Edison International · NYSE:EIX
Edison International — Corporate Update (February 2015)
42 slides from Edison International's corporate update, Feb 25, 2015
Slide 1: Business Update February 2015
Business Update February 2015 February 25, 2015
Slide 2: Forward-Looking Statements
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-looking statements. T
Slide 3: Table of Contents
Table of Contents New (N) or Page Updated (U) EIX Shareholder Value 3 U SCE Highlights, Regulatory Model 4‐5 Capital Expenditures and Rate Base 6‐9 U General Rate Case, Cost of Capital 10‐11 U System Investment, Growth Drivers Beyond 2017, Grid of the Future 12‐15 U California Energy Policy 16‐21 N,
Slide 4: EIX Shareholder Value
EIX Shareholder Value Sustainable Positioning for Transformative Financial Earnings Growth Sector Change Discipline Rate Base and Core Earnings SCE Growth Drivers Beyond 2017: Dividend and CapEx Balancing: Growth: • Reliability • 11 consecutive years of EIX • 9% 5-year SCE rate base CAGR • Grid read
Slide 5: SCE Highlights
SCE Highlights • One of the nation’s largest electric utilities: ‒ Nearly 14 million residents in service territory ‒ Approximately 5 million customer accounts ‒ 50,000 square-mile service area • Significant infrastructure investments: ‒ 1.4 million power poles ‒ 700,000 transformers ‒ 103,000 miles
Slide 6: SCE Decoupled Regulatory Model
SCE Decoupled Regulatory Model Regulatory Model Key Benefits Decoupling of Regulated • SCE earnings are not affected by changes in retail Revenues from Sales electricity sales • Differences between amounts collected and authorized levels are either billed or refunded to customers • Promotes energy c
Slide 7: SCE Historical Capital Expenditures
SCE Historical Capital Expenditures ($ billions) $3.9 $3.9 $4.0 $3.8 $3.5 $2.9 2009 2010 2011 2012 2013 2014 February 25, 2015 6
Slide 8: SCE Historical Rate Base and Core Earnings
SCE Historical Rate Base and Core Earnings ($ billions) 2009 – 2014 CAGR Rate Base 9% $23.3 Core Earnings 12% $21.0 $21.1 $18.8 $16.8 $15.0 2009 2010 2011 2012 2013 2014 Core $2.68 $3.01 $3.33 $4.10 $3.88 $4.68 EPS Note: Recorded rate base, year-end basis. See Earnings Non-GAAP Reconciliations and U
Slide 9: SCE Capital Expenditures Forecast
SCE Capital Expenditures Forecast ($ billions) $11.8 – 13.4 billion forecasted capital program 2015-2017 Distribution Transmission Generation $4.8 • Request case incorporates 2015 GRC $4.5 January update $4.1 • $100 million 2015-2016 changes from prior forecast primarily due to timing of Transmissio
Slide 10: SCE Rate Base Forecast
SCE Rate Base Forecast ($ billions) 2015 – 2017 rate base growth consistent with prior 7-9% forecast • Incorporates 2015 GRC January update Request $29.0 • Net $300 million reduction by 2017 from Range $26.2 prior forecast due to: – Extension of bonus depreciation $23.8 ($400 million reduction) – Ti
Slide 11: SCE 2015 CPUC General Rate Case
SCE 2015 CPUC General Rate Case • November 2013, 2015 GRC Application A.13-11-003 sets 2015 – 2017 base revenue requirement – Includes operating costs and CPUC jurisdictional capital – Excludes fuel and purchased power (and other utility cost-recovery activities), cost of capital, and FERC jurisdict
Slide 12: CPUC and FERC Cost of Capital
CPUC and FERC Cost of Capital CPUC Adjustment Mechanism 7 Moody’s Baa Utility Index Spot Rate Moving Average (10/1/14 – 10/10/14) = 4.69% 100 basis point +/- Deadband 6 Rate (%) 5 Starting Value – 5.00% 4 3 10/1/12 10/1/13 10/1/14 10/1/15 • CPUC – 48% common equity and Return on Equity (ROE) adjustm
Slide 13: SCE System Investments
SCE System Investments Distribution Transmission • Aging system reaching equilibrium • Large transmission projects: replacement rate – Tehachapi 4-11 – $2.4 billion total project • 2015 GRC request includes ~120% cost; 2016-17 in service date increase in infrastructure replacement – Coolwater-Lugo –
Slide 14: SCE Growth Drivers Beyond 2017
SCE Growth Drivers Beyond 2017 Infrastructure Reliability Investment • Sustained level of infrastructure investment required until equilibrium replacement rates are achieved - includes underground cable, poles, switches, and transformers1 Grid Readiness • Accelerate automation and control technology
Slide 15: Distribution Grid of the Future
