Portland General Electric Reports Full Year and Fourth Quarter 2007 Earnings Results
PORTLAND, Ore., Feb 26, 2008 (BUSINESS WIRE) -- Portland General Electric Company (NYSE:POR):
Full Year 2007
Portland General Electric Company (NYSE:POR) today reported net income of $145 million, or $2.33 per diluted share, for the twelve months ended December 31, 2007, compared to $71 million, or $1.14 per diluted share, for 2006. Results for 2007 were driven primarily by increased energy deliveries, excellent plant operations including increased generation from the return of Boardman to full operation and the addition of Port Westward. Results for 2007 also included the following items:
-- $16 million after tax, or $0.26 per diluted share, resulting from the deferral for future recovery of excess Boardman power costs ($20.4 million deferral and $5.0 million in interest, both pre-tax).
-- $4 million after tax, or $0.06 per diluted share, resulting from a reduction in the Company's wholesale credit reserve related to the settlement with certain California parties involving wholesale energy transactions in 2000-2001 ($6 million pre-tax).
-- $11 million after tax, or $0.18 per diluted share, resulting from Senate Bill 408 (SB 408), the Oregon law which attempts to more closely match utility income tax amounts forecasted to be collected in revenues with the amount of income taxes paid to governmental entities.
"Our 2007 results demonstrate that Portland General Electric is committed to delivering value to its customers and shareholders alike," said Peggy Fowler, CEO and president of Portland General Electric (PGE). "Our list of accomplishments includes bringing our new Port Westward plant online, completing Phase I of the Biglow Canyon Wind Farm on schedule in December and delivering a year of operational excellence with our overall system performing at a high level."
"Our success can be attributed to the hard work of my co-workers. In 2008, we'll continue to deliver on our commitment to provide our customers with safe, reliable power at a reasonable price while delivering long-term value to shareholders."
Full Year 2007 Summary
-- Total customers served increased by 1.4 percent to approximately 804,000 as of December 31, 2007, compared to approximately 793,000 as of December 31, 2006.
-- Total retail energy deliveries increased 1.0 percent (1.1 percent weather adjusted) to 19,627,000 MWhs in 2007 from 19,432,000 MWhs in 2006.
-- Total revenues increased by 15 percent to $1,743 million from $1,520 million in 2006. The increase was due primarily to the following key factors:
-- Price increases related to higher power and fuel costs and
cost recovery of Port Westward.
-- SB 408 with an increase of $58 million consisting of $18
million recorded in 2007 ($15 million collection for the 2007
tax reporting year and $3 million related to the 2006 tax
reporting year, both pre-tax) compared to a $40 million refund
recorded in 2006.
-- An increase in total retail energy deliveries due primarily
from the addition of approximately 11,000 new customers.
-- Price increases resulting from changes under the Residential
Exchange Program (fully offset by increased purchased power
costs).
-- Wholesale revenues increased by $66 million due to increases
in both sales volume and the average sales price.
-- Purchased power and fuel expenses increased by 15 percent to $879 million in 2007 from $763 million in 2006. The increase was due primarily to the net effect of the following key factors:
-- Increased expense related to settled natural gas swap
agreements entered into in conjunction with PGE's management of
net power costs.
-- A 12% increase in the average cost of purchased power.
-- A 22% decrease in the volume of electricity purchases, which
more than offset the increased cost of thermal generation,
primarily resulting from the operation of the new Port Westward
plant and a full year of operations at Boardman.
-- An estimated $16 million future refund to customers under the
Power Cost Adjustment Mechanism (PCAM).
-- Reduction in expense due to the deferral of excess Boardman
power costs and a reduction in the Company's wholesale credit
reserve related to settlement with certain California parties
involving wholesale energy transactions in 2000-2001.
-- Discontinuance of subscription power benefits under the
Residential Exchange Program (fully offset by increased
revenues).
-- Production, distribution, administrative and other expenses increased by 10 percent to $334 million in 2007 from $304 million in 2006. This increase was due primarily to new operating costs at Port Westward, higher employee benefits (including incentive compensation and medical costs), increased labor costs and increased customer support expenses.
-- Depreciation and amortization expenses decreased by 17 percent to $181 million in 2007 from $219 million in 2006 due primarily to the net effect of the following key factors:
-- Reduction in depreciation rates for utility plant assets and
the authorized recovery of Trojan decommissioning costs.
