10-K: TXNM Energy Reports 2025 Earnings Decline Amid Merger Progress

TXNM Energy, Inc. reported a significant decrease in net earnings for 2025, down to $151.4 million from $242.2 million in 2024, while advancing its proposed merger with Blackstone Infrastructure.

Summary

• Net earnings attributable to TXNM decreased significantly to $151.4 million, or $1.48 per diluted share, in 2025, compared to $242.2 million, or $2.67 per diluted share, in 2024.
• The proposed merger with Blackstone Infrastructure, where TXNM will become a wholly-owned subsidiary, was unanimously approved by the Board and shareholders on August 28, 2025, and is expected to close in the second half of 2026.
• Regulatory approvals for the merger have been received from the FCC (January 23, 2026) and FERC (February 20, 2026), and the PUCT approved a unanimous settlement on February 6, 2026; NMPRC and NRC approvals are still pending.
• TNMP's segment earnings increased by $20.8 million, driven by higher transmission and distribution rates, increased volumetric and demand-based load (data center load up 70.5%), and revenues recorded under HB 5247.
• PNM's segment earnings decreased by $104.6 million, primarily due to higher operating expenses, increased depreciation, capacity arrangements, milder weather, and higher interest charges, partially offset by increased retail load and rate relief.
• PNM incurred a one-time pension settlement charge of $58.8 million in 2025.
• Total consolidated capital requirements for 2026-2030 are projected to be $11.1 billion, with $10.2 billion allocated to construction expenditures.
• TXNM's consolidated debt-to-capitalization ratio improved to 61.3% in 2025 from 65.9% in 2024.
• PNM's Grid Modernization Plan was approved, increasing investments from $344 million to $367 million for the first six years, with projected O&M costs decreasing by 18%.
• The New Mexico Energy Transition Act (ETA) mandates 100% zero-carbon energy by 2045, and PNM aims for a 100% carbon-free generating portfolio by 2040, including exiting Four Corners by 2031.
• TNMP filed its Base Rate Review in November 2025, requesting recovery of $2.8 billion of rate base, a 10.4% ROE, and recovery of $20.5 million in Hurricane Beryl restoration costs.

Sentiment

Score: 4

Explanation: StockSavvy.ai views this filing with a mixed sentiment. While the significant decline in net earnings is a negative, the progress on the Blackstone merger, substantial capital investment plans for grid modernization and clean energy, and favorable regulatory approvals for rate increases in key segments provide a strategic upside. The earnings decline is partially attributable to one-time charges and increased interest expenses, which are manageable in the context of the larger strategic transformation.

Positives

• TNMP experienced significant growth, with weather-normalized retail load increasing by 2.8% and demand-based load (excluding retail transmission) increasing by 5.3% in 2025 compared to 2024.
• Data center load on the TNMP system increased by 70.5% in 2025 compared to 2024, indicating strong economic development in its service territory.
• TNMP received multiple interim rate adjustments from the PUCT in 2025, including $11.5 million and $12.3 million annually for transmission rates, and $25.0 million and $1.8 million annually for distribution rates.
• The PUCT approved TNMP's first System Resiliency Plan (SRP) in March 2025, including $545.8 million in capital investments and $86.1 million in O&M expenses for 2025-2027, enhancing distribution system resiliency.
• PNM received NMPRC approval for a $105.0 million increase in retail electric rates, with the first phase effective July 1, 2025, and the second phase effective April 1, 2026, reflecting a 9.45% Return on Equity (ROE).
• PNM's Grid Modernization Plan was approved, increasing investments to approximately $367 million for the first six years and decreasing projected operations and maintenance costs by approximately 18%.
• PNM's 2028 Resource Application, including two 150 MW Energy Storage Agreements (ESAs), a 167 MW Power Purchase Agreement (PPA) for Valencia, and a Certificate of Convenience and Necessity (CCN) for a 100 MW solar facility and a 30 MW battery (with a 20 MW option), was approved by the NMPRC in June 2025.
• PNM's utility-owned solar and energy storage capacity, along with procurements from facilities in service, totaled 3,244 MW as of December 31, 2025, demonstrating progress towards carbon-free generation.
• PNM's energy efficiency programs achieved an estimated 84 GWh of incremental energy savings in 2025, equivalent to the annual consumption of approximately 11,639 homes.
• TNMP's energy efficiency programs achieved an estimated 20 GWh of incremental energy savings in 2025, equivalent to the annual consumption of approximately 2,762 homes.
• The company maintains investment grade issuer credit ratings from both Moody's and S&P, with a stable outlook, which is credit supportive for the proposed merger.
• The proposed merger with Blackstone Infrastructure has received key regulatory approvals from the FCC, FERC, and PUCT, indicating progress towards closing.
• TXNM's Board increased the quarterly dividend from $0.4075 to $0.4225 per share in December 2025, targeting a payout ratio between 50% and 60% of ongoing earnings.

