SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended MARCH 31, 1997
Registrant; State of Incorporation; IRS Employer
COMMISSION FILE NUMBER ADDRESS; AND TELEPHONE NUMBER IDENTIFICATION NO.
1-5532 PORTLAND GENERAL CORPORATION 93-0909442
(an Oregon Corporation)
121 SW Salmon Street
Portland, Oregon 97204
(503) 464-8820
1-5532-99 PORTLAND GENERAL ELECTRIC COMPANY 93-0256820
(an Oregon Corporation)
121 SW Salmon Street
Portland, Oregon 97204
(503) 464-8000
Indicate by check mark whether the registrants (1) have filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrants were required to file such reports), and (2) have been subject to
such filing requirements for the past 90 days. Yes X . No .
The number of shares outstanding of the registrants' common stocks as of April
30, 1997 are:
Portland General Corporation 51,406,352
Portland General Electric Company 42,758,877
(owned by Portland General Corporation)
1
TABLE OF CONTENTS
PAGE NUMBER
DEFINITIONS........................................................2
PART I. PORTLAND GENERAL CORPORATION AND SUBSIDIARIES
FINANCIAL INFORMATION
Management's Discussion and Analysis of
Financial Condition and Results of Operations....... 3
Consolidated Statements of Income.....................8
Consolidated Statements of Retained Earnings..........8
Consolidated Balance Sheets...........................9
Consolidated Statements of Cash Flow.................10
Notes to Consolidated Financial Statements...........11
Portland General Electric Company and
Subsidiaries Financial Information..................12
PART II. OTHER INFORMATION
Item 1 - Legal Proceedings...........................16
Item 6 - Exhibits and Reports on Form 8-K............16
Signature Page.......................................17
DEFINITIONS
AFDC...................Allowance For Funds Used During Construction
Bonneville Pacific...................Bonneville Pacific Corporation
BPA.................................Bonneville Power Administration
Coyote Springs......................Coyote Springs Generation Plant
Enron...................................................Enron Corp.
FERC...........................Federal Energy Regulatory Commission
Holdings............................Portland General Holdings, Inc.
kWh...................................................Kilowatt-Hour
Mill..........................................One tenth of one cent
MWa...............................................Average megawatts
MWh...................................................Megawatt-hour
NYMEX..................................New York Mercantile Exchange
OPUC or the Commission.............Oregon Public Utility Commission
Portland General or PGC................Portland General Corporation
PGE or the Company................Portland General Electric Company
PUHCA....................Public Utility Holding Company Act of 1935
Trojan.........................................Trojan Nuclear Plant
USDOE............................United States Department of Energy
WAPA...................................Western Area Power Authority
WNP-3..................Washington Public Power Supply System Unit 3
2
PORTLAND GENERAL CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FINANCIAL AND OPERATING OUTLOOK
PORTLAND GENERAL CORPORATION - HOLDING COMPANY
Portland General Corporation (Portland General or PGC), an electric utility
holding company, was organized in December 1985. Portland General Electric
Company (PGE or the Company), an electric utility company and Portland
General's principal operating subsidiary, accounts for substantially all of
Portland General's assets, revenues and net income.
PROPOSED MERGER
GENERAL
During 1996 Portland General entered into an Amended and Restated Agreement and
Plan of Merger (Original Merger Agreement) with Enron Corp. (Enron) and Enron
Oregon Corp. (New Enron), a wholly-owned subsidiary of Enron. The Original
Merger Agreement was approved by the shareholders of both Enron and PGC on
November 12, 1996. In April 1997 the Original Merger Agreement was amended
(Amended Merger Agreement) by the First Amendment to Amended and Restated
Agreement and Plan of Merger (First Amendment). The principal effects of the
First Amendment are (i) to reduce the PGC conversion ratio to 0.9825 shares of
New Enron Common Stock for each share of PGC Common Stock (as compared to one
share of New Enron Common Stock for each share of PGC Common Stock under the
Original Merger Agreement) and (ii) to address issues raised through the merger
approval process, including to provide guaranteed merger related benefits to
PGE's electricity customers of $141 million.
Under the terms of the Amended Merger Agreement, Portland General will merge
into New Enron (Merger) and each share of the common stock of Portland General
will be converted into 0.9825 shares of the common stock of New Enron.
Immediately prior to the consummation of the Merger, Enron will merge into New
Enron for the purpose of reincorporating Enron in Oregon (Reincorporation
Merger).
