Portland General Electric Co

Good morning, everyone, and welcome to Portland General Electric Company's first quarter 2023 earnings results conference call. Today is Friday, April 23rd, 2023. 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 numbers 11 on your telephone keypad. If you would like to withdraw your question, please press star 11 again. If you do not intend to ask questions, if you do intend to ask questions, please avoid using the speakerphone. For opening remarks, I will turn the conference over to Portland General Electric Senior Director of Finance, Investor Relations, and Risk Management, Jardon Jaramillo. Please go ahead, sir.

Thank you, Valerie. 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 Magello, 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, and good morning. Thank you all for joining us today. Beginning with slide four, I'll start by discussing our first quarter results and speak to the key drivers. For the first quarter, we reported gap net income of $74 million or $0.80 per diluted share. This compares with first quarter 2022 gap net income of $60 million or $0.67 per share, or non-gap net income of $72 million or $0.81 per share. There are three primary drivers of our results this quarter. First, we continue to see good load growth. Industrial loads in particular increased over 8% quarter over quarter as high-tech sectors and steady expansion in the region continued. Second, our power costs have increased both as a result of load growth as well as higher natural gas and power prices. And third, cost management remains a key priority, and we expect largely flat O&M for the full year, excluding the impact of wildfire and major deferrals, as was the case this quarter. In addition, our Q1 results reflect the impact of a $300 million draw from our equity forward, which was completed on March 1st. This draw is an important step for ongoing clean energy investments and in resetting our balance sheet for growth ahead. 2023 earnings is forecast to be in the range of $2.60 to $2.75 per share, and we remain confident in our long-term earnings growth rate of 5 to 7%, driven by strong load growth and customer growth, as well as attractive capital investment profile and improved operational performance. Moving to slide five. As you know, we've been focused on bringing on new, renewable, and non-emitting resources onto our system, and we're excited to announce the acquisition of a company-owned battery storage project as part of our most recent RFP. Seaside Grid, a 200-megawatt facility, will total approximately $360 million in investment, excluding AFUDC, and is expected to begin service by mid-year 2025. They're also announcing an additional 200 million battery storage from the Troutdale Grid facility. developed and owned by NextEra Energy Resources, who will sell the capacity under a 20-year storage capacity agreement. This project is expected to begin service by year-end 2024. We continue to negotiate with a remaining shortlist bidder for a 75 megawatt company-owned battery storage project and expect negotiations to be finalized in the first half of 2023. Negotiations for this project represent the final chapter of the 2021 RFP. These new Oregon-based projects are a significant addition to our existing capital clean energy portfolio and provide grid reliability, resiliency, and flexibility. This will help us manage energy costs, allowing us to deploy stored renewable energy during times of peak demand, partially offsetting market energy purchases. Associated with wind, solar, and hydro generation, these battery projects will be an important component in integrating future renewable resources. To finance the Seaside project and other capital needs, we will use a combination of debt and equity and have registered a $300 million at-the-market shelf offering to allow incremental equity issuances. Jim will expand on this in his remarks. On the regulatory front, we filed an inaugural clean energy plan in conjunction with our 2023 integrated resource plan. And out of today's battery announcements, these integrated documents outline the 2,300 to 3,300 megawatts needed to meet our future resource needs by 2030. Also in the first quarter, we filed our 2024 general ratings and have recently established the procedural schedule for the year. The rate case increase has three main components. First, 30% as a result of natural gas and purchased energy prices. Second, 40% related to capital investment. And finally, third, the balance is due to higher O&M costs associated with compliance and inflation. This rate case also addresses our Power Cost Adjustment Mechanism, or PCAM, to facilitate Oregon's decarbonization goals and better reflect current and future operating conditions. We are still in the early stages of this case and look forward to collaborative discussions with the OPC and stakeholders. We expect to conclude all deferral dockets following resolution of the 2020 Boardman Revenue Requirement Deferral which we expect to be concluded in the second quarter. We're very pleased that securitization legislation is moving through the Oregon legislature and expect it to be signed into law later this year. If passed, this legislation can help limit customer price impacts for major events. Affordability is essential with significant inflationary pressures and energy price volatility. I commend our PGE colleagues who are incredibly focused on controlling costs. As I discussed last quarter, in 2022, we made progress streamlining our work processes, leveraging technology, and improving productivity. And throughout 2023, we have a lot more work to do and are building on the work we have done over the last several years. For example, we're investing in digital tools to enable operational efficiencies, better resource deployment, and improve customer service. In fact, our upgraded cloud-based customer system was deployed seamlessly just two weeks ago. Our customer information and meter data management system is making it easier for customers to get accurate and timely information and for our teams to execute more coordinated and timely customer service response. Another great example is the implementation of new management and scheduling technologies. which are helping us to more efficiently manage our crews, workflows, and field tools, both increasing cost efficiency and reducing cybersecurity risks. With this focus and these improvements, we will continue to target largely flat O&M when compared to prior year, excluding the impact of major deferral amortizations and higher wildfire costs. We also strengthened our organization with the appointment of Ben Felton as our new Chief Operating Officer. Ben joins us from D to E, where he most recently served as Senior Vice President of Energy Supply. Ben brings a wealth of experience built over 30 years across just about every aspect of utility operations and deep knowledge of the industry. We've experienced tremendous growth over the last several years and our operations are increasingly complex. As we look ahead, We expect that our business and operating environment will only become more dynamic and interconnected. Bringing a COO of Ben's caliber to PGE provides an opportunity to unite several groups, including engineering, construction, and operations. Following our 2023 annual meeting of shareholders, I'm also pleased to share that Jim Torgerson has been appointed chair of our board of directors. Jim has served on the PGE Board since 2021 and has extensive knowledge of the utility industry and power markets, including renewable energy development, finance, regulation, and risk management. I would like to thank Jack Davis and Rod Brown, who are concluding their board service. Their wise counsel and vision have helped guide PGE for a combined 25 years. We have greatly benefited from Jack Davis, who was our chair of our board for a number of years and who has deep industry knowledge, as well as Rob's experience in environmental law. And then on a final organizational change, you may have seen the release that we issued this morning announcing that Jim Adello has decided to retire. Jim came to us in 2020 when the company needed a steady hand to lead our financial organization. He helped us implement new risk and financial management practices, strengthen our financial foundation, and accelerate our clean energy transition. Today, in no small part, and thanks to his leadership, we are executing on a refocused strategy, identifying new ways to operate more efficiently and continuing to improve our reliability and resource adequacy. Among Jim's many accomplishments, I'm especially thankful for his leadership in resetting our balance sheet. We completed a $500 million equity issuance last fall, lost $300 million at the market program today, and have raised nearly $1 billion in debt and expanded our bank lines of credit and insurance programs. All of this supports higher levels of clean energy investments, reliability improvements, as well as smart grid transformation. positioning us for growth and superior customer service for many years to come. We are currently conducting a search for Jim's replacement, including internal and external candidates. To ensure a smooth transition, Jim has agreed to remain as a senior advisor through the end of August after he transitions from his current role at the end of June. Jim, thank you. You've made a remarkable difference during your tenure, and we're enormously grateful. Now, before I turn it over to Jim, I'll close from where I began. Overall, we had a good quarter. We made significant progress to strengthen our organization and accelerate the carbonization and reliability of our energy supply through battery projects announced today. With a clear line of sight to accelerated growth and value creation, we remain focused on providing safe, reliable, affordable, clean energy to all customers. And with that, Jim will walk you through our financial results. Thank you.