News Releases

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 president Oct. 1 and succeed Piro effective Jan. 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

PORTLAND, Ore.--(BUSINESS WIRE)-- Portland General Electric Company (NYSE: POR) today reported net income of $32 million, or 36 cents per diluted share, for the second quarter of 2017. This compares with net income of $37 million, or 42 cents per diluted share, for the second quarter of 2016. The company is reaffirming 2017 earnings guidance of $2.20-$2.35 per diluted share.

"We remain in a good position to meet our financial targets for the year," said Jim Piro, CEO and president of Portland General Electric. "We are making progress on our key initiatives, and the strength of our local economy is contributing to increased energy deliveries to industrial customers and a growing customer base."

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 Carty litigation costs and depreciation expense and carrying costs for Carty related to incremental construction costs not included in customer prices. The additional costs were partially offset by increased deliveries to retail customers driven by favorable weather and high tech growth in the industrial sector, as well as favorable estimated collections from the decoupling mechanism.

Company Updates

PGE announces succession plan
Jim Piro, president and chief executive officer (CEO), notified the board of directors on July 26, 2017 of his decision to retire from Portland General Electric on Dec. 31, 2017. As part of the company's leadership succession plan, the board of directors has appointed Maria Pope, senior vice president of Power Supply, Operations and Resource Strategy, to succeed Mr. Piro. Ms. Pope will assume the role of company president on Oct. 1, 2017, and the role of CEO and member of the board of directors effective Jan. 1, 2018.

Integrated Resource Plan
PGE filed its 2016 Integrated Resource Plan (IRP) with the Oregon Public Utility Commission (OPUC), including a four-year Action Plan. PGE's Action Plan calls for a minimum of 135 MWa of cost-effective energy efficiency, 77 MW of demand response, the addition of approximately 175 MWa of qualifying renewable resources, and 561 MW of dispatchable capacity. As part of the OPUC process, PGE and parties have filed additional comments and held workshops to address stakeholder questions and identify the best strategy for achieving a renewable, reliable, affordable energy future for customers. Next steps in the process include OPUC Staff's final comments on July 28, 2017 and a Public Meeting on August 8, 2017. The company is expecting the OPUC to issue a decision on its IRP by August 31, 2017.

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 Feb. 28, 2017, PGE filed a general rate case with the Public Utility Commission of Oregon (OPUC) based on a 2018 test year.

As part of its commitment to provide safe, reliable, sustainable and affordable energy to customers, the company filed a request for a $100 million increase in the annual revenue requirement related to increased base business costs. These costs are related primarily to necessary upgrades to the transmission and distribution system, investments in strengthening and safeguarding the grid, and investments that will integrate more renewable resources and enhance system reliability. PGE's request would result in an average overall increase of 5.6%.
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 July 18, 2017. Regulatory review of the 2018 General Rate Case will continue throughout 2017, with a final order from the OPUC targeted for the end of 2017. New customer prices are expected to become effective Jan. 1, 2018. The filing can be found at http://apps.puc.state.or.us/edockets/search.asp under docket number UE 319.

Second quarter operating results

 
Earnings Reconciliation of Q2 2016 to Q2 2017
($ in millions, except EPS)  

Pre-Tax
Income

  Net Income*  

Diluted
EPS**

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 June 30, 2017 increased $21 million compared to the three months ended June 30, 2016, as Total retail revenues increased $16 million while Other revenues were $3 million higher.

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 June 30, 2017, although below the level for the three months ended June 30, 2016, were nearly double the quarterly 15-year average. Total heating degree-days for the three months ended June 30, 2017 were 70% above the three months ended June 30, 2016 while nearly equivalent with historical averages.

The following table indicates the number of heating and cooling degree-days for the three months ended June 30, 2017 and 2016, along with 15-year averages based on weather data provided by the National Weather Service, as measured at Portland International Airport:

 
    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 June 30, 2017 increased $2 million, or 14%, from the three months ended June 30, 2016, and consisted of a $3 million increase related to a 27% increase in average wholesale price partially offset by a $1 million decrease related to a 13% decrease in wholesale sales volume.

Actual NVPC for the three months ended June 30, 2017 decreased $10 million when compared with the three months ended June 30, 2016. The decrease was driven by a 6% decline in the average variable power cost per MWh, and a 1% decrease in total system load. The increase in wholesale revenues was driven primarily by a 27% increase in the average wholesale sales price, offset slightly by a 13% decrease in wholesale sales volume. For the three months ended June 30, 2017, actual NVPC was $3 million below the baseline, while the three months ended June 30, 2016 actual NVPC was $7 million below baseline NVPC.

