News Releases

Portland General Electric Reports 2014 Financial Results and Initiates 2015 Earnings Guidance

General rate case filing seeks inclusion of new power plant in customer prices, effective 2016

PORTLAND, Ore.--(BUSINESS WIRE)-- Portland General Electric Company (NYSE:POR) today reported net income of $175 million, or $2.18 per diluted share, for the year ended Dec. 31, 2014. This compares with $105 million, or $1.35 per diluted share, for 2013. Net income was $43 million, or 55 cents per diluted share, for the fourth quarter of 2014 compared with $47 million, or 59 cents per diluted share, for the comparable period of 2013. In addition, the company is initiating full-year 2015 earnings guidance of $2.20 to $2.35 per diluted share.

"I'm very proud of our employees' accomplishments in delivering outstanding customer service along with strong operating and financial performance in 2014," said Jim Piro, president and chief executive officer. "In addition to achieving excellent performance at our generating facilities, we delivered on the significant objective of completing two new major generating plants — on time and on budget. These plants will play an important role in meeting our customers' energy needs for years to come in a safe, sustainable and reliable manner."

2014 Earnings Compared to 2013

The increase in annual net income was largely due to the expense in 2013 of capitalized costs related to termination of the Cascade Crossing Transmission Project and an industrial customer refund recorded in 2013. Results for 2014 reflect an increase in allowance for equity funds used during construction for the company's three new generating resources, improved generation plant operations and alignment of our revenues with our cost structure with implementation of new retail prices on January 1, 2014. The increase in net income was partially offset by a higher effective tax rate in 2014 over 2013. Excluding the Cascade Crossing expense and the industrial customer refund, PGE's non-GAAP adjusted earnings per share for 2013 would have been $1.84.

Company Updates

Generation Projects

  • Tucannon River Wind Farm - PGE's second fully owned and operated large-scale wind project with total installed capacity of 267 megawatts was placed into service on December 15, 2014 and will allow PGE to increase the amount of renewable power in its system and meet the requirements of Oregon's Renewable Portfolio Standard. As of December 31, 2014, $501 million is included in Electric utility plant related to Tucannon River Wind Farm. The Company estimates that final completion of the wind farm will require approximately $29 million of capital expenditures in 2015.
  • Port Westward Unit 2 - PGE's 220 megawatt natural gas-fired power plant was placed into service on December 30, 2014 and is designed for maximum flexibility to help meet real-time fluctuations in customer demand and integrate intermittent renewable resources, such as wind. As of December 31, 2014, $295 million is included in Electric utility plant related to Port Westward Unit 2. The Company estimates that final completion of the plant will require approximately $20 million of capital expenditures in 2015.
  • Carty Generating Station - Construction is on schedule for the 440 megawatt natural gas-fired baseload power plant located near Boardman, Ore. The plant is expected to be placed into service during the second quarter of 2016 at an estimated cost of $450 million, excluding AFDC. Major foundation work and the cooling tower are complete, the heat recovery steam generator modules and casings have been installed and welding of piping components has commenced.

Updates on General Rate Cases

2015 GRC

On December 4, 2014, the Oregon Public Utility Commission (OPUC) issued an order that, when combined with customer credits, resulted in an overall increase in customer prices of approximately one percent. Embedded in the price change was a decrease related to PGE's base business and customer credits, and increases related to the addition of the Tucannon River Wind Farm and Port Westward Unit 2. These prices became effective January 1, 2015 and reflect:

  • Return on equity of 9.68 percent;
  • Capital structure of 50 percent debt and 50 percent equity;
  • Cost of capital of 7.56 percent;
  • Rate base of $3.8 billion;
  • Annual revenue increase of $15 million.

