Edison International · NYSE:EIX
Edison International — Q3 2017 Earnings Presentation
50 slides from Edison International's earnings presentation, Oct 31, 2017
Slide 1: Business Update October 2017
October 31, 2017 Business Update October 2017 Exhibit 99.1
Slide 2: Forward-looking statements
October 31, 2017 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
October 31, 2017 2 Page Updated (U) from July 2017 Business Update EIX Shareholder Value 3 U SCE Highlights, SCE Long-Term Growth Drivers, Regulatory Model 4-6 Capital Expenditures and Rate Base History and Forecast 7-9 U 2018 GRC Intervenor Testimony 10 U Key Regulatory Proceedings 11 U CPUC Cost o
Slide 4: EIX Strategy Should Produce Superior Value
October 31, 2017 3 EIX Strategy Should Produce Superior Value Sustained Earnings and Dividend Growth Led by SCE Electric-Led Clean Energy Future SCE Rate Base Growth Drives Earnings • 8.3% average annual rate base growth through 2020 at request level • SCE earnings should track rate base growth Cons
Slide 5: SCE Highlights
October 31, 2017 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 • 729,000 transformers • 119,000 miles of distribution and tra
Slide 6: SCE Long-Term Growth Drivers
October 31, 2017 5 SCE Long-Term Growth Drivers Description Timeframe/Regulatory Process Sustained level of infrastructure investment required until equilibrium replacement rates achieved and then maintained • Ongoing - current and future GRCs Accelerate circuit upgrades, automation, communication,
Slide 7: SCE Decoupled Regulatory Framework
October 31, 2017 6 SCE Decoupled Regulatory Framework Decoupling of Revenues from Sales Major Balancing Accounts • Sales • Fuel and Purchased power • Energy efficiency • Pension expense Advanced Long-Term Procurement Planning Forward-looking Ratemaking • Earnings not affected by variability of retai
Slide 8: SCE Historical Rate Base and Core Earnings
October 31, 2017 7 SCE Historical Rate Base and Core Earnings Rate Base Core Earnings 7% 5% 2011 – 2016 CAGR ($ billions) Note: Recorded rate base, year-end basis. See SCE Core EPS Non-GAAP Reconciliations and Use of Non-GAAP Financial Measures. Since 2013, rate base excludes SONGS $18.8 $21.0 $21.1
Slide 9: SCE Capital Expenditure Forecast – Request Level
October 31, 2017 8 SCE Capital Expenditure Forecast – Request Level Note: Forecasted capital spending includes CPUC, FERC and other spending. 2018-2020 CPUC based on 2018 GRC request rebuttal testimony. See Capital Expenditure/Rate Base Detailed Forecast for further information, including potential
Slide 10: SCE Rate Base Forecast – Request Level
October 31, 2017 9 SCE Rate Base Forecast – Request Level CPUC • Rate base based on request levels from 2018 GRC Rebuttal Testimony FERC • FERC rate base is approximately 20% of SCE’s rate base by 2020; includes Construction Work in Progress (CWIP) Other • No change from prior forecast • Excludes SO
Slide 11: SCE Rate Base Forecast Comparison to ORA and TURN
October 31, 2017 10 SCE Rate Base Forecast Comparison to ORA and TURN – 2017-20204 ($ in billions) 2016 2017 2018 2019 2020 CAGR SCE’s Rebuttal Forecast $24.9 $26.1 $29.2 $31.7 $34.3 8.3% SCE’s Request Level Forecast at ORA Recommended Spending Levels $24.9 $26.1 $28.6 $30.4 $32.2 6.6% Difference ($
Slide 12: SCE Key Regulatory Proceedings
October 31, 2017 11 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; intervenor and rebuttal testimony s
Slide 13: CPUC Cost of Capital
October 31, 2017 12 3 4 5 6 7 10/1/12 10/1/13 10/1/14 10/1/15 10/1/16 10/1/17 10/1/18 10/1/19 R a te ( % ) CPUC Cost of Capital CPUC Adjustment Mechanism Moody’s Baa Utility Index Spot Rate Moving Average (10/1/16 – 09/30/17) = 4.50% 100 basis point +/- Deadband Starting Value – 5.00% Two year settl
Slide 14: SCE Distribution System Investments
October 31, 2017 13 SCE Distribution System Investments 1. Other includes GRC energy storage, Charge Ready Phase I and mobile home pilot programs Distribution Trends • Continued focus on safety and reliability with infrastructure replacement representing 44% of total distribution capital spend, but
Slide 15: Energy Storage
October 31, 2017 14 Energy Storage Given 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); ownership al
Slide 16: SCE Transportation Electrification Proposals
October 31, 2017 15 SCE Transportation Electrification Proposals On January 20, 2017, SCE filed with the CPUC a wide-ranging plan to increase electrification of cars, buses, medium- and heavy-duty trucks and industrial vehicles and equipment • SCE proposed 6 near-term, priority-review projects and 2
Slide 17: Transportation Electrification Overview