Distribution Grid of the Future Current State Future State One-Way Electricity Flow Variable and Two-Way Electricity Flow • System planned and designed to serve • System planned and designed to serve customer demand variable customer demand • Very few distributed energy resources • High penetration
Slide 16: New Technology Grid Impacts
New Technology Grid Impacts 1 3 1 2 1 2 Future state based on evolving energy 1 landscape 1 More automated and digital, with more sophisticated 2 voltage control and protection schemes 1 2 Facilitates increasing renewables & two- way power flow 3 Cyber mitigation must be included February 25, 2015 1
Slide 17: The Future of California Energy Policy
The Future of California Energy Policy • January 2015, Governor Brown’s inauguration speech outlined environmental objectives for 2030: – Increase renewables (RPS) to 50% – Reduce petroleum use in cars by 50% – Double efficiency of existing buildings Utility Role Renewables Electric Energy Vehicles
Slide 18: California Climate Change Policy
California Climate Change Policy • Assembly Bill 32 (2006) – reduces State greenhouse gas (GHG) emissions to 1990 levels AB32 Emissions by 2020 Reduction Programs (~16% reduction) High GWP • Cap and trade program basics: Gases – State-wide cap in 2013 – decreases over time 7% Cap & Trade – Complianc
Slide 19: California Renewables Policy
California Renewables Policy • On April 12, 2011, Governor Brown signed SB X 1 2, which codifies a 33% Renewables Portfolio Standard (RPS) for California by Actual 2013 Renewable Resources: 2020 21.6% of SCE’s portfolio – Allows use of Renewable Energy Credits (RECs) for up to 25% of target with Sma
Slide 20: Energy Storage
Energy Storage • AB2514 directed CPUC to establish SCE 2014 Existing Storage procurement targets and policies for storage 50 • CPUC final decision in Energy Storage OIR (R.10-12-007) 30 MW – 1,325 MW target for IOUs by 2024 16.40 (580 MW SCE share) 13.68 10 – Three types: transmission (53%), distrib
Slide 21: SCE Charge Ready Program
SCE Charge Ready Program • October 2014, electric vehicle Charge Ready Program application submitted to CPUC (A.14-10- 014) • 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: $22 million pilot program f
Slide 22: SCE Energy Efficiency Programs
SCE Energy Efficiency Programs Energy efficiency programs updated for 2013 – 2015 • 2015 budget of $333 million • Savings targets of 983 GWh and 160.1 MW for 2015 – Reduced goals reflect CPUC-identified potential for energy efficiency Energy efficiency earnings incentive mechanism modified • CPUC ap
Slide 23: SCE Key Regulatory Proceedings
SCE Key Regulatory Proceedings Proceeding Description Next Steps Capital 2015 GRC Application Rate setting for CPUC 3‐year cycle 2015 – 17 Proposed and final decision in 2015 (A.13‐11‐003) Cost of Capital Application Capital structure and return on equity Extension to file in April 2016 approved Dis
Slide 24: EIX is Responding to Industry Change
EIX is Responding to Industry Change Long-Term Industry Trends Strategy • Public policy prioritizing environmental • SCE Strategy sustainability – Invest in, build, and operate the next • Innovation facilitating conservation and generation electric grid self-generation – Operational and service exce
Slide 25: 2015 Financial Assumptions
2015 Financial Assumptions ($ billions) SCE Capital Expenditures SCE Weighted Average Rate Base Distribution $3.1 Distribution $16.0 Transmission 0.8 Transmission 5.6 Generation 0.2 Generation 2.2 Request $4.1 Request $23.8 Range $3.6 Range $23.3 SCE Authorized Cost of Capital Other SCE Items CPUC R
Slide 26: EIX Annual Dividends Per Share
EIX Annual Dividends Per Share $1.67 Eleven Years of Dividend Growth $1.42 $1.35 $1.28 $1.30 $1.24 $1.26 $1.22 $1.16 $1.08 $1.00 $0.80 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 EIX targets a payout ratio of 45 – 55% of SCE core earnings and plans to return to target payout ratio in
Slide 27: Appendix
Appendix February 25, 2015 26
Slide 28: SCE 2014 Bundled Revenue Requirement
SCE 2014 Bundled Revenue Requirement 2014 Bundled Revenue Requirement $millions ¢/kWh Fuel & Purchased Power – includes CDWR Bond Charge 5,071 6.9 Fuel & Purchased Power (41%) Distribution – poles, wires, substations, service centers; Edison 3,867 5.3 SmartConnect® 60% Distribution Generation – util
Slide 29: SCE Customer Demand Trends
SCE Customer Demand Trends Kilowatt-Hour Sales (millions of kWh) 2013 2012 2011 2010 2009 Residential 29,889 30,563 29,631 29,034 30,078 Commercial 40,649 40,541 39,622 39,318 40,076 Industrial 8,472 8,504 8,490 8,507 8,522 Public authorities 5,012 5,196 5,206 5,336 5,686 Agricultural and other 1,88
