<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of report (date of earliest event reported):
January 27, 1998
PACIFICORP
(Exact name of registrant as specified in its charter)
State of Oregon 1-5152 93-0246090
(State of Incorporation) (Commission (I.R.S. Employer
File No.) Identification No.)
700 N.E. Multnomah, Suite 1600, Portland, Oregon 97232-4116
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(503) 731-2000
No Change
(Former Name or Former Address, if changed since last report)
<PAGE>2
Item 5. OTHER EVENTS
Information contained in the news release of PacifiCorp issued
on January 27, 1998 is incorporated herein by reference.
Item 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(c) Exhibit.
99. PacifiCorp news release issued January 27, 1998.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PACIFICORP
(Registrant)
By: RICHARD T. O'BRIEN
__________________________________
Richard T. O'Brien
Senior Vice President and
Chief Financial Officer
Date: January 28, 1998
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION PAGE
_______ ___________ ____
<S> <C> <C>
99 PacifiCorp news release issued January 27, 1998.
</TABLE>
<PAGE>
EXHIBIT 99
_____________________________________________________________________________
PACIFICORP NEWS RELEASE
_____________________________________________________________________________
FOR FURTHER INFORMATION CONTACT:
Scott Hibbs: (503) 731-2123
January 27, 1998
PACIFICORP REPORTS 1997 FINANCIAL RESULTS
PORTLAND, Oregon - PacifiCorp (NYSE: PPW) today reported earnings on common
stock of $451 million, or $1.52 per share, excluding asset sale gains and a
series of special charges and other adjustments recorded in 1997 (see chart
following). The Company recorded asset sale gains in 1997 totaling
$395 million, or $1.33 per share, and special charges and other adjustments
totaling $205 million, or $0.69 per share. Total reported earnings on common
stock was $2.16 per share for the year.
In 1996, PacifiCorp reported earnings on common stock of $475 million, or
$1.62 per share.
Fourth quarter 1997 earnings on common stock were $118 million, or $0.39 per
share, excluding asset sale gains, special charges and other adjustments. The
Company recorded asset sale gains of $395 million, or $1.33 per share and
special charges and other adjustments totaling $144 million, or $0.48 per
share, in the fourth quarter of 1997. Total reported earnings on common stock
was $1.24 per share for the quarter.
In the fourth quarter of 1996, PacifiCorp reported earnings on common stock of
$127 million, or $0.42 per share.
The earnings contribution from the Company's Domestic Electric Operations
totaled $297 million in 1997, excluding special charges and other adjustments.
The 1996 earnings contribution from Domestic Electric Operations was
$342 million. The $45 million decline in earnings contribution was
attributable to higher depreciation, outside services, and employee related
costs.
On January 12, 1998, the Company announced a series of initiatives aimed at
reducing costs in its domestic electric business. These initiatives include
workforce reductions, closure of the Company's Glenrock coal mine, and certain
asset write-offs.
Earnings from the Company's Australian electric operations increased to $54
million in 1997, from $32 million in 1996. This increase was attributable to
renegotiations of Tariff H industrial contracts, decreased maintenance costs
and lower interest expense.
"Despite growth in our Australian electric distribution business and
substantial increases in domestic wholesale electricity sales, higher costs in
our domestic electric business have resulted in the Company's earnings being
significantly below our expectations for the year," said Fred
<PAGE>2
Buckman, PacifiCorp's President and Chief Executive Officer. "The initiatives
we announced earlier this month are a direct attempt to improve the cost
profile of our domestic electric business. We are continuing to seek
additional ways to both reduce costs and add new revenue sources in an effort
to improve our earnings outlook."
In December of 1997, PacifiCorp completed the sale of its telecommunications
subsidiary, Pacific Telecom, Inc. (PTI), to Century Telephone Enterprises,
Inc. This business was reported as a discontinued operation during 1997.
During 1997, PacifiCorp actively sought to acquire The Energy Group PLC. On
December 19, 1997, the Company received unconditional approval from the U.K.
government to proceed with the transaction. However, approval from the U.S.
Federal Trade Commission has not yet been received.
