Portland General Electric(POR) - 2023 Q1 - Quarterly Report

Definitions This section provides definitions for abbreviations and acronyms used throughout the Form 10-Q, such as OPUC (Public Utility Commission of Oregon), NVPC (Net Variable Power Costs), and GRC (General Rate Case) - This section provides definitions for abbreviations and acronyms used throughout the Form 10-Q, such as OPUC (Public Utility Commission of Oregon), NVPC (Net Variable Power Costs), and GRC (General Rate Case)[9] PART I — FINANCIAL INFORMATION Financial Statements For the first quarter of 2023, Portland General Electric reported net income of $74 million, an increase from $60 million in the same period of 2022, driven by higher revenues. Total assets decreased slightly to $10.15 billion from $10.46 billion at year-end 2022. The company experienced a net cash outflow from operations of $39 million, a significant shift from a $249 million inflow in Q1 2022, primarily due to working capital changes related to elevated power and fuel costs Condensed Consolidated Statements of Income and Comprehensive Income Q1 2023 vs. Q1 2022 Income Statement Highlights | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Total Revenues | $748 million | $626 million | | Income from Operations | $117 million | $106 million | | Net Income | $74 million | $60 million | | Diluted EPS | $0.80 | $0.67 | Condensed Consolidated Balance Sheets Balance Sheet Summary | Metric | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Total Current Assets | $766 million | $1,210 million | | Total Assets | $10,151 million | $10,459 million | | Total Current Liabilities | $751 million | $1,496 million | | Total Liabilities | $7,039 million | $7,680 million | | Total Shareholders' Equity | $3,112 million | $2,779 million | - The decrease in total assets and liabilities was primarily driven by a reduction in current assets and liabilities, including a significant drop in cash and cash equivalents from $165 million to $12 million, and a decrease in accounts payable[15][18] Condensed Consolidated Statements of Cash Flows Q1 2023 vs. Q1 2022 Cash Flow Summary | Cash Flow Activity | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Net Cash (Used in) Provided by Operating Activities | ($39 million) | $249 million | | Net Cash Used in Investing Activities | ($276 million) | ($154 million) | | Net Cash Provided by (Used in) Financing Activities | $162 million | ($37 million) | | (Decrease) Increase in Cash and Cash Equivalents | ($153 million) | $58 million | - The significant decrease in operating cash flow was mainly due to changes in working capital, including a $174 million decrease in accounts payable and a $140 million decrease in margin deposits from wholesale counterparties. Financing activities were positive due to $300 million in proceeds from issuing common stock and $100 million from long-term debt, which offset a $260 million debt repayment[21][23] Notes to Condensed Consolidated Financial Statements Disaggregated Revenue by Customer Type (Q1 2023 vs Q1 2022) | Customer Type | Q1 2023 Revenue (millions) | Q1 2022 Revenue (millions) | | :--- | :--- | :--- | | Residential | $362 | $308 | | Commercial | $197 | $178 | | Industrial | $82 | $69 | | Wholesale | $88 | $56 | | Total Revenues | $748 | $626 | - The company is involved in several legal and regulatory contingencies, most notably the EPA investigation of Portland Harbor contamination, where total remediation costs could range from $1.9 billion to $3.5 billion, and various litigation related to its part-ownership of the Colstrip coal-fired plant[116][118][125] - In March 2023, the company issued 7.2 million shares under its Equity Forward Sale Agreement (EFSA) and received net proceeds of $300 million. The proceeds were used to repay a $260 million term loan[63][102] - The company's effective tax rate for Q1 2023 was 15.9%, lower than the federal statutory rate of 21.0%, primarily due to federal production tax credits (PTCs) from wind facilities[137] Management's Discussion and Analysis of Financial Condition and Results of Operations Net income for Q1 2023 rose to $74 million from $60 million in Q1 2022, driven by higher retail revenues from price increases and a 5% increase in energy deliveries. This was partially offset by a 50% increase in purchased power and fuel costs due to higher commodity prices. The company is advancing its clean energy strategy with significant capital investments planned for renewables and grid modernization, totaling $1.3 billion for 2023. Key regulatory activities include a 2024 General Rate Case filing requesting a ~14% price increase to recover these investments and higher operating costs Company Strategy - PGE's core strategy focuses on three initiatives: Decarbonize Power, Electrify the Economy, and Advance Performance[152] - The company is committed to reducing greenhouse gas emissions by at least 80% by 2030 and 100% by 2040, in line with Oregon's House Bill 2021[148][152] - Through its 2021 All-Source RFP, PGE has entered into agreements for the 311 MW Clearwater Wind development and multiple Battery Energy Storage System (BESS) projects totaling 475 MW of capacity[159][165][161] Laws and Regulations - The Inflation Reduction Act of 2022 (IRA) is expected to provide