Portland General Electric Reports 2016 Financial Results and Initiates 2017 Earnings Guidance
- Full-year 2016 financial results in line with revised guidance
-
Initiating 2017 earnings guidance of
$2.20 to$2.35 per diluted share -
Plans to file a 2018 General Rate Case with the
Oregon Public Utility Commission by the end of February
"I'm very proud of our operational and financial performance, despite the impact of lower retail loads associated with warmer than normal temperatures and wind generation below our forecast that resulted in a return on equity lower than our currently allowed return," said
2016 earnings compared to 2015 earnings
Annual earnings per diluted share increased year-over-year due to incremental earnings from the additional investment in
Company updates
2018 General Rate Case
By the end of February, PGE plans to file a 2018 General Rate Case (GRC) with the
"We realize the impact price increases can have on our customers, and do not make this request lightly," said Piro. "We continue to invest in our system to ensure its safety, reliability, and security in delivering power to our customers. Our efforts include replacing assets at the end of their useful life; strengthening our system to better prepare for storms, earthquakes, cyber-attacks and other potential threats; as well as investments in operational changes that will integrate more renewable resources and enhance system reliability."
Regulatory review of the 2018 GRC will occur throughout 2017, with a final order expected to be issued by the OPUC by the end of
Integrated Resource Planning
On
As part of OPUC's public review process, PGE is preparing responses to comments provided by OPUC staff, consumer advocates, environmental groups and other stakeholders. Additional rounds of comments, responses and workshops will follow as PGE works to address stakeholder questions and identify the best strategy for achieving a renewable, reliable, affordable energy future for its customers. The company continues to target mid-2017 for acknowledgement of the plan.
Upon acknowledgment, PGE will request approval from the OPUC to issue one or more request for proposals (RFPs) to acquire capacity and renewable resources. "We will be seeking the best combination of resources, consistent with the acknowledged IRP Action Plan, to meet our customers' future energy and capacity needs," said Piro. "We have no predetermined outcome in the RFP process and will, along with the independent evaluator, analyze a variety of resource proposals to determine the portfolios with the best overall balance of cost and risk." Resource options could include hydro, wind, solar, geothermal, biomass, efficient combined-cycle natural gas fired facilities, and generic capacity facilities such as seasonal contracts, power purchase agreements, energy storage, and combustion turbines. The RFP process will include oversight by an independent evaluator and review by the OPUC.
2016 Annual Operating Results
Earnings Reconciliation of 2015 to 2016 | ||||||||||||
($ in millions, except EPS) |
Pre-Tax Income |
Net Income(1) | Diluted EPS | |||||||||
Reported 2015 | $ | 217 | $ | 172 | $ | 2.04 | ||||||
Adjustment for change in share count(2) | (0.11 | ) | ||||||||||
EPS After share count adjustment | 1.93 | |||||||||||
Revenue Adjustments | ||||||||||||
Electric retail price increase | 49 | 30 | 0.33 | |||||||||
Electric volume decrease | (38 | ) | (23 | ) | (0.26 | ) | ||||||
Change in decoupling collection/(refund) | 10 | 6 | 0.07 | |||||||||
Electric wholesale volume and price increase | 15 | 9 | 0.10 | |||||||||
Other revenue adjustments | (11 | ) | (7 | ) | (0.07 | ) | ||||||
Change in Revenue | 25 | 15 | 0.17 | |||||||||
Power Cost Adjustments | ||||||||||||
Average power cost decrease | 50 | 31 | 0.34 | |||||||||
Increase in total system load | (8 | ) | (5 | ) | (0.05 | ) | ||||||
Other | 2 | 1 | 0.01 | |||||||||
Change in Power Costs | 44 | 27 | 0.30 | |||||||||
O&M Adjustments | ||||||||||||
Generation, transmission, distribution | (20 | ) | (12 | ) | (0.13 | ) | ||||||
