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 SEPTEMBER 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
September 30, 1995 are:
Portland General Corporation 50,824,141
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 22
Signature Page 23
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 SEPTEMBER 30
Portland General earned $14 million or $0.28 per share for the third quarter
of 1995 compared to earnings of $12 million or $0.24 per share in 1994.
Earnings for the period include an after tax provision against earnings of
$13 million, related to unrecoverable deferred power costs. Excluding this
charge to income, earnings would have been $27 million. The quarters' strong
operating earnings reflect continued retail load growth as well as low
variable power costs driven by improved hydro conditions throughout the
western region and a competitive wholesale market.
Operating revenues increased $8 million or 4% for the quarter. Retail
revenues increased by $14 million, or 8%, due primarily to the company's
April 1995 general rate increase and increased retail energy sales. A
strong local
economy and continued increase in the number of retail customers contributed
to a 3% rise in retail energy sales. PGE is serving 13,600, or 2.2 %, more
retail customers than served in the same period last year with 2,580 new
retail customers added during this quarter. A $6 million wholesale, or 23%,
decline in wholesale revenues partially offset the increase in retail
revenues. Wholesale energy sales decreased 11% and average wholesale prices
decreased 13%. A competitive wholesale market coupled with the availability
of inexpensive power narrowed wholesale margins and decreased sales.
PGE took advantage of the competitive wholesale market and the availability
of inexpensive power and purchased 54% of its total system load compared to
48% last year. Increased low-cost energy purchases, good hydro generation
and low natural gas prices drove variable power costs down despite increased
total system load. The average cost of power decreased from 19.7 to 16.0
mills (10 mills = 1 cent) as variable power costs decreased $19 million, or
23% for the quarter (see table below).
Abundant supplies of energy drove secondary prices below 1994
levels. Spot market purchases averaged 11.4 mills, ranging from 6 to 20
mills, compared to an average 22.4 mills in 1994.
Hydro generation increased 14%, or 53,600 MWh, reflecting good water
conditions on the Clackamas River system. While thermal generation decreased
15%, lower gas prices allowed the Beaver Combustion Turbine Plant to generate
energy at 39% lower variable cost.
3
PORTLAND GENERAL CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESOURCE MIX/VARIABLE POWER COSTS
Average Variable
Resource Mix Power Cost (Mills/KWh)
1995 1994 1995 1994
Generation 46% 52% 8.4 11.3
Firm Purchases 35% 35% 24.5 26.6
Spot Purchases 19% 13% 11.4 22.4
Total 100% 100% Average 16.0 19.7
Resources
Operating expenses (excluding variable power, depreciation and income
taxes) were comparable with 1994. Depreciation increased $2 million, or
7%, largely due to higher depreciation levels effective with the Company's
recent general rate increase in April 1995.
Income taxes included in Net Operating Income increased $14 million
primarily due to an increase in before
tax operating income.
PGE recorded a $13 million, after tax, provision against earnings as a
result of an
agreement with the Oregon Public Utility Commission's (PUC) Staff which
allows for only partial recovery of the Company's outstanding power cost
deferrals. For further information regarding this agreement see the Power
Cost Recovery and Coyote Springs Filing discussion in the Financial and
Operating Outlook section below.
1995 COMPARED TO 1994 FOR THE NINE MONTHS ENDED SEPTEMBER 30
Portland General earned $45 million or $0.88 per share for the nine months
ended September 30, 1995, compared to earnings of $75 million or $1.51 per
share in 1994. 1995 results include after tax charges to income of $37
million related to the PUC's rate order disallowing 13% of PGE's remaining
investment in Trojan and $13 million related to the Company's agreement
with PUC Staff allowing only partial recovery of the Company's deferred
power costs. 1994 earnings include $7 million, after tax, in previously
recorded
real estate reserves. Excluding these items, earnings would have been $94
million in 1995 and $69 million in 1994. Strong operating results reflect
improved hydro conditions, favorable secondary power costs and continued
retail load growth, partially offset by narrowing margins in a competitive
wholesale market.