<TABLE>
1997 EARNINGS OVERVIEW
<CAPTION>
Item (millions except EPS) Pre-Tax Net Income EPS Segment
__________________________ _______ __________ ___ _______
<S> <C> <C> <C> <C>
Reported Earnings Contribution $ 640.9 $2.16
Adjustments (Location in Statements):
Asset Sale Gains
________________
PTI Sale Gain (Discontinued Ops) (669.8) (365.1) (1.23) Telecommunications
PGC Sale Gain (Other Income) (56.5) (30.0) (0.10) Other Operations
______ ______ _____
Total Asset Sales Gains (726.3) (395.1) (1.33)
______ ______ _____
Special Charges:
________________
Glenrock Closure 64.4 39.9 0.14 Domestic Electric
Deferred Regulatory Pension cost 86.9 53.9 0.18
Valuation charges on IT systems 19.1 11.9 0.04
____ ____ ____
Total Special Charges 170.4 105.7 0.36
_____ _____ ____
Other Adjustments:
__________________
Depreciation rate changes
(Depreciation) 17.0 10.2 0.03 Domestic Electric
Reserve for uncollectibles
(Other Operations & Maint.) 10.0 6.2 0.02 Domestic Electric
Industrial Billing Adjustments
(Revenues) 5.6 3.5 0.01 Domestic Electric
SAP process re-engineering
(Admin. & General) 13.8 8.6 0.03 Domestic Electric &
Australia
Tariff H Contract Adjustments
(Revenues) (15.4) (9.6) (0.03) Australia
Foreign Currency Option Loss
(Other Expense) 105.6 64.5 0.22 Other Operations
Regulatory Asset Impairments
(Extraordinary Item) 25.6 16.0 0.05 Domestic Electric
____ ____
Adjusted Earnings and EPS $450.9 $1.52
______ _____
</TABLE>
<PAGE>3
DOMESTIC ELECTRIC OPERATIONS
EARNINGS CONTRIBUTION
Domestic Electric Operations reported earnings contribution of $166 million,
or $0.56 per share, in 1997, compared to $342 million, or $1.17 per share, in
1996. Domestic Electric's 1997 earnings contribution was $297 million, or
$1.00 per share, before special charges and other adjustments of $132 million
after tax.
REVENUES
Total 1997 Domestic Electric revenues increased $715 million, or 24 percent,
from 1996 to $3,700 million primarily from the increased wholesale revenues of
$689 million, or 93 percent. Retail revenues were $2,200 million in 1997,
approximately equal to 1996.
Residential revenues were up $13 million, or 2 percent, to $814 million.
Growth in the average number of residential customers of 3 percent added
$20 million to revenues. Price increases in Oregon, effective July 1996,
added $9 million in 1997, offset in part by price decreases of $4 million in
Utah that became effective April 1997. Declines in customer usage, primarily
attributable to weather, reduced revenues $14 million in 1997 compared to
1996.
Commercial revenues increased $18 million, or 3 percent, to $641 million.
This increase was attributable to a 3 percent growth in average number of
customers in Utah and Oregon.
Industrial revenues decreased $9 million, or 1 percent, to $710 million.
Increased customer usage added revenues of $6 million in Eastern Wyoming and
$4 million in Oregon. However, this was more than offset by reduced revenues
of $8 million from lower usage by irrigation customers and $6 million of
unfavorable billing adjustments in the first quarter 1997 resulting from the
implementation of the new customer service system in late 1996.
During 1997, the active wholesale market led to an increase in revenues of
$689 million, or 93 percent, to a record $1,400 million. Energy volumes
increased 99 percent, driven by a $589 million increase in short-term firm and
spot market sales. Sales prices for short-term firm and spot market sales
averaged $20 per mWh in 1997, compared to $15 per mWh in 1996, resulting in
$80 million in additional revenues. Increased long-term firm contract volumes
added $14 million to wholesale revenues.
OPERATING EXPENSE
Operating expenses increased $984 million, or 46 percent, to $3,100 million,
attributable to a significant increase in purchased power costs, special
charges, and higher depreciation and administrative costs.
Purchased power expenses increased $678 million to $1,300 million, more than
double last year, and was attributable to the growth of the Company's
wholesale business. Short-term firm and spot market purchases totaled 45.6
million mWh in 1997, nearly three times the level of 1996 purchases, adding
$570 million to purchased power expenses. Short-term firm and spot market
<PAGE>4
purchase prices averaged $19 per mWh in 1997 compared to $13 per mWh in 1996,
a 46 percent increase, adding $76 million to purchased power expenses.
Net power costs in 1997 were $6.99 per mWh, compared to $7.20 per mWh in 1996,
a 3 percent decrease. Electric operations net power cost represents the net
cost to serve the Company's retail customers on a mWh basis. This is measured
by the sum of fuel, purchased power and wheeling expense, less wholesale power
and wheeling revenues. The decrease in net power cost was attributable to
increased hydro generation which displaced higher cost resources, reduced
system losses and improved margins from higher short-term and spot market
sales, offset in part by increased fuel costs.
Other operations and maintenance expense increased $26 million, to
$470 million in 1997. Included in this 6 percent increase was $11 million of
higher plant maintenance and tree trimming, and a $10 million special reserve
provision for uncollectible accounts resulting from issues related to the
strengthening of the payment treatment processes in the new customer billing
system implemented late last year.
Depreciation and amortization expense increased $46 million, or 13 percent, to
$389 million in 1997. The Company completed a depreciation study of its fixed
assets and has filed with the appropriate regulatory bodies for approval to
increase its annual depreciation rates. As part of the study, the Company
recorded charges of $17 million in the fourth quarter to reflect the new
higher depreciation rates. An additional $26 million in depreciation is
attributable to increased plant in service, the new customer service system
and a full year of operations at the Hermiston plant.
Administrative and general expenses increased $53 million to $325 million in
1997, a 19 percent increase over 1996. This increase was primarily the result
of higher outside services of $18 million, expensing process re-engineering
costs of $10 million, in accordance with new accounting rules, relating to the
Company's new SAP software operating environment, and increased employee
related costs of $20 million, primarily attributable to the Company's
significant increase in its marketing activities in the wholesale markets.
