Table of Contents

Table of Contents

Notice of Annual Meeting of Shareholders

Tuesday, May 19, 2009

9:00 a.m., Mountain Daylight Time

South Broadway Cultural Center

1025 Broadway SE

Albuquerque, New Mexico

April 8, 2009

Dear Shareholder:

You are cordially invited to attend the Annual Meeting of Shareholders of PNM Resources, Inc.   The meeting will be held on Tuesday, May 19, 2009, at 9:00 a.m. (Mountain Daylight Time), at the South Broadway Cultural Center, 1025 Broadway SE, Albuquerque, New Mexico.  A map to the meeting location is included on the back page of this proxy statement for your reference.

At the meeting, shareholders are being asked to:

·                  Elect nine (9) directors.

·                  Approve the PNM Resources, Inc. Second Amended and Restated Omnibus Performance Equity Plan.

·                  Ratify appointment of Deloitte & Touche LLP as independent public accountants for 2009.

·                  Transact any other business properly brought up at the meeting.

The proxy statement and form of proxy were first made available to our shareholders on or about April 8, 2009.  We are pleased to take advantage of the Securities and Exchange Commission rules that allow us to furnish proxy materials to our shareholders on the Internet.  We believe these rules allow us to provide you with the information you need while lowering the costs of delivery and reducing the environmental impact of our Annual Meeting.

Your vote is extremely important.  After reading the proxy statement, please vote, at your earliest convenience by telephone or via the Internet, or by completing, signing and returning the proxy card mailed to you upon your request.  Voting by telephone or the Internet is fast and convenient and your vote is immediately confirmed and tabulated.  Please vote so that we can be assured of having a quorum present at the meeting and so your shares may be voted in accordance with your wishes.  Your continued interest in the business of PNM Resources, Inc. is appreciated and we hope you will be able to attend the Annual Meeting.

Table of Contents

TABLE OF CONTENTS

i

Table of Contents

GLOSSARY OF TERMS USED IN THIS PROXY

ii

Table of Contents

PNM Resources, Inc.

Proxy Statement for 2009 Annual Meeting of Shareholders

Tuesday, May 19, 2009

SOME QUESTIONS YOU MAY HAVE REGARDING THIS PROXY STATEMENT

Why am I being asked to review these materials?

This proxy statement summarizes the information you need to know to vote at the Annual Meeting.  You do not need to attend the Annual Meeting to vote your shares. Our Board of Directors (“Board”) has made these materials available to you on the Internet or, upon your request, has delivered printed versions of these materials to you by mail.  We made these materials available to shareholders on or about April 8, 2009.  Our shareholders are invited to attend the Annual Meeting and are requested to vote on the proposals described in this proxy statement.  For a complete listing of terms defined and used in this proxy statement, see the Glossary on page ii.

What is included in these materials?

These materials include:

·                  Our proxy statement for the Annual Meeting; and

·                  Our 2008 Annual Report to Shareholders and Annual Report on Form10-K, which includes our consolidated financial statements.

If you requested printed versions of these materials by mail, these materials also include the proxy card for the Annual Meeting.

Why did I receive a one-page notice in the mail regarding Internet availability of proxy materials this year instead of a full set of proxy materials?

Pursuant to rules adopted by the Securities and Exchange Commission (“SEC”), we have elected to provide access to our proxy materials over the Internet.  Accordingly, we are sending a Notice of Internet Availability of Proxy Materials (the “Notice”) to our shareholders of record and beneficial owners.  All shareholders will have the ability to access the proxy materials on the website referred to in the Notice or request to receive a printed set of the proxy materials.  The Notice includes instructions on how to access the proxy materials over the Internet or how to request a printed copy.  Pursuant to applicable law, beneficial owners of shares held in the RSP (our 401(k) plan for employees) will automatically receive paper copies of the proxy materials by mail instead of the Notice.

Who may vote at the Annual Meeting?

You may vote all of the shares of our common stock that you own at the close of business on March 30, 2009, the record date.  On the record date, PNM Resources had 86,580,277 shares of common stock outstanding and entitled to be voted on at the Annual Meeting.  You may cast one vote for each share of common stock held by you on all matters presented at the Annual Meeting.

We also have outstanding 477,800 shares of Convertible Preferred Stock, Series A (“preferred stock”), which are entitled to vote together with the holders of common stock on all matters which are voted upon by our shareholders, except the election of directors.  Each share of preferred stock is entitled to 10 votes at the Annual Meeting because each share of preferred stock is convertible into 10 shares of common stock, subject to certain anti-dilution adjustments.

1

Table of Contents

What proposals will be voted on at the Annual Meeting?

The following three proposals will be considered and voted on at the Annual Meeting:

Proposal 1 – Elect Nine Directors

Nine current members of the Board are seeking election for one-year terms at this year’s Annual Meeting.  The Board recommends:

for election to the Board at the Annual Meeting.  Detailed information about these nominees is provided beginning on page 7.

If a nominee becomes unavailable for election, proxy holders will vote for another nominee proposed by the Board or the seat will remain vacant until the Board proposes another nominee.

Proposal 2 – Approve the PNM Resources, Inc. Second Amended and Restated Omnibus Performance Equity Plan

The Board is asking shareholders to approve amending the current Omnibus Performance Equity Plan to:

·                  increase the number of authorized shares of common stock reserved for issuance under the PEP from 8,250,000 to 12,343,000, and increase the limit on shares that may be subject to restricted stock, restricted stock rights, performance share and performance unit awards from 450,000 shares to 1,560,000 shares;

·                  permit the grant of awards that qualify for the “performance-based compensation” exception to the $1,000,000 limitation on the deduction of compensation imposed under Section 162(m) of the Tax Code;

·                  permit the grant of performance cash awards and restricted stock awards; and

·                  extend the term of the plan from December 31, 2015 to May 19, 2019.

The plan has been restated to incorporate these amendments.

Proposal 3 — Ratify Appointment of Independent Public Accountants

The Audit and Ethics Committee of the Board (“Audit Committee”), which is composed entirely of independent non-employee directors, selects and hires the independent registered public accountant, subject to ratification by the Company’s shareholders, to audit the Company’s books.  The Audit Committee has selected Deloitte & Touche to audit the Company’s consolidated financial statements for the fiscal year beginning January 1, 2009.

Representatives of Deloitte & Touche will attend the Annual Meeting, where they will have the opportunity to make statements and answer questions.  If shareholders fail to ratify the appointment of Deloitte & Touche, the Audit Committee would reconsider its selection.

What are our Board of Directors’ Voting Recommendations?

Our Board unanimously recommends that you vote your shares “For” each of the nominees to the Board, “For” approval of the PNM Resources, Inc. Second Amended and Restated Omnibus Performance Equity Plan and “For” the ratification of the appointment of Deloitte & Touche.

2

Table of Contents

How do I vote my shares?

For your convenience, we have established four easy methods for voting shares held in your name:

Your shares will be voted in the manner you indicate.  Holders of our preferred stock may only vote in person or by faxing the completed paper proxy card pursuant to the instructions on the proxy card for the preferred stock.

What is a proxy?

A proxy is your legal designation of another person (the “proxy”) to vote on your behalf.  By voting by telephone or the Internet, or by completing and mailing a printed proxy card, you are giving the proxy committee (W. L. Hunt, R. R. Nordhaus, and M. T. Pacheco) appointed by the Board the authority to vote your shares in the manner you indicate.  If you sign and return your proxy card without indicating how you want your shares to be voted, or if you vote by telephone or Internet in accordance with the Board of Directors’ voting recommendations, the proxy committee will vote your shares as follows:

FOR the election of the directors nominated,

FOR the approval of the PNM Resources, Inc. Second Amended and Restated Omnibus Performance Equity Plan, and

FOR ratification of the appointment of Deloitte & Touche as independent public accountants for 2009.

Can I change my vote or revoke my proxy?

Yes.  Any subsequent vote by any means will change your prior vote.  The last vote actually received before the Annual Meeting will be the one counted.  You may also revoke your proxy by voting in person at the Annual Meeting.

What happens if additional matters are presented at the Annual Meeting?

The Board knows of no other business to be conducted at the Annual Meeting other than those discussed in this proxy statement.  If any other matter is properly presented, the proxy committee will vote on the matter in accordance with their judgment.  Shareholders attending the meeting will directly vote on those matters.

Why did I receive more than one proxy card or Notice?

You will receive multiple proxy cards or Notices if you hold your shares in different ways (e.g., joint tenancy, trusts, custodial accounts) or in multiple accounts.  Each Notice and proxy card that you receive will contain a specific “control number” with the relevant information to vote the specific shares at issue.  Note that the proxy card or Notice for shares registered in your name will include any shares acquired by employee purchases

3

Table of Contents

through the ESPP.    If your shares are held by a broker (i.e., in “street name”), you will receive a Notice on how to obtain your proxy materials and vote from your broker.  You should vote according to the instructions on each Notice you receive and vote on, sign and return and sign each proxy card you receive.

How do I vote my RSP shares?

If you participate in the RSP, our 401(k) plan for our employees, and shares have been allocated to your account under the PNMR Stock Fund investment option, then you will receive a separate vote authorization form and supplemental materials on voting instructions for these shares from the PNMR Corporate Investment Committee.  Thus, if you have shares allocated to your RSP account, you will need to vote your RSP shares with the RSP vote authorization form.  If you participate in the RSP, you will receive the proxy statement and RSP voting materials by mail.

