Portland General Electric Reports Third Quarter 2012 Financial Results

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Portland General Electric Reports Third Quarter 2012 Financial Results

Earnings of $0.50 per diluted share for the third quarter of 2012

Earnings guidance for 2012 reaffirmed ranging between $1.85 to $2.00 per diluted share


PORTLAND, Ore.--(BUSINESS WIRE)-- Portland General Electric Company (NYS: POR) today reported net income of $38 million, or $0.50 per diluted share, for the third quarter of 2012, compared with $27 million, or $0.36 per diluted share, for the third quarter of 2011. This increase was due to several items including a 2% increase in residential deliveries, the impact of the power cost adjustment mechanism (PCAM), and an increase in unrealized gains on non-qualified benefit plan trust assets. For the nine months ended September 30, 2012, net income was $113 million, or $1.49 per diluted share, compared with $118 million, or $1.57 per diluted share for the nine months ended September 30, 2011. This decrease was primarily driven by a 2% decrease in residential energy deliveries as a result of warmer weather during the 2012 heating season, and a 1% decrease in average variable power cost as a result of lower natural gas prices partially offset by lower energy received from hydro and wind generating resources.

PGE made continued progress toward implementing its Integrated Resource Plan (IRP) this quarter. For the energy and capacity request for proposals, numerous bids, including the Company's benchmark proposals, have been received and PGE is in the process of identifying an initial short list of projects, which is expected by the end of 2012. The Company expects negotiations with final short listed bidders to begin in late 2012 or early 2013.

Also, in October, PGE issued a request for proposals seeking approximately 100 average megawatts of renewable generating resources. The Company submitted its renewable resource benchmark proposal and all other bids are due next week. PGE expects to select a final short list and initiate negotiations in early 2013.

"I'm pleased with PGE's performance this quarter," said Jim Piro, President and Chief Executive Officer. "Our operating performance remains strong, and we continue to move forward with our IRP Action Plan. As a result, we are on track to meet our financial and operating objectives for the year."

Third Quarter Operating Results

Total revenues for the third quarter of 2012 were $450 million compared with $439 million for the third quarter of 2011, an increase of $11 million, or 3%.

Retail revenues were $422 million for the third quarter of 2012 compared to $406 million for the third quarter of 2011. The increase of $16 million, or 4%, consisted of the following (in millions):

Changes in the PCAM for 2011   $11
Independent Spent Fuel Storage Installation tax credits provided to customers in 20114
Increase in volume and price for energy delivered to direct access customers3
Changes in volume of energy sold to retail customers(4)
Average retail price of energy declined 1%(4)
The aggregate impact of several items, including decoupling mechanism, supplemental tariffs and other 6 
$16 
 

Residential energy deliveries increased 2%, while energy deliveries to industrial and commercial customers were comparable to the third quarter of 2011. For 2012, there was an increase in the number of industrial and commercial customers electing to purchase their energy requirements from an approved electricity service supplier. Due to this shift, retail revenues attributable to commercial and industrial customers declined in the third quarter of 2012 relative to same period of 2011.

Wholesale revenues in the third quarter of 2012 were $19 million, a decrease of 21%, from $24 million for the third quarter of 2011. Lower wholesale revenues were due to a 22% decrease in average price and a 1% decrease in sales volume. Lower wholesale power prices were driven by low natural gas prices.

Purchased power and fuel expense for the third quarter of 2012 was comparable with the third quarter of 2011. Declines in energy received from hydro and wind resources led to a 1% increase in average variable power cost, which was offset by a 1% decrease in total retail load requirement. The average variable power cost increased to $33.89 per megawatt hour in the third quarter of 2012 compared with $33.49 per megawatt hour in the third quarter of 2011.

Energy received from hydroelectric resources, including that purchased from mid-Columbia projects, in the third quarter of 2012 decreased 32% from the third quarter of 2011. This was 14% above the levels projected in PGE's 2012 Annual Power Cost Update Tariff (AUT) for the current quarter, compared with 16% above the levels projected in the 2011 AUT for the third quarter of 2011. Energy received from the Company's Biglow Canyon Wind Farm decreased 10%, from less favorable wind conditions during the third quarter of 2012 relative to the third quarter of 2011.

For the three and nine month periods ended September 30, 2012, actual net variable power costs (NVPC) were approximately $4 million and $14 million, respectively, below baseline NVPC. NVPC for the year ending December 31, 2012 is currently estimated to be within the $15 million lower deadband of the PCAM. Accordingly, no estimated refund to or collection from customers was recorded as of September 30, 2012. For the third quarter of 2011, actual NVPC was approximately $7 million below baseline NVPC, with PGE recording an estimated refund to customers of $4 million.

