Exhibit 99.1
Exhibit 99.1
Leading the Way in Electricity SM
[Graphic Appears Here]
Business Update
March 2008
EDISON INTERNATIONAL®
Leading the Way in Electricity SM
Forward-Looking Statements
Statements contained in this presentation about future performance, including, without limitation, earnings, asset and rate base growth, load growth, capital investments, and other statements that are not purely historical, are forward-looking statements. These forward-looking statements reflect our current expectations; however, such statements involve risks and uncertainties. Actual results could differ materially from current expectations. Important factors that could cause different results are discussed under the headings “Risk Factors” and “Management’s Discussion and Analysis” in Edison International’s 2007 Form 10-K and subsequent reports filed with the Securities and Exchange Commission and are available on our website: www.edisoninvestor.com. These forward-looking statements represent our expectations only as of the date of this presentation, and Edison International assumes no duty to update them to reflect new information, events or circumstances.
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EDISON INTERNATIONAL®
Leading the Way in ElectricitySM
What’s New Since Our Last Update
Updated Information
• 2007 results and forward-looking forecasts as appropriate
• 2008 earnings guidance and assumptions
Major SCE Topics
• Demand and meter installation outlook (p. 9)
• Power procurement outlook to 2015 (p. 10 & 11)
• Capital expansion and rate base growth 2008-2012 (p. 12 & 13)
• FERC investment incentives approved for major transmission projects (p. 14)
• Expanded disclosure of energy efficiency program (p. 16 & 17)
• Regulatory update including GRC timeline elements (p. 18)
Major EMG Topics
• Expanded wind pipeline (5,091 MW) (p. 20)
• EME awarded 10-year power purchase agreement for 479 MW (p. 28)
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EDISON INTERNATIONAL®
Leading the Way in Electricity SM
Strategic Overview
3
EDISON INTERNATIONAL®
Leading the Way in Electricity SM
Edison International Value Drivers
EIX Integrated Platform
SCE Value Drivers
• Strong focus on infrastructure investment helps ensure reliability
• Tight system reserve margins keep focus on power procurement
• Energy Efficiency programs represent a new earnings opportunity
• Proposed $19.0 billion, 5-year capital investment plan1
52% - Expand and strengthen distribution system
29% - New transmission for renewable interconnection and system reliability
13% - San Onofre steam generators and other generation
6% - Edison SmartConnectTM metering program
• Strengthened regulatory framework
Three-year forward rate-setting
Cost of capital
Procurement cost recovery mechanisms
FERC transmission incentives
• Financial performance
Earning assets expected to grow 12%+ annually from 2007 - 2012
EMG Value Drivers
• Low-cost coal generation portfolio
Adjusted EBITDA has exceeded $1 billion annually2
• Favorable capacity market trends
• Operational and marketing/trading capabilities
Improving merchant price trends
Experienced/value-added trading capability
• Long-term environmental plan for Midwest Generation
• Financial Flexibility & allocation of cash
Hedging collateral
• Diversify and grow the generation portfolio
Emphasize renewables, natural gas, IGCC (longer-term)
1 Subject to timely receipt of permitting, licensing and regulatory approvals. See “SCE Capital Investment” (slide 12) for further information.
2 See adjusted EMG EBITDA in appendix for reconciliation to net income.
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EDISON INTERNATIONAL®
Leading the Way in Electricity SM
Our Business Portfolio
Financial data is for the year ended December 31, 2007
| | | |
Edison International | | | |
Revenue | | $ | 13.1 |
Operating Cash Flow | | $ | 3.2 |
Generation Capacity (MW) | | | 14,955 |
Market Capitalization | | $ | 16.6 |
| | | |
Southern California | | | |
Edison | | | |
Revenue | | $ | 10.5 |
Operating Cash Flow | | $ | 3.0 |
Generation Capacity (MW) | | | 5,502 |
Population Served (MM) | | | 13+ |
| | | |
Edison Mission | | | |
Group | | | |
Revenue | | $ | 2.6 |
Operating Cash Flow | | $ | 0.6 |
Generation Capacity (MW) | | | 9,453 |
Wind Pipeline (MW) | | | 5,000+ |
Note: Capacity and wind pipeline data is as of December 31, 2007, and market capitalization is as of February 27, 2008. Dollar amounts in billions, population served in millions. Edison Mission Group includes Edison Mission Energy and Edison Capital.
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EDISON INTERNATIONAL®
Leading the Way in Electricity SM
Financial Strategies
Funding Growth Investments
• Southern California Edison
Operating cash flow and financing
• Edison Mission Energy
Cash on hand, operating cash flow and project debt
Focus on organic growth
Credit Objectives1
• Southern California Edison
A rating metrics (current: S&P BBB, Fitch A, Moody’s A3)
• Edison Mission Energy
BB rating metrics (current: S&P & Fitch BB-, Moody’s B1)
Dividend Policy
• Targeting annual dividend increases
• Dividend increases balanced with growth investments
• Parent financing capacity supports financial strategies
1 Senior unsecured credit ratings shown.
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EDISON INTERNATIONAL®
Leading the Way in Electricity SM
2008 Earnings Guidance
Reconciliation of Core Earnings Guidance to Reported Earnings Guidance
| | | | | | | | | | | | | |
| | | | | | | | 2008 Guidance as of |
Core EPS1 | |
| 2007
Results |
| | | 2/27/2008 |
Southern California Edison | | $ | 2.07 | | | $ | 2.18 | | — | | | $ | 2.28 |
Edison Mission Group | | | 1.72 | | | | 1.57 | | — | | | | 1.87 |
EIX parent company and other | | | (0.10 | ) | | | | | (0.14 | ) | | | |
EIX core earnings per share | | $ | 3.69 | | | $ | 3.61 | | — | | | $ | 4.01 |
Non-Core Items | | | | | | | | | | | | | |
Southern California Edison | | | 0.10 | | | | | | — | | | | |
Edison Mission Group | | | (0.46 | ) | | | | | — | | | | |
Total Non-Core Items | | | (0.36 | ) | | | | | — | | | | |
EIX reported earnings per share | | $ | 3.33 | | | $ | 3.61 | | — | | | $ | 4.01 |
Key Factors/Assumptions
SCE
• 11.5% Return on Equity
• Energy Efficiency potential - $0.08
EMG
• Forward hedge positions and prices as of 1/31/08
• EMMT pre-tax trading margin - $75M
• Lower pre-tax earnings from EMG’s Sycamore and Watson projects
Other
• No changes in GAAP accounting
• Excludes discontinued operations
1 See use of Non-GAAP Financial Measures in appendix. The expected impact of participating securities is $(0.04) per share for 2007 results and $(0.05) per share for 2008 guidance and is included in EIX parent company and other. Reported earnings per share refers to basic earnings per share.
