areas of far west Texas between Midland and El Paso. TNMP owns 1,049 miles of electric transmission lines that interconnect with other utilities in Texas. There has been a significant increase in interconnection requests and data center applications on the TNMP system, which has necessitated new transmission stations, upgrades at existing stations, and transmission line capacity upgrades.
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. For its volumetric load consumers billed on KWh usage, TNMP experienced an increase of 2.8% in its weather normalized retail load in 2025 compared to 2024. For its weather normalized demand-based load, excluding retail transmission consumers, TNMP experienced an increase of 5.3% in 2025 compared to 2024. Data center load, including distribution and transmission, has increased 70.5% in 2025 compared to 2024. As of December 31, 2025, 125 active REPs receive transmission and distribution services from TNMP. In 2025, the two largest REPs accounted for 24% and 19% of TNMP’s operating revenues. No other consumer accounted for more than 10% of revenues.
TNMP holds long-term, non-exclusive franchise agreements for its electric transmission and distribution services. These agreements have varying expiration dates, and some have expired. TNMP intends to negotiate and execute new or amended franchise agreements with municipalities where the agreements have expired or will be expiring. Since TNMP is the exclusive provider of transmission and distribution services in most areas that it serves, the need to renew or renegotiate franchise agreements should not have a material adverse impact. TNMP also earns revenues from service provided to facilities in its service area that lie outside the territorial jurisdiction of the municipalities with which TNMP has franchise agreements.
Regulatory Activities
The rates TNMP charges customers are subject to traditional rate regulation by the PUCT. The PUCT has approved mechanisms that allow TNMP to recover capital invested in transmission and distribution projects without having to file a general rate case. The PUCT approved interim adjustments to TNMP’s transmission rates of $11.5 million annually in March 2025 and $12.3 million annually in September 2025. The PUCT approved interim adjustments to TNMP’s distribution rates of $25.0 million annually in June 2025 and $1.8 million annually in November 2025. The PUCT also approved rate riders that allow TNMP to recover amounts related to energy efficiency and third-party transmission costs.
In March 2025, the PUCT approved TNMP’s first SRP, designed to benefit customers through enhanced resiliency of its distribution system. The approved SRP includes $545.8 million of capital investments and $86.1 million of operations and maintenance expenses associated with several programs, including vegetation management and wildfire mitigation in 2025 through 2027.
In November 2025, TNMP filed the TNMP Base Rate Review with the PUCT, requesting recovery of $2.8 billion of rate base, a requested ROE of 10.4%, and a 47.54% equity ratio. The TNMP Base Rate Review also includes increases in operations and maintenance expenses that are not recovered through semi-annual TCOS and DCRF filings, excludes increases in interest expense resulting from refinancing of debt associated with the proposed Merger, and requests recovery of $20.5 million associated with Hurricane Beryl restoration costs over a five-year period. If approved by the PUCT, the new rates are expected to become effective in mid-2026.
PNM
Operational Information
PNM is an electric utility that provides electric generation, transmission, and distribution service to its rate-regulated customers. PNM was incorporated in the State of New Mexico in 1917. PNM’s retail electric service territory covers a large area of north-central New Mexico, including the cities of Albuquerque, Rio Rancho, and Santa Fe, and certain areas of southern New Mexico as well as 9 sovereign nations. Service to retail electric customers is subject to the jurisdiction of the NMPRC. The largest retail electric customer served by PNM accounted for 5.4% of its retail electric revenues for the year ended December 31, 2025. Other services provided by PNM include wholesale transmission services to third parties. Regulation encompasses the utility’s electric rates, service, accounting, issuances of securities, construction of major new generation, abandonment of existing generation, types of generation resources, transmission and distribution facilities, and other matters. PNM experienced increases in weather normalized residential load of 0.1%, in commercial load of 1.0%, and industrial load of 14.3% compared to 2024. The system peak demands for retail customers are as follows:
System Peak Demands
(Megawatts)
Summer
Winter
PNM holds long-term, non-exclusive franchise agreements for its electric retail operations, with varying expiration dates. These franchise agreements allow the utility to access public rights-of-way for placement of its electric facilities. To the
Table of Contents
extent franchise agreements expire in some areas PNM serves, PNM remains obligated under New Mexico state law to provide service to customers in these areas, and therefore, the expirations should not have a material adverse impact. The Albuquerque, Rio Rancho, Los Lunas, and Santa Fe metropolitan areas accounted for 41.3%, 8.5%, 5.7% and 5.9% of PNM’s 2025 revenues. No other franchise area represents more than 5%. PNM also earns revenues from its electric retail operations in its service areas that do not require franchise agreements.
PNM owns 3,450 miles of electric transmission lines that interconnect with other utilities in New Mexico, Arizona, Colorado, Texas, and Utah. New Mexico is frequently characterized by its high potential for solar and wind capacity. PNM owns transmission capacity in an area of eastern New Mexico with large wind generation potential and in recent years there has been substantial interest by developers of wind generation to interconnect to PNM’s transmission system in this area.
Regulatory Activities
NMPRC Regulated Retail Rate Proceedings
On May 15, 2025, the NMPRC approved PNM’s general increase in retail electric rates. The approval includes an increase of $105.0 million in retail revenues with the first phase effective July 1, 2025, and the second phase effective April 1, 2026, reflecting an ROE of 9.45%.
In October 2024, the NMPRC approved PNM’s Grid Modernization Plan. PNM’s plan to modernize its electricity grid through infrastructure and technology improvements increases the efficiency, reliability, resilience, and security of PNM’s electric system. PNM’s grid modernization investments include approximately $344 million for the first six years of a broader 11-year strategy. The first annual Grid Modernization Plan review was approved in February 2026, updating key portions of the strategy, including increasing investments from approximately $344 million to $367 million for the first six years, and decreasing projected operations and maintenance costs by approximately 18%.
PNM has a NMPRC-approved rate rider to collect costs for renewable energy procurements that are not otherwise being collected in rates. The NMPRC has also approved riders designed to allow PNM to bill and collect substantially all fuel and purchased power costs, costs of approved energy efficiency initiatives, and costs associated with enhancing transportation electrification in New Mexico.
FERC Regulated Wholesale Transmission
Rates charged to wholesale electric transmission customers, other than customers on the Western Spirit Line, are based on a formula rate mechanism pursuant to which rates for wholesale transmission service are calculated annually in accordance with an approved formula. The formula includes updating cost of service components, including investment in plant and operating expenses, based on information contained in PNM’s annual financial report filed with FERC, as well as including projected transmission capital projects to be placed into service in the following year. The projections included are subject to true-up in the formula rate for the following year. Certain items, including changes to return on equity and depreciation rates, require a separate filing to be made with FERC before being included in the formula rate.
Renewable Energy
The REA was enacted to encourage the development of renewable energy in New Mexico. The ETA amended the REA and requires utilities operating in New Mexico to have renewable portfolios equal to 40% by 2025, 50% by 2030, 80% by 2040, and 100% zero-carbon energy by 2045. The REA provides for streamlined proceedings for approval of utilities’ renewable energy procurement plans, provides utilities recovery of costs incurred consistent with approved procurement plans, and sets a RCT for the procurement of renewable resources to prevent excessive costs being added to rates. PNM files required renewable energy plans with the NMPRC annually and makes procurements consistent with the plans approved by the NMPRC.
Corporate and Other
The Corporate and Other segment includes TXNM holding company activities, primarily related to corporate level debt and the activities of PNMR Services Company. PNMR Services Company provides corporate services through shared services agreements to TXNM and all of TXNM’s business units, including PNM and TNMP. These services are charged and billed at cost on a monthly basis to the business units. The activities of PNMR Development and the equity method investment in NMRD were also included in Corporate and Other, until the close of the sale of NMRD on February 27, 2024.
Table of Contents
SOURCES OF POWER
TNMP
TNMP provides only transmission and distribution services and does not sell power.
PNM
PNM’s capacity in commercial operation as of December 31, 2025, are as follows:
Generation
Percent of
Capacity
Generation
Type
Name
Location
Capacity
Solar
PNM-owned solar
Twenty sites in New Mexico
Solar
Britton
Torrance County, New Mexico
Solar
Encino
Sandoval County, New Mexico
Solar
Encino North
Sandoval County, New Mexico
Solar
Solar Direct
Rio Arriba County, New Mexico
Solar
Route 66
Cibola County, New Mexico
Solar
Arroyo
McKinley County, New Mexico
Solar
Sky Ranch
Valencia County, New Mexico
Solar
Jicarilla I
Rio Arriba County, New Mexico
Solar
Atrisco
Bernalillo County, New Mexico
Solar
San Juan
San Juan County, New Mexico
Solar
TAG
Sandoval County, New Mexico
Solar
Quail Ranch
Bernalillo County, New Mexico
Solar
Community Solar
Multiple sites in New Mexico
Solar
Other
Los Lunas, New Mexico
Wind
New Mexico Wind
House, New Mexico
Wind
Red Mesa Wind
Seboyeta, New Mexico
Wind
Casa Mesa Wind
House, New Mexico
Wind
La Joya Wind I
Torrance, New Mexico
Wind
La Joya Wind II
Torrance, New Mexico
Geothermal
Lightning Dock Geothermal
Lordsburg, New Mexico
Renewable resources
Energy storage
PNM-owned battery
Valencia County & Bernalillo County, New Mexico
Energy storage
Arroyo
McKinley County, New Mexico
Energy storage
Jicarilla
Rio Arriba County, New Mexico
Energy storage
Sky Ranch
Valencia County, New Mexico
Energy storage
Sky Ranch II
Valencia County, New Mexico
Energy storage
San Juan
San Juan County, New Mexico
Energy storage
Atrisco
Bernalillo County, New Mexico
Energy storage
TAG
Sandoval County, New Mexico
Energy storage
Route 66
Cibola County, New Mexico
Energy storage resources
Gas
Reeves Station
Albuquerque, New Mexico
Gas
Afton (combined cycle)
La Mesa, New Mexico
Gas
Lordsburg
Lordsburg, New Mexico
Gas
Luna (combined cycle)
Deming, New Mexico
Gas/Oil
Rio Bravo
Albuquerque, New Mexico
Gas
Valencia
Belen, New Mexico
Gas
La Luz
Belen, New Mexico
Gas-fired resources
Nuclear
PVNGS
Wintersburg, Arizona
Coal
Four Corners
Fruitland, New Mexico
Renewable and Energy Storage Resources
In addition to PNM’s owned and contracted solar facilities, PNM has a customer distributed solar generation program that represented 334.1 MW at December 31, 2025. PNM stores energy under ESAs and purchases renewable power under long-term PPAs, all currently having expiration dates beginning in January 2035 and extending through May 2047. The
Table of Contents
NMPRC has approved plans for PNM to procure energy and RECs from additional resources to serve retail customers and a data center located in PNM’s service territory, some of which are expected to be in service by summer of 2026 and others that will be available for the 2028 summer peak. These approved resources are necessary for PNM to meet forecasted peak load requirements to serve its customers and to continue progress towards a carbon-free generating portfolio. If adjusted for these approved plans, the table above would reflect the percentage of generation capacity from renewable resources of 49.8%, energy storage resources of 26.0%, nuclear resources of 4.7%, and fossil-fueled resources of 19.6%. These resources and their currently expected operation dates are as follows:
Generation
Expected
Capacity
Type
Application
Operation
NMPRC approved
Energy storage
2026 Resource Application
PNM-owned battery
2026 Resource Application
Gas
2028 Resource Application
PNM-owned solar
2028 Resource Application
PNM-owned battery
2028 Resource Application
Energy storage
2028 Resource Application
Energy storage
2028 Resource Application
Solar
Meta Resources
Solar
Meta Resources
Solar
Meta Resources
Energy storage
Meta Resources
Energy storage
Meta Resources
Energy storage
Meta Resources
NMPRC approval pending
Energy storage
PNM-owned BESS Project
Fossil‑Fueled Plants
Four Corners Units 4 and 5 are 13% owned by PNM. These units are jointly owned with APS, SRP, Tucson, and NTEC, and are operated by APS. PNM had no ownership interest in Four Corners Units 1, 2, or 3, which were shut down by APS in 2013. The Four Corners plant site is located on land within the Navajo Nation and is subject to an easement from the federal government. APS, on behalf of the Four Corners participants, negotiated amendments to extend the owners’ right to operate the plant on the site to July 2041.
PNM owns 100% of Reeves, Afton, Rio Bravo, Lordsburg, and La Luz and one-third of Luna. The remaining interests in Luna are owned equally by Tucson and Samchully Power & Utilities 1, LLC. PNM is also entitled to the entire output of Valencia under a PPA. Reeves, Lordsburg, Rio Bravo, La Luz, and Valencia are used primarily for peaking power and transmission support. As discussed in Note 10, Valencia is a variable interest entity and is consolidated by PNM.
Nuclear Plant
PNM is participating in the three units of PVNGS with APS (the operating agent), SRP, EPE, SCE, SCPPA, and the Department of Water and Power of the City of Los Angeles. PNM has ownership interests of 2.3% in Unit 1, 9.4% in Unit 2, and 10.2% in Unit 3. See Note 16 for information on other PVNGS matters.
Purchased Power
PNM engages in activities to optimize its existing jurisdictional assets and long-term power agreements through transacting in the hour-ahead, day-ahead, week-ahead, and month-ahead bilateral markets that allows PNM to market any excess generation not required to fulfill retail load and contractual commitments.
PNM participates in the EIM, a real-time wholesale energy trading market operated by CAISO, which enables participating electric utilities to buy and sell energy. Participation in the EIM has generated cost savings that are passed through to customers under PNM’s FPPAC. PNM also plans to join the EDAM, which is a voluntary day-ahead regional market that expands on CAISO’s EIM market, as early as 2027. PNM joined the WRAP in April 2023 to promote region-wide coordination between power providers for assessing and addressing resource adequacy. On October 28, 2025, PNM notified the Western Power Pool that it has elected to withdraw from WRAP and will not proceed into the binding phase. PNM will seek to align resource adequacy coordination with others in the EDAM regional market to maximize customer benefits.
Table of Contents
Plant Operating Statistics
Equivalent availability of PNM’s major base-load generating stations was:
Plant
Operator
Four Corners
APS
PVNGS
APS
Joint Projects
SJGS, PVNGS, Four Corners, and Luna are joint projects each owned or leased by several different entities. Some participants in the joint projects are investor-owned entities, while others are privately, municipally, tribally, or co-operatively owned. Furthermore, participants in SJGS had varying percentage interest in different generating units within the project and have different percentage interest with respect to plant decommissioning and coal mine reclamation obligations.
The primary operating or participation agreements for the other joint projects expire July 2041 for Four Corners, December 2046 for Luna, and November 2047 for PVNGS. As described above, Four Corners is located on land within the Navajo Nation and is subject to an easement from the federal government.
It is possible that other participants in the joint projects have circumstances and objectives that have changed from those existing at the time of becoming participants. The status of these joint projects is further complicated by the uncertainty surrounding the form of potential legislation and/or regulation of GHG, other air emissions, and CCRs, as well as the impacts of the costs of compliance and operational viability of all or certain units within the joint projects. It is unclear how these factors will enter into discussions and negotiations concerning the status of the joint projects as the expiration of basic operational agreements approaches. PNM can provide no assurance that its participation in the joint projects will continue in the manner that currently exists.
FUEL
PNM
The percentages (on the basis of KWh) of PNM’s generation of electricity, including Valencia, fueled by coal, nuclear fuel, and gas and oil, and the average costs to PNM of those fuels per MMBTU were as follows:
Coal
Nuclear
Gas
Percent of
Generation
Average
Cost
Percent of
Generation
Average
Cost
Percent of
Generation
Average
Cost
In 2025 and 2024, 57% and 48% of PNM’s generation was from wind and solar resources (including PPAs), which have no fuel cost. Due to locally available natural gas, the utilization of locally available coal deposits, and the generally adequate supply of nuclear fuel, PNM believes that adequate sources of fuel are available for its generating stations into the foreseeable future. PNM recovers substantially all of its fuel and purchased power costs through the FPPAC.
Coal
Four Corners obtains its coal requirements from a mine near the plant. The coal supply arrangement for Four Corners runs through July 6, 2031, and provides for pricing adjustments over its term based on economic indices. See Note 16 for additional information about PNM’s coal supply arrangements. See Note 17 for additional information about PNM’s SJGS Abandonment Application, PNM’s Four Corners Abandonment Application, and PNM’s IRP.
Natural Gas
The natural gas used as fuel for the electric generating plants is procured on the open market and delivered by third-party transportation providers. The supply of natural gas can be subject to disruptions due to extreme weather events and/or pipeline or facility outages. PNM has contracted for firm gas transmission capacity to minimize the potential for disruptions due to extreme weather events. Certain natural gas plants of PNM’s are generally used as peaking resources that are highly relied upon during seasonally high load periods and/or during periods of extreme weather, which also may be the times natural gas has the highest demand from other users.
Nuclear Fuel and Waste
PNM is one of several participants in PVNGS. The PVNGS participants are continually identifying their future nuclear fuel resource needs and negotiating arrangements to fill those needs. Additional needed supplies are covered through existing inventories or spot market transactions. The PVNGS participants have contracted for 77% of PVNGS’s requirements for uranium concentrates through 2026 and an average of 42% through 2031. For conversion services, 90% are contracted through
Table of Contents
2026 and an average of 68% through 2031. For enrichment services, 100% is contracted through 2026 and an average of 57% is contracted through 2028. For fuel assembly fabrication, 100% is contracted through 2027.
The Nuclear Waste Policy Act of 1982 required the DOE to begin to accept, transport, and dispose of spent nuclear fuel and high-level waste generated by the nation’s nuclear power plants by 1998. The DOE’s obligations are reflected in a contract with each nuclear power plant. The DOE failed to begin accepting spent nuclear fuel by 1998. APS (on behalf of itself and the other PVNGS participants) pursued legal actions for which settlements were reached. See Note 16 for information concerning these actions.
The DOE had planned to meet its disposal obligations by designing, licensing, constructing, and operating a permanent geologic repository at Yucca Mountain, Nevada. In March 2010, the DOE filed a motion to dismiss with prejudice its Yucca Mountain construction authorization application that was pending before the NRC. Several legal proceedings followed challenging DOE’s withdrawal of its Yucca Mountain construction authorization application. None of these lawsuits have been conclusively decided. However, the DC Circuit ordered the NRC to resume its review of the application. The results of the NRC’s review publications do not signal whether or when the NRC might authorize construction of the repository.
All spent nuclear fuel from PVNGS is being stored on-site. PVNGS has sufficient capacity at its on-site ISFSI to store all of the nuclear fuel that will be irradiated during the initial operating license periods, which end in December 2027. Additionally, PVNGS has sufficient capacity at its on-site ISFSI to store a portion of the fuel that will be irradiated during the extended license periods, which end in November 2047. If uncertainties regarding the U.S. government’s obligation to accept and store spent fuel are not favorably resolved, the PVNGS participants will evaluate alternative storage solutions. These may obviate the need to expand the ISFSI to accommodate all of the fuel that will be irradiated during the extended license periods.
ENVIRONMENTAL MATTERS
Electric utilities are subject to stringent laws and regulations for protection of the environment by local, state, federal, and tribal authorities. In addition, PVNGS is subject to the jurisdiction of the NRC, which has the authority to issue permits and licenses and to regulate nuclear facilities in order to protect the health and safety of the public from radioactive hazards and to conduct environmental reviews. The liabilities under these laws and regulations can be material. In some instances, liabilities may be imposed without regard to fault, or may be imposed for past acts, whether or not such acts were lawful at the time they occurred. See MD&A – Other Issues Facing the Company – Climate Change Issues for information on GHG. In addition, Note 16 contains information related to the following matters, incorporated in this item by reference:
• PVNGS Decommissioning Funding
• Nuclear Spent Fuel and Waste Disposal
• The New Mexico Energy Transition Act
• Environmental Matters under the caption “The Clean Air Act”
• Cooling Water Intake Structures
• Effluent Limitation Guidelines
• Santa Fe Generating Station
• Environmental Matters under the caption “Coal Combustion Residuals Waste Disposal”
COMPETITION
Regulated utilities are generally not subject to competition from other utilities in areas that are under the jurisdiction of state regulatory commissions. In New Mexico, PNM does not have direct competition for services provided to its retail electric customers. In Texas, TNMP is not currently in any direct retail competition with any other regulated electric utility. However, as with other regulated transmission and distribution utilities and cooperatives, TNMP competes to attract new customers to locate within its service territory. PNM and TNMP are also subject to customer conservation and energy efficiency activities, as well as initiatives to utilize alternative energy sources, including self-generation, to otherwise bypass the PNM and TNMP systems.
PNM is subject to varying degrees of competition in certain territories adjacent to or within the areas it serves. This competition comes from other utilities in its region as well as rural electric cooperatives and municipal utilities. PNM is involved in the generation and sale of electricity into the wholesale market to serve its New Mexico retail customers. PNM is subject to competition from regional utilities and merchant power suppliers with similar opportunities to generate and sell energy at market-based prices and larger trading entities that do not own or operate generating assets.
HUMAN CAPITAL RESOURCES
TXNM depends on over 1,700 dedicated employees to deliver outstanding customer service and transform into a carbon-free generation future.
Table of Contents
Culture
Our inclusive workforce makes the Company successful through our core values of safety, caring, and integrity. Our culture fosters an accountability and behavioral mindset to sustain shared purpose. Transparency, collaboration, and innovation create both individual and organizational focus on achieving key results. Aligned with the core value of safety, we continued an in-depth safety culture initiative with training and actionable plans integrated into leadership development. In addition, we incorporate mental and physical well-being into our culture through a robust employee wellness program.
Talent Management and Total Rewards
We seek to attract and retain a highly skilled workforce by offering competitive compensation and benefits as well as opportunities for career advancement. Total compensation packages are reviewed regularly to ensure competitiveness within the industry and consistency with performance levels. We are committed to leadership development and mentorship programs, which ensure our leaders’ success and provide diverse learning plans for all employees.
Governance
The Board agrees that human capital management is an important component of TXNM’s continued growth and success, and is essential for its ability to attract, retain and develop talented and skilled employees. Management regularly reports to the Compensation and Human Capital Committee of the Board on human capital management topics, including corporate culture, employee development and compensation and benefits. The Compensation and Human Capital Committee has oversight of talent retention and development and succession planning, and the Board provides input on important decisions in each of these areas.
Employees
The following table sets forth the number of employees of TXNM, PNM, and TNMP as of December 31, 2025:
TXNM
PNM
TNMP
Corporate (1)
PNM
TNMP
Total
(1) Represents employees of PNMR Services Company.
As of December 31, 2025, PNM had 389 employees in its power plant and operations areas that are currently covered by a collective bargaining agreement with the IBEW Local 611 that is in effect through April 30, 2026. As of December 31, 2025, TNMP had 229 employees represented by IBEW Local 66 covered by a collective bargaining agreement that is in effect through August 31, 2027. The wages and benefits for PNM and TNMP employees who are members of the IBEW are typically included in the rates charged to electric customers and consumers, subject to approval of the NMPRC and PUCT.
DISCLOSURE REGARDING FORWARD LOOKING STATEMENTS
Statements made in this filing that relate to future events or TXNM’s, PNM’s, or TNMP’s expectations, projections, estimates, intentions, goals, targets, and strategies are made pursuant to the Private Securities Litigation Reform Act of 1995. Readers are cautioned that all forward-looking statements are based upon current expectations and estimates and apply only as of the date of this report. TXNM, PNM, and TNMP assume no obligation to update this information.
