愛迪生國際 (EIX) 2005 Q4 法說會逐字稿

Welcome to the Edison International's conference call. This call will be available for replay at the following numbers. 877-693-4277, also at 402-220-0042. You will need to use the PIN code 10601 to access today's call. [OPERATOR INSTRUCTIONS] At this time, I would like to introduce your host. John Bryson, Chairman and CEO of Edison International. Thank you, and go ahead, John Bryson.

Good morning to all of you on the phone. Thank you for joining us. We will go through the 2005 financial results in detail. After that we would welcome your questions. Let's start with asking Barbara Matthews to provide the forward-looking statement.

During this call we will make forward-looking statements about the financial out look for Edison International and it's subsidiaries, and about other future events Additional forward-looking information may be available on our website 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 have set forth important factors that could cause different results in Edison International's 2005 form K -- 10-K report to be filed today. We encourage you to read this report carefully.

Thank you, Barbara, and I'm going to assume that all of you on the phone have the press release. Most of you will have looked at it. I'm going to start just with a few overview comments. Tom McDaniel, our Chief Financial Officer, will take you through details in the earnings statement and other detail that we will provide. First, what you will have seen, and those of you who have followed us closely will recognize, that 2005 was a very good year for our company. It was a year in which performance at each of our businesses was strong. The net effect of all of that, including a strong fourth quarter's contribution, was that, over the full year, we have reported this morning earnings that are record earnings for the company, the highest in the company's history.

The earnings are in excess of $1.1 billion on a consolidated reported basis, that works out to $3.41 per share. Again, on a -- pardon I'm sorry $3.47 per share. The -- those earnings represent an increase over the last year's reported earnings of 23%. On a quarter earnings basis, as you will have seen in the notes that the -- the earnings increase was substantially greater than that. The key in all this was each business executing well their strategic plan we put before all of you in the fall of 2004. October 2004.

We were highly focused on what we need to accomplish. We accomplished it. The special earnings contribution relative to last year came from our unregulated businesses. Utility performed well on earnings, but the big, big step up came on the unregulated side. Tom will set that out.

Overall, if you took two things in our execution of the strategic plan that marked 2005, they would be the operation of our unregulated businesses, particularly in the merchant power plants that we have in the Midwest and in Pennsylvania, where we were able to achieve strong margins by capturing the opportunities available in relatively high wholesale energy markets without incurring the extra cost of what has cut into those earnings, so we maintain the margins, operate the plants well, and captured the considerably increased earnings.

And then on the utilities side in the execution of the strategic plan, the big, big step was this large capital investment that lies at the heart of the strategic plan to strengthen and modernize our distribution system and to grow the transmission base and build the permitting and foundation for continuing to build the transmission base that will serve our utility customers extremely well in Southern California.

And again, those of you that have followed us will know that when we announced the strategic plan in October 2004, we identified a targeted level of capital investment in our utility wires, the distribution and the transmission, that represented approximately a doubling over five years of what, prior to 2004, the rate of capital investment in the system had been. So this was a hugely ambitious project, and we're pleased to be able to announce that in 2005, our team of people, broadly across the company, making that investment possible, stepping up at that increased rate of investment, focusing and prioritizing what needed to be done, met all of its goal with respect to distribution and transmission investment. So that is a big thing for us.

It gives us growing confidence that we can continue to do that in the future, and it should serve our customers very well and our company very well. With those comments on the high points of 2005, I might mention a couple of other things that all of you will want to be watching on the phone, one key one is the foundation that we laid during 2005 for a general rate case decision at the California Public Utilities Commission. That was a comprehensive effort. Across our utility company, we believe we presented a very strong case for continued significant investment to keep strengthening our utility wires network and operating the utility at a high level. We do need that. We'll need a positive outcome from the California Public Utilities Commission. A decision is expected in the next month or so on that.

Couple of additional developments we completed at the end of the year, in fact, on December 31st. We reached a landmark in the construction of our Mountainview Power Project. That's as a power project, natural gas fired, combined cycle, in the heart of the rapidly growing area to the east of Los Angeles County that will serve our fastest growing portion of the utility service territory. Getting that done, on budget ahead of schedule was a big accomplishment for our company and will help serve our customers this next summer and beyond. So that was quite a big step for us.