Although operating revenues only increased $7 million, retail MWh sales
rose 3% and revenues increased by $23 million. Colder temperatures during
the early part of the year and an increase in retail customers contributed
to a higher level of energy sales. The increased sales combined with the
general rate increase boosted revenues from energy sales nearly 7%. Fewer
accrued revenues partially offset increases from energy sales. PGE
recorded $12 million in power cost deferrals in 1995 ($11 million in the
first quarter), compared with $19 million in 1994 ($18 million in the
first quarter).
4
PORTLAND GENERAL CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
A decline in wholesale revenues of $18 million from 1994 levels also
partially offset the increase in retail revenues. Wholesale energy sales
declined 13% and prices averaged 13% lower. The Northwest region's
traditional price advantage over the Southwest eroded due to abundant
energy supplies and improved hydro conditions in California and made for a
more competitive wholesale marketplace.
Variable power costs decreased $50 million, or 20%, resulting from
increased hydro production and lower secondary prices.
PGE reduced thermal plant generation 30% to take advantage of favorable
secondary energy prices, decreasing average variable power costs from 19.1
to 16.0 mills (see table below).
PGE hydro generation increased 21%, or 307,704 MWh, reflecting improved
water conditions on the Clackamas River system. Spot market purchases
averaged 10.7 mills compared to 19.8 mills in 1994 due to the availability
of low-cost secondary power.
RESOURCE MIX/VARIABLE POWER COSTS
Average Variable
Resource Mix Power Cost (Mills/KWh)
1995 1994 1995 1994
Generation 37% 45% 7.5 10.6
Firm Purchases 36% 33% 24.8 25.5
Spot Purchases 27% 22% 10.7 19.8
Total Resources 100% 100% Average 16.0 19.1
The Company held operating expenses (excluding variable power,
depreciation and income taxes) at levels comparable to 1994. Depreciation
increased $7 million, or 8%, largely due to increased depreciation rates
effective with the Company's general rate increase in April 1995.
Income taxes increased $19 million, or 37%, due to an increase in before
tax operating income.
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.
5
PORTLAND GENERAL CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Portland General received $11.5 million in dividends from PGE during the
third quarter of 1995 and $2.3 million in proceeds from the issuance of
shares of common stock under its Dividend Reinvestment and Optional Cash
Payment Plan.
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 for the current year reflects the
Company's general price increase and lower variable power costs. 1994
third quarter cash flows were also affected by a $20 million prepayment to
the IRS related to the 1985 tax deduction discussed below.
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 $225 million.
Approximately $160 million has been expended for capital projects,
including energy efficiency, through September 30, 1995.
PGE funds an external trust for the Trojan decommissioning costs. The
April 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 $8 million.
FINANCING ACTIVITIES
During the third quarter the Company used strong operating cash flows to
reduce short-term debt $26 million.
6
PORTLAND GENERAL CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
In early October 1995, PGE issued $75 million in 8.25% Quarterly Income
Debt Securities (QUIDS) Junior Subordinated Deferrable Interest Debentures
maturing on December 31, 2035. The proceeds will be used to redeem the
balance of outstanding shares of the 8.20%, 7.88% and 7.95% Preferred
stock series. PGE will redeem each of the preferred stock series at
$101.00 per share which including partial period dividends will require
funding of approximately $71 million. The redemption is scheduled for
early November 1995.
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 September 30, 1995, PGE could issue approximately $300
million of preferred stock and $350 million of additional First Mortgage
Bonds.
FINANCIAL AND OPERATING OUTLOOK
UTILITY
RETAIL CUSTOMER GROWTH AND ENERGY SALES
During the third quarter of 1995, 2,580 retail customers were added to PGE's
service territory. For the nine-months ended September 30, 1995,
approximately 8,500 retail customers were added.
Weather adjusted retail energy sales growth for the nine months ended
September 30, 1995 was approximately 2.7%. The Company expects annual 1995
weather-adjusted retail energy sales growth to be approximately 2.9%.
<GRAPH>
Quarterly Increase in Retail Customers
Quarter/Year Residential Customers Commercial/Industrial Customers
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
3Q 95 2145 435
</GRAPH>
SEASONALITY
Due to seasonal fluctuations in electricity sales, as well as the price of
wholesale energy and fuel costs, quarterly operating earnings are not
necessarily indicative of results to be expected for calendar 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.
