Good day, ladies and gentlemen, and welcome to the PNM Resources First Quarter Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to introduce your host for today's conference, Gina Jacobi. You may begin.

Thank you, everyone for joining us this morning for a discussion of the company's First Quarter 2010 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' CEO, Pat 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 Pat, 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 on 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 SEC. And with that, I'll turn the call over to Pat.

Thank you, Gina, and good morning, everyone. This morning, we released our first quarter results and reported ongoing earnings of $0.04 per diluted share, which is below our 2010 performance of $0.06. As we noted in our news release, quarterly results were driven by performance from TNMP and First Choice Power. While we expected First Choice Power to be down compared to last year, we are very pleased with their performance as they continued to demonstrate good results. As Chuck will discuss in more detail, TNMP had strong performance, up $0.03 quarter-over-quarter primarily as a result of rate relief. TNMP implemented new transmission costs of service rates last May and also benefited from new retail rates that went into effect on February 1. As expected, First Choice Power was down this quarter compared to the same period last year as we continue to see margins compressed due to lower consumer pricing. For PNM, we remain focused on strengthening the regulatory framework for PNM with the ultimate goal of improving credit metrics and shareholder returns. If you turn to Slide 5, I will go into some detail on our ongoing regulatory matters. As I'm sure you're all aware, the hearing on PNM stipulation begins this coming Monday in Santa Fe. The hearing is scheduled for 8 days of testimony. Opposition testimony has been filed and PNM has also filed its rebuttal testimony. We believe the hearing examiner will issue her recommended decision in June and the commission has indicated they could render a final order in July. PNM's FERC case is still moving forward and we plan to implement new transmission rates on June 1 subject to refund. As a reminder, the new FERC rates will increase annual revenues by $11.1 million and the filing is based on the return of…

Thanks, Pat, and good morning. As Pat reported, we are in the $0.04, down $0.02 from last year. The breakdown of our earnings by segment shows that earnings at our regulated businesses are beginning to improve, particularly in Texas. In total regulated earnings were up $0.02 from last year, reflecting improved load growth in Texas and New Mexico as well as our continued focus to earn our allowed return. On the other hand, you'll see our competitive businesses show a decline in earnings. This trend has been fully expected given the low power price in Texas and the expiration of the Twin Oaks contract, both of which have been factored into the guidance we issued earlier this year. And turning now to the individual business units on Slide 11 that provides a breakdown of the major earnings drivers for our regulated businesses, PNM Electric and TNMP. Let's start with PNM. This year, the New Mexico utility's ongoing earnings were down $0.01 from last year. The decline reflects the expiration of the Palo Verde 3 toll agreement, which had been expected and reduced earnings by $0.06. Lower outage costs, improving load growth and some rate relief helped to offset the impact of the toll's expiration. Outage costs were down $0.04 from last year reflecting a reduction on a number of plant outages. Last year, 2 units at San Juan and one unit at Four Corners were down for maintenance while this year, only one unit at San Juan was down for plant maintenance. Weather-normalized load growth of 2.2% added $0.02 of earnings. An implementation of the second base of 2008's rate increase added another $0.02 to PNM's earnings. If you recall, the second phase went into effect April 1 of 2010. Other negative factors affecting PNM's performance this year included milder…

Thank you, Chuck. We will finish today's presentation with our checklist. This is a brief reminder of the strategic goals we continue to work on in our efforts to ultimately return our subsidiaries and PNM Resources back to investment-grade status. This was an unusual quarter in that we do not have any milestone as our previous earnings call. Although we do have a lot in progress, by the time we talk to you again to report our second quarter results on August 5, we should have a significant updates for you. By then, we'll have a clearer picture on the PNM rate case and the TNMP AMF docket, and we'll have an idea of how that Texas power market fared during this summer. With that, I will turn the call back over to our operator to start the question-and-answer portion.

[Operator Instructions] Our first question comes from Paul Fremont from Jefferies. Paul Fremont - Jefferies & Company, Inc.: I guess my first question relates to First Choice. With the growing level of C&I contribution there, is the margin on C&I different than the margin on the residential and can you give us sort of numbers that we should think about in terms of like a range?

Paul, it's Pat, and Brian Hayduk who's the head of First Choice Power is here with us this morning and I'm going to ask him to give you some color on that.

Sure. Paul, it's Brian. Certainly, the commercial margins are lower than residential -- and I don't I'll give specific guidance of that, but I will say as Chuck mentioned, we were down in the neighborhood of 10% for the year on margin last year. We expect to be in similar trends this year, and that is inclusive of what we are forecasting from a commercial standpoint. So we are not at this point, really, looking to have the commercial growth dramatically impact our forecasted margin. Paul Fremont - Jefferies & Company, Inc.: So is it fair then to think about the 10% decline in '11 as being primarily driven by the change in mix in your customer base?