We had also secured from the California Public Utilities Commission a decision that will allow us to make a major capital investment at our San Onofre nuclear plant that will be required to replace the steam generators at that plant. So that decision is reached. We have found it a satisfactory decision to proceed forward. We will proceed forward on that major project, and again, that allows us to serve customers by maintaining that critical facility that diversifies our energy base and strengthens the operation of the power grid, so a major, major step for us.

On the non-utility side we developed and invested in a growing pipeline of projects that we think will strengthen our renewable energy generation business into the future. So that was a big step. We also at the non-utility business in our EMMT, our trading group in Boston, had a very good year and developed, we think, growing confidence in our capability in the trading area to find opportunities, from time to time, in these markets that can strengthen our business. We do that in a very, very disciplined, significantly risk-controlled way, and you wouldn't expect to see from us in the future consistently higher earnings necessarily. We won't aspire to that so much as we'll aspire to maintaining the kind of risk disciplines we have in finding the opportunities that are available when they present themselves.

One thing you'll be interested to see, I think if you have looked at it closely, is that in the past year, 2005, approximately 60% of our earnings were from the regulated business, approximately 40% from the unregulated business. That's kind of nice balance in -- in our thinking about the future, and those percentages will vary some, but we -- to have the contribution from all of our business is certainly at the heart of what we were trying to do for the future. With that I'll stop my comments and ask Tom McDaniel to take you in detail through the materials that you have on our earnings.

Okay. Thank you, John. Today my remarks will cover our 2005 earnings performance compared to last year, as well as an update on operations and hedging programs at our Midwest generation in Homer City plants. First, just to take care of a few housekeeping items, to help you follow my discussion of our performance, we have included three supplemental charts to our press release. Chart 1 really covers our fourth quarter earnings performance. Chart 2 covers full-year 2005 core and non-core earnings, compared to 2004, and chart 3 includes the key operating and hedge information that I talked about earlier. Also, our 10-K, which will be filed later today, will give you much more detail on our performance through the past year.

As shown on chart 1, fourth quarter earnings were $0.71 per share in 2005, compared to $0.35 per share for the prior year, a $0.36-per-share increase, primarily driving -- driven by the strong performance at MEHC in the fourth quarter. Reported earnings for the quarter were $0.83 per share compared to $1.16 the prior year or down $0.33, primarily because 2004 results included favorable regulatory and tax adjustments at SCE, and a gain from the sale of MEHC's international assets. You may recall again that 2004 results were impacted pretty significantly because of the general rate case -- 2003 general rate case decision that was received in that year. You'll find additional details on fourth quarter performance in the earnings release.

Moving to chart 2, I'll cover full-year core earnings, and then non-core items. We reported consolidated EIX core earnings of $3.13 per share, more than double the $1.50 per share reported in 2004. SCE's contribution to this increase of $1.82 were $0.02 higher than 2004, due to a $0.03 improvement in operating results, including tax benefits, and a $0.02 benefit from lower financing cost, partially offset by the decrease in the CPUC-authorized rate of return, which was $0.03. As John mentioned, we had -- our return was reduced from 11.6% in 2004 to 11.4% in 2005, and then subsequently increased for 2006 to 11.6%. MEHC core earnings were $1.13 per share during 2005, compared to a loss of $0.27 per share in 2004. This $1.40 increase in core earnings is due to a number of factors, including predominately higher wholesale energy margins at Midwest Generation. That's $0.81 of this increase. This increase was driven by increased wholesale power prices and contracted coal supplies for our stations there, which were largely -- which largely insulated Midwest Gen from rising market prices for Powder River Basin coal.

We had higher trading income at EMMT, which contributed $0.30 per share, reduced levels of long term debt and higher cash balances resulted in lower net interest expense, $0.20 per share, and a number of smaller item, which amounted to $0.09 per share.

At Homer City our earnings were down $0.01 per share, as higher revenue was more than offset by higher fuel, emissions, and scheduled maintenance costs. I would also like to point that included in MEHC's 2005 results were unrealized losses or FAS 133 losses of $0.12 per share related to marking to market a portion of our 2006 and 2007 hedging.

