Portland General Electric Announces Second Quarter 2017 Results
CEO succession plan implemented
-
Jim Piro , president and Chief Executive Officer, to retire at the end of 2017.Maria Pope , senior vice president, Power Supply, Operations and Resource Strategy, to become presidentOct. 1 and succeed Piro effectiveJan. 1 - Second quarter results reflect strong retail deliveries due to favorable weather and customer growth, offset by lower wind generation and restoration costs for a severe April wind storm
- Integrated Resource Planning continues: Several options identified to meet the company's future capacity needs as the result of productive bilateral negotiations
"We remain in a good position to meet our financial targets for the
year," said
Q2 2017 earnings compared to Q2 2016 earnings
The decrease in second quarter earnings per diluted share for 2017 in
comparison to the second quarter of 2016 was due to storm restoration
efforts resulting from a severe April wind storm, a decrease in
production tax credits due to lower wind generation, as well as
incremental generation maintenance and repair costs. Also contributing
to the decrease were
Company Updates
PGE announces succession plan
Integrated Resource Plan
PGE filed its 2016 Integrated
Resource Plan (IRP) with the
PGE is engaged in productive bilateral negotiations with owners of existing regional resources to fill its capacity needs. By mid-August, upon completing detailed term sheets with potential sellers, the company intends to file for a waiver of the OPUC guidelines that call for a competitive bidding process for resources greater than 100 MWs and a term of more than five years. Following acknowledgment of the IRP and the outcomes of the bilateral negotiations and waiver process, PGE may request approval from the OPUC to issue a request for proposals for (RFPs) for any remaining capacity need. PGE has also proposed conducting an RFP for renewable resources as soon as possible after the commission issues an acknowledgement order. The RFP processes will include review and input by stakeholders, oversight by an independent evaluator who reports to the OPUC staff, and overall review by the OPUC itself.
Since issuing the IRP, PGE has identified a potential benchmark wind resource that could have a nameplate capacity of up to approximately 500 MW, and which would qualify for the production tax credit. The company is continuing to explore this option. The submission of this resource into an RFP for renewable resources as a benchmark bid is subject to additional due diligence by PGE and the negotiation and execution of definitive agreements.
PGE's IRP puts the company ahead of schedule for Oregon's Renewable Portfolio Standard goals and enables the company to serve approximately 50 percent of its customers' energy from carbon-free resources by 2020.
2018 General Rate Case
On
As part of its commitment to provide safe, reliable, sustainable and
affordable energy to customers, the company filed a request for a
The
net increase in annual revenue requirement is based upon:
- A return on equity of 9.75%;
- A capital structure of 50% debt and 50% equity;
-
Rate base of
$4.6 billion .
PGE has reached settlements on depreciation expense, net variable power
cost (NVPC), and a partial settlement on non-NVPC issues. PGE filed its
reply testimony on the remaining items on
Second quarter operating results
Earnings Reconciliation of Q2 2016 to Q2 2017 | ||||||||||||
($ in millions, except EPS) |
Pre-Tax |
Net Income* |
Diluted |
|||||||||
Reported Q2 2016 | $ | 46 | $ | 37 | $ | 0.42 | ||||||
Revenue | ||||||||||||
Electric Retail price change | 4 | 2 | 0.03 | |||||||||
Electric Retail volume change | 11 | 7 | 0.07 | |||||||||
Change in decoupling deferral | 4 | 3 | 0.03 | |||||||||
Electric wholesale price and volume change | 2 | 1 | 0.01 | |||||||||
Change in Revenue | 21 | 13 | 0.14 | |||||||||
Power Cost | ||||||||||||
Change in average power cost | 7 | 4 | 0.05 | |||||||||
Change purchased power and generation | 1 | 1 | 0.01 | |||||||||
Change in Power Costs | 8 | 5 | 0.06 | |||||||||
O&M | ||||||||||||
Generation, transmission, distribution | (17 | ) | (10 | ) | (0.12 | ) | ||||||
Administrative and general | (4 | ) | (3 | ) | (0.03 | ) | ||||||
Change in O&M | (21 | ) | (13 | ) | (0.15 | ) | ||||||
Other Items | ||||||||||||
Depreciation & amortization | (3 | ) | (2 | ) | (0.02 | ) | ||||||
AFDC Equity*** | (5 | ) | (5 | ) | (0.06 | ) | ||||||
Other Items | (4 | ) | (3 | ) | (0.03 | ) | ||||||
Change in Other Items | (12 | ) | (10 | ) | (0.11 | ) | ||||||
Reported Q2 2017 | $ | 42 | $ | 32 | $ | 0.36 | ||||||
* After tax adjustments based on PGE's statutory tax rate of 39.5% | ||||||||||||
** Some values may not foot due to rounding | ||||||||||||
*** Statutory tax rate does not apply to AFDC equity | ||||||||||||
Total revenues for the three months ended
The change in Retail revenues resulted largely from the following:
-
An
$11 million increase resulting from 2.8% greater retail energy deliveries due to favorable weather conditions and an increase in deliveries to industrial customers, combined with an increase of$4 million that resulted from customer price changes. Energy deliveries to residential customers increased 4.4% in the second quarter of 2017 due in part to the effects of weather, as temperatures in 2016 were abnormally warm during the spring heating season, and continued customer growth. Energy deliveries to industrial customers increased 6.5%, largely due to strength in the high tech sector while energy deliveries to commercial customers declined 0.7%. -
A
$1 million increase resulted from other tariffs, which included a$4 million increase in estimated collections under the decoupling mechanism, mostly offset by a variety of smaller items; partially offset by -
A
$1 million decrease in Supplemental tariffs as a$4 million decrease due to the timing difference related to the Trojan spent fuel refund to customers, as the refund, offset in Depreciation and amortization, temporarily suspended in early 2016, has resumed, partially offset by an increase related to the accelerated cost recovery of Colstrip and various smaller tariffs.
