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Portland General Electric Company (POR) Q4 2022 Earnings Call Transcript

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Portland General Electric Company (NYSE:POR) Q4 2022 Results Conference Call February 16, 2023 11:00 AM ET

Company Participants

Jardon Jaramillo - Senior Director of Finance, Investor Relations and Risk Management

Maria Pope - President and CEO

Jim Ajello - SVP Finance, CFO, Treasurer and CCO

Conference Call Participants

Julien Dumoulin-Smith - Bank of America

Sophie Karp - KeyBank

Alex Mortimer - Mizuho Group

Travis Miller - Morningstar

Nathan Richardson - Credit Suisse

James Kennedy - Guggenheim Partners

Operator

Good morning, everyone. And invited to Portland General Electric Company's Fourth Quarter 2022 Earnings Results Conference Call. Today is Thursday, February 16, 2023. This telephone is being recorded. And arsenic such, each lines person been placed connected shut up to forestall immoderate inheritance noise. After nan speakers' remarks, location will beryllium a question-and-answer play [Operator Instructions].

For opening remarks, I would move nan convention telephone complete to Portland General Electric's Senior Director of Finance, Investor Relations and Risk Management, Jardon Jaramillo. Please spell ahead, sir.

Jardon Jaramillo

Thank you, Towanda. Good morning, everyone. I'm happy you tin subordinate america today. Before we statesman this morning, I would for illustration to punctual you that we've prepared a position to supplement our discussion, which we will beryllium referencing passim nan call. The slides are disposable connected our Web tract astatine investors.portlandgeneral.com. Referring to descent two, immoderate of our remarks this greeting will represent forward-looking statements. We be aware you that specified statements impact inherent risks and uncertainties and existent results whitethorn disagree materially from our expectations. For a explanation of immoderate of nan factors that could origin existent results to disagree materially, please mention to our net property merchandise and our astir caller periodic reports connected Forms 10-K and 10-Q, which are disposable connected our Web site. Leading our chat coming are Maria Pope, President and CEO; and Jim Ajello, Senior Vice President of Finance, CFO, Treasurer and CCO. Following their prepared remarks, we will unfastened nan statement for your questions. Now, it’s my pleasance to move nan telephone complete to Maria.

Maria Pope

Great, convey you, Jardon. Good morning. Thank you each for joining america today. Beginning pinch Slide 4, I'll start by discussing our 2022 afloat twelvemonth and 4th fourth results, arsenic good arsenic touch connected a fewer cardinal drivers. Overall, we delivered coagulated results for nan twelvemonth contempt important challenges. We reported GAAP nett income of $233 cardinal aliases $2.60 per stock for nan afloat twelvemonth of 2022. After adjusting for nan first 4th $0.14 effect of nan 2020 wildfire and COVID net [Indiscernible] constitute off, non-GAAP nett income was $245 cardinal aliases $2.74 per diluted share. This compares pinch $244 cardinal aliases $2.72 per stock successful 2021. For nan 4th quarter, GAAP nett income was $50 cardinal aliases $0.56 per share. This compares pinch $66 cardinal aliases $0.73 per stock successful nan 4th fourth of 2021, arsenic we were specifically impacted by terrible precocious December storms and bonzer earthy state and power marketplace volatility. In December, earthy state prices astatine location hubs peaked astatine complete $55 per MMBtu and mean Mid-C powerfulness prices roseate to $265 per megawatt hour, complete 5 times what we knowledgeable successful 2021. The risks and impacts of marketplace volatility are squarely successful our focus. We've made improvements to procurement, modeling and person entered into further hedges. We're besides much actively utilizing earthy state retention astatine nan North Mist installation to mitigate marketplace volatility.

Over nan past year, our hedging programme was effective and is besides being approved upon. While 2022 prices astatine nan Mid-C accrued by astir 60%, nan value for our customers paid for powerfulness only accrued by 14%. As hedges rotation off, further power marketplace related value increases see 7.7% successful 2023, a forecast of 4.5% successful 2024. Load maturation continues astatine a accelerated pace, expanding 2% complete past year. High tech and integer customers are driving this summation pinch business load increasing astatine 10.6%. Offsetting this effect is simply a customer operation displacement pinch a return to little residential pre-COOVID usage. From an operating perspective, I could not beryllium prouder of nan difficult activity and dedication of our squad this twelvemonth successful driving operational efficiencies and navigating bonzer upwind conditions. Excluding nan impacts of accrued wildfire mitigation expenses and deferral items, twelvemonth complete year, generation, transmission, distribution, O&M was up little than 1%, and administrative and different O&M was up 1.2%, arsenic we are laser focused connected costs guidance to offset nan impacts of ostentation and different costs.

Moving to Slide 5. Our committedness to affordability remains patient and we’ll proceed to negociate costs aggressively. We are streamlining our activity processes, simplifying, leveraging exertion and improving productivity. We person upped our crippled pinch regards to aging infrastructure and compliance, replacing and installing captious assets to fortify our reliability. On nan exertion front, we've deployed integer devices to alteration operational efficiencies and visibility, amended assets deployment and improved customer service. We've decreased nan mean long of business impacting events by complete 13% and saved thousands of personification hours done automation of repeatable tasks. We're besides utilizing instrumentality learning to amended restoration forecasting giving our customers greater clarity, while we reduced 1.3 cardinal outage minutes successful 2022. We are cognizant arsenic good of our broader societal effect and responsibility. Our spending pinch divers suppliers accrued significantly, helping to prolong and fortify our communities. Jim will spell into much item connected our O&M arsenic we are again readying to beryllium mostly level successful 2023, excluding nan impacts of accrued wildfire mitigation expenses and deferral items. Today, we revenge our 2024 complaint case, aliases I should really say, yesterday, we revenge our 2024 complaint case. With nan OPUC, which includes a 14% value increase. 40% of our petition is related to reliability, resiliency and customer acquired superior investment, 30% is driven by higher earthy state and purchased power prices pinch nan past 30% reflective of higher compliance costs and ostentation arsenic good arsenic operating and financing costs.

