Edison International Reports Financial Results for 2004

March 11, 2005

March 11, 2005

ROSEMEAD, Calif., March 11, 2005 –

  • Edison International (EIX) recorded consolidated earnings of $2.81 per share in 2004, an increase of about 12% over 2003 and well above the outlook range of $2.13-2.23 per share presented to investors in October of last year.
  • Increased reported earnings primarily reflect net benefits from the sale of international projects and the resolution of several regulatory and tax issues that more than offset the net effect of asset impairments, lease termination costs and lower operating earnings at Mission Energy Holding Company (MEHC) and Southern California Edison (SCE). 
    • In 2004, MEHC realized a gain of $1.64 per share from the sale of substantially all of its interests in international projects, net of related benefits and charges.
    • SCE’s resolution of several regulatory and tax issues contributed $1.01 and $0.75 per share to earnings in 2004 and 2003, respectively.
    • Charges for asset impairments and a lease termination at MEHC’s Midwest Generation facilities totaled $1.86 and $0.57 per share in 2004 and 2003, respectively.
    • EIX’s 2004 core earnings, which exclude non-core and other adjustments, were $1.91 per share, a decrease of 14% from 2003, but above the company’s October 2004 Outlook of $1.69 - $1.79.

2004 Financial Highlights:

  • Earnings per share - $2.81
  • Revenues - $10.2 billion
  • Assets – $33.3 billion

YEAR 2004 EARNINGS SUMMARY

For the year ending December 31, 2004, EIX recorded consolidated earnings of $2.81 cents per share, compared to $2.52 per share for the same period last year.

“2004 was another strong year for both our utility and our independent power businesses.  The achievements of the past three years have set a solid foundation for 2005 and beyond," commented John Bryson, Chairman, Edison International. 

In 2004, MEHC completed the sale of 11 of the 14 projects in its international project portfolio.  Two of the remaining three projects were sold in early 2005 and one project, Doga in Turkey, has not been sold at this time.   While EME will continue to seek to sell its ownership interest in this project, there is no assurance that such efforts will result in a sale.

The resolution of several key events and regulatory proceedings in both 2004 and 2003 resulted in many non-core adjustments that are excluded from core or operating earnings in an effort to provide a more meaningful comparison of ongoing operating performance. 

The 2004 non-core adjustments include earnings of $1.01 per share at SCE from the resolution of regulatory proceedings and prior year tax issues.  The 2004 regulatory proceedings included the 2003 General Rate Case (GRC) decision and a 2003 power procurement reasonableness proceeding.

The 2004 non-core adjustments at MEHC net to a loss of 7 cents per share.  The non-core positive adjustments include a $1.64 gain on the sale of its interest in international projects; a 9-cent-per-share gain on the sale of MEHC’s interest in Four Star Oil and Gas; and a 6-cents-per-share benefit from ceasing depreciation on the foreign assets held for sale.  The 2004 non-core gains at MEHC were offset by charges of $1.86 per share primarily from the termination of the Collins lease and the impairment of the small peaking plants in Illinois.

The 2004 non-core adjustments at EIX parent company include a 4-cents-per-share charge related to the write-off of unamortized debt costs from the early payment of EIX’s quarterly income debt securities in the fourth quarter of 2004.

The 2003 non-core adjustments include earnings of 75 cents per share at SCE from the resolution of various regulatory and tax issues together with a 15-cents-per-share gain from the sale of SCE’s pipeline business, impairment charges of 57 cents per share at MEHC primarily related to the eight small peaking plants in Illinois, and a 3-cents-per-share charge for a change in accounting principles at MEHC related to asset-retirement obligations.

Excluding the non-core items, EIX’s earnings were $1.91 per share for 2004 compared to $2.22 per share for 2003.  The year-over-year decrease primarily reflects the expiration of SCE’s performance-incentive mechanism for the San Onofre nuclear plant, the absence of earnings from MEHC’s interest in the Four Star Oil & Gas Company, which was sold in the first quarter of 2004, lower earnings at MEHC’s Homer City facility, and a charge for an indemnity related to asbestos claims at the Illinois plants.  The decrease was partially offset by higher revenue net of operating expenses at SCE and improved operating performance at MEHC’s international projects (including depreciation expense) and the Illinois plants.