Negatives

• Net earnings attributable to TXNM decreased by $90.7 million, from $242.2 million in 2024 to $151.4 million in 2025.
• Net earnings per diluted share decreased by $1.19, from $2.67 in 2024 to $1.48 in 2025.
• PNM's segment earnings decreased by $104.6 million, primarily due to higher operating expenses, increased depreciation, capacity arrangements, and milder weather.
• PNM recorded a one-time pension settlement charge of $58.8 million in 2025.
• Consolidated interest charges increased significantly to $271.5 million in 2025 from $228.1 million in 2024, reflecting higher interest rates and increased debt.
• The OBBBA, signed in July 2025, is expected to accelerate the phase-out of certain Inflation Reduction Act (IRA) energy tax credits and restrict credit availability for foreign entities of concern, potentially increasing future renewable energy development costs.
• PNM recorded a regulatory disallowance of $0.2 million related to surface mine reclamation liability in 2025.
• PNM's appeal of the NMPRC's decision to deny the Four Corners Abandonment Application was rejected by the NM Supreme Court on September 25, 2025, upholding the NMPRC's denial.

Risks

• The completion of the proposed merger with Blackstone Infrastructure is subject to the satisfaction or waiver of certain customary conditions, including NMPRC and NRC regulatory approvals, and there is no assurance when or if it will be completed.
• The announcement and pendency of the proposed merger could disrupt TXNM's businesses, affect employee retention, and divert management's attention from day-to-day operations.
• TXNM will incur substantial transaction fees and costs in connection with the proposed merger, and if the merger is not completed, TXNM may still be required to pay a termination fee of $210.0 million plus costs and expenses under certain circumstances.
• Lawsuits have been filed by purported TXNM shareholders challenging the proposed merger, alleging disclosure violations and seeking injunctive relief, which could delay or prevent the merger or result in damages.
• 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.
• The profitability of TXNM's utilities depends on timely cost recovery through regulated rates and earning a fair return on invested capital; failure to obtain this could negatively impact liquidity and results of operations.
• The company is projecting $10.2 billion in construction expenditures for 2026-2030, and if regulators do not authorize appropriate recovery of these costs, financial position could be negatively impacted.
• Customer electricity usage could be reduced by increases in prices, energy efficiency measures, alternative power sources, and economic conditions, leading to underutilization of assets and negatively impacting financial performance.
• Advances in technology, such as distributed generation and energy storage, could make central station power plants less competitive, eroding energy sales and regulated returns, and reducing asset values.
• Costs of decommissioning, remediation, and restoration of power plants, as well as reclamation of coal mines, could exceed estimates and amounts recovered from ratepayers, negatively impacting results and liquidity.
• The financial performance may be adversely affected if power plants, other generation resources, and transmission and distribution systems do not operate reliably and efficiently, leading to increased costs for purchased power.
• The company faces risks from physical and cybersecurity attacks, which could disrupt operations, lead to data loss, harm reputation, and incur significant remediation costs, especially with the proliferation of Generative AI tools.
• Inherent risks in the ownership and operation of nuclear facilities, including fuel supply, waste disposal, decommissioning costs, and potential regulatory changes or incidents, could materially affect PNM's financial condition.
• Peak demand for power could exceed forecasted supply capacity, leading to increased costs for purchasing capacity or building additional facilities, with potential opposition to cost recovery.
• Difficulties in obtaining permits and rights-of-way for transmission and distribution lines, especially on federal, state, and tribal lands, could result in higher costs, delays, or inability to complete planned projects.
• Changes in interest rates could adversely affect the business by increasing financing costs on future credit facilities and debt offerings, and impacting variable rate borrowings.
• Supply chain issues, high inflation, and geopolitical activity could reduce electricity demand, cause delays in material delivery, deteriorate counterparty credit quality, impair assets, impact credit ratings, and decrease the value of trust investments.
• 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, exacerbated by severe drought and high winds, could result in higher maintenance costs, increased insurance premiums, liability for damages, and service disruptions.
• TXNM's substantial indebtedness could limit its ability to obtain additional financing and increase vulnerability to adverse economic conditions.
• Servicing debt requires significant cash flow, and if operations do not generate sufficient cash, TXNM may need to sell assets, restructure debt, or obtain additional capital on unfavorable terms.
• The fundamental change repurchase features of Convertible Notes may delay or prevent an otherwise beneficial attempt to acquire TXNM.
• TXNM's ability to pay dividends depends on its subsidiaries' net earnings and cash flows, which are subject to regulatory and contractual restrictions.
• Reductions in credit ratings or changing rating agency requirements could increase borrowing costs, limit access to capital, and require additional collateral.
• Declines in values of marketable securities held in trust funds for pension, postretirement benefits, decommissioning, and reclamation could result in increased funding requirements and affect operational results.
• Impairments of goodwill and long-lived assets could adversely affect the company's financial position and results of operations.
• Changes in U.S. tax reform legislation, such as the OBBBA, may negatively impact businesses, financial position, results of operations, and cash flows by altering tax credits or deductibility.
• PNM is unable to predict the outcome of NMED's S1AP proposal for groundwater and soil contamination at the former Santa Fe Generating Station site.
• PNM cannot predict the outcome of EPA's rulemaking activity regarding CCR regulation, including mine placement of CCRs, or how it would affect operations at Four Corners.