In addition, we are seeking an authorization for important activity to protect and mitigate against ambiance and important arena risks, specified arsenic wildfires. An important facet of our wide complaint lawsuit is addressing our powerfulness costs accommodation system aliases PCAM. We person projected modifications to nan powerfulness costs regulatory model to facilitate Oregon's decarbonization goals and amended bespeak existent and early operating conditions. This is not a consequence transfer. Rather, our connection will create a much durable model that supports customers by reasonably balancing benefits and costs and improving nan wide mechanism. As successful nan past, we look guardant to collaborative discussions pinch nan OPUC and stakeholders, particularly during this play of tremendous translator and important superior investment. Last quarter, arsenic you know, we announced nan Clearwater Wind Project, 1 of our benchmark procreation bids. We are optimistic astir nan imaginable ownership opportunities arsenic we proceed to discuss nan remaining non-emitting dispatchable capacity RFP. We expect to procure 375 megawatts successful request that was identified successful nan 2021 RFP. This includes PGE’s benchmark projects and imaginable PPAs that will beryllium captious devices successful supporting reliability and helping america negociate powerfulness costs volatility, fixed nan further upwind and star adaptable resources coming onto our system. We expect these negotiations to reason successful nan first half of this year. In March, we will record our mixed cleanable power scheme and integrated assets plan. As we've shared previously, these plans will incorporated Oregon's wide decarbonization goals and PGE’s associated actions. In nan 2nd half of nan year, we expect to motorboat further RFPs for renewable procreation and non-emitting capacity successful alignment pinch those plans.

As we proceed to lead nan measurement to a cleanable power future, reliability and affordability person been and will ever beryllium cardinal to this transformation. With nan transition of nan Infrastructure Investment and Jobs Act and nan Inflation Reduction Act, we look guardant to moving successful business pinch section communities, tribal entities, exertion companies and others, to unafraid national backing for ambiance and infrastructure investments, helping to trim customer measure impacts. In 2022, we submitted 180 cardinal successful national assistance applications and conception papers, and successful conscionable nan first six weeks of 2023, we person submitted an further 300 cardinal of conception papers. This astir 480 cardinal successful assistance applications and conception papers are successful support of projects totaling astir 945 cardinal targeted towards projects, which will scope from caller technologies that merge ever-increasing amounts of renewable power to ample standard transmission. For nan afloat twelvemonth 2023, we expect net to beryllium successful nan scope of $2.60 to $2.75 per share. 2023 represents an finance year. The equity issuance to reset our equilibrium expanse and regulatory lag are impermanent headwinds. And our 2024 GRC and RFP finance opportunities established a clear way to beardown performance. Looking beyond 2023, we are assured successful our agelong word net maturation of 5% to 7%, driven by beardown load and customer maturation and charismatic superior finance profile, and improved operational capacity that enables exceptional customer service. In summary, our capacity successful 2022 laid a beardown instauration for agelong word growth. We precocious captious decarbonization projects, navigated historical power, marketplace volatility and executed good successful look of terrible weather. As we look ahead, we are assured that by remaining focused connected providing safe, reliable, affordable and cleanable power to each customers, we will present beardown financial results.

With that, I'll move it complete to Jim.

Jim Ajello

Thank you, Maria, and bully morning, everyone. Our 2022 results bespeak some nan upside of our work territory but besides nan challenges we face, arsenic our region undertakes nan power translator journey. Strong load maturation continued but we besides faced difficult powerfulness marketplace volatility and terrible upwind that impacted our performance. First, immoderate contacts for operating conditions. We witnessed continued request maturation arsenic good arsenic changing load patterns arsenic habits person shifted from nan tallness of nan pandemic successful 2021 to much normalized usage successful 2022. Overall, 2022 loads accrued 2% upwind adjusted compared to 2021. On a non-weather adjusted basis, full load accrued 3.4% twelvemonth complete year, driven by acold periods successful nan outpouring and wintertime and a historically lukewarm summer. In 2022, Portland saw nan hottest July and August temperatures connected record, and utmost wintertime temperatures successful December caused a caller wintertime highest for nan first clip since 1998. Residential usage accrued 1.4% connected a non-weather adjusted ground but decreased 1.4% upwind adjusted. As COVID-19 related uses trends moderated for nan elevated 2021 levels, residential customer counts accrued 1.2% during nan year. Commercial usage accrued 0.1% non-weather adjusted but decreased 0.5% upwind adjusted arsenic commercialized maturation has slowed somewhat successful nan aftermath of nan pandemic compared to nan precocious maturation levels successful nan conception successful 2021. The business people continued connected its accelerated maturation trajectory pinch business loads expanding 10.9% connected a upwind adjusted ground aliases 10.6% whether adjusted arsenic precocious tech sectors, dependable description successful our region continued.

Similar to overmuch of nan country, we person seen immoderate signals of moderation successful our location economy. We stay assured successful nan fundamentals of our work territory. A patient pipeline of building and interconnections gives america statement of show to load expectations successful 2023 and beyond. As such, we are reaffirming our agelong word load maturation guidance of 2% done 2027. As Maria noted, our quarterly EPS decreased from $0.73 per stock successful nan 4th fourth of ‘21 to $0.56 per stock successful nan 4th fourth of ‘22. We relied connected each disposable strategies to mitigate nan effect of historical volatility successful nan Pacific Northwest successful nan closing weeks of 2022, but request during acold upwind stretches and sustained precocious prices created financial impacts that could not beryllium wholly flooded during this volatile time. Despite these conditions, our financial liquidity remains beardown and we closed 2022 having served 39% of unit customer load from specified non-carbon emitting power sources during nan year. You will besides retrieve that successful 4th fourth 2021, we had already surpassed nan $30 cardinal precocious indebtedness set successful nan PCAM, creating a unsocial quarter-over-quarter costs comparison.

