愛迪生國際 (EIX) 2003 Q3 法說會逐字稿

Hello and welcome to the Edison International conference call. This call will be available for replay at the following numbers 877-693-4277 and also 402-220-0042. You will need to use the pin code 9501 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 web cast of this conference call. [operator instructions]

At this time I would like to introduce your host Mr. Bryson, our chairman and CEO.

Good morning, and welcome to all of you. Let's start with the first disclosure statement. Ken Stewart will provide that.

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 now 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 current expectations. We set forth important factors that can cause different results in Edison International's 2002 Form 10-K and subsequent 10-Q and 8-K reports. We encourage you to read those reports carefully.

All right. We had a significant and a positive third quarter at Edison International. I'll tick through briefly at the outset here key steps. And then go into a little more detail. Key steps, first encouraging operating results at our major subsidiaries. We'll say more about that this morning. Second, as most of you know, we completed, that is we absolutely finalized, recovery of the wholesale power cost that had been incurred by Southern California Edison during the power crisis.

Those as you know had deeply injured the financial health of the company. That's done, that's behind us. We also secured a California Supreme Court decision fully affirming our right to recover those power costs. That's done. Finally, we were able on the strength of those steps, to meaningfully reduce rates for our consumers. And they deserve that. We reduced rates by $1.2 billion on an annualized basis. That's an average rate reduction of 13% across all our customers. It's a much larger reduction for those customers that incurred the largest increased cost during the power crisis. In addition, we reduced rates to enable a credit to our customers by an additional 0.4 billion. So aggregate reduction for our customers, $1.6 billion.

Finally, we took significant further steps and I'll describe those toward our goal of restarting a common stock dividend for our shareholders with a declaration potentially by our board of directors by the end of this year. So let me take you then through those steps just a little further. With the completion of the PROACT recovery, that is the wholesale power cost recovery, we were able to rebalance the capital structure at Southern California Edison. So those of you who know California regulations, you know that the California Public Utilities Commission sets an authorized capital structure. That authorized capital structure allows us to retain 48% of the total capital in the form of equity. And we're allowed to earn on that equity. With the completion of the recovery in mid October we were able to rebalance that capital structure. Rebalancing the capital structure there allowed us to dividend excess equity from Southern California Edison. We also dividend' Ed excess capital from Edison Capital to Edison International.

Those are key steps towards restarting the common stock dividend. What we will do now as we move forward is we anticipate paying down the dividend arrears on our quarterly income preferred securities. That should be cleared by December 1st, and that, in turn, will allow us to recommend in the month of December the restarting of a common stock dividend to our Edison International common stock shareholders. So those are critical steps.

Let me say just a little about earnings. We released earlier this morning reported earnings per share. They were $1.67 in the third quarter. That is 59 cents stronger than in the third quarter of last year. Even if we exclude from those numbers the gain on sale of the Edison pipeline and terminal company, and also exclude the effect of some discontinued operations from last year, so excluding discontinued operations from the calculations, the earnings from continuing operations in the third quarter were up 47 cents over last year's third quarter.

Higher quarter-over-quarter results of both Southern California Edison and Edison Mission Energy accounted for virtually all of that increase. Now, with the strength of the third quarter, we are able now to upgrade our outlook of reported earnings for the full year, and we now foresee, we now provide an outlook for earnings for the full year of $1.85 to $1.95 per share, that's an increase over the previous guidance of $1.40 to $1.60. I'd underscore that this outlook for reported earnings assumes, among other things, further delay in the pending generate case proceedings for Southern California Edison which is before the California Public Utilities Commission now. So with that, we've taken steps towards renewing our common stock dividend, we foresee stronger than previously forecasted earnings for the year. I'd like to turn now these comments over to Ted Craver, who will take you through additional materials on these earnings and our liquidity. Ted.

Thanks John. Lets start first with the third quarter over third quarter results. As John mentioned reported earnings were $1.67 for the third quarter of 2003. Or $1.53 when we exclude the 14-cent gain on the Ebtec sale. If we look at continuing operations, so excluding discontinued operations effects in both the third quarter of 2003 and third quarter 2002, we see a 47 cent increase for this third quarter over last year's third quarter. A SCE earnings from continuing operations was $1.01, up 29 cents on a quarter-over-quarter basis. Earnings from operations were actually down about 9 cents, mostly as a result of delays in the generate case proceeding.

