TXNM

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations for TXNM is presented on a combined basis, including certain information applicable to PNM and TNMP. The MD&A for PNM and TNMP is presented as permitted by Form 10-Q General Instruction H(2). This report uses the term “Company” when discussing matters of common applicability to TXNM, PNM, and TNMP. A reference to a “Note” in this Item 2 refers to the accompanying Notes to Condensed Consolidated Financial Statements (Unaudited) included in Item 1, unless otherwise specified. Certain of the tables below may not appear visually accurate due to rounding. MD&A FOR TXNM EXECUTIVE SUMMARY Overview TXNM is a holding company with two regulated electric utilities, PNM and TNMP, serving approximately 846,000 residential, commercial, and industrial customers in New Mexico and Texas. TXNM strives to create a clean and bright energy future for customers, communities, and shareholders. TXNM’s strategy and decision-making are focused on safely providing reliable, affordable, and environmentally responsible power built on a foundation of sustainability. Recent Developments Merger On May 18, 2025, TXNM, Parent, and Merger Sub (both Parent and Merger Sub are affiliates of Blackstone Infrastructure) entered into the Merger Agreement pursuant to which Merger Sub will merge with and into TXNM, with TXNM surviving the Merger as a direct, wholly-owned subsidiary of Parent. Pursuant to the Merger Agreement, each issued and outstanding share of the common stock of TXNM (other than those listed in Note 17) at the Effective Time will be converted into the right to receive $61.25 in cash, without interest. The proposed Merger has been unanimously approved by the Board and was approved by the TXNM shareholders at a special meeting held on August 28, 2025. The waiting period under the HSR Act in connection with the Merger has expired without any objections or concerns having been raised, both the FCC and FERC approved the application, and the PUCT approved the unanimous settlement, satisfying four of the conditions to closing of the Merger Agreement. Consummation of the Merger remains subject to the satisfaction or waiver of certain customary conditions, including, without limitation, no Legal Restraint, and the receipt of certain required regulatory approvals (including the NMPRC and the NRC). TXNM has filed applications for regulatory approval of the Merger with the NMPRC (Note 12) and NRC. The Merger Agreement does not contain any financing condition and is currently expected to close in the first half of 2027. On December 11, 2025, TXNM and Blackstone Infrastructure reached a unanimous settlement with parties in the Merger proceeding filed with the PUCT, that was approved on February 6, 2026. On February 20, 2026, FERC approved the proposed Merger rejecting claims related to data centers, private equity ownership, and speculative cross-subsidization relying on existing state ring-fencing protections in New Mexico and Texas. See Note 12. Vision, Values, and Business Objectives TXNM’s vision is to create a clean and bright energy future while fulfilling its purpose to work together with customers and communities to meet their energy needs. TXNM’s core values of Safety, Caring, and Integrity are the foundation for the Company’s business objectives focused on safety excellence and customer satisfaction, including reliability. To reach these objectives, the Company is committed to: •Preparing our workforce with the knowledge and skills to thrive in a customer-focused world •Purposefully delivering an intentional customer experience that exceeds our evolving customer and stakeholder expectations •Enabling an environmentally sustainable future and deploying technologically advanced solutions that empower and benefit customers •Demonstrating the relationship between customer excellence and our dedicated focus on financial strength Meeting the business objectives above will drive key financial results: •Earning authorized returns on regulated businesses 75 Table of Contents •Delivering long-term earnings growth, with a dividend payout ratio between 50 and 60 percent of earnings •Maintaining investment grade credit ratings Business Focus To achieve the Company’s business objectives, focus is directed in key areas: Safe, Reliable and Affordable Power; Utility Plant Investments; Superior Customer Experience; Environmentally Responsible Power; and Stakeholder and Community Engagement. The Company works closely with its stakeholders to ensure that resource plans and infrastructure investments benefit from robust public dialogue and balance the diverse needs of our communities. Equally important is the focus of TXNM’s utilities on customer satisfaction and community engagement. Safe, Reliable, and Affordable Power Safety is the first priority of our business and a core value of the Company. TXNM utilizes a Safety Management System to provide clear direction, objectives and targets for managing safety performance and minimizing risks and empowers employees to “Be the Reason Everyone Goes Home Safe”. TXNM measures reliability and benchmark performance of PNM and TNMP against other utilities using industry-standard metrics, including System Average Interruption Duration Index (“SAIDI”) and System Average Interruption Frequency Index (“SAIFI”). PNM’s and TNMP’s investment plans include projects designed to support reliability and reduce the amount of time customers are without power. TXNM and its utilities are aware of the important roles they play in enhancing economic vitality in their service territories. Management believes that maintaining strong and modern electric infrastructure is critical to ensuring reliability and supporting economic growth. When contemplating expanding or relocating their operations, businesses consider energy affordability and reliability to be important factors. PNM and TNMP strive to balance service affordability with infrastructure investment to maintain a high level of electric reliability and to deliver a safe and superior customer experience. Investing in PNM’s and TNMP’s infrastructure is critical to ensuring reliability and meeting future energy needs. Both utilities have long-established records of providing customers with safe and reliable electric service. PNM participates in the EIM, a real-time wholesale energy trading market operated by the CAISO, that enables participating electric utilities to buy and sell energy. The EIM aggregates the variability of electricity generation and load for multiple balancing authority areas and utility jurisdictions. PNM passes the cost savings achieved by participating in the EIM through to customers under PNM’s FPPAC. PNM also plans to join the EDAM, which is a voluntary day-ahead regional market that expands on CAISO’s EIM market, as early as 2027. Utility Plant Investments During the 2024 and 2025 periods, PNM and TNMP together invested $2.4 billion in utility plant, including transmission and distribution systems, substations, power plants, and nuclear fuel. Investment plans emphasize new investments in transmission and distribution infrastructure to support growing demand with grid reliability and resilience and to deliver clean energy. The Company has been improving the diversification of its rate base among regulatory jurisdictions, moving TNMP and FERC transmission rate base to over half of the consolidated rate base. Investments at TNMP support the continued high growth across each region of its service territory. Economic growth across Texas continues to push the demands on TNMP’s system to new levels, including a new system peak in July 2026. In 2023, the Texas legislature passed a series of bills aimed at encouraging investments to enhance grid reliability and resilience, while the PUCT continues to develop rules in support of new legislation. TNMP will continue to submit filings for recovery of its investments, in accordance with these new rules, in addition to the existing rate recovery mechanisms. See the subheading under State Regulation and Legislation below. Investments at PNM are aimed at supporting economic development and advancing the infrastructure beyond its original architecture to a more flexible and redundant system accommodating growing amounts of intermittent and distributed generation resources and integrating evolving technologies that provide long-term customer value. New Mexico’s clean energy future depends on a reliable, resilient, secure grid to deliver an evolving mix of energy resources to customers. More recently, the 2029-2032 Resource portfolio application filed with the NMPRC is an integrated package of resources designed to ensure that PNM continues to provide safe, reliable, and cost-effective electric service while meeting anticipated load growth, including a new system peak in July 2026, and supporting the clean energy transition under New Mexico’s ETA. In addition, the CCN requesting approval of a new transmission line and the recent approval received to defer costs of two economic development projects filed under SB 170 support economic development in New Mexico. Similarly, projects included in the Grid Modernization Plan will improve customers’ ability to customize their use of energy and modernize PNM’s electric grid through infrastructure and technology improvements. 76 Table of Contents See the subheading Capital Requirements included in the full discussion of Liquidity and Capital Resources below for additional discussion of the Company’s projected capital requirements. Superior Customer Experience The Company strives to deliver a superior customer experience and includes customer satisfaction as a key performance metric. As a transmission and distribution service provider in Texas’ deregulated market, reliability is core to the customer experience and TNMP continues to focus on keeping end-users updated about interruptions and encouraging consumer preparation when severe weather is forecasted. In 2024, TNMP made significant strides in improving customer satisfaction related to power outages by providing a more user-friendly experience on TNMP’s outage map information system, making it easier for customers to access real-time outage information. In addition, TNMP introduced a new system that allows customers to receive outage alerts through multiple communication channels to enhance transparency and to ensure customers stay informed during outages. During the most recent winter storm, TNMP sent employees to assist in expanded vegetation support, helping crews address tree-related outages in remote or difficult-to-access areas and restoring power to those communities. In April 2026, TNMP was announced as an Emergency Response Award recipient by EEI. The Emergency Response Awards recognize recovery and assistance efforts of electric companies following service disruptions caused by extreme weather or other natural events. PNM, as a vertically integrated utility in New Mexico, is focused on providing customers reliable, affordable and clean energy. PNM holds in-person engagements with residential and business customers through customer advisory councils to receive feedback on the programs and services offered. Additionally, PNM continues to focus its efforts on customer service improvements, including enhanced digital payment options, strategic customer outreach, and improved communications. To supplement its service, PNM has implemented programs regulated by the NMPRC to incentivize customers to address these issues through rebates and/or discounts, including Energy Efficiency, Transportation Electrification, Community Solar, and Time-of-Day pilot Programs. Increased incentives are provided to low-income customers to further encourage participation from households typically experiencing a higher energy burden. Additionally, PNM offers customer bill payment assistance through PNM Good Neighbor Fund and accepts employee and customer donations to supplement this fund. As a result of PNM’s efforts, 2,608 families in need received emergency assistance through the PNM Good Neighbor Fund for the six months ended June 30, 2026. While the electric utility industry continues to experience declines in customer satisfaction, as measured by J.D. Power, PNM’s ranking in 2025 remained stable, reflecting the Company’s sustained efforts to improve the customer journey through a more seamless and customer-friendly experience. In early 2026, PNM refreshed its outage communications to push out more timely, transparent and customer-friendly information when a customer experiences a power outage. These communications were implemented for all customers with available contact information and follow a bill redesign implemented in 2025 to improve transparency and usability. Additional improvements are planned as a part of PNM’s approved Grid Modernization Plan. PNM has also increased engagement in communities with inherent high fire risk, including enrollment in outage alerts, a series of town hall panel discussions with local community officials, newsletters and other mailings. In 2026, these efforts highlight a Public Safety Power Shutoff Alert System with varying status levels, similar to those for other emergencies (hurricanes, tornadoes, etc.) to provide customers with the necessary information to prepare for potential power outages as a last resort when extreme wildfire risks are present on our system. Environmentally Responsible Power TXNM has a long-standing record of environmental stewardship. PNM’s environmental focus is in three key areas: •Developing strategies to provide reliable and affordable power while transitioning to a 100% carbon-free generating portfolio by 2040 •Preparing PNM’s system to meet New Mexico’s increasing renewable energy requirements as cost-effectively as possible •Increasing energy efficiency participation TXNM’s corporate website (www.txnmenergy.com) includes a dedicated section providing key environmental and other information related to PNM’s and TNMP’s operations, including information that collectively demonstrates the Company’s commitment to sustainability. This information highlights plans for PNM to be coal-free no later than 2031 and to achieve a carbon-free generating portfolio by 2040. Achieving our goal of carbon-free by 2040 is dependent on balancing reliability, cost considerations, and maturity of emerging technologies. PNM’s Grid Modernization Plan is a major step forward in providing reliable, affordable and sustainable energy. As part of that plan, PNM will promote energy equity by installing technology like smart meters and making distribution upgrades in low-income areas first in order to allow lower-income customers to gain insights into their energy usage to improve 77 Table of Contents affordability and create fairer access to energy. In addition, PNM’s Time-of-Day pilot incentivizes customers, through price signals, to use energy during the day when renewable generation is abundant. The IRA provided benefits for TXNM and its customers by extending and enhancing clean energy incentives such as the investment tax credit and production tax credit. As the Company continues its transition away from carbon emitting sources, these credits may have reduced the cost of renewable investments. In addition, the IRA included a production tax credit for existing nuclear facilities that created an added benefit for PNM’s ownership in the carbon-free PVNGS. Other IRA provisions encouraged transportation electrification with EV credits and incentives for vehicle charging infrastructure. In July 2025, the OBBBA was enacted and it accelerated the phase-out of certain IRA energy tax credits and restricted the availability of credits for “foreign entities of concern”, as such term is used in the OBBBA. As a result, TXNM anticipates potentially higher costs associated with any future renewable energy development but does not expect other aspects of the OBBBA to have a material impact on its financial statements. Electric Vehicles TXNM’s sustainability goals include plans for additional emissions reductions through the electrification of its vehicle fleet. Growing the number of EVs within the Company’s fleet will benefit the environment and lower fuel costs furthering the commitment to sustainability. Under the commitment, existing fleet vehicles will be replaced as they are retired