Good afternoon and welcome to the Edison International Second Quarter 2020 Financial Teleconference. My name is Ted, and I will be your operator today. [Operator Instructions] Today's call is being recorded. I would now like to turn the call over to Mr. Sam Ramraj, Vice President of Investor Relations. Mr. Ramraj, you may begin your conference.

Thank you, Ted, and welcome, everyone. Our speakers today are President and Chief Executive Officer, Pedro Pizarro; and Executive Vice President and Chief Financial Officer, Maria Rigatti. Also on the call are other members of the management team. I would like to mention that we are doing this call with our executives in different locations. So, please bear with us if we experience any technical difficulties. Materials supporting today's call are available at www.edisoninvestor.com. These include our Form 10-K, prepared remarks from Pedro and Maria, and the teleconference presentation. Tomorrow, we will distribute our regular business update presentation. During this call, we’ll make forward-looking statements about the outlook for Edison International and its subsidiaries. Actual results could differ materially from current expectations. Important factors that could cause different results are set forth in our SEC filings. Please read these carefully. The presentation includes certain outlook assumptions, as well as reconciliation of non-GAAP measures to the nearest GAAP measure. During the question-and-answer session, please limit yourself to one question and one follow-up. I will now turn the call over to Pedro.

Well, thank you Sam, and let me start by hoping that all of you listening today and your loved ones are staying safe and healthy as our world continues to work its way through COVID-19. Today, Edison International reported core earnings per share of $1 for the second quarter 2020, down $0.58 compared to the same period last year. The decline in year-over-year EPS was primarily due to higher O&M expenses, equity share dilution, and the true-up for the final 2018 GRC decision we recorded in the second quarter of last year. Consistent with recent quarters, results for this period were impacted by the timing of O&M spend and deferrals of certain wildfire-related expenses. However, the year-over-year EPS impact of wildfire-related expenses should improve in the second half, and we remain confident in our outlook for the full year. Therefore, we are narrowing our 2020 EPS guidance range to $4.37 to $4.62 by raising our low end by $0.05. Maria will discuss our financial performance in more detail in her report. On the legislative front, we are pleased that the Governor and Legislature prioritized wildfire funding in the recently adopted budget, despite its projected $54 billion deficit due to the pandemic. The budget provides over $200 million in one-time and ongoing funding for community resiliency preparedness, additional firefighting personnel and equipment, and enhancement of the State’s emergency preparedness, response and coordination with State agencies, local governments and utilities. We are also encouraged by the State’s enhanced wildfire mitigation capabilities as we prepare for this year’s wildfire season. For instance, CAL FIRE reported that it completed all of the planned 35 emergency fuels management projects in May, making 90,000 acres safer ahead of wildfire season and protecting 200 vulnerable communities. Some of these projects were located in, or adjacent to, SCE…

Thank you, Pedro. Edison International reported core earnings of $1 per share for the second quarter 2020, a decrease of $0.58 per share from the same period last year. This decline was primarily due to higher O&M expenses, equity share dilution, and the true-up for the final 2018 GRC decision we recorded in the second quarter of last year. As Pedro had mentioned, we expect the year-over-year EPS impact of wildfire-related expenses to improve in the second half and we are narrowing our full year 2020 EPS guidance by raising the low end of the range. On page 2, you can see SCE’s key EPS drivers on the right-hand side. I would like to highlight four items that negatively impacted the variance. First, EPS declined by $0.20 due to the 2018 true-up recorded in the second quarter of 2019 upon receipt of the final GRC decision. Second, O&M had a negative variance of $0.24, including from increased expenses that are offset by revenue due to balancing account treatment, as well as the timing of deferrals related to both, wildfire mitigation expenses and COVID-19 related costs. The variance related to wildfire mitigation expenses is due to the timing of regulatory deferrals for vegetation management and inspection and preventative maintenance costs. For the quarter, the negative variance from wildfire mitigation expenses was $0.06 per share. During the quarter, certain wildfire-related expenses reached the total amount authorized in the GRC and we began to defer incremental costs through approved memorandum accounts. We will begin to defer other categories of costs in the third quarter when these exceed the GRC authorized levels. Therefore, wildfire-related expenses will be less of a driver of year-over-year variances in the second half. O&M expenses were also negatively impacted by the timing of customer uncollectibles, labor and other expenses…

Ted, please open the call for questions. As a reminder, we request you to limit yourself to one question and one follow-up, so everyone in line has the opportunity to ask questions.

