Good morning, everyone, and welcome to the Portland General Electric Company's First Quarter 2018 Earnings Results Conference Call. Today is Friday, April 27, 2018. This call is being recorded. [Operator Instructions] For opening remarks, I will turn the conference over to Portland General Electric's Director of Investor Relations and Treasury, Chris Liddle. Please go ahead, sir.

Thank you, Sabrina. Good morning, everyone. I'm pleased that you're able to join us today. Before we begin our discussion 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 in investors.portlandgeneral.com. Referring to Slide 2, I'd like to make our customary statements regarding Portland General Electric's written and oral disclosures. There will be statements in this call that are not based on historical fact and as such constitute forward-looking statements under current law. These statements are subject to factors that may cause actual results to differ materially from the forward-looking statements made today. For a description of some of the factors that may occur that could cause such differences, the company requests that you read our most recent Form 10-K and Form 10-Q. Portland General Electric's first quarter earnings were released via our earnings press release and the Form 10-K before the market opened today, both of which are available on our website. The company undertakes no obligation to update publicly any forward-looking statements whether as a result of new information, future events or otherwise. This safe harbor statement should be incorporated as part of any transcripts of this call. Leading our discussion today are Maria Pope, President and CEO; and Jim Lobdell, Senior Vice President of Finance, CFO and Treasurer. Following their prepared remarks, we will open the lines for your questions. Now it's my pleasure to turn the call over to Maria Pope.

Thanks, Chris. Good morning, everyone, and thank you for joining us. Welcome to Portland General Electric's First Quarter Earnings Call. On today’s call, I will provide an update on our financial and operating performance, the economy in our service area, the status, our renewable request for proposals. I will then turn the call over to Jim to provide more details on our financial performance and guidance. Now turning to Slide 4. We’ve reported net income of $64 million or $0.72 per diluted share compared with net income of $73 million or $0.82 per diluted share in the first quarter of 2017. Winter weather was significantly warmer than the prior year, which drove a quarter-over-quarter decrease in energy deliveries. This was partially offset by a decrease in distribution expense as a result of our storm-driven assistance, restoration and repair work. We are affirming our 2018 full year earnings guidance of $2.10 to $2.25 per diluted share. I’m delighted to say PGE’s Board of Directors approved a 12th consecutive annual dividend increase since we went public in 2006. The 6.6% increase [Indiscernible] our commitment to provide a competitive returns for investors, strong business fundamentals and a long-term growth, as we increase our mix of clean energy and invest in a more reserves and secure grid. Now on to Slide 5 for operational and economic highlights. This month, as part of our ongoing commitment to providing customers with a 100% clean energy, we’ve filed an application with Oregon Public Utility Commission, or OPUC, seeking approval for renewable - for new renewable power options for large business and municipal customer. This progress supports cost-effective local and regional renewable power development by enabling customers to welcome PGE to purchase directly from new solar, wind or renewable energy facilities. In addition, in February, we received OPUC…

Thank you, Maria. Moving to Slide 7. As we share it in our fourth quarter call, we filed our 2019 general rate case with the OPUC in February of this year. They are currently in the discovery phase of the general rate case process with staff and interveners opening testimonies due on June 6, followed by a conference scheduled for June ’18. Regulatory review of the 2019 GRC will continue throughout 2018, with the commission expected to issue a final order by the end of 2018. In regards to tax reform, we are currently deferring the net benefits of the lower federal tax rate, which we expect to refund the customers over future periods. Turning to Slide 8, which shows our earnings driver for the quarter. First, gross margin decreased earnings by $0.18 due to the following: a $0.15 decrease due to an exceptionally cold winter in 2017 and a $0.03 decrease to the unfavorable weather in 2018. While January was warmer than normal, cooler than normal temperatures in February and March helped to offset some of the unfavorable leverage in January. Second, a $0.05 favorable increase related to distribution cost as no major storms occurred in the first quarter of 2018. The next driver is a $0.04 decrease due to lower generation maintenance cost; and finally, a $0.01 decrease in other miscellaneous items. On the Slide 9, we’ve provided a summary of the company’s current capital expenditure forecast from 2018 to 2022, which includes additional investments in 2018 as compared to our previously forecast. These expenditures are related to investments we are making to support the continued customer growth and build a more efficient, reliable and secure system. For example, we are replacing and upgrading substations and other distribution and transmission equipment. As we identify opportunities for additional investments,…

Thanks, Jim. In closing, [Indiscernible] and PGE are the forefront of the transformation to a clean energy future. We remain committed to delivering safe, reliable, affordable, clean and secure energy. And now, operator, we’re ready for questions.

