SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Transition period from __________ to __________
Registrant; State of Incorporation; IRS Employer
Commission File Number Address; and Telephone Number Identification No.
1-5532 PORTLAND GENERAL CORPORATION 93-0909442
(an Oregon Corporation)
121 SW Salmon Street
Portland, Oregon 97204
(503) 464-8820
1-5532-99 PORTLAND GENERAL ELECTRIC COMPANY 93-0256820
(an Oregon Corporation)
121 SW Salmon Street
Portland, Oregon 97204
(503) 464-8000
Indicate by check mark whether the registrants (1) have filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrants were required to file such reports), and (2) have been subject to
such filing requirements for the past 90 days. Yes X . No .
The number of shares outstanding of the registrants' common stocks as of July
31, 1995 are:
Portland General Corporation 50,804,314
Portland General Electric Company 42,758,877
(owned by Portland General Corporation)
1
Index
Page
Number
Part I. Portland General Corporation and Subsidiaries
Financial Information
Management's Discussion and Analysis of
Financial Condition and Results of Operations 3
Statements of Income 11
Statements of Retained Earnings 11
Balance Sheets 12
Statements of Capitalization 13
Statements of Cash Flow 14
Notes to Financial Statements 15
Portland General Electric Company and
Subsidiaries Financial Information 18
Part II. Other Information
Item 1 - Legal Proceedings 22
Item 6 - Exhibits and Reports on Form 8-K 23
Signature Page 24
2
Portland General Corporation and Subsidiaries
Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
Portland General Electric Company (PGE or the Company), an
electric utility company and the principal operating subsidiary of
Portland General Corporation (Portland General), accounts for
substantially all of Portland General's assets, revenues and net
income. The following discussion focuses on utility operations,
unless otherwise noted.
1995 Compared to 1994 for the Three Months Ended June 30
Portland General earned $32 million or $0.64 per share for the
second quarter of 1995, compared to earnings of $24 million or
$0.48 per share in 1994. Strong earnings reflect abundant west
coast hydro conditions resulting in lower power costs, as well as
the Company's April 1, 1995 price increase. 1994 earnings include
the restoration to income of $6.5 million, net of tax, in
previously recorded real estate reserves. 1994 earnings from
continuing operations were $17 million, or $.35 per share.
Retail revenues increased $21 million, or 12%, for the period,
primarily due to a general price increase and increased energy
sales. The April 1, 1995 rate order, which contained an average
5% price increase, resulted in $13 million of additional revenue
(including $4 million of decoupling revenues). Retail energy
sales increased 4%, or 155,000 MWhs, resulting in $8 million of
additional revenue. Load growth was driven by both an increase in
retail customers and significantly cooler April temperatures.
Weather adjusted energy sales increased 3%.
Wholesale revenues declined $5 million, or 23%, despite a 4%
increase in the volume of energy sold. Abundant energy supplies,
lower natural gas prices, and an increasingly competitive
wholesale market resulted in a 26% reduction in wholesale prices.
Variable power costs fell $17 million, or 27%, despite increased
load, as the average cost of power decreased from 17.9 to 13.7
mills (see table below). Mild temperatures, low gas prices, and
excellent water conditions due to snow melt in both the Northwest
and California contributed to an abundance of low cost secondary
(or spot) energy in the region.
Resource Mix/Variable Power Costs
Average Variable
Resource Mix Power Cost
(Mills/KWh)
1995 1994 1995 1994
Generation 22% 32% 4.6 7.8
Firm Purchases 29% 26% 22.4 23.2
Spot Purchases 49% 42% 10.0 18.2
Total Resources 100% 100% Average 13.7 17.9
3
Portland General Corporation and Subsidiaries
Management's Discussion and Analysis of Financial
Condition and Results of Operations
Secondary energy purchases met nearly half of the Company's total energy
requirements. Since abundant supplies of energy drove market prices to
historic lows, PGE used purchased power to meet increased loads and to
displace thermal generation. Spot market purchases averaged 10.0 mills,
ranging from 1.7 to 14 mills, compared to an average 18.2 mills in 1994.
Company-owned hydro generation increased 22%, or 109,600 MWh, reflecting
above-average hydro conditions on the Clackamas River system. Favorable gas
prices allowed the Beaver Combustion Turbine Plant (Beaver) to generate
slightly more energy at 33% lower variable cost. Overall, PGE reduced
thermal plant generation by 58% to take advantage of low prices in the
spot market.
Operating expenses (excluding variable power, depreciation and income taxes)
were slightly lower than in 1994. Maintenance costs at the Boardman Coal
Plant (Boardman) were lower during the current year since the February
economic outage allowed for major maintenance activities to occur earlier in
the year.
New depreciation rates, effective April 1, 1995 with the general price
increase, raised depreciation expense $4 million. Higher operating income
yielded a $14 million increase in income taxes. Miscellaneous Other Income
declined $2 million due to a 1994 sale of nonutility property.
1995 Compared to 1994 for the Six Months Ended June 30
Portland General earned $30 million or $0.60 per share for the six months
ended June 30, 1995, compared to earnings of $63 million or $1.28 per share in
1994. 1995 results include a $36.7 million charge to income related to the
Public Utility Commission of Oregon's (PUC) rate order disallowing 13% of
PGE's remaining investment in the Trojan Nuclear Plant (Trojan). 1994
earnings include $6.5 million in previously recorded real estate reserves.
Excluding these items, operating earnings were $67 million in 1995 and $56
million in 1994. Strong operating results reflect good hydro conditions,
lower secondary power costs and continued retail load growth, partially offset
by narrowing margins in a competitive wholesale market.
Retail sales rose 3% and revenues increased by $9 million as cooler
temperatures during the period and the addition of approximately 4,800 retail
customers contributed to load growth. Increased sales combined with the
Company's general price increase grew retail revenues almost 6%.
Other revenues, not related to sales of energy, declined for the period.
During 1995, $11 million in revenues related to deferred power costs were
recorded, compared with $19 million in 1994. In addition, during the 1994
period, $11 million of incentive revenues related to energy efficiency
programs were recorded.
A 14% decrease in wholesale energy sales coupled with an average 12% reduction
in prices, caused wholesale revenues to decrease $12 million from 1994 levels.
