愛迪生國際 (EIX) 2003 Q1 法說會逐字稿

The Edison International conference call will begin momentarily.

Good morning ladies and gentlemen. And welcome to Edison International's conference call. This call will be available for replay at the following numbers. 877-693-4277. International is 402-220-0042. You will need to use the pin code 9201 followed by the pound sign to access today's call.

For your information, this call is being recorded. We also want to advise that Edison International is holding a simultaneous webcast of this conference call at WWW.Edisoninvestor.com. This will be on the company's web site in a listen-only mode for interested parties.

When the conversation begins you will be on listen only and there will be a chance for question and answers at the end. Thank you for your patience and your conference will begin shortly.

And at this time, I would like to introduce your host Mr. Bryson, Chairman and CEO of Edison International, go ahead Mr. Bryson.

Thank you and good morning. We will review this morning as we have in the past our earnings this time for the first quarter year 2003. We will follow our usual format, providing first some opening comments and then answering questions.

Our plan is to conclude this call within one hour.

Let's start with the forward looking statement advisory, during this call we will make forward-looking statements about the financial outlook for Edison International and its subsidiaries and about other future events.

Additional forward looking information is available on our web site at WWW.Edisoninvestor.com. We believe these statements and this information to be reasonable and well-founded. However, actual results could differ materially from prior expectations.

We set forth important factors that could cause different results in Edison International's 2002 form 10-K and subsequent 10-Qs and 8-K's, we encourage you to read those reports carefully.

All right. We had a first quarter that exceeded our expectations and are off to a good start for the year. As we announced this morning, Edison International earned 57 million dollars, at 17 cents per share. This is 9 cents lower than last year's first quarter earnings per share.

One event alone, a scheduled refueling outage in the San Onofre nuclear plant from the beginning of the year's first quarter, advised earnings per share to be 15 cents lower than last year's first quarter. This caused both Southern California Edison and Edison International to earn less this quarter than in the previous year's first quarter.

Edison Mission Energy outperformed last year's first quarter by 8 cents earnings per share. EME still posted a loss of 5 cents but as we previously reminded you earnings at Edison Mission Energy is highly seasonal. The first and fourth quarters of the year are usually loss quarters with the vast majority of the earnings coming in the third quarter, reflecting the summer peaking nature of Edison Mission Energy's assets. The strong year over year improvement at Edison Mission Energy was driven primarily by strong performance at our Homer City power generation complex, that as most of you now, is a merchant coal fired power generating facility in western Pennsylvania.

In fact, Homer City was up 8 cents in the first quarter this year, versus the first quarter last year. Matching the total year over year improvement at Edison Mission Energy.

Another noteworthy point regarding Edison Mission Energy is that the earnings from the Illinois plants were essentially equivalent to the earnings from these plants last year in the first quarter. Even though Exelon released about one-half of the capacity under contract to them.

This meant that after mothballing some of the release plants, a little more than 3100 megawatts of capacity had to be sold for the first time into the merchant market and that has gone smoothly and well.

Both Homer City and the Illinois plants benefited from stronger energy prices as well as higher volumes of megawatt hours sold on both a year over year basis and in relation to our expectations for the quarter. While power prices are volatile, the forward prices appear to be holding on to a good portion of the gains they made earlier during this winter.

But as I mentioned, the summer prices and our ability to generate at peak performance during those months are most critical for full year earnings performance at EME.

While earnings are important, we have much work to do to restore our operating companies and Edison International to full credit worthiness in the aftermath of the California power crisis.

Of paramount importance is getting our utility set in California Edison back to investment grade ratings and the key to that is to get the Proact balance fully collected. Equally important [inaudible] California Edison's recovery is meeting the legal challenge mounted by the consumer group turn.

At the end of the first quarter, the Proact balance remaining to be recovered was $640 million. That is actually a small increase from the end of year 2002. The increase was mostly due to a public utilities commission decision allowing Southern California Edison to transfer 200 million dollars into the Proact account for natural gas hedging costs, as was allowed under the settlement agreement.

We expect that once the numbers for the month of April are finalized we will see progress in reducing the Proact balance once again. We still anticipate having the balance fully collected by this summer.

Regarding the TURN appealed to the settlement agreement, California Supreme Court has now set a date for the hearing of the oral arguments on that important issue. That date is May 27. So it's coming up very soon.

With oral arguments scheduled, this suggests the possibility of having a decision rendered by the court in the late summer time frame. Just as at Edison Mission Energy, the summer is shaping up as an important and active time and that's true also for Southern California Edison.

