愛迪生國際 (EIX) 2002 Q2 法說會逐字稿

Good morning, ladies and gentlemen. Welcome to the Edison International earning release conference call. This call will be available for replay at the following numbers. 877-693-4277. Also, 402-220-0042. You will need to use the pin code 8301 to access today's call. For your information, this call is being recorded. Also, we want to advise you that Edison International is holding a simultaneous webcast of this conference call. This will be on the company's website in a listen-only mode for interested parties. When the conference begins, you will be on listen only and there will be a chance for questions and answers the end. In addition, if at any time during the conference you are in need of assistance, press star zero for a conference coordinator. Thank you again for your patience. The conference will be beginning shortly. And at this time I would like to introduce your host, Mr. John Bryson, Chairman and Chief Executive Officer of Edison International.

Good morning. We have many of you on the line this morning. It is a pleasure for us to bring a number of people here together to talk again about Edison International, to say these are turbulent times in the industry is something of an understatement. And we've had many questions.

What we've tried to do is plan and prepare for this call today, to respond to questions we've had as well as to provide information about our earnings and outlook as of the present time. The plan is that what we provide you today, which we plan now hour and a half, extra half hour beyond our usual calls, that coupled with the 10-Q, which is an international file on or before August 14th, will provide you the information you need to further and properly assess your investments in Edison International . What we'll try to do is provide as much factual information in this call as we practically can. We recognize that a conference call setting is not the easiest way to convey a lot of numbers, so we expect the 10-Q will help augment the effort that we make in this call.

Let me start with the Miranda rights here. During this call, we will make forward-looking statements about Edison International and its subsidiaries. We believe the stages to be accurate and well founded. However, actual results could differ materially from current expectations. We have set forth important factors that could cause different results in Edison International's 2001 form, 10-K and the subsequent 10-Q's and 8-K's. We encourage you to read those reports carefully.

All right. Since the release has gone out, some of you have seen at least the major headlines. We had at Edison International a solid second quarter of performance, with reported earnings per share of $2.04 and core earnings per share of 56 cents. Further, we believe Edison International will exceed the earnings guidance we provided late last year for the year 2002, even though we did not fully anticipate the level of stress in the wholesale power industry. We now expect Edison International's core earnings per share for the year to be in the range of $1.65 per share to $1.75 per share.

We are generally pleased with overall Edison International results. Even though the contributions from our three major operating companies are uneven for the year.

Let me start first with Southern California Edison, strong operating performance coupled with some constructive regulatory decisions, is a significant reason for the utilities results and is strengthening Southern California Edison's balance sheet and advancing the utilities financial recovery. To be sure uncertainties remain, such as resolution to the turn appeal of our settlement of Public Utilities Commission and also getting the critically important energy procurement rules resolved at the PUC. But we see continuing progress toward a primary goal of improving Southern California Edison's credit rating from the current status to investment grade. Indeed, Southern California Edison's ability to adequately perform the energy procurement function and to resume that role from the state requires reasonable procurement rules and an investment grade credit rating.

Edison Capital has continued to reduce its dependence on bank lines, build liquidity, and pay down debt. That is another critical step toward the overall Edison International goal of strengthening the balance sheet.

The earnings performance at Edison Mission Energy was a mixture of strong performance at some projects, the Illinois plant's performed particularly well, for example, while with standing all going price weakness at other projects such as, the First Hydro Project in the United Kingdom and Homer City in Pennsylvania.

Ted Craver, our Chief Financial Officer at Edison International, who most of you know well, will provide more details on earnings in the earnings outlook in a few minutes. But let me spend the rest of my comments addressing the risk issues that surround Edison International's investment in Edison Mission Energy.

We recently announced a management change at Edison Mission Energy. Tom McDaniel, who has had a very distinguished career of 31 years and a number of capacities at Edison International Companies, has taken on the role of Chief Executive Officer at Edison Mission Energy. Tom is no stranger to tough challenges. He managed the successful resolution of the Mission Land Portfolio and as CEO of Edison Capital last year he aggressively dealt with and averted what could have been a serious liquidity problem there as a result of the spillover effects from the troubles the Southern California Edison.

Many of you know Tom, I believe you should share my confidence that he is up to the task of leadership at this challenging time at Edison Mission Energy. The attention focused on all the companies in the wholesale power sector by the rating agencies highlights a difficult credit and liquidity situation and one that affects Edison Mission Energy as well.

Certainly, Edison Mission Energy shares the principal source of difficulty facing all companies in the sector. That of depressed wholesale power prices. And EME's case, low power prices in the United Kingdom and within the United States in the PJM and Maine markets are affecting its revenues. However, there's some important differences between EME situation and some of its peers, which help to lessens the impact of low power prices. Let me take you through those. There are four of these.

First specifically, Edison Mission Energy's merchant exposures, mostly involve cool and hydroplants, not gas. As such, it has low-cost power production that is still going to run profitably, even in the current depressed market. This means there's somewhat less of an impact on EME's liquidity than if it had been principally gas peekers.

Second, Edison Mission Energy has concurentably little in the way of capital commitments for construction programs or turbine orders. For the last couple years, Edison Mission Energy's new business development activities have been substantially curtailed and EME has now put them on hold.

Third, Edison Mission Energy has never been a big participant in the power trading business. It is principally limited its activities to hedging its asset positions through forward sales. As a result, EME has relatively little exposure to cash collateral requirements in the event of credit downgrades, or to weaken trading parties.

And finally, from its early days, Edison Mission Energy's basic strategy was to separately develop and project finance its power investments. The belief was it and is that non-recourse project financing represented an essential risk discipline, even though it generally has been more expensive. In fact, the same kind of risk discipline embodied in project financing is something practiced at all of the Edison International companies. Both Edison Mission Energy and Mission Energy Holding Company are stand-alone, separate corporate entities from the rest of the companies at Edison International. As is required under the ring fencing provisions of both companies' corporate charters. Likewise, consistent with the California Public Utility Commission decisions dating back to the holding company decision in 1988, Southern California Edison is structured as a stand-alone entity that must be separate from the business activities and risks of the unregulated subsidiaries of Edison International.

Therefore, except for Edison International's guarantee of some limited obligations to employees, there are no Edison International guarantees extending to Mission Energy Holding Company, Edison Mission Energy, Southern California Edison, or Edison Capital. And there are no cross-default provisions at Edison Mission Energy or Mission Energy Holding Company that involves Southern California Edison, Edison Capital, or Edison International.

Edison International expects each of its companies to do what it takes to meet its obligations and manage its business profitably. Edison International will evaluate future investments and Mission Energy Holding Company or Edison Mission Energy on the basis of its judgment about value to the Edison International shareholders.