with an increasing percentage of EVs. To demonstrate TXNM’s commitment to increase the electrification of vehicles in its service territory, PNM implemented its first TEP in 2022 and received approval of its 2024-2026 TEP in 2024. Since then, PNM has launched transportation electrification offerings that continue to support customer adoption of EVs by addressing barriers to adoption. PNM’s TEP program budget provides financial support to residential and non-residential customers towards the purchase of EV chargers and/or site make-ready costs, as well as customer education and outreach on EV-specific electricity rates to encourage charging during off-peak periods. More than 25% of the program budget is dedicated to low- and moderate-income customers to plan for an equitable transition to an electrified transportation sector. PNM participates in the National Electric Highway Coalition, which plans to build fast-charging ports along major U.S. travel corridors. The coalition, with approximately 50 investor-owned electric companies, is committed to providing EV fast charging ports that will allow the public to drive EVs with confidence throughout the country’s major roadways. To support this initiative, PNM’s TEP program includes the installation of a charging network along major roadways in New Mexico. PNM filed its 2027-2029 TEP with the NMPRC on June 1, 2026. Renewable Energy and Energy Storage PNM’s utility-owned solar and energy storage capacity, as well as solar, energy storage, wind, and geothermal procurements from facilities in service as of June 30, 2026, have a total net generation capacity of 3,409 MW. In addition to PNM’s owned and third-party contracted solar facilities, PNM also has a customer distributed solar generation program that represented 387.4 MW at June 30, 2026. The NMPRC has approved plans for PNM to procure energy and RECs from additional resources to serve retail customers and a data center located in PNM’s service territory. PNM’s approved resources have a generation capacity of 1,318 MW. This includes approximately 280 MW of additional capacity under the Community Solar Act which will provide customers an additional option of accessing solar energy. PNM will continue to seek approval to procure renewable resources as needed to meet forecasted peak load requirements to serve its customers and New Mexico’s RPS and carbon-free resource requirements, while balancing the impact to customers’ electricity costs. Energy Efficiency Energy efficiency plays a significant role in helping to keep customers’ electricity costs low while meeting their energy needs and is one of the Company’s approaches to supporting environmentally responsible power. PNM’s and TNMP’s energy efficiency and load management portfolios continue to achieve robust results. In 2026, incremental energy saved as a result of participation in PNM’s portfolio of energy efficiency programs is estimated to be 87 GWh. This is equivalent to the annual consumption of approximately 12,056 homes in PNM’s service territory. PNM’s load management and energy efficiency programs also help lower peak demand requirements. In 2026, TNMP’s incremental energy saved as a result of participation in TNMP’s energy efficiency programs is estimated to be approximately 17 GWh. This is equivalent to the annual consumption of approximately 2,392 homes in TNMP’s service territory, estimated using a national average avoided emissions rate. TNMP’s high-performance homes residential new construction energy efficiency program has earned the Energy Star Partner of the Year award for 8 years, including 6 years receiving the Sustained Excellence Award, recognizing long-term commitment to fighting climate change and protecting public health through energy efficiency. In April 2026, PNM filed an application with the NMPRC for its energy efficiency and load management programs to be offered in its 2027 Plan (Note 12). In May 2026, TNMP filed its annual request with the PUCT to adjust its EECRF for changes in costs for 2027 (Note 12). 78 Table of Contents Water Conservation and Solid Waste Reduction PNM continues to make progress in its efforts to reduce the amount of fresh water used to make electricity. Continued growth in PNM’s solar and wind energy resources, energy efficiency programs, and innovative uses of air-cooling technology have contributed to this reduction. Water usage has continued to decline as PNM has substituted less fresh-water-intensive generation resources to replace SJGS. As the Company moves forward with its mission to achieve carbon-free generation, it expects that more significant water savings will be gained. Shutting down SJGS in 2022 and Four Corners in 2031 will allow the Company to reach our goals for reduced freshwater use at 80% by 2035 and 90% by 2040 from 2005 levels. Focusing on responsible stewardship of New Mexico’s scarce water resources improves PNM’s water-resilience in the face of persistent drought and ever-increasing demands for water to spur the growth of New Mexico’s economy. In addition to the above areas of focus, the Company is working to reduce the amount of solid waste going to landfills through increased recycling and reduction of waste. In 2025, 18 of the Company’s 22 facilities met or exceeded the solid waste diversion goal of a 65% diversion rate. Stakeholder and Community Engagement The Company is committed to fostering relationships with its customers, stakeholders, and communities. Through outreach, collaboration, and various community-oriented programs, the Company has demonstrated a commitment to building productive relationships with stakeholders, including customers, community partners, regulators, intervenors, legislators, and shareholders. Local relationships and one-on-one communications remain two of the most valuable ways both PNM and TNMP connect with their stakeholders. Both companies maintain long-standing relationships with governmental representatives and key electricity consumers to ensure that these stakeholders are updated on Company investments and initiatives. Key electricity consumers also have dedicated Company contacts that support their important service needs. The Company utilizes a number of communications channels and strategic content to serve and engage its many stakeholders. PNM’s website provides the details of major regulatory filings, including general rate requests, as well as the background on PNM’s efforts to maintain reliability, keep prices affordable, and protect the environment. The website is also a resource for information about PNM’s operations and community outreach efforts to customers on various topics such as education, outage alerts, safety, wildfire safety, customer service, community partnerships in philanthropic projects, and plans for building a sustainable energy future for New Mexico and to transition to a carbon-free generating portfolio. PNM also leverages social media to communicate about some of these topics with certain customers. TNMP’s website provides information on customized energy efficiency programs and TNMP rates, in addition to other community outreach information. As discussed above, TXNM’s corporate website includes a dedicated section providing additional information regarding the Company’s commitment to sustainability. In July 2026, PUCT adopted a rule requiring utilities that own or operate power transmission or distribution facilities in wildfire risk areas, as defined by the Texas Division of Emergency Management to prepare and submit a wildfire mitigation plan (“WMP”) for approval. TNMP has filed a notice of intent to prepare and submit its WMP for approval on or before September 30, 2026. Throughout 2025, PNM held in-person community events focused on wildfire safety and educating customers about the PSPS process and wildfire mitigation efforts to protect the public. These gatherings are designed to share critical information, coordinate with local resources, and listen to feedback from local communities. PNM hosted four events in High Fire Risk Areas (“HFRA”) across New Mexico in 2025 and expects to host similar events in 2026. In addition, PNM included local emergency managers in its periodic meetings referred to as “wildfire tabletops” in 2025. Each of these engagements builds and strengthens our preparedness as a Company for wildfire prevention and response. TXNM has a long tradition of supporting the communities that it serves in New Mexico and Texas. During the three years ended December 31, 2025, TXNM, through corporate giving, contributed $8.7 million to civic, educational, environmental, tribal, low income, and economic development organizations. Additionally, the PNM Resources Foundation (the “Foundation”) has provided an annual average of $1.2 million in grant funding over the past three years across New Mexico and Texas. Throughout 2025, the Foundation focused on grants for wellness and athletic activities within the community and grants for the environment. These grants help nonprofits innovate or sustain programs to grow and develop their missions, develop and implement environmental programs, and provide educational opportunities. The Foundation continues to expand its matching and volunteer grant programs and the annual amount of matching donations available to each of its employees. The Foundation has also approved an increase to the amount awarded to employees through the employee crisis management fund, which provides our employees with financial support for basic living needs during catastrophic emergencies and times of crises. The Company collaborated with community foundations to help support the effort and direct funds where they were most needed for those who have been affected by the wildfires, floods and hurricanes in surrounding communities in addition to supporting law enforcement and first responders. 79 Table of Contents TXNM recognizes its responsibility to support programs and organizations that enrich the quality of life across its service territories and seeks opportunities to further demonstrate its commitment in these areas as needs arise. In response to community needs, TXNM partners with other corporate funders to support nonprofits and small businesses. TXNM also collaborates on community projects, low-income customer assistance programs, and employee volunteerism. PNM stands out as one of the few investor-owned utilities operating a tribal relations office, which is focused on serving and collaborating with 18 of the 23 sovereign nations in New Mexico and the Southwest. PNM created the Navajo Nation Workforce Training Scholarship Program to provide support for Navajo tribal members and to encourage the pursuit of education and training in existing and emerging jobs in the communities in which they live. PNM has invested in paid summer college engineering internship programs for American Indian students in the greater Albuquerque area, established the PNM Pueblo Education Scholarship and Endowment to invest in higher education for Native American Indian students, and supported the development of an entrepreneur complex located in Albuquerque and operated by the Indian Pueblo Cultural Center. PNM continues to partner with the Navajo Nation in the Light Up Navajo project, piloted in 2019 and modeled as a mutual aid project to connect Navajo homes without electricity to the power grid. PNM is one of 44 utilities across 16 states to participate in improving the quality of life for families by bringing electricity to over 1,000 homes since inception of the project. PNM has also partnered with New Mexico universities to enhance intern programs and developed a business coalition model to drive economic development through intern partnerships. Employee volunteers are the lifeblood of a healthy corporate culture. Community giving through volunteers’ time and effort is at the heart of employee engagement. Throughout 2025, the Company held large-scale volunteer events, working alongside nonprofits, schools, and vulnerable communities throughout New Mexico and Texas. More than 640 employees in both states participated in the annual “Day of Service,” a workday event encouraging employee volunteerism and serving more than 40 organizations. Throughout the year, employees volunteer their time generously through independent volunteer activities and board participation. Employees strengthen community resilience by giving more than 4,000 volunteer hours each year to support the health, safety, and well-being of diverse communities. Financial Focus Earning Authorized Returns on Regulated Businesses TXNM’s success in accomplishing its financial objectives is highly dependent on two key factors: fair and timely regulatory treatment for its utilities and the utilities’ strong operating performance. The Company has multiple strategies to achieve favorable regulatory treatment, all of which have as their foundation a focus on the basics: safety, operational excellence, and customer satisfaction, while engaging stakeholders to build productive relationships. Both PNM and TNMP seek cost recovery for their investments through general rate cases, periodic cost of service filings, and various rate riders. The rates PNM and TNMP charge customers are subject to traditional rate regulation by the NMPRC, FERC, and the PUCT. Additional information about rate filings is provided in Note 17 of the Notes to Consolidated Financial Statements in the 2025 Annual Reports on Form 10-K. Fair and timely rate treatment from regulators is crucial to PNM and TNMP in earning their allowed returns and critical for TXNM to achieve its financial objectives. TXNM believes that earning allowed returns is viewed positively by credit rating agencies and that improvements in the Company’s ratings could lower costs for utility customers. State Regulation and Legislation TNMP In the 2023 and 2025 Texas Legislative sessions several bills were passed to support utility reliability and resiliency by encouraging and protecting utility infrastructure investments. Under the new legislation, TNMP filed its 2025-2027 SRP in August 2024 and filed an unopposed settlement with the PUCT in December 2024 that was approved with slight modifications in March 2025. Other bills directed ERCOT to develop reliability plans for the Permian Basin which resulted in the need for additional investments in the West Texas service territory and to establish standards for interconnecting large load customers in the region. In 2025, HB 5247 was passed, which immediately authorized certain utilities, including TNMP, to offset depreciation, property tax expenses, and carrying costs with alternative revenue and recognize a regulatory asset for qualifying investments that are not currently reflected in rates, until the following year in which they would file a single, annual proceeding with the PUCT. In February 2026, PUCT adopted a rule to ensure the power demands of large load customers of 75 MW or more, be incorporated into ERCOT’s Regional Transmission Plan and resource adequacy assessments. These pieces of legislation demonstrate that Texas continues to encourage utility investment and prioritizes timely rate recovery. TNMP will look to prioritize investments aligned with these measures that improve the quality of service for current and future customers and anticipates submitting annual filings in accordance with the rule. Beyond legislative actions, the regulatory framework in Texas strongly encourages investments into the grid by providing timely recovery through rate mechanisms outside of general rate cases. The PUCT has approved mechanisms that allow TNMP to recover capital invested in transmission and distribution projects without having to file a general rate case. The 80 Table of Contents PUCT also approved rate riders that allow TNMP to recover amounts related to energy efficiency and third-party transmission costs. TNMP also has approximately 285,000 advanced meters across its service territory, the costs of which are being recovered through base rates. TNMP Base Rate Review In November 2025, TNMP filed the TNMP Base Rate Review with the PUCT, requesting recovery of $2.8 billion of rate base, a requested ROE of 10.4%, and a 47.54% equity ratio. The TNMP Base Rate Review also includes increases in operations and maintenance expenses that are not recovered through semi-annual TCOS and DCRF filings, excludes