Good day, everyone, and welcome to the PNM Resources second quarter earnings call. Today’s conference is being recorded. At this time, I would like to turn the conference over to Gina Jacobi, Director of Investor Relations. Please go ahead.

Thank you everyone for joining us this morning for a discussion of the company’s second quarter 2009 earnings. Please note that the presentation and accompanying materials for this conference call and supporting documents are available on the PNM Resources website at www.pnmresources.com. Joining me today are PNM Resources Chairman and CEO, Jeff Sterba; PNM Resources Chief Operating Officer, Pat Vincent-Collawn; and Chuck Eldred, our Chief Financial Officer, as well as several members of our executive management team. Before I turn the call over to Jeff, I need to remind you that some of the information provided this morning should be considered forward-looking statements pursuant to the Private Securities Litigation Reform Act of 1995. We caution you that all of the forward-looking statements are based upon current expectations and estimates and that PNM Resources assumes no obligation to update the information. For a detailed discussion of factors affecting PNM Resources results, please refer to our current and future annual reports on Form 10-K and the quarterly reports on Form 10-Q as well as other current and future reports on Form 8-K filed with the SEC. And with that, I’ll turn the call over to Jeff.

Thanks Gina and welcome, thanks for joining us this morning. I am sure most of you have seen our earnings release that showed that in spite of challenging economic times with the recession really across the country, our company turned in strong quarterly performance, and this was on the heels of a solid first quarter. We had ongoing court earnings for the quarter of $0.21 a share compared to a $0.10 loss same quarter last year. And year-to-date earnings, ongoing earnings are now $0.31 a share compared to a $0.05 loss in 2008. Really what drove this was good performance across virtually all of our businesses but the primary improvement drivers where within our New Mexico utility PNM and First Choice Power. For those of you that are interested in the GAAP numbers, those are also included in the release as well as a reconciliation to the ongoing earnings. You see also – you will see when you look at that the GAAP earnings were also up significantly as you would expect largely driven by the gain on the sale of the gas business in the first quarter. Based on the performance that we've had so far this year, we do expect to be at the high-end of the earnings range that we have provided you, which is $0.40 to $0.55 when adjusted for the rate case outcomes. But I think we do have the potential to exceed that range and we will talk a bit more about that as we go forward. Before turning it over to our folks to talk about some specifics let me just make a few summary comments. First, relative to our regulated utilities, they continue to be on a solid path to restoration. But we are obviously not there yet. You have seen the news of the new rates that were implemented at July 1 in New Mexico and the unanimous stipulation that is in Texas which will be hopefully acted on this next month where rates would go into effect in September along with numerous other regulatory initiatives on renewables efficiencies and the like. Solid progress is really being made but obviously significant earnings gap still exists. We have talked to you about this and the time that it will take to restore full earnings power in our regulated operation, particularly in New Mexico. On First Choice Power, I will spend some time in a few minutes giving you some more detail but I'm very pleased with the progress that has been made in the turnaround from a disastrous 2008. Brian Hayduk and his folks are doing a great job in stabilizing and restoring the value to this business, which we knew, was in there. And as I said I will come back and talk about that in a few moments but let me first turn to Pat Collawn to comment on our core regulated operations.

Thank you Jeff and good morning everyone. I'm going to start this morning on slide six. For several quarters, we have talked with you about how we're working toward accomplishing two main goals for our regulated businesses. We have reached many milestones during the quarter and I just want to spend a little time updating you on our progress. First, in our effort to achieve regulatory relief at PNM, the New Mexico Public Regulation Commission approved our unopposed stipulation in May. This is a $77.1 million increase to base rate implemented in two phases that started July 1 of this year. An important component of that stipulation is the implementation of a more conventional fuel and purchase power costs. The previous emergency fuel and purchased power costs have a cap on recovery and a floor on power plant performance. This fuel cost has neither. Another important piece of the stipulation was the inclusion of our merchant assets Luna, Lordsburg and Valencia in base rate. Chuck is going to talk in more detail about the financial impact of the rate case, and slide 24 and the appendix has additional details on the earnings contributions. We're also working in earnest to prepare for the future test year filing in the next rate case. We have talked about the legislation that was passed here in New Mexico that gives us a true future test year. We would like for those rates to take effect on April 1 of 2011, so we're working towards putting together our filing, which will be required about this time next year. We also continue to be successful in streamlining our capital and managing our operations. We saw solid power plant performance at our base load power plans. Our T&D operations remain in the top quartile of reliability and…