In addition to the hope for full recovery with the Proact balance there are a number of important proceeding Southern California Edison has before the Public Utilities Commission that should be decided during this period. Including the general rate case, the cost of capital proceeding, and our planned reduction in consumer rates.

These events and others will be important to the recovery of credit worthiness and earnings performance for the year at Edison International. So we are off to a reasonably good start to what we hope will be a good year.

Let me ask Ted Craver now our chief financial officer to take you through some additional information on earnings and on liquidity.

Ted Craver, Jr.: Thanks, John. Let me first provide more detail on the first quarter earnings and as reported, EIX earned 57 million or 17 cents a share in the first quarter of this year. This is 27 million or 9 cents per share less than in the first quarter last year.

I'm going to go through each of the companies and provide some highlights.

One note, we are trying to a avoid having to refer to so-called core earnings that we've had to use so much in the last two years, as we get past all of these multibillion dollar write-offs at SCE and EME, taken as a result of the California energy crisis.

I will reference some of the accounting principal adoption effects and discontinued operation effects, but the explanation of our earnings is hopefully becoming a little bit easier to do.

Starting at Southern California Edison, SCE recorded 31 cents, earnings per share, in this year's first quarter, which as we've said is 14 cents lower than in the same period last year. We had expected and indeed planned a refueling outage at San Onofre nuclear generating station, and this occurred in the first quarter, and was responsible for actually 15 cents negative variance, so pretty much all of the SCE year over year variance is explained by this expected refueling outage.

It should be remembered that we had a similar refueling outage last year, but that occurred in the second quarter, so you'll have some of these year over year comparisons reversing in the other direction when we give our second quarter earnings.

The other year over year variances that are worthy of mention, we had 9 cents of higher O&M expense, this came from various sources, some of those were unexpected, in the form of the storm damage that affected our T & D area, some of them were expected with -- such as health care costs.

We also had performance based rate making revenues in the first quarter of 2003 that were 7 cents higher than in the first quarter last year. This really reflects the effect of timing differences, the eram mechanism came into effect for the full quarter this year but was not into effect until April of last year.

At Edison Mission Energy, including a negative $9 million from the cumulative effect of a change in accounting principle that was adopted in the first quarter of this year, EME recorded a loss of 17 million or a negative five cents a share. This represents a significant improvement of 33 million or 10 cents a share over the same period last year.

Again, including adoption of new accounting principle and the effect of discontinued operations in last year's number. I keep mentioning this adopting -- adoption of the new accounting standard.

We mentioned this in our earnings guidance call as well as in our 10-K, that we would be adopting FAS 143 this year which is a new accounting standard that requires companies to accrue for legal or contractual obligations to retire fixed assets at the end of their useful life.

The more interesting point though is in the operating results, EME's segment reporting, that you'll see in the first quarter 10-Q, will show income before taxes for the America's region of 39 million or 52 million higher than in the first quarter last year. The strength in the America's region essentially explains the positive variance in the total EME year over year performance.

And in fact if you drill down into the America's region, we find that it was really the performance at Homer City that is mostly responsible for the year over year improvement. Income before taxes at Homer City were 46 million, versus 2 million last year in the first quarter.

The big four projects also contributed 16 million pretax to the year over year improvement while the Illinois plants were essentially the same as in the previous period.

I want to provide a little bit of detail on both the Illinois plants and on Homer City since those are our two large merchant assets and the ones that I think investors have been most interested in.

First at Midwest Gen, or the Illinois plants with Exelon releasing a little less than half the total capacity under contract, people certainly, and we were as well, concerned about how this roughly 3,100 megawatts of capacity was going to be -- was going to perform in the open market.

In our earnings guidance, we assumed $22.15 megawatt hour flat price for the whole year of 2003. So this is on peak and off peak and this is for the coal plants. The actual realized price for the first quarter for these plants, which is a somewhat different unit of measure than a full year flat price, was $25.48 per megawatt hour.

The higher-than-expected merchant price coupled with the price step-up in the power sold to Exelon under the PPAs is largely responsible for allowing the Illinois plants in total to equal the performance of last year's first quarter. And this is when essentially all of the available energy and capacity was under contract with Exelon last year.

Of note, we had over three tera watt hours sold into the merchant market in the first quarter and only about five to six percent of that was sold to Exelon with the rest of it sold to a wide range of load serving entities and other counter parties.