-- Decrease in amortization of regulatory assets.
-- Increase related to the new Port Westward plant and other
capital additions during 2007.
-- Income taxes increased by 87 percent to $71 million in 2007 from $38 million in 2006 due primarily to higher taxable income.
Fourth Quarter 2007
For the fourth quarter ended December 31, 2007, the Company reported net income of $24 million, or $0.40 per diluted share, compared to $40 million, or $0.64 per diluted share, for 2006. The decrease was primarily attributable to non-recurring gains in 2006, partially offset by the effects of SB 408, with an estimated collection in 2007 compared to an estimated refund in 2006, and to a reduction in other income.
Fourth Quarter 2007 Summary
-- Total retail energy deliveries increased by 1.4 percent (1.2 percent weather adjusted), with 5,193,000 MWhs in 2007 compared to 5,120,000 MWhs in 2006.
-- Total revenues increased by 13 percent to $470 million in 2007 from $416 million in 2006. The increase was due primarily to the following key factors:
-- Price increases related to higher power and fuel costs, and
cost recovery of Port Westward.
-- An increase of $17 million related to SB 408 consisting of $7
million recorded in 2007 ($5 million collection for the 2007 tax
reporting year and $2 million adjustment for the 2006 tax
reporting year, both pre-tax) compared to a $10 million refund
recorded in 2006.
-- Wholesale revenues increased by $31 million due to increased
sales volume and the average sales price.
-- Purchased power and fuel expenses increased by 36 percent to $259 million in 2007 from $190 million in 2006. The increase was due to the net effect of the following key factors:
-- Higher cost of thermal generation, including operation of the
new Port Westward plant and higher cost of settled natural gas
transactions.
-- A 19 percent increase in the average cost of purchased power.
-- Displacement of wholesale power purchases with lower-cost
power from Port Westward.
-- A reduction in unrealized gains on derivative activities ($18
million in 2006 vs. $0 in 2007).
-- A deferral of Boardman replacement power costs ($6 million in
2006 vs. $0 in 2007).
-- Production, distribution, administrative and other expenses increased by 9 percent to $89 million from $82 million in 2006 due primarily to new operating costs at Port Westward, higher employee benefit expense and increased labor costs.
-- Depreciation and amortization expenses decreased by 13 percent to $47 million in 2007 from $54 million in 2006 due primarily to the net effect of the following key factors:
-- Reduction in depreciation rates for utility plant assets and
the authorized recovery of Trojan decommissioning costs.
-- Decrease in amortization of regulatory assets.
-- An increase in depreciation from the addition of Port
Westward.
-- Income taxes decreased by 33 percent to $12 million in 2007 from $18 million in 2006 due primarily to lower taxable income.
Advanced Metering Infrastructure (AMI)
As part of the regulatory approval process for inclusion of AMI in prices, PGE made its final filing on February 6, 2008 and is now waiting for an order from the OPUC. If approved, the tariff will go into effect on June 1, 2008 and continue through December 31, 2010. This proposed two and a half year tariff period coincides with the systems acceptance testing and installation of over 800,000 meters. Once the meters are installed, at an estimated capital cost of $130 million to $135 million, we estimate that AMI will reduce annual operating expenses by approximately $18 million pre tax.
Biglow Canyon Wind Farm
Phase I of the Biglow Canyon Wind Farm, comprised of 76 turbines with an installed capacity of 125 megawatts, was completed and placed in service in mid-December 2007 at a total cost of approximately $255 million (including AFDC). Phase I, which was included in customer prices beginning in January 2008, fulfills PGE's goals for adding renewable energy as outlined in the Company's last Integrated Resource Plan.
Phases II and III of the project are in the advanced planning stages, with an estimated total cost of $700 million to $800 million (including AFDC). Phase II is expected to be completed by the end of 2009 and Phase III is expected to be completed by the end of 2010. All three phases of the project are expected to have a total installed capacity of 400 to 450 megawatts.
Capital Expenditures
Capital expenditures in 2007 totaled $455 million compared to $371 million in 2006. Expenditures for 2007 consisted of approximately $199 million for the Biglow Canyon Wind Farm Phase I, $17 million for Phases II and III, $182 million for ongoing production, transmission and distribution facilities, $40 million for hydro relicensing projects, $16 million for Port Westward and $1 million for AMI.
