Portland General Electric announces 2022 financial results and initiates 2023 earnings guidance
Portland General Electric Company (NYSE: POR) reported a GAAP net income of $233 million or $2.60 per diluted share for 2022. Non-GAAP results showed an adjusted income of $245 million or $2.74 per diluted share, slightly up from 2021's figures. The company initiated 2023 adjusted earnings guidance between $2.60 and $2.75 per diluted share, with an anticipated increase in energy deliveries. Key investments included $811 million in capital assets and a $499 million equity forward sale agreement. A 14% average price increase is requested for the 2024 general rate case. A quarterly dividend of $0.4525 per share was also approved.
- Initiated 2023 adjusted earnings guidance of $2.60 to $2.75 per diluted share.
- Invested $811 million in capital assets for growth and resiliency.
- Achieved a 17% increase in the rate base through the general rate case.
- GAAP net income in Q4 2022 declined to $50 million from $66 million in Q4 2021.
- Operating and administrative expenses increased due to higher wildfire and storm costs.
- Full-year 2022 GAAP basis financial results of
$2.60 $2.74 - Initiating 2023 adjusted earnings guidance of
$2.60 $2.75 5% to7% long-term earnings per share growth using 2022 non-GAAP adjusted base year - 2024 test year general rate case filed, focused on capital investments and policy items to support safe, reliable and clean energy service
"Our performance in 2022 laid a strong foundation for long-term growth as we took meaningful steps forward in our decarbonization journey, navigated historic power market volatility, and executed well in the face of severe weather," said
2022 Year in Review
Key strategic accomplishments in 2022 included:
- Invested
$811 million - Entered into agreements with
NextEra Energy Resources, LLC , to construct the 311MW Clearwater Wind Project inMontana , with PGE owning 208 MW and acquiring the power from the remaining 103 MW of site output under a 30-year purchased power agreement (PPA); - Executed a
$499 million - Received amortization approval from the OPUC for
$131 million Labor Day Wildfire, 2021 February Ice Storm and 2021 Power Cost Adjustment Mechanism (PCAM) deferrals; - Deployed innovative technologies, including cameras designed to detect wildfires in our service territory and the Advanced Distribution Management System which enables improved real-time management of our distribution network;
- Served
39% of retail customer load from specified non-emitting energy sources; - Concluded the 2022 General Rate Case (GRC) with OPUC Order 22-129, which achieved a
$814 million 17% , increase in rate base, accelerated depreciation ofColstrip to 2025, full recovery of theIntegrated Operations Center and established a balancing account for PGE's major storm damage recovery mechanism; - Submitted
$178 million $478 million $945 million - Maintained customer satisfaction ratings for residential customers in the top decile of utilities nationwide, according to Escalent's National Energy Utility Benchmarking; and
- Continued our long-standing commitment to diversity, equity and inclusion and increased our supplier diversity spending to
14% of total supplier spending in 2022.
2022 Earnings Compared to 2021 Earnings
Total revenue increased, driven by continued growth in industrial demand, partially offset by a reduction in the average price of deliveries due to a varying customer mix. Net variable power costs were unfavorable due to high regional power prices, particularly in the third and fourth quarters. Operating and administrative expenses increased due to higher wildfire and vegetation management costs, storm expenses, and reductions to deferral amounts recorded in 2020 related to COVID and Wildfire expenses as a result of the 2022 GRC outcome. Depreciation and amortization expense increased driven by higher transmission and distribution asset balances. Interest expense increased due to higher long-term debt balances. Taxes other than income taxes increased due to higher property and payroll taxes. Other income increased as a result of a settlement gain from the buyout of a portion of PGE's post-retirement medical plan, offset partially by declines in the value of the non-qualified benefit plan trust assets. Tax expense increased due to a local tax flow-through adjustment that did not recur in 2022.
