Portland General Electric Co

Good morning, everyone, and welcome to Portland General Electric Company's third quarter 2023 earnings results conference call. Today is Friday, October 27, 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, 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 intend to ask a question, please avoid the use of speaker phones. For opening remarks, I will turn the conference over to Portland General Electric's Manager of Investor Relations, Nick White. Please go ahead, sir.

Thank you, Lateef. 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. or a description of some of the factors that can 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 Joe Terpich, Senior Vice President of Finance and CFO. 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, Nick, and good morning. Thank you all for joining us today. Beginning with slide four, I'll start by discussing our results for the quarter and speak to the key drivers as well as our outlook for the balance of the year. For the third quarter, we reported gap net income of 47 million or 46 cents per diluted share. This compares with third quarter 2022 results of 58 million or 65 cents per diluted share. Clearly, it was a tough quarter. The key drivers include, first, continued load growth from industrial customers offset by reductions in residential and commercial usage, partially driven by cooler weather overall. And second, volatile power costs from a major heat event in mid-August, which resulted in transmission congestion issues and a significant spike in energy costs. I will touch on each in turn. Turning to slide five, we continue to see solid growth from industrial customers, particularly data centers. However, this growth is chunky, and we saw modest growth in the third quarter. Overall, through the first nine months of the year, industrial load has grown over 6.5% compared to 2022. We foresee continued growth in the fourth quarter and potentially even higher industrial growth in the coming years. With strong legislative tailwinds at both the state and federal level, there is significant government support through grants and other incentives focused on the semiconductor sector. Fifteen percent of U.S. semiconductor manufacturing occurs in our state, largely within PGE service territory. The sector will benefit not only from the Federal CHIPS Act, but from the $240 million that the Oregon legislature has allocated to 15 semiconductor companies. As a result of these investments, state officials are projecting over $40 billion in new Oregon projects and over 6,000 new jobs. Recent expansion announcements have been made by Intel, microchip, and analog devices. In the third quarter, We also saw modest reductions in residential and commercial energy use compared to last year, driven by cooler weather in the late summer, as well as energy efficiency, rooftop solar, and overall distributed energy adoption. Given lower than planned third quarter loads, we have revised our full year 2023 growth guidance to 2% weather adjusted, consistent with our long-term expectations. The second driver of third quarter results was higher power costs stemming from the record-breaking heat event. PGE set a new peak load that surpassed our previous summer peak by 6%. During this time, we also, in this day ahead, mid-Columbia peak pricing of nearly $1,000 per megawatt hour, given significant transmission issues and constraints. Our generation plants performed well. very well, and were well integrated with our contracted energy supply. We also saw meaningful customer demand response reductions. Even still, our overall purchase power and fuel expense increased significantly. I want to thank and recognize our PGE colleagues who helped ensure that customers continued to receive safe, reliable, and uninterrupted power throughout the heat wave. Given the impact of power costs on our third quarter results, we are narrowing our guidance range for the year. We now expect 2023 results to be in the range of $2.60, $2.65 per share, as compared to the previous range of $2.60 to $2.75 per share. We anticipate fourth quarter results to improve as a result of normalized power cost conditions Just as a reminder, fourth quarter 2022 regional gas prices peaked to over $55 per mm BTU, and average mid-sea power prices rose to $265 per megawatt hour. Additionally, while year-to-date power cost performance has been challenging relative to the annual update tariff, or AUT, we anticipate a more favorable resource mix and market conditions through the fourth quarter. And finally, we expect continued effective O&M cost management and to hit our 2023 targets. Joe will walk through our project rate for fourth quarter in more detail. Overall, our capital programs are on track with Clearwater Wind expected to come online later this year and continued progress on our previously announced battery storage projects. These are in addition to our base capital work that support customer growth as well as grid improvements focused on greater safety as well as reliability and extreme weather resilience. Two other significant highlights from the third quarter include concluding our 2024 rate case negotiations and the announcement of several federal grants which will enable the acceleration of new technologies and transmission construction. I'll start with our GRC, which we are very pleased to conclude with parties and await a commission order expected in the coming weeks. Overall, we settled recovery of ongoing capital investments, operating and maintenance costs, notably wildfire, vegetation management expenses, and importantly, risk reduction in our power cost recovery framework. An important first step in addressing our PECAM mechanism, which Joe will touch on in his remarks. We also maintained a 50-50 capital structure and a 9.5% ROE. Additionally, we received approval to amortize 27 million in wildfire deferrals and collect forecasted wildfire mitigation costs under the automatic adjustment clause. Lastly, federal grants. We're pleased and excited with the three Department of Energy announcements that build upon the work we're doing to advance the clean energy transition, and in collaboration with our regional partners. First, DOE announced a $250 million grant to support upgrading the Bethel-Round Butte transmission line from 230 to 500 kV in partnership with the Confederated Tribes of the Warm Springs. The tribes have been our partner and co-owner of the 500 megawatt Pelton-Round Butte hydro projects along the Deschutes River for decades. Second, AGE, Utilidata, and NVIDIA have a consortium that was awarded a $50 million grant for a smart chip grid project to improve visibility, reliability, and overall grid management. And lastly, the Pacific Northwest Hydrogen Association's hub is one of seven projects nationwide to move forward to the next step and negotiations with DOE. PGE is contributing our former Boardman coal plant site and water rights for the green hydrogen production facility. We also look forward to an offtake agreement and working on green hydrogen power generation. These award selections represent just the start. Near-term capital will be determined in 2024 as negotiations proceed. We are still pursuing additional projects and opportunities and have submitted over 65 million in incremental grants to support another 125 million in additional projects, as well as have other projects in the pipeline. These projects represent growing momentum in the region that will create meaningful benefits for customers and communities for years to come. In summary, despite challenging operating conditions in the third quarter, We made important progress towards strengthening key cost recovery mechanisms as part of the constructive GRC settlement. Our entire team is laser focused on execution for the remainder of the year. Our long-term growth plan is increasingly well established, underpinned by investments to meet growing customer needs, ensuring grid resilience, and leading the clean energy transition. Our recent regulatory progress and ongoing capital investment reinforces our confidence in our long-term earnings growth rate of 5% to 7% in 2024 and beyond. With that, I'll turn it over to Joe, who will walk you through our financial results. Thank you.