THIRD SUPPLEMENTAL INDENTURE

THIRD SUPPLEMENTAL INDENTURE , dated as of April 30, 2009, between TEXAS-NEW MEXICO POWER COMPANY , a corporation organized and existing under the laws of the State of Texas (hereinafter called the “ Company ”), and THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A. , a national banking association organized and existing under the laws of the United States, as Trustee under the Indenture hereinafter referred to (hereinafter called the “ Trustee ”).

WHEREAS, the Company has heretofore executed and delivered to the Trustee a First Mortgage Indenture, dated as of March 23, 2009 (the “ Original Indenture ”), providing for the issuance by the Company from time to time of its bonds, notes or other evidence of indebtedness to be issued in one or more series of Securities and to provide security for the payment of the principal of and premium, if any, and interest, if any, on the Securities and the performance and observance of the other obligations of the Company thereunder; and

WHEREAS , the Company has also heretofore executed and delivered to the Trustee a First Supplemental Indenture, dated as of March 23, 2009, and a Second Supplemental Indenture, dated as of March 25, 2009, each by and between the Company and the Trustee, each providing for the establishment of the terms of a series of Securities (the Original Indenture, as supplemented by said First Supplemental Indenture and said Second Supplemental Indenture, the “ Indenture ”); and

WHEREAS , the Company has entered into a Credit Agreement dated as of April 30, 2009 (as amended, amended and restated, supplemented or otherwise modified from time to time, the “ Credit Agreement ”) with the Lenders (as defined below) and JPMorgan Chase Bank, N.A., as administrative agent for the Lenders, providing for the making of certain financial accommodations thereunder, and pursuant to such Credit Agreement the Company has agreed to issue to the Administrative Agent (as defined below), as collateral security for the Borrower Obligations (as defined below), a new series of Securities under the Indenture; and

WHEREAS , for such purposes the Company desires to issue a new series of Securities, to be designated First Mortgage Bonds, due 2011, Series 2009C (the “ Collateral Bonds ”), the Securities of which series are to be issued as registered bonds without coupons and are to bear interest at the Interest Rate (as defined below) and are to mature on the Maturity Date (as defined below); and

WHEREAS , the Company, in the exercise of the power and authority conferred upon and reserved to it under the provisions of the Indenture and pursuant to appropriate resolutions of the Board of Directors, has duly determined to make, execute and deliver to the Trustee this Third Supplemental Indenture to the Indenture as permitted by Sections 2.01, 3.01 and 14.01 of the Original Indenture in order to establish the form and terms of, and to provide for the creation and issuance of, the Collateral Bonds under the Indenture in an initial aggregate principal amount of $75,000,000; and

WHEREAS , all things necessary to make the Collateral Bonds, when executed by the Company and authenticated and delivered by the Trustee or any Authenticating Agent and issued upon the terms and subject to the conditions hereinafter and in the Indenture, the valid, binding and legal obligations of the Company and to make this Third Supplemental Indenture a valid, binding and legal agreement of the Company, have been done;

NOW, THEREFORE, THIS THIRD SUPPLEMENTAL INDENTURE WITNESSETH that, in order to establish the terms of the Collateral Bonds and for and in consideration of the premises and of the covenants contained in the Indenture and in this Third Supplemental Indenture and for other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, intending to be legally bound, it is mutually covenanted and agreed as follows:

Section 1.01        Certain Definitions . Each capitalized term that is used herein and is defined in the Original Indenture shall have the meaning specified in the Original Indenture unless such term is otherwise defined herein.  Unless the context otherwise requires, any references to a “Section” refers to a Section of this Third Supplemental Indenture.

The following terms have the meanings given to them in this Article One and, for purposes of this Third Supplemental Indenture, such meanings shall supersede and replace the meanings given them, if any, in the Indenture:

“ Administrative Agent ” has the meaning given it in the Credit Agreement.

“ Borrower Obligations ” has the meaning given it in the Credit Agreement.

