Edison International 2020 Form 10-K Summary
Business context and reporting period
This combined Form 10-K covers Edison International and its wholly owned regulated utility, Southern California Edison Company (SCE), for the fiscal year ended December 31, 2020. Edison International is primarily a holding company; SCE supplies and delivers electricity across approximately 50,000 square miles in Southern California to about 5.2 million customers. Edison Energy is not material as a separate reporting segment.
The filing also provides fourth-quarter 2020 data. The annual results, rather than a standalone quarterly filing, are the primary reporting focus.
Financial performance and key metrics
| Metric | 2020 | 2019 | Change |
|---|---|---|---|
| Edison International operating revenue | $13.578 billion | $12.347 billion | +10.0% |
| Net income attributable to common shareholders | $739 million | $1.284 billion | -$545 million |
| Basic EPS | $1.98 | $3.78 | -$1.80 |
| Core earnings, non-GAAP | $1.686 billion | $1.595 billion | +$91 million |
| SCE operating revenue | $13.546 billion | $12.306 billion | +10.1% |
| SCE net income available for common stock | $810 million | $1.409 billion | -$599 million |
| SCE core earnings, non-GAAP | $1.825 billion | $1.702 billion | +$123 million |
| SCE operating cash flow | $1.427 billion | $(91) million | +$1.518 billion |
| SCE capital expenditures | $5.480 billion | $4.876 billion | +$604 million |
Edison International's operating income was $1.217 billion, compared with $1.775 billion in 2019. The implied operating margin declined to approximately 9.0% from 14.4%. SCE's operating income was $1.178 billion, compared with $1.845 billion; its implied operating margin declined to approximately 8.7% from 15.0%.
Consolidated operating cash flow was $1.263 billion, compared with $(307) million in 2019. Consolidated investing cash flow was $(4.971) billion, principally reflecting capital expenditures, while financing cash flow was $3.727 billion. Edison International ended the year with $87 million of cash and cash equivalents; SCE had $55 million.
At December 31, 2020, Edison International had $19.632 billion of long-term debt, excluding current debt, and SCE had $16.499 billion. SCE also had $2.268 billion of short-term debt and $1.029 billion of current long-term debt. SCE reported $3.921 billion of available credit-facility capacity, while Edison International Parent reported $1.370 billion available. SCE's debt-to-total-capitalization ratio was 0.51, and Edison International's consolidated ratio was 0.59; both were within applicable covenant limits.
Material changes versus the prior comparable period
- GAAP earnings fell substantially because SCE recorded a $1.213 billion pretax charge, or $874 million after tax, for 2017/2018 wildfire and mudslide claims, net of expected FERC recoveries.
- Wildfire Insurance Fund expense increased to $336 million from $152 million.
- SCE's core earnings increased because of higher CPUC-related revenue, regulatory deferrals for wildfire mitigation, and the Track 2 GRC adjustment, partly offset by higher employee benefits, COVID-19-related uncollectibles and pandemic-response costs.
- Operating revenue increased primarily from the 2018 GRC escalation mechanism, higher FERC revenue, wildfire-related cost-recovery activities and approved balancing-account mechanisms.
- Capital expenditures increased to approximately $5.5 billion. SCE's year-end rate base was $34.7 billion, excluding $875 million of AB 1054-excluded capital expenditures.
- SCE's operating cash flow improved from an outflow in 2019, largely because the 2019 period included a $2.457 billion Wildfire Insurance Fund contribution, compared with a $95 million contribution in 2020.
- Edison International issued approximately $800 million of common stock in May 2020 and contributed $1.432 billion of equity to SCE. SCE redeemed $120 million of cumulative preferred stock and $180 million of Series G preference stock.
Guidance, outlook, risks and unusual items
SCE requested a $7.6 billion 2021 GRC test-year revenue requirement, approximately $1.3 billion above the 2020 authorized requirement. The CPUC had not issued a final Track 1 decision at the filing date, and management stated that the timing and ultimate authorized revenue requirement were uncertain. Intervenors proposed materially lower revenue requirements.
SCE forecast 2021–2023 capital expenditures of $14.7 billion to $16.2 billion, including approximately $3.6 billion of wildfire-mitigation capital spending. The company expects rate base for expected capital expenditures to reach $41.1 billion by 2023 under its base case, before certain exclusions and unapproved programs.
SCE initiated Public Safety Power Shutoffs 12 times in 2020, affecting approximately 140,000 unique customers. CPUC officials expressed concern about SCE's 2020 execution and required a PSPS action plan. SCE expects to reduce PSPS frequency and customer impacts in 2021, assuming comparable weather conditions.
- After year-end, SCE entered into the Woolsey Subrogation Settlement requiring payment of approximately $2.2 billion by April 22, 2021. Including subsequent settlements through February 18, 2021, estimated remaining 2017/2018 wildfire and mudslide losses were approximately $2.1 billion.
- As of February 18, 2021, SCE had paid or agreed to pay approximately $4.1 billion in settlements and had approximately $708 million of expected insurance recoveries remaining. Uninsured CPUC-jurisdictional costs remain subject to prudency determinations and are not currently considered probable of recovery.
- AB 1054 provides a Wildfire Insurance Fund, safety-certification framework and potential liability cap for qualifying post-July 12, 2019 fires. SCE had contributed approximately $2.6 billion and committed to eight annual contributions of approximately $95 million. The fund's expected life was reassessed from 10 to 15 years, affecting future amortization.
- SCE had $1.465 billion of wildfire-related and restoration memorandum-account balances at year-end, including $176 million related to COVID-19. Recovery depends on CPUC reviews and approvals.
- SCE had $35.488 billion of future power-purchase commitments, including $3.144 billion due in 2021. Total Edison International contractual obligations were estimated at $69.928 billion.
- San Onofre decommissioning is expected to require SCE's share of approximately $2.5 billion based on the 2017-dollar estimate, with $2.9 billion in related trust funds at year-end. Costs, timing and spent-fuel storage remain uncertain.
- The CPUC was investigating SCE's Upstream Lighting Program. Advocacy groups requested refunds, fines and other remedies relating to approximately $91 million of manufacturer incentives; the company recorded an accrual at the lower end of its estimated loss range.
- COVID-19 increased customer uncollectibles and operating costs. SCE recognized $191 million of net incremental pandemic costs, with $176 million deferred to memorandum accounts and $15 million transferred to balancing accounts.
- Credit ratings remained investment grade, but S&P assigned a negative outlook to Edison International and SCE. A downgrade could increase financing and collateral requirements.
Fourth-quarter 2020 snapshot
| Metric | Fourth quarter 2020 |
|---|---|
| Edison International operating revenue | $3.157 billion |
| Edison International net income attributable to common shareholders | $526 million |
| Edison International diluted EPS | $1.39 |
| SCE operating revenue | $3.151 billion |
| SCE net income available for common stock | $474 million |
Most important facts for investors to verify
- Final CPUC outcomes for the 2021 GRC, wildfire-cost recovery and pending memorandum-account balances.
- Cash funding, insurance recoveries and remaining liability associated with the Woolsey and other 2017/2018 wildfire settlements.
- Progress on AB 1054 securitization, the Wildfire Insurance Fund's solvency and SCE's continuing annual contributions.
- Execution and regulatory consequences of wildfire mitigation and PSPS programs, including maintenance of SCE's safety certification.
- Debt maturities, refinancing capacity, rating outlooks and the potential need for Edison International equity contributions to SCE.
- San Onofre decommissioning cost updates, trust-fund performance and federal spent-fuel storage developments.
- Resolution of the Upstream Lighting Program investigation and any resulting refunds, penalties or disallowances.