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EX-99.2 - EARNINGS CALL SLIDES - PORTLAND GENERAL ELECTRIC CO /OR/q3earningsslidedeckportl.htm
8-K - FORM 8-K - PORTLAND GENERAL ELECTRIC CO /OR/form8-kfor20150930pressrel.htm
Exhibit 99.1


 
Portland General Electric
One World Trade Center
121 S.W. Salmon Street
Portland, Oregon 97204

News Release
 
 
FOR IMMEDIATE RELEASE
 
 
 
October 27, 2015
 
 
 
 
 
 
 
Media Contact:
 
Investor Contact:
 
Melanie Moir
 
Bill Valach
 
Corporate Communications
 
Investor Relations
 
Phone: 503-464-8790
 
Phone: 503-464-7395

Portland General Electric announces third quarter 2015 results

Financial and operating performance on track for 2015 and earnings guidance reaffirmed at $2.05 - $2.20 per share
Carty Generating Station on budget and scheduled to be in-service in the second quarter of 2016
Settlement reached on all issues in the 2016 general rate case

PORTLAND, Ore. — Portland General Electric Company (NYSE: POR) today reported net income of $36 million, or 40 cents per diluted share, for the third quarter of 2015. This compares with net income of $39 million, or 47 cents per diluted share, for the third quarter of 2014.

“Although our financial results were lower quarter over quarter, we are on track to meet our revised 2015 financial targets, and I’m pleased with our solid operations and strong load growth supported by continued positive economic trends in Oregon,” said Jim Piro, president and chief executive officer. “We are reaffirming our full year earnings guidance of $2.05 - $2.20 per share.”

When compared to the prior year, earnings in the third quarter of 2015 were positively impacted by new generating resources (approx. $0.04 EPS), which were offset by increases in several miscellaneous operating and maintenance and other expenses (approx. $0.06 EPS). In addition, the company issued new shares of common stock in June 2015 and the timing of this issuance impacted quarter over quarter earnings per share by approximately $0.05. Average diluted shares increased from 80.2 million for the third quarter 2014 to 88.8 million for the third quarter 2015. The Company is increasing its full year weather adjusted load forecast from 1.5 percent to 2 percent due to continued strong load growth in the industrial sector.

Company Updates

Generation Project: Construction is proceeding on the Carty Generating Station, a 440 megawatt natural gas-fired baseload power plant near Boardman, Ore. The plant is scheduled to be placed into service during the second quarter of 2016 at an estimated cost of $450 million, excluding allowance for funds used during construction (AFDC). The 500 KV Grassland switchyard serving the site has been completed and construction on the plant is now approximately 70 percent complete.


1

Exhibit 99.1

2016 General Rate Case: During the third quarter of 2015, PGE, Oregon Public Utility Commission (OPUC) Staff and interveners reached an agreement that resolved all remaining matters in the general rate case, subject to OPUC approval. Parties have agreed to:

A capital structure of 50% debt and 50% equity;
A return on equity of 9.6%, down from the current authorized rate of 9.68%;
A cost of capital of 7.52%; and
An average rate base of $4.4 billion.

On October 1, 2015, PGE filed its latest power cost and retail load forecast updates. The net increase in annual revenue requirement as proposed in the Company’s initial filing and as revised consists of the following (in millions):
 
As Filed February 12, 2015
Stipulations and Updates through July 15, 2015
Additional Stipulations and Updates through October 1, 2015
As Revised October 1, 2015
Carty
$83
$2
$(1)
$84
Base business cost*
$39
$(21)
$(33)
$(15)
Supplemental tariff updates
$(56)
$(6)
$6
$(56)
Annual revenue requirement, net
$66
$(25)
$(28)
$13
* The July reduction in base business revenue requirement includes various Operating and Maintenance and other cost adjustments ($11 million), lower net variable power costs (NVPC) ($7 million), and the Grassland switchyard moved from base business to Carty ($3 million). The additional stipulations and updates through October 1, 2015, include the August reduction in base business revenue requirement, which consists primarily of a lower return on equity than requested ($10 million), lower NVPC ($10 million), miscellaneous reductions ($4 million), and settlement on cost of capital and all other issues in the filing ($4 million), as well as reductions for the load forecast update ($3 million) and the power cost update ($2 million).

The net annual revenue requirement increase of $13 million, or 0.7%, will be effective in two phases. A $43 million decrease, representing a 2.4% decrease in customer prices effective January 1, 2016, will consist of a reduction in base business costs of $15 million and a decrease of $28 million related to the amortization of certain customer credits through supplemental tariffs. A $56 million annualized increase, representing a customer price increase of 3.1%, will be effective when Carty becomes operational, provided that occurs by July 31, 2016. The increase will consist of an $84 million annualized increase related to the cost recovery of Carty and a $28 million annualized decrease related to the amortization of certain customer credits through supplemental tariffs.

