News Column

Portland General Electric Announces Second Quarter Results

July 29, 2014

PORTLAND, Ore.--(BUSINESS WIRE)-- Portland General Electric Company (NYSE:POR)today reported net income of $35 million, or 43 cents per diluted share, for the second quarter of 2014. This compares with a net loss of $22 million, or 29 cents per diluted share, for the second quarter of 2013. The increase in earnings primarily reflects the impact of two expenses in the second quarter of 2013 - the Cascade Crossing transmission project write off and an industrial customer refund - totaling 49 cents when including the full year of tax benefits.

Excluding these two items, second quarter 2013 non-GAAP adjusted earnings per share would have been 20 cents per diluted share. Earnings per diluted share for the second quarter of 2014 were 23 cents higher than the non-GAAP adjusted earnings per diluted share for the second quarter of 2013 primarily due to the alignment of revenues and operating expenses as authorized in the 2014 general rate case and increased allowance of equity funds used during construction for the company’s three new generating resources.

“PGE continues to demonstrate strong operational performance across the company in 2014,” said Jim Piro, president and chief executive officer. “Construction of our three new generating resources is proceeding on time and on budget, our 2015 general rate case is progressing on schedule, and our financial performance is in line with our expectations.”

Company updates

  • Generation projects: Construction is progressing smoothly on all three generation projects selected last year through the competitive RFP processes.
  • Port Westward Unit 2—All twelve engines are now installed at Port Westward Unit 2, a 220 megawatt natural gas-fired capacity resource, and initial testing will begin later this summer. The plant is expected to be placed in service in the first quarter of 2015 at an estimated cost of $300 million, excluding allowances for funds used during construction.
  • Tucannon River Wind Farm—Construction of all 116 turbine foundations is complete at Tucannon River Wind Farm, a 267 megawatt wind farm in southeastern Washington, and turbine erection has begun. The wind farm is expected to be placed in service between December 2014 and March 2015 at an estimated cost of $500 million, excluding AFDC.
  • Carty Generating Station—Foundations are being poured at Carty Generating Station, a 440 megawatt natural gas-fired baseload power plant, and heat recovery steam generator construction will begin soon. The plant is expected to be placed in service mid-2016 at an estimated cost of $450 million, excluding AFDC.
  • General rate case filing: In February of this year, PGE filed a general rate case primarily requesting recovery of incremental costs to bring Port Westward Unit 2 and Tucannon River Wind Farm into service. The request originally proposed an $81 million increase in revenue requirements and included a return on equity of 10 percent, a capital structure of 50 percent debt and 50 percent equity, and an average rate base of $3.9 billion.

    On July 16, 2014, PGE filed testimony supporting a revised revenue requirement increase of $31 million, which reflects the impacts of stipulations reached to-date with Staff and interveners, updates to 2015 power cost and load forecasts, and other updates. The cost of long-term debt and the capital structure have been settled, while the return on equity and modifications to the PCAM are among things yet to be resolved. PGE expects the Oregon Public Utility Commission to issue a final order with approved price changes before the end of 2014 for prices effective early 2015.

    Second quarter operating results

    Retail revenues increased $23 million, or 6 percent, to $396 million for the second quarter of 2014 from $373 million for the second quarter of 2013. The increase consisted of:

  • $14 million resulting from the January 1, 2014 price increase authorized by the OPUC in the company’s 2014 general rate case;
  • $9 million due to an industrial customer refund recorded in the second quarter of 2013; and
  • $5 million related to the collection of costs deferred in 2012 related to four capital projects beginning January 1, 2014 (offset in depreciation and amortization); partially offset by
  • $3 million decrease related to various items, including the decoupling mechanism and other supplemental tariff changes; and
  • $2 million decrease related to lower volumes of energy delivered in the second quarter of 2014 compared with the second quarter of 2013. Residential and industrial energy deliveries declined 1.8 percent and 0.7 percent, respectively, while commercial energy deliveries increased 1.0 percent.

    Net variable power cost, which consists of purchased power and fuel expense net of wholesale revenues, decreased approximately $10 million for the second quarter of 2014 compared with the second quarter of 2013. The decrease was due to a 7 percent decline in total system load, a 3 percent decline in the average variable power cost per MWh and a 22 percent increase in the average wholesale sales price, partially offset by a 34 percent decrease in wholesale sales volume. The decrease in the average variable power cost was driven by the economic displacement of a greater amount of thermal generation with purchased power during the second quarter of 2014 relative to the second quarter of 2013, combined with an increase in energy received from wind generating resources. For the second quarters of 2014 and 2013, actual NVPC was $11 million and $13 million, respectively, below baseline NVPC (which is included in customer prices).

    Production and distribution expense increased $3 million, or 5 percent, in the second quarter of 2014 compared with the second quarter of 2013, primarily due to an increase in costs associated with the company’s ownership of Boardman. On December 31, 2013, PGE’s ownership of Boardman increased from 65 percent to 80 percent.

