Good morning everyone and welcome to the Portland General Electric Company’s Second Quarter 2015 Earnings Results Conference Call. Today is Tuesday July 28, 2015. This call is being recorded and as such all lines have been placed on mute to prevent any background noise. After the speakers’ remarks, we’ll have a question-and-answer period. [Operator Instructions]. For opening remarks I’d 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 Ashley and good morning everyone. We’re pleased that you can join us today. And before we begin our discussion this morning I’d like to remind you that we have prepared a presentation slide deck to supplement our discussions and we will be referencing throughout the call. The slides are available also on our website at portlandgeneral.com. Referring to Slide 2, I would also like to make our customary statements regarding Portland General Electric's written and oral disclosures and commentary. There will be statements in this call that are not based on historical fact and as such consult to forward-looking statements under current law. These statements are subject to factors that may cause the actual results to differ materially from the forward-looking statements made today. And 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 second quarter earnings were released via our earnings press release and the Form 10-Q before the market opened today and the release and the Form 10-Q are available on our website at portlandgeneral.com. Company undertakes no obligation to update publicly any forward-looking statements whether as a result of new information, future events or otherwise and the 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 Finance, CFO and Treasurer. Following their prepared remarks, we will open the line up for your questions. And now, it’s my pleasure to turn the call over to Jim Piro.

Thanks, Bill. Good morning everyone and thank you for joining us. Welcome to Portland General Electric second quarter earnings call. On today’s call, I’ll provide an overview of our financial and operating performance, give you an update on the economy in our operating area and discuss construction progress on our new Carty Generating Station. I’ll then turn the call over to Jim Lobdell, who will provide more details on our financial performance and general rate case. As presented on Slide 4, we reported net income of $35 million or $0.44 per diluted share in the second quarter of 2015 compared with net income of $35 million or $0.43 per diluted share in the second quarter of 2014. Overall PGE continues to demonstrate strong operational performance across the company in 2015. Construction on our Carty Generating Station is proceeding on budget and is expected to be completed in the second quarter of 2016. Our 2016 general rate case has made significant progress and we are affirming our full year 2015 earnings guidance of $2.05 to $2.20 per diluted share. Moving to Slide 5, we continue to see strong performance in our generating plans, distribution system and power supply portfolio during the second quarter of 2015. However, offsetting some of the operating performance from these areas was lower than forecasted wind in hydro generation. Regarding customer satisfaction, according to the latest published national rankings, PGE continues to maintain top quartile system reliability metrics, top decile customer satisfaction metrics for key customers and top quartile customer satisfaction metrics for residential and business customers. Earlier this month, PGE was named a 2015 most trusted business partner among utilities by Market Strategies International. In June, PGE received the 2015 Smart Grid Customer Education Award from the Smart Grid Consumer Collaborative for our Salem Smart Power…

Thank you, Jim. Turning to Slide 10 as Jim mentioned, the second quarter of 2015 we recorded net income of $35 million or $0.44 per diluted share compared with net income of $35 million or $0.43 per diluted share for the second quarter of 2014. These comparable quarter-over-quarter earnings were the result of the following items. Increased energy deliveries for all customer classes, the incremental earnings contribution of Port Westward 2 and the Tucannon River Wind Farm in customer prices in 2015 and increased AFUDC earnings on the construction cost of the Carty Generating plant. These increases were offset by higher power supply cost from the second quarter of 2015 compared to the second quarter of 2014. Moving to Slide 11, total revenues for the second quarter of 2015 increased $27 million to $450 million. This increase was primarily driven by growing demand in the industrial sector, an increase to customer prices from the 2015 general rate case, which included the addition of the Tucannon River Wind Farm and the Port Westward 2 generating station. Energy deliveries for the second quarter of 2015 were 5.6% higher than the second quarter of 2014 for the 4.9% increase in residential deliveries, a 3.6% increase in commercial deliveries and a 9.8% increase in industrial deliveries. For the full year of 2015, we expect a weather adjusted load growth of approximately 1.5% net of energy efficiency and excluding one large paper company. This is a 0.5% increase from our previously disclosed load growth estimate. Now on the power supply. Lower than expected hydro and wind generation in the second quarter of 2015 were offset by effective power supply management, which resulted in net variable power cost at approximately the baseline of the annual update tariff for the second quarter of 2015. This is in…