Thank you. [Operator Instructions] And our first question will come from the line of Christopher Turnure from JPMorgan. Your line is now open.

Good morning, Lid and Jim. I wanted to get a little bit more color on your thinking and the Board's thinking behind the 6.6% dividend raise this week. It’s towards the higher end of the past couple of year of raise that you guys have done. On our estimate at least for this year brings you kind of squarely in the upper half of your payout target range. But I wanted to kind of understand your thinking a little longer term kind of context here on that?

Sure. Thank you. So the Board declared earlier this week a 6.6% increase in our dividend. It really reflects the strong fundamentals of our business. First and foremost, a growing service territory; and as I mentioned in my earlier remarks, strong growth not only in terms of immigration into the States, customer load count, but also weather-adjusted load long-term looks very strong. Behind that is our investment in particularly a grid infrastructure as well as in clean energy, and concern and focus on making sure that we are delivering value for all stakeholders and shareholders in particular.

Okay. And posted in that is - or I should say, is there and posted in that any desire to not preserve capital for future needs a year or 2 down the road?

Jim can get into that further, but we feel confident in our capital availability at this point in time.

Okay, despite the 6.6% increase? Okay. And then my second question is on the CIS deferral. I heard your comments, Jim, but I wanted to make sure I understood them. You're saying that you guys will be able to defer basically the depreciation on that - the asset placed into service beginning in the second quarter of this year, but no return would be deferred. And then also if you could just give us an update on maybe your conversations with interveners so far on that request?

Well, we're going to request for the costs associated with the development of the CIS system. When a goal is live in the second quarter, we will file a deferral to capture the depreciation and amortization associated with that and then we will have the conversation of that figure at a point in time with the interveners regarding the recovery of it.

Okay. So it's basically too early to tell if we have a window into whether or not that would get approved?

Yes.

Okay. Got it. Thank you.

Thanks, Chris.

Thank you. And the next question comes from the line of Michael Lapides with Goldman Sachs. Your line is now open.

Hey, guys. Thank you for taking my question. Really one or two. The increase in the CapEx for this year, you’ve already filed the rate case. How do you get that CapEx into the rate case process? I mean, is that just a known and measurable filing? Or does that incremental $100 million just hold over till the next time you file?

Michael, those dollars are not factored into our general rate case filing for 2019. So it will be part of the decision making as to what we would do in a follow-on filing.

Got it. So there’s no way to file an adjusted number during a known and measurables process?

No.

Okay.

Until and unless they want to restart the process, and that's not something we're interested in.

Got it. Totally understand. I want to make sure I understand, and this is a little bit of housekeeping item. In your guidance, what do you assume is your kind of your tax rate for income statement purposes?

Yeah, the effective tax rate that we’re assuming is somewhere between 11% to 15%.

Okay. And that’s for kind of the - for the GAAP income statement? I’m trying to separate kind of income statement and cash flow, what’s you actually want to pay in the cash taxes.

We’re expecting to pay minimal cash taxes because of the fact that we’ve got the PTCs.

Okay. And then finally, on storage and - I wanted to - again, you made some comments about the transportation electrification, and I know you’ve also been kind of contemplating and there's been a talking around energy storage. Can you talk a little bit about kind of when you think capital could be invested in either of those and any ballpark around kind of what the impact on the capital budget of either of those two items could be?

Sure. With regard to the electrification transportation projects that we have going on, it is not a lot of capital, Michael, but it will move us forward quite significantly in our partnership with TriMet, the regional transit authority here, and I would expect that we will see further capital expenditures in the next couple of years after this initial plan, which is largely sort of a smaller program. In terms of battery storage, we had -- previously had higher indications of capital. You’ve got up to $50 million at this point in time. There is no significant change there, but rather that we’re going through the normal regulatory processes and in honing sort of where we are, certainly on the battery storage in particular, we would like to be moving faster than the docketed process that we have in more aggressively, but again, this is the normal course sort of regulatory environment that we have.

Yeah. I mean, there is a whole bunch of pilot programs that are involved in the battery storage. It’s looking at putting batteries next to solar facilities. It’s putting batteries and substations or next capacity units, so looking at microgrids and then looking at the residential applications as well. So there is a lot of work that still needs to be done.

Got it. Last item, that just trying to think through to the renewable RFP. If you win that project -- and on a nameplate capacity it’s kind of roughly 300 megawatts or so. How do you think about how you finance that?

So at this point in time, we were thinking that we can finance this with available cash from operations and additional debt as we move forward.

It really just depends on the size of the project. And as we all know, we still got a lot of process to go through just to figure out exactly what is going to look like in the end. We think it’s going to be a very competitive process, so we’re looking forward to that.