October 31, 2017 16 Transportation Electrification Overview California’s goals to reduce total GHG emissions by 40 percent from 1990 levels by 2030 is 42% from current levels • Recent Governor Order set a 2050 target of 80% below 1990 levels Many of California's policies to date focused on electric
Slide 18: SCE Large Transmission Projects
October 31, 2017 17 SCE Large Transmission Projects 1. CPUC approved 2. FEIR issued and revised costs are being developed 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 option is
Slide 19: SCE Operational Excellence
October 31, 2017 18 SCE Operational Excellence Top Quartile • Safety • Reliability • Customer service • Cost efficiency Optimize • Capital productivity • Purchased power cost High performing, continuous improvement culture Defining Excellence Measuring Excellence • Employee and public safety metrics
Slide 20: Responding to Industry Change
October 31, 2017 19 Responding to Industry Change Long-Term Industry Trends Strategy • The technology landscape is evolving at an unprecedented pace, with innovation driving advances in cost and capabilities of distributed energy resources • Customer expectations are changing with increasing choices
Slide 21: Edison Energy Group Summary
October 31, 2017 20 • Edison Energy is an advisory and services company with the capabilities to develop and integrate an array of energy solutions to help commercial and industrial customers improve management of their energy costs and risks in dealing with increasingly complex tariff and technolog
Slide 22: 2017 Earnings Per Share Guidance
October 31, 2017 21 $4.05 $4.32 (0.11)0.38 SCE 2017 EPS from Rate Base Forecast SCE Variances EIX Parent & Other EIX 2017 Core EPS Midpoint Guidance • O&M, financing and other benefits - $0.35 • Energy efficiency - $0.03 2017 Core Earnings Per Share Guidance – Building from SCE Rate Base • SCE autho
Slide 23: EIX Annual Dividends Per Share
October 31, 2017 22 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 $2.17 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Note: See Use of Non-GAAP Financial Measures Thirteen Years of Dividend Growth Target dividend
Slide 24: Appendix
October 31, 2017 23 Appendix
Slide 25: 2018 GRC Overview
October 31, 2017 24 • 2018 GRC Application (A. 16-09-001) filed September 1, 2016 • Addresses 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 other poten
Slide 26: 2018 GRC Key Items
October 31, 2017 25 • Capital expenditures of $1.8 billion for grid modernization capital to support improved safety and reliability and increased levels of distributed energy resources (DER) • Increased depreciation expense to reflect updated cost of removal estimates1 Limiting cost of removal re
Slide 27: EIX and SCE Tax Reform
October 31, 2017 26 Key Reform Considerations Impact on Customer / Shareholder Comments No interest deductibility Negative Negative • Permanent increase in customer rates (top concern) • Costs passed through but lowers tax shield Lower tax rate (15%-20%) Positive Negative at EIX holding company • Lo
Slide 28: SCE Historical Capital Expenditures
October 31, 2017 27 SCE Historical Capital Expenditures ($ billions) $3.9 $3.5 $4.0 $3.9 $3.5 2012 2013 2014 2015 2016
Slide 29: Capital Expenditure/Rate Base Detailed Forecast
October 31, 2017 28 Detailed Capital Expenditures at Request Level – 2016-2020 2016 (Actual) 2017 2018 2019 2020 Total Core Distribution1,2 $2.9 $2.9 $3.2 $3.2 $3.1 $15.2 Mobile Home Pilot Program - 0.1 - - - 0.1 Grid Modernization3 - - 0.5 0.7 0.6 1.8 Subtotal Distribution $2.9 $3.0 $3.7 $3.8 $3.7
Slide 30: Distribution Power Grid of the Future
October 31, 2017 29 Distribution Power Grid of the Future One-Way Electricity Flow • System designed to distribute electricity from large central generating plants • Increasing penetration of distributed energy resources • Voltage centrally maintained • Limited situational awareness and visualizatio
Slide 31: Grid Modernization Highlights
October 31, 2017 30 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 32: Grid Modernization Capital and Rate Impact
October 31, 2017 31 $0.54 $0.65 $0.61 2018 2019 2020 Building next generation electric grid requires accelerating traditional Transmission and Distribution / Information Technology programs and investing in new capabilities • Increased capacity: Upgrade portions of the grid (such as 4kV system) to i
Slide 33: Distributed Energy Resources Proceedings
October 31, 2017 32 Distributed Energy Resources (DER) Proceedings 2017 Activities • Utility incentive pilot, including a competitive solicitation framework and consultation with a stakeholder Distribution Planning Advisory Group • Regulatory approval of proposed pilot projects • Societal Cost Test
Slide 34: SCE Customer Demand Trends
