Portland General Electric Earnings: New Investment Opportunities Continue To Emerge

We are reaffirming our $50 per share fair value estimate for Portland General Electric POR, or PGE, after the company reported earning $0.44 per share on an adjusted basis in the second quarter of 2023, down from $0.72 during the second quarter last year. We are reaffirming our narrow moat rating.

Management reaffirmed 2023 EPS guidance of $2.60-$2.75 and its 5%-7% long-term annual earnings growth outlook, both in line with our outlook. We think PGE’s five-year earnings growth could trend toward 7% if it reaches a constructive outcome in its 2023 rate case and continues to win at least some of the new renewable energy projects we expect to be offered in 2023 and beyond.

We continue to forecast $5 billion of capital investment in 2023-27. This is in line with management’s plan after adding the $360 million Seaside battery project and the $150 million Evergreen battery project this year. Our forecast was above management’s plan coming into 2023 to reflect our expectation that PGE would find additional investment opportunities.

We will consider raising our capital investment forecast if it appears PGE might win some of the bids to construct renewable energy projects beyond 2025, pending regulatory approval of its amended long-term integrated resource plan. This could add $2-$3 per share to our fair value estimate, but it is very early in the process.

Management reported progress toward a settlement in its rate case. This would be the third consecutive rate case settlement. We expect regulators to approve an allowed return on equity closer to PGE’s current 9.5% rather than PGE’s 9.8% request. We also think investors should watch the outcome of PGE’s request to change its energy cost rate framework and use the long-standing renewable adjustment clause for new renewable energy and battery projects. We expect a decision from regulators by year-end with new rates to support earnings growth in 2024.