Portland General Electric Reports 2008 Results

Published: 25-Feb-2009

Portland General Electric Company (Portland General Electric) has reported net revenues of $1.745 billion for the year-end 2008, compared with the net revenues of $1.743 billion in the previous year-end. It has also reported a net income of $87 million, or $1.39 per share, for the year-end 2008, compared with the net income of $145 million, or $2.33 per share, in the previous year-end.

The decrease in the net income has resulted primarily from the Oregon Public Utility Commission (OPUC) Trojan refund order and losses on non-qualified benefit plan trust assets both in 2008; and a benefit recorded in 2007 from the deferral of a portion of Boardman replacement power costs. In 2008, the company had good plant and utility operations. The fourth quarter of 2008 earnings for 2008 were $0.32 per diluted share compared to $0.40 per diluted share in the fourth quarter 2007.

2008 was an exceptional year for operations, said Jim Piro, president and chief executive officer of Portland General Electric. Our plants and distribution system performed well, and according to J.D. Power and Associates, Portland General Electric ranks highest in the Western region in overall business customer satisfaction as well as power quality and reliability.

Looking ahead, we believe that sound financial management combined with ongoing opportunities for investment in rate-based assets gives us solid prospects for growth as we remain focused on providing value to our customers and our shareholders.

Full Year 2008 Highlights

The company has received the final OPUC general rate case order in January 2009 which approved an overall price increase of 7.3% consisting of a $95 million increase for net variable power costs (NVPC) and a $26 million increase for other costs.

The company has received authorization for a new decoupling mechanism, with the condition that the return on equity (ROE) be reduced by 0.1% to 10% reflecting the OPUC's view of reduced company risk.

The total customers served increased by around 1% from 803,788 at year-end 2007 to 810,197 at year-end 2008. Total retail energy deliveries in 2008 increased by around 2% from 2007.

The company has achieved a high level of generation performance and had excellent plant availability with thermal at 89%, wind at 93% and Portland General Electric-owned hydro at 99%.

The company achieved a high level of system reliability exceeding our power reliability goals.

The company was ranked number one in the Western region in overall business customer satisfaction, according to J.D. Power and Associates 2009 Electric Utility Business Customer Satisfaction StudySM.

The company has achieved the highest rating level of residential customer satisfaction in more than a decade with the ratings among the top quartile in the industry according to an independent quarterly survey.

The company has received OPUC approval in May 2008 for the company's smart meter project and began system acceptance testing. Full deployment of 850,000 meters will begin in 2009 and is expected to be completed by year-end 2010.

The company started construction of the second phase of the Biglow Canyon Wind Farm. Phase II is expected to be completed in 2009 and Phase III is expected to be completed in 2010.

The company has effectively operated our utility system through a series of storms in late December that brought freezing rain and the heaviest snowfall seen in our service area in 40 years. Handled more than 400,000 customer outages.

The company put in place additional liquidity by adding a $125 million, 364-day revolving credit facility in December 2008 and by issuing $130 million of First Mortgage Bonds in January 2009.

The company has increased the quarterly common stock dividend in May from 23.5 cents per share to 24.5 cents per share, an increase of 4.3%.

2009 Earnings Guidance

Portland General Electric is reaffirming the full-year 2009 earnings guidance of $1.80 to $1.90 per diluted share. The guidance assumes normal hydro conditions and plant operations. Guidance also reflects steps taken to align operating costs with the recent OPUC general rate case order. Currently, the regional Hydro forecast indicates below normal conditions. Given that it is early in the year the company assumes average hydro in guidance, and will be actively monitoring hydro conditions through the year. Portland General Electric is also reaffirming its long-term annual earnings growth expectation of 6 to 8% beginning with 2009.

General Rate Case

In January 2009, the OPUC has issued its final order in PGE's general rate case with tariffs effective January 1, 2009. The OPUC has approved an average price increase of 7.3% and a cost of capital that provides for a debt-to-equity capital structure of 50/50. The order authorizes $121 million of increased revenues consisting of around $95 million for net variable power costs and $26 million for other costs. Certain customer credits, including those related to 2007 results of the power cost adjustment mechanism (PCAM), reduced the average overall price increase to around 5.6%.

The OPUC has also authorized the company's proposed decoupling mechanism effective for a period of two years. The condition of this authorization is that the company's allowed ROE be reduced by 0.1% to 10% reflecting the OPUC's view of reduced company risk. On January 30, 2009 the company filed an application with the OPUC for deferred accounting of revenues associated with the decoupling mechanism, effective February 1, 2009.

Liquidity

In December 2008, Portland General Electric has obtained an unsecured $125 million revolving credit facility (credit facility) with a group of banks. The credit facility, which matures in December 2009, is for general corporate purposes, including back-up for the issuance of commercial paper, potential refinancing of certain existing indebtedness and support for collateral requirements under energy purchase and sale agreements. This will supplement the company's existing $370 million revolving credit facility with a separate group of banks. $360 million of this facility matures in July 2013, with the remaining $10 million maturing in July 2012.

As of February 20, 2009, Portland General Electric had $53 million of commercial paper outstanding and borrowings of $61 million under the credit facility. The company also had issued $153 million in letters of credit. As of February 20, 2009, the company had an aggregate remaining borrowing capacity of $228 million available under the two credit facilities and a cash balance of $1 million. Higher levels of short-term borrowings and outstanding letters of credit are the result of additional margin deposit requirements related to power and natural gas contracts. As of February 20, 2009, Portland General Electric had posted margin deposits of $363 million. Margin deposits create a cash flow timing difference but have minimal impact on earnings.

Tell your friend about this article