October 31, 2017 33 2016 29,141 41,565 7,056 4,645 1,776 84,183 1,794 85,977 4,417,340 565,222 10,445 46,133 21,233 133 22 5,060,528 38,076 23,091 SCE Customer Demand Trends Kilowatt-Hour Sales (millions of kWh) Residential Commercial Industrial Public authorities Agricultural and other Subtotal Res
Slide 35: California’s Energy Policy
October 31, 2017 34 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 36: SCE 2017 Bundled Revenue Requirement
October 31, 2017 35 SCE 2017 Bundled Revenue Requirement Note: Rates in effect as of June 1, 2017. 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 2016 2017 14.3 14.1 1
Slide 37: System Average Rate Historical Growth
October 31, 2017 36 9.7¢ 15.7¢ 8.0¢ 10.0¢ 12.0¢ 14.0¢ 16.0¢ 18.0¢ 20.0¢ 22.0¢ 1990 1993 1996 1999 2002 2005 2008 2011 2014 2017 ¢/kWh System Average Rate Historical Growth SCE’s system average rate has grown in line with inflation over the last 25 years SCE System Average Rate Los Angeles Area Infla
Slide 38: Community Choice Aggregation Overview
October 31, 2017 37 • An Order Instituting Rulemaking (OIR R.17-06- 026) was opened on June 29, 2017 to review, revise, and consider alternatives to the “Power Charge Indifference Adjustment” or PCIA While not an impact on earnings, for every 1% of departing load, $6 million is shifted to other cu
Slide 39: Residential Rate Design OIR Decision
October 31, 2017 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 (TOU) rates • July 2015 CPUC Decision D.15-07-001 includes: Transition to 2 tiered rates by 201
Slide 40: SCE Net Metering Rate Structure
October 31, 2017 39 SCE Net Metering Rate Structure NEM Rate Developments: • NEM allowed residential customers to receive full-retail rate credit for exported generation and use these credits to offset energy purchased from the electric power company, leading to a cost-shift to non-NEM customers T
Slide 41: Residential Solar Installations in SCE Territory
October 31, 2017 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 July 1, 2017 • Official start of NEM successor tariff; customers are subject to: Mandatory Time-Of-Use rate Non-bypassabl
Slide 42: SCE Rates and Bills Comparison
October 31, 2017 41 SCE Rates and Bills Comparison SCE’s average residential rates are above national average, but residential bills are below national average due to lower usage • SCE’s residential rates are above national average due, in part, to a cleaner fuel mix. Costs for low carbon energy are
Slide 43: Third Quarter Earnings Summary
October 31, 2017 42 Third Quarter Earnings Summary Q3 2017 Q3 2016(*) Variance Basic Earnings Per Share (EPS) SCE $ 1.43 $ 1.34 $ 0.09 EIX Parent & Other 0.01 (0.05) 0.06 Discontinued Operations — — — Basic EPS $ 1.44 $ 1.29 $ 0.15 Less: Non-core Items SCE $ — $ — $ — EIX Parent & Other — — — Discon
Slide 44: Year to Date Earnings Summary
October 31, 2017 43 Year to Date Earnings Summary YTD 2017 YTD 2016(*) Variance Basic Earnings Per Share (EPS) SCE $ 3.44 $ 3.21 $ 0.23 EIX Parent & Other (0.03) (0.20) 0.17 Discontinued Operations — — — Basic EPS $ 3.41 $ 3.01 $ 0.40 Less: Non-core Items SCE $ — $ — $ — EIX Parent & Other1 — 0.01 (
Slide 45: SCE Annual Results of Operations
October 31, 2017 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 (370) $1,368 SCE Annual Results of Operations • Earning activities – revenue auth
Slide 46: 2016 Retrospectively Adjusted EPS by Quarter
October 31, 2017 45 2016 Retrospectively Adjusted EPS by Quarter 20161 Q4 Q3 Q2 Q1 Earnings (loss) per share attributable to Edison International Continuing Operations SCE $4.22 $1.01 $1.34 $0.98 $0.90 Edison International Parent & Other (0.23) (0.04) (0.05) (0.11) (0.04) Discontinued Operations 0.0
Slide 47: MHI Award Accounting
October 31, 2017 46 MHI Award Accounting • On March 13, 2017, a decision was received from the International Chamber of Commerce International Court (ICC) regarding the MHI Arbitration • $47.1 million net proceeds received by SCE • CPUC will review the documentation of the final resolution of the MH
Slide 48: Earnings Non-GAAP Reconciliations
October 31, 2017 47 Earnings Non-GAAP Reconciliations "Note: See Use of Non-GAAP Financial Measures. Earnings for second quarter and year-to-date 2016 were updated to reflect the implementation of the accounting standard for share- based payments effective January 1, 2016. ($ millions) Reconciliatio
Slide 49: SCE Core EPS Non-GAAP Reconciliations
October 31, 2017 48 SCE Core EPS Non-GAAP Reconciliations Basic EPS Non-Core Items 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 Core Earnings Per Share 5% 5% $3.33 — —
Slide 50: Use of Non-GAAP Financial Measures
October 31, 2017 49 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