SPECIAL CHARGES
During the fourth quarter of 1997, Domestic Electric Operations recorded in
operating income certain special charges totaling $170 million pre-tax. These
special charges included $64 million for the Glenrock mine closure, $87
million for the write-off of deferred regulatory pension assets and $19
million for the valuation impairment of certain information systems assets.
OTHER INCOME/EXPENSE
Domestic Electric interest expense increased $27 million, or 9 percent, to
$319 million in 1997. This increase was attributable to higher debt balances
as a result of the Hermiston plant acquisition in July 1996 and capital
contributions to PacifiCorp Holdings, Inc. relating to the acquisition of TPC
Corporation (TPC) in April 1997. Other income increased $7 million in 1997
primarily as a result of increased sales of emission allowances.
<PAGE>5
As previously reported, the Company's 1997 results included an extraordinary
charge of $16 million, or $0.05 per share ($26 million pre-tax), related to
its decision to record a valuation allowance for regulatory assets pertaining
to generation resources allocable to its operations in California and Montana.
The decision to impair these assets is based primarily on recent regulatory
and legislative actions in those states that have mandated customer choice of
electric supplier and eliminated cost-based regulation for the generation
portion of the electricity business. Regulatory assets represent costs
incurred in the past that have been deferred under regulatory accounting
practices for future recovery. Because of the potential regulatory and
legislative actions in its other states jurisdictions, the Company may have
additional regulatory asset write-offs and charges for impairment of
long-lived assets in future periods.
AUSTRALIAN ELECTRIC OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEAR (IN MILLIONS):
POWERCOR: 1997 1996
_________ ____ ____
<S> <C> <C>
Revenue $ 716 $659
Purchased power (309) (305)
Depreciation and amortization (67) (72)
Other operating expenses (189) (155)
____ ____
Income from operations 151 127
Interest expense and other (62) (75)
___ ___
Income before income taxes 89 52
Income taxes (33) (19)
___ ___
POWERCOR EARNINGS CONTRIBUTION 56 33
HAZELWOOD NET LOSS (2) (1)
__ __
AUSTRALIAN ELECTRIC OPERATIONS
CONTRIBUTION $ 54 $ 32
==== ====
</TABLE>
<PAGE>6
EARNINGS CONTRIBUTION
In 1997, Australian Electric Operations contributed earnings of $54 million,
or $0.18 per share, compared to the 1996 results of $32 million, or $0.11 per
share. The 1997 earnings included adjustments associated with renegotiating
certain Tariff H industrial customer contracts that added $10 million, or
$0.03 per share.
POWERCOR REVENUES
Powercor reported 1997 revenues of $716 million, a $57 million increase, or
9 percent, over the prior year. The increase was attributable to higher
energy sales volumes of 2,734 million kWh, or 33 percent. Powercor continued
to increase market share in the contestable markets of Victoria and New South
Wales outside Powercor's franchise area and added 2,843 million kWh and
$100 million of revenue in 1997. Powercor now holds an estimated 42 percent
of the contestable markets in Victoria and 13 percent in New South Wales.
Revenue from inside Powercor's franchise area decreased $47 million, or 8
percent, to $539 million. Lower average realized prices reduced revenues by
$39 million. Energy volumes decreased 108 million kWh, or $8 million, due to
customers lost from the effect of contestability in Powercor's franchise area.
The currency exchange rate for converting Australian dollars to United States
dollars was 0.744 in 1997 compared to 0.783 in 1996, a 5 percent decrease
for the year. The effect of the exchange rate fluctuation significantly
lowered revenues by $33 million and expenses by $31 million during 1997.
POWERCOR OPERATING EXPENSES
Purchased power expenses increased $4 million, or 1 percent, to $309 million.
Volumes of purchased power increased 2,734 million kWh, or 33 percent, adding
$101 million to costs, offset in part by lower pool power prices that reduced
purchased power costs by $97 million. Purchased power prices averaged $28 per
mWh in 1997, compared to $37 per mWh in 1996.
Other operating expenses increased $34 million, or 22 percent, to $189
million. Increased sales to contestable customers outside Powercor's
franchised area resulted in higher network and grid fees of $52 million. This
was partially offset by higher network revenues of $15 million from customers
inside Powercor's franchise area that are serviced by other energy suppliers
and a decrease in maintenance expenses of $17 million attributable to
increased productivity and cost reduction efforts. Administrative and general
expenses increased $14 million due to higher outside services of $10 million
and expensing process re-engineering costs of $4 million relating to the new
SAP software operating environment in accordance with new accounting rules.
HAZELWOOD
For 1997, the Company recorded an after tax loss of $2 million on its 19.9
percent ownership interest in the Hazelwood Power Station, a coal-fired
generating station and associated coal mine in Victoria, Australia, as
compared to a loss of $1 million in 1996. Hazelwood was purchased in September
1996.
<PAGE>7
TELECOMMUNICATIONS
On December 1, 1997, the Company completed the sale of PTI to Century
Telephone Enterprises, Inc. for $1.5 billion in cash, plus the assumption of
PTI debt. The Company realized an after tax gain of $365 million, or $1.23
per share. For the eleven months of 1997, PTI reported net income of $89
million or $0.30 per share, compared to $75 million, or $0.25 per share, for
the entire year of 1996.