APPROVALS AND CONSENTS
OPUC - Portland General Electric (PGE), an electric utility and PGC's
principal subsidiary, is subject to the jurisdiction of the OPUC with respect
to its electric utility operations. The approval of the OPUC is required for
any transaction in which a person seeks to acquire the power to exercise any
substantial influence over the policies and actions of a public utility subject
to OPUC's jurisdiction. Upon completion of the Merger, Enron will be the sole
owner of PGE common stock. On August 30, 1996, Enron filed an application with
the OPUC seeking approval of the Merger. The OPUC must approve the merger if
they find that it will serve the customers of PGE in the public interest. In
making that finding the OPUC may consider whether the change in ownership of
PGE will impair the ability of the utility to provide adequate service at just
and reasonable rates. On April 29, 1997, following extensive discussions, Enron
and PGC finalized a settlement agreement on their proposed merger with the OPUC
Staff and other interested parties. The stipulation agreement has been
presented to the OPUC for approval. As one of the conditions of the agreement,
under the Amended Merger Agreement, the two companies will guarantee merger
related benefits to PGE's retail electricity customers of $141 million. A final
order from the Commission will be issued by June 4, 1997.
3
PORTLAND GENERAL CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
SHAREHOLDER - Approval of the Amended Merger Agreement by PGC shareholders (but
not Enron shareholders) is required as a result of the First Amendment. A
shareholder vote is scheduled to take place at PGC's annual shareholder meeting
scheduled on June 24, 1997.
OTHER - All mandatory approvals for consummation of the Merger have been
obtained except for approval by the OPUC.
OPERATIONS AFTER THE BUSINESS COMBINATION
When the merger is complete, Portland General will cease to exist. PGE,
Portland General's utility subsidiary will retain its name, most of its
functions, maintain its principal corporate offices in Portland, Oregon and
will be a subsidiary of Enron, an integrated natural gas company headquartered
in Houston, Texas. Essentially all of Enron's operations are conducted through
its subsidiaries and affiliates which are principally engaged in the gathering,
transportation and wholesale marketing of natural gas; the exploration and
production of natural gas and crude oil; the production, purchase,
transportation and marketing of natural gas liquids and refined petroleum
products; the independent development, promotion, construction and operation of
power plants, natural gas liquids facilities and pipelines; and the non-price
regulated purchasing and marketing of energy related commitments.
ACCOUNTING TREATMENT
The Merger will be accounted for by Enron as a purchase for financial reporting
purposes.
PORTLAND GENERAL ELECTRIC COMPANY - ELECTRIC UTILITY
COMPETITION
The Energy Policy Act of 1992 (Energy Act) set the stage for change in federal
and state regulations aimed at increasing both wholesale and retail competition
in the electric industry. The Energy Act eased restrictions on independent
power production and granted authority to the FERC to mandate open access for
the wholesale transmission of electricity. The FERC has taken steps to provide
a framework for increased competition in the electric industry. In 1996, the
FERC issued Order 888 requiring non-discriminatory open access transmission by
all public utilities that own interstate transmission.
FERC actions apply only to the wholesale transmission of electricity. Terms
and conditions of retail transmission service are subject to individual state
regulation. Since the passage of the Energy Act, various state utility
commissions have addressed retail wheeling proposals which would allow retail
customers direct access to generation suppliers, marketers, brokers and other
service providers in a competitive marketplace for energy services. Several
states have implemented pilot programs to evaluate the effects that competition
will have on retail customers. Other states, such as California, have passed
legislation that mandates the phase in of retail wheeling. Several bills
proposing retail competition have been introduced during the 1997 Oregon
legislative session. Industry restructuring bills are also being introduced at
the federal level.
PGE will file a plan with the OPUC on or before 60 days after the closing of
the Enron / PGC merger (see Proposed Merger Discussion above), to open PGE's
service territory to competition. This plan will allow residential, commercial
and industrial customers to choose their energy supplier and will include a
proposal to separate PGE's competitive and monopoly businesses. In addition,
the plan will include a proposal for the treatment of transition or stranded
costs.
4
PORTLAND GENERAL CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RETAIL CUSTOMER GROWTH AND ENERGY SALES
Weather adjusted retail energy sales grew 4.7% for the three months ended March
31, 1997 compared to the same period last year. Commercial and industrial sales
increased by 8.2% and 8.7%, respectively due to strong growth in most industry
segments. Sales to high-tech and lumber industries increased by over 20%,
whereas sales to paper manufactures remained flat. Metals manufactures have
begun to rebound from prior year production cutbacks. The addition of over
5,300 customers resulted in residential sales growth of 2.1%. The Company
expects 1997 retail energy sales growth to be approximately 7.0%.
