Edison International · NYSE:EIX
Edison International — Corporate Update (February 2015)
42 slides from Edison International's corporate update, Feb 25, 2015
Slide 1: Business Update February 2015
February 25, 2015 Business Update February 2015
Slide 2: Forward-Looking Statements
February 25, 2015 1 Forward-Looking Statements Statements contained in this presentation about future performance, including, without limitation, operating results, asset and rate base growth, capital expenditures, financial outlook, and other statements that are not purely historical, are forward-l
Slide 3: Table of Contents
February 25, 2015 2 Table of Contents Page New (N) or Updated (U) EIX Shareholder Value 3 U SCE Highlights, Regulatory Model 4‐5 Capital Expenditures and Rate Base 6‐9 U General Rate Case, Cost of Capital 10‐11 U System Investment, Growth Drivers Beyond 2017, Grid of the Future 12‐15 U California En
Slide 4: EIX Shareholder Value
February 25, 2015 3 EIX Shareholder Value Sustainable Earnings Growth Positioning for Transformative Sector Change Financial Discipline Rate Base and Core Earnings Growth: • 9% 5-year SCE rate base CAGR (2009 – 2014) • 12% Core SCE EPS growth (2009 – 2014) • Consistent 7 – 9% rate base growth throug
Slide 5: SCE Highlights
February 25, 2015 4 • 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 ‒ 700,000 transformers ‒ 103,000
Slide 6: SCE Decoupled Regulatory Model
February 25, 2015 5 SCE Decoupled Regulatory Model Decoupling of Regulated Revenues from Sales Major Balancing Accounts • Fuel • Purchased power • Energy efficiency • Pension-related contributions Advanced Long-Term Procurement Planning Forward-looking Ratemaking • SCE earnings are not affected by c
Slide 7: SCE Historical Capital Expenditures
February 25, 2015 6 SCE Historical Capital Expenditures $2.9 $3.8 $3.9 $3.9 $3.5 $4.0 2009 2010 2011 2012 2013 2014 ($ billions)
Slide 8: SCE Historical Rate Base and Core Earnings
February 25, 2015 7 $15.0 $16.8 $18.8 $21.0 $21.1 $23.3 2009 2010 2011 2012 2013 2014 SCE Historical Rate Base and Core Earnings Rate Base Core Earnings 9% 12% 2009 – 2014 CAGR Core EPS $4.68$2.68 $3.01 $3.33 $4.10 ($ billions) $3.88 Note: Recorded rate base, year-end basis. See Earnings Non-GAAP Re
Slide 9: SCE Capital Expenditures Forecast
February 25, 2015 8 SCE Capital Expenditures Forecast • Request case incorporates 2015 GRC January update • $100 million 2015-2016 changes from prior forecast primarily due to timing of Transmission capital expenditures • Growth driven by infrastructure replacement, reliability investments, and publ
Slide 10: SCE Rate Base Forecast
February 25, 2015 9 SCE Rate Base Forecast • Incorporates 2015 GRC January update • Net $300 million reduction by 2017 from prior forecast due to: – Extension of bonus depreciation ($400 million reduction) – Timing of transmission spend ($100 million reduction) – SmartConnect deferred tax adjustment
Slide 11: SCE 2015 CPUC General Rate Case
February 25, 2015 10 SCE 2015 CPUC General Rate Case • November 2013, 2015 GRC Application A.13-11-003 sets 2015 – 2017 base revenue requirement – Includes operating costs and CPUC jurisdictional capital – Excludes fuel and purchased power (and other utility cost-recovery activities), cost of capita
Slide 12: CPUC and FERC Cost of Capital
February 25, 2015 11 CPUC and FERC Cost of Capital • CPUC – 48% common equity and Return on Equity (ROE) adjustment mechanism has been extended through 2016 – Weighted average authorized cost of capital – 7.90% – ROE adjustment based on 12-month average of Moody’s Baa utility bond rates, measured fr
Slide 13: SCE System Investments
February 25, 2015 12 SCE System Investments Distribution Transmission • Large transmission projects: – Tehachapi 4-11 – $2.4 billion total project cost; 2016-17 in service date – Coolwater-Lugo – $0.7 billion total project cost; 2018 in service date pending CPUC review – West of Devers – $1.0 billio
Slide 14: SCE Growth Drivers Beyond 2017
February 25, 2015 13 SCE Growth Drivers Beyond 2017 Infrastructure Reliability Investment • Sustained level of infrastructure investment required until equilibrium replacement rates are achieved - includes underground cable, poles, switches, and transformers1 Grid Readiness • Accelerate automation a
Slide 15: Distribution Grid of the Future
