SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended JUNE 30, 1996 Registrant; State of Incorporation; IRS Employer COMMISSION FILE NUMBER ADDRESS; AND TELEPHONE NUMBER IDENTIFICATION NO. 1-5532 PORTLAND GENERAL CORPORATION 93-0909442 (an Oregon Corporation) 121 SW Salmon Street Portland, Oregon 97204 (503) 464-8820 1-5532-99 PORTLAND GENERAL ELECTRIC COMPANY 93-0256820 (an Oregon Corporation) 121 SW Salmon Street Portland, Oregon 97204 (503) 464-8000 Indicate by check mark whether the registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days. Yes X . No . The number of shares outstanding of the registrants' common stocks as of July 31, 1996 are: Portland General Corporation 51,167,274 Portland General Electric Company 42,758,877 (owned by Portland General Corporation) 1
TABLE OF CONTENTS PAGE NUMBER DEFINITIONS ............................................................ 2 PART I. PORTLAND GENERAL CORPORATION AND SUBSIDIARIES FINANCIAL INFORMATION Management's Discussion and Analysis of Financial Condition and Results of Operations ............. 3 Consolidated Statements of Income .......................... 11 Consolidated Statements of Retained Earnings ............... 11 Consolidated Balance Sheets ................................ 12 Consolidated Statements of Cash Flow ....................... 13 Notes to Consolidated Financial Statements ................. 14 Portland General Electric Company and Subsidiaries Financial Information ........................ 17 PART II. OTHER INFORMATION Item 1 - Legal Proceedings ................................. 20 Item 4 - Submission of Matters to a Vote of Security Holders 20 Item 6 - Exhibits and Reports on Form 8-K .................. 21 Signature Page ............................................. 22 DEFINITIONS Bonneville Pacific .................Bonneville Pacific Corporation BPA ...............................Bonneville Power Administration Coyote Springs ....................Coyote Springs Generation Plant Enron .................................................Enron Corp. FERC .........................Federal Energy Regulatory Commission Holdings ..........................Portland General Holdings, Inc. kWh .................................................Kilowatt-Hour MWa .............................................Average megawatts MWh .................................................Megawatt-hour NYMEX ................................New York Mercantile Exchange OPUC or the Commission ...........Oregon Public Utility Commission Portland General or PGC ..............Portland General Corporation PGE or the Company ..............Portland General Electric Company PUHCA ..................Public Utility Holding Company Act of 1935 Trojan .......................................Trojan Nuclear Plant USDOE ..........................United States Department of Energy 2
PORTLAND GENERAL CORPORATION AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FINANCIAL AND OPERATING OUTLOOK PORTLAND GENERAL CORPORATION - HOLDING COMPANY Portland General Corporation (Portland General or PGC), an electric utility holding company, was organized in December 1985. Portland General Electric Company (PGE or the Company), an electric utility company and Portland General's principal operating subsidiary, accounts for substantially all of Portland General's assets, revenues and net income. PROPOSED MERGER On July 20, 1996, Portland General entered into an Agreement and Plan of Merger with Enron, a Delaware corporation, to merge in a tax-free, stock-for- stock transaction. The transaction which has been approved by both companies' boards of directors, will entitle Portland General shareholders to receive one share of Enron common stock for each share of Portland General common stock held by them. Under the terms of merger agreement, Enron will reincorporate in Oregon to allow it to qualify as an intrastate holding company that is exempt from the registration requirements of PUHCA. In the event that PUHCA is amended or repealed in a manner that would make this reincorporation no longer necessary, PGC will merge directly into the present Enron, a Delaware corporation. PGE, Portland General's utility subsidiary, will retain its name and most of its functions, becoming the fifth business unit of Enron. It will join the existing four Enron business units: Enron Operations; Enron Development/Enron Global Power and Pipelines; Enron Capital and Trade Resources; and Enron Oil and Gas Company. The merger is conditioned, among other things, upon the approvals of each company's shareholders at special meetings planned for the fall of 1996 and the completion of regulatory procedures including those at the OPUC and FERC. The companies are hopeful that the regulatory procedures can be completed in less than 12 months from the date of the agreement. The merger agreement may be terminated by Enron if the average of the closing prices of Enron Common Stock during the 20 consecutive trading day period ending five trading days prior to the date of the special meeting of the shareholders of Portland General is more than $47.25 per share, and may be terminated by PGC if the average of the closing prices of Enron Common Stock during such period is less than $36.25 per share. APPROVALS AND CONSENTS OPUC - Upon completion of the PGC merger, Enron will be the owner of the common stock of PGE. PGE is subject to the jurisdiction of the OPUC with respect to its electric utility operations. Under Oregon statute, the OPUC must approve any transaction in which a person acquires the power to exercise any substantial influence over the policies and actions of a public utility subject to its jurisdiction. Enron and Portland General will file a joint application with the Commission seeking approval of the merger. The OPUC will address whether the merger will serve the customers of PGE in the public interest. In making that finding the OPUC considers whether the change in ownership of the public utility will impair the ability of the utility to provide adequate service at just and reasonable rates. Concurrent with working with the Commission on the merger approval issues and process, PGE has presented a rate plan to the OPUC that proposes to reduce prices and provide new options and services for customers, as well as commits to no general price increase 3
