UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 30, 2008
PORTLAND GENERAL ELECTRIC COMPANY
(Exact name of registrant as specified in its charter)
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Oregon |
1-5532-99 |
93-0256820 |
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(State or other jurisdiction of incorporation) |
(Commission File Number) |
(I.R.S. Employer Identification No.) |
121 SW Salmon Street, Portland, Oregon 97204
(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code: (503) 464-8000
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Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: |
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02 Results of Operations and Financial Condition.
On October 30, 2008, Portland General Electric Company issued a press release announcing its financial results for the three and nine month periods ended September 30, 2008.
The press release is furnished herewith as Exhibit 99.1 to this Report.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
99.1 Press Release issued by Portland General Electric Company dated October 30, 2008.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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PORTLAND GENERAL ELECTRIC COMPANY |
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(Registrant) |
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Date: |
October 30, 2008 |
By: |
/s/ James J. Piro |
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James J. Piro Executive Vice President, Finance, Chief Financial Officer and Treasurer |
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EXHIBIT 99.1
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Portland General Electric 121 SW Salmon Street Portland, Oregon 97204 News Release |
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FOR RELEASE |
Media Contact: |
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5 a.m. EDT, October 30, 2008 |
Gail Baker |
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Director, Corporate Communications |
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Phone: 503-464-8693 |
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Investor Contact: |
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Bill Valach |
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Director, Investor Relations |
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Phone: 503-464-7395 |
Portland General Electric reports
third-quarter 2008 earnings results
Updates 2008 earnings guidance,
initiates 2009 earnings guidance and announces dividend
Third-Quarter Financial and Operating Summary:
- Net income was zero for the third quarter of 2008 compared to $20 million, or $0.32 per diluted share, for the third quarter of 2007. The decrease in net income was primarily attributable to the effects of the Trojan Refund Order.
- PGE had solid operating results with generation plants running well and increases in both the number of customers and total retail energy deliveries.
- PGE lowers full-year 2008 earnings guidance from $1.85 - $1.95 to $1.40 - $1.50 per diluted share primarily due to effects related to the Trojan Refund Order and losses on non-qualified benefit plan trust assets.
- PGE initiates 2009 earnings guidance of $1.80 - $1.90 per diluted share.
Portland, Ore. - Portland General Electric Company (NYSE: POR) today reported that net income was zero for the third quarter of 2008 compared to $20 million, or $0.32 per diluted share, for the third quarter of 2007. The decrease was due primarily to a $20 million after-tax provision for the future refund to customers related to the Oregon Public Utility Commission's (OPUC) Trojan Refund Order. Pursuant to Senate Bill 408 (SB 408) there was also a $7 million after-tax impact of an estimated increased customer refund, primarily due to the Trojan Refund Order. Also contributing to the decrease was a $3 million after-tax impact of a decline in the fair market value of non-qualified benefit plan trust assets. Results were partially offset by a 3 percent increase in retail energy deliveries and reduced power costs. In the third quarter of 2008, the Company's power costs decreased by $6 million related to results of the power cost adjustment mechanism (PCAM), while power costs in the 200 7 comparable period included a $12 million increase related to the PCAM.
Net income for the nine months ended Sept. 30, 2008, was $67 million, or $1.08 per diluted share, compared to $121 million, or $1.93 per diluted share, for the nine months ended Sept. 30, 2007.
"Portland General Electric had solid operating results in the third quarter, and our residential customer satisfaction ratings rose to their highest level in a decade," said Peggy Fowler, CEO and president of Portland General Electric (PGE). "Our third-quarter financial results were impacted by the Trojan Refund Order, but we're pleased to be moving ahead in getting this challenging issue resolved."
