Portland General Electric Announces Second Quarter Results

  Portland General Electric Announces Second Quarter Results

Business Wire

PORTLAND, Ore. -- August 2, 2013

Portland General Electric Company (NYSE:POR)  today reported a net loss of $22
million, or 29 cents per diluted share, for the second quarter of 2013. This
compares with net income of $26 million, or 34 cents per diluted share, for
the second quarter of 2012. Results for the quarter were driven by several
factors, including the suspension of the Cascade Crossing Transmission Project
and increased operating and maintenance expense related to the company’s
generation plants and distribution system. The increase in operating and
maintenance expense is in-line with full-year expectations of $440 million to
$460 million for 2013.

“Although several factors impacted our operating and financial performance
this quarter, our outlook for 2014 and beyond is positive,” said Jim Piro,
president and chief executive officer. “We are moving forward on our three new
generation projects, have reached substantial settlement on our 2014 General
Rate Case and have successfully completed debt and equity financings,
positioning the company for strong operations and growth over the next few
years.”

Company updates

  *General Rate Case—PGE filed a 2014 General Rate Case in mid-February and
    has reached settlement with OPUC staff and interveners on all items except
    pension expense. Stipulating parties have settled on an allowed ROE of
    9.75 percent, a capital structure of 50 percent debt and 50 percent
    equity, and an average rate base of $3.1 billion. The stipulated items,
    along with recently filed updates of power costs and the load forecast,
    result in a revised increase of $79 million in annual revenue requirement.
  *Generating Projects—On June 3, PGE announced the completion of the
    competitive bidding process for baseload and renewable generation plants.
    PGE has entered into an agreement for the construction of a new 440 MW
    natural gas-fired baseload plant called Carty, to be built by a third
    party next to the Boardman coal plant. On August 1, PGE closed on an
    agreement to acquire development rights for the construction of a new 267
    MW wind farm, which the company will now call Tucannon River Wind Farm. In
    addition, PGE has begun construction on Port Westward Unit 2, the 220 MW
    natural gas-fired capacity resource announced earlier this year. Together,
    these three projects represent an investment of approximately $1.3 billion
    (excluding AFDC) and are scheduled to come online in 2015 and 2016.
  *Cascade Crossing—On June 3, PGE announced a new non-binding memorandum of
    understanding with Bonneville Power Administration. Under this MOU, the
    parties will explore a transmission capacity option whereby BPA could
    provide PGE with ownership of approximately 1,500 MW in transmission
    capacity, in exchange for certain PGE assets, investments and/or PGE
    transfer capabilities to BPA. Timing and costs of potential options under
    the MOU will need to be clarified through further discussions and are
    contingent upon reaching a definitive agreement with BPA. As a result of
    the changed conditions reflected in the MOU, PGE suspended permitting and
    development of Cascade Crossing and charged $52 million of capitalized
    costs related to Cascade Crossing to expense in the second quarter of
    2013.
  *Equity Financing—On June 11, PGE completed a public offering of 12,765,000
    shares of common stock at an offering price per share of $29.50.
    11,100,000 shares were offered pursuant to a forward sale transaction and
    are expected to be issued over a two-year period ending June 11, 2015. The
    remaining 1,665,000 shares were issued in June. Proceeds from the offering
    will be used for capital expenditures, debt repayment and general
    corporate purposes.
  *Debt Financing—On June 27, PGE agreed to issue $225 million of 4.47%
    series First Mortgage Bonds in the private placement market. The bonds
    consist of $150 million due in 2044, which were issued in June, and $75
    million due in 2043, which are expected to be issued in August. This
    financing will support capital expenditures, debt repayment and general
    corporate purposes.
  *Credit Ratings Upgrade—On June 28, Moody’s Investor Service upgraded the
    long-term ratings of the company. The issuer rating improved from ‘Baa2.’
    to ‘Baa1’ and the First Mortgage Bonds improved from ‘A3’ to ‘A2.’ The
    credit rating upgrades reflect a constructive regulatory environment with
    the timely recovery of prudently incurred costs, and a strong and stable
    financial profile with adequate liquidity to support a significant
    construction cycle.
  *Generating Plant Outages—As disclosed on July 15, the Boardman and
    Colstrip Unit 4 coal plants went offline at the beginning of July due to
    specific equipment failures.

