Portland General Electric Company Third Quarter 2026 Conference Call - PORTLAND GENERAL ELECTRIC CO

Explicit Guidance:

• Full-year 2026 adjusted EPS guidance revised to $1.18–$2.28 per diluted share (previously $3.33–$3.53), driven by historically mild weather headwinds in H2 2026.
• Long-term earnings growth guidance reaffirmed at 5% to 7% annually.
• Long-term dividend growth guidance reaffirmed at 5% to 7% annually; dividend increased 5% annually to $0.55125 per share (declared in October).
• Long-term load growth guidance reaffirmed at 3% annually through 2033.
• 2026 weather-adjusted load growth guidance updated to 1% to 2% (previously 1.5% to 2.5%), reflecting timing changes in industrial load ramp-ups.
• 2027 forecasted capital expenditures estimated at $2.5 billion (including recently signed Bigelow and Salmonfly projects).
• 2027 financing plans anticipate $350 million to $400 million in tax credit modernization and $150 million to $200 million in equity issuance.
• 2027 equity financing needs inclusive of RFP projects increased by approximately $50 million from prior disclosures.

Business-Segment Outlook:

• Large customer capacity growth expected to be 12% annually through 2030 (up from prior 10% outlook), driven by tech, semiconductor, and data center demand.
• Veris facility: Up to 420 MW agreement; energization expected in 2028, full capacity ramp by 2033; includes integrated battery storage.
• Washington Acquisition: Anticipated close in 2027 or mid-2027; regulatory review process advancing.
• Clean Energy Projects:
  • Bigelow Project: 200 MW solar + 250 MW storage; $900 million investment; in-service timing in 2029.
  • Salmonfly Project: 199 MW solar + 199 MW storage; $850 million investment; in-service timing in 2029.
• New Large Load Tariff: Effective July 2026; expected to contribute $4 million incremental margin in Q3 2026; annualized impact expected to continue into 2027 and beyond as load ramps.
• EDAM (Extended Day Ahead Market): Launched Q3 2026; projected $14 million customer savings reflected in 2027 Automated Utility Test (AUT).
• 2025 RFP: Continued commercial negotiations; potential in-service dates ranging into 2029.

Market and Competitive Outlook:

• Industrial Demand: Growing 9% YoY in Q3 2026; industrial load up 5% QoQ and 9% YoY, fueled by high-tech and data center sectors.
• Residential/Commercial: Nominally lower due to mild weather; weather-adjusted residential deliveries down 0.6% Q3 2026; commercial down 2.8% weather-adjusted.
• Data Center Dynamics: Minimal weather sensitivity observed; "choppy" energy usage noted; significant take-or-pay capacity payments under new tariff structure mitigate revenue volatility.
• Battery Storage: System capacity expected to exceed 1,000 MW as projects from 2025 RFPs and large load customers (e.g., Veris) come online; peak load approximately 4,500 MW.
• Pricing Structure: Tariff shifts lower rates for residential/small commercial while increasing rates for large loads; anticipated to reduce customer risk and maintain reliability.

Macro / Industry Outlook:

• Wildfire Season: Declared ended Oct 26, 2026; continuing year-round mitigation (hardening, tech) to address regional fire risks.
• Regulatory Environment: Commission holding company order issued Sept 25, 2026, with unresolved conditions; decision on clarification expected by December 7, 2026.
• Oregon Legislation: Pending PUC-commissioned report on wildfire impacts (expected in "next couple of weeks" relative to call date) to inform legislative work.
• Washington Compliance: Acquisition negotiations hinge on CETA compliance, specific hydro facility exclusion (Lewis River/Mt. St. Helens), and rate credits.

Strategic Initiatives:

• Holding Company Restructuring: Pursuing clarification on conditions to ensure financial flexibility and dividend protections; growth strategy and capital plan do not depend on this implementation.
• Capital Deployment: $2.5B CapEx in 2027 includes Bigelow ($900M) and Salmonfly ($850M); equity draw from 2026 forward sale ($550M authorized) shifted to 2027 pending holding company status.
• Financing: $350M term loan to cover 2026 needs; $500M ATM facility available; credit ratings maintained at investment grade.
• EDAM Participation: PGE-designed market expected to lower costs, reduce volatility, and improve reliability in Western energy markets.

Risks and Headwinds to Outlook:

• Weather Variability: Historically mild summer and projected mild H2 2026 directly caused EPS guidance revision; residual impact on residential/commercial load.
• Regulatory Uncertainty: Holding company order conditions (dividend restrictions, one-notch credit downgrade risk) are "red lines"; potential for delays or rejection of proposed structure.
• Inflation and Supply Chain: Management notes nervousness regarding inflation and supply chain for RFP projects, though execution remains strong on cost/per kW metrics.
• Rate Case Timing: Washington acquisition rate case timing uncertain; potential double-leverage risk noted as typical industry risk.
• Coaldale Asset: Uncertainty regarding future ownership/disposition of Coal Strip (power cannot be served to retail load under current Oregon law); potential need for regulatory dialogue.

Management Tone on the Future:

• Confidence: Strong confidence in customer growth (large load) and execution of capital projects (Bigelow/Salmonfly) despite holding company delays.
• Hedges: Repeatedly state that 5-7% long-term growth guidance assumes no holding company implementation; capital plan remains unchanged pending final regulatory resolution.
• Resilience: Emphasis on "growth pays for growth" via new tariff structures; disciplined O&M management and power cost control highlighted as offsets to weather headwinds.
• Strategic Flexibility: Willing to proceed with Washington acquisition without holding company to achieve break-even to slight accretion, though holding company preferred for accretive value.

Miscellaneous:

• Veris Agreement: Backed by shareholder protections, minimum payment obligations, and direct cost allocation for infrastructure.
• Salmonfly Partnership: Developed with Confederated Tribes of the Warm Springs; supports coordinated solar/storage/hydro operations.
• 2027 Guidance Preparation: Management indicated readiness to formalize 2027 guidance and evaluate rate-based vs. earnings growth spreads after holding company resolution.