OTHER OPERATIONS
The Company's other operations reported net losses of $17 million, or $0.06
per share, compared to earnings of $27 million, or $0.09 in 1996, a
$44 million decrease, or $0.15 per share.
In the third quarter of 1997, the Company recorded an after tax loss of
$65 million, or $0.22 per share, associated with the closing of foreign
exchange positions related to the Company's tender offer for The Energy Group
PLC (TEG). As previously reported, the Company purchased the foreign exchange
positions to hedge risk of exchange rate fluctuations associated with its
recommended offer for TEG. On August 1, the tender offer lapsed and the
Company closed the foreign exchange position as required by its hedging
policies.
The Company estimates that it has incurred approximately $60 million of other
costs related to the TEG transaction for bank fees, legal expenses and other
related costs. These costs have been deferred because the Company expects to
make a new bid for TEG. It is possible that the outcome of the potential
transaction will be known before the Company files its 1997 financial
statements with the Securities and Exchange Commission in March. If it is an
unsuccessful outcome, the Company will adjust its 1997 reported earnings to
reflect the after tax write off of the deferred costs of approximately
$38 million, or $0.13 per share.
On November 5, 1997, the Company completed the sale of its independent power
subsidiary, Pacific Generation Company (PGC), to NRG Energy, Inc. for
approximately $150 million in cash resulting in a gain of $30 million, or
$0.10 per share.
PacifiCorp Power Marketing, Inc. (PPM), the Company's eastern wholesale energy
trading company, completed its first full year of operations with revenues of
$913 million and reported a net loss of $2 million. TPC, the Company's
natural gas marketing and storage company acquired in April of this year,
reported revenues of $816 million and a net loss of $6 million for the year.
The Company's other unregulated businesses and equity investments reported
1997 earnings of $25 million, compared to $35 million in 1996, a decrease of
$10 million, or $0.03 per share.
Other after-tax interest expense for 1997 increased $7 million over 1996 due
to higher debt balances resulting primarily from the Hazelwood acquisition.
Interest income increased $7
<PAGE>8
million from temporary cash investments as a result of the late 1997 asset
sales. Income taxes were benefited $6 million by favorable state tax
adjustments in 1997.
<PAGE>9
FOURTH QUARTER 1997 EARNINGS ANALYSIS
DOMESTIC ELECTRIC OPERATIONS
EARNINGS CONTRIBUTION
For the fourth quarter of 1997, Domestic Electric Operations reported a total
net loss before extraordinary item of $59 million, or $0.20 per share,
compared to earnings of $93 million, or $0.32 per share, in the last quarter
of 1996. Excluding the special charges and other adjustments, the 1997 fourth
quarter earnings were $70 million, or $0.23 per share.
Domestic Electric reported an operating loss of $7 million in the last quarter
1997, a decline of $242 million from the same period in 1996. This decrease
resulted from special charges, higher depreciation expense and increased
general and administrative expenses in 1997.
REVENUES
Domestic Electric Operations revenue increased $297 million in the quarter, or
36 percent, to $1,100 million, primarily from increased wholesale revenues of
$303 million. Retail revenues were flat with a slight increase in energy
volumes of 360 million kWh , or 3 percent.
Residential revenues were $225 million on energy sales of 3.6 million kWh, up
slightly from the prior year. Growth in the average number of residential
customers of 3 percent, primarily in Utah and Oregon, added $5 million to
revenue. This increase was offset by price decreases of $1 million in the
Company's Utah jurisdiction and by declining customer usage of $4 million,
which was largely attributable to weather.
Commercial revenues grew by $2 million, or 1 percent, to $166 million on a
2 percent increase in energy sales. Growth in the average number of customers
of 2 percent added $3 million to revenues, while decreased prices in Utah
lowered revenues by $1 million.
Industrial revenues decreased $2 million, or 1 percent, to $172 million. The
decrease was attributable to a contract amendment of $2 million and lower
prices in Utah of $1 million, offset in apart by increased energy sales of
252 million kWh that added $3 million to revenue.
Wholesale revenues increased $303 million, to $534 million, on a 128 percent
increase in energy sales. Increased short-term firm and spot market energy
sales volumes added $269 million. Short-term firm and spot market sales
prices averaged $23 per mWh in 1997, compared to $18 per mWh for the same
period in 1996. The increased prices added $28 million in revenues.
Increased long-term firm contract volumes added $2 million to wholesale
revenues for the quarter.
<PAGE>10
OPERATING EXPENSES
Total operating expenses increased $539 million, or 90 percent, to
$1,100 million in the quarter, primarily attributable to higher purchased
power expenses, special charges, and higher depreciation and administrative
costs.
Purchased power expenses for the fourth quarter of 1997 increased
$308 million, to $510 million. Short-term firm and spot market energy
purchases were up $274 million, or 12.2 million mWh, more than three times the
amount of purchases in the same period of 1996. Short-term firm and spot
market purchase prices averaged $23 per mWh in the quarter versus $18 per mWh
in the fourth quarter of 1996. The increase in purchased power costs included
$26 million related to increased prices.