    Cascade Crossing transmission project consists of $52 million of costs charged to expense in the second quarter of 2013 that were previously capitalized in connection with this project.

    Depreciation and amortization expense increased $11 million, or 18 percent, in the second quarter of 2014 compared with the second quarter of 2013, with $8 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 second quarter of 2013, PGE deferred $4 million of costs related to these four projects and in the second quarter of 2014, the company recorded $4 million of amortization expense related to the recovery of these costs (offset in retail revenues). In addition, capital additions increased depreciation and amortization expense by $4 million.

    Interest expense decreased $2 million, or 8 percent, in the second quarter of 2014 compared with the second quarter of 2013, as a $4 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 $7 million in the second quarter of 2014 compared with the second quarter of 2013 due to an increase in AFDC from the higher average CWIP balance.

    Income tax expense was $10 million in the second quarter of 2014 compared with a benefit of $11 million in the second quarter of 2013. The change is primarily due to the increase in the annual estimated pre-tax income for 2014 compared to 2013, which was driven by the charge to expense related to Cascade Crossing and an industrial customer refund recorded in 2013, offset by a favorable income tax benefit in 2014 related to an increase in the allowance for equity funds used during construction.

    2014 earnings guidance

    PGE is affirming full-year 2014 earnings guidance of $2.05 to $2.20 per diluted share, based on the following assumptions:

  • Average hydro conditions;
  • Wind generation based on historical levels;
  • Normal thermal plant operations;
  • Colstrip Unit 4 replacement power costs of $1.5 million in January;
  • Operating and maintenance costs between $480 and $500 million;
  • Depreciation and amortization expense between $295 and $305 million; and
  • Capital expenditures of approximately $1 billion.

    Second quarter 2014 earnings call and web cast — Jul. 29

    PGE will host a conference call with financial analysts and investors on Tuesday, Jul. 29, 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 Tuesday, Jul. 29 through Tuesday, Aug. 5.

    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 842,000 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 AND SUBSIDIARIES
    CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

    (In millions, except per share amounts)

    (Unaudited)

     
     
    Three Months Ended

    Six Months Ended

    June 30,June 30,
    2014     20132014     2013
    Revenues, net$423$403$916$876
    Operating expenses:
    Purchased power and fuel 142 156 326 348
    Production and distribution 67 64 121 115
    Cascade Crossing transmission project 52 52
    Administrative and other 56 55 110 109
    Depreciation and amortization 73 62 148 124
    Taxes other than income taxes 27   25   55   52  
    Total operating expenses 365   414   760   800  
    Income (loss) from operations 58 (11 ) 156 76
    Interest expense (1) 23 25 48 50
    Other income:
    Allowance for equity funds used during construction 9 2 15 4
    Miscellaneous income, net 1   1     2  
    Other income, net 10   3   15   6  
    Income (loss) before income tax expense (benefit) 45 (33 ) 123 32
    Income tax expense (benefit) 10   (11 ) 30   6  
    Net income (loss) 35 (22 ) 93 26
    Less: net loss attributable to noncontrolling interests       (1 )
    Net income (loss) attributable to Portland General Electric Company$35   $(22)$93   $27  
     
    Weighted-average shares outstanding (in thousands):
    Basic 78,183   75,935   78,154   75,772  
    Diluted 80,051   75,935   79,742   75,893  
    Earnings (loss) per share:
    Basic $ 0.44   $ (0.29 ) $ 1.19   $ 0.36  
    Diluted $ 0.43   $ (0.29 ) $ 1.16   $ 0.36  
    Dividends declared per common share $ 0.280   $ 0.275   $ 0.555   $ 0.545  
     
    (1) Includes an allowance for borrowed funds used during construction of $ 5 $ 1 $ 9 $ 2
     
                 
    PORTLAND GENERAL ELECTRIC COMPANY AND SUBSIDIARIES
    CONDENSED CONSOLIDATED BALANCE SHEETS

    (In millions)

    (Unaudited)

     
     
    June 30,December 31,
    20142013

    ASSETS

    Current assets:
    Cash and cash equivalents $ 97 $ 107
    Accounts receivable, net 121 146
    Unbilled revenues 74 104
    Inventories 85 65
    Regulatory assets—current 38 66
    Other current assets 98   103
    Total current assets513591
    Electric utility plant, net 5,324 4,880
    Regulatory assets—noncurrent 399 464
    Nuclear decommissioning trust 83 82
    Non-qualified benefit plan trust 33 35
    Other noncurrent assets 47   49
    Total assets$6,399   $6,101
     

