SoCal Edison Takes $661M Charge in 1Q

Banks providing credit lines to Southern California Edison and its parent, Edison International, have extended their forbearance in recognition that they expect the utilities deal (MOU) with California's governor will eventually be implemented to help restore credit-worthiness, Edison officials said last Tuesday as part of a conference call with the financial community dealing with the company's first-quarter earnings report.

When questioned, however, Edison officials said they could not be sure that the MOU and currently contemplated rate increases would eliminate all of the Edison utility's cash flow problems. The unknown still is the price of natural gas and electricity, both of which have been subject substantial price spikes and volatility over the past 12 months, said Ted Craver, Edison senior vice president and CFO.

"Clearly we can see that a number of these commodity prices --- whether natural gas for fueling power plants or the cost of electricity itself --- are subject to a lot of variation," Craver said. "So I don't think we want to mislead investors. That is why we stress the fact that the MOU covers going-forward costs.

"The point here is to assure that the utility is credit-worthy so it can resume its traditional utility functions, including procurement of power. If we're not credit-worthy, people won't lend to us --- whether it is banks or generators --- if they do not see an assurance of our recovering our costs going forward. We can't just rely on forecasts and estimates; we have to have assurances."

Edison International's $618 million credit line with banks has been extended to June 30, during which time the company expects to restructure the parent corporation's financing, Craver said. The utility's $200 million credit lines have been extended to Sept. 15, corresponding to the legislative deadline of mid-August in the MOU and adding time to get state regulatory financing approvals in place.

"The banks think we have an approach that works, and a path --- the governor's plan that we have signed onto --- and some momentum is building and wanted to assure we had adequate time within our bank line to let the MOU legislative and regulatory processes play out," Craver said. "So, the banks agreed to extend our bank line to mid-September."

Meanwhile, Edison International suspended its third consecutive quarterly dividend last Monday and reported a sea of red ink with a $617 million loss, or $1.89/share, for the first quarter of 2001. The utility reported a $661 million, or $2.03/share, first-quarter charge on after tax earnings, reflecting the amounts of purchased power that exceeded the utility's revenues.

Aside from the charge, Edison International had first-quarter earnings of $43 million, compared to $110 million the first quarter of last year; the utility, SCE, earned $62 million, compared to $113 million the same quarter last year.

Sales were down 9.6%, dropping to $2.46 billion for the first quarter, compared to $2.72 billion for the first quarter in 2000. Edison non-utility executives indicated that a combination of the economy slowing down and some capital constraints probably contributed to the decline, but they noted that longer term Edison Mission Energy, for example, intends to expand and upgrade existing coal-fired and nuclear facilities in the U.S. and develop new projects in Asia and Europe.

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