SCE also establishes best estimate of total
liabilities for 2017, 2018 wildfire and mudslide events, EIX
reaffirms earnings guidance and commitment to maintaining
investment grade ratings
Southern California Edison has reached a settlement agreement
with all the holders of insurance subrogation claims in the pending
litigation arising from the 2017 Thomas and Koenigstein fires and
the 2018 Montecito Mudslides (TKM). No admission of wrongdoing or
liability was made in reaching this settlement. In addition, SCE
continues to make progress in reaching settlements with individual
plaintiffs in litigation arising from these events and the 2018
Woolsey Fire (collectively, the 2017/2018 Wildfire/Mudslide
Events).
“We are making significant progress toward resolving
wildfire-related litigation,” said Pedro J. Pizarro, president and
CEO of Edison International, parent company of SCE. “The settlement
announced today resolves all the subrogation claims in the pending
2017 Thomas and Koenigstein fires and January 2018 Montecito
Mudslides litigation. In addition, while other claims and potential
claims related to the 2017/2018 Wildfire/Mudslide Events remain,
SCE has reached settlements with several hundred individual
plaintiffs in litigation arising from these events. The company
continues to explore reasonable settlement opportunities with other
parties.”
Under the subrogation claims settlement, subrogation plaintiffs
will receive $1.16 billion for claims based on payments they have
already made to individual and business policyholders associated
with the Thomas and Koenigstein fires and Montecito Mudslides. SCE
will pay additional amounts for claims arising from future payments
that may be made to policyholders prior to July 15, 2023, up to an
agreed-upon cap.
Previously, last November, SCE and Edison International reached
separate settlements with 23 public entities impacted by the
2017/2018 Wildfire/Mudslide Events. With this current subrogation
claims settlement, increased settlement activity with individual
plaintiffs and currently available information, SCE is now
establishing a best estimate of total expected losses for the
2017/2018 Wildfire/Mudslide Events litigation of $6.2 billion (an
increase of $1.3 billion from the prior estimate) and will record
an incremental net charge to earnings of $878 million after tax.
SCE’s best estimate of expected remaining losses is $4.6
billion.
SCE intends to seek reimbursement for a large portion of the
settlement announced today from the approximately $843 million of
its remaining wildfire insurance for the Thomas and Koenigstein
fires and Montecito Mudslides. Timing differences between payments
to the subrogation plaintiffs and reimbursement by insurance will
be financed with SCE short-term debt supported by SCE’s $4.5
billion of existing credit facilities.
The following table presents changes in expected insurance
recoveries associated with the estimated losses for the 2017/2018
Wildfire/Mudslide Events since June 30, 2020:
($ in millions)
TKM
Woolsey
Total
Total insurance for 2017/2018
Wildfire/Mudslide Events
1,000
1,000
2,000
Recovered from insurance carriers through
June 30, 2020
(157
)
(206
)
(363
)
Balance at June 30, 2020
843
794
1,637
Expected insurance recoveries for the TKM
settlement
(843
)
n/a
(843
)
Expected remaining balance after
reimbursement
–
794
794
To enable SCE to debt finance these incremental claims payments
and maintain investment grade credit ratings, Edison International
anticipates issuing approximately $1 billion of equity to invest in
SCE. The timing of this financing will be dependent upon future
settlements and claims payments that exceed insurance, and Edison
International will provide an update on the fourth quarter 2020
earnings call.
Reaffirm 2020 Earnings Guidance
Additionally, Edison International reaffirms its previously
provided 2020 earnings guidance range of $4.37 to $4.62 per share.
The net charge to earnings associated with establishing a best
estimate of expected losses will be treated as a noncore item.
Edison International uses core earnings, which is a non-GAAP
financial measure. See discussion of Use of Non-GAAP Financial
Measures at the end of this release.
Additional Information
The company also made an 8-K filing, which can be accessed here.
For additional information, the company also provided a frequently
asked questions (FAQ) document, which can be accessed here.
