Good day and welcome to the PNM Resources conference call. Please be aware that today’s conference is being recorded. At this time I would like to turn the conference over to Gina Jacobi. Please go ahead.

Thank you everyone for joining us this morning for a discussion of the company’s third quarter 2008 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 again thank you for joining us today on the call. I’m sure that you all have seen the release that we made early this morning. You note that our, on a GAAP basis, we had losses of $0.06 per diluted share. On an ongoing earnings basis we earned $0.27 per diluted share for the third quarter. Chuck will spend more time on going through this in detail but the major elements that rationalize the difference between GAAP and ongoing earnings are really associated with the write off at the EnergyCo side of the CAIR NOx credits, the finalization of the FCP First Choice Power goodwill impairment which we talked about in the second quarter, and then the ongoing mark to market accounting issues. A year ago recall that we laid out four key strategic objectives that we had for 2008 moving into 2009 that we were going to be executing on. Remember that the first one was to reposition our regulated utilities to earn their cost of capital. And you can see from the results of the third quarter that those strategies are starting to pay off. PNM Electric ongoing earnings are up about 22% year-over-year for the quarter. This is as a result of the modified fuel adjustment clause that got put in place and the rate relief in the last rate case. We previously told you about the filing of the electric rate case in New Mexico and Pat will talk about that in more detail, as well as the rate case in our Texas jurisdiction for TNMP. And I think one of the things that we were pleased to see is the commission agreeing to allow us to modify that Texas case to include the $25 to $30 million of costs that we incurred…

Thank you Jeff and good morning everyone. Turning to Slide 7, I’m going to start with PNM Electric. And I think many of you know that PNM this September filed its integrated resource plan which was developed during a year long, public involvement effort that included 19 public meetings and a large amount of stakeholders here in New Mexico. And that plan calls for us to add some more renewable resources, to approximately double our energy efficiency programs and very importantly add the two existing natural gas fired plants to our energy portfolio. Those two plants, which are Luna and Lordsburg, were part of that stipulation that Jeff mentioned earlier. An agreement among key parties is going to allow us to move about 357 megawatts of jurisdictional generation portfolio into rate base at PNM. In addition to moving Luna and Lordsburg, the stipulation allows us to acquire the beneficial interest in Palo Verde Unit 2 which is about 30 megawatts and it also allows us to include the recovery of the purchase power agreement, including the capacity recovery from the Valencia power plants that we have here. We estimate that moving Luna and Lordsburg into rate base will save our customers about $144 million over the next 20 years. And for purposes of rate making those two plants are going to be put in at net book value which is $38.7 million for Luna and $40.2 million for Lordsburg. Since we had our last earnings call we also filed a new rate case. It totaled $123 million. That was based on a revenue requirement of $807.4 million. Our new rate base is $1.6 billion and our requested ROE in that case is 11.75%. There’s a tentative schedule in the presentation appendix. Most of the key dates occur after the first…

Thank you [Patty] and good morning everyone. Let me just add a few comments to what Pat said about the gas sale. As you can tell from her comments those parties do remain committed to completing the transaction. But in addition to that there’s been a lot of questions on the ability of financing through Lindsay Goldberg and the acquisition of the gas business. I just want to remind everyone that Lindsay Goldberg did provide a commitment letter for the financing from a lead bank at the time we entered into the transactions. And there’s been no issues raised on their ability to provide that financing and in the agreement itself there is no financing out that allows them to use that as a reason not to pursue the transaction. Now turning to Slide 13, I’d like to just hit some of the highlights to give a little more detail around the comments that Jeff has made earlier. For the quarter we reported GAAP losses of $0.06 which is down from $0.11 gained last year. The losses reflect two non-cash charges, one of which is the EnergyCo writing off their inventory balances of mission allowances under the [inaudible] Interstate Rules. Our share of that write down is $9.6 million after tax. EnergyCo does still have about $118 million in inventory for other additional allowances that are not related to the care program. At First Choice we completed our impairment analysis and recorded an additional $7.3 million after tax charge which related to customer contracts and trade name. That brings to a total impairment when you add to the Q2 write downs of $147 million approximately for First Choice. As we report earnings, ongoing earnings of $0.27 this year was down from $0.46 last year. You can see from this walk…