2008 and 2009 Earnings Guidance
PGE is reducing its full-year 2008 earnings guidance to $1.40 - $1.50 per diluted share. This decrease from $1.85 - $1.95 per diluted share is due primarily to the effects of the Trojan Refund Order and losses on non-qualified benefit trust assets. The estimated net impact of the Trojan Refund Order on 2008 earnings is approximately $0.41 per diluted share and includes both SB 408 and PCAM impacts. PGE is initiating 2009 earnings guidance of $1.80 - $1.90 per diluted share based on normal hydro conditions and normal plant operations. PGE is also reaffirming its long-term annual earnings growth expectation of 6 to 8 percent beginning with 2009.
Dividend
On Wednesday, Oct. 29, 2008, the PGE Board of Directors declared a quarterly common stock dividend of 24.5 cents per share. The dividend is payable on or before Jan. 15, 2009, to shareholders of record at the close of business on Dec. 26, 2008.
Market Conditions and Liquidity
PGE has significant capital funding requirements in 2009 and 2010. Although the recent turmoil in market conditions has made access to capital more challenging, PGE believes it has sufficient access to liquidity to meet anticipated capital and operating requirements. Liquidity sources include issuances of long-term debt and equity securities, availability under the Company's revolving credit facility and the expected ability to increase short-term credit capacity. The Company anticipates issuing a total of approximately $230 million of equity and $300 million of new long-term debt in either late 2008 or in 2009, subject to market conditions and availability of capital.
PGE has an unsecured $400 million revolving credit facility with a group of banks. In June 2008, PGE extended the maturity on $390 million of the facility to July 2013, with the remaining $10 million maturing in July 2012.
Lehman Brothers represented $55 million of PGE's $400 million revolving credit facility. On Sept.15, 2008, Lehman's parent company, Lehman Brothers Holdings, Inc., filed for protection under Chapter 11 of the U.S. Bankruptcy Code. In October 2008, $25 million of Lehman's $55 million share was reassigned to Sumitomo Mitsui Banking Corporation. PGE is in discussions with another financial institution for reassignment of the remaining $30 million.
As of Oct. 24, 2008, PGE had $179 million of available borrowing capacity under its revolving credit facility. PGE had $50 million of commercial paper outstanding and $83 million in letters of credit. In addition, the Company had $58 million of borrowings under the credit facility.
Trojan Refund Order
On Sept. 30, 2008, the OPUC issued an order that requires PGE to refund $33.1 million to customers. The refund relates to the OPUC determination of the recoverable balance at Sept. 30, 2000, of the Company's remaining investment in Trojan.
The OPUC ruled that the difference of $15.4 million, plus interest at 9.6 percent from Sept. 30, 2000, should be refunded to customers who received service from PGE during the period Oct. 1, 2000, to Sept. 30, 2001. The $15.4 million amount, plus accrued interest, results in a total refund of $33.1 million as of Sept. 30, 2008. The order also provides that the total refund amount will earn interest at 9.6 percent from Oct. 1, 2008, until all refunds are issued to customers.
In the order, the OPUC also made the following findings:
- The OPUC has authority to order a utility to issue refunds to former customers under certain limited circumstances.
- PGE's rates that were in effect for the period April 1, 1995, through Sept. 30, 2000, were just and reasonable.
As a result of this order, PGE accrued the total refund due to customers of $33.1 million as a regulatory liability, which reduced revenues for the third quarter of 2008. PGE is continuing to review and evaluate the order.
2009 General Rate Case
In February 2008, PGE filed a general rate case which is currently under review by the OPUC. PGE's initial filing proposed an 8.9 percent average price increase related to higher purchased power and fuel costs, increased investment in utility plant and higher operating expenses.
PGE, OPUC staff and interveners have reached stipulations on two major items: cost of capital and the method for determining estimated power cost. First, the cost of capital stipulation provides for a capital structure of 50 percent equity and 50 percent debt and a return on equity of 10.1 percent. Second, the agreement on net variable power costs (NVPC) stipulates to a number of modeling and other adjustments, which results in an approximate $5 million downward adjustment to the forecast of 2009's NVPC. The stipulated items and the power cost updates filed to date would result in a proposed average price increase of approximately 10 percent. Certain customer credits, including those related to 2007 results of PGE's PCAM, are expected to reduce the average price increase to approximately 8.4 percent.
