THIS DOCUMENT IS A COPY OF THE FORM 8-K PREVIOUSLY FILED ON
FEBRUARY 15, 1994 PURSUANT TO A RULE 201 TEMPORARY HARDSHIP
EXEMPTION
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) February 15,
1994
Registrant; State of Incorporation; IRS
Employer
Commission File Number Address; and Telephone Number
Identification No.
1-5532 Portland General Corporation
93-0909442
(an Oregon Corporation)
121 SW Salmon Street
Portland, Oregon 97204
(503) 464-8820
1-5532-99 Portland General Electric Company
93-0256820
(an Oregon Corporation)
121 SW Salmon Street
Portland, Oregon 97204
(503) 464-8000
121 S.W. Salmon Street, Portland, Oregon
97204
(Address of principal executive offices)
(zip code)
Registrant's telephone number, including area code
503-464-8820
1
Item 5. Other Events
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Financial and Operating Outlook
Trojan Related Issues
Shutdown - In early 1993, Portland
General Electric Company (PGE or the
Company) ceased commercial operation of
the Trojan Nuclear Plant (Trojan). PGE
made the decision to shut down Trojan as
part of its least cost planning process,
a biennial process whereby PGE evaluates
a mix of energy options that yield an
adequate and reliable supply of
electricity at the least cost to the
utility and to its customers. On June
3, 1993 the Oregon Public Utility
Commission (PUC) acknowledged PGE's
Least Cost Plan.
Decommissioning Estimate - The 1993
nuclear decommissioning estimate of $409
million represents a site-specific
decommissioning cost estimate performed
for Trojan by an experienced
decommissioning engineering firm. This
cost estimate assumes that the majority
of decommissioning activities will occur
between 1998 and 2002, after
construction of a temporary dry spent
fuel storage facility. The final
decommissioning activities will occur in
2018 after PGE completes shipment of
spent fuel to a United States Department
of Energy (USDOE) facility.
The decommissioning cost estimate
includes the cost of decommissioning
planning, removal and burial of
irradiated equipment and facilities as
required by the Nuclear Regulatory
Commission (NRC); building demolition
and nonradiological site remediation;
and fuel management costs including
licensing, surveillance and $75 million
of transition costs. Transition costs
are the costs associated with operating
and maintaining the spent fuel pool and
securing the plant until dismantlement
can begin.
The 1992 decommissioning cost estimate
of $411 million was based upon a study
performed on a nuclear plant similar to
Trojan and included the cost of
dismantlement activities performed
during the years 1996 through 2002,
monitoring of stored spent fuel through
2018 and $130 million of miscellaneous
closure and transition costs ($43
million was amortized to nuclear
operating expenses during 1993).
The 1992 estimate and the 1993 site-
specific estimate are reflected in the
Company's financial statements in
nominal dollars (actual dollars expected
to be spent in each year). The
difference between the 1992 and the 1993
cost estimates, reflected in nominal
dollars, is due to the application of a
higher inflation factor, the timing of
decommissioning activities and certain
changes in assumptions, such as
decommissioning the temporary dry spent
fuel storage facility and shipping
highly activated reactor components to
the USDOE repository in 2018, which are
included in the 1993 estimate. Both the
1992 cost estimate and the 1993 site-
specific cost estimate reflected in 1993
(current) dollars are $289 million.
Assumptions used to develop the site-
specific cost estimate represent the
best information PGE has currently.
However, the Company is continuing its
analysis of various options which could
change the timing and scope of
dismantling activities. Presently, PGE
is planning to accelerate the timing of
large component removal which could
reduce overall decommissioning costs.
PGE plans to submit a detailed
decommissioning work plan to the NRC in
mid-1994. The Company expects any
future changes in estimated
decommissioning costs to be incorporated
in future revenues to be collected from
customers.
Investment Recovery - PGE filed a
general rate case on November 8, 1993,
which addresses recovery of Trojan plant
costs, including decommissioning. In
late February 1993, the PUC granted PGE
accounting authorization to continue
using previously approved depreciation
and decommissioning rates and lives for
its Trojan investment.
Least cost analysis assumed that
recovery of the Trojan plant investment,
including future decommissioning costs,
would be granted by the PUC. Regarding
the authority of the PUC to grant
recovery, the Oregon Department of
Justice (Attorney General) issued an
opinion that the PUC may allow rate
recovery of total plant costs, including
operating expenses, taxes,
decommissioning costs, return of capital
invested in the plant and return on the
undepreciated investment. While the
Attorney General's opinion does not
guarantee recovery of costs associated
with the shutdown, it does clarify that
under current law the PUC has authority
to allow recovery of such costs in
rates.
PGE asked the PUC to resolve certain
legal and policy questions regarding the
statutory framework for future
ratemaking proceedings related to the
recovery of the Trojan investment and
decommissioning costs. On August 9,
1993, the PUC issued a declaratory
ruling agreeing with the Attorney
General's opinion discussed above. The
ruling also stated that the PUC will
favorably consider allowing PGE to
recover in rates some or all of its
return on and return of its
undepreciated investment in Trojan,
including decommissioning costs, if PGE
meets certain conditions. PGE believes
that its general rate filing provides
evidence that satisfies the conditions
established by the PUC. In February
1993 the Citizens' Utility Board of
Oregon appealed the ruling to the Marion
County Circuit Court.
Management believes that the PUC will
grant future revenues to cover all, or
substantially all, of Trojan plant costs
with an appropriate return. However,
future recovery of the Trojan plant
investment and future decommissioning
costs requires PUC approval in a public
regulatory process. Although the PUC
has allowed PGE to continue, on an
interim basis, collection of these costs
in the same manner as prescribed in the
Company's last general rate proceeding,
the PUC has yet to address recovery of
costs related to a prematurely retired
plant when the decision to close the
plant was based upon a least cost
planning process. Due to uncertainties
inherent in a public process, management
cannot predict, with certainty, whether
all, or substantially all, of the $367
million Trojan plant investment and $356
million of future decommissioning costs
will be recovered. Management believes
the ultimate outcome of this public
regulatory process will not have a
material adverse effect on the financial
condition, liquidity or capital
resources of Portland General. However,
it may have a material impact on the
results of operations for a future
reporting period.
The Company's independent accountants
are satisfied that management's
assessment regarding the ultimate
outcome of the regulatory process is
reasonable. Due to the inherent
uncertainties in the regulatory process
discussed above, the magnitude of the
amounts involved and the possible impact
on the results of operations for a
future reporting period, the Company's
independent accountants have added a
paragraph to their audit report to give
emphasis to this matter.
General Rate Filing
On November 8, 1993, the Company filed a
request with the PUC to increase
electric prices by an average of 5%
beginning January 1, 1995. Commercial
and industrial customers' rates would
increase, on average, 3.2%. The
proposed increase in average annual
revenues is $43 million, after the
effects of the Regional Power Act
exchange credit. PGE requested a return
on equity of 11.5%, down from the
current authorized return of 12.5%. If
approved, this would be the Company's
first general price increase since 1991.
The increase in the cost of power,
driven by higher priced purchased power
and increased fuel costs, is the single
largest factor behind the need to
request an increase in prices. Other
operating factors that contributed to
the request are federal tax increases
and capital improvements to PGE's
distribution system. Helping to offset
these cost increases are cost savings at
Trojan, property tax reductions and
customer growth. In addition, the
Company is proposing to accelerate the
return to customers of profits from the
1985 sale of a portion of the Boardman
Coal Plant (Boardman) from 27 years to
three years. In the 1987 rate
proceeding the PUC ordered PGE to
allocate 77% of the gain to customers
over a 27 year period.
The general rate filing includes PGE's
request for continued recovery of Trojan
costs including decommissioning,
operating expenses, taxes, return of
capital invested in the plant and return
on the undepreciated investment. PGE's
current rates include recovery of these
Trojan costs. The Company expects a PUC
decision in late 1994.
Recovery of power cost deferrals is
addressed in separate rate proceedings,
not in the general rate filing (see the
discussion of Power Cost Recovery
below).
Customer Growth and Revenues
Customer growth in PGE's service
territory was evident with the addition
of 11,000 retail customers in 1993.
This growth accounted for a 2.6%
increase in weather-adjusted retail
sales. In 1993, 9,300 residential
customers were added to the system,
compared to 9,400 in 1992. The Company
estimates retail load growth in 1994 to
be approximately the same as the growth
experienced in 1993.
Power Cost Recovery
The Company is incurring substantial
near-term power costs to replace Trojan
generation. PGE's Power Cost Adjustment
Tariff (PCA) was eliminated in 1987. As
a result, adjustments for power costs
above or below those used in existing
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general tariffs are not automatically
reflected in customers' rates. In
February 1993, the PUC authorized PGE to
defer, for later collection, 80% of the
incremental power costs incurred from
December 4, 1992, to March 31, 1993, to
replace Trojan generation. In January
1994, the PUC authorized PGE to start
collecting this power cost deferral
beginning in April 1994.
In August 1993, the PUC authorized PGE
to defer, for later collection, 50% of
the incremental replacement power costs
incurred from July 1, 1993, to March 31,
1994, subject to a review of PGE
earnings. This power cost deferral
authorization does not immediately
affect customer rates. However, PGE
expects future rates to allow recovery
of these costs.
Power Supply
The combination of power purchases and
internal generation will continue to be
utilized to replace Trojan's energy
until new generating resources come on
line by 1996. PGE expects to purchase
approximately 57% of its 1994 load
requirement. The early predictions of
1994 water conditions indicate they will
be about 75% of normal. However,
adequate supplies of secondary energy
are expected to be available to meet
customer demand. The completion of the
third intertie in 1993 increased the
Company's access to surplus energy and
sales opportunities in California and
Arizona.
The January 1994 earthquake in the Los
Angeles area caused damage to the direct
current (DC) intertie. PGE expects this
transmission loss to affect the supply
of power from the Southwest to the
Pacific Northwest. As a result, the
price of secondary power, and the
Company's wholesale efforts, may be
affected. PGE has 100 MW of scheduling
capability on the DC line to reach
wholesale customers in the southwest.
Restoration of Salmon Runs - The Snake
River chinook salmon has been listed as
a threatened species and the Snake River
sockeye salmon has been listed as
endangered under the federal Endangered
Species Act. The National Marine
Fisheries Service has proposed minor
changes to current river operations in a
draft recovery plan that is undergoing
public comment. Proposals to restore
these salmon runs include measures to
increase the river flows on the Snake
and lower Columbia rivers during the
spring to allow salmon to reach the
Pacific Ocean faster, resulting in less
water available for power generation in
the fall and winter months. Although
Company-owned hydro projects are not
located on these rivers, future costs of
secondary purchased power will likely
increase throughout the region during
low-water years.
Fuel Supply
PGE has short-term agreements with
various suppliers to purchase gas during
the winter peak demand period. PGE also
utilizes spot-market purchases of gas
when necessary.
PGE owns 90% of a pipeline which
directly connects the Beaver Combustion
Turbine Plant (Beaver) to an interstate
gas pipeline operating between British
Columbia and New Mexico. Beginning in
June 1993, PGE had access to 30,000
million British thermal units
(MMBtu/day) of capacity on the pipeline,
increasing to 76,000 MMBtu/day in
November 1995. Also in 1993, PGE signed
an agreement with Pacific Gas
Transmission to provide 41,000 MMBtu/day
of capacity, starting in November 1995,
on its natural gas pipeline.
National Energy Policy Act of 1992
The Federal Energy Regulatory Commission
(FERC) can now order wholesale
transmission access (wholesale wheeling)
of electric power. Wholesale wheeling
allows independent power producers and
utilities to market excess power to
other utilities over wide geographic
areas. PGE's ownership of 950 megawatts
of transmission rights on the Pacific
Northwest Intertie provides access to
power and wholesale customers beyond
PGE's service territory.
Nonutility
Bonneville Pacific Litigation - Portland
General Corporation (Portland General),
Portland General Holdings, Inc.
(Holdings), and certain affiliated
individuals have been named in a class
action suit by investors in Bonneville
Pacific Corporation (Bonneville Pacific)
and in a suit filed by the
4
bankruptcy
trustee for Bonneville Pacific. The
class action suit alleges various
violations of securities law, fraud and
misrepresentation. The suit by the
bankruptcy trustee for Bonneville
Pacific alleges federal and Utah
securities violations, common law fraud,
breach of fiduciary duty, tortious
interference, negligence, negligent
misrepresentation and other actionable
wrongs.
Holdings has filed a complaint seeking
approximately $228 million in damages
against Deloitte & Touche and certain
parties associated with Bonneville
Pacific alleging that it relied on
fraudulent and negligent statements and
omissions when it acquired a 46%
interest in and made loans to Bonneville
Pacific.
A detailed report released in June 1992,
by a U.S. Bankruptcy examiner outlined a
number of questionable transactions that
resulted in gross exaggeration of
Bonneville Pacific's assets prior to
Holdings' investment. This report
includes the examiner's opinion that
there was significant mismanagement and
very likely fraud at Bonneville Pacific.
These findings support management's
belief that a favorable outcome on these
matters can be achieved.