Yes.

Got it. Thank you, guys. Much appreciated.

Thanks, Michael.

Thank you. And the next question will come from the line of Julien Dumoulin-Smith. Your line is now open.

Hey, good morning.

Good morning, Julien.

Good morning.

So I wanted to follow up on a couple of items. First with respect to the higher CapEx. Can you elaborate a little bit on the timing of the update? I suppose typically we see the update with third quarter every year around these substations. Is it a new policy or should we still expect to see yet the latest sort of full plan delineate by third quarter?

Easily, Julien, you’ll see it in the third quarter. But as things -- we become aware of things and are they become to be more solid in our planning, then we’ll include them in the updates. But typically it would be the in the third quarter.

Got it. And can I read between the lines? I mean, it seems like a customer growth piece of the equation that’s driving the acceleration?

So this would be investments in our operations for reliability, resiliency and certainly we’re seeing a lot of customer growth in our area.

Got it, alright. Excellent. And then just turning to the latest on the Oregon Commission here. Is there any potential delays from the latest changes in composition given just the two remaining there? Or does that not really have any kind of meaningful impact operational day to day in terms of the Commission’s ability to move forward? What does the tie even mean in terms of any of your pending docket?

It’s a great question, Julien. I don’t believe there will be any delay. There governor is contemplating names that she will put forth in the legislature probably by end of the day or early next week to fill thevacant spot. Commissioner Decker has already been named Chair of the Commission to replace Commissioner Hardy, who has announced her desire to resign in this spring.

Got it. Alright. Excellent. Good to hear. And then lastly just to reconcile the renewables procurement, is there a potential that its multiple projects or is this really going to be fixated on just a single project as you think about the, call it, nameplate 300 megawatts?

We really don’t know. Clearly economies of scale would favor a larger project, but we can also see multiple projects being bid and that would be very competitive. As Jim mentioned, it will be a competitive process.

Right, absolutely. And it's not known necessarily if you're necessarily partnering with anyone specifically, or it’s not necessarily necessary yet either. Right? You don’t necessarily need to identify any build on transfer opportunities until after perhaps the initial explicit proposals come out?

Well, the only thing that we have put out there publicly, Julien, is the fact that we’ve got a benchmark project that we are proposing to put into the RFP process. We find that when we do that, the process becomes very, very competitive and we get great prices for our customers, great investment opportunities.

Excellent. I leave it there. Thank you all. Take care.

Thank you. And the next question comes from the line of Paul Ridzon with KeyBanc. Your line is now open.

Thank you. How much of the - how much of a drag is A loss of the paper? How much of that 1% is driven by that?

Loss of the paper?

This is about the paper company.

Loss of the - you mean, a drag in earnings or drag in load?

Load growth.

We haven’t shared that. That would be giving out customer information.

Okay.

But it’s not as insignificant, so it was a significant change year-over-year.

And then what was the win capacity factor for the quarter?

I think it was about 31%, 32%.

It was up quite this quarter primarily because last year’s first quarter was significantly below normal, at about 19%.

And what’s the 15 he was talking there?

What's normal? We're still trying to figure that one out. If we haven’t seen what we thought would be normal for the last several years. So we’re starting to see things throughout the call last, but if we got a little bit more of a track record to go.

And then what’s the structural regulatory lag and basis points we should be thinking about?

It’s about - well, on a dollar amount or on a percentage on basis points? I mean, on our dollar amount -- go ahead, Paul.

Basis points would be actually more helpful.

Yeah, I’d say it’s more around 70 basis points.

And any action you could do to kind of work that done? Or is that kind of probably stuck there for a while?

We’re continuing to look at to see if there are ways to get a better cost recovery of the items that are included in that. So that’s an ongoing project and ongoing conversation that we have with the commission. Actually it’s I would make it - I’m going to correct my statement on basis points. It’s more around 80 basis points - 80 to 85 basis points right now. It represents about $29 million, excluding Carty Okay, thank you very much. And that keep in mind that’s pretax.

Okay. Understood. Thanks.

Thank you. And the next question comes from the line of [Augustina Gloza with Misura]. Your line is now open.

Hi. Good morning. I just wanted to get a sense of the weather-adjusted decline in retail deliveries for the quarter, especially since year-over-year rating guidance we’ve had to 1% decline in retail deliveries for the year?

Actually, for loads our weather-adjusted basis for the quarter, they are actually up by 0.5%. And Maria mentioned this earlier. When you look at behind, the residential was up about 1.2% on a weather-adjusted basis driven by about 1.4% customer account increase that was partially offset by energy efficiency out there. Commercial was down about 1.4% weather-adjusted. We just got weakness in a few sectors. And then industrial was up about 2.4%, and that was more or less fueled by the high-tech sector, which should be more on the semi-conductor side.

