Edison International (EIX) (EIX), owner of
California?s second-largest electric utility, said its money-
losing, unregulated generation unit may be put into bankruptcy
and disclosed more inquiries into its nuclear plant shutdown.
The net loss at its Edison Mission Group widened to $110
million from $30 million a year ago on lower power prices and
higher fuel costs, the Rosemead, California-based company said
yesterday when reporting a 46 percent fall in second-quarter
profit. The unit may have to file for Chapter 11 bankruptcy
protection, the company said in a filing with the U.S.
Securities and Exchange Commission.
The company is working to restructure about $3.7 billion in
debt (0223076D) at Edison Mission, which has been hurt by a slump in power
prices and rising environmental-compliance costs for its coal-
fired power plants, Chief Executive Officer Ted Craver said on a
conference call with investors. It?s in talks with bondholders
to restructure debt and may have to reorganize its generation
unit under new ownership if talks are unsuccessful, he said.
?I don?t think it?s all that surprising that the company
is exploring various forms of reorganizing its generating unit,
given its financial condition and the overall wholesale power
market it is operating in,? Paul Patterson, a New York-based
utility analyst for Glenrock Associates LLC, said yesterday in a
telephone interview.
The earnings were issued after the close of regular trading
in New York. Edison?s shares fell 24 cents, or 0.5 percent, in
after-hours trading.
San Onofre Plant
Net income fell to $103 million, or 23 cents a share, from
$191 million, or 54 cents, a year earlier. Excluding results
from a coal plant that the company intends to transfer to
General Electric Co. (GE) (GE), per-share profit was 32 cents, more than
the 28-cent average of nine analysts? estimates compiled by
Bloomberg.
The benchmark power price in PJM Interconnection LLC, a
wholesale market where Edison?s generation unit sells power,
fell 27 percent to a second-quarter average of $41.51 a
megawatt-hour.
Net income at the company?s Southern California Edison
utility fell 9.5 percent to $191 million on increased costs that
cannot be recovered due to a rate case delay and expenses
related to inspections and repairs at its San Onofre nuclear
power plant. Sales rose 2.5 percent to $3.06 billion.
The San Onofre plant, operated by Southern California
Edison, has been offline since January after inspectors found
unusual wear on its steam generator tubes. The shutdown of the
reactors is costing about $1.5 million a day in lost revenue,
according to a July 3 report by Bloomberg New Energy Finance.
Commission Probe?
The California Public Utilities Commission may vote
tomorrow to start an investigation into the impact of the
shutdown, Craver said. In addition, the commission would start a
probe if the outage extends to nine months, which would then
make any revenues collected from that point forward subject to a
possible refund.
Edison will probably be able to return San Onofre?s Unit 2
to service ?months in advance? of Unit 3 because it had less
tube wear, Craver said. The company said it is ?less likely?
Unit 3 will be online this year and the utility plans to remove
fuel from the reactor and conduct additional analysis and tests,
according to a regulatory filing.
Costs to inspect and repair San Onofre have totaled $48
million and the utility has spent $117 million on replacement
power, Chief Financial Officer Jim Scilacci said yesterday
during the conference call. The utility estimates it will cost
$25 million to restart Unit 2 at reduced power, Scilacci said.
Outage Costs
Edison cannot say when it plans to have the plant online
and it must gain approval from the U.S. Nuclear Regulatory
Commission before starting either reactor. The agency may
require amendments to the plant?s operating license, the company
said in filing.
The company has notified Nuclear Electric Insurance Ltd. of
potential claims for accidental property damage and outage costs.
Insurance covers as much as $2.75 billion in accidental property
damage and up to $490 million of outage costs per unit while
policy exclusions or limitations may reduce or eliminate
coverage, according to a filing. Edison also has a $137 million
repair liability limit under a warranty with Mitsubishi Heavy
Industries Ltd.
Faulty computer modeling and manufacturing changes led to
the wear at San Onofre?s steam generator tubes, the U.S. Nuclear
Regulatory Commission said in a July 18 report. The reactors are
located about 60 miles (97 kilometers) south of Los Angeles and
generate enough power for 1.4 million homes.
Natural gas, which helps set the price of electricity, fell
to a 10-year low in April and averaged $2.354 per million
British thermal units during the quarter, 46 percent less than a
year earlier.
Southern California Edison provides power to 14 million
people, according to the company?s website. PG&E Corp. (PCG) (PCG), based in
San Francisco, owns California?s largest electric utility.
To contact the reporter on this story:
Mark Chediak in San Francisco at
mchediak@bloomberg.net
To contact the editor responsible for this story:
Susan Warren at
susanwarren@bloomberg.net
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