Good morning everyone. And welcome to Portland General Electric Company’s First Quarter 2013 Earnings Results Conference Call. Today is Wednesday, May 1, 2013. This call is being recorded and all lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer period. (Operator Instructions). For opening remarks, I would like to turn the conference call over to Portland General Electric’s Director of Investor Relations, Mr. Bill Valach. Please go ahead, sir.

Thank you Vicky and good morning, everyone. We are pleased that you can join us today. And before we begin our discussion this morning, I would like to remind you that we have prepared a PowerPoint presentation to supplement the discussion today and we’ll be referencing slides throughout the call. For those of you accessing the call over the phone, the slides are available on our website at investors.portlandgeneral.com. Referring to slide 2, I'd also like to make our customary statements regarding Portland General Electric’s written and oral disclosures and commentary, that there will be statements on this call that are not based on historical facts 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 10Qs. Portland General Electric’s first quarter earnings were released before the market opened today and the release is available at portlandgeneral.com. The company undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise, and this Safe Harbor statement should be incorporated as part of any transcript of this call. As shown on slide 3, leading our discussion today are Jim Piro, President and CEO and Jim Lobdell, Senior Vice President of Finance, CFO and Treasurer. Jim Piro will begin today’s discussion by providing a review of our performance in the first quarter and update of our strategic initiatives. Then Jim Lobdell will provide more detail around the quarterly results and our expectations for 2013. Following these prepared remarks, we will open the lineup for your questions. And now it’s my pleasure to turn the call over to Jim Piro.

Thank Bill. Good morning and thank you for joining us. Welcome to Portland General Electric’s first quarter 2013 earnings call. As slide 4 shows, on today’s call, I'll provide an overview of our financial and operating operational performance, give an update on the economy and our operating area, discuss the progress on our strategic initiatives and provide you an update on our general rate case. Then Jim Lobdell will give you a financial update discussing the quarter’s results and our outlook for 2013. So let’s begin. As you can see n slide 5 our financial performance in first quarter was solid with net income of $49 million or $0.65 per diluted share. This is equivalent to what we earned in the first quarter of 2012. We are affirming full year 2013 earnings guidance of $1.85 to $2 per share. Now into operational excellence on slide 6, we delivered excellent operating performance in first quarter of 2013. Our delivery system and generating facilities operated well with the average duration and frequency of outages in the top quartile and generation plant availability factors exceeding our goals. Our overall customer satisfaction also remains very strong. PGE ranks in the top quartile for residential customer satisfaction and the top decile for business customer satisfaction in Market Strategy's international most recently available surveys. We also rank second nationally for large key customer satisfaction in the TQS Incorporated annual survey. As you know we’ve been implementing new technology systems in several areas of company, including transmission and distribution, human resources, and finance and accounting to help improve processes and reduce operating cost, which are critical to our efforts to keep customer prices as low as possible in the face of increases in regulatory and inflationary cost. Now let’s move onto slide 7 for the economic outlook…

Thank you Jim. Turning to page 12, net income for the first quarter of 2013 was $49 million or $0.65 per share, equivalent to earnings in the first quarter of 2012. Net income was positively impacted by reduced power costs, lower storm restoration costs and decreased interest expense. However, these items were offset by lower retail energy deliveries and higher income taxes. Moving to page 13, total revenues for the quarter were $473 million, down 6 million for the same period last year, driven by a decrease in price and volume of retail energy deliveries. Average retail prices decreased 3% quarter-over-quarter based on a price decrease on January 1st of this year to reflect lower expected power costs. Although retail deliveries decreased approximately 1% quarter-over-quarter, the revenue impact was partially offset by the de-coupling mechanism under which we recorded a collection from customers of $4 million in the first quarter of this year. As Jim mentioned, energy deliveries adjusted for weather and a leap day in 2012 were flat quarter-over-quarter. During the first quarter of this year, we have seen lower than expected residential and commercial deliveries. While the high-tech industry continues to grow, we experienced decline in the solar industry, the partial closure of a paper mill and reduced usage in the government sector. Based on deliveries this quarter, we are guiding to the lower-end of our initial load growth forecast of 0.5% to 1% over 2012 levels. As we move through the second quarter and complete our regular load forecast updates, we will provide more information on our expectations going forward. For the quarter, purchase power and fuel expenses decreased $3 million to $192 million with a 2% decrease in the average variable power cost. Hydro generation from PGE owned and mid-Columbia hydro resources decreased 12% this quarter,…

