Portland General Electric Company
PORTLAND GENERAL ELECTRIC CO /OR/ (Form: 8-K, Received: 10/27/2017 08:57:10)


 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 
FORM 8-K
 
 
CURRENT REPORT

Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): October 27, 2017

 
 
 
PORTLAND GENERAL ELECTRIC COMPANY
(Exact name of registrant as specified in its charter)
 
 
 
 
 
 
Oregon
001-5532-99
     93-0256820          
(State or other jurisdiction
of incorporation)
(Commission
File Number)
     (I.R.S. Employer          
     Identification No.)          
121 SW Salmon Street, Portland, Oregon 97204
(Address of principal executive offices, including zip code)

Registrant’s telephone number, including area code: (503) 464-8000
 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

[ ]
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

[ ]
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

[ ]
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

[ ]
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 or Rule 12b-2 of the Securities Exchange Act of 1934.

Emerging growth company [ ]

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]

 





Item 2.02    Results of Operations and Financial Condition.

The following information is furnished pursuant to Item 2.02.

On October 27, 2017 , Portland General Electric Company (PGE or the Company) issued a press release announcing its financial results for the three and nine month periods ended September 30, 2017. The press release is furnished herewith as Exhibit 99.1 to this Report.

Item 7.01    Regulation FD Disclosure.

The following information is furnished pursuant to Item 7.01.

At 11:00 a.m. ET on Friday , October 27, 2017 , the Company will hold its quarterly earnings call and web cast, and will use a slide presentation in conjunction with the earnings call. A copy of the slide presentation is furnished herewith as Exhibit 99.2.

Item 9.01
Financial Statements and Exhibits.


SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 
 
 
 
PORTLAND GENERAL ELECTRIC COMPANY
 
 
 
 
(Registrant)
 
 
 
 
 
Date:
October 26, 2017
 
By:
/s/ James F. Lobdell
 
 
 
 
James F. Lobdell
 
                                                                             
 
 
Senior Vice President of Finance,
Chief Financial Officer and Treasurer


2


Exhibit 99.1
 
IMAGE0A01A02A02.JPG
Portland General Electric
One World Trade Center
121 S.W. Salmon Street
Portland, Oregon 97204

News Release
 
 
FOR IMMEDIATE RELEASE
 
 
 
October 27, 2017
 
 
 
 
 
 
 
Media Contact:
 
Investor Contact:
 
Melanie Moir
 
Chris Liddle
 
Corporate Communications
 
Investor Relations
 
Phone: 503-464-8790
 
Phone: 503-464-7458

Portland General Electric announces third quarter 2017 results

Strong third quarter results due to increased retail deliveries and favorable weather
Settlement reached on all issues in the 2018 General Rate Case
PGE joined the Western Energy Imbalance Market on October 1

PORTLAND, Ore. -- Portland General Electric Company (NYSE: POR) today reported net income of $ 40 million , or 44 cent s per diluted share, for the third quarter of 2017 . This compares with net income of 34 million , or 38 cent s per diluted share, for the third quarter of 2016 . The company is reaffirming 2017 earnings guidance of $2.20-$2.35 per diluted share.

”PGE’s strong third quarter financial performance was driven by higher energy deliveries across all customer groups,” said Jim Piro, CEO of Portland General Electric. “We also achieved several important milestones on key initiatives, including settlement of all issues in our 2018 General Rate Case, acknowledgement of our 2016 Integrated Resource Plan and a successful transition to the western Energy Imbalance Market on October 1st.”

Q3 2017 earnings compared to Q3 2016 earnings

The increase in third quarter earnings per diluted share for 2017 in comparison to the third quarter of 2016 was due to an increase in retail deliveries driven by increased customer usage and increased customer counts, as well as favorable weather. This increase was partially offset by an increase in the estimated refund under the decoupling mechanism, higher depreciation and amortization expense, an increase in the effective tax rate and other miscellaneous items.
Company Updates

Integrated Resource Plan (IRP)
    
In November 2016, PGE filed an IRP (2016 IRP) with the Oregon Public Utility Commission (OPUC). The 2016 IRP addresses acquisition of additional resources to meet Renewable Portfolio Standards (RPS) requirements and replace energy and capacity from Boardman, which will cease coal-fired operations at the end of 2020. Further actions identified through 2021 are expected to offset expiring power purchase agreements and integrate variable energy resources, such as wind or solar generation facilities. The 2016 IRP also considers the OCEP, which, among other things, increased the RPS requirements for 2025 and future years. For further information on the OCEP, see the “Legal, Regulatory and Environmental” section in this Overview section of Item 2.
 


