Edison International · NYSE:EIX
Edison International — Corporate Update (July 2015)
45 slides from Edison International's corporate update, Jul 31, 2015
Slide 1: Business Update July 2015
July 31, 2015 Business Update July 2015
Slide 2: Forward-Looking Statements
July 31, 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-looki
Slide 3: Table of Contents
July 31, 2015 2 Table of Contents Page New (N) or Updated (U) EIX Shareholder Value 3 SCE Highlights, Regulatory Model 4‐5 Capital Expenditures, Rate Base 6‐9 System Investment, Growth Drivers Beyond 2017, Grid of the Future 10‐13 Distribution Resources Plan 14‐16 N Energy Storage, Charge Ready Prog
Slide 4: EIX Strategy Should Produce Superior Value
July 31, 2015 3 EIX Strategy Should Produce Superior Value Sustainable Earnings and Dividend Growth Positioned for Transformative Change Rate Base and Core Earnings Growth • 7 – 9% average annual rate base growth through 2017 Constructive Regulatory Structure • Decoupling • Balancing accounts • Forw
Slide 5: SCE Highlights
July 31, 2015 4 One of the nation’s largest electric utilities • Nearly 14 million residents in service territory • 5 million customer accounts • 50,000 square-mile service area Significant infrastructure investments • 1.4 million power poles • 700,000 transformers • 103,000 miles of distribution an
Slide 6: SCE Decoupled Regulatory Model
July 31, 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 chang
Slide 7: SCE Historical Capital Expenditures
July 31, 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
July 31, 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) $3.88 Note: Recorded rate base, year-end basis. See Earnings Non-GAAP Reconc
Slide 9: SCE Capital Expenditures Forecast
July 31, 2015 8 SCE Capital Expenditures Forecast • No change from prior forecast • Growth driven by infrastructure replacement, reliability investments, distribution resources plan investments and public policy requirements Note: Forecasted capital spending subject to timely receipt of permitting,
Slide 10: SCE Rate Base Forecast
July 31, 2015 9 SCE Rate Base Forecast • No change from prior forecast • FERC rate base includes Construction Work in Progress (CWIP) and is approximately 23% of SCE’s rate base forecast by 2017 • Excludes SONGS regulatory asset ($ billions) Request Range $23.1 $25.0 $26.9 $23.6 $26.0 $28.4 2015 201
Slide 11: SCE System Investments
July 31, 2015 10 SCE System Investments Distribution Transmission • Large transmission projects: – Tehachapi 4-11 – $2.5 billion total project cost; remaining investment $0.4 billion; 2016-17 in service date – West of Devers – $1.0 billion total project cost; remaining investment $1.0 billion; 2019-
Slide 12: SCE Growth Drivers Beyond 2017
July 31, 2015 11 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 Distribution Resources Plan • Accelerate aut
Slide 13: Distribution Grid of the Future
July 31, 2015 12 Distribution Grid of the Future One-Way Electricity Flow • System designed to generate electricity from large central plant • Very few distributed energy resources • Voltage relatively simple to maintain • Limited situational awareness and visualization tools for grid operators Rene
Slide 14: New Technology Grid Impacts
July 31, 2015 13 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 1
Slide 15: Distribution Resources Plan filing
July 31, 2015 14 AB 327 required IOU submissions of Distribution Resources Plans (DRP) on July 1, 2015 to integrate increasing penetration of Distributed Energy Resources (DERs). Key provisions of the DRP filing include: • Methodology/Tools for identifying optimal locations for DERs (includes distri
Slide 16: DRP phased plan 2015-2021+
July 31, 2015 15 2015 - 2017 2018 - 2020 2021 + Implement foundational information technology, communication systems, and system planning tools; begin grid reinforcement work Expand automation and improve communications and control with Distributed Energy Resources; continue grid reinforcement work
Slide 17: SCE DRP Capital Expenditure Estimates
July 31, 2015 16 SCE DRP Capital Expenditure Estimates Time Period Capital Expenditures CPUC Approval Mechanism 2015-2017 Distribution Automation $40-70 million • Proposed memorandum account to record associated revenue requirement until expenditures are authorized by CPUC Substation Automation $30-
Slide 18: Energy Storage
July 31, 2015 17 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 (15%)
Slide 19: SCE Charge Ready Program
July 31, 2015 18 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 millio
Slide 20: SCE Key Regulatory Proceedings
July 31, 2015 19 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 expected in 2015 Cost of Capital Application Capital structure and return on equity Next filing schedu
Slide 21: SCE 2015 CPUC General Rate Case
July 31, 2015 20 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 capital, and
Slide 22: CPUC and FERC Cost of Capital