increases in interest expense resulting from refinancing of debt associated with the proposed Merger, and requests recovery of $20.5 million associated with Hurricane Beryl restoration costs over a five-year period. If approved by the PUCT, the new rates are expected to become effective in mid-2026. On May 29, 2026, TNMP filed an unopposed stipulation and settlement agreement with the PUCT that was approved in a Final Order issued on July 30, 2026. See Note 12. PNM The 2025 New Mexico Legislative session included several bills that were passed to support economic development, clean energy, grid modernization, and wildfire preparedness. Among the bills passed were companion bills: New Mexico Senate Bill 169 (the “Site Readiness Bill”) and New Mexico Senate Bill 170 (the “Power Readiness Bill”). The Site Readiness Bill creates a dedicated funding mechanism and a structured process for identifying, assessing, and preparing strategic economic development sites across the state, designed to position New Mexico to compete with other states actively investing in site readiness. It appropriates approximately $24 million for the site readiness fund for site-characterization studies of proposed economic development sites and site preparations of strategic economic development sites. The Site Readiness Bill also creates the Strategic Economic Development Site Advisory Committee to advise the New Mexico Economic Development Department (“NMEDD”) in selecting sites and awarding funding. The Power Readiness Bill is intended to reduce risk, lead times, and regulatory uncertainty in acquiring additional generation resources and in building large-scale infrastructure needed to competitively serve economic development customers that create jobs. It allows a public utility to annually increase generation capacity by up to 10% of the public utility’s total system peak load. The Power Readiness Bill also shortens the time for regulatory approval of CCN filings for new, major infrastructure and allows a public utility to defer costs of economic development projects, placing them into a regulatory asset until a customer signs a contract or begins taking service. In March 2026, PNM received approval to defer costs of two economic development projects under the Power Readiness Bill; the Westpointe and Mesa Del Sol Substations (See Note 12). The New Mexico Energy Transition Act (“ETA”) The passage of the ETA amended the REA to require utilities operating in New Mexico to have renewable portfolios equal to 50% by 2030, 80% by 2040, and 100% zero-carbon energy by 2045. Those amendments also allow for the recovery of undepreciated investments and decommissioning costs related to qualifying EGUs that the NMPRC has required be removed from retail jurisdictional rates, provided replacement resources to be included in retail rates have lower or zero-carbon emissions. The ETA provides for a transition from fossil-fueled generating resources to renewable and other carbon-free resources by allowing utilities to issue Securitized Bonds related to the retirement of certain coal-fired generating facilities to qualified investors. See additional discussion of the ETA in Notes 16 and 17 of the Notes to Consolidated Financial Statements in the 2025 Annual Reports on Form 10-K and the issuance of the ETBC I Securitized Bonds in Note 7 of the Notes to Consolidated Financial Statements in the 2025 Annual Reports on Form 10-K. Grid Modernization Plan In October 2024, the NMPRC approved PNM’s Grid Modernization Plan which will improve customers’ ability to customize their use of energy and benefit from the electricity grid consistent with the Grid Modernization Statute. PNM’s plan to modernize its electricity grid through infrastructure and technology improvements includes installing technology like smart meters and making distribution upgrades in low-income areas first in order to allow lower-income customers to gain insights into their energy usage to improve affordability and create fairer access to energy. The approved plan includes grid modernization investments of approximately $344 million for the first six years of a broader 11-year strategy. The approved rate rider will recover capital costs, operating expenses, and taxes associated with the investments included in the plan. In June 2025, the Grid Modernization Plan was updated to reflect an increase in investments from approximately $344 million to $367 million in the first six years and a decrease in projected operations and maintenance costs of approximately 18%. See Note 12. Integrated Resource Plan NMPRC rules require that investor-owned utilities file an IRP every three years. The IRP is required to cover a 20-year planning period and contain an action plan covering the first three years of that period. PNM’s accepted 2023 IRP maintains a continued focus on a carbon-free energy system by 2040. The plan highlights the need for a significant sustained addition of 81 Table of Contents resources over the next two decades, replacing retiring or expiring capacity and meeting concurrent load growth, while reducing the carbon intensity of PNM’s portfolio. In December 2024, PNM issued its 2029-2032 RFP for at least 900 MW of new energy resources to come online between 2029 and 2032, with at least 500 MW needed by 2030, and is anticipated to identify potential replacement resources for PNM’s current natural gas generation capacity as well as PNM’s ownership interest in Four Corners. In May 2026, PNM filed its 2029-2032 Resource Portfolio Application with the NMPRC, requesting 1,650 MW of new energy resources and its abandonment and exit of its ownership interest in Four Corners in 2031. See Note 12. In the fourth quarter of 2025, PNM initiated its 2026 IRP process which will cover the 20-year planning period from 2026 through 2046. Consistent with historical practice, PNM is receiving public input from interested parties as part of this process. PNM expects to file its 2026 IRP with the NMPRC on or before September 1, 2026. PNM Rate Riders and other The NMPRC has approved PNM recovering fuel costs through the FPPAC, as well as rate riders for renewable energy, energy efficiency, Grid Modernization, and the TEP. These mechanisms allow for more timely recovery of investments. FERC Regulation Rates PNM charges wholesale transmission customers are subject to traditional rate regulation by FERC. Rates charged to wholesale electric transmission customers, other than customers on the Western Spirit Line, are based on a formula rate mechanism pursuant to which rates for wholesale transmission service are calculated annually in accordance with an approved formula. The formula includes updating cost of service components, including investment in plant and operating expenses, based on information contained in PNM’s annual financial report filed with FERC, as well as including projected transmission capital projects to be placed into service in the following year. The projections included are subject to true-up. Certain items, including changes to return on equity and depreciation rates, require a separate filing to be made with FERC before being included in the formula rate. Delivering Long-Term Earnings Growth TXNM’s financial objective to deliver long-term earnings growth, enables investors to realize the value of their investment in the Company’s business. Earnings growth is based on ongoing earnings, which is a non-GAAP financial measure that excludes from GAAP earnings certain non-recurring, infrequent, and other items that are not indicative of fundamental changes in the earnings capacity of the Company’s operations. TXNM uses ongoing earnings to evaluate the operations of the Company and to establish goals, including those used for certain aspects of incentive compensation, for management and employees. TXNM targets a dividend payout ratio in the 50% to 60% range of its ongoing earnings. The Board will continue to evaluate the dividend on an annual basis, considering sustainability and growth, capital planning, and industry standards. The Board approved the following increases in the indicated annual common stock dividend: Approval Date Percent Increase December 2024 5.2% December 2025 3.7% Under the terms of the Merger Agreement, TXNM has agreed not to declare, set aside, make or pay any dividend or other distribution, payable in cash, stock, property or otherwise, with respect to any of its equity securities, or make any other actual, constructive or deemed dividend or distribution in respect of any of its equity securities (except (i) TXNM may continue the declaration and payment of regular quarterly cash dividends on TXNM common stock for each quarterly period ending after the date of the Merger Agreement, in an amount not to exceed $0.4275 in 2026, with usual record and payment dates for such quarterly dividends in accordance with past dividend practice, (ii) for any cash dividend or cash distribution by a wholly-owned subsidiary of TXNM to TXNM or another wholly-owned subsidiary of TXNM, and (iii) a “stub period” dividend to holders of record of TXNM common stock as of immediately prior to the Effective Time equal to the product of (1) the number of days from the record date for payment of the last quarterly dividend paid by TXNM prior to the Effective Time, multiplied by (2) a daily dividend rate determined by dividing the amount of the last quarterly dividend paid prior to the Effective Time by ninety-one). Maintaining Investment Grade Credit Ratings The Company is committed to maintaining investment grade issuer credit ratings in order to reduce the cost of debt financing and to help ensure access to credit markets, when required. On January 15, 2024, S&P revised TXNM, PNM, and 82 Table of Contents TNMP’s outlook to stable from positive. See the subheading Liquidity included in the full discussion of Liquidity and Capital Resources below for the specific credit ratings for TXNM, PNM, and TNMP. All of the credit ratings issued by both Moody’s and S&P on the Company’s senior debt continue to be investment grade. Economic Factors TNMP – In the three and six months ended June 30, 2026, TNMP experienced an increase in volumetric weather normalized retail load of 4.3% and 1.4% compared to 2025. Weather normalized demand-based load, excluding retail transmission consumers, increased 5.8% and 4.5% in the three and six months ended June 30, 2026, compared to 2025. Data center load, including distribution and transmission, has decreased 24.6% and 21.4% in the three and six months ended June 30, 2026 compared to 2025. PNM – In the three and six months ended June 30, 2026, PNM experienced an increase of 1.3% and a decrease of 0.8% in weather normalized residential load compared to 2025. Weather normalized commercial load increased 1.5% and decreased 0.7% in the three and six months ended June 30, 2026 compared to 2025. Industrial load increased 5.5% and 4.5% in the three and six months ended June 30, 2026 compared to 2025. The Company is closely monitoring the impacts on the capital markets of various macroeconomic conditions, including actions by the Federal Reserve to address inflationary concerns or other market conditions, and geopolitical activity. The Company has not experienced, nor does it expect to experience significant negative impacts to customer usage at PNM and TNMP resulting from these economic impacts. However, if current economic conditions worsen, the Company may be required to implement additional measures such as reducing or delaying operating and maintenance expenses and planned capital expenditures. Results of Operations Net earnings attributable to TXNM were $75.0 million, or $0.67 per diluted share, in the six months ended June 30, 2026, compared to $30.5 million, or $0.32 per diluted share, in 2025. Among other things, earnings in the six months ended June 30, 2026, benefited from higher transmission and distribution rates at TNMP, impacts of revenues recorded under HB 5247 at TNMP, increased revenue at PNM approved in the 2025 Rate Change, and higher transmission margin at PNM. These increases were partially offset by higher operating expenses at PNM and TNMP, increased depreciation, property taxes, and interest expense at PNM and TNMP due to increased plant in service, capacity arrangements at PNM, milder weather at PNM and TNMP, and decreased performance of investment securities in the NDT and coal mine reclamation trusts at PNM. Additional information on factors impacting results of operations for each segment is discussed below under Results of Operations. Liquidity and Capital Resources As of June 30, 2026, TXNM, PNM, and TNMP had revolving credit facilities with capacities of $300.0 million, $440.0 million, and $300.0 million. Total availability for TXNM on a consolidated basis was $512.9 million at July 24, 2026. The Company utilizes the revolving credit facilities and notes outstanding under the commercial paper program that are backed by the revolving credit facilities, except the PNM New Mexico Credit Facility, and cash flows from operations to provide funds for both construction and operational expenditures. TXNM also has intercompany loan agreements with each of its subsidiaries. TXNM projects that its consolidated capital requirements, consisting of construction expenditures and dividends, will total $11.1 billion for 2026 - 2030, including amounts expended through June 30, 2026. These construction expenditures may change due to incremental expenditures for new customer growth and other transmission and renewable energy expansion. TNMP’s investments support continued high growth in system demand across TNMP’s service territories and growing encouragement for infrastructure investments from the Texas legislature to support grid reliability and resilience. PNM’s capital initiatives include investments in generation, transmission, and distribution infrastructure to deliver clean energy, support customer growth, enhance customer satisfaction, and increase grid resilience. Construction expenditures also include investments proposed in PNM’s Grid Modernization Plan and TNMP’s SRP. To fund capital spending requirements to meet growth that balances earnings goals, credit metrics, and liquidity needs, the Company has entered into a number of other financing arrangements. A complete listing of outstanding financing arrangements is contained in Note 7 of the Notes to Consolidated Financial Statements in the 2025 Annual Reports on Form 10-K and details for current financing activity is contained in Note 9. After considering the effects of these financings and the Company’s short-term liquidity position as of July 24, 2026, the Company has consolidated maturities of long-term and short-term debt aggregating approximately $751.8 million through July 2027. In addition to internal cash generation, the Company anticipates that it will be necessary to obtain additional long-term financing in the form of debt refinancing, new debt issuances, and/or new equity, including those provided for under the Merger Agreement, in order to fund its capital requirements during the 2026-2030 period. The Company currently believes that 83 Table of Contents its internal cash generation, existing credit arrangements, and access to public and private capital markets will provide sufficient resources to meet the Company’s capital requirements for at least the next twelve months. As of June 30, 2026 and July 24, 2026, the Company was in compliance with its debt covenants. RESULTS OF OPERATIONS The following discussion and analysis should be read in conjunction with the Condensed Consolidated Financial Statements and Notes thereto. Trends and contingencies of a material nature are discussed to the extent known. Refer also to Disclosure Regarding Forward Looking Statements and to Part II, Item 1A. Risk Factors. A summary of net earnings attributable to TXNM is as follows: Three Months Ended June 30, Six Months Ended June 30, 2026 2025 Change 2026 2025 Change (In millions, except per share amounts) Net earnings attributable to TXNM $ 71.3 $ 21.6 $ 49.7 $ 75.0 $ 30.5 $ 44.5 Average diluted common and common equivalent shares 111.2 96.2 15.0 112.1 94.6 17.5 Net earnings attributable to TXNM per diluted share $ 0.64 $ 0.22 $ 0.42 $ 0.67 $ 0.32 $ 0.35 The components of the change in net earnings attributable to TXNM are: Three Months Ended Six