Portland General Electric Reports 2013 Financial Results and Initiates 2014 Earnings Guidance General rate case filing seeks inclusion of two new power plants in customer prices, effective 2015 Business Wire PORTLAND, Ore. -- February 14, 2014 Portland General Electric Company (NYSE: POR) today reported net income of $105 million, or $1.35 per diluted share, for the year ended Dec.31, 2013. This compares with $141 million, or $1.87 per diluted share, for 2012. Net income was $47 million, or 59 cents per diluted share, for the fourth quarter of 2013 compared with $28 million, or 38 cents per diluted share, for the comparable period of 2012. The decrease in annual net income was largely due to the write-off of the Cascade Crossing Transmission Project and a customer billing refund in the second quarter of 2013 (49 cents per share) and incremental replacement power costs due to plant outages in the second half of 2013 (13 cents per share). “In 2013, we completed two RFP processes, which resulted in the selection of three new long-term generation resources that will deliver value to our customers, and achieved a fair outcome in the 2014 general rate case,” said Jim Piro, president and chief executive officer. “In 2014, we are focused on constructing the three new generation resources on time and on budget and continually emphasizing operational excellence.” Generation projects Construction is underway on all three generation projects selected last year through the competitive RFP processes and each of these projects continue to be on time and on budget. The majority of engines and generators are now on site for Port Westward Unit 2, a 220 megawatt natural gas-fired capacity resource. This plant is needed to help PGE integrate the variable output from wind and solar facilities and meet customer demand for power during peak events such as heat waves or cold fronts. Foundations are being poured and roads are being built at Tucannon River Wind Farm, a 267 megawatt wind farm in Southeastern Washington that will help PGE increase the amount of renewable power in its system and meet state renewable power standards. Construction on Carty Generating Station, a highly-efficient 440 megawatt natural gas-fired baseload plant, began in early January with ground clearing and site development. General rate case filing With Tucannon River and Port Westward Unit 2 expected to begin serving customers in the first half of 2015, PGE has initiated a comprehensive 10-month review and approval process with the Oregon Public Utility Commission in order to include these resources in prices when the plants go online. Late yesterday, PGE filed a general rate case with a 2015 test year requesting an overall customer price increase of 4.6 percent effective early 2015. The rate case requests recovery of incremental costs to bring these two new plants into service and to provide safe, reliable and sustainable power to customers. The request is based on 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. The specific impact on individual customers’ bills will vary depending on usage and customer class. If the OPUC approves PGE’s request as submitted, a typical residential customer using a monthly average of 840 kilowatt-hours of power would see their bill increase by about 5 dollars per month. PGE expects the Commission to issue a final order with approved price changes before the end of 2014, with new customer prices expected to be effective in three stages. A price reduction for base business costs, resulting from amortization of several customer credits, is expected to be effective on Jan. 1, 2015, and price increases related to each of the two new generation facilities are expected to be effective when each facility is providing service to customers in the first half of 2015. Fourth quarter operating results Total revenues increased $36 million in the fourth quarter of 2013 compared with the fourth quarter of 2012, which was driven by a 6 percent increase in energy deliveries resulting from cooler weather. During the fourth quarter of 2013, heating degree-days (an indicator of the extent to which customers are likely to have used electricity for heating) were 26 percent higher than the fourth quarter of 2012. Residential energy deliveries increased 12 percent and commercial and industrial deliveries combined increased 2 percent. Adjusting for the effects of weather, total retail deliveries in the fourth quarter of 2013 were comparable to the fourth quarter of 2012. Purchased power and fuel expense increased $26 million in the fourth quarter of 2013 compared with the fourth quarter of 2012, with $16 million related to an 8 percent increase in average variable power cost per MWh and $9 