Thanks. Our operating and financial performance for 2013 is on track and we're looking forward to continued progress on our strategic initiatives in 2013 including building Port Westward 2, selecting energy and renewable resources and completing the 2014 general rate case. And now operator we're ready for questions.

(Operator Instructions). And we will take the first question of the day from Neil Mehta with Goldman Sachs, please go ahead.

On O&M you did a terrific job in the quarter there, the $105 million came in well below the $110 million to $115 million run rate that you set out on a quarterly basis at the beginning of the year. Was there anything unusual to take into consideration and is it fair to assume that you're tracking towards the bottom end of the $440 million to $460 million range that you laid out in that same guidance?

I would say that what we're seeing Neil is just more of a timing difference at this particular point. We are gaining savings through a lot of the efforts that Jim Piro had mentioned earlier and then as we pointed out, there's little bit of improvement because of no major storms but we seem to be online for our projections for the range that we had given in guidance at this point.

And then on hydro conditions, as you said, are slightly below normal but even in years where you’ve had slightly negative hydro, you’ve still been able to breakeven on the PKM through other components of the PKM. Do you still think that’s the case or whether the PKM impact be negative in 2013 as you look at it?

No, I think that we are still be where we need to be. There is a lot of things, lot of moving parts going on now in the whole subpart of the marketplace this year, including a hydro dam in California is down significantly. So but we could see some improvements in the value of the holdings that we have.

And then can you comment on the potential for you to ultimately acquire the assets that you didn’t win in the RFPs?

We can't tell you. We are in the negotiations right now and when we reach the end of the negotiations we will let you know and as we mentioned it could be either purchase power agreement or an ownership option for the company. So hopefully we’ll have more to report in the next few months.

And the next question comes from Sarah Akers with Wells Fargo.

As a follow up to Neil’s last question, I know the RFP conversations are confidential, but can you tell us if it’s still a matter of identifying that winning bid or is it safe to say that the top has been identified and you are just negotiating the final contract details?

The way the process works as we get the short list and we start with the one on the top of the list, based on our business judgment and then we start the negotiations and if we can reach the finish line with those negotiations within the context of the bid, then that’s what where we will execute. If we can’t then we go to the next one on the list. So we're in negotiations right now. We can’t tell you whether we're still at the top or at the bottom or where we are but that’s the process we go through.

Got it and then on sales, you mentioned that sales growth is not necessarily reflecting the improvements that you are seeing in the economy. Do you think there is just a natural lag time there or is it more of a structural issue with conservation an efficiency?

When we look at, we are looking at a really harder decision, it’s a whole bunch of things going in the marketplace, the economic is still relatively fragile, people are being relatively conservative. I think we will start seeing a pickup later this year. That’s why we're watching it pretty carefully. People have instituted efficiency measures, they try to be more efficient in their operations, all those things kind of impact usage. So it is with conservation. So it’s just a whole host of things that add to that and as businesses get stronger, we would expect to see a recovery in those sectors but there have been some changes. As Jim mentioned, one of the paper customers shut down one of their lines of operations. There are some structural changes also that are going on in the marketplace.

And then will you be able to update the rate case to reflect the downward lever wise sales expectations? Can you capture that in the test here?

