Edison International · NYSE:EIX
Edison International — Investor Presentation (November 2016)
48 slides from Edison International's investor presentation, Nov 2, 2016
Slide 1: Business Update November 2016
November 2, 2016 Business Update November 2016
Slide 2: Forward-looking statements
November 2, 2016 1 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 statements. Th
Slide 3: Table of Contents
November 2, 2016 2 Page New (N) or Updated (U) from September 2016 Business Update EIX Shareholder Value 3 U SCE Highlights, Regulatory Model 4‐5 Capital Expenditures and Rate Base History and Forecast 6‐8 2018 GRC Overview 9‐10 Distribution and Transmission Capital Expenditure Detail 11‐15 Growth D
Slide 4: EIX Strategy Should Produce Superior Value
November 2, 2016 3 EIX Strategy Should Produce Superior Value Sustained Earnings and Dividend Growth Led by SCE Positioned for Transformative Change SCE Rate Base Growth Drives Earnings • 8.5% average annual rate base growth through 2020 at request level • SCE earnings should track rate base growth
Slide 5: SCE Highlights
November 2, 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 investment • 1.4 million power poles • 725,000 transformers • 103,000 miles of distribution and tra
Slide 6: SCE Decoupled Regulatory Model
November 2, 2016 5 SCE Decoupled Regulatory Model Decoupling of Regulated Revenues from Sales Major Balancing Accounts • Fuel • Purchased power • Energy efficiency • Pension expense Advanced Long-Term Procurement Planning Forward-looking Ratemaking • SCE earnings are not affected by variability of r
Slide 7: SCE Historical Rate Base and Core Earnings
November 2, 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 SCE Core EPS Non-GAAP Reconciliations and Use of Non-GAAP Financial Measures. 2013-2015 rate base excludes SONGS $16.8 $18.8 $21.0 $
Slide 8: SCE Capital Expenditure Forecast – Request Level
November 2, 2016 7 SCE Capital Expenditure Forecast – Request Level Note: Forecasted capital spending includes CPUC, FERC and other spending. See Capital Expenditure/Rate Base Detailed Forecast. ($ billions) $3.8 $4.5 $5.0 $5.2 $4.9 2016 2017 2018 2019 2020 Distribution Transmission Generation Tradi
Slide 9: SCE Rate Base Forecast – Request Level
November 2, 2016 8 SCE Rate Base Forecast – Request Level • Incorporates 2015 GRC final decision, except “rate-base offset” excluded because of write off of regulatory asset related to 2012-2014 incremental tax repairs • CPUC rate base based on request levels from 2018 GRC and 2018 positive true-up
Slide 10: 2018 GRC Application Overview
November 2, 2016 9 • 2018 GRC Application (A. 16-09-001) filed September 1st • Addresses major portion of CPUC jurisdictional revenue requirement for 2018-2020 Includes operating costs and capital investment Excludes CPUC jurisdictional costs such as fuel and purchased power, cost of capital and
Slide 11: 2018 GRC Key Items
November 2, 2016 10 • Capital expenditures include $2.1 billion of proposed grid modernization capital to support improved safety and reliability and increased levels of distributed energy resources (DER) Requested approval to establish a memorandum account to facilitate $210 million of grid moder
Slide 12: SCE Distribution System Investments
November 2, 2016 11 SCE Distribution System Investments 1. Other includes energy storage, Charge Ready Pilot and mobile home park conversion Distribution Trends • Continued focus on safety and reliability with infrastructure replacement representing 46% of total distribution capital spend, but not y
Slide 13: Grid Modernization Capital
November 2, 2016 12 $0.03 $0.18 $0.64 $0.75 $0.71 2016 2017 2018 2019 2020 Building next generation electric grid will require accelerating traditional Transmission and Distribution / Information Technology programs and investing in new capabilities • Increased capacity: Upgrade portions of the grid
Slide 14: Energy Storage
November 2, 2016 13 Energy Storage Given flexibility counting rules, SCE has already met the aggregate 2016 targetsCPUC Energy Storage Program Requirements: • 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);
Slide 15: SCE Charge Ready Program
