Edison International · NYSE:EIX
Edison International — Corporate Update (October 2013)
52 slides from Edison International's corporate update, Oct 30, 2013
Slide 1: Business Update
Leading the Way in Electricity SM Business Update October 2013 October 30, 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: SCE Highlights
Leading the Way in Electricity SM 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
Slide 4: SCE Decoupled Regulatory Model
Leading the Way in Electricity SM SCE Decoupled Regulatory Model Regulatory Model Elements 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 o
Slide 5: SCE Customer and Revenue Profile
Leading the Way in Electricity SM SCE Customer and Revenue Profile 2012 Sales by Class of Service 2012 Revenue Requirement by Source Total Sales (millions kWh): 88,215 Agricultural, FERC Resale & Other Other 7% 4% Public CPUC Residential Authorities 12% 35% 6% Fuel & Industrial Purchased 9% Power 33
Slide 6: SCE Customer Demand Trends
Leading the Way in Electricity SM SCE Customer Demand Trends Kilowatt-Hour Sales (millions of kWh) 2012 2011 2010 2009 2008 Residential 30,563 29,631 29,034 30,063 30,745 Commercial 40,541 39,622 39,318 40,076 41,978 Industrial 8,504 8,490 8,507 8,524 9,658 Public authorities 5,196 5,206 5,336 5,687
Slide 7: SCE Historical Capital Expenditures
Leading the Way in Electricity SM SCE Historical Capital Expenditures ($ billions) $3.8 $3.9 $3.9 $2.9 $2.4 $2.2 2007 2008 2009 2010 2011 2012 October 30, 2013 6 EDISON INTERNATIONAL®
Slide 8: SCE Historical Rate Base and Core Earnings
Leading the Way in Electricity SM SCE Historical Rate Base and Core Earnings ($ billions) 2007 – 2012 CAGR Rate Base 11% $21.0 Core Earnings 15% $18.8 $16.8 $15.0 $12.5 $13.1 2007 2008 2009 2010 2011 2012 Core Earnings $2.07 $2.25 $2.68 $3.01 $3.33 $4.10 Note: Recorded rate base, year-end basis. See
Slide 9: SCE 2015 CPUC General Rate Case
Leading the Way in Electricity SM SCE 2015 CPUC General Rate Case • July 2013, Notice of Intent (NOI) submitted to the CPUC’s Office of Ratepayer Advocates (ORA) • Request sets base revenue requirement for 2015 – 2017 Includes operating costs and CPUC jurisdictional capital Excludes fuel and pur
Slide 10: CPUC Cost of Capital
Leading the Way in Electricity SM CPUC Cost of Capital CPUC Adjustment Mechanism 7 Moody’s Baa Utility Index Spot Rate Moving Average (10/1/12 – 9/30/13) = 4.80% 100 basis point +/- Deadband 6 Rate (%) Starting Value – 5.00% 5 4 3 10/1/12 10/1/13 10/1/14 10/1/15 • Interest rates did not trigger chan
Slide 11: 2012 FERC Formula Rate Settlement
Leading the Way in Electricity SM 2012 FERC Formula Rate Settlement • August 2011, FERC accepted SCE’s formula rates subject to refund and settlement • August 2013, SCE filed settlement for rates retroactive to January 1, 2012 • 10.45% settlement ROE: 9.30% base + 50 bps CAISO participation +
Slide 12: SCE Capital Expenditures Forecast
Leading the Way in Electricity SM SCE Capital Expenditures Forecast ($ 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 $3.8 approximate the mean time to failur
Slide 13: SCE Distribution Program
Leading the Way in Electricity SM SCE Distribution Program • Average equipment age beginning to approach mean time to failure making it critical to achieve equilibrium replacement rates • 2015 GRC request represents ~120% increase in infrastructure replacement over 2012 GRC 2015 – 2017 Requested GRC
Slide 14: SCE Large Transmission Projects
Leading the Way in Electricity SM SCE Large Transmission Projects ($ 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 $2,860 in
Slide 15: SCE Rate Base Forecast
Leading the Way in Electricity SM SCE Rate Base Forecast ($ 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 16: 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 per 2013 Earnings Per 2013 Earnings 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 17: 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 18: 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 $1.26 (42%) • Dividend growth rate slowed to hel
Slide 19: Creating Shareholder Value: What Remains
Leading the Way in Electricity SM Creating Shareholder Value Create Sustainable Position for Resolve Earnings and Transformative Uncertainties Dividend Growth Sector Change • SCE 2012 GRC • 5-year rate base CAGR of • New business development / What We’ve Done • SCE 2013 cost of capital 11% (2007 – 2
Slide 20: EME Bankruptcy
Leading the Way in Electricity SM EME Bankruptcy • December 2012, EME and certain of its wholly-owned subsidiaries filed voluntary petitions for Chapter 11 bankruptcy • EIX recorded full impairment of EME in 2012 and no longer consolidates EME earnings and losses • July 2013, Transaction Support Agr