YEAR 2004 EARNINGS DETAIL

Earnings (Loss) from Continuing Operations

SCE’s earnings from continuing operations for the year ending December 31, 2004 increased by $43 million, compared to the same period last year.  The net effect of non-core items related to the resolution of regulatory proceedings and prior year tax issues increased earnings by $86 million over 2003.  The 2004 proceedings included the 2003 GRC that was resolved in July of last year and the 2003 Energy Resource Recovery Account (ERRA) proceeding addressing power procurement reasonableness that was resolved in the fourth quarter.  Also, in the fourth quarter, the company favorably resolved prior year tax issues. Excluding these items, earnings decreased $43 million, primarily from the expiration at year-end 2003 of the incremental cost incentive pricing (ICIP) mechanism at the San Onofre nuclear plant partially offset by the increase in revenues authorized by the 2003 GRC decision.  Post-test-year revenue increases for 2004 and 2005, to compensate for customer growth and increased capital expenditures were authorized in the 2003 GRC decision.

MEHC, on a consolidated basis, had a loss from continuing operations of $666 million during 2004 compared to a loss of $194 million during 2003.  MEHC's 2004 loss from continuing operations increased by $472 million from 2003 primarily due to $608 million of charges for both terminating the Collins lease and impairment of the Illinois small-peaking plants during 2004.  This decrease in earnings was partially offset by $186 million of impairment charges in 2003 primarily related to the Illinois small-peaking plants and the investment in the Brooklyn Navy Yard project.  MEHC's 2004 results were favorably impacted by a gain on the sale of EME's interest in Four Star Oil & Gas which mostly offset the earnings recorded from the project during 2003.  During the fourth quarter of 2004, MEHC's subsidiary, Midwest Generation, recorded a charge of $34 million related to a contract indemnity for asbestos claims from activities at the Illinois plants prior to their acquisition in 1999.  In addition, the earnings from Homer City were lower in 2004 from 2003 due to unplanned outages and higher fuel costs related to emission allowances. The earnings from MEHC’s Illinois plants, excluding the above asbestos charge, improved in 2004 over 2003 from higher generation and energy prices, which more than offset the lower capacity revenues under the power purchase agreement with Exelon. 

Edison Capital’s earnings for the year ended December 31, 2004 were $60 million, compared with $57 million in 2003.  This increase is primarily due to higher income from Edison Capital’s global infrastructure investment funds.  The increase was partially offset by Edison Capital’s maturing lease and housing portfolios which produce lower income.

The loss for “EIX parent company and other” increased $3 million over last year with the write-off of unamortized debt costs from the early payment of the EIX quarterly income debt securities  and other expenses being virtually offset by lower net interest expense.

Earnings from Discontinued Operations

At SCE, earnings from discontinued operations for the year ended December 31, 2003 included a gain on sale and operating results totaling $50 million from SCE’s pipeline business which was sold in the third quarter of 2003.  MEHC, on a consolidated basis, had income from discontinued operations of $690 million in 2004 compared to $124 million in 2003.  The 2004 results of discontinued operations include gains of $533 million related to both the sale of its interests in Contact Energy and the sale of the Dutch holding company.  In 2004, MEHC completed the sale of 11 of its 14 international projects.  Two of the three remaining projects were sold in early 2005 and one project has not been sold at this time.

Excluding the gain, earnings from discontinued operations were $157 million during 2004 compared to $124 million in 2003.  The increase in earnings is due to improved performance at First Hydro, EcoElectrica and Loy Yang B offset by interest costs related to the $800 million bridge loan completed in December 2003.  

Change in Accounting Principle
       
MEHC’s consolidated results for the year ending December 31, 2003 include a $9 million charge for the cumulative effect of a change in accounting principle for asset retirement obligations adopted in 2003.  As SCE follows accounting principles for rate-regulated enterprises, implementation of this new standard did not affect its earnings. 

 
Year Ended December 31,
 
Earnings (Loss) (in millions) (Unaudited)
2004
2003
Change

Southern California Edison
$915
$872
$43
Mission Energy Holding Company
(666)
(194)
(472)
Edison Capital
60
57
3
EIX parent company and other
(83)
(80)
(3)

EIX Consol. Earnings from Continuing Operations

226

655
(429)

Earnings from Discontinued Operations
690
175
515
Changes in Accounting Principles
-
(9)
9

Total EIX Consolidated Earnings
$916
$821
$95

 
Year Ended December 31,
 
Earnings (Loss) Per Share (Unaudited)
2004
2003
Change

Southern California Edison $2.81 $2.68 $0.13
Mission Energy Holding Company (2.05) (0.60) (1.45)
Edison Capital
0.18 0.17 0.01
EIX parent company and other (0.25) (0.24) (0.01)