Edison Capital's 2005 core earnings were $0.28 per share compared to $0.18 per share in 2004. This $0.10 increase in core earnings was primarily due to gains from the emerging Europe infrastructure fund. The mark to market gains from this fund was largely realized during 2005 as the fund-- as the fund's investments in Europe were sold. EIX Holding Company recorded a core operating loss of $0.10 per share in 2005, an $0.11 improvement over 2004, mainly due to lower interest expense from the elimination of debt at the holding company at the end of 2004.

And now I'll focus on non-core items. 2004 non-core items total $1.31 per share, driven largely by the favorable regulatory and tax adjustments at SCE, related to the receipt of the 2003 general rate case decision and the gain from the sale of MEHC's international assets. Focusing now on 2005 non-core items, they totaled $0.34 per share, made up of the following items. SCE had non-core items of $0.40 per share, comprised of three specific items. The first was a $0.19-per-share benefit recorded in the third quarter, reflecting a favorable tax settlement with the IRS. The second was a $0.17-per-share benefit recorded in the fourth quarter from receipt of a final FERC decision approving recovery of certain wholesale transmission costs incurred in connection with California market restructuring. Also in the fourth quarter SCE recorded a $0.04 incentive benefit related to generated refunds stemming from the energy crisis.

MEHC's non-core items represented a loss of $0.06 per share, comprised of an asset impairment charge of $0.10 per share related to the March Point project recorded during the third quarter, and a loss of $0.05 per share from the early pay-down of debt during the first quarter. Also included was a $0.09 gain re-- related to discontinued operations, and this gain was net of an $0.08 charge recorded in the fourth quarter related to a tax indemnity claim associated with the sale of our international assets. I might also note that we had expected to close the sale of the Doga project before year end. This did not occur and we continue to manage our investment in this product on an ongoing basis. In summary, EIX's reported 2005 consolidated earnings including core and non-core items were $3.40 per share in 2005, compared $2.81 per share in 2004, as John mentioned, a 23% increase.

Now turning to chart number 3 to cover our operations and hedging information. I'll start with Midwest Generation first. 2000 -- in 2005, Midwest Generation completed its first year in operation as a merchant generator. Midwest Gen generated 31 terawatt hours. slightly above 2004 levels. Plant availability, as noted on the chart, was less than 2004 because of higher planned maintenance and the return to service of two moth-balled units at our Will County station, and also, river temperature deratings at our Joliet station because of very warm summer temperatures.

Wholesale market. Wholesale power prices in Northern Illinois -- the Northern Illinois hub, or NI-hub as we call it, for 2005 averaged $46.39 per megawatt hour versus 2004 price at around $29.5 per megawatt hour. Tracking this pretty significant increase, Midwest Generation's average energy price, reflecting hedged and spot energy sales, was $46.68 per megawatt hour during 2005, compared to $31.11 in 2004. Fuel costs, which include emissions, were largely contained. Our coal position, including transportation, was hedged and subject only to contractual escalation. Midwest Generation also had a net long SO2-emissions position in 2005, and as a result of rising prices, realized the benefit from the sale of these excess emission allowances to Homer City, totaling $56 million. Although we report the Illinois and Homer City plants separately, we do manage our emissions costs on a portfolio basis, and that's due to rising SO2 emission prices that's benefited Midwest Gen and hurt Homer City.

Homer City had solid operating performance in 2005, generating 13.6 terawatt hours, with plant availability of over 85%. Homer City's average energy price for 2005 was $46.29 a megawatt hour, compared to $36.20 in 2004. The average energy price for Homer City reflects spot and hedged energy sales, including the impact of basis. Basis, as we have explained previously, is the differential between the PJM West hub price and the Homer City busbar price that has the effect of reducing hedge prices. This basis differential averaged $6.12 per megawatt hour during 2005 compared to $1.55 in 2004. Fuel costs including emissions were adversely impacted during the year by rising Northern Appalachian coal prices and the significantly -- the significant increase in SO2 prices.

