PNM Resources Reports Net Earnings Of $98.1 million In Q1 2009

PNM Resources also reported unaudited 2009 first quarter consolidated GAAP earnings of $95.4 million, or $1.04 per diluted share, compared with losses of $48.6 million, or $0.63 per diluted share, in 2008. GAAP earnings for the quarter reflect different non-recurring items that have a net positive impact totaling $86.1 million, including the after-tax gain from the January sale of the company’s gas operations.

Unaudited, consolidated ongoing earnings were $9.3 million, or $0.10 per diluted share, compared with $3.5 million, or $0.05 per diluted share, in 2008. Increased ongoing earnings were a result of significantly better performance at the PNM Resources electric business as a result of the implementation of new rates and a fuel and purchased power cost adjustment clause and better performance at First Choice Power.

Impact Of Economic Conditions:

Economic indicators and trends in PNM Resources’ operating territories in New Mexico and Texas have fared better than the country during the present recession. As of March 2009 unemployment in New Mexico and Texas was 5.9% and 6.7%, respectively, compared with the national rate of 8.7%.

Comparing first quarter 2009 with 2008, residential and commercial customer counts grew 0.9% for the company and 1.6% for TNMP. However, low use-per-customer resulted in weather-normalized residential load decline of 2.4% for PNM Resources and 3.1% for TNMP. PNM Resources weather-normalized total retail load reduced 3.7%, mainly due to a 6.1% reduction in industrial sales volumes, half of which has been anticipated because of customer decisions made prior to the recession.

TNMP’s service territory experienced a total weather-normalized load reduction of 3.0% during the comparable periods, mainly attributed to the decline in residential usage.

Quarterly Segment Reporting Of Earnings:

Regulated Operations:

PNM Electric – a vertically integrated electric utility in New Mexico with distribution, transmission and generation assets.

Ongoing losses were less than $0.1 million, compared to the losses of $14.4 million, or $0.19 per diluted share, in 2008. GAAP losses were $5.1 million, or $0.05 per diluted share, compared to the losses of $27.1 million, or $0.35 per diluted share, in 2008. Higher base rates and implementation of the fuel clause increased earnings by $6.3 million, or $0.08 per diluted share. Earnings were offset by the decrease in retail sales volumes and higher interest charges.

TNMP – a transmission and distribution company in Texas.

TNMP reported GAAP and ongoing earnings of $1.4 million, or $0.02 per diluted share, compared to the earnings of $3.7 million, or $0.05 per diluted share, in 2008. Higher medical, pension and other administrative expenses and the decline in load in 2009, compared to 2008, decreased earnings.

Unregulated Operations

First Choice Power – a competitive retail electric provider in Texas.

First Choice Power reported ongoing earnings of $6.8 million, or $0.07 per diluted share, compared to $2.2 million, or $0.03 per diluted share, in 2008. GAAP earnings were $7.0 million, or $0.07 per diluted share, compared to the losses of $24.1 million, or $0.31 per diluted share, in 2008. GAAP losses in 2008 reflected speculative trading activities totaling $30.3 million after tax.

Lower natural gas and power prices significantly increased average retail margins during the quarter. Margins are anticipated to return to traditional levels as First Choice Power aligns contracts prices with current, lower fuel costs.

Bad debt expense increased from $3.6 million in 2008 to $14.3 million in 2009 because of higher average final bills, higher default rates, overall economic conditions and an increased churn.

Optim Energy is jointly owned by PNM Resources and a subsidiary of Cascade Investment, L.L.C.

Optim Energy reported PNM Resources’ equity in net ongoing losses of $2.0 million, or $0.02 per diluted share, compared to the losses of $0.2 million in 2008. A scheduled outage at Twin Oaks Power facility and higher operating costs negatively affected results. PNM Resources’ equity in the net GAAP earnings of Optim Energy was $0.8 million, or $0.01 per diluted share, compared to the losses of $15.2 million, or $0.20 per diluted share, in 2008. Unrealized mark-to-market losses on economic hedges significantly lowered results by $14.2 million after tax in 2008.

PNM Resources’ share of Optim Energy’s ongoing 2009 EBITDA was $4.3 million, compared with $7.6 million in 2008.

Twin Oaks had an equivalent availability factor of 83.7% during the quarter, which included a 35 day planned outage. Altura Cogen produced a quarterly availability factor of 96.9%.

Corporate/Other – a business segment that reflects costs at the PNM Resources’ holding company, included mainly due to interest expense related to certain short- and long-term debt.

Corporate/Other reported ongoing losses of $4.5 million, or $0.05 per diluted share, compared to the losses of $7.1 million, or $0.09 per diluted share in 2008. GAAP earnings were $9.4 million, or $0.10 per diluted share, compared to the losses of $8.5 million, or $0.12 per diluted share, in 2008.

2009 GAAP earnings include non-recurring, after-tax gains of $4.5 million and $9.1 million associated with reacquired debt and the termination of the Cap Rock Energy acquisition agreement, respectively.

Discontinued Operations:

PNM Gas: On January 30, 2009, PNM Resources completed the sale of its natural gas utility to New Mexico Gas Co.

PNM Gas operations contributed $7.6 million, or $0.08 per diluted share, to ongoing earnings prior to its sale. GAAP earnings were $81.7 million, or $0.89 per diluted share, including the one-time gain associated with the sale.

We’ve worked aggressively to restore the financial health of the PNM utility and the entire corporation, and our 2009 first quarter results show success in those areas, said Jeff Sterba, PNM Resources’ chairman and chief executive officer. Numerous steps have been implemented to manage costs across all subsidiaries, improve our liquidity position and strengthen our balance sheets.

Work continues to achieve appropriate return for our utilities. Specifically, we’ve reached an agreement with key parties regarding the pending PNM electric rate case and we amended our pending TNMP rate case in Texas to include Hurricane Ike and higher interest costs, Sterba said. In addition, recent legislation that will allow utilities to seek a future test period in upcoming rate cases in New Mexico was passed. We have accomplished many initiatives and we will continue to work to ensure PNM’s viability and ability to return to investment grade.

Regarding First Choice Power, we are seeing improvement there as a new business focus is in place. However, First Choice Power, as well as our utility operations in New Mexico and Texas, experienced lower retail electric sales volumes as milder weather and current economic conditions decreased demand.

While we are seeing a reduction in load throughout our operations, it appears to be less than what is being observed in other parts of the country, Sterba said.