Updates to power costs and actual cost of debt, to be finalized in November 2015, may further change the amounts shown in the table above. Regulatory review of the 2016 GRC will continue, with a final order expected to be issued by the OPUC by December 2015.

2

Exhibit 99.1

Third quarter operating results
Earnings Reconciliation of Q3 2014 to Q3 2015
($ in millions, except EPS)
Pre-Tax Income
Net Income*
Diluted EPS
Reported Q3 2014
$
54

$
39

$
0.47

Adjustment for change in share count
 
 
(0.05
)
EPS After share count adjustment
 
 
0.42

Revenue Adjustments
 
 
 
Electric retail price and volume
12

7

0.08

Supplemental tariffs
(7
)
(4
)
(0.05
)
Electric wholesale price and volume
(10
)
(6
)
(0.07
)
Other revenue adjustments
(3
)
(2
)
(0.01
)
Change in Revenue
(8
)
(5
)
(0.05
)
Power Cost Adjustments
 
 
 
Average power cost
18

11

0.13

Purchased power and generating volume
3

2

0.02

Change in Power Costs
21

13

0.15

O&M Adjustments
 
 
 
Generation, transmission, distribution
(4
)
(3
)
(0.03
)
Administrative and general
(5
)
(3
)
(0.03
)
Change in O&M
(9
)
(6
)
(0.06
)
Other Item Adjustments
 
 
 
Depreciation & amortization



Interest
(5
)
(3
)
(0.03
)
AFDC equity**
(5
)
(5
)
(0.06
)
Other Items
(4
)
(2
)
(0.03
)
Adjustment for effective vs statutory tax rate
 
5

0.06

Change in Other Items
(14
)
(5
)
(0.06
)
Reported Q3 2015
$
44

$
36

$
0.40

* After tax adjustments based on PGE’s statutory tax rate of 39.5%
** Statutory tax rate applied only to AFDC debt

Retail revenues increased $5 million, or 1 percent, to $439 million for the third quarter of 2015 from $434 million for the third quarter of 2014. The increase consisted of:

A $10 million increase related to a 2.3 percent increase in average customer prices largely resulting from the 2015 general rate case; and
A $2 million increase related to a 0.6 percent higher volume of retail energy delivered in the third quarter of 2015 compared with the third quarter of 2014, with an increase in residential and industrial deliveries of 0.2 percent and 4.0 percent, respectively and a decrease in commercial deliveries of 0.9 percent; partially offset by
A $7 million decrease related to various supplemental tariff changes, including the return of $5 million to customers in the third quarter of 2015 of proceeds received in connection with the settlement of a legal matter related to the operation of the Independent Spent Fuel Storage Installation (ISFSI) at the Trojan nuclear power plant, which was closed in 1993 (offset in depreciation and amortization).

Net variable power costs (purchased power and fuel expense, net of wholesale revenues) decreased $11 million for the third quarter of 2015 compared with the third quarter of 2014, and consisted of the following:

An $18 million decrease related to a 9 percent decline in the average variable power cost per MWh; and
A $3 million decrease related to a 2 percent decline in total system load which included both retail and wholesale loads; partially offset by
A $10 million decrease in wholesale revenue, related to a 16 percent decrease in wholesale sales volume and a 12 percent decrease in wholesale prices.


3

Exhibit 99.1

For the third quarter of 2015, actual NVPC were $6 million above baseline NVPC included in the annual power cost update tariff (AUT), while NVPC for the third quarter of 2014 were above baseline NVPC included in the AUT by $5 million. Forecasted NVPC for 2015 are expected to be within the deadband of the power cost adjustment mechanism; accordingly, no estimated collection from, or refund to customers, has been recorded pursuant to the Power Cost Adjustment Mechanism.

Generation, transmission and distribution expense increased $4 million, or 7 percent, in the third quarter of 2015 compared with the third quarter of 2014 driven by $2 million higher operating and maintenance expenses in 2015, driven by the addition of Port Westward Unit 2 and Tucannon River, a $1 million write-off of inventory related to the Boardman biomass project and $1 million in unexpected repairs and maintenance in the third quarter of 2015, compared with the third quarter of 2014.

Administrative and other expense in the third quarter of 2015 was $5 million, or 9 percent, higher than in the third quarter of 2014 due to a combination of higher expenses for legal and environmental services, pension, information technology and other items.