This is because higher revenues from rates are not covering higher operating expenses at this point. The negative effects of the generate case delays were more than offset by two regulatory decisions. The first, in utility-speak we refer to this as the Terna decision. It is a CPUC decision on the allocation of certain overhead costs between the PUC and FERC. That was worth 24 cents Positive 24 cents. The second decision we refer to as the PROACT decision, this is the final disposition and approval of the various PROACT accounts, which was accounted for a 15-cent increase.

Turning to Edison Mission Energy the results were 61 cents for the quarter up 17 cents over last year. And the combination of SCE's performance and EME's performance really explain the positive quarter-over-quarter variance at EIX. On the operating side, at Edison Mission Energy the negative impact of having about half of the megawatts at the Illinois plants coming off contract with Exelon which accounted for a decline of about 12 cents on a quarter-over-quarter basis was nearly offset by the increases in earnings from other projects such as at Homer city, Paiton, Contact Energy and Sunrise. Most of the quarter over quarter increase at Edison Energy is explained by the absence of one time write off.'s, which were taken in last year's third quarter.

The major ones being 11 cents Turpine write off and a 5-cent write off at some work on the power plant in Illinois. The remaining subsidiaries at EIX Edison Capital, Meh the holding company parent, all of those had small pluses and minuses that basically offset each other. Turning to the year-to-date, nine-month comparisons, EIX had reported earnings per share of $1.92 in 2003, versus $3.38 EPS for last year. The $1.46 difference is really explained by the utility retained generation decision, where we had a write-up of assets last year of $1.47. For the year-to-date nine months' earnings when we exclude discontinued operations, effects of changes in accounting principle, and the utility retained generation write up, we see that performance was $1.80 this year versus $1.84 last year. We sometimes have referred to this as core earnings, but I will remind you that this core earnings number does include other one-time items such as the Illinois peaker write off of 46 cents taken in EME in the second quarter. SCE's core earnings were $2 per share or 17 cents higher than last year.

Earnings per share from operations were 7 cents lower in 2003 versus 2002. Again, mostly due to the effects of the delay in the generate case proceedings. But these effects were more than offset by 24 cents worth of one-time items relating to the two items I just mentioned, the so-called Terma decision and the PROACT decision. At Edison Mission Energy the year to date nine months EPS was 8 cents for the year or 21 cents lower than last year. However, earnings per share from operations were 6 cents greater on a year-over-year basis. It was really the impact of one-time items, principally the Illinois peaker write off that caused the earnings to be lower on a year-over-year basis. Just to tick off a few of those, the peaker write off was 46 cents. Loss on sale of Gordonsville project was 1 cent. So totals 47 cents of negative one time items this year partially offsetting that was the absence of 20 cents worth of write off.'s taken last year. And again the rest of the pieces at Edison Capital Mission Energy Holding Company netted each other out.

Let me turn to the 2003 outlook that John mentioned where we've upgraded our earnings guidance now to $1.85 to $1.95. In the last call, we made it pretty clear that although we weren't patient prepared to change the guidance it was unlikely that we would come in lower than the high end of that $1.40 $1.60 range. But that we needed to see how things progressed during the summer on some important regulatory decisions and summer prices particularly at our merchant plants at EME. And so with those things behind us let me give you some of the specific details of the new guidance. I'm going to refer to each of the components, and talk about what the original guidance was and now what the new guidance is.

For Southern California Edison, the original guidance was $1.93. We've now moved that up to $2.45. For Edison Mission Energy the old guidance was from negative 10 cents to positive 10 cents, a range of 20 cents in there. We've narrowed that to negative 5 cents to positive 5 cents. Edison Capital was 15 cents is now 16 cents. MEH was 29 is now 30 cents and the parent was 29 is now 28 cents. So when we rack these up, we refer to these as continuing operations, the old guidance was $1.40 to $1.60. The new guidance is $1.98 to $2.08. There are also a number of items in the discontinued and change in accounting principal area that are fairly hefty so let me go through those. SCE discontinued Ops, which is principally the Edison terminal and pipeline company, is plus 15 cents. The EME discontinued operations, which has some holdovers from FFF in Lakeland is 1 cent, negative 1 cent.