Because actual results may differ materially from those expressed or implied by these forward-looking statements, TXNM, PNM, and TNMP caution readers not to place undue reliance on these statements. TXNM’s, PNM’s, and TNMP’s business, financial condition, cash flows, and operating results are influenced by many factors, which are often beyond their control, that can cause actual results to differ from those expressed or implied by the forward-looking statements. These factors, which are neither presented in order of importance nor weighted, include:
• The failure of Parent to obtain any equity, debt, or other financing necessary to complete the proposed Merger
• The expected timing and likelihood of completion of the proposed Merger, including the timing, receipt and terms and conditions of any required governmental and regulatory approvals of the proposed Merger that could reduce anticipated benefits or cause the parties to abandon the transaction
• The occurrence of any event, change or other circumstances that could give rise to the termination of the Merger Agreement, including in circumstances requiring TXNM to pay a termination fee
• The receipt of an unsolicited offer from another party to acquire our assets or capital stock that could interfere with the proposed Merger
• The outcome of any legal proceedings, regulatory proceedings, or enforcement matters that may be instituted relating to the proposed Merger
Table of Contents
• Risks related to disruption of management time from ongoing business operations due to the proposed Merger
• The risk that the proposed Merger and its announcement could have an adverse effect on the ability of TXNM to retain and hire key personnel and maintain relationships with its customers and suppliers, and on its operating results and businesses generally
• The announcement and pendency of the proposed Merger, during which TXNM is subject to certain operating restrictions, could have an adverse effect on TXNM’s businesses, results of operations, financial condition or cash flows
• The costs incurred to consummate the proposed Merger
• The risk that the price of TXNM’s common stock may fluctuate during the pendency of the proposed Merger and may decline significantly if the proposed Merger is not completed
• The ability of PNM and TNMP to recover costs and earn allowed returns in regulated jurisdictions and the impact on service levels for PNM customers if the ultimate outcomes do not provide for the recovery of costs and operating and capital expenditures, as well as other impacts of federal or state regulatory and judicial actions
• The ability of the Company to successfully forecast and manage its operating and capital expenditures, including aligning expenditures with the revenue levels resulting from the ultimate outcomes of regulatory proceedings
• Uncertainty surrounding the status of PNM’s participation in jointly-owned generation projects
• Uncertainty regarding the requirements and related costs of decommissioning power plants and reclamation of coal mines, as well as the ability to recover those costs from customers, including the potential impacts of current and future regulatory proceedings
• The impacts on the electricity usage of customers and consumers due to performance of state, regional, and national economies, energy efficiency measures, weather, seasonality, alternative sources of power, advances in technology, and other changes in supply and demand
• Uncertainty related to the potential for regulatory orders, legislation or rulemakings that provide for municipalization of utility assets or public ownership of utility assets, including generation resources, or which would delay or otherwise impact the procurement of necessary resources in a timely manner
• The Company’s ability to maintain its debt, including convertible debt, and access the financial markets in order to repay or refinance debt as it comes due and for ongoing operations and construction expenditures due to disruptions in the capital or credit markets, actions by ratings agencies, and fluctuations in interest rates resulting from any negative impacts from regulatory proceedings, actions by the Federal Reserve, entry into the Merger Agreement, geopolitical activity, including tariffs, or the risk of wildfires and storms
• The risks associated with the cost and completion of generation, transmission, distribution, and other projects, including uncertainty related to regulatory approvals and cost recovery, the ability of counterparties to meet their obligations under certain arrangements (including renewable energy resources, approved PPAs and ESAs), and supply chain or other outside support services that may be disrupted
• The potential unavailability of cash from TXNM’s subsidiaries due to regulatory, statutory, or contractual restrictions or subsidiary earnings or cash flows
• The performance of generating units, transmission systems, and distribution systems, which could be negatively affected by operational issues, fuel quality and supply chain issues (disruptions), unplanned outages, extreme weather conditions, wildfires, storms, terrorism, cybersecurity breaches, and other catastrophic events, including the costs the Company may incur to repair its facilities and/or the liabilities the Company may incur to third parties in connection with such issues beyond the extent of insurance coverage
• State and federal regulation or legislation relating to environmental matters and renewable energy requirements, the resultant costs of compliance, and other impacts on the operations and economic viability of PNM’s generating plants
• State and federal regulatory, legislative, executive, and judicial decisions and actions on ratemaking, tariffs, and taxes, including guidance related to the interpretation of changes in tax laws, the Inflation Reduction Act, the Infrastructure Investment and Jobs Act of 2021, the OBBBA, and other matters including the cancellation of grants or related funding
• Risks related to climate change, including potential financial and reputational risks resulting from increased stakeholder scrutiny related to climate change, litigation, legislative and regulatory efforts to limit GHG, including the impacts of the ETA
• Employee workforce factors, including cost control efforts and issues arising out of collective bargaining agreements and labor negotiations with union employees
• Variability of prices and volatility and liquidity in the wholesale power and natural gas markets, including the impacts to transmission margins
• Changes in price and availability of fuel and water supplies, including the ability of the mine supplying coal to Four Corners and the companies involved in supplying nuclear fuel to provide adequate quantities of fuel
• Regulatory, financial, and operational risks inherent in the operation of nuclear facilities, including spent fuel disposal uncertainties
• The impacts of decreases in the values of marketable securities maintained in trusts to provide for decommissioning, reclamation, pension benefits, and other postretirement benefits, including potential increased volatility resulting from actions by the Federal Reserve to address inflationary concerns, and international developments
• Uncertainty surrounding counterparty performance and credit risk, including the ability of counterparties to supply fuel and perform reclamation activities and impacts to financial support provided to facilitate reclamation and decommissioning at SJGS
Table of Contents
• The effectiveness of risk management regarding commodity transactions and counterparty risk
• The outcome of legal proceedings, including the extent of insurance coverage
• Changes in applicable accounting principles or policies
For information about the risks associated with the use of derivative financial instruments see Part II, Item 7A. “Quantitative and Qualitative Disclosures About Market Risk.”
SECURITIES ACT DISCLAIMER
Certain securities described in this report have not been registered under the Securities Act of 1933, as amended, or any state securities laws and may not be reoffered or sold in the United States absent registration or an applicable exemption from the registration requirements of the Securities Act of 1933 and applicable state securities laws. This Form 10-K does not constitute an offer to sell or the solicitation of an offer to buy any securities.
ITEM 1A. RISK FACTORS
The business and financial results of TXNM, PNM, and TNMP are subject to a number of risks and uncertainties, many of which are beyond their control, including those set forth below and in MD&A, Note 16, and Note 17. For other factors that may cause actual results to differ materially from those indicated in any forward-looking statement contained in this report, see Disclosure Regarding Forward Looking Statements in Item 1. Business. TNMP provides transmission and distribution services to REPs that provide electric service to consumers in TNMP’s service territories. References to customers in the risk factors discussed below also encompass the customers of these REPs who are the ultimate consumers of electricity transmitted and distributed through TNMP’s facilities.
Regulatory Risks
The profitability of TXNM’s utilities depends on being able to recover their costs through regulated rates and earn a fair return on invested capital, including investments in its generating plants. Without timely cost recovery, including recovery of undepreciated investments and the opportunity to earn a fair return on capital investments, TXNM’s liquidity and results of operations could be negatively impacted. Further, PNM and TNMP are in a period of significant capital expenditures. While increased capital investments, higher interest rates, and other costs are placing upward pressure on rates charged to customers, energy efficiency initiatives and other factors are placing downward pressure on customer usage. The combination of these matters could adversely affect the Company’s results of operations and cash flows.
The rates PNM charges its customers are regulated by the NMPRC and FERC. TNMP is regulated by the PUCT. The Company is in a period requiring significant capital investment and is projecting total construction expenditures for the years 2026-2030 to be $10.2 billion. PNM and TNMP anticipate a trend toward increasing costs, for which they will have to seek regulatory recovery. These costs include, or are related to, costs of asset construction for generation, transmission, and distribution systems necessary to provide electric service, as well as the cost to remove and retire existing assets, environmental compliance expenditures, regulatory mandates to acquire power from renewable resources, regulation related to nuclear safety, increased costs related to cybersecurity, increased interest costs to finance capital investments, and depreciation. If the regulators do not authorize appropriate recovery of any of the costs discussed above, including undepreciated generating resources at the time those resources are removed from service and fails to authorize recovery of the costs of obtaining power to replace those resources, PNM and TNMP’s financial position, results of operations, and cash flows could be negatively impacted.
At the same time costs are increasing, there are factors placing downward pressure on the demand for power, thereby reducing customer usage. These factors include changing customer behaviors, increased emphasis on energy efficiency measures, utilization of alternative sources of power, rate design that is not driven by economics, unfavorable economic conditions, reduced new sources of demand, and unpredictable weather patterns. The combination of costs increasing relatively rapidly and the technologies and behaviors that are reducing energy consumption places upward pressure on the per unit prices that must be charged to recover costs. This upward pressure on unit prices could result in additional efforts by customers to reduce consumption through alternative measures. Without timely cost recovery and the authorization to earn a reasonable return on invested capital, the Company’s liquidity and results of operations could be negatively impacted.
In November 2025, TNMP filed its Base Rate Review requesting recovery of $2.8 billion of rate base as of June 30, 2025, a requested ROE of 10.4%, and a 47.54% equity ratio. The TNMP Base Rate Review also includes increases in operations and maintenance expenses that are not recovered through semi-annual TCOS and DCRF filings, excludes increases in interest expense resulting from refinancing of debt associated with the proposed Merger, and requests recovery of $20.5 million associated with Hurricane Beryl restoration costs.
It is also possible that unsatisfactory outcomes of these matters, the financial impact of climate change regulation or legislation, other environmental regulations, the result of litigation, the adequacy and timeliness of cost recovery mechanisms,
Table of Contents
and other business considerations, could jeopardize the economic viability of certain generating facilities or the ability or willingness of individual participants to continue their participation through the periods currently contemplated in the agreements governing those facilities.
TXNM’s utilities are subject to numerous comprehensive federal, state, tribal, and local environmental laws and regulations, including those related to climate change as well as increased stakeholder actions related to sustainability matters and reducing GHG, which may impose significant compliance costs and may significantly limit or affect their operations and financial results.
Compliance with federal, state, tribal, and local environmental laws and regulations, including those addressing climate change, air quality, CCRs, discharges of wastewater originating from fly ash and bottom ash handling facilities, cooling water, sustainability, GHG emissions, and other matters, may result in increased capital, operating, and other costs, particularly with regard to enforcement efforts focused on power plant emission control obligations. These costs could include remediation, containment, civil liability, and monitoring expenses. The Company cannot predict how it would be affected if existing environmental laws and regulations were to be repealed, revised, or reinterpreted, or if new environmental laws or regulations were to be adopted. See Note 16 and the Climate Change Issues subsection of the Other Issues Facing the Company section of MD&A.
The utility industry is facing increasing stakeholder scrutiny related to sustainability. Recently, TXNM has seen a rise in certain stakeholders, such as investors, customers, employees, and lenders, placing increasing importance on the impact and social cost associated with climate change. Federal GHG reduction measures setting standards and emission guidelines, and climate-related disclosure rules remain in a state of uncertainty. Therefore, TXNM is dealing with an uncertain regulatory and policy environment and increased scrutiny and changing stakeholder expectations with respect to environmental and climate change programs, judicial decisions, and international accords. Under the Biden Administration, EPA and other federal agencies sought to expand climate change regulations and worked to aggressively reduce GHG emissions. On January 20, 2025, President Trump signed an executive order directing all agencies, including EPA, to review all agency actions and suspend, revise, or rescind those identified as imposing an undue burden on domestic energy resources. The order also expressly directs EPA to submit joint recommendations on the legality and continuing applicability of the 2009 Endangerment Finding for GHG. On January 7, 2026, EPA sent the proposed rule rescinding the 2009 Endangerment Finding to OMB. On February 12, 2026, the final rule was finalized as proposed, repealing all GHG emission standards for certain vehicles and engines promulgated on the basis of the Finding. While the Finding did not directly impose any requirements on EGUs, EPA has cited the Finding as a basis for its authority to regulate GHG emissions from EGUs under CAA Section 111. PNM currently depends on fossil-fueled generation for 25.3% of its electricity. As discussed under Climate Change Issues, the existing and future EPA or state regulations regarding GHG reductions for this type of generation are under review. The expansion of federal and state regulations could result in additional operating restrictions on facilities and increased generation and compliance costs.
CCRs from the operation of SJGS were used in the reclamation of a surface coal mine. These CCRs consist of fly ash, bottom ash, and gypsum. Any new regulation that would affect the reclamation process, including any future decision regarding classification of CCRs as hazardous waste, could significantly increase the costs of the disposal of CCRs and the costs of mine reclamation. In addition, PNM would incur additional costs to the extent the rule requires the closure or modification of CCR units at Four Corners or the construction of new CCR units beyond those already anticipated or requires corrective action to address releases from CCR disposal units at the site. See Note 16.
A regulatory body may identify a site requiring environmental cleanup, including cleanup related to catastrophic events such as hurricanes or wildfires, and designate PNM or TNMP as a responsible party. There is also uncertainty in quantifying exposure under environmental laws that impose joint and several liability on all potentially responsible parties. Failure to comply with environmental laws and regulations, even if such non-compliance is caused by factors beyond PNM’s or TNMP’s control, may result in the assessment of civil or criminal penalties and fines.
If PNM fails to timely obtain, maintain, or comply with any required environmental regulatory approval, operations at affected facilities could be suspended or could subject PNM to additional expenses and potential penalties. Failure to comply with applicable environmental laws and regulations also could result in civil liability arising out of government enforcement actions or private claims. Environmental noncompliance could also result in reputational harm, which may cause stock price decreases or cause certain investors and financial institutions not to purchase the Company’s debt securities or otherwise provide the Company with capital or credit on favorable terms, which may cause the cost of capital to increase. In addition, TXNM and its operating subsidiaries may underestimate the costs of environmental compliance, liabilities, and litigation due to the uncertainty inherent in these matters. Although there is uncertainty about the timing and form of the implementation of EPA’s regulations regarding GHG emissions, climate change, CCRs, power plant emissions, changes to the ambient air quality standards, and other environmental issues, the promulgation and implementation of such regulations could have a material impact on operations. The Company is to estimate these costs due to the many uncertainties associated with, among other things, the nature and extent of future regulations and changes in existing regulations, including the changes in regulatory policy under the Trump Administration. Timely regulatory recovery of costs associated with any environmental-related
Table of Contents
regulations would be needed to maintain a strong financial and operational profile. The above factors could adversely affect the Company’s business, financial position, results of operations, and liquidity.
TXNM, PNM, and TNMP are subject to complex government regulation unrelated to the environment, which may have a negative impact on their businesses, financial position and results of operations.
To operate their businesses, TXNM, PNM, and TNMP are required to have numerous permits and approvals from a variety of regulatory agencies. Regulatory bodies with jurisdiction over the utilities include the NMPRC, NMED, PUCT, TCEQ, ERCOT, FERC, NRC, EPA, and NERC. Oversight by these agencies covers many aspects of the Company’s utility operations including, but not limited to: location, construction, and operation of facilities; the purchase of power under long-term contracts; conditions of service; the issuance of securities; and rates charged to customers. FERC has issued a number of rules pertaining to preventing undue discrimination in transmission services and electric reliability standards. The significant level of regulation imposes restrictions on the operations of the Company and causes the incurrence of substantial compliance costs. TXNM and its subsidiaries are unable to predict the impact on their business and operating results from future actions of any agency regulating the Company. Changes in existing regulations or the adoption of new ones could result in additional expenses and/or changes in business operations. Failure to comply with any applicable rules, regulations or decisions may lead to customer refunds, fines, penalties, and other payments, which could materially and affect the results of operations and financial condition of TXNM and its subsidiaries.
Operational Risks
Customer electricity usage could be reduced by increases in prices charged and other factors. This could result in underutilization of PNM’s generating capacity, as well as underutilization of the capacities of PNM’s and TNMP’s transmission and distribution systems. Should this occur, operating and capital costs might not be fully recovered, and financial performance could be negatively impacted.
A number of factors influence customers’ electricity usage. These factors include but are not limited to rates charged by PNM and TNMP, rates charged by REPs utilizing TNMP’s facilities to deliver power, energy efficiency initiatives, unusual weather patterns, availability and cost of alternative sources of power, and national, regional, or local economic conditions. These factors and others may prompt customers to institute additional energy efficiency measures or take other actions that would result in lower energy consumption. If customers bypass or underutilize PNM’s and TNMP’s facilities through self-generation, renewable, or other energy resources, technological change, or other measures, revenues would be negatively impacted.
PNM’s and TNMP’s service territories include several military bases and federally funded national laboratories, as well as large industrial customers that have significant direct and indirect impacts on the local economies where they operate. The Company does not directly provide service to any of the military bases or national laboratories but does provide service to large industrial customers. The Company’s business could be hurt from the impacts on the local economies associated with these customer groups as well as directly from the large industrial customers for a number of reasons including federally-mandated base closures, significant curtailment of the funding of or activities at the bases or national laboratories, and closure of industrial facilities or significant curtailment of their activities.
Another factor that could negatively impact the Company is that proposals are periodically advanced in various localities to municipalize, or otherwise take over PNM’s facilities, which PNM believes would require state legislative or other legal action to implement, or to establish new municipal utilities in areas currently served by PNM. If any such initiative is successful, the result could be a material reduction in the usage of the facilities, a reduction in rate base, and reduced earnings.
Should any of the above factors result in facilities being underutilized, the Company’s financial position, results of operations, and cash flows could be significantly impacted.
Advances in technology could make electric generating facilities less competitive.
Research and development activities are ongoing for new technologies that produce power or reduce power consumption. These technologies include renewable energy, customer-oriented generation, energy storage, and energy efficiency. PNM generates power at central station power plants to achieve economies of scale and produce power at a cost that is competitive with rates established through the regulatory process. There are distributed generation technologies that produce power, including fuel cells, microturbines, wind turbines, and solar cells, which have become increasingly cost competitive. These advances in technology have reduced the costs of these alternative methods of producing power to a level that is competitive with that of central station power production. In addition, advances made in the capabilities of energy storage have further decreased power production and peak usage through the dispatch of more battery systems. These technological advances have resulted in demand reduction that negatively impact revenue and/or result in underutilized assets that have been built to serve peak usage. In addition, certain federal, state, or local requirements that regulated utilities such as PNM are required to follow could result in third parties being to provide electricity from similar generation technologies to consumers at prices lower than PNM is to offer. As these technologies become more cost competitive or can be used by
Table of Contents
third parties to supply power at lower prices than PNM is able to offer, PNM’s energy sales and/or regulated returns could be eroded, and the value of its generating facilities could be reduced. Advances in technology could also change the channels through which electric customers purchase or use power, which could reduce the Company’s sales and revenues or increase expenses. These advances can also create more uncertainty in load shapes and forecasts, which could have implications for generation and system planning.
Costs of decommissioning, remediation, and restoration of nuclear and fossil-fueled power plants, as well as reclamation of related coal mines, could exceed the estimates of TXNM and PNM as well as the amounts PNM recovers from its ratepayers, which could negatively impact results of operations and liquidity.
PNM has interests in a nuclear power plant, a coal-fired power plant, and several natural gas-fired power plants and is obligated to pay its share of the costs to decommission these facilities. PNM is also obligated to pay for its share of the costs of reclamation of the mine that supplies coal to the coal-fired power plant. Likewise, other owners or participants are responsible for their shares of the decommissioning and reclamation obligations, and it is important to PNM that those parties fulfill their obligations. Rates charged by PNM to its customers, as approved by the NMPRC, include a provision for recovery of certain costs of decommissioning, remediation, reclamation, and restoration. The NMPRC has established a cap on the amount of costs for the final reclamation of the surface coal mines that may be recovered from customers. PNM records estimated liabilities for its share of the legal obligations for decommissioning and reclamation. These estimates include many assumptions about future events and are inherently imprecise. In the event the costs to decommission the facilities or to reclaim the mines serving the plants exceed current estimates, or if amounts are not approved for recovery by the NMPRC, results of operations could be negatively impacted.
The costs of decommissioning any nuclear power plant are substantial. PNM is responsible for all decommissioning obligations related to its entire interest in PVNGS, including portions both during and after termination of the leases. PNM maintains trust funds designed to provide adequate financial resources for decommissioning PVNGS and SJGS, and for reclamation of the coal mine that served SJGS and continues to serve Four Corners at the end of its expected life. However, if the PVNGS units are decommissioned before their planned date or the coal mine serving Four Corners is shut down sooner than expected, these funds may prove to be insufficient.
The financial performance of TXNM, PNM, and TNMP may be adversely affected if power plants, other generation resources, and transmission and distribution systems do not operate reliably and efficiently.
The Company’s financial performance depends on the successful operation of PNM’s generation assets, as well as the transmission and distribution systems of PNM and TNMP. PNM’s retirement of SJGS will increase PNM’s dependency on other generation resources, including renewable resources, gas-fired facilities, and PVNGS, and will reduce PNM’s flexibility in managing those resources. Unscheduled or longer than expected maintenance outages, breakdown or failure of equipment or processes due to aging infrastructure, inability to install or operate renewable resources, temporary or permanent shutdowns to achieve environmental compliance, other performance problems with the generation assets, severe weather conditions, accidents and other catastrophic events, acts of war or terrorism, cybersecurity attacks, wildfires, in the supply, quality, and delivery of fuel and water supplies, and other factors could result in PNM’s load requirements being larger than available system generation capacity. of generating units and extensions of scheduled occur from time to time and are an inherent risk of the Company’s business. If these were to occur, PNM would be required to purchase electricity in either the wholesale market or spot market at the then-current market price. There can be no assurance that sufficient electricity would be available at reasonable prices, or available at all. The of transmission or distribution facilities may also affect PNM’s and TNMP’s ability to deliver power. These potential generation, distribution, and transmission , and any service related to them, could result in revenues and additional costs.
TXNM, PNM, and TNMP are subject to information security breaches and risks of unauthorized access to their information and operational technology systems as well as physical threats to assets.
The Company faces the risk of physical and cybersecurity attacks, both threatened and actual, against generation facilities, transmission and distribution infrastructure, information technology systems, and network infrastructure, which could negatively impact the ability of the Company to generate, transmit, and distribute power, or otherwise operate facilities in the most efficient manner or at all.
The utility industry in which the Company operates is a highly regulated industry that requires the continued operation of sophisticated information technology systems and network infrastructure, some of which are deemed to be critical infrastructure under NERC guidelines. Certain of the Company’s systems are interconnected with external networks. In the regular course of business, the utilities handle a range of sensitive security and customer information. PNM and TNMP are subject to the rules of various agencies and the laws of various states, related to safeguarding and maintaining the confidentiality of this information. Cyber-attacks regularly occur and generally are unsuccessful. To date, those few events that were successful did not result in significant or consequential business impacts. However, despite steps the Company may take to detect, mitigate, and/or eliminate threats and respond to security incidents, the techniques used by those who wish to obtain unauthorized access, and possibly disable or sabotage systems and/or abscond with information and data, change
Table of Contents
frequently and continue to evolve with the use of artificial intelligence and the Company may not be able to protect against all such actions.
With the proliferation of Generative Artificial Intelligence (“GenAI”) tools like opensource ChatGPT and other public Large Language models, bad actors are becoming better equipped to effectively launch social engineering attacks against individuals and organizations. With their broad array of use cases, these tools are enhancing data theft, malware development, social engineering, ransomware, and misinformation. GenAI technology is enabling malicious actors to increase the speed and variation of their attacks by modifying code almost instantaneously, enabling attacks to be created and deployed with thousands of variations of social engineering messages, effectively changing to a more iterative attack methodology to increase their probability of success. In the event that a capable adversary attacks the Company’s computer and operating systems, despite the best efforts of the Company, the generation, transmission, or distribution of electrical services could be or , customer information, business records, or other sensitive data could be , , or released outside of the Company’s control.
Further, the Company’s use of technologies manufactured by third parties, including applications with GenAI capabilities, may be subject to espionage activities, and cyber-attack of the third party resulting in the loss of confidentiality, privacy, integrity of data, and other losses outside of the control of the Company. Although the Company has implemented security measures to identify, prevent, detect, respond to, and recover from cyber and physical security events and supply chain disruptions, critical infrastructure, including information and operational technology systems, are vulnerable to disability, failures, or unauthorized access, which could occur as a result of malicious compromise, employee error, and/or employee misconduct or supply compromise.
A successful physical or cybersecurity attack or other similar failure of the systems could impact the reliability of PNM’s generation and PNM’s and TNMP’s transmission and distribution systems, including the possible unauthorized shutdown of facilities. Such an event could lead to disruptions of business operations, including the Company’s ability to generate, transport, and deliver power to serve customers, to bill customers, and to process other financial information. A breach of the Company’s information systems could also lead to the loss and destruction of confidential and proprietary data, personally identifiable information, trade secrets, intellectual property and supplier data, and could disrupt business operations which could harm the Company’s reputation and financial results, as well as potential increased regulatory oversight, litigation, fines, and other remedial action. The costs incurred to and remediate a physical or cybersecurity attack could be significant. A significant physical or cybersecurity attack on the Company’s infrastructure could have an impact on the operations, reputation, and financial condition of TXNM, PNM, and TNMP.
There are inherent risks in the ownership and operation of nuclear facilities.
PNM has a 7.3% undivided interest in PVNGS that represented 6.1% of PNM’s total generating capacity as of December 31, 2025. PVNGS is subject to environmental, health, and financial risks including but not limited to the ability to obtain adequate supplies of nuclear fuel and water, the ability to dispose of spent nuclear fuel, decommissioning of the plant (see above), securing the facilities against possible terrorist attacks, and unscheduled outages due to equipment failures.
