Q4 2020 Portland General Electric Co Earnings Call
[music].
Yeah.
Okay.
Good morning, everyone and welcome to the Portland General Electric company's fourth quarter 2020 earnings results Conference call. Today is Friday February 19, 2021. This call is being recorded and as such all lines have been placed on mute to prevent any background noise.
After the Speakers' remarks, there will be a question and answer the period. If you would like to ask a question. During this time simply press Star then the number one on your telephone keypad. If you would like to withdraw your question press the pound key on your telephone keypad, if you do it.
Intend to ask a question. Please avoid the use of.
Of the speaker phones for opening remarks, I will turn the conference call over to Portland General Electric Senior director of Investor Relations Jarden.
Jalapeno you. Please go ahead Sir.
Thank you Kieran good morning, everyone I'm pleased that Youre able to join US today before we begin this morning.
Morning, I would like to remind you that we have prepared a presentation to supplement our discussion, which we'll be referencing throughout the call. The slides are available on our website at investors the Portland General Dot com refer to slide two some of our remarks. This morning will constitute forward looking statements. We caution you that such statements involve inherent risks and uncertainty.
Certainties and actual results may differ materially from our expectations.
For a description of some of the factors that could cause actual results to differ materially. Please refer to our earnings press release and our most recent periodic reports on forms 10-K, and 10-Q, which are available on our website, leading our discussion today are Maria Pope President.
And CEO and Jim Ajello Senior Vice President of Finance CFO and Treasurer. Following their prepared remarks, we will open the line for your questions now, it's my pleasure to turn the call over to Maria.
Thanks, John and thank you all for joining us today I'd like to take a moment to formally introduce Jim Ajello.
President and CFO, who many of you already know.
Please join me in extending a warm welcome to Jim.
As many of you know and many of you may also be experiencing yourself firsthand millions of Americans have been impacted by severe winter storms. This past week.
Our new Oregon, we have had an historic storm system move through over a four and a half day period.
It brought punishing wind ice and snow to three separate storm systems and left hundreds of thousands of PGE customers over a third of our customer base.
And without power.
The significant ice late in the storm system is particularly punishing to trees and power lines.
In less than a week, we have restored over 600000 customers and we still have about 68000 customers to go excuse.
68000 customers to go.
Many customers have experienced multiple outages.
As restoration continues we appreciate the fatigue and deep frustration of customers, who have been without power for extended periods.
He was my deepest gratitude to everyone, who was working 24 seven to restore power.
In addition to our P. J E co workers hundreds of line workers from neighboring utilities and contractors are working tirelessly alongside our crews and very challenging conditions.
Our.
As we look back over 2020 and into the new year. We are proud of how we have responded to significant challenges the tested us like never before.
From the pandemic civil unrest trading losses and historic wildfires.
Due to these recent winter storms. Our team has remained focused on delivering for customers.
Supporting the communities we serve.
Yeah.
We take very seriously our role as an essential service provider.
Given the trading losses, our financial results for <unk>.
Disappointing.
But we delivered solid operational performance and improved throughout the past year and through the pandemic.
We also have consistent momentum.
That is in line with our long term growth strategy.
We took actions beginning early in the pandemic.
To control customer prices with an appreciation for the economic hardships of many of our customers.
Today, we are more efficient with improved reliability and getting more work done.
We are also seeing the positive impact of investments in our distribution system.
Including investments in subsea.
Substation upgrades, new wouldn't steel poles distribution automation and other resiliency investments.
We improved operational efficiency by leveraging technology, and improving overall workflow and operations.
We deployed solutions to better serve customers with innovative.
Innovative and clean energy solutions.
We are enabling our employees to work more efficiently.
2020 was an important year for us in our journey towards the clean energy future.
We announced significant the carbonization goals of net zero greenhouse gas emissions.
Missions by 2040.
Including at least 80% reduction in the power supply to customers by 2030 relative to 2010 levels.
This ambitious companywide goal will touch every aspect of our business from the power we serve customers.
The the vehicles we drive.
But how we operate our buildings and operations.
In the fourth quarter, we closed the Boardman coal plant and opened the wheat Ridge energy facility one of the nation's first facilities to integrate solar and wind generation with battery storage at scale in one location.
We.
We are also working to serve many municipal and industrial customers with 100% renewable energy under our Green tariff programs building on our number one decade long residential clean energy programs.
Partnership.
And support for our communities and employees is also central.
The who we are.
To that end PGE, along with employees retirees and the PGE Foundation.
Donated $5 $6 million and volunteered over 18000 hours with more than two more than 400 nonprofits across Oregon.
<unk>.
Diversity equity and inclusion has long been of core value and.
And we measure and publish progress as well as pay equity and other key metrics publicly.
Inclusion in the Bloomberg gender equality index and a perfect score on the human rights campaign.
<unk> corporate equality index reflects our years of focus and work in this area.
However, we know that there is still much work to do.
As we reflect on 2020 and look to the year ahead of the responsibility we have it as an essential service provider.
<unk> a leader within Oregon's economy.
And of crucial partner to customers and communities. We serve has never been more important.
I want to give a special thanks to our teams who have spent considerable time and energy operating a more efficient customers.
Focused utility executing on our strategy to deliver clean energy to oregonians.
Through the historic storms and record of outages.
Many are working 24, 7% to restore power.
I am humbled by the strength.
Dedication and resilience.
Customer of teams, we will not stop working hard until every customer is back online.
Now, let me turn the call over to Jim. Thank.
Thank you.
Thank you Maria and nice to speak with all of you today I want to start by echoing <unk> comments, the number of customer power outages.
And widespread damage to our electric system is unprecedented and we recognize the hardship. These events of creative for our customers. Our entire company is focused on restoring power to our communities and repairing our system and I'm. So impressed with my new teammates at PGE.
The PGE faced a number of.
Of our two circumstances in 2020 it is clear that this team's hard work and focus on advancing our strategy is paying off.
PGE is in a strong position to build on the momentum we've established and deliver long term sustainable growth.
Excited for the opportunities ahead to further reduce carbon emissions invest across our services.
Service territory and continue to reduce cost companywide to cute customer prices low.
Now I'll briefly comment on the economy in our service territory.
While the recovery is continuing in the hardest hit the segments of the economy, such as lodging and restaurants other segments of our economy have been less impacted.
Challenge of 19, and performed well from the load growth standpoint, like residential high Tech manufacturing and digital services in the long run or 1% average load growth anchors on the strength of these sectors as well as continued in migration our load growth. This year remains consistent with long term trends.
But despite the change in composition due to the economies of response to COVID-19.
And our customer base continues to grow despite the COVID-19 pandemic, Oregon continue to rank high among the states ranking third.
Inbound moves.
Construction spending on both residential developments.
And the commercial projects throughout our service territory is strong in several major infrastructure projects around the horizon.
Lets cover our financial results on slide five.
In 2020, we recorded GAAP net income of $155 million or $1 72.
<unk> per diluted share compared to GAAP net income of $214 million or $2 39 per diluted share in 2019.
We finished the fourth quarter, earning GAAP based earnings per diluted share of <unk> 57.
Compared with GAAP based earnings per diluted share of <unk> 68.
In the fourth quarter of 2019, our 2020 non-GAAP net income was $247 million or $2 75 per diluted share the.
This amount is adjusted to reflect the previously disclosed onetime energy trading losses of $1 <unk> per diluted.
Sure.
