Edison International · NYSE:EIX
Edison International — Investor Presentation (February 2016)
51 slides from Edison International's investor presentation, Feb 24, 2016
Slide 1: Business Update February 2016
February 24, 2016 Business Update February 2016 Exhibit 99.1
Slide 2: Forward-Looking Statements
February 24, 2016 1 Forward-Looking Statements Statements contained in this presentation about future performance, including, without limitation, operating results, capital expenditures, rate base growth, dividend policy, financial outlook, and other statements that are not purely historical, are fo
Slide 3: Table of Contents
February 24, 2016 2 Page New (N) or Updated (U) from November 2015 Business Update EIX Shareholder Value 3 U SCE Highlights, Regulatory Model 4‐5 Capital Expenditures and Rate Base History and Outlook 6‐11 N,U CPUC Cost of Capital 12 U 2016 Guidance 13 N Growth Drivers Beyond 2017, Grid of the Futur
Slide 4: EIX Strategy Should Produce Superior Value
February 24, 2016 3 EIX Strategy Should Produce Superior Value Sustainable Earnings and Dividend Growth Positioned for Transformative Change Rate Base and Core Earnings Growth • 7% average annual rate base growth through 2017 Constructive Regulatory Structure • Decoupling • Balancing accounts • Forw
Slide 5: SCE Highlights
February 24, 2016 4 One of the nation’s largest electric utilities • 15 million residents in service territory • 5 million customer accounts • 50,000 square-mile service area Significant infrastructure investments • 1.4 million power poles • 725,000 transformers • 103,000 miles of distribution and t
Slide 6: SCE Decoupled Regulatory Model
February 24, 2016 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 c
Slide 7: SCE Historical Rate Base and Core Earnings
February 24, 2016 6 SCE Historical Rate Base and Core Earnings Rate Base Core Earnings 8% 7% 2010 – 2015 CAGR ($ billions) Note: Recorded rate base, year-end basis. See Earnings Non-GAAP Reconciliations and Use of Non-GAAP Financial Measures in Appendix. 2013-2015 rate base excludes SONGS $16.8 $18.
Slide 8: SCE 2016-2017 Capital Expenditure Forecast
February 24, 2016 7 • Reflects CPUC 2015 GRC decision • Includes up to 115% of capital spending for the pole loading and deteriorated poles program for 2016 and 20171 • Includes $12 million for Charge Ready pilot program in 2016 • Excludes future DRP and energy storage capital spending SCE 2016-2017
Slide 9: SCE Distribution System Investments
February 24, 2016 8 SCE Distribution System Investments Distribution Trends • 2015 GRC includes 94% increase in infrastructure replacement, but grid not yet reaching equilibrium replacement rate • Distribution grid requires more automation and voltage management as customer use of distributed energy
Slide 10: SCE Large Transmission Projects
February 24, 2016 9 SCE Large Transmission Projects Large Transmission Projects Tehachapi 4-11 • $2.5 billion total project cost; remaining investment $300 million • 2016-17 in service date West of Devers • $1.1 billion total project cost; remaining investment $1.0 billion • 2021 in service date; ma
Slide 11: SCE 2016-2017 Rate Base Forecast
February 24, 2016 10 SCE 2016-2017 Rate Base Forecast • Incorporates 2015 GRC final decision with bonus depreciation provision, except “rate base offset” excluded because of write off of regulatory asset related to 2012-2014 incremental tax repairs • Includes incremental rate base for the pole loadi
Slide 12: SCE Rate Base Forecast Updates
February 24, 2016 11 2015 2016 2017 Prior Outlook – November 2015 $23.0 $24.8 $26.7 Bonus Depreciation CPUC (0.0) (0.2) (0.4) FERC (0.0) (0.1) (0.3) Subtotal Bonus Depreciation (0.0) (0.3) (0.7) Incremental Pole Loading Rate Base 0.3 0.6 0.7 FERC 0.0 0.0 0.1 Total Change 0.3 0.3 0.1 Updated Outlook
Slide 13: CPUC Cost of Capital
February 24, 2016 12 CPUC Cost of Capital 3 4 5 6 7 10/1/12 10/1/13 10/1/14 10/1/15 10/1/16 10/1/17 R a t e ( % ) CPUC Adjustment Mechanism Moody’s Baa Utility Index Spot Rate Moving Average (10/1/15 – 12/31/15) = 5.53% 100 basis point +/- Deadband Starting Value – 5.00% Return on Equity (ROE) adjus
Slide 14: 2016 Core and Basic Earnings Guidance
February 24, 2016 13 • Revenues based on GRC final decision • Weighted-average 2016 rate base of $25.1 billion (see Rate Base Forecast) • Energy efficiency earnings of $0.05 per share • Authorized CPUC capital structure – 48% equity; 10.45% ROE • FERC ROE comparable to CPUC ROE • No change in tax po
Slide 15: SCE Growth Drivers Beyond 2017
February 24, 2016 14 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 Resourc
Slide 16: Distribution Grid of the Future
February 24, 2016 15 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
Slide 17: 21st Century Grid Highlights
