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Portland General Electric Reports Third Quarter 2007 Earnings Results

Posted on: Thursday, 1 November 2007, 06:00 CDT

Portland General Electric Company (NYSE:POR) today reported net income of $20 million, or $0.32 per diluted share, for the quarter ending September 30, 2007, compared to $10 million, or $0.16 per diluted share, for the third quarter 2006. The improved results were primarily attributable to the approximate $18 million after tax impact of Senate Bill 408 (SB 408), an Oregon utility income tax law, with an estimated amount to be collected from customers recorded in the third quarter of 2007 compared to a refund to customers recorded in the same period in 2006. Higher power costs and administrative and general expenses during the third quarter partially offset the impact of SB 408.

"We continue our commitment to meet growing demand in our service territory through strong, efficient operations," said Peggy Fowler, CEO and president of PGE. "We remain focused on providing our customers with safe, reliable power, and our strategic investment in the Biglow Canyon Wind Farm will help us meet our customers' energy needs."

Third Quarter 2007 Summary

Total customers served increased by 1.3 percent to approximately 804,000 as of September 30, 2007, as compared to approximately 793,000 as of September 30, 2006.

Total retail energy deliveries were relatively unchanged, with 4,711,000 MWhs in 2007 compared to 4,717,000 MWhs in 2006.

Total operating revenues increased by 16.9 percent to $435 million from $372 million in 2006. The increase was a result of 2007 price increases related to higher power and fuel costs, cost recovery of the Port Westward Generating Plant (Port Westward), and an increase in the average number of customers served. The increase also includes a $28 million increase related to SB 408, with an estimated collection of $6 million (related to the 2007 tax year) recorded in the third quarter of 2007 compared to an estimated refund of $22 million (related to the 2006 tax year) recorded in the third quarter of 2006. The increase also includes the discontinuance of subscription power benefits under the Residential Exchange Program (fully offset in power costs). Partially offsetting these increases was cooler-than-normal weather in 2007 (compared to warmer-than-normal weather in 2006) resulting in reduced electricity use by customers. Wholesale revenues increased 13.3 percent from 2006 due to an increase in energy sales and an increase in wholesale energy prices caused primarily by higher prices for natural gas.

Purchased power and fuel expenses increased by $44 million from 2006. The increase was due primarily to an increase in the average cost of generation as a result of higher costs of settled natural gas hedging transactions, an $11.5 million reduction in unrealized gains on derivative activities, and the discontinuance of subscription power benefits under the Residential Exchange Program (fully offset in revenues). Partially offsetting these increases were the displacement of power purchases with lower-cost power from Port Westward and a 4 percent decrease in total system load. Expenses for 2007 also include $11.8 million recorded for future refund to customers under the Power Cost Adjustment Mechanism (PCAM).

Production, distribution, administrative and other expenses increased $8 million from 2006 due primarily to operating expenses at Port Westward, and higher employee benefit and customer support expenses.

Depreciation and amortization expenses decreased by $9 million compared to 2006. The decrease is due primarily to a $7 million decrease resulting from reductions in both depreciation rates for utility plant assets and the authorized recovery of Trojan decommissioning costs, which became effective in January 2007. The decrease also reflects a $3 million reduction in the amortization of regulatory assets. These decreases were partially offset by a $2 million increase in depreciation expense due to the addition of Port Westward.

Income taxes increased by $4 million due primarily to higher taxable income.

Other income decreased by $3 million primarily due to lower returns on non-qualified benefit plan trust assets and higher taxes on non-utility income.

Year-to-Date 2007

For the nine months ending September 30, 2007, net income was $121 million, or $1.93 per diluted share, compared to $31 million, or $0.50 per diluted share, for the same period in 2006. The improved results were attributable to increased energy deliveries and the return of Boardman to full operation. In 2006, the Company's results included a $32 million after tax impact of incremental power costs required to replace the output of Boardman during its extended repair outage. Also contributing to the increase in earnings was a positive $26 million after tax impact from Senate Bill 408, a positive $13 million after tax impact of the deferral of a portion of the Boardman replacement power costs for future recovery and higher energy sales.

Year-to-Date 2007 Summary

Total retail energy deliveries increased 0.8 percent for the first nine months of 2007 to 14,433,000 MWhs from 14,312,000 MWhs in 2006.