The region's price advantage over the Southwest eroded in the current year due
to abundant energy supplies and improved hydro conditions in California.
4
Portland General Corporation and Subsidiaries
Management's Discussion and Analysis of Financial
Condition and Results of Operations
Variable power costs, reflecting the benefits of abundant west coast hydro
generation and declining gas prices, fell 19% or $31 million. Spot market
purchases, which provided 31% of the Company's energy supply, averaged 10.5
mills compared to 19.2 mills in 1994 (see table below).
Resource Mix/Variable Power Costs
Average Variable
Resource Mix Power Cost
(Mills/KWh)
1995 1994 1995 1994
Generation 32% 42% 6.9 10.1
Firm Purchases 37% 32% 24.8 24.9
Spot Purchases 31% 26% 10.5 19.2
Total Resources 100% 100% Average 16.0 18.8
Company generation met 32% of PGE's load, 60% of which was
provided by the Company's eight hydroelectric plants. Hydro
generation increased 24%, or 254,132 MWh, reflecting above
average water conditions on the Clackamas River system. Thermal
plant generation was reduced 40%. Total average variable power
costs declined from 18.8 to 16.0 mills.
New depreciation rates, effective April 1, 1995 with the general
price increase, raised depreciation expense $4 million. Higher
operating income yielded a $12 million increase in income taxes.
Other income decreased $37 million from last year largely due to
the Trojan write-off.
Cash Flow
Portland General Corporation
Portland General requires cash to pay dividends to its common
stockholders, to provide funds to its subsidiaries, to meet debt
service obligations and for day to day operations. Sources of
cash are dividends from PGE, leasing rentals, short- and
intermediate-term borrowings and the sale of its common stock.
Cash provided by operations decreased for the year compared with
1994. During 1994, Portland General's cash provided by
operations benefited from the use of approximately $9 million
in tax credits which reduced federal tax payments.
Portland General received $11.5 million in dividends from PGE
during the second quarter of 1995 and $2.1 million in proceeds
from the issuance of shares of common stock under its Dividend
Reinvestment and Optional Cash Payment Plan.
5
Portland General Corporation and Subsidiaries
Management's Discussion and Analysis of Financial
Condition and Results of Operations
Portland General Electric Company
Cash Provided by Operations
Operations are the primary source of cash used for day to day
operating needs of PGE and funding of construction activities.
PGE also obtains cash from external borrowings, as needed.
A significant portion of cash from operations comes from
depreciation and amortization of utility plant, charges which are
recovered in customer revenues but require no current cash
outlay. Changes in accounts receivable and accounts payable can
also be significant contributors or users of cash. Improved cash flow
reflects the Company's general price increase and lower variable
power costs.
Portland General has reached a tentative settlement with the IRS
regarding the Washington Public Power Supply System Unit 3 (WNP-
3) abandonment loss deduction on its 1985 tax return. Portland
General does not expect future cash requirements to be materially
affected by the resolution of this matter (see Note 3, Income
Taxes, for further information).
Investing Activities
PGE invests in facilities for generation, transmission and
distribution of electric energy and products and services for
energy efficiency. Estimated capital expenditures for 1995 are
expected to be $250 million. Approximately $104 million has been
expended for capital projects, including energy efficiency,
through June 30, 1995.
PGE pays into an external trust for the Trojan decommissioning costs.
The April 1, 1995 general rate order authorized PGE to increase its
collections from customers and its corresponding contribution to the trust
from $11 million to $14 million annually. The trust invests in investment-
grade tax-exempt bonds. Total-to-date cash withdrawn from the trust to
pay for decommissioning costs is approximately $7 million.
Financing Activities
Second quarter financing activities include the issuance of $50
million of twelve year notes at 7.15% maturing June 2007 and $25
million of five year notes at 6.75% maturing June 2000. Other
financing activities for the quarter included a $10 million
sinking fund redemption of 200,000 shares of PGE's 8.10% series
preferred stock.
The issuance of additional preferred stock and First Mortgage
Bonds requires PGE to meet earnings coverage and security
provisions set forth in the Articles of Incorporation and
Indenture securing its First Mortgage Bonds. As of June 30,
1995, PGE could issue $290 million of preferred stock and $330
million of additional First Mortgage Bonds.
6
Portland General Corporation and Subsidiaries
Management's Discussion and Analysis of Financial
Condition and Results of Operations
Financial and Operating Outlook
Utility
Retail Customer Growth and Energy Sales
During the second quarter of 1995 approximately 2,700 retail
customers were added to PGE's service territory. For the six-
months ended June 30, 1995, 4,800 retail customers were added.
The Company expects 1995 weather-adjusted retail energy sales
growth to be approximately 2.6%.
Omitted graphic information:
Quarterly Increase in Retail Customers
Residential Commercial/Industrial
Quarter/Year Customers Customers
1Q 93 2025 275
2Q 93 1697 429
3Q 93 2802 446
4Q 93 2775 563
1Q 94 2986 390
2Q 94 2476 550
3Q 94 2219 454
4Q 94 4247 379
1Q 95 3010 270
2Q 95 2194 509
Seasonality
PGE's retail sales peak in the winter, therefore, quarterly
earnings are not necessarily indicative of results to be expected
for fiscal year 1995.
Competition
The Energy Policy Act of 1992 (Energy Act) set the stage for federal and state
regulations directed toward the stimulation of both wholesale and retail
competition in the electric industry. The Energy Act eased restrictions on
independent power production, and bestowed authority on the Federal Energy
Regulatory Commission (FERC) to mandate open access for the wholesale
transmission of electricity.
FERC has since taken steps to provide a framework for increased competition in
the electric industry. In March 1995 it issued a Notice of Proposed Rulemaking
(NOPR) regarding non-discriminatory open access transmission requirements for
all public utilities. The proposed rules address several issues including
stranded asset recovery and the open access transmission of electricity. If
adopted, the proposed open access transmission requirements would give
wholesale competitors access to PGE's transmission facilities and, in turn,
give PGE access to their transmission facilities. PGE is in the process of
preparing an open access transmission tariff for its existing transmission
facilities.
Since the passage of the Energy Act, various state utility commissions are
considering proposals which would gradually allow customers direct access to
generation suppliers, marketers, brokers and other service providers in a
competitive marketplace for energy services.