The total volume of megawatt hours sold was about 8% higher than in the first quarter last year, or a little more than about a half a tera watt higher. This is including both the contracted and merchant power.

At Homer City, the much improved year over year performance is explained by a balance between both higher output and higher prices. You may remember, we had an unplanned outage in unit three at Homer City last year, which caused our volumes to be depressed.

This quarter, with an availability factor approaching 90%, we had nearly one tera watt hour more sold than last year. When we look at the comparison of year over year average realized energy prices, at Homer City, we see that in the first quarter this year, we had prices around $39.82. Or 33% higher than the 26.65 per megawatt hour that we experienced last year.

And to put that in context, that 39.82 compares with the full year flat price assumption that we have in our 2003 earnings guidance of around $28.85.

At Edison Capital, we earned 4 cents a share or 2 cents lower than last year, and this really reflects the continuing run-off of the portfolio at Edison Capital, as a result of no new investments being made, as we continue to conserve cash across the company.

At Mission Energy Holding Company, really the earnings were unchanged from last year with a loss of 7 cents.

And at EIX parent we showed a 1 cent improvement with a 6 cent earnings per share loss. And this reflects the absence of losses from some of the remaining operations that were wound up last year.

What I would like to do now is provide some comments on the liquidity picture. Before I start the new FCC reg D requires us to provide the location on our web site where you can find all of this 2003 projected cash balances, and again, that web site is WWW.Edisoninvestor.com.

At SCE, cash balance was 1.1 billion, at March 31, we really have very few significant maturities left. We in the quarter paid down actually on April 16, we paid down 300 million that we had in a revolver at Southern California Edison.

And that leaves now about 125 million of first mortgage bonds that will mature in June and 34 million of the 895 variable rate notes that will mature in November. The year-end cash balance is forecasted now to be 1.2 billion. This assumes no dividends to EIX, just for purposes of forecasting simplicity.

In our last call, we had forecasted the year end balance of 1.1 billion, so this is a slight improvement in outlook.

At Edison Mission Energy, in terms of the cash forecast, we now are expecting a year-end balance of 166 million at 2003. This is about 10 million less than the year-end balance that we gave you the last time.

There are lots of little puts and takes between the last forecast and this current one. But there are a few items that I want to mention.

Homer City, cash distributions from Homer City are expected to be 137 million higher for 2003 than what we provided in our last forecast. Tax benefits, these are the monitorization of tax benefits are expected to be 87 million lower than what we had provided in our last forecast. Those now are expected to total 100 million.

And again, we have some natural offsets here as some of the projects performed better, that means that there is less of a tax loss at Edison Mission Energy and therefore less monitorization of tax benefits.

Finally, of note, there is -- we now expect some higher investments in projects, so in relation to our previous forecast, that's up 63 million. The principal contributors there are an additional investment at Homer City unit three, SCR, and also just some timing differences related to some construction costs at the Sunrise Plant.

The cash balance at Edison Mission Energy is currently -- at the end of the first quarter, 31 million, that's actually moved up now to around 145 million.

And we also have additional borrowing capacity, so at the end of of the first quarter, when you include the cash balance and the borrowing capacity, we had total liquidity of about 305 million.

We continue to provide this coverage ratio, it's actually a funds flow from operations, to total interest, this is relevant to some of the covenants, and it relates to one of the test, not all of them, but one of the tests for paying dividends to MEHC.

That number at the end of March 31 was 2.32 times coverage, an ware required to have 2.2 times, in order to make dividends up to MEH.

At Edison Capital, the cash balance as of March 31 was 421 million. This is down slightly from the year-end cash balances. These are really just timing differences.

We still expect the year-end 2003 cash balance to be 518 million, which is essentially the same as we gave you in our last forecast. Mission Energy Holding Company, at the end of the first quarter, we had unrestricted cash of 85 million, and we had about 77 million in the cash escrow account, the interest escrow account.

The forecast for the year-end balance is 147 million, which is slightly lower than the last forecast we gave you, of 164 million. At Edison International, the cash on hand at the end of the first quarter was 93 million.

Our forecast for the year-end 2003, ending cash balance, is 101 million. This is 116 less than the previous forecast, which is all explained by the cash that was used to repurchase some of the 750 million in notes that mature in September of next year.

So when you -- when you look at the cash forecast that's on the web, you will see retirement of debt of 128 million.

Finally I would like to just make a few additional comments regarding earnings guidance. We are keeping our guidance at the $1.40 to $1.60 a share.