Depreciation and amortization expense in the third quarter of 2015 was comparable to the third quarter of 2014. A $7 million increase resulting from capital additions were largely offset by $6 million in amortization of deferred regulatory liabilities for the Trojan spent fuel settlement and ISFSI tax credits. The reduction in expenses resulting from the amortization of the regulatory liabilities is offset by corresponding reductions in revenues.

Interest expense in the third quarter of 2015 was $5 million, or 22 percent, higher than in the third quarter of 2014, primarily due to $3 million lower allowance for borrowed funds used during construction. In December 2014, Port Westward Unit 2 and Tucannon River were placed into service resulting in a lower average construction work in process (CWIP) balance during 2015. Interest on long-term debt increased $2 million due to issuance of First Mortgage Bonds in the fourth quarter of 2014.

Other income, net in the third quarter of 2015 was $8 million lower than in the third quarter of 2014 driven by a $5 million decrease in the allowance for equity funds used during construction resulting from the lower average CWIP balance due to new plants being placed into service, $1 million lower earnings on the non-qualified benefit plan trust assets and other decreases of $2 million.

Income tax expense was $8 million in the third quarter of 2015 compared with $16 million in the third quarter of 2014. The decrease was largely due to lower pre-tax income and an increase in production tax credits for 2015 compared to 2014.

2015 earnings guidance

PGE is reaffirming its full-year 2015 earnings guidance of $2.05 - $2.20 per share, based on the following assumptions:

Annual weather adjusted load growth of approximately 2 percent;
Below average hydro conditions for the year;
Normal thermal plant and wind generation for the remainder of the year;
Depreciation and amortization expense between $300 and $310 million; and,
Capital expenditures of $580 million.

Third Quarter 2015 earnings call and web cast — October 27

PGE will host a conference call with financial analysts and investors on Tuesday, October 27, at 11 a.m. ET. The conference call will be webcast live on the PGE website at portlandgeneral.com. A replay of the call will be available beginning at 2 p.m. ET on Tuesday, October 27 through Tuesday, November 4.

4

Exhibit 99.1


Jim Piro, president and CEO; Jim Lobdell, senior vice president of finance, CFO, and treasurer; and Bill Valach, director, investor relations, will participate in the call. Management will respond to questions following formal comments.

The attached unaudited condensed consolidated statements of income, condensed consolidated balance sheets, and condensed consolidated statements of cash flows, as well as the supplemental operating statistics, are an integral part of this earnings release.

# # # # #

About Portland General Electric Company

Portland General Electric Company is a vertically integrated electric utility that serves approximately 852,000 residential, commercial and industrial customers in the Portland/Salem metropolitan area of Oregon. The company’s headquarters are located at 121 S.W. Salmon Street, Portland, Oregon 97204. Visit PGE’s website at portlandgeneral.com.

Safe Harbor Statement
Statements in this news release that relate to future plans, objectives, expectations, performance, events and the like may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements include statements regarding earnings guidance; statements regarding future load, hydro conditions and operating and maintenance costs; statements concerning implementation of the company’s integrated resource plan; statements concerning future compliance with regulations limiting emissions from generation facilities and the costs to achieve such compliance; as well as other statements containing words such as “anticipates,” “believes,” “intends,” “estimates,” “promises,” “expects,” “should,” “conditioned upon,” and similar expressions. Investors are cautioned that any such forward-looking statements are subject to risks and uncertainties, including reductions in demand for electricity; the sale of excess energy during periods of low demand or low wholesale market prices; operational risks relating to the company’s generation facilities, including hydro conditions, wind conditions, disruption of fuel supply, and unscheduled plant outages, which may result in unanticipated operating, maintenance and repair costs, as well as replacement power costs; failure to complete capital projects on schedule or within budget, or the abandonment of capital projects, which could result in the company’s inability to recover project costs; the costs of compliance with environmental laws and regulations, including those that govern emissions from thermal power plants; changes in weather, hydroelectric and energy markets conditions, which could affect the availability and cost of purchased power and fuel; changes in capital market conditions, which could affect the availability and cost of capital and result in delay or cancellation of capital projects; the outcome of various legal and regulatory proceedings; and general economic and financial market conditions. As a result, actual results may differ materially from those projected in the forward-looking statements. All forward-looking statements included in this news release are based on information available to the company on the date hereof and such statements speak only as of the date hereof. The company assumes no obligation to update any such forward-looking statement. Prospective investors should also review the risks and uncertainties listed in the company’s most recent annual report on form 10-K and the company’s reports on forms 8-K and 10-Q filed with the United States Securities and Exchange Commission, including management’s discussion and analysis of financial condition and results of operations and the risks described therein from time to time.