QUARTERLY INCREASE IN RETAIL CUSTOMERS
QUARTER/YEAR RESIDENTIAL COMMERCIAL/INDUSTRIAL
4Q 94 4247 379
1Q 95 3010 270
2Q 95 2194 509
3Q 95 2145 435
4Q 95 5566 554
1Q 96 3633 539
2Q 96 3664 76
3Q 96 3021 594
4Q 96 5151 877
1Q 97 3953 509
WHOLESALE MARKETING
The surplus of electric generating capability in the Western U.S., the entrance
of numerous wholesale marketers and brokers into the market, and open access
transmission is contributing to increasing pressure on the price of power. In
addition the development of financial markets and NYMEX electricity contract
trading has led to increased price discovery available to market participants,
further adding to the competitive pressure on wholesale margins. During the
first quarter PGE's wholesale revenues increased $78 million compared to the
same period last year, accounting for 32% of total revenues and 57% of total
sales. In future years PGE will continue its participation in the wholesale
marketplace to balance its supply of power to meet the needs of its retail
customers, manage risk and to administer PGE's current long-term wholesale
contracts. Due to increasing volatility and reduced margins resulting from
increased competition, long-term wholesale marketing activities will be
performed by PGE's non-regulated affiliates.
POWER SUPPLY
Current projections forecast the annual runoff of the Columbia River at The
Dalles to be 144 percent of normal, assuming normal precipitation for the rest
of the run-off season. Given this forecast, 1997 hydro conditions will be
more favorable than those experienced in 1996. Not since the early 1980's has
the region had more favorable hydro conditions. Current water conditions
should result in continued high levels of hydro generation during the January -
July run-off season as well as provide ample water supplies to refill
reservoirs for the remainder of the year. As a result of the availability of
low-cost hydro generation, most PGE thermal plants are currently in economic or
maintenance shutdown. Hydro generation will continue to be a major factor in
the availability of low-cost secondary power and the economic displacement of
higher cost thermal generation.
5
PORTLAND GENERAL CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following discussion focuses on utility operations, unless otherwise noted.
Due to seasonal fluctuations in electricity sales, as well as the price of
wholesale energy and fuel costs, quarterly operating earnings are not
necessarily indicative of results to be expected for calendar year 1997.
1997 COMPARED TO 1996 FOR THE THREE MONTHS ENDED MARCH 31
Portland General earned $59 million or $1.16 per share for the first quarter of
1997. 1997 earnings include non-operating income items of $17 million.
Excluding the non-operating income items, 1997 quarterly earnings would have
been $42 million or $0.82 per share compared to $49 million or $0.97 per share
in first quarter 1996. Reduced earnings were the result of a decline in retail
revenues caused by lower prices and warmer temperatures during winter heating
months. Decreased operating expenses partially offset lower retail revenues.
Retail revenues were down for the period due to a December 1996 rate decrease.
This decrease was partially offset by additional revenues resulting from the
addition of over 17,000 retail customers since the first quarter of 1996 and
sales strong growth experienced in industrial and commercial customer classes.
Wholesale revenues increased $78 million from 1996 due to increased trading
activities coupled with a 3% rise in average sales prices.
Purchased power and fuel expense increased $76 million or 95% to supply the
increase in wholesale and native loads. Energy purchases were up 65% due to
increased wholesale activity. Firm purchases averaged 16.2 mills compared to
14.6 mills last year due to increased gas prices. Spot market purchases
averaged 12.5 mills compared to an average 9.3 mills in 1996. Favorable hydro
conditions led to thermal plant displacement, also increasing power purchases.
PGE thermal generation increased 208,227 MWh, but accounted for only 5% of
total Company energy requirements compared to 27% two years ago.
RESOURCE MIX/VARIABLE POWER COSTS
Average Variable
Resource Mix Power Cost (Mills/kWh)
1997 1996 1997 1996
Generation 13% 17% 4.3 4.4
Firm Purchases 81 67 16.2 14.6
Spot Purchases 6 16 12.5 9.3
Total Resources 100% 100% Average 15.0 12.9
PGE does not have a fuel adjustment clause as part of its retail rate
structure; therefore, changes in fuel and purchased power expenses are
reflected currently in earnings.
6
PORTLAND GENERAL CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Operating expenses (excluding variable power, depreciation and income
taxes) decreased $9 million due to reduced production, distribution and
administrative expenditures. The first quarter of 1996 included non-
recurring storm and flood related expenditures.
Other Income increased primarily due to $17 million of non-operating events
representing the recovery of litigation and related costs associated
with Portland General's non-utility businesses.
CASH FLOW
PORTLAND GENERAL CORPORATION
Portland General requires cash to pay dividends to its common stockholders,
to provide funds to its subsidiaries, to meet debt service obligations and
for day to day operations. Sources of cash are dividends from PGE, leasing
rentals, short- and intermediate-term borrowings and the sale of its common
stock. In order to meet periodic liquidity and operational needs. Portland
General maintains a $20 million one-year credit facility.
Portland General received $16 million in dividends from PGE during the
first quarter of 1997 and $2 million in proceeds from the exercise of stock
options and purchases under the Employee Stock Purchase Plan. In addition
Portland General received cash recoveries of litigation and related costs
associated with Portland General's non-utility businesses.
