Edison International · NYSE:EIX
Edison International — Q3 2015 Earnings Presentation
47 slides from Edison International's earnings presentation, Oct 28, 2015
Slide 1: Business Update October 2015
October 28, 2015 Business Update October 2015
Slide 2: Forward-Looking Statements
October 28, 2015 1 Forward-Looking Statements Statements contained in this presentation about future performance, including, without limitation, operating results, asset and rate base growth, capital expenditures, financial outlook, and other statements that are not purely historical, are forward-lo
Slide 3: Table of Contents
October 28, 2015 2 Table of Contents Page New (N) or Updated (U) EIX Shareholder Value 3 SCE Highlights, Regulatory Model 4‐5 Capital Expenditures, Rate Base 6‐7 General Rate Case, Capital Expenditures and Rate Base Outlook 8‐11 N,U 2015 Guidance 12 N Growth Drivers Beyond 2017, Grid of the Future 1
Slide 4: EIX Strategy Should Produce Superior Value
October 28, 2015 3 EIX Strategy Should Produce Superior Value Sustainable Earnings and Dividend Growth Positioned for Transformative Change Rate Base and Core Earnings Growth • 8% average annual rate base growth through 2017 based on GRC proposed decision Constructive Regulatory Structure • Decoupli
Slide 5: SCE Highlights
October 28, 2015 4 One of the nation’s largest electric utilities • Nearly 14 million residents in service territory • 5 million customer accounts • 50,000 square-mile service area Significant infrastructure investments • 1.4 million power poles • 700,000 transformers • 103,000 miles of distribution
Slide 6: SCE Decoupled Regulatory Model
October 28, 2015 5 SCE Decoupled Regulatory Model Decoupling of Regulated Revenues from Sales Major Balancing Accounts • Fuel • Purchased power • Energy efficiency • Pension-related contributions Advanced Long-Term Procurement Planning Forward-looking Ratemaking • SCE earnings are not affected by ch
Slide 7: SCE Historical Capital Expenditures
October 28, 2015 6 SCE Historical Capital Expenditures $2.9 $3.8 $3.9 $3.9 $3.5 $4.0 2009 2010 2011 2012 2013 2014 ($ billions)
Slide 8: SCE Historical Rate Base and Core Earnings
October 28, 2015 7 $15.0 $16.8 $18.8 $21.0 $21.1 $23.3 2009 2010 2011 2012 2013 2014 SCE Historical Rate Base and Core Earnings Rate Base Core Earnings 9% 12% 2009 – 2014 CAGR Core EPS $4.68$2.68 $3.01 $3.33 $4.10 ($ billions) $3.88 Note: Recorded rate base, year-end basis. See Earnings Non-GAAP Rec
Slide 9: 2015 General Rate Case Proposed Decision
October 28, 2015 8 On September 18, 2015, the CPUC issued a proposed decision which is supportive of SCE strategy to increase infrastructure investment consistent with capital plan while mitigating customer rate impacts through productivity and lower operating costs • 2015 revenue requirement propos
Slide 10: 2015 General Rate Case Proposed Decision (cont.)