Thanks Chuck. If you’d look at Slide 20 that’s the checklist that we provided you each quarter and except for First Choice Power and the challenges that we face with that this year, all of the other items seem to be moving well on track. Let me make just a few last comments about not just First Choice Power but also the Texas market. Obviously the Texas market has gone through a lot of ups and downs through the course of this year, largely driven by the volatility of natural gas prices. Early in the year, by what I will call questionable management of congestion by ERCOT which I believe they have really focused on trying to improve. And they in fact have improved substantively. I think the rep market is obviously an issue of significant concern to the Commission. They clearly understand that the retail market is a key to their market structure, that there are things that probably need to be changed in terms of the rules of operation. We are certainly working hard and suggesting a number of changes that we think can help make it more effective. I continue to believe in that market structure and what can be accomplished. But we are obviously changing the focus and the direction that FCP is taking compared to what it had been doing earlier in the year to help improve its financial performance regardless of whether we’re successful in getting some of the market rule changes that we believe need to take place. So I guess in summary, I think we are making substantive, significant progress on our major initiatives. We’re obviously not there yet and we told you it would take 18 to 24 months. And we believe that we’re still another year out in order to get everything back in line, but our goals of getting the regulated business to earning its cost to capital, to developing the capacity to move back into an investment grade credit rating, these will take time. But we’re committed to doing them and I think we’re making progress. With that we’ll open up for any questions that you all may have.

Your first question comes from Lasan Johong – RBC Capital Markets. Lasan Johong – RBC Capital Markets: Did I hear correctly, Chuck that you plan to pay down $317 million of TNMP debt in the first quarter of ’09?

It’s not paying it down. They’re actually refinancing. There’s 6.25 and 6 and an eighth that needs to be refinanced and we’re prepared to go to the market, but we’re really waiting for market conditions to stabilize. So within the next several months we’ll be looking for that opportunity to refinance that come out. Lasan Johong – RBC Capital Markets: And that means interest rates are probably headed up on those?

Interest rates would be headed up on those offerings, yes. Lasan Johong – RBC Capital Markets: And that’s in your expected ’09 outlook?

Yes, it will be reflected in guidance for ’09 when we provide that information. Lasan Johong – RBC Capital Markets: And on First Choice Power I think your decision to keep it is probably a correct one but just curiosity drives me to ask this question. How different were the offers versus the net profit value you thought First Choice Power was worth?

Well, Lasan, I guess the best way to answer it is different enough to say it’s worth the risk to refocus and retain it. More than that, I probably wouldn’t give you any sense of specifics. But you know better than I the royal that the market, the overall financial market is in. And particularly related to some of the players that are in the retail competitive markets. So this is not a great time to try to sell that property. I think that was generally reflected in what we saw and the gap between that and what we think this business is really worth was enough to make us want to say we’ll hold onto it. Lasan Johong – RBC Capital Markets: Then the question begets obviously in normal – when increased [weather] deviations normal, weather patterns typically First Choice Power is going to be a decent money maker for you. The problem is once in a while we have some severe disruptions that causes these what I would call – characterize bill out losses temporarily. The problem is as an equity investor you really don’t know when that’s going to happen and what that means. And so is there a way that you can give us comfort that there’s a way to mitigate those kind of blow out risks?

