UPDATE: Edison International 3Q Profit Down On Demand, Prices
(Adds comments from chief executive, background and details, including
earnings at the company's merchant-generation unit).
By Cassandra Sweet
Of DOW JONES NEWSWIRES
SAN FRANCISCO -(Dow Jones)- Edison International's (EIX) third-quarter profit
fell a lower-than-expected 8.2%, pressured by lower earnings at the company's
troubled Midwestern coal fleet amid lower prices, weak demand and higher
pollution-reduction costs.
Third-quarter earnings at Edison's merchant-generation unit, which consists
largely of Chicago-area coal-fired power plants but also a growing fleet of wind
farms, fell 45 cents a share, or 70%, compared to a year ago due to weak demand
caused by the recession and milder weather, and lower wholesale power prices,
the company said.
Shares of Edison were recently trading 2.5% higher at $32.98.
Edison reported earnings of $403 million, or $1.23 a share, down from $439
million, or $1.33, a year earlier. Excluding regulatory impacts, earnings fell
to $1.09 from $1.46.
Revenue dropped 15% to $3.66 billion.
Analysts polled by Thomson Reuters had forecast earnings of $1.04 per share on
$3.76 billion in sales.
The company also narrowed its 2009 earnings forecast to $2.23 to $2.45 a
share, from $2.18 to $2.48 a share earlier this year. Edison will issue earnings
guidance for 2010 in March.
A lawsuit brought by federal and state agencies that could result in the need
to install costly pollution-control equipment, as well as pending climate-change
legislation, which would require U.S. power producers to cut their carbon-
dioxide emissions over time, have thrown the future of Edison's coal fleet into
question, said Edison Chief Executive Ted Craver. He added that the company
hasn't yet decided what type of pollution-control equipment to install at the
plants and that it has yet to make crucial decisions about the plants' future.
"Those kinds of investments are more difficult when you have uncertainty about
the future of environmental regulations, including potentially carbon," Craver
said, speaking by telephone with analysts. "We haven't come to a final, firm
conclusion."
In August, the U.S. Department of Justice and the state of Illinois sued
Edison, alleging that six of its Illinois coal-fired power plants are in
violation of Clean Air Act rules. The agencies accused Edison unit Midwest
Generation of illegally emitting "massive amounts" of pollutants including
nitrogen oxides, sulfur dioxide and soot for years, particularly after the
plants were modified in the 1990s by their previous owner, Exelon Corp. (EXC)
unit Commonwealth Edison Co., without required pollution-control equipment.
With the lawsuit and with U.S. climate-change legislation looking increasingly
likely, albeit slow-moving, the U.S. power market has taken a negative view of
older coal-fired power plants like Edison's, Craver said.
"Heightened concerns about coal generation have depressed the value of Edison
Mission Group," Craver said. "It seems no value, or negative value, is being
assigned to this business in the market."
Edison's coal fleet stands in stark contrast to its southern California
utility, which claims to use more renewable energy than any other U.S. utility.
Southern California Edison plans to spend more than $800 million on a solar-
rooftop program and is developing three transmission lines to ship renewable
power to market. The utility is increasingly profitable, reporting a 5-cents-a-
share boost in third-quarter profit, to 92 cents a share.
SoCal Edison, which enjoys a guaranteed return on investment, plans to spend $
19.8 billion on capital expenditures between 2009 and 2013. Half the money will
be spent on the utility's distribution system, with about a quarter on
transmission projects, one of which is under construction, while the other two
await regulatory approval. The utility also plans to spend $1.2 billion to
install digital "smart" meters for all of its more than 5 million customers.
Pending state regulations require SoCal Edison and other California utilities
to use renewable sources for a third of the power they sell by 2020. The
requirement is part of the state's 2006 plan to combat climate change.
Meanwhile, Edison is working to green its merchant-generation unit with more
wind power. The unit started construction this year on wind farms in Illinois
and Texas, which will bring total wind-power capacity to more than 1,500
megawatts. The outlook for the wind business has improved since earlier this
year, as more utilities are looking to sign contracts and banks are providing
more financing, Craver said.
-By Cassandra Sweet, Dow Jones Newswires; 415-269-4446; cassandra.sweet@
dowjones.com
(Nathan Becker in New York contributed to this article)
(END) Dow Jones Newswires
11-06-091346ET
Copyright (c) 2009 Dow Jones & Company, Inc.
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