No, I think it's a combination. It's the combination of compression certainly on the residential side. I think most suppliers have mentioned the compression in margin and the competitive nature of Texas. I think you have that as well as the change in mix and in our case, it's probably more the compression on the residential side than a dramatic material change in mix at this point.

And, Paul, I think the other thing to think about, when we talk about commercial customers, Brian is not talking about the real large folks that you tend to have really very small margins in. And this is more what we could consider smaller and medium-sized commercial customers. Paul Fremont - Jefferies & Company, Inc.: And then my other question is for Chuck. He mentioned that you might be at the low end of the guidance range on the New Mexico utility depending on the rate case outcome. Can you sort of clarify what that means -- are you assuming that the settlement is approved as submitted or is there something that I'm missing?

No, I think the key point, Paul, is we're making the assumption that rates would be implemented by August 1, which means that we would anticipate a decision out of the commission sometime in July. And so given that, obviously, if you go back and look at the full implementation of the stipulation, we would've gotten $0.23 this year, that drops it down to $0.16. And in the way in which we're managing that, and why I say at the lower end, it's because it's really trying to match up ways in which we can adjust O&M costs. And then also we're assuming in our guidance range, the upper end of the load growth of -- which is 1% to 2%, so the combination of those factors allow us to remain within the PNM guidance range. But I just want to caution you that based on what the ultimate outcome is, and given what that answer might be, then we would have to reevaluate based on what the decision is out of the Commission, but the key is the assumption that we're using now is August 1 with no change in the stipulation.

And Paul, we said that it was $0.02 to $0.03 a month impact to earnings if the stip was delayed as since these tend to be hot summer months, so if you end up moving to August 1, you'd lose some of the hot summer months.

Our next question comes from Bryan Russo from Ladenburg Thalmann. Brian Russo - Ladenburg Thalmann & Co. Inc.: Can you just talk a little bit more about kind of the Optim and First Choice Power dynamic. And correct me if I'm wrong, but Optim, or PNM -- I'm sorry, First Choice Power's load is significantly more than the capacity output of Optim? So I'm just trying to get a sense -- it's not kind of a perfect hedge because you're not selling from one to the other in purchase power, right?

Well, first of all -- I'm Brian, the load if compared to Optim Energy is 50%. So actually your long energy when you think Optim's supply versus what the load is on First Choice. And there's a pretty good match relative to the location of the generation assets and where that's in, in First Choice. It's not perfect but certainly not a bad match. But there is no benefit from integration of that, it's really how the 2 businesses perform during that cold snap. And that's our point, is that as you would expect, with the extreme increase in power prices in February because of that cold period, Optim and the plants performed well during that period. We were able to sell excess power and make money. On the other hand, Brian, it was in a situation where we had to deal with the swings and the usage and the impact of the cold snap, had to buy power, and that’s more costly. But net-net, the 2 businesses when you look at it in total really did come out as a net positive, and that is our point there, is the fact that the natural offset of how the businesses performed independently resulted in a net positive for the period of time that occurred in February. Brian Russo - Ladenburg Thalmann & Co. Inc.: And I have hadn't a chance to look at the PNM Electric subsidiary income statement. But I'm just wondering if you can discuss the trends that you're seeing in O&M maybe first quarter, '10 actual and then what you're seeing for the rest of the year, because I think that's kind of a big supporting factor in earning your allowed or a way over the next couple of years?.

Yes, we really haven't given direct information on the O&M cost costs but you can see the trends. But I think that the main message is that we continue to find ways to align the revenues and the costs certainly to reflect a more manageable outcome for the business to work towards earnings allowed returns. So we have internally tasked up programs and management does of ongoing process improvements and ways to tighten our belts to ensure that we create as much efficiency as we can. And so I think you will see over time that we'll continue -- it's just the nature of how we think of the business, is to find ways to control O&M costs and hopefully reduce and continue to reduce O&M costs.

Brian, if you look at the first quarter, for example, we did $0.04 better because of lower outage costs. As Chuck mentioned, we had significantly fewer outages. So we have some natural things in there that benefited us but we have plans in place to basically match our costs with our revenue. Brian Russo - Ladenburg Thalmann & Co. Inc.: My last question has to do with load growth. I think weather-normalized load growth at PNM Electric was 2% in the first quarter '11 versus first quarter '10.

Yes, 2.2%. Yes. Brian Russo - Ladenburg Thalmann & Co. Inc.: 2.2%, that seems quite high relative to what we're seeing in other parts of the country. I'm wondering if you could just maybe explain kind of the demographics or the dynamic that’s supporting that. And is that sustainable or is it just a function of the low sales base from a year ago?

