Portland General Electric Company — 2020 Form 10-K
Business context and period: PGE is a regulated, vertically integrated electric utility serving Oregon. This filing covers the fiscal year ended December 31, 2020; it reports annual results, not standalone fourth-quarter results. PGE served approximately 908,000 retail customers at year-end.
Financial performance
| Metric | 2020 | 2019 | Change |
|---|---|---|---|
| Total revenue | $2.145 billion | $2.123 billion | +1% |
| Gross margin (revenue less purchased power and fuel; non-GAAP) | $1.437 billion | $1.509 billion | -5% |
| Income from operations | $269 million | $353 million | -24% |
| Net income | $155 million | $214 million | -28% |
| Diluted EPS | $1.72 | $2.39 | Lower |
| Cash from operating activities | $567 million | $546 million | +$21 million |
| Capital expenditures | $784 million | $606 million | +$178 million |
Purchased power and fuel expense rose 15% to $708 million. The company reported a $127 million realized loss on energy trading positions, which it said were outside acceptable risk tolerances and would not be submitted for regulatory recovery. Excluding those losses, actual net variable power costs were $13 million below baseline for PCAM purposes, within the deadband.
Balance sheet, debt, and liquidity
- Year-end cash and cash equivalents were $257 million, versus $30 million a year earlier. Current assets were $721 million and current liabilities were $815 million.
- Long-term debt was $3.046 billion net of debt expense, with $160 million of principal due in 2021; the balance sheet also included $150 million of short-term debt.
- Available liquidity was reported at $917 million, comprising $660 million of available credit and $257 million of cash. PGE had a $500 million revolving facility and no commercial paper outstanding at year-end.
- The credit-agreement debt-to-total-capital ratio was 56.4%, below its 65% covenant limit. The common equity ratio was 45.0%, down from 49.9% in 2019. Debt ratings were investment grade with stable outlooks.
- Dividends paid were $140 million. The board authorized a share repurchase program of up to $17.5 million through 2022 after year-end.
Material changes and operating developments
- Retail deliveries increased 0.4% overall: residential deliveries rose 3.8%, commercial fell 6.3%, and industrial rose 5.6%. The filing attributes the divergent class trends in part to COVID-19 effects.
- Boardman ceased coal-fired operations in October 2020; decommissioning began. PGE’s owned and contracted wind capacity increased, including 100 MW of PGE-owned Wheatridge wind placed in service during the fourth quarter.
- Energy trading losses drove a significant earnings decline. PGE announced revised trading policies, enhanced risk reporting and oversight, and personnel changes following an independent Board Special Committee review.
- Wildfire-response costs of $15 million and COVID-related costs, including $8 million of incremental bad debt expense, were deferred subject to regulatory review and possible recovery.
Outlook, risks, and contingencies
- Management stated a long-term goal of reducing emissions associated with power served to customers by 80% by 2030 from a 2010 baseline, with an aspirational net-zero goal by 2040. These are company goals, not earnings guidance.
- For 2021, PGE projected retail deliveries 1.0%–1.5% above 2020 weather-adjusted levels, operating cash flow of $600–$650 million, and capital expenditures of $655 million. It expected to fund planned spending and maturities with operating cash, debt issuance of up to $300 million, and commercial paper as needed.
- The 2021 AUT included a $79 million increase in forecast net variable power costs, to be reflected in customer prices beginning January 1, 2021. Management’s stated average diluted-EPS growth guidance was 4%–6%.
- Major risks include regulatory cost recovery, power and fuel price volatility, weather and renewable-resource variability, wildfire and other natural disasters, climate and environmental regulation, cybersecurity, capital-market access, and COVID-19 effects on customers and operations.
- PGE’s potential Portland Harbor Superfund liability is not reasonably estimable and could be material to financial position; the company expects the OPUC-approved recovery mechanism to mitigate earnings effects, subject to review. Securities and derivative shareholder lawsuits related to the trading losses were pending, with outcomes and potential losses not estimable.
- A severe February 2021 storm occurred after year-end. Restoration costs could be material in 2021; PGE had sought regulatory deferral, with no assurance of recovery.
Key facts for investors to verify
- How much of the 2020 earnings decline and $127 million trading loss is nonrecurring, and whether revised trading controls operate effectively.
- OPUC decisions on recovery of wildfire and COVID-19 deferred costs, and on any proposed Boardman-related customer refund.
- 2021 execution against EPS growth, cash-flow, capital-spending, and load projections, including the impact of power-cost increases.
- Potential liability and recovery developments involving Portland Harbor, shareholder litigation, and the February 2021 storm.
- Debt maturities, refinancing needs, and maintenance of investment-grade ratings and covenant headroom.