v3.26.3
Lease Commitments
 9 Months Ended
Sep. 30, 2026
Leases [Abstract]  
Lease Commitments Lease Commitments
The Company leases office buildings, vehicles, energy storage facilities, and other equipment. In addition, certain rights-of-way agreements are classified as leases. All of the Company’s leases with terms in excess of one year are recorded on the balance sheet by recording a present value lease liability and a corresponding right-of-use asset. Operating lease expense is recognized within operating expenses according to the use of the asset on a straight-line basis. Financing lease costs, which are comprised primarily of fleet and office equipment leases commencing after January 1, 2019, are recognized by amortizing the right-of-use asset on a straight-line basis and by recording interest expense on the lease liability. Financing lease right-of-use assets amortization is reflected in depreciation and amortization and interest on financing lease liabilities is reflected as interest charges on the Company’s Condensed Consolidated Statements of Earnings. See additional discussion of the Company’s leasing activities in Note 8 of the Notes to Consolidated Financial Statements in the 2025 Annual Reports on Form 10-K.

Land Easements and Rights-of-Way

Many of PNM’s electric transmission and distribution facilities are located on lands that require the grant of rights-of-way from governmental entities, Native American tribes, or private parties. PNM has completed several renewals of rights-of-way, the largest of which is a renewal with the Navajo Nation. PNM is obligated to pay the Navajo Nation annual payments of $6.0 million, subject to adjustment each year based on the Consumer Price Index, through 2029. PNM’s April 2026 payment for the amount due under the Navajo Nation right-of-way lease was $9.1 million, which included amounts due under the Consumer Price Index adjustment. Changes in the Consumer Price Index subsequent to January 1, 2019, are considered variable lease payments.

PNM has other prepaid rights-of-way agreements that are not accounted for as leases or recognized as a component of plant in service. PNM reflects the unamortized balance of these prepayments in other deferred charges on the Condensed Consolidated Balance Sheets and recognizes amortization expense associated with these agreements in the Condensed Consolidated Statement of Earnings over their term. As of September 30, 2026 and December 31, 2025, the unamortized balance of these rights-of-ways was $82.1 million and $69.2 million. PNM recognized amortization expense associated with these agreements of $1.3 million and $3.6 million in the three and nine months ended September 30, 2026, and $1.1 million and $3.3 million in the three and nine months ended September 30, 2025.

Fleet Vehicles and Equipment

Fleet vehicle and equipment leases commencing on or after January 1, 2019, are classified as financing leases. Fleet vehicle and equipment leases existing as of December 31, 2018, are classified as operating leases. The Company’s fleet vehicle and equipment lease agreements include non-lease components for insignificant administrative and other costs that are billed over the life of the agreement. At September 30, 2026, residual value guarantees on fleet vehicle, and equipment leases are $0.5 million, $0.4 million, and $0.9 million for PNM, TNMP, and TXNM Consolidated.

Energy Storage Agreements

The Company has ESAs with fixed payments over the life of the agreements, that are accounted for as operating leases, for which the Company records the initial lease liabilities and corresponding right-of-use assets. The Company also has ESAs with monthly payments that vary, depending on the available capacity of the energy storage facility, that are also accounted for as operating leases. However, due to the variable nature of the consideration, these agreements do not require a lease liability or a right-of-use asset to be recorded upon inception. Expenses for this type of lease are reflected in variable lease expense in the tables below. During the first quarter of 2026, one existing fixed payment ESA was amended to variable payments based on available capacity, resulting in a $57.2 million retirement of unamortized right-of-use assets and associated lease liabilities. In
addition, the Company has elected to separate lease components from non-lease components for ESAs and accordingly does not include non-lease components in the measurement of the lease liability or right-of-use asset. The non-lease components, which are not included in the measurement of the lease liability or the corresponding right-of-use asset, comprise 25.5% of the value of the agreements.