Thank you. [Operator Instructions] First question is from Jonathan Arnold with Vertical Research. Your line is now open.

Pedro, could I just ask -- obviously, you've mentioned that you've reached some initial settlements with I think you certainly have described in the sort of some of the plaintiffs in 2017 and '18 fires. And obviously, there are thousands of others. But, should we read the fact that you didn't change your accrual, despite reaching some of these settlements as a sign that you feel still good about your estimate, or is it just that you don't have enough experience in settling additional claims to really have an update at this point?

Yes. Hey, Jonathan, that's a really good question. I think, just the simple answer is that we did a handful of settlements, a few dozen settlements here compared to the thousands of plaintiffs. So, that is simply just not enough evidence to have any sort of material impact in our assessment for the low end of estimable range. So, we did look at the range again, and at the low end, as we mentioned before, we reassess that we go into every quarter. But just based on the very small number of cases that we settled, that's just not sufficient to provide any sort of material input that would lead to a change.

Okay. Thank you. And then, if I could just follow up on one similar topic. I see, you booked a charge related to 2017 and 2018, a small one in the quarter that's below the core line and just -- the $9 million. What was that and what sort of caused that to get booked this quarter?

Sure. So, Jonathan, you can imagine, as we move through this process, we're accumulating legal and expert costs. Because those are legal and expert costs that are associated with the non-core charge, we're booking those as non-core as well. Prior to this quarter, the number was really not significant.

Okay. So, that's sort of a sign of your -- maybe your settlement activities sort of ramping up. Is that fair?

I would just say, it’s a sign of our continuing litigation activities, Jonathan.

All right. I'll let it go. Thank you very much.

Hey, thanks. You take care.

Our next question is from Julien Dumoulin-Smith from Bank of America. Your line is now open.

Hello, Julien.

Hey. Good afternoon Thanks guys for the time. Perhaps just a follow-up on Jonathan's question, this is my follow-up, if I will. Can you clarify a little bit on how you think about the various groups of potential parties that you'd be seeking to settle with? And just as you set expectations, and I know it's difficult to talk about it, obviously the worldly timeline is a little shifted out. Can you talk about potential expectations on what kinds of parties you might expect to settle with? And then, obviously, I think you said, this is just the handful basically of individuals here. Just, how do you think about the timeline and cadence given the bellwether trial for one is established still in January versus vacated for the other one?

Yes. And let me start Julien by saying that, I do think of the timelines as in some sense being almost two separate timelines, although obviously they're related. There's a timeline for the normal litigation course and that's where the bellwether trial dates are relevant. And as you noted and I think that we mentioned earlier, there's a new date set for -- on the Thomas side, the Woolsey date has been postponed. We didn't know that that Thomas date could still move again just because of the COVID-19 impacts and uncertainty around that. So that's a track. A separate track is really multiple tracks of discussions with multiple classes of plaintiffs. And, the reality is that that track has a life of its own. And it really depends on parties on both sides, and whether, on the plaintiff's side, are there parties that are interested in being reasonable and achieving reasonable settlements. And so, we're open for business to parties that want to have reasonable discussions and we’re less open business for folks who may not have a reasonable point of view. How that relates to the trial timeline? Frankly, it's hard to say. I really can't get into the head of specific parties and whether they view a linkage to a trial date or not. In terms of the other part of your question around, how do we think about the various classes here? On one large class for the public entities, and as you recall, we settled with the vast majority of those last fall and the other two classes are the subrogation parties that are really representing insurance company interests, and the individual plaintiffs. And so, nothing that we've had to announce at this point on the several parties, again, we'll continue to be open to discussions with regional parties. And with the individual plaintiffs we saw a handful of a settlement that we entered. So again, probably the longest answer in the world is that it’s really hard to give you any sense of timeline or timing, because that really comes down to each of those parties or groups of parties.

