Edison International · NYSE:EIX
Edison International — Corporate Update (February 2016)
51 slides from Edison International's corporate update, Feb 24, 2016
Slide 1: Business Update February 2016
Business Update February 2016 February 24, 2016
Slide 2: Forward-Looking Statements
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 forward-looking statem
Slide 3: Table of Contents
Table of Contents New (N) or Updated (U) from Page 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 Future
Slide 4: EIX Strategy Should Produce Superior Value
EIX Strategy Should Produce Superior Value Sustainable Positioned for Earnings and Dividend Growth Transformative Change Rate Base and Core Earnings Growth SCE Focus on Lower-Risk Energy • 7% average annual rate base growth Delivery through 2017 • Wires assets represent over 90% of utility plant as
Slide 5: SCE Highlights
SCE Highlights 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 transm
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 electricity Revenues from Sales sales • Differences between amounts collected and authorized levels are either billed or refunded to customers • Promotes energy c
Slide 7: SCE Historical Rate Base and Core Earnings
SCE Historical Rate Base and Core Earnings ($ billions) 2010 – 2015 CAGR Rate Base 8% Core Earnings 7% $24.6 $23.3 $21.0 $21.1 $18.8 $16.8 2010 2011 2012 2013 2014 2015 Core EPS $3.01 $3.33 $4.10 $3.88 $4.68 $4.20 Note: Recorded rate base, year-end basis. See Earnings Non-GAAP Reconciliations and Us
Slide 8: SCE 2016-2017 Capital Expenditure Forecast
SCE 2016-2017 Capital Expenditure Forecast ($ billions) $8.0 – $8.3 Billion Capital Program for Distribution Transmission Generation 2016-2017 • Reflects CPUC 2015 GRC decision $4.1 $4.2 $3.9 • Includes up to 115% of capital spending for the pole loading and deteriorated poles program for 2016 and 2
Slide 9: SCE Distribution System Investments
SCE Distribution System Investments Distribution Trends 2016 – 2017 CPUC • 2015 GRC includes 94% increase in Expenditures for Distribution Assets1 infrastructure replacement, but grid not yet $5.9 Billion reaching equilibrium replacement rate • Distribution grid requires more automation Load and vol
Slide 10: SCE Large Transmission Projects
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 $1.0 billion • 2021 in service date; majority of capital sp
Slide 11: SCE 2016-2017 Rate Base Forecast
SCE 2016-2017 Rate Base Forecast ($ billions) 7% Average Annual Rate Base Growth for 2015-2017 Outlook • Incorporates 2015 GRC final decision with Range bonus depreciation provision, except “rate $26.8 base offset” excluded because of write off $25.1 of regulatory asset related to 2012-2014 incremen
Slide 12: SCE Rate Base Forecast Updates
SCE Rate Base Forecast Updates ($ billions) 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
Slide 13: CPUC Cost of Capital
CPUC Cost of Capital 7 CPUC Adjustment Mechanism Moody’s Baa Utility Index Spot Rate Moving Average (10/1/15 – 12/31/15) = 5.53% 100 basis point +/- Deadband 6 Rate (%) 5 4 Starting Value – 5.00% ROE set at 10.45%, independent of trigger mechanism 3 10/1/12 10/1/13 10/1/14 10/1/15 10/1/16 10/1/17 Re
Slide 14: 2016 Core and Basic Earnings Guidance
2016 Core and Basic Earnings Guidance 2016 Earnings Guidance as of February 23, 2016 Key Assumptions (core) Low Mid High • Revenues based on GRC final decision SCE $4.09 • Weighted-average 2016 rate base of $25.1 billion (see Rate Base Forecast) EIX Parent & Other (0.18) • Energy efficiency earnings
Slide 15: 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 and then maintained - includes underground cable, poles, switches, and transformers1 Distribution Resources Plan • Accelerate
Slide 16: Distribution Grid of the Future
Distribution Grid of the Future Current State Future State One-Way Electricity Flow Variable, Two-Way Electricity Flow • System designed to generate • Distribution system at the center of electricity from large central plant the grid • Very few distributed energy • System designed to serve variable
Slide 17: 21st Century Grid Highlights
21st Century Grid Highlights Devices that provide Devices that provide stable voltage and power quality more flexibility during outage events Future circuit designs integrate State of the art Distributed operating tools Energy Resources for utility & increase operators and flexibility engineers Smar
Slide 18: SCE Distribution Resources Plan