Given this context, I'll move to Slide 6 and screen our financial capacity year-over-year. We knowledgeable a $0.40 summation successful full revenues compared to ‘21, including a $0.63 summation successful EPS owed to nan 3.4% summation successful deliveries, led by increasing request from our high-tech and integer business customers, partially offset by a $0.23 alteration successful EPS, owed to changes successful customer value creation pinch business load maturation outweighing residential and commercialized load. Power costs accrued a nett $0.02 compared to 2021, made up of $0.27 summation attributed to nan headwinds successful 2021 nett of nan 2021 PCAM deferral that we normalized for this comparison. Higher marketplace prices driven by assets scarcity successful highest periods chiefly driven by serving load during periods of terrible upwind and marketplace volatility, drove a $0.19 EPS decrease, and $0.08 alteration owed to higher acquisition volumes to service load successful ‘22 and $0.02 alteration owed to nan alteration incurred arsenic portion of nan 2021 PCAM referral settlement. There was a $0.06 alteration to EPS attributed to higher operating expenses nett of large wind restoration and regulatory programme costs that are offset successful revenue, driven chiefly by accrued wildfire mitigation, vegetation guidance and grid hardening efforts that accrued successful 2022. It was a $0.05 effect from depreciation and amortization expense, driven by higher works plus balances successful 2022 compared to 2021, mostly for transmission, distribution and intangible exertion assets.

There was a $0.05 alteration owed to higher spot and payroll taxes, a $0.09 alteration owed to higher liking expense, driven by accrued agelong word indebtedness balances passim 2022 pinch higher liking rates, including our Q3 2021 and Q4 2022 indebtedness issuances. There was a $0.09 alteration driven by nan section travel done taxation accommodation recognized successful ‘21, which did not recur successful 2022. We had a nett $0.02 alteration reflecting offsetting impacts from a fistful of items arsenic follows: a $0.07 alteration owed to little returns connected nan non-qualified use spot compared to 2021; a $0.04 alteration owed to little AFUDC, driven by little speedy balances successful 2022; a $0.09 alteration owed to nan colony summation and nan buyout information of PGE’s post-retirement aesculapian plan; and finally, a $0.01 alteration owed to different various items. Lastly, we knowledgeable a $0.14 alteration to GAAP EPS arsenic a consequence of nan exertion of nan net trial connected awesome 2020 deferrals established successful nan last 2022 GRC order, which brings america to our GAAP EPS of $1.60 per diluted share. After adjusting for nan $0.14 effect of nan 2022 GRC net trial deferral reduction, we reached our 2022 non-GAAP EPS of $2.74 per diluted share.

Moving to Slide 7. As noted earlier, yesterday, we revenge a wide complaint lawsuit pinch nan Oregon Public Utility Commission to reappraisal our costs of providing work and o.k. caller prices to return effect successful January 2024. The GRC filing requests betterment of basal superior investments of astir $859 cardinal and upgrading nan grid to amended reliability, resiliency and capacity to present safe, reliable and cleanable energy to customers. This includes nan Faraday Hydro Project, which was placed into work successful January of 2023. The requested value summation reflects a complaint guidelines of $6.3 billion, an summation of $859 cardinal aliases 16%, a return connected equity of 9.8%, a superior building of 50% indebtedness and 50% equity, a costs of indebtedness of 4.32% and a costs of superior of 7.06%. As Maria discussed, nan filing besides includes a projected modification of nan PCAM. The connection provides a 90/10 sharing of powerfulness costs variances without a indebtedness set mechanism. Additionally, nan connection provides for afloat betterment of costs prudently incurred during circumstantial reliability contingency events. Finally, betterment aliases refund complete aggregate years arsenic each year's betterment is taxable to a rolling customer value effect cap, which limits nan yearly value changes for nan system betterment aliases in installments to 2.5%. Meaning immoderate variance causing value changes supra 2.5% is carried to nan pursuing twelvemonth aliases continued postulation aliases credit. [Indiscernible] is simply a adjacent and balanced 1 and confederation nan interests of our customers pinch nan company. We look guardant to engaging pinch stakeholders during nan complaint lawsuit process, which would return astir 10 months pinch procedural schedule publication expected successful nan coming weeks.

Onto Slide 8 for an update of our 2021 RFP. The Clearwater Project announced successful nan 4th fourth is now nether building pinch task completion still estimated by nan extremity of 2023. Maria touched connected nan ongoing negotiations relating to nan remaining non-emitting dispatchable capacity, and I will reiterate that this includes PEG’s benchmark projects. Negotiations are going good and we proceed to beryllium optimistic astir our ownership opportunities for artillery retention resources. We are hopeful to stock nan result of these negotiations successful nan first half of 2023. We are besides continuing negotiations for incremental renewable procreation projects arsenic portion of nan 2021 RFP. If contracts for further procreation projects are not achieved successful nan ‘21 RFP, we would see them successful our adjacent RFP. With nan conclusion of nan 2021 RFP connected nan horizon, we are now opening to move attraction to nan 2023 assets readying and procurement processes. We precocious revenge announcement pinch nan OPUC that an RFP successful 2023 is needed to procure resources to beryllium forecasted capacity needs and to make continued advancement towards Oregon's decarbonization targets. We will record PGE’s first cleanable power scheme by nan extremity of March, outlining PGE’s strategy to meet decarbonization targets nether nan Oregon law, on pinch a 2023 integrated assets plan. We will urge nan initiation of nan 2023 RFP process by nan 3rd 4th of 2023 and dream to prime nan last shortlist and taxable a petition for acknowledgement to nan OPUC by nan extremity of 2023.

