Shares of Oregon-based utility Portland General Electric (POR -1.66%) fell as much as 14% out of the gate on Aug. 25. The key driver of the decline was a company update released after the close on Aug. 24. Investors were clearly displeased with the news.
The headline number from the utility's third-quarter update was the $104 million in realized losses. But it could get worse, with Portland General Electric projecting realized losses for the quarter to be as high as $155 million, depending on market conditions. These losses are tied to the company's energy trading portfolio, with management noting that there was no impact on the utility side of the business. It also stressed that it would not be altering its long-term earnings or dividend plans and that it remains financially sound.
Although Portland General Electric is clearly trying to reassure long-term investors, the losses will have a very material impact on 2020. Along with the update, the company lowered its full-year 2020 earnings guidance from $2.20 to $2.50 per share to $1.30 to $1.60. That's a sizable hit. Understandably, the company has set up a special committee to review what happened at the energy trading unit. All in, however, investors were rightly displeased by this update.
Although Portland General Electric is looking to convince investors that the trading losses are a one-time thing that will impact only 2020, it's probably safer to err on the side of caution for now. Indeed, conservative long-term investors will probably want to wait to see what the special committee finds before even considering digging further into this utility's story.