Yes, I do believe Lasan that there are ways to mitigate those risks and I think there are a number of learnings for our folks in this past summer. Some of the ways to mitigate these risks involve market rule changes associated with bad debt and associated with customer switching. Others of that will involve a moderation or a modification to the customer mix that we have which is largely very heavily residential. And one of the things that the Commission did is they – and this happened last spring, they prohibited reps from taking customers who were on a term product and rolling them over to a term product if you couldn’t reach them. So what happened is you automatically move them to a month-to-month product which by nature is higher priced and obviously has more volatility associated with it. And that coupled with having probably only 20 to 25% success rate in making contact with customers and getting them to renew for a term product, creates higher volatility for customers. We don’t think this is a good outcome. So we’re working with the Commission on alternative ways, whether they be kind of evergreen renewal approaches or others that will help move more off of month-to-month kind of contracts and into term product contracts. The term product will help take some of that volatility out of the marketplace or at least out of our performance. Because a lot of what happened this year was associated with customers moving into term product, the enormous fly up in gas prices we don’t hedge out for month-to-month customers because you don’t know if they’re going to be there. That’s why they’re month-to-month and their prices float. But when their prices jumped as much as they did, a lot of them said, “I’m not going to pay that bill” and so consequently we’re racking up large bad debt amounts. And on the bad debt side, one of the things that can be done is that create some kind of a mechanism to help insure that the customers can’t just switch without some obligation to pay off bills. And that’s one of the challenges that exist in the current market in Texas. So we’ve got some ways that I think will help mitigate that. But you’re right, there will always be some volatility within the marketplace. But it doesn’t need to be nearly what we and others have experienced this summer. Lasan Johong – RBC Capital Markets: And I’m assuming the change regulatory model is going from a zone system to a normal system?

Well, I continue to believe that ultimately that’s going to happen. My personal view is that that’s going to slow down in Texas. You’ve got two new commissioners who are just coming on board. Obviously the move to Noodle has already been delayed. I certainly don’t know what it will be delayed to but I think it’ll be longer rather than shorter. But obviously we’re focused on getting into another market because that benefits we believe our EnergyCo assets. Lasan Johong – RBC Capital Markets: One last question on the economic front, you kind of alluded to and hinted to a slowing down in New Mexico’s economy. Can you kind of give us a sense so where these sources of slowdowns are coming from? Industry, housing, service businesses and what do you think is the net impact actual contraction in the economic activity? Or are we talking about a slowing down in the growth?

No, it’s going to be a slowdown in the growth. If you look at New Mexico’s economy it has never even through all the recessions that we’ve had going back to ’82 which is a pretty deep recession, it has never gone to negative. It just is a question of how much slower is the growth rate? Like many places, we’re seeing a slowdown in housing. We’re certainly not seeing the collapse in housing that some other markets are. We have had some industrial slowdown and I frankly expect to see a little bit more of that. But remember the economy of New Mexico is fairly well diversified. It’s still got a very large federal government element with the labs and with the major military installations. Those will not be significantly adversed but we have high tech manufacturing that is a function of the global economy. We also have some other what I will call some light manufacturing which is consumables. Things like Tempur Pedic beds and all that other kind of stuff, and I expect to see some of that slow down. But instead of seeing 3, 3.5% growth rates we’re probably 2 below, a little bit below 2. And how deep and how far and how long is the real question. So this is one of the things that Pat and her team are taking into account at this stage is what does this mean relative to resource acquisition? We’ve got efforts out today for renewables. What does it mean to the procurement of renewables? What does it mean to any other expansion on our gas generation side?So all of that’s getting rolled in and we need to a see a little bit more of the slowdown. But typically what happens is the New Mexico economy is affected but it’s not as affected by far as the national economy on average. We still have very high employment rates. We’re seeing a slight increase in unemployment but not nearly what you’re seeing in other areas. In fact, one of the most recent industrial additions into the economy is having difficulty hiring people for their start up which is supposed to occur early next year. Pat, anything you want to add on that?

I think you got it, Jeff.

Your next question comes from Paul Patterson – Glenrock Associates. Paul Patterson – Glenrock Associates: First of all, why did the First Choice customer count go down? Was that simply bad debt expense? And exactly what’s sort of affecting the fourth quarter here? Is it just effectively again bad debt is going to – the margins just don’t keep up with bad debt? Or is there something else we should be thinking about here?

