Shares of Portland General Electric are falling 13.4% in the US morning trading on Tuesday after the electric utility company lowered its full-year 2020 earnings guidance due to losses from energy trading activities.
Portland General Electric (POR) revealed that its personnel entered into several energy trades in 2020. The company further disclosed that “In August 2020, this portion of PGE’s energy portfolio experienced significant losses as wholesale electricity prices increased substantially at various market hubs due to extreme weather conditions, constraints to regional transmission facilities, and changes in power supply in the West.”
Portland said it has realized losses of $104 million and unrealized mark-to-market losses of $23, so far in the third quarter. Moreover, it projects total portfolio losses to be approximately $155 million in 3Q. The energy utility company has formed a committee to review recent trading losses. (See POR stock analysis on TipRanks).
As a result of the trading losses, Portland lowered its EPS guidance range for 2020 to $1.30-$1.60 from $2.20-$2.50 previously forecast.
Merrill Lynch analyst Julien Dumoulin Smith downgraded the stock to Hold from Buy and reiterated a price target of $41 (2.3% downside potential) saying that such amount of exposure for a regulated entity is “highly unusual.” He stated the trades as “ill-conceived” and pointed out that it enhances risk controls employed at POR.
Currently, POR has a Hold analyst consensus. With shares down nearly 25% year-to-date, the average price target of $43.00 implies upside potential of about 2.5% to current levels.
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