10-KPeriod: FY2017

EDISON INTERNATIONAL Annual Report, Year Ended Dec 31, 2017

Filed February 22, 2018For Securities:EIX

Summary

Edison International (EIX) reported a decrease in net income attributable to common shareholders for the fiscal year ended December 31, 2017, primarily due to significant non-core items, including charges related to the San Onofre settlement and the impact of Tax Reform. Southern California Edison (SCE), the primary subsidiary, experienced lower earnings driven by these non-core items, although core earnings for SCE saw an increase. The company faces substantial risks and uncertainties, notably from the December 2017 wildfires and the Montecito mudslides, which could lead to material liabilities and impact future financial performance. The company is actively pursuing legislative and regulatory solutions to address wildfire cost recovery and is also navigating significant capital investment plans for grid modernization and regulatory proceedings for its 2018 General Rate Case. Despite these challenges, Edison International maintained a solid liquidity position and continued to pay dividends. Investors should closely monitor the outcomes of the wildfire litigation, the CPUC's decision on the Revised San Onofre Settlement Agreement, and the company's ability to manage regulatory and operational risks. The company's future outlook depends significantly on its success in navigating these complex issues and managing its capital program effectively.

Financial Highlights

48 data points
Beta

Revenue

$12.32B

Net Income

$668.00M

5.4% Net Margin

EPS (Diluted)

$1.72

Total Assets

$52.58B

Cash & Equivalents

$1.09B

Free Cash Flow

-$247.00M

Financial Statements
Beta
Revenue$12.32B
Operating Expenses$10.86B
Operating Income$1.46B
Interest Expense$639.00M
Net Income$668.00M
EPS (Basic)$1.73
EPS (Diluted)$1.72
Shares Outstanding (Basic)326.00M
Shares Outstanding (Diluted)328.00M

Key Highlights

  • 1Edison International reported a net income attributable to common shareholders of $565 million in 2017, a decrease from $1.311 billion in 2016, largely due to significant non-core charges.
  • 2Southern California Edison (SCE) incurred approximately $716 million in impairment and other charges related to the Revised San Onofre Settlement Agreement, impacting overall earnings.
  • 3The Tax Cuts and Jobs Act of 2017 resulted in a re-measurement of deferred taxes, leading to a non-core charge of $433 million for Edison International Parent and Other and $5.0 billion in increased regulatory liabilities for SCE.
  • 4SCE is facing potential material liabilities from the December 2017 wildfires and Montecito mudslides, with ongoing investigations and lawsuits, and the extent of potential losses is currently not estimable.
  • 5SCE's wildfire-specific insurance coverage may not be sufficient to cover all potential damages, and recovery of uninsured losses through customer rates is uncertain.
  • 6The company is undergoing a strategic review of its competitive businesses under Edison Energy Group, including exploring the potential sale of SoCore Energy.
  • 7SCE's capital expenditure forecast for 2018-2020 is approximately $13.7 billion, with significant investments planned for traditional capital expenditures and grid modernization.

Frequently Asked Questions

The primary driver for the decrease in Edison International's net income in 2017 was the recognition of significant non-core items. These included charges totaling $716 million related to the Revised San Onofre Settlement Agreement and $466 million in income tax expense from the re-measurement of deferred taxes due to the Tax Cuts and Jobs Act. These items, combined with lower earnings from SCE and the parent company, significantly impacted the consolidated net income.

The company faces several significant risks. These include potential substantial liabilities from the December 2017 wildfires and Montecito mudslides, where the full extent of damages and SCE's liability is yet to be determined and insurance coverage may be insufficient. Regulatory risks are also prominent, with ongoing proceedings from the CPUC and FERC, including the 2018 General Rate Case and the San Onofre settlement approval. Additionally, climate change and extreme weather events pose operational risks, and the company is managing significant capital investments for grid modernization.

The Tax Cuts and Jobs Act reduced the federal corporate income tax rate from 35% to 21%, effective January 1, 2018. This required the re-measurement of deferred tax assets and liabilities. For Edison International Parent and Other, this resulted in a $433 million non-core charge. For SCE, the re-measurement of deferred taxes led to a reduction in deferred tax liabilities and an increase in regulatory liabilities of approximately $5.0 billion, which are expected to be refunded to customers over time. While it lowers customer rates in the near term, the lower corporate tax rate will reduce cash flow from operations and increase rate base over time.

Edison International and other parties entered into a Revised San Onofre Settlement Agreement on January 30, 2018. This agreement, if approved by the CPUC, will resolve issues related to the nuclear facility's shutdown and replacement steam generators. The agreement modifies the prior settlement and will result in the cessation of rate recovery for San Onofre costs once remaining regulatory assets reach $775 million. SCE will retain $47 million from an arbitration with MHI and the right to sell nuclear fuel inventory without sharing proceeds with customers, a change from the prior agreement. The CPUC's approval is pending, with further testimony and hearings scheduled.