Segment Information

3 Months Ended

Mar. 31, 2020

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. TNMP also provides transmission services at regulated rates to other utilities that interconnect with TNMP’s facilities.

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, NM Capital, and the equity method investment in NMRD are also included in Corporate and Other. Eliminations of intercompany transactions are reflected in the Corporate and Other segment.

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		PNMR Consolidated
	(In thousands)

















Three Months Ended March 31, 2020
Electric operating revenues	$	248,133	$	85,489	$	—	$	333,622
Cost of energy	74,524		24,186		—		98,710
Utility margin	173,609		61,303		—		234,912
Other operating expenses	98,555		25,122		(5,476)		118,201
Depreciation and amortization	41,449		21,836		5,688		68,973
Operating income (loss)	33,605		14,345		(212)		47,738
Interest income	3,496		—		(73)		3,423
Other income (deductions)	(34,027)		561		(540)		(34,006)
Interest charges	(17,629)		(7,172)		(5,633)		(30,434)
Segment earnings (loss) before income taxes	(14,555)		7,734		(6,458)		(13,279)
Income taxes (benefit)	(2,359)		642		(163)		(1,880)
Segment earnings (loss)	(12,196)		7,092		(6,295)		(11,399)
Valencia non-controlling interest	(3,729)		—		—		(3,729)
Subsidiary preferred stock dividends	(132)		—		—		(132)
Segment earnings (loss) attributable to PNMR	$	(16,057)	$	7,092	$	(6,295)	$	(15,260)

At March 31, 2020:
Total Assets	$	5,260,528	$	1,913,270	$	201,321	$	7,375,119
Goodwill	$	51,632	$	226,665	$	—	$	278,297


	PNM		TNMP		Corporate and Other		PNMR Consolidated
	(In thousands)

















Three Months Ended March 31, 2019
Electric operating revenues	$	269,318	$	80,327	$	—	$	349,645
Cost of energy	99,339		22,287		—		121,626
Utility margin	169,979		58,040		—		228,019
Other operating expenses	106,462		25,241		(5,763)		125,940
Depreciation and amortization	39,224		20,214		5,918		65,356
Operating income (loss)	24,293		12,585		(155)		36,723
Interest income	3,656		—		(68)		3,588
Other income (deductions)	14,358		585		(735)		14,208
Interest charges	(18,360)		(8,800)		(4,474)		(31,634)
Segment earnings (loss) before income taxes	23,947		4,370		(5,432)		22,885
Income taxes (benefit)	1,973		272		(1,022)		1,223
Segment earnings (loss)	21,974		4,098		(4,410)		21,662
Valencia non-controlling interest	(2,830)		—		—		(2,830)
Subsidiary preferred stock dividends	(132)		—		—		(132)
Segment earnings (loss) attributable to PNMR	$	19,012	$	4,098	$	(4,410)	$	18,700

At March 31, 2019:
Total Assets	$	5,202,039	$	1,871,780	$	176,939	$	7,250,758
Goodwill	$	51,632	$	226,665	$	—	$	278,297

The Company defines utility margin as electric operating revenues less cost of energy. Cost of energy consists primarily of fuel and purchase power costs for PNM and costs charged by third-party transmission providers for TNMP. The Company believes that utility margin provides a more meaningful basis for evaluating operations than electric operating revenues since substantially all such costs are offset in revenues as fuel and purchase power costs are passed through to customers under PNM’s FPPAC and third-party transmission costs are passed on to customers through TNMP’s transmission cost recovery factor. Utility margin is not a financial measure required to be presented under GAAP and is considered a non-GAAP measure.