SCE Distribution Resources Plan 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 (
Slide 19: SCE Grid Modernization Road Map
SCE Grid Modernization Road Map SCE’s July 1, 2015 DRP supports the Commission’s proposed phased approach, which would be implemented over future General Rate Case (GRC) cycles 2015 - 2017 2018 - 2020 2021 + Cycle GRC Implement foundational Expand automation and Continue grid modernization, Technolo
Slide 20: July 2015 SCE DRP Capital Expenditure Estimates
July 2015 SCE DRP Capital Expenditure Estimates CPUC Approval Time Period Capital Expenditures Mechanism 2016-2017 Distribution Automation $40-70 million • Proposed memorandum account to record Substation Automation $30-60 million associated revenue Communications Systems $7-15 million requirement u
Slide 21: SCE Key Regulatory Proceedings
SCE Key Regulatory Proceedings Proceeding Description Next Steps Key SCE Proceedings Cost of Capital CPUC capital structure, cost of capital, and CPUC to approve the Joint Petition for return on equity Modification to suspend adjustment mechanism through 2017 in February 2016 Distribution Resources
Slide 22: SCE 2016 Bundled Revenue Requirement
SCE 2016 Bundled Revenue Requirement 2016 Bundled Revenue Requirement $millions ¢/kWh Fuel & Purchased Power – includes CDWR Bond Charge 4,928 6.7 Fuel & Purchased Power (43%) Distribution – poles, wires, substations, service centers; Edison 4,185 5.7 SmartConnect® Distribution Generation – utility
Slide 23: SCE Operational Excellence
SCE Operational Excellence Defining Excellence Measuring Excellence Top Quartile • Employee and public safety • Safety metrics • Cost efficiency • System reliability (SAIDI, • Reliability SAIFI, MAIFI) • Customer service • J.D. Power customer satisfaction Optimize • O&M cost per customer • Capital p
Slide 24: EIX is Responding to Industry Change
EIX is Responding to Industry Change Long-Term Industry Trends Strategy • Public policy and large commercial SCE Strategy customers prioritizing sustainability • Invest in, build, and operate the next objectives generation electric grid • Innovation facilitating conservation and • Operational and se
Slide 25: Edison Energy Focus: Commercial & Industrial
Edison Energy Focus: Commercial & Industrial Changing Customer Needs The Opportunity: Trusted Advisor and Solution Integrator • Create energy services that help simplify and optimize energy needs for large commercial & industrial customers: – Help customers better assess and capture the value of ene
Slide 26: Edison Energy: Acquired Businesses Summary
Edison Energy: Acquired Businesses Summary • Hundreds of solar solutions designed and installed across 16 states, SoCore offers multisite retailers, REITs and industrial companies portfolio-wide solar solutions that provide energy cost savings and carbon reduction opportunities • Provides comprehens
Slide 27: Grid Assurance Overview
Grid AssuranceTM Overview 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 prolong
Slide 28: EIX Annual Dividends Per Share
EIX Annual Dividends Per Share Twelve Years of Dividend Growth $1.92 $1.67 $1.42 $1.30 $1.35 $1.24 $1.26 $1.28 $1.22 $1.16 $1.08 $1.00 $0.80 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Target dividend growth at a higher than industry growth rate within its target payout ratio of
Slide 29: Appendix
Appendix February 24, 2016 28
Slide 30: 2015 General Rate Case Final Decision
2015 General Rate Case Final Decision On November 5, 2015, the CPUC issued a final decision supportive of SCE strategy to increase infrastructure reliability and safety investment while mitigating customer rate impacts through productivity and operating efficiency ($ billions) GRC Final Decision 201
Slide 31: SCE Tax Memorandum Account
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 or tax repair - chang
Slide 32: SCE Historical Capital Expenditures
SCE Historical Capital Expenditures ($ billions) $3.9 $3.9 $4.0 $3.9 $3.8 $3.5 2010 2011 2012 2013 2014 2015 February 24, 2016 31
Slide 33: Energy Storage
Energy Storage SCE 2016 Storage Portfolio 200 • CPUC Energy Storage Program: ~185 – Storage Rulemaking (R.10-12-007) established 1,325 MW target for IOUs by 2024 (580 MW 150 SCE share; spread as biennial targets during 2014-20) 115 MW – Utility ownership allowed up to 50% of total 100 100.5 target (
Slide 34: SCE Charge Ready Program
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 to support installat
Slide 35: Residential Rate Design OIR Decision
