愛迪生國際 (EIX) 2004 Q3 法說會逐字稿

And at this time, I'd like to introduce your host, John Bryson, Chairman and CEO of Edison International. Thank you, and go ahead, Mr. Bryson.

Good morning, and thank you. Thank you all on the phone for joining in. Let's start with the usual forward-looking statement disclaimer.

During this call, we may make forward-looking statements about Edison International and its subsidiaries. These statements are not guarantees, and the actual outcomes could differ materially from our expectation. We have set forth important factors that could cause different results in Edison International's 2003 Form 10-K report and subsequent 10-Q and 8-K reports. We encourage you to read those reports carefully.

All right. Let me preface our remarks by saying that we expect this earnings call will be shorter than usual, as all of you on the phone, I think, know, we went forth beginning on October 13th, so over the past two to three weeks, with a comprehensive and highly detailed outlook on the Company over the next five years. And with the detail provided at that time, coupled with the fact there have been no changes whatsoever in our outlook since October 13th when we presented that publicly, we don't intend to go into that today.

Let me further preface what I'm going to say about earnings with a little larger context. Earnings for the quarter were solid. The reporting of those earnings is complicated because of an unusual number of onetime items. I think most of you on the phone will know that it is not so much the earnings performance, but the very large events in this quarter that mark the transition in the Company from a period of recovery to a period of what we believe will be substantial growth and high performance in the future. Those two -- that transition -- was marked principally by two big steps in the Company. The first was the Public Utility Commission general rate case, known as the 2003 rate case, which established the foundation sought by the Company for substantially larger investments in our electric system, particularly our electric grid, to ensure future reliability in California in the wires that deliver the power to our customers. And secondly, the announcement of the international asset sale was a very successful sale, yet to be completed. It will provide a large infusion of cash into Mission, putting it in a position to pursue future growth. So big transition, a big quarter for us.

I'll summarize briefly the earnings. They've already been put out publicly, so many of you will have looked at them. For the third quarter, Edison International reported consolidated earnings of $2.49 per share. That compares with earnings of $1.67 per share in the same period last year. That's an increase in reported earnings of 82 cents per share. I indicated those earnings include an unusually large number of onetime items and adjustments. And Ted Craver will spend time in his remarks providing an explanation of those items. We usually try to highlight onetime gains and charges in an effort to help investors get a better understanding of the underlying earnings of the Company. As you know, we refer to these adjusted reported earnings as core earnings.

For the third quarter, core earnings were $1.01 per share 2004, down 13 cents per share in these core earnings from the third quarter in 2003. That reduction in core earnings was driven by lower earnings in the Americas region at Edison Mission Energy in the quarter, and that down performance overcame the positive variances in core earnings in Edison Mission Energy's international operations and at Southern California Edison. For the nine months ending September, reported earnings were $1.65 per share 2004 versus $1.92 last year. After several adjustments, the core earnings for the first nine months of 2004 were $1.55 per share, again, down 13 cents per share from the same period last year. The major reasons for the decline in core earnings were, again, lower earnings in the Americas region and EME, and also the discontinuation this year, that is, for 2004 relative to 2003 of the incentive pricing mechanism that previously applied to Southern California Edison San Onofre nuclear power plant operations. Those two items more than offset the increased earnings from international operations over the nine months at Edison Mission Energy. As I mentioned before, we still expect core earnings per share for the full year 2004 to be in the range of $1.69, $1.79, so no change in outlook to announce with respect to that. So -- and I would say these third-quarter results simply remain consistent with that outlook.

Alright. Now, we pushed forward on the growth. We have lots of work ahead. No doubt there will be challenges in meeting the goals we set out. We are highly energized about the outlook for that Company. And I think many of you have sensed that in our recent presentations of the last few weeks. And with that, let me turn the presentation over to Ted Craver to provide additional material on third-quarter earnings before we turn to your questions.

Thank you, John. Let me just cover a couple of housekeeping items with you here first. We have on our website now a written transcript of the October 13th investor conference that we held in New York. And actually, by the end of the day, we'll have the audio version of that conference up on the Web as well. We put on the Web earlier this morning some supplementary materials that should help in explaining how you reconcile between reported earnings, core earnings, and the various items of continuing and discontinued operations, both for EIX and Mission Energy Holding Co. for the quarter as well as for the year-to-date. So there are four schedules that help you reconcile the back and forth there. And then finally, we do expect all the various 10-Qs to be filed by Monday, which will give you quite a bit more additional information than what we'll be covering here today.