7
Portland General Corporation and Subsidiaries
Management's Discussion and Analysis of Financial
Condition and Results of Operations
Although presently operating in a cost-based regulated environment, PGE expects
increasing competition from other forms of energy and other suppliers of
electricity. While the Company is unable to determine precisely the future
impact of increased competition, it believes that ultimately it will result in
reduced wholesale and retail prices in the industry.
Residential Exchange Program
In July 1995 the Bonneville Power Administration (BPA) released its
1996 rate proposal under which there would be a significant reduction
in the benefits to PGE's customers from the
residential exchange program under the Regional Power Act (RPA).
The RPA, passed in 1980, attempted to resolve growing power supply and cost
inequities between customers of government and publicly owned utilities, who
have priority access to the low cost power from the federal hydro electric
system, and the customers of IOUs. The RPA residential exchange program exists
to ensure that all residential and small farm customers in the region, the vast
majority of which are served by IOUs, receive similar benefits from the
publicly funded federal power system. Exchange program benefits are passed
directly to residential and small farm customers. The exchange benefit for
PGE residential and small farm customers
totaled $46 million for calendar year 1994. Under BPA's July 1995 proposal,
this exchange benefit would be substantially decreased.
New BPA rates are expected to be effective October 1,
1996, after a ten month public process in which PGE will be an active party
seeking equitable treatment for its residential and small farm customers.
General Rate Order
Beginning April 1, 1995 PGE implemented new general rates.
The PUC authorized a single average rate increase of 5%, representing
additional annual revenues of $51 million. The rate order
authorized PGE to recover all of the estimated Trojan decommissioning costs
and 87% of its remaining investment in Trojan. Amounts
will be collected over Trojan's original license period ending in 2011.
The order also adopted a mechanism to decouple short-term profits from retail
kilowatt-hour sales during the two-year test period. The decoupling mechanism
adopted by the PUC sets revenue targets associated
with retail loads for each month beginning April 1995 through December 1996.
If actual weather-adjusted revenues exceed or fall short of target revenues,
PGE will refund or collect the difference from customers over an 18-month
period. The adjustment at any time during the two-year period cannot result
in an overall increase or decrease in rates, due solely to decoupling, of more
than 3%. Adjustments to rates, if necessary, will be made every six months.
The Company has recently filed a request with the PUC to exclude certain
large customers from the decouplig mechanism.
The rate order also included the variable power cost savings expected from the
commercial operation of the Coyote Springs Generating Project (Coyote Springs),
a 220 megawatt natural gas-fueled cogeneration facility under construction in
eastern Oregon. The order did not include capital and fixed costs associated
with the plant. In August 1995, the Company filed for inclusion of these costs
in rates beginning early November 1995, concurrent with the projected
commercial operation of the plant. See discussion below regarding the Coyote
Springs filing.
8
Portland General Corporation and Subsidiaries
Management's Discussion and Analysis of Financial
Condition and Results of Operations
Legal challenges have been filed against the PUC regarding recovery of the
Trojan Investment and decommissioning costs (see Item 1. Legal Proceedings for
further discussion). PGE has intervened in these filings and believes that the
rate order and the authorized recovery of the Trojan investment and
decommissioning costs will be upheld.
Power Cost Recovery and Coyote Springs Filing
PGE operates without a power cost adjustment tariff, therefore
adjustments for power costs above or below those set in existing general
tariffs are not automatically reflected in customers' rates. As a
result, PGE obtained PUC approval to defer incremental replacement power
costs related to the closure of Trojan. The following table sets out
the amounts deferred and the collection status of the various deferrals.
In accordance with Oregon law, collection of the deferrals is subject to
PUC review of PGE's reported earnings, adjusted for the regulatory
treatment of unusual and/or non-recurring items, as well as the
determination of an appropriate rate of return on equity for a given
review period.
Synopsis of Power Cost Deferrals
Deferral Earnings Amounts
Period Covered Rate Review Deferred Collected
December 4, 1992 - 80% Approved (1) $56 million $23 million
March 31, 1993 (4)(a)
July 1, 1993 - 50% Mid-1995 (2) $58 million N/A
March 31, 1994 (4)(b)
January 1, 1995 - 40% Mid-1995 (3) $11 million N/A
March 31, 1995 (4)(c)
(1) Approved for collection which began on 4/1/94.
(2) Subject to earnings review for the period 4/1/93 through 3/31/94 filed
on August 8, 1995.
(3) Subject to earnings review for the period 4/1/94 through 3/31/95 filed
on August 8, 1995.
(4) Includes accrued interest of (a) $11 million and (b) $9 million and
$.4 million.
On August 8, 1995 Portland General Electric filed with the Public Utility
Commission of Oregon a consolidated request to recover deferred power costs,
the capital and fixed costs associated with
Coyote Springs and BPA's October 1995 price increases.
Upon the PUC's completion of review and approval for collection,
the filing proposes to offset the power cost deferrals and certain
other regulatory assets against PGE's unamortized gain on the sale of a
portion of the Boardman Coal Plant (a refund to customers). In addition,
the Company proposes to cancel the existing collection of deferred power
costs.
The proposal, if approved, would eliminate regulatory assets and liabilities
of $117 million. It would also eliminate any price increase resulting
from authorization to collect outstanding power cost deferrals and mitigate
the price increase resulting from Coyote Springs and BPA costs.
If approved, the filing would result in a 2.4% rate increase or $23.5 million
in additional annual revenues. The Company expects the PUC to rule on the
proposal in November 1995.
9
Portland General Corporation and Subsidiaries
Management's Discussion and Analysis of Financial
Condition and Results of Operations
Nonutility
Portland General, Portland General Holdings, Inc. (Holdings), and certain
affiliated individuals (Portland Defendants), along with others, have been
named as defendants in a class action suit by investors in Bonneville Pacific
Corporation (Bonneville Pacific) and in a suit filed by the bankruptcy trustee
for Bonneville Pacific. The class action suit has been settled for
$2.5 million (see Item 1. Legal Proceedings for further discussion).
Holdings has filed a complaint seeking approximately $228 million in damages
against Deloitte & Touche and certain parties associated with Bonneville
Pacific alleging that it relied on fraudulent and negligent statements and
omissions when it acquired an interest in and made loans to Bonneville
Pacific.
