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PGE Posts Lower Q2 Results

by Ted Sickinger
The Oregonian, August 3, 2009

Get ready for a series of major investments and associated rate increases by Portland General Electric Co.

PGE released fairly dismal second quarter earnings results today as the recession cut into customer demand and wholesale power sales. But the company also provided the first glimpse of the resource plan it will release later this summer, and assured analysts that it could grow earnings by 6 to 8 percent a year in the future if regulators approve its plans to invest billions in new power plants, transmission lines and distribution equipment.

PGE will release its Integrated Resource Plan later this summer detailing its options for meeting future electricity demand over the next decade. The company is facing a major shortfall in supply because of population and demand growth, coupled with its low investment in power plants since the closure of its Trojan nuclear plant and the expiration of long-term supply contracts. Meeting future needs, along with state renewable and federal pollution mandates, will require major investments, the company said.

PGE said it earned $24 million, or 31 cents a diluted share, for the three months ended June 30. That compared with net income of $39 million, or 63 cents a diluted share, in the same period last year. Analysts polled by Thomson Reuters were expecting a profit of 37 cents a share, on average.

Second quarter revenues declined 8.5 percent year over year to $389 million from $425 million last year.

PGE said the slow economy reduced customers energy use, and that it sold excess power into a depressed market.

Lower income meant a lower tax liability, and PGE booked a $10 million charge for a refund of income taxes that it collected in rates. Under Oregon law, the company needs to reconcile the amount of taxes it collects in rates with what it pays units of government, and refund or surcharge customers for the difference.

Earlier this summer, PGE reduced its earnings forecast for 2009 to $1.35 to $1.45 a diluted share from a prior forecast of $1.80 to $1.90 a diluted share.

Part of the decline comes from extended maintenance outages at the company's coal plants at Boardman in northeast Oregon and Montana. The outages, coupled with lower than anticipated hydro generation, are expected to shave 2009 earnings by 15 cents per share. The Portland-based utility told financial analysts Thursday that it was pulling the plug on a near-term plan to add 218 megawatts of new wind power because of financial market conditions.

The company still plans, however, to complete the ongoing expansion of its Biglow Canyon wind farm and add another 300 to 400 megawatts of wind or other renewable power to meet Oregon's renewable energy standard by 2015.

PGE said that also will continue ongoing projects to install more than 800,000 smart electrical meters in households and businesses. The company also is considering building two new gas-fired power plants -- including a plant at Boardman to meet base demand and a smaller unit at Port Westward on the lower Columbia River to meet peak load requirements.

The company is preparing to install more than $500 million worth of pollution control equipment at its Boardman coal plant, and is studying the addition of a new transmission line across the Cascades that could cost up to $800 million over the long term.

PGE released its results before the opening of financial markets. Its shares, traded on the New York Stock Exchange, closed at $18.67, down 36 cents.

Ted Sickinger
PGE Posts Lower Q2 Results
The Oregonian, August 3, 2009

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