Let me move into discussion of the third-quarter earnings, then I'll go to the year-to-date. And again, I'm going to focus mostly on going from recorded earnings -- reported earnings -- to our so-called core earnings. As John mentioned, for the quarter, we had recorded earnings of $2.49. When we eliminate about $1.48 (ph) in onetime items, a combination of charges and gains, we end up with $1.01 for the quarter in core earnings, which is 13 cents less than the $1.14 in core earnings we had in the third quarter last year.

Let me kind of go through each of the companies. Southern California Edison reported earnings for the third quarter 2004 were 79 cents. There are 15 cents worth of positive onetime items; about 20 cents of that relates to two additional items for the general rate case, kind of mop-up items associated with that. So that's a positive 20. And then, we have a charge related to the adjustment on the PBR (ph) safety awards of negative 5 cents. So putting those together, the 15 cents of onetime items that we pull out of reported earnings to get to the core earnings of 64 cents. That 64 cents for the quarter relates to 62 cents for the quarter last year for an increase of about 2 cents on a core earnings basis. Various puts and takes in there. But the principal positives are higher authorized revenues associated with the general rate case for this year, as well as a slightly higher ROE for the SONGS asset. And those two positives of 21 cents more than offset the absence of the incentive pricing mechanism for SONGS, of 14 cents, and the higher operating expenses of 5 cents on a year-over-year basis.

In terms of Mission Energy Holding Co., the reported earnings for the quarter were $1.71. But there are $1.33 in onetime positives that we pull out to get to 38 cents for core earnings. Those onetime positives -- that's the gain on sale for the Contact Energy transaction that closed in the quarter. Also, a fairly complicated application of GAAP here. We put our remaining international asset sales -- the ones to International Power Mitsui in the held for sale category. And related to effectively triggered by the contact closing, we ended up with a large difference in the tax basis of the BV stock versus the book basis. And that, under GAAP accounting, has to be recorded, even though those sales have not yet closed. So there's $1 deferred tax gain that is recorded in the third quarter, which we pull out as a onetime item.

Finally, the peakers, which we talked to you about a few weeks ago in New York, we are decommissioning a number of peakers. And so the final asset impairment associated with that being 6 cents. So the combination of the plus 39, the plus $1 and the minus 6 cents is the $1.33 in onetime items that we exclude from the reported earnings to get to the 38 cents core earnings. That 38 cents compares with 54 cents last year. And the principal reasons for the decline of 16 cents on a core earnings quarter over quarter basis -- 9 cents is due to lower capacity payments under the Exelon contracts at Midwest Gen. 6 cents is due principally to lower volumes at Homer City. 3 cents is due to the absence of earnings from the Four Star oil and gas properties because they were sold at the beginning of this year; so they are in the earnings last year but not in the earnings this year. And so the total of the 18 cents negative there. And then there's about 3 cents higher earnings from the international operations, and a few other odds and ends. But this gets you to the -- explaining the 16 cents variance.

Edison Capital, really, the reported earnings of 4 cents, no onetime items. And on a quarter-over-quarter basis, flat earnings. Finally, at EIX, negative 5 cents reported -- no onetime items in the quarter. And we have negative 5 cents core versus negative 6 cents core last year. And really the improvements or the reduction in the loss is due to lower interest expense.

Let me now move to the year-to-date. A lot of these explanations will be the same, so I won't spend as much time on it. But for the Company as a total, $1.65 for year-to-date 2004. We end up pulling out about 10 cents worth of onetime items in net to get us to $1.55, which is 13 cents lower than the $1.68 core earnings last year. Going through the companies, Southern California Edison, they're 48 cents worth of positive onetime items; 58 cents of those relates really to a GRC decision. And then there's various odds and ends of negative 10 cents that make the net onetime items a positive 48 cents. So subtracting the 48 cents from the $1.84 recorded gives us the $1.36 of core earnings for Southern California Edison, which is 6 cents lower than core earnings last year. A lot of the same types of explanations account for that 6 cents decline. No SONGS incentive pricing mechanism in '04, higher O&M expenses, those add up to around 30 cents of negatives. And then on the positive side, we have higher revenues from the general rate case and 3 cents higher for the SONGS higher return on equity, positive 23 cents. So when we put all these things together, it's about 6 cents. Explains virtually all of the 6 cents.