On the accounting side EME, we had this Fin 46 that we have referred to in the past, that is not recorded in the third quarter but will be recorded in the fourth quarter, that is negative 43 cents and the FAS 143 which we have talked about in the past is negative 2 cents. So that EME the accounting items are negative 25 cents in total. And then Edison Capital, the Fin 46 effect is negative 2 cents. So when you put all these discontinued operations and accounting principle pieces against the $1.98 to $2.08 from continuing Ops you end up with $1.85 to $1.95. A couple of explanatory notes on that. The Southern California Edison, the 245 that we show there does not incorporate a decision or a conclusion in 2003 of the generate case. So definitely the SCE numbers at least for forecast purposes assume a CPUC decision is delayed until next year which has a negative impact on 2003 earnings.

You will remember there is a memorandum account that has been established and is available when the rate decision is finally made to make rates retroactive back to late May of this year, but the effects would not be felt or recorded in 2003 if the rate case decision is postponed. And another point to make here is, the earnings from continuing operations, that's this $1.98 to $2.08 that I mentioned, for all the companies, that does include various one-time items which gets a little bit confusing.

Which is principally why we always talk about the reported earnings number, the $1.85, $1.95. And at the risk of oversimplifying, I would say there are roughly speaking about 50 cents worth of positive one-time items in that SCE number of $2.45, and about an equal number of one-time negatives in the EME number of the minus 5 to plus 5.

And the specific one-time items I'm referring to at SCE, plus 24 cents for this Terma decision that I mentioned a little while ago, plus 15 cents for the PROACT decision that I also just mentioned, plus 7 cents for the Palo Verde incentives, covers the years 2000 and 2001, and the plus 5 cents for the FERC rate case period of '98 to '01 that was resolved earlier in the year, which had a tax effect.

So when you add all of those components up, that's the plus 51 cents of one-time items at SCE. And then at EME the negative items are the 46 cents peaker write off and the 1-cent loss on sale for Gordonsville totaling negative 47 cents. So really these are the major one-time items embedded in that $1.98 to $2.08 from continuing operations. One final note on earnings guidance.

Given the uncertainties around the timing of the generate case decision, and the Edison Mission Energy debt restructuring issues, it's unlikely that we will provide earnings guidance on 2004 until sometime next year. So it's a little later than we usually do it. But really any attempt to do -- -- to provide guidance before that would require so many caveats as to be meaningless.

Let me turn to liquidity. We're going to make some changes in the information we give on these earnings calls going forward, so we'll provide a lot of the same information on this call but in subsequent calls we're going to drop a fair amount of the information on cash balances, projected year-end cash and most of the various credit ratios that we've been giving for Southern California Edison, Edison Capital and EIX parent. Really, these companies are healthy and stable by any credit measure, so we'll rely on just our normal 10-Q and 10-K disclosure for those items. And we look forward to the ratings agencies catching up to the credit situation in these three companies.

However, with regard to EME and MEH we will continue to provide this data since because obviously there's a keen interest in the liquidity and credit information for those companies. So at SCE as we mentioned we're in good shape at 49% equity to total cap on a regulatory basis. At Edison Capital, the cash balance at the end of September was 493 million. That was before the 225 million dividend that was paid in October 16th. Our forecast reflects that dividend now, so the year-end forecast at Edison Capital is for 325 million versus the 518 million year-end forecast that we had before. Again, that's just the effect of the dividend. Post the dividend; Edison Capital's capital structure is extremely strong, about one-third debt, two-thirds equity, which really represents significant under leverage particularly for a finance company. At Edison International, the current cash balance at the parent is a billion three in cash. Our forecast for year-end is a little less than a billion one, which really reflects 205 million payment to clear the Quips deferral that John mentioned earlier.

Let me turn to Edison Mission Energy. We have in the last few calls been providing some information on the two principal merchant facilities. Midwest Gen. and Homer City. So I 'll give you some of the same information in the past on that. Add Midwest Gen. as you remember for 2003 about half of the megawatts are under contract and half are merchant.

The total terawatt hours year to date, for the nine months on the merchant side, not the contract side, is about 10 terawatt hours and the average realized energy price for that merchant volume was $26.79 for the first nine months. At Homer city where the entire plant is merchant, for the first nine months, the generation was 10.7 terawatt hours and the average realized energy price for that merchant volume was $35.46 in the first nine months. A note, although we typically don't want to be too specific here but we do want to give you some general idea of the hedge program that we have for the merchant assets. So looking forward into 2004, we have a little more than a quarter of our merchant volume at Midwest Gen. hedged now. And we have a little less than a half of the merchant volume at Homer City hedged now for 2004. And in both cases, those are hedged at prices that are about five to $6 higher than the current forward, forward prices for 2004.

