Morningstar | Portland General Growth Plan on Track, Positioned to Add Renewables
We are reaffirming our $37 fair value estimate and narrow moat and stable moat trend ratings for Portland General Electric after the company reported earnings per share of $2.37 in 2018, up from $2.10 in 2017. Earnings were in line with our forecast and within management's $2.25-$2.40 guidance range.Management also initiated $2.35-$2.50 EPS guidance for 2019, in line with our estimate. We expect first-half 2019 earnings will show substantial improvement over first-half 2018 earnings based on higher 2018 operating expenses preceding the midyear Carty Generating Station litigation settlement.
We continue to forecast that Portland General will average $500 million of annual capital investment in 2019-22, supporting our 4% average annual earnings growth forecast. PGE's investment plan and growth rate could go higher if Oregon regulators approve PGE's recent proposal to invest $160 million in a wind-solar-battery project with NextEra Energy that would result in PGE owning 100 megawatts of new wind power. If regulators approve the project, it would have a slight positive impact on our fair value estimate. Management expects a decision in the next few months.
The new wind investment comes after management raised its 2019-21 spending outlook by 16% late last year. We think these moves demonstrate that PGE can continue finding growth projects to maintain or expand its investment plan. A rate settlement in late 2018 helps ensure PGE will continue to receive constructive regulatory support.
Portland General Electric is an electric utility engaged in the generation, purchase, transmission, distribution, and retail sale of electricity in the state of Oregon. The company also participates in the wholesale market by purchasing and selling electricity and natural gas. The company's generating facilities consist of thermal plants (natural gas- and coal-fired), wind farms, and hydroelectric. The company owns or has contractual rights associated with transmission lines that deliver electricity from its generation facilities to its distribution system in its service territory and also to the Western Interconnection.
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