EIX Consol. Earnings from Continuing Operations 0.69 2.01 (1.32)

Earnings from Discontinued Operations
2.12 0.54 1.58
Changes in Accounting Principles -- (0.03) 0.03

Total EIX Consolidated Earnings $2.81 $2.52 $0.29

 
Year Ended December 31,
 
Core vs. Non-Core Presentation of
Earnings (Loss) Per Share (Unaudited)
2004
2003
Change

Southern California Edison $1.80 $1.93 ($0.13)
Mission Energy Holding Company* 0.14 0.36 (0.22)
Edison Capital
0.18 0.17 0.01
EIX parent company and other (0.21) (0.24) 0.03

EIX Consol. Core Earnings 1.91 2.22 (0.31)

SCE – non-core items / Disc.Ops.
1.01 0.90 0.11
MEHC – non-core items      
- Lease Terminations / Impairments (1.86) (0.57) (1.29)
- Gain on Sales of Assets 1.79 -- 1.79
EIX – Debt Extinguishment Costs (0.04) -- (0.04)
Change in Accounting Principle -- (0.03) 0.03

Total EIX Consolidated Earnings $2.81 $2.52 $0.29

*Includes depreciation expense on all MEHC international assets

The table below uses the annual non-core adjustments to reconcile year-end reported earnings to core earnings. 

YEAR 2004 ADJUSTMENTS REQUIRED TO RECONCILE REPORTED EARNINGS TO CORE EARNINGS
2003 2004
EIX YEAR ENDED DECEMBER 31 EARNINGS PER SHARE ON A REPORTED BASIS 2.52 2.81
 
SCE Net positive regulatory and tax items Continuing (0.75) (1.01)
SCE Gain and operating results from the sale of the pipeline business Discontinued (0.15) --
MEHC Collins lease termination Continuing -- 1.81
MEHC Asset impairments Continuing 0.57 0.05
MEHC Gain on sale of interest in Four Star Oil & Gas Company Continuing -- (0.09)
MEHC Net gain on sale of international assets Discontinued -- (1.64)
MEHC FAS #144 - Benefit from ceasing depreciation on international assets Discontinued -- (0.06)
MEHC Change in accounting principle  N/A 0.03 --
EIX Early extinguishment of debt Continuing      --  0.04
      (0.30) (0.90)
EIX YEAR ENDED DECEMBER 31 CORE EARNINGS
  2.22 1.91


FOURTH-QUARTER EARNINGS SUMMARY

For the fourth quarter of 2004, EIX recorded consolidated earnings of $1.16 per share compared to earnings of 60 cents per share in the same period last year.  The increase is primarily due to the year-over-year impact from resolution of regulatory and tax issues, the gain on sale and related items from the sale of MEHC’s international projects that closed in the fourth quarter of 2004 and impairment charges recorded in 2003 related to MEHC’s Brooklyn Navy Yard project.

The fourth quarter results include several non-core adjustments which are summarized in a table below to reconcile fourth quarter reported earnings to core earning.  The 2004 non-core adjustments include the resolution of regulatory and tax issues, the gain on the sale on MEHC’s interest in international assets that closed in 2004 and related items, the impairment in 2003 from MEHC’s Brooklyn Navy Yard project and cost associated with the early extinguishment of EIX quarterly income debt securities.
       
Excluding the non-core items, EIX’s core earnings were 42 cents per share for 2004 compared to 52 cents per share for the same period last year.  Most of the decrease reflects the $34 million charge at MEHC related to the asbestos indemnity, lower earnings from Four Star Oil and Gas, as the project was sold in 2004, offset by a $24 million increase from higher generation and energy prices at the Illinois plants and higher trading income.

FOURTH-QUARTER EARNINGS DETAIL

Earnings from Continuing Operations

SCE’s earnings from continuing operations were $315 million in the fourth quarter of 2004, compared with $222 million in the fourth quarter of 2003.  The increase in fourth quarter earnings primarily reflects a $97 million increase from the resolution of regulatory and tax issues.  After adjusting for these items, the decrease in earnings from the expiration of the performance-incentive mechanism for the San Onofre nuclear plant was offset by higher revenue, primarily authorized in SCE’s 2003 GRC for 2004.  SCE’s 2004 fourth quarter earnings included four positive regulatory items totaling $157 million including $71 million from the resolution of the 2003 power procurement reasonableness review, $74 million of income tax benefits related to prior years, and $12 million from generator refunds and other regulatory items.  Positive regulatory items that occurred in the fourth quarter of 2003 included $60 million related to the tax impact of the FERC rate case. 

