Public Service Company of New Mexico PFD 4.58% (PNMXO) Financial Report Summaries

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.
• 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.
• 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.
• 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.
• 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.
• 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.
• 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.
• There are inherent risks in the ownership and operation of nuclear facilities.
• 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.
• Difficulties in obtaining permits and rights-of-way could negatively impact PNM’s results of operations.
• General Economic and Weather Risks
• 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.
• 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.
• The operating results of TXNM and its operating subsidiaries are seasonal and are affected by weather conditions.
• TXNM and its subsidiaries’ substantial indebtedness could adversely affect its 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.
• 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.
• The conditional conversion feature of the Convertible Notes, if triggered, may adversely affect TXNM’s financial condition and operating results.
• The accounting method for the Convertible Notes could have a material effect on TXNM’s reported financial results.
• The fundamental change repurchase features of the Convertible Notes and the TNMP first mortgage bonds may delay or prevent an otherwise beneficial attempt to acquire TXNM.
• 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.
• Disruption in the credit and capital markets may impact the Company’s strategy and ability to raise capital.
• 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.
• 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.
• 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.
• 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.