As we go through the process in the rate case, we have various options every time to what to update the rate case forecast. I think September is the time. We do it in June and I think we also do it September. So it’s a couple or three times we updated our load forecast, capital related state economic data and the latest trends in what we’re seeing in the loads themselves. And just to recall, on the residential side that sector is de-coupled and a small portion of our commercial sector is de-coupled for specific energy efficiency measures and so if we get a wrong under residential side, either way that tends to go back to de-coupling and that change in use per customer can be due to a variety things including efficiency.

And we'll now go to Brian Russo with Ladenburg Thalmann.

In the past you guys have alluded to like 100 basis points of lag for just unrecovered cost and I’m just wondering, can you give us an absolute dollar value for that, because I would assume as your rate base grows the basis point lag will decline.

That's a great question Brian. You’re right in that it does change as rate base grows. Right now we’ve about a $3 billion rate basis. As we add more to rate base, then the fixed amount of disallowances will be a smaller percentage overall and the major area of disallowances I think, like corporate contribution, image advertising and some of the incentives for officers. So, those are the typical numbers. If you go back to our previous rate cases and look at that, it’s in the $13 million range in terms of what is allowed in the regulatory filings for cost recovery, and that could be little bit more or less but the major items are the ones I discussed and so you are correct, as rate base grows, then that becomes a smaller percentage of the ROE and would cause less of a drag on ROE as we go forward.

Okay. And I guess on that topic, your rate base really isn’t growing with the 2014 test year. So the narrowing of that lag would probably occur in '15 after adding the Port Westward 2 plans to base rates, correct?

Right, and that will be somewhere in the $300 million range, which will add a rate base in 2015 when that plan goes into service…

And then correct me if I’m wrong but I think in the past you also had unrecovered interest costs related to some debt that falls outside of your regulatory debt of roughly $12 million. Is that captured in the lag on the corporate cost you’ve just talked about or is that in addition or is that taken care of already?

Not that just the precision in the capital structure, I think the difference in the overall which allowed in the regulatory fillings including CUF and so some of that is timing issues and some of it just the different between the regulatory weighted cost of capital and our actual weighted cost of capital.

So does that create lag in addition to that historical 100 bips of lag?

It can’t in some cases and some other cases it may not. So I think it’s hard to really quantify that precisely.

And we’ll now go to Lauren Duke with Deutsche Bank.

I was hoping I could get you guys to give us an update on your thoughts for timing of reaching a definitive agreement with the BPA on Cascade Crossing, just when we might be able to have a better sense of the timing as the capital spend associated with that?

At this time point, the best we can tell is probably by the end of this year we will have better clarity on what this project going to look like. We’ve gone through various innovations with BPA on trying to look at this as a single utility project. As you recall we started with, we will the site from the Boardman are down to Salem. That project was kind of independent of Bonneville and provided us the 2,600 megawatt of capacity we thought we needed. The regional economic continues to change and so as we’ve been working with Bonneville on a single utility solution, many factors have come into play around how we would integrate and get 2,600 megawatts of capacity. So we’re doing a lot of transmission studies right now in corporation with BPA to figure out what are the reinforcements where the capital add that need to be made. The MOU contemplated a line that went from Coyote Springs to a new substation called Pine Grove, at which point it would interconnect with BPA. So, we’re now trying to work through all that with the transmission planters and latest forecast of new generation in the region and trying to figure out what is the right way to plan this on a single utility basis. So I will tell you we’re doing a lot of transmission studies and we’re in detailed discussions with BPA in how to bring this all together to create the best benefits for both BPA and our customers and do this in a single utility sense. So our hope is by the end of this year we should have real clarity on what this project will look like, but it’s still all subject to our negotiations with BPA and reaching and agreeing with them on the right kind of split in allocation of resources.

Okay and I guess the kind of updated thoughts on your sales forecast outlook would also potentially impact this as well?