PORTLAND GENERAL ELECTRIC COMPANY
CASH PROVIDED BY OPERATIONS is used to meet the day-to-day cash
requirements of PGE. Supplemental cash is obtained from external
borrowings as needed.
A significant portion of cash from operations comes from depreciation and
amortization of utility plant, charges which are recovered in customer
revenues but require no current cash outlay. Changes in accounts
receivable and accounts payable can also be significant contributors or
users of cash. Cash flows did not change significantly compared to the
first quarter of 1996.
INVESTING ACTIVITIES include improvements to generation, transmission and
distribution facilities and continued investment in energy efficiency
programs. Through March 31, 1997 nearly $36 million has been expended for
capital projects, primarily improvements to the Company's distribution
system to support the addition of new customers to PGE's service territory.
PGE funds an external trust for Trojan decommissioning costs through
customer collections at a rate of $14 million annually. The trust invests
in investment-grade tax-exempt and U.S. Treasury bonds. The Company makes
withdrawals from the trust, as necessary for reimbursement of
decommissioning expenditures.
FINANCING ACTIVITIES - In March 1997 the Company retired $24 million of
First Mortgage bonds. In addition, the Company reduced its short term debt
balances by $19 million during the quarter.
The issuance of additional First Mortgage Bonds and preferred stock
requires PGE to meet earnings coverage and security provisions set forth in
the Articles of Incorporation and the Indenture securing its First Mortgage
Bonds. As of March 31, 1997 PGE has the capability to issue preferred
stock and additional First Mortgage Bonds in amounts sufficient to meet
its capital requirements.
7
PORTLAND GENERAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME FOR THE
THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(UNAUDITED)
Three Months Ended
March 31
1997 1996
(Thousands of Dollars)
OPERATING REVENUES $ 368,075 $ 300,581
OPERATING EXPENSES
Purchased power and fuel 156,679 80,216
Production and distribution 20,111 21,952
Maintenance and repairs 7,946 13,249
Administrative and other 25,153 27,685
Depreciation and amortization 39,291 37,533
Taxes other than income taxes 15,297 14,893
264,477 195,528
OPERATING INCOME BEFORE INCOME TAXES 103,598 105,053
INCOME TAXES 39,548 37,049
NET OPERATING INCOME 64,050 68,004
OTHER INCOME (DEDUCTIONS)
Interest expense (19,119) (19,768)
Allowance for funds used during construction 296 242
Preferred dividend requirement - PGE (581) (986)
Other - net of income taxes ($9,378) and $726 14,731 1,870
NET INCOME $ 59,377 $ 49,362
COMMON STOCK
Average shares outstanding 51,375,172 51,063,105
Earnings per average share $1.16 $0.97
Dividends declared per share $0.32 $0.32
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS FOR THE
THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(Unaudited)
Three Months Ended
March 31
1997 1996
(Thousands of Dollars)
BALANCE AT BEGINNING OF PERIOD $ 197,812 $ 135,885
NET INCOME 59,377 49,362
ESOP TAX BENEFIT AND OTHER (530) (530)
256,659 184,717
DIVIDENDS DECLARED ON COMMON STOCK 16,449 16,352
BALANCE AT END OF PERIOD $ 240,210 $ 168,365
The accompanying notes are an integral part of these consolidated statements.
8
PORTLAND GENERAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 1997 AND DECEMBER 31, 1996
(Unaudited)
March 31 December 31
1997 1996
(Thousands of Dollars)
ASSETS
ELECTRIC UTILITY PLANT - ORIGINAL COST
Utility plant (includes Construction Work in
Progress of $26,922 and $36,919) $ 2,931,815 $ 2,899,746
Accumulated depreciation (1,152,599) (1,124,337)
1,779,216 1,775,409
Capital leases - less amortization of $31,225 and $30,569 6,094 6,750
1,785,310 1,782,159
OTHER PROPERTY AND INVESTMENTS
Leveraged leases 150,785 150,695
Trojan decommissioning trust, at market value 80,153 78,448
Corporate owned life insurance, less loans of $26,411 and $26,411 86,128 83,666
Contract termination receivable 109,522 111,447
Other investments 29,770 29,745
456,358 454,001
CURRENT ASSETS
Cash and cash equivalents 65,511 29,802
Accounts and notes receivable 139,115 125,314
Unbilled and accrued revenues 44,577 53,317
Inventories, at average cost 34,710 32,903
Prepayments and other 27,550 17,613
311,463 258,949
DEFERRED CHARGES
Unamortized regulatory assets
Trojan investment 269,781 275,460
Trojan decommissioning 277,116 282,131
Income taxes recoverable 189,534 195,592
Debt reacquisition costs 27,440 28,063
