MANZANO CORP, S-4, 2000-03-10

MANZANO CORP
S-4, 2000-03-10

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As filed with the Securities and Exchange Commission on March 10, 2000.
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
-----------------------
MANZANO CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

NEW MEXICO 6749 85-0468296
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD (I.R.S. EMPLOYER
OF INCORPORATION OR INDUSTRIAL CLASSIFICATION IDENTIFICATION NO.)
ORGANIZATION) CODE NUMBER)
-----------------------
Alvarado Square
Albuquerque, New Mexico 87158
(505) 241-2700
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
-----------------------
M.H. Maerki
Senior Vice President and Chief Financial Officer
Manzano Corporation
Alvarado Square
Albuquerque, New Mexico 87158
(505) 241-2700
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)

COPIES TO:

CHARLES L. MOORE, ESQ. TIMOTHY M. TOY, ESQ.
KELEHER & MCLEOD, P.A.. WINTHROP, STIMSON, PUTNAM & ROBERTS
201 THIRD NW, 12TH FLOOR ONE BATTERY PARK PLAZA
ALBUQUERQUE, NEW MEXICO 87102 NEW YORK, NEW YORK 10004-1490
(505)346-4646 (212) 858-1000

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after this Registration Statement becomes effective.
-----------------------
If the securities being registered on this Form are being offered
in connection with the formation of a holding company and there is
compliance with General Instruction G, check the following box. / /
________

If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, check the
following box and list the Securities Act registration statement number
of the earlier effective registration statement for the same offering.
/ / _______

If this Form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. / / _______
-----------------------
CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
- ---------------------------------- --------------------- ----------------------- ----------------------- ---------------------
TITLE OF EACH CLASS OF PROPOSED MAXIMUM PROPOSED MAXIMUM
SECURITIES AMOUNT OFFERING PRICE PER AGGREGATE AMOUNT OF
TO BE REGISTERED TO BE REGISTERED(1) UNIT(2) OFFERING PRICE(2) REGISTRATION FEE
- ---------------------------------- --------------------- ----------------------- ----------------------- ---------------------
<S> <C> <C> <C> <C>
Common Stock,
no par value..................... 39,700,000 $15.59 $618,923,000 $163,396
- ---------------------------------- --------------------- ----------------------- ----------------------- ---------------------
</TABLE>
(1) The number of shares of Common Stock of Manzano Corporation
("Manzano") to be issued in the share exchange described herein (the
"Share Exchange") cannot be precisely determined at the time this
Registration Statement becomes effective because shares of common
stock of Public Service Company of New Mexico ("PNM") may be
repurchased thereafter and prior to the effective time of the Share
Exchange pursuant to PNM's common stock repurchase program. This
Registration Statement covers a number of shares of common stock of
Manzano which is estimated to be at least as large as the number of
shares of common stock of PNM that is expected to be outstanding at
the effective time of the Share Exchange.
(2) Estimated pursuant to Rule 457(f)(1) under the Securities Act of
1933, based upon the per share market value of the shares of common
stock of PNM to be exchanged in the Share Exchange, which is the
average of the reported high and low sales prices of a share of
common stock of PNM on the New York Stock Exchange, Inc. Composite
Tape on March 7, 2000.

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.

================================================================================

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[LOGO]

Public Service Company of New Mexico
Alvarado Square
Albuquerque, New Mexico 87158

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TUESDAY, JUNE 6, 2000
9:30 A.M., MOUNTAIN DAYLIGHT SAVINGS TIME

SOUTH BROADWAY CULTURAL CENTER
1025 BROADWAY S.E.
ALBUQUERQUE, NEW MEXICO

April 24, 2000

Dear Shareholder:

You are cordially invited to attend the 2000 Public Service Company
of New Mexico Annual Meeting of Shareholders to:

- Consider and vote upon an agreement and plan of share exchange
under which Public Service Company of NewMexico, or PNM, will
reorganize into a holding company structure. If approved, Manzano
Corporation, a New Mexico corporation formed by PNM, will become
the parent company of PNM and will trade on the New York Stock
Exchange under the symbol "MZO."

- Elect three directors.

- Consider and vote upon the Manzano Corporation Omnibus
Performance Equity Plan, which will only become effective if the
share exchange is consummated.

- Approve the appointment of Arthur Andersen LLP as independent
public accountants for 2000.

- Conduct other business properly brought up at the meeting.

Shareholders of record at the close of business on April 17, 2000
are entitled to notice of, and may vote at, the annual meeting.

Your vote is important. Whether you plan to attend or not, please
sign, date, and return the enclosed proxy card in the envelope provided. If
you attend the meeting and prefer to vote in person, you may do so.

This proxy statement/prospectus and proxy card are being distributed
on or about April 24, 2000. I look forward to seeing you at the meeting.

Sincerely,

Benjamin F. Montoya
Chairman of the Board of Directors and
Chief Executive Officer

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The information in this proxy statement/prospectus is not complete and may be
changed. We may not sell these securities until the registration statement
filed with the Securities and Exchange Commission is effective. This proxy
statement/prospectus is not an offer to sell these securities and is not
soliciting an offer to buy these securities in any state where the offer or
sale is not permitted.

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SUBJECT TO COMPLETION DATED MARCH 10, 2000

PROXY STATEMENT

PUBLIC SERVICE COMPANY OF NEW MEXICO

---------------------------------

PROSPECTUS

MANZANO CORPORATION

---------------------------------

This proxy statement/prospectus combines a proxy statement for the
2000 annual meeting of shareholders of Public Service Company of New Mexico,
or PNM, with a prospectus of Manzano Corporation, or Manzano. The proxy which
accompanies this proxy statement/prospectus is being solicited by PNM's Board
of Directors. The 2000 annual meeting of shareholders will be held at 9:30
a.m., Mountain Daylight Savings Time, on June 6, 2000 at the South Broadway
Cultural Center, 1025 Broadway S.E., Albuquerque, New Mexico.

The Board of Directors proposes to reorganize PNM into a holding
company structure as a means of achieving the corporate and asset separations
required by New Mexico's Electric Utility Industry Restructuring Act of 1999,
or the Restructuring Act. Under the terms of the agreement and plan of share
exchange, all of the outstanding shares of PNM common stock will be exchanged
on a share-for-share basis for shares of Manzano common stock. Thus, when the
share exchange is completed, each person who owned PNM common stock
immediately prior to the share exchange will own the same number of shares
(and percentage) of Manzano common stock after the share exchange. Manzano
will own all of the outstanding shares of PNM common stock. For your
convenience, we have attached a copy of the legal document which creates the
holding company structure to this proxy statement/prospectus as Exhibit A.

Prior to completion of the proposed share exchange, PNM will form
another wholly-owned subsidiary, referred to in this proxy
statement/prospectus as "UtilityCo," which, after completion of the proposed
share exchange and related transactions, will be a wholly-owned subsidiary of
Manzano and a sister company to PNM. After completion of the proposed share
exchange and related transactions, UtilityCo will acquire the name "Public
Service Company of New Mexico" and the existing PNM will be renamed Manzano
Energy Corporation. For purposes of this proxy statement/prospectus, the term
"PNM" refers to the current integrated utility, Public Service Company of New
Mexico. In addition, the term "Energy" refers to the subsidiary (currently
PNM) that will own PNM's existing electric generation and related assets and
the term "UtilityCo" refers to the future Public Service Company of New
Mexico which will own PNM's existing electric and gas transmission and
distribution assets. You will own, through your ownership of Manzano, all of
the common stock of Energy and UtilityCo.

After completion of the proposed share exchange and receipt of all
necessary regulatory and other approvals, to comply with the Restructuring
Act, all of PNM's electric and gas distribution

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and transmission assets will be transferred to UtilityCo. This proxy
statement/prospectus is not soliciting your vote for this asset transfer to
UtilityCo since shareholder approval is not required.

In the event the shareholders of PNM approve the proposed
reorganization into a holding company structure, Manzano will issue up to
39.7 million shares of its common stock in exchange for shares of PNM common
stock. Manzano's common stock is not currently listed on any stock exchange.
However, we anticipate that shares of Manzano common stock will be listed on
the New York Stock Exchange, or the New York Stock Exchange, following
completion of the proposed reorganization and that it will be traded under
the symbol "MZO."

If the share exchange is implemented, you will not be required to
surrender your PNM common stock certificates. Instead, your PNM common stock
certificates will automatically represent the same number of shares of
Manzano common stock.

Holders of PNM common stock of record at the close of business on
April 17, 2000 are entitled to notice of, and may vote at, the annual
meeting. Holders of PNM common stock may be entitled to assert dissenters'
rights under Sections 53-15-3 and 53-15-4 of the New Mexico Business
Corporation Act, or the BCA, in connection with the share exchange. This
proxy statement/prospectus contains a summary of the dissenters' rights
provisions of the BCA (see "Proposal No. 1--The Agreement and Plan of Share
Exchange--Rights of Dissenting Shareholders") and a copy of Sections 53-15-3
and 53-15-4 of the BCA (Exhibit E).

SEE "RISK FACTORS" ON PAGES 7 TO 11 OF THIS PROXY
STATEMENT/PROSPECTUS FOR CERTAIN CONSIDERATIONS RELEVANT IN DETERMINING
WHETHER OR NOT TO VOTE FOR THE SHARE EXCHANGE.

In addition, at the annual meeting, the shareholders of PNM will be
asked to elect three persons to PNM's Board of Directors, each to serve a
term of three years. If elected and the share exchange becomes effective, two
of these directors, Robert G. Armstrong and Theodore F. Patlovich, will also
be directors of Manzano, and the third, Paul F. Roth, will be a director of
UtilityCo.

Also, at the annual meeting, the shareholders of PNM will be asked
to approve the Manzano Corporation Omnibus Performance Equity Plan, or the
Omnibus Plan. If approved by the shareholders, this plan will only become
effective immediately if the share exchange is consummated.

Lastly, at the annual meeting, the shareholders of PNM will be asked
to approve the appointment of Arthur Andersen LLP as independent public
accountants for 2000.

The principal executive offices of both PNM and Manzano are located
at Alvarado Square, Albuquerque, New Mexico 87158, telephone number (505)
241-2700.

PNM will mail this proxy statement/prospectus, together with the
accompanying proxy solicited by the Board of Directors, to PNM's shareholders
on or about April 24, 2000. The date of this proxy statement/prospectus is
April 24, 2000.

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE
SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THE SECURITIES TO BE
ISSUED IN CONNECTION WITH THE SHARE EXCHANGE OR PASSED UPON THE ADEQUACY OR
ACCURACY OF THIS PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.

THIS PROXY STATEMENT/PROSPECTUS INCORPORATES IMPORTANT BUSINESS AND
FINANCIAL INFORMATION ABOUT PNM THAT IS NOT INCLUDED IN OR DELIVERED WITH
THIS DOCUMENT. PLEASE SEE "WHERE YOU CAN FIND MORE INFORMATION" FOR MORE
INFORMATION REGARDING WHAT DOCUMENTS HAVE BEEN INCORPORATED AND HOW YOU CAN
OBTAIN COPIES OF THOSE DOCUMENTS.

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TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
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<S> <C>
SUMMARY...........................................................................................................1

RISK FACTORS......................................................................................................7

INFORMATION ABOUT THE 2000 ANNUAL MEETING........................................................................12

PUBLIC SERVICE COMPANY OF NEW MEXICO.............................................................................13

WHERE YOU CAN FIND MORE INFORMATION..............................................................................14

FORWARD LOOKING STATEMENTS.......................................................................................15

PROPOSAL 1: THE AGREEMENT AND PLAN OF SHARE EXCHANGE............................................................17

PROPOSAL 2: ELECTION OF DIRECTORS...............................................................................42

PROPOSAL 3: APPROVAL OF OMNIBUS PERFORMANCE EQUITY PLAN.........................................................58

PROPOSAL 4: APPROVAL OF INDEPENDENT ACCOUNTANTS.................................................................63

VALIDITY OF MANZANO COMMON STOCK.................................................................................63

EXPERTS..........................................................................................................63

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE..........................................................64

DEADLINE FOR SHAREHOLDER PROPOSALS FOR THE 2001 ANNUAL MEETING...................................................64

EXHIBITS

Exhibit A - Agreement and Plan of Share Exchange
Exhibit B - Articles of Incorporation of Manzano Corporation
Exhibit C - Bylaws of Manzano Corporation
Exhibit D - Manzano Corporation Omnibus Performance Equity Plan
Exhibit E - New Mexico Business Corporation Act Provisions - Rights of
Dissenting Shareholders
</TABLE>

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SUMMARY

THE FOLLOWING SUMMARY HIGHLIGHTS SELECTED INFORMATION ON THE MATTERS
TO BE VOTED ON AT THE ANNUAL MEETING, WHICH WILL BE HELD AT 9:30 A.M.,
MOUNTAIN DAYLIGHT SAVINGS TIME, ON JUNE 6, 2000 AT THE SOUTH BROADWAY
CULTURAL CENTER, 1025 BROADWAY S.E., ALBUQUERQUE, NEW MEXICO. HOLDERS OF PNM
COMMON STOCK OF RECORD AT THE CLOSE OF BUSINESS ON APRIL 17, 2000 ARE
ENTITLED TO NOTICE OF, AND MAY VOTE AT, THE ANNUAL MEETING. FOR A MORE
COMPLETE DISCUSSION OF PNM AND THE MATTERS TO BE VOTED ON AT THE ANNUAL
MEETING, YOU SHOULD READ CAREFULLY THIS ENTIRE DOCUMENT, THE ATTACHED
EXHIBITS AND THE DOCUMENTS THAT ARE INCORPORATED BY REFERENCE.

PROPOSAL 1: THE AGREEMENT AND PLAN OF SHARE EXCHANGE

1. WHAT IS THE AGREEMENT AND PLAN OF SHARE EXCHANGE? The agreement and
plan of share exchange is the legal document that creates the holding company
structure. It provides that each share of PNM common stock will be exchanged
for one share of Manzano common stock. As a result of the share exchange, you
will own Manzano common stock and Manzano will own all of the outstanding
shares of PNM common stock. In connection with the share exchange, PNM will
distribute the outstanding shares of common stock of UtilityCo to Manzano by
way of a dividend so that UtilityCo will also be a wholly-owned subsidiary of
Manzano. PNM, or Manzano Energy Corporation, as it will be referred to after
completion of the share exchange, will continue to own all of the outstanding
shares of common stock of its other existing subsidiaries, including Avistar,
Inc., or Avistar, an unregulated subsidiary of PNM engaged in providing
energy and utility-related services. Although our organizational structure
will change, Manzano will continue to conduct PNM's current businesses
through UtilityCo, the future PNM, Energy and Avistar, and Manzano
shareholders will continue to have the same rights and proportionate
ownership inherent in PNM common stock.

2. WHY IS THE HOLDING COMPANY STRUCTURE BEING PROPOSED? Primarily as a
result of federal and state regulatory reforms, the electric generation
industry is undergoing a fundamental transformation into a competitive
marketplace. The Restructuring Act enacted in New Mexico in April 1999 begins
to open the state's electric generation market to customer choice in 2001.
The Restructuring Act also requires that assets and activities subject to the
jurisdiction of the New Mexico Public Regulation Commission, or the PRC, and
the Federal Energy Regulatory Commission, or the FERC, primarily electric and
gas distribution and transmission assets and activities, be separated from
competitive, deregulated businesses, primarily electric generation assets and
service and other energy services. This separation is required by the
Restructuring Act to be accomplished through the use of at least two separate
corporations.

PNM has decided to accomplish this mandated separation by the
formation of a holding company and the transfer of the regulated business to
UtilityCo, subject to various regulatory and other approvals. Under a holding
company structure, PNM's regulated business (that is, electric and gas
transmission and distribution service and other non-competitive ancillary
services, including metering and billing) and its competitive, deregulated
businesses (that is, electric generation, energy supply and ancillary supply
services) would each be grouped under separate companies. This structure will
limit the amount of direct regulation to which the holding company is subject
and permit it to establish and fund new competitive businesses without

<PAGE>

regulatory approval and the delay and complexity inherent in that approval
process. This will increase financial and regulatory flexibility, enhance
Manzano's ability to take advantage of new business opportunities in a timely
manner, and broaden the range of financing techniques available to Manzano.
As a result, Manzano will be in a better position to adapt to the rapidly
changing energy marketplace and to meet and take advantage of future
challenges and opportunities while continuing to operate its regulated
business through UtilityCo.

3. WILL I HAVE TO EXCHANGE MY PNM COMMON STOCK CERTIFICATES FOR NEW
MANZANO COMMON STOCK CERTIFICATES? No. The agreement and plan of share
exchange provides that your PNM common stock certificates will automatically
represent Manzano common stock instead of PNM common stock.

4. WILL MY DIVIDENDS BE AFFECTED? There is currently no reason to
expect that dividends to common shareholders will be affected by the
reorganization. The ability of Manzano to pay dividends will depend initially
on the dividends and other distributions that UtilityCo and Energy pay to
Manzano and the capital requirements of Manzano and its direct and indirect
subsidiaries. It is anticipated that the dividends paid to Manzano by
UtilityCo and Energy will be sufficient to enable Manzano to pay dividends on
its common stock initially at the same rate and on the same schedule that PNM
currently pays dividends. However, the ability of UtilityCo and Energy to pay
dividends to Manzano will depend on a number of factors, including the extent
to which cash flows will support dividends, the availability of retained
earnings, the financial circumstances and performance of UtilityCo and
Energy, the PRC's decisions on PNM's various regulatory cases currently
pending and market and economic conditions generally. The most recent
quarterly dividend declared on PNM common stock was $0.20 per share, paid on
February 18, 2000. See "Risk Factors--Dividends on Manzano Common Stock Will
Depend Initially on Common Stock Dividends Paid by UtilityCo and Energy."

5. WILL THE VALUE OF MY SHARES BE AFFECTED BY THE SHARE EXCHANGE? The
value of a company's stock is affected by a number of factors including
market and economic conditions. Consequently, no prediction can be made as to
what the value of the Manzano common stock will be after the share exchange.

The future performance of Manzano common stock will depend, in part,
on the results of operations of UtilityCo, Energy and Energy's subsidiaries,
currently existing or created in the future. PNM believes that Manzano common
stock should initially perform as if it were the common stock of an
integrated domestic public utility. Over time, to the extent that Manzano's
investments increase (for example, by expanding existing businesses,
acquiring new assets or adding new businesses, particularly in competitive
markets), the investment performance of Manzano's common stock will be
affected increasingly by the results of operations of these businesses.

6. WHEN WILL THE SHARE EXCHANGE BE CONSUMMATED? Consummation of the
share exchange is subject to the satisfaction of certain conditions,
including the receipt of certain regulatory approvals and the listing of
Manzano common stock on the New York Stock Exchange. Following satisfaction
of these conditions, the share exchange will become effective upon filing (or
at a specified time thereafter) with the Corporations Bureau of the PRC the
Articles of Exchange relating to the share exchange. PNM expects that the
share exchange will

2
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be consummated as soon as practicable following approval of the share
exchange by the holders of PNM's common stock and receipt of the necessary
regulatory approvals, which consummation is assumed to occur on or about
August 1, 2000.

Even if the shareholders approve the agreement and plan of share
exchange, the Board of Directors of PNM may terminate the agreement and plan
of share exchange at any time prior to its effectiveness if the Board of
Directors of PNM determines, in its sole judgment, that consummation of the
share exchange would for any reason be inadvisable or not in the best
interests of PNM or its shareholders. In addition, the Boards of Directors of
PNM and Manzano, acting together, may amend the agreement and plan of share
exchange at any time prior to its effectiveness. Once the shareholders have
approved the agreement and plan of share exchange, however, the Boards may
not amend the agreement and plan of share exchange if the amendment, in the
sole judgment of the Board of Directors of PNM, would materially and
adversely affect the rights of the shareholders of PNM.

7. WHO MUST APPROVE THE FORMATION OF THE HOLDING COMPANY STRUCTURE AND
THE SHARE EXCHANGE? Approval of the proposed holding company structure and
the share exchange is required from the PRC, the FERC, and the Nuclear
Regulatory Commission, or the NRC. PNM received an order from the PRC in
February 2000 authorizing it to form Manzano and UtilityCo as wholly-owned
shell subsidiaries of PNM. Applications for approval of the proposed holding
company structure and the share exchange have been or will be filed with each
commission, including an additional application with the PRC to approve the
share exchange and the separation of PNM's regulated business and
competitive, deregulated businesses into two separate corporations. Also, the
agreement and plan of share exchange requires a two-thirds favorable vote
from PNM's common shareholders. The separation of assets requires additional
approvals. See "Risk Factors--Necessary Regulatory Approvals of Proposed
Separation Plan May Not Be Obtained."

8. HOW WILL MY RIGHTS AS A SHAREHOLDER BE AFFECTED? Following
consummation of the share exchange, the former holders of PNM common stock
will automatically become holders of Manzano common stock and their rights
will be governed by Manzano's Articles of Incorporation and Bylaws (the forms
of which are included as Exhibits B and C, respectively, to this proxy
statement/prospectus) rather than those of PNM.

Manzano's Articles of Incorporation provide Manzano with broad
corporate powers to engage in any lawful act or activity for which a
corporation may be formed under New Mexico law. Manzano's Articles of
Incorporation and Bylaws will be similar to PNM's Restated Articles of
Incorporation and Bylaws in several respects. See "Proposal 1: The Agreement
and Plan of Share Exchange--Comparison of PNM Common Stock and Manzano Common
Stock" for a comparison of PNM's and Manzano's Articles of Incorporation and
Bylaws.

9. WILL PNM'S EXISTING INDEBTEDNESS OR PREFERRED STOCK BE EXCHANGED?
The share exchange itself will not result in any change in the outstanding
indebtedness of PNM. In addition, PNM's preferred stock will remain an equity
security of Energy after the share exchange unless an exchange offer for the
preferred stock is made by UtilityCo and accepted by all the holders or the
preferred stock is redeemed. See "Proposal 1: The Agreement and Plan of Share
Exchange--Treatment of PNM Existing Indebtedness and Preferred Stock."

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10. HOW WILL MY PARTICIPATION IN THE PNM DIVIDEND REINVESTMENT AND STOCK
PURCHASE PLAN BE AFFECTED? All shares of PNM common stock held under the
dividend reinvestment and stock purchase plan, or PNM Direct, will be
automatically exchanged for the same number of shares of Manzano common
stock. Manzano will become the sponsor of the dividend reinvestment and stock
purchase plan and will continue the plan with Manzano common stock after the
share exchange.

11. HOW WILL THE PNM PERFORMANCE STOCK PLAN AND THE PNM DIRECTOR
RETAINER PLAN BE AFFECTED? The PNM Performance Stock Plan and the PNM
Director Retainer Plan will be amended to provide for ownership of common
stock of Manzano instead of PNM and Manzano rather than PNM will become the
sponsor of these plans. All existing shares of PNM common stock held in these
plans, or subject to plan options, will automatically become an equal number
of shares of common stock or stock options of Manzano, and Manzano will be
the issuer of future stock options. If shareholders approve the Omnibus Plan
at the annual meeting and the share exchange is approved and consummated, no
new option grants will be made under the PNM Performance Stock Plan but
instead will be made under the Omnibus Plan.

12. WHAT DO I NEED TO DO NOW? Just mail your signed proxy card in the
enclosed postage-paid return envelope as soon as possible so that your shares
of PNM common stock may be represented at the annual meeting.

13. ARE THERE RIGHTS OF DISSENTING SHAREHOLDERS? Holders of shares of
PNM common stock who do not vote their shares in favor of the share exchange
and who meet all of the requisite statutory requirements contained in
Sections 53-15-3 and 53-15-4 of the BCA, the full text of which is reproduced
as Exhibit E to this proxy statement/prospectus, are entitled to demand in
writing that PNM pay to that shareholder the fair value of the shares of PNM
common stock held by that shareholder. Any shareholder entitled to
dissenters' rights who wishes to make a demand for appraisal is urged to
review carefully the information set forth under "Proposal 1: The Agreement
and Plan of Share Exchange - Rights of Dissenting Shareholders" and the
provisions of Sections 53-15-3 and 53-15-4 of the BCA, particularly the
provisions setting forth the procedural steps required to perfect these
rights. Dissenters' rights will be lost if the procedural requirements are
not fully satisfied. ANY SHAREHOLDER ENTITLED TO DISSENTERS' RIGHTS WHO
DESIRES TO EXERCISE THESE RIGHTS SHOULD CAREFULLY REVIEW THE BCA AND IS
ADVISED TO CONSULT LEGAL COUNSEL BEFORE EXERCISING OR ATTEMPTING TO EXERCISE
THESE RIGHTS.

14. WHAT ARE THE UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF
PARTICIPATING IN THE SHARE EXCHANGE? You will not recognize any gain or loss
for United States federal income tax purposes if you exchange your PNM common
stock for Manzano common stock. YOU SHOULD CONSULT YOUR OWN TAX ADVISOR
REGARDING THE TAX CONSEQUENCES TO YOU OF EXERCISING YOUR DISSENTERS' RIGHTS.

15. WHERE WILL MY MANZANO COMMON STOCK BE TRADED? We expect the Manzano
common stock to be listed on the New York Stock Exchange and, after the share
exchange, to trade under the stock symbol "MZO." PNM common stock is
currently listed and traded on the New York Stock Exchange. The reported
closing price of PNM common stock on March 7, 2000 was $15.625.

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16. WHO WILL MANAGE MANZANO? The initial Board of Directors of Manzano
will consist of seven of the nine directors of the Board of Directors of PNM
(including two of the directors standing for election at the annual meeting).
The initial term of each of the directors of Manzano will be until the first
election of Manzano directors at its annual meeting of shareholders in 2001.
There will be minimal overlap between the Manzano Board of Directors and the
UtilityCo Board of Directors and between the Manzano Board of Directors and
the Energy Board of Directors. There will be no overlap between the Boards of
UtilityCo and Energy or its subsidiaries that are involved in a competitive
business. However, we anticipate that Manzano, Energy and UtilityCo may have
some common officers. The existence of common directors and officers among
Manzano, Energy and UtilityCo will comply with the PRC Code of Conduct and
PNM's Statement of Policy and Procedure after they become effective.

-------------------------

THE AFFIRMATIVE VOTE OF THE HOLDERS OF TWO-THIRDS OF THE SHARES OF
PNM COMMON STOCK ENTITLED TO VOTE AT THE ANNUAL MEETING IS REQUIRED TO
APPROVE THE AGREEMENT AND PLAN OF SHARE EXCHANGE.

PROPOSAL 2: ELECTION OF DIRECTORS

Three persons have been nominated for election as directors of PNM
to serve a term of three years expiring in 2003. If elected and the share
exchange becomes effective, two of these directors, Robert G. Armstrong and
Theodore F. Patlovich, will also be directors of Manzano, and the third, Paul
F. Roth, will be a director of UtilityCo.

----------------------------

THE AFFIRMATIVE VOTE OF THE HOLDERS OF A MAJORITY OF THE SHARES OF
PNM COMMON STOCK PRESENT, IN PERSON OR BY PROXY, AND ENTITLED TO VOTE AT THE
ANNUAL MEETING IS REQUIRED TO ELECT DIRECTORS TO THE PNM BOARD.

PROPOSAL 3: APPROVAL OF OMNIBUS PLAN

At the annual meeting, the shareholders will be asked to consider
and vote on the creation of the Omnibus Plan. The Omnibus Plan, if approved
by the requisite shareholder vote, will only become effective if the share
exchange is approved and consummated.

--------------------------

THE AFFIRMATIVE VOTE OF THE HOLDERS OF A MAJORITY OF THE SHARES OF
PNM COMMON STOCK ENTITLED TO VOTE AT THE ANNUAL MEETING IS REQUIRED TO
APPROVE THE OMNIBUS PLAN.

PROPOSAL 4: APPROVAL OF INDEPENDENT ACCOUNTANTS

At the annual meeting, the shareholders will be asked to approve the
selection by the Audit Committee of PNM's Board of Directors of Arthur
Andersen LLP as the independent public accountants to audit the consolidated
financial statements of PNM and its subsidiaries for 2000. If the share
exchange is approved and consummated, Arthur Andersen LLP will also become,
and be approved as, the independent public accountants of Manzano and its
subsidiaries for 2000.

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------------------------

THE AFFIRMATIVE VOTE OF THE HOLDERS OF A MAJORITY OF THE SHARES OF
PNM COMMON STOCK PRESENT, IN PERSON OR BY PROXY, AND ENTITLED TO VOTE AT THE
ANNUAL MEETING IS REQUIRED TO APPROVE THE SELECTION OF INDEPENDENT PUBLIC
ACCOUNTANTS.

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RISK FACTORS

IN ADDITION TO THE OTHER INFORMATION IN THIS PROXY
STATEMENT/PROSPECTUS, OR INCORPORATED BY REFERENCE, INCLUDING THE ELEMENTS OF
PNM'S PROPOSED SEPARATION PLAN PURSUANT TO THE RESTRUCTURING ACT, YOU SHOULD
CONSIDER CAREFULLY THE FOLLOWING FACTORS IN EVALUATING WHETHER OR NOT TO VOTE
FOR THE SHARE EXCHANGE.

FUTURE PERFORMANCE OF MANZANO COMMON STOCK IS DIFFICULT TO PREDICT

The purpose of the share exchange is to establish a holding company
structure that will comply with the requirements of the Restructuring Act and
will enhance the ability of PNM to take advantage of competitive business
opportunities beyond its present regulated business that, after the share
exchange and corporate separation are consummated, will be conducted by
UtilityCo. PNM's Board of Directors believes that the share exchange and the
holding company structure are in the best interests of PNM, its shareholders
and its customers. Nevertheless, the success of Manzano in realizing its
goals and the future performance of Manzano common stock are difficult to
predict with certainty.

DIVIDENDS ON MANZANO COMMON STOCK WILL DEPEND INITIALLY ON COMMON STOCK
DIVIDENDS PAID BY UTILITYCO AND ENERGY

The ability of Manzano to pay dividends will depend initially on the
dividends and other distributions that UtilityCo and Energy pay to Manzano
and the capital requirements of Manzano and its direct and indirect
subsidiaries. It is anticipated that the dividends paid to Manzano by
UtilityCo and Energy will be sufficient to enable Manzano to pay dividends on
its common stock initially at the same rate and on the same schedule that PNM
currently pays dividends. However, the ability of UtilityCo and Energy to pay
dividends to Manzano will depend on a number of factors, including the extent
to which cash flows will support dividends, the availability of retained
earnings, the financial circumstances and performance of UtilityCo and
Energy, the PRC's decisions on PNM's various regulatory cases currently
pending, the effect of deregulating generation markets, and market and
economic conditions generally.

Because UtilityCo will remain subject to regulation by the PRC after
the share exchange and corporate separation are consummated, the amount of
its earnings and the ability to pay dividends will be affected by the manner
in which the PRC regulates UtilityCo. The amount of Energy's earnings and
dividends will be affected by the manner in which Energy and its subsidiaries
operate in the competitive, deregulated businesses that they will be engaged
in after the completion of the share exchange and corporate separation. The
ability to recover stranded costs in deregulation, future growth plans and
the related capital requirements and standard business considerations will
also affect UtilityCo's and Energy's ability to pay dividends to Manzano and
meet ongoing operating costs. See "--Competition Will Increase Under
Deregulation and May Involve More Risk".

The ability of UtilityCo and Energy to pay dividends on their
respective common stock will be subject to the preferential dividend rights
of the holders of any preferred stock of UtilityCo that may be issued in
connection with an exchange offer for the currently outstanding

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PNM preferred stock or any PNM preferred stock that will continue to be an
equity security of Energy after the share exchange. In addition, it is
possible that Manzano, UtilityCo and Energy may need to issue preferred stock
in the future to meet their capital requirements. If additional preferred
stock is issued in the future, it will also have preferential dividend rights.

Current PNM debt instruments and the PNM Articles of Incorporation
have dividend payment restrictions. It is likely that future financings on
behalf of UtilityCo or Energy would have similar restrictions that could
affect future dividend payments by UtilityCo or Energy to Manzano.

Accordingly, there can be no guarantee of the amount of the initial
quarterly dividend on Manzano common stock or of the payment of future
dividends on Manzano common stock.

SHARE EXCHANGE MAY HAVE CERTAIN ANTI-TAKEOVER EFFECTS

Certain provisions of Manzano's Articles of Incorporation and Bylaws
that will be in effect when the proposed share exchange becomes effective
could discourage certain types of transactions that may involve an actual or
threatened change of control of Manzano. These provisions include the ability
to classify the Manzano Board of Directors at its option if the number of
directors on the Manzano Board of Directors is at least nine (the initial
number is seven), although directors may be removed without cause by
shareholders at a meeting expressly called for that purpose, increased
amounts of authorized shares of capital stock over currently issued and
outstanding amounts and super majority voting requirements to amend Manzano's
Articles of Incorporation and for certain other matters. For a detailed
description of these provisions, please read the information under the
caption "Proposal 1: The Agreement and Plan of Share Exchange--Possible
Anti-Takeover Effect of Certain Provisions of Manzano's Articles and Bylaws."

While these provisions are designed to improve the ability of the
Manzano Board of Directors to prevent transactions that, in the Board's
opinion, do not have the effect of maximizing long-term shareholder value or
are otherwise not in the best interests of Manzano's shareholders, they may,
individually or in the aggregate, delay, discourage or prevent an unsolicited
takeover attempt that a shareholder might believe to be in the shareholders'
interest, including those attempts that might result in a premium over the
market price for Manzano common stock. These provisions may also adversely
affect the market price for Manzano common stock.

ENERGY MAY NOT MEET NRC FINANCIAL ASSURANCE REQUIREMENTS

Pursuant to NRC rules on financial assurance requirements for the
decommissioning of nuclear power plants, PNM has a program for funding its
share of decommissioning costs for Palo Verde Nuclear Generating Station
through a sinking fund mechanism. The NRC rules on financial assurance
provide that a licensee may use an external sinking fund as the exclusive
financial assurance mechanism if the licensee recovers amounts equal to the
estimated total decommissioning costs through cost of service rates or a
"non-bypassable charge". Other mechanisms are prescribed, such as prepayment,
surety methods, insurance and other guarantees, to the extent that the
requirements for exclusive reliance on the fund mechanism are not met.