Information related to the Company’s operating leases recorded on the Condensed Consolidated Balance Sheets is presented below:
September 30, 2026December 31, 2025
PNMTNMP
TXNM
PNMTNMP
TXNM
(In thousands)
Operating leases:
Operating lease assets, net of amortization$45,355 $312 $46,123 $107,986 $39 $108,517 
Current portion of operating lease liabilities7,203 76 7,324 8,913 15 8,969 
Long-term portion of operating lease liabilities33,903 239 34,572 96,246 24 96,735 

As discussed above, the Company classifies its fleet vehicle and equipment leases and its office equipment leases commencing on or after January 1, 2019 as financing leases.

Information related to the Company’s financing leases recorded on the Condensed Consolidated Balance Sheets is presented below:
September 30, 2026December 31, 2025
PNMTNMP
TXNM
PNMTNMP
TXNM
(In thousands)
Financing leases:
Non-utility property$30,712 $40,012 $72,240 $30,555 $33,344 $65,366 
Accumulated depreciation(14,850)(16,134)(31,788)(13,079)(14,319)(27,928)
Non-utility property, net15,862 23,878 40,452 17,476 19,025 37,438 
Other current liabilities$5,718 $7,893 $13,988 $5,764 $6,604 $12,743 
Other deferred credits10,177 16,024 26,562 11,740 12,456 24,786 

Information concerning the weighted average remaining lease terms and the weighted average discount rates used to determine the Company’s lease liabilities is presented below:

September 30, 2026December 31, 2025
PNMTNMP
TXNM
PNMTNMP
TXNM
Weighted average remaining lease term (years):
Operating leases10.984.0110.8915.642.6315.60
Financing leases3.463.623.533.753.483.59
Weighted average discount rate:
Operating leases5.17 %4.30 %5.17 %5.55 %5.39 %5.55 %
Financing leases5.42 %5.53 %5.48 %5.33 %5.43 %5.37 %
Information for the components of lease expense is as follows:

Three Months Ended September 30, 2026Nine Months Ended September 30, 2026
PNMTNMP
TXNM
PNMTNMP
TXNM
(In thousands)
Operating lease cost:
Energy storage leases
$156 $— $156 $1,406 $— $1,406 
Other operating leases2,139 23 2,181 5,891 69 6,016 
Amounts capitalized— — — — — — 
Total operating lease expense2,295 23 2,337 7,297 69 7,422 
Financing lease cost:
Amortization of right-of-use assets1,567 2,086 3,749 4,616 6,185 11,094 
Interest on lease liabilities216 322 549 676 948 1,657 
Amounts capitalized(1,195)(2,025)(3,220)(3,607)(5,898)(9,505)
Total financing lease expense588 383 1,078 1,685 1,235 3,246 
Variable lease expense19,942 — 19,942 55,128 — 55,128 
Short-term lease expense220 10 234 585 26 634 
Total lease expense for the period$23,045 $416 $23,591 $64,695 $1,330 $66,430 

Three Months Ended September 30, 2025Nine Months Ended September 30, 2025
PNMTNMP
TXNM
PNMTNMP
TXNM
(In thousands)
Operating lease cost:
Energy storage leases
$5,493 $— $5,493 $15,660 $— $15,660 
Other operating leases
1,863 105 1,987 5,589 390 6,035 
Amounts capitalized(11)(81)(92)(33)(317)(350)
Total operating lease expense7,345 24 7,388 21,216 73 21,345 
Financing lease cost:
Amortization of right-of-use assets1,255 1,612 2,956 3,686 4,455 8,409 
Interest on lease liabilities189 220 421 553 577 1,171 
Amounts capitalized(941)(1,527)(2,468)(2,719)(4,177)(6,897)
Total financing lease expense503 305 909 1,520 855 2,683 
Variable lease expense6,555 — 6,555 19,690 — 19,690 
Short-term lease expense173 4 182 542 16 605 
Total lease expense for the period$14,576 $333 $15,034 $42,968 $944 $44,323 

Supplemental cash flow information related to the Company’s leases is as follows:

Nine Months EndedNine Months Ended
September 30, 2026September 30, 2025
PNMTNMP
TXNM
PNMTNMP
TXNM
(In thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases$8,719 $66 $8,837 $22,633 $43 $22,725 
Operating cash flows from financing leases214 185 432 196 141 379 
Finance cash flows from financing leases1,470 1,046 2,808 1,319 722 2,296 
Non-cash information related to right-of-use assets obtained in exchange for lease obligations:
Operating leases additions
$— $331 $331 $57,920 $9 $57,930 
Operating leases retirements
(57,228)— (57,228)(367)(26)(393)
Financing leases3,133 11,145 14,347 5,562 10,521 16,345 
Capitalized lease costs are reflected as investing activities on the Company’s Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2026 and 2025.