Fuel expense for the quarter was down $12 million, or 9 percent, to
$115 million. This decrease was attributable to reduced generation of
747 million kWh, or 5 percent, and lower average fuel costs of $5 million.
The Company's hydro generation resources were 153 million kWh, or 11 percent,
above the same period in 1996.
Net power costs in the quarter were $7.53 per mWh, compared to $8.23 per mWh
in the fourth quarter of 1996, a 9 percent decrease. The decrease in net
power cost was attributable to increased hydro generation which displaced
higher cost resources, reduced system losses and improved margins from higher
short-term and spot market sales.
Other operations and maintenance expense increased $8 million, or 7 percent,
to $125 million in the fourth quarter of 1997. This increase was attributable
to a $10 million special reserve provision for uncollectible accounts
resulting from issues related to the strengthening of the payment treatment
process in the new customer billing system implemented late last year.
Depreciation and amortization expense increased $28 million, or 31 percent, to
$117 million. The increase was attributed to a $17 million charge in the
quarter to reflect higher depreciation rates and $9 million for increased
plant in service.
Administrative and general expenses increased $36 million, or 56 percent, to
$100 million. This increase was attributable to $10 million of process
re-engineering costs relating to the Company's new SAP software operating
environment, higher outside services of $8 million, increased employee related
costs of $11 million primarily related to the significant increase in the
wholesale markets and software expenses of $5 million.
SPECIAL CHARGES
During the fourth quarter of 1997, Domestic Electric Operations recorded in
operating income certain special charges totaling $170 million pre-tax. These
special charges included $64 million for the Glenrock mine closure,
$87 million for the write-off of deferred regulatory pension assets and
$19 million for the valuation impairment of certain information systems
assets.
<PAGE>11
OTHER INCOME/EXPENSE
Electric interest expense increased $9 million, or 12 percent, to $83 million.
The increase was attributable to higher debt balances as the result of
increased capital contributions to PacifiCorp Holdings, Inc. relating to the
acquisition of TPC in the second quarter of 1997. Domestic Electric income
tax expense declined $90 million, resulting in a tax benefit of $32 million in
1997 due to the level of pre-tax losses in the quarter.
The Company's 1997 fourth quarter results included an extraordinary charge of
$16 million, or $0.05 per share, ($26 million pre-tax) related to the
valuation allowance for regulatory generation assets allocable to its
operations in California and Montana.
AUSTRALIAN ELECTRIC OPERATIONS
<TABLE>
<CAPTION>
FOURTH QUARTER RESULTS (IN MILLIONS):
______________________
1997 1996
____ ____
<S> <C> <C>
Powercor:
________
Revenues $169 $181
Purchased power (73) (84)
Depreciation and amortization (15) (18)
Other operating expenses (51) (46)
___ ___
Income from operations 30 33
Interest expense and other (13) (17)
___ ___
Income before income taxes 17 16
Income taxes (7) (6)
__ __
POWERCOR EARNINGS CONTRIBUTION 10 10
HAZELWOOD NET LOSS (1) (1)
__ __
AUSTRALIAN ELECTRIC OPERATIONS CONTRIBUTION $9 $ 9
== ===
</TABLE>
EARNINGS CONTRIBUTION
Australian Electric Operations contributed $9 million, or $0.03 per share, in
the fourth quarters of 1997 and 1996.
POWERCOR REVENUES
Powercor's revenues decreased $12 million, or 7 percent, to $169 million. The
decrease was attributable to lower average realized prices, offset in part by
increased energy sales volumes of 751 million kWh, or 32 percent.
Energy volumes to contestable customers outside Powercor's franchise area were
up 835 million kWh and added $22 million to revenue due to customer gains in
Victoria and New South Wales. This included increased energy volumes for
customers in Victoria of 228 million kWh that added
<PAGE>12
$1 million to revenue, and energy volumes for new customers in New South Wales
of 607 million kWh that added $21 million to revenue.
Revenue inside Powercor's franchise area from franchise and contestable
customers decreased $26 million, or 17 percent, to $121 million. Lower
average realized prices reduced revenue by $19 million and decreased energy
volumes of 84 million kWh reduced revenues by $7 million, including $4 million
as a result of customers lost due to the effects of contestability in
Powercor's franchise area in 1997. The fourth quarter of 1997 included
adjustments associated with certain Tariff H industrial contracts that added
$3 million to revenues.
The currency exchange rate for converting Australian dollars to United States
dollars was 0.692 in the fourth quarter 1997 compared to 0.796 in 1996, a
13 percent decrease in the quarter. The effect of the exchange rate
fluctuation lowered revenues by $24 million and costs by $23 million during
the fourth quarter of 1997.
POWERCOR OPERATING EXPENSES
Purchased power expense decreased $11 million, or 13 percent, to $73 million.
Lower pool prices reduced power costs by $39 million, offset in part by a
32 percent increase in purchased power volumes that added $27 million to
costs. Purchased power prices averaged $24 per mWh in the fourth quarter of
1997, compared to $36 per mWh in 1996.
Other operating expenses increased $5 million, or 11 percent, to $51 million.
