Market Overview

Portland General Electric Announces Second Quarter 2018 Results

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  • Settlement of Carty Generating Station litigation allows for full
    offset of incremental construction costs
  • Increasing guidance from $2.10-$2.25 to $2.25-$2.40 per diluted
    share
  • SP Global upgraded PGE's issuer credit rating from BBB to BBB+

Portland General Electric Company (NYSE:POR) today reported net
income of $46 million, or 51 cents per diluted share, for the second
quarter of 2018. This compares with net income of $32 million, or 36
cents per diluted share, for the second quarter of 2017.

"I'm pleased to put the Carty litigation behind us and recognize the
increase in our credit ratings," said Maria Pope, president and CEO. "In
addition, we're making progress in bringing customers new renewable
resources and programs, including our renewable RFP and green tariff."

Q2 2018 earnings compared with Q2 2017 earnings

Lower natural gas prices and reduced plant maintenance expenses drove
the increase in second quarter earnings per diluted share for 2018 in
comparison with second quarter of 2017. Additionally, a decrease in
distribution-related expenses due to the absence of major storms in 2018
and an increase in production tax credits was partially offset by gross
margin due to temperatures that were warmer than prior year as well as
increased administrative expenses.

Company update

Carty Generating Station

On July 16, 2018, PGE entered into a settlement with the other parties
to resolve all claims relating to Carty construction between PGE and
each of the Abeinsa EPC LLC; Abener Construction Services, LLC; Teyma
Construction USA, LLC; and Abeinsa Abener Teyma General Partnership
(collectively, the Contractor); Abengoa S.A., Liberty Mutual Insurance
Company and Zurich American Insurance Company (together, the Sureties).
Under the terms of the settlement, (i) the Sureties have paid $130
million to PGE, and (ii) the Contractor, Abengoa S.A., and the Sureties
have released all claims against PGE arising out of the Carty
construction, and in return, PGE has released all such claims against
the Contractor, Abengoa S.A., and the Sureties.

2019 General Rate Case

On February 15, 2018 the 2019 General Rate Case was filed, and parties
are currently in the testimony phase. Several settlement discussions
have been held with parties and have resulted in agreement on all
power-cost related matters as well as some non-power-cost items, such as
cost of capital. Stipulations regarding these agreements are in progress
and will become available in the coming weeks.

PGE filed reply testimony on the remaining items on July 13, 2018, and
held additional settlement discussions on July 23, 2018. A final order
is expected from the Oregon Public Utility Commission (OPUC) by the end
of the year, with a price change effective January 1, 2019.

Renewable Request for Proposal (RFP)

PGE issued an RFP on May 22, 2018 for the 100 average megawatts of
renewable resources needed as identified in its 2016 Integrated Resource
Plan. All submissions were due on June 15, 2018. As planned, PGE
submitted a self-build benchmark proposal for a greenfield wind project.
The bids are currently under review with oversight from an independent
third-party evaluator appointed by the OPUC to ensure that all bids are
evaluated consistently and impartially. A shortlist will be established
and submitted to the OPUC in October with final contract execution
expected by December 31, 2018.

Second quarter operating results

 
Earnings Reconciliation of Q2 2017 to Q2 2018
(in $millions, except EPS)   Pre-Tax Income   Net Income*   Diluted EPS **
Reported Q2 2017   $ 42     $ 32     $ 0.36  
Revenue                  
Electric retail price change   8   6   0.06
Electric retail volume change (6 ) (4 ) (0.05 )
Change in decoupling deferral (4 ) (3 ) (0.03 )
Electric wholesale price and volume change 6 4 0.05
Other Items (4 )   (3 )   (0.03 )
Change in Revenue
                   
Power Cost                  
Change in average power cost 21 15 0.17
Change purchased power and generation (7 )   (5 )   (0.06 )
Change in Power Costs 14 10 0.11
                   
O&M                  
Generation, transmission, distribution 10 7 0.08
Administrative and general (5 )   (4 )   (0.04 )
Change in O&M 5 3 0.04
                   
Other Items                  
Depreciation and amortization (7 ) (5 ) (0.05 )
Other Items (2 ) (1 ) (0.02 )
Adjustment for effective vs statutory tax rate       7     0.07  
Change in Other Items   (9 )   1      
Reported Q2 2018   $ 52     $ 46     $ 0.51  
* After tax adjustments based on PGE's statutory tax rate of 27.5%
** Some values may not foot due to rounding
 

The following table indicates the number of heating and cooling
degree-days for the three months ended June 30, 2018 and 2017, along
with 15-year averages based on weather data provided by the National
Weather Service, as measured at Portland International Airport:

  Heating Degree-days   Cooling Degree-days
2018   2017   Avg. 2018   2017   Avg.
April 338 421 373 9 2
May 89 196 204 34 41 19
June 44 69 79 73 88 64
Totals 471 686 656 116 129 85
(Decrease)/increase from the 15-year average (28)% 5% 36% 52%
 