Now turning to our hedge program for Midwest Generation and Homer City. We entered into -- and this is shown at the bottom of chart 3 -- we entered into additional generation hedges during the fourth quarter for both 2006 and 2007. The volumes in prices set forth -- or set forth at the bottom of the chart, as of December 31, 2005. In summary, our 2006 hedge plan is largely completed for both power and coal. On the power side we have hedged about half of Midwest Generation's expected output, and just under two thirds of Homer City, with all of our coal requirements under contract for both stations. Also at year-end 2005, we had 36% of Midwest Generation and 39% of Homer City's expected generation hedge for that year. Let me also point out one additional item regarding Homer City. On January 29, the main power transformer for Unit Three failed, resulting in us a suspension of operation of that unit. Homer City has secured a replacement transformer, and Unit Three is expected to return to service in April of 2006. We have adjusted previously planned outage schedules for Unit Three and the other Homer City units to minimize the overall outage activities over the next 15 months.

Now a final point with regard to earnings guidance. As we have mentioned previously, we will not be providing 2006 earnings guidance until we received SE's generate rate case decision, which is expected next month, and with that final comment, we'll now turn it over to questions. And as we did the last time, we would like to limit to one question and then if you have more -- and then please go back into the queue, and we'll pick that question up later.

We do have a question from Paul Fremont with Jefferies & Company. Go ahead, please.

Just a quick question. When you guys were giving guidance, I guess this would have been back in the October time frame, the guidance would have worked out to be considerably less for the quarter result for Mission Energy Holding Company. Can you tell us what would account for the positive variance from the fourth quarter guidance versus what you actually were able to earn at Mission Energy?

Really two factors we had the continuation of -- of strong spot pricing, particularly in the month of December when we had very cold temperatures in the Midwest and in the East. And then the second factor was continued very strong performance by EMMT in the fourth quarter.

Next, we have a question from John Kiani with Credit Suisse. Go ahead, please.

Good morning.

Hi, John.

Tom, what do you expect the Midwest Gen and Homer City generation output to be in 2006? Can we assume it's at least flat to '05 or -- or even better? What kind of color can you give us because Midwest Gen had a high forced outage rate of around 8% in '05, so, is there any potential improvement there and what do you think about Homer City?

Well there's always a potential for improvement. We're constantly working to-- to manage our availability and optimize our availability. It's a bit unpredictable. We've included in chart 3 what we have indicated is the percent of our expected generation hedged. If you do the math on it, it really shows that at this point in time, the generation will be on the order of 30 terawatt hours for Midwest Generation and about 13.5 for Homer City, but as we provide our guidance in the coming months, coming month, we'll provide an update on that expected generation.

So is it -- is -- will-- will that update be more in the direction of there's some improvement potential at Midwest Gen, because weren't there some one-off events like a barge that sank last year, where you had to -- to really skip one whole -- whole shipment, and weren't there other derating issues with Joliet?

Next, we have a question from Ryan Watson with Stanfield.

Let me answer John's question. You know, these are mid-merit plants, John. So-- I mean, E 4 is something that we-- that we-- we factor, but really the loading pattern of these plants, depending upon conditions in the system, are really the primary dictator of exactly how much production we're going to get out of them. Next question?

Yes. Hi. Can you just again go through the basis differential at Homer City? From what I remember last time, you're long HC busbar; you're short PJM West hub. Just walk me through that again and how that effects your average energy price, thank you.

This is Jim Scilacci you are right on the way you described it. We hedge at the liquid hub, which is PJM West. We deliver the output of the plant at the Homer City busbar, and so what we have shown the -- the numbers provided in our disclosure is the basis that's been experienced over the last couple of years. It has risen from about $2 in 2004 to over on average $6 in 2005. And that's an average number for the full year, so there were much higher basis realized during some of the months, and we try to give some color in the disclosures to give you a feel for the level of the basis. Does that get to your question? I guess there's no follow on, so.

Next question.

Next, we have a question from Kit Konolige with Morgan Stanley. Go ahead, please.

Good morning, guys.

Hi, Kit.

Wondered if you could give us a little more color on the energy trading? How much of an increase was that from-- excuse me-- from say a year ago? And would I be correct in assuming that you -- you would require certain conditions, such as the very large volatility that -- that we saw especially in the second half of last year to duplicate that kind of earnings at -- at the trading operation?

Hey, Kit this is Ted. On the trading piece, 2005 was clearly larger than anything we had before on the trading side. A good portion of that really related to transmission- elated trading, congestion-related trading. Frankly, relatively little of what is done there relates to outright positions on power prices or gas prices, that type of thing, so most of it's spread trading, and the volatility was really the primary driver. Volatility has -- and -- and prices for congestion have come down substantially here in 2006. So it -- it's really not something we try to force. It's just a matter of whether the opportunities are there. If they're there, we take advantage of them. And 2005 had pretty exceptional opportunities.