PORTLAND GENERAL CORPORATION AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS through December 31, 1998 (see discussion below). FERC - The Federal Power Act provides that no public utility shall sell or otherwise dispose of its jurisdictional facilities or, directly or indirectly, merge or consolidate such facilities with those of any other person or acquire any security of any other public utility without first having obtained authorization from FERC. The Approval of FERC is required in order to consummate the Merger. Under the Federal Power Act, FERC will approve the merger if it finds such merger consistent with the public interest. In reviewing a merger, FERC generally evaluates: whether the merger will adversely affect competition; whether the merger will adversely affect operating costs and rates; whether the merger will impair the effectiveness of regulation; whether the purchase price is reasonable; whether the merger is the result of coercion; and whether the accounting treatment is reasonable. OTHER - The merger will require the consent and approval of various other regulatory agencies. PGC and Enron will seek to obtain all necessary consents and approvals in order to consummate the merger. It is anticipated that these regulatory procedures can be completed in less than 12 months. PORTLAND GENERAL ELECTRIC COMPANY - ELECTRIC UTILITY REGULATORY MATTERS RATE PROPOSAL - On August 6, 1996 PGE presented a plan to the OPUC to address issues related to lower than expected power and natural gas costs. The plan seeks Commission approval for change to certain PGE tariffs. Changes include expansion of PGE's market based retail rates, a 3.5 percent reduction in residential customer rates, development of tariffs for time of day and direct access experimental programs for residential and small commercial customers, a potential extension beyond its 1996 expiration of a rate mechanism to decouple short-term profits from retail kilowatt-hour sales and acceleration of the Trojan investment recovery. PGE's current rates were established after a lengthy formal public process ending in March 1995. Since PGE's last general rate case the Company has benefited from significant savings as a result of falling natural gas and power purchase prices. In early 1996, PGE agreed to develop a plan for sharing some of these savings with customers beginning in 1997. If approved, the rate plan will provide approximately $50 million in annual rate reductions, benefiting all customer classes, as well as accelerating PGE's recovery of its Trojan investment. The proposal is based on forecasts that assume regulatory approval of the merger between Portland General and Enron. The Company has included in the plan a request to accelerate certain of the rate reductions upon the OPUC's approval of the merger application. PGE's goal is to obtain Commission approval for both the rate plan and the merger application this fall. TROJAN INVESTMENT RECOVERY - In April 1996 a circuit court judge in Marion County, Oregon contradicted a November 1994 ruling from the same court, finding that the OPUC could not authorize PGE to collect a return on its undepreciated investment in Trojan currently in PGE's rate base. The ruling was the result of an appeal of PGE's 1995 general rate order which granted PGE recovery of, and a return on, 87 percent of its remaining investment in Trojan. The November 1994 ruling, by a different judge of the same court, upheld the Commission's 1993 4
PORTLAND GENERAL CORPORATION AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Declaratory Ruling (DR-10). In DR-10 the OPUC ruled that PGE could recover and earn a return on its undepreciated Trojan investment, provided certain conditions were met. The Commission relied on a 1992 Oregon Department of Justice opinion issued by the Attorney General's office stating that the Commission had the authority to set prices including recovery of and on investment in plant that is no longer in service. The 1994 ruling was appealed to the Oregon Court of Appeals and stayed pending the appeal of the Commission's March 1995 order. Both PGE and the OPUC have separately appealed the April 1996 ruling which was combined with the appeal of the November 1994 ruling at the Oregon Court of Appeals. For further information regarding the legal challenges to the OPUC's authority to grant recovery of PGE's Trojan investment see Item 3, Legal proceedings, of Portland General's and PGE's Forms 10-K for the year ended December 31, 1995. COMPETITION The Energy Policy Act of 1992 (Energy Act) set the stage for change in federal and state regulations aimed at increasing both wholesale and retail competition in the electric industry. The Energy Act eased restrictions on independent power production and granted authority to FERC to mandate open access for the wholesale transmission of electricity. FERC has taken steps to provide a framework for increased competition in the electric industry. In 1996 FERC issued Order 888 requiring non- discriminatory open access transmission by all public utilities that own interstate transmission. The final rule requires utilities to file tariffs that offer others the same transmission services they provide themselves under comparable terms and conditions. This rule also allows public utilities to recover stranded costs in accordance with the terms, conditions and procedures set forth in Order 888. The ruling requires reciprocity from municipals, cooperatives and federal power marketers receiving service under the tariff. The new rules became effective July 9, 1996 and are expected to result in increased competition, lower prices and more choices to wholesale energy customers. The FERC action applies only to the wholesale transmission of electricity and does not proscribe terms and conditions of retail transmission service which is subject to individual state regulation. Since the passage of the Energy Act, various state utility commissions have addressed proposals which would gradually allow retail customers direct access to generation suppliers, marketers, brokers and other service providers in a competitive marketplace for energy services (retail wheeling). Although presently operating in a cost-based regulated environment, PGE expects increasing competition from other forms of energy and other suppliers of electricity. While the Company is unable to determine the future impact of increased competition, it believes that ultimately it will result in reduced retail as well as wholesale prices. OREGON RESTRUCTURING WORKSHOP - In April 1996, FERC concluded that each state should decide, given its own unique circumstances and objectives, whether and how retail wheeling of electric power should occur. The OPUC began its investigation into restructuring the state's electric utility on June 19, 1996, meeting with state utility executives, customers, environmental advocates and other interested parties. The workshop included a discussion on how different electric industry structures would meet public policy objectives. The discussion centered on how competition in the generation of electric power could be introduced and when to allow customers access to competing power suppliers. The Commission's objective is to ensure that all electric utility customers are able to benefit from any savings resulting from a restructured electric industry. 5