One final comment on EME. A lot of hard work has gone into building EME into what I believe is a valuable company. Current power prices are putting pressure on revenues and earnings there, but I believe current power prices are uneconomic and unsustainable in the longer term. Edison Mission Energy has strong assets and a number of important markets and its mix of low-cost producing plants should allow it to work through this very tough market environment.

I have great confidence in the abilities of the employees and management of Edison Mission Energy to work through this difficult period. I had a similar confidence in the abilities of the people at Southern California Edison to work through the difficult times experienced at the utility, over the last two years. I expect Edison Mission Energy to use the same clear-eyed, tough minded and forthright approach as I like to think the Edison International companies consistently use when addressing difficult situations.

Now, I would like to have Ted Craver take you through the remaining financial information.

Thank you, John. I'm going to forewarn up front here that I'm going to through a lot of data at you over the next several minutes. What we're going to try do is get answers to a lot of questions you all have posed over the last few weeks, right up front here, as opposed to having it come out during the Q & A session. So get your pencils ready.

First thing we do is a quick review of the second quarter results, then provide a little more detail on the 2002 earnings guidance and then really spend the bulk of the time presenting information on liquidity and credit issues, including cash projections, coverage ratios, debt maturities, rating triggers for each of the entities.

Before I get started on the second quarter results let me mention that Price Waterhouse Cooper's was appoint as independent auditors for EIX in the second quarter of 2002 and as recently completed their first quarterly review of the June 30, 2002 financial statements. PWC also performed a review of our EIX 2001 10-K and the first quarter 10-Q. I will tell you, our people feel this was a very intensive review, something more akin to a year-end audit than a quarterly review, but that should give investors additional comfort.

As we reported this morning, EIX had reported earnings of $2.04 for the second quarter, of 2002, versus a loss of 31 cents in the same quarter last year. We've been using for the last few quarters this concept of core earnings, so called core earnings and really what we're doing when we're using core earnings we're taking out some of the one-time items relating to two different issues.

First, the write-offs in 2001 and then the write-ups in 2001 and 2002 of regulatory assets. Related to the under recovery of energy pro turment costs at Southern California Edison and secondly we're adjusting the results of discontinued businesses at Edison Mission Energy and Edison Enterprises. Our hope by doing this we can make year-over-year comparisons more meaningful for investors. Using that core earnings concept, EIX had second quarter core earnings of 56 cents, versus 37 cents in the same period last year. The core earnings exclude a regulatory adjustment related to April 2002, PUC decision on utility retained generation and a loss of 19 cents for unrecovered procurement related expenses in the second quarter of last year. The core earnings also exclude one cents of earnings in the second quarter, 2002, from the triple F investment at Edison Mission Energy, as well as 12 cents and 37 cents of loss in last year's quarter, from triple F and Edison Enterprises, respectively.

At Southern California Edison, the earnings for the second quarter were strong on both a core and reported basis. Corps EPS was 66 cents versus 28 cents, same period last year, representing an increase of 38 cents. The major year-over-year variance was a 31 cents positive impact due to the establishment of so-called E-RAM mechanism in the California Public Utilities Commission's April performance-based rate making decision.

At Edison Capital, second quarter earnings were four cents versus eight cents last year. Some of the major reasons for the decline relates to a smaller portfolio of earnings assets in the current period and also a lack of gains from asset sales in the current period versus 2001.

At Edison Mission Energy, core EPS for the second quarter was zero. A little less than a million dollars. Versus 12 cents for the same period last year. Focusing on the variances related to the project investments, we had higher performance this quarter at Midwest Gen, 11 cents stronger than last year and we started recording earnings for Paiton in 2002 and that was about a positive two cents. The negatives came from Big 4, 4 Star, and Homer City, which together were about 20 cents lower and also First Hydro about two cents lower.

Mission Energy Holding Company, the EPS for the quarter was a seven cent loss, as you know Mission Energy Holding Company just established last year so there weren't any comparable second quarter numbers in 2001.

And finally, at the parent core EPS for the parent in the second quarter was a loss of seven cents versus a loss of 11 cents in the same period last year. The reduced loss of four cents was due to lower interest expense and lower G&A.

John mentioned in his remarks that we're increasing our earnings guidance for 2002 from the guidance we gave late last year of $1.50/$1.60, up to $1.65/$1.75. The components there are that SCE is now expected to be at $2.10, Edison Capital was now expected to be at 17 cent, Edison Mission Energy we've reduced down to 5 to 15 cents, Mission Energy Holding Company remains at a negative 29 cents and Edison Enterprises and the parent are now at minus 38 cents EPS. So when you combine that, that's the $1.65 to $1.75. Let me give a few details around those. Obviously, the biggest change is that Southern California Edison and the principal reasons for the improvement are 45 cents related to the CPUC decision that adopted this E-RAM mechanism, as well as eight cents for resolving 1998 and 1999 performance based rate making proceedings, including rewards for reliability and customer satisfaction.

We had identified in last quarter's call the potential risks and issues around songs. The outage was completed at unit two, actually three days ahead of schedule, and the complete inspection was made of unit two's head and no problems were found. The major future events we have our eye on now going forward really relate to two principle issues, that's the procurement rules, which again John referenced. We're in the process of submitting reply briefs at the CPUC under the procurement proceeding. The current best thinking is that a decision may be rendered by the end of September. Very important development in this regard is AB-57, which is passed by both houses of the legislature, and now awaits the governor's signature.

Overall, we feel the bill is very supportive to utility credit quality and that it eliminates the need for reasonableness reviews, of procurement decisions within approved CPUC guidelines and provides importantly for prompt recovery of procurement expenditures through balancing account trigger mechanisms.

The second item we have our eye on is the 2003 generate case, Southern California Edison is seeking a $240 million rate increase for higher distribution and generation costs. And at the current pace we're expecting that we would have a decision rendered sometime around mid-2003.

In terms of Edison Capital, the one cent lower outlook from our original guidance is due primarily to lower expected performance from the overseas infrastructure fund investments.

At Edison Mission Energy, the significantly lower outlook for power prices at First Hydro had and Homer City is one of the principal reasons. The second main reason for the lowered outlook is we anticipate taking some actions with regard to some turbines and Cap Ex spending that will free up cash, but at the expense of reported earnings. So this 29 cent reduction in outlook is fairly evenly distributed between the lower power price issue and the cash conservation measures. MEH as we indicated no change in outlook, and at EIX parent and Edison Enterprises the ten cent lower outlook is due to some likely write-offs associated with miscellaneous small investments, including procurement B to B business, as well as losses in a captive insurance company we used to sell, to self-assure some of our property insurance.