Next question?

Next, we have a question from David Grumhaus with Copia Capital. Go ahead, please.

Good morning. On your hedging, when you give the average price at Homer City, is that a PJM West price? Is that a HC busbar price? How do we think about that?

That's a PJM West price.

So we would expect -- you haven't hedged in the basis risk; is that correct? So the realized price would be lower?

It -- go ahead.

This is Jim Scilacci. It can be-- it depends on what the basis actually is, and to the extent that we would participate in the auctions for [FTRs], and those are done on an annual basis, the auction occurs -- I believe, we're looking at the numbers right now and starts -- it's on an annual basis starting April first and so, we will look to participate, but we can't now, at this point in time, predict how successful we'll be in buying FTRs.

Okay. As just a follow-up, can you give us any help on fuel costs for next year. I know they're hedged, but in line with this year, expecting to trend up?

We really don't provide that information .

Next, we have a question from Jeff [Colville] with Duquesne Capital Management. Go ahead, please.

Good morning guys. How are you.

Good morning.

I had a few questions. I guess the first one is you mentioned a whole series of things that were affecting -- that were in the core guidance. I know one of them was the EMMT trading, which I think was $0.30. I just wanted to confirm that for the year, and then I think there was a accounting mark to market of negative $0.13 that was also included in '05? I just wondered if you could run through those again. .

Yeah, we broke down this $1.40 gain.

Yes.

For MEHC year-over-year, 80-- let me go to-- let me go back to my notes, but $0.81 of that related to Midwest Generation.

Yes.

$0.30 from a higher trading income at EMMT.

Yes.

$0.20 for lower interest -- lower net interest expense.

Yes.

And then-- and then we had a positive $0.09 from a variety of items. Included in that $1.13 number is a $0.12 mark to market loss associated with FAS 133 accounting for -- for our forward hedge positions.

Okay. I got it. And then on the-- going back to the trading, the fact that there was a lot of volatility in the basis, the fact that you were able to make more money in trading this year because of that, is that something I should connect with some of the costs you incurred at Homer City, because it seems like it's a similar thing between the PJM West price and the basis differentials in that region. Is that the proper connection to make in the sense that it's sort of a -- somewhat of a hedge?

I think as we talked about particularly last quarter, that volatility and congestion as it relates to Homer City is a negative. Volatility is a positive with respect to the things that EMMT does, and so we think that because we're actively in that market in terms of -- of -- of selling the power from Homer City and making ourselves aware of where they are -- opportunities to benefit from congestion, we think that that's a plus. So -- so the engagement of EMMT in both sides, we think, is a plus for us.

Next. we have a question from Terran Miller with UBS. Go ahead, please.

Yes, good morning. I was wondering if I could follow-up on some of the hedging questions, and last -- at the end of the third quarter, you talked about doing a study to try to figure out if the breakdown on the basis was tied to the abnormal 2005 weather or more fundamental shifts, and I was trying to find out what the results of that study were.

Terran, it's Jim Scilacci. The-- that is a very difficult question to get to the core root of, because we just didn't have all of the information because that resides with PJM, and so, we can speculate on what has caused it, and obviously, we had a very hot summer, and you also have to look to factors of others being incorporated in the PJM that could have effected the overall level basis, so I can't give you a definitive answer. We have speculations, as I already mentioned, and it's something we'll have to continuously monitor in terms of how it evolves over time.

Next question?

We have a question from Ryan Watson with Stanfield. Go ahead, please.

Hi, are you then eating the $6 per megawatt hour cost on Homer City, with that basis differential, or is that offset by FTR's-- by purchases of FTR's.

This is Jim Scilacci, again. It-- it depends. We do have some FTR's, and we are exposed in the majority of the situation in terms of our hedging. So-- and that changes month to month. So the $6 was the average for 2005, and you have to go online, you can next in the PJM website, and that changes daily or hourly based on the actual basis amount.

Next question?

Next, we have a question from Doug Fischer with A.G. Edwards. Go ahead, please.