Let me turn to the cash and liquidity situation at Edison Mission Energy. First, at EME, the cash balance at the end of September, $158 million. And at Midwest Gen. is cash balance at the end of September is 211 million. If you know certainly that Standard & Poors down graded a number of the entities last week, including Edison Mission, mid west holdings. There is a cash recapture account for the credit agreement there and with the down grade and that money is no longer held in a collateral account, in the recapture account it now must be swept to pay down balances in tranche A, B and C of EMMH. We don't have anything outstanding in tranche C. its just tranche A and B that the money was swept to. Tranche A, 911 million, 130 million, a little more than 130 million was applied to that from the cash recapture account so the new balance of tranche A is 780.7 million and tranche B, that's the 808 million that matures December of next year, 115.6 million of that cash recapture amount was swept to that balance.

So the new balance on tranche B is now 692.7 million. And per the credit agreement, there is no more cash sitting in that cash recapture account at this terms of the forecast for year-end cash. We now forecast at Edison Mission Energy a cash balance at the end of the year of 180 million. That's about 25 million less than the last time we provided this forecast. The principal reason for this is that the monetization of tax benefits is lower as a result of higher performance at the various project entities over the course of the year. That's really most of the difference between the two forecast. About 20 million of the 25 million difference. Wrapping up with some of the coverage ratios, at EME, there is interest coverage ratio that is important in terms of dividends that can be paid to Mission Energy Holding Company. At the end of September 30th, 12- month look back, net interest coverage ratio, which is kind of a funds flow from operations type of ratio, was 2.10. This is up a little bit from what it was the previous year, the distribution threshold is 2.2.

In terms of the EME revolvers, which is really just the 212 million that is left, there is a recourse debt to total recourse capital ratio that needs to be maintained under that revolver, it's required to be less than 67.5, the number at the end of September 30 was 61.6%, which again is a little bit better than what the ratio was at the end of the 2002 year. At Midwest Gen. there's a debt service coverage ratio of 1.5. This is really somewhat muted these days, given the credit rating there.

But for the record, the actual coverage ratio that we have there for the 12 months ended September 30th was 2.31. At Homer city the senior ramp coverage ratio the actual ratio 4.53 for the 12 months ended September 30th versus the covenant requirement of 1.7 and at Edison Mission Energy Funding which we refer to as the big four projects, the actual coverage ratio, 2.55, versus the covenant requirement of 1.25. So all of these are well within -- within the requirements. And finally, at Mission Energy Holding Company, the forecasted cash balance for the end of the year is 150 million, which is essentially the same forecast that we had previously. With that, we'll be happy to entertain questions. Maggie.

Wonderful. [operator instructions]

At this time, we do have a question from Kit Konolige from Morgan Stanley. Go ahead please.

Hello guys. Just trying to digest everything here.

Not hard to digest right Kit?

I apologize if this question might seem overly simplistic or something. Ted, can you break out for how much of the utility earnings were ICHP for '03?

Just one second Kit. It's about 35 cents of that 2.45.

35 cents of the 2.45. Okay. And then different area, on Edison Capital, going forward, my sense is, if I recall correctly, you have not given any strong indications of a strategic direction there, is that correct?

Well, we have indicated that, for the time being, we've had to really focus on generating cash, making sure that we could meet all of the debt maturities at Edison Capital, and then since that's a source of cash for meeting debt requirements up art EIX, it's really caused us to be in a standstill mode on new investments at Edison Capital. We are starting to look at new investments at Edison Capital but I think we really have to save most of those comments for when we provide guidance for 2004 earnings.

Can I ask it this way: In the absence of new investments, at Edison Capital, would one expect that reported earnings from Edison Capital would be lower in '04 than they are in '03?

Yes,

Modestly.

Small runoff until we begin making new investments.

Right, right, very good. Okay, thank you.

Okay.

At this time we do have a question from Vladimir Josefchek (ph) from (inaudible) Management. Go ahead please.

