8-KOther Events

EDISON INTERNATIONAL 8-K Report (Nov 27, 2002)

Filed November 27, 2002For Securities:EIX

Summary

This Form 8-K filing by Edison International on November 27, 2002, primarily details significant negative developments impacting its subsidiary, Mission Energy. Standard & Poor's has downgraded the debt ratings of Mission Energy Holding Company and its related subsidiaries, assigning a negative outlook. This action, following a similar downgrade by Moody's, is expected to increase borrowing costs. Additionally, Edison Mission Energy anticipates potential credit support needs for its power generation plants totaling between $100 million and $200 million over the next twelve months, though this projection is not expected to increase due to the rating actions. The filing also reports on the severe impact of TXU Europe's administration proceedings on Edison Mission Energy's Lakeland project in the UK. The power sales agreement with Norweb Energi, a TXU subsidiary, has been terminated, and the plant is not operating. Edison Mission Energy faces potential loss of its entire $70 million investment in the project, with significant uncertainty surrounding recovery from TXU's administration and the possibility of lender foreclosure or bankruptcy for the Lakeland project itself. Lastly, the report notes progress in the California Supreme Court's review of the litigation settlement agreement concerning Southern California Edison's past electricity procurement costs, with the court agreeing to hear the case.

Key Highlights

  • 1Standard & Poor's downgraded Mission Energy Holding Company and its related subsidiaries' debt ratings (senior debt to B- from BB-) with a negative outlook, increasing borrowing costs.
  • 2Edison Mission Energy projects a need for $100-$200 million in working capital support for certain power generation plants over the next 12 months.
  • 3TXU Europe's administration proceedings have led to the termination of the power sales agreement for Edison Mission Energy's Lakeland project in the UK, halting operations.
  • 4Edison Mission Energy faces potential loss of its entire $70 million investment in the Lakeland project due to defaults, possible lender foreclosure, or bankruptcy proceedings.
  • 5The California Supreme Court agreed to hear an appeal regarding the settlement agreement for Southern California Edison's past electricity procurement costs.
  • 6Defaults under Lakeland Power Ltd.'s loan agreements are non-recourse to Edison Mission Energy and do not cross-default to other Edison indebtedness.

Frequently Asked Questions

The downgrade of Mission Energy Holding Company and its subsidiaries by Standard & Poor's to speculative-grade ratings (e.g., B- for senior debt) will increase the cost of borrowing for these entities. While it doesn't trigger defaults, it signals increased financial risk for these specific operations within Edison International.

The Lakeland project in the UK is currently not operating due to the administration proceedings of its power offtaker, TXU Europe. The power sales agreement has effectively ended, and Edison Mission Energy faces the risk of losing its entire investment in the project, with potential outcomes including lender foreclosure or bankruptcy of the project itself.

The California Supreme Court's decision to hear the case regarding the settlement agreement for Southern California Edison's past electricity procurement costs is significant. The court's ultimate ruling could impact the recovery of these costs for Southern California Edison, which is a key subsidiary of Edison International.

Edison Mission Energy, a subsidiary, could lose its entire investment of approximately $70 million in the Lakeland project. While the project's loans are non-recourse and do not directly impact Edison International's balance sheet through cross-defaults, the loss of this investment would be a material financial setback.