February 24, 2016 16 Computing intelligence inside electrical substations Future circuit designs integrate Distributed Energy Resources & increase flexibility The 21st century distribution system will require transformative technologies in planning, design, construction, and operation. Net benefits
Slide 18: Distribution Resources Plan Overview
February 24, 2016 17 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 di
Slide 19: DRP Roadmap 2015-2021+
February 24, 2016 18 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 w
Slide 20: July 2015 SCE DRP Capital Expenditure Estimates
February 24, 2016 19 July 2015 SCE DRP Capital Expenditure Estimates Time Period Capital Expenditures CPUC Approval Mechanism 2016-2017 Distribution Automation $40-70 million • Proposed memorandum account to record associated revenue requirement until expenditures are authorized by CPUC Substation A
Slide 21: SCE Key Regulatory Proceedings
February 24, 2016 20 SCE Key Regulatory Proceedings Proceeding Description Next Steps Key SCE Proceedings Cost of Capital CPUC capital structure, cost of capital, and return on equity CPUC to approve the Joint Petition for Modification to suspend adjustment mechanism through 2017 in February 2016 Di
Slide 22: SCE 2016 Bundled Revenue Requirement
February 24, 2016 21 SCE 2016 Bundled Revenue Requirement Note: Rates in effect as of January 1, 2016. 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 2015 14.3 14.1 14.3 15
Slide 23: SCE Operational Excellence
February 24, 2016 22 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 metric
Slide 24: EIX is Responding to Industry Change
February 24, 2016 23 EIX is Responding to Industry Change • Public policy and large commercial customers prioritizing sustainability objectives • Innovation facilitating conservation and self-generation • Regulation supporting new forms of competition • Flattening domestic demand for electricity • G
Slide 25: Edison Energy Focus: Commercial & Industrial
February 24, 2016 24 • Create energy services that help simplify and optimize energy needs for large commercial & industrial customers: – Help customers better assess and capture the value of energy optimization, paving the way for greater third-party energy services – Help customers manage through
Slide 26: Edison Energy: Acquired Businesses
February 24, 2016 25 Edison Energy: Acquired Businesses Summary • Provides comprehensive renewable energy advisory and procurement services to leading Fortune 1000 companies, universities and municipalities • Created a proprietary market access platform where it typically procures energy for its cli
Slide 27: Grid Assurance
February 24, 2016 26 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 tr
Slide 28: EIX Annual Dividends Per Share
February 24, 2016 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 $1.92 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Note: See use of Non-GAAP Financial Measures in Appendix Twelve Years of Dividend Growth Target dividend
Slide 29: Appendix
February 24, 2016 28 Appendix Exhibit 99.1
Slide 30: 2015 General Rate Case Final Decision
February 24, 2016 29 Tax Repair Accounting • As a result of the rate base offset, SCE wrote down $382 million of regulatory assets associated with deferred income taxes related to 2012-2014 incremental tax repair deductions Because this rate base offset will be implemented at SCE through the regul
Slide 31: SCE Tax Memorandum Account
February 24, 2016 30 SCE Tax Memorandum Account • 2015 GRC decision established tax accounting memorandum account (TAMA), which tracks 2015 – 2017 tax benefits or costs associated with following events: - changes in tax accounting methods - changes in tax laws and regulations impacting depreciation
Slide 32: SCE Historical Capital Expenditures
February 24, 2016 31 SCE Historical Capital Expenditures ($ billions) $3.8 $3.9 $3.9 $3.5 $4.0 $3.9 2010 2011 2012 2013 2014 2015 Exhibit 99.1
Slide 33: Energy Storage
February 24, 2016 32 Energy Storage • CPUC Energy Storage Program: – Storage Rulemaking (R.10-12-007) established 1,325 MW target for IOUs by 2024 (580 MW SCE share; spread as biennial targets during 2014-20) – Utility ownership allowed up to 50% of total target (290 MW SCE share) – Flexibility to t
Slide 34: SCE Charge Ready Program
February 24, 2016 33 SCE Charge Ready Program • Electric vehicle Charge Ready Program Phase 1 pilot approved by CPUC January 2016 − Authorizes spend of $22 million on pilot implementation for charger installations and Market Education Programs ($12 million rate base) • Pro-active, two-phased program
Slide 35: Residential Rate Design OIR Decision
February 24, 2016 34 Residential Rate Design OIR Decision • CPUC Order Instituting Ratemaking R.12-06-013 comprehensively reviewed residential rate structure including a future transition to time of use rates • July 2015 CPUC Decision D.15-07-001 includes: - Transition to 2 tiered rates by 2019 - “S
