Edison International (EIX), the parent company of Southern California Edison (SCE), has demonstrated strong financial performance and strategic foresight in navigating the evolving energy landscape. With a focus on reliability, resiliency, and readiness, the company is well-positioned to capitalize on the growing demand for electricity and drive sustainable growth.

Financial Highlights

In the second quarter of 2024, Edison International reported core earnings per share (EPS) of $1.23, up from $1.01 in the same period of 2023. This growth was primarily driven by higher revenue authorized in Track 4 of SCE's 2021 General Rate Case, an increase in the authorized rate of return, and recognition of previously unrecognized return on rate base related to wildfire restoration efforts. For the first half of 2024, Edison International's core EPS stood at $2.37.

Looking at the full-year financials, Edison International reported annual net income of $1.41 billion and annual revenue of $16.34 billion in 2023. The company's annual operating cash flow was $3.40 billion, while its annual free cash flow was negative $2.05 billion, reflecting the substantial capital investments required to modernize and expand the grid.

Quarterly Performance

In the second quarter of 2024, Edison International's operating revenue totaled $4.34 billion, up from $3.96 billion in the same period of 2023. This increase was driven by higher CPUC-related revenue due to the higher revenue authorized in Track 4 and an increase in the authorized rate of return. The company's total operating expenses rose to $3.41 billion, up from $3.23 billion in the prior-year quarter, primarily due to higher purchased power and fuel costs, as well as increased depreciation and amortization expenses.

Business Overview

Edison International, through its subsidiary SCE, is a leading electric utility serving a vast area of Southern California, excluding Los Angeles. The company's core business is the generation, transmission, and distribution of electricity to its 15 million customers. SCE operates a vast network of power lines, substations, and other infrastructure to ensure reliable and efficient power delivery.

Regulatory Landscape and Capital Investment

Edison International benefits from a supportive regulatory environment in California. The company's capital investment plan, which includes at least $2.0 billion in transmission projects expected beyond 2028, positions it for sustained growth and infrastructure development. SCE's 2025 General Rate Case (GRC) is progressing well, with the company reaching partial settlements covering 12 areas of the GRC, representing nearly 20% of the O&M request and about 8% of the capital request.

Wildfire Risk Mitigation and Operational Resilience

One of the key priorities for Edison International is mitigating the risk of wildfires in its service area. The company has made significant progress in this regard, with 84% of its distribution lines in high-fire-risk areas now hardened through the deployment of covered conductors and undergrounding. By the end of 2025, SCE expects to have nearly 90% of its total distribution lines in high-fire-risk areas hardened, reducing the risk of wildfires by 85% to 88% compared to pre-2018 levels.

Sustainability and Clean Energy Transition

Edison International is at the forefront of California's clean energy transition, with a strong commitment to sustainability. In 2023, SCE delivered 52% carbon-free power to its customers, which is 55% cleaner than the national average. The company has also contracted approximately 8,100 megawatts of energy storage, one of the largest portfolios in the nation, supporting the integration of renewable energy sources.

Liquidity

As of June 30, 2024, Edison International had cash and cash equivalents of $465 million and long-term debt of $33.10 billion. The company's equity needs to fund its substantial capital program over the next several years are among the lowest in the industry, with only $400 million in total equity needs projected for the 2025-2028 period. This is due to SCE's strong cash flow generation and the incremental debt financing to support accretive growth.

Risks and Challenges

While Edison International has made significant strides in mitigating wildfire risks, the company remains exposed to financial risks associated with future wildfire events and the associated claims and expenses. Additionally, the company faces the challenge of maintaining affordability and equity as it invests heavily in grid modernization and the clean energy transition.

Outlook

Edison International has reaffirmed its 2024 core EPS guidance of $4.75 to $5.05. The company's long-term outlook is also positive, with a projected 5% to 7% EPS CAGR through 2028, driven by the substantial capital investments required to support the growing demand for electricity and the clean energy transition.

Conclusion

Edison International is a resilient utility that is leading the charge towards a carbon-neutral California. With its focus on reliability, resiliency, and readiness, the company is well-positioned to capitalize on the growing demand for electricity and drive sustainable growth. The company's strong financial performance, proactive risk management, and commitment to sustainability make it an attractive investment opportunity in the evolving energy landscape.