Total cooling degree-days for the three months ended
The following table indicates the number of heating and cooling
degree-days for the three months ended
Heating Degree-days | Cooling Degree-days | |||||||||||||||||
2017 | 2016 | Avg. | 2017 | 2016 | Avg. | |||||||||||||
April | 421 | 227 | 386 | — | 18 | 1 | ||||||||||||
May | 196 | 109 | 216 | 41 | 31 | 18 | ||||||||||||
June | 69 | 67 | 87 | 88 | 105 | 51 | ||||||||||||
Totals for the quarter | 686 | 403 | 689 | 129 | 154 | 70 | ||||||||||||
Wholesale revenues for the three months ended
Actual NVPC for the three months ended
Generation, transmission and distribution expense increased
Administrative and other expense increased
Depreciation and amortization expense increased
Interest expense increased
Other income, net decreased
Income tax expense was
2017 earnings guidance
PGE reaffirms its 2017 guidance of
- A decline in retail deliveries between zero and one percent, weather-adjusted;
- Normal hydro conditions for the remainder of the year based on the current hydro forecast;
- Wind generation for the remainder of the year based on five years of historic levels or forecast studies when historical data is not available;
- Normal thermal plant operations for the remainder of the year;
-
Depreciation and amortization expense between
$340 and$350 million ; -
Revised operating and maintenance costs between
$555 and$575 million driven by increased distribution costs.
Second Quarter 2017 earnings call and web cast
—
PGE will host a conference call with financial analysts and investors on
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
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 the recovery of
capital costs for the
POR-F
Source:
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (Dollars in millions, except per share amounts) (Unaudited) |
||||||||||||||||
Three Months Ended |
Six Months Ended |
|||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Revenues, net | $ | 449 | $ | 428 | $ | 979 | $ | 915 | ||||||||
Operating expenses: | ||||||||||||||||
Purchased power and fuel | 118 | 126 | 259 | 275 | ||||||||||||
Generation, transmission and distribution | 81 | 64 | 162 | 130 | ||||||||||||
Administrative and other | 65 | 61 | 133 | 122 | ||||||||||||
Depreciation and amortization | 86 | 83 | 170 | 165 | ||||||||||||
Taxes other than income taxes | 31 | 30 | 64 | 60 | ||||||||||||
Total operating expenses | 381 | 364 | 788 | 752 | ||||||||||||
Income from operations | 68 | 64 | 191 | 163 | ||||||||||||
Interest expense, net | 30 | 27 | 60 | 54 | ||||||||||||
Other income: | ||||||||||||||||
Allowance for equity funds used during construction | 3 | 8 | 5 | 15 | ||||||||||||
Miscellaneous income, net | 1 | 1 | 2 | — | ||||||||||||
Other income, net | 4 | 9 | 7 | 15 | ||||||||||||
Income before income tax expense | 42 | 46 | 138 | 124 | ||||||||||||
Income tax expense | 10 | 9 | 33 | 26 | ||||||||||||
Net income | $ | 32 | $ | 37 | $ | 105 | $ | 98 | ||||||||
Other comprehensive income | 1 | — | — | — | ||||||||||||
Comprehensive income | $ | 33 | $ | 37 | $ | 105 | $ | 98 | ||||||||
Weighted-average shares outstanding—basic and diluted (in thousands) | 89,063 | 88,902 | 89,033 | 88,867 | ||||||||||||
Earnings per share—basic and diluted | $ | 0.36 | $ | 0.42 | $ | 1.18 | $ | 1.10 | ||||||||
Dividends declared per common share | $ | 0.34 | $ | 0.32 | $ | 0.66 | $ | 0.62 | ||||||||
CONDENSED CONSOLIDATED BALANCE SHEETS (Dollars in millions) (Unaudited) |
||||||||
2017 |
2016 |
|||||||
ASSETS |