That said, we have to admit the bias is to the upside and it is unlikely to be below that $1.40. The primary reason for that bias to the upside is the operating performance at the principal subsidiaries has been favorable.

Edison Mission Energy clearly has been stronger due to higher generation, higher energy prices, and increased availability from the Homer City plant in Illinois.

And SCE got through the songs outage actually four days ahead of schedule and that was, as we indicated in our earnings guidance, one of the -- one of the risks was the refueling outage. However, it is still early in the year.

And as John mentioned, there are a number of important events that could affect earnings both positively and negatively during the summer that we really can't adequately forecast at this time.

Those include a number of critical regulatory proceedings, involving Southern California Edison, such as the general rate case. Obviously a lot is pending during the summer period on Proact and the TURN appeal activities.

Summer power prices, and discussions surrounding maturing debt at Edison Mission Energy. We indicated in our earnings guidance previously that at Edison Capital, we have leases with American Airlines and that situation remains fluid.

And finally, there are additional accounting pronouncements that can affect us, such as spin 46, which we also highlighted in our 10-K.

So although the bias is to the upside, we are going to leave the guidance at this point at the $1.40 to $1.60. John, I think we're probably ready for questions.

All right, we have in addition to Ted and myself here the people who have been part of these calls in the past. Please go ahead and we'll distribute the calls to the people who are best able answer them to the detail you want.

Ladies and gentlemen on the phone if you would like to ask a question, press star followed by one. If you would like to withdraw that question, press star followed by two. And the first question is from Vladimir Yozavick, of Long Anchor Management. Go ahead, please.

Good morning, gentlemen. Just had a couple questions, first of all, can you explain the apparent increase in the Proact balance that relates to natural gas hedging costs and can you tell us if that's, you know, -- if that increased cost was run through your income statement at all for the first quarter.

I'm going to ask Jim Scilacci the chief financial officer of Southern California Edison to respond to that.

This is really, we've been waiting to get commission approval on the gas hedge for the QFs. As you know, we bought that hedge way back in 2002, end of 2001.

And we have been waiting for commission approval to get authority to run the full 209 million dollars through the Proact balance and that occurred and we did run it through the month of February so we set up basically a regulatory asset and once we got approval we reverse the regulatory asset and it flows through the fuel account.

When you look at disclosures for the quarter it will explain how it actually flows through. It works through the power purchase accounts and the provision for regulatory adjustment. It doesn't flow through the income statement. It doesn't flow through earnings, excuse me.

And as a result of the increase in the Proact are you changing your guidance on when you think the Proact can be fully paid down?

No, we said in the summer. We're maintaining the same guidance.

Okay. Understood. And just one final question. Can you tell us what the cash balance is at EMMH because I believe that might not be consolidated in with EME.

Let me have Kevin Smith the CFO of Edison Mission Energy to provide that.

At March 31, the cash balance at EMMH was 338 million dollars. Down a little bit from 370 at year-end. But you know, it's a seasonal, a seasonal operation.

Right. Understood. Thank you.

Next question is from David Frank of Zimmer Lucas partners. Go ahead, please.

Yeah, hi, can you hear me?

Yes.

Good morning. Ted, I had a question on the results for the quarter at the utility. And you commented that results were down about 15 cents due to the outage at Songs.

Could you kind of step me through the costs related to the increase in pension, and the storm, and did you also realize other benefits in the quarter at the utility for the URG and PVR? So actually when I look at the quarter, I would look at last year's 45 cents, I think you mentioned 7 cents, and would I add anything more to that, other than take out the 15 cents plus storm, plus pension?

Ted Craver, Jr.: Yeah, let me try kind of a general explanation and then see if you need something more than that.

First on Songs, again, what I was trying to indicate is last year, we had a refueling outage as well, but that occurred in the second quarter. This year, we had refueling outage on another unit, at Songs, that occurred in the first quarter.

So what you're going to see over the first quarter and second quarter is these things are going to swing around.

But essentially, the refueling outage caused earnings to be 15 cents lower at Southern California Edison on a year over year basis, just from that one item. Which pretty much explains the entire FCE quarter over quarter difference.

In terms of the PVR, that was something that went in the other direction. We had the eram effect fully in the quarter this year, it was not in that quarter last year, in the first quarter last year, didn't kick in until April, so you ended up with again something of a, you know, in one quarter and not in the other quarter type of an effect.

That added 7 cents and then the O&M as I mentioned was 9 cents difference, so in other words O&M costs were higher in the first quarter this year than last year by 9 cents.