MEHC, on a consolidated basis, had a loss from continuing operations of $52 million during the fourth quarter of 2004 compared to a loss of $85 million during the fourth quarter of 2003.  The increase in earnings was primarily due to higher generation and energy prices at the Illinois plants, higher trading income and the absence of the 2003 impairment charges and utilization of a related tax benefit in 2004 for MEHC’s Brooklyn Navy Yard project. These increases were partially offset by a charge of $34 million related to a contract indemnity with Commonwealth Edison related to asbestos claims and the absence of earnings from Four Star Oil and Gas that was sold in the first quarter of 2004.
 
Earnings in the fourth quarter of 2004 for Edison Capital were $26 million compared to $16 million in the same period last year.  The increase is primarily due to higher income from its global infrastructure investment funds.

The loss for “EIX parent company and other” increased by $11 million over the fourth quarter of 2003 primarily due to the write-off of unamortized debt costs associated with the early payment of the EIX quarterly income debt securities, partially offset by lower net interest expense.

Earnings from Discontinued Operations

MEHC, on a consolidated basis, had income from discontinued operations of $120 million during 2004 compared to income of $63 million during 2003.  The 2004 results of discontinued operations include a gain on sale of the international projects that closed in the fourth quarter of $65 million and earnings from the discontinued international projects of $55 million during 2004 compared to $63 million in 2003.  The decreased quarterly earnings over last year resulted from the sale of a development project and costs incurred in connection with the sale of the international projects.

 
Quarter Ended Dec. 31,
 
Earnings (Loss) Per Share (Unaudited)
2004
2003
Change

Southern California Edison $0.97 $0.68 $0.29
Mission Energy Holding Company (0.16) (0.26) 0.10
Edison Capital
0.08 0.05 0.03
EIX parent company and other (0.10) (0.06) (0.04)

EIX Consol. Earnings from Continuing Ops. 0.79 0.41 0.38

Earnings from Discontinued Operations 0.37 0.19 0.18

Total EIX Consolidated Earnings $1.16 $0.60 $0.56

 
Quarter Ended Dec. 31,
 
Earnings (Loss) (in millions) (Unaudited)
2004
2003
Change

Southern California Edison $315 $222 $93
Mission Energy Holding Company (52) (85) 33
Edison Capital
26 16 10
EIX parent company and other (30) (19) (11)

EIX Consol. Earnings from Continuing Ops. 259 134 125

Earnings from Discontinued Operations 120 63 57

Total EIX Consolidated Earnings $379 $197 $182

The table below uses non-core adjustments to reconcile quarterly earnings from continuing operations to
core earnings.

4Q ADJUSTMENTS REQUIRED TO RECONCILE REPORTED EARNINGS TO CORE EARNINGS
2003 2004
EIX 4Q EARNINGS PER SHARE ON A REPORTED BASIS  0.60 1.16 
 
SCE Net positive regulatory and tax items Continuing (0.18)  (0.48)
MEHC Net gain on sale of international assets  Discontinued --  (0.20)
MEHC Asset impairments    Continuing 0.10 --
MEHC Tax benefit and other  Discontinued -- (0.06)
MEHC FAS #144 - Benefit from ceasing depreciation on international assets  Discontinued --  (0.04)
EIX Early extinguishment of debt Continuing        --  0.04
      (0.08) (0.74)
EIX 4Q 2004 Core Earnings Reconciled from a Reported Basis   0.52 0.42

Reminder:  EIX Will Hold a Conference Call Today

        Today, EIX will hold a conference call to discuss its 2004 financial results at 8:00 a.m. PST.  Although two-way participation in the telephone call is limited to financial analysts and investors, all other interested parties are invited to participate in a “listen-only mode” through a simultaneous webcast on the company’s Web site at www.edisoninvestor.com.  Additional financial and other statistical information, if any, presented during the call will be available on the Web site.  The domestic call-in number is (800) 356-8584 and the ID# is 10200.

Additional Attachments:

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Based in Rosemead, Calif., Edison International (NYSE: EIX) is the parent company of Southern California Edison, Edison Mission Energy and Edison Capital.