Well, let me take that and I’ll ask Chuck to add a few points if he wants to on the second part of your question. First in terms of the customers going down, part of this is conscious. What we found is a lot of our what we call passive enrollments is the customers that move on to our system, they come in and buy from us but we haven’t actively solicited them to become a customer. A lot of them are at risk apartments. They’re not very good credit customers. But they might be just above the threshold. They have a tendency to move quickly because they may not be in the apartment very long. What we’ve consciously done is moved away from trying to serve those customers. So we are willing to lose a lot of those as customers and focus on our term products. So we expected to see – and by expected I mean since the early summer, we expected to see some customer degradation in terms of numbers of customers as we altered consciously the marketing strategy of First Choice Power. Now I would tell you that it’s turning. This last month we’ve seen a net increase to numbers of customers. But it’s more focused on the customers that I think we will want for the longer term. Relative to the fourth quarter, certainly a piece of it is bad debt. But the fourth quarter is never a strong performance quarter for that retail marketplace. It hasn’t been in any of the years. Second and third quarters are the stronger performance years. But remember that a lot of the bad debt that is really created in August, September becomes 90 days past due in the fourth quarter. So yes bad debt will be a piece of it – a significant piece of it. Chuck, anything you want to add on that?

No, I just think it just as Jeff said, as we go forward and we’re in the process of executing more aggressive plans to lower the churn rates through renewal programs. In addition to that we’re looking to try to extend as Jeff talked about earlier terms of customers as far as changing from month-to-month to longer periods of time. And it just takes time to execute those plans and address our exiting given the challenges we’ve had earlier this year and the summer months of high commodity prices. Trying to work through getting those plans implemented to stabilize that business, but although we’ll see some improvements in fourth quarter we won’t be out of the woods in the fourth quarter. And we’ll begin to see those improvements more significantly in 2009 as we re-stabilize that business. Paul Patterson – Glenrock Associates: Now you mentioned that the First Choice, that there was an issue with bad debt customers simply going and switching supplier and I guess effectively just leaving you guys the bad debt. Generally speaking in most commercial marketplaces, people deal with that in terms of credit ratings or something of the sort. There’s some predictable way of dealing with it. There’s not usually some mechanism I guess to go to the Commission to ask them to somehow take care of it. Could you just elaborate a little bit more on that?

Well you know you’re absolutely right. And a lot of it’s done through the credit side. What we’re working on and I’m not going to go into a lot of detail on it, but is a much more focused set of credit metrics. Because typically you’ll end up with people that they use just basic FICO scores and what we’re finding is that that’s not necessarily as good a predictive of bill payment behavior as others. But what happens is someone says, “Okay, I’ve got $300. I’m not going to pay the electric bill. I’m going to pay the deposit to go someplace else.” And so you end up with this churn that causes a friction across the business. The – so credit scores are clearly one of the tools and the development of deposit payments to be made are one of the key tools. Let me give you an example, though, of where we find credit scores not necessarily being predictive of behavior. We have established a pretty strong position within the Hispanic market. And if we look at raw credit scores, frankly, they are not at the same level as we see in other parts of the marketplace. Yet their payment behavior to First Choice Power is much better than other market segments. So that’s where we are working on tools that will be more predictive of payment behavior for electricity. Because traditional FICO scores we just don’t think are – Paul Patterson – Glenrock Associates: So really briefly, the PMP ROE for the last 12 months, what was it? And I looked at the appendix or just missed it. What is the equity ratio in the capital structure that you guys are proposing you make it?

Pat, do you want to take that?

Yes. If you turn to PNMP, Page 10 and the last allowed we at PNMP Texas with 10.25 and the debt equity ratio was 60/40. Paul Patterson – Glenrock Associates: 60% equity?

No.

The debt. Paul Patterson – Glenrock Associates: The debt is 60%?

Yes. Paul Patterson – Glenrock Associates: And what is the last 12 month ROE? I mean, in other words what are you currently earning on this at TMP right now if we take the last – whatever the last numbers you have available?

We haven’t calculated that for you but we can get that to you.

Your next question comes from Paul Fremont – Jefferies & Co. Paul Fremont – Jefferies & Co.: If I look at your Slide 20, I’m just trying to figure out if that last checkmark implies that you may need to file another rate case. And I guess my question would be your past year probably goes through March of this year. To what extent do you have the ability to update known and measurable changes in cost into your current filing? Or would you have to wait until a new filing to sort of catch up?