Months Ended June 30, 2026 June 30, 2026 (In millions) TNMP $ 18.9 $ 27.3 PNM 21.4 4.6 Corporate and Other 9.4 12.6 Net change $ 49.7 $ 44.5 Information regarding the factors impacting TXNM’s operating results by segment are set forth below. Segment Information The following discussion is based on the segment methodology that TXNM’s management uses for making operating decisions and assessing performance of its various business activities. See Note 2 for more information on TXNM’s operating segments. TNMP Non-GAAP Financial Measures TNMP defines utility margin as electric operating revenues less cost of energy, which consists of costs charged by third-party transmission providers. TNMP believes that utility margin provides a more meaningful basis for evaluating operations than electric operating revenues since all third-party transmission costs are passed on to consumers through a transmission cost recovery factor. Utility margin is not a financial measure required to be presented and is considered a non-GAAP measure. TNMP does not intend for utility margin to represent any financial measure as defined by GAAP; however, the calculation of utility margin, as presented, most closely compares to gross margin as defined by GAAP. Reconciliations between utility margin and gross margin are presented below. Three Months Ended June 30, Six Months Ended June 30, 2026 2025 Change 2026 2025 Change (In millions) Gross margin $ 93.9 $ 75.1 $ 18.8 $ 178.9 $ 141.4 $ 37.5 Transmission and distribution costs 10.0 10.7 (0.7) 17.9 20.4 (2.5) Depreciation and amortization 39.6 34.9 4.7 78.1 70.1 8.0 Utility margin $ 143.5 $ 120.8 $ 22.7 $ 275.0 $ 231.9 $ 43.1 84 Table of Contents The following table summarizes the operating results for TNMP: Three Months Ended June 30, Six Months Ended June 30, 2026 2025 Change 2026 2025 Change (In millions) Electric operating revenues $ 187.4 $ 164.0 $ 23.4 $ 362.4 $ 313.5 $ 48.9 Cost of energy 44.0 43.3 0.7 87.4 81.5 5.9 Utility margin 143.5 120.8 22.7 275.0 231.9 43.1 Operating expenses 36.3 37.1 (0.8) 72.7 70.4 2.3 Depreciation and amortization 39.6 34.9 4.7 78.1 70.1 8.0 Operating income 67.6 48.7 18.9 124.2 91.4 32.8 Other income 4.4 1.7 2.7 7.6 4.1 3.5 Interest charges (22.0) (23.9) 1.9 (43.4) (41.3) (2.1) Segment earnings before income taxes 50.0 26.4 23.6 88.4 54.3 34.1 Income (taxes) (10.0) (5.5) (4.5) (17.8) (11.0) (6.8) Segment earnings $ 39.9 $ 21.0 $ 18.9 $ 70.6 $ 43.3 $ 27.3 The following table shows total sales, including the impacts of weather, by retail tariff consumer class and average number of consumers: Three Months Ended June 30, Six Months Ended June 30, Percentage Percentage 2026 2025 Change 2026 2025 Change Volumetric load (1) (GWh) Residential 837.1 837.0 — % 1,490.8 1,546.2 (3.6) % Commercial and other 12.5 11.5 8.7 24.8 23.6 5.1 Total volumetric load 849.6 848.5 0.1 % 1,515.6 1,569.8 (3.5) % Demand-based load (2) (MW) 8,872.2 9,435.8 (6.0) % 17,897.5 18,831.6 (5.0) % Average retail consumers (thousands) (3) 285.5 281.4 1.5 % 285.0 280.9 1.5 % (1) Volumetric load consumers are billed on KWh usage. (2) Demand-based load includes consumers billed on monthly KW peak and also includes retail transmission customers that are primarily billed under rate riders. (3) TNMP provides transmission and distribution services to REPs that provide electric service to customers in TNMP’s service territories. The number of consumers above represents the customers of these REPs. Under TECA, consumers in Texas have the ability to choose any REP to provide energy. Operating Results – Three Months Ended June 30, 2026, compared to 2025 The following table summarizes the significant changes to gross margin: Three Months Ended June 30, 2026 Change Gross margin: (In millions) Utility margin (see below) $ 22.7 Depreciation and amortization (see below) (4.7) Lower vegetation management and outside services expense, partially offset by higher employee related expense, excluding administrative costs 0.7 Other 0.1 Net Change $ 18.8 85 Table of Contents The following table summarizes the significant changes to utility margin: Three Months Ended June 30, 2026 Change Utility margin: (In millions) Transmission rate relief/load – Transmission cost of service rate increase in September 2025 and a decrease in ERCOT approved demand in May 2025 $ 4.2 Distribution rate relief – Distribution cost of service rate increases in June 2025 and December 2025 6.0 Volumetric-based consumer usage/load – Weather normalized KWh sales increased 4.3%; the average number of volumetric consumers increased 1.5% 1.2 Demand-based consumer usage/load – Weather normalized demand-based MW sales for large commercial and industrial consumers excluding retail transmission consumers increased 5.8% 1.8 Weather – Milder weather in the second quarter of 2026 (1.1) Rate relief - Increase in revenue due to interim base rates pending final order Note 12 1.6 Impacts of revenues recorded under HB 5247 Note 12 10.9 Decrease in deferral of excess deferred income tax benefits refunded through base rates (0.3) Rate Riders and other – Includes transmission cost recovery factor and energy efficiency rider which are partially offset in operating expenses (1.6) Net Change $ 22.7 The following tables summarize the primary drivers for changes in operating expenses, depreciation and amortization, other income (deductions), interest charges, and income taxes: Three Months Ended June 30, 2026 Change Operating expenses: (In millions) Lower employee related, outside services and vegetation management expense $ (2.4) Lower capitalization of administrative and general expenses due to lower construction expenditures 0.8 Higher allocated depreciation and amortization expense from Corporate and Other 0.3 Higher property tax due to increased utility plant in service 1.0 Other (0.5) Net Change $ (0.8) Depreciation and amortization: Increased utility plant in service $ 4.5 Other 0.2 Net Change $ 4.7 Other income (deductions): Higher CIAC $ 0.8 Higher equity AFUDC 1.0 Interest on Texas Sales and Use Tax refund 0.2 Other 0.7 Net Change $ 2.7 86 Table of Contents Three Months Ended June 30, 2026 Change Interest charges: (In millions) TNMP Merger Backstop Term Loan in June 2025 (Note 9) $ 1.3 Loss on reacquired debt in June 2025 5.3 Interest on FMBs (5.4) Lower interest on short-term borrowings 0.8 Lower debt AFUDC (0.4) Lower interest on transmission interconnection and security deposit arrangements 0.2 Other 0.1 Net Change $ 1.9 Income (taxes) benefits: Higher segment earnings before income taxes $ (4.9) Higher amortization of excess deferred income taxes 0.2 Other 0.2 Net Change $ (4.5) Operating Results – Six Months Ended June 30, 2026 compared to 2025 The following table summarizes the significant changes to gross margin: Six Months Ended June 30, 2026 Change Gross margin: (In millions) Utility margin (see below) $ 43.1 Depreciation and amortization (see below) (8.0) Lower vegetation management and outside services expense, partially offset by higher employee related expense, excluding administrative costs 2.4 Net Change $ 37.5 The following table summarizes the significant changes to utility margin: Six Months Ended June 30, 2026 Change Utility margin: (In millions) Transmission rate relief/load – Transmission cost of service rate increases in March 2025 and September 2025, and a decrease in ERCOT approved demand in May 2025 $ 9.5 Distribution rate relief – Distribution cost of service rate increases in June 2025 and December 2025 11.2 Volumetric-based consumer usage/load – Weather normalized KWh sales increased 1.4%; the number of volumetric consumers increased 1.5% 1.3 Demand-based consumer usage/load – Weather normalized demand-based MW sales for large commercial and industrial consumers excluding retail transmission consumers increased 4.5% 2.0 Weather – Milder weather in 2026 (2.4) Rate relief - Increase in revenue due to interim base rates pending final order Note 12 1.6 Impacts of revenues recorded under HB 5247 Note 12 19.2 Increase in deferral of excess deferred income tax benefits refunded through base rates 1.1 Rate Riders and other – Includes transmission cost recovery factor and energy efficiency rider which are partially offset in operating expenses (0.4) Net Change $ 43.1 87 Table of Contents The following tables summarize the primary drivers for changes in operating expenses, depreciation and amortization, other income (deductions), interest charges, and income taxes: Six Months Ended June 30, 2026 Change Operating expenses: (In millions) Lower employee related, outside services and vegetation management expense $ (4.3) Higher property taxes due to increased utility plant in service 2.4 Lower capitalization of administrative and general expenses due to lower construction expenditures 4.2 Higher allocated depreciation and amortization expense from Corporate and Other 0.7 Lower insurance premiums (0.4) Other (0.3) Net Change $ 2.3 Depreciation and amortization: Increased utility plant in service $ 7.8 Other 0.2 Net Change $ 8.0 Other income (deductions): Lower CIAC $ (0.6) Higher equity AFUDC 3.0 Interest on Texas Sales and Use Tax refund 0.2 Other 0.9 Net Change $ 3.5 Interest charges: TNMP Merger Backstop Term Loan in June 2025 (Note 9) $ 1.3 Loss on reacquired debt in June 2025 5.3 Interest on FMBs (10.9) Lower interest on short-term borrowings 2.5 Lower debt AFUDC (1.2) Lower interest on transmission interconnection and security deposit arrangements 0.6 Other 0.3 Net Change $ (2.1) Income (taxes) benefits: Higher segment earnings before income taxes $ (7.2) Higher amortization of excess deferred federal income taxes 0.2 Other 0.2 Net Change $ (6.8) PNM Non-GAAP Financial Measures PNM defines utility margin as electric operating revenues less cost of energy, which consists primarily of fuel and purchase power costs. PNM believes that utility margin provides a more meaningful basis for evaluating operations than electric operating revenues since substantially all fuel and purchase power costs are offset in revenues as those costs are passed through to customers under PNM’s FPPAC. Utility margin is not a financial measure required to be presented and is 88 Table of Contents considered a non-GAAP measure. PNM does not intend for utility margin to represent any financial measure as defined by GAAP however, the calculation of utility margin, as presented, most closely compares to gross margin as defined by GAAP. Reconciliations between utility margin and gross margin are presented below. Three Months Ended June 30, Six Months Ended June 30, 2026 2025 Change 2026 2025 Change (In millions) Gross margin $ 134.9 $ 111.4 $ 23.5 $ 235.4 $ 213.7 $ 21.7 Energy production costs 25.3 26.1 (0.8) 49.7 50.6 (0.9) Transmission and distribution costs 15.4 15.8 (0.4) 33.3 31.6 1.7 Depreciation and amortization 65.3 60.8 4.5 129.4 120.6 8.8 Utility margin $ 240.9 $ 214.0 $ 26.9 $ 447.9 $ 416.5 $ 31.4 The following table summarizes the operating results for PNM: Three Months Ended June 30, Six Months Ended June 30, 2026 2025 Change 2026 2025 Change (In millions) Electric operating revenues $ 361.1 $ 338.4 $ 22.7 $ 691.1 $ 671.8 $ 19.3 Cost of energy 120.2 124.3 (4.1) 243.2 255.3 (12.1) Utility margin 240.9 214.0 26.9 447.9 416.5 31.4 Operating expenses 116.6 116.6 — 237.3 227.9 9.4 Depreciation and amortization 65.3 60.8 4.5 129.4 120.6 8.8 Operating income 59.0 36.6 22.4 81.1 68.0 13.1 Other income (deductions) 29.5 26.5 3.0 26.2 29.8 (3.6) Interest charges (32.3) (32.0) (0.3) (65.4) (61.8) (3.6) Segment earnings before income taxes 56.1 31.2 24.9 41.9 36.0 5.9 Income (taxes) benefit (6.2) (2.4) (3.8) (3.7) (2.4) (1.3) Valencia non-controlling interest (4.0) (4.3) 0.3 (8.1) (8.0) (0.1) Preferred stock dividend requirements (0.1) (0.1) — (0.3) (0.3) — Segment earnings (losses) $ 45.8 $ 24.4 $ 21.4 $ 29.9 $ 25.3 $ 4.6 The following table shows total GWh sales, including the impacts of weather, by customer class and average number of customers: Three Months Ended June 30, Six Months Ended June 30, Percentage Percentage 2026 2025 Change 2026 2025 Change (Gigawatt hours, except customers) Residential 784.1 772.1 1.6 % 1,508.6 1,544.8 (2.3) % Commercial 919.8 899.6 2.2 1,742.5 1,752.6 (0.6) Industrial (1) 713.6 599.2 19.1 1,377.1 1,183.7 16.3 Public authority 52.8 56.4 (6.4) 94.2 104.2 (9.6) Economy energy service (2) 93.8 99.1 (5.3) 180.3 248.8 (27.5) Other sales for resale (3) 1,169.9 1,111.7 5.2 2,289.9 2,008.8 14.0 3,734.0 3,538.1 5.5 % 7,192.6 6,842.9 5.1 % Average retail customers (thousands) 559.9 556.3 0.6 % 559.6 555.9 0.7 % (1) Includes energy provided by PNM for renewable energy resources to match the energy and capacity requirements of the Meta data center. PNM purchases renewable energy which is passed through to Meta under a rate rider. A special service rate is applied to Meta’s energy consumption in those hours of the month when their consumption exceeds the energy production from the renewable resources. (2) PNM purchases energy for a large customer on the customer’s behalf and delivers the energy to the customer’s location through PNM’s transmission system. PNM charges the customer for the cost of the energy as a direct pass through to the customer with only a minor impact in utility margin resulting from providing ancillary services. (3) Includes sales for resale activity resulting from PNM’s participation in the EIM. 89 Table of Contents Operating Results – Three Months Ended June 30, 2026, compared to 2025 The following table summarizes the significant changes to gross margin: Three Months Ended June 30, 2026 Change Gross margin: (In millions) Utility margin (see below) $ 26.9 Depreciation and amortization (see below) (4.5) Lower plant maintenance costs at gas fired plants, partially offset by higher costs at PVNGS and Four Corners 0.1 Lower outside services and employee related expenses, partially offset by higher vegetation management expenses, excluding administrative costs 0.6 Other 0.4 Net Change $ 23.5 The following table summarizes the significant changes to utility margin: Three Months Ended June 30, 2026 Change Utility margin: (In millions) Retail customer usage/load – Weather normalized retail KWh sales increased 1.3% for residential customers, 1.5% for commercial customers and 5.5% for industrial customers $ 2.7 Weather – Warmer weather in the second quarter of 2026 1.1 Rate relief – Increase in revenue approved in 2025 Rate Request 21.5 Transmission – Increase in revenues primarily due to higher formula rates and volumes, partially offset by lower market prices and higher expenses 7.0 Capacity arrangements – Additional energy storage agreements starting in the fourth quarter of 2025 and the first quarter of 2026 partially offset with a sales agreement in 2026 (5.0) Rate riders and other – Includes renewable energy, FPPAC, energy efficiency, energy transition charge, grid modernization, and transportation electrification riders which are partially offset in operating expenses, depreciation and amortization, other income (deductions), and interest charges (0.4) Net Change $ 26.9 The following tables summarize the primary drivers for changes in operating expenses, depreciation and amortization, other income (deductions), interest charges, and income taxes: Three Months Ended June 30, 2026 Change Operating expenses: (In millions) Higher costs at PVNGS and Four Corners, partially offset by lower costs at gas fired plants $ 0.3 Lower outside services expense, partially offset by higher employee related and vegetation management expense (0.2) Higher property taxes associated with increased utility plant in service 0.5 Lower allocated charitable contributions from Corporate and Other related to the 2025 Rate Request (1.5) Higher costs associated with rate riders included in utility margin 1.1 Higher allocated depreciation and amortization expense from Corporate and Other 0.5 Other (0.7) Net Change $ — 90 Table of Contents Three Months Ended June 30, 2026 Change Depreciation and amortization: (In millions) Increased utility plant in service $ 3.3 Amortization related to grid modernization costs, offset in utility margin 1.1 Other 0.1 Net Change $ 4.5 Other income (deductions): Increased performance on investment securities in the NDT and coal mine reclamation trusts $ 0.9 Lower expenses related to investment securities in the NDT and coal mine reclamation trust, partially offset by