Edison International (EIX)

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Edison International (EIX)

Q2 2009 Earnings Call

August 7, 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

Ronald L. Litzinger – Chairman of EMG

John P. Finneran – Senior Vice President of EMG


Hugh Wynne - Sanford Bernstein

[Kit Conwidge] – Soleil

Greg Gordon - Morgan Stanley

Michael Lapides - Goldman Sachs

Brian Chin - Citigroup

[Clark Erske] – State Street Global Markets

Lasan Johong - RBC Capital Markets



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

I’d 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, Jane, and good morning everyone. Our principal speakers today will be Ted Craver, 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 your earnings press release and our second 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 second 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 financial measure.

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

Theodore F. Craver

Thank you, Scott, and good morning everyone. Due mainly to a consolidated after tax earnings charge of $0.81 per share, associated with our global tax settlement with the IRS, we are reporting a second quarter loss of $0.05 per share. Core earnings were $0.78 per share, a penny less than last year’s second quarter per share results. We’re also reaffirming our core earnings guidance range for the year at $2.90 to $3.20 per share.

At the beginning of the year we identified three major business imperatives to be successful, financial discipline, superior execution and developing innovative approaches. I’m going to review several items that we believe represent noteworthy progress on some important milestones under these priorities. A key goal has been to insure we have strong liquidity. Finalizing the global tax settlement was critical in that it improved our cash position and removed a major uncertainty for investors. The settlement will be a significant positive cash event for EIX in total, which was the primary objective for us.

Liquidity was enhanced from the first quarter, primarily due to the cash infusion from terminating the cross-border leases as part of the global tax settlement, particularly at SCE.

Southern California Edison expects to use these funds to support its large capital investment plan to improve system reliability and customer service.

Another goal for this year was to reduce the near term cash outlays at EMG, particularly with regard to its turbine commitments. We are in the process of converting non-binding letter agreements into definitive agreements with two wind turbine manufacturers, which will provide EMG with a form of financing. If executed, these agreements would significantly defer EMG’s payments for wind turbines over the next three years. Obtaining project financing at EMG for part of its operating renewables projects was a key objective we identified for you during our last call. The non-recourse project financing market has been challenging since last year, but in a sign that that market is beginning to thaw, in June EME completed a $207 million project financing of its interest in the Wildorado, San Juan Mesa and Elkhorn Ridge wind projects. This is significant beyond the obvious immediate benefit to liquidity.

Over the last several years we have taken the excess free cash flow created by the coal fleet and used it to 100% equity finance the development of EMG’s renewables business, some 25 projects. The project financing of three of those projects in EMG’s wind fleet represents the first step to monetizing those assets. About two-thirds of the projects in the wind fleet are still 100% equity financed, and therefore available for other project financings in the future. The proceeds from the financings are available for further renewables development.

At SCE, we have been closely watching the index calculation under our current cost of capital arrangement. To remind everyone, in September of last year the Commission approved SCE’s cost of capital filing, which allows for a potential annual adjustment in our rate of return if certain interest rate index thresholds are reached. This framework remains in place through 2010. We intend to file a petition to modify this mechanism next week. What we are proposing is that we forego an expected increase in our rate of return in 2010 under the annual adjustment provision, but extend the cost of capital framework for an additional two years to 2012 with the same index annual adjustment provision. We believe there is value in extending the cost of capital mechanism for an additional two years, which provides important stability and predictability for both our customers and for our investors.

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