Total operating revenues increased by 15.3 percent to $1,273 million from $1,104 million in 2006. The increase was due primarily to 2007 price increases related to higher power and fuel costs and cost recovery of Port Westward. In addition, the increase includes $42 million related to SB 408, with an estimated collection of $11 million recorded in the first nine months of 2007 compared to a $31 million refund recorded in the same period last year. Also contributing to increased revenues was the discontinuance of subscription power benefits under the Residential Exchange Program (fully offset in power costs) and higher retail energy deliveries resulting primarily from an increase in customers served. Wholesale revenues increased 30.7 percent from last year's first nine months due to increases in energy sales and in wholesale energy prices, resulting from higher natural gas prices and decreased regional hydro availability.

Purchased power and fuel expenses increased by $47 million from last year's first nine months. The increase was due primarily to an increase in the average cost of purchased power, higher natural gas prices, higher costs of settled natural gas hedging transactions, the discontinuance of subscription power benefits under the Residential Exchange Program (fully offset in revenues) and $14.6 million recorded for future refund to customers under the PCAM. These increases were partially offset by the 2007 deferral of $20.4 million of excess Boardman power costs related to the 2005-2006 outage, unrealized losses on derivative activities of $13.3 million in 2006, and a $6 million reduction in the Company's wholesale credit reserve related to the settlement with certain California parties concerning wholesale energy transactions in 2000-2001. Partial offsets also include reduced electricity purchases to serve retail load, related to both the return of Boardman to full operation and to generation from the new Port Westward plant, and lower commercial and industrial energy sales resulting from an increase in direct access customers that purchase energy from an Electricity Service Supplier.

Production, distribution, administrative and other expenses increased $23 million from 2006, due primarily to higher employee benefit and customer support expenses, new operating costs at Port Westward, and increased maintenance activities at Boardman and Colstrip.

Depreciation and amortization expenses decreased by $31 million compared to 2006. The decrease was due primarily to a $19 million reduction in both depreciation rates for utility plant assets and the authorized recovery of Trojan decommissioning costs, which became effective in January 2007. In addition, there was a $9 million decrease in the amortization of regulatory assets and a $3 million reduction in the deferral of certain tax credits for future ratemaking treatment.

Income taxes increased by $39 million in 2007 due primarily to higher taxable income.

Other income increased $7 million in 2007 due primarily to a $4 million interest accrual on the deferred excess power costs associated with Boardman's repair outage, a $2 million increase in income from non-qualified benefit plan trust assets, and a $2 million increase in the allowance for equity funds used during construction, related primarily to Port Westward and Biglow Canyon.

Interest charges increased $5 million in 2007, primarily due to a higher level of outstanding long-term debt resulting from the issuance of additional First Mortgage Bonds during 2006 and 2007.

Biglow Canyon Wind Farm

On October 15, 2007, PGE announced that its Biglow Canyon Wind Farm began generating electricity as the first several wind turbines began supplying power on the Pacific Northwest's electricity grid. Phase I of the project is on track for completion by December 2007, and will be comprised of 76 turbines with an installed capacity of 125 megawatts at a total estimated cost of between $255 million and $265 million (including AFDC). Biglow Canyon Phase I fulfills the Company's goals for adding renewable energy as outlined in PGE's last Integrated Resource Plan.

Phases II and III of the project are in the advanced planning stages, with an estimated total cost of $600 million to $700 million (including AFDC). Phase II is expected to be completed by the end of 2009 and Phase III is expected to be completed by the end of 2010. All three phases of the project combined are expected to have a total installed capacity of 400 to 450 megawatts.

Capital Expenditures

Capital expenditures in 2007 are estimated to total $471 million compared to actual 2006 expenditures of $371 million. Capital expenditures for 2007 consist of approximately $203 million for the Biglow Canyon Wind Farm Phase I, $19 million for Phases II and III, $178 million for ongoing production, transmission and distribution facilities, $52 million for hydro relicensing projects, $16 million for Port Westward and $3 million for Advanced Metering Infrastructure.

