Portland General Electric Company (POR)

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Portland General Electric Company (POR)

Q2 2010 Earnings Conference Call

August 05, 2010 11:00 am ET

Executives

Bill Valach - Director of IR

Jim Piro - President & CEO

Maria Pope - SVP of Finance, CFO & Treasurer

Analysts

Brian Russo - Ladenburg Thalmann

Gavin Tam - Macquarie Research

James Bellessa - DA Davidson & Co.

Chris Ellinghaus - Wellington Shields & Co.

Egor Grenandan - Semi Lucas Partners

Presentation

Operator

Good morning everyone and welcome to Portland General Electric Company second quarter 2010 earnings results conference call. Today is Thursday, August 5th, 2010. This call is being recorded and as such all lines has been placed on mute to prevent any background noise. After the speakers' remarks there will be a question-and-answer period. (Operator Instructions).

For opening remarks I would like to turn the conference call over to Portland General Electric's Director of Investor Relations, Mr. Bill Valach. Please go ahead, sir.

Bill Valach

Thank you Sara and good morning everyone. I am pleased that you are 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 and disclosures in commentary. There will be statements in this call that are not based on the 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-Q's.

The Form 10-Q for the second quarter of 2010 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 second quarter earnings were released before the market opened today and the release is available at portlandgeneral.com.

Leading our discussion today are Jim Piro, President and CEO; and Maria Pope, Senior Vice President of Finance, CFO and Treasurer. Jim will begin today's call by providing an overview of the quarter's results and our strategic capital projects. Then Maria will provide more detail around the quarter's results and key regulatory proceedings. Following those prepared remarks we will open the lines up for your questions.

And now it's my pleasure to turn the call over to Jim.

Jim Piro

Thank you, Bill. Good morning everyone and thank you for joining us. Welcome to Portland General Electric's second quarter 2010 earnings call. PGE's net income for second quarter 2010 was $24 million or $0.32 per diluted share compared to $24 million or $0.31 per diluted share for the second quarter of 2009.

We are increasing our full year 2010 earnings guidance by $0.10 to $1.40 to $1.55 per share up from the prior guidance of $1.30 to $1.45 per share. Increased guidance reflects the positive impact of improved hydro conditions, strong thermal operations and Senate Bill 408. The guidance also reflects the margin impact from a down revision to the 2010 load forecast. Maria will talk more about guidance later in the call.

Now an update on our 2011 general rate case filing. I am very pleased with the productive and open dialogue we've experienced during this regulatory process. We are making good progress and have reached agreement on all revenue requirement items resulting in an overall increase of approximately $52 million in annual revenue. This will cover inflationary cost increases, the effects of reduced loads, new rate based investments and provide the company with the opportunity to earn a fair return on equity.

Excluding future updates to net variable power cost an update to the 2011 load forecast. This represents an approximate 3% overall increase in customer prices, subject to OPUC approval.

We've also reached agreement with the parties in the case on several policy issues. We made progress on the power cost adjustment mechanism resulting in a fixed deadband range of $15 million below to $30 million above base line net variable power cost which will not expand as rate base grows.

We also agreed on the cost of capital with the capital structure of 50% tax and 50% equity, our return on equity of 10% and an overall cost of capital of approximately 8%. We extended our decoupling mechanism for another three years and as the operating life of the Boardman Plant continues to be evaluated, we agreed on a mechanism that will allow recovery of PGE's remaining investment in the plant, if the decision is made on an early closure.

All of these agreements remain subject to OPUC approval which we expect to occur in December of this year. Maria will go into more details on the case later.

Now move on to quarterly results with an economic outlook in our operating area. During the second quarter we saw strong plan operations specifically at our thermal plant. Scheduled maintenance outages were successfully completed and we are exceeding our performance objective.

In the Pacific Northwest, June's record setting levels of rain resulted in an improvement to hydro conditions for the second quarter of 2010, compared to the first quarter of 2010. However when we look at the entire year, energy from hydro resources is expected to continue to be below normal for 2010. While we experience customer growth of a half a percent quarter-over-quarter, overall retail energy deliveries were flat.

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