ML20248K689
| ML20248K689 | |
| Person / Time | |
|---|---|
| Site: | Trojan File:Portland General Electric icon.png |
| Issue date: | 12/31/1997 |
| From: | Lay K, Skilling J PORTLAND GENERAL ELECTRIC CO. |
| To: | |
| Shared Package | |
| ML20248K675 | List: |
| References | |
| NUDOCS 9806100225 | |
| Download: ML20248K689 (82) | |
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financial O O . msm1s1. (Unaudited: in millions except per share data) 1997 1996 1995 1994 1993 Revenues $ 20,273 $ 13,289 $ 9,189 $ 8,984 $ 7,986 Net income: Resutts from Core Businesses $ 585 5 493 $ 489 $ 440 $ 380 Retail Energy Services (a) (g) . . . . Items impacting comparability (471) 91 31 13 (47) Total $ 105 $ 584 $ i20 $ 453 $ 333 Earnings per Diluted Common Share: Results from Core Businesses $ 1.98 $ 1 82 $ 1.32 $ 1.65 $ 1.43 Retail Energy Services (8) (0.03) - - - - ltems impacting comparability (1.60) 0.34 0.12 0.05 (0.18) Effect of anti-dilution (0.03) - - - - Total $ 0,32 $ 2.16 $ 1.94 $ 1.70 $ 1.25 Dividends Paid per Common Share 0.91 0.86 0.81 0.76 0.71 2
- Total Assets 23,422 16.137 13,239 11,966 11,504 h
4 Book Value per Common Share 17.26 13.81 12.01 10.94 10.01 Capital Expenditures and Equity Investments 2,357 1,639 947 941 962 I NYSE Price Range -1 High 45 % 47 M 39 M 34 % 37 Low Close December 31 35 41 b 34 % 43 % 28 38 X 26 % 22A [ i 30 W 29 6 l (a) includes gain on sale of 7% of Enron Energy Serwces shares ($61 mdhon or 50 2I per dduted share) I Ravsnres Earnings Per Share - Diluted Annual Dividend Rate (5 in billions) (in dollars) (in dollars) gg
.90 13.3 9.0 9.2 lll 94 95 96 g7 O Reported 12.w 12/95- 11% 12m-9/95 9/96 9/97 present 9 Core Businesses
l to our shareholders 1997 was a difficult year for Enron in terms of report- i Increased worldwide oil and gas reserves by ed net income and stock price performance. Our net 12 percent. income of 5032 per diluted share included $1.82 per i Added sizable new oil and gas concession in share of non-recurring charges primarily attributable China. to the renegotiation of a North Sea gas contract. These financial results adversely affected our stock Transportation and Distribution price performance, as 1997 total return to shareholders # Continued our solid record of safe and reliable of (1.5) percent was our first annual negative return operations.
\\ since 1991- a year where the S&P 500 also showed 6 Achieved progress on key expansions on each E\ =
a negative return. of our major North American interstate natural gas pipelines. While we view the 1997 net income results and stock i Completed the merger with Portland General and 1
! price performance as unacceptable, we believe the fully integrated its assets, skills and capabilities actions taken in 1997, including the resolution of the into our expanding wholesale and retail electricity 2
long-standing gas contract dispute, were necessary businesses. f to clear the decks of key business uncertainties which overshadowed the excellent operating results Wholesale Energy Operations and Services of our core businesses. I Continued as the largest wholesale marketer of nat-ural gas and became the largest seller of electricity
/ 1997 Performance: Strong Operational in North America in 1997.