Let me turn to really the principal issues that I think are on most people's minds, and that's liquidity and credit. Again, I'd like to start with Southern California Edison. The PROACT recovery mechanism related obligations account is critical to restoring credit worthiness at Southern California Edison. At the end of the quarter, the remaining balance of PROACT left to collect was a billion-six, which means we've collected about two billion thus far. SCE still forecasts full recovery of PROACT by late 2003 and our 10-Q will go into a lot of the details related to the puts and takes that could affect PROACT recovery. In terms of liquidity at Southern California Edison, the cash balance at the end of the second quarter was $840 million and as of July 31st, was actually a billion-one. The significant maturities through the end of 2003 are 200 million in first mortgage bonds in October of this year, 600 million in term A notes as part of the bridge financing, which is due in March of '03, 125 million first mortgage bonds that come due in June of '03, and finally a billion of variable rate notes that matures in November of '03.

Our cash forecast shows that we have sufficient cash to meet all of these maturities without any additional bother owings at Southern California Edison. And in fact, after retiring the billion-dollar variable rate note in November of '03, we expect to have year-end 2003 cash balance of approximately $450 million. Given the strong cash position, we have discussed an early pay-down of the term A loan with the bank group and rating agencies and we expect to reduce our term A loan by around $300 million shortly and will do further reductions if crash flow permits. The debt ratio at the end of the second quarter was down to 55% and by the end of 2003 is expected to be below 40%. Which means that Southern California's equity as a total capital will be above the 48% authorized level by the PUC. Ratings triggers and cross defaults really by definition are not an issue at Southern California Edison since we've been below investment grade for some time there.

Moving to Edison Capital, the cash balance at the end of the second quarter was $224 million, which includes some restricted cash. If we just look at unrestricted cash, the cash balance is $216 million. And bringing that down to July, to the end of July, that number is $227 million. Earlier, in this year, we paid off the 150 million in bank line, so there's no revolver at Edison Capital, and no collateral is require in the event of the downgrade because Edison Capital again is one of the entities that is below investment grade. So all those triggers to the extent if there were any, were full.

I'd like to go over the cash forecast for 2002 and looking forward as well to 2003. At the end of 2002, we expect a 91 million increase in cash. We start with a starting balance of 216 million. We expect 310 million in receipts. A large portion of that about 280 million relates to monetizing the tax benefits that Edison Capital contributed to the consolidated EIX group. 54 million in funding commitments, which is related to global infrastructure fund and affordable housing. 154 million in financing related expenses being retiring 140 million in maturities in October and December. And 11 million in operating expenses will leave us with a 307 million ending balance at Edison Capital in 2002.

That cash ending balance will increase by another 193 million in year 2003, such that the ending cash balance at 2003 will be 500 million. The principal components are 270 million in receipts, 199 million of that coming from the monetization of tax benefits, 83 million in funding commitments, 11 million in interest expense. There are no maturities at Edison Capital in the year 2003. And 28 million in operating expenses. So quite a strong cash build over the next 18 months at Edison Capital.

Turning to Edison Mission Energy, first would like to talk about the available liquidity, bank line capacity. The total liquidity at the end of the second quarter was 713 million, made up of 681 million of unused bank lines and 32 million cash on hand. Bringing that forward to July 31st, we had total liquidity of 650 million, comprised of 616 million of unused bank lines and 34 million of cash on hand. Just for comparison purposes, if we look back a year ago, the total liquidity was 263 million, June 30, '01, made up of 16 million in unused lines and 246 million of cash on hand. We have a 750 million revolver, really in two pieces. 212 million, three-year tranch, which matures in September of '04, and 538 million, one-year tranch, maturing September of this year. We are in discussions with the banks now about rolling a substantial part of that 538 million most likely 364 days, as the original facility was.

On ratings triggers, it still appears that we have a modest impact from ratings triggers. We've been forthright in the disclosures in our 10-K as well as the first quarter Q. I will say that we keep going over this, trying to make sure that in the hundreds if not thousands of contracts we have, that something hasn't been missed. Because we've gone through this exercise three or four times, I feel pretty confident we've tracked this down and there aren't remaining items. But there always is some risk given that many contracts that you could have something that develops that we're not aware of.

As of June 30th, '02, the immediate liabilities that would be triggered by an Edison Mission Energy downgrade from investment grade to non-investment grade is $55.6 million, made up of an acceleration of $48 million for an equity contribution to the CVK project in Asia. That's really an acceleration of about six months from what we need to pay in any event. There's about 7.1 million that in cash collateral that would be required to back up hedge positions in the U.S.. About half a million to back up emissions hedges. And that would total up to the 55.6.

If we bring that forward to July 31st, of this year, it would be the same 48 million for the accelerated equity injection in CBK. The cash required to back hedging positions in the U.S. is 12.2 million. The emissions would still be half a million, and in the U.K. due to the establishment of some EME supportive First Hydro edges hedges, it's about 10.1 million. So the total for July 31st would be 70.8 million. We've also tried to think in terms of what might be if you will secondary impacts of a rating downgrade. And most of those really surround future hedging activity that we might wish to do relative to our First Hydro position, our Homer City position and Midwest Gen positions.

Ultimately, we could elect to do very little hedging if cash were constrained. But we've sized this as something in the neighborhood of 100 million to 200 million in potential secondary impacts, where we would wish to have cash or LCs available to support hedging operations from those merchant activities.

Finally, ratings triggers at affect Midwest Gen in terms of cash traps. As long as Midwest Gen's rating remains at triple B, minus or BAA 3, there's no cash trapped. If the ratings at Midwest Gen slip to double B plus, B A-1, 50% of the cash would be trapped until six months. Principal and interest is reserved. If ratings drop to BB flat or BB minus, BA 2, BA 3, 100% of the cash would be trapped.

And finally, if Midwest Gen ratings dropped to B+, B-1, or below, a hundred percent of the cash would be trapped in a cash sweep would be instituted to pay the senior debt.

Another question that people have asked is, what is the potential for cash traps that other projects?

Really, the largest risk of this is that the merchant plants and so let me talk about those. In the event of no downgrade, but just coverage tests that would produce cash traps. At First Hydro, the coverage test for distributions to Edison Mission Energy are -- we need a 1.2 times or greater with a 12-month look back. The actual coverage for the 12 months ended June 30, 2002, was 1.09 times. Our projection for that 12-month look back at the end of this year is around 1.5 times, so we would not be affected at that point. At Midwest GEN, the coverage test for distribution is 1.75 times. There are two tests there, a 12-month look back and then two 12-month look forwards at actual coverage for the 12 months ended June 30th was 2.64 times. At Homer City, the coverage tests for distribution is 1.70 times, 12-month look back, and the actual coverage for the 12 months ended June 30 was 3.33 times.