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EDISON INTERNATIONAL®
Leading the Way in Electricity SM
Southern California Edison (SCE)
[Graphic Appears Here]
An Investor-Owned Electric Utility
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EDISON INTERNATIONAL®
Leading the Way in ElectricitySM
SCE System Growth
SCE Growth1
New Meter Connections
100,000 87,708
83,979
77,437
73,204
80,000 67,002
63,463 61,521
60,000
40,000
20,000
0
2002 2003 2004 2005 2006 2007 2008
Forecast
Peak Demand
25,000 23,883
22,889 23,303
23,000 21,934
20,762
MW 21,000 20,136
18,821
19,000
17,000
15,000
2002 2003 2004 2005 2006 2007 2008
Forecast
New meter connections
~453,000 meters added in past 6 years
Slower growth in new customers allows for resource deployment to infrastructure replacement
KWh Sales
SCE earnings are unaffected due to decoupling revenues from sales consistent with California’s constructive regulatory model
Peak Demand
August 2007 demand peak 23,303 MW
~2.5% peak demand growth expected in 2008
Customer and load growth keeps statewide focus on the need to expand, replace and strengthen the utility infrastructure
1 2008 figures projected for full-year.
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EDISON INTERNATIONAL®
Leading the Way in Electricity SM
SCE Long-Term Resource Objectives
Supply and Demand Balance (MW)
Power Resource
Supply Objectives Needs
New Renewables
830
Other Projects
Underway
4,790
4,176
1,874 1,339
319
Increased Demand Requirement1
Potential Retirements
Anticipated New Generation
New Demand-Side Resources
Potential Need by 20152
System Reliability
Price Stability
Environmental Considerations
Balance Objectives
• Energy efficiency
• Demand response
• Renewable resources
• Distributed generation
• Clean fossil fuel generation
Load growth, retirements, and renewable mandates drive power resource needs
• ~6,700 MW new resources required
• ~1,350 MW new generation contracts awarded March 2008
• ~350 MW still to be procured
1 Relative to 2007; data as of February 2008, includes planning reserve margin (PRM) of 15%. Source: 2006 SCE long-Term Procurement Plan Final Decision; CEC November Load Forecast.
2 This number is without DPV2
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EDISON INTERNATIONAL®
Leading the Way in Electricity SM
SCE Renewable Energy Goals
Billion kWh
[Graphic Appears Here]
23% Increase
16
13
2006 Actual Procurement
2010 Goal
It is unlikely that SCE will have 20% of its energy delivered from renewable resources by 2010; however, SCE may remain RPS compliant through the flexible compliance rules
Key challenges include
Transmission
Unexpectedly high customer demand
Demonstrate RPS compliance through
Continued, aggressive procurement efforts
Use of flexible compliance rules
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EDISON INTERNATIONAL®
Leading the Way in Electricity SM
SCE Capital Investment
Proposed $19 Billion Five-Year Capital Spending Plan
$ Billions
$ 5
$ 4.3 $ 4.4
$ 3.9
$ 4 $ 3.6
$ 3 $ 2.8
$ 2
$ 1
$ 0
2008
2009
2010
2011
2012
| | | | | |
Forecast by Classification | | | | | |
| | | $ | | | % |
Edison SmartConnectTM | | | 1.2 | | 6 |
Generation | | | 2.5 | | 13 |
Transmission | | | 5.5 | | 29 |
Distribution | | | 9.8 | | 52 |
Total1 | | | 19.0 | | 100 |
Current Forecast by Proceeding | | | | | |
| | | $ | | | % |
CPUC Rate Cases | | | 11.8 | | 62 |
CPUC Project Specific | | | 1.7 | | 9 |
FERC Rate Cases | | | 5.5 | | 29 |
Total1 | | | 19.0 | | 100 |
$19 billion capital spending plan over next 5 years
In 2007, SCE substantially advanced major multi-year projects comprising more than 75% of this plan
1 Subject to timely receipt of permitting, licensing and regulatory approvals. Forecast is as of February 2008 and includes $692 million of capital spending for DPV2, the majority of which is expected to occur in 2009 and 2010. The Arizona Corporation Commission (ACC) denied approval of the DPV2 project. The denial has resulted in a minimum two-year delay of the project. SCE has initiated pre-filing activities with the FERC and is continuing to work with ACC on acceptable alternatives.
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EDISON INTERNATIONAL®
Leading the Way in Electricity SM
SCE Earnings Asset Base
Forecast SCE Rate Base 2007-20121
$ Billions
12+% Compound Annual Growth
$ 23.0
$ 24
$ 20.8
$ 21
$ 18.0
$ 18
$ 15.4
$ 15 $ 12.7
$ 11.7
$ 12
$ 9
$ 6
$ 3
$ 0
2007
2008
2009
2010
2011
2012
[Graphic Appears Here]
With effective execution of SCE’s capital expenditure program and continued regulatory support, the utility earnings asset base should nearly double by 2012
1 Includes impact of 2006 CPUC and 2006 FERC GRC decisions and forecasted rate base for FERC (2007-2012) and CPUC (2009-2012) which are subject to timely receipt of permitting, licensing and regulatory approvals; includes estimated impacts of the November 15, 2007 FERC incentives decision allowing construction work-in-process (CWIP) recovery in rate base and the Economic Stimulus Act of 2008. Forecast is as of February 2008 and includes $692 million of capital spending for DPV2, the majority of which is expected to occur in 2009 and 2010. The Arizona Corporation Commission (ACC) denied approval of the DPV2 project. The denial has resulted in a minimum two-year delay of the project. SCE has initiated pre-filing activities with the FERC and is continuing to work with ACC on acceptable alternatives.
