Edison International(EIX) - 2020 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Edison International reported core earnings per share (EPS) of $1 for Q2 2020, a decrease of $0.58 compared to the same period last year, primarily due to higher O&M expenses, equity share dilution, and the true-up for the final 2018 GRC decision recorded in Q2 2019 [9][20] - The company narrowed its 2020 EPS guidance range to $4.37 to $4.62, raising the low end by $0.05 [9][33] Business Line Data and Key Metrics Changes - The decline in EPS was impacted by a negative variance of $0.24 from O&M expenses, which included increased expenses offset by revenue due to balancing account treatment, as well as timing of deferrals related to wildfire mitigation and COVID-19 costs [21][22] - Wildfire-related expenses negatively impacted EPS by $0.06 per share for the quarter, but are expected to be less of a driver of year-over-year variances in the second half of the year [22] Market Data and Key Metrics Changes - The company has secured $1 billion of gross wildfire insurance coverage from July 2020 to June 2021, which is $870 million net of self and co-insurance, optimizing risk mitigation and cost to customers [30] - The regulatory asset related to wildfire mitigation memo accounts is over $1.1 billion, which is significant for maintaining cash flow [46] Company Strategy and Development Direction - Edison International is focused on sustainability and aims to deliver 100% carbon-free power to SCE customers by 2045, with ongoing investments in clean energy and electrification [15][17] - The company is advancing its clean energy strategy, including a significant energy storage procurement of 770 megawatts, one of the largest in the nation [16] Management's Comments on Operating Environment and Future Outlook - Management anticipates another active fire season due to dry conditions in California but believes the company is better prepared than ever for wildfire mitigation [12] - The management expressed confidence in the outlook for the full year, expecting improvements in EPS impact from wildfire-related expenses in the second half [9][20] Other Important Information - The company completed its 2020 financing plan with the direct placement of $800 million of equity, indicating minimal equity needs to fund ongoing capital expenditures beyond 2020 [29] - Edison International filed an application with the CPUC to securitize $337 million of wildfire-related capital expenditures, which can’t be included in the equity portion of SCE's rate base [32] Q&A Session Summary Question: Regarding settlements with plaintiffs from the 2017 and 2018 fires - Management indicated that the small number of settlements reached is not sufficient to materially impact their assessment of liability, and they continue to reassess the situation each quarter [36][37] Question: Clarification on legal and expert costs booked this quarter - The $9 million charge booked was related to accumulating legal and expert costs associated with ongoing litigation activities [38] Question: Expectations on various groups of potential parties for settlement - Management noted that there are multiple tracks for discussions with different classes of plaintiffs, and the timeline for settlements is uncertain due to the nature of negotiations [40][42] Question: Cash flow and rating agency perspectives - Management expressed confidence in maintaining cash flow and staying within targeted rating agency ranges, emphasizing the importance of timely recovery of requested amounts [46][47] Question: Prudency review for the 2017 and 2018 fires - Management clarified that the prudency review process will begin after finalizing litigation outcomes, and they currently do not see any basis for criminal liability [49][50]