I'd like to now move to the funds flow from operations. This FFO based coverage is important to Edison Mission Energy and to Mission Energy Holding Company because it's a ratio we've used with rating agencies for some time and has more recently been picked up in the MEH bond covenants, as well as in the bank lines. It's not entirely a cash-base number, which I think a number of you understand. I'm going to provide the actual cash base stuff in a minute. But just in terms of those coverages, since they're important to potential distributions from EME to MEH, at the end of December '01, the coverage ratio which we showed in our 10-K was 1.64 times. The number for the end of the first quarter '02 was 1.74 times.

The number for the end of the second quarter is now moved up to 1.93 times. And our forecast for the end of the year is this coverage ratio will be at 2.35 times.

Debt maturities, I'm going to really talk first in terms of EM Americans, then Midwest Gen. At Edison Mission Energy we have one remaining debt maturity this year that's 538 million, 364 day tranch of our corporate revolver. After that we don't have any maturities at Edison Mission Energy in 2003 you have to go into 2004, where we have a couple of coal and Cap Ex sterling based facilities which would be met with offshore cash in January and July of '04, total about $175 million. And then in September of '04, the other tranch, the three-year tranch, the corporate revolver, 212 million, matures.

At Midwest Gen, we have some important maturities coming up. At the end of next year, December of '03, we have 911 million in the tranch A of the bank facility. December of '04, we have another 808 million, the tranch B component of the senior debt, another bank facility. And also in December of '04, 150 million working capital line or so-called tranch C, matures. We also have 774 million of lease debt associated with our Collins lease, which while technically not requiring a refinancing, does have significant step-up in pricing if not refinanced by December of 2004.

Let me finally turn to sources and uses of cash. I'm going to give you a string of numbers, but these are the ones I think most people have been really looking for from us. You can imagine three columns, June of '02, so 12 months into June of '02, 12 months ended December of '02, and 12 months ended December of '03.

Starting with the 12 months ended June '02, the beginning balance 246 million, this was all at EME now. The sources of cash with total 1 billion, 147 million. That would be made up of a number of components, I'll summarize some of them here.

Midwest Gen about 75 million, Homer City, 429 million, the Big 4, 330 million. Nothing from First Hydro. Other projects and interests would be 160 million. And the monetization of tax benefits contributed by Edison Mission Energy to the EIX consolidated tax group would yield cash of 153 million. So those are the components that would add up to the billion, 147. The principal uses, G&A 154 million, corporate interests 318 million, construction and turbine related uses is of cash, 108 million. Pay-down of debt, 748 million. Dividends to Mission Energy Holding Company, 33 million. For a total of 1,361 million. This actually yields a decline of net cash of 214 million.

So the beginning cash balance of 246 less the 214 million negative net cash, leaves an ending cash balance for the 12 months ended June '02 of 32 million.

If we now move to what is it going to look like foyer the 12 months ended December '02?

We would have 977 million of sources, 778 million of uses. The net cash would be positive, 199 million, bringing us to an ending cash balance of 227. The big components on the sources side, Midwest Gen 138 million, Homer City, nothing. Big 4, 227 million. And First Hydro, nothing. We also would have other projects, cash from other projects and interests, 255 million. And the monetization of tax benefits, 357 million.

The principal components of the uses that 778 million uses, 130 in G&A, 303 corporate interest, 120 construction and turbines, 225 million in debt retirements, and no dividends to MEH. Taking the 227 million ending cash balance for December of '02, as our beginning balance for the 12 month ended '03, we would have 695 million in total sources, 455 million in total uses, for a positive net cash of 240 million, which when added to the 227 million beginning balance would leave us with 467 million, ending cash balance at the end of 2003. The principal components on the sources, 48 million for Midwest Gen, this assumes the principal assumptions there are $22.15, all in price, and 25 Terra watt hours for volume. Homer City would be 67 million. Principal assumptions there are $28.18 for all energy price and 14 Terra watt hours. Big 4, which is really contracted, is 56 million.

First Hydro, expectations is 11 million. Cash from other projects and interests, 309. And monetization of tax benefits, 204 million. So that adds up to the 695 in total sources. The components for the uses, 119 for G&A, 299 for corporate interest, 37 million for construction and turbines, no debt pay-downs. There are no maturities as I mentioned earlier, and no dividends to MEH. So that's the 455.

So again, to summarize the 12 months ended June of this year, ending cash balance, 32 million. For the 12 months ended December '02, the ending cash balance, 227 million. And for the 12 months ended December of '03, the ending cash balance would be 467 million.

Let me -- do one final sensitivity to these numbers. If we assume a number of additional stresses, including a cash lockup at Midwest Gen, a full 100% cash lockup, such that there are no dividends from Midwest Gen. And if we further assume we're not able to do the project financing for the Sunrise Project, which would take out about 140 million, which comes out of the other projects interest line. And if we assume we're unable to roll any of the 538 million coming due in September, in the corporate revolver, the ending cash balances for December '02 would be 193 million, rather than the 227, and the ending cash balance in December '03 would be 272 million, as opposed to the 467.

One further sensitivity we ran was what is actually the low point within the year, is there any point we would fall below zero. The low point is 189 million and the 12 months ended December '02. Low point in December '03 -- I'm sorry, for the year ended December '03 would be 121 million.

The way we look at this is this ending cash balance is the amount of cash that we would have to work with in terms of the hedging activity that I discussed for, where we would kind of range that somewhere between 100 and on the lower end and 200 million on the high end of cash requirements. We will do our hedging in relationship to the expectation we have forecast balances, doing shorter hedges or less hedging if we have less cash available.

Those are all the pieces on Edison Mission Energy. Try to round up here. At Edison Mission Energy Holding Company, the ending cash balance on June 30th, '02, is approximately 30 million. Bringing down to July 31st that number is 29 million. The escrowed cash balance, which is being used to pay interest out through July of next year, as of the end of June was 220 million, at the end of July was one 55 million.

There are two principal maturities at Mission Energy Holding Company. 385 term loans, which matures in July of '06, and 800 million, a note which matures in July of '08.

Cash projections, sources and uses for the end of '02, we see a beginning cash balance of about a million dollars. The total sources of cash would be about 92 million. Most of that, virtually all of that, would be the monetization of tax benefits that MEH contributes to the consolidated EIX tax group. The uses would be very small, 3.2 million. Again, most of the cash being used to pay interest is coming out of the escrow account. For an ending balance at the end of 2002 of 89.5 million.

In 2003, we pick up that beginning cash balance of 89.5. There would be total sources of 70 million.