PORTLAND GENERAL CORPORATION AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Four specific issues will be the focus of subsequent meetings: how an electricity distribution company would operate and be regulated; how energy efficiency and other public purpose programs will be offered and funded in a restructured environment; what treatment is appropriate for utility investment in a generating plant that is no longer economic; and whether vertical integration of electrical utilities should be discouraged or prohibited. The Commission intends to use future discussions to prepare itself to act on the competitive initiatives that can be implemented under its direct authority and to work with the legislature in assessing proposals for restructuring or allowing greater customer access to the electric generation market. RETAIL CUSTOMER GROWTH AND ENERGY SALES Weather adjusted retail energy sales were relatively flat for the three months ended June 30, 1996 compared to the same period last year. Residential and commercial sales increased 2.5 percent and 1.7 percent respectively with the addition of 3,740 new customers during the quarter. High-tech and transportation industrial sales were strong as well; however, production cutbacks by paper and metal manufacturers caused total industrial sales to be off approximately 4.1 percent for the year. Energy sales have also been adversly affected by the lingering impact of the December 1995 wind storms and February 1996 flooding which interrupted services for extended periods. As a result the Company has revised its projected retail energy sales growth to be less than 1 percent for 1996. WHOLESALE MARKETING The surplus of electric generating capability in the Western U.S., the entrance of numerous wholesale marketers and brokers into the market, and open access transmission will contribute to increasing pressure on the price of power. In addition the development of financial markets and the NYMEX futures trading have led to increased information available to market participants, further adding to the competitive pressure on wholesale prices. Company wholesale revenues continue to make a growing contribution providing nearly 14 percent of total operating revenues; this represents an 89 percent increase compared to the second quarter of 1995. The growth in wholesale sales is in part attributed to PGE's aggressive sales efforts as part of the Company's plan to expand its existing marketing capabilities and activities throughout the Western U.S. INDEPENDENT TRANSMISSION GRID OPERATOR PGE has signed a memorandum of understanding with six other Northwest utilities to create an independent transmission grid operator called "IndeGo". The plan between PGE, Idaho Power Company, Montana Power Company, PacifiCorp, Puget Sound Power & Light Company, Sierra Pacific Power Company and The Washington Water Power Company is scheduled to be filed with FERC by the end of the year, in anticipation of operations commencing mid-1997. 6
PORTLAND GENERAL CORPORATION AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS IndeGo's purpose is to ensure non-discriminatory open access to electricity transmission facilities in compliance with FERC rules. FERC has required open transmission access in its recent Order 888, as part of deregulation of the electric utility industry. Under the agreement, IndeGo would assume responsibility for day to day operation of main transmission lines which are directly owned by the seven utilities. Each of the companies would maintain ownership of the lines, as well as responsibility for repair and upgrades. RESULTS OF OPERATIONS The following discussion focuses on utility operations, unless otherwise noted. Due to seasonal fluctuations in electricity sales, as well as the price of wholesale energy and fuel costs, quarterly operating earnings are not necessarily indicative of results to be expected for calendar year 1996. 1996 COMPARED TO 1995 FOR THE THREE MONTHS ENDED JUNE 30 Portland General earned $34 million or $0.66 per share for the second quarter of 1996 compared to earnings of $32 million or $0.64 per share in 1995. Improved 1996 operating earnings include continued strong growth in residential sales and wholesale sales, the benefits of an abundant, low cost supply of electricity resulting from very favorable water conditions and a competitive wholesale power market. Operating revenues increased $14 million or 6 percent over the same period last year primarily driven by an 89 percent jump in wholesale revenues. Power marketing efforts led to increased sales as PGE was able to purchase and remarket abundant northwest hydro-generated power. Wholesale sales were profitable despite a 57 percent decrease in the average sales price which remained well above the Company's average cost of power. Retail revenues of $199 million were comparable to 1995. Residential sales remained strong, increasing 2.9 percent and providing $6 million in additional revenue. Residential weather-adjusted sales were 2.5 percent above 1995. This increase was propelled by the addition of 3,664 residential customers for the quarter. The Company served an average of 14,300 more customers than in 1995. Commercial sales were in line with 1995 but an increase in average prices contributed nearly $3 million to revenues. However, industrial sales are off last years pace despite robust demand from high-tech customers as paper and metals manufacturers experienced cutbacks due to weak paper markets and competitive pressures. The Company deferred $6 million in revenues related to a one time Oregon state excise tax reduction for refund to customers which offseet retail revenue increases. Variable power costs of $46 million approximated the level incurred in 1995 despite a 36 percent increase in total energy sales. An abundant supply of power available in the market, much of it hydro-generated, displaced more expensive thermal generation throughout the region. PGE took advantage of competitive market prices and purchased 87 percent of its power needs with an additional 10 percent generated by PGE hydro-electric plants. Company generation, primarily hydro, provided 13 percent of PGE's power needs. Hydro plant generation increased 7 percent from 1995, or 44,480 MWh, reflecting good water conditions on the Clackamas River system. PGE thermal generation accounted for only 3 percent of total Company energy requirements compared to 9 percent last year. 7