July 31, 2015 21 CPUC and FERC Cost of Capital 3 4 5 6 7 10/1/12 10/1/13 10/1/14 10/1/15 10/1/16 R a t e ( % ) CPUC Adjustment Mechanism Moody’s Baa Utility Index Spot Rate Moving Average (10/1/14 – 4/1/15) = 4.69% 100 basis point +/- Deadband Starting Value – 5.00% CPUC – 48% common equity and Retu
Slide 23: Residential Rate Design OIR
July 31, 2015 22 Residential Rate Design OIR • CPUC Order Instituting Ratemaking R.12-06-013 includes comprehensive review of residential rate structure including a future transition to time of use rates • July 2015 CPUC Decision includes: - Transition to 2 tiered rates by 2019 - “Super User Electri
Slide 24: SCE Residential Net Metering Rate Structure
July 31, 2015 23 SCE Residential Net Metering Rate Structure 7¢ 24¢17¢ 0 5 10 15 20 25 30 ¢ / k W h Solar Subsidies (Illustrative) Avoided Generation Subsidy Paid by Other Ratepayers Equivalent Solar Offset Current rate design results in residential solar customers receiving a subsidy funded by all
Slide 25: SCE Operational Excellence
July 31, 2015 24 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 metrics •
Slide 26: EIX Annual Dividends Per Share
July 31, 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 of 4
Slide 27: Appendix
July 31, 2015 26 Appendix
Slide 28: SCE 2014 Bundled Revenue Requirement
July 31, 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) 201
Slide 29: SCE Rates and Bills Comparison
July 31, 2015 28 SCE Rates and Bills Comparison 12.9 16.4 US Average SCE 27% 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 average –
Slide 30: SCE Customer Demand Trends
July 31, 2015 29 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 railways I
Slide 31: Southern California wholesale electricity prices
July 31, 2015 30 (Southern California) Source: Energy Information Administration, July 2015. Data is for SP-15 Nodes Wholesale Electricity Prices, May 2014-June 2015
Slide 32: The Future of California Energy Policy
July 31, 2015 31 The Future of California Energy Policy January 2015, Governor Brown’s inauguration speech outlined environmental objectives for 2030 which are currently being considered by the legislature (SB 350) • Increase renewables (RPS) to 50% • Reduce petroleum use in cars by 50% • Double eff
Slide 33: California Cap and Trade Program
July 31, 2015 32 • 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 allowances s
Slide 34: California Renewables Policy
July 31, 2015 33 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 – Applies s
Slide 35: SCE Energy Efficiency Earnings Summary
July 31, 2015 34 SCE Energy Efficiency Earnings Summary Program Year Total Requested Received Pending CPUC Approval 2010 $15.1 million $0.03/share $15.1 million $0.03/share (2012) 2011 $18.6 million $0.04/share $13.6 million $0.03/share (2013) $5.0 million $0.01/share 2012 $16.2 million $0.03/share
Slide 36: EIX is Responding to Industry Change
July 31, 2015 35 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 more c
Slide 37: Edison Energy Focus: Commercial & Industrial
July 31, 2015 36 • Create energy services that help simplify and optimize energy needs for commercial & industrial customers: – Help customers better value energy optimization, paving the way for greater third party energy services – Help customers manage through potential technological / regulatory
Slide 38: Grid Assurance
July 31, 2015 37 On June 10th, eight electric utilities and energy companies announced a MOU to pursue the development of Grid Assurance, a limited liability company that plans to offer subscribers cost- effective solutions for enhancing grid resiliency and protecting customers from prolonged transm
Slide 39: Second Quarter Earnings Summary
July 31, 2015 38 Q2 2015 Q2 2014 Variance Core Earnings Per Share (EPS)1 SCE $1.18 $1.11 $0.07 EIX Parent & Other (0.02) (0.03) 0.01 Core EPS1 $1.16 $1.08 $0.08 Non-Core Items2 SCE $ – $ – $ – EIX Parent & Other – – – Discontinued Operations – 0.56 (0.56) Total Non-Core $ – $0.56 $(0.56) Basic EPS $
Slide 40: YTD 2015 Earnings Summary
July 31, 2015 39 YTD 2015 YTD 2014 Variance Core Earnings Per Share (EPS)1 SCE $2.12 $2.04 $0.08 EIX Parent & Other (0.06) (0.06) – Core EPS1 $2.06 $1.98 $0.08 Non-Core Items2 SCE $ – $(0.29) $0.29 EIX Parent & Other 0.02 – 0.02 Discontinued Operations – 0.49 (0.49) Total Non-Core $0.02 $0.20 $(0.18
Slide 41: SCE Results of Operations – Full-Year 2014
July 31, 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) — — — — — $— $13,380 5,593 3,057 1,720 318 163
Slide 42: 2015 Financial Assumptions
July 31, 2015 41 2015 Financial Assumptions ($ 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 Comparable to CPUC ROE EIX will provide 2015 earnings guidance a
Slide 43: Earnings Non-GAAP Reconciliations
July 31, 2015 42 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 Basic
Slide 44: SCE Core EPS Non-GAAP Reconciliations
July 31, 2015 43 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 Basic
Slide 45: Use of Non-GAAP Financial Measures
July 31, 2015 44 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 a