Thanks. We continue to focus on successful execution of our initiatives that deliver value for our customers and shareholders by achieving operational excellence, by meeting our 2015 performance targets, completing construction of the Carty Generation Station in the second quarter of 2016 and on budget, achieving the fair and reasonable outcome in our 2016 general rate case and working collaboratively with all our stakeholders to repair our 2016 integrated resource plan and its associated action plan to meet our customers future energy needs using resources that provide the best long term balance of cost and risk. And now operator, we’re ready for questions.

Thank you. [Operator Instructions] Our first question comes from Paul Ridzon of KeyBanc. Your line is open.

Congratulations on the solid quarter. A quick question. You updated your sales forecast, just wondering, if there is any particularly bright spot in the economy or it's just kind of broad based?

When you look at the numbers, as we looked at the second quarter, again we’re seeing strong growth in the industrial sector driven by the hi-tech and also in the commercial sector, there's been a really bright spot for us. We’re seeing a lot of growth in the commercial sector more than we had anticipated. We shows [Indiscernible] two bright spots. Residential continues to be about flat most of that is driven by energy efficiency which is offsetting our growth in that sector. So really the growth in the commercial sector and industrial sector are really bright spots and if you look around Portland in the Metro area, you see fair amount of cranes out there which is always a good sign that the economy is growing. And the housing market is definitely picking up as we see our permit starting to rise and we continue to see construction multi-family. So all-in-all, it’s a positive sign the economy more people going back to work and feel really good about what’s going on in our service area.

So you’re seeing underlying growth is 3% half of which is even though not efficient?

Yes. We typically use about, have about 1.5% reduction on a low duty energy efficiency. We run those providences energy trust of Oregon and they produce about 30 average megawatts or so a reduction in the energy efficiency each year. That tends to be weatherization, lighting, we’ve been doing a big program throughout our service area on LED lighting for the streets and so forth and that’s been a really successful program in using our product more efficiently.

Not much that loading included already in high risks?

As you look at the curves and we’re right now in the integrated resource plan. If you look at what existing in the pipeline starting to run out and so I think as we look to the future, we don’t see necessarily as much energy efficiency opportunity with the current technology. You always have to win what the new technologies are going to be and it does start to taper off. But if you look at the forecast, the energy thrust is well there maybe new technologies out there that might produce the additional efficiencies but much of it is starting to become part of [closing] standards and so it’s kind of baked into the new appliances and the new construction standards. So it is starting to tail off, we’ve been doing this for, I think you think back to all, back to 1980 we’ve been doing efficiency. And so it is starting to if you will run out in terms of that opportunity.

Would you say weather was a help or kind of push, kind of give in the mix before --

Yes and yes. April and May were warm and that tends to be a heating month. So we kind of got heard in April and May due to warmer weather and then June went the other direction, it was warmer in June and Jim you want to talk about the financial impact of that or?

Yes, Paul. It was impact of weather for the second quarter, it was about $0.07. As Jim pointed out in the first few months, there was little drag and then June really helped out with the hot weather.

So you have got $0.07 versus normal or year-over-year?

$0.07 quarter, year-over-year negative.

Negative, okay. And then how is the wind resource in the quarter?

It was down again and I think if you look year-to-date, wind is down about 30% overall for the year and it was down again in the second quarter.

Yes. Paul actually $0.07 was just for Q2.

This is normal?

Yes.

And then looking forward to some generation opportunities, is it for basically, or is it we have to get 20% by probably its more wind from some backup gas behind that wind and then in 2020 you have the backs for Boardman retirement, is that kind of the way to look at it?