PORTLAND GENERAL CORPORATION AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESOURCE MIX/VARIABLE POWER COSTS Average Variable Resource Mix Power Cost (Mills/kWh) 1996 1995 1996 1995 Generation 13% 22% 3.6 4.6 Firm Purchases 72 29 10.3 22.4 Spot Purchases 15 49 8.8 10.0 Total Resources 100% 100% Average 10.4 13.7 PGE does not have a fuel adjustment clause as part of its retail rate structure; therefore, changes in fuel and purchased power expenses are reflected currently in earnings. Energy purchases were up 48 percent due to higher loads and thermal displacement. A competitive market and abundant supplies of energy drove wholesale prices below 1995 levels saving PGE almost $25 million. Firm purchases, primarily from mid-Columbia projects, averaged 10.3 mills compared to 22.4 mills while spot market purchases averaged 8.8 mills compared to an average 10.0 mills in 1995. Operating expenses (excluding variable power, depreciation and income taxes) were $5 million higher than last year. Operating costs associated with the new Coyote Springs facility, including higher firm natural gas transportation costs, and increased customer marketing and service costs contributed to this increase. Decreased operations and maintenance costs at Company generating plants helped partially offset the increases for the quarter. PGE effectively utilized personnel from its idle thermal plants to reduce expenditures for temporary, contract and overtime labor as well as assist in Trojan decommissioning activities. Depreciation, Decommissioning and Amortization increased $4 million due to depreciation taken on Coyote Springs as well as depreciation taken on other general plant investment completed since the second quarter of 1995. Other income decreased nearly $3 million due to discontinuation of carrying costs accruals on regulatory assets. Interest charges were 9 percent above 1995 due to higher levels of short-term debt, decreased AFDC accruals since the completion of Coyote Springs in November 1995 and the refinancing of $80 million in preferred stock with Junior Subordinated Deferrable Interest Debentures. This refinancing of preferred stock has lowered the preferred dividend requirement by nearly $2 million. 1996 COMPARED TO 1995 FOR THE SIX MONTHS ENDED JUNE 30 Portland General earned $83 million or $1.63 per share for the six months ended June 30, 1996 compared to $30 million or $0.60 per share in 1995. 1995 earnings include a one time $37 million after tax charge to income relating to the regulatory disallowance of 13 percent of PGE's investment in Trojan. Excluding the Trojan charge, 1995 earnings would have been $67 million. Improved earnings for the year reflect the benefits of record water conditions, cooler temperatures coupled with a growing residential customer base and the Company's aggressive wholesale marketing efforts. 8
PORTLAND GENERAL CORPORATION AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Retail Revenues exceeded 1995 by $23 million or 5 percent largely due to April 1995 and November 1995 rate increases accompanied by a 2.2 percent growth in energy sales. Significantly colder mean temperatures in January and February, 2.6 and 4.5 degrees respectively, contributed to higher energy sales in both residential and commercial sectors. For the year the Company has seen a 13 percent increase in residential heating days. In addition, residential load growth has contributed significantly to increased revenues with PGE serving an average of over 16,000 more retail customers during the period. Although industrial loads have benefited from the anticipated growth in high-tech industries weak demand from paper and metals manufacturers has led to a 4 percent decline in industrial sales for the year. Aggressive marketing and active trading enabled the Company to increase wholesale sales by 291 percent contributing $32 million in additional revenues. A competitive marketplace led to a reduction in the average sales price by nearly 53 percent. Variable power costs were $6 million or 4 percent below 1995. Steep reductions in the cost of purchased power helped more than offset a 34 percent increase in energy needs. Optimal hydro conditions brought sharp declines in the cost of firm power purchased from the mid-Columbia projects as well as Company owned hydro projects on the Clackamas River system. Power purchases amounted to 85 percent of total PGE load at an average cost of 11.9 mills compared to 18.3 mills in 1995. PGE hydro projects generated 11 percent of the Company is energy needs with a 12 percent increase in production levels. PGE's thermal plants were largely displaced contributing to reduced fuel expenditures. RESOURCE MIX/VARIABLE POWER COSTS Average Variable Resource Mix Power Cost (Mills/KWh) 1996 1995 1996 1995 Generation 15% 32% 4.1 6.9 Firm Purchases 70 37 12.5 24.8 Spot Purchases 15 31 9.1 10.5 Total Resources 100% 100% Average 11.7 16.0 PGE does not have a fuel adjustment clause as part of its retail rate structure; therefore, changes in fuel and purchased power expenses are reflected currently in earnings. Operating expenses (excluding variable power, depreciation and income taxes) were $18 million higher than last year. The increase is primarily due to an additional $7 million in fixed natural gas transportation costs, approximately $7 million in increased costs for transmission and distribution most of which is related to storm related repair costs and maintenance deferred from December 1995, and an increase in planned customer marketing and support costs to meet 1996 marketing objectives and improve to PGE's Customer Information System. Depreciation, Decommissioning and Amortization increased $10 million, or 15 percent, due to depreciation taken on Coyote Springs, new depreciation rates effective April 1, 1995 and depreciation taken on other general plant investment completed since the second quarter of 1995. 9
PORTLAND GENERAL CORPORATION AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Excluding the Trojan write-down, other income declined $6 million due to the discontinuance of accruals of carrying costs on regulatory assets in late 1995. Interest charges are $4 million above 1995 due to the lack of AFDC accruals in 1996 as well as higher levels of short-term debt. PGE's preferred dividend requirement is down $3 million due to the refinancing of nearly $80 million in preferred stock in 1995. CASH FLOW PORTLAND GENERAL CORPORATION Portland General requires cash to pay dividends to its common shareholders, to provide funds to its subsidiaries, to meet debt service obligations and for day to day operations. Sources of cash are dividends from PGE, leasing rentals, short- and intermediate- term borrowings and the sale of its common stock. During the second quarter of 1996 Portland General received $15 million in dividends from PGE. The retirement of Portland General's $30 million in medium term notes which mature in September 1996 is expected to be funded through a special cash dividend from PGE. Portland General has agreed, as to itself, PGE and other