Future Outlook

The company anticipates the proposed merger with Blackstone Infrastructure to close in the second half of 2026, subject to remaining regulatory approvals. PNM plans to file its 2026 Integrated Resource Plan by September 1, 2026, and will continue to procure renewable resources to meet its carbon-free goals. TNMP expects new rates from its Base Rate Review to become effective in mid-2026. The company will continue to monitor and adapt to evolving EPA regulations regarding GHG emissions and the Regional Haze Program, as well as the impacts of the OBBBA on energy tax credits.

Management Comments

• Our vision is to create a clean and bright energy future while fulfilling our purpose to work together with customers and communities to meet their energy needs.
• Our 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.
• 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.
• Earning authorized returns on regulated businesses, delivering at or above industry-average long-term earnings growth, with a dividend payout ratio between 50 and 60 percent of earnings, and maintaining investment grade credit ratings are key financial results.
• 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'.
• The Company is committed to fostering relationships with its customers, stakeholders, and communities through outreach, collaboration, and various community-oriented programs.
• Achieving our goal of carbon-free by 2040 is dependent on balancing reliability, cost considerations, and maturity of emerging technologies.

Industry Context

StockSavvy.ai notes that the utility industry is undergoing a significant transition towards clean energy, as evidenced by TXNM's commitment to a 100% carbon-free generating portfolio by 2040 and New Mexico's ETA requiring 100% zero-carbon energy by 2045. This transition necessitates substantial capital investments in transmission, distribution, and renewable energy infrastructure, a trend seen across the sector. The increasing focus on grid modernization, resiliency, and cybersecurity reflects broader industry efforts to enhance reliability and adapt to evolving threats and technologies. Regulatory frameworks continue to play a critical role in shaping utility profitability and investment recovery, with states like Texas actively encouraging infrastructure investments through streamlined cost recovery mechanisms. The ongoing reevaluation of federal environmental regulations, particularly concerning GHG emissions, creates a dynamic and uncertain operating environment for utilities, requiring continuous adaptation and strategic planning.

Comparison to Industry Standards

• PNM's ranking in J.D. Power customer satisfaction remained stable in 2025, reflecting sustained efforts to improve customer experience, despite a general decline in customer satisfaction across the electric utility industry.
• 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 Sustained Excellence Awards, indicating superior performance in energy efficiency compared to industry peers.
• TXNM's target dividend payout ratio of 50% to 60% of ongoing earnings is consistent with common practices among investor-owned utilities, balancing shareholder returns with capital reinvestment needs.
• The company's maintenance of investment grade credit ratings from both Moody's and S&P aligns with industry standards for financial stability and access to capital markets.

Management Changes

Corporate Governance

Legal Proceedings

• TXNM and its directors are facing putative class action lawsuits from purported shareholders alleging disclosure violations related to the proposed merger and seeking injunctive relief; TXNM believes these allegations are without merit and will defend vigorously.
• PNM received a letter from the NMED on July 29, 2025, designating it as a responsible party for groundwater and soil contamination at the former Santa Fe Generating Station and requiring a Stage 1 Abatement Plan (S1AP) proposal, which was approved on February 9, 2026.
• The U.S. Supreme Court denied a requested stay of EPA's Legacy Rule for Coal Combustion Residuals (CCR) management units, and the DC Circuit agreed to hold the case in abeyance pending EPA's reconsideration of the rule.