A. _omplishments Company Wide i Originated several large energy contracts in 1997 was a year of exceptionally strong performance Europe, further enhancing Enron's position as the in our core businesses, which include Exploration leader in providing competitive natural gas and and Production, Transportation and Distribution electricity supplies and innovative finance and and Wholesale Energy Operations and Services. risk management products in the rapidly These core businesses posted an increase in earnings developing European markets. to $1.98 per diluted share in 1997 compared with e Advanced construction on three international
$1.82 in 1996. Each of these businesses achieved power projects and began construction on six addi. j significant operational successes in 1997 and is well- tional international power and natural gas pipeline I
positioned to continue superior operating results: projects, representing over $6 billion in capital. e Extended the risk management and finance products Exploration and Production created in North American and European markets e increased North American oil and gas production to the emerging energy markets worldwide. by 10 percent. I Aggressively invested in infrastructure and new e Significantly progressed development of India businesses in select international regions, such as l offshore properties. Europe, India and latin America, to gain footholds I t
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? and franchises for expanded delivery of Enron's Enron's attractive pricing, to result in substantial unique energy pmducts in growing markets. earnings growth in 1998. The volume growth will come from execution of a well-defined, diversified Each of the operations that comprise our core North American and international drilling program. businesses possesses unique capabilities, is the clear leader of its respective industry by almost any The Transportation and Distribution segment is measure and is uniquely positioned to consistently poised for another year of steady growth in earnings generate very strong earnings growth. and cash flow. Due to the regulated environments in which these businesses operate, this growth will In addition to our positive results from these core come from continued selective expansions to meet businesses, we created a new business, Enron Energy customer demands. Services, to capture opportunities resulting from the deregulation of electricity and natural gas sales to Our Wholesale Energy Operations and Services end-use customers, primarily in the commercial and business did not exist 10 years ago. During this period, light industrial sectors. Contracts completed in 1997 we have developed an incomparable North related to this business have associated future American franchise for marketing commodities and
\ revenues in excess of $1 billion. In 1997, we incurred structuring creative energy-related finance and risk , start-up costs representing investments in this new management products. This successful franchise and v
j retail energy services business of $107 million, or our extension of it to the U. K., the European conti-l $0.24 per share, but we also sold a small minority rent and developing energy markets, coupled with interest in this business to defray start-up costs and our large worldwide investments in energy-related f
~l 4 ~
establish an approximate $1.9 billion enterprise asset development, have positioned this segment for value, which equates to a value of $5.50 per Emon another significant earnings increase in 1998. [ share. We expect the value of this business to increase several fold over the next three to five years. This year, we expect our retail energy services basi-ness to incur start-up investments comparable to We invested $2.4 billion in our businesses in 1997 1997. As evidenced by recent transactions, however, i and expect to invest a comparable amount in 1998. we expect this unit to continue signing contracts for l These investments will fortify our competitive new commodity and service deliveries that assure advantages and enhance earnings growth in 1998 very sizable future revenues and profits. and beyond. Although our business portfolio will continue to pro-1998 Outlook: Strong, Visible and Predictable vide periodic opportunities to capture non-recurring Enmings Growth values, we are committed to generating strong, visible Across Enron, platform are in place for strong earn- and predictable recurring earnings growth year after ings growth in our core businesses, the new retail year. We also are committed to delivering earnings energy services company and other new businesses. growth from our core businesses in 1998 and target an appmximate 10 percent increase over 1997 eamings. Enron has hedged its net exposure to natural gas This growth will exclude one-time earnings items. prices in the Exploration and Production business at attractive levels for 1998 and will continue to as..ess To assist investors' understanding and analysis of our j future years' hedging opporttmities. In this business, operations, we also will continue to more clearly pre-we expect increased volumes, combined with sent the outstanding fundamentals of our operations.
Commitment to Enhancing Shareholder Value At Enron, we are committed to achieving the superior returns to which our shareholders have been accustomed in the years prior to 1997. With a leading market position in each of our core businesses, a proven track record of creating value by establishing new businesses and our large scale and early move into the direct sale of electricity and natural gas to new markets, we believe Enron is the global energy company best positioned to provide superior share-holder value. To this end, our company is equipped with a unique combination of assets, people, skills, market knowl-edge and innovative energy product development expertise. We understand the marketplace and look forward to meeting our customers' needs with / creative products and services. Through these /, customer-oriented approaches, we are confident that we will retain our established position as a leader in l!
/
;3 each of our businesses and continue to provide i j excellent service to our customers. We are absolutely f8-convinced that our efforts will create superior value 75 for our shareholders. jj
\t i
\
\
\
Kenneth L Lay \ Chairman and CEO Jeffrey K. Skilling President and COO March 8,1998
~
._ outlook: Cleaner Fuels and Expanding Market Opportunities As we approach the 21st century, deregulation of and Europe. By transferring our wholesale gas market developed economies, economic liberalization in expertise to the electricity market, we established developing countries and an emphasis on cleaner similar high-caliber products and services for our fuels are creating significant growth opportunities customers. Today, we are the leading natural gas and for companies such as Enron. As these trends evolve ekctricity wholesale marketer in North America and and alter traditional energy infrastructure require- are rapidly expanding our European operations.
