Edison International · NYSE:EIX
Edison International — Q3 2013 Earnings Presentation
38 slides from Edison International's earnings presentation, Oct 29, 2013
Slide 1: Third Quarter 2013 Financial Teleconference
Leading the Way in Electricity SM Third Quarter 2013 Financial Teleconference October 29, 2013 0 EDISON INTERNATIONAL®
Slide 2: Forward-Looking Statements
Leading the Way in Electricity SM Forward-Looking Statements Statements contained in this presentation about future performance, including, without limitation, operating results, asset and rate base growth, capital expenditures, San Onofre Nuclear Generating Station (SONGS), EME bankruptcy, and othe
Slide 3: Third Quarter Earnings Summary
Leading the Way in Electricity SM Third Quarter Earnings Summary Q3 2013 Q3 2012 Variance SCE Key Core Earnings Drivers Core EPS1 Impact of delay in 2012 GRC $0.29 SCE $1.46 $1.11 $0.35 Impact of SONGS2 0.02 Other revenue increases 0.01 EIX Parent & Other (0.04) (0.11) 0.07 Lower O&M (excluding SONG
Slide 4: Year-to-Date Earnings Summary
Leading the Way in Electricity SM Year-to-Date Earnings Summary YTD YTD SCE Key Core Earnings Drivers 2013 2012 Variance Core EPS1 Impact of delay in 2012 GRC $0.59 SCE $3.09 $2.26 $0.83 Impact of SONGS2 0.05 Other revenue increases 0.10 EIX Parent & Other (0.11) (0.15) 0.04 Higher depreciation (exc
Slide 5: SCE Capital Expenditures Forecast
Leading the Way in Electricity SM SCE Capital Expenditures Forecast ($ billions) $18.2 – $20.6 billion forecasted capital program 2013 – 2017 Distribution Transmission Generation $4.2 $4.4 • CPUC GRC requests additional $4.2 $4.0 infrastructure replacement to $3.8 approximate the mean time to failur
Slide 6: SCE Large Transmission Projects
Leading the Way in Electricity SM SCE Large Transmission Projects ($ millions) Project Total Project In Service ROE 2013–2017 Name Costs1 Date Incentives2 Forecast Status3 Chino Hills Costs and schedule remain uncertain. undergrounding Cost estimate does not include scope 125 bps Tehachapi $2,860 in
Slide 7: SCE Rate Base Forecast
Leading the Way in Electricity SM SCE Rate Base Forecast ($ billions) CAGR 7 – 9% projected rate base 2013 – 2017 $29.3 $27.1 • Driven by infrastructure replacement, reliability $24.7 investments, and public policy requirements $22.4 • FERC rate base includes CWIP $20.5 and is approximately 21% of 2
Slide 8: SONGS Regulatory – CPUC OII Phases
Leading the Way in Electricity SM SONGS Regulatory – CPUC OII Phases • October 2012, CPUC issued Order Instituting Investigation for SONGS outages (I.12-10-013) Consolidates all SONGS proceedings to determine appropriate cost recovery – steam generator project, market power, capital expenditures,
Slide 9: SONGS Regulatory – CPUC OII Testimony
Leading the Way in Electricity SM SONGS Regulatory – CPUC OII Testimony • August 2013, SCE Phase 2 testimony requested return on 2013 investment1: $425 million used and useful, materials and supplies – 7.90% through December 2017 (currently authorized cost of capital); 5.54% through 2020 (authoriz
Slide 10: Fuel and Purchased Power Account
Leading the Way in Electricity SM Fuel and Purchased Power Account • The Energy Resource Recovery Account (ERRA) balancing account was established in 2004 • Rates set based on annual forecast submitted in August – compliance review application for prior year submitted in April • Cost Recovery Trigge
Slide 11: 2013 Core and Basic EPS Guidance
Leading the Way in Electricity SM 2013 Core and Basic EPS Guidance Key Assumptions: • SCE rate base model earnings of $3.39 2013 Earnings Per 2013 Earnings Per per share Share Guidance as of Share Guidance as of • Impact of SONGS shutdown ($0.20) per 8/1/13 10/29/13 share Low Mid High Low Mid High •
Slide 12: Drivers of Increased 2013 EPS Guidance
Leading the Way in Electricity SM Drivers of Increased 2013 EPS Guidance $3.55 ($0.20) $0.30 $3.65 $3.35 Core EPS EPS Guidance Changes EPS Guidance Changes EPS Guidance Midpoint 2/26/13 6/7/13 and 8/1/13 Midpoint 6/7/13 10/29/13 Midpoint 10/29/13 SCE $3.70 SCE SCE • Rate base model • SONGS rate base