For background information and further
details, see Note 14, Legal Matters, in
Notes to Financial Statements.
Results of Operations
1993 Compared to 1992
Portland General reported 1993 earnings
of $89 million, $1.88 per share,
compared to $90 million, $1.93 per
share, in 1992. In 1992, upon approval
from the PUC, PGE applied capital
treatment to $18 million of Trojan steam
generator repair costs which were
incurred in 1991. As a result, $11
million, after tax, was restored to 1992
earnings. Excluding this event, 1992
earnings would have been $79 million
compared to $89 million in 1993.
Regulatory action, continued customer
growth and cost reductions contributed
to the favorable 1993 results.
In August 1993, the PUC authorized PGE
to defer, for later collection, 50% of
the incremental Trojan replacement power
costs incurred from July 1, 1993,
through March 31, 1994. This
authorization, coupled with the 80%
deferral in place from December 4, 1992,
to March 31, 1993, (see the Power Cost
Recovery discussion in the Outlook
section above) allowed the Company to
record, in 1993, $67 million of revenues
related to the future recovery of
replacement power costs.
Retail load growth of 2.6% and cooler
weather during the early months of 1993
positively affected revenue by
increasing sales of kilowatt-hours 5%.
Wholesale revenue declined $30 million
due to the lack of low-cost power for
resale. The recording of replacement
power revenues and retail sales growth,
partially offset by the decline in
wholesale revenues, yielded an operating
revenue increase of $64 million.
Operating costs (excluding variable
power, depreciation, decommissioning and
amortization) declined 14% due to a $53
million decline in nuclear expenses. In
May 1993, the NRC issued PGE a
possession only license amendment for
Trojan. This license amendment reduced
or eliminated certain operating
requirements that were unnecessary for a
shut down and defueled reactor which
allowed PGE to reduce personnel.
Nuclear expenses for 1993 reflect the
amortization of Trojan
5
miscellaneous
closure and transition costs (which were
accrued and capitalized at December 31,
1992). These costs are amortized as
payments are made. During 1993 the
Company amortized $43 million to nuclear
operating expenses.
The $53 million nuclear savings
partially offset the $90 million
increase in variable power costs. The
average variable power cost increased
from 15 mills per kilowatt-hour in 1992
to 19 mills per kilowatt-hour (10 mills
= 1 cent) in 1993. Trojan generated 16%
of the Company's 1992 power needs at an
average fuel cost of 4 mills per
kilowatt-hour. This generation was
primarily replaced by power purchases at
an average price of 24 mills per
kilowatt-hour.
Good plant performance helped control
variable power costs. PGE's Beaver
plant operated well in 1993, generating
13% more power than in 1992. Company-
owned hydro production rose 21%.
Additional maintenance outage time
caused the Colstrip Units 3 and 4 Coal
Plant (Colstrip) generation to decline
which slightly reduced the Company's
1993 thermal generation from the 1992
level (excluding Trojan), however the
total average fuel cost increased from 9
mills per kilowatt-hour to 10 mills per
kilowatt-hour driving 1993 fuel expense
up $5 million.
Depreciation, decommissioning and
amortization increased $24 million in
1993. The 1992 amount includes a credit
of $18 million associated with the
capitalization of 1991 Trojan steam
generator repair costs discussed above.
The remaining increase reflects
depreciation charges for new plant
placed in service.
Other income increased slightly
reflecting accrued interest on deferred
charges and declining interest costs,
partially offset by an increase in
charitable contributions of
approximately $4 million.
1992 Compared to 1991
Financial results for 1992 were much
improved over 1991. Portland General's
earnings of $90 million, or $1.93 per
share, reflected improved operations at
the utility's generating facilities,
continued customer growth and cost
control. In 1991, Portland General
experienced a loss of $50 million, or
$1.06 per share, which included losses
from independent power of $74 million
and additional real estate reserves of
$29 million. Excluding the effects of
losses from nonutility interests, 1991
earnings would have been $53 million.
Trojan operated for six months in 1992
compared with two months in 1991,
generating more than twice the power.
This reduced the need for power
purchases on the secondary market.
Operating and maintenance costs for
Trojan declined 30% in 1992. The 1991
operating and maintenance costs included
$18 million for repairs that were
capitalized in 1992 (see the discussion
of 1993 compared to 1992 above).
The Company's non-nuclear generating
facilities performed well in 1992.
Boardman operated at an 85% capacity
factor generating 31% more power than in
1991. Other thermal generation
increased 30%, while Company-owned hydro
power production declined 9% due to poor
water conditions. Higher internal
generation raised fuel expense 34%, but
significantly reduced the need for
incremental power purchases. 34% fewer
megawatt-hours were purchased; however,
the average price per megawatt-hour
purchased increased 26% due to poor
hydro conditions experienced in the
region. The poor hydro conditions also
limited PGE's ability to make nonfirm
resales. Consequently, 1992 wholesale
revenue declined 17%.
6
Even though unseasonably warm weather
reduced
demand, 1992 retail revenues rose
slightly due to the addition of 11,000
retail customers and $18 million of
accrued revenues associated with the
recovery of Trojan replacement power
costs. Accrued revenues of $12 million
were recorded in 1991 representing the
1991 portion of 90% of the replacement
power costs incurred from November 1,
1991 to March 6, 1992. The PUC
authorized a temporary price increase to
collect these revenues. The 1992
accrued revenues of $18 million
represented $10 million of the 90%
deferral and $8 million of the 80%
deferral (see the Power Cost Recovery
discussion in the Outlook section
above). Total 1992 operating revenues
declined slightly due to the drop in
wholesale revenue.
Corporate cost containment also
contributed to the earnings growth.
Operating expenses (excluding variable
power, depreciation, decommissioning and
amortization) declined 10% due to cost
cutting measures. A manpower reduction
program was implemented in 1991 that
eliminated 300 positions. The severance
costs associated with the program were
reflected in 1991 results. Interest
expense declined 10% as the Company took
advantage of lower interest rates.
Financial Condition
1993 Compared to 1992
During 1993 PGE invested approximately
$126 million in electric utility plant.
Plant investments included $29 million
in the Coyote Springs Generation Project
(Coyote Springs). This project will be
a 220 megawatt cogeneration facility
constructed near Boardman as part of the
Trojan replacement resource portfolio.
Coyote Springs is expected to be
completed in the fall of 1995. Also
during 1993, PGE completed construction
of a third intertie to California which
gave the Company an additional 150
megawatts of scheduling capability. The
intertie project has increased PGE's
capacity for buying and selling
wholesale energy. In addition to
utility plant, the Company invested $18
million in energy efficiency assets
including new construction, lighting and
appliances. The PUC has authorized a
return on PGE's investment in energy
efficiency projects.
The Company's non-cash revenues
increased in 1993 due to the recording
of $67 million of revenues associated
with the future recovery of Trojan
replacement power costs (see the Power
Cost Recovery discussion in the
Financial and Operating Outlook
section).
Deferred charges increased over $200
million primarily due to the recording
of $228 million of deferred tax
liabilities and related regulatory
assets representing future collections
from customers. Under the liability
method specified by SFAS No. 109, the
deferred tax assets and liabilities are
determined based on the temporary
differences between the financial
statement bases and tax bases of assets
and liabilities as measured by the
enacted tax rates for the years in which
the taxes are expected to be paid.
Management believes it is probable that
the regulatory asset will be fully
recovered in customer rates.
Changes in liabilities primarily reflect
the adoption of SFAS No. 109, the
revision of the decommissioning estimate
to $409 million, and financing
activities.
Common stock equity of Portland General
increased $46 million reflecting
earnings of $89 million, dividends
declared of $57 million, and common
stock issuances. Portland General's
return on average shareholders' equity
was 11.6% in 1993.
Cash Flow
Portland General Corporation
Portland General requires cash to pay
dividends to its common stockholders, to
provide funds to its subsidiaries, to
meet debt service obligations and for
day to day operations. Sources of cash
are dividends from PGE, its principal
subsidiary, asset sales and leasing
rentals, short- and intermediate-term
borrowings, and the sale of its common
stock.
Portland General received $73 million in
dividends from PGE and $10 million in
proceeds from the issuance of shares of
common stock under its Dividend
Reinvestment and Optional Cash Payment
Plan.
In October 1993, Portland General filed
a Registration Statement with the
Securities and Exchange Commission (SEC)
to issue up to 5,000,000 additional
shares of its $3.75 par value common
stock. The net proceeds from the sale
of common stock will be used to purchase
additional shares of PGE common stock.
In February 1994, Portland General filed
a Prospectus Supplement covering the
sale of up to 2,300,000 of these shares.
Portland General Electric Company
Cash Provided by Operations is the
primary source of cash used for day to
day operating needs of PGE and funding
of construction activities. PGE also
obtains cash from external borrowings,
as needed.
7
A significant portion of cash from
operations comes from depreciation and
amortization of utility plant, charges
which are recovered in customer revenues
but require no current cash outlay.
Changes in accounts receivable and
accounts payable can also be significant
contributors or users of cash. Cash
provided by operations increased
slightly in 1993 reflecting lower
income tax payments. The 1992 cash flow
from current operations declined
slightly from the 1991 level.
Increased replacement power costs have
affected current cash flows. A
significant portion of such costs have
been offset by cost savings driven by
personnel reductions at Trojan.
Future cash requirements may be affected
by the ultimate outcome of the IRS audit
of PGE's 1985 WNP-3 abandonment loss
deduction. The IRS has completed its
audit of Portland General's tax returns
for the years 1985 to 1987 and has
issued a statutory notice of tax
deficiency, which PGE is contesting.
See Notes 5 and 5A, Income Taxes, in
Notes to Financial Statements for
further information.
PGE has been named a "potentially
responsible party" (PRP) of PCB
contaminants at various environmental
cleanup sites. The total cost of
cleanup is estimated at $27 million, of
which the Company's share is
approximately $3 million. Should the
eventual outcome of these uncertainties
result in additional cash requirements,
PGE expects internally generated cash
flows or external borrowings to be
sufficient to fund such obligations.
PGE has made an assessment of the other
involved PRP's and is satisfied that
they can meet their share of the
obligation.
Investing activities are primarily for
investment in facilities for generation,
transmission and distribution of
electric energy and for energy
efficiency improvements. In 1993, PGE's
capital expenditures of $144 million
were 20% new generating resources, 7%
existing generation plants, 43%
transmission and distribution, 13%
energy efficiency, and 17% general plant
and other. 1994 expected capital
expenditures of $265 million include
$115 million for new generating
resources, $20 million for existing
generating plants, $75 million for
transmission and distribution,
$25 million for energy efficiency and
$30 million of other expenditures. The
PUC has authorized a return on PGE's
investment in energy efficiency
projects, which will help alleviate the
need for additional energy resources in
the future.
PGE continues to fund an external trust
for the future costs of Trojan
decommissioning. Funding began in March
1991. Currently PGE funds $11 million
each year. As of December 31, 1993, $46
million had been funded and invested
primarily in investment grade tax-exempt
bonds with a current market value of $49
million.
PGE's future capital expenditure program
is expected to include investment of
$400 million to $450 million to add up
to 600 megawatts of gas-fired combustion
turbines and cogeneration projects to
PGE's resource base over the next five
years. In addition, PGE expects to
continue investing in energy efficiency
programs.
PGE's cash provided by operations, after
dividends, is expected to meet
approximately 50% of PGE's estimated
1994 investing activities compared to
90% in 1993 and 85% in 1992.
Financing activities to fund the
remaining capital requirements are
accomplished through intermediate-term
and long-term debt and equity issuances.
Access to capital markets is necessary
to implement the asset growth strategy
discussed above. PGE intends to
maintain approximately the same
capitalization ratios while funding this
asset expansion.
The maturities of intermediate and long-
term debt are chosen to match expected
asset lives and maintain a balanced
maturity schedule. Short-term debt,
which includes commercial paper and
lines of credit, is used for day-to-day
operations.
Interest rates continued to decline
during 1993. As a result, PGE refunded
higher coupon debt. PGE issued $150
million of 7 3/4% First Mortgage Bonds
in April 1993, and $27 million of 5.65 %
Medium
8
Term Notes in May 1993. Proceeds
from these issuances redeemed the 9 5/8%
Series First Mortgage Bonds and 10%
Debentures. Additionally, in August 1993
PGE issued $75 million of Medium Term
Notes consisting of $35 million of five
year notes at 5.69% and $40 million of
ten year notes at 6.47%. Proceeds from
this issuance were used to redeem the 8%
and both 8 3/4% Series First Mortgage
Bonds.
The issuance of additional preferred
stock and First Mortgage Bonds requires
PGE to meet earnings coverage and
security provisions set forth in the
Articles of Incorporation and the
Indenture securing its First Mortgage
Bonds. As of December 31, 1993, PGE
could issue $475 million of preferred
stock and $370 million of additional
First Mortgage Bonds.
9
Management's Statement of Responsibility
Portland General Corporation's management is responsible for the preparation
and presentation of the consolidated financial statements in this report.