No, I think it's the state of -- because the sales base of last year at 2010 was not that bad. 2009 was there real low sales year. And anecdotally, what we are seeing and hearing is people that have their jobs, they're are much more comfortable with their jobs. So they are either keeping the house a little cooler in the summer, maybe a little warmer in the winter and we’re all buying all these gadgets that just really kind of take a lot of energy. And so I think it's just more a psychological function of the fact that people are more comfortable using energy. And remember, we -- only 13% of our sales come from the Industrial segment, which was the one that I think experienced a large downturn. And our largest industrial customer happens to be Intel, and they're pretty steady. So we're just more of a steady commercial residential customer mix.

[Operator Instructions] Our next question comes from Ali Agha from SunTrust.

Chuck, can you remind us, embedded in your '11 guidance currently for PNM Electric? What is the implied ROE in there? And then, assuming the stipulation of the 71 days approved as planned, what should we be thinking about the ROE in '12, has it pretty much overcome the lag?

'11, we talked about 7% to 7.5% for the rate base return for PNM. In '12, we haven't really given out any guidance and information. I think that the clear message is based on the stipulation and the assumptions around the stipulation, it gives us a clear path towards earning our allowed return up through 2013. So I think at this point until we have more definite information as a result of this stipulation, we should probably just leave it at that. But definitely, if you look at 2010, or '09, '10 and '11, clearly you'd see us beginning to making significant improvements in our return on rate base and we just need a clear decision so we can begin to manage to earn that allowed return.

So should we not assume that you are only allowed return in '12 yet or assuming the stipulation goes through or did I not hear that correctly?

I think if you can take a look at the stipulation, it's in 3 pieces. It's this year, next year and then 2013 where you get that Capital Additions Rider. And in that Capital Additions Rider basically applies to any additions made to the capital from June 30 of 2010 which is the end of this case to December 31, 2012. So if you think about it, you really need to take another step until you get caught up on your capital.

Okay, that's understood. And then if you take -- and assuming that it goes out as planned and you now have 5-year CapEx numbers across the utilities, if you look at your growth rate and rate base of that, which I believe is about 6% a year, if my math is right, should we assume pretty much underlying EPS growth kind of follows that pattern? Or are there other pluses or minuses to think about assuming that 6% number sounds right to you?

I think there's 2 things to think about that are not in that capital that could happen. One is, as we discussed earlier, if the federal implementation plan for San Juan is implemented, that's about $460 million of capital that isn't in there. We would apply for rate recovery of that and we have an out in the stipulation to apply for rate recovery of that. The other question is if there would be any renewables above and beyond what currently is in the plan right now, but the rest of the capital that we have in here is really base O&M capital -- base capital would be covered in the Additions Rider.

Okay. And the last question, going back to Optim and First Energy, in the past you guys have talked about your goal obviously to run them in somewhat of integrated fashion. As you said, the location, it makes a lot of sense, et cetera. Any success there and linked to that, you've also said if that doesn't play out at some point, you're going to make a decision -- a strategic decision. Does it make sense to run them separately or to even own them-- can you just give us an update on your current thoughts on those non-reg businesses?

Ali, I think you just answered a question for us. You well stated our position and our view. We think the longer-term strategic direction would be a full integration of the business and certainly alternatives to achieve that are certainly things that we continue to review and think through. Meanwhile, our focus has been on stabilizing First Choice and having consistent and favorable results on that which we've proven out the last 2 years and continue to have a good feeling about that business this year. And Optim Energy itself has been able to manage through pretty difficult environment in Texas with low energy prices. So the businesses work well as they are but they are not fully benefiting from any synergies. And so we would continue to think through ways in which we would integrate it or make other decisions if we don't think that's achievable.

[indiscernible] on a number decision point or is that more on the 2012 kind of decision point?

You know, I wouldn't actually put a timetable on it at this point, Ali. I think we'll just leave it like it is. We'll let you know as soon as we have some better information.

Our next question comes from John Ali from Decade Capital.

A follow-up to Ali's question, if you were to drop First Choice into Optim, I'm assuming they pay off the cash for their portion of the – I mean, their portion of the JV, where are some potential uses for that cash?

You say if we pull cash out. Well, there's all sorts of ways at which you can look at it -- handling cash. If you were to pull cash out of it and use it to capitalize the new businesses you’re putting together. So whether you look at reducing debt to holding company, buy back stock, whatever typical things you might think about on use of cash, we would think through those alternatives as well.

Any preferences?

No comment.

I'm showing no further questions at this time, I would like to turn the call back to the CEO, Pat Collawn.

Okay, thank you, operator. With that, I think we'll end the call today and we appreciate everyone taking the time to participate in this call this morning. We look forward to talking with you all on the second quarter call, if we don't see you beforehand. Again, thank you all very much. Have a wonderful weekend.