1



In August 2017, the OPUC acknowledged PGE’s 2016 IRP and the following primary action plan items:
Acknowledge capacity needs of 561 MW, of which 240 MW must be dispatchable, in 2021;
Acquire a total of 135 MWa of cost-effective energy efficiency;
Acquire at least 77 MW (winter) and 69 MW (summer) demand response through 2020 and 16 MW of dispatchable standby generation from customers to help manage peak load conditions and other supply contingencies;
Deploy 1 MWa of conservation voltage reduction through 2020;
Submit one or more energy storage proposals in accordance with House Bill 2193, by January 1, 2018, with an initial proposal expected to be filed with the OPUC by mid-November 2017; and
Perform various research and studies related to flexible capacity and curtailment metrics, customer insights, decarbonization, risks associated with Direct Access, treatment of market capacity, accessing resources from Montana, and load forecasting improvements.

PGE is engaged in bilateral negotiations with owners of existing regional resources to fill its capacity need. In August 2017, the Company filed with the OPUC a request for a waiver of the OPUC’s competitive bidding guidelines. In that filing, PGE requests a waiver to procure 350 - 450 MW of capacity to partially satisfy PGE’s 561 MW capacity deficit. PGE expects additional capacity contributions from contracts with Qualifying Facilities as defined by the Public Utility Regulatory Policies Act of 1978, acquisition of energy storage in compliance with House Bill 2193, and an assumed capacity contribution from incremental renewables procured through a request for proposal (RFP). The OPUC is scheduled to make a decision on the waiver request by December 5, 2017 and the Company currently anticipates negotiations to be complete by the end of the first quarter of 2018. Following the outcome of the bilateral negotiations and waiver process, PGE may request approval from the OPUC to issue RFPs for any remaining capacity need.

The OPUC did not acknowledge PGE’s proposed actions for acquiring renewable resources and asked the Company to work with OPUC staff and parties to prepare and submit a revised proposal, which PGE presented at a public meeting on October 10, 2017. In the revised proposal, the Company identified the potential of revising the procurement target for the addition of RPS compliant renewable resources to 100 MWa, which could include unbundled RECs. PGE expects to submit an IRP addendum by the end of 2017 that would seek acknowledgement of a revised renewable action plan, including the issuance of RFPs for renewable resources.

Since issuing the IRP, PGE has identified a potential benchmark wind resource that could have a nameplate capacity of up to approximately 300 MW, that would meet the need for the renewable resources, and which would qualify for the production tax credit. The Company continues 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 and negotiation along with execution of definitive agreements. If agreements are reached, the potential benchmark resource would be considered in the RFP along with other renewable resource offerings.

The RFP process will include oversight by an independent evaluator and review by the OPUC.

2018 General Rate Case

On February 28, 2017, the Company filed with the OPUC a general rate case based on a 2018 test year (2018 GRC). The filing includes investments to ensure system safety and reliability and to better meet customers’ changing needs and service expectations. PGE’s initial filing proposed a $100 million increase in the annual revenue requirement related primarily to an increase in base business costs for upgrades to PGE’s transmission and distribution system, investments in strengthening and safeguarding the grid, and support for key initiatives such as participation in the Western Energy Imbalance Market (EIM). The proposal was based upon:

A capital structure of 50% debt and 50% equity;

2


A return on equity of 9.75%; and
A rate base of $4.6 billion.

PGE, OPUC staff, and certain customer groups have reached agreements that resolve all issues in the case, provide for an expected $20 million net increase in annual revenue requirements, and reflect:

A capital structure of 50% debt and 50% equity;
A return on equity of 9.5%; and
A rate base of $4.5 billion.