Management is also responsible for the integrity and objectivity of the
statements. Generally accepted accounting principles have been used to
prepare the statements, and in certain cases informed estimates have been used
that are based on the best judgment of management.
Management has established, and maintains, a system of internal accounting
controls. The controls provide reasonable assurance that assets are
safeguarded, transactions receive appropriate authorization, and financial
records are reliable. Accounting controls are supported by written policies
and procedures, an operations planning and budget process designed to achieve
corporate objectives, and internal audits of operating activities.
Portland General's Board of Directors includes an Audit Committee composed
entirely of outside directors. It reviews with management, internal auditors
and independent auditors, the adequacy of internal controls, financial
reporting, and other audit matters.
Arthur Andersen & Co. is Portland General's independent public accountant. As
a part of its annual audit, internal accounting controls are selected for
review in order to determine the nature, timing and extent of audit tests to
be performed. All of the corporation's financial records and related data are
made available to Arthur Andersen & Co. Management has also endeavored to
ensure that all representations to Arthur Andersen & Co. were valid and
appropriate.
Joseph M. Hirko
Vice President Finance,
Chief Financial Officer,
Chief Accounting Officer
and Treasurer
Report of Independent Public Accountants
To the Board of Directors and Shareholders of
Portland General Corporation:
We have audited the accompanying consolidated balance sheets and statements of
capitalization of Portland General Corporation and subsidiaries as of December
31, 1993 and 1992, and the related consolidated statements of income, retained
earnings and cash flows for each of the three years in the period ended
December 31, 1993. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
As more fully discussed in Note 6 to the consolidated financial statements,
the realization of assets related to the abandoned Trojan Nuclear Plant in the
amount of $722 million is dependent upon the ratemaking treatment as
determined by the Public Utility Commission of Oregon.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Portland General Corporation
and subsidiaries as of December 31, 1993 and 1992, and the results of their
operations and their cash flows for each of the three years in the period
ended December 31, 1993 in conformity with generally accepted accounting
principles.
As more fully discussed in Note 5 to the consolidated financial statements,
effective January 1, 1993, the Company changed its method of accounting for
income taxes.
Portland, Oregon,
January 25, 1994 ARTHUR ANDERSEN & CO.
10
Financial Statements and Supplementary Data
Portland General Corporation and Subsidiaries
Consolidated Statements of Income
For the Years Ended December 31 1993 1992 1991
(Thousands of dollars except per share amounts)
Operating Revenues $946,829 $883,266 $889,876
Operating Expenses
Purchased power and fuel 311,713 222,127 226,312
Production and distribution 73,576 93,677 95,960
Maintenance and repairs 55,320 70,496 91,304
Administrative and other 100,321 112,010 124,174
Depreciation, decommissioning and amortization 122,218 98,706 112,567
Taxes other than income taxes 55,730 55,515 59,023
718,878 652,531 709,340
Operating Income Before Income Taxes 227,951 230,735 180,536
Income Taxes 67,520 67,235 44,005
Net Operating Income 160,431 163,500 136,531
Other Income (Deductions)
Loss from independent power-net of taxes $16,058 - -
(74,144)
Interest expense (70,802) (73,895)
(81,745)
Allowance for funds used during construction 785 2,769 2,049
Preferred dividend requirement - PGE (12,046) (12,636)
(12,913)
Other - net of income taxes 10,750 9,885 9,524
Income (Loss) From Continuing Operations 89,118 89,623
(20,698)
Discontinued Operations
Estimated loss on disposal of real estate operations,
including provision for operating losses during
the phase-out period - -
(29,169)
Net Income (Loss) $ 89,118 $ 89,623
$(49,867)
Common Stock
Average shares outstanding 47,392,185 46,887,184 46,333,096
Earnings (loss) per average share
Continuing operations $1.88 $1.93*
$(0.43)*
Estimated loss from disposal of real
estate operations - -
(0.63)
Earnings (loss) per average share $1.88 $1.93*
$(1.06)*
Dividends declared per share $1.20 $1.20 $1.20
* Includes $.02 for tax benefits from ESOP dividends.
Portland General Corporation and Subsidiaries
Consolidated Statements of Retained Earnings
For the Years Ended December 31 1993 1992 1991
(Thousands of Dollars)
Balance at Beginning of Year $ 50,481 $ 19,635 $124,112
Net Income (Loss) 89,118 89,623
(49,867)
ESOP Tax Benefit & Preferred Stock
Premium @ Redemption (1,524) (2,505) 992
138,075 106,753 75,237
Dividends Declared on Common Stock 56,916 56,272 55,602
Balance at End of Year $ 81,159 $ 50,481 $ 19,635
The accompanying notes are an integral part of these consolidated statements.
11
Portland General Corporation and Subsidiaries
Consolidated Balance Sheets
At December 31 1993 1992
(Thousands of Dollars)
Assets
Electric Utility Plant - Original Cost
Utility plant (includes Construction Work
in Progress of $46,679 and $12,308) $2,370,460 $2,260,935
Accumulated depreciation (894,284) (825,365)
1,476,176 1,435,570
Capital leases - less amortization of $23,626 and $21,471 13,693 15,847
1,489,869 1,451,417
Other Property and Investments
Leveraged leases 155,618 155,697
Net assets of discontinued real estate operations 31,378 33,978
Trojan decommissioning trust, at market value 48,861 32,945
Other investments 102,164 93,126
338,021 315,746
Current Assets
Cash and cash equivalents 3,202 6,689
Accounts and notes receivable 91,641 83,065
Unbilled and accrued revenues 133,476 69,151
Inventories, at average cost 46,534 61,550
Prepayments and other 22,128 33,759
296,981 254,214
Deferred Charges
Unamortized regulatory assets
Trojan abandonment - Plant 366,712 399,255
Trojan abandonment - Decommissioning 355,718 339,514
Trojan - other 66,387 94,759
Income taxes recoverable 228,233 -
Debt reacquisition costs 34,941 22,855
Energy efficiency programs 39,480 23,989
Other 33,857 37,445
WNP-3 settlement exchange agreement 178,003 182,492
Miscellaneous 21,126 18,939
1,324,457 1,119,248
$3,449,328 $3,140,625
Capitalization and Liabilities
Capitalization
Common stock $ 178,630 $ 176,624
Other paid-in capital 519,058 509,802
Unearned compensation (19,151) (23,478)
Retained earnings 81,159 50,481
759,696 713,429
Cumulative preferred stock of subsidiary
Subject to mandatory redemption 70,000 81,800
Not subject to mandatory redemption 69,704 69,704
Long-term debt 842,994 856,138
1,742,394 1,721,071
Current Liabilities
Long-term debt and preferred stock due within one year 51,614 47,500
Short-term borrowings 159,414 140,678
Accounts payable and other accruals 109,479 116,503
Accrued interest 18,581 25,236
Dividends payable 17,657 17,591
Accrued taxes 25,601 42,378
382,346 389,886
Other
Deferred income taxes 660,248 365,434
Deferred investment tax credits 60,706 64,781
Regulatory reserves 120,410 121,914
Trojan decommissioning reserve and misc. closure costs 407,610 411,404
Miscellaneous 75,614 66,135
1,324,588 1,029,668
$3,449,328 $3,140,625
The accompanying notes are an integral part of these consolidated balance sheets.
12
Portland General Corporation and Subsidiaries
Consolidated Statements of Capitalization
At December 31 1993 1992
(Thousands of Dollars)
Common Stock Equity
Common stock, $3.75 par value per
share, 100,000,000 shares authorized,
47,634,653 and 47,099,701 shares outstanding $ 178,630 $ 176,624
Other paid-in capital - net 519,058 509,802
Unearned compensation (19,151) (23,478)
Retained earnings 81,159 50,481
759,696 43.6% 713,429 41.5%
Cumulative Preferred Stock
Subject to mandatory redemption
No par value, 30,000,000 shares authorized
7.75% Series, 300,000 shares outstanding 30,000 30,000
$100 par value, 2,500,000 shares authorized
8.875% Series, 0 and 36,000 shares outstanding - 3,600
Current sinking fund - (1,800)
8.10% Series, 500,000 shares outstanding 50,000 50,000
Current sinking fund (10,000) -
70,000 4.0 81,800 4.8
Not subject to mandatory redemption
7.95% Series, 298,045 shares outstanding 29,804 29,804
7.88% Series, 199,575 shares outstanding 19,958 19,958
8.20% Series, 199,420 shares outstanding 19,942 19,942
69,704 4.0 69,704 4.0
Long Term Debt
First mortgage bonds
Maturing 1993 through 1997
4-5/8% Series due February 1, 1993 - 7,851
4-3/4% Series due June 1, 1993 - 9,720
4-3/4% Series due April 1, 1994 8,119 8,344
4.70% Series due March 1, 1995 3,220 3,395
5-7/8% Series due June 1, 1996 5,366 5,516
6.60% Series due October 1, 1997 15,363 15,663
Medium-term notes, 6.60%-9.27% 136,000 148,550
Maturing 1998 through 2002, 5.65%-8.88% 140,625 98,615
Maturing 2003 through 2007, 6.47%-9.07% 131,658 145,473
Maturing 2016 through 2023, 7.75%-9-5/8% 195,000 145,000
Pollution control bonds
Port of Morrow, Oregon, variable rate
(Average 2.3% for 1993), due 2013 23,600 23,600
City of Forsyth, Montana, variable rate
(Average 2.4 for 1993), due 2013 through 2016 118,800 118,800
Amount held by trustee (8,537) (8,498)
Port of St. Helens, Oregon, due 2010 and 2014
(Average variable 2.2%-2.4% for 1993) 51,600 51,600
10% Debentures due March 1, 2018 - 50,000
Medium-term notes maturing 1994 through
1996, 7.23%-8.09% 50,000 50,000
Notes maturing 1993, 8.62% - 13,000
Capital lease obligations 13,693 15,847
Other 101 (638)
884,608 901,838
Long-term debt due within one year (41,614) (45,700)
842,994 48.4 856,138 49.7
Total capitalization $1,742,394 100.0% $1,721,071 100.0%
The accompanying notes are an integral part of these consolidated statements.
13
Portland General Corporation and Subsidiaries
Consolidated Statements of Cash Flow
For the Years Ended December 31 1993 1992 1991
(Thousands of Dollars)
Cash Provided by Operations:
Net income (loss) $ 89,118 $ 89,623 $ (49,867)
Adjustments to reconcile net income (loss)
to net cash provided by operations:
Non-cash loss from independent power - - 83,493
Depreciation, decommissioning and amortization 92,367 109,884 115,285
Amortization of WNP-3 exchange agreement 4,489 5,658 6,231
Amortization of deferred charges - Trojan 31,419 1,609 573
Amortization of deferred charges - other 5,087 7,080 9,225
Deferred income taxes - net 59,193 26,480 1,200
Other noncash revenues (1,926) (2,659) (4,160)
Increase in receivables (72,837) (12,736) (3,750)
(Increase) Decrease in inventories 15,017 (4,181) 751
Increase (Decrease) in payables (29,837) (6,231) 25,208
Other working capital items - net 14,366 7,020 (1,895)
Loss from discontinued operations - - 29,169
Deferred charges - other (3,808) (13,175) (6,825)
Miscellaneous - net 17,475 21,527 14,214
220,123 229,899 218,852
Investing Activities:
Utility construction (125,787) (143,561) (138,905)
Energy efficiency programs (18,149) (10,365) (8,610)
Rentals received from leveraged leases 12,005 12,373 11,099
Trojan decommissioning trust (11,220) (11,220) (19,272)
Advances to affiliates - - (42,494)
Other (11,924) (9,964) (14,143)
(155,075) (162,737) (212,325)
Financing Activities:
Short-term borrowings - net 18,736 48,273 (22,701)
Long-term debt issued 252,000 123,000 178,016
Long-term debt retired (279,986) (143,902) (119,004)
Repayment of nonrecourse borrowings for
leveraged leases (10,955) (11,215) (10,304)
Preferred stock issued - 30,000 -
Preferred stock retired (3,600) (31,225) (1,800)
Common stock issued 9,520 9,753 6,585
Dividends paid (56,850) (56,230) (55,564)
(71,135) (31,546) (24,772)
Net Cash Provided (Used) by:
Continuing Operations (6,087) 35,616 (18,245)
Discontinued Operations 2,600 (30,948) 5,582
Increase (Decrease) in Cash and
Cash Equivalents (3,487) 4,668 (12,663)
Cash and Cash Equivalents at the Beginning
of Year 6,689 2,021 14,684
Cash and Cash Equivalents at the End
of Year $ 3,202 $ 6,689 $ 2,021
Supplemental disclosures of cash flow information
Cash paid during the year:
Interest $ 74,261 $ 72,535 $ 76,326
Income taxes 12,259 22,241 23,560
The accompanying notes are an integral part of these consolidated statements.
14
Portland General Corporation and Subsidiaries Notes to Financial Statements
Note 1
Summary of Significant Accounting Policies
Consolidation Principles
The consolidated financial statements
include the accounts of Portland General
Corporation (Portland General or the
Company) and all of its majority-owned
subsidiaries. Significant intercompany
balances and transactions have been
eliminated.