lower interest income 0.8 Higher equity AFUDC 1.1 Other 0.2 Net Change $ 3.0 Interest charges: Lower interest on term loans $ 1.7 Interest on SUNs (3.2) Lower interest on short-term borrowings 0.5 Lower interest on transmission interconnection and security deposit arrangements 0.5 Other 0.2 Net Change $ (0.3) Income (taxes) benefits: Higher segment earnings before income taxes $ (6.4) Higher amortization of federal excess deferred income taxes 2.1 Other 0.5 Net Change $ (3.8) Operating Results – Six Months Ended June 30, 2026 compared to 2025 The following table summarizes the significant changes to gross margin: Six Months Ended June 30, 2026 Change Gross margin: (In millions) Utility margin (see below) $ 31.4 Depreciation and amortization (see below) (8.8) Lower plant maintenance costs at gas fired plants and Four Corners, partially offset by higher costs at PVNGS 0.1 Higher vegetation management expense, partially offset by lower outside services and employee related expenses, excluding administrative costs (1.2) Other 0.2 Net Change $ 21.7 91 Table of Contents The following table summarizes the significant changes to utility margin: Six Months Ended June 30, 2026 Change Utility margin: (In millions) Retail customer usage/load – Weather normalized retail KWh sales increased 4.5% for industrial customers and decreased 0.8% for residential customers and 0.7% for commercial customers $ 0.1 Weather – Milder weather in 2026 (2.6) Rate relief – Increase in revenue approved in 2025 Rate Request 34.2 Transmission – Increase in revenues primarily due to higher formula rates and volumes, partially offset by lower market prices and higher expenses 11.2 Capacity arrangements – Additional energy storage agreements starting in the fourth quarter of 2025 and the first quarter of 2026 partially offset with a sales agreement in 2026 (11.4) Rate riders and other – Includes renewable energy, FPPAC, energy efficiency, energy transition charge, grid modernization, and transportation electrification riders which are partially offset in operating expenses, depreciation and amortization, other income (deductions), and interest charges (0.1) Net Change $ 31.4 The following tables summarize the primary drivers for changes in operating expenses, depreciation and amortization, other income (deductions), interest charges, and income taxes: Six Months Ended June 30, 2026 Change Operating expenses: (In millions) Higher costs at PVNGS partially offset by lower costs at Four Corners and gas fired plants $ 0.5 Higher employee related and vegetation management expense 4.7 Higher property taxes associated with increased utility plant in service 3.7 Higher allocated depreciation and amortization expense from Corporate and Other 1.1 Lower allocated charitable contributions from Corporate and Other related to the 2025 Rate Request (1.5) Higher costs associated with rate riders included in utility margin 1.3 Other (0.4) Net Change $ 9.4 Depreciation and amortization: Increased utility plant in service $ 7.4 Amortization related to grid modernization costs, offset in utility margin 1.1 Other 0.3 Net Change $ 8.8 Other income (deductions): Decreased performance on investment securities in the NDT and coal mine reclamation trusts $ (6.8) Lower expenses related to investment securities in the NDT and coal mine reclamation trust, partially offset by lower interest income 1.1 Higher equity AFUDC 2.4 Other (0.3) Net Change $ (3.6) 92 Table of Contents Six Months Ended June 30, 2026 Change Interest charges: (In millions) Lower interest on term loans $ 2.8 Interest on SUNs (9.4) Lower interest on short-term borrowings 1.8 Lower interest on transmission interconnection and security deposit arrangements 1.2 Net Change $ (3.6) Income (taxes) benefits: Higher segment earnings before income taxes $ (1.5) Other 0.2 Net Change $ (1.3) Corporate and Other The table below summarizes the operating results for Corporate and Other: Three Months Ended June 30, Six Months Ended June 30, 2026 2025 Change 2026 2025 Change (In millions) Electric operating revenues $ — $ — $ — $ — $ — $ — Cost of energy — — — — — — Utility margin — — — — — — Operating expenses (6.5) 3.1 (9.6) (14.4) (4.2) (10.2) Depreciation and amortization 9.7 9.5 0.2 19.4 19.1 0.3 Operating (loss) (3.3) (12.6) 9.3 (5.0) (14.8) 9.8 Other income (deductions) (0.2) (1.6) 1.4 (0.5) (1.8) 1.3 Interest charges (15.0) (16.1) 1.1 (29.1) (32.5) 3.4 Segment (loss) before income taxes (18.4) (30.3) 11.9 (34.7) (49.1) 14.4 Income (taxes) benefit 4.0 6.6 (2.6) 9.1 11.0 (1.9) Segment (loss) $ (14.4) $ (23.8) $ 9.4 $ (25.5) $ (38.1) $ 12.6 Corporate and Other operating expenses shown above are net of amounts allocated to PNM and TNMP under shared services agreements. The amounts allocated include certain expenses shown as depreciation and amortization and other income (deductions) in the table above. The change in operating expense for the three and six months ended June 30, 2026, includes decreases of $10.6 million and $11.4 million for costs related to the Merger. Substantially all depreciation and amortization expense is offset in operating expenses as a result of allocation of these costs to other business segments. Operating Results – Three Months Ended June 30, 2026 compared to 2025 The following tables summarize the primary drivers for changes in other income (deductions), interest charges, and income taxes: Three Months Ended June 30, 2026 Change Other income (deductions): (In millions) Lower charitable contributions allocated to PNM $ 1.5 Lower income at PNMR Development (0.1) Net Change $ 1.4 93 Table of Contents Three Months Ended June 30, 2026 Change Interest charges: (In millions) Lower interest on short-term borrowings $ 0.7 Lower interest on term loans 6.4 Issuance of $350.0 million Jr. Subordinated Notes in December 2025 (6.1) Other 0.1 Net Change $ 1.1 Income (taxes) benefits: Lower segment loss before income taxes $ (3.0) Impact of difference in effective tax rates used by TXNM and its subsidiaries in the calculation of income taxes in interim periods 0.4 Net Change $ (2.6) Operating Results – Six Months Ended June 30, 2026 compared to 2025 The following tables summarize the primary drivers for changes in other income (deductions), interest charges, and income taxes: Six Months Ended June 30, 2026 Change Other income (deductions): (In millions) Lower charitable contributions allocated to PNM $ 1.5 Lower income at PNMR Development (0.2) Net Change $ 1.3 Interest charges: Lower interest on short-term borrowings $ 2.3 Lower interest on term loans 13.1 Issuance of $350.0 million Jr. Subordinated Notes in December 2025 (12.3) Other 0.3 Net Change $ 3.4 Income (taxes) benefits: Lower segment loss before income taxes $ (3.7) Impact of difference in effective tax rates used by TXNM and its subsidiaries in the calculation of income taxes in interim periods 1.6 Other 0.2 Net Change $ (1.9) 94 Table of Contents LIQUIDITY AND CAPITAL RESOURCES Statements of Cash Flows The changes in TXNM’s cash flows for the six months ended June 30, 2026, compared to June 30, 2025, are summarized as follows: Six Months Ended June 30, 2026 2025 Change (In millions) Net cash flows from (used in): Operating activities $ 223.0 $ 144.8 $ 78.2 Investing activities (581.0) (611.3) 30.3 Financing activities 353.0 481.9 (128.9) Net change in cash, cash equivalents, and restricted cash $ (5.0) $ 15.4 $ (20.4) Cash Flows from Operating Activities Changes in TXNM’s cash flow from operating activities result from net earnings, adjusted for items impacting earnings that do not provide or use cash. See Results of Operations above. Certain changes in assets and liabilities resulting from normal operations, including the effects of the seasonal nature of the Company’s operations, also impact operating cash flows. Cash Flows from Investing Activities The changes in TXNM’s cash flows used in investing activities relate primarily to changes in utility plant additions. Cash flows from investing activities include purchases and sales of investment securities in the NDT, SJGS decommissioning trust, and coal mine reclamation trusts. Major components of TXNM’s cash inflows and (outflows) from investing activities are shown below: Six Months Ended June 30, 2026 2025 Change Cash (Outflows) for Utility Plant Additions (In millions) PNM: Generation $ (126.2) $ (60.5) $ (65.7) Transmission and distribution (166.6) (200.5) 33.9 Grid Modernization Plan (16.4) — (16.4) Nuclear fuel (9.1) (11.7) 2.6 (318.3) (272.7) (45.6) TNMP: Transmission (75.4) (144.1) 68.7 Distribution (90.1) (173.6) 83.5 SRP (51.0) — (51.0) (216.5) (317.7) 101.2 Corporate and Other: Computer hardware, software, general services, and other (42.8) (18.4) (24.4) (577.6) (608.8) 31.2 Other Cash Flows from Investing Activities Proceeds from sales of investment securities $ 329.7 $ 198.7 $ 131.0 Purchases of investment securities (333.2) (201.2) (132.0) Other, net 0.1 — 0.1 (3.4) (2.5) (0.9) Net cash flows used in investing activities $ (581.0) $ (611.3) $ 30.3 Cash Flows from Financing Activities The changes in TXNM’s cash flows from financing activities include: •Short-term borrowings increased $301.6 million in 2026 compared to an decrease of $263.6 million in 2025, resulting in a net increase in cash flows from financing activities of $565.2 million •In 2026, TXNM sold 2,123,544 shares of TXNM common stock under the TXNM 2026 ATM Program aggregating $123.7 million and used the proceeds to make cash equity contributions to PNM and for other corporate purposes 95 Table of Contents Financing Activities See Note 7 of the Notes to Consolidated Financial Statements in the 2025 Annual Reports on Form 10-K and Note 9 for additional information concerning the Company’s financing activities. PNM must obtain NMPRC approval for any financing transaction having a maturity of more than 18 months. In addition, PNM files its annual informational financing filing and short-term financing plan with the NMPRC. The Company’s ability to access the credit and capital markets at a reasonable cost is largely dependent upon its: •Ability to earn a fair return on equity •Results of operations •Ability to obtain required regulatory approvals •Conditions in the financial markets •Credit ratings The Company is closely monitoring the impacts on the capital markets of other macroeconomic conditions, including actions by the Federal Reserve to address inflationary concerns or other market conditions, and geopolitical activity, including the potential impacts of tariffs. The Company currently believes it has adequate liquidity but cannot predict the effects of any of these macroeconomic conditions on the global, national, or local economy, including the Company’s ability to access capital in the financial markets, or on the Company’s financial position, results of operations, and cash flows. Each of the Company’s revolving credit facilities and term loans contain a single financial covenant that requires the maintenance of a debt-to-capitalization ratio. For the TXNM agreements, this ratio must be maintained at less than or equal to 70%, and for the PNM and TNMP agreements, this ratio must be maintained at less than or equal to 65%. The Company’s revolving credit facilities, term loans, and other debt agreements generally also contain customary covenants, events of default, cross-default provisions, and change-of-control provisions. The Company is in compliance with its debt covenants. Pursuant to the TXNM 2026 ATM Program, TXNM sold an aggregate of 2,123,544 shares of TXNM common stock under the Distribution Agreement for net cash proceeds of $123.7 million. TXNM used the proceeds to pay cash equity contributions to PNM and for other corporate purposes. See Note 9. On May 1, 2026, TXNM, PNM, and TNMP each established Programs pursuant to which they may issue, from time to time, Notes under the exemption from registration contained in Section 4(a)(2) of the Securities Act. Amounts available under the Programs may be borrowed, repaid and re-borrowed from time to time, with the aggregate face or principal amount of the Notes outstanding under the Programs at any time not to exceed $300.0 million for TXNM, $400.0 million for PNM, and $300.0 million for TNMP. The Notes will have maturities of up to 364 days from the date of issue and net proceeds will be used for general corporate purposes. Each of TXNM, PNM and TNMP have agreed to maintain, at all times, unused available borrowing capacity under their respective revolving credit agreements (except for the PNM New Mexico Credit Agreement) in an amount at least equal to the amount of Notes outstanding at any time. Notes outstanding under the Programs as of June 30, 2026 are $44.1 million for TXNM, zero for PNM, and $15.0 million for TNMP. On July 17, 2026, TXNM entered into the TXNM 2026 Delayed-Draw Term Loan between TXNM and Wells Fargo Bank, National Association, as administrative agent. Draws on the TXNM 2026 Delayed-Draw Term Loan bear interest at a variable rate, and mature on January 17, 2029. TXNM drew the full amount available under the TXNM 2026 Delayed-Draw Term Loan on July 22, 2026, and used such amount to fully repay the $400.0 million previously received under the May 2025 Stock Purchase Agreement in connection with unwinding the transaction as a result of the NMPRC’s Final Order issued in the show cause matter (Note 12). On July 21, 2026, PNM entered into the PNM 2026 Term Loan, among PNM, the lenders party thereto and Canadian Imperial Bank of Commerce, New York Branch, as administrative agent. PNM used the proceeds of the PNM 2026 Term Loan to repay borrowings under the PNM 2025 Term Loan which matured on July 21, 2026. Capital Requirements TXNM’s total capital requirements consist of construction expenditures and cash dividend requirements for TXNM common stock and PNM preferred stock. Key activities in TXNM’s current construction program include: •Investing in transmission and distribution infrastructure •Upgrading generation resources and delivering clean energy •Purchasing nuclear fuel 96 Table of Contents Projected capital requirements, including amounts expended through June 30, 2026, are: 2026 2027-2030 Total (In millions) Construction expenditures $ 1,566.9 $ 8,647.9 $ 10,214.8 Dividends on TXNM common stock 184.1 736.3 920.4 Dividends on PNM preferred stock 0.5 2.1 2.6 Total capital requirements $ 1,751.5 $ 9,386.3 $ 11,137.8 The construction expenditure estimates are under continuing review and subject to ongoing adjustment, as well as to Board review and approval and in certain instances, require regulatory approval. The construction expenditures above include TNMP’s investments to support continued high growth in system demand across TNMP’s service territories and growing encouragement for infrastructure investments from the Texas legislature to support grid reliability and resilience. PNM’s capital initiatives include investments in generation, transmission, and distribution infrastructure to deliver clean energy, support customer growth, enhance customer satisfaction, and increase grid resilience. Construction expenditures also include investments in PNM’s Grid Modernization Plan and TNMP’s SRP. These investments provide for a more resilient, reliable, efficient, and decarbonized electric system. Construction expenditures included in the table above may change due to incremental expenditures for new customer growth in New Mexico and Texas, and other transmission and renewable energy expansion in New Mexico. The ability of TXNM to pay dividends on its common stock is dependent upon the ability of PNM and TNMP to pay dividends to TXNM and the Merger (See Note 17). See Note 6 of the Notes to the Consolidated Financial Statements in the 2025 Annual Reports on Form 10-K for a discussion of regulatory and contractual restrictions on the payment of dividends by PNM and TNMP. During the six months ended June 30, 2026, TXNM met its capital requirements and construction expenditures through cash generated from operations, as well as its liquidity arrangements and the borrowings discussed in Financing Activities above. In addition to the capital requirements for construction expenditures and dividends, the Company has long-term debt and term loans that must be paid or refinanced at maturity. PNM has $3.7 million and $3.8 million in scheduled principal payments due for the ETBC I Securitized