News Release Details

PORTLAND, Ore.--(BUSINESS WIRE)-- Portland General Electric Company (NYSE:POR) today reported net income of $39 million, or 47 cents per diluted share, for the third quarter of 2014. This compares with net income of $31 million, or 40 cents per diluted share, for the third quarter of 2013. The increase in earnings was driven by an increase in the volume and price of energy deliveries, lower net variable power costs, and an increased allowance for equity funds used during construction for the company's three new generating resources. Increased energy deliveries were driven by warmer weather and increased demand from new construction and high tech industry expansion. Also, the Company is narrowing its full-year earnings guidance range from $2.05 - $2.20 to $2.10 - $2.20 per share.

"PGE's strong third quarter results can be attributed to the continued strong operational performance across the company and positive economic trends in our service area," said Jim Piro, president and chief executive officer. "Construction of our three new generating resources is proceeding on time and on budget, we have reached settlement on all issues in our 2015 general rate case, and we are on track to meet our financial and operating objectives for the year."

Company updates

• Generation projects: Port Westward 2 and Tucannon River Wind Farm are in their final phases of construction and Carty Generating Station continues to progress on schedule.
  • Tucannon River Wind Farm is a 267 megawatt wind farm in southeastern Washington. Construction continues to progress on schedule and our current expectation is for the resource to be online in December 2014 or early Q1 2015, at an estimated cost of $500 million, excluding allowance for funds used during construction (AFDC). Turbine delivery and erection has been completed and testing is underway.
  • Port Westward Unit 2, a 220 megawatt natural gas-fired capacity resource, is expected to be placed in service during Q1 of 2015. The project is in the final phase of construction and initial testing has begun. The estimated cost of the project is $300 million, excluding AFDC.
  • Carty Generating Station, a 440 megawatt natural gas-fired baseload power plant, is expected to be placed in service in mid-2016 at an estimated cost of $450 million, excluding AFDC. Foundation work continues for the gas and steam turbines and the cooling tower and heat recovery steam generating equipment is being delivered and installed.
• 2015 General rate case filing: During the third quarter of 2014, PGE, Oregon Public Utility Commission (OPUC) Staff and interveners reached an agreement that resolved all remaining matters in the general rate case. Parties have agreed to:
  • Return on equity of 9.68%;
  • Capital structure of 50 percent debt and 50 percent equity;
  • Cost of capital of 7.56%;
  • A rate base of $3.8 billion - (which is based on a stipulated in-service amount of $323 million for Port Westward 2 and $525 million for Tucannon River Wind Farm)

The estimated net increase in annual revenues is $17 million which approximates a 1 percent overall increase in customer prices. PGE expects the OPUC to issue a final order with approved price changes before the end of 2014. New customer prices are expected to become effective in 2015, with a price decrease related to base business and customer credits effective January 1 and two price increases to be effective as the two new generating plants become operational.

Third quarter operating results

Retail revenues increased $31 million, or 8 percent, to $434 million for the third quarter of 2014 from $403 million for the third quarter of 2013. The increase consisted of:

• $17 million increase related to an overall 4.1 percent higher volume of energy delivered in the third quarter of 2014 compared with the third quarter of 2013 with residential, commercial and industrial energy deliveries increasing 5.2 percent, 3.5 percent, and 3.6 percent respectively;
• $16 million increase resulting from the January 1, 2014 price increase authorized by the OPUC in the company's 2014 general rate case; and
• $5 million increase related to the 2014 collection of costs deferred in 2012 related to four capital projects; partially offset by
• $6 million decrease related to the decoupling mechanism, with a $7 million potential refund to customers recorded in the third quarter of 2014 compared with a $1 million potential refund recorded for the third quarter of 2013.

Net variable power cost, which consists of purchased power and fuel expense net of wholesale revenues, decreased approximately $5 million for the third quarter of 2014 compared with the third quarter of 2013. The decrease was due to the following:

• $17 million increase in wholesale revenue due to a 72 percent increase in wholesale sales volume and an average price increase of 4 percent; offset by,
• $12 million increase in power costs driven by a $21 million increase from an 11 percent increase in total system load, offset by a $9 million decrease due to a 4 percent decline in the average variable power cost per MWh.

The decrease in the average variable power cost was driven largely by an increase in energy received from thermal generation, which was partially offset by declines in energy received from hydro resources and wind generating resources. During the third quarter of 2013, the Company experienced unplanned outages at its Colstrip, Boardman, and Coyote Springs plants. These outages drove an increase in the average cost per MWh as a result of the replacement of such energy with higher-cost purchased power during that period. For the third quarters of 2014 and 2013, actual net variable power costs were $5 million and $9 million, respectively above the annual power cost update tariff baseline. Year to date net variable power costs are within the deadband of the Power Cost Adjustment Mechanism (PCAM); accordingly, no estimated collection from, or refund to customers has been recorded.

