Edison International (EIX)

EIX 
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Edison International (EIX)

Q2 2011 Earnings Call

August 04, 2011 11:00 am ET

Executives

Ronald Litzinger - President of Southern California Edison Company

Theodore Craver - Chairman, Chief Executive Officer and President

Pedro Pizarro - President of Edison Mission Group Inc and President of Edison Mission Energy

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

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

Analysts

Michael Lapides - Goldman Sachs Group Inc.

Dan Eggers - Crédit Suisse AG

Michael Goldenberg - Luminus Management

Travis Miller - Morningstar Inc.

Jonathan Arnold - Deutsche Bank AG

Ali Agha - SunTrust Robinson Humphrey, Inc.

Unknown Analyst -

Raymond Leung - Goldman Sachs Group Inc.

Brian Chin - Citigroup Inc

Hugh Wynne - Sanford C. Bernstein & Co., Inc.

Steven Fleishman - BofA Merrill Lynch

Daniel Ford - Barclays Capital

Presentation

Operator

Good morning. My name is Candy, and I will be your conference operator today. At this time, I would like to welcome everyone to the Edison International Second Quarter 2011 Financial Teleconference. [Operator Instructions] Today's conference 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, Candy, 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 and our 10-Q filings, are available on our website at edisoninvestor.com.

This afternoon, we'll be posting on our website our regular quarterly business update presentation that we'll use these slides in the regular order for our ongoing investor discussions.

During the 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 SEC filings. We encourage you to read these carefully.

The presentation includes certain outlook assumptions, as well as reconciliation of non-GAAP measures to the nearest GAAP measure. [Operator Instructions] With that, I'll turn the call over to Ted Craver.

Theodore Craver

Thanks, Scott, and good morning, everyone. Today, Edison International reported second quarter GAAP earnings of $0.54 per share compared with $1.05 per share last year. Core earnings in the second quarter were also $0.54 per share and compared with $0.62 per share last year. Core earnings in the first sixth months were $1.16 per share and compared to $1.44 per share for the same period last year. Second quarter and year-to-date earnings performance is fully consistent with our 2000 earnings guidance. In fact, we now expect full-year earnings to be at the high-end of our earnings guidance range.

SCE continues to deliver a solid earnings growth as it implements its capital investment program, although second quarter comparisons were impacted by favorable tax items that occurred last year.

EMG reported a loss for the quarter, which was expected, but we are encouraged by the recent improvement in capacity and energy prices. As always, the third quarter will be a key determinant of full year performance and we expect to update our full year earnings guidance when we report third quarter results.

I'd like to spend most of my time this morning focusing on our key strategies and some important developments. I'll start with SCE and its General Rate Case.

We are well into the rate case process now, having completed several public participation hearings across the state, responded to interveners with rebuttal testimony and commenced evidentiary hearings,which will continue through the end of this month. The formal schedule contemplates a decision by year end.

At a high level, the issues raised by the interveners are similar to those from the 2009 General Rate Case. They seek affordable electric service for customers, so do we. They want reliability and safety and so do we. Above all else, we hope that the process will appropriately balance these worthwhile objectives of safety, reliability and affordability. The cost of a public mandates is growing much faster than to the demand for electricity, driving up customer rates. And therefore, also need to be tempered by the need for the balance.

Moving to FERC, on Tuesday, SCE's 2011 transmission rate filing was accepted by FERC to be effective on January 1, 2012. This will include construction work in progress incentives that were previously recovered in separate proceedings. The formula rate approach is more typically used by peer utilities in FERC rate making and this will best fit SCE's needs going forward. We will be updating our revenue request to reflect the orders authorized based ROE of 9.93%, plus a 50 basis points California ISO adder and roughly 40 basis points on the entire transmission rate base for ROE incentives previously granted by FERC for certain projects. The overall ROE is expected to be about 10.85% in 2012. The exact return will vary depending on the mix of construction spending and timing.

Progress also continues on securing approvals for some of SCE's major transmission projects. In May, we received approval from the Bureau of Land Management for the $411 million Eldorado-Ivanpah transmission project, which will serve as new solar and wind projects. Interior Secretary Salazar announced on July 14, approvals from the Bureau of Land Management and the U.S. Forest Service for SCE's $655 million Devers-Colorado River Transmission Project, which will access important solar resources.

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