New Mexico regulators Thursday unanimously approved the $620 million cash sale of Albuquerque-based PNM Resources’ natural gas distribution utility operations, the state’s largest gas distributor, to New Mexico Gas Co.

Struggling of late financially, PNM earlier this year announced its intent to get out of the gas business and concentrate on its electric investments, including its electric utility operations in the state (see Daily GPI, Jan. 16).

Under the New Mexico Public Regulation Commission (PRC) rules, there is a 30-day window during which any party can ask for a rehearing of the decision or appeal it to the state Supreme Court. Given no rehearing requests or court appeals, PNM anticipates closing the sale in January.

When the sale is completed, PNM will be slimmed down to its 500,000-customer New Mexico electric utility operations; Texas electric distribution and transmission utility operations under Texas-New Mexico Power (TNMP); and First Choice Power, a currently struggling retail electricity provider in the Texas competitive retail power market with 234,000 customers. Earlier in December, PNM named a new CEO at First Choice in an attempt to revive its profitability (see Power Market Today, Dec. 4).

PNM Resources also owns half of EnergyCo, a power marketing and generation company in Texas with 920 MW of capacity, and it said that when Unit 4 at its Cedar Bayou Generating Station is completed in the mid-part of next year, Energy Co’s capacity will increase to nearly 1,200 MW.

Proceeds from the sale are expected to be about $460 million, according to PNM CFO Chuck Eldred. He said the funds will be used “to retire debt and for other corporate purposes.”

After reporting losses in the second and third quarters, Eldred reiterated that the gas utility sale is the latest in a series of steps being taken by PNM to “preserve and strengthen its capital and liquidity positions during the current national credit crisis.” He called the company’s liquidity position “strong” heading into 2009.

PNM CEO Jeff Sterba said the gas utility sale allows his company “to focus solely on the generation and delivery of electricity,” and it is also “a key element of our strategy to restore financial health to the PNM utility.

“Moving forward, we will continue our efforts to seek fair rate treatment for our utilities and position First Choice Power [which last summer was on the sales block] to succeed in Texas’ competitive marketplace.”

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