November 2, 2016 14 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) Advice letter approval to spend
Slide 16: SCE Large Transmission Projects
November 2, 2016 15 SCE Large Transmission Projects 1. CPUC approved in August 2016 2. Presently under CPUC environmental review 3. Morongo Transmission holds an option to invest up to $400 million, or half of the estimated cost of the transmission facilities only, at the in-service date. If the opt
Slide 17: SCE Growth Drivers Beyond 2017
November 2, 2016 16 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 Grid Modernization •
Slide 18: CPUC Cost of Capital
November 2, 2016 17 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 (10/1/16 – 10/27/16) = 4.33% 100 basis point +/- Deadband Starting Value – 5.00% Return on Equity (ROE) adjust
Slide 19: 2016 Earnings Guidance Reaffirmed
November 2, 2016 18 $3.84 $3.91 (0.27) 0.34 SCE 2016 EPS from Rate Base Forecast SCE Variances EIX Parent & Other 2016 EIX Core EPS Guidance • Productivity and financing benefits - $0.30 • Energy efficiency - $0.04 Reaffirmed 2016 Core Earnings Per Share Guidance – Building from SCE Rate Base3 2016
Slide 20: EIX Annual Dividends Per Share
November 2, 2016 19 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 Twelve Years of Dividend Growth Target dividend growth at a h
Slide 21: SCE Operational Excellence
November 2, 2016 20 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 22: Responding to Industry Change
November 2, 2016 21 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 • Power gri
Slide 23: Edison Energy Focus: Commercial & Industrial
November 2, 2016 22 • 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 t
Slide 24: Edison Energy: Acquired Businesses Summary
November 2, 2016 23 Edison Energy: Acquired Businesses Summary • Provides comprehensive renewable energy advisory and procurement services to leading Fortune 1000 companies, universities and municipalities • Proprietary market access platform procuring energy for clients by negotiating multiyear pow
Slide 25: Grid Assurance, LLC
November 2, 2016 24 On May 9, 2016, six electric power companies announced the official launch of Grid Assurance, LLC, an independent company providing transmission sparing solutions for critical electric transmission equipment. The company is offering its subscribers a cost-effective way to enhance
Slide 26: Appendix
November 2, 2016 25 Appendix
Slide 27: SCE Tax Memorandum Account
November 2, 2016 26 SCE Tax Memorandum Account • 2018 GRC continues tax accounting memorandum account (TAMA) established in 2015 GRC decision, which tracks tax benefits or costs associated with changes in: tax accounting methods tax laws and regulations impacting depreciation or tax repair for
Slide 28: SCE Historical Capital Expenditures
November 2, 2016 27 SCE Historical Capital Expenditures ($ billions) $3.8 $3.9 $3.9 $3.5 $4.0 $3.9 2010 2011 2012 2013 2014 2015
Slide 29: Capital Expenditure and Rate Base Detailed Forecast
November 2, 2016 28 Detailed Capital Expenditures at Request Level – 2016-2020 2016 2017 2018 2019 2020 Total Core Distribution1,2 $2.9 $2.9 $3.2 $3.2 $3.1 $15.3 Mobile Home Park Conversion 0.1 0.1 - - - 0.2 Grid Modernization 0.0 0.2 0.6 0.8 0.7 2.3 Subtotal Distribution $3.0 $3.2 $3.9 $3.9 $3.8 $1
Slide 30: SCE Key Regulatory Proceedings
November 2, 2016 29 SCE Key Regulatory Proceedings Proceeding Description Next Steps Key CPUC Proceedings 2018 General Rate Case (A. 16‐09‐001) Set CPUC base revenue requirement, capital expenditures and rate base for 2018‐2020 Ongoing workshops and data requests; awaiting schedule to be set by ALJ;
Slide 31: Distribution Power Grid of the Future
November 2, 2016 30 Distribution Power Grid of the Future One-Way Electricity Flow • System designed to distribute electricity from large central plant • Very few distributed energy resources • Voltage centrally maintained • Limited situational awareness and visualization tools for power grid operat
Slide 32: Grid Modernization Framework
November 2, 2016 31 Grid Modernization Framework SCE will leverage its automation and infrastructure replacement programs to implement circuit-specific solutions that improve safety and reliability, while updating the system for continued DER adoption Distribution Automation Installation of more sen