Turning to Slide 9, which shows our refreshed superior forecast done 2027. As a reminder, figures for 2023 done 2027 do not see immoderate imaginable expenditures related to imaginable ownership from nan remainder of nan existent RFP aliases early RFP cycles. Slide 10 includes a ocular illustration of finance opportunities done nan extremity of nan decade to meet our 2030 emanation standards. For further context, our 2022 superior expenditures were $811 million, including accruals, exceeding nan erstwhile guidance of $750 million, arsenic we continued our efforts to modernize and optimize nan grid, deploy exertion to thrust efficiencies and put successful captious infrastructure. Turning to descent 11, you could spot that our complaint based trajectory done 2027, considering some complaint based superior expenditures and nan Clearwater task and erstwhile considering RFP opportunities, further RFP opportunities astatine an assumed 25% ownership rate, which could beryllium conservative. The schematic superior finance trajectory positive further opportunities stemming from nan existent and early RFP cycles will alteration america to execute our 5% to 7% agelong word net maturation guidance. This is an opportunity outlook and not reflective of net maturation arsenic nan scheme requires equity and indebtedness superior to consummate.

Turning to Slide 12. Our equilibrium expanse remains beardown and we proceed to support our finance people in installments ratings accompanied by a unchangeable in installments outlook. Total disposable liquidity astatine December 31, 2022 is 938 million. And I'll statement this does not see counting immoderate of nan equity guardant that is now successful place. As we look up to 2023, we expect a indebtedness issuance of up to $250 cardinal later successful nan twelvemonth successful summation to nan $100 cardinal funded earlier this year. We will proceed to rumor indebtedness nether our greenish financing model whenever imaginable to proceed our believe of tying indebtedness financings to our sustainability strategy done superior investments. We besides expect issuing communal equity successful 2023 nether nan existing equity guardant waste statement executed successful 2022 opening pinch astir $300 cardinal successful nan first quarter. Remaining draws against nan equity guardant will beryllium completed by nan extremity of nan agreements 24 period term. Turning to Slide 13. We are initiating afloat twelvemonth 2023 adjusted net guidance of $2.60 to $2.75 per diluted share. I'd for illustration to locomotion done a fewer cardinal drivers that will thief america execute this target successful 2023. As I mentioned previously, we've remained assured successful nan fundamentals of nan work territory and expect continued maturation successful demand, led by our precocious tech and integer customers pinch much humble increases successful residential and commercialized load. Combined, we presume 2.5% to 3% upwind adjusted unit load maturation successful 2023.

While our full 2023 O&M guidance midpoint stands astatine 705, this includes astir $45 cardinal of deferral amortization that will beryllium offset successful different income connection lines. Net of this amortization, $655 cardinal of O&M is astir level pinch nan normalized 2022 O&M of $659 million, which excludes nan effect of nan 2022 GRC deferral simplification and large wind costs’ offset and revenue. 2022 O&M included important efforts to streamline our [work processes], improved productivity done nan statement and supply nan highest value work to customers. This difficult activity and our lessons learned will output ratio successful 2023 and will thief our costs guidance strategy. Just a fewer examples: Trimmed 3,300 statement miles of vegetation to trim wildfire risk; we replaced and installed complete 8,200 powerfulness poles; we launched an outage privilege automation program, aligning unit scheduling pinch restoration priorities; decreased nan mean long of business impacting events by complete 13%, redeeming thousands of personification hours done automation and repeatable work; we achieved a simplification of $1.3 cardinal successful customer outage minutes; we accomplished a clip to complete customer creation projects from 80 to 60 days; and our statement ops productivity accrued 40%.

Looking backmost since 2019, our halfway O&M aft deferrals has grown inline pinch inflation. During nan aforesaid timeframe, we've absorbed a important group of increases successful wildfire mitigation expenses while expanding our customer footprint by 5%. Deliveries went up successful that clip play by 10% to power unit customers and nan complaint guidelines accrued 24% since 2019, and accelerating really we service customers successful reaching standard successful nan business, each while keeping headcount flat. 2023 represents captious finance twelvemonth that will fortify PGE for sustained agelong word maturation successful years to come. We stay assured successful our maturation trajectory and reiterate our agelong word net maturation of 5% to 7% based disconnected of 2023 adjusted existent results. To beryllium clear, our outlook for nan agelong word maturation prospects is unchanged. Using our existent 2022 consequence arsenic a starting constituent provides clarity for nan calculation arsenic really -- and really we judge we are capable to move much meaningfully into nan scope by 2025. We are besides reaffirming our agelong word dividend maturation guidance of 5% to 7% for 2023. We expect to beryllium adjacent aliases somewhat supra nan apical of our 60% to 70% payout ratio. Regarding dividends. Our committee precocious declared a dividend of $0.4525 per share. Our 2022 afloat twelvemonth declared dividend was $1.79, which completed our 16th consecutive twelvemonth of dividend maturation pinch nan past 5 years astatine a 5.8% compounded yearly maturation rate. Due to dilution expected successful 2023, nan dividend payout ratio possibly higher than humanities ratios, but we expect this to beryllium a impermanent phenomenon. As we move our undivided detention to nan twelvemonth ahead, we stay committed to our halfway ngo of providing clean, reliable and affordable power and executing our agelong word financial goals, while delivering worth to our customers, our organization and our shareholders.

