===============================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
/X/ Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended March 31, 2000
OR
/ / Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
----------------- -----------------------
Commission File Number 1-9936
EDISON INTERNATIONAL
(Exact name of registrant as specified in its charter)
CALIFORNIA 95-4137452
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2244 Walnut Grove Avenue
(P.O. Box 800)
Rosemead, California
(Address of principal 91770
executive offices) (Zip Code)
(626) 302-2222
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No ___
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date:
Class Outstanding at May 9, 2000
- -------------------------------------------------------------------------------
Common Stock, no par value 332,296,306
<PAGE>
EDISON INTERNATIONAL
INDEX
Page
No.
----
Part I. Financial Information:
Item 1. Consolidated Financial Statements:
Consolidated Statements of Income -- Three Months
Ended March 31, 2000, and 1999 1
Consolidated Statements of Comprehensive Income--
Three Months Ended March 31, 2000, and 1999 1
Consolidated Balance Sheets-- March 31, 2000,
and December 31, 1999 2
Consolidated Statements of Cash Flows -- Three Months
Ended March 31, 2000, and 1999 4
Notes to Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of Results
of Operations and Financial Condition 10
Part II. Other Information:
Item 1. Legal Proceedings 23
Item 4. Submission of Matters to a Vote of Security Holders 24
Item 6. Exhibits and Reports on Form 8-K 25
<PAGE>
EDISON INTERNATIONAL
PART I -- FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
CONSOLIDATED STATEMENTS OF INCOME
In thousands, except per-share amounts
<TABLE>
<CAPTION>
3 Months Ended
March 31,
- --------------------------------------------------------- ---------------------------------------------
2000 1999
- -------------------------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
Electric utility $ 1,829,691 $ 1,684,837
Nonutility power generation 750,753 269,810
Financial services and other 142,876 141,253
- -------------------------------------------------------------------------------------------------------
Total operating revenue 2,723,320 2,095,900
- -------------------------------------------------------------------------------------------------------
Fuel 331,590 114,438
Purchased power-- contracts 428,174 609,906
Purchased power-- PX/ISO-- net 75,961 116,956
Provisions for regulatory adjustment clauses-- net 102,954 (279,636)
Other operation and maintenance 727,559 668,079
Depreciation, decommissioning and amortization 494,265 423,981
Property and other taxes 40,076 39,155
Net gain on sale of utility plant (6,224) (2,200)
- -------------------------------------------------------------------------------------------------------
Total operating expenses 2,194,355 1,690,679
- -------------------------------------------------------------------------------------------------------
Operating income 528,965 405,221
- -------------------------------------------------------------------------------------------------------
Interest and dividend income 25,239 20,371
Other nonoperating deductions-- net (28) (4,172)
- -------------------------------------------------------------------------------------------------------
Total other income-- net 25,211 16,199
- -------------------------------------------------------------------------------------------------------
Income before fixed charges and taxes 554,176 421,420
- -------------------------------------------------------------------------------------------------------
Interest and amortization on long-term debt 255,707 151,821
Other interest expense-- net 67,978 22,934
Dividends on preferred securities 25,241 3,233
Dividends on utility preferred stock 5,648 6,199
- -------------------------------------------------------------------------------------------------------
Total fixed charges 354,574 184,187
- -------------------------------------------------------------------------------------------------------
Minority interest 897 962
- -------------------------------------------------------------------------------------------------------
Income before taxes 198,705 236,271
Income taxes 89,164 93,060
- -------------------------------------------------------------------------------------------------------
Net income $ 109,541 $ 143,211
- -------------------------------------------------------------------------------------------------------
Weighted-average shares of common stock outstanding 344,922 348,327
Basic earnings per share $ 0.32 $ 0.41
Diluted earnings per share $ 0.32 $ 0.41
Dividends declared per common share $ 0.28 $ 0.27
</TABLE>
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
In thousands
<TABLE>
<CAPTION>
3 Months Ended
March 31,
- -----------------------------------------------------------------------------------------------------------------
2000 1999
- -----------------------------------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
Net income $ 109,541 $ 143,211
Cumulative translation adjustments-- net (47,082) (12,638)
Unrealized gain (loss) on securities-- net (6,827) (9,146)
Reclassification adjustment for gains included in net income -- (17,371)
- -----------------------------------------------------------------------------------------------------------------
Comprehensive income $ 55,632 $ 104,056
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
1
<PAGE>
EDISON INTERNATIONAL
CONSOLIDATED BALANCE SHEETS
In thousands
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
- --------------------------------------------------------------------------------------------------------------------
(Unaudited)
ASSETS
<S> <C> <C>
Cash and equivalents $ 917,474 $ 507,581
Receivables, including unbilled revenue, less allowances of
$34,794 and $34,164 for uncollectible accounts at respective dates 1,336,599 1,378,422
Fuel inventory 297,540 241,216
Materials and supplies, at average cost 196,957 199,302
Accumulated deferred income taxes-- net 127,811 190,508
Prepayments and other current assets 95,126 152,635
- --------------------------------------------------------------------------------------------------------------------
Total current assets 2,971,507 2,669,664
- --------------------------------------------------------------------------------------------------------------------
Nonutility property-- less accumulated provision for
depreciation of $526,971 and $445,945 at respective dates 12,107,088 12,352,095
Nuclear decommissioning trusts 2,580,656 2,508,904
Investments in partnerships and unconsolidated subsidiaries 2,598,723 2,504,691
Investments in leveraged leases 1,934,489 1,884,603
Other investments 162,217 180,594
- --------------------------------------------------------------------------------------------------------------------
Total investments and other assets 19,383,173 19,430,887
- --------------------------------------------------------------------------------------------------------------------
Utility plant at original cost:
Transmission and distribution 12,558,206 12,439,059
Generation 1,736,204 1,717,676
Accumulated provision for depreciation and decommissioning (7,705,363) (7,520,036)
Construction work in progress 664,606 562,651
Nuclear fuel, at amortized cost 117,571 132,197
- --------------------------------------------------------------------------------------------------------------------
Total utility plant 7,371,224 7,331,547
- --------------------------------------------------------------------------------------------------------------------
Unamortized nuclear investment-- net 1,167,340 1,365,848
Income tax-related deferred charges 1,305,704 1,272,947
Regulatory balancing accounts-- net 1,806,882 1,714,973
Unamortized debt issuance and reacquisition expense 333,740 339,806
Other deferred charges 2,122,071 2,103,716
- --------------------------------------------------------------------------------------------------------------------
Total deferred charges 6,735,737 6,797,290
- --------------------------------------------------------------------------------------------------------------------
Total assets $ 36,461,641 $ 36,229,388
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
EDISON INTERNATIONAL
CONSOLIDATED BALANCE SHEETS
In thousands, except share amounts
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
- -----------------------------------------------------------------------------------------------------------
(Unaudited)
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
Short-term debt $ 2,921,735 $ 2,553,376
Current portion of long-term debt 832,310 962,041
Accounts payable 506,082 625,347
Accrued taxes 478,256 406,770
Accrued interest 180,321 188,773
Dividends payable 108,663 100,598
Regulatory balancing accounts-- net 196,201 75,693
Deferred unbilled revenue and other current liabilities 2,104,937 1,929,589
- ----------------------------------------------------------------------------------------------------------
Total current liabilities 7,328,505 6,842,187
- ----------------------------------------------------------------------------------------------------------
Long-term debt 13,570,390 13,391,636
- ----------------------------------------------------------------------------------------------------------
Accumulated deferred income taxes-- net 5,732,831 5,756,824
Accumulated deferred investment tax credits 214,380 224,636
Customer advances and other deferred credits 1,780,918 2,094,225
Power purchase contracts 538,588 563,459
Other long-term liabilities 611,953 477,313
- ----------------------------------------------------------------------------------------------------------
Total deferred credits and other liabilities 8,878,670 9,116,457
- ----------------------------------------------------------------------------------------------------------
Commitments and contingencies (Notes 1 and 2)
Minority interest 10,354 8,778
- ----------------------------------------------------------------------------------------------------------
Preferred stock of utility:
Not subject to mandatory redemption 128,755 128,755
Subject to mandatory redemption 255,700 255,700
Company-obligated mandatorily redeemable securities
of subsidiaries holding solely parent company debentures 948,490 948,238
Other preferred securities 316,414 326,894
- ----------------------------------------------------------------------------------------------------------
Total preferred securities of subsidiaries 1,649,359 1,659,587
- ----------------------------------------------------------------------------------------------------------
Common stock (338,059,806 and 347,207,106 shares
outstanding at respective dates) 2,035,271 2,090,212
Accumulated other comprehensive income:
Cumulative translation adjustments-- net (36,634) 10,448
Unrealized gain in equity securities-- net 24,365 31,192
Retained earnings 3,001,361 3,078,891
- ----------------------------------------------------------------------------------------------------------
Total common shareholders' equity 5,024,363 5,210,743
- ----------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $ 36,461,641 $ 36,229,388
- ----------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
EDISON INTERNATIONAL
CONSOLIDATED STATEMENTS OF CASH FLOWS
In thousands
<TABLE>
<CAPTION>
3 Months Ended
March 31,
- ------------------------------------------------------------------------------------------------------------
2000 1999
- ------------------------------------------------------------------------------------------------------------
(Unaudited)
Cash flows from operating activities:
<S> <C> <C>
Net income $ 109,541 $ 143,211
Adjustments for non-cash items:
Depreciation, decommissioning and amortization 494,265 423,981
Other amortization 43,038 20,689
Deferred income taxes and investment tax credits 3,756 144,279
Equity in income from partnerships and
unconsolidated subsidiaries (37,153) (64,441)
Income from leveraged leases (49,952) (57,564)
Other long-term liabilities 13,098 52,523
Regulatory balancing account-- long-term (91,909) (329,097)
Net loss (gain) on sale of utility generating plants 19 (1,124)
Other-- net (90,615) (13,492)
Changes in working capital:
Receivables (1,266) 53,194
Regulatory balancing accounts 120,508 3,688
Fuel inventory, materials and supplies 7,964 (4,252)
Prepayments and other current assets (4,629) 47,642
Accrued interest and taxes 67,532 (34,770)
Accounts payable and other current liabilities (15,445) 57,173
Distributions from partnerships and unconsolidated subsidiaries 39,031 29,099
- ------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 607,783 470,739
- ------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Long-term debt issued 2,308,153 234,878
Long-term debt repaid (2,092,890) (43,705)
Common stock issued 134 --
Common stock repurchased (146,582) (92,023)
Rate reduction notes repaid (60,952) (70,531)
Short-term debt issued-- net 351,622 1,704,841
Dividends paid (93,746) (91,513)
Other-- net (14,362) (8,836)
- ------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 251,377 1,633,111
- ------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Additions to property and plant (331,032) (263,649)
Purchase of nonutility generating plants -- (1,800,355)
Proceeds from sale of assets -- 13,819
Funding of nuclear decommissioning trusts (23,182) (37,126)
Investments in partnerships and unconsolidated subsidiaries (106,635) (6,241)
Unrealized loss on securities-- net (6,827) (26,517)
Investment in leveraged leases 12,763 466
Other-- net 5,646 42,832
- ------------------------------------------------------------------------------------------------------------
Net cash used by investing activities (449,267) (2,076,771)
- ------------------------------------------------------------------------------------------------------------
Net increase in cash and equivalents 409,893 27,079
Cash and equivalents, beginning of period 507,581 583,556
- ------------------------------------------------------------------------------------------------------------
Cash and equivalents, end of period $ 917,474 $ 610,635
- ------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
EDISON INTERNATIONAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Management's Statement
In the opinion of management, all adjustments have been made that are necessary
to present a fair statement of the financial position and results of operations
for the periods covered by this report.
Edison International's significant accounting policies were described in Note 1
of "Notes to Consolidated Financial Statements" included in its 1999 Annual
Report on Form 10-K filed with the Securities and Exchange Commission. Edison
International follows the same accounting policies for interim reporting
purposes. This quarterly report should be read in conjunction with Edison
International's 1999 Annual Report and Form 10-K filed with the Securities and
Exchange Commission (SEC).
Certain prior-period amounts were reclassified to conform to the March 31, 2000,
financial statement presentation.
Note 1. Regulatory Matters
FERC Transmission Rate Case
Southern California Edison Company (SCE) filed its first Federal Energy
Regulatory Commission (FERC) transmission rate case in March 1997. The filing
proposed a transmission revenue requirement of $211 million. In March 1999, a
proposed FERC decision was issued recommending a return on equity of 9.68%
[compared to SCE's current California Public Utilities Commission (CPUC) rate
for distribution of 11.6%] and a lower revenue requirement. SCE filed comments
opposing the proposed decision in May 1999. In response to a FERC ruling, on
November 1, 1999, SCE filed additional evidence regarding return on equity. A
final FERC decision is expected by mid-2000. SCE does not expect the final
decision to have a material effect on its results of operations or financial
position.
Generating Plant Divestiture
In October 1999, SCE filed an application with the CPUC to approve an auction
process to sell its 56% interest in the Mohave Generating Station. On April 6,
2000, the CPUC approved the auction process. On May 10, 2000, SCE agreed to sell
its interest in Mohave to The AES Corporation for over $533 million. The
transaction is subject to approval by the CPUC and the FERC. The sale is
expected to close by November 2000.
On April 27, 2000, SCE agreed to sell its 16% interest in Palo Verde Nuclear
Generating Station and its 48% interest in Four Corners Generating Station to
Pinnacle West Energy for a total price of $550 million. The sale of assets at
Palo Verde will be accompanied by an assignment of SCE's interest in the related
decommissioning fund. Palo Verde is located in Arizona and Four Corners is
located in New Mexico. The transaction, which is subject to the approval of the
CPUC, the Nuclear Regulatory Commission and other state and federal entities, is
expected to close by mid-2001. For a certain period of time, competing offers
may be solicited and any superior offers received are subject to matching rights
by Pinnacle West Energy.
Hydroelectric Market Value Filing
In December 1999, SCE filed an application with the CPUC establishing a market
value for its hydroelectric generation-related assets at approximately $1.0
billion (almost twice the assets' book value) and proposing to retain and
operate the hydroelectric assets under a performance-based and revenue-sharing
mechanism. The application had broad-based support from labor, ratepayer and
environmental groups. If approved by the CPUC, SCE would be allowed to recover
an authorized, inflation-index operations and maintenance allowance, as well as
a reasonable return on capital investment. A revenue-sharing arrangement would
be activated if revenue from the sale of hydroelectricity exceeds or falls
short of the authorized revenue requirement. SCE would then refund 90% of the
excess revenue to ratepayers or recover 90% of any shortfalls from ratepayers. A
final CPUC decision is expected by the end of 2000.
5
<PAGE>
EDISON INTERNATIONAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 2. Contingencies
In addition to the matters disclosed in these notes, Edison International is
involved in other legal, tax and regulatory proceedings before various courts
and governmental agencies regarding matters arising in the ordinary course of
business. Edison International believes the outcome of these proceedings will
not materially affect its results of operations or liquidity.
Environmental Protection
Edison International is subject to numerous environmental laws and regulations,
which require it to incur substantial costs to operate existing facilities,
construct and operate new facilities, and mitigate or remove the effect of past
operations on the environment.
Edison International records its environmental liabilities when site assessments
and/or remedial actions are probable and a range of reasonably likely cleanup
costs can be estimated. Edison International reviews its sites and measures the
liability quarterly, by assessing a range of reasonably likely costs for each
identified site using currently available information, including existing
technology, presently enacted laws and regulations, experience gained at similar
sites, and the probable level of involvement and financial condition of other
potentially responsible parties. These estimates include costs for site
investigations, remediation, operations and maintenance, monitoring and site
closure. Unless there is a probable amount, Edison International records the
lower end of this reasonably likely range of costs (classified as other
long-term liabilities at undiscounted amounts).
Edison International's recorded estimated minimum liability to remediate its 46
identified sites is $159 million. The ultimate costs to clean up Edison
International's identified sites may vary from its recorded liability due to
numerous uncertainties inherent in the estimation process, such as: the extent
and nature of contamination; the scarcity of reliable data for identified sites;
the varying costs of alternative cleanup methods; developments resulting from
investigatory studies; the possibility of identifying additional sites; and the
time periods over which site remediation is expected to occur. Edison
International believes that, due to these uncertainties, it is reasonably
possible that cleanup costs could exceed its recorded liability by up to $281
million. The upper limit of this range of costs was estimated using assumptions
least favorable to Edison International among a range of reasonably possible
outcomes. In 1998, SCE sold all of its gas- and oil-fueled generation plants and
has retained some liability associated with the divested properties.
The CPUC allows SCE to recover environmental-cleanup costs at 42 of its sites,
representing $88 million of its recorded liability, through an incentive
mechanism (SCE may request to include additional sites). Under this mechanism,
SCE will recover 90% of cleanup costs through customer rates; and shareholders
fund the remaining 10%, with the opportunity to recover these costs from
insurance carriers and other third parties. SCE has successfully settled
insurance claims with all responsible carriers. Costs incurred at SCE's
remaining sites are expected to be recovered through customer rates. SCE has
recorded a regulatory asset of $122 million for its estimated minimum
environmental-cleanup costs expected to be recovered through customer rates.
Edison International's identified sites include several sites for which there is
a lack of currently available information, including the nature and magnitude of
contamination, and the extent, if any, that Edison International may be held
responsible for contributing to any costs incurred for remediating these sites.