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 28, 2017

$100
Load and Power Cost Updates

($28)
Depreciation Study Updates
 
($8)
Base Business Revenue Requirement Updates:

 
Lower return on equity
($10)
 
Lower labor costs
($9)
 
Adjustment to depreciation expense
($8)
 
Lower level of plant in service
($5)
 
Other reductions to rate base
($4)
 
Other various modifications
($8)
 
Subtotal
 
($44)
As Stipulated
 
$20

Regulatory review of the 2018 GRC will continue until the final order is issued, which is expected in December 2017, with new customer prices expected to become effective January 1, 2018. Final revenue requirement amounts subject to revision include power costs (to be finalized November 2017) and actual cost of debt, including any additional debt issuances. Any subsequent reductions in PGE's overall cost of long-term debt through June 30, 2018 will be reflected either in the final 2018 GRC update or through a supplemental tariff filing. All stipulations remain subject to OPUC approval.

The 2018 GRC filing (OPUC Docket UE 319), as well as copies of direct and reply testimony, exhibits, and stipulations are available on the OPUC website at www.oregon.gov/puc.


Western Energy Imbalance Market
On October 1, PGE officially began full participation in the western Energy Imbalance Market (EIM).

“Joining the EIM is an important milestone in our effort to build a smarter, cleaner, more resilient energy grid,” said Maria Pope, PGE’s president and incoming CEO. “Our customers will benefit from our participation, as it will help us maintain reliability and keep power affordable while making efficient use of carbon-free renewable resources throughout the region.”

As a market participant, PGE’s generating plants now receive automated dispatch signals from the California Independent System Operator, allowing for load-balancing with other EIM participants in five-minute intervals. This gives PGE access to the least-cost energy available in the region to meet changes in real-time energy demand and short-term variations in customers’ power use. Additionally, it maximizes the use of renewable resources by making it easier to take immediate advantage of available wind and solar generation anywhere in the system while efficiently integrating variable output with other, dispatchable resources.

3




Third quarter operating results

Earnings Reconciliation of Q3 2016 to Q3 2017
($ in millions, except EPS)
Pre-Tax Income
Net Income*
Diluted EPS**
Reported Q3 2016
$
40

$
34

$
0.38

Revenue
 
 
 
Electric Retail price change
(7
)
(4
)
(0.05
)
Electric Retail volume change
37

22

0.25

Change in decoupling deferral
(3
)
(2
)
(0.02
)
Electric wholesale price and volume change
2

1

0.01

Other Items
4

2

0.02

Change in Revenue
33

19

0.21

 
 
 
 
Power Cost
 
 
 
Change in average power cost
(1
)
(1
)
(0.01
)
Change purchased power and generation
(3
)
(2
)
(0.02
)
Change in Power Costs
(4
)
(3
)
(0.03
)
 
 
 
 
O&M
 
 
 
Generation, transmission, distribution
(4
)
(2
)
(0.02
)
Administrative and general
(1
)
(1
)
(0.01
)
Change in O&M
(5
)
(3
)
(0.03
)
 
 
 
 
Other Items
 
 
 
Depreciation & amortization
(8
)
(4
)
(0.06
)
AFDC Equity***
(1
)
(1
)
(0.01
)
Other Items
(2
)
(2
)
(0.02
)
Change in Other Items
(11
)
(7
)
(0.09
)
Reported Q3 2017
$
53

$
40

$
0.44

* 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 September 30, 2017 increased $31 million compared to the three months ended September 30, 2016 , as Total retail revenues increased $27 million while Wholesale and Other revenues were a total of $4 million higher.


4


The change in Retail revenues resulted largely from the following:

A $37 million increase resulting from 8.5% greater retail energy deliveries due to favorable weather conditions and increased average usage per customer across all classes. Energy deliveries to residential customers increased 12.3% in the third quarter of 2017 due in part to the effects of weather, as temperatures in 2017 were abnormally warm during the summer cooling season, and customer growth continued. Energy deliveries to commercial customers showed an increase of 6.8% while deliveries to industrial customers increased 6.0% , largely due to strength in the high tech sector; and

A $3 million increase in various Supplemental tariffs, the largest of which was a $1 million increase due to the accelerated cost recovery of Colstrip; partially offset by

A $7 million decrease that resulted from customer price changes; and

A $4 million decrease that resulted from other tariffs, which included $3 million greater estimated refunds under the decoupling mechanism, combined with a variety of smaller items.

Total cooling degree-days for the three months ended September 30, 2017 , were up 45% from the level for the three months ended September 30, 2016 , 43% above the quarterly average. Total heating degree-days for the three months ended September 30, 2017 were on par with the three months ended September 30, 2016 and the historical average.