And now, operator, we're fresh for questions.

Question-and-Answer Session

Operator

[Operator Instructions] Our first mobility comes from nan statement of Julien Dumoulin-Smith pinch Bank of America.

Julien Dumoulin-Smith

I conscionable wanted to travel backmost to nan hold present and nan reaffirmation of 5% to 7%, kudos there. I conscionable want to explain this and really property a small bit. Obviously, ‘22, you're ruling guardant connected nan actuals arsenic nan baseline here, but intelligibly ‘22 was towards nan little extremity of nan wide scope here. Again, I conscionable want to perceive if you opportunity for lawsuit came successful towards nan midpoint of ‘22 and that would've been nan baseline present to reset nan actuals, would you still consciousness comfortable pinch nan outlook successful 5% to 7%? I cognize that's a small spot of a what if type question, truthful hopefully it's fair. But pinch that said, I conscionable want to make judge we're crystal clear astir immoderate imaginable signaling of moving to ‘22 existent fixed wherever you came against nan existent scope pinch respect to nan cascading implications connected nan 5% to 7%?

Jim Ajello

I don't see this a rebasing. I would opportunity that nan discourse present is erstwhile we released caller net guidance successful nan 3rd quarter, we didn't person existent ‘22 numbers, right? And so, I deliberation it's rather adjacent for group to return nan midpoint of nan scope and commencement to extrapolate from there. But I dream we were ever clear connected basing it disconnected nan ‘22 existent results. And arsenic you're implying, we had a unsmooth extremity of nan twelvemonth fixed upwind and volatility. So -- but nan bottommost statement is I would still beryllium comfortable successful achieving nan 5% to 7% range, moreover if net were a small spot higher, adjusted net were a small spot higher successful 2022. The opportunity that we person to turn nan business is still significant. We consciousness that we'll beryllium very comfortable wrong 5% to 7% range. And truthful while it's a hypothetical mobility and we're not utilizing nan hypothetical to guidelines nan guardant look, I'm still beautiful comfortable and beautiful assured successful nan 5% to 7% range, moreover if you did.

Maria Pope

So Julien, underlining nan 5% to 7% agelong word is really our basal work territory maturation that we're seeing successful position customer usage of 2%. And we're very fortunate to person a beardown exertion assemblage successful our area. But we besides person -- to service that we spot increasing request for renewable energy, some wind, solar, artillery storage, longer term, moreover [battery] storage. But successful addition, nan maturation that we're seeing is putting unit connected our distribution infrastructure and we're besides seeing replacement of aging assets and processing retired a a bidirectional smart virtual powerfulness plant. And past we're besides seeing expanding needs for transmission. So each of those projects mixed pinch a beardown load maturation makes america assured successful nan 5% to 7% agelong term.

Julien Dumoulin-Smith

And actually, conscionable since we're talking astir nan 2% debased maturation here, I mean, conscionable tin you elaborate a small bit? Is it shaped otherwise considering immoderate of nan headlines we've seen present successful early ‘23 and specifically what that does for nan tech sector, et cetera, aliases is that reference excessively overmuch into nan outlook here?

Maria Pope

No, that's a really bully question, it’s thing that we've looked a batch astatine ourselves. Near term, we consciousness very assured successful nan maturation rate, because overmuch of nan capacity is already built retired by nan semiconductor arsenic good arsenic integer customers. So it's really filling retired superior finance that they person already spent arsenic they're continuing to statement pinch their customers. We person not seen a move down successful nan semiconductor area. I would statement that astir of nan semiconductor activity that we do present for our customers relates to R&D and different cutting separator developments. So if you deliberation of having Lam Research successful our work territory arsenic good arsenic overmuch of nan R&D areas for Intel and others, it's not rather nan aforesaid commodity semiconductor manufacturing that you spot successful different states, we're very fortunate. And arsenic we look astatine nan investments from nan CHIP Act and nan support of nan State of Oregon is giving to this assemblage we're reasonably bullsish.

Julien Dumoulin-Smith

And past conscionable nan cadence of developments, I mean, obviously, you guys are rather constructive present connected nan setup connected immoderate of nan renewable developments here. But successful position of nan procurements themselves and information points from a adjacent word position to benignant of springiness you affirmation connected -- your circumstantial expertise to ain immoderate of these opportunities, possibly that was successful Jim's comments. Can you reappraisal that successful little here, conscionable wherever we guidelines and what should beryllium nan anticipation present connected those information points present successful nan adjacent fewer months?

Jim Ajello

So we're moving towards nan capacity aliases artillery sets correct now. We person been moving towards that for a number of months now. I would opportunity that fixed this challenging macroenvironment that we're in, it is taking a small longer. But we're literally, I'll telephone it, a number of months distant by nan extremity of nan first half of nan year. So still person a batch of assurance there. That will still beryllium a very important superior investment. Stay tuned for that. But arsenic we get person to announcing that, we'll besides supply updates connected really we're going to finance that arsenic well. But I deliberation that that's an opportunity that will beryllium there. There whitethorn moreover beryllium immoderate procreation opportunity successful this first set. But moreover if it's not there, it'll rotation into nan adjacent RFP, which will statesman very soon aft nan mid twelvemonth constituent arsenic well. So arsenic we discussed successful nan past, we're going to beryllium successful almost changeless procurement rhythm for nan adjacent 4 aliases 5 years arsenic we get towards nan extremity of nan decade to execute nan decarb goals. So we've added a mates of slides present for you. Slides 10 and 11, successful particular, which show you nan opportunity group that's there, these are numbers that are embedded successful our moving group and our cleanable power scheme that we're astir to see. And we've besides provided schematic complaint based growth, and I made nan constituent successful nan commentary that nan 85% CAGR does not see financing. So it's not a surrogate for [earnings model], but it conscionable goes to show you nan ample superior finance needed present successful summation to Clearwater that we person successful beforehand of us. So we're really optimistic. And this is really astatine a 25% ownership rate. So I deliberation a batch of folks, including yourself, were asking for a spot of an illustration connected really we looked astatine that. And I deliberation this could beryllium conservative.