February 25, 2015 14 Distribution Grid of the Future One-Way Electricity Flow • System planned and designed to serve customer demand • Very few distributed energy resources • Voltage simple to maintain • Limited situational awareness and visualization tools for grid operators Subsidized Residential
Slide 16: New Technology Grid Impacts
February 25, 2015 15 New Technology Grid Impacts 2 1 3 1 1 1 2 2 Future state based on evolving energy landscape More automated and digital, with more sophisticated voltage control and protection schemes Facilitates increasing renewables & two- way power flow Cyber mitigation must be included 1 2 3
Slide 17: The Future of California Energy Policy
February 25, 2015 16 The Future of California Energy Policy • January 2015, Governor Brown’s inauguration speech outlined environmental objectives for 2030: – Increase renewables (RPS) to 50% – Reduce petroleum use in cars by 50% – Double efficiency of existing buildings Renewables Electric Vehicles
Slide 18: California Climate Change Policy
February 25, 2015 17 • Assembly Bill 32 (2006) – reduces State greenhouse gas (GHG) emissions to 1990 levels by 2020 (~16% reduction) • Cap and trade program basics: – State-wide cap in 2013 – decreases over time – Compliance met through allowances, offsets, or emissions reductions – Excess allowanc
Slide 19: California Renewables Policy
February 25, 2015 18 California Renewables Policy • On April 12, 2011, Governor Brown signed SB X 1 2, which codifies a 33% Renewables Portfolio Standard (RPS) for California by 2020 – Allows use of Renewable Energy Credits (RECs) for up to 25% of target with decreasing percentages over time – Appli
Slide 20: Energy Storage
February 25, 2015 19 Energy Storage • AB2514 directed CPUC to establish procurement targets and policies for storage • CPUC final decision in Energy Storage OIR (R.10-12-007) – 1,325 MW target for IOUs by 2024 (580 MW SCE share) – Three types: transmission (53%), distribution (32%), customer-sited (
Slide 21: SCE Charge Ready Program
February 25, 2015 20 SCE Charge Ready Program • October 2014, electric vehicle Charge Ready Program application submitted to CPUC (A.14-10- 014) • Pro-active, two-phased program over five years to support installation of up to 30,000 EV charging stations to be included in rate base – Phase 1: $22 mi
Slide 22: SCE Energy Efficiency Programs
February 25, 2015 21 SCE Energy Efficiency Programs Energy efficiency programs updated for 2013 – 2015 • 2015 budget of $333 million • Savings targets of 983 GWh and 160.1 MW for 2015 – Reduced goals reflect CPUC-identified potential for energy efficiency Energy efficiency earnings incentive mechani
Slide 23: SCE Key Regulatory Proceedings
February 25, 2015 22 SCE Key Regulatory Proceedings Proceeding Description Next Steps Capital 2015 GRC Application (A.13‐11‐003) Rate setting for CPUC 3‐year cycle 2015 – 17 Proposed and final decision in 2015 Cost of Capital Application Capital structure and return on equity Extension to file in Ap
Slide 24: EIX is Responding to Industry Change
February 25, 2015 23 EIX is Responding to Industry Change • Public policy prioritizing environmental sustainability • Innovation facilitating conservation and self-generation • Regulation supporting new forms of competition • Flattening domestic demand for electricity • Grid of the future will be mo
Slide 25: 2015 Financial Assumptions
February 25, 2015 24 2015 Financial Assumptions ($ billions) SCE Capital Expenditures SCE Authorized Cost of Capital Other SCE Items CPUC Return on Equity 10.45% CPUC Capital Structure 48% equity 43% debt 9% preferred FERC Return on Equity (Inc. FERC Incentives) 10.45% EIX will provide 2015 earnings
Slide 26: EIX Annual Dividends Per Share
February 25, 2015 25 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 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Note: See use of Non-GAAP Financial Measures in Appendix Eleven Years of Dividend Growth EIX targets a payout ratio
Slide 27: Appendix
February 25, 2015 26 Appendix
Slide 28: SCE 2014 Bundled Revenue Requirement
February 25, 2015 27 SCE 2014 Bundled Revenue Requirement Note: Rates in effect as of July 7, 2014, based on forecast. Represents bundled service which excludes Direct Access customers that do not receive generation services. 60% utility earnings activities SCE Systemwide Average Rate History (¢/kWh
