Moodys.com
Close
Please Note
We brought you to this page based on your search query. If this isn't what you are looking for, you can continue to Search Results for ""
The maximum number of items you can export is 3,000. Please reduce your list by using the filtering tool to the left.
Close
Close
Email Research
Recipient email addresses will not be used in mailing lists or redistributed.
Recipient's
Email

Use semicolon to separate each address, limit to 20 addresses.
Enter the
characters you see
Close
Email Research
Thank you for your interest in sharing Moody's Research. You have reached the daily limit of Research email sharings.
Close
Thank you!
You have successfully sent the research.
Please note: some research requires a paid subscription in order to access.
Already a customer?
LOG IN
Don't want to see this again?
REGISTER
OR
Accept our Terms of Use to continue to Moodys.com:

PLEASE READ AND SCROLL DOWN!

By clicking “I AGREE” [at the end of this document], you indicate that you understand and intend these terms and conditions to be the legal equivalent of a signed, written contract and equally binding, and that you accept such terms and conditions as a condition of viewing any and all Moody’s inform​ation that becomes accessible to you [after clicking “I AGREE”] (the “Information”).   References herein to “Moody’s” include Moody’s Corporation, Inc. and each of its subsidiaries and affiliates.

Terms of One-Time Website Use

1.            Unless you have entered into an express written contract with Moody’s to the contrary, you agree that you have no right to use the Information in a commercial or public setting and no right to copy it, save it, print it, sell it, or publish or distribute any portion of it in any form.               

2.            You acknowledge and agree that Moody’s credit ratings: (i) are current opinions of the future relative creditworthiness of securities and address no other risk; and (ii) are not statements of current or historical fact or recommendations to purchase, hold or sell particular securities.  Moody’s credit ratings and publications are not intended for retail investors, and it would be reckless and inappropriate for retail investors to use Moody’s credit ratings and publications when making an investment decision.  No warranty, express or implied, as the accuracy, timeliness, completeness, merchantability or fitness for any particular purpose of any Moody’s credit rating is given or made by Moody’s in any form whatsoever.          

3.            To the extent permitted by law, Moody’s and its directors, officers, employees, representatives, licensors and suppliers disclaim liability for: (i) any indirect, special, consequential, or incidental losses or damages whatsoever arising from or in connection with use of the Information; and (ii) any direct or compensatory damages caused to any person or entity, including but not limited to by any negligence (but excluding fraud or any other type of liability that by law cannot be excluded) on the part of Moody’s or any of its directors, officers, employees, agents, representatives, licensors or suppliers, arising from or in connection with use of the Information.

4.            You agree to read [and be bound by] the more detailed disclosures regarding Moody’s ratings and the limitations of Moody’s liability included in the Information.     

5.            You agree that any disputes relating to this agreement or your use of the Information, whether sounding in contract, tort, statute or otherwise, shall be governed by the laws of the State of New York and shall be subject to the exclusive jurisdiction of the courts of the State of New York located in the City and County of New York, Borough of Manhattan.​​​

I AGREE
Rating Action:

Moody's revises the ratings outlook of Southern California Edison and Edison International to negative

03 Dec 2018

Approximately $16 billion of debt affected

New York, December 03, 2018 -- Moody's Investors Service ("Moody's") today revised the rating outlook for Edison International (EIX) and its principal subsidiary, Southern California Edison Company (SCE), to negative from stable. At the same time, Moody's affirmed the Baa1 Issuer Rating of EIX and the A3 Issuer Rating of SCE. See rating list below for the complete list of ratings for EIX and SCE.

"The Woolsey fire, which is similar to the size of the Thomas fire last year, has created another large contingent exposure for SCE," said Toby Shea Vice President -- Senior Credit Officer, and "the cumulative exposure to wildfires fanned by the effects of climate change are materializing faster than we originally expected. Efforts to insulate the utilities, in the form of new laws or regulations, will be slow and drawn out, putting downward pressure on its credit rating."

