8-KFinancial EventsRegulation FDOther Events+1

EDISON INTERNATIONAL 8-K Report, Material Impairment (May 28, 2019)

Filed May 28, 2019For Securities:EIX

Summary

This 8-K filing from Edison International (EIX) primarily details the final decision by the California Public Utilities Commission (CPUC) regarding Southern California Edison's (SCE) 2018 General Rate Case (GRC). The CPUC approved a final revenue requirement of $5.117 billion for 2018, which is lower than SCE's request and also a decrease from the 2017 authorized base revenue. This final decision is retroactive to January 1, 2018, and also sets forward-looking revenue requirements for 2019 and 2020, with specific escalation factors for capital additions and operating expenses. Furthermore, the filing discloses that the disallowances in the 2018 GRC final decision will result in a material impairment of utility property, plant, and equipment. SCE will record an impairment charge of approximately $170 million (or $122 million after-tax) in the second quarter of 2019 due to these disallowances. Separately, Edison International also announced its 2019 earnings per share guidance, with further details available in an attached investor presentation.

Key Highlights

  • 1CPUC approved final decision for SCE's 2018 General Rate Case (GRC) on May 16, 2019.
  • 2Authorized revenue requirement for 2018 is $5.117 billion, a decrease from SCE's request and 2017 levels.
  • 3Final decision is retroactive to January 1, 2018.
  • 4Sets authorized revenue requirements for 2019 at $5.453 billion and 2019 at $5.863 billion, with specific escalation factors.
  • 5Disallowances in the GRC decision will lead to a $170 million pre-tax impairment of utility assets.
  • 6Impairment charge of approximately $122 million after-tax will be recorded in Q2 2019.
  • 7Edison International announced 2019 earnings per share guidance.

Frequently Asked Questions

The CPUC approved a final revenue requirement of $5.117 billion for SCE in 2018. This is lower than what SCE requested and also represents a decrease compared to the 2017 authorized base revenue. The decision also sets revenue requirements for 2019 ($5.453 billion) and 2020 ($5.863 billion) with defined escalation factors.

The capital expenditure disallowances within the 2018 GRC final decision will result in a pre-tax impairment charge of approximately $170 million ($122 million after-tax) on utility property, plant, and equipment. This charge is expected to be recorded in the second quarter of 2019.

While the filing mentions Edison International announced its 2019 earnings per share guidance, the direct financial impact of the GRC revenue reduction and impairment on that guidance is not explicitly detailed in this 8-K. Investors are directed to an attached presentation (Exhibit 99.1) for further information on guidance assumptions.

The CPUC's final decision in the 2018 General Rate Case is retroactive to January 1, 2018, meaning its financial implications apply from the beginning of that year.