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EDISON INTERNATIONAL®
Leading the Way in Electricity SM
SCE Growth Driver – Transmission Investment
Tehachapi transmission line to interconnect up to 4,500 MW of generation
New transmission needed to strengthen system reliability and access economical power
NEVADA
CALIFORNIA
Las Vegas
Midway
Tehachapi
SCE Service Territory
Eldorado
(PG&E)
Windhub
Antelope
Palmdale Lugo
Vincent Mohave ARIZONA
Santa Clarita Rancho
Pardee Vista
MiraLoma
Devers
Serrano Phoenix
PalmSprings
Los Angeles
Valley
SantaAna
PaloVerde
San Diego
| | |
Existing 500kV | | Tehachapi
Segments
1-3
500kV |
DPV2 & Rancho Vista 500kV | | Tehachapi
Segments
4-'11
500kV |
| | | | | | | | | | | | |
| | | | | | | | 2008-2012 | | | FERC | |
Project Name | | Phase | | | In-Service | | ($
|
Millions |
)1 | | Adders
|
(bps)3 |
Renewables | | | | | | | | | | | | |
Tehachapi Segments 1–3 | | Construction | | | 2008-
2009 | | | 328 | | | 175 | |
Tehachapi Segments 4–11 | | Licensing | | | 2011-
2013 | | | 1,742 | | | 175 | |
Other Projects | | Licensing | | | Various | | | 933 | | | — | |
Total Renewables | | | | | | | | 3,003 | | | | |
Reliability | | | | | | | | | | | | |
Rancho Vista Substation | | Construction | | | 2009 | | | 192 | | | 125 | |
Other Projects | | Various | | | Various | | | 1,589 | | | — | |
Total Reliability | | | | | | | | 1,781 | | | | |
Economics | | | | | | | | | | | | |
DPV2 | | Licensing | 2 | | 2011 | | | 692 | | | 175 | |
Total Economics | | | | | | | | 692 | | | | |
Grand Total | | | | | | | | 5,476 | | | | |
FERC investment incentives will provide important earnings and cash flow benefits
1 Subject to timely receipt of permitting, licensing and regulatory approvals. Forecast is as of February 2008.
2 All approvals have been received except the Bureau of Land Management and the Arizona Corporation Commission (ACC). The ACC denied approval of the DPV2 project. The denial has resulted in a minimum two-year delay of the project. SCE has initiated pre-filing activities with the FERC and is continuing to work with ACC on acceptable alternatives.
3 Includes 50b.p. ROE adder for belonging to CAISO and 125b.p. project specific adder for Tehachapi & DPV2 and 75b.p. project specific adder for Rancho Vista
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EDISON INTERNATIONAL®
Leading the Way in Electricity SM
SCE Growth Driver – Edison SmartConnectTM
Phase III Meter Installation Timeline Cumulative Capital Spending & Meter Installations
| | | | | | | | | | | | |
2008 | | | 2009 | | | 2010 | | | 2011 | | | 2012 |
$100 M | | $
| 450
M | | $
| 800
M | | $
| 1,100
M | | $
| 1,245
M |
– | | | 1.4 M | | | 3.0 M | | | 4.6 M | | | 5.3 M |
Highlights
Phase III application filed July 2007 to deploy to 5.3 million residential and small commercial customers between 2008 – 2012
Estimated total project cost is $1.7 billion, of which approximately $1.25 billion is capital cost to be included in rate base1
SmartConnectTM combines the efforts of IBM, Itron and eMeter to manage system integration, meter technology and data management, respectively
Edison SmartConnectTM has the potential to reduce peak power consumption by as much as 1,000 MW and reduce GHG emissions by 365,000 metric tons per year
Integrate Homes with the Utility Circuit
Integrate Smart Appliances with the Home
SCE leadership in advanced metering infrastructure
1 Subject to CPUC approval.
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EDISON INTERNATIONAL®
Leading the Way in Electricity SM
SCE Growth Driver – Nation’s Leader in Energy Efficiency
1992 to 2006 National EE Leaders1
10,000
9,000
8,000
7,000
6,000
GWh 5,000
9,031
4,000
7,090
3,000
2,000 4,041 3,863
1,000 2,226
0
SCE PG&E NSP FPL CL&P
EE Milestones
SCE has 69 energy efficiency programs, providing financial incentives and/or other benefits for saving energy and shifting usage from on-peak periods
During the past 5 years –
SCE customers have saved more than 5 billion kWhs – enough to power over 700,000 homes for an entire year
SCE has reduced greenhouse gas emissions by 2 million metric tons – the equivalent of taking 375,000 cars off the road
SCE has consistently won national recognition including:
7 United States Department of Energy “Energy Star” awards
2 Environment Protection Agency “Stratospheric Ozone Protection” awards, including the “Best of the Best International Stratospheric Ozone Protection Award” for 2007
Alliance to Save Energy “Star of Energy Efficiency” award
American Council for an Energy Efficient Economy “Champion of Energy Efficiency” award
SCE’s strong performance history in EE coupled with a Constructive Regulatory Environment has SCE poised for future Success
1 US Department of Energy, Energy Information Administration
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EDISON INTERNATIONAL®
Leading the Way in Electricity SM
Energy Efficiency Earnings Opportunity
CPUC Approved Energy Efficiency (EE) Shareholder Incentive Mechanism1
| | | | | | | | | | | | | | | | | | | | | | |
| | | 2006-2008 EE Cycle | | | 2009-2011 EE Cycle | | | | | | | |
Year | | 2006 | | 2007 | | 2008 | | | 2009 | | | 2010 | | | 2011 | | | 2012 | | | 2013 | |
| | | | | | | 65 | % of | | 65 | % of | | 35 | % of | | 65 | % of | | 65 | % of | | 35 | % of |
Potential | | | | | | 2006- | | | 2008 | | | 2006- | | | 2009- | | | 2011 | | | 2009- | |
Earnings | | | | | | 2007 | | | savings | | | 2008 | | | 2010 | | | savings | | | 2011 | |
Profile by | | | | | | savings | 2 | | | | | savings | | | savings | 2 | | | | | savings | |
Year3 | | | | | | | | | | | | plus | | | | | | | | | plus | |
| | | | | | | | | | | | | true-up | | | | | | | | | true-up | |
SCE, the national leader in energy efficiency, is targeting $1.2 billion in net customer savings for 2006-2008 Three-year earnings opportunity of up to ~$146 million (pre-tax) for the 2006-2008 period4
1 Based upon September 20, 2007 and January 31, 2008 decisions released by the California Public Utilities Commission (CPUC).