The NRC has broad authority under federal law to impose licensing and safety-related requirements for the operation of nuclear generation facilities. Events at nuclear facilities of other operators or which impact the industry generally may lead the NRC to impose additional requirements and regulations on all nuclear generation facilities, including PVNGS. A major incident at a nuclear facility anywhere in the world could cause the NRC to limit or prohibit the operation or licensing of any domestic nuclear unit and to promulgate new regulations that could require significant capital expenditures and/or increase operating costs.
In the event of noncompliance with its requirements, the NRC has the authority to impose a progressively increasing inspection regime that could ultimately result in the shutdown of a unit, civil penalties, or both, depending upon the NRC’s assessment of the severity of the situation, until compliance is achieved. Increased costs resulting from penalties, a heightened level of scrutiny, and/or implementation of plans to achieve compliance with NRC requirements could adversely affect the financial condition, results of operations, and cash flows of TXNM and PNM. Although PNM has no reason to anticipate a serious nuclear incident at PVNGS, if an incident did occur, it could materially and adversely affect PNM’s results of operations and financial condition.
PNM has external insurance coverage to minimize its financial exposure to some risks. However, it is possible that liabilities associated with nuclear operations could exceed the amount of insurance coverage. See Note 16.
Peak demand for power could exceed forecasted supply capacity, resulting in increased costs for purchasing capacity in the market or building additional generation facilities and/or energy storage facilities.
PNM is obligated to supply power to retail customers. As PNM continues to complete the significant transition in generation resources necessary to achieve 100% carbon emission-free generation, there are certain potential deliverability and cost risks associated with this transition. These risks are in three main areas, including 1) risk of completion of replacement
Table of Contents
resources prior to planned generation unit retirements, 2) increasing levels of renewable generation presenting risks of uncertainty and variability that will be further compounded as neighboring systems transition towards increasing levels of renewable resources, and 3) risks for mitigating possible resource volatility through a shrinking energy market.
At peak times, power demand could exceed PNM’s forecasted available generation capacity, particularly if PNM’s power plants are not performing as anticipated and additional resources are not approved, or are not available, as PNM transitions its system to carbon emission-free generation and energy storage. Availability of this technology may create additional strain on the system by adding these additional resources without adequate storage. Additionally, further advances in the technology of renewable resources may need to occur in order to ensure that these resources meet carbon emission-free standards. Competitive market forces or adverse regulatory actions may require PNM to purchase capacity and energy from the market or build additional resources to meet customers’ energy needs in an expedited manner. If that occurs, PNM may see opposition to recovery of these additional costs and could experience a lag between when costs are incurred and when regulators permit recovery in customers’ rates. These situations could have negative impacts on results of operations and cash flows.
Difficulties in obtaining permits and rights-of-way could negatively impact PNM’s results of operations.
PNM’s ability to execute planned operational activities and projects may be inhibited by difficulties in obtaining permits and rights-of-way and other delays. Many of PNM’s transmission and distribution lines cross federal, state, and tribal lands. The Company can experience significant delays in obtaining approvals for new infrastructure, as well as renewals of existing rights-of-way and access for critical maintenance, including vegetation management on these lands. The environmental regulations governing siting and permitting on federal, state, and tribal lands are complex, involve multiple agencies, and include a public process. Any of these risk factors could result in higher costs, delays, or the inability to complete planned projects.
General Economic and Weather Risks
Changes in interest rates could adversely affect our business .
Interest rates have increased and may continue to increase in the future. As a result, interest rates on future credit facilities and debt offerings could be higher than current levels, causing our financing costs to increase accordingly. In addition, because we use both fixed and variable rate debt, we are exposed to market risk due to the floating interest rates on our variable rate borrowings. Our results of operations, cash flows and financial position could be affected adversely by significant fluctuations in interest rates from current levels.
Supply chain issues, high inflation, actions by the Federal Reserve to address inflationary concerns and other market conditions, geopolitical activity and the resulting impact on business and economic conditions could negatively affect the Company’s business, results of operations, financial condition, cash flows, and the trading value of TXNM’s common stock and the Company’s debt securities.
Continued supply chain issues were initially experienced during high inflation, actions by the Federal Reserve to address inflationary concerns or other market conditions, geopolitical activity and the resulting impact on the economy and financial markets could adversely affect the Company’s business, results of operations, financial condition, cash flows, and access to the capital markets. There is no assurance that the continued effects of these market conditions will not adversely impact our business, results of operations, financial condition, cash flows, ability to access the capital markets, and the trading value of the Company’s common stock and debt securities. These effects could adversely impact the Company by:
• reducing usage and/or demand for electricity by our customers in New Mexico and Texas
• causing delays and disruptions in the availability of and timely delivery of materials and components used in our operations
• causing delays and disruptions in the supply chain resulting in disruptions in the commercial operation dates of certain projects
• causing a deterioration in the credit quality of our counterparties, including power purchase agreement providers, contractors or retail customers, that could result in credit losses
• causing impairments of goodwill or long-lived assets and adversely impacting the Company’s ability to develop, construct and operate facilities
• impacting the Company’s ability to meet the requirements of the covenants in our existing credit facilities, including covenants regarding debt to capitalization
• causing a deterioration in our financial metrics or the business environment that impacts our credit ratings
• decreasing the value of our investment securities held in trusts for pension and other postretirement benefits, and for nuclear decommissioning, SJGS decommissioning, and coal mine reclamation, which could lead to increased funding requirements
• impacting our liquidity position and cost of and ability to access funds from financial institutions and capital markets
• causing other unpredictable events.
Table of Contents
General economic conditions of the nation and/or specific areas can affect the Company’s customers and suppliers. Economic recession or downturn may result in decreased consumption by customers and increased bad debt expense, and could also negatively impact suppliers, all of which could negatively affect the Company.
Economic activity in the service territories of TXNM subsidiaries is a key factor in their performance. Decreased economic activity can lead to declines in energy consumption, which could adversely affect future revenues, earnings, and growth. Higher unemployment rates, both in the Company’s service territories and nationwide, could result in commercial customers ceasing operations and lower levels of income for residential customers. These customers might then be unable to pay their bills on time, which could increase bad debt expense and negatively impact results of operations and cash flows. Economic conditions also impact the supply and/or cost of commodities and materials needed to construct or acquire utility assets or make necessary repairs.
The operating results of TXNM and its operating subsidiaries are seasonal and are affected by weather conditions.
Electric generation, transmission, and distribution are generally seasonal businesses that vary with the demand for power. With power consumption typically peaking during the hot summer months, revenues traditionally peak during that period. As a result, quarterly operating results of TXNM and its operating subsidiaries vary throughout the year. In addition, TXNM and its operating subsidiaries have historically had lower revenues resulting in lower earnings when weather conditions are milder. Unusually mild weather in the future could reduce the revenues, net earnings, and cash flows of the Company.
Drought conditions in New Mexico, especially in the “four corners” region, where Four Corners is located, may affect the water supply for PNM’s generating plants. If inadequate precipitation occurs in the watershed that supplies that region, PNM may have to decrease generation at these plants. This would require PNM to purchase power to serve customers and/or reduce the ability to sell excess power on the wholesale market and reduce revenues. Drought conditions or actions taken by the court system, regulators, or legislators could limit PNM’s supply of water, which would adversely impact PNM’s business.
TNMP’s service areas are exposed to extreme weather, including high winds, drought, flooding, ice storms, and periodic hurricanes. Extreme weather conditions, particularly high winds and severe thunderstorms, also occur periodically in PNM’s service areas. These severe weather events can physically damage facilities owned by TNMP and PNM. Any such occurrence both disrupts the ability to deliver energy and increases costs. Extreme weather can also reduce customers’ usage and demand for energy or could result in the Company incurring obligations to third parties related to such events. These factors could negatively impact results of operations and cash flows.
The impact of wildfires could negatively affect PNM’s and TNMP’s results of operations.
PNM and TNMP have large networks of electric transmission and distribution facilities. Weather conditions including severe drought, high winds, and the natural vegetation in the U.S. Southwest region and certain parts of Texas, could contribute to wildfires in or near PNM’s and TNMP’s service territories. The risk of wildfires could result in higher maintenance costs, increased insurance premiums, and the inability to maintain adequate insurance coverage. PNM and TNMP take proactive steps to mitigate wildfire risk. However, wildfire risk is always present and PNM and TNMP could be held liable for damages incurred as a result of wildfires caused, or allegedly caused, by their transmission and distribution systems. In addition, wildfires could cause damage to PNM’s and TNMP’s assets that could result in loss of service to customers or make it difficult to supply power in sufficient quantities to meet customer needs. Wildfire avoidance measures, such as intentional power , also may lead to customer for service, business , and other .
Failure to adequately address the risk of wildfires could also result in civil liability arising out of government enforcement actions or private claims. These actions could also result in reputational harm, which may cause stock price decreases, increased insurance premiums or the inability to maintain adequate insurance coverage, or cause certain investors and financial institutions not to purchase the Company’s debt securities or otherwise provide the Company with capital or credit on favorable terms, which may cause the cost of capital to increase. In addition, TXNM and its operating subsidiaries may underestimate the costs of litigation due to the uncertainty inherent in these matters. These events could have negative impacts on the Company’s financial position, results of operations, and cash flows.
Risks Relating to the Proposed Merger with Blackstone Infrastructure
There is no assurance when or if the proposed Merger will be completed.
Completion of the proposed Merger is subject to the satisfaction or waiver of a number of conditions as set forth in the Merger Agreement, including regulatory approvals and other customary closing conditions. There can be no assurance that the conditions to completion of the proposed Merger will be satisfied or waived or that other events will not intervene to delay or result in the failure to close the proposed Merger. In addition, each of Blackstone Infrastructure and TXNM may unilaterally terminate the Merger Agreement under certain circumstances, and Blackstone Infrastructure and TXNM may agree at any time to terminate the Merger Agreement, even though TXNM shareholders already approved the Merger Agreement at a special meeting on August 28, 2025 (and thereby approved the Merger and the other transactions contemplated by the Merger Agreement).
Table of Contents
Blackstone Infrastructure and TXNM may be unable to obtain the regulatory approvals required to complete the proposed Merger.
In addition to other conditions set forth in the Merger Agreement, completion of the proposed Merger is conditioned upon the receipt of various state and U.S. federal regulatory approvals, including, but not limited to, expiration or termination of the applicable waiting period under HSR Act and approval by NMPRC, PUCT, FERC, FCC, and NRC. Blackstone Infrastructure and TXNM have made and will make various filings and submissions and will pursue all required consents, orders and approvals in accordance with the Merger Agreement. These consents, orders and approvals may impose requirements, limitations or costs or place restrictions, and if such consents, orders and approvals require an extended period of time to be obtained, such extended period of time could increase the chance that an event occurs that constitutes a material adverse effect with respect to TXNM and thereby may allow Blackstone Infrastructure not to complete the proposed Merger. Such extended period of time also may increase the chance that other adverse effects with respect to TXNM could occur, such as the loss of key personnel. Further, no assurance can be given that the required consents, orders and approvals will be obtained or that the required conditions to closing will be .
The announcement and pendency of the proposed Merger, during which TXNM is subject to certain operating restrictions, could have an adverse effect on TXNM’s businesses, results of operations, financial condition, or cash flows.
The announcement and pendency of the proposed Merger could disrupt TXNM’s businesses, and uncertainty about the effect of the Merger may have an adverse effect on TXNM. These uncertainties could disrupt the business of TXNM and cause suppliers, vendors, partners, and others that deal with TXNM to defer entering into contracts with TXNM or making other decisions concerning TXNM or seek to change or cancel existing business relationships with TXNM. In addition, TXNM’s employees may experience uncertainty regarding their roles after the Merger; for example, employees may depart either before the completion of the Merger because of such uncertainty and issues relating to the difficulty of coordination or a desire not to remain following the Merger; and the pendency of the Merger may adversely affect TXNM’s ability to retain, recruit, and motivate key personnel. Additionally, the attention of TXNM’s management may be directed towards the completion of the Merger including obtaining regulatory approvals and other transaction-related considerations and may be diverted from the day-to-day business operations of TXNM and matters related to the Merger may require commitments of time and resources that could otherwise have been devoted to other that might have been to TXNM. Additionally, the Merger requires TXNM to obtain Blackstone Infrastructure’s consent prior to taking certain specified actions while the Merger is pending. These restrictions may prevent TXNM from pursuing otherwise business or other capital structure alternatives and making other changes to its business or executing certain of its business strategies prior to the completion of the Merger. Further, the Merger may give rise to potential liabilities, including as a result of pending and future shareholder lawsuits relating to the Merger. Any of these matters could affect the businesses of, or the results of operations, financial condition or cash flows of TXNM.
TXNM will incur substantial transaction fees and costs in connection with the proposed Merger.
TXNM has incurred and expects to incur additional material non-recurring expenses in connection with the proposed Merger and completion of the transactions contemplated by the Merger Agreement. Further, even if the proposed Merger is not completed, TXNM will need to pay certain costs relating to the proposed Merger incurred prior to the date the proposed Merger was abandoned, such as legal, accounting, financial advisory, filing, and printing fees.
The termination of the Merger Agreement could negatively impact TXNM.
If the Merger is not completed for any reason, the ongoing business of TXNM may be adversely affected and, without realizing any of the anticipated benefits of having completed the Merger, TXNM would be subject to a number of risks, including the following:
• TXNM may experience negative reactions from the financial markets, including a decline of its stock price (which may reflect a market assumption that the Merger will be completed)
• TXNM may experience negative reactions from its customers, regulators and employees
• TXNM may be required to pay certain costs relating to the Merger, whether or not the Merger is completed
• Matters relating to the Merger will have required substantial commitments of time and resources by TXNM management, which would otherwise have been devoted to day-to-day operations and other opportunities that may have been beneficial to TXNM as an independent company.
If the Merger Agreement is terminated and the Board seeks another merger, business combination or other transaction, TXNM shareholders cannot be certain that TXNM will be able to find a party willing to offer equivalent or more attractive consideration than the consideration TXNM shareholders would receive in the Merger. If the Merger Agreement is terminated under certain circumstances specified in the Merger Agreement (including if Blackstone Infrastructure terminates the Merger Agreement due to a change in recommendation of the Board or if TXNM terminates the Merger Agreement to accept a Superior Proposal (as defined in the Merger Agreement)), TXNM will be required to pay Blackstone Infrastructure a termination fee of $210.0 million, plus costs and expenses.
Table of Contents
Lawsuits have been, and additional lawsuits may be, filed that challenge the proposed Merger, and adverse judgments in these lawsuits may prevent the proposed Merger from becoming effective within the expected timeframe or at all.
TXNM and members of the Board have been, and may be, named as defendants in putative class action lawsuits or other proceedings that have been or may be brought by TXNM shareholders challenging the proposed Merger. If the plaintiffs in any of these actions seek a preliminary or permanent injunction and are successful in obtaining one, the parties may be prevented from completing the proposed Merger in the expected timeframe, if at all. Even if the plaintiffs in these actions are not successful in obtaining an injunction, they may nevertheless continue the action and seek damages after the transaction has closed. In addition, the costs of defending against such claims could adversely affect the financial condition of TXNM and such actions could affect the reputation of TXNM and members of its Board or management.
Counsel for TXNM received a number of demand letters from law firms on behalf of individuals who are purported TXNM shareholders, accompanied by draft complaints naming TXNM and its directors as defendants and alleging that TXNM’s preliminary proxy statement with respect to the Merger, omitted or misrepresented certain material information. Such draft complaints include a request for injunctive relief with respect to the TXNM shareholder vote to approve, and the closing of, the Merger, as well as other remedies, including counsel fees. In August 2025, reported shareholders filed complaints in New York state court alleging disclosure violations and seeking injunctive relief. TXNM believes that the allegations set forth in the demand letters, draft complaints, and New York state court cases are without merit and, if such are actually filed, will such actions vigorously. See Note 16 for additional information concerning the Merger-related .
The Merger Agreement contains provisions that could discourage a potential alternative acquirer that might be willing to pay more to acquire TXNM.
The Merger Agreement contains customary “no shop” provisions which state that we will not solicit or facilitate proposals regarding a merger or similar transaction with another party except in certain limited circumstances. While the Board may withdraw or change its recommendation regarding the Merger Agreement in response to an unsolicited third-party proposal to acquire TXNM that the Board determines to be superior to the Merger, there are restrictions on its ability to do so, and in certain circumstances, TXNM may also be required to pay Blackstone Infrastructure a termination fee. These provisions could discourage a potential third-party acquirer from considering or proposing an alternative acquisition, even if it were prepared to pay consideration with a higher value than that proposed to be paid in the Merger.
Financial Risks
TXNM has counterparty credit risk in connection with financial support that was provided to facilitate the coal supply arrangement for SJGS. Adverse developments from these factors could have a negative impact on the business, financial condition, results of operations, and cash flows of PNM and TXNM.
TXNM has an arrangement with a bank under which the bank has issued $19.3 million of letters of credit in favor of sureties in order for the sureties to post reclamation bonds that are required under the miner’s operating permit. The Company’s financial position, results of operations, and cash flows could be negatively impacted if the current mine operator were to default on its obligations to reclaim the San Juan mine and TXNM is required to perform under the letter of credit support agreement.
TXNM and its subsidiaries’ substantial indebtedness could adversely affect its financial condition.
TXNM and its subsidiaries currently have a significant amount of indebtedness, including the Convertible Notes and TXNM 2025 Junior Subs. This significant amount of indebtedness could limit TXNM’s ability to obtain additional financing for working capital, capital expenditures, acquisitions, debt service requirements, stock repurchases or other purposes. It may also increase TXNM’s vulnerability to adverse economic, market and industry conditions, limit its flexibility in planning for, or reacting to, changes in its business operations or to its industry overall, and place TXNM at a disadvantage in relation to its competitors that have lower debt levels. Any or all of the above events and/or factors could have an adverse effect on TXNM’s results of operations and financial condition.
Servicing TXNM and its subsidiaries’ debt requires a significant amount of cash, and it may not have sufficient cash flow from its business to pay its substantial debt.
TXNM and its subsidiaries’ ability to make scheduled payments of the principal of, to pay interest on or to refinance, its indebtedness, including the Convertible Notes and TXNM 2025 Junior Subs, depends on its future performance, which is subject to economic, financial, competitive and other factors beyond its control. TXNM’s business may not continue to generate cash flow from operations in the future sufficient to service its debt and make necessary capital expenditures. If TXNM is unable to generate such cash flow, TXNM may be required to adopt one or more alternatives, such as selling assets, restructuring debt or obtaining additional equity capital on terms that may be onerous or highly dilutive. TXNM’s ability to refinance its indebtedness will depend on the capital markets and its financial condition at such time. TXNM may not be able to engage in any of these activities or engage in these activities on desirable terms, which could result in a default on its debt obligations.
Table of Contents
Despite TXNM’s current consolidated debt levels, TXNM and its subsidiaries may still incur substantially more debt or take other actions which would intensify the risks discussed above.
Despite TXNM’s current consolidated debt levels, TXNM and its subsidiaries may be able to incur substantial additional debt in the future, subject to the restrictions contained in the Merger Agreement and its debt instruments, some of which may be senior indebtedness or secured debt. TXNM is not restricted under the terms of the indentures governing the Convertible Notes or the TXNM 2025 Junior Subs from incurring additional debt, securing existing or future debt, recapitalizing its debt or taking a number of other actions. TXNM’s Credit Agreement restricts its ability to incur additional indebtedness, including secured indebtedness, but if the TXNM Credit Agreement matures or is repaid, TXNM may not be subject to such restrictions under the terms of any subsequent indebtedness.
The fundamental change repurchase features of the Convertible Notes may delay or prevent an otherwise beneficial attempt to acquire TXNM.
Certain provisions in the indenture governing the Convertible Notes may make it more difficult or expensive for a third party to acquire TXNM. For example, the indenture governing the Convertible Notes requires TXNM, subject to certain exceptions, to repurchase the Convertible Notes for cash upon the occurrence of a fundamental change (as defined in the indenture) and, in certain circumstances, to increase the conversion rate for a holder that converts its Convertible Notes in connection with a make-whole fundamental change (as defined in the indenture). Such additional costs may have the effect of delaying or preventing a takeover of TXNM that would otherwise be beneficial to investors.
TXNM may be unable to meet its ongoing and future financial obligations and to pay dividends on its common stock if its subsidiaries are unable to pay dividends or distributions to TXNM.
TXNM is a holding company and has no operations of its own. TXNM’s ability to meet its financial obligations and to pay dividends on its common stock primarily depends on the net earnings and cash flows of PNM and TNMP and their capacity to pay upstream dividends or distributions. Prior to providing funds to TXNM, PNM and TNMP have financial and regulatory obligations that must be satisfied, including among others, debt service and, in the case of PNM, preferred stock dividends.
The NMPRC has placed certain restrictions on the ability of PNM to pay dividends to TXNM, including that PNM cannot pay dividends that cause its debt rating to fall below investment grade. The NMPRC has also restricted PNM from paying dividends in any year, as determined on a rolling four-quarter basis, in excess of net earnings without prior NMPRC approval. PNM is permitted to pay dividends to TXNM from prior equity contributions made by TXNM. Additionally, TXNM’s financing agreements generally include a covenant to maintain a debt-to-capitalization ratio that does not exceed 70%, and PNM and TNMP’s financing arrangements generally include a covenant to maintain debt-to-capitalization ratios that do not exceed 65%. PNM also has various financial covenants that limit the transfer of assets, through dividends or other means and the Federal Power Act imposes certain restrictions on dividends paid by public utilities, including that dividends cannot be paid from paid-in capital. The Merger Agreement also restricts TXNM from paying dividends outside of regular quarterly dividends.
Further, the ability of TXNM to declare dividends depends upon the extent to which cash flows will support dividends, the Company’s financial circumstances and performance, economic conditions in the U.S. and in the Company’s service areas, future growth plans and the related capital requirements, and other business considerations. Declaration of dividends may also be affected by decisions of the NMPRC, FERC, and PUCT in various regulatory cases currently pending or that may be docketed in the future, including the outcome of appeals of those decisions, conditions imposed by the NMPRC, PUCT, or Federal Power Act, and the effect of federal regulatory decisions and legislative acts.
Disruption in the credit and capital markets may impact the Company’s strategy and ability to raise capital.
TXNM and its subsidiaries rely on access to both short-term and longer-term capital markets as sources of liquidity for any capital requirements not satisfied by cash flow from operations. In general, the Company relies on its short-term credit facilities as the initial source to finance construction expenditures. This results in increased borrowings under the facilities over time. The Company is currently projecting total construction expenditures for the years 2026-2030 to be $10.2 billion. If TXNM or its operating subsidiaries are not able to access capital at competitive rates, or at all, TXNM’s ability to finance capital requirements and implement its strategy will be limited. Disruptions in the credit markets, which could negatively impact the Company’s access to capital, could be caused by an economic recession, declines in the health of the banking sector generally or the failure of specific banks who are parties to the Company’s credit facilities, deterioration in the overall health of the utility industry, the bankruptcy of an unrelated energy company, war, terrorist attacks, cybersecurity attacks, or attacks.
If the Company’s cash flow and credit and capital resources are insufficient to fund capital expenditure plans, the Company may be forced to delay important capital investments, sell assets, seek additional equity or debt capital, or restructure debt. In addition, insufficient cash flows and capital resources may result in reductions of credit ratings. This could negatively impact the Company’s ability to incur additional indebtedness on acceptable terms and would result in an increase in the
Table of Contents
interest rates applicable under the Company’s credit facilities. The Company’s cash flow and capital resources may be insufficient to pay interest and principal on debt in the future. If that should occur, the Company’s capital raising or debt restructuring measures may be unsuccessful or inadequate to meet scheduled debt service obligations. This could cause the Company to default on its obligations and further impair liquidity.
Reduction in credit ratings or changing rating agency requirements could materially and adversely affect the Company’s growth, strategy, business, financial position, results of operations, and liquidity.
TXNM, PNM, and TNMP cannot be sure that any of their current credit ratings will remain in effect for any given period of time or that a rating will not be put under review for a downgrade, lowered, or withdrawn entirely by a rating agency. As discussed in MD&A - Liquidity and Capital Resources, all of TXNM, PNM, and TNMP’s senior debt ratings are investment grade. Downgrades or changing requirements could result in increased borrowing costs due to higher interest rates on current borrowings or future financings, a smaller potential pool of investors, and decreased funding sources. Such conditions also could require the provision of additional support in the form of letters of credit and cash or other collateral to various counterparties.
