10-K: TXNM Energy's 2025 Earnings Decline Amidst Blackstone Merger Progress

TXNM Energy reports a significant decline in 2025 net earnings to $151.4 million, down from $242.2 million in 2024, as its merger with Blackstone Infrastructure advances towards a projected second-half 2026 close.

Summary

• Net earnings attributable to TXNM decreased to $151.4 million ($1.48 per diluted share) in 2025, down from $242.2 million ($2.67 per diluted share) in 2024.
• The proposed merger with Blackstone Infrastructure, where TXNM will become a wholly-owned subsidiary, is expected to close in the second half of 2026, with a cash consideration of $61.25 per share.
• TXNM's consolidated capital requirements for 2026-2030 are projected to be $11.1 billion, with $10.2 billion allocated to construction expenditures.
• PNM's retail electric rates received an approved increase of $105.0 million, implemented in two phases (July 1, 2025, and April 1, 2026), reflecting a Return on Equity (ROE) of 9.45%.
• TNMP filed a Base Rate Review in November 2025, seeking recovery of $2.8 billion of rate base, a requested ROE of 10.4%, and a 47.54% equity ratio, with new rates anticipated in mid-2026.
• PNM's Grid Modernization Plan investments were updated to approximately $367 million for the first six years, with projected operations and maintenance (O&M) costs decreasing by 18%.
• As of December 31, 2025, PNM's generation capacity mix includes 51.0% renewable resources, 17.6% energy storage, 21.1% gas-fired, 6.1% nuclear, and 4.2% coal.
• TNMP experienced a 2.8% increase in weather-normalized retail load and a 5.3% increase in demand-based load in 2025 compared to 2024, with data center load increasing by 70.5%.
• PNM's weather-normalized industrial load increased by 14.3% in 2025 compared to 2024.
• A one-time pension settlement charge of $58.8 million was recognized by PNM in 2025.
• TXNM's Board increased the quarterly dividend from $0.4075 to $0.4225 per share in December 2025.

Sentiment

Score: 4

Explanation: StockSavvy.ai views this as a mixed report. While the progress on the Blackstone merger and significant infrastructure investments are positive, the substantial decline in net earnings and the one-time pension charge are concerning, indicating operational headwinds despite regulatory rate increases.

Positives

• The proposed merger with Blackstone Infrastructure is progressing, with a unanimous settlement approved by the PUCT and FERC approval received, reducing regulatory uncertainty.
• PNM's retail electric rates increased by $105.0 million, with a 9.45% ROE, providing a stable revenue stream for its regulated operations.
• PNM's Grid Modernization Plan investments increased to $367 million for the first six years, coupled with an 18% decrease in projected O&M costs, enhancing efficiency and reliability.
• TNMP demonstrated strong load growth in 2025, with volumetric retail load up 2.8%, demand-based load up 5.3%, and a significant 70.5% increase in data center load.
• PNM's weather-normalized industrial load experienced a robust 14.3% increase in 2025.
• The NMPRC approved PNM's 2028 Resource Application, securing future energy supply and supporting the transition to cleaner energy.
• TXNM's Board increased the quarterly dividend to $0.4225 per share in December 2025, signaling confidence in future financial performance.
• The Inflation Reduction Act (IRA) provides benefits through extended clean energy incentives and a new production tax credit for existing nuclear facilities, supporting the company's decarbonization efforts.
• TNMP's System Resiliency Plan (SRP), with $545.8 million in capital investments and $86.1 million in O&M expenses for 2025-2027, was approved, enhancing distribution system resiliency.
• TNMP received a $34.6 million sales and use tax refund, with $24.7 million applied to 2025 capital projects, improving liquidity.
• Management successfully maintained investment-grade credit ratings for TXNM, PNM, and TNMP, with stable outlooks from Moody's and S&P.
• PNM's generation portfolio is 51.0% renewable and 17.6% energy storage, demonstrating significant progress towards carbon-free goals.
• PNM's energy efficiency programs saved an estimated 84 GWh in 2025, equivalent to the annual consumption of approximately 11,639 homes.
• TNMP's energy efficiency programs saved an estimated 20 GWh in 2025, equivalent to the annual consumption of approximately 2,762 homes.
• PNM's water conservation efforts are on track to reduce freshwater use by 80% by 2035 and 90% by 2040 from 2005 levels.
• 18 of the company's 22 facilities met or exceeded the 65% solid waste diversion goal in 2025.

