TXNM's Q3 Revenue Up, But Net Earnings Plunge 28.7% on Higher Interest Costs

TL;DR

**TXNM's revenue growth is overshadowed by soaring interest costs, making it a risky bet despite operational improvements.**

AI Summary

TEXAS NEW MEXICO POWER CO (TXNM) reported a mixed financial performance for the nine months ended September 30, 2025. Electric operating revenues increased by 9.2% to $1.63 billion from $1.49 billion in the prior year, driven by higher cost of energy, which rose to $531.8 million from $425.9 million. However, net earnings attributable to TXNM decreased significantly by 28.7% to $161.2 million from $226.4 million, primarily due to a substantial increase in interest charges, which climbed to $205.7 million from $169.3 million. Basic net earnings per common share also fell to $1.63 from $2.50. The company saw a positive shift in cash flows from operating activities, increasing to $426.8 million from $349.5 million, while cash flows used in investing activities increased to $890.5 million from $805.9 million, largely due to additions to utility plant. Long-term borrowings surged to $3.15 billion from $1.23 billion, and common stock issuance generated $842.9 million, indicating significant financing activities. The company's total current assets increased to $595.4 million from $498.8 million, with cash and cash equivalents rising to $32.1 million from $4.5 million.

Why It Matters

This filing reveals a critical challenge for TXNM: while revenue is growing, profitability is being eroded by rising interest expenses. For investors, this signals potential pressure on dividends and future earnings growth, especially given the significant increase in long-term borrowings to $3.15 billion. Employees might face tighter budget constraints if this trend continues, impacting operational investments. Customers could see rate increases as the company seeks to offset higher financing costs. In the broader market, this reflects the impact of a rising interest rate environment on capital-intensive utilities, potentially making TXNM less competitive compared to peers with stronger balance sheets or lower debt burdens.

Risk Assessment

Risk Level: high — The risk level is high due to a significant 28.7% decrease in Net Earnings Attributable to TXNM, falling from $226.4 million in 2024 to $161.2 million in 2025 for the nine-month period. This decline is primarily driven by a substantial 21.5% increase in Interest Charges, which rose from $169.3 million to $205.7 million, coupled with a massive increase in long-term borrowings to $3.15 billion from $1.23 billion, indicating a growing debt burden.

Analyst Insight

Investors should scrutinize TXNM's debt management strategy and future interest rate exposure. Consider reducing exposure or holding off on new investments until there's clear evidence of improved profitability and a stabilized interest expense outlook. Monitor upcoming rate case decisions by the NMPRC and PUCT, as these will be crucial for the company's ability to recover costs.

Financial Highlights

revenue

$1.63B

total Debt

$3.15B

net Income

$161.2M

eps

$1.63

cash Position

$32.1M

revenue Growth

+9.2%

Revenue Breakdown

Key Numbers

• $1.63B — Electric Operating Revenues (Increased by 9.2% from $1.49 billion for the nine months ended September 30, 2024)
• $161.2M — Net Earnings Attributable to TXNM (Decreased by 28.7% from $226.4 million for the nine months ended September 30, 2024)
• $205.7M — Interest Charges (Increased by 21.5% from $169.3 million for the nine months ended September 30, 2024)
• $1.63 — Basic Net Earnings Attributable to TXNM per Common Share (Decreased from $2.50 for the nine months ended September 30, 2024)
• $426.8M — Net Cash Flows from Operating Activities (Increased from $349.5 million for the nine months ended September 30, 2024)
• $890.5M — Net Cash Flows Used in Investing Activities (Increased from $805.9 million for the nine months ended September 30, 2024)
• $3.15B — Long-term Borrowings (Increased significantly from $1.23 billion for the nine months ended September 30, 2024)
• $842.9M — Issuance of Common Stock (New capital raised for the nine months ended September 30, 2025)
• $595.4M — Total Current Assets (Increased from $498.8 million as of December 31, 2024)
• $32.1M — Cash and Cash Equivalents (Increased from $4.5 million as of December 31, 2024)