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<PAGE>

The Restructuring Act allows for the recoverability of at least 50%
and up to 100% of stranded costs including decommissioning costs (See
"Proposal 1: The Agreement and Plan of Share Exchange--Significant Factors
Affecting PNM's Present Businesses--Recovery of Stranded Costs"). To the
extent that Energy is unable to meet the requirements of the NRC rules
permitting the use of an external sinking fund because it is unable to
recover its estimated decommissioning costs through a non-bypassable charge,
Energy may have to pre-fund or find some other, perhaps capital intensive,
means to meet the NRC rules. There can be no assurance that such an event
will not negatively affect the funding of growth plans of Energy.

In addition, as part of the determination and quantification of the
stranded costs related to the decommissioning, PNM will have to estimate
future decommissioning costs. These costs will be collected by UtilityCo as
Energy's agent and paid to the decommissioning trusts. If PNM's estimate
proves to be less than the actual costs of decommissioning, any cost in
excess of the amount allowed through stranded cost recovery may not be
recoverable. Such excess costs, if any, will also be subject to potential
pre-funding requirements as discussed above.

NECESSARY REGULATORY APPROVALS OF PROPOSED SEPARATION PLAN MAY NOT BE OBTAINED

PNM is filing its transition plan with the PRC pursuant to the
Restructuring Act in three parts. In November 1999, PNM filed the first two
parts of the transition plan with the PRC. Part one, which has been approved,
requested approval to create Manzano and UtilityCo as wholly-owned shell
subsidiaries of PNM. Part two of the transition plan requested by June 1,
2000 all PRC approvals necessary for PNM to implement the formation of the
holding company structure and the share exchange and its separation plan
pursuant to the Restructuring Act. However, the part two hearing was
scheduled for May 15, 2000 which will make a June 1, 2000 approval unlikely.
Therefore, the Company has assumed a July 1, 2000 approval date with an
August 1, 2000 separation date. However, there can be no assurance that the
August 1, 2000 separation date can be achieved. PRC staff and the New Mexico
Attorney General, or AG, filed a motion in February 2000 to delay the May 15,
2000 hearing date. PNM filed a response in opposition in February 2000. The
motion is pending before the PRC hearing examiner. As discussed, this
separation plan involves the transfer of the regulated business of PNM
(generally, electric and gas distribution and transmission assets) to
UtilityCo so that Energy will maintain ownership of the competitive,
deregulated businesses (generally, electric generation and related assets).
Part three of PNM's transition plan, which is currently planned to be filed
by PNM in March 2000, will address transition costs, stranded costs,
UtilityCo's cost of service and other issues required to be considered under
the Restructuring Act. On January 18, 2000, the PRC extended the March 1
deadline for the transition plan filing for all New Mexico utilities by three
months to June 1, 2000.

This proxy statement/prospectus is soliciting your vote for the
share exchange. If the shareholders of PNM approve the share exchange at the
annual meeting, and the other necessary regulatory approvals are obtained,
PNM expects to consummate the share exchange as soon as practicable
thereafter, currently assumed to be on or about August 1, 2000. If
shareholder approval of the share exchange is obtained, PNM will still need
to receive separate approval from the PRC of its separation plan to comply
with the Restructuring Act, as well as other approvals. This proxy
statement/prospectus is not soliciting your vote for this separation plan

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<PAGE>

since shareholder approval is not required. As discussed above, PNM has
submitted its separation plan to the PRC for approval as part two of the
transition plan required by the Restructuring Act.

If the separation plan as proposed by PNM is not approved by the
PRC, PNM cannot predict the form that the separation of its regulated
activities and its competitive, deregulated activities would take pursuant to
the Restructuring Act. Significant changes to the proposed capital structure
of UtilityCo and Energy would affect the debt ratings of each proposed
company and could result in increased transactional costs and capital costs
for each. Likewise, changes or modifications to the proposed asset and
liability transfers among UtilityCo, Energy and Manzano could require that
material supply contracts and leases be renegotiated and could result in
increased operating costs for UtilityCo or Energy. In addition, such changes
may impact Energy's ability to compete in non-regulated markets. Therefore,
PNM believes that modifications to its proposed separation plan could
materially affect the financial results and position of Manzano and its
subsidiaries if the share exchange is consummated.

The Restructuring Act does not require, nor does it permit the PRC
to require, PNM to divest itself of any of its assets.

COMPETITION WILL INCREASE UNDER DEREGULATION AND MAY INVOLVE MORE RISK

PNM is not in any direct retail competition with any other regulated
electric and gas utility. Nevertheless, PNM is subject to varying degrees of
competition in certain territories adjacent to or within areas it serves that
are also currently served by other utilities in its region as well as
cooperatives, municipalities, electric districts and similar types of
government organizations.

The Restructuring Act opens the New Mexico electric power market to
customer choice for certain customers beginning in 2001 and the balance of
customers in 2002, although these dates could be delayed up to a year by the
PRC. As a result, after the completion of the share exchange and corporate
separation, Energy may face competition from companies with greater financial
and other resources. Accordingly, there can be no assurance that Energy will
not face competition in the future that would adversely affect its results.

It is the current intention to have Manzano's competitive,
deregulated subsidiaries, Energy and its subsidiaries including Avistar,
engage primarily in energy-related businesses that will not be regulated by
state or federal agencies as traditionally regulated public utilities (other
than the FERC and the NRC). These competitive, deregulated businesses,
including the generation business that will be engaged in by Energy after the
completion of the share exchange and corporate separation, will encounter
competitive and other factors not previously experienced by PNM, and may have
different, and perhaps greater, investment risks than those involved in the
regulated business that will be engaged in by UtilityCo after completion of
the share exchange and corporate separation.

Specifically, the passage of the Restructuring Act and deregulation
in the electric utility industry generally is likely to have an impact on the
price and margins for electric generation and, thus, the return on the
investment in electric generation assets. In response to competition

10
<PAGE>

and the need to gain economies of scale, electricity producers will need to
continue to control costs to maintain margins, profitability and cash flow
that will be adequate to support investments in new technology and
infrastructure. Energy will have to compete directly with independent power
producers, many of whom will be larger in scale, thus creating a competitive
advantage for such producers due to scale efficiencies. Energy's current five
year business plan includes a 300% increase in sales by doubling the
construction or acquisition of additional power generation assets in its
surrounding region of operations. Such growth will be dependent upon
Manzano's ability to generate $400 to $600 million to fund Energy's
expansion. There can be no assurance that these competitive, deregulated
businesses, particularly the generation business, will be successful or, if
unsuccessful, that they will not have a direct or indirect adverse effect on
Manzano.

PNM DEPENDS ON CERTAIN KEY EXECUTIVE OFFICERS AND MANAGERS

PNM is dependent on the management experience and continued services
of its executive officers and key managers. The loss of the services of these
officers or managers could have a material adverse effect on PNM's results of
operations and financial condition. In addition, PNM's continued growth and
the success of the proposed holding company structure and separation of
assets (which will result in three corporate entities) depends on the ability
of Manzano, UtilityCo and Energy to attract and retain experienced key
employees. Competition for qualified employees is intense, and the loss of
such persons, or an inability to attract, retain and motivate additional
highly skilled employees, could have a material adverse effect on the results
of operations and financial condition and prospects of Manzano, UtilityCo and
Energy. There can be no assurance that Manzano, Energy or UtilityCo will be
able to retain its existing personnel or attract and retain additional
qualified employees. Furthermore, the proposed PRC Code of Conduct and PNM's
proposed Statement of Policy and Procedure require minimal overlap of
directors and officers among Manzano, UtilityCo and Energy.

Benjamin F. Montoya, Chief Executive Officer and Chairman of the
Board has announced his decision to retire sometime within the next 18
months. In January 2000, Jeffry E. Sterba was hired to succeed Mr. Montoya.
Mr. Sterba assumed the duties of President in March 2000. He will assume the
duties of Chief Executive Officer in June 2000 and become Chairman of the
Board upon Mr. Montoya's retirement. Mr. Sterba was appointed to the PNM
Board of Directors in March 2000 and has also been selected to serve on the
first Manzano Board of Directors.

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INFORMATION ABOUT THE 2000 ANNUAL MEETING

ANNUAL REPORT

PNM has mailed a copy of its annual report for the year ended
December 31, 1999, which includes consolidated financial statements, to all
of its shareholders of record.

OUTSTANDING VOTING SECURITIES AND VOTING RIGHTS

The close of business on April 17, 2000 has been fixed as the record
date for determining the holders of PNM common stock entitled to vote at the
2000 annual meeting. As of April 17, 2000, PNM had outstanding shares of
common stock. Shareholders of record are entitled to one vote per share on
each matter to be considered at the 2000 annual meeting. No other class of
securities, including PNM's currently outstanding preferred stock, is
entitled to vote at the 2000 annual meeting.

VOTING METHODS

You can vote on matters to come before the meeting in two ways:

- You can come to the annual meeting and cast your vote there;
or

- You can vote by signing and returning the enclosed proxy card.
If you do so, your shares will be voted in the manner you
indicate. In the absence of any specific instructions on the
proxy card, proxies will be voted by those named in the proxy
FOR approval of the agreement and plan of share exchange, FOR
the election of directors nominated, FOR the approval of the
Omnibus Plan, FOR the approval of the selection of Arthur
Andersen LLP as independent public accountants for 2000, and
on all other matters in accordance with their best judgment.

If you beneficially own shares which your broker holds in street
name on your behalf, you will be provided with a form of proxy instructing
the broker how to vote for you. If you do not provide voting instructions to
your broker, your broker may, in accordance with the rules of the New York
Stock Exchange, vote your shares in his or her discretion in the election of
directors or the approval of the selection of independent public accountants.
However, your broker may not vote your shares in his or her discretion on the
proposed agreement and plan of share exchange or the approval of the Omnibus
Plan. Therefore, to vote your shares in favor of the agreement and plan of
share exchange or the Omnibus Plan, you must so instruct your broker on the
form of proxy.

QUORUM AND VOTE NECESSARY FOR ACTION

A quorum of shareholders is necessary to hold a valid meeting. If at
least a majority of the outstanding PNM common stock is represented at the
annual meeting, in person or by proxy, a quorum will exist. A quorum and the
affirmative vote of the holders of two-thirds of the shares of PNM common
stock entitled to vote at the annual meeting are required to approve the

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<PAGE>

agreement and plan of share exchange. A quorum and the affirmative vote of
the holders of a majority of the shares of PNM common stock entitled to vote
at the annual meeting are required to approve the Omnibus Plan. Abstentions
and "broker non-votes" will have the effect of a vote against these matters.
A quorum and the affirmative vote of the holders of a majority of the shares
of PNM common stock present, in person or by proxy, and entitled to vote at
the annual meeting are required to elect directors, approve the selection of
independent public accountants and to approve other actions. Abstentions 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.

REVOCATION OF PROXIES

You may revoke your proxy by attending the annual meeting and voting
your shares in person or by providing a written revocation or a later
executed proxy to the Secretary of PNM. Attendance at the annual meeting, in
and of itself, will not constitute revocation of a proxy.

ADJOURNMENT OF ANNUAL MEETING

PNM reserves the right to adjourn the annual meeting one or more
times, and to continue to solicit proxies, if insufficient affirmative votes
are present, in person or by proxy, to adopt the agreement and plan of share
exchange or the other matters being considered at the annual meeting.

COST OF SOLICITATION

The accompanying proxy is being solicited on behalf of PNM's Board
of Directors. PNM will pay the costs of this solicitation, including
reimbursing brokerage firms and others for their expenses in forwarding proxy
material to beneficial owners of PNM's common stock. Directors, officers and
employees of PNM may solicit proxies by telephone, other electronic means or
in person without additional compensation. In addition, PNM has retained
ChaseMellon Shareholder Services to assist in soliciting proxies at an
anticipated fee of approximately $8,000, plus out-of-pocket expenses.

MATTERS RAISED AT THE ANNUAL MEETING NOT INCLUDED IN THIS PROXY
STATEMENT/PROSPECTUS

We do not know of any matters to be acted upon at the annual meeting
other than those discussed in this proxy statement/prospectus. If any other
matter is presented, proxy holders will vote on the matter in their
discretion.

PUBLIC SERVICE COMPANY OF NEW MEXICO

PNM was organized under the laws of the State of New Mexico in 1917.
PNM is an integrated public utility primarily engaged in the generation,
transmission, distribution and sale of electricity and in the transmission,
distribution and sale of natural gas within the State of New Mexico. Avistar,
a wholly-owned, unregulated subsidiary of PNM, operates the City of Santa
Fe's water system under a contract that will expire on July 1, 2000, and is
not expected to be renewed.

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<PAGE>

The total population of the area served by one or more of PNM's
utility services is estimated to be approximately 1.35 million, of which
52.2% live in the greater Albuquerque area. For the year ended December 31,
1999, 78.8% of PNM's operating revenues were derived from electric
operations, 20.4% from natural gas operations and 0.8% from unregulated
businesses. As of December 31, 1999, PNM employed 2,667 persons.

WHERE YOU CAN FIND MORE INFORMATION

PNM is subject to the informational requirements of the Securities
Exchange Act of 1934, or the Exchange Act. PNM files annual and quarterly
reports, proxy statements and other information with the Securities and
Exchange Commission, or the SEC, in accordance with the Exchange Act. You may
read and copy any of these reports, proxy statements and other information at
the SEC's public reference facilities in New York and Chicago as well as in
the SEC's Public Reference Room located at 450 Fifth Street, NW, Washington,
D.C. 20549. You can obtain information about the operation of the Public
Reference Room by calling 1-800-SEC-0330. The SEC also maintains an Internet
web site at www.sec.gov that contains reports, proxy statements and other
information regarding reporting companies like PNM. You may also read and
copy any of these reports, proxy statements and other information concerning
PNM at the offices of the New York Stock Exchange at 20 Broad Street, New
York, New York 10005.

The SEC allows PNM to "incorporate by reference" certain information
into this proxy statement/prospectus. This means that PNM can disclose
important information by referring you to another document filed separately
with the SEC. The information incorporated by reference is deemed to be part
of this proxy statement/prospectus unless it is superseded by information in
this proxy statement/prospectus. This proxy statement/prospectus incorporates
by reference PNM's annual report on Form 10-K for the year ended December 31,
1999 that has been filed with the SEC. The annual report contains important
information about PNM and its operations and financial condition.

PNM is also incorporating by reference any additional documents that
it may file with the SEC between the date of this proxy statement/prospectus
and the termination of the offering made by this proxy statement/prospectus.
Manzano has filed a registration statement on Form S-4 with the SEC under the
Securities Act of 1933. The primary purpose of the registration statement is
to register the shares of Manzano common stock that it will issue under the
proposed share exchange. As permitted by the rules and regulations of the
SEC, this proxy statement/prospectus does not contain all of the information
set forth in the registration statement.

PNM will provide you without charge, upon written or oral request, a
copy of any documents that have been or may be incorporated by reference into
this proxy statement/prospectus, other than certain lengthy exhibits to the
documents. Written or telephone requests for such materials should be
directed to Barbara L. Barsky, Senior Vice President, Planning and Investor
Services, Public Service Company of New Mexico, Alvarado Square, Albuquerque,
New Mexico 87158, telephone number (505) 241-2700. Please make your request
no later than May 30, 2000 in order to ensure timely delivery.

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<PAGE>

The Board of Directors has not authorized anyone to provide you with
information that is different from what is contained in this proxy
statement/prospectus. This proxy statement/prospectus does not constitute an
offer to sell or a solicitation of an offer to buy shares of Manzano common
stock by any person in any jurisdiction or in any circumstance in which such
offer or solicitation would be unlawful.

Neither the delivery of this proxy statement/prospectus nor any
offer or sale made hereunder shall, under any circumstances, create any
implication that there has been no change in the affairs of PNM or Manzano
since the date of this proxy statement/prospectus.

Manzano is applying to have its common stock listed on the New York
Stock Exchange. It is expected that such listing will become effective when
the share exchange becomes effective. Once listed, Manzano's stock will be
registered under, and Manzano will be subject to the continuous reporting
requirements of, the Exchange Act. Following consummation of the share
exchange, PNM common stock will no longer trade, will be delisted from the
New York Stock Exchange and will no longer be registered.

FORWARD LOOKING STATEMENTS

This proxy statement/prospectus contains statements which are not
historical fact and which can be classified as forward looking. The Private
Securities Litigation Reform Act of 1995 provides a "safe harbor" for
forward-looking statements to encourage companies to provide prospective
information about their companies without fear of litigation so long as those
statements are identified as forward-looking and are accompanied by
meaningful, cautionary statements identifying important factors that could
cause actual results to differ materially from those projected in the
statement. Words such as "estimates," "expects," "anticipates," "plans,"
"believes," "projects," and similar expressions identify forward-looking
statements. For example, such forward-looking statements may include, without
limitation, statements in connection with the future payment of dividends,
statements as to the pursuit of business in new markets, statements in
connection with the regulatory approval process or future regulation of
Manzano and its subsidiaries, statements in connection with future businesses
or management of Manzano and its subsidiaries, and statements in connection
with the effects or benefits of a holding company structure.

In addition to the assumptions and other factors referred to
specifically in connection with such statements, Manzano and PNM hereby
identify the following important factors which could cause our actual
financial results to differ materially from any such results that might be
projected, forecasted, estimated or budgeted by Manzano and PNM in
forward-looking statements including, among others:

- adverse actions of utility regulatory commissions;

- utility industry restructuring;

- failure to recover stranded costs;

- failure to recover transition costs;

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<PAGE>

- our inability to successfully compete outside our traditional
regulated market;

- the success of our expansion strategies, particularly as it
relates to Energy;

- regional economic conditions, which could affect customer
growth;

- adverse impacts resulting from environmental regulations;

- loss of favorable fuel supply contracts or inability to
negotiate favorable new fuel arrangements;

- failure to obtain water rights and rights-of-way;

- operational and environmental problems at generating stations;

- the cost of debt and equity capital;

- weather conditions;

- the ability of Manzano to manage profitably its new
competitive, deregulated operations, including the management
of Energy's competitive businesses;

- technical developments in the utility industry; and

- other considerations that may be disclosed from time to time
in the publicly disseminated documents or filings of PNM or
Manzano and its subsidiaries.

Manzano and PNM undertake no obligation to update publicly any
forward-looking statements, whether as a result of new information, future
events or otherwise.

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PROPOSAL 1: THE AGREEMENT AND PLAN OF SHARE EXCHANGE
(PROPOSAL 1 ON YOUR PROXY CARD)

TERMS

PNM proposes to reorganize its operations by forming a holding
company structure as a means of achieving the corporate and asset separations
required by the Restructuring Act. Under the terms of the agreement and plan
of share exchange, all of the outstanding shares of PNM common stock will be
exchanged on a share-for-share basis for shares of Manzano common stock.
Thus, when the share exchange is completed, each person who owned PNM common
stock immediately prior to the share exchange will own the same number of
shares (and percentage) of Manzano common stock. Likewise, Manzano will own
all of the outstanding shares of PNM common stock. If the share exchange is
implemented, shareholders will not be required to surrender their existing
PNM stock certificates for stock certificates of Manzano.

The Board of Directors of PNM has approved the agreement and plan of
share exchange because it believes the share exchange is in the best
interests of the shareholders, PNM and its customers and, furthermore,
because it complies with the requirements of the Restructuring Act. If the
shareholders approve the agreement and plan of share exchange, and if the
applicable regulatory approvals are obtained and other conditions are
satisfied, the share exchange will become effective upon the filing of the
Articles of Exchange relating to the share exchange with the Corporations
Bureau of the PRC. PNM is assuming that the consummation of the share
exchange will occur on or about August 1, 2000. The share exchange proposal
requires the affirmative vote of the holders of two-thirds of the shares of
PNM common stock entitled to vote at the annual meeting.

Shareholder approval of the agreement and plan of share exchange
will also result in the approval of several amendments to the PNM Performance
Stock Plan and the PNM Director Retainer Plan. These amendments provide for
the future use of Manzano common stock instead of PNM common stock under
these common stock plans. Moreover, after the share exchange is completed,
Manzano will become the sponsor of these common stock plans instead of PNM.

After the share exchange, Manzano common shareholders will have the
right to vote on corporate action concerning Manzano (but not PNM) in
accordance with Section 53-11-33 of the BCA.

If PNM receives all necessary regulatory and other approvals,
pursuant to the Restructuring Act, all of PNM's electric and gas distribution
and transmission assets will be transferred to UtilityCo after completion of
the share exchange. After this asset transfer, UtilityCo will acquire the
name "Public Service Company of New Mexico" and the existing PNM will be
renamed Manzano Energy Corporation. Energy will continue to own PNM's
existing electric generation and related assets after completion of the
transfer of the regulated business to UtilityCo. Your approval is not
required, and is therefore not being solicited, for this asset and liability
transfer to UtilityCo, which will occur after the completion of the share
exchange if PNM receives all necessary approvals. After the asset and
liability transfer,

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UtilityCo is expected to have approximately $1.2 billion of assets, $0.3
billion of liabilities and $0.9 billion of capital, $540 million of debt and
$360 million of equity.

The share exchange itself will not result in any change in the
outstanding indebtedness of PNM. In addition, PNM's preferred stock will
remain an equity security of Energy after the share exchange unless an
exchange offer for the preferred stock is made by UtilityCo and accepted by
all the holders or the preferred stock is redeemed by PNM. See "--Treatment
of PNM Existing Indebtedness and Preferred Stock."

RECOMMENDATION OF THE BOARD OF DIRECTORS

The Board of Directors has unanimously approved the agreement and
plan of share exchange and unanimously recommends that shareholders vote FOR
the agreement and plan of share exchange. In making its decision to recommend
the agreement and plan of share exchange, the Board of Directors has
considered the following material factors:

The energy industry is evolving at an accelerated pace and
undergoing a fundamental transformation into a competitive marketplace. This
is primarily a result of state and federal regulatory developments, including
the passage of the Federal Energy Policy Act of 1992, or the Energy Policy
Act, and the Restructuring Act, and escalating competitive pressures. To
respond effectively to the increased competition and restructured regulatory
environment mandated by the Restructuring Act, the Board of Directors has
determined that PNM must position itself to take advantage of potential
business opportunities outside of its present markets and legally separate
its regulatory assets.

In the opinion of the Board of Directors, it is desirable in the
long run for PNM and its shareholders to pursue the new business
opportunities created by the Restructuring Act through a holding company
structure. The structure is a well-established form of organization for
companies engaging in multiple lines of business, is expressly authorized by
the Restructuring Act and is increasingly prevalent in the utility industry.
Under a holding company structure, Manzano would not be subject to PRC
regulation and, therefore, would be able to pursue non-utility business
opportunities in a timely manner and without the delay associated with a
regulated business. The proposed holding company structure also would permit
the use of financing techniques and strategies that are better suited to the
particular requirements, characteristics and risks of non-utility operations
without affecting the capital structure or creditworthiness of UtilityCo.
This may increase Manzano's financial flexibility by allowing it

18
<PAGE>

to establish different debt-to-equity ratios and appropriate leverage levels
for each individual line of business.

The Board of Directors considered the financial cost to PNM of
implementing the agreement and plan of share exchange and concluded that the
benefits of implementing the holding company structure outweighed these
costs. These costs include (1) expenses associated with obtaining the
required regulatory and other approvals to implement the structure and the
related separation of businesses, (2) expenses incurred in connection with
registering the Manzano common stock with the SEC and (3) other transaction
related expenses, including professional fees. The present value of these
costs is estimated to be in excess of $50 million. It is expected that
transition costs will be recoverable through a separate wires charge. See
"--Significant Factors Affecting PNM's Present Business--Transition Cost
Recovery".

PRESENT BUSINESSES

PNM was organized under the laws of the State of New Mexico in 1917.
PNM is an integrated public utility primarily engaged in the generation,
transmission, distribution and sale of electricity and in the transmission,
distribution and sale of natural gas within the State of New Mexico. For the
year ended December 31, 1999, 78.8% of its operating revenues were derived
from electric operations, 20.4% from natural gas operations and 0.8% from
unregulated businesses. PNM's service area has a population of approximately
1.35 million of which 52.2% live in the greater Albuquerque area.

PNM is currently subject to the jurisdiction of the PRC with respect
to its retail electric and gas rates, service, accounting, issuance of
securities, construction of major new generation and transmission facilities
and other matters. The FERC has jurisdiction over rates and other matters
related to transmission service and wholesale electric sales. As a
co-licensee with respect to three nuclear generating units, PNM is also
subject to the authority of the NRC.

SIGNIFICANT FACTORS AFFECTING PNM'S PRESENT BUSINESSES

The following are significant factors affecting PNM's present
businesses irrespective of the occurrence of the share exchange and proposed
separation of assets pursuant to the Restructuring Act.

TRANSITION COST RECOVERY. Pursuant to the Restructuring Act,
utilities will be allowed to recover in full any prudent and reasonable costs
incurred in implementing full open access ("transition costs"). The
transition costs may be recovered through 2007 by means of a separate wires
charge. PNM estimates that the present value of these costs will be in excess
of $50 million. Transition costs include, but are not limited to, costs of
this solicitation, professional fees, financing costs including underwriting
fees, consents relating to the transfer of assets, management information
system changes including billing system changes and public and customer
education and communications. Recoverable transition costs are currently
being capitalized and will be amortized over the recovery period to match
related revenues. Recovery of any transition costs which are not deemed
recoverable by the PRC may be vigorously pursued through all remedies
available to PNM with the ultimate outcome uncertain. Costs not recoverable
will be expensed when incurred unless these costs are otherwise permitted to
be

19
<PAGE>

capitalized under current and future accounting rules. If the amount of
nonrecoverable transition costs is material, the resulting charge to earnings
may have a material impact on the consolidated financial results and position
of Manzano in the period of the change.

RECOVERY OF STRANDED COSTS. The Restructuring Act recognizes that
electric utilities should be permitted a reasonable opportunity to recover an
appropriate amount of the costs incurred previously in providing electric
service ("stranded costs"). Examples of stranded costs include plant
decommissioning costs, regulatory assets, lease and lease-related costs
recognized under cost-of-service regulation. Utilities operating in New
Mexico will be allowed to recover no less than 50% of such costs through a
non-bypassable charge on all customer bills for five years after
implementation of customer choice. The PRC could authorize a utility to
recover up to 100% of its stranded costs if the PRC finds that recovery of
more than 50%: (1) is in the public interest; (2) is necessary to maintain
the financial integrity of the public utility; (3) is necessary to continue
adequate and reliable service; and (4) will not cause an increase in rates to
residential or small business customers during the transition period. While
recoverable stranded costs will be collected as part of the regulated
business by UtilityCo, such collections would be paid to Energy and be part
of the revenues available to the competitive businesses subsequent to
restructuring. However, no determination and quantification of stranded cost
recovery has yet been made by the PRC. Such determination will have a
material impact on Manzano and its subsidiaries.

EFFECTS OF PNM'S DEPENDENCE ON FUEL, WATER AND GAS. PNM's generation
mix for 1999 was 69.0% coal, 30.0% nuclear and 1.0% gas and oil. Due to
locally available natural gas and oil supplies, the utilization of locally
available coal deposits and the generally abundant supply of nuclear fuel,
PNM believes that adequate sources of fuel are available for its generating
stations.

Water for the Four Corners Power Plant, or Four Corners, and San
Juan Generating Station, or SJGS, is obtained from the San Juan River. BHP
Minerals International, Inc. holds rights to San Juan River water and
committed a portion of such rights to Four Corners through the life of the
project. PNM and Tucson Electric Power Company have a contract with the
United States Bureau of Reclamation, or USBR, for consumption of 16,200 acre
feet of water per year for the SJGS, which contract expires in 2005, and in
addition, PNM was granted the authority to consume 8,000 acre feet of water
per year under a state permit that is held by BHP Minerals International,
Inc. PNM is of the opinion that sufficient water is under contract for the
SJGS through 2005. Currently, PNM is in discussions with the Jicarilla Apache
Tribe for a twenty-seven year contract, beginning in 2006, for a replacement
of the current USBR contract for 16,200 AF of water. PNM cannot predict the
outcome of the discussions but expects to obtain a replacement water supply
for the USBR contract that expires in 2005. Various environmental approvals
will likely be required for a replacement water supply. PNM is actively
involved in the San Juan River Recovery Implementation Program to mitigate
any concerns with the taking of the negotiated water supply from a river that
contains endangered species and critical habitat. As a result, PNM believes
that adequate sources of water are available for its generating stations.

Public Service Company of New Mexico Gas Services, or PNMGS, obtains
its supply of natural gas primarily from sources within New Mexico pursuant
to contracts with producers and

20
<PAGE>

marketers. These contracts are generally sufficient to meet PNMGS' peak-day
demand. PNMGS serves certain cities which depend on El Paso Natural Gas or
Transwestern Pipeline Company for transportation of gas supplies. Because
these cities are not directly connected to PNMGS transmission facilities, gas
transported by these companies is the sole supply source for those cities.
PNM believes that adequate sources of gas are available for its distribution
systems.

COMPLIANCE WITH ENVIRONMENTAL LAWS AND REGULATIONS. PNM's operations
are subject to various federal, state, local and tribal environmental laws
and regulations, including, but not limited to, those governing discharges
into the air and water, the storage, handling and disposal of solid and
hazardous wastes, the remediation of soil and groundwater contaminated by
hazardous substances or wastes, and the health and safety of employees
particularly as it relates to PNM's coal, gas and nuclear based electric
generation assets. These assets will be assets of Energy upon completion of
PNM's proposed corporate separation under the Restructuring Act. Compliance
with environmental laws, stricter interpretations of or amendments to these
laws, or changes in enforcement policies by regulatory agencies may require
material expenditures by PNM. The nature of PNM's current and former
operations and the history of industrial uses at some of its facilities
result in exposure to the risk of liabilities or claims with respect to
environmental and worker health and safety matters. In addition, under
certain environmental laws, a current or previous owner or operator of
property may be jointly and severally liable for the costs of investigation,
removal or remediation of certain substances on, under, or in such property,
without regard to negligence or fault. The presence of, or failure to
remediate properly, such substances may adversely affect the ability to sell
or rent the property or to borrow using the property as collateral. In
addition, persons who generate, arrange for the disposal or treatment of, or
dispose of, hazardous substances may be jointly and severally liable for the
costs of investigation, remediation or removal of the hazardous substances at
or from the disposal or treatment facility, regardless of whether the
facility is owned or operated by such person. Responsible parties also may be
subject to common law claims by third parties based on damages and costs
resulting from environmental contamination emanating from a site.

REQUIRED COLLECTIVE BARGAINING NEGOTIATIONS WITH ELECTRICAL WORKERS.
PNM and the International Brotherhood of Electrical Workers, Local Union 611
will enter into negotiations during the latter part of the first quarter of
2000. The current collective bargaining agreement, which covers the 654
bargaining unit employees in PNM's regulated and competitive, deregulated
operations, expires on May 1, 2000. PNM's negotiating team is currently
preparing for the upcoming negotiations. While PNM believes that its
relations with its employees are satisfactory, a dispute between PNM and its
employees' representative could have a material adverse effect on PNM.

EFFECTS OF CERTAIN PENDING EVENTS ON FUTURE REVENUES. PNM's contract
with San Diego Gas and Electric Company, or SDG&E, to provide electricity
will expire in April 2001. SDG&E has notified PNM that it will not renew its
contract. PNM currently estimates that the net revenue reduction resulting
from the expiration of the SDG&E contract will be approximately $20 million
annually. In addition, there is currently ongoing litigation at the FERC
between PNM and SDG&E regarding prior years' contract pricing.

On October 4, 1999, the Western Area Power Administration, or
Western, filed a petition at the FERC requesting the FERC to consider, on an
expedited basis, ordering PNM to provide

21
<PAGE>

network transmission service to Western under PNM's Open Access Transmission
Tariff on behalf of the United States Department of Energy as contracting
agent for Kirtland Air Force Base. PNM intends to litigate this matter
vigorously. The net revenue reduction to PNM if PNM is replaced as the power
supplier to Kirtland Air Force Base is estimated to be approximately $7.0
million annually.

A MORE DETAILED DISCUSSION OF MATTERS AFFECTING PNM'S PRESENT
BUSINESSES CAN BE FOUND IN PNM'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR
ENDED DECEMBER 31, 1999, INCORPORATED BY REFERENCE IN THIS PROXY
STATEMENT/PROSPECTUS. SEE "WHERE YOU CAN FIND MORE INFORMATION."

PNM'S CORPORATE STRUCTURE

PUBLIC SERVICE COMPANY OF NEW MEXICO. PNM's corporate structure
(including the planned formation of UtilityCo) prior to the completion of the
share exchange is as follows:

--------------------
PNM
--------------------

----------------------- -------------------- ----------------
MANZANO UTILITYCO AVISTAR

(to be formed)
----------------------- -------------------- ----------------

The above chart does not show any of PNM's other existing
subsidiaries since these subsidiaries are either inactive or immaterial to
PNM.

MANZANO CORPORATION. Manzano, a New Mexico corporation, was
organized in March 2000 for the purpose of carrying out the reorganization of
PNM into a holding company structure. Manzano is currently a direct,
wholly-owned shell subsidiary of PNM. Upon the consummation of the share
exchange, Manzano will become the parent of PNM. As part of the
reorganization, PNM will distribute the outstanding shares of common stock of
UtilityCo to Manzano by way of a dividend so that UtilityCo will also be a
wholly-owned subsidiary of Manzano after the consummation of the share
exchange. Manzano is not expected to be an operating company. Thus, all the
business and operations conducted by PNM and its subsidiaries immediately
before the share exchange will continue to be conducted by UtilityCo and
Energy (the former PNM) immediately after the share exchange.