What constitutes a quorum and why is a quorum required?

A quorum of shareholders is necessary to conduct business at the Annual Meeting. If at least a majority of all of the PNM Resources common stock and preferred stock outstanding on the record date is represented at the Annual Meeting, in person or by proxy (by voting by telephone or on the Internet or by properly submitting a proxy card or voting instruction form by mail), a quorum will exist.  Abstentions, withheld votes, and broker non-votes will be counted as present for quorum purposes.

What vote is required to approve each proposal?

A quorum and the affirmative vote of the holders of a majority of the shares of PNM Resources common stock present, in person or by proxy, and entitled to vote at the Annual Meeting are required to elect directors.  A quorum and the affirmative vote of a majority of the shares of our common stock and preferred stock, voting together as a single class, are required to approve the PNM Resources, Inc. Second Amended and Restated Omnibus Performance Equity Plan, and ratify the appointment of independent public accountants.   Abstentions and withheld votes will have the effect of a vote against these matters, while broker non-votes will not be counted in calculating voting results on these matters.

Further, in order to satisfy the requirements of New Mexico law relating to director conflict of interest transactions, the vote of the holders of a majority of the shares of PNM Resources common stock and preferred stock entitled to be counted at the Annual Meeting is required to approve the PNM Resources, Inc. Second Amended and Restated Omnibus Performance Equity Plan and shares owned by or voted under the control of our directors are not entitled to be counted in the vote concerning approval of the Second Amended and Restated Omnibus Performance Equity Plan.

What is the difference between a “shareholder of record” and a “street name” holder?

These terms describe how your shares are held. If your shares are registered directly in your name with BNY Mellon Shareowner Services, the Company’s transfer agent, you are a “shareholder of record” with respect to those shares and the Notice was sent directly to you by PNM Resources.

If your shares are held in the name of a brokerage, bank, trust or other nominee as a custodian, you are a “street name” holder, and the Notice was forwarded to you by that organization.  As a beneficial owner, you have the right to direct that organization on how to vote the shares held in your account.

What happens if I don’t give my broker voting instructions for my “street name” shares?

If you do not give your broker voting instructions, your brokerage firm may vote your “street name” shares on certain “routine” matters.   When a brokerage firm votes its customers’ unvoted shares on routine matters, these shares are counted to determine if a quorum exists to conduct business at the meeting.  The election of directors and the ratification of the appointment of Deloitte & Touche as independent public accountants for 2009 are considered routine matters for which brokerage firms may vote your shares without your voting instructions.

4

Table of Contents

What is a broker non-vote?

A broker non-vote occurs when a broker is not permitted under NYSE rules to vote on a “non-routine” matter without instructions from the beneficial owner of the shares and no instruction is given.  The approval of Proposal 2 (Approve the Second Amended and Restated Omnibus Performance Equity Plan) is considered a non-routine matter and so your shares cannot be voted on this matter without receipt of your voting instructions.

We encourage you to provide instructions to your broker by giving your proxy.  This ensures that your shares will be voted at the Annual Meeting.

How are votes withheld, abstentions and broker non-votes treated?

Votes withheld and abstentions are deemed as “present” at the Annual Meeting, are counted for quorum purposes, and will have the same effect as a vote against the matter.  Broker non-votes, if any, while counted for general quorum purposes, are not deemed to be “present” with respect to any matter for which a broker does not have authority to vote.

Who may attend the Annual Meeting?

Admission tickets will be distributed at the registration tables in the lobby of the South Broadway Cultural Center prior to the Annual Meeting.  Attendance is limited to shareholders of record on March 30, 2009.  If your shares are held in the name of your broker, bank, or other nominee, please bring an account statement or letter from the nominee indicating that you are the beneficial owner of the shares as of the record date.

Can I vote my shares in person at the Meeting?

If you are a “shareholder of record,” you may vote your shares in person at the Annual Meeting.  If you hold your shares in “street name,” you must obtain a proxy from your broker, banker, trustee or nominee, giving you the right to vote the shares at the Annual Meeting.

Who pays the cost of this proxy solicitation?

The enclosed proxy is being solicited on behalf of PNM Resources’ Board of Directors.  This solicitation is being made by mail, but also may be made in person, by telephone or via the Internet.  The Company has hired Georgeson Shareholder Communications, Inc., to assist in the solicitation for an estimated fee of $7,500 plus any out-of-pocket expenses.  PNM Resources will pay all costs related to solicitation.  BNY Mellon Shareowner Services is tabulating the vote.

Is this proxy statement the only way that proxies are being solicited?

No.  As stated above, the Company has retained Georgeson Shareholder Communications, Inc., to aid in the solicitation of proxy materials. In addition to mailing these proxy materials, certain directors, officers or employees of the Company may solicit proxies by telephone, facsimile, e-mail or personal contact. They will not be specifically compensated for doing so.

Where can I find voting results of the Annual Meeting?

The final voting results will be published in our quarterly report on Form 10-Q for the second quarter of fiscal year 2009 and on our website at www.pnmresources.com.

Whom should I call with other questions?

If you have any further questions about voting your shares or attending the Annual Meeting, please call our Investor Relations Department at 1-800-545-4425.

5

Table of Contents

INTRODUCTION

PNM Resources is an investor-owned holding company of energy and energy-related businesses.  Its headquarters are in Albuquerque, New Mexico and it trades on the NYSE under the symbol “PNM.”

GOVERNANCE

In recognition of the importance of governance to the proper management of the Company, the Board has organized the various governance policies adopted and practiced over the years into a consolidated Corporate Governance Principles document so that investors, employees, customers, regulators and the community may be aware of the policies followed by the Company.  These principles have been approved by the full Board after analysis of policy considerations and peer benchmarks.  The Board has chosen those practices it believes to be in the best interests of its investors.  Because the Board wants to follow and stay abreast of best corporate governance practices, it has charged its Board Governance and Human Resources Committee (“BGHRC”) (formerly known as the Governance and Public Policy Committee) with reviewing the principles at least annually (more often if necessary) and recommending any necessary changes to the Board.

The Corporate Governance Principles document is attached as Appendix A, and can also be found on PNM Resources’ website at www.pnmresources.com.  The principles document sets forth key practices and addresses the following:

CODE OF ETHICS

The Company has adopted a code of ethics, Do the Right Thing-Principles of Business Conduct, which applies to all directors, officers (including the principal executive officer, principal financial officer and principal accounting officer) and employees.  Do the Right Thing is available in print to any shareholder who requests it by writing to the Ethics and Governance Department, PNM Resources, Inc., Alvarado Square, MS-2850, Albuquerque New Mexico 87158.  Do the Right Thing is also available on our website at www.pnmresources.com.  The Company will post amendments to or waivers from its code of ethics (to the extent applicable to the Company’s executive officers and directors) at this location on its website.

Concerns relating to financial statement disclosures, accounting, internal accounting controls, or auditing matters, and other matters involving violations of law are handled in accordance with the complaint procedures adopted by the Audit and Ethics Committee that are posted on the Company’s website at www.pnmresources.com. The Company also established an anonymous/confidential hotline through which employees and others may report concerns about the Company’s business practices.

OTHER GOVERNANCE POLICIES

Stock Option Grant Policy

The Board adopted the Stock Option Grant Policy on December 4, 2006 to govern the granting of all forms of equity compensation.  The policy was amended in February 2007 to set forth additional good governance procedures for making equity awards when the regular schedule for the grant of equity compensation falls within a black-out period for trading in the Company’s securities under PNM Resources’ Insider Trading Policy.  The Stock Option Grant Policy, as amended to date, is attached as Appendix B, and can also be found on our website at www.pnmresources.com.

The Company also took a proactive approach in conducting an internal audit review of past stock option grant practices, and no issues relating to backdating or any other irregularities were identified in the audit review.

Related Person Transactions Policy

On February 13, 2007, the Board approved the “Policy and Procedures Governing Related Party Transactions,” attached as Appendix C to this proxy statement, and posted on our website at www.pnmresources.com.  The policy provides that all transactions with executive officers, directors or greater than 5% shareholders or any immediate family member of any of the foregoing where the aggregate amount involved is expected to exceed $120,000 per

6

Table of Contents

year, are subject to pre-approval or ratification by the BGHRC, or by the Board or another committee in the normal fulfillment of their respective charters and responsibilities. In determining whether to approve such transactions, the BGHRC will consider, among other factors, the extent of the related person’s interest in the transaction; the availability of other sources of comparable products or services; whether the terms are no less favorable than terms generally available in unaffiliated transactions under like circumstances; the benefit to the Company; and the aggregate value of the transaction at issue.

PROPOSAL 1:  ELECT NINE DIRECTORS (PROPOSAL 1 ON YOUR PROXY CARD)

General Information

Nine members of the Board are seeking election for one-year terms at this year’s Annual Meeting.  Woody L. Hunt will complete his current term, but will not stand for election at the Annual Meeting of Shareholders on May 19, 2009.  We sincerely acknowledge his dedication, leadership and contributions to PNMR during his tenure.  There are no vacancies as the Board fixed the number of directors at nine, effective with the 2009 Annual Meeting.