7
PORTLAND GENERAL CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
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 other's transmission facilities. PGE is in the
process of preparing an open access transmission tariff for its 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.
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.
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.
The table below indicates the balance of outstanding power cost deferrals as
of September 30, 1995.
SYNOPSIS OF POWER COST DEFERRALS
Deferral Earnings Amounts
Period Covered Rate Review Deferred Collected
December 4, 1992 - 80% Approved (1) $57 million $27 million
March 31, 1993 (4)(a)
July 1, 1993 - 50% Late 1995 (2) $59 million N/A
March 31, 1994 (4)(b)
January 1, 1995 - 40% Late 1995 (3) $11 million N/A
March 31, 1995 (4)(c)
(1) Approved for collection which began on 4/1/94.
(2) See discussion below on settlement with PUC staff.
(3) See discussion below on settlement with PUC staff.
(4) Includes accrued interest of (a) $12 million, (b) $10 million, and (c) $.7 million.
8
PORTLAND GENERAL CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
On October 17, 1995 PGE and the Oregon Public Utility
Commission's (PUC) Staff agreed to jointly recommend to the
PUC a settlement on PGE's August 1995 consolidated filing which
supports increasing Company annual revenues by $20 million or
approximately 2.0%. The increase includes an additional $40
million for the Coyote Springs Generation Project (Coyote
Springs) and Bonneville Power Administration (BPA) price
increases offset by the cancellation of the current collection
of deferred power costs. See Portland General's and PGE's
reports on form 10-Q dated June 30, 1995 and form 8-K dated
October 5, 1995 for further information on PGE's consolidated
filing.
While the agreement supports full recovery of the $11 million
of power costs deferred from January through March 1995, it
supports recovery of only $9 million of the $50 million of
power costs deferred from July 1993 through March 1994. The
agreement also includes a provision for immediate recovery of
approximately $27 million in incentive revenues associated with
prior years' achievements of the Company's energy efficiency
programs.
Lastly, the stipulation supports the Company's proposal to
offset the uncollected balance of all power cost deferrals,
incentive revenues, certain other regulatory assets, and a
portion of the remaining Trojan investment, against PGE's
unamortized gain on the prior sale of a portion of the Boardman
Coal Plant. If approved, the offsets will allow for recovery
of the deferred power costs and incentive revenues discussed
above, without increasing customer rates as well as eliminate
approximately $117 million of regulatory assets and
liabilities from the Company's Balance Sheets. A PUC order on
the regulatory proceeding is expected during the fourth quarter 1995.
TROJAN DECOMMISSIONING UPDATE
As of October 31, 1995 PGE has substantially completed the
early removal of some of Trojan's large components. The large
component removal project (LCRP) commenced in November 1994
following public hearings in a lengthy state approval process.
On two separate occasions LCRP work was interrupted
pending review of legal challenges in both state
and federal courts. Despite the work stoppages the LCRP was
completed in time to take advantage of lower near-
term burial costs and provide cost savings.
The LCRP was the subject of an NRC
review initiated in early September 1995. The NRC solicited
comments from interested parties on whether to halt the LCRP
and any further decommissioning activities at Trojan until
public hearings could be held regarding the Trojan
Decommissioning Plan. For further information see Portland
General's and PGE's reports on form 8-K dated August 30, 1995.
The NRC completed its review on October 12, 1995 with an order
that allowed the completion of the LCRP. However, the NRC
Order stated that no further major dismantling
at Trojan would be allowed until final NRC approval of the
Trojan Decommissioning Plan is obtained. This does not preclude
further planning or minor dismantling activities.
The Trojan Decommissioning Plan is presently under review by the NRC. The
order notes that the NRC intends to give notice of an
opportunity for a public hearing on the plan. A hearing may
require additional time beyond that originally anticipated by
the Company in obtaining final approval of the Trojan
Decommissioning Plan.
9
PORTLAND GENERAL CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
NONUTILITY
In April 1992 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
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.