Declines in values of marketable securities held in trust funds for pension and other postretirement benefits, in the NDT and coal mine reclamation trusts, and in the SJGS decommissioning trust could result in sustained increases in costs and funding requirements for those obligations, which may affect operational results.
The PNM and TNMP Pension Plans have targeted asset allocations of 50% and 70% liability matching fixed and 50% and 30% return generating income, which includes alternative income. The Company uses a strategy, known as Liability Driven Investing, which seeks to select investments that match the liabilities of the pension plans. The OPEB plans generally use the same pension fixed income and equity investment managers and utilize the same overall investment strategy as the pension plans, except there is no allocation to alternative investments and the OPEB plans have a target asset allocation of 30% equities and 70% fixed income.
The current asset allocation exposes the NDT investment portfolio to market and macroeconomic factors. Declines in market values could result in increased funding of the trusts, the recognition of losses as impairments for the NDT and coal mine reclamation trusts, SJGS decommissioning trust, and additional expense for the benefit plans. In addition, a change in GAAP required that all changes in the fair value of equity securities recorded on the Company’s balance sheet be reflected in earnings, which result in increased volatility in earnings.
Impairments of goodwill and long-lived assets of TXNM, PNM, and TNMP could adversely affect the Company’s business, financial position, liquidity, and results of operations.
The Company annually evaluates recorded goodwill for impairment. See Note 1 and the Critical Accounting Policies and Estimates section of MD&A. Long-lived assets are also assessed whenever indicators of impairment exist. Factors that affect the long-term value of these assets, including treatment by regulators in ratemaking proceedings, as well as other economic and market conditions, could result in impairments. Significant impairments could adversely affect the Company’s business, financial position, liquidity, and results of operations.
The impacts and implementation of U.S. tax reform legislation may negatively impact TXNM’s, PNM’s, and TNMP’s businesses, financial position, results of operations, and cash flows.
Changes in tax laws may negatively impact TXNM’s, PNM’s, and TNMP’s businesses, financial position, results of operations, and cash flows. The Company possesses tax credits and other carryforwards, the value of which could be diminished by new laws or the Company’s ability to timely utilize them. Increases in tax rates may not be immediately recoverable through PNM’s and TNMP’s regulated rates, reducing earnings. Tax laws and regulations may also negatively impact the relative value of some resource investments over others, making those investments less competitive.
In July 2025, President Trump signed the OBBBA, significantly altering the landscape of climate action and clean energy initiatives in the United States. The legislation revises and, in including some cases, phases out tax credits established under the IRA and also includes restrictions on the availability of credits for “foreign entities of concern,” as such term is used in the OBBBA.
Governance Risks
Provisions of TXNM’s organizational documents, as well as several other statutory and regulatory factors, will limit another party’s ability to acquire TXNM and could deprive TXNM’s shareholders of the opportunity to receive a takeover premium for shares of TXNM’s common stock.
In addition to the restrictions in the Merger Agreement discussed above, TXNM’s restated articles of incorporation and by-laws include a number of provisions that may have the effect of discouraging persons from acquiring large blocks of
Table of Contents
TXNM’s common stock or delaying or preventing a change in control of TXNM. The material provisions that may have such an effect include:
• Authorization for the Board to issue TXNM’s preferred stock in series and to fix rights and preferences of the series (including, among other things, voting rights and preferences with respect to dividends and other matters)
• Advance notice procedures with respect to any proposal other than those adopted or recommended by the Board
• Provisions specifying that only a majority of the Board, the chairman of the Board, the chief executive officer, or holders of at least one-tenth of all of TXNM’s shares entitled to vote may call a special meeting of shareholders
Under the New Mexico Public Utility Act, NMPRC approval is required for certain transactions that may result in TXNM’s change in control or exercise of control, including ownership of 10% or more of TXNM’s voting stock. PUCT approval is required for changes to the ownership of TNMP or its parent and certain other transactions relating to TNMP. Certain acquisitions of TXNM’s outstanding voting securities also require FERC approval.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 1C. CYBERSECURITY
Cybersecurity Risk Management and Strategy
Process for identifying, assessing, and managing cybersecurity risks
From an overall enterprise risk management perspective, the Company views cybersecurity as a “tier 1” risk and considers it one of its top priorities. The Company’s cybersecurity program (the “Cybersecurity Program”) includes processes to identify, assess, and manage material risks from cybersecurity threats. The Cybersecurity Program utilizes a risk-based approach and includes written cybersecurity and information technology policies and procedures, including a cybersecurity incident response plan. The Company’s Cybersecurity Program is led by its Vice President and Chief Information Officer (“CIO”), who oversees the management and development of all business technology and cyber and physical security for the Company and its subsidiaries. The CIO is also responsible for federal reliability standards compliance, critical infrastructure protection and crisis management resilience.
The Cybersecurity Program is a robust, enterprise-wide, risk-based security program that adheres to the guidelines of the National Institute of Science and Technology (“NIST”) Cybersecurity Framework for Protecting Critical Infrastructure to define material risks and establish controls designed to protect, detect, respond to, and recover from cybersecurity incidents. To protect the most critical systems, the Company also complies with the NERC Critical Infrastructure Protection Standards.
The Company regularly assesses control results through third party audits, penetration tests and internal assessments to continuously improve cyber protections and data privacy controls. The Company partners with government and industry peers in several cybersecurity programs to share information and provide mutual assistance in the event of a cyber-attack. Supply chain risk of third-party suppliers is also assessed as part of the procurement process and incorporates cybersecurity contractual stipulations in its supplier contracts. The Company remains focused on increasing cybersecurity awareness and is continuously evaluating and implementing effective, up-to-date technologies and processes to enhance its cybersecurity capabilities.
The Company engages in the periodic assessment and testing of the Company’s policies, standards, processes and practices that are designed to address cybersecurity threats and incidents. These efforts include a wide range of activities, including audits, assessments, tabletop exercises, threat modeling, vulnerability testing, and other exercises focused on evaluating the effectiveness of the Company’s cybersecurity measures and planning. The Company regularly engages third parties to perform assessments on the Company’s cybersecurity measures, including information security maturity assessments, audits and independent reviews of the Company’s information security control environment and operating effectiveness. The results of such assessments, audits, and reviews are reported to the Audit and Ethics Committee and the Board, and the Company adjusts its cybersecurity policies, standards, processes and practices as necessary based on the information provided by these assessments, audits, and reviews.
Risks from cybersecurity threats
The information set forth under Item 1A, “Risk Factors” — “ TXNM, PNM, and TNMP are subject to information security breaches and risks of unauthorized access to their information and operational technology systems as well as physical threats to assets. ” on page A-14 of this Annual Report on Form 10-K is hereby incorporated by reference. As of December 31, 2025, our financial condition, results of operations or business strategy have not been materially affected by risks from cybersecurity threats, including as a result of previously identified cybersecurity incidents, but we cannot provide assurance that they will not be materially affected in the future by such risks or any future material incidents.
Table of Contents
Cybersecurity Governance
Management’s role in assessing and managing the Company’s material risks from cybersecurity threats
The Company’s management is responsible for managing cybersecurity risk and bringing to the Audit and Ethics Committee and Board’s attention the most significant cybersecurity risks facing the Company. The CIO oversees the Company’s Cybersecurity Program and reports to the Company’s Senior Vice President of Corporate Services. The CIO leads the development, implementation, and enforcement of security policies and data breach resiliency plans, as well as works with internal and external cybersecurity and IT teams to monitor and maintain the security of the Company’s IT infrastructure. The CIO is supported by a team of enterprise information, system security, and risk professionals. The CIO receives reports on cybersecurity threats on an ongoing basis and regularly reviews risk management measures implemented by the Company to identify and mitigate data security and cybersecurity risks. The CIO updates senior management on these matters and works closely with the General Counsel to oversee compliance with legal, regulatory, and contractual security requirements. The CIO has significant technology and program management experience and has served many years in the Company’s information technology organization. The CIO is a Certified Project Management Professional and Change Management Registered Practitioner. In addition, the CIO has a B.B.A. in business computer systems and an MBA.
Board oversight of risks from cybersecurity threats
Cybersecurity risk oversight remains a priority for the Board who is responsible for oversight of the Company’s information security program, including compliance and risk management and the review of cybersecurity risks. The Board has adopted a Cyber Risk Policy which is overseen by the Audit and Ethics Committee. The Audit and Ethics Committee’s oversight of cyber risk management assists in the Board’s assessment of the adequacy of resources, funding, and focus within the Company with respect to cyber risk. Specifically, the Audit and Ethics Committee assist the Board in its oversight responsibilities regarding the company-wide security risk management practices, including overseeing the practices, procedures, and controls that management uses to identify, assess, respond to, remediate, and mitigate risks related to cybersecurity. The Audit and Ethics Committee provide oversight of management’s efforts to identify and mitigate cyber risk. Specifically, senior leadership, including the CIO, regularly briefs the Audit and Ethics Committee and the Board on Company’s cybersecurity posture. In executing its risk oversight duties, the Audit and Ethics Committee and the Board can and does access internal and external expertise regarding the Company’s challenges and opportunities related to cybersecurity.
ITEM 2. PROPERTIES
TXNM
The significant properties owned by TXNM include those owned by PNM and TNMP and are disclosed below.
PNM
See Sources of Power in Part I, Item 1 Business above for information on PNM’s owned and leased capacity in electric generating stations. As of December 31, 2025, PNM owned, or jointly owned, 3,450 miles of electric transmission lines, 5,774 miles of distribution overhead lines, 6,251 miles of underground distribution lines (excluding street lighting), and 250 substations. PNM’s electric transmission and distribution lines are generally located within easements and rights-of-way on public, private, and Native American lands. PNM owns and leases communication, office and other equipment, office space, vehicles, energy storage facilities, and real estate. PNM also owns service and office facilities throughout its service territory. See Note 8 for additional information concerning leases.
TNMP
TNMP’s facilities consist primarily of transmission and distribution facilities located in its service areas. TNMP also owns and leases vehicles, service facilities, and office locations throughout its service territory. As of December 31, 2025, TNMP owned 1,049 miles of overhead electric transmission lines, 7,346 miles of overhead distribution lines, 1,633 miles of underground distribution lines, and 106 substations. Substantially all of TNMP’s property is pledged to secure its first mortgage bonds. See Note 7.
ITEM 3. LEGAL PROCEEDINGS
See Note 16 and Note 17 for information related to the following matters for TXNM, PNM, and TNMP, incorporated in this item by reference.
Note 16
• TXNM – Merger Related Litigation
Table of Contents
Note 17
• TXNM – Merger Related Regulatory Applications
• PNM – Integrated Resource Plans
• PNM – Grid Modernization Plan
• PNM – BESS Project
• PNM – SB 170 Projects
• PNM – Rio Puerco-Pajarito-Prosperity CCN
• TNMP – Base Rate Review
• TNMP – Transmission Cost of Service Rates
• TNMP – Periodic Distribution Rate Adjustment
ITEM 4. MINE SAFETY DISCLOSURES
Not Applicable.
SUPPLEMENTAL ITEM – INFORMATION ABOUT EXECUTIVE OFFICERS OF TXNM ENERGY, INC.
All officers are elected annually by the Board of TXNM. Executive officers, their ages as of February 13, 2026, and offices held for the past five years are as follows:
Name
Age
Office
Initial Effective Date
P. K. Collawn
Executive Chairman
July 2025
Chairman and Chief Executive Officer
May 2022
Chairman, President, and Chief Executive Officer
January 2012
J. D. Tarry
President and Chief Executive Officer
July 2025
President and Chief Operating Officer
May 2022
Senior Vice President and Chief Financial Officer
January 2020
H. E. Monroy
Senior Vice President and Chief Financial Officer
May 2025
PNM Vice President, Regulatory
December 2023
PNM Vice President, Regulatory and TXNM Corporate Controller
July 2022
Vice President and Corporate Controller
January 2020
B. G. Iverson
General Counsel, Senior Vice President Regulatory and Public Policy, and Corporate Secretary
September 2024
Senior Vice President, General Counsel and Chief Compliance Officer at Black Hills Corporation
April 2016
M. M. Jacobson
Senior Vice President, Corporate Services
April 2025
Partner of Forward Solutions, LLC
June 2022
Owner of Monique and Associates, LLC
January 2019
Table of Contents
PART II
ITEM 5. MARKET FOR TXNM’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES
TXNM’s common stock is traded on the New York Stock Exchange under the symbol “TXNM”.
Dividends on TXNM’s common stock are declared by its Board. The timing of the declaration of dividends is dependent on the timing of meetings and other actions of the Board. This has historically resulted in dividends considered to be attributable to the second quarter of each year being declared through actions of the Board during the third quarter of the year. The Board declared dividends on common stock considered to be for the second quarter of $0.4075 per share in July 2025 and $0.3875 per share in July 2024. The Board declared dividends on common stock considered to be for the third quarter of $0.4075 per share in September 2025 and $0.3875 per share in September 2024. In December 2025, the Board increased the quarterly dividend from $0.4075 to $0.4225 per share. In December 2024, the Board increased the quarterly dividend from $0.3875 to $0.4075 per share. TXNM targets long-term earnings growth with a dividend payout ratio between 50 and 60 percent of ongoing earnings, which is a non-GAAP financial measure, that excludes from GAAP earnings certain non-recurring, infrequent, and other items that are not indicative of fundamental changes in the earnings capacity of the Company’s operations. TXNM uses ongoing earnings to evaluate the operations of the Company and to establish goals, including those used for certain aspects of incentive compensation, for management and employees. See Note 6 for a discussion on limitations on the payments of dividends and the payment of future dividends, as well as dividends paid by PNM and TNMP.
On August 2, 2024, TXNM increased the number of authorized shares of its common stock from 120,000,000 to 200,000,000.
On February 13, 2026, there were 6,354 holders of record of TXNM’s common stock. There have been no issuer purchases of equity securities. All of PNM’s and TNMP’s common stock is owned by TXNM and is not listed for trading on any stock exchange.
See Part III, Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
Preferred Stock
As of December 31, 2025, PNM has 115,293 shares of cumulative preferred stock outstanding. PNM is not aware of any active trading market for its cumulative preferred stock. Quarterly cash dividends were paid on PNM’s outstanding cumulative preferred stock at the stated rates during 2025 and 2024. TXNM and TNMP do not have any preferred stock outstanding.
Sales of Unregistered Securities
None.
ITEM 6. [RESERVED]
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations for TXNM is presented on a combined basis, including certain information applicable to PNM and TNMP. This report uses the term “Company” when discussing matters of common applicability to TXNM, PNM, and TNMP. The MD&A for PNM and TNMP is presented as permitted by Form 10-K General Instruction I (2) as amended by the FAST Act. For additional information related to the earliest of the two years presented please refer to the Company’s 2023 Annual Report on Form 10-K. A reference to a “Note” in this Item 7 refers to the accompanying Notes to Consolidated Financial Statements included in Part II, Item 8, unless otherwise specified. Certain of the tables below may not appear visually accurate due to rounding.
MD&A FOR TXNM
EXECUTIVE SUMMARY
Overview
TXNM is a holding company with two regulated electric utilities, PNM and TNMP, serving approximately 842,000 residential, commercial, and industrial customers New Mexico and Texas. TXNM was incorporated in the State of New Mexico in 2000 and its common stock trades on the New York Stock Exchange under the symbol TXNM.
Table of Contents
Recent Developments
Merger
On May 18, 2025, TXNM, Parent, and Merger Sub (both Parent and Merger Sub are affiliates of Blackstone Infrastructure) entered into the Merger Agreement pursuant to which Merger Sub will merge with and into TXNM, with TXNM surviving the Merger as a direct, wholly-owned subsidiary of Parent. Pursuant to the Merger Agreement, each issued and outstanding share of the common stock of TXNM (other than those listed in Note 22) at the Effective Time will be converted into the right to receive $61.25 in cash, without interest.
The proposed Merger has been unanimously approved by the Board and was approved by the TXNM shareholders at a special meeting held on August 28, 2025. The waiting period under the HSR Act in connection with the Merger has expired without any objections or concerns having been raised, both the FCC and FERC approved the application, and the PUCT approved the unanimous settlement, satisfying four of the conditions to closing of the Merger Agreement. Consummation of the Merger remains subject to the satisfaction or waiver of certain customary conditions, including, without limitation, no Legal Restraint, and the receipt of certain required regulatory approvals (including the NMPRC and the NRC). TXNM has filed applications for regulatory approval of the Merger with the NMPRC (Note 17). The Merger Agreement does not contain any financing condition and is currently expected to close in the second half of 2026.
On December 11, 2025, TXNM and Blackstone Infrastructure reached a unanimous settlement with parties in the Merger proceeding filed with the PUCT, that was approved on February 6, 2026. On February 20, 2026, FERC approved the proposed Merger rejecting claims related to data centers, private equity ownership, and speculative cross-subsidization relying on existing state ring-fencing protections in New Mexico and Texas. See Note 17.
Vision, Values and Business Objectives
TXNM’s vision is to create a clean and bright energy future while fulfilling its purpose to work together with customers and communities to meet their energy needs. TXNM’s core values of Safety, Caring and Integrity are the foundation for the Company’s business objectives focused on safety excellence and customer satisfaction, including reliability. To reach these objectives, the Company is committed to:
• Preparing our workforce with the knowledge and skills to thrive in a customer-focused world
• Purposefully delivering an intentional customer experience that exceeds our evolving customer and stakeholder expectations
• Enabling an environmentally sustainable future and deploying technologically advanced solutions that empower and benefit customers
• Demonstrating the relationship between customer excellence and our dedicated focus on financial strength
Meeting the business objectives above will drive key financial results:
• Earning authorized returns on regulated businesses
• Delivering at or above industry-average long-term earnings growth, with a dividend payout ratio between 50 and 60 percent of earnings
• Maintaining investment grade credit ratings
Business Focus
To achieve the Company’s business objectives, focus is directed in key areas: Safe, Reliable and Affordable Power; Utility Plant Investments; Superior Customer Experience; Environmentally Responsible Power; and Stakeholder and Community Engagement. The Company works closely with its stakeholders to ensure that resource plans and infrastructure investments benefit from robust public dialogue and balance the diverse needs of our communities. Equally important is the focus of TXNM’s utilities on customer satisfaction and community engagement.
Safe, Reliable, and Affordable Power
Safety is the first priority of our business and a core value of the Company. TXNM utilizes a Safety Management System to provide clear direction, objectives and targets for managing safety performance and minimizing risks and empowers employees to “Be the Reason Everyone Goes Home Safe”.
TXNM measure’s reliability and benchmark performance of PNM and TNMP against other utilities using industry-standard metrics, including System Average Interruption Duration Index (“SAIDI”) and System Average Interruption Frequency Index (“SAIFI”). PNM’s and TNMP’s investment plans include projects designed to support reliability and reduce the amount of time customers are without power.
TXNM and its utilities are aware of the important roles they play in enhancing economic vitality in their service
Table of Contents
territories. Management believes that maintaining strong and modern electric infrastructure is critical to ensuring reliability and supporting economic growth. When contemplating expanding or relocating their operations, businesses consider energy affordability and reliability to be important factors. PNM and TNMP strive to balance service affordability with infrastructure investment to maintain a high level of electric reliability and to deliver a safe and superior customer experience. Investing in PNM’s and TNMP’s infrastructure is critical to ensuring reliability and meeting future energy needs. Both utilities have long-established records of providing customers with safe and reliable electric service.
PNM participates in the EIM, a real-time wholesale energy trading market operated by the CAISO, that enables participating electric utilities to buy and sell energy. The EIM aggregates the variability of electricity generation and load for multiple balancing authority areas and utility jurisdictions. In addition, the EIM facilitates greater integration of renewable resources through the aggregation of flexible resources by capturing diversity benefits from the expanding geographic footprint and the expanded potential uses for those resources. The NMPRC approved collection of PNM’s regulatory asset to recover the initial capital investments and implementation and ongoing costs necessary to participate in the EIM in the 2024 Rate Change final order. PNM passes the cost savings achieved by participating in the EIM through to customers under PNM’s FPPAC. PNM also plans to join the EDAM, which is a voluntary day-ahead regional market that expands on CAISO’s EIM market, as early as 2027.
PNM joined the WRAP in April 2023 to help ensure regional resource availability is visible and coordinated in the event PNM customers are critically impacted by a resource emergency. WRAP is currently in the non-binding phases of the program, which is expected to continue through the summer of 2027. PNM has successfully complied with all WRAP requirements to date and fully supports the need to align a resource adequacy program with coordination between power providers. However, on October 28, 2025, PNM notified the Western Power Pool that it has elected to withdraw from WRAP and will not proceed into the binding phase. PNM will seek to align resource adequacy coordination with others in the EDAM regional market to maximize customer benefits.
In May 2024, PNM filed its updated WMP and its PSPS Plan with the NMPRC. The plans enhance Company wildfire prevention efforts and identify conditions for preventive shutoffs. PNM’s WMP addresses the increasing severity and frequency of extreme weather events and increasing wildfire risk and is focused on situational awareness, field personnel safety practices and operational wildfire mitigation strategies to prevent the accidental ignition of wildfires. PNM’s PSPS Plan is designed to proactively de-energize electrical facilities in identified areas of extreme wildfire risk under certain conditions to reduce the potential of those electrical facilities becoming a wildfire ignition source or contributing to the spread of wildfires.
In June 2024, TNMP filed its WMP with the PUCT in response to recent wildfire events impacting the electric utility industry and the customers it serves. TNMP’s WMP establishes a wildfire risk awareness and mitigation strategy that becomes part of a fire safe culture across the Company. The WMP increases grid awareness and serves as a blueprint to help reduce the risk of the accidental ignition of wildfires. The WMP also provides new strategies, technologies, and operating guidelines to enhance grid resiliency and public safety.
Utility Plant Investments
During the 2024 and 2025 periods, PNM and TNMP together invested $2.4 billion in utility plants, including transmission and distribution systems, substations, power plants, and nuclear fuel. Investment plans emphasize new investments in transmission and distribution infrastructure to support growing demand with grid reliability and resilience and to deliver clean energy. The Company has been improving the diversification of its rate base among regulatory jurisdictions, moving TNMP and FERC transmission rate base to over half of the consolidated rate base.
Investments at TNMP support the continued high growth across each region of its service territory. Economic growth across Texas continues to push the demands on TNMP’s system to new levels, including a new system peak in September 2025. In 2023, the Texas legislature passed a series of bills aimed at encouraging investments to enhance grid reliability and resilience, while the PUCT continues to develop rules in support of this new legislation. TNMP will continue to submit filings for recovery of its investments, in accordance with these new rules, in addition to the existing rate recovery mechanisms. In June 2025, HB 5247 added Section 36.216 to PURA, which immediately authorized certain electric utilities, including TNMP, to offset depreciation, property tax expenses, and carrying costs with alternative revenue and recognize a regulatory asset for qualifying investments until the following year in which they would file a single, annual proceeding with the PUCT.
Investments at PNM are aimed at supporting economic development and advancing the infrastructure beyond its original architecture to a more flexible and redundant system accommodating growing amounts of intermittent and distributed generation resources and integrating evolving technologies that provide long-term customer value. New Mexico’s clean energy future depends on a reliable, resilient, secure grid to deliver an evolving mix of energy resources to customers. A CCN requesting approval of a new transmission line and the application seeking to defer costs of two economic development projects filed under SB 170 support economic development and projects included in the Grid Modernization Plan will improve customers’ ability to customize their use of energy and modernize PNM’s electric grid through infrastructure and technology improvements.
Table of Contents
See the subheading Capital Requirements included in the full discussion of Liquidity and Capital Resources below for additional discussion of the Company’s projected capital requirements.
Superior Customer Experience
The Company strives to deliver a superior customer experience. With reliability being the primary role of a transmission and distribution service provider in Texas’ deregulated market, TNMP continues to focus on keeping end-users updated about interruptions and encouraging consumer preparation when severe weather is forecasted. In 2024, TNMP made significant strides in improving customer satisfaction related to power outages by providing a more user-friendly experience on TNMP’s outage map information system, making it easier for customers to access real-time outage information. In addition, TNMP introduced a new system that allows customers to receive outage alerts through multiple communication channels to enhance transparency and to ensure customers stay informed during . In September 2024, TNMP sent employees to assist in restoring power to those communities impacted by Hurricane Helene and in January 2025 TNMP was announced as an Emergency Response Award recipient by the Edison Electric Institute (“EEI”), an association representing all US investor-owned electric companies. The Emergency Response Awards recognize recovery and assistance efforts of electric companies following service caused by extreme weather or other natural events.