Similarly, the consolidated assets and liabilities of PNM and its
subsidiaries immediately before the share exchange will be the same as the
consolidated assets and liabilities of Manzano and its subsidiaries
(UtilityCo (the future PNM) and Energy (the former PNM)) immediately after
the share exchange. Although Manzano is not expected to be an operating
company, Manzano will engage in those activities that are necessary for it to
meet its fiduciary and financial obligations as a publicly-traded company.
These activities include financial risk management, cash management,
compliance, credit management, trust and corporate

22
<PAGE>

investments, planning and capital management, financial accounting and
reporting, budgeting, tax planning and strategy, audit, general counsel
services, corporate governance, strategic planning and analysis, shareholder
records and alliance, investor relations and government relations. In
addition, Manzano will have a division that will provide its subsidiaries
with various finance and accounting services, information services (including
telecommunications), human resources, certain legal services, document
control and records center, building and property management, environmental
services and corporate governance support. To establish this division, PNM
will transfer the relevant assets to Manzano at the time the share exchange
is consummated.

UTILITYCO. PNM expects to form a new wholly-owned shell subsidiary,
UtilityCo, as a New Mexico corporation prior to consummation of the share
exchange. To comply with the Restructuring Act, UtilityCo will be formed so
that PNM can transfer all of its electric and gas distribution and
transmission assets to UtilityCo after the consummation of the share
exchange. In addition, the names "PNM" and "Public Service Company of New
Mexico" will be transferred to UtilityCo. As discussed, as a result of a
dividend by PNM of all of the outstanding shares of UtilityCo common stock,
after the consummation of the share exchange, UtilityCo will be a
wholly-owned subsidiary of Manzano. After completion of the share exchange
and the separation of PNM's regulated business and competitive, deregulated
businesses, the PRC will retain the authority to regulate the distribution
rates and services of UtilityCo and FERC will have jurisdiction over
transmission rates and services. This separation, as discussed, will not
occur until the necessary regulatory and other approvals are obtained.

MANZANO ENERGY CORPORATION. Upon consummation of the share exchange,
the former PNM will be renamed Manzano Energy Corporation and will be a
direct, wholly-owned subsidiary of Manzano. After the transfer of the
regulated business to UtilityCo, assuming the receipt of all necessary
regulatory and other approvals, Energy will be a generation, power supply and
energy-related services company that ultimately will provide these services
pursuant to the Restructuring Act on a competitive, deregulated basis. The
competitive, deregulated businesses that will be retained by Energy include
PNM's interests in the Palo Verde Nuclear Generating Station, Four Corners
and SJGS as well as less significant generation assets. Avistar will continue
to be a wholly-owned subsidiary of Energy as will the other existing
subsidiaries of PNM that are currently either inactive or immaterial. In the
future, as business conditions warrant, Energy may form new subsidiaries to
take advantage of competitive, deregulated business opportunities.

AVISTAR INC. PNM's wholly-owned subsidiary, Avistar, was formed in
August 1999 as a New Mexico corporation and is currently engaged in certain
non-utility businesses, including energy and utility-related services
previously operated by PNM. In February 2000, Avistar invested $3 million in
AMDAX.com, a start-up company which will provide an on-line auction service
to bring together electricity buyers and sellers in the deregulated electric
power market. In addition, Avistar operates and manages the City of Santa
Fe's water system under a contract due to expire on July 1, 2000. That
contract is not expected to be renewed. Pursuant to PRC authority, PNM could
invest up to $50 million in equity in Avistar and entered into a reciprocal
loan agreement with Avistar for up to $30 million. PNM has currently invested
$25 million in Avistar and has no amounts outstanding under the reciprocal
loan agreement.

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<PAGE>

PNM expects the reorganized corporate structure of Manzano
immediately after the share exchange and corporate separation to be as
follows:

--------------
MANZANO
--------------

---------------- -------------------
ENERGY UTILITYCO
(the former PNM) (renamed Public
Service Company
of New Mexico)
---------------- -------------------

----------------
AVISTAR
----------------

The above chart does not show any of PNM's other existing
subsidiaries since these subsidiaries are either inactive or immaterial to
PNM. Manzano may also establish other subsidiaries in the future to engage in
competitive or other businesses.

REASONS FOR THE HOLDING COMPANY STRUCTURE AND THE SHARE EXCHANGE

The primary purpose of the formation of a holding company structure
is to establish a corporate structure that will respond to increased
competition in the electric and natural gas utility industries and to comply
with the recently adopted Restructuring Act.

In recent years, federal and state initiatives have promoted the
development of competition in the sale of electricity and gas. In general,
these initiatives have sought to unbundle the integrated services that
electric and gas utilities have traditionally provided and to enable
customers to purchase electricity and gas directly from suppliers other than
their local utilities while continuing to have this electricity and gas
delivered by their local utilities.

FEDERAL ELECTRIC INITIATIVES. Beginning with the passage of the
Public Utility Regulatory Policies Act of 1978 and, subsequently, the Energy
Policy Act, there has been a significant increase in the level of competition
in the market for the generation and sale of electricity. The Energy Policy
Act reduced barriers to market entry for companies wishing to build, own and
operate electric generating facilities, and it also promoted competition by
authorizing the FERC to require transmission service for wholesale power
transactions. In this regard, in 1996, the FERC issued Order 888 which, among
other things, required electric utilities controlling transmission facilities
to file open access transmission tariffs that would make the utility
transmission systems available to wholesale sellers and buyers of electric
energy on a non-discriminatory basis. PNM filed its open access transmission
tariffs with the FERC in April 1996.

24
<PAGE>

Order 888 encouraged utilities to investigate the formation of
independent system operators, or ISOs, to operate transmission assets and
provided criteria under which the formation, operation and governance of ISOs
would be reviewed. The FERC issued an order relating to regional transmission
organizations, or RTOs establishing timelines for transmission asset-owning
entities to join an RTO and defined the minimum characteristics and functions
that an RTO must satisfy.

Since early 1997 PNM has been informally discussing the formation of
an ISO in the southwestern United States. In January 1998, PNM entered into a
development agreement with other transmission service providers and users to
form an ISO in the Southwest. The development agreement called for the
development of the ISO to be separated into two phases. The first phase
defined the operating, pricing, planning and legal parameters of the ISO. The
second phase, which is still underway, was to develop the by-laws, articles
of incorporation and various tariffs and agreements required to operate the
ISO.

Desert STAR, Inc., was incorporated as a non-profit organization in
the State of Arizona on September 21, 1999. Desert STAR is being developed to
satisfy the FERC's characteristics and functions as defined in Order 2000.
PNM is unable to predict the ultimate timing of the formation or the ultimate
outcome of the proposed Desert STAR RTO.

THE RESTRUCTURING ACT. At the retail level, the Restructuring Act in
New Mexico was enacted into law on April 8, 1999, opening the state's
electric power market to certain customers beginning in 2001 and the
remainder in 2002. The law requires the competitive unregulated activities of
a public utility to be separated from its regulated activities through the
creation of at least two separate corporations. The law also requires that
public utilities be allowed to recover at least half of their stranded costs
through a non-bypassable wires charge on all customer bills for five years
after the implementation of customer choice. The PRC could authorize a public
utility to recover up to 100% of its stranded costs if certain criteria
specified in the law are met. Public utilities will also be allowed to
recover in full prudent and reasonable costs incurred in implementing full
open access or transition costs. These transition costs may be recovered
through 2007 by means of a separate wires charge. PNM was initially required
to file a transition plan with the PRC by March 1, 2000, for approval on or
before December 1, 2000, which plan had to include, among other things,
proposals for separating regulated and competitive business activities and
proposed charges for the recovery of stranded costs and transition costs. The
PRC has the authority under the Restructuring Act to extend the deadline for
filing a transition plan and the commencement date for customer choice by up
to one year.

On January 18, 2000, the PRC extended the deadline for the
transition plan filing for all New Mexico utilities by three months to June
1, 2000. The PRC also asked for written comments within 60 days about
extending the open access starting dates but no extensions or changes have
been made thus far.

25
<PAGE>

subsidiaries of PNM. In response to this request, PNM received an order from
the PRC on February 15, 2000 authorizing it to form Manzano and UtilityCo as
wholly-owned shell subsidiaries of PNM. Part two of the transition plan
requested by June 1, 2000 all PRC approvals necessary for PNM to implement
the formation of the holding company structure and the share exchange and its
separation plan pursuant to the Restructuring Act. However, the part two
hearing was scheduled for May 15, 2000 which will make a June 1, 2000
approval unlikely. Therefore, PNM has assumed a July 1, 2000 approval date
with an August 1, 2000 separation date. However, there can be no assurance
that the August 1, 2000 separation date can be achieved. PRC staff and the AG
filed a motion in February 2000 to delay the May 15, 2000 hearing date. PNM
filed a response in opposition in February 2000. The motion is pending before
the PRC hearing examiner. As discussed, this separation plan involves the
transfer of the regulated business of PNM (generally, electric and gas
distribution and transmission assets) to UtilityCo so that PNM or Manzano
Energy as it will be called after the transfer, will maintain ownership of
the competitive, deregulated businesses (generally, electric generation and
related assets). This transfer is expected to take place after the
consummation of the share exchange assuming the receipt of all necessary
regulatory and other approvals. Part three of PNM's transition plan, which is
currently planned to be filed by PNM in March 2000 will address transition
costs, stranded costs, UtilityCo's cost of service, standard offer service
and other issues required to be considered under the Restructuring Act.

INCREASED FLEXIBILITY OF A HOLDING COMPANY STRUCTURE. Currently, PNM
is subject to the regulation of the PRC with respect to almost all aspects of
its business, including the making of investments and the issuance of
securities. Under a holding company structure, Manzano would not be subject
to PRC regulation and, therefore, would be able to pursue non-utility
business opportunities in a timely manner and without the delay associated
with a regulated business. The proposed holding company structure also would
permit the use of financing techniques and strategies that are better suited
to the particular requirements, characteristics and risks of non-utility
operations without affecting the capital structure or creditworthiness of
UtilityCo. This would increase Manzano's financial flexibility by allowing it
to establish different debt-to-equity ratios and appropriate leverage levels
for each individual line of business. In addition, the holding company
structure is expressly authorized by the Restructuring Act as complying with
the Restructuring Act's requirements to separate regulated businesses from
competitive deregulated businesses.

REGULATORY APPROVALS

Approval of the proposed holding company structure and the share
exchange is required from the PRC, the FERC and the NRC.

As discussed above, PNM received an order from the PRC on February
15, 2000 authorizing it to form Manzano and UtilityCo as wholly-owned shell
subsidiaries of PNM. PNM filed an application with the PRC in November 1999
that is still pending seeking by June 1, 2000 all PRC approvals necessary for
PNM to implement the formation of the holding company structure and the share
exchange and its separation plan, including necessary financing transactions,
pursuant to the Restructuring Act. However, the part two hearing was
scheduled for May 15, 2000 which will make a June 1, 2000 approval unlikely.
Therefore, PNM has assumed a July 1, 2000 approval date with an August 1,
2000 separation date. The PRC staff and the AG filed a motion in February
2000 to delay the May 15, 2000 hearing date. PNM filed

26
<PAGE>

a response in opposition in February 2000. The motion is pending before the
PRC hearing examiner.

The FERC has held that transfer of control of a public utility
company from its existing shareholders to shareholders of a holding company
constitutes a transfer of the "ownership and control" of facilities subject
to its jurisdiction under the Federal Power Act. Such an exchange must
therefore be reviewed and approved by the FERC under Section 203 of the
Federal Power Act. PNM currently plans to file an application with the FERC
requesting this approval in March 2000.

As a co-licensee with respect to three nuclear generating units, PNM
is subject to the authority of the NRC. The formation of a holding company
and the separation of PNM's competitive, deregulated and regulated businesses
will involve two matters requiring NRC approval: (1) consent to the indirect
transfer of control of PNM's NRC license for its minority interests in Palo
Verde Nuclear Generating Station Units 1, 2 and 3 to a holding company and
(2) approval of amendments to the operating licenses for Palo Verde Nuclear
Generating Station Units 1, 2 and 3 to reflect the change in PNM's name. PNM
filed an application with the NRC requesting this approval in March 2000. The
application is currently pending with the NRC.

In addition to the regulatory approvals described above that are
necessary to implement the formation of the holding company structure and the
share exchange, PNM must obtain the approval of the SEC under Section 9(a)(2)
of the Public Utility Holding Company Act of 1935, or the 1935 Act, the
approval of the FCC and certain financial consents to effect the separation
of the regulated business and the competitive, deregulated businesses.
Receipt of these approvals which are required for separation will not be a
condition to the implementation of the share exchange.

CONDITIONS TO THE SHARE EXCHANGE

The agreement and plan of share exchange is subject to the
satisfaction of the following conditions (in addition to approval of the
agreement and plan of share exchange by the holders of PNM common stock as
described in this proxy statement/prospectus):

- all necessary orders, authorizations, approvals or waivers
from the PRC, FERC, NRC and any other jurisdictional
regulatory bodies, boards or agencies, or other parties, have
been received, remain in full force and effect, and do not
include, in the sole judgment of PNM's Board of Directors,
unacceptable conditions;

- shares of the Manzano common stock to be issued in connection
with the share exchange have been listed, subject to official
notice of issuance, on the New York Stock Exchange;

- a registration statement is effective under the Securities Act
relating to the shares of Manzano common stock to be issued in
connection with the share exchange and is not subject to any
stop order thereunder;

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<PAGE>

- the receipt of an opinion of counsel or an opinion from PNM's
independent public accountants, in form and substance
satisfactory to PNM's and Manzano's Boards of Directors, as to
the United States federal income tax consequences of the share
exchange; and

- the receipt of an opinion, in form and substance satisfactory
to PNM's Board of Directors, from Keleher & McLeod, P.A.,
counsel to PNM, as to the legality of Manzano common stock to
be issued by Manzano in connection with the share exchange.

Following satisfaction of these conditions, the share exchange will
become effective upon filing (or at a specified time thereafter) with the
Corporations Bureau of the PRC the Articles of Exchange relating to the share
exchange. PNM cannot predict when all conditions will be satisfied but has
assumed that the share exchange will become effective on or about August 1,
2000.

CONSEQUENCES OF FAILURE TO OBTAIN SHAREHOLDER APPROVAL OF THE SHARE EXCHANGE

The holding company structure being proposed is PNM's response to
the transformation of the energy generation industry into a competitive
marketplace. As required by the Restructuring Act, PNM must separate its
regulated businesses from its competitive businesses through the use of at
least two separate corporations. PNM believes that its proposed holding
company structure achieves the mandate of the Restructuring Act while
enhancing its ability to compete in deregulated markets. The holding company
structure limits the amount of direct regulation to which the holding company
is subject and permits it to establish and fund new competitive businesses
without regulatory approval.

If the holding company structure is not approved by shareholders,
PNM's competitive businesses would be materially affected. Developing and
implementing an alternative form to meet the requirements of the
Restructuring Act and position PNM to grow its competitive businesses would
be costly and protracted. PNM would experience a significant delay in
creating a new form of organization to take advantage of new business
opportunities in a timely manner. In addition, any alternative form of
separation could materially affect both the competitive, deregulated
businesses as well as the regulated business (see "Risk Factors--Necessary
Regulatory Approvals of Proposed Separation Plan May Not Be Obtained"). If
PNM is unable to implement the proposed holding company structure, its growth
plans for its competitive, deregulated businesses may be negatively affected.

REGULATION OF MANZANO AND ITS SUBSIDIARIES AFTER THE SHARE EXCHANGE AND
CORPORATE SEPARATION

Upon consummation of the share exchange and corporate separation,
Manzano, as the owner of all the outstanding UtilityCo and Energy common
stock, will be a "holding company" under the 1935 Act. Manzano will claim an
exemption under Section 3(a)(1) of the 1935 Act on the basis that Manzano,
UtilityCo and Energy are each organized and carry on their businesses
substantially in the State of New Mexico. This exemption is available only so
long as the utility businesses of UtilityCo and Energy, and of any other
public utility subsidiary from which

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<PAGE>

Manzano derives a material portion of its income, remain predominantly within
New Mexico. The exemption would exempt Manzano from all provisions of the
1935 Act except Section 9(a)(2), which requires SEC approval for any person
to acquire any security of a public utility company if the person owns,
controls or holds with the power to vote 5% or more of the outstanding voting
securities of the utility and of any other public utility or holding company,
or will by virtue of the acquisition, own, control or hold with the power to
vote 5% or more of the outstanding voting securities of the utility. To
maintain this exemption, Manzano must file an exemption statement each year
prior to March 1 with the SEC. The exemption may be revoked by the SEC if a
substantial question of law or fact exists as to whether Manzano is within
the parameters of the exemption, or if it appears that the exemption may be
detrimental to the public interest or the interest of investors or consumers.

Manzano will not be subject to regulation by the PRC, the FERC or
the NRC, except to the extent that the statutes and rules and orders of these
agencies impose restrictions on Manzano's relationships with UtilityCo or
Energy, or UtilityCo's or Energy's relationships with any future subsidiaries
of Manzano, or potential transactions involving Manzano and other public
utilities or holding companies that own public utilities subject to Federal
Power Act jurisdiction.

One of the purposes of the Restructuring Act and PNM's separation
plan is to functionally separate the regulated business from the competitive,
deregulated businesses. However, since implementation of customer choice in
New Mexico under the Restructuring Act will not be complete until at least
January 1, 2002, there will be an interim period during which UtilityCo will
function as PNM traditionally has functioned--as a public utility offering
fully bundled electric generation, transmission and distribution
service--even though it will not own electric generation assets after PNM's
regulated and competitive, deregulated businesses have been separated.
UtilityCo intends to provide fully bundled service with the same level of
reliability PNM has traditionally provided and at rates in accordance with
the rate freeze approved by the PRC. These rates will remain in effect for
each class of customer until customer choice is available for each class, or
until 2003, whichever occurs first. UtilityCo will be able to continue to
provide fully bundled electric service because it will enter into power
purchase and other ancillary agreements with Energy allowing it to procure
the same resources traditionally available to PNM for providing fully bundled
service. These agreements will terminate on the date of full open access.

During the interim period between the implementation of PNM's
separation plan, and the implementation of customer choice for medium, large
commercial and industrial customers on January 1, 2002, or a later date
determined by the PRC, Energy will provide electric supply to UtilityCo as
described above. Otherwise, Energy will continue to provide wholesale
electric service as it has in the past and currently does, and will also
function as a competitive, deregulated firm offering and providing retail
electric supply and energy-related services after it receives its license
from the PRC.

After the implementation of the share exchange and PNM's proposed
separation plan, aside from the indirect regulatory oversight occasioned by
the interim period prior to complete customer choice as described above,
UtilityCo will continue to be subject to the regulation of the PRC and the
FERC, and Energy will generally not be subject to the regulation of the PRC,

29
<PAGE>

although it will be required to obtain a competitive power supplier license
in order to sell retail power in New Mexico and comply with customer
protection rules adopted by the PRC in accordance with the Restructuring Act.
Energy will continue to be subject to the regulation of the NRC, as a
co-licensee with respect to three nuclear generating units, and the FERC.

TREATMENT OF PNM EXISTING INDEBTEDNESS AND PREFERRED STOCK

The share exchange itself will not result in any change in the
consolidated outstanding indebtedness of PNM. In connection with the transfer
of the regulated business by PNM to UtilityCo and the permanent debt
financing for the assets to be transferred, subject to the receipt of the
necessary regulatory and other approvals, UtilityCo may make an offer to
holders of PNM's public senior unsecured notes ($403 million outstanding as
of December 31, 1999) to exchange these notes for newly-issued senior
unsecured notes of UtilityCo with substantially the same terms as the
existing PNM notes. Alternatively, some or all of these notes could continue
to be debt of Energy depending on the results of any exchange offer or if it
is more appropriate to capitalize UtilityCo with newly issued debt and use
the proceeds from this debt issue to purchase a portion of the assets to be
transferred to UtilityCo from Energy. It is currently planned that $586
million of currently outstanding pollution control revenue bonds (secured by
senior unsecured notes and first mortgage bonds) will remain as debt
instruments of Energy after the share exchange and corporate separation since
these bonds were issued to finance the ownership and operation of electric
generation assets.

PNM's preferred stock ($12.8 million outstanding as of December 31,
1999) will remain an equity security of Energy after the share exchange
unless an exchange offer is made by UtilityCo and accepted by all the holders
or the preferred stock is redeemed by PNM. Depending on the results of any
exchange offer for PNM's preferred stock, some or all of this preferred stock
could remain an equity security of Energy or become a new equity security of
UtilityCo.

DIVIDEND POLICY

There is currently no reason to expect that dividends to common
shareholders will be affected by the reorganization. The ability of Manzano
to pay dividends will depend initially on the dividends and other
distributions that UtilityCo and Energy pay to Manzano and the capital
requirements of Manzano and its direct and indirect subsidiaries. It is
anticipated that the dividends paid to Manzano by UtilityCo and Energy will
be sufficient to enable Manzano to pay dividends on its common stock
initially at the same rate and on the same schedule that PNM currently pays
dividends. However, the ability of UtilityCo and Energy to pay dividends to
Manzano will depend on a number of factors, including the extent to which
cash flows will support dividends, the availability of retained earnings, the
financial circumstances and performance of UtilityCo and Energy, the PRC's
decisions on PNM's various regulatory cases currently pending and market and
economic conditions generally. See "Risk Factors--Dividends on Manzano Common
Stock Will Depend Initially on Common Stock Dividends Paid by UtilityCo and
Energy."

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<PAGE>

RIGHTS OF DISSENTING SHAREHOLDERS

THE FOLLOWING SUMMARY OF THE AVAILABILITY OF DISSENTERS' RIGHTS AND
STATUTORY PROCEDURES TO BE FOLLOWED BY A HOLDER OF PNM COMMON STOCK IN ORDER
TO PERFECT DISSENTERS' RIGHTS UNDER NEW MEXICO LAW IS NECESSARILY INCOMPLETE
AND SELECTIVE AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SECTIONS
53-15-3 AND 53-15-4 OF THE BCA THE TEXT OF WHICH IS ATTACHED TO THIS PROXY
STATEMENT/PROSPECTUS AS EXHIBIT E.

The BCA gives holders of PNM common stock the right to dissent from
certain corporate actions, including share exchanges to which PNM is a party.
The BCA sets forth the procedure whereby a shareholder who desires to dissent
from any such proposed action must file with the corporation, a written
objection to the action prior to or at the meeting of shareholders at which
the proposed action is submitted to a vote. A shareholder need not vote
against the proposed action to perfect his or her dissenters' rights, which
may be done only by a written notice of objection to PNM. PNM intends to take
the position that voting in person or by proxy against the proposed action
will not constitute the written objection required.

If the action is consummated and a shareholder who has given written
notice of objection has not voted in favor of the action, the shareholder
may, within ten days after the date on which the vote was taken, make written
demand on PNM for payment of the fair value of his or her shares of PNM
stock. Within twenty days after demanding payment, each holder of shares
represented by certificates demanding payment must submit the certificates
for notation that such demand has been made. Failure to do so, at the option
of PNM, terminates the shareholder's dissenters' rights unless a court of
competent jurisdiction, for good and sufficient cause shown, decides
otherwise.

Within ten days after the corporate action is effected, the
corporation is required to give written notice of the action to each
dissenting shareholder who has made demand and to make a written offer to
each such shareholder to pay for their shares at a specified price deemed by
the corporation to be their fair value. If the corporation and the
shareholder can agree upon the fair value of the shares, that value will be
paid and all rights of the dissenting shareholder will cease. If agreement as
to the fair value cannot be reached, the corporation, within the time limits
prescribed by Section 53-15-4 of the BCA, is to file suit in any court of
competent jurisdiction in the county in which the registered office of the
company is located, asking for a finding and determination of the fair value
of the shares. If the corporation fails to institute the proceeding, any
dissenting shareholder may do so in the name of the corporation. All
dissenting shareholders of the corporation, wherever they reside, must be
made parties to the proceeding. The fair value of the shares, as determined
by the court, is payable immediately to the holders of uncertificated shares
and, to the holders of shares represented by certificates, only upon and
concurrently with the surrender to the corporation of the certificates
representing the shares. Upon payment of the fair value, the dissenting
shareholder will cease to have any interest in the shares. The costs and
expenses of any such proceeding will be determined by the court and assessed
against the corporation, but all or any part of the costs and expenses may be
apportioned and assessed as the court deems equitable against any or all of
the dissenting shareholders who are parties to the proceeding to whom the
corporation made an offer to pay for the shares if the court finds that the
action of the shareholders in failing to accept the offer was arbitrary or
vexatious or not in good faith. The fair value of the shares will be their
value as of the day before the vote was taken

31
<PAGE>

authorizing the corporate action, excluding any appreciation or depreciation
in anticipation of the action.

IT IS SUGGESTED THAT SHAREHOLDERS CONSIDERING EXERCISING STATUTORY
DISSENTERS' RIGHTS CONSULT WITH THEIR OWN TAX ADVISORS WITH REGARD TO THE
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE ACTION.

PNM DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN

Shares of PNM common stock held in its dividend reinvestment and
stock purchase plan, known as the PNM Direct Plan (including uncertificated
whole and fractional shares), will automatically become a like number of
shares of Manzano common stock at the consummation of the share exchange. As
of the consummation of the share exchange, Manzano will succeed to this plan
as sponsor as in effect immediately prior to the consummation of the share
exchange, and shares of Manzano common stock will be issued under this plan
after the consummation of the share exchange. Manzano will file a
post-effective amendment to PNM's registration statement on Form S-3 for this
plan shortly after the share exchange is consummated.

PNM PERFORMANCE STOCK PLAN AND PNM DIRECTOR RETAINER PLAN

The agreement and plan of share exchange provides that the PNM
Performance Stock Plan and the PNM Director Retainer Plan will be amended to
provide that upon consummation of the share exchange, Manzano will become the
sponsor of these plans. If the share exchange is consummated, shares of PNM
common stock then held under the PNM Director Retainer Plan will
automatically become a like number of shares of Manzano common stock.

Upon consummation of the share exchange, all outstanding options
under the Performance Stock Plan and the Director Retainer Plan will be
converted into options to acquire, on the same terms and conditions as were
applicable under these stock options immediately prior to the consummation of
the share exchange, such number of shares of Manzano common stock as the
holders of these options would have been entitled to receive pursuant to the
share exchange had these holders exercised these stock options in full
immediately prior to the share exchange, at a price per share of Manzano
common stock equal to the per share option price of PNM common stock. Also, a
vote in favor of the agreement and plan of share exchange will also
constitute approval, under these plans, as amended, for shares of Manzano
common stock, instead of PNM common stock, to be issued and delivered in the
future under these plans. Except as otherwise described below, Manzano may
issue future options on its common stock under these plans. Manzano will file
post-effective amendments to PNM's registration statements on Form S-8 for
these amended plans shortly after the consummation of the share exchange.

During the seven years that the Performance Stock Plan has been in
existence, of the 5,000,000 million options available to be granted, PNM has
granted 3,961,835 options to members of management. As of February 25, 2000,
employees held 2,510,505 options that have not been exercised. These options
have the potential to be dilutive. However, to date, PNM has used market
purchases to satisfy the exercise of options by employees and, therefore, no
share

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<PAGE>

dilution has occurred. PNM and Manzano currently intend to continue to
satisfy the exercise of options with market purchases.

If shareholders approve the Omnibus Plan at the annual meeting and
the share exchange is consummated, no new option grants will be made under
the Performance Stock Plan and instead will be made under the Omnibus Plan.
In any event, no new options will be awarded under the Performance Stock Plan
after December 31, 2000, in accordance with the terms of the plan.

LISTING OF MANZANO COMMON STOCK

We expect the Manzano common stock to be approved for listing on the
New York Stock Exchange and to trade under the stock symbol "MZO." At the
time of the listing of Manzano common stock, we will de-list the PNM common
stock.

TRANSFER AGENT AND REGISTRAR

Manzano will act as transfer agent and registrar for its common
stock. The address for the transfer agent and registrar will be Manzano
Corporation Shareholder Records Department, Alvarado Square - MS 1104,
Albuquerque, New Mexico 87158.

MARKET PRICE OF PNM COMMON STOCK

PNM's common stock is currently listed and traded on the New York
Stock Exchange. On October 5, 1999, the day before PNM filed a press release
announcing its intention to form a holding company, the high and low sales
prices of PNM's common stock were $18.375 and $17.8125, respectively. The
reported closing price of PNM common stock on March 7, 2000 was $15.625.

DIRECTORS AND EXECUTIVE OFFICERS

The initial Board of Directors of Manzano will consist of seven of
the nine directors of the Board of Directors of PNM (including two of the
directors standing for election at the annual meeting). These directors are
identified in Exhibit B hereto. The initial term of each of the directors of
Manzano will be until the first election of Manzano directors at its annual
meeting of shareholders in 2001. There will be minimal overlap between the
Manzano Board of Directors and the UtilityCo Board of Directors and between
the Manzano Board of Directors and the Energy Board of Directors. There will
be no overlap between the Boards of UtilityCo and Energy, or its subsidiaries
that are involved in a competitive business. However, we anticipate that
Manzano, Energy and UtilityCo may have some common officers. The existence of
common directors and officers among Manzano, Energy and UtilityCo will comply
with the PRC Code of Conduct and PNM's Statement of Policy and Procedure
after they become effective.

DESCRIPTION OF PNM CAPITAL STOCK

GENERAL. PNM is authorized to issue:

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<PAGE>

- 80,000,000 shares of common stock having a par value of $5
each, of which 40,703,383 shares were issued and outstanding
as of December 31, 1999; and

- 10,000,000 shares of cumulative preferred stock without par
value, of which 128,000 shares were issued and outstanding as
of December 31, 1999.

The outstanding preferred stock has preference over the outstanding
common stock as to dividends and assets on liquidation.

PREFERRED STOCK. The PNM Restated Articles of Incorporation, as
amended, or the PNM Articles, provide that, to the extent permitted by the
BCA, the PNM Board of Directors is authorized, at any time or from time to
time, to establish and designate one or more series of preferred stock and to
fix the number of shares and the relative rights, preferences and limitations
of each series. However, certain of the characteristics of PNM preferred
stock, such as voting rights, are fixed in the PNM Articles.

DIVIDENDS. After giving effect to any prior rights of PNM preferred
stock, if any are outstanding, PNM will pay dividends on its common stock as
determined by its Board of Directors out of legally available funds. The PNM
Articles contain certain restrictions on dividends so long as PNM preferred
stock is outstanding.

VOTING RIGHTS. The holders of PNM common stock are entitled to one
vote for each share held by them on all matters submitted to the shareholders
of PNM. Holders of PNM common stock do not have cumulative voting rights in
the election of directors. The PNM Articles and Bylaws generally require the
affirmative vote of a majority of the shares represented at the annual
meeting and entitled to vote for shareholder action, including the election
of directors. As a result of the application of certain provisions of the
BCA, some corporate actions, including amending the PNM Articles and
approving a plan of merger, consolidation or share exchange, require the
affirmative vote of two-thirds of the outstanding shares entitled to vote.

LIQUIDATION. In the event PNM is liquidated or dissolved, either
voluntarily or involuntarily, the holders of any PNM preferred stock
established by its Board of Directors would have priority (after PNM's
creditors) with respect to the distribution of PNM's assets. After the
holders of any such preferred stock are paid their aggregate liquidation
preference, the holders of PNM common stock would be entitled, to the
exclusion of the holders of any such preferred stock, to share ratably
(according to the number of shares held by them) in all remaining assets of
PNM available for distribution.

PREEMPTIVE AND OTHER RIGHTS. The holders of PNM capital stock do not
have any preemptive rights to purchase shares of PNM common or preferred
stock (or their equivalents). The PNM common stock is not subject to
redemption or to any further calls or assessments and is not entitled to the
benefit of any sinking fund provisions.

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<PAGE>

DESCRIPTION OF MANZANO CAPITAL STOCK

GENERAL. Manzano is authorized to issue:

- 120,000,000 shares of common stock, of which 100 shares are
currently outstanding and issued to PNM; and

- 50,000,000 shares of preferred stock, of which none are
currently issued and outstanding.

PREFERRED STOCK. Like the PNM Articles, the Manzano Articles of
Incorporation, or the Manzano Articles, provide that, to the extent permitted
by the BCA, the Manzano Board of Directors is authorized, at any time or from
time to time, to establish and designate one or more series of preferred
stock and to fix the number of shares and the relative rights, preferences
and limitations of each such series. The Manzano Articles limit the Manzano
Board of Directors to designating voting rights only when dividends on the
preferred stock are not paid and when proposed changes to the Articles would
adversely affect preferred shareholder rights.

DIVIDENDS. After giving effect to any prior rights of Manzano
preferred stock, if any should become outstanding, Manzano will pay dividends
on its common stock as determined by its Board of Directors out of legally
available funds.

VOTING RIGHTS. The holders of Manzano common stock are entitled to
one vote for each share held by them on all matters submitted to the
shareholders of Manzano. Holders of Manzano common stock do not have
cumulative voting rights in the election of directors. The Manzano Articles
and Bylaws generally require the affirmative vote of a majority of the shares
represented at the annual meeting and entitled to vote for shareholder
action, including the election of directors. Under the Manzano Articles, some
corporate actions, including amending the Manzano Articles and approving a
plan of merger, consolidation or share exchange, require the affirmative vote
of two-thirds of the outstanding shares entitled to vote.

LIQUIDATION. In the event Manzano is liquidated or dissolved, either
voluntarily or involuntarily, the holders of any Manzano preferred stock
established by its Board of Directors would have priority (after Manzano's
creditors) with respect to the distribution of Manzano's assets. After the
holders of any such preferred stock are paid their aggregate liquidation
preference, the holders of Manzano common stock would be entitled, to the
exclusion of the holders of preferred stock, to share ratably (according to
the number of shares held by them) in all remaining assets of Manzano
available for distribution.

