Portland General Electric Company (NYSE: POR) ("PGE" or the "Company") provided a business update in connection with energy trading activity in certain wholesale electricity markets that has resulted in realized and unrealized losses of $127 million as of August 24, 2020.

Notably, PGE, which has a limited direct access program for large customers, said that it would not seek regulatory recovery for the losses.

"PGE personnel entered into a number of energy trades during 2020, with increasing volume accumulating late in the second quarter and into the third quarter, resulting in significant exposure to the Company," the Company said

"In August 2020, this portion of PGE's energy portfolio experienced significant losses as wholesale electricity prices increased substantially at various market hubs due to extreme weather conditions, constraints to regional transmission facilities, and changes in power supply in the West. During this time period, the California Independent System Operator (CAISO) declared a Stage 3 Electrical Emergency and ordered the first rolling blackouts in the state of California since 2001," PGE said

"As a result of the convergence of these conditions, the Company's energy portfolio, as of August 24, 2020, has experienced realized losses of $104 million and unrealized, mark-to-market losses of $23 million. Total third quarter losses in the portfolio are estimated to be up to $155 million subject to market conditions – although the ultimate amount of losses could exceed that amount," PGE said

"The increase in net variable power costs due to this trading activity will be recognized in PGE's results of operations. There will be no impact to customer prices, as the Company will not pursue regulatory recovery. The Company noted that the loss does not impact PGE's ability to serve customers," PGE said

"Promptly upon learning of the issue, the PGE Board of Directors formed a Special Committee comprising five independent Board members (John Ballantine, Jack Davis (Chair), Kathryn Jackson, Neil Nelson and Charles Shivery) to review the energy trading that led to the losses and the Company's procedures and controls related to the trading, and to make recommendations to the Board for appropriate action. The Special Committee has retained Simpson Thacher & Bartlett LLP as its independent legal advisor, which expects to engage additional advisors on behalf of the Special Committee during the course of this review," PGE said

"PGE has engaged and is actively working with an external consultant to perform a full operational review of the Company's energy supply risk management policies, procedures and personnel. In addition, PGE has placed two individuals on administrative leave, pending review, and enhanced oversight including implementing immediate supervisory and reporting changes in advance of the conclusion of a broader evaluation," PGE said

"PGE continues to have a strong balance sheet and ample liquidity," PGE said

As of August 24, 2020, the Company maintains short-term liquidity of $155 million cash, a $500 million revolving credit facility, which has a maturity date of November 2023, and a $220 million letter of credit facility, of which $172 million remains available. The Company has $75 million of commercial paper outstanding.

PGE expects to fund estimated capital requirements with cash from operations, issuances of long-term debt securities of up to $325 million, and the issuance of commercial paper, as needed.

PGE believes that the issuance of secured long-term debt, as well as other sources of liquidity, such as borrowings under its revolving credit facility, the expected ability to issue short-term debt, such as commercial paper, and unsecured long-term debt, and cash expected to be generated from operations provide ample liquidity to meet the Company's anticipated capital and operating requirements.

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PGE   Oregon   Portland General Electric  

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