Mission Energy Holding Co. -- the reported earnings for year-to-date, minus 13 cents. We have 38 cents in net worth of negative onetime items. When we take the minus 13 cents and then take out the 38 cents worth of onetime items, we get positive 25 cents core earnings compared with 32 cents core earnings last year. Just to go through the onetime items, $1.86 worth of negative asset impairment charges related to Collins and the peakers being written off. And then we have $1.48 worth of gains so far related to asset sales -- $1. plus 39 cents for the international asset sales and 9 cents for the Four Star. The 7 cents difference -- 25 core versus 32 core last year -- is principally explained by 15 cents lower at Homer City due to lower volumes and higher fuel costs; 10 cents decline on a year-over basis due to know Four Star earnings in 2004 due to the sale. And those are offset partially by about 20 cents higher in international earnings on a year-over-year basis, with most of those improvements occurring at Contact Energy, First Hydro, Loy Yang B and ISAB.

At Edison Capital, both reported and core are the same at 11 cents versus 13 cents and the year-to-date last year. The 2 cent decline being entirely due to portfolio runoff since we haven't been making any investments at Edison Capital for the last few years.

And at Edison International, reported and core earnings loss of 17 cents, which is 2 cents less of a loss or an improvement over the same period last year, mostly due to lower net interest expense.

I'd like to refer to one of the supplementary schedules that we have on the Web. It's actually, I think it's the fourth in the series there, Mission Energy Holding Co. consolidated, the earnings per share for September year-to-date 2004. All I really want to try to do is highlight a couple of key reasons why the way the Company explains core earnings is different than the continuing versus discontinued operations. That's in the GAAP presentation. For year-to-date, we have 25 cents of core earnings, which is principally made up of both the domestic operations and the international operations. So we do include the international operations in the year-to-date September 2004. The onetime items are listed below that, which we've gone through here. Principally, those relates to gains on sale for the international assets, Contact, and Four Star, and then the peaker write-offs. So that's the way we've been describing it to you.

In terms of the GAAP presentation, the continuing operations does not relate to, or is not the same as the core earnings, because they include, in continuing operations under the GAAP presentation, the Collins and peaker write-offs, and they do not include the international operations contact and the other international assets. And on the other side, they also include the Four Star gain and exclude the BV loan interest expense. So those are the principal differences. I think the schedule will help you understand the specifics within that.

One final thing that we said we would do when we made our presentation in New York is that we would update you when we did these earnings calls regarding Mission Energy Holding Company's hedge position and what remains unhedged. And essentially, what I'm going to do is give you the same numbers that were on Page 12 of the Craver presentation during the analyst meeting in New York. The hedged portion of Midwest Gen has now moved up. And these numbers I'm going to give you are as of November 3rd, so comparing those against the September 30 numbers that we had given you for analyst presentation. So the hedged portion at Midwest Gen has moved up from 4.7 terawatt hours to 7.9. And the weighted average price of those hedges, expressed as a flat energy price, so that we can compare it against forwards, is 34.94. So 7.9 hedged at Midwest Gen, average, flat price equivalent of 34.94. Homer City, we've moved up from 6.3 terawatt hours to 8.5 terawatt hours hedged. And that flat price equivalent price is now 45.01 for those hedges versus the 44.26 (ph). We still expect the same total production from Midwest Gen and Homer City. So when we take these new numbers, it says that we're 16.4 terawatt hours hedged of the expected 48 terawatt hours of production or 34 percent hedged.

The final piece to update you on, we have our so-called rules of thumb, the after-tax earnings impacts relating to $1 change per megawatt hour in prices at Midwest Gen and Homer City. Those numbers are now 15.9 million after-tax impact at Midwest Gen for every $1 change in price. And at Homer City, the updated number is 3 million after-tax impact for every $1 megawatt hour change in price.

So those are all the items we wanted to cover with you this morning. John, I think we're probably ready to take the questions.

Alright. We'd just like your questions.

(Operator Instructions). Your first question comes from Michael Goldenberg (ph) with Luminous Management. Go ahead, please.

Good morning guys. I wanted to ask a question on deferred tax assets. So does that mean that the book -- the tax basis value was higher than what you're selling it for and there will be a deferred tax -- or a tax benefit recognized with the sale of international assets?