    LIABILITIES AND EQUITY

    Current liabilities:
    Accounts payable $ 181 $ 173
    Liabilities from price risk management activities - current 32 49
    Current portion of long-term debt 70
    Accrued expenses and other current liabilities 174   171
    Total current liabilities457   393
    Long-term debt, net of current portion 2,071 1,916
    Regulatory liabilities—noncurrent 913 865
    Deferred income taxes 613 586
    Unfunded status of pension and postretirement plans 160 154
    Non-qualified benefit plan liabilities 101 101
    Asset retirement obligations 105 100
    Liabilities from price risk management activities—noncurrent 83 141
    Other noncurrent liabilities 24   25
    Total liabilities4,527   4,281
    Total equity1,872   1,820
    Total liabilities and equity$6,399   $6,101
     
           
    PORTLAND GENERAL ELECTRIC COMPANY AND SUBSIDIARIES
    CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

    (In millions)

    (Unaudited)

     
     
    Six Months Ended June 30,
    2014   2013
    Cash flows from operating activities:
    Net income $ 93 $ 26
    Depreciation and amortization 148 124
    Capitalized costs expensed related to Cascade Crossing 52
    Other non-cash income and expenses, net included in Net income 37 30
    Changes in working capital 24   47  
    Net cash provided by operating activities302   279  
    Cash flows from investing activities:
    Capital expenditures (501 ) (260 )
    Other, net 7   1  
    Net cash used in investing activities(494)(259)
    Cash flows from financing activities:
    Net issuance of long-term debt 225 98
    Proceeds from issuance of common stock, net of issuance costs 47
    Maturities of commercial paper, net (17 )
    Dividends paid (43 ) (41 )
    Net cash provided by financing activities182   87  
    Change in cash and cash equivalents (10 ) 107
    Cash and cash equivalents, beginning of period 107   12  
    Cash and cash equivalents, end of period$97   $119  
     
             
    PORTLAND GENERAL ELECTRIC COMPANY AND SUBSIDIARIES
    SUPPLEMENTAL OPERATING STATISTICS

    (Unaudited)

     
     
    Three Months EndedSix Months Ended
    June 30,     June 30,
    2014   20132014   2013
    Revenues (dollars in millions):
    Retail:
    Residential $ 188 $ 179 $ 445 $ 425
    Commercial 159 150 317 299
    Industrial 53   54   105   105  
    Subtotal 400 383 867 829
    Other retail revenues, net (4 ) (10 ) (2 ) (6 )
    Total retail revenues 396 373 865 823
    Wholesale revenues 17 21 34 37
    Other operating revenues 10   9   17   16  
    Total revenues $ 423   $ 403   $ 916   $ 876  
     
    Energy sold and delivered (MWh in thousands):
    Retail energy sales:
    Residential 1,552 1,580 3,726 3,809
    Commercial 1,675 1,663 3,326 3,321
    Industrial 785   794   1,525   1,555  
    Total retail energy sales 4,012 4,037 8,577 8,685
    Retail energy deliveries:
    Commercial 139 133 269 262
    Industrial 272   270   533   533  
    Total retail energy deliveries 411   403   802   795  
    Total retail energy sales and deliveries 4,423 4,440 9,379 9,480
    Wholesale energy deliveries 512   771   893   1,311  
    Total energy sold and delivered 4,935   5,211   10,272   10,791  
     
    Number of retail customers at end of period:
    Residential 735,153 727,793
    Commercial 106,139 105,242
    Industrial 200 204
    Direct access 438   511  
    Total retail customers 841,930   833,750  
     
     

    PORTLAND GENERAL ELECTRIC COMPANY AND SUBSIDIARIES

    SUPPLEMENTAL OPERATING STATISTICS, continued

    (Unaudited)
     
     
    Three Months EndedSix Months Ended
    June 30,June 30,
    2014   20132014   2013
    Sources of energy (MWh in thousands):
    Generation:
    Thermal:
    Coal 367 794 1,600 2,155
    Natural gas 43   228   991   1,204  
    Total thermal 410 1,022 2,591 3,359
    Hydro 448 436 981 917
    Wind 404   384   621   629  
    Total generation 1,262   1,842   4,193   4,905  
    Purchased power:
    Term 2,562 2,571 3,782 3,881
    Hydro 489 508 867 901
    Wind 102 111 165 177
    Spot 294   19   1,041   703  
    Total purchased power 3,447   3,209   5,855   5,662  
    Total system load 4,709 5,051 10,048 10,567
    Less: wholesale sales (512 ) (771 ) (893 ) (1,311 )
    Retail load requirement 4,197   4,280   9,155   9,256  
     
    Heating Degree-daysCooling Degree-days
    2014   201320142013
    First quarter 1,891 1,902
    Average1,8641,850
    Second quarter 530 593 57 82
    Average7137217068
    Year-to-date 2,421 2,495 57 82
    Year-to-date average *2,5772,5717068

    * — “Average” amounts represent the 15-year rolling averages provided by the National Weather Service (Portland Airport).






    PGE

    Media Contact:

    Steven Corson, 503-464-8444

    Corporate Communications

    or

    Investor Contact:

    Bill Valach, 503-464-7395

    Investor Relations

    Source: Portland General Electric Company


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