In 2025, PNM continued to hold in-person engagements with residential and business customers through customer advisory councils. These engagements have helped PNM to build and improve customer relationships and have provided PNM with valuable customer insights to gauge customer interest levels towards programs and services to be highly customer centric. Additionally, PNM continues to focus its efforts on enhancing the customer experience through customer service improvements, including enhanced digital payment options, strategic customer outreach, and improved communications. In early 2025, PNM introduced a redesigned customer bill to make it easier for customers to understand their bill as a part of a broader commitment to improve transparency and usability. While the electric utility industry continues to experience declines in customer satisfaction as measured by J.D. Power, PNM’s ranking in 2025 remained stable, reflecting the Company’s sustained efforts to the customer journey through a more seamless and customer- experience. PNM continues to focus on addressing energy affordability by promoting participation in utility programs among households with high energy to offset high bills. PNM has also implemented efforts to increase participation in low-income energy programs, including providing additional aid through the PNM Neighbor Fund, partnering with state agencies to make it to access funding, access to clean energy through expanded outreach and communication, and implementing low-income transportation electrification programs. As a result of PNM’s efforts, 6,509 families in need received emergency assistance through the PNM Neighbor Fund for the year ended December 31, 2025.
Environmentally Responsible Power
TXNM has a long-standing record of environmental stewardship. PNM’s environmental focus is in three key areas:
• Developing strategies to provide reliable and affordable power while transitioning to a 100% carbon-free generating portfolio by 2040
• Preparing PNM’s system to meet New Mexico’s increasing renewable energy requirements as cost-effectively as possible
• Increasing energy efficiency participation
TXNM’s corporate website (www.txnmenergy.com) includes a dedicated section providing key environmental and other information related to PNM’s and TNMP’s operations, including information that collectively demonstrates the Company’s commitment to sustainability. This information highlights plans for PNM to be coal-free no later than 2031 and to achieve a carbon-free generating portfolio by 2040. Achieving our goal of carbon-free by 2040 is dependent on balancing reliability, cost considerations, and maturity of emerging technologies.
PNM’s Grid Modernization Plan is a major step forward in providing reliable, affordable and sustainable energy. As part of that plan, PNM will promote energy equity by installing technology like smart meters and making distribution upgrades in low-income areas first in order to allow lower-income customers to gain insights into their energy usage to improve affordability and create fairer access to energy. In addition, PNM’s Time-of-Day pilot approved in the 2024 Rate Change final order incentivizes customers, through price signals, to use energy during the day when renewable generation is abundant.
The IRA provided benefits for TXNM and its customers by extending and enhancing clean energy incentives such as the investment tax credit and production tax credit. As the Company continues its transition away from carbon emitting sources, these credits reduce the cost of renewable investments. In addition, the IRA includes a new production tax credit for existing nuclear facilities that may create an added benefit for PNM’s ownership in the carbon-free PVNGS. Other IRA provisions encourage transportation electrification with new EV credits and added incentives for vehicle charging infrastructure. In July 2025, the OBBBA was enacted and is expected to accelerate the phase-out of certain IRA energy tax credits and restrict the availability of credits for “foreign entities of concern,” as such term is used in the OBBBA.
Table of Contents
Electric Vehicles
TXNM’s sustainability goals include plans for additional emissions reductions through the electrification of its vehicle fleet. Growing the number of EVs within the Company’s fleet will benefit the environment and lower fuel costs furthering the commitment to sustainability. Under the commitment, existing fleet vehicles will be replaced as they are retired with an increasing percentage of EVs.
To demonstrate TXNM’s commitment to increase the electrification of vehicles in its service territory, PNM implemented its first TEP in 2022 and received approval of its 2024-2026 TEP in 2024. PNM has launched new transportation electrification offerings that support customer adoption of EVs by addressing barriers to adoption. PNM’s TEP program budget provides financial support to residential and non-residential customers towards the purchase of EV chargers and/or site make-ready costs, as well as customer education and outreach on EV-specific electricity rates to encourage charging during off-peak periods. More than 25% of the program budget is dedicated to low- and moderate-income customers to plan for an equitable transition to an electrified transportation sector.
PNM participates in the National Electric Highway Coalition, which plans to build fast-charging ports along major U.S. travel corridors. The coalition, with approximately 50 investor-owned electric companies is committed to providing EV fast charging ports that will allow the public to drive EVs with confidence throughout the country’s major roadways. To support this initiative, PNM’s TEP program includes the installation of a charging network along major roadways in New Mexico.
Renewable Energy and Energy Storage
PNM’s utility-owned solar and energy storage capacity, as well as solar, energy storage, wind, and geothermal procurements from facilities in service as of December 31, 2025, have a total net generation capacity of 3,244 MW. In addition to PNM’s owned and third-party contracted solar facilities, PNM also has a customer distributed solar generation program that represented 334.1 MW at December 31, 2025. The NMPRC has approved plans for PNM to procure energy and RECs from additional resources to serve retail customers and a data center located in PNM’s service territory. PNM’s approved resources have a generation capacity of 1,453 MW. This includes approximately 285 MW of additional capacity under the Community Solar Act which will provide customers an additional option of accessing solar energy.
PNM will continue to seek approval to procure renewable resources as needed to meet forecasted peak load requirements to serve its customers and New Mexico’s RPS and carbon-free resource requirements, while balancing the impact to customers’ electricity costs.
Energy Efficiency
Energy efficiency plays a significant role in helping to keep customers’ electricity costs low while meeting their energy needs and is one of the Company’s approaches to supporting environmentally responsible power. PNM’s and TNMP’s energy efficiency and load management portfolios continue to achieve robust results. In 2025, incremental energy saved as a result of participation in PNM’s portfolio of energy efficiency programs is estimated to be 84 GWh. This is equivalent to the annual consumption of approximately 11,639 homes in PNM’s service territory. PNM’s load management and energy efficiency programs also help lower peak demand requirements. In 2025, TNMP’s incremental energy saved as a result of participation in TNMP’s energy efficiency programs is estimated to be approximately 20 GWh. This is equivalent to the annual consumption of approximately 2,762 homes in TNMP’s service territory, estimated using a national average avoided emissions rate. TNMP’s high-performance homes residential new construction energy efficiency program has earned the Energy Star Partner of the Year award for 8 years, including 6 years receiving the Sustained Excellence Award, recognizing long-term commitment to fighting climate change and protecting public health through energy . For information on PNM’s and TNMP’s energy filing with the NMPRC and PUCT see Note 17.
Water Conservation and Solid Waste Reduction
PNM continues to make progress in its efforts to reduce the amount of fresh water used to make electricity. Continued growth in PNM’s solar and wind energy resources, energy efficiency programs, and innovative uses of air-cooling technology have contributed to this reduction. Water usage has continued to decline as PNM has substituted less fresh-water-intensive generation resources to replace SJGS. As the Company moves forward with its mission to achieve carbon-free generation, it expects that more significant water savings will be gained. Shutting down SJGS in 2022 and Four Corners in 2031 will allow the Company to reach our goals for reduced freshwater use at 80% by 2035 and 90% by 2040 from 2005 levels. Focusing on responsible stewardship of New Mexico’s scarce water resources improves PNM’s water-resilience in the face of persistent drought and ever-increasing demands for water to spur the growth of New Mexico’s economy.
In addition to the above areas of focus, the Company is working to reduce the amount of solid waste going to landfills through increased recycling and reduction of waste. In 2025, 18 of the Company’s 22 facilities met or exceeded the solid waste diversion goal of a 65% diversion rate.
Table of Contents
Stakeholder and Community Engagement
The Company is committed to fostering relationships with its customers, stakeholders, and communities. Through outreach, collaboration, and various community-oriented programs, the Company has demonstrated a commitment to building productive relationships with stakeholders, including customers, community partners, regulators, intervenors, legislators, and shareholders. Local relationships and one-on-one communications remain two of the most valuable ways both PNM and TNMP connect with their stakeholders. Both companies maintain long-standing relationships with governmental representatives and key electricity consumers to ensure that these stakeholders are updated on Company investments and initiatives. Key electricity consumers also have dedicated Company contacts that support their important service needs.
The Company utilizes a number of communications channels and strategic content to serve and engage its many stakeholders. PNM’s website provides the details of major regulatory filings, including general rate requests, as well as the background on PNM’s efforts to maintain reliability, keep prices affordable, and protect the environment. The website is also a resource for information about PNM’s operations and community outreach efforts to customers on various topics such as education, outage alerts, safety, wildfire safety, customer service, community partnerships in philanthropic projects, and plans for building a sustainable energy future for New Mexico and to transition to a carbon-free generating portfolio. PNM also leverages social media to communicate about some of these topics with certain customers. TNMP’s website provides information on customized energy efficiency programs and TNMP rates, in addition to other community outreach information. As discussed above, TXNM’s corporate website includes a dedicated section providing additional information regarding the Company’s commitment to sustainability.
Throughout 2025, PNM held in-person community events focused on wildfire safety and educating customers about the PSPS process and wildfire mitigation efforts to protect the public. These gatherings are designed to share critical information, coordinate with local resources, and listen to feedback from local communities. PNM hosted four events in High Fire Risk Areas (“HFRA”) across New Mexico in 2025 and expects to host similar events in 2026. In addition, PNM included local emergency managers in its periodic meetings, referred to as “wildfire tabletops,” in 2025. Each of these engagements builds and strengthens our preparedness as a Company for wildfire prevention and response.
TXNM has a long tradition of supporting the communities that it serves in New Mexico and Texas. During the three years ended December 31, 2025, TXNM, through corporate giving, contributed $8.7 million to civic, educational, environmental, tribal, low income, and economic development organizations. Additionally, the PNM Resources Foundation (the “Foundation”) has provided an annual average of $1.2 million in grant funding over the past three years across New Mexico and Texas. Throughout 2025, the Foundation focused on grants for wellness and athletic activities within the community and grants for the environment. These grants help nonprofits innovate or sustain programs to grow and develop their missions, develop and implement environmental programs, and provide educational opportunities. The Foundation continues to expand its matching and volunteer grant programs and the annual amount of matching donations available to each of its employees. The Foundation has also approved an increase to the amount awarded to employees through the employee crisis management fund, which provides our employees with financial support for basic living needs during catastrophic emergencies and times of crises. PNM collaborated with community foundations to help support the effort and direct funds where they were most needed for those who have been affected by the wildfires, floods and hurricanes in surrounding communities in addition to supporting law enforcement and first responders.
TXNM recognizes its responsibility to support programs and organizations that enrich the quality of life across its service territories and seeks opportunities to further demonstrate its commitment in these areas as needs arise. In response to community needs, TXNM partners with other corporate funders to support nonprofits and small businesses. TXNM also collaborates on community projects, low-income customer assistance programs, and employee volunteerism.
PNM stands out as one of the few investor-owned utilities operating a tribal relations office, which is focused on serving and collaborating with 18 of the 23 sovereign nations in New Mexico and the Southwest. PNM created the Navajo Nation Workforce Training Scholarship Program to provide support for Navajo tribal members and to encourage the pursuit of education and training in existing and emerging jobs in the communities in which they live. PNM has invested in paid summer college engineering internship programs for American Indian students in the greater Albuquerque area, established the PNM Pueblo Education Scholarship and Endowment to invest in higher education for Native American Indian students, and supported the development of an entrepreneur complex located in Albuquerque and operated by the Indian Pueblo Cultural Center. PNM continues to partner with the Navajo Nation in the Light Up Navajo project, piloted in 2019 and modeled as a mutual aid project to connect Navajo homes without electricity to the power grid. PNM is one of 44 utilities across 16 states to participate in improving the quality of life for families by bringing electricity to over 700 homes since inception of the project. PNM has also partnered with New Mexico universities to enhance intern programs and developed a business coalition model to drive economic development through intern partnerships.
Employee volunteers are the lifeblood of a healthy corporate culture. Community giving through volunteers’ time and effort is at the heart of employee engagement. Throughout 2025, the Company held large-scale volunteer events, working alongside nonprofits, schools, and vulnerable communities throughout New Mexico and Texas. More than 640 employees in both states participated in the annual “Day of Service,” a workday event encouraging employee volunteerism and serving more
Table of Contents
than 40 organizations. Throughout the year, employees volunteer their time generously through independent volunteer activities and board participation. Employees strengthen community resilience by giving more than 4,000 volunteer hours each year to support the health, safety, and well-being of diverse communities.
Financial Focus
Earning Authorized Returns on Regulated Businesses
TXNM’s success in accomplishing its financial objectives is highly dependent on two key factors: fair and timely regulatory treatment for its utilities and the utilities’ strong operating performance. The Company has multiple strategies to achieve favorable regulatory treatment, all of which have as their foundation a focus on the basics: safety, operational excellence, and customer satisfaction, while engaging stakeholders to build productive relationships. Both PNM and TNMP seek cost recovery for their investments through general rate cases, periodic cost of service filings, and various rate riders. The rates PNM and TNMP charge customers are subject to traditional rate regulation by the NMPRC, FERC, and the PUCT. Additional information about rate filings is provided in Note 17.
Fair and timely rate treatment from regulators is crucial to PNM and TNMP in earning their allowed returns and critical for TXNM to achieve its financial objectives. TXNM believes that earning allowed returns is viewed positively by credit rating agencies and that improvements in the Company’s ratings could lower costs for utility customers.
State Regulation and Legislation
TNMP
In the 2023 and 2025 Texas Legislative sessions several bills were passed to support utility reliability and resiliency by encouraging and protecting utility infrastructure investments. Under the new legislation, TNMP filed its 2025-2027 SRP in August 2024 and filed an unopposed settlement with the PUCT in December 2024 that was approved with slight modifications in March 2025. Another bill directed ERCOT to develop reliability plans for the Permian Basin which resulted in the need for additional investments in the West Texas service territory. In 2025, HB 5247 was passed, which streamlines cost recovery for certain utilities, including TNMP, who continue to invest in the Permian Basin territory. HB 5247 allows for the offset of depreciation, property tax expenses, and carrying costs with alternative revenue, and recognition of a regulatory asset for qualifying investments that are not currently reflected in rates, until such time a single, annual proceeding can be filed to adjust non-fuel rates. These pieces of legislation demonstrate that Texas continues to encourage utility investment and prioritizes timely rate recovery. TNMP will look to prioritize investments aligned with these measures that improve the quality of service for current and future customers.
Beyond legislative actions, the regulatory framework in Texas strongly encourages investments into the grid by providing timely recovery through rate mechanisms outside of general rate cases. The PUCT has approved mechanisms that allow TNMP to recover capital invested in transmission and distribution projects without having to file a general rate case. The PUCT also approved rate riders that allow TNMP to recover amounts related to energy efficiency and third-party transmission costs. TNMP also has approximately 282,000 advanced meters across its service territory, the costs of which are being recovered through base rates.
TNMP Base Rate Review
In November 2025, TNMP filed the TNMP Base Rate Review with the PUCT, requesting recovery of $2.8 billion of rate base, a requested ROE of 10.4%, and a 47.54% equity ratio. The TNMP Base Rate Review also includes increases in operations and maintenance expenses that are not recovered through semi-annual TCOS and DCRF filings, excludes increases in interest expense resulting from refinancing of debt associated with the proposed Merger, and requests recovery of $20.5 million associated with Hurricane Beryl restoration costs over a five-year period. If approved by the PUCT, the new rates are expected to become effective in mid-2026. See Note 17.
PNM
The 2025 New Mexico Legislative session included several bills that were passed to support economic development, clean energy, grid modernization, and wildfire preparedness. Amongst the bills passed were companion bills: New Mexico Senate Bill 169 (the “Site Readiness Bill”) and New Mexico Senate Bill 170 (the “Power Readiness Bill”).
The Site Readiness Bill creates a dedicated funding mechanism and a structured process for identifying, assessing, and preparing strategic economic development sites across the state, designed to position New Mexico to compete with other states actively investing in site readiness. It appropriates approximately $24 million for the site readiness fund for site-characterization studies of proposed economic development sites and site preparations of strategic economic development sites. The Site Readiness Bill also creates the Strategic Economic Development Site Advisory Committee to advise the New Mexico Economic Development Department (“NMEDD”) in selecting sites and awarding funding. The Power Readiness Bill is
Table of Contents
intended to reduce risk, lead times, and regulatory uncertainty in acquiring additional generation resources and in building large-scale infrastructure needed to competitively serve economic development customers that create jobs. It allows a public utility to annually increase generation capacity by up to 10% of the public utility’s total system peak load. The Power Readiness Bill also shortens the time for regulatory approval of CCN filings for new, major infrastructure and allows a public utility to defer costs of economic development projects, placing them into a regulatory asset until a customer signs a contract or begins taking service. In December 2025, PNM filed an application for approval of two projects under the Power Readiness Bill; the Westpointe and Mesa Del Sol Substations (See Note 17).
The New Mexico Energy Transition Act (“ETA”)
The passage of the ETA amended the REA to require utilities operating in New Mexico to have renewable portfolios equal to 40% by 2025, 50% by 2030, 80% by 2040, and 100% zero-carbon energy by 2045. Those amendments also allow for the recovery of undepreciated investments and decommissioning costs related to qualifying EGUs that the NMPRC has required be removed from retail jurisdictional rates, provided replacement resources to be included in retail rates have lower or zero-carbon emissions. The ETA provides for a transition from fossil-fueled generating resources to renewable and other carbon-free resources by allowing utilities to issue Securitized Bonds related to the retirement of certain coal-fired generating facilities to qualified investors. See additional discussion of the ETA in Notes 16 and 17 and the issuance of the ETBC I Securitized Bonds in Note 7.
Grid Modernization Plan
On October 17, 2024, the NMPRC issued a final order approving PNM’s Grid Modernization Plan which will improve customers’ ability to customize their use of energy and benefit from the electricity grid consistent with the Grid Modernization Statute. PNM’s plan to modernize its electricity grid through infrastructure and technology improvements includes installing technology like smart meters and making distribution upgrades in low-income areas first in order to allow lower-income customers to gain insights into their energy usage to improve affordability and create fairer access to energy. The approved plan includes grid modernization investments of approximately $344 million for the first six years of a broader 11-year strategy. The approved rate rider will recover capital costs, operating expenses, and taxes associated with the investments included in the plan. In June 2025, the Grid Modernization Plan was updated to reflect an increase in investments from approximately $344 million to $367 million in the first six years and a decrease in projected operations and maintenance costs of approximately 18%. See Note 17.
Integrated Resource Plan
NMPRC rules require that investor-owned utilities file an IRP every three years. The IRP is required to cover a 20-year planning period and contain an action plan covering the first three years of that period. PNM’s accepted 2023 IRP maintains a continued focus on a carbon-free energy system by 2040. The plan highlights the need for a significant sustained addition of resources over the next two decades, replacing retiring or expiring capacity and meeting concurrent load growth, while reducing the carbon intensity of PNM’s portfolio.
In December 2024, PNM issued its 2029-2032 RFP for at least 900 MW of new energy resources to come online between 2029 and 2032, with at least 500 MW needed by 2030, and is anticipated to identify potential replacement resources for PNM’s current natural gas generation capacity as well as PNM’s ownership interest in Four Corners.
In the fourth quarter of 2025, PNM initiated its 2026 IRP process which will cover the 20-year planning period from 2026 through 2046. Consistent with historical practice, PNM is receiving public input from interested parties as part of this process. PNM expects to file its 2026 IRP with the NMPRC on or before September 1, 2026.
2028 Resource Application
On November 22, 2024, PNM filed an application with the NMPRC seeking approval of two 150 MW ESAs, a 167 MW PPA for the Valencia power plant, and a CCN for a 100 MW solar facility and a 30 MW battery, with a proposed additional 20 MW option, to be available to meet summer 2028 customer needs. On March 12, 2025, PNM and intervening parties filed an unopposed comprehensive stipulation with the NMPRC which supports approval of PNM’s application, including the proposed option to increase the 30 MW battery by an additional 20 MW. On June 26, 2025, the NMPRC approved the unopposed stipulation.
PNM Rate Riders and other
The NMPRC has approved PNM recovering fuel costs through the FPPAC, as well as rate riders for renewable energy, energy efficiency, and the TEP. These mechanisms allow for more timely recovery of investments. See Note 17.
Table of Contents
FERC Regulation
Rates PNM charges wholesale transmission customers are subject to traditional rate regulation by FERC. Rates charged to wholesale electric transmission customers, other than customers on the Western Spirit Line, are based on a formula rate mechanism pursuant to which rates for wholesale transmission service are calculated annually in accordance with an approved formula. The formula includes updating cost of service components, including investment in plant and operating expenses, based on information contained in PNM’s annual financial report filed with FERC, as well as including projected transmission capital projects to be placed into service in the following year. The projections included are subject to true-up. Certain items, including changes to return on equity and depreciation rates, require a separate filing to be made with FERC before being included in the formula rate.
Delivering At or Above Industry-Average Long-Term Earnings Growth
TXNM’s financial objective to deliver at or above industry-average long-term earnings growth enables investors to realize the value of their investment in the Company’s business. Earnings growth is based on ongoing earnings, which is a non-GAAP financial measure that excludes from GAAP earnings certain non-recurring, infrequent, and other items that are not indicative of fundamental changes in the earnings capacity of the Company’s operations. TXNM uses ongoing earnings to evaluate the operations of the Company and to establish goals, including those used for certain aspects of incentive compensation, for management and employees.
TXNM targets a dividend payout ratio in the 50% to 60% range of its ongoing earnings. The Board will continue to evaluate the dividend on an annual basis, considering sustainability and growth, capital planning, and industry standards. The Board approved the following increases in the indicated annual common stock dividend:
Approval Date
Percent Increase
December 2024
December 2025
Under the terms of the Merger Agreement, TXNM has agreed not to declare, set aside, make or pay any dividend or other distribution, payable in cash, stock, property or otherwise, with respect to any of its equity securities, or make any other actual, constructive or deemed dividend or distribution in respect of any of its equity securities (except (i) TXNM may continue the declaration and payment of regular quarterly cash dividends on TXNM common stock for each quarterly period ending after the date of the Merger Agreement, in an amount not to exceed $0.4275 in 2026, with usual record and payment dates for such quarterly dividends in accordance with past dividend practice, (ii) for any cash dividend or cash distribution by a wholly-owned subsidiary of TXNM to TXNM or another wholly-owned subsidiary of TXNM, and (iii) a “stub period” dividend to holders of record of TXNM common stock as of immediately prior to the Effective Time equal to the product of (1) the number of days from the record date for payment of the last quarterly dividend paid by TXNM prior to the Effective Time, multiplied by (2) a daily dividend rate determined by dividing the amount of the last quarterly dividend paid prior to the Effective Time by ninety-one).
Maintaining Investment Grade Credit Ratings
The Company is committed to maintaining investment grade issuer credit ratings in order to reduce the cost of debt financing and to help ensure access to credit markets, when required. On January 15, 2024, S&P revised TXNM, PNM, and TNMP’s outlook to stable from positive. See the subheading Liquidity included in the full discussion of Liquidity and Capital Resources below for the specific credit ratings for TXNM, PNM, and TNMP. All of the credit ratings issued by both Moody’s and S&P on the Company’s senior debt continue to be investment grade.
Economic Factors
TNMP – In 2025, TNMP experienced an increase in volumetric weather normalized retail load of 2.8% compared to 2024. Weather normalized demand-based load, excluding retail transmission consumers, increased 5.3% in 2025 compared to 2024. Data center load, including distribution and transmission, has increased 70.5% in 2025 compared to 2024.
PNM – In 2025, PNM experienced increases in weather normalized residential load of 0.1%, in commercial load of 1.0%, and in industrial load of 14.3% compared to 2024.
The Company is closely monitoring the impacts on the capital markets of various macroeconomic conditions, including actions by the Federal Reserve to address inflationary concerns or other market conditions, and geopolitical activity, including the potential impacts of tariffs. The Company has not experienced, nor does it expect to experience significant negative impacts to customer usage at PNM and TNMP resulting from these economic impacts. However, if current economic conditions worsen, the Company may be required to implement additional measures such as reducing or delaying operating and maintenance expenses and planned capital expenditures.
Table of Contents
Results of Operations
Net earnings attributable to TXNM were $151.4 million, or $1.48 per diluted share in the year ended December 31, 2025 compared to $242.2 million, or $2.67 per diluted share in 2024. Among other things, earnings in the year ended December 31, 2025, benefited from higher transmission and distribution rates at TNMP, higher volumetric and demand-based load at TNMP, impacts of revenues recorded under HB 5247 at TNMP, higher weather normalized retail load at PNM, increased revenue at PNM approved in the 2025 Rate Change and higher transmission margin at PNM. These increases were partially offset by higher operating expenses at PNM and TNMP, increased depreciation at PNM and TNMP due to increased plant in service, capacity arrangements at PNM, milder weather at PNM, and higher interest charges at PNM and TNMP. Additional information on factors impacting results of operations for each segment is discussed below under Results of Operations.
