Portland General Wraps Solid 2022

We are reaffirming our $49 per share fair value estimate for Portland General Electric, or PGE, after the company reported earning $2.74 per share on an adjusted basis in 2022, mostly flat with 2021 earnings and slightly below our estimate. We are reaffirming our narrow moat and stable moat trend ratings.

Management initiated 2023 EPS guidance of $2.60-$2.75, below our estimate primarily due to higher costs than we forecast. We plan to adjust our assumptions for 2023 but don’t expect a material impact on our fair value estimate. We are maintaining our 6% long-term growth outlook, consistent with management’s 5%-7% range that it raised in late 2022 from 4%-6%.

We think PGE’s five-year earnings and dividend growth could trend toward 7% if it reaches a constructive outcome in its 2023 rate case and wins at least some of the new renewable energy projects offered in 2023 and beyond.

We continue to assume PGE tops its current $4.3 billion capital investment plan in 2023-27. PGE has the opportunity through competitive bidding this year to add another large clean energy project to its investment pipeline, similar to the $415 million Clearwater wind project added in late 2022. We expect more than 600 megawatts of projects could be offered in 2023. Management estimated another 2-3 gigawatts of opportunities during the next six years, representing a potential doubling of PGE’s capital investment. We don’t include any major new projects in our forecast beyond 2024.

We think PGE’s 16% rate increase request filed with Oregon regulators on Feb. 15 is a fair opening bid. We expect regulators to approve an allowed return on equity closer to PGE’s current 9.5% rather than its 9.8% request. PGE’s proposed energy cost rate adjustments could reduce customer bill volatility and help PGE win support for earnings-accretive rate increases. We expect a decision from regulators late this year, but a settlement could come earlier like in PGE’s last two rate cases.