significant tax incentives for energy and climate initiatives, which PGE believes will create additional investment opportunities and result in lower customer prices[173] - Oregon's House Bill (HB) 2021 mandates GHG emissions reduction targets for PGE: 80% by 2030, 90% by 2035, and 100% by 2040, compared to a 2010-2012 baseline[174] - As approved in the 2022 General Rate Case, PGE is further accelerating the depreciation of its Colstrip coal plant investment to be fully depreciated by December 31, 2025, ahead of the previous 2030 target[182] Regulatory Matters - On February 15, 2023, PGE filed a General Rate Case (GRC) for 2024, requesting an overall average customer price increase of approximately 14.0%. The request is driven by capital investments and higher net variable power costs[186] - The 2024 GRC filing requests a 9.8% return on equity (ROE), a capital structure of 50% equity, and a rate base of $6.3 billion[189] - PGE is seeking recovery for incremental wildfire mitigation costs exceeding the $24 million annual amount currently in rates. As of March 31, 2023, the deferred balance was $31 million[193] Operating Activities Energy Deliveries (MWhs in thousands) | Customer Class | Q1 2023 | Q1 2022 | % Change | | :--- | :--- | :--- | :--- | | Residential | 2,327 | 2,216 | 5% | | Commercial | 1,657 | 1,634 | 1% | | Industrial | 1,071 | 974 | 10% | | Total Retail | 5,620 | 5,368 | 5% | - Total retail energy deliveries increased 5% year-over-year, driven by a 10% increase in the industrial sector and colder weather. After adjusting for weather, retail energy deliveries increased 1.9%[212][213][215] - Generation from company-owned natural gas plants increased significantly, providing 54% of the total retail load in Q1 2023 compared to 42% in Q1 2022, due to economic dispatch decisions[219] Results of Operations Q1 2023 vs. Q1 2022 Results of Operations (in millions) | Line Item | Q1 2023 | Q1 2022 | % Change | | :--- | :--- | :--- | :--- | | Total Revenues | $748 | $626 | 19% | | Purchased Power and Fuel | $304 | $202 | 50% | | Income from Operations | $117 | $106 | 10% | | Net Income | $74 | $60 | 23% | - The $87 million increase in total retail revenues was primarily due to higher prices from the Annual Power Cost Update Tariff (AUT) ($35 million) and higher retail energy deliveries ($26 million)[230] - Purchased power and fuel expense increased by $102 million, driven by a $119 million increase from higher average variable power costs per MWh, which rose from $30.34 to $44.25[234] Liquidity and Capital Resources Estimated Capital Expenditures (2023-2025, in millions) | Project Category | 2023 | 2024 | 2025 | | :--- | :--- | :--- | :--- | | Ongoing Capital Expenditures | $840 | $780 | $800 | | Clearwater Wind Project | $415 | $0 | $0 | | BESS Projects | $70 | $130 | $160 | | Total Capital Expenditures | $1,325 | $910 | $960 | - The company plans to make capital expenditures of $1.3 billion in 2023, funded by cash from operations ($550-$600 million), long-term debt (up to $400 million), and proceeds from the EFSA[249][254] - As of March 31, 2023, PGE had total available liquidity of $679 million, consisting of $582 million under its revolving credit facility, $85 million in letters of credit capacity, and $12 million in cash[256] Quantitative and Qualitative Disclosures About Market Risk The company states that there have been no material changes to its market risks, including commodity price, foreign currency, interest rate, and credit risk, from those disclosed in its 2022 Annual Report on Form 10-K - There have been no material changes to market risks affecting the Company from those set forth in the Annual Report on Form 10-K for the year ended December 31, 2022[270] Controls and Procedures Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective as of March 31, 2023. No material changes to internal control over financial reporting occurred during the quarter - The CEO and CFO concluded that as of March 31, 2023, the company's disclosure controls and procedures were effective[271] - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, the company's internal control[272] PART II — OTHER INFORMATION Legal Proceedings This section refers to Note 8 of the financial statements for detailed information regarding ongoing legal proceedings, which include the Portland Harbor Superfund site investigation, governmental investigations related to 2020 energy trading losses, and various litigation concerning the Colstrip generating plant - For information regarding legal proceedings, the report refers to Note 8, Contingencies, in the Notes to Condensed Consolidated Financial Statements[274] Risk Factors The company reports that there have been no material changes to the risk factors previously disclosed in its Annual Report on Form 10-K for the year ended December 31, 2022 - There have been no material changes to PGE's risk factors from those disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2022[275] Exhibits This section lists the exhibits filed with the Form 10-Q, including the company's restated articles of incorporation and bylaws, CEO and CFO certifications, and XBRL data files - Lists exhibits filed with the report, including CEO/CFO certifications (31.1, 31.2, 32) and XBRL data files (101 series)[276]