Looking ahead, we are initiating 2021 full year earnings guidance of.
Of $2 55 to $2 70 per diluted share. We are also affirming our long term earnings guidance of 4% to 6% growth of 2000.
The change in earnings per share of $2 39.
Turning to slide six allow me to walk through the earnings drivers for 2020.
First we saw a <unk> increase in retail revenue is load increased <unk>, 4% year over year weather adjusted the.
This increase was particularly.
9%, partially offset by the impacts of the changing load composition on our decoupling mechanism.
We also achieved a 12% increase due to the lower net variable power costs as a result of low market prices and the effective dispatch of our generating facilities as we've been saying.
The liard all along.
Wind was particularly strong in fact, our wind resources produced 23% more energy when compared to 2019.
We drove a 33 cent decrease increase pardon me in connection with our lower operating and maintenance expenses.
This year served.
Thank you analysts, we're making long term sustainable operational improvements companywide I'll discuss these in more detail in a moment.
Continuing on slide six we have a 26 cent decrease associated with higher depreciation and amortization, which consisted of <unk> <unk> from higher plant in service in two.
As the county in 17.
Attributed to a measurement of the company's only non utility asset retirement obligation on land, we owned along the Willamette River at our Sullivan plant in 2020, we reassess stakeholder needs and the long term strategy for the site, which included an updated fourth quarter of study.
2020, the site study resulted in a significant increase in our retirement asset liability the.
The changes however de risk our ability to respond to long term strategic opportunities at the property.
Further there was a 10% increase associated with higher production tax credits from favorable wind generation compared.
The forecast and the.
Then a <unk> increase for miscellaneous items. This brings our non-GAAP earnings per share diluted share to $2 75.
The third quarter energy trading losses represented a negative impact of $1 <unk> per diluted share for the year and our GAAP earnings per.
Share towards share.
$1 72.
For 2020, the corresponding ROE are 6% and nine 3% respectively.
As it relates to the regulatory environment, we are keeping our focus on customer price impacts given the concerns around economic recovery in our service.
Per day Victoria.
We continue to evaluate our cost structure to ensure that we are providing safe affordable and reliable service for our customers.
Right now we are evaluating our need to file a general rate case with the Oregon Public utility Commission for a 2022 test year. It is important that.
We continue to operate in a way that is cost efficient to keep prices low for our customers regardless of our outlook for a new general rate case with respect to our future resource needs. We filed an update to our 2019 integrated resource plan last month.
The action plan was previously acknowledged by the commission and remains.
This tour of changed as we continue to target 150 average megawatts of renewables to go online by the end of 2024 and secure up to 511 megawatts of capacity as indicated on slide seven.
We are planning to work with stakeholders of seek approval of our RFP and.
<unk> process later this year, but we are continuing to consider customer and stakeholder interest as it relates to timing given the recent updates to federal tax credits, we plan to issue an RFP for both renewables and our remaining capacity.
We will bid a benchmark resource into this competitive process.
On.
<unk> regulatory proceedings last October the <unk> approved our deferral requests per wildfire related expenses as of December 31, 2020, we've deferred $15 million related to wildfire response, we also applied for and received deferral treatment from the <unk> for certain COVID-19 expenses.
Other income principally bad debt expense as of December 31, 2020, we've deferred $10 million relating to the COVID-19.
Earlier this week, we filed the deferral requests per restoration costs associated with the severe winter events that Maria discussed.
And we've recently experienced because of the magnitude and duration.
Expense of the event, we are uncertain as to the cost associated with the full restoration service. We will continue to discuss the impact of this deferral on existing storm recovery mechanism with regulators and stakeholders.
Turning to slide eight this shows our updated capital forecast through 2025.
<unk>, we are providing enhanced recovery here for our capital expenditures forecast the majority of our investment in future years are concentrated in low risk <unk>.
Table distribution infrastructure upgrades to improve safety and reliability of our system investments here are also intended to make us more efficient and help facilitate.
And improve reliability.
The weeks the.
The recent weeks and the wildfire impacts in 2020 demonstrate the importance of maintaining a safe and reliable grid.
We added $200 million to the outer years of the capital plan through 2025, and our capital plan now includes.
$2 $9 billion over the next five years.
As a reminder, these projections do not include any generation build investment that may arise from our renewable energy RFP.
On slide nine we continue to maintain a solid balance sheet, including strong liquidity and investment grade ratings of company.
By the stable outlook based on our strong financial condition, we do not anticipate to issue equity in 2021.
We expect to fund 2021 capital expenditures and long term debt maturities with cash from operations. During 'twenty, one, which is which is expected to range from $600 million to $650 million.
The issuance of debt securities of up to $300 million and.
The issuance of commercial paper as needed. After 2021, there are no maturities of long term debt until 2024.
Turning to slide 10, we are initiating full year 2021 earnings guidance of $2.
<unk> 55 to $2 70 per diluted share our assumptions for this guidance range on the slides.
I'd like to dive deeper and walk through of a few key drivers that were confident will help us grow within the 4% to 6% range in 2021.
Because of continued load trends, we're currently seeing with.
Financial customers and commercial customers that are slowly reopening we expect to refund residential customers under the decoupling mechanism and we will again hit the 2% cap on collections for nonresidential decoupling.
We continue to recognize the challenges faced by our customers and we will continue to make sustainable.
With the resident changes to our cost structure throughout the company, we have accelerated the use of technology throughout the business and a 6% reduction in O&M year over year and about end.
And about half is from lowering our costs and using technology to enable process improvements, but here are just a few exam.
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We have reduced and restructured our software license agreements as PGE continues to move to the cloud we rolled out of new mapping software to our line crews and they are now using tablets for better access in the field, we're using new customer relationship management software to better improve our customer relationships.
<unk>.
We continue to leverage our billing system to drive efficiencies, while providing customers with increased functionality.
I am confident we can continue to identify and implement efficiencies in 2021 as we continue to growth. We are also reaffirming long term earnings growth guidance of 4% to six.
<unk>.
Off a 2019 base year.
The drivers of our long term guidance are consistent with what we've previously discussed including load growth from in migration in the industrial customer expansion operational efficiencies and potential investment opportunities in our system and renewable resources with.
Per the dividends our board recently declared a dividend of $40 75 per share, reflecting an annualized dividend of $1 63 per share with with this dividend. We completed our 14th consecutive year of dividend growth with the last five years at a compounded annual growth rate of five.
One 4%.
And now operator, we're ready for your questions.
As a reminder, if you have a question. Please press star one of your telephone keypad.
The first question comes from the line of Julien Dumoulin Smith from Bank of America.
Hey, good morning team.
Hey.
With the response.
Well done all around.
If we can just kick it off here after adding in the additional Capex can you talk about where that puts you.
In this 46% long term range that we've talked about so much in the past.
And in the Navy.
Your thoughts are about equity financing given the higher capex and obviously.
Considering the impact last year as well just curious on how you would frame that.
Yes, Hi, Julian it's Jim So I would say to you that the the.
The capex here that we've we've laid out for you which is an increase.
A couple of hundred million dollars over the out years and as I mentioned $2 9 billion altogether over this period of time puts us really squarely in that range I feel that that actually.
Ensures that we actually stay in that range with respect to equity no equity.
Sorry for that this year.
There is pretty good and strong cash flow production and I don't see equity for a bit of time here, but let's let's take it one year at a time.
In terms of our forecast.
And when you say squarely you mean midpoint of you mean squarely at the above the low end.