2023 Earnings Guidance
PGE is initiating full-year 2023 adjusted earnings guidance of
- An increase in energy deliveries between
2.5% and3% , weather adjusted; - Normal temperatures in its utility service territory;
- Hydro conditions for the year that reflect current estimates;
- Wind generation based on five years of historical levels or forecast studies when historical data is not available;
- Normal thermal plant operations;
- Operating and maintenance expense between
$695 million $715 million $45 million - Depreciation and amortization expense between
$445 million $465 million - Effective tax rate of
15% to20% ; - Cash from operations of
$700 $750 million - Capital expenditures of
$1,210 million - Average construction work in progress balance of
$520 million
Company Updates
On
The requested price increase reflects:
- Return on equity of
9.8% - Capital structure of
50% debt and50% equity - Cost of capital of
7.06% - Rate base of
$6.3 billion
As part of the GRC filing, PGE has proposed a new PCAM in order to enable Oregon's decarbonization goals, better reflect current and future operating conditions, and create a more durable PCAM framework that supports customers. PGE's proposal provides 90/10 sharing of power cost variances without a deadband mechanism and recovery of costs prudently incurred during specific, disruptive market conditions, subject to a rolling multi-year price increase cap of
Issuance of a final order by the Commission is expected in
Renewable Energy and Non-Emitting Capacity Request for Proposal Update
In
PGE continues to negotiate with remaining bidders on the final shortlist for renewable generation and non-emitting capacity resources, including PGE's benchmark projects, as well as PPA options. Finalization of negotiations are expected in the first half of 2023. PGE filed a status report on
PGE is preparing a Clean Energy Plan (CEP), which will articulate the Company's strategy to meet the 2030, 2035, and 2040 emission reduction targets, set by HB 2021, through an equitable transition to a decarbonized grid. PGE anticipates filing its first combined Integrated Resource Plan (IRP) and CEP with the OPUC on
Quarterly dividend
As previously announced, on
Fourth Quarter and Full Year 2022 Earnings Call and Webcast —
PGE will host a conference call with financial analysts and investors on
Non-GAAP Financial Measures
This press release contains certain non-GAAP measures, such as adjusted earnings, adjusted EPS and adjusted earnings guidance. These non-GAAP financial measures exclude significant items that are generally not related to our ongoing business activities, are infrequent in nature, or both. PGE believes that excluding the effects of these items provides a meaningful representation of the Company's comparative earnings per share and enables investors to evaluate the Company's ongoing operating financial performance. Management utilizes non-GAAP measures to assess the Company's current and forecasted performance, and for communications with shareholders, analysts and investors. Non-GAAP financial measures are supplementary information that should be considered in addition to, but not as a substitute for, the information prepared in accordance with GAAP.
Items in the periods presented, which PGE believes impact the comparability of comparative earnings and do not represent ongoing operating financial performance, include the following:
- Non-cash Wildfire and COVID deferral reversal charge associated with the year ended 2020, resulting from the OPUC's 2022 GRC Final Order deferral earnings test.
Due to the forward-looking nature of PGE's non-GAAP adjusted earnings guidance, management is unable to estimate specific items requiring adjustment, which could potentially impact the Company's GAAP earnings (such as potential adjustments described above) for future periods and therefore cannot provide a reconciliation of non-GAAP adjusted earnings per share guidance to the most comparable GAAP financial measure without unreasonable effort.
PGE's reconciliation of non-GAAP earnings for the year ended
Non-GAAP Earnings Reconciliation for the year ended | ||
(Dollars in millions, except EPS) | Net Income | Diluted EPS |
GAAP as reported for the year ended | $ 233 | $ 2.60 |
Exclusion of released deferrals related to 2020 | 17 | 0.19 |
Tax effect (1) | (5) | (0.05) |
Non-GAAP as reported for the year ended | $ 245 | $ 2.74 |
(1) Tax effects were determined based on the Company's full-year blended federal and state statutory tax rate. |
About
Safe Harbor Statement
Statements in this press 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. These forward-looking statements represent our estimates and assumptions as of the date of this report. The Company assumes no obligation to update or revise any forward-looking statement as a result of new information, future events or other factors.
Forward-looking statements include statements regarding the Company's full-year earnings guidance (including expectations regarding annual retail deliveries, average hydro conditions, wind generation, normal thermal plant operations, operating and maintenance expense and depreciation and amortization expense) as well as other statements containing words such as "anticipates," "based on," "believes," "conditioned upon," "considers," "estimates," "expects," "forecast," "goals," "intends," "needs," "plans," "predicts," "projects," "promises," "seeks," "should," "subject to," "targets," or similar expressions.