2016 GRC

Late yesterday, PGE filed a general rate case with a 2016 test year which would result in an overall price increase of 3.7 percent effective in 2016, primarily to recover the costs associated with the Carty Generating Station which is expected to begin serving customers in the second quarter of 2016. PGE has initiated a comprehensive 10-month review and approval process with the OPUC in order to include this resource in prices when the plant goes in service. The requested price increase reflects:

  • Return on equity of 9.90 percent;
  • Capital structure of 50 percent debt and 50 percent equity;
  • Cost of capital of 7.67 percent;
  • Rate base of $4.5 billion;
  • Annual revenue increase of $66 million, net of customer credits and supplemental tariff updates.

PGE expects the Commission to issue a final order with approved price changes before the end of 2015, with new customer prices expected to be effective in two stages. A price reduction of approximately 1.0 percent is expected on Jan. 1, 2016 reflecting an increase in base business costs more than offset by the amortization of customer credits and supplemental tariff updates, and a price increase of approximately 4.7 percent for the Carty Generating Station is expected to be effective when the plant is placed into service in the second quarter of 2016.

The specific impact on individual customers' bills will vary depending on usage and customer class. If the OPUC approves PGE's request as submitted, typical residential customers using a monthly average of 840 kilowatt-hours of power would see their bill increase by about three dollars per month when Carty goes into service.

Fourth quarter operating results

Retail revenues decreased $2 million in the fourth quarter of 2014 compared with the fourth quarter of 2013, which was driven by an 11 percent decrease in residential energy deliveries resulting from warmer weather. During the fourth quarter of 2014, heating degree-days (an indicator of the extent to which customers are likely to have used electricity for heating) were 25 percent lower than in the fourth quarter of 2013. Commercial and industrial deliveries combined were comparable to the fourth quarter of 2013. Adjusting for the effects of weather and one large paper customer, total retail deliveries in the fourth quarter of 2014 were 0.5 percent lower than in the fourth quarter of 2013. Revenue increased approximately $5 million due to storm cost reserves, which were offset in operating and maintenance expenses.

Net variable power costs, which consist of purchased power and fuel expense net of wholesale revenues, decreased $35 million in the fourth quarter of 2014 compared to the fourth quarter of 2013. The decrease is largely due to a 15 percent decrease in the average variable power cost per MWh resulting from increases in energy received from the Company's generating resources, combined with a 28 percent decline in the cost of natural gas-fired generation. In the fourth quarter of 2013, the Company had unplanned plant outages at two thermal generating facilities and incurred $6 million of incremental replacement power costs related to the outages.

Total operating and maintenance expenses were $139 million in the fourth quarter of 2014 compared with $117 million in the fourth quarter of 2013. The $22 million, or 19 percent, increase was largely due to higher storm-related restoration costs (which were partially offset in revenue by using $5 million of storm cost reserves), increased operating costs for Boardman as a result of the company's ownership percent increasing to 80 percent from 65 percent in December 2013, and higher plant and distribution maintenance expenses.

Depreciation and amortization expense was $15 million higher in the fourth quarter of 2014 compared with the fourth quarter of 2013, with $8 million related to timing of the deferral and amortization of costs of four capital projects as authorized in the company's 2011 General Rate Case. In the fourth quarter of 2013, PGE deferred $4 million of costs related to these four projects and in the fourth quarter of 2014, the company recorded $4 million of amortization expense related to the recovery of these costs (offset in retail revenues). Capital additions also increased depreciation and amortization expense by $5 million.

2014 annual operating results

Retail revenues increased $71 million in 2014 compared to 2013 primarily due to the net effect of the following:

  • $60 million increase related to higher average retail prices effective January 1, 2014;
  • $20 million increase as a result of the collection of deferred costs related to four capital projects beginning January 1, 2014 (offset in Depreciation and amortization expense); and
  • $14 million increase as a result of a $9 million industrial customer refund recorded in the second quarter of 2013 and a $5 million increase related to other various items including the use of storm reserves, partially offset by:
  • $10 million decrease related to the decoupling mechanism; and
  • $13 million decrease related to an 0.8 percent decline in retail energy deliveries, with a 3.1 percent decrease in residential loads, partially offset by increases of 0.7 percent and 0.8 percent in commercial and industrial sales, respectively.

