Portland General Electric Co

Good day and thank you for standing by. Welcome to Portland General Electric Company's third quarter 2022 earning results conference call. Today is Tuesday, October 25th, 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'll be a question and answer session. To ask a question during the session, you will need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. 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 Senior Director of Finance, Investor Relations, and Risk Management, Jardon Jarmillo. Please go ahead, sir.

Thank you, Dulem. 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. Leading our discussion today are Maria Pope, President and CEO, and Jim Agello, Senior Vice President of Finance, CFO, Treasurer, and CCO. Following their prepared remarks, we will open the line for your questions. Now, it is my pleasure to turn the call over to Maria.

Thank you, Jordan. Good morning, everyone, and thank you for joining us today. Beginning with slide four, I'll start by discussing our third quarter results before moving on to long-term growth. This morning, we reported gap net income of $58 million or $0.65 per share compared with $50 million or $0.56 per share in the third quarter of last year. Our solid results this quarter were driven by strong operating performance and revenue growth. First, load growth. which came primarily from technology and digital customers, continues to be robust. Industrial load was up 10% this quarter versus the same period a year ago. Given the CHIPS and Science Act, as well as the focus on semiconductor investments in the state of Oregon, we anticipate several significant semiconductor expansions in our service territory. We're also continuing to see steady business growth in other sectors, as well as continued residential in-migration. Overall, we're moving our load growth expectations to 2%, up from 1.5% over the next five years. From an operating perspective, we're pleased to see that the hard work we're doing across the company to reduce operating expenses is having an impact. Overall, O&M expenses were largely flat with last year's third quarter. as savings in several areas offset wildfire mitigation and grid resilience costs. Third quarter power markets were remarkably volatile, as many states in the West set all-time temperature records. In Oregon, at least 12 cities, including Portland, saw the hottest July and hottest temperatures on record. 2022 also ranked as the warmest August on record in Washington and Idaho, and California saw hot temperatures as well as record drought conditions. Our generation's plants could not have performed better and were well integrated with power operations, contracted, and purchased energy supply. Overall, purchased power and fuel expenses increased due to market conditions and to meet significantly higher energy usage. We are pleased to share that we have resolved a number of open deferral dockets, which have been ongoing for many months and now provide greater certainty. Overall, we have achieved settlements totaling $130 million, including the 2020 wildfire, the 2021 ice storm, the 2021 power cost adjustment mechanism dockets. These agreements are subject to final approval by the OPUC with an order expected in November. We also anticipate filing an amortization request for the $34 million COVID deferral later this year or in early 2023. Jim will walk through the expected financial impacts of these updates in more detail, but I'd like to add my appreciation to our PGE leaders and to all other parties for the constructive spirit they've brought to these discussions. Moving to slide five. After a robust and highly competitive process, identifying options that increase renewable energy at the best combination of price and risk for customers, we announced the Clearwater Wind Project, one of our benchmark generation bids. Clearwater is part of a broader wind development in eastern Montana that will generate approximately 311 megawatts of nameplate capacity. We signed a build transfer agreement with NextEra Energy Resources for Portland General's two-thirds or 208 megawatt ownership share. PGE will secure the remaining third or 103 megawatts under a 30-year PPA. This is a significant step forward in our clean energy transition, as the renewable energy generated at Clearwater complements our long-term plan to remove the remaining coal generation from our portfolio. PGE's capital investment in Clearwater is projected to be $415 million, and the facility is planned to come online by the end of 2023. The Clearwater investment opportunity will have an impact on the capital needed to fuel our growth and rebalance our capital structure, which Jim will touch on shortly. PGE has been on the forefront of the energy transition for years. We could not be more excited about the great opportunities that we see ahead. In the spring of 2023, we expect to file both our Clean Energy Plan and our next Integrated Resource Plan. These plans will incorporate enhanced analysis and actions to meet evolving energy needs with a focus on reliability and affordability. In the second half of 2023, we expect to launch additional RFPs for renewable generation and non-emitting capacity. Now, let me turn to operating performance and risk management. As I mentioned earlier, This was a very tough summer as we navigated record heat and heightened risk of wildfires. We're focused on making strategic investments and much of the work we're doing to enhance resiliency in the summer also helps us prepare for winter storms. This includes proactively replacing aging equipment, reducing outages, accommodating growth, and better integrating renewable resources. We're also making use of the latest technologies. At our integrated operations center, we're using analytics to better track plant performance and predict potential issues before they arise. We're using advanced modeling and improved tools to better monitor dynamic weather. Through AI and data analytics, we're proactively addressing issues in the distribution system, reducing costs and increasing reliability. In short, We're advancing the digitization and simplification work that we have scaled over the last couple of years. This quarter, for example, we have focused our work on improvements to our field crew scheduling systems that will improve productivity and workflow for our line crews. We're also upgrading our digital platforms for more seamless customer service and interaction. Given the current environment, one area of particular concern is power cost management and challenging wholesale markets, especially during critical peak periods. This quarter, we experienced significant volatility driven by intense summer heat. Western power market conditions were very challenging with day ahead peak prices of $1,000 per megawatt hour on multiple occasions. Our risk management strategies and strong balance sheet were critical as we navigated these headwinds. Our vertically integrated utility model and 16 generation facilities helped to insulate customers from the full impact of the volatility that we saw in the energy markets. In the current environment, we are frequently generating power to serve our customers at significantly lower energy costs that can be purchased in the open market. I want to recognize the outstanding work of our generation leaders and planned operations. We know that our customers, ranging from some of the largest global companies to our neighbors down the block, are facing significant financial pressures. As we look ahead, we're intently focused on making full use of the tools available to us to help manage power costs. We're committed to providing our customers with the ability to take an active role in enabling the region's clean energy future. Again this year, Portland General's Clean Future Program was recognized as the number one green energy program in the country by the National Renewable Energy Lab, or NREL. Before I turn the call over to Jim, I'd like to discuss our financials. I'd like to touch on the coming quarter and our growth outlook. In the fourth quarter, we expect continued load growth, power cost performance, and disciplined O&M management to keep us on track to meet our guidance for the year. Looking ahead, the progress we've made this year has laid a foundation for substantial investments in 2023 that will position us for significant growth in 2024 and beyond. As such, we're raising our long-term EPS growth guidance from 4 to 6 percent to 5 to 7 percent, reflecting investment opportunities ahead. In sum, we're pleased with our strong performance this quarter, demonstrating that providing safe, reliable, affordable, and clean energy is the right formula for steady and consistent results. With that, I'll turn it over to Jim.