“ Business Day ” has the meaning given it in the Credit Agreement.

“ Collateral Bonds ” has the meaning given it in the fourth recital.

“ Commitment ” has the meaning given it in the Credit Agreement.

“ Company ” has the meaning given it in the preamble.

“ Credit Acceleration Event ” means the acceleration of the Loans and any and all other Borrower Obligations pursuant to Section 9.2(b) of the Credit Agreement.

“ Credit Agreement ” has the meaning given it in the third recital.

“ Credit Notice ” means a written notice from the Administrative Agent to the Company (with a copy to a Responsible Officer of the Trustee at the Corporate Trust Office of the Trustee) that states (i) that there has occurred a Credit Repurchase Event and (ii) the Credit Repurchase Amount as of the related Credit Repurchase Date.

“ Credit Repurchase Amount ” has the meaning given it in Section 2.03(c).

“ Credit Repurchase Date ” means (i) the date of the occurrence of a Credit Repurchase Event, or (ii) with respect to a Credit Acceleration Event (other than a Credit Repurchase Event), the date fixed in a Credit Written Demand for the Company’s satisfaction of a Credit Repurchase Requirement.

“ Credit Repurchase Event ” means the occurrence of an “Event of Default”, as such term is defined in the Credit Agreement, under Section 9.1(e) of the Credit Agreement.

“ Credit Repurchase Requirement ” has the meaning given it in Section 2.03(c).

“ Credit Written Demand ” means a written demand from the Administrative Agent to the Company (with a copy to a Responsible Officer of the Trustee at the Corporate Trust Office of the Trustee) that (i) states that there has occurred a Credit Acceleration Event (other than a Credit Repurchase Event), (ii) demands repurchase by the Company of Collateral Bonds pursuant to Section 2.03(c), (iii) fixes a Credit Repurchase Date (which date must be at least three and no more than ten Business Days following the date on which the Company receives the related Credit Written Demand) and (iv) states the Credit Repurchase Amount as of such Credit Repurchase Date.

“ Indenture ” has the meaning given it in the second recital.

“ Interest Payment Date ” means each date on which Borrower Obligations constituting interest and/or fees are due and payable from time to time pursuant to the Credit Agreement.

“ Interest Rate ” means a rate of interest per annum, adjusted as necessary, to result in an interest payment equal to the aggregate amount of Borrower Obligations constituting interest and/or fees due under the Credit Agreement on the applicable Interest Payment Date.

“ Lenders ” has the meaning given it in the Credit Agreement.

“ Loans ” has the meaning given it in the Credit Agreement.

“ Maturity ” means the date on which all of the principal of the Collateral Bonds becomes due and payable, whether at stated maturity, upon redemption or acceleration or otherwise.

“ Maturity Date ” has the meaning given it in the Credit Agreement.

“ Original Indenture ” has the meaning given it in the first recital.

“ Revolving Committed Amount ” has the meaning given it in the Credit Agreement.

“ Trustee ” has the meaning given it in the preamble.

Section 2.01        Title of the Collateral Bonds .  This Third Supplemental Indenture hereby creates a series of Securities designated as the “First Mortgage Bonds, due 2011, Series 2009C” (which are referred to herein as the “ Collateral Bonds ”) and the form thereof shall be substantially as set forth in Exhibit A hereto.  Such Collateral Bonds shall be executed, authenticated and delivered in accordance with the provisions of, and, except as hereinafter provided, shall in all respects be subject to all of the terms, conditions and covenants of the Indenture as supplemented by this Third Supplemental Indenture. For purposes of the Indenture, the Collateral Bonds shall constitute a single series of Securities and may be issued in an unlimited aggregate principal amount (subject to the limitations set forth in Article IV of the Indenture), although the initial issuance, authentication and delivery of the Collateral Bonds shall be in the aggregate principal amount of $75,000,000.

Section 2.02        Form and Terms of the Collateral Bonds .