Slide 33: Grid Modernization Highlights
November 2, 2016 32 Computing intelligence inside electrical substations Future circuit designs integrate Distributed Energy Resources and increase flexibility The distribution system will require transformative technologies in planning, design, construction and operation Net benefits to customers i
Slide 34: CPUC Distributed Energy Resources Proceedings
November 2, 2016 33 CPUC Distributed Energy Resources (DER) Proceedings Expanded scope • Competitive DER solicitation framework: product definition, rules, plans, standard contracts, “review groups,” and DER valuation methodology • Electric power company roles in DER markets, business models, and fi
Slide 35: SCE Customer Demand Trends
November 2, 2016 34 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 36: California's Energy Policy
November 2, 2016 35 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 37: SCE 2016 Bundled Revenue Requirement
November 2, 2016 36 SCE 2016 Bundled Revenue Requirement Note: Rates in effect as of June 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 15.9 1
Slide 38: System Average Rate Historical Growth
November 2, 2016 37 9.7¢ 16.2¢ 14.9¢ 8.0¢ 10.0¢ 12.0¢ 14.0¢ 16.0¢ 18.0¢ 20.0¢ 22.0¢ 24.0¢ 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 Energy Crisis and return to normal Higher gas price forecast post-Katrina leads to higher rates with subsequent refund of over collection De
Slide 39: Residential Rate Design OIR Decision
November 2, 2016 38 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 “Su
Slide 40: SCE Net Metering Rate Structure
November 2, 2016 39 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-retai
Slide 41: Residential Solar Installations in SCE Territory
November 2, 2016 40 Note: NEM solar installations in SCE service territory include projects with solar PV only less than 1 MW Residential Solar Installations in SCE Territory 10 20 30 40 50 60 1,000 2,000 3,000 4,000 5,000 6,000 7,000 2010 2011 2012 2013 2014 2015 2016 M W Installed N u m b e r o f
Slide 42: SCE Rates and Bills Comparison
November 2, 2016 41 SCE Rates and Bills Comparison 13.0 16.3 US Average SCE 25% Higher 2015-16 Average Residential Rates (¢/kWh) 2015-16 Average Residential Bills ($ per Month) ¢ ¢ SCE’s average residential rates are above national average, but residential bills are below national average due to low
Slide 43: Third Quarter Earnings Summary
November 2, 2016 42 Q3 2016 Q3 2015 Variance Basic Earnings Per Share (EPS)1 SCE $1.34 $1.19 $0.15 EIX Parent & Other (0.05) (0.03) (0.02) Discontinued Operations 0.13 (0.13) Basic EPS $1.29 $1.29 $ Less: Non-Core Items SCE $ $ $ EIX Parent & Other Discontinued Operations2 0.13 (0.
Slide 44: YTD 2016 Earnings Summary
November 2, 2016 43 YTD 2016 YTD 2015 Variance Basic Earnings Per Share (EPS)1 SCE $3.18 $3.31 $(0.13) EIX Parent & Other (0.22) (0.07) (0.15) Discontinued Operations 0.13 (0.13) Basic EPS $2.96 $3.37 $(0.41) Less: Non-Core Items SCE $ $ $ EIX Parent & Other2 0.01 0.02 (0.01) Discontinued Op
Slide 45: SCE Results of Operations
November 2, 2016 44 $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) $998 SCE Results of Operations • Earning activities – revenue author
Slide 46: Earnings Non-GAAP Reconciliations
November 2, 2016 45 Earnings Non-GAAP Reconciliations Note: See Use of Non-GAAP Financial Measures ($ millions) Reconciliation of EIX GAAP Earnings to EIX Core Earnings SCE EIX Parent & Other Discontinued Operations Basic Earnings Non-Core Items SCE EIX Parent & Other Discontinued Operations Total N
Slide 47: SCE Core EPS Non-GAAP Reconciliations
November 2, 2016 46 SCE Core EPS Non-GAAP Reconciliations Basic EPS Non-Core Items Tax settlement Health care legislation Regulatory and tax items Write down, impairment and other charges Insurance recoveries Less: Total Non-Core Items Core EPS Reconciliation of SCE Basic Earnings Per Share to SCE C
Slide 48: Use of Non-GAAP Financial Measures
November 2, 2016 47 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
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