Edison International (EIX)

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Edison International (EIX)

Q4 2010 Earnings Call

February 28, 2011 11:00 am ET


Pedro Pizarro - Vice President

Linda Sullivan -

Theodore Craver - Chairman, Chief Executive Officer, President and Chairman of Executive Committee

W. Scilacci - Chief Financial Officer, Executive Vice President and Treasurer

Scott Cunningham - Interim Head of Corporate Communications and Vice President of Investor Relations


Michael Lapides - Goldman Sachs Group Inc.

Dan Eggers - Crédit Suisse AG

Michael Goldenberg - Luminus Management

Kit Konolige - Soleil Securities Group, Inc.

Jonathan Arnold - Deutsche Bank AG

Ashar Khan - SAC Capital

John Collins

James Dobson - Wunderlich Securities Inc.

Ali Agha - SunTrust Robinson Humphrey, Inc.



Good morning. My name is Holly, and I'll be your conference operator today. At this time, I'd like to welcome everyone to the Edison International Fourth Quarter 2010 Financial Teleconference. [Operator Instructions] I would now like to turn the call over to Mr. Scott Cunningham, Vice President of Investor Relations. You may begin.

Scott Cunningham

Thanks, Holly. And good morning, everyone. Our principal speakers today will be Chairman and CEO, Ted Craver; and Chief Financial Officer, Jim Scilacci. Also with us are other members of the management team.

The presentation that accompanies Jim's financial review, together with the earnings press release, our 2010 10-K filings and supplemental information on EMG's 2011 EBITDA outlook are available on our website at www.edisoninvestor.com.

This afternoon, we will be posting a regular business update presentation. This will add our usual business strategy and key initiative information.

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 10-K and other SEC filings. We encourage you to read these carefully.

The presentation and supplemental information on our website includes certain outlook assumptions, as well as a reconciliation of non-GAAP measures to the nearest GAAP measure.

When we get to Q&A, please limit yourself to one question and one follow-up. If you have further questions, please return to that queue. With that, I'll turn the call over to Ted Craver.

Theodore Craver

Thank you, Scott. And good morning, everyone. Jim Scilacci will cover the fourth quarter results in detail. So I will focus on full year 2010 results and the major events that impact our outlook for 2011.

Full year core earnings were $3.48 per share, an increase of 7% from 2009. These results were above the earnings guidance range we established at the beginning of the year and consistent with guidance we updated last fall.

Both Southern California Edison and Edison Mission Group delivered solid results. SCE is our primary engine of growth, and once again, increased rate base and earnings last year.

When Jim reviews the investor slide deck during his comments, you will see that over the past five years, SCE's rate base has experienced a 10% compound annual growth rate and earnings that had an 11% compounded annual growth rate. This is consistent with our current investment thesis in which SCE is the near-term value driver for our stock, while EMG represents upside with the recovery in competitive power markets and additions to its Renewable Generation portfolio.

Specifically to that point, EMG continues to grow its Wind portfolio, as demonstrated by a 40% increase in megawatts brought into operation over the course of last year and this month. Liquidity and cash flow improved in 2010, in part due to tax-related outcomes.

Specifically, we completed the last steps in the global tax settlement by finalizing the arrangement with California tax authorities, and there were federal tax law changes that accelerated depreciation benefits.

EMG's cash position also improved as a result of a 30% federal tax grant program for Renewable Energy projects, which provided needed cash to reinvest in the business.

In December, we announced a seventh consecutive dividend increase to an annual rate of $1.28 per share. We continue to target modest annual dividend increases, reflecting the significant capital required to support SCE's growth.

We announced earlier this morning that we are providing guidance for 2011 core earnings per share in the range of $2.60 to $2.90. The midpoint of this estimated range for consolidated Edison International is $2.75 per share, made up of $3.08 for SCE less $0.19 for EMG, less $0.14 for parent company expenses.

SCE's earnings in 2011 are anticipated to be $0.07 higher than the strong performance last year in this final year of SCE's 2009 to 2011 rate case. Obviously, the big change is at EMG, which I will discuss shortly after I make a few comments about SCE.

As I have indicated already, successfully executing SCE's capital investment program is a critical part of the value proposition for our customers, our communities and our shareholders.

Overall, SCE's capital spending in 2010 was a record $3.8 billion, and I want to highlight three of the more important accomplishments.

Number one, earlier this month, SCE completed the steam generator replacement program at the San Onofre nuclear power plant, as Unit 3 was synced to the grid. Together with the Unit 2 steam generator replacement completed in the spring of 2010, this $600 million investment program extends the life of our nuclear plant so that it can continue to provide low-cost, clean electric power to California.

Number two, we have now installed over 2 million Edison SmartConnect advanced meters, and are well along in the development of the online tools to enable customers to receive enhanced usage and pricing information.

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