Q4 2024 Earnings Summary
- Edison International (EIX) is maintaining strong financial stability, with credit metrics moving into the 15% to 17% FFO to debt range, as noted by S&P for the 2025 through 2028 period.
- Edison International is making significant progress in regulatory proceedings, including settling 20% of O&M items and 8% of capital items in their General Rate Case (GRC) with intervenors, indicating a constructive regulatory environment and potential for positive outcomes.
- AB 1054 provides substantial protections to EIX's balance sheet in the event of wildfire liabilities, enabling access to the wildfire fund for claims payments and avoiding the need to issue debt, which differentiates post-AB 1054 fires from previous events and reduces financial risk.
- Uncertainties Related to Potential Wildfire Liabilities: Edison International faces potential liabilities from recent wildfires, such as the Eaton fire. Management indicated that it's too early to estimate damages or potential liabilities, which could be significant. This ongoing uncertainty poses a risk to the company's financial position.
- Credit Rating Concerns Due to Climate Risk Exposure: Rating agencies are increasingly focused on climate risk, and S&P has placed Edison International on negative outlook. Any potential rating downgrade could increase financing costs and impact the company's ability to finance future capital needs.
- Regulatory Risks Affecting Rate Increases and Earnings Growth: There are concerns that recent wildfires may impact the outcome of the General Rate Case (GRC). Public perception that the company's equipment may have started fires could make it less likely for the commission to grant a rate increase, which would affect future earnings growth.
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Core EPS Guidance | FY 2025 | $5.50 to $5.90 | $5.50 to $5.90 | no change |
Dividend | Q1 2025 | no prior guidance | $0.8275 per share | no prior guidance |
Capital and Rate Base Forecast | FY 2025 | no prior guidance | “Focus on replacing aging infrastructure, grid hardening investments, and expanding the grid” | no prior guidance |
Regulatory Decisions | FY 2025+ | no prior guidance | “Decisions expected on 2025 GRC, Wildfire Mitigation Cost, and cost of capital application for 2026–2028” | no prior guidance |
Financing Plan | FY 2025 | no prior guidance | $100 million in debt maturities for FY 2025 (a portion prefunded in December 2024) | no prior guidance |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Wildfire Liabilities, Cost Recovery, and Claims Resolution | Q1 and Q2 discussions focused on high percentages of claims resolution, detailed cost recovery applications, and structured approaches to wildfire cost recovery | Q4 highlights a more complex investigation (e.g. Eaton Fire involvement) combined with legislative advocacy and refined recovery frameworks | Consistent focus with added complexity and advocacy in Q4 |
Financial Stability and Credit Metrics | Q1 and Q2 emphasized a target FFO-to-debt range (15%-17%), improvements through wildfire cost recovery, and stable credit ratings alongside robust cash flow generation | Q4 reaffirms the FFO-to-debt targets while explicitly noting rating agency concerns over climate risk exposure, affecting cost of debt outlook | Steady emphasis, with Q4 adding a stronger focus on climate risk’s influence on credit metrics |
Regulatory Proceedings and GRC Developments | Q1 and Q2 detailed partial settlements, interveners’ testimony, and capital plan adjustments in the GRC process | Q4 provides a more detailed timeline for the 2025 GRC (including TKM and Woolsey proceedings), advanced settlements, and planned applications | Process consolidated with clearer timelines and advanced settlement initiatives in Q4 |
Accelerated Load Growth and Infrastructure Investment Opportunities | Q1 and Q2 outlined moderate annual load growth (2%-3%) driven by EV, industrial, and building electrification trends along with corresponding infrastructure investments | Q4 underscores accelerated load growth with additional capital opportunities (e.g. next-gen ERP, advanced metering) and continued grid expansion efforts | Amplified focus on infrastructure investments driven by faster-than-expected load growth |
Capital Financing Needs and Equity/Debt Issuance Considerations | Q1 and Q2 discussed limited equity needs, defined debt issuance plans, and financing structures maintained by strong cash flows, with set FFO-to-debt frameworks | Q4 confirms maintaining the target FFO-to-debt range, details integration of wildfire liabilities via AB 1054, and lays out scenario planning in the cost of capital cycle | Consistent financing approach, with Q4 providing greater detail and scenario planning for emerging liabilities |
