Good day, and welcome to the PNM Resources 2008 Earnings Conference Call. Today’s conference is being recorded. At this time, I would like to turn the conference over to Ms. Gina Jacobi, Director of Investor Relations. Please go ahead, ma’am.

Thank you everyone for joining us this morning for a discussion of the company’s fourth 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 President and Chief Operating Officer, Pat Vincent-Collawn; and Chuck Eldred, our Executive Vice President and 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.

Thank you, Gina and good morning. Thanks for joining us today. I’m sure you have had a chance to read the press release, where we announced ongoing earnings per share for 2008 of $0.12 within a $0.01 of market estimates. If I [was to] summarize 2008, it was certainly a difficult transitional year for us. Our focus was really on shoring of the foundation for providing sustainable returns in the future, but we had a significant performance shortfall at one of our units First Choice Power. While, the financial results are obviously unacceptable going forward for the entire corporation. We did make significant progress on the four strategic initiatives that we laid out for our owners at the beginning of 2008. Let me just summarize those briefly. Relative to fair regulatory treatment, this is not something that as we’ve talked before you turn on a dime. It takes time, its building better understanding with regulators, its working with regulatory lag that that keeps rate increases from going in, in a timely way, although we are focused on that. But if you look at 2008, we had our first electric rate increase in over 20 years. We also had the first fuel adjustment clause implemented for the company on the electric side of the business in over 15 years. Progress is being made; Pat will talk more about the regulatory environment that we’re in, and the improvements that we’re seeing. We also had a major focus on efficiency and effectiveness, and we drove $35 million of cost out of our structure, which is about 15% of controllable O&M by that I mean non-fuel, non-lease related operating costs. And that process hasn’t done, it will continue. We also laid out that we wanted to simplify our operation particularly within PNM, where we…

Thank you, Jeff and good morning everyone. I’m going to start on slide seven, as Jeff mentioned while this was not a year that we are happy with the outcome. There was a lot of the solid achievement going on. PNM had its first new rates implemented in May, which was worth about $34 million to us, and then we obtained a much needed fuel clause a month later. Chuck is going to provide you with more detail, but net of the fuel expense and the planned outages of prior June. Higher rate relief and the fuel recovery clause added about $0.26 per diluted share year-over-year. We then filed a rate increase in September for a $123 million, testimony will be filed later this month on February 27, and we are in nine-month clock for that case. We feel that this case is being put in a much more constructive regulatory environments and we have seen before in New Mexico. Jeff mentioned we’ve completed our San Juan scheduled environmental upgrades and those have gone very well. We are seeing very good operational and environmental performance out of those. Our completed units for example, we’re seeing 95% SO2 removal and mercury removal north of 90%. One of the things, we keep our eye on here is reliability. In this cost cutting environment and in an enhanced regulatory environment, we need to make sure that our environment, or reliability is still good. And PNM and TNMP have both maintained top quartile reliability, which helps with customer satisfaction. Jeff talks about Palo Verde, and we’re working with them and they continued their improvement. They went from an EAF of 77% in 2007 to an EAF of 83% last year in 2008, and we also achieved our business improvement plans. We turned to the…

Thanks Pat. Let me just add one thing on in terms of the economy within the state. For those of you that haven’t followed us greatly in the past, one of the things that you find in the New Mexico economy and it’s to a lesser extent true in Texas is that its resilience in down - economic downturns has been something that’s always been there, the part of it, is because of the large governmental, federal government presence with the labs in the large Air Force bases. And that’s why, but also we see the attraction for people to retire out here and the like, that’s why even in the fourth quarter, we still are seeing 1% customer growth rates in New Mexico. And in fact we are seeing higher than that, growth rates of customers in the fourth quarter, in the properties served by Texas. Moving to slide 13. Let me spend a few minutes talking about First Choice Power. Obviously, the results in 2008 were unacceptable. If you look at the three prior years, the first three years that we owned Palo Verde, I am sorry that we owned First Choice Power. It averaged an EBITDA performance of about $50 million. Going into 2008, however, it slipped to a loss of $27 million, which is as I said is unacceptable. All of us in ERCOT experienced to varying degrees, the impacts of really four things. The first was the high congestion that was experienced in the spring and frankly poor congestion management on the part of ERCOT, which has largely been rectified. Second was the extreme commodity price volatility that drives market prices and created very interesting and difficult dynamics particularly as we moved into the late spring and into the summer. Third, as Pat mentioned Hurricane…

