PNM Resources lowers 2002 earnings estimate

ALBUQUERQUE, N.M., July 11, 2002 — Continued weakness in the wholesale power market has caused PNM Resources to reduce its 2002 earnings estimate.

The company now expects operating earnings for the full year will be in the range of $1.90 to $2.10 per share. Second quarter earnings are expected to be in the range of 25 cents per share.

“Although the PNM electric utility continues to perform well, the depressed level of wholesale prices in the West, coupled with the significantly decreased trading activity in that market, has severely limited the potential of our power marketing arm so far this year,” said PNM Resources Chairman, President and Chief Executive Officer Jeff Sterba.

“We are lowering our earnings expectations because it appears increasingly likely that these adverse conditions will persist through the end of 2002.”

Several factors, including an abundance of available hydropower from the Pacific Northwest, cooler weather through May and June, low natural gas prices, the number of new generating plants coming on line, and the lingering slowdown in the regional economy have all contributed to keeping power prices down in 2002.

Additionally, fewer credit-worthy counterparties and political and regulatory uncertainty regarding the western marketplace have significantly reduced market liquidity and trading volume as some companies have curtailed their activity or exited the business altogether. These factors resulted in a 25% reduction in wholesale sales compared to the first half of 2001.

Other contributing factors include increased coal costs and lower earnings in the gas utility business as a result of a mild spring and reduced gas sales for electric generation in New Mexico.

“Fortunately, PNM Resources has the liquidity and the financial strength to weather this downturn in the market,” Sterba continued. “We have a steady cash flow from our utility operations, a relatively low level of debt and a healthy cash position. We intend to maintain this conservative financial posture.”

To preserve the company’s strong financial position, management will control expenses and limit capital expenditures. Construction expenditures in 2002, originally budgeted at $391 million, have been reduced by $111 million to $280 million for the year. Planned construction expenditures through 2003 have been reduced in total by over $400 million.

Although the current environment has led the company to scale back its expansion plans, the company will continue to operate in the wholesale market. Expansion of the PNM generating portfolio will depend upon acquiring favorably priced assets at strategic locations and securing long-term commitments for the power from those new plants.

“PNM has been a participant in the wholesale power market for more than a decade and this business remains an integral part of our strategic plan,” Sterba said.

PNM Resources plans to announce its financial results for second-quarter 2002 after the market closes on Monday, July 22.


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