       *Boardman, of which PGE owns 65%, experienced a thermal hammer event
         in the cold reheat line causing structural damage, and came back
         online July 31, 2013.
       *Colstrip Unit 4, of which PGE owns 20%, experienced vibration and
         rotor issues. PGE is working closely with PPL Montana, the operator
         of the facility, to assess the damage and necessary repairs. Colstrip
         is expected to be offline for the remainder of 2013.

The company estimates 2013 replacement power costs for the two plants combined
to be between $10 and $12 million. The estimated repair costs are expected to
be approximately $10 million for Boardman and $30 to $40 million for Colstrip
Unit 4. Insurance recovery of repair costs is subject to a $2.5 million
deductible at each plant; insurance carriers have been notified of potential
claims.

Second quarter operating results

Total revenues decreased $10 million, or 2 percent, to $403 million in the
second quarter of 2013 from $413 million in the second quarter of 2012
primarily due to the net effect of the following:

  *$10 million decrease in average retail price primarily driven by lower
    power costs as established in the 2013 annual power cost update tariff;
  *$9 million decrease related to an industrial customer refund recorded in
    the second quarter of 2013 for a billing error covering a period of
    several years; and
  *$2 million decrease related to lower volume of retail energy sold and
    delivered, with total volume down approximately 1 percent from the second
    quarter of 2012 largely as a result of warmer weather during the second
    quarter of 2013. Residential and industrial volumes were down 3 percent
    and 1 percent, respectively, which were offset by a 2 percent increase in
    commercial volumes; partially offset by
  *$12 million, or 133 percent, increase in wholesale revenues consisting of
    a 101 percent increase in the average price of wholesale power and a 10
    percent increase in the volume sold.

Purchased power and fuel expense for the second quarter of 2013 was comparable
to the second quarter of 2012. A decrease primarily due to more generation
from lower-cost coal-fired resources was substantially offset by decreases in
the volume of purchased power and energy received from hydro resources.

Production and distribution expense increased $13 million, or 25 percent, in
the second quarter of 2013 compared with the second quarter of 2012, primarily
due to higher operating and maintenance costs related to the company’s
generating plants and distribution system.

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.

Other income, net increased $2 million in the second quarter of 2013 compared
with the second quarter of 2012, primarily due to higher earnings from
non-qualified benefit plan trust assets.

Interest expense decreased $2 million, or 7 percent, in the second quarter of
2013 compared with the second quarter of 2012, primarily due to the redemption
of $100 million of first mortgage bonds in October 2012 and $50 million in
April 2013.

Income tax benefit was $11 million in the second quarter of 2013 compared with
income tax expense of $9 million in the second quarter of 2012. The change is
primarily due to the decrease in the annual estimated pre-tax income for 2013
compared to 2012, which was driven by costs expensed related to Cascade
Crossing and an industrial customer refund recorded in 2013.

2013 earnings guidance

PGE is reducing full-year 2013 earnings guidance to $1.25 to $1.40 per diluted
share. This is a $0.10 decrease from the June 3 guidance revision of $1.35 to
$1.50, driven by $10-12 million of estimated replacement power costs for the
Boardman and Colstrip coal plant outages. This revised guidance also includes
the following assumptions:

  *Energy deliveries comparable to weather-adjusted 2012;
  *Normal hydro conditions and wind conditions in line with expectations;
  *Ongoing operating and maintenance costs between $440 million and $460
    million;
  *Depreciation expense between $240 million and $250 million; and
  *Capital expenditures between $710 million and $730 million.

