PacifiCorp Reports Second Quarter 1995 Earnings: Challenges and Opportunities

Strategic Insights -

PacifiCorp, a Portland-based energy company, reported its second quarter 1995 earnings, highlighting the challenges it faces in the dynamic energy market. Despite a decline in wholesale revenues due to increased competition, surplus hydro generation, and low natural gas prices, the company was able to reduce its fuel expense and maintain its operating expenses. The company's earnings contribution at Electric Operations decreased significantly, but this was largely due to an increase in interest expense related to the settlement with the IRS. On the other hand, Telecommunications revenues increased, and the company's earnings contribution in this segment improved.

Key Takeaways:

  • PacifiCorp reported a second quarter 1995 earnings on common stock of $83 million, or $0.29 per share, compared to $79 million, or $0.28 per share, for the same quarter a year ago.
  • The company's after-tax gain from the sales of excess sulfur dioxide emission allowances and water rights was $4 million, or $0.01 per share.
  • Fred Buckman, President and Chief Executive Officer, stated that pressure on the wholesale market and weather continue to dominate the current earnings trend, but the company is looking for ways to minimize the negative effects of unusual weather on its earnings.
  • Residential revenues increased $5 million, or 4 percent, while Industrial revenues decreased $14 million, or 8 percent, due to an 8 percent reduction in energy volume sold.
  • Operating expenses decreased $16 million or 3 percent, with fuel expense reductions accounting for $15 million of the improvement.
  • The company purchased 15 percent more energy than the prior year period while reducing purchased power expense by $4 million, or 5 percent.
  • Maintenance expense decreased $4 million, or 8 percent, primarily due to extending the duration of maintenance overhaul periods at some plants and lengthening the intervals between thermal plant overhauls.
  • Earnings contribution at Electric Operations decreased $34 million, or 60 percent, to $23 million, mainly due to a $32 million, or 48 percent, increase in interest expense related to the settlement with the IRS.
  • Telecommunications revenues increased $22 million, or 13 percent, to $192 million, primarily due to the acquisition of local telephone exchange assets in Colorado.
  • The company's earnings contribution in the Telecommunications segment increased $3 million, or 16 percent, to $18 million.

Statistics:

  • Total Electric Operations revenues decreased $20 million, or 3 percent, to $593 million.
  • Residential revenues increased $5 million, or 4 percent.
  • Industrial revenues decreased $14 million, or 8 percent, due to an 8 percent reduction in energy volume sold.
  • Operating expenses decreased $16 million or 3 percent.
  • Fuel expense reductions accounted for $15 million of the improvement.
  • The company purchased 15 percent more energy than the prior year period while reducing purchased power expense by $4 million, or 5 percent.
  • Maintenance expense decreased $4 million, or 8 percent.
  • Earnings contribution at Electric Operations decreased $34 million, or 60 percent, to $23 million.
  • Interest expense increased $32 million, or 48 percent, due to the settlement with the IRS.

Sources:

  • PacifiCorp's press release, dated August 2, 1995, available at no charge through PR Newswire's Company News On-Call fax service.