A detailed report released in June 1992, by a U.S. Bankruptcy examiner
outlined a number of questionable transactions that resulted in gross
exaggeration of Bonneville Pacific's assets prior to Holdings' investment.
This report includes the examiner's opinion that there was significant
mismanagement and very likely fraud at Bonneville Pacific.
For background information and further details, see Note 2, Legal Matters
in the Notes to Financial Statements.
10
Portland General Corporation and Subsidiaries
Consolidated Statements of Income for the
Three Months and Six Months Ended June 30, 1995 and 1994
(Unaudited)
Three Months Ended Six Months Ended
June 30 June 30
1995 1994 1995 1994
(Thousands of Dollars)
Operating Revenues $219,892 $202,110 $479,069 $480,124
Operating Expenses
Purchased power and fuel 46,616 63,847 134,312 164,817
Production and distribution 16,288 15,607 31,441 31,013
Maintenance and repairs 11,384 14,069 21,317 23,228
Administrative and other 26,409 25,294 51,549 47,726
Depreciation and amortization 34,785 30,399 66,243 61,248
Taxes other than income taxes 13,026 12,793 26,783 27,087
148,508 162,009 331,645 355,119
Operating Income Before
Income Taxes 71,384 40,101 147,424 125,005
Income Taxes 24,205 10,082 50,692 39,066
Net Operating Income 47,179 30,019 96,732 85,939
Other Income (Deductions)
Trojan disallowance - net of income
taxes of $17,101 - - (36,708) -
Interest expense (20,134) (17,868) (39,329) (34,919)
Allowance for funds used
during construction 2,926 800 5,074 1,264
Preferred dividend requirement - PGE (2,417) (2,646) (5,000) (5,634)
Other - net of income taxes 4,849 7,188 9,680 10,008
Income from Continuing Operations 32,403 17,493 30,449 56,658
Discontinued Operations
Gain on disposal of real estate
operations - net of income taxes
of $4,226 - 6,472 - 6,472
Net Income $ 32,403 $ 23,965 $ 30,449 $ 63,130
Common Stock
Average shares outstanding 50,697,040 50,145,565 50,644,415 49,411,959
Earnings per average share
Continuing operations 0.64 0.35 0.60 1.15
Discontinued operations - 0.13 - 0.13
Earnings per average share $ 0.64 $ 0.48 $ 0.60 $ 1.28
Dividends declared per share $ 0.30 $ 0.30 $ 0.60 $ 0.60
Consolidated Statements of Retained Earnings for the
Three Months and Six Months Ended June 30, 1995 and 1994
(Unaudited)
Three Months Ended Six Months Ended
June 30 June 30
1995 1994 1995 1994
(Thousands of Dollars)
Balance at Beginning of Period $101,063 $104,939 $118,676 $ 81,159
Net Income 32,403 23,965 30,449 63,130
ESOP Tax Benefit & Amortization of
Preferred Stock Premium (474) (426) (948) (796)
132,992 128,478 148,177 143,493
Dividends Declared on
Common Stock 15,215 15,051 30,400 30,066
Balance at End of Period $117,777 $113,427 $117,777 $113,427
<FN>
The accompanying notes are an integral part of these consolidated statements.
</FN>
11
Portland General Corporation and Subsidiaries
Consolidated Balance Sheets
as of June 30, 1995 and December 31, 1994
(Unaudited)
June 30 December 31
1995 1994
(Thousands of Dollars)
Assets
Electric Utility Plant -Original Cost
Utility plant (includes Construction Work
in Progress of $193,769 and $148,267) $2,653,838 $2,563,476
Accumulated depreciation ( 999,278) (958,465)
1,654,560 1,605,011
Capital leases - less amortization of $26,881 and $25,796 10,438 11,523
1,664,998 1,616,534
Other Property and Investments
Leveraged leases 153,992 153,332
Net assets of discontinued real estate operations 4,623 11,562
Trojan decommissioning trust, at market value 66,272 58,485
Corporate Owned Life Insurance less loans of $24,320 in 1995
and $21,731 in 1994 69,195 65,687
Other investments 28,227 28,626
322,309 317,692
Current Assets
Cash and cash equivalents 19,098 17,542
Accounts and notes receivable 84,999 91,418
Unbilled and accrued revenues 157,713 162,151
Inventories, at average cost 38,740 31,149
Prepayments and other 34,570 34,455
335,120 336,715
Deferred Charges
Unamortized regulatory assets
Trojan investment 336,816 402,713
Trojan decommissioning 324,324 338,718
Income taxes recoverable 204,009 217,967
Debt reacquisition costs 30,896 32,245
Energy efficiency programs 65,410 58,894
Other 46,116 47,787
WNP-3 settlement exchange agreement 170,853 173,308
Miscellaneous 21,769 16,698
1,200,193 1,288,330
$3,522,620 $3,559,271
Capitalization and Liabilities
Capitalization
Common stock $ 190,195 $ 189,358
Other paid-in capital 568,700 563,915
Unearned compensation (10,480) (13,636)
Retained earnings 117,777 118,676
866,192 858,313
Cumulative preferred stock of subsidiary
Subject to mandatory redemption 40,000 50,000
Not subject to mandatory redemption 69,704 69,704
Long-term debt 904,644 835,814
1,880,540 1,813,831
Current Liabilities
Long-term debt and preferred stock due within one year 83,448 81,506
Short-term borrowings 100,073 148,598
Accounts payable and other accruals 80,860 104,254
Accrued interest 19,805 19,915
Dividends payable 17,970 18,109
Accrued taxes 36,849 27,778
339,005 400,160
Other
Deferred income taxes 655,028 687,670
Deferred investment tax credits 54,510 56,760
Deferred gain on sale of assets 118,205 118,939
Trojan decommissioning and transition costs 388,812 396,873
Miscellaneous 86,520 85,038
1,303,075 1,345,280
$3,522,620 $3,559,271
<FN>
The accompanying notes are an integral part of these consolidated balance sheets.