Thus, no reasonable estimate of cleanup costs can now be made for these sites.
Edison International expects to clean up its identified sites over a period of
up to 30 years. Remediation costs in each of the next several years are expected
to range from $5 million to $15 million. Recorded costs for the twelve-month
period ended March 31, 2000 were $8 million.
6
<PAGE>
EDISON INTERNATIONAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Based on currently available information, Edison International believes it is
unlikely that it will incur amounts in excess of the upper limit of the
estimated range and, based upon the CPUC's regulatory treatment of
environmental-cleanup costs, Edison International believes that costs ultimately
recorded will not materially affect its results of operations or financial
position. There can be no assurance, however, that future developments,
including additional information about existing sites or the identification of
new sites, will not require material revisions to such estimates.
Nuclear Insurance
Federal law limits public liability claims from a nuclear incident to $9.5
billion. SCE and other owners of the San Onofre and Palo Verde nuclear plants
have purchased the maximum private primary insurance available ($200 million).
The balance is covered by the industry's retrospective rating plan that uses
deferred premium charges to every reactor licensee if a nuclear incident at any
licensed reactor in the U.S. results in claims and/or costs which exceed the
primary insurance at that plant site. Federal regulations require this secondary
level of financial protection. The Nuclear Regulatory Commission exempted San
Onofre Unit 1 from this secondary level, effective June 1994. The maximum
deferred premium for each nuclear incident is $88 million per reactor, but not
more than $10 million per reactor may be charged in any one year for each
incident. Based on its ownership interests, SCE could be required to pay a
maximum of $175 million per nuclear incident. However, it would have to pay no
more than $20 million per incident in any one year. Such amounts include a 5%
surcharge if additional funds are needed to satisfy public liability claims and
are subject to adjustment for inflation. If the public liability limit above is
insufficient, federal regulations may impose further revenue-raising measures to
pay claims, including a possible additional assessment on all licensed reactor
operators.
Property damage insurance covers losses up to $500 million, including
decontamination costs, at San Onofre and Palo Verde. Decontamination liability
and property damage coverage exceeding the primary $500 million also has been
purchased in amounts greater than federal requirements. Additional insurance
covers part of replacement power expenses during an accident-related nuclear
unit outage. These policies are issued primarily by mutual insurance companies
owned by utilities with nuclear facilities. If losses at any nuclear facility
covered by the arrangement were to exceed the accumulated funds for these
insurance programs, SCE could be assessed retrospective premium adjustments of
up to $19 million per year. Insurance premiums are charged to operating expense.
Spent Nuclear Fuel
Under federal law, the Department of Energy (DOE) is responsible for the
selection and development of a facility for disposal of spent nuclear fuel and
high-level radioactive waste. Such a facility was to be in operation by January
1998. However, the DOE did not meet its obligation. It is not certain when the
DOE will begin accepting spent nuclear fuel from San Onofre or from other
nuclear power plants.
SCE has primary responsibility for the interim storage of its spent nuclear fuel
at San Onofre. Current capability to store spent fuel is estimated to be
adequate through 2005. Meeting spent-fuel storage requirements beyond that
period would require additional on-site storage capability, the costs for which
have not been determined. Extended delays by the DOE could lead to consideration
of costly alternatives involving siting and environmental issues. SCE has paid
the DOE the required one-time fee applicable to nuclear generation at San Onofre
through April 6, 1983, (approximately $24 million, plus interest). SCE is also
paying the required quarterly fee equal to one mill per kilowatt-hour of
nuclear-generated electricity sold after April 6, 1983.
Palo Verde on-site spent fuel storage capacity will accommodate needs until 2003
for Unit 2, and until 2004 for Units 1 and 3. Arizona Public Service Company,
operating agent for Palo Verde, is constructing an interim fuel storage facility
that is expected to be completed in 2002.
7
<PAGE>
EDISON INTERNATIONAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SCE and other owners of nuclear power plants may be able to recover interim
storage costs arising from DOE delays in the acceptance of utility spent nuclear
fuel by pursuing relief under the terms of the contracts, as directed by the
courts, or through other court actions.
Note 3. Business Segments
Edison International's reportable business segments include its electric utility
operation segment (SCE), an unregulated power generation segment (Edison Mission
Energy), and a capital and financial services provider segment (Edison
Capital).
Segment information for the three months ended March 31, 2000, and 1999, was:
3 Months Ended
March 31,
- -------------------------------------------------------------------------
In millions 2000 1999
- -------------------------------------------------------------------------
Operating Revenue:
Electric utility $ 1,830 $ 1,685
Unregulated power generation 751 270
Capital & financial services 66 83
Corporate and other* 76 58
- -------------------------------------------------------------------------
Consolidated Edison International $ 2,723 $ 2,096
- -------------------------------------------------------------------------
Net Income:
Electric utility $ 113 $ 76
Unregulated power generation (12) 44
Capital & financial services 28 25
Corporate and other* (19) (2)
- -------------------------------------------------------------------------
Consolidated Edison International $ 110 $ 143
- -------------------------------------------------------------------------
* Includes amounts from nonutility subsidiaries not significant as a
reportable segment.
Total segment assets as March 31, 2000, were: electric utility, $17.7 billion;
unregulated power generation, $16 billion; capital and financial services, $3
billion.
Note 4. Acquisitions
On March 15, 2000, EME completed its acquisition of Edison Mission Wind Power
Italy B.V., formerly known as Italian Vento Power Corp. Energy 5 B.V. Edison
Mission Wind owns a 50% interest in a series of wind-generated power projects in
operation or under development in Italy. Assuming all of the projects under
development are completed, currently scheduled for 2002, the total capacity of
these projects will be 283 MW. The purchase price of the acquisition was $45
million with equity contribution obligations of up to $17 million, depending on
the number of projects that are ultimately developed.
Note 5. Accounting Changes
Effective January 1, 2000, EME changed its accounting method for major
maintenance to record such expenses as incurred. Previously, EME recorded major
maintenance costs on an accrue in advance method. EME voluntarily made the
change in accounting due to recent guidance provided by the Securities and
Exchange Commission. The cumulative effect of the change in accounting method
was an $18 million after-tax benefit.
8
<PAGE>
EDISON INTERNATIONAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
On January 1, 1999, Edison International implemented a new accounting rule that
requires costs related to start-up activities to be expensed as incurred.
Although this new accounting rule did not materially affect Edison
International's results of operations or financial position, EME wrote off $14
million on previously capitalized start-up costs in first quarter 1999.
Note 6. Employee Compensation and Benefit Plans
As disclosed in Edison International's 1999 Annual Report on Form 10-K, Edison
International's Board of Directors and its Compensation and Executive Personnel
Committee have been considering an exchange offer for outstanding affiliate
options issued by EME and Edison Capital. Such an exchange offer was reviewed
and approved by the Board of Directors at its meetings in January and February
2000, subject to final approval by the Compensation and Executive Personnel
Committee of the offer terms and documentation. The Compensation and Executive
Personnel Committee and the Board of Directors have subsequently concluded that,
in view of unexpected events adversely impacting the earnings from merchant
plants in the United Kingdom and the price of Edison International stock, it is
not advisable to make an exchange offer to the holders of EME's affiliate stock
options at this time. Accordingly, the Compensation and Executive Personnel
Committee, the Board of Directors and management are now concentrating on
developing methods to be used in valuing EME's 1999 merchant plant acquisitions
for purposes of affiliate option exercise windows and on other matters relating
to future exercise windows (including other steps necessary to value the EME
project portfolio at December 31, 1999). The Compensation and Executive
Personnel Committee is still considering whether to proceed with the exchange
offer for outstanding Edison Capital affiliate options. Upon resolution of the
matters noted above, any adjustments which may be required to the accrued
incentive liability will be recorded at that time.
9
<PAGE>
EDISON INTERNATIONAL
Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition
Results of Operations
First Quarter 2000 vs. First Quarter 1999
Earnings
Edison International's basic earnings per share were 32(cent) for first quarter
2000, compared to 41(cent) for first quarter 1999. Southern California Edison's
(SCE) first quarter 2000 earnings were 33(cent) per share, compared with
22(cent) for the same period last year. The quarterly increase for SCE was
primarily due to a planned refueling outage in 1999 at the San Onofre Nuclear
Generating Station and higher kilowatt-hour sales in 2000. Edison Mission Energy
(EME) lost 3(cent) for the quarter, compared to earnings of 13(cent) for the
prior-year period. The decrease was primarily attributable to losses from the
generating assets acquired from Commonwealth Edison (Illinois plants) in
December 1999, higher interest expense and a higher effective tax rate. The
decrease was partially offset by earnings from new acquisitions, the Ferrybridge
and Fiddler's Ferry plants in the United Kingdom (U.K.), and the Homer City
plant, which did not have comparable first quarter 1999 earnings. The earnings
from the winter peaking plants in the U.K. were insufficient to offset the
expected seasonal net loss from the summer peaking plants in Illinois. The
Ferrybridge and Fiddler's Ferry plants' earnings were adversely impacted by
lower energy prices during the first quarter of 2000 due to unseasonably warm
weather and regulatory uncertainty regarding planned changes in the electricity
trading arrangements. Edison Capital's earnings were 11(cent), unchanged from
the same period last year. Edison Enterprises and the parent company were
responsible for a 9(cent) loss in first quarter 2000, compared to a 5(cent) loss
in first quarter 1999. The decrease in earnings was primarily due to higher
interest expense at the parent company, partially offset by improved operating
performance and lower general and administrative expenses at Edison Enterprises.
Operating Revenue
As a result of industry restructuring, customers have an option to buy power
from SCE or directly from the California Power Exchange (PX), thus becoming
direct access customers. Most direct access customers continue to be billed by
SCE, but are also given a credit for the generation portion of their bills.
Electric utility revenue increased during the first quarter of 2000, compared
with the same period in 1999, as retail sales volume increased 8%. Over 92% of
electric utility revenue was from retail sales. Retail rates are regulated by
the California Public Utilities Commission (CPUC) and wholesale rates are
regulated by the Federal Energy Regulatory Commission (FERC).
Due to warmer weather during the summer months, electric operating revenue
during the third quarter of each year is significantly higher than other
quarters.
Nonutility power generation revenue increased in 2000, primarily due to
increases at EME related to the Ferrybridge and Fiddler's Ferry generating
facilities, the Illinois plants and the Homer City plant.
Due to warmer weather during the summer months, nonutility power generation
revenue from Homer City and the Illinois plants is usually higher during the
third quarter of each year. In addition, EME's third quarter revenue from energy
projects is materially higher than other quarters of the year due to a
significant number of EME's domestic energy projects located on the western
coast of the United States, which generally have power sales contracts that
provide for higher payments during summer months. First Hydro and Ferrybridge
and Fiddler's Ferry provide for higher nonutility power generation revenue
during the winter months.
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Operating Expenses
Fuel expense increased in 2000, primarily due to increased expenses at EME
related to the Ferrybridge and Fiddler's Ferry generating facilities, the
Illinois plants and the Homer City plant.
Purchased-power expense -- contracts decreased for the three months ended March
31, 2000, compared to the year-earlier period, primarily due to SCE entering
into settlements to end its contractual obligations with certain nonutility
generators (known as qualifying facilities, or QFs) and the terms in some of the
QF contracts reverting to lower prices. Prior to April 1998, SCE was required
under federal law and CPUC orders to enter into contracts to purchase power from
QFs at CPUC-mandated prices even though energy and capacity prices under many of
these contracts are generally higher than other sources. For the twelve months
ended March 31, 2000, SCE paid about $1.3 billion (including energy and capacity
payments) more for these power purchases than the cost of power available from
other sources. SCE is continuing to purchase power under existing contracts from
certain QFs and from other utilities. Power purchases from QFs and other
utilities are sold through the PX.
Since April 1, 1998, SCE has been required to sell all of its generated power
through the PX, schedule delivery of the power through the California
Independent System Operator (ISO) and acquire all of its power from the PX to
distribute to its retail customers. These transactions with the PX and ISO are
reported net. For the quarter ended March 31, 2000, PX/ISO purchased-power
expense decreased 35%, mainly due to the realization of hydroelectric-related
ISO revenue which had been previously deferred awaiting regulatory approval.
Provisions for regulatory adjustment clauses increased for the three months
ended March 31, 2000, compared to the year-earlier period. The quarterly
increase reflects overcollections related to the difference between
generation-related revenue and generation-related costs, as well as
overcollections related to the administration of public-purpose funds.
Other operation and maintenance expenses increased in 2000, primarily reflecting
increased plant operating expenses at EME due to the Illinois plants, the
Ferrybridge and Fiddler's Ferry generating facilities, and the Homer City plant.
This increase was partially offset by a decrease in mandated transmission
service (known as must-run reliability services) expense at SCE which was caused
by SCE being contractually obligated for fewer must-run units in 2000, compared
to 1999.
Depreciation, decommissioning and amortization expense increased in 2000, mainly
due to EME's 1999 acquisitions of the Illinois plants (in December) and the
Ferrybridge and Fiddler's Ferry generating facilities (in July).
Other Income
Interest and dividend income increased in 2000, primarily due to increases in
interest earned on higher balancing account undercollections at SCE.
Other nonoperating deductions decreased in 2000, primarily due to the gain on
sale of an equity investment at Edison International's insurance subsidiary in
first quarter 2000, as well as the absence of EME's write-off of start-up costs
in first quarter 1999. These deduction decreases were almost completely offset
by a nonoperating income decrease at SCE due to gains on sales of equity
investments in first quarter 1999.
Fixed Charges and Taxes
Interest and amortization on long-term debt increased in 2000, reflecting
additional long-term debt at EME to finance its acquisition of the Homer City
plant, the Ferrybridge and Fiddler's Ferry generating facilities, and the
Illinois plants. Increased long-term debt at Edison International (parent
company) also contributed to the increased interest expense.
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Other interest expense increased in 2000, mostly due to additional debt
financing for EME's 1999 acquisitions of the Illinois plants, the Ferrybridge
and Fiddler's Ferry generating facilities and the Homer City plant. Higher
overall short-term debt balances at both SCE and Edison International, the
parent company, also contributed to the increase in first quarter 2000.
Dividends on preferred securities increased in 2000, reflecting the additional
issuance of preferred securities at EME during 1999, and the issuance of
quarterly income securities at Edison International, the parent company, in July
and October 1999. Proceeds from the issuances were used primarily to finance
EME's 1999 acquisitions of a 40% interest in Contact Energy Ltd., the Fiddler's
Ferry and Ferrybridge generating facilities, and the Illinois plants.
Income taxes decreased slightly in 2000, as decreases at EME and Edison
International (parent) were almost completely offset by an increase at SCE.
EME's decrease reflects lower first quarter 2000 earnings (see additional
discussion in Market Risk Exposures - EME Issues) while the decrease at Edison
International (parent) was the result of significantly lower pre-tax income. The
increase at SCE was mainly due to higher pre-tax income.
Financial Condition
Edison International's liquidity is primarily affected by debt maturities,
dividend payments, capital expenditures, and investments in partnerships and
unconsolidated subsidiaries. Capital resources include cash from operations and
external financings.
Edison International's Board of Directors has authorized the repurchase of up to
$2.8 billion of its outstanding shares of common stock. In the first quarter of
2000, Edison International repurchased more than 9 million shares (approximately
$150 million) of its common stock. These repurchases were the first to occur
since first quarter 1999. Edison International has now repurchased approximately
110 million shares ($2.6 billion) between January 1, 1995, and March 31, 2000,
funded by dividends from its subsidiaries. On March 16, 2000, Edison
International increased its annual common stock dividend from $1.08 to $1.12, a
3.7% increase. Edison International's dividend payout ratio for the twelve-month
period ended March 31, 2000, was 64%.
Cash Flows from Operating Activities
Net cash provided by operating activities totaled $608 million in the first
quarter of 2000, compared to $471 million in the first quarter of 1999. For the
first quarter of 2000, Edison International's cash flow coverage of dividends
was 6.5 times, compared to 5.1 times for the year-earlier period.
Cash Flows from Financing Activities
At March 31, 2000, Edison International and its subsidiaries had $898 million of
borrowing capacity available under lines of credit totaling $2.6 billion. SCE
had total lines of credit of $1.25 billion, with $1 million available for
short-term debt and $515 million available for the long-term refinancing of its
variable-rate pollution-control bonds. The parent company had total lines of
credit of $590 million, with $8 million available. The nonutility subsidiaries
had total lines of credit of $800 million, with $374 million available to
finance general cash requirements. These unsecured lines of credit are at
negotiated or bank index rates with various expiration dates.
Both EME's short-term and long-term debt are used for general corporate purposes
as well as acquisitions. SCE's short-term debt is used to finance fuel
inventories and general cash requirements. SCE's long-term debt is used mainly
to finance capital expenditures. SCE's external financings are influenced by
market conditions and other factors, including limitations imposed by its
articles of incorporation and trust indenture. As of March 31, 2000, SCE could
issue approximately $11.6 billion of additional first and refunding
mortgage bonds and $2.8 billion of preferred stock at current interest and
dividend rates.
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EME has firm commitments of $220 million to make equity and other contributions
for the ISAB project in Italy, the EcoElectrica project in Puerto Rico, the Tri
Energy project in Thailand and the Italian wind projects. EME also has
contingent obligations to make additional contributions of $123 million,
primarily for equity support guarantees related to the Paiton project in
Indonesia.