Excellent. And a quick clarification again as my follow-up here. On your '20 guidance, I think Maria, you commented going back a quarter here in light of COVID. You didn't show a bridge, obviously now you have, and there were a number of items introducing uncertainty in light of COVID, et cetera. Just to make sure -- any specific items that are still outstanding that could introduce volatility? And I know you are raising guidance here after not showing it earlier, at least the low end is indeed a sign of confidence. I just want to make sure that we're hearing you right about some of the key pieces that you were looking for clarity last quarter.

Sure. Thanks, Julien. And last quarter, while we didn't provide a bridge, we did reaffirm guidance. Obviously, now we’re raising low end of the range a little bit as well. But, last quarter, what we were really saying was, the piece parts could move around and that's why we didn't provide the bridge. I think, as our team continued to move through the process, we have more clarity on what those pieces parts are. Obviously, we have the memo accounts that we set up related to COVID expenses, we have decoupling, we have all of those things in California that provide us with confidence. So, I wouldn't point to anything necessarily being different other than that with the passage of time that granularity is more apparent to us.

Our next is from Steve Fleishman with Wolfe Research. Your line is now open.

So, two questions are related ones. First is just on the cash flow standpoint, I know there's a lot of moves back and forth through the trackers and the like. So, just how are you feeling about staying within the targeted rating agency ranges for this year next year?

So, you’re right. We do have a lot of cash tied up particularly in those wildfire mitigation memo accounts. I think, the regulatory asset that we have on the books this quarter is just more than $1.1 billion. So, it's a fair amount. We have been moving through the process on various of those proceedings. GSNIP [ph] has been approved and the settlements has been approved. The WEMO [ph] we’re expecting that decision in September. That's the one about the insurance proceeds from last year. So, we're moving through that process. We do think that that's moving through timely on those requested amounts. It’s important to maintaining our cash flow. And those are some of the -- that's one of the assumptions that our 2020 financing plan was predicated on. I think that from a rating agency perspective, the COVID-related items, they understand very well the strong supports that we have in California, both the trackers that we have as well as decoupling. So, as sales vary that we will cover that as well. So, I think that is something that they're very familiar with and think highly of, frankly. On the memo accounts of wildfire mitigation, I think demonstrating that we can get to other decisions behind this will be important. And I think that really was one of the important assumptions that we made in our financing plan for this year. We'll continue to look at that for next year. And as we get that cash in the door, obviously our metrics will improve.

Okay. And I'm going to ask a clarification...

It is a really important element. I agree with you.

Okay. Thank you. Just a clarification of someone else's question. So, just -- we keep looking back to the '17 and '18 and potential settlements. One of the things that ultimately has to come up is like, did you actually do anything imprudent? Because, again, as far as I recall, I don't remember any investigation that has found that you actually did anything wrong in the '17, '18 fires. So, could you just like remind us when and how prudency would be reviewed for the '17, '18 fires?

