Summary
On December 17, 2012, Edison International announced that its indirect, wholly-owned subsidiary, Edison Mission Energy (EME), along with certain of its subsidiaries, filed for voluntary Chapter 11 bankruptcy protection. This event triggers the deconsolidation of EME from Edison International's financial statements, effective from the Petition Date. Consequently, Edison International anticipates recording a significant after-tax charge of approximately $1.5 billion in the fourth quarter of 2012, reflecting the impairment of its investment in EME to zero, recognition of previously deferred losses, and estimated assumed liabilities. Edison International and EME have entered into a Transaction Support Agreement with certain EME senior unsecured noteholders. This agreement outlines a framework for a settlement transaction to be approved by the Bankruptcy Court, involving the release of certain claims between the parties. Under the terms, Edison International will eventually cease to own EME once it emerges from bankruptcy, and Edison International will assume approximately $200 million in EME's employee retirement-related liabilities. EME will be accounted for as a discontinued operation in Edison International's 2012 financial statements.
Key Highlights
- 1Edison Mission Energy (EME) and its subsidiaries filed for Chapter 11 bankruptcy on December 17, 2012.
- 2EME will be deconsolidated from Edison International's financial statements.
- 3Edison International expects a $1.5 billion after-tax charge in Q4 2012 due to the bankruptcy filing and deconsolidation.
- 4The company will impair its investment in EME to an estimated fair value of zero.
- 5A Transaction Support Agreement has been established with EME's noteholders to facilitate a settlement transaction and eventual EME emergence from bankruptcy.
- 6Edison International will ultimately cease ownership of EME.
- 7Edison International will assume approximately $200 million in EME's employee retirement liabilities upon EME's reorganization.