Basis of Accounting
Portland General and its subsidiaries
conform to generally accepted accounting
principles. In addition, Portland
General Electric Company's (PGE)
policies are in accordance with the
accounting requirements and the
ratemaking practices of regulatory
authorities having jurisdiction.
Revenues
PGE accrues estimated unbilled revenues
for services provided to month-end.
Purchased Power
PGE credits purchased power costs for
the net amount of benefits received
through a power purchase and sale
contract with the Bonneville Power
Administration (BPA). Reductions in
purchased power costs that result from
this exchange are passed directly to
PGE's residential and small farm
customers in the form of lower prices.
Depreciation
PGE's depreciation is computed on the
straight-line method based on the
estimated average service lives of the
various classes of plant in service.
Excluding the Trojan Nuclear Plant
(Trojan), depreciation expense as a
percent of the related average
depreciable plant in service was
approximately 3.9% in 1993, 3.8% in 1992
and 3.9% in 1991.
The cost of renewal and replacement of
property units is charged to plant, and
repairs and maintenance are charged to
expense as incurred. The cost of
utility property units retired, other
than land, is charged to accumulated
depreciation.
Allowance for Funds Used During
Construction (AFDC)
AFDC represents the pretax cost of
borrowed funds used for construction
purposes and a reasonable rate for
equity funds. AFDC is capitalized as
part of the cost of plant and is
credited to income but does not
represent current cash earnings. The
average rates used by PGE were 3.52%,
4.72% and 8.05% for the years 1993, 1992
and 1991, respectively.
Income Taxes
Portland General files a consolidated
federal income tax return. Portland
General's policy is to collect for tax
liabilities from subsidiaries that
generate taxable income and to reimburse
subsidiaries for tax benefits utilized
in its tax return.
Income tax provisions are adjusted, when
appropriate, for potential tax
adjustments. Deferred income taxes are
provided for temporary differences
between financial and income tax
reporting. See Notes 5 and 5A, Income
Taxes, for more details.
Amounts recorded for Investment Tax
Credits (ITC) have been deferred and are
being amortized to income over the
approximate lives of the related
properties, not to exceed 25 years.
Nuclear Fuel
Amortization of the cost of nuclear fuel
was based on the quantity of heat
produced for the generation of electric
energy.
15
Investment in Leases
Columbia Willamette Leasing (CWL), a
subsidiary of Portland General Holdings,
Inc. (Holdings), acquires and
leases capital equipment. Leases that
qualify as direct financing leases and
are substantially financed with
nonrecourse debt at lease inception are
accounted for as leveraged leases.
Recorded investment in leases is the sum
of the net contracts receivable and the
estimated residual value, less unearned
income and deferred ITC. Unearned
income and deferred ITC are amortized to
income over the life of the leases to
provide a level rate of return on net
equity invested.
The components of CWL's net investment
in leases as of December 31, 1993 and
1992, are as follows (thousands of
dollars):
1993 1992
Lease contracts receivable $ 600,710 $ 645,746
Nonrecourse debt service (481,988) (524,661)
Net contracts receivable 118,722 121,085
Estimated residual value 88,047 88,085
Less - Unearned income (41,395) (43,436)
Investment in leveraged leases 165,374 165,734
Less - Deferred ITC (9,756) (10,037)
Investment in leases, net $ 155,618 $ 155,697
Cash and Cash Equivalents
Highly liquid investments with original
maturities of three months or less are
classified as cash equivalents.
WNP-3 Settlement Exchange Agreement
The Washington Public Power Supply
System Unit 3 (WNP-3) Settlement
Exchange Agreement, which has been
excluded from PGE's rate base, is
carried at present value and amortized
on a constant return basis.
Regulatory Assets
PGE defers, or accrues revenue for,
certain costs which otherwise would be
charged to expense, if it is probable
that future collections will permit
recovery of such costs. These costs are
reflected as deferred charges or accrued
revenues in the financial statements and
are amortized over the period in which
revenues are collected. Trojan plant
and decommissioning costs are currently
covered in customer rates. Of the
remaining regulatory assets,
approximately 78% have been treated by
the Oregon Public Utility Commission
(PUC) as allowable cost of service items
in PGE's most recent rate processes.
The remaining amounts are subject to
regulatory confirmation in PGE's future
ratemaking proceedings.
Reclassifications
Certain amounts in prior years have been
reclassified for comparative purposes.
16
Note 2
Real Estate - Discontinued Operations
Portland General is divesting its real
estate operations, which consist
primarily of Columbia Willamette
Development Company (CWDC). In early
1993, CWDC withdrew from the Cornerstone
Columbia Development Company
(Cornerstone), a partnership with
Weyerhauser Real Estate Company. As a
distribution and complete liquidation of
CWDC's interest in Cornerstone, CWDC
received all of Cornerstone's interest
in a joint venture.
In 1991, Portland General reviewed the
adequacy of its real estate loss reserve
and determined that an additional
reserve was warranted. A loss of $29
million (net of related income tax
benefits of $17 million) was recorded in
the fourth quarter of 1991 to recognize
lower market values and additional
holding costs.
At December 31, 1993 and 1992, the net
assets of real estate operations were
composed of the following (thousands of
dollars):
1993 1992
Assets
Real estate development $18,900 $22,132
Other assets 21,234 27,248
Total assets 40,134 49,380
Liabilities 1,632 2,181
Reserve for discontinuance - net 7,124 13,221
Net Assets $31,378 $33,978
Management believes that it has
adequately provided for accounting
losses to be incurred during the
disposal of real estate assets. Prior
estimates will be continually monitored
during the liquidation period.
17
Note 3
Loss from Independent Power
In late 1991 Holdings, a wholly owned
subsidiary of Portland General, recorded
losses totaling $74 million, net of tax
benefits of $16 million, related to the
write-off of Holdings' equity investment
in Bonneville Pacific Corporation
(Bonneville Pacific) and a provision for
uncollectible loans, project development
and other costs.
Holdings owns 9.8 million shares, or
46%, of Bonneville Pacific's common
stock. The write-off followed a review
of the Bonneville Pacific investment,
which raised various concerns including
the carrying values of certain of its
assets, the lack of progress by
Bonneville Pacific to complete agreed-
upon project selldowns and
Bonneville Pacific's poor financial
performance. In December 1991,
Bonneville Pacific voluntarily filed for
protection under Chapter 11 of the
Bankruptcy Code. Holdings also has $28
million of secured and unsecured loans
outstanding to Bonneville Pacific and
its subsidiaries. Holdings recorded a
reserve in December 1991 against the
outstanding loans. Holdings intends to
pursue recovery of these loans but
cannot predict what amount, if any, may
be recovered. See Note 14, Legal
Matters, for litigation related to
Bonneville Pacific.
Note 4
Employee Benefits
Pension Plan
Portland General has a non-contributory
pension plan (the Plan) covering
substantially all of its employees.
Benefits under the Plan are based on
years of service, final average pay and
covered compensation.Portland
General's policy is to contribute
annually to the Plan at least the
minimum required under the Employee
Retirement Income Security Act of 1974
but not more than the maximum amount
deductible for income tax
purposes. The Plan's assets are held in
a trust and consist primarily of
investments in common and preferred
stocks, corporate bonds and
US government and agency issues.
Portland General determines net periodic
pension expense according to the
principles of SFAS No. 87, Employers'
Accounting for Pensions.
The following table sets forth the
Plan's funded status and amounts
recognized in Portland General's
financial statements (thousands of
dollars):
1993 1992
Actuarial present value of benefit obligations:
Accumulated benefit obligation, including
vested benefits of $151,334 and $133,870 $166,301 $145,670
Effect of projected future compensation levels 32,608 34,531
Projected benefit obligation (PBO) 198,909 180,201
Plan assets at fair value 262,412 226,413
Plan assets in excess of PBO 63,503 46,212
Unrecognized net experience gain (60,445) (42,324)
Unrecognized prior service costs 14,147 16,677
Unrecognized net transition asset being
recognized over 18 years (21,533) (23,490)
Pension - prepaid cost (liability) $ (4,328) $(2,925)
18
1993 1992 1991
Assumptions:
Discount rate used to calculate PBO 7.25% 8.00% 8.00%
Rate of increase in future compensation levels 5.25% 6.00% 6.25%
Long-term rate of return on assets 8.50% 8.50% 8.50%
Net pension expense for 1993, 1992 and
1991 included the following components
(thousands of dollars):
1993 1992 1991
Service Cost $ 6,151 $ 6,082 $ 5,627
Interest cost on PBO 14,241 13,792 13,641
Actual return on plan assets (48,231) (18,272) (45,693)
Net amortization and deferral 29,839 1,496 30,029
Net periodic pension expense $ 2,000 $ 3,098 $ 3,604
Other Post-Retirement Benefit Plans
Portland General accrues for health,
medical and life insurance costs during
the employees' service years, per SFAS
No. 106. The Company receives recovery
for the annual provision in customer
rates. Employees are covered under a
Defined Dollar Medical Benefit Plan
which limits Portland General's
obligation by establishing a maximum
contribution per employee. The
accumulated benefit obligation for
postretirement health and life insurance
benefits at December 31, 1993 was
$31 million, for which there were
$31 million of assets held in trust.
The projected benefit obligation for
postretirement health and life insurance
benefits at December 31, 1992 was $29
million.
Portland General also provides senior
officers with additional benefits under
an unfunded Supplemental Executive
Retirement Plan (SERP). Projected
benefit obligations for the SERP are $16
million and $12 million at December 31,
1993 and 1992, respectively.
Deferred Compensation
Portland General provides certain
management employees with benefits under
an unfunded Management Deferred
Compensation Plan (MDCP). Obligations
for the MDCP are $18 million and
$14 million at December 31, 1993 and
1992, respectively.
Trojan Retention Plan
In October 1992, Portland General
implemented a defined contribution plan
to retain Trojan employees during a
phaseout of plant operations. Trojan
ceased commercial operation in early
1993; participation in the retention
plan was terminated on May 31, 1993 and
all benefits under the plan were paid.
Employee Stock Ownership Plan
Portland General has an Employee Stock
Ownership Plan (ESOP) which is a part of
its 401(k) retirement savings plan.
Employee contributions up to 6% of base
pay are matched by employer
contributions in the form of ESOP common
stock. Shares of common stock to be
used to match contributions of PGE
employees were purchased from a
$36 million loan from PGE to the ESOP
trust in late 1990. This loan is
presented in the common equity section
as unearned compensation. Cash
contributions from PGE and dividends on
shares held in the trust are used to pay
the debt service on PGE's loan. As the
loan is retired, an equivalent amount of
stock is allocated to employee accounts.
In 1993, total contributions to the ESOP
of $5 million combined with dividends on
unallocated shares of $2 million were
used to pay debt service and interest on
PGE's loan. Shares of common stock used
to match contributions by employees of
Portland General and its subsidiaries
are purchased on the open market.
19
Note 5
Income Taxes
The following table shows the detail of
taxes on income and the items used in
computing the differences between the
statutory federal income tax rate and
Portland General's effective tax rate.
Note: The table does not include income
taxes related to 1991 losses from
independent power or discontinued real
estate operations (thousands of
dollars):
1993 1992 1991
Income Tax Expense
Currently payable $ 2,989 $ 44,057 $ 22,520
Deferred income taxes
Accelerated depreciation 15,477 20,049 26,258
WNP-3 amortization (1,099) (2,190) (2,570)
AMAX coal contract (1,238) (1,227) (1,050)
Trojan operating costs 17,332 7,402 4,080
Energy efficiency programs 7,327 3,246 2,859
Replacement power costs 26,543 (246) 5,084
Repurchase debt 4,847 1,019 (850)
USDOE nuclear fuel assessment 6,108 - -
Excess deferred taxes (3,494) (1,888) (1,557)
Interim rate relief - 6,573 1,036
Lease income (18,151) (15,453) (14,892)
Nonrecourse debt interest 12,578 11,621 12,156
Other 6,659 (1,258) (3,469)
Investment tax credit adjustments (4,356) (6,981) (4,589)
$ 71,522 $ 64,724 $ 45,016
Provision Allocated to:
Operations $ 67,520 $ 67,235 $ 44,005
Other income and deductions 4,002 (2,511) 1,011
$ 71,522 $ 64,724 $ 45,016
Effective Tax Rate Computation
Computed tax based on statutory $ 56,224 $ 52,478 $ 33,477
federal income tax rates applied to
income before income taxes
Increases (Decreases) resulting from:
Accelerated depreciation 10,748 9,462 7,763
State and local taxes - net 3,288 10,117 5,766
Investment tax credits (4,356) (6,981) (4,589)
Adjustments to income tax reserves - (3,284) (393)
Excess deferred taxes (3,419) (1,816) (1,483)
USDOE nuclear fuel assessment 5,075 - -
Preferred dividend requirement 3,935 4,296 4,390
Other 27 452 85
$ 71,522 $ 64,724 $ 45,016
Effective tax rate 44.5% 41.9% 45.7%
20
Effective January 1, 1993, Portland
General adopted SFAS No. 109,
"Accounting for Income Taxes". Prior to
SFAS 109, Portland General accounted for
income taxes in accordance with
Accounting Principles Board Opinion No.
