Summary
Edison International (EIX) has entered into a material definitive agreement to settle its disputes with Edison Mission Energy (EME) and certain of EME's creditors. This settlement, subject to bankruptcy court approval, outlines EME's emergence from bankruptcy with Edison International retaining EME's tax attributes. The agreement addresses the transfer of EME's assets and liabilities, with certain liabilities being assumed by Edison International and the remainder to be transferred to a trust controlled by EME's creditors. This move is expected to resolve significant outstanding issues related to EME's bankruptcy proceedings and position Edison International to realize substantial tax benefits.
Key Highlights
- 1Edison International and Edison Mission Energy (EME) have entered into a Settlement Agreement concerning EME's bankruptcy.
- 2EME will emerge from bankruptcy, remaining an indirect wholly-owned subsidiary of Edison International, but its assets and liabilities will largely be transferred to a creditors' trust (Reorganization Trust).
- 3Edison International will retain EME's income tax attributes, which are estimated at approximately $1.191 billion.
- 4Edison International will pay the Reorganization Trust 50% of the value of these EME Tax Attributes, with payments structured as $225 million in cash and two future installments with interest.
- 5Edison International will assume certain EME liabilities totaling approximately $350 million, including tax and pension obligations.
- 6The agreement includes mutual releases of claims between Edison International and EME/Reorganization Trust, with specified exceptions.
- 7Edison International anticipates recording non-core income from discontinued operations in Q1 2014, estimated at approximately $130 million, as a result of this settlement.
Frequently Asked Questions
The main impact is the resolution of Edison Mission Energy's bankruptcy, allowing Edison International to retain significant tax attributes (estimated at $1.191 billion) from EME. Edison International will make payments and assume certain liabilities, but anticipates a net financial benefit and expects to record income from discontinued operations in Q1 2014.
Edison International will pay 50% of the value of EME's tax attributes to the Reorganization Trust. This payment will consist of $225 million in cash on the effective date, with the remaining balance paid in two equal installments on September 30, 2015, and September 30, 2016, plus 5% annual interest. The exact amount of these installments will be fixed after a final determination of the tax attributes.
Edison International will assume approximately $350 million in EME liabilities. These primarily include federal and certain state income tax liabilities, and qualified and executive pension liabilities. Edison International is already jointly and severally liable for a significant portion of these.
Edison International anticipates recording non-core income from discontinued operations in the first quarter of 2014, estimated at approximately $130 million, net of prior accounting impacts. The full financial implications will unfold as EME emerges from bankruptcy and the tax attribute value is finalized.