PREEMPTIVE AND OTHER RIGHTS. The holders of Manzano capital stock do
not automatically have any preemptive rights to purchase shares of Manzano
common or preferred stock (or their equivalents). The Manzano common stock is
not subject to redemption or to any further calls or assessments and is not
entitled to the benefit of any sinking fund provisions. The shares of Manzano
common stock to be issued to PNM common shareholders in connection with the
share exchange will be fully paid and non-assessable once the share exchange
is completed.

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<PAGE>

COMPARISON OF PNM COMMON STOCK AND MANZANO COMMON STOCK

As New Mexico corporations, both PNM and Manzano are governed by the
BCA. As a result of the share exchange, holders of PNM common stock, whose
rights as shareholders are currently governed by the BCA and PNM's Articles
and Bylaws, will become holders of Manzano common stock, whose rights as
shareholders will be governed by the BCA and Manzano's Articles and Bylaws.

The following table summarizes and compares the principal rights of
Manzano shareholders and the principal rights of PNM shareholders under the
BCA and the respective Articles and Bylaws of PNM and Manzano. It is
qualified in its entirety, however, by reference to the full texts of the
Manzano Articles and Bylaws and the PNM Articles and Bylaws. We have attached
the Manzano Articles and Bylaws as Exhibits B and C to this proxy
statement/prospectus for your convenience. The PNM Articles and Bylaws are
incorporated by reference as exhibits to the registration statement of which
this proxy statement/prospectus is a part.

<TABLE>
<CAPTION>
PNM MANZANO
COMMON SHAREHOLDERS COMMON SHAREHOLDERS
- ------------------------------------------------------------ --------------------------------------------------------
<S> <C>
AUTHORIZED SHARES

80 million shares of common stock and 10 million shares of 120 million shares of common stock and 50 million
cumulative preferred stock shares of preferred stock.

PREEMPTIVE RIGHTS

None. None, except as determined by the Board.

ADVANCE NOTICE OF BUSINESS TO BE BROUGHT BEFORE
SHAREHOLDER MEETINGS BY A SHAREHOLDER

None required. 90 days prior to the anniversary date of the previous
year's proxy statement mailing.

NUMBER OF DIRECTORS

Nine. Variable, between five and twelve, as determined by the
Manzano Board of Directors. The initial Manzano Board
of Directors will have seven members.
</TABLE>

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<PAGE>

Amend the PNM Articles upon the affirmative vote of The Manzano Board of Directors can increase or decrease
two-thirds of the outstanding shares entitled the number of directors between five and twelve as
to vote. established in the Manzano Articles. Changing this range
would require an amendment to the Manzano Articles and,
therefore, would require the affirmative vote of two-thirds
of the outstanding shares entitled to vote.

CLASSIFIED BOARD
Three classes of directors, with each class serving If there are nine or more directors, the Manzano Board of
staggered three-year terms. Directors, at its option, may classify itself to the
extent permitted under the Manzano Articles and the BCA
into two or three classes with staggered terms.

CUMULATIVE VOTING FOR DIRECTORS

None. None.

REMOVAL OF DIRECTORS

With or without cause at a meeting of shareholders called Same.
expressly for that purpose by the vote of a majority of
the shares then entitled to vote on the election of
directors.

ELECTION OF DIRECTORS TO FILL VACANCIES

By a majority of the remaining directors. Same.

SPECIAL MEETINGS OF SHAREHOLDERS

May be called by a majority of the Board of Directors, the May be called by a majority of the Board of Directors,
Executive Committee, the Chairman of the Board, the the Chairman of the Board, the President or the holders
President or the holders of not less than one-tenth of of not less than one-tenth of all the shares entitled to vote
all the shares entitled to vote at the meeting. at the meeting.
</TABLE>

37
<PAGE>

Only if the consent is signed by all shareholders entitled Same.
to vote with respect to the subject matter at issue.

SUPER MAJORITY VOTING PROVISIONS

Two-thirds shareholder approval required for any plan of Two-thirds shareholder approval required for any plan
merger, consolidation or share exchange or to amend the of merger, consolidation or share exchange or to amend
PNM Articles. the Manzano Articles.

SHAREHOLDER APPROVAL OF STOCK RIGHTS OR OPTIONS

The BCA requires shareholder approval of stock rights or The Manzano Articles vest in the Manzano Board of Directors
options issued to directors, officers or employees and not the authority to create and issue stock rights and options
to shareholders generally, unless otherwise provided in without shareholder approval.
the articles of incorporation.
</TABLE>

POSSIBLE ANTI-TAKEOVER EFFECT OF CERTAIN PROVISIONS OF MANZANO'S ARTICLES AND
BYLAWS

The Board of Directors of Manzano does not believe that there are
any provisions in the Manzano Articles or Bylaws that have potential
anti-takeover effects other than the provisions described below. Although it
is not the intention of the Manzano Board of Directors to discourage
legitimate offers to enhance shareholder value, the overall effect of these
provisions of the Manzano Articles may be to render more difficult or to
discourage unsolicited attempts to acquire and take over Manzano. By
discouraging potential takeover bids, these provisions might diminish the
opportunity for Manzano's shareholders to sell their shares at a premium over
then prevailing market prices. The PNM Board of Directors decided to include
these provisions to ensure that the Manzano Board of Directors would have the
ability to evaluate any proposed acquisition or change in control based on
the interests of Manzano and all of its constituencies without undue
pressure. The Manzano Board of Directors believes that these anti-takeover
provisions will provide additional protection and potential stability for
Manzano and its shareholders, thus increasing Manzano's ability to maximize
shareholder value.

CAPITALIZATION AND PREFERRED STOCK. The Manzano Board of Directors
believes that the shares of Manzano preferred stock authorized to be issued
from time to time with such rights, preferences and limitations as the
Manzano Board of Directors shall determine will provide the

38
<PAGE>

Manzano Board of Directors with desirable flexibility in structuring possible
future financings and acquisitions and in meeting other possible future
corporate needs.

The Manzano preferred stock will be issuable from time to time in
one or more series by the Manzano Board of Directors without further action
by shareholders. The Manzano Board of Directors is authorized, subject to
certain limitations, prior to the issuance of any shares of a particular
series of preferred stock, to fix the designations, preferences and relative,
participating, optional and other special rights, and the qualifications,
limitations and restrictions of such rights, including, without limitation,
the dividend rights, conversion rights, rights and terms of redemption
(including sinking fund provisions) and liquidation rights of each series. In
addition, the Manzano Board of Directors is authorized to determine the
number of shares constituting each series of Manzano preferred stock. The
ability of Manzano's Board of Directors to designate preferential rights of
the Manzano preferred stock as to dividends or redemption or in connection
with any liquidation, dissolution or winding-up of Manzano could diminish
funds otherwise available to the holders of Manzano common stock.

SUPER MAJORITY VOTING PROVISIONS. Absent a specific amendment to the
PNM Articles, PNM is not subject to certain amendments, effective June 17,
1983, to the BCA that lowered the shareholder voting requirements on certain
matters, including mergers, sales of assets, charter amendments and certain
exchanges of stock, such as the share exchange, from two-thirds of the
outstanding shares entitled to vote thereon to a majority of the outstanding
shares entitled to vote thereon. Accordingly, under current New Mexico law
applicable to PNM, the affirmative vote of the holders of two-thirds of the
shares of PNM common stock entitled to vote is required to approve the
agreement and plan of share exchange.

Unlike PNM, Manzano is subject to the 1983 amendments to the BCA
which, as indicated below, lowered the shareholder voting requirements in
certain circumstances to a majority of the outstanding shares entitled to
vote on a matter. Despite the availability of these lowered voting
requirements to Manzano, the Manzano Articles provide that the affirmative
vote of the holders of two-thirds of the outstanding Manzano common stock is
required to effect a merger, consolidation or sale of all or substantially
all of its assets, to amend the provisions of the Manzano Articles and to
effect certain exchanges of stock.

NON-CUMULATIVE VOTING. Like PNM, Manzano will not provide for
cumulative voting in the election of directors. Cumulative voting means that
the total number of votes which a holder of common stock may cast for the
election of directors shall equal the number of directors to be elected
multiplied by the number of shares held, and the shareholder may cast all of
his or her votes for a single nominee for director or may distribute them
among all or several nominees, as the shareholder sees fit.

Under cumulative voting, it is possible for representation on a
board of directors to be obtained by an individual or group of individuals
who own less than a majority of the voting stock. Such a shareholder or group
may have interests and goals which are not consistent with, and indeed might
be in conflict with, those of a majority of the shareholders. The Manzano
Board of Directors believes that each director should represent all
shareholders, rather than the interests of any special constituency, and that
the presence on the Manzano Board of Directors of one or more directors
representing such a constituency could disrupt and impair the efficient

39
<PAGE>

management of Manzano. The lack of cumulative voting could discourage the
accumulation of blocks of common stock and therefore could tend to make
increases in the market price of Manzano common stock, which could result
therefrom, less likely to occur. Therefore, shareholders may not be able to
sell their shares of Manzano common stock at a market price influenced by
this type of activity.

OTHER PROVISIONS. Some other provisions of the Manzano Articles or
Bylaws may also tend to discourage potential offers to take over and acquire
the business of Manzano. The initial Manzano Board of Directors will not be
classified since it will only have seven members. The Manzano Articles and
Bylaws, however, also provide directors with the ability to increase the
number of directors, between five and twelve, and to elect, by majority vote,
the additional directors. If the Manzano Board of Directors in the future
consists of nine or more persons, at the option of the Manzano Board of
Directors, it may be divided into classes, with directors in each class
generally being elected to serve multi-year terms. However, under the BCA,
shareholders may remove directors at any time, with or without cause at a
meeting of shareholders called expressly for that purpose. Thus, these
classified board provisions, which are generally comparable to the current
PNM provisions, may not have the usual effect of prolonging the time required
for a shareholder or shareholders with significant voting power to gain
majority representation on the Manzano Board of Directors. In addition, as is
currently the case under the BCA, shareholders can only act by written
consent if the consent is unanimous. Lastly, unlike under the PNM Bylaws, the
Manzano Bylaws require that shareholders give at least ninety days advance
notice to properly bring business before an annual meeting of Manzano. This
Manzano bylaw provision may provide sufficient time for Manzano to institute
litigation or take other steps to respond to such business, or to prevent
such business from being acted upon, if such response or prevention is
thought to be necessary or desirable.

ACCOUNTING TREATMENT

The consolidated assets and liabilities of Manzano and its
subsidiaries (including UtilityCo and Energy) immediately after the share
exchange will be the same as the consolidated assets and liabilities of PNM
and its subsidiaries (including UtilityCo and Manzano) immediately before the
share exchange. Manzano, on an unconsolidated basis, will record its
investment in PNM and in the subsidiaries transferred by PNM to Manzano at
their net book value. The share exchange will result in Manzano becoming the
owner of all of the outstanding shares of PNM common stock and all the
outstanding shares of UtilityCo common stock. This change in ownership will
have no accounting effect on Manzano and its subsidiaries nor will it have
any effect on consolidated results of operations or cash flows of Manzano.
The transfers of subsidiaries by PNM to Manzano and its subsidiaries will
reduce PNM's retained earnings by an amount equal to the net book value of
the subsidiaries and related assets and liabilities.

MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES

The following is a discussion of the material United States federal
income tax consequences of the share exchange and, insofar as it relates to
matters of United States Federal income tax law, constitutes the opinion of
Arthur Andersen LLP. This discussion is based upon the Internal Revenue Code
of 1986, as amended, or the Code, existing income tax regulations, and
administrative and judicial interpretations of the Code and income tax
regulations, all as in

40
<PAGE>

effect as of the date of this document. Those authorities are subject to
change, possibly with retroactive effect, which could result in United States
federal income tax consequences different from those described here.

This discussion does not address any consequences of the share
exchange under the tax laws of any state, local or foreign jurisdiction. It
also does not address every aspect of United States federal income taxation
that may be relevant to a PNM shareholder in light of the shareholder's
particular circumstances, or to PNM shareholders subject to special rules,
including shareholders that are foreign entities or nonresident foreign
individuals for United States federal income tax purposes, financial
institutions, insurance companies, tax-exempt entities, dealers in securities
and persons who acquired shares of PNM common stock pursuant to the exercise
of an employee option or otherwise as compensation. This discussion assumes
that PNM shareholders hold their shares of PNM common stock as capital assets
within the meaning of Code Section 1221.

Further if a PNM shareholder can trace existing PNM shares or lots
of shares to specific purchase dates and specific purchase prices, the
shareholder is expected to be entitled to use the specific share
identification method to determine the tax basis of their new Manzano shares.
However, a prudent shareholder should consult an independent tax advisor for
the proper calculation of tax basis in the Manzano shares received.

THIS DISCUSSION DOES NOT ADDRESS ANY TAX CONSEQUENCES TO PNM
SHAREHOLDERS THAT EXERCISE DISSENTERS' RIGHTS. YOU SHOULD CONSULT YOUR OWN
TAX ADVISOR REGARDING THE TAX CONSEQUENCES TO YOU OF EXERCISING DISSENTERS'
RIGHTS.

YOUR INDIVIDUAL CIRCUMSTANCES MAY AFFECT THE TAX CONSEQUENCES TO YOU
OF PARTICIPATING IN THE SHARE EXCHANGE. THOSE CIRCUMSTANCES MAY NOT BE
ADDRESSED IN THIS DISCUSSION. ACCORDINGLY, YOU SHOULD CONSULT YOUR OWN TAX
ADVISOR TO DETERMINE THE TAX EFFECT TO YOU, IN LIGHT OF YOUR INDIVIDUAL
CIRCUMSTANCES, OF PARTICIPATING IN THE SHARE EXCHANGE, INCLUDING THE
APPLICATION AND EFFECT OF UNITED STATES FEDERAL, STATE, LOCAL AND FOREIGN TAX
LAWS AND IN PARTICULAR, WHETHER FOR UNITED STATES FEDERAL INCOME TAXES, YOU
MAY BE ENTITLED TO USE THE SPECIFIC SHARE IDENTIFICATION METHOD TO DETERMINE
THE TAX BASIS AND HOLDING PERIOD OF YOUR HOLDINGCO COMMON SHARES RECEIVED IN
EXCHANGE FOR INDIVIDUAL SHARES OR LOTS OF SHARES OF PNM ACQUIRED FOR
DIFFERENT AMOUNTS AND AT DIFFERENT TIMES.

THE SHARE EXCHANGE. For the share exchange to be completed, PNM must
receive an opinion from Arthur Andersen LLP to the effect that the share
exchange will constitute a tax-free exchange under Code Section 354(a)(1).

The opinion will be based upon customary assumptions and
representations of fact, including representations of fact contained in
certificates of officers of PNM and Manzano. No ruling has been or will be
sought from the IRS, as to the United States federal income tax consequences
of the share exchange, and the opinion is not binding on the IRS or any
court. Accordingly, there can be no assurances that the IRS will not contest
the conclusions expressed in the opinion or that a court will not sustain
such contest.

41
<PAGE>

The following discussion assumes that the share exchange will
constitute a tax-free exchange under Code Section 354(a)(1).

TAX CONSEQUENCES TO PNM SHAREHOLDERS. For United States federal
income tax purposes, no gain or loss will be recognized by a PNM shareholder
that participates in the share exchange and receives solely common stock of
Manzano in exchange for PNM common stock. The shareholder's aggregate tax
basis in the shares of Manzano common stock received in the share exchange
will equal the shareholder's aggregate tax basis in the shares of PNM common
stock held by the shareholder immediately before the share exchange. A
shareholder's holding period for the shares of Manzano common stock received
in the share exchange will include the period during which the shareholder
held the shares of PNM common stock exchanged, provided the shares of PNM
common stock were held as capital assets on the date of the share exchange.

TAX CONSEQUENCES TO PNM AND MANZANO. For United States federal
income tax purposes, neither PNM nor Manzano will recognize gain or loss as a
result of the share exchange.

Your Board of Directors recommends a vote FOR this proposal.

PROPOSAL 2: ELECTION OF DIRECTORS
(PROPOSAL 2 ON YOUR PROXY CARD)

STRUCTURE

PNM's Board of Directors is divided into three classes for purposes
of election. One class is elected at each annual meeting of shareholders to
serve for a three-year term.

At the 2000 annual meeting, the terms of three directors are
expiring. These directors, if elected at this annual meeting, will hold
office for a three-year term expiring in 2003. Two of these directors, Robert
G. Armstrong and Theodore F. Patlovich, will also serve as directors on the
first Board of Directors of Manzano if the share exchange is approved and
becomes effective. The other directors are not up for election this year and
will continue in office until their successors are elected and qualified.

If a nominee is unavailable for election, proxy holders will vote
for another nominee proposed by the Board of Directors.

DIRECTORS NOMINATED THIS YEAR FOR TERMS EXPIRING IN 2003

ROBERT G. ARMSTRONG, 53, is a resident of Roswell, New Mexico, and
has been a director since May 1991. Mr. Armstrong is the President of
Armstrong Energy Corporation, Roswell, New Mexico, an oil and gas exploration
and production company.

THEODORE F. PATLOVICH, 72, is a resident of Albuquerque, New Mexico
and will be a new director. Mr. Patlovich is a businessman, entrepreneur, and
teacher. He joined Loctite Corporation in 1956, serving in various executive
positions including President of the Loctite Pacific Group from 1974 to 1975,
President of Loctite-Japan from 1975 to 1983, Corporate

42
<PAGE>

Senior Vice President from 1985 to 1991 and served as Vice Chairman of the
Board of Directors from 1985 until his retirement in 1991. Other
directorships include: SVS, Inc., Fresnel Corporation, Reflexite Corporation,
and American Home Furnishings.

PAUL F. ROTH, 67, is a resident of Santa Fe, New Mexico and has been
a director since May 1991. Mr. Roth served as the President of the Dallas
Chamber of Commerce, Dallas, Texas, from 1991 to 1992. Between 1956 and 1991,
Mr. Roth served in various executive positions, including President of the
Texas Division of Southwestern Bell Telephone Company, Dallas, Texas.

Your Board of Directors recommends a vote FOR these nominees.

CONTINUING DIRECTORS - CLASS II (TERM EXPIRING IN 2001)

JOHN T. ACKERMAN, 58, is a resident of Corrales, New Mexico and has
been a director since June 1990. Mr. Ackerman is Chairman Emeritus of PNM.
Mr. Ackerman served as Chairman of the Board of PNM from 1991 to 1999 and
served as President and Chief Executive Officer of PNM from 1990 until his
retirement in 1993.

JOYCE A. GODWIN, 56, is a resident of Albuquerque, New Mexico, and
has been a director since May 1989. Ms. Godwin served as Vice President and
Secretary of Presbyterian Healthcare Services of Albuquerque, New Mexico from
1979 until her retirement in December 1993. Ms. Godwin also served as
Chairman and President of Southwest Business Ventures, Inc., a holding
company for Presbyterian Healthcare Services' for-profit ventures from 1986
until her retirement in December 1993. Other directorships include: Charter
Bank, Albuquerque, New Mexico.

MANUEL LUJAN, JR., 72, is a resident of Albuquerque, New Mexico, and
has been a director since April 1994. Mr. Lujan has been a consultant on
United States governmental matters, focusing on western United States issues
since 1993. Mr. Lujan served as United States Secretary of the Interior from
1989 to 1993 and served in the United States House of Representatives from
1969 to 1989. Mr. Lujan has been an insurance agent with Manuel Lujan
Insurance, Inc. since 1948. Other directorships include: Bank 1st,
Albuquerque, New Mexico, and SODAK Gaming, Inc.

CONTINUING DIRECTORS - CLASS III (TERM EXPIRING IN 2002)

BENJAMIN F. MONTOYA, 64, is a resident of Rio Rancho, New Mexico,
and has been a director since October 1993. Mr. Montoya has served as
President and Chief Executive Officer of PNM since August 1993 and as
Chairman of the Board of PNM since June 1999. He previously served as Senior
Vice President and General Manager, Gas Supply Business Unit, Pacific Gas and
Electric Company (1991-1993). Other directorships include: Wells Fargo
(formerly Norwest Corporation) and Furr's Supermarkets, Inc.

ROBERT M. PRICE, 69, is a resident of Edina, Minnesota, and has been
a director since July 1992. Mr. Price has been President of PSV Inc., a
technology consulting business located in Burnsville, Minnesota, 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

43
<PAGE>

directorships include: Tupperware Corporation, International Multifoods
Corp., Fourth Shift Corporation, Affinity Technology Group, Inc. and Data
Link Corp.

JEFFRY E. STERBA, 45, was elected to the PNM Board of Directors in
March 2000, and was appointed President of PNM on January 26, 2000, with an
effective date of March 6, 2000. Mr. Sterba comes from Bethesda, Maryland,
where he served as Executive Vice President of USEC, Inc. ("USEC") from
January 1999 to February 2000. Mr. Sterba was responsible for leading new
initiatives in USEC's revenue development, market growth and business
strategy. He oversaw USEC's corporate development, marketing and sales,
international trade and information technology functions. USEC is the world
leader in the sale of uranium fuel enrichment services for commercial nuclear
power plants. Before joining USEC in January 1999, Mr. Sterba was Executive
Vice President and Chief Operating Officer of PNM, overseeing all of PNM's
business units. During his 21 years at PNM, 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.

DIRECTOR COMPENSATION

Of PNM's current Board members, only two, Mr. Montoya and Mr.
Sterba, are salaried employees. They receive no compensation for serving on
the PNM Board of Directors or its committees. Board members who are not
salaried employees of PNM receive compensation for Board of Director service.
That compensation includes:

Annual Retainer*: $20,000

Attendance Fees: $750 per Board meeting
$500 for each Board committee meeting

Committee Chairs: $200 for each Board committee meeting
(in addition to attendance fees)

In June 1999, the PNM Board of Directors assigned temporary
additional duties to the Chairman of the Executive Committee, currently Mr.
Ackerman, to oversee PNM's development of a corporate governance plan for the
regulated utility company under a holding company system. The current
Chairman of the Executive Committee receives additional Board of Director
fees in the amount of $7,000 per month during the period that he is
performing these additional duties.

*Under PNM's Director Retainer Plan, approved by shareholders in
1996, directors may choose to receive their annual retainer in the form of
cash, restricted stock or stock options. The restrictions on the restricted
stock generally lapse one-third each year following the year of the grant.
The options generally vest (become exercisable) one year from the date they
were granted and allow the director to purchase 2,000 shares of common stock.
The exercise price of the option is equal to the fair market value of the
common stock on the date of grant less the annual retainer divided by 2,000,
subject to a minimum exercise price.

44
<PAGE>

PNM COMMON STOCK OWNED BY EXECUTIVE OFFICERS AND DIRECTORS
(AS OF FEBRUARY 1, 2000)

<TABLE>
<CAPTION>
- ----------------------------------- ----------------------------------------------------------------------------------
Amount and Nature of Shares Beneficially Owned(a)
- ----------------------------------- ----------------------------------------------------------------------------------
Aggregate No. of Shares Right to Acquire Within Percent of Shares
Name Held(b) 60 Days(c) Beneficially Owned
- ----------------------------------- --------------------------- -------------------------- ---------------------------
<S> <C> <C> <C>
John T. Ackerman 10,935 -0- *
- ----------------------------------- --------------------------- -------------------------- ---------------------------
Robert G. Armstrong 4,183 5,000 *
- ----------------------------------- --------------------------- -------------------------- ---------------------------
Roger J. Flynn 1,000 12,301 *
- ----------------------------------- --------------------------- -------------------------- ---------------------------
Joyce A. Godwin 3,758 5,000 *
- ----------------------------------- --------------------------- -------------------------- ---------------------------
Laurence H. Lattman 3,123 4,000 *
- ----------------------------------- --------------------------- -------------------------- ---------------------------
Manuel Lujan, Jr. 5,291 -0- *
- ----------------------------------- --------------------------- -------------------------- ---------------------------
Max H. Maerki 1,279 25,791 *
- ----------------------------------- --------------------------- -------------------------- ---------------------------
Benjamin F. Montoya 3,046 166,896 *
- ----------------------------------- --------------------------- -------------------------- ---------------------------
Patrick T. Ortiz 669 61,240 *
- ----------------------------------- --------------------------- -------------------------- ---------------------------
Reynaldo U. Ortiz 3,224 2,000 *
- ----------------------------------- --------------------------- -------------------------- ---------------------------
Robert M. Price 3,000 5,000 *
- ----------------------------------- --------------------------- -------------------------- ---------------------------
William J. Real 972 22,603 *
- ----------------------------------- --------------------------- -------------------------- ---------------------------
Paul F. Roth 5,378 -0- *
- ----------------------------------- -------------------------- -------------------------- ---------------------------
Directors and Executive Officers 47,888 358,715 *
as a Group (19)
- ----------------------------------- --------------------------- -------------------------- ---------------------------
</TABLE>

(a) Beneficial ownership means the sole or shared power to vote, or to direct
the voting of, a security 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.

(c) The number of shares directors and executive officers have a right to
acquire through stock option exercises within 60 days after February 1,
2000.

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

45
<PAGE>

PERSONS OWNING MORE THAN FIVE PERCENT OF PNM COMMON STOCK
(AS OF MARCH 8, 2000)

<TABLE>
<CAPTION>
- ---------------------------------------- ------------------------- ------------------------- ------------ ------------
VOTING AUTHORITY DISPOSITIVE AUTHORITY
------------ ------------ ------------ ------------ TOTAL PERCENT OF
NAME AND ADDRESS SOLE SHARED SOLE SHARED AMOUNT CLASS
- ---------------------------------------- ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
The Prudential Insurance Company of 134,200 2,629,656 134,200 2,596,024 2,642,056 6.81%
America
751 Broad Street
Newark, NJ 07102-3777
- ---------------------------------------- ------------ ------------ ------------ ------------ ------------ ------------
</TABLE>

The information provided above is based on reports filed with the
SEC. PNM makes no representation as to the accuracy or completeness of this
information. This is the only person known to PNM, as of March 8, 2000, to be
the beneficial owner of more than 5% of PNM's common stock.

MEETINGS AND STANDING COMMITTEES OF THE BOARD OF DIRECTORS

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
MEMBERSHIP ROSTER(STANDING BOARD COMMITTEES)
- ----------------------------------------------------------------------------------------------------------------------
Compensation Customer & Nominating
& Human Public &
Name Board Audit Resources Policy Executive Finance Governance
- --------------------------- ------------ ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
J. T. Ackerman x* x*
- --------------------------- ------------ ------------ ------------ ------------ ------------ ------------ ------------
R. G. Armstrong x x* x x
- --------------------------- ------------ ------------ ------------ ------------ ------------ ------------ ------------
J. A. Godwin x x x* x x*
- --------------------------- ------------ ------------ ------------ ------------ ------------ ------------ ------------
L. H. Lattman x x x x
- --------------------------- ------------ ------------ ------------ ------------ ------------ ------------ ------------
M. Lujan, Jr. x x x
- --------------------------- ------------ ------------ ------------ ------------ ------------ ------------ ------------
B. F. Montoya x* x
- --------------------------- ------------ ------------ ------------ ------------ ------------ ------------ ------------
R. U. Ortiz x x x
- --------------------------- ------------ ------------ ------------ ------------ ------------ ------------ ------------
R. M. Price x x x x*
- --------------------------- ------------ ------------ ------------ ------------ ------------ ------------ ------------
P. F. Roth x x* x x x
- --------------------------- ------------ ------------ ------------ ------------ ------------ ------------ ------------
No. of Meetings in 1999 9 6 5 11 0 6 7
- --------------------------- ------------ ------------ ------------ ------------ ------------ ------------ ------------
</TABLE>
* Chair

Notes:

1. J.T. Ackerman was Chairman of the Board through June 8, 1999. B.F.
Montoya was elected Chairman of the Board on June 8, 1999 to succeed
J.T. Ackerman, who is now Chairman Emeritus.

2. B.F. Montoya was a member of the Finance Committee through June 8,
1999. J.T. Ackerman was appointed as a member of the Finance Committee
on June 8, 1999.

3. J.E. Sterba was elected to the PNM Board of Directors in March 2000 to
complete the term of L.H. Lattman who retired in March 2000.

46
<PAGE>

In 1999, the full PNM Board of Directors met nine times. In
addition, the outside directors met three times during 1999. Directors
attended meetings of individual Board committees as shown in the above table.
For the PNM Board of Directors as a whole, attendance in 1999 at full Board
and committee meetings exceeded 96%. Only one director, Mr. Ortiz, attended
less than 75% of all meetings

The AUDIT COMMITTEE consists entirely of non-employee directors. It
assesses the work of PNM's internal auditors and independent public
accountants and the effectiveness of the business control structure. It also
reviews the financial statements of PNM and oversees PNM's financial
reporting. The committee represents the PNM Board of Directors in accounting
and auditing related activities of PNM. It has the responsibility to make
recommendations to the Board of Directors with respect to appointment of the
independent public accountants, to approve the scope of the annual audit and
to monitor and review the effectiveness of PNM's management of accounting
functions. The committee also had the responsibility to monitor and report to
the Board of Directors the status of PNM's activities to assure that its
computers and other systems were year 2000 compliant.

The COMPENSATION AND HUMAN RESOURCES COMMITTEE consists entirely of
non-employee directors. It reviews PNM's compensation policies and benefit
programs and their relationship to the attainment of business goals. The
committee recommends to the Board of Directors the compensation philosophy
and guidelines for the entire executive and managerial group, giving emphasis
to rewarding long-term results and maximizing shareholder value. The
committee reviews PNM's affirmative action program, conducts an annual
performance evaluation of the chief executive officer, and ensures management
continuity through annual review and approval of a management development and
succession program. The committee also has oversight of PNM's code of conduct
and compliance program and interacts with PNM's employee organizations.

The CUSTOMER AND PUBLIC POLICY COMMITTEE consists entirely of
non-employee directors. It reviews and monitors policies that deal with PNM's
responsibility to the communities in which it does business. The subject
matter of policies reviewed and monitored includes: customer service, the
environment, charitable contributions, government relations and
communications to various constituencies of PNM. The committee meets with
public officials, the media and other opinion leaders throughout the year to
obtain an independent assessment of PNM's public reputation.

The EXECUTIVE COMMITTEE consists of directors appointed by a
majority of the Board of Directors. The Board of Directors appoints the Chair
of the Executive Committee who is a director other than the Chairman of the
Board of Directors. It exercises the powers of the PNM Board of Directors
during intervals between Board meetings.

The FINANCE COMMITTEE consists of a majority of non-employee
directors. It reviews and recommends to the Board of Directors the capital
structure and financial strategy for PNM, including dividend policy. It has
oversight of PNM's financial performance, investment procedures and policies,
pension fund performance and funding level and risk management strategies and
policies. The committee specifically has responsibility for the review and

47
<PAGE>

approval of certain capital expenditures in excess of $1,000,000 and of all
capital expenditures in excess of $2,500,000.

The NOMINATING AND GOVERNANCE COMMITTEE consists entirely of
non-employee directors. It has the responsibility to make recommendations to
the PNM Board of Directors for nominees for election as directors, as well as
recommendations concerning the effectiveness, structure, size, composition
and compensation of the Board of Directors, including committee assignments
and candidates for election as Chairman of the Board. The Nominating and
Governance Committee conducts an annual evaluation of Board performance and
effectiveness, and, at least annually, reviews conflict of interest
questionnaires submitted by directors to determine whether any potential or
actual conflict of interest exists. In 1995, the Board of Directors approved
a Nominations Policy which describes the guidelines, procedures, and
selection criteria for filling vacancies on the Board of Directors,
recognizing the importance of a well-balanced Board of Directors which
reflects the interests of PNM's shareholders, customers, employees and the
communities it serves. The Nominating and Governance Committee seeks
potential nominees for Board membership in various ways and will consider
suggestions submitted by shareholders. Suggestions, together with a
description of the potential nominee's qualifications, appropriate
biographical information, and the potential nominee's signed consent to
serve, should be submitted to the Secretary of PNM prior to December 28,
2000, for consideration at PNM's (or Manzano's, after consummation of the
share exchange) 2001 annual meeting.

48
<PAGE>

- --------------------------------------------------------------------------------
PERFORMANCE GRAPH
- --------------------------------------------------------------------------------

COMPARISON OF FIVE YEAR CUMULATIVE TOTAL SHAREHOLDER RETURN AMONG PNM, A PEER
GROUP* AND S&P 500 STOCK INDEX

The following graph assumes that $100 was invested on December 31,
1994 in PNM common stock, the combination gas and electric peer group and the
S&P 500 Stock Index, and that all dividends were reinvested.

Historical performance does not necessarily predict future results.

[GRAPH]
<TABLE>
<CAPTION>
- ---------------------------------- ------------ -------------- -------------- -------------- ------------- ------------
FISCAL YEAR ENDED
DECEMBER 31, 1994 1995 1996 1997 1998 1999
- ---------------------------------- ------------ -------------- -------------- -------------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
PNM 100 136 158 193 173 143
- ---------------------------------- ------------ -------------- -------------- -------------- ------------- ------------
Peer Group 100 125 116 155 193 148
- ---------------------------------- ------------ -------------- -------------- -------------- ------------- ------------
S&P 500 100 138 169 226 290 351
- ---------------------------------- ------------ -------------- -------------- -------------- ------------- ------------
</TABLE>

* The peer group companies are combination electric and gas utilities each of
which has an investment in a nuclear power generating station. The peer group
companies are as follows: Central Hudson Gas & Electric Company, CMS Energy
Corp., Consolidated Edison, Inc., Niagara Mohawk Holdings, Inc., Northern
States Power Company, Pacific Gas & Electric Corp., PECO Energy Company,
Public Service Enterprise Group, RGS Energy Group, Inc., SCANA Corporation,
Wisconsin Energy Corp. and WPS Resources Corp. The comparative total return
for 1998 varied from that reported in 1999 due to mergers and/or
consolidations occurring within the Peer Group.