2 There is no assurance of earnings in any given year. If approved by the CPUC, SCE currently projects, based on preliminary results, that it will record a progress payment in the range of $41 million to $49 million in the fourth quarter of 2008 for the years (2006-2007) of the program cycle. SCE expects to collect this progress payment in rates in 2009. SCE is scheduled to file advice filings in September of each year requesting recovery of the progress payments. SCE expects it will recognize earnings in the amount of the progress payments upon CPUC acceptance of its filing, expected in the fourth quarter of each year.
3 Assumes SCE achieves all of its energy efficiency goals, and delivers customer benefits of approximately $1.2 billion. Based on forecast, cash is received in the year following the period when earnings are recognized.
4 The January 2008 modifications incorporate an update to the effective useful life of the energy efficiency measures installed. If the draft CPUC effective useful life study is adopted in its current form, the effective useful life of residential compact fluorescent lights, one of the largest contributors to SCE’s energy efficiency portfolio, would be reduced and SCE’s earnings opportunity would decrease to approximately $124 million.
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EDISON INTERNATIONAL®
Leading the Way in Electricity SM
Constructive Regulatory Environment
| | | | |
| | | Element | | Regulatory Details |
| | |
| | | Forward looking rate-making | | GRC provides three-year forward-looking rate-setting mechanism based forecast spending |
| | |
GRC | | Expected cost-inflation provided for in rate-making process | | Adopted operation and maintenance costs include approval for cost inflation assumptions for principal operating costs such as labor and |
| | |
| | | | | benefits |
| | |
| | | State support for reliable electric system infrastructure | | |
| | |
| | | Trigger mechanism for fuel and purchased power cost recovery | | Fuel and purchased power costs are covered through a separate balancing account process, with predetermined trigger mechanisms for recovery of |
| | |
Procurement | | Advanced approval of annual procurement plans for purchased power | | higher costs Upfront review of utility procurement decisions based on demonstration low-cost dispatch |
| | |
Cost of Capital | |
Enabling strong investing capabilities to support growth and reliability needs | | Consistently fair returns allowed. An 11.5% ROCE approved for 2008 |
| | |
Energy Efficiency | |
Providing alternative forms of shareholder incentives | | CPUC adopted incentive mechanism allows for incentives and penalties capped at $ 200 million for three-year period 2006-2008 with second three-year period to follow |
California’s regulatory framework supports growth and reliability needs
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EDISON INTERNATIONAL®
Leading the Way in Electricity SM
Edison Mission Group (EMG)
[Graphic Appears Here]
A Competitive Power Generation Company
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EDISON INTERNATIONAL®
Leading the Way in Electricity SM
EMG Business Platform
Washington
Natural Gas 70 MW
California
Natural Gas 964 MW Natural Gas (UC) 479 MW
Arizona
Wind (Pipeline) 1,140 MW
Wyoming
Wind (UC) 141 MW
Utah
Wind (Pipeline) 70 MW Wind (UC) 19 MW
Oklahoma
Wind 95 MW
Wind (Pipeline) 300 MW
Nevada
Wind (Pipeline) 515 MW
New Mexico
Wind 90 MW
Wind (Pipeline) 1,070 MW
Texas
Wind 161 MW Wind (UC) 150 MW Wind (Pipeline) 480 MW
Iowa
Wind 145 MW
Wind (Pipeline) 200 MW
Minnesota
Wind 75 MW Wind (UC) 70 MW Wind (Pipeline) 149 MW
Nebraska
Wind (Pipeline) 80 MW
Illinois
Coal 5,471 MW Natural Gas 305 MW Wind (Pipeline) 520 MW
Maryland
Wind (Pipeline) 95 MW
Wisconsin
Wind (Pipeline) 100 MW
New York
Wind (Pipeline) 140 MW
West Virginia
Coal 40 MW
Wind (Pipeline) 232 MW
Pennsylvania
Coal 1,884 MW Wind (UC) 67 MW
Operating Platform1
| | | | | |
| | | MW | | % | |
Coal | | 7,395 | | 79 | % |
Natural Gas | | 1,339 | | 14 | % |
Wind | | 566 | | 5 | % |
Other | | 153 | | 2 | % |
| | | 9,453 | | 100 | % |
Wind Development Pipeline1
| | |
| | | MW |
Under Construction | | 447 |
Pipeline2 | | 5,091 |
Turbines (Not Shown) | | 1,166 |
Gas Pipeline3 | | |
| | | MW |
Gas Plant (UC) | | 479 |
1 Natural gas includes oil-fired; other includes Doga in Turkey (144 MW) and Huntington biomass (9 MW) which are not shown. Turbines purchased or committed to support development pipeline. Data as of December 31, 2007.
2 Owned or under exclusive agreement.
3 Data as of March 7, 2008
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EDISON INTERNATIONAL®
Leading the Way in Electricity SM
Midwest Generation – Operating Performance
2007 vs. 2006
• Generation up 3.7%
• Forced Outage Rate impacted by unplanned maintenance outages at Powerton Station (1,538 MW) during 4Q 07.
