Business Context and Reporting Period
Company: TXNM Energy, Inc. (formerly PNM Resources, Inc.), a holding company for two regulated electric utilities: Public Service Company of New Mexico (PNM) and Texas-New Mexico Power Company (TNMP).
Reporting Period: Fiscal year ended December 31, 2024.
Operations: The Company serves approximately 834,000 customers in New Mexico and Texas. PNM provides generation, transmission, and distribution services, while TNMP provides transmission and distribution services in Texas. The Company is transitioning its generation portfolio to be 100% carbon-free by 2040, with a goal to be coal-free by 2031.
Key Financial Metrics (2024 vs. 2023)
| Metric | 2024 | 2023 | Change |
|---|---|---|---|
| Net Earnings Attributable to TXNM | $242.2 million | $87.8 million | +$154.4 million |
| Diluted EPS | $2.67 | $1.02 | +$1.65 |
| Electric Operating Revenues | $1,971.2 million | $1,939.2 million | +$32.0 million |
| Operating Income | $453.5 million | $231.3 million | +$222.2 million |
| Operating Cash Flow | $508.2 million | $551.2 million | -$43.0 million |
| Capital Expenditures (Utility Plant Additions) | $1,247.0 million | $1,075.8 million | +$171.2 million |
| Total Debt (Long-term + Current) | $4,939.2 million | $4,525.7 million | +$413.5 million |
Material Changes and Drivers
- Earnings Growth: The significant increase in net earnings was driven by rate relief approved in PNM's 2024 Rate Change, higher transmission and distribution rates at TNMP, increased volumetric load at TNMP, and improved performance on investment securities in nuclear decommissioning and coal mine reclamation trusts.
- Regulatory Disallowances: Earnings in 2023 were negatively impacted by regulatory disallowances related to the 2024 Rate Change and the San Juan Generating Station (SJGS) abandonment settlement, which were not present to the same extent in 2024.
- Load Growth: TNMP saw a 13.7% increase in data center load and a 1.8% increase in weather-normalized retail load. PNM experienced a 12.5% increase in industrial load and a 1.5% increase in residential load.
- Cost Increases: Higher employee-related expenses, increased depreciation and amortization due to new plant in service, and higher interest charges partially offset revenue gains.
Guidance, Outlook, and Risks
Capital Requirements and Financing
The Company projects consolidated capital requirements of approximately $8.6 billion for 2025–2029, consisting of construction expenditures and dividends. To fund these requirements, the Company plans to utilize internal cash generation, existing credit facilities, and additional long-term financing (debt and equity).
- Recent Financing: In 2024, TXNM issued $550 million in Convertible Notes and settled forward sales of common stock under its ATM program for net proceeds of $99.4 million. TNMP issued $285 million in First Mortgage Bonds.
- Liquidity: As of February 14, 2025, the Company had $460.7 million in remaining availability under its revolving credit facilities.
Regulatory and Rate Matters
- PNM 2025 Rate Request: PNM filed an application for a general rate increase. An unopposed comprehensive stipulation was filed in November 2024, proposing a $105.0 million revenue increase (ROE of 9.45%) effective in two phases starting July 1, 2025. A hearing was held in February 2025.
- TNMP System Resiliency Plan (SRP): TNMP filed an unopposed settlement for its SRP, including $565.8 million in capital investments over 2025–2027 to enhance grid reliability and wildfire mitigation.
- Grid Modernization: PNM's Grid Modernization Plan was approved by the NMPRC in October 2024, covering approximately $344 million in investments for the first six years.
Risks and Contingencies
- Climate Change and Regulation: The Company faces uncertainty regarding federal and state regulations on greenhouse gas emissions (e.g., EPA rules on power plants) and the potential impact of the new Trump Administration on these regulations. PNM is subject to New Mexico's Energy Transition Act (ETA), mandating 100% zero-carbon energy by 2045.
- Asset Retirement Obligations (ARO): Significant liabilities exist for nuclear decommissioning (PVNGS) and coal mine reclamation (SJGS and Four Corners). A 10% increase in estimated decommissioning costs would increase the ARO liability by $15.0 million.
- Wildfire Risk: Both PNM and TNMP face wildfire risks in their service territories, which could lead to liability, increased insurance costs, and operational disruptions.
- Joint Projects: Uncertainty remains regarding the future of jointly-owned projects like Four Corners, where PNM's abandonment application was previously denied by the NMPRC and affirmed by the NM Supreme Court. PNM currently plans to remain a participant until 2031.
Investor Verification Checklist
- Regulatory Outcomes: Verify the final NMPRC order on PNM's 2025 Rate Request and the PUCT approval of TNMP's System Resiliency Plan to confirm revenue recovery assumptions.
- Capital Expenditure Execution: Monitor the execution of the $8.6 billion capital plan (2025–2029), specifically the transition to renewable resources and grid modernization projects.
- Debt Maturities: Review the schedule of debt maturities, noting $1.1 billion in maturities between January 2025 and February 2026, and the Company's refinancing strategy.
- Environmental Liabilities: Track updates on coal mine reclamation cost studies and nuclear decommissioning funding, as these are subject to significant estimation uncertainty and regulatory caps.
- Load Growth Sustainability: Assess the sustainability of the 13.7% data center load growth at TNMP and the 12.5% industrial load growth at PNM.