POR-F
Source: Portland General Electric Company


5

Exhibit 99.1

PORTLAND GENERAL ELECTRIC COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In millions, except per share amounts)
(Unaudited)

 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
2015
 
2014
 
2015
 
2014
Revenues, net
$
476

 
$
484

 
$
1,399

 
$
1,400

Operating expenses:
 
 
 
 
 
 
 
Purchased power and fuel
181

 
202

 
490

 
528

Generation, transmission and distribution
64

 
60

 
192

 
181

Administrative and other
59

 
54

 
179

 
164

Depreciation and amortization
76

 
76

 
227

 
224

Taxes other than income taxes
28

 
27

 
86

 
82

Total operating expenses
408

 
419

 
1,174

 
1,179

Income from operations
68

 
65

 
225

 
221

Interest expense (1)
28

 
23

 
86

 
71

Other income:
 
 
 
 
 
 
 
Allowance for equity funds used during construction
6

 
11

 
15

 
26

Miscellaneous income, net
(2
)
 
1

 

 
1

Other income, net
4

 
12

 
15

 
27

Income before income tax expense
44

 
54

 
154

 
177

Income tax expense
8

 
16

 
33

 
46

Net income
36

 
38

 
$
121

 
$
131

Less: net loss attributable to noncontrolling interests

 
(1
)
 

 
(1
)
Net income attributable to Portland General Electric Company
$
36

 
$
39

 
$
121

 
$
132

 
 
 
 
 
 
 
 
Weighted-average shares outstanding (in thousands):
 
 
 
 
 
 
 
Basic
88,766

 
78,203

 
82,633

 
78,170

Diluted
88,766

 
80,225

 
82,633

 
79,977

Earnings per share:
 
 
 
 
 
 
 
Basic
$
0.40

 
$
0.48

 
$
1.47

 
$
1.67

Diluted
$
0.40

 
$
0.47

 
$
1.47

 
$
1.63

Dividends declared per common share
$
0.300

 
$
0.280

 
$
0.880

 
$
0.835

 
 
 
 
 
 
 
 
(1) Net of an allowance for borrowed funds used during construction of $3 million and $7 million in the three months ended September 30, 2015 and 2014, respectively, and $9 million and $15 million in the nine months ended September 30, 2015 and 2014, respectively.


6

Exhibit 99.1

PORTLAND GENERAL ELECTRIC COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions)
(Unaudited)
 
 
September 30,
 
December 31,
 
2015
 
2014
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
92

 
$
127

Accounts receivable, net
133

 
149

Unbilled revenues
72

 
93

Inventories
94

 
82

Regulatory assets—current
122

 
133

Other current assets
92

 
115

Total current assets
605

 
699

Electric utility plant, net
5,920

 
5,679

Regulatory assets—noncurrent
547

 
494

Nuclear decommissioning trust
40

 
90

Non-qualified benefit plan trust
33

 
32

Other noncurrent assets
52

 
48

Total assets
$
7,197

 
$
7,042

 
 
 
 
LIABILITIES AND EQUITY
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
96

 
$
156

Liabilities from price risk management activities - current
115

 
106

Current portion of long-term debt

 
375

Accrued expenses and other current liabilities
254

 
236

Total current liabilities
465

 
873

Long-term debt, net of current portion
2,204

 
2,126

Regulatory liabilities—noncurrent
939

 
906

Deferred income taxes
664

 
625

Unfunded status of pension and postretirement plans
246

 
237

Liabilities from price risk management activities—noncurrent
184

 
122

Asset retirement obligations
137

 
116

Non-qualified benefit plan liabilities
105

 
105

Other noncurrent liabilities
21

 
21

Total liabilities
4,965

 
5,131

Total equity
2,232

 
1,911

Total liabilities and equity
$
7,197

 
$
7,042



7

Exhibit 99.1

PORTLAND GENERAL ELECTRIC COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)

 
Nine Months Ended September 30,
 
2015
 
2014
Cash flows from operating activities:
 
 
 
Net income
$
121

 
$
131

Depreciation and amortization
227

 
224

Other non-cash income and expenses, net included in Net income
70

 
61

Changes in working capital
41

 
65

Proceeds received from legal settlement

 
6

Other, net
(20
)
 
(14
)
Net cash provided by operating activities
439

 
473

Cash flows from investing activities:
 
 
 
Capital expenditures
(452
)
 
(824
)
Distribution from Nuclear decommissioning trust
50

 
(6
)
Sales tax refund received related to Tucannon River Wind Farm
23

 

Other, net
2

 
9

Net cash used in investing activities
(377
)
 
