Edison International · NYSE:EIX
Edison International — Q3 2019 Earnings Presentation
50 slides from Edison International's earnings presentation, Oct 30, 2019
Slide 1: Business Update
Exhibit 99.1 Business Update October 30, 2019
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 Updated (U) or New (N) from July 2019 Business Page Update EIX Shareholder Value 3 U SCE Highlights, SCE Long-Term Growth Drivers 4-5 U Capital Expenditures and Rate Base History and Forecast 6-9 N,U California’s GHG Emissions Overview, SCE’s Pathway 2045 Highlights 10-11 N,U 2019
Slide 4: EIX Strategy Should Produce Long-Term Value
EIX Strategy Should Produce Long-Term Value Sustained Earnings and Dividend Electric-Led Clean Energy Future Growth Led by SCE SCE Rate Base Growth Drives Earnings EIX Vision • 7-8% average annual rate base • Lead transformation of the electric growth through 2023 power industry • SCE earnings expec
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 investment • 1.4 million power poles • 724,000 transformers • 127,000 miles of distribution/transmissio
Slide 6: SCE Long-Term Growth Drivers
SCE Long-Term Growth Drivers Description Timeframe/Regulatory Process • Sustained level of infrastructure investment Ongoing - current and future GRCs Infrastructure required until equilibrium replacement Replacement rates achieved and then maintained • 2018-2020 – Approximately $590 million of capi
Slide 7: SCE Historical Rate Base and Core Earnings
SCE Historical Rate Base and Core Earnings ($ billions, except per share data) $29.6 $27.8 $25.9 $24.6 $23.3 $21.1 2013 2014 2015 2016 2017 2018 Core $4.22 EPS $3.88 $4.68 $4.20 $4.58 $4.42 Note: Recorded rate base, year-end basis. See SCE Core EPS Non-GAAP Reconciliations and Use of Non-GAAP Financ
Slide 8: SCE Capital Expenditure Forecast
SCE Capital Expenditure Forecast ($ billions) $23.8 - $25.6 billion capital program Distribution for 2019-2023 Transmission • Generation This capital forecast includes: Wildire mitigation-related spend1 2018 GRC approved CPUC capital spend $5.3 $5.4 $5.3 for 2019-2020 $5.0 2021 GRC requested CPU
Slide 9: SCE Rate Base Forecast
SCE Rate Base Forecast ($ billions) $40.8 $38.2 $36.0 $33.4 $30.7 $28.5 $26.2 Range Case 1 CAGR 2017 2018 2019 2020 2021 2022 2023 Range 6.9% Case2 $30.7 $33.2 $35.3 $36.9 $39.0 1. Morongo Transmission holds an option to invest up to $400 million in the West of Devers Transmission Project, or half o
Slide 10: SCE Wildfire Capital Forecast
SCE Wildfire Capital Forecast ($ billions) 1 All Other Wildfire-Related Mitigation $4.2 Billion Capital Request for 2019-2023 1 Spend • Under AB 1054, ~$1.6 billion of SCE’s fire risk capital Wildfire-Related Mitigation Spend - expenditures per CPUC-approved Wildfire Mitigation Plan AB1054 shall not
Slide 11: California's GHG Emissions Overview
California’s GHG Emissions Overview • SB 350 requires a doubling of energy efficiency in existing buildings for California by 2030 • SB 32 requires statewide GHG emissions to be reduced to 40% below the 1990 level by 2030; Governor Order set a 2050 target of 80% below 1990 levels • SB 100 requires t
Slide 12: SCE's Pathway 2045 Highlights
SCE’s Pathway 2045 Highlights “Adaptation to climate change must begin in earnest – which SCE is doing in part with our grid hardening, situational awareness and operational changes – but we must act on longer term solutions as well.” – Pedro Pizarro, Edison International CEO • 100% of grid sales wi
Slide 13: 2019 Wildfire Legislation Update
2019 Wildfire Legislation Update Summary of Assembly Bill 1054 and Assembly Bill 111 Safety • Creates Wildfire Safety Division1 to provide additional wildfire safety oversight Oversight • Initial safety certification issued by CPUC Executive Director within 30 days of IOU request requires: 1) an app
Slide 14: Mitigating Catastrophic Wildfire Risk