October 28, 2015 9 $80 million compensation expense reduction • Reductions in short-term incentives even though total compensation is 5% below market $10 million commercial solar program disallowance • Contract early termination payment resulted in over $200 million in customer savings 2015 General
Slide 11: SCE 2015-2017 Capital Expenditures
October 28, 2015 10 SCE 2015-2017 Capital Expenditures • Incorporates CPUC 2015 GRC proposed decision • Outlook adjusted for delays in FERC spending of approximately $50 million in 2015 and $350 million in 2016 related to shift in project schedules out in time Note: Forecasted capital spending subje
Slide 12: SCE 2015-2017 Rate Base
October 28, 2015 11 SCE 2015-2017 Rate Base • Includes updated FERC capital spending forecast (rate base reductions of $0.1, $0.3 and $0.6 billion in 2015, 2016 and 2017 respectively) and GRC proposed decision rate base adjustments, except for $344 million rate base reduction for repair deduction ta
Slide 13: 2015 Core and Basic Earnings Guidance
October 28, 2015 12 $3.56 3.56 3.82 $3.82 (0.15) 0.41 SCE 2015 EPS from Rate Base Forecast 2015 SCE Variances EIX Parent & Other 2015 Core EIX EPS Midpoint Guidance 2015 Core and Basic Earnings Guidance 1. See Earnings Non-GAAP Reconciliations and Use of Non-GAAP Financial Measures in Appendix 2. No
Slide 14: SCE Growth Drivers Beyond 2017
October 28, 2015 13 SCE Growth Drivers Beyond 2017 Infrastructure Reliability Investment • Sustained level of infrastructure investment required until equilibrium replacement rates are achieved and then maintained - includes underground cable, poles, switches, and transformers1 Distribution Resource
Slide 15: Distribution Grid of the Future
October 28, 2015 14 Distribution Grid of the Future One-Way Electricity Flow • System designed to generate electricity from large central plant • Very few distributed energy resources • Voltage relatively simple to maintain • Limited situational awareness and visualization tools for grid operators R
Slide 16: 21st Century Grid Highlights
October 28, 2015 15 Future state based on evolving energy landscape More automation enhances interaction of grid with customer devices & DER. Sophisticated automation schemes now possible Prediction of DER performance facilitates increasing renewables & two- way power flow Software tools for real ti
Slide 17: Distribution Resources Plan Filing
October 28, 2015 16 AB 327 required IOU submissions of Distribution Resources Plans (DRP) on July 1, 2015 to integrate increasing penetration of Distributed Energy Resources (DERs). Key provisions of the DRP filing include: • Methodology/tools for identifying optimal locations for DERs (includes dis
Slide 18: DRP Timeline 2015-2021+
October 28, 2015 17 2015 - 2017 2018 - 2020 2021 + Implement foundational information technology, communication systems, and system planning tools; begin grid reinforcement work Expand automation and improve communications and control with Distributed Energy Resources; continue grid reinforcement wo
Slide 19: SCE DRP Capital Expenditure Estimates
October 28, 2015 18 SCE DRP Capital Expenditure Estimates Time Period Capital Expenditures CPUC Approval Mechanism 2015-2017 Distribution Automation $40-70 million • Proposed memorandum account to record associated revenue requirement until expenditures are authorized by CPUC Substation Automation $
Slide 20: Energy Storage
October 28, 2015 19 Energy Storage • AB2514 directed CPUC to establish procurement targets and policies for storage • CPUC Energy Storage OIR (R.10-12-007) established: – 1,325 MW target for IOUs by 2024 (580 MW SCE share; spread as biennial targets during 2014-2020) – Three categories: transmission
Slide 21: SCE Charge Ready Program
October 28, 2015 20 SCE Charge Ready Program • Electric vehicle Charge Ready Program application submitted to CPUC (A.14-10-014) in October 2014 • Pro-active, two-phased program over five years to support installation of up to 30,000 EV charging stations to be included in rate base – Phase 1: pilot
Slide 22: SCE Key Regulatory Proceedings
October 28, 2015 21 SCE Key Regulatory Proceedings Proceeding Description Next Steps Key SCE Proceedings 2015 GRC Application (A.13‐11‐003) Rate setting for CPUC 3‐year cycle 2015 – 17 Proposed decision received September 18, 2015; Final decision expected in 2015 Cost of Capital Application Capital
Slide 23: CPUC and FERC Cost of Capital
October 28, 2015 22 CPUC and FERC Cost of Capital 3 4 5 6 7 10/1/12 10/1/13 10/1/14 10/1/15 10/1/16 R a t e ( % ) CPUC Adjustment Mechanism Moody’s Baa Utility Index Spot Rate Moving Average (10/1/14 – 9/30/15) = 4.82% 100 basis point +/- Deadband Starting Value – 5.00% CPUC – 48% common equity and
Slide 24: Residential Rate Design OIR
October 28, 2015 23 Residential Rate Design OIR • CPUC Order Instituting Ratemaking R.12-06-013 comprehensively reviewed residential rate structure including a future transition to time of use rates • July 2015 CPUC Decision D.15-07-001 includes: - Transition to 2 tiered rates by 2019 - “Super User
Slide 25: SCE Residential Net Metering Rate Structure