Conservation investments - secured 78,360 80,102
Energy efficiency programs 13,149 11,974
Other 21,072 22,575
WNP-3 settlement exchange agreement 161,050 163,217
Miscellaneous 30,171 29,026
1,067,673 1,088,140
$ 3,620,804 $ 3,583,249
CAPITALIZATION AND LIABILITIES
CAPITALIZATION
Common stock equity
Common stock, $3.75 par value per share, 100,000,000
shares authorized, 51,405,317 and 51,317,828 shares outstanding $ 192,788 $ 192,442
Other paid-in capital - net 586,251 584,272
Unearned compensation (2,373) (3,072)
Retained earnings 240,210 197,812
1,016,876 971,454
Cumulative preferred stock of subsidiary
Subject to mandatory redemption 30,000 30,000
Long-term debt 930,814 933,042
1,977,690 1,934,496
CURRENT LIABILITIES
Long-term debt and preferred stock due within one year 68,692 92,559
Short-term borrowings 73,422 92,027
Accounts payable and other accruals 143,050 149,255
Accrued interest 15,671 14,372
Dividends payable 17,409 17,386
Accrued taxes 84,051 30,985
402,295 396,584
OTHER
Deferred income taxes 610,384 614,576
Deferred investment tax credits 46,006 47,314
Deferred gain on contract termination 110,290 112,697
Trojan decommissioning and transition obligation 354,632 357,844
Miscellaneous 119,507 119,738
1,240,819 1,252,169
$ 3,620,804 $ 3,583,249
The accompanying notes are an integral part of these
consolidated balance sheets.
9
PORTLAND GENERAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW FOR THE
THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(UNAUDITED)
Three Months Ended
March 31
1997 1996
(Thousands of Dollars)
CASH PROVIDED (USED) BY -
OPERATIONS:
Net income $ 59,377 $ 49,362
Adjustment to reconcile net income to net cash
provided by operations:
Depreciation and amortization 31,501 29,113
Amortization of WNP-3 exchange agreement 2,167 1,296
Amortization of Trojan investment 6,051 5,825
Amortization of Trojan decommissioning 3,510 3,510
Amortization of deferred items - other 3,501 (1,473)
Deferred income taxes - net 552 (4,772)
Other noncash revenues (349) (383)
Changes in working capital:
(Increase) Decrease in receivables (4,923) 404
(Increase) Decrease in inventories (1,807) (521)
Increase (Decrease) in payables 48,266 26,896
Other working capital items - net (9,937) (8,538)
Trojan decommissioning expenditures (2,626) (530)
Deferred items - other (5,214) (2,083)
Miscellaneous - net 6,174 4,704
136,243 102,810
INVESTING ACTIVITIES:
Utility construction - new resources - (11)
Utility construction - other (35,832) (33,274)
Energy efficiency programs (1,746) (2,711)
Rentals received from leveraged leases 5,711 5,576
Nuclear decommissioning trust deposits (3,510) (4,439)
Nuclear decommissioning trust withdrawals 2,725 1,356
Other (4,250) (7,008)
(36,902) (40,511)
FINANCING ACTIVITIES:
Short-term borrowings - net (18,605) 2,151
Borrowings from Corporate Owned Life Insurance - 1,312
Long-term debt issued - 35,000
Long-term debt retired (25,431) (82,595)
Repayment of nonrecourse borrowings for
leveraged leases (4,966) (4,874)
Common stock issued 1,795 1,433
Dividends paid (16,425) (15,303)
(63,632) (62,876)
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 35,709 (577)
CASH AND CASH EQUIVALENTS AT THE BEGINNING
OF PERIOD 29,802 11,919
CASH AND CASH EQUIVALENTS AT THE END
OF PERIOD $ 65,511 $ 11,342
Supplemental disclosures of cash flow information
Cash paid during the period:
Interest, net of amounts capitalized $ 16,533 $ 16,901
Income taxes 2,194 -
The accompanying notes are an integral part of these consolidated statements.
10
PORTLAND GENERAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - PRINCIPLES OF INTERIM STATEMENTS
The interim financial statements have
been prepared by Portland General and,
in the opinion of management, reflect
all material adjustments which are
necessary to a fair statement of results
for the interim period presented.
Certain information and footnote
disclosures made in the last annual
report on Form 10-K have been condensed
or omitted for the interim statements.
Certain costs are estimated for the full
year and allocated to interim periods
based on the estimates of operating time
expired, benefit received or activity
associated with the interim period.
Accordingly, such costs are subject to
year-end adjustment. It is Portland
General's opinion that, when the interim
statements are read in conjunction with
the 1996 Annual Report on Form 10-K, the
disclosures are adequate to make the
information presented not misleading.
RECLASSIFICATIONS - Certain amounts in
prior years have been reclassified for
comparative purposes.