Investors are cautioned that any such forward-looking statements are subject to risks and uncertainties, including, without limitation: the timing or outcome of various legal and regulatory actions; changing customer expectations and choices that may reduce demand for electricity; the sale of excess energy during periods of low demand or low wholesale market prices; operational risks relating to the Company's generation and battery storage facilities, including hydro conditions, wind conditions, disruption of transmission and distribution, disruption of fuel supply, and unscheduled plant outages, which may result in unanticipated operating, maintenance and repair costs, as well as replacement power costs; delays in the supply chain and increased supply costs (including application of tariffs impacting solar module imports), failure to complete capital projects on schedule or within budget, failure of counterparties to perform under agreement, or the abandonment of capital projects, which could result in the Company's inability to recover project costs, or impact our competitive position, market share, revenues and project margins in material ways; default or nonperformance of counterparties from whom PGE purchases capacity or energy, which require the purchase of replacement power and renewable attributes at increased costs; complications arising from PGE's jointly-owned plant, including ownership changes, regulatory outcomes or operational failures; the costs of compliance with environmental laws and regulations, including those that govern emissions from thermal power plants; changes in weather, hydroelectric and energy market conditions, which could affect the availability and cost of purchased power and fuel; the development of alternative technologies; changes in capital and credit market conditions, including volatility of equity markets, reductions in demand for investment-grade commercial paper or interest rates, which could affect the access to and availability or cost of capital and result in delay or cancellation of capital projects or execution of the Company's strategic plan as currently envisioned; general economic and financial market conditions, including inflation; the effects of climate change, whether global or local in nature; unseasonable or severe weather conditions, wildfires, and other natural phenomena and natural disasters that could result in operational disruptions, unanticipated restoration costs, third party liability or that may affect energy costs or consumption; the effectiveness of PGE's risk management policies and procedures; PGE's ability to effectively implement Public Safety Power Shutoffs (PSPS) and de-energize its system in the event of heightened wildfire risk; cyber security attacks, data security breaches, physical attacks and security breaches, or other malicious acts, which could disrupt operations, require significant expenditures, or result in claims against the Company; employee workforce factors, including potential strikes, work stoppages, transitions in senior management, and the ability to recruit and retain key employees and other talent and turnover due to macroeconomic trends; PGE business activities are concentrated in one region and future performance may be affected by events and factors unique to
Risks and uncertainties to which the Company are subject are further discussed in the reports that the Company has filed with the
POR
Source:
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Years Ended | |||||
2022 | 2021 | 2020 | |||
Revenues: | |||||
Revenues, net | $ 2,636 | $ 2,425 | $ 2,151 | ||
Alternative revenue programs, net of amortization | 11 | (29) | $ (6) | ||
Total Revenues | 2,647 | 2,396 | 2,145 | ||
Operating expenses: | |||||
Purchased power and fuel | 988 | 822 | 708 | ||
Generation, transmission and distribution | 348 | 310 | 293 | ||
Administrative and other | 340 | 336 | 283 | ||
Depreciation and amortization | 417 | 404 | 454 | ||
Taxes other than income taxes | 157 | 146 | 138 | ||
Total operating expenses | 2,250 | 2,018 | 1,876 | ||
Income from operations | 397 | 378 | 269 | ||
Interest expense, net | 156 | 137 | 136 | ||
Other income: | |||||
Allowance for equity funds used during construction | 14 | 17 | 16 | ||