RATINGS RATIONALE

The A3 rating for SCE reflects its business fundamentals as a low-risk regulated utility with mainly transmission and distribution (T&D) operations. The credit profiles of EIX and SCE are closely linked as over 99% of EIX's cash flows are generated from SCE. EIX is rated one notch below SCE because EIX has an additional $1.7 billion of parent holding company debt, which is structurally subordinated to SCE's $13.1 billion of debt and $2.2 billion of trust preferred shares. EIX's debt at the holding company accounts for about 12% of the company's total consolidated debt amount.

The primary driver of SCE's business risk is California's legislative and regulatory environments, which have both positive and negative characteristics. On the positive side, SCE has access to an extensive suite of recovery mechanisms, including decoupling and a forward test year. SCE also benefits from a supportive authorized return on equity, absent wildfire risk, that bolsters its financial risk profile and provides a strong incentive for investment. Negative aspects include California's higher degree of political risk relative to other jurisdictions in the US. Moody's thinks California's utilities tend to receive a higher level of attention and scrutiny from both the media and public and issues can quickly become contentious and litigious.

Wildfire events have become an increasing concern for all of California's utilities, regardless of whether they are investor or publicly owned, including SCE. Wildfires are a regular occurrence in California and other western states, but droughts and stronger winds, are spreading fires more quickly, undermining firefighters' ability to contain them. Due to the effects of climate change, which includes prolonged draughts and stronger winds, wildfires have become more intense and damaging. The proliferation of real estate development in fire-prone areas also adds to the damaging effects of the wildfires.

Due to the application of a legal theory known as inverse condemnation, California's electric utilities are exposed to material contingent liabilities related to wildfires. This is a unique risk factor across the sector that other utilities do not face. Any losses that utilities have to absorb could be reduced by liability insurance coverage ($1 billion in the case of SCE), where the cost of insurance can be passed on the ratepayers if the California Public Utility Commission (CPUC) finds that the utility acted prudently. Under the application of inverse condemnation, if utility equipment is determined to be the source of the fire, utilities are held strictly liable for property damages caused the wildfires, regardless of fault. Today, these losses could be much higher than any insurance coverage offers.

Prospectively, Moody's still sees California regulation as credit supportive for utilities, but overall the supportiveness has weakened. The legislature is also supportive, when needed. For example, the wildfire legislation SB 901 passed into law in September of 2018 provided some improvement over the existing situation because it established the framework for wildfire mitigation practices and clarifies the CPUC's discretion on the amount of cost that utilities can pass on to ratepayers. However, it failed to address the strict liability standard created by the application of inverse condemnation legal theory and leaves a considerable amount of uncertainty regarding cost recovery stemming from exposure created by inverse condemnation.

Financially, SCE has historically generated a ratio of CFO pre-WC to debt in the mid-20% range. This ratio is expected to fall to the low twenties going forward. This erosion of the financial profile is mainly attributed to tax reform, but is occurring against the backdrop of higher risks associated with wildfires and climate change, making the decline a more material credit negative. EIX is projected to generate a ratio of CFO pre-WC to debt to be around 20%. Tax reform will only have a minor effect on EIX's cash flows because EIX, unlike SCE, will have net operating losses that can be used to offset tax liabilities. It remains unclear if SCE would be held liable for wildfire damages or how the liability will be financed. However, as an indication of the potential impact, $2 billion of additional debt would drive SCE's CFO pre-WC to around 20%, and EIX, to 18%.

Outlook Actions:

..Issuer: Edison International

....Outlook, Changed To Negative From Stable

..Issuer: Southern California Edison Company

....Outlook, Changed To Negative From Stable

..Issuer: SCE Trust II

....Outlook, Changed To Negative From Stable

..Issuer: SCE Trust III

....Outlook, Changed To Negative From Stable

..Issuer: SCE Trust IV

....Outlook, Changed To Negative From Stable

..Issuer: SCE TRUST V

....Outlook, Changed To Negative From Stable

..Issuer: SCE Trust VI

....Outlook, Changed To Negative From Stable

Affirmations:

..Issuer: California Pollution Control Financing Auth.