subsidiaries, to certain limitations on its ability to declare or pay dividends on or repurchase or redeem its securities, issue securities, and incur indebtedness pending consummation of the merger agreement with Enron. This is not expected to interfere with the ability of Portland General or PGE to declare dividends, obtain financing or conduct its business operations in a manner consistent with past practice. For further details regarding these limitations please see Portland General's Form 8-K dated July 20, 1996. PORTLAND GENERAL ELECTRIC COMPANY CASH PROVIDED BY OPERATIONS is used to meet the day-to-day cash requirements of PGE. Supplemental cash is obtained from external borrowings as needed. A significant portion of cash from operations comes from depreciation and amortization of utility plant, charges which are recovered in customer revenues but require no current cash outlay. Changes in accounts receivable and accounts payable can also be significant contributors or users of cash. Improved cash flow for the current year reflects a higher percentage of cash revenues combined with lower variable power costs. INVESTING ACTIVITIES include improvements to generation, transmission and distribution facilities and continued investment in energy efficiency programs. Capital expenditures for 1996 of approximately $170 million are expected to be fully funded by operating cash flows. Through June 30, 1996 nearly $ 98 million has been expended for capital projects, including energy efficiency programs, primarily for improvements to the Company's distribution system to support the addition of new customers to PGE's service territory. PGE funds an external trust for Trojan decommissioning costs through customer collections at a rate of $14 million annually. The trust invests in investment-grade tax-exempt and U.S. Treasury bonds. The Company makes withdrawals from the trust, as necessary, for reimbursement of decommissioning expenditures. FINANCING ACTIVITIES - On April 15, 1996 PGE redeemed the 200,000 outstanding shares of its 8.10 percent preferred stock, at par. The $20 million redemption leaves outstanding only the Company's 7.75 percent preferred stock which has sinking fund requirements beginning in 2002. The issuance of additional preferred stock and First Mortgage Bonds requires PGE to meet earnings coverage and security provisions set forth in the Articles of Incorporation and Indenture securing its First Mortgage Bonds. As of June 30, 1996, PGE has the capability to issue in excess of $500 million each of preferred stock and additional First Mortgage Bonds under the earnings coverage test. 10
PORTLAND GENERAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 1996 AND 1995 (Unaudited) <TABLE> <CAPTION> Three Months Ended Six Months Ended <S> <C> <C> <C> <C> June 30 June 30 1996 1995 1996 1995 (Thousands of Dollars) OPERATING REVENUES $ 233,425 $ 219,892 $ 534,006 $ 479,069 OPERATING EXPENSES Purchased power and fuel 46,262 46,616 128,559 134,312 Production and distribution 20,018 16,288 41,970 31,441 Maintenance and repairs 11,845 11,384 25,094 21,317 Administrative and other 27,566 26,409 55,251 51,549 Depreciation and amortization 38,550 34,785 76,083 66,243 Taxes other than income taxes 12,766 13,026 27,659 26,783 157,007 148,508 354,616 331,645 OPERATING INCOME BEFORE INCOME TAXES 76,418 71,384 179,390 147,424 INCOME TAXES 24,743 24,205 60,971 50,692 NET OPERATING INCOME 51,675 47,179 118,419 96,732 OTHER INCOME (DEDUCTIONS) Regulatory disallowance - net of income taxes of $17,101 - - - (36,708) Interest expense (19,835) (20,134) (39,603) (39,329) Allowance for funds used during construction 500 2,926 742 5,074 Preferred dividend requirement - PGE (645) (2,417) (1,631) (5,000) Other - net of income taxes 1,984 4,849 5,114 9,680 NET INCOME $ 33,679 $ 32,403 $ 83,041 $ 30,449 COMMON STOCK Average shares outstanding 51,109,790 50,697,040 51,086,325 50,644,415 Earnings per average share $0.66 $0.64 $1.63 $0.60 Dividends declared per share $0.32 $0.30 $0.64 $0.60 </TABLE> CONSOLIDATED STATEMENTS OF RETAINED EARNINGS FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 1996 AND 1995 (Unaudited) <TABLE> <CAPTION> Three Months Ended Six Months Ended <S> <C> <C> <C> <C> June 30 June 30 1996 1995 1996 1995 (Thousands of Dollars) BALANCE AT BEGINNING OF PERIOD $ 168,365 $ 101,063 $ 135,885 $ 118,676 NET INCOME 33,679 32,403 83,041 30,449 ESOP TAX BENEFIT AND OTHER (605) (474) (1,135) (948) 201,439 132,992 217,791 148,177 DIVIDENDS DECLARED ON COMMON STOCK 16,358 15,215 32,710 30,400 BALANCE AT END OF PERIOD $ 185,081 $ 117,777 $ 185,081 $ 117,777 The accompanying notes are an integral part of these consolidated statements. </TABLE> 11
PORTLAND GENERAL CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS AS OF JUNE 30, 1996 AND DECEMBER 31, 1995 <TABLE> <CAPTION> <S> <C> <C> (Unaudited) June 30 December 31 1996 1995 (Thousands of Dollars) ASSETS ELECTRIC UTILITY PLANT - ORIGINAL COST Utility plant (includes Construction Work in Progress of $49,011 and $33,382) $ 2,828,860 $ 2,754,280 Accumulated depreciation (1,089,073) (1,040,014) 1,739,787 1,714,266 Capital leases - less amortization of $29,388 and $27,966 7,980 9,353 1,747,767 1,723,619 OTHER PROPERTY AND INVESTMENTS Leveraged leases 151,911 152,666 Trojan decommissioning trust, at market value 75,170 68,774 Corporate owned life insurance, less loans of $27,763 and $26,432 78,481 74,574 Other investments 36,752 28,603 342,314 324,617 CURRENT ASSETS Cash and cash equivalents 7,549 11,919 Accounts and notes receivable 101,115 104,815 Unbilled and accrued revenues 45,438 64,516 Inventories, at average cost 38,269 38,338 Prepayments and other 16,670 16,953 209,041 236,541 DEFERRED CHARGES Unamortized regulatory assets Trojan investment 289,897 301,023 Trojan decommissioning 300,382 311,403 Income taxes recoverable 210,318 217,366 Debt reacquisition costs 29,306 29,576 Energy efficiency programs 82,092 77,945 Other 26,640 27,611 WNP-3 settlement exchange agreement 166,239 168,399 Miscellaneous 30,388 29,917 1,135,262 1,163,240 $ 3,434,384 $ 3,448,017 CAPITALIZATION AND LIABILITIES CAPITALIZATION Common stock equity Common stock, $3.75 par value per share, 100,000,000 shares authorized, 51,116,367 and 51,013,549 shares outstanding $ 191,686 $ 191,301 Other paid-in capital - net 576,929 574,468 Unearned compensation (6,208) (8,506) Retained earnings 185,081 135,885 947,488 893,148 Cumulative preferred stock of subsidiary Subject to mandatory redemption 30,000 40,000 Long-term debt 865,067 890,556 1,842,555 1,823,704 CURRENT LIABILITIES Long-term debt and preferred stock due within one year 66,542 105,114 Short-term borrowings 226,532 170,248 Accounts payable and other accruals 85,990 133,405 Accrued interest 16,754 16,247 Dividends payable 17,318 16,668 Accrued taxes 23,500 15,151 436,636 456,833 OTHER Deferred income taxes 635,991 652,846 Deferred investment tax credits 48,944 51,211 Trojan decommissioning and transition obligation 372,933 379,179 Miscellaneous 97,325 84,244 1,155,193 1,167,480 $ 3,434,384 $ 3,448,017 The accompanying notes are an integral part of these consolidated balance sheets. </TABLE> 12