Bonds in August 2026 and February 2027. PNM also has $100.3 million of 0.875% PCRBs outstanding with a mandatory tender date of October 1, 2026, and $120.0 million under the PNM November 2025 Term Loan due in May 2027. See Note 7 of the Notes to Consolidated Financial Statements in the 2025 Annual Reports on Form 10-K and Note 9 for additional information about the Company’s long-term debt and equity arrangements. The Company may also enter into new arrangements similar to the existing agreements, borrow under the revolving credit facilities, or issue new long-term debt or equity in the public or private capital markets, or a combination of these sources. The Company has from time to time refinanced or repurchased portions of its outstanding debt before scheduled maturity. Depending on market conditions, the Company may refinance other debt issuances or make additional debt repurchases in the future. Liquidity TXNM’s liquidity arrangements include the $300.0 million TXNM Revolving Credit Facility, the $400.0 million PNM Revolving Credit Facility, and the $300.0 million TNMP Revolving Credit Facility. Each of these facilities matures on March 29, 2030, and contains a one-year extension option that, if exercised, would extend the maturity to March 2031, subject to approval by a majority of the lenders. On December 19, 2025, when the first extension options were exercised, one lender in each of the revolving credit facilities failed to agree to the extension. As a result, effective March 30, 2029, the TXNM Revolving Credit Facility capacity will adjust to $265.4 million, the PNM Revolving Credit Facility capacity will adjust to $354.1 million, and the TNMP Revolving Credit Facility capacity will adjust to $277.0 million. PNM also has the $40.0 million PNM New Mexico Credit Facility that matures on May 31, 2030. Variable interest rates under the TXNM, PNM, and TNMP revolving credit facilities are based on SOFR. The Company believes the terms and conditions of these facilities are consistent with those of other investment grade revolving credit facilities in the utility industry. The Company expects that it will be able to extend or replace these credit facilities under similar terms and conditions prior to their expirations. The revolving credit facilities and the PNM New Mexico Credit Facility provide short-term borrowing capacity. The revolving credit facilities also allow letters of credit to be issued. Letters of credit reduce the available capacity under the facilities. The Company may also issue Notes under the Commercial Paper Programs, further reducing the available capacity under each facility, except the PNM New Mexico Credit Facility. The Company utilizes these credit facilities, Notes, and cash flows from operations to provide funds for both construction and operational expenditures. The Company’s business is seasonal with more revenues and cash flows from operations being generated in the summer months. In general, the Company may utilize Notes issued under its Commercial Paper Programs and relies on the credit facilities to be the initial funding source for construction expenditures. Accordingly, borrowings under the facilities may increase over time. Depending on market and other conditions, the Company will periodically issue equity or long-term debt and use the proceeds to reduce the borrowings under the credit facilities or refinance other debt. 97 Table of Contents Information regarding the range of borrowings for each facility is as follows: Three Months Ended June 30, 2026 Six Months Ended June 30, 2026 Range of Borrowings Low High Low High (In millions) PNM: PNM Revolving Credit Facility $ 60.0 $ 175.0 $ 60.0 $ 209.0 PNM New Mexico Credit Facility 40.0 40.0 40.0 40.0 Commercial Paper Notes — 124.0 — 124.0 TNMP: TNMP Revolving Credit Facility — 95.9 — 95.9 Commercial Paper Notes — 114.3 — 114.3 TXNM: TXNM Revolving Credit Facility 19.0 115.4 — 115.4 Commercial Paper Notes — 113.5 — 113.5 At June 30, 2026, the weighted average interest rates on borrowings outstanding were 4.90% for the PNM Revolving Credit Facility, 5.00% for the PNM New Mexico Credit Facility, 4.52% for the TNMP Revolving Credit Facility, 4.10% for the TNMP Commercial Paper Notes, 5.15% for the TXNM Revolving Credit Facility, and 4.19% for the TXNM Commercial Paper Notes. There were no Notes outstanding under the PNM Commercial Paper Programs as of June 30, 2026. The Company currently believes that its capital requirements for at least the next twelve months can be met through internal cash generation, existing, extended, or new credit arrangements, and access to public and private capital markets as discussed above and in Note 9. The Company anticipates that additional long-term financing, in the form of debt and/or equity issuances, will be necessary to fund its capital requirements and to balance its capital structure during the 2026-2030 period. To cover the difference in the amounts and timing of internal cash generation and cash requirements, the Company intends to use short-term borrowings under its current and future liquidity arrangements or other short-term loans. Market conditions, such as rising interest rates, may raise the cost of borrowing under the Company’s current and future liquidity arrangements or other variable debt. In addition, if market conditions worsen, the Company may not be able to access the capital markets or renew credit facilities when they expire. Should that occur, the Company would seek to improve cash flows by reducing capital expenditures and exploring other available alternatives. As of July 24, 2026, ratings on the Company’s securities were as follows: TXNM PNM TNMP S&P Issuer rating BBB BBB BBB+ Senior secured debt * * A Senior unsecured debt BBB- BBB * Junior subordinated debt BB+ * * Preferred stock * BB+ * Moody’s Issuer rating Baa3 Baa2 Baa1 Senior secured debt * * A2 Senior unsecured debt Baa3 Baa2 * Junior subordinated debt Ba1 * * * Not applicable In its May 2025 credit opinion, S&P commented that it views the proposed Merger as credit supportive. S&P commented on the Final Order in the show cause proceeding in a July 2026 research report indicating that the resulting delay in the closing of the proposed Merger is a negative development but it does not immediately impact its ratings, as the impact on credit measures is viewed as temporary. In its June 2025 credit opinion, Moody’s commented that the announced terms of the proposed Merger are not expected to adversely affect the ratings or outlooks of TXNM or its two utility subsidiaries. Investors are cautioned that a security rating is not a recommendation to buy, sell, or hold securities, that each rating is subject to revision or withdrawal at any time by the rating organization, and that each rating should be evaluated independently of any other rating. 98 Table of Contents A summary of liquidity arrangements as of July 24, 2026, is as follows: PNM TNMP TXNMSeparate TXNM (In millions) Financing capacity: Revolving Credit Facility $ 400.0 $ 300.0 $ 300.0 $ 1,000.0 PNM New Mexico Credit Facility 40.0 — — 40.0 Total financing capacity 440.0 300.0 300.0 1,040.0 Amounts outstanding as of July 24, 2026: Commercial Paper Program — — — — Revolving Credit Facility 180.0 107.0 197.0 484.0 PNM New Mexico Credit Facility 40.0 — — 40.0 Letters of credit — — 3.1 3.1 Total short-term debt and letters of credit 220.0 107.0 200.1 527.1 Remaining availability as of July 24, 2026 $ 220.0 $ 193.0 $ 99.9 $ 512.9 Invested cash as of July 24, 2026 $ — $ 4.3 $ 1.5 $ 5.8 In addition to the above, TXNM has $20.2 million of letters of credit issued. The above table excludes intercompany debt. As of July 24, 2026, PNM and TNMP had $46.3 million and $0 in borrowings from TXNM under their respective intercompany loan agreements. The remaining availability under the revolving credit facilities at any point in time varies based on a number of factors, including the timing of collections of accounts receivables and payments for construction and operating expenditures. Other Material Cash Requirements TXNM, PNM, and TNMP have contractual obligations for long-term debt, minimum lease payments, coal contracts, coal mine reclamation, nuclear decommissioning, SJGS plant decommissioning, pension and retiree medical contributions, and other long-term obligations. See MD&A – Other Material Cash Requirements in the 2025 Annual Reports on Form 10-K. Contingent Provisions of Certain Obligations As discussed in the 2025 Annual Reports on Form 10-K, TXNM, PNM, and TNMP have a number of debt obligations and other contractual commitments that contain contingent provisions. Some of these, if triggered, could affect the liquidity of the Company. In the unlikely event that the contingent requirements were to be triggered, TXNM, PNM, or TNMP could be required to provide security, immediately pay outstanding obligations, or be prevented from drawing on unused capacity under certain credit agreements. The contingent provisions also include contractual increases in the interest rate charged on certain of the Company’s short-term debt obligations in the event of a downgrade in credit ratings. The Company believes its financing arrangements are sufficient to meet the requirements of the contingent provisions. No conditions have occurred that would result in any of the above contingent provisions being implemented. 99 Table of Contents Capital Structure The capitalization tables below include the current maturities of long-term debt but does not include short-term debt or lease obligations as debt. June 30, 2026 December 31, 2025 TXNM TXNM common equity 39.6 % 38.5 % Preferred stock of subsidiary 0.1 0.2 Long-term debt 1 60.3 61.3 Total capitalization 100.0 % 100.0 % PNM PNM common equity 46.9 % 45.5 % Preferred stock 0.2 0.2 Long-term debt 52.9 54.3 Total capitalization 100.0 % 100.0 % TNMP Common equity 52.0 % 51.0 % Long-term debt 48.0 49.0 Total capitalization 100.0 % 100.0 % 1 TXNM’s long-term debt includes Convertible Notes, which receive 50% equity credit from ratings organizations. OTHER ISSUES FACING THE COMPANY Climate Change Issues Background For the past several years, management has identified multiple risks and opportunities related to climate change, including the impacts of severe weather events, potential environmental regulation, technological innovation, and availability of fuel and water for operations, as among the most significant risks facing the Company. Accordingly, these risks are overseen by the Board in order to facilitate more integrated risk and strategy oversight and planning. Board oversight includes understanding the various challenges and opportunities presented by these risks, including the financial consequences that might result from enacted and potential federal and/or state regulation of GHG; plans to mitigate these risks; and the impact these risks may have on the Company’s strategy. In addition, the Board approves certain procurements of grid modernization technologies and replacement resources. Management is also responsible for assessing significant risks, developing and executing appropriate responses, and reporting to the Board on the status of risk activities. For example, management periodically updates the Board on the implementation of corporate environmental policy, and the Company’s environmental management systems, including the promotion of energy efficiency programs, and the use of renewable resources. The Board is also informed of the Company’s practices and procedures to assess the impact of operations on the environment. The Board considers issues associated with climate change, the Company’s GHG exposures, and the financial consequences that might result from enacted and potential federal and/or state regulation of GHG. Management has published, with Board oversight, a Climate Change Report available at https://www.txnmenergy.com/sustainability/environment/climate_change_report that details the Company’s efforts to transition to a carbon-free generating portfolio. As part of management’s continuing effort to monitor climate-related risks and assess opportunities, the Company has advanced its understanding of climate change by participating in the “2 Degree Scenario” planning by participating in the Electric Power Research Institute (“EPRI”) Understanding Climate Scenarios & Goal Setting Activities program. The program focused on characterizing and analyzing the relationship of individual electric utility company’s carbon emissions and global temperature goals. Activities included analyzing the scientific understanding of global emissions pathways that are consistent with limiting global warming and providing insight to assist companies in developing approaches to climate scenario planning. As PNM expands its sustainability efforts, EPRI’s environmental and climate analysis programs have also been useful in gaining a better understanding of energy and environmental policy and regulations, advanced clean energy technologies, decarbonization trends and climate impacts. In 2022, PNM joined EPRI’s Climate READi program which is a strategic initiative convening a global collaborative of electric utilities, thought leaders, scientific researchers and other key stakeholders to strengthen the power sector’s collective approach to managing climate risk to the power system. The program is a three-year initiative, through work across three concurrent workstreams, and PNM will benefit from the development of a first-of-its-kind comprehensive framework for managing physical climate risk and investment prioritization that was launched in May 2025. 100 Table of Contents The Company cannot anticipate or predict the potential long-term effects of climate change or climate change related regulation on its results of operations, financial position, or cash flows. Greenhouse Gas Emissions Exposures In 2024, GHG emissions associated with PNM’s interests in its fossil-fueled generating plants included approximately 1.5 million metric tons of CO2, which comprises the vast majority of PNM’s GHG emissions. As of June 30, 2026, approximately 25% of PNM’s generating capacity, including resources owned, leased, or under PPAs, all of which is located within the U.S., consisted of coal or gas-fired generation that produces GHG emissions. As PNM shifts its generation to cleaner energy resources, the Company’s output of GHG emissions continues to decrease. Many factors affect the amount of GHG emitted, including total electricity sales, plant performance, economic dispatch, and the availability of renewable resources. For example, wind generation performance varies each year as a result of highly seasonal wind patterns and annual wind resource variability. Similarly, if PVNGS experienced prolonged outages or if PNM’s entitlement from PVNGS were reduced, PNM might be required to utilize other power supply resources such as gas-fired generation, which could increase GHG emissions. PNM has several programs underway to reduce or offset GHG emissions from its generation resource portfolio, thereby reducing its exposure to climate change regulation. The shutdown of SJGS resulted in a reduction of GHG emissions for the entire station allowing PNM to attain GHG emissions reductions goals set forth by the ETA, discussed below. PNM’s utility-owned solar and energy storage capacity, as well as solar, energy storage, wind, and geothermal procurements in service as of June 30, 2026, have a total net generation capacity of 3,409 MW. The NMPRC has approved plans for PNM to procure energy and RECs from additional resources to serve retail customers and a data center located in PNM’s service territory. PNM’s approved resource plans have a generation capacity of 1,318 MW. This includes approximately 280 MW of capacity under the Community Solar Act which will provide customers an additional option of accessing solar energy. PNM will continue to seek approval to procure renewable resources as needed to meet forecasted peak load requirements to serve its customers and New Mexico’s RPS and carbon-free resource requirements, while balancing the impact to customers’ electricity costs. PNM also has a customer distributed solar generation program that represented 387.4 MW at June 30, 2026. PNM’s distributed solar programs will generate an estimated 774.8 GWh of emission-free solar energy available this year to offset