Portland General Electric Company (POR) is an integrated energy company that generates, transmits, and distributes electricity to over 930,000 customers in the state of Oregon. The company has a long history of powering social progress, delivering safe, affordable, and reliable electricity while transforming its energy systems to meet evolving customer needs.
In the latest fiscal year, POR reported annual revenue of $2,923 million and net income of $228 million. The company's annual operating cash flow stood at $420 million, while free cash flow was negative $938 million, reflecting the significant capital investments required to modernize its infrastructure and transition to cleaner energy sources.
For the second quarter of 2024, POR reported GAAP net income of $72 million, or $0.69 per diluted share, compared to $39 million, or $0.39 per diluted share, in the same period of 2023. The year-over-year improvement was driven by several factors, including continued growth in demand from industrial customers, particularly in the semiconductor manufacturing and data center sectors, as well as solid power cost performance and the company's focus on cost management and risk mitigation.
Business Overview
POR's business is centered around the generation, transmission, and distribution of electricity to its residential, commercial, and industrial customers in Oregon. The company operates a diverse generation portfolio, including natural gas, coal, hydroelectric, and wind power, and also purchases power from the wholesale market to meet its retail load requirements.One of the key strategic priorities for POR is the transition to a clean energy future. The company has set ambitious goals to reduce greenhouse gas emissions associated with its retail electricity sales by 80% by 2030 and 100% by 2040, compared to a 2010-2012 baseline. To achieve these targets, POR is actively investing in renewable energy resources and battery storage projects through its ongoing resource planning process.
In 2023, POR completed its 2021 All-Source Request for Proposals (RFP), which resulted in the acquisition of 311 MW of wind energy from the Clearwater Wind Development project and 475 MW of battery energy storage capacity from three separate projects. The company is now focused on its 2023 All-Source RFP, which seeks to procure additional renewable and non-emitting dispatchable capacity resources to meet its long-term clean energy goals.
Operational and Financial Performance
POR's operational and financial performance in the second quarter of 2024 was strong, with the company reporting a 17% increase in total revenues compared to the same period in 2023. This was driven by a combination of higher retail prices, which were implemented to recover increased net variable power costs, as well as continued growth in demand from industrial customers, particularly in the semiconductor manufacturing and data center sectors.The company's total retail energy deliveries for the six months ended June 30, 2024, decreased by 1% compared to the same period in 2023, as decreases in residential and commercial deliveries were partially offset by an 8% increase in industrial deliveries. POR's weather-adjusted load growth for the first half of 2024 was 1%, and the company is reiterating its full-year 2024 weather-adjusted load growth guidance of 2% to 3%.
POR's purchased power and fuel expense increased by 30% in the first half of 2024 compared to the same period in 2023, primarily due to higher system load, increased prices for purchased power, and increased costs for the company's own generation. However, the company's focus on cost management and risk mitigation, as well as the mild weather conditions experienced in the second quarter, helped to offset some of these higher costs, resulting in a $0.16 per share increase in earnings from power costs.
Liquidity and Capital Investments
As of June 30, 2024, POR had total available liquidity of $990 million, including $6 million in cash and cash equivalents and $984 million in available capacity under its revolving credit facility. The company's investment-grade credit ratings and strong balance sheet remain unchanged, although Moody's recently revised the company's outlook from stable to negative while affirming its credit ratings.POR plans to fund its capital expenditures, which are expected to total $1.3 billion in 2024, through a combination of cash generated from operations, the issuance of short-term and long-term debt securities, and the use of its at-the-market (ATM) equity offering program. The company has registered a new $400 million ATM program and anticipates an annual equity need of approximately $300 million to support its base capital investments and maintain its target capital structure.
Risks and Outlook
POR faces several risks, including regulatory and legislative actions, economic conditions that could impact customer demand, supply chain disruptions and cost inflation, and the increasing frequency and severity of extreme weather events, such as wildfires and heat waves, which can affect the company's operations and financial performance.Despite these challenges, POR remains focused on executing its strategic plan and delivering value to its customers, communities, and shareholders. The company is reaffirming its adjusted earnings guidance of $2.98 to $3.18 per share for the full year 2024 and its long-term earnings and dividend growth guidance of 5% to 7%.