Thank you, Jeff, and good morning everyone. As Jeff mentioned earlier 2008 was a challenging year, and while our financial results don’t show year-over-year improvement. We have made significant strides on the four key initiatives that Jeff mentioned in his opening remarks. So turning to slide 19, I want to point out some of the significant year-over-year performance drivers. Ongoing earnings were $0.12 per share in 2008 down from the $1.11 we reported in ’07 what's not evident in our financials is the steady improvement we made on the regulated side and how the successes we achieved during the year. Most of which, Pat mentioned in our comments but in the first quarter prior to the implementation our new base rates, and the emergency fuel clause adjustment PNM’s earnings were down $0.34 from the prior year. However, since that time PNM’s earnings have rebounded during the second half of 2008 the utilities earnings were up about $0.10 or 45% above last year. I walk across graph, clearly shows the benefit from implementing new base rates and fuel adjustment clause for PNM. The $0.26 increase in the graph reflects the impact of the higher retail rates and fuel recovery, which were partially offset by the cost incurred early in the year related to the power plant availability and higher coal cost. Regarding scheduled generation outages, the $0.14 decline in EPS as due to generation outages reflects the O&M associated with last year’s scheduled outages. With implementation of the fuel adjustment clause, we are able to timely recover the cost of purchase power whenever we take the plants down for scheduled outages. However, we still incur the O&M expense related to those outages. : : : Turning to slide 20. I’ll walk you through our current outlook for the year, excluding the…

Thanks Chuck. Let me just close with the few comments about the economy that the big uncertainty that we are all facing, in terms of the impacts of the recession and particularly the duration of that recession. We’ve tried to build that into our ’09 guidance through a number of factors first on our load growth as we talked about before. : Second, relative to FCP, while it pains me greatly we have build in a 7% bad debt write-off. And even with that we believe and have shown you what our forecast is for that business. Obviously, we’re going to do everything we can to reduce that. But given the recessionary impacts that we’re seeing, I think it’s prudent to recognize that bad debt is something that virtually all businesses are going to have to deal with. And so, we’ve built that into our plans for FCP. : With that, let’s turn to questions. : With that, let’s turn to questions. Jonathan Arnold – Merrill Lynch: Hi, good morning guys

Hi, Jon.

Good morning Jonathan Arnold – Merrill Lynch: I had a quick question on, you talked about this the new legislation that’s being introduced with the future test year and CWIP et cetera. Two questions on that, what is the timing, how long is it likely for that to take to navigate through the legislature. And then just some reminders around when the session is open would be helpful. Secondly, I am guessing you would want to file a new case to take – it reflecting that at some point. How should we think about your future rate plans beyond the current case in PNM?

:

One thing to add to that Jonathan is, for our Southern Mexico territory, its real clear that we will be filing a rate case, that isn’t dependent so much on the outcome of the current PNM rate case for rates to go into effect in early 2011. And if this ball passes Pat would you use that legislation for the shaping of that rate case for the southern territory.

Thank you, Jeff.

Thank you.

We’ll take our next question from Brian Russo, Ladenburg Thalmann. Brian Russo – Ladenburg Thalmann: Hello, good morning.

Good morning.

Good morning. Brian Russo – Ladenburg Thalmann: Could you just comment on what was the driver for the impairment charge on First Choice Power in the fourth quarter?

Yeah, let me comment on that. We continually have to look at the evaluation of the business using the accounting methodologies that incurred earlier in 2008 when we have the impairment write-off. So we go through that analysis and in doing such we look at three areas one of which is the trade name, which is our assumption is that 1% royalty rate. You can look at that as the value of the First Choice Power name in the market relative to that methodology. We reduced that to 0.5%, that’s a non-amortized intangible asset and also what kind of discount rate we would use to apply to that would result in part of that $24 million write-off we mentioned in the press release. Also we have to look at the customer list, which is another amortized intangible asset, which is amortized over 7 years. We have to look at that value and reflect that relative to where the market is, that is part of that after tax $24 million write-off. And so the additional amount is really the enterprise value that’s associated with goodwill and we’ll go through that analysis in the second step and announce any changes to that as we finalize the 10-K. But this is something we have to go through. And we given the fact that the First Choice didn’t perform as expected for 2008, and given that valuation that triggers the methodology for the accounting approach to making these determinations to any adjustments to goodwill and intangible assets. And as result of that performance we are adjusting accordingly to that. Brian Russo – Ladenburg Thalmann: So, was it more of an historical look at the value of the business or is there some sort of forward-looking component?