EME may incur additional obligations to make equity and other contributions to
projects in the future. EME believes it will have sufficient liquidity to meet
these equity requirements from cash provided by operating activities, proceeds
from the repayment of loans to energy projects and funds available from EME's
revolving line of credit.
Edison Capital has firm commitments of $331 million to fund affordable housing,
and energy and infrastructure investments.
California law prohibits SCE from incurring or guaranteeing debt for its
nonutility affiliates. Additionally, the CPUC regulates SCE's capital structure,
limiting the dividends it may pay Edison International. At March 31, 2000, SCE
had the capacity to pay $81 million in additional dividends and continue to
maintain its authorized capital structure. These restrictions are not expected
to affect Edison International's ability to meet its cash obligations.
In December 1997, $2.5 billion of rate reduction notes were issued on behalf of
SCE by SCE Funding LLC, a special purpose entity. These notes were issued to
finance the 10% rate reduction mandated by state law. The proceeds of the rate
reduction notes were used by SCE Funding LLC to purchase from SCE an enforceable
right known as transition property. Transition property is a current property
right created by the restructuring legislation and a financing order of the CPUC
and consists generally of the right to be paid a specified amount from
non-bypassable rates charged to residential and small commercial customers. The
rate reduction notes are being repaid over 10 years through these non-bypassable
residential and small commercial customer rates which constitute the transition
property purchased by SCE Funding LLC. The remaining series of outstanding rate
reduction notes have scheduled maturities beginning in 2001 and ending in 2007,
with interest rates ranging from 6.17% to 6.42%. The notes are secured by the
transition property and are not secured by, or payable from, assets of SCE or
Edison International. SCE used the proceeds from the sale of the transition
property to retire debt and equity securities.
Although, as required by generally accepted accounting principles, SCE Funding
LLC is consolidated with SCE and the rate reduction notes are shown as long-term
debt in the consolidated financial statements, SCE Funding LLC is legally
separate from SCE. The assets of SCE Funding LLC are not available to creditors
of SCE or Edison International, and the transition property is legally not an
asset of SCE or Edison International.
Cash Flows from Investing Activities
Cash flows from investing activities are affected by additions to property and
plant, purchases and sales of assets, the nonutility companies' investments in
partnerships and unconsolidated subsidiaries, and funding of nuclear
decommissioning trusts. Decommissioning costs are recovered in rates. SCE
estimates that it will spend approximately $8.6 billion through 2060 to
decommission its nuclear facilities. This estimate is based on SCE's
current-dollar decommissioning costs ($2.1 billion), escalated at rates ranging
from 0.3% to 10.0% (depending on the cost element) annually. These costs are
expected to be funded from independent decommissioning trusts which receive SCE
contributions of approximately $25 million per year.
Cash used for the nonutility subsidiaries' investing activities was $172 million
for the three-month period ended March 31, 2000, compared to $1.8 billion for
the same period in 1999. The decrease in 2000 reflects EME's acquisition of the
Homer City plant in first quarter 1999.
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Projected Capital Requirements
Edison International's projected construction expenditures for the next five
years are: 2000 - $1.4 billion; 2001 - $1.2 billion; 2002 - $1.1 billion; 2003 -
$1.0 billion; and 2004 - $908 million.
Long-term debt maturities and sinking fund requirements for the five
twelve-month periods following March 31, 2000, are: 2001 - $809 million; 2002 -
$1.2 billion; 2003 - $777 million; 2004 - $670 million; and 2005 - $719 million.
Preferred stock redemption requirements for the five twelve-month periods
following March 31, 2000, are: 2001 and 2002 - zero; 2003 - $109 million; 2004 -
$9 million; and 2005 - $9 million.
Market Risk Exposures
Edison International's primary market risk exposures arise from fluctuations in
energy prices, interest rates and foreign exchange rates. Edison International's
risk management policy allows the use of derivative financial instruments to
manage its financial exposures, but prohibits the use of these instruments for
speculative or trading purposes.
SCE Issues
As a result of the rate freeze established in the restructuring legislation,
SCE's transition costs are recovered as the residual component of rates once the
costs for distribution, transmission, public purpose programs, nuclear
decommissioning and the cost of supplying power to its customers through the PX
and ISO have already been recovered. Accordingly, more revenue will be available
to cover transition costs when market prices in the PX and ISO are low than when
PX and ISO prices are high. The PX and ISO market prices to date have generally
been consistent, although some irregular price spikes have occurred. The ISO has
responded to price spikes in the market for reliability services (referred to as
ancillary services) by imposing a price cap on the market for such services
until certain actions have been completed to improve the functioning of those
markets. Similarly, the ISO currently maintains a cap on its market for
imbalance energy until adequate measures to improve the efficient operation of
the market have been implemented. The caps in these markets mitigate the risk of
costly price spikes that would reduce the revenue available to SCE to pay
transition costs. The price cap instituted by the ISO in the summer of 1998 was
$250/MWh. In October 1999, that cap was raised to $750/MWh and will remain at
that level through November 15, 2000. SCE has entered into gas call options to
mitigate high natural gas prices, since increases in natural gas prices tend to
raise the price of electricity.
In July 1999, SCE began participating in forward purchases through a PX block
forward market. In the PX block forward market, SCE can purchase monthly blocks
of energy or ancillary services for six days a week (excluding Sundays and
holidays) for 8 to 16 hours a day. These purchases can be made up to 12 months
in advance of the delivery date. The CPUC originally limited SCE's use of the PX
block forward market to a maximum of approximately 2,000 MW in any month. The PX
requested and was granted authority from the FERC to sell other forward products
including a peak product, six days a week, for eight hours a day. SCE requested
rate-making treatment from the CPUC for its use of these additional products,
and requested an expansion of the limits from all forward PX products up to
5,200 MW in summer months. These requests were granted in March 2000. SCE
requested permission from the CPUC to begin a demand responsiveness program that
would allow customers to be paid to curtail their load during times of very high
prices. The CPUC approved SCE's request for this program in April 2000.
EME Issues
Changes in interest rates, electricity pool pricing and fluctuations in foreign
currency exchange rates can have a significant impact on EME's results of
operations. EME has mitigated a portion of the risk of interest rate
fluctuations by arranging for fixed rate or variable rate financing with
interest rate swaps or other hedging mechanisms for a number of its project
financings. Interest expense includes $5 million for the three month period
ended March 31, 2000, and $6 million for the same period in 1999, as a result of
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EME Issues
interest rate swap and collar agreements. Several of EME's interest rate swap
and collar agreements mature prior to their underlying debt.
EME hedges a portion of the electric output of its plants in order to lock in
desirable outcomes. EME also manages the margin between electric prices and fuel
prices when deemed appropriate. EME uses forward contracts, swaps, futures or
option contracts to achieve these objectives.
Projects in the U.K. sell their electric energy and capacity through a
centralized electricity pool, which establishes a half-hourly clearing price, or
pool price, for electric energy. The pool price is extremely volatile, and can
vary by a factor of 10 or more over the course of a few hours due to large
differentials in demand according to the time of day. First Hydro and
Ferrybridge and Fiddler's Ferry mitigate a portion of the market risk of the
pool by entering into contracts for differences (electricity rate swap
agreements), related to either the selling or purchasing price of power, where a
contract specifies a price at which the electricity will be traded, and the
parties to the agreements make payments, calculated on the difference between
the price in the contract and the pool price for the element of power under
contract. These contracts are sold in various structures. These contracts act as
a means of stabilizing production revenue or purchasing costs by removing an
element of their net exposure to pool price volatility. A proposal to replace
the current structure of the pool and the forward-contracts market to require
firm physical delivery has been made by the Director General of Electricity
supply, at the request of the Minister for Science, Energy and Industry in the
U.K. The Minister has recommended that the proposal be implemented by October
2000. This proposal has placed a significant downward pressure on forward
contract prices. Legislation in the form of a Utilities Bill, published on
January 20, 2000, is being introduced to allow for the implementation of new
trading arrangements and the necessary amendments to generators' licenses. A
warmer than average winter, the entry of new operations into the generation
market, the introduction of the new electricity trading arrangements coupled
with uncertainties surrounding the new Utilities Bill and a proposed "good
behavior" clause, discussed below, have depressed anticipated prices for winter
2000/2001. As a result of these events, EME expects lower than anticipated
revenue from its Ferrybridge and Fiddler's Ferry plants.
The Utilities Bill, which includes several consumer and environmental protection
measures, is scheduled to become law by July 2000. While the U.K. government
recognizes the need to strike a balance between consumer and shareholder
interests, the proposals have far-reaching implications for the utilities
sector.
In December 1999, the U.K. Director General of Electricity Supply gave notice of
an intention to introduce a new condition into the licenses of a number of
generators to curb the perceived exercise of market power in the determination
of wholesale electricity prices. The majority of the major generators have
accepted the new clauses, including EME, which has sought and received specific
assurances from the Regulator on the definition of market abuse and the way the
clauses will be interpreted in the future.
Electric power generated at Homer City is sold under bilateral arrangements with
domestic utilities and power marketers under short-term contracts (two years or
less) or to the Pennsylvania-New Jersey-Maryland Power Pool (PJM) or the New
York Independent System Operator (NYISO). The PJM pool has a market that
establishes an hourly clearing price. Homer City is located in the PJM pool area
and is physically connected to high-voltage transmission lines serving both the
PJM and NYISO markets. Power can also be transmitted to the mid-western United
States.
Commonwealth Edison (ComEd) entered into purchase power agreements in which
ComEd will purchase capacity and have the right to purchase energy generated by
the Illinois plants. The agreements, which began in December 1999, and have a
term of up to five years, provide for capacity and energy payments. ComEd will
be obligated to make a capacity payment for the units under contract and an
energy payment for the electricity produced by these units. The capacity payment
will provide the Illinois plants revenue for fixed charges, and the energy
payment will compensate the Illinois plants for variable costs of production. If
ComEd does not fully dispatch the units under contract, the Illinois plants may
sell, subject to certain conditions, the excess energy at market prices to
neighboring utilities, municipalities, third party electric retailers, large
consumers and power marketers on a spot basis.
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Loy Yang B sells its electrical energy through a centralized electricity pool,
which provides for a system of generator bidding, central dispatch and a
settlements system based on a clearing market for each half-hour of every day.
The National Electricity Market Management Company, operator and administrator
of the pool, determines a system marginal price each half-hour. To mitigate the
exposure to price volatility of the electricity traded in the pool, Loy Yang B
has entered into a number of financial hedges. From May 8, 1997, to December 31,
2000, 53% to 64% of the plant output sold is hedged under vesting contracts,
with the remainder of the plant capacity hedged under the State Government of
Victoria, Australia (State) hedge described below. Vesting contracts were put
into place by the State, between each generator and each distributor, prior to
the privatization of electric power distributors in order to provide more
predictable pricing for those electricity customers that were unable to choose
their electricity retailer. Vesting contracts set base strike prices at which
the electricity will be traded, and the parties to the agreement make payments,
calculated based on the difference between the price in the contract and the
half-hourly pool clearing price for the element of power under contract. These
contracts are sold in various structures. These contracts are accounted for as
electricity rate swap agreements. The State hedge is a long-term contractual
arrangement based upon a fixed price commencing May 8, 1997, and terminating
October 31, 2016. The State guarantees the State Electricity Commission of
Victoria's obligations under the State hedge.
EME's electric revenue increased by $37 million for the three months ended March
31, 2000, compared to an increase of $22 million for the same period in 1999, as
a result of electricity rate swap agreements and other hedging activities.
As EME continues to expand into foreign markets, fluctuations in foreign
currency exchange rates can affect the amount of its equity contributions to,
distributions from and results of operations of its foreign projects. At times,
EME has hedged a portion of its exposure to fluctuations in foreign exchange
rates where it deems appropriate through financial derivatives, offsetting
obligations denominated in foreign currencies, and indexing underlying project
agreements to U.S. dollars or other indices reasonably expected to correlate
with foreign exchange movements. Statistical forecasting techniques are used to
help assess foreign exchange risk and the probabilities of various outcomes.
There can be no assurance, however, that fluctuations in exchange rates will be
fully offset by hedges or that currency movements and the relationship between
macro-economic variables will behave in a manner that is consistent with
historical or forecasted relationships.
Paiton Project
A wholly owned subsidiary of EME owns a 40% interest in the Paiton project, a
1,230-MW coal-fired power plant in Indonesia. The tariff is higher in the early
years and steps down over time. The tariff for the Paiton project includes
infrastructure to be used in common by other units at the Paiton complex. The
plant's output is fully contracted with the state-owned electricity company for
payment in Indonesian Rupiah, with the portion of such payments intended to
cover non-Rupiah project costs (including returns to investors) indexed to the
Indonesian Rupiah/U.S. dollar exchange rate established at the time of the power
purchase agreement in February 1994. The state-owned electricity company's
payment obligations are supported by the Indonesian government. The project
received substantial finance and insurance support from the Export-Import Bank
of the United States, The Export-Import Bank of Japan, the U.S. Overseas Private
Investment Corporation and the Ministry of International Trade and Industry of
Japan. The projected rate of growth of the Indonesian economy and the exchange
rate of Indonesian Rupiah into U.S. dollars have deteriorated significantly
since the Paiton project was contracted, approved and financed. The Paiton
project's senior debt ratings have been reduced from investment grade to
speculative grade based on the rating agencies' perceived increased risk that
the state-owned electricity company might not be able to honor the electricity
sales contract with Paiton. The Indonesian government has arranged to reschedule
sovereign debt owed to foreign governments and has entered into discussions
about rescheduling sovereign debt owed to private lenders. Certain events have
occurred (including those discussed in the subsequent paragraph) which, with the
passage of time or upon notice, may mature into defaults of the project's debt
agreement. In October 1999, the project entered into an interim
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agreement with its lenders, in which the lenders waived such defaults until July
31, 2000. However, such waiver may expire on an earlier date if additional
defaults (other than those specifically waived) or certain other specified
events occur.
One of the Paiton units began commercial operation in May 1999 and the other
unit in July 1999. Because of the economic downturn, the state-owned electricity
company is experiencing low electricity demand and has therefore ordered no
power from the Paiton plant; however, under the terms of the power purchase
agreement, the state-owned electricity company is required to continue to pay
for capacity and fixed operating costs once each unit and the plant achieve
commercial operation. An invoice for these charges for May 1999 has been
submitted and a partial payment, based on an arbitrary exchange rate that does
not comply with the terms of the power purchase agreement, was received.
Additional invoices for capacity charges and fixed operating costs have been
submitted; no payment has been received.
On February 21, 2000, Paiton and the state-owned electricity company executed an
Interim Agreement in which the power purchase agreement will be administered
pending a long-term restructure of the power purchase agreement. Among other
things, the Interim Agreement provides for dispatch of the project, fixed
monthly capacity payments to Paiton by the state-owned electricity company, and
the standstill of any further legal proceedings by either party during the term
of the Interim Agreement. The first two capacity payments totaling $15 million
have been received. The Agreement runs through December 31, 2000, and may be
extended by mutual agreement. The state-owned electricity company and Paiton
have agreed that negotiations on a long-term restructuring of the tariff will
begin in May 2000. Any material modifications of the contract could also require
a renegotiation of the Paiton project's debt agreement. The impact of any such
renegotiations with the state-owned electricity company, the Indonesian
government or the project's creditors on EME's expected return on its investment
in Paiton is uncertain at this time; however, EME believes that it will
ultimately recover its investment in the project.
EME's Acquisitions
On March 15, 2000, EME completed its acquisition of Edison Mission Wind Power
Italy B.V., formerly known as Italian Vento Power Corp. Energy 5 B.V. Edison
Mission Wind owns a 50% interest in a series of wind-generated power projects in
operation or under development in Italy. Assuming all of the projects under
development are completed, currently scheduled for 2002, the total capacity of
these projects will be 283 MW. The purchase price of the acquisition was $45
million, with equity contribution obligations of up to $17 million, depending on
the number of projects that are ultimately developed.
SCE's Regulatory Environment
SCE currently operates in a highly regulated environment in which it has an
obligation to deliver electric service to customers in return for an exclusive
franchise within its service territory. This regulatory environment continues to
change as California moves toward a more competitive climate. SCE continues to
recover its stranded costs associated with generation-related assets through the
CTC. The 1996 restructuring legislation (Statute) included provisions to finance
a portion of the stranded costs that residential and small commercial customers
would have paid between 1998 and 2001, which allowed SCE to reduce rates by at
least 10% to these customers, effective January 1, 1998. The Statute mandated
other rates to remain frozen at June 1996 levels (system average of 10.1(cent)
per kilowatt-hour), including those for large commercial and industrial
customers, and included provisions for continued funding for energy
conservation, low-income programs and renewable resources. Despite the rate
freeze, SCE expects to be able to recover its revenue requirement during the
transition period.
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Revenue and Cost-Recovery Mechanisms
Revenue is determined by various mechanisms depending on the utility operation.
Revenue related to distribution operations is being determined through a
performance-based rate-making (PBR) mechanism and the distribution assets have
the opportunity to earn a CPUC-authorized 9.49% return. The distribution PBR
will extend through December 2001. Key elements of the distribution PBR include:
distribution rates indexed for inflation based on the Consumer Price Index less
a productivity factor; adjustments for cost changes that are not within SCE's
control; a cost-of-capital trigger mechanism based on changes in a bond index;
standards for customer satisfaction; service reliability and safety; and a net
revenue-sharing mechanism that determines how customers and shareholders will
share gains and losses from distribution operations. Transmission revenue is
being determined through FERC-authorized rates that are subject to refund.