Operator

Our adjacent mobility comes from nan statement of Sophie Karp pinch KeyBank.

Sophie Karp

I wanted to inquire you astir nan Slide 11 present successful particular, which you conscionable referenced. I think, it's very adjuvant successful position of showing maine what if upside scenario. And truthful you guys outlined imaginable for 8.5% CAGR for nan complaint guidelines present pinch definite assumptions, but stopped short of translating that into imaginable EPS CAGR upside. And I'm conscionable funny really you deliberation astir imaginable for illustration puts and takes present successful this upside script and financing equity needs and really regulatory lag nether various scenarios, really would that construe into nan EPS CAGR, and erstwhile would we person immoderate much clarity connected that?

Jim Ajello

I deliberation we're going to beryllium providing incremental clarity arsenic we triumph existent projects, right? And truthful since we person 2 much procurement cycles positive nan wrap up of nan existent one, I don't want to beryllium presumptuous astir that and coming an net exemplary based connected this maturation rate. But you tin presume a mates of things, I believe, which is fair. This is astatine a 25%, I'll telephone it, handicapping of nan full opportunity, taking into relationship a procreation that's owned by others, DER and different needs that are taken attraction of. It'll presume accretive projects. It'll presume that we financed astatine a 50/50 indebtedness equity structure. And you could presume excessively that arsenic we participate 2023, nan equilibrium expanse repair will beryllium almost done. We'll beryllium a agelong measurement into adding to nan equity ratio. So it's a spot of a cleanable commencement for maturation successful position of nan equilibrium sheet. We've asked for a 50/50 ratio successful this caller complaint case. So I'm not providing an net exemplary against this. But if I were to look astatine this from that 8.5% illustration that we have, that's why we telephone it illustration, not guidance. You'd person to presume 50% equity and 50% debt, but this astatine slightest gives you nan numbers upon which to do that modeling.

Sophie Karp

And it's adjacent to opportunity that you would spell astir issuing equity successful a akin manner arsenic you were benignant of gone astir it truthful far? Can I [Multiple Speakers] resolutions?

Jim Ajello

Yes, possibly not. I think, fixed nan quality of these projects, which are mostly build connected transfer, I deliberation that'll continue. That intends that we won't want to overequitize nan projects connected time one, because they haven't been built yet. So what we'll do much than apt is usage guardant equity and backstage spot bonds pinch besides delayed draws. So some features, some markets person delayed tie opportunities. So we tin really money advancement payments pinch equity and indebtedness arsenic we go. That'll beryllium nan champion and astir businesslike building to money nan projects. So we person nary antagonistic arbitrage if you get my drift. So I surely for illustration nan astatine nan marketplace programme arsenic a method arsenic we spell into this second portion of nan year. So that's what I'm reasoning correct now.

Sophie Karp

My different mobility is more, I guess, philosophical question. So beautiful important powerfulness value -- power prices volatility and powerfulness successful nan state that you guys sustained, arsenic you highlighted. As you look astatine nan buildout plans successful nan region, peculiarly for electrical generation, right? Would you opportunity that nan measurement nan procreation stack is poised to germinate present is apt to trim aliases summation this volatility successful nan future?

Maria Pope

I deliberation what we're going to spot is simply a important summation successful distributed power resources, rooftop star successful particular, but besides much locational based artillery storage, which will not needfully thief nan seasonal changes, peculiarly those that could beryllium caused by multi-year drought, but will surely trim nan fluctuations connected a 24 hr basis, arsenic we person star periods versus upwind periods versus hydro periods. And I deliberation you'll spot wide little volatility but we could spot much longer word seasonal issues, peculiarly pinch multi-year drought periods aliases multi-year precocious precipitation and precocious upwind periods. So arsenic we look going forward, you're asking nan cardinal dollar mobility that, that we're each trying to fig out. And what we return is benignant of what I'd opportunity is an each supra group of solutions. We're looking astatine each replacement because arsenic we move forward, peculiarly pinch nan maturation we have, we're going to request nan diverseness of each of those resources and nan expertise to respond and support reliability astatine nan lowest costs for customers. The astir costly measurement to grip a modulation would beryllium to create a awesome daze for customers, and we request to beryllium prudent here, peculiarly arsenic we're seeing higher and higher reliability issues. I'd besides opportunity we're moving overmuch much intimately crossed nan full westbound successful position of integrated markets, successful position of partnerships betwixt precocious tech companies, ample and mini to location and world hydro players and we're -- it's again, an each supra group of solutions.

Operator

Our adjacent mobility comes from nan statement of Alex Mortimer pinch nan Mizuho Group.

Alex Mortimer

So we've seen precocious earthy state prices benignant of crossed Pacific Northwest, moreover arsenic we've seen decreases successful different areas from different hubs successful nan country. Is location immoderate expertise you person to diversify from your hub?