Mitigating Catastrophic Wildfire Risk SCE plans to spend significant capital and O&M from 2019-2023, including ~$1.6 billion of AB 1054 spend, with continued investments beyond our forecast period • SCE’s comprehensive risk mitigation program focuses on three key areas: Grid hardening: Increase th
Slide 15: Wildfire Mitigation Summary
Wildfire Mitigation Summary Increased Situational Grid Hardening Enhanced Operational Practices Awareness Capabilities • ~300 circuit miles of covered • In-house team of fire weather • Completed Enhanced Overhead conductor installed with hundreds experts staffing our 24/7 Inspections of 400,000+ T&D
Slide 16: SCE Key Regulatory Proceedings
SCE Key Regulatory Proceedings Proceeding Description Next Steps Key CPUC Proceedings 2021 General Rate Case Set CPUC base revenue requirement, capital Application filed August 30, 2019; awaiting scoping memo (A. 19-08-013) expenditures and rate base for 2021-2023 2020 Cost of Capital Sets CPUC cost
Slide 17: SCE 2021 General Rate Case Overview
SCE 2021 General Rate Case Overview Filed August 30, 2019, SCE’s 2021 GRC request balances the need to advance California’s ambitious decarbonization policy goals and address emergent wildfire public safety risks, while continuing to provide safe, reliable, and affordable service to customers • 2021
Slide 18: SCE 2021 General Rate Case Timeline
SCE 2021 General Rate Case Timeline • Track 1 includes approval of the 2021-2023 GRC revenue requirement and reasonableness of additional 2018- 2019 recorded incremental amounts associated with the Fire Mitigation memorandum accounts1 Estimated 2019 2020 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 GRC 2018-2019 Interve
Slide 19: CPUC and FERC Cost of Capital Summary
CPUC and FERC Cost of Capital Summary CPUC Cost of Capital FERC Rate Case Component % Cost Weighted Cost Breakdown of Return on Equity (ROE) Cost Conventional ROE 10.60% Conventional ROE 11.12% Wildfire Risk ROE 0.85% Wildfire Risk ROE 0.85% Common Equity 52.0% 11.45% 5.95% Requested ROE + 11.97% Lo
Slide 20: CPUC Cost of Capital (2013-2019)
CPUC Cost of Capital (2013-2019) CPUC Adjustment Mechanism 7 Moody’s Baa Utility Index Spot Rate Moving Average (10/1/18 – 10/1/19) = 4.50% 100 basis point +/- Deadband 6 5 Rate (%) Starting Value – 5.00% 4 ROE fixed at 10.45% ROE fixed at 10.30% for 2017, independent for 2018, independent of trigge
Slide 21: SCE Distribution System Investments
SCE Distribution System Investments Distribution Trends • Capital expenditures for certain programs deferred over 2019 – 2023 Capital Spending Forecast 2 - next five years to support reallocation of distribution for Distribution $20.8 billion resources to wildfire mitigation1; historical program New
Slide 22: SCE Transportation Electrification Proposals
SCE Transportation Electrification (TE) Proposals • Proposals build on SCE’s Clean Power and Electrification Pathway, which is an integrated approach to reduce GHG emissions and air pollution by taking action in three California economic sectors: electricity, transportation and buildings • These pro
Slide 23: SCE Energy Storage
SCE Energy Storage CPUC 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 SCE 2018 Storage Portfolio 2014-20); ownership allowed up to 290 MW for SCE 350 • Flexibility to transfer
Slide 24: SCE Large Transmission Projects
SCE Large Transmission Projects Summary of Large Transmission Projects Remaining Investment Estimated In-Service Project Name Total Cost5 (as of September 30, 2019) Date West of Devers1,2 $848 million $416 million 2021 Mesa Substation1 $646 million $296 million 2022 Alberhill System3 $486 million $4
Slide 25: SCE Operational Excellence
SCE Operational Excellence Defining Excellence Measuring Excellence Top Quartile • Employee and public safety • Safety metrics • Reliability • System performance and reliability (SAIDI and SAIFI) • Customer service • Customer satisfaction • Cost efficiency calculation based on Optimize internal voic