Yes. As you look at it, that's the whole purpose of the integrated resource plan. We will do all the analysis; we will look at what's the best balance of cost and risk. We are going to have to add additional renewable resources, it’s about 110 roughly average megawatts of new renewable resources to meet the 2020 objective. And then we have an overall energy kind of whole of around 450 million megawatt when you look at 2021 after Boardman shuts down. So we are trying to address what's the least cost flows risk way of doing that and replacing those resources. So it'll be a combination of, likely we will do an RFP for the renewable resources I think when tends to be the lowest cost resource for us. And then on the baseline side we will look at gas resources and we will also look at peaking type resources like on Port Westward 2 unit to backup the new renewable resources. But the way it will play out just so you can understand we are getting always one of the action plan which we are targeting for the first quarter of 2017 then we would go to what's called an RFP process or request for a proposal to solicit bids for resources to meet the action plan. We intend as we did in the last plan to probably include self build options. And we will work to that process after the action plan is acknowledged.

Thank you. And then lastly, is there any discussion Oregon about expanding the RPFs?

There is lots of discussions in Oregon around carbon and global warming and climate change and number of issues around that. I think we are all waiting to see what 1/11d produces and how that will impact our decisions around resources. So we, like many utilities, are waiting for the new rule to come up on the EPA around 1/11d and then we can assess weather that would by itself require us to add more renewable resources or just exactly what actions we would have to take. So I think everyone's kind of pausing right now, until we see the results of that, and then I think there will be additional discussions in the state around those kinds of items. But right now there is nothing be proposed to increase the RPS standard. And just for clarification, the final standard is 25% by 2025. So we still got a couple of more steps to go before we kind of visit the next ideas.

Our next question comes from Brian Chin of Merrill Lynch. Your line is open.

I apologize if I miss this earlier in your comments. I think the CapEx numbers on slide eight or a little bit higher than where you at projected them earlier. Can you give a little bit more color there?

So Jim you want to go to those numbers?

Yes, there up about $60 million and the reason is because we’ve got a customer service system efforts is going on or CET customer engagement transformation, so that’s the real driver plus a few other small items.

Yes, we have a pretty significant project. We hope to kick off in October with final Board approval. But we need to replace our customer information system and our meter data management system. Both those systems drive are billing to our customers. Our systems were put and back in 2001 and so they’ve reached the end of the useful live, so we need to replace those and we’re in the process negotiating contracts and getting the work plan put together. We’ve got 10 approval from the Board we’ll get final approval in October.

And the past when you guys have talked about improving more centralize communications in a greater building out of the R&D assets. It seems to me there was a lot of little pieces that you guys were looking at. I guess the question I have is when we’re looking at this race of 60 million here is that your sense that this is probably more of a final level kind of number or we still in the mid of trying to assess what other touch could happen where there is further potential upside in those numbers?

I think we’re still assessing other potential opportunities we’ve been looking at simply because the smart grade work on it, the integrated grade, but really working we add technology to grew the throughput of the system and the performance of the system. And so we just and our Board need to share we spend half a day talking to our Board about smart grade technologies and how you can improve the throughput of system. So things like conservation both each reduction smart switches, all those technologies that can improve a liability and performance of the grade. And so we are, we’ve run some pilots, we’re looking at expanding that and that’s really what we’re in right now. And so in the next year so we’re trying to solidify those plans ensure that we have the bandwidth and that the technologies are working to our satisfaction. So I think there is some other opportunities there, but we have run into ground and add in terms of actual capital expenditure and numbers, yes.

Got you. And one last question and I will hop back. So if I understand it correctly there are not any sort of like discrete dockets or anything like that are proceedings relates to this extra amount this would just be involved under the base CapEx, is that the right assumption going forward?

That's the right way to think about. That are rate base coming to grow our shrink base on those investments and then that would just be part of our general rate cases going forward.

Thank you. Our next question comes from Chris Turnure of JPMorgan. Your line is open.

I want to follow up more on your dividend increase and your plans going forward there, obviously you are pretty low in your payout target range right now, I wanted to understand if that 5% to 7% that you want to recommend to the board next year going forward is kind of a lose guidance range where in some years it could be higher than that or if that's pretty hard and fast and you might reconsider doing a buyback or something of that nature given your cash flows especially in seventh?

