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Edison International Reports Operating Results (10-Q)

October 29, 2010 | About:
10qk

10qk

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Edison International (EIX) filed Quarterly Report for the period ended 2010-09-30.

Edison International has a market cap of $11.7 billion; its shares were traded at around $35.97 with a P/E ratio of 11.5 and P/S ratio of 0.9. The dividend yield of Edison International stocks is 3.5%. Edison International had an annual average earning growth of 1.4% over the past 10 years.EIX is in the portfolios of Richard Pzena of Pzena Investment Management LLC, HOTCHKIS & WILEY of HOTCHKIS & WILEY Capital Management LLC, John Buckingham of Al Frank Asset Management, Inc., Pioneer Investments, Mario Gabelli of GAMCO Investors, Paul Tudor Jones of The Tudor Group, Charles Brandes of Brandes Investment, Jim Simons of Renaissance Technologies LLC, PRIMECAP Management, Bruce Kovner of Caxton Associates, Steven Cohen of SAC Capital Advisors, David Dreman of Dreman Value Management, Kenneth Fisher of Fisher Asset Management, LLC.

Highlight of Business Operations:

SCE's 2010 core earnings increased $52 million and $95 million for the quarter and year-to-date, respectively. The quarter increase was primarily due to higher authorized revenue to support rate base growth and higher capitalized financing costs (AFUDC). The year-to-date increase was due to higher authorized revenue to support rate base growth, lower income tax expense and higher capitalized financing costs (AFUDC). The year-to-date increase was partially offset by higher operating expenses that continue to reflect the impact of curtailed spending last year due to the timing of the 2009 CPUC GRC decision. The year-to-date lower tax expense includes a change in method of tax accounting for asset removal costs primarily related to SCE's infrastructure replacement program.

EMG's 2010 core earnings increased $59 million and decreased $21 million for the quarter and year-to-date, respectively. EMG's third quarter 2010 core earnings were higher than third quarter 2009 core earnings primarily due to higher operating revenues from Midwest Generation and Homer City mostly from higher average realized energy prices, higher capacity revenues, and a gain from the sale of bankruptcy claims. EMG's core earnings for the nine months ended September 30, 2010 were lower than core earnings for the nine months ended September 30, 2009 primarily as a result of higher plant maintenance costs in 2010 due to scheduled plant outages, partially offset by higher energy trading revenues. Energy and fuel related unrealized losses during the nine months ended September 30, 2010 were $30 million compared to unrealized gains of $45 million during the same period last year.

An earnings benefit of $175 million recorded in 2010 relating to the California impact of the federal Global Settlement, including $138 million in the second quarter resulting from acceptance by the California Franchise Tax Board of the tax positions finalized with the IRS in 2009 and revision to interest recorded on the federal Global Settlement, and $37 million in the third quarter resulting from receipt of the final interest determination from the California Franchise Tax Board. During the nine months ended September 30, 2009, Edison International recorded a consolidated after-tax earnings charge of $274 million related to the Global Settlement finalized with the IRS and termination of Edison Capital's cross-border leases ($920 million pre-tax loss). For further discussion of Global Settlement, see "Item 8. Edison International Notes to Consolidated Financial StatementsNote 4. Income Taxes" of the 2009 Form 10-K. 53

A non-cash charge of $39 million in the first quarter of 2010 to reverse previously recognized federal tax benefits eliminated by the federal health care legislation. The Patient Protection and Affordable Care Act, as modified by the Health Care and Education Reconciliation Act, was enacted in March 2010. The new health care legislation includes a provision that eliminates the federal tax deduction of retiree health care costs to the extent those costs are eligible for federal Medicare Part D subsidies. An after-tax benefit of $46 million recorded in the third quarter of 2009 resulting from the transfer of the Mountainview power plant to utility rate base pursuant to CPUC and FERC approvals. SCE Capital Program

SCE's capital investments (including accruals) during the nine months ended September 30, 2010 totaled $2.4 billion. SCE projects that capital investments will be in the range of $3.3 billion to $4.0 billion in 2010 and in the range of $18 billion to $21.5 billion for 2010 2014. The rate of actual capital spending will be affected by permitting, regulatory, market and other factors as discussed further under "SCE: Liquidity and Capital ResourcesCapital Investment Plan" in the 2009 Form 10-K.

On July 19, 2010, SCE submitted to the CPUC's Division of Ratepayer Advocates its notice of intent ("NOI") to file a 2012 GRC. The NOI indicates that SCE's GRC application, expected to be filed by year-end 2010, will request a 2012 base rate revenue requirement of $6.3 billion. After considering the effects of sales growth, SCE's request would be a $903 million increase over projected 2011 base rate revenue. If the CPUC approves the requested rate increase and allocates the increase to ratepayer groups on a system average percentage change basis, the percentage increases over current base rates and total rates are estimated to be 16.9% and 7.9%, respectively. The requested revenue requirement increase is driven by the need to maintain system reliability, accommodate customer load growth, and increase operation and maintenance expenses primarily for capital-related projects, information technology, insurance and pension contributions. The NOI also indicates that SCE's application will propose a post-test year ratemaking mechanism which would result in 2013 and 2014 incremental base revenue requirement increases, net of sales growth, of $305 million and $542 million, respectively, for the same reasons. The current schedule anticipates a final decision on SCE's 2012 GRC by the end of 2011. SCE cannot predict the revenue requirement the CPUC will ultimately authorize or precisely when a final decision will be adopted.

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