10-QPeriod: Q1 FY2012

EDISON INTERNATIONAL Quarterly Report for Q1 Ended Mar 31, 2012

Filed May 2, 2012For Securities:EIX

Summary

Edison International (EIX) reported a net income attributable to common shareholders of $93 million, or $0.28 per diluted share, for the first quarter of 2012. This represents a significant decrease compared to the $200 million, or $0.61 per diluted share, reported in the same period of 2011. The decline in profitability was primarily driven by lower results from the competitive power generation segment (EMG), which experienced increased losses, and a decrease in net income from the electric utility segment (SCE). The company's financial performance was impacted by several factors, including lower average realized energy and capacity prices, increased fuel costs, and reduced generation at its coal plants. Additionally, ongoing issues at the San Onofre nuclear generating station, which remains offline for extensive inspections and repairs, contributed to higher operating costs and replacement power expenses for SCE. Management's outlook for EMG highlights potential liquidity constraints and the need to consider strategic options if energy and capacity prices do not improve. Investors should monitor regulatory decisions, particularly the outcome of SCE's General Rate Case, and the progress of EMG's restructuring efforts.

Financial Highlights

43 data points
Beta

Revenue

$2.42B

Net Income

$112.00M

4.6% Net Margin

EPS (Diluted)

$0.28

Total Assets

$49.38B

Cash & Equivalents

$1.48B

Free Cash Flow

-$512.00M

Financial Statements
Beta
Revenue$2.42B
Operating Expenses$2.03B
Operating Income$389.00M
Interest Expense$126.00M
Net Income$112.00M
EPS (Basic)$0.28
EPS (Diluted)$0.28
Shares Outstanding (Basic)326.00M
Shares Outstanding (Diluted)329.00M

Key Highlights

  • 1Net income attributable to common shareholders decreased by 53.5% year-over-year to $93 million ($0.28/share) from $200 million ($0.61/share).
  • 2Electric utility (SCE) segment net income decreased by 18% to $182 million, primarily due to a delay in the General Rate Case decision and increased costs related to San Onofre steam generator issues.
  • 3Competitive power generation (EMG) segment reported a net loss of $84 million, a significant increase from a $20 million loss in the prior year, driven by lower energy prices and higher operating costs.
  • 4Edison International's total operating revenue increased slightly to $2.856 billion from $2.782 billion, but operating expenses rose more significantly.
  • 5The company's capital expenditures for the quarter were $1.276 billion, up from $1.133 billion in the prior year, reflecting ongoing investments in transmission and distribution, and generation assets.
  • 6Significant uncertainties remain for EMG regarding its liquidity and potential restructuring needs, compounded by ongoing environmental compliance costs and challenging market conditions.

Frequently Asked Questions

The primary drivers for the substantial decrease in net income were the underperformance of the competitive power generation segment (EMG) due to lower energy prices and higher costs, as well as increased operating expenses and replacement power costs for the electric utility segment (SCE) stemming from issues at the San Onofre nuclear plant. EMG's net loss widened significantly, and SCE's net income saw a notable decline.

Both Units 2 and 3 at the San Onofre plant remain offline for extensive inspections and repairs related to wear found in steam generator tubes. This has resulted in increased operating costs and significant replacement power expenses for SCE. The total incremental costs for repairs are still uncertain, but are projected to be between $55 million and $65 million, subject to further analysis and NRC review. The situation is a key factor impacting SCE's financial performance and requires close monitoring.

EMG faces significant challenges, including continued losses, liquidity concerns, and the need to manage environmental compliance costs. Lower energy and capacity prices, driven by abundant low-cost natural gas, have strained profitability. Management indicates that if these adverse trends continue, EMG may need to consider asset sales, restructurings, or reorganization of its capital structure. The potential divestiture of Homer City's leasehold interest and environmental compliance costs at Midwest Generation are also key factors.

Regulatory matters are crucial. The delay in the 2012 CPUC General Rate Case decision for SCE means higher depreciation and interest expenses are not yet being recovered in current rates, impacting SCE's earnings. The outcome of this case, expected in the second quarter of 2012, will retroactively adjust revenue requirements. Environmental regulations also present ongoing compliance costs and potential liabilities for EMG's coal-fired plants.