Thanks very much. Great quarter, couple of questions, first of all you mentioned that on the Midwest Gen assets, that you were able to achieve, that you were able to hedge approximately 25% of the forward capacity of prices, approximately $5 above the 2004 strip. Let me ask you why only 25%? Is that what you chose to do or is that all the liquidity in the forward market currently allows you to hedge out?

That's what we chose to do at this point.

Right. Right. Do you, you know, do you believe that, you know, Exelon's announcement that they're purchasing Illinois Power from Dynegy, do you believe that changes in any way Exelon's you know willingness to potentially you know, do contract for peak capacity, you know, regarding your fleet in Illinois?

Well, on the merchant piece as we've previously reported, Exelon is one of many counter parties that we deal with. But depends a little bit by the month. But somewhere in the neighborhood of five to 6% of our merchant energy has been sold to Exelon. The rest has gone to a whole host of different counter parties. So I think that would probably be the most we could say about it at this point. In terms of anything else related to their potential acquisition of Illinois Power, we're really not going to have any comments on that.

Right, right.

Maybe there's one additional comment and that is to the extent you're looking at 2004, you know, they don't propose that the merger be completed until the end of 2004, whether they achieve that or not is an unknown.

Understood. And finally, regarding the upcoming maturities at Edison Mission Midwest Holdings, can you comment on how you plan to deal with those maturities in the Collins lease?

We're not prepared to comment on that at this time. Back in queue.

At this time you have Question from David Frank of Zimmer Lucas Partners, go ahead please.

Hello, good morning. Maybe you commented a projection of the cash that there will be at SCE at the end of this year.

That's what I was referring to. We're really not going to provide you know forecast of cash balances at SCE. And I think that was relevant when, you know, when we had different liquidity issues. But really, with the PROACT recovery complete and all the other pieces that John reported on, we really don't feel it's necessary to continue to provide those kinds of cash forecasts. There is more than ample liquidity at Southern California Edison.

I'm sure. You have the number and maybe you've given it to us already at the end of the quarter cash on hand?

It is about 1.7, again before the distribution to EIX.

And the distribution again was above 1.1?

945.

945. So about $750 million? If I strip out?

Okay.

David Frank Okay. And I'm sorry, Ted, do you have what the net income number was for Midwestern in the quarter?

We really don't provide a net income number. We will in the Q provide a pretax and revenue numbers. But I don't have that here in front of me right now.

Okay, thanks a lot.

But that will be in the Q.

At this time we have a question from Michael Goldenberg from Lumens Management go ahead please.

Good morning, gentlemen.

Good morning.

Just wanted to ask you on Edison Capital, you mentioned 325 million of year-end cash, was I correct in hearing that?

325 projected for year-end cash.

And what's the equity shareholders equity at Edison Capital projected for year-end?

I think we've really provided a forecast for where the equity is, but I did (inaudible) you a number that -- it isn't going to change really much. The capital structure is about one-third debt and two-thirds equity.

And just on EIX, on Southern California Edison, what's your expected 2003 expected year end equity layer at Southern California Edison?

I don't have it off the top of my head. Jim do you have that?

We're currently at 49.3% as Ted mentioned before. We'll grow by a small amount each month as the earnings come in. I don't have what the exact number would be.

Okay. Just a couple of other questions. On your Mountain View project that is currently being proposed, assuming -- assuming you will get a green light to do the construction, how long will it be before the project is up and running and is part of the rate base?

This is Jim Scilacci. We are waiting to hear from the Public Utilities Commission for a preliminary decision in November, final decision in December. We go to FERC. If we get the green light from everybody we'll start construction immediately as soon as we get the go-ahead. We would expect the project will be completed and in service before the end of '05, and operational providing energy to our customers end of '05 or beginning of '06.

And just quickly on Midwest Gen. and Homer city, you said you hedged that five or $6 above what the forwards are. Is that due to the timing when you hedged that high gas prices or is it because you have ability to do long term contracts at higher levels than what the forwards indicate?

it's a little bit of all the above. But we have an ongoing hedge program at both of those merchant facilities. I'm not really going to go into a lot of detail here, I think you understand why. But what we're trying to do is give people some general flavor for currently how much is hedged. We are still in the process of looking at hedging on those plants. And we enter the market, when we think it's opportunistic to do so, that has something to do with prices and something to do with interest on the part of counter parties. So it's the usual type of judgments that you make. But the intention is not to have all of the merchant capacity sold into the spot market, but to have a laddered portfolio of hedges and contracts for our merchant capacity. And we're just giving you an update as we have in the past on where we stand in that hedge program at this point in time.