....Senior Unsecured Revenue Bonds, Affirmed A3

....Underlying Senior Unsecured Revenue Bonds, Affirmed A3

..Issuer: California Statewide Communities Dev. Auth.

....Senior Secured Revenue Bonds, Affirmed A1

....Underlying Senior Secured Revenue Bonds, Affirmed A1

..Issuer: CLARK (COUNTY OF) NV

....Senior Secured Revenue Bonds, Affirmed A1

....Senior Unsecured Revenue Bonds, Affirmed A3

..Issuer: Edison International

.... Issuer Rating, Affirmed Baa1

....Senior Unsecured Bank Credit Facility, Affirmed Baa1

....Senior Unsecured Commercial Paper, Affirmed P-2

....Senior Unsecured Regular Bond/Debenture, Affirmed Baa1

....Senior Unsecured Shelf, Affirmed (P)Baa1

..Issuer: Farmington (City of) NM

....Senior Secured Revenue Bonds, Affirmed A1

....Senior Unsecured Revenue Bonds, Affirmed A3

....Underlying Senior Unsecured Revenue Bonds, Affirmed A3

..Issuer: Maricopa (County of) AZ, Poll. Ctrl. Corp.

....Senior Secured Revenue Bonds, Affirmed A1

..Issuer: SCE Trust II

....Preferred Stock, Affirmed Baa2

..Issuer: SCE Trust III

....Preferred Stock, Affirmed Baa2

..Issuer: SCE Trust IV

....Preferred Stock, Affirmed Baa2

..Issuer: SCE TRUST V

....Preference Stock, Affirmed Baa2

..Issuer: SCE Trust VI

....Preferred Stock, Affirmed Baa2

..Issuer: Southern California Edison Company

....Issuer Rating, Affirmed A3

....Senior Secured Shelf, Affirmed (P)A1

....Senior Unsecured Shelf, Affirmed (P)A3

....Preferred Shelf , Affirmed (P)Baa2

....Preferred Stock, Affirmed Baa2

....Senior Secured First Mortgage Bonds, Affirmed A1

....Underlying Senior Secured First Mortgage Bonds, Affirmed A1

....Senior Unsecured Bank Credit Facility, Affirmed A3

....Senior Unsecured Commercial Paper, Affirmed P-2

....Senior Unsecured Regular Bond/Debenture, Affirmed A3

Liquidity Analysis

Despite the large negative free cash flow forecast, SCE and EIX have a healthy level of liquidity based on a total of $4.5 billion of revolving credit facilities ($3 billion at SCE and $1.5 billion at EIX) that mature in May 2023. SCE and EIX both have a short-term commercial paper rating of Prime-2.

SCE and EIX's credit facilities were largely undrawn as of September 30, 2018. Drawing on the credit facilities are not subject to a MAC representation. The debt covenant in SCE and EIX's credit facility limits their debt to total capitalization ratio to less than or equal to 0.65 to 1 and 0.70 to 1, respectively. At September 30, 2018, SCE's debt to total capitalization ratio was 0.46 to 1 while EIX's was 0.51 to 1.

For year 2017, SCE generated negative free cash flow of $712 million and EIX generated negative free cash flow of $1 billion on a consolidated basis. This pattern is expected to become more pronounced due to its large capital expenditure program and a growing dividend. SCE and EIX have a minor amount of cash holding.

As of September 30, 2018, SCE had an approximately $103 million in commercial paper outstanding, and EIX had none. Upcoming major debt maturities include $400m of senior notes at EIX due April 2020 and $450m of first mortgage bonds due March 2021 at SCE.

Our current assumption is that the company will not reduce dividends or fully draw on its revolving credit facility in response to the Woolsey fire.