Next steps in the procedural schedule include reply briefs on Tuesday, Nov. 4, oral arguments on Thursday, Nov. 13, and an order from the OPUC by year-end, with new prices expected to go into effect on Jan. 1, 2009.
The following table indicates the revenue requirement increase as originally filed on Feb. 27, 2008, and PGE's updated revenue requirement increase based on the settlement agreements and the Sept. 29, 2008, NVPC update:
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Initial Filing |
Update1 |
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NVPC2 |
$53 million |
$104 million |
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Other |
$93 million |
$57 million |
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Total |
$146 million |
$161 million |
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1. Includes both Sept. 29 update to NVPC and stipulations to date. 2. Net of load adjustments. |
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Biglow Canyon Wind Farm
Construction has started on Phase II of the Biglow Canyon Wind Farm. The estimated total cost of Phases II and III is $730 million to $770 million, including allowance for funds used during construction (AFDC) of approximately $40 million, with Phases II and III expected to be completed by the end of 2009 and 2010, respectively.
Smart Meters
PGE plans to install approximately 850,000 new customer meters that will enable two-way remote communications. In May 2008, the OPUC approved PGE's smart-meter project. Approximately 16,000 new meters are currently being installed as part of the project's acceptance testing phase, with the remaining meters to be installed starting in 2009 and concluding in 2010. PGE expects the smart-meter project to provide improved services, as well as operational efficiencies and a reduction in future expenses.
Capital Expenditures
Capital expenditures in 2008 are estimated to be $401 million. This consists of:
- $222 million for ongoing production, transmission and distribution facilities
- $98 million for Phases II and III of the Biglow Canyon Wind Farm
- $59 million for hydro relicensing projects
- $19 million for smart meters
- $3 million for Boardman emissions controls
Capital expenditures in 2009 are estimated to be $760 million. This consists of:
- $240 million for ongoing production, transmission and distribution facilities
- $414 million for Phases II and III of the Biglow Canyon Wind Farm
- $25 million for hydro relicensing projects
- $79 million for smart meters
- $2 million for Boardman emissions controls
Third-Quarter 2008 Results Compared to Third Quarter 2007
- Total retail revenues decreased $34 million, or 9 percent, due primarily to the accrual of refunds to customers in the amount of $33.1 million pursuant to the OPUC order issued Sept. 30, 2008, related to various Trojan matters.
- $12 million decrease related to SB 408, largely due to an estimated refund due to customers of $6 million recorded in the third quarter of 2008, resulting primarily from the Trojan Refund Order, compared to an estimated collection from customers of $5 million recorded in the third quarter of 2007.
- $10 million increase resulting from a 2 percent increase in average price and a 3 percent increase in total retail energy deliveries, which was primarily due to a 1.4 percent increase in the average number of customers served during the third quarter of 2008, relative to the third quarter of 2007.
- $7 million decrease in wholesale revenues due to a $16 million decrease in wholesale energy sales volume partially offset by a $9 million increase in average price due to higher natural gas prices.
- $6 million increase in other operating revenue due primarily to the sale of fuel oil in 2008. Pursuant to an assessment of reliability requirements, PGE reduced oil inventory levels at its Beaver Plant.
- $50 million decrease related to settled natural gas agreements entered into in conjunction with PGE's management of its NVPC.
- $18 million decrease related to application of the Company's PCAM.
- $30 million increase in the cost of purchased power, resulting primarily from a 27 percent increase in the average cost.
- $11 million increase in the cost of natural gas-fired production, as a 55 percent increase in the average cost of natural gas was only partially offset by a 24 percent reduction in generation.