Key Players & Entities

• TEXAS NEW MEXICO POWER CO (company) — Registrant
• TXNM Energy, Inc. (company) — Registrant and Parent Company
• Public Service Company of New Mexico (company) — Subsidiary Registrant
• Blackstone Infrastructure Partners L.P. (company) — Affiliate of Parent in Merger Agreement
• NMPRC (regulator) — New Mexico Public Regulation Commission
• PUCT (regulator) — Public Utility Commission of Texas
• Troy ParentCo LLC (company) — Parent in Merger Agreement
• Troy Merger Sub Inc. (company) — Merger Sub in Merger Agreement
• Valencia (company) — Non-controlling Interest

FAQ

Risk Factors

• Increased Interest Expenses [high — financial]: Interest charges increased by 21.5% to $205.7 million from $169.3 million. This substantial rise in financing costs significantly impacted net earnings, contributing to a 28.7% decrease.
• Surge in Long-term Borrowings [high — financial]: Long-term borrowings surged from $1.23 billion to $3.15 billion. This indicates a significant increase in the company's debt leverage, potentially increasing financial risk.
• Increased Capital Expenditures [medium — financial]: Cash flows used in investing activities increased to $890.5 million from $805.9 million, primarily due to additions to utility plant. This requires substantial capital, funded partly by increased debt and equity.
• Reliance on Energy Costs [medium — financial]: Electric operating revenues increased by 9.2% driven by higher cost of energy. Fluctuations in energy prices can directly impact profitability and revenue recognition.
• Diluted Earnings Per Share Decline [medium — financial]: Basic net earnings per common share fell to $1.63 from $2.50. This decline, coupled with increased interest expenses, signals pressure on shareholder returns.
• Regulatory Disallowances [low — regulatory]: The company experienced regulatory disallowances of $(731) thousand in the nine months ended September 30, 2025, compared to $10.6 million in the prior year. While reduced, these can still impact earnings.

Industry Context

The electric utility sector is characterized by significant capital intensity and regulatory oversight. Companies like Texas New Mexico Power Co. (TXNM) operate in a stable but competitive environment, facing challenges related to energy price volatility, infrastructure upgrades, and environmental regulations. Recent trends include a focus on renewable energy integration and grid modernization, requiring substantial investment.

Regulatory Implications

TXNM operates under strict regulatory frameworks that govern its rates, operations, and capital expenditures. Changes in regulations, such as those related to environmental standards or rate-setting, can significantly impact financial performance. The company's ability to recover costs through approved rates is crucial for maintaining profitability.

What Investors Should Do

1. Monitor interest rate sensitivity
2. Analyze capital expenditure plans
3. Assess cost management strategies
4. Evaluate debt levels and repayment capacity

Glossary

Electric Operating Revenues

The total revenue generated from the sale of electricity to customers. (Primary revenue driver for the company, showing a 9.2% increase.)

Cost of energy

The direct costs associated with generating or purchasing electricity sold to customers. (Increased by 24.9%, significantly impacting profitability despite revenue growth.)

Interest Charges

The cost incurred by the company for borrowing money, including interest on debt. (Increased by 21.5%, a major factor in the decline of net earnings.)

Net Earnings Attributable to TXNM

The portion of the company's net profit that belongs to its common shareholders after all expenses and preferred dividends. (Decreased by 28.7%, indicating reduced profitability for shareholders.)

Net Cash Flows from Operating Activities

The cash generated or used by the company's normal business operations. (Increased by 19.3%, showing improved cash generation from core operations.)

Net Cash Flows Used in Investing Activities

The cash spent or received from the purchase or sale of long-term assets, such as property, plant, and equipment. (Increased by 10.5%, primarily due to investments in utility plant.)

Long-term Borrowings

Debt obligations that are due more than one year from the balance sheet date. (Surged significantly, indicating a substantial increase in the company's long-term debt.)

Cash and Cash Equivalents

Highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. (Increased substantially to $32.1 million, improving the company's short-term liquidity.)

Year-Over-Year Comparison

For the nine months ended September 30, 2025, Texas New Mexico Power Co. (TXNM) reported a 9.2% increase in electric operating revenues to $1.63 billion, largely driven by higher energy costs. However, net earnings attributable to TXNM saw a significant 28.7% decline to $161.2 million, primarily due to a 21.5% surge in interest charges. While operating cash flows improved, substantial increases in long-term borrowings (from $1.23 billion to $3.15 billion) and capital expenditures indicate a more leveraged and investment-heavy financial position compared to the prior year.