49
<PAGE>

COMPENSATION AND HUMAN RESOURCES COMMITTEE REPORT ON EXECUTIVE COMPENSATION

COMPENSATION POLICIES. The Compensation and Human Resources
Committee (the "Committee") establishes compensation guidelines and targets
based upon the performance of PNM, business units within PNM, and individual
executive officers. The Committee consists of four independent directors who
are not PNM employees. The Committee's goal is to establish a compensation
program that:

- links the interests of management and shareholders,

- links executive compensation with long-term PNM performance,
and

- attracts and retains executives of high caliber and ability.

For 1999, that program consisted of base salary, short-term
incentive compensation and long-term incentive compensation.

The Committee believes this compensation program was a factor
contributing to PNM's success this past year, including earnings per share of
$2.01 and operating revenues of $1.16 billion.

BASE SALARIES.

EXECUTIVE OFFICERS

Each year the Committee reviews base salaries of individual
executive officers and their salary ranges. In 1999, base salaries were
conservatively tied to the median base salaries of executives in comparable
positions within electric and gas utilities together with general industry
practices as reported in compensation surveys sponsored by the Edison
Electric Institute, the American Gas Association and William M. Mercer, Inc.

CHIEF EXECUTIVE OFFICER

Mr. Montoya became the President and Chief Executive Officer of PNM
in 1993. At that time, data provided by an executive compensation consultant
and an executive search firm were considered in determining Mr. Montoya's
compensation. Mr. Montoya's salary remained unchanged until 1996, when the
common stock dividend was reinstated. In 1996, his salary was increased by
$30,000 to $350,000. In 1997, Mr. Montoya's salary was increased by $25,000
to $375,000. In 1998, his salary remained at the same level. In 1999, Mr.
Montoya's salary was increased by $50,000 to $425,000, and he became
Chairman, President and Chief Executive Officer. In setting Mr. Montoya's
salary, the Committee evaluated his performance in the prior year.
Determinative factors included:

- strategic planning

50
<PAGE>

- company restructuring for deregulation

- financial targets

- Y2K critical systems transition

- succession planning

- external relations targets

Some of the significant achievements considered are set forth below:

- development of an initial holding company transition plan

- development of a competitive strategic direction plan

- achievement of generation cost reduction targets

- continued improvement in financial credit rating criteria

- continued improvement in community acceptance and customer
satisfaction indicators

SHORT-TERM INCENTIVE COMPENSATION.

EXECUTIVE OFFICERS

In 1999, executive officers, together with all other PNM employees,
participated in a results pay plan. The plan has an "at risk" cash
compensation element tied to the success of the individual business units
combined with company-wide earnings per share ("EPS") performance. EPS goals
are approved annually by the PNM Board of Directors. Business unit goals for
1999 were generally focused on customer satisfaction, cost control,
operations efficiency and business unit earnings per share, with performance
targets established for threshold, stretch and optimal achievements. Overall
business unit goals for 1999 were achieved at the optimal performance level
and the company-wide EPS goal was achieved at 110% of the business plan goal.
Award payments were made to participants in February 2000.

CHIEF EXECUTIVE OFFICER

Mr. Montoya was not a participant in the results pay plan; however,
based on his 1999 performance, the PNM Board of Directors awarded Mr. Montoya
a bonus of $100,000 in 2000.

51
<PAGE>

LONG-TERM INCENTIVE COMPENSATION.

EXECUTIVE OFFICERS AND CHIEF EXECUTIVE OFFICER

Under PNM's Performance Stock Plan, or the PSP, non-qualified stock
option grants are awarded to all executive officers, including Mr. Montoya,
as well as other key employees. The PSP provides that the Committee, in its
sole and absolute discretion, will declare the level of options to be
granted. Grants for 1999 were approved and awarded in February 1999 and are
reported in this proxy statement/prospectus under "--Option Grants in 1999"
below.

CERTAIN TAX MATTERS. Under Section 162(m) of the Code, PNM may not
deduct certain forms of compensation in excess of $1 million. PNM has no
policy with respect to Section 162(m) because no executive of PNM earns in
excess of $1 million.

Compensation and Human Resources Committee

Paul F. Roth (Chair) Joyce A. Godwin
Robert G. Armstrong Robert M. Price

52
<PAGE>

EXECUTIVE COMPENSATION

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
SUMMARY COMPENSATION TABLE
----------------------------------------------------------- ----------------
LONG-TERM
COMPENSATION
----------------
ANNUAL COMPENSATION AWARDS
- ---------------------------- ----------- ------------- -------------- ------------------ ---------------- ---------------
SECURITIES
NAME AND OTHER ANNUAL UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(a) OPTIONS(#) COMPENSATION
- ---------------------------- ----------- ------------- -------------- ------------------ ---------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
B. F. Montoya 1999 $415,376 $100,000(b) -- 45,000 $ 19,153(d)
Chairman and CEO 1998 389,423 25,000(b) -- -0- (c) 22,327(d)
1997 358,657 75,000(b) -- 20,902 -0-
- ---------------------------- ----------- ------------- -------------- ------------------ ---------------- ---------------
R. J. Flynn 1999 $193,110 $ 64,400(e) -- 16,000 $ 5,555(d)
Executive Vice President 1998 166,320 49,223(e) -- -0- (c) 1,842(d)
of Electric and Gas 1997 155,574 9,975(e) -- 7,432 -0-
Services
- ---------------------------- ----------- ------------- -------------- ------------------ ---------------- ---------------
M. H. Maerki 1999 $188,732 $ 55,200(e) -- 16,000 $ 5,281(d)
Senior Vice President 1998 190,432(f) 49,927(e) -- -0- (c) 3,024(d)
and Chief Financial 1997 178,346(f) 12,408(e) -- 7,432 -0-
Officer
- ---------------------------- ----------- ------------- -------------- ------------------ ---------------- ---------------
P. T. Ortiz 1999 $170,670 $ 39,900(e) ---- 16,000 $ 3,446(d)
Senior Vice President, $ 75,000(f) -- -0- (c) 982(d)
General Counsel and 1998 155,699 41,588(e) 7,432 -0-
Secretary 1997 142,884 11,093(e)
- ---------------------------- ----------- ------------- ------------- ------------------- ---------------- ---------------
W. J. Real 1999 $173,139 $ 45,600(e) -- 16,000 $ 3,752(d)
Executive Vice President 1998 145,335 18,685(e) -- -0- (c) 301(d)
of Power Production and 1997 137,596(g) 30,000(e) -- 7,432 -0-
Energy Services
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) These amounts are less than the established reporting thresholds.
(b) This bonus was paid in February 2000 for 1999 performance. There was no
bonus paid in 1999 for 1998 performance. Bonuses paid in June 1998 and
August 1997 were for previous performance.
(c) Due to Performance Stock Plan amendments approved in 1998 which changed the
timing of the grants, no grants were awarded with a 1998 effective date.
(d) These amounts are pursuant to a plan that provides executives with
contribution benefits for earning more than IRS limits imposed for
qualified plans.
(e) In 1995, a results-based reward program was implemented which was designed
to tie a portion of cash compensation awarded to employees to the success
of their business unit, combined with company-wide earnings per share
("EPS") results. EPS goals are approved annually by the Board of Directors.
These amounts reflect incentive award amounts paid in 2000 for 1999
achievements, in 1999 for 1998 achievements, and in 1998 for 1997
achievements. In addition, these amounts include any lump sum awards
granted for individual performance.
(f) Award paid in March 2000 for previous performance.
(g) These amounts include sales of accrued vacation hours during 1998 and 1997
and also reflect increases in base salaries.
- --------------------------------------------------------------------------------

53
<PAGE>

OPTION GRANTS IN 1999

Under PNM's PSP, non-qualified stock option grants are awarded to
all executive officers, including Mr. Montoya, as well as other key
employees. Grants for 1999 were approved and awarded in February 1999 and are
reported in this proxy statement/prospectus.

<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR (1999)
- ----------------------------------- ----------------------------------------------------------------------------------
Individual Grants (1)
- ----------------------------------- ----------------------------------------------------------------------------------
Number of Percent of
Securities Total Options
Underlying Granted to Exercise or Grant Date
Options Employees in Base Price Present
NAME Granted (#) Fiscal Year ($/Share) Expiration Date Value ($) (2)
- ----------------------------------- ---------------- --------------- ---------------- ---------------- ---------------
<S> <C> <C> <C> <C> <C>
B. F. Montoya 45,000 7.8% $17.50 02/08/2009 165,600
- ----------------------------------- ---------------- --------------- ---------------- ---------------- ---------------
R. J. Flynn 16,000 2.8% $17.50 02/08/2009 58,880
- ----------------------------------- ---------------- --------------- ---------------- ---------------- ---------------
M. H. Maerki 16,000 2.8% $17.50 02/08/2009 58,880
- ----------------------------------- ---------------- --------------- ---------------- ---------------- ---------------
P. T. Ortiz 16,000 2.8% $17.50 02/08/2009 58,880
- ----------------------------------- ---------------- --------------- ---------------- ---------------- ---------------
W. J. Real 16,000 2.8% $17.50 02/08/2009 58,880
- ----------------------------------- ---------------- --------------- ---------------- ---------------- ---------------
</TABLE>
(1) The options shown in this table were granted in 1999 under the Third
Restated and Amended Public Service Company of New Mexico Performance Stock
Plan.
(2) The grant date valuation was calculated using the Black-Scholes option
pricing model assuming stock price volatility of 25%, a risk-free rate of
return of 4.58% and an annual dividend yield of 4.369%. The weighted
average grant date option fair value is $3.68.

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
AGGREGATED OPTION EXERCISES IN 1999
AND 1999 YEAR-END OPTION VALUES

------------------------------ -------------------------------
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
DECEMBER 31, 1999 DECEMBER 31, 1999(A)
- ------------------------------------------------------- ------------------------------ -------------------------------
SHARES ACQUIRED VALUE
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------ ------------------ ----------- -------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
B. F. Montoya -0- 166,896 65,902 $320,033 -0-
R. J. Flynn -0- 12,301 23,432 -0- -0-
M. H. Maerki -0- 25,791 23,432 -0- -0-
P. T. Ortiz -0- 61,240 23,432 119,654 -0-
W. J. Real -0- 22,603 23,432 -0- -0-
- ------------------------ ------------------ ----------- -------------- --------------- --------------- ---------------
(a) VALUE EQUALS THE YEAR-END STOCK PRICE ($16.25) MINUS THE EXERCISE PRICE,
TIMES THE NUMBER OF SHARES UNDERLYING THE OPTION. "IN-THE-MONEY" MEANS THAT
THE YEAR-END STOCK PRICE WAS GREATER THAN THE EXERCISE PRICE OF THE OPTION.
ALL UNEXERCISABLE OPTIONS, AS OF DECEMBER 31, 1999 WERE NOT "IN-THE-MONEY".
- --------------------------------------------------------------------------------
</TABLE>

RETIREMENT PLAN AND RELATED MATTERS

In December 1996, the Board of Directors approved changes to the PNM
defined benefit plan ("Retirement Plan") and implementation of matching and
non-matching contributions to the 401(k) defined contribution plan effective
January 1, 1998. PNM contributions to the 401(k) plan

54
<PAGE>

consist of a 3 percent non-matching contribution, and a 75 percent match on
the first 6 percent contributed by the employee on a before-tax basis.

Through December 31, 1997, the Retirement Plan covered employees who
had at least one year of service and had attained the age of 21. Vesting
occurred after five years of service. Directors who were not employees did
not participate in the Retirement Plan. PNM made no contribution in 1999 to
the Retirement Plan for plan year 1998, as the Retirement Plan was frozen
effective December 31, 1997.

Salaries used in Retirement Plan benefit calculations were frozen as
of December 31, 1997. Additional credited service can be accrued under the
Retirement Plan up to a limit determined by age and years of service. PNM
made contributions in 1998 to the Retirement Plan for plan year 1997 in the
amount of $185,000. The amount of any contribution with respect to any one
person cannot be determined. The contribution amount is actuarially
determined based upon the number of Plan participants, the participants' age,
salary, and years of service.

Directors who were not employees did not participate in the Retirement Plan.

The following table illustrates the annual benefits that would be
provided under the Retirement Plan to employees who retire at the indicated
compensation and year of service levels and who elect to receive the
benefits, which are calculated on a straight-life annuity basis, over their
remaining lives. Vesting of accrued benefits would also occur in the event of
a change in control of PNM. Benefits shown are maximum annual benefits
payable at age 65 to participants who retire at age 65. The table is based on
the Retirement Plan. The amounts shown in the table are not subject to any
deduction for Social Security benefits or other offset amounts.

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
PENSION PLAN TABLE
- ---------------- -----------------------------------------------------------------------------------------------------
AVERAGE OF
HIGHEST ANNUAL CREDITED YEARS OF SERVICE
BASE SALARY -------------- ------------- -------------- ------------- -------------- -------------- -------------
FOR 3 5(b) 10 15 20 25 30 321/2(c)
CONSECUTIVE
YEARS(a)
- ---------------- -------------- ------------- -------------- ------------- -------------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
$100,000 $10,000 $20,000 $ 30,000 $ 40,000 $ 50,000 $ 60,000 $ 65,000
$150,000 15,000 30,000 45,000 60,000 75,000 90,000 97,500
$200,000 20,000 40,000 60,000 80,000 100,000 120,000 130,000
$250,000 25,000 50,000 75,000 100,000 125,000 150,000 162,500
$300,000 30,000 60,000 90,000 120,000 150,000 180,000 195,000
$350.000 35,000 70,000 105,000 140,000 175,000 210,000 227,500
$400,000 40,000 80,000 120,000 160,000 200,000 240,000 260,000
$450,000 45,000 90,000 135,000 180,000 225,000 270,000 292,500
- ---------------- -------------- ------------- -------------- ------------- -------------- -------------- -------------
</TABLE>
(a) For these purposes, compensation consists of base salaries and includes any
amount voluntarily deferred under PNM's Master Employee Savings Plan.
Generally, compensation for these purposes does not include bonuses,
payments for accrued vacation, or overtime pay.
(b) Although years of service begin accumulating from the date of employment,
vesting occurs after five years of service.
(c) The maximum number of years generally taken into account for purposes of
calculating benefits under the
non-contributory defined benefit plan. Under limited circumstances, an
employee working beyond age 62 could earn an additional 3% retirement
benefit.

55
<PAGE>

Credited years of service, which can be used to calculate benefits
as shown in the above table, have been accumulated by executive officers
under the Retirement Plan, the Accelerated Management Performance Plan
discussed below and the supplemental employee retirement arrangements
discussed below. Credited years of service computed as of December 31, 1999,
are as follows: Mr. Montoya, 10 years; Mr. Flynn, 5.08 years; Mr. Maerki,
27.57 years; Mr. Ortiz, 8.25 years; and Mr. Real, 21.33 years. The executive
officers' remuneration which would be used to calculate benefits is
determined by reference to the Retirement Plan and the supplemental employee
retirement arrangements discussed below. As of December 31, 1999, the
remuneration used to calculate benefits were as follows: Mr. Montoya,
$373,336; Mr. Flynn, $161,163; Mr. Maerki, $170,900; Mr. Ortiz, $138,332; and
Mr. Real, $135,000. The remunerator used by the plan was frozen as of
December 31, 1997.

Under Section 401(a)(17) of the Code there is a limitation on the
amount of compensation that can be considered in determining retirement
benefits under qualified retirement plans. In June 1998, the Board of
Directors approved a plan to give executives with earnings in excess of the
Code Section 401(a)(17) limitation ($160,000 for 1999) an opportunity to more
fully participate in PNM's 401(k) plan and enable them to receive the 3%
company contribution and a 75 cent on the dollar match for the first 6%
contributed by the employee for eligible earnings in excess of the
compensation limitation. The plan also permits executives to contribute
amounts in excess of the Code Section 402(g) limitations on elective
deferrals. Six executive officers participated in the executive savings plan
in 1999.

In January 1981, the Board of Directors approved a non-qualified
executive benefit program for a group of management employees. The
Accelerated Management Performance Plan, or AMPP, was intended to attract,
motivate and retain key management employees. Mr. Maerki and certain other
key management employees are eligible to participate in one or more of the
plans in the program. Under the program, as originally adopted, key
management employees had the opportunity to earn additional credit for years
of service toward retirement. The AMPP, as amended and restated, phased out
the accumulation of additional credits by January 1, 1990. In addition, the
amended and restated plan includes a provision which allows key management
employees who have not attained the maximum credits for years of service to
receive a reduced benefit from the plan upon accepting early retirement.
Monthly benefits received pursuant to the AMPP are offset by monthly benefits
received pursuant to the Retirement Plan.

As approved by the Board of Directors in 1989, a supplemental
employee retirement agreement was entered into with Mr. Maerki. Under the
agreement, Mr. Maerki's retirement benefits will be computed as if he had
been an employee of PNM since February 15, 1974.

As approved by the Board of Directors in 2000, a supplemental
employee retirement agreement was entered into with Mr. Ortiz. Under the
terms of the agreement, if Mr. Ortiz remains employed by PNM until January 1,
2010, he will be deemed to accrue the equivalent of 30 years of credited
service under the Retirement Plan. In addition, the agreement provides that
for purposes of calculating the supplemental retirement benefits available to
Mr. Ortiz under PNM's Executive Retention Plan, the years of service accrued
under this agreement shall be used in lieu of the actual years of credited
service accrued by Mr. Ortiz under the Retirement Plan. Finally, the
agreement provides that until Mr. Ortiz reaches the age of 55 his eligibility
for retiree

56
<PAGE>

medical benefits shall be determined as if he had attained age 45 with 20
years of credited service with PNM.

Under the terms of employment agreements with Mr. Montoya, he will
be eligible to receive supplemental retirement benefits computed as if he had
been an employee of PNM since August 1, 1990.

The Board of Directors has approved the establishment of an
irrevocable grantor trust, under provisions of the Code, generally in
connection with the AMPP and the supplemental retirement arrangements with
Mr. Montoya, Mr. Maerki, and certain former executive officers. PNM may, but
is not obligated to, provide funds to the trust, which was established with
an independent trustee, to aid in meeting its obligations under such
arrangements. Funds in the amount of $12.7 million have been provided to the
trust since 1989. Distributions have been made from the trust since 1989. No
additional funds have been provided to the trust. In connection with
amendments to the Executive Retention Plan discussed below, the executive
savings program and supplemental retirement arrangements would be required to
be funded through the trust upon a change in control of PNM.

EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL
ARRANGEMENTS

The PNM Board of Directors adopted the Executive Retention Plan, or
the Retention Plan, effective January 1, 1992. The Retention Plan covers
executive officers and other key employees designated by the Board. Mr.
Montoya's agreement, which provided him with substantially similar benefits,
was discontinued in 1998, and he is now also covered by the Retention Plan.
The Retention Plan, as recently amended, provides certain severance benefits
should the employee be terminated from PNM as a result of a change in control
of PNM, and the employee is not immediately re-employed by the successor
company, if that termination is (a) for reasons other than cause, or (b) by
the employee due to constructive termination. The severance benefits include:
(i) lump sum severance equal to 2.5 times current base compensation for
executive officers; (ii) reimbursement of reasonable legal fees and expenses
incurred as a result of termination of employment; (iii) certain insurance
benefits which are substantially similar to those received by the employee
immediately prior to termination of employment; (iv) certain other amounts;
and (v) if an employee receives any payment due to a change in control which
is subject to the excise tax provided in Section 4999 of the Code, then PNM
will reimburse the employee in an amount equal to that which places the
employee in the same after-tax position as if no excise tax had been imposed.
The Retention Plan was effective for an initial term through December 31,
1992, and is to continue in effect until terminated by the Board. The
Retention Plan is also subject to automatic extension, or revival if it has
been terminated, as to certain events relating to potential changes in
control.

PNM also has a non-union severance pay plan that covers non-union
employees terminated due to the elimination of their positions. Benefits
include continuation of certain insurance benefits plus regular severance pay
in the amount of two months of base salary plus one additional week of base
salary for each year of service, which may be enhanced if the participant
signs a release agreement with PNM. Executives are also eligible, upon
signing a release agreement, for a lump sum payment equal to one year of base
salary and reimbursement

57
<PAGE>

for placement assistance expenses incurred during the year after being
terminated up to 5% of base salary. If an employee is eligible to receive
benefits under the Retention Plan, severance benefits are not available to
that employee under the non-union severance pay plan.

Under the terms of employment agreements entered into between PNM
and Mr. Montoya, if Mr. Montoya were to be terminated by the Board, he would
receive severance benefits substantially equal to the level of benefits
provided to other members of senior management discussed above.

PROPOSAL 3: APPROVAL OF OMNIBUS PERFORMANCE EQUITY PLAN
(PROPOSAL 3 ON YOUR PROXY CARD)

On December 7, 1999, the PNM Board of Directors adopted a new
employee stock incentive plan. Subject to approval by PNM's shareholders and
the consummation of the share exchange, the Omnibus Performance Equity Plan,
or the Omnibus Plan, will expand Manzano's flexibility to structure
compensation incentives for Manzano officers and other key employees by
rewarding long-term growth and profitability incentives in the emerging
competitive environment. Accordingly, certain key employees may be granted
Non-Qualified Stock Options, Incentive Stock Options, Restricted Stock
Rights, Performance Shares, Performance Units and Stock Appreciation Rights
under the Omnibus Plan as described below. While it puts more pay at risk,
ownership of stock assists in the attraction and retention of eligible
employees and provides them with additional incentives to devote their best
efforts to pursue and sustain Manzano's financial success as well as to
perform in the best interest of shareholders, customers and employees.

SUMMARY OF OMNIBUS PLAN FEATURES

GENERAL. The Omnibus Plan contemplates that from time to time,
grants of stock-related awards of four general types will be made to selected
eligible employees: (1) options to purchase shares of Manzano common stock
("Options"); (2) rights to receive, upon exercise, the appreciation of the
fair market value of shares of Manzano common stock ("Stock Appreciation
Rights" or "SARs"); (3) outright grants of shares of Manzano common stock,
subject to transfer restrictions and risk of forfeiture for a specified
restriction period ("Restricted Stock Rights"); and (4) rights to receive (a)
shares of Manzano common stock ("Performance Shares") or (b) a specified
dollar amount or, in lieu of all or any portion of such amount, shares of
Manzano common stock having the same fair market value ("Performance Units"),
both conditional upon the attainment during a specified performance period of
specified performance measures. Options meeting the requirements of Section
422 of the Code and intended to be afforded the federal income tax treatment
of Section 422 options ("Incentive Stock Options"), as well as other Options
("Nonqualified Stock Options" or "NQSOs"), may be awarded under the Omnibus
Plan. SARs granted under the Omnibus Plan may be awarded either in tandem
with Options ("Tandem SARs") or standing alone ("Freestanding SARs").

The full text of the Omnibus Plan is attached to this proxy
statement/prospectus as Exhibit D. The discussion which follows provides
additional information concerning the Omnibus Plan features highlighted
above, as well as certain other noteworthy features. Since such discussion
necessarily is in the nature of a summary and does not cover all aspects of
the

58
<PAGE>

Omnibus Plan, shareholders should review Exhibit D in its entirety as they
consider whether to approve the Omnibus Plan.

SHARES AVAILABLE FOR AWARD. The total number of shares of common
stock subject to awards under the Omnibus Plan may not exceed five million
(5,000,000), subject to adjustment upon the occurrence of any of the events
specified in the Omnibus Plan. The shares of Manzano common stock to be
delivered under the Omnibus Plan may consist, in whole or in part, of
authorized, but unissued, shares of Manzano common stock or shares purchased
on the open market or, if it becomes allowable under New Mexico law, treasury
stock not reserved for any other purpose.

Subject to the express provisions of the Omnibus Plan, if any award
granted under the Omnibus Plan 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. With respect
to awards made to insiders under Section 16 of the Exchange Act, shares of
such stock may be reused to the maximum extent permitted under Section 16 of
the Exchange Act.

ADMINISTRATION AND ELIGIBILITY. The Omnibus Plan will be
administered by a committee ("Committee") designated by the Manzano Board of
Directors. The membership of such committee shall not contain less than two
(2) members of the Manzano Board of Directors. All Committee members must be
"non-employee directors." The Committee, by majority action thereof, is
authorized to interpret the Omnibus Plan, to prescribe, amend, and rescind
rules and regulations relating to the Omnibus Plan, to provide for conditions
and assurances deemed necessary or advisable to protect the interests of
Manzano, and to make all other determinations necessary or advisable for the
administration of the Omnibus Plan.

The Committee shall have the authority, in its sole discretion, to
determine the types of awards, the times when awards will be granted, the
number of awards, the purchase price or exercise price, the period(s) during
which the awards shall be exercisable (whether in whole or in part), the
restrictions applicable to such awards, and other terms and provisions (which
need not be identical). The Committee will have the authority to modify
existing awards, subject to specified provisions of the Omnibus Plan. Awards
may be made only to those participants who are employees of Manzano or a
subsidiary that has adopted the Omnibus Plan on the grant date of the award.

GRANT OF OPTIONS. Subject to the provisions of the Omnibus Plan,
Options may be granted to participants at any time and from time to time as
determined by the Committee. The Committee will have complete discretion in
determining the number of Options granted as well as the type, size, and
other terms and conditions of each granted award, subject to the parameters
set forth in the Omnibus Plan. The Committee may make grants to employees
under any or a combination of all of the various categories of awards that
are authorized under the Omnibus Plan. No Option may be exercised more than
ten years from the date of grant. Upon exercise of any Option, payment must
be made in full and may be either (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 Committee. The participant shall have none of the rights of
a shareholder with respect to Options until the record date of the stock
purchase.

59
<PAGE>

RESTRICTED STOCK RIGHTS. A grant of Restricted Stock Rights involves
the grant of a right to acquire Manzano common stock in the future at no
monetary cost to the participant. Shares of Manzano common stock are not
issued until specified restrictions lapse, typically the achievement of
specified performance targets or the continued employment of the participant
until a specified date. Voting rights, dividend equivalents and other
distributions, form and timing of payments are specified in the Omnibus Plan.

PERFORMANCE SHARES AND PERFORMANCE UNITS. These award vehicles
provide shares of Manzano common stock or rewards for achieving specific,
long-term performance targets. Each Performance Share and each Performance
Unit will have a value determined by the Committee at the time of grant. The
Committee will also set forth performance goals it deems appropriate. For
Performance Shares, a payment will be made in Manzano common stock. For
Performance Units, payment will be made in cash, Manzano common stock or a
combination thereof as determined by the Committee.

STOCK APPRECIATION RIGHTS. This award vehicle provides a payment
equal to the appreciation in market value of the Manzano common stock and may
be granted to participants at any time and from time to time as shall be
determined by the Committee. SARs may be granted in connection with the grant
of an Option, in which case the exercise of 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 cash, stock or a combination thereof and
shall be exercisable at the time and be subject to such restrictions and
conditions as the Committee approves.

RESTRICTIONS. The Committee may impose restrictions on any awards
under the Omnibus Plan as it may deem advisable, including restrictions under
applicable federal securities law, under the requirements of any stock
exchange upon which the Manzano common stock is then listed and under any
blue sky or state securities law applicable to the awards.

TERMINATION OF EMPLOYMENT. Disposition of Awards when termination of
employment occurs due to death, disability, retirement, or change in control
are specified in the Omnibus Plan.

NON-TRANSFERABILITY. The Committee may, in it sole discretion,
determine the right of a participant to transfer any award granted under the
Omnibus Plan. Unless otherwise determined by the Committee, no award granted
under the Omnibus Plan 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 qualified domestic relations order
as defined by the Code or Title I of the Employee Retirement Income Security
Act of 1974, as amended, or the regulations thereunder, or, if applicable,
until the termination of any restricted or performance period as determined
by the Committee.

AMENDMENT, MODIFICATION AND TERMINATION OF OMNIBUS PLAN. The Manzano
Board of Directors has discretion to terminate, amend or modify the Omnibus
Plan. Any such action of the Manzano Board of Directors is subject to the
approval of the Manzano shareholders to the extent required by law. To the
extent permitted, the Manzano Board of Directors may delegate

60
<PAGE>

to the Committee or the President the authority to approve non-substantive
amendments to the Omnibus Plan.

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

NEW PLAN BENEFITS. To date, no awards of any kind have been granted
under the Omnibus Plan, and no executive officer, other officer or other
employee has been selected to receive any such award in the future.

The rules of the SEC require disclosure of the awards individuals
will receive pursuant to such a plan if such awards are determinable. Since
awards of Options, SARs, Restricted Stock Rights, Performance Shares and
Performance Units will be made by the Committee in its discretion under the
Omnibus Plan, it is not possible to determine the amounts of such awards that
will be made.

EFFECT OF CONSUMMATION OF PLAN OF SHARE EXCHANGE. Subject to the
approval of the shareholders of PNM of the Omnibus Plan, the Omnibus Plan
provides that the Omnibus Plan will only become effective immediately if the
share exchange is consummated. If the PNM shareholders approve the Omnibus
Plan and the share exchange is approved and consummated, no new options will
be made under the PNM Performance Stock Plan.

FEDERAL INCOME TAX CONSEQUENCES OF OMNIBUS PLAN

The following is a brief summary of certain of the Federal income
tax consequences of certain transactions under the Omnibus Plan based on
Federal income tax laws in effect on January 1, 2000. This summary is not
intended to be exhaustive and does not describe state or local tax
consequences.

NONQUALIFIED STOCK OPTIONS ("NQSO'S"). In general: (i) no income
will be recognized by an optionee at the time an NQSO is granted; (ii) at the
time of exercise of an NQSO, ordinary income (subject to income tax
withholding) will be recognized by the optionee in an amount equal to the
difference between the option price paid for the shares and the fair market
value of the shares if they are nonrestricted on the date of exercise (see
"Restricted Stock Rights" below for the tax consequences of receiving
restricted shares on date of exercise); and (iii) at the time of sale of
shares acquired pursuant to the exercise of an NQSO, any appreciation (or
depreciation) in the value of the shares after the date of exercise will be
treated as either short-term or long-term capital gain (or loss) depending on
how long the shares have been held after exercise and prior to sale.

INCENTIVE STOCK OPTIONS. No income generally will be recognized by
an optionee upon the grant or exercise of an Incentive Stock Option. The
spread on an Incentive Stock Option at the time of exercise is, however, an
item of tax preference that may result in the imposition of the alternative
minimum tax. If common shares are issued to an optionee pursuant to the
exercise of

61
<PAGE>

an Incentive Stock Option and the optionee holds the shares before selling
them for at least two years after the date of grant and one year after
exercise, then upon the sale of the shares any amount realized in excess of
the option price will be taxed to the optionee as long-term capital gain and
any loss sustained will be a long-term capital loss.

If shares acquired upon the exercise of an Incentive Stock Option
are disposed of prior to the expiration of either holding period described
above, the optionee generally will recognize ordinary income in the year of
disposition in an amount equal to any excess of the fair market value of the
shares at the time of exercise (or, if less, the amount realized on the
disposition of the shares in a sale or exchange) over the option price paid
for the shares. Any further gain (or loss) realized by the optionee generally
will be taxed as short-term or long-term capital gain (or loss) depending on
how long the shares have been held.

STOCK APPRECIATION RIGHTS. No income will be recognized by a holder
in connection with the grant of a Tandem SAR or a Freestanding SAR. When the
SAR is exercised, the recipient normally will be required to include as
taxable ordinary income (subject to income tax withholding) in the year of
exercise an amount equal to the amount of cash received and the fair market
value of any nonrestricted shares of common stock received on the exercise.

RESTRICTED STOCK RIGHTS. A recipient of Restricted Stock Rights
generally will be subject to tax at ordinary income rates on the fair market
value of the shares of Restricted Stock received on exercise of the rights
(reduced by any amount paid by the recipient for such shares) which fair
market value shall be determined at such time as the shares are no longer
subject to a risk of forfeiture or restrictions on transfer for purposes of
Section 83 of the Code. However, a recipient who so elects under Section
83(b) of the Code within 30 days of the date of transfer of the shares will
have taxable ordinary income on the date of transfer of the shares equal to
the excess of the fair market value of the shares (determined on the date of
transfer without regard to the risk of forfeiture or restrictions on
transfer) over any purchase price paid for the shares. If a Section 83(b)
election has not been made, any dividends received with respect to shares of
Restricted Stock that are subject at that time to a risk of forfeiture or
restrictions on transfer generally will be treated as compensation that is
taxable as ordinary income to the recipient.

PERFORMANCE SHARES AND PERFORMANCE UNITS. No income generally will
be recognized upon the grant of Performance Shares or Performance Units. Upon
payment in respect of the earn-out of Performance Shares or Performance
Units, the recipient generally will be required to include as taxable
ordinary income (subject to income tax withholding) in the year of receipt an
amount equal to the amount of cash received and the fair market value of any
nonrestricted shares of common stock received.

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 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 Exchange Act, but
not longer than six months.

62
<PAGE>

TAX CONSEQUENCES TO MANZANO OR ITS SUBSIDIARIES. To the extent that
an employee recognizes ordinary income in the circumstances described above,
Manzano 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 Code and is not disallowed by the $1 million limitation
on certain executive compensation.

Your Board of Directors recommends a vote FOR this proposal.

PROPOSAL 4: APPROVAL OF INDEPENDENT ACCOUNTANTS
(PROPOSAL 4 ON YOUR PROXY CARD)

The Audit Committee of the Board of Directors selects and hires
independent public accountants to audit the consolidated financial statements
of PNM and its subsidiaries. The Audit Committee's selection for 2000 must be
approved by you.

The Audit Committee selected Arthur Andersen LLP to audit PNM's
books of account and other corporate records for 2000. This firm has audited
PNM's books since 1993, and no relationship exists other than the usual
relationship between independent public accountant and client. A
representative of Arthur Andersen LLP will be available at the annual meeting
to respond to questions and to make any statement the representative may
desire. If the share exchange is approved and becomes effective, Arthur
Andersen LLP will also become, and be approved as, the independent public
accountants of Manzano and its subsidiaries for 2000.

Your Board of Directors recommends a vote FOR this proposal.