Net variable power costs decreased $59 million for 2014 compared with 2013, primarily driven by a $44 million decrease related to a 6 percent decline in the average variable power cost per MWh and $17 million in replacement power costs incurred in 2013 in connection with unplanned outages. In addition, an 11 percent increase in the average price per MWh of wholesale power sales combined with a 7 percent increase in the volume of wholesale power sale contributed to the decrease in NVPC.

Total operating and maintenance expenses were $484 million in 2014 compared with $444 million in 2013. The $40 million, or 9 percent, increase is primarily due to the following:

  • $10 million primarily due to storm-related and restoration costs as the company's service territory experienced three major wind storms during the fourth quarter, $5 million of which was offset in revenues through our storm recovery mechanism for the three major storms during Q4;
  • $7 million as a result of the Company's ownership interest in Boardman increasing from 65% to 80% on December 31, 2013;
  • $17 million for numerous items including maintenance, generation, transmission and distribution, partially offset by the $3 million expense for the 2013 renewable benchmark bid; and
  • $8 million due to a number of items including higher incentive compensation as a result of improved performance, medical, and technology costs, offset by lower pension, injury and damage expense.

Cascade Crossing transmission project consisted of $52 million of costs charged to expense in the second quarter of 2013 due to the termination of the project.

Depreciation and amortization expense was $301 million in 2014 compared with $248 million in 2013. The $53 million, or 21 percent, increase is primarily due to timing of the deferral and amortization of costs of four capital projects as authorized in the company's 2011 General Rate Case. In 2013, PGE deferred $17 million of costs related to these four projects and in 2014, the company recorded $16 million of amortization expense related to the recovery of these costs (offset in retail revenues). Capital additions also increased depreciation and amortization expense by $16 million.

Interest expense, net decreased $5 million in 2014 compared with 2013, with a $16 million decrease due to an increase in the allowance for borrowed funds used for construction resulting from a higher average construction work-in-progress (CWIP) balance from the construction of the three new generating plants, partially offset by an increase in the average balance of debt outstanding during 2014 compared with 2013.

Other income, net increased $18 million in 2014 compared with 2013, primarily driven by a $24 million increase in the allowance for equity funds used for construction resulting from the higher average CWIP balance, partially offset by a decrease in earnings from the non-qualified benefit plan trust assets.

Income taxes increased $40 million in 2014 compared with 2013, largely due to an increase in pre-tax income, which was driven in part by the $52 million charge to expense of capitalized costs related to the Cascade Crossing transmission project and a $9 million customer refund, both of which were recorded in 2013. The company's effective tax rate increased to 26.0 percent in 2014 compared with 16.8 percent in 2013 due primarily to the increase in pre-tax income and the smaller relative percentage thereof represented by federal and state tax credits, partially offset by the effect of increased AFDC equity.

2013 adjusted operating earnings per share

Excluding the impacts of the Cascade Crossing charge and the customer billing matter, PGE's adjusted operating earnings for 2013 would be $1.84 per share, as shown below:

   
2013 GAAP earnings per share $1.35
Exclude the Cascade Crossing expense 0.42
Exclude the customer billing matter revenue reduction .07
2013 Non-GAAP adjusted operating earnings per share $1.84
 

PGE believes this non-GAAP adjusted earnings reconciliation is useful to investors, analysts, rating agencies and other parties, as it facilitates the analysis of our results of operations from one period to another and provides clarity concerning the impact of certain events on operational results.

2015 earnings guidance

PGE is initiating full-year 2015 earnings guidance of $2.20 to $2.35 per diluted share. Guidance is based on the following assumptions:

  • Retail deliveries growth of approximately 1%;
  • 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 $510 and $530 million;
  • Depreciation and amortization expense between $300 and $310 million; and
  • Capital expenditures of approximately $629 million.