Negatives

• Net earnings attributable to TXNM decreased by $90.7 million, from $242.2 million in 2024 to $151.4 million in 2025, representing a significant decline.
• PNM's segment earnings decreased by $104.6 million in 2025 compared to 2024, indicating operational challenges within its primary utility.
• A one-time pension settlement charge of $58.8 million significantly impacted PNM's other income (deductions) in 2025.
• Higher operating expenses at PNM and TNMP, increased depreciation due to plant in service, costs related to capacity arrangements at PNM, milder weather at PNM, and higher interest charges at both PNM and TNMP partially offset revenue increases.
• The One Big Beautiful Bill Act of 2025 (OBBBA), signed in July 2025, is expected to accelerate the phase-out of certain IRA energy tax credits and restrict credit availability for foreign entities of concern, potentially increasing future renewable energy development costs.
• PNM's 2024 Rate Change resulted in a regulatory disallowance of $81.0 million to Four Corners' net book value and a disallowance of return on $45.0 million of PVNGS undepreciated investments.
• PNM recorded regulatory disallowances totaling $10.6 million in 2024 and $0.2 million in 2025 related to surface mine reclamation liabilities.
• PNM's decision to withdraw from the Western Resource Adequacy Program (WRAP) binding phase, seeking alignment with EDAM, could introduce new uncertainties in resource adequacy coordination.
• Ongoing legal proceedings challenging the proposed Merger, including shareholder lawsuits alleging disclosure violations, create uncertainty and potential costs.
• The Merger Agreement includes a $210.0 million termination fee payable by TXNM under certain circumstances, which could be a significant financial burden if the merger fails.
• The company's substantial indebtedness could limit its ability to obtain additional financing and increase its vulnerability to adverse economic conditions.