Brian, let me. The biggest change is on the intangible at the trade name. And frankly, from a layman's perspective, I will tell you my rational for it, is that we see particularly in a recession that price is going to drive much more than the value of trade name. So, when we look at what is typically used as 1% for a value of the trade name frankly, I don’t think it worth that. And so in a sense that is a going, looking forward analysis, where we don’t think the value of any trade name frankly in a recession is worth what it was in the non-recession. And so we are appropriately reflecting that adjustment.

All right thanks. And one more question. Could you just add some more color to the increase in bad debt expense in 2008? Was it primarily related to the impact from Hurricane Ike or is it increased customer switching without paying bills or is it more related to commercial and industrial slowdown that we are seeing here?

Really all of the above in particularly the first two, with Hurricane Ike, we’ve got a lot of customers that are still trying to rebuild or that you’ve got a meter set that now the house is completely gone or they haven’t been able to come back and take on employment. They maybe still paying the small amounts on the bill or they’ve asked for bill terms. So we’ve got obviously a continued amount of accounts receivable and we take the total amount of account receivable into account as we took at total bad debt. So Ike is definitely had an impact. I think probably a bigger piece is has got to do with some of the rules for example, in Texas if you're a customer under a term contract, if you leave that contract, you are supposed to pay a termination penalty, but what some people have found out is that they can use what’s called the move-in, move-out procedure. Where no one knows that’s it’s the same customer on promise. None of the reps know, so they just switched to a new provider and don’t pay the termination fee, because its not under move-in move-out and then they just don’t pay that last bill, and because of the fly-up in gas prices that we saw in early year, we ended up with much biggest last bills. And then we saw a very short increase in the percentage of customers, who defaulted under last bills. So, it’s a combination of all of those factors, and the way that we have to manage it, obviously is through a credit policies, through our much more aggressive deposit and tier deposit structures, as well as working with the commission and the REP community to change some of the loopholes that were never intended to be utilized in this way. One of the things I think the commission is really coming to understand is that everybody in Texas is paying a high price, because the rules enable people to avoid paying their bills. And that, Texas has been sensitive to what’s happened to electric prices, and this is the way to help, mitigate electric prices to the vast majority of customers. Brian Russo – Ladenburg Thalmann: One more question on First Choice Power, you are forecasting 7% of revenues and bad debt expense in 2009. That seems awfully high, I mean its just kind of the reality of Texas retial.

No, I would say it is high. And on a steady state basis, we would not expect nor we would we tolerate 7%, but part of this our intention to build in the impacts that may very well occur in a recessionary environment, where it might be that you will continue to see people not be able to pay bills or that we are not able to get the adjustments that we believe are appropriate in the regulatory rules. If we’re able to get those rules adjusted to more rapidly we’re able to get those adjusted then frankly you’ll see these percentages come down. So, I think part of it is the conservatism because of what we experienced in 2008 on a going forward basis long-term though, in an improved economy we would not tolerate or expect to see 7%.

Brian, this is Chuck. I want to add a comment too on the impairment to be clear because you asked about the forward-looking view or the valuation of the business. Keep in mind that we’re valuing the business with the accounting methodology at year-end 2008. So, we look at the impact of that business look at the full enterprise, look at fixed price contracts associated to where they are relative to the market at the end of 2008. And make a determination based on that to the performer that we would project the accounting valuation. So, we can have a debate about market valuations and accounting valuations, but this is the right thing for us to do to reflect the appropriate impairment charge against the business giving the results that occurred at the end of 2008. Brian Russo – Ladenburg Thalmann: All right. And then lastly on slide A14 of the presentation you outlined the revenue requirement in the pending PNM electric rate case. It looks like a good portion of it has already been, so to speak pre-approved on Luna & Lordsburg and some other things. I’m just wondering how much of the revenue requirements relates to the incremental financing costs experienced as your credit rating was cut below investment grade.

I’m not sure I have that; well I know I don’t have that number. We would have to get back with you on the specifics of the increased financing costs. There is certainly some in there. Brian Russo – Ladenburg Thalmann: Yeah.

But there is obviously in addition to the – what you might call pre-approval, although remember we don’t have that stipulation yet approved by the commission. Yeah, we obviously have other investments that have been made and increased O&M and depreciation costs that are pretty critical to us. But we’ll get back to you, okay. Brian Russo – Ladenburg Thalmann: Okay, thank you very much.

(Operator Instructions). We’ll go next to Sam Brothwell, Wachovia Samuel Brothwell – Wachovia Securities: Hi, good morning guys.

Hi, Sam.

Good morning, Sam.

Good morning. Samuel Brothwell – Wachovia Securities: Jeff, a couple of questions on the Texas business that I’m not trying to beat the First Choice horse to death, but when you made the decision last year to hang on to it. Did you and the Board kind of discuss a window of time that you are willing to allow to rebuild that business?