PORTLAND GENERAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOW FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 1996 AND 1995 (UNAUDITED) <TABLE> <CAPTION> Three Months Ended Six Months Ended <S> <C> <C> <C> <C> June 30 June 30 1996 1995 1996 1995 (Thousands of Dollars) CASH PROVIDED (USED) BY - OPERATIONS: Net income $ 33,679 $ 32,403 $ 83,041 $ 30,449 Adjustment to reconcile net income to net cash provided by operations: Depreciation and amortization 30,503 27,039 59,616 50,845 Amortization of WNP-3 exchange agreement 864 1,227 2,160 2,455 Amortization of Trojan investment 5,935 5,946 11,760 12,409 Amortization of Trojan decommissioning 3,511 3,510 7,021 6,315 Amortization of deferred charges - other 1,355 833 (118) (178) Deferred income taxes - net (7,087) (140) (11,859) (3,872) Other noncash revenues (416) (1,405) (799) (1,687) Regulatory disallowance - - - 36,708 Changes in working capital: (Increase) Decrease in receivables 22,321 5,914 22,725 10,801 (Increase) Decrease in inventories 590 (946) 69 (7,591) Increase (Decrease) in payables (59,441) (41,773) (32,545) (17,107) Other working capital items - net 8,821 11,835 283 785 Nuclear decommissioning expenditures (1,609) (2,497) (2,139) (3,871) Deferred items - other 13,709 (7,373) 11,626 (5,869) Miscellaneous - net (1,557) 2,351 3,147 5,043 51,178 36,924 153,988 115,635 INVESTING ACTIVITIES: Utility construction - new resources (4) (13,452) (15) (29,411) Utility construction - other (56,922) (36,729) (90,196) (65,163) Energy efficiency programs (4,694) (5,050) (7,405) (8,952) Rentals received from leveraged leases 10,516 7,262 16,092 11,685 Nuclear decommissioning trust deposits (3,511) (7,702) (7,950) (10,507) Nuclear decommissioning trust withdrawals 91 1,670 1,447 6,608 Other (3,594) (2,969) (10,602) 2,247 (58,118) (56,970) (98,629) (93,493) FINANCING ACTIVITIES: Short-term borrowings - net 54,133 (24,898) 56,284 (48,525) Borrowings from corporate owned life insurance - - 1,312 2,589 Long-term debt issued - 75,000 35,000 75,000 Long-term debt retired (5,066) - (87,661) (3,045) Repayment of nonrecourse borrowings for leveraged leases (9,516) (6,757) (14,390) (10,628) Preferred stock retired (20,000) (10,000) (20,000) (10,000) Common stock issued 353 2,148 1,786 4,562 Dividends paid (16,757) (15,406) (32,060) (30,539) 3,147 20,087 (59,729) (20,586) INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (3,793) 41 (4,370) 1,556 CASH AND CASH EQUIVALENTS AT THE BEGINNING OF PERIOD 11,342 19,057 11,919 17,542 CASH AND CASH EQUIVALENTS AT THE END OF PERIOD $ 7,549 $ 19,098 $ 7,549 $ 19,098 Supplemental disclosures of cash flow information Cash paid during the period: Interest, net of amounts capitalized $ 19,273 $ 18,248 $ 36,174 $ 31,623 Income taxes 67,670 41,390 67,670 41,390 The accompanying notes are an integral part of these consolidated statements. </TABLE> 13
PORTLAND GENERAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE 1 - PRINCIPLES OF INTERIM STATEMENTS The interim financial statements have been prepared by Portland General and, in the opinion of management, reflect all material adjustments which are necessary to a fair statement of results for the interim period presented. Certain information and footnote disclosures made in the last annual report on Form 10-K have been condensed or omitted for the interim statements. Certain costs are estimated for the full year and allocated to interim periods based on the estimates of operating time expired, benefit received or activity associated with the interim period. Accordingly, such costs are subject to year-end adjustment. It is Portland General's opinion that, when the interim statements are read in conjunction with the 1995 Annual Report on Form 10-K, the disclosures are adequate to make the information presented not misleading. RECLASSIFICATIONS - Certain amounts in prior years have been reclassified for comparative purposes. NOTE 2 - LEGAL MATTERS BONNEVILLE PACIFIC LAWSUIT - In April 1992 legal action was filed by Bonneville Pacific against Portland General, Holdings, and certain individuals affiliated with Portland General and Holdings alleging breach of fiduciary duty, tortious interference, breach of contract, and other actionable wrongs related to Holdings' investment in Bonneville Pacific. Following his appointment, the Bonneville Pacific bankruptcy trustee, on behalf of Bonneville Pacific, filed numerous amendments to the complaint. The complaint now includes allegations of civil conspiracy, negligent misrepresentation, breach of fiduciary duty, and breach of contract. The amount of damages sought is not specified in the complaint. The Court has rejected the Trustee's previously filed damage study which is expected to be revised and refiled. OTHER LEGAL MATTERS - Portland General and certain of its subsidiaries are party to various other claims, legal actions and complaints arising in the ordinary course of business. These claims are not considered material. SUMMARY - While the ultimate disposition of these matters may have an impact on the results of operations for a future reporting period, management believes, based on discussion of the underlying facts and circumstances with legal counsel, that these matters will not have a material adverse effect on the financial condition of Portland General. 14
PORTLAND GENERAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE 3 - TROJAN NUCLEAR PLANT INVESTMENT RECOVERY - On April 4, 1996 a circuit court judge in Marion County, Oregon contradicted a November 1994 ruling from the same court, finding that the OPUC could not authorize PGE to collect a return on its undepreciated investment in Trojan currently in PGE's rate base. The ruling was the result of an appeal of PGE's 1995 general rate order which granted PGE recovery of, and a return on, 87 percent of its remaining investment in Trojan. The November 1994 ruling, by a different judge of the same court, upheld the Commission's 1993 Declaratory Ruling (DR-10). In DR-10 the OPUC ruled that PGE could recover and earn a return on its undepreciated Trojan investment, provided certain conditions were met. The Commission relied on a 1992 Oregon Department of Justice opinion issued by the Attorney General's office stating that the Commission had the authority to set prices including recovery of and on investment in plant that is no longer in service. The 1994 ruling was appealed to the Oregon Court of Appeals and stayed pending