(B)(N) EIX Edison International

Deal Book. Edison International is a $15 billion company with total assets of about $45 billion and total liabilities of $34 billion and is the owner of Southern California Edison (SCE) which operates the San Onofre Nuclear Generating Station (SONGS) which is 78.2% owned by Edison International, 20% owned by the San Diego Gas & Electric Company, and 1.8% owned by the City of Riverside Utilities Department.

San Onofre Nuclear Generating Plant (SONGS)

As if all of that were not exciting enough, the corporate low man on the totem pole, the San Diego Gas & Electric Company, has asked the California Public Utilities Commission for permission to recover $800 million from its customers, in conjunction with a similar request from Southern California Edison to recover in excess of $2 billion from its customers in order to compensate shareholders for the premature and total shutdown and decommissioning of the SONGS plant (The Associated Press, September 7, 2013, San Diego utility asks customers for $808M to recover investments at closed SoCal nuke plant).

$2 billion for a song, you say?

No kidding. But based on the balance sheet, the shareholders haven’t done anything for the customers and the stock price is just now returning to pre-2008 levels of $45, and one would think that a nuclear power plant built in an earthquake zone (the Christianitos fault, considered dormant), absent a tsunami, and water-cooled by salt water, might have some operating issues.

The company has, on occasion, been eligible for the Perpetual Bond™, and it’s trading now at $45 above the price of risk which we estimate as the Risk Price (SF) of $40 to $42 and flat to declining, which is never a good sign. Please see Exhibit 1 below.

The company also expects to pay a current dividend of $440 million to its shareholders this year for a current yield of 3%, which is not bad – although somebody bought the stock for $53 in April and is probably still holding it – but not as good as the preferred shareholders who are getting 4% to 6% on their investments of about $4 billion or the long term debt holders who are getting another $3.3 billion over the next several years towards obligations of $16 billion.

Moreover, SCE has started a 90-day dispute resolution process with Mitsubishi Heavy Industries which installed new steam generators in a $670 million overhaul in 2009 and 2010, although the contract has a limited liability of $138 million and excludes consequential damages which SCE estimates to be of the order of $2 billion (CBS Los Angeles, July 22, 2013, Mitsubishi To Fight San Onofre Negligence Claim).

Exhibit 1: (B)(N) EIX Edison International – Risk Price Chart

(B)(N) EIX Edison International

Edison International through its subsidiaries, is a generator and distributor of electric power and an investor in infrastructure and energy assets, including renewable energy.

(Please Click on the Chart to make it larger if required.)

From the Company: Edison International, through its subsidiaries, generates and distributes electric power. It also invests in transportation infrastructure and energy assets, including renewable energy in the Netherlands, Australia, Switzerland, and the United Kingdom. In addition, the company offers capital and financial services. Edison International was formerly known as SCEcorp and changed its name to Edison International in February 1996. The company was founded in 1886, has 17,000 employees, and is based in Rosemead, California with power generation facilities in the United Kingdom, Australia, Indonesia, Italy, Turkey, the Philippines, Thailand, Illinois, and Pennsylvania.

For more on what risk averse investing has done for us this year, please see our recent Posts on The S&P TSX “Hangdog” Market or The Wall Street Put or specialty markets such as The Dow Transports & Utilities or for the real class action, La Dolce Vita – Let’s Do Prada! and It’s For You, Dear on the smartphone business.

Postscript

We are The RiskWerk Company and care not a jot for mutual funds, hedge funds, “alternative investments”, the “risk/reward equation” and every other unprovable artifact of investment lore. We have just one product

The Perpetual Bond™“
Alpha-smart with 100% Capital Safety and 100% Liquidity”
Guaranteed
With No Fees and No Loads on Capital

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Disclaimer

Investing in the bond and stock markets has become a highly regulated and litigious industry but despite that, there remains only one effective rule and that is caveat emptor or “buyer beware”. Nothing that we say should be construed by any person as advice or a recommendation to buy, sell, hold or avoid the common stock or bonds of any public company at any time for any purpose. That is the law and we fully support and respect that law and regulation in every jurisdiction without exception and without qualification to the best of our knowledge and ability. We can only tell you what we do and why we do it or have done it and we know nothing at all about the future or the future of stock prices of any company nor why they are what they are, now. The author retains all copyrights to his works in this blog and on this website. The Perpetual Bond®™ is a registered trademark and patented technology of The RiskWerk Company and RiskWerk Limited (“Company”) . The Canada Pension Bond®™ and The Medina Bond®™ are registered trademarks or trademarks of the Company as are the words and phrases “Alpha-smart”, “100% Capital Safety”, “100% Liquidity”, ”price of risk”, “risk price”, and the symbols “(B)”, “(N)” and N*.