Liquidity and Capital Resources
As of December 31, 2025, TXNM, PNM, and TNMP had revolving credit facilities with capacities of $300.0 million, $440.0 million, and $300.0 million. Total availability for TXNM on a consolidated basis was $681.6 million at February 13, 2026. The Company utilizes these credit facilities and cash flows from operations to provide funds for both construction and operational expenditures. TXNM also has intercompany loan agreements with each of its subsidiaries. For additional details regarding the Company’s revolving credit facilities, see Note 7.
TXNM projects that its consolidated capital requirements, consisting of construction expenditures and dividends, will total $11.1 billion for 2026 - 2030. These construction expenditures may change due to incremental expenditures for new customer growth and other transmission and renewable energy expansion. TNMP’s investments support continued high growth in system demand across TNMP’s service territories and growing encouragement for infrastructure investments from the Texas legislature to support grid reliability and resilience. PNM’s capital initiatives include investments in transmission and distribution infrastructure to deliver clean energy, enhance customer satisfaction, and increase grid resilience. Construction expenditures also include investments proposed in PNM’s Grid Modernization Plan and TNMP’s SRP.
To fund capital spending requirements to meet growth that balances earnings goals, credit metrics and liquidity needs, the Company has entered into a number of other financing arrangements. For further discussion on these financing arrangements see Liquidity and Capital Resources discussion below as well as Note 7.
After considering the effects of these financings and the Company’s short-term liquidity position as of February 13, 2026, the Company has consolidated maturities of long-term and short-term debt aggregating $657.9 million in the period from January 1, 2026 through February 27, 2027. In addition to internal cash generation, the Company anticipates that it will be necessary to obtain additional long-term financing in the form of debt refinancing, new debt issuances, and/or new equity in order to fund its capital requirements during the 2026-2030 period. The Company currently believes that its internal cash generation, existing credit arrangements, and access to public and private capital markets will provide sufficient resources to meet the Company’s capital requirements for at least the next twelve months. As of December 31, 2025 and February 13, 2026, the Company was in compliance with its debt covenants.
RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the Consolidated Financial Statements and Notes thereto. Trends and contingencies of a material nature are discussed to the extent known. Also, refer to Disclosure Regarding Forward Looking Statements in Part I, Item 1 and to Risk Factors in Part I, Item 1A.
A summary of net earnings attributable to TXNM is as follows:
Year Ended December 31,
Change
(In millions, except per share amounts)
Net earnings attributable to TXNM
Average diluted common and common equivalent shares
Net earnings attributable to TXNM per diluted share
Table of Contents
The components of the changes in net earnings attributable to TXNM by segment are:
Change
(In millions)
TNMP
PNM
Corporate and Other
Net change
Information regarding the factors impacting TXNM’s operating results by segment are set forth below.
Segment Information
The following discussion is based on the segment methodology that TXNM’s management uses for making operating decisions and assessing performance of its various business activities. See Note 2 for more information on TXNM’s operating segments.
TNMP
Non-GAAP Financial Measures
TNMP defines utility margin as electric operating revenues less cost of energy, which consists of costs charged by third-party transmission providers. TNMP believes that utility margin provides a more meaningful basis for evaluating operations than electric operating revenues since all third-party transmission costs are passed on to consumers through a transmission cost recovery factor. Utility margin is not a financial measure required to be presented and is considered a non-GAAP measure. TNMP does not intend for utility margin to represent any financial measure as defined by GAAP however, the calculation of utility margin, as presented, most closely compares to gross margin as defined by GAAP. Reconciliations between utility margin and gross margin are presented below.
Year Ended December 31,
Change
(In millions)
Gross margin
Transmission and distribution costs
Depreciation and amortization
Utility margin
The following table summarizes the operating results for TNMP:
Year Ended December 31,
Change
(In millions)
Electric operating revenues
Cost of energy
Utility margin
Operating expenses
Depreciation and amortization
Operating income
Other income (deductions)
Interest charges
Segment earnings before income taxes
Income (taxes)
Segment earnings
Table of Contents
The following table shows total GWh sales, including the impacts of weather, by retail tariff consumer class and average number of consumers:
Year Ended December 31,
Percentage Change
Volumetric load (1) (GWh)
Residential
Commercial and other
Total volumetric load
Demand-based load (2) (MW)
Average retail consumers (thousands) (3)
(1) Volumetric load consumers are billed on KWh usage.
(2) Demand-based load includes consumers billed on a monthly KW peak and also includes retail transmission customers that are primarily billed under rate riders.
(3) TNMP provides transmission and distribution services to REPs that provide electric service to customers in TNMP’s service territories. The number of consumers above represents the customers of these REPs. Under TECA, consumers in Texas have the ability to choose any REP to provide energy.
Operating results – 2025 compared to 2024
The following table summarizes the significant changes to gross margin:
Year Ended December 31, 2025
Change
Gross margin:
(In millions)
Utility Margin (see below)
Depreciation and amortization (see below)
Other
Net Change
The following table summarizes the significant changes to utility margin:
Year Ended December 31, 2025
Change
Utility margin:
(In millions)
Transmission rate relief/load – Transmission cost of service rate increases in March 2024, September 2024, March 2025, and September 2025, partially offset by a decrease in ERCOT approved demand
Distribution rate relief – Distribution cost of service rate increases in July 2024, November 2024, June 2025, and December 2025
Volumetric-based consumer usage/load – Weather normalized KWh sales increased 2.8%; the average number of volumetric consumers increased 1.8%
Demand based consumer usage/load – Weather normalized demand-based MW sales for large commercial and industrial consumers excluding retail transmission customers increased 5.3%
Leap Year - Decrease in revenue due to additional day in 2024
Weather – Colder weather in the first and fourth quarters of 2025 was partially offset by milder weather in the second and third quarters of 2025
Impacts of revenues recorded under HB 5247 Note 17
Decrease in deferral of excess deferred income tax benefits refunded through base rates
Rate riders and other – Includes transmission cost recovery factor and energy efficiency rider which are partially offset in operating expenses
Net Change
Table of Contents
The following tables summarize the primary drivers for operating expenses, depreciation and amortization, other income (deductions), interest charges, and income taxes:
Year Ended December 31, 2025
Change
Operating expenses:
(In millions)
Higher employee related and outside services expenses partially offset by lower vegetation management expenses
Higher property taxes due to increased utility plant in service
Higher capitalization of administrative and general expenses due to higher construction expenditures
Higher allocated depreciation and amortization from Corporate and Other
Higher insurance premiums primarily related to wildfire risk
Regulatory settlement
Costs related to the Merger
Other
Net Change
Year Ended December 31, 2025
Change
Depreciation and amortization:
(In millions)
Increased utility plant in service
Other
Net Change
Other income (deductions):
Lower CIAC
Higher equity AFUDC
Interest on Texas Sales and Use Tax refund
Other
Net Change
Interest charges:
TNMP Merger Backstop Term Loan (Note 7)
Loss on reacquired debt
Interest on FMBs
Higher interest on transmission interconnection and security deposit arrangements
Lower interest on revolving short-term borrowings
Other
Net Change
Income (taxes):
Higher segment earnings before income taxes
Other
Net Change
Table of Contents
PNM
Non-GAAP Financial Measures
PNM defines utility margin as electric operating revenues less cost of energy, which consists primarily of fuel and purchase power costs. PNM believes that utility margin provides a more meaningful basis for evaluating operations than electric operating revenues since substantially all fuel and purchase power costs are offset in revenues as those costs are passed through to customers under PNM’s FPPAC. Utility margin is not a financial measure required to be presented and is considered a non-GAAP measure. PNM does not intend for utility margin to represent any financial measure as defined by GAAP however, the calculation of utility margin, as presented, most closely compares to gross margin as defined by GAAP. Reconciliations between utility margin and gross margin are presented below.
Year Ended December 31,
Change
(In millions)
Gross margin
Energy production costs
Transmission and distribution costs
Depreciation and amortization
Utility margin
The following table summarizes the operating results for PNM:
Year Ended December 31,
Change
(In millions)
Electric operating revenues
Cost of energy
Utility margin
Operating expenses
Depreciation and amortization
Operating income
Other income (deductions)
Interest charges
Segment earnings before income taxes
Income (taxes) benefits
Valencia non-controlling interest
Preferred stock dividend requirements
Segment earnings
The following table shows GWh sales, including the impact of weather, by customer class and average number of customers:
Year Ended December 31,
Percent Change
(Gigawatt hours, except customers)
Residential
Commercial
Industrial (1)
Public authority
Economy service (2)
Other sales for resale (3)
Average retail customer (thousands)
(1) Includes energy provided by PNM for renewable energy resources to match the energy and capacity requirements of the Meta data center. PNM purchases renewable energy which is passed through to Meta under a rate rider. A special service rate is applied to Meta’s energy consumption in those hours of the month when their consumption exceeds the energy production from the renewable resources.
(2) PNM purchases energy for a large customer on the customer’s behalf and delivers the energy to the customer’s location through PNM’s transmission system. PNM charges the customer for the cost of the energy as a direct pass through to the customer with only a minor impact in utility margin resulting from providing ancillary services.
(3) Includes sales for resale activity resulting from PNM’s participation in the EIM.
Table of Contents
Operating results – 2025 compared to 2024
The following table summarizes the significant changes to gross margin:
Year Ended December 31, 2025
Change
Gross margin:
(In millions)
Utility margin (see below)
Depreciation and amortization (see below)
Higher plant maintenance costs at Four Corners and gas fired plants, partially offset by lower costs at PVNGS
Higher employee related, outside services and vegetation management expenses, excluding administrative costs
Other
Net Change
The following table summarizes the significant changes to utility margin:
Year Ended December 31, 2025
Change
Utility margin:
(In millions)
Retail customer usage/load – Weather normalized retail KWh sales increased 0.1% for residential customers, 1.0% for commercial customers, and 14.3% for industrial customers
Weather – Milder weather in 2025
Leap Year - Decrease in revenue due to additional day in 2024
Transmission – Increase in revenues due to higher formula rates partially offset by lower market prices and volumes and an EPE refund in 2024
Rate relief – Increase in revenue approved in 2025 Rate Change
Capacity arrangements – Additional energy storage agreements starting in the fourth quarter of 2024 and sales agreements in 2024, partially offset with sales agreement in 2025
Rate riders and other – Includes renewable energy, FPPAC, energy efficiency, energy transition charge, and transportation electrification riders which are partially offset in operating expenses, depreciation and amortization, other income (deductions), and interest charges
Net Change
Table of Contents
The following tables summarize the primary drivers for operating expenses, depreciation and amortization, other income (deductions), interest charges, and income taxes:
Year Ended December 31, 2025
Change
Operating expenses:
(In millions)
Higher costs at Four Corners and gas fired plants
Higher property taxes associated with increased utility plant in service
Unrecoverable portion of San Juan Coal Mine reclamation remeasurement related to the capped surface mine liability (Note 16)
Unrecoverable portion of Four Corners Coal Mine reclamation remeasurement related to the capped surface mine liability (Note 16)
Higher allocated depreciation and amortization expense from Corporate and Other
Higher employee related, outside services, and vegetation management expenses
Higher capitalization of administrative and general expenses due to higher construction expenditures
Higher allocated charitable contributions from Corporate and Other related to the 2025 Rate Request
Higher insurance premiums primarily related to wildfire risk
Higher costs associated with rate riders included in utility margin
Other
Net Change
Depreciation and amortization:
Increased utility plant in service
Amortization related to ETBC I Securitized Costs, offset in utility margin
Net Change
Other income (deductions):
Increased performance on investment securities in the NDT and coal mine reclamation trusts
Lower interest income and higher trust expenses related to investment securities in the NDT and coal mine reclamation trust
Lower equity AFUDC
Pension settlement charge (Note 11)
Higher non-service post-retirement benefit costs
Interest related to the 2024 NTEC agreement (Note 16)
Other
Net Change
Interest charges:
Higher interest on term loans
Higher interest related to remarketed PCRBs in June 2024
Higher interest on revolving short-term borrowings
Interest on SUNs
Lower interest on transmission interconnection and security deposit arrangements
Higher debt AFUDC
Other
Net Change
Table of Contents
Year Ended December 31, 2025
Change
Income (taxes):
(In millions)
Lower segment earnings before income taxes
Higher amortization of federal excess deferred income taxes
Impacts of lower equity AFUDC
Lower tax credits
Other
Net Change
Corporate and Other
The table below summarizes the operating results for Corporate and Other:
Year Ended December 31,
Change
(In millions)
Total revenues
Cost of energy
Utility margin
Operating expenses
Depreciation and amortization
Operating income (loss)
Other income (deductions)
Interest charges
Segment earnings (loss) before income taxes
Income (taxes) benefits
Segment earnings (loss)
Corporate and Other operating expenses shown above are net of amounts allocated to PNM and TNMP under shared services agreements. The amounts allocated include certain expenses shown as depreciation and amortization and other income (deductions) in the table above. The change in operating expenses includes an increase of $15.4 million in costs related to the Merger that were not allocated to PNM or TNMP. Substantially all depreciation and amortization expense are offset in operating expenses as a result of allocation of these costs to other business segments.
Operating results – 2025 compared to 2024
The following tables summarize the primary drivers for other income (deductions), interest charges, and income taxes:
Year Ended December 31, 2025
Change
Other income (deductions):
(In millions)
Sale of NMRD equity method investment in 2024
Higher charitable contributions allocated to PNM
Other
Net Change
Interest charges:
Issuance of $550.0 million Convertible Notes in 2024
Issuance of $350.0 million TXNM 2025 Junior Subs
Lower interest on short-term borrowings
Lower interest on term loans
Other
Net Change
Table of Contents
Year Ended December 31, 2025
Change
Income (taxes) benefits:
(In millions)
Lower segment loss before income taxes
Investment tax credits related to the sale of NMRD in 2024
Other
Net Change
LIQUIDITY AND CAPITAL RESOURCES
Statements of Cash Flows
The information concerning TXNM’s cash flows is summarized as follows:
Year Ended December 31,
Change
Net cash flows from:
(In millions)
Operating activities
Investing activities
Financing activities
Net change in cash and cash equivalents
Cash Flows from Operating Activities
Changes in TXNM’s cash flow from operating activities result from net earnings, adjusted for items impacting earnings that do not provide or use cash. See Results of Operations above. Certain changes in assets and liabilities resulting from normal operations, including the effects of the seasonal nature of the Company’s operations, also impact operating cash flows.
Cash Flows from Investing Activities
The changes in TXNM’s cash flows from investing activities relate primarily to changes in utility plant additions. Cash flows from investing activities include purchases and sales of investment securities in the NDT, SJGS decommissioning trust, and coal mine reclamation trusts as well as the sale of NMRD on February 27, 2024.
Major components of TXNM’s cash inflows and (outflows) from investing activities are shown below:
Year Ended December 31,
Change
Cash (Outflows) for Utility Plant Additions
(In millions)
PNM:
Generation
Renewables
Transmission and distribution
Nuclear fuel
TNMP:
Transmission
Distribution
Corporate and Other:
Computer hardware and software
General services, building, and other
Other Cash Flows from Investing Activities
Proceeds from sale of plant assets (Note 8)
Proceeds from sales of investment securities
Purchases of investment securities
Proceeds from sale of NMRD
Investments in NMRD
Other, net
Net cash flows from investing activities
Table of Contents
Cash Flow from Financing Activities
The changes in TXNM’s cash flows from financing activities include:
• Short-term borrowings decreased $427.9 million in 2025 compared to an increase of $347.4 million in 2024, resulting in a net decrease in cash flows from financing activities of $775.3 million in 2024
• In 2025, TNMP issued $140.0 million aggregate principal amount of TNMP February 2025 Bonds and used the proceeds to repay borrowings under the TNMP Revolving Credit Facility, to fund capital expenditures, and for other corporate purposes
• In 2025, TNMP offered to prepay an aggregate $1,505.0 million of outstanding TNMP FMBs as a result of the signing of the Merger Agreement. TNMP drew $1,084.3 million on the TNMP Merger Backstop Term Loan to fund the prepayment of the validly-tendered bonds
• In 2025, TNMP issued the TNMP July 2025 FMBs to institutional investors and used the proceeds to repay the $1,084.3 million drawn under the TNMP Merger Backstop Term Loan
• In 2025, TNMP issued $70.0 million aggregate principal amount of TNMP November 2025 Bonds and used the proceeds to repay borrowings under the TNMP Revolving Credit Facility, to fund capital expenditures, and for other corporate purposes
• In 2025, PNM entered into the PNM 2025 Term Loan for $195.0 million and used the proceeds to repay borrowings under the PNM Revolving Credit Facility, the PNM New Mexico Credit Facility, and for other corporate purposes
• In 2025, PNM issued $300.0 million aggregate principal amount of PNM April 2025 SUNs and used the proceeds to repay existing indebtedness, including the $104.0 million of SUNs that were due in May 2025, to fund capital expenditures, and for other corporate purposes
• In 2025, PNM issued $350.0 million aggregate principal amount of PNM July 2025 SUNs and used the proceeds to repay existing indebtedness, including the $250.0 million of SUNs that were due in August 2025, and for other corporate purposes
• In 2025, PNM entered into the PNM November 2025 Term Loan for $120.0 million and used the proceeds to partially repay existing indebtedness due under the PNM 2024 Term Loan
• In 2025, TXNM physically settled all remaining shares under the TXNM 2024 ATM Program by issuing 1.1 million shares of TXNM common stock aggregating net proceeds of $49.6 million that were used to repay borrowings under the TXNM Revolving Credit Facility
• In 2025, TXNM repaid $51.0 million in borrowings under the TXNM 2021 Delayed Draw Term Loan
• In 2025, TXNM sold 8,000,000 shares of TXNM common stock in a private placement transaction aggregating $400.0 million and used the proceeds to make cash equity contributions to TNMP, to repay borrowings under the TXNM Revolving Credit Facility, and for other corporate purposes
• In 2025, TXNM sold 3,615,003 shares of TXNM common stock in a private placement transaction aggregating $200.0 million and used the proceeds to repay an equal amount of the TXNM 2023 Term Loan
• In 2025, TXNM issued 3,542,377 shares of TXNM common stock sold under the TXNM 2025 ATM Program, aggregating net proceeds of $198.0 million that was used to repay borrowings under the TXNM Revolving Credit Facility and for other corporate purposes
• In 2025, TXNM repaid the remaining $210.0 million in borrowings under the TXNM 2023 Term Loan
• In 2025, TXNM issued $350.0 million in TXNM 2025 Junior Subs and used the proceeds to fund the cash equity contribution to PNM of $123.3 million, to repay borrowings under the TXNM Revolving Credit Facility, and for other corporate purposes
Financing Activities
See Note 7 for additional information concerning the Company’s financing activities. PNM must obtain NMPRC approval for any financing transaction having a maturity of more than 18 months. In addition, PNM files its annual informational financing filing and short-term financing plan with the NMPRC. The Company’s ability to access the credit and capital markets at a reasonable cost is largely dependent upon its:
• Ability to earn a fair return on equity
• Results of operations
• Ability to obtain required regulatory approvals
• Conditions in the financial markets
• Credit ratings
The Company is closely monitoring the impacts on the capital markets of other macroeconomic conditions, including actions by the Federal Reserve to address inflationary concerns or other market conditions, and geopolitical activity. The Company currently believes it has adequate liquidity but cannot predict the effects of any of these macroeconomic conditions on the global, national, or local economy, including the Company’s ability to access capital in the financial markets, or on the Company’s financial position, results of operations, and cash flows.
Table of Contents
Each of the Company’s revolving credit facilities and term loans contain a single financial covenant that requires the maintenance of a debt-to-capitalization ratio. For the TXNM agreements, this ratio must be maintained at less than or equal to 70%, and for the PNM and TNMP agreements, this ratio must be maintained at less than or equal to 65%. The Company’s revolving credit facilities, term loans, and other debt agreements generally also contain customary covenants, events of default, cross-default provisions, and change-of-control provisions. The Company is in compliance with its debt covenants.
On January 21, 2025, PNM entered into the $195.0 million PNM 2025 Term Loan. PNM used the proceeds of the PNM 2025 Term Loan to repay borrowings under the PNM Revolving Credit Facility, the PNM New Mexico Credit Facility, and for general corporate purposes. The PNM 2025 Term Loan bears interest at a variable rate, which was 4.73% at December 31, 2025, and must be repaid on or before July 21, 2026.
On February 14, 2025, TNMP entered into the TNMP February 2025 Bond Purchase Agreement with institutional investors for the sale of $140.0 million aggregate principal amount of its 5.19% TNMP February 2025 Bonds offered in private placement transactions. On February 14, 2025, TNMP issued all $140.0 million of the TNMP February 2025 Bonds, due April 1, 2031. The proceeds were used to repay borrowings under the TNMP Revolving Credit Facility, for funding of capital expenditures, and for other corporate purposes.
On April 23, 2025, PNM entered into the PNM April 2025 Note Purchase Agreement with institutional investors for the sale and issuance of $300.0 million aggregate principal amount of two series of the PNM April 2025 SUNs, offered in private placement transactions. On April 23, 2025, PNM issued $125.0 million of the PNM April 2025 SUNs at 5.75%, due June 1, 2032, and $175.0 million of the PNM April 2025 SUNs at 6.13%, due June 1, 2037. Proceeds from the PNM April 2025 SUNs were used for the repayment of existing indebtedness, funding of capital expenditures, and other corporate purposes.
On May 16, 2025, TXNM paid the $51.0 million remaining balance due under its TXNM 2021 Delayed Draw Term Loan in accordance with its terms.
In May 2024, TXNM entered into the TXNM 2024 ATM Program pursuant to which TXNM may sell, from time to time, up to an aggregate amount of $100.0 million of its common stock. In August 2024, subsequent to approval by shareholders to increase TXNM’s authorized shares, the Company increased the aggregate sales amount from $100.0 million to $300.0 million of its common stock, no par value, that may be sold under the TXNM 2024 ATM Program. Throughout 2024, TXNM entered into forward sale agreements with forward purchasers, for the sale of 3,563,592 shares of TXNM common stock. TXNM did not receive any proceeds upon the execution of this agreement and, except in certain specified circumstances, has the option to elect physical, cash, or net share settlement of the forward sale agreement on or before a date that is 12 months from the agreement effective dates. On December 30, 2024, TXNM physically settled forward purchases under the TXNM 2024 ATM Program for 2,458,951 shares, receiving $98.6 million in cash proceeds, and used those proceeds to repay borrowings under the TXNM Revolving Credit Facility. On May 27, 2025, TXNM physically settled all remaining shares under the TXNM 2024 ATM Program by issuing 1,104,641 shares, receiving $49.6 million in cash proceeds, and used those proceeds to repay borrowings under the TXNM Revolving Credit Facility. Following this settlement, no additional shares of TXNM’s common stock remain subject to future settlement under the TXNM 2024 ATM Program.
On May 18, 2025, the execution of the Merger Agreement constituted a “Change of Control” under certain TXNM and TNMP debt agreements. Under each of the specified debt agreements, a “Change of Control” constitutes an “Event of Default,” pursuant to which the lender parties thereto had the right to accelerate the indebtedness under the debt agreements. On December 19, 2025, in connection with exercising the available extension options (see Note 7), TXNM and TNMP entered into additional amendments in connection with the TXNM Revolving Credit Facility and the TNMP Revolving Credit Facility to amend the definition of Change of Control to not include the closing of the Merger. The definitions of Change of Control under the PNM debt agreements and PNM note purchase agreements will not be triggered by the closing of the Merger.
On May 18, 2025, TXNM entered into the May 2025 Stock Purchase Agreement, whereby TXNM sold, in a private placement transaction, 8,000,000 shares of TXNM common stock for a purchase price of $50.00 per share (aggregating $400.0 million). The consummation of the May 2025 Stock Purchase Agreement occurred on June 2, 2025. TXNM used the proceeds to make cash equity contributions to TNMP, to repay borrowings under the TXNM Revolving Credit Facility, and for general corporate purposes.
To ensure sufficient liquidity pending the Lender Consents (Note 7), on May 18, 2025, TXNM entered into the $910.0 million 364-day TXNM Merger Backstop Revolving Facility to provide liquidity in the event TXNM was unable to obtain the Lender Consents. On May 19, 2025, TXNM borrowed approximately $4 million under the TXNM Merger Backstop Revolving Facility and subsequently repaid the entire balance by May 21, 2025. The TXNM Merger Backstop Revolving Facility expired according to its terms as TXNM did not make any additional borrowings thereunder by the commitment termination date of May 23, 2025, and TXNM was able to obtain the necessary Lender Consents.