million related to a 5 percent increase in total system load. The increase in the average variable power cost per MWh was driven by the following: *Less favorable regional hydro conditions in the fourth quarter of 2013 compared with the fourth quarter of 2012 contributing to an increase in the price per MWh of purchased power; *An 11 percent decrease in energy received from PGE owned and contracted hydroelectric projects, which was replaced with purchased power; and *Unplanned thermal plant outages. During the fourth quarter of 2013, the company’s Coyote Springs natural gas-fired generating plant was offline until November 30, 2013 and Colstrip Unit 4 coal-fired generating facility was offline until January 23, 2014. As a result, the company replaced such power with purchased power, incurring $6 million of incremental replacement power costs. Net variable power costs, which consists of purchased power and fuel expense net of wholesale revenues and is used in the company’s power cost adjustment mechanism, increased $16 million in the fourth quarter of 2013 compared to the fourth quarter of 2012. The increase is largely due to the increase in the average variable power cost per MWh partially offset by a higher average price per MWh for wholesale sales. Total production, distribution, administrative and other expenses (operating and maintenance expenses) were $117 million in the fourth quarter of 2013 compared with $114 million in the fourth quarter of 2012. The $3 million increase was largely due to higher benefits expense. Income taxes decreased $10 million in the fourth quarter of 2013 compared with the fourth quarter of 2012, primarily due to an adjustment to increase the Company’s net deferred income tax liability in 2012, which was driven by an increase in PGE’s composite state tax rate, and changes related to production tax credits. 2013 annual operating results Total revenues increased $5 million in 2013 compared to 2012 primarily due to the net effect of the following: *A $20 million increase resulting from higher volumes of energy deliveries driven by more extreme weather in 2013 compared to 2012. Residential energy deliveries were up 3 percent in 2013, while commercial and industrial deliveries combined were comparable to 2012. Adjusting for the effects of weather, total retail deliveries were comparable to prior year; and *A $5 million increase related to the sale of natural gas and oil not needed for operations; *A $31 million increase in wholesale revenues consisting of a 55 percent increase in average price of wholesale power, combined with a 5 percent increase in the volume sold; partially offset by *A $38 million decrease as a result of lower average retail prices due to lower expected power costs as established in the annual update tariff for power costs and a larger portion of energy deliveries going to customers who purchase their energy from electricity service suppliers; *A $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 *A $4 million decrease related to the company’s power cost adjustment mechanism, as the estimated refund to customers related to the 2011 PCAM was reduced in 2012, with no estimated refund to or collection from customers recorded in 2013. Purchased power and fuel expense increased $31 million in 2013 compared with 2012, largely due to a 4 percent increase in average variable power cost per MWh. This increase was due to the combination of the following: *Less favorable regional hydro conditions in 2013 compared with 2012 contributing to an increase in the price per MWh of purchased power; *An 11 percent decrease in the energy received from PGE owned and contracted hydroelectric projects, which was replaced with thermal generation and purchased power. *Unplanned thermal plant outages at three of its generating facilities during the second half of 2013. As a result, the company replaced such power with purchased power, incurring $17 million of incremental replacement power costs. Net variable power costs for 2013 were comparable to 2012. A 55 percent increase in the average price per MWh of wholesale sales, was offset by the increase in the average variable power cost per MWh. Total production, distribution, administrative and other expenses (operating and maintenance expenses) were $444 million in 2013 compared with $427 million in 2012. The $17 million increase is primarily due to higher repair and maintenance costs for the company’s generating plants and distribution system, as well as higher pension costs. Cascade Crossing transmission project consists of $52 million of costs charged to expense in the second quarter of 2013 due to the suspension of permitting and development of the project. Interest expense, net