Future expected lease payments are shown below:

As of September 30, 2026
PNMTNMP
TXNM
Operating
Operating
Financing
Energy Storage
Other
FinancingOperatingFinancing
Energy Storage
Other
(In thousands)
Remainder of 2026
$1,778 $446 $73 $2,420 $22 $4,304 $446 $112 
2027
5,945 1,783 7,049 8,375 87 14,718 1,783 7,206 
2028
4,424 1,783 7,052 6,689 83 11,327 1,783 7,208 
2029
2,890 1,783 7,039 5,185 74 8,135 1,783 7,188 
2030
1,313 1,783 164 2,434 76 3,751 1,783 317 
Later years1,039 22,603 3,497 1,163 — 2,202 22,603 3,770 
Total minimum lease payments17,389 30,181 24,874 26,266 342 44,437 30,181 25,801 
Less: Imputed interest1,494 11,259 2,690 2,349 27 3,887 11,259 2,827 
Lease liabilities
$15,895 $18,922 $22,184 $23,917 $315 $40,550 $18,922 $22,974 

The above table includes $15.4 million, $21.3 million, and $36.9 million for PNM, TNMP, and TXNM at September 30, 2026, for expected future payments on fleet vehicle and equipment leases that could be avoided if the leased assets were returned and the lessor is able to recover estimated market value for the equipment from third parties.

At September 30, 2026, the Company has an ESA that has been executed with a lease component that has not yet commenced. The lease component begins in 2029, expires in 2044, and will be recognized as a lease asset and liability upon the commencement. The expected total fixed consideration to be paid for this arrangement, which includes non-lease payments, is approximately $94.3 million over the 20-year term of the agreement.
Lease Commitments Lease Commitments
The Company leases office buildings, vehicles, energy storage facilities, and other equipment. In addition, certain rights-of-way agreements are classified as leases. All of the Company’s leases with terms in excess of one year are recorded on the balance sheet by recording a present value lease liability and a corresponding right-of-use asset. Operating lease expense is recognized within operating expenses according to the use of the asset on a straight-line basis. Financing lease costs, which are comprised primarily of fleet and office equipment leases commencing after January 1, 2019, are recognized by amortizing the right-of-use asset on a straight-line basis and by recording interest expense on the lease liability. Financing lease right-of-use assets amortization is reflected in depreciation and amortization and interest on financing lease liabilities is reflected as interest charges on the Company’s Condensed Consolidated Statements of Earnings. See additional discussion of the Company’s leasing activities in Note 8 of the Notes to Consolidated Financial Statements in the 2025 Annual Reports on Form 10-K.

Land Easements and Rights-of-Way

Many of PNM’s electric transmission and distribution facilities are located on lands that require the grant of rights-of-way from governmental entities, Native American tribes, or private parties. PNM has completed several renewals of rights-of-way, the largest of which is a renewal with the Navajo Nation. PNM is obligated to pay the Navajo Nation annual payments of $6.0 million, subject to adjustment each year based on the Consumer Price Index, through 2029. PNM’s April 2026 payment for the amount due under the Navajo Nation right-of-way lease was $9.1 million, which included amounts due under the Consumer Price Index adjustment. Changes in the Consumer Price Index subsequent to January 1, 2019, are considered variable lease payments.

PNM has other prepaid rights-of-way agreements that are not accounted for as leases or recognized as a component of plant in service. PNM reflects the unamortized balance of these prepayments in other deferred charges on the Condensed Consolidated Balance Sheets and recognizes amortization expense associated with these agreements in the Condensed Consolidated Statement of Earnings over their term. As of September 30, 2026 and December 31, 2025, the unamortized balance of these rights-of-ways was $82.1 million and $69.2 million. PNM recognized amortization expense associated with these agreements of $1.3 million and $3.6 million in the three and nine months ended September 30, 2026, and $1.1 million and $3.3 million in the three and nine months ended September 30, 2025.

