Edison International (EIX)

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Edison International (EIX)

Q3 2009 Earnings Call

November 6, 2009 11:00 am ET


Scott Cunningham – Vice President of Investor Relations

Theodore F. Craver – Chairman and Chief Executive Officer

W. James Scilacci Jr. – Chief Financial Officer

Alan J. Fohrer - Chairman and Chief Executive Officer, Southern California Edison

Ronald L. Litzinger – Chairman of EMG


Dan Eggers - Credit Suisse

Greg Gordon - Morgan Stanley

Jonathan Arnold - Deutsche Bank

Michael Lapides - Goldman Sachs

Lesley Rich - Columbia Management

Lasan Johong - RBC Capital Markets

Steve Fleischman - Banc of America Merrill Lynch

Tarin Miller - Nightlibertos

Kit Conwidge – Soleil

Yvonna Ergrovich - Jefferies



Good morning. My name is Barb and I will be your conference operator today. At this time I would like to welcome everyone to the Edison International third quarter 2009 financial teleconference. (Operator Instructions) Today’s call is being recorded.

I would now like to turn the call over to Mr. Scott Cunningham, Vice President of Investor Relations. Thank you, Mr. Cunningham. You may begin your conference.

Scott Cunningham

Thanks, Barb, and good morning everyone. Our principal speakers today will be Ted Craver, our Chairman and CEO; and Jim Scilacci, our Chief Financial Officer. Also with us to participate in the Q&A session are other members of the management team.

The presentation that accompanies Jim’s financial review together with the earnings press release and our third quarter 10-Q filings are available on our website at www.edisoninvestor.com.

During this call we will make forward-looking statements about the financial outlook for Edison International and its subsidiaries, and about other future events. Actual results could differ materially from current expectations. Important factors that could cause different results are set forth in our third quarter 10-Q and other SEC filings. We encourage you to read these carefully. The presentation also includes additional information, including certain outlook assumptions, as well as reconciliation of non-GAAP measures to the nearest GAAP measure.

When we get to the Q&A, please limit yourself to one question and one follow-up. If you have further questions, please return to the queue so we can give as many of you as possible an opportunity to ask a question.

With that I’ll turn the call over to Ted Craver.

Theodore F. Craver

Thank you, Scott. Good morning, everyone. This morning we reported third quarter GAAP earnings of $1.23 per share and core earnings of $1.09 per share. We are essentially reaffirming our earnings guidance for the year but with the summer behind us, we are narrowing our guidance range. We now expect core earnings to be in the range of $2.95 to $3.15 per share.

Overall, we are pleased with the results of the quarter and what we have been able to accomplish thus far for the year. We have tried to focus on the things we can control with particular attention to superior execution.

I would like to highlight some of the more noteworthy achievements that helped us produce solid earnings in spite of the worse than expected economic conditions and the sharp declines in financial and commodity markets.

Let me start with our progress in dealing with some of our greatest challenges. Weaker than expected commodity prices and heightened concerns about public policy pressure on coal generation have worked to depress the implied value for Edison mission group. It appears no value -- indeed, probably negative value, is being assigned to this business currently by the market. We know the current valuation reflects investor concerns about the forecasted amount of capital needed to meet more stringent Nox and SO2 emission requirements in the 2012 to 2019 period, and the uncertainties around potential carbon regulations.

I believe negative value is unwarranted since we have made it clear that given the high level of uncertainty around the coal fleet, Edison mission energy must live with the existing level of capital EIX has committed to it.

We view the current valuation as a potential opportunity if we can resolve the uncertainty around the capital needs of the coal fleet and improved liquidity at EMG and finally build value in the renewables portfolio.

Let me discuss recent progress in addressing these three areas. First, EMG has been busy developing alternative control options to meet the Illinois NOX and SO2 admissions requirements. Technical tests have encouraged us that we have real potential to achieve the state’s emissions targets at a significantly lower capital cost.

EMG has more work to do to fully understand the financial trade-offs of these alternative approaches and we much conclude they work with the regulators and legally. We have largely concluded SNCRs are the optimal means of meeting the more stringent NOX requirements starting in 2012, which our best estimates suggest will save us roughly $350 million to $400 million in capital expenditures.

However, we still have more work to do on the alternative SO2 approaches and that work will continue into next year .

Second, we wanted to improve liquidity by reducing cash outlays in 2009/2010 at EMG. I will save the specifics for Jim to discuss but we have successfully negotiated payment deferrals or financings with our wind turbine suppliers, thereby significantly improving liquidity.

Third, we wanted to prudently continue expanding our renewables business by placing our committed wind turbines into good renewables projects where we could obtain financing on the strength of securing long-term PPAs.

In October, we placed two new projects totaling 390 megawatts into construction in Illinois and Texas. As evidenced by these two new projects, we are once again seeing utilities making new contract commitments for renewable projects and banks actively marketing project financings.

Read the rest of this transcript for free on seekingalpha.com