11. Prior period financial statements
have not been restated. As of December
31, 1993 and 1992, the significant
components of the Company's deferred
income tax assets and liabilities were
as follows (thousands of dollars):
1993 1992
Deferred Tax Assets
Plant-in-service $ 83,602 $ 18,608
Regulatory Reserve 47,718 46,804
Other 75,404 40,796
206,724 106,208
Deferred Tax Liabilities
Plant-in-service (497,476) (201,596)
WNP-3 exchange contract (70,542) (71,099)
Replacement Power Costs (29,574) (4,838)
Leasing (147,101) (140,980)
Other (94,924) (53,129)
(839,617) (471,642)
Less Current deferred Taxes 842 -
Less valuation allowance (28,197) -
Total $(660,248) $(365,434)
As a result of implementing SFAS 109,
Portland General has recorded deferred
tax assets and liabilities for all
temporary differences between the
financial statement bases and tax bases
of assets and liabilities.
Portland General has certain state
pollution control tax credit
carryforwards and the benefits of
capital loss carryforwards that
presently cannot be offset with future
taxable income or capital gains and
accordingly has recorded a valuation
allowance totalling $28.2 million at
December 31, 1993 to fully reserve
against these assets.
Federal alternative minimum tax credit
carryforwards, which have no expiration
date, are $15.7 million at December 31,
1993.
The Omnibus Budget Reconciliation Act of
1993 resulted in a federal tax rate
increase from 34% to 35% effective
January 1, 1993. The tax rate increase
resulted in additional income tax
expense for the Company of $4.9 million.
The IRS completed its examination of
Portland General's tax returns for the
years 1985 to 1987 and has issued a
statutory notice of tax deficiency,
which Portland General is contesting.
As part of this audit, the IRS has
proposed to disallow PGE's 1985 WNP-3
abandonment loss deduction on the
premise that it is a taxable exchange.
PGE disagrees with this position and
will take appropriate action to defend
its deduction. Management believes that
it has appropriately provided for
probable tax adjustments and is of the
opinion that the ultimate disposition of
this matter will not have a material
adverse impact on the financial
condition of Portland General.
21
Note 6
Trojan Nuclear Plant
Shutdown - PGE is the 67.5% owner of
Trojan. In early 1993, PGE ceased
commercial operation of Trojan. PGE
made the decision to shut down Trojan as
part of its least cost planning process,
a biennial process whereby PGE evaluates
a mix of energy options that yield an
adequate and reliable supply of
electricity at the least cost to the
utility and to its customers. On June
3, 1993 the PUC acknowledged PGE's Least
Cost Plan (LCP).
Decommissioning Estimate - The 1993
nuclear decommissioning estimate of $409
million represents a site-specific
decommissioning cost estimate performed
for Trojan by an experienced
decommissioning engineering firm. This
cost estimate assumes that the majority
of decommissioning activities will occur
between 1998 and 2002, after
construction of a temporary dry spent
fuel storage facility. The final
decommissioning activities will occur in
2018 after PGE completes shipment of
spent fuel to a United States Department
of Energy (USDOE) facility.
The decommissioning cost estimate
includes the cost of decommissioning
planning, removal and burial of
irradiated equipment and facilities as
required by the Nuclear Regulatory
Commission (NRC); building demolition
and nonradiological site remediation;
and fuel management costs including
licensing, surveillance and $75 million
of transition costs. Transition costs
are the operating costs associated with
closing Trojan, operating and
maintaining the spent fuel pool and
securing the plant until dismantlement
can begin. Except for transition costs,
which will continue to be amortized as
incurred PGE will fund the
decommissioning costs through
contributions to the Trojan
decommissioning trust.
The 1992 decommissioning cost estimate
of $411 million was based upon a study
performed on a nuclear plant similar to
Trojan and included the cost of
dismantlement activities performed
during the years 1996 through 2002,
monitoring of stored spent fuel through
2018 and $130 million of miscellaneous
closure and transition costs ($43
million was amortized to nuclear
operating expenses during 1993).
The 1992 estimate and the 1993 site-
specific estimate are reflected in the
financial statements in nominal dollars
(actual dollars expected to be spent in
each year). The difference between the
1992 and the 1993 cost estimates,
reflected in nominal dollars, is due to
the application of a higher inflation
factor, the timing of decommissioning
activities and certain changes in
assumptions, such as decommissioning the
temporary dry spent fuel storage
facility and shipping highly activated
reactor components to the USDOE
repository in 2018, which are included
in the 1993 estimate. Both the 1992
cost estimate and the 1993 site-specific
cost estimate reflected in 1993
(current) dollars are $289 million.
Assumptions used to develop the site-
specific cost estimate represent the
best information PGE has currently.
However, the Company is continuing its
analysis of various options which could
change the timing and scope of
dismantling activities. Presently, PGE
is planning to accelerate the timing of
large component removal which could
reduce overall decommissioning costs.
PGE plans to submit a detailed
decommissioning work plan to the NRC in
mid-1994. PGE expects any future
changes in estimated decommissioning
costs to be incorporated in future
revenues to be collected from customers.
PGE is recording an annual operating
provision of $11 million for
decommissioning. This provision is
being collected from customers and
deposited in an external trust fund.
Earnings on the trust fund assets reduce
the amount of decommissioning costs to
be collected from customers. Trojan
abandonment - Decommissioning of $356
million (reflected in the deferred
charges section of the Company's balance
sheet) represent remaining
decommissioning costs expected to be
collected from customers.
Trojan decommissioning trust assets are
invested primarily in investment grade
tax-exempt bonds. At December 31, 1993
the trust reflects the following
activity (thousands of dollars):
Beginning Balance 1/01/93 $32,945
1993 Activity
Contributions 11,220
Earnings 4,696
Ending Balance 12/31/93 $48,861
22
Investment Recovery - PGE filed a
general rate case on November 8, 1993
which addresses recovery of Trojan plant
costs, including decommissioning. In
late February 1993, the PUC granted PGE
accounting authorization to continue
using previously approved depreciation
and decommissioning rates and lives for
its Trojan investment.
As stated earlier, PGE made the decision
to permanently cease commercial
operation of Trojan as part of its least
cost planning process. Management
determined that continued operation of
Trojan was not cost effective. Least
cost analysis assumed that recovery of
the Trojan plant investment, including
future decommissioning costs, would be
granted by the PUC. Regarding the
authority of the PUC to grant recovery,
the Oregon Department of Justice
(Attorney General) issued an opinion
that the PUC may allow rate recovery of
total plant costs, including operating
expenses, taxes, decommissioning costs,
return of capital invested in the plant
and return on the undepreciated
investment. While the Attorney
General's opinion does not guarantee
recovery of costs associated with the
shutdown, it does clarify that under
current law the PUC has authority to
allow recovery of such costs in rates.
PGE asked the PUC to resolve certain
legal and policy questions regarding the
statutory framework for future
ratemaking proceedings related to the
recovery of the Trojan investment and
decommissioning costs. On August 9,
1993, the PUC issued a declaratory
ruling agreeing with the Attorney
General's opinion discussed above. The
ruling also stated that the PUC will
favorably consider allowing PGE to
recover in rates some or all of its
return on and return of its
undepreciated investment in Trojan,
including decommissioning costs, if PGE
meets certain conditions. PGE believes
that its general rate filing provides
evidence that satisfies the conditions
established by the PUC.
Management believes that the PUC will
grant future revenues to cover all, or
substantially all, of Trojan plant costs
with an appropriate return. However,
future recovery of the Trojan plant
investment and future decommissioning
costs requires PUC approval in a public
regulatory process. Although the PUC
has allowed PGE to continue, on an
interim basis, collection of these costs
in the same manner as prescribed in its
last general rate proceeding, the PUC
has yet to address recovery of costs
related to a prematurely retired plant
when the decision to close the plant was
based upon a least cost planning
process. Due to uncertainties inherent
in a public process, management cannot
predict, with certainty, whether all, or
substantially all, of the Trojan plant
investment and future decommissioning
costs will be recovered. Management
believes the ultimate outcome of this
public regulatory process will not have
a material adverse effect on the
financial condition, liquidity or
capital resources of Portland General.
However, it may have a material impact
on the results of operations for a
future reporting period.
Portland General's independent
accountants are satisfied that
management's assessment regarding the
ultimate outcome of the regulatory
process is reasonable. Due to the
inherent uncertainties in the regulatory
process discussed above, the magnitude
of the amounts involved and the possible
impact on the results of operations for
a future reporting period, the
independent accountants have added a
paragraph to their audit report to give
emphasis to this matter.
Nuclear Fuel Disposal and Clean up of
Federal Plants - PGE has a contract with
the USDOE for permanent disposal of
spent nuclear fuel in USDOE facilities.
These disposal services are now
estimated to commence no earlier than
2010. PGE paid the USDOE .1 cent per net
kilowatt-hour sold at Trojan for these
future disposal services. On-site
storage capacity is able to accommodate
fuel until the federal facilities are
available.
The Energy Policy Act of 1992 provided
for the creation of a Decontamination
and Decommissioning Fund (DDF) to
provide for the clean up of the USDOE
gas diffusion plants. The DDF is to be
funded by domestic nuclear utilities and
the Federal Government. The legislation
provided that each utility pays based on
the ratio of the amount of enrichment
services the utility purchased and the
total amount of enrichment services
purchased by all domestic utilities
prior to the enactment of the
legislation. Trojan's estimated usage
was 1.03%. Based on this estimate,
PGE's portion of the funding requirement
is approximately $15.6 million. Amounts
are funded over 15 years beginning with
the USDOE's fiscal year 1993. PGE made
its first of the 15 annual payments on
September 30, 1993 for $1.04 million.
Nuclear Insurance - The Price-Anderson
Amendment of 1988 limits public
liability claims that could arise from a
nuclear incident to a maximum of $9.4
billion per incident. PGE has purchased
the maximum primary insurance coverage
currently available of $200 million.
The
23
remaining $9.2 billion is covered by
secondary financial protection required
by the NRC. This secondary coverage
provides for loss sharing among all
owners of nuclear reactor licenses.
In the event of an incident at any
nuclear plant in which the amount of the
loss exceeds $200 million, PGE could be
assessed retrospective premiums of up to
$53.5 million per incident, limited to a
maximum of $7 million per incident in
any one year under the secondary
financial protection coverage.
PGE's share of property damage and
decontamination coverage is provided for
losses at Trojan up to $337 million
primary and $378 million excess. The
$378 million excess coverage is provided
subject to a potential maximum
retrospective premium adjustment of
$0.8 million per policy year. The NRC
requires that, in case of an incident,
insurance proceeds must first be
dedicated to stabilizing and
decontaminating the reactor. This could
reduce the amount of proceeds available
to repair, replace or restore the
property or otherwise available to the
trustee for application under PGE's
first mortgage bond indenture.
Insurance coverage is provided primarily
through insurance companies owned by
utilities with nuclear facilities.
24
Note 7
Common and Preferred Stock
Cumulative Preferred
Common Stock of Subsidiary Other
Number $3.75 Par Number $100 Par $25 Par No-Par Paid-in Unearned
of Shares Value of Shares Value Value Value Capital Compensation*
(Thousands of Dollars
except share amount)
December 31, 1990 46,145,208 $173,045 2,287,040 $128,704 $25,000 - $495,212 $(35,789)
Sales of stock 381,342 1,430 - - - - 5,161 -
Redemption of stock (1,387) (6) (18,000) (1,800) - - 2,119 -
Repayment of ESOP loan
and other - - - - - - 67 5,719
December 31, 1991 46,525,163 174,469 2,269,040 126,904 25,000 - 502,559 (30,070)
Sales of stock 574,538 2,155 300,000 - - $30,000 7,293 -
Redemption of stock - - (1,036,000) (3,600) (25,000) - 871 -
Repayment of ESOP loan
and other - - - - - - (921) 6,592
December 31, 1992 47,099,701 176,624 1,533,040 123,304 - 30,000 $509,802 (23,478)
Sales of stock 534,952 2,006 - - - 8,802 -
Redemption of stock - - (36,000) (3,600) - - 2,130 -
Repayment of ESOP loan
and other - - - - - - (1,676) 4,327
December 31, 1993 47,634,653 $178,630 1,497,040 $119,704 $ - $30,000 $519,058 $(19,151)
*See the discussion of stock compensation plans below and Note 4, Employee
Benefits for a
discussion of the ESOP.
Common Stock
As of December 31, 1993, Portland
General had reserved 367,000 authorized
but unissued common shares for issuance
under its dividend reinvestment plan.
In addition, new shares of common stock
are issued under an employee stock
purchase plan.
Cumulative Preferred Stock of Subsidiary
No dividends may be paid on common stock
or any class of stock over which the
preferred stock has priority unless all
amounts required to be paid for
dividends and sinking fund payments have
been paid or set aside, respectively.