Again, virtually all of that being monetization of tax benefits. We actually would have a negative usage or if you will a contribution, which comes from the fact that there's excess cash in the escrow account, given that when we establish the escrow account, it was done when rates were higher and the term loan is a variable rate note. So there's excess cash sitting in the escrow balance. That would bring us to an ending cash balance of 166 million.

Doing some sensitivities, if no dividends are assumed from Edison Mission Energy to Mission Energy Holding Company, and further if we assume that 100 million under the term B loan is put back to us as they have the rights under the term B loan in July of '04, then cash would last at MEH through July '04. If we assume that the hundred million is not put back to us in July of '04, cash and no dividends from Edison Mission Energy, we would have sufficient cash at MEH to make payments through July of '05.

Finally, at the parent company, EIX, the parent, the ending cash balance at June 30 was 136 million. The ending cash balance at July 31st was 134 million. There are three principal components of debt and preferred at the holding company. There's 750 million that matures in September of '04. And there's 825 million in two different trusts, trust one, trust two, which matures in 2029. In terms of the sources and uses of cash at the parent, beginning cash balance of 34 million and 12 months ended '02, 489 million in sources of cash, 450 million of that comes from the monetization of tax benefits that are contributed by the parent to the consolidated group, and 39 million in principally dividends from one of the subsidiaries at Edison Enterprises. In terms of uses, 357 million in uses, most of that relating to a maturity, which was the repayment of a company tax loan. That would leave an ending balance of 166 million, using that as the starting balance for 2003, we'd have 70 million in sources, most of that monetization of tax benefits. 85 million in uses, which would be interest expense of 51 million, and 34 million of O&M, no maturities, and that would leave us an ending cash balance of 151 million in 2003.

Picture we're trying to present here is that there are substantial cash resources throughout the company. The assumption has been that that cash would remain in each of the entities as John discussed. In terms of the information here, we try to get it up up front. You may have some clarifying questions along the way, and quite a bit of that and a lot more would be also presented in our 10-Q.

With that, we'll turn it back to John to go over questions.

We'd be pleased to have your questions now and we'll take them as they come in. Please go ahead.

Ladies and gentlemen, at this time we'll be taking your questions. If you're like to ask a question, touch star, followed by one on your phone. If you want to remove the same question, touch star followed by two.

At this time, we have a question from Scott Pearl of Credit Suisse First Boston. Go ahead, please.

Good afternoon. Thank you for the extensive detail.

I guess if you could just walk us through a little bit so we understand from the &1.55 in earnings at the utility to the new balance of $50.10, and I guess on the last call we talked about a 30 cent benefit from the E-RAM decision, and now I guess that's increased. I guess what has changed as far as the interpretation of the impact of the E-RAM decision?

Let's have Jim Salatchi, the Chief Financial Officer at Souther California Edison answer that.

Good morning, Scott.

Morning.

We mentioned it's 45 cents when you take into consideration and I don't remember what we went through in the last call, but there's different pieces. There's a 2001 impact. And the benefits through 2002, and the total of both those pieces aggregate currently 45 cents.

And we also said there was an additional piece for rewards that now that the commission has finally reviewed, the results from '98 and 1999, performance-based rate making proceedings, an additional 8 cents is coming through. So those are the two principal components that caused our earnings guidance to change. There are some pluses and minuses that tend to negate each other, but those two things stick out principally for the difference.

And I guess, just so I'm clear, how much of those two items have you recognized year-to-date in the second quarter?

Hold on one second. Scott, it's 28 cent from E-RAM and three cents from the rewards associated with the PBR mechanism. Okay?

Okay. I guess just relief here, your up coming rate case, the '03 rate cases is my understanding correct that I think Ted, you said you expect it to be decided by mid '03, has an effective days of 1-1-03.

That was the original effective date, Scott. But given the current schedule and the filing delays that always granted, we don't expect a final decision to be rendered from the commission until at least probably mid-year. We would hope to have the effective date back to January 1 of '03rd but it will probably be pushed out six months.

I guess I was asking if it would be -- you don't think it will be retroactive?

Unlikely. The way they set it up, just so you know, the PBR mechanism we currently have in place is extended until final decision is rendered in our generate case.

Okay.

So thereby a rate adjustment that will be effective January 1st of '03 based on the PBR mechanism, not as much as as we'd like in terms of GRC, but there is both the CPI minus X, plus a customer addition factor that's built in to the rate analysis.

Okay.

Scott?

Yes.

I'm sorry to do this but we were informed there's something like 260 people on the call and just to give everybody a little bit of a crack at a question.

No problem. Thank you.

Next question, please

Jeffrey Stein of Durham Asset Management, go ahead.

Good morning. Can you please give us some additional details and I may have missed this earlier, with respect to the timing of the CPUC procurement rules?

And can you elaborate in more detail with respect to relationship between those procurement rules and the pending legislation that you touched on earlier? Thank you.

This is Jim Salatchi. Let's take it in reverse order.

AB 57, I would say is a very supportive, as Ted already said, legislation because it goes to the core issues we're seeking in our procurement filing. We're looking for prompt cost recovery, and AB 57 has what we call the balancing accounts and a trigger mechanism to the extent that we are over or under collecting our costs, and to the extent the way it works right now of about 300 million dollars, a rate change would go into effect to amortize off that over or under collection. And that's exactly what we were seeking with our filing of the Public Utilities Commission, in our procurement fund.

In addition, we're looking for broad compliance reviews, so we would put forth to the commission a procurement plan, and as long as we stayed within the compliance of that plan, then there would be no reasonable reviews. And the past in our history, reviews would take years. Four, five years to filing resolve. And we're trying to avoid that going forward.

And so it's a very comprehensive plan and principally we're looking to secure additional capacity to meet the varying needs of requirements going forward. And we're looking to contract out as far as no more than five years for capacity. It's a broad, broad issue. Hopefully, that gives you a thumbnail of what we're trying to there.

Yes, it did.

Can you also just highlight again for me please expectations on the timing for responses from the CPUC and when we may get some type of formal order in place on these issues?

I can do that. This is John Bryson.

We don't know exactly, but early October, late September is the probable time frame at the PUC. We do anticipate the governor -- the legislation we've been talking about, AB 57, has been passed by both houses. But not yet signed by the governor. Every indication is the governor will sign it. But there is a budget dispute in California right now, and the legislative actions are tied up pending resolution at budget dispute.

Understood. Thank you very much.

Next question, please.

Our next question is from Steve Fleischman from Merrill Lynch. Go ahead, sir.

Yes, hi, can you hear me.

Yes, Steve.

Hi, John. Couple questions.

First, with respect to the equity that is built into the utility by the end of 2003, what is your understanding of whose equity is that?

Is that equity something that can be dividend up to the parent or is that something that will be reviewed as part of the end of the PROACT?