decreased $7 million in 2013 compared with 2012, with $4 million related to the timing of the 2013 maturities and issuances of long-term debt and $3 million related to an increase in the allowance for borrowed funds used for construction resulting from a higher average construction work-in-progress balance with the commencement of the construction for three new generating facilities in 2013. Other income, net increased $10 million in 2013 compared with 2012, primarily driven by an increase in the allowance for equity funds used for construction from the higher average CWIP balance, as well as an increase in earnings from the non-qualified benefit plan trust assets. Income taxes decreased $43 million, in 2013 compared with 2012, which resulted in the company’s effective tax rate decreasing to 16.8 percent in 2013 compared with 31.4 percent in 2012. These decreases are primarily due to a decrease in pre-tax income for 2013 compared with 2012, which was driven by the $52 million charge to expense in 2013 related to Cascade Crossing, combined with other unfavorable impacts to 2013 pre-tax income. Also contributing to the decreases was an increase to deferred tax balances in 2012 for a change in the blended statutory income tax rate and an increase in production tax credits in 2013. Adjusted operating earnings per share Excluding the impacts of the Cascade Crossing charge and the customer billing matter, PGE’s adjusted operating earnings for 2013 would be $1.84 per share, as shown below: 2013 GAAP earnings per share $ 1.35 Exclude the second quarter Cascade Crossing expense 0.42 Exclude the second quarter customer billing matter revenue 0.07 reduction 2013 Non-GAAP adjusted operating earnings per share $ 1.84 PGE believes this non-GAAP adjusted earnings reconciliation is useful to investors, analysts, rating agencies and other parties, as it facilitates the analysis of our results of operations from one period to another andprovides clarity concerning the impact of certain events on operational results. 2014 earnings guidance PGE is initiating full-year 2014 earnings guidance of $2.00 to $2.15 per diluted share. Guidance is based on the following assumptions: *Retail deliveries and revenues in line with levels set in the 2014 general rate case; *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 $300 and $310 million; and *Capital expenditures slightly above $1 billion. Fourth quarter 2013 earnings call and web cast — Feb. 14, 2014 PGE will host a conference call with financial analysts and investors on Friday, Feb.14, 2014, 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 1 p.m. ET on Friday, Feb.14, 2014 through Friday, Feb.21, 2014. 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 consolidated statements of 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 Company is a vertically integrated electric utility that serves approximately 836,000 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 INCOME (In millions, except per share amounts) (Unaudited) Three Months Ended Years Ended December 31, December 31, 2013 2012 2013 2012 Revenues, net $ 499 $ 463 $ 1,810 $ 1,805 Operating expenses: Purchased power and 219 193 757 726 fuel Production and 56 58 225 211 distribution Cascade Crossing — — 52 — transmission project Administrative and 61 56 219 216 other Depreciation and 62 60 248 248 amortization Taxes other than 24 25 103 102 income taxes Total operating 422 392 1,604 1,503 expenses Income from operations 77 71 206 302 Interest expense, net 26 26 101 108 ^(1) Other income: Allowance for equity funds used during 5 2 13 6 construction Miscellaneous income, 2 2 7 4 net Other income, net 7 4 20 10 Income before income 58 49 125 204 taxes Income taxes 11 21 21 64 Net income 47 28 104 140 Less: net loss attributable to — — (1 ) (1 ) noncontrolling interests Net income attributable to $ 47 $ 28 $ 105 $ 141 Portland General Electric Company Weighted-average shares outstanding (in thousands): Basic 78,068 75,535 76,821 75,498 Diluted 78,812 75,677 77,388 75,647 Earnings per share: Basic $ 0.59 $ 0.38 $ 1.36 $ 1.87 Diluted $ 0.59 $ 0.38 $ 1.35 $ 1.87 (1) Includes an allowance for borrowed $ 3 $ 1 $ 7 $ 4 funds used during construction PORTLAND GENERAL ELECTRIC COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In millions) (Unaudited) As of December 31, 2013 2012 ASSETS Current assets: Cash and cash equivalents $ 107 $ 12 Accounts receivable, net 146 152 Unbilled revenues 104 97 Inventories 65 78 Margin deposits 9 46 Regulatory assets—current 66 144 Other current assets 94 93 Total current assets 591 622 Electric utility plant, net 4,880 4,392 Regulatory assets—noncurrent 464 524 Nuclear decommissioning trust 82 38 Non-qualified benefit plan trust 35 