Slide 21: Updates Since Our Last Presentation
Leading the Way in Electricity SM Updates Since Our Last Presentation • SCE Capital Expenditures Forecast (p. 11) • SCE Large Transmission Projects (p. 13) • SCE Rate Base Forecast (p. 14) • 2013 Core and Basic EPS Guidance (p. 15) • Drivers of Increase 2013 EPS Guidance – New Slide (p. 16) • EME Ba
Slide 22: Appendix – SONGS
Leading the Way in Electricity SM Appendix – SONGS October 30, 2013 21 EDISON INTERNATIONAL®
Slide 23: SONGS – Supplemental Data
Leading the Way in Electricity SM SONGS – Supplemental Data ($ 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 $115 Severance – Shu
Slide 24: SONGS – Asset Impairment
Leading the Way in Electricity SM SONGS – Asset Impairment ($ 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 25: 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 26: 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 27: 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 28: 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 29: 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 30: SCE Fuel and Purchased Power Account
Leading the Way in Electricity SM SCE 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 Tr
Slide 31: 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 32: 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 33: 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 34: Appendix – Regulatory
Leading the Way in Electricity SM Appendix – Regulatory October 30, 2013 33 EDISON INTERNATIONAL®
Slide 35: 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 36: 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 37: 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 38: 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 39: SCE Residential Net Metering Rate Structure
Leading the Way in Electricity SM SCE Residential Net Metering Rate Structure Solar Subsidies1,2 • Residential solar customer generation offsets total retail rate 30 20.1¢ 28.3¢ • Average retail rate of 28.3¢/kWh vs. actual generation cost of 8.2¢/kWh 25 • Resulting 20.1¢/kWh is a subsidy funded 20
Slide 40: SCE Rates and Bills Comparison
Leading the Way in Electricity SM SCE Rates and Bills Comparison 2012 Average Residential Rates Key Factors (¢/kWh) 16.1¢ • SCE’s residential rates are above national average due, in part, to a cleaner fuel mix – 12.3¢ cost for renewables are higher than high 31% carbon sources Higher • Average mont
Slide 41: California Climate Change Policy
Leading the Way in Electricity SM California Climate Change Policy • Assembly Bill 32 (2006) – reduces State greenhouse gas (GHG) emissions to 1990 levels by 2020 (~16% reduction) AB32 Emissions • Cap and trade program basics: Reduction Programs State-wide cap in 2013 – decreases over time Compl
Slide 42: California Renewables Policy
Leading the Way in Electricity SM California Renewables Policy • On April 12, 2011, Governor Brown signed Actual 2012 Renewable Resources: SB X 1 2, which codifies a 33% 20% of SCE’s portfolio Renewables Portfolio Standard (RPS) for California by 2020 Allows use of Renewable Energy Credits Small H
Slide 43: 2012 SCE Energy Portfolio
Leading the Way in Electricity SM 2012 SCE Energy Portfolio 1 (Billion kWh – Retail Sales) 75.6 30.8 Market Source 2 Coal Natural Gas Nuclear Low Carbon Large Hydro 52% Wind 5.4 41% Solar 15.8 Small Hydro 7% Geothermal Biomass & Waste Carbon Neutral 31% 5.3 21% 3.1 Renewables 7% 6.2 20% 4% 1.0 0.6 6
Slide 44: CAISO Net Load
Leading the Way in Electricity SM CAISO Net Load 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 20,000 •
Slide 45: 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 46: Appendix – Financial
Leading the Way in Electricity SM Appendix – Financial October 30, 2013 45 EDISON INTERNATIONAL®
Slide 47: 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 48: 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 $0.83 Impact of SONGS2 0.05 Other revenue increases 0.10 EIX Parent & Other (0.11) (0.15) 0.04 Higher depreciation (exc
Slide 49: Non-GAAP Reconciliations
Leading the Way in Electricity SM Non-GAAP Reconciliations ($ 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 $736 EIX Parent & Other (14) (37) (34) (50) Core Earning
Slide 50: SCE Results of Operations
Leading the Way in Electricity SM SCE Results of Operations ($ 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 specif
Slide 51: 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 52: 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
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