Let me start on that, Steve. I'll ask Steve Pickett to the General Counsel of Southern California Edison to add anything. By way of detail that he thinks is appropriate. But that equity is the equity of Southern California Edison. And ultimately, that's an international shareholders.

As I think you know, Steve, and our settlement agreement with the PUC, we accepted a provision that bars Southern California Edison from making dividends, that would otherwise possible, to the parent company until completion of the PROACT recovery. If that is completed prior to the end of the year 2003, Southern California Edison should be free to dividend that consistent with the capital structure requirements of the Public Utilities Commission. If the PROACT recovery goes beyond 2003, there is a provision that would further restrain the dividends, but the utility is entitled to request the opportunity to distribute the dividends and the PUC is obligated not to unreasonably deny that request. The equity is the equity of the shareholders of the company.

Okay. Just so I understand, and the assumptions that you put into that whole analysis, are you assuming the PROACT is not fully recovered until the end of '03?

And, obviously, the rates to cover the PROACT, are those in place through the end of '03?

Yes. That's the assumption.

And then just one other utility question: In the 210 number for SC for this year, how much of that is related to the [SAN ANOFRI] incentive cost plan?

Jim or Tom, can you pick that up?

On a sense basis at 37 1/2 cents, Steve.

37 1/2 cents per share?

Yes.

Okay. Thank you, guys.

Next question.

Our next question is from Tom O'Neal of Lehman Brothers.

Good morning. Just to clarify a couple areas of the revised guidance that the gave. At the EME level you described I think about half of the 29 cent change was attribute able to cash conservation measures.

Yes.

Can you further describe what that is and one-time in nature or something ongoing?

Tom, this is one of those areas we'll be a little cautious at this point. Some of these involve negotiations with other folks but I think we're pretty confident that those will be the actions we take that relate to canceling some orders and things of that nature.

So again, the impact is increasing cash by around 50 million, but it has an impact on a negative impact on earnings. It's not something we're done yet, but it's something that we're continuing to work through with people and negotiate about.

Okay. But am I correct to think of it as an impairment versus a new expense trend that persists for a long period of time?

Yes.

Okay. And secondary was as the parent you described something...

One time non-cash item, I guess is the way to say it. Done in order to raise cash.

Okay. And then at the parent level, that's the 10 cent shift that you talked about?

Yes.

That's one-time in nature as well?

Correct. Yeah. Those are all one-to, non-cash.

And then the final area is there's a proposed decision that is out by Commissioner Lynch that I guess my look at it, seems to be that it looks like a bit of a backstop to the appellate process going on. Wondering, your thoughts on that as well as the timing of when that may be completed.

Steve Pickett, General Counsel, Southern California Edison, will take that.

I assume you're referring to Lynch's request for comments on the change in the decisions that the surcharge could not only an used for forward-looking procurement. And we don't know exactly what she's doing there. It does appear to be a clean-up of old decisions from the AB 1890 restructuring era and from the chaotic events that surrounded the adoption of the surcharges. We're supporting it. It appears to be the appropriate thing to do. It has no impact, I should note though, on our settlement or recovery of the PROACT under our settlement, which is governed by an order, stipulated judgment, issued by the federal court.

Okay. So I guess in the event that turn were successful on their appeal, with regard to procedural grounds, this doesn't backfill that process?

It doesn't change it any, no.

Okay. Thank you.

Our next question is from Robert Ryaners of Edison International. Go ahead, sir.

Yes. Thank you. Is management in a position at this time to forecast the approximate date of the availability of funds with which to bring the quid B preferred arrearage into current status?

And secondly, what is the status of the lawsuit against FERC? Thank you.

Ted Craver will pick up the first. And Steve Pickett the second.

With regard to clearing the deferral on the so-called quips, that would not occur in the forecast period that I gave 2002 and 2003, as we've currently foresee events. We have the ability to -- under the terms of the quips to defer payments for 20 quarters, which would take us out through 2006.

At this point, we don't really have a specific time identified, but it is not anticipated in the 2002-2003 time frame or the cash forecasts that I gave that we would be cleaning up the deferral.

As to your question about the lawsuit against the FERC, we don't have a lawsuit pending against the FERC. There are two activities going on at the FERC of substantial importance to the company.

One is the FERC's so-called refund case, in which they are looking at the overcharges, charged by the independent generating companies in the summer of 2000 and 2001. That proceeding is going on. We expect a decision from the administrative law judge sometime late this year or early next year, and final commission action will follow that within 90 to 120 days, we would expect.

There's also ongoing FERC an investigation at generic investigation of market structure and the causes of the market dysfunction in the summer of 2000 and 2001. I'm told that a report may be issued later this week by the FERC on that investigation, and at this point we don't know what FERC may say there on what further direction they may take their investigation.

Next question, please.

Our next question is from John Riley from Watershed Asset Management, go ahead sir.

Yes, it's Maradee Moore I'm sorry to ask this because I think it was deliberately left out in your liquidity conversation.

Given the fact there's a fair amount of building cash at EME, and at Edison Capital, what are your options and plans as far as using that liquidity so it doesn't sit there earning 1% while you have long-term, non-call debt at MEH and EME trading at a discount?

Yes, the question really asking is are we going to be using our cash to pre-pay some of the debt to deliver at MEH or EME. All of the debt that we have at MEH Is non-call debt. It has substantial penalties if we were to tender for it.

At Edison Mission Nature, the billion-six we have at EME corporate debt is similar, non-call, involves substantial penalties if we were to tender for it. The other option is open market purchases, and I think you understand we wouldn't talk about that or make any comment relative to whether we had or did not have intentions regarding open market purchases.

Okay. Thank you.

You're welcome. Next question. Stephanie, do we have another question? Stephanie? I do believe we may have lost our operator.

I'm sorry, our next question from Brent Buckley of Deutsche Bank of go ahead, sir.

Brent, we can't hear you. There you go.

Ted?

Yes, we can hear you now.

Okay, good. Just a question on your -- couple things. One is, you can tell us the EBITDA for SO Cal Ed for the second period, please?

I think the short answer is we'd have to get back to you on that. We don't have it available here.

Okay. I guess the second question is, you went through some of the sources and uses quickly. Are you going to make that available on the website or slide presentations that we can piece through a bit better?

Yeah. Perhaps. The Q's going to be out in a week or so. But we will make some attempt to get that out.

One of the reasons I went through that unbelievable barrage of numbers up front, was so you wouldn't have to peck through an hour and half of questions to get it. So all the data is there. Even though it's not the easiest form to get it. We will have quite a bit of -- we'll have all of this, plus a lot more in the 10-Q.