The Director Service Policy provides that ordinarily a director will not serve for more than 12 years on the Board.  Robert M. Price has served as a director for approximately 17 years.  The Board is recommending that Mr. Price be elected to serve an additional one-year term because Mr. Price’s continued service is in the best interest of the Company.  His extensive qualifications and experience and ability to provide transitional continuity are invaluable.  In accordance with the Director Service Policy, referenced in this proxy on page 11, Mr. Price submitted a written resignation to the Board for acceptance at such time as the Board, in its discretion, deems advisable.  There is no current expectation that the resignation would be accepted by the board within the one-year term.

The Governance and Public Policy Committee (“GPPC”) recommended Donald K. Schwanz for Board consideration as a director candidate.  The GPPC interviewed Mr. Schwanz and subsequently recommended his election to the full Board.  On July 29, 2008, the Board elected Mr. Schwanz as a director of PNM Resources.  No third party fees were paid in 2008 for identifying Board candidates.

Each nominee has consented to being nominated and to serve if elected. In the unlikely event that any nominee becomes unable to serve for any reason, the proxies will be voted for a substitute nominee selected by the Board upon the recommendation of the BGHRC, the nominating committee of the Board.  Alternatively, the seat will remain vacant if a substitute nominee is not selected prior to the Annual Meeting.

All of the director nominees are non-employee independent directors, except as discussed under the “Director Independence” section.  Biographical information regarding each nominee is noted below.

DIRECTORS NOMINATED THIS YEAR — TERM EXPIRING IN 2010

Adelmo E. Archuleta

Director since July 15, 2003

Principal Occupation During Past Five Years:

President and CEO, Molzen-Corbin & Associates, a New Mexico consulting engineering and architecture firm, since 1982

Mr. Archuleta, age 58, is a resident of Albuquerque, New Mexico, and holds a Master’s degree in Civil Engineering from New Mexico State University.  He joined Molzen-Corbin & Associates in 1975, and has led the firm as its President and Chief Executive Officer since 1982.  Other directorships include:  the Bank of Albuquerque; Presbyterian Healthcare Services; the Greater Albuquerque Chamber of Commerce; and Explora Children and Science Museum. Mr. Archuleta currently serves as Chair of the Public Policy and Sustainability Committee and is a member of the Audit and Ethics Committee.

7

Table of Contents

Julie A. Dobson

Director since July 16, 2002

Principal Occupation During Past Five Years:

Chairman, TeleBright Corp., a telecommunications decision-support technology company, since 2002

Chief Operating Officer, TeleCorp PCS, 1998-2002

Ms. Dobson, age 52, is a resident of Potomac, Maryland, and was Chief Operating Officer and one of the founding principals of TeleCorp PCS, a wireless/mobile phone company serving more than a million customers when sold to AT&T Wireless.  A 1978 William & Mary graduate, she earned an MBA in Finance at the University of Pittsburgh the following year before beginning a long career in what became Verizon, starting in sales with Bell of Pennsylvania, and concluding as president of one of the company’s non-regulated businesses, Bell Atlantic Mobile (New York).  Other directorships include:  Safeguard Scientifics, Inc., Wayne, PA; and LCCI, McLean, VA.  Ms. Dobson currently serves as Chair of the Audit and Ethics Committee and is a member of the Board Governance and Human Resources Committee.  The Board of Directors has determined that Ms. Dobson qualifies as an “audit committee financial expert” as defined by the SEC regulations.

Robert R. Nordhaus

Director since September 18, 2007

Principal Occupation During Past Five Years:

Member, Van Ness, Feldman, P.C., Attorney at Law, since 1997

Mr. Nordhaus, age 72, is a resident of Washington, DC, and is a member of Van Ness, Feldman, P.C., Attorneys at Law.  Mr. Nordhaus practiced with the firm from 1981 to 1993, when he was appointed General Counsel of the Department of Energy by President Clinton. He rejoined the firm in 1997.  Mr. Nordhaus is a 1960 graduate of Stanford University, and a 1963 graduate of Yale Law School.  Mr. Nordhaus currently serves as a member of the Finance Committee and the Public Policy and Sustainability Committee.

Manuel T. Pacheco, Ph.D.

Director since November 20, 2001

Principal Occupation During Past Five Years:

Interim President, Highlands University – July 2006-January 2007

Retired President, University of Missouri System – 1997-2003

Dr. Pacheco, age 67, is a resident of Phoenix, Arizona, and served as Interim President of New Mexico Highlands University, Las Vegas, New Mexico, from July 2006 to January 2007.  He retired in 2003 as the President of the University of Missouri System.  From 1984 to 1997, he served as President of various universities, including the University of Arizona and the University of Houston. He holds a Doctorate degree in Foreign Language Education.  Dr. Pacheco currently serves as a member of the Audit and Ethics Committee and the Board Governance and Human Resources Committee.

8

Table of Contents

Robert M. Price

Director since July 7, 1992

Principal Occupation During Past Five Years:

President, PSV, Inc., a technology consulting business, since 1990

Mr. Price, age 78, is a resident of Edina, Minnesota, and has been President of PSV Inc. located in Burnsville, MN, since 1990.  Between 1961 and 1990, Mr. Price served in various executive positions, including Chairman and Chief Executive Officer, of Control Data Corporation, a mainframe computer manufacturer and business services provider.  Other directorships include:  Affinity Technology Group, Inc. and Datalink Corporation.  He currently serves as a member of the Audit and Ethics Committee and the Finance Committee. 

Bonnie S. Reitz

Director since July 16, 2002

Principal Occupation During Past Five Years:

Owner, InsideOut…Culture to Customer, a business consulting company, since March 2003

President, EOS Airlines - April-August 2005

Senior Vice President, Sales and Distribution, Continental Airlines, Inc., 1994-2003

Ms. Reitz, age 56, is a resident of St. Petersburg, Florida, and is the owner/founder of InsideOut…Culture to Customer.  Ms. Reitz was President of EOS Airlines from April to August 2005.  Ms. Reitz retired in 2003, as Senior Vice President for Sales and Distribution of Continental Airlines.  Ms. Reitz is a 1974 Purdue graduate and began her career in the airline industry in 1977.  Other directorships include: Express Jet Holdings of Houston, Texas for which she serves on the compensation committee and the corporate governance committee; the local and national organizations of Dress for Success; and Farelogix, a provider of low-cost, multi-source distribution and independent faring technology to the global travel industry.  Ms. Reitz currently serves as Chair of the Board Governance and Human Resources Committee and is a member of the Public Policy and Sustainability Committee.

Donald K. Schwanz

Director since July 29, 2008

Principal Occupation During Past Five Years:

CTS Corporation, Chairman, 2002-2007

CTS Corporation, CEO, 2001-2007

CTS Corporation, COO, 1/01-9/01

Honeywell, 1979-2000

Mr. Schwanz, age 65, is a resident of Scottsdale, Arizona, and is retired Chairman and CEO of CTS Corporation, a global manufacturer of electronic components and sensors and a provider of electronic manufacturing services. Mr. Schwanz held various management and senior executive roles at Honeywell from 1979 to 2000, where he last served as President Industrial Controls Business.  He graduated from Massachusetts Institute of Technology with a Bachelor’s degree in Mechanical Engineering, and he earned an MBA in General Management from Harvard Graduate School of Business in 1968. Other directorships include: Multi-Fineline Electronix, Inc. (MFLEX), where he currently serves as Chair, Compensation Committee and is a member of the Audit Committee.

Mr. Schwanz currently serves as a member of the Finance Committee and the Public Policy and Sustainability Committee.

9

Table of Contents

Jeffry E. Sterba

Director since March 7, 2000

Principal Occupation During Past Five Years:

Chairman and Chief Executive Officer, PNM Resources, Inc. – 8/11/2008 - Present

Chairman, President and CEO, PNM Resources, Inc. – 2000 – 8/11/08

Executive Vice President, USEC, 1999-2000

Executive Vice President and Chief Operating Officer, Public Service Company of New Mexico (“PNM”), 1997-1999

Mr. Sterba, age 54, is a resident of Albuquerque, New Mexico, and is Chairman and Chief Executive Officer of PNM Resources, and Chairman of PNM.  Mr. Sterba became President of PNM on March 6, 2000, became President and CEO of PNM on June 6, 2000, and was elected Chairman of the Board of the Company on October 1, 2000.  Previously, Mr. Sterba served as Executive Vice President of USEC, Inc., from January 1999 to February 2000.  Before joining USEC in January 1999, Mr. Sterba was Executive Vice President and Chief Operating Officer of PNM overseeing all of its business units.  During his previous years at the Company, Mr. Sterba held various executive positions and was responsible for bulk power services, corporate strategy and asset restructuring, retail electric and water services, and electric business development and finance.  Other directorships in addition to various Company subsidiaries include: Edison Electric Institute; the Keystone Center; Albuquerque Community Foundation; U. S. Chamber of Commerce; and Optim Energy, LLC.  Mr. Sterba also serves on an advisory board for Wells Fargo Bank, N.A.

Joan B. Woodard, Ph. D.

Director since July 15, 2003

Principal Occupation During Past Five Years:

Executive Vice President and Deputy Director of Integrated Technologies & Systems Sandia National Laboratories, since March 1999

Dr. Woodard, age 56, is a resident of Albuquerque, New Mexico, and is Executive Vice President and Deputy Director for Sandia National Laboratories in Albuquerque. She holds a Doctorate degree in Mechanical Engineering from the University of California.  She is currently responsible for Integrated Technology Programs, and previously led the nuclear deterrent program, served as the lead Vice President for energy research and development, and served as the chief operations officer.    She serves on advisory boards for the Missouri University of Science and Technology, as well as the Air Force Scientific Advisory Board.  Dr. Woodard currently serves on the Finance Committee, the Board Governance and Human Resources Committee, and as the presiding director of the non-management directors’ meetings.