October 28, 2015 24 SCE Residential Net Metering Rate Structure 7¢ 24¢17¢ 0 5 10 15 20 25 30 ¢ / k W h Solar Subsidies (Illustrative) Avoided Generation (excludes RPS Premium) Subsidy Paid by Other Ratepayers Equivalent Solar Offset Current rate design results in residential solar customers receivin
Slide 26: SCE Successor Net Metering Tariff Proposal
October 28, 2015 25 On August 3rd, SCE filed its proposal for a successor to the current NEM tariff and alternative offerings to grow residential distributed generation in disadvantaged communities SCE’s proposal includes the following key elements: • Elimination of netting and decoupling of exporte
Slide 27: SCE Operational Excellence
October 28, 2015 26 SCE Operational Excellence Top Quartile • Safety • Cost efficiency • Reliability • Customer service Optimize • Capital productivity • Purchased power cost High performing, continuous improvement culture Defining Excellence Measuring Excellence • Employee and public safety metrics
Slide 28: EIX Annual Dividends Per Share
October 28, 2015 27 EIX Annual Dividends Per Share $0.80 $1.00 $1.08 $1.16 $1.22 $1.24 $1.26 $1.28 $1.30 $1.35 $1.42 $1.67 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Note: See use of Non-GAAP Financial Measures in Appendix Eleven Years of Dividend Growth EIX targets a payout ratio o
Slide 29: Appendix
October 28, 2015 28 Appendix
Slide 30: SCE 2014 Bundled Revenue Requirement
October 28, 2015 29 SCE 2014 Bundled Revenue Requirement Note: Rates in effect as of July 7, 2014, based on forecast. Represents bundled service which excludes Direct Access customers that do not receive generation services SCE Systemwide Average Rate History (¢/kWh) 2010 2011 2012 2013 2014 14.3 14
Slide 31: SCE Residential Rates and Bills vs. National Average
October 28, 2015 30 12.9 16.4 US Average SCE 27% Higher • SCE’s residential rates are above national average due, in part, to a cleaner fuel mix – cost for renewables are higher than high carbon sources • Average monthly residential bills are lower than national average – higher rate levels offset b
Slide 32: SCE Customer Demand Trends
October 28, 2015 31 SCE Customer Demand Trends Kilowatt-Hour Sales (millions of kWh) Residential Commercial Industrial Public authorities Agricultural and other Subtotal Resale Total Kilowatt-Hour Sales Customers Residential Commercial Industrial Public authorities Agricultural Railroads and railway
Slide 33: Southern California Wholesale Electricity Prices
October 28, 2015 32 (Southern California) Source: Energy Information Administration, October 2015. Data is for SP-15 Nodes Wholesale Electricity Prices, May 2014-Sep 2015 $0 $10 $20 $30 $40 $50 $60 $70 $80 May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep
Slide 34: California's Energy Policy
October 28, 2015 33 California’s Energy Policy • On October 7, 2015, Governor Brown signed SB 350, which requires that 50 percent of energy sales to customers come from renewable power and a doubling of energy efficiency in existing buildings for California by 2030 - Also requires Transportation Ele
Slide 35: California Cap and Trade Program
October 28, 2015 34 • Assembly Bill 32 (2006) – reduces State greenhouse gas (GHG) emissions to 1990 levels by 2020 (~16% reduction) • Cap and trade program basics: – State-wide cap in 2013 – decreases over time – Compliance met through allowances, offsets, or emissions reductions – Excess allowance
Slide 36: Energy Efficiency Programs and Earnings
October 28, 2015 35 Energy efficiency programs updated for 2013 – 2015 • 2015 budget of $333 million • Savings targets of 983 GWh and 160.1 MW for 2015 – Reduced goals reflect CPUC-identified potential for energy efficiency Energy efficiency earnings incentive mechanism modified • CPUC approved new
Slide 37: EIX is Responding to Industry Change
October 28, 2015 36 EIX is Responding to Industry Change • Public policy prioritizing environmental sustainability • Innovation facilitating conservation and self-generation • Regulation supporting new forms of competition • Flattening domestic demand for electricity • Grid of the future will be mor
Slide 38: Edison Energy Focus: Commercial & Industrial
October 28, 2015 37 • Create energy services that help simplify and optimize energy needs for commercial & industrial customers: – Help customers better value energy optimization, paving the way for greater third party energy services – Help customers manage through potential technological / regulat
Slide 39: Grid Assurance
October 28, 2015 38 On June 10th, eight electric utilities and energy companies announced a MOU to pursue the development of Grid Assurance, a limited liability company that plans to offer subscribers cost- effective solutions for enhancing grid resiliency and protecting customers from prolonged tra
Slide 40: Third Quarter Earnings Summary
October 28, 2015 39 Q3 2015 Q3 2014 Variance Core Earnings Per Share (EPS)1 SCE $1.19 $1.54 ($0.35) EIX Parent & Other (0.03) (0.02) (0.01) Core EPS1 $1.16 $1.52 ($0.36) Non-Core Items2 SCE $ – $ – $ – EIX Parent & Other – – – Discontinued Operations 0.13 (0.05) 0.18 Total Non-Core $0.13 ($0.05) $0.