| | | | | | |
Operating Statistics | | 2007 | | | 2006 | |
Total Generation (GWh) | | 29,961 | | | 28,898 | |
Equivalent Availability | | 75.8 | % | | 79.3 | % |
Capacity Factor | | 60.9 | % | | 58.8 | % |
Load Factor | | 80.4 | % | | 74.1 | % |
Forced Outage Rate | | 9.7 | % | | 7.9 | % |
All-in average realized price increased 13% in 2007 compared to last year
All-in Average Realized Prices1
$ 60
$ 53.53 $ 53.36
$ 47.03
$ 42.95
$ 40
$ 40.28 $ 40.00
$ 33.84
$ 30.69
$/MWh
$ 20
$ 13.25 $ 12.26 $ 13.36 $ 13.19
$ 0
4Q 07 4Q 06 2007 2006
Average realized gross margin ($/MWh)2
Average fuel and emission costs ($/MWh)
1 Includes the price of energy, capacity, ancillary services, etc.
2 Average realized gross margin is equal to all-in average realized prices less average fuel and emission costs.
21
EDISON INTERNATIONAL®
Leading the Way in Electricity SM
Homer City –Operating Performance
2007 vs. 2006
• Generation up 11.1%
• Strong operating performance across the board in 2007
| | | | | | |
Operating Statistics | | 2007 | | | 2006 | |
Total Generation (GWh) | | 13,649 | | | 12,286 | |
Equivalent Availability | | 89.4 | % | | 81.9 | % |
Capacity Factor | | 82.5 | % | | 74.3 | % |
Load Factor | | 92.4 | % | | 90.7 | % |
Forced Outage Rate | | 4.1 | % | | 13.5 | % |
All-in average realized price increased 15% in 2007 compared to last year
All-in Average Realized Prices1
$ 60 $ 56.68 $ 56.52
$ 48.61 $ 49.20
$ 40 $ 32.85 $ 34.07
$ 27.05 $ 26.14
$/MWh
$ 20
$ 23.83 $ 21.56 $ 22.45 $ 23.06
$ 0
4Q 07 4Q 06 2007 2006
Average realized gross margin ($/MWh)2
Average fuel and emission costs ($/MWh)
1 Includes the price of energy, capacity, ancillary services, etc.
2 Average realized gross margin is equal to all-in average realized prices less average fuel and emission costs.
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EDISON INTERNATIONAL®
Leading the Way in Electricity SM
EMG Hedge Program Status
Status at December 31, 2007
| | | | | | | | | |
| | | | 2008 | | | 2009 | | | 2010 |
Midwest Generation | | | | | | | | | |
Energy Only Contracts | | | | | | | | | |
Megawatt hours (in GWh) | | | 10,838 | | | 7,692 | | | 3,472 |
Average Price ($/MWh) | | $ | 61.27 | | $ | 62.38 | | $ | 62.62 |
Load Requirement Services Contracts | | | | | | | | | |
Estimated GWh1 | | | 5,613 | | | 1,632 | | | — |
Average Price ($/MWh)2 | | $ | 64.01 | | $ | 63.65 | | | — |
Total estimated GWh hedged | | | 16,451 | | | 9,324 | | | 3,472 |
Coal under contract (in millions of tons) | | | 17.5 | | | 11.7 | | | 11.7 |
Homer City | | | | | | | | | |
Total estimated GWh hedged | | | 7,232 | | | 2,8673 | | | 1,022 |
Average Price ($ /MWh)4 | | $ | 60.85 | | $ | 73.84 | | $ | 77.80 |
Coal under contract (in millions of tons) | | | 5.7 | | | 4.4 | | | 0.3 |
1 The amount of power sold is a portion of the retail load of the purchasing utility and can vary significantly with variations in that retail load. Retail load depends upon a number of factors, including the time of day and year, and the utility’s number of new and continuing customers. Estimated MWh have been forecast based on historical patterns and on assumptions regarding the factors that may affect retail loads in the future. The actual load will vary from that used for the above estimate, and the amount of variation may be material.
2 The average price per MWh, which is subject to a seasonal price adjustment, represents the sale of a bundled product that includes, but is not limited to, energy, capacity and ancillary services. Also, Midwest Generation will incur charges from PJM as a load-serving entity. Thus, the average price per MWh is not comparable to the sale of power under an energy only contract. The average price per MWh represents the sale of the bundled product based on an estimated customer load profile.
3 Homer City hedge position for 2009 was incorrectly reported as 3,890/GWh at September 30, 2007. The correct hedge position for 2009 was 2,867/GWh. There was no change in the hedge position during the fourth quarter.
4 The average price/MWh for Homer City’s hedge position is based on PJM West Hub prices. As a result of transmission congestion in the PJM, actual energy prices at the Homer City busbar have been lower than those at the PJM West Hub.
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EDISON INTERNATIONAL®
Leading the Way in Electricity SM
EMG Capacity Sales
Status at December 31, 2007
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | |
| Jan. 1, 2008 —
May 31, 2008 |
| |
| June 1, 2008 —
May 31, 2009 |
| |
| June 1, 2009 —
May 31, 2010 |
| |
| June 1, 2010 —
May 31, 2011 |
|
| | | | Midwest | | | | Homer | | | | Midwest | | | | Homer | | | | Midwest | | | | Homer | | | | Midwest | | | | Homer | |
Megawatts except price per MW-day | | | Generation | | | | City | | | | Generation | | | | City | | | | Generation | | | | City | | | | Generation | | | | City | |
INSTALLED CAPACITY | | | 5,776 | | | | 1,884 | | | | 5,776 | | | | 1,884 | | | | 5,776 | | | | 1,884 | | | | 5,477 | | | | 1,884 | |
Less: Net capacity held due to loadrequirement services contracts,1and retained for outages | | | (2,673 | ) | | | (207 | ) | | | (1,613 | ) | | | (173 | ) | | | (447 | ) | | | (214 | ) | | | (548 | ) | | | (71 | ) |
NET CAPACITY AVAILABLE FOR SALE | | | 3,103 | | | | 1,677 | | | | 4,163 | | | | 1,711 | | | | 5,329 | | | | 1,670 | | | | 4,929 | | | | 1,813 | |
Fixed Price Capacity Sales | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
RPM Auction Process | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
• Net Capacity Sold | | | 2,603 | | | | 786 | | | | 3,283 | | | | 820 | | | | 4,614 | | | | 1,670 | | | | 4,929 | | | | 1,813 | |
• Price per MW-day | | $ | 40.80 | | | $ | 40.80 | | | $ | 111.92 | | | $ | 111.92 | | | $ | 102.04 | | | $ | 191.32 | | | $ | 174.29 | | | $ | 174.29 | |
Non-unit Specific Capacity Sales | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
• Net Capacity Sold | | | 500 | | | | — | | | | 880 | | | | — | | | | 715 | | | | — | | | | — | | | | — | |
• Price per MW-day (Net) | | $ | 21.31 | | | $ | — | | | $ | 64.35 | | | $ | — | | | $ | 71.46 | | | $ | — | | | $ | — | | | $ | — | |
Variable Capacity Sales | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Third Party Transaction | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
• Capacity | | | — | | | | 891 | | | | — | | | | 891 | | | | — | | | | — | | | | — | | | | — | |
• Expected price per MW-day2 | | $ | — | | | $ | 66.71 | | | $ | — | | | $ | 69.50 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
TOTAL CAPACITY SOLD | | | 3,103 | | | | 1,677 | | | | 4,163 | | | | 1,711 | | | | 5,329 | | | | 1,670 | | | | 4,929 | | | | 1,813 | |
AVERAGE PRICE PER MW-DAY | | $ | 37.66 | | | $ | 54.57 | | | $ | 101.86 | | | $ | 89.83 | | | $ | 97.94 | | | $ | 191.32 | | | $ | 174.29 | | | $ | 174.29 | |