Increased sales to contestable customers outside Powercor's franchise area
resulted in higher network and grid fees of $13 million. This was offset in
part by higher network revenues of $5 million from customers inside Powercor's
franchise area serviced by other energy suppliers. Administrative expenses
increased $8 million expensing process re-engineering costs of $4 million, in
accordance with new accounting rules, relating to the new SAP software
operating environment and higher outside services expenses. Maintenance
expenses decreased $13 million attributable to increased productivity and cost
reduction efforts.
Interest expense and other decreased $4 million, or 24 percent, to
$13 million, due to lower average interest rates and debt balances.
HAZELWOOD
The Company recorded an after tax loss of $1 million in the fourth quarters of
1997 and 1996 on its 19.9 percent ownership interest in the Hazelwood Power
Station.
TELECOMMUNICATIONS
As previously discussed, the Company completed the sale of PTI to Century
Telephone Enterprises, Inc. for $1.5 billion in cash, plus the assumption of
PTI's debt and recorded an after tax gain of $365 million, or $1.23 per share.
For the two months prior to the sale PTI reported
<PAGE>13
net income of $25 million, or $0.08 per share, compared to $21 million, or
$0.06 per share, for the entire fourth quarter of 1996.
OTHER BUSINESSES
In the fourth quarter of 1997, the Company's other operations reported
earnings of $45 million, or $0.15 per share, compared to $4 million, or $0.01
in 1996. During the quarter, the sale of PGC to NRG Energy, Inc. resulted in
a gain of $30 million, or $0.10 per share.
PPM reported a loss of $1 million in the fourth quarter of 1997 compared to
break even results last year. PPM's fourth quarter revenues increased
$252 million to $260 million on increased energy trading activities. TPC
reported a loss of $4 million on revenues of $405 million in the fourth
quarter of 1997. For its other unregulated businesses, the Company reported
earnings of $13 million in the fourth quarter of 1997, as compared to
$9 million in 1996.
Interest income increased $5 million over the fourth quarter of 1996 primarily
due to increased temporary cash investments from the sales of PTI and PGC.
Income taxes were benefited by $6 million of favorable state tax adjustments
in 1997.
<PAGE>14
<TABLE>
PacifiCorp
and its Consolidated Subsidiaries
Summary Financial Information
(In Thousands, Except Per Share Amounts)
(Unaudited)
<CAPTION>
12 Months Ended December 31 $ %
1997 1996 (1) Change Change
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUES
Domestic Electric Operations
(See next page) $ 3,706,900 $ 2,991,800 $ 715,100 24
Australian Electric Operations
(See next page) 716,200 658,800 57,400 9
Other Operations (2) 1,854,900 153,100 1,701,800 *
------------------------------------------------
TOTAL 6,278,000 3,803,700 2,474,300 65
------------------------------------------------
EXPENSES
Domestic Electric Operations
(See next page) 3,105,600 2,122,000 983,600 46
Australian Electric Operations 565,700 531,400 34,300 6
Other Operations (2) 1,804,200 63,900 1,740,300 *
------------------------------------------------
TOTAL 5,475,500 2,717,300 2,758,200 102
------------------------------------------------
INCOME FROM OPERATIONS
Domestic Electric Operations 601,300 869,800 (268,500) (31)
Australian Electric Operations 150,500 127,400 23,100 18
Other Operations (2) 50,700 89,200 (38,500) (43)
------------------------------------------------
TOTAL 802,500 1,086,400 (283,900) (26)
Interest expense 439,500 415,000 24,500 6
Other (income) expense 28,100 4,800 23,300 *
------------------------------------------------
Income from continuing operations
before income taxes 334,900 666,600 (331,700) (50)
Income taxes 109,500 236,400 (126,900) (54)
------------------------------------------------
Income from continuing operations before
extraordinary item 225,400 430,200 (204,800) (48)
Discontinued operations (3) 454,300 74,700 379,600 *
Extraordinary item (4) (16,000) - (16,000) *
------------------------------------------------
NET INCOME 663,700 504,900 158,800 31
Preferred dividend requirement 22,800 29,800 (7,000) (23)
------------------------------------------------
EARNINGS CONTRIBUTION
ON COMMON STOCK (5)
Domestic Electric Operations 165,500 341,500 (176,000) (52)
Australian Electric Operations 54,200 31,900 22,300 70
Other Operations (2) (17,100) 27,000 (44,100) *
------------------------------------------------
Continuing operations 202,600 400,400 (197,800) (49)
Discontinued operations (3) 454,300 74,700 379,600 *
Extraordinary item (4) (16,000) - (16,000) *
------------------------------------------------
TOTAL $ 640,900 $ 475,100 $ 165,800 35
================================================
Average common shares outstanding 296,094 292,424 3,670 1
EARNINGS PER COMMON SHARE
Domestic Electric Operations $ 0.56 $ 1.17 $ (0.61) (52)
Australian Electric Operations 0.18 0.11 0.07 64
Other Operations (2) (0.06) 0.09 (0.15) *
------------------------------------------------
Continuing operations 0.68 1.37 (0.69) (50)
Discontinued operations (3) 1.53 0.25 1.28 *
Extraordinary item (4) (0.05) - (0.05) *
------------------------------------------------
TOTAL (6) $ 2.16 $ 1.62 $ 0.54 33
================================================
Dividends paid per common share $ 1.08 $ 1.08 $ - -
================================================
<FN>
* Not a meaningful number.