Risks

• The profitability of TXNM's utilities depends on timely cost recovery through regulated rates and earning a fair return on invested capital; failure to achieve this could negatively impact liquidity and results of operations.
• The company faces significant capital expenditures ($10.2 billion for 2026-2030), and increasing costs combined with downward pressure on customer usage could adversely affect results and cash flows if not adequately recovered.
• Uncertainty surrounds PNM's continued participation in jointly-owned generation projects, which could impact its financial performance.
• Costs of decommissioning power plants and reclaiming coal mines could exceed estimates or recoverable amounts, negatively impacting results and liquidity.
• Customer electricity usage could be reduced by price increases, energy efficiency measures, alternative power sources, and economic conditions, leading to underutilization of assets and negatively impacting revenues.
• Advances in technology, such as distributed generation and energy storage, could make existing electric generating facilities less competitive, eroding energy sales and regulated returns.
• The financial performance depends on the reliable and efficient operation of generation, transmission, and distribution systems; unplanned outages, equipment failures, extreme weather, and cybersecurity attacks could lead to lost revenues and increased costs.
• The company faces significant risks from physical and cybersecurity attacks on its infrastructure and IT systems, potentially disrupting operations, causing data loss, reputational harm, and incurring substantial remediation costs.
• Inherent risks in the ownership and operation of nuclear facilities (PVNGS), including fuel/water supply, spent fuel disposal uncertainties, security threats, and potential for additional NRC requirements or shutdowns.
• Peak demand for power could exceed forecasted supply capacity, leading to increased costs for market purchases or expedited construction of new facilities, with potential for delayed cost recovery.
• Difficulties in obtaining permits and rights-of-way for new infrastructure and maintenance, especially on federal, state, and tribal lands, could result in higher costs, delays, or project inability.
• Changes in interest rates could adversely affect the business by increasing financing costs on future credit facilities and debt offerings.
• Supply chain issues, high inflation, and geopolitical activity could negatively affect the company's business, results of operations, financial condition, cash flows, and access to capital markets.
• Economic recession or downturn could lead to decreased consumption, increased bad debt expense, and negative impacts on suppliers.
• Operating results are seasonal and affected by weather conditions; unusually mild weather or drought conditions could reduce revenues and generation capacity.
• The impact of wildfires could negatively affect results of operations through higher maintenance costs, increased insurance premiums, and potential liability for damages.
• There is no assurance when or if the proposed Merger with Blackstone Infrastructure will be completed, and failure to obtain regulatory approvals (NMPRC, NRC) could delay or prevent it.
• The announcement and pendency of the proposed Merger could disrupt TXNM's businesses, divert management's attention, and adversely affect its ability to retain key personnel and maintain customer relationships.
• TXNM will incur substantial transaction fees and costs in connection with the proposed Merger, regardless of its completion.
• Termination of the Merger Agreement could negatively impact TXNM, including potential stock price decline and a $210.0 million termination fee payable to Parent under certain circumstances.
• Lawsuits challenging the proposed Merger could prevent its completion or result in damages and reputational harm.
• Provisions in TXNM's organizational documents and regulatory factors could limit another party's ability to acquire TXNM, potentially depriving shareholders of a takeover premium.
• TXNM has counterparty credit risk in connection with financial support for coal supply arrangements, with $19.3 million in letters of credit outstanding.
• Substantial indebtedness could limit TXNM's ability to obtain additional financing and increase its vulnerability to adverse economic conditions.
• Declines in values of marketable securities held in trust funds for pension, OPEB, decommissioning, and reclamation could result in increased funding requirements and costs.
• Impairments of goodwill and long-lived assets could adversely affect the company's business, financial position, liquidity, and results of operations.
• The impacts and implementation of U.S. tax reform legislation, such as the OBBBA, may negatively impact TXNM's businesses, financial position, results of operations, and cash flows by accelerating the phase-out of certain tax credits.

Future Outlook

The proposed merger with Blackstone Infrastructure is expected to close in the second half of 2026. New TNMP rates from the Base Rate Review are anticipated to become effective in mid-2026. PNM plans to join the EDAM day-ahead regional market as early as 2027 and expects to file its 2026 Integrated Resource Plan by September 1, 2026, covering a 20-year planning period. The company projects substantial consolidated capital requirements of $11.1 billion for 2026-2030, primarily for construction expenditures, as it continues its transition towards a 100% carbon-free generating portfolio by 2040, aligning with New Mexico's 2045 zero-carbon energy mandate.

Management Comments

• 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.
• The Company believes that maintaining strong and modern electric infrastructure is critical to ensuring reliability and supporting economic growth.
• 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.
• Management 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.
• The Company currently believes that 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.
• TXNM believes that the allegations set forth in the demand letters, draft complaints, and complaints are without merit and, if such complaints are actually filed, will defend such actions vigorously (regarding merger-related litigation).
• PNM cannot predict the full impact of the ETA with respect to Four Corners or the outcome of its future generating resource abandonment and replacement resource filings with the NMPRC.
• PNM is currently unable to determine the outcome of the NMED's S1AP proposal for SJGS for groundwater and soil contamination.
• PNM cannot predict the outcome of EPA's CCRMU site evaluations and investigations, or how these outcomes might affect the associated costs, which might have a material impact on PNM's operations, financial position, or cash flows.
• PNM cannot predict the outcome of OSM's proposed rulemaking regarding CCR regulation, including mine placement of CCRs, or whether OSM's actions will have a material impact on PNM's operations, financial position, or cash flows.

Industry Context

StockSavvy.ai notes that TXNM Energy's strategic focus on transitioning to a carbon-free generating portfolio by 2040 aligns with broader utility industry trends towards decarbonization and increased renewable energy integration, driven by regulatory mandates like New Mexico's ETA and federal incentives like the IRA. The significant capital investments in grid modernization and resiliency reflect an industry-wide need to upgrade aging infrastructure and adapt to extreme weather events, a challenge faced by many utilities in the U.S. Southwest and Gulf Coast regions. The increase in data center load in TNMP's service territory highlights a growing demand segment for utilities, particularly in regions with favorable economic conditions like Texas. The ongoing merger with Blackstone Infrastructure also reflects a trend of private equity investment in regulated utilities, seeking stable, long-term returns.

