Edison International (EIX) Q1 2012 Earnings Call May 02, 2012 5:00 pm ET Executives Scott Cunningham - Interim Head of Corporate Communications and Vice President of Investor Relations Theodore F. Craver - Chairman, Chief Executive Officer and President W. James Scilacci - Chief Financial Officer, Executive Vice President and Treasurer Ronald L. Litzinger - President of Southern California Edison Company Pedro J. Pizarro - Vice President and President of Edison Mission Group Inc Linda G. Sullivan - Former Chief Financial Officer, Principal Accounting Officer, Senior Vice President and Acting Controller Maria Rigatti - Chief Financial Officer, Senior Vice President and Treasurer Analysts Dan Eggers - Crédit Suisse AG, Research Division James L. Dobson - Wunderlich Securities Inc., Research Division Jonathan P. Arnold - Deutsche Bank AG, Research Division Michael J. Lapides - Goldman Sachs Group Inc., Research Division Hugh Wynne - Sanford C. Bernstein & Co., LLC., Research Division Steven I. Fleishman - BofA Merrill Lynch, Research Division Paul B. Fremont - Jefferies & Company, Inc., Research Division Travis Miller - Morningstar Inc., Research Division David Frank Angie Storozynski - Macquarie Research Stephen Byrd - Morgan Stanley, Research Division Terran Miller Ashar Khan Kit Konolige Ali Agha - SunTrust Robinson Humphrey, Inc., Research Division Jason Mandel Unknown Analyst Raymond M. Leung - Goldman Sachs Group Inc., Research Division Presentation Operator
During this 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. 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 F. Craver Thanks, Scott, and good morning -- or good afternoon, everyone. Today, we reported GAAP earnings of $0.28 per share. As expected, a decline from the $0.61 per share last year. Core earnings were $0.35 per share compared to $0.65 per share a year ago. There are 2 high-level points I would like to make about our first quarter earnings. Southern California Edison's first quarter results reflect a mismatch of costs and revenues, given the delay in receiving our General Rate Case decision. Once the California Public Utilities Commission issues a final decision, revenues will be recognized retroactively to the beginning of the year. Second, in anticipation of transferring EMG's Homer City plant to the owner-lessors, we reclassified Homer City's $0.03 per share loss last year and this year's $0.07 per share loss into noncore earnings. I would like to update you on a few important matters since our year-end earnings call. Let me start with the cost of capital applications Southern California Edison filed with the CPUC on April 20. SCE's application recommended continuing its current capital structure of 48% equity, 43% long-term debt and 9% preferred stock with a recommended ROE of 11.1%, down from the current 11.5%. SCE also recommended continuation of the same automatic trigger mechanism, which has been in place for several years, that uses the Moody's Baa utility bond index. We recommended this mechanism be continued for a 3-year cycle and adjusting the baseline to reflect the 12-month average of the index at September 30 of this year. SCE's proposal would result in a 2013 reduction in customer rates of $128 million, about half associated with the lower ROE and the other half related to the true-up of our embedded cost of debt and preferred stock. Hearings are anticipated in late summer or early fall with a final CPUC decision by year end and effective January 1 of next year. There are summaries of the filing and an illustrative example of the index mechanism in the presentation appendix.
Let me now turn to our San Onofre Nuclear Generating Station. SCE is continuing to assess the causes of the steam generator leak discovered January 31 at the Unit 3, working together with the NRC, the manufacturer, and other consultants and industry experts. Over the last 3 months, we have been conducting a battery of tests and studying the phenomenon causing the tube wear. We have identified some unusual wear in approximately 1% of the nearly 39,000 steam generator tubes that transfer heat to produce the steam, which drives the turbines and generates the electricity. While tube wear is to be expected, we are taking this very seriously since it is occurring in the newly installed steam generators. When we are satisfied that we sufficiently understand the mechanisms and the causes of the wear, we will seek confirmation of our remediation plan with the NRC. The plan will likely follow standard industry practice of plugging, stabilizing and removing from service all affected tubes along with some other operational changes.Read the rest of this transcript for free on seekingalpha.com