Slide 13: Creating Shareholder Value: What Remains
Leading the Way in Electricity SM Creating Shareholder Value Create Sustainable Position for Resolve Earnings and Transformative Uncertainties Dividend Growth Sector Change • SCE 2012 GRC • 5-year rate base CAGR of • New business development / What We’ve Done • SCE 2013 cost of capital 11% (2007 – 2
Slide 14: Appendix
Leading the Way in Electricity SM Appendix October 29, 2013 13 EDISON INTERNATIONAL®
Slide 15: Updates Since Our Last Presentation
Leading the Way in Electricity SM Updates Since Our Last Presentation • Third quarter and year-to-date results • Increased earnings guidance (p. 10-11) • New Slides SONGS – NRC Inspection Reports (p. 22) CAISO Load Projections (p. 27) Solar PV Cost Trends (p. 29) All Generation Cost Trends,
Slide 16: EIX Dividend Growth
Leading the Way in Electricity SM EIX Dividend Growth $3.65 Guidance Midpoint 2007 – 2012 CAGR 2013 $1.35 (37%) SCE Core EPS 15% $4.10 2012 EIX Dividend 2% $1.30 (32%) $3.33 2011 $1.28 (38%) • EIX targets paying out 45 – 55% of SCE earnings $3.01 2010 $1.26 (42%) • Dividend growth rate slowed to hel
Slide 17: SONGS – Supplemental Data
Leading the Way in Electricity SM SONGS – Supplemental Data ($ millions) Since (SCE Share as of September 30, 2013) 1/1/2012 Revenue Requirement Collected1 $1,107 Steam Generator Replacement (SGRP) – Approved2 $665 SGRP Total – Incurred $602 Incremental Inspection & Repair Costs $115 Severance – Shu
Slide 18: SONGS – Asset Impairment
Leading the Way in Electricity SM SONGS – Asset Impairment ($ millions) Revenue Subject to Refund Net Investment in SONGS Since Since 1/1/12 11/1/12 Net investment as of 5/31/13 $2,096 Authorized revenues $1,107 $565 (as of 9/30/13) Replacement power $680 $339 (as of 6/6/13) Exposure to refunds for
Slide 19: SONGS – Recovery Examples
Leading the Way in Electricity SM SONGS – Recovery Examples Partial Return of Return on Docket# Owner & Project Investment Investment D.92-08-036 SCE – SONGS 1 generating plant D.12-10-051 SCE – GRC Legacy Meters D.11-05-018 PG&E – GRC Legacy Meters D.11-09-017 Golden State Water – Hill
Slide 20: SONGS Third-Party Recovery – MHI Warranty
Leading the Way in Electricity SM SONGS Third-Party Recovery – MHI Warranty Warranty Summary Request for Arbitration • 20-year warranty: • October 2013, Request for Arbitration Repair or replace defective items filed with the International Chamber of Commerce per MHI contract Specified damages f
Slide 21: SONGS Third-Party Recovery – NEIL Insurance
Leading the Way in Electricity SM SONGS Third-Party Recovery – NEIL Insurance • Accidental property damage and accidental outage insurance through Nuclear Electric Insurance Limited (“NEIL”) Accidental Property Damage Policies – $2.5 million deductible; $2.75 billion liability limit Accidental O
Slide 22: SONGS – Decommissioning
Leading the Way in Electricity SM SONGS – Decommissioning Decommissioning Trusts • Decommissioning Trust contributions recovered in rates approved by CPUC in triennial proceeding • December 2012, A.12-12-013 Joint Filing with SDG&E submitted • July 2013, updated early retirement scenario total decom
Slide 23: SONGS – NRC Inspection Reports
Leading the Way in Electricity SM SONGS – NRC Inspection Reports September 2013 Inspection Report to SCE • Preliminary “white” finding (low to moderate safety significance) and an apparent violation regarding Unit 3 steam generators related to MHI computer modeling error. Preliminary “green” finding
Slide 24: SCE System Reliability
Leading the Way in Electricity SM SCE System Reliability • Short-term SONGS closure solutions Transmission – 220 kV Barre-Ellis reconfiguration Voltage support – Huntington Beach 3 and 4 synchronous condensers Substations – Santiago, Viejo, Johanna capacitor bank upgrades Generation – El Seg
Slide 25: SCE 2015 CPUC General Rate Case
Leading the Way in Electricity SM SCE 2015 CPUC General Rate Case • July 2013, Notice of Intent (NOI) submitted to the CPUC’s Office of Ratepayer Advocates (ORA) • Request sets base revenue requirement for 2015 – 2017 Includes operating costs and CPUC jurisdictional capital Excludes fuel and pur