Outlook

The negative outlook reflects the compounding contingent exposure from wildfires created by the application of inverse condemnation legal doctrine and the regulatory uncertainty involved in recovering the cost of wildfires from ratepayers. The negative outlook also reflects an expectation that EIX will continue to be facing more severe weather conditions, including higher wildfire risks and other negative impacts from climate change, over the next several years.

Factors that Could Lead to an Upgrade

We could stabilize the outlooks of EIX and SCE if there are additional supportive legislation that mitigate the risk of wildfires to SCE. An upgrade is possible if the inverse condemnation exposure from wildfires is fully mitigated through regulatory, legislative, or judicial action.

Factors that Could Lead to an Downgrade

A downgrade of EIX and SCE is likely if SCE's wildfire exposure is not further mitigated or SCE's cumulative exposure continues to grow.

The principal methodology used in these ratings was Regulated Electric and Gas Utilities published in June 2017. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

Company Profile

Headquartered in Rosemead, California, EIX is a California based electric utility holding company with its principal subsidiary SCE supplying electric energy to 15 million people in central, coastal and southern California. SCE is predominantly a transmission and distribution company. SCE's earnings are regulated by California Public Utility Commission and the Federal Energy Regulatory Commission.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Toby Shea
VP - Senior Credit Officer
Infrastructure Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Michael G. Haggarty
Associate Managing Director
Infrastructure Finance Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

No Related Data.
© 2019 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

CREDIT RATINGS ISSUED BY MOODY'S INVESTORS SERVICE, INC. AND ITS RATINGS AFFILIATES (“MIS”) ARE MOODY’S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MOODY’S PUBLICATIONS MAY INCLUDE MOODY’S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES. MOODY’S DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT OR IMPAIRMENT. SEE MOODY’S RATING SYMBOLS AND DEFINITIONS PUBLICATION FOR INFORMATION ON THE TYPES OF CONTRACTUAL FINANCIAL OBLIGATIONS ADDRESSED BY MOODY’S RATINGS. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS AND MOODY’S OPINIONS INCLUDED IN MOODY’S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. MOODY’S PUBLICATIONS MAY ALSO INCLUDE QUANTITATIVE MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS OR COMMENTARY PUBLISHED BY MOODY’S ANALYTICS, INC. CREDIT RATINGS AND MOODY’S PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND CREDIT RATINGS AND MOODY’S PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. NEITHER CREDIT RATINGS NOR MOODY’S PUBLICATIONS COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY’S ISSUES ITS CREDIT RATINGS AND PUBLISHES MOODY’S PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL, WITH DUE CARE, MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.

MOODY’S CREDIT RATINGS AND MOODY’S PUBLICATIONS ARE NOT INTENDED FOR USE BY RETAIL INVESTORS AND IT WOULD BE RECKLESS AND INAPPROPRIATE FOR RETAIL INVESTORS TO USE MOODY’S CREDIT RATINGS OR MOODY’S PUBLICATIONS WHEN MAKING AN INVESTMENT DECISION. IF IN DOUBT YOU SHOULD CONTACT YOUR FINANCIAL OR OTHER PROFESSIONAL ADVISER.

ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY LAW, INCLUDING BUT NOT LIMITED TO, COPYRIGHT LAW, AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED, DISSEMINATED, REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT MOODY’S PRIOR WRITTEN CONSENT.

CREDIT RATINGS AND MOODY’S PUBLICATIONS ARE NOT INTENDED FOR USE BY ANY PERSON AS A BENCHMARK AS THAT TERM IS DEFINED FOR REGULATORY PURPOSES AND MUST NOT BE USED IN ANY WAY THAT COULD RESULT IN THEM BEING CONSIDERED A BENCHMARK.

All information contained herein is obtained by MOODY’S from sources believed by it to be accurate and reliable. Because of the possibility of human or mechanical error as well as other factors, however, all information contained herein is provided “AS IS” without warranty of any kind. MOODY'S adopts all necessary measures so that the information it uses in assigning a credit rating is of sufficient quality and from sources MOODY'S considers to be reliable including, when appropriate, independent third-party sources. However, MOODY’S is not an auditor and cannot in every instance independently verify or validate information received in the rating process or in preparing the Moody’s publications.

