Edison International (EIX) 2024 Q2 Earnings Call Summary

Optimistic Highlights

• Strong Financial Performance: Edison International reported a core EPS of $1.23 for Q2 2024, with a year-to-date core EPS of $2.37, reinforcing confidence in achieving the 2024 core EPS guidance of $4.75 to $5.05.
• Load Growth Exceeding Expectations: Load growth trends are materializing sooner than expected, with a 35% higher 10-year load growth forecast, indicating substantial CapEx opportunities.
• Rate Increases Aligned with Inflation: SCE forecasts system average rate increases through 2028 to be closely aligned with inflation rates, ensuring stable costs for customers.
• Significant Wildfire Risk Reduction: Edison International has achieved an estimated wildfire risk reduction of 85% to 88% compared to pre-2018, enhancing operational and financial risk profiles.
• Leadership in Sustainability: Edison International is advancing towards a carbon-neutral California, with 52% carbon-free power delivered to customers in 2023 and significant investments in energy storage and wildfire mitigation.

Pessimistic Highlights

• Unsettled Portions of GRC: While partial settlements have been reached in the GRC, representing 19% of O&M and 8% of the capital request, there remains a significant portion not yet settled.
• Legacy Wildfire Cost Recovery Uncertainties: The TKM cost recovery application faces criticism from Cal Advocates, although SCE has rebutted these claims, the outcome remains uncertain.

Company Outlook

• Confidence in 2024 Guidance: Edison International is confident in achieving its 2024 core EPS guidance range of $4.75 to $5.05, supported by strong financial performance and positive regulatory outcomes.
• Capital Investment and Rate Base Growth: Continued investments are planned to meet the critical objectives of reliability, resiliency, and readiness, with SCE's capital and rate base forecasts remaining consistent with previous disclosures.

Q & A Highlights

• Q: Can you discuss the key debates remaining in the GRC and your confidence in a constructive final decision? (Michael Lonegan, from Evercore ISI)

  A: We are confident in the investments requested for a reliable, resilient, and ready grid, with the SCE team having done a very nice job in the GRC process. (Pedro Pizarro)

• Q: Are you expecting incremental investment in the planning period through 2028 due to faster-than-expected load growth? (Michael Lonegan, from Evercore ISI)

  A: We are evaluating customer demands and the precise plans, which will allow us to lay out when the investments will come back into the capital plan. (Maria Rigatti)

• Q: On the legacy wildfire cost application, would you settle for anything less than 100%? (Shar Pourreza, from Guggenheim Partners)

  A: We can't comment on potential settlements beyond saying that we're certainly open to that and always willing to engage with parties. (Pedro Pizarro)

• Q: How are you thinking about capital allocation in light of the legacy wildfire claims recovery? (Shar Pourreza, from Guggenheim Partners)

  A: We will continue to have a 15% to 17% FFO-to-debt framework for the company, with debt outstanding at SCE that went to fund the claims payments. (Maria Rigatti)

• Q: Is the load growth already faster than what you were thinking last quarter? (David Arcaro, from Morgan Stanley)

  A: We're still seeing a 2% to 3% in the near-term, but the long term is really showing that increase. (Pedro Pizarro)

• Q: Do you have any early thinking on whether utilities like yourself would be involved in any of the next generation technologies procurement? (David Arcaro, from Morgan Stanley)

  A: We see the need to develop a whole host of resources to meet the demand that's coming, and we're evaluating what the PUC put out. (Pedro Pizarro)

• Q: As you're preparing to file the next gen ERP application next quarter, would you be able to frame broadly the magnitude of the investment opportunity? (Ryan Levine, from Citi)

  A: When we file the application, we will lay out the cost of the system and the benefits, focusing on efficiency in T&D operation and financial reporting. (Maria Rigatti)

• Q: In terms of the load growth forecast, is there anything you're looking for from federal policy that could impact both growth in your service territory? (Ryan Levine, from Citi)

  A: We are being driven by the state's requirements and targets for EVs, with federal incentives provided by the Inflation Reduction Act helping lower the ultimate cost of the transition to consumers. (Pedro Pizarro)

• Q: How should we interpret only Cal Advocates filing testimony on the TKM recovery? (Anthony Crowdell, from Mizuho)

  A: Not reading a lot into this initial step, there are opportunities for other parties to express interest as we move along. (Pedro Pizarro)