There are a whole series of things in there. The storm damage was around 2 cents of that, health care costs were around 3 cents and there are a bunch of other odds and ends.

Okay.

So I would take last year's results of about 45 cents, add 7 cents for the eram and then subtract off 9 and the 15? Essentially.

Ted Craver, Jr.: Yeah, those are the major -- there are other pieces that, you know, year over year differences but I'm just trying to give you kind of the main ones.

Okay. And were you experiencing a higher purchase power cost during the outage this year? I know power prices were pretty high in the first quarter. Did that offset some of potentially upside in the quarter at the utility?

Ted Craver, Jr.: It doesn't really track through that way. No, the short answer is no.

Okay. Thank you.

Next question is from Michael Goldenburg of Luminous Management. Go ahead, please.

Good morning, gentlemen. Congratulations on a good quarter. I wanted to ask you a couple questions. First when you talk about negative 15 cent variation at EIX, at Southern California Edison that mainly has to do with the [inaudible] benefit; is that so?

Ted Craver, Jr.: Yes.

So it's not really the replacement cost, it is just the extra benefits you get from this mechanism?

Ted Craver, Jr.: Right. It's -- when it's running, you earn -- when it's not running, you don't earn. So obviously if one of the units is in a refueling outage, it is not running, therefore it is not earning.

And just had a couple of quick questions on EME. I remember reading in your 10-K that Will County's operations were suspended for a while. Is it currently running? Did you guys bring it back on line or is it?

Ted Craver, Jr.: Will County one and two, units one and two are, as you mentioned, temporarily mothballed and those are not running.

Outside of Will County, the merchant coal plants that have you at Midwest Gen, what was the capacity for those plants?

Ted Craver, Jr.: Probably the easiest way to go through this is we had released from Exelon contracts around 4500 megawatts of capacity.

We ended up mothballing around 1370 megawatts, including Will County one and two. Also some Collins units and we closed one unit of 45 megawatts so we ended up with 3133 megawatts of capacity available for sale into the merchant market.

Is that all coal?

Ted Craver, Jr.: No, it is some coal, some Collins, and some peakers.

Okay.

Ted Craver, Jr.: But the vast majority is coal and Collins and peakers units, in the first quarter, hardly run, so it's -- it really -- it really boils down to coal. Primarily explains what is taking place there. So one way to compare it, there is roughly 9300 megawatts in total megawatts at the Illinois plants.

We've mothballed and closed some of those and that leaves about 4700 megawatts under the PPA with Exelon and about 3100 megawatts open for sale into the merchant market.

And those merchant plants, how much did they produce? Are you saying they produced about three tera watt hours.

Ted Craver, Jr.: Right.

Okay so I can back into capacity. And I understand it's still early in the year and you've indicated bias towards the upside.

Given where the gas prices are today, if everything else remains constant, is it safe to say that even with negative 30 cent charge at MEHC, the overall -- that overall your unregulated power generation business can actually yield positive benefit to overall EIX.

That is can EME produce more than positive 30 cents if everything else stays the same to offset the MEHC charge.

Ted Craver, Jr.: I'm going to give you an unsatisfactory answer but I think we've said as much as we really feel comfortable saying at this point regarding the earnings outlook and we are staying with the guidance that we put out before.

So in terms of Edison Mission Energy, that's negative 10 cents, to positive 10 cents range, on EPS.

And for Mission Energy Holding Company, it was -- I don't have the number right here in front of me but I believe around negative 28 or 29 cents, but we have to stay with that guidance for the time being.

Okay. Thank you very much. Good luck.

Ted Craver, Jr.: Thank you.

The next question is from Mike Lucas of Apaloosa management. Go ahead, please.

Hey, Ted, how is it going?

Ted Craver, Jr.: Hey, Mike. How are you?

Good. I wanted to touch more on Midwest Generation. You said the cash at EMMH was 338 million.

Ted Craver, Jr.: Kevin did, yes.

And that is down from 370 million at the end of the year. And secondly isn't there also a cash debt reserve fund there, too.

That includes that.

Ted Craver, Jr.: Yeah, I think the number you gave included that but also the explanation that Kevin gave is, you know, in the winter and spring period, it is typically when we have our planned outages, trying to get the plants ready for the summer, and that ends up burning cash, as you're paying the expenses for those planned outages. And then they're available during the summer and that's typically when the cash balances grow and then you get back into the late fall and winter and again, you tend to have some outages. So you've got a cyclical, seasonal cyclical pattern relating to the cash and so that really explains the drop in the cash.