Fleet Vehicles and Equipment

Fleet vehicle and equipment leases commencing on or after January 1, 2019, are classified as financing leases. Fleet vehicle and equipment leases existing as of December 31, 2018, are classified as operating leases. The Company’s fleet vehicle and equipment lease agreements include non-lease components for insignificant administrative and other costs that are billed over the life of the agreement. At September 30, 2026, residual value guarantees on fleet vehicle, and equipment leases are $0.5 million, $0.4 million, and $0.9 million for PNM, TNMP, and TXNM Consolidated.

Energy Storage Agreements

The Company has ESAs with fixed payments over the life of the agreements, that are accounted for as operating leases, for which the Company records the initial lease liabilities and corresponding right-of-use assets. The Company also has ESAs with monthly payments that vary, depending on the available capacity of the energy storage facility, that are also accounted for as operating leases. However, due to the variable nature of the consideration, these agreements do not require a lease liability or a right-of-use asset to be recorded upon inception. Expenses for this type of lease are reflected in variable lease expense in the tables below. During the first quarter of 2026, one existing fixed payment ESA was amended to variable payments based on available capacity, resulting in a $57.2 million retirement of unamortized right-of-use assets and associated lease liabilities. In
addition, the Company has elected to separate lease components from non-lease components for ESAs and accordingly does not include non-lease components in the measurement of the lease liability or right-of-use asset. The non-lease components, which are not included in the measurement of the lease liability or the corresponding right-of-use asset, comprise 25.5% of the value of the agreements.

Information related to the Company’s operating leases recorded on the Condensed Consolidated Balance Sheets is presented below:
September 30, 2026December 31, 2025
PNMTNMP
TXNM
PNMTNMP
TXNM
(In thousands)
Operating leases:
Operating lease assets, net of amortization$45,355 $312 $46,123 $107,986 $39 $108,517 
Current portion of operating lease liabilities7,203 76 7,324 8,913 15 8,969 
Long-term portion of operating lease liabilities33,903 239 34,572 96,246 24 96,735 

As discussed above, the Company classifies its fleet vehicle and equipment leases and its office equipment leases commencing on or after January 1, 2019 as financing leases.

Information related to the Company’s financing leases recorded on the Condensed Consolidated Balance Sheets is presented below:
September 30, 2026December 31, 2025
PNMTNMP
TXNM
PNMTNMP
TXNM
(In thousands)
Financing leases:
Non-utility property$30,712 $40,012 $72,240 $30,555 $33,344 $65,366 
Accumulated depreciation(14,850)(16,134)(31,788)(13,079)(14,319)(27,928)
Non-utility property, net15,862 23,878 40,452 17,476 19,025 37,438 
Other current liabilities$5,718 $7,893 $13,988 $5,764 $6,604 $12,743 
Other deferred credits10,177 16,024 26,562 11,740 12,456 24,786 

Information concerning the weighted average remaining lease terms and the weighted average discount rates used to determine the Company’s lease liabilities is presented below:

September 30, 2026December 31, 2025
PNMTNMP
TXNM
PNMTNMP
TXNM
Weighted average remaining lease term (years):
Operating leases10.984.0110.8915.642.6315.60
Financing leases3.463.623.533.753.483.59
Weighted average discount rate:
Operating leases5.17 %4.30 %5.17 %5.55 %5.39 %5.55 %
Financing leases5.42 %5.53 %5.48 %5.33 %5.43 %5.37 %
Information for the components of lease expense is as follows:

Three Months Ended September 30, 2026Nine Months Ended September 30, 2026
PNMTNMP
TXNM
PNMTNMP
TXNM
(In thousands)
Operating lease cost:
Energy storage leases
$156 $— $156 $1,406 $— $1,406 
Other operating leases2,139 23 2,181 5,891 69 6,016 
Amounts capitalized— — — — — — 
Total operating lease expense2,295 23 2,337 7,297 69 7,422 
Financing lease cost:
Amortization of right-of-use assets1,567 2,086 3,749 4,616 6,185 11,094 
Interest on lease liabilities216 322 549 676 948 1,657 
Amounts capitalized(1,195)(2,025)(3,220)(3,607)(5,898)(9,505)
Total financing lease expense588 383 1,078 1,685 1,235 3,246 
Variable lease expense19,942 — 19,942 55,128 — 55,128 
Short-term lease expense220 10 234 585 26 634 
Total lease expense for the period$23,045 $416 $23,591 $64,695 $1,330 $66,430 

Three Months Ended September 30, 2025Nine Months Ended September 30, 2025
PNMTNMP
TXNM
PNMTNMP
TXNM
(In thousands)
Operating lease cost:
Energy storage leases
$5,493 $— $5,493 $15,660 $— $15,660 
Other operating leases
1,863 105 1,987 5,589 390 6,035 
Amounts capitalized(11)(81)(92)(33)(317)(350)
Total operating lease expense7,345 24 7,388 21,216 73 21,345 
Financing lease cost:
Amortization of right-of-use assets1,255 1,612 2,956 3,686 4,455 8,409 
Interest on lease liabilities189 220 421 553 577 1,171 
Amounts capitalized(941)(1,527)(2,468)(2,719)(4,177)(6,897)
Total financing lease expense503 305 909 1,520 855 2,683 
Variable lease expense6,555 — 6,555 19,690 — 19,690 
Short-term lease expense173 4 182 542 16 605 
Total lease expense for the period$14,576 $333 $15,034 $42,968 $944 $44,323 

Supplemental cash flow information related to the Company’s leases is as follows:

Nine Months EndedNine Months Ended
September 30, 2026September 30, 2025
PNMTNMP
TXNM
PNMTNMP
TXNM
(In thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases$8,719 $66 $8,837 $22,633 $43 $22,725 
Operating cash flows from financing leases214 185 432 196 141 379 
Finance cash flows from financing leases1,470 1,046 2,808 1,319 722 2,296 
Non-cash information related to right-of-use assets obtained in exchange for lease obligations:
Operating leases additions
$— $331 $331 $57,920 $9 $57,930 
Operating leases retirements
(57,228)— (57,228)(367)(26)(393)
Financing leases3,133 11,145 14,347 5,562 10,521 16,345 
Capitalized lease costs are reflected as investing activities on the Company’s Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2026 and 2025.

Future expected lease payments are shown below:

As of September 30, 2026
PNMTNMP
TXNM
Operating
Operating
Financing
Energy Storage
Other
FinancingOperatingFinancing
Energy Storage
Other
(In thousands)
Remainder of 2026
$1,778 $446 $73 $2,420 $22 $4,304 $446 $112 
2027
5,945 1,783 7,049 8,375 87 14,718 1,783 7,206 
2028
4,424 1,783 7,052 6,689 83 11,327 1,783 7,208 
2029
2,890 1,783 7,039 5,185 74 8,135 1,783 7,188 
2030
1,313 1,783 164 2,434 76 3,751 1,783 317 
Later years1,039 22,603 3,497 1,163 — 2,202 22,603 3,770 
Total minimum lease payments17,389 30,181 24,874 26,266 342 44,437 30,181 25,801 
Less: Imputed interest1,494 11,259 2,690 2,349 27 3,887 11,259 2,827 
Lease liabilities
$15,895 $18,922 $22,184 $23,917 $315 $40,550 $18,922 $22,974 

The above table includes $15.4 million, $21.3 million, and $36.9 million for PNM, TNMP, and TXNM at September 30, 2026, for expected future payments on fleet vehicle and equipment leases that could be avoided if the leased assets were returned and the lessor is able to recover estimated market value for the equipment from third parties.

At September 30, 2026, the Company has an ESA that has been executed with a lease component that has not yet commenced. The lease component begins in 2029, expires in 2044, and will be recognized as a lease asset and liability upon the commencement. The expected total fixed consideration to be paid for this arrangement, which includes non-lease payments, is approximately $94.3 million over the 20-year term of the agreement.