Yes. I'm going to turn it over to Mark Clark (ph), our Controller at Mission Energy Holding Co. But I just want to introduce one kind of thing. This is in a sense part of the gain that will ultimately be recognized. There will be another chunk that comes in when the assets are actually closed. It's just the way the accounting works. But we'd have to recognize this tax basis of the stock versus the book basis of the stock at this point in time. The rest of the gain will come through when we close it.

But when you spoke about 2.1 billion of proceeds, roughly, does that include any tax effects? Or should we tack on the tax benefit on top of this sale number?

The numbers have been provided in the past, had included the tax benefit. The gain that we had put forth in our second-quarter report was 550 million related to the sale of all of our international, including Contact Energy. During the third quarter, we closed Contact Energy. During the fourth quarter, we anticipate closing the sale of the remaining international assets. And that gain would be slightly higher. I think the three components to focus on -- one is, including the cost of the auction, $126 million gain on the sale of Contact. This deferred tax benefit, which I'll spend another minute on, of 327. And we expect that upon completion of the sale of the remaining international assets, the gain to be 120. So the total of that is 573 million, which is the comparable to the 550 that we had included in our second quarter. That increase is just largely due to the final gain on Contact was slightly higher.

Under the accounting roles, because when we sell the BV, we expect that the tax basis is higher than the book basis. There's a timing difference in that we recorded that in the third quarter. And in the fourth quarter, then the gain would be lower than what we would otherwise had estimated. In total, it comes to the same, but the accounting rules require recognition of that in the third quarter, because we would project to pay less tax, because the tax basis of the stock of the BV is greater than the book, which would mean that our tax liability would be less during the fourth quarter. And we recognize that in the third quarter. The total comes to the same, but the timing between third and fourth quarter changed.

Just from a cash perspective, is there a gain on sale or a loss on sale from the cash benefit?

On a cash basis, there will be a cash tax on both the sale of Contact and a cash tax on the sale of the BV. But in total, those were included in the net proceeds that (multiple speakers) provided guidance.

Okay, excellent. And on the other --

Michael, let me just do two other things here to clarify in terms of other things we've said in the past. We said about 550 was the original estimate of gain. As Mark said here, we ended up with more primarily due to the Contact sale. I mentioned in New York that one of the reasons that we were going to end up with a larger gain was because of the foreign exchange -- the way we hedged the foreign exchange on the Contact sale.

We actually bought an option which limited the downside and left the ability to enjoy the upside, which, in fact, is what occurred. So there's a higher gain principally than that 550 because of the way we hedged the foreign exchange. So we were able to take advantage of that. I also mentioned in New York that that additional gain was roughly equivalent to the additional book write-off that we expected with the peaker impairment that we discussed, so that on a net-net basis, we still expect all of the gains associated with sales and the charges associated with decommissioning of the Collins and the other peakers, were all basically expected to about net out to zero.

Got you. I appreciate it. Just one more question on SC. As you know, one of your neighbors is going through this LJ thing. And apparently, it seems that there may be -- they just may be the first ones. Is there any idea on timing of this gas LJ thing that (indiscernible) looking at, you know, gas management from 2000 and 2001 -- do you feel like LJ will the effect PG&E and yourselves?

I think we're all shaking our heads a little bit as to what you're -- is this something (multiple speakers) borders?

This is Al Fohrer. The exact timing of that is there's no definitive time line for it. So it could come out soon. But we don't have any special insight into the exact timing.

But there is a possibility that you may be reviewed next.

No.

No, we have no gas operations, so we're not part of that.

Okay, got you. Thank you very much.

Strictly electric, Michael.

I know, but --

Your next question is from Kevin Milan (ph) with Citigroup. Go ahead, please.

Two quick questions. First, can you give an EBITDA level at Midwest Gen this quarter? And second, any update on the deployment of cash at Midwest -- I'm sorry at Mission Energy.

I'll pick up the second one in a second here. Mark, in our Q? (multiple speakers). We don't have any of the EBITDA information that we regularly disclose. This came up a few times during the various meetings over the last few weeks. We are looking at whether we would actually start to present something along that line, whether starting historically or moving to a forward look. But at this point, we're not providing any of that information.

In terms of the second question, no update from what we gave over the last few weeks. That is, we've taken the cash from the sale of Contact and applied 600 million of that to paying down the 800 million bridge loan. The rest of the cash is sitting on the balance sheet. And, of course, we haven't closed on the larger sale at this point in time. And so we don't have that cash to work with yet.

Our next question is from Jeff Caviello with Duquesne Capital. Go ahead.