NOTE 2 - LEGAL MATTERS
TROJAN INVESTMENT RECOVERY - In April
1996 a circuit court judge in Marion
County, Oregon found that the OPUC could
not authorize PGE to collect a return on
its undepreciated investment in Trojan
contradicting a November 1994 ruling
from the same court. The ruling was the
result of an appeal of PGE's 1995
general rate order which granted PGE
recovery of, and a return on, 87 percent
of its remaining investment in Trojan.
The November 1994 ruling, by a different
judge of the same court, upheld the
Commission's 1993 Declaratory Ruling
(DR-10). In DR-10 the OPUC ruled that
PGE could recover and earn a return on
its undepreciated Trojan investment,
provided certain conditions were met.
The Commission relied on a 1992 Oregon
Department of Justice opinion issued by
the Attorney General's office stating
that the Commission had the authority to
set prices including recovery of and on
investment in plant that is no longer in
service.
The 1994 ruling was appealed to the
Oregon Court of Appeals and stayed
pending the appeal of the Commission's
March 1995 order. Both PGE and the OPUC
have separately appealed the April 1996
ruling which were combined with the
appeal of the November 1994 ruling at
the Oregon Court of Appeals.
Management believes that the authorized
recovery of and on the Trojan investment
and decommissioning costs will be upheld
and that these legal challenges will not
have a material adverse impact on the
results of operations or financial
condition of the Company for any future
reporting period.
OTHER LEGAL MATTERS - Portland General
and certain of its subsidiaries are
party to various other claims, legal
actions and complaints arising in the
ordinary course of business. These
claims are not considered material.
11
PORTLAND GENERAL ELECTRIC COMPANY AND SUBSIDIARIES
FINANCIAL STATEMENTS AND RELATED INFORMATION
TABLE OF CONTENTS
PAGE
NUMBER
Management Discussion and Analysis of
Financial Condition and Results of Operations* 3-7
Financial Statements 13-15
Notes to Financial Statements** 11
* The discussion is substantially
the same as that disclosed by
Portland General and,
therefore, is incorporated by reference
to the information on the page
numbers listed above.
** The notes are substantially the
same as those disclosed by
Portland General and are
incorporated by reference to the
information on the page numbers
shown above.
12
Portland General Electric Company and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME FOR THE
THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(UNAUDITED)
Three Months Ended
March 31
1997 1996
(Thousands of Dollars)
OPERATING REVENUES $367,682 $300,195
OPERATING EXPENSES
Purchased power and fuel 156,679 80,216
Production and distribution 20,111 21,952
Maintenance and repairs 7,946 13,249
Administrative and other 24,444 27,070
Depreciation and amortization 39,291 37,512
Taxes other than income taxes 15,173 14,847
Income taxes 38,907 37,273
302,551 232,119
NET OPERATING INCOME 65,131 68,076
OTHER INCOME (DEDUCTIONS)
Other 461 (333)
Income taxes 1,005 1,144
1,466 811
INTEREST CHARGES
Interest on long-term debt and other 18,058 16,537
Interest on short-term borrowings 1,071 2,488
Allowance for borrowed funds used during construction (296) (242)
18,833 18,783
NET INCOME 47,764 50,104
PREFERRED DIVIDEND REQUIREMENT 581 986
INCOME AVAILABLE FOR COMMON STOCK $ 47,183 $ 49,118
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS FOR THE
THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(Unaudited)
Three Months Ended
March 31
1997 1996
(Thousands of Dollars)
BALANCE AT BEGINNING OF PERIOD $292,124 $246,282
NET INCOME 47,764 50,104
ESOP TAX BENEFIT AND OTHER (530) (530)
339,358 295,856
DIVIDENDS DECLARED
Common stock 13,682 14,966
Preferred stock 581 986
14,263 15,952
BALANCE AT END OF PERIOD $325,095 $279,904
The accompanying notes are an integral part of these consolidated statements.