Pat.

In New Mexico we have 150 day known and measurable adjustment. So we’ve made all those known and measurable adjustments. We have also in this case asked for some more of the San Juan environmental upgrades that are outside of that 150 day drew up because they are not revenue producing. So we have done known and measurables all the way up until August plus the San Juan. Paul Fremont – Jefferies & Co.: So does that imply – am I reading that correctly that there are expense increases that you’re now anticipating post-August that will put pressure on the expense side of your income statement next year which you would have – which would then potentially cause you to file another rate case after you get the result of this rate case?

We filed for a fuel clause – the extension of the fuel clause in this case and that fuel clause is a prospective looking clause and the calculation in there is the 12 months forward looking from March of this year. You’re always going to have PMB capital investments that are outside that 150 days because if we get new rates, they would go into effect late summer of next year. So you’re always going to have some regulatory lag. But by taking forward the 150 days plus the San Juan and the fuel clause, we’re going to start to minimize that. Obviously the decision to file another rate case also depends upon the outcome of what you actually get in that rate case. Paul Fremont – Jefferies & Co.: And then my other question is back in February you identified PNM Electric rate base as $1.8 billion expected, I guess, for 2009. Can you update that number for the stipulation or give us a sense of what you would expect rate base to be in 2009?

Paul, this is Gina. Just to clarify, you’re talking about the earnings power slide that we presented? Paul Fremont – Jefferies & Co.: Slide 36 of the February presentation.

That would be the earnings power slide. Paul Fremont – Jefferies & Co.: Right, but I think it gives an estimated rate base number for PNM Electric.

Yes, that’s correct. That was the $1.6 –

We filed it this last rate case as $1.6 is our rate base.

We’re going to update that when we do guidance for ’09. We’ll go back and we’ll update that slide because I think we just want to make sure we have the most current information and let the budget process and some things settle for this year. Then we’ll provide that information.

Paul, the earning – just to keep in mind that $1.8 billion which I do recall on that slide, that’s the year end ’09 and it was based largely on the old capital budget which we just talked about that we’re cutting fairly substantively. So it will be updated. Paul Fremont – Jefferies & Co.: And I guess the $1.6 – do I need to add the $78 million for Luna and Lordsburg?

No. That’s in that $1.6. Paul Fremont – Jefferies & Co.: That’s included in the $1.6. So there are no adjustments? Because also the repurchased lease hold interests in Palo Verde is in the $1.6?

That’s correct. Paul Fremont – Jefferies & Co.: So that number is still a good number as of what? March of this year?

March plus the five months so August of this year, plus in San Juan – that San Juan environmental upgrade that we put in there. So it’s basically August of this year plus San Juan. It doesn’t have any T&D and other generation numbers past August.

The earlier question regarding 2007 ROE results, if you just reference in the appendix Slide 30 it shows what the ’07 results are for rate days for each of the regulated utilities. And if you access our website you’ll get the details as to the methodology and the calculations. So just wanted to add that information.

We haven’t calculated them at the third quarter this year but those are year end.

Your next question comes from Chris Taylor – Evergreen Investments. Chris Taylor – Evergreen Investments: First of all a request, I didn’t see a balance sheet or a cash flow statement in your release and if liquidity is a key concern I think that would be something relevant to include going forward. That would be very helpful. On your refinancing and you basically have $460 million at TNMP early next year

$317 million. Chris Taylor – Evergreen Investments: Well the bridge is $150 and the two notes are $300 million. But basically you’re

The bridge is supporting part of that $317 until we go to the market and able to issue the permanent debt. So the total amount of debt is just slightly over that $300 million. And also just to add, too, we issued the 10-Q this morning so you can get the details. Chris Taylor – Evergreen Investments: If I’m looking at TNMP, you’ve got rate base of roughly $400 million. You earned 6% on it, yet now you need to refinance $300 million which is given the markets going to be well over 6%. How confident are you on the refinancing there?