</FN>
12
Portland General Corporation and Subsidiaries
Consolidated Statements of Capitalization
as of June 30, 1995 and December 31, 1994
(Unaudited)
June 30 December 31
1995 1994
(Thousands of Dollars)
Common Stock Equity
Common stock, $3.75 par value per
share 100,000,000 shares authorized,
50,718,615 and 50,495,492 shares outstanding $ 190,195 $ 189,358
Other paid-in capital - net 568,700 563,915
Unearned compensation (10,480) (13,636)
Retained earnings 117,777 118,676
866,192 46.1% 858,313 47.3%
Cumulative Preferred Stock
Subject to mandatory redemption
No par value, 30,000,000 shares authorized
7.75% Series, 300,000 shares outstanding 30,000 30,000
$100 par value, 2,500,000 shares authorized
8.10% Series, 200,000 and 300,000 shares outstanding 20,000 30,000
Current sinking fund (10,000) (10,000)
40,000 2.1 50,000 2.8
Not subject to mandatory redemption, $100 par value
7.95% Series, 298,045 shares outstanding 29,804 29,804
7.88% Series, 199,575 shares outstanding 19,958 19,958
8.20% Series, 199,420 shares outstanding 19,942 19,942
69,704 3.7 69,704 3.8
Long-Term Debt
First mortgage bonds
Maturing 1995 through 2000
4.70% Series due March 1, 1995 - 3,045
5-7/8% Series due June 1, 1996 5,066 5,216
6.60% Series due October 1, 1997 15,363 15,363
Medium-term notes - 5.65%-9.27% 276,000 251,000
Maturing 2001 through 2007 - 6.47%-9.07% 260,845 210,845
Maturing 2021 through 2023 - 7.75%-9.46% 195,000 195,000
Pollution control bonds
Port of Morrow, Oregon, variable rate
(Average 2.7% for 1994), due 2013 23,600 23,600
City of Forsyth, Montana, variable rate
(Average 2.9% for 1994), due 2013
through 2016 118,800 118,800
Amount held by trustee (8,076) (8,355)
Port of St. Helens, Oregon, due 2010 and 2014
(Average variable 2.7%-2.9% for 1994) 51,600 51,600
Medium-term notes maturing 1996 - 8.09% 30,000 30,000
Capital lease obligations 10,438 11,523
Other (544) (317)
978,092 907,320
Long-term debt due within one year (73,448) (71,506)
904,644 48.1 835,814 46.1
Total capitalization $1,880,540 100.0% $1,813,831 100.0%
<FN>
The accompanying notes are an integral part of these consolidated statements.
</FN>
13
Portland General Corporation and Subsidiaries
Consolidated Statements of Cash Flow for the
Three Months and Six Months Ended June 30, 1995 and 1994
(Unaudited)
Three Months Ended Six Months Ended
June 30 June 30
1995 1994 1995 1994
Cash Provided (Used) By -
Operations:
Net income $ 32,403 $ 23,965 $ 30,449 $ 63,130
Adjustments to reconcile net income
to net cash provided by operations:
Depreciation and amortization 27,039 22,589 50,845 45,154
Amortization of WNP-3 exchange agreement 1,227 1,173 2,455 2,347
Amortization of Trojan investment 5,946 6,495 12,409 13,216
Amortization of Trojan decommissioning 3,510 2,805 6,315 5,610
Amortization of deferred charges - other 833 547 (178) 2,886
Deferred income taxes - net (140) 9,720 (3,872) 12,532
Other noncash revenues (1,969) (324) (2,372) (658)
Changes in working capital:
(Increase) Decrease in receivables 5,914 20,907 10,801 (879)
(Increase) Decrease in inventories (946) (2,475) (7,591) (1,358)
Increase (Decrease) in payables (41,773) (48,684) (17,107) (21,241)
Other working capital items - net 11,835 7,000 785 3,399
Gain from discontinued operations - (6,472) - (6,472)
Deferred charges - other (9,870) 899 (9,740) (244)
Miscellaneous - net 2,915 6,768 5,728 7,315
Trojan disallowance - - 36,708 -
36,924 44,913 115,635 124,737
Investing Activities:
Utility construction - new resources (13,452) (26,874) (29,411) (49,853)
Utility construction - other (36,729) (36,108) (65,163) (61,408)
Energy efficiency programs (5,050) (5,198) (8,952) (10,032)
Rentals received from leveraged leases 7,262 7,897 11,685 12,882
Nuclear decommissioning trust contributions (7,702) (2,805) (10,507) (5,610)
Nuclear decommissioning expenditures 1,670 - 6,608 -
Discontinued operations 1,222 26,454 6,939 27,065
Other (4,191) (1,987) (4,692) (2,327)
(56,970) (38,621) (93,493) (89,283)
Financing Activities:
Short-term borrowings - net (24,898) 40,283 (48,525) 1,134
Borrowings from Corporate Owned Life Insurance - 19,619 2,589 19,619
Long-term debt issued 75,000 - 75,000 -
Long-term debt retired - (233) (3,045) (11,465)
Repayment of nonrecourse borrowings for
leveraged leases (6,757) (7,585) (10,628) (12,061)
Preferred stock retired (10,000) (20,000) (10,000) (20,000)
Common stock issued 2,148 1,899 4,562 45,206
Dividends paid (15,406) (15,482) (30,539) (29,710)
20,087 18,501 (20,586) (7,277)
Increase (Decrease) in Cash and
Cash Equivalents 41 24,793 1,556 28,177
Cash and Cash Equivalents at the Beginning
of Period 19,057 6,586 17,542 3,202
Cash and Cash Equivalents at the End
of Period $ 19,098 $ 31,379 $ 19,098 $ 31,379
Supplemental disclosures of cash flow information
Cash paid during the period:
Interest $ 20,608 $ 20,330 $ 36,011 $ 32,938
Income taxes 41,390 18,450 41,390 18,239
<FN>
The accompanying notes are an integral part of these consolidated statements.
</FN>
14
Portland General Corporation and Subsidiaries
Notes to Financial Statements
(Unaudited)
Note 1
Principles of Interim Statements
The interim financial statements have been prepared by Portland
General and, in the opinion of management, reflect all material
adjustments which are necessary to a fair statement of results for the
interim periods presented. Certain information and footnote
disclosures made in the last annual report on Form 10-K have been
condensed or omitted for the interim statements. Certain costs are
estimated for the full year and allocated to interim periods based on
the estimates of operating time expired, benefit received or activity
associated with the interim period. Accordingly, such costs are
subject to year-end adjustment. It is Portland General's opinion
that, when the interim statements are read in conjunction with the
1994 Annual Report on Form 10-K, the disclosures are adequate to make
the information presented not misleading.