Sam, I don’t think you could beat it to death many more than we have. And the answer to that is absolutely. FCP it understands that they are being watched closely and being actively supported. And that their performance, as we move through particularly the first three quarters of 2009 are very important. And I have a large amount of faith in Brain and in what Brain is going to be able to accomplish. But obviously it’s within the constraints of that marketplace and what happens and what the regulators may or may not do. But I’m not putting any specific timeline on it. But we’re not going to tolerate another kind of performance like we saw in 2008. That’s if we can’t turn this business around then we’re not going to stay in it regardless of how we may have to exit. We made a decision that we believed the best way to add value associated with FCP was to restore its level of performance. Then we will make a determination about what to do. Obviously, if that performance is not restored, we are faced with the issue. Samuel Brothwell – Wachovia Securities: It sounds like the spotlight is definitely going to be on at this year?

Spotlight, heat lamp you name it yes, sir. Samuel Brothwell – Wachovia Securities: And I guess the other thing is looking at some of your assumptions going into ’09, if I am doing this right, we are looking at 11% customer growth, pretty good improvement, pretty margins. And what do you see happening differently versus the last two quarters of ’08, especially in light of the some of the petrochemical industry in Texas in particular, which I imagine you have some exposure to is coming under a lot of pressure?

Yeah, the only exposure we have to the petrochemical industry frankly is on the employment side. We don’t serve any of the petrochemicals and frankly the commercial customers that we serve are really not in that supply chain for the petrochemical side. But obviously as an overall economy turns, that will affect customers in general. We do have customers in the Houston area, but remember we also have a pretty junk of customers that are up in the Dallas area that are really, fairly well disconnected from the petrochemical industry. The challenges that we face in relative to FCP on growth really have to do with how we look at pricing our products. One of the things that we’re seeing in ERCOT this year, as we move into year is everybody and you all don’t have transparency into it except for a couple of us that are publicly traded, but everybody in that business has gotten buffeted hard and as there is a rebounding that’s a kind of occurring. People realize that the market hit everybody. So, hard in 2008 that margins have to move up and I think what you are seeing is pricing within that market that is much more rational than it was last year. How long does that last, before someone starts to try to drive down prices, thinking that they can chase something. Well, I don’t know we will have to see. We are going to be disciplined about maintaining the kinds of margins that we are seeing today, which on average are certainly in the mid 20s, if not a little higher and that’s going to be a matter of the target markets that we go after and the way in which we price that product and our ability to control costs. Samuel Brothwell – Wachovia Securities: And just one last quick one, with respect to petrochemicals specifically isn't Altura, isn’t the host there a Lyondell facility.

It is, it's Basell Lyondell and as some of you may know that they did, they had have gone into Chapter 11. We are actively involved in that process, we do have a small amount that’s immaterial of pre bankruptcy debt, but in the post bankruptcy period this is not a facility that is on the list but they have submitted to the bankruptcy judge for potential closing of facilities. And we are in discussions with them about how we can enhance this facility. So, we feel, we are in pretty good shape relative to the bankruptcy, but obviously that’s something that we are going to be paying very, very close attention to, it has not demonstrably changed the operation, they certainly have cut back production, but what that is done is freed up the ability to deploy Lyondell capacity into the ancillaries market which is still a very strong market particularly for the Houston zone… Samuel Brothwell – Wachovia Securities: Thanks guys.

Let me just add a comment to in regards to Lyondell and what Jeff had alluded too, but under the very worse-scenario, if there were consequences of that plant shutting down. We still have plants and continue to see that will allow for those units to be essentially merchant units as Jeff pointed out, whether small capital investment would allow us to dispatch this units, still in the ancillary market and provide the ability to serve the load within the Texas market. So, even on the worse-case scenario, we don’t lose the ability to manage the output of that plan, it just has to be reconfigured and accessed water rights et cetera allow us to running it as a merchant plant going forward. Samuel Brothwell – Wachovia Securities: Okay, thanks for the extra help, Chuck.

It’s okay.

And we have no further questions at this time. I would like to turn the conference back over to Mr. Jeff Sterba for any additional or closing remarks.

Well, again thank you very much for joining us in many ways obviously we are all happy to close the door on 2008 and open the door on 2009, I would also point you to slide 29, where we provide a checklist much as we did last year of the things that you can hold us accountable for as we move through 2009 which will be the industries of our ability to beat our earnings target. Please feel free to make contact with Gina or her folks if you have any follow-on questions and we look forward to a better 2009. Thank you very much for joining us.