The 7.75% Series preferred stock has an
annual sinking fund requirement which
requires the
redemption of 15,000 shares at $100 per
share beginning in 2002. At its option,
PGE may
redeem, through the sinking fund, an
additional 15,000 shares each year. All
remaining shares shall be mandatorily
redeemed by sinking fund in 2007. This
Series is only redeemable by operation
of the sinking fund.
The 8.10% Series preferred stock has an
annual sinking fund requirement which
requires the redemption of 100,000
shares at $100 per share beginning in
1994. At its option, PGE may redeem,
through the sinking fund, an additional
100,000 shares each year. This Series
is redeemable at the option of PGE at
$103 per share to April 14, 1994 and at
reduced amounts thereafter.
Common Dividend Restriction of Subsidiary
PGE is restricted from paying dividends
or making other distributions to
Portland General, without prior PUC
approval, to the extent such payment or
distribution would reduce PGE's common
stock equity capital below 36% of its
total capitalization. At December 31,
1993, PGE's common stock equity capital
was 44% of its total capitalization.
Stock Compensation Plans
Portland General has a plan under which
2.3 million shares of Portland General
common stock are available for stock-
based incentives. Upon termination,
expiration or lapse of certain types of
awards, any shares remaining subject to
the award are again available for grant
under the plan. As of December 31,
1993, 856,800 stock options were
outstanding. Of the outstanding
options, 20,000 are exercisable: 10,000
at a price of $15.75 per share; 2,500 at
$17.375 per share; and 7,500 at $14.75
per share. The remaining 836,800
options are exercisable beginning in
1994 through 1998 at prices ranging from
$14 to $22.25 per share. In addition,
25,000 options granted under a separate
award were exercised in 1993.
On December 6, 1993 Portland General
issued 64,000 restricted common shares
for officers of Portland General and
PGE.
25
Note 8
Short-Term Borrowings
Portland General meets its liquidity
needs through the issuance of commercial
paper and borrowings from commercial
banks. At December 31, 1993, Portland
General had total committed lines of
credit of $240 million. Portland
General has a $40 million committed
facility expiring in July 1994. PGE has
committed facilities of $120 million
expiring in July 1996 and $80 million
expiring in July 1994. These lines of
credit have annual fees ranging from
0.15 to 0.25 percent and do not require
compensating cash balances. The
facilities are used primarily as backup
for both commercial paper and borrowings
from commercial banks under uncommitted
lines of
credit. At December 31, 1993, there
were no outstanding borrowings under the
committed facilities.
Portland General has a commercial paper
facility of $40 million in addition to
PGE's $200 million facility. The amount
of commercial paper outstanding cannot
exceed each company's unused committed
lines of credit.
Commercial paper and lines of credit
borrowings are at rates reflecting
current market conditions and,
generally, are substantially below the
prime commercial rate.
Short-term borrowings and related
interest rates were as follows
(thousands of dollars):
1993 1992 1991
As of year end:
Aggregate short-term debt outstanding
Bank loans - $ 10,002 $ 16,000
Commercial paper $159,414 $130,676 $ 76,473
Weighted average interest rate
Bank loans - 4.4% 6.8%
Commercial paper 3.5% 4.1% 5.5%
Unused committed lines of credit $240,000 $180,000 $175,000
For the year ended:
Average daily amounts of short-term
debt outstanding
Bank loans $ 10,949 $ 7,671 $ 56,579
Commercial paper $123,032 $ 89,077 $ 30,539
Weighted daily average interest rate
Bank loans 3.6% 5.0% 7.2%
Commercial paper 3.5% 4.2% 6.5%
Maximum amount outstanding
during the year $171,208 $144,056 $108,231
Interest rates exclude the effect of commitment
fees, facility fees and other financing fees.
26
Note 9
Long-Term Debt
The Indenture securing PGE's first
mortgage bonds constitutes a direct
first mortgage lien on substantially all
utility property and franchises, other
than expressly excepted property.
The following principal amounts of
long-term debt become due for redemption
through sinking funds and maturities
(thousands of dollars):
1994 1995 1996 1997 1998
Sinking Funds $ 1,313 $ 1,138 $ 988 $ 688 $ 688
Maturities 41,289 71,356 57,528 56,085 64,745
The sinking funds include $988,000 a
year for 1994 through 1996 and $688,000
for 1997 and 1998, which, in accordance
with the terms of the Indenture, PGE may
satisfy by pledging available property
additions equal to 166-2/3% of the
sinking fund requirements.
Note 10
Commitments
New Generating Resources
During 1993 PGE entered into a $133
million agreement with a contractor for
construction of the Coyote Springs
cogeneration facility. Under the terms
of the agreement, PGE is committed to
making progress payments of
approximately $91 million in 1994, and
$16 million in 1995. At December 31,
1993, progress payments of approximately
$26 million have been made.
Natural Gas Transmission Agreements
In January 1993, PGE signed two long-
term agreements for transmission of
natural gas from domestic and Canadian
sources to PGE's existing and proposed
natural gas-fired generating facilities.
One agreement provides PGE firm pipeline
capacity beginning June, 1993 and
increased pipeline capacity in November
1995. Beginning in late 1995, the
second agreement will give PGE capacity
on a second interstate gas pipeline.
Under the terms of these two agreements,
PGE is committed to paying capacity
charges of approximately $3 million
during 1994, $4 million in 1995,
$11 million annually through 2010 and $3
million annually until 2015. Under
these agreements PGE has the right to
assign unused capacity to other parties.
In addition, PGE will make a capital
contribution for pipeline construction
of between $3 million and $7 million in
1995.
Railroad Service Agreement
In October 1993, PGE entered into a
railroad service agreement and will make
capital contributions toward upgrading a
line used to deliver coal from Wyoming
to the Boardman Coal Plant (Boardman).
PGE is required to contribute $8 million
over the 6-year contract life.
Purchase Commitments
Other Purchase commitments outstanding
(principally construction at PGE)
totaled approximately $14 million at
December 31, 1993. Cancellation of
these purchase agreements could result
in cancellation charges.
27
Purchased Power
PGE has long-term power purchase
contracts with certain public utility
districts in the state of Washington and
with the City of Portland, Oregon. PGE
is required to pay its proportionate
share of the operating and debt service
costs of the hydro projects whether or
not they are operable. Selected
information is summarized as follows
(thousands of dollars):
Rocky Priest Portland
Reach Rapids Wanapum Wells Hydro
Revenue bonds outstanding
at December 31, 1993 $189,752 $141,245 $189,395 $199,920 $ 40,230
PGE's current share of output,
capacity, and cost
Percentage of output 12.0% 13.9% 18.7% 21.9% 100%
Net capability in megawatts 154 125 170 184 36
Annual cost, including debt
service
1993 $4,000 $3,800 $5,400 $5,500 $4,800
1992 3,900 3,100 4,400 4,800 4,400
1991 3,800 3,400 4,000 4,300 3,800
Contract expiration date 2011 2005 2009 2018 2017
PGE's share of debt service costs,
excluding interest, will be
approximately $6 million for each of the
years 1994 through 1996, $7 million for
1997 and $5 million for 1998. The
minimum payments through the remainder
of the contracts are estimated to total
$104 million.
PGE has entered into long-term contracts
to purchase power from three other
utilities in the
region. These contracts will require
fixed payments of up to $25 million in
1994 and $32 million in 1995 and 1996.
After that date, capacity charges will
be up to $25 million annually until the
second contract terminates in 2001. The
third contract will continue until 2016
with capacity charges of $19 million
annually.
28
Leases
PGE has operating and capital leasing
arrangements for its headquarters
complex, combustion turbines and the
coal-handling facilities and certain
railroad cars for Boardman. PGE's
aggregate rental payments charged to
expense amounted to $22 million in 1993,
$20 million in 1992 and $21 million in
1991. PGE has capitalized its
combustion turbine leases. However,
these leases are considered operating
leases for ratemaking purposes.
As of December 31, 1993, the future
minimum lease payments under non-
cancelable leases are as follows
(thousands of dollars):
Year Ending Operating Leases
December 31 Capital Leases (Net of Sublease Rentals) Total
1994 $ 3,016 $ 18,568 $ 21,584
1995 3,016 19,711 22,727
1996 3,016 20,261 23,277
1997 3,016 19,794 22,810
1998 3,016 18,992 22,008
Remainder 1,388 186,575 187,963
Total 16,468 $283,901 $300,369
Imputed (2,775)
Interest
Present Value of
Minimum Future
Net Lease Payments $13,693
Included in the future minimum operating
lease payments schedule above is
approximately $140 million for PGE's
headquarters complex.
Note 11
WNP-3 Settlement Exchange Agreement
PGE is selling energy received under a
WNP-3 Settlement Exchange Agreement
(WSA) to the Western Area Power
Administration (WAPA) for 25 years,
which began October 1990. Revenues from
the WAPA sales contract are expected to
be sufficient to support the carrying
value of PGE's investment.
The energy received by PGE under WSA is
the result of a settlement related to
litigation surrounding the abandonment
of WNP-3. PGE receives about 65 average
annual megawatts for approximately 30
years from BPA under the WSA. In
exchange PGE will make available to BPA
energy from its combustion turbines or
from other available resources at an
agreed-to price.
29
Note 12
Jointly-Owned Plant
At December 31, 1993, PGE had the
following investments in jointly-owned
generating plants (thousands of
dollars):
MW PGE % Plant Accumulated
Facility Location Fuel Capacity Interest In Service Depreciation
Boardman Boardman, OR Coal 508 65.0 $359,555 $152,981
Colstrip 3&4 Colstrip, MT Coal 1,440 20.0 444,817 157,576
Centralia Centralia, WA Coal 1,310 2.5 9,301 5,143
The dollar amounts in the table above
represent PGE's share of each jointly-
owned plant. Each participant in the
above generating plants has provided its
own financing. PGE's share of the
direct expenses of these plants is
included in the corresponding operating
expenses on Portland General's and PGE's
consolidated income statements.
Note 13
Regulatory Matters
Public Utility Commission of Oregon
PGE had sought judicial review of three
rate matters related to a 1987 general
rate case. In 1989, PGE reserved $89
million for an unfavorable outcome of
these matters. In July 1990, PGE
reached an out-of-court settlement with
the PUC on two of the three rate matter
issues being litigated. As a result of
the settlement, $16 million was restored
to income in 1990. The settlement
resolved the dispute with the PUC
regarding treatment of accelerated
amortization of certain ITC and 1986-
1987 interim relief. As a settlement of
the interim relief issue, PGE refunded
approximately $17 million to customers.
In 1991, the Utility Reform Project (URP)
petitioned the PUC to reconsider the order
approving the settlement. The Oregon legislature
subsequently passed a law clarifying the PUC's
authority to approve the settlement. As a
result, the PUC issued an order implementing the
settlement. URP has filed an appeal in
Multnomah County Circuit Court to overturn the
PUC's order implementing settlement.
In addition, CUB filed a complaint in 1991 in
Marion County Circuit Court seeking to
modify, vacate, set aside or reverse the
PUC's order implementing settlement. In
September 1992, the Marion County
Circuit Court judge issued a decision
upholding the PUC orders approving the
settlement. CUB appealed the decision.
In December 1993 the Oregon Court of
Appeals affirmed without opinion the
Circuit Court decision upholding the PUC
order.
The settlement, however, did not resolve
the Boardman/Intertie gain issue, which
the parties continue to litigate. PGE's
position is that 28% of the gain should
be allocated to customers. The 1987 rate
order allocated 77% of the gain to customers
over a 27-year period. PGE has fully reserved
this amount, which is being amortized over a
27-year period in accordance with the 1987
rate order. The unamortized gain, $120
million at December 31, 1993, is shown as
"Regulatory reserves" on the balance sheet.
In PGE's general rate filing, PGE proposes to
accelerate the amortization of the Boardman
gain to customers from 27 years to three years,
starting in January 1995, as part of a
comprehensive settlement of the outstanding
litigation on this issue.
30
Note 14
Legal Matters
WNP Cost Sharing
PGE and three other investor-owned
utilities (IOUs) are involved in
litigation surrounding the proper
allocation of shared costs between
Washington Public Power Supply System
(Supply System) Units 1 and 3 and Units
4 and 5. A court ruling issued in May
1989 stated that Bond Resolution
No. 890, adopted by the Supply System,
controlled disbursement of proceeds from
bonds issued for the construction of
Unit 5, including the method for
allocation of shared costs. It is the
IOUs' contention that at the time the
project commenced there was agreement
among the parties as to the allocation
of shared costs and that this agreement
and the Bond Resolution are consistent
such that the allocation under the
agreement is not prohibited by the Bond
Resolution.
In October 1990, the U.S. District Court
ruled that the methodology for the
allocation of shared costs required the
application of principles akin to those
espoused by Chemical Bank. In February
1992, the Court of Appeals reversed the
U.S. District Court's decision and ruled
that shared costs between Units 3 and 5
should be allocated in proportion to
benefits under the equitable method
supported by PGE and the other IOUs. A
trial remains necessary to assure that
the allocations are properly performed.