Reclassifications
Certain amounts in prior years have been reclassified for comparative
purposes.
Note 2
Legal Matters
WNP Cost Sharing
PGE and three other investor-owned utilities (IOUs) have been involved
in litigation since October 1982 surrounding the proper allocation of
shared costs between Washington Public Power Supply System (WPPSS) Units
1 and 3 and Units 4 and 5. In late 1994, PGE agreed to a tentative
settlement in the case. The settlement was approved by the court on July
6, 1995 and the Company paid $1 million.
Bonneville Pacific Class Action and Lawsuit
Portland General, Portland General Holdings, Inc., and certain
affiliated individuals have settled for $2.5 million the claims alleged
in the class action suit. The suit was a consolidation of various
actions filed on behalf of certain purchasers of Bonneville Pacific
common shares and subordinated debentures against numerous defendants
including Portland General, Holdings and certain Portland General
individuals. Final court approval of the settlement was obtained in
June 1995 with no party having any appeal rights.
A separate legal action was filed by Bonneville Pacific against Portland
General, Holdings, and certain individuals affiliated with Portland
General and Holdings alleging breach of fiduciary duty, tortious
interference, breach of contract, and other actionable wrongs related to
Holdings' investment in Bonneville Pacific. Following his appointment,
the Bonneville Pacific bankruptcy trustee, on behalf of Bonneville
Pacific, filed numerous amendments to the complaint. The complaint now
includes allegations of RICO violations and RICO conspiracy, collusive
tort, civil conspiracy, common law fraud, negligent misrepresentation,
breach of fiduciary duty, liability as a partner for the debts of a
partnership, and other actionable wrongs. Although the amount of
damages sought is not specified
15
Portland General Corporation and Subsidiaries
Notes to Financial Statements
(Unaudited)
in the Complaint, the Trustee has filed a damage disclosure calculation
which purports to compute damages in amounts ranging from $340 million
to $1 billion - subject to possible increase based on various factors.
Other Legal Matters
Portland General and certain of its subsidiaries are party to various
other claims, legal actions and complaints arising in the ordinary
course of business. These claims are not considered material.
Summary
While the ultimate disposition of these matters may have an impact on
the results of operations for a future reporting period, management
believes, based on discussion of the underlying facts and circumstances
with legal counsel, that these matters will not have a material adverse
effect on the financial condition of Portland General.
Other Bonneville Pacific Related Litigation
Holdings has filed complaints seeking approximately $228 million in
damages against Deloitte & Touche and certain other parties associated
with Bonneville Pacific alleging that it relied on fraudulent and
negligent statements and omissions by Deloitte & Touche and the other
defendants when it acquired an interest in and made loans to Bonneville
Pacific.
Note 3
Income Taxes
As a result of its examination of PGE's 1985 tax return the IRS proposed
to disallow PGE's 1985 WNP-3 abandonment loss deduction on the premise
that it is a taxable exchange. Portland General and the IRS have
reached a tentative settlement regarding this issue. Management has
previously provided for probable tax adjustments and is of the opinion
that the ultimate disposition of this matter will not have a material
adverse impact on the results of operations or cash flows of Portland
General.
Note 4
Short-Term Borrowings
Portland General and PGE replaced expiring committed credit facilities
in July 1995. Portland General now has a $15 million committed facility
expiring in July 1996 and PGE has a committed facility of $200 million
expiring in July 2000. These lines of credit have annual facility fees
of .10% and do not require compensating cash balances. The facilities
are used primarily as backup for commercial paper.
PGE has a commercial paper facility of $200 million. The amount of
commercial paper outstanding cannot exceed the Company's unused
committed lines of credit.
16
Portland General Corporation and Subsidiaries
Financial Statements and Related Information
Table of Contents
Page
Number
Management Discussion and Analysis of
Financial Condition and Results of Operations * 3-10
Financial Statements 18-21
Notes to Financial Statements ** 15-16
* The discussion is substantially the same as that disclosed by
Portland General and, therefore, is incorporated by reference
to the information on the page numbers listed above.
** The notes are substantially the same as those disclosed by
Portland General and are incorporated by reference to the
information on the page numbers shown above, excluding the
Bonneville Pacific litigation discussion contained in Note 2
which relates solely to Portland General.
17
Portland General Electric Company and Subsidiaries
Consolidated Statements of Income for the
Three Months and Six Months Ended June 30, 1995 and 1994
(Unaudited)
Three Months Ended Six Months Ended
June 30 June 30
1995 1994 1995 1994
(Thousands of Dollars)
Operating Revenues $218,476 $201,773 $477,367 $479,445
Operating Expenses
Purchased power and fuel 46,616 63,847 134,312 164,817
Production and distribution 16,288 15,607 31,441 31,013
Maintenance and repairs 11,384 14,068 21,317 23,227
Administrative and other 26,144 24,405 50,961 46,412
Depreciation and amortization 34,765 30,318 66,202 61,088
Taxes other than income taxes 13,014 12,782 26,735 27,019
Income taxes 23,766 13,012 50,512 44,580
171,977 174,039 381,480 398,156
Net Operating Income 46,499 27,734 95,887 81,289
Other Income (Deductions)
Regulatory disallowance - net of income
taxes of $17,101 - - (36,708) -
Allowance for equity funds used
during construction 565 - 686 -
Other 4,814 8,464 9,504 10,279
Income taxes 84 (2,010) (260) (950)
5,463 6,454 (26,778) 9,329
Interest Charges
Interest on long-term debt and other 17,464 15,134 33,811 29,845
Interest on short-term borrowings 2,059 1,314 4,246 2,310
Allowance for borrowed funds used
during construction (2,361) (800) (4,388) (1,264)
17,162 15,648 33,669 30,891
Net Income 34,800 18,540 35,440 59,727
Preferred Dividend Requirement 2,417 2,646 5,000 5,634
Income Available for Common Stock $ 32,383 $ 15,894 $ 30,440 $ 54,093
Consolidated Statements Of Retained Earnings for the
Three Months and Six Months Ended June 30, 1995 and 1994
(Unaudited)
Three Months Ended Six Months Ended
June 30 June 30
1995 1994 1995 1994
(Thousands of Dollars)
Balance at Beginning of Period $202,506 $201,670 $216,468 $179,297
Net Income 34,800 18,540 35,440 59,727
ESOP Tax Benefit & Amortization of
Preferred Stock Premium (474) (426) (948) (796)
236,832 219,784 250,960 238,228
Dividends Declared
Common stock 11,545 15,393 23,090 30,786
Preferred stock 2,417 2,583 5,000 5,634
13,962 17,976 28,090 36,420
Balance at End of Period $222,870 $201,808 $222,870 $201,808
<FN>
The accompanying notes are an integral part of these consolidated statements.
