Portland General Electric(POR) - 2023 Q2 - Quarterly Report

PART I — FINANCIAL INFORMATION Item 1. Financial Statements Presents PGE's unaudited condensed consolidated financial statements for Q2 and H1 2023, highlighting decreased net income, higher power costs, and key financial notes Condensed Consolidated Financial Statements The company's financial statements show decreased net income for Q2 and H1 2023, with diluted EPS dropping, and a significant decline in operating cash flow Key Financial Indicators | Indicator | Three Months Ended June 30, 2023 (in millions) | Three Months Ended June 30, 2022 (in millions) | Six Months Ended June 30, 2023 (in millions) | Six Months Ended June 30, 2022 (in millions) | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $648 million | $591 million | $1,396 million | $1,217 million | | Income from Operations | $81 million | $112 million | $198 million | $218 million | | Net Income | $39 million | $64 million | $113 million | $124 million | | Diluted EPS | $0.39 | $0.72 | $1.19 | $1.39 | Condensed Consolidated Balance Sheet Data | Account | June 30, 2023 (in millions) | December 31, 2022 (in millions) | | :--- | :--- | :--- | | Total Current Assets | $676 million | $1,210 million | | Electric Utility Plant, Net | $8,841 million | $8,465 million | | Total Assets | $10,370 million | $10,459 million | | Total Current Liabilities | $761 million | $1,496 million | | Long-term Debt, Net | $3,486 million | $3,386 million | | Total Liabilities | $7,170 million | $7,680 million | | Total Shareholders' Equity | $3,200 million | $2,779 million | Condensed Consolidated Statements of Cash Flows | Cash Flow Activity (Six Months Ended June 30) | 2023 (in millions) | 2022 (in millions) | | :--- | :--- | :--- | | Net Cash from Operating Activities | $143 million | $451 million | | Net Cash used in Investing Activities | ($574) million | ($334) million | | Net Cash from (used in) Financing Activities | $279 million | ($78) million | | (Decrease) Increase in Cash | ($152) million | $39 million | Notes to Condensed Consolidated Financial Statements Details PGE's financial reporting basis, including revenue, regulatory assets, significant contingencies, and recent equity financing activities - PGE is a vertically-integrated electric utility serving 928,000 retail customers in Oregon as of June 30, 2023[25] Revenue by Customer Type | Revenue by Customer Type (in millions) | Q2 2023 (in millions) | Q2 2022 (in millions) | H1 2023 (in millions) | H1 2022 (in millions) | | :--- | :--- | :--- | :--- | :--- | | Residential | $279 | $250 | $641 | $558 | | Commercial | $196 | $168 | $393 | $346 | | Industrial | $87 | $73 | $169 | $142 | | Total Retail Revenues | $567 | $503 | $1,218 | $1,067 | | Total Revenues | $648 | $591 | $1,396 | $1,217 | - PGE is a Potentially Responsible Party for the Portland Harbor Superfund site cleanup. While PGE's specific liability is not yet reasonably estimable, the total undiscounted remediation cost for the site is estimated to range from $1.9 billion to $3.5 billion[117][119][121] - The company is subject to ongoing investigations by the CFTC, SEC, and FERC related to energy trading losses announced in August 2020[125] - In the first half of 2023, PGE issued a total of 9,390,626 shares under its Equity Forward Sale Agreement (EFSA), receiving net proceeds of $392 million[104][106] - PGE filed its 2024 General Rate Case, which includes a request to recover $188 million in capital costs for the Faraday hydro facility repowering project[136] Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Details the company's strategy, operational performance, and financial results, focusing on decarbonization, renewable investments, regulatory matters, and rising power costs Overview Outlines PGE's business strategy focused on decarbonization, electrification, and performance, detailing climate goals, clean energy investments, and regulatory matters - PGE's strategy focuses on three initiatives: Decarbonize Power (100% clean by 2040), Electrify the Economy, and Advance Performance (targeting 5-7% annual EPS growth)[158] - Through its 2021 All-Source RFP, PGE is acquiring 311 MW of wind resources (Clearwater Wind) and 475 MW of battery storage capacity to meet its 2030 emissions reduction target[161][163] - On February 15, 2023, PGE filed a