Edison International's CEO Discusses Q1 2012 Results - Earnings Call Transcript

Edison International (EIX)

Q1 2012 Earnings Call

May 02, 2012 5:00 pm ET


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


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



Good afternoon. My name is Sharon, and I will be your conference operator today. At this time, I would like to welcome everyone to the Edison International First Quarter 2012 Financial Teleconference. [Operator Instructions] Today's call is being recorded. I would now like to turn the call over to Mr. Scott Cunningham, Vice President of Investor Relations. Thank you. Mr. Cunningham, you may begin your conference.

Scott Cunningham

Thanks, Sharon, and good afternoon, everyone. Our principal speakers today will be Chairman and CEO, Ted Craver; and Chief Financial Officer, Jim Scilacci. Also with us are other members of the management team. The presentation that accompanies Jim's comments, the earnings press release and our 10-Q filings are available on our website at www.edisoninvestor.com. Tomorrow afternoon, we will issue our regular quarterly business update presentation that will use of these and other slides for our ongoing investor discussions.

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.

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