</FN>
18
Portland General Electric Company and Subsidiaries
Consolidated Balance Sheets
as of June 30, 1995 and December 31, 1994
(Unaudited)
June 30 December 31
1995 1994
(Thousands of Dollars)
Assets
Electric Utility Plant - Original Cost
Utility plant (includes Construction Work in Progress of
$193,769 and $148,267) $2,653,838 $2,563,476
Accumulated depreciation (999,278) (958,465)
1,654,560 1,605,011
Capital leases - less amortization of $26,881 and $25,796 10,438 11,523
1,664,998 1,616,534
Other Property and Investments
Trojan decommissioning trust, at market value 66,272 58,485
Corporate Owned Life Insurance less loans of $24,320 in 1995
and $21,731 in 1994 41,310 40,034
Other investments 25,656 26,074
133,238 124,593
Current Assets
Cash and cash equivalents 10,415 9,590
Accounts and notes receivable 82,396 91,672
Unbilled and accrued revenues 157,713 162,151
Inventories, at average cost 38,740 31,149
Prepayments and other 33,182 33,148
322,446 327,710
Deferred Charges
Unamortized regulatory assets
Trojan investment 336,816 402,713
Trojan decommissioning 324,324 338,718
Income taxes recoverable 204,009 217,967
Debt reacquisition costs 30,896 32,245
Energy efficiency programs 65,410 58,894
Other 46,116 47,787
WNP-3 settlement exchange agreement 170,853 173,308
Miscellaneous 18,785 13,682
1,197,209 1,285,314
$3,317,891 $3,354,151
Capitalization and Liabilities
Capitalization
Common stock equity $ 844,870 $ 834,226
Cumulative preferred stock
Subject to mandatory redemption 40,000 50,000
Not subject to mandatory redemption 69,704 69,704
Long-term debt 874,644 805,814
1,829,218 1,759,744
Current Liabilities
Long-term debt and preferred stock due within one year 83,448 81,506
Short-term borrowings 100,086 148,598
Accounts payable and other accruals 79,019 104,612
Accrued interest 18,992 19,084
Dividends payable 14,212 15,702
Accrued taxes 42,393 32,820
338,150 402,322
Other
Deferred income taxes 518,509 549,160
Deferred investment tax credits 54,510 56,760
Deferred gain on sale of assets 118,205 118,939
Trojan decommissioning and transition costs 388,812 396,873
Miscellaneous 70,487 70,353
1,150,523 1,192,085
$3,317,891 $3,354,151
<FN>
The accompanying notes are an integral part of these consolidated balance sheets.
</FN>
19
Portland General Electric Company and Subsidiaries
Consolidated Statements of Capitalization
as of June 30, 1995 and December 31, 1994
(Unaudited)
June 30 December 31
1995 1994
(Thousands of Dollars)
Common Stock Equity
Common stock, $3.75 par value per share,
100,000,000 shares authorized, 42,758,877
shares outstanding $ 160,346 $ 160,346
Other paid-in capital - net 471,182 470,008
Unearned compensation (9,528) (12,596)
Retained earnings 222,870 216,468
844,870 46.2 % 834,226 47.4 %
Cumulative Preferred Stock
Subject to mandatory redemption
No par value, 30,000,000 shares authorized
7.75% Series, 300,000 shares outstanding 30,000 30,000
$100 par value, 2,500,000 shares authorized
8.10% Series, 200,000 and 300,000 shares outstanding 20,000 30,000
Current sinking fund (10,000) (10,000)
40,000 2.2 50,000 2.8
Not subject to mandatory redemption, $100 par value
7.95% Series, 298,045 shares outstanding 29,804 29,804
7.88% Series, 199,575 shares outstanding 19,958 19,958
8.20% Series, 199,420 shares outstanding 19,942 19,942
69,704 3.8 69,704 4.0
Long-Term Debt
First mortgage bonds
Maturing 1995 through 2000
4.70% Series due March 1, 1995 - 3,045
5-7/8% Series due June 1, 1996 5,066 5,216
6.60% Series due October 1, 1997 15,363 15,363
Medium-term notes - 5.65%-9.27% 276,000 251,000
Maturing 2001 through 2007 - 6.47%-9.07% 260,845 210,845
Maturing 2021 through 2023 - 7.75%-9.46% 195,000 195,000
Pollution control bonds
Port of Morrow, Oregon, variable rate
(Average 2.7% for 1994), due 2013 23,600 23,600
City of Forsyth, Montana, variable rate
(Average 2.9% for 1994), due 2013
through 2016 118,800 118,800
Amount held by trustee (8,076) (8,355)
Port of St. Helens, Oregon, due 2010 and 2014
(Average variable 2.7% - 2.9% for 1994) 51,600 51,600
Capital lease obligations 10,438 11,523
Other (544) (317)
948,092 877,320
Long-term debt due within one year (73,448) (71,506)
874,644 47.8 805,814 45.8
Total capitalization $1,829,218 100.0% $1,759,744 100.0%
<FN>
The accompanying notes are an integral part of these consolidated statements.
