EDISON INTERNATIONAL annual report, FY2023

Edison International 2023 Form 10-K Summary

Business context and reporting period

Edison International is the holding company for Southern California Edison Company (SCE), a regulated electric utility serving approximately 5.3 million customers across an approximately 50,000-square-mile area of Southern California, and Edison Energy, a nonmaterial energy advisory business. This combined Form 10-K covers the fiscal year ended December 31, 2023, with comparative 2022 and 2021 information. The filing was dated February 22, 2024.

Financial performance and liquidity

Metric	2023	2022	Change
Edison International operating revenue	$16.338 billion	$17.220 billion	Down $882 million
Operating income	$2.627 billion	$1.483 billion	Up $1.144 billion
Net income	$1.407 billion	$824 million	Up $583 million
Net income attributable to common shareholders	$1.197 billion	$612 million	Up $585 million
Diluted EPS	$3.11	$1.60	Up $1.51
Net cash from operating activities	$3.401 billion	$3.216 billion	Up $185 million
Capital expenditures	$5.448 billion	$5.778 billion	Down $330 million

Consolidated operating margin improved to approximately 16.1% from 8.6%; net margin was approximately 8.6% versus 4.8%.
SCE generated $16.275 billion of operating revenue, $1.597 billion of net income and $1.474 billion of net income available for common stock, compared with $17.172 billion, $954 million and $847 million, respectively, in 2022.
Edison International reported 2023 core earnings of $1.825 billion, compared with $1.765 billion in 2022. SCE core earnings increased to $2.135 billion from $2.029 billion, while Edison International Parent and Other core loss increased to $310 million from $264 million.
Reported results included substantial non-core wildfire and other items. Total non-core items were a net loss of $628 million in 2023 versus a net loss of $1.153 billion in 2022.
At December 31, 2023, Edison International had $345 million of cash and cash equivalents, $31.393 billion of total debt including current maturities, and total liabilities of $63.814 billion. SCE had $214 million of cash, $28.494 billion of long-term debt including current maturities, and $60.079 billion of total liabilities.
SCE had approximately $1.8 billion available under its $3.4 billion revolving credit facility and $572 million of unused standby letter-of-credit capacity. Edison International Parent had $1.3 billion available under its $1.5 billion revolving credit facility.
SCE's debt-to-total-capitalization ratio was 0.56 to 1, below its 0.65 covenant limit. Edison International's consolidated ratio was 0.63 to 1, below its 0.70 covenant limit. Both companies were in compliance with applicable financial covenants.
Credit ratings were investment grade with stable outlooks: SCE was rated Baa1 by Moody's and BBB by Fitch and S&P; Edison International was rated Baa2 by Moody's and BBB by Fitch and S&P.

Material changes versus the prior comparable period

Net income attributable to Edison International common shareholders nearly doubled, primarily because 2023 wildfire charges were materially lower than in 2022, while SCE core earnings increased $106 million.
Revenue declined primarily because lower energy prices and volumes reduced cost-recovery revenue. Purchased power and fuel expense declined $889 million to $5.486 billion, and SCE operation and maintenance expense declined $588 million to $4.071 billion.
Interest expense increased $443 million to $1.612 billion, reflecting higher interest rates and increased borrowings. SCE interest expense increased $351 million to $1.356 billion.
Operating cash flow increased despite a $762 million working-capital outflow, compared with a $327 million inflow in 2022. Cash used in investing activities was $5.233 billion, and financing activities provided $1.447 billion.
SCE's year-end rate base increased to $42.7 billion from $40.6 billion, excluding AB 1054-excluded capital expenditures. Total 2023 capital expenditures were $5.4 billion versus $5.7 billion in 2022.
Beginning July 1, 2023, SCE implemented customer-funded wildfire self-insurance. Customers funded $150 million during the second half of 2023, reducing 2023 revenue requirements by $80 million and lowering commercial wildfire insurance costs.

Guidance, outlook, commentary, risks and unusual items

In November 2023, the CPUC approved a Track 4 settlement authorizing an $8.4 billion SCE revenue requirement for 2024, subject to specified adjustments.
SCE's 2025 General Rate Case requests approximately $10.3 billion of 2025 revenue requirement, 23% above the approximately $8.4 billion 2024 amount, plus requested increases of approximately $600 million in 2026 and $700 million in each of 2027 and 2028. The request remained subject to CPUC approval.
A cost-of-capital trigger increased SCE's authorized ROE from 10.05% to 10.75% effective January 1, 2024. The resulting 2024 revenue requirement increase was estimated at $201 million, although certain parties sought review or suspension.
SCE forecasts $37.5 billion of capital expenditures for 2024–2028, or $32.2 billion under its range case. The plan includes approximately $6.7 billion of wildfire-mitigation capital expenditures and approximately $13 billion of infrastructure replacement spending between 2023 and 2028.
For 2017/2018 wildfire and mudslide events, SCE had accrued $9.4 billion of estimated losses through December 31, 2023, recovered $2.0 billion from insurance, paid $8.7 billion under executed settlements, and recorded $637 million of estimated remaining losses. SCE expects to seek approximately $6.4 billion of CPUC rate recovery for uninsured claims, but stated that recovery of the pre-AB 1054 CPUC-jurisdictional costs was not yet probable.
Post-2018 wildfire claims had $676 million of estimated remaining losses, with $512 million of expected insurance and third-party recoveries and $154 million of expected electric-rate recoveries recorded as assets. Management could not estimate the upper end of reasonably possible losses for several fires.
The filing identifies significant risks from wildfire liability, regulatory disallowances, insurance and Wildfire Insurance Fund exhaustion, customer affordability, rising interest rates, capital-market access, climate-related events, permitting and construction delays, San Onofre decommissioning, cybersecurity, and customer departures to community choice aggregators or other providers.
San Onofre Units 2 and 3 decommissioning costs were estimated at $3.4 billion in 2021 dollars, including $2.6 billion for SCE's share, with completion currently estimated for 2053. SCE held $2.2 billion in nuclear decommissioning trust funds at year-end 2023 and accrued a $30 million probable disallowance related to the 2021 decommissioning proceeding.
The CPUC denied SCE's $677 million Building Electrification Program application in January 2024. SCE also disclosed delays and potential cost or force-majeure disputes involving its 537.5 MW utility-owned storage projects.
The audit opinion was unqualified. PricewaterhouseCoopers identified wildfire-related claims and rate-regulated accounting as critical audit matters; management reported effective internal control over financial reporting for Edison International.

Most important facts for investors to verify

Track CPUC decisions on SCE's $2.4 billion TKM wildfire recovery application and any later application for approximately $4 billion of Woolsey Fire uninsured claims.
Reconcile reported earnings with core earnings and separately quantify wildfire, regulatory, tax, decommissioning and other non-core items.
Monitor wildfire claims, insurance recoveries, self-insurance funding, Wildfire Insurance Fund capacity and potential losses above accrued amounts.
Assess whether the $37.5 billion 2024–2028 capital plan can be executed and recovered without worsening customer affordability or leverage.
Verify the final 2025 GRC revenue requirement, the 2024–2025 cost-of-capital adjustments and the status of SCE's dividend capacity.
Review debt maturities, refinancing needs, interest-rate sensitivity and liquidity after the January 2024 SCE bond issuance.
Track San Onofre decommissioning costs, trust-fund performance, spent-fuel storage obligations and potential additional contributions.
Evaluate actual outcomes for pending wildfire trials, including the Creek, Saddle Ridge, Bobcat, Coastal and Fairview fires, as the filing states that several loss ranges cannot be estimated.