Related Party Transactions

• PNMR Services Company, a wholly-owned subsidiary of TXNM, provides corporate services to TXNM and its subsidiaries (PNM and TNMP) and bills these services at cost on a monthly basis.
• TXNM has intercompany loan agreements with its subsidiaries, with interest charged based on TXNM's short-term borrowing rates or money-market rates.
• TXNM files a consolidated federal income tax return with its affiliated companies, and a tax allocation agreement ensures subsidiaries compute taxable income on a stand-alone basis, with payments made for net tax liabilities or tax savings.
• PNM purchased renewable energy from NMRD-owned facilities at a fixed price per MWh until NMRD was sold on February 27, 2024.

Stakeholder Impact

• Shareholders: The proposed merger offers a cash consideration of $61.25 per share, providing a clear exit opportunity. Dividend policy aims for 50-60% payout ratio, with a recent increase to $0.4225 per share.
• Customers (PNM & TNMP): Will benefit from rate credits ($105.0 million for PNM, $45.5 million for TNMP) as part of the merger settlement. PNM customers will also receive $10.0 million in additional contributions to the Good Neighbor Fund and $25.0 million for innovative clean energy technologies. Rate increases have been approved for PNM and TNMP to recover infrastructure investments and operating costs. Energy efficiency programs aim to lower electricity costs and promote sustainable usage.
• Employees: The company is committed to preparing its workforce for a carbon-free future, offering competitive compensation and benefits, and leadership development programs. Collective bargaining agreements are in place for unionized employees. The merger could create uncertainty regarding roles, but the company aims to retain key personnel.
• Communities: PNM will receive $35.0 million in economic development funding over 10 years as part of the merger settlement. Both PNM and TNMP engage in significant community outreach, philanthropic projects, and support for local organizations, including wildfire safety initiatives and low-income assistance programs.
• Regulators: The company's operations are heavily influenced by NMPRC, PUCT, and FERC decisions on rates, resource procurement, and environmental compliance. The merger requires multiple regulatory approvals, and the company actively participates in rate cases and rulemakings.
• Creditors: The company's investment-grade credit ratings and compliance with debt covenants are crucial for maintaining access to capital markets and managing its substantial indebtedness. The merger's impact on debt agreements has been addressed through amendments.

Next Steps

• Consummation of the proposed merger with Blackstone Infrastructure, pending NMPRC and NRC approvals, expected in the second half of 2026.
• TNMP's Base Rate Review hearing is scheduled for March 9, 2026, with new rates expected to become effective in mid-2026.
• PNM expects to file its 2026 Integrated Resource Plan (IRP) with the NMPRC on or before September 1, 2026.
• PNM intends to issue a supplemental Request For Proposal (RFP) for gas-fired resources in response to accelerated and increased energy demands.
• PNM expects to seek recovery of costs associated with joining the Extended Day Ahead Market (EDAM) in a future rate case, with plans to join as early as 2027.
• PNM will continue monitoring and adapting to EPA's reconsideration of GHG emission standards and the Regional Haze Program.
• PNM will conduct requisite site investigation reports for the identified Coal Combustion Residuals Management Unit (CCRMU) at SJGS, with reports due by February 9, 2027, and February 8, 2028.
• PNM will continue monitoring and other abatement activities at the former Santa Fe Generating Station site until groundwater meets applicable standards or NMED determines remediation is not required.
• TNMP expects to make its first comprehensive filing under Section 36.216 of PURA to recover costs associated with eligible transmission and distribution investments after its general rate proceeding.

Key Dates

Recommendation

The filing presents a mixed financial picture with a notable decline in consolidated net earnings for 2025, primarily due to increased operating expenses, higher interest charges, and a significant pension settlement charge. However, the ongoing progress of the Blackstone Infrastructure merger, which offers a fixed cash consideration of $61.25 per share, provides a clear valuation floor and potential upside if the deal closes as expected. The company's strategic investments in grid modernization and renewable energy, coupled with favorable regulatory approvals for rate increases in its utility segments, position it for long-term growth and alignment with clean energy mandates. Given the pending merger, which largely de-risks future operational performance for current shareholders by offering a defined exit price, a 'hold' recommendation is appropriate. Investors should await the finalization of the merger, as the current share price is likely to trade close to the offer price, with limited independent upside or downside from operational results in the interim.

Keywords

TXNM Energy, PNM, TNMP, Blackstone Infrastructure, Merger, Utility, Electric, New Mexico, Texas, SEC Filing, 10-K, Financial Results, Earnings, Regulation, Renewable Energy, Grid Modernization, Capital Expenditures, Debt, Cybersecurity, Climate Change, Rate Case, Energy Transition Act, Environmental Compliance, Dividend, Credit Ratings