Capital expenditures in 2008 are estimated to be $428 million. This includes $121 million for Phases II and III of the Biglow Canyon Wind Farm, $229 million for ongoing production, transmission and distribution facilities, $55 million for hydro relicensing projects and $23 million for AMI.
General Rate Case
The Company plans to file a general rate case with the OPUC on February 27, 2008, based on a 2009 test year, with new prices expected to be effective beginning in January 2009. The proposed 8.9% increase in prices is a result of increased generation costs based on higher natural gas and coal prices; increased purchased power costs; and higher general (non-power) costs, including the rising cost of materials and supplies, compliance with government regulation, hydro relicensing improvements, and labor and healthcare benefits. The requested revenue requirement includes a return on common equity of 10.75%, based on an expected capital structure of 50% equity and 50% debt, and an overall weighted average cost of capital of 8.66%.
2008 Earnings Guidance
PGE is reaffirming full-year 2008 earnings guidance of $1.75 to $1.85 per diluted share. Guidance assumes normal hydro conditions and plant operations. PGE is also reaffirming its long-term annual earnings growth expectation of 6 to 8 percent beginning with 2008.
Full Year 2007 Earnings Call and Webcast February 26, 2008
PGE will host a conference call with financial analysts and investors on Tuesday, February 26, 2008, at 5 p.m. EST. The conference call will be webcast live on the PGE Web site at www.PortlandGeneral.com. A replay of the call will be available beginning at 7 p.m. EST on Tuesday, February 26 through Tuesday, March 4.
Peggy Fowler, CEO and president; Jim Piro, executive vice president, CFO and treasurer; and Bill Valach, director of investor relations will participate in the call. Management will respond to questions following formal comments.
The attached consolidated income statements, balance sheets, cash flow statements and supplemental operating statistics are an integral part of this earnings release.
About Portland General Electric Company
Portland General Electric, headquartered in Portland, Ore., is a vertically integrated electric utility that serves approximately 804,000 residential, commercial and industrial customers in Oregon. Visit our Web site at www.PortlandGeneral.com.
Safe Harbor Statement
Statements in this news release that relate to future plans, objectives, expectations, performance, events and the like may constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements include statements regarding earnings guidance, statements regarding future capital expenditures, statements regarding the cost, completion and benefits of capital projects, such as the Biglow Canyon Wind Farm, as well as other statements containing words such as "anticipates," "believes," "intends," "estimates," "promises," "expects," "should," "conditioned upon" and similar expressions. Investors are cautioned that any such forward-looking statements are subject to risks and uncertainties, including matters and events related to final regulatory review and approval of the deferral of excess power costs related to Boardman's outage; regulatory approval and rate treatment of the Advanced Metering Infrastructure and Biglow Canyon Wind Farm projects; the costs of compliance with environmental laws and regulations, including those that govern emissions from thermal power plants; changes in weather, hydroelectric, and energy market conditions, which could affect the availability and cost of purchased power and fuel; and the outcome of various legal and regulatory proceedings. As a result, actual results may differ materially from those projected in the forward-looking statements. All forward-looking statements included in this news release are based on information available to the Company on the date hereof and such statements speak only as of the date hereof. The Company assumes no obligation to update any such forward-looking statement. Prospective investors should also review the risks and uncertainties listed in the Company's most recent Annual Report on Form 10-K and the Company's reports on Forms 8-K and 10-Q filed with the United States Securities and Exchange Commission, including Management's Discussion and Analysis of Financial Condition and Results of Operation and the risks described therein from time to time.
