Edison International · NYSE:EIX
Edison International — Corporate Update (February 2014)
53 slides from Edison International's corporate update, Feb 25, 2014
Slide 1: Business Update
Leading the Way in Electricity SM Business Update February 2014 February 25, 2014 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 2013 Bundled Revenue Requirement
Leading the Way in Electricity SM SCE 2013 Bundled Revenue Requirement 2013 Bundled Revenue Requirement $millions ¢/kWh Fuel & Purchased Power – includes CDWR Bond Charge 4,285 5.8 Fuel & Purchased Power (38%) Distribution – poles, wires, substations, service centers; 3,820 5.2 Edison SmartConnect®
Slide 6: SCE Customer Demand Trends
Leading the Way in Electricity SM SCE Customer Demand Trends Kilowatt-Hour Sales (millions of kWh) 2013 2012 2011 2010 2009 Residential 30,007 30,563 29,631 29,034 30,078 Commercial 40,808 40,541 39,622 39,318 40,076 Industrial 8,505 8,504 8,490 8,507 8,522 Public authorities 5,031 5,196 5,206 5,336
Slide 7: SCE Historical Capital Expenditures
Leading the Way in Electricity SM SCE Historical Capital Expenditures ($ billions) $3.8 $3.9 $3.9 $3.5 $2.9 $2.4 2008 2009 2010 2011 2012 2013 Note: 2013 distribution reliability spend up $300 million, offset by completion of SmartConnect in 2012 ($300 million); lower FERC ($300 million) and lower S
Slide 8: SCE Historical Rate Base and Core Earnings
Leading the Way in Electricity SM SCE Historical Rate Base and Core Earnings ($ billions) 2008 – 2013 CAGR Rate Base2 10% $21.0 $21.12 Core Earnings 12% $18.8 $16.8 $15.0 $13.1 2008 2009 2010 2011 2012 2013 Core Earnings $2.25 $2.68 $3.01 $3.33 $4.10 $3.88 1 Recorded rate base, year-end basis. See N
Slide 9: SCE 2015 CPUC General Rate Case
Leading the Way in Electricity SM SCE 2015 CPUC General Rate Case • November 2013, 2015 GRC Application A.13-11-003 submitted to Office of Ratepayer Advocate (ORA) Prehearing conference held on February 11 Current schedule anticipates final decision by the end of 2014 • Request sets base revenue
Slide 10: CPUC and FERC Cost of Capital
Leading the Way in Electricity SM CPUC and FERC Cost of Capital 7 CPUC Adjustment Mechanism Moody’s Baa Utility Index Spot Rate Moving Average (10/1/13 – 1/31/14) = 5.19% 100 basis point +/- Deadband 6 Rate (%) 5 Starting Value – 5.00% 4 3 10/1/12 10/1/13 10/1/14 10/1/15 • CPUC – 10.45% Return on Eq
Slide 11: SCE Capital Expenditures Forecast
Leading the Way in Electricity SM SCE Capital Expenditures Forecast ($ billions) $15.1 – $17.2 billion forecasted capital program 2014 – 2017 Distribution Transmission Generation $4.5 $4.4 • CPUC GRC focused on $4.1 $4.2 infrastructure replacement • Includes known scope changes for FAA requirements
Slide 12: SCE Rate Base Forecast
Leading the Way in Electricity SM SCE Rate Base Forecast ($ billions) 7 – 9% CAGR projected rate base 2014 – 2017 $29.2 $27.0 • Driven by infrastructure replacement, reliability $24.4 investments, and public policy requirements $22.4 • FERC rate base includes CWIP and is approximately 22% of 2014 ra
Slide 13: SCE Large Transmission Projects
Leading the Way in Electricity SM SCE Large Transmission Projects ($ millions) Project Total Project In Service ROE 2014–2017 Name Costs1 Date Incentives2 Forecast Status Costs and schedule remain uncertain. Cost estimate includes known scope 125 bps changes for FAA requirements. Final Tehachapi $3,
Slide 14: 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 15: 2014 Core and Basic Earnings Guidance
Leading the Way in Electricity SM 2014 Core and Basic Earnings Guidance 2014 Earnings Guidance as of 2/25/14 Low Mid High $0.52 $3.60 $3.70 $3.80 $3.70 $(0.15) Key Assumptions: $3.40 • Midpoint rate base of $22.1 billion $(0.07) • Cost savings / • Approved capital structure – other - $0.35 48% equit
Slide 16: EIX Dividend Growth