You know, we’re confident. Your point is certainly clear is that we’re confident in access in the market but under today’s conditions the rate level is the concern. And so frankly that’s the reason why we put these bridge facilities in place to give ourselves ample flexibility as to when we time execution to refinance the securities in the market. So we’re going to let things stand on the sideline for the next few months and just kind of let the markets settle down. But certainly the interest costs will be well above the 6% level. And at this point if we were to go out into the market then we’re probably looking for levels that wouldn’t be attractive to us and therefore that’s why we want to sit back and wait for a better opportunity. And let things settle down, liquidity in the capital markets. Chris Taylor – Evergreen Investments: But you’ll have to refinance it using at the parent level?

Actually we have adequate liquidity at the parent level and then no plans at all to refinance. And just to further substantiate that as I talked that we will go to the market with the $100 million equity linked securities this Friday but given the fact that we previously financed an extra $100 million back in May of this year at 9.25, we really don’t anticipate that that additional $100 million is absolutely essential. But we’ll go to the market, see what the rates are and we’ll make a determination as to if any how much we’d allocate back to the company. Chris Taylor – Evergreen Investments: In terms of the gas sale and there’s no financing out for the buyer but I mean if they can’t get financing do they have any other resources that you would have recourse to? Or are you confident that you can force a sale through?

We’re comfortable that the commitments in place by Lindsay Goldberg and we’ve had recent conversations and frankly know the lead banks and the bank syndicates that are involved in the financing. And those facilities are committed and in place and don’t see any issues with that. Chris Taylor – Evergreen Investments: So this is a – I guess do you have recourse to the fund itself? Or is this just a shell company? In other words, just in a worse case scenario that they can’t get financing who are you – what legal entity are you dealing with? Is it the shell company that’s doing the buying or is it the fund itself that –

The company is Continental Energy Systems which is the holding entity of not only the New Mexico Gas business but also the other gas businesses that are owned through that holding entity, located both in Michigan and Alaska. Chris Taylor – Evergreen Investments: I mean, I know those companies. They really don’t have the resources to come up with this kind of money without the parent support, without the funds support. So I mean you can say well, there’s no financing out but –

That’s not an out for Lindsay Goldberg to use as a reason to not execute the transaction. So we have both debt and equity commitment letters in place. And recent discussions with both Lindsay Goldberg and the lead bank that has put that debt commitment letter in place has confirmed that they’re ready to do the financing at the time we have approval to proceed with the closing. At the same time we will plan activities around any situation that could occur from the liquidity standpoint, but we’re confident that at this point we’ve affirmed Lindsay Goldberg’s ability and we’re comfortable that financing will take place. Chris Taylor – Evergreen Investments: Please correct me if I’m wrong, but I think you were feeling confident that you could get this deal done by year end. What would account for the delay? And what’s the absolute final date that they have to execute this?

The hearing examiner in New Mexico has a couple other cases. She has the [FPS] rate case. She now has our electric rate case. So – and she had some personal time come in there. So it’s just a matter of a regulatory delay, nothing in particular other than the hearing examiner’s schedule. Chris Taylor – Evergreen Investments: And what’s the timeframe here for closing? Is it – I remember in the Alaska end, Michigan transactions that your counterpart did it was 30 days after the regulators made their decision. Is it something similar here?

Chris, this is Frederick. If you call Gina or me later today we’ll give you the background on the transaction because we’re out of time.

I think the 30 day timeframe is very reasonable and what would be our expectation. Chris Taylor – Evergreen Investments: So it all depends on the regulator.

Yes, that’s exactly right. Yes.

That does conclude our question and answer session. At this time I’d like to turn the conference back to our presenters for any additional or closing remarks.

Well again thank you for your time this morning. Chuck and Pat will be out in Phoenix. I’ll be there for part of the time but will not be able to be there the entire time. So if you have any follow ups you can certainly run into any of us in Phoenix next week. And I don’t know how many of you all stayed up last night watching the election results so you may want to go take a nap. We’ve got a lot of change ahead of us in this industry and which I think makes it even more exciting. Thank you all very much.