The Board of Directors unanimously recommends a vote FOR each director nominee.

DIRECTOR INDEPENDENCE

In accordance with the Company’s Corporate Governance Principles, the Board has affirmatively determined that all of the directors, except Jeffry E. Sterba, and Donald K. Schwanz, are independent of PNM Resources and its management.  Mr. Sterba is considered an inside director because of his employment as the Chief Executive Officer.  Mr. Schwanz is not considered to be independent under applicable NYSE listing standards because he served as Chairman and CEO of CTS Corporation in 2007 and 2006 when Patricia Collawn, our President and Chief Operating Officer, served on the compensation committee of CTS Corporation.  Mr. Schwanz retired as Chairman and CEO of CTS Corporation in October 2007 and was elected to our Board on July 29, 2008.  Mr. Schwanz currently has no direct or indirect relationship with PNM Resources other than service on the Board, Finance Committee, and Public Policy and Sustainability Committee.

10

Table of Contents

In determining the independence of the eight remaining non-employee members of the Board, the Board examined all direct and indirect relationships of these non-employee directors with the Company and determined that all such relationships complied with the specific independence criteria under applicable law, including the NYSE listing standards.  In addition, other than service on the Board or Board committee, all other relationships were considered to be immaterial in amount and significance.

BOARD MEETINGS

The Chairman of the Board presides at all meetings of the shareholders and of the Board.  In circumstances where the non-employee (i.e. non-management) directors meet without the Chairman, the Board selects a presiding director.  A presiding director is nominated and approved by the non-management directors annually.  Dr. Joan B. Woodard currently serves as the presiding director.  The director selected is responsible for facilitating and chairing the non-management directors’ meetings scheduled for that year.  The non-management directors meet at least twice a year without management present, and will meet more often as the need arises.

In 2008, the full Board met eight times.  The non-management directors held five regularly scheduled meetings in 2008.  Attendance in 2008 at full Board and committee meetings was 98%.

Directors are expected to attend the Annual Meeting, and as stated in the Corporate Governance Principles (Appendix A), directors are responsible for attending all director meetings and for reviewing materials provided in advance of each meeting.  Directors are expected to actively participate in Board and committee meetings.  All directors attended the 2008 Annual Meeting held on May 28, 2008.

COMMUNICATION WITH THE BOARD

Shareholders wishing to communicate with the Board, or with a specific director, may do so by writing to the Board, or to the particular director, and delivering the communication in person or mailing it to: Board of Directors, c/o Corporate Secretary, PNM Resources, Inc., Alvarado Square, MS-2822, Albuquerque, New Mexico 87158. All shareholder communications will be relayed to the Board of Directors or an appropriate committee of the Board.  If the shareholder desires to communicate a concern directly with the Board without initial review by the Corporate Secretary, the concern should be submitted in writing, in a sealed envelope addressed to the Board, in care of the Corporate Secretary, with a notation indicating that it is to be opened only by the Board.  The Corporate Secretary shall promptly forward the unopened envelope to the Board.  From time to time, the Board may change the process for shareholder communications with the Board or its members. Please refer to the Company’s website www.pnmresources.com for any changes in this process.

Shareholders and other interested parties wishing to communicate directly with the presiding director or with the non-management directors as a group may do so by writing to Presiding Director, c/o Corporate Secretary, PNM Resources, Inc., Alvarado Square, MS-2822, Albuquerque, New Mexico 87158.

DIRECTOR SERVICE POLICY

On February 19, 2002, the Board adopted a revised Director Service Policy addressing various aspects of board service, retirement practices, terms of office and inside directors.  The current Director Service Policy can be found on page A-7 of the Corporate Governance Principles, (Appendix A) and on the Company’s website at www.pnmresources.com.

BOARD COMMITTEES AND THEIR FUNCTIONS

Currently the Company’s focus is on restoring the utilities to financial health, narrowing our focus to the core electric business, while balancing environmental (including climate change) and market sustainability, operational and regulatory management excellence.  Relationship building with key customers, environmental groups, regulatory staff and other interveners is an essential component, along with a different, more intimate knowledge and understanding of our customer base.  These factors made it timely to modify our standing Board committees.

On December 8, 2008, the GPPC recommended and the Board approved revising the functions of this committee to address the public policy, sustainability and market aspects of the Company and change its name to Public Policy

11

Table of Contents

and Sustainability Committee (“PPSC”).  The PPSC has oversight responsibility of legislative and regulatory initiatives, public opinion and stakeholder engagement, customer and market channel positioning, energy efficiency and smart grid development, climate change and carbon management, and environmental performance.  A copy of the PPSC Charter is attached as Appendix G, and can also be found on our website at www.pnmresources.com.

The governance and director compensation responsibilities of the GPPC were transferred to the Human Resources and Compensation Committee (“HRCC”) and the name of the HRCC was changed to the Board Governance and Human Resources Committee (“BGHRC”).  A copy of the BGHRC Charter is attached as Appendix E, and can also be found on our website at www.pnmresources.com.

Accordingly, the Board has four current standing committees: the Audit and Ethics Committee, the Board Governance and Human Resources Committee, the Finance Committee, and the Public Policy and Sustainability Committee.  All committee members are independent directors, with the exception of Donald K. Schwanz, who is a member of the Finance Committee and the Public Policy and Sustainability Committee.  The Finance Committee and Public Policy and Sustainability Committee are not required to be comprised solely of independent directors under applicable rules.

Each committee has a written charter that addresses the committee’s purpose and responsibilities.  All charters attached to this proxy statement can be found at www.pnmresources.com, and are available in print without charge to any shareholder who requests it.  The charters are in compliance with applicable NYSE Listing Standards.

A summary of the committee responsibilities is included on the following pages:

Audit and Ethics Committee

Mr. Woody L. Hunt served on the Audit and Ethics Committee throughout 2008. Mr. Hunt will complete his current term, but will not stand for election at the Annual Meeting of Shareholders on May 19, 2009.

12

Table of Contents

Board Governance and Human Resources Committee, formerly Human Resources and Compensation Committee

13

Table of Contents

The BGHRC will consider director candidates proposed by shareholders.  Director candidates recommended by shareholders will be evaluated against the same criteria as nominees submitted by the BGHRC.  Candidates must be highly qualified and exhibit both willingness and interest in serving on the Board.  Candidates should represent the interests of all shareholders and not those of a special interest group.  A shareholder wishing to nominate a candidate should forward the candidate’s name and a detailed description of the candidate’s qualifications, appropriate biographical information and signed consent to serve to the Secretary of the Company, taking into consideration the criteria for new directors:

·      directors should be individuals of the highest character and integrity and have inquiring minds, vision and the ability to work well with others and exercise good judgment;

·      directors should be free of any conflict of interest which would violate any applicable law or regulation or interfere with the proper performance of the responsibilities of a director;

·      directors should possess substantial and significant experience which would be of particular importance to the Company in the performance of the duties of a director;

·      directors should have sufficient time available to devote to the affairs of the Company in order to carry out the responsibilities of a director;

·      directors should have the capacity and desire to represent the balanced, best interests of the shareholders as a whole and not primarily a special interest group or constituency; and

·      directors are required to have an equity ownership interest in the Company prior to commencing service on the Board. Each director’s ownership interest should increase over time, consistent with the stock ownership guidelines and applicable insider trading restrictions, so that an appropriate amount of stock is accumulated.

General Board attributes and director qualifications can also be found on page A-3 of the Corporate Governance Principles (Appendix A).

In addition, please see “Shareholder Proposals for the Year 2010 Annual Meeting” on page 63 below for information on how to submit a shareholder proposal for nomination of a director candidate in accordance with our bylaws and applicable SEC rules.

Finance Committee

Mr. Woody L. Hunt served as Chair of the Finance Committee throughout 2008.  Mr. Hunt will complete his current term, but will not stand for election at the Annual Meeting of Shareholders on May 19, 2009.  Mr. Robert M. Price was elected Chair of the Finance Committee to be effective May 19, 2009.

14

Table of Contents

Public Policy and Sustainability Committee, formerly Governance and Public Policy Committee

15

Table of Contents

PNM Resources Common Stock** Owned by Executive Officers and Directors

(As of March 30, 2009)

(a)   Beneficial ownership means the sole or shared power to vote, or to direct the voting of a security and/or investment power with respect to a security.

(b)   Shares held in the individual’s name, individually or jointly with others, or in the name of a bank, broker, or nominee for the individual’s account. The amounts shown also include the number of restricted stock units held by each director and officer.

(c)   The number of shares directors and executive officers have a right to acquire through stock option exercises within 60 days after March 30, 2009, and number of shares that executive officers have a right to acquire through the ESP II upon the participant’s death or termination of employment.  As of March 30, 2009, the ESP II share rights consist of 16,188 of the 689,340 shares reported for Jeffry E. Sterba, and an additional 45,439 shares of the 962,200 shares reported for directors and executive officers as a group.

*Less than 1% of PNM Resources outstanding shares of common stock.

**The only other outstanding class of equity securities of PNM Resources consists of 477,800 shares of Convertible Preferred Stock, Series A issued to Cascade as discussed below on page 18 and in footnote* of the next table.