2007 Earnings Guidance

PGE is reaffirming its full-year 2007 earnings guidance of $2.25 to $2.35 per diluted share. Guidance continues to include one-time items totaling $0.41 per diluted share resulting from a deferral of excess power costs related to the Boardman outage and the FERC-approved settlement between PGE and certain California parties relating to wholesale energy transactions in the western markets during 2000-2001. Guidance also continues to include the effect of improved thermal plant operations and favorable hydro conditions.

2008 Earnings Guidance

PGE is providing full-year 2008 earnings guidance of $1.75 to $1.85 per diluted share. Guidance assumes normal hydro and plant operations, including a full year of operation for Port Westward and Biglow Canyon Phase I. PGE is also updating its long-term annual earnings growth expectation to 6 to 8 percent beginning with 2008.

Third Quarter 2007 Earnings Call and Webcast November 1, 2007

PGE will host a conference call with financial analysts and investors on Thursday, November 1, 2007, 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, November 1 through Thursday, November 8.

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 consolidated income statements, balance sheets, cash flow statements 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 fully integrated electric utility that serves approximately 804,000 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, statements regarding future capital expenditures, statements regarding the cost, completion and benefits of capital projects, such as the Biglow Canyon Wind Farm, 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 matters and events related to 2007 and 2008 earnings guidance, final review of the deferral of excess power costs for the Boardman Plant outage; completion and rate treatment of Phase I of the Biglow Canyon Wind Farm; and the Advanced Metering Infrastructure project; 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 fuel or purchased power; 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 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 SubsidiariesCondensed Consolidated Statements of Income

(Unaudited)

Three Months Ended September 30,

Nine Months EndedSeptember 30,

2007

2006

2007

2006

(In Millions, Except per Share Amounts)

Operating Revenues

$

435

$

372

$

1,273

$

1,104

Operating Expenses

Purchased power and fuel

242

198

620

573

Production and distribution

36

34

109

103

Administrative and other

46

40

136

119

Depreciation and amortization

46

55

134

165

Taxes other than income taxes

20

19

60

57

Income taxes

10

6

59

20

400

352

1,118

1,037

Net Operating Income

35

20

155

67

Other Income (Deductions)

Allowance for equity funds used during construction

4

4

13

11

Miscellaneous

2

3

10

1

Income taxes

(2

)

-

(3

)

1

4

7

20

13

Interest Charges

Interest on long-term debt and other

19

17

54

49

Net Income

$

20

$

10

$

121

$

31

Common Stock:

Weighted-average shares outstanding (thousands), Basic

62,516

62,500

62,509

62,500

Weighted-average shares outstanding (thousands), Diluted

62,542

62,505

62,534

62,502

Earnings per share, Basic and Diluted

$

0.32

$

0.16

$

1.93

$

0.50

Dividends declared per share

$

0.235

$

0.225

$

0.695

$

0.45

Portland General Electric Company and Subsidiaries

Condensed Consolidated Balance Sheets

(Unaudited)

September 30,

December 31,

2007

2006

(In Millions, Except Share Amounts)

Assets

Electric Utility Plant - Original Cost

Utility plant (includes construction work in progress of $357 and $412)

$

4,942

$

4,582

Accumulated depreciation

(1,936

)

(1,864

)

3,006

2,718

Other Property and Investments

Nuclear decommissioning trust, at market value

45

42

Non-qualified benefit plan trust

71

70

Miscellaneous

22

26

138

138

Current Assets

Cash and cash equivalents

60

12

Accounts and notes receivable (less allowance for uncollectible accounts of $5 and $45)

172

177

Unbilled revenues

64

88

Assets from price risk management activities

65

93

Inventories, at average cost

63

64

Margin deposits

39

46

Prepayments and other

40

25

Deferred income taxes

20

22

523

527

Deferred Charges

Regulatory assets

385

351

Miscellaneous

36

33

421

384

$

4,088

$

3,767

Capitalization and Liabilities

Capitalization

Common stock equity:

Common stock, no par value, 80,000,000 shares authorized; 62,519,160 and 62,504,767 shares outstanding at September 30, 2007 and December 31, 2006, respectively

$

645

$

643

Retained earnings

664

587

Accumulated other comprehensive income (loss):

Pension and other post-retirement plans

(6

)

(6

)