Fourth quarter 2014 earnings call and web cast — Feb. 13, 2015

PGE will host a conference call with financial analysts and investors on Friday, Feb. 13, 2015, at 11 a.m. ET. The conference call will be web cast live on the PGE website at PortlandGeneral.com. A replay of the call will be available beginning at 2 p.m. ET on Friday, Feb. 13, 2015 through Friday, Feb. 20, 2015.

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 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 842,000 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 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 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

(In millions, except per share amounts)

(Unaudited)

 
 
Three Months Ended Years Ended
December 31, December 31,
2014     2013 2014     2013
Revenues, net $ 500 $ 499 $ 1,900 $ 1,810
Operating expenses:
Purchased power and fuel 185 219 713 757
Generation, transmission and distribution 76 56 257 225
Cascade Crossing transmission project 52
Administrative and other 63 61 227 219
Depreciation and amortization 77 62 301 248
Taxes other than income taxes 27   24   109   103  
Total operating expenses 428   422   1,607   1,604  
Income from operations 72 77 293 206
Interest expense, net (1) 25 26 96 101
Other income:
Allowance for equity funds used during construction 11 5 37 13
Miscellaneous income, net   2   1   7  
Other income, net 11   7   38   20  
Income before income taxes 58 58 235 125
Income taxes 15   11   61   21  
Net income 43 47 174 104
Less: net loss attributable to noncontrolling interests     (1 ) (1 )
Net income attributable to Portland General Electric Company $ 43   $ 47   $ 175   $ 105  
 
Weighted-average shares outstanding (in thousands):
Basic 78,210   78,068   78,180   76,821  
Diluted 81,174   78,812   80,494   77,388  
Earnings per share:
Basic $ 0.57   $ 0.59   $ 2.24   $ 1.36  
Diluted $ 0.55   $ 0.59   $ 2.18   $ 1.35  
 
(1) Includes an allowance for borrowed funds used during construction $ 7 $ 3 $ 22 $ 7
 
   

PORTLAND GENERAL ELECTRIC COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions)
(Unaudited)
 
 
As of December 31,
2014     2013

ASSETS

Current assets:
Cash and cash equivalents $ 127 $ 107
Accounts receivable, net 149 146
Unbilled revenues 93 104
Inventories 82 65
Regulatory assets—current 133 66
Other current assets 115 103
Total current assets 699 591
Electric utility plant, net 5,679 4,880
Regulatory assets—noncurrent 494 464
Nuclear decommissioning trust 90 82
Non-qualified benefit plan trust 32 35
Other noncurrent assets 48 49
Total assets $ 7,042 $ 6,101
 

LIABILITIES AND EQUITY

Current liabilities:
Accounts payable $ 156 173
Liabilities from price risk management activities—current 106 49
Current portion of long-term debt 375
Accrued expenses and other current liabilities 236 171
Total current liabilities 873 393
Long-term debt, net of current portion 2,126 1,916
Regulatory liabilities—noncurrent 906 865
Deferred income taxes 625 586
Unfunded status of pension and postretirement plans 237 154
Liabilities from price risk management activities—noncurrent 122 141
Asset retirement obligations 116 100
Non-qualified benefit plan liabilities 105 101
Other noncurrent liabilities 21 25
Total liabilities 5,131 4,281
Total equity 1,911 1,820
Total liabilities and equity $ 7,042 $ 6,101
 
 
PORTLAND GENERAL ELECTRIC COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)

 
 
Years Ended December 31,
2014   2013
Cash flows from operating activities:
Net income $ 174 $ 104
Depreciation and amortization 301 248
Capitalized costs expensed related to Cascade Crossing 52
Other non-cash income and expenses, net included in Net income 70 51
Changes in working capital (19 ) 68
Proceeds received from legal settlement 6 44
Other, net (14 ) (23 )
Net cash provided by operating activities 518   544  
Cash flows from investing activities:
Capital expenditures (1,007 ) (656 )
Contribution to Nuclear decommissioning trust (6 ) (44 )
Other, net 19   8  
Net cash used in investing activities (994 ) (692 )
Cash flows from financing activities:
Net issuance of long-term debt 583 277
Proceeds from issuance of common stock, net of issuance costs 67
Maturities of commercial paper, net (17 )
Dividends paid (87 ) (84 )
Net cash provided by financing activities 496   243  
Increase in cash and cash equivalents 20 95
Cash and cash equivalents, beginning of year 107   12  
Cash and cash equivalents, end of year $ 127   $ 107  
 