PNM’s annual production from fossil-fueled electricity generation. PNM has offered its customers a comprehensive portfolio of energy efficiency and load management programs since 2007. PNM’s cumulative savings from these programs were an estimated 9,008 GWh of electricity through 2025. Over the next 20 years, PNM projects energy efficiency and load management programs will provide the equivalent of approximately 12,900 GWh of electricity savings, which will avoid approximately 220,000 tons of CO2 based upon projected emissions from PNM’s portfolio of resources. These estimates are subject to change because of the uncertainty of many of the underlying variables, including changes in PNM’s generation portfolio, demand for electricity, energy efficiency, and complex relationships between those variables. Because of PNM’s dependence on fossil-fueled generation, legislation or regulation that imposes a limit or cost on GHG could impact the cost at which electricity is produced. While PNM expects to recover any such costs through rates, the timing and outcome of proceedings for cost recovery are uncertain. In addition, to the extent that any additional costs are recovered through rates, customers may reduce their usage, relocate facilities to other areas with lower energy costs, or take other actions that ultimately could adversely impact PNM. Other Climate Change Risks PNM’s generating stations are located in the arid southwest. Access to water for cooling for some of these facilities is critical to continued operations. Forecasts for the impacts of climate change on water supply in the southwest range from reduced precipitation to changes in the timing of precipitation. In either case, PNM’s generating facilities requiring water for cooling will need to mitigate the impacts of climate change through adaptive measures. Current measures employed by PNM generating stations include the use of sustainable, less variable groundwater supplies, and investments in technologies such as air cooling and cooling water recycling. These types of actions will continue to be important to sustain operations. PNM’s service areas occasionally experience periodic high winds and severe thunderstorms. TNMP has operations in the Gulf Coast area of Texas, which experiences periodic hurricanes and other extreme weather conditions. In addition to potentially causing physical damage to Company-owned facilities, which disrupts the ability to transmit and/or distribute energy, weather and other events of nature can temporarily reduce customers’ usage and demand for energy. In addition, other events influenced by climate change, such as wildfires, could disrupt Company operations or result in third-party claims against the Company. PNM has enhanced its wildfire prevention efforts and maintains a wildfire mitigation plan and a public safety power shutoff plan. TNMP has also developed a wildfire mitigation plan. However, both PNM and TNMP remain at risk for wildfires outside of their control and the resulting damages in their service areas. 101 Table of Contents EPA Regulation In 2007, the U.S. Supreme Court held that EPA has the authority to regulate GHG emissions under the CAA, and in 2009, EPA released its endangerment finding for GHG from new motor vehicles, stating that the atmospheric concentrations of six key greenhouse gases (CO2, methane, nitrous oxides, hydrofluorocarbons, perfluorocarbons, and sulfur hexafluoride) endanger the public health and welfare. These actions triggered new GHG permitting requirements for stationary sources, including the energy industry, under the Prevention of Significant Deterioration (“PSD”) and Title V program, although the U.S. Supreme Court held the CAA does not authorize EPA to require a source to obtain a PSD permit solely on the basis of its potential GHG emissions. EPA also determined that its finding of endangerment requires it to issue performance standards under Section 111 of the CAA to regulate GHG emissions from new and existing stationary sources, including fossil fuel fired EGUs. Accordingly, in 2015, EPA issued Carbon Pollution Standards for new, modified, and reconstructed power plants (under Section 111(b)) and the Clean Power Plan for existing power plants (under Section 111(d)). Multiple states, utilities, and trade groups challenged both the Carbon Pollution Standards for new sources and the Clean Power Plan for existing sources in separate cases, and the challengers successfully petitioned the U.S. Supreme Court for a stay of the Clean Power Plan. In 2019, EPA repealed the Clean Power Plan, promulgated the ACE Rule, and revised the implementing regulations for all emission guidelines issued under CAA Section 111(d). The ACE Rule was also challenged, and on January 19, 2021, the DC Circuit issued an opinion in American Lung Association and American Public Health Association v. EPA, et al. vacating the ACE Rule. Numerous parties sought review by the U.S. Supreme Court, and on June 30, 2022, the Court held that the “generation shifting” approach in the Clean Power Plan exceeded the powers granted to EPA by Congress, though the Court did not address the related issue of whether Section 111 of the CAA only authorizes EPA to require measures that can be implemented entirely within the fence line at an individual source. Of broader significance in administrative law, the Court’s opinion expressly invoked the major questions doctrine, which requires rules involving issues of “vast economic or political significance,” to be supported by clear statutory authorization. In cases where there is no clear statement of authority, courts need not defer to the agency’s statutory interpretation on “major questions.” The decision sets legal precedent for future rulemakings by EPA and other federal regulatory agencies whereby the agency’s authority may be limited based upon similar reasoning. The litigation over the Carbon Pollution Standards remains held in abeyance but could be reactivated by the parties upon a determination by the court that reconsideration of the rule has concluded. In 2024, EPA published in the Federal Register proposed regulatory actions under CAA Sections 111(b) and (d) to replace the Clean Power Plan and the ACE Rule and finalized the rules on May 9, 2024. The final rules include revised new source performance standards under Section 111(b) for all new natural gas-fired combustion turbines and emission guidelines under Section 111(d) requiring states to develop standards of performance for GHG emissions from existing fossil-fuel-fired electric steam generating units. In the final rules, EPA determined that the standards for existing coal- or gas-fired steam generating units must be based on the use of either CCS (long-term), natural gas co-firing (medium-term), or exempt from the rule via early retirement. The standards for new combustion turbines must be based on CCS (base load), efficient simple cycle design (intermediate load), or lower-emitting fuels (low load). Over a dozen states, several industry groups, and some power companies and labor unions have filed challenges to the rule at the DC Circuit. The DC Circuit heard oral arguments on December 6, 2024. On January 20, 2025, President Trump signed an executive order entitled “Unleashing American Energy” directing all agencies, including EPA, to review all agency actions and suspend, revise, or rescind those identified as imposing an undue burden on domestic energy resources. The order also disbands the Interagency Working Group on the Social Cost of Greenhouse Gases, eliminates the “social cost of carbon” from consideration in any Federal permitting or regulatory decision, and expressly directs EPA to submit joint recommendations on the legality and continuing applicability of the 2009 endangerment finding for greenhouse gases. On June 17, 2025, EPA published a proposed rule in the Federal Register with two alternatives to repeal or revise the GHG emission standards for EGUs. EPA primarily proposes to find that GHG emissions from fossil fuel-fired power plants “do not contribute significantly to dangerous air pollution” under the meaning of CAA Section 111, which would preclude EPA from regulating GHG emissions from those plants. As a result, EPA is proposing to repeal all GHG standards for the power sector promulgated under CAA Section 111 in both 2015 and 2024. EPA also proposed in the alternative to find that CCS is not adequately demonstrated, and that neither CCS nor gas co-firing are the best system of emission reduction for GHG emissions from power plants, which findings also support repeal of those specific requirements from the rules adopted in 2024. Comments were due by September 15, 2025, and EPA intends to finalize the proposed rule in 2026. On August 1, 2025, EPA published a proposal to rescind its 2009 final rule commonly known as the Endangerment Finding. In the Endangerment Finding, EPA found that current and projected atmospheric concentrations of the well-mixed 102 Table of Contents combination of six GHGs threaten public health and welfare, and that the combined emissions of these GHGs from new motor vehicles and engines contribute to the GHG pollution that threatens public health and welfare. On February 12, 2026, the final rule was finalized as proposed, repealing all GHG emission standards for certain vehicles and engines promulgated on the basis of the Endangerment Finding. While the Endangerment Finding did not directly impose any requirements on EGUs, EPA has cited the Endangerment Finding as a basis for its authority to regulate GHG emissions from EGUs under CAA Section 111. Federal Legislation In July 2025, President Trump signed the OBBBA, significantly altering the landscape of climate action and clean energy initiatives in the United States. The legislation revises and, in some cases, phases out tax credits established under the IRA and includes restrictions on the availability of credits for “foreign entities of concern,” as such term is used in the OBBBA. Given the control of both houses of Congress by the Republican Party, no additional Federal legislation on climate change is expected during this Congress. State and Regional Activity Pursuant to New Mexico law, each utility must submit an IRP to the NMPRC every three years to evaluate renewable energy, energy efficiency, load management, distributed generation, and conventional supply-side resources on a consistent and comparable basis. The IRP is required to take into consideration risk and uncertainty of fuel supply, price volatility, and costs of anticipated environmental regulations when evaluating resource options to meet supply needs of the utility’s customers. The NMPRC requires that New Mexico utilities factor a standardized cost of carbon emissions into their IRPs using prices ranging between $8 and $40 per metric ton of CO2 emitted and escalating these costs by 2.5% per year. Under the NMPRC order, each utility must analyze these standardized prices as projected operating costs. Reflecting the evolving nature of this issue, the NMPRC order states that these prices may be changed in the future to account for additional information or changed circumstances. Although these prices may not reflect the costs that ultimately will be incurred, PNM is required to use these prices for purposes of its IRP. PNM’s 2023 filing has a continued focus on a carbon-free energy system by 2040. The plan highlights the need for the significant sustained addition of resources over the next two decades, replacing retiring or expiring capacity, meeting concurrent load growth, while reducing the carbon intensity of PNM’s portfolio. The ETA, among other things, requires that investor-owned utilities obtain specified percentages of their energy from renewable and carbon-free resources. The passage of the ETA amended the REA to require utilities operating in New Mexico to have renewable portfolios equal to 50% by 2030, 80% by 2040, and 100% zero-carbon energy by 2045. Under the ETA provisions, PNM will also be required to meet a generation emission standard of no more than 400 lbs. of CO2 per MWh beginning in 2023 and not more than 200 lbs. per MWh beginning in 2032. PNM takes this requirement into account in its resource planning and will manage compliance with the standards based upon existing generation resources and approved resource retirements and replacements. The ETA provides for a transition from fossil-fuel generating resources to renewable and other carbon-free resources by allowing investor-owned utilities to issue securitized bonds related to the retirement of coal-fired generating facilities to qualified investors. The ETA has a significant impact on PNM’s future generation portfolio. In 2022, in compliance with the ETA, the NMED announced a new rulemaking, Carbon Dioxide Emission Standards for Electric Generating Facilities, to develop carbon emission standards for new and existing electric coal-fired generating facilities. In 2022, the rule was passed which adopts new carbon emission standards for new and existing coal-fired power plants. In compliance with the ETA, PNM filed its first CO2 Emissions Measurement and Compliance Annual Report on March 14, 2025. In 2020, the NMPRC approved PNM’s San Juan abandonment application and for the issuance of securitized bonds consistent with the requirements of the ETA and in 2023 PNM issued the ETBC I Securitized Bonds. PNM cannot predict the full impact of the ETA with respect to Four Corners. The State of California has enacted comprehensive climate-related disclosure laws that will require large entities doing business in the state to measure and disclose Scope 1 and Scope 2 GHG emissions beginning in 2026, Scope 3 GHG emissions beginning in 2027, and to publish biennial reports detailing climate-related financial risk beginning in January 2026. The State of California released proposed regulations in December 2025 with comments due in January 2026. The Company is closely monitoring developments to determine if any TXNM entity would be required to make disclosures under California law and the nature of any such required disclosures. International Accords The United Nations Framework Convention on Climate Change (“UNFCCC”) is an international environmental treaty that was negotiated at the 1992 United Nations Conference on Environment and Development (informally known as the Earth Summit) and entered into force in March 1994. The objective of the treaty is to “stabilize greenhouse gas concentrations in the atmosphere at a level that would prevent dangerous anthropogenic interference with the climate system.” Parties to the 103 Table of Contents UNFCCC, including the U.S., have been meeting annually in Conferences of the Parties (“COP”) to assess progress in meeting the objectives of the UNFCCC. In 2015, the Paris Agreement was finalized during the 2015 COP. The aim of the Paris Agreement is to limit global temperature rise to two degrees Celsius above pre-industrial levels. The agreement, which was agreed to by approximately 200 parties, requires that countries submit INDCs. INDCs reflect national targets and actions that arise out of national policies and elements relating to oversight, guidance and coordination of actions to reduce emissions by all countries. In 2017, President Trump announced that the U.S. would withdraw from the Paris Agreement. As a result of the President’s notice to the United Nations, the U.S. officially withdrew from the Paris Agreement on November 4, 2020. On January 20, 2021, President Biden signed an instrument that will allow the U.S. to rejoin the Paris Agreement. The instrument was deposited with the United Nations on January 21, 2021, and the U.S. officially became a party to the Paris Agreement on February 19, 2021. On January 20, 2025, President Trump signed an executive order entitled “Putting America First in International Environmental Agreements,” directing the United States Ambassador to the United Nations to immediately submit formal written notification of the United States’ withdrawal from the Paris Agreement and any other agreement, pact, accord, or similar commitment made under the United Nations Framework Convention on Climate Change. PNM has calculated GHG reductions that would result from scenarios that capture PNM’s retirement of its share of the SJGS in 2022 and assume exiting Four