Slide 29: SCE Customer Demand Trends
February 25, 2015 28 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 railwa
Slide 30: SCE Rates and Bills Comparison
February 25, 2015 29 SCE Rates and Bills Comparison 12.6 16.6 US Average SCE 33% Higher • SCE’s residential rates are above national average due, in part, to a cleaner fuel mix – cost for renewables are higher than high carbon sources • Average monthly residential bills are lower than national avera
Slide 31: Residential Rate Design OIR
February 25, 2015 30 Residential Rate Design OIR 14.85 19.28 28.10 32.10 0 5 10 15 20 25 30 35 0 200 400 600 800 1,000 1,200 1,400 ¢ / k W h kWh/month SCE Proposed 2018 Tiers: • Two tiers: Tier 1 – 16.4¢/kWh Tier 2 – 19.7¢/kWh • June 2012, CPUC opened Order Instituting Ratemaking (OIR) R.12-06-0
Slide 32: SCE Residential Net Metering Rate Structure
February 25, 2015 31 SCE Residential Net Metering Rate Structure 8.7¢ 30.6¢21.9¢ 0 5 10 15 20 25 30 35 ¢ / k W h Solar Subsidies (Illustrative) Generation Rate Subsidy Paid by Other Ratepayers Equivalent Solar Rate Current rate design results in residential solar customers receiving a subsidy funded
Slide 33: Fixed Charge vs. Minimum Bill
February 25, 2015 32 Fixed Charge vs. Minimum Bill AB 327 permits the CPUC to authorize up to a $10/month fixed charge, and the Commission may consider whether minimum bills are appropriate as a substitute for any fixed charges • SCE has proposed a $10/month fixed charge while some parties have prop
Slide 34: SCE Operational Excellence
February 25, 2015 33 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 metric
Slide 35: Fourth Quarter Earnings Summary
February 25, 2015 34 Fourth Quarter Earnings Summary • SCE $0.08 – change in estimate of SONGS settlement • Discontinued Operations $0.12 – income tax benefits from resolution of 2003-2006 tax positions and other tax impacts related to EME Q4 2014 Q4 2013 Variance Core EPS1 SCE $1.09 $0.79 $0.30 EIX
Slide 36: Full-Year Earnings Summary
February 25, 2015 35 Full-Year Earnings Summary 2014 2013 Variance Core EPS1 SCE $4.68 $3.88 $0.80 EIX Parent & Other (0.09) (0.08) (0.01) Core EPS1 $4.59 $3.80 $0.79 Non-Core Items SCE $(0.22) $(1.12) $0.90 EIX Parent & Other 0.01 0.02 (0.01) Discontinued Operations 0.57 0.11 0.46 Total Non-Core $0
Slide 37: 2014 Earnings Guidance Result Reconciliation
February 25, 2015 36 2014 Earnings Guidance Result Reconciliation $3.40 $1.03 $4.30 $0.25 $0.04 $4.59 ($0.13) SCE 2014 EPS from Rate Base Forecast SCE 2014 Variances EIX Parent & Other October 28, 2014 Guidance Midpoint Fourth Quarter SCE Variances Fourth Quarter EIX Parent & Other Variances 2014 Co
Slide 38: Earnings Non-GAAP Reconciliations
February 25, 2015 37 Earnings Non-GAAP Reconciliations ($ millions) Reconciliation of EIX Core Earnings to EIX GAAP Earnings Earnings Attributable to Edison International Core Earnings SCE EIX Parent & Other Core Earnings Non-Core Items SCE EIX Parent & Other Discontinued operations Total Non-Core B
Slide 39: SCE Core EPS Non-GAAP Reconciliations
February 25, 2015 38 SCE Core EPS Non-GAAP Reconciliations Earnings Per Share Attributable to SCE Core EPS Non-Core Items Tax settlement Health care legislation Regulatory and tax items Impairment and other charges Total Non-Core Items Basic EPS Reconciliation of SCE Core Earnings Per Share to SCE B
Slide 40: SCE Results of Operations – Fourth Quarter 2014
February 25, 2015 39 $1,590 — 608 398 79 — 1,085 505 (136) (3) 366 83 283 25 $258 $1,341 1,073 268 — — — 1,341 — — — — — — — $— $1,808 — 604 472 86 (68) 1,094 714 (130) (12) 572 164 408 28 $380 $1,296 1,029 266 — — — 1,295 1 (1) — — — — — $— $3,104 1,029 870 472 86 (68) 2,389 715 (131) (12) 572 164
Slide 41: SCE Results of Operations – Full-Year 2014
February 25, 2015 40 $6,602 — 2,348 1,622 307 575 4,852 1,750 (519) 48 1,279 279 1,000 100 $900 $5,960 4,891 1,068 — — — 5,959 1 (1) — — — — — $— $6,831 — 2,106 1,720 318 163 4,307 2,524 (528) 43 2,039 474 1,565 112 $1,453 $6,549 5,593 951 — — — 6,544 5 (5) — — — — — $— $13,380 5,593 3,057 1,720 318
Slide 42: Use of Non-GAAP Financial Measures
February 25, 2015 41 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 a
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