01—Abstract
Summary
Summary of the 8-K filed February 23, 2024. Cited figures are marked; the original filing is the authoritative source.
Edison International (EIX) furnished a February 23, 2024 business update presentation (Exhibit 99.1) under Regulation FD, for use in investor meetings and conferences.
The 8-K itself contains no new financial results. The substance is management's multi-year outlook, centered on a $38a–43 billion SCE capital plan for 2023–2028, roughly 6–8% rate base growth, and 5–7% core EPS growth targets through 2025 and 2028. The company introduced 2024 core EPS guidance of $4.75–5.05, versus $4.76 recorded in 2023, and 2025 guidance of $5.50–5.90, which implies the step-up in earnings depends heavily on rate base growth.
The presentation also quantifies wildfire risk and liability. Management estimates its wildfire mitigation and PSPS efforts have cut the probability of catastrophic losses by 85–88% versus pre-2018 levels, and it cites the AB 1054 framework, including a ~$21 billionb Wildfire Insurance Fund and a 2024 SCE liability cap of about $3.9 billion. Legacy 2017/2018 wildfire and debris-flow exposure remains a key swing factor.
SCE is seeking recovery of about $2.4 billionc for the TKM events and plans to file a Woolsey cost recovery application in Q3 2024 covering more than $4 billion. Management raised its best estimate of total losses by $65 million, and a final TKM decision could come as early as Q1 2025.
For investors, the key items are the capital growth runway, the dividend (20 consecutive years of growth, a 45–55%d payout target of SCE core earnings, and roughly a 4% yield at the time), and the financing plan, which management says needs minimal new equity. The main risks are wildfire cost recovery outcomes, regulatory decisions on the 2025 GRC and wildfire applications, and interest expense on wildfire claims debt, which weighs on EPS growth.
02—Key points
Key Highlights
- Capital plan of $38–43 billion for 2023–2028, with over 85% directed to the distribution grid, supporting projected ~6–8% rate base growth (about 8% CAGR in the chart) from ~$41 billion in 2023 to ~$61 billion in 2028 (Range Case and recorded figures).
- Core EPS guidance of $4.75–5.05 for 2024 (vs. $4.76 in 2023) and $5.50–5.90 for 2025, with management reaffirming 5–7% core EPS growth for 2021–2025 and targeting 5–7% for 2025–2028.
- Wildfire risk reduction: management estimates 85–88% lower probability of catastrophic-loss-driven claims versus pre-2018, with covered conductor now over 5,580 miles and PSPS contributing only about 10% of risk reduction.
- Legacy 2017/2018 wildfire and mudslide costs remain the main overhang: $2.4 billion TKM cost recovery application pending, Woolsey application targeted for Q3 2024 covering $4+ billion, and a $65 million upward adjustment to the best estimate of losses.
- Balance sheet: investment-grade ratings (EIX Baa2/BBB/BBB; SCE Baa1/BBB/BBB) after 2023 upgrades by Moody's and Fitch; EIX targets 15–17% long-term FFO-to-debt; total liquidity of ~$3.4 billion at year-end 2023.
- Financing: 2025–2028 plan of $27–32 billion capital spend with minimal equity need (~$0.4 billion), and 2024 equity needs expected to be fully met by end of Q1 2024.
- Dividend: $3.12 annualized 2024 dividend (7% CAGR since 2004), 20 consecutive years of growth, and a target payout of 45–55% of SCE core earnings; management cites roughly a 4% current yield.
03—Questions
Frequently Asked Questions
Does this 8-K report new financial results or guidance changes?
No. The 8-K is a Regulation FD filing that furnishes a business update presentation (Exhibit 99.1). It does not report quarterly or annual results. The presentation does introduce 2024 core EPS guidance of $4.75–5.05 and provides 2025 guidance of $5.50–5.90, along with 2025–2028 growth targets.
What is the growth outlook for SCE's rate base and earnings?
Management projects roughly 6–8% rate base growth for 2023–2028, supported by a $38–43 billion capital plan and substantial upside from unlisted investment opportunities. It targets 5–7% core EPS growth through 2025 and 2025–2028. Rate base growth is the main earnings driver, while higher interest expense on wildfire claims debt is a headwind.
How exposed is EIX to wildfire liability and recovery risk?
Exposure is partly capped under AB 1054. The Wildfire Insurance Fund (~$21 billion established, ~$10 billion in assets) reimburses eligible claims above the higher of $1 billion and required insurance, and SCE's 2024 liability cap is about $3.9 billion for imprudence findings. Pending legacy 2017/2018 cost recovery requests total roughly $2.4 billion for TKM plus a planned $4+ billion Woolsey filing, and the outcome of these proceedings is uncertain.
Is the dividend sustainable?
Management cites 20 consecutive years of dividend growth, a 7% dividend CAGR since 2004, and a target payout of 45–55% of SCE core earnings. With 2024 annualized dividends of $3.12, the payout appears consistent with that target given 2024 core EPS guidance of $4.75–5.05, though the presentation does not include a formal dividend growth commitment.
What are the key near-term catalysts to watch?
Key catalysts include the CPUC proposed decision on the 2021 wildfire mitigation application (~$310 million revenue requirement, vote scheduled March 7, 2024), intervenor testimony on the 2025 General Rate Case (due February 29, 2024), the TKM cost recovery schedule (hearings in August 2024), and the Woolsey application targeted for Q3 2024. Each has implications for earnings timing and financing needs.
04—Continue