Thanks Pat. First on First Choice Power, our financial performance is obviously ahead of plan year-to-date and this is due really both to market conditions and I think also improved execution. On the market conditions, we, as you all know, we have seen continued low gas prices, continued low power prices, and also low volatility in Texas. And the volatility is important because as – since we try to maintain as flat a book as possible at FCP, the thing that can cause real perturbation is weather related increases in demand or reductions in demand where you are either over or under hedged, and so you are moving to the balancing markets, and those markets can be much more volatile. And frankly they have been relatively stable through the summer. Those things, the low general prices, wholesale cost, and the low volatility have helped to significantly improve margins. We saw in the second quarter the same kind of margins that we saw in the first quarter with residential margins up in the 40s range. We don't expect that to be a new norm by any means. We're already seeing now price decline notices by other players in the marketplace and this is expected. We obviously are doing our own as we work to add customers to the system, so we expect that the third and the fourth quarter and particularly as we move into 2010 that we will move closer to more historical levels of margin performance. Obviously, one of the other main issues that Brian and his folks have faced has been the bad debt challenge that we have had which really cost us last year with exceptionally high levels of bad debt, and we have talked about what were the real drivers for that. The main things that…

Great. Thank you, Jeff, and good morning, everybody. Beginning on slide 14, you can see we earned $0.21, up $0.31 from last year. The results were largely due to improved performance at First Choice Power. However, last year's implementation of new rates, the fuel costs at PNM and our continued focus on controlling costs were critical achievements that added to our bottom line. Obviously, we're very pleased with the performance this quarter. It clearly demonstrates the progress we are making towards earning our allowed return and restoring value to First Choice Power. Before I move on to the individual business units, I do want to touch base on cash flow and liquidity. Year-to-date cash earnings were $205 million, up about $45 million or 29% from last year. Even more significant, if you exclude the one-time cash items from both years, our cash earnings were up almost $40 million or 32% year-over-year. You can see clearly we're making progress on both the earnings and cash flow results and this certainly would translate into our approved credit metrics which is one of our key objectives this year. Our available liquidity also remains strong given our reductions in short and long-term debt following the sale of the gas business which we were able to reduce $150 million of long-term debt at PNM Resources and 375 million of short-term debt both that PNM and PNMR and also accomplishing the refinancing of debt at TNMP. Now if you will turn to slide 15, I will walk you through the results of the regulated operations. Our combined regulated utilities, PNM and TNMP had ongoing earnings of $0.13 for the quarter. This is up a penny from the second quarter of last year. PNM Electric's earnings of $0.11 were up $0.06 from last year. The full quarter…

Thanks Chuck. On page 19, we have the checklist that we close with every quarter. I don't plan on going through it in any great detail, you can read it for yourself. But you can see it is all in green things and moving well forward. We look forward to a solid balance of the year. I think there are a couple things, let me just point out there. I think one of the things that we have seen is by the work of Jim Ferland and his folks, the power plants have really picked up and have improved in their availability. While a lot of that flows through to our customers under fuel costs, frankly that gives us headroom through relative to the ability to get other rate increases in place in New Mexico and that is very important. Obviously Optim's availability has done very well also. The improved credit metrics are very important to us. The increasing cash earnings, 29% increase is a real important measure as we go through the balance of this year and move into next year. I think that is all I'm going to comment on and we would be happy to take any questions if you have.

Thank you. Our question-and-answer session will be conducted electronically today. (Operator instructions). We will turn first to Lasan Johong with RBC Capital Markets. Lasan Johong – RBC Capital Markets: Thank you. Nice quarter by the way.

Thank you, Johong. Lasan Johong – RBC Capital Markets: Pat, if I'm not mistaken, there is at least one, potentially one more rate filing coming at PNM, correct?

Yes. Lasan Johong – RBC Capital Markets: Do you know when that might be or for how much?

It'll be around this time next year, Lasan, and no, we haven't put together the numbers yet, we are just working on that right now.

And remember that Lasan will be one that we anticipate using the future test your provision that we got in the rate case – I mean in the legislative session. Lasan Johong – RBC Capital Markets: Right. And that is going to decrease the lag, right?

Yes. Lasan Johong – RBC Capital Markets: Was it eliminated?

You're pretty close. I mean you never – I don't know that you ever get it eliminated to zero. Part of that will depend on what we actually file and how the commission responds.