SCE's transition costs are being recovered through a non-bypassable CTC. This
charge applies to all customers who were using or began using utility services
on or after the CPUC's December 1995 restructuring decision date. SCE's
transition costs arise from QF contracts, which are the direct result of prior
legislative and regulatory mandates, costs pertaining to certain generating
assets (including the 1998 sale of SCE's generating plants) and regulatory
commitments consisting of costs incurred (whose recovery has been deferred by
the CPUC) to provide service to customers. Such commitments include the recovery
of income tax benefits previously flowed through to customers, postretirement
benefit transition costs, accelerated recovery of San Onofre Units 2 and 3 and
the Palo Verde units, and certain other costs. Transition costs related to
power-purchase contracts are being recovered through the terms of the contracts
while most of the remaining transition costs will be recovered through 2001.
During 1998, SCE sold all of its gas- and oil-fueled generation plants for $1.2
billion, over $500 million more than the combined book value. Net proceeds of
the sales were used to reduce stranded costs, which otherwise were expected to
be collected through the CTC mechanism. If events occur during the restructuring
process that result in all or a portion of the transition costs being improbable
of recovery, SCE could have write-offs associated with these costs if they are
not recovered through another regulatory mechanism.
Revenue from generation-related operations is being determined through the
market and the CTC mechanism, which now includes the nuclear rate-making
agreements. The portion of revenue related to fossil and hydroelectric
generation operations that is made uneconomic by electric industry restructuring
is recovered through the CTC mechanism. The portion that is economic is
recovered through the market. SCE's costs associated with its hydroelectric
plants are being recovered through a performance-based mechanism. The mechanism
sets the hydroelectric revenue requirement and establishes a formula for
extending it through the duration of the electric industry restructuring
transition period, or until market valuation of the hydroelectric facilities,
whichever occurs first. The mechanism provides that power sales revenue from
hydroelectric facilities in excess of the hydroelectric revenue requirement be
credited against the costs to transition to a competitive market. In 2000,
fossil and hydroelectric generation assets have the opportunity to earn a 7.22%
return. SCE has filed an application with the CPUC regarding the market
valuation of its hydroelectric facilities. See additional discussions below
regarding hydroelectric valuation, Mohave Generating Station auction and pending
Four Corners Generating Station sale.
SCE is recovering its investment in its nuclear facilities on an accelerated
basis in exchange for a lower authorized rate of return. SCE's nuclear assets
are earning an annual rate of return of 7.35%. In addition, the San Onofre plan
authorizes a fixed rate of approximately 4(cent) per kilowatt-hour generated for
operating costs including incremental capital costs, and nuclear fuel and
nuclear fuel financing costs. The San Onofre plan commenced in April 1996, and
ends in December 2001 for the accelerated recovery portion and in December 2003
for the incentive-pricing portion. Palo Verde's operating costs, including
incremental capital costs, and nuclear fuel and nuclear fuel financing costs,
are subject to balancing account treatment. The Palo Verde plan commenced in
January 1997 and ends in December 2001. Beginning January 1, 1998, both the San
Onofre and Palo Verde rate-making plans became part of the CTC mechanism. SCE
has entered into an agreement to sell its investment in Palo Verde (see
discussion below).
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In March 1997, SCE filed its first FERC transmission rate case. In March 1999, a
proposed FERC decision was issued which recommended a reduced rate of return on
equity of 9.68% (compared to SCE's current CPUC rate for distribution of 11.6%)
and a reduced return on transmission assets of 8.41% (compared to the current
rate of 9.43% being earned on transmission assets). SCE filed comments opposing
the proposed decision in May 1999. In response to a FERC ruling, in November
1999, SCE filed additional evidence regarding return on equity. A final FERC
decision is expected by mid-2000. SCE does not expect the final decision to have
a material effect on its results of operations or financial position.
In October 1999, SCE filed an application with the CPUC to approve an auction
process to sell its 56% interest in the Mohave Generating Station. On April 6,
2000, the CPUC approved the auction process. On May 10, 2000, SCE agreed to sell
its interest in Mohave to The AES Corporation for over $533 million. The
transaction is subject to approval by the CPUC and the FERC. The sale is
expected to close by November 2000.
In December 1999, SCE filed an application with the CPUC establishing a market
value for its hydroelectric generation-related assets at approximately $1.0
billion (almost twice the assets' book value) and proposing to retain and
operate the hydroelectric assets under a performance-based and revenue-sharing
mechanism. The application had broad-based support from labor, ratepayer and
environmental groups. If approved by the CPUC, SCE would be allowed to recover
an authorized, inflation-index operations and maintenance allowance, as well as
a reasonable return on capital investment. A revenue-sharing arrangement would
be activated if revenue from the sale of hydroelectricity exceeds or falls short
of the authorized revenue requirement. SCE would then refund 90% of the excess
revenue to ratepayers or recover 90% of any shortfalls from ratepayers. A final
CPUC decision is expected by the end of 2000.
On January 7, 2000, SCE filed an application with the CPUC proposing rates that
would go into effect when the current rate freeze ends on March 31, 2002, or
earlier, depending on the pace of CTC recovery. The proposal seeks CPUC approval
of a rate redesign that will result in reduced rates for most customers when SCE
completes the first phase of recovery of its transition costs. The proposed new
rates are expected to reduce SCE's system average rates by about 17% from
current frozen rate levels, based on certain assumptions about competitive
energy prices. In addition, SCE's filing proposes to redesign and establish
separate transmission and distribution rates to better reflect the actual costs
to deliver electricity and serve customers. This pricing approach is consistent
with CPUC policies requiring California's major utilities to move toward
cost-based transmission and distribution rates.
On April 27, 2000, SCE agreed to sell its 16% interest in Palo Verde and its 48%
interest in Four Corners Generating Station to Pinnacle West Energy for a total
price of $550 million. The sale of assets at Palo Verde will be accompanied by
an assignment of SCE's interest in the related decommissioning fund. The
transaction, which is subject to the approval of the CPUC, Nuclear Regulatory
Commission and other state and federal entities, is expected to close by
mid-2001. For a certain period of time, competing offers may be solicited and
any superior offers received are subject to matching rights by Pinnacle West
Energy.
Accounting for Utility Generation-Related Assets
As the CPUC's electric industry restructuring plan continues as described above,
SCE is allowed to recover its transition costs through non-bypassable charges to
its distribution customers (although its investment in certain generation assets
is subject to a lower authorized rate of return). In 1997, SCE discontinued
application of accounting principles for rate-regulated enterprises for its
generation assets based on new accounting guidance. The new guidance did not
require SCE to write off any of its generation-related assets, including related
regulatory assets because the restructuring plan referred to above makes
probable their recovery through a non-bypassable charge to distribution
customers. The regulatory assets are comprised of accelerated income tax
benefits previously flowed through to customers, purchased power contract
termination payments and unamortized losses on reacquired debt. The new
accounting guidance also permits the recording of new generation-related
regulatory assets during the transition period that are probable of recovery
through the CTC mechanism.
19
<PAGE>
During the second quarter of 1998, additional guidance was developed related to
the application of asset impairment standards to these assets. Using this
guidance, SCE reduced its remaining nuclear plant investment by $2.6 billion (as
of June 30, 1998) and recorded a regulatory asset on its balance sheet for the
same amount. For this impairment assessment, the fair value of the investment
was calculated by discounting expected future net cash flows. This
reclassification had no effect on SCE's results of operations.
If during the transition period events were to occur that made the recovery of
these generation-related regulatory assets no longer probable, SCE would be
required to write off the remaining balance of such assets (approximately $2.5
billion, after tax, at March 31, 2000) as a one-time, non-cash charge against
earnings. At this time, SCE cannot predict what other revisions will ultimately
be made during the restructuring process in subsequent proceedings or the
effect, after the transition period, that competition will have on its results
of operations or financial position.
Environmental Protection
Edison International is subject to numerous environmental laws and regulations,
which require it to incur substantial costs to operate existing facilities,
construct and operate new facilities, and mitigate or remove the effect of past
operations on the environment.
As further discussed in Note 2 to the Consolidated Financial Statements, Edison
International records its environmental liabilities when site assessments and/or
remedial actions are probable and a range of reasonably likely cleanup costs can
be estimated. Edison International's recorded estimated minimum liability to
remediate its 46 identified sites is $159 million. One of SCE's sites, a former
pole-treating facility, is considered a federal Superfund site and represents
40% of its recorded liability. Edison International believes that, due to
uncertainties inherent in the estimation process, it is reasonably possible that
cleanup costs could exceed its recorded liability by up to $281 million. In
1998, SCE sold all of its gas- and oil-fueled power plants but has retained some
liability associated with the divested properties.
The CPUC allows SCE to recover environmental-cleanup costs at 42 of its sites,
representing $88 million of its recorded liability, through an incentive
mechanism, which is discussed in Note 2. SCE has recorded a regulatory asset of
$122 million for its estimated minimum environmental-cleanup costs expected to
be recovered through customer rates.
Edison International's identified sites include several sites for which there is
a lack of currently available information. As a result, no reasonable estimate
of cleanup costs can be made for these sites. Edison International expects to
clean up its identified sites over a period of up to 30 years. Remediation costs
in each of the next several years are expected to range from $5 million to $15
million. Recorded costs for the twelve months ended March 31, 2000, were $8
million.
Based on currently available information, Edison International believes it is
unlikely that it will incur amounts in excess of the upper limit of the
estimated range and, based upon the CPUC's regulatory treatment of
environmental-cleanup costs, Edison International believes that costs ultimately
recorded will not materially affect its results of operations or financial
position. There can be no assurance, however, that future developments,
including additional information about existing sites or the identification of
new sites, will not require material revisions to such estimates.
The 1990 Federal Clean Air Act requires power producers to have emissions
allowances to emit sulfur dioxide. Power companies receive emissions allowances
from the federal government and may bank or sell excess allowances. SCE expects
to have excess allowances under Phase II of the Clean Air Act (2000 and later).
A study was undertaken to determine the specific impact of air contaminant
emissions from the Mohave Generating Station on visibility in Grand Canyon
National Park. The final report on this study, which was issued in March 1999,
found negligible correlation between measured Mohave station tracer
concentrations and visibility impairment. The absence of any obvious
relationship cannot rule out Mohave station contributions to haze in Grand
Canyon National Park, but strongly suggests that other
20
<PAGE>
sources were primarily responsible for the haze. In June 1999, the Environmental
Protection Agency (EPA) issued an advanced notice of proposed rulemaking
regarding assessment of visibility impairment at the Grand Canyon. SCE filed
comments on the proposed rulemaking in November 1999. In 1998, several
environmental groups filed suit against the co-owners of the Mohave station
regarding alleged violations of emissions limits. In order to accelerate
resolution of key environmental issues regarding the plant, the parties filed,
in concurrence with SCE and the other station owners, a consent decree, which
was approved by the court in December 1999. In a letter to SCE, the EPA has
expressed its belief that the controls provided in the consent decree will
likely resolve the potential Clean Air Act visibility concerns. The EPA is
considering incorporating the decree into the visibility provisions of its
Federal Implementation Plan for Nevada.
Edison International's projected environmental capital expenditures are $1.5
billion for the 2000-2004 period, mainly for undergrounding certain transmission
and distribution lines at SCE and upgrading environmental controls at EME.
San Onofre Steam Generator Tubes
The San Onofre Units 2 and 3 steam generators have performed relatively well
through the first 16 years of operation. The steam generator design allows for
the removal of up to 10% of the tubes before the rated capacity of the unit must
be reduced. Increased tube degradation was found during routine inspections in
1997. To date, 7.5% of Unit 2's tubes and 5.4% of Unit 3's tubes have been
removed from service. A decreasing (favorable) trend in degradation has been
observed in more recent inspections.
Accounting Changes
Effective January 1, 2000, EME changed its accounting method for major
maintenance to record such expenses as incurred. Previously, EME recorded major
maintenance costs on an accrue in advance method. EME voluntarily made the
change in accounting due to recent guidance provided by the Securities and
Exchange Commission. The cumulative effect of the change in accounting method
was an $18 million after-tax benefit.
On January 1, 1999, Edison International implemented a new accounting rule that
requires costs related to start-up activities to be expensed as incurred.
Although this new accounting rule did not materially affect Edison
International's results of operations or financial position, EME wrote off $14
million in previously capitalized start-up costs in first quarter 1999.
In June 1998, a new accounting standard for derivative instruments and hedging
activities was issued. The new standard, which Edison International will be
required to implement on January 1, 2001, requires all derivatives to be
recognized on the balance sheet at fair value. Gains or losses from changes in
fair value would be recognized in earnings in the period of change unless the
derivative is designated as a hedging instrument. Gains or losses from hedges of
a forecasted transaction or foreign currency exposure would be reflected in
other comprehensive income. Gains or losses from hedges of a recognized asset or
liability or a firm commitment would be reflected in earnings for the
ineffective portion of the hedge. SCE anticipates that most of its derivatives
under the new standard would qualify for hedge accounting. SCE expects to
recover in rates any market price changes from its derivatives that could
potentially affect earnings. Edison International is studying the impact of the
new standard on its nonutility subsidiaries, and is unable to predict at this
time the impact on its financial statements.
21
<PAGE>
Forward-looking Information
In the preceding Management's Discussion and Analysis of Results of Operations
and Financial Condition and elsewhere in this quarterly report, the words
estimates, expects, anticipates, believes, and other similar expressions are
intended to identify forward-looking information that involves risks and
uncertainties. Actual results or outcomes could differ materially as a result of
such important factors as further actions by state and federal regulatory bodies
setting rates and implementing the restructuring of the electric utility
industry; the effects, unfavorable interpretations and applications of new or
existing laws and regulations relating to restructuring, taxes and other
matters; the effects of increased competition in the electric utility business
and other energy-related businesses, including direct customer access to retail
energy suppliers and the unbundling of revenue cycle services such as metering
and billing; changes in prices of electricity and fuel costs; changes in
financial market conditions; risks of doing business in foreign countries, such
as political changes and currency devaluations; power plant construction and
operation risks; the ability to sell or retain electric generation assets; new
or increased environmental liabilities; the ability to create and expand new
businesses, such as telecommunications; and other unforeseen events.
22
<PAGE>
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings
Edison International
Geothermal Generators' Litigation
Edison International, The Mission Group, and Mission Power Engineering Company,
have been named as defendants in a lawsuit more fully described under "Southern
California Edison Company - Geothermal Generators' Litigation below."
Southern California Edison Company
Geothermal Generators' Litigation
On June 9, 1997, SCE filed a complaint in Los Angeles County Superior Court
against an independent power producer of geothermal generation and six of its
affiliated entities (Coso parties). SCE alleges that in order to avoid power
production plant shutdowns caused by excessive noncondensable gas in the
geothermal field brine, the Coso parties routinely vented highly toxic hydrogen
sulfide gas from unmonitored release points beginning in 1990 and continuing
through at least 1994, in violation of applicable federal, state, and local
environmental law. According to SCE, these violations constituted material
breaches by the Coso parties of their obligations under their contracts with SCE
and applicable law. SCE seeks damages for excess power purchase payments made to
the Coso parties and other relief. The Coso parties' motion to transfer venue to
Inyo County Superior Court was granted on August 31, 1997.
The Coso parties filed a cross-complaint against SCE, The Mission Group, and
Mission Power Engineering Company (Mission parties), which contains claims for
breach of contract, unfair competition, interference with contract, defamation,
breach of an earlier settlement agreement between the Mission parties and the
Coso parties, and other claims. As against SCE, the cross-complaint seeks
restitution, compensatory damages in excess of $115 million, punitive damages in
an amount not less than $400 million, interest, attorney's fees, declaratory
relief, and injunctive relief. As against the Mission parties, the
cross-complaint seeks damages for breach of warranty of authority with respect
to the settlement agreement, and for equitable indemnity. Edison International
was named as a cross-defendant, allegedly as an alter ego of SCE and the Mission
parties. The Coso parties voluntarily dismissed the claims against Edison
International.
Three of the Coso parties also filed a separate action in the Inyo County
Superior Court against SCE and Edison International, alleging claims for unfair
competition, false advertising and for violations of Public Utilities Code ss.
2106, and seeking injunctive relief, restitution, and punitive damages. The
Court ordered this action consolidated with the SCE action.
Effective February 8, 2000, the parties entered into confidential agreements
resolving all claims in the consolidated action and calling for dismissals with
prejudice and releases. The settlement is subject to the approval of the CPUC.
On February 10, 2000, the Court approved a stipulation staying all proceedings
during the period required to obtain CPUC approval. On April 26, 2000, SCE filed
an application to obtain such approval. The settlement is not expected to have a
material financial effect on SCE.
