Portland General Electric Company (POR)
Q4 2009 Earnings Call Transcript
February 25, 2010 11:00 am ET
Bill Valach – Director, IR
Jim Piro – President and CEO
Maria Pope – SVP, Finance, CFO and Treasurer
Brian Russo – Ladenburg Thalmann
Jaideep Malik – Goldman Sachs
Nancy Doyle – MetLife
Igor Grinman – Zimmer Lucas Partners
Gavin Tam – Macquarie
John Ali [ph] – Decade Capital
James Bellessa – D.A. Davidson
Previous Statements by POR
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For opening remarks, I would now like to turn the conference call over to Portland General Electric’s Director of Investor Relations, Mr. Bill Valach. Please go ahead, sir.
Thank you, Cachetta and good morning, everyone. We’re very pleased that you’re able to join us today. Before we begin our discussion this morning, I’d like to make our customary statements regarding Portland General Electric’s written and oral disclosures to commentary that there will be statements in this call that are not based on historical facts and as such, constitute forward-looking statements under current law.
These statements are subject to factors that may cause actual results to differ materially from the forward-looking statements made today. For a description of some of the factors that may occur that could cause such differences, the Company requests that you read our most recent Form 10-K and Form 10-Qs. Form 10-K for 2009 was available this morning at portlandgeneral.com.
The Company undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise, and this Safe Harbor statement should be incorporated as part of any transcript of this call.
Portland General Electric’s fourth quarter and annual 2009 earnings were released before the market opened today, and the release is available at portlandgeneral.com.
And with me today are Jim Piro, President and CEO, and Maria Pope, Senior Vice President of Finance, CFO and Treasurer. And it’s a pleasure now for me to turn the call over to Jim.
Thank you, Bill. Good morning, everyone, and thank you for joining us. Welcome to Portland General Electric’s 2009 Year End and Fourth Quarter Earnings Call. 2009 was a challenging year for our business and our customers. As the national recession impacted Oregon, we maintained our focus on operational excellence.
We’ve put a special emphasis on reducing costs in the short-term and focusing on continuous improvements and sustainable cost efficiencies for the long-term. We work closely with our customers to support their needs through energy efficiency and flexible payment options.
We made progress executing our strategic initiatives. And we continued our efforts to work with key stakeholders to help them understand our business and our challenges. This includes (inaudible) cost recovery, sharing risks appropriately and earning a fair return for our shareholders.
On today’s call, I will address the key drivers of 2009 earnings. I will also provide more clarity around the key drivers for our revised 2010 earnings guidance. I will give an outlook for Oregon’s economy and our operating area.
Finally, I will update you on PGE’s strategic direction and capital investment opportunities included in our integrated resource plan. Then Maria will provide details on the fourth quarter and year end results, financing and liquidity and current regulatory proceedings, focusing on the general rate case we filed on February 16. So let’s begin.
PGE’s net income for 2009 was $95 million or $1.31 per diluted share compared to $87 million or $1.39 per diluted share for 2008. 2009 earnings were a result of the following key drivers
The impact of the economic recession on retail loads; and increase in power costs due to poor hydro conditions and a prolonged outage at Colstrip Unit 4; and increase in the fair value of nonqualified benefit plan assets; the OPUC order on the Selective Water Withdrawal project and a write-off of a portion of the regulatory asset associated with the Boardman forced outage from late 2005 to early 2006. I was just disappointed in the Boardman deferral replacement power costs decision, which caused our earnings to fall below our 2009 revised earnings guidance.
We are revising our full year 2010 earnings guidance to $1.30 per diluted share to $1.45 per diluted share from prior guidance of $1.50 per diluted share to $1.65 per diluted share. The two key drivers for the revision of guidance are the following
First, unfavorable hydro conditions. The April through September run-off forecast for PGE-owned hydro and hydro energy received from the Mid-Columbia is forecasted to be significantly below normal. This will result in increased power costs.
Second, warmer weather in January and February, resulting in a decline in retail margin. This past January was the third warmest on record and February continues to be unusually warm.
The combined impact from the above two factors results in lower income taxes, which in turn, would require customer refunds under SB 408, an Oregon Utility tax law. Reduced hydro energy, a decline in retail margins and the related impacts from SB 408 represent approximately 50%, 25% and 25% respectively of the total reduction in earnings guidance.
We want to ensure that our investors understand the challenges we face due to these weather related drivers. Although still early in the year, we believe clarity around these key drivers is critical.