In some affect. I think this is a small blip in the curve. I still see as they are having continued economic growth we are going to need to continue to add resources and the line will provide long-term reliability. Transmission takes a long time to build and you have to look it over 20 to 30 year time horizon. Our general view is we will continue to see demand growth throughout the region and transmission in a necessary component to meet that growing demand and our current view it's better to do it now than wait for the very last minute, just because the complexity of building transmission and so that is part of the other conversation with Bonneville is the time horizon, which we would need to add strategic assets to increase the capability of the transmission system. So I will tell you we have got a lot of focus on it. I really appreciate what Bonneville is doing in terms of working with us on the single utility. It’s got a lot of traction in terms of other support and the environmentalist appreciate that we are trying to think about this holistically. So that is kind of where we are.

Okay and then secondly can you just quickly quantify the impact of weather versus normal on an EPS basis for the quarter?

Jim, you want to cover that one.

Yes on a quarter-over-quarter we had about a $0.01 impact associated with that Lauren.

Pretty close to normal.

Yes.

This year was pretty close to normal?

Yes.

And we will now go to Maury May with Wellington Shields.

A question for the CFO Jim. Just again on your comments on the working of the PCAM for the rest of the year, did I hear you say that a slightly below average hydro year will lead to a slightly negative PCAM?

No, no it won't lead to a negative PCAM. We are down bit in our average variable power cost. We hedge pretty much everything that we have got going into the year. Our loads are down but at the same time, I think that the power markets are going to be picking up here as we move further into the year. The hydro in California, as I mentioned earlier is down significantly. So I think that's going to have an impact on the Pacific Northwest but I think overall we will just be slightly lower than the baseline by about $1 million at this point. So, pretty much in line.

Okay, so pretty much in line but really the first quarter is where you think you will stand by the end of the year?

Maury, it is really too hard to project that at this point. A lot of things can change; the operation of our plan, GAAP prices in the region, California in demand, just tons of factors. So to tell you that's going to be $1 million by the end of the year, it’s just too early to make that projection.

Okay but you are looking at it being pretty close to in balance I guess.

We are looking right now, but as Jim pointed out, there is a lot that can change between now and the end of the year.

Okay. Second of all; can you review once again the equity levels that you discussed currently and then the equity levels versus the plan debt and equity issuance?

Yes, I think Jim discussed that in his remarks but I think we are at about 52.6%.

Yes, right now, we repaid the $50 million of maturing first mortgage bonds and that brings us to 52.6, as Jim pointed out.

Okay and that's at the end of March or now?

That is April 1st. That's pretty much where we are right now.

And then you mentioned a bond offering coming. Can you discus that again?

Yes, the second quarter we are looking at the potential going out anywhere from $50 to $100 million of first mortgage bonds, just trying to maintain the liquidity of the company; trying to make sure that we are not dipping into any additional short term debt at this particular point in time given now all the activities going to be going on with Port Westward 2. So just kind of positioning ourselves in that perspective.

And then the big question; the equity question. Are you still looking at 2014 for cast and equity issuance?

We don't know what we are going to be doing at this particular point in time because we don't know what the outcome will be of the renewable and energy RFPs are. They are power purchase agreements. We will take a very close look at it to see what the impact of our power purchase agreements are on the capital structure of the company. If it turns out there are ownership opportunities, then obviously we'll be looking very closely at the debt and equity markets.

Okay and final question really has to do with those RFPs, the base load and the renewable. A couple of months ago you were saying that you thought it would be late June and early July that you would get the results of both of them and I noticed in the slide deck also you're talking mid-year. So are you really still talking late June, early July for both of those RFPs?

Yes, we're still looking at it in the second quarter. I think that's our plan right now. Negotiations are going well and we should be able to announce the winning bidders in that timeframe.

So it will be probably in June, probably in late June for both of them.

In the second quarter.

(Operator instructions). And we'll now go to Paul Risdon with KeyBanc. Please go ahead.