Good morning. Just remind me what -- what the gain was at -- from the Emerging European Infrastructure Fund for the whole year and for the fourth quarter. What the number was for the fourth quarter.

The-- the-- the gain, I believe, was $0.18 for Edison Capital for-- for-- for the European Infrastructure Fund.

That's the full year?

For the full year.

Okay. .

Next, we have a question from Vladimir Jelisavcic with Longacre. Go ahead, please.

Hi. Could you just give us an update on what -- at Midwest Gen, what percentage are you hedged for '06 and '07, and maybe give us a little visibility on the prices that you realized in the hedges that you put on during the fourth quarter?

Yeah. Percent hedge for '0'07? Yeah for Midwest Generation it was 50% for '06, 36% for '07. For Homer City 63% for '06 and 39% for '07. And back to that prior question, the-- the-- the gain associated with the European Infrastructure Fund was $0.14 per share.

Next, we have a question from Zack Schreiber with Duquesne Capital Management. Go ahead.

Hi, it's Zack Schreiber from Duquesne Capital Management. Can you hear me?

Yeah, Zach.

Hi. Just a question given the fact that the weather's been mild so far, could you just explain the effect of the weather on the capacity factors at both Midwest Gen and Homer City respectively? Is there any impact at all, or does it really not matter, given the [inaudible] spreads are so wide, and those plants are mid-merit and not base-load plants?

Zach we're not going to comment on first quarter performance until we report on the first quarter.

Next, we have a question from Paul Patterson with Glenrock Associates. Go ahead, please.

Good morning. Can you hear me?

Yes.

A two-part question. The total -- I guess it was $0.30 that was the trading differential, and I was wondering what the total benefit of trading was at EMMT, and the second question is, just to clarify, there was no benefit for emission sales outside of the company to other parties? I wanted just to clarify that in terms of -- was there any benefit at all from emission sales?

The answer to the second question is No. The answer to the first question was the pre-tax income from trading was $195 million last year.

Next, we have a question from Vladimir Jelisavcic for Longacre. Go ahead, please.

Hi, could-- could you also just-- just tell us what was the cash position, consolidated and also at -- at EME at the end of the quarter, and also maybe give us a little bit of your thought process on how you intend to use cash in '06?

In cash-- this is Jim Scilacci-- at the end of the year at EME, consolidated, as we look at it, was $1.1 billion, and in the disclosures, I think, we expand on that to talk about the hedging the amount of cash we had with counterparties at the end of the year was approximately $700 million. That includes both EME cash and Midwest Gen, and Midwest Gen also had borrowed on it's revolver for $170 million, so you have to net out, so there's obviously cash that, given we had those positions, that would add to that $1.1 billion position. So it's about approximately another $0.5 billion dollars. Now, in terms of -- what we're going to use the cash, clearly we have some plans for growth in the generation area, particularly in the wind investment area. The disclosures go into some detail about those plans. And I -- I think that's -- we should stop there. You can follow up if you have additional questions.

Nest, we have a question from Paul Fremont with Jefferies Company. Go ahead, please.

Looking at the fourth quarter hedging versus the third quarter, it appears as if there wasn't a significant amount of incremental hedging done. Is that primarily because the company has sort of a target of hedging 50% of the output, and you were largely there in the third quarter? And what potentially would change that-- that hedging policy?

Hey, Paul, it's Ted. We-- we do have kind of a general approach, general policy of reaching the beginning of the year about 50% hedged for the total coal fleet. We ended up doing more than that when you look at the combined Midwest Gen and Homer City in part because we saw prices at what we thought were particularly attractive levels. We also for the first time reached into the following year, and-- and did some hedging for 2007, which we previously have-- have never done. Again, for the same reason. We thought the prices were at generally attractive levels, so I -- I think I would actually term it as we -- we have done considerably more hedging than our normal policy or normal approach, which would be to enter the new year about 50% hedged for the total fleet.

Next, we have a question from Devin Geoghegan with ZLP. Go ahead, please.

I was just curious for 2005, how much SARs expense there was. I think in -- there was some in '04. I was just curious what the number was in '05.

Sorry-- we're not quite following your question.

Stock appreciation rights? I was just wondering if you guys had-- had a significant expense for those in 2005.

We -- we don't have that broken out at this point.

Okay.

Next question?

Next we have a question from [Sean Cahn] with SSE Capital Group. Go ahead, please.