I just wanted to see if you could update us on the process and the timing of the international sales, closing of the sales?

Yes, we're still in the process. We're obviously getting a little bit closer to that time period. The main condition precedent is the shareholder vote by International Power. That should be taking place here over the November -- the notification period -- over November and into perhaps into early December. So we still expect to be on track to close that transaction before the end of the year.

Okay. I mean is there any way you can give specific guidance on the different assets (ph) and the approval processes?

Not really. It's just all part of the closing process. I think people know we have to get a number of partner consents, and certain other cases, lender consents. Some cases, partners have rights of first refusal or functional equivalents in the areas where we have partners. We've gotten a number of those things done. We still have a few outstanding that we're working on. But I don't really want to be any more specific about it at this point.

Got it. Thank you very much.

Our next question is from Ali Agha with Wells Fargo Securities. Go ahead, please.

Thank you. I just, a couple of quick ones. Can you remind me, what was causing the volume reduction at Homer City?

Let me have John Finneran, the VP for Finance in the Americas respond.

We had a temporary supply interruption due to what's referred to legally as a force majeure geological event at one of the mines locally. In the fourth quarter, our supply has now gotten back to contracted levels and inventory balances have built up to the level that we feel comfortable. The reason why we pulled back, and it was only in the low margin off-peak hours that we had pulled back, was to make sure that we weren't out buying very expensive spot coal. So it was a decision, an economic decision, to not chase high coal prices for low margin electricity sales. But things seem to have now gotten back on track.

Okay. So you should not expect that interruption going forward?

No, we're not. We're not.

Okay. Separately, the new CPUC guidelines about moving the result requirements up to '06 versus '08, did that in any way change your need to procure more power? And if so, by how much?

This is Al Fohrer. We don't give the exact short position that we would have, but it would accelerate the time that we would have to have additional reserves getting up to that level.

And (indiscernible), is that going to come from purchase power?

It would come from purchase power. We have an RFO in the market right now. But we don't anticipate any major issues. It will be going out soon.

Just for somewhat of a clarification, typically, the utility is energy long and capacity short. So solicitation really is for capacity. And part of that capacity is going to be covered by the Mountain View facility. As you know, it's a over 1000 megawatt facility currently being constructed and should be ready for operation by the end of '05 or the beginning of '06.

Right. So I guess what I was getting at is over and above the Mountain View capacity, you should leave some more to meet that requirement.

That's correct.

And one last question. On even an LTM basis or the year-to-date basis, when you look at the ROE at the utility right now, are you pretty much earning at authorized return? Or are you above it or below it? Where are you right now?

That's a good question. Because there's a lot of ways you could look at the return. On a financial basis, we have traditionally come in above the -- the financial return has been above the authorized return. And the authorized return is set by the Public Utilities Commission, 11.6 (ph). When you get through all the rate making associated with it, we've been typically earning slightly below the authorized return. So it's still early in the year. I mean well it's getting later in the year. We should probably come in near or slightly below the authorized return.

Our next question comes from Kit Konolige with Morgan Stanley. Go ahead, please.

A question for you. I might have missed or misheard or something like this. But Ted, when you are going through core earnings in the supplemental material, third quarter, MEHC, 38 cents, and year-to-date MEHC 25 cents. Did I hear you say that that does include the international earnings?

Yes. Let me just go through it one more time. The year-to-date 2004 reported earnings at Mission Energy Holding Co., negative 13 cents. The core earnings year-to-date are positive 25 cents. The difference between the reported negative 13 and the positive core is when we eliminate negative 38 cents worth of onetime items.

The onetime items all, whether we're talking about quarter or the year-to-date or when we finally get to the end of the full year, really has two basic components -- gains on sales from the international assets and Four Star and asset impairment charges related to decommissioning Collins and the peakers. So that's what's being stripped out.

I think the core of your question is what's in the positive 25 cents year-to-date. And that does include domestic operations and international operations.

Can you break that down at all?

Well, I gave a variance. Well, some of this gets down to how do you end up allocating overheads and other stuff; that gets a little complicated. But on a year-over-year basis, the 25 cents year-to-date core for 2004 is down 7 cents versus the 32 cents core last year. And the principal reasons for that decline are Homer City is lower, and we don't have earnings from Four Star because it's been sold. And that's not quite offset by higher international earnings, principally at Contact Loy Yang B, First Hydro and ISAB.