ments, energy cor.'panies that take an early lead in identifying these changes and creating solutions for With our wholesale strategy in place, we are now customers are poised to experience significant actively focused on the deregulating retail natural g growth. By combining Enron's first-mover advantage gas and electricity markets, both in the U.S. and
\ with our project development, asset management, Europe. We are once again leading the market in marketing, finance, regulatory and risk management terms of capturing efficiencies and creating new
{ j expertise, we believe our company is better positioned energy products that are similar to the price, product, ! than any other to benefit from these significant and service improvements witnessed in the deregu- ! market changc, lated airline, telecommunication and other indus-6 - tries. Just as the deregulated telecommunications Deregulating monopolies in developed countries industry led to the creation of voice messaging and 7 ! The deregulation of monopolies in developed caller identification, deregulation of the electricity countries is a large-scale trend from which Enron has industry is leading to innovative products, such as l benefited in the past and is helping to lead today. sophisticated metering technology and real-time I
/ In the early 1980s, we identified restructuring billing data. ! opportunities in the U.S. wholesale natural gas market and led our industry in restructunng the Liberalizing policies in developing countries natural gas transportation and marketing functions. In developing countries around the world-places We created market-responsive energy products and such as Brazil, China and India-we are witnessing a services with our strong base of people, financial trerti toward the liberalization of economic policies.
expertise, asset management, marketing skills and For the hrst time in many nations, governments are strategic regulatory approaches. The competitive altering their policies in favor of private energy infra-market that evolved from the deregulation of the structure investments that will strengthen their wholesale natural gas market led to the creation of economies and position them to compete in the global high-growth businesses and resulted in lower prices marketplace. These governments want to form and greater diversity of products and services alliances with experienced energy developers and for custorrers. managers who will support their energy needs and maintain a long-term presence in their countries. In the early 1990s, we identified many of the same opportunities in the wholesale electricity market, Through the relationships we have established, and which is continuing to deregulate in both the U.S. with the assets and other energy services we have _ - _ _ - _ _ _ ~
created and are managing in markets such as Argentina, Colombia, Guatemala and Trinidad, we believe Enron is extremely well positioned to suc-ceed in these economies. Our expertise lies in creat-ing markets to better serve local energy customers. As reflected by our current efforts in Bolivia, Brazil. India and other countries around the world, we are developing projects that address substantial energy needs and contribute to broad energy infrastructure. We are willing to invest our time and expertise in assisting governments with their energy programs because we have experienced firsthand, both in developed and developing countries, how these a;liances benefit customers and help our company establish an even stronger base from which to create worldwide 'ntegrated energy solutions. Cleaner fuels / High population growth rates and a concern over ,j rising pollution have caused many nations around lE
'z the world to insist on cleaner solutions for their ! ?
\i energy needs. This clean energy trend has led to
~
J 7 increased demand for natural gas, one of the cleanest 7 fossil fuels available. Worldwide, natural gas j ! demand has increased from 66 trillion cubic feet (Tcf) in 1987 to 82 Tcf in 1996 and by 2005 the demand is {i - { expected to increase to 104 Tcf. In addition, rapid \ improvements in renewable energy technology and i greater economies of scale are lowering renewable energy prices and creating significant market share opportunities for solar and wind energy products. Enron has a successful track record as a natural gas developer, transporter and marketer and maintains a strong leadership position in the development of other clean energy businesses. We design and manu-facture competitively priced wind turbines, partner in a successful joint venture that develops solar encryy applications and are investing in the development of technology that lowers the environmental cost of energy pmduction. We believe these activities, and i others that we are pursuing, have put our company in an extremely strong position to benefit from the clean energy trend.
