Q4 2022 Edison International Earnings Call

February 23, 2023

Good afternoon, and welcome to the Edison International fourth quarter 2022 financial teleconference.

That will be your operator today, when we get to the question and answer session. If you have a question for Starwood understanding today's call is being recorded I would now like to turn the call over to Mr. Sam <unk>, Vice President Investor Relations. Mr. Ramos you may begin your conference.

Thank you David and welcome everyone. Our speakers today are president and Chief Executive Officer, Pedro Pizarro and executed Vice President and Chief Financial Officer Maria <unk> also on the call are other members of the management team.

<unk> supporting today's call are lot available at Www Dot Edison investment Dot com.

These include a Form 10-K prepared remarks from Pedro and Maria and the teleconference presentation Tomorrow, we will distribute our regular business update presentation. During the call. We will make forward looking statements about the outlook for Edison International and its subsidiaries actual results could differ materially from current expectation.

Important factors that could cause different results are set forth.

Filings. Please read these carefully.

Presentation includes certain outlook assumptions as well as reconciliation of non-GAAP measures to the nearest GAAP measure.

During the question and answer session. Please limit yourself to one question and one follow up I will now turn the call over to Pedro.

Thanks, a lot Sam and good afternoon everybody.

I am pleased to report that Edison International core EPS for 2022 was $4 63.

Which was in the upper end of our initial guidance range.

We are introducing 2023 EPS guidance of $4 55 to $4 85.

And we are reinforcing our strong confidence in delivering our long term EPS growth target of 5% to 7% from 31% to 2025 Maria will discuss our financial performance and outlook.

Let's start with our key accomplishments in 2022 and they are noted on page three first.

First we once again delivered on our annual EPS guidance as I just mentioned.

Second SCE continues to make tremendous progress in reducing wildfire risk and Sps.

He successfully executed its wildfire mitigation plan.

Updated key statistics shown on page five.

That is that SCE now estimates it has reduced the probability of losses of catastrophic wildfires by 75% to 80% compared to pre 2018 levels and critically with much lower reliance on Sps now only 15% as hardening and other litigations continue as deep.

On page six.

Despite solid operational and financial performance market sentiment impacted our total shareholder return.

Our <unk> for 2022 trails that of the Philadelphia utility sector index and most of our peers.

As shareholders ourselves or our leadership team and I are deeply committed to achieving our financial targets, while strengthening sce's ability to deliver safe reliable affordable and increasingly clean electricity.

Diving deeper into Sce's tremendous progress in wildfire mitigation.

Despite challenging weather conditions and some fires in our service area last year 2022 marks the fourth consecutive year without a catastrophic wildfire associated with Sce's infrastructure.

Key achievements in 2022 include deployment.

Hundred circuit miles of covered conductor bring.

Bringing total installations to around 4400 circuit miles.

Put this in perspective. This is nearly the round trip distance from Los Angeles, Washington D C.

I am extremely proud of Sce's ongoing execution of grid hardening activities, which have made our communities safer.

The utility is targeting up to another 200 miles of covered conductor three bye.

By year end.

<unk>, 74% of total distribution lines in high fire risk areas or <unk>.

Including the 7000 miles already underground are expected to be hardened.

This is a significant achievement and Ada is summarized on page seven.

SCE completed its one millionth high fire risk inspection since 2019, which is like visiting every structure.

Three times.

The utility continued to build out its network of weather stations and now with more than 1600 total.

<unk> has the largest privately owned weather station network in the country, providing a granular view of weather related risks to inform operations.

A key result is that total acres burned from admissions on houghton's sections of our grid are 99% smaller than those in areas not yet.

Sce's approach to reducing wildfire risk is differentiated by the speed of its infrastructure hardening and by reducing reliance on measures that affect customer reliability like PSP, yes.

For example by prioritizing hardening circuits at risk of power shutoff.

By the end of the 2023 through 2025 wildfire wildfire mitigation plan.

Hard to about 7700 miles of its overhead distribution system and scaled innovative pilots such as early fault detection.

We look forward to Sce's continued success in reducing the greatest amount of wildfire risk in the shortest amount of time.

Turning to the 2017, and 2018 wildfire and mudslide events outlined on page eight in the fourth quarter SCE paid about $280 million in claims settlements.

SCE now targets filing be Teekay M cost recovery application in the third quarter of 2023.

Let me emphasize that SCE will seek full CPUC cost recovery, excluding amounts foregone under the agreement with the CP enforcement division or already recovered.

SCE will show strong compelling case that had operated the system prudently and that it is in the public interest to authorized forecast recovery.

The utility currently expects to request about $2 billion in this first application.

Our financial assumptions for 2025 and beyond do not factor in any potential upside from the cost recovery applications, which would represent substantial volume.

Looking ahead I want to highlight key management focus areas for 2023.

These are laid out on page nine.

First and foremost safety is foundational to our values and success.

And we are targeting reducing the rates of employee injuries by 15%.

Tragically a utility trouble then Johnny Kincaid.

From a work related injury last month.

200 of US joined his loved ones at his memorial service last week.

This was our first employee work related fatality in five five years.

And <unk> my resolve and had we doubled our teams resolved to make it our very last.

Sce's unwavering commitment to keeping our communities safe to wildfire mitigation also continues.

Utility plans to keep it space of about 100 miles per month of covered conductor.

A total of 5600 miles by year end.

Again filing the first cost recovery application for the historical wildfires is a front and center focus area for us.

On the regulatory front SCE looks forward to its upcoming 2025 applications.

Applications.

We will monitor the cost of capital mechanism, which could result in significant upside to 2024 earnings should a trigger.

On the financial side, we will be focused on achieving our capital expenditure and earnings goals as well as pursuing upgrades to our credit ratings.

We believe this is well warranted considering the significant wildfire risk reduction by SCE.

<unk> strong firefighting capabilities and supportive, California regulation.

Looking to the future the support for economy wide electrification continues to grow nationally out here in California, we've shared before with you that we forecast electricity usage growing 60% by 2045 Yep, that's a big six zero.

And previously we projected almost flat annual growth through 2030.

Followed by trajectory through 2045, but we are now seeing earlier increases with the breadth of legislation regulations and codes and standards approved last year.

CE has updated its electricity sales forecast to reflect the significant policy changes.

And now projects about 2% annual growth from 2023 through 2035.

Both transportation.

Electrification forecasts have increased significantly narrowing the gap to our pathway 2045 analysis.

This strong electrification load growth outlook is also consistent with the California energy Commission's forecast based on the state's de carbonization policies, providing a source of external validation.

Rapid expansion of electrification sharpens, the continued need to make significant investments in sce's infrastructure.

Over the coming years, SCE will continue to invest in wildfire mitigation and increase its grid work to support California's leading role in building a carbon free economy.

With growth in electricity demand this significant grid investment will be spread over a higher volume of sales supporting affordability overall.

<unk> system average rate is already the lowest among major California, industrial and utilities and we expect it will be the lowest for the foreseeable future.

All of us.

Wildfire risk reduction cost recovery for historical wildfires.

Electrification investment opportunity.

And importantly, our confidence in the 2025 EPS target.

It makes me very excited about our near term.

Our long term growth so I am confident that investors will fully recognize our significant value creation.

With that let me turn it over to Maria for the financial report.

Thanks, Pedro and good afternoon, everyone. Let me start by highlighting that Edison International's core EPS of $4 63 for 2022 was in the upper end of our initial guidance range and.

In my comments today, I will discuss our fourth quarter results, our 2023, EPS guidance and our 2023 financing plan.

Starting with the fourth quarter of 2022, <unk> reported core EPS of $1 15.

As you can see from the year over year quarterly variance analysis shown on page 10, Sce's fourth quarter earnings increased primarily due to <unk> attrition year escalation.

This was partially offset by higher depreciation expense and higher net interest expense.

The latter was driven by higher interest rates associated with funding 2017, and 2018 wildfire claims payments.

At <unk> parent and other it was a negative variance of <unk>, primarily due to higher holding company interest expense.

I would now like to discuss Sce's capital and rate base forecast shown on pages 11 and 12.

These are largely consistent with last quarter's disclosures.

I want to emphasize that SCE has significant capital expenditure opportunities driven by investments in the safety and reliability grid.

We continue to project strong rate base growth of 7% to 9% from 2021% to 2025.

The forecast also incorporates sce's current view of the requests we made in the 2025 <unk> and other applications.

SCE filed its 2025 G. R C application and testimony in May and we will update our forecasts and extend them through 2028 before our second quarter earnings call.

Turning to our earnings outlook, we are initiating 2023 core EPS guidance of $4 55 to $4 85.

I will cover the components of 2023 guidance in a moment, but first I want to frame our year over year EPS growth.

The primary driver is rate base growth, which we expect to be approximately eight 5% in 2023.

However, you can see that our guidance range implies relatively flat to modest growth for the year.

To help you bridge the difference page 13 lays out core EPS growth year over year.

The primary reason for the difference is higher interest expense at both the parent and SCE.

Refinancing of debt at the parent and get for historical wildfire claims payments driving increase.

To put this in perspective of the gap between 2023 rate base and EPS growth about 75% can be attributed to Sce's wildfire settlement related deaths.

While SCE is carrying refinancing costs until they reach cost recovery resolution I want to be very clear that the utility expects to seek full CPUC cost recovery of legal claims payments, including financing costs.

Please turn to page 14 for 2023 guidance and key earnings drivers.

The components of our EPS guidance start with rate base, math, which we forecast at $5 68.

Let's next discuss Sce's operational variances, which have a net contribution to guidance of 48% to 75 cents per share.

The major contributors are shown on the right side of the page.

SCE costs excluded from authorized our 71 with the biggest contributor being interest expense on debt for wildfire claims payments.

For <unk> parent and other we expect a total expense of 87 to <unk> 90 per share.

I would now like to provide the parent company's 2023 financing plan.

I'll preface this by saying that regardless of the specific instruments, we use our cash.

Fully reflected in our EPS guidance.

Turning to page 15, we project total EIA ex parent financing needs of $1 4 billion.

We expect that this will be financed with a combination of securities with $300 million to $400 million of equity content and parent debt for the remainder.

As a reminder, we issue securities with equity content to support our investment grade credit ratings, which we are firmly committed to maintaining.

To achieve our desired level of equity content, we may use a combination of hybrid securities internal programs or our existing aftermarket program.

Page 16 provides an update on the CPUC cost of capital mechanism.

If the 12 month average of the Moody's be double AA utility bond index exceeds 537% at the end of September the mechanism calls for increasing the ROE by half the difference between the average and 437%.

Importantly, the mechanism also resets the authorized cost of debt and preferred equity.

Through February 16th the measurement period average is around five 8%.

We will be monitoring this over the next seven months as an as an aid for understanding the specifics of the mechanism. We have provided a spreadsheet on our Investor Relations website that you can download.

Looking ahead, we are reiterating our 5% to 7% EPS growth rate guidance from 2021 through 2025, which translates to 2025 EPS of $5 50 to $5 90.

Laid out on page 17.

My management team and I are fully committed to delivering on this target.

I will note that this EPS target incorporates assumptions to accommodate the higher interest rate environment.

The upside potential associated with the cost of capital mechanism, which adjust ROE and updates the cost of debt and preferred.

To provide you with a sensitivity for the mechanism does trigger that would increase the ROE by a minimum of 50 basis points and each 50 basis points of ROE.

As 2025 EPS by about 28.

Further our financial assumptions for 2025.

And the potential recovery of historical wildfire costs, which could be substantial.

Lastly, I wanted to build on Pedros earlier point about affordability and highlight yet another action SCE has taken some bad customer rates.

Earlier this month SCE reached a settlement agreement with churn in Cal advocate to move to a customer funded wildfire self insurance model.

This builds on the customer funded self insurance that was previously authorized in the 2021 GIC.

Under the revised structure SCE will be able to reduce its revenue requirement by an annualized $160 million.

Further driving down Sce's system average rate, which is already the lowest among major California, Ious and we expect it will be the lowest for the foreseeable future.

Yeah.

To conclude <unk> offers double digit total return potential consisting of our 5% to 7% EPS growth rate guidance and 4% dividend yield.

Sce's rate base growth is the fundamental driver as the utility index.

Reliability of the grid, which increases in importance each year as economy wide electrification accelerates.

That concludes my remarks, I'll hand, it back to Sam.

Ted Please open the call for questions. As a reminder, we request you to limit yourself to one question and one follow up so everyone. In line has the opportunity to ask questions.

The phone line is now open for questions. If you would like to ask a question. Please press star one on your phone one moment for the first question. Please.

The first question is from Shar <unk> with Guggenheim Partners. Your line is now open.

Hey, good afternoon, Pedro and Maria.

Peter just given the I guess emerging visibility on the wildfire cost recovery I mean, I guess, that's a light at the end of the tunnel. If you if you will.

Do you still need to issue equity or equity content I mean, assuming if you start getting cost recovery you become over appetizers right at that time, So you could find some efficiency and deferring issuance and potentially showing the agencies a glide path for credit metrics.

Hey, Charles Maria I think now that when we when we've shared our equity needs before we really focus that on the underlying rate base needs and the capital needs of the company. So we've addressed all of the liabilities already.

Our focus has been on getting to that point. So really we're talking about equity on a go forward basis that $1 billion or $250 million on average over the next four years, that's about rate base growth, yes, if we when we get recovery now as we go through those processes I think that will consider continues to address how we're going to incorporate that into the capital structure. We obviously will have some debt.

Third higher at SCE as we as we get those dollars in the door, but I think we will deal with all of that as we go forward.

Okay got it so more to come there Okay and then just obviously since you're now seeing a 2% load growth starting in 'twenty, three I think from flattish levels.

I guess do you anticipate any incremental investment needs that are currently in the DRC.

<unk> capex within sort of this planning horizon.

That sort of have an impact on rate base and how do we sort of think about the recovery mechanisms would that be recovered under or do you need to file another jersey. Thanks.

Yes, Thanks, Charles apologize I jumped in there there was a little blip on the phone line. So I thought you were done.

Couple of pieces to this and you'll see probably want to add to this as well.

We're certainly managing within the current 21 rate case, you saw that we have for application we're waiting for.

Approval of that key thing here, though as you know.

As we look through 2000 32035, we see that growth earlier than we had expected we will certainly be building that into the 25% to 20 Herc application that Steve's team is completing now and expecting to file in may.

I think within that we believe is manageable Steve anything you would add from a renewal perspective, I just pointed out Pedro in terms of clarification of our load growth over the next 13 years, we do expect to see that load growth increase over time, it'll start lower so I wouldn't expect to see 2% starting next year it will ramp up as.

The level of vehicle electrification as well as building begins to accelerate and at some point begins to swaps.

The salt solar rooftop growth as well so that will that will that won't really impact for the next couple of years with our current rate case cycle, but Pedro like you said, we're looking at it hard for 2025 rate case to figure out what additional investments will be needed to support that growth that's great.

Great, Steve and Sean maybe more than you asked for but I'll give you one other point here, which I think is really important and frankly exciting.

This is now going to be almost totally smooth right.

We're going to see some frankly good for prices out there.

Over time, that's going to bring some short term volatility I don't mean, it in a negative way, but just volatility in customer adoption and particularly the example that we focus a lot on is think about fleet electrification.

If we did a big box retailer with a large trucks depot.

That is installing or buying a fleet of heavy duty electric vehicles.

They may not have let us know about that yet that's going to be as we're priced at some point, we'll be able to manage that but I think one of the themes you will see in the upcoming 25 DRC application as the team looking at getting.

Proposing investments that will rely that seem a little more flexibility in terms of being able to manage those goods for prices in terms of you know earlier electrification or more concentrated electrification and on one distribution circuit than we've experienced in the past.

Very different day, that's coming up in my head. It's a good thing right because it's all California would decarbonize, but it's going to come with some step changes as we go along particularly when you think about some of the heavier duty applications for electrification like Oh.

Larger trucks.

So maybe charges said the main takeaway there is that the next couple of years, we can fully managed within our existing <unk>, but you will see this low growth fully refract reflected in our 2025 applications.

This is perfect fantastic guys I appreciate it.

Thanks sure.

Okay.

The next question the queue is from Angie store SKU. Your line is now open with seaport.

Thank you how are you.

Okay.

So first question, maybe a different angle.

I think if you looked at the equity needs are for 'twenty, three and they seem relatively low given that you didn't issue all of the equity you needed for 'twenty. Two so is it a reflection of just some.

Fees on the catch up on the cash flow side and that you don't need to do the catch up for.

<unk> 22 or is it that you've managed to I dunno monetize some assets buildings you name it.

Hi, Angie it's Maria.

So I think I'm good.

To start by just saying we are managing to that 15% to 17, 17% <unk> to debt range, we have a real commitment to our investment grade ratings.

Having said that we told you before that we have about $1 billion up to about $1 billion of equity content need.

Through 'twenty, five but that that would flex depending on where we were in our capital program etcetera. So as we came into 2023, yes, we had deferred some of the equity content out of 2022, given the market conditions, but we took another good look at where you know where we want to be in terms of our metrics and this will satisfy that and allow us to continue to make that <unk>.

<unk> to our investment grade rating, so as we move through the rest of the 'twenty one through 'twenty five cycle will continue to take looks at where we are in the capital plan, but we're very comfortable with where we are today for our 23 financing plan.

Mhm Okay.

You Didnt mentioned anything about your battery project.

You give us a sense of the status of that project.

Yes, that's on track to be online by the summer Steve do you want to give any more detail.

So as a reminder for everyone.

Funding agreement back in October of 'twenty, one for with <unk> for 537 megawatts.

We've been working that project ever since at last last year did run into supply chain and some other execution challenges.

And we.

I just said, we expect that that will be online for the summer we fully expect still to spend about $1 billion in total on the projects and what the project coming online. This year, though we also are getting it'll.

It will be eligible for about $270 million of tax credits under the inflation reduction Act and so that will go to the to the benefit of our customers.

Okay, and then lastly, and probably most importantly, so you are planning to accelerate the <unk>.

Filling for the wildfire cost recovery at least the first portion.

Just wondering why why is it coming earlier than expected. So that's one and number two is.

So youre not deferring any interest associated with the financing of those wildfire claims because you haven't had any decision from the CPUC. So I'm just wondering if you do get a decision or a settlement why at least the settlement and that first batch is that enough for you to start deferring the interest expense associated with we'll see.

I'll take the first part Maria can take the second part.

I think what we said over the last several quarters' earnings calls is that we were targeting the first filing by the end of this year and also I think we commented on how we were.

Looking through to that as soon as possible because we recognize that there is value in getting that certainty and getting the first piece of cost recovery behind us. So I'm not sure I would say that we accelerated.

Again, it's consistently by the end of the year, but now that we have more clarity every quarter, we see that we have the ability to follow.

In the third quarter and so that's what we're going to get the floating out Maria facility.

So Angie as you correctly point out we are not deferring the interest expense associated with the wildfire claims that and so thats running through the income statement, we are asking for well, we'll ask for recovery when we filed the application and.

When we get recovery, then we would reverse that and you would recognize that in earnings when we get the decision. We will look at what the length precise languages et cetera, and see if we want to apply that to <unk> or how that would set itself up as a precedent. So we'll see what happens around that when we actually get the language of the decision on <unk>.

Awesome. Thank you.

Thanks, Andrew.

Next question is from Steve Fleishman with Wolfe Research Your line is open.

Yes, hi, good afternoon.

Hi, Steve you.

You guys, probably you probably know this already but as we were on this call. It looks like Moody's may have upgraded you already.

That's on that.

So first check mark on our scorecard steel [laughter] yeah.

But.

So.

On the.

I guess just on the filing.

For recovery could you talk about do.

We expect the timeline to get an answer from the CPUC in I think.

There isn't sort of like two decisions.

First prudency and then determining.

Actual dollars.

Okay.

A prudent process could you talk about both of those.

Sure so.

Our intent when we filed the application is to request an 18 months schedule, that's consistent with how they handle right setting sorts of applications.

We are also going to ask that they consider both of those items that you just mentioned both the prudency of our operations and the prudency of our of our settlement process of our claims process simultaneously what will happen. After we filed the application as it typically there would be a 30 day window in which people could final comments after which.

The Ah <unk>.

Commission would schedule a pre hearing conference and following a pre hearing conference. They would issue a scoping memo. The scoping memo would then have their schedule or their response to our requests and other intervenor comments, so that sort of thing we're looking at and we will know a lot more after that scoping memo is issued.

Okay.

Uh huh.

Great and then just on the.

I guess with respect to.

The operational variances so.

I think you've been able to offset in terms of your long term growth rate a lot of the interest rate increases through.

Improvement in the operational variances, particularly up to 25 could you just.

Give us some better sense of what those are.

And driving that and Mike <unk>.

How does that play into the.

<unk> also.

Yes.

Sure and Theres a lot of things in there and you can even see it in our 2023 guidance, we have actually a fairly similar range in 'twenty three that we have in the in the 2025 EPS CAGR. So what's in there big.

Big things that are in there are <unk> earnings that's a healthy chunk of operational variances. We also have regulatory applications that we have been submitting from time to time actually pretty much every year at this point and when those get when we get those decisions. Some of those true ups then go through the operational variances.

Speaking, specifically to 2025 and you know how do we manage through that since it's the first year of a G. RFP cycle, there are things that become.

Less.

Lined over the course of the <unk> cycle. An example, I often use is depreciation so you can get out of out of.

Get misaligned with what Youre actually recognizing depreciation versus what was authorized when you get to the first year with GIC cycle, you can actually true those things up and get more into a normal cadence. So those are the sorts of things that we have embedded whether it was 23, our last year 22 or the future 25.

Okay. Thank you.

Thanks, Steve.

The next question is from Ryan Levine with Citi. Your line is now open.

Hi, everybody.

To follow up on cost recovery application.

Third remarks in the presentation, you highlight about $2 billion.

That would be the ask how did you determine that amount and what factors.

Could cause some deviation from from that request.

Good question Ryan.

I think the simple answer is this is about the Teekay mk's.

And that's separate from the Woolsey case.

Before giving you.

A sense of how the total amount was divided up between the two cases notice gives you insight into the amount debt.

Allocated or.

Relevant to T J M.

Simply.

Ed I, just don't see accounting.

What kinds of which but it probably doesn't give you perfect insight quite yet because we will continue to settle claims and we will continue to accrue interest annual include a true up mechanism in the application that we filed so that we can address anything that any cost we incur following the application.

Between now and any filing in the third quarter.

I presume there is a lot of work that needs to be done.

Any factors that you care to share that could influence the more specific timing.

And any milestones to watch in the process.

Well I think Maria covered nicely earlier on.

The expectation there will be proposing an 18 months schedule.

I think we've shared in past calls that the team has been working on these applications already for quite some time. So it's not work that starts now it's work that's been ongoing.

And so we'll have final details once we put the application out there.

Okay. Thank you.

Thanks, Ron.

The next question is from Gregg <unk> with UBS. Your line is open.

Hey, Greg Yeah, Hi, Thank you.

Can you talk about the track for proceeding and sort of.

How that impacts your.

How thats going and.

How that impacts your ability to hit your financial goals.

How we should think about it.

Sure. So track for is that that stub year in our 2021 <unk> <unk> teekay. So it addresses 2024 revenue requirement.

Gotten interveners have filed comments I think we are going through the normal process.

Skip the schedule for that is to get a decision by the end of this year.

That's a very relevant data point for 2024.

So that that is sort of the normal process that we go through anytime theres, a GIC or some component of the JRC outstanding. It is it is not something that is affecting 2025. So if you recall will be through this GIC cycle. As you mentioned in response to Steve's question. In 2025 is the first year of the next ERC cycle.

Of our 5% to 7% EPS CAGR from 'twenty. One through 2025 is really focused on that 2025 outcome.

And the final outcome.

We'd be expecting to be somewhere between the intervenors and some.

<unk>.

On that in the final decision.

Youre talking about <unk> four.

Yes.

I think there's still some things we need to work through but on track for that still procedural schedules in comments there do so we'll work through that the balance of the year.

Alright, good luck.

Okay.

Next question is from Nicholas Campanella with Credit Suisse. Your line is now open.

Hey, everyone. Thanks for taking my questions.

I wanted to ask just a follow up on the claims and I'm, sorry, if I missed it but just.

And for what we.

When would that actually be filed I guess would it be sometime after 25 after the 18 months process on.

The Teekay am or can you just explain that.

Yes.

We haven't given you timing on that yet.

We have commented on this in the past on how we will see happen around a year. After two dam so you'd expect the schedule too.

To be.

Sometime later than PJM.

I don't think that we would necessarily need to wait for the teekay and proceeding to be completed.

While for <unk>, So just as we did with PJM.

Really we have.

Are substantially complete in terms of settlements I think that would be the timing for filing.

Okay. That's helpful. I appreciate it.

On.

On the earnings guidance.

Youre confidence on 25 is very notable and thanks for the walk to get there I guess just as.

As we think about that 24 cents of drag with the debt balance is affecting 23, presumably that's going to get carried forward I would imagine to 'twenty four is potentially a wafer recovery and actions from the CPUC just how do you frame where you are within this five to seven range and 24 are you do you have a line of sight to be with.

Or is it more just about thank.

Thank you.

Well fundamentally 25 is the most important aspect of this conversation right because that's the that's the target we put out there and that we're driving towards and that will commit to in terms of 2024, though you know how.

How do we think about that I think obviously, we'll give guidance for 'twenty two before on the Q4 call of next year of this year Q4, 'twenty three but I still think about 2024 as rate basis.

The driver of growth and there are things that we're going to find out in 2023 that are going to inform our 2024 guidance when we give it so some of the things we've already discussed today the <unk> III to track for a decision we have a number of memo account filings that we've made and we'll see where the timing on those for example, we're going to <unk>.

To execute on our financing plan I want to I want to be really clear we've embedded it is higher interest rate environment.

At this point, so I think.

I won't I won't say definitively where interest rates will end up in 2025, but there is that already baked into it.

We're also frankly going to continue to monitor the cost of capital mechanism. It is not necessary for us to get to our 5% to 7% EPS CAGR in 2025, but it is something that could impact 2024. So we are doing all of those things as we prepare and move into 2024 and of course. The team here continues to lean in and work on all of the operational efficiencies.

That are so important.

To this question, but also to customer affordability.

Thanks for that color Murray I really appreciate it thank you.

Thanks, Matt.

Next question is from David Arcaro with Morgan Stanley . Your line is open.

Alright, thanks, so much for taking my questions.

Okay.

I was wondering maybe first following up on on the financing outlook and the interest rate environment. We've seen a couple of your peers do.

Some different types of debt Securities recently convertible debt securities that have offered lower.

Interest rates I'm wondering if there are any ideas like that that you are exploring in terms of opportunities to lower the debt financing costs as you look at some of the upcoming refinancings and debt issuances.

Yeah, I think the answer that question is we're always looking at opportunities to be as cost effective as possible and we will have to monitor the market and see how all of those other transactions go whether it fits our situation, but absolutely looking for every opportunity like that that we can.

Okay got it thanks and then.

Also following up on the operational variances looking at the 2025 outlook I'm wondering if you could.

Given indication as to what kind of portion of that increased versus the prior expectation and are you able to give just how much of that is operational efficiencies within the overall bucket.

Yes, so we haven't broken it out into a ton of detail in terms of operational efficiencies because remember operational efficiencies. There is theres a lot of work that goes on at SCE and <unk> and so like you have many many line items that youre working through but some of the broad thematic areas that we've looked at that world.

Looking at.

Related to technology improvements and leveraging technology. It relates to work management and relates to procurement to there are a number of areas that I would say fall into the category of operational efficiencies, but as I mentioned earlier.

The operations the operational variances bucket also includes a lot of other things. It includes <unk>. It includes sort of the realization of of regulatory applications as we as we get into the into that time period. It includes the fact that we're going to realign some of the things that may have gotten a little bit misaligned over the course of a four year <unk>.

Cycle like depreciation so there's all of those things that fall into the operational variances.

Okay, Great. That's helpful color I appreciate it thanks, so much.

Thank you thanks much.

The next question is from Julien Dumoulin Smith with Bank of America. Your line is open.

Hey, good afternoon. Thanks, so much for the time I appreciate it you guys are well.

And just coming back to the guidance here 23 25.

We received a good amount of attention here, but just let me ask it this way when you look at your parent and others, it's relatively flattish from 23% to 25 it call it like that 88 midpoint.

Given the commentary thus far about the balance sheet and are focused on equity issuance and the fact that some of that is including the parent includes the dilutive effect. It kind of suggests that there is no incremental.

<unk> parent debt issuance your equity issued or if there is some kind of positive offset rate I E. Maybe some debt paydown from T cam or something like that.

Trying to understand the puts and takes in that parent and otherwise.

Yeah, I think Julien.

At the parent we do the same things that the utility does and look for cost efficiencies and we think that there are a number of areas around operational efficiencies around how we manage our work etcetera that will allow us to.

The fall into the range that we've given in 2025, so I think it's it's it's not that glamour.

Glamorous, but there's a lot of hard work getting costs down.

Got it do we have any sense of how much is baked in there in terms of cost reductions through the course of the period. If you will and also in the 'twenty three guidance I think it was like a 14 Tamar and what is that true up as well just while we're on the subject of detail.

Sure. So we're working across a whole range of items.

To hit our operational efficiencies and frankly, just our business effectiveness at the holding company so more to come on that as we work through those issues in terms of the 2023 sema item that youre, referring to that relates to so sema is a catastrophic event memo accounts. So we incurred costs a few years ago related to.

Capital et cetera that that we had to ask because there was a catastrophic event of a storm a wildfire et cetera, not related to any of the 17 or 18 events and when that happens we make an application for any incremental costs and now that application. We believe will come to fruition in this year and that would be recognized in our op.

<unk> variances, it's very similar.

It's analogous to the CSR P item that we flagged when we gave 2022 guidance.

Got it alright. Thank you guys very much have a great day.

Thanks Julien.

And that was our last question I will now turn the call back over to Mr. Sam Home Rush.

Well. Thank you for joining us. This concludes our conference call and have a good rest of the day and stay safe you may now disconnect.

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Good afternoon, and welcome to the Edison International fourth quarter 2022 financial teleconference. My name is Todd and I will be your operator today, when we get to the question and answer session. If you have a question for star one on your phone today's call is being recorded.

I'd like to turn the call over to Mr. Sam <unk>, Vice President of Investor Relations. Mr. <unk> you may begin your conference.

Thank you, Dave and welcome everyone. Our speakers today are president and Chief Executive Officer, Pedro Pizarro and executed Vice President and Chief Financial Officer Maria <unk> also on the call are other members of the management team.

Materials supporting today's call are available at Www Dot Edison investment Dot com.

Form 10-K .

Remarks from Pedro and Maria and the teleconference presentation Tomorrow, we will distribute our regular business update presentation.

During the call we will make forward looking statements about the outlook for Edison International and its subsidiaries.

Actual results could differ materially from current expectations.

Important factors that could cause different results are set forth.

Filings. Please read these carefully.

The presentation includes certain outlook assumptions as well as reconciliation of non-GAAP measures to the nearest GAAP measure viewed.

During the question and answer session. Please limit yourself to one question and one follow up I will now turn the call over to Pedro.

Thanks, a lot Sam and good afternoon everybody.

I am pleased to report that Edison International core EPS for 2022 was $4 63.

Which was in the upper end of our initial guidance range. Today, we are introducing 2023 EPS guidance of $4 55 to $4 85.

And we are reinforcing our strong confidence in delivering our long term EPS growth target of 5% to 7%.

One to 2025.

Maria will discuss our financial performance and outlook.

Let's start with our key accomplishments in 2022 and they are noted on page three.

First we once again delivered on our EPS guidance as I just mentioned second SCE continues to make tremendous progress in reducing wildfire risks and <unk>.

<unk> successfully executed its wildfire mitigation plan update.

Updated key statistics shown on page five.

That is that SCE now estimates it has reduced the probability of losses of catastrophic wildfires by 75% to 80% compared to 2018 levels and critically with much lower reliance on PSB US now only 15% as hardening and other litigations continue.

On page six.

Despite solid operational and financial performance market sentiment impacted our total shareholder return.

Our <unk> for 2022 trails that of the Philadelphia Utilities index and most of our peers.

Diving deeper into SCE is tremendous progress in wildfire mitigation.

Despite challenging weather conditions and some flyers in our service area last year 2022 marks the fourth consecutive year without a catastrophic wildfire associated with Sce's infrastructure.

Key achievements in 2022 inclusive.

1400 circuit miles of covered conductor bring.

Bringing total installations to around 4400 circuit miles.

To put this in perspective. This is nearly the round trip distance from Los Angeles, Washington D C.

I am extremely proud of Sce's ongoing execution of grid hardening activities, which have made our communities safer.

The utility is targeting up to another 200 miles of covered conductor three bye.

By year end, approximately 74% of total distribution lines in high fire risk areas or egfr or.

Including the 7000 miles already underground or expect it to be hard.

This is a significant achievement and is summarized on page seven.

SCE completed its one millionth high fire risk inspection since 2019, which is like visiting every structure.

Three times.

<unk> continued to build out its network of weather stations and now with more than 1600 total SCE has the largest privately owned weather station network in the country, providing a granular view of weather related risks to inform operations.

A key result is the total acres burned from admissions on houghton's sections of our grid or 99% smaller than those in areas not yet.

Sce's approach to reducing wildfire risk is differentiated by the speed of its infrastructure hardening and by reducing reliance on measures that affect customer reliability with PSP us for example by prioritizing hardening circuits at risk of power shutoff.

By the end of the 2023 through 2025 wildfire wildfire mitigation plan.

SCE recorded about 7700 miles of its overhead distribution system and scaled innovative pilots such as early false detection.

We look forward to <unk> continued success in reducing the greatest amount of wildfire risk in the shortest amount of time.

Turning to the 2017, and 2018 wildfire and mudslide events outlined on page eight in the fourth quarter SCE paid about $280 million in claims settlements.

SCE now target spoiling the TTM cost recovery application in the third quarter of 2023.

Let me emphasize that SCE will seek full CPUC cost recovery, excluding amounts foregone under the agreements with the FCC enforcement division or already recovered.

SCE will show strong compelling case that had operated the system prudently and that it is in the public interest to authorized forecast recovery.

The utility currently expects to request about $2 billion in this first application.

Our financial assumptions for 2025 and beyond.

Not factor in any potential upside from the cost recovery obligations, which would represent substantial volume.

Looking ahead I want to highlight key management focus areas for 2023.

<unk> laid out on page nine.

First and foremost.

Safety is foundational to our values and success.

And we are targeting reducing the rates of employee injuries by 15%.

Tragically utility trouble, then John and Kincaid.

From a workplace injury last month.

200 of US joined his loved ones at his memorial service last week.

This was our first employee work related fatality in five and a half years.

And it'll be doubled my resolve and we doubled our teams resolved to make it our very last.

Sce's unwavering commitment to keeping our communities safe to wildfire mitigation also continues.

Utility plans to keep its space of about 100 miles per month of covered conductor.

A total of 5600 miles by year end.

Again filing the first cost recovery application for the historical wildfires is a front and center focus area for us.

On the regulatory front SCE looks forward to its upcoming 2025.

Okay.

We'll monitor the cost of capital mechanism, which could result in significant upside to 2024 earnings should a trigger.

On the financial side, we will be focused on achieving our capital expenditure and earnings goals as well as pursuing upgrades to our credit ratings.

We believe this is well warranted considering the significant wildfire risk reduction by SCE the.

The state's strong firefighting capabilities and supportive, California regulation.

That's a big six zero.

And previously we projected almost flat annual growth through 2030.

<unk> trajectory through 2045, but we are now seeing earlier increases with the breadth of legislation regulations and codes and standards approved last year.

SCE has updated its electricity sales forecast to reflect the significant policy changes and now projects about 2% annual growth from 2023 through 2035.

Both transportation.

<unk> forecasts have increased significantly narrowing the gap to our pathway 2045 analysis.

This growing electrification load growth outlook is also consistent with the California energy Commission's forecast based on the states the carbonization policies, providing a source of external validation.

Rapid expansion of electrification sharpens, the continued need to make significant investments in sce's infrastructure.

Over the coming years, SCE will continue to invest in wildfire mitigation and increase its grid work to support California's leading role in building a carbon free economy.

With growth in electricity demand this significant grid investment will be spread over a higher volume of sales supporting affordability overall.

So your system average rate is already the lowest among major California, industrial and utilities and we expect it will be the lowest for the foreseeable future.

All of this.

Wildfire risk reduction cost recovery for historical wildfires.

Clean electrification investment opportunity then.

Importantly, our confidence in the 2025 EPS target.

Me very excited about our near term and our long term growth. So I am confident that investors will fully recognize our significant value creation.

With that let me turn it over to Maria for the financial report.

Thanks, Pedro and good afternoon, everyone. Let me start by highlighting that Edison International's core EPS of $4 63 for 2022 was in the upper end of our initial guidance range and.

In my comments today, I will discuss fourth quarter results, our 2023, EPS guidance and our 2023 financing plan.

Starting with the fourth quarter of 2022, <unk> reported core EPS of $1 15.

As you can see from the year over year quarterly variance analysis shown on page 10, Sce's fourth quarter earnings increased primarily due to <unk> attrition year escalation.

This was partially offset by higher depreciation expense and higher net interest expense.

The latter was driven by higher interest rates associated with funding 2017, and 2018 wildfire claims payments.

At <unk> parent and other there was a negative variance of <unk>, primarily due to higher holding company interest expense.

I would now like to discuss Sce's capital and rate base forecast shown on pages 11 and 12.

These are largely consistent with last quarter's disclosures.

I want to emphasize that SCE has significant capital expenditure opportunities driven by investments in the safety and reliability grid.

We continue to project strong rate base growth of 7% to 9% from 2021% to 2025.

The forecast also incorporates sce's current view of the request to be made in the 2025 GIC and other applications.

SCE filed its 2025 GIC application and testimony in May and we will update our forecasts and extend them through 2028 before our second quarter earnings call.

Turning to our earnings outlook, we are initiating 2023 core EPS guidance of $4 55 to $4 85.

I will cover the components of 2023 guidance in a moment, but first I want to frame our year over year EPS growth.

The primary driver is rate base growth, which we expect to be approximately eight 5% in 2023.

However, you can see that our guidance range implies relatively flat to modest growth for the year.

To help you bridge the difference page 13 lays out core EPS growth year over year.

The primary reason for the difference is higher interest expense at both the parent and SCE.

Refinancing of debt at the plant and.

And that for historical wildfire claims payments drive the increase.

To put this in perspective of the gap between 2023 rate base and EPS growth about 75% can be attributed to Sce's wildfire settlement related debt.

While SCE is carrying refinancing costs until they reach cost recovery resolution.

To be very clear that the utility expects to seek full CPUC cost recovery of legal claims payments, including financing costs.

Please turn to page 14 for 2023 guidance and key earnings drivers.

The components of our EPS guidance start with rate base, math, which we forecast at $5.68.

What's next discuss Sce's operational variances, which have a net contribution to guidance of 48 to 75 per share.

The major contributors are shown on the right side of the page.

SCE costs excluded from authorized or <unk> 71.

With the biggest contributor being interest expense on debt for wildfire claims payments.

For <unk> parent and other we expect a total expense of 87 to <unk> 90 per share.

I would now like to provide the parent company's 2023 financing plan.

Preface this by saying that regardless of the specific instruments, we use are fully.

Fully reflected in our EPS guidance.

Turning to page 15, we project total <unk> parent financing needs of $1 4 billion.

We expect that this will be financed with a combination of securities with $300 million to $400 million of equity content and parent debt for the remainder.

As a reminder, we issue securities with equity content to support our investment grade credit ratings, which we are firmly committed to maintaining.

To achieve our desired level of equity content, we may use a combination of hybrid securities internal programs or our existing at the market program.

Page 16 provides an update on the CPUC cost of capital mechanism.

If the 12 month average of the Moody's <unk> utility bond index exceeds 537% at the end of September the mechanism call for increasing the ROE by half the difference between the average and 437%.

Importantly, the mechanism also resets the authorized cost of debt and preferred equity.

Through February 16th the measurement period average is around five 8%.

Looking ahead, we are reiterating our 5% to 7% EPS growth rate guidance from 2021 through 2025, which translates to 2025 EPS of $5 50 to $5 90.

Weighed out on page 17.

My management team and I are fully committed to delivering on this target.

I will note that this EPS target incorporates assumptions to accommodate the higher interest rate environment.

Include the upside potential associated with the cost of capital mechanism, which adjust ROE and updates the cost of debt and preferred.

To provide you with a sensitivity for the mechanism does trigger that would increase the ROE by a minimum of 50 basis points and each 50 basis points of ROE changes 2025, EPS by about 28.

Further our financial assumptions for 2025.

And the potential recovery of historical wildfire costs, which could be substantial.

Lastly, I wanted to build on Pedros earlier point about affordability and highlight yet another action SCE has taken to that customer rates.

Earlier this month SCE reached a settlement agreement with churn in Cal advocate to move to a customer funded wildfire self insurance model.

This builds on the customer funded self insurance that was previously authorized in the 2021 <unk>.

Under the revised structure.

He will be able to reduce its revenue requirement by an annualized $160 million.

Further driving down Sce's system average rate, which is already the lowest among major California, Ious and we expect it will be the lowest for the foreseeable future.

To conclude <unk> offers double digit total return potential consisting of our 5% to 7% EPS growth rate guidance and 4% dividend yield.

Sce's rate base growth is the fundamental driver as the utility index.

A liability of the grid, which increases in importance each year as economy wide electrification accelerates.

That concludes my remarks, I'll hand, it back to Sam.

Ted Please open the call for questions. As a reminder, we request you to limit yourself to one question and one follow up so everyone. In line has the opportunity to ask questions.

The phone line is now opened for questions. If you would like to ask a question. Please press star one on your phone one moment for the first question. Please.

The first question is from Shar <unk> with Guggenheim Partners. Your line is now open.

Good afternoon.

Hey, good afternoon, Pedro and Maria.

Peter just given the I guess emerging visibility on the wildfire cost recovery I mean, I guess, that's a light at the end of the tunnel if you will.

Hey, Jos Maria.

We know that when we when we've shared our equity needs before we really focus that on the underlying rate base needs and the capital needs of the company. So we've addressed all of the liabilities already.

You get recovery now as we go through those processes I think that will consider continue to address how we're going to incorporate that into the capital structure. We obviously will have some debt to retire at SCE as we as we get those dollars in the door, but I think we will deal with all of that as we go forward.

Okay got it so more to come there Okay and then just obviously since you're now seeing a 2% load growth starting in 'twenty, three I think from flattish levels.

I guess do you anticipate any incremental investment needs that aren't currently in the DRC approved capex within sort of this planning horizon, I mean could that sort of have an impact on rate base and how do we sort of think about the recovery mechanisms would that be recovered under or do you need to file another Georgia.

Thanks.

Yes, okay. Thanks charge apologize I jumped in there was a little blip on the phone line. So I thought you were done.

Yes.

Couple of pieces to this and you'll see probably want to add to this as well we are certainly managing within the current 21 rate case, you saw that we have for application we're waiting for.

Approval of that key thing here, though is as we look through 2000 32035, we see that growth earlier than we had expected we will certainly be building that into the 25% to 20 Herc obligation that Steve's team is completing now and expect to file in may.

I think within that we believe is manageable and let Steve anything you would add.

I'll just point out Pedro in terms of clarification of our load growth over the next 13 years, we do expect to see that load growth increase over time, it'll start lower so I wouldn't expect to see 2% starting next year, it will ramp up as well.

The level of vehicle electrification as well as building begins to accelerate.

At some point begins to swaps.

The salt solar rooftop growth as well.

That will that won't really impact for the next couple of years with our current rate case cycle, but Pedro like you said, we're looking at it hard for 2025 rate case to figure out what additional investments will be needed to support that growth.

Great, Steve and Sean maybe more than you asked for but I'll give you one other point here, which I think is really important and frankly exciting. This is now going to be fairly smooth right.

We're going to see some frankly, good surprises out there.

Over time, that's going to bring some of these.

The term volatility I don't mean, it in a negative way, but it just volatility in customer adoption and particularly the example that we focus a lot on is think about fleet electrification.

If we did a big box retailer with a large trucks depot that is installing or buying a fleet of heavy duty electric vehicles.

They may not have let us know about that yet that's going to be a sort of price at some point, we'll be able to manage that but I think one of the themes you will see in the upcoming 25 DRC application as a team looking at getting.

<unk> investments that will rely that seem a little more flexibility in terms of being able to manage those goods are prices in terms of you know earlier electrification or more concentrated electrification and <unk>.

On one distribution circuit than we've experienced in the past.

So very different day, that's coming up and it's a good thing right because it's all California would decarbonize, but it's going to come with some step changes as we go along particularly when you think about some of the heavier duty applications, where electrification micah.

Larger trucks.

Okay. This is perfect fantastic guys I appreciate it.

Thanks sure.

The next question the cues from Angi <unk> skew. Your line is now open with seaport.

Thank you.

Are you.

Okay, but.

So first question, maybe a different angle.

I actually looked at the equity needs are for 'twenty, three and they seem relatively low given that you didn't issue all of the equity you needed for 'twenty. Two so is it a reflection of just some efficiencies.

The kept up on the cash flow side, and thus you don't need to do the catch up for.

22 or is it that you've managed to I dunno monetize some assets buildings you name it.

Hi, Andrew It's Maria.

So I think I'm going to start by just saying we are managing to that 15% to 17, 17% <unk> to debt range, we have a real commitment to our investment grade ratings.

Having said that we told you before that we have about $1 billion up to about $1 billion of equity content need.

Through 'twenty, five but that that would flex depending on where we were in our capital program etcetera. So as we came into 2023, yes, we had deferred some of the equity content out of 2022, given the market conditions, but we took another good look at where we want to be in terms of our metrics and this will satisfy that and allow us to continue to make that <unk>.

Fitment to our investment grade ratings, so as we move through the rest of the 'twenty one through 'twenty five cycle will continue to take looks at where we are in the capital plan, but we're very comfortable with where we are today for our 23 financing plan.

Mhm Okay.

You Didnt mentioned anything about your battery project.

You give us a sense of the status of that project.

Yes, that's on track to be online by the summer Steve do you want to give any more details on this slide.

So as a reminder for everyone.

Agreement back in October of 'twenty, one for with <unk> for 537 megawatts.

We've been working that project ever since at last last year did run into supply chain and some other execution challenges.

And we.

As you said, we expect that that will be online for the summer.

We fully expect still to spend about $1 billion in total on the projects with the project coming online.

Though we also are getting.

It will be eligible for about $270 million of tax credits under the inflation reduction Act and so that will go to the to the benefit of our customers.

Okay, and then lastly, and probably most importantly, so you are planning to accelerate the filing for the wildfire cost recovery at least the first portion.

I'm just wondering why why is it coming earlier than expected. So that's one and number two is.

First batch is that enough for you to start deferring the interest expense associated with we'll see.

So I'll take the first part Maria can take the second part.

I think what we said over the last several quarters' earnings calls is that we were targeting the first filing by the end of this year and also I think we commented on how we were.

Again, it's consistent we by the end of the year, but now that we have more clarity every quarter, we see that we have the ability to follow in the third quarter and so that's what we're going to get the falling out.

Maria.

The other part yes, so Angie as you correctly point out we are not deferring the interest expense associated with the wildfire claims that and so thats running through the income statement, we are asking for where we'll ask for recovery when we filed the application.

And when we get recovery, then we would reverse that and you would recognize that in earnings when we get the decision. We will look at what the lag precise languages et cetera, and see if we want to apply that to woolsey or how that would set itself up as a precedent. So we'll see what happens around that when we actually get the language of the decision.

<unk>.

Awesome. Thank you.

Thanks, Andrew.

Next question is from Steve Fleishman with Wolfe Research Your line is open.

Yes, hi, good afternoon.

Hi, Steve.

You guys, probably you probably know this already but as we were on this call. It looks like Moody's may have upgraded you already.

Congrats on that.

So.

First checkmark on our scorecards deal [laughter] yeah.

But.

So.

The.

I guess just on the filing.

For recovery could you talk about do.

Do you expect the timeline to get an answer from the CPUC in I think.

There isn't sort of like two decisions.

First prudency and then determining.

Actual dollars.

Okay.

A prudent process could you talk about both of those.

Sure so.

Our intent when we filed the application is to request an 18 month schedule, that's consistent with how they handle right setting sorts of applications.

The Ah <unk>.

The commission would schedule a pre hearing conference and following a pre hearing conference. They would issue their scoping memo. The scoping memo would then have their schedule sort of their response to our requests and other intervenor comments, so that sort of thing we're looking at and we will know a lot more after that scoping memo is issued.

Okay.

Uh huh.

Great and then just on the.

I guess with respect to.

The operational variances so.

I think you've been able to offset in terms of your long term growth rate a lot of the interest rate increases through.

Improvement in the operational variances, particularly up to 25 could you just.

Give us a sense better sense of what those are.

Driving that and Mike <unk> how.

How does that play into the <unk>.

<unk> awesome.

Thanks.

A healthy chunk of operational variances, we also have.

Regulatory applications that we have been submitting from time to time actually pretty much every year at this point and when those get when we get those decisions. Some of those true ups then go through the operational variances.

Speaking, specifically to 2025 and you know how do we manage through that since it's the first year of a DRC cycle there are things that become.

Less.

Aligned over the course of <unk> cycle. An example, I often use is depreciation so you can get out of out of.

Get misaligned with what Youre actually recognizing depreciation versus what was authorized when you get to the first year with DRC cycle, you can actually true those things up and get more into a normal cadence. So those are the sorts of things that we have embedded whether it was 23, our last year 22 or the future 25.

Okay. Thank you.

Thanks, Dave.

The next question is from Ryan Levine with Citi. Your line is now open.

Hi, everybody.

To follow up on cost recovery application.

Prepared remarks in the presentation, you highlight about $2 billion that would be the asking how did you determine that amount and what factors.

Could cause some deviation from that.

Yes.

Good question Ryan.

I think the simple answer is this is about the Teekay MKS.

<unk>.

Separate from the <unk>.

Before giving you.

A sense of how the total amount was divided up between the two cases now this gives you insights into the amount.

Our gated or.

Relevant to TTM.

Simply.

Ed just does the accounting of what kinds of work, but it probably doesn't give you perfect insight quite yet because we will continue to settle claims and we will continue to accrue interest and it will include a true up mechanism in the application that we filed so that we can address anything that we incur any cost we incur following the application.

Between now and any filing in the third quarter.

I presume there is a lot of work that needs to be done.

Any factors that you care to share that could influence the more specific timing.

And any milestones to watch in the process.

Well I think Maria covered nicely earlier on in the quarter.

Expectation there will be proposing an 18 months schedule.

I think we've shared in past calls that the team has been working on these applications already for quite some time. So it's not work that starts now it's work that's been ongoing.

And so we'll have final details once we file the application out there.

Okay. Thank you.

Thanks, Ron.

The next question is from Gregg <unk> with UBS. Your line is open.

Hey, Greg Yeah, Hi, Thank you.

Can you talk about the track for proceeding and sort of.

How that impacts your.

<unk>.

How thats going and how.

That impacts your ability to hit your financial goals.

How we should think about it.

Sure. So track for is that stub year in our 2021 generic tier CK. So it addresses 2024 revenue requirement and we've gotten interveners have filed comments I think were going through the normal process.

The skip the schedule for that is to get a decision by the end of this year. So that's a very relevant data point for 2024.

2% to 7% EPS CAGR from 'twenty, one through 2025 is really focused on that 2025 outcome.

And the final outcome.

We'd be expecting to be somewhere between the intervenors.

Some improvement on that in the final decision.

You are talking about <unk> four.

Yes.

I think there's still some things we need to work through but on track for that still procedural schedules in comments there do so we'll work through that the balance of the year.

Alright, good luck.

Okay.

Next question is from Nicholas Campanella with Credit Suisse. Your line is now open.

Hey, everyone. Thanks for taking my questions.

I wanted to ask just a follow up on the claims and I'm, sorry, if I missed it but just.

And for Wolverine.

When would that actually be filed I guess would it be sometime after 25 after the 18 month process on.

The teekay them or can you just explain that.

Yes.

We haven't given you timing on that yet.

We have commented on this in the past on how we will see happen around a year. After <unk>. So you would expect the schedule too.

To be.

Sometime later than PJM.

I don't think that we would necessarily need to wait for the teekay and proceeding to be completed.

<unk>, so just as we did with PJM.

Really we have.

Are substantially complete in terms of settlements that would be the timing for filing.

Okay. That's helpful. I appreciate it.

On.

On the earnings guidance.

Youre confidence on 25 is very notable and thanks for the walk to get there I guess, just as we think about that 24 cents of drag with the debt balances affecting 23, presumably that's going to get carried forward I would imagine to 'twenty four is potentially a wafer recovery and actions from the CPUC just how.

Are you frame, where you are within that five to seven range and 24 are you do you have a line of sight to be within it or is it more just about getting there in 25. Thank you.

How do we think about that I think obviously, we'll give guidance for 'twenty three before on the Q4 call of next year of this year Q4, 'twenty three but I still think about 2024 as rate basis.

The driver of growth and there are things that we're going to find out in 2023 that are going to inform our 2024 guidance when we give it so some of the things we've already discussed today you know the <unk> III to track for a decision we have a number of memo account filings that we've made and we'll see where the timing on those for example, we're going to <unk>.

To execute on our financing plan I want to I want to be really clear we've embedded so this higher interest rate environment.

Numbers at this point, so I think.

I won't I won't say definitively where interest rates will end up in 2025, but there is that already baked into it.

Is that are so important.

To this question, but also to customer affordability.

Thanks for that color Murray I really appreciate it thank you.

Thanks, Matt.

Next question is from David Arcaro with Morgan Stanley . Your line is open.

Alright, thanks, so much for taking my questions.

Okay.

I was wondering maybe first following up on on the financing outlook and the interest rate environment. We've seen a couple of your peers do some.

Some different types of debt Securities recently convertible debt securities that have offered lower.

Yes, I think the answer that question is we're always looking at opportunities to be as cost effective as possible and we will have to monitor the market and see how all of those other transactions go whether it fits our situation, but absolutely looking for every opportunity like that that we can.

Okay got it thanks and then.

Also following up on the operational variances looking at the 2025 outlook I'm wondering if you could.

Given indication as to what kind of portion of that increased versus the prior expectation and are you able to give just how much of that is operational efficiencies within the overall bucket.

Looking at.

Cycle like depreciation so there's all of those things that fall into the operational variances.

Okay, Great. That's helpful color I appreciate it thanks, so much.

Thank you thanks much.

The next question is from Julien Dumoulin Smith with Bank of America. Your line is open.

Hey, good afternoon. Thanks, so much for the time I appreciate it you guys are well.

And just coming back to the guidance here 23 25.

A good amount of attention here, but just let me ask it this way when you look at your parent of it right. It's relatively flattish from 23% to 25 it call it like that 88 midpoint.

Given the commentary thus far about the balance sheet and are focused on equity issuance and the fact that some of that is including the parent includes the dilutive effect.

Suggest that there is no incremental.

Parent debt issuance of equity issued or if there is some kind of positive offset rate I E. Maybe some debt pay down from Teekay I am.

Just trying to understand the puts and takes in there.

And otherwise.

Yes, I think Julien.

The fall into the range that we've given in 2025, so I think it's it's it's not that.

Glamorous, but there's a lot of hard work getting costs down.

Got it do we have any sense of how much is baked in there in terms of cost reductions through the course of the period. If you will and also in the 'twenty three guidance I think it was like a 14th FEMA. So what is that true up as well just while we're on the subject of detail.

Sure. So we're working across a whole range of items.

Our operational efficiencies and frankly, just our business effectiveness at the holding company so more to come on that as we work through those issues in terms of the 2023 sema item that youre, referring to that relates to so sema is a catastrophic event memo account. So we incurred costs a few years ago related to.

Capital et cetera that that we had to do that because there was a catastrophic event of a storm a wildfire etcetera not related to any of the 17 or 18 events and when that happens we make an application for any incremental costs and now that application. We believe will come to fruition in this year and that will.

Be recognized in our operational variances, it's very similar.

Think it's analogous to the CSR P item that we flagged when we gave 2022 guidance.

Got it alright. Thank you guys very much have a great day.

Thanks Julien.

And that was our last question I will now turn the call back over to Mr. Sam <unk>.

Well. Thank you for joining us. This concludes our conference call and have a good rest of the day and you may now disconnect.

Q4 2022 Edison International Earnings Call

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