VALIDITY OF MANZANO COMMON STOCK

The validity of the shares of the Manzano common stock will be
passed upon by Keleher & McLeod, P.A., Albuquerque, New Mexico.

EXPERTS

The financial statements and schedules incorporated by reference in
this proxy statement/prospectus and elsewhere in the registration statement
of which this proxy statement/prospectus is a part have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
reports with respect thereto, and are incorporated by reference herein in
reliance upon the authority of said firm as experts in accounting and
auditing in giving said reports.

63
<PAGE>

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Exchange Act requires PNM's directors and
executive officers to file certain reports of ownership and changes in
ownership with the SEC and the New York Stock Exchange. Based solely on our
review of copies of the reports received by us, and on the written
representations of certain reporting persons, we believe that during 1999 all
filing requirements were timely satisfied by the directors and executive
officers of PNM, except that one transaction by B. F. Montoya was reported
late on a Form 4.

DEADLINE FOR SHAREHOLDER PROPOSALS FOR THE 2001 ANNUAL MEETING

Any proposal to be considered for possible inclusion in PNM's 2001
annual meeting of shareholders (or at Manzano's 2001 annual meeting if the
agreement and plan of share exchange is approved) must be received by the
Secretary of PNM (or Manzano) at Alvarado Square, Mail Stop 2822,
Albuquerque, New Mexico 87158 no later than December , 2000 in order to be
eligible for inclusion in PNM's (or Manzano's) proxy materials relating to
that meeting.

A shareholder proposal submitted outside the processes of the SEC's
proxy rules will be considered untimely if notice is received by PNM, if the
share exchange is not consummated, after March , 2001, or by Manzano, if the
share exchange is consummated, after January , 2001, and the proxy for the
meeting may confer discretionary authority to vote on a matter for which
notice is not timely received.

By Order of the Board of Directors

Patrick T. Ortiz
Senior Vice President, General Counsel
and Secretary

Dated: April 24, 2000
Albuquerque, New Mexico

64
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned thereunto duly authorized, in the City of Albuquerque,
State of New Mexico, on March 10, 2000.

Manzano Corporation

By: /s/ J.E. Sterba
---------------------------------
Name: J.E. Sterba
Title: President

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each officer or director of
Manzano Corporation whose signature appears below constitutes and appoints B.
F. Montoya and M. H. Maerki each of them singly, his or her true and lawful
attorney-in-fact and agent, with full and several power of substitution, for
him or her and in his or her name, place and stead, in any and all
capacities, to sign any or all amendments, including post-effective
amendments, and supplements to this registration statement, and to file the
same, with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said
attorney-in-fact and agent full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as they or he or she might or
could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent or his or her or their substitute or substitutes,
may lawfully do or cause to be done by virtue thereof.

Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.

<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ B.F. Montoya Chief Executive Officer and Chairman of the March 10, 2000
- -------------------------------------- Board of Directors
B.F. Montoya (Principal Executive Officer)

/s/ M.H. Maerki Senior Vice President and March 10, 2000
- -------------------------------------- Chief Financial Officer
M.H. Maerki (Principal Financial Officer)

<PAGE>

/s/ J.R. Loyack Vice President, March 10, 2000
- -------------------------------------- Corporate Controller and
J.R. Loyack Chief Accounting Officer
(Principal Accounting Officer)

/s/ J.T. Ackerman Director March 10, 2000
- --------------------------------------
J.T. Ackerman

/s/ R.G. Armstrtong Director March 10, 2000
- ---------------------------------------
R.G. Armstrong

/s/ J.A. Godwin Director March 10, 2000
- ---------------------------------------
J.A. Godwin

/s/ J.E. Sterba President and Director March 10, 2000
- ---------------------------------------
J.E. Sterba

/s/ T.F. Patlovich Director March 10, 2000
- ---------------------------------------
T.F. Patlovich

/s/ R.M. Price Director March 10, 2000
- ---------------------------------------
R.M. Price
</TABLE>

<PAGE>

EXHIBIT A

AGREEMENT AND PLAN OF SHARE EXCHANGE

THIS AGREEMENT AND PLAN OF SHARE EXCHANGE (this "Agreement"), dated as
of __________________, 2000, is between PUBLIC SERVICE COMPANY OF NEW MEXICO,
a New Mexico corporation (the "Company") and the corporation whose shares of
Common Stock, $5.00 par value per share (the "Company Common Stock"), will be
acquired pursuant to the Exchange (as hereinafter defined) provided for
herein, and MANZANO CORPORATION, a New Mexico corporation ("Manzano") and the
corporation which will acquire the Company Common Stock. The Company and
Manzano are hereinafter referred to, collectively, as the "Companies".

WITNESSETH:

WHEREAS, the authorized capital stock of the Company consists of (a)
80,000,000 shares of Company Common Stock, of which ____________ shares are
issued and outstanding as of the date hereof, and (b) 10,000,000 shares of
Cumulative Preferred Stock, no par value ("Company Preferred Stock"), of
which _____ shares are issued and outstanding in one series as of the date
hereof;

WHEREAS, Manzano is a wholly-owned subsidiary of the Company with
authorized capital stock consisting of (a) 120,000,000 shares of Common
Stock, without par value ("Manzano Common Stock"), of which ______ shares are
issued and outstanding as of the date hereof and owned of record by the
Company, and (b) 50,000,000 shares of Preferred Stock, without par value
("Manzano Preferred Stock"), of which no shares are issued and outstanding as
of the date hereof;

WHEREAS, the Boards of Directors of the respective Companies deem it
desirable and in the best interests of the Companies and their shareholders
that, at the Effective Time (as hereinafter defined), Manzano acquire each
share of Company Common Stock issued and outstanding immediately prior to the
Effective Time and that each such share of Company Common Stock be
automatically exchanged for one share of Manzano Common Stock with the result
that Manzano becomes the owner of all outstanding Company Common Stock and
that each holder of Company Common Stock becomes the owner of an equal number
of shares of Manzano Common Stock, all on the terms and conditions
hereinafter set forth;

WHEREAS, the implementation of the Exchange is subject, to the extent
required, and among other things as provided herein, to the receipt of
orders, authorizations and approvals of the New Mexico Public Regulation
Commission (the "PRC"), the Federal Energy Regulatory Commission (the "FERC")
and the Nuclear Regulatory Commission (the "NRC"); and

WHEREAS, the Board of Directors of the Company has recommended that
the Company's shareholders approve the Exchange and this Agreement, and the
Exchange and this Agreement will be submitted to a vote of the holders of
Company Common Stock pursuant to the New Mexico Business Corporation Act (the
"Act").

A-1
<PAGE>

NOW THEREFORE, in consideration of the premises, and of the
agreements, covenants and conditions hereinafter contained, and subject to
satisfaction of the conditions herein contained, the parties hereto agree
with respect to the acquisition and exchange provided for herein (the
"Exchange") that at the Effective Time each share of Company Common Stock
issued and outstanding immediately prior to the Effective Time will be
automatically exchanged for one share of Manzano Common Stock, and that the
terms and conditions of the Exchange and the method of carrying the same into
effect are as follows:

ARTICLE I

Subject to the satisfaction of the terms and conditions contained
herein, the Exchange will be effective upon the filing of Articles of
Exchange (the "Articles") with respect to the Exchange with the Corporations
Bureau of the PRC or at such later time as may be stated in the Articles (the
time at which the Exchange becomes effective being referred to herein as the
"Effective Time").

ARTICLE II

At the Effective Time:

(1) each share of Company Common Stock issued and outstanding
immediately prior to the Effective Time shall be automatically exchanged for
one share of Manzano Common Stock, which shares of Manzano Common Stock shall
thereupon be fully paid and non-assessable;

(2) Manzano shall acquire and become the owner and holder of each
issued and outstanding share of Company Common Stock so exchanged;

(3) each share of Manzano Common Stock issued and outstanding
immediately prior to the Effective Time shall be cancelled and shall
thereupon constitute an authorized and unissued share of Manzano Common
Stock; and

(4) the former holders of Company Common Stock shall be entitled
only to receive shares of Manzano Common Stock in exchange therefor as
provided herein subject to statutory dissenters' rights under Sections
53-15-3 and 53-15-4 of the Act that may be applicable to such former holders.

Shares of Company Preferred Stock shall not be exchanged or otherwise
affected in connection with the Exchange. Subject to the terms thereof, each
share of Company Preferred Stock issued and outstanding immediately prior to
the Effective Time shall continue to be issued and outstanding following the
Exchange and shall continue to be a share of Company Preferred Stock of the
applicable series designation.

A-2
<PAGE>

ARTICLE III

The consummation of the Exchange is subject to the following
conditions precedent at or prior to the Effective Time:

(1) the receipt and continued effectiveness of (a) the approval by
the holders of Company Common Stock as required by the Act and (b) such
orders, authorizations, approvals or waivers from the PRC, the FERC, the NRC
and any other jurisdictive regulatory bodies, boards or agencies, or other
parties, which are required to consummate the Exchange at the Effective Time
and which do not include, in the sole judgment of the Company's Board of
Directors, unacceptable conditions;

(2) a registration statement relating to the shares of Manzano
Common Stock to be issued or reserved for issuance in connection with the
Exchange shall be effective under the Securities Act of 1933, as amended, and
shall not be the subject of any stop order pursuant to Section 8 thereunder;

(3) the approval for listing, upon official notice of issuance, by
the New York Stock Exchange of the shares of Manzano Common Stock to be
issued in connection with the Exchange;

(4) the receipt of an opinion of counsel or an opinion from the
Company's independent public accountants, in form and substance satisfactory
to the Board of Directors of the Company and of Manzano, as to the United
States federal income tax consequences of the Exchange; and

(5) the receipt of an opinion, in form and substance satisfactory
to the Company's Board of Directors, from Keleher & McLeod, P.A., counsel to
the Company, as to the legality of Manzano Common Stock to be issued by
Manzano in connection with the Exchange.

ARTICLE IV

This Agreement may be amended, modified or supplemented, or compliance
with any provision or condition hereof may be waived, at any time prior to
the Effective Time (including, without limitation after receipt of the
affirmative vote of holders of the Company Common Stock as provided in
Article V hereof), by the mutual consent of the Boards of Directors of the
Company and of Manzano; provided, however, that, after receipt of such holder
approval, no such amendment, modification, supplement or waiver shall be made
or effected if such amendment, modification, supplement or waiver would, in
the sole judgment of the Board of Directors of the Company, materially and
adversely affect the rights of the shareholders of the Company.

This Agreement may be terminated and the Exchange abandoned at any
time prior to the Effective Time (including, without limitation, after
receipt of the affirmative vote of holders of the Company Common Stock as
provided in Article V hereof), if the Board of Directors of the Company
determines, in its sole judgment, that consummation of the Exchange would for
any reason be inadvisable or not in the best interests of the Company or its
shareholders.

A-3
<PAGE>

ARTICLE V

The Exchange and this Agreement will be submitted to the holders of
Company Common Stock for approval pursuant to the Act. As required by the
Act, the affirmative vote of the holders of two-thirds of the outstanding
shares of Company Common Stock will be required to approve the Exchange and
this Agreement.

ARTICLE VI

Following the Effective Time, each holder of an outstanding
certificate or certificates theretofore representing shares of Company Common
Stock may, but shall not be required to, surrender the same to Manzano for
cancellation and reissuance of a new certificate or certificates in such
holder's name or for cancellation and transfer, and each such holder or
transferee will be entitled to receive a certificate or certificates
representing the same number of shares of Manzano Common Stock as the shares
of Company Common Stock previously represented by the certificate or
certificates surrendered. Until so surrendered or presented for transfer,
each outstanding certificate which, immediately prior to the Effective Time,
represents Company Common Stock shall be deemed and treated for all corporate
purposes to represent the ownership of the same number of shares of Manzano
Common Stock as though such surrender or transfer and exchange had taken
place. The holders of Company Common Stock at the Effective Time shall have
no right to have their shares of Company Common Stock transferred on the
stock transfer books of the Company, and such stock transfer books shall be
deemed to be closed for this purpose at the Effective Time, and at and after
the Effective Time, such stock transfer books may be deemed to be the stock
transfer books of Manzano.

ARTICLE VII

Prior to or as of the Effective Time, the Company shall cause those
directors of the Company identified as Manzano directors in the Company's
Proxy Statement for the Company's 2000 Annual Meeting to be elected directors
of Manzano, and such directors shall remain as directors of Manzano at and
after the Effective Time until Manzano's 2001 Annual Meeting. Each director
of the Company as of the Effective Time shall also remain a director of the
Company at and after the Effective Time until otherwise determined by
Manzano.

ARTICLE VIII

At the Effective Time, Manzano shall become sponsor of a dividend
reinvestment and stock purchase plan ("Manzano Direct Plan") by amendment to
the Company's PNM Direct Plan as in effect immediately prior to the Effective
Time. At the Effective Time, all shares of Company Common Stock held under
the PNM Direct Plan (including fractional and uncertificated shares)
immediately prior to the Effective Time shall be automatically exchanged for
a like number of shares (including fractional and uncertificated shares) of
Manzano Common Stock and shall be held under and pursuant to the Manzano
Direct Plan. At the Effective Time, Manzano shall become the sponsor of, and
agree to issue Manzano Common Stock on and after the Effective Time in
connection with, the Company's Performance Stock Plan and the Company's
Director Retainer Plan, each as in effect immediately prior to the Effective
Time, by appropriate amendments to these plans.

A-4
<PAGE>

IN WITNESS WHEREOF, each of the Company and Manzano, pursuant to
authorization and approval given by its Board of Directors, has caused this
Agreement to be executed by its President and Chief Executive Officer and its
corporate seal to be affixed hereto and attested by its Secretary as of the
date first above written.

PUBLIC SERVICE COMPANY
OF NEW MEXICO

By:
----------------------------------
Chairman of the Board
and Chief Executive Officer

ATTEST:

- --------------------------------
Secretary

MANZANO CORPORATION

By:
----------------------------------
Chairman of the Board
and Chief Executive Officer

ATTEST:

- --------------------------------
Secretary

A-5
<PAGE>

EXHIBIT B

ARTICLES OF INCORPORATION
OF
MANZANO CORPORATION

The undersigned acting as incorporator of a Corporation under the New
Mexico Business Corporation Act adopts the following Articles of
Incorporation for the Corporation.

ARTICLE I

NAME

The name of the Corporation is MANZANO CORPORATION.

ARTICLE II

PERIOD OF DURATION

The period of its duration is perpetual.

ARTICLE III

PURPOSE

The purposes of the Corporation are to hold the voting securities of
other companies and to engage in any other lawful business for which
corporations may be incorporated under the laws of the State of New Mexico. The
Corporation shall have all the powers that are lawful for a corporation to
exercise under New Mexico law.

ARTICLE IV

AUTHORIZED NUMBER OF SHARES

A. AUTHORIZED CAPITAL SHARES. The total number of shares of stock
which the Corporation shall have the authority to issue is One Hundred
Seventy (170) Million shares, of which One Hundred Twenty (120) Million
shares shall be Common Stock, no par value, and Fifty (50) Million shares
shall be Preferred Stock, no par value. Common Stock and Preferred Stock
shall be issued for such minimum consideration as authorized by the Board of
Directors.

B. COMMON STOCK. The Board of Directors is authorized by
resolution to provide from time to time for the issuance of shares of Common
Stock subject to the following restrictions and qualifications:

B-1
<PAGE>

(1) DIVIDENDS. Subject to any rights of holders of Preferred
Stock, such dividends (payable in cash, stock or otherwise) as may be
determined by the Board of Directors may be declared and paid on the Common
Stock from time to time from any available funds, property or shares.

(2) VOTING RIGHTS. Subject to any rights of holders of Preferred
Stock to vote on a matter as a class or series, each outstanding share of
Common Stock shall be entitled to one vote on each matter submitted to a vote
of holders of Common Stock at a meeting of shareholders. Cumulative voting
for the election of directors of the Corporation shall not be permitted.

(3) LIQUIDATION, DISSOLUTION OR WINDING UP. In the event of any
liquidation, dissolution or winding up of the Corporation, the holders of
Common Stock shall be entitled to receive the net balance of any assets of
the Corporation remaining after any distribution of the assets of the
Corporation to the holders of Preferred Stock to the extent necessary to
satisfy any preferences to the assets.

C. PREFERRED STOCK. The Board of Directors is authorized by
resolution to provide from time to time for the issuance of shares of
Preferred Stock in series and to fix, from time to time before issuance, the
designation, preferences, privileges and voting powers of the shares of each
series of Preferred Stock and its restrictions or qualifications, limited to
the following:

(1) the serial designation, authorized number of shares and the
stated value;

(2) the dividend rate, if any, the date or dates on which the
dividends will be payable, and the extent to which the dividends may be
cumulative;

(3) the price or prices at which shares may be redeemed, and any
terms, conditions and limitations upon any redemption;

(4) the amount or amounts to be received by the holders in the
event of dissolution, liquidation, or winding up of the Corporation;

(5) any sinking fund provisions for redemption or purchase of
shares of any series;

(6) the terms and conditions, if any, on which shares may be
converted into, or exchanged for, shares of other capital stock, or of other
series of Preferred Stock, of the Corporation; and

(7) the voting rights, if any, for the shares of each series,
limited to circumstances when:

(a) the Corporation fails to pay dividends on the applicable series; and

(b) when a proposed amendment to these Articles would have an adverse
impact on the rights and privileges of the preferred stockholders.

B-2
<PAGE>

D. PREEMPTIVE RIGHTS. The holders of Common Stock or Preferred
Stock shall not have a preemptive right to acquire authorized but unissued
shares, securities convertible into shares or carrying a right to subscribe
to or acquire shares, except under such terms and conditions as may be
provided by the Board of Directors in its sole judgment.

ARTICLE V

STOCK RIGHTS AND OPTIONS

The Board of Directors in its sole judgment may create and issue rights
or options entitling the holders, which may include directors, officers or
employees of the Corporation, to purchase from the Corporation shares of any
class of stock.

ARTICLE VI

AMENDMENTS

The affirmative vote of the holders of two-thirds of the outstanding
capital stock of the Corporation entitled to vote shall be required in order to
amend, alter, change or repeal any provisions of these Articles of
Incorporation.

ARTICLE VII

DIRECTORS

The number of directors of the Corporation shall be as specified in
the Bylaws but shall be no less than five (5) and no more than twelve (12).
The number of directors may be increased or decreased from time to time as
provided in the Bylaws so long as no decrease shall have the effect of
shortening the term of any incumbent director. To the extent and in the
manner provided by law, the directors may be classified as to the time for
which they severally hold office, in accordance with the Bylaws of the
Corporation.

The initial Board of Directors shall consist of seven members,
and the names and addresses of the persons who are to serve as the initial
Directors until the first annual meeting of shareholders, or until their
successors shall have been elected and qualified, are:

B-3
<PAGE>

<TABLE>
<CAPTION>
Name Address
- ---- -------
<S> <C>
John T. Ackerman 165 Sol de Oro Court
Corrales, NM 87048

Robert G. Armstrong 2608 North Washington
Roswell, NM 88201

Joyce A. Godwin 904 Brazos Place SE
Albuquerque, NM 87123

Benjamin F. Montoya Alvarado Square, MS 2824
Albuquerque, NM 87158

Theodore F. Patlovich 11109 Bobcat NE
Albuquerque, NM 87122

Robert M. Price 14579 Grand Ave. S., Suite 100
Burnsville, MN 55306

Jeffry E. Sterba Alvarado Square, MS 2802
Albuquerque, NM 87158
</TABLE>

ARTICLE VIII

LIMITATION ON LIABILITY

The liability of the directors of the Corporation for monetary damages
shall be eliminated or limited to the fullest extent permissible under New
Mexico law as may be amended from time to time.

ARTICLE IX

SHAREHOLDERS

The affirmative vote of the holders of two-thirds of the outstanding
capital stock of the Corporation entitled to vote shall be required in order
to approve any merger, consolidation, plan to exchange all the issued or
outstanding shares of one or more classes of stock of this Corporation for
shares of another corporation or sale of all or substantially all of the
Corporation's assets.

ARTICLE X

ADDRESS OF INITIAL REGISTERED OFFICE AND NAME OF INITIAL REGISTERED AGENT

B-4
<PAGE>

The address of the Corporation's initial registered office is:
Alvarado Square, MS 2822, Albuquerque, NM 87158. The name of the
Corporation's initial registered agent at that address is Patrick T. Ortiz.

ARTICLE XI

INCORPORATOR

The name and address of the Incorporator is Public Service Company of
New Mexico, Alvarado Square, Albuquerque, New Mexico 87158.

Incorporator

PUBLIC SERVICE COMPANY
OF NEW MEXICO

By: /s/ Benjamin F. Montoya
----------------------------------
BENJAMIN F. MONTOYA
Chairman and Chief Executive
Officer

DATED: March 3, 2000
----------------------

B-5
<PAGE>

EXHIBIT C

BYLAWS
OF
MANZANO CORPORATION

ARTICLE I

MEETINGS OF SHAREHOLDERS

SECTION 1. MEETINGS

The annual meeting of shareholders shall be held at the time and place
set by resolution of the Board of Directors for the election of directors and
the transaction of such other business as may properly come before the
meeting.

Special meetings may be called by a majority of the Board of
Directors, the Chairman of the Board, the President or by holders of not less
than one-tenth of all the shares entitled to vote at the meeting.

SECTION 2. NOTICE

Written notice of any meeting stating the time and place, and if a
special meeting, the purpose, of the meeting shall be mailed to each
shareholder of record entitled to vote at the meeting at the address of the
shareholder as it appears on the stock transfer books of the Corporation,
except as otherwise provided by law. Notices of special meetings called by a
majority of the Board of Directors, the Chairman of the Board or the
President, and of annual meetings shall be mailed not less than ten (10) days
nor more than fifty (50) days before the meeting. Notices of other special
shareholder meetings shall be mailed not less than forty (40) days nor more
than fifty (50) days before the date of the meeting.

SECTION 3. ADJOURNMENT

Whenever a quorum is not present at any meeting of the shareholders,
or whenever it may be deemed desirable, a majority in interest of the
shareholders present in person or by proxy may adjourn the meeting from time
to time to any future date, without notice other than by announcement at the
meeting. At any continuation of the adjourned meeting at which a quorum is
present, any business may be transacted which might have been transacted at
the meeting originally scheduled.

SECTION 4. ORDER OF BUSINESS

(a) The Chairman of the Board, or in the absence of the Chairman, the
President, or in their absence, a director designated by the Board of
Directors, shall call meetings of the shareholders to order and shall act as
Chairman of the meeting. The shareholders may appoint

C-1
<PAGE>

any shareholder or the proxy of any shareholder to act as Chairman of any
meeting of the shareholders in the absence of the Chairman of the Board,
President and a director designated by the Board to serve as Chairman of the
meeting. The Secretary, or in the absence of the Secretary, an Assistant
Secretary, shall act as Secretary at all meetings of the shareholders, but in
the absence of the Secretary and Assistant Secretary at any meetings of the
shareholders, the Chairman of the meeting may appoint any person to act as
Secretary of the meeting.

(b) The Chairman of the meeting shall have the right to determine the
order of business at the meeting, to prescribe the rules and procedures for
the conduct of the meeting, and to do all things necessary or desirable for
the proper conduct of the meeting, including maintenance of order and safety
and limitations on the time allotted to questions or comments on the affairs
of the Corporation.

(c) The only business that may be conducted at an annual meeting of
shareholders is that business which has been brought before the meeting: (i)
by or at the direction of the Chairman of the meeting; (ii) pursuant to the
notice of the meeting; or (iii) by any shareholder who is a holder of record
at the time of the giving of the notice of the meeting who is entitled to
vote at the meeting and who complies with the procedures set forth in Section
4 (d).

(d) For business to be properly brought before an annual meeting by a
shareholder, the shareholder must have given timely notice of the proposal in
proper written form to the Secretary of the Corporation. To be timely, a
shareholder's notice must be delivered to or mailed and received at the
Secretary's office at least ninety (90) days before the date on which the
proxy materials for the prior year's annual meeting of shareholders were
first mailed.

To be in proper written form, a shareholder's notice to the Secretary shall
set forth in writing as to each matter the shareholder proposes to bring
before the annual meeting: (i) a brief description of the business desired
to be brought before the annual meeting and the reasons for conducting the
business at the annual meeting; (ii) the name and address of the shareholder
proposing the business and all persons or entities acting in concert with the
shareholder; (iii) the class and number of shares of the Corporation which
are beneficially owned by the shareholder and all persons or entities acting
in concert with the shareholder; and (iv) any material interest of the
shareholder in the proposed business. These notice requirements will be
satisfied by a shareholder if the shareholder has notified the Secretary of
the Corporation of his or her intention to present a proposal at an annual
meeting and the proposal has been included in a proxy statement that has been
prepared by management of the Corporation to solicit proxies for the annual
meeting. If, however, the shareholder does not appear or send a qualified
representative to present the proposal at the annual meeting, the proposal
shall not be presented for a vote at the meeting, even though proxies
regarding that vote have been received by the Corporation.

SECTION 5. INSPECTORS

At each meeting of the shareholders at which a vote by ballot is
taken, the polls shall be opened and closed, the proxies and ballots shall be
collected, and the validity of proxies and the acceptance or rejection of
votes shall be decided by two inspectors. No person who is a candidate for
the office of director shall act as inspector of any election for directors.
The inspectors shall be appointed by the Board of Directors before the
meeting or, if no appointment

C-2
<PAGE>

has been made, then by the Chairman of the meeting. If for any reason any of
the inspectors previously appointed fails to attend or refuses or is unable
to serve, those inspectors not serving shall be replaced by inspectors
appointed by the Chairman of the meeting.

SECTION 6. VOTING

At meetings of shareholders, every shareholder having voting rights as
provided for in the Articles of Incorporation shall be entitled to one (1)
vote for each share of stock outstanding in the name of the shareholder on
the books of the Corporation on the date on which shareholders entitled to
vote are determined or as otherwise provided for in the Articles of
Incorporation. Each shareholder may be represented and vote by a proxy or
proxies appointed by an instrument in writing or other manner authorized by
the Board of Directors to the extent permitted by law. If the instrument
designates two (2) or more persons to act as proxies, a majority of the
proxies present at the meeting may exercise all of the powers conferred by
the instrument unless the instrument provides otherwise. No proxy shall be
voted at any meeting or continuation of an adjourned meeting other than that
for which the proxy is given.

In all elections for directors, voting shall be by written ballot, or
by electronic, telephonic or other process as the Board of Directors may
authorize, to the extent permitted by law.

The Board of Directors may fix a date in advance not exceeding fifty
(50) days before the date of any meeting of shareholders as a record date for
the determination of shareholders entitled to notice of and to vote at the
meeting. Only shareholders of record on the date so fixed shall be entitled
to notice of and to vote at the meeting.

ARTICLE II

DIRECTORS

SECTION 1. NUMBER, ELECTION AND TERMS

The business and property of the Corporation shall be managed under
the direction of the Board of Directors. The Board of Directors shall, by
resolution, fix the number of directors which shall be no less than five (5)
and no more than twelve (12) in number. If less than nine directors, the
directors shall be elected at the first annual meeting by the shareholders
and each director shall serve until the next annual meeting and until his or
her successor shall be elected and qualify. If there are nine or more
directors, directors may be elected in classes as authorized by the Articles
of Incorporation in the manner provided by law.

SECTION 2. COMPENSATION

Directors shall receive compensation for their services as directors
as may be fixed by resolution of the Board of Directors, including
reimbursement for expenses for Board related services.

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<PAGE>

SECTION 3. MEETINGS

The meetings of the Board of Directors shall be held at the times and
places designated by the Board of Directors. The annual meeting of the Board
of Directors for the election of officers and such other business as may
properly come before the meeting shall be held immediately following the
annual meeting of shareholders. Special meetings of the Board of Directors
shall be held whenever called at the direction of the Chairman of the Board,
the President, or any two (2) directors if there are less than nine (9)
directors on the Board, or any three (3) directors if there are nine (9) or
more directors on the Board.

SECTION 4. NOTICE

No notice shall be required of any annual or regular meeting of the
Board of Directors unless the place has been changed from that last
designated by the Board of Directors. Notice of any annual or regular
meeting, when required, or of any special meeting, of the Board of Directors
shall be given to each director in writing or by telephone at least
twenty-four (24) hours before the time fixed for the meeting. Notice may be
waived by any director. Unless otherwise indicated in the notice, any and
all business may be transacted at a special meeting. At any meeting at which
every director is present, even without notice, any business may be
transacted.

SECTION 5. ADJOURNMENTS

Any annual, regular or special meeting of the Board of Directors may
be adjourned from time to time by the members present whether or not a quorum
is present, and no notice shall be required of any continuation of an
adjourned meeting beyond the announcement at the adjourned meeting.

SECTION 6. INDEMNIFICATION

Each person serving as a director or an officer of the Corporation,
or, at the request of the Corporation, as a director or an officer of any
other company in which the Corporation has a financial interest and
regardless of whether or not the person is then in office, and the heirs,
executors, administrators and personal representatives of the person, shall
be indemnified by the Corporation to the full extent of the authority of the
Corporation to so indemnify as authorized by New Mexico law.

SECTION 7. COMMITTEES

The Board of Directors may designate from among its members one (1) or
more committees, to exercise the power and authority and perform the
functions that the Board may determine, except as may be limited by law.

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<PAGE>

ARTICLE III

CONTRACTS AND NEGOTIABLE INSTRUMENTS

SECTION 1. AUTHORITY TO SIGN CONTRACTS

Unless the Board of Directors shall otherwise specifically direct, all
contracts, instruments, documents or agreements of the Corporation shall be
executed in the name of the Corporation by the President, or any Vice
President, or any other employee, if approved by the President by either
administrative policy letter or specific written designation. It shall not
be necessary that the corporate seal be affixed to any contract.

SECTION 2. AUTHORITY TO SIGN NEGOTIABLE INSTRUMENTS

Except as otherwise authorized by the Board of Directors, all checks,
drafts, bills of exchange, promissory notes, electronic funds transfer
documents, and other negotiable instruments shall be signed by the Chairman
of the Board, President, any Vice President, Secretary or Treasurer.
Facsimile signatures shall be sufficient to meet the requirements of this
section.

SECTION 3. APPROVAL BY SHAREHOLDERS

The Board of Directors in its discretion may submit any contract, or
act, for approval or ratification at any annual meeting of the shareholders,
or at any special meeting of the shareholders called for the purpose of
considering the act or contract. Except as provided for in the Articles of
Incorporation, any contract or act that shall be approved or ratified by the
vote of the holders of a majority of the capital stock of the Corporation
which is represented in person or by proxy at the meeting shall be valid and
binding upon the Corporation.

ARTICLE IV

OFFICERS

SECTION 1. NUMBER, ELECTION AND TERM

The officers of the Corporation shall be a Chairman of the Board, a
President, one or more Vice Presidents, a Secretary, a Treasurer, and a
Controller, who shall be elected annually by the Board of Directors at the
annual meeting and who shall hold office until the next annual meeting or
until a successor is elected and qualifies. The Board of Directors may
designate the Chairman of the Board or the President as Chief Executive
Officer. The Board of Directors may elect one person to serve as both
Chairman of the Board and President. The Board of Directors may designate
one or more Vice Presidents as "Executive" Vice Presidents and one or more
Vice Presidents as "Senior" Vice Presidents. The title of any Vice President
may include words indicative of the area of responsibility of the Vice
President. The Board of Directors shall designate one of the Vice Presidents
as the chief financial officer of the Corporation. The Board of Directors
may from time to time appoint such additional officers as the interest of the

C-5
<PAGE>

Corporation may require and fix their terms and duties of office. A vacancy
occurring in any office may be filled by the Board of Directors. All
officers shall hold office at the discretion of the Board of Directors and
shall be subject to removal at any time by the affirmative vote of a majority
of the whole Board of Directors. Election of any person as an officer of the
Corporation shall not of itself create contract rights.

SECTION 2. CHAIRMAN OF THE BOARD OF DIRECTORS

The Chairman of the Board shall be elected annually by the Board of
Directors at the annual meeting and shall hold that office until a successor
is elected and qualifies. In the event of the incapacity of the Chairman of
the Board, the Board of Directors shall, by a majority vote of the Board of
Directors, designate an Acting Chairman who shall, during the incapacity of
the Chairman of the Board, assume and perform all functions and duties which
the Chairman of the Board is authorized or required by law to do. The
Chairman of the Board shall have the power to call special meetings of the
shareholders and of the directors for any purpose. The Chairman of the Board
shall preside at all meetings of the shareholders and of the Board of
Directors unless the Chairman of the Board is absent or incapacitated. The
Chairman of the Board, subject to the authority of the Board of Directors,
shall generally do and perform all acts incident to the office of the
Chairman of the Board and which are authorized or required by law.

SECTION 3. PRESIDENT

The President shall provide active management over all operations of
the Corporation subject to control of the Board of Directors. The President
shall have the power to appoint and discharge, subject to the general
approval or review by the Board of Directors, employees and agents of the
Corporation and to fix their compensation, to make and sign contracts and
agreements in the name of and on behalf of the Corporation and direct the
general management and control of the business and affairs of the
Corporation. The President may delegate authority to officers of the
Corporation as the President may determine. The President shall have the
power to segregate the operations of the Corporation into areas of
responsibility. The President shall see that the books, reports, statements
and certificates required by law are properly kept, made, and filed, and
shall generally do and perform all acts which are authorized or required by
law. The President shall designate a Vice President who shall, during the
absence or incapacity of the President, assume and perform all functions and
duties which the President might lawfully do if present in person and not
under any incapacity.

SECTION 4. VICE PRESIDENTS

Each Vice President designated as "Executive" or "Senior Vice
President" shall be responsible for the areas and activities assigned by the
President, shall be subject to the authority of the President and shall
assist in the general control and management of the business and affairs of
the Corporation.