2018 earnings guidance

PGE is revising its 2018 guidance from $2.10-$2.25 to $2.25-$2.40 per
diluted share due to better-than-expected weather when initial guidance
was launched and settlement of Carty litigation. The guidance is based
on the following assumptions:

  • $0.12 per diluted share attributed to Carty settlement
  • Flat retail deliveries, weather-adjusted
  • Normal hydro conditions for the remainder of the year, based on the
    current hydro forecast
  • Wind generation for the remainder of the year, based on five years of
    historical levels or forecast studies when historical data is not
    available
  • Normal thermal plant operations for the remainder of the year
  • Depreciation and amortization expense between $365 and $385 million
  • Operating and maintenance costs between $565 and $585 million

Second Quarter 2018 earnings call and webcast —
July 27, 2018

PGE will host a conference call with financial analysts and investors on
Friday, July 27, 2018, at 11 a.m. ET. The conference call will be
webcast live on the PGE website at investors.portlandgeneral.com.
A replay of the call will be available beginning at 2 p.m. ET on Friday,
July 27, 2018, through Friday, August 3, 2018.

Maria Pope, president and CEO; Jim Lobdell, senior vice president of
Finance, CFO, and treasurer; and Chris Liddle, director, Investor
Relations and Treasury, will participate in the call. Management will
respond to questions following formal comments.

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

About Portland General Electric Company

Portland General Electric (NYSE:POR) is a fully integrated energy
company based in Portland, Oregon, serving approximately 883,000
customers in 51 cities. For more than 125 years, PGE has been delivering
safe, affordable and reliable energy to Oregonians. Together with its
customers, PGE has the No. 1 voluntary renewable energy program in the
U.S. With approximately 2,900 employees across the state, PGE is
committed to helping its customers and the communities it serves build a
clean energy future. For more information, visit PortlandGeneral.com/CleanVision.

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

POR-F

Source: Portland General Electric Company

 
PORTLAND GENERAL ELECTRIC COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
AND COMPREHENSIVE INCOME

(Dollars in millions, except per share amounts)

(Unaudited)

 
 

Three Months Ended
June 30,

  Six Months Ended
June 30,
2018   2017   2018   2017
Revenues:  
Revenues, net $ 449 $ 449 $ 944 $ 979
Alternative revenue programs, net of amortization     (2 )
Total revenues 449   449   942   979
Operating expenses:
Purchased power and fuel 104 118 234 259
Generation, transmission and distribution 71 81 140 162
Administrative and other 70 64 139 131
Depreciation and amortization 93 86 185 170
Taxes other than income taxes 31   31   64   64
Total operating expenses 369   380   762   786
Income from operations 80 69 180 193
Interest expense, net 31 30 62 60
Other income:
Allowance for equity funds used during construction 2 3 6 5
Miscellaneous income (expense), net 1      
Other income, net 3   3   6   5
Income before income tax expense 52 42 124 138
Income tax expense 6   10   14   33
Net income 46 32 110 105
Other comprehensive income   1    
Comprehensive income $ 46   $ 33   $ 110   $ 105
 
Weighted-average shares outstanding—basic and diluted (in thousands) 89,215   89,063   89,188   89,033
 
Earnings per share—basic and diluted $ 0.51   $ 0.36   $ 1.23   $ 1.18
 
Dividends declared per common share $ 0.3625   $ 0.3400   $ 0.7025   $ 0.6600
 

PORTLAND GENERAL ELECTRIC COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in millions)
(Unaudited)
 
  June 30,
2018
  December 31,
2017

ASSETS

Current assets:
Cash and cash equivalents $ 48 $ 39
Accounts receivable, net 162 168
Unbilled revenues 86 106
Inventories 85 78
Regulatory assets—current 56 62
Other current assets 56   73
Total current assets 493   526
Electric utility plant, net 6,840 6,741
Regulatory assets—noncurrent 441 438
Nuclear decommissioning trust 42 42
Non-qualified benefit plan trust 38 37
Other noncurrent assets 55   54
Total assets $ 7,909   $ 7,838
 

PORTLAND GENERAL ELECTRIC COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS, continued

(Dollars in millions)
(Unaudited)
 
  June 30,
2018
  December 31,
2017

LIABILITIES AND EQUITY

Current liabilities:
Accounts payable $ 103 132
Liabilities from price risk management activities—current 51 59
Current Portion of long-term debt 300
Accrued expenses and other current liabilities 225   241  
Total current liabilities 679 432
Long-term debt, net of current portion 2,126 2,426
Regulatory liabilities—noncurrent 1,348 1,288
Deferred income taxes 378 376
Unfunded status of pension and postretirement plans 280 284
Liabilities from price risk management activities—noncurrent 136 151
Asset retirement obligations 192 167
Non-qualified benefit plan liabilities 107 106
Other noncurrent liabilities 198   192  
Total liabilities 5,444   5,422  
 