Hi, it's Ashar Khan with SSE. Can I just - I went to the October presentation and I don't know if you can highlight -- you said you don't provide -- at that time, you were showing nearly a 20% increase in fuel cost '06 versus '05 at Homer City, based on 58% hedged, I guess those were the numbers about 15 months ago. So can we allude that level of cost from the last disclosure are in the similar realm of things '06 versus '05 at least 20%?

Ashar, this is Jim. That-- again, that's 15 months ago, and if you have been tracking the coal market, obviously that -- the projections that we showed in that analysts' presentation in some categories like SO2 and, to a certain extent in coal, the cost escalations have been greater than we showed back then. And what we plan on doing is when we come out with guidance, we'll update numbers at that point in time, and provide some additional information.

Next we have a question from Vladimir Jelisavcic with Longacre, go ahead, please.

Hi, just a follow-up from my previous question. I also asked for [inaudible ] consolidated cash. I don't think you had a chance to annals the last part of the question. .

Yeah. What we disclosed, the consolidated cash, and this includes short-term investments, is $1.9 billion, and that would roughly break down about $0.5 billion at Edison Capital and $1.4 billion at MEHC, and the difference between that number and what Jim had said was short-term and project-level investment -- cash.

Next, we have a question from [Neil Troy] with Peacock Capital. Go ahead, please.

Good morning. I was wondering if the company has a longer term EPS growth goal, in particular, what growth drivers does the company see that could offset potentially backward-dated commodity prices when you start looking out beyond 2007?

This is John Bryson. No we do not set out a specific earnings growth target.

Next, we have a question from [Sean Khan] with SSE Capital Group. Go ahead, please.

Hi. Jim, can I just-- on this outage that you mentioned, you mentioned that the plant is expected back on line in April, and then I couldn't get what you said over the next 15 months. Could you just mention the-- the cause when it comes back on line and what kind of a cap factor are you assuming?

Actually it was Tom that made the comments.

Sorry.

That's all right. Right -- right now, we're in the process. We've secured the turbine -- excuse me, the transformer that's being -- it's going to be transported to the Homer City site. And what we have done is shifted outages. Remember there's three units at Homer City, and we have been able to shift outages in order to minimize the downtime overall over the period, and we have estimated that sometime in April, the plant will come bac. We're still working through the details on how that's going to occur. The capital expenditures are actually very modest to buy the replacement transformer, so that is not a material issue, but the key thing is to bring the plant back on line in the most expeditious process, and we're targeting right now sometime in probably mid-April.

Next question.

Next, we have a question from Michael Goldenberg with Luminous Management . Go ahead, please.

Good morning, guys. Just following up on Neil Troy's question. If we just focus on the MEHC, obviously the utility is growing and Edison Capital is growing. Besides the commodity curve and repayment of expense of debt, what other positive or negative drivers can we expect out of MEHC over the next two, three years, whether it be coal costs, or the differential spread to improve productivity? Can you identify positive or negative catalysts here, besides commodity curve and expense of debt repayments?

Okay this is Jim Scilacci. There are a number of factors that you need to track. We have growth plans at MEHC in terms of generation growth. At the end of the year, we acquired a significant wind project. In the disclosures, it talks about another large wind project by the name of Wildorado, that we're constructing right now. We hope to bring it on line at the beginning of, or the first quarter of 2007. We've also acquired a number of wind turbines to support other wind projects we're looking to bring on line in 2006 and 2007. Additional things in the horizon on the positive side, we've got a number of thermal generation investments that we're evaluating. We're permitting two peaker projects here in Southern California. We will not proceed until we have some kind of indication of an off-taker for those projects. And, of course, we just recently announced and we're studying the feasibility of a project with BP at the Carson Refinery. It's a pet-coke project, hydrogen fuel, and it has a carbon sequestration characteristic associated with the project, and that's a 500 megawatt project. On the -- on plus and minus too, you have to look at -- there's a number of factors. SO2 has been quite volatile. It has affected the performance of Homer City, especially during 2005. Coal is also -- can be biased to the upward and in terms of costs, it's Powder River Basin coal that we burn exclusively at Midwest Gen. It's gone up quite a bit. But at least in the near term for those coal expenditures, we're largely hedged at both Midwest Gen and Homer City. As you go out three to four years, we have less of that hedged, but just as a reminder, at Midwest Gen, the key consideration over two-thirds of the cost of the coal is the transportation charge, and we have a long-term contract reaching out to 2011 on that piece.