Climate Risk Exposure and Its Impact on Credit Ratings | Earlier period discussions either implied climate adaptation via wildfire mitigation or were less direct about climate risk’s rating impact | Q4 explicitly cites rating agencies’ increased scrutiny on climate risk, with S&P’s negative outlook linked to climate exposure | New and increased emphasis in Q4, highlighting climate risk as a critical factor for credit ratings |
Grid Hardening and Wildfire Mitigation Initiatives | Q1 detailed extensive grid hardening (e.g. undergrounding, percentages, miles hardened) and Q2 noted similar risk reductions with substantial physical investments | Q4 continues to report significant progress (e.g. over 800 additional miles of covered conductor and nearly 90% hardened lines) while also evaluating future capital allocations | Consistent efforts with a slight strategic reassessment in capital allocation in light of achieved milestones |
AB 1054 Liability Protections | Q1 emphasized AB 1054 as establishing prudency standards and an insurance fund that could serve as a model; Q2 described the $21 billion wildfire fund and liability cap framework | Q4 reiterates the benefits of AB 1054, detailing how its liability cap and wildfire fund safeguard against significant debt issuance for wildfire claims | Stable recognition across periods, with Q4 reinforcing AB 1054 as a critical safeguard for financial stability |
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Wildfire Impact Q: What is the impact of recent wildfires on EIX? A: Management stated it's too early to determine the impact of the recent wildfire, including whether their equipment was involved. They are confident in their operational practices and believe they can make a strong case for prudency.
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Legislative Solutions Q: How are discussions with policymakers regarding wildfire legislation? A: Management is engaged with policymakers and believes there is a strong understanding of the importance of financially healthy utilities. They are advocating for near-term solutions to reinforce the AB 1054 framework.
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General Rate Case and Cost of Capital Q: Will wildfires affect the outcome of the GRC and cost of capital proceedings? A: Management does not believe the wildfires will impact the GRC outcome, as they are far along in the process. They plan to file their cost of capital application in March, which will include discussions of recent events and market impacts.
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Credit Ratings and Financing Q: How might wildfires affect credit ratings and financing plans? A: Rating agencies are focused on climate risk, and while S&P has placed SCE on negative outlook, management believes they can manage within their financing plans. They expect any cost impacts to be addressed through regulatory mechanisms.
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Operational Changes and CapEx Q: Will recent wildfires change capital expenditures and operational practices? A: Management continuously evaluates risks and may adjust capital allocation based on new information. They prioritize public safety and are considering additional measures, but the impact on overall plans is expected to be small.
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Wildfire Fund and Liabilities Q: How will potential liabilities from fires be financed? A: Under AB 1054, they would utilize the wildfire fund for claims payments after exhausting their $1 billion customer-funded self-insurance, avoiding the need to issue significant debt.
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Investigation Delays Q: Why are there delays in investigating equipment involved in fires? A: Legal processes require coordination with multiple plaintiffs to preserve evidence, leading to delays as protocols are established under court oversight.
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Prudency Determination Q: Is there a middle ground in prudency findings? A: The Public Utilities Commission has full discretion and can determine prudency on a spectrum rather than a binary choice.
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Future CapEx Priorities Q: Will CapEx focus shift toward wildfire mitigation? A: Management will continue to prioritize capital based on risk assessments, public safety, and reliability. They may adjust plans as they learn more, but no significant shifts are planned at this time.
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Legislative Advocacy Q: What solutions are being advocated for in the legislative backdrop? A: Management is discussing various options with stakeholders, focusing on reinforcing the AB 1054 framework to provide certainty to investors.
Research analysts covering EDISON INTERNATIONAL.