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Edison International Annual Report, Year Ended Dec 31, 1996

Filing Date
Filed March 28, 1997
Period End
December 31, 1996
Security
EIX
In the record · 2016–202610-K1110-Q348-K186

EIX filed 11 annual reports (10-K), 34 quarterly reports (10-Q) and 186 current reports (8-K) between 2016 and 2026.

  1. FY2016 annual report10-K · Feb ’17Feb ’17
  2. Leadership change8-K · Oct ’19Oct ’19
  3. Leadership change8-K · Dec ’21Dec ’21
  4. Material agreement8-K · Dec ’25Dec ’25

01—Abstract

Summary

Summary of the 10-K filed March 28, 1997. Cited figures are marked; the original filing is the authoritative source.

Edison International (EIX), parent holding company of Southern California Edison (SCE) and a set of nonutility businesses, reported 1996 net income of $716.7 milliona, or $1.64 per share, versus $1.66 in 1995 and $1.52 in 1994.

SCE accounted for 87% of net income and the Nonutility Companies for 13%. Earnings were held back by a 4.4% cut in SCE's authorized 1996 revenue ($338 millionb), a $237 million one-time ECAC bill credit, and about 6 cents per share of special charges, partly offset by a common stock buyback that retired 19.2 million shares ($344 million). Edison Mission Energy (EME), which owns the Asia Pacific, European and Turkish/Italian projects, drove most of the nonutility growth, aided by its First Hydro acquisition.

The central investor issue is California electric restructuring. Assembly Bill 1890, enacted September 1996, sets a rate freeze, at least a 10% residential and small commercial rate cut from 1998, and recovery of transition costs through a non-bypassable competition transition charge (CTC) through 2001. SCE estimates its potential transition costs at $13.1 to $13.8 billionc.

A key risk is that the SEC staff has questioned whether SCE can keep applying regulatory (SFAS 71) accounting to its generation assets. If that accounting is discontinued, SCE would write off about $600 milliond after tax of regulatory assets. SCE also proposes to divest its oil- and gas-fired plants by auction, with CPUC approval requested for late 1997.

The filing also discloses substantial litigation and contingent exposure. These include a $136.8 million contractor claim against the Brooklyn Navy Yard project, a $300 million-plus claim by an oil pipeline company, wind-producer and geothermal qualifying-facility suits, and San Onofre radiation injury cases.

Environmental cleanup reserves total $114 million, with a possible excess of up to $211 million. Overall the filing describes a company with stable earnings, a rising nonutility contribution, and a regulatory transition whose accounting and financial outcomes remain uncertain.

02—Key points

Key Highlights

  1. 1996 EPS of $1.64 (vs. $1.66 in 1995); net income $716.7 million, with SCE contributing 87% and nonutilities 13%
  2. Common stock repurchases of $344 million in 1996 retired 19.2 million shares, offsetting the earnings decline per share
  3. California AB 1890 (Sept. 1996) mandates a rate freeze, at least a 10% residential and small commercial rate cut from 1998, and a non-bypassable CTC through 2001
  4. Estimated potential transition costs of $13.1 to $13.8 billion, including $7.5 billion of qualifying facility contract costs
  5. SEC staff concern about SCE's continued use of regulatory accounting for generation assets; a discontinuation would require a write-off of about $600 million after tax
  6. Significant litigation, including a $136.8 million claim against Brooklyn Navy Yard, a $300 million-plus oil pipeline suit, and San Onofre radiation injury lawsuits
  7. Nonutility growth led by Edison Mission Energy, including the First Hydro acquisition, Paiton and ISAB projects, and Loy Yang B Unit 2 commercial operation

03—Questions

Frequently Asked Questions

  1. How did Edison International's 1996 earnings compare with prior years?

    Net income was $716.7 million, or $1.64 per share, compared with $739.1 million ($1.66) in 1995 and $680.7 million ($1.52) in 1994. The 1996 result included about 6 cents per share of special charges, and lower SCE authorized revenue was offset in part by share buybacks.

  2. What is the biggest regulatory risk to the company's earnings and balance sheet?

    The main risk is the transition to a competitive market under AB 1890 and the CPUC's restructuring decision. If the SEC requires SCE to discontinue regulatory accounting for its generation assets, SCE would write off roughly $600 million after tax of regulatory assets. Recovery of transition costs through the CTC and the 1998-2001 rate freeze also depend on future regulatory outcomes.

  3. How much does the company's nonutility business contribute?

    Nonutility companies contributed 13% of 1996 net income. Edison Mission Energy is the largest, with 7,549 MW of operating capacity worldwide (4,706 MW attributable to EME), while Mission Land is exiting real estate and Edison Capital is growing its affordable housing and leveraged-lease businesses.

  4. What significant legal exposures does the filing disclose?

    Key exposures include a $136.8 million claim by the Brooklyn Navy Yard contractor, a pipeline company suit alleging losses above $300 million, consolidated wind-producer contract claims of about $189 million, geothermal qualifying-facility claims, EMF cancer suits, and San Onofre radiation injury cases. Management generally believes these will not have a material adverse effect, though outcomes are uncertain.

04—Continue

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