(See accompanying notes on page 17.)
</FN>
</TABLE>
<PAGE>15
<TABLE>
PacifiCorp
and its Consolidated Subsidiaries
Summary Financial Information
(Unaudited)
<CAPTION>
12 Months Ended December 31 $ %
1997 1996 Change Change
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
DOMESTIC ELECTRIC REVENUES (In thousands)
Residential $ 814,000 $ 801,400 $ 12,600 2
Commercial 640,900 623,300 17,600 3
Industrial 709,900 719,300 (9,400) (1)
Other 31,700 32,500 (800) (2)
------------------------------------------------
Retail Sales 2,196,500 2,176,500 20,000 1
Wholesale sales 1,428,000 738,800 689,200 93
Other 82,400 76,500 5,900 8
------------------------------------------------
TOTAL $ 3,706,900 $ 2,991,800 $ 715,100 24
================================================
DOMESTIC ELECTRIC ENERGY SALES (Millions of kWh)
Residential 12,902 12,819 83 1
Commercial 11,868 11,497 371 3
Industrial 20,674 20,332 342 2
Other 705 640 65 10
------------------------------------------------
Retail Sales 46,149 45,288 861 2
Wholesale sales 59,143 29,665 29,478 99
------------------------------------------------
TOTAL 105,292 74,953 30,339 40
================================================
DOMESTIC ELECTRIC EXPENSES (In thousands)
Fuel 454,200 443,000 11,200 3
Purchased power 1,296,500 618,700 677,800 110
Other operations and maintenance 470,000 444,200 25,800 6
Depreciation and amortization 389,100 343,400 45,700 13
Administrative and general 325,400 272,700 52,700 19
Special charges 170,400 - 170,400 *
------------------------------------------------
TOTAL 3,105,600 2,122,000 983,600 46
================================================
AUSTRALIAN ELECTRIC REVENUES (In thousands)
Residential $ 239,200 $ 239,400 $ (200) -
Commercial 207,900 165,500 42,400 26
Industrial 236,200 223,700 12,500 6
------------------------------------------------
Retail Sales 683,300 628,600 54,700 9
Other 32,900 30,200 2,700 9
------------------------------------------------
TOTAL $ 716,200 $ 658,800 $ 57,400 9
================================================
AUSTRALIAN ELECTRIC ENERGY
SALES (Millions of kWh)
Residential 2,683 2,608 75 3
Commercial 3,082 1,926 1,156 60
Industrial 5,279 3,776 1,503 40
------------------------------------------------
TOTAL 11,044 8,310 2,734 33
================================================
December December $ %
1997 1996 Change Change
------------------------------------------------
<S> <C> <C> <C> <C>
CONSOLIDATED CAPITALIZATION
Common equity $ 4,332,000 $ 4,032,000 $ 300,000 7
Preferred stock 241,000 314,000 (73,000) (23)
Preferred securities of trust holding
solely PacifiCorp debentures 340,000 210,000 130,000 62
Long-term debt 4,415,000 4,829,000 (414,000) (9)
Short-term debt 555,000 903,000 (348,000) (39)
------------------------------------------------
TOTAL $ 9,883,000 $ 10,288,000 $ (405,000) (4)
================================================
<FN>
* Not a meaningful number.
(See accompanying notes on page 17.)
</FN>
</TABLE>
<PAGE>16
<TABLE>
PacifiCorp
and its Consolidated Subsidiaries
Summary Financial Information
(In Thousands, Except Per Share Amounts)
(Unaudited)
<CAPTION>
3 Months Ended December 31 $ %
1997 1996 (1) Change Change
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUES
Domestic Electric Operations
(See next page) $ 1,129,400 $ 832,800 $ 296,600 36
Australian Electric Operations
(See next page) 169,300 181,200 (11,900) (7)
Other Operations (2) 706,800 37,800 669,000 *
------------------------------------------------
TOTAL 2,005,500 1,051,800 953,700 91
------------------------------------------------
EXPENSES
Domestic Electric Operations
(See next page) 1,136,700 598,200 538,500 90
Australian Electric Operations 139,100 147,600 (8,500) (6)
Other Operations (2) 691,600 12,300 679,300 *
------------------------------------------------
TOTAL 1,967,400 758,100 1,209,300 *
------------------------------------------------
INCOME FROM OPERATIONS
Domestic Electric Operations (7,300) 234,600 (241,900) (103)
Australian Electric Operations 30,200 33,600 (3,400) (10)
Other Operations (2) 15,200 25,500 (10,300) (40)
------------------------------------------------
TOTAL 38,100 293,700 (255,600) (87)
Interest expense 107,900 106,000 1,900 2
Other (income) expense (67,000) 13,100 (80,100) *
------------------------------------------------
Income from continuing operations
before income taxes (2,800) 174,600 (177,400) (102)
Income taxes (2,900) 62,300 (65,200) (105)
------------------------------------------------
Income from continuing operations before
extraordinary item 100 112,300 (112,200) (100)
Discontinued operations (3) 389,800 20,600 369,200 *
Extraordinary item (4) (16,000) - (16,000) *
------------------------------------------------