13
PORTLAND GENERAL ELECTRIC COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 1997 AND DECEMBER 31, 1996
(Unaudited)
March 31 December 31
1997 1996
(Thousands of Dollars)
ASSETS
ELECTRIC UTILITY PLANT - ORIGINAL COST
Utility plant (includes Construction Work in
Progress of $26,922 and $36,919) $ 2,931,815 $ 2,899,746
Accumulated depreciation (1,152,599) (1,124,337)
1,779,216 1,775,409
Capital leases - less amortization of $31,225 and $30,569 6,094 6,750
1,785,310 1,782,159
OTHER PROPERTY AND INVESTMENTS
Contract termination receivable 109,522 111,447
Trojan decommissioning trust, at market value 80,153 78,448
Corporate owned life insurance, less loans of $26,411 and $26,411 54,143 51,410
Other investments 21,526 20,700
265,344 262,005
CURRENT ASSETS
Cash and cash equivalents 32,456 19,477
Accounts and notes receivable 157,587 145,372
Unbilled and accrued revenues 44,577 53,317
Inventories, at average cost 34,710 32,903
Prepayments and other 26,590 16,476
295,920 267,545
DEFERRED CHARGES
Unamortized regulatory assets
Trojan investment 269,781 275,460
Trojan decommissioning 277,116 282,131
Income taxes recoverable 189,534 195,592
Debt reacquisition costs 27,440 28,063
Conservation investments - secured 78,360 80,102
Energy efficiency programs 13,149 11,974
Other 21,072 22,575
WNP-3 settlement exchange agreement 161,050 163,217
Miscellaneous 28,808 27,389
1,066,310 1,086,503
$ 3,412,884 $ 3,398,212
CAPITALIZATION AND LIABILITIES
CAPITALIZATION
Common stock equity
Common stock, $3.75 par value per share, 100,000,000 shares
authorized, 42,758,877 shares outstanding $ 160,346 $ 160,346
Other paid-in capital - net 476,253 475,055
Retained earnings 325,095 292,124
Cumulative preferred stock
Subject to mandatory redemption 30,000 30,000
Long-term debt 930,814 933,042
1,922,508 1,890,567
CURRENT LIABILITIES
Long-term debt and preferred stock due within one year 68,692 92,559
Short-term borrowings 73,422 92,027
Accounts payable and other accruals 144,466 144,712
Accrued interest 15,656 14,372
Dividends payable 14,551 17,117
Accrued taxes 72,269 31,485
389,056 392,272
OTHER
Deferred income taxes 492,045 497,734
Deferred investment tax credits 46,006 47,314
Deferred gain on contract termination 110,290 112,697
Trojan decommissioning and transition costs 354,632 357,844
Miscellaneous 98,347 99,784
1,101,320 1,115,373
$ 3,412,884 $ 3,398,212
The accompanying notes are an integral part of
these consolidated balance sheets.
14
PORTLAND GENERAL ELECTRIC COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW FOR THE
THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(Unaudited)
Three Months Ended
March 31
1997 1996
(Thousands of Dollars)
CASH PROVIDED (USED IN)
OPERATIONS:
Net Income $ 47,764 $ 50,104
Non-cash items included in net income:
Depreciation and amortization 31,501 29,092
Amortization of WNP-3 exchange agreement 2,167 1,296
Amortization of Trojan investment 6,051 5,825
Amortization of Trojan decommissioning 3,510 3,510
Amortization of deferred charges - other 3,501 (1,473)
Deferred income taxes - net (890) (2,600)
Changes in working capital:
(Increase) Decrease in receivables (3,337) (1,589)
(Increase) Decrease in inventories (1,807) (521)
Increase (Decrease) in payables 42,178 35,447
Other working capital items - net (10,114) (8,737)
Trojan decommissioning expenditures (2,626) (530)
Deferred charges - other (5,214) (2,083)
Miscellaneous - net 1,759 4,047
114,443 111,788
INVESTING ACTIVITIES:
Utility construction - new resources - (11)
Utility construction - other (35,832) (33,274)
Energy efficiency programs (1,746) (2,711)
Nuclear decommissioning trust deposits (3,510) (4,439)
Nuclear decommissioning trust withdrawals 2,725 1,356
Other investments (2,235) (7,008)
(40,598) (46,087)
FINANCING ACTIVITIES:
Short-term debt - net (18,605) 2,151
Borrowings from Corporate Owned Life Insurance - 1,312
Long-term debt issued - 35,000
Long-term debt retired (25,431) (82,595)
Dividends paid (16,830) (14,669)
(60,866) (58,801)
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 12,979 6,900
CASH AND CASH EQUIVALENTS AT THE BEGINNING
OF PERIOD 19,477 2,241
CASH AND CASH EQUIVALENTS AT THE END
OF PERIOD $ 32,456 $ 9,141
Supplemental disclosures of cash flow information
Cash paid during the period:
Interest, net of amounts capitalized $ 16,533 $ 15,713
Income taxes 5,304 (7,437)
The accompanying notes are an integral part of these consolidated statements.
15
PORTLAND GENERAL CORPORATION AND SUBSIDIARIES
PORTLAND GENERAL ELECTRIC COMPANY AND SUBSIDIARIES
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
For further information, see Portland General's and PGE's reports on Form 10-K
for the year ended December 31, 1996.
COLUMBIA STEEL CASTING CO., INC. V. PGE, PACIFICORP, AND MYRON KATZ, NANCY
RYLES AND RONALD EACHUS, NINTH CIRCUIT COURT OF APPEALS
On June 19, 1990 Columbia Steel filed a complaint for declaratory judgment,
injunctive relief and damages in U.S. District Court for the District of Oregon
contending that a 1972 territory allocation agreement between PGE and
PacifiCorp, dba Pacific Power & Light Company (PP&L), which was subsequently
approved by the OPUC and the City of Portland, does not give PGE the exclusive
right to serve them nor does it allow PP&L to deny service to them. Columbia
Steel is seeking an unspecified amount in damages amounting to three times the
excess power costs paid over a 10 year period.