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Exploration and Production Enron Oil & Gas Company's (EOG) strategy is to be one of the most successful, low-cost exploration and production companies in North America and to grow its highly profitable and focused international portfolio. EOG has a long and successful operating history in North America and is experiencing signif-icant international growth. The company increased its 1997 worldwide produc-tion to 889 million cubic feet per day (MMcf/d) of natural gas and 23.8 thousand barrels per day of [ crude oil, condensate and natural gas liquids, or 377 billion cubic feet equivalent (Bcfe) of natural gas. EOG had proved oil and gas reserves of 4.5 Tcfe at year end 1997 and has replaced production by more
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generated cash flow into its business. In 1997, EOG's capital investments totaled approximately 5700 million, and a comparable investment level is expected in 1998. North America Contributing to EOG's North American success is a well-defined and geographically diverse drilling and development program, including almost 70 plays in South Texas, the Rocky Mountains, West Texas and New Mexico, the Mid-Continent, California and the onshore Gulf Coast areas, as well
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drilkd 520 net wells in North Amer:ca in 1997 and ECC has been active in Trinidad since 1992, and its produced almost 317 Bcfe of natural gas. operations there are well established. In 1997, EOG produced 113 MMcf/d of natural gas and 3.4 thou-EOG added new acreage in South Texas and is con- sand barrels per day of crude oil in Trinidad. The gas tinuing to achieve consistent natural gas volurre from these fields is sold under a long-term contract, growth in that region. In the onshore Gulf Coast producing strong cash flow. EOG expects to drill in a areas, EOG is producing gas volumes from a new new block in Trinidad in 1998, play in the Mississippi Merit field. EOG began operating in India in 1994 after winning in the Rocky Mountain area, EOG made progress on a privatization bid award and signing a production key prospects, including continued successful sharing contract for a 30-percent interest in an off-drilling in the Big Piney area in Wyoming. In shore reserve development program. EOG is the California, EOG acquired 95,000 contiguous acres in operator and participates in the development of the the Sacramento Basin and is initiating a 3-D seismic Tapti, Panna and Mukta blocks off the western coast of program in that area. India. In 1997, EOG produced 18 MMcf/d of gas and 2.3 thousand barrels per day of crude oil and expects The West Texas and New Mexico areas added sigmf- 1998 equivalent production to almost triple. EOG has icant new oil production during the year, and the invested $170 million to date, increasing its proven y Mid-Continent area is now realizing the benefit of recoverable reserves in India to 652 Bcfe at year-end j seismic technologies that are being applied to this 1997. In addition, EOG anticipates that the approxi-region for the first time. mate 1 Tcfe of gross recoverable reserves originally f~ expected at Tapti could increase up to fourfold, posi-10 - EOG expects to continue developing its Canadian tively impacting future production after construction [ presence as evidenced by the recent acquisition of of a new 36-inch natural gas pipeline to llazira. This E j 74 Bcfe of reserves in the Blackfoot area of Alberta expansion proposal currently is being reviewed by and continued drilling in the Wapiti area. partners and the Indian government. Offshore in the Gulf of Mexico, EOG successfully In 1997, EOG signed a production sharing contract drilled the second Eugene Island 135 well, in w hich with the China National Petroleum Corporation for it holds a 50-percent interest. A third well is currently the appraisal an'i potential development of oil and being completed. The company has numerous gas reserves within the 1.8 million-acre Chuanzhong prospects in the Gulf of Mexico and expects to drill Bhick, situated in one of China's oldest producing j f three to five wildcat wells there annually. EOG also areas in the central Sichuan Province. This opportu-owns several deepwater prospects and plans to drill nity could have high upside potential. Workover up to two annually. activities are now underway, with initial develop-ment drilling plarmed for late 1998. International EOC's primary international activities are focused in Trinidad, where gas demand is steady, and India, where the markets have untapped demand for com-petitively priced natural gas. Revenues from both activities are paid in U.S. dollars. Similar to North America, one of EOG's international strengths is its low-cost, fast-track, high-technology approach.
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Transportation and tive expansion projects that will continue to increase E.nron's market presence. Distribution The 16,969-mile Northern Natural Gas (Northern) system transported an average of 4.4 licf/d in 1997, serving kical distribution companies, gas marketers and producers. The company has partnered with customers to identify growth needs and gain effi-Enron's Transportation and Distribution business is ciencies from well-planned construction projects. comprised of the company's North American natural Consistent with these efforts, Northern completed gas transportation systems and its ekctricity trans- the first phase of a five-year, 5113 million growth mission and distribution operations in Omgon. Enron plan to expand incremental firm capacity into has a long, successful history in the natural gas trans- lowa, Wisconsin and Minnesota by approximately portation business, which includes four major inter- 350 MMcf/d. This expansion is fully subscribed with state natural gas pipelines comprised of 32,000 miles five- to 10-year contracts. Northern also completed a of pipe across the U.S. In 1997, Enron merged with 4,800-foot pipeline crossing under the Mississippi Portland General, an electric utility that has a 100- River at the Minnesota state border to provide , year history in its own right and now serves 685,000 increased operating flexibility, In addition, Northern ._
.t customers in oee of the fastest-growing service terri- has a 60 MMcf/d expansion underway, which is /g tories in the nation. Iloth businesses generate pre- expected to be in service in late 1998.