Okay.

And focusing more now, switching it to power prices, just looking at, you know, some of the other merchant guys who have sold into that power market it seems that the $25 power price that you realized is pretty low comparatively to everybody else who are in the 30s in the marketplace.

I was just wondering if you could help me out, why is that the case? Are you guys hedging. Selling forward power at specific prices?

Ted Craver, Jr.: Yeah that really is principally the explanation. We, as you remember, Exelon made their election on the coal plants in very early July. And over the course of the third and fourth quarter last year, we did engage in some hedging.

We had a projected, you know, $22.15 flat price for the total year of 2003. And when prices were at or above that level we tended to do some hedging.

By the time we started the first quarter, we had about 52% of the coal energy available for merchant market sales hedged.

And so you can -- you can remember what the prices were during the third and fourth quarter of last year, figure we did hedging during that period of time, and so if you're just looking at the spot prices, over the course of the first quarter, which is when the prices really started to take out, some of that we were able to enjoy and some of that didn't make any difference to us because we had already hedged it down.

Ted I just wanted to nail this down a little bit better. 52% is hedged right now?

Ted Craver, Jr.: 52% was hedged going into the first quarter.

What about going forward from now perspectively?

Ted Craver, Jr.: Well, I'm not going to -- I'm not going to give you a number on that one.

Can I ask you this. Did you engage in hedges in the first quarter, vis-a-vis the fact that power prices were a lot higher and if you use that same theory of $22 that you were forecasting then, then theoretically you probably did a lot of hedging in the first quarter at very high prices if you did it back in the fourth quarter of last year.

Ted Craver, Jr.: I think you can assume just as we do with Homer City that we seek to selectively hedge and when we see opportunities to do that that we think are favorable, we try to lock in some of the power prices so that we're not entirely exposed to the spot market.

Just one last follow-up. How far ahead do you usually hedge?

Ted Craver, Jr.: We tend to concentrate on kind of the 12 months and under period. Although we do from time to time hedge longer than one year out.

Okay. Thanks, Ted.

Ted Craver, Jr.: You're welcome.

Next question from Jeff Gildersleeve of Argus Research. Go ahead, sir.

Thank you. I wanted to touch base. The Supreme Court oral arguments again, May 27, what would be the usual course or any other dates we should be aware of with that case?

Steve Pickett, the general counsel at Southern California Edison will respond to that.

We would expect a decision from the Supreme Court somewhere between 30 to 60 days after the oral argument.

I would emphasize though that the timing of the decision is entirely in the control of the court. And it could come earlier or later than that expectation. 30 to 60 days would be normal, however.

Okay. And then with the recovery of the Proact, there is no direct correlation, I mean they're both involved, but you can recover the Proact with this proceeding going on?

Yes, this proceeding has been going on ever since the settlement was adopted. And the full recovery of Proact in the summer of this year is entirely coincidental in terms of timing of the oral argument in the Supreme Court.

Okay. And finally, do you expect any additional transfers into the Proact and could you be any more specific as far as the summer recovery timing?

Maybe I will take that up. We can't be more specific on the summer timing. That is, we had narrowed the range in a previous -- previous earnings call, three months ago, to identify -- I think we described it as midsummer, those that have followed us will recognize there are a very large number of variables that determine exactly when recovery is complete.

But we are looking sometime during the summer now.

And as Ted indicated, that is not a revision, or I think it was Jim Scilacci, it was not a revision in the outlook. The outlook remains the same. We don't foresee additional changes in the amounts to be affirmatively recovered in that account.

So it is a question of simply recovering with the existing rates, what has yet to be recovered.

I would make a larger point on the question about e PUC or the Supreme Court proceedings, the lawsuit. The Public Utilities Commission has, notwithstanding the questions raised by TURN, stood by the settlement throughout, so there have not been any change and we don't anticipate any change in our ability to recover that amount. The legal proceedings simply entirely independent of that and the Public Utilities Commission as vigorously briefed and advocated support for the settlement, as has now the governor in a separate filing before the California Supreme Court and various other groups.

Thank you.

The next question is from Scott Pearl of Credit Suisse First Boston.

Good afternoon. John, just following up on that point that you just made. I think just so it's perfectly clear, you know, in the unlikely case that -- the California Supreme Court decided in favor of TURN, there is nothing in and of that decision specifically that compels the commission to take any action? That would be a completely separate commission matter, is that the right way to think about that?

Scott, it's Steve Pickett. Yes, that is correct.