On July 3, 1991 the Court ruled that the Agreement did not allocate customers
for the provision of exclusive services and that the 1972 order of the OPUC
approving the Agreement did not order the allocation of territories and
customers. Subsequently, on August 19, 1993 the Court ruled that Columbia
Steel was entitled to receive from PGE approximately $1.4 million in damages
which represented the additional costs incurred by Columbia Steel for electric
service from July 1990 to July 1991, trebled, plus costs and attorney's fees.
PGE appealed to the U.S. Court of Appeals for the Ninth Circuit which, on July
20, 1995, issued an opinion in favor of PGE, reversing the judgment and
ordering judgment to be entered in favor of PGE. Columbia Steel filed a
petition for reconsideration and on December 27, 1996 , the Ninth Circuit Court
of Appeals reversed its earlier decision, ruling in favor of Columbia Steel. In
early 1997 PGE's request for reconsideration by the Ninth Circuit has been
denied. The case has been remanded to the US District Court for a new
determination of damages for service rendered from early 1987 to July 1991.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
NUMBER EXHIBIT PGC PGE
24 Power of Attorney X X
27 Financial Data Schedule - UT X X
(Electronic Filing Only)
b. Reports on Form 8-K
March 12, 1997 - Item 5. Other Events: Settlement conferences end without
settlement.
April 11, 1997 - Item 5. Other Events: Merger Agreement amended.
16
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrants have duly caused this report to be signed on their behalf by
the undersigned hereunto duly authorized.
PORTLAND GENERAL CORPORATION
PORTLAND GENERAL ELECTRIC COMPANY
(Registrants)
May 15, 1997 By /S/ JOSEPH E. FELTZ
Joseph E. Feltz
Assistant Controller
Assistant Treasurer
* Joseph M. Hirko
Sr. Vice President and
Chief Financial Officer
*Signed on behalf of this person.
May 15, 1997 By /S/ JOSEPH E. FELTZ
Joseph E. Feltz
(Attorney-in-Fact)
17
UT
1,000
0000079636
PORTLAND GENERAL CORPORATION
3-MOS
DEC-31-1996
MAR-31-1997
PER-BOOK
1,785,310
456,358
311,463
1,067,673
0
3,620,804
192,788
586,251
237,837
1,016,876
30,000
0
924,720
0
0
73,422
71,345
0
6,094
2,653
1,501,000
3,620,804
368,075
39,548
264,477
304,025
64,050
14,731
78,781
18,823
59,958
(581)
59,958
16,449
64,469
136,243
$1.16
$1.16
Represents the 12 month-to-date figure ending December 31, 1996.
UT
1,000
0000784977
PORTLAND GENERAL ELECTRIC COMPANY
3-MOS
DEC-31-1996
MAR-31-1997
PER-BOOK
1,785,310
265,344
295,920
1,066,310
0
3,412,884
160,346
476,253
325,095
961,694
30,000
0
924,720
0
0
73,422
71,345
0
6,094
2,653
1,348,262
3,412,884
367,682
38,907
263,644
302,551
65,131
1,466
66,597
18,833
47,764
581
47,183
13,682
63,296
114,443
0
0
Represents the 12 month-to-date figure ending December 31, 1996.
POWER OF ATTORNEY
The undersigned Joseph M. Hirko, in his capacity as Senior Vice
President and Chief Financial Officer of Portland General Corporation
(the "Corporation"), hereby appoints Joseph E. Feltz, Assistant
Controller of the Corporation, as the attorney-in-fact, in my and all
capacities stated herein, to execute on behalf of the undersigned and
to file with the Securities and Exchange Commission under the
Securities Exchange Act of 1934, the Portland General Corporation
Quarterly Report on Form 10-Q for the quarter ended March 31, 1997.
Dated May 14, 1997
/S/ JOSEPH M. HIRKO
Joseph M. Hirko
1
POWER OF ATTORNEY
The undersigned Joseph M. Hirko, in his capacity as Senior Vice
President and Chief Financial Officer of Portland General Electric
Company (the "Company"), hereby appoints Joseph E. Feltz, Assistant
Controller of the Company, as the attorney-in-fact, in my and all
capacities stated herein, to execute on behalf of the undersigned and
to file with the Securities and Exchange Commission under the
Securities Exchange Act of 1934, the Portland General Electric
Quarterly Report on Form 10-Q for the quarter ended March 31, 1997.
Dated May 14, 1997
/S/ JOSEPH M. HIRKO
Joseph M. Hirko
1