23
<PAGE>
Item 4. Submission of Matters to a Vote of Security Holders
Election of Directors
At Edison International's Annual Meeting of Shareholders on April 20, 2000,
shareholders elected thirteen nominees to the Board of Directors. The number of
broker non-votes for each nominee was zero. The number of votes cast for and
withheld from each Director-nominee were as follows:
Number of Votes
- --------------------------------------------------------------------------
Name For Withheld
- --------------------------------------------------------------------------
John E. Bryson 287,405,875 7,931,036
Warren Christopher 285,708,853 9,628,058
Stephen E. Frank 287,961,165 7,375,746
Joan C. Hanley 287,879,576 7,457,335
Carl F. Huntsinger 287,834,637 7,502,274
Charles D. Miller 287,629,657 7,707,254
Luis G. Nogales 287,881,852 7,455,059
Ronald L. Olson 286,492,801 8,884,110
James M. Rosser 287,976,247 7,360,664
Robert H. Smith 288,043,802 7,293,109
Thomas C. Sutton 288,107,808 7,229,103
Daniel M. Tellep 287,990,022 7,346,889
Edward Zapanta 287,889,918 7,446,993
24
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
3.1 Restated Articles of Incorporation of Edison International dated May
7, 1998 (File No. 1-9936, Form 10-K for the year ended December 31,
1998)*
3.2 Certificate of Determination of Series A Junior participating
Cumulative Preferred Stock of Edison International dated November 21,
1996 (Form 8-A dated November 21, 1996)*
3.3 Amended Bylaws of Edison International as adopted by the Board of
Directors on February 17, 2000 (File No. 1-9936, filed as Exhibit 3.3
to Form 10-K for the year ended December 31, 1999)*
10.1 Form of Agreement for 2000 Employee Awards under the Equity
Compensation Plan
10.2 Resolution regarding the computation of disability and survivor
benefits prior to age 55 for Alan J. Fohrer
10.3 Agreement among Edward R. Muller, Edison International and Edison
Mission Energy concerning the terms of Mr. Muller's employment
separation
11 Computation of Primary and Fully Diluted Earnings per Share
27 Financial Data Schedule
(b) Reports on Form 8-K:
None
- ---------------------
* Incorporated by reference pursuant to Rule 12b-32.
25
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
EDISON INTERNATIONAL
(Registrant)
By THOMAS M. NOONAN
------------------------------
THOMAS M. NOONAN
Vice President and Controller
By KENNETH S. STEWART
------------------------------
KENNETH S. STEWART
Assistant General Counsel and
Assistant Secretary
May 12, 2000
[GRAPHIC OMITTED]
EQUITY COMPENSATION PLAN
2000 AWARD CERTIFICATE
This award is made by Edison International to [name]("Employee") as of
[date], pursuant to the Equity Compensation Plan. Edison International hereby
grants to Employee, as a matter of separate agreement and not in lieu of salary
or any other compensation for services the following:
--------------------------------------------
The right and option to purchase [ ]
shares of authorized Edison International
Common Stock at an exercise price of $[ ]
per share.
--------------------------------------------
--------------------------------------------
A target grant of [ ] Performance
Shares at an initial value of [ ] per
share, the final number and value of
which will be contingent upon Edison's
relative Total Shareholder return and
stock price.
--------------------------------------------
This award is made subject to the conditions contained in the 2000 Long-Term
Incentives Terms and Conditions statement which is incorporated herein by
reference.
Edison International
By: Theodore F. Craver, Jr.
--------------------------
Theodore F. Craver, Jr.
1
<PAGE>
EDISON INTERNATIONAL
2000 Long-Term Incentives
Terms and Conditions
Long-term incentives (LTI) for the year 2000 for eligible persons (Holders) at
Edison International (EIX) or its participating affiliates (the Companies, or
individually, the Company) include EIX nonqualified stock options to purchase
EIX common stock (EIX Options) to be awarded under the Equity Compensation Plan
(Plan) and contingent EIX Performance Shares, 50% of which will be payable as
Stock Grants under the Plan and 50% of which will be payable in cash outside of
the Plan. The LTI are subject to the following terms and conditions:
1. PRICE
The exercise price of an EIX Option stated in the award certificate is the
average of the high and low sales prices of EIX Common Stock as reported in the
Western Edition of The Wall Street Journal for the New York Stock Exchange
Composite Transactions for the date of the award.
2. VESTING
(a) Subject to the provisions of Section 3, EIX Options may only be exercised or
paid to the extent vested. The initial vesting date will be January 2nd of the
year following the date of the grant, or six months after the date of the grant,
whichever date is later. The EIX Options will vest as follows:
o On the initial vesting date, one-fourth of the EIX Options will vest.
o On January 2nd of the following year, an additional one-fourth of the EIX
Options will vest.
o On January 2nd of the following year, an additional one-fourth of the EIX
Options will vest
o On January 2nd of the fourth year following the date of grant, the balance
of the EIX Options will vest.
(b) The vested portions of the EIX Options will accumulate to the extent not
exercised, and be exercisable by the Holder subject to the provisions of Section
3, in whole or in part, in any subsequent period but not later than the first
business day of the 10th calendar year following the date of the award.
(c) One-half of the Performance Shares will vest and become payable to the
extent earned at the end of the second year of the Performance Period (defined
in Section 4) (first payment date). The remaining one-half of the Performance
Shares will vest and become payable to the extent earned at the end of the full
three-year Performance Period (second payment date).
(d) If, during the vesting period or a Performance Period, the Holder retires,
terminates employment while on leave with a permanent and total disability, or
dies, then the vesting and exercise provisions of this Section 2(d) will apply.
The EIX Options will vest to the extent necessary to cause the aggregate amount
of vested EIX Options (including any previously exercised) to equal the product
of 1/48th of the number of shares granted times the number of full months of
service the Holder has completed during the vesting period, and such vested
options will be exercisable for the full original term. The Performance Shares
will vest on a pro rata basis based on each full month of service the Holder
completes during the first two years of the Performance Period for the first
payment date, and during the full three-year Performance Period for the second
payment date. Performance Shares will be payable to the Holder on such pro rata
basis on the applicable payment date to the extent of the EIX total shareholder
return (TSR) ranking achieved as specified in Section 4. Notwithstanding the
foregoing, the LTI of a Holder who served as a member of the Southern California
Edison Company Management Committee (which was dissolved in 1993) will fully
vest upon his or her retirement or death, or upon employment termination while
on leave of absence with a permanent and total disability.
(e) Upon termination of employment during the EIX Option term for any reason
other than those specified in Section 2(d), only those EIX Options that have
vested as of the prior vesting date may be exercised, and they will be forfeited
unless they are exercised within 180 days following the date of termination or
by the end of the applicable EIX Option term, if that date is earlier. If such
termination occurs (i) during the first two years of the Performance Period, all
Performance Shares will be forfeited, or (iii) during the third year of the
Performance Period, those Performance Shares subject to payment at the end of
the three-year Performance Period will be forfeited.
2
<PAGE>
(f) Notwithstanding the foregoing, LTI may vest in accordance with Section 3.4
of the Plan as a result of certain events, including liquidation of EIX or
merger, reorganization or consolidation of EIX as a result of which EIX is not
the surviving corporation. Upon a change of control of EIX following the
occurrence of a Distribution Date, as that term is defined in the Rights
Agreement approved by the EIX Board of Directors on November 20, 1996, as
amended, the LTI will vest and EIX Options will remain exercisable for at least
two years following the Distribution Date. During that period, (i) the Plan may
not be terminated, (ii) individual awards may not be cashed out, terminated, or
modified without the Holder's consent, and (iii) valuation procedures and
exercise periods will occur on a basis consistent with past practice.
3. EIX OPTION EXERCISE
(a) The Holder may exercise an EIX Option by providing written notice to EIX on
the form prescribed by EIX for this purpose accompanied by full payment of the
applicable exercise price. Payment must be in cash, or its equivalent, including
EIX Common Stock valued on the exercise date at a per share price equal to the
average of the high and low sales prices of EIX Common Stock as reported in the
Western Edition of The Wall Street Journal for the New York Stock Exchange
Composite Transactions acceptable to EIX. A "cashless" exercise may be
accommodated for EIX Options at the discretion of EIX. Until payment is
accepted, the Holder will have no rights in the optioned stock. EIX Options may
be exercised at any time after they have vested through the first business day
of the 10th calendar year following the date of the award except as otherwise
provided in Sections 2(e) and 8.
(b) The Holder agrees that any securities acquired by him or her hereunder are
being acquired for his or her own account for investment and not with a view to
or for sale in connection with any distribution thereof and that he or she
understands that such securities may not be sold, transferred, pledged,
hypothecated, alienated, or otherwise assigned or disposed of without either
registration under the Securities Act of 1933 or compliance with the exemption
provided by Rule 144 or another applicable exemption under such act.
(c) The Holder will have no right or claim to any specific funds, property or
assets of EIX as a result of the award.
4. PERFORMANCE SHARES
(a) Performance Shares are EIX stock-based units subject to a performance
measure based on the percentile ranking of EIX total shareholder return (TSR)
compared to the TSR for each stock in the Dow Jones Electric Utilities Group
Index over all or part of a three-calendar-year period commencing on January 1st
of the year the Performance Shares are granted ("Performance Period"). TSR is
calculated using a 20-day trading average on the measurement dates. A target
number of contingent Performance Shares will be awarded during the first two
months of the Performance Period. The actual amount of Performance Shares to be
paid will depend on the EIX TSR percentile ranking. The target number of
Performance Shares will be paid if the EIX TSR rank is at the 60th percentile.
Payment may range from nothing if the EIX TSR is below the 40th percentile to
three times the target number of Performance Shares if the EIX TSR percentile
ranking is at the 90th percentile or higher. The payment multiples for the
various EIX TSR rankings are as follows:
<TABLE>
<CAPTION>
Performance Share Payment
- -------------------------------------------------------------
EIX TSR Rank Payment Multiple(1)
- ------------------------------- -----------------------------
<S> <C> <C>
Above 90th Percentile 3 times
- ------------------------------- -----------------------------
75th to 89th Percentile Between 2 and 3 times
- ------------------------------- -----------------------------
60th to 74th Percentile Between 1 and 2 times
- ------------------------------- -----------------------------
40th to 59th Percentile Between 0.25 and 1 times
- ------------------------------- -----------------------------
Below 40th Percentile 0 times
- ------------------------------- -----------------------------
(1) The multiple is interpolated for performance between
the points indicated.
</TABLE>
3
<PAGE>
(b) There will be two performance measurement dates and payment dates during the
three-year Performance Period for the initial grant of Performance Shares in the
year 2000, each covering one-half of the contingent target Performance Shares
awarded. The first measurement and payment date covering the first two years of
performance will be the last business day of the second year of the Performance
Period, the second measurement and payment date will be the last business day of
the Performance Period covering all three years of performance. The applicable
target multiple earned as provided in the table above for one-half of the
Performance Shares will be paid for each Performance Period to the extent of the
EIX TSR percentile ranking achieved on the date of measurement.
(c) Each Performance Share earned will be worth one share of EIX Common Stock.
One-half of the earned Performance Shares will be paid in EIX Common Stock as a
Stock Payment under the Plan. The remaining one-half of the earned Performance
Shares will be paid in cash and the value of each Performance Share will be
equal to the average of the high and low sales prices per share of EIX Common
Stock as reported in the Western Edition of The Wall Street Journal for the New
York Stock Exchange Composite Transactions for the measurement date. The shares
of EIX Common Stock and the cash payable for the earned Performance Shares will
be delivered within 30 days following the end of the Performance Periods
described in Section 4(b).
5. DELAYED PAYMENT OR DELIVERY OF LTI GAINS
Notwithstanding the terms of any LTI, Holders who are eligible to defer salary
under the EIX Executive Deferred Compensation Plan (EDCP) may irrevocably elect
to alternatively exercise all or part of any vested EIX Option pursuant to the
terms of the Option Gain Deferral Program (OGDP), and/or may irrevocably elect
to defer receipt of all or a part of the cash portion of any Performance Shares
pursuant to the terms of the EDCP. To make such an election, the Holder must
submit a signed agreement in the form approved by the Administrator at least six
months prior to the expiration date of the EIX Option, or the payment date of a
Performance Share. An EIX Option may not be exercised for six months thereafter
except under the limited circumstances specified in the OGDP. Any subsequent
exercises or payments will be subject to the terms, conditions and restrictions
of the OGDP or the EDCP, as applicable.
6. TRANSFER AND BENEFICIARY
(a) The LTI will not be transferable by the Holder. During the lifetime of the
Holder, the LTI will be exercisable only by him or her. The Holder may designate
a beneficiary who, upon the death of the Holder, will be entitled to exercise
the then vested portion of the LTI during the remaining term subject to the
provisions of the Plan and these terms and conditions.
(b) Notwithstanding the foregoing, EIX Options of the CEOs of EIX, Edison
Mission Energy, Edison Capital and Edison Enterprises, the COO of Southern
California Edison and the EVPs of EIX are transferable to a spouse, children or
grandchildren, or trusts or other vehicles established exclusively for their
benefit. Any transfer request must specifically be authorized by EIX in writing
and shall be subject to any conditions, restrictions or requirements as the
administrator may determine.
8. TERMINATION OF LONG TERM INCENTIVES
As set forth in Section 2(e), in the event of termination of the employment of
the Holder for any reason other than retirement, permanent and total disability
or death of the Holder, EIX Options will terminate 180 days from the date on
which such employment terminated, and Performance Shares will be forfeited. In
addition, the LTI may be terminated if EIX elects to substitute cash awards as
provided under Section 12.
9. TAXES
EIX will have the right to retain and withhold the amount of taxes required by
any government to be withheld or otherwise deducted and remitted with respect to
the exercise of any LTI. In its discretion, EIX may require the Holder to
reimburse EIX for any such taxes required to be withheld by EIX and may withhold
any distribution in whole or in part until EIX is so reimbursed. In lieu
thereof, EIX will have the right to withhold from any other cash amounts due
from EIX to the Holder an amount equal to such taxes required to be withheld by
EIX, or to retain and withhold a number of shares of EIX Common Stock having a
market value equal to such taxes and cancel (in whole or in part) the shares, or
to repurchase such shares from the Holder within six months after the shares of
Common Stock were acquired by the Holder. Shares withheld or repurchased to
reimburse EIX for federal and state income and payroll taxes shall be limited to
the number of shares which have a Fair Market Value on the date of withholding
4
<PAGE>
or repurchase equal to the aggregate amount of such tax liabilities based on the
minimum statutory withholding rates that are applicable to such supplemental
taxable income.
Each recipient of an EIX Option must attach a statement to his or her federal
and state tax returns for the year in which the EIX Option was granted
containing certain information specified in tax regulations. A sample statement
is attached.
10. CONTINUED EMPLOYMENT
Nothing in the award certificate or this Statement of Terms and Conditions will
be deemed to confer on the Holder any right to continue in the employ of EIX or
an EIX affiliate or interfere in any way with the right of the employer to
terminate his or her employment at any time.
11. NOTICE OF DISPOSITION OF SHARES AND SECTION 16
(a) Holder agrees that if he or she should dispose of any shares of stock
acquired on the exercise of EIX Options, including a disposition by sale,
exchange, gift or transfer of legal title within six months from the date such
shares are transferred to the Holder, the Holder will notify EIX promptly of
such disposition.
(b) If an LTI is granted to a person who later becomes subject to the provisions
of Section 16 of the Securities Exchange Act of 1934, as amended ("Section 16"),
the LTI will immediately and automatically become subject to the requirements of
Rule 16b-3(d)(3) ("Rule") and may not be exercised, paid or transferred until
the Rule has been satisfied. In its sole discretion, the Administrator may take
any action to assure compliance with the requirements of the Rule, including
withholding delivery to Holder (or any other person) of any security or of any
other payment in any form until the requirements of the Rule have been
satisfied. The Secretary of Edison International may waive compliance with the
requirements of the Rule if he or she determines the transaction to be exempt
from the provisions of paragraph (b) of Section 16.
12. AMENDMENT
The LTI are subject to the terms of the Plan as amended from time to time. EIX
reserves the right to substitute cash awards substantially equivalent in value
to the LTI. The LTI may not otherwise be restricted or limited by any Plan
amendment or termination approved after the date of the award without the
Holder's consent.
13. FORCE AND EFFECT
The various provisions herein are severable in their entirety. Any determination
of invalidity or unenforceability of any one provision will have no effect on
the continuing force and effect of the remaining provisions.
14. GOVERNING LAW
The terms and conditions of the LTI will be construed under the laws of the
State of California.
15. NOTICE
Unless waived by EIX, any notice required under or relating to the LTI must
be in writing, with postage prepaid, addressed to: Edison International,
Attn: Corporate Secretary, P.O. Box 800, Rosemead, CA 91770.
EDISON INTERNATIONAL
Theodore F. Craver, Jr
- ----------------------------------
Theodore F. Craver, Jr.
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STATEMENT PURSUANT TO INCOME TAX
REGULATION SECTION 1.61-15(c)
This statement is attached to my income tax return in compliance with
the requirements of Income Tax Regulation ss.1.61-15(c) relative to a
nonqualified stock option I received on ------------------.
(1) Name and address of the taxpayer:
-------------------------
-------------------------
-------------------------
(2) Description of Securities subject to the option:
On ------------------, I was granted a nonqualified stock option covering
- -------- shares of Edison International common stock.
(3) Period during which the option is exercisable:
The option vests and becomes exercisable as to one-fourth of the
covered shares on January 2nd of the first year after the date of grant (or six
months after the date of grant if later) and as to an additional one-fourth on
January 2nd of each of the three years thereafter. To the extent vested, the
option may be exercised at any time through the first business day of the 10th
calendar year following the date of the award.
(4) Whether the option had an ascertainable market value:
The option did not have a readily ascertainable fair market value on the
date of the grant.
