10-QPeriod: Q2 FY2019

EDISON INTERNATIONAL Quarterly Report for Q2 Ended Jun 30, 2019

Filed July 25, 2019For Securities:EIX

Summary

Edison International (EIX) reported a significant increase in net income for the six months ended June 30, 2019, compared to the same period in 2018, primarily driven by improvements in its subsidiary Southern California Edison (SCE). This improvement was largely due to the adoption of the 2018 General Rate Case (GRC) final decision, which retroactively adjusted revenues and expenses, and favorable regulatory deferrals related to wildfire insurance and mitigation costs. Despite the positive earnings trend, the company continues to face substantial risks and uncertainties, most notably the ongoing liabilities and potential future costs associated with the 2017/2018 wildfire and mudslide events. A significant development during the period was the enactment of California Assembly Bill 1054 (AB 1054), establishing a wildfire fund to help manage future wildfire liabilities, for which SCE has committed substantial contributions. The company is actively evaluating funding options for these contributions, which may impact its financial performance. Investors should note the ongoing legal proceedings and the significant accrued liability of $4.7 billion for the 2017/2018 wildfire events. While AB 1054 provides a framework for future wildfire cost recovery and risk mitigation, the effective implementation and potential exhaustion of the wildfire fund, along with the company's ability to recover uninsured losses through rates, remain key areas of focus. The company's financial health is also influenced by regulatory decisions, capital expenditure plans, and its ongoing efforts to manage operational and environmental risks.

Financial Highlights

45 data points
Beta

Revenue

$2.81B

Net Income

$422.00M

15.0% Net Margin

EPS (Diluted)

$1.20

Total Assets

$59.52B

Cash & Equivalents

$257.00M

Free Cash Flow

-$773.00M

Financial Statements
Beta
Revenue$2.81B
Operating Expenses$2.31B
Operating Income$500.00M
Interest Expense$211.00M
Net Income$422.00M
EPS (Basic)$1.20
EPS (Diluted)$1.20
Shares Outstanding (Basic)326.00M
Shares Outstanding (Diluted)327.00M

Key Highlights

  • 1Net income attributable to Edison International increased by $176 million for the six months ended June 30, 2019, compared to the same period in 2018, driven by SCE's improved earnings.
  • 2The adoption of the 2018 General Rate Case (GRC) final decision retroactively adjusted revenues and expenses, significantly impacting SCE's financial results.
  • 3California Assembly Bill 1054 (AB 1054) was signed into law, establishing a wildfire fund to manage future wildfire claims, with SCE committing significant contributions.
  • 4Edison International and SCE have accrued a liability of $4.7 billion for the 2017/2018 wildfire and mudslide events, with potential recoveries from insurance and electric rates being pursued.
  • 5Total capital expenditures for SCE in 2019 are projected between $4.6 billion and $4.9 billion, including significant wildfire mitigation investments.
  • 6SCE's credit ratings remain investment grade, but outlooks are negative, reflecting ongoing concerns related to wildfire liabilities and potential future downgrades.
  • 7The company is actively managing its liquidity, with approximately $2.6 billion available under its credit facility as of June 30, 2019.

Frequently Asked Questions

For the six months ended June 30, 2019, Edison International reported an increase in net income of $176 million compared to the same period in 2018. This improvement was primarily driven by Southern California Edison (SCE), its subsidiary, due to favorable regulatory decisions like the 2018 GRC final decision and better management of wildfire-related costs and insurance.

The most significant challenge is the ongoing liability and potential financial impact from the 2017/2018 wildfire and mudslide events, for which the company has accrued $4.7 billion. Additionally, the company faces risks related to regulatory approvals for cost recovery, capital expenditure programs, and the implementation of new legislation like AB 1054, which requires substantial contributions to a wildfire fund.

AB 1054 establishes a wildfire fund to help manage future wildfire liabilities. SCE has committed to significant contributions to this fund, which will require substantial capital raising efforts. While the legislation aims to mitigate future wildfire risk for investor-owned utilities, the effectiveness and full benefits of the fund are contingent on its establishment and SCE's ability to meet its obligations. The company is evaluating the accounting impact of its contributions, which could lead to a material charge.

SCE forecasts capital expenditures of approximately $9.3 billion to $9.5 billion for 2019-2020. This includes significant investments in wildfire mitigation, with approximately $387 million planned for 2019 and an estimated $500 million to $700 million for 2020. The company is actively tracking and seeking recovery for these wildfire mitigation costs through various regulatory mechanisms.