Long-term debt

1,238

937

2,541

2,161

Current Liabilities

Long-term debt due within one year

-

66

Short-term borrowings

-

81

Accounts payable and other accruals

215

212

Liabilities from price risk management activities

121

155

Customer deposits

5

5

Accrued interest

21

15

Accrued taxes

59

14

Dividends payable

15

14

436

562

Other

Deferred income taxes

275

251

Deferred investment tax credits

4

7

Trojan asset retirement obligation

111

108

Accumulated asset retirement obligation

21

26

Regulatory liabilities:

Accumulated asset retirement removal costs

445

411

Other

118

112

Non-qualified benefit plan liabilities

87

84

Miscellaneous

50

45

1,111

1,044

$

4,088

$

3,767

Portland General Electric Company and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited)

Nine Months Ended

September 30,

2007

2006

(In Millions)

Cash Flows From Operating Activities:

Reconciliation of net income to net cash provided by operating activities

Net income

$

121

$

31

Non-cash items included in net income:

Depreciation and amortization

134

165

Deferred income taxes

20

(35

)

Net assets from price risk management activities

(16

)

138

Power cost deferrals

(10

)

-

Regulatory deferrals - price risk management activities

16

(125

)

Allowance for equity funds used during construction

(13

)

(11

)

Senate Bill 408 deferrals

(9

)

32

Other non-cash income and expenses (net)

(5

)

13

Changes in working capital:

Net margin deposit activity

7

(71

)

Decrease in receivables

29

56

Increase (Decrease) in payables

41

(62

)

Other working capital items - net

(15

)

(27

)

Other - net

(9

)

6

Net Cash Provided by Operating Activities

291

110

Cash Flows From Investing Activities:

Capital expenditures

(351

)

(269

)

Purchases of nuclear decommissioning trust securities

(19

)

(30

)

Sales of nuclear decommissioning trust securities

17

16

Other - net

2

3

Net Cash Used in Investing Activities

(351

)

(280

)

Cash Flows From Financing Activities:

Short-term borrowings (repayments) - net

(81

)

-

Repayment of long-term debt

(71

)

(161

)

Issuance of long-term debt (net of issuance costs of $3 and $2)

303

273

Dividends paid

(43

)

(14

)

Net Cash Provided by Financing Activities

108

98

Increase (Decrease) in Cash and Cash Equivalents

48

(72

)

Cash and Cash Equivalents, Beginning of Period

12

122

Cash and Cash Equivalents, End of Period

$

60

$

50

Supplemental disclosures of cash flow information

Cash paid during the period:

Interest, net of amounts capitalized

$

37

$

38

Income taxes

30

73

Non-cash activities:

Accrued capital additions

33

23

Common stock dividends declared but not paid

15

14

Portland General Electric Company and Subsidiaries

Supplemental Operating Statistics

Three Months EndedSeptember 30,

Nine Months EndedSeptember 30,

2007

2006

2007

2006

Operating revenues (millions)

Retail sales

Residential

$

160

$

134

$

501

$

448

Commercial

157

143

440

407

Industrial

41

53

119

153

Total retail sales

358

330

1,060

1,008

Direct access customers

Commercial

-

(2

)

-

(4

)

Industrial

(3

)

(1

)

(9

)

(5

)

Tariff revenues

355

327

1,051

999

Regional Power Act credits

-

4

42

9

Provision for collection (refund) - SB 408

6

(22

)

11

(31

)

Accrued revenues

1

-

1

2

Total retail revenues

362

309

1,105

979

Wholesale revenues

68

60

149

114

Other operating revenues

5

3

19

11

Total Operating Revenues

$

435

$

372

$

1,273

$

1,104

Energy sold and delivered - MWhs (thousands)

Retail energy sales

Residential

1,602

1,630

5,504

5,448

Commercial

1,910

1,939

5,442

5,460

Industrial

632

895

1,875

2,641

Total retail energy sales

4,144

4,464

12,821

13,549

Delivery to direct access customers

Commercial

135

110

376

331

Industrial

432

143

1,236

432

Total retail energy deliveries

4,711

4,717

14,433

14,312

Wholesale sales

1,221

1,119

3,161

2,628

Total energy sold and delivered

5,932

5,836

17,594

16,940

Customers - end of period

Residential

703,272

693,772

Commercial

100,110

98,964

Industrial

257

259

Total Retail Customers

803,639

792,995

Source: Business Wire

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