The following table indicates the number of heating and cooling degree-days for the three months ended September 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.
July
1

 
3

 
9

 
164

 
140

 
163

August
1

 
3

 
8

 
275

 
224

 
168

September
76

 
72

 
61

 
132

 
30

 
68

Totals for the quarter
78

 
78

 
78

 
571

 
394

 
399


Wholesale revenues for the three months ended September 30, 2017 increased $2 million , or 4% , from the three months ended September 30, 2016 , and consisted of a $7 million increase related to a 16% increase in average wholesale price partially offset by a $5 million decrease related to a 10% decrease in wholesale sales volume.

Actual NVPC for the three months ended September 30, 2017 increased $2 million when compared with the three months ended September 30, 2016 . The increase was driven by a 1% increase in the average variable power cost per MWh, and a 2% increase in total system load. The increase in wholesale revenues was driven primarily by a 16% increase in the average wholesale sales price, offset slightly by a 10% decrease in wholesale sales volume. For the three months ended September 30, 2017 , actual NVPC was $22 million above the baseline as the Company met higher customer load, driven by historically hot weather, with energy purchased at super peak prices in the open market in addition to the cost of foregoing the use of Company resources in order to maintain mandated reliability reserves. For the three months ended September 30, 2016 , actual NVPC was $3 million above baseline NVPC.

Generation, transmission and distribution expense increased $4 million , or 6% , in the three months ended September 30, 2017 compared with the three months ended September 30, 2016 , driven primarily by $2 million of operating expense for Carty (placed in service July 29, 2016).



5


Administrative and other expense increased $1 million , or 2% , in the three months ended September 30, 2017 compared with the three months ended September 30, 2016 . The increase was primarily due to a $2 million increase in employee incentives, offset by decreases in other miscellaneous expenses.

Depreciation and amortization expense increased $8 million in the three months ended September 30, 2017 compared with the three months ended September 30, 2016 . The increase was driven by higher depreciation expense of $6 million resulting from capital additions, $2 million of which was due to Carty going into service in July 2016, and a $1 million decrease in the amortization credit related to the Trojan spent fuel refund to customers, which is also reflected in revenues as increases or decreases in expense resulting from amortization of regulatory assets or liabilities are directly offset in revenues.

Interest expense, net increased $2 million, or 7%, in the three months ended September 30, 2017 compared with the three months ended September 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 increased $2 million for the three months ended September 30, 2017 compared with the three months ended September 30, 2016 , due largely to interest income on various regulatory assets and unrealized gains on trust assets.

Income tax expense was $13 million in the three months ended September 30, 2017 compared with $6 million in the three months ended September 30, 2016 , with effective tax rates of 24.5% and 15.0% , respectively. The increase in income tax expense and effective tax rate was primarily driven by higher pre-tax income and lower PTCs.

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;
Operating and maintenance costs between $555 and $575 million.

Third Quarter 2017 earnings call and web cast — October 27, 2017

PGE will host a conference call with financial analysts and investors on Friday , October 27, 2017 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, October 27, through Friday, November 3rd.

Jim Piro, CEO; Maria Pope, President; 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

6



Portland General Electric Company is a fully integrated utility based in Portland, Ore., serving approximately 873,000 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


7


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
September 30,
 
Nine Months Ended
September 30,
 
2017
 
2016
 
2017
 
2016
Revenues, net
$
515

 
$
484

 
$
1,494

 
$
1,399

Operating expenses:
 
 
 
 
 
 
 
Purchased power and fuel
184

 
180

 
443

 
455

Generation, transmission and distribution
73

 
69

 
235

 
199

Administrative and other
64

 
63

 
197

 
185

Depreciation and amortization
87

 
79

 
257

 
244

Taxes other than income taxes
30

 
29

 
94

 
89

Total operating expenses
438

 
420

 
1,226

 
1,172

Income from operations
77

 
64

 
268

 
227

Interest expense, net
30

 
28

 
90

 
82

Other income:
 
 
 
 
 
 
 
Allowance for equity funds used during construction
4

 
4

 
9

 
19

Miscellaneous income, net
2

 

 
4

 