Bonneville Pacific Class Action Suit and Lawsuit
A consolidated case of all previously
filed class actions has been filed in
U.S. District Court for the District of
Utah purportedly on behalf of purchasers
of common shares and convertible
subordinated debentures of Bonneville
Pacific Corporation in the period from
August 18, 1989 until January 22, 1992
alleging violations of federal and Utah
state securities laws, common law fraud
and negligent misrepresentation. The
defendants are specific Bonneville
Pacific insiders, Portland General,
Portland General Holdings, Inc., certain
Portland General individuals, Deloitte &
Touche and three underwriters of a
Bonneville Pacific offering of
subordinated debentures. The amount of
damages alleged is not specified.
In addition, the bankruptcy trustee for
Bonneville Pacific has filed an amended
complaint against Portland General,
Holdings, and certain affiliated
individuals in U.S. District Court for
the District of Utah alleging common low
fraud, breach of fiduciary duty,
tortious interference, negligence,
negligent misrepresentation and other
actionable wrongs. The original suit
was filed by Bonneville Pacific prior to
the appointment of the bankruptcy
trustee. The amount of damages sought
is not specified in the complaint.
Other Legal Matters
Portland General and certain of its
subsidiaries are party to various other
claims, legal actions and complaints
arising in the ordinary course of
business. These claims are not
considered material.
Summary
While the ultimate disposition of these
matters may have an impact on the
results of operations for a future
reporting period, management believes,
based on discussion of the underlying
facts and circumstances with legal
counsel, that these matters will not
have a material adverse effect on the
financial condition of Portland General.
Other Bonneville Pacific Related
Litigation
Holdings filed complaints seeking
approximately $228 million in damages in
the Third Judicial District Court for
Salt Lake County (in Utah) against
Deloitte & Touche and certain other
parties associated with Bonneville
Pacific alleging that it relied on
fraudulent and negligent statements and
omissions by Deloitte & Touche and the
other defendants when it acquired a 46%
interest in and made loans to Bonneville
Pacific starting in September 1990.
31
Note 15
Fair Value of Financial Instruments
The following methods and assumptions
were used to estimate the fair value of
each class of financial instruments for
which it is practicable to estimate that
value:
Cash and cash equivalents
The carrying amount of cash and cash
equivalents approximates fair value
because of the short maturity of those
instruments.
Other investments
Other investments approximate market
value.
Redeemable preferred stock
The fair value of redeemable preferred
stock is based on quoted market prices.
Long-term debt
The fair value of long-term debt is
estimated based on the quoted market
prices for the same or similar issues or
on the current rates offered to Portland
General for debt of similar remaining
maturities.
The estimated fair values of financial
instruments are as follows (thousands of
dollars):
1993 1992
Carrying Fair Carrying Fair
Amount Value Amount Value
Preferred stock subject to $ 80,000 $ 84,815 $ 83,600 $ 82,686
mandatory redemption
Long-term debt 870,814 902,059 886,629 915,292
32
Management's Statement of Responsibility
PGE's management is responsible for the preparation and presentation of
the consolidated financial statements in this report. Management is
also responsible for the integrity and objectivity of the statements.
Generally accepted accounting principles have been used to prepare the
statements, and in certain cases informed estimates have been used that
are based on the best judgment of management.
Management has established, and maintains, a system of internal
accounting controls. The controls provide reasonable assurance that
assets are safeguarded, transactions receive appropriate authorization, and
financial records are reliable. Accounting controls are supported
by written policies and procedures, an operations planning and budget
process designed to achieve corporate objectives, and internal audits
of operating activities.
PGE's Board of Directors includes an Audit Committee composed entirely
of outside directors. It reviews with management, internal auditors
and independent auditors, the adequacy of internal controls, financial
reporting, and other audit matters.
Arthur Andersen & Co. is PGE's independent public accountant. As
a part of its annual audit, internal accounting controls are selected
for review in order to determine the nature, timing and extent of audit tests
to be performed. All of the corporation's financial records and related
data are made available to Arthur Andersen & Co. Management has also
endeavored to ensure that all representations to Arthur Andersen &
Co. were valid and appropriate.
Joseph M. Hirko
Vice President Finance,
Chief Financial Officer,
Chief Accounting Officer
and Treasurer
Report of Independent Public Accountants
To the Board of Directors and Shareholder of
Portland General Electric Company:
We have audited the accompanying consolidated balance sheets
and statements of capitalization of Portland General Electric Company
and subsidiaries as of December 31, 1993 and 1992, and the related
consolidated statements of income, retained earnings and cash flows for
each of the three years in the period ended December 31, 1993. These
financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management,
as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis
for our opinion.
As more fully discussed in Note 6 to the consolidated financial statements,
the realization of assets related to the abandoned Trojan Nuclear Plant
in the amount of $722 million is dependent upon the ratemaking treatment as
determined by the Public Utility Commission of Oregon.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Portland General
Electric Company and subsidiaries as of December 31, 1993 and 1992, and the
results of their operations and their cash flows for each of the three
years in the period ended December 31, 1993 in conformity with
generally accepted accounting principles.
As more fully discussed in Note 5A to the consolidated financial
statements, effective January 1, 1993, the Company changed its method of
accounting for income taxes.
Portland, Oregon,
January 25, 1994 ARTHUR ANDERSEN & CO.
33
Financial Statements and Supplementary Data
Portland General Electric Company and Subsidiaries
Consolidated Statements of Income
For the Years Ended December 31 1993 1992 1991
(Thousands of Dollars)
Operating Revenues $944,531 $880,098 $885,578
Operating Expenses
Purchased power and fuel 311,713 222,127 226,312
Production and distribution 73,576 93,677 96,174
Maintenance and repairs 55,320 70,476 91,272
Administrative and other 98,408 107,657 115,443
Depreciation, decommissioning and amortization 121,898 98,039 111,539
Taxes other than income taxes 55,676 54,945 58,337
Income taxes 71,490 73,140 47,244
788,081 720,061 746,321
Net Operating Income 156,450 160,037 139,257
Other Income (Deductions)
Allowance for equity funds used during construction - 311 617
Other 11,771 7,717 9,099
Income taxes (4,002) 2,511 (991)
7,769 10,539 8,725
Interest Charges
Interest on long-term debt and other 61,817 64,718 73,359
Interest on short-term borrowings 3,443 2,754 1,979
Allowance for borrowed funds used during construction (785) (2,458) (1,431)
64,475 65,014 73,907
Net Income 99,744 105,562 74,075
Preferred Dividend Requirement 12,046 12,636 12,913
Income Available for Common Stock $ 87,698 $ 92,926 $ 61,162
Portland General Electric Company and Subsidiaries
Consolidated Statements of Retained Earnings
For the Years Ended December 31 1993 1992 1991
(Thousands of Dollars)
Balance at Beginning of Year $165,949 $146,198 $146,610
Net Income 99,744 105,562 74,075
ESOP Tax Benefit & Preferred Stock
Premium @ Redemption (1,524) (2,505) 992
264,169 249,255 221,677
Dividends Declared
Common stock 72,826 70,670 62,566
Preferred stock 12,046 12,636 12,913
84,872 83,306 75,479
Balance at End of Year $179,297 $165,949 $146,198
The accompanying notes are an integral part of these consolidated statements.
34
Portland General Electric Company and Subsidiaries
Consolidated Balance Sheets
At December 31 1993 1992
(Thousands of Dollars)
Assets
Electric Utility Plant - Original Cost
Utility plant (includes Construction Work
in Progress of $46,679 and $12,308) $2,370,460 $2,260,935
Accumulated depreciation (894,284) (825,365)
1,476,176 1,435,570
Capital leases - less amortization of $23,626 and $21,471 13,693 15,847
1,489,869 1,451,417
Other Property and Investments
Conservation loans 12,018 14,061
Trojan decommissioning trust, at market value 48,861 32,945
Other investments 65,696 57,673
126,575 104,679
Current Assets
Cash and cash equivalents 2,099 3,414
Accounts and notes receivable 85,169 81,999
Unbilled and accrued revenues 133,476 69,151
Inventories, at average cost 46,534 61,550
Prepayments and other 20,646 32,997
287,924 249,111
Deferred Charges
Unamortized regulatory assets
Trojan abandonment - Plant 366,712 399,255
Trojan abandonment - Decommissioning 355,718 339,514
Trojan - other 66,387 94,759
Income taxes recoverable 228,233 -
Debt reacquisition costs 34,941 22,634
Energy efficiency programs 39,480 23,989
Other 33,857 37,445
WNP-3 settlement exchange agreement 178,003 182,492
Miscellaneous 18,975 15,685
1,322,306 1,115,773
$3,226,674 $2,920,980
Capitalization and Liabilities
Capitalization
Common stock equity $ 747,197 $ 726,076
Cumulative preferred stock
Subject to mandatory redemption 70,000 81,800
Not subject to mandatory redemption 69,704 69,704
Long-term debt 802,994 806,138
1,689,895 1,683,718
Current Liabilities
Long-term debt and preferred stock due within one year 41,614 34,500
Short-term borrowings 129,920 100,065
Accounts payable and other accruals 111,647 117,850
Accrued interest 17,139 23,416
Dividends payable 21,486 21,566
Accrued taxes 27,395 41,503
349,201 338,900
Other
Deferred income taxes 534,194 242,619
Deferred investment tax credits 60,706 64,781
Regulatory reserves 120,410 121,914
Trojan decommissioning reserve and misc. closure costs 407,610 411,404
Miscellaneous 64,658 57,644
1,187,578 898,362
$3,226,674 $2,920,980
The accompanying notes are an integral part of these consolidated balance sheets.
35
Portland General Electric Company and Subsidiaries
Consolidated Statements of Capitalization
At December 31 1993 1992
(Thousands of Dollars)
Common Stock Equity
Common stock, $3.75 par value per
share, 100,000,000 shares authorized,
40,458,877 shares outstanding $ 151,721 $ 151,721
Other paid-in capital - net 433,978 431,673
Unearned compensation (17,799) (23,267)
Retained earnings 179,297 165,949
747,197 44.2% 726,076 43.1%
Cumulative Preferred Stock
Subject to mandatory redemption
No par value, 30,000,000 shares authorized
7.75% Series, 300,000 shares outstanding 30,000 30,000
$100 par value, 2,500,000 shares authorized
8.875% Series, 0 and 36,000 shares outstanding - 3,600
Current sinking fund - (1,800)
8.10% Series, 500,000 shares outstanding 50,000 50,000
Current sinking fund (10,000) -
70,000 4.2 81,800 4.9
Not subject to mandatory redemption
7.95% Series, 298,045 shares outstanding 29,804 29,804
7.88% Series, 199,575 shares outstanding 19,958 19,958
8.20% Series, 199,420 shares outstanding 19,942 19,942
69,704 4.1 69,704 4.1
Long-Term Debt
First mortgage bonds
Maturing 1993 through 1997
4-5/8% Series due February 1, 1993 - 7,851
4-3/4% Series due June 1, 1993 - 9,720
4-3/4% Series due April 1, 1994 8,119 8,344
4.70% Series due March 1, 1995 3,220 3,395
5-7/8% Series due June 1, 1996 5,366 5,516
6.60% Series due October 1, 1997 15,363 15,663
Medium-term notes, 6.60%-9.27% 136,000 148,550
Maturing 1998 through 2002, 5.65%-8.88% 140,625 98,615
Maturing 2003 through 2007, 6.47%-9.07% 131,658 145,473
Maturing 2016 through 2023, 7.75%-9-5/8% 195,000 145,000
Pollution control bonds
Port of Morrow, Oregon, variable rate
(Average 2.3% for 1993), due 2013 23,600 23,600
City of Forsyth, Montana, variable rate
(Average 2.4% for 1993), due 2013
through 2016 118,800 118,800
Amount held by trustee (8,537) (8,498)
Port of St. Helens, Oregon, due 2010 and 2014
(Average variable 2.2%-2.4% for 1993) 51,600 51,600
10% Debentures due March 1, 2018 - 50,000
Capital lease obligations 13,693 15,847
Other 101 (638)
834,608 838,838
Long-term debt due within one year (31,614) (32,700)
802,994 47.5 806,138 47.9
Total capitalization $1,689,895 100.0% $1,683,718 100.0%
The accompanying notes are an integral part of these consolidated statements.