16

Table of Contents

Ownership of More than Five Percent of PNM Resources’ Common Stock*

(1)  As reported on Schedule 13G/A filed February 17, 2009 with the SEC by Cascade Investment, L.L.C. (“Cascade”).  The filing reported that all shares beneficially owned by Cascade may be deemed to be beneficially owned by William H. Gates III as the sole member of Cascade.   As explained below under “Settlement of Equity Units; Issuance of Preferred Stock,” pursuant to the settlement of certain equity-linked units previously issued to Cascade, in November 2008, PNMR issued 477,800 shares of its Convertible Preferred Stock, Series A to Cascade which are convertible into 4,778,000 shares of common stock, subject to certain anti-dilution adjustments. The number of shares in the table does not reflect any shares of common stock that Cascade would be entitled to receive upon conversion of the preferred stock.  Certain regulatory approvals must be obtained before any conversion into common stock that would result in Cascade owning 10% or more of the outstanding common stock of PNM Resources.

(2)  As reported on Schedule 13G filed February 9, 2009 with the SEC by Franklin Resources, Inc. (“FRI”).  The filing reported that Charles B. Johnson and Rupert H. Johnson, Jr. each own in excess of 10% of the outstanding stock of FRI and that the following direct and indirect subsidiaries of FRI beneficially owned PNMR shares of common stock as follows:

Franklin Templeton Investments Corp. beneficially owns 3,255,220 shares with sole voting and sole dispositive power; Franklin Advisory Services, LLC beneficially owns 1,990,000 shares with sole voting and sole dispositive power; Franklin Advisors, Inc. beneficially owns 1,196,896 shares with sole voting and sole dispositive power; Templeton Investment Counsel, LLC beneficially owns 280,170 shares with sole voting and sole dispositive power; and Fiduciary Trust Company International beneficially owns 8,250 shares with sole voting and sole dispositive power.

(3)  As reported on Schedule 13G filed February 12, 2009 with the SEC by T. Rowe Price Associates, Inc.

(4)  As reported on Schedule 13G/A filed February 13, 2009 with the SEC by Tradewinds Global Investors, LLC.

(5)  As reported on Schedule 13D/A filed March 18, 2009 with the SEC by GAMCO Investors, Inc. et al.  This filing reported that Gabelli Funds, LLC beneficially owed 2,040,000 shares (2.36%) with sole voting and sole dispositive power; and GAMCO Asset Management Inc. beneficially owned 2,936,556 shares with sole voting power and 3,084,056 shares (3.56%) with sole dispositive power.

(6)  As reported on Schedule 13G filed February 5, 2009 with the SEC by Barclays Global Investors, N.A.  This filing reported that Barclays Global Investors, N.A. beneficially owned 1,668,510 shares with sole voting power and 1,945,810 shares with sole dispositive power; Barclays Global Fund Advisors beneficially owned 2,628,905 shares with sole voting power and 3,117,312 shares with sole dispositive power; and Barclays Global Investors, LTD beneficially owned 0 shares with sole voting power and 58,997 shares with sole dispositive power.

*The only other outstanding class of equity securities of PNM Resources consists of the 477,800 shares of Convertible Preferred Stock, Series A issued to Cascade as discussed in footnote 1 above and on page 18, and as reported by Cascade in its Schedule 13G/A filed February 17, 2009 with the SEC.  The filing reported that all preferred stock beneficially owned by Cascade may be deemed to be beneficially owned by William H. Gates III as the sole member of Cascade.

17

Table of Contents

The information provided on page 17 is based on reports filed with the SEC.  PNM Resources makes no representation as to the accuracy or completeness of the information.  These are the only persons known to PNM Resources to be the beneficial owners of more than five percent of PNM Resources’ common stock, as of March 31, 2009.

RELATED PERSON TRANSACTIONS

Since January 1, 2008, PNM Resources has not participated, and has no current plans to participate, in any transactions in which its directors or executive officers or any of their immediate family members have a material interest that is reportable under applicable SEC rules.  PNM Resources has participated in the following transactions with Cascade, a shareholder, which owns more than 5% of our common stock as indicated in the table on page 17.

Settlement of Equity-Linked Units; Issuance of Preferred Stock.  On August 16, 2004, we announced that Cascade had agreed to invest $100 million in equity-linked units to be issued by PNM Resources.  Cascade is one of the largest holders of our common stock.  This investment and securities issuance was a key element in the financing assembled to fund the purchase of TNP Enterprises, Inc. and its subsidiaries, including Texas-New Mexico Power Company and First Choice Power that was completed in June 2005.  In October 2005, we completed the private offering to Cascade of 4,000,000 equity-linked units at 6.625%.  PNM Resources received $100 million in proceeds from this transaction and used the proceeds to repay short-term borrowings, which included borrowings for the acquisition of TNP Enterprises, Inc.

Each equity-linked unit consisted of a purchase contract and a 2.5% undivided beneficial ownership interest in one of PNM Resources’ senior notes. The ownership interest in the senior notes was pledged to secure Cascade’s obligation to purchase PNM Resources common stock or preferred stock (at Cascade’s option) under the related purchase contract. Each purchase contract obligated Cascade to purchase, and PNM Resources to sell, at a purchase price of $25.00 in cash, a number of shares of PNM Resources common stock or preferred stock on or before November 17, 2008 (the first business day after the purchase contract settlement date of November 16, 2008).

In October 2008, we created our first series of preferred stock designated “Convertible Preferred Stock, Series A”, to be issued in the event Cascade elected to purchase preferred stock to settle its mandatory obligations.

On October 31, 2008, Cascade provided notice of its election to purchase preferred stock to settle its obligations under the equity-linked units.  Therefore, on November 17, 2008, we issued 477,800 shares of Convertible Preferred Stock, Series A to Cascade in a private transaction exempt from registration under the Securities Act of 1933, as amended.  The consideration we received for the issuance of the preferred stock was Cascade’s tender of the senior notes, which had been pledged to secure Cascade’s obligations pursuant to the settlement of the equity-linked units.  We received no additional proceeds for the issuance of the preferred stock and the $100 million principal amount of outstanding senior notes was cancelled.

Optim Energy, LLC.  In January 2007, PNM Resources and ECJV, a wholly owned subsidiary of Cascade, created EnergyCo, LLC to serve expanding U.S. markets, principally in certain areas of Texas.  EnergyCo’s name was changed to Optim Energy, LLC (“Optim Energy”) on February 2, 2009.  References to Optim Energy in this discussion encompass periods prior to the name change.  PNM Resources and ECJV each have a 50 percent ownership interest in Optim Energy, a limited liability company.  PNMR Services Company provides corporate services to PNM Resources, its subsidiaries, and Optim Energy in accordance with shared services agreements.  Services provided to Optim Energy are billed at cost plus a profit element.  There is also a service agreement for Optim Energy to provide services to PNM Resources.

On June 1, 2007, Optim Energy entered into a bank financing arrangement with a term of five years, which includes a revolving line of credit.  This facility also provides for bank letters of credit to be issued as credit support for certain contractual arrangements entered into by Optim Energy.  Cascade and ECJV have guaranteed Optim Energy’s obligations on this facility and, to secure Optim Energy’s obligation to reimburse Cascade and ECJV for any payments made under the guaranty, have a first lien on all assets of Optim Energy and its subsidiaries.  In June 2007, Optim Energy distributed $87.5 million to each of PNM Resources and ECJV from a long-term borrowing under this facility.

On August 2, 2007, PNM Resources announced that Optim Energy had agreed with NRG Energy, Inc. to jointly develop a 550 MW combined-cycle natural gas unit at the existing NRG Cedar Bayou Generating Station near Houston.  Optim Energy anticipates the construction of the project will be completed in the summer of 2009, at

18

Table of Contents

which time 275 MW of electricity will be available for sale by Optim Energy.  Optim Energy expects to fund its portion of the Cedar Bayou construction with borrowings under its existing credit facility. Once the project is complete, Optim Energy may arrange long-term financing of an appropriate mix of debt and equity.  PNM Resources does not anticipate making significant capital contributions to Optim Energy in connection with this project.

All of the above-described equity-linked units and Optim Energy transactions with Cascade were pre-approved by the full Board pursuant to the Policy and Procedures Governing Related Party Transactions discussed on page 6.

DIRECTOR COMPENSATION

Effective December 2008, the Board Governance and Human Resources Committee assumed the former GPPC’s duties to recommend non-employee director compensation levels and stock ownership guidelines for review and approval by the full Board.  Of PNM Resources’ current directors, only Jeffry E. Sterba, the Chairman and CEO, is a salaried employee who receives no compensation for serving on the Board.

The BGHRC seeks to recommend a reasonable compensation package that will attract and retain highly qualified non-employee directors.  The BGHRC selects, weighs and reviews each element of director compensation on an annual basis to recommend a total compensation amount that approximates the 50th percentile of non-employee director compensation in the similarly situated utility and energy companies comprising the Index Group.  The BGHRC believes that the companies comprising the Index Group are an appropriate peer group for director compensation because these utility and energy companies have revenues ranging from $0.5B to $12B with a median of $2.7B.  In addition, the BGHRC believes that the median of director compensation awarded by the companies in the Index Group represents a reasonable comparative compensation level.  The composition of the Index Group, maintained and selected by Standard & Poors, varies from time-to-time.