Can you just give order of magnitude of megawatt hour annual basis delta between the new wind normal, versus the old wind normal, or capacity factor?

I still need to look into the rate case, but in the rate case what we did is we looked at as a five year rolling average and that's what we've done with our thermal plants in terms of availability factor and for its value. So in the rate case we did project based on a five rolling average what the win would be. We've tried to use that for the forecast, compared to what the original design was which was a certain number. Jim do you have the exact numbers on what that would look like in terms of difference in megawatts?

No I don’t, I was just thinking, another way to look at it is a wind form is 450 megawatts. These are approximate numbers, around 30%, a little bit north of that originally in our first profile and now we're down to approximately 25%, as far as the capacity factor expectation for the wind farm.

We can get you the exact number. Bill can get that for you, because in the rate case we did show the five year rolling average for wind generation based on actual results and that's what we're using for our forecast going forward, and then we'll just strew that up over time, similar to what we've done with Hydro to determine normal. Prior to that we were using a kind of theoretical number that was based on studies for that site. Now those studies may still be valid but because of just the timing issue, we're going to a five year rolling average and so Bill can get you those numbers offline but they're in the rate case. So they can be discussed.

And then on the RFP, assuming it's with PPA, did I hear you just in response with Maury's question suggest that maybe the impeded debt would drive an equity lease.

Something we're really concerned about, just given the new accounting standards and how purchase power agreement would show up on the balance sheet and affect our ratio. So generally S&P takes a view that purchase power creates a debt like obligation to a company and therefore they do an impeded debt to look at our overall ratios, and that's a concern to us, and with the new accounting standards potentially coming forward, we might actually have to put the obligation on the balance sheet, which we then have to balance. So we believe that if we entered into purchase power agreement, we might have to increase our equity ratio to offset that obligation, and we're looking at it pretty closely. Our goal is to maintain investment grade credit ratings and anything that would put downward pressure on that would be a concern in terms of raising our cost and raising the cost to customers. So we are factoring that in and we'll have to make some decisions around that, based on the obligation and the nature of the negotiations and the contractual arrangement.

So you mean you would do an equity raise either way, either outcome.

We're not going to say when we might add it, but we will clearly evaluate it and include it in our decision making and look at that, if it were a purchase power agreement, what that obligation would look like.

And are both the energy and renewable, could those go either way PPA or cellphone.

At this point we'd say either way it could go and we're not tipping our hand if you will, which way it will go.

So there's four potential outcomes, two PPAs, two cellphone and then flip one of each.

Yes, it could be any combination of those potentially.

And the next question is from David Paz with Wolfe Research.

Just a few follow up questions. In your rate case I think you mentioned you'll be filing updates, I think it was the context of sales forecasts, will you also be updating any impact on bonus depreciation in 2013.

We made a projection in the rate case for tax depreciation. As I recall we have not exercised bonus depreciation just because we don't have the capacity to utilize it. So we continue to evaluate that going forward to see if it still makes sense do or do not do it. So we would likely not update it but if there was a decision to do something, it was definitely the rate case, it would probably come through the discovery process but right now I think our plan is not to move forward and exercise bonus depreciation, just because we don’t have the tax capacity.

And so the last time you exercised bonus D&A was in 2011?

Yes that was about right. We did 50% in 2013. Yes it was 2010.

And the reason for that as we were generating so many production tax credits is that we don’t have the tax capacity to utilize the bonus depreciation. So I guess going to be normal tax.

Also I noticed that you updated your ongoing CapEx, I think you raised ’13 projection then slightly and then slightly lower ’14 and ’17. Just curious are those changes just due to timing or changes and assumed escalation rates, what are driving those slight tweaks?

Mostly just regulatory updates that’s going on, but I will get back to you.

No problem and then just on what do you discussed earlier on the higher equity layer or potential higher equity layer under PPA scenario for the base load and renewable RFPs. Would you request a higher authorized equity layer? Would you need to speak approval from OPUC and could that be done in the current rate case?

