Edison Reports Drop in Earnings
Utility company Edison International said Tuesday that its second-quarter profit fell 12%, citing the costs of refinancing debt.
The Rosemead-based company, parent of Southern California Edison, said net income declined to $177 million, or 54 cents a share, for the quarter ended June 30. That compared with $201 million, or 61 cents, a year earlier.
Revenue in the second quarter rose 15% to $3 billion.
The company’s power plant unit, Edison Mission Group, reported a loss after it refinanced about $1 billion in debt in June to benefit from lower interest rates. Costs from the refinancing offset increased profit at utility Southern California Edison, which had tax-related gains.
“Refinancing the debt disrupts earnings a little bit, but it’s a long-term positive,” said Mark Sadeghian, an analyst with Morningstar Investment Service in Chicago, who rates the shares three stars out of five and does not own them. “For a long time, they’ve had a big debt overhang.”
Shares of Edison International rose 12 cents Tuesday to $41.77.
Edison Mission Group had a loss of $56 million, or 17 cents a share, swinging from a profit of $25 million, or 8 cents, a year earlier. Profit at Southern California Edison rose to $234 million, or 72 cents, from $161 million, or 49 cents.
Edison’s earnings also fell because of lower income at the Edison Capital unit, which manages investments, and on reduced profit related to the firm’s former Lakeland Power unit in Britain.
The results were “a little light,” said Dan Eggers, an analyst with Credit Suisse First Boston, in a note to clients. “The second quarter is a seasonally light quarter.” Eggers rates the shares “outperform.”
Excluding the tax items and refinancing costs, Edison’s earnings rose to $180 million, or 55 cents a share, from $176 million, or 54 cents, a year earlier. The company was expected to earn 59 cents a share, based on the average estimate of 10 analysts surveyed by Thomson Financial, which did not disclose the parameters of its survey.
The company, which declined to update its earnings forecast for the year, is seeing better results than it expected from energy trading. It also is benefiting from higher power prices tied to demand driven by hot weather, Chief Financial Officer Thomas McDaniel said on a conference call with analysts.
Edison International in June forecast annual profit of $3.13 a share. The company plans to update the forecast when reporting third-quarter earnings, McDaniel said.
Southern California Edison was granted regulatory approval in May for a $134-million rate increase retroactive to January. The utility plans to spend $11 billion in the next five years on its power system.
A heat wave last month boosted electricity demand in the utility’s service area, including a record 22,889 megawatts July 25, exceeding the previous mark by 4.4%, Chief Executive John Bryson said. (One megawatt is enough to power about 750 typical U.S. homes.)
“We are continuing to experience very high customer growth rates and have for some time,” he said. “We expect to continue to face demanding scenarios.”
