Segment Information

The following segment presentation is based on the methodology that management uses for making operating decisions and assessing performance of its various business activities. A reconciliation of the segment presentation to the GAAP financial statements is provided.

PNM

PNM includes the retail electric utility operations of PNM that are subject to traditional rate regulation by the NMPRC. PNM provides integrated electricity services that include the generation, transmission, and distribution of electricity for retail electric customers in New Mexico. PNM also includes the generation and sale of electricity into the wholesale market, as well as providing transmission services to third parties. The sale of electricity includes the asset optimization of PNM’s jurisdictional capacity, as well as the capacity excluded from retail rates. FERC has jurisdiction over wholesale power and transmission rates.

TNMP

TNMP is an electric utility providing services in Texas under the TECA. TNMP’s operations are subject to traditional rate regulation by the PUCT. 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.

Corporate and Other

The Corporate and Other segment includes PNMR holding company activities, primarily related to corporate level debt and PNMR Services Company. The activities of PNMR Development and NM Capital are also included in Corporate and Other.

The following tables present summarized financial information for PNMR by segment. PNM and TNMP each operate in only one segment. Therefore, tabular segment information is not presented for PNM and TNMP.

PNMR SEGMENT INFORMATION



	PNM			TNMP			Corporate and Other			Consolidated
	(In thousands)
Three Months Ended September 30, 2017
Electric operating revenues	$	327,254		$	92,646		$	—		$	419,900
Cost of energy	82,367			21,381			—			103,748
Utility margin	244,887			71,265			—			316,152
Other operating expenses	94,871			25,367			(5,391		)	114,847
Depreciation and amortization	36,764			16,424			5,633			58,821
Operating income (loss)	113,252			29,474			(242		)	142,484
Interest income	1,782			—			1,800			3,582
Other income (deductions)	6,342			1,228			(460		)	7,110
Interest charges	(20,451		)	(7,704		)	(3,951		)	(32,106		)
Segment earnings (loss) before income taxes	100,925			22,998			(2,853		)	121,070
Income taxes (benefit)	35,642			8,271			(1,170		)	42,743
Segment earnings (loss)	65,283			14,727			(1,683		)	78,327
Valencia non-controlling interest	(4,456		)	—			—			(4,456		)
Subsidiary preferred stock dividends	(132		)	—			—			(132		)
Segment earnings (loss) attributable to PNMR	$	60,695		$	14,727		$	(1,683	)	$	73,739

Nine Months Ended September 30, 2017
Electric operating revenues	$	854,909		$	257,489		$	—		$	1,112,398
Cost of energy	246,635			64,183			—			310,818
Utility margin	608,274			193,306			—			801,580
Other operating expenses	288,300			72,188			(15,286		)	345,202
Depreciation and amortization	109,228			47,392			16,209			172,829
Operating income (loss)	210,746			73,726			(923		)	283,549
Interest income	6,457			—			5,891			12,348
Other income (deductions)	19,924			2,392			(918		)	21,398
Interest charges	(62,393		)	(22,619		)	(11,125		)	(96,137		)
Segment earnings (loss) before income taxes	174,734			53,499			(7,075		)	221,158
Income taxes (benefit)	58,865			18,964			(2,675		)	75,154
Segment earnings (loss)	115,869			34,535			(4,400		)	146,004
Valencia non-controlling interest	(11,452		)	—			—			(11,452		)
Subsidiary preferred stock dividends	(396		)	—			—			(396		)
Segment earnings (loss) attributable to PNMR	$	104,021		$	34,535		$	(4,400	)	$	134,156

At September 30, 2017:
Total Assets	$	5,023,816		$	1,465,219		$	208,219		$	6,697,254
Goodwill	$	51,632		$	226,665		$	—		$	278,297



	PNM			TNMP			Corporate and Other			Consolidated
	(In thousands)
Three Months Ended September 30, 2016
Electric operating revenues	$	311,276		$	89,098		$	—		$	400,374
Cost of energy	88,565			20,201			—			108,766
Utility margin	222,711			68,897			—			291,608
Other operating expenses	109,342			24,184			(3,006		)	130,520
Depreciation and amortization	33,312			16,354			3,351			53,017
Operating income (loss)	80,057			28,359			(345		)	108,071
Interest income	1,509			—			3,095			4,604
Other income (deductions)	4,980			855			(184		)	5,651
Interest charges	(22,213		)	(7,308		)	(2,946		)	(32,467		)
Segment earnings (loss) before income taxes	64,333			21,906			(380		)	85,859
Income taxes	19,343			8,053			(93		)	27,303
Segment earnings (loss)	44,990			13,853			(287		)	58,556
Valencia non-controlling interest	(4,006		)	—			—			(4,006		)
Subsidiary preferred stock dividends	(132		)	—			—			(132		)
Segment earnings (loss) attributable to PNMR	$	40,852		$	13,853		$	(287	)	$	54,418

Nine Months Ended September 30, 2016
Electric operating revenues	$	780,228		$	246,498		$	—		$	1,026,726
Cost of energy	222,376			60,122			—			282,498
Utility margin	557,852			186,376			—			744,228
Other operating expenses	314,961			70,328			(9,261		)	376,028
Depreciation and amortization	97,778			45,760			10,263			153,801
Operating income (loss)	145,113			70,288			(1,002		)	214,399
Interest income	8,549			—			9,871			18,420
Other income (deductions)	17,305			2,139			(1,517		)	17,927
Interest charges	(66,494		)	(22,150		)	(8,535		)	(97,179		)
Segment earnings (loss) before income taxes	104,473			50,277			(1,183		)	153,567
Income taxes (benefit)	32,131			18,460			(497		)	50,094
Segment earnings (loss)	72,342			31,817			(686		)	103,473
Valencia non-controlling interest	(11,037		)	—			—			(11,037		)
Subsidiary preferred stock dividends	(396		)	—			—			(396		)
Segment earnings (loss) attributable to PNMR	$	60,909		$	31,817		$	(686	)	$	92,040

At September 30, 2016:
Total Assets	$	4,799,012		$	1,366,840		$	237,818		$	6,403,670
Goodwill	$	51,632		$	226,665		$	—		$	278,297