PERFORMANCE CASH AWARD AGREEMENT PNM RESOURCES, INC. SECOND AMENDED AND RESTATED OMNIBUS PERFORMANCE EQUITY PLAN

Exhibit 10.7

Part II Award Agreement

PNM Resources, Inc., a New Mexico corporation, (“PNMR” or the “Company”) hereby awards to «First» «Last» (the “Participant”), a Participant in the PNM Resources, Inc. Second Amended and Restated Omnibus Performance Equity Plan (the “Plan”), as it may be amended, a Performance Cash Award (the “Award”) effective as of April 27, 2009.

Capitalized terms used in this Performance Cash Award Agreement (the “Agreement”) and not otherwise defined in this Agreement shall have the meanings given to such terms in the Plan.

1.     Grant .  Company hereby awards to Participant the opportunity to earn a cash payment in an amount equal to the Threshold, Target or Maximum Award levels listed in Section 4(a) and (b), based upon Company’s performance over the Performance Period (defined in Section 3), in accordance with and subject to the terms and conditions set forth in this Agreement.  In no event will the Award exceed the Maximum Award levels indicated in Section 4(a) and (b).  If Participant is a Covered Employee, the Award is intended to be a Performance-Based Award granted pursuant to Section 12 of the Plan.

2.     Award Subject to Plan .  This Award is granted pursuant to the Plan, the terms of which are hereby incorporated by reference.

3.     Performance Period .  The Performance Period for this Award began on April 1, 2009 and ends on December 31, 2011.

4.     Performance Goals; Amount of Award .  The amount of the Award to which Participant is entitled pursuant to this Agreement, if any, is based upon the level of Company’s achievement with respect to the two Performance Goals described in this Section.  Each of the Performance Goals described in this Section will account for fifty percent of the Participant’s total Award opportunity.

(a)     Funds from Operations to Debt (“FFO to Debt”) Ratio Goal :  Fifty percent of Participant’s Award will be determined based upon Company’s FFO to Debt Ratio during the Performance Period (the “FFO to Debt Ratio Portion”), as set forth in this Section 4(a).

(i)     FFO to Debt Ratio Defined .  For purposes of this Agreement, the term FFO to Debt Ratio means Company’s funds from operations (as determined conclusively by Company) for the fiscal year ending on the last day of the Performance Period divided by Company’s total debt outstanding, including any long-term leases and unfunded pension plan obligations, as of the last day of the Performance Period.

(ii)     FFO to Debt Ratio Award Levels :   Company’s achievement of the FFO to Debt Ratio Goal will determine the amount of the FFO to Debt Ratio Portion of the Award to which Participant is entitled as set forth below:

If Company’s FFO to Debt Ratio for the Performance Period is equal to or less than 15.0% no payment will be due with respect to the FFO to Debt Ratio Portion of the Award.  If Company’s FFO to Debt Ratio for the Performance Period exceeds 15.0% but does not exceed 15.5%, the FFO to Debt Ratio Portion of Participant’s Award will be interpolated between the Threshold and Target Award levels.  If Company’s FFO to Debt Ratio for the Performance Period exceeds 15.5% but does not exceed 16.0%, the FFO to Debt Ratio Portion of Participant’s Award also will be interpolated between the Target and Maximum Award levels.

(b)     Environmental Goal :  Fifty percent of Participant’s Award will be determined based upon Company’s attainment of the Environmental Goal (the “Environmental Goal Portion”), as set forth in this Section 4(b).

(i)     Environmental Goal Defined .  For purposes of this Agreement, the term “Environmental Goal” means the reduction in the emission levels of (1) nitrous oxide, (2) sulfur dioxide, (3) particulate matter, and (4) mercury (the “Pollutants”) at Company’s San Juan Generating Station (“SJGS”) during the Performance Period to levels that are less than the limits on the emissions of such Pollutants set forth in the Consent Decree entered by the United States District Court for the District of New Mexico on May 10, 2005 in the case of Grand Canyon Trust and Sierra Club v. Public Service Company of New Mexico , Case No. CIV 02-552 (the “Consent Decree”).  The Consent Decree limits are set forth in the following table.

Company will use the following method for determining the level of attainment of the Environmental Goal:  (A) Company will measure the emission levels of each of the Pollutants from the SJGS over the course of the Performance Period; (B) Company then will compare the actual emission level for each Pollutant to the Cons