Administrative and general | (6 | ) | (3 | ) | (0.04 | ) | ||||||
Change in O&M | (26 | ) | (15 | ) | (0.17 | ) | ||||||
Other Item Adjustments | ||||||||||||
Depreciation & amortization | (16 | ) | (10 | ) | (0.11 | ) | ||||||
Other Items | (1 | ) | (1 | ) | (0.01 | ) | ||||||
Production Tax Credits | 3 | 0.03 | ||||||||||
Change in Other Tax Items | 2 | 0.02 | ||||||||||
Change in Other Items | (17 | ) | (6 | ) | (0.07 | ) | ||||||
Reported 2016 | $ | 243 | $ | 193 | $ | 2.16 |
(1) | After tax adjustments based on PGE's statutory tax rate of 39.5% | |
(2) |
Diluted share count increased in |
|
Revenues increased
Total retail revenues increased
-
A
$49 million increase resulting from price changes, as authorized by the OPUC, includingCarty going into service and into customer prices in mid-2016, as a result of the Company's 2016 GRC; -
A
$10 million increase resulting from the Decoupling mechanism, as an estimated$3 million collection was recorded in 2016 compared to a refund in 2015; -
A
$5 million increase due to a lower amount of customer credits related to tax credits in connection with operation of the ISFSI at the former Trojan nuclear power plant site. Such credits are directly offset in depreciation and amortization expense; and -
A
$5 million overall increase due to various other largely offsetting tariff changes and adjustments; partially offset by -
A
$38 million decrease in revenues related to a 2.1% decrease in retail energy deliveries, consisting of 8.4% and 0.7% decreases in industrial and commercial deliveries, respectively, partially offset by a 0.3% increase in residential deliveries; and -
A
$23 million decrease related to the collection from customers during 2015 of costs associated with previous capital project deferrals, with no comparable collection in 2016. This decrease in revenues is largely offset by a comparable decrease in depreciation and amortization expense.
Wholesale revenues result from sales of electricity to utilities and power marketers made in the Company's efforts to secure reasonably priced power for its retail customers, manage risk, and administer its current long-term wholesale contracts. Such sales can vary significantly from year to year as a result of economic conditions, power and fuel prices, hydro and wind availability, and customer demand.
In 2016, the
Other operating revenues increased
Net variable power costs decreased
For 2016, actual NVPC, as calculated for regulatory purposes under the PCAM, was
Generation, transmission, and distribution expense increased
Administrative and other expense increased
Depreciation and amortization expense in 2016 increased
Taxes other than income taxes expense increased
Interest expense decreased
Other income, net was
Income tax expense increased
2017 earnings guidance
PGE is initiating full-year 2017 earnings guidance of
- A decline in retail deliveries between 0 and 1 percent, weather adjusted;
- Average hydro conditions;
- Wind generation based on five years of historical levels or forecast studies when historical data is not available;
- Normal thermal plant operations;
-
Operating and maintenance costs between
$540 and$560 million ; and -
Depreciation and amortization expense between
$340 and$350 million .
Fourth Quarter 2016 earnings call and web cast —
PGE will host a conference call with financial analysts and investors on
The attached unaudited 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 future load, hydro conditions, wind 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 and the sale of excess energy during periods of 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; 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; 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 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
POR-F
Source:
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (In millions, except per share amounts) (Unaudited) |
|||||||||||||||
Three Months Ended | Years Ended | ||||||||||||||
|
|
||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Revenues, net | $ | 524 | $ | 499 | $ | 1,923 | $ | 1,898 | |||||||