General Rate Case requesting an overall average increase of approximately 14.0% in customer prices for 2024, driven by capital investments and higher net variable power costs[192] Energy Deliveries | Energy Deliveries (MWhs in thousands) | H1 2023 (MWhs in thousands) | H1 2022 (MWhs in thousands) | % Change | | :--- | :--- | :--- | :--- | | Residential | 4,057 | 3,940 | 3% | | Commercial | 3,252 | 3,186 | 2% | | Industrial | 2,211 | 1,972 | 12% | | Total Retail | 10,669 | 10,216 | 4% | Results of Operations Analyzes Q2 and H1 2023 operational results, showing a significant decline in net income due to increased purchased power and fuel expenses, and rising distribution costs Key Financial Indicators | Metric | Q2 2023 | Q2 2022 | % Change | | :--- | :--- | :--- | :--- | | Total Revenues | $648M | $591M | 10% | | Purchased Power and Fuel | $220M | $168M | 31% | | Income from Operations | $81M | $112M | (28)% | | Net Income | $39M | $64M | (39)% | - The increase in Total Retail Revenues for H1 2023 was primarily driven by price changes from the AUT ($67 million) and higher retail energy deliveries from customer load growth ($42 million)[238] - Purchased power and fuel expense for H1 2023 increased by $154 million compared to H1 2022, largely due to a $185 million impact from a higher average variable power cost per MWh ($40.01 in 2023 vs $29.43 in 2022)[243] - Generation, transmission and distribution expenses for H1 2023 increased by $19 million, driven by higher generating facility expenses ($12M), vegetation management and wildfire mitigation ($10M), and amortization of prior storm costs ($11M)[253] Liquidity and Capital Resources Discusses PGE's liquidity, capital resources, and financing strategies, highlighting decreased operating cash flow, projected capital expenditures, and equity financing - Net cash from operating activities decreased by $308 million in H1 2023 compared to H1 2022, primarily due to a $197 million change in margin deposit activity and a $178 million change in accounts payable[260] Estimated Capital Expenditures | Estimated Capital Expenditures (in millions) | 2023 (in millions) | 2024 (in millions) | 2025 (in millions) | | :--- | :--- | :--- | :--- | | Ongoing Capital Expenditures | $945 | $810 | $800 | | Clearwater Wind Project | $415 | — | — | | BESS Projects | $115 | $240 | $155 | | Total Capital Expenditures | $1,475 | $1,050 | $955 | - As of June 30, 2023, total liquidity was $651 million, which included $510 million available under its $650 million revolving credit facility and $13 million in cash[269] - The company's common equity ratio was 46.9% as of June 30, 2023, below its target of approximately 50%[278] Quantitative and Qualitative Disclosures About Market Risk States no material changes to market risks, including commodity prices, foreign currency, interest rates, and credit risk, since the 2022 Annual Report - There have been no material changes to market risks affecting the Company from those disclosed in the Annual Report on Form 10-K for the year ended December 31, 2022[285] Controls and Procedures Management concluded disclosure controls and procedures were effective as of June 30, 2023, despite a material change in internal control due to a system upgrade - Management concluded that disclosure controls and procedures were effective as of June 30, 2023[286] - In April 2023, PGE implemented a major upgrade to its customer information system, which resulted in a material change in the company's internal control over financial reporting[287] PART II — OTHER INFORMATION Legal Proceedings Refers to Note 8 of the financial statements for detailed information on legal proceedings - For information regarding legal proceedings, the report refers to Note 8, Contingencies, in the Notes to Condensed Consolidated Financial Statements[289] Risk Factors States no material changes to the company's risk factors since the 2022 Annual Report - There have been no material changes to the risk factors disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2022[290] Exhibits Lists exhibits filed with the Form 10-Q, including corporate governance documents and officer certifications - The report lists exhibits filed, including the Third Amended and Restated Articles of Incorporation, Eleventh Amended and Restated Bylaws, and CEO/CFO certifications[291]