Okay. My final question is just, can you please update us on what your current stance is as to potential of standing financing down to MEHC and the whole ME structure where the management currently is and how you view that division?

Yes, obviously we know there's a lot of intense interest around that but it's really just not appropriate for us at this point in time to talk about that. Those are items that are in-actively under consideration and it's really not appropriate for us to go into any more depth at this point. I'm sorry.

Okay. Thank you very much, gentlemen, congratulations on a great quarter. Good luck.

Thank you.

At this time we have a question from Craig Gilbert from Banc of America. Go ahead please.

I may have missed it but how much is outstanding on the 212 million revolver?

None of it is drawn at this point but we do have letters of credit that have been issued against that facility of about 65 million.

About 65 million. And do you guys expect to get any; you know, project financing or complete any asset sales to improve the liquidity at EME, the holding company? I'm just looking at the sterling CAPEX facility that matures and trying to figure where funds are going to come to take that out.

Again, sorry for the un satisfying answer here. But we're just not going to be able to speculate about those things at this point in time.

Okay. And lastly can you give me a sense of what run rate capital expenditures are at Midwest Gen.?

Very minimal at this point.

It seems like for 2003, they're going to be about 50 million. Is that a fair assumption?

Yes, that's about right for '03.

And can I assume that it will be similar in the years -- in the coming years?

We're really not providing at this point guidance about you know, what those components would be on a forward-looking basis.

Okay, thank you very much.

Thanks.

At this time we have a question from Kevin from Ducane Capital. Go ahead please.

Can you talk about the pricing in the PGN market as well as in the common market?

I'm not sure exactly what you mean Kevin. I mean, you know, it's -- in terms of where we were, say, a year ago, which it's better. It's not as high as it has been at certain points over the course of the year, you know, it's a market, prices move. There seems to be good liquidity really in both markets, we certainly, when we feel it's right to do so, we've been able to access the market, and enter into hedges. Obviously PJM is a bit better-developed market, and that does enter into some of our hedging decisions. But I think both markets are certainly capable of absorbing the type of hedge program that we want to put in place.

Okay. And you had said that pricing for your hedges in Midwest Gen and in Homer City were about $5 higher than the forwards.

Just repeat it one more time since it's kind of getting a little bit changed over the course of the questions here. I said we're a little bit more than a quarter hedged at Midwest Gen in 2004 and a little bit less than half hedged at Homer City in 2004 and that the prices of those hedges are between $5 and $6 higher than where the current calendar '04 strips are for flat energy prices.

And what are those current forward calendar strips?

Well, I don't know exactly what they are today. But that stuff's reported regularly.

Okay. Can you talk about where you see pricing in those markets for the next -

PJM calendar '04 strips are in the 32.5, $33.50 range. And for Midwest Gen the calendar '04 strips are in the kind of $24 to $25 range.

Okay. Can you talk about where you see power prices in those markets over the next couple months?

Ken, I think I've gone as far as I can go on this stuff right now.

Gone as far as you can go, okay. Can you talk about your Okay. Can you talk a little bit about what your plan is for EME addressing the debt maturities at EME specifically the bank debt maturities next year?

No, I think I've said a couple of times here, we really aren't prepared at this point to speculate about how those things are going to get resolved. But we know there's a lot of interest and it's just not appropriate for us to go into it at this point.

Okay, thanks.

Thanks.

Okay.

At this time we have a question from Michael Livsky(ph) from Deutsche Bank Go ahead please.

Brent Buckley. You said it is Brent Buckley actually you mentioned that at Midwest Gen 9-30 you had 211 million of cash. Did that include the recapture fund or was that separate?

Separate. Separate from the cash recapture.

Okay, and is that required for working capital? Is there a reason that it wasn't in the cash recapture fund?

Well, it's just the mechanism of how that cash recapture fund works. There is a definition around excess cash and then each quarter, a calculation is made, and we certify that calculation, and then an amount is deposited into the cash recapture account. So like I said, up to the point of the S&P down grade that cash recapture account had 245, 246 million in it. With the S&P down grade, that cash recapture count really is essentially no longer operable. When the calculation of excess cash is made each quarter, that amount is swept to the tranche A, B and C, if there's anything outstanding in C on a quarterly basis. So cash recaptured was emptied, I gave you those numbers, and there really won't be cash stacking up in a cash recapture account on a going-forward basis.