Key Financial Figures

• $10 — mber of shares of common stock of TNMP, $10 par value per share, outstanding as of
• $550.0 million — ne 18, 2021 Convertible Notes TXNM's $550.0 million junior subordinated convertible notes i
• $343.2 million — ds On November 15, 2023, ETBC I issued $343.2 million aggregate principal amount of its senio
• $344 million — t includes investments of approximately $344 million for the first six years of a broader 11
• $40.0 million — PNM New Mexico Credit Facility PNM's $40.0 million Unsecured Revolving Credit Facility P
• $200.0 million — it Facility PNM 2024 Term Loan PNM's $200.0 million term loan that matures on November 10,
• $195.0 Million — er 10, 2025 PNM 2025 Term Loan PNM's $195.0 Million Unsecured Term Loan issued on January 2
• $300.0 million — 2025 SUNs PNM April 2025 SUNs PNM's $300.0 million Senior Unsecured Notes issued on April
• $400.0 million — 5 PNM Revolving Credit Facility PNM's $400.0 million Unsecured Revolving Credit Facility P
• $285.0 million — Agreement for the sale of an aggregate $285.0 million of TNMP's 2024 Bonds TNMP February 20
• $140.0 Million — Agreement for the sale of an aggregate $140.0 Million of TNMP February 2025 Bonds TNMP Revo
• $1.0 billion — XNM 2021 Delayed-Draw Term Loan TXNM's $1.0 billion Unsecured Delayed-Draw Term Loan that m
• $500.0 million — 18, 2025 TXNM 2023 Term Loan TXNM's $500.0 million term loan that matures on June 30, 2026

Filing Documents

• pnm-20250930.htm (10-Q) — 4307KB
• txnm9302025ex311.htm (EX-31.1) — 11KB
• txnm9302025ex312.htm (EX-31.2) — 11KB
• txnm9302025ex313.htm (EX-31.3) — 11KB
• txnm9302025ex314.htm (EX-31.4) — 11KB
• txnm9302025ex315.htm (EX-31.5) — 11KB
• txnm9302025ex316.htm (EX-31.6) — 11KB
• txnm9302025ex321.htm (EX-32.1) — 8KB
• txnm9302025ex322.htm (EX-32.2) — 7KB
• txnm9302025ex323.htm (EX-32.3) — 7KB
• 0001108426-25-000109.txt ( ) — 21096KB
• pnm-20250930.xsd (EX-101.SCH) — 150KB
• pnm-20250930_cal.xml (EX-101.CAL) — 130KB
• pnm-20250930_def.xml (EX-101.DEF) — 948KB
• pnm-20250930_lab.xml (EX-101.LAB) — 1297KB
• pnm-20250930_pre.xml (EX-101.PRE) — 1183KB
• pnm-20250930_htm.xml (XML) — 3714KB

FINANCIAL INFORMATION

PART I. FINANCIAL INFORMATION

FINANCIAL STATEMENTS (UNAUDITED)

ITEM 1. FINANCIAL STATEMENTS (UNAUDITED) TXNM ENERGY , INC. AND SUBSIDIARIES Condensed Consolidated Statements of Earnings 8 Condensed Consolidated Statements of Comprehensive Income 9 Condensed Consolidated Statements of Cash Flows 10 Condensed Consolidated Balance Sheets 12 Condensed Consolidated Statements of Changes in Equity 14 PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES Condensed Consolidated Statements of Earnings 15 Condensed Consolidated Statements of Comprehensive Income 16 Condensed Consolidated Statements of Cash Flows 17 Condensed Consolidated Balance Sheets 19 Condensed Consolidated Statements of Changes in Equity 21 TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES Condensed Consolidated Statements of Earnings 22 Condensed Consolidated Statements of Cash Flows 23 Condensed Consolidated Balance Sheets 24 Condensed Consolidated Statements of Changes in Common Stockholder's Equity 26 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 27

