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California

Edison Profit Dims in Second Quarter

The utility holding company is weighed down by a charge for the declining value of several power plants.

August 06, 2003|Nancy Rivera Brooks | Times Staff Writer

Edison International reported Tuesday that second-quarter net income fell 96% as its electricity-generation subsidiary wrote down the value of several Midwestern power plants.

But Edison's operating earnings, which exclude the charges, beat analyst expectations, and the Rosemead utility holding company said it was on track to hit its earnings target of $1.40 to $1.60 a share for 2003.

Still, Edison executives warned during a conference call of hurdles ahead for its two main subsidiaries -- Southern California Edison and Edison Mission Energy. Edison's stock fell 34 cents to $16.26 on the New York Stock Exchange.

The last several months have marked a return to relative health for Southern California Edison, which last month paid off its power debts from the energy crisis and, as a result, last Friday reduced customer rates by an average of 13%.

The utility remains saddled with a credit rating that is not investment grade. In addition, the company is awaiting a ruling by the California Supreme Court on the validity of the deal with state regulators that allowed Edison to pay off the debts from the energy crisis of 2000-2001.

Meanwhile, recent months have brought continuing problems for Mission Energy, which builds and operates power plants around the world. Like other so-called merchant generators, Mission Energy has been hurt by low power prices, high natural gas costs and tight credit.

Mission Energy lacks the cash to make debt payments of $275 million in September and $911 million in December. Edison International Chief Financial Officer Ted Craver told analysts and investors Tuesday that the firm was negotiating with creditors to restructure the debt.

Mission Energy "has been a question mark for the better part of a year and it will come to a head in the fourth quarter," said analyst Paul Fremont of Jefferies & Co., who doesn't own any Edison stock and rates it a "buy."

Mission Energy could join PG&E Corp.'s National Energy Group in Bankruptcy Court, Fremont said, noting that Edison Chief Executive John Bryson vowed not to infuse more cash into the subsidiary.

For the quarter ended June 30, Edison International's net income fell to $24 million, or 7 cents a share, from $665 million, or $2.04, in the same quarter last year. Revenue rose 11% to $3.1 billion.

The latest earnings included a charge of $150 million, or 46 cents a share, taken by Mission Energy to reflect the declining value of several "peaker" plants because of overbuilding by developers and high projected prices for natural gas, which fuels the plants. Peaker plants are used during periods of high electricity demand.

Another plant impairment charge of $475 million was taken by Midwest Generation, an indirect subsidiary of Mission Energy, but the charge did not affect Edison International earnings because the plant is treated as an operating lease, the company said.

In addition, earnings in the year-earlier quarter received one-time boosts of more than $480 million because of various regulatory rulings.

Excluding the charge, Edison said it earned roughly $176 million, or 54 cents a share, comparable with earnings in the second quarter of 2002. Analysts surveyed by Thomson First Call had expected 44 cents a share.

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