Comparison to Industry Standards

• TXNM's dividend payout ratio target of 50-60% of ongoing earnings is generally in line with industry standards for mature, regulated utilities that balance shareholder returns with capital reinvestment.
• PNM's approved ROE of 9.45% and TNMP's requested ROE of 10.4% are within the typical range for regulated utilities, which often see ROEs between 9% and 11%, reflecting the stable but regulated nature of their earnings.
• The company's commitment to maintaining investment-grade credit ratings (BBB/Baa3 for TXNM, BBB/Baa2 for PNM, BBB+/Baa1 for TNMP) is a common industry practice to ensure access to capital markets at favorable rates.
• PNM's goal of 100% carbon-free generation by 2040 and New Mexico's ETA requirement of 100% zero-carbon energy by 2045 are ambitious and ahead of many national targets, positioning PNM as a leader in decarbonization efforts compared to utilities in less progressive regulatory environments.
• The increase in data center load (70.5% for TNMP) is a significant growth driver, outperforming general load growth seen by many utilities.

Management Changes

Corporate Governance

Legal Proceedings

• Merger-related litigation: Demand letters and lawsuits filed by purported TXNM shareholders alleging disclosure violations and seeking injunctive relief regarding the proposed merger. TXNM believes these allegations are without merit and will defend vigorously.
• PNM is a designated responsible party by the NMED for groundwater and soil contamination at the former Santa Fe Generating Station, requiring a Stage 1 Abatement Plan (S1AP) proposal, which was approved on February 9, 2026.
• Challenges to EPA's 2024 Effluent Limitation Guidelines (ELG) rule are ongoing in the U.S. Court of Appeals for the Eighth Circuit.
• Challenges to EPA's Legacy Rule for Coal Combustion Residuals (CCR) management units are being held in abeyance in the DC Circuit pending EPA's reconsideration.
• Environmental groups filed a petition for review of the EAB's decision regarding the Four Corners NPDES permit with the U.S. Court of Appeals for the Ninth Circuit, which was settled, but further changes are possible.
• PNM cannot predict the outcome of OSM's proposed rulemaking regarding CCR regulation, including mine placement of CCRs.

Related Party Transactions

• PNMR Services Company, a wholly-owned subsidiary of TXNM, provides corporate services to TXNM and its subsidiaries (PNM and TNMP) through shared services agreements, billed at cost.
• Intercompany loan agreements exist between TXNM and its subsidiaries, with interest charged based on TXNM's short-term borrowings or money-market rates.
• TXNM files a consolidated federal income tax return with its affiliated companies, with a tax allocation agreement ensuring subsidiaries compute taxable income on a stand-alone basis and receive payment for tax savings.
• PNM purchased renewable energy from NMRD (previously 50% owned by PNMR Development) until its sale on February 27, 2024.

Stakeholder Impact

• **Shareholders**: Impacted by the decrease in net earnings and diluted EPS, but the proposed merger with Blackstone Infrastructure offers a defined cash exit at $61.25 per share, providing a premium to recent trading prices. Merger-related litigation introduces uncertainty.
• **Customers**: PNM customers benefit from $105.0 million in retail rate credits and $10.0 million in additional contributions to the PNM Good Neighbor Fund over 10 years as part of the merger settlement. TNMP customers will receive $45.5 million in rate credits over four years. All customers benefit from investments in grid modernization, energy efficiency programs, and the transition to carbon-free energy, but face potential rate increases from TNMP's Base Rate Review and PNM's future rate cases.
• **Employees**: The company is committed to preparing its workforce for a customer-focused future, offering competitive compensation and benefits, and providing leadership development and mentorship programs. Collective bargaining agreements cover a significant portion of PNM and TNMP employees, and severance and retention plans are in place.
• **Communities**: Benefit from $35.0 million in economic development funding (PNM) and increased charitable giving. Wildfire mitigation plans enhance public safety in service territories. The PNM Resources Foundation provides an annual average of $1.2 million in grant funding.
• **Creditors**: Impacted by the company's substantial indebtedness and debt-to-capitalization ratios. Merger-related change of control provisions in debt agreements were addressed through amendments and refinancing, maintaining compliance with covenants.
• **Suppliers/Vendors**: Potential for disruption due to merger uncertainties and ongoing supply chain issues, which could affect the timely delivery of materials and components.