the appeal of the Commission's March 1995 order. Both PGE and the OPUC have separately appealed the April 1996 ruling which was combined with the appeal of the November 1994 ruling at the Oregon Court of Appeals. Management believes that the authorized recovery of the Trojan investment and decommissioning costs will be upheld and that these legal challenges will not have a material adverse impact on the results of operations or financial condition of the Company for any future reporting period. NOTE 4 - SUBSEQUENT EVENT PROPOSED MERGER - On July 20, 1996, Portland General entered into an Agreement and Plan of Merger with Enron Corp. (Enron), a Delaware corporation, to merge in a tax-free, stock- for-stock transaction . The transaction which has been approved by both companies' boards of directors, will entitle Portland General shareholders to receive one share of Enron common stock for each share of Portland General common stock held by them. The merger is conditioned, among other things, upon the approvals of each company's shareholders at special meetings planned for the fall of 1996 and the completion of regulatory procedures including those at the OPUC and FERC. The companies are hopeful that the regulatory procedures can be completed in less than 12 months from the date of the agreement. The merger agreement may be terminated by Enron if the average of the closing prices of Enron Common Stock during the 20 consecutive trading day period ending five trading days prior to the date of the meeting of the shareholders of the Company expected to be held this fall is more than $47.25 per share, and may be terminated by the Company if the aveage of the closing prices of Enron Common Stock during such period is less than $36.25 per share. 15
PORTLAND GENERAL ELECTRIC COMPANY SUBSIDIARIES FINANCIAL STATEMENTS AND RELATED INFORMATION TABLE OF CONTENTS PAGE NUMBER Management Discussion and Analysis of Financial Condition and Results of Operations * 3-10 Financial Statements 17-19 Notes to Financial Statements ** 14-15 * The discussion is substantially the same as that disclosed by Portland General and, therefore, is incorporated by reference to the information on the page numbers listed above. ** The notes are substantially the same as those disclosed by Portland General and are incorporated by reference to the information on the page numbers shown above, excluding the Bonneville Pacific litigation discussion contained in Note 2 which relates solely to Portland General. 16
Portland General Electric Company and Subsidiaries CONSOLIDATED STATEMENTS OF INCOME FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 1996 AND 1995 (UNAUDITED) <TABLE> <CAPTION> Three Months Ended Six Months Ended <S> <C> <C> <C> <C> June 30 June 30 1996 1995 1996 1995 (Thousands of Dollars) OPERATING REVENUES $ 232,921 $ 218,476 $ 533,116 $ 477,367 OPERATING EXPENSES Purchased power and fuel 46,262 46,616 128,559 134,312 Production and distribution 20,018 16,288 41,970 31,441 Maintenance and repairs 11,845 11,384 25,094 21,317 Administrative and other 27,066 26,144 54,136 50,961 Depreciation and amortization 38,529 34,765 76,041 66,202 Taxes other than income taxes 12,746 13,014 27,593 26,735 Income taxes 24,605 23,766 61,057 50,512 181,071 171,977 414,450 381,480 NET OPERATING INCOME 51,850 46,499 118,666 95,887 OTHER INCOME (DEDUCTIONS) Regulatory disallowance - net of income taxes of $17,101 - - - (36,708) Allowance for equity funds used during construction - 565 - 686 Other 1,643 4,814 3,391 9,504 Income taxes 105 84 428 (260) 1,748 5,463 3,819 (26,778) INTEREST CHARGES Interest on long-term debt and other 16,413 17,464 32,950 33,811 Interest on short-term borrowings 2,771 2,059 5,259 4,246 Allowance for borrowed funds used during construction (500) (2,361) (742) (4,388) 18,684 17,162 37,467 33,669 NET INCOME 34,914 34,800 85,018 35,440 PREFERRED DIVIDEND REQUIREMENT 645 2,417 1,631 5,000 INCOME AVAILABLE FOR COMMON STOCK $ 34,269 $ 32,383 $ 83,387 $ 30,440 </TABLE> CONSOLIDATED STATEMENTS OF RETAINED EARNINGS FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 1996 AND 1995 (Unaudited) <TABLE> <CAPTION> Three Months Ended Six Months Ended <S> <C> <C> <C> <C> June 30 June 30 1996 1995 1996 1995 (Thousands of Dollars) BALANCE AT BEGINNING OF PERIOD $ 279,904 $ 202,506 $ 246,282 $ 216,468 NET INCOME 34,914 34,800 85,018 35,440 ESOP TAX BENEFIT AND OTHER (605) (474) (1,135) (948) 314,213 236,832 330,165 250,960 DIVIDENDS DECLARED Common stock 17,958 11,545 32,924 23,090 Preferred stock 645 2,417 1,631 5,000 18,603 13,962 34,555 28,090 BALANCE AT END OF PERIOD $ 295,610 $ 222,870 $ 295,610 $ 222,870 The accompanying notes are an integral part of these consolidated statements. </TABLE> 17
PORTLAND GENERAL ELECTRIC COMPANY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS AS OF JUNE 30, 1996 AND DECEMBER 31, 1995 <TABLE> <CAPTION> <S> <C> <C> (Unaudited) June 30 December 31 1996 1995 (Thousands of Dollars) ASSETS ELECTRIC UTILITY PLANT - ORIGINAL COST Utility plant (includes Construction Work in Progress of $49,011 and $33,382) $ 2,828,860 $ 2,754,280 Accumulated depreciation (1,089,073) (1,040,014) 1,739,787 1,714,266 Capital leases - less amortization of $29,388 and $27,966 7,980 9,353 1,747,767 1,723,619 OTHER PROPERTY AND INVESTMENTS Trojan decommissioning trust, at market value 75,170 68,774 Corporate owned life insurance, less loans of $27,763 and $26,432 46,508 44,635 Other investments 32,461 24,943 154,139 138,352 CURRENT ASSETS Cash and cash equivalents 6,533 2,241 Accounts and notes receivable 101,551 102,592 Unbilled and accrued revenues 45,438 64,516 Inventories, at average cost 38,269 38,338 Prepayments and other 15,733 15,619 207,524 223,306 DEFERRED CHARGES Unamortized regulatory assets Trojan investment 289,897 301,023 Trojan decommissioning 300,382 311,403 Income taxes recoverable 210,318 217,366 Debt reacquisition costs 29,306 29,576 Energy efficiency programs 82,092 77,945 Other 26,640 27,611 WNP-3 settlement exchange agreement 166,239 168,399 Miscellaneous 28,518 26,997 1,133,392 1,160,320 $ 3,242,822 $ 3,245,597 CAPITALIZATION AND LIABILITIES CAPITALIZATION Common stock equity Common stock, $3.75 par value per share, 100,000,000 shares authorized, 42,758,877 shares outstanding $ 160,346 160,346 Other paid-in capital - net 469,815 466,325 Retained earnings 295,610 246,282 Cumulative preferred stock Subject to mandatory redemption 30,000 40,000 Long-term debt 865,067 890,556 1,820,838 1,803,509 CURRENT LIABILITIES Long-term debt and preferred stock due within one year 36,542 75,114 Short-term borrowings 224,332 170,248 Accounts payable and other accruals 86,056 132,064 Accrued interest 15,937 15,442 Dividends payable 18,827 14,956 Accrued taxes 26,981 12,870 408,675 420,694 OTHER Deferred income taxes 513,527 525,391 Deferred investment tax credits 48,944 51,211 Trojan decommissioning and transition costs 372,933 379,179 Miscellaneous 77,905 65,613 1,013,309 1,021,394 $ 3,242,822 $ 3,245,597 The accompanying notes are an integral part of these consolidated balance sheets. </TABLE> 18