On an annual basis, the BGHRC directs the Corporate Governance Department of the Company to prepare a compensation benchmark analysis based upon:

·                  compensation data in individual proxy statements filed by the utility and energy companies comprising the Index Group available at salary.com; and

·                  the annual survey of director compensation provided by the National Association of Corporate Directors (“NACD survey”), which is also used to review trends in director compensation.

The Corporate Secretary reviews the compensation benchmark analysis and also confers with PRM Consulting to assess the significance of various trend indicators.  The Corporate Secretary then provides the analysis to the BGHRC together with a recommendation on any action to be taken on director compensation.

As discussed in the 2008 proxy statement, the only change made for 2008 compensation (from the 2007 annual retainer) was to increase the amount of restricted stock rights awarded from 1,050 to 1,750 effective May 2008.  The change was made to bring equity compensation for our non-employee directors closer to the 50th percentile of companies comprising the Index Group as of November 2007.

Non-employee directors receive their annual retainer in the form of cash and stock-based compensation as determined by the Board.  The annual retainer and fees for 2008 were as follows:

19

Table of Contents

In addition, directors were also reimbursed for any board-related expenses, such as travel expenses incurred to attend Board and Committee meetings and director education programs sponsored by educational and other institutions.

(1)   Stock options and restricted stock rights granted under the PEP each vest in three equal annual installments beginning on the first anniversary of the grant date.  These awards are typically made at the annual meeting of directors, unless the meeting occurs during a black-out period for trading in the Company’s securities as specified in the Company’s Insider Trading Policy.  As set forth under the Stock Option Grant Policy, under those circumstances, the Board will either (a) schedule a special meeting after the expiration of the black-out period, (b) make awards pursuant to a unanimous written consent executed after the expiration of the black-out period, or (c) pre-approve the equity awards with an effective date after the expiration of the black-out period.  The date of the awards is the date on which the Board approves the awards, unless (i) the approval date is a non-trading day, in which case the date is the immediately preceding trading date or (ii) in the case of pre-approval during a black-out period, in which case the grant date is the first trading date after the expiration of the black-out period.  The exercise price of the stock option is equal to the closing price of the common stock on the New York Stock Exchange, or NYSE, on the date of the grant.   The PEP prohibits option re-pricing.

In December 2008, the BGHRC reviewed the analysis of competitive director compensation using the sources mentioned above and duly considered the significant amount of time needed to fulfill Board and Board committee duties and responsibilities.  Accordingly, the BGHRC recommended and the Board approved increasing the 2009 annual retainer from the 2008 annual retainer described above by (1) increasing the amount of restricted stock rights from 1,750 to 2,500 and decreasing the amount of options from 1,050 to 1,000; (2) increasing the non-audit chair fees from $4,000 to $5,000; and (3) increasing the meeting attendance fees from $0 to $1,750 per Board meeting, and from $1,250 to $1,500 per Board committee meeting (no attendance fees for teleconference meetings of less than one hour in duration).  No changes were made to the annual cash retainer of $35,000 or to the Annual Audit and Ethics Committee Chair Fee of $10,000.

The BGHRC increased the elements of our 2009 non-employee director compensation described above to bring compensation closer to the 50th percentile of the following companies comprising the Index Group as of November 2008.

AGL Resources, Inc.

Alliant Energy Corporation

Aqua America, Inc.

Black Hills Corporation

DPL Incorporated

Energen Corporation

Equitable Resources, Inc.

Great Plains Energy Inc.

Hawaiian Electric Industries

Idacorp Inc. Holding Company

MDU Resources Group, Inc.

National Fuel Gas Company

Northeast Utilities

NSTAR

OGE Energy Corporation

Oneok, Inc.

Puget Energy, Inc.

Scana Corporation

NV Energy, Inc.

UGI Corporation

Vectren Corporation

Westar Energy, Inc.

WGL Holdings, Inc.

20

Table of Contents

SUMMARY OF NON-EMPLOYEE DIRECTOR COMPENSATION IN 2008

The following table summarizes the total compensation paid or earned by each of the non-employee directors for the year ended December 31, 2008.

Director Compensation

(1)Jeffry E. Sterba, Chairman and Chief Executive Officer, is not included in this table, as he is an employee of PNM Resources and receives no compensation for serving on the Board.

(2)Represents the dollar amount of equity compensation expense recognized for financial statement reporting purposes for the fiscal year ended December 31, 2008 in accordance with SFAS 123R and thus includes amounts from awards granted in and prior to 2008. See Note 13 of the consolidated financial statements in PNMR’s Annual Report on Form 10-K for the year ended December 31, 2008 regarding assumptions underlying the value of equity awards. As of December 31, 2008, each non-employee director has the following number of restricted stock rights outstanding: A. E. Archuleta – 2,800; J. A. Dobson – 2,800; W. L. Hunt – 2,800; R. R. Nordhaus – 1,750; M. T. Pacheco – 2,800; R. M. Price – 2,800; B. S. Reitz – 2,800; J. B. Woodard – 2,800. The grant date fair value calculated in accordance with SFAS 123R of the 1,750 restricted stock rights awarded under the PEP to each director in May 2008 is $22,523 (or $12.87 per share).

(3)Represents the dollar amount of equity compensation expense recognized for financial statement reporting purposes for the fiscal year ended December 31, 2008 in accordance with SFAS 123R and thus includes amounts from awards granted in and prior to 2008. See Note 13 of the consolidated financial statements in PNMR’s Annual Report on Form 10-K for the year ended December 31, 2008 regarding assumptions underlying the value of equity awards. As of December 31, 2008, each non-employee director has the following number of options outstanding: A. E. Archuleta – 19,200; J. A. Dobson – 21,450; W. L. Hunt – 3,150; R. R. Nordhaus – 1,050; M. T. Pacheco – 19,200; R. M. Price – 15,700; B. S. Reitz – 25,200; J. B. Woodard – 19,200. The grant date fair value calculated in accordance with SFAS 123R of the 1,050 stock options awarded under the PEP to each director in May 2008 is $1,796 (or $1.71 per option).

(4)The options and restricted stock rights granted under the PEP vest in three equal annual installments beginning on the first anniversary of the grant. The exercise price of the stock option is equal to the closing price of the common stock on the NYSE on the date of grant or immediately preceding trading day if the stock was not traded on the grant date. The Stock Option Grant Policy provides that for awards made on and after 2007, the grant date for awards approved on a non-trading date will be the immediately preceding trading day. As discussed below in “Stock Ownership Guidelines”, directors will hold seventy-five percent of the annual restricted stock award until they hold stock equal to the required multiple of annual cash retainer. This amount of restricted stock is held until six months after termination of board service.

(5)D. K. Schwanz was not a member of the Board in May 2008 when the stock option and restricted stock rights were awarded. Mr. Schwanz began Board service on July 29, 2008.

21

Table of Contents

Additional Information About Fees Earned or Paid in Cash in 2008

(1) Mr. Schwanz was elected to the Board on July 29, 2008, and received ½ of the annual retainer.

STOCK OWNERSHIP GUIDELINES

The Board believes that directors should be shareholders and have a financial stake in the Company, to help ensure that director financial interests are aligned with the financial interests of the Company’s longer term shareholders. Accordingly, the Board requires that newly elected directors, before commencing board service, become shareholders in the Company, and that over time, directors attain a significant level of Company stock ownership.

The BGHRC is responsible for recommending Board compensation levels and stock ownership guidelines to the Board for approval.  The current Stock Ownership Guidelines were adopted by the Board in December 2005 and amended in February 2006.

According to the guidelines, within three years, directors should hold stock equal to two times the annual cash retainer.  Within five years, the amount of ownership should be five times the annual cash retainer.  Directors will hold seventy-five percent of the annual restricted stock award until the required multiple of the annual cash retainer is achieved.  This amount of restricted stock is held until six months after termination of board service. We believe these holding requirements are appropriate because they approximate the median of holding requirements found in the NACD survey and would require a reasonable amount of share acquisition in addition to the annual equity awards received by the directors. Similar stock ownership guidelines have been developed for executives and are discussed further below under “Executive Compensation Discussion and Analysis – Stock Ownership Guidelines.”

The Stock Ownership Guidelines will be reviewed periodically for any appropriate changes.  The Guidelines can be found on page A-7 of the Corporate Governance Principles document, attached as Appendix A, and can also be found on PNM Resources’ website at www.pnmresources.com.

PROPOSAL 2:  APPROVE THE PNM RESOURCES, INC. SECOND AMENDED AND RESTATED OMNIBUS PERFORMANCE EQUITY PLAN (PROPOSAL 2 ON YOUR PROXY CARD)

General Information

The Board adopted the PNM Resources, Inc. Amended and Restated Omnibus Performance Equity Plan (the “PEP”) on December 7, 2004. The PEP was approved by the Company’s shareholders at the Company’s 2005 Annual Meeting.  The PEP allows the Company to grant options, restricted stock rights, performance shares, performance units and stock appreciation rights to employees of the Company and any affiliate of the Company that has adopted the PEP and to non-employee members of the Board.

22

Table of Contents

On February 17, 2009, the Board of Directors adopted, subject to shareholder approval, the PNM Resources, Inc. Second Amended and Restated Omnibus Performance Equity Plan.  The amended and restated PEP amends the PEP to:

·                  increase the number of authorized shares of common stock reserved for issuance under the PEP from 8,250,000 to 12,343,000 and increase the limit on shares that may be subject to restricted stock, restricted stock rights, performance share and performance unit awards from 450,000 shares to 1,560,000 shares;

·                  permit the grant of awards that qualify for the “performance-based compensation” exception to the $1,000,000 limitation on the deduction of compensation imposed under Section 162(m) of the Tax Code;

·                  permit the grant of performance cash awards and restricted stock awards; and

·                  extend the term of the PEP from December 31, 2015 to May 19, 2019.

