8-K: TXNM Energy Reports Q3 2025 Results Amidst Blackstone Deal

TXNM Energy announced its third quarter 2025 results, reporting GAAP earnings of $1.22 per diluted share and ongoing earnings of $1.33 per diluted share, while progressing its acquisition by Blackstone Infrastructure.

Summary

• Q3 2025 GAAP diluted EPS was $1.22, a decrease from $1.45 in Q3 2024.
• Q3 2025 ongoing diluted EPS was $1.33, a decrease from $1.43 in Q3 2024.
• YTD 2025 GAAP diluted EPS was $1.63, a decrease from $2.50 in YTD 2024.
• YTD 2025 ongoing diluted EPS was $1.87, a decrease from $2.44 in YTD 2024.
• Shareholders approved the acquisition by affiliates of Blackstone Infrastructure for $61.25 per share on August 28, 2025.
• The regulatory approval process for the Blackstone transaction has commenced with applications filed with the NMPRC, PUCT, and FERC on August 25, 2025.
• The company anticipates the acquisition closing in the second half of 2026, subject to customary closing conditions and regulatory approvals.
• Third quarter results reflect the implementation of the first phase of approved rates in New Mexico and newly approved transmission recovery in Texas.
• TNMP's second Transmission Cost of Service (TCOS) filing for 2025 was approved, providing recovery for $87 million of rate base.
• TNMP filed its second Distribution Cost Recovery Factor (DCRF) application, seeking recovery for an additional $28 million of rate base.
• PNM filed an application with the NMPRC for approval to construct, own, and operate 30 megawatts of energy storage at an estimated cost of $78 million.
• Q3 2025 GAAP earnings included $14.0 million of costs related to the planned acquisition.
• Q3 2025 GAAP earnings included $2.1 million of net unrealized losses on investment securities, compared to $9.5 million of net unrealized gains in Q3 2024.
• Diluted EPS was reduced in Q3 2025 by shares issued as part of 2024 forward sales agreements ($150 million) and shares issued in June and August 2025 ($800 million).

Sentiment

Score: 4

Explanation: While the acquisition by Blackstone is progressing and regulatory approvals are being sought, the reported GAAP and ongoing earnings per share for both the quarter and year-to-date periods show a decline compared to the previous year. Significant merger-related costs and share dilution also negatively impacted results. The non-affirmation of earnings guidance further contributes to a cautious outlook, despite positive regulatory developments for rate recovery and infrastructure investment plans.

Positives

• Shareholders approved the proposed transaction with Blackstone Infrastructure on August 28, 2025.
• The first phase of approved rates in New Mexico has been implemented, contributing to Q3 results.
• Newly approved transmission recovery in Texas provides recovery for $87 million of rate base.
• TNMP filed for an additional $28 million of rate base recovery to support ongoing investment in distribution infrastructure.
• PNM filed an application to construct 30 megawatts of energy storage at an estimated cost of $78 million, which will enhance grid flexibility and assist in serving summer peak season.
• The Corporate and Other segment experienced lower interest expense due to reduced debt balances, which increased earnings.

Negatives

• Q3 2025 GAAP diluted EPS decreased to $1.22 from $1.45 in Q3 2024.
• Q3 2025 ongoing diluted EPS decreased to $1.33 from $1.43 in Q3 2024.
• YTD 2025 GAAP diluted EPS decreased to $1.63 from $2.50 in YTD 2024.
• YTD 2025 ongoing diluted EPS decreased to $1.87 from $2.44 in YTD 2024.
• Q3 2025 GAAP earnings included $14.0 million in merger-related costs.
• Q3 2025 GAAP earnings were negatively impacted by $2.1 million of net unrealized losses on investment securities, a significant swing from $9.5 million in gains in Q3 2024.
• PNM segment experienced lower weather-related usage, increased O&M, higher depreciation, property tax, and interest expense associated with new capital investments, and increased demand charges from energy storage agreements.
• TNMP segment experienced lower weather-related usage and higher depreciation and property tax expense associated with new capital investments.
• Diluted EPS was reduced by the issuance of new shares totaling $950 million ($150 million from 2024 forward sales and $800 million in June and August 2025).

Risks

• The expected timing and likelihood of completion of the pending transaction with Blackstone Infrastructure, including the timing, receipt, and terms and conditions of any required governmental and regulatory approvals 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 transaction agreement, including in circumstances requiring the Company to pay a termination fee.
• The risk that the parties may not be able to satisfy the conditions to the proposed transaction in a timely manner or at all.
• The outcome of legal proceedings that may be instituted against TXNM Energy, its directors, and others related to the proposed transaction.
• Risks related to disruption of management time from ongoing business operations due to the proposed transaction.
• The risk that the proposed transaction and its announcement could have an adverse effect on the ability of TXNM Energy to retain and hire key personnel and maintain relationships with its customers and suppliers, and on its operating results and businesses generally.
• The amount of costs, fees, charges, or expenses resulting from the proposed transaction.
• The risk that the price of TXNM Energy's common stock may fluctuate during the pendency of the proposed transaction and may decline significantly if the proposed transaction is not completed.
• Other unpredictable or unknown factors not discussed in this communication could also have material adverse effects on forward-looking statements.