PORTLAND GENERAL ELECTRIC COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOW FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 1996 AND 1995 (Unaudited) <TABLE> <CAPTION> <S> <C> <C> <C> <C> Three Months Ended Six Months Ended June 30 June 30 1996 1995 1996 1995 (Thousands of Dollars) CASH PROVIDED (USED IN) OPERATIONS: Net Income $ 34,914 $ 34,800 $ 85,018 $ 35,440 Non-cash items included in net income: Depreciation and amortization 30,485 27,019 59,577 50,804 Amortization of WNP-3 exchange agreement 864 1,227 2,160 2,455 Amortization of Trojan investment 5,935 5,946 11,760 12,409 Amortization of Trojan decommissioning 3,511 3,510 7,021 6,315 Amortization of deferred charges - other 1,355 833 (118) (178) Deferred income taxes - net (4,120) (662) (6,720) (690) Regulatory disallowance - - - 36,708 Changes in working capital: (Increase) Decrease in receivables 21,655 9,997 20,066 13,658 (Increase) Decrease in inventories 590 (946) 69 (7,591) Increase (Decrease) in payables (60,888) (47,866) (25,441) (18,897) Other working capital items - net 8,623 11,629 (114) (210) Nuclear decommissioning expenditures (1,609) (2,497) (2,139) (3,871) Deferred items - other 13,709 (7,373) 11,626 (5,869) Miscellaneous - net (1,282) 2,242 2,765 4,292 53,742 37,859 165,530 124,775 INVESTING ACTIVITIES: Utility construction - new resources (4) (13,452) (15) (29,411) Utility construction - other (56,922) (36,729) (90,196) (65,163) Energy efficiency programs (4,694) (5,050) (7,405) (8,952) Nuclear decommissioning trust deposits (3,511) (7,702) (7,950) (10,507) Nuclear decommissioning trust withdrawals 91 1,670 1,447 6,608 Other investments (2,162) (2,477) (9,170) (2,978) (67,202) (63,740) (113,289) (110,403) FINANCING ACTIVITIES: Short-term debt - net 51,933 (24,904) 54,084 (48,512) Borrowings from corporate owned life insurance - - 1,312 2,589 Long-term debt issued - 75,000 35,000 75,000 Long-term debt retired (5,066) - (87,661) (3,045) Preferred stock retired (20,000) (10,000) (20,000) (10,000) Dividends paid (16,015) (14,170) (30,684) (29,579) 10,852 25,926 (47,949) (13,547) INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (2,608) 45 4,292 825 CASH AND CASH EQUIVALENTS AT THE BEGINNING OF PERIOD 9,141 10,370 2,241 9,590 CASH AND CASH EQUIVALENTS AT THE END OF PERIOD $ 6,533 $ 10,415 $ 6,533 $ 10,415 Supplemental disclosures of cash flow information Cash paid during the period: Interest, net of amounts capitalized $ 19,454 $ 18,243 $ 34,884 $ 30,393 Income taxes 64,072 45,818 56,635 45,121 The accompanying notes are an integral part of these consolidated statements. </TABLE> 19
PORTLAND GENERAL CORPORATION AND SUBSIDIARIES PORTLAND GENERAL ELECTRIC COMPANY AND SUBSIDIARIES PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS For further information, see Portland General's and PGE's reports on Form 10-K for the year ended December 31, 1995. NONUTILITY ROGER G. SEGAL, AS THE CHAPTER 11 TRUSTEE FOR BONNEVILLE PACIFIC CORPORATION V. PORTLAND GENERAL CORPORATION, PORTLAND GENERAL HOLDINGS, INC. ET AL, U.S. DISTRICT COURT FOR THE DISTRICT OF UTAH At pre-trial hearings held in early May and most recently on August 2, 1996 the court dismissed claims by the trustee regarding RICO violations and RICO conspriacy, collusive tort, common law fraud and liability as a partner for the debts of a partnership. The dismissal of these claims significantly reduces the amount of damages the defendants could be held liable for if the court were to rule in favor of the plaintiff on the remaining claims. See Note 2 - Legal Matters in the Notes to Consolidated Financial Statements for further discussion regarding this case. ITEM 4. RESULTS OF VOTES OF SECURITY HOLDERS At the Annual Meeting of Shareholders held on May 7, 1996 the matters voted upon and the results of voting were as follows: FOR AGAINST WITHHELD Election of Class I Directors: Richard Geary 43,370,772 308,778 597,304 Jerry E. Hudson 43,321,567 391,809 563,478 Bruce G. Willison 43,324,390 373,420 579,044 FOR AGAINST ABSTAIN Ratification of the appointment of Arthur Andersen LLP as independent public accountants for the year 1996: 43,184,628 652,352 439,874 Shareholder proposal to require new public accountants every four years: 3,703,691 29,491,385 1,059,178 Shareholder proposal regarding confidential voting: 6,565,088 26,383,627 1,305,539 20
PORTLAND GENERAL CORPORATION AND SUBSIDIARIES PORTLAND GENERAL ELECTRIC COMPANY AND SUBSIDIARIES PART II. OTHER INFORMATION FOR AGAINST ABSTAIN Shareholder proposal regarding executive compensation upon change in control: 12,206,248 19,551,457 2,496,549 Names of other directors whose terms of office as director continued after the meeting are: CLASS II CLASS III Carolyn S. Chamers Gwyneth E. Gamble Booth Ken L. Harrison Peter J. Brix Jerome J. Meyer John W. Creighton Randolph L. Miller ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K a. Exhibits NUMBER EXHIBIT PGC PGE 10 Portland General Corporation Retirement Plan for Outside Directors, 1996 Restatement dated January 1, 1996, filed herewith X X Portland General Corporation Management Deferred Compensation Plan, 1996 Restatement dated January 1, 1996, filed herewith X X Portland General Corporation Supplemental Executive Retirement Plan, 1996 Restatement dated January 1, 1996, filed herewith X X Portland General Corporation Outside Directors' Life Insurance Benefit Plan, 1996 Restatement dated January 1, 1996, filed herewith X X Portland General Corporation Outside Directors' Deferred Compensation Plan, 1996 Restatement dated January 1, 1996, filed herewith X X 21
PORTLAND GENERAL CORPORATION AND SUBSIDIARIES PORTLAND GENERAL ELECTRIC COMPANY AND SUBSIDIARIES PART II. OTHER INFORMATION NUMBER EXHIBIT PGC PGE 10 Portland General Corporation Outside Directors' Stock Compensation Plan, Amended and Restated February 6, 1996, filed herewith X X 24 Power of Attorney X X 27 Financial Data Schedule - UT X X (Electronic Filing Only) b. Reports on Form 8-K July 22, 1996 - Item 5. Other Events: Merger Agreement with Enron Corp. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrants have duly caused this report to be signed on their behalf by the undersigned hereunto duly authorized. PORTLAND GENERAL CORPORATION PORTLAND GENERAL ELECTRIC COMPANY (Registrants) August 12 , 1996 By /S/ JOSEPH E. FELTZ Joseph E. Feltz Assistant Controller Assistant Treasurer *Joseph M. Hirko Sr. Vice President and Chief Financial Officer *Signed on behalf of this person. August 12 , 1996 By /S/ JOSEPH E. FELTZ Joseph E. Feltz (Attorney-in-Fact) 22