Year-to-Date 2008
Net income for the nine months ended Sept. 30, 2008, was $67 million, or $1.08 per diluted share, compared to $121 million, or $1.93 per diluted share, for 2007. The decrease was primarily due to the net effect of:
- $20 million after-tax provision for the future refund to customers related to the Trojan Refund Order.
- $13 million after-tax impact of the deferral in 2007 of a portion of Boardman replacement power cost (including accrued interest) for potential future recovery.
- $10 million after-tax impact of adjustments related to SB 408.
- $9 million after-tax impact of a decline in the fair market value of non-qualified benefit plan assets.
- $4 million after-tax impact of a 2007 settlement between PGE and certain California parties related to wholesale energy transactions during 2000 and 2001.
- The decreases above were partially offset by a 3 percent increase in retail energy deliveries.
Year-to-Date 2008 Results Compared to Year-to-Date 2007
- $28 million increase resulting from a 2 percent increase in average price, which was driven by the Company's smart-meter project, and recovery of Port Westward and Biglow Canyon Phase I.
- $21 million increase resulting from a 3 percent increase in total retail energy deliveries, due to more extreme weather conditions in 2008 and a 1.4 percent increase in the average number of customers served during the first nine months of 2008 relative to the first nine months of 2007.
- $33.1 million decrease, related to the accrual of refunds to customers pursuant to the OPUC order issued Sept. 30, 2008, related to various Trojan matters.
- $17 million decrease related to SB 408, with an estimated refund due to customers of $7 million recorded in 2008, compared to an estimated collection from customers of $10 million recorded in 2007.
- $4 million increase in wholesale revenues due to a $39 million increase resulting from a 34 percent increase in average price, partially offset by a $35 million decrease in wholesale energy sales volume.
- $16 million increase in other operating revenue due to sales of fuel oil from the Company's Beaver Plant in 2008, which resulted in a net gain of $11 million.
- $99 million increase in the cost of thermal production, due primarily to a 39 percent increase in the average cost of natural gas and a 41 percent increase in gas-fired generation.
- $20 million increase related to the deferral of excess Boardman power costs in the first quarter of 2007, which were incurred in late 2005 and early 2006.
- $5 million increase due to a reduction in the Company's wholesale credit reserve in the first quarter of 2007, primarily as a result of a settlement with certain California parties involving transactions in 2000 and 2001.
- $46 million decrease in the cost of purchased power, due primarily to an 18 percent decrease in purchases resulting from the addition of Port Westward and Biglow Canyon Phase I to the Company's generation portfolio.
- $37 million decrease related to settled natural gas agreements entered into in conjunction with PGE's management of its power cost.
- $14 million decrease in the estimated amount recorded for potential future refund to customers under the PCAM.
- $7 million increase in operating costs at the Company's generation facilities, including Port Westward and Biglow Canyon Phase I.
- $4 million increase in distribution labor, contractor and tree-trimming costs.
- $3 million increase related to repair and maintenance activities completed at Boardman and Beaver during the plants' scheduled outages in 2008.
- $15 million decrease in income from non-qualified benefit plan trust assets resulting from the recognition of a $9 million decline in the fair market value of the plan assets during the first nine months of 2008, compared to a $6 million increase in the first nine months of 2007.
- $6 million decrease in AFDC equity, which resulted from lower construction work in progress (CWIP) balances during the first nine months of 2008 due to the completion of both Port Westward and Biglow Canyon Phase I.
Third-Quarter 2008 Earnings Call and Webcast Oct. 30, 2008
PGE will host a conference call with financial analysts and investors on Thursday, Oct. 30, 2008, at 5 p.m. EDT. The conference call will be webcast live on the PGE Web site at www.PortlandGeneral.com.
A replay of the call will be available beginning at 7 p.m. EDT on Thursday, Oct. 30, through Thursday, Nov. 6.