Equity:
Portland General Electric Company shareholders' equity:
Preferred stock, no par value, 30,000,000 shares authorized; none
issued and outstanding as of June 30, 2018 and December 31, 2017
Common stock, no par value, 160,000,000 shares authorized;
89,238,206 and 89,114,265 shares issued and outstanding as of June
30, 2018 and December 31, 2017, respectively
1,208 1,207
Accumulated other comprehensive loss (8 ) (8 )
Retained earnings 1,265   1,217  
Total equity 2,465   2,416  
Total liabilities and equity $ 7,909   $ 7,838  
 
PORTLAND GENERAL ELECTRIC COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)

 
  Six Months Ended June 30,
2018   2017
Cash flows from operating activities:
Net income $ 110 $ 105
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 185 170
Deferred income taxes 6 20
Pension and other postretirement benefits 13 13
Allowance for equity funds used during construction (6 ) (5 )
Decoupling mechanism deferrals, net of amortization 2 (15 )
Deferral of net benefits due to Tax Reform 25
Other non-cash income and expenses, net 4 16
Changes in working capital:
Decrease in accounts receivable and unbilled revenues 26 55
(Increase) in inventories (7 )
Decrease in margin deposits, net 4 7
(Decrease) in accounts payable and accrued liabilities (20 ) (29 )
Other working capital items, net 13 11
Other, net (17 ) (15 )
Net cash provided by operating activities 338   333  
Cash flows from investing activities:
Capital expenditures (266 ) (245 )
Sales of Nuclear decommissioning trust securities 6 11
Purchases of Nuclear decommissioning trust securities (5 ) (9 )
Other, net   (2 )
Net cash used in investing activities (265 ) (245 )
Cash flows from financing activities:
Dividends paid (61 ) (57 )
Other (3 ) (4 )
Net cash used in financing activities (64 ) (61 )
Increase in cash and cash equivalents 9 27
Cash and cash equivalents, beginning of period 39   6  
Cash and cash equivalents, end of period $ 48   $ 33  
 
Supplemental cash flow information is as follows:
Cash paid for interest, net of amounts capitalized $ 58 $ 55
Cash paid for income taxes 10 13
Non-cash investing and financing activities
Assets obtained under leasing arrangements 12 55
 
PORTLAND GENERAL ELECTRIC COMPANY AND SUBSIDIARIES
SUPPLEMENTAL OPERATING STATISTICS

(Unaudited)

 
  Three Months Ended June 30,
2018   2017  
Revenues (dollars in millions):    
Retail:
Residential $ 207 46 % $ 203 45 %
Commercial 162 36 158 35
Industrial 39 9 49 11
Direct Access 13   3   9   2  
Subtotal 421 94 419 93
Alternative revenue programs, net of amortization
Other accrued (deferred) revenues, net (10 ) (2 ) 1    
Total retail revenues 411 92 420 93
Wholesale revenues 24 5 16 4
Other operating revenues 14   3   13   3  
Total revenues $ 449   100 % $ 449   100 %
 
Energy deliveries (MWh in thousands):
Retail:
Residential 1,612 29 % 1,626 31 %
Commercial 1,654 30 1,655 32
Industrial 717   13   749   14  
Subtotal 3,983   72   4,030   77  
Direct access:
Commercial 159 3 160 3
Industrial 342   6   359   7  
Subtotal 501   9   519   10  
Total retail energy deliveries 4,484 81 4,549 87
Wholesale energy deliveries 1,041   19   673   13  
Total energy deliveries 5,525   100 % 5,222   100 %
 
Average number of retail customers:
Residential 771,608 88 % 761,443 88 %
Commercial 108,939 12 107,620 12
Industrial 205 196
Direct access 596   572  
Total 881,348 100 % 869,831 100 %
 

PORTLAND GENERAL ELECTRIC COMPANY AND SUBSIDIARIES

SUPPLEMENTAL OPERATING STATISTICS, continued

(Unaudited)

 

  Three Months Ended June 30,
2018     2017  
Sources of energy (MWh in thousands):    
Generation:
Thermal:
Natural gas 828 16 % 237 5 %
Coal 421   8   256   5  
Total thermal 1,249 24 493 10
Hydro 395 8 528 11
Wind 613   11   504   10  
Total generation 2,257   43 % 1,525   31  
Purchased power:
Term 2,384 45 2,815 57
Hydro 500 10 503 10
Wind 94   2   85   2  
Total purchased power 2,978   57   3,403   69  
Total system load 5,235   100 % 4,928   100 %
Less: wholesale sales (1,041 ) (673 )
Retail load requirement 4,194   4,255  

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