All other Vice Presidents shall be responsible for the areas and
activities assigned by the President and shall perform other duties as may be
required, including those assigned to an

C-6
<PAGE>

Executive or Senior Vice President during the absence or incapacity of the
Executive or Senior Vice President.

SECTION 5. SECRETARY

The Secretary shall keep a record in the proper books provided for that
purpose of meetings and proceedings of shareholders, the Board of Directors
and Committees of the Board of Directors, and shall record all votes of the
directors and shareholders in a book to be kept for that purpose. The
Secretary shall notify the directors and shareholders of meetings as required
by law or by the Bylaws of the Corporation and shall perform other duties as
may be required by law or the Bylaws of the Corporation, or which may be
assigned from time to time by the Board of Directors, Chairman of the Board
or President. The Secretary is authorized to appoint one or more assistants
from time to time as the Secretary deems advisable, the assistant or
assistants to serve at the pleasure of the Secretary, and to perform the
duties that are delegated by the Secretary. An assistant shall not be an
officer of the Corporation.

SECTION 6. TREASURER

The Treasurer shall have the custody of all the funds and securities
of the Corporation, and shall have the power on behalf of the Corporation to
sign checks, notes, drafts and other evidences of indebtedness, to borrow
money for the current needs of the business of the Corporation and to make
short-term investments of surplus funds of the Corporation. The Treasurer
shall render to the Board of Directors, the Chairman of the Board or the
President, whenever requested, an account of all transactions performed as
Treasurer and of the financial condition of the Corporation. The Treasurer
shall perform other duties as may be assigned by the Board of Directors, the
Chairman of the Board or the President. The Treasurer is authorized to
appoint one or more assistants from time to time as the Treasurer deems
advisable, the assistant or assistants to serve at the pleasure of the
Treasurer, and to perform the duties that are delegated by the Treasurer. An
assistant shall not be an officer of the Corporation.

SECTION 7. CONTROLLER

The Controller shall be the chief accounting officer of the
Corporation and have full responsibility and control of the accounting
practices of the Corporation The Controller shall, subject to the approval
of the Board of Directors, the Chairman of the Board or the President,
establish accounting policies. The Controller shall standardize and
coordinate accounting practices, supervise all accounting records and the
presentation of all financial statements and tax returns. The Controller
shall have other powers and duties as, from time to time, may be conferred by
the Board of Directors, the Chairman of the Board or the President. The
Controller is authorized to appoint one or more assistants from time to time
as the Controller deems advisable, the assistant or assistants to serve at
the pleasure of the Controller, and to perform the duties that are delegated
by the Controller. An assistant shall not be an officer of the Corporation.

C-7
<PAGE>

SECTION 8. FORM OF APPOINTMENT

In making any appointments of assistants, the Secretary, Treasurer and
Controller shall use the following form:

I, ________________________ (Name), the duly elected
__________________ (Title) of Manzano Corporation do
hereby appoint _____________________ (Name) to serve
as Assistant ________________ (Title) for the period
of ______________ (Date) to ________________ (Date),
unless this appointment is terminated earlier in
writing, to assume or perform all functions and
duties which I might require and, in my absence or
incapacity, which I might lawfully do if present and
not under any incapacity.

Any appointments of assistants by the Secretary, Treasurer or
Controller and any terminations of appointments shall be maintained in the
records of the Secretary's office.

ARTICLE V

CAPITAL STOCK

SECTION 1. CERTIFICATES OF STOCK

The name of the person owning shares of the capital stock of the
Corporation, together with the number of shares and the date of issue, shall
be entered on the Corporation's books. All certificates surrendered to the
Corporation shall be canceled, and no new certificates shall be issued until
a certificate or certificates aggregating the same number of shares of the
same class have been surrendered or canceled. The Board of Directors may make
proper provision, from time to time, for the issuance of new certificates in
place of lost, destroyed or stolen certificates.

SECTION 2. TRANSFER AGENTS AND REGISTRARS

The Corporation shall, if and whenever the Board of Directors
determines, maintain one or more transfer offices or agencies, each in charge
of a transfer agent designated by the Board of Directors, where the shares of
the capital stock of the Corporation will be directly transferable, and also
one or more registry offices, each in charge of a registrar designated by the
Board of Directors, where shares of stock will be registered, and no
certificates for shares of the capital stock of the Corporation, in respect
of which one or more transfer agents and registrars shall have been
designated, shall be valid unless countersigned by one of such transfer
agents and registered by one of such registrars. The Board of Directors may
also make additional rules and regulations as it may deem expedient
concerning the issue, transfer and registration of certificates for shares of
the capital stock of the Corporation.

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<PAGE>

SECTION 3. SHARES HELD FOR ACCOUNT

The Board of Directors may adopt by resolution a procedure whereby a
shareholder of the Corporation may certify in writing to the Corporation that
all or a portion of the shares registered in the name of the shareholder are
held for the account of a specified person or persons as provided for by New
Mexico law.

SECTION 4. TRANSFER OF SHARES

Transfers of shares shall be made only upon the books of the
Corporation by the holder or by the holder's attorney in fact upon surrender
of certificates for a like number of shares.

SECTION 5. LOST, DESTROYED OR STOLEN CERTIFICATES

A new certificate of stock may be issued in the place of any
certificate previously issued by the Corporation, or any predecessor of the
Corporation, alleged to have been lost, destroyed or stolen. The Board of
Directors may, in its discretion, require the owner of the lost, destroyed or
stolen certificate to give to the Corporation satisfactory evidence that the
certificate was lost, destroyed or stolen. The Board of Directors may also
require a bond sufficient to indemnify it and its transfer agent, against any
claim that may be made on account of the alleged loss of the certificate or
the issuance of any new certificate.

SECTION 6. FIXING OF RECORD DATES

For the purpose of determining shareholders entitled to notice of any
meeting of shareholders, or entitled to receive payment of any dividend, or
in order to make a determination of shareholders for any other proper
purpose, the Board of Directors may, by resolution, provide that the stock
transfer books be closed for a stated period not to exceed fifty (50) days.
If the stock transfer books are closed for the purpose of determining
shareholders entitled to notice of a meeting of shareholders, the books shall
be closed for at least ten (10) days immediately prior to the meeting.

In lieu of closing the stock transfer books, the Board of Directors
may, by resolution, fix in advance a date as the record date for any
determination of shareholders, the date to be not more than fifty (50) days
and, in case of a meeting of shareholders, not less than ten (10) days prior
to the date on which the action requiring the determination of shareholders
is to be taken.

ARTICLE VI

MISCELLANEOUS PROVISIONS

SECTION 1. BOOKS

The books of the Corporation, except as otherwise provided by law, may
be kept outside of the State of New Mexico, at such place or places as may be
designated by the Board of Directors. The Board of Directors shall determine
whether and to what extent, and at what time

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<PAGE>

and places, and under what conditions and regulations, the accounts and the
books of the Corporation, or any of them, shall be open to the inspection of
shareholders; and no shareholder shall have any right to inspect any book or
account or document of the Corporation except as conferred by the statutes of
New Mexico, or authorized by the Board of Directors.

SECTION 2. CORPORATE SEAL

The common corporate seal is, and until otherwise ordered by the Board
of Directors shall be, an impression circular in form upon paper or wax
bearing the words "Manzano Corporation Incorporated 2000." The seal shall be
in the charge of the Secretary. If and when directed by the Board of
Directors, a duplicate of the seal may be kept and used by the Treasurer or
by an Assistant Secretary or Assistant Treasurer.

SECTION 3. FISCAL YEAR

The fiscal year of the Corporation shall be as determined by the Board
of Directors.

SECTION 4. PRINCIPAL OFFICE

The principal office shall be established and maintained at a place
designated by the Board of Directors.

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<PAGE>

EXHIBIT D

MANZANO CORPORATION

OMNIBUS

PERFORMANCE EQUITY PLAN

Effective ________, 2000

<PAGE>

TABLE OF CONTENTS

<TABLE>
<S> <C>
SECTION 1: ESTABLISHMENT, PURPOSE, AND EFFECTIVE DATE OF PLAN. . . . . . . . . . . 1

1.1 ESTABLISHMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

1.2 PURPOSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

1.3 EFFECTIVE DATE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

SECTION 2: DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

2.1 DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

2.2 GENDER AND NUMBER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

SECTION 3: ELIGIBILITY AND PARTICIPATION . . . . . . . . . . . . . . . . . . . . . 5

SECTION 4: ADMINISTRATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

4.1 ADMINISTRATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

4.2 AWARDS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

4.3 AWARD AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

4.4 CLAIMS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

SECTION 5: STOCK SUBJECT TO PLAN . . . . . . . . . . . . . . . . . . . . . . . . . 6

5.1 NUMBER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

5.2 AVAILABILITY OF STOCK FOR GRANT . . . . . . . . . . . . . . . . . . . . . . 6

5.3 ADJUSTMENT IN CAPITALIZATION. . . . . . . . . . . . . . . . . . . . . . . . 6

SECTION 6: DURATION OF PLAN. . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

SECTION 7: STOCK OPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

7.1 GRANT OF OPTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

7.2 EXERCISE PRICE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

7.3 DURATION OF OPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

7.4 EXERCISABILITY OF OPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . 7

7.5 NO OBLIGATIONS TO EXERCISE OPTIONS. . . . . . . . . . . . . . . . . . . . . 7

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<PAGE>

7.6 PAYMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

7.7 DELIVERY OF SHARES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

SECTION 8: RESTRICTED STOCK RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . 8

8.1 GRANT OF RESTRICTED STOCK RIGHTS. . . . . . . . . . . . . . . . . . . . . . 8

8.2 VOTING RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

8.3 DIVIDEND EQUIVALENTS AND OTHER DISTRIBUTIONS. . . . . . . . . . . . . . . . 8

8.4 FORM AND TIMING OF PAYMENT. . . . . . . . . . . . . . . . . . . . . . . . . 8

SECTION 9: PERFORMANCE SHARES AND PERFORMANCE UNITS. . . . . . . . . . . . . . . . 8

9.1 GRANT OF PERFORMANCE SHARES OR PERFORMANCE UNITS. . . . . . . . . . . . . . 8

9.2 VALUE OF PERFORMANCE SHARES AND PERFORMANCE UNITS . . . . . . . . . . . . . 8

9.3 FORM AND TIMING OF PAYMENT. . . . . . . . . . . . . . . . . . . . . . . . . 9

SECTION 10: STOCK APPRECIATION RIGHTS. . . . . . . . . . . . . . . . . . . . . . . 9

10.1 GRANT OF STOCK APPRECIATION RIGHTS. . . . . . . . . . . . . . . . . . . . . 9

10.2 EXERCISABILITY OF SARS. . . . . . . . . . . . . . . . . . . . . . . . . . . 9

10.3 EXERCISE OF SARS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

10.4 FORM AND TIMING OF PAYMENT. . . . . . . . . . . . . . . . . . . . . . . . . 9

10.5 RULE 16B-3 REQUIREMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . 9

10.6 TERM OF SAR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

SECTION 11: RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

SECTION 12: TERMINATION OF EMPLOYMENT. . . . . . . . . . . . . . . . . . . . . . . 10

12.2 VOLUNTARY TERMINATION OR INVOLUNTARY TERMINATION OF EMPLOYMENT
FOR REASONS OTHER THAN IMPACTION OR CAUSE.. . . . . . . . . . . . . . . . . 10

12.3 TERMINATION OF EMPLOYMENT FOR CAUSE . . . . . . . . . . . . . . . . . . . . 12

12.4 DISPOSITION OF VESTED AWARDS UPON DEATH . . . . . . . . . . . . . . . . . . 12

D-ii
<PAGE>

12.5 DISCRETION OF COMMITTEE . . . . . . . . . . . . . . . . . . . . . . . . . . 12

SECTION 13: NON-TRANSFERABILITY. . . . . . . . . . . . . . . . . . . . . . . . . . 12

SECTION 14: EMPLOYER DISCRETION. . . . . . . . . . . . . . . . . . . . . . . . . . 12

14.1 EMPLOYMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

14.2 PARTICIPANT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

SECTION 15: SUBSTITUTION OF AWARDS . . . . . . . . . . . . . . . . . . . . . . . . 12

SECTION 16: AMENDMENT, MODIFICATION, AND TERMINATION OF PLAN . . . . . . . . . . . 13

SECTION 17: TAX WITHHOLDING. . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

17.1 TAX WITHHOLDING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

17.2 FORM OF PAYMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

17.3 TAX UPON DISPOSITION OF SHARES SUBJECT TO Section 422 RESTRICTIONS. . . . . 14

SECTION 18: INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

SECTION 19: REQUIREMENTS OF LAW. . . . . . . . . . . . . . . . . . . . . . . . . . 15

19.1 REQUIREMENTS OF LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

19.2 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

19.3 CODE SECTION 162(M) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

SECTION 20: FUNDING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
</TABLE>

D-iii

<PAGE>

MANZANO CORPORATION
OMNIBUS PERFORMANCE EQUITY PLAN

SECTION 1

ESTABLISHMENT, PURPOSE, AND EFFECTIVE DATE OF PLAN

1.1 ESTABLISHMENT. Manzano Corporation (the "Company"), a New
Mexico corporation, hereby establishes the "MANZANO CORPORATION OMNIBUS
PERFORMANCE EQUITY PLAN" (the "Plan") for Employees. The Plan permits the
grant of Stock Options, Restricted Stock Rights, Performance Shares,
Performance Units, and Stock Appreciation Rights.

1.2 PURPOSE. The purpose of the Plan is to advance the interests
of the Company by encouraging and providing for the acquisition of an equity
interest in the Company by Employees, by providing additional incentives and
motivation toward superior performance of the Company, and by enabling the
Company to attract and retain the services of Employees upon whose judgment,
interest, and special effort the successful conduct of its operations is
largely dependent.

1.3 EFFECTIVE DATE. Subject to shareholder approval, the Plan
shall become effective immediately upon the effective date of the closing of
the mandatory share exchange under the New Mexico Business Corporation Act,
NMSA 1978, Section 53-13-13 (1983), which will result in the Company becoming
the holding company for the Public Service Company of New Mexico.

SECTION 2

DEFINITIONS

2.1 DEFINITIONS. Whenever used herein, the following terms will
have their respective meanings set forth below:

(a) "Award" means any Option, Restricted Stock Right,
Performance Share, Performance Unit or Stock Appreciation Right granted
under this Plan.

(b) "Board" means the Board of Directors of the Company.

(c) "Cause," subject to the exception and modification set
forth at the end of this Subsection (c), shall mean termination of employment
due to the willful engaging by the Participant in conduct which is
demonstrably and materially injurious to an Employer, monetarily or
otherwise, such as acts of fraud, misappropriation or embezzlement for
personal gain at the expense of an Employer, conviction of a felony, or
conviction of a misdemeanor involving immoral acts.

D-1
<PAGE>

For purposes of this definition, an act or failure to act by a Participant
shall not be deemed "willful" if done, or omitted to be done, by the
Participant in good faith and with reasonable belief that his or her action
was in the best interest of the Employer.

(d) "Change in Control," subject to the exceptions and
modifications set forth at the end of this Subsection (d), shall be deemed to
have occurred (any required approval, including any final nonappealable
regulatory order, having been obtained):

i. if any "person," as such term is used in
Sections 13(d) and 14(d) of the Exchange Act (as hereinafter defined),
becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of securities of the Company representing
twenty percent (20%) or more of the combined voting power of the Company's
then outstanding securities;

ii. if, during any period of two (2)
consecutive years, the following individuals cease, for any reason, to
constitute a majority of the Board:

a. directors who were directors at the
beginning of such period; and

b. any new directors, whose election
by the Board or nomination for election by the Company's stockholders was
approved by a vote of at least two-thirds (2/3rds) of the directors then
still in office, who were either directors at the beginning of such period or
whose election or nomination for election was previously so approved (such
new directors being referred to as "Approved New Directors");

iii. upon the effective date of a merger or
consolidation of the Company with any other corporation; or

iv. upon the effective date of the adoption of a plan
of complete liquidation of the Company or an agreement for the sale or
disposition by the Company of all or substantially all of the Company's
assets.

Subsection (d)(i) shall not apply if the "person" as referred to
therein is, or shall be, (a) a trustee or other fiduciary holding securities
under an employee benefit plan of the Company or (b) a corporation owned,
directly or indirectly, by the stockholders of the Company in substantially
the same proportions as their ownership of stock of the Company.

In Subsection (d)(ii), the Approved New Director shall not include a
director designated by a person who has entered into an agreement with the
Company to effect a transaction described in Subsection (d)(i), (d)(iii) or
(d)(iv) hereof.

Subsection (d)(iii) shall not apply to a merger or consolidation which
would result in the voting securities of the Company outstanding immediately
prior thereto continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving

D-2
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entity) at least eighty percent (80%) of the combined voting power of the
voting securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation.

(e) "Code" means the Internal Revenue Code of 1986, as
amended.

(f) "Committee" means the Compensation and Human Resources
Committee of the Board or any such other committee as may be designated by
the Board to administer the Plan, the membership of such committee not being
less than two (2) members of the Board. All Committee members must be
"non-employee directors" (as defined in Rule 16b-3 under the Exchange Act) if
required to meet the conditions for exemption of the Awards under the Plan
from Section 16(b) of the Exchange Act.

(g) "Company" means Manzano Corporation, a New Mexico
corporation.

(h) "Disability" shall have the same meaning as provided in
the Company's long term disability plan for the provision of long term
disability benefits.

(i) "Employee" means any full-time or part-time employee of
an Employer who was not hired for a specific job of limited duration, or for
a position designated for students.

(j) "Employer" means the Company, or any of its subsidiaries
which has by resolution of the subsidiary's Board affirmatively adopted the
Plan.

(k) "ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended, or the rules thereunder.

(l) "Exchange Act" means the Securities Exchange Act of
1934, as amended.

(m) "Fair Market Value" means the closing sale price of one
share of Stock for "New York Stock Exchange Composite Transactions," as
reported in the Western Edition of the WALL STREET JOURNAL, or a successor
comparable publication, on the date such value is determined (or if Stock is
not traded on such date, on the first immediately preceding business day on
which Stock was so traded).

(n) "Grant Date" means the date the Committee approves the
Award.

(o) "Impaction" means involuntary termination due to
elimination of job, position, department or work unit or general downsizing.

(p) "Option" means the right to purchase Stock at a stated
price for a specified period of time. For purposes of the Plan an Option may
be either (i) a "nonstatutory stock option" (an option which is not an
incentive stock option), or (ii) an "incentive stock option" within the
meaning of Section 422 of the Code.

(q) "Participant" means any Employee who is selected by an
Employer from time to time to participate in the Plan; provided, however,
that all Employees who are selected to participate in the Plan shall be
subject to approval by the President, in his or her sole discretion.

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Notwithstanding the above, the President's right to participate in the Plan
shall be determined in the sole discretion of the Committee.

(r) "Performance Period" means the time period during which
the performance goals must be met as determined by the Committee.

(s) "Performance Share" means a right to receive a payment
in the form of Stock equal to the value of a Performance Share as determined
by the Committee.

(t) "Performance Unit" means a right to receive a payment in
cash or Stock or a combination thereof equal to the value of a Performance
Unit as determined by the Committee.

(u) "Plan" shall mean the Manzano Corporation Omnibus
Performance Equity Plan as set forth in this document and as amended from
time to time.

(v) "President" means the President of the Company.

(w) "Restricted Period" means the period during which a
Restricted Stock Right, Performance Share or Performance Unit is subject to
restrictions pursuant to the relevant provisions of the Plan.

(x) "Restricted Stock Right" means the right to receive a
share of Stock at no monetary cost to the Participant.

(y) "Retirement," for purposes of this Plan, shall mean
termination of employment and attainment of:

(i) age forty-five (45) and twenty (20) years of
service;

(ii) age fifty five (55) and ten (10) years of service;

(iii) the age at which the early distribution penalty no
longer applies as specified in Code Section 72(t)
and five (5) years of service; or

(iv) any age and thirty (30) years of service.

(z) "Stock" means the Common Stock of the Company, no par
value.

(aa) "Stock Appreciation Right" and "SAR" mean the right to
receive a payment from the Company equal to the excess of the Fair Market
Value of the share of Stock at the date of exercise over a specified price
fixed by the Committee, which shall not be less than one hundred percent
(100%) of the Fair Market Value of the Stock on the Grant Date. In the case
of a Stock Appreciation Right which is granted in conjunction with an Option,
the specified price shall be the Option exercise price.

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2.2 GENDER AND NUMBER. Except when otherwise indicated by the
context, words in the masculine gender when used in the Plan will include the
feminine gender, the singular will include the plural, and the plural will
include the singular.

SECTION 3

ELIGIBILITY AND PARTICIPATION

Awards may be made only to those Participants who are Employees of an
Employer on the Grant Date of the Award.

SECTION 4

ADMINISTRATION

4.1 ADMINISTRATION. The Committee shall be responsible for the
administration of the Plan. The Committee, by majority action thereof, is
authorized to interpret the Plan, to prescribe, amend, and rescind rules and
regulations relating to the Plan, 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 Plan, but only to the extent not contrary to the express provisions of
the Plan. Determinations, interpretations, or other actions made or taken by
the Committee in good faith pursuant to the provisions of the Plan shall be
final, binding and conclusive for all purposes of the Plan.

4.2 AWARDS. The Committee shall have the authority, in its sole
discretion, to determine the types of Awards, the times when Awards shall be
granted, the number of Awards, the purchase price or exercise price, the
period(s) during which such Awards shall be exercisable (whether in whole or
in part), the restrictions applicable to Awards, and the other terms and
provisions thereof (which need not be identical). The Committee shall have
the authority to modify existing Awards, subject to Section 16 of this Plan.

4.3 AWARD AGREEMENT. Each Award shall be evidenced by an agreement
that shall specify the type of Award granted and such other provisions and
restrictions as the Committee shall determine.

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4.4 CLAIMS. Any claim relating to an Award granted under this Plan
shall be submitted to the Committee or its designee. The Committee shall
render a written decision and, if there is an adverse determination with
respect to the claim, either in whole or in part, the decision will set forth
the basis for the determination. If the Committee does not render a decision
within one hundred and twenty (120) days, the claim shall be deemed denied.

SECTION 5

STOCK SUBJECT TO PLAN

5.1 NUMBER. The total number of shares of Stock subject to Awards
under the Plan may not exceed five million (5,000,000), subject to adjustment
upon occurrence of any of the events indicated in Section 5.3. The shares to
be delivered under the Plan may consist, in whole or in part, of authorized
but unissued Stock or shares purchased on the open market or, if it becomes
allowable under New Mexico law, treasury Stock not reserved for any other
purpose.

5.2 AVAILABILITY OF STOCK FOR GRANT. Subject to the express
provisions of the Plan, if any Award granted under the Plan terminates,
expires, lapses for any reason, or is paid in cash, any Stock subject to or
surrendered for such Award will again be Stock available for the grant of an
Award. With respect to Awards made to insiders under Section 16 of the
Exchange Act, shares of such Stock may be reused to the maximum extent
permitted under Section 16 of the Exchange Act.

5.3 ADJUSTMENT IN CAPITALIZATION. In the event of any change in
the outstanding shares of Stock by reason of a Stock dividend or split,
recapitalization, merger, consolidation, combination, exchange of shares, or
other similar corporate change, the aggregate number of shares of Stock
available under the Plan and subject to each outstanding Award, and its
stated exercise price or the basis upon which the Award is measured, shall be
adjusted appropriately by the Committee, whose determination shall be
conclusive; provided, however, that fractional shares shall be rounded to the
nearest whole share. Any adjustment to an incentive stock option shall be
made consistent with the requirements of Section 424 of the Code.

SECTION 6

DURATION OF PLAN

The Plan shall remain in effect, subject to the Board's right to
terminate the Plan earlier pursuant to Section 16 herein, until all Awards
hereunder shall have expired or terminated or shall have been exercised or
fully vested, and any Stock subject thereto shall have been purchased or
acquired pursuant to the provisions thereof. Notwithstanding the foregoing,
no Award may be granted under the Plan after December 31, 2010.

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SECTION 7

STOCK OPTIONS

7.1 GRANT OF OPTIONS. Subject to the provisions of Sections 5 and
6, Options may be granted to Participants at any time and from time to time
as shall be determined by the Committee. The Committee shall have complete
discretion in determining the number of Options granted to each Participant.
The Committee may grant any type of Option to purchase Company Stock that is
permitted by law at the time of grant except discounted options. To the
extent the aggregate Fair Market Value (determined at the time the Option is
granted) of the Stock with respect to which incentive stock options are
exercisable for the first time by a Participant in any calendar year (under
this Plan and any other plans of the Company) exceeds the limitations set
forth in Code Section 422(d), as amended, such Options shall not be deemed
incentive stock options. In determining which Options may be treated as
non-qualified options under the preceding sentence, Options will be taken
into account in the order of their Grant Dates. No incentive stock option
may be granted to any person who owns, directly or indirectly, more than ten
percent (10%) of the total combined voting power of all classes of stock of
the Company. Nothing in this Section 7 of the Plan shall be deemed to
prevent the grant of nonstatutory stock options in amounts which exceed the
maximum established by Section 422 of the Code.

7.2 EXERCISE PRICE. No Option shall be granted pursuant to the
Plan at an exercise price that is less than the Fair Market Value of the
Stock on the Grant Date.

7.3 DURATION OF OPTIONS. Each Option shall expire at such time or
times as the Committee shall determine at the time it is granted, provided,
however, that no incentive stock option may be granted later than ten years
from the date the Plan is adopted or approved by the shareholders, whichever
is earlier.

7.4 EXERCISABILITY OF OPTIONS. Options granted under the Plan
shall be exercisable at such times and be subject to such restrictions and
conditions as the Committee shall in each instance approve, which need not be
the same for all Participants; provided, however, that no Option shall be
exercisable later than ten (10) years from the Grant Date.

7.5 NO OBLIGATIONS TO EXERCISE OPTIONS. The granting of an Option
will impose no obligation upon the Participant to exercise such Option.

7.6 PAYMENT. The purchase price of Stock upon exercise of any
Option shall be paid in full either (i) in cash, (ii) in Stock valued at its
Fair Market Value on the date of exercise, or (iii) by a combination thereof
as determined by the Committee. The Committee in its sole discretion may
also permit payment of the purchase price upon exercise of any Option to be
made by (i) having shares withheld from the total number of shares of Stock
to be delivered upon exercise or (ii) delivering a properly executed notice
together with irrevocable instructions to a broker to promptly deliver to the
Company the amount of sale or loan proceeds to pay the exercise price. The
proceeds from payment of exercise prices shall be added to the general funds
of the Company and shall be used for general corporate purposes.

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<PAGE>

7.7 DELIVERY OF SHARES. Within an administratively reasonable
period of time after the exercise of an Option, and the payment of the full
exercise price, and the satisfaction of all withholding obligations incurred
pursuant to such exercise, the Participant shall receive a Stock certificate
evidencing his or her ownership of such Stock. A Participant shall have none
of the rights of a shareholder with respect to Options until the record date
of the Stock purchase. No adjustment will be made for dividends or other
rights for which the record date is prior to the date such Stock certificate
is issued in the Participant's name.

SECTION 8

RESTRICTED STOCK RIGHTS

8.1 GRANT OF RESTRICTED STOCK RIGHTS. Subject to the provisions of
Sections 5 and 6, the Committee, at any time and from time to time, may grant
Restricted Stock Rights under the Plan to such Participants and in such
amounts as it shall determine.

8.2 VOTING RIGHTS. During the Restricted Period, Participants
holding the Restricted Stock Rights granted hereunder shall have no voting
rights with respect to the shares subject to such Restricted Stock Rights
prior to the issuance of such shares pursuant to the Plan.

8.3 DIVIDEND EQUIVALENTS AND OTHER DISTRIBUTIONS. During the
Restricted Period, at the discretion of the Committee, Participants holding
Restricted Stock Rights may be entitled to receive dividend equivalents and
other distributions paid with respect to those Rights while they are so held.

8.4 FORM AND TIMING OF PAYMENT. Upon the satisfaction of the
restrictions, shares will be issued to the Participant. If any shares are to
be issued on a deferred basis, the Committee may provide for the payment of
dividend equivalents or interest during the deferral period.

SECTION 9

PERFORMANCE SHARES AND PERFORMANCE UNITS

9.1 GRANT OF PERFORMANCE SHARES OR PERFORMANCE UNITS. Subject to
the provisions of Sections 5 and 6, Performance Shares or Performance Units
may be granted to Participants at any time and from time to time as shall be
determined by the Committee. The Committee shall have complete discretion in
determining the number of Performance Shares or Performance Units granted to
each Participant.

9.2 VALUE OF PERFORMANCE SHARES AND PERFORMANCE UNITS. Each
Performance Share and each Performance Unit shall have a value determined by
the Committee at the time of grant. The Committee shall set performance
goals in its discretion which, depending on the extent to which they are met,
will determine the ultimate value of the Performance Share or Performance
Unit to the Participant. The time period during which the performance goals
must be met shall be called a Performance Period and shall be determined by
the Committee.

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<PAGE>

9.3 FORM AND TIMING OF PAYMENT. For Performance Shares, payment
shall be made in Stock. For Performance Units, payment shall be made in
cash, Stock or a combination thereof as determined by the Committee. Payment
may be made in a lump sum or installments as prescribed by the Committee. If
any payment is to be made on a deferred basis, the Committee may provide for
the payment of dividend equivalents or interest during the deferral period.

SECTION 10

STOCK APPRECIATION RIGHTS

10.1 GRANT OF STOCK APPRECIATION RIGHTS. Subject to the provisions
of Sections 5 and 6, Stock Appreciation Rights ("SARs") may be granted to
Participants at any time and from time to time as shall be determined by the
Committee. SARs may be granted in connection with the grant of an Option, in
which case the exercise of 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.

10.2 EXERCISABILITY OF SARS. SARs granted under the Plan shall be
exercisable at such times and be subject to such restrictions and conditions
as the Committee shall in each instance approve, which need not be the same
for all Participants; provided, however, that no SAR shall be exercisable
later than ten (10) years from the Grant Date.

10.3 EXERCISE OF SARS. Upon exercise of the SAR, the Participant
shall be entitled to receive payment of an amount determined by multiplying:

(a) The difference between the Fair Market Value of a share
of Stock at the date of exercise over the price fixed by the Committee at the
Grant Date, by

(b) The number of shares with respect to which the SAR is
exercised.

10.4 FORM AND TIMING OF PAYMENT. At the sole discretion of the
Committee, payment for SARs may be made in cash or Stock, or in a combination
thereof.

10.5 RULE 16b-3 REQUIREMENTS. Notwithstanding any other provision
of the Plan, the Committee may impose such conditions on exercise of an SAR
(including, without limitation, the right of the Committee to limit the time
of exercise to specified periods) as may be required to satisfy the
requirements of Rule 16b-3 (or any successor rule), under the Exchange Act.

10.6 TERM OF SAR. The term of an SAR granted under the Plan shall
not exceed ten (10) years.

SECTION 11

RESTRICTIONS

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<PAGE>

The Committee shall impose such restrictions on any Awards under the
Plan as it may deem advisable, including, without limitation, restrictions
under applicable federal securities law, under the requirements of any stock
exchange upon which the Stock is then listed and under any blue sky or state
securities laws applicable to such Awards.

SECTION 12

TERMINATION OF EMPLOYMENT

12.1 TERMINATION OF EMPLOYMENT DUE TO DEATH, DISABILITY, RETIREMENT,
IMPACTION OR CHANGE IN CONTROL.

(a) NONVESTED AWARDS.

i. OPTIONS AND SARS. If a Participant holds any
nonvested Options or SARs upon a termination of employment due to death,
Disability, Retirement, Impaction, or Change in Control, all such nonvested
Options or SARs shall become one hundred percent (100%) vested.

ii. RESTRICTED STOCK RIGHTS, PERFORMANCE SHARES AND
PERFORMANCE UNITS. If a Participant holds any nonvested Restricted Stock
Rights, Performance Shares or Performance Units upon a termination of
employment due to death, Disability, Retirement, Impaction or Change in
Control, all such nonvested Restricted Stock Rights, Performance Shares or
Performance Units shall vest as follows:

a. If the restriction is based on meeting
certain service requirements, the Restricted Stock Rights, Performance Shares
or Performance Units shall vest at termination of employment. The
Participant shall receive pro rata shares and/or cash payment based on the
number of full months of service during the Restricted Period.

b. If the restriction is based on meeting
certain performance requirements, the Restricted Stock Right, Performance
Share or Performance Unit shall vest at the end of the Performance Period.
The Participant shall receive pro rata shares and/or cash payment based on
the achievement of performance goals during the entire Performance Period,
pro rated for the number of full months of service during the Performance
Period. Distribution of shares and/or cash payment shall be made at the same
time as payment is made to those Participants who did not terminate service
during the Performance Period.

(b) VESTED AWARDS.

i. OPTIONS AND SARS. If a Participant holds any
vested Options or SARs upon a termination of employment due to death,
Disability, Retirement, Impaction or Change in Control, vested Options or
SARs shall be exercisable on or before the earlier of: (i) three (3) years
following the termination of employment or (ii) the tenth (10th) anniversary
date of the Grant Date of the Options or SARs.

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<PAGE>

ii. INCENTIVE STOCK OPTIONS. Notwithstanding the
foregoing, in the case of an incentive stock option, the favorable tax
treatment described in Section 422 of the Code shall not be available if such
Option is exercised after the date prescribed in Section 422(a)(2), as
amended, following a termination of employment except as otherwise allowed by
Sections 421(c)(1)(A) and 422(c)(6).

iii. RESTRICTED STOCK RIGHTS, PERFORMANCE SHARES AND
PERFORMANCE UNITS. If a Participant holds any vested Restricted Stock Rights,
Performance Shares or Performance Units subject to a deferral period, payment
shall be made at termination of employment.

