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Edison's Rebound From Energy Crisis Continues

The company's CEO points to 'significant and positive' third-quarter operating results.

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

Edison International said Wednesday that its profit jumped 55% in the third quarter -- evidence that the utility holding company is regaining financial strength after taking a bruising during the energy crisis of 2000-01.

Chief Executive John E. Bryson said the company had "a significant and a positive third quarter" that included key steps toward recovery from crisis-inflicted injuries at Southern California Edison, the utility that serves 4.5 million customers.

For the three months that ended Sept. 30, Rosemead-based Edison reported net income of $544 million, or $1.67 a share, compared with $352 million, or $1.08, in the same quarter of last year.

Revenue was $3.83 billion, up 3.4% from $3.7 billion a year earlier.

Bryson said income rose because of "encouraging operating results" at its two major subsidiaries, Southern California Edison and Edison Mission Energy, which builds and operates power plants.

Income also was boosted by a gain from the sale of a fuel oil pipeline and storage business and the resolution of regulatory proceedings.

In contrast, Edison's third-quarter results a year earlier were hurt by write-offs.

Excluding such items, Edison earned $1.53 a share in the latest quarter, beating Wall Street expectations of $1.08 a share, the average of analysts surveyed by Thomson First Call.

"They're getting back on track," said Douglas Christopher, a Crowell, Weedon & Co. analyst who has a "buy" rating on Edison and owns the stock.

During the energy crisis, Southern California Edison amassed huge power debts that "deeply injured the financial health of the company," Bryson said.

But through an agreement with the California Public Utilities Commission, Edison was able to take advantage of high electricity rates to finish paying off those debts by Aug. 1. The company then lowered rates, and it now expects to reestablish its common stock dividend early next year, he said.

Edison also boosted its earnings forecast for the year to a range of $1.85 to $1.95 a share, from its previous guidance of $1.40 to $1.60.

But the company hasn't recovered in the eyes of Wall Street, where its credit rating remains in junk bond territory. And Edison executives refused Wednesday to discuss how they would address looming debt payments at the Edison Mission Energy subsidiary.

A payment of $780.7 million is due Dec. 11, with an additional $692.7 million due next year. In a conference call with analysts and investors, Bryson declined to say whether Edison was in talks with its banks to restructure that debt.

The company previously has said it would have insufficient cash to make the December payment and would not invest any more capital in the operation. Like other energy sellers, Edison Mission Energy has been hit hard by low electricity prices, high natural gas costs and tight credit.

During the third quarter, Edison Mission Energy showed improvement, earning $200 million, or 61 cents a share, compared with $143 million, or 44 cents, in the same period last year.

Earnings at Southern California Edison, meanwhile, rose to $329 million, or $1.01 a share, from $234 million, or 72 cents.

Edison Capital, a small investment-vehicle subsidiary, saw earnings slip to $14 million, or 4 cents a share, from $27 million, or 8 cents.

Separately, Calpine Corp., an independent power producer based in San Jose, said third-quarter net income rose 57% to $237.8 million, or 51 cents a share, thanks to gains from the repurchase of debt and securities as well as greater electricity production. In the same quarter last year, Calpine reported earnings of $151.1 million, or 34 cents a share. Revenue increased to $2.69 billion from $2.47 billion.

Calpine lowered its earnings projections for the year to a range of 85 cents to $1 a share, from previous estimates of 90 cents to $1.20 a share.

The company said it expected smaller fourth-quarter "spark spreads," which are the difference between the cost of generating electricity and the price for which it can be sold. High natural gas prices have squeezed spark spreads throughout the industry.

Edison's stock closed up 27 cents at $19.95 and Calpine jumped 36 cents to $5.11. Both are traded on the New York Stock Exchange.

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