Slide 26: CPUC Cost of Capital
Leading the Way in Electricity SM CPUC Cost of Capital CPUC Adjustment Mechanism 7 Moody’s Baa Utility Index Spot Rate Moving Average (10/1/12 – 9/30/13) = 4.80% 100 basis point +/- Deadband 6 Rate (%) Starting Value – 5.00% 5 4 3 10/1/12 10/1/13 10/1/14 10/1/15 • Interest rates did not trigger chan
Slide 27: 2012 FERC Formula Rate Settlement
Leading the Way in Electricity SM 2012 FERC Formula Rate Settlement • August 2011, FERC accepted SCE’s formula rates subject to refund and settlement • August 2013, SCE filed settlement for rates retroactive to January 1, 2012 • 10.45% settlement ROE: 9.30% base + 50 bps CAISO participation +
Slide 28: CAISO Load Projections
Leading the Way in Electricity SM CAISO Load Projections Renewables CAISO ‘Peaking’ Duck Chart • Current 33% RPS by 2020 set as floor CAISO Net Load --- 2012 through 2020 for CPUC per AB327 28,000 • More variable and less predictable 26,000 output 24,000 22,000 • Output does not fully match demand 2
Slide 29: Distributed Generation
Leading the Way in Electricity SM Distributed Generation • Distributed generation (DG) will be a key part of the future generation mix due to: Rapidly declining cost of solar photovoltaic panels Challenges to building new generation and transmission facilities Public policy support Rate Design
Slide 30: Solar PV Cost Trends
Leading the Way in Electricity SM Solar PV Cost Trends ≤ 10 kW 10-100 kW > 100 kW $12.00 $11.00 Median Value per Watt (2012$ ) $10.00 $9.00 $8.00 $7.00 $6.00 $5.00 $4.00 1998 2000 2002 2004 2006 2008 2010 2012 Over the past decade, real installed solar system prices have fallen by nearly 50% Note: D
Slide 31: All Generation Cost Trends, Unsubsidized
Leading the Way in Electricity SM All Generation Cost Trends, Unsubsidized Distributed Central Station / Utility Scale Generation Generation $0.250 $0.204 $0.206 $0.200 $0.150 $0.145 $0.149 $0.144 $/kWh $0.122 $0.123 $0.104 $0.100 $0.087 $0.108 $0.095 $0.109 $0.067 $0.086 $0.089 $0.086 $0.050 $0.065
Slide 32: Legislative Rate Reform – AB 327
Leading the Way in Electricity SM Legislative Rate Reform – AB 327 2013 SCE Residential Rate Structure1,2,3 September 2013, Assembly Bill 327 (Perea) provides the following changes to rate structure (subject to 35 further CPUC rulemaking) 31.1¢ • Rate Reform 30 Tier 4 Removes tier restrictions on
Slide 33: SCE Distribution Program
Leading the Way in Electricity SM SCE Distribution Program • Average equipment age beginning to approach mean time to failure making it critical to achieve equilibrium replacement rates • 2015 GRC request represents ~120% increase in infrastructure replacement over 2012 GRC 2015 – 2017 Requested GRC
Slide 34: SCE Energy Efficiency Programs
Leading the Way in Electricity SM SCE Energy Efficiency Programs Energy efficiency programs updated for 2013 – 2014 Annual kWh Savings (billions) • SCE is a national leader 2012 energy savings = 1.8% of retail sales1 1.7 1.6 • 2013 budget of $347 million2 • Target 0.9 billion kWh average annual sa
Slide 35: EME Bankruptcy
Leading the Way in Electricity SM EME Bankruptcy • December 2012, EME and certain of its wholly-owned subsidiaries filed voluntary petitions for Chapter 11 bankruptcy • EIX recorded full impairment of EME in 2012 and no longer consolidates EME earnings and losses • July 2013, Transaction Support Agr
Slide 36: SCE Core EPS Non-GAAP Reconciliations
Leading the Way in Electricity SM 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 2007 2008 2009 2010 2011 2012 CAGR Core EPS $2.07 $2.25 $2.68 $3.01 $3.33 $4.10 15% Non-Core Items Tax settleme
Slide 37: Non-GAAP Reconciliations
Leading the Way in Electricity SM Non-GAAP Reconciliations ($ millions) Reconciliation of EIX Core Earnings to EIX GAAP Earnings Earnings Attributable to Q3 Q3 YTD YTD Edison International 2013 2012 2013 2012 Core Earnings SCE $477 $363 $1,007 $736 EIX Parent & Other (14) (37) (34) (50) Core Earning
Slide 38: Use of Non-GAAP Financial Measures
Leading the Way in Electricity SM 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. Co