Generation, transmission and distribution expense increased $17 million, or 27%, in the three months ended June 30, 2017 compared with the three months ended June 30, 2016, driven primarily by $6 million of storm restoration costs, $5 million of operating expense for Carty (placed in service in July 2016), and $3 million higher maintenance expense at Beaver.

Administrative and other expense increased $4 million, or 7%, in the three months ended June 30, 2017 compared with the three months ended June 30, 2016. The increase was primarily due to a $1 million increase in legal costs related to Carty litigation and other miscellaneous expenses.

Depreciation and amortization expense increased $3 million in the three months ended June 30, 2017 compared with the three months ended June 30, 2016. The increase was driven by higher depreciation expense of $4 million due to Carty going into service in July 2016, $3 million higher depreciation expense for other capital additions, partially offset by an amortization credit in the second quarter of 2017 related to the Trojan spent fuel refund to customers, which is also reflected in reduced revenues. Increases or decreases in expense resulting from amortization of regulatory assets or liabilities are directly offset in revenues.

Interest expense increased $3 million, or 11% in the three months ended June 30, 2017 compared with the three months ended June 30, 2016, primarily due to a lower allowance for borrowed funds used during construction, as a result of Carty going into service in July 2016.

Other income, net decreased $5 million for the three months ended June 30, 2017 compared with the three months ended June 30, 2016, due to a decrease in the allowance for equity funds used during construction, primarily related to the construction of Carty in 2016.

Income tax expense was $10 million in the three months ended June 30, 2017 compared with $9 million in the three months ended June 30, 2016, with effective tax rates of 23.8% and 19.6%, respectively. The increase in income tax expense and effective tax rate was primarily due to lower production tax credits, partially offset by lower pre-tax income.

2017 earnings guidance

PGE reaffirms its 2017 guidance of $2.20 - $2.35 per diluted share. The guidance is based on the following assumptions:

  • 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 — July 28, 2017

PGE will host a conference call with financial analysts and investors on Friday, July 28 at 11 a.m. ET. The conference call will be webcast live on the PGE website at investors.portlandgeneral.com. A replay of the call will be available beginning at 2 p.m. ET on Friday, July 28, through Friday, August 4th.

Jim Piro, president and CEO; Jim Lobdell, senior vice president of finance, CFO, and treasurer; and Chris Liddle, manager, corporate finance and 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 fully integrated utility based in Portland, Ore., serving approximately 872,000 residential, commercial and industrial customers in 51 cities. For more than 125 years, PGE has been delivering safe, reliable energy to Oregonians. With approximately 2,750 employees across the state, PGE is committed to building a cleaner, more efficient energy future. Together with its customers, PGE has the number one voluntary renewable energy program in the U.S. For more information, visit PGE's website at investors.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 the recovery of capital costs for the Carty Generating Station; 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

PORTLAND GENERAL ELECTRIC COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

AND COMPREHENSIVE INCOME

(Dollars in millions, except per share amounts)

(Unaudited)

 
    Three Months Ended
June 30,
  Six Months Ended
June 30,
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
 
 

PORTLAND GENERAL ELECTRIC COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in millions)

(Unaudited)

 
    June 30,
2017
  December 31,
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
 
 

PORTLAND GENERAL ELECTRIC COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS, continued

(Dollars in millions)

(Unaudited)

 
    June 30,
2017
  December 31,
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:
Portland General Electric Company shareholders' equity:
Preferred stock, no par value, 30,000,000 shares authorized; none issued and outstanding as of June 30, 2017 and December 31, 2016
Common stock, no par value, 160,000,000 shares authorized; 89,062,560 and 88,946,704 shares issued and outstanding as of

June 30, 2017 and December 31, 2016, respectively

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  
 
 

PORTLAND GENERAL ELECTRIC COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)

 
    Six Months Ended June 30,
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
 

PORTLAND GENERAL ELECTRIC COMPANY AND SUBSIDIARIES

SUPPLEMENTAL OPERATING STATISTICS

(Unaudited)

 
    Three Months Ended June 30,
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 %
 
 

PORTLAND GENERAL ELECTRIC COMPANY AND SUBSIDIARIES

SUPPLEMENTAL OPERATING STATISTICS, continued

(Unaudited)

 
    Three Months Ended June 30,
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  
 

Portland General Electric
Media Contact:
Melanie Moir, 503-464-8790
Corporate Communications
or
Investor Contact:
Chris Liddle, 503-464-7458
Investor Relations

Source: Portland General Electric Company

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