Next Steps

• The proposed Merger with Blackstone Infrastructure is expected to close in the second half of 2026.
• New rates from TNMP's Base Rate Review are expected to become effective in mid-2026.
• PNM plans to join the EDAM day-ahead regional market as early as 2027.
• PNM expects to file its 2026 Integrated Resource Plan (IRP) with the NMPRC on or before September 1, 2026.
• PNM expects to host similar wildfire safety events in High Fire Risk Areas in 2026.
• PNM anticipates providing additional funding of $0.5 million for Four Corners mine reclamation in 2026 and $0.5 million in 2027.
• PNM does not anticipate making any contributions to pension plans in 2026 or 2027.
• PNM does not expect to make cash contributions to OPEB trusts in 2026-2030.
• PNM expects to seek recovery of EDAM costs in a future rate case.
• PNM expects to seek recovery of BESS Project costs in a future rate case.
• PNM's SB 170 Projects (Westpointe and Mesa Del Sol Substations) are expected to be reviewed in a future rate proceeding.
• PNM's new application for approval of the Rio Puerco-Pajarito-Prosperity CCN is expected to be reviewed in a future rate proceeding.
• TNMP expects to make its first comprehensive filing under Section 36.216 (HB 5247) after its general rate proceeding.
• SJGS is required to conduct a two-part evaluation of historic and current CCRMUs with reporting due dates of February 9, 2027, and February 8, 2028.
• EPA is expected to seek an extension of the PM standard attainment/nonattainment area designation deadline by one year.
• EPA intends to finalize the proposed rule rescinding the 2009 Endangerment Finding in the first quarter of 2026.
• EPA issued a proposed rule to approve New Mexico's SIP submission for ozone, which, if finalized, will withdraw the prior proposed partial SIP disapproval.
• The DC Circuit agreed to hold the Legacy Rule case in abeyance pending the outcome of EPA's reconsideration, with status reports due on March 16, 2026, and at 90-day intervals thereafter.
• EPA issued a final extension rule on February 6, 2026, delaying the deadline to complete the Facility Evaluation Report Part 1 until February 9, 2027.

Key Dates

Recommendation

The filing presents a mixed financial picture with a significant decline in net earnings for 2025, primarily due to a one-time pension charge and increased operating/financing costs. However, the ongoing merger with Blackstone Infrastructure, which offers a fixed cash price of $61.25 per share, provides a clear exit strategy for shareholders at a premium to recent trading prices. The regulatory approvals for the merger are progressing, reducing uncertainty. For investors seeking a near-term cash exit, the merger provides a defined value. For those considering the long-term, the company's substantial capital investment plans in clean energy and grid modernization, coupled with favorable regulatory mechanisms for cost recovery, suggest future growth potential in its regulated businesses, but this is offset by the current earnings decline and the eventual delisting of the stock. Therefore, a 'hold' recommendation is appropriate for existing shareholders awaiting merger completion, while new investors might find better opportunities given the limited upside to the merger price and the current financial performance.

Keywords

TXNM Energy, PNM, TNMP, Blackstone Infrastructure, Utility, Electric, New Mexico, Texas, 10-K, Annual Report, Merger, Acquisition, Regulatory Approval, NMPRC, PUCT, FERC, Net Earnings, Capital Expenditures, Renewable Energy, Energy Storage, Grid Modernization, Carbon-Free, Climate Change, ESG, Debt, Credit Ratings, Cybersecurity, Wildfire Risk, Pension, Dividends