1 Load requirements services contracts include energy, capacity and ancillary services.
2 Actual contract price for Homer City sale is a function of NYISO capacity auction clearing prices. Expected price per MW-day is based on forward over-the-counter NYISO prices on December 31, 2007.
24
EDISON INTERNATIONAL®
Leading the Way in Electricity SM
Edison Mission Marketing and Trading
Edison Mission Marketing and Trading (EMMT)
• Optimize forward sales opportunities
Extending hedge program
Reducing collateral requirements
• EMMT provides opportunistic trading revenues
Leverage knowledge gained from managing merchant coal fleet(
Trading primarily transmission congestion products and electricity basis spreads
Entering California and Texas markets
• Controls on types and sizes of exposures
Allowed products and region (large majority of positions are low-risk congestion contracts)
VaR, volumetric, duration and credit limits
EMMT Trading Margin1
(pre-tax)
250
$ 195
200
150 $ 143
($M) $ 130
100
50 $ 34
$ 23
0
2003
2004
2005
2006
2007
Edison Mission Marketing and Trading provides significant incremental income from trading activity
1 Income from energy trading represents the gains recognized from price changes related to contracts for electricity, fuels and transmission congestion. The overhead cost of energy trading is excluded.
25
EDISON INTERNATIONAL®
Leading the Way in Electricity SM
EMG Environmental Compliance
MWG Compliance Plan
Phase I – Mercury Reductions
90% removed by 2015
Installation of Activated Carbon Injection (ACI) technology by July 2009
Estimated cost of $60 million
Phase II – NOx Reductions
Emissions of .11 lbs. per million Btus by 2011 (66% reduction)
Installation of primarily Selective Catalytic Reduction (SCR) systems by the end of 2011
Estimated cost of $450 million
Phase III – SO2 Reductions
Emissions of .11 lbs. per million Btus by 2019, with interim step-down (78% reduction)
Flue Gas Desulfurization (FGD) technology
Estimated cost $2.2 – $2.9 billion
Homer City Compliance Plan
PA State Implementation Plan for CAMR and CAIR adopted
Homer City will comply with 2010 phase of mercury requirements by installing ACI on Units 1 & 2
EMG expects to update its environmental capital expenditure estimates by the end of 2008.
Note: Cost estimates are in 2006 dollars.
26
EDISON INTERNATIONAL®
Leading the Way in Electricity SM
Wind Energy Development Strategy & Portfolio
Wind Energy Development Strategy
Strategic importance to growth plan
Contributes to portfolio diversification
Objective is to attain national scope and leadership scale
Leverages successful wind energy experience to date
• Wind energy provides attractive opportunities
Growing RPS requirements and national desire for renewables
Production tax credits
Accelerated depreciation (MACRS) over 5 years
Mainly long-term contracts for output
Wind Project Portfolio & Development Pipeline
| | | | |
Projects1 | | No. of
Projects | | MW |
In-Service | | 13 | | 566 |
Under Construction | | 8 | | 447 |
Total Projects | | 21 | | 1,013 |
Development Pipeline2 | | 39 | | 5,091 |
Turbines | | | | |
Purchased and under option | | | | 1,166 |
1 Data as of December 31, 2007. Turbines purchased or committed to support development pipeline. Working through wind turbine generator blade issues.