Operating expenses: | |||||||||||||||
Purchased power and fuel | 162 | 171 | 617 | 661 | |||||||||||
Generation, transmission and distribution | 87 | 74 | 286 | 266 | |||||||||||
Administrative and other | 62 | 62 | 247 | 241 | |||||||||||
Depreciation and amortization | 77 | 78 | 321 | 305 | |||||||||||
Taxes other than income taxes | 30 | 30 | 119 | 116 | |||||||||||
Total operating expenses | 418 | 415 | 1,590 | 1,589 | |||||||||||
Income from operations | 106 | 84 | 333 | 309 | |||||||||||
Interest expense, net * | 30 | 28 | 112 | 114 | |||||||||||
Other income: | |||||||||||||||
Allowance for equity funds used during construction | 2 | 6 | 21 | 21 | |||||||||||
Miscellaneous income, net | 1 | 1 | 1 | 1 | |||||||||||
Other income, net | 3 | 7 | 22 | 22 | |||||||||||
Income before income taxes | 79 | 63 | 243 | 217 | |||||||||||
Income taxes | 18 | 12 | 50 | 45 | |||||||||||
Net income | 61 | 51 | 193 | 172 | |||||||||||
Weighted-average shares outstanding (in thousands): | |||||||||||||||
Basic | 88,927 | 88,773 | 88,896 | 84,180 | |||||||||||
Diluted | 89,085 | 88,933 | 89,054 | 84,341 | |||||||||||
Earnings per share: | |||||||||||||||
Basic | $ | 0.68 | $ | 0.57 | $ | 2.17 | $ | 2.05 | |||||||
Diluted | $ | 0.68 | $ | 0.57 | $ | 2.16 | $ | 2.04 | |||||||
* Includes an allowance for borrowed funds used during construction | $ | 1 | $ | 4 | $ | 11 | $ | 13 | |||||||
CONDENSED CONSOLIDATED BALANCE SHEETS (In millions) (Unaudited) |
|||||||
As of |
|||||||
2016 | 2015 | ||||||
ASSETS |
|||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 6 | 4 | ||||
Accounts receivable, net | 155 | 158 | |||||
Unbilled revenues | 107 | 95 | |||||
Inventories | 82 | 83 | |||||
Regulatory assets—current | 36 | 129 | |||||
Other current assets | 77 | 88 | |||||
Total current assets | 463 | 557 | |||||
Electric utility plant, net | 6,434 | 6,012 | |||||
Regulatory assets—noncurrent | 498 | 524 | |||||
Nuclear decommissioning trust | 41 | 40 | |||||
Non-qualified benefit plan trust | 34 | 33 | |||||
Other noncurrent assets | 57 | 44 | |||||
Total assets | $ | 7,527 | $ | 7,210 | |||
LIABILITIES AND EQUITY |
|||||||
Current liabilities: | |||||||
Accounts payable | $ | 129 | 98 | ||||
Liabilities from price risk management activities—current | 44 | 130 | |||||
Short-term debt | — | 6 | |||||
Current portion of long-term debt | 150 | 133 | |||||
Accrued expenses and other current liabilities | 254 | 259 | |||||
Total current liabilities | 577 | 626 | |||||
Long-term debt, net of current portion | 2,200 | 2,060 | |||||
Regulatory liabilities—noncurrent | 958 | 928 | |||||
Deferred income taxes | 669 | 632 | |||||
Unfunded status of pension and postretirement plans | 281 | 259 | |||||
Liabilities from price risk management activities—noncurrent | 125 | 161 | |||||
Asset retirement obligations | 161 | 151 | |||||
Non-qualified benefit plan liabilities | 105 | 106 | |||||
Other noncurrent liabilities | 107 | 29 | |||||
Total liabilities | 5,183 | 4,952 | |||||
Total equity | 2,344 | 2,258 | |||||
Total liabilities and equity | $ | 7,527 | $ | 7,210 | |||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In millions) (Unaudited) |
||||||||
Years Ended |
||||||||
2016 | 2015 | |||||||
Cash flows from operating activities: | ||||||||
Net income | $ | 193 | $ | 172 | ||||
Depreciation and amortization | 321 | 305 | ||||||
Other non-cash income and expenses, net included in Net income | 50 | 95 | ||||||
Changes in working capital | 27 | (31 | ) | |||||
Other, net | (38 | ) | (21 | ) | ||||
Net cash provided by operating activities | 553 | 520 | ||||||
Cash flows from investing activities: | ||||||||
Capital expenditures | (584 | ) | (598 | ) | ||||
Distribution from (Contribution to) Nuclear decommissioning trust | — | 50 | ||||||
Other, net | (1 | ) | 26 | |||||
Net cash used in investing activities | (585 | ) | (522 | ) | ||||
Cash flows from financing activities: | ||||||||
Net issuances (payments) of long-term debt, including premiums paid or issuance costs incurred | 157 | (297 | ) | |||||