Slide 30: SCE Rates and Bills Comparison
SCE Rates and Bills Comparison 2014 Average Residential Rates Key Factors (¢/kWh) • SCE’s residential rates are above national 16.6¢ average due, in part, to a cleaner fuel mix – 12.6¢ cost for renewables are higher than high carbon sources 33% Higher • Average monthly residential bills are lower th
Slide 31: Residential Rate Design OIR
Residential Rate Design OIR • June 2012, CPUC opened Order Instituting OIR Phase 2 Ratemaking (OIR) R.12-06-013: Settlement Summary – Comprehensive review of residential rate structure 35 – Transition to Time of Use (TOU) rates 32.10 Tier 4 – AB327 rate design 30 28.10 • Phase 2 (Summer 2014): simpl
Slide 32: SCE Residential Net Metering Rate Structure
SCE Residential Net Metering Rate Structure • Residential solar customer generation offsets Solar Subsidies total retail rate (Illustrative) • Average retail rate of 30.6¢/kWh vs. actual 35 generation cost of 8.7¢/kWh – 21.9¢/kWh 21.9¢ 30.6¢ subsidy funded by non-solar customers in Tiers 3 30 and 4
Slide 33: Fixed Charge vs. Minimum Bill
Fixed Charge vs. Minimum Bill AB 327 permits the CPUC to authorize up to a $10/month fixed charge, and the Commission may consider whether minimum bills are appropriate as a substitute for any fixed charges • SCE has proposed a $10/month fixed charge while some parties have proposed a “minimum bill”
Slide 34: SCE Operational Excellence
SCE Operational Excellence Defining Excellence Measuring Excellence Top Quartile • Safety • Employee and public safety • Cost efficiency metrics • Reliability • System reliability (SAIDI, • Customer service SAIFI, MAIFI) • J.D. Power customer Optimize satisfaction • Capital productivity • O&M cost p
Slide 35: Fourth Quarter Earnings Summary
Fourth Quarter Earnings Summary Q4 Q4 Variance SCE Key Core Earnings Drivers 2014 2013 Core EPS1 Higher revenue $0.28 SCE $1.09 $0.79 $0.30 SONGS impact 0.02 Lower O&M2 0.05 EIX Parent & Other (0.01) 0.02 (0.03) Higher depreciation (0.08) Core EPS1 $1.08 $0.81 $0.27 Higher net financing costs (0.01)
Slide 36: Full-Year Earnings Summary
Full-Year Earnings Summary 2014 2013 Variance SCE Key Core Earnings Drivers Core EPS1 Higher revenue $0.95 SCE $4.68 $3.88 $0.80 SONGS impact 0.01 EIX Parent & Other (0.09) (0.08) (0.01) Lower O&M2 0.02 Higher depreciation (0.28) Core EPS1 $4.59 $3.80 $0.79 Higher net financing costs (0.06) Non-Core
Slide 37: 2014 Earnings Guidance Result Reconciliation
2014 Earnings Guidance Result Reconciliation $0.25 $0.04 $4.59 $1.03 ($0.13) $4.30 • Higher income from Edison Capital • Income Taxes +$0.10 • Rate base adjustment +$0.05 • Energy Efficiency +$0.04 • SONGS +$0.01 • Cost Savings / Other +$0.05 $3.40 • Cost Savings / Other +$0.69 • Income Taxes +$0.41
Slide 38: Earnings Non-GAAP Reconciliations
Earnings Non-GAAP Reconciliations ($ millions) Reconciliation of EIX Core Earnings to EIX GAAP Earnings Q4 Q4 Earnings Attributable to Edison International 2014 2013 2014 2013 Core Earnings SCE $356 $258 $1,525 $1,265 EIX Parent & Other (1) 6 (28) (28) Core Earnings $355 $264 $1,497 $1,237 Non-Core
Slide 39: SCE Core EPS Non-GAAP Reconciliations
SCE Core EPS Non-GAAP Reconciliations Reconciliation of SCE Core Earnings Per Share to SCE Basic Earnings Per Share Earnings Per Share Attributable to SCE 2009 2010 2011 2012 2013 2014 CAGR Core EPS $2.68 $3.01 $3.33 $4.10 $3.88 $4.68 12% Non-Core Items Tax settlement 0.94 0.30 — — — — Health care l
Slide 40: SCE Results of Operations – Fourth Quarter 2014
SCE Results of Operations – Fourth Quarter 2014 ($ millions) • Utility earning activities – revenue authorized by CPUC and FERC to provide reasonable cost recovery and return on investment • Utility cost-recovery activities – CPUC- and FERC-authorized balancing accounts to recover specific project o
Slide 41: SCE Results of Operations – Full-Year 2014
SCE Results of Operations – Full-Year 2014 ($ millions) • Utility earning activities – revenue authorized by CPUC and FERC to provide reasonable cost recovery and return on investment • Utility cost-recovery activities – CPUC- and FERC-authorized balancing accounts to recover specific project or pro
Slide 42: Use of Non-GAAP Financial Measures
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 are also used when com
Edison International — Corporate Update (February 2015) on 6ix