So we'll see what we can do in terms of getting this up on the web, but I hope at least giving you all the numbers up front you can get it from the recording.

Okay. When you fully pay down the product account, what do you expect the EBITDA from the utility to be roughly? Like '04?

I think we're going to be flat on EBITDA questions here. Relative to the utility. Tell you what, we should be able to help you on that, though, if you called in to the investor relations number. We'll make an attempt to get that for you. Sorry, we just don't have it here.

Okay. With respect to cash, the cash balance I think was So Cal 840 million.

End of June.

And I think like 1.3 billion at the end of March. So there's a reduction in cash during the quarter of about 500 million.

It goes up and down. It's also 1.1 billion at the end of July. So it goes up and down.

Okay. Great. Last question, with respect to,you know, your mission projects, you can go over for us what portion of your projects are hedged and what are not hedged?

That's something that we don't typically disclose. I'll give you some general comments around it but I think you understand explaining to the marketplace in which we would be operating how much we have hedged and how much we don't have hedged is probably not the wisest thing for us to do. We do have a policy to hedge up to two-thirds of the power at Homer City. That's really two units out of the three.

And for Midwest Gen, all of that is essentially under contract now in 2002. We have started to do some hedging in for calendar '03, but it's at this point less than a quarter of the power that's been released from the coal plants has been hedged for '03.

And lastly, just one other question about current pricing, can you talk about the current power prices in the markets that you have plants, where they are in the spot market currently and any thought to color as to what they may be going in the future?

Well, I guess the current color is they're low. And in terms of where they're going in the future, I don't think we have great expectations that there's going to be a tremendous rebound in prices short-term.

John addressed this in his remarks, that the current prices are uneconomic, certainly no new build can come into the market, certainly no new plants can be financed in the market with prices where they currently are. So over the long-term is unsustainable. How long prices will remain depressed in some of these principal markets is, of course, the thing that fortunes are made and lost on. But our view generally is to be conservative and I think you saw that interest the assumptions I gave you relative to our 2003 cash expectations, that Midwest Gen and Homer City, where we used $22.15 for the energy price at Midwest Gen and $28.16 for the price at Homer City.

Thank you, Ted.

Okay.

Our next question from Taren Miller of UBS Warburg, go ahead Mr. Miller.

Yes, thank you. I was wondering if you could give us a little bit more detail on how some of the cash flows come out of the projects under EME. It does not appear we looked at the individual statements that the dividends matched the cash flows that you are stating in your sources. So I was wondering if you could walk us through some of those pieces.

Kevin Smith, the Chief Financial Officer at Edison Mission Energy will to that.

I think to answer your question, the sources that Ted gave you are exactly what we expect to flow from the projects. What I think is a bit confusing is the covenants, the interest coverage covenants are driven by what is called the funds flow mechanism at the agencies have used and it's in our financing documents. But just to be clear, the sources and uses that Ted went through, that is an exact match with cash.

Ted mentioned one of the caveats was because Midwest Gen has a cash trap depending on what its ratings, if they were to fall, we gave that sensitivity, if those were basically blocked completely. The only other comment is the funds flow, the sort of the metric in our financing documents. It has for projection 50% or less owned, it's the exact cash. For projects that are consolidated, takes more of an accounting approach to cash, which may not reflect true cash. It also doesn't reflect, this is the funds flow, the monetization of tax benefits, which as Ted mentioned, is quite a significant number.

Taren, this is Ted, you may be thinking a little bit about what I tried to cover with First Hydro, Midwest Gen for coverage tests to distributions to EME. And if you listened to the call again, the playback, you'll get all the specific numbers. I won't repeat them here. But we did give you the coverage test for distribution out of those three principal projects, which are merchant projects where you would have some potential for variability in cash.

Thank you.

Next question from Gary Jacoby of West Board Capital, go ahead, sir.

Good afternoon. Any sense of when you hope to get your investment grade rating back? Timing?

We assume that by that question you're referring to investment grade rating at...

At SCE, yes, I'm sorry.

Okay. I'll provide just a quick comment, I think Jim Salatchi, who has been extremely involved with the rating agencies should provide the rest of it. We have recently held meetings with Moody's and S&P on all of the companies within Edison International, as well as for the parent and addressed the ratings issue for all of the operating companies and the parent. I think our general view is that the numbers straight by the numbers, Southern California Edison is improving.

And we still are not back to the authorized equity level for Southern California Edison and there are certainly some continuing concerns on the part of the rating agencies regarding procurement. But I think it's a little bit of time and continuing to show that the PROACT recovery is being worked down. Our principal in getting that investment grade rating back.

And the only thing I'd add, Gary, is that the rating agencies have been focused on the turn appeal and resolution is a critical element. With AB 57, with the cost recovery mechanism, and the procedures involved in that, we will take a strong case to the rating agencies that we should be investment grade within a reasonable amount of time.

I think the last piece of that is consistent rate-making treatment, and the rating agencies have repeatedly said they want to see a consistent pattern in the decision we've had here to date over the last six months have been very supportive. And we hope that will continue through the balance of the year. So we can take a strong case we should be investment grade by the end of the year or no later than the end of the year.

Thank you very much.

Our next question is from Bill Mellon of Fair Long Capital.

Thank you very much. Three questions by way of clarification. With regards to the PROACT recovery and your ability thereafter to dividend cash from So Cal Edison up to the parent, you said that once PROACT was fully recovered you should be able to make that dividend. I'm wondering if you mean to say that you will be able to make that dividend or if there's some other reason why you might not be able to.

Let me have Steve Pickett, General Counsel at PUC respond to that. I'm sorry, Counsel at Southern California Edison.

See where my paycheck comes from! There are no restrictions on SCE area, ability to pay a difficult descend to EIX other than the restriction in the settlement agreement with the PUC that restricts us from paying a dividend until PROACT is recovered. There are holding company conditions imposed by the PUC that governor the relationship between the utility and the holding company that require SCE to maintain a dividend policy as though it were a stand-alone company and to maintain a balance capital structure at a level mandated by the CPUC as they may have changed over time. Those are not restrictions, they're governing conditions that have been in place with the exception of the holding company in 1988.

I would note that the settlement agreement with the PUC specifically addresses the importance of making dividend payments. It says, I'll quote here from the settlement agreement, "That SCE and the CPUC recognize that resumption of common stock dividend payments will improve the ability SCE to attract capital and reasonable terms for investment and safe and reliable utility service." That's a statement from both parties that's embodied in the settlement agreement. So the exact timing and the amount of the dividend clearly depend on First PROACT recovery and then the financial condition of the company at that time.

That's very helpful. Thank you very much.