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 Corporations and Subsidaries
Consolidated Statements of Income for the
Three Months and Nine Months Ended September 30, 1995 and 1994
(Unaudited)
Three Months Ended Nine Months Ended
September 30 September 30
1995 1994 1995 1994
(Thousands of Dollars)
Operating Revenues $ 222,612 $ 214,180 $ 701,681 $ 694,304
Operating Expenses
Purchased power and fuel 64,428 83,732 198,740 248,549
Production and distribution 15,963 15,282 47,404 46,295
Maintenance and repairs 10,563 12,267 31,880 35,495
Administrative and other 25,346 24,836 76,895 72,562
Depreciation and amortization 33,340 31,331 99,583 92,579
Taxes other than income taxes 11,889 12,057 38,672 39,144
161,529 179,505 493,174 534,624
Operating Income Before Income Taxes 61,083 34,675 208,507 159,680
Income Taxes 20,817 7,150 71,509 46,216
Net Operating Income 40,266 27,525 136,998 113,464
Other Income (Deductions)
Regulatory disallowances - net of income
taxes of $8,441 and $25,542 (12,859) 0 (49,567) 0
Interest expense (19,592) (18,951) (58,921) (53,870)
Allowance for funds used
during construction 3,608 1,243 8,682 2,507
Preferred dividend requirement - PGE (2,380) (2,583) (7,380) (8,217)
Other - net of income taxes 5,138 4,653 14,818 14,661
Income From Continuing Operations 14,181 11,887 44,630 68,545
Discontinued Operations
Gain on disposal of real estate
operations - net of income taxes
of $4,226 0 0 0 6,472
Net Income $ 14,181 $ 11,887 $ 44,630 $ 75,017
Common Stock
Average shares outstanding 50,798,082 50,285,669 50,696,185 49,706,398
Earnings per average share
Continuing operations $0.28 $0.24 $0.88 $1.38
Discontinued operations 0 0 0 0.13
Earnings per average share $0.28 $0.24 $0.88 $1.51
Dividends declared per share $0.30 $0.30 $0.90 $0.90
Consolidated Statements of Retained Earnings for the
Three Months and Nine Months Ended September 30, 1995 and 1994
(Unaudited)
Three Months Ended Nine Months Ended
September 30 September 30
1995 1994 1995 1994
(Thousands of Dollars)
Balance at Beginning of Period $ 117,777 $ 113,427 $ 118,676 $ 81,159
Net Income 14,181 11,887 44,630 75,017
ESOP Tax Benefit and Amortization of
Preferred Stock Premium (470) (484) (1,418) (1,280)
131,488 124,830 161,888 154,896
Dividends Declared on
Common Stock 15,247 15,094 45,647 45,160
Balance at End of Period $ 116,241 $ 109,736 $ 116,241 $ 109,736
The accompanying notes are an integral part of these consolidated statements.
11
Portland General Corporation and Subsidaries
Consolidated Balance Sheets
as of September 30, 1995 and December 31, 1994
(Unaudited)
September 30 December 31
1995 1994
(Thousands of Dollars)
Assets
Electric Utility Plant - Original Cost
Utility plant (includes Construction Work
in Progress of $201,963 and $148,267) $ 2,699,334 $ 2,563,476
Accumulated depreciation (1,019,142) (958,465)
1,680,192 1,605,011
Capital leases - less amortization of $27,423 9,895 11,523
1,690,087 1,616,534
Other Property and Investments
Leveraged leases 153,106 153,332
Net assets of discontinued real estate operations 2,770 11,562
Trojan decommissioning trust, at market value 69,261 58,485
Corporate Owned Life Insurance less loans of $24,320 in 1995
and $21,731 in 1994 69,964 65,687
Other investments 27,999 28,626
323,100 317,692
Current Assets
Cash and cash equivalents 10,323 17,542
Accounts and notes receivable 84,845 91,418
Unbilled and accrued revenues 127,938 162,151
Inventories, at average cost 33,512 31,149
Prepayments and other 45,864 34,455
302,482 336,715
Deferred Charges
Unamortized regulatory assets
Trojan investment 330,521 402,713
Trojan decommissioning 316,434 338,718
Income taxes recoverable 200,595 217,967
Debt reacquisition costs 30,222 32,245
Energy efficiency programs 68,502 58,894
Other 45,265 47,787
WNP-3 settlement exchange agreement 169,626 173,308
Miscellaneous 22,109 16,698
1,183,274 1,288,330
$ 3,498,943 $ 3,559,271
Capitalization and Liabilities
Capitalization
Common stock $ 190,591 $ 189,358
Other paid-in capital 571,137 563,915
Unearned compensation (8,906) (13,636)
Retained earnings 116,241 118,676
869,063 858,313
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 874,051 835,814
1,852,818 1,813,831
Current Liabilities
Long-term debt and preferred stock due within 113,483 81,506
Short-term borrowings 74,216 148,598
Accounts payable and other accruals 82,420 104,254
Accrued interest 23,050 19,915
Dividends payable 17,999 18,109
Accrued taxes 48,389 27,778
359,557 400,160
Other
Deferred income taxes 645,217 687,670
Deferred investment tax credits 53,558 56,760
Deferred gain on sale of assets 117,840 118,939
Trojan decommissioning and transition costs 383,836 396,873
Miscellaneous 86,117 85,038
1,286,568 1,345,280
$ 3,498,943 $ 3,559,271
The accompanying notes are an integral part of of these consolidated balance sheets.