Lasan, the legislation is very good. It really gives you most future test years, it is still a little bit behind, because it the data when you file. Ours would be date, the projected data, when the rates go into effect. So the legislation is very good but it is just that it will end up what we actually file. Lasan Johong – RBC Capital Markets: Okay. That makes sense. Right now, Texas, I hear, is going through a very bad drought/high temperature weather period. This definitely bodes ill for First Choice Power in the sense that, yes, demand goes up, but if you haven't bought enough power to offset that increase in demand, you then have to go out into the market and buy expensive power. So the question becomes is First Choice Power ready for this and can Optim Energy benefit on the other side from this particular situation developing?

Well, one of the things, Lasan, you are right that they are – that one they have to have a drought largely restricted to – I mean in the Houston area, more than areas. On the heat, you also have to look, Texas is not a small state, and you have to look at the regions. And so in fact the Houston area, which is an important load piece for us, they have had hotter whether the normal and hotter weather than last year. But if you look at Dallas, which is also an important load piece for us, they have had cooler weather than normal and cooler weather than last year. So it is not all across the board. You really have to start looking at the individual areas. And while the Houston zone is the most congested zone, it is the one where we are most focused on both the opportunities from Optim side and the risks from First Choice's side. Frankly I think our folks have that pretty well under control so long as the ERCOT continues to do a much improved job from what they did last year on congestion management and the like. We have not – while we're still seeing basis differentials that show higher prices on the Houston zone, frankly that is – a lot of that is already built into our hedge, and rest assured that as we think about the risks in Houston, that also goes into how we hedge. So we talk about in general we are flat. That doesn't mean there aren't zonal differences. Lasan Johong – RBC Capital Markets: Of course, okay. One last question if you don't mind, on the renewables initiatives, a couple of questions, what kind of – do you expect to kind of get a ROE in line with the utility ROE or something greater? Do you kind of – can you give us the split between let us say wind and solar roughly speaking and when you might start going out and putting metal in the ground?

Yes.

Yes, Lasan, we would expect ROE to be in line with the utility ROE. There is no provisions for higher ROEs on renewables here. The nice thing about the regulatory recovery here that was that piece from the New Mexico renewable energy act that once you get your plan approved, it is deemed just and reasonable. We're talking about probably you know two thirds wind, one third solar. We are in the process of negotiating contracts that goes back and forth and we could start some construction next year on that.

One thing to mention, Lasan, because on the solar side, this has been an issue in a lot of areas is this difference between photovoltaic versus concentrating solar. And while we initially started in a hard examination for a concentrating solar project because you have got the potential for storage and the like, quite frankly the cost of PV has come so much and it has not come down on the concentrating solar. It is not – we just don't perceive it to be worth the risk from a technology side and the higher cost for the storage benefit. Lasan Johong – RBC Capital Markets: Beautiful. Thank you.

(Operator instructions). And now we will turn to Brian Russo with Ladenburg Thalmann. Brian Russo – Ladenburg Thalmann: Good morning.

Good morning. Brian Russo – Ladenburg Thalmann: In terms of First Choice Power, just to confirm, you guys realized low $40 per megawatt hour residential margins in the second quarter?

That is for the whole portfolio. Brian Russo – Ladenburg Thalmann: For the whole portfolio? Okay. So residential could be higher and C&I would be lower?

It could. Brian Russo – Ladenburg Thalmann: Okay. And what are the margin trends that you are seeing in July?

Well, I think we are starting to see a little bit of compression. But you know a lot of what happened in July is a lot of people were waiting to see where we are going to start to see a price fall in the wholesale market. And we really didn't. And so margins for July have stayed reasonably strong. You know maybe it is conservatism but I think it is just practicality. We do expect to see a narrowing of that. I mean TXU came out or EFH came out yesterday with an announced 15% rate reduction across all classes, that did not surprise us that much. It was a question of timing. So we have already been building that, or Brian has in his plans. So we do expect the same margins start to come down because what we saw, if you think about it, natural gas prices in the early – in the prompt period, the rear window of the futures curve has dropped. Heat rates moved up and that is good for Optim. The net of it though for First Choice is a wash. And because of that softness in the gas market, we do expect to see - start to see more pressure on prices. Brian Russo – Ladenburg Thalmann: All right. And could you give us a sense of any net customer additions or decreases year-over-year at First Choice Power?

Yes. I have got Brian here. I'm going to ask Brian to answer that question. But let me put up a note in front of it. One of the directions that I gave Brian was look, we are not measuring you on customer count, we're mentioning you on profitability. And we want you to get the right kinds of customers and that requires some transition.