32 Other noncurrent assets 49 62 Total assets $ 6,101 $ 5,670 LIABILITIES AND EQUITY Current liabilities: Accounts payable $ 173 98 Liabilities from price risk management 49 127 activities—current Short-term debt — 17 Current portion of long-term debt — 100 Accrued expenses and other current liabilities 171 179 Total current liabilities 393 521 Long-term debt, net of current portion 1,916 1,536 Regulatory liabilities—noncurrent 865 765 Deferred income taxes 586 588 Unfunded status of pension and postretirement 154 247 plans Liabilities from price risk management 141 73 activities—noncurrent Non-qualified benefit plan liabilities 101 102 Asset retirement obligations 100 94 Other noncurrent liabilities 25 14 Total liabilities 4,281 3,940 Total equity 1,820 1,730 Total liabilities and equity $ 6,101 $ 5,670 PORTLAND GENERAL ELECTRIC COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In millions) (Unaudited) Years Ended December 31, 2013 2012 Cash flows from operating activities: Net income $ 104 $ 140 Depreciation and amortization 248 248 Capitalized costs expensed related to Cascade 52 — Crossing Other non-cash income and expenses, net 51 74 included in Net income Changes in working capital 68 40 Proceeds received from legal settlement 44 — Other, net (23 ) (8 ) Net cash provided by operating activities 544 494 Cash flows from investing activities: Capital expenditures (656 ) (303 ) Contribution to Nuclear decommissioning trust (44 ) — Other, net 8 9 Net cash used in investing activities (692 ) (294 ) Cash flows from financing activities: Net issuance (repayment) of long-term debt 277 (100 ) Proceeds from issuance of common stock, net of 67 — issuance costs Maturities of commercial paper, net (17 ) (13 ) Dividends paid (84 ) (81 ) Net cash provided by (used in) financing 243 (194 ) activities Increase in cash and cash equivalents 95 6 Cash and cash equivalents, beginning of year 12 6 Cash and cash equivalents, end of year $ 107 $ 12 PORTLAND GENERAL ELECTRIC COMPANY AND SUBSIDIARIES SUPPLEMENTAL OPERATING STATISTICS (Unaudited) Three Months Ended Years Ended December 31, December 31, 2013 2012 2013 2012 Revenues (dollars in millions): Retail: Residential $ 250 $ 230 $ 861 $ 860 Commercial 159 157 619 633 Industrial 57 60 217 226 Subtotal 466 447 1,697 1,719 Other accrued (deferred) — (2 ) (5 ) 4 revenues, net Total retail revenues 466 445 1,692 1,723 Wholesale revenues 21 11 80 49 Other operating revenues 12 7 38 33 Total revenues $ 499 $ 463 $ 1,810 $ 1,805 Energy sold and delivered (MWh in thousands): Retail energy sales: Residential 2,232 1,999 7,702 7,505 Commercial 1,764 1,725 6,896 6,964 Industrial 832 902 3,210 3,475 Total retail energy sales 4,828 4,626 17,808 17,944 Retail energy deliveries: Commercial 137 111 545 438 Industrial 258 201 1,066 808 Total retail energy 395 312 1,611 1,246 deliveries Total retail energy sales 5,223 4,938 19,419 19,190 and deliveries Wholesale energy 461 388 2,353 2,249 deliveries Total energy sold and 5,684 5,326 21,772 21,439 delivered Number of retail customers at end of period: Residential 732,341 725,502 Commercial 103,021 102,138 Industrial 204 216 Direct access 504 498 Total retail customers 836,070 828,354 PORTLAND GENERAL ELECTRIC COMPANY AND SUBSIDIARIES SUPPLEMENTAL OPERATING STATISTICS, continued (Unaudited) Three Months Ended Years Ended December 31, December 31, 2013 2012 2013 2012 Sources of energy (MWh in thousands): Generation: Thermal: Coal 1,084 1,330 4,070 3,610 Natural gas 1,076 889 3,375 2,882 Total thermal 2,160 2,219 7,445 6,492 Hydro 415 482 1,646 1,943 Wind 199 160 1,200 1,125 Total generation 2,774 2,861 10,291 9,560 Purchased power: Term 1,652 1,340 6,472 7,382 Hydro 343 370 1,629 1,728 Wind 41 47 311 319 Spot 697 644 2,547 2,285 Total purchased power 2,733 2,401 10,959 11,714 Total system load 5,507 5,262 21,250 21,274 Less: wholesale sales (461 ) (388 ) (2,353 ) (2,249 ) Retail load requirement 5,046 4,874 18,897 19,025 Heating Degree-days Cooling Degree-days 2013 2012 2013 2012 1st Quarter 1,902 1,967 — — Average 1,850 1,848 — — 2nd Quarter 593 709 82 40 Average 721 714 68 68 3rd Quarter 90 58 457 395 Average 82 81 385 387 4th Quarter 1,801 1,435 — 1 Average 1,586 1,592 1 1 Annual total 4,386 4,169 539 436 Annual total average 4,239 4,235 454 456 Note: “Average” amounts represent the 15-year rolling averages provided by the National Weather Service (Portland Airport). Contact: Portland General Electric Company Media Contact: Steven Corson, 503-464-8444 Corporate Communications or Investor Contact: Bill Valach, 503-464-7395 Investor Relations
Portland General Electric Reports 2013 Financial Results and Initiates 2014 Earnings Guidance
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