||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 33 | $ | 6 | ||||
Accounts receivable, net | 139 | 155 | ||||||
Unbilled revenues | 68 | 107 | ||||||
Inventories | 82 | 82 | ||||||
Regulatory assets—current | 47 | 36 | ||||||
Other current assets | 43 | 77 | ||||||
Total current assets | 412 | 463 | ||||||
Electric utility plant, net | 6,573 | 6,434 | ||||||
Regulatory assets—noncurrent | 536 | 498 | ||||||
Nuclear decommissioning trust | 41 | 41 | ||||||
Non-qualified benefit plan trust | 36 | 34 | ||||||
Other noncurrent assets | 55 | 57 | ||||||
Total assets | $ | 7,653 | $ | 7,527 | ||||
CONDENSED CONSOLIDATED BALANCE SHEETS, continued (Dollars in millions) (Unaudited) |
|||||||||
2017 |
2016 |
||||||||
LIABILITIES AND EQUITY |
|||||||||
Current liabilities: | |||||||||
Accounts payable | $ | 90 | $ | 129 | |||||
Liabilities from price risk management activities—current | 46 | 44 | |||||||
Current portion of long-term debt | 150 | 150 | |||||||
Accrued expenses and other current liabilities | 226 | 254 | |||||||
Total current liabilities | 512 | 577 | |||||||
Long-term debt, net of current portion | 2,200 | 2,200 | |||||||
Regulatory liabilities—noncurrent | 989 | 958 | |||||||
Deferred income taxes | 685 | 669 | |||||||
Unfunded status of pension and postretirement plans | 286 | 281 | |||||||
Liabilities from price risk management activities—noncurrent | 158 | 125 | |||||||
Asset retirement obligations | 165 | 161 | |||||||
Non-qualified benefit plan liabilities | 106 | 105 | |||||||
Other noncurrent liabilities | 160 | 107 | |||||||
Total liabilities | 5,261 | 5,183 | |||||||
Commitments and contingencies (see notes) | |||||||||
Equity: | |||||||||
|
|||||||||
Preferred stock, no par value, 30,000,000 shares authorized; none
issued and outstanding as of |
— | — | |||||||
Common stock, no par value, 160,000,000 shares authorized;
89,062,560 and 88,946,704 shares issued and outstanding as of
|
1,203 | 1,201 | |||||||
Accumulated other comprehensive loss | (7 | ) | (7 | ) | |||||
Retained earnings | 1,196 | 1,150 | |||||||
Total equity | 2,392 | 2,344 | |||||||
Total liabilities and equity | $ | 7,653 | $ | 7,527 | |||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In millions) (Unaudited) |
|||||||||
Six Months Ended |
|||||||||
2017 | 2016 | ||||||||
Cash flows from operating activities: | |||||||||
Net income | $ | 105 | $ | 98 | |||||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||
Depreciation and amortization | 170 | 165 | |||||||
Deferred income taxes | 20 | 20 | |||||||
Pension and other postretirement benefits | 13 | 14 | |||||||
Allowance for equity funds used during construction | (5 | ) | (15 | ) | |||||
Decoupling mechanism deferrals, net of amortization | (15 | ) | (3 | ) | |||||
Other non-cash income and expenses, net | 16 | 12 | |||||||
Changes in working capital: | |||||||||
Decrease in accounts receivable and unbilled revenues | 55 | 59 | |||||||
Increase in inventories | — | (4 | ) | ||||||
Decrease in margin deposits, net | 7 | 18 | |||||||
Decrease in accounts payable and accrued liabilities | (29 | ) | (13 | ) | |||||
Other working capital items, net | 11 | 6 | |||||||
Other, net | (15 | ) | (19 | ) | |||||
Net cash provided by operating activities | 333 | 338 | |||||||
Cash flows from investing activities: | |||||||||
Capital expenditures | (245 | ) | (319 | ) | |||||
Sales of Nuclear decommissioning trust securities | 11 | 11 | |||||||
Purchases of Nuclear decommissioning trust securities | (9 | ) | (11 | ) | |||||
Other, net | (2 | ) | — | ||||||