Now, let me -- having said that, when I look back at your presentation, in the big presentation from the October 13th, you have Mission Energy Holding Co. '04 and '05 assumptions. In '04 core EPS there, you have 3 to 13 cents. And it was my understanding when I was looking at that core EPS that I was looking at domestic.

No, it's always included the international as well. So when you're looking at '04, we have both domestic and international operating activities in there. When you look '05, of course, you don't have the international because it will have been sold. So '05 is increasing over '04, even without the international assets. And what we said in the presentation is that the increase in income from power prices, as well as the reduction in G&A expense and interest expense, more than offsets the loss of income from the international operations.

Okay, so then I would have to conclude then finally that your core earnings at MEHC would go from 25 to 3 to 13 cents in the fourth quarter, meaning --

Right.

-- that you lose --

Yes, that fourth quarter is usually one of our weaker quarters.

Okay.

But we're highly seasonal. We I didn't say it this time. But we usually do say, it's really the summer months where we make our money. But the other quarters are flat to, in some cases, down. We're still expecting the 3 to 13 for core earnings for the full-year 2004, which includes both international and domestic operations.

Right. And then, just on Homer City, the lower output, higher coal costs -- what's your indication of what coal costs and output are going to be in '05 versus '04?

Actually, probably, the best way to do that would be to refer back to the presentation we made in New York. That famous i-chart (ph) thing would give you --

Right. That's on the same chart, actually.

Page 13.

So you have it -- oh okay.

Yes, Page 13 of the presentation I made in New York.

Okay, and that's all still good. The '04 numbers are still good for Homer City?

Should be. Yes. Yes, they are.

13.2 terawatt hours be in the --

Yes.

So at that time, you had been aware of the --

Yes.

Okay.

Actually, the thing -- John gave us the more technical words, but I think I called it a cave-in in New York in how I described it.

Fair enough. Okay. Thank you.

Our next question is from Mark Monises (ph) of Smith Barney. Go ahead, please.

Just a quick couple of questions. I want to just follow up on a few assumptions from your October meeting. You guys are projecting to earn 2.5 percent on your cash balance at MEHC from the residual proceeds?

The cash that's not used from the various things we talked about, like taking out callable debt and so on and so forth, is assumed to stay on the balance sheet, earning the LIBOR forward curve. So for 2005, that's about 2.5 percent.

Okay. And just one more question. I wanted to just get a sense of your collateral needs, given the new hedge position. How much collateral do you expect to post with these new hedge positions for '05?

We can tell you roughly what we have out in collateral now. But the numbers that I gave you before -- the 50 percent hedged for a full year is somewhere between that 250 and 400. I think I actually said 450 in New York. I've since been recalibrated on that. It's more like 400. But anyway, we're somewhere between 250 and 400 million, depending on whether you use the 95 percent confidence interval for volatility or whether you use 99.5.

Which one have you guys traditionally used?

99.5. That's our policy position with our risk management committee. But let me give you -- have either Kevin or John give you an update on the cash balance right now.

For the hedge to hedging collateral? Yes, at September 30, about 93 million was out. And on just recently on November 3rd, that amount had increased to 143 million of collateral for Homer City and Midwest Gen positions. With the price increases that have taken place.

Did you catch that?

Yes, I did. Thanks.

Our next question is from Ryan Watson of Stanfield Capital. Go ahead, please.

Just on the hedging collateral, you had spoken about, at your analyst meeting about, some of the cash on your balance sheet would have to go towards that purpose hedging collateral. But I mean, what are the purposes of the revolver that you have at Midwest Gen and the revolver you have at EME? I mean could those be used to satisfy that specific purpose, and then you could use your cash for other -- I don't know, maybe paying back debt or something?

Maybe huh?

Tongue and cheek!

Let's give you the facts. We have 200 million revolver at Midwest Gen. We have 100 million revolver at Edison Mission Energy. The one down at Midwest Gen is for working capital purposes, which include providing collateral. The one up at EME is for working capital purposes, including providing collateral for Homer City. So there are 300 million in revolvers sitting out there. But, of course, that's not entirely for the use of providing collateral. It's also for other working capital needs.

But we do, as part of our risk management activities, take a forward look against that policy position that we just talked about -- the 99.5 percent confidence interval. What hedges we have out, what hedges we expect to put on, what we think could be the collateral call. And then we look at the lines that we have and how much of those we're going to reserve, if you will, for collateral purposes versus other working capital purposes. And then we'd have to make up the difference in cash.