As required.
You're kind of setting the couple of times in different ways, Yes, I would say, we're comfortably in that range how about that.
Excellent I liked the punch genus.
Quick follow up there if you don't mind and obviously this could.
Drive some of the considerations here, how do you think about the timing.
Ending of a rate case, you alluded to of 22 test year in the commentary just now, but what does that mean in terms of the timing of filing and then related.
Is this driven by the outcome of the storm deferral, if you get that or not would that dictate the.
Precise timing here potentially.
I would.
No pun intended decouple the.
The.
The storm restoration expenses and any deferral of that might arise from it with the timing of the rate case.
Secondly, we file our annual AUT in April that sort of fairly prescribed event and so that's the FERC.
First chunk of the filing right there in terms of the general rate case, we're evaluating the timing right now looking at our expenses, making sure we're efficient and actually taking stock of the local economy customer bills and the like this company is becoming a lot more efficient as we go so we have a lot.
The flexibility here it'll be this year, but the actual timing hasn't been set yet.
But it will be the got it okay excellent.
Thank you guys best of luck congrats on the sure. Thank you Julien.
Your next question comes from the line of <unk>, Kim with Goldman Sachs.
Good morning, and so.
Hi, Good morning, Maria Congrats Jim again.
My first question is on the storms I know you asked for the the deferral, but just educate me a little bit currently there is no automatic deferral mechanism or is there any of threshold amount where you would.
Book certain expenses.
The before deferring anything like that.
So thank you and so we have a.
We accrue for storms on a regular basis.
This storm that we are seeing.
Is a one in 40 year type of storm the governor on Saturday declared a state of emergency.
<unk>.
And we are currently restoring customers at a rate that we have never seen in the history of our utility we have had extensive damage throughout the entire system not unlike what we saw with the devastating wildfires and high winds events in early September this.
This is what we've thought of as an unprecedented event, but clearly these are unprecedented times and we will be working collaboratively with the commission we filed earlier this week.
We will work through how we handle all of the expenses and then Sue I'll just tell you that coming into 2021.
We have a storm deferral of $8 million built at that point in time, so starting the new year.
Understood.
And.
I guess going back to potentially the timing of the rate case.
Depending on how you see efficiencies this year that.
You could achieve maybe beyond what you see right now as of this point.
You were to file more later in the years instead of towards the first half of the year.
And most of that rates won't go interest impact won't going to expect in 2022 do you still see that four to six range of the likely even without a full.
Full year of the rate increase of 22.
I do I wouldn't necessarily pick a time for filing as I mentioned, the Julien we're still working on that.
But I'm extremely impressed with our achievement last year, and reducing expenses by 6% I'd call that a catalyst for other things.
Things and so I'd like to sit back here with the team and figure out how we could manage through that given the difficult economy, given the storms that we've had we've got to take that into accounts and given the pace of Covid recovery right. So I look at it is a balancing act and I want to be very.
Judicious and I also want.
To be very.
Half of our customers squarely in mind here, but we are managing well.
Last year demonstrates that.
Got it.
Seems like the Crazy 2020 seems to be extending through the first part of this year. So please stay warm and station.
Thank you.
Your next question comes from the line of Sophie Karp from Keybanc.
Good morning, Paul Good morning, Good morning, and thank you for taking my question.
So I have two questions first on the storm response of course right. So.
What did you assume.
Assume in the guidance range with respect of the outcome of the deferral of here.
Is that basically this is the smiths in the full deferral and could we see of guidance revision is that does not materialize in the kind of what is the timing of that.
Hi, Sophie it's Jim we haven't built in any specific.
The expense for the storm deferral in the guidance that you see as I mentioned and so we do have a.
The storm deferral accounts already existing.
And we just simply don't have an estimate of what the storm deferral accounts are but right now were.
Our guidance is independent of that.
One of the things I think is really important to appreciate is the level of destruction from.
From the ice that coated trees and power lines has resulted in damage that is truly unprecedented and we have thousands of people working in the field today. They will continue working.
24, seven until we get customers restored, but we are still learning more about the damages we get into some of them more remote areas and see tremendous amount of trees out of power lines out.
And many of the customers that we're now putting online.
Our fairly are.
Increasingly.
Hard to reach either because of the amount of of debris.
Or because of their location so we will.
Still more to learn here, but right now getting power back onto all of our customers is our highest priority.
Alright, thank you.
The following with the.
For the questions.
I get it that this is the once in a 40 year event and maybe it doesn't make sense to harden the grid for.
So thats kind of the ones that were 40 years, but.
Would there be an opportunity maybe at some point.
The postmortem of base and see if there is an opportunity for capital investments to mitigate the potential impact and the way events in the future.
And that's of Great question, and it's something that community members of customers.
And many others.
Leaders across the state are asking ourselves please.
Please note that after every significant event, we do after action reports and root cause analysis and figure out how we could do better after the significant wildfires and wind storms. We had in September we made a number of adjustments not only in our processes and procedures. Our incident command response our.
Partnerships with first responders throughout our area, but also in terms of equipment standards.
And other tools and technologies and quite frankly, just the kinds of repair and restoration, we do over the last number of years, we have been increasing our investments.
In our distribution system quite significantly and we have seen the results of those investments.
As part of the contributor to our lower O&M costs. This year, because we have had significantly less outages on average throughout the year, we've had less overtime less truck rolls on Saturdays and Sundays.
And overall better outcomes for customers Sophie if I can add if you look at our <unk>.
Capex projections really I want to leave you with the point that these projections are really all about making us more reliable and efficient so invest capital to make us more efficient down the line secondly, I've been through a lot of storm recovery.
<unk> efforts and I know you've observed from over the years with utilities. There is always some capital that comes back into the system and the restoration process. We don't know what the restoration expense will be and therefore, I cant provide any more clarity on what the capital versus the O&M would be but theres always a mixture as you'd appreciate.
Coverage.
Alright, thank gives its helpful.
The way.
I guess you mentioned that your capital plan does not include potential upside from the renewable Rfps is there a way to frame kind of the range of outcomes of these rfps and the potential impact on your Capex plans at this point of isn't just the.
<unk> impossible to handicap at this point.
Choose I mean, these will be competitive efforts.
We will bid of benchmark resource I think we've been successful in the in the past.
With some of our efforts I was very pleased to see the <unk>.
Day, we prosecuted wheat ridge.
So.
Right.
While there has been as they say in the investment community past successes no guarantee of future results. So we.
We don't we don't exactly know how that will come out. So we'll just have to wait and see.
And I think of Super helpful. I appreciate your answers sure.
So.
Your next question comes from the line of Brian Russo from Sidoti.
D.
Good morning, Brian.
Hi, Good morning, the most of my questions have been asked and answered, but im just curious with the recent storms in.
Where.
Water supply levels are snowpack is as we approach the.
Sure.
Hi, Joe.
Susan maybe at the documents or true.
Et cetera.
A great question, we have had great snow pack levels in comparison to prior years.
They are significantly above normal.
The big issue that we have in addition to Snowpack.
The of collateral of thriving hydro conditions.
Is the run off rate and what we've seen is run off has tended to be earlier.
Then it has been in the past and that has changed some of our profile.
Also know that as we get is really cold periods, we tend to have much less.
Packaged wind generation and so we are seeing less wind than we saw last year on our system. So far in 2021.
Oh, I see sort of the forecast is for above normal temperatures, which would create an earlier than normal runoff net.