Is the cash re-capture accounts still in effect, the cash still going to be recaptured there?

No, that's my point. Is it's being from now on it will just be swept to the balances.

Right, directly?

Yes.

And have you given any thought to, you know, sort of changing the structure around Midwest Gen? I know that you said that you can't comment on sort of the restructuring in general. But is the idea that you may, you know, sort of file one or another of the entities, and leave some of the operations intact?

I think my general counsel would string me up if I tried to speculate on filings and things like that. So we really can't speculate on those issues.

Is the reason you can't speculate on it simply because it's currently being negotiated? I mean the maturity is coming up, you know, in four, five weeks. And I know everybody's anxious this year where are you going with it. When can we expect to hear some type of announcement?

We have the nine, whatever the new, I gave the new balance. I don't have the new balance, I don't have it off the top of my head we have trenches A maturing on December 11th and we certainly need to address that by December 11th.

And have you thought at all about how, going forward, you would deal with the Collins facility, the Collins lease, given that the Exelon contract only provides for an amount of cash flow that doesn't actually cover the lease payment?

Yes, again, this kind of falls in that same category as the overall approach to the debt restructuring, and we're really not in a position at this point to comment on that. Do you have any other questions outside of that area of questioning?

Yes, I think Mike does. Hold on one second.

Ted, one question on the S&P report on Midwest Gen there was a line in there that talked with substantive discussions you've had with the bank group regarding refinancing. Can you confirm or deny the report from S&P?

I've really been very clear now about what we're prepared and not prepared to do. I'm just not able at this point to talk about that.

Thank you Ted.

Thanks.

At this time we have a question from Mary Losanto of Private Investor.

Hello, I just have one simple question. I'm currently holding a lot of Edison stock, EIX, and I'm wondering when they're going to be paying common dividends. Can you help me with that?

We're really pleased to have you as part of this call, I must say.

Beg your pardon?

We're very pleased to have you on this call.

Yes.

We take -- we've, in each of these calls for a long time, underscored our commitment to restore a common stock dividend going forward for our shareholders as soon as we reasonably can.

And do you have any idea -

I'll give you a little guidance around it. With the various steps that we've taken, a large number of which were taken just in this immediate past third quarter, we now anticipate going to our board of directors in December, if everything works well, we'd recommend in December a common stock dividend to the board of directors. That would mean if they approve the recommendation, the potential for a payment in early next year of a common stock dividend.

That sounds good. I've been hanging onto it for a long time.

We're glad -

Do you have any idea what it might pay?

We simply can't indicate that at this time. We've looked at it closely. I'd simply say that the things we've said in general are that we're committed to moving to pay a dividend. We think our shareholders like you value that. And we're looking to have a durable, dependable, solid dividend as soon as we're able to restart the dividend and going into the future.

And you feel that will be possibly next year, then?

Very early next year, if everything works out.

Well, thank you very much.

Thank you.

At this time we have a question from Jason Coe from Sandle (ph) Assets.

Can you hear please? I wanted to clarify the interest coverage ratio at EME, you said was at 2.1 which is below 2.2 distribution threshold for dividends up to MEH, is that correct?

Yes. On that one measure, yes.

Okay. With regard to cash balance, at the time of S&P down grade what was the cash balance at Midwest Gen, has it changed materially from September 30th?

Hang on just one second, please. Again, just to make sure that there isn't confusion on this point, at Midwest Gen, up until the S&P down grade, there were in a sense two buckets of cash. One was the cash recapture account, which was really in a sense a collateral account for the lenders. And then there was cash at our regular operating bank accounts, which was really for the use of Midwest Gen assets. With the downgrade, the cash recapture account, which was this 246, that has been fully paid out against tranche A and tranche B balances. The cash that is sitting in our operating accounts, that number is expected to be in the neighborhood of $250 million by the end of the year. And so that is not, itself, subject to the sweep provisions that are laid out in the credit agreement.

Got you. And if I may, what are your current thoughts with regard to some of your international assets, you know, whether or not they, you know, they are part of your core, you know, holdings going forward, or is there potentially a source of cash for your unregulated subsidiary? And also, as a housekeeping item, would you mind sharing what the operating income was at Midwest Gen and First Hydro?