l3 dictable earnings and cash flows with steady growth l/? prospects. Additionally, these systems' excellent safety The 2,660-mile Transwestern system transports gas ly~ records and reliable operations reflect company-wide east and west between markets in California and the """' 13 expertise at managing energy-related assets. Texas and Oklahoma region. Transwestern moved { 1.4 Ilef/d in 1997, primarily for kical distribution Enron's etrategy for these businesses is to continue companies and gas marketers. Expansion of the San {f a! offering low-cost service, maintaining safety and Juan lateral in New Mexico ensures access to addi-i reliability and making new investments to serve tional gas supply and provides greater flexibility for growing markets. significant gas volumes to move on the Transwestern system. naginning in 1998, Transwestern's San Juan Natural Gas Pipelines pipeline expansion will add 200 MMcf/d of incre-Enron's four major interstate pipelines colkctively mental capacity from ignacio, Colorado, to Illanco, averaged approximately 9 billion cubic feet per day New Mexico, and 130 MMcf/d of incremental capac-(Dcf/d) of throughput in 1997. These systems trans- ity from Illanco to Thoreau, New Mexico, for a total ported 18 percent of all the natural gas consumed in San Juan capacity of 930 MMcf/d. the United States and delivered gas to customers in 21 states. Florida Gas Transmission (Florida Gas), a 4,449-mile ! system operated and owned 50 percent by Enron,is l To meet increased market demand, Enron has added the only major pipeline system serving peninsular incremental capacity of approximately 2.1 Ikf/d Florida. System capacity has doubled since 1985. 1 during the past six years and expects to add up to in 1997, Florida Gas moved 1.3 Ilef/d of gas from ! 1.8 Ilcf/d of new capacity in the five years to follow. Texas across the Gulf Coast states and into Florida, All of the interstate pipeline systems are competi- where it serves a mix of customers anchored by util-tively well positioned as evidenced by their respec- ity generators and kical distribution companies. t L. . _ _ . . _ _ _ _ _ _ _ _ _ _ _ _
Florida Gas also has established new interconnects Enron's western electricity marketing activities have to attach strategic Gulf Coast and offshore gas strengthened E. tron's physical presence and opera-supplies and is identifying significant system expan- tional understanding of that market n gion. sion opportunities. At the onset et nationwide electricity deregulation, Enron owns 8 percent of Northern Border Pipeline PGE is maintaining its commitment to service excel-(Northern Border) through an interest in Northern lence while assisting with the formation of a compet-Border Partners, LP. The 970-mile system, which itive electricity market in the Northwest. Its Enron operates, is the largest transporter of natural Customer Choice implementation Proposal was filed gas from Canada to the U.S. and moved with the Oregon Public Utilities Commission 1.8 Bcf/d of gas in 1997. Northern Border is (OPUC) in December 1997, and an introducers pro-constructing an $840 million project, which will gram has been put in place. The proposal addresses deliver 700 MMcf/d of new gas into the Chicago area five key principles: bringing true market conditions and increase total system capacity to 2.4 Bef/d to the industry, separating the regulated and non-beginning in November 1998. This project is fully regulated portions of utility services, removing the subscribed by 21 shippers with 10-year minimum incumbent utility advantage, transferring commer-transportation contracts. cial customer relationships to competitive energy service providers and allowing the market to deter-r mine the cost of transitioning from a regulated to a g Electricity Transmission and Distribution Enron entered the regulated electricity business competitive environment. The proposal,if approved l through its July 1,1997 merger with Portland by the OPUC, will create one of the nation's first reg-f ~ General Electric (PGE). PGE is a premier provider of ulated electricity transmission and distribution com- "~ electric services for its growing service territory, panies focused on delivering, not selling, power. In which includes a significant base of leading high- the proposed new environment, regulated ekctric tech companies with intensive energy requirements, companies would conduct business similar to regu-
, PGE senices more than 3,000 square miles of 9rritory lated natural gas pipelines. As a regulated electric and approximately 60 percent of Oregon's econorr. company, PGE would continue to operate and main-base. In 1997, PGE delivered 18.3 thousand tain the electricity delivery system and handle outages, megawatts of ekctricity and connected 21,500 new while other competitive companies, such as Enron's customers. PGE's high-quality, low-cost generating whoksale and retail businesses, would market power assets include hydroekctric power, coal and gas to customers over that system. This proposal serves combustion and transmission resources. as a model for ekctric utilities across the natica Enron's merger with PGE affords significant benefits to various areas within Enron. PGE enhances both Enron's global credibility in power markets beyond generation and its insight into customer preferences for new electric products and services. In the U.S.
and international ekctricity markets, PGE brings transmission and distribution asset management expertise to Enron, as well as metering, billine and customer-senice knowledge applicable to Enron's expanding retail electricity business. PGE's strategic West Coast kication and the rekration to Portland of . l
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