10-QPeriod: Q3 FY2019

EDISON INTERNATIONAL Quarterly Report for Q3 Ended Sep 30, 2019

Filed October 29, 2019For Securities:EIX

Summary

Edison International (EIX) reported its third-quarter 2019 financial results, showing a net income of $471 million, a decrease from $513 million in the prior-year quarter. However, core earnings, which management uses for performance analysis, increased to $519 million from $510 million year-over-year. This improvement was largely driven by Southern California Edison's (SCE) core earnings, which benefited from the adoption of the 2018 General Rate Case (GRC) decision and higher FERC revenue. Despite the increase in core earnings, SCE's overall earnings were impacted by higher non-core losses, including amortization of contributions to the Wildfire Insurance Fund. A significant development during the quarter was the ongoing impact of wildfire litigation and related expenses. SCE accrued a liability of $4.7 billion in late 2018 for the 2017/2018 Wildfire/Mudslide Events, with ongoing efforts to recover costs through insurance and electric rates. The passage of California Assembly Bill 1054 (AB 1054) in July 2019 provided a new framework for wildfire cost recovery and mitigation, establishing a Wildfire Insurance Fund and a liability cap for participating utilities. SCE made a substantial initial contribution to this fund, supported by both debt and equity issuances. The company's outlook has stabilized due to AB 1054, with credit rating agencies moving their outlooks from negative to stable.

Financial Highlights

45 data points
Beta

Revenue

$3.74B

Net Income

$502.00M

13.4% Net Margin

EPS (Diluted)

$1.35

Total Assets

$64.21B

Cash & Equivalents

$547.00M

Free Cash Flow

-$2.68B

Financial Statements
Beta
Revenue$3.74B
Operating Expenses$3.10B
Operating Income$636.00M
Interest Expense$214.00M
Net Income$502.00M
EPS (Basic)$1.36
EPS (Diluted)$1.35
Shares Outstanding (Basic)347.00M
Shares Outstanding (Diluted)349.00M

Key Highlights

  • 1Core earnings increased year-over-year, primarily driven by SCE's regulatory rate case decisions and improved FERC revenue.
  • 2Net income decreased year-over-year due to higher non-core losses, including wildfire insurance fund contributions.
  • 3SCE made a significant initial contribution ($2.4 billion) to the newly established Wildfire Insurance Fund under AB 1054, supported by equity and debt financing.
  • 4The company continues to accrue a substantial liability ($4.7 billion) for 2017/2018 wildfire and mudslide events, with ongoing efforts to recover costs.
  • 5California's AB 1054 legislation aims to mitigate wildfire risks and provides a framework for cost recovery, leading to a stable outlook from credit rating agencies.
  • 6Capital expenditures remain significant, with a forecast of $23.8 billion to $25.6 billion for 2019-2023, heavily focused on wildfire mitigation and grid modernization.
  • 7SCE's 2021 GRC filing requests significant revenue increases, largely to fund wildfire risk reduction efforts.

Frequently Asked Questions

The most significant financial risk is related to wildfire liabilities. The company has accrued a substantial liability for past wildfire events and faces ongoing uncertainty regarding cost recovery through rates. While new legislation (AB 1054) provides a framework for future mitigation and insurance, the ultimate financial impact of past and potential future wildfires remains a major concern.

AB 1054 is a critical piece of legislation that aims to address the significant financial risks posed by wildfires. It established a Wildfire Insurance Fund to help cover third-party damage claims exceeding certain thresholds and introduced a liability cap for participating utilities. This legislation has led to a more stable outlook from credit rating agencies and provides a new prudency standard for wildfire cost recovery. SCE made a substantial contribution to the fund and is now required to maintain safety certifications to benefit from the new framework.

Edison International and SCE are planning substantial capital investments. For the period 2019-2023, total estimated capital expenditures are projected to be between $23.8 billion and $25.6 billion. A significant portion of these investments is dedicated to wildfire mitigation efforts, as well as grid modernization and the integration of distributed energy resources.

The final decision in SCE's 2018 GRC, adopted in May 2019 and retroactive to January 1, 2018, had a positive impact on core earnings, increasing them by $131 million. This was due to adjustments in revenue, depreciation expense, and income tax expense. However, the decision also disallowed certain historical capital expenditures, leading to a $170 million non-core impairment charge.