This is Brian. The only thing that I will say is we are still ahead of where we ended 2008 in terms of customer count. Quarter over quarter 2008 over 2009 I think we are below, but we are still ahead of where we were end of 2008. But as Jeff said, as we try to change out a little bit of the portfolio looking for a better quality customer, we could see that trend down slightly towards the end of the year. Brian Russo – Ladenburg Thalmann: All right. But when I look at the gigawatt hour electric sales at the various customer classes, it looks like some pretty steep decreases, is that just a function of the seasonal weather patterns year-over-year or what else is leading to such a decrease thee considering we had a hot June?

Yes. I don't have those numbers in front of me but certainly it is a combination of customers and weather and demand at the customer side. And I'm sure it is a combination of those things. Brian Russo – Ladenburg Thalmann: Okay. And what was bad debt as a percentage of revenues?

7% for the second quarter, and remember it was in 12s in the first quarter. One of the things we have seen is people make the comparison to our next debt to the bad debt by other entities that do that are publicly held. And the one thing that you have got to recognize is we have a very different customer mix than a Reliant for example. And certainly on a kilowatt hour basis, the kilowatt hour sales or a revenue basis, there is a big difference in customer mix. But it is trending down. It is still – it is not going to be low this year. And also as a percentage, we're going to have lower prices this year so that percentage will be partially boosted by the denominator being low. Brian Russo – Ladenburg Thalmann: All right, thanks. And in a previous presentation, you had laid out what your projected 2011 rate base would look like at the various regulated subsidiaries. I think it totaled about 2.5 billion with 1.89 billion at PNM Electric, is that still relatively intact despite the near-term curtailment of CapEx and then would the plan to build the renewable, would that be incremental to that rate base?

Yes. The revenue will be incremental to that and we will be updating frankly that information towards the end of the year as we get closer as I pointed out to our filing for the forecast years. So that information is at the end of the year, but there is a couple of days we would be pursuing as we go through…

Yes, because some of the capital reductions that we have made are not included in that and what you're going back to Brian. Brian Russo – Ladenburg Thalmann: Okay. So just on the renewale side, are these assets that would be in operation in 2011 and captured in the up coming rate case?

It would, Brian. Brian Russo – Ladenburg Thalmann: Okay.

The other thing Brian to note, I don't know, Pat, did you mention the issue of on renewables, those that go into service, so we are not accumulating AFEDC but it is before the rate case except the cost. We go on continuing to accumulate a charge, a regulatory asset charge, so even though there would be some, may be some lag from the time they go into service to the time they go into rates, there is a regulatory asset that will be booked and also placed into rates so we don't carry [ph] the money. Brian Russo – Ladenburg Thalmann: Okay, got you. And then just lastly, on the full-year guidance of $0.40 to $0.55, what are – could you breakdown the subsidiary contributions to that, and given that you have reported $0.31 already in the first half, it seems like you are well on your way to exceed the $0.55, but I sense a little caution on your part and I'm just curious maybe if you could just elaborate on that a bit?

Your sense is right, Brian. We are not yet issuing new numeric guidance at this stage. We want to get through the third quarter, see how the third quarter performs. And then we will come out and tell you where we really think we would be end of the year. We do believe that we will be at the high-end of the range and with the potential to exceed that range, but we have not provided breakout numbers by each of the individual businesses. Brian Russo – Ladenburg Thalmann: All right. So there is no subsidiary breakdown for these $0.55 top end of the guidance?

Not for the forecast.

No, Brian. As Jeff said, there are just other factors that go into it and we felt it was better just to stay within the range that we pointed out with the potential to go through that. But as you could tell from the performance of the business, First Choice certainly has the potential to continue to show signs of improvement. But again, that is the year-to-date performance has done well, but we don't want to get ahead of ourselves frankly when we get through third quarter, and make sure that we understand the impacts to the economy, the impacts to load, and deliver results this year that you are comfortable with, and that is why we're leaving the guidance where it is right now. Brian Russo – Ladenburg Thalmann: Okay. And just one more if I may, the hedged prices at Optim, how does that compare to market or spot prices?

We are comfortable that the hedges that we have got in place at Optim income are replaced in good position. I'm not going to give you a full breakout of where they actually are but we don't have – I don't think we have got any that are – there is no (inaudible).

And then basically they are – certainly they are hedged around the 50% level but we have got plenty of opportunities to have surplus power to sell if market movements occur this year. And the same strategy going into 2010, we're partially hedged, but positioned well enough to take advantage of and good results if energy prices go up.