(5) Whether the option was granted as compensation:
The option was granted as compensation and is subject to Reg.ss.1.61-15(a).
Respectfully Submitted,
RESOLUTION OF THE COMPENSATION AND EXECUTIVE PERSONNEL
COMMITTEES OF THE BOARDS OF DIRECTORS OF
EDISON INTERNATIONAL AND
SOUTHERN CALIFORNIA EDISON COMPANY
Adopted: February 17, 2000
RE: Plan Deviation
WHEREAS, Alan J. Fohrer has been elected as chief executive officer of
Edison Mission Energy; and
WHEREAS, it has been proposed that the benefits that would be payable under
the nonqualified executive benefit plans of the companies in the event Mr.
Fohrer's employment is terminated prior to age 55 as a result of his death or
disability be determined as if he had attained age 55, and the members of the
Committees having conferred thereon;
NOW, THEREFORE, BE IT RESOLVED, that the nonqualified executive benefit
plans of the companies in which Mr. Fohrer participates shall be administered
and applied with respect to him as provided above.
Charles D. Miller
- ---------------------------------
Charles D. Miller
Chairman of the Committees
M. D. McDonald
- ---------------------------------
M. D. Mcdonald
Counsel
AGREEMENT
BY AND AMONG
Edward R. Muller
Edison Mission Energy
AND
Edison International
(As To Certain Sections Only)
JANUARY 17, 2000
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE 1: DEFINITIONS; INTERPRETIVE MATTERS........................1
Section 1.01 Definitions..............................................1
Section 1.02 Interpretive Matters.....................................3
ARTICLE 2: EMPLOYMENT AND COMPENSATION..............................4
Section 2.01 Resignation..............................................4
Section 2.02 Further Assurances.......................................4
Section 2.03 Effect of Resignation....................................4
Section 2.04 Compensation and Benefits................................4
Section 2.05 Withholding..............................................7
Section 2.06 Company Property.........................................7
Section 2.07 Releases.................................................8
ARTICLE 3: CONSULTING...............................................8
Section 3.01 Consulting Services......................................8
Section 3.02 Compensation.............................................8
Section 3.03 Expense Reimbursement...................................10
Section 3.04 Indemnity...............................................10
Section 3.05 Relationship Between Parties............................10
Section 3.06 Limitations on Authority................................11
Section 3.07 Early Termination.......................................11
ARTICLE 4: ADDITIONAL COVENANTS OF EXECUTIVE.......................12
Section 4.01 Confidentiality.........................................12
Section 4.02 Stock Activity..........................................14
Section 4.03 Non-Competition.........................................15
Section 4.04 Non-Solicitation; Non-Disparagement;
Non-Interference........................................16
Section 4.05 Ownership of Works......................................17
Section 4.06 Cooperation With Legal Process..........................17
ARTICLE 5: GENERAL PROVISIONS......................................18
Section 5.01 Opportunity to Review With Counsel......................18
Section 5.02 Choice of Law...........................................18
Section 5.03 Remedies................................................18
Section 5.04 Severability............................................18
Section 5.05 No Amendment; Entire Agreement; No Waiver...............19
Section 5.06 Right Of Offset.........................................19
Section 5.07 Parties of Interest.....................................19
Section 5.08 Notices.................................................19
Section 5.09 Counterparts............................................20
Section 5.10 Publicity...............................................20
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Page
Section 5.11 Headings................................................20
Section 5.12 Attorneys Fees..........................................20
Section 5.13 Further Assurances......................................20
Section 5.14 Additional Covenants of the Company.....................20
Section 5.15 Dispute Resolution......................................20
Section 5.16 Approvals...............................................21
SCHEDULE OF ADDRESSES
SCHEDULE OF DEFERRED COMPENSATION
SCHEDULE OF OTHER TERMINATED BENEFITS
SCHEDULE OF POSITIONS
SCHEDULE OF RETIREMENT BENEFITS
SCHEDULE OF VESTED OPTIONS
FORM OF GENERAL RELEASE
FORM OF AGE DISCRIMINATION RELEASE
<PAGE>
AGREEMENT
THIS AGREEMENT ("Agreement") is entered into as of January 17, 2000 by and
among Edward R. Muller (the "Executive"), Edison Mission Energy, a California
corporation (the "Company"), and, as to Sections 2.04(d)(in respect of options
for Parent company stock) and 3.02(d), Edison International, a California
corporation (the "Parent").
RECITALS
WHEREAS, the Executive is currently employed as the President and Chief
Executive Officer of the Company; and
WHEREAS, the Executive and the Company have mutually agreed that Executive
will resign from his full-time position at the Company; and
WHEREAS, the Company desires to retain certain consultant services of
Executive as described and for the term set forth herein;
NOW, THEREFORE, in consideration of the mutual agreements and covenants of
the parties herein contained, and for other good and valuable consideration the
receipt and sufficiency of which are hereby acknowledged, the parties do hereby
agree as follows.
Article 1: DEFINITIONS; INTERPRETIVE MATTERS
SECTION 1.01 DEFINITIONS. As used herein the following terms have the
following meanings:
(a) "Affiliate" means, with respect to a specified Person, any Person that,
directly or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, such specified Person.
(b) "Agreement" has the meaning specified in the introductory paragraph of
this Agreement.
(c) "Claims" has the meaning specified in the form of General Releases
attached hereto.
(d) "Company" has the meaning specified in the introductory paragraph of
this Agreement.
(e) "Confidential Information" has the meaning specified in Section
4.01(a).
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(f) "Consulting Services" has the meaning specified in Section 3.01.
(g) "Consulting Term" means the period commencing on the Effective Date and
ending on the earlier of the second anniversary of the Effective Date or the
date on which the Consulting Term is sooner terminated in accordance with the
provisions hereof, provided that, if the Consulting Term is otherwise terminated
pursuant to Section 3.07(a)(iv), the Consulting Term shall nevertheless be
deemed to continue until its originally scheduled expiration date solely for
purposes of Section 3.02.
(h) "Deferral Plans" means the Edison International Executive Deferred
Compensation Plan and the Edison International Option Gain Deferral Plan.
(i) "Effective Date" shall be January 18, 2000.
(j) "Equity Plans" has the meaning specified in Section 2.04(d).
(k) "Executive" has the meaning specified in the introductory paragraph of
this Agreement.
(l) "Group" means two or more Persons which agree to act together for the
purpose of acquiring, holding, voting or disposing of Voting Stock or of
acquiring, holding or disposing of any significant subsidiary, or significant
amount of assets, of the Company or any Affiliate of the Company.
(m) "Materials" has the meaning specified in Section 4.05.
(n) "Options" has the meaning specified in Section 2.04(d).
(o) "Line of Business" means the construction, development, financing,
acquisition, ownership, disposition, operation or maintenance of electrical
power generating facilities and/or the transmission or distribution of
electrical power or natural gas.
(p) "Parent" has the meaning specified in the introductory paragraph of
this Agreement.
(q) "Person" means and includes an individual, a partnership, a limited
liability company, a joint venture, a corporation, a trust, an unincorporated
organization, a government or any department or agency thereof or any entity
similar to any of the foregoing.
(r) "Releasee" has the meaning specified in the form of General Release
attached hereto.
(s) "Releasor" has the meanin specified in the form of General Release
attached hereto.
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(t) "Schedule of Addresses" means the Schedule of Addresses attached hereto
and incorporated herein by reference.
(u) "Schedule of Deferred Compensation" means the Schedule of Deferred
Compensation attached hereto and incorporated herein by reference.
(v) "Schedule of Other Terminated Benefits" means the Schedule of Other
Terminated Benefits attached hereto and incorporated herein by reference.
(w) "Schedule of Positions" means the Schedule of Positions attached hereto
and incorporated herein by reference.
(x) "Schedule of Retirement Benefits" means the Schedule of Retirement
Benefits attached hereto and incorporated herein by reference.
(y) "Schedule of Vested Options" means the Schedule of Vested Options
attached hereto and incorporated herein by reference.
(z) "Voting Stock" means shares of capital stock of the Parent that are
entitled to vote in periodic elections for directors and any shares of capital
stock, or similar securities, of any Affiliate of the Parent which are entitled
to vote in periodic elections for directors or other similar governing board
members.
(aa) "Works" has the meaning specified in Section 4.05.
SECTION 1.02 INTERPRETIVE MATTERS. In this Agreement, unless the context
otherwise requires, the singular shall include the plural, the masculine shall
include the feminine and neuter, and vice versa. The terms "includes" or
"including" shall mean "including without limitation." References to a Section,
Article, Exhibit or Schedule shall mean a Section, Article, Exhibit or Schedule
of this Agreement, and reference to a given agreement or instrument shall be a
reference to that agreement or instrument as modified, amended, supplemented and
restated through the date as of which such reference is made. This Agreement and
any documents or instruments delivered pursuant hereto shall be construed
without regard to the identity of the Person who drafted the various provisions
of the same. Each and every provision of this Agreement and such other documents
and instruments shall be construed as though the parties participated equally in
the drafting of the same. Consequently, the parties acknowledge and agree that
any rule of construction that a document is to be construed against the drafting
party shall not be applicable either to this Agreement or such other documents
and instruments.
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Article 2: EMPLOYMENT AND COMPENSATION
SECTION 2.01 RESIGNATION. Effective upon the Company's approval and
execution of this Agreement, Executive does hereby resign from any and all
positions of responsibility or authority at the Company, any subsidiary or
Affiliate of the Company, any other entity in which the Company or any of its
Affiliates has an investment where Executive's position with such entity is
related to such investment, and any division, unit, plan, program, trust, fund,
project or other subdivision established, organized or sponsored by the Company
or any of its subsidiaries or Affiliates or any such other entity, whether such
position is that of an agent, officer, manager, member, partner, executive,
trustee, administrator, director or otherwise, provided that with respect to any
membership that Executive may have on the board of directors or similar
governing board of any publicly traded entity, Executive's resignation shall be
deemed deferred until the Company makes written request therefor. Without
limiting the generality of the foregoing, Executive hereby resigns from all
positions set forth or described in the Schedule of Positions attached hereto
and incorporated herein by reference. Notwithstanding the foregoing, if the
Effective Date is after the date hereof, then between the date hereof and the
Effective Date, Executive shall remain an employee of the Company on
administrative leave, entitled to compensation for such period at his current
base rate of salary and existing fringe benefits, but it is understood that
Executive shall have no authority to bind or to determine or direct any activity
of, or represent, the Company or any of its Affiliates during such period. Upon
the Effective Date, and without any further action by Executive or the Company,
Executive's employment with the Company shall end.
SECTION 2.02 FURTHER ASSURANCES. To the extent necessary, Executive agrees
from time-to-time, upon the Company's reasonable request, to execute any and all
documents as may be necessary or desirable, in the reasonable and good faith
judgment of the Company or any of its Affiliates, to further confirm and/or
effectuate the aforesaid resignations.
SECTION 2.03 EFFECT OF RESIGNATION. Executive and the Company agree that
the resignation contained herein arises from the mutual agreement of the
Executive and the Company, resulting in a cessation of Executive's continued
employment. Accordingly, such resignation shall not be construed or deemed to be
a termination of Executive's employment by the Company, whether with or without
cause, or to constitute or be deemed to be any breach of any employment or other
obligation or duty by either the Executive or by the Company or any of its
Affiliates, whether express or implied, for any purpose, provided that for
purposes of construing the provisions of any employee benefit plan in which
Executive has been a participant, Executive's resignation shall be given the
same effect as a termination without cause.
SECTION 2.04 COMPENSATION AND BENEFITS. Executive hereby agrees that the
following, together with amounts that shall be payable to Executive under
Article 3 hereof in respect of Executive's Consulting Services, accurately
reflect all of the compensation,
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benefits or perquisites payable or otherwise to be provided to Executive by
the Company and its Affiliates on and after the Effective Date as a result of
Executive's employment by and separation from the Company and its Affiliates and
that Executive is not entitled to any other compensation, benefits, or
perquisites except as set forth in this Agreement:
(a) Salary. On the Effective Date, Executive will receive accrued base
salary from the end of the immediately preceding payroll period for which
payment has been made through the Effective Date.
(b) Accrued Vacation. On the Effective Date, the Company will pay Executive
such amounts as are due Executive for accrued and unused vacation time in
accordance with the Company's usual policies. After the Effective Date,
Executive will not accrue or be paid for vacation time in connection with his
provision of consulting services to the Company.
(c) Executive Incentive Compensation Plan. On the Effective Date, the
Company will pay Executive a bonus amount for the 1999 year under the Company's
Executive Incentive Compensation Plan equal to a gross amount, before
withholding, of Three Hundred Forty-Seven Thousand Two Hundred Fifty Dollars
Exactly ($347,250). Executive shall not be entitled to any further payments
under the Company's Executive Incentive Compensation Plan, including for any
period after 1999. Nothing in this paragraph shall create any inference or
expectation regarding bonuses actually to be paid to participants in such Plan
for the 1999 year, which may be above or below target amounts for individuals or
in the aggregate.
(d) Options. For purposes of the vesting of any unvested awards previously
made to Executive under the Edison International Equity Compensation Plan or
under the Edison International Management and Officer Long-Term Incentive
Compensation Plans (the "Equity Plans"), Executive's employment by the Company
shall be given the same effect as if Executive had remained regularly employed
through the Effective Date. Executive and the Company agree that, as of the
Effective Date, Executive's vested options to acquire stock of the Parent and
vested phantom options in respect of the Company will be as set forth in the
Schedule of Vested Options attached hereto and incorporated herein by reference
(the "Options"). From and after the Effective Date, the Executive shall no
longer be eligible for grants of any awards under the Equity Plans or under any
other long-term incentive plan of the Company or its Affiliates, and except as
set forth in Section 3.02, all unvested awards shall terminate as of the
Effective Date. On March 16, 2000, the Company shall pay to Executive, by wire
transfer in accordance with Executive's reasonable written instructions given at
least forty-eight (48) hours in advance, a gross amount, before withholding,
that is equal to the difference between $471.0642 per phantom share and the
pertinent exercise price of such share as shown on the Schedule of Vested
Options for each vested phantom Option of the Company. From and after the date
hereof, Executive shall have no further rights or entitlements in respect of
such phantom Options or any phantom options in respect of the Company, except as
set forth in Section 3.02; provided that if,
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within six (6) months of the date hereof, the Company or any Affiliate of
the Company consummates an exchange offer with holders of phantom options of the
Company in which the stated exchange value (before interest and any contingent
amounts) per phantom share for purposes of the exchange offer exceeds $471.0642
per phantom share, then, within thirty (30) days following the completion of
such exchange offer, the Company shall pay to Executive a gross amount, before
withholding, equal to such excess multiplied by the number of vested phantom
Options of Executive shown on the Schedule of Vested Options. Following the
Effective Date, Options for stock of the Parent listed on the Schedule of Vested
Options, shall remain subject to the terms of the award and the Plan under which
they were granted, subject to the provisions of Section 3.02.
(e) Deferral Plans. The Schedule of Deferred Compensation attached hereto
and incorporated herein by reference sets forth, as of the date shown, the
vested balance of Executive's deferral account in the Edison International
Executive Deferred Compensation Plan and units credited to Executive's stock
unit account in the Edison International Option Gain Deferral Plan. All deferred
compensation benefits shown on the Schedule of Deferred Compensation, following
the Effective Date, shall remain subject to the terms of the Deferred
Compensation Plan applicable thereto.
(f) Retirement Benefits. The Schedule of Retirement Benefits attached
hereto and incorporated herein by reference sets forth, as of the Effective
Date, the vested benefits payable to Executive under retirement plans of the
Company and its Affiliates in which he has been a participant. All such benefits
shown on the Schedule of Retirement Benefits, following the Effective Date,
shall remain subject to the terms of the pertinent retirement plan applicable
thereto, including the conditions to payment set forth therein. After the
Effective Date, there will be no further accrual of benefits for Executive under
such retirement plans.
(g) Health Benefits. From the Effective Date until eighteen (18) months
thereafter, Executive and his family shall remain eligible to continue to
participate in medical and dental plans of the Company and its Affiliates on the
same basis as if Executive had remained employed by the Company in his current
position, provided that Executive shall be responsible for paying the premium
costs therefor in accordance with the Company's ordinary practices in respect of
former employees, subject to the further provisions of Section 3.02.
(h) Other Insurance Coverage. Executive acknowledges that, except as
provided in Section 2.04(g) above and Section 3.02(c), no life, health,
accident, disability or other insurance policies or health or welfare benefits
will be provided for him by the Company or its Affiliates after the Effective
Date.
(i) Contract Costs. The Company will reimburse Executive for the reasonable
fees and costs of any attorney, financial advisor, accountant and/or other
professional
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advising and assisting Executive in the negotiations of this Agreement, up
to Twenty-Five Thousand Dollars ($25,000) in the aggregate.
(j) Outstanding Expense Reports. Executive agrees to submit to the Company
an expense report for all reimbursable and reasonable expenses he has incurred
as an employee of the Company no later than the fifteenth business day following
the Effective Date, and acknowledges that the business expenses to be contained
in such expense report will be the only remaining reimbursable business expenses
incurred by Executive while in the Company's employ. The Company will reimburse
Executive for such expenses within thirty (30) days of Executive's submission of
the report, to the extent such expenses are valid and reimbursable under Company
policy.
