Portland General Electric Co

Good morning, everyone, and welcome to Portland General Electric Company's second quarter 2022 earnings results conference call. Today is Thursday, July 28, 2022. 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 11 on your telephone keypad. If you do not intend to ask a question, please avoid the, if you do intend to, please avoid the use of speaker phones. For opening remarks, I would like to turn the conference call over to Portland General Electric Senior Director of Finance, Investor Relations, and Risk Management, Chardhan Haramijo. Please go ahead, sir.

Thank you, Jonathan. Good morning, everyone. I'm happy you can join us today. Before we begin this morning, I would like to remind you that we have prepared a presentation to supplement our discussion, which we will 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 reports on forms 10-K and 10-Q, which are available on our website. Feeding our discussion today are Maria Pope, President and CEO, and Jim Magello, Senior Vice President of Finance, CFO, Treasurer, and CCO. 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, everyone, and thank you for joining us today. Beginning with slide four, I'll start by discussing our strong quarter and provide some operational and regulatory highlights. We reported GAAP net income of $64 million, or $0.72 per share, compared with net income of $32 million, or $0.36 per share, in the second quarter of last year. Due to these strong results, we're revising our GAAP earnings guidance to $2.60 to $2.75 per share. Additionally, after further evaluating the first quarter write-off of the 2020 wildfire and COVID deferrals, and after receiving further clarification from the Oregon Public Utility Commission, we're also initiating non-GAAP adjusted earnings guidance of $2.74 to $2.89 per share. This addition reflects our ongoing work to provide the most meaningful comparison of our earnings and assessment of ongoing financial performance. Our results this quarter reflect several key drivers. We're seeing continued growth in energy deliveries, particularly on the industrial side with semiconductor, high-tech, and digital customers. Several new and existing semiconductor manufacturers are expanding their operations in our region. This builds upon decades of investment in the state and extends a longer secular trend in immigration and business growth. Many of our investments at Portland General are critical to the infrastructure that supports the technology sector. As we discussed in the first quarter call, Operating expenses are also higher due to wildfire mitigation, as well as grid resilience and enhancements to customer and other digital technologies. On the power and fuel expense front, we've had a great hydro year and have benefited from the very favorable power market conditions. As many as you know, our region experienced the wettest second quarter in the last 81 years, as well as record-breaking spring snowfall. Moving to slide five, as we look to the future, we're focused on three key areas, advancing investment that drives growth in alignment with the state's energy policies, enhancing performance and operating efficiency, and operating our system with a focus on risk management. We are pleased with the operational and financial progress we're making in these areas, and we're well positioned as we execute through year-end and beyond. Let me start with growth. We're living in a transformational moment in the energy industry, and Portland General Electric is leading the way by advancing the state's policy goals and investing strategically to build a clean energy future. We continue to see opportunity related to resource acquisition as we seek to reduce greenhouse gas emissions to meet 2030 admissions targets. And on July 15th, the OPC verbally acknowledged our RFP shortlist. Given inflationary pressures, a process is underway for parties to refresh their bids. While we hope this is short, we will need to be patient as we work with independent evaluator to ensure the best price and lowest risk for customers while maintaining the attractive diversity of wind, solar, battery, and pump storage resources. We remain optimistic that we will announce executed agreements by the end of this year. The projects are expected to be in service by the end of 2024 to capture expiring federal production tax credits for the benefit of customers. While the process is ongoing, any new generation capacity ownership opportunities will have an impact on our equity needs in 2023 and beyond, which Jim will discuss shortly. The RFP process represents an important step in accelerating the clean energy transformation and is a key aspect in our ability to decarbonize our power supplies while continuing to provide reliable, affordable energy to everyone we serve. While the ink is not yet dry, we are also looking ahead and expect to issue our next integrated resource plan and file our inaugural clean energy plan in early 2023. Turning to performance. During a period of significant inflation and growth, we are all the more disciplined in managing our costs. Like most companies, we're dealing with the impacts of a strong labor market and high inflation. We are intently focused on driving operational productivity and performance while holding overall cost trends stable. As an example, on the T&D side, crew productivity is up about a third since 2018, thanks to better use of technology, investments in the grid, and improvements in overall workflow. Today, we are getting a lot more work done at the same cost. Much of our digital improvements have been focused on customers. We have improved web-based solutions, payment options, communications, and better reliability through greater visibility and distributed automation. On the generation side, our thermal plant operating performance has remained high over the last five years. Today, our peaker plant utilization has more than tripled to support renewable adoption all the while saving money and maintaining availability. While we're operating more efficiently, we're also improving safety. Safety statistics, including vehicle incidents, have shown an 80% improvement over the last five years. Now turning to risk management. As the work we're doing to manage costs supports our ability to invest in robust and improved risk management. First, As a vertically integrated utility, we're well positioned. For example, while commodity prices, in particular natural gas prices, have shown significant volatility throughout 2022, our regulatory mechanisms, hedging strategies, strong balance sheets, and credit ratings have all helped to mitigate potential impacts to customers and shareholders. In late April, the OPC approved our 2022 wildfire mitigation plan, which was timely in light of the Oregon Department of Forestry's recent declaration that all of Oregon is now in wildfire season. While wildfire season typically extends from May through October, wildfire related planning is year round. Our mitigation initiatives this year are well underway and showing results. This work is paired with long-term investments in wildfire cameras, automated reclosers, weather stations, all to increase situational awareness and provide visibility in high-risk fire zones. Our risk mitigation, of course, goes beyond wildfires. Our climate is becoming more extreme in every season. The investments we're making today are making our system more resilient and reliable. Our integrated operations center is a great example as it allows us to monitor control our entire system in real time. It centralizes a range of vital functions that is critical to resource and system integration. It helps us manage and improve reliability with daily grid management, and it serves as a central hub to offer efforts to increase resilience and security. As you all have seen in the press, we are in the middle of an extreme heat wave in the Pacific Northwest, and this facility our Integrated Operations Center is improving our ability to respond to these circumstances, which put a great deal of stress on the grid. Finally, I'd like to touch on our focus on areas in the coming quarter. Market conditions for power costs are favorable as they were in the second quarter, and our outlook for the third quarter is solid. We're monitoring the possibility of constraints in regional power markets that could produce significant higher energy costs, such as we saw last year. We're laser focused on closely managing O&M in light of our run rate in the first half of the year and our current inflationary environment. And finally, yesterday, we filed for the amortization of major deferral expense balances related to the 2022 Labor Day wildfire the February 2021 ice storm, and the 2021 Power Costs Adjustment Mechanism, or PCAM. All of these represent a total of 132 million of outstanding major deferrals. Additionally, we plan to file for amortization of the 34 million COVID-19 deferral in late 2022 or early 2023. As we close the books on a solid quarter, It's worth noting that the key to our success is focusing on what matters most, safe, reliable, affordable, clean energy with customers at the center of all we do, enabling their well-being and the advancement of the communities we serve, all the while creating opportunities to invest, delivering value for all stakeholders and shareholders alike. With that, thank you, and let me turn it over to Jim.