SCE’s Efforts at Managing the Wildfire Threat in
California
Our thoughts are with communities across the state that are
suffering losses due to wildfire. At SCE, safety remains our first
and highest priority. As SCE implements measures to reduce wildfire
risk, the company continues to work closely with local first
responders and emergency managers and communicate regularly with
customers to improve awareness and promote preparedness.
Multiple factors contribute to wildfires throughout California,
including the buildup of dry vegetation in areas severely impacted
by years of historic drought; the failure of multiple responsible
parties to clear the buildup of hazardous fuels; increasing
temperatures; lower humidity and strong Santa Ana winds. Such
factors can trigger wildfires for a variety of reasons and strain
or damage utility facilities, no matter how well designed,
constructed and maintained.
SCE’s wildfire risk mitigation efforts continue to focus on
hardening infrastructure, bolstering situational awareness
capabilities and improving operational practices, while
implementing enhanced data analytics and technology. The California
Public Utilities Commission approved SCE’s latest Wildfire
Mitigation Plan on June 11, 2020.
Use of Non-GAAP Financial Measures
Edison International’s earnings are prepared in accordance with
generally accepted accounting principles used in the United States
and represent the company’s earnings as reported to the Securities
and Exchange Commission. Our management uses core earnings and core
earnings per share (EPS) internally for financial planning and for
analysis of performance of Edison International and Southern
California Edison. We also use core earnings and core EPS when
communicating with analysts and investors regarding our earnings
results to facilitate comparisons of the company’s performance from
period to period. Financial measures referred to as net income,
basic EPS, core earnings or core EPS also apply to the description
of earnings or earnings per share.
Core earnings and core EPS are non-GAAP financial measures and
may not be comparable to those of other companies. Core earnings
and core EPS are defined as basic earnings and basic EPS, excluding
income or loss from discontinued operations and income or loss from
significant discrete items that management does not consider
representative of ongoing earnings. Basic earnings and losses refer
to net income or losses attributable to Edison International
shareholders. Core earnings are reconciled to basic earnings in the
table below. The impact of participating securities (vested awards
that earn dividend equivalents that may participate in
undistributed earnings with common stock) for the principal
operating subsidiary is not material to the principal operating
subsidiary’s EPS and is therefore reflected in the results of the
Edison International holding company, which is included in Edison
International Parent and Other.
2020 Earnings Guidance
as of Sept. 22, 2020
Low
High
EIX Basic EPS
$4.09
$4.34
Less: Noncore Items*
(0.28)
(0.28)
EIX Core EPS
$4.37
$4.62
* There were ($102) million, or ($0.28) per share of noncore
items recorded for the six months ended June 30, 2020, calculated
based on an assumed weighted average share count for 2020. This
does not include the charge described in this press release
associated with establishing a best estimate of expected losses for
the 2017/2018 Wildfire/Mudslide Events litigation.
Safe Harbor Statement for Investors
Statements contained in this press release about the settlements
and SCE’s wildfire mitigation efforts, and other statements that do
not directly relate to a historical or current fact, are
forward-looking statements. In this press release, the words
"believes," "continuing to," "predict," "plan," "may," "will," and
variations of such words and similar expressions, or discussions of
strategy, plans or actions, are intended to identify
forward-looking statements. Such statements reflect our current
expectations; however, such statements necessarily involve risks
and uncertainties. Actual results could differ materially from
current expectations. Other important factors are discussed in
Southern California Edison’s Form 10-K, most recent Form 10-Q and
other reports filed with the Securities and Exchange Commission,
which are available on our website: edisoninvestor.com. Edison
International and Southern California Edison Company have no
obligation to publicly update or revise any forward-looking
statements, whether due to new information, future events or
otherwise.
About Southern California Edison
An Edison International (NYSE: EIX) company, Southern California
Edison is one of the nation’s largest electric utilities, serving a
population of approximately 15 million via 5 million customer
accounts in a 50,000-square-mile service area within Central,
Coastal and Southern California.
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Investor Relations Contact: Sam Ramraj, (626) 302-2540 Media
Contact: Gloria Quinn, (626) 302-2255
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