As of February 27, 2009, (i) 2,940,594 shares have been issued upon exercise or vesting of awards under the PEP, (ii) 4,201,985 shares are subject to outstanding awards under the PEP and not otherwise forfeited or cancelled, and (iii) 1,107,421 shares remain available for future grant or award under the PEP (with no available shares remaining under any other Company equity plans).  Also as of February 27, 2009, the Company had total outstanding awards of 4,526,150 stock options, with a weighted average exercise price of $19.22 and a weighted average remaining contractual term of 7.2 years, and 257,630 full-value awards.  The Board believes that increasing the number of shares of common stock issuable under the PEP is desirable in order to be able to grant additional equity awards to continue to motivate key employees.

Under Section 162(m) of the Tax Code, the Company may not be able to deduct certain forms of compensation in excess of $1,000,000 paid to any “covered employees.”  The term “covered employees” is defined in Section 162(m) of the Tax Code, and the regulations and other guidance issued by the Internal Revenue Service pursuant to Section 162(m), to mean the principal executive officer and the three other most highly compensated officers of a public company other than its principal executive officer or its principal financial officer.  The Board believes that it generally is in the best interest of the Company to satisfy the requirements for deductibility under Section 162(m) of the Tax Code.  The PEP is designed to enable the Company to grant awards (in addition to options and stock appreciation rights) that qualify as “performance-based compensation” that is excluded from the $1,000,000 deduction limitation.

Set forth below is a summary of the principal provisions of the proposed amended and restated PEP.  The summary is qualified by reference to the full text of the proposed PNM Resources, Inc. Seconded Amended and Restated Omnibus Performance Equity Plan, which is attached to this proxy statement as Appendix H, and is referenced below in the Summary of Plan Features as the PEP.

SUMMARY OF PLAN FEATURES

Administration.

The PEP will be administered by the Compensation Committee or such other committee as may be designated by the Board.   The Compensation Committee must be comprised of at least two (2) independent members of the Board.  Each Compensation Committee member must be a “non-employee director” as defined in Rule 16b-3 of the Securities Exchange Act and an “outside director” as defined in Section 162(m) of the Tax Code.   The Compensation Committee, by majority action, is authorized to interpret the PEP, to prescribe, amend, and rescind rules and regulations relating to the PEP, to provide for conditions and assurances deemed necessary or advisable to protect the interests of the Company, and to make all other determinations necessary or advisable for the administration of the PEP, to the extent they are not inconsistent with the PEP.

The Compensation Committee will have the authority, in its sole discretion, to determine the participants who are entitled to receive awards under the PEP, the types of awards granted under the PEP, the times at which awards will be granted, the number of awards, the purchase price or exercise price, if any, for any award, the period(s) during which the awards shall be exercisable (whether in whole or in part), the restrictions applicable to awards, the form of each award agreement and the other terms and provisions of any award.  Neither the award agreement nor the other terms and provisions of any award must be identical for each participant.  The Compensation Committee also will have the authority to modify existing awards, subject to specified provisions of the PEP and the listing requirements of the NYSE.  The Compensation Committee will not have the authority to accelerate the vesting or waive the

23

Table of Contents

forfeiture of any performance-based awards (as defined below).  The Compensation Committee also will be prohibited from repricing any previously granted options without first obtaining shareholder approval.

Eligibility

Awards may be made only to those individuals who are (i) employees of the Company or an affiliate of the Company that has adopted the PEP on the grant date of the award, or (ii) nonemployee members of the Company’s Board who are Board members on the grant date of the award.

Limitation on Awards and Shares Available for Awards

The total number of shares of common stock subject to awards under the PEP may not exceed 12,343,000, subject to adjustment upon the occurrence of any of the events specified in the PEP.  The total number of shares of common stock that may be subject to restricted stock, restricted stock right, performance share and performance unit awards may not exceed 1,560,000 shares, subject to adjustment upon the occurrence of any of the events specified in the PEP.  The shares of common stock to be delivered under the PEP may consist, in whole or in part, of authorized, but unissued, shares of Company common stock or shares purchased on the open market or treasury stock not reserved for any other purpose.

Subject to the express provisions of the PEP, if any award granted under the PEP terminates, expires, lapses for any reason, or is paid in cash, any common stock subject to or surrendered for such award will again be common stock available for the grant of an award.  The exercise of a stock-settled stock appreciation right (“SAR”) or broker-assisted “cashless” exercise of an option (or a portion thereof) will reduce the number of shares of stock available for issuance under the PEP by the entire number of shares of stock subject to the SAR or option (or applicable portion thereof) even though a smaller number of shares of stock will be issued upon such exercise.  Shares of stock tendered to pay the exercise price of an option or tendered or withheld to satisfy a tax withholding obligation arising in connection with an award granted under the PEP will not become available for grant or sale under the PEP.

No participant in the PEP may be granted an award for more than 500,000 shares of common stock during any fiscal year.  As of April 1, 2009, the closing price of the Company’s stock on the NYSE was $8.01 per share.

Awards Available Under the PEP

The following types of awards may be granted pursuant to the PEP:  options, restricted stock, restricted stock rights, performance shares, performance units, performance cash and SARs.

Stock Options.  The Compensation Committee may grant incentive stock options and nonqualified stock options under the PEP.  Incentive stock options will be granted only to participants who are employees.  The exercise price of all options granted under the PEP will be at least 100% of the fair market value of Company stock on the date on which the option is granted.  No option may be exercised more than ten (10) years from the date of grant.  Upon exercise of any option, payment must be made in full (1) in cash, (2) in stock valued at its fair market value on the date of exercise, or (3) by a combination thereof as determined by the Compensation Committee.  The Compensation Committee, in its sole discretion, may permit a participant to make payment of the purchase price upon exercise of any option through a broker-assisted “cashless” exercise or through a “net issuance” in accordance with any policy adopted by the Compensation Committee.  A participant will have none of the rights of a shareholder with respect to options until the record date of the stock purchase.

Restricted Stock.  The Compensation Committee may grant restricted stock under the PEP.  A restricted stock award gives the participant the right to receive a specified number of shares of common stock at a purchase price determined by the Compensation Committee (including and typically zero).  Restrictions limit the participant’s ability to transfer the stock and subject the stock to a substantial risk of forfeiture until specific conditions or goals are met.  During the restriction period, participants holding restricted stock may, if permitted by the Compensation Committee, have full voting and dividend rights with respect to such shares.  The restrictions will lapse in accordance with a schedule or other conditions as determined by the Compensation Committee.  As a general rule, if a participant terminates employment when the restricted stock is subject to restrictions, the participant forfeits the unvested restricted stock.  The Compensation Committee may, in its discretion, waive the restrictions in whole or in part, unless the restricted stock award is a performance-based award as described below.

Restricted Stock Rights.  The Compensation Committee also may grant restricted stock rights awards under the PEP.  A restricted stock rights award gives the participant the right to acquire common stock in the future at no monetary cost to the participant.  Shares of common stock are not issued under the award until specified restrictions lapse.

24

Table of Contents

The restrictions typically involve the achievement of specified performance targets and/or the continued employment of the participant until a specified date.  Participants holding restricted stock rights have no voting rights with respect to the shares of stock subject to their restricted stock rights award.  During the restriction period, participants holding restricted stock rights may, if permitted by the Compensation Committee, have the right to receive dividend equivalents or other distributions with respect to the shares payable under the restricted stock rights award.

Performance Shares.  The Compensation Committee also may grant performance share awards under the PEP.  A performance share award gives the participant the right to receive common stock of the Company if the participant achieves the performance goals specified by the Compensation Committee during a performance period specified by the Compensation Committee.  Each performance share will have a value determined by the Compensation Committee at the time of grant.

Performance Units.  The Compensation Committee also may grant performance unit awards under the PEP.  A performance unit award gives the participant the right to receive common stock of the Company, a cash payment or a combination of stock and cash, if the participant achieves the performance goals specified by the Compensation Committee during a performance period specified by the Compensation Committee.  Each performance unit will have a value determined by the Compensation Committee at the time of grant.

Performance Cash Awards.  The Compensation Committee also may grant performance cash awards under the PEP.  A performance cash award gives the participant the right to receive a cash payment if certain performance goals are satisfied during a performance period specified by the Compensation Committee.

Stock Appreciation Rights.  The Compensation Committee also may grant SARs under the PEP.  A SAR gives the participant the right to receive the appreciation in value of one share of common stock of the Company.  Appreciation is calculated as the excess of (i) the fair market value of a share of common stock on the date of exercise over (ii) the price fixed by the Compensation Committee on the grant date, which may not be less than the fair market value of a share of common stock on the grant date.  SARs may be granted in connection with the grant of an option, in which case the exercise of the SARs will result in the surrender of the right to purchase the shares under the option as to which the SARs were exercised.  Alternatively, SARs may be granted independently of options.  Payment for SARs shall be made in Company stock.  SARs are exercisable at the time and subject to the restrictions and conditions as the Compensation Committee approves, provided that no SAR may be exercised more than ten (10) years following the grant date.