Administrative and other expense decreased $5 million, or 9%, driven by lower legal fees and employee compensation and benefit costs, partially offset by increased pension-related costs resulting from a lower discount rate and lower return on trust assets.

Other income, net was $1 million in the third quarter of 2012 compared with Other expense, net of $3 million in the third quarter of 2011, as PGE recorded unrealized losses on the non-qualified benefit plan trust assets in the amount of $4 million in the third quarter of 2011.

Income taxes increased in the third quarter of 2012 for an effective tax rate of 33.9% compared with an effective tax rate of 28.9% in the third quarter of 2011. The higher effective tax rate for the third quarter of 2012 compared with the third quarter of 2011 resulted from a reduced income tax rate benefit from both production tax credits (PTCs) and state income tax credits resulting from an increase in pre-tax income. The effective tax rate for the nine months ended September 30, 2012 was 27.7% compared with 26.3% for the same period of 2011.

2012 Earnings Guidance

PGE's 2012 earnings are expected to be within the guidance range of $1.85 to $2.00 per diluted share, which is based on the following:

  • Retail energy deliveries approximately one-half of 1% higher than weather adjusted 2011 levels, excluding certain paper customers that do not significantly impact the company's gross margin;
  • Favorable power supply operations;
  • Operating and maintenance costs of approximately $105 million to $110 million per quarter; and
  • Capital deferrals of $16 million for the full year, with $11 million recorded in the first nine months of 2012.

Third Quarter 2012 Earnings Call and Webcast — November 8, 2012

PGE will host a conference call with financial analysts and investors on Thursday, November 8, 2012, at 11:00 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 2:00 p.m. ET on Thursday, November 8, 2012 through Thursday, November 15, 2012.

Jim Piro, President and CEO; Maria Pope, Senior Vice President, 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 condensed 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 829,000 residential, commercial and industrial customers in the Portland/Salem metropolitan area of Oregon. The Company's headquarters are located at 121 SW 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 market 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 and 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

(Dollars in millions, except per share amounts)

(Unaudited)

 
   Three Months Ended  Nine Months Ended
September 30,September 30,
2012  20112012  2011
Revenues, net$450$439$1,342$1,334
Operating expenses:
Purchased power and fuel182182533545
Production and distribution4950153147
Administrative and other5055160158
Depreciation and amortization6359188170
Taxes other than income taxes 24  25  77  74 
Total operating expenses 368  371  1,111  1,094 
Income from operations8268231240
Other income (expense):
Allowance for equity funds used during construction1143
Miscellaneous income (expense), net   (4) 2  (1)
Other income (expense), net1(3)62
Interest expense 27  27  82  82 
Income before income taxes5638155160
Income taxes 19  11  43  42 
Net income3727112118
Less: net loss attributable to noncontrolling interests (1)   (1)  
Net income attributable to Portland General Electric Company$38 $27 $113 $118 
 
Weighted-average shares outstanding (in thousands):
Basic 75,528  75,342  75,486  75,329 
Diluted 75,541  75,358  75,500  75,345 
Earnings per share — basic and diluted$0.50 $0.36 $1.49  $1.57 
Dividends declared per common share$0.270 $0.265 $0.805 $0.790 
 
PORTLAND GENERAL ELECTRIC COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions)

(Unaudited)

 
   September 30,  December 31,
20122011

ASSETS

Current assets:
Cash and cash equivalents$156$6
Accounts receivable, net129144
Unbilled revenues75101
Inventories7871
Margin deposits5380
Regulatory assets — current154216
Deferred income tax assets4033
Other current assets 99 65
Total current assets 784 716
Electric utility plant, net4,3514,285
Regulatory assets — noncurrent490594
Nuclear decommissioning trust3737
Non-qualified benefit plan trust3236
Other noncurrent assets 63 65
Total assets$5,757$5,733
 

LIABILITIES AND EQUITY

Current liabilities:
Accounts payable$76$111
Liabilities from price risk management activities — current147216
Short-term debt30
Current portion of long-term debt200100
Accrued expenses and other current liabilities 225 157
Total current liabilities 648 614
Long-term debt, net of current portion1,5361,635
Regulatory liabilities — noncurrent760720
Deferred income taxes598529
Liabilities from price risk management activities — noncurrent90172
Unfunded status of pension and postretirement plans201195
Non-qualified benefit plan liabilities102101
Other noncurrent liabilities 103 101
Total liabilities 4,038 4,067
Total equity 1,719 1,666
Total liabilities and equity$5,757$5,733
 
PORTLAND GENERAL ELECTRIC COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)

 

   Nine Months Ended
September 30,
2012  2011
Cash flows from operating activities:
Net income$112$118
Depreciation and amortization188170
Other non-cash items, net, included in Net income99109
Changes in working capital5746
Contributions to pension plan and voluntary employees' beneficiary association trust(2 Read Full Story

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