Slide 36: SCE Net Metering Rate Structure
February 24, 2016 35 SCE Net Metering Rate Structure 7¢ 24¢17¢ 0 5 10 15 20 25 30 ¢ / k W h Solar Subsidies (Illustrative) Avoided Generation (excludes RPS Premium) Subsidy Paid by Other Ratepayers Equivalent Solar Offset NEM Rate Developments: • NEM allows residential customers to receive full-reta
Slide 37: NEM Successor Tariff Adopted
February 24, 2016 36 In January 2016, the Commission Voted (3-2) to adopt a successor to the existing NEM tariff. The Successor Tariff largely maintains the current NEM tariff structure with following adjustments: • NEM customers will be required to take service under mandatory Time-of-Use (TOU) rat
Slide 38: Residential Solar Installations in SCE Territory
February 24, 2016 37 Note: NEM solar installations in SCE service territory include projects with solar PV only less than 1 MW Residential Solar Installations in SCE Territory 5 10 15 20 25 30 35 40 1,000 2,000 3,000 4,000 5,000 6,000 7,000 2010 2011 2012 2013 2014 2015 M W Installed N u m b e r o f
Slide 39: SCE System Average Rate Change
February 24, 2016 38 (0.3¢) (0.5¢) (1.4¢) 0.3¢ 0.4¢ 0.3¢ 4.00 2015 SAR 2015 ERRA Settlement 2015 GRC Expiration of Prior Refunds Other CPUC 2016 FERC 2016 ERRA Changes 2016 SAR 2016 System Average Rate SCE’s system average rate is expected to decline from 16.2¢/kWh to 15.0¢/kWh on January 1, 2016, a
Slide 40: SCE Rates and Bills Comparison
February 24, 2016 39 SCE Rates and Bills Comparison 13.1 16.6 US Average SCE 27% Higher 2015 Average Residential Rates (¢/kWh) 2015 Average Residential Bills ($ per Month) ¢ ¢ SCE’s average residential rates are above national average, but residential bills are below national average due to lower en
Slide 41: SCE Customer Demand Trends
February 24, 2016 40 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 railwa
Slide 42: California's Energy Policy
February 24, 2016 41 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 El
Slide 43: California Cap and Trade Program
February 24, 2016 42 • 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 allowanc
Slide 44: Fourth Quarter Earnings Summary
February 24, 2016 43 Q4 2015 Q4 2014 Variance Core Earnings Per Share (EPS)1 SCE $0.89 $1.09 $(0.20) EIX Parent & Other (0.01) (0.01) – Core EPS1 $0.88 $1.08 $(0.20) Non-Core Items2 SCE $(1.14) $0.08 $(1.22) EIX Parent & Other 0.04 0.01 0.03 Discontinued Operations (0.02) 0.12 (0.14) Total Non-Core
Slide 45: 2015 Earnings Summary
February 24, 2016 44 2015 2014 Variance Core Earnings Per Share (EPS)1 SCE $4.20 $4.68 $(0.48) EIX Parent & Other (0.10) (0.09) (0.01) Core EPS1 $4.10 $4.59 $(0.49) Non-Core Items2 SCE $(1.14) $(0.22) $(0.92) EIX Parent & Other 0.06 0.01 0.05 Discontinued Operations 0.11 0.57 (0.46) Total Non-Core $
Slide 46: 2015 Core Earnings vs. Guidance Reconciliation
February 24, 2016 45 2015 Core Earnings vs. Guidance Reconciliation $0.08 $0.08 $0.01 $0.06 $0.05 $4.10 November 9, 2015 Guidance Midpoint Additional Rate Base Return Lower O&M Costs Financing Benefits Income Taxes & Other EIX Parent & Other Variances 2015 Core EPS • Pole Loading – Equity Portion -
Slide 47: SCE Results of Operations
February 24, 2016 46 $6,305 — 1,977 1,915 334 — 4,226 2,079 (525) 64 1,618 507 1,111 113 $998 $5,180 4,266 913 — — — 5,179 1 (1) — — — — — $— $11,485 4,266 2,890 1,915 334 — 9,405 2,080 (526) 64 1,618 507 1,111 113 $998 $1,368 (370) $998 SCE Results of Operations • Utility earning activities – reven
Slide 48: 2015 Non-Core Items
February 24, 2016 47 Q4 2015 Q4 2014 2015 2014 SCE Write down, impairment and other charges GRC Decision – write-down of regulatory assets $(1.18) $(1.18) SONGS settlement $0.08) $(0.22) NEIL insurance recoveries 0.04) 0.04) –) EIX Parent and Other Edison Capital sale of affordable housing projects
Slide 49: Earnings Non-GAAP Reconciliations
February 24, 2016 48 Earnings Non-GAAP Reconciliations Reconciliation of EIX Core Earnings to EIX GAAP Earnings Core Earnings SCE EIX Parent & Other Core Earnings Non-Core Items SCE EIX Parent & Other Discontinued operations Total Non-Core Basic Earnings $356 (1) $355 $24 2 39 $65 $420 $290 (3) $287
Slide 50: SCE Core EPS Non-GAAP Reconciliations
February 24, 2016 49 SCE Core EPS Non-GAAP Reconciliations Core EPS Non-Core Items Tax settlement Health care legislation Regulatory and tax items Write down, impairment and other charges Insurance recoveries Total Non-Core Items Basic EPS Reconciliation of SCE Core Earnings Per Share to SCE Basic E
Slide 51: Use of Non-GAAP Financial Measures
February 24, 2016 50 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 a
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