12
Portland General Corporation and Subsidiaries
Consolidated Statements of Capitalization
as of September 30, 1995 and December 31, 1994
(Unaudited)
September 30 December 31
1995 1994
(Thousands of Dollars)
Common Stock Equity
Common stock, $3.75 par value per
share 100,000,000 shares authorized,
50,824,141 and 50,495,492 shares outstanding $ 190,591 $ 189,358
Other paid-in capital - net 571,137 563,915
Unearned compensation (8,906) (13,636)
Retained earnings 116,241 118,676
869,063 46.9% 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 shares 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 3.8 69,704 3.8
Long-Term Debt
First mortgage bonds
Maturing 1995 through 2000
4.70% Series due March 1, 1995 0 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 (8,117) (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 9,895 11,523
Other (518) (317)
977,534 907,320
Long-term debt due within one year (103,483) (71,506)
874,051 47.2 835,814 46.1
Total Capitalization $1,852,818 100.0% $1,813,831 100.0%
The accompanying notes are an integral part of these consolidated statements.
13
Portland General Corporation and Subsidaries
Consolidated Statements of Cash Flow for the
Three Months and Nine Months Ended September 30, 1995 and 1994
(Unaudited)
Three Months Ended Nine Months Ended
September 30 September 30
1995 1994 1995 1994
(Thousands of Dollars)
Cash Provided (Used) By -
Operations:
Net income $ 14,181 $ 11,887 $ 44,630 $ 75,017
Adjustment to reconcile net income to net cash
provided by operations:
Depreciation and amortization 24,695 25,442 75,540 70,596
Amortization of WNP-3 exchange agreement 1,227 1,174 3,682 3,521
Amortization of Trojan investment 6,456 6,425 18,865 19,641
Amortization of Trojan decommissioning 3,511 2,805 9,826 8,415
Amortization of deferred charges - other (30) (339) (208) 2,547
Deferred income taxes - net 2,221 7,075 (1,651) 19,607
Other noncash revenues (1,597) (296) (3,969) (954)
Changes in working capital:
(Increase) Decrease in receivables 8,175 5,147 18,976 4,268
(Increase) Decrease in inventories 5,228 2,661 (2,363) 1,303
Increase (Decrease) in payables 16,931 27,071 (176) 5,830
Other working capital items - net (12,132) (32,379) (11,347) (28,980)
Gain from discontinued operations 0 0 0 (6,472)
Deferred charges - other (3,465) 5,622 (13,205) 5,378
Miscellaneous - net 5,985 6,258 11,713 13,573
Regulatory Disallowances 12,859 0 49,567 0
84,246 68,553 199,881 193,290
Investing Activities:
Utility construction - new resources (8,386) (19,667) (37,797) (69,520)
Utility construction - other (43,056) (33,179) (108,219) (94,587)
Energy efficiency programs (4,439) (5,757) (13,391) (15,789)
Rentals received from leveraged leases 8,050 6,469 19,735 19,351
Nuclear decommissioning trust contributions (3,046) (2,805) (13,553) (8,415)
Nuclear decommissioning expenditures 1,805 0 8,413 0
Discontinued operations 1,853 (181) 8,792 26,884
Other (215) (2,310) (4,907) (4,637)
(47,434) (57,430) (140,927) (146,713)
Financing Activities:
Short-term borrowings - net (25,856) (48,458) (74,381) (47,324)
Borrowings from Corporate Owned Life Insurance 0 0 2,589 19,619
Long-term debt issued 0 75,000 75,000 75,000
Long-term debt retired 0 (34,112) (3,045) (45,577)
Repayment of nonrecourse borrowings for
leveraged leases (6,815) (4,804) (17,443) (16,865)
Preferred stock retired 0 0 (10,000) (20,000)
Common stock issued 2,303 2,479 6,865 47,685
Dividends paid (15,218) (15,044) (45,757) (44,754)
(45,587) (24,939) (66,173) (32,216)
Increase (Decrease) in Cash and
Cash Equivalents (8,775) (13,816) (7,219) 14,361
Cash and Cash Equivalents at the Beginning
of Period 19,098 31,379 17,542 3,202
Cash and Cash Equivalents at the End
of Period $ 10,323 $ 17,563 $ 10,323 $ 17,563
Supplemental disclosures of cash flow information
Cash paid during the period:
Interest $ 14,923 $ 12,488 $ 50,934 $ 45,426
Income taxes 26,220 2,100 67,610 20,339
The accompanying notes are an integral part of these consolidated statements.
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
BONNEVILLE PACIFIC CLASS ACTION AND LAWSUIT
In April 1992 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 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.
15
PORTLAND GENERAL CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
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
DEFERRED POWER COST RECOVERY
In accordance with Oregon law, collection of PGE's power costs deferrals is
subject to PUC review of PGE's reported earnings, adjusted for 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. On
August 8, 1995 as part of a consolidated request to recover deferred power
costs and fixed costs associated with Coyote Springs, PGE filed earnings
reviews for both of its outstanding power cost deferrals. On October 17, 1995
PGE and the PUC Staff reached an agreement on the Company's August 1995
filing that, if approved, would allow full recovery of the power costs
deferred from January to March 1995 and partial recovery of the power costs
deferred from July 1993 to March 1994.
As a result of the agreement management believes that it is unlikely that the
PUC will authorize collection of all of the deferred power costs and has
recorded a third quarter $13 million, after tax, loss provision. A PUC
order on the regulatory proceeding is expected during the fourth quarter
1995.
16
PORTLAND GENERAL ELECTRIC COMPANY 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
Consoliated Statements of Income for the
Three Months and Nine Months Ended September 30, 1995 and 1994
(Unaudited)
Three Months Ended Nine Months Ended
September 30 September 30
1995 1994 1995 1994
(Thousands of Dollars)
Operating Revenues $ 222,240 $ 213,897 $ 699,607 $ 693,342
Operating Expenses
Purchased power and fuel 64,428 83,732 198,740 248,549
Production and distribution 15,963 15,282 47,404 46,295
Maintenance and repairs 10,563 12,267 31,880 35,494
Administrative and other 24,943 25,013 75,904 71,425
Depreciation and amortization 33,318 31,257 99,520 92,345
Taxes other than income taxes 11,915 12,073 38,650 39,092
Income taxes 21,208 7,931 71,720 52,511
182,338 187,555 563,818 585,711
Net Operating Income 39,902 26,342 135,789 107,631
Other Income (Deductions)
Regulatory disallowances - net of income
taxes of $8,441 and $25,542 (12,859) 0 (49,567) 0
Allowance for equity funds used
during construction 1,274 0 1,960 0
Other 5,348 5,286 14,852 15,565
Income taxes (258) (689) (518) (1,639)
(6,495) 4,597 (33,273) 13,926
Interest Charges
Interest on long-term debt and other 17,735 15,706 51,546 45,551
Interest on short-term borrowings 1,217 1,669 5,463 3,979
Allowance for borrowed funds used
during construction (2,334) (1,243) (6,722) (2,507)
16,618 16,132 50,287 47,023
Net Income 16,789 14,807 52,229 74,534
Preferred Dividend Requirement 2,380 2,583 7,380 8,217
Income Available for Common Stock $ 14,409 $ 12,224 $ 44,849 $ 66,317
Consolidated Statements of Retained Earnings for the
Three Months and Nine Months Ended September 30, 1995 and 1994
(Unaudited)
Three Months Ended Nine Months Ended
September 30 September 30
1995 1994 1995 1994
(Thousands of Dollars)
Balance at Beginning of Period $ 222,870 $ 201,808 $ 216,468 $ 179,297
Net Income 16,789 14,807 52,229 74,534
ESOP Tax Benefit & Amortization of
Preferred Stock Premium (470) (484) (1,418) (1,280)
239,189 216,131 267,279 252,551
Dividends Declared
Common stock 13,682 12,828 36,772 43,614
Preferred stock 2,380 2,583 7,380 8,217
16,062 15,411 44,152 51,831
Balance at End of Period $ 223,127 $ 200,720 $ 223,127 $ 200,720
The accompanying notes are an integral part of these consolidated statements.