36
Portland General Electric Company and Subsidiaries
Consolidated Statements of Cash Flow
For the Years Ended December 31 1993 1992 1991
(Thousands of Dollars)
Cash Provided by Operations:
Net income $ 99,744 $ 105,562 $ 74,075
Noncash items included in net income:
Depreciation, decommissioning and amortization 92,336 109,749 114,103
Amortization of WNP-3 exchange agreement 4,489 5,658 6,231
Amortization of deferred charges - Trojan 31,419 1,609 577
Amortization of deferred charges - other 5,087 7,080 9,208
Deferred income taxes - net 60,721 4,252 7,628
Other noncash revenues - (311) (617)
Changes in working capital:
Increase in receivables (67,431) (9,588) (4,826)
(Increase) Decrease in inventories 15,017 (4,181) 751
Increase (Decrease) in payables (26,588) (2,084) 22,314
Other working capital items - net 10,600 7,328 (2,399)
Deferred charges - other (3,808) (13,198) (6,319)
Miscellaneous - net 14,231 20,435 13,388
235,817 232,311 234,114
Investing Activities:
Utility construction (125,787) (143,561) (138,905)
Energy efficiency programs (18,149) (10,365) (8,610)
Trojan decommissioning trust (11,220) (11,220) (19,272)
Other investments (8,294) (8,602) (7,915)
(163,450) (173,748) (174,702)
Financing Activities:
Short-term debt - net 29,855 27,939 17,451
Long-term debt issued 252,000 123,000 104,000
Long-term debt retired (266,986) (123,902) (111,004)
Preferred stock issued - 30,000 -
Preferred stock retired (3,600) (31,225) (1,800)
Dividends paid (84,951) (82,293) (71,233)
(73,682) (56,481) (62,586)
Increase (Decrease) in Cash and
Cash Equivalents (1,315) 2,082 (3,174)
Cash and Cash Equivalents at the Beginning
of Year 3,414 1,332 4,506
Cash and Cash Equivalents at the End
of Year $ 2,099 $ 3,414 $ 1,332
Supplemental disclosures of cash flow information
Cash paid during the year:
Interest $ 68,232 $ 64,452 $ 68,931
Income taxes 17,242 61,915 47,652
The accompanying notes are an integral part of these consolidated statements.
PAGE> 37
Portland General Electric Company and Subsidiaries
Notes to Financial Statements
Certain information, necessary for a sufficient understanding of PGE's
financial condition and results of operations, is substantially the same as
that disclosed by Portland General in this report. Therefore, the following
PGE information is incorporated by reference to Portland General's financial
information on the following page numbers.
Page
Notes to Financial Statements
Note 1A. Summary of Significant Accounting Policies 15
Note 4A. Employee Benefits 18
Note 6A. Trojan Nuclear Plant 22
Note 7A. Preferred Stock 25
Note 10A. Commitments 27
Note 11A. WNP-3 Settlement Exchange Agreement 29
Note 12A. Jointly-Owned Plant 30
Note 13A. Regulatory Matters 30
Note 14A. Legal Matters 31
Management's Discussion and Analysis of Financial
Condition and Results of Operations 2
38
Note 5A
Income Taxes
The following table shows the detail of taxes on income and the items used in
computing the differences between the statutory federal income tax rate and
Portland General Electric Company's (PGE) effective tax rate. (thousands of
dollars)
1993 1992 1991
Income Tax Expense
Currently payable $ 14,086 $ 59,804 $ 39,345
Deferred income taxes
Accelerated depreciation 5,039 5,987 9,167
WNP-3 Amortization (560) (2,190) (2,570)
Energy efficiency programs 7,449 3,246 2,859
USDOE nuclear fuel assessment 6,155 - -
AMAX coal contract (1,170) (1,227) (1,050)
Replacement power costs 26,785 (246) 5,084
Trojan operating costs 17,565 7,402 , 4,080
Repurchase debt 4,952 1,019 (850)
Excess deferred taxes (3,494) (1,888) (1,557)
Interim rate relief refund - 6,573 1,036
Other 2,760 (1,092) (3,160)
Investment tax credit adjustments (4,075) (6,759) (4,149)
$ 75,492 $ 70,629 $ 48,235
Provision Allocated to:
Operations $ 71,490 $ 73,140 $ 47,244
Other income and deductions 4,002 (2,511) 991
$ 75,492 $ 70,629 $ 48,235
Effective Tax Rate Computation
Computed tax based on statutory
federal income tax rates applied
to income before income taxes $ 61,333 $ 59,905 $ 41,430
Increases (Decreases) resulting from:
Accelerated depreciation 9,207 9,462 7,763
State and local taxes - net 9,783 10,568 4,984
Investment tax credits (4,075) (6,759) (4,149)
USDOE nuclear fuel assessment 5,050 - -
Excess deferred tax (3,419) (1,816) (1,483)
Adjustments to income tax reserves - (3,284) (507)
Other (2,387) 2,553 197
$ 75,492 $ 70,629 $ 48,235
Effective tax rate 43.1% 40.1% 39.6%
39
Effective January 1, 1993, PGE adopted Statement of Financial Accounting
Standards (SFAS) No. 109, "Accounting for Income Taxes". Prior to SFAS 109,
PGE accounted for income taxes in accordance with Accounting Principles Board
Opinion No. 11. Prior period financial statements have not been restated. As
of December 31, 1993 and 1992, the significant components of PGE's deferred
income tax assets and liabilities were as follows:
1993 1992
Deferred Tax Assets
Plant-in-service $ 83,602 $ 18,608
Regulatory Reserve 47,718 46,804
Other 24,038 22,626
155,358 88,038
Deferred Tax Liabilities
Plant-in-service (497,476) (201,596)
Replacement Power Costs (29,574) (4,838)
WNP-3 exchange contract (70,542) (71,099)
Other (93,711) (53,124)
(691,303) (330,657)
Less Current deferred Taxes 1,751 -
Total $ (534,194) $ (242,619)
As a result of implementing SFAS 109, PGE has recorded deferred tax assets and
liabilities for all temporary differences between the financial statement
bases and tax bases of assets and liabilities.
The Omnibus Budget Reconciliation Act of 1993 resulted in a federal tax rate
increase from 34% to 35% effective January 1, 1993. The tax rate increase
resulted in additional income tax expense for PGE of $3.6 million.
The IRS completed its examination of Portland General Corporation's (Portland
General) tax returns for the years 1985 to 1987 and has issued
a statutory notice of tax deficiency which Portland General is contesting. As
part of this audit, the IRS has proposed to disallow PGE's 1985 Washington
Public Power Supply System Unit 3 (WNP-3) abandonment loss deduction on the
premise that it is a taxable exchange. PGE disagrees with this position and
will take appropriate action to defend its deduction. Management believes
that it has appropriately provided for probable tax adjustments and is of the
opinion that the ultimate disposition of this matter will not have a material
adverse impact on the financial condition of PGE.
40
Note 7A
Common Stock
Common Stock Other
Number $3.75 Par Paid-In Unearned
of Shares Value Capital Compensation
(Thousands of Dollars)
December 31, 1990 40,458,877 $151,721 $429,398 $(35,338)
Sales of stock - - - -
Redemption of preferred - - 2,119 -
stock
Repayment of ESOP loan
and other - - - 5,579
December 31, 1991 40,458,877 151,721 431,517 (29,759)
Sales of stock - - - -
Sale and redemption of
preferred stock - - 565 -
Repayment of ESOP loan
and other - - (409) 6,492
December 31, 1992 40,458,877 151,721 431,673 (23,267)
Sales of stock - - - -
Redemption of stock - - - -
Sale and redemption of - - 2,130 -
preferred stock
Repayment of ESOP loan
and other - - 175 5,468
December 31, 1993 40,458,877 $151,721 $433,978 $ (17,799)
Common Stock
Portland General is the sole shareholder of PGE common stock. PGE is
restricted, without prior Oregon Public Utility Commission (PUC) approval,
from paying dividends or making other distributions to Portland General to the
extent such payment or distribution would reduce PGE's common stock equity
capital below 36% of total capitalization. At December 31, 1993, PGE's common
stock equity capital was 44% of its total capitalization.
41
Note 8A
Short-Term Borrowings
PGE meets liquidity needs through the issuance of commercial paper and
borrowings from commercial banks. At December 31, 1993, PGE had a committed
facilities of $120 million expiring in July 1996 and an $80 million expiring
in July 1994. These lines of credit have commitment fees and/or facility fees
ranging from 0.15 to 0.20 of one percent and do not require compensating cash
balances. The facilities are used primarily as back-up for both commercial
paper and borrowings from commercial banks under uncommitted lines of credit.
At December 31, 1993, there were no outstanding borrowings under the committed
facilities.
PGE has a $200 million commercial paper facility. Unused committed lines of
credit must be at least equal to the amount of commercial paper outstanding.
Most of PGE's short-term borrowings are through commercial paper.
Commercial paper and lines of credit borrowing are at rates reflecting current
market conditions and generally are substantially below the prime commercial
rate.
Short-term borrowings and related interest rates were as follows (thousands of
dollars):
1993 1992 1991
As of year end:
Aggregate short-term debt outstanding
Bank loans - $4,001 $15,000
Commercial paper $129,920 $96,064 $57,126
Weighted average interest rate
Bank loans - 4.1% 6.2%
Commercial paper 3.5% 3.9% 5.5%
Unused committed lines of credit $200,000 $125,000 $125,000
For the year ended:
Average daily amounts of short-term
debt outstanding
Bank loans $5,025 $ 2,803 $ 2,087
Commercial paper $94,983 $ 62,036 $ 28,892
Weighted daily average interest rate
Bank loans 3.6% 5.5% 6.0%
Commercial paper 3.5% 4.2% 6.5%
Maximum amount outstanding $144,774 $101,028 $ 72,126
during year
Interest rates exclude the effect of commitment fees, facility fees, and
other financing fees.
42
Note 9A
Long-Term Debt
The Indenture securing PGE's first mortgage bonds constitutes a direct first
mortgage lien on substantially all utility property and franchises, other than
expressly excepted property.
The following principal amounts of long-term debt become due for redemption
through sinking funds and maturities (thousands of dollars):
1994 1995 1996 1997 1998
Sinking Funds $ 1,313 $ 1,138 $ 988 $ 688 $ 688
Maturities 31,289 71,356 17,528 56,085 64,745
The sinking funds include $988,000 a year for 1994 through 1996 and $688,000
for 1997 and 1998, which, in accordance with the terms of the Indenture, PGE
may satisfy by pledging available property additions equal to 166-2/3% of the
sinking fund requirements.
Note 15A
Fair Value of Financial Instruments
The following methods and assumptions
were used to estimate the fair value of
each class of financial instruments for
which it is practicable to estimate that
value:
Cash and cash equivalents
The carrying amount of cash and cash
equivalents approximates fair value
because of the short maturity of those
instruments.
Other investments
Other investments approximate market
value.
Redeemable preferred stock
The fair value of redeemable preferred
stock is based on quoted market prices.
Long-term debt
The fair value of long-term debt is
estimated based on the quoted market
prices for the same or similar issues or
on the current rates offered to PGE for
debt of similar remaining maturities.
The estimated fair values of financial
instruments are as follows (thousands of
dollars):
1993 1992
Carrying Fair Carrying Fair
Amount Value Amount Value
Preferred stock subject to
mandatory redemption $ 80,000 $84,815 $83,600 $ 82,686
Long-term debt 820,814 848,696 823,629 849,876
43
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrants have duly caused this report to be signed on their behalf
by the undersigned hereunto duly authorized.
Portland General Corporation
Portland General Electric Company
February 15, 1994 By
Joseph M. Hirko
Vice President Finance,
Chief Financial Officer,
Chief Accounting Officer
and Treasurer
44
Appendix I
(Electronic Filing Only)
Omitted graphic material:
Page 4 Residential Customers graph:
(Thousands)
1983 454950
1984 454732
1985 461076
1986 470136
1987 476481
1988 484293
1989 496165
1990 512913
1991 526699
1992 536111
1993 545410
Page 5 Operating Revenue and Net Income
(Loss) graph:
($ Millions)
Operating Revenue N e t Income
1989 797 -27
1990 852 100
1991 890 -50
1992 884 90
1993 947 89
Page 5 PGE Electricity Sales graph:
(Billions of KWh)
1989 Residential 6.1
Commercial 5.2
Industrial 3.5
Wholesale 3.0
1990 Residential 6.4
Commercial 5.5
Industrial 3.6
Wholesale 4.3
1991 Residential 6.5
Commercial 5.6
Industrial 3.6
Wholesale 3.9
1992 Residential 6.3
Commercial 5.8
Industrial 3.6
Wholesale 2.7
1993 Residential 6.8
Commercial 6.0
Industrial 3.8
Wholesale 1.6
Page 6 Operating Expenses graph:
($ Millions)
1989 Operating Expenses 295
Variable Power 179
Depreciation 91
1990
Operating Expenses
302
46
Variable Power
200
Depreciation
90
1991
Operating Expenses
361
Variable Power 226
Depreciation
112
1992
Operating Expenses
327
Variable Power
222
Depreciation
99
1993
Operating Expenses
283
Variable Power
311
Depreciation
122
Page 6 Net Variable Power Costs graph:
Net variable power is defined as
variable power less wholesale revenues.
(Mills/KWh)
Net Variable Power
Retail Revenues
1989 5
46
1990 5
46
1991 6
48
1992 7
49
1993
13 52
Page 8 Utility Capital Expenditures
graph:
47
($ Millions)
1989
119
1990
109
1991
148
1992
154
1993
144
Page 9 Capitalization
($ Millions)
1989
Long-term Debt
817
Common Equity
762
Preferred Stock 153
1990
Long-term Debt 763
Common Equity
771
Preferred Stock 152
1991
Long-term Debt
913
Common Equity
679
Preferred Stock 150
1992
Long-term Debt
874
Common Equity
724
Preferred Stock 152
1993
Long-term Debt
803
Common Equity
744
48
Preferred Stock 140