I would call it loose guidance, I mean I think it's generally what we are comfortable with right now, every year you have to reevaluate, we are getting to the close to the date when we will get a better picture of our CapEx spending and cash flows of the company and then we all revisit that issue. But we generally feel that's an acceptable range. If we look at the runway towards new capital projects to meet our customers' energy needs, we want to kind of preload the equity structure so that we can have the ability to ride through that without having to issue new equity. And so that all goes into the decision making process, as we get to the integrated resource plan we will get a little more visibility on where the parties want to go with new resources and the timing of those resources 1/11d will also inform. So what we know today, we are comfortable on that range as I mean we couldn’t go out of that range but I think right now, given the CapEx forecast we have and how we think about new resources that's kind of where we would likely would land. We do want to retain a sustainable pattern and not just kind of jerk it around each year. But again that's all the things we take into account when we sit down with our finance committee and the board to talk about the dividend.

Okay. Got you. And then could you give us a little bit more detail on the power cost issue? I am not sure was in your general rate case or outside of it, but was that kind of something that went back to the PKM reform that we heard something about late last year or earlier this year over that topic?

Yes, the one issue we have that we pulled out of the settlement on the rate cases was called Port Westward Unit 1 extensive maintenance outage that's scheduled for next year. We had a problem with the turbine this year, there was an aired major in the maintenance outage. And so we are going to have to go back next year and pull the road and look at that and do some work on it, just get a back up to -- And so there is some discussion between the company and the commission and the parties about whether we should be allowed to recover for that extended maintenance, I don't think that is much better but I don’t know if we filed in the case what the dollar was so it’s not a huge number, but it is something we want to -- with the commission. It’s fairly new information and so we didn’t really, the parties weren’t ready to settle that issue and so we decided to pull it out and brief it. We will finally, we filed testimony last week? I think it was last Friday, Friday we filed the testimony on that case, on that issue and you could probably find that out in the dark to get more color on what it is.

Okay. But as of now you have hold it and you are going to eat those cost?

Well, now we’re going to work through that we filed our testimony why we think should recover that cost, we believe we are prudent that the contract we had with the vendor who did the work was a good contract but we do have the sloppy origin or the extension of the maintenance that and we were asking to get recovery of those dollars and we didn’t put in the settlement because it was a fairly new issue and we are ready to settle it. So we all agreed that we’ll brief the issue and then working through the process.

Thank you. Our next question comes from Michael Lapides of Goldman Sachs. Your line is open.

Couple of questions. Real quick just with the revised capital spending numbers how are you thinking following this year’s rate case, what kind of the timing or cycle is for any future or follow-on cases?

We’re right now in the budgeting process Michael and getting the ’16 budgets complete and then we will also ask our operator do a ’17 budget. We’re going to try to take a holiday but rate cases we can’t guarantee that at this point we have to look at the numbers to make sure there is nothing in ’17 that would cause us to have file a rate case, right now with we typically, I have to go every other year just to deal with inflation, the big driver is obviously load growth, as you see what happens in ’16 and ’17 to be right provide some margin to cover our general increase in inflationary cost. So we’re looking ’17, I think we’ve gone through three rate cases in a row and I think it’s time for a one year hiatus but again we will complete the budget process, we’ll look at the results and see if we can manage through ’17. So that's kind of what we are right now, we’ll know more probably in the third quarter call, and whether that's the indication, we won’t have to file a ’17 rate case to February of next year as we do have time but we want to complete the budgeting process look at the numbers and see what it would mean to try to manage through ’17.

Got it and when I look at the slide 13, I just want to make sure I’m understanding this correctly, when I think about what drops to the bottom line kind of one pre-tax, I guess dropped to the earnings before taxes line, is that $41 million or is that a different number?

Well, supplemental is usually offset by amortization. So you typically -- I have to look at each of the supplemental tariff, but the supplemental tariff usually a refined of a prior credit to customers and Jim gave you the detail behind the supplemental. But those are typically just amortizations or credits that we have the biggest the biggest is the fuel, the fuel credit from department of energy. The base business is really what, base business [indiscernible] the two numbers that flow to the bottom-line obviously they are offset by costs, which has differentiation costs, we have other cost increases. So at the end of the day essentially rate base time is return on equity they guess to the bottom-line. So there is a lot’s of moving parts in these numbers including power costs and ONM and a lot of other changes. So it’s not easy to say what drops to the bottom-line so because of the offset to cost. So again I was kind of look at or look at the rate base for the case time the 50% capital structure times in ROE and that really is what we would project earnings less certain costs that we don’t get recovery for.