One other question. In one of your prior regulatory filings, you made disclosure about a contingent obligation or maybe it was an actual obligation to construct additional generating capacity in one of your midwestern markets, I think it might have been Illinois, and given your view of the fact there were excess capacity in the market at the present time, that you were engaged in negotiations with the other party to the contract to renegotiate that contract or eliminate that commitment. Can you tell me where that stands?

Ray Vickers, General Counsel at Edison Mission Energy will respond.

I think you're referring to what we call the in city obligation in Chicago. Which we agreed to in the purchase agreements we had with Commonwealth Edison. I don't think our view has changed. We continue to believe that that based on the other capacity that's come into the market and the distribution improvements, which Tom made, is no longer necessary, our discussions continue with them, though, to finally get a final resolution of that.

Do you anticipate that... I guess you'll need to get a final resolution of that before the scheduled in service date of what was it, the end of next year?

That's right.

When would you anticipate that you will have a resolution?

Any money associated with that negotiations? Or the resolution?

This is Ted. We've been in discussions with [EXCILON] on a number of issues and I don't think it's wise future us to elaborate on the details any further of those discussions at this point. But I think Ray's answer gives you the basic point, which is it's one of the items that we're discussing with them.

Very well. Thank you very much.

Our next question is from Arthur Winston of Pilot Advisors, go ahead, sir.

Thank you. My questions was answered.

Our next question is from Allen Cohen of York Capital. Go ahead.

This question may have been answered but with respect to the 2004 maturity of bonds at the EIX level, if there is not an ability to get dividends up from the holding company, are there other alternatives that allow for the refinancing of maturity of those bonds?

This is Ted. The holding company, EIX parent, which holds the 750 million notes, maturing September '04, really has two principal sources of cash. That's dividends from its various subsidiaries and the past we've received dividends from all the subsidiaries at one time or another. And its monetization of the tax benefits that the parent itself contributes to the consolidated tax group. There are beyond that just financing sources of liquidity.

So if for some reason there were no cash coming up either in the form of monetization of tax benefits or in the form of dividends from one or more subsidiaries, then it would rely on the ability to roll over the debt or find other financing.

But with respect to the guidance, you gave for '03, is there any guidance you can give on the tax benefits? It sounds like the PROACT whether or not you get the release from the PROACT is something you just can't predict at this point.

I did give that. It's not surprising that you weren't able to catch it in the blizzard. But for '03...

I got '03, I was looking for '04.

It's pretty consistent. Through the years there. It's really related to the tax benefits associated with the interest payments. So it's pretty consistent each year.

Okay. Thank you.

Our next question is from Greg Lesko, of Delta Asset Management, go ahead, sir.

Hello.

Yes.

Thank you. You had a PROACT balance at the end of the first quarter was around 2.1 billion? And went down to 1.6 billion at the end of June, is that correct?

Yes.

At that pace, wouldn't it be logical that you would have a that filled up well before the end of '03?

Jim Salatchi will cover that.

The recovery of PROACT is not symmetrical. There are some months where we have significant recoveries, and then is slows down it. Just tracks our overnew revenues. We expect to see larger PROACT recovery in the summer months, then it declines substantially as you get into the winter, late fourth quarter, early first quarter of 2003, and stretches out from there.

So we're still anticipate that it will be by the end of 2003, but there's also a possibility of sales or higher potentially or other regulatory factors that could affect PROACT recovery, it could be earlier. But our best judgment right now is the end every 2003.

And a second question, with the significant cash build that you guys are anticipating for each unit, looked like you were planning on perhaps paying down the SO Cal tranch early. Why would you take advantage of the 20 quarters of deferral on the Bs?

I assume you can't pay dividends on the common EIX shares until that's cured, is that correct?

Kind of mixing a couple different things there. Just to clarify, at Southern California Edison, the view is that we have sufficient cash and projection for cash remains strong, such that we seek to pay down some of the nearest maturities and that's the term A tranch we have with the banks. And as I indicated, current view is in the discussions we were having with the banks and rate agencies is somewhere around 300 million. Pre-pays under the term A.

Up at the holding company, different issue. The parent, we are not able to pay a common stock dividend as long as the quips deferral remains in place. So we have to clear the deferral for quips so before we can pay common stock dividends. But as I indicated, in the 2002 and 2003 cash forecast we gave, we do not have baked in there a clean-up of the deferral.

May suggest we're a little over scheduled time. But I know there are a lot of callers.

Why don't we take perhaps two additional questions, and then in the interests of everyone on the phone, we'll stop at that point and allow follow-up and through the investor relations department here and as Ted emphasized, we will be putting out the 10-Q with all the detail we've provided today and considerably more. All right, go ahead, please.

Our next question from Peggy Jones of [INAUDIBLE], go ahead, Ms. Jones.

If there's going to be a cash problem at Midwest Gen in 2003, as a result of you're not being able to meet the projections that you outlined, at what point in the year would you anticipate is occurring, or would you anticipate being aware that it would occur?

And beginning discussions to deal with it?

All right. Kevin Smith, the Chief Financial Officer at Edison Mission Energy will cover that.

I don't mean by my question to suggest there will be a problem. I just wanted to address the contingency.

I think there's Edison Mission Energy is a compilation of projects, all have project finance and so long as the health of the projects is there, they keep producing cash. It's been our experience when things have gotten -- it's hard to predict where power markets may go. We've looked at all kinds of forecasts. We've assumed very low pricing, we think, in '03. But should we get to the end of '03 and there is short-term debt in Midwest Gen, it's different than our other projects, it's our expectation to roll that debt. And that's -- but I think the what the -- it is recourse not to EME, that is project debt that's recoursed to the project itself. The lenders make that decision. The only thing I would mention is that we've had fortunately not too many circumstances like it.

One in our Paiton in Indonesia, and working through a situation there where fortunately we believe what we're close to resolution, will be getting close to resolution, with the bank group there on a refinancing. But again, it's a project financing. We will at that point and time, sometime probably in mid-to late 2003, we will definitely face this issue. A lot of it will be influenced where the market prices move and where people expect them to be in future years.

Thank you very much.

One last question, please.

Our final question is from Tim Shalor at [INAUDIBLE], go ahead, sir.

Hi, guys. One question has been answered. When can we expect the tax monetization to occur in '02?

Throughout the different companies of the EME corporate structure, what other sources of cash were tax related monetization?

There are payments that are distributed, allocated amongst the entities that are contributing for tax benefits to the consolidated group, and it pretty much falls along the lines of estimated tax periods or federal tax purposes. So it's September, December, those are the typical periods.

Thank you.

All right. With that, we'll conclude the call. Thank you all very much for your interest and we would be pleased to answer follow-up questions through the investor relations department. Ted or otherwise is there anything we might add before we close? All right, thank you.