Other income, net
6

 
4

 
13

 
19

Income before income tax expense
53

 
40

 
191

 
164

Income tax expense
13

 
6

 
46

 
32

Net income and Comprehensive income
$
40

 
$
34

 
$
145

 
$
132

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted-average shares outstanding—basic and diluted (in thousands)
89,065

 
88,921

 
89,044

 
88,885

 
 
 
 
 
 
 
 
Earnings per share—basic and diluted
$
0.44

 
$
0.38

 
$
1.62

 
$
1.49

 
 
 
 
 
 
 
 
Dividends declared per common share
$
0.34

 
$
0.32

 
$
1.00

 
$
0.94



8


PORTLAND GENERAL ELECTRIC COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in millions)
(Unaudited)
 

September 30,
2017

December 31,
2016
ASSETS



Current assets:



Cash and cash equivalents
$
89


$
6

Accounts receivable, net
151


155

Unbilled revenues
71


107

Inventories
70


82

Regulatory assets—current
42


36

Other current assets
43


77

Total current assets
466


463

Electric utility plant, net
6,638


6,434

Regulatory assets—noncurrent
526


498

Nuclear decommissioning trust
41


41

Non-qualified benefit plan trust
37


34

Other noncurrent assets
51


57

Total assets
$
7,759


$
7,527




































9




PORTLAND GENERAL ELECTRIC COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS, continued
(Dollars in millions)
(Unaudited)

 
September 30,
2017
 
December 31,
2016
LIABILITIES AND EQUITY
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
100

 
$
129

Liabilities from price risk management activities—current
43

 
44

Current portion of long-term debt
100

 
150

Accrued expenses and other current liabilities
248

 
254

Total current liabilities
491

 
577

Long-term debt, net of current portion
2,277

 
2,200

Regulatory liabilities—noncurrent
1,002

 
958

Deferred income taxes
701

 
669

Unfunded status of pension and postretirement plans
288

 
281

Liabilities from price risk management activities—noncurrent
150

 
125

Asset retirement obligations
166

 
161

Non-qualified benefit plan liabilities
105

 
105

Other noncurrent liabilities
177

 
107

Total liabilities
5,357

 
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 September 30, 2017 and December 31, 2016

 

Common stock, no par value, 160,000,000 shares authorized; 89,091,955 and 88,946,704 shares issued and outstanding as of
September 30, 2017 and December 31, 2016, respectively
1,204

 
1,201

Accumulated other comprehensive loss
(7
)
 
(7
)
Retained earnings
1,205

 
1,150

Total equity
2,402

 
2,344

Total liabilities and equity
$
7,759

 
$
7,527



10


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

Nine Months Ended September 30,

2017

2016
Cash flows from operating activities:



Net income
$
145


$
132

Adjustments to reconcile net income to net cash provided by operating activities:



Depreciation and amortization
257


244

Deferred income taxes
35


18

Pension and other postretirement benefits
19


21

Allowance for equity funds used during construction
(9
)

(19
)
Decoupling mechanism deferrals, net of amortization
(15
)

(4
)
Other non-cash income and expenses, net
18


12

Changes in working capital:



Decrease in accounts receivable and unbilled revenues
40


53

Decrease in inventories
12


1

Decrease in margin deposits, net
4


25

Increase in accounts payable and accrued liabilities
14


31

Other working capital items, net
20


12

Other, net
(21
)

(29
)
Net cash provided by operating activities
519


497

Cash flows from investing activities:



Capital expenditures
(369
)

(454
)
Sales of Nuclear decommissioning trust securities
14


17

Purchases of Nuclear decommissioning trust securities
(12
)

(16
)
Other, net
(2
)

(1
)
Net cash used in investing activities
(369
)

(454
)






Cash flows from financing activities:



Proceeds from issuance of long-term debt
75


265

Payments on long-term debt
(50
)

(133
)
Change in short-term debt


(6
)
Dividends paid
(87
)

(82
)
Other
(5
)

(3
)
Net cash (used in) provided by financing activities
(67
)

41

Increase in cash and cash equivalents
83


84

Cash and cash equivalents, beginning of period
6


4

Cash and cash equivalents, end of period
$
89


$
88





Supplemental cash flow information is as follows:



Cash paid for interest, net of amounts capitalized
$
68


$
61

Cash paid for income taxes
16


12

Non-cash investing and financing activities:



Assets obtained under capital lease
73


57



11




12


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


Three Months Ended September 30,

2017
 
2016
Revenues *  (dollars in millions):
 
 
 
 
 
 
 
Retail:
 
 
 
 
 
 
 
Residential
$
224

 
43
 %
 
$
203

 
42
%
Commercial
178

 
35

 
170

 
35

Industrial
55

 
11

 
54

 
11

Subtotal
457

 
89

 
427

 
88

Other retail revenues, net
(2
)
 
(1
)
 
1

 

Total retail revenues
455

 
88

 
428

 
88

Wholesale revenues
50

 
10

 
48

 
10

Other operating revenues
10

 
2

 
8

 
2

Total revenues
$
515

 
100
 %
 
$
484

 
100
%
Energy deliveries  (MWh in thousands):
 
 
 
 
 
 
 
Retail:
 
 
 
 
 
 
 
Residential
1,817

 
29
 %
 
1,618

 
27
%
Commercial
1,851

 
30

 
1,751

 
30

Industrial
752

 
12

 
754

 
13

Subtotal
4,420

 
71

 
4,123

 
70

Direct access:
 
 
 
 
 
 
 
Commercial
169

 
3

 
141

 
2

Industrial
366

 
6

 
301

 
5

Subtotal
535

 
9

 
442

 
7

Total retail energy deliveries
4,955

 
80

 
4,565

 
77

Wholesale energy deliveries
1,224

 
20

 
1,360

 
23

Total energy deliveries
6,179

 
100
 %
 
5,925

 
100
%
Average number of retail customers:
 
 
 
 
 
 
 
Residential
763,553

 
88
 %
 
753,345

 
87
%
Commercial
108,705

 
12

 
107,844

 
13

Industrial
200

 

 
204

 

Direct access
588

 

 
373

 

Total
873,046

 
100
 %
 
861,766

 
100
%


* Includes revenues from customers who purchase their energy from the Company as well as $10 million and $7 million in revenues for 2017 and for 2016, respectively, from Direct Access customers for transmission and delivery charges only.


13


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

 
Three Months Ended September 30,
 
2017
 
2016
Sources of energy (MWh in thousands):
 
 
 
 
 
 
 
Generation:
 
 
 
 
 
 
 
Thermal:
 
 
 
 
 
 
 
Coal
1,404

 
24
%
 
1,418

 
24
%
Natural gas
2,442

 
41

 
2,243

 
39

Total thermal
3,846

 
65

 
3,661

 
63

Hydro
277

 
5

 
267

 
4

Wind
480

 
8

 
570

 
10

Total generation
4,603

 
78

 
4,498

 
77

Purchased power:
 
 
 
 
 
 
 
Term
908

 
15

 
913

 
16

Hydro
332

 
6

 
322

 
6

Wind
83

 
1

 
91

 
1

Total purchased power
1,323

 
22

 
1,326

 
23

Total system load
5,926

 
100
%
 
5,824

 
100
%
Less: wholesale sales
(1,224
)
 
 
 
(1,360
)
 
 
Retail load requirement
4,702

 
 
 
4,464

 
 






14
Portland General Electric Earnings Conference Call Third Quarter 2017 Exhibit 99.2


 
Cautionary Statement Information Current as of October 27, 2017 Except as expressly noted, the information in this presentation is current as of October 27, 2017 — the date on which PGE filed its Quarterly Report on Form 10-Q for the quarter ended September 30, 2017 — and should not be relied upon as being current as of any subsequent date. PGE undertakes no duty to update the presentation, except as may be required by law. Forward-Looking Statements 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 expected 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. 2


 
Leadership Presenting Today Jim Lobdell Senior VP of Finance, CFO & Treasurer Jim Piro CEO On Today's Call • Corporate strategy • Financial performance • Economy and customers • Entering the Energy Imbalance Market • 2016 Integrated Resource Plan (IRP) • 2018 General Rate Case • Financial Update • Guidance 3 Maria Pope President and incoming CEO


 
Third Quarter 2017 Earnings Results NI in millions Q3 2016 Q3 2017 Net Income $34 $40 Diluted EPS $0.38 $0.44 2016 Diluted EPS $2.16 2017E Diluted EPS $2.20 - $2.35 4 Q1 Q1 Q2 Q3 Q4 Q2 Q3 Q4E $0.58 - $0.73