(a)   The form and terms of the Collateral Bonds pursuant to the authority granted by this Third Supplemental Indenture in accordance with Sections 2.01 and 3.01 of the Original Indenture are set forth herein.  The Collateral Bonds shall be issued in registered form without coupons in the denominations of $1,000 and integral multiples of $1,000, appropriately numbered and substantially in the form set forth as Exhibit A hereto.  The Collateral Bonds are to be issued to and registered in the name of the Administrative Agent under the Credit Agreement, and are issued as collateral security for any and all Borrower Obligations.

(b)   The Collateral Bonds shall mature on the Maturity Date and shall bear interest at the Interest Rate, payable on each Interest Payment Date.  The Collateral Bonds shall be payable as to principal and interest in any coin or currency of the United States of America which at the time of payment is legal tender for public and private debts and as otherwise provided for in the Indenture.

(c)   The obligation of the Company to pay the principal of and accrued interest on the Collateral Bonds at or after the Maturity (x) shall be deemed to have been satisfied and discharged in full in the event that all amounts then due in respect of the Borrower Obligations shall have been paid in full in immediately available funds or (y) shall be deemed to remain unsatisfied in an amount equal to the aggregate amount then due in respect of the Borrower Obligations and remaining unpaid (not in excess, however, of the amount otherwise then due in respect of principal of and accrued interest on the Collateral Bonds).  The aggregate principal amount of the Collateral Bonds shall be reduced in amount pursuant to Section 2.03 herein.

(d)   The obligation of the Company to pay the accrued interest on the Collateral Bonds on any Interest Payment Date prior to the Maturity (a) shall be deemed to have been satisfied and discharged in full in the event that all amounts then due in respect of the

Borrower Obligations shall have been paid in full in immediately available funds or (b) shall be deemed to remain unsatisfied in an amount equal to the aggregate amount then due in respect of the Borrower Obligations and remaining unpaid (not in excess, however, of the amount otherwise then due in respect of interest on the Collateral Bonds).

(e)   The Trustee may at any time and all times conclusively presume that the obligation of the Company to pay the principal of and interest on the Collateral Bonds as the same shall have become due and payable shall have been fully satisfied and discharged unless and until a Responsible Officer of the Trustee shall have received at the Corporate Trust Office a written notice from the Administrative Agent stating (A) that timely payment of principal and interest on the Collateral Bonds has not been made, (B) that the Company is in arrears as to the payments required to be made by it to the Administrative Agent pursuant to the Credit Agreement and (C) the amount of the arrearage.  This paragraph is solely for the benefit of the Trustee.

Section 2.03        Redemption; Repurchase .  (a) The Collateral Bonds are not redeemable at the option of the Company.

(b)           A reduction in the Revolving Committed Amount in accordance with Section 2.1(d) of the Credit Agreement shall automatically reduce the aggregate principal amount of the Collateral Bonds by the aggregate amount of such reduction in the Revolving Committed Amount, upon surrender by the Administrative Agent to the Trustee at the Corporate Trust Office of the Trustee of Collateral Bonds in an aggregate principal amount equal to the reduction, which surrender shall be a condition precedent to the reduction in the Revolving Committed Amount and a condition precedent to the reduction of the aggregate principal amount of the Collateral Bonds.

(c)           On a Credit Repurchase Date, the Company shall repurchase (the “ Credit Repurchase Requirement ”) the Collateral Bonds (including all accrued and unpaid interest on the Collateral Bonds) for a purchase price equal to the Borrower Obligations (the “ Credit Repurchase Amount ”).  On the Credit Repurchase Date, the Company will deposit with the Trustee immediately available funds in an amount equal to the Credit Repurchase Amount and the Trustee shall pay such amount as soon as practicable after receipt thereof to the Administrative Agent.  Payment of a Credit Repurchase Amount equal to the Borrower Obligations as of the applicable Credit Repurchase Date shall be deemed to satisfy and discharge in full the principal of, and accrued and u