Future Outlook

TXNM Energy is not affirming previously issued earnings guidance for 2025 and does not plan to issue revised earnings guidance during the pending transaction. The company continues to anticipate that the closing of the acquisition by Blackstone Infrastructure will occur in the second half of 2026, subject to customary closing conditions and regulatory approvals.

Management Comments

• "Third quarter results incorporate the implementation of the first phase of approved rates in New Mexico and newly approved transmission recovery in Texas, along with additional equity issued during the quarter." Don Tarry, President and CEO of TXNM Energy.
• "We have initiated the regulatory approval process for our transaction with Blackstone Infrastructure with filings that address the key issues raised during our conversations with local stakeholders and community groups." Don Tarry.
• "We look forward to continued conversations through the regulatory process and achieving the best path forward to invest in positive outcomes for our customers and communities across New Mexico and Texas." Don Tarry.

Industry Context

The utility sector, particularly in regulated markets like New Mexico and Texas, often sees earnings influenced by rate case approvals and infrastructure investments. The trend towards energy storage, as evidenced by PNM's application for 30 MW, reflects a broader industry shift towards grid modernization and renewable energy integration to enhance reliability and meet peak demand. Mergers and acquisitions, such as the Blackstone deal, are common in the utility space as companies seek scale, capital, or strategic realignment. The use of non-GAAP measures like "ongoing earnings" is also a common practice in the industry to provide a clearer view of operational performance by excluding non-recurring or non-cash items.

Comparison to Industry Standards

• The acquisition by Blackstone Infrastructure for $61.25 per share indicates a valuation that will be benchmarked against recent utility sector M&A transactions, considering factors like regulated asset base multiples and premium paid over pre-announcement share prices.
• The approved rate recovery mechanisms (TCOS for $87 million and DCRF application for $28 million) are standard regulatory tools in the utility industry, comparable to those used by other regulated utilities in Texas and New Mexico to ensure cost recovery and incentivize infrastructure investment.
• PNM's proposed $78 million investment in 30 megawatts of energy storage aligns with industry trends where utilities are increasingly deploying battery storage solutions to support grid stability, integrate intermittent renewables, and manage peak loads, similar to projects undertaken by utilities like NextEra Energy or Duke Energy.
• The decline in GAAP and ongoing EPS, partly due to increased operating expenses, depreciation, and new share issuances, would be compared to the performance of peer utilities such as Xcel Energy, Sempra Energy, or CenterPoint Energy, which also operate in regulated environments and face similar capital expenditure and operational cost pressures.

Legal Proceedings

• The filing mentions "the outcome of legal proceedings that may be instituted against TXNM Energy, its directors and others related to the proposed transaction" as a risk factor.

Stakeholder Impact

• Shareholders: Approved the Blackstone acquisition at $61.25 per share. Experienced dilution from recent share issuances. Will be impacted by the finalization of the acquisition.
• Customers: Benefit from approved rates in New Mexico and transmission recovery in Texas, as well as planned investments in distribution infrastructure and energy storage aimed at improving grid flexibility and service reliability.
• Employees: Potential impact on retention and hiring due to the proposed transaction is noted as a risk.
• Suppliers: Potential adverse effect on relationships due to the proposed transaction is noted as a risk.
• Regulatory Authorities: Actively involved in reviewing and approving the Blackstone acquisition and various rate and infrastructure applications.

Next Steps

• Continue the regulatory approval process for the Blackstone Infrastructure acquisition with NMPRC, PUCT, FERC, Department of Justice (Hart Scott-Rodino Clearance), Nuclear Regulatory Commission, and Federal Communications Commission.
• Work towards the anticipated closing of the Blackstone acquisition in the second half of 2026.
• Progress TNMP's second Distribution Cost Recovery Factor (DCRF) application seeking recovery for an additional $28 million of rate base.
• Seek NMPRC approval for PNM's application for a CCN to construct, own, and operate 30 megawatts of energy storage.

Key Dates

Recommendation

The company is in the midst of a pending acquisition by Blackstone Infrastructure, which has been approved by shareholders and is now undergoing regulatory review. This creates a floor for the stock price around the $61.25 acquisition price, assuming the deal closes. However, the reported Q3 2025 earnings show a decline year-over-year, and the company has withdrawn its 2025 guidance, indicating operational challenges or uncertainties outside the merger. While there are positive regulatory developments for rate recovery and infrastructure investment, the immediate focus is on the merger's completion. For investors, holding the stock seems appropriate to capture the acquisition premium if the deal closes, but new investment might be cautious given the operational performance and the time until the deal's expected close in H2 2026. The risks associated with regulatory approvals and potential termination fees also warrant a 'hold' rather than a 'buy' or 'sell' at this stage.

Keywords

TXNM Energy, Blackstone Infrastructure, Q3 2025 Earnings, Utility, Electric Utility, New Mexico, Texas, PNM, TNMP, Merger, Acquisition, Regulatory Approval, Energy Storage, Rate Base, GAAP Earnings, Ongoing Earnings, SEC Filing, 8-K