(k) Severance. On the Effective Date, the Company shall make a one-time
severance payment to Executive in an amount, prior to withholding, that is equal
to Five Hundred Thousand Dollars Exactly ($500,000).
(l) Other Compensation. Executive acknowledges that from and after the
Effective Date, all other compensation, benefits and perquisites to which he has
been entitled as an employee of the Company shall forthwith terminate and that
he shall no longer be entitled to receive the same, including without
limitation, reimbursement for the costs of a car and driver and for private club
memberships. Without limiting the generality of the foregoing, the other
benefits and perquisites in which Executive currently participates which shall
no longer be available to him after the Effective Date are as set forth in the
Schedule of Other Terminated Benefits attached hereto and incorporated herein by
reference.
SECTION 2.05 WITHHOLDING. Executive agrees that all compensation, benefits
and perquisites payable hereunder shall be paid after withholding for taxes
which, in the Company's reasonable good faith judgment, are required to be
withheld by the Company, including income taxes at the then current published
federal and state rate unless Executive elects to use a higher rate.
Notwithstanding the foregoing, it is understood that all personal income and
related taxes applicable to any and all compensation, benefits and perquisites
payable hereunder shall be paid by Executive, and the Company shall not be
obligated to pay any such taxes or to provide Executive with funds for the
payment of same.
SECTION 2.06 COMPANY PROPERTY. Executive agrees to return to the Company,
as soon as practicable, but in any event on or prior to the Effective Date, all
Company property, including, but not limited to, all keys, credit cards,
documents, equipment (including computer and telephone equipment) automobiles,
files, data and records of any kind whatsoever that he has in his possession or
control (except for any Company property that the Company authorizes Executive
in writing to retain for purposes of his providing the Consulting Services
hereunder) regardless of the form for storage thereof (whether documentary, on
discs or present on other electronic media). The Company agrees to permit
Executive to retain copies of documents that are contained in his office files
and that are personal
7
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in nature, subject to the Company's prior review of such materials and
approval of their retention by the Executive. Notwithstanding the foregoing, (a)
subject to the Company's satisfaction that all Company information and programs
have been removed therefrom, Executive may retain the Company's personal
computer currently at Executive's residence, and (b) the Company will cooperate
and work together with Executive to facilitate Executive's assumption of the
Company's future obligations in respect of the automobile currently leased by
the Company for Executive.
SECTION 2.07 RELEASES. In further consideration of the Company's entry into
this Agreement with Executive and its promise to make payments and to provide
benefits hereunder to which Executive is not otherwise entitled, Executive is,
concurrent with the Company's execution of this Agreement, delivering to the
Company executed copies of the forms of releases attached hereto, respectively,
as "Form of General Release" and "Form of Age Discrimination Release." In the
event that the Executive exercises his right to rescind the Age Discrimination
Release, then notwithstanding any other provision of this Agreement, the Company
shall have the right, within five (5) days thereafter, to terminate any and all
further obligations of the parties under this Agreement.
Article 3: CONSULTING
SECTION 3.01 CONSULTING SERVICES. During the Consulting Term, Executive
will, when reasonably requested to do so by the Company's Chairman, Chief
Executive Officer or Board of Directors, provide the Company and its officers
and directors with strategic consulting and advisory services related to
material aspects of the Company's business. All Consulting Services provided
hereunder will be provided on an "as requested" basis, subject to Executive's
reasonable availability. Without limiting the generality of the foregoing, and
subject to the Company's compensating the Executive for additional time as
provided for herein, Executive shall not be required to expend more than forty
(40) hours per month on providing Consulting Services hereunder. When requested
to provide Consulting Services, Executive shall endeavor to do so in a
professional, diligent and workmanlike manner, providing the Company and its
Affiliates with the benefit of his best, informed and professional judgment. All
Consulting Services shall be provided by Executive personally, but Executive
shall have the right to obtain the assistance of his employees at no additional
cost to the Company.
SECTION 3.02 COMPENSATION. In consideration of his providing the Consulting
Services and subject to the terms and provisions of this Agreement and
Executive's compliance therewith, the Company shall pay to the Executive the
following compensation:
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(a) The Company shall pay Executive a consulting fee at the rate of Three
Hundred Thousand Dollars ($300,000) per annum, payable in equal monthly
installments on the last day of each month during the Consulting Term (pro-rated
for partial months during the Term).
(b) In the event that Executive provides more than forty (40) hours of
Consulting Services in any calendar month, then the Company shall also pay
Executive $[300] for each such additional hour, provided that within thirty (30)
days following the close of such month, Executive submits to the Company an
invoice setting forth time expended for Consulting Services during such month in
reasonable detail and with such supporting documentation as the Company may
reasonably request.
(c) During the Consulting Term, the Company shall reimburse Executive, or,
if requested by Executive, pay directly on Executive's behalf, up to Twenty
Thousand Dollars ($20,000) per annum in the aggregate, for Executive's premium
costs for health care benefits comparable to those referred to in Section
2.04(g) and premium costs for disability insurance coverage comparable to that
now enjoyed by Executive under the Company's long-term disability plan (to the
extent commercially available), subject in each case to the Company's receipt
from time-to-time and upon request of customary certifications of Executive's
ineligibility for health care or disability benefits, as the case may be, under
a plan of another employer.
(d) Notwithstanding any other provision of the Equity Plans, certain
unvested awards of options for Parent company stock granted to the Executive in
1998 and 1999 shall continue to vest as follows. One twenty-fourth (1/24) of the
6,650 currently unvested Parent company options granted to Executive on January
2, 1998, and one twenty-fourth (1/24) of the 17,325 currently unvested Parent
company options granted to Executive on January 4, 1999, shall continue to vest
at the end of each calendar month completed during the Consulting Term
(pro-rated for the partial periods from the Effective Date to January 31, 2000,
and from January 1, 2002 to January 18, 2002). Furthermore, the term for the
exercise by Executive of any vested options to acquire capital stock of the
Parent that are listed on the Schedule of Vested Options or that are vested
pursuant to the provisions of this Section 3.02(d) shall be extended to, and
including, the 180th day following the end of the Consulting Term.
(e) Notwithstanding any other provision of the Equity Plans, certain
unvested awards for phantom options in respect of the Company granted to the
Executive in 1998 and 1999 shall continue to vest as follows. One twenty-fourth
(1/24) of the 3,930 currently unvested phantom options granted to Executive on
January 2, 1998, and one twenty-fourth (1/24) of the 8,010 currently unvested
phantom options granted to Executive on January 4, 1999, shall continue to vest
at the end of each calendar month completed during the Consulting Term
(pro-rated for the partial periods from the Effective Date to January 31, 2000,
and from January 1, 2002 to January 18, 2002). Within ten (10) days following
the close of each calendar month as of the end of which unvested options have
vested pur-
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suant to the preceding sentence, the Company shall pay to Executive a gross
amount, before withholding, that is equal to the difference between $471.0642
(subject to adjustment in accordance with the proviso to the penultimate
sentence of Section 2.04(d)) for each phantom option that vested at the end of
the preceding month under this Section 3.02(e) and the pertinent exercise price
thereof. By way of example, if there were 12,000 unvested options, 500 options
would vest monthly, and the Company would pay Executive on a monthly basis the
excess of $471.0642 (subject to adjustment in accordance with the proviso to the
penultimate sentence of Section 2.04(d)) per option over the exercise price of
each of such 500 options.
(f) The Company may, in its discretion, withhold taxes from amounts due
Executive under this Section 3.02 unless and to the extent an acceptable legal
opinion is received from Executive's legal counsel to the effect that
withholding is either not applicable or not required.
SECTION 3.03 EXPENSE REIMBURSEMENT. The Company will reimburse Executive,
in accordance with the Company's customary practices, for reasonable and
customary out-of-pocket expenses which are pre-approved by the Company and
actually incurred and paid by Executive as a result of and directly related to
the provision of Consulting Services, provided that such expenses would be
reimbursable to management executives of the Company under then prevailing
Company policies. In no event shall such expenses include salaries of
Executive's employees, or other overhead costs.
SECTION 3.04 INDEMNITY. The Company shall indemnify and hold harmless
Executive and his Affiliates from and against any and all Claims, actual or
threatened (including all expenses incurred in connection therewith as they are
incurred) arising from or related to Executive's performance of the Consulting
Services, except to the extent that such Claims or threatened Claims arise from
or are related to the breach of this Agreement by Executive or the gross
negligence or willful misconduct of Executive or his Affiliates, for which
Executive shall indemnify and hold harmless the Company and its Affiliates to
the same extent as the Company would otherwise be obligated to provide indemnity
to Executive.
SECTION 3.05 RELATIONSHIP BETWEEN PARTIES. The parties acknowledge and
agree that the provision of the Consulting Services shall not create any
association, partnership, joint venture, agency or employer and employee
relationship between the Company and the Executive. Executive acknowledges that
Executive is being engaged as an independent contractor, and Executive will not
be eligible for benefits generally available to the employees of the Company. In
the performance of the Consulting Services, Executive agrees at his sole cost
and expense to materially comply with all applicable laws and with such
requirements or restrictions as may be imposed by any governmental authority,
including the procurement of any applicable permits and compliance with any
applicable laws now or hereafter in effect relating to Executive's provision of
Consulting Services or Execu-
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tive's hiring of any employees in connection therewith, including any
applicable workers' compensation, unemployment, and wages and hours laws.
SECTION 3.06 LIMITATIONS ON AUTHORITY. Except as may be expressly
authorized in writing from time to time by the Company's chief executive
officer, Executive agrees that he will not have authority to, and that he will
not, in connection with the Consulting Services, (a) enter into any contracts or
other undertakings binding on, or imposing any obligations or liabilities on,
the Company or any of its Affiliates, or (b) make any representations to any
Person(s) that either Executive or any Person acting under his authority has the
authority to act for the Company or any of its Affiliates or represent that
either Executive or any Person in his employ or under his authority is engaged
by the Company or any of its Affiliates in any capacity other than the
engagement hereunder as a consultant.
SECTION 3.07 EARLY TERMINATION. In addition to any other rights or remedies
at law, in equity or pursuant to any other provisions of this Agreement, the
consulting relationship created hereby may be terminated as follows:
(a) By the Company at any time:
(i) Upon written notice to Executive in the event of his material breach or
default hereunder, provided that if such material breach or default is curable,
then Executive shall have thirty (30) days to cure the default or breach;
(ii) Upon written notice to Executive pursuant to the provisions of Section
4.03(a), or in the event of his habitual neglect of duty, or in the event of his
failure to follow reasonable instructions consistent with the scope of his
engagement from the Company's Chief Executive Officer, Chairman or Board of
Directors, or in the event of any gross negligence, willful misconduct or
intentionally tortious acts or omissions, or in the event of any acts of
material dishonesty, committed by Executive in the course of providing
Consulting Services;
(iii) Upon the death or permanent disability of Executive (as determined in
accordance with the Company's customary policy); or
(iv) Upon thirty (30) days' prior written notice to Executive for any other
reason or for no reason; or
(b) By the Executive, at any time on or after the expiration of six (6)
calendar months from the Effective Date, upon thirty (30) days' prior written
notice to the Company for any reason or for no reason.
In the event of any termination arising under Section 3.07(a)(i), (ii) or
(iii) or Section 3.07(b), then and in such event the Company shall be obligated
to pay the compensation set
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forth in Section 3.02 that is due hereunder to the date of termination only
and shall have no obligation to provide further compensation thereafter, and all
currently unvested options and phantom options shall cease vesting under
Sections 3.02(d) and (e) or otherwise as of the end of the calendar month
immediately preceding such date of termination, provided that if the Consulting
Term has not earlier terminated pursuant to Section 3.07(a)(i) or (ii) or under
Section 3.07(b), all then unvested options and phantom options shall vest and be
paid upon any termination under Section 3.07(a)(iii). In the event of any
termination under Section 3.07(a)(iv), the Company shall remain obligated to
continue to provide the compensation to Executive that would otherwise become
due thereafter under the terms of Section 3.02 of this Agreement but for such
termination, and Executive's rights under Sections 3.02(d) and (e) shall be
unaffected by such termination. In the event the Company wishes to obtain
insurance for its obligations in the event of Executive's death or disability,
Executive agrees to reasonably cooperate with the Company in such endeavor.
Article 4: ADDITIONAL COVENANTS OF EXECUTIVE
SECTION 4.01 CONFIDENTIALITY.
(a) Executive acknowledges that he has held a sensitive management position
with the Company and that, by virtue of having held such position, he has had
access to and has learned the Company's and its subsidiaries' and Affiliates'
confidential and proprietary information and trade secrets pertaining to its and
their past, present, planned or projected operations, results of operations,
prospects, processes, know-how, services, projects, strategies, techniques,
procedures, financial capabilities, assets, transactions, partners, financing
sources and personnel, disclosure of any of which to present or future
competitors, investors, partners or the general public would be highly
detrimental to the best interests of the Company and its Affiliates. All such
confidential and proprietary information to which Executive has had prior access
as a result of his position with the Company, and all similar information to
which Executive may have access in the future as a result of performing
Consulting Services, are herein referred to as "Confidential Information."
Examples of such confidential and proprietary information include, but are not
limited to, the Company's investigations of and development and analytical work
on potential future electric generation assets, both those potentially to be
constructed and those potentially to be acquired. Executive further acknowledges
and agrees that the right to maintain the confidentiality of such Confidential
Information constitutes a proprietary right which the Company and its Affiliates
are entitled to protect.
(b) Accordingly, without limiting any obligations of Executive arising at
law or pursuant to any existing agreement to which Executive is bound, Executive
covenants and agrees to and in favor of the Company that, subject to the further
provisions of this
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Agreement, Executive shall not disclose any Confidential Information to any
Person other than as approved by the Company in writing in advance in connection
with Executive providing Consulting Services hereunder, and Executive shall not
use for the Executive's own purposes or for any purpose other than those of the
Company and its Affiliates any Confidential Information during the Consulting
Term or at any time thereafter until such Confidential Information has been
otherwise publicly disclosed. Without limiting the generality of the foregoing,
Executive agrees that, except as permitted in writing by the Company, he will
not respond to or in any way participate in or contribute to any public
discussion, notice or other publicity concerning or in any way related to
Confidential Information or, subject to Section 5.10, any matters concerning his
employment at the Company. Executive agrees that any disclosure by him of any of
the Confidential Information shall constitute a material breach of this
Agreement and of his fiduciary obligations to the Company.
(c) For purposes of this Section 4.01, "Confidential Information" does not
include information which (i) is or becomes generally available to the public
other than as a result of disclosure by Executive, or (ii) was within the
Executive's possession prior to being furnished to the Executive by or on behalf
of the Company or its Affiliates, provided that the Executive did not receive
such information in a fiduciary capacity and provided further that the scope of
such information was not known to the Executive to be bound by a confidentiality
agreement with or other contractual, legal or fiduciary obligation of
confidentiality to the Company or any of its Affiliates or any other Person with
respect to such information.
(d) If Executive is requested or required (by oral questions,
interrogatories, requests for information or documents in connection with any
legal proceedings, subpoena, civil investigative demand or other similar
process) to disclose any Confidential Information, then Executive shall provide
the Company with prompt written notice of any such request or requirement so
that the Company may seek a protective order or other appropriate remedy and/or
waive compliance with the provisions of this Agreement. If, in the absence of a
protective order or other remedy or the receipt of a waiver from the Company,
the Executive is, in the written opinion of counsel reasonably acceptable to the
Company (the reasonable attorney's fees and costs of which opinion the Company
shall reimburse), legally compelled to disclose Confidential Information to any
tribunal or else stand liable for contempt, or suffer other censure or penalty,
then Executive may, without liability hereunder, disclose to such tribunal only
that portion of the Confidential Information which such counsel advises the
Executive is legally required to disclose, provided that Executive exercises
commercially reasonable efforts to preserve the confidentiality of the
Confidential Information, including, without limitation, by cooperating with the
Company to obtain an appropriate protective order or other reliable assurance
that confidential treatment will be accorded the Confidential Information by
such tribunal.
(e) Without limiting the provisions of Section 2.06, all files, forms,
brochures, books, materials, written correspondence, memoranda, documents,
manuals, computer
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disks, software products and lists that have in the past or may in the
future come into the possession or control of the Executive as a result of his
being an employee of or consultant to the Company shall at all times remain as
the property of the Company and not of the Executive. At the times required by
Section 2.06, upon conclusion of the Consulting Term and at any other time or
times demanded by the Company, Executive shall deliver promptly to the Company
all such property in the possession of the Executive or directly or indirectly
under the control of the Executive. Executive agrees not to make, for the use of
the Executive or of any other Person, reproductions or copies of any such
property or other property of the Company.
(f) Executive agrees that following his employment by the Company, he will
not, without the prior written consent of the Chief Executive Officer of the
Company, undertake employment or provide services for any Person other than the
Company or its Affiliates if the loyal and complete fulfillment of his duties in
connection with such employment or services would require him to reveal or
otherwise use any Confidential Information in violation of the provisions
hereof.