You know, Brian, if you look at the forward curve from the end of the first quarter to the end of the second quarter, on power, they virtually are on top of each other, whether it is being a lot of movement in the meantime from quarter to quarter, they are virtually like on top of each other. The only difference is that the front end of the gas price curve is down and the front end of the heat break curve is up. Brian Russo – Ladenburg Thalmann: Okay, thank you very much.

Next we will turn to Edward Heyn [ph] with Catapult. Edward Heyn – Catapult: Good morning.

Good morning. Edward Heyn – Catapult: Congratulations on the good quarter. I wanted to just go back to the First Choice margins for a second. You mentioned – I guess first you said that you expect them to go back to historical margins, does that – does historical margins mean the same as the $26 megawatt hour you talked about with before on the first quarter call?

Yes, in general. Edward Heyn – Catapult: Okay. And then the – is the assumption that they go back to – I think you talk a little bit about the competition but how much of that of them going back to historical levels as you are just being conservative before you go into the third quarter versus actual fundamental pressures that you guys are predicting?

Now you're trying to be a psychologist, Ted. I'm just teasing you. You know certainly there is a little bit of conservatism as we move through this because you know we are still licking our wounds from 2008 performance at FCP where some missteps were made and the market did everything possible to hurt all of us that were playing in that market. But you are seeing prices come down, remember that a falling wholesale market generally advantages a retail business because (inaudible) get from nothing else. And that is what we're experiencing today. Prices are not – even the forward curve shows us, prices are going to move up. And as the prices move up, there is a tendency to believe you also will have increased volatility, because it doesn't take much to get you know the same $5, $10, $20 movement in price. So with that, you will see more pressure on margins. And I just I don't believe that the level of margins that we are seeing today have established a new norm, and I think the pricing behavior of some of the players in the market demonstrates that, willing to take a little more risk. I don't think that you will see margins collapse like they did last year. I think we all learned some lessons through that process but a rising market will just by nature put more pressure on margins. Edward Heyn – Catapult: Okay. And I think you guys have said – I guess I'm a little confused because you said that – and I think you have been working to get more of your customers to a term versus a month-to-month, and given that you have more term customers now, wouldn't that give you more comfort that the margins would stay at that rate, or how does it work? Do you still have risk on the term customers of margin compression?

Well, you have risk on margin compression of term customers with high volatility that affects the balancing market because of the changes in weather. You can't hedge perfectly a residential customer, right? And so when you see 5% to 10% movements in consumption because of weather or because of some fundamental changes in the mix of – the type of customers that you are attracting in the residential piece, it is not a perfect hedge. So you will see changes there. Yes we're very effectively hedged, we try to maintain a flat a book as possible, but the margins that we are locking in the future are not necessarily the margins that we experienced last quarter. Edward Heyn – Catapult: Got you. And then just the last question is if you look at your year-to-date First Choice EBITDA, I think I calculated it is like $33 million, which is already at the high-end of the initial range you gave like 20 million to 35 million. Just kind of getting back to Brian's question on the segment guidance, is there something on the other segments where you're seeing a little bit more weakness that caused you not to just pick up the range this quarter as opposed to kind of giving a little more cautious tone of potentially exceeding?

You know there is a couple things that we see as risks as we go forward. One is the overall economy. Yes, we think that it is kind of bottoming out, but we just had an announcement of another manufacturing close a couple day ago here in New Mexico. It is not huge, but it is 400 employees. And so you know there is still more fallout that can happen in the economy and we want to be cognizant of that. Our folks have done a great job of doing things to help offset the impacts that we will see in kilowatt hour sales in our retail businesses and our regulated businesses. But that is a piece that can remain of concern and certainly Optim in the low price market, it bears more risk than other segments of our business right now. They are performing well and the new unit come on line provides a greater bit of stability but the third quarter of 2008 is not that long ago. And the third quarter of 2008 knocked us on our butt, and so I would like to kind of get through the third quarter and we will be very straight up with you about where we think we will be. Obviously when FCP is at 33 million of the 35 million target, yes, that looks pretty good, we understand that. But we're just going to – just wait with us till the third quarter, but we are bullish on this year. Edward Heyn – Catapult: Got you. Okay, thanks a lot.

And that will conclude today's question-and-answer session. Mr. Sterba, I will turn the conference back to you for any additional or closing remarks.

Well, thank you very much for joining us, and we appreciate your visiting, and if you have any follow up questions, you know who to get hold of. And I know that Chuck, Pat and I will be out on the road and if we don't see you before, we will see you at EEI and have a great weekend.