POR-F
Source: Portland General Electric Company
PORTLAND GENERAL ELECTRIC COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in millions, except per share amounts)
(Unaudited)
Three Months Twelve Months
Ended December Ended December
31, 31,
---------------- ----------------
2007 2006 2007 2006
-------- ------- -------- -------
Revenues $ 470 $ 416 $ 1,743 $ 1,520
Operating expenses
Purchased power and fuel 259 190 879 763
Production and distribution 41 37 150 140
Administrative and other 48 45 184 164
Depreciation and amortization 47 54 181 219
Taxes other than income taxes 20 18 80 75
Income taxes 12 18 71 38
-------- ------- -------- -------
427 362 1,545 1,399
-------- ------- -------- -------
Income from operations 43 54 198 121
-------- ------- -------- -------
Other income (deductions)
Allowance for equity funds used
during construction 3 5 16 16
Miscellaneous (2) - 8 1
Income taxes - 1 (3) 2
-------- ------- -------- -------
1 6 21 19
-------- ------- -------- -------
Interest expense 20 20 74 69
-------- ------- -------- -------
Net income $ 24 $ 40 $ 145 $ 71
======== ======= ======== =======
Common Stock
Weighted-average shares outstanding
(in thousands):
Basic 62,519 62,502 62,512 62,501
======== ======= ======== =======
Diluted 62,533 62,515 62,534 62,505
======== ======= ======== =======
Earnings per share, basic and
diluted $ 0.40 $ 0.64 $ 2.33 $ 1.14
======== ======= ======== =======
Dividends declared per share $ 0.235 $ 0.225 $ 0.93 $ 0.675
======== ======= ======== =======
PORTLAND GENERAL ELECTRIC COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In millions, except share amounts)
(Unaudited)
At December 31 2007 2006
----------------------------------------------------------------------
ASSETS
----------------------------------------------------------------------
Electric utility plant, net:
Electric utility plant at cost (includes
construction work in progress of $126 and $412) $ 5,024 $ 4,582
Less: accumulated depreciation and amortization (1,958) (1,864)
-------
Electric utility plant, net 3,066 2,718
------- -------
Other property and investments:
Nuclear decommissioning trust, at market value 46 42
Non-qualified benefit plan trust 69 70
Miscellaneous 19 26
------- -------
Total other property and investments 134 138
------- -------
Current assets:
Cash and cash equivalents 73 12
Accounts and notes receivable (less allowance for
uncollectible accounts of $5 and $45) 178 177
Unbilled revenues 92 88
Assets from price risk management activities 64 93
Inventories, at average cost 64 64
Other current assets 67 93
------- -------
Total current assets 538 527
------- -------
Regulatory assets 304 351
Other noncurrent assets 66 33
------- -------
Total assets $ 4,108 $ 3,767
======= =======
CAPITALIZATION AND LIABILITIES
----------------------------------------------------------------------
Capitalization:
Common stock, no par value, 80,000,000 shares
authorized; 62,529,787 and 62,504,767 shares
issued and outstanding at December 31, 2007 and
2006, respectively $ 646 $ 643
Accumulated other comprehensive loss (4) (6)
Retained earnings 674 587
------- -------
Total shareholders' equity 1,316 1,224
Long-term debt 1,313 937
------- -------
Total capitalization 2,629 2,161
------- -------
Current liabilities:
Accounts payable and other accruals 227 212
Liabilities from price risk management activities 101 155
Accrued taxes 23 14
Short-term borrowings - 81
Long-term debt due within one year - 66
Other current liabilities 40 34
------- -------
Total current liabilities 391 562
------- -------
Regulatory liabilities 574 523
Deferred income taxes 279 251
Non-qualified benefit plan liabilities 86 84
Trojan asset retirement obligation 62 108
Accumulated asset retirement obligation 29 26
Other noncurrent liabilities 58 52
------- -------
Total liabilities 1,479 1,606
------- -------
Total capitalization and liabilities $ 4,108 $ 3,767
======= =======
PORTLAND GENERAL ELECTRIC COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
Years Ended December 31 2007 2006
----------------------------------------------------------------------
Cash flows from operating activities:
Net income $ 145 $ 71
Reconciliation of net income to net cash provided by
operating activities
Depreciation and amortization 181 219
Net assets from price risk management activities (26) 132
Regulatory deferrals - price risk management activities 26 (132)
Deferred income taxes 22 (38)
Allowance for equity funds used during construction (16) (16)