Miscellaneous income (expense), net | 17 | 9 | 6 | ||
Other income, net | 31 | 26 | 22 | ||
Income before income taxes | 272 | 267 | 155 | ||
Income tax expense | 39 | 23 | — | ||
Net income | $ 233 | $ 244 | $ 155 | ||
Weighted-average shares outstanding (in thousands): | |||||
Basic | 89,290 | 89,481 | 89,485 | ||
Diluted | 89,643 | 89,627 | 89,645 | ||
Earnings per share: | |||||
Basic | $ 2.61 | $ 2.72 | $ 1.73 | ||
Diluted | $ 2.60 | $ 2.72 | $ 1.72 | ||
| |||
As of | |||
2022 | 2021 | ||
ASSETS | |||
Current assets: | |||
Cash and cash equivalents | $ 165 | $ 52 | |
Accounts receivable, net | 398 | 329 | |
Inventories, at average cost: | |||
Materials and supplies | 63 | 51 | |
Fuel | 32 | 27 | |
Regulatory assets—current | 54 | 24 | |
Other current assets | 498 | 205 | |
Total current assets | 1,210 | 688 | |
Electric utility plant: | |||
In service | 12,421 | 11,838 | |
Accumulated depreciation and amortization | (4,423) | (4,146) | |
In service, net | 7,998 | 7,692 | |
Construction work-in-progress | 467 | 313 | |
Electric utility plant, net | 8,465 | 8,005 | |
Regulatory assets—noncurrent | 473 | 533 | |
Nuclear decommissioning trust | 39 | 47 | |
Non-qualified benefit plan trust | 38 | 45 | |
Other noncurrent assets | 234 | 176 | |
Total assets | $ 10,459 | $ 9,494 | |
| |||
As of | |||
2022 | 2021 | ||
LIABILITIES AND SHAREHOLDERS' EQUITY | |||
Current liabilities: | |||
Accounts payable | $ 457 | $ 244 | |
Liabilities from price risk management activities—current | 118 | 47 | |
Current portion of long-term debt | 260 | — | |
Current portion of finance lease obligations | 20 | 20 | |
Accrued expenses and other current liabilities | 641 | 457 | |
Total current liabilities | 1,496 | 768 | |
Long-term debt, net of current portion | 3,386 | 3,285 | |
Regulatory liabilities—noncurrent | 1,389 | 1,360 | |
Deferred income taxes | 439 | 413 | |
Unfunded status of pension and postretirement plans | 170 | 206 | |
Liabilities from price risk management activities—noncurrent | 75 | 90 | |
Asset retirement obligations | 257 | 238 | |
Non-qualified benefit plan liabilities | 83 | 95 | |
Finance lease obligations, net of current portion | 294 | 273 | |
Other noncurrent liabilities | 91 | 59 | |
Total liabilities | 7,680 | 6,787 | |
Commitments and contingencies (see notes) | |||
Shareholders' equity: | |||
Preferred stock, no par value, 30,000,000 shares authorized; none | — | — | |
Common stock, no par value, 160,000,000 shares authorized; | 1,249 | 1,241 | |
Accumulated other comprehensive loss | (4) | (10) | |
Retained earnings | 1,534 | 1,476 | |
Total shareholders' equity | 2,779 | 2,707 | |
Total liabilities and shareholders' equity | $ 10,459 | $ 9,494 | |
| |||||
Years Ended | |||||
2022 | 2021 | 2020 | |||
Cash flows from operating activities: | |||||
Net income | $ 233 | $ 244 | $ 155 | ||
Adjustments to reconcile net income to net cash provided by | |||||
Depreciation and amortization | 417 | 404 | 454 | ||
Deferred income taxes | 6 | 5 | (23) | ||
Allowance for equity funds used during construction | (14) | (17) | (16) | ||
Pension and other postretirement benefits | 13 | 24 | 22 | ||
Other post retirement benefits settlement gain | (11) | — | — | ||
Decoupling mechanism deferrals, net of amortization | (11) | 29 | 6 | ||
Amortization of net benefits due to Tax Reform | — | — | (23) | ||
Stock-based compensation | 15 | 14 | 11 | ||
Deferral of incremental storm costs | (5) | (67) | — | ||
2020 | — | (30) | (15) | ||
2020 | 15 | — | — | ||
Deferral of wildfire mitigation costs | (28) | — | — | ||
Other non-cash income and expenses, net | 54 | (10) | 23 | ||
Changes in working capital: | |||||
Increase in receivables and unbilled revenues | (66) | (64) | (24) | ||
(Increase) decrease in margin deposits | (80) | (29) | 8 | ||
Increase in payables and accrued liabilities | 157 | 61 | 26 | ||
Increase in margin deposits from wholesale counterparties | 82 | 58 | — | ||
Other working capital items, net | (22) | (21) | 17 | ||
Contribution to non-qualified employee benefit trust | (9) | (11) | (11) | ||
Asset retirement obligation settlements | (27) | (18) | (18) | ||
Other, net | (45) | (40) | (25) | ||
Net cash provided by operating activities | 674 | 532 | 567 | ||
Cash flows from investing activities: | |||||