18
Portland General Electric Company and Subsidiaries
Consolidated Balance Sheets
as of September 30, 1995 and December 31, 1994
(Unaudited)
September 30 December 31
1995 1994
(Thousands of Dollars)
Assets
Electric Utility Plant - Original Cost
Utility plant (includes Construction Work in Progress of
$201,963 and $148,267) $ 2,699,334 $ 2,563,476
Accumulated depreciation (1,019,142) (958,465)
1,680,192 1,605,011
Capital leases - less amortization of $27,423 and $25,796 9,895 11,523
1,690,087 1,616,534
Other Property and Investments
Trojan decommissioning trust, at market value 69,261 58,485
Corporate Owned Life Insurance, less loans of $ 24,320 in 1995 41,785 40,034
and $ 21,731 in 1994
Other investments 25,101 26,074
136,147 124,593
Current Assets
Cash and cash equivalents 4,438 9,590
Accounts and notes receivable 82,420 91,672
Unbilled and accrued revenues 127,938 162,151
Inventories, at average cost 33,512 31,149
Prepayments and other 44,082 33,148
292,390 327,710
Deferred Charges
Unamortized regulatory assets
Trojan investment 330,521 402,713
Trojan decommissioning 316,434 338,718
Income taxes recoverable 200,595 217,967
Debt reacquisition costs 30,222 32,245
Energy efficiency programs 68,502 58,894
Other 45,265 47,787
WNP-3 settlement exchange agreement 169,626 173,308
Miscellaneous 19,143 13,682
1,180,308 1,285,314
$ 3,298,932 $ 3,354,151
Capitalization and Liabilities
Capitalization
Common stock equity $ 847,211 $ 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 874,051 805,814
1,830,966 1,759,744
Current Liabilities
Long-term debt and preferred stock due within one year 83,483 81,506
Short-term borrowings 74,216 148,598
Accounts payable and other accruals 82,723 104,612
Accrued interest 22,835 19,084
Dividends payable 16,350 15,702
Accrued taxes 53,999 32,820
333,606 402,322
Other
Deferred income taxes 509,491 549,160
Deferred investment tax credits 53,558 56,760
Deferred gain on sale of assets 117,840 118,939
Trojan decommissioning and transition costs 383,836 396,873
Miscellaneous 69,635 70,353
1,134,360 1,192,085
$ 3,298,932 $ 3,354,151
The accompanying notes are an integral part of these consolidated balance sheets.
19
Portland General Electric Company and Subsidiaries
Consolidated Statements of Capitalization
as of September 30, 1995 and December 31, 1994
(Unaudited)
September 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 471,766 470,008
Unearned compensation (8,028) (12,596)
Retained earnings 223,127 216,468
847,211 46.3% 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
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 0 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 (8,117) (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 9,895 11,523
Other (518) (317)
947,534 877,320
Long-term debt due within one year (73,483) (71,506)
874,051 47.7 805,814 45.8
Total Capitalization $ 1,830,966 100.0% $ 1,759,744 100.0%
The accompanying notes are an integral part of these consolidated statements.