Yes, actually on your question about the operating income and so on, that will be in the 10-Q, we provide revenue numbers, and before tax income numbers for the major projects. So you'll see that when the Q is released. And again, I think in terms of the assets we've got a number of projects around the globe. A lot of work has gone on to make those assets as effective and efficient as we can providing cash to - through distributions to Edison Mission Energy and we're really pleased with those operations.

Okay, thanks.

You're welcome.

At this time we have a question from Adam Deutsche from Barclays Capital. Go ahead please.

Good Morning gentlemen, actually, my question is also regarding First Hydro, you may have answered it with the response to the previous question there. I notice in the preliminary release notice there are low ancillary releases on contract contracts to First Hydro, can you give any more guidance on this stage or do we have to wait for the 10-Q for that?

Don't have any more information for you today but do have pretty complete disclosures and will be updating those things as we previously have.

Okay. Thank you very much.

At this time we have a question from Tom O'Neill from Lehman Brothers. Go ahead please.

Good morning. Couple of questions on the utility. Just what time line do you expect on the JRC with regard to the ALJ on the final decision.

Tom, Jim Scilacci. We are expecting a decision at any time. Typically the way it works, the proposed decision is released in a 30-day period over which the full commission would consider it, and obviously it could go longer if there are alternate decisions. So we would hope to get a decision out in the month of November and possibly voted on in December. But that could easily slip into January.

Okay. Just the prospects of alternates making you think that may get delays?

It could very much so.

The accounting for the Mountain View project I guess under its current contemplated form would you be booking non cash income during the construction period?

You will not see equity AFUDC from the Mountain View project. It is not classically a utility project. There will be QUIP during construction and that will be added to the total basis of the project and recovered through depreciation once it's used and useful.

Okay. And just a final question on dividend levels, just out of the dividends from Southern Cal Ed to the parent, is a typical run rate worth thinking in the future, 90% of the So called going up for the parent and out of capital any sort of guidance you can give on what a typical run rate might be added that's you know, contemplating investment as well?

This is John Bryson. We don't have a formula on those things. We use our best judgment on how best to optimize benefits to our individual companies and customers and shareholders but there's no formula.

Okay, thank you.

All right, Meg, I think we ought to make this, it's the end of the hour perhaps the last question please.

Okay, then our last question will be from Michael Lucas from Apaloosa (ph). Go ahead please.

I was just wondering if you guys could just comment on a little on the prices in the U.K in terms of First Hydro, and you can comment on some of the reports about NV contact, the shells that came across Dow Jones tape, and also the, there is another fellow pine, adjacent to yours, so you just understand what's going on internationally.

Might be a couple of points there but most of that stuff we'll end up covering in the 10-Q when it comes out. You know, I've already indicated we're not going to comment on various other people's speculation around, you know, assets or asset sales or any of that kind of stuff, so we'll drop that one. In terms of the energy pricing, in the U.K., hang on just one second, we may be able to help you there.

Let me have Tom McDaniel our CEO for Edison Mission Energy give you a little color on the energy prices in First Hydro.

I think really what we've seen going into the winter and inward has been a shrinkage, that's one reason why we've had kind of an adverse accounting impact on mark-to-market, about forward contracts. That's good news for First Hydro going forward. We think the events of the summer, very hot Europe, issues and concerns about reliability and availability has been a benefit to First Hydro.

In terms of hedges, how much you are you hedged in First Hydro?

That's really complicated to get into that because of the nature of that facility, you can't look at it in the same terms as you can some of our merchant coal plants. As you have to understand we have to pump power up at night to be able to buy power to pump water overnight, to be able to generate power the next day. So it's a much more complex contracting and hedging program at First Hydro.

Understood, but isn't that merely the delta between peak and off peak prices? I am trying to understand the maintenance volatility, would that affect you greatly in this facility, the difference between peak and off peak prices?

That is a long conversation but I think in general, we're pleased with the way First Hydro has been performing particularly as we're going into winter months.

Okay.

All right. We thank you for your interest and questions. Additional questions, please direct to our Investor Relations team. They'll be well prepared to answer. We underscore at the outset that we will have a 10-Q that will be available to you not later than November 14th, and that will cover the details provided today, and more. Thank you very much.