Edison Earnings Beat Expectations
A stronger performance by its battered utility unit Southern California Edison helped Edison International post $352 million in third-quarter net income Friday, reversing a $413-million loss a year earlier.
Despite continuing problems at Edison International’s unregulated power-generation subsidiary Edison Mission Energy, the Rosemead-based utility holding company said it would earn more during 2002 than previously expected. But it also said it would earn less next year because of uncertainty at EME and a lack of one-time items that have boosted 2002 income.
Overall, Edison executives painted a picture of a company returning to health in the wake of the 2000-01 energy crisis, but one that still faces several regulatory, legal and market challenges.
Edison’s earnings per share for the third quarter totaled $1.07, in contrast to a loss of $1.27 a share in the July-to-September quarter of 2001.
The year-earlier loss reflected a $1.15-billion charge from the sale of two power plants in England.
Excluding charges and costs related to procurement and generation, Edison reported operating earnings of $351 million, or $1.08 a share, compared with $283 million, or 87 cents, a year earlier. Edison’s operating earnings beat analyst expectations by a wide margin. The average estimate of analysts surveyed by Thomson First Call was 82 cents a share.
Revenue for the third quarter edged higher to $3.99 billion from $3.88 billion a year earlier.
Edison earnings were released before the stock market opened, and investors pushed the company’s stock 31 cents higher to $10.36 on the New York Stock Exchange.
The third-quarter report “reflects good operating performance from our three primary operating companies,” John E. Bryson, chairman and chief executive of Edison International, said during a conference call with analysts and investors.
For the full year, Edison raised its 2002 earnings estimate to $1.80 to $1.90 a share, up from guidance issued last quarter of $1.65 to $1.75 a share, because of better-than-expected earnings at Southern California Edison and Edison Mission Energy.
Next year, however, earnings probably will be lower because of uncertainty at Edison Mission Energy and because this year’s earnings were bolstered by one-time events, such as a reward by regulators for meeting performance targets in previous years, said Theodore F. Craver Jr., Edison International’s chief financial officer.
“They’re going to have some issues that hit the company next year,” said utility analyst Michael Worms of Gerard Klauer Mattison, including tight credit, weak electricity demand and low power prices.
Edison suffered during the energy crisis of 2000-01 because the utility was paying high wholesale prices for electricity that could not be passed along to customers under a state- mandated rate freeze. Two rate increases last year and a deal with the California Public Utilities Commission have allowed the utility to begin paying off its huge power debts and return to profitability.
But Southern California Edison faces a legal challenge to its debt-repayment deal with the PUC. Edison also must resume buying power for its customers Jan. 1, when the state by law must relinquish that responsibility. And the utility is embroiled in a contentious rate case, which will determine how much customers must pay and what level of return on its investments the utility can earn.
Higher rates and lower interest costs allowed SCE to post third-quarter operating earnings of $234 million, up from $133 million a year earlier.
Under the deal with the PUC, Edison has collected $2.7 billion toward the recovery of power costs from the energy crisis, with $905 million remaining to be collected.
The Edison Mission Energy unit posted operating earnings of $149 million, down from $180 million a year earlier.
