Portland General Electric Co

Good morning, everyone, and welcome to Portland General Electric Company's second quarter 2020 earnings results conference call. Today is Friday, July 31st, 2020. This call is being recorded, and as such, all lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer period. If you would like to ask a question during this time, simply press star, then the number one on your telephone keypad. If you would like to withdraw your question, Press the pound key on your telephone keypad. If you do intend to ask a question, please avoid the use of speaker phones. For opening remarks, I will turn the conference call over to Portland General Electric's Senior Director of Investor Relations, Jardon Adamio. Please go ahead, sir.

Thank you, Andrew. Good morning, everyone. I'm pleased that you're able to join us today. Before we begin this morning, I'd like to remind you that we have prepared a presentation to supplement our discussion. which we'll be referencing throughout the call. The slides are available on our website at investors.portlandgeneral.com. Referring to slide two, some of our remarks this morning will constitute forward-looking statements. We caution you that such statements involve inherent risks and uncertainties and actual results may differ materially from our expectations. For a description of some of the factors that could cause actual results to differ materially, Please refer to our earnings press release and our most recent periodic report on Forms 10-K and 10-Q, which are available on our website. Leading our discussion today are Maria Pope, President and CEO, and Jim Lobdell, Senior Vice President of Finance, CFO, and Treasurer. Following their prepared remarks, we will open the line for your questions. Now, it's my pleasure to turn the call over to Maria.

Thank you, Jordan, and good morning. Welcome to Portland General Electric's earnings call. I hope that you're all staying safe and healthy during these unprecedented times. Today, I'll provide an overview of our financial results, updates on our economy, and actions we've taken in response to the COVID-19 pandemic. Jim will provide more detail on our financial results, as well as the outlook for the remainder of the year. Before I go through the quarter, I want to first address The social unrest that we are experiencing in our state, across our country focused on racial inequities, and the ongoing protests that have placed Portland front and center. We are reminded daily that we are living in a historic time for our community and country. This tumultuous time, corporations have an opportunity to use their influence for positive change. PGE is committed to diversity, equity, and inclusion. While we are proud of our work to date in making progress towards our DE&I goals, we know that there is much more to do. We're looking at all the ways we have impact through policy, employee hiring, promotion, and retention, as well as supporting the communities we serve. And we will do so while working together collaboratively with customers and communities as we continue to provide safe, reliable, affordable, and clean energy. Now let's turn to the financial forecast and our performance on slide four. On our last earnings call, we lowered our guidance to reflect the COVID-19 pandemic and resulting drop in economic activity. Our response included reducing operating expenses as part of our ongoing commitment to control costs across the organization. For the overall quarter, revenue was strong under those circumstances and was led by high tech and digital industrial deliveries. Savorable hydro and wind conditions across the region resulted in surplus energy and low power prices. Additionally, we were able to lower operating expenses due to operational efficiencies and lower dispatch rates at our generating plants. As a result, our second quarter 2020 net income was 39 million or 43 cents per share, which represents an increase of 15 cents when compared to 2019. You may recall the second quarter of 2019, we experienced the opposite conditions. Record low hydro in the region and unfavorable weather which negatively impacted our gross margin. With year-to-date earnings per share of $1.34, we are more than halfway to our midpoint of our guidance, making a solid first half of the year. The second half of the year presents challenges as the economic fallout from the pandemic will continue to impact retail revenue and wholesale market conditions. Retail deliveries for the balance of the year will also be impacted by the decoupling mechanism. Gross margin will face additional headwinds due to more normal power market conditions. Jim will further address both decoupling and power markets later in the call. While the first full-year financial picture presents challenges, we continue to aggressively manage costs to drive strong business results and are reaffirming our revised full-year guidance of $2.20 to $2.50, reflecting anticipated economic challenges that our customers and our community face. As we move forward, we continue to pay close attention to economic conditions and the course of the pandemic. Our first quarter forecast projected a gradual recovery into 2021. That forecast remains largely unchanged, and our outlook for the balance of 2020 remains cautious. Turning to slide five. The economic impact of the pandemic on businesses, communities, and residential customers is reflected in the spike in the unemployment rate, which rose from historic lows of 3% in March to 14% in April and is now 11%. In response to the economic hardships faced by our customers, we have paused collection of late fees and service disconnections and are working with customers to implement flexible payment options. The impact of economic conditions on energy usage has been relatively consistent with our forecast. Second quarter residential loads increased 7% on a weather-adjusted basis and the number of customers increased by 1.6%. Industrial deliveries increased 3% on a weather-adjusted basis as our digital services and high-tech manufacturing customers continued their long-term trend of steady growth despite the pandemic. These increases were more than offset by a 16% decrease in the commercial sector, where declines were concentrated in hospitality, government, education, and office buildings. Turning to slide six, we are on track to achieve our strategic targets and major capital projects We've had no significant supply chain or operational disruptions as a result of COVID-19. Wheat Ridge and the Integrated Operations Center remain on schedule. In May, we announced our partnership with the Douglas County Public Utility District for a five-year power purchase agreement for capacity that provides up to 160 megawatts of emission-free hydroelectric power. As part of this partnership, we will be providing load management and wholesale marketing and services, leveraging our power portfolio management expertise. Regarding future resources, we expect to issue one or more RFPs for the new admitting resources. Over the next several years, Portland General Electric and the region face growing capacity needs as regional coal resources are retired. We will also continue to assess the region's energy needs given long-term economic consequences of the pandemic and other factors and market dynamics. With that, I'll turn the call over to Jim. Thank you.