On May 18, 2025, concurrent with the execution of the TXNM Merger Backstop Revolving Facility, TNMP entered into the $1,505.0 million, 364-day TNMP Merger Backstop Term Loan to provide liquidity to repurchase TNMP’s FMBs that were tendered for prepayment pursuant to the Offer (defined below). Borrowings under the TNMP Merger Backstop Term
Table of Contents
Loan were short-term in nature and bore interest at a variable rate. As discussed below, on July 21, 2025, TNMP issued the TNMP July 2025 FMBs and used the proceeds to repay the outstanding principal balance under the TNMP Merger Backstop Term Loan on July 22, 2025, terminating that agreement.
The documents governing an aggregate $1,505.0 million of TNMP’s outstanding FMBs (“TNMP FMBs”) obligated TNMP to offer (the “Offer”), within 30 business days following the signing of the Merger Agreement, to prepay all outstanding TNMP FMBs at 100% of the principal amount, plus accrued and unpaid interest thereon, but without any make-whole amount or other premium. On June 14, 2025, the Offer expired and $1,084.3 million in aggregate principal amount of the bonds were validly tendered. On June 24, 2025, holders whose bonds were validly tendered and accepted for purchase received 100% of the aggregate principal amount of bonds prepaid plus accrued and unpaid interest using funds drawn under the TNMP Merger Backstop Term Loan. On November 6, 2025, TNMP entered into an agreement and supplemental indenture to amend the documents governing $417.7 million of TNMP FMBs. The supplemental indenture amends the requirement for TNMP to provide certain financial reports and amends the definition of change of control such that TNMP will no longer be required to make an offer to prepay the aggregate $417.7 million TNMP FMBs upon closing of the Merger.
The documents governing an aggregate $3.0 million of TNMP FMBs still require TNMP to make another offer, within 30 business days of closing of the Merger, to prepay all those $3.0 million remaining outstanding TNMP FMBs at par. TNMP will make such offer to prepay the TNMP FMBs in accordance with the terms of the TNMP FMBs; however, holders of the TNMP FMBs are not required to tender their TNMP FMBs and may accept or reject such offer to prepay.
The information in this Form 10-K is for informational purposes only and is neither an offer to purchase, nor a solicitation of an offer to sell, subscribe for or buy any securities in any jurisdiction pursuant to the proposed transactions or otherwise, nor shall there be any sale, issuance or transfer of securities in any jurisdiction in contravention of applicable law. Similar to the offer to prepay made after signing the Merger Agreement, the post-Merger closing offer to prepay the TNMP FMBs will be made only pursuant to an offer to prepay, which will set forth the terms and conditions of the offer to prepay.
On June 24, 2025, TXNM entered into the June 2025 Stock Purchase Agreement whereby TXNM sold, and the purchasers named therein agreed to purchase 3,615,003 shares of TXNM common stock for a purchase price of $55.325 per share (for an aggregate amount of approximately $200 million). The closing of the issuance occurred on June 27, 2025. TXNM used the proceeds to repay an equal amount due under the TXNM 2023 Term Loan. TXNM granted the purchasers customary registration rights with respect to the shares, pursuant to which TXNM was required to register such shares for resale with the SEC. On August 8, 2025, TXNM registered the shares for resale.
On July 21, 2025, TNMP entered into the TNMP July 2025 Bond Purchase Agreement with institutional investors for the sale of $1,084.3 million aggregate principal amount of six series of TNMP July 2025 FMBs offered in private placement transactions. On July 21, 2025, TNMP issued all $1,084.3 million of the TNMP July 2025 FMBs and the proceeds were used to repay borrowings under the TNMP Merger Backstop Term Loan. See Note 7 for the terms of the TNMP July 2025 FMBs.
On July 31, 2025, PNM entered into the PNM July 2025 Note Purchase Agreement with institutional investors for the sale and issuance of $350.0 million aggregate principal amount of two series of the PNM July 2025 SUNs offered in private placement transactions. On July 31, 2025, PNM issued $200.0 million of the PNM July 2025 SUNs at 5.47%, due July 31, 2031, and $150.0 million at 6.03%, due July 31, 2036. PNM used the proceeds from the PNM July 2025 SUNs to repay the PNM $250.0 million SUNs and for other corporate purposes.
On August 15, 2025, TXNM entered into a distribution agreement (the “Distribution Agreement”) pursuant to which the Company may sell, from time to time, up to an aggregate sales price of $200.0 million of its common stock, no par value, through the sales agents (the “TXNM 2025 ATM Program”). Sales of the shares made pursuant to the Distribution Agreement, if any, may be made in “at the market offerings” as defined in Rule 415 of the Securities Act. TXNM did not initially receive any proceeds upon the execution of this agreement. Beginning on August 15, 2025, TXNM, pursuant to the TXNM 2025 ATM Program, sold an aggregate of 3,542,377 shares of TXNM common stock under the Distribution Agreement for net cash proceeds of $198.0 million. TXNM used the proceeds to repay borrowings under the TXNM Revolving Credit Facility and for other corporate purposes.
On August 29, 2025, TXNM paid the $210.0 million remaining balance due under its TXNM 2023 Term Loan in accordance with its terms, which terminated the agreement.
On November 10, 2025, PNM entered into the $120.0 million PNM November 2025 Term Loan. PNM used the proceeds of the PNM November 2025 Term Loan to repay a portion of the borrowings outstanding under the PNM 2024 Term Loan. The PNM November 2025 Term Loan bears interest at a variable rate, which was 4.67% at December 31, 2025, and must be repaid on or before May 10, 2027.
On November 18, 2025, TNMP entered into the TNMP November 2025 Bond Purchase Agreement with institutional investors for the sale of $70.0 million aggregate principal amount of its 4.69% TNMP November 2025 FMBs offered in private placement transactions. On December 18, 2025, TNMP issued all $70.0 million TNMP November 2025 FMBs at a 4.69%
Table of Contents
interest rate, due December 18, 2031. The proceeds were used to repay borrowings under the TNMP Revolving Credit Facility and for other corporate purposes.
On December 10, 2025, TXNM issued $350.0 million aggregate principal amount of its TXNM 2025 Junior Subs. The TXNM 2025 Junior Subs rank equally in right of payment to the $550.0 million 5.75% Convertible Notes. The TXNM 2025 Junior Subs bear interest at a rate of 7.000% per year, payable semi-annually in arrears on January 31 and July 31 (subject to TXNM’s right to defer interest payments) and mature on July 31, 2056, unless earlier redeemed in accordance with their terms. Proceeds from the TXNM 2025 Junior Subs were used to fund the cash equity contribution to PNM of $123.3 million, to repay borrowings under the TXNM Revolving Credit Facility, and for other corporate purposes. See Note 7 for details related to the interest rate reset and redemption options.
Capital Requirements
TXNM’s total capital requirements consist of construction expenditures, cash dividend requirements for TXNM common stock and PNM preferred stock.
Key activities in TXNM’s current construction program include:
• Investments in transmission and distribution infrastructure
• Upgrading generation resources and delivering clean energy
• Purchasing nuclear fuel
Projected capital requirements for 2026-2030 are:
Total
(In millions)
Construction expenditures
Dividends on TXNM common stock
Dividends on PNM preferred stock
Total capital requirements
The construction expenditure estimates are under continuing review and subject to ongoing adjustment, as well as to Board review and approval. The construction expenditures above include TNMP’s investments to support continued high growth in system demand across TNMP’s service territories and growing encouragement for infrastructure investments from the Texas legislature to support grid reliability and resilience. PNM’s capital initiative that includes investments in transmission and distribution infrastructure to deliver clean energy, enhance customer satisfaction, and increase grid resilience. Construction expenditures also include investments included in PNM’s Grid Modernization Plan and TNMP’s SRP. These investments provide for a more resilient, reliable, efficient, and decarbonized electric system. Construction expenditures included in the table above may change due to incremental expenditures for new customer growth in New Mexico and Texas, and other transmission and renewable energy expansion in New Mexico. The ability of TXNM to pay dividends on its common stock is dependent upon the ability of PNM and TNMP to pay dividends to TXNM. See Note 6 for a discussion of regulatory and contractual restrictions on the payment of dividends by PNM and TNMP.
During the year ended December 31, 2025, TXNM met its capital requirements and construction expenditures through cash generated from operations, as well as its liquidity arrangements and the borrowings discussed in Financing Activities above.
In addition to the capital requirements for construction expenditures and dividends, the Company has long-term debt and term loans that must be paid or refinanced at maturity. PNM has $3.6 million and $3.7 million in scheduled principal payments due for the ETBC I Securitized Bonds in February and August 2026. PNM also has $195.0 million under the PNM 2025 Term Loan due in July 2026 and $100.3 million of 0.875% PCRBs with a mandatory tender date of October 1, 2026. See Note 7 for additional information about the Company’s long-term debt and equity arrangements. The Company may also enter into new arrangements similar to the existing agreements, borrow under the revolving credit facilities, issue new long-term debt or equity in the public or private capital markets, or a combination of these sources. The Company has from time to time refinanced or repurchased portions of its outstanding debt before scheduled maturity. Depending on market conditions, the Company may refinance other debt issuances or make additional debt repurchases in the future.
Other Material Cash Requirements
In addition to the cash requirements for construction requirements and long-term debt discussed above, the Company has other material cash requirements related to long-term contractual obligations including minimum lease payments (Note 8), coal contracts, coal mine reclamation, nuclear decommissioning, SJGS plant decommissioning (Note 16), and pension and retiree medical contributions (Note 11).
Table of Contents
Interest on long-term debt, excluding ETBC I Securitized Bonds
Interest accrues on long-term debt agreements, at fixed rates, with the passage of time, and is typically paid semi-annually in accordance with the terms of the debt agreement. Provided that these long-term debt agreements are not prepaid or refinanced before their expected maturities, payments of interest are expected to total $238.1 million in 2026, $469.6 million in 2027 and 2028, $433.4 million in 2029 and 2030, and $2.4 billion in 2031 and thereafter.
Scheduled payments on ETBC I Securitized Bonds
The ETBC I Securitized Bonds are subject to fixed, scheduled, principal and interest payment arrangements that are paid semi-annually in accordance with the terms of the agreement and are funded by the energy transition charge billed to customers. See Note 16. Principal payments are expected to total $7.3 million for 2026, $15.9 million for 2027 and 2028, $17.8 million for 2029 and 2030, and $292.8 million for 2031 and thereafter. Interest payments are expected to total $19.4 million for 2026, $37.5 million for 2027 and 2028, $35.6 million for 2029 and 2030, and $187.4 million for 2031 and thereafter.
Transmission service arrangements
PNM owns transmission lines that are interconnected with other utilities in Arizona and Texas. PNM has executed long-term contracts with these other utilities to receive service for the transmission of energy owned by PNM utilizing the third-party transmission facilities. PNM generally receives transmission services, which are regulated by FERC, from a third-party through the other utilities’ OATT or a specific contract. PNM has reserved firm capacity on a long-term basis and is committed under the terms of the contracts. These contracted obligations total $17.3 million in 2026, $16.5 million in 2027, $11.4 million in 2028 and, $3.7 million in 2029.
Technology outsourcing
The Company has other technology services under long-term contracts. The obligations under these contracts total $8.2 million for 2026 and $15.6 million for 2027 and 2028.
Liquidity
TXNM’s liquidity arrangements include the $300.0 million TXNM Revolving Credit Facility, the $400.0 million PNM Revolving Credit Facility, and the $300.0 million TNMP Revolving Credit Facility. Each of these facilities had an original maturity date of March 30, 2029, and contained two one-year extension options that, if exercised, would extend the maturity to March 2031, subject to approval by a majority of the lenders. On December 19, 2025, TNMP amended the TNMP Revolving Credit Facility to increase the capacity from $200.0 million to $300.0 million, secured by $300.0 million aggregate principal amount of TNMP first mortgage bonds and exercised the first of two one-year extension options, extending the maturities for each of the facilities to March 29, 2030. One lender in each of the revolving credit facilities failed to agree to the extension and as a result, effective March 30, 2029, the TXNM Revolving Credit Facility capacity will adjust to $265.4 million, the PNM Revolving Credit Facility capacity will adjust to $354.1 million, and the TNMP Revolving Credit Facility capacity will adjust to $277.0 million. PNM also has the $40.0 million PNM New Mexico Credit Facility. On July 25, 2025, PNM amended its PNM New Mexico Credit Facility to, among other things, extend the maturity from May 20, 2026 to May 31, 2030. Variable interest rates under the TXNM, PNM, and TNMP revolving credit facilities, including the PNM New Mexico Credit Facility, are based on SOFR. The Company believes the terms and conditions of these facilities are consistent with those of other investment grade revolving credit facilities in the utility industry. The Company expects that it will be to extend or replace these credit facilities under similar terms and conditions prior to their expirations.
The revolving credit facilities and the PNM New Mexico Credit Facility provide short-term borrowing capacity. The revolving credit facilities also allow letters of credit to be issued. Letters of credit reduce the available capacity under the facilities. The Company utilizes these credit facilities and cash flows from operations to provide funds for both construction and operational expenditures. The Company’s business is seasonal with more revenues and cash flows from operations being generated in the summer months. In general, the Company relies on the credit facilities to be the initial funding source for construction expenditures. Accordingly, borrowings under the facilities may increase over time. Depending on market and other conditions, the Company will periodically sell long-term debt and use the proceeds to reduce the borrowings under the credit facilities. Information regarding the range of borrowings for each facility is as follows:
Three Months Ended
Year Ended December 31
December 31, 2025
Range of Borrowings
Low
High
Low
High
Low
High
(In millions)
PNM:
PNM Revolving Credit Facility
PNM New Mexico Credit Facility
TNMP Revolving Credit Facility
TXNM Revolving Credit Facility
Table of Contents
At December 31, 2025, the weighted average interest rates were 5.04% for the PNM Revolving Credit Facility, 5.08% for the PNM New Mexico Credit Facility, and 5.16% for the TXNM Revolving Credit Facility. There were no borrowings outstanding under the TNMP Revolving Credit Facility at December 31, 2025.
The Company currently believes that its capital requirements for at least the next twelve months can be met through internal cash generation, existing, extended, or new credit arrangements, and access to public and private capital markets as discussed above and in Note 7. The Company anticipates that it will be necessary to obtain additional long-term financing to fund its capital requirements and to balance its capital structure during the 2026 – 2030 period. This could include new debt and/or equity issuances. To cover the difference in the amounts and timing of internal cash generation and cash requirements, the Company intends to use short-term borrowings under its current and future liquidity arrangements or other short-term loans. Market conditions, such as rising interest rates, may raise the cost of borrowing under the Company’s current and future liquidity arrangements or other variable debt. In addition, if market conditions worsen, the Company may not be able to access the capital markets or renew credit facilities when they expire. Should that occur, the Company would seek to improve cash flows by reducing capital expenditures and exploring other available alternatives.
Currently, all of the credit ratings issued by both Moody’s and S&P on the Company’s senior debt are investment grade. As of December 31, 2025, Moody’s and S&P’s outlook is stable for all entities. In its May 2025 credit opinion, S&P commented that they view the proposed Merger as credit supportive. In its June 2025 credit opinion, Moody’s commented that the announced terms of the proposed Merger are not expected to adversely affect the ratings or outlooks of TXNM or its two utility subsidiaries. Investors are cautioned that a security rating is not a recommendation to buy, sell, or hold securities, that each rating is subject to revision or withdrawal at any time by the rating organization, and that each rating should be evaluated independently of any other rating.
As of February 13, 2026, ratings on the Company’s securities were as follows:
TXNM
PNM
TNMP
Issuer rating
BBB
BBB
BBB+
Senior secured debt
Senior unsecured debt
BBB-
BBB
Junior subordinated debt
Preferred stock
Moody’s
Issuer rating
Baa3
Baa2
Baa1
Senior secured debt
Senior unsecured debt
Baa3
Baa2
Junior subordinated debt
* Not applicable
A summary of liquidity arrangements as of February 13, 2026, is as follows:
PNM
TNMP
TXNM
Separate
TXNM
Consolidated
(In millions)
Financing capacity:
Revolving Credit Facility
PNM New Mexico Credit Facility
Total financing capacity
Amounts outstanding as of February 13, 2026:
Revolving Credit Facility
PNM New Mexico Credit Facility
Letters of credit
Total short-term debt and letters of credit
Remaining availability as of February 13, 2026
Invested cash as of February 13, 2026
In addition to the above, TXNM has $19.3 million of letters of credit outstanding under the WFB LOC Facility. The above table excludes intercompany debt. As of February 13, 2026, neither PNM nor TNMP had any intercompany borrowings outstanding from TXNM. As of February 13, 2026, PNMR Development had $16.0 million in intercompany borrowings outstanding from TXNM. The remaining availability under the revolving credit facilities at any point in time varies based on a number of factors, including the timing of collections of accounts receivables and payments for construction and operating expenditures.
Table of Contents
TXNM has an automatic shelf registration that provides for the issuance of various types of debt and equity securities that expires February 2028.
Off-Balance Sheet Arrangements
TXNM has no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on its financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.
Contingent Provisions of Certain Obligations
TXNM, PNM, and TNMP have a number of debt obligations and other contractual commitments that contain contingent provisions. Some of these, if triggered, could affect the liquidity of the Company. In the unlikely event that the contingent requirements were to be triggered, TXNM, PNM, or TNMP could be required to provide security, immediately pay outstanding obligations, or be prevented from drawing on unused capacity under certain credit agreements. The most significant consequences resulting from these contingent requirements are detailed in the discussion below.
The TXNM Revolving Credit Facility, PNM Revolving Credit Facility, PNM New Mexico Credit Facility, and the TNMP Revolving Credit Facility contain “ratings triggers,” for pricing purposes only. If TXNM, PNM, or TNMP is downgraded or upgraded by the ratings agencies, the result would be an increase or decrease in interest cost. The TXNM facility requires that TXNM is 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 the PNM and TNMP facilities. If these ratios were exceeded, the entity could be required to repay all borrowings under its facility, be prevented from borrowing on the unused capacity under the facility and be required to provide collateral for all outstanding letters of credit issued under the facility.
PNM’s standard purchase agreement for the procurement of natural gas for its fuel needs contains a contingent requirement that could require PNM to provide collateral for its gas purchase obligations if the seller were to reasonably believe that PNM was unable to fulfill its payment obligations under the agreement.
The master agreement for the sale of electricity in the WSPP contains a contingent requirement that could require PNM to provide collateral if the credit ratings on its debt falls below investment grade. The WSPP agreement also contains a contingent requirement, commonly called a “material adverse change” provision, which could require PNM to provide collateral if a material adverse change in its financial condition or operations were to occur. Additionally, PNM utilizes standard derivative contracts to financially hedge and trade energy. These agreements contain contingent requirements that require PNM to provide security if the credit rating on its debt falls below investment grade. The Company believes its financing arrangements are sufficient to meet the requirements of the contingent provisions. No conditions have occurred that would result in any of the above contingent provisions being implemented.
Capital Structure
The capitalization tables below include the current maturities of long-term debt, but do not include short-term debt and do not include operating lease obligations as debt.
December 31,
TXNM
TXNM common equity
Preferred stock of subsidiary
Long-term debt 1
Total capitalization
PNM
PNM common equity
Preferred stock
Long-term debt
Total capitalization
TNMP
Common equity
Long-term debt
Total capitalization
1 TXNM’s long-term debt as of December 31, 2025, includes Convertible Notes (Note 7), which receive 50% equity credit from ratings organizations.
Table of Contents
OTHER ISSUES FACING THE COMPANY
Climate Change Issues
Background
For the past several years, management has identified multiple risks and opportunities related to climate change, including the impacts of severe weather events, potential environmental regulation, technological innovation, and availability of fuel and water for operations, as among the most significant risks facing the Company. Accordingly, these risks are overseen by the Board in order to facilitate more integrated risk and strategy oversight and planning. Board oversight includes understanding the various challenges and opportunities presented by these risks, including the financial consequences that might result from enacted and potential federal and/or state regulation of GHG; plans to mitigate these risks; and the impact these risks may have on the Company’s strategy. In addition, the Board approves certain procurements of grid modernization technologies and replacement resources.
Management is also responsible for assessing significant risks, developing and executing appropriate responses, and reporting to the Board on the status of risk activities. For example, management periodically updates the Board on the implementation of corporate environmental policy, and the Company’s environmental management systems, including the promotion of energy efficiency programs, and the use of renewable resources. The Board is also informed of the Company’s practices and procedures to assess the impact of operations on the environment. The Board considers issues associated with climate change, the Company’s GHG exposures, and the financial consequences that might result from enacted and potential federal and/or state regulation of GHG. Management has published, with Board oversight, a Climate Change Report available at https://www.txnmenergy.com/sustainability/environment/climate_change_report that details the Company’s efforts to transition to a carbon-free generating portfolio.
As part of management’s continuing effort to monitor climate-related risks and assess opportunities, the Company has advanced its understanding of climate change by participating in the “2 Degree Scenario” planning by participating in the Electric Power Research Institute (“EPRI”) Understanding Climate Scenarios & Goal Setting Activities program. The program focused on characterizing and analyzing the relationship of individual electric utility company’s carbon emissions and global temperature goals. Activities included analyzing the scientific understanding of global emissions pathways that are consistent with limiting global warming and providing insight to assist companies in developing approaches to climate scenario planning. As PNM expands its sustainability efforts, EPRI’s environmental and climate analysis programs have also been useful in gaining a better understanding of energy and environmental policy and regulations, advanced clean energy technologies, decarbonization trends and climate impacts. In 2022, PNM joined EPRI’s Climate READi program which is a strategic initiative convening a global collaborative of electric utilities, thought leaders, scientific researchers and other key stakeholders to strengthen the power sector’s collective approach to managing climate risk to the power system. The program is a three-year initiative, through work across three concurrent workstreams, and PNM will from the development of a first-of-its-kind comprehensive framework for managing physical climate risk and investment prioritization that was launched in May 2025.
The Company cannot anticipate or predict the potential long-term effects of climate change or climate change related regulation on its results of operations, financial position, or cash flows.
Greenhouse Gas Emissions Exposures
In 2024, GHG emissions associated with PNM’s interests in its fossil-fueled generating plants included approximately 1.5 million metric tons of CO 2 , which comprises the vast majority of PNM’s GHG emissions.
As of December 31, 2025, approximately 25% of PNM’s generating capacity, including resources owned, leased, and under PPAs, all of which is located within the U.S., consisted of coal or gas-fired generation that produces GHG emissions. As PNM shifts its generation to cleaner energy resources, the Company’s output of GHG emissions continues to decrease. Many factors affect the amount of GHG emitted, including total electricity sales, plant performance, economic dispatch, and the availability of renewable resources. For example, wind generation performance varies each year as a result of highly seasonal wind patterns and annual wind resource variability. Similarly, if PVNGS experienced prolonged outages or if PNM’s entitlement from PVNGS were reduced, PNM might be required to utilize other power supply resources such as gas-fired generation, which could increase GHG emissions.
PNM has several programs underway to reduce or offset GHG emissions from its generation resource portfolio, thereby reducing its exposure to climate change regulation. The shutdown of SJGS resulted in a reduction of GHG emissions for the entire station allowing PNM to attain GHG emissions reductions goals set forth by the ETA, discussed below.
PNM’s utility-owned solar and energy storage capacity, as well as solar, energy storage, wind, and geothermal procurements in service as of December 31, 2025, have a total net generation capacity of 3,244 MW. The NMPRC has approved plans for PNM to procure energy and RECs from additional resources to serve retail customers and a data center located in PNM’s service territory. PNM’s approved resource plans have a generation capacity of 1,453 MW. This includes approximately 285 MW of capacity under the Community Solar Act which will provide customers an additional option of
Table of Contents
accessing solar energy. PNM will continue to seek approval to procure renewable resources as needed to meet forecasted peak load requirements to serve its customers and New Mexico’s RPS and carbon-free resource requirements, while balancing the impact to customers’ electricity costs. See additional discussion of these resources in Notes 16 and 17.