So the way you would do it is, the regulators typically want to see real equity on the balance sheet as opposed to theoretical cap structure. If we were to enter into a purchase power agreement, we would have to look at the effective add on the balance sheet and how it will work and if we believe that there was a requirement for extra equity to offset that obligation, we'd have to have a plan to issue it and then we would reflect that in a future rate case. That probably it wouldn’t hit us in the 2014 rate case because likely the purchase power agreement, if they were to go that way wouldn’t be hitting our balance sheet probably to later beyond that period. So it might be subject to 2015 rate case potentially but it would be something that we have demonstrate the prudency of why we would need that, especially as it would impact our bond ratings and our cost of capital.

So in interim you would still target 50/50?

Well at this point we are targeting 50/50 at least for the 2014 rate case. 2015 is whole different game depending on what the outcome of the RFP’s would be.

(Operator Instructions). And we will now take a question from Lauren Duke with Deutsche Bank. Please go ahead.

Follow up on the equity ratio comments. Given that you’re already over equitized right now and if you didn’t win more RFPs you might continue down that path, is it possible that you could ask for an equity ratio increase without actually having to issue market equity?

That's a possibility. I don’t know if you’d be able to build your equity balance enough to offset a purchase power obligation, but again it depends on the nature of the PPA obligation and contractual arrangement and then in discussion with the rating agencies, how they would view that, as well as the accounting treatment on our balance sheet. So there's a whole bunch of things that get factored in there. I doubt if you could build it over time just by retaining earnings. That would obviously factor into the analysis that as you grew your equity and really didn’t have any need to issue debt.

And we’ll now go to Andy Levi with Avon Capital.

Just of couple of things I guess to clear up. So, just back on the equity and the PPA, so if it ended up being PPAs, the equity wouldn’t, assuming you would have to issue equity, that wouldn’t be issued until the PPAs came online, is that kind of the way to think about it?

Well, I think you have to look at the obligation, if when you are entering into the obligation and when the writ agencies would include that. So it usually starts when they start delivering if you will and you have the obligation to pay.

Okay. So, I guess the goal would be kind of get that equity ratio higher in conjunction with an equity raise/PPA. Is that kind of the way to look at it?

That’s correct. Again, we will work closely with the rating agencies so that we'd help them understand what that effect is on our ratios and ensure that we maintain credit worthiness.

I’m trying to recall correctly, as you look at PPA, you’re not looking at the full value of PPA but you’re looking at a subset of that.

Right, now I just want to clear that up. That’s obviously important detail. The second thing is what's always happy to hear was that, as your rate base grows and in particular I guess if the renewable/base loads ends up being a building purchase type thing or someone else builds your purchase, that regulatory lag comes down over time. So, I think that’s probably fairly significant and I guess something new to investors. Because I don’t remember you guys talking about that?

No, I think it’s just that basic math of the equation. You have certain dollars that you don’t necessarily get recovery on and those dollars just become a smaller percentage as your rate base grows. So I think that’s just math and if you look at other utilities that have much larger rate base, they probably have about the same amount of dollar dis-allowances but with a larger rate base it's just a smaller percentage for them. So if you look at our rate base for customer we tend to be at the lower end of the range for utilities and that’s because we are basically short on generation. As we add more generation, get ourselves more in line with where others are in terms of reserve margins et cetera, then that unrecovered cost becomes a smaller percentage.

I think that’s significant because I think most sales side analysts really just take your rate base and assume 100 basis point lag, probably an estimate.

Better look at the dollar amount and watch that change overtime as rate base can grow.

I think that’s all the questions we have and we appreciate your interest in Portland General Electric and invite you to joining us when we report our second quarter 2013 results in August. Thanks a lot and have a great day.

And thank you very much. That does conclude our conference for today. I’d like to thank everyone for your participation and you may now disconnect.