2 Owned or under exclusive agreements.
27
EDISON INTERNATIONAL®
Leading the Way in Electricity SM
Other EMG Growth Opportunities
Natural Gas-Fired Generation
• Walnut Creek, CA – Awarded 10-year power purchase agreement with Southern California Edison for 479 MW – Online June 1, 2013
• Sun Valley, CA opportunity (500 MW) in permitting and engineering stage
• Potential acquisitions of assets or portfolios
Will be selective and disciplined
Assets complement marketing and trading skills
Longer-Term
Solar power generation
Advanced fossil fuel technologies with carbon capture
28
EDISON INTERNATIONAL®
Leading the Way in Electricity SM
Appendix
29
EDISON INTERNATIONAL®
Leading the Way in Electricity SM
SCE Regulatory Update
| | | | | | | | |
| | | Case Number | | Date of
Filing | | Status | | Next Milestone |
| | | | | | | | | Evidentiary Hearings begin |
| | | | | | | GRC Application filed and | | May 29, 2008 |
GRC | | A.07-11-011 | | November
2007 | | | | Proposed decision expected Nov. 4, 2008 |
| | | | | | | CPUC schedule approved | | |
| | | | | | | Final decision expected Dec. 4, 2008 | | |
Cost of
Capital | | | | May | | 11.5% ROCE established in | | None |
| | | A.07-05-003 | | | | D. 07-12-049 | | |
(COC) | | | | 2007 | | | | |
| | | | | | | The possibility of a multi-year cost of | | Proposed Decision scheduled |
COC Multi-
Year | | | | May | | | | |
| | | A.07-05-003 | | | | capital mechanism, as opposed to | | March 24, 2008 |
Program | | | | 2007 | | | | |
| | | | | | | annual filings. | | |
| | | A.04-12-007/8 | | December | | Decision Granted D. 07-03-012 / 045 | | Construction began March 2008 |
Tehachapi | | (Segments 1-3) | | 2004 | | | | |
| | | | | | | Pre-hearing conference held August, | | Draft EIR/EIS scheduled August, |
Transmission | | A.07-06-031 | | June | | | | 2008. Decision anticipated late |
| | | | | | | 2007. Supplemental cost testimony | | |
| | | (segments 4-11) | | 2007 | | filed in October, 2007 | | 2008 / early 2009 |
DPV 2 – | | ACC: | | | | ACC denied approval of | | Initiated pre-filing activities with |
| | | | | May | | | | FERC. Continuing to work with ACC |
Transmission1 | | L-00000A-06- | | | | application in May, 2007 | | |
| | | | | 2006 | | | | on acceptable alternatives. |
| | | 0295-00130 | | | | | | |
Edison | | Phase III | | July | | Phases I and II approved | | Final Phase III decision expected |
SmartConnectTM | | A.07-07-026 | | 2007 | | Phase III filed | | July 2008 |
| | | | | | | Awaiting intervenor comments on | | |
Capacity
Market | | | | December | | | | Final Decision expected |
| | | R.05-12-013 | | | | Phase 2/Track 2 proposals, comments | | |
| | | | | 2005 | | | | May 2008. |
| | | | | | | due March 14, 2008. | | |
Long-Term | | | | | | D. 07-12-052 approved an additional | | |
| | | | | December | | 1,200 - 1,700 MW, in addition to the 305 | | Procuring 1,700 MW |
Procurement | | R.06-02-013 | | | | | | |
| | | | | 2006 | | MW remaining from SCE’s standard-track | | by 2015 |
Plan2 | | | | | | RFO, procurement through 2015 | | |
1 CPUC has approved (A. 05-04-015) and FERC has declared it a National Interest Electric Transmission Corridor (N.I.E.T.C.)
2 SCE has the opportunity to bid into building generation for the 1,200 – 1,700 MW of additional power
30
EDISON INTERNATIONAL®
Leading the Way in Electricity SM
Fourth Quarter Financial Results
Reconciliation of Core Earnings to Reported Earnings
| | | | | | | | | | | | |
Core Earnings | | | 4Q 07 | | | | 4Q 06 | | | | Var. | |
SCE | | $ | 0.37 | | | $ | 0.32 | | | $ | 0.05 | |
EMG | | | 0.30 | | | | 0.36 | | | | (0.06 | ) |
EIX parent company | | | (0.02 | ) | | | (0.03 | ) | | | 0.01 | |
and other | | | | | | | | | | | | |
Core EPS1 | | $ | 0.65 | | | $ | 0.65 | | | $ | ? | |
Non-core Items | | | | | | | | | | | | |
SCE | | $ | ? | | | $ | 0.16 | | | $ | (0.16 | ) |
EMG | | | (0.01 | ) | | | 0.06 | | | | (0.07 | ) |
Total Non-Core | | $ | (0.01 | ) | | $ | 0.22 | | | $ | (0.23 | ) |
Basic EPS | | $ | 0.64 | | | $ | 0.87 | | | $ | (0.23 | ) |
Diluted EPS | | $ | 0.64 | | | $ | 0.87 | | | $ | (0.23 | ) |
Core Earnings Variances
| | | |
SCE | | | |
Settlement of a tariff dispute | | 0.05 | |
EMG | | | |
Midwest Generation | | | |
Lower interest expense from debt repayment in 2Q 07 and higher | | 0.06 | |
realized energy margin, partially offset by higher maintenance costs and SFAS #133 impact | | | |
Homer City | | | |
Higher energy margin, mostly offset by SFAS #133 impact | | 0.01 | |
EMMT2 | | | |
Higher trading margin | | 0.05 | |
Corporate Expense and Other Items | | (0.07 | ) |
Edison Capital | | | |
2006 infrastructure fund gains and other | | (0.11 | ) |
Non-Core Variances | | | |
SCE 4Q 06 resolution of a state tax apportionment issue $0.15 | | (0.16 | ) |
and generator refund incentive $ 0.01 | | | |
EMG 4Q 07 includes ($0.01) from discontinued operations; 4Q 06 | | (0.07 | ) |
includes $0.07 from discontinued operations and ($0.01) from early debt extinguishment charges | | | |
1 See use of Non-GAAP Financial Measures in appendix. The impact of participating securities is included in EIX parent company and other, and was $(0.01) per share for each of the quarters ended December 31, 2007 and 2006.
2 EMMT overhead is excluded from trading margin.
31
Leading the Way in Electricity SM
Full-Year Financial Results
Reconciliation of Core Earnings to Reported Earnings
| | | | | | | | | | | | |
Core Earnings | | | 2007 | | | | 2006 | | | | Var. | |
SCE | | $ | 2.07 | | | $ | 1.89 | | | $ | 0.18 | |
EMG | | | 1.72 | | | | 1.30 | | | | 0.42 | |
EIX parent company | | | (0.10 | ) | | | (0.12 | ) | | | 0.02 | |
and other | | | | | | | | | | | | |
Core EPS1 | | $ | 3.69 | | | $ | 3.07 | | | $ | 0.62 | |
Non-core Items | | | | | | | | | | | | |
SCE | | $ | 0.10 | | | $ | 0.49 | | | $ | (0.39 | ) |
EMG | | | (0.46 | ) | | | 0.02 | | | | (0.48 | ) |
Total Non-Core | | $ | (0.36 | ) | | $ | 0.51 | | | $ | (0.87 | ) |
Basic EPS | | $ | 3.33 | | | $ | 3.58 | | | $ | (0.25 | ) |
Diluted EPS | | $ | 3.31 | | | $ | 3.57 | | | $ | (0.26 | ) |
| | | | | |
Core Earnings Variances | | | |
SCE | | | |
Higher operating margin, settlement of a tariff dispute and lower | | 0.18 | |
income taxes, partially offset by higher net interest expense | | | | | |
EMG | | | | | |
Midwest Generation | | | | | |
Higher energy margin (generation and realized energy prices) and | | 0.39 | |
lower interest expense, partially offset by SFAS #133 impact and higher maintenance costs | | | | | |
Homer City | | | | | |
Higher energy margin (generation and realized energy prices), partially | | 0.14 | |
offset by SFAS #133 impact | | | | | |
Income from Other Projects | | 0.07 | |
EMMT2 | | | | | |
Higher trading margin | | 0.03 | |
Corporate Expense and Other Items | | | | | |
Higher development costs, corporate expenses and other | | (0.15 | ) |
Edison Capital | | | | | |
2006 infrastructure fund gains and other | | (0.06 | ) |
Non-Core Variances | | | | | |
SCE 2007: $0.10 income tax treatment of certain environmental | | (0.39 | ) |
remediation costs; 2006: $0.40 resolution of regulatory and tax issues, generator settlement $0.07, and generator refund incentive $ 0.02 | | | | | |
EMG 2007 and 2006 include ($0.45) and ($0.28) for early debt | | (0.48 | ) |
extinguishment charges, and ($0.01)and $0.30 for discontinued opeartions, respectively | | | | | |
1 See use of Non-GAAP Financial Measures in appendix. The impact of participating securities is included in EIX parent company and other, and was $(0.04) and $(0.05) per share for year-to-date December 31, 2007 and 2006, respectively.