And can you remind us what’s the amount of cost you don’t get normally, it kind of hidden historically rate cases that you didn’t get recovery up?

The amount ROE perspective, we kind of put it out there and approximately 80 basis points.

I have one or two others. I can follow-up offline.

Our next question comes from Brian Russo of Ladenburg Thalmann. Your line is open.

I’m just curious what the upward revision to your load growth forecast. Will that change the revenue requirements that we see on page 13?

Well, we did GRC and we updated our load forecast as part of that filing that did increase the load expected. So it’s actually going to increase a little bit.

Okay got you and the stipulation that you mentioned was filed in June and details will be out soon. Is that if I heard you correctly it’s all…

Yes, Brian there were two stipulations. One we did filed with the commission influence on record to date. There is another one we have just recently reached agreement with the parties that has not yet been filed with the commission. We still working through the paperwork and you know trying to make sure everyone agreed, getting everyone to sign-up on it then we will then filed up stipulation. Any deals with almost all the remaining issues that are than the Port Westward 1 project that we talked about earlier on the call. So we have been able to provide those details to you because the parties have been signed up it’s not done. So we do not want to pre-jump the results, but the hope is to get that completed, next couple of weeks and get filed with the commission.

So all remaining issues mean return parameters as well?

Yes, everything. Everything, except for the PW1 issue.

Okay. Great. And then income statement in the guidance, can you kind of give us a sense of does the midpoint of your guidance assume zero balance on the PKM?

I don’t think we get that.

We do not get into much detail.

Yes. We are generally within the guidance with all kinds of things moving on and a lot of it will depend on wind generation. I think we have a pretty good runway on hydro, we kind of see what that's going to produce, but we still have the end of the year and that can have a hydro impact also which is still not yet happened. So there are a lot of moving parts between the load forecast and power cost and wind forecast, there are just a lot moving on right now. So we are generally feel comfortable within that guidance but we still have a whole half year left to go.

Yes. I would say that for the full year we anticipate it within the debt band of the PKM and right now as I mentioned earlier, we are effectively at the UT level, the baseline level.

Got it. And I think you ended the first quarter of ’15 $2 million below is that assumes?

Yes.

You lost that $2 million in the second quarter and you are flat year-to-date?

Well, we are down $2 million year-to-date underneath the baseline. We are flat on Q2.

Thank you. Our next question comes from Mark Barnett of Morningstar. Your line is open.

Thanks for all the commentary so far. Just a couple of quick questions, would you be able to disclose the impact of -- you said that the load growth exclude one large paper customer, was that a closure or just a major delta in their usage for the quarter?

One of our large customers --the paper customer they get variable rate from the company. So we essentially buy and sell for them or buy power for them when they need it at the market rate and so their consumption really does not impact our result and it could be very volatile and the impact they have had sales generation out there which can change the overall results. So because there are variable load customer and we just sell to them in a margin, they are not one of our cost of service customers on a long-term basis. So we try to take them out because the volatility in their loads just can impact the growth numbers and it does not reflect the base growth in our business. So we have just excluded that for purposes of clarification and clarity of our load growth numbers.

Okay. And I thought that that would be the same customer, I just wanted to make sure?

Yes, same customer.

Okay. And second, could you get just a little bit of color when you talk about the rest of the year being below average for hydro conditions now you have a pretty good idea by this point, what the next few months will look like, you maybe just comment on that a little bit?

Sure, Jimmy?

Yes, when we look at three basins that we are sourcing our generation from our which is the mid sea, Clackamas and Deschutes all of those basins are below normal and the April through September forecast, so we’re looking out for the balance of the year we’re expecting that to continue to be down at a less than normal level, and if you look at it and on a composite perspective we’re expecting it to be about 73% of normal.

Thank you. Our next question comes from Andy Levy of Avon Capital. Your line is open.

Just a quick follow-up on the PCAM, so could you just describe to us, so you had some verbiage in the release and also you mentioned it also on the call that you did a very good job kind of offsetting the hydro conditions in the low wind conditions, can you just give us some more detail on that if possible?

