PORTLAND, Ore., Aug. 24, 2020 /PRNewswire/ -- Portland General
Electric Company (NYSE: POR) ("PGE" or the "Company")
today provided a business update in connection with energy trading
activity in certain wholesale electricity markets that has resulted
in realized and unrealized losses of $127
million as of August 24,
2020.
Background and Formation of Special Committee
PGE personnel entered into a number of energy trades during
2020, with increasing volume accumulating late in the second
quarter and into the third quarter, resulting in significant
exposure to the Company.
In August 2020, this portion of
PGE's energy portfolio experienced significant losses as wholesale
electricity prices increased substantially at various market hubs
due to extreme weather conditions, constraints to regional
transmission facilities, and changes in power supply in the West.
During this time period, the California Independent System Operator
(CAISO) declared a Stage 3 Electrical Emergency and ordered the
first rolling blackouts in the state of California since 2001.
As a result of the convergence of these conditions, the
Company's energy portfolio, as of August 24,
2020, has experienced realized losses of $104 million and unrealized, mark-to-market
losses of $23 million. Total third
quarter losses in the portfolio are estimated to be up to
$155 million subject to market
conditions – although the ultimate amount of losses could exceed
that amount.
The increase in net variable power costs due to this trading
activity will be recognized in PGE's results of operations. There
will be no impact to customer prices, as the Company will not
pursue regulatory recovery. The Company noted that the loss does
not impact PGE's ability to serve customers.
Promptly upon learning of the issue, the PGE Board of Directors
formed a Special Committee comprising five independent Board
members (John Ballantine,
Jack Davis (Chair), Kathryn Jackson, Neil
Nelson and Charles Shivery) to review the energy trading
that led to the losses and the Company's procedures and controls
related to the trading, and to make recommendations to the Board
for appropriate action. The Special Committee has retained Simpson
Thacher & Bartlett LLP as its independent legal advisor, which
expects to engage additional advisors on behalf of the Special
Committee during the course of this review.
Skadden, Arps, Slate, Meagher & Flom LLP is serving as the
Company's legal advisor, and J.P. Morgan Securities LLC is serving
as its financial advisor. PGE has engaged and is actively working
with an external consultant to perform a full operational review of
the Company's energy supply risk management policies, procedures
and personnel. In addition, PGE has placed two individuals on
administrative leave, pending review, and enhanced oversight
including implementing immediate supervisory and reporting changes
in advance of the conclusion of a broader evaluation.
Annual Earnings Guidance
PGE is revising its full-year 2020 guidance from $2.20 to $2.50 per
diluted share to $1.30 to
$1.60 per diluted share due to the
impacts of higher net variable power costs. This guidance is based
on the following assumptions:
- Higher third quarter net variable power costs of up to
$155 million;
- Annual retail deliveries flat, weather adjusted, year over
year;
- Average hydro conditions for the year;
- 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 $550 million and $570
million, which includes a full-year forecasted bad debt
expense of $15 million due to
moratoriums on collection activities and customer disconnects;
and
- Depreciation and amortization expense between $410 million and $430
million.
The Company believes the impact of this event is isolated to
2020, and reaffirms 4% to 6% long-term diluted earnings per share
growth based on previous guidance. The Company does not expect any
change to its dividend guidance.
Financing and Liquidity
PGE continues to have a strong balance sheet and ample
liquidity.
As of August 24, 2020, the Company
maintains short-term liquidity of $155
million cash, a $500 million
revolving credit facility, which has a maturity date of
November 2023, and a $220 million letter of credit facility, of which
$172 million remains available. The
Company has $75 million of commercial
paper outstanding.
PGE expects to fund estimated capital requirements with cash
from operations, issuances of long-term debt securities of up to
$325 million, and the issuance of
commercial paper, as needed.
PGE believes that the issuance of secured long-term debt, as
well as other sources of liquidity, such as borrowings under its
revolving credit facility, the expected ability to issue short-term
debt, such as commercial paper, and unsecured long-term debt, and
cash expected to be generated from operations provide ample
liquidity to meet the Company's anticipated capital and operating
requirements.
About Portland General Electric Company
Portland General Electric (NYSE: POR) is a fully integrated energy
company based in Portland, Oregon,
with operations across the state. The company serves approximately
900,000 customers with a service area population of 2 million
Oregonians in 51 cities. PGE has 16 generation plants in five
Oregon counties, and maintains and
operates 13 public parks and recreation areas. For over 130 years,
PGE has delivered safe, affordable and reliable energy to
Oregonians. Together with its customers, PGE has the No. 1
voluntary renewable energy program in the U.S. PGE and its 3,000
employees are working with customers to build a clean energy
future. In 2019, PGE, employees, retirees and the PGE Foundation
donated $4.7 million and volunteered
32,900 hours with more than 700 nonprofits across Oregon. For more information
visit portlandgeneral.com/news.
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. Forward-looking
statements include statements regarding the estimated total third
quarter loss due to energy trading activities; the Company's
full-year earnings guidance (including expectations regarding the
impacts of higher net variable power costs, annual retail
deliveries, average hydro conditions, wind generation, normal
thermal plant operations, operating and maintenance expense and
depreciation and amortization expense); the Company's long-term
diluted earnings per share growth; the Company's future dividend
guidance; the Company's ability to fund estimated capital
requirements with cash from operations, issuances of long-term debt
and the issuance of commercial paper; 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, without limitation: the outcome of the review being
conducted by the Special Committee; the impact of the
recommendations of the Special Committee on the Company and its
operations; the time and expense incurred in implementing the
recommendations of the Special Committee; any reputational damage
to the Company relating to the matters underlying the Special
Committee's review; 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 facilities,
including hydro conditions, wind conditions, disruption of fuel
supply, and unscheduled plant outages, which may result in
unanticipated operating, maintenance and repair costs, as well as
replacement power costs; failure to complete capital projects on
schedule or within budget, or the abandonment of capital projects,
which could result in the Company's inability to recover project
costs; the costs of compliance with environmental laws and
regulations, including those that govern emissions from thermal
power plants; changes in weather, hydroelectric and energy markets
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; the outcome of
various legal and regulatory proceedings; general economic and
financial market conditions; severe weather conditions, wildfires,
and other natural phenomena and natural disasters that could result
in operational disruptions, unanticipated restoration costs, or
liability for third party property damage; and cyber security
breaches of the Company's customer information system or operating
systems, which may affect customer bills or other aspects of our
operations; and widespread health emergencies or outbreaks of
infectious diseases such as the novel coronavirus disease
(COVID-19), which may affect our financial position, results of
operations and cash flows. As a result, actual results may differ
materially from those projected in the forward-looking statements.
All forward-looking statements included in this press 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
expressly disclaims any current intention to update publicly any
forward-looking statement after the distribution of this release,
whether as a result of new information, future events, changes in
assumptions or otherwise. Prospective investors should also review
the risks, assumptions and uncertainties listed in the Company's
most recent annual report on form 10-K and in other documents that
we file 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.
Media Contact:
Brianne Hyder
503-464-8596
Dan Katcher / Jamie Moser / Arielle
Rothstein
Joele Frank, Wilkinson Brimmer
Katcher
212-355-4449
Investor Contact:
Jardon Jaramillo
Investor Relations
503-464-7051
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SOURCE Portland General Electric