Second quarter 2013 earnings call and web cast — August2, 2013

PGE will host a conference call with financial analysts and investors on
Friday, Aug. 2, at 11 a.m. ET. The conference call will be web cast live on
the PGE website at portlandgeneral.com. A replay of the call will be available
beginning at 2 p.m. ET on Friday, Aug. 2 through Friday, Aug. 9.

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 834,000 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 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 OPERATIONS
(In millions, except per share amounts)
(Unaudited)

                                  Three Months Ended     Six Months Ended
                                   June 30,               June 30,
                                   2013       2012        2013       2012
Revenues, net                      $ 403       $ 413       $ 876       $ 892
Operating expenses:
Purchased power and fuel           156         156         348         351
Production and distribution        64          51          115         104
Cascade Crossing transmission      52          —           52          —
project
Administrative and other           55          56          109         110
Depreciation and amortization      62          63          124         125
Taxes other than income taxes      25         26         52         53
Total operating expenses           414        352        800        743
Income (loss) from operations      (11     )   61          76          149
Other income (expense):
Allowance for equity funds used    2           2           4           3
during construction
Miscellaneous income (expense),    1          (1      )   2          2
net
Other income, net                  3           1           6           5
Interest expense                   25         27         50         55
Income (loss) before income tax    (33     )   35          32          99
expense (benefit)
Income tax expense (benefit)       (11     )   9          6          24
Net income (loss)                  (22     )   26          26          75
Less: net loss attributable to     —          —          (1      )   —
noncontrolling interests
Net income (loss) attributable
to Portland General Electric       $ (22   )   $ 26       $ 27       $ 75
Company
                                                                       
Weighted-average shares
outstanding (in thousands):
Basic                              75,935     75,507     75,772     75,465
Diluted                            75,935     75,517     75,893     75,479
Earnings (loss) per share—basic    $ (0.29 )   $ 0.34     $ 0.36     $ 0.99
and diluted
Dividends declared per common      $ 0.275    $ 0.270    $ 0.545    $ 0.535
share


PORTLAND GENERAL ELECTRIC COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions)
(Unaudited)

                                                     June 30,   December 31,
                                                      2013        2012
ASSETS
Current assets:
Cash and cash equivalents                             $ 119       $    12
Accounts receivable, net                              137         152
Unbilled revenues                                     73          97
Inventories                                           72          78
Margin deposits                                       34          46
Regulatory assets—current                             114         144
Other current assets                                  78         93
Total current assets                                  627         622
Electric utility plant, net                           4,532       4,392
Regulatory assets—noncurrent                          519         524
Nuclear decommissioning trust                         37          38
Non-qualified benefit plan trust                      32          32
Other noncurrent assets                               49         62
Total assets                                          $ 5,796    $    5,670
                                                                  
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable                                      $ 107       $    98
Liabilities from price risk management activities -   103         127
current
Short-term debt                                       —           17
Current portion of long-term debt                     50          100
Accrued expenses and other current liabilities        175        179
Total current liabilities                             435        521
Long-term debt, net of current portion                1,686       1,536
Regulatory liabilities—noncurrent                     796         765
Deferred income taxes                                 571         588
Unfunded status of pension and postretirement plans   251         247
Non-qualified benefit plan liabilities                103         102
Asset retirement obligations                          96          94
Liabilities from price risk management                78          73
activities—noncurrent
Other noncurrent liabilities                          18         14
Total liabilities                                     4,034      3,940
Total equity                                          1,762      1,730
Total liabilities and equity                          $ 5,796    $    5,670


PORTLAND GENERAL ELECTRIC COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)