Performance-Based Awards.  When the Compensation Committee grants a restricted stock, restricted stock rights, performance share, performance unit or performance cash award, it may designate the award as a performance-based award.  Options and SARs granted pursuant to the PEP should, by their terms, qualify as performance-based awards.  Performance-based awards are designed to qualify for the “performance-based compensation” exception to the limitations on the deduction of compensation imposed by Section 162(m) of the Tax Code.  Section 162(m) of the Tax Code only applies to “covered employees” as that term is defined in Section 162(m) of the Tax Code (as described above).  Therefore, only covered employees are eligible to receive awards that are designated as performance-based awards.  The Compensation Committee has complete discretion regarding whether to grant awards to covered employees that qualify for the “performance-based compensation” exception.  The Compensation Committee may, in its discretion, grant awards under the PEP to covered employees that do not qualify for the exception.

The payment of restricted stock, restricted stock rights, performance share, performance unit or performance cash awards that are designated as performance-based awards is contingent upon a covered employee’s achievement of pre-established performance goals during a specified performance period.  Performance goals are based on any one or more pre-established performance criteria.  The pre-established performance criteria are limited to the following: revenue; revenue growth; earnings (including earnings before interest, taxes, depreciation and amortization); operating income; pre- and after-tax income; cash flow earnings (before and after dividends); cash flow earnings per share (before and after dividends); net earnings; earnings per share; adjusted cash earnings; return on equity; return on capital (including return on total capital or return on invested capital); cash flow earnings return on investment; return on assets or net assets; economic value added (or an equivalent metric); share price performance; total shareholder return; improvement in or attainment of expense levels; improvement in or attainment of working capital levels; total operating cost or operating cost per unit of output (megawatt hours); and improvements in, attainment of, or compliance with, various environmental standards.

25

Table of Contents

Performance goals may be expressed in terms of overall Company performance, the performance of a division, affiliate or subsidiary or the performance of an individual.  Performance goals may be stated in terms of absolute levels or relative to another company or companies or to an index or indices.

With respect to any performance-based award granted to a covered employee that qualifies for the “performance-based compensation” exception to the Section 162(m) limitation, the Compensation Committee has the discretion to: select the length of the performance period, the type of performance-based awards to be issued, the kind and/or level of performance goal or goals and whether the performance goal or goals apply to the Company, an affiliate or subsidiary or any division or business unit of any of them, or to the individual participant or any group of participants.  The Compensation Committee has the discretion to decrease the amount of compensation payable pursuant to any performance-based award but may not increase the compensation payable pursuant to any performance-based award.

The performance criteria and other related aspects of the PEP will be subject to shareholder approval again in 2014 if (as is currently the case) shareholder approval is then required to maintain the tax-deductible nature of performance-based compensation under the PEP.

The maximum amount of any performance-based award (other than performance cash) that may be granted to a covered employee during any performance period is 500,000 shares of common stock or the equivalent cash value.  The maximum performance cash award payable to any covered employee for any performance period is 500,000 times the fair market value of a share of stock on the date on which the applicable performance period begins.

Restrictions

The Compensation Committee may impose such restrictions on any awards under the PEP as it may deem advisable, including restrictions under applicable federal securities law, under the requirements of any stock exchange upon which the Company’s common stock is then listed and under any blue sky or state securities law applicable to the awards.

Termination of Employment or Service

Awards granted under the PEP may be subject to special vesting and payment rules in the event of a participant’s termination of employment or service due to death, disability, retirement, impaction or change in control or due to voluntary or involuntary termination of employment for reasons other than impaction or cause.  These special rules are specified in the PEP for options, SARs, restricted stock rights, performance share and performance unit awards or in the award agreement for restricted stock and performance cash awards.

Non-transferability

The Compensation Committee may, in its sole discretion, determine the right of a participant to transfer any award granted under the PEP.  Unless otherwise determined by the Compensation Committee, no award granted under the PEP may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, otherwise than by will or by the laws of descent and distribution or pursuant to a domestic relations order (that would otherwise qualify as a qualified domestic relations order as defined in the Tax Code or Title I of the Employee Retirement Income Security Act of 1974, but for the fact that it relates to an award granted under the PEP), or, if applicable, until the termination of any restricted or performance period as determined by the Compensation Committee.

Amendment, Modification and Termination of PEP

Subject to the Board of Directors’ right to amend or terminate the PEP at any time, the PEP will remain in effect until all awards issued under the PEP expire, terminate, are exercised or are paid in full in accordance with the PEP provisions and any award agreement.  However, no award may be granted under the PEP after May 18, 2019.

The Board has discretion to terminate, amend or modify the PEP.  Any such action of the Board is subject to the approval of the shareholders to the extent required by law, regulation or the rules of any exchange on which Company stock is listed.  To the extent permitted, the Board may delegate to the Compensation Committee or the Chief Executive Officer the authority to approve non-substantive amendments to the PEP.  Except as otherwise provided in the PEP, neither the Board, the Chief Executive Officer nor the Compensation Committee may do any of the following without shareholder approval:  reduce the purchase price or exercise price of any outstanding award, including any option or SAR; increase the number of shares available under the PEP; grant options with an exercise price that is below fair market value of a share of Company stock on the grant date; reprice previously

26

Table of Contents

granted options; or cancel any option or SAR in exchange for cash or any other award or in exchange for any option or SAR with an exercise price that is less than the exercise price for the original option or SAR.

Tax Withholding

The Company and its affiliates will have the power to withhold, or require a participant to remit to the Company, an amount sufficient to satisfy federal, state, and local withholding tax requirements on any award under the PEP.  To the extent that alternative methods of withholding are available under applicable laws, the Company and its affiliates will have the power to choose among such methods.

Federal Income Tax Consequences of the PEP

The following is a brief summary of certain of the Federal income tax consequences of certain transactions under the PEP based on Federal income tax laws in effect on January 1, 2009.  This summary is not intended to be exhaustive and does not describe state or local tax consequences.

As a general rule, a participant will not recognize taxable income with respect to any award at the time of grant.  If the participant receives a stock grant that is not subject to a substantial risk of forfeiture or if a participant who receives a restricted stock grant makes the election permitted by Section 83(b) of the Tax Code, the participant will recognize income on the award at the time of grant.

Upon exercise of a nonqualified stock option, the lapse of restrictions on restricted stock, or upon the payment of stock appreciation rights, restricted stock rights, stock grants that are not subject to a substantial risk of forfeiture, performance shares, performance units or performance cash, the participant will recognize ordinary taxable income in an amount equal to the difference between the amount paid for the award, if any, and the fair market value of the stock or amount received on the date of exercise, lapse of restriction or payment.  The Company will be entitled to a concurrent income tax deduction equal to the ordinary income recognized by the participant.

A participant who is granted an incentive stock option will not recognize taxable income at the time of exercise.  However, the excess of the stock’s fair market value over the option price could be subject to the alternative minimum tax in the year of exercise (assuming the stock received is not subject to a substantial risk of forfeiture or is transferable).  If stock acquired upon exercise of an incentive stock option is held for a minimum of two years from the date of grant and one year from the date of exercise, the gain or loss (in an amount equal to the difference between the sales price and the exercise price) upon disposition of the stock will be treated as a long-term capital gain or loss, and the Company will not be entitled to any income tax deduction.  If the holding period requirements are not met, the incentive stock option will not meet the requirements of the Tax Code and the tax consequences described for nonqualified stock options will apply.

Section 409A of the Tax Code became effective as of January 1, 2009.  If certain awards fail to comply with Section 409A, a participant must include in ordinary income all deferred compensation conferred by the award, pay interest from the date of the deferral and pay an additional 20% tax.  The award agreement for any award that is subject to Section 409A may include provisions necessary for compliance as determined by the Compensation Committee.  The Company intends (but cannot and does not guarantee) that awards granted under the PEP will comply with the requirements of Section 409A or an exception thereto and intends to administer and interpret the PEP in such a manner.

Special Rules Applicable to Officers

In limited circumstances where the sale of stock that is received as the result of a grant of an award could subject an officer to suit under Section 16(b) of the Securities Exchange Act, the tax consequences to the officer may differ from the tax consequences described above.  In these circumstances, unless a special election has been made, the principal difference usually will be to postpone valuation and taxation of the stock received so long as the sale of the stock received could subject the officer or director to suit under Section 16(b) of the Securities Exchange Act, but not longer than six months.

Tax Consequences to the Company or Its Subsidiaries

To the extent that an employee recognizes ordinary income in the circumstances described above, the Company or the subsidiary for which the employee performs services will be entitled to a corresponding deduction provided that, among other things, the income meets the test of reasonableness, is an ordinary and necessary business expense, is not an “excess parachute payment” within the meaning of Section 280G of the Tax Code and is not subject to the $1 million deduction limit for certain executive compensation under Section 162(m) of the Tax Code.

27

Table of Contents

ADDITIONAL AMENDED PLAN BENEFITS INFORMATION

The following table provides information with respect to benefits received by or allocated to the following individuals and groups under the proposal to amend and restate the PEP to increase the number of shares of common stock of the Company authorized for awards under the PEP by 4,093,000 shares.

* Except as set forth below, it is not possible to provide information about specific type and amount of award grants that may be made under the PEP in the future.  Accordingly, the amounts ultimately allocated are not determinable at this time.    In 2008, the following options and restricted stock rights (both of which vest over a three year period) were awarded under the current Amended and Restated Omnibus Performance Equity Plan (“Original Plan”).

CEO and Other Individuals Named in Summary Compensation Table: