Edison International faces serious challenges on three fronts.
The Rosemead company’s power generation subsidiary, Edison Mission Energy, plans to file for bankruptcy protection unless bondholders quickly agree to restructure $3.7 billion in debt at plants in the Midwest and East.
Closer to home, the Southern California Edison utility subsidiary is facing up to several hundred million dollars in costs to fix the idled San Onofre nuclear plant in northern San Diego County, which shut down in January after a leak. Edison wants to pass the cost of repairs and other expenses to ratepayers, but consumer advocates want Edison to pay.
Also, SCE is awaiting word from the state Public Utilities Commission on how much of its request for a $1.5 billion, three-year rate increase will be granted. If the commission doesn’t back the full rate-hike request, Edison shareholders will likely see lower-than-expected returns for the next three years.
As a result, Edison’s stock has fallen 6.5 percent over the last five weeks to close at $43.71 a share Aug. 29. The Dow Jones utility index was down 4.5 percent over that span.
Despite all that, one analyst believes the company’s shares are still a good buy.
“Edison International’s stock offers an attractively priced claim on one of the most profitable, fastest growing and best regulated utilities in the United States,” wrote Hugh Wynne, senior analyst at Bernstein Research in New York, in an Aug. 13 report.
The most pressing issue is the huge debt at Edison Mission, although its resolution could lift a burden from the parent company.
Edison Mission owns 45 power plants throughout the United States, including seven aging coal plants in Illinois and Pennsylvania that have been pummeled in recent years by a double whammy of low natural gas prices and huge plant retrofit costs. Edison Mission has $3.2 billion in debt coming due over the next couple of years, including $500 million in unsecured debt due in June.
When Edison Mission purchased six coal-fired power plants in Illinois from Chicago-based Commonwealth Edison in 1999 and another coal-fired power plant in Homer City, Pa., market deregulation was in full swing and companies were racing to snap up power plants that they hoped would yield profits for decades to come.
But since then, natural gas prices have fallen to 30- and 40-year lows, prompting utilities to switch from coal. Edison Mission’s coal-fired plants, with their fixed maintenance and coal delivery costs, could not offer prices as low as those from gas-fired plants. They went into the red and stayed there.
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