Maria Pope

Yes, location is. And really 1 of nan things that's really absorbing is what happened this past December was benignant of a -- immoderate things spike arsenic they did is nan confluence of aggregate events. Clearly, you had very basking upwind turning very acold quickly without nan play that galore of nan retention accommodation crossed nan westbound were capable to re refill. You besides had beautiful barren December. So you had galore hydro participants who had really sold guardant power and needed to fulfill those contracts, putting different unit connected nan market. And past you had, arsenic Jim mentioned, ace acold upwind and usage that spiked. So I deliberation arsenic we look to going forward, really we create stronger hedging strategies, much diverseness successful resources, further partnerships, again, for much diversity, is each portion of our strategy arsenic we move guardant and will person an incremental benefit. The different is, arsenic we looked astatine past year, we had forecast very beardown business demand, driven by semiconductor industry, unreality computing and different integer capabilities. But it exceeded moreover our expectations. And truthful arsenic we spell into 2023, we've really reracked nan measurement we deliberation astir our customer load and different customer segments. And truthful that will springiness america -- that's overmuch much aligned to our hedging strategy passim nan full twelvemonth that is already successful place. So yes, we're doing much and we already person done overmuch of that.

Alex Mortimer

And past conscionable successful position of guidance, some successful 2023 and past benignant of complete nan agelong word pinch nan 5% to 7%. Basically what gets you either to nan precocious aliases debased extremity some successful nan adjacent and agelong term, and past is location immoderate bias pinch really things guidelines astatine nan infinitesimal wrong that range?

Jim Ajello

I would opportunity that there's nary peculiar bias astatine this moment. We are leveraged to nan RFP opportunities that we have. Really those are wherever we're going to scope nan precocious limits of that guidance range. But I would opportunity progressively moreover since past October erstwhile we first talked astir expanding this guidance scope that we are much assured now that we could beryllium comfortably wrong that scope pinch what's successful beforehand of us. I'll time off it much qualitative astatine nan infinitesimal and conscionable show you that I deliberation that our assurance level has really accrued successful nan past 5 aliases six months.

Maria Pope

And I besides would adhd that we are really good poised to bring to Oregon and to our customers important national funding, whether it’d beryllium for reliability and resiliency and let's opportunity BRIC grants from FEMA, whether it’d beryllium successful infrastructure grants and partnerships pinch proscription organizations crossed nan State of Oregon and nan IIJA, whether it’d beryllium successful position of cleanable power done nan IRA, we are focused successful being successful successful these areas. We've already started pinch a number of applications and are really moving difficult to make a difference, arsenic we spell done a important modulation to trim nan [otherwise] customer value effect of a cleanable power transition.

Jim Ajello

And I think, I would adhd 2 things to Maria's commentary. Number 1 is that, of course, fixed that nan treasury rules connected nan Inflation Reduction Act are not yet promulgated, we deliberation there's upside. We're conscionable not judge really to cipher that yet and wherever nan marketplace is going to monetize nan credits, that's constituent number one. And constituent number one, I'm really pleased astir really we've attacked nan national programs that are available. And our conception papers and our assistance applications are truthful acold put against $945 cardinal successful full task opportunity. And we haven't had 1 conception insubstantial rejected. And nan measurement it useful is you taxable a conception insubstantial and if your conception insubstantial is accepted you're invited to make a bid. We've had nary rejections connected nan conception papers. Concept insubstantial rejects are astatine 50% correct now, truthful each of our applications and conception papers truthful acold are moving forward. So I deliberation that's a bully sign.

Alex Mortimer

And then, conscionable finally, we've seen headwinds evidently crossed nan industry, whether it’d beryllium earthy gas, liking rates, inflations, et cetera. I was conscionable hoping you could supply immoderate benignant of colour connected your assumptions connected erstwhile immoderate of these headwinds whitethorn abate going forward, conscionable fixed nan reaffirmation of nan 5% to 7% today?

Maria Pope

Well, your conjecture is arsenic bully arsenic ours. We are expecting to spot continued ostentation done 2023, hoping that it will moderate. But clearly, peculiarly erstwhile it comes to electrical equipment, successful peculiar transformers and different superior investment, we are continuing to spot steep demand, robust prices and moving very difficult to amended our processes, our systems and our businesslike deployment of each of that instrumentality to mitigate nan effect of each of those outer factors connected our customer base.

Jim Ajello

I conscionable can't guess, right, it's excessively hard. But we tin conscionable do what we've been doing, right? We've grown deliveries 10%, customer count 5%, kept our caput count flat. And we've grown nan complaint guidelines beautiful significantly, right? So we're getting standard successful nan business. So that's nan continued attraction that we person against a difficult macro environment.

Operator

[Operator Instructions] Our adjacent mobility comes from nan statement of Travis Miller pinch Morningstar.

Travis Miller

Just connected nan 20 -- pursuing up connected that 2023 aliases alternatively 2021, nan RFP projects to come. When you break retired that 375 and past nan remaining, are location exertion differences that you're looking astatine successful that 375 and past that remaining up to 200?

Jim Ajello

Yes, Travis, location are, right? So successful summation to nan upwind and perchance much wind, solar, of course, location is an opportunity for important artillery sets successful there. We're moving connected immoderate correct now and that's what we dream to denote by nan extremity of nan first half. There is 1 upstorage task successful nan acknowledgement database that's there. And erstwhile we move nan crank connected nan adjacent RFP and successful nan mediate of this year, telephone it -- I'll telephone it, July 1 for pointers, we'll spot further technologies. We're exertion agnostic, right? It's each astir pricing for nan consumers, managing nan load and nan grid and integrating them efficiently. So we expect to spot much diverseness arsenic we go.

Travis Miller

All those would be, I guess, for deficiency of a amended term, accepted renewable energy. And we're not load guidance aliases thing for illustration that though, right?

Jim Ajello

I deliberation there's a batch of DER going on, but not needfully arsenic portion of this procurement process. I besides deliberation that we will spot further players travel in, truthful nan dynamics could evolve, competitory dynamics could germinate here, arsenic this decade unfolds. So enactment tuned for that and we'll support you updated.

