01—Abstract
Summary
Summary of the 10-K filed February 28, 2019. Cited figures are marked; the original filing is the authoritative source.
Edison International's (EIX) 2018 10-K highlights a challenging year, primarily driven by significant wildfire-related claims which led to a net loss attributable to common shareholders of $423 milliona, a stark contrast to the $565 million net income in 2017.
Southern California Edison (SCE) recorded a substantial $2.5 billionb pre-tax charge for wildfire claims, partially offset by expected insurance and FERC recoveries. Despite these challenges, SCE's core operations remained resilient, though impacted by higher operation and maintenance expenses related to wildfire insurance and vegetation management. The company is focused on modernizing its grid and investing in safety and resiliency measures, with a capital expenditure plan of $4.4 billion in 2018 and planned investments in grid modernization.
Regulatory proceedings, including the pending 2018 General Rate Case for SCE, will be crucial for future revenue recovery. The company also faced operational hurdles with the suspension of spent nuclear fuel transfer at San Onofre and the ongoing impacts of Tax Reform on deferred taxes.
02—Key points
Key Highlights
- Edison International reported a net loss attributable to common shareholders of $423 million in 2018, significantly down from a net income of $565 million in 2017, largely due to a $2.5 billion charge for wildfire-related claims recorded by SCE.
- SCE's core earnings were $1.44 billion, slightly down from $1.49 billion in 2017, reflecting increased operation and maintenance expenses, particularly wildfire insurance premiums and vegetation management.
- Wildfire events in 2017/2018 led to a substantial charge of $4.7 billion before recoveries and taxes, with $2.0 billion in expected insurance recoveries and $135 million from FERC rates recognized, resulting in an $1.8 billion after-tax net charge.
- SCE's capital expenditures were $4.4 billion in 2018, with significant ongoing investments in transmission, distribution, and grid modernization to enhance safety and reliability.
- The company is navigating significant regulatory processes, including the pending 2018 General Rate Case for SCE, which will determine revenue requirements for 2018-2020 and impact future capital recovery.
- The permanent retirement of the San Onofre nuclear facility was resolved through a settlement agreement, though SCE incurred charges related to this resolution in 2017.
- Tax Reform enacted in late 2017, which reduced the federal corporate tax rate to 21%, required re-measurement of deferred taxes and has ongoing implications for future cash flows and rate base growth.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2018filed February 28, 2019Financial Statements
FY2018 against FY2017
| Line item | FY2018FY2017 | Change |
|---|---|---|
| Revenue | $12.66B$12.32B | +2.7% |
| Operating Expenses | $13.21B$10.86B | +21.6% |
| Operating Income | -$552.00M$1.46B | −137.9% |
| Interest Expense | $734.00M$639.00M | +14.9% |
| Net Income | -$316.00M$668.00M | −147.3% |
| EPS (Basic) | $-1.30$1.73 | −175.1% |
| EPS (Diluted) | $-1.30$1.72 | −175.6% |
| Shares Outstanding (Basic) | 326.00M326.00M | 0.0% |
| Shares Outstanding (Diluted) | 326.00M328.00M | −0.6% |
05—Questions
Frequently Asked Questions
What was the main driver of Edison International's financial performance in 2018?
The primary driver of Edison International's significantly reduced net income and resulting net loss in 2018 was the substantial charge of $2.5 billion for wildfire-related claims recorded by its subsidiary, Southern California Edison (SCE). These wildfire events, coupled with the associated litigation and potential liabilities, created a significant financial impact.
How is SCE addressing the wildfire risks and what is the financial impact?
SCE is implementing wildfire mitigation plans and investing in hardening its infrastructure. The company has accrued a significant charge for wildfire claims and is seeking recovery of insured and uninsured losses through insurance policies and customer rates, subject to regulatory approval. The ultimate recovery of uninsured wildfire costs through rates remains uncertain and subject to regulatory prudency reviews.
What is the status of SCE's capital investments and regulatory approvals?
SCE made significant capital investments in 2018, totaling $4.4 billion, focusing on transmission, distribution, and grid modernization to improve safety and reliability. The company's capital plan execution is dependent on approvals from regulatory bodies like the CPUC for its General Rate Case and other specific programs, such as the Grid Safety and Resiliency Program and the Wildfire Mitigation Plan.
What are the implications of the Tax Cuts and Jobs Act (Tax Reform) for Edison International?
Tax Reform, which lowered the federal corporate tax rate to 21%, required Edison International and SCE to re-measure their deferred taxes. While the lower tax rate is expected to benefit customers through lower rates, it will also reduce cash flow from operations and increase the rate base over time as new plant is placed in service. The allocation of excess deferred taxes between customers and shareholders is being addressed through regulatory proceedings.
06—Continue