Excuse me of the forecast.
The last is for above normal snowpack levels.
Okay.
And the question is one does it the one does it run off because that happens that will determine the impact on the company.
Understood Great and then.
In terms of the dividend policy and it looks like the announcement you just made dividends remain.
Our cash I think historically it was the April timeframe with the board considers increases although.
The weighted last year two of the Covid pandemic.
Should we expect the April time period for.
The increase in the dividend evaluation by the board.
Yes, Brian Thanks, It's Jim so.
<unk> remains the right. So just to make it crystal clear. This was the final capex dividend of 2020 and the board traditionally does look at that.
In the April timeframe, and I would expect them to do that then yes.
Okay, great. Thank you very much.
Sure.
Your question comes from the line of Travis Miller from Morningstar.
Good morning.
Thank you.
You just answered my question on the dividend so I'll skip that one.
The other one was just generically speaking with the storms that you've experienced and obviously the storms of making the headlines in Texas and other places.
Some of the U S.
What do you think and what have you seen impact on renewables.
Are they performing wells do you think there'd be any policy changes coming out of discussion across the entire U S. In terms of cold weather.
What are your thoughts along those lines.
Sure.
This is something that obviously people.
Youre talking about renewable generation remains very strong in the Pacific Northwest I think you'll see across the west as a result of the wildfires there was not a reduction in interest in expanding our renewable generation.
Across the west even with the with the significant wildfire.
<unk>, there actually wasn't of interest in accelerating the.
The pace of renewable transformation in the energy sector.
The census is that this may.
Accelerate what where we're going.
Clearly investing a lot of in technologies bidirectional grid capabilities much of the equipment.
<unk> that we're putting in place handling some of these additional renewables.
Also adds to more resiliency and reliability of the underlying system and allows us to restore faster during the regular storms and catastrophic storms like we have now.
Mhm, Okay have you.
Any of the cold weather issues.
Or the.
<unk>.
Such that we're seeing in Texas or the.
Are there.
The other way of thinking about that at our euro or euro of renewables in the renewables up there.
Designed differently thinking, particularly wind.
Yes.
Of those issues that theyre, having in Texas.
Yes, so most of our wind generation takes place in the eastern part of our state Eastern Washington, and then even farther eastern that they have a regular and ongoing cold winters and we design our system to be able to withstand a fair amount of ice on the wind side on the in our service.
Corey we have seen unprecedented levels.
Of ice that have caused significant damage to the distribution system, but yes, because of the normal cold rather is normal for our.
The wind facilities, we have built them differently than they have in Texas.
Okay.
Terry Great. That's really helpful. Thank you very much.
You.
Your next question comes from the line of Andrew Levi from <unk> edge.
Hey, guys how are you.
Good day.
I guess the first question I have just on the green future.
That program you guys are doing.
You said that the same program that you've talked about in the past an area that you've been kind of growing.
Yes, Andy It is Oh. This is the this is an opportunity for us to deliver 100% Green energy to.
To those customers.
One of move further faster than regular Rps standards, they tend to be municipalities.
Of large tech and digital companies and it's been a very successful program.
The new where you add as far as major run rate.
Good.
Just wanted the deal but earnings Wise I know you do.
There is a margin that you kind of share.
Our run rate that you can kind of give us some.
I'm assuming.
That's what that's a good question I would I would.
Probably not want to give you a runway of its been chunky for example.
Example, our last announcement with Intel well it was a significantly higher volume than we had announced previously.
But we do earn a margin on this it reflects the the risk in the integration and other costs for these programs.
As well as give.
The recognition to the Companys role so that we will continue it's been very beneficial and I would expect to do more.
Is it like ongoing earnings could you sort of chunky or is it like a one time price.
Alright.
Would be ongoing it'd be ongoing Andy okay, Okay, and so this is so.
Your line of business that clear.
Clearly is going to grow.
Obviously as part of your forecast is it is it significant enough where at some point.
It kind of goes in the direction that you anticipate it to go that it could end up being broken out of there or is that more.
More kind of proprietary reasons and things like that that you don't feel comfortable sharing it.
So I think we're going to keep the information as part of our regular disclosure.
It's not big enough that it would be broken out by any SEC standards of any sort.
This is not so sure I'd call. It proprietary really it's about meeting customer needs with the green energy that they want the Andy I'll add a couple of quick points number one I think it has a lot of growth opportunities as customers, such as Intel and others increasingly.
Require renewable energy for the.
Your own ESG goals.
The number one number two I would say the decent negotiated transactions right do you have an IPP in this case of on grid and you have a consumer of anchor tenant.
On the other side with Intel plus 16 or 17 other commercial customers. So so these these are these.
The prices rates and development costs that are that are confidential frankly so.
I don't think youre going to see that transparency, because they're negotiated transactions oftentimes there'll be competitive bidding associated with this too to make sure that we built.
Deliver to those customers like Intel the best available price.
We can from the market.
Okay and then my second question.
He is kind of more of like a bigger picture question. So.
Looking at whether it's this opportunity.
It's big but you know we're not sure what the earnings are.
So.
How big of a tendency to as far as earnings per share.
The potential IRR of P.
Of our IRB.
And of out there.
You just raised.
$665 million of Capex this year about the spirit.
Here again.
Potential.
To raise of the outer years.
And a very good balance sheet.
What happened last summer.
And also flow and one more thing.
The tremendous amount of TD opportunities absent the storm.
And then you have.
Of this 4% to 6% growth rate again.
I'm not pushing you for this year.
Of course, because obviously, we want the season nature of numbers each year.
It happened last year.
But the longer term what are kind of the aspiration.
Obviously, you have to wait customer rates on the.
Rates are not high.
Hi.
But you obviously you have to the way those.
Do you guys see a resonating longer term where.
And then again I'll say, one more thing that you just kind of implementing the growth rate.
You off of base.
But do you see opportunities longer term or the aspirational.
Longer term.
Which would be beneficial to both the shareholders.
And the state and the customers where with the growth rate because of the way the the.
Kind of getting work.
The service territories transforming that the growth rate could go higher.
Andy I think I got all of that.
But.
And then a lot of it okay.
Kind of yes, no no there is a lot of opportunity here at this company to become more efficient to afford.
More capex and resiliency to benefit customers in the market as you know we have.
One of the most unlevered balance sheets.
<unk> per pound in the industry, we have one of the best cash flow producers in the industry pound for pound the.
Sets us up with the tool to be able to moving the direction that you're talking about.
If we could manage our.
Our O&M expenses to offset the additional capital we have plenty of capital to deploy in the future years, especially in the grid and even putting aside anything that we might competitively when in the RFP those.
Those investments are off the chart here on.
On page eight right. These are these are sustainability investments that will make us more reliable and efficient personally convinced that these kinds of investments are going to improve our operating costs. So one follows the other theyre not detached from each other so that's the goal right, but we've got to do the.
The balancing that you so I think well articulated and so I think I think there is opportunity here down the line.
Okay. Thank you guys and good luck.
The cleaning up after the storm.
Thanks, Andy Thank you.
Your line is open.
Okay.
Operator, it looks like we may be finished with the questions.
Okay.
Hello, I will turn the call back over to Maria Pope for closing remarks.
Thank you very much for joining us today, we look forward to further following up with questions.
<unk> as well as of virtual investor conferences coming up in the first quarter, we will be announcing our first quarter results at the end of April and thank you very much for your time today and interest in the company. Thank you.
