8-K: Edison International Reports Strong Second Quarter, Reaffirms Full-Year Guidance Amidst Increased Load Growth

Edison International announced a solid second quarter with core EPS of $1.23, reaffirming its 2024 core EPS guidance and highlighting significant load growth and grid hardening progress.

Summary

• Edison International reported a second-quarter 2024 GAAP EPS of $1.14 and core EPS of $1.23, compared to $0.92 and $1.01 respectively in the same quarter last year.
• The company reaffirmed its 2024 core EPS guidance of $4.75 to $5.05 and long-term core EPS growth rate targets of 5-7% for both 2021-2025 and 2025-2028.
• Southern California Edison's (SCE) second-quarter core earnings per share increased due to higher authorized revenue, an increased rate of return, and recognition of wildfire restoration efforts, partially offset by higher interest expenses.
• Edison International's 10-year load growth forecast has increased by 35%, driven by customer requests for load growth projects and policy-driven electrification demand.
• SCE has completed 84% of its planned hardening of distribution lines in high fire risk areas and expects to approach 90% by the end of 2025.
• The company projects SCE's rate increases through 2028 to be closely aligned with local inflation levels, incorporating both requested increases in the 2025 General Rate Case (GRC) and full recovery of legacy wildfire costs.
• A stock repurchase program of up to $200 million was authorized, effective July 29, 2024, to offset dilution from stock issued under long-term incentive programs.

Sentiment

Score: 8

Explanation: The document conveys a positive sentiment due to strong financial results, reaffirmed guidance, and significant progress in key areas like grid hardening and load growth. The company's focus on sustainability and risk reduction also contributes to the positive outlook. However, there are still some risks and challenges that need to be addressed.

Positives

• Edison International had a strong start to the first half of the year, leading to the reaffirmation of its 2024 core EPS guidance.
• SCE's operational and financial risk profiles have significantly improved, with a substantial reduction in wildfire risk.
• The company is making significant progress in hardening the grid, reducing the need for operational measures like power shutoffs.
• SCE has the lowest system average rate among major California IOUs, positioning it well for future growth.
• The company is leading the charge toward a carbon-neutral California, with 52% carbon-free power delivered in 2023.
• SCE has a large portfolio of energy storage, with approximately 8,100 megawatts currently under contract.
• The company has completed its 2024 financing plan, with minimal equity needs for the 2025-2028 period.

Negatives

• Higher interest expenses partially offset the increase in SCE's core earnings.
• The company is still dealing with legacy wildfire costs and claims, which are impacting earnings.
• There are risks associated with regulatory approvals and potential disallowances of costs.
• The company faces risks related to extreme weather events and natural disasters.
• There are risks associated with the decommissioning of San Onofre.

Risks

• The ability of SCE to recover costs through regulated rates, including wildfire-related costs, is a risk.
• Affordability of customer rates could impact SCE's ability to execute its strategy.
• Regulatory or legislative restrictions could limit SCE's ability to implement wildfire mitigation measures.
• There are risks associated with the operation of electrical facilities, including worker and public safety issues.
• Cybersecurity risks to critical information technology systems are a concern.
• Extreme weather events and natural disasters could cause operational issues and unanticipated costs.
• The cost and availability of labor, equipment, and materials are risks.
• Actions by credit rating agencies could downgrade Edison International or SCE's credit ratings.
• There are risks associated with the decommissioning of San Onofre, including cost overruns and delays.

Future Outlook

Edison International is confident in achieving its 2024 core EPS guidance and long-term growth targets, driven by investments in grid infrastructure and the clean energy transition. The company expects significant load growth and is positioned to benefit from increased electrification. They also expect to continue to make progress on wildfire mitigation and cost recovery.

Management Comments

• Pedro J. Pizarro, president and CEO of Edison International, stated that the company is confident in reaffirming its 2024 core EPS guidance.
• Pizarro also noted that the funding authorized in the GRC is crucial for achieving the 2025 EPS guidance and delivering a 5% to 7% EPS CAGR through 2028.
• Pizarro highlighted that SCE's latest 10-year load growth forecast calls for 35% higher load growth.
• Maria Rigatti, Executive Vice President and Chief Financial Officer, emphasized that EIX's equity needs to fund its capital program are among the lowest in the industry.
• Rigatti also noted that SCE has the lowest system average rate among California IOUs, positioning it well for future growth.

Industry Context

This announcement comes as the utility industry is facing increasing demands for grid modernization and clean energy transition. Edison International's focus on grid hardening and electrification aligns with broader industry trends. The company's emphasis on wildfire mitigation is particularly relevant in California, where utilities face significant risks and regulatory scrutiny. The increased load growth forecast reflects a broader trend of electrification across various sectors.

Comparison to Industry Standards

• Edison International's wildfire mitigation efforts, particularly the hardening of distribution lines, are ahead of many other California IOUs, with SCE's total hardened miles exceeding those of all other California IOUs combined.
• SCE's system average rate is the lowest among major California IOUs, which is a competitive advantage.
• The company's 5-7% long-term EPS growth target is in line with or slightly above the average for regulated utilities.
• Edison International's focus on energy storage is also a key differentiator, with one of the largest portfolios in the nation.
• The company's financial discipline and efficient financing execution are also notable, with minimal equity needs for the 2025-2028 period.

Stakeholder Impact

• Shareholders will benefit from the strong financial results, reaffirmed guidance, and stock repurchase program.
• Customers will benefit from a more reliable and resilient grid, as well as lower rates in the long term.
• Employees will benefit from the company's commitment to sustainability and operational excellence.
• Suppliers will benefit from the company's continued investments in grid infrastructure.
• Creditors will benefit from the company's strong financial position and cash flow generation.

Next Steps

• SCE will continue to execute its Wildfire Mitigation Plan and capital program.
• The company will continue to work on the 2025 General Rate Case and the TKM cost recovery application.
• SCE will file its Woolsey cost recovery application in the third quarter of 2024.
• The company will continue to monitor and respond to load growth trends.
• Edison International will continue to invest in grid infrastructure and the clean energy transition.

Key Dates

Keywords

Edison International, Southern California Edison, Core EPS, Wildfire Mitigation, Load Growth, Grid Hardening, Rate Base, General Rate Case, Stock Repurchase, Electrification, Sustainability, Regulatory, Financial Results