Leading the Way in Electricity SM EIX Dividend Growth $3.85 Guidance Midpoint 2008 – 2013 CAGR 2014 $1.42 (37%) SCE Core EPS 12% $3.88 2013 EIX Dividend 2% $1.35 (35%) $4.10 2012 $1.30 (32%) • EIX targets paying out 45 – 55% of SCE earnings $3.33 2011 $1.28 (38%) • Dividend growth rate slowed to hel
Slide 17: EIX – Positioned for Industry Change
Leading the Way in Electricity SM EIX – Positioned for Industry Change Long-Term EIX Industry Trends Strategy • Public policy • Invest in, build, and prioritizing operate the next environmental generation electric sustainability grid • Technology and Responding • Pursue growth financing innovations
Slide 18: Creating Shareholder Value: What We've Done and What Remains
Leading the Way in Electricity SM Creating Shareholder Value Create Sustainable Position for Resolve Earnings and Transformative Uncertainties Dividend Growth Sector Change What We’ve Done • SCE 2012 GRC • 10% 5-year SCE rate base • Acquired SoCore Energy • SCE 2013 cost of capital CAGR (2008 – 2013
Slide 19: EME Bankruptcy Settlement Summary
Leading the Way in Electricity SM EME Bankruptcy Settlement Summary • On February 18, settlement reached among EIX, EME, and certain of EME’s creditors holding a majority of its outstanding senior unsecured notes • Settlement will extinguish all existing claims between EME and EIX • Allows EME to em
Slide 20: EME Bankruptcy Settlement Implications
Leading the Way in Electricity SM EME Bankruptcy Settlement Implications Cash Impact • Based on current estimates: EIX expects net benefits of approximately $200 million over time EIX expects to utilize approximately $1.2 billion of EME tax benefits EIX would make $634 million in total payment
Slide 21: Changes Since Our Last Presentation
Leading the Way in Electricity SM Changes Since Our Last Presentation • Quarterly and year-end updates • SCE 2013 Bundled Revenue Requirement (p. 4) – new slide • SCE 2015 CPUC General Rate Case (p. 8) • CPUC and FERC Cost of Capital (p. 9) • SCE Capital Expenditures Forecast (p. 10) • SCE Rate Base
Slide 22: Appendix – SONGS
Leading the Way in Electricity SM Appendix – SONGS February 25, 2014 21 EDISON INTERNATIONAL®
Slide 23: SONGS – Supplemental Data
Leading the Way in Electricity SM SONGS – Supplemental Data ($ millions) Since (SCE Share as of December 31, 2013) 1/1/2012 Revenue Requirement Collected1 $1,248 Steam Generator Replacement (SGRP) – Approved2 $665 SGRP Total – Incurred $602 Incremental Inspection & Repair Costs $115 Shut Down Costs3
Slide 24: SONGS – Asset Impairment
Leading the Way in Electricity SM SONGS – Asset Impairment ($ millions) Revenue Subject to Refund SONGS Regulatory Asset Since Since Net investment1 $2,096 1/1/12 11/1/12 (as of 5/31/13) Authorized revenues $1,248 $706 Less: $575 million impairment (575) (as of 12/31/13) Add: other costs 70 Replacem
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 – 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 27: 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 filed Repair or replace defective items with the International Chamber of Commerce per MHI contract Specified damages f
Slide 28: 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 29: 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 30: 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 31: SONGS – NRC Notice of Nonconformance
Leading the Way in Electricity SM SONGS – NRC Notice of Nonconformance • Nuclear Regulatory Commission (NRC) issued Inspection Report and Notice of Nonconformance to MHI for its flawed computer modeling in the design of San Onofre’s steam generators – key findings presented in September 20, 2013 NRC
Slide 32: 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 33: Appendix – Regulatory
Leading the Way in Electricity SM Appendix – Regulatory February 25, 2014 32 EDISON INTERNATIONAL®