2 EMMT overhead is excluded from trading margin.
32
EDISON INTERNATIONAL®
Leading the Way in Electricity SM
EMG 2006-2007 Adjusted EBITDA
| | | | | | | | |
Reconciliation to Net Income ($ Millions) | | | 2007 | | | | 2006 | |
Net Income | | $ | 410 | | | $ | 432 | |
Addback (Deduct): | | | | | | | | |
Cumulative change in accounting, net of tax | | | — | | | | — | |
Discontinued operations | | | 2 | | | | (97 | ) |
Income from continuing operations | | | 412 | | | | 335 | |
Interest expense | | | 323 | | | | 409 | |
Interest income | | | (101 | ) | | | (118 | ) |
Income taxes | | | 170 | | | | 154 | |
Depreciation and Amortization | | | 172 | | | | 157 | |
EBITDA | | | 976 | | | | 937 | |
Production tax credits1 | | | 28 | | | | 17 | |
Discrete items: | | | | | | | | |
Loss on lease termination, asset impairment and other | | | — | | | | — | |
Impairment of equity method investment | | | — | | | | — | |
Gain on sale of assets | | | (1 | ) | | | (22 | ) |
Loss on early extinguishment of debt | | | 241 | | | | 146 | |
Adjusted EBITDA | | $ | 1,244 | | | $ | 1,078 | |
Note: EBITDA is defined as earnings before interest, income taxes, depreciation and amortization. Adjusted EBITDA includes production tax credits from EMG’s wind projects and excludes amounts from gain on the sale of assets, loss on early extinguishment of debt and leases, and impairment of assets and investments.
1 Production tax credits (PTC) are after-tax.
33
EDISON INTERNATIONAL®
Leading the Way in Electricity SM
EMG Liquidity Profile
Available Liquidity
| | | | | | |
Sources ($ Millions) | | | 2007 | | | 2006 |
EME Revolver | | $ | 507 | | $ | 473 |
MWG Revolver | | | 497 | | | 495 |
Cash & Short term investments1 | | | 1,230 | | | 2,181 |
Total | | $ | 2,234 | | $ | 3,149 |
$1.1 billion of credit facilities between MWG and EME
1 Excludes $121 million and $73 million of cash collateral held by counterparties at 12/31/07 and 12/31/06, respectively.
34
EDISON INTERNATIONAL®
Leading the Way in Electricity SM
EMG Capital Expenditures
Estimated Expenditures1
2008 – 2010
Growth Commitments
Environmental Plan
Plant/Corporate Capex Plan
$ Millions
1000
$ 861
800 $ 729
600
400 $ 380
200
0
2008 2009 2010
Total $1,970 Million
Estimated Expenditures (2008 – 2010)
• Additional growth opportunities
• Additional wind turbines
• Balance of plant costs for purchased wind
turbines
• Homer City will comply with 2010 phase of
mercury requirements
Estimated Expenditures After 2010
• Midwest Generation environmental spending
plan
• Evaluating FGD installation at Homer City
• Additional growth opportunities
1 EMG expects to make substantial investments in new projects during the next three years. As of December 31, 2007, EMG had a development pipeline of potential wind projects with an estimated installed capacity of over 5,000 MW (the development pipeline represents potential projects for which EME either owns the project rights or has exclusive negotiation rights). Completion of these projects is dependent upon a number of items which may include, depending on the project’s status, completion of a power sales agreement, permits, an interconnection agreement or other agreements necessary to start construction. Additional projects may from time to time be added to the development pipeline, and there is no assurance that the projects included in the development pipeline currently or added in the future will lead to the successful completion of a wind project.
36
EDISON INTERNATIONAL®
Leading the Way in Electricity SM
Use of Non-GAAP Financial Measures
Edison International’s earnings are prepared in accordance with generally accepted accounting principles used in the United States and represent the company’s earnings as reported to the Securities and Exchange Commission. Our management uses core earnings and EPS by principal operating subsidiary internally for financial planning and for analysis of performance. We also use core earnings and EPS by principal operating subsidiary as primary performance measurements when communicating with analysts and investors regarding our earnings results and outlook, as it allows us to more accurately compare the company’s ongoing performance across periods. Core earnings exclude discontinued operations and other non-core items and are reconciled to basic earnings per common share.
EPS by principal operating subsidiary is based on the principal operating subsidiary net income and Edison International’s weighted average outstanding common shares. The impact of participating securities (vested stock options that earn dividend equivalents that may participate in undistributed earnings with common stock) for each principal operating subsidiary is not material to each principal operating subsidiary’s EPS and is therefore reflected in the results of the Edison International holding company, which we refer to as EIX parent company. EPS and core EPS by principal operating subsidiary are reconciled to basic earnings per common share.
A reconciliation of Non-GAAP information to GAAP information, including the impact of participating securities, is included either on the slide where the information appears or on another slide referenced in the presentation.
37
EDISON INTERNATIONAL®