Production and distribution expense increased $6 million, or 11 percent, in the third quarter of 2014 compared with the third quarter of 2013. The increase is largely due to $4 million higher maintenance expenses at PGE's generation facilities, $1 million higher substation and line maintenance expenses, and $1 million additional operating costs as a result of the Company's ownership interest in Boardman increasing to 80% from 65% on December 31, 2013.

Administrative and other expense in the third quarter of 2014 increased $5 million, or 10%, compared with the third quarter of 2013, driven by $4 million more incentive compensation expense in 2014 largely resulting from the higher expected net income in 2014. In the third quarter 2014, pension expense decreased by $1 million, which was offset by increases in other expenses.

Depreciation and amortization expense increased $14 million, or 23 percent, in the third quarter of 2014 compared with the third quarter of 2013, with $9 million related to timing of the deferral and amortization of costs of four capital projects as authorized in the company's 2011 General Rate Case. In the third quarter of 2013, PGE deferred $5 million of costs related to these four projects and in the third quarter of 2014, the company recorded $4 million of amortization expense related to the recovery of these costs (offset in retail revenues). Capital additions also increased depreciation and amortization expense by $3 million.

Interest expense decreased $2 million, or 8 percent, in the third quarter of 2014 compared with the third quarter of 2013, as a $5 million decrease related to higher AFDC from the construction of three new generation projects was partially offset by an increase related to a higher average balance of debt outstanding.

Other income, net, increased $5 million in the third quarter of 2014 compared with the third quarter of 2013 due to a $7 million increase in AFDC from the construction of three new generation projects, partially offset by lower earnings on the non-qualified benefit plan trust assets.

Income tax expense was $16 million in the third quarter of 2014 compared with $4 million in the third quarter of 2013. The increase is largely due to higher pre-tax income for 2014 compared to 2013, combined with an increase related to the timing of the recognition of production tax credits.

2014 earnings guidance

PGE is narrowing its full-year 2014 earnings guidance from $2.05 - $2.20 per share to $2.10 - $2.20 per share. Earnings guidance is based on the following assumptions:

• Normal levels of hydro, wind and thermal generation for the remainder of the year;
• Operating and maintenance costs between $475 and $495 million, a reduction of $5 million from prior guidance;
• Depreciation and amortization expense between $295 and $305 million; and
• Capital expenditures of approximately $980 million.

Third quarter 2014 earnings call and web cast — Oct. 28

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

Jim Piro, president and CEO; Jim Lobdell, senior vice president of finance, CFO, and treasurer; and Bill Valach, director, investor relations, will participate in the call. Management will respond to questions following formal comments.

The attached unaudited condensed consolidated statements of operations, condensed consolidated balance sheets, and condensed consolidated statements of cash flows, as well as the supplemental operating statistics, are an integral part of this earnings release.

About Portland General Electric Company

Portland General Electric Company is a vertically integrated electric utility that serves approximately 843,000 residential, commercial and industrial customers in the Portland/Salem metropolitan area of Oregon. The company's headquarters are located at 121 S.W. Salmon Street, Portland, Oregon 97204. Visit PGE's website at portlandgeneral.com.

Safe Harbor Statement

Statements in this news release that relate to future plans, objectives, expectations, performance, events and the like may constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements include statements regarding earnings guidance; statements regarding future load, hydro conditions and operating and maintenance costs; statements concerning implementation of the company's integrated resource plan; statements concerning future compliance with regulations limiting emissions from generation facilities and the costs to achieve such compliance; as well as other statements containing words such as "anticipates," "believes," "intends," "estimates," "promises," "expects," "should," "conditioned upon," and similar expressions. Investors are cautioned that any such forward-looking statements are subject to risks and uncertainties, including reductions in demand for electricity; the sale of excess energy during periods of low demand or low wholesale market prices; operational risks relating to the company's generation facilities, including hydro conditions, wind conditions, disruption of fuel supply, and unscheduled plant outages, which may result in unanticipated operating, maintenance and repair costs, as well as replacement power costs; failure to complete capital projects on schedule or within budget, or the abandonment of capital projects, which could result in the company's inability to recover project costs; the costs of compliance with environmental laws and regulations, including those that govern emissions from thermal power plants; changes in weather, hydroelectric and energy markets conditions, which could affect the availability and cost of purchased power and fuel; changes in capital market conditions, which could affect the availability and cost of capital and result in delay or cancellation of capital projects; the outcome of various legal and regulatory proceedings; and general economic and financial market conditions. As a result, actual results may differ materially from those projected in the forward-looking statements. All forward-looking statements included in this news release are based on information available to the company on the date hereof and such statements speak only as of the date hereof. The company assumes no obligation to update any such forward-looking statement. Prospective investors should also review the risks and uncertainties listed in the company's most recent annual report on form 10-K and the company's reports on forms 8-K and 10-Q filed with the United States Securities and Exchange Commission, including management's discussion and analysis of financial condition and results of operations and the risks described therein from time to time.

POR-F
Source: Portland General Electric Company

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

Source: Portland General Electric Company

News Provided by Acquire Media