SECTION 4.02 STOCK ACTIVITY. Executive hereby agrees that from the date
hereof until the second anniversary of the Effective Date, Executive shall not:
(a) Acquire, by purchase or otherwise (except pursuant to Executive`s
participation in employee benefit plans), offer to acquire or obtain the right
to acquire, propose to acquire, announce any intention or plan to acquire, or
announce or make any request for permission to acquire, directly or indirectly,
any shares of Voting Stock, or any other security convertible into or
exercisable or exchangeable for Voting Stock, unless (i) following such
acquisition and after giving effect thereto, the Executive and any Group of
which he is a member, would not be directly or indirectly the beneficial owners
of more than five percent (5%) of the outstanding shares of Voting Stock of the
Parent, the Company or any Affiliate thereof, as the case may be, and (ii) such
acquisitions or offers or agreements to acquire are made in open market
transactions (or pursuant to the Equity Plans);
(b) Directly or indirectly engage in, or become a member of a Group which
is engaging or which subsequently engages in, any tender offer or exchange offer
for any shares of Voting Stock;
(c) Take any other action, participate in or become a member of any Group,
or make any proposal, offer to acquire or obtain a right to acquire, propose to
acquire, announce any intention or plan to acquire, or announce or make any
request for permission to acquire, directly or indirectly or alone or together
with others, control of the Company or of any Affiliate of the Company or of any
division, business segment or significant amount of assets of the Company or of
any Affiliate of the Company;
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(d) Enter into any voting agreement or proxy arrangement with respect to
shares of Voting Stock, or deposit any shares of Voting Stock into any voting
trust or similar entity, as a result of which the voting rights associated with
any or all of Executive's Voting Stock are vested in another Person, other than
proxies (or their substitutes) designated by the Board of Directors of the
issuer of such Voting Stock in proxy material for any meeting of stockholders of
such issuer;
(e) Conduct or become a participant in any solicitation of proxies with
respect to Voting Stock, or make any announcement with respect to any
solicitation of proxies, for the purpose of opposing a solicitation (for
election of directors or otherwise) approved by a majority of the whole Board of
Directors of the issuer of such Voting Stock, or present any proposal, or
solicit or become a participant in the solicitation of proxies in favor of a
proposal, for action at a meeting of the stockholders of such issuer, which is
not approved by a majority of the whole Board of Directors of such issuer;
(f) Enter into any plan, agreement or arrangement, or become a member of
any Group, for the purpose of engaging in any activity prohibited by the
foregoing paragraphs of this Section 4.02 ; or
(g) Assist any other Person in connection with such other Person's engaging
in any activity which, if engaged in by the Executive, would constitute a
violation of this Section 4.02.
SECTION 4.03 NON-COMPETITION.
(a) Without limiting the provisions of Sections 4.01. 4.02 and 4.04, and as
a further inducement to the Company to enter into this Agreement, Executive
agrees that, except as otherwise permitted hereby, until the expiration of six
(6) calendar months from the Effective Date, or until the end of the Consulting
Term if the Consulting Term ends after the expiration of six (6) calendar months
from the Effective Date, Executive shall not, directly or indirectly, for his
own account or as agent for another, carry on or participate in the ownership,
management or control of, or be employed by, or serve as a director of, or
consult for, or license or provide know-how to, or otherwise render services to,
or allow his name or reputation to be used in or by, any other present or future
business enterprise that, either alone or together with its Affiliates, engages
in the Line of Business and competes with current or planned activities of the
Company and its Affiliates anywhere in the world without the prior written
approval of the Chief Executive Officer of the Company. In the event of any
violation of the foregoing, then and in such event the Company may, upon notice
to Executive, terminate the consulting relationship between Executive and
Company without limiting any other remedies of the Company.
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(b) Notwithstanding the foregoing, nothing herein shall limit the right of
Executive, as an investor, to hold and make investments in securities of any
corporation or other entity that competes in the Line of Business with the
Company and its Affiliates and that is registered on a national securities
exchange or admitted to trading privileges thereon or actively traded in a
generally recognized over-the-counter market, provided that the aggregate of all
of Executive's beneficial ownership therein does not exceed one percent (1%) of
the outstanding equity interests in such corporation or other entity.
(c) Executive acknowledges that he considers the restrictions set forth in
this Section 4.03 to be reasonable both individually and in the aggregate and
that the duration, geographic scope, extent and application of each of such
restrictions are no greater than is necessary for the protection of the
legitimate interests of the Company and its Affiliates. In the event that any
restriction herein shall be found to be void or unenforceable but would be valid
or enforceable if some part or parts thereof were deleted or the period or area
of application reduced, each of the parties hereby agrees that such restriction
shall apply with such modification as may be necessary to make it valid.
SECTION 4.04 NON-SOLICITATION; NON-DISPARAGEMENT; NON-INTERFERENCE. During
the period that begins on the date hereof and that ends on the second
anniversary of the Effective Date, Executive agrees that he will not, directly
or indirectly, for his own benefit, for the benefit of any Person other than the
Company or its Affiliates, or otherwise:
(a) Solicit, encourage or induce, or assist any Person to solicit,
encourage or induce, any officer, director, executive or employee of the Company
or its Affiliates to leave his or her employment with the Company or its
Affiliates for any reason, it being agreed that the foregoing shall not prohibit
Executive from soliciting the employment of his current secretarial assistant;
(b) Induce or attempt to induce any customer, supplier, financier,
government agency, independent contractor, developer, promoter or other Person
having any business or regulatory relationship with the Company or any of its
Affiliates to cease, reduce or alter the nature, amount or terms of business
conducted or regulatory oversight or practices followed with respect to the
Company or any of its Affiliates or to engage in any business, regulatory or
other activity which might materially harm the Company or any of its Affiliates
or which is opposed by the Company and its Affiliates;
(c) Make or cause to be made any public statement that is disparaging of
the Company or any of its Affiliates or their respective businesses or that
materially injures the business or reputation of the Company or any of its
Affiliates or their respective businesses; or
(d) Directly or indirectly advise, consult or discuss with, provide
information to, or assist any Person, including any holder of phantom
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options in the Company or any advisor or representative of any such holder,
or make any comment or offer or provide any opinion or otherwise make
statements, concerning the phantom options, or the grant, appreciation, value,
or exercise thereof, or any transaction or proposed transaction in respect of
such phantom options, including without limitation any planned or actual
exchange offer by the Company therefor, or any interpretation or action by the
Company planned or actually made with respect to such phantom options, or any
claims or proceedings, whether pending or threatened, relating to such phantom
options, without the prior written consent of the Chief Executive Officer of the
Company, except and to the extent compelled by law.
SECTION 4.05 OWNERSHIP OF WORKS. As between the Company and Executive, the
Company shall be the sole and exclusive owner, throughout the universe, in
perpetuity, of all right, title, interest, benefits and profits of every kind
and nature whatsoever, whether now known or unknown, in, to and from all
programs, financial or business plans, all non-generic ideas and concepts,
logos, discoveries, trade secrets, prospect lists, or other tangible work
product and materials (including, without limitation, tangible materials
containing market, financial and other research) of every kind and nature
whatsoever (collectively, the "Works") written, conceived, developed, furnished
or created by or under the auspices of Executive in connection with his
performance of duties as an employee of or consultant to the Company, and all
results, benefits and proceeds of such Works (all of such Works, results,
benefits and proceeds being collectively referred to as the "Materials"). All of
such Materials shall constitute a "work made for hire" for the Company within
the meaning of the United States Copyright Act of 1976, as amended. In the event
that the Materials or any portion thereof are for any reason whatsoever not
deemed to be a "work made for hire" for the Company, Executive hereby grants and
assigns to the Company all right, title, interest, benefits and profits of every
kind and nature whatsoever, whether now known or unknown, in, to and from the
Materials. As between the Company and Executive, the Company shall at all times
have the perpetual and exclusive right to exploit such Materials and all works
derived therefrom throughout the universe, and all revenues and other benefits
and profits derived by the Company from such exploitation, as between the
Company and Executive, shall be the sole and exclusive property of the Company.
Executive agrees to execute, and to cause each of his employees or agents to
execute, any and all formal assignments, recordations and any other documents
which the Company reasonably deems are necessary or desirable to effectuate
and/or evidence the Company's rights in and to the Materials.
SECTION 4.06 COOPERATION WITH LEGAL PROCESS. From and after Executive's
employment with the Company, the Company shall, consistent with the Company's
then existing policies for indemnification of officers, continue to indemnify
Executive for his activities as an officer, director and employee of the Company
to the extent provided under and permitted by, and subject to the provisions and
conditions of, law and the charter documents of the Company in effect at the
time, as though Executive remained an officer,
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director and/or employee of the Company. In return, Executive agrees to
provide reasonable cooperation and assistance to the Company, when and as
requested by the Company and without charge to the Company except for the
Executive's reasonable and bona fide out-of-pocket costs (including reasonable
attorney's fees and costs), in connection with any and all pending or threatened
claims, proceedings and investigations (whether on behalf of or against the
Company) arising out of, or alleged to arise out of, facts or circumstances
existing during the term of Executive's employment by the Company.
Article 5: GENERAL PROVISIONS
SECTION 5.01 OPPORTUNITY TO REVIEW WITH COUNSEL. Executive represents that
he has discussed all aspects of this Agreement with an attorney of his choice,
that he has carefully read and fully understands all of the provisions of this
Agreement and that he is voluntarily entering into this Agreement.
SECTION 5.02 CHOICE OF LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of California, without
reference to the choice of law doctrine of California.
SECTION 5.03 REMEDIES. The rights and remedies of each party under this
Agreement are not, except as expressly provided herein to the contrary, to the
exclusion of each other or of any other rights or remedies of such party. Each
party may exercise or decline to exercise any one or more of its rights and
remedies without waiver of any such subsequent exercise of such right and remedy
or any other rights and remedies of such party. Executive acknowledges that the
Company cannot be properly protected from adverse consequences if Executive
should default under specified provisions of this Agreement. Accordingly, the
Executive agrees that in the event of any breach or threatened breach by
Executive of any of the provisions of Sections 3.06, 4.01, 4.02, 4.03, 4.04 or
4.05, the Company, in addition to any other right or relief to which it may be
entitled, shall be entitled to an order enjoining such breach or threatened
breach and specifically enforcing Executive's compliance with the provisions
thereof, Executive agreeing that he is hereby estopped and prohibited from
arguing that damages are an adequate remedy for any such breach or threatened
breach or that such equitable relief is inappropriate under the circumstances.
SECTION 5.04 SEVERABILITY. Without limiting the applicability of Section
4.03(c), if any term or other provision of this Agreement is invalid, illegal or
incapable of being enforced by any law or public policy, all other terms and
provisions of this Agreement shall nevertheless remain in full force and effect
so long as the economic or legal substance of the provisions hereof is not
affected in any manner materially adverse to any party. Upon such determination
that any term or other provision is invalid, illegal or incapable of being
enforced, the parties hereto shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties as closely as
possible in an acceptable manner in order
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that the provisions hereof are implemented and enforced as originally
contemplated to the greatest extent possible.
SECTION 5.05 NO AMENDMENT; ENTIRE AGREEMENT; NO WAIVER. This Agreement and
the Schedules and attachments hereto constitute the entire agreement of the
parties with respect to the subject matter hereof and supersede all prior
agreements and undertakings, both written and oral, between the parties with
respect to the subject matter hereof. Without limiting the generality of the
foregoing, Executive specifically represents and acknowledges that in executing
this Agreement, he does not rely and has not relied on any representations or
statements made by the Company, or any of the Company's agents, representatives
or attorneys with regard to the subject matter, basis or effect of this
Agreement, or otherwise. This Agreement may not be amended except by an
instrument in writing signed by the parties. Either party may (a) extend the
time for the performance of any of the obligations or other acts of the other
party, or (b) waive compliance with any of the agreements applicable to the
other party contained herein. Any such extension or waiver shall be valid only
if set forth in an instrument in writing signed by the party to be bound
thereby. Any waiver of any term or condition shall not be construed as a waiver
of any subsequent breach or a subsequent waiver of the same term or condition,
or a waiver of any other term or condition, of this Agreement. The failure of a
party to assert any of its rights hereunder shall not constitute a waiver of any
of such right.
SECTION 5.06 RIGHT OF OFFSET. The Company shall have the right to offset
against amounts owed Executive by the Company any amounts which, in the future,
Executive owes to the Company.
SECTION 5.07 PARTIES IN INTEREST. This Agreement may not be assigned or
transferred by either party, by operation of law or otherwise, without the prior
written consent of the other party (which consent may be granted or withheld in
the sole discretion of such other party). This Agreement shall be binding upon
and inure solely to the benefit of the parties and their permitted assigns and
nothing herein, express or implied, is intended to or shall confer upon any
other Person any legal or equitable right, benefit or remedy of any nature
whatsoever under or by reason of this Agreement.
SECTION 5.08 NOTICES. Any notice, payment, demand, or communication
required or permitted to be given by any provision of this Agreement shall be in
writing and shall be deemed to have been delivered, given, and received for all
purposes (a) if delivered personally to the Person to whom it is addressed, or
(b) when the same is actually received, if sent by a nationally recognized
courier service (which provides proof of delivery), by registered or certified
mail (postage and charges prepaid), or by facsimile (if such facsimile is
followed by a hard copy of the facsimile communication sent promptly thereafter
by a nationally recognized courier service (which provides proof of delivery) or
registered or certified mail (postage and charges prepaid)), addressed as set
forth in the Schedule of Addresses attached hereto and incorporated herein by
reference or to such other address as such Person may from time to time specify
by due notice.
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SECTION 5.09 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, and by the Parties in separate counterparts, each of which when
executed shall be deemed to be an original but all of which taken together shall
constitute one and the same agreement.
SECTION 5.10 PUBLICITY. The parties agree that, for a period of at least
six (6) months, they will keep the terms, amounts and facts of this Agreement
completely confidential, and that they will not during such period disclose any
information concerning this Agreement to anyone except their respective
attorneys or accountants, including, but not limited to, any past, present or
prospective employees of the Company or any of its Affiliates, except in each
case as may be required by law, including, without limitation, filings required
by the Company and by its parent entity with the Securities and Exchange
Commission. Notwithstanding the foregoing, the parties shall mutually agree upon
forms for a press release, internal communications and answers to press
questions to be used in connection with announcing Executive's resignation.
Subject to Executive conforming and limiting his statements to the substance of
such mutually agreed upon press release, internal communications and answers to
press questions, Executive may respond to press or analyst inquiries concerning
his resignation.
SECTION 5.11 HEADINGS. The descriptive headings contained in this Agreement
and table of contents of this Agreement are for convenience of reference only
and shall not affect in any way the meaning or interpretation of this Agreement.
SECTION 5.12 ATTORNEYS FEES. In any litigation or proceeding relating to
this Agreement, the prevailing party shall be entitled to recover its costs and
reasonable attorney fees.
SECTION 5.13 FURTHER ASSURANCES. The parties agree to execute such further
instruments and perform such further acts as may be reasonably necessary to
carry out the intent and purposes of this Agreement.
SECTION 5.14 ADDITIONAL COVENANTS OF THE COMPANY. The Company agrees that,
for a period of two (2) years from the Effective Date, the Company and its
Affiliates will not publicly issue any press release that disparages, or
materially injures the business or reputation of, the Executive, and will make
reasonable efforts to prevent their executive officers and official
spokespersons from making public statements on behalf of the Company or its
Affiliates that are disparaging of Executive or materially injure his business
or reputation. The Company further agrees to exercise reasonable efforts to
cause personal mail addressed to Executive to be forwarded to him in a timely
fashion (Executive agreeing to make reasonable efforts to notify third parties
of the change in his business address).
SECTION 5.15 DISPUTE RESOLUTION. All disputes arising out of or relating to
this Agreement shall be resolved pursuant to the reference procedure set forth
in California Code of Civil Procedure 638 et seq. The parties hereby agree to
submit to the jurisdiction of
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the Superior Court of Los Angeles County for such purpose. Either party may
initiate the procedure set forth in this Section by providing the other party
with notice setting forth the nature of the dispute. The parties shall designate
to the Superior Court a referee who is an active attorney or retired judge
living in Los Angeles County who shall resolve the dispute. If the parties are
unable to designate a referee within 20 days after the receipt of the original
referral notice, the parties shall request that the Superior Court appoint a
referee. In connection with any proceeding pursuant to this Section, the parties
shall have all discovery rights which would have been available had the matters
which are the subject of the dispute been decided by the Superior Court.
Discovery proceedings may be noticed and commenced immediately after delivery of
the original referral notice. The hearing before the referee shall begin no
later than 60 days after the receipt of such referral notice. All discovery in
connection with the reference procedure shall be concluded no later than 15 days
prior to the commencement of the hearing. Judgment upon the award rendered by
the referee shall be entered in the Superior Court. Nothing in this Section
shall be construed to impair the right of either party to appeal from such
judgment.
SECTION 5.16 APPROVALS. The effectiveness and implementation of this
Agreement are subject to the approval of the Boards of Directors of the Company
and the Parent and the Compensation and Executive Personnel Committee of the
Board of Directors of the Parent.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
Edward R. Muller
-----------------------
Edward R. Muller
EDISON MISSION ENERGY
By: John E. Bryson
-------------------
John E. Bryson
Title: Chairman
By: Alan J. Fohrer
-------------------
Alan J. Fohrer
Title: President and CEO
With respect to Sections 2.04(d) and 3.02(d) only:
EDISON INTERNATIONAL
By: John E. Bryson
-------------------
John E. Bryson
Title: Chairman
By: Bryant C. Danner
-------------------
Bryant C. Danner
Title: Executive Vice President
and General Counsel
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SCHEDULE OF ADDRESSES
Notices to the