8-KFinancial Events

EDISON INTERNATIONAL 8-K Report, Material Impairment (Jun 7, 2013)

Filed June 7, 2013For Securities:EIX

Summary

Edison International (EIX), through its subsidiary Southern California Edison (SCE), announced on June 6, 2013, the permanent retirement of Units 2 and 3 of the San Onofre Nuclear Generating Station (San Onofre). This decision follows an extended shutdown since early 2012 due to issues with replacement steam generators installed in 2010 and 2011. Despite efforts to develop a restart plan for Unit 2, significant regulatory uncertainty and potential delays of over a year prompted the company to retire the units to allow for more orderly planning of replacement power and transmission resources. The retirement will result in a significant accounting impact. SCE expects to record an impairment charge in the range of $450 million to $650 million ($300 million to $425 million after tax) in the second quarter of 2013. This charge reflects the uncertainty surrounding the recovery of the net investment in San Onofre and potential customer refunds. The company intends to seek recovery of these costs through future customer rates and is pursuing damages from the replacement steam generator manufacturer and insurance claims. However, the ultimate recovery of costs and potential for customer refunds will be determined through ongoing California Public Utilities Commission (CPUC) proceedings, which introduce further uncertainty for investors.

Key Highlights

  • 1Permanent retirement of San Onofre Nuclear Generating Station Units 2 and 3 announced.
  • 2Decision driven by significant regulatory uncertainty and prolonged delays in restart approval for Unit 2.
  • 3Expected impairment charge in Q2 2013 ranging from $450 million to $650 million ($300 million to $425 million after tax).
  • 4Net investment in San Onofre, including replacement steam generators, was approximately $2.1 billion as of March 31, 2013.
  • 5SCE will reclassify assets to a regulatory asset, subject to probable recovery through future rates.
  • 6Ongoing CPUC investigation (OII) will determine cost recovery for San Onofre-related expenses and potential customer refunds.
  • 7Company is pursuing legal and insurance claims against the replacement steam generator supplier.

Frequently Asked Questions

Edison International expects to record an impairment charge between $450 million and $650 million ($300 million to $425 million after tax) in the second quarter of 2013. This charge reflects the net investment in the plant and the uncertainty of cost recovery through future customer rates.

SCE intends to seek recovery of the costs associated with the retirement through future customer rates. However, the California Public Utilities Commission (CPUC) will ultimately decide the extent of cost recovery and whether any amounts previously collected from customers will be refunded.

The CPUC is conducting an Order Instituting Investigation (OII) to determine appropriate cost recovery for all San Onofre-related costs, including the steam generator replacement, operating expenses, and substitute power costs. The CPUC's decision will be critical in determining how much of the $2.1 billion net investment (as of March 31, 2013) is recoverable and whether refunds to customers are required.

SCE plans to reclassify assets to a regulatory asset, assuming probable recovery through future rates. Additionally, the company is pursuing claims for damages against Mitsubishi Heavy Industries, the supplier of the replacement steam generators, and is seeking recovery under applicable insurance policies. Severance costs for workforce reduction are also expected to be recoverable through customer rates.