Edison Intl to Eliminate Dividend, Reduce Spending from Bloomberg:
By Daniel Taub
Rosemead, California, Dec. 22 (Bloomberg) -- Edison International, owner of California's No. 2 power company, said it will eliminate its dividend and reduce spending to save $190 million as it copes with $3.5 billion in power-buying losses.
The reduced spending on electrical operations and maintenance next year will affect 400 jobs and save $100 million, Edison said. Edison's board eliminated its fourth-quarter dividend to save $90 million. The company has 85,000 individual shareholders and many depend on the dividend for retirement income, it said. The payout would've gone out on Jan. 31.
Rosemead, California-based Edison, the parent of Southern California Edison, has paid more than $3.5 billion more for power this year than it is allowed to charge customers. It can't pass those higher costs on to Edison's customers because rates are temporarily frozen under California's 1996 deregulation law.
Southern California Edison has paid more than four times as much for power this year as it did in 1999 because natural-gas prices have leapt 25-fold since last year. Half of California's power plants burn natural gas. A drought in the Northwest also reduced power produced by dams, raising electricity prices.
Edison shares rose $1.31 to $16.25 before the dividend and latest cost cuts were disclosed. They have dropped 35 percent since mid-September.
PUC Hearings
Edison and San Francisco-based PG&E Corp., owner of California's No. 1 electric utility, have asked the California Public Utilities Commission to end the state's rate freeze, and allow them to pass electricity costs on to customers. PG&E has more than $4.6 billion in power-buying losses.
The PUC yesterday scheduled hearings for next week on ending the rate freeze. The payment of future Edison dividends are partly dependent on what the PUC decides to do, the company said. Edison last paid a quarterly dividend of 28 cents a share on Oct. 31.
California Governor Gray Davis and Federal Reserve Chairman Alan Greenspan plan to meet on Tuesday in Washington to discuss the state's energy crisis.
Fed officials have called Wall Street dealers who underwrite the Edison's and PG&E's short-term debt, or commercial paper, as well as analysts, seeking information on the effect of the crisis in the financial markets.
With their credit rating under review for a possible downgrade, the utilities can't sell more commercial paper. More than $2 billion of the short-term debt matures in the next two months. A default on the IOUs typically triggers defaults on a company's other debt, which totals more than $20 billion for the two utilities.
As the overseer of the U.S. banking system, the Fed monitors potential financial crisis for any possible ripple effect that could hurt the economy. California has considered blackouts if the utilities can't keep buying power.
Brink of Insolvency
Edison's latest moves follow initial cost-cutting measures made last month. Those steps included a freeze on hiring and new construction, as well as a suspension of equipment purchases. Edison also suspended charitable and community contributions, eliminated discretionary travel and reduced other expenses, the company said.
The company developed a plan ``to implement more substantial reductions if further action to remain solvent becomes necessary,'' Edison said in a statement. ``The plan will result in additional substantial workforce reductions and significantly reduce service to customers.''
In a filing with federal regulators this week, Edison said it is on the brink of insolvency.
Unless Edison is able to begin cutting costs soon, ``it is very uncertain that Edison will be able to meet its obligations for January,'' the company said in the filing. ``If it does not, Edison will be required to seek the protection of the bankruptcy court.''
Best Regards, J.T. |