If the Supreme Court were to rule against us, the matter would be referred back to the 9th circuit and presumably remanded to the trial court, the federal district court, and we would resume trying our filed rate doctrine lawsuit, that the PUC settlement resolved, so -- and it would take further affirmative action by the PUC to change rates or otherwise affect the recovery of the -- what we now call the Proact account.

And the commission as Mr. Bryson indicated has stood four square behind that recovery thus far.

Okay. And if -- in this 30 to 60 daytime frame, this is based upon the precedent with regard to the California Supreme Court action.

Yeah, typically, the court acts somewhere between 30 to 60 days after an oral argument. They have a 90-daytime frame which can be extended under certain conditions, so the timing really is in their control. But when you look at ordinary experience from the court, you would expect a decision somewhere between 30 to 60 days after it has been argued.

And I guess a question for John, if you know, assuming that that case moves forward, you know, in a positive fashion, can you give us a little bit more sense, you certainly said in the past, that with regard to a dividend, you would like to reinstate a dividend by the end of the year, now that -- or there's a little bit more known as far as timing relative to Proact recovery and in TURN case resolution, what your thinking would be as far as relative to the completion of those events and your decision with regard to reintroducing the dividend.

I see what you're saying. Scott, we we've set out over the last couple of years this goal of restoring the dividend by the end of this year.

And of course in the end, that will be determined with a management recommendation of our board and action by our board, I think we can't give any more detail on that at this point. We simply indicated it's a high priority for us. And we believe the high priority for our shareholders to have that dividend restored and put in place on a prudent, sustainable basis going forward.

So a lot of our focus on financial recovery, cash conservation, enhancing equity values has been built around that major objective and we'll seek to do it in a way that is consistent with our ongoing financial recovery and financial health, that has been what we talked to you about for the last couple of year, but we couldn't give you more specific timing on the dividend at this point.

Okay. One last just question for Ted on the numbers. With regard to the utility guidance, just want to confirm what you said before, that the utility guidance has not changed, and also just wanted to ask, as far as increased health care costs, relative to the quarter, these are things that you have planned for, with regard to your upcoming rate case, and obviously the storm costs wasn't come contemplated but above and beyond that, as far as the systematic cost basis and you know, what you saw as far as overall outage costs for San Onofre, these are things that are provided for within the rate application that you submitted to CPC.

Ted Craver, Jr.: Yeah just kind of ticking through there, 193 was the guidance we gave for SCE, again as I said we're not changing any of our guidance either for EIX in total or for any of the individual companies at this point in time.

The summer is going to be important, certainly will be important to SCE, but at this point we really can't -- we can't adequately forecast a lot of those event issues.

In terms of the other piece, yeah, you know, there is a whole [inaudible] of items in that 9 cents and that is a year over year comparison.

So maybe kind of bifurcating this, when we just look at the facts, you know, what were the O&M costs, in the first quarter last year, versus what the O&M costs were in the first quarter this year, they were 9 cents higher, 9 cents EPS higher, in the first quarter of this year.

A different way of looking at it is, you know, how many of those increases are unusual or unexpected, that is, not in a sense, not part of our forecast for earnings at SCE.

The health care costs were part of -- those were expected. So there's nothing unusual associated with that.

The storm damages, as you said, you know, you can't exactly predict that, but we do include -- we can't count on perfect weather, even though California does a pretty good job of that.

So there is always some element of storm damage and some of that is incorporated into our expectations for the year.

But these are year over year comparisons, and as I said, you know, two of the items that are, you know, a little larger than the others, in that 9 cents are the 3 cents for health care cost, again, that was expected, 2 cents for storm damage, and the T & D system, and there is a whole slew of other items that are, you know, nickel and dime things.

Okay. Thank you very much.

Ted Craver, Jr.: You're welcome.

The next question is from Paul Fremont of Jefferies, go ahead, please.

Thank you very much. I just want to sort of fully understand your Mission guidance. Which I guess is minus 10 to positive 10.

If I adjust for nonrecurring charges last year, it looked as if Mission earned about 8 cents before the various write-offs of goodwill, turbines, and what not. You're already 10 cents ahead of where you came in for the first quarter of last year.

Wouldn't it -- in order to come in within your guidance range, wouldn't prices for the remainder of the year have to be below the 22.15 in Chicago, that you used as your baseline assumption or below the 28.85, or I guess terra watt hour levels of production be down from the numbers that you gave back in December, or I guess the third possibility would be that the company report nonrecurring type charges, similar to the extensive charges that were reported last year.