     
PORTLAND GENERAL ELECTRIC COMPANY AND SUBSIDIARIES
SUPPLEMENTAL OPERATING STATISTICS

(Unaudited)

 
 
Three Months Ended Years Ended
December 31, December 31,
2014   2013 2014   2013
Revenues (dollars in millions):
Retail:
Residential $ 240 $ 250 $ 893 $ 861
Commercial 164 159 657 619
Industrial 57 57 221   217  
Subtotal 461 466 1,771 1,697
Other accrued (deferred) revenues, net 3 (8 ) (5 )
Total retail revenues 464 466 1,763 1,692
Wholesale revenues 22 21 95 80
Other operating revenues 14 12 42   38  
Total revenues $ 500 $ 499 $ 1,900   $ 1,810  
 
Energy sold and delivered (MWh in thousands):
Retail energy sales:
Residential 1,990 2,232 7,462 7,702
Commercial 1,733 1,764 6,931 6,896
Industrial 838 832 3,211   3,210  
Total retail energy sales 4,561 4,828 17,604 17,808
Retail energy deliveries:
Commercial 140 137 563 545
Industrial 276 258 1,099   1,066  
Total retail energy deliveries 416 395 1,662   1,611  
Total retail energy sales and deliveries 4,977 5,223 19,266 19,419
Wholesale energy deliveries 628 461 2,520   2,353  
Total energy sold and delivered 5,605 5,684 21,786   21,772  
 
Number of retail customers at end of period:
Residential 738,008 732,341
Commercial 103,637 103,021
Industrial 198 204
Direct access 430   504  
Total retail customers 842,273   836,070  
 
     
PORTLAND GENERAL ELECTRIC COMPANY AND SUBSIDIARIES
SUPPLEMENTAL OPERATING STATISTICS, continued

(Unaudited)

 
 
Three Months Ended Years Ended
December 31, December 31,
2014   2013 2014   2013
Sources of energy (MWh in thousands):
Generation:
Thermal:
Coal 1,387 1,084 4,466 4,070
Natural gas 1,156   1,076   3,429   3,375  
Total thermal 2,543 2,160 7,895 7,445
Hydro 458 415 1,750 1,646
Wind 219   199   1,172   1,200  
Total generation 3,220   2,774   10,817   10,291  
Purchased power:
Term 1,228 1,652 5,926 6,472
Hydro 349 343 1,568 1,629
Wind 50 41 317 311
Spot 608   697   2,626   2,547  
Total purchased power 2,235   2,733   10,437   10,959  
Total system load 5,455 5,507 21,254 21,250
Less: wholesale sales (628 ) (461 ) (2,520 ) (2,353 )
Retail load requirement 4,827   5,046   18,734   18,897  
 
       
Heating Degree-days Cooling Degree-days
2014   2013 2014   2013
1st Quarter 1,891 1,902
Average 1,864 1,850
2nd Quarter 530 593 57 82
Average 713 721 70 68
3rd Quarter 18 90 579 457
Average 85 82 382 385
4th Quarter 1,355 1,801 17
Average 1,602 1,586 1 1
Annual total 3,794 4,386 653 539
Annual total average 4,264 4,239 453 454
 
Note: "Average" amounts represent the 15-year rolling averages provided by the National Weather Service (Portland Airport).

Portland General Electric Company
Media Contact:
Melanie Moir, 503-464-8790
Corporate Communications
or
Investor Contact:
Bill Valach, 503-464-7395
Investor Relations

Source: Portland General Electric Company

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