12.2 VOLUNTARY TERMINATION OR INVOLUNTARY TERMINATION OF EMPLOYMENT
FOR REASONS OTHER THAN IMPACTION OR CAUSE.

(a) NONVESTED AWARDS. If a Participant holds any nonvested
Awards upon voluntary termination or involuntary termination of employment
for reasons other than Impaction or Cause, all such nonvested Awards shall be
canceled.

(b) VESTED AWARDS.

i. OPTIONS AND SARS. If a Participant holds any vested
Options or SARs upon voluntary termination or involuntary termination of
employment for reasons other than Impaction or Cause, such vested Options or
SARs shall be exercisable on or before the earlier of: (i) three (3) months
following the termination date or (ii) the tenth (10th) anniversary of the Grant
Date of the Options or SARs.

ii. RESTRICTED STOCK RIGHTS, PERFORMANCE SHARES AND
PERFORMANCE UNITS. If a Participant holds any vested Restricted Stock Rights,
Performance Shares and Performance Units which are subject to a deferral
period upon voluntary termination or involuntary termination of employment
for reasons other than Impaction or Cause, payment shall be made at
termination of employment.

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<PAGE>

12.3 TERMINATION OF EMPLOYMENT FOR CAUSE. If a Participant holds
any Awards, whether vested or nonvested, all Awards shall terminate
immediately and shall be forfeited upon a termination of employment for Cause.

12.4 DISPOSITION OF VESTED AWARDS UPON DEATH. If a Participant dies
without having fully exercised his or her vested Awards, the estate or
beneficiary, if such designation was made for purposes of the Plan, shall
have the right to exercise the Awards pursuant to the terms and conditions
contained herein. If a Participant dies holding Restricted Stock Rights,
Performance Shares or Performance Units issued on a deferred basis, payment
shall be made to the Participant's estate or beneficiary, if such designation
was made for purposes of the Plan.

12.5 DISCRETION OF COMMITTEE. Notwithstanding the above, the
Committee may, at any time and in its sole discretion, alter the vesting and
exercise provisions for all or part of the Awards which have been or will be
granted to Participants, subject to Section 16 of the Plan.

SECTION 13

NON-TRANSFERABILITY

The Committee may, in its sole discretion, determine the right of a
Participant to transfer any Award granted under the Plan. Unless otherwise
determined by the Committee, no Award granted under the Plan 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 qualified domestic relations order as defined by the Code or Title I of
ERISA, or the rules thereunder, or, if applicable, until the termination of
any Restricted or Performance Period as determined by the Committee.

SECTION 14

EMPLOYER DISCRETION

14.1 EMPLOYMENT. Nothing in the Plan shall interfere with or limit
in any way the right of any Employer to terminate any Participant's
employment at any time, nor confer upon any Participant any right to continue
in the employ of the Employer.

14.2 PARTICIPANT. No Employee shall have a right to be selected as
a Participant, or, having been so selected, to be selected again as a
Participant.

SECTION 15

SUBSTITUTION OF AWARDS

Any Award may be granted under this Plan in substitution for Awards
held by employees of other corporations who are about to become Employees of
an Employer as the result of a merger, consolidation or reorganization of the
employing corporation with an Employer, or the

D-12
<PAGE>

acquisition by an Employer of the assets of the employing corporation, or the
acquisition by an Employer of stock of the employing corporation as the
result of which it becomes a subsidiary of an Employer. The terms and
conditions of the Awards so granted may vary from the terms and conditions
set forth in this Plan to such extent as the Committee at the time of
granting the Award may deem appropriate to conform, in whole or in part, to
the provisions of the Award in substitution for which they are granted.
However, in the event that the Award for which a substitute Award is being
granted is an incentive stock option, no variation shall adversely affect the
status of any substitute Award as an incentive stock option under the Code.

SECTION 16

AMENDMENT, MODIFICATION, AND TERMINATION OF PLAN

The Board may at any time, and from time to time, terminate, amend or
modify the Plan; provided however, that any such action of the Board shall be
subject to approval of the shareholders to the extent required by law.
Notwithstanding the above, to the extent permitted by law, the Board may
delegate to the Committee or the President the authority to approve
non-substantive amendments to the Plan. No amendment, modification, or
termination of the Plan or any Award under the Plan shall in any manner
adversely affect any Award theretofore granted under the Plan without the
consent of the holder thereof (unless such change is required in order to
cause the benefits under the Plan to qualify as performance-based
compensation within the meaning of Section 162(m) of the Code and applicable
interpretive authority thereunder).

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<PAGE>

SECTION 17

TAX WITHHOLDING

17.1 TAX WITHHOLDING. The Company shall 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 Plan. To the extent that alternative methods of withholding are
available under applicable tax laws, the Company shall have the power to
choose among such methods.

17.2 FORM OF PAYMENT. To the extent permissible under applicable
tax, securities, and other laws, the Company may, in its sole discretion,
permit the Participant to satisfy a tax withholding requirement by (i) using
already owned shares; (ii) a cashless transaction; or (iii) directing the
Company to apply shares of Stock to which the Participant is entitled as a
result of the exercise of an Option or the lapse of a Restricted Period
(including, for this purpose, the filing of an election under Section 83(b)
of the Code), to satisfy such requirement.

17.3 TAX UPON DISPOSITION OF SHARES SUBJECT TO SECTION 422
RESTRICTIONS. In the event that a Participant shall dispose (whether by
sale, exchange, gift, the use of a qualified domestic relations order as
defined by the Code or Title I of ERISA, or the rules thereunder, or any like
transfer) of any shares of Stock of the Company (to the extent such shares
are deemed to be purchased pursuant to an incentive stock option) acquired by
him within two (2) years of the Grant Date of the related Option or within
one (1) year after the acquisition of such shares, he will notify the
secretary of the Company no later than fifteen (15) days from the date of
such disposition of the date or dates and the number of shares disposed of by
him and the consideration received, if any, and, upon notification from the
Company, promptly forward to the secretary of the Company any amount
requested by the Company for the purpose of satisfying its liability, if any,
to withhold federal, state or local income or earnings tax or any other
applicable tax or assessment (plus interest or penalties thereon, if any,
caused by delay in making such payment) incurred by reason of such
disposition.

SECTION 18

INDEMNIFICATION

Each person who is or shall have been a member of the Committee or of
the Board shall be indemnified and held harmless by the Company against and
from any loss, cost, liability, or expense that may be imposed upon or
reasonably incurred by him in connection with or resulting from any claim,
action, suit, or proceeding to which he may be a party or in which he may be
involved by reason of any action taken or failure to act under the Plan and
against and from any and all amounts paid by him in settlement thereof, with
the Company's approval, or paid by him in satisfaction of any judgment in any
such action, suit, or proceeding against him, provided he shall give the
Company an opportunity, at its own expense, to handle and defend the same
before he undertakes to handle and defend it on his own behalf. The
foregoing right of indemnification shall not be exclusive of any other rights
of indemnification to which such person may be entitled under the Company's
articles of incorporation, bylaws, resolution or agreement, as a

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<PAGE>

matter of law, or otherwise, or any power that the Company may have to
indemnify him or hold him harmless.

SECTION 19

REQUIREMENTS OF LAW

19.1 REQUIREMENTS OF LAW. The granting of Awards and the issuance
of shares and/or cash under the Plan shall be subject to all applicable laws,
rules, and regulations, and to such approvals by any governmental agencies or
national securities exchanges as may be required.

19.2 GOVERNING LAW. The Plan, and all agreements hereunder, shall
be construed in accordance with and governed by the laws of the State of New
Mexico. This Plan is an unfunded performance-based bonus plan for a select
group of management or highly compensated employees and is not intended to be
either an employee pension or welfare benefit plan subject to ERISA.

19.3 CODE SECTION 162(m). If the Plan is subject to Section 162(m)
of the Code, it is intended that the Plan comply fully with and meet all the
requirements of Section 162(m) of the Code so that Awards granted hereunder
shall constitute "performance-based" compensation within the meaning of such
section. If any provision of the Plan would disqualify the Plan or would not
otherwise permit the Plan to comply with Section 162(m) as so intended, such
provision shall be construed or deemed amended to conform to the requirements
or provisions of Section 162(m); provided that no such construction or
amendment shall have an adverse effect on the economic value to a Participant
of any Award previously granted hereunder.

SECTION 20

FUNDING

The Company shall not be required to segregate any of its assets to
ensure the payment of any Award under the Plan. Neither the Participant nor
any other persons shall have any interest in any fund or in any specific
asset or assets of the Company or any other entity by reason of any Award,
except to the extent expressly provided hereunder. The interests of each
Participant and former Participant hereunder are unsecured and shall be
subject to the general creditors of the Company.

MANZANO CORPORATION:

By:
------------------------------------
Benjamin F. Montoya,
Chairman and Chief Executive Officer

Date:
----------------------------------

D-15
<PAGE>

EXHIBIT E

NEW MEXICO BUSINESS CORPORATION ACT PROVISIONS

SECTION 53-15-3. RIGHT OF SHAREHOLDERS TO DISSENT AND OBTAIN PAYMENT FOR
SHARES.

A. Any shareholder of a corporation may dissent from, and obtain
payment for the shareholder's shares in the event of, any of the
following corporate actions:

(1) any plan of merger or consolidation to which the
corporation is a party, except as provided in Subsection C of this
section;

(2) any sale or exchange of all or substantially all of the
property and assets of the corporation not made in the usual and regular
course of its business, including a sale in dissolution, but not
including a sale pursuant to an order of a court having jurisdiction in
the premises or a sale for cash on terms requiring that all or
substantially all of the net proceeds of sale be distributed to the
shareholders in accordance with their respective interests within one
year after the date of sale;

(3) any plan of exchange to which the corporation is a party as
the corporation the shares of which are to be acquired;

(4) any amendment of the articles of incorporation which
materially and adversely affects the rights appurtenant to the shares of
the dissenting shareholder in that it:
(a) alters or abolishes a preferential right of such
shares;

(b) creates, alters or abolishes a right in respect of
the redemption of such shares, including a provision respecting a
sinking fund for the redemption or repurchase of such shares;

(c) alters or abolishes an existing preemptive right of
the holder of such shares to acquire shares or other securities;
or

(d) excludes or limits the right of the holder of such
shares to vote on any matter, or to cumulate his votes, except as
such right may be limited by dilution through the issuance of
shares or other securities with similar voting rights; or

(5) any other corporate action taken pursuant to a shareholder
vote with respect to which the articles of incorporation, the bylaws or a
resolution of the board of directors directs that dissenting shareholders
shall have a right to obtain payment for their shares.

B. (1) A record holder of shares may assert dissenters' rights as
to less than all of the shares registered in his name only if the holder
dissents with respect to all the shares

E-1
<PAGE>

beneficially owned by any one person and discloses the name and address of
the person and persons on whose behalf the holder dissents. In that event,
his rights shall be determined as if the shares as to which he has dissented
and his other shares were registered in the names of different shareholders.

(2) A beneficial owner of shares who is not the record
holder may assert dissenters' rights with respect to shares held on his
behalf, and shall be treated as a dissenting shareholder under the terms of
this section and Section 53-15-4 NMSA 1978 if he submits to the corporation
at the time of or before the assertion of these rights a written consent of
the record holder.

C. The right to obtain payment under this section shall not apply
to the shareholders of the surviving corporation in a merger if a vote of the
shareholders of such corporation is not necessary to authorize such merger.

D. A shareholder of a corporation who has a right under this
section to obtain payment for his shares shall have no right at law or in
equity to attack the validity of the corporate action that gives rise to his
right to obtain payment, or to have the action set aside or rescinded, except
when the corporate action is unlawful or fraudulent with regard to the
complaining shareholder or to the corporation.

SECTION 53-15-4. RIGHTS OF DISSENTING SHAREHOLDERS.

A. Any shareholder electing to exercise his right of dissent shall
file with the corporation, prior to or at the meeting of shareholders at
which the proposed corporate action is submitted to a vote, a written
objection to the proposed corporate action. If the proposed corporate action
is approved by the required vote and the shareholder has not voted in favor
thereof, the shareholder may, within ten days after the date on which the
vote was taken or if a corporation is to be merged without a vote of its
shareholders into another corporation any of its shareholders may, within
twenty-five days after the plan of the merger has been mailed to the
shareholders, make written demand on the corporation, or, in the case of a
merger or consolidation, on the surviving or new corporation, domestic or
foreign, for payment of the fair value of the shareholder's shares, and, if
the proposed corporate action is effected, the corporation shall pay to the
shareholder, upon the determination of the fair value, by agreement or
judgment as provided herein, and, in the case of shares represented by
certificates, the surrender of such certificates the fair value thereof as of
the day prior to the date on which the vote was taken approving the proposed
corporate action, excluding any appreciation or depreciation in anticipation
of the corporate action. Any shareholder failing to make demand within the
prescribed ten-day or twenty-five day period shall be bound by the terms of
the proposed corporate action. Any shareholder making such demand shall
thereafter be entitled only to payment as in this section provided and shall
not be entitled to vote or to exercise any other rights of shareholder.

E-2
<PAGE>

B. No such demand may be withdrawn unless the corporation consents
thereto. If, however, the demand is withdrawn upon consent, or if the
proposed corporate action is abandoned or rescinded or the shareholders
revoke the authority to effect the action, or if, in the case of a merger, on
the date of the filing of the articles of merger the surviving corporation is
the owner of all the outstanding shares of the other corporation, domestic
and foreign, that are parties to the merger, or if no demand or petition for
the determination of fair value by a court has been made or filed within the
time provided in this section, or if a court of competent jurisdiction
determines that the shareholder is not entitled to the relief provided by
this section, then the right of the shareholder to be paid the fair value of
his shares ceases and his status as a shareholder shall be restored, without
prejudice, to any corporate proceedings which may have been taken during the
interim.

C. Within ten days after such corporate action is effected, the
corporation, or, in the case of a merger or consolidation, the surviving or
new corporation, domestic or foreign, shall give written notice thereof to
each dissenting shareholder who has made demand as provided in this section
and shall make a written offer to each such shareholder to pay for such
shares at a specified price deemed by the corporation to be the fair value
thereof. The notice and offer shall be accompanied by a balance sheet of the
corporation, the shares of which the dissenting shareholder holds, as of the
latest available date and not more than twelve months prior to the making of
the offer, and a profit and loss statement of the corporation for the
twelve-months' period ended on the date of the balance sheet.

D. If within thirty days after the date on which the corporate
action was effected the fair value of the shares is agreed upon between any
dissenting shareholder and the corporation, payment therefor shall be made
within ninety days after the date on which the corporate action was effected,
and, in the case of shares represented by certificates, upon surrender of the
certificates. Upon payment of the agreed value, the dissenting shareholder
shall cease to have any interest in the shares.

E. If, within the period of thirty days, a dissenting shareholder
and the corporation do not so agree, then the corporation, within thirty days
after receipt of written demand from any dissenting shareholder, given within
sixty days after the date on which corporate action was effected, shall, or
at its election at any time within the period of sixty days may, file a
petition in any court of competent jurisdiction in the county in this state
where the registered office of the corporation is located praying that the
fair value of the shares be found and determined. If, in the case of a
merger or consolidation, the surviving or new corporation is a foreign
corporation without a registered office in this state, the petition shall be
filed in the county where the registered office of the domestic corporation
was last located. If the corporation fails to institute the proceeding as
provided in this section, any dissenting shareholder may do so in the name of
the corporation. All dissenting shareholders, wherever residing, shall be
made parties to the proceeding as an action against their shares quasi in
rem. A copy of the petition shall be served on each dissenting shareholder
who is a resident of this state and shall be served by registered or
certified mail on each dissenting shareholder who is a nonresident. Service
on nonresidents shall also be made by publication as provided by law. The
jurisdiction of the court shall plenary and exclusive. All shareholders who
are parties to the proceeding shall be entitled to judgment against the
corporation for the amount of the fair value of their shares. The court may,
if it so

E-3
<PAGE>

elects, appoint one or more persons as appraisers to receive evidence and
recommend a decision on the question of fair value. The appraisers shall
have such power and authority as specified in the order of their appointment
or on an amendment thereof. The judgment shall be payable to the holders of
uncertificated shares immediately, but to the holders of shares represented
by certificates only upon and concurrently with the surrender to the
corporation of certificates. Upon payment of the judgment, the dissenting
shareholder ceases to have any interest in the shares.

F. The judgment shall include an allowance for interest at such
rate as the court may find to be fair and equitable, in all the
circumstances, from the date on which the vote was taken on the proposed
corporate action to the date of payment.

G. The costs and expenses of any such proceeding shall be
determined by the court and shall be assessed against the corporation, but
all or any part of the costs and expenses may be apportioned and assessed as
the court deems equitable against any or all of the dissenting shareholders
who are parties to the proceeding to whom the corporation made an offer to
pay for the shares if the court finds that the action of the shareholders in
failing to accept the offer was arbitrary or vexatious or not in good faith.
Such expenses include reasonable compensation for and reasonable expenses of
the appraisers, but exclude the fees and expenses of counsel for and experts
employed by any party; but if the fair value of the shares as determined
materially exceeds the amount which the corporation offered to pay therefor,
or if no offer was made, the court in its discretion may award to any
shareholder who is a party to the proceeding such sum as the court determines
to be reasonable compensation to any expert employed by the shareholder in
the proceeding, together with reasonable fees of legal counsel.

H. Upon receiving a demand for payment from any dissenting
shareholder, the corporation shall make an appropriate notation thereof in
its shareholder records. Within twenty days after demanding payment for his
shares, each holder of shares represented by certificates demanding payment
shall submit the certificates to the corporation for notation thereon that
such demand has been made. His failure to do so shall, at the option of the
corporation, terminate his rights under this section unless a court of
competent jurisdiction, for good and sufficient cause shown, otherwise
directs. If uncertificated shares for which payment has been demanded or
shares represented by a certificate on which notation has been so made is
[are] transferred, any new certificate issued therefor shall bear similar
notation, together with the name of the original dissenting holder of the
shares, and a transferee of the shares acquires by such transfer no rights in
the corporation other than those which the original dissenting shareholder
had after making demand for payment of the fair value thereof.

I. Shares acquired by a corporation pursuant to payment of the
agreed value therefor or to payment of the judgment entered therefor, as in
this section provided, may be held and disposed of by the corporation as in
the case of other treasury shares, except that, in the case of a merger or
consolidation, they may be held and disposed of as the plan of merger or
consolidation may otherwise provide.

E-4
<PAGE>

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Section 6 of Article II of Manzano's Bylaws contains the following
provisions with respect to indemnification of directors and officers:

"Each person who shall have served as a director or an officer of the
Corporation, or, at the request of the Corporation, as a director or an
officer of any other company in which the Corporation has a financial
interest and regardless of whether or not such person is then in office,
and the heirs, executors, administrators and personal representatives of
the person, shall be indemnified by the Corporation to the full extent of
the authority of the Corporation to so indemnify as authorized by New
Mexico law."

Section 53-11-4.1 of the Business Corporation Act of the State of New
Mexico ("BCA") provides that a corporation shall have power to indemnify any
person made (or threatened to be made) a party to any proceeding (whether
threatened, pending or completed) by reason of the fact that the person is or
was a director (or, while a director, is or was serving in any of certain
other capacities) if: (1) the person acted in good faith; (2) the person
reasonably believed: (a) in the case of conduct in the person's official
capacity with the corporation, that the person's conduct was in its best
interests; and (b) in all other cases, that the person's conduct was at least
not opposed to its best interests; and (3) in the case of any criminal
proceeding, the person had no reasonable cause to believe the person's
conduct was unlawful. Indemnification may be made against judgments,
penalties, fines, settlements and reasonable expenses actually incurred by
the person in connection with the proceeding, but may be limited or
unavailable with respect to certain proceedings. In some instances,
indemnification of a director may be mandatory or, upon the application of a
director, may be ordered by a court. Reasonable expenses incurred by a
director may, under certain circumstances, be paid or reimbursed in advance
of a final disposition of a proceeding. Unless limited by its articles of
incorporation, a corporation may (or, as the case may be, shall) indemnify
and advance expenses to an officer of the corporation to the same extent as
to a director under Section 53-11-4.1 of the BCA.

Also, unless limited by its articles of incorporation, a corporation
has (1) the power to indemnify and to advance expenses to an employee or
agent of the corporation to the same extent that it may indemnify and advance
expenses to directors under the statute and (2) additional power to indemnify
and to advance reasonable expenses to an officer, employee or agent who is
not a director to such further extent, consistent with law, as may be
provided by its articles of incorporation, bylaws, general or specific action
of its Board of Directors, or contract.

Section 53-11-4.1 of the BCA was amended in 1987 to provide that the
indemnification authorized thereunder shall not be deemed exclusive of any
rights to which those seeking indemnification may be entitled under the
articles of incorporation, the by-laws, an agreement, a resolution of
shareholders or directors or otherwise. At PNM's 1987 Annual Meeting of
Stockholders, the stockholders approved certain agreements with PNM's
directors and officers relating to indemnification of directors and officers.
Such agreements have been entered into

II-1
<PAGE>

with each director and officer. The agreements provide for indemnification
of directors and officers to the fullest extent permitted by law, including
advancement of litigation expenses where appropriate. The agreements provide
for the appointment of a reviewing party by the Board of Directors to make a
determination whether claimed indemnification is permitted under applicable
law. Similar agreements will be entered into by Manzano with its directors
and officers.

Insurance is maintained on a regular basis by PNM against liabilities
arising on the part of directors and officers out of their performance in
such capacities or arising on the part of PNM out of its identical
indemnification provisions, subject to certain exclusions and to the policy
limits. It is anticipated that Manzano would maintain substantially similar
insurance.

II-2
<PAGE>

Item 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

<TABLE>
<CAPTION>
Exhibit
Number Description
-------- -----------
<S> <C>
2 Form of Agreement and Plan of Share Exchange
(attached to the proxy statement/prospectus as
Exhibit A).

3.1 Articles of Incorporation of Manzano Corporation
(attached to the proxy statement/prospectus as
Exhibit B).

3.2 Bylaws of Manzano Corporation (attached to the
Proxy statement/prospectus as Exhibit C).

3.3 Restated Articles of Incorporation of Public
Service Company of New Mexico as amended through
May 10, 1985 (incorporated by reference to
Exhibit 4-(b) of PNM's Registration Statement
No. 2-99990).

3.4 Bylaws of Public Service Company of New Mexico
(incorporated by reference to Exhibit 3.2 to
PNM's Annual Report on Form 10-K for the year
ended December 31, 1999).

*5 Opinion of Keleher & McLeod, P.A. with respect
to the legality of the securities registered
hereunder.

8 Tax Opinion of Arthur Andersen LLP.

10 Manzano Corporation Omnibus Performance Equity
Plan (attached to the proxy statement/prospectus
as Exhibit D).

*23.1 Consent of Keleher & McLeod, P.A. (included in
Exhibit 5).

23.2 Consent of Arthur Andersen LLP (included in
Exhibit 8).

23.3 Consent of Arthur Andersen LLP.

24 Power of Attorney (included on signature page
hereof).

99 Form of Proxy Card.
</TABLE>

- ------------------------

* To be filed by amendment.

- ------------------------

(1) Reference is made to a duplicate list of exhibits being filed as part of
this registration statement, which list, prepared in accordance with Item
102 of Regulation S-T of the Securities and Exchange Commission,
immediately precedes the exhibits being physically filed with this
registration statement.

II-3
<PAGE>

ITEM 22. UNDERTAKINGS

The undersigned registrant hereby undertakes:

(1) That, for purposes of determining any liability under the
Securities Act of 1933, each filing of the registrant's annual report
pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934
(and, where applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that
is incorporated by reference in the registration statement shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial BONA FIDE offering thereof.

(2) To respond to requests for information that is incorporated by
reference into the prospectus pursuant to Items 4, 10(b), 11 or 13 of this
form, within one business day of receipt of such request, and to send the
incorporated documents by first class mail or other equally prompt means.
This includes information contained in documents filed subsequent to the
effective date of the registration statement through the date of responding
to the request.

(3) To supply by means of a post-effective amendment all
information concerning a transaction, and the company being acquired involved
therein, that was not the subject of and included in the registration
statement when it became effective.

Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing provisions,
or otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.

II-4
<PAGE>

EXHIBIT INDEX

<TABLE>
<CAPTION>
Exhibit
Number Description
------ -----------
<S> <C>
2 Form of Agreement and Plan of Share Exchange
(attached to the proxy statement/prospectus as
Exhibit A).

3.1 Articles of Incorporation of Manzano Corporation
(attached to the proxy statement/prospectus as
Exhibit B).

3.2 Bylaws of Manzano Corporation (attached to the
proxy statement/prospectus as Exhibit C).

3.4 Bylaws of Public Service Company of New Mexico
(incorporated by reference to Exhibit 3.2 to
PNM's Annual Report on Form 10-K for the year
ended December 31, 1999).

*5 Opinion of Keleher & McLeod, P.A. with respect
to the legality of the securities registered
hereunder.

8 Tax opinion of Arthur Andersen LLP.

10 Manzano Corporation Omnibus Performance Equity
Plan (attached to the proxy statement/prospectus
as Exhibit D).

*23.1
Consent of Keleher & McLeod, P.A. (included in
Exhibit 5).

23.2 Consent of Arthur Andersen LLP (included in
Exhibit 8).

23.3 Consent of Arthur Andersen LLP.

24 Power of Attorney (included on signature page
hereof).

99 Form of Proxy Card.
</TABLE>

- -----------------------

* To be filed by amendment.

<PAGE>

EXHIBIT 8

March 9, 2000

Mr. John Loyack

Vice President - Corporate Controller
and Chief Accounting Officer
Public Service Company of New Mexico
Alvarado Square MS 2706
Albuquerque, New Mexico 87158

Dear Mr. Loyack:

You have requested that we summarize our opinion concerning the material federal
income tax consequences to Public Service Company of New Mexico ("PNM") and its
shareholders of a transaction to reorganize PNM into a holding company structure
as a means of achieving the corporate and asset separations required by New
Mexico's Electric Utility Industry Restructuring Act of 1999. For a further
description of the factual circumstances of this transaction see the Facts and
Representations section of our supporting memorandum, attached as Appendix A.
Our opinion is as follows:

1. No gain or loss will be recognized by the PNM shareholders on their
transfer of their PNM shares in exchange solely for Manzano common
stock. Section 351(a).(1)

2. The shareholder's aggregate tax basis in the Manzano common stock
received in the share exchange will equal the shareholder's aggregate
tax basis in the shares of PNM common stock held by the shareholder
immediately before the share exchange. Section 358(a)(1).

3. A shareholder's holding period for the shares of Manzano common stock
received in the share exchange will include the period during which the
shareholder held the shares of PNM common stock exchanged, provided the
shares of PNM common stock were held as capital assets on the date of
the share exchange. Section 1223(1).

4. No gain or loss will be recognized by Manzano upon receipt of the PNM
shares as a result of the share exchange. Section 1032(a).

- -----------------
(1) Except as otherwise noted herein, all Section references are to the
Internal Revenue Code of 1986, as amended, (the "Code") and the Treasury
Regulations promulgated thereunder.

<PAGE>

Mr. Loyack
Page 2 of 3
March 9, 2000

5. Manzano's basis in the PNM shares received from the PNM shareholders in
the share exchange will equal the basis of such shares in the hands of
the PNM shareholders immediately prior to the share exchange. Section
362(a).

6. Manzano's holding period in the PNM shares received in the share
exchange will include the holding period during which the shares were
held by the PNM shareholders. Section 1223(2).

In analyzing the authorities relevant to the potential tax issues outlined in
opinions one through four, above, Appendix A, and the overall tax result set
forth above, we have applied the standards of "substantial authority" and "more
likely than not proper," as used in Section 6662 under current law. Based upon
our analysis, we have concluded that the indicated tax treatment of such issues
will prevail. This opinion is made with the intent to be relied upon for
purposes of the imposition of the accuracy-related penalty for substantial
understatement of income tax under Section 6662(d).

The opinions summarized herein are based on the facts, representations, and
assumptions you have provided to us as summarized in the Facts and
Representations section of the memorandum attached in EXHIBIT A and set forth or
referenced in the representation letter contained in EXHIBIT B. We have assumed
that these facts are complete and accurate, but we have not independently
audited or verified any of these facts, representations, or assumptions. Any
misstatement of a material fact or omission of any fact that may be material or
any amendment or change in any of the facts referred to may require a
modification of all or a part of these opinions. Our opinions are as of the date
of this letter, and we have no responsibility to update them for events,
transactions, or circumstances occurring after the date of this letter.

The opinions summarized herein are based upon our interpretation of the Code,
Treasury Regulations, court decisions, and rulings and procedures issued by the
Internal Revenue Service ("Service") as of the date of this letter. The opinions
summarized herein are not binding on the Service, and there can be no assurance
that the Service will not take a position contrary to these opinions. However,
it is our opinion that if the Service does take a contrary position with respect
to any of the matters set forth herein, that the conclusions expressed will
prevail.

We have not considered any nonincome tax, state, or local income tax
consequences, and, therefore, do not express any opinion regarding the treatment
that would be given the transactions that are the subject of this opinion by the
applicable authorities on any nonincome tax or any state or local tax issues. We
also express no opinion on nontax or state tax issues, such as personal property
tax transactions or securities law matters.

<PAGE>

Mr. Loyack
Page 3 of 3
March 9, 2000

Should there be any change in the Code, the Treasury Regulations and published
rulings issued thereunder, the current administrative rulings, the previous
judicial interpretations, or in the current understanding and interpretation of
accounting practices, the opinions summarized herein would necessarily have to
be reevaluated in light of any such changes. We have no responsibility to update
these opinions for any such changes occurring after the date of this letter.

The opinions summarized herein reflect our assessment of the probable outcome of
litigation and other adversarial proceedings based solely on an analysis of the
existing tax authority relating to the issues.

These opinions are solely for your benefit and the benefit of the PNM
shareholders and are not intended to be relied upon by any other party. We
assume no responsibility for tax consequences to such other parties. Instead,
each of such other parties must consult and rely upon the advice of his/her/its
own counsel, accountant, or other advisor. Without the prior written consent of
this firm, this letter may not be quoted in whole or in part or otherwise
referred to in any documents or delivered to any other person or entity other
than any federal or state tax authority.

In connection with our engagement to provide this tax opinion, we have also
reviewed the description of the Material United States Federal Income Tax
Consequences contained in the S-4 to be filed with the Securities and Exchange
Commission. We are in agreement with the description of the tax consequences as
an appropriate summary of our tax opinion. While we concur with such disclosure
in the S-4 as to the application of the Code and other relevant authorities, we
can not conclude on the adequacy of such disclosure under the relevant
securities laws and regulations. Such conclusion can only be reached by legal
counsel that is expert in such matters.

The opinions summarized herein reflect what we regard to be the material federal
income tax effects to PNM and its shareholders of the transaction as described
herein; nevertheless, they should not be taken as an assurance of the ultimate
tax treatment.

Very truly yours,

ARTHUR ANDERSEN LLP

\s\ Arthur Andersen LLP

<PAGE>

EXHIBIT 23.3

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our reports dated January 26,
2000 included in Public Service Company of New Mexico's Form 10-K for the
year ended December 31, 1999 and to all references to our Firm included in
this registration statement.

Albuquerque, New Mexico
March 8, 2000

/s/ Arthur Andersen LLP
- -----------------------------------

<PAGE>

[LOGO]

The Annual Meeting of Shareholders of Public Service Company of New Mexico
will be held at the South Broadway Cultural Center, 1025 Broadway S.E.,
Albuquerque, New Mexico at 9:30 a.m., Mountain Daylight Savings Time on
June 6, 2000.

(VOTING INSTRUCTIONS ARE ON BACK)

FOLD AND DETACH HERE
- --------------------------------------------------------------------------------

A vote FOR the following proposals is recommended by the Board of Directors.

1. Approval of the Agreement and Plan of Share Exchange under which PNM will
reorganize into a holding company structure.
/ / FOR / / AGAINST / / ABSTAIN
2. Election of Directors (Robert G. Armstrong, Theodore F. Patlovich and Paul
F. Roth).

Mark one:____ FOR all nominees listed above
____ FOR all nominees listed above except
____________________________________
____ WITHHOLD AUTHORITY to vote for all
nominees listed above.

P ----------------------------------------------
R Signature
O ----------------------------------------------
X Signature
Y Dated:__________________________________, 2000

- --------------------------------------------------
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY
CARD PROMPTLY, USING THE ENCLOSED ENVELOPE
- --------------------------------------------------

3. Approval of the Manzano Corporation Omnibus
Performance Equity Plan.
/ / FOR / / AGAINST / / ABSTAIN
4. Selection of Arthur Andersen LLP as independent public
accountants for the current year.
/ / FOR / / AGAINST / / ABSTAIN

5. In their discretion, the proxies are authorized to vote
upon such other matters as may properly come before
this meeting, or any adjournment or adjournments thereof.

<PAGE>

PUBLIC SERVICE COMPANY OF NEW MEXICO

Proxy Solicited on Behalf of the Board of Directors

The undersigned does hereby constitute and appoint J. E. Sterba, B. F.
Montoya and R. M. Price and each or any one of them, true and lawful
P attorney-in-fact and proxy for the undersigned, with full power of
substitution, to represent and vote the Common Stock of the undersigned
R at the Annual Meeting of Shareholders of Public Service Company of New
Mexico to be held at the South Broadway Cultural Center, 1025 Broadway,
O S.E., Albuquerque, New Mexico, at 9:30 a.m., Mountain Daylight Savings Time,
on June 6, 2000 and at any adjournments thereof, on all matters coming
X before said meeting.

Y This proxy, when properly executed, will be voted in the manner directed
herein by the undersigned shareholder. IF NO DIRECTION IS MADE, THIS
PROXY WILL BE VOTED FOR PROPOSALS 1, 2, 3, and 4.

Please date and sign exactly as name appears hereon. When signing as
attorney, executor, administrator, trustee, guardian, etc., give full
title. If stock is held jointly, each owner should sign. If stock is
owned by a corporation, please sign full corporate name by duly
authorized officer. If a partnership, please sign in partnership name by
authorized person.