This concludes today's conference you may now disconnect.
Okay.
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Yeah.
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Good morning, everyone and welcome to the Portland General Electric company's fourth quarter 2020 earnings results Conference call. Today is Friday February 19 2000.
The 21 this call is being recorded and as such all lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer the period. If you would like to ask the question. During this time simply press Star then the number one on your telephone keypad. If you would like to withdraw your question.
Question press the pound key on your telephone keypad, if you do.
Intend to ask a question. Please avoid the use of the speaker phones for opening remarks, I will turn the conference call over to Portland General Electric Senior director of Investor Relations Jarden Holly.
Jalapeno.
Of that Sir.
Thank you Sean good morning, everyone I am pleased that Youre able to join US today before we begin this morning I'd like to remind you that we have prepared a presentation to supplement our discussion, which we'll be referencing throughout the call. The slides are available on our website at investors the Portland General Dot com, referring to slide.
To some of our remarks. This morning will constitute forward looking statements. We caution you that such statements involve inherent risks and uncertainties and actual results may differ materially from our expectations.
For a description of some of the factors that could cause actual results to differ materially. Please refer to our earnings press release and our most recent periodic.
<unk> reports on forms 10-K, and 10-Q, which are available on our website.
Leading our discussion today are Maria Pope President and CEO, and Jim Ajello Senior Vice President of Finance CFO and Treasurer. Following their prepared remarks, we will open the line for your questions now, it's my pleasure to turn the call over to Maria.
Thanks, John and thank you all for joining us today I'd like to take a moment to formally introduce Jim Ajello, our new CFO, who many of you already know.
Please join me in extending a warm welcome to Jim.
As many of you know and many of you may also be experiencing.
Our self firsthand millions of Americans have been impacted by severe winter storms this past week.
And the Oregon, We have had an historic storm system move through over a four and a half day period.
It brought punishing wind ice and snow too.
Three separate storm systems and left hundreds of thousands of PGE customers over a third of our customer base without power.
The significant ice late in the storm system is particularly punishing to trees and power lines.
In less than a week we.
We have restored over 600000 customers.
And we still have about 68000 customers to go excuse me 68000 customers to go.
Many customers have experienced multiple outages.
As restoration continues we appreciate the.
The fatigue and deep frustration of customers, who have been without power for extended periods.
Our deepest gratitude to everyone, who was working 24 seven to restore power.
In addition to our PGE co workers hundreds of line workers from neighboring.
Utilities and contractors are working tirelessly alongside our crews and very challenging conditions.
As we look back over 2020 and into the new year. We are proud of how we have responded to significant challenges the tested us like never.
Before.
From the pandemic.
Civil unrest trading losses, and historic wildfires to these recent winter storms. Our team has remained focused on delivering for customers supporting.
Supporting the communities we serve.
We take very.
Very seriously our role as an essential service provider.
Given the trading losses, our financial results were disappointing but.
But we delivered solid operational performance and improved throughout the past year and through the pandemic.
We also have consistent momentum.
That is in line with our long term growth strategy.
We took actions beginning early in the pandemic to control customer prices with an appreciation for the economic hardships of many of our customers.
Today, we are more efficient with improved reliability and getting more work.
Done.
We are also seeing the positive impact of investments in our distribution system, including investments in substation upgrades, new wouldn't steel poles distribution automation and other resiliency investments.
We improved operational efficiency by leveraging technology.
<unk>, improving overall workflow and operations we.
We deployed solutions to better serve customers with innovative and clean energy solutions.
We are enabling our employees to work more efficiently.
2020 was an important year for us in our journey.
Ernie towards the clean energy future.
We announced significant de carbonization goals of net zero greenhouse gas emissions by 2040 <unk>.
Including at least 80% reduction in the power supply to customers by 2030 relative to 2010 levels.
This ambitious compass.
Tony wide goal will touch every aspect of our business from the power we serve customers.
To the vehicles, we drive.
To how we operate our buildings and operations.
In the fourth quarter, we closed the Boardman coal plant and open the wheat Ridge energy facility one of the nation's first.
First facilities to integrate solar and wind generation with battery storage at scale in one location.
We are also working to serve many municipal and industrial customers with 100% renewable energy under our Green tariff programs building on our number one decade long residential.
<unk> clean energy programs.
Partnership.
And support for our communities and employees is also central to who we are.
To that end PGE, along with employees retirees and the PGE Foundation.
<unk> $5 6 million.
And volunteered over 18000 hours with more than two more than 400 nonprofits across Oregon.
Diversity equity and inclusion has long been of core value and.
And we measure and publish progress as well as pay equity and other key.
The metrics publicly.
Inclusion in the Bloomberg gender equality index and a perfect score on the human rights campaign Foundation's corporate equality index.
The flex our years of focus and work in this area.
However, we know that there is still much work to do.
As we reflect on 2020 and look to the year ahead of the responsibility we have as an essential service provider.
The leader within Oregon's economy.
And of crucial partner to customers and communities. We serve has never been more important.
I want to give a special thanks to our teams who have spent considerable time and energy operating a more efficient customer focused utility executing on our strategy to deliver clean energy to oregonians.
Through these historic storms and record outages.
Many.
Many are working 24, 7% to restore power.
I am humbled by the strength.
Dedication and resilience of our teams.
We will not stop working hard until every customer is back online.
Now, let me turn the call over to Jim.
Thank you.
Thank you Maria and nice to speak with all of you today I want to start by echoing <unk> comments, the number of customer power outages and widespread damage to our electric system is unprecedented and we recognize the hardship. These events of creative for our customers. Our entire company is focused on restoring power to our communities.
<unk> and repairing our system and I'm, so impressed with my new team mates PGE.
Although PGE face the number of challenging circumstances in 2020. It is clear that this team's hard work and focus on advancing our strategy is paying off.
PGE is in a strong position to build on the momentum we've established.
<unk> and deliver long term sustainable growth.
Excited for the opportunities ahead to further reduce carbon emissions invest across our service territory.
To reduce cost companywide to cute customer prices low.
Now I'll briefly comment on the economy in our service territory while recoveries.
Continuing in the hardest hit segments of the economy, such as lodging and restaurants other segments of our economy have been less impacted by COVID-19, and performed well from the load growth standpoint, like residential high Tech manufacturing and digital services in the long run or 1% average load growth anchor.
Coverage on the strength of these sectors as well as continued in migration of our load growth. This year remains consistent with long term trends. Despite the change in composition due to the economies of response to COVID-19.
And our customer base continues to grow despite the COVID-19 pandemic, Oregon continue.
<unk> to rank high among the states ranking third.
Inbound moves.
The construction spending on both residential developments and commercial projects throughout our service territory is strong in several major infrastructure projects around the horizon.
Lets cover our financial results on slide five.
Continued.
In 2020, we recorded GAAP net income of $155 million or $1 72.
Per diluted share compared to GAAP net income of $214 million or $2 39 per diluted share in 2019.
We finished the fourth quarter.
Five of GAAP based earnings per diluted share of <unk> 57 comp.
Compared with GAAP based earnings per diluted share of <unk> 68 in the fourth quarter of 2019, our 2020 non-GAAP net income was $247 million or $2 75 per diluted.
This amount is adjusted to reflect the previously disclosed onetime energy trading losses of $1 <unk> per diluted share.
Looking ahead, we are initiating 2021 full year earnings guidance.
Of $2 55 to $2 70.