Slide 34: 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 35: 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 36: 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 37: 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) • Rate Reform 30.8¢ 30 Tier 4 Removes tier restrictions on
Slide 38: 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 39: SCE Rates and Bills Comparison
Leading the Way in Electricity SM SCE Rates and Bills Comparison 2013 Average Residential Rates Key Factors (¢/kWh) 16.5¢ • SCE’s residential rates are above national average due, in part, to a cleaner fuel mix – 12.4¢ cost for renewables are higher than high 33% carbon sources Higher • Average mont
Slide 40: 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 41: California Renewables Policy
Leading the Way in Electricity SM California Renewables Policy • On April 12, 2011, Governor Brown signed SB X 1 2, which codifies a 33% Renewables Portfolio Standard (RPS) for Actual 2012 Renewable Resources: California by 2020 20% of SCE’s portfolio Allows use of Renewable Energy Credits (RECs)
Slide 42: 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 43: 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 for CPUC per AB327 28,000 CAISO Net Load --- 2012 through 2020 • More variable and less predictable 26,000 output 24,000 • Output does not fully match demand 22,000 20,000 •
Slide 44: SCE Energy Efficiency Programs
Leading the Way in Electricity SM SCE Energy Efficiency Programs Energy efficiency programs updated for 2013 – 2014 Annual kWh Savings • SCE is a national leader (billions) 2012 energy savings = 1.8% of retail sales1 1.7 • 2013 budget of $347 million2 1.6 • Target 0.9 billion kWh average annual sa
Slide 45: Energy Storage
Leading the Way in Electricity SM Energy Storage • September 2010, AB2514 (Skinner) directs Energy Storage Procurement CPUC to establish procurement targets and Guiding Principles: policies for energy storage • October 2013, CPUC final decision in Energy • Optimization of the grid, including Storage
Slide 46: Appendix – Financial
Leading the Way in Electricity SM Appendix – Financial February 25, 2014 45 EDISON INTERNATIONAL®
Slide 47: Fourth Quarter Earnings Summary
Leading the Way in Electricity SM Fourth Quarter Earnings Summary Q4 2013 Q4 2012 Variance SCE Key Core Earnings Drivers Core EPS1 Lower revenue $(0.42) SCE $0.79 $1.85 $(1.06) SONGS impact2 (0.20) EIX Parent & Other 0.02 (0.06) 0.08 Lower O&M 0.15 Higher depreciation (0.10) Core EPS1 $0.81 $1.79 $(
Slide 48: Year End Earnings Summary
Leading the Way in Electricity SM Year End Earnings Summary 2013 2012 Variance SCE Key Core Earnings Drivers Core EPS1 Higher revenue $0.41 SCE $3.88 $4.10 $(0.22) SONGS impact2 (0.15) EIX Parent & Other (0.08) (0.18) 0.10 Higher depreciation (0.23) Higher net financing costs (0.10) Core EPS1 $3.80
Slide 49: 2013 Results vs. Guidance
Leading the Way in Electricity SM 2013 Results vs. Guidance SCE: $3.80 $3.80 +$0.07 EIX Parent & Other: +$0.08 Core EPS $(0.15) EIX Parent & Other: • Edison Capital – $0.05 SCE: • Other – $0.02 • Cost savings – $0.07 • Energy efficiency – $(0.01) • Other – $0.02 Total: $3.65 EPS Guidance SCE - EIX P
Slide 50: Non-GAAP Reconciliations
Leading the Way in Electricity SM Non-GAAP Reconciliations ($ millions) Reconciliation of EIX Core Earnings to EIX GAAP Earnings Earnings Attributable to Q4 Q4 Edison International 2013 2012 2013 2012 Core Earnings SCE $258 $602 $1,265 $1,338 EIX Parent & Other 6 (20) (28) (60) Core Earnings $264 $5
Slide 51: SCE Results of Operations
Leading the Way in Electricity SM SCE Results of Operations ($ 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 52: 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 2008 2009 2010 2011 2012 2013 CAGR Core EPS $2.25 $2.68 $3.01 $3.33 $4.10 $3.88 12% Non-Core Items Tax settleme
Slide 53: 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
Edison International — Corporate Update (February 2014) on 6ix