Perfect. And then can you give us an update on the [Indiscernible] litigation? I don’t know if there is any update on the timeframe?

No, not at this trigger point. We had an arbitration in front of a panel early this month, and it was to figure out are declines [Indiscernible] in front of the International Commerce Commission and who the parties would be. We won’t know the outcome of that for a while. And so until we hear something from that panel, I think we’re just kind of on hold.

Okay, perfect. And just what would you expect the hydroconditions to be throughout the year?

We’re looking at about normal.

Okay. Okay, thank you so much. Have a good day. Bye-bye.

Thank you.[Operator Instructions] And our next question will come from the line of Travis Miller with Morningstar. Your line is now open.

Good morning. Thank you.

Good morning, Travis.

You answered my dividend questions and one of my test questions. So I have to try number one here.

[Indiscernible]

Given the PTCs, and you mentioned that cash tax position, how long can you go. Again, given the PTCs and you’ve got obviously a nice PTL to return to customers. How long can you go do you think with centrally no cash tax position?

It’s going to be quite a while. I can’t tell you the exact number of years out into the future. But what I will say is with the production of continuing production of PTC’s we will use them as generated and we don’t believe that we will see any of the mix buyer.

And the last generation of our projection test growth yes in 2024.

Okay, and those can cover what that posted the return in whatever cash and the detail could cover a substantial amount of the GAAP tax.

Yeah, that 75% of your taxable income or your tax can be covered with [ECs].

Okay. Okay. That’s all I had.

Thank you. And the next question will come from the line of Michael Lapides with Goldman Sachs. Your line is now open.

Hey, Jim, just housekeeping on the structural lag that $29 million that's a pretax number. So using a really low tax rate, you're talking about $25 million -- $24 million, $25 million on an after tax basis. Has that changed much in the last couple of years?

It's gone up slightly, but not a lot.

Michael, one of the most significant things that Jim has done in the rate case is request a full volumetric decoupling for weather and then also storm restoration recovery. So while we normally don’t think of those as art of structural lag, that’s a really important part of our rate case as we move forward and not uncommon for utilities across the countries and experience a significant weather patterns as we do in Oregon.

Got it. Okay. Thank you, guys. Much appreciated.

Thank you. And the next question comes from the line of Kevin Balen with [Indiscernible]. Your line is now open.

Hey, guys. Could you quantify what the weather impact in the first quarter was versus normal?

The weather impact in the first quarter was about $0.03.

Okay. And that's what you guys had said on the fourth quarter call that you bakken in $0.11 hit into the guidance and it came in much better than that. Is there some other driver that has materialized?

No, we did - we said $0.11, and now you've got about $0.03 that has showed up in the first quarter. And that’s - you have to keep in mind that weather it’s just degree days. But we are at this particular point time, we got too much of a year ahead of us before we're willing to consider any other look at our guidance

Okay. That’s great. And you’ve also said ion the Q2, you guys have had an unplanned outage in Portland. Was that a material event?

No.

Okay.

No. It’s a place in the fourth quarter of 2017, and will continue for a little bit longer, but it’s not material result. In fact, it can be the results that we have.

And on the storage investment that you guys are making, does that come with a rider recovery?

You mean what we are asking for as part of that process is the ability to use the renewable adjustment cost to recover the costs associated with those investments.

Okay. So that's about half of the increase? Is there other increase -- other $50 million-ish need to be recovered in GRC?

No. Kevin, when we look at up to $50 million, we’re anticipating associate with all of the pilot projects for energy storage. Yes, to say with all of those dollars, we're anticipating the use of the renewable adjustment clause, which would allow us to be able to track that into customer prices.

Okay. That’s very helpful. And the last thing, when are you guys expecting the commission to rule on the request to defer the billing system?

We won’t see that until - we will be filing it this quarter and there's no statutory time limit associated with it. So it's going to be a while.

But as it's pending you're allowed to effectively run it through the financials as if it's been granted?

Yes.

Okay. Thank you very much.

All right. Thanks, Kevin.

Thank you.

Thank you. I’m showing no further questions at this time. I would now like to turn the conference back over to Mrs. Maria Pope for any closing remarks.

Thank you. We appreciate your interest in Portland General Electric and we invite you to join us when we report our second quarter 2018 results in late July. Have a great day.

Ladies and gentlemen, thank you for participating in today’s conference. This concludes your program. You may all disconnect. Everyone, have a great day.