Yes. Happy to take a quick stab at that. And just to remind you that there's really a whole process around obviously the litigation proceeding that this is determining that potential litigation exposure or potential settlement outcomes. There is a separate track around the Attorney General's office, which is again pretty standard course in these kinds of cases where they can take a look at whether there's any basis for liability. [Ph] If you've seen we discussed in prior calls but we seem to be past that period now for time, events Attorney General is continuing their investigation for the Woolsey Fire. In any case, we don't see any basis for any liability in any of these events. And then, the final track there would be the track at the CPUC, which although the CPUC's safety and enforcement division engages right away and looking at the facts of a fire, et cetera, the real meat and bones of the potency review would start after filing by Southern California Edison, seeking recovery of amounts related to the fires for outcomes and mitigation or settlements, right? So that has not begun yet. We have shared in prior calls as well that at this point, we still don't have full visibility to every piece of evidence out there. There's still equipment that we have yet to inspect, et cetera. So, the way this works is that once we had finalized the litigation outcome for the 2017, Thomas, Koenigstein mudslide events and separately for the 2018 Woolsey Fire event. As we end up understanding what the final liability is, whether court process or through settlement, we understand what the outstanding amount is, beyond our insurance coverage, at that point, based on our then understanding of our prudency, right, we complete that review on our site or SCE would do that review, then SCE would decide to go the CPUC to seek cost recovery from customers and that would start that proceeding. So, at this point, we can tell you pretty definitively that we don't see any basis for criminal felony liability and the investigatory criminal part of this led by the Attorney General. But, we don't have all the pieces in place to understand our degree of prudency and what the case would be for cost recovery. Just final reminder, in our accounting reserve, we have not assumed any recovery from the CPUC given the precedent, San Diego case. We have assumed recovery from FERC because they had a different precedent. But, I would expect that we will be likely to be seeking cost recovery of some amount, dependent ultimately on the degree of prudency that we concluded we had shown. So, lots of pieces to the answer because this is a complex process. Does that make sense, Steve?

Yes. No, that was really good review. Thank you, Pedro.

Thanks. You take care.

Next question is from Michael Lapides from Goldman Sachs. Your line is open.

Hey, guys. Thank you for taking my questions. I actually have a handful and Maria, they're probably more directed at you. Can you talk a little bit about the leeway, the comfort zone you have regarding Southern California Edison dividend payment potential up to the parent relative to what both, the CPUC requirement and the California corporate court requirements are?

Sure. So, you know that in California, there are some rules around dividend payments, which some of them are I’ll say very standard, earnings tested, et cetera. And then, also around, largely following the payment of dividend that has an ability to meet obligations as they come due. And we've been evaluating this forever before the wildfires as well, because that's been part of the course for a long time. But I think it got a little bit more attention after the 2017-2018 events. We look at a wide range of really potentially negative outcomes to ascertain the answer to that second question. And we've been in position each quarter to think about that, both at the EIX levels of common shareholders but then also in between SCE and EIX. SCE also is looking at cash flows and the like and exact timing of their financing. So, there's a little bit of just I'll say, the day-to-day cash management that comes with accounts as well, but they routinely make dividend upto the parent company. As far as CPUC goes, obviously CPUC is looking to ascertain that they are living within their own capital structure and the like. And we've always been able to do that as well and I think we’ll be able to do that.

Got you. Thank you for that. Also, can you talk a little bit about current debt financing and the cost of interest, meaning the coupon rates, you're able to realize in the market right now, relative to what you're seeing other companies? And if the rate is higher relative to other utility, even though interest rates broadly are lower, how you're thinking about kind of short-term, long-term debt, the balance, and really the total debt balance you want up top with the holdco versus down at the opco?

Sure. So, I mean, obviously we did $400 million of holdco couple of months ago now, more than couple of months ago now. And that completed what we had announced for 2020. Not surprising to anyone on the call, EIX has been trading light of other entities. And I think that's a reflection of what -- a lot of what happened last year or even prior to [indiscernible] passed. So, we do we do have to deal with that. I'm hoping that as time passes, that will also change. Obviously the underlying treasuries are pretty low right now. So, that's a benefit when you think about the total coupon. I think as we move forward in time, Michael, like any company we’ll be trying to balance timing to market, short and long-term interest rates and the like. I would see us on a go forward basis, just making that decision to move from a short-term position to a long-term position based on what’s going in the market and working into the company. In terms of the overall debt at the holding company versus the complex, obviously, we're going to be thinking about that in terms of also keep an eye on the rating agencies. Obviously they're looking at holdco debt relative to total debt. And so, we'll be staying within those guidelines as well. So that's kind of the thought process.

That was the last question. I will now turn the call back to Mr. Sam Ramraj.

So, that concludes the conference call. Thank you for joining us today. And please call us if you have any follow-up questions. You may now disconnect.