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Rating Action:

Moody's assigns Baa2 to EIX's senior notes and affirms ratings; outlook stable

14 Sep 2010

Approximately $2 billion of debt securities and affected

New York, September 14, 2010 -- Moody's Investors Service assigned a Baa2 rating to Edison International's (EIX) planned issuance of senior notes and assigned a (P) Baa2 rating to the shelf registration for EIX's issuance of senior unsecured notes. Concurrent with these rating assignments, Moody's affirmed all of EIX's ratings, including its Issuer Rating and senior unsecured bank credit facility at Baa2. The rating outlook for EIX is stable.

Assignments:

..Issuer: Edison International

....Senior Unsecured Regular Bond/Debenture, Assigned Baa2

....Senior Unsecured Shelf, Assigned (P)Baa2

RATINGS RATIONALE

EIX's Baa2 senior unsecured rating considers the relatively stable financial performance expected at Southern California Edison Company (SCE: A3 senior unsecured; stable outlook), the principal source of cash flow and earnings for the next few years; a fairly conservative dividend payout ratio; a business strategy primary focused around growing the regulated utility business which comes with a substantially increasing capital investment program at SCE; and the challenging prospects for Edison Mission Energy (B3: senior unsecured; negative outlook), its unregulated wholesale power generation subsidiary. The rating factors in the structural subordination at EIX as a holding company, whose primary source of dependable cash flow are dividends from SCE. Our rating recognizes continuing evidence of a more predictable and credit supportive state regulatory environment in California, which helps to mitigate the financial impact of a weakened service territory economy. Given the substantial increase in capital investment over the next five years, SCE's and EIX prospective credit metrics are likely to be weaker than recent historical results. Also, we expect the size of the utility's capital investment program to impact the amount of dividends that can be upstreamed to the holding company during this build-out period at the utility. For more information on SCE and EME, please refer to the Credit Opinion which can be found on www.moodys.com under the issuer's name.

Net proceeds from the note offering will be used to repay short-term borrowings under the company's $1.426 billion unsecured revolving credit or for general corporate purposes. In light of the utility's large capital investment program, Moody's believes that EIX holding company debt may be used as a funding source for the payment of EIX common dividends. While we view the sustained use of holding company debt for the payment of dividends as a credit negative, we observe that EIX does not currently have any long-term funded debt obligations at the holding company in its capital structure. However, a heavy reliance on holding company debt for the payment of EIX dividends during the utility's heavy capital spend years could negatively impact ratings at EIX and at SCE.

The stable outlook for EIX is largely based upon the stability of its principal subsidiary, SCE, the parent's moderate dividend policy, which is balanced by the capital requirements of the organization. The stable outlook also factors in our belief that management will ultimately finance this large capital investment program in a conservative manner. As a holding company that is primarily dependent upon SCE for a substantial portion of its cash flow in the form of dividends, any change in SCE's rating is likely but not certain to result in a similar rating action at EIX.

In light of the size of SCE's capital expenditure program and the company's ownership of EME, a substantially weaker subsidiary, limited prospects exist for the rating to be upgraded over the near term. Longer term, however, should EIX's ratio of consolidated cash flow to total debt exceed 20% and the ratio of cash flow to interest expense approaches 5x on a sustainable basis, the rating could be upgraded.

EIX's ratings could be negatively impacted if the company does not finance its substantial capital investment conservatively, which at some point, is likely to include the issuance of common equity. The rating could also be negatively affected if the ratio of consolidated cash flow to total debt declined below 18% and the ratio of cash flow to interest expense fell to 3.5x or less for an extended period. Moreover, to the extent that EIX provides material direct credit support for its weaker non-regulated businesses, the EIX rating is likely to be negatively impacted.

The principal methodology used in rating Edison International was Regulated Electric and Gas Utilities rating methodology published in August 2009. Other methodologies and factors that may have been considered in the process of rating this issuer can also be found on Moody's website.

Headquartered in Rosemead, CA, EIX is an integrated energy holding company with assets at June 30, 2010 of $43.9 billion, that provides electric utility services through its 100% owned utility, SCE. EIX also conducts its unregulated businesses through Edison Mission Group, whose principal asset is EME, an unregulated wholesale power company.

REGULATORY DISCLOSURES

Information sources used to prepare the credit rating are the following: parties involved in the ratings, parties not involved in the ratings, public information, confidential and proprietary Moody's Investors Service's information, confidential and proprietary Moody's Analytics' information.

Moody's Investors Service considers the quality of information available on the issuer or obligation satisfactory for the purposes of assigning a credit rating.

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Please see ratings tab on the issuer/entity page on Moodys.com for the last rating action and the rating history.

The date on which some Credit Ratings were first released goes back to a time before Moody's Investors Service's Credit Ratings were fully digitized and accurate data may not be available. Consequently, Moody's Investors Service provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com for further information.

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New York
A.J. Sabatelle
Senior Vice President
Infrastructure Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

New York
Michael G. Haggarty
Senior Vice President
Infrastructure Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's Investors Service
250 Greenwich Street
New York, NY 10007
USA

Moody's assigns Baa2 to EIX's senior notes and affirms ratings; outlook stable
No Related Data.
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