                                                              Six Months Ended
                                                            
                                                              June 30,
                                                              2013     2012
Cash flows from operating activities:
Net income                                                    $ 26      $ 75
Depreciation and amortization                                 124       125
Capitalized costs expensed related to Cascade Crossing        52        —
Other non-cash income and expenses, net included in Net       30        72
income
Changes in working capital                                    49        (4   )
Other, net                                                    (2    )   (1   )
Net cash provided by operating activities                     279      267  
Cash flows from investing activities:
Capital expenditures                                          (260  )   (137 )
Sale of solar power facility                                  —         10
Other, net                                                    1        (1   )
Net cash used in investing activities                         (259  )   (128 )
Cash flows from financing activities:
Net issuance of long-term debt                                98        —
Proceeds from issuance of common stock, net of issuance       47        —
costs
Maturities of commercial paper, net                           (17   )   (30  )
Dividends paid                                                (41   )   (41  )
Net cash provided by (used in) financing activities           87       (71  )
Increase in cash and cash equivalents                         107       68
Cash and cash equivalents, beginning of period                12       6    
Cash and cash equivalents, end of period                      $ 119    $ 74 


PORTLAND GENERAL ELECTRIC COMPANY AND SUBSIDIARIES
SUPPLEMENTAL OPERATING STATISTICS
(Unaudited)

                                   Three Months Ended  Six Months Ended
                                    June 30,            June 30,
                                    2013      2012      2013       2012
Revenues (dollars in millions):
Retail:
Residential                         $  179     $ 187     $   425     $   443
Commercial                          150        152       299         308
Industrial                          54        56       105        109     
Subtotal                            383        395       829         860
Other retail revenues, net          (10    )   (1    )   (6      )   (4      )
Total retail revenues               373        394       823         856
Wholesale revenues                  21         9         37          19
Other operating revenues            9         10       16         17      
Total revenues                      $  403    $ 413    $   876    $   892 
                                                                     
Energy sold and delivered (MWh in
thousands):
Retail energy sales:
Residential                         1,580      1,621     3,809       3,880
Commercial                          1,663      1,657     3,321       3,390
Industrial                          794       877      1,555      1,687   
Total retail energy sales           4,037      4,155     8,685       8,957
Retail energy deliveries:
Commercial                          133        107       262         213
Industrial                          270       201      533        397     
Total retail energy deliveries      403       308      795        610     
Total retail energy sales and       4,440      4,463     9,480       9,567
deliveries
Wholesale energy deliveries         771       702      1,311      1,090   
Total energy sold and delivered     5,211     5,165    10,791     10,657  
                                                                     
Number of retail customers at end
of period:
Residential                                              727,793     723,169
Commercial                                               105,242     104,604
Industrial                                               204         210
Direct access                                            511        511     
Total retail customers                                   833,750    828,494 


PORTLAND GENERAL ELECTRIC COMPANY AND SUBSIDIARIES
SUPPLEMENTAL OPERATING STATISTICS, continued
(Unaudited)

                                      Three Months Ended  Six Months Ended
                                      June 30,             June 30,
                                      2013      2012      2013      2012
Sources of energy (MWh in thousands):
Generation:
Thermal:
Coal                                  794        208       2,155      1,285
Natural gas                           228       7        1,204     1,137  
Total thermal                         1,022      215       3,359      2,422
Hydro                                 436        547       917        1,130
Wind                                  384       377      629       623    
Total generation                      1,842     1,139    4,905     4,175  
Purchased power:
Term                                  2,571      2,931     3,881      4,147
Hydro                                 508        522       901        936
Wind                                  111        103       177        177
Spot                                  19        398      703       1,181  
Total purchased power                 3,209     3,954    5,662     6,441  
Total system load                     5,051      5,093     10,567     10,616
Less: wholesale sales                 (771   )   (702  )   (1,311 )   (1,090 )
Retail load requirement               4,280     4,391    9,256     9,526  


                      Heating Degree-days   Cooling Degree-days
                       2013        2012       2013        2012
First quarter          1,902        1,967      —            —
Average                1,850        1,848      —            —
Second quarter         593          709        82           40
Average                721          714        68           68
Year-to-date           2,495        2,676      82           40
Year-to-date average   2,571        2,562      68           68

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

Contact:

Portland General Electric Company
Media Contact:
Corporate Communications
Steven Corson, 503-464-8444
or
Investor Contact:
Director, Investor Relations
Bill Valach, 503-464-7395
 
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