Ted Craver, Jr.: I will give you high marks for trying but we just can't go there. All I can do is kind of reiterate some of the comments I made before.

In terms of a full year 2003 forecast, we're going to stay at this point in time with the guidance that we gave before.

We have also indicated to both in John's comments and in mine, that the summer is, you know, an important period of time. Summer power prices and the volumes, that we can get from the plants during the summer really is the most critical on the operating side.

But we also have a number of other items that are taking place at Edison Mission Energy that just make it difficult for us at this point in time to really make any better projections than the ones that we have out in front of you.

Such as the discussions around the maturing debt at EME, depending on how various things work out there, those could have potentially ,e earnings impacts, we've got additional accounting pronouncements, we've put all this stuff in our 10-K, relating for instance to [inaudible] 46, there are a lot of items that are still out there that are a little bit -- that are sufficiently unclear to us at this point in time, to adjust the guidance.

So we're going to keep it where it is for the moment.

And sort of as a quick follow-up, in terms of you have been kind enough I guess in the past to share with us Edison's view of prices in the forward market.

If I take your realized price of 25.48 in Chicago, and 39.82, can you give us a sense of where you're seeing the forwards for the remainder of the year in both of those markets?

Ted Craver, Jr.: Yeah, generally. Again, relating back to Mike Lucas' question, remember, there is hedging that has taken place, so it's not going to be a simple matter of just looking at, you know, the forwards, but the forwards for -- for the rest of the year, I'm going to say third and fourth quarter 2003 forwards, and PJM, the latest stuff I got here PJM, west hub, which is one of the -- that's at least an indicative price of where we can operate, a little different than the Homer City [inaudible], but peak is around 54 dollars, offpeak around 32, 33 dollars. At Com Ed, peak prices are around 37.38 dollars and offpeak are around 19 to 20 dollars. So those are the current forwards, for third and fourth quarter of '03.

Thank you.

Ted Craver, Jr.: You're welcome.

Our next question is from Neil Badal of Barclays Capital. Go ahead please.

Thank you. I just wanted to ask a specific question on First Hydro if I may -- I was wondering if you could provide us with the actual operational performance of the first quarter and give me some indication of what the interest cover is and also if you can give me an update on the current state of play with the discussions of bond holders, the cash flow, you're projecting cash in flow from First Hydro of 24 million dollars and I wonder if that assumes that you're going to resolve the discussions there.

Ted Craver, Jr.: Probably not going to be able to satisfy you a lot on some of the more operational stuff at this point at First Hydro. We will be coming out with a Q shortly and there will be a little bit of information in the Q relating to some of the major projects including First Hydro but I don't have anything that I can provide at this point.

In terms of some of the discussions around the bonds, we have had some discussions as we reported in our disclosures, and continue to have, you know, an open dialogue, we also have continued to operate the plant as effectively as we can.

And in fact, we've had coverages as we've disclosed previously, that allow for a distribution, and in fact have made a distribution.

So you've actually made a distribution to Edison, have you, from First Hydro?

Ted Craver, Jr.: To Edison Mission Energy.

So the dividend is being paid?

Ted Craver, Jr.: Correct.

Thank you, Tom.

Ted Craver, Jr.: You're welcome.

The next question is from Jason Co of Sandoval Investment Management.

Yes, I wanted to follow-up on First Hydro if I may. It is our understanding that the bond trustee has moved to initiate a bond put event procedure, and I was wondering how you were able to get yourselves comfortable to dividend up the cash to the parent company.

Given that the trustee has moved now, to go about, you know, to go about restructuring event and the bond put event.

I'm going to ask Ray Vickers who is the general counsel at Edison Mission Energy to respond to that.

After some preliminary action by the trustee, nothing further has happened. I think as we've reported we intend to vigorously contest the applicability of the provisions which have been referred to and frankly things have really been at an -- in that continued situation while discussions that Ted refers to have continued. Under the terms of the bond document, it's quite clear that as we met the ratios required, so forth, that the dividend was permitted.

Okay.

We're nearing the end of the scheduled time here is. There one more question?

Yes, sir. The next question is from Cyrus Habibe of JMB Capital.

Actually my question has been answered. Thank you very much, gentlemen.

All right. We thank all of you who have participated in the call. As in the past, if you have additional questions, please feel free to call in and put the questions to Joanne Guard, our vice president for investor relations and she will see to it that you can get a response. I think that covers it. Many thanks to all of you.