Slide 41: Key Drivers of Q3 2015 Core EPS
October 28, 2015 40 $1.16 (0.20) (0.03) (0.02) (0.12) (0.01) 0.02 $1.52 Q3 2014 Core EPS Lower Revenue Higher O&M Higher Depreciation Lower Net Financing Costs Higher Income Taxes EIX Parent & Other Q3 2015 Core EPS Key Drivers of Q3 2015 Core EPS Lower revenues reflect 2015 GRC Proposed Decision 1
Slide 42: YTD 2015 Earnings Summary
October 28, 2015 41 YTD 2015 YTD 2014 Variance Core Earnings Per Share (EPS)1 SCE $3.31 $3.58 ($0.27) EIX Parent & Other (0.09) (0.08) ($0.01) Core EPS1 $3.22 $3.50 ($0.28) Non-Core Items2 SCE $ – ($0.29) $0.29 EIX Parent & Other 0.02 – 0.02 Discontinued Operations 0.13 0.45 (0.32) Total Non-Core $0
Slide 43: Key Drivers of YTD 2015 Core EPS
October 28, 2015 42 Key Drivers of YTD 2015 Core EPS $3.22 (0.07) (0.02) (0.11) (0.08) (0.04) (0.03) (0.01) 0.08 $3.50 YTD 2014 Core EPS Lower Revenue Higher O&M Higher Depreciation Lower Net Financing Costs Higher Income Taxes Property Taxes and Other Generator Settlements EIX Parent & Other YTD 20
Slide 44: SCE Results of Operations
October 28, 2015 43 $6,602 — 2,348 1,622 307 575 4,852 1,750 (519) 48 1,279 279 1,000 100 $900 $5,960 4,891 1,068 — — — 5,959 1 (1) — — — — — $— $6,831 — 2,106 1,720 318 163 4,307 2,524 (528) 43 2,039 474 1,565 112 $1,453 $6,549 5,593 951 — — — 6,544 5 (5) — — — — — $— $13,380 5,593 3,057 1,720 318
Slide 45: Earnings Non-GAAP Reconciliations
October 28, 2015 44 Earnings Non-GAAP Reconciliations Reconciliation of EIX Core Earnings to EIX GAAP Earnings Earnings Attributable to Edison International Core Earnings SCE EIX Parent & Other Core Earnings Non-Core Items SCE EIX Parent & Other Discontinued operations Total Non-Core Basic Earnings
Slide 46: SCE Core EPS Non-GAAP Reconciliations
October 28, 2015 45 SCE Core EPS Non-GAAP Reconciliations Earnings Per Share Attributable to SCE Core EPS Non-Core Items Tax settlement Health care legislation Regulatory and tax items Impairment and other charges Total Non-Core Items Basic EPS Reconciliation of SCE Core Earnings Per Share to SCE Ba
Slide 47: Use of Non-GAAP Financial Measures
October 28, 2015 46 Use of Non-GAAP Financial Measures Edison International's earnings are prepared in accordance with generally accepted accounting principles used in the United States. Management uses core earnings internally for financial planning and for analysis of performance. Core earnings ar