I think part of that just due to changes in the market and market opportunities, California is obviously gone through a pretty significant drought down there and so we try to take advantage of those opportunities when they make themselves available, they are random and never can predict them, but we try to always optimize our power supply in the market, when there are opportunities to sell power into that market and so because of what’s going on in California that severe drought the market heat rate has gone up which provides us an opportunity to sell some of our excess generation into that market.

Okay. So just if I understand it correctly your fossil units ran very well and that provided even with the heat excess generation that you are able to selling to the California market and offset the lower hydro and wind conditions, is that kind of, is that correct?

Yes, that basically correct, along with the first two months of the quarter, we had lower loads, so we had lower power cost, [a trigger] point as well.

And was hedging, pre-hedging or have anything to do with there or was it really just a dynamics of the market and good production from your fossil units?

It still laterals not hedging, because we typically going to the year fairly flat, so we don’t take risk positions going into the year. So we essentially buy the gas, buy the power, buy the other fuels that we need to run our power plants in anticipation of what we think how we are going to run and then everything else changes, hydro changes, wind changes, California hydro condition is changed and that’s where we try to optimize our power supply. And because of the unique satiation in California the market rates have been up a little bit.

And I know it’s quarter that you haven’t leased yet. But those dynamics continue in July?

They should, I mean we’ll have to see how it all works out. You never know how California set themselves up, whether we get heating California will make a difference.

And whether we got heat in the Pacific Northwest difference as well.

Yes, whether our thermals are committed to meet load in the Northwest or the loads are moderate here and then there is an opportunity there. So there is a lot of things to move around on a daily basis in terms of the markets.

Our next question comes from Ashar Khan of Visium. Your line is open.

I wanted to just go over. Could you just repeat, I just wanted to make sure what is the contribution of the weather past of negative year-to-date and if you could just repeat for the quarter versus normal?

For the quarter versus normal, it was $0.07.

Okay. Negative?

Negative, yes.

And year-to-date?

We’ll get back to you on that.

Sorry?

We’ll get back to you on that. I don’t have that with me right now on a year-to-date basis.

And then I just wanted to get a sense on the strategically one thing which has happened since last call M&A and the small caps space is being in the forefront. And I just wanted to check-in how does the Board look at M&A and strategic things generally in the space or just for shareholders long-term?

We don’t really comment on mergers and acquisitions. I will tell you just like any Board, you have responsibility to observe what’s going on in the market, we brief our Board and what’s going on in the market related to M&A. So I’d like to say on that issue.

Sure on a weather adjust we have to look at number up. So year-to-date weather compare to normal is driven down EPS by $0.20.

$0.20. Okay. Great. I appreciate.

$0.27 year-to-date.

$0.27. Okay.

$0.20 in Q1, $0.27 Q2.

Okay. No, I am just trying to make a sense of how should we try to forecast next year, take the weather out of normalized it first [indiscernible] which has to our numbers. Thank you.

Yes. You are welcome.

Thank you. And we have a follow up from Michael Lapides of Goldman Sachs. Your line is open.

Hey, guys. I know you are ways away from thinking about longer term EPS, but is the best directionally if I am an investor, just think about rate base in 2016, I assume the authorized capital structure and maybe a slight discount to the authorized ROE, let's say we used a 99, but some slight discount to it. Is that kind of ballpark the right way to be thinking about this?

In terms of the earnings performance of the company, you take your rate base time to 50%. You always have to add [indiscernible] you have to add rate base plus [indiscernible] and then you take your cap structure times what you think the allowed ROE is going to be and then reduce it by roughly 80 basis points or so for reduced allowanced and other costs and they are not recovered and that gets you to the earnings power of the company.

Got it. And I want to make sure, the comments, I asked that question earlier about the GRC and the detail at the bottom of slide 13, the supplemental tariffs update, so that $62 million, that's a reduction in revenue, but it's also a reduction in the amortization so it does not impact kind of EBITs or earnings, it impacts cash flow, but not earnings necessarily.

That's correct.

Got it. Okay guys. Thank you much. Appreciate it.

Thank you.

Okay. So let's conclude we have no further call. So we appreciate your interest in Portland General Electric. And we invite you to join us when we report our third quarter 2015 results in late October. Thanks again and have a great day.