Edison International · NYSE:EIX
Edison International — Corporate Update (April 2015)
40 slides from Edison International's corporate update, Apr 30, 2015
Slide 1: Business Update April 2015
April 30, 2015 Business Update April 2015
Slide 2: Forward-Looking Statements
April 30, 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-look
Slide 3: Table of Contents
April 30, 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, 2015 Financial Assumptions 6‐10 U General Rate Case, Cost of Capital 11‐12 System Investment, Growth Drivers Beyond 2017, Grid of the Future 12
Slide 4: EIX Shareholder Value
April 30, 2015 3 EIX Shareholder Value Sustainable Earnings Growth Positioned for Transformative 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 through 2017 Cons
Slide 5: SCE Highlights
April 30, 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 distribu
Slide 6: SCE Decoupled Regulatory Model
April 30, 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 chan
Slide 7: SCE Historical Capital Expenditures
April 30, 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
April 30, 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 Recon
Slide 9: SCE Capital Expenditures Forecast
April 30, 2015 8 SCE Capital Expenditures Forecast • Request case incorporates 2015 GRC January update • Net $325 million 2016-2017 decrease from prior forecast primarily for Coolwater-Lugo project suspension and other FERC project adjustments • Growth driven by infrastructure replacement, reliabili
Slide 10: SCE Rate Base Forecast
April 30, 2015 9 SCE Rate Base Forecast • Incorporates 2015 GRC January update • Rate base reduced due to Coolwater- Lugo transmission project request for suspension • FERC rate base includes Construction Work in Progress (CWIP) and is approximately 23% of SCE’s rate base forecast by 2017 • Excludes
Slide 11: 2015 Financial Assumptions
April 30, 2015 10 2015 Financial Assumptions ($ 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 gu
Slide 12: SCE 2015 CPUC General Rate Case
April 30, 2015 11 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,
Slide 13: CPUC and FERC Cost of Capital
April 30, 2015 12 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 from
Slide 14: SCE System Investments
April 30, 2015 13 SCE System Investments Distribution Transmission • Large transmission projects: – Tehachapi 4-11 – $2.5 billion total project cost; 2016-17 in service date – West of Devers – $1.0 billion total project cost; 2019-20 in service date • Aging system reaching equilibrium replacement ra
Slide 15: SCE Growth Drivers Beyond 2017
April 30, 2015 14 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 and
Slide 16: Distribution Grid of the Future
April 30, 2015 15 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 Sol
Slide 17: New Technology Grid Impacts
April 30, 2015 16 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 18: The Future of California Energy Policy
April 30, 2015 17 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 En
Slide 19: California Climate Change Policy
April 30, 2015 18 • 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
Slide 20: California Renewables Policy
April 30, 2015 19 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
Slide 21: Energy Storage
April 30, 2015 20 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 22: SCE Charge Ready Program
April 30, 2015 21 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 milli
Slide 23: SCE Energy Efficiency Programs
April 30, 2015 22 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 mechanism
Slide 24: SCE Key Regulatory Proceedings
April 30, 2015 23 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 A.13‐08‐023 Certificate of Public Convenience and Necessity for Coolwater‐Lugo Project Propos
Slide 25: SCE Operational Excellence
April 30, 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 is Responding to Industry Change
April 30, 2015 25 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 27: With a Commercial & Industrial Focus
April 30, 2015 26 ... With a Commercial & Industrial Focus • 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 outsourcing – Help customers manage through potential
Slide 28: EIX Annual Dividends Per Share
April 30, 2015 27 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
Slide 29: Appendix
April 30, 2015 28 Appendix
Slide 30: SCE 2014 Bundled Revenue Requirement
April 30, 2015 29 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) 2
Slide 31: SCE Customer Demand Trends
April 30, 2015 30 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
Slide 32: SCE Rates and Bills Comparison
April 30, 2015 31 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 33: Residential Rate Design OIR
April 30, 2015 32 Residential Rate Design OIR 14.85 19.28 25.39 30.89 0 5 10 15 20 25 30 35 0 200 400 600 800 1,000 1,200 1,400 ¢ / k W h kWh/month Proposed Decision 2017 Tiers: • Two tiers: Tier 1 – 19.7¢/kWh Tier 2 – 24.1¢/kWh • June 2012, CPUC opened Order Instituting Ratemaking (OIR) R.12-06
Slide 34: Fixed Charge vs. Minimum Bill
April 30, 2015 33 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 • OIR Proposed Decision “minimum bill” of $10/month – vast majority of SCE’
Slide 35: SCE Residential Net Metering Rate Structure
April 30, 2015 34 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 by
Slide 36: First Quarter Earnings Summary
April 30, 2015 35 First Quarter Earnings Summary Q1 2015 Q1 2014 Variance Core EPS1 SCE $0.93 $0.93 $ – EIX Parent & Other (0.03) (0.03) – Core EPS1 $0.90 $0.90 $ - Non-Core Items2 SCE $ – $(0.29) $0.29 EIX Parent & Other 0.02 – 0.02 Discontinued Operations – (0.07) 0.07 Total Non-Core $0.02 $(0.36)
Slide 37: Earnings Non-GAAP Reconciliations
April 30, 2015 36 Earnings Non-GAAP Reconciliations ($ 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 Basi
Slide 38: SCE Core EPS Non-GAAP Reconciliations
April 30, 2015 37 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 Basi
Slide 39: SCE Results of Operations – Full-Year 2014
April 30, 2015 38 $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 16
Slide 40: Use of Non-GAAP Financial Measures
April 30, 2015 39 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