Okay. So those could be used (multiple speakers) you're saying?

Yes, but not entirely because they have other purposes too.

Yes, yes. International Power, on their call -- and I logged off for a second here, so excuse me if you mentioned this. Could we talk about CBK and Tri Energy in their press release, and talking about how if they don't get specific consent, there could be an adjustment in the purchase price of 300 million. I don't know if you mentioned this or not. But this is public data I'm just looking at here, publicly what they said. Have you heard anything about this? I mean is there any truth to that? Or do you care to comment on that 300 million that they've put out there?

I think they said something more in an estimate kind of format. And they included other possible things. But yes, we're virtually in daily contact with International Power and Mitsui as we run through the closing process.

But the purchase price could be adjusted downward by 300 million then?

Yes, it could be adjusted. I think for their offering circular purposes, they have to give some indication of what could potentially fall out and what that impact would be. And the issue -- that's an issue for them in terms of how that would work. For us, it would be more a matter of, are those things -- and we're speaking a little hypothetically here -- but if those things were to fall out of the transaction, why are they falling out? And if they are falling out because of the exercise of a right of first refusal by a partner, well then it's just a matter of where the cash comes from, from our perspective.

Okay. But I'm just thinking you're working hard to make sure you get that full purchase price rather than a possible reduction, I would think.

That's a very good assumption.

Okay. I just want to be comforted by that. All right. Thank you.

Our next question is from Tim Shaw (ph) with Pemco. Go ahead, please.

I have a few questions regarding your power book on the EME side. First of all, PG&E also has some RFOs outstanding. Are you participating in those? And if so, when do you expect some sort of resolution on that?

We have looked at the PG&E RFO. And just as a matter of general policy for the Company, we went to help California meet its considerable capacity needs in the near-term, and we have the skill base and we have some assets that might be able to contribute. Whether or not they will be able to contribute in this initial PG&E RFO is less clear. We've analyzed the terms of that RFO and had some questions about whether our assets will best meet their needs.

Okay. Just kind of a similar question -- different part of the country. It looks like Illinois is going to move to some sort of a power market type situation for post January '07. When do you expect resolution of what that market is going to look like? Is that going to be in the next few months? Or is that going to be a more protracted negotiating process?

Well, I can start by describing the process that we see going forward, and maybe others here can supplement. I think the way you put it, there now, I think, is something fairly described as a consensus among all the stakeholders working with the Illinois Commerce Commission that there will be an auction that our generators will bid into that auction to the extent they choose to. That's how Commonwealth Edison will source it's needs for power post into 2006, certainly, our plan to evaluate and then to bid portions of our considerable generating fleet in the Illinois area into that auction. They are very important details. You have to be set beyond the general hedgement (ph) that there should be an auction. And the Illinois Commerce Commission and the stakeholders are meeting around those details now. Questions, for example about what credit requirements generators might have. Whole series of things that you'd normally expect to get in one of these auctions is utilities look at how best to serve the loads of their customers. So the schedule anticipates trying to get those resolved over the next several months, and holding an auction sometime in the second half of year 2005, so that when the start date January 1, 2006 hits, there's a readiness to go.

That's great.

Did I say that right? Did I give the dates right? 2005 and 2006?

Sorry, so just to clarify -- you're expecting the auction in the second half of '05 or '06?

No, I'm sorry, the second half of '06.

Okay.

And start date January 1, 2007.

And then going back to this Page 12 that you all provided as part of Ted's presentation in New York, you have already provided an update on how many terawatt hours and at what price the hedge position is. But because of what's going on in Illinois, do you see an update that you might want to provide in the unhedged portion and how we should be thinking about that for starting in '06?

For '06, that's really the stuff that we have on this next page.

Right. Okay. I'm sorry. Do you have an update on the prices and what you're seeing out there, as this potential market develops?

Yes, you're getting a reference it back to that Page 12. At Midwest Gen, the unhedged portion now would be 26.1 terawatt hours. The energy price -- this is the around the clock flat energy price at Midwest Gen -- we gave on September 30th is $32.82. The November 30 calendar -- November 3rd -- price for the calendar '05 strip is 36.63, or an increase of $3.81. And at Homer City, the unhedged portion is now 5.5 terawatt hours. And the flat energy price has moved up from 46.19 at September 30 to 49.41 as of November 3rd, an increase of $3.22.

There are not further questions waiting at this time.

All right. We thank you all for your interest and we'll close the call.