PNM also has a customer distributed solar generation program that represented 334.1 MW at December 31, 2025. PNM’s distributed solar programs will generate an estimated 668.2 GWh of emission-free solar energy available this year to offset PNM’s annual production from fossil-fueled electricity generation. PNM has offered its customers a comprehensive portfolio of energy efficiency and load management programs since 2007. PNM’s cumulative savings from these programs were an estimated 9,005 GWh of electricity through 2025. Over the next 20 years, PNM projects energy efficiency and load management programs will provide the equivalent of approximately 12,900 GWh of electricity savings, which will avoid approximately 220,000 tons of CO 2 based upon projected emissions from PNM’s portfolio of resources. These estimates are subject to change because of the uncertainty of many of the underlying variables, including changes in PNM’s generation portfolio, demand for electricity, energy efficiency, and complex relationships between those variables.
Because of PNM’s dependence on fossil-fueled generation, legislation or regulation that imposes a limit or cost on GHG could impact the cost at which electricity is produced. While PNM expects to recover any such costs through rates, the timing and outcome of proceedings for cost recovery are uncertain. In addition, to the extent that any additional costs are recovered through rates, customers may reduce their usage, relocate facilities to other areas with lower energy costs, or take other actions that ultimately could adversely impact PNM.
Other Climate Change Risks
PNM’s generating stations are located in the arid southwest. Access to water for cooling for some of these facilities is critical to continued operations. Forecasts for the impacts of climate change on water supply in the southwest range from reduced precipitation to changes in the timing of precipitation. In either case, PNM’s generating facilities requiring water for cooling will need to mitigate the impacts of climate change through adaptive measures. Current measures employed by PNM generating stations include the use of sustainable, less variable groundwater supplies and investments in technologies such as air cooling and cooling water recycling. These types of actions will continue to be important to sustain operations.
PNM’s service areas occasionally experience periodic high winds and severe thunderstorms. TNMP has operations in the Gulf Coast area of Texas, which experiences periodic hurricanes and other extreme weather conditions. In addition to potentially causing physical damage to Company-owned facilities, which disrupts the ability to transmit and/or distribute energy, weather and other events of nature can temporarily reduce customers’ usage and demand for energy. In addition, other events influenced by climate change, such as wildfires, could disrupt Company operations or result in third-party claims against the Company. PNM has enhanced its wildfire prevention efforts and maintains a wildfire mitigation plan and a public safety power shutoff plan. TNMP has also developed a wildfire mitigation plan. However, both PNM and TNMP remain at risk for wildfires outside of their control and the resulting damages in their service areas.
EPA Regulation
In 2007, the US Supreme Court held that EPA has the authority to regulate GHG emissions under the CAA, and in 2009, EPA released its endangerment finding for GHG from new motor vehicles, stating that the atmospheric concentrations of six key greenhouse gases (CO 2 , methane, nitrous oxides, hydrofluorocarbons, perfluorocarbons, and sulfur hexafluoride) endanger the public health and welfare. These actions triggered new GHG permitting requirements for stationary sources, including the energy industry, under the Prevention of Significant Deterioration (“PSD”) and Title V program, although the US Supreme Court held the CAA does not authorize EPA to require a source to obtain a PSD permit solely on the basis of its potential GHG emissions.
EPA also determined that its finding of endangerment requires it to issue performance standards under Section 111 of the CAA to regulate GHG emissions from new and existing stationary sources, including fossil fuel fired electric generating units. Accordingly, in 2015, EPA issued Carbon Pollution Standards for new, modified, and reconstructed power plants (under Section 111(b)) and the Clean Power Plan for existing power plants (under Section 111(d)).
Multiple states, utilities, and trade groups challenged both the Carbon Pollution Standards for new sources and the Clean Power Plan for existing sources in separate cases, and the challengers successfully petitioned the US Supreme Court for a stay of the Clean Power Plan.
In 2019, EPA repealed the Clean Power Plan, promulgated the ACE Rule, and revised the implementing regulations for all emission guidelines issued under CAA Section 111(d). The ACE Rule was also challenged, and on January 19, 2021, the DC Circuit issued an opinion in American Lung Association and American Public Health Association v. EPA, et al. vacating the ACE Rule.
Numerous parties sought review by the US Supreme Court, and on June 30, 2022, the Court held that the “generation shifting” approach in the Clean Power Plan exceeded the powers granted to EPA by Congress, though the Court did not address
Table of Contents
the related issue of whether Section 111 of the CAA only authorizes EPA to require measures that can be implemented entirely within the fence line at an individual source. Of broader significance in administrative law, the Court’s opinion expressly invoked the major questions doctrine, which requires rules involving issues of “vast economic or political significance” to be supported by clear statutory authorization. In cases where there is no clear statement of authority, courts need not defer to the agency’s statutory interpretation on “major questions.” The decision sets legal precedent for future rulemakings by EPA and other federal regulatory agencies whereby the agency’s authority may be limited based upon similar reasoning.
The litigation over the Carbon Pollution Standards remains held in abeyance but could be reactivated by the parties upon a determination by the court that reconsideration of the rule has concluded.
In 2024, EPA published in the Federal Register proposed regulatory actions under CAA sections 111(b) and (d) to replace the Clean Power Plan and the ACE Rule and finalized the rules on May 9, 2024. The final rules include revised new source performance standards under Section 111(b) for all new natural gas-fired combustion turbines and emission guidelines under Section 111(d) requiring states to develop standards of performance for GHG emissions from existing fossil-fuel-fired electric steam generating units. In the final rules, EPA determined that the standards for existing coal- or gas-fired steam generating units must be based on the use of either Carbon Capture Storage (“CCS”) (long-term), natural gas co-firing (medium-term), or exempt from the rule via early retirement. The standards for new combustion turbines must be based on CCS (base load), efficient simple cycle design (intermediate load), or lower-emitting fuels (low load). Over a dozen states, several industry groups, and some power companies and labor unions have filed challenges to the rule at the DC Circuit. The DC Circuit heard oral arguments on December 6, 2024.
On January 20, 2025, President Trump signed an executive order entitled “Unleashing American Energy” directing all agencies, including EPA, to review all agency actions and suspend, revise, or rescind those identified as imposing an undue burden on domestic energy resources. The order also disbands the Interagency Working Group on the Social Cost of Greenhouse Gases (“IWG”), eliminates the “social cost of carbon” from consideration in any Federal permitting or regulatory decision, and expressly directs EPA to submit joint recommendations on the legality and continuing applicability of the 2009 endangerment finding for greenhouse gases that currently provides the legal basis for EPA to regulate greenhouse gases under the CAA. On March 12, 2025, EPA announced it will formally reconsider the 2009 endangerment finding in collaboration with the Office of Management and Budget and other relevant agencies. On June 17, 2025, EPA published a proposed rule in the Federal Register with two alternatives to repeal or revise the GHG emission standards for EGUs. EPA primarily proposes to find that GHG emissions from fossil fuel-fired power plants “do not contribute significantly to dangerous air pollution” under the meaning of CAA Section 111, which would EPA from regulating GHG emissions from those plants. As a result, EPA is proposing to repeal all GHG standards for the power sector promulgated under CAA Section 111 in both 2015 and 2024. EPA also proposed in the alternative to find that CCS is not demonstrated, and that neither CCS nor gas co- are the system of emission reduction for GHG emissions from power plants, which findings also support repeal of those specific requirements from the rules adopted in 2024. Comments were due by September 15, 2025, and EPA intends to finalize the proposed rule in the first quarter of 2026.
On August 1, 2025, EPA published a proposal to rescind its 2009 final rule commonly known as the Endangerment Finding. In the Endangerment Finding, EPA found that current and projected atmospheric concentrations of the well-mixed combination of six GHGs threaten public health and welfare, and that the combined emissions of these GHGs from new motor vehicles and engines contribute to the GHG pollution that threatens public health and welfare. This provided the basis for EPA’s subsequent GHG regulations applicable to stationary sources. Comments were due September 15, 2025. On January 7, 2026, EPA sent the proposed rule rescinding the 2009 Endangerment Finding to OMB. On February 12, 2026, the final rule was finalized as proposed, repealing all GHG emission standards for certain vehicles and engines promulgated on the basis of the Endangerment Finding. While the Endangerment Finding did not directly impose any requirements on EGUs, EPA has cited the Endangerment Finding as a basis for its authority to regulate GHG emissions from EGUs under CAA Section 111.
Federal Legislation
In July 2025, President Trump signed the OBBBA, significantly altering the landscape of climate action and clean energy initiatives in the United States. The legislation revises and, in some cases, phases out tax credits established under the IRA and includes restrictions on the availability of credits for “foreign entities of concern,” as such term is used in the OBBBA. Given the control of both houses of Congress by the Republican Party, no additional Federal legislation on climate change is expected during this Congress.
State and Regional Activity
Pursuant to New Mexico law, each utility must submit an IRP to the NMPRC every three years to evaluate renewable energy, energy efficiency, load management, distributed generation, and conventional supply-side resources on a consistent and comparable basis. The IRP is required to take into consideration risk and uncertainty of fuel supply, price volatility, and costs of anticipated environmental regulations when evaluating resource options to meet supply needs of the utility’s customers. The NMPRC requires that New Mexico utilities factor a standardized cost of carbon emissions into their IRPs using prices ranging
Table of Contents
between $8 and $40 per metric ton of CO 2 emitted and escalating these costs by 2.5% per year. Under the NMPRC order, each utility must analyze these standardized prices as projected operating costs. Reflecting the evolving nature of this issue, the NMPRC order states that these prices may be changed in the future to account for additional information or changed circumstances. Although these prices may not reflect the costs that ultimately will be incurred, PNM is required to use these prices for purposes of its IRP. PNM’s 2023 filing has a continued focus on a carbon-free energy system by 2040. The plan highlights the need for the significant sustained addition of resources over the next two decades, replacing retiring or expiring capacity, meeting concurrent load growth, while reducing the carbon intensity of PNM’s portfolio. See Note 17.
The ETA, among other things, requires that investor-owned utilities obtain specified percentages of their energy from renewable and carbon-free resources. The passage of the ETA amended the REA to require utilities operating in New Mexico to have renewable portfolios equal to 40% by 2025, 50% by 2030, 80% by 2040, and 100% zero-carbon energy by 2045. Under the ETA provisions, PNM will also be required to meet a generation emission standard of no more than 400 lbs. of CO 2 per MWh beginning in 2023 and not more than 200 lbs. per MWh beginning in 2032. PNM takes this requirement into account in its resource planning and will manage compliance with the standards based upon existing generation resources and approved resource retirements and replacements. The ETA provides for a transition from fossil-fuel generating resources to renewable and other carbon-free resources by allowing investor-owned utilities to issue securitized bonds related to the retirement of coal-fired generating facilities to qualified investors. See additional discussion of the ETA in Note 16.
The ETA has a significant impact on PNM’s future generation portfolio. In 2022, in compliance with the ETA, the NMED announced a new rulemaking, Carbon Dioxide Emission Standards for Electric Generating Facilities, to develop carbon emission standards for new and existing electric coal-fired generating facilities. In 2022, the rule was passed which adopts new carbon emission standards for new and existing coal-fired power plants. In compliance with the ETA, PNM filed its first CO 2 Emissions Measurement and Compliance Annual Report on March 14, 2025.
In 2020, the NMPRC approved PNM’s San Juan abandonment application and for the issuance of securitized bonds consistent with the requirements of the ETA and in 2023 PNM issued the ETBC I Securitized Bonds. PNM cannot predict the full impact of the ETA with respect to Four Corners. See additional discussion of PNM’s Four Corners Abandonment Application in Note 17.
The State of California has enacted comprehensive climate-related disclosure laws that will require large entities doing business in the state to measure and disclose Scope 1 and Scope 2 GHG emissions beginning in 2026, Scope 3 GHG emissions beginning in 2027, and to publish biennial reports detailing climate-related financial risk beginning in January 2026. The State of California released proposed regulations in December 2025 with comments due in January 2026. The Company is closely monitoring developments to determine if any TXNM entity would be required to make disclosures under California law and the nature of any such required disclosures.
International Accords
The United Nations Framework Convention on Climate Change (“UNFCCC”) is an international environmental treaty that was negotiated at the 1992 United Nations Conference on Environment and Development (informally known as the Earth Summit) and entered into force in March 1994. The objective of the treaty is to “stabilize greenhouse gas concentrations in the atmosphere at a level that would prevent dangerous anthropogenic interference with the climate system.” Parties to the UNFCCC, including the U.S., have been meeting annually in Conferences of the Parties (“COP”) to assess progress in meeting the objectives of the UNFCCC.
In 2015, the Paris Agreement was finalized during the 2015 COP. The aim of the Paris Agreement is to limit global temperature rise to two degrees Celsius above pre-industrial levels. The agreement, which was agreed to by approximately 200 parties, requires that countries submit INDCs. INDCs reflect national targets and actions that arise out of national policies and elements relating to oversight, guidance and coordination of actions to reduce emissions by all countries. In 2017, President Trump announced that the U.S. would withdraw from the Paris Agreement. As a result of the President’s notice to the United Nations, the U.S. officially withdrew from the Paris Agreement on November 4, 2020. On January 20, 2021, President Biden signed an instrument that will allow the U.S. to rejoin the Paris Agreement on Climate Change. The instrument was deposited with the United Nations on January 21, 2021, and the U.S. officially became a party to the Agreement on February 19, 2021. On January 20, 2025, President Trump signed an executive order entitled “Putting America First in International Environmental Agreements,” directing the United States Ambassador to the United Nations to immediately submit formal written notification of the United States’ withdrawal from the Paris Agreement and any other agreement, pact, accord, or similar commitment made under the United Nations Framework Convention on Climate Change.
PNM has calculated GHG reductions that would result from scenarios that capture PNM’s retirement of its share of the SJGS in 2022 and assume exiting Four Corners in 2031 and PNM has set a goal to have a 100% carbon-free generating portfolio by 2040. Achieving our goal of carbon-free by 2040 is dependent on balancing reliability, cost-considerations, and maturity of emerging technologies. While the Company has not conducted an independent 2 Degree Scenario analysis, our commitment to becoming 100% carbon-free produces a carbon emissions reduction pathway that tracks within the ranges of climate scenario pathways that are consistent with limiting the global warming average to less than 2 degrees Celsius. In
Table of Contents
addition, as an investor-owned utility operating in the state of New Mexico, PNM is required to comply with the ETA, which requires utilities’ generating portfolio be 100% carbon-free by 2045. The requirements of the ETA and the Company’s goal compare favorably to the U.S. INDC of 50% to 52% carbon emissions reduction by 2030. On April 1, 2020, the NMPRC approved PNM’s application to retire its share of SJGS in 2022. See Note 17.
PNM will continue to monitor the United States’ move to withdraw from the Paris Agreement and other parties’ involvement in these types of international accords, but the potential impact that such accords may have on the Company cannot be determined at this time.
Assessment of Legislative/Regulatory Impacts
The Company has assessed, and continues to assess, the impacts of climate change legislation and regulation on its business. This assessment is ongoing and future changes arising out of the legislative or regulatory process could impact the assessment significantly. PNM’s assessment includes assumptions regarding specific GHG limits; the timing of implementation of these limits; the possibility of a market-based trading program, including the associated costs and the availability of emission credits or allowances; the development of emission reduction and/or renewable energy technologies; and provisions for cost containment. Moreover, the assessment assumes various market reactions such as the price of coal and gas and regional plant economics. These assumptions are, at best, preliminary and speculative. However, based upon these assumptions, the enactment of climate change legislation or regulation could, among other things, result in significant compliance costs, including large capital expenditures by PNM, and could jeopardize the Company’s reputation as well as the economic viability of certain generating facilities. See Notes 16 and 17. The ultimate consequences of increased stakeholder scrutiny related to climate change and environmental regulation could lead to increased costs to customers and affect results of operations, cash flows, and financial condition if the incurred costs are not fully recovered through regulated rates. Higher rates could also contribute to reduced usage of electricity. PNM’s assessment process is evolving and is too speculative at this time for a meaningful prediction of the long-term financial impact.
Transmission Issues
At any given time, FERC has various notices of inquiry and rulemaking dockets related to transmission issues pending. Such actions may lead to changes in FERC administrative rules or ratemaking policy but have no time frame in which action must be taken or a docket closed with no further action. Further, such notices and rulemaking dockets do not apply strictly to PNM but will have industry-wide effects in that they will apply to all FERC-regulated entities. PNM monitors and often submits comments taking a position in such notices and rulemaking dockets or may join in larger group responses. PNM often cannot determine the full impact of a proposed rule and policy change until the final determination is made by FERC and PNM is unable to predict the outcome of these matters.
Other Matters
See Notes 16 and 17 for a discussion of commitments and contingencies and rate and regulatory matters.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The preparation of financial statements in accordance with GAAP requires management to apply accounting policies and to make estimates and judgments that best provide the framework to report the results of operations and financial position for TXNM, PNM, and TNMP. As a result, there exists the likelihood that materially different amounts would be reported under different conditions or using different assumptions. Management has identified the following accounting policies that it deems critical to the portrayal of the financial condition and results of operations and that involve significant subjectivity. The following discussion provides information on the processes utilized by management in making judgments and assumptions as they apply to its critical accounting policies.
Regulatory Accounting
The Company is subject to the provisions of GAAP for rate-regulated enterprises and records assets and liabilities resulting from the effects of the ratemaking process, which would not be recorded under GAAP for non-regulated entities. Additional information concerning regulatory assets and liabilities is contained in Note 13.
The Company continually evaluates the probability that regulatory assets and liabilities will impact future rates and make various assumptions in those analyses. The expectations of future rate impacts are generally based on orders issued by regulatory commissions or historical experience, as well as discussions with applicable regulatory authorities. If future recovery or refund ceases to be probable, the Company would be required to write-off the portion that is not recoverable or refundable in current period earnings.
The Company has made adjustments to regulatory assets and liabilities that affected its results of operations in the past due to changes in various factors and conditions impacting future cost recovery. Based on its current evaluation, the Company believes that future recovery of its regulatory assets is probable.
Table of Contents
Impairments
Tangible long-lived assets are evaluated for impairment when events and circumstances indicate that the assets might be impaired. These potential impairment indicators include management’s assessment of fluctuating market conditions as a result of planned and scheduled customer purchase commitments; future market penetration; changing environmental requirements; fluctuating market prices resulting from factors including changing fuel costs and other economic conditions; long-term weather patterns; and other market trends. The amount of impairment recognized, if any, is the difference between the fair value of the asset and the carrying value of the asset and would reduce both the asset and current period earnings. Variations in the assessment of potential impairment or in the assumptions used to calculate an impairment could result in different outcomes, which could lead to significant effects on the Consolidated Financial Statements. See Notes 16 and 17.
Goodwill is evaluated for impairment at least annually, or more frequently if events and circumstances indicate that the goodwill might be impaired. Impairment testing may be performed based on either a qualitative analysis or quantitative analysis. Note 19 contains information on the impairment testing performed by the Company on goodwill. For 2025, the Company utilized a quantitative analysis for the PNM reporting unit and a qualitative analysis for the TNMP reporting unit. No impairments were indicated in the Company’s annual goodwill testing, which was performed as of April 1, 2025. Since the annual evaluation, there have been no indications that the fair values of the reporting units with recorded goodwill have decreased below the carrying values. The annual testing was based on certain critical estimates and assumptions. Changes in the estimates or the use of different assumptions could affect the determination of fair value and the conclusion of impairment for each reporting unit.
Application of the qualitative goodwill impairment test requires evaluating various events and circumstances to determine whether it is not more likely than not that the fair value of a reporting unit is less than its carrying amount. As a part of the Company’s goodwill qualitative testing process for a reporting unit, various factors that are specific to that reporting unit as well as industry and macroeconomic factors are evaluated in order to determine whether these factors are reasonably likely to have a material impact on the fair value of the reporting unit. Examples of the factors that were considered in the qualitative testing of the goodwill include the results of the most recent quantitative impairment test, current and long-term forecasted financial results, regulatory environment, credit rating, changes in the interest rate environment, and operating strategy for the reporting unit.
Based on the analysis performed for the PNM and TNMP reporting units in 2025, the Company concluded that there were no changes that were reasonably likely to cause the fair value of the reporting units to be less than their carrying value and determined that there was no impairment of goodwill. Although the Company believes all relevant factors were considered in the qualitative impairment analysis to reach the conclusion that goodwill is not impaired, significant changes in any one of the assumptions could produce a significantly different result potentially leading to the recording of an impairment that could have significant impacts on the results of operations and financial position of the Company.
Decommissioning and Reclamation Costs
PNM is only required to recognize and measure decommissioning liabilities for tangible long-lived assets for which a legal obligation exists. Accounting for decommissioning costs for nuclear and fossil-fuel generation involves significant estimates related to costs to be incurred many years in the future after plant closure. Decommissioning costs are based on site-specific estimates, which are updated periodically and involve numerous judgments and assumptions, including estimates of future decommissioning costs at current price levels, inflation rates, and discount rates. Changes in these estimates could significantly impact TXNM’s and PNM’s financial position, results of operations, and cash flows. Nuclear decommissioning costs are based on estimates of the costs for removing all radioactive and other structures at PVNGS. AROs, including nuclear decommissioning costs, are discussed in Note 15. Nuclear decommissioning costs represent approximately 76% of PNM’s ARO liability. A 10% increase in the estimates of future decommissioning costs at current price levels would have increased the ARO liability by $15.0 million at December 31, 2025. PNM recognizes an expense and a corresponding liability for ultimate decommissioning of PVNGS. See Note 17 for information concerning NMPRC’s order to address the recovery of decommissioning costs in a future proceeding.
In connection with both the SJGS coal agreement and the Four Corners fuel agreement, the owners and former owners are required to reimburse the mining companies for the cost of contemporaneous reclamation, as well as the costs for final reclamation of the coal mines. The reclamation costs are based on periodic site-specific studies that estimate the costs to be incurred in the future and are dependent upon numerous assumptions, including estimates of future reclamation costs at current price levels, inflation rates, and discount rates. A 10% increase in the estimates of future reclamation costs at current price levels would have increased the mine reclamation liability by $18.4 million at December 31, 2025. PNM considers the contemporaneous reclamation costs part of the cost of its delivered coal costs. The NMPRC has capped the amount that can be collected from ratepayers for final reclamation of the surface mines. If future estimates increase the liability for surface mine reclamation, the excess would be expensed at that time. See Note 16 for discussion of reclamation costs.
Pension and Other Postretirement Benefits
The Company maintains qualified defined benefit pension plans, postretirement benefit plans providing medical and dental benefits, and executive retirement programs. The net periodic benefit cost or income and the calculation of the projected benefit obligations are recognized in the Company’s financial statements and depend on expected investment performance, the
Table of Contents
level of contributions made to the plans, and employee demographics. These calculations require the use of a number of actuarial assumptions and estimates. The most critical of the actuarial assumptions are the expected long-term rate of return, the discount rate, and projected health care cost trend rates. The Company reviews and evaluates its actuarial assumptions annually and adjusts them as necessary. Changes in the pension and OPEB assets and liabilities associated with these factors are not immediately recognized as net periodic benefit cost or income in results of operations, but are recognized in future years, generally, over the remaining life of the plan. However, these factors could have a significant impact on the financial position of the Company. Note 11 contains additional information about pension and OPEB obligations, including assumptions utilized in the calculations and impacts of changes in certain of those assumptions.
Accounting for Contingencies
The financial results of the Company may be affected by judgments and estimates related to loss contingencies. Contingencies related to litigation and claims, as well as environmental and regulatory matters, also require the use of significant judgment and estimation. The Company attempts to take into account all known factors regarding the future outcome of contingent events and records an accrual for any contingent loss events that are both probable of occurring and can be reasonably estimated based upon current available information. However, the actual outcomes can vary from any amounts accrued which could have a material effect on the results of operations and financial position of the Company. See Note 16 and Note 17.
Income Taxes
The Company’s income tax expense and related balance sheet amounts involve significant judgment and use of estimates. Amounts of deferred income tax assets and liabilities, current and noncurrent accruals, and determination of uncertain tax positions involve judgment and estimates related to timing and probability of the recognition of income and deductions by taxing authorities. In addition, some temporary differences are accorded flow-through treatment by the Company’s regulators and impact the Company’s effective tax rate. In assessing the likelihood of the realization of deferred tax assets, management considers the estimated amount and character of future taxable income. Significant changes in these judgments and estimates could have a material impact on the results of operations and financial position of the Company. Actual income taxes could vary from estimated amounts due to the future impacts of various items, including changes in income tax laws, the Company’s forecasted financial condition and results of operations in future periods, and the final review from taxing authorities. See Note 18.
MD&A FOR PNM
RESULTS OF OPERATIONS
PNM operates in only one reportable segment, as presented above in Results of Operations for TXNM.
MD&A FOR TNMP
RESULTS OF OPERATIONS
TNMP operates in only one reportable segment, as presented above in Results of Operations for TXNM.