Proceeds from issuance of common stock, net of issuance costs | — | 271 | ||||||
(Maturities) issuances of commercial paper, net | (6 | ) | 6 | |||||
Dividends paid | (110 | ) | (97 | ) | ||||
Other, net | (7 | ) | (4 | ) | ||||
Net cash provided by (used in) financing activities | 34 | (121 | ) | |||||
Increase (Decrease) in cash and cash equivalents | 2 | (123 | ) | |||||
Cash and cash equivalents, beginning of year | 4 | 127 | ||||||
Cash and cash equivalents, end of year | $ | 6 | $ | 4 | ||||
SUPPLEMENTAL OPERATING STATISTICS (Unaudited) |
||||||||||||||||
Three Months Ended | Years Ended | |||||||||||||||
|
|
|||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
Revenues (dollars in millions): | ||||||||||||||||
Retail: | ||||||||||||||||
Residential | $ | 259 | $ | 245 | $ | 907 | $ | 895 | ||||||||
Commercial | 173 | 166 | 665 | 662 | ||||||||||||
Industrial | 55 | 55 | 208 | 228 | ||||||||||||
Subtotal | 487 | 466 | 1,780 | 1,785 | ||||||||||||
Other accrued (deferred) revenues, net | (2 | ) | 2 | 3 | (10 | ) | ||||||||||
Total retail revenues | 485 | 468 | 1,783 | 1,775 | ||||||||||||
Wholesale revenues | 29 | 22 | 103 | 88 | ||||||||||||
Other operating revenues | 10 | 9 | 37 | 35 | ||||||||||||
Total revenues | $ | 524 | $ | 499 | $ | 1,923 | $ | 1,898 | ||||||||
Energy sold and delivered (MWh in thousands): | ||||||||||||||||
Retail energy sales: | ||||||||||||||||
Residential | 2,070 | 2,017 | 7,348 | 7,325 | ||||||||||||
Commercial | 1,784 | 1,756 | 6,932 | 7,002 | ||||||||||||
Industrial | 800 | 806 | 2,968 | 3,369 | ||||||||||||
Total retail energy sales | 4,654 | 4,579 | 17,248 | 17,696 | ||||||||||||
Direct access retail deliveries: | ||||||||||||||||
Commercial | 122 | 108 | 525 | 509 | ||||||||||||
Industrial | 290 | 302 | 1,198 | 1,177 | ||||||||||||
Total direct access retail deliveries | 412 | 410 | 1,723 | 1,686 | ||||||||||||
Total retail energy sales and direct access deliveries | 5,066 | 4,989 | 18,971 | 19,382 | ||||||||||||
Wholesale energy deliveries | 731 | 605 | 3,352 | 2,560 | ||||||||||||
Total energy sold and delivered | 5,797 | 5,594 | 22,323 | 21,942 | ||||||||||||
Number of retail customers at end of period: | ||||||||||||||||
Residential | 756,675 | 746,969 | ||||||||||||||
Commercial | 105,519 | 104,613 | ||||||||||||||
Industrial | 200 | 195 | ||||||||||||||
Direct access | 370 | 387 | ||||||||||||||
Total retail customers | 862,764 | 852,164 | ||||||||||||||
Heating Degree-days | Cooling Degree-days | |||||||||||||||||
2016 | 2015 | Average | 2016 | 2015 | Average | |||||||||||||
First quarter | 1,585 | 1,481 | 1,866 | — | — | — | ||||||||||||
Second quarter | 403 | 513 | 689 | 154 | 207 | 70 | ||||||||||||
Third quarter | 78 | 76 | 78 | 394 | 573 | 399 | ||||||||||||
Fourth Quarter | 1,486 | 1,391 | 1,600 | — | 5 | 2 | ||||||||||||
Year-to-date | 3,552 | 3,461 | 4,233 | 548 | 785 | 471 | ||||||||||||
Note: |
"Average" amounts represent the 15-year rolling averages provided by the |
|
SUPPLEMENTAL OPERATING STATISTICS, continued (Unaudited) |
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Three Months Ended | Years Ended | |||||||||||
|
|
|||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||
Sources of energy (MWh in thousands): | ||||||||||||
Generation: | ||||||||||||
Thermal: | ||||||||||||
Coal | 957 | 1,472 | 3,492 | 4,128 | ||||||||
Natural gas | 1,794 | 1,427 | 5,811 | 4,783 | ||||||||
Total thermal | 2,751 | 2,899 | 9,303 | 8,911 | ||||||||
Hydro | 415 | 390 | 1,629 | 1,453 | ||||||||
Wind | 353 | 417 | 1,912 | 1,788 | ||||||||
Total generation | 3,519 | 3,706 | 12,844 | 12,152 | ||||||||
Purchased power: | ||||||||||||
Term | 1,606 | 1,367 | 6,961 | 7,364 | ||||||||
Hydro | 381 | 333 | 1,541 | 1,572 | ||||||||
Wind | 60 | 62 | 301 | 303 | ||||||||
Total purchased power | 2,047 | 1,762 | 8,803 | 9,239 | ||||||||
Total system load | 5,566 | 5,468 | 21,647 | 21,391 | ||||||||
Less: wholesale sales | (731 | ) | (606 | ) | (3,352 | ) | (2,560 | ) | ||||
Retail load requirement | 4,835 | 4,862 | 18,295 | 18,831 | ||||||||
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