10-QPeriod: Q2 FY2018

EDISON INTERNATIONAL Quarterly Report for Q2 Ended Jun 30, 2018

Filed July 26, 2018For Securities:EIX

Summary

Edison International (EIX) reported financial results for the second quarter and the first half of 2018. The company's net income attributable to common shareholders saw a slight decrease year-over-year. A significant factor influencing results was the continued impact of the December 2017 wildfires and January 2018 Montecito mudslides, which have resulted in substantial legal and operational uncertainties, including potential material liabilities that are currently difficult to estimate. These events have also contributed to increased wildfire insurance costs. While the utility segment (Southern California Edison - SCE) demonstrated stable operating revenues and earnings, the parent company and competitive subsidiaries (Edison International Parent and Other) continued to experience losses, partly due to the sale of SoCore Energy. Investors should pay close attention to the ongoing wildfire and mudslide litigation, as well as regulatory proceedings, particularly the 2018 General Rate Case (GRC) decision, which will impact future revenue requirements. The company's liquidity remains adequate, supported by its credit facilities and capital market access, although credit ratings are under negative outlook, highlighting the financial risks associated with the aforementioned contingent liabilities. The company is actively pursuing strategies to mitigate wildfire-related risks and recover costs.

Financial Highlights

45 data points
Beta

Revenue

$2.81B

Net Income

$298.00M

10.6% Net Margin

EPS (Diluted)

$0.84

Total Assets

$52.82B

Cash & Equivalents

$99.00M

Free Cash Flow

-$664.00M

Financial Statements
Beta
Revenue$2.81B
Operating Expenses$2.40B
Operating Income$420.00M
Interest Expense$180.00M
Net Income$298.00M
EPS (Basic)$0.85
EPS (Diluted)$0.84
Shares Outstanding (Basic)326.00M
Shares Outstanding (Diluted)327.00M

Key Highlights

  • 1Net income attributable to Edison International common shareholders decreased slightly to $276 million for Q2 2018 and $494 million for the first six months of 2018, compared to $278 million and $640 million in the prior year periods, respectively.
  • 2The company faces significant uncertainty and potential material liabilities from the December 2017 wildfires (including the Thomas Fire) and the January 2018 Montecito mudslides, with losses currently unable to be reasonably estimated.
  • 3Wildfire insurance costs have increased significantly, with SCE anticipating approximately $237 million in wildfire insurance expense for 2018.
  • 4The Revised San Onofre Settlement Agreement was approved by the CPUC on July 26, 2018, subject to the elimination of a specific GHG Reduction Funding Program provision.
  • 5SCE's capital expenditures for the first six months of 2018 were $1.9 billion, with a full-year projection of approximately $4.2 billion, subject to the 2018 GRC decision.
  • 6Credit ratings for both Edison International and SCE remain at investment grade but are under negative outlook/watch from major rating agencies due to wildfire-related uncertainties.
  • 7The sale of SoCore Energy, a subsidiary of Edison Energy Group, was completed in April 2018, resulting in a pre-tax loss of $63 million for the six-month period.

Frequently Asked Questions

Edison International and its subsidiary SCE are facing significant potential liabilities from the December 2017 wildfires and the January 2018 Montecito mudslides. The company is currently unable to reasonably estimate the range of potential losses due to ongoing investigations into fire origins and causes, and complex legal proceedings. These events have also led to increased wildfire insurance costs and potential for uninsured losses if recovery through rates is not authorized by the CPUC.

The 2018 GRC proceeding, covering the period 2018-2020, is still pending. Until a final decision is issued, SCE is recognizing revenue based on the 2017 authorized revenue requirement, with adjustments. The ultimate revenue requirement authorized by the CPUC will significantly influence SCE's future earnings and capital spending plans, as SCE aims to ramp up its capital program to meet authorized levels while managing the risk of unauthorized spending.

On July 26, 2018, the CPUC approved the Revised San Onofre Settlement Agreement, which resolves issues related to the permanent retirement of the San Onofre nuclear facility. This approval was subject to the elimination of a specific Greenhouse Gas Reduction Funding Program provision. The settlement, if accepted by the parties with this modification, will finalize the resolution of issues under consideration in the San Onofre OII proceeding.

SCE's liquidity is supported by operating cash flows, tax benefits, and capital market financings, including an amended credit facility of $3.0 billion. Edison International Parent also has access to a $1.5 billion credit facility. Despite maintaining investment grade credit ratings, both entities are under negative outlook/watch by rating agencies due to wildfire uncertainties. Potential credit rating downgrades could increase borrowing costs and impact access to capital markets, and some power contracts require an investment grade rating.