Travis Miller

And past 1 longer term, nan scope you provided retired done 2030 astatine 2.2 to 3.1. What are nan underlying assumptions arsenic item, I'm reasoning you astir apt person that aforesaid type load growth? But are location retirements successful that assumption, are location different load shaping presumption wrong that number, and what's embedded successful that number aliases that range?

Maria Pope

No, it's a awesome mobility and location are a number of assumptions. And astir apt arsenic we look guardant there's much variability than we've ever seen successful our industry. We do not person immoderate retirements included successful immoderate of those assumptions of immoderate of our assets. With nan objection of we are readying connected getting retired of our Colstrip investments and not having that power delivered to our customers present successful Oregon. We besides have, and this relates a small spot to your earlier mobility to Jim. We are reasonably precocious erstwhile it comes to a virtual powerfulness plant. So we were incorporating distributed power resources, immoderate of which we own, but galore of which our customers ain and will progressively ain successful nan future. We besides person a number of load guidance programs, which thief pinch immoderate of our hedging and we're besides looking astatine nan take of quickly successful this area of electrical vehicles. As you know, Oregon and our work territory is 1 of nan apical 5 leaders of EV penetration successful nan country. So there's a number of items that are impacting our load forecast and our plus maturation forecast complete time.

Operator

Our adjacent mobility comes from nan statement of Nicholas Campanella pinch Credit Suisse.

Nathan Richardson

It's Nathan Richardson connected for Nick. I conscionable wanted to ask, what's assumed for nan PCAM successful ‘23, if you haven't covered that already? Is it nan baseline aliases is it still a headwind there?

Maria Pope

As we look astatine our PCAM, we forecast fundamentally astatine nan yearly update tariff. So there's nary forecast. I do deliberation that arsenic you look astatine our powerfulness costs and you look astatine nan full region, it's important to statement wherever we are pinch hydro conditions. 55% of nan power generated crossed nan northwest is hydro based and we're roughly, and you tin spot it successful nan 10-K successful our disclosures, we're astir a small spot complete 80%, and that's nan low, but it's successful peculiar a debased successful comparison to past twelvemonth wherever you saw Mid-C and others astatine 110%. And truthful we person forecast those little hydro levels into our power prices for this coming twelvemonth and I deliberation that's an important benignant of calibration successful position of nan consequence balancing of 2023.

Jim Ajello

So 1 measurement to shorthand it is we entered nan twelvemonth level based connected nan AUT, which is nan baseline, if you want to telephone it that of nan PCAM. So evidently things change. We saw that past year. But we fundamentally are reset fundamentally are reset astatine nan opening of early January 1.

Operator

Our adjacent mobility comes from nan statement of James Kennedy pinch Guggenheim Partners.

James Kennedy

I apologize if I missed this a small earlier, but nan slippage of nan 2021 items and nan RFP process. What is really driving that, is it nan bids that were rebid, is it nan deadline for nan RFP itself? I conjecture conscionable what would thrust that schedule for…

Maria Pope

You know, it's conscionable normal commercialized negotiations successful a clip of bonzer proviso concatenation challenges. We've had a number of star projects precocious that person been laid arsenic they person been laid crossed nan state and we want to make definite that arsenic we are negotiating that each of these projects will beryllium delivered arsenic expected. And it's a challenging situation retired there, but it's thing unusual.

Jim Ajello

Yes. It's a mobility of a fewer months, James [indiscernible] of these [indiscernible] projects, I'm not concerned astatine all. And besides batteries are different successful nan consciousness that they're modular, right? So we're ever looking astatine nan grid and what benignant of retention and capacity is needed astir nan grid. And we're capable to activity pinch nan vendors to size those projects appropriately based connected nan latest accusation we have. So arsenic you spell further successful time, you person much accusation astir nan grid and you tin really creation astir that. But we're talking astir very humble differences successful timeframe.

James Kennedy

And past conscionable 1 benignant of nuance question. I really for illustration Slide 11, but I'm conscionable curious, 1 of nan footnotes, you assumed astir 25% ownership of nan midpoint. I conjecture conscionable really did you benignant of get astatine that number?

Jim Ajello

So we stepped back, and we wanted to supply this benignant of illustration to thief you understand what nan opportunity is. Just wanted to beryllium somewhat conservative. But besides return into relationship what we saw happening successful nan remainder of nan market, nan PPAs, 3rd statement agreements, organization solar, DER, I mean, you sanction it. So we tried to person a holistic look astatine what we would request to do to make nan decarb goals possible. And truthful I think, complete time, I would opportunity that we won a higher percentage, and I'll fto Maria adhd onto this, because of her history present successful position of inferior standard generation, we've been overmuch much successful connected that. But this 25% is much a portion of nan pastry of nan much holistic power operation that we have.

Maria Pope

We've sometimes amazed ourselves pinch nan number of income builds aliases ownership opportunities we've had done RFPs. And I deliberation it's because we return very earnestly nan request to beryllium costs competitory and slightest costs leased risk. And we activity very difficult to make judge that our bids are group up wherever customer value impacts first and foremost arsenic good arsenic nan wide functionality pinch nan portfolio. So hopefully, we will beryllium arsenic successful arsenic we person been successful nan past. But it's highly competitive, which is important successful position of driving costs to their lowest levels, which is simply a situation done a important power modulation and thing we request to ever enactment perpetually vigilant on.

Operator

I'm showing nary further questions successful nan queue. I’d now for illustration to move nan telephone backmost to Maria Pope for closing remarks.

Maria Pope

Thank you very overmuch for joining america today. We admit your liking successful Portland General and we look guardant to seeing you each soon. We very overmuch admit nan robust questions. Thank you.

Operator

[Technical Difficulty] today's convention call. Thank you for your information and you whitethorn now disconnect.

Editor: Naga



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