Release Date: July 26, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Portland General Electric Co (POR, Financial) reported a significant increase in GAAP net income for Q2 2024, reaching $72 million or $0.69 per diluted share, compared to $39 million or $0.39 per diluted share in Q2 2023.
- The company experienced continued growth in demand from industrial customers, particularly in semiconductor manufacturing and data centers.
- Effective cost management and risk mitigation strategies contributed to improved financial performance.
- Portland General Electric Co (POR) successfully managed a regional heat wave, demonstrating resilience through new processes, training, and targeted investments.
- The company is making progress on its renewable generation and capacity RFP, with strong subscription for wind, solar, battery, and pumped hydro projects.
Negative Points
- Overall Q2 2024 load decreased by 2.2%, with residential load decreasing by 7.1% year-over-year.
- Commercial load also saw a decline of 4.2%, driven by energy efficiency efforts.
- Moody's changed Portland General Electric Co (POR)'s outlook from stable to negative, although credit ratings were affirmed.
- The company anticipates significant equity needs, with $300 million required annually through 2026 to support capital investments and balance sheet management.
- Hydro conditions have deteriorated, with the Columbia River at about 75% capacity, posing challenges for energy supply.
Q & A Highlights
Q: You talked about a moderate decline in equity needs after 2026. How do you think about what's run rate equity per year through '25 now? And does the ATM cover any shortlist additions?
A: (Joseph Trpik, CFO) The equity need is about $300 million per year for the base plan to serve the capital plan and balance sheet repair. After that, it would be moderately less, around half of that amount.
Q: How are you trending versus your baseline and your PCAM now? And how do you feel about power costs for the rest of the year?
A: (Joseph Trpik, CFO) We are $52 million below the baseline for the PCAM to date. We expect to come back within the deadband by year-end, considering the third quarter's volatility. The derisking efforts have reduced volatility and helped us get ahead of the PCAM.
Q: How should we think about updating The Street on earnings growth given the 2% load growth and industrial demand?
A: (Maria Pope, CEO) We are seeing good load growth from the industrial sector, particularly semiconductors and data centers. We will update on growth rates likely in early 2025, influenced by our IRP results and competitive bidding process.
Q: What are the prospects for settlements in the rate case, and where are you closest and furthest apart?
A: (Maria Pope, CEO) Conversations are constructive, and we are focused on serving customers and affordability. We have strong relationships with interveners and parties, and recent customer experience ratings reflect our effectiveness.
Q: Can you expand on your transmission efforts and their impact on your 5-year capital plan?
A: (Maria Pope, CEO) We are focused on three areas: existing rights of way, state-wide projects like the Warm Springs transmission line, and regional collaborations like the North Plains Connector. These efforts address customer growth and renewable energy integration.
Q: How are local conditions and relative wildfire risk this year compared to prior years?
A: (Maria Pope, CEO) Much of Oregon is in Level 5 condition with over 130 fires burning. We focus on wildfire prevention through system hardening, vegetation management, and early detection. We work closely with local first responders and community leaders.
Q: Should we assume $300 million equity issuance evenly spread over '24 through '26?
A: (Joseph Trpik, CFO) The equity plan is $300 million per annum. We plan to use the remaining amount for this year and need $300 million per year for the next two years to fund the capital plan and balance sheet needs.
Q: What is the timeline for the North Plains Connector project?
A: (Maria Pope, CEO) The project aims to start construction in 2027 and complete by 2029. It is not included in our current CapEx plan.
Q: How has the weather been so far this quarter?
A: (Maria Pope, CEO) We had record high temperatures in early July, followed by cooler conditions. Overall, conditions are dry with deteriorated hydro conditions compared to last year.
Q: Any thoughts on the timing of your next rate case filing?
A: (Maria Pope, CEO) We are focused on the current rate case and ongoing discussions. We aim to create a gap between rate cases to benefit all parties.
Q: As your growth potential accelerates, would you still use the ATM for equity raises?
A: (Joseph Trpik, CFO) The ATM works for our base capital plan, but we will evaluate other financing options based on the size and scale of future growth and RFP outcomes.
Q: What information gets made public around the RFP shortlist?
A: (Joseph Trpik, CFO) The shortlist will include technical details like site size, megawatts, and ownership options. Subsequent contract negotiations will determine if projects are PPAs or build transfers.
Q: How do you think about the timeline for formalizing the Grid United MOU into an ownership stake?
A: (Maria Pope, CEO) It will take a couple of years. We are impressed with their progress and expect further announcements with other utilities. The ownership structure will dictate if a holdco is needed.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