Slide 26: Responding to Industry Change
Responding to Industry Change Long-Term Industry Trends Strategy • The technology landscape is evolving at SCE Strategy an unprecedented pace, with innovation • Clean the power system by accelerating driving advances in cost and capabilities of the de-carbonization of electricity supply distributed
Slide 27: Edison Energy Summary
Edison Energy Summary Edison Energy • Energy is a significant risk large commercial and industrial customers face. Edison Energy creates competitive advantage for market leaders by Renewables & Supply quantifying this risk and designing the portfolio solution to protect shareholder value threatened
Slide 28: 2019 EIX Core Earnings Guidance
2019 EIX Core Earnings Guidance 2019 Core Earnings Per Share Guidance – Key Assumptions Building from SCE Rate Base $0.29 ($0.33) Total Rate Base $30.7 billion $0.41 ($0.24) • FERC comprises ~20% of total $4.80 $4.68 • Test year • HoldCo CPUC 2018 GRC operating • Previously • Financing true-up: expe
Slide 29: EIX Annual Dividends Per Share
EIX Annual Dividends Per Share Fifteen Consecutive Years of Dividend Growth 1 $2.42 $2.45 $2.17 $1.92 $1.67 $1.42 $1.35 $1.28 $1.30 $1.22 $1.24 $1.26 $1.16 $1.08 $1.00 $0.80 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Target dividend growth within target payout ra
Slide 30: Appendix
Appendix October 30, 2019 Energy for What's Ahead 29
Slide 31: EIX's 2018 Sustainability Report Highlights
EIX’s 2018 Sustainability Report Highlights “At Edison International, we are leading the transformation of the electric power industry toward a clean energy future by focusing on opportunities in clean energy, efficient electrification, the grid of the future, and customer choice. As we pursue this
Slide 32: SCE Decoupled Regulatory Framework
SCE Decoupled Regulatory Framework Regulatory Mechanism Key Benefits Decoupling of Revenues from • Earnings not affected by variability of retail electricity sales Sales • Differences between amounts collected and authorized levels either billed or refunded • Promotes energy conservation • Stabilize
Slide 33: SCE Historical Capital Expenditures
SCE Historical Capital Expenditures ($ billions) $4.4 $4.0 $3.9 $3.8 $3.5 2014 2015 2016 2017 2018 October 30, 2019 32
Slide 34: Credit Ratings Summary
Credit Ratings Summary S&P Moody’s Fitch Date of Report July 26, 2019 July 29, 2019 July 29, 2019 Edison International Corporate / Outlook BBB/Stable Baa3/Stable BBB-/Stable Senior Unsecured BBB- Baa3 BBB- Commercial Paper A-2 P-3 F3 Southern California Edison Corporate / Outlook BBB/Stable Baa2/Sta
Slide 35: Power Grid of the Future
Distribution Power Grid of the Future Current State Future State One-Way Electricity Flow Variable, Two-Way Electricity Flow • System designed to distribute electricity • Distribution system at the center of the from large central generating plants power grid • Voltage centrally maintained • System
Slide 36: SCE Customer Demand Trends
SCE Customer Demand Trends Kilowatt-Hour Sales (millions of kWh) 2014 2015 2016 2017 2018 Residential 30,027 30,093 29,579 30,221 29,865 Commercial 42,004 42,396 42,189 42,514 42,369 Industrial 8,392 7,623 7,162 6,659 6,786 Public authorities 4,975 4,795 4,715 4,711 4,510 Agricultural and other 2,01
Slide 37: SCE Bundled Revenue Requirement
SCE Bundled Revenue Requirement 2019 Bundled Revenue Requirement $millions ¢/kWh Fuel & Purchased Power – includes CDWR Bond 4,422 7.4 Fuel & Purchased Power Charge (47%) Distribution – poles, wires, substations, service 3,628 6.1 centers; Edison SmartConnect® Distribution (38%) Generation Generatio
Slide 38: System Average Rate Historical Growth