Peggy Fowler, CEO and president; Jim Piro, executive vice president, CFO and treasurer; and Bill Valach, director of investor relations, will participate in the call. Management will respond to questions following formal comments.
The attached condensed consolidated statements of income, balance sheets, statements of cash flows and supplemental operating statistics are an integral part of this earnings release.
# # #
About Portland General Electric Company
Portland General Electric, headquartered in Portland, Ore., is a vertically integrated electric utility that serves approximately 814,000 residential, commercial and industrial customers in Oregon. Visit our Web site at www.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 and long-term earnings growth; statements regarding future capital expenditure;, statements regarding PGE's access to capital and cost of capital; statements regarding PGE's future liquidity; statements regarding the cost, completion and benefits of capital projects, such as the smart-meter and Biglow Canyon Wind Farm projects; statements regarding the outcome of the 2009 general rate case, as well as other statements containing words such as "anticipates," "believes," "intends," "estimates," "promises," "expects," "should," "conditioned upon" and similar expressions. Inve stors are cautioned that any such forward-looking statements are subject to risks and uncertainties, including 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; unforeseen problems or delays in completing capital projects, resulting in the failure to complete such projects on schedule or within budget; operational factors affecting the Company's power generation facilities, including outages, hydro conditions, wind conditions and disruption of fuel supply; and the outcome of various legal and regulatory proceedings. 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
SUPPLEMENTAL OPERATING STATISTICS
(Unaudited)
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Three Months Ended Sept. 30, |
Nine Months Ended Sept. 30, |
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2008 |
2007 |
2008 |
2007 |
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Revenues (millions) |
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Retail sales: |
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Residential |
$ 155 |
$ 160 |
$ 559 |
$ 501 |
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Commercial |
156 |
157 |
450 |
440 |
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Industrial |
42 |
41 |
119 |
119 |
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Total retail sales |
353 |
358 |
1,128 |
1,060 |
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Trojan refund liability |
(33) |
- |
(33) |
- |
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Direct access customers |
(3) |
(3) |
(7) |
(9) |
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Other retail revenues |
11 |
7 |
20 |
54 |
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Total retail revenues |
328 |
362 |
1,108 |
1,105 |
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Wholesale revenues |
61 |
68 |
153 |
149 |
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Other operating revenues |
11 |
5 |
35 |
19 |
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Revenues, net |
$ 400 |
$ 435 |
$ 1,296 |
$ 1,273 |
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Energy sold and delivered - MWhs (thousands) |
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Retail energy sales: |
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Residential |
1,643 |
1,602 |
5,765 |
5,504 |
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Commercial |
1,909 |
1,910 |
5,439 |
5,442 |
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Industrial |
649 |
632 |
1,857 |
1,875 |
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Total retail energy sales |
4,201 |
4,144 |
13,061 |
12,821 |
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Delivered to direct access customers |
636 |
567 |
1,825 |
1,612 |
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Total retail energy deliveries |
4,837 |
4,711 |
14,886 |
14,433 |
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Wholesale sales |
942 |
1,221 |
2,429 |
3,161 |
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Total energy sold and delivered |
5,779 |
5,932 |
17,315 |
17,594 |
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Retail customers - end of period |
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Residential |
711,963 |
703,272 |
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Commercial |
102,162 |
100,110 |
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Industrial |
267 |
257 |
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Total retail customers |
814,392 |
803,639 |
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Degree-Days |
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Heating |
Cooling |
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2008 |
2007 |
2008 |
2007 |
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1st Quarter |
1,981 |
1,852 |
- |
- |
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Average |
1,840 |
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1,840 |
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- |
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2nd Quarter |
860 |
698 |
98 |
56 |
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Average |
664 |
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664 |
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67 |
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67 |
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3rd Quarter |
80 |
123 |
376 |
344 |
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Average |
82 |
82 |
385 |
385 |
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Note: "Average" amounts represent 15-year rolling averages provided by the National Weather Service (Portland Airport). |
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