Net cash used in investing activities | (245 | ) | (319 | ) | |||||
Cash flows from financing activities: | |||||||||
Proceeds from issuance of long-term debt | — | 265 | |||||||
Payments on long-term debt | — | (133 | ) | ||||||
Change in short-term debt | — | (6 | ) | ||||||
Dividends paid | (57 | ) | (53 | ) | |||||
Other | (4 | ) | (3 | ) | |||||
Net cash (used in) provided by financing activities | (61 | ) | 70 | ||||||
Increase (Decrease) in cash and cash equivalents | 27 | 89 | |||||||
Cash and cash equivalents, beginning of period | 6 | 4 | |||||||
Cash and cash equivalents, end of period | $ | 33 | $ | 93 | |||||
Supplemental cash flow information is as follows: | |||||||||
Cash paid for interest, net of amounts capitalized | $ | 55 | $ | 49 | |||||
Cash paid for income taxes | 13 | 7 | |||||||
Non-cash investing and financing activities: | |||||||||
Assets obtained under capital lease | 55 | 57 |
SUPPLEMENTAL OPERATING STATISTICS (Unaudited) |
|||||||||||||||
Three Months Ended |
|||||||||||||||
2017 | 2016 | ||||||||||||||
Revenues (dollars in millions): | |||||||||||||||
Retail: | |||||||||||||||
Residential | $ | 203 | 45 | % | $ | 191 | 45 | % | |||||||
Commercial | 162 | 36 | 162 | 38 | |||||||||||
Industrial | 54 | 12 | 50 | 12 | |||||||||||
Subtotal | 419 | 93 | 403 | 95 | |||||||||||
Other retail revenues, net | 1 | — | 1 | — | |||||||||||
Total retail revenues | 420 | 93 | 404 | 95 | |||||||||||
Wholesale revenues | 16 | 4 | 14 | 3 | |||||||||||
Other operating revenues | 13 | 3 | 10 | 2 | |||||||||||
Total revenues | $ | 449 | 100 | % | $ | 428 | 100 | % | |||||||
Energy deliveries (MWh in thousands): | |||||||||||||||
Retail: | |||||||||||||||
Residential | 1,626 | 31 | % | 1,557 | 30 | % | |||||||||
Commercial | 1,655 | 32 | 1,695 | 33 | |||||||||||
Industrial | 749 | 14 | 717 | 14 | |||||||||||
Subtotal | 4,030 | 77 | 3,969 | 76 | |||||||||||
Direct access: | |||||||||||||||
Commercial | 160 | 3 | 133 | 3 | |||||||||||
Industrial | 359 | 7 | 323 | 6 | |||||||||||
Subtotal | 519 | 10 | 456 | 9 | |||||||||||
Total retail energy deliveries | 4,549 | 87 | 4,425 | 85 | |||||||||||
Wholesale energy deliveries | 673 | 13 | 773 | 15 | |||||||||||
Total energy deliveries | 5,222 | 100 | % | 5,198 | 100 | % | |||||||||
Average number of retail customers: | |||||||||||||||
Residential | 761,443 | 88 | % | 750,961 | 88 | % | |||||||||
Commercial | 107,620 | 12 | 106,656 | 12 | |||||||||||
Industrial | 196 | — | 190 | — | |||||||||||
Direct access | 572 | — | 375 | — | |||||||||||
Total | 869,831 | 100 | % | 858,182 | 100 | % | |||||||||
SUPPLEMENTAL OPERATING STATISTICS, continued (Unaudited) |
|||||||||||||
Three Months Ended |
|||||||||||||
2017 | 2016 | ||||||||||||
Sources of energy (MWh in thousands): | |||||||||||||
Generation: | |||||||||||||
Thermal: | |||||||||||||
Coal | 256 | 5 | % | 360 | 7 | % | |||||||
Natural gas | 237 | 5 | 772 | 16 | |||||||||
Total thermal | 493 | 10 | 1,132 | 23 | |||||||||
Hydro | 528 | 11 | 379 | 7 | |||||||||
Wind | 504 | 10 | 628 | 13 | |||||||||
Total generation | 1,525 | 31 | 2,139 | 43 | |||||||||
Purchased power: | |||||||||||||
Term | 2,815 | 57 | 2,354 | 47 | |||||||||
Hydro | 503 | 10 | 393 | 8 | |||||||||
Wind | 85 | 2 | 91 | 2 | |||||||||
Total purchased power | 3,403 | 69 | 2,838 | 57 | |||||||||
Total system load | 4,928 | 100 | % | 4,977 | 100 | % | |||||||
Less: wholesale sales | (673 | ) | (773 | ) | |||||||||
Retail load requirement | 4,255 | 4,204 | |||||||||||
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