8-KOther Events

EDISON INTERNATIONAL 8-K Report (Jan 9, 2003)

Filed January 9, 2003For Securities:EIX

Summary

Edison International (EIX) filed an 8-K on January 9, 2003, detailing several significant events impacting its subsidiaries. A major development is the administrative receivership of its UK-based Lakeland power project, operated by indirect subsidiary Edison Mission Energy. This action stems from the earlier administration proceedings of TXU UK, a key counterparty to the project's power sales agreement. The disclaimer of this agreement by Norweb Energi Ltd. led to the acceleration of Lakeland's debt and the appointment of an administrative receiver by the project's lenders. Consequently, Edison International expects to record an impairment charge and bad debt provision of approximately $100 million ($70 million after tax) in Q4 2002, treating the project as a discontinued operation. In other news, Edison Mission Energy's 51% owned New Zealand subsidiary, Contact Energy, has entered into a conditional agreement to acquire the Taranaki Combined Cycle power station for NZ$500 million, a move that led Standard and Poor's to lower Contact Energy's long-term credit rating. Additionally, Edison Capital will incur a $35 million write-down due to United Airlines' bankruptcy filing and proposed lease restructuring, which will result in Edison Capital receiving no further rent payments for two leased aircraft.

Key Highlights

  • 1Edison Mission Energy's Lakeland power project in the UK has been placed into administrative receivership due to counterparty financial distress (TXU UK) and the subsequent disclaimer of its power sales agreement.
  • 2Edison International anticipates a significant financial impact from the Lakeland project's receivership, including an approximate $100 million impairment charge and bad debt provision ( $70 million after tax) for Q4 2002.
  • 3The Lakeland project will be treated as a discontinued operation, and its financial activities will no longer be consolidated by Edison Mission Energy.
  • 4Contact Energy, a New Zealand subsidiary of Edison Mission Energy, has agreed to acquire the Taranaki Combined Cycle power station for NZ$500 million, pending regulatory and shareholder approvals.
  • 5Contact Energy's credit rating was lowered by Standard and Poor's from BBB+ to BBB following the announcement of the Taranaki acquisition and related financing.
  • 6Edison Capital will record a $35 million write-down due to United Airlines' bankruptcy filing and proposed lease restructuring, ceasing future rent payments for two aircraft.
  • 7A re-audit of Edison Mission Energy's 2001 and 2000 consolidated financial statements by PricewaterhouseCoopers LLP is required due to the reclassification of the Lakeland project as a discontinued operation.

Frequently Asked Questions

The administrative receivership of the Lakeland project is primarily due to the financial distress and administration proceedings of TXU UK, a key contractual counterparty. This led Norweb Energi Ltd. to disclaim the power sales agreement, which in turn caused the lenders to accelerate the project's debt and appoint an administrative receiver.

Edison International expects to recognize an impairment charge and a provision for bad debts totaling approximately $100 million, with a $70 million after-tax impact, in its fourth quarter ended December 31, 2002. This relates to the write-down of the Lakeland power plant and associated claims.

The Lakeland project will be accounted for as a discontinued operation, and its financial activities will no longer be consolidated by Edison Mission Energy due to the loss of control resulting from the administrative receivership.

United Airlines' bankruptcy filing and proposed lease restructuring will result in Edison Capital no longer receiving rent payments for two leased aircraft. This will lead to a $35 million write-down against earnings for the fourth quarter of 2002.