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 - “Super User Electric Su
Slide 36: SCE Net Metering Rate Structure
SCE Net Metering Rate Structure Solar Subsidies NEM Rate Developments: (Illustrative) • NEM allows residential customers to receive full-retail credit 30 for exported generation and use these credits to offset energy purchased from the utility, leading to a cost-shift to non-NEM customers 25 17¢ 24¢
Slide 37: NEM Successor Tariff Decision
NEM Successor Tariff Decision 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
Slide 38: Residential Solar Installations in SCE Territory
Residential Solar Installations in SCE Territory 7,000 40 Key Dates 6,000 35 January 28, 2016 • NEM Successor Approval Number of Residential Installations 30 July 1, 2017 5,000 • NEM customers will be MW Installed 25 required to take service under 4,000 mandatory Time-of-Use rate 20 2019 3,000 • Com
Slide 39: 2016 System Average Rate
2016 System Average Rate (¢/kWh) 0.3¢ 16.2¢ 0.4¢ 0.3¢ (0.3¢) (0.5¢) 4.00 15.0¢ (1.4¢) 2015 SAR 2015 ERRA 2015 GRC Expiration of Other CPUC 1 2016 FERC 2016 ERRA 2016 SAR Settlement Prior Refunds Changes SCE’s system average rate is expected to decline from 16.2¢/kWh to 15.0¢/kWh on January 1, 2016,
Slide 40: SCE Rates and Bills Comparison
SCE Rates and Bills Comparison 2015 Average Residential Rates (¢/kWh) Key KeyFactors Factors 16.6 ¢ • SCE’s residential rates are above national average due, in part, to a cleaner fuel mix – 13.1¢ cost for renewables are higher than high 27% carbon sources Higher • Average monthly residential bills
Slide 41: SCE Customer Demand Trends
SCE Customer Demand Trends Kilowatt-Hour Sales (millions of kWh) 2015 2014 2013 2012 2011 Residential 30,093 30,115 29,889 30,563 29,631 Commercial 42,396 42,127 40,649 40,541 39,622 Industrial 7,623 8,417 8,472 8,504 8,490 Public authorities 4,795 4,990 5,012 5,196 5,206 Agricultural and other 1,95
Slide 42: California’s Energy Policy
California’s Energy Policy • On October 7, 2015, Governor Brown signed SB 350, Actual 2015 Renewable Resources: which requires that 50 percent of energy sales to 24.3% of SCE’s portfolio customers come from renewable power and a doubling of energy efficiency in existing buildings for Small Hydro 1%
Slide 43: California Cap and Trade Program
California Cap and Trade Program • 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 44: Fourth Quarter Earnings Summary
Fourth Quarter Earnings Summary Q4 Q4 Variance Key SCE Core EPS Drivers 2015 2014 Core Earnings Per Share (EPS)1 Lower revenue3,4 $(0.15) - GRC return on rate base - pole loading 0.08 SCE $0.89 $1.09 $(0.20) - Lower GRC revenue – other (0.26) EIX Parent & Other (0.01) (0.01) – - FERC revenue and oth
Slide 45: 2015 Earnings Summary
2015 Earnings Summary 2015 2014 Variance Key SCE Core EPS Drivers Core Earnings Per Share (EPS)1 Lower revenue3,4 $(0.25) - GRC return on rate base - pole loading 0.08 SCE $4.20 $4.68 $(0.48) - Lower GRC revenue – other (0.47) EIX Parent & Other (0.10) (0.09) (0.01) - FERC revenue and other 0.14 Cor
Slide 46: 2015 Core Earnings vs. Guidance Reconciliation
2015 Core Earnings vs. Guidance Reconciliation $0.06 $0.05 $4.10 SCE $3.97 $0.08 $0.01 EIX Parent & $0.08 Other $(0.15) • Pole Loading – Equity Portion - $0.05 Total • Pole Loading – $3.82 Debt & Preferred Portion - $0.03 • Bonus Depreciation - None November 9, Additional Rate Lower O&M Financing In
Slide 47: SCE Results of Operations
SCE Results of Operations ($ 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 program costs, subje
Slide 48: 2015 Non-Core Items
2015 Non-Core Items Q4 Q4 2015 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) $(0.22) NEIL insurance recoveries 0.04) 0.04) –) EIX Parent and Other Edison Capital sale of affordable housing projects 0
Slide 49: Earnings Non-GAAP Reconciliations
Earnings Non-GAAP Reconciliations ($ millions) Reconciliation of EIX Core Earnings to EIX GAAP Earnings Earnings Attributable to Edison International Q4 Q4 2015 2014 2015 2014 Core Earnings SCE $290 $356 $1,368 $1,525 EIX Parent & Other (3) (1) (32) (28) Core Earnings $287 $355 $1,336 $1,497 Non-Cor
Slide 50: 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 2010 2011 2012 2013 2014 2015 CAGR Core EPS $3.01 $3.33 $4.10 $3.88 $4.68 $4.20 7% Non-Core Items Tax settlement 0.30 — — — — — Health care legis
Slide 51: 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
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