 
Accomplishments and Operational Update New summer peak-demand record during August heatwave of 3,976 MW. Employees and systems performed exceptionally well. Generating plant availability of 96%. Top quartile customer satisfaction according to TQS Research, Inc. and Market Strategies International. 5


 
• Portland ranked No. 1 on FORBE'S Best Places for Business and Careers based on strong economic outlook and talent surge. • September unemployment rates in our service area remained low at 3.9%, and lower than the U.S. rate of 4.2%.1 • Average residential customer count increased approximately 1.3% over the past year. • Portland's median household income growth of 8.7% was 4th largest annual percentage change in the nation.2 • Increase in building permits of 6.4% in our service area and 5.7% nationally, compared to 2016.3 • Weather-adjusted 2017 energy deliveries forecasted to decrease by 0 to 1% with long-term positive annual growth of 1%.4 Economic Update 1. State of Oregon Employment Department 2. Oregon Office of Economic Analysis Census data for 2016 3. Year-to-date through August 2017 4. Net of approximately 1.5% of energy efficiency 6


 
2018 General Rate Case Settled 7 • Final order from Commission expected later this year. • Supports investments we're making to build and operate a more flexible grid to support a sustainable, renewable and resilient energy future.


 
Joined Western Energy Imbalance Market 8 • As of October 1, we're buying and selling energy in five-minute intervals, which will help us better integrate more renewable energy into the grid. • A major accomplishment and important step forward in investing in a reliable and clean energy future for our customers.


 
2016 Integrated Resource Plan • A flexible, balanced plan that reflects our commitment to a low-carbon future and in keeping with the Oregon Clean Electricity Plan • Process includes continuing dialog with OPUC staff and stakeholders • Productive bilateral negotiations continue for capacity need Areas of Focus • Procurement of renewables (100 MWa) to meet Oregon Clean Electricity Plan • Filling up to approximately 350-450 MW capacity deficit to ensure reliability • Energy efficiency (135 MWa) and demand-side actions (77 MW) 9 IRP filed with commission OPUC decision; waiver request filed1 Addendum filed; RFP process commences Expected to reach decision on RFP Nov. 2016 August 2017 Q4 2017 2018 (1) See docket UM 1892 on the OPUC website for details


 
2018 General Rate Case Settled Key Items: • A return on equity of 9.5% • A capital structure of 50% debt and 50% equity • Rate base of $4.5 billion • Increase in major storm accrual from $2.0 million to $2.6 million • Customer price increase of approx. 1.2%, effective January 1st 10 Timeline: • November: Power Cost Update (AUT) • December: Final Order


 
Carty Generating Station update 11 Carty Generating Station, our 440 MW natural gas baseload plant near Boardman, Ore. • Carty plant in-service, including AFDC, as of 9/30/2017: $637 million • Estimated timeframe to complete litigation: 2-4 years • Hearing scheduled for spring 2018 to determine whether the lawsuit is arbitrable in the ICC's International Court of Arbitration


 
Third Quarter Earnings Bridge 12 Favorable Load $ 0.08 Favorable Weather $ 0.06 Decoupling $ (0.02 ) Other $ 0.01 Earnings per diluted share


 
Capital Planning Current Capital Outlook Investments include: • Upgrades and replacement of aging generation, transmission and distribution • Strengthening the power grid for earthquakes, cyber attacks and other potential threats • New customer information systems and technology tools (1) Does not include any capital related to the 2016 IRP. $533 $549 13 (1) $ millions


 
Liquidity and Financing Total Liquidity as of 09/30/2017 (in millions) Credit Facilities $ 720 Commercial Paper — Letters of Credit $ (54 ) Cash $ 89 Available $ 755 Ratings S&P Moody's Senior Secured A- A1 Senior Unsecured BBB A3 Commercial Paper A-2 Prime-2 Outlook Positive Stable ($ in millions) Q1 2017 Q2 2017 Q3 2017 Q4 2017 First Mortgage Bonds - - $75 million issued $150 million to be issued Bank Loan - - Early repaid $50 million Repay $100 million 14


 
Guidance and Assumptions 2017 EPS Guidance: $2.20 - $2.35 • Retail deliveries decline 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 5 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; and • Operating and Maintenance costs between $555 to $575 million 15


 
16 Smart Grid Strategies