To the extent permitted by law, MOODY’S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability to any person or entity for any indirect, special, consequential, or incidental losses or damages whatsoever arising from or in connection with the information contained herein or the use of or inability to use any such information, even if MOODY’S or any of its directors, officers, employees, agents, representatives, licensors or suppliers is advised in advance of the possibility of such losses or damages, including but not limited to: (a) any loss of present or prospective profits or (b) any loss or damage arising where the relevant financial instrument is not the subject of a particular credit rating assigned by MOODY’S.

To the extent permitted by law, MOODY’S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability for any direct or compensatory losses or damages caused to any person or entity, including but not limited to by any negligence (but excluding fraud, willful misconduct or any other type of liability that, for the avoidance of doubt, by law cannot be excluded) on the part of, or any contingency within or beyond the control of, MOODY’S or any of its directors, officers, employees, agents, representatives, licensors or suppliers, arising from or in connection with the information contained herein or the use of or inability to use any such information.

NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY CREDIT RATING OR OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY MOODY’S IN ANY FORM OR MANNER WHATSOEVER.

Moody’s Investors Service, Inc., a wholly-owned credit rating agency subsidiary of Moody’s Corporation (“MCO”), hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by Moody’s Investors Service, Inc. have, prior to assignment of any rating, agreed to pay to Moody’s Investors Service, Inc. for ratings opinions and services rendered by it fees ranging from $1,000 to approximately $2,700,000. MCO and MIS also maintain policies and procedures to address the independence of MIS’s ratings and rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold ratings from MIS and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually at www.moodys.com under the heading “Investor Relations — Corporate Governance — Director and Shareholder Affiliation Policy.”

Additional terms for Australia only: Any publication into Australia of this document is pursuant to the Australian Financial Services License of MOODY’S affiliate, Moody’s Investors Service Pty Limited ABN 61 003 399 657AFSL 336969 and/or Moody’s Analytics Australia Pty Ltd ABN 94 105 136 972 AFSL 383569 (as applicable). This document is intended to be provided only to “wholesale clients” within the meaning of section 761G of the Corporations Act 2001. By continuing to access this document from within Australia, you represent to MOODY’S that you are, or are accessing the document as a representative of, a “wholesale client” and that neither you nor the entity you represent will directly or indirectly disseminate this document or its contents to “retail clients” within the meaning of section 761G of the Corporations Act 2001. MOODY’S credit rating is an opinion as to the creditworthiness of a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail investors.

Additional terms for Japan only: Moody's Japan K.K. (“MJKK”) is a wholly-owned credit rating agency subsidiary of Moody's Group Japan G.K., which is wholly-owned by Moody’s Overseas Holdings Inc., a wholly-owned subsidiary of MCO. Moody’s SF Japan K.K. (“MSFJ”) is a wholly-owned credit rating agency subsidiary of MJKK. MSFJ is not a Nationally Recognized Statistical Rating Organization (“NRSRO”). Therefore, credit ratings assigned by MSFJ are Non-NRSRO Credit Ratings. Non-NRSRO Credit Ratings are assigned by an entity that is not a NRSRO and, consequently, the rated obligation will not qualify for certain types of treatment under U.S. laws. MJKK and MSFJ are credit rating agencies registered with the Japan Financial Services Agency and their registration numbers are FSA Commissioner (Ratings) No. 2 and 3 respectively.

MJKK or MSFJ (as applicable) hereby disclose that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MJKK or MSFJ (as applicable) have, prior to assignment of any rating, agreed to pay to MJKK or MSFJ (as applicable) for ratings opinions and services rendered by it fees ranging from JPY125,000 to approximately JPY250,000,000.

MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements.

​​​​
Moodys.com