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 76

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 110

CONTROLS AND PROCEDURES

ITEM 4. CONTROLS AND PROCEDURES 112

OTHER INFORMATION

PART II. OTHER INFORMATION

LEGAL PROCEEDINGS

ITEM 1. LEGAL PROCEEDINGS 113

RISK FACTORS

ITEM 1A. RISK FACTORS 113

OTHER INFORMATION

ITEM 5. OTHER INFORMATION 115

EXHIBITS

ITEM 6. EXHIBITS 115 SIGNATURE 116 3 Table of Contents GLOSSARY Definitions: 2024 Rate Change PNM's request for a general increase in electric rates filed with the NMPRC on December 5, 2022 using a calendar year 2024 FTY 2025 Rate Request PNM's request for a general increase in electric rates filed with the NMPRC on June 14, 2024 using a FTY beginning July 1, 2025 2028 Resource Application PNM's November 22, 2024 application with the NMPRC for approval of resources to be available for the 2028 summer peak ACE Rule Affordable Clean Energy Rule AEP OnSite Partners AEP OnSite Partners, LLC, a subsidiary of American Electric Power, Inc. until the completion of its sale on September 30, 2024 to Basalt Infrastructure Partners LLC AFUDC Allowance for Funds Used During Construction AOCI Accumulated Other Comprehensive Income APS Arizona Public Service Company, the operator and a co-owner of PVNGS and Four Corners ARO Asset Retirement Obligation ASU Accounting Standards Update Blackstone Infrastructure Blackstone Infrastructure Partners L.P. Board Board of Directors of TXNM CAA Clean Air Act CAISO California Independent System Operator Carbon Pollution Standards Carbon Pollution Standards established by the EPA on August 3, 2015 CCN Certificate of Convenience and Necessity CCR Coal Combustion Residuals CCS Carbon Capture and Storage/Sequestration CIAC Contributions in Aid of Construction CO 2 Carbon Dioxide CODM Chief Operating Decision Maker Community Solar Act Senate Bill 84 effective June 18, 2021 Convertible Notes TXNM's $550.0 million junior subordinated convertible notes issued on June 10, 2024 and June 21, 2024 DC Circuit United States Court of Appeals for the District of Columbia Circuit DCRF TNMP's applications for a distribution cost recovery factor DOE United States Department of Energy EDAM Extended Day Ahead Market EEI Edison Electric Institute, an association representing all U.S. investor-owned e

FINANCIAL INFORMATION

PART I. FINANCIAL INFORMATION

FINANCIAL STATEMENTS

ITEM 1. FINANCIAL STATEMENTS TXNM ENERGY, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited) Three Months Ended September 30, Nine Months Ended September 30, 2025 2024 2025 2024 (In thousands, except per share amounts) Electric Operating Revenues $ 647,162 $ 569,256 $ 1,632,374 $ 1,494,235 Operating Expenses: Cost of energy 195,042 138,909 531,846 425,919 Administrative and general 68,445 64,840 205,205 179,848 Energy production costs 21,172 21,259 71,799 68,055 Regulatory disallowances ( 731 ) 6,142 ( 731 ) 10,601 Depreciation and amortization 105,012 97,400 314,798 285,000 Transmission and distribution costs 27,167 23,660 79,133 71,475 Taxes other than income taxes 28,185 25,966 82,864 75,984 Total operating expenses 444,292 378,176 1,284,914 1,116,882 Operating income 202,870 191,080 347,460 377,353 Other Income and Deductions: Interest income 6,496 8,669 14,615 17,719 Gains on investment securities 11,376 13,770 33,691 32,326 Other income 7,688 7,953 18,121 20,552 Other (deductions) ( 3,028 ) ( 1,988 ) ( 11,767 ) ( 20,146 ) Net other income and deductions 22,532 28,404 54,660 50,451 Interest Charges 70,149 59,664 205,713 169,254 Earnings before Income Taxes 155,253 159,820 196,407 258,550 Income Taxes 18,949 23,422 21,293 19,822 Net Earnings 136,304 136,398 175,114 238,728 (Earnings) Attributable to Valencia Non-controlling Interest ( 5,462 ) ( 5,064 ) ( 13,509 ) ( 11,891 ) Preferred Stock Dividend Requirements of Subsidiary ( 132 ) ( 132 ) ( 396 ) ( 396 ) Net Earnings Attributable to TXNM $ 130,710 $ 131,202 $ 161,209 $ 226,441 Net Earnings Attributable to TXNM per Common Share: Basic $ 1.22 $ 1.45 $ 1.63 $ 2.50 Diluted $ 1.22 $ 1.45 $ 1.63 $ 2.50 Dividends Declared per Common Share $ 0.4075 $ 0.3875 $ 1.2225 $ 1.1625 The accompanying notes, as they relate to TXNM, are an integral part of these condensed consolidated financial statements. 8 Table of Contents TXNM ENERGY, INC. AND SUB

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