Senate Bill 408 deferrals (16) 42
Power cost deferrals (9) -
Other non-cash income and expenses, net 1 -
Changes in working capital:
Net margin deposit activity 21 (94)
(Increase) decrease in receivables (4) 17
Increase (decrease) in payables 19 (88)
Other working capital items, net (2) (11)
Other, net 2 4
---- ----
Net cash provided by operating activities 344 106
---- ----
Cash flows from investing activities:
Capital expenditures (455) (371)
Purchases of nuclear decommissioning trust securities (23) (37)
Sales of nuclear decommissioning trust securities 21 21
Proceeds from sale of assets - 6
Other, net 6 1
---- ----
Net cash used in investing activities (451) (380)
---- ----
Cash flows from financing activities:
Issuance of long-term debt 381 275
Short-term borrowings, net (81) 81
Repayment of long-term debt (71) (162)
Dividends paid (58) (28)
Debt issuance costs (3) (2)
---- ----
Net cash provided by financing activities 168 164
---- ----
Increase (decrease) in cash and cash equivalents 61 (110)
Cash and cash equivalents, beginning of year 12 122
---- ----
Cash and cash equivalents, end of year $ 73 $ 12
==== ====
----------------------------------------------------------------------
Supplemental disclosures of cash flow information:
Cash paid during the year:
Interest, net of amounts capitalized $ 58 $ 55
Income taxes 46 101
Non-cash investing and operating activities:
Accrued capital additions 27 20
Common stock dividends declared but not paid 15 14
PORTLAND GENERAL ELECTRIC COMPANY AND SUBSIDIARIES
SUPPLEMENTAL OPERATING STATISTICS
Three Months
Ended Twelve Months Ended
December 31, December 31,
--------------- -------------------
2007 2006 2007 2006
------- ------- --------- ---------
Revenues (in millions)
Retail sales:
Residential $ 215 $ 180 $ 716 $ 628
Commercial 153 141 593 547
Industrial 40 53 159 206
------- ------- --------- ---------
Total retail sales 408 374 1,468 1,381
Direct access customers:
Commercial - (1) - (6)
Industrial (3) (2) (12) (6)
------- ------- --------- ---------
Tariff revenues 405 371 1,456 1,369
Accrued revenues (1) 1 - 3
Regional Power Act credits - 26 42 35
Provision for collection
(refund) - SB 408 7 (10) 18 (40)
------- ------- --------- ---------
Total retail revenues 411 388 1,516 1,367
Wholesale revenues 52 21 201 135
Other operating revenues 7 7 26 18
------- ------- --------- ---------
Total revenues $ 470 $ 416 $ 1,743 $ 1,520
======= ======= ========= =========
Energy sold and delivered - MWhs
(in thousands)
Retail energy sales:
Residential 2,183 2,125 7,688 7,573
Commercial 1,847 1,860 7,289 7,319
Industrial 610 899 2,485 3,541
------- ------- --------- ---------
Total retail energy sales 4,640 4,884 17,462 18,433
Delivered to direct access
customers:
Commercial 116 99 492 430
Industrial 437 137 1,673 569
------- ------- --------- ---------
Total retail energy deliveries 5,193 5,120 19,627 19,432
Wholesale sales 882 684 4,042 3,312
------- ------- --------- ---------
Total energy sold and
delivered 6,075 5,804 23,669 22,744
======= ======= ========= =========
Retail customers - end of period
Residential 706,444 696,779
Commercial 97,088 95,734
Industrial 256 259
--------- ---------
Total retail customers 803,788 792,772
========= =========
PORTLAND GENERAL ELECTRIC COMPANY AND SUBSIDIARIES
SUPPLEMENTAL OPERATING STATISTICS (CONTINUED)
Degree Days
Heating Cooling
----------------------- -----------------------
2007 2006 2007 2006
---------- ----------- ---------- -----------
1st Quarter 1,852 1,814 - -
Average 1,840 1,840 - -
----------------------------------------------------------------------
2nd Quarter 698 572 56 116
Average 664 664 67 67
----------------------------------------------------------------------
3rd Quarter 123 79 344 424
Average 82 82 385 385
----------------------------------------------------------------------
4th Quarter 1,701 1,624 - 1
Average 1,575 1,575 2 2
======================================================================
Annual Total 4,374 4,089 400 541
Average 4,161 4,161 454 454
Note: Average represents a 15 year average (1993 - 2007) of degree day
data provided by the National Weather Service (Portland Airport).
SOURCE: Portland General Electric Company
Portland General Electric Company Media Contact Gail Baker, 503-464-8693 Director, Corporate Communications or Investor Contact Bill Valach, 503-464-7395 Director, Investor Relations
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