Corners in 2031 and PNM has set a goal to have a 100% carbon-free generating portfolio by 2040. Achieving our goal of carbon-free by 2040 is dependent on balancing reliability, cost-considerations, and maturity of emerging technologies. While the Company has not conducted an independent 2 Degree Scenario analysis, our commitment to becoming 100% carbon-free produces a carbon emissions reduction pathway that tracks within the ranges of climate scenario pathways that are consistent with limiting the global warming average to less than 2 degrees Celsius. In addition, as an investor-owned utility operating in the state of New Mexico, PNM is required to comply with the ETA, which requires utilities’ generating portfolio be 100% carbon-free by 2045. The requirements of the ETA and the Company’s goal compare favorably to the U.S. INDC of 50% to 52% carbon emissions reduction by 2030. PNM will continue to monitor the United States’ move to withdraw from the Paris Agreement and other parties’ involvement in these types of international accords, but the potential impact that such accords may have on the Company cannot be determined at this time. Assessment of Legislative/Regulatory Impacts The Company has assessed, and continues to assess, the impacts of climate change legislation and regulation on its business. This assessment is ongoing and future changes arising out of the legislative or regulatory process could impact the assessment significantly. PNM’s assessment includes assumptions regarding specific GHG limits; the timing of implementation of these limits; the possibility of a market-based trading program, including the associated costs and the availability of emission credits or allowances; the development of emission reduction and/or renewable energy technologies; and provisions for cost containment. Moreover, the assessment assumes various market reactions such as the price of coal and gas and regional plant economics. These assumptions are, at best, preliminary and speculative. However, based upon these assumptions, the enactment of climate change legislation or regulation could, among other things, result in significant compliance costs, including large capital expenditures by PNM, and could jeopardize the Company’s reputation as well as the economic viability of certain generating facilities. The ultimate consequences of increased stakeholder scrutiny related to climate change and environmental regulation could lead to increased costs to customers and affect results of operations, cash flows, and financial condition if the incurred costs are not fully recovered through regulated rates. Higher rates could also contribute to reduced usage of electricity. PNM’s assessment process is evolving and is too speculative at this time for a meaningful prediction of the long-term financial impact. Transmission Issues At any given time, FERC has various notices of inquiry and rulemaking dockets related to transmission issues pending. Such actions may lead to changes in FERC administrative rules or ratemaking policy but have no time frame in which action must be taken or a docket closed with no further action. Further, such notices and rulemaking dockets do not apply strictly to PNM but will have industry-wide effects in that they will apply to all FERC-regulated entities. PNM monitors and often submits comments taking a position in such notices and rulemaking dockets or may join in larger group responses. PNM often cannot determine the full impact of a proposed rule and policy change until the final determination is made by FERC and PNM is unable to predict the outcome of these matters. Other Matters See Notes 11 and 12 herein and Notes 16 and 17 of the Notes to Consolidated Financial Statements in the 2025 Annual Reports on Form 10-K for a discussion of commitments and contingencies and rate and regulatory matters. 104 CRITICAL ACCOUNTING POLICIES AND ESTIMATES The preparation of financial statements in accordance with GAAP requires Company management to select and apply accounting policies that best provide the framework to report the results of operations and financial position for TXNM, PNM, and TNMP. The selection and application of those policies require management to make difficult, subjective, and/or complex judgments concerning reported amounts of revenue and expenses during the reporting period and the reported amounts of assets and liabilities at the date of the financial statements. As a result, there exists the likelihood that materially different amounts would be reported under different conditions or using different assumptions. As of June 30, 2026, there have been no significant changes with regard to the critical accounting policies disclosed in TXNM’s, PNM’s, and TNMP’s 2025 Annual Reports on Forms 10-K. The policies disclosed included regulatory accounting, impairments, decommissioning and reclamation costs, pension and other postretirement benefits, accounting for contingencies, and income taxes. MD&A FOR TNMP RESULTS OF OPERATIONS TNMP operates in only one reportable segment, as presented above in Results of Operations for TXNM. MD&A FOR PNM RESULTS OF OPERATIONS PNM operates in only one reportable segment, as presented above in Results of Operations for TXNM. DISCLOSURE REGARDING FORWARD LOOKING STATEMENTS Statements made in this filing that relate to future events or TXNM’s, PNM’s, or TNMP’s expectations, projections, estimates, intentions, goals, targets, and strategies are made pursuant to the Private Securities Litigation Reform Act of 1995. Readers are cautioned that all forward-looking statements are based upon current expectations and estimates and apply only as of the date of this report. TXNM, PNM, and TNMP assume no obligation to update this information. Because actual results may differ materially from those expressed or implied by these forward-looking statements, TXNM, PNM, and TNMP caution readers not to place undue reliance on these statements. TXNM’s, PNM’s, and TNMP’s business, financial condition, cash flows, and operating results are influenced by many factors, which are often beyond their control, that can cause actual results to differ from those expressed or implied by the forward-looking statements. These factors, which are neither presented in order of importance nor weighted, include: •The failure of Parent to obtain any equity, debt, or other financing necessary to complete the Merger •The expected timing and likelihood of completion of the pending Merger, including the timing, receipt and terms and conditions of any required governmental and regulatory approvals of the pending Merger that could reduce anticipated benefits or cause the parties to abandon the transaction •The occurrence of any event, change or other circumstances that could give rise to the termination of the Merger Agreement, including in circumstances requiring TXNM to pay a termination fee •The receipt of an unsolicited offer from another party to acquire our assets or capital stock that could interfere with the Merger •The outcome of any legal proceedings, regulatory proceedings, or enforcement matters that may be instituted relating to the Merger •Risks related to disruption of management time from ongoing business operations due to the proposed Merger •The risk that the proposed transaction and its announcement could have an adverse effect on the ability of TXNM to retain and hire key personnel and maintain relationships with its customers and suppliers, and on its operating results and businesses generally •The announcement and pendency of the Merger, during which TXNM is subject to certain operating restrictions, could have an adverse effect on TXNM’s businesses, results of operations, financial condition or cash flows •The costs incurred to consummate the Merger •The risk that the price of TXNM’s common stock may fluctuate during the pendency of the proposed transaction and may decline significantly if the proposed transaction is not completed •The ability of PNM and TNMP to recover costs and earn allowed returns in regulated jurisdictions and the impact on service levels for PNM customers if the ultimate outcomes do not provide for the recovery of costs and operating and capital expenditures, as well as other impacts of federal or state regulatory and judicial actions •The ability of the Company to successfully forecast and manage its operating and capital expenditures, including aligning expenditures with the revenue levels resulting from the ultimate outcomes of regulatory proceedings •Uncertainty surrounding the status of PNM’s participation in jointly-owned generation projects 105 Table of Contents •Uncertainty regarding the requirements and related costs of decommissioning power plants and reclamation of coal mines, as well as the ability to recover those costs from customers, including the potential impacts of current and future regulatory proceedings •The impacts on the electricity usage of customers and consumers due to performance of state, regional, and national economies, energy efficiency measures, weather, seasonality, alternative sources of power, advances in technology, and other changes in supply and demand •Uncertainty related to the potential for regulatory orders, legislation or rulemakings that provide for municipalization of utility assets or public ownership of utility assets, including generation resources, or which would delay or otherwise impact the procurement of necessary resources in a timely manner •The Company’s ability to maintain its debt, including convertible debt, and access the financial markets in order to repay or refinance debt as it comes due and for ongoing operations and construction expenditures due to disruptions in the capital or credit markets, actions by ratings agencies, and fluctuations in interest rates resulting from any negative impacts from regulatory proceedings, actions by the Federal Reserve, entry into the Merger Agreement, geopolitical activity, including tariffs, or the risk of wildfires and storms •The risks associated with the cost and completion of generation, transmission, distribution, and other projects, including uncertainty related to regulatory approvals and cost recovery, the ability of counterparties to meet their obligations under certain arrangements (including renewable energy resources, approved PPAs and ESAs), and supply chain or other outside support services that may be disrupted •The potential unavailability of cash from TXNM’s subsidiaries due to regulatory, statutory, or contractual restrictions or subsidiary earnings or cash flows •The performance of generating units, transmission systems, and distribution systems, which could be negatively affected by operational issues, fuel quality and supply chain issues (disruptions), unplanned outages, extreme weather conditions, wildfires, storms, terrorism, cybersecurity breaches, and other catastrophic events, including the costs the Company may incur to repair its facilities and/or the liabilities the Company may incur to third parties in connection with such issues beyond the extent of insurance coverage •State and federal regulation or legislation relating to environmental matters and renewable energy requirements, the resultant costs of compliance, and other impacts on the operations and economic viability of PNM’s generating plants •State and federal regulatory, legislative, executive, and judicial decisions and actions on ratemaking, tariffs, and taxes, including guidance related to the interpretation of changes in tax laws, the Inflation Reduction Act, the Infrastructure Investment and Jobs Act of 2021, the OBBBA, and other matters including a government shutdown and the cancellation of grants or related funding •Risks related to climate change, including potential financial and reputational risks resulting from increased stakeholder scrutiny related to climate change, litigation, legislative and regulatory efforts to limit GHG, including the impacts of the ETA •Employee workforce factors, including cost control efforts and issues arising out of collective bargaining agreements and labor negotiations with union employees •Variability of prices and volatility and liquidity in the wholesale power and natural gas markets, including the impacts to transmission margins •Changes in price and availability of fuel and water supplies, including the ability of the mine supplying coal to Four Corners and the companies involved in supplying nuclear fuel to provide adequate quantities of fuel •Regulatory, financial, and operational risks inherent in the operation of nuclear facilities, including spent fuel disposal uncertainties •The impacts of decreases in the values of marketable securities maintained in trusts to provide for decommissioning, reclamation, pension benefits, and other postretirement benefits, including potential increased volatility resulting from actions by the Federal Reserve to address inflationary concerns, and international developments •Uncertainty surrounding counterparty performance and credit risk, including the ability of counterparties to supply fuel and perform reclamation activities and impacts to financial support provided to facilitate reclamation and decommissioning at SJGS •The effectiveness of risk management regarding commodity transactions and counterparty risk •The outcome of legal proceedings, including the extent of insurance coverage •Changes in applicable accounting principles or policies Any material changes to risk factors occurring after the filing of TXNM’s, PNM’s, and TNMP’s 2025 Annual Reports on Form 10-K are disclosed in Item 1A, Risk Factors, in Part II of this Form 10-Q. For information about the risks associated with the use of derivative financial instruments, see Item 3. “Quantitative and Qualitative Disclosures About Market Risk.” SECURITIES ACT DISCLAIMER Certain securities described or cross-referenced in this report have not been registered under the Securities Act, or any state securities laws and may not be reoffered or sold in the United States absent registration or an applicable exemption from the registration requirements of the Securities Act and applicable state securities laws. This Form 10-Q does not constitute an offer to sell or the solicitation of an offer to buy any securities. 106 WEBSITES The TXNM website, www.txnmenergy.com, is an important source of Company information. New or updated information for public access is routinely posted. TXNM encourages analysts, investors, and other interested parties to register on the website to automatically receive Company information by e-mail. This information includes news releases, notices of webcasts, and filings with the SEC. Participants will not receive information that was not requested and can unsubscribe at any time. Our corporate internet addresses are: •TXNM: www.txnmenergy.com •PNM: www.pnm.com •TNMP: www.tnmp.com TXNM’s corporate website includes a dedicated section providing key environmental and other information related to PNM’s and TNMP’s operations, including information that collectively demonstrates the Company’s commitment to sustainability. This information highlights plans for PNM to be coal-free no later than 2031 and to have a carbon-free generating portfolio by 2040. The contents of these websites are not a part of this Form 10-Q. The SEC filings of TXNM, PNM, and TNMP, including annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, are accessible free of charge on the TXNM website as soon as reasonably practicable after they are filed with, or furnished to, the SEC. Reports filed with the SEC are available on its website, www.sec.gov. These reports are also available in print upon request from TXNM free of charge. Also available on the Company’s website at https://www.txnmenergy.com/sustainability/governance/governance-documents.aspx and in print upon request from any shareholder are TXNM’s: •Corporate Governance Principles •Code of Ethics (Do the Right Thing – Principles of Business Conduct; Supplier Code of Conduct) •Charters of the Audit and Ethics Committee, Nominating and Governance Committee, Compensation and Human Resources Committee, and Finance Committee •Restated Articles of Incorporation and Bylaws The Company will post amendments to or waivers from its code of ethics (to the extent applicable to the Company’s executive officers and directors) on its website.