Next question.

Next, we have a question from Jeff Covello with Duquesne Capital Management. Go ahead, please.

Hi. How are you again. I just had a follow-up question. On the long-term growth rate, if I remember correctly I believe you did give out a growth rate of 8% to 12% at the end of '04. I just wanted to see if that was indeed the case.

Yeah, Jeff, that goes back to-- to October, as we laid out plans then. And as we proceed forward, I mean the foundation that we have looked to, is the growth in rate base at the utility, which we will update upon receipt of the general rate case decision, and in response to that, we'll be looking at-- at our forward plans to provide an update.

Next, we have a question from Vladimir Jelisavcic with Longacre. Go ahead, please.

Hi, could you update us on the status of the Devers line into -- into -- into the Desert Southwest and Palo Verde, and what the -- what the effect is on -- on -- on your sort of year-over-year projections, having the Mohave unit down at this point.

We couldn't hear the last part.

Devers and the effect of Mohave by being down.

This is Al Fohrer. Devers- Palo Verde. We have two projects. Devers-Palo Verde One is an expansion that should be completed and operational this summer. Devers-Palo Verde Two is on track. We are continuing to meet milestones that have been laid out, moving forward with the environmental reviews and the -- and all of the licensing, the ISO found it to be cost effective. So we are moving forward with that. The effect of Mohave on the transmission. It has no impact. Obviously we would like to find a path to bring Mohave back, but it depends upon a lot of issues that are well laid out in the financial disclosures, but that has no impact on -- on D-PV 2.

Next, we have a question from Andrew Levi with Bear Wegner Specialists. Go ahead.

It's Andy Levi from Bear Wegner. You guys talked about organic growth. Can you talk also about buying and selling of assets and just kind of rationalizing what you got and possibly adding to what you got on the non-regulated side.

This is John Bryson, we won't have any comment on that at this time. We're trying to build our business in disciplined ways. We just don't have a comment now.

Next, we have a question from Tom O'Neill with Citadel. Go ahead, please.

Good morning> Just a question on the followon growth drivers. I was curious whether you participated in the [Sivi] Gas and Electric RFO, which, I guess, is coming out in a couple of weeks? And then secondarily at EME, just a question whether you're looking at an alternative hedging structure to make that more efficient.

Hey, Tom, it's Jim.

Hi.

We really have to be careful about saying anything relative to participation in RFO's, but I think you can generally assume that we have an interest in contributing to building generation at California where we have some projects that we have announced that kind of demonstrate that, so we have an ongoing interest in that. In terms of the other point, really the best way to think about our 7600 megawatts of pull is that it's-- it's a big spread trait. We end up having to deal with volatile commodity prices on the cost side principally in the form of coal transportation and emissions, and also on the revenue side with power. We do, as we've demonstrated, take opportunities that we see in the market to put on hedges at certain times, which allow us, hopefully, if we're successful in that, to provide a -- a reasonably consistent margin within risk parameters that we think are -- are appropriate, so we will vary the amount of hedges we have. on both the cost side and on the revenue side, in an effort to maintain a reasonable spread. Beyond that, I think it's really blocking and tackling about how we actually execute those hedges, including the cost side, revenue side, basis rift, all of those things and we're fairly active in that -- in that activity.

Okay. I think we have got time for one more question.

And our next question comes from John Kiani with Credit Suisse. Go ahead, please.

Going back to your comments on the two peakers that you would consider building and housing within EME, it kind of sounded like you -- you've obviously offered into either SCE's RFO or potentially PG&E's RFO. Can you give us an idea of the size of those two peakers from a megawatt capacity standpoint, or perhaps a ballpark figure for the capital costs?

Yeah, this is Ted again. As we have announced those are both 500-megawatt peaker projects in Southern California. We are-- though more generally, looking for opportunities for building generation in California, as well as other capacity-constrained markets.

We thank you all for your interest. We'd be happy to have followon questions. You should call our Investor Relations Department. Most of you know how to do that. It's on -- the phone number, I think, is on our release. That concludes the call.