System Average Rate Historical Growth ¢/kWh Comparative System Rates reduced due to the implementation of Average Rates 1) the SONGS Revised Settlement, including CAGR % Delta to SCE NEIL insurance benefits, 2) lower fuel & 29-yr 20-yr 10-yr SCE 15.9¢ -- purchased power costs, and 3) a lower 2015 (‘
Slide 39: SCE Rates and Bills Comparison
SCE Rates and Bills Comparison 2018-19 Average Residential Rates (¢/kWh) KeyKey Factors Factors 27% 16.4 ₵ Higher • SCE’s residential rates are above national 12.9 ₵ average due, in part, to a cleaner fuel mix, high cost of living, and lower system load factor • SCE’s residential customer usage is l
Slide 40: Community Choice Aggregator (CCA) Overview
Community Choice Aggregator (CCA) Overview • Assembly Bill 1171 permits cities and counties, and Joint Powers Agencies (JPAs) to act as CCAs to purchase and sell electricity on behalf of the utility customers within their jurisdiction • An Order Instituting Rulemaking (OIR R.17-06-026) was opened on
Slide 41: 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 (TOU) rates In March 2018, SCE began to migrate 400,000 residential customers to TOU rate structures Remaining e
Slide 42: Impacts of Abundant Solar Energy (Duck Curve)
Impacts of Abundant Solar Energy (Duck Curve) New Time-of-Use (TOU) Periods • On March 1, 2019, SCE changed its basic TOU pricing period definition for the first time in over 30 years • Abundant mid-day renewable energy lowers prices from 8am-4pm (October - June) • Highest cost period is now 4pm-9pm
Slide 43: SCE Net Energy Metering
SCE Net Energy Metering Monthly Residential Solar SCE Net Metering Statistics (9/19) Installations and MW Installed • 327,778 combined residential and non-residential projects – 2,734 MW installed • 99.8 % solar projects 7000 40 • 320,445 residential (7.1% of all residential customers) – 1,756 MW •
Slide 44: Third Quarter Earnings Summary
Third Quarter Earnings Summary Key SCE EPS Drivers4 Q3 Q3 Variance 2019 2018 Higher revenue5 $ 0.12 (0.02) Basic Earnings Per Share (EPS)1 - CPUC revenue - 2018 FERC Formula Rate settlement 0.10 SCE $ 1.45 $ 1.64 $ (0.19) - Other FERC revenue 0.04 Higher O&M (0.21) EIX Parent & Other (0.09) (0.07) (
Slide 45: Year to Date Earnings Summary
Year to Date Earnings Summary YTD YTD Key SCE EPS Drivers4 2019 2018 Variance Test Year 2018 GRC true-up5 $ 0.20 Higher revenue6 0.55 Basic Earnings Per Share (EPS)1 - CPUC revenue 0.32 SCE $ 3.65 $ 3.43 $ 0.22 - 2018 FERC Formula Rate settlement 0.10 - FERC and other operating revenue 0.13 EIX Pare
Slide 46: SCE Annual Results of Operations
SCE Annual Results of Operations ($ millions) • Earning activities – revenue authorized by CPUC and FERC to provide reasonable cost recovery and return on investment • Cost-recovery activities – CPUC- and FERC-authorized balancing accounts to recover specific project or program costs, subject to rea
Slide 47: Earnings Per Share Non-GAAP Reconciliations
Earnings Per Share Non-GAAP Reconciliations Reconciliation of EIX Basic Earnings Per Share Guidance to EIX Core Earnings Per Share Guidance EPS Attributable to Edison International 2019 Low Midpoint High SCE $4.83 EIX Parent & Other (0.32) Basic EPS1 $4.41 $4.51 $4.61 Non-Core Items SCE2,3 (0.29) (0
Slide 48: Earnings Non-GAAP Reconciliations
Earnings Non-GAAP Reconciliations ($ millions) Reconciliation of EIX GAAP Earnings to EIX Core Earnings Q3 Q3 YTD YTD Earnings Attributable to Edison International 2019 2018 2019 2018 SCE $503 $536 $1,215 $1,119 EIX Parent & Other (32) (23) (74) (112) Basic Earnings $471 $513 $1,141 $1,007 Non-Core
Slide 49: EIX Core EPS Non-GAAP Reconciliations
EIX Core EPS Non-GAAP Reconciliations Reconciliation of Edison International Basic Earnings Per Share to Edison International Core Earnings Per Share Earnings Per Share Attributable to Edison International 2018 2017 Basic EPS ($1.30) $1.73 Non-Core Items SCE Wildfire-related claims, net of recoverie
Slide 50: 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