</FN>
20
Portland General Electric Company and Subsidiaries
Consolidated Statements of Cash Flow for the
Three Months and Six Months Ended June 30, 1995 and 1994
(Unaudited)
Three Months Ended Six Months Ended
June 30 June 30
1995 1994 1995 1994
(Thousands of Dollars)
Cash Provided (Used) By -
Operations:
Net Income $ 34,800 $ 18,540 $ 35,440 $ 59,727
Non-cash items included in net income:
Depreciation and amortization 27,019 22,583 50,804 45,142
Amortization of WNP-3 exchange agreement 1,227 1,173 2,455 2,347
Amortization of Trojan investment 5,946 6,495 12,409 13,216
Amortization of Trojan decommissioning 3,510 2,805 6,315 5,610
Amortization of deferred charges - other 833 547 (178) 2,886
Deferred income taxes - net (662) (2,987) (690) 4,590
Other noncash revenues (564) - (685) -
Changes in working capital:
(Increase) Decrease in receivables 9,997 19,162 13,658 (2,432)
(Increase) Decrease in inventories (946) (2,476) (7,591) (1,359)
Increase (Decrease) in payables (47,866) (49,142) (18,897) (16,053)
Other working capital items - net 11,629 7,706 (210) 2,993
Deferred charges - other (9,870) 899 (9,740) (244)
Miscellaneous - net 2,806 2,607 4,977 2,701
Trojan disallowance - - 36,708 -
37,859 27,912 124,775 119,124
Investing Activities:
Utility construction - new resources (13,452) (26,874) (29,411) (49,853)
Utility construction - other (36,729) (36,108) (65,163) (61,408)
Energy efficiency programs (5,050) (5,198) (8,952) (10,032)
Nuclear decommissioning trust contributions (7,702) (2,805) (10,507) (5,610)
Nuclear decommissioning expenditures 1,670 - 6,608 -
Other investments (2,477) (2,441) (2,978) (2,546)
(63,740) (73,426) (110,403) (129,449)
Financing Activities:
Short-term debt - net (24,904) 63,280 (48,512) 20,424
Borrowings from Corporate Owned Life Insurance - 19,619 2,589 19,619
Long-term debt issued 75,000 - 75,000 -
Long-term debt retired - (150) (3,045) (8,882)
Preferred stock retired (10,000) (20,000) (10,000) (20,000)
Common stock issued - - - 41,055
Dividends paid (14,170) (18,444) (29,579) (39,639)
25,926 44,305 (13,547) 12,577
Increase (Decrease) in Cash and
Cash Equivalents 45 (1,209) 825 2,252
Cash and Cash Equivalents at the Beginning
of Period 10,370 5,560 9,590 2,099
Cash and Cash Equivalents at the End
of Period $ 10,415 $ 4,351 $ 10,415 $ 4,351
Supplemental disclosures of cash flow information
Cash paid during the period:
Interest $ 20,603 $ 19,389 $ 34,781 $ 29,765
Income taxes 45,818 31,560 45,121 25,460
<FN>
The accompanying notes are an integral part of these consolidated statements.
</FN>
21
Portland General Corporation and Subsidiaries
Portland General Electric Company and Subsidiaries
Part II. Other Information
Item 1. Legal Proceedings
For further information, see Portland General's and PGE's reports on
Form 10-K for the year ended December 31, 1994.
NONUTILITY
Gerhard W. Gohler, IRA, et al v Robert L. Wood et al, U.S. District
Court for the District of Utah
Portland General, Portland General Holdings, Inc., and certain
affiliated individuals have settled the claims alleged in the class
action for $2.5 million. Final court approval was obtained in June 1995
with no party having any appeal rights.
UTILITY
PGE v. Ronald Eachus, Myron Katz, Nancy Ryles (Oregon Public Utility
Commissioners) and the Oregon Public Utility Commission, Marion County
Oregon Circuit Court
On January 23, 1995 the Court affirmed the PUC's decision in the 1987
rate order related to the gain on PGE's sale of a portion of Boardman
and the Intertie. This judgement was entered on May 1,1995 and PGE has
since filed a Notice of Appeal with the Oregon Court of Appeals.
Columbia Steel Casting Co., Inc. v. (Columbia Steel) PGE, Pacificorp,
and Myron Katz, Nancy Ryles and Ronald Eachus, U.S. Ninth Circuit Court
of Appeals
On July 24, 1995 the Ninth Circuit Court of Appeals reversed a lower
court ruling regarding Columbia Steel's 1990 lawsuit against PGE and set
aside the $1.3 million judgement against PGE. The decision holds that
the 1972 territorial allocation agreement between PGE and PacifiCorp,
dba Pacific Power & Light Company, approved by the PUC provides immunity
to PGE under the anti-trust laws. Columbia Steel has asked for
reconsideration.
BPA v. WPPSS (WPPSS v. 88 Participants), U.S. District Court for the
Western District of Washington
The parties settlement in the case was approved by the Court on July 6,
1995. PGE's contribution was $1 million.
Southern California Edison Company v. PGE, Multnomah County Oregon
Circuit Court, August 3, 1994
On June 29, 1995 FERC denied PGE's petition for a declaratory order and
request that FERC take jurisdiction over the contract dispute. FERC's
ruling means the case will proceed in the Multnomah County Circuit
Court. A trial date is currently scheduled for October 1995.
22
Portland General Corporation and Subsidiaries
Portland General Electric Company and Subsidiaries
Part II. Other Information
Utility Reform Project and Colleen O'Neil v. Public Utility Commission
of Oregon, Marion County Oregon Circuit Court, March 1995
The Utility Reform Project (URP) filed an appeal of the PUC's order in
PGE's general rate case. The Multnomah county court granted the PUC's
motion to transfer the case to Marion County where PGE has since
intervened in the case.
Citizens Utility Board of Oregon v. Public Utility Commission of Oregon,
Marion County Oregon Circuit Court, April 1995.
PGE has intervened in the Citizens Utility Board's (CUB) appeal which
challenges the portion of the PUC's order in PGE's general rate case
that authorizes PGE to recover a return on its remaining investment in
Trojan.
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
Number Exhibit PGC PGE
4 Forty-Fifth Supplemental Indenture X X
dated May 1, 1995
27 Financial Data Schedule - UT X X
(Electronic Filing Only)
b. Reports on Form 8-K
June 13, 1995 - Item 5. Other Events
PGE requested an extension from the PUC to file earnings reviews related
to two outstanding power cost deferrals.
23
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrants have duly caused this report to be signed on their behalf by
the undersigned hereunto duly authorized.
PORTLAND GENERAL CORPORATION
PORTLAND GENERAL ELECTRIC COMPANY
(Registrants)
August 9, 1995 By /s/ Joseph M. Hirko
Joseph M. Hirko
Vice President Finance,
Chief Financial Officer,
Chief Accounting Officer,
and Treasurer
24