Portland GE Earnings Struggle Over These Costs

Portland General Electric (NYSE:POR) didn’t have the best news for investors on Friday, but the utility company had its excuses lined up during the quarterly conference call. Facing rising costs attributed to plant operation and the effect of good weather in the Pacific Northwest, PGE missed analyst expectations by $0.02 a share, though the company said its slate of projects in the works point to better earnings moving forward.

CEO Jim Piro announced a net loss of $22 million straight away ($0.29 per share), a contrast from the $26 million in profit ($0.34 per share) in the second quarter of 2012. Analysts were expecting earnings per share at $0.31, giving the company a miss. Piro called the drop attributable to the Cascade Crossing project’s expense, as well as refunds that had to be given out to customers. In addition, general operating expenses were higher, while warm weather led to lower usage among customers.

“Excluding these factors earnings this quarter would have been comparable to earnings in the second quarter of 2012,” Piro said. He then laid out the case for why this slip shouldn’t discourage investors moving forward. Three projects should give the company the chance to increase rates and turn the tables on revenue.

The first was a natural gas plant at Port Westward 2, which cost $300 million but could result in rate increases of 3 to 4 percent for customers, according to Piro.  Another project in the works is the Carty Generation Station, a second natural gas plant that will run the company some $450 million.

Piro said this station the Carty plant would be operational in the next three years, and could result in price increases of 6 to 7 percent. The third project centered around the second phase of Lower Snake River station, which Piro said will now be known as Tucannon River Wind Farm. This half-billion dollar project will also generate significant revenues that could amount to more customer price increases (4 to 5 percent).

Portland General Electric reduced its earnings per share for the year to $1.25 from $1.40, provided the weather follows a pattern similar to last year. Warmer temperatures in 2013 also accounted for the slip in revenue, and investors would have to continue considering the trend a factor for the coming year.

Piro ended his statement noting the sterling reputation of PGE among customers, as well as the strong trends of the Oregon economy in general.

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