Capital expenditures | (766) | (636) | (784) | ||
Purchases of nuclear decommissioning trust securities | (3) | (10) | (6) | ||
Sales of nuclear decommissioning trust securities | 3 | 12 | 9 | ||
Proceeds from sale of properties | 13 | 4 | — | ||
Other, net | (5) | (26) | (6) | ||
Net cash used in investing activities | (758) | (656) | (787) | ||
| |||||
Years Ended | |||||
2022 | 2021 | 2020 | |||
Cash flows from financing activities: | |||||
Proceeds from issuance of long-term debt | $ 360 | $ 400 | $ 549 | ||
Payments on long-term debt | — | (160) | (98) | ||
Borrowings on short-term debt | — | 200 | 275 | ||
Payments on short-term debt | — | (350) | (125) | ||
Proceeds from Pelton/Round Butte financing arrangement | 25 | — | — | ||
Dividends paid | (158) | (150) | (140) | ||
Repurchase of common stock | (18) | (12) | — | ||
Other | (12) | (9) | (14) | ||
Net cash provided by (used in) financing activities | 197 | (81) | 447 | ||
Increase (decrease) in cash and cash equivalents | 113 | (205) | 227 | ||
Cash and cash equivalents, beginning of year | 52 | 257 | 30 | ||
Cash and cash equivalents, end of year | $ 165 | $ 52 | $ 257 | ||
Supplemental disclosures of cash flow information: | |||||
Cash paid for: | |||||
Interest, net of amounts capitalized | $ 128 | $ 120 | $ 113 | ||
Income taxes | 37 | 16 | 17 | ||
Non-cash investing and financing activities: | |||||
Accrued capital additions | 111 | 87 | 72 | ||
Accrued dividends payable | 42 | 40 | 38 | ||
| |||||||||||
Years Ended | |||||||||||
2022 | 2021 | 2020 | |||||||||
Retail revenues (dollars in millions): | |||||||||||
Residential | $ 1,158 | 52 % | $ 1,118 | 54 % | $ 1,030 | 53 % | |||||
Commercial | 735 | 33 | 708 | 34 | 634 | 33 | |||||
Industrial | 312 | 14 | 279 | 13 | 246 | 13 | |||||
Subtotal | 2,205 | 99 | 2,105 | 101 | 1,910 | 99 | |||||
Alternative revenue programs, net of | 11 | 1 | (29) | (1) | (6) | — | |||||
Other accrued revenues, net | 7 | — | 2 | — | 28 | 1 | |||||
Total retail revenues | $ 2,223 | 100 % | $ 2,078 | 100 % | $ 1,932 | 100 % | |||||
Retail energy deliveries (MWh in | |||||||||||
Residential | 8,088 | 38 % | 7,978 | 39 % | 7,756 | 40 % | |||||
Commercial | 7,198 | 34 | 7,193 | 35 | 6,855 | 35 | |||||
Industrial | 5,945 | 28 | 5,361 | 26 | 4,932 | 25 | |||||
Total retail energy deliveries | 21,231 | 100 % | 20,532 | 100 % | 19,543 | 100 % | |||||
Average number of retail customers: | |||||||||||
Residential | 809,573 | 88 % | 800,372 | 88 % | 791,119 | 88 % | |||||
Commercial | 112,602 | 12 | 111,569 | 12 | 110,851 | 12 | |||||
Industrial | 269 | — | 268 | — | 267 | — | |||||
Total | 922,444 | 100 % | 912,209 | 100 % | 902,237 | 100 % | |||||
| |||||||||||
Heating Degree-Days | Cooling Degree-Days | ||||||||||
2022 | 2021 | 15-Year | 2022 | 2021 | 15-Year | ||||||
1st quarter | 1,761 | 1,805 | 1,846 | — | — | — | |||||
2nd quarter | 760 | 498 | 625 | 75 | 238 | 100 | |||||
3rd quarter | 6 | 54 | 72 | 745 | 600 | 467 | |||||
4th quarter | 1,576 | 1,471 | 1,560 | 45 | — | 2 | |||||
Total | 4,103 | 3,828 | 4,103 | 865 | 838 | 569 | |||||
Increase (decrease) from the 15- | — % | (7) % | 52 % | 47 % | |||||||
Note: "Average" amounts represent the 15-year rolling averages provided by the |
Years Ended | ||||||||
2022 | 2021 | |||||||
Sources of energy (MWh in thousands): | ||||||||
Generation: | ||||||||
Thermal: | ||||||||
Natural gas | 8,242 | 31 % | 9,306 | 37 % | ||||
Coal | 2,186 | 8 | 2,060 | 8 | ||||
Total thermal | 10,428 | 39 | 11,366 | 45 | ||||
Hydro | 1,027 | 4 | 1,073 | 4 | ||||
Wind | 1,765 | 7 | 2,316 | 9 | ||||
Total generation | 13,220 | 50 | 14,755 | 58 | ||||
Purchased power: | ||||||||
Hydro | 6,297 | 24 | 4,789 | 19 | ||||
Wind | 824 | 3 | 989 | 4 | ||||
Solar | 723 | 3 | 501 | 2 | ||||
Natural Gas | 33 | — | 63 | — | ||||
Waste, | 168 | 1 | 167 | 1 | ||||
Source not specified | 4,961 | 19 | 4,031 | 16 | ||||
Total purchased power | 13,006 | 50 | 10,540 | 42 | ||||
Total system load | 26,226 | 100 % | 25,295 | 100 % | ||||
Less: wholesale sales | (6,000) | (5,946) | ||||||
Retail load requirement | 20,226 | 19,349 | ||||||
Media Contact: | Investor Contact: | |
Corporate Communications | Investor Relations | |
Phone: 435-513-0799 | Phone: 503-464-7051 |
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