20
Portland General Electric Company and Subsidaries
Consolidated Statements of Cash Flow for the
Three Months and Nine Months Ended September 30, 1995 and 1994
(Unaudited)
Three Months Ended Nine Months Ended
September 30 September 30
1995 1994 1995 1994
(Thousands of Dollars)
Cash Provided (Used In)
Operations:
Net Income $ 16,789 $ 14,807 $ 52,229 $ 74,534
Non-cash items included in net income:
Depreciation and amortization 24,729 25,221 75,533 70,363
Amortization of WNP-3 exchange agreement 1,227 1,174 3,682 3,521
Amortization of Trojan investment 6,456 6,425 18,865 19,641
Amortization of Trojan decommissioning 3,511 2,805 9,826 8,415
Amortization of deferred charges - other (30) (339) (208) 2,547
Deferred income taxes - net 2,113 6,592 1,423 11,182
Other noncash revenues (1,275) 0 (1,960) 0
Changes in working capital:
(Increase) Decrease in receivables 7,997 5,270 21,655 2,838
(Increase) Decrease in inventories 5,228 2,662 (2,363) 1,303
Increase (Decrease) in payables 19,678 26,452 781 10,399
Other working capital items - net (10,946) (31,616) (11,156) (28,623)
Deferred charges - other (3,465) 5,622 (13,205) 5,378
Miscellaneous - net 6,139 6,388 11,116 9,089
Regulatory disallowances 12,859 0 49,567 0
91,010 71,463 215,785 190,587
Investing Activities:
Utility construction - new resources (8,386) (19,667) (37,797) (69,520)
Utility construction - other (43,056) (33,179) (108,219) (94,587)
Energy efficiency programs (4,439) (5,757) (13,391) (15,789)
Nuclear decommissioning trust contributions (3,046) (2,805) (13,553) (8,415)
Nuclear decommissioning expenditures 1,805 0 8,413 0
Other investments (70) (451) (3,048) (2,997)
(57,192) (61,859) (167,595) (191,308)
Financing Activities:
Short-term debt - net (25,869) (39,897) (74,381) (19,473)
Borrowings from Corporate Owned Life Insurance 0 0 2,589 19,619
Long-term debt issued 0 75,000 75,000 75,000
Long-term debt retired 0 (24,195) (3,045) (33,077)
Preferred stock retired 0 0 (10,000) (20,000)
Common stock issued 0 0 0 41,055
Dividends paid (13,926) (17,976) (43,505) (57,615)
(39,795) (7,068) (53,342) 5,509
Increase (Decrease) in Cash and
Cash Equivalents (5,977) 2,536 (5,152) 4,788
Cash and Cash Equivalents at the Beginning
of Period 10,415 4,351 9,590 2,099
Cash and Cash Equivalents at the End
of Period $ 4,438 $ 6,887 $ 4,438 $ 6,887
Supplemental disclosures of cash flow information
Cash paid during the period:
Interest $ 13,709 $ 11,265 $ 48,490 $ 41,030
Income taxes 27,721 5,358 72,842 30,818
The accompanying notes are an integral part of these consolidated statements.
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.
UTILITY
SOUTHERN CALIFORNIA EDISON COMPANY V. PGE, OREGON COURT OF APPEALS, OCTOBER 9,
1995
Southern California Edison (SCE) has appealed a Multnomah County Circuit Court
order which granted PGE summary judgment in a long-term power sales contract
dispute.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
NUMBER EXHIBIT PGC PGE
1 Underwriting agreement X X
24 Power of Attorney X X
27 Financial Data Schedule - UT X X
(Electronic Filing Only)
b. Reports on Form 8-K
August 16, 1995 - Item 5. Other Events: Update on Trojan Decommissioning,
legal proceedings and regulatory
matters.
October 3, 1995 - Item 5. Other Events: Financing update.
Item 7. Exhibits: (4)b Indentures.
(4)c Indenture supplement.
October 5, 1995 - Item 5. Other Events: Regulatory update.
October 17, 1995 - Item 5. Other Events: Regulatory update.
22
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)
October 31, 1995 By /s/ Joseph E. Feltz
Joseph E. Feltz
Assistant Controller
Assistant Treasurer
*Joseph M. Hirko
Sr. Vice President and
Chief Financial Officer
* Signed on behalf of this person.
October 31, 1995 By /s/ Joseph E. Feltz
Joseph E. Feltz
(Attorney-in-Fact)
23