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    EDISON INTERNATIONAL (EIX)

    Q1 2024 Earnings Summary

    Reported on Apr 30, 2024 (After Market Close)
    Pre-Earnings Price$71.06Last close (Apr 30, 2024)
    Post-Earnings Price$70.56Open (May 1, 2024)
    Price Change
    $-0.50(-0.70%)

    What went well

    • Edison International has made significant progress in resolving legacy wildfire claims, settling 97% of TKM individual plaintiff claims and 86% of Woolsey individual plaintiff claims, and is on track to file the Woolsey cost recovery application in Q3, enhancing financial certainty. ,
    • The company maintains a strong financial position with limited equity needs, committed to only about $100 million of equity per year through 2028, and is improving its FFO to debt ratio into the target range, as recognized by S&P affirming their ratings and lowering the FFO to debt downgrade threshold to 14%, noting the company's decreasing business risk. , ,
    • Southern California Edison's substantial investments in grid hardening and wildfire mitigation have significantly reduced wildfire risk by 85% to 88%, and the company continues to refine and improve mitigation strategies, leading to decreased business risk and operational reliability, and recognition from S&P, supporting long-term stability. , ,

    What went wrong

    • Edison International increased its best estimate of losses by $490 million due to fewer plaintiffs dropping litigation in the Woolsey Fire mediation program, indicating higher than expected liabilities.
    • Operating and Maintenance (O&M) costs have increased year-over-year due to higher inspection and maintenance costs, potentially impacting earnings.
    • FFO to debt ratio is just over 14%, close to S&P's downgrade threshold, indicating tight financial metrics and potential pressure on credit ratings.

    Q&A Summary

    1. Litigation Charges Revision
      Q: Will there be further revisions to litigation charges?
      A: Management explained that while they reassess estimates each quarter, their focus is on completing the process and getting this fully behind them. They highlighted that 97% of the TKM individual plaintiffs and 86% of the Woolsey individual plaintiffs have been settled, indicating significant progress toward resolution.

    2. Balance Sheet Impact and FFO/Debt Ratios
      Q: How does the recent charge affect FFO to debt ratios?
      A: The latest S&P report shows an FFO to debt ratio just over 14%, which is within the downward range. Management's objective remains at 15% to 17%, and they plan to issue $100 million of equity annually through 2028 to improve credit metrics.

    3. Capital Plans for NextGen ERP and AMI 2.0
      Q: When will applications for NextGen ERP and AMI 2.0 be filed?
      A: The NextGen ERP application is expected in late 2024, and the AMI 2.0 (smart meter) application in 2025, totaling about $2 billion in capital. Financing will adhere to the authorized capital structure, aiming to minimize incremental equity by staying within credit metric ranges.

    4. Transmission CapEx Trends
      Q: What are the trends in transmission CapEx through Cal ISO?
      A: Management noted that recent California ISO plans include about $2 billion of capital across 17 projects where SCE has the right of first refusal. These projects present significant investment opportunities for SCE in the coming years.

    5. Wildfire Season Expectations
      Q: What are expectations for wildfire conditions this summer?
      A: While this season may appear average or below average in risk, management anticipates increasing climate-driven wildfire risks due to climate change. SCE has significantly reduced wildfire risk by 85% to 88% through grid hardening and other measures.

    6. O&M Cost Increases
      Q: Why did O&M expenses increase year-over-year?
      A: The rise in O&M costs is mainly due to timing differences and when expenses are booked, often influenced by weather conditions. There is no change in the cost structure, and the company remains focused on streamlining processes and reducing costs over time.

    7. National Wildfire Mitigation Initiatives
      Q: Are there opportunities to streamline wildfire mitigation costs nationally?
      A: Management is sharing best practices with the industry, recognizing that wildfire risk is now a national issue. As more utilities adopt similar technologies and strategies, there may be opportunities to reduce costs through greater scale and collaboration.

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