Share alluded share. We are also affirming our long term earnings guidance of 4% to 6% growth off of 2019 earnings per share of $2 39.
Turning to slide six allow me to walk through the earnings drivers for 2020.
First we saw of <unk>.
Per day increase in retail revenue is load increased <unk>, 4% year over year other adjusted this.
This increase was particularly offset partially offset by the impacts of the changing load composition on our decoupling mechanism.
We also achieved a 12% increase due to a lower net.
A variable power cost as a result of low market prices and the effective dispatch of our generating facilities as we've been saying to you all along.
Wind was particularly strong in fact, our wind resources produced 23% more energy when compared to 2019.
We drove.
Net 33 cent decrease increase pardon me in connection with our lower operating and maintenance expenses.
This year served as a catalyst for making long term sustainable operational improvements companywide I'll discuss these in more detail in a moment.
Continuing on slide six we have a 26%.
The theories associated with higher depreciation and amortization, which consisted of <unk> <unk> from higher plant in service in 2020 and 17.
Attributed to a measurement of the company's only non utility asset retirement obligation on land, we own along the <unk> River at our Sullivan plant.
The decrease in 2020, we reassess stakeholder needs and the long term strategy for the site, which included an updated fourth quarter of study.
The site study resulted in a significant increase in our retirement asset liability. These changes however de risk our ability to respond to long term strategic opportunities.
<unk> operating.
Further there was a 10% increase associated with higher production tax credits from favorable wind generation compared to our forecast and then a <unk> increase for miscellaneous items. This brings our non-GAAP earnings per share diluted share to $2 75, the <unk>.
Third.
At the <unk> trading losses represented a negative impact of $1 <unk> per diluted share for the year and our GAAP earnings per diluted share were $1 72.
For 2020, the corresponding ROE are 6% and nine 3% respectively.
Yes.
Quarter as it relates to the regulatory environment, we are keeping our focus on customer price impacts given the concerns around economic recovery in our service territory. We continue to evaluate our cost structure to ensure that we're providing safe affordable and reliable service for our customers right now we are.
While you're waiting or need to file a general rate case with the Oregon Public utility Commission for a 2022 test year. It is important that we continue to operate in a way that is cost efficient to keep prices low for our customers regardless of our outlook for a new general rate case with respect to our future resource needs we filed.
You have the update to our 2019 integrated resource plan last month.
The action plan was previously acknowledged by the commission and remains unchanged as we continue to target 150 average megawatts of renewables to go online by the end of 2024 and secure up to 511 megawatts.
The <unk>.
As indicated on slide seven.
We are planning to work with stakeholders of seek approval of our RFP and launch the process. Later this year, but we are continuing to consider customer and stakeholder interest as it relates to timing given recent updates to federal tax credits, we plan to issue.
The RFP for both renewables and our remaining capacity, we will bid a benchmark resource into this competitive process.
On other regulatory proceedings last October the <unk> approved our deferral request per wildfire related expenses as of December 31, 2020, we've deferred $15 million.
Related to wildfire response, we also applied for and received deferral treatment from the <unk> for certain COVID-19 expenses, principally bad debt expense as of December 31, 2020, we've deferred $10 million relating to COVID-19.
Earlier this week, we filed the deferral requests.
Integration cost associated with the severe winter events that Maria discussed the.
And we've recently experienced because of the magnitude and duration of the event, we are uncertain as to the cost associated with the full restoration service. We will continue to discuss the impact of this deferral on existing storm recovery mechanism.
For risks with regulators and stakeholders.
Turning to slide eight this shows our updated capital forecast through 2025.
We are providing enhanced recovery here for our capital expenditures forecast the majority of our investment in future years are concentrated in low risk stable distribution infrastructure.
Grades to improve safety and reliability of our system investments here are also intended to make us more efficient and help facilitate savings and improved reliability.
The weeks the recent weeks and the wildfire impacts in 2020 demonstrate the importance of maintaining a safe and reliable grid.
We added $200 million to the outer years of the capital plan through 2025, and our capital plan now includes $2 $9 billion over the next five years.
As a reminder, these projections do not include any generation build investment that may arise from of renewable energy RFP.
On slide nine we continue to maintain a solid balance sheet, including strong liquidity and investment grade ratings accompanied by a stable outlook based on our strong financial condition, we do not anticipate to issue equity in 2021.
We expect to fund 2021 capital expenditures and long term debt.
With cash from operations during 'twenty, one, which is which is expected to range from 600 million to $650 million.
The issuance of debt securities of up to $300 million and.
The issuance of commercial paper as needed. After 2021, there are no maturities of long term debt.
Mature of 2024.
Turning to slide 10, we are initiating full year 2021 earnings guidance of $2 55 to $2 70 per diluted share our assumptions for this guidance range on the slide.
I'd like to dive deeper and walk through of a few key drivers that were confident.
It will help us grow within the 4% to 6% range in 2021.
Because of continued load trends, we're currently seeing with residential customers and commercial customers that are slowly reopening we expect to refund residential customers under the decoupling mechanism and we will again hit the 2% cap.
On collections for nonresidential decoupling.
We continue to recognize the challenges faced by our customers and we will continue to make sustainable changes to our cost structure throughout the company. We have accelerated the use of technology throughout the business and our 6% reduction in O&M year over year and about <unk>.
And about.
Half is from lowering our costs and using technology to enable process improvements, but here are just a few examples.
We have reduced and restructured our software license agreements as PGE continue to move to the cloud we rolled out of new mapping software to our lying crews and.
And they are now using tablets for better access in the field.
We're using new customer relationship management software to better improve our customer relationships.
We continue to leverage our billing system to drive efficiencies, while providing customers with increased functionality.
I am confident we can continue to identify and implement.
Implement efficiencies in 2021 as we continue to grow we are also reaffirming long term earnings growth guidance of 4% to 6% of 820 19 base year.
The drivers of our long term guidance are consistent with what we've previously discussed including load growth from in migration in industrial.
Customer expansion operational efficiencies and potential investment opportunities in our system and renewable resources with respect the dividends. Our board recently declared a dividend of $40 75 per share, reflecting an annualized dividend of $1 63 per share with with this.
This dividend, we completed our 14th consecutive year of dividend growth with the last five years at a compounded annual growth rate of five 4%.
And now operator, we're ready for your questions.
As a reminder, if you have a question. Please press star one of your telephone keypad.
The first question comes from the line.
Line of Julien Dumoulin Smith from Bank of America.
Hey, good morning team.
Hey.
So.
Well done all around.
Different kinds of kicked it off here after adding in the additional Capex can you talk about where that puts you.
In this 46% long term range that we've talked about so much in the past.
And in the Navy.
What your thoughts are about equity financing given the higher capex and obviously.
Hum.
During the impact last year as well just curious on how you would frame that.
Yes.
Hi, Julian it's Jim So I would say to you that the the Capex here that we've we've laid out for you which is an increase.
A couple of hundred million dollars over the out years and as I mentioned $2 9 billion altogether over this period of time puts us really squarely in that range.
I feel that that actually.
<unk> ensures that we actually stay in that range with respect to equity no equity is required for that this year.
It's pretty good and strong cash flow production and I don't see equity for a bit of time here, but let's let's take it one year at a time.
In terms of our forecast.
Got it and when you say squarely you mean midpoint or you mean squarely at the above the low end.
Alright.
Kind of a set of couple of times.
The way.
Yes.
I would say we're comfortably in that range how about that.
Excellent I liked the punch.