NET INCOME 373,900 132,900 241,000 *
Preferred dividend requirement 4,800 5,500 (700) (13)
------------------------------------------------
EARNINGS CONTRIBUTION
ON COMMON STOCK (5)
Domestic Electric Operations (58,800) 93,000 (151,800) *
Australian Electric Operations 9,300 9,400 (100) (1)
Other Operations (2) 44,800 4,400 40,400 *
------------------------------------------------
Continuing operations (4,700) 106,800 (111,500) (104)
Discontinued operations (3) 389,800 20,600 369,200 *
Extraordinary item (4) (16,000) - (16,000) *
------------------------------------------------
TOTAL $ 369,100 $ 127,400 $ 241,700 *
================================================
Average common shares outstanding 296,719 294,897 1,822 1
EARNINGS PER COMMON SHARE
Domestic Electric Operations $ (0.20)$ 0.32 $ (0.52) *
Australian Electric Operations 0.03 0.03 - -
Other Operations (2) 0.15 0.01 0.14 *
------------------------------------------------
Continuing operations (0.02) 0.36 (0.38) (106)
Discontinued operations (3) 1.31 0.06 1.25 *
Extraordinary item (4) (0.05) - (0.05) *
------------------------------------------------
TOTAL (6) $ 1.24 $ 0.42 $ 0.82 *
================================================
Dividends paid per common share $ 0.27 $ 0.27 $ - -
================================================
<FN>
* Not a meaningful number.
(See accompanying notes on page 17.)
</FN>
</TABLE>
<PAGE>17
<TABLE>
PacifiCorp
and its Consolidated Subsidiaries
Summary Financial Information
(Unaudited)
<CAPTION>
3 Months Ended December 31 $ %
1997 1996 Change Change
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
DOMESTIC ELECTRIC REVENUES (In thousands)
Residential $ 225,400 $ 224,900 $ 500 -
Commercial 166,000 164,000 2,000 1
Industrial 172,400 174,000 (1,600) (1)
Other 7,600 8,300 (700) (8)
------------------------------------------------
Retail Sales 571,400 571,200 200 -
Wholesale sales 534,200 231,300 302,900 131
Other 23,800 30,300 (6,500) (21)
------------------------------------------------
TOTAL $ 1,129,400 $ 832,800 $ 296,600 36
================================================
DOMESTIC ELECTRIC ENERGY SALES (Millions of kWh)
Residential 3,608 3,559 49 1
Commercial 3,057 2,997 60 2
Industrial 5,202 4,950 252 5
Other 159 160 (1) (1)
------------------------------------------------
Retail Sales 12,026 11,666 360 3
Wholesale sales 21,687 9,499 12,188 128
------------------------------------------------
TOTAL 33,713 21,165 12,548 59
================================================
DOMESTIC ELECTRIC EXPENSES (In thousands)
Fuel 114,900 126,400 (11,500) (9)
Purchased power 510,000 201,700 308,300 *
Other operations and maintenance 124,800 117,000 7,800 7
Depreciation and amortization 117,000 89,200 27,800 31
Administrative and general 99,600 63,900 35,700 56
Special charges 170,400 - 170,400 *
------------------------------------------------
TOTAL 1,136,700 598,200 538,500 90
================================================
AUSTRALIAN ELECTRIC REVENUES (In thousands)
Residential $ 52,900 $ 58,900 $ (6,000) (10)
Commercial 58,100 50,400 7,700 15
Industrial 54,800 59,700 (4,900) (8)
------------------------------------------------
Retail Sales 165,800 169,000 (3,200) (2)
Other 3,500 12,200 (8,700) (71)
------------------------------------------------
TOTAL $ 169,300 $ 181,200 $ (11,900) (7)
================================================
AUSTRALIAN ELECTRIC ENERGY SALES (Millions of kWh)
Residential 623 604 19 3
Commercial 1,068 658 410 62
Industrial 1,380 1,058 322 30
------------------------------------------------
TOTAL 3,071 2,320 751 32
================================================
<FN>
* Not a meaningful number.
</FN>
</TABLE>
(1) Certain amounts from the prior year have been reclassified to conform
with the 1997 method of presentation. Reclassification had no effect on
previously reported consolidated net income.
(2) Other Operations includes the operations of PacifiCorp Financial
Services, Inc., Pacific Generation Company (sold Nov. 1997), TPC
Corporation and PacifiCorp Power Marketing, as well as activities of
PacifiCorp Holdings, Inc.
(3) Represents the discontinued operations of Pacific Telecom, Inc., a
telecommunications subsidiary.
(4) Extraordinary charges for unrecoverability of regulatory assets in
California and Montana.
(5) Earnings contribution on common stock by segment: (a) Does not reflect
elimination for interest on intercompany borrowing arrangements. (b)
Includes income taxes on a separate company basis, with any benefit or
detriment of consolidation reflected in Other Operations. (c) Amounts
are net of preferred dividend requirements and minority interest.
(6) Basic earnings per share is equivalent to fully diluted earnings per
share.