(821
)
Cash flows from financing activities:
 
 
 
Proceeds from issuance of common stock, net of issuance costs
271

 

Repayment of long-term debt, net of issuances
(298
)
 
404

Dividends paid
(70
)
 
(66
)
Net cash (used in) provided by financing activities
(97
)
 
338

Decrease in cash and cash equivalents
(35
)
 
(10
)
Cash and cash equivalents, beginning of period
127

 
107

Cash and cash equivalents, end of period
$
92

 
$
97

 
 
 
 



8

Exhibit 99.1

PORTLAND GENERAL ELECTRIC COMPANY AND SUBSIDIARIES
SUPPLEMENTAL OPERATING STATISTICS
(Unaudited)

 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
2015
 
2014
 
2015
 
2014
Revenues (dollars in millions):
 
 
 
 
 
 
 
Retail:
 
 
 
 
 
 
 
Residential
$
213

 
$
208

 
$
647

 
$
653

Commercial
176

 
176

 
498

 
493

Industrial
59

 
59

 
172

 
164

Subtotal
448

 
443

 
1,317

 
1,310

Other retail revenues, net
(9
)
 
(9
)
 
(11
)
 
(11
)
Total retail revenues
439

 
434

 
1,306

 
1,299

Wholesale revenues
29

 
39

 
66

 
73

Other operating revenues
8

 
11

 
27

 
28

Total revenues
$
476

 
$
484

 
$
1,399

 
$
1,400

 
 
 
 
 
 
 
 
Energy sold and delivered (MWh in thousands):
 
 
 
 
 
 
 
Retail energy sales:
 
 
 
 
 
 
 
Residential
1,749

 
1,746

 
5,308

 
5,472

Commercial
1,862

 
1,872

 
5,246

 
5,198

Industrial
870

 
848

 
2,563

 
2,373

Total retail energy sales
4,481

 
4,466

 
13,117

 
13,043

Retail energy deliveries:
 
 
 
 
 
 
 
Commercial
145

 
154

 
401

 
423

Industrial
313

 
290

 
875

 
823

Total retail energy deliveries
458

 
444

 
1,276

 
1,246

Total retail energy sales and deliveries
4,939

 
4,910

 
14,393

 
14,289

Wholesale energy deliveries
836

 
999

 
1,954

 
1,892

Total energy sold and delivered
5,775

 
5,909

 
16,347

 
16,181

 
 
 
 
 
 
 
 
Number of retail customers at end of period:
 
 
 
 
 
 
 
Residential
 
 
 
 
744,172

 
736,289

Commercial
 
 
 
 
106,892

 
106,188

Industrial
 
 
 
 
197

 
203

Direct access
 
 
 
 
389

 
430

Total retail customers
 
 
 
 
851,650

 
843,110



9

Exhibit 99.1

 
Heating Degree-days
 
Cooling Degree-days
 
2015
2014
Average
 
2015
2014
Average
First quarter
1,481

1,891

1,864

 



Second quarter
513

530

713

 
207

57

70

Third quarter
76

18

85

 
573

579

383

Year-to-date
2,070

2,439

2,662

 
780

636

453

* — “Average” amounts represent the 15-year rolling averages provided by the National Weather Service (Portland Airport).


10

Exhibit 99.1

PORTLAND GENERAL ELECTRIC COMPANY AND SUBSIDIARIES
SUPPLEMENTAL OPERATING STATISTICS, continued
(Unaudited)

 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
2015
 
2014
 
2015
 
2014
Sources of energy (MWh in thousands):
 
 
 
 
 
 
 
Generation:
 
 
 
 
 
 
 
Thermal:
 
 
 
 
 
 
 
Coal
1,445

 
1,479

 
2,656

 
3,079

Natural gas
1,702

 
1,282

 
3,356

 
2,273

Total thermal
3,147

 
2,761

 
6,012

 
5,352

Hydro
267

 
311

 
1,063

 
1,292

Wind
568

 
332

 
1,371

 
953

Total generation
3,982

 
3,404

 
8,446

 
7,597

Purchased power:
 
 
 
 
 
 
 
Term
527

 
916

 
3,403

 
4,698

Hydro
326

 
352

 
1,239

 
1,219

Wind
88

 
102

 
241

 
267

Spot
733

 
977

 
2,594

 
2,018

Total purchased power
1,674

 
2,347

 
7,477

 
8,202

Total system load
5,656

 
5,751

 
15,923

 
15,799

Less: wholesale sales
(836
)
 
(999
)
 
(1,954
)
 
(1,892
)
Retail load requirement
4,820

 
4,752

 
13,969

 
13,907







11