10-QPeriod: Q3 FY2011

EDISON INTERNATIONAL Quarterly Report for Q3 Ended Sep 30, 2011

Filed November 2, 2011For Securities:EIX

Summary

Edison International reported a net income of $426 million for the third quarter of 2011, a decrease from $510 million in the same period of the prior year. This decline is primarily driven by lower earnings from the competitive power generation segment (EMG), which experienced reduced capacity revenues and trading income, partially offset by improvements in the electric utility segment (SCE) driven by rate base growth and lower income taxes. For the nine-month period ended September 30, 2011, net income was $802 million, down from $1,090 million in the prior year. The company continues to invest heavily in its capital program, particularly in transmission and distribution upgrades for SCE, while EMG faces ongoing challenges related to environmental regulations and commodity prices. Liquidity remains a focus, with SCE maintaining significant availability under its credit facilities. EMG's operations, particularly the Homer City plant, are facing capital needs for environmental compliance and potential financing challenges. The company is also navigating complex environmental regulations and ongoing litigation, which could materially impact future financial performance.

Financial Highlights

43 data points
Beta

Revenue

$3.39B

Net Income

$441.00M

13.0% Net Margin

EPS (Diluted)

$1.30

Total Assets

$47.67B

Cash & Equivalents

$1.28B

Free Cash Flow

$377.00M

Financial Statements
Beta
Revenue$3.39B
Operating Expenses$3.04B
Operating Income$755.00M
Interest Expense$203.00M
Net Income$441.00M
EPS (Basic)$1.31
EPS (Diluted)$1.30
Shares Outstanding (Basic)326.00M
Shares Outstanding (Diluted)329.00M

Key Highlights

  • 1Edison International's net income attributable to common shareholders decreased by 16.5% year-over-year to $426 million for the third quarter of 2011 ($510 million in Q3 2010).
  • 2The electric utility segment (SCE) saw an increase in core earnings due to rate base growth and lower income taxes, while the competitive power generation segment (EMG) experienced a significant decline in core earnings primarily from lower capacity revenues, realized energy prices, and trading income.
  • 3Total capital expenditures for SCE in the first nine months of 2011 were $2.5 billion, with a projected full-year capital expenditure range of $3.9 billion to $4.4 billion, focusing on infrastructure upgrades.
  • 4EMG's Homer City plant requires significant capital investment for environmental compliance with the Cross-State Air Pollution Rule (CSAPR), estimated between $600 million and $700 million, and faces potential financing challenges and risk of deconsolidation.
  • 5The company is involved in ongoing environmental litigation, notably with the US EPA regarding emissions at Midwest Generation and Homer City plants, though many claims have been dismissed.
  • 6SCE has access to $2.26 billion in available credit facilities as of September 30, 2011, providing ample liquidity. EMG also maintains significant liquidity through cash and credit facilities.
  • 7The company's consolidated debt-to-capitalization ratio was 0.54 to 1 at September 30, 2011, indicating a manageable leverage level.

Frequently Asked Questions

The primary driver for the decrease in net income was the weaker performance of Edison International's competitive power generation segment (EMG), which reported significantly lower earnings due to reduced capacity revenues, lower average realized energy prices, and decreased trading income. This was partially offset by stronger results from the electric utility segment (SCE), driven by rate base growth and lower income taxes.

Edison International continues to invest significantly in its capital program. For SCE, the focus is on upgrading and expanding the transmission and distribution system, replacing generation asset equipment, and installing smart meters. For EMG, capital expenditures are directed towards environmental compliance at plants like Homer City and continued development of renewable energy projects.

Key risks include ongoing environmental regulations and compliance costs (particularly for EMG's coal plants), potential penalties from environmental litigation, fluctuating commodity prices (coal, natural gas, electricity), interest rate fluctuations, and the ability to secure necessary financing for large capital projects like those at Homer City. SCE also faces regulatory risk from the CPUC regarding rate recovery and capital expenditure approvals.

SCE maintains substantial liquidity through available credit facilities totaling $2.26 billion. Edison International (Parent) also has a significant credit facility. The consolidated debt-to-capitalization ratio remains manageable at 0.54 to 1 as of September 30, 2011. EMG also has access to cash and credit facilities to manage its operations and capital needs, though specific subsidiaries face tighter financial constraints.