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Edison Takes Over SoCore Energy - Analyst Blog

By: Zacks.com
Posted: 8/6/2013 4:40:00 PM
Referenced Stocks: EIX;NRG;SCTY;SPG;SUNE

Edison International ( EIX ) took over solar rooftop developer SoCore Energy LLC for an undisclosed price. This move gives the owner of California's second-largest electric utility a footing in the area of installing and operating rooftop solar electric systems for business and industrial customers.

With this acquisition SoCore Energy now becomes a wholly owned indirect subsidiary of Edison International. Established in 2008, SoCore is a privately held company focused on the solar energy needs of multisite retailers, real estate investment trusts (REITs) and large commercial and industrial clients.

This Chicago-based developer has installed and operates 80 solar projects in 11 states for commercial customers that include the likes of Walgreen Co. ( WAG ), Ikea, Kimco Realty Corp. and Simon Property Group Inc. ( SPG ).

In recent times low-priced solar panels and more financing options have helped the commercial and residential rooftop solar businesses to eliminate the need to pay for the pricey upfront cost of buying and installing solar equipment. Rooftop solar is often termed as "distributed solar" in order to differentiate it from the conventional, centralized power plant model of supplying electricity.

The acquisition enables Edison to be a part of the ongoing solar energy development for unmarked energy customers. This participation also paves the way for Edison to compete with other associated energy producers like NRG Energy, Inc. ( NRG ), SolarCity Corp. ( SCTY ) and SunEdison, Inc. ( SUNE ). In 2011, NRG Energy had acquired Solar Power Partners.

Recently, Edison reported second quarter results with adjusted earnings of 79 cents per share well ahead of the Zacks Consensus Estimate of 66 cents by 19.7% and the year-ago quarterly earnings of 56 cents by 41.1%. The beneficial results were driven by a robust operating performance from Southern California Edison ("SCE"). This was attributable to higher authorized investment in its electric grid infrastructure and favorable tax benefits.

Edison International is the parent company of one of California's largest investor-owned utilities, SCE, whose second quarter adjusted earnings boosted 42.4% on year-over-year basis. The results were driven by timing and tax benefits from incremental repair deductions and lower operating expenses.

The company currently holds a Zacks Rank #4 (Sell). We remain concerned about its coal-based plants that generate three-fourths of its output. This will compel the company to make environmental investments to meet the stringent requirements for nitrogen oxides and sulphur dioxide emissions. Again, Edison generates more than 80% of its revenues from its regulated utility assets. This also makes the performance of the company dependent upon approvals of regulatory bodies like California Public Utilities Commission and Federal Energy Regulatory Commission. Any adverse decision regarding general rate cases will greatly affect the utility's earnings growth.



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