Bob.
Quick follow up there if you don't mind and obviously this could drive.
Drive some of the considerations here, how do you think about the timing of our rate case, you alluded to of 22 test here in the commentary just now, but what does that mean in terms of timing of filing and then related.
Punching the driven by the outcome of the storm deferral, if you get that or not would that dictate the the precise timing here potentially.
I would no pun intended decouple.
The the <unk>.
Storm restoration expenses, and any deferral of that might arise from it with the timing of the rate case.
Yes.
Secondly, we file our annual AUT in April that sort of fairly prescribed event and so that's the first chunk of the filing right. There in terms of the general rate case, we're evaluating the timing right now looking at our expenses, making sure we're efficient and actually taking.
Is the stock of the local economy customer bills and the like this company is becoming a lot more efficient as we go so we have a lot of flexibility here.
It'll be this year, but the actual timing hasn't been set yet.
But it will be the.
Got it okay excellent.
Thank you guys best of luck congrats on the sure. Thank you Julien.
Your next question comes from the line of Enzo Kim of Goldman Sachs.
Good morning.
Hi, Good morning, Maria Congrats Jim again.
My first question is on the <unk>.
I know you asked for the the deferral, but.
Just educate me a little bit currently there is no <unk>.
<unk> deferral mechanism or is there any of threshold amount where the UA.
Book certain expenses before deferring anything like that.
So thank you and so we have a.
We accrue for storms on a regular basis.
This storm.
That we are seeing.
Is a one in 40 year type of storm the governor on Saturday declared the state of emergency.
And we are currently restoring customers at a rate that we have never seen in the history of our utility we have had extensive damage throughout.
Throughout the entire system.
Not unlike what we saw of the devastating wildfires and high winds events in early September. This is what we have thought of as an unprecedented event, but clearly these are unprecedented times and we will be working collaboratively with the commission we filed earlier.
This week and we will work through how we handle all of the expenses and then Sue I will just tell you that coming into 2021, we have a storm deferral of $8 million built at that point in time, so starting the new year.
Okay.
Understood.
And.
And.
I guess going back to potentially the timing of the rate case.
A.
Depending on how you see efficiencies this year that you could achieve maybe beyond what you see right now as of this point.
If you were to file more later in the year instead of towards the first half of the year.
And most of that rates won't go interest impact won't go into effect in 2022 do you still see that four to six range of likely even without a full year of the.
The rate increase of 22.
I do I wouldn't necessarily pick a time for filing as I mentioned, the Julien we're still working on that.
But I'm extremely impressed with our achievement last year, and reducing expenses by 6% I'd call that a catalyst for other things and so I would like to sit back here with the team and figure out how we could manage through that given the difficult the economy given the storms that we've had we've got to take that into.
The account and given the pace of Covid recovery right. So I look at it is a balancing act and I want to be very.
Judicious and I also want to be very.
Half.
Half of our customers squarely in mind here, but.
We are managing well.
I think last year demonstrates that.
Got it.
It seems like the Crazy 2020 seems to be extending through the first part of this year. So please stay warm and station.
Thank you.
Your next question comes from the line of Sophie Karp from Keybanc.
Good morning, Paul Good morning, Good morning, and thank you for taking.
Taking my question.
So I have two questions first on the storm response of course right. So.
What did you assume in the guidance range with respect of the outcome of the deferral of here.
Is that basically this is anything thats in the full deferral and could we see of guidance revision is.
If that does not materialize in the kind of what is the timing of that.
Hi, Sophie it's Jim we haven't built in any specific.
The expense for the storm deferral in the guidance that you see as I mentioned and so we do have a <unk>.
Norm.
Deferral accounts already existing.
And we just simply don't have an estimate of what the storm deferral accounts are.
But right now we're.
Our guidance is independent of that.
One of the things I think is really important to appreciate is the level of destruction.
From the ice.
Coded trees and power lines has resulted in damage that is truly unprecedented and we have thousands of people working in the field today. They will continue working to.
24, seven until we get customers restored, but we are still learning more about the damages we get into some of the more remote areas and see tremendous.
This amount of trees out of power lines out.
And many of the customers that we're now putting online.
Our fairly are increasingly.
Hard to reach either because of the amount of of debris.
Or because of their location so we will.
Have still more to learn here, but right now getting power back onto all of our customers is our highest priority.
Alright.
And the.
Following the.
Storm questions.
I get it that this is the ones in the 40 year event in.
And maybe it doesn't make sense to harden the grid for events that kind of once ever for the years, but.
Would there be an opportunity maybe at some point to do a postmortem of base and see if there is an opportunity for capital investments to mitigate the potential impact anyway of events in the future.
Yes, that's of Great question.
And it's something that community members of customers.
And many others.
Leaders across the state are asking.
Ourselves. Please know that after every significant event, we do after action reports and root cause analysis and figure out how we could do better.
After.
<unk> the significant wildfires and Windstorms ahead September we made a number of adjustments not only in our processes and procedures. Our incident command response, our partnerships with first responders throughout our area, but also in terms of equipment standards and other tools and technologies.
And quite frankly, just the kinds of repair and restoration, we do over the last number of years, we have been increasing our investments in our distribution system quite significantly and we have seen the results of those investments as part of the contributor to our lower O&M costs.
This year, because we have had significantly less outages on average throughout the year, we've had less overtime less truck rolls on Saturdays and Sundays and overall better outcomes for customers Sophie if I can add if you look at our Capex.
Capex projections really I want to leave you with the point that these.
These projections are really all about making us more reliable and efficient so invest capital to make us more efficient down the line secondly, I've been through a lot of storm recovery efforts and I know you've observed from over the years with utilities. There is always some capital that comes back into the system in the restoration process, we don't.
Don't know what the restoration expense will be of therefore, I cant provide any more clarity on what the capital versus the O&M would be but theres always a mixture of as you would appreciate.
Alright, thank goodness helpful and rapidly.
I guess you mentioned that your capital plan does not include potential upside.
Upsides from the renewable Rfps is there a way to frame kind of the range of outcomes of these rfps and the potential impact on your Capex plans at this point of isn't just the early to say impossible to handicap at this point choose.
I mean, these will be competitive efforts.
Well bit of benchmark resource.
<unk> been successful in the in the past.
With some of our efforts I was very pleased to see the <unk>.
Day, we prosecuted wheat ridge.
So.
While there has been as they say in the investment community past successes no guarantee of future results.
We don't we don't exactly know.
Know how that will come out so we'll just have to.
Wait and see.
And I think it's super helpful. I appreciate your answers share.
Your next question comes from the line of Brian Russo from Sidoti.
Good morning, Brian.
Hi, Good morning, most of my questions have been.
The asked and answered.
I'm just curious with the recent storms in.
Where water supply levels are snowpack is as we approach the upcoming hydro.
Susan maybe at the Clackamas ore shoots et cetera.
That's a great question, we have had great.
Cash levels in comparison to prior years, they're significantly above normal.
The big issue that we have in addition to snow pack levels driving hydro conditions.
The runoff rate and what we've seen is runoff has tended to be earlier.
Then.
It has been in the past and that has changed some of our profile.
We also know that as we get is really cold periods, we tend to have much less wind generation and so we are seeing less wind than we saw last year on our system. So far in 2021.
Oh, I see sort of the forecast is for above normal temperatures, which would create an earlier than normal runoff net.
Excuse me of the forecast is for above normal snowpack levels.
Okay.
And the question is when does the one does it run off because that kind of got will determine.
Impact on the company.
Yes.
Great and then.
In terms of the dividend policy looks like the announce.
Some of it you just made dividend was remained flat I think historically it was the April timeframe, where the board considers increases although.
The delayed last year due to the Covid pandemic.
Sure.
Herman the we expect the April time period for.
The increase in the dividend evaluation by the board.
Yes, Brian Thanks, It's Jim So youre right. So just to make it crystal clear. This was the final capex dividend of 2020 and the board traditionally does look at that.
In the.
April timeframe and I would expect them to do that then yes.
Okay, great. Thank you very much.
Sure.
Your next question comes from the line of Travis Miller from Morningstar.
Good morning.
Alright, thank you.
To answer my question on the dividend, so I'll skip that one.
The other one was just generically speaking with the storms that you've experienced and obviously the storms of making the headlines in Texas and other places in the U S.
Or do you think and what have you seen impact on renewables.
Are they performing well the do you think there'd be any policy changes coming out.
Out of discussion across the entire U S in terms of cold weather.
One of your thoughts along those lines.
Sure.
This is something that obviously people are talking about renewable generation remains very strong in the Pacific Northwest I think you see across the west as a result of the wildfires.
There was not a reduction in interest in expanding our renewable generation.
Across the west even with the with the significant wildfires there actually wasn't of interest in accelerating.
The pace of renewable transformation in the energy sector.
My sense is is that this may.
Hey.
Accelerate what where we're going.
Clearly investing a lot in technologies bidirectional grid capabilities much of the equipment that we're putting in place handling some of these <unk>.
Additional renewables also adds to more resiliency and reliability of the underlying system and allows us to restore.
Store faster during the regular storms and catastrophic storms like we have now.
Mhm, Okay have you had any of the cold weather issues or the the icing.
Such that we're seeing in Texas or the.
Are there I guess, the other way of thinking about the R. R.
The renewables and the renewables up there.
<unk> differently and think of it particularly wind.
Yes.
Issues that they're having in Texas.
So most of our wind generation takes place in the eastern part of our state Eastern Washington, and then even farther eastern that they have regular.
<unk> and ongoing cold winters, and we design our system to be able to withstand a fair amount of ice on the wind side on the in our service territory. We have seen unprecedented levels of ice that have caused a concerning the damage to the distribution system, but yes.
Because of the normal cold weather is normal for our.
The wind facilities.
<unk> built them differently than they have in Texas.
Okay, Great. That's really helpful. Thank you very much thank.
Thank you.
Your next question comes from the line of Andrew Levi from <unk> edge.
Hey, guys how are you.
Good day Andy.
I guess the first question I have just on the Green future impact program you guys are doing.
Sure.
The second is that the same program that you've talked about in the past Maria.
<unk> been kind of growth.
Growing.
Yes, Andy it is.
This is the this is an opportunity for us to deliver 100% Green energy to those customers that want to move further faster than regular rps standards they tend to be municipalities.
Large.
Tech and digital companies and it's been a very successful program.
The new where you add as far as like your run rate.
It seems like you just just wanted the deal as well, but earnings Wise I know you do.
There is a margin that you kind of share.
Is there a run rate that you.
And they give us.
I'm assuming.
That's a good question I would I would.
Probably not want to give you a runway of its been chunky for example, our last announcement with Intel well it was a significantly higher volume than we had announced previously.
But we do earn a margin.
On this it reflects the the risk in the integration.
Other costs for these programs.
As well as a.
It gives recognition to the companys role. So that we will continue it's been very beneficial and I would expect to do more.
Is it like ongoing earnings.
Could you say a chunk of your or is it like a one time.
It was that would be ongoing at the ongoing Andy Okay. Okay and so this is so this is the line of business that <unk>.
Clearly is going to grow.
Obviously as part of your forecast.
Is it isn't significant enough.
Earnings were at some point.
It kind of goes in the direction that you <unk>.
The pages to go the it could end up being broken out of there is the more kind of proprietary reasons. It seems like that that you don't feel comfortable sharing it.
So I think we're going to keep the information as part.
Thus our regular disclosure.
It is not big enough that it would be broken out by any SEC standards of any sort of I'm not so sure I'd call. It proprietary really it's about meeting customer needs with the green energy that they want the Andy I'll add a couple of quick points number one I.
I think it has a lot of growth opportunities as customers, such as Intel and others increasingly.
Require renewable energy for their own ESG goals.
Number one number two I would say the decent negotiated transactions right you have an IPP in this case of on grid and you have of consumer.
Consumer an anchor tenant.
On the other side with Intel plus 16 or 17 other commercial customers. So so these these are these are prices rates and development costs that are that are confidential frankly so.
I don't think youre going to see that transparency, because they're negotiated transactions oftentimes.
The times there'll be competitive bidding associated with this too to make sure that we deliver.
Deliver to those customers like Intel the best available price, we can from the market.
Okay.
And then my second question.
He is kind of more of like a bigger picture questions.
So.
Looking at whether it's this opportunity.
It's big but we're not sure what the earnings are.
So how big it turns into as far as earnings per share.
The potential of IR.
Or youre going to have out there.
You just raised.
Okay.
$665 million of Capex this year about the spirit of care.
Potential to raise in the outer years.
And a very good balance sheet, despite what happened last summer.
And also one more thing.
Tremendous amount of TD opportunities absent the storm.
And then you have this for the 6% growth rate again.
A lot of pushing you for this year.
Of course, because obviously, we want the nature of numbers each year. This is what happened.
Last year.
But the longer term what are kind of the aspirations.
Obviously, you have to wait customer rates.
It's not high.
But you obviously you have to the way those but do you guys see a resume longer term where.
And again I'll say, one more thing.
Thank you just kind of implementing the growth rate, which was the.
On the base.
But do you see opportunities longer term are there aspiration of longer term.
Which would be beneficial to both the shareholders.
And the state and the customers were for the growth rate because of the way the.
The kind of getting work.
The service territory of transporting that the growth rates of July.
Andy I think I got all of that but.
Sorry.
Okay, what kind of.
Yes, no no there is a lot of opportunity here at this company.
Because.
Come more efficient to afford.
More capex and resiliency to benefit customers in the market as you know we have one of the most unlevered balance sheets.
Per pound in the industry, we have one of the best cash flow producers in the.
The street pound for pound the.
Sets us up with the tool to be able to moving the direction that you are talking about.
If we could manage our O&M expenses to offset the additional capital we have plenty of capital to deploy in the future years, especially in the grid and even putting aside.
The side anything that we might competitively when in the RFP. Those those investments are off the chart here on page eight right. These are these are sustainability investments that will make us more reliable and efficient I'm personally convinced that these kinds of.
The investments are going to improve our operating costs. So one follows the other they're not detached from each other so that's the goal right, but we've got to do the balancing that you. So I think well articulated.
So I think I think there is opportunity here down the line.
Okay. Thank.
You guys and good luck.
Cleaning up after the storm.
Thanks, Andy Thank you.
Your line is open.
Operator, it looks like we may be finished with the questions.
Okay.
Well I will turn the call back over to Maria Pope for closing remarks.
Thank you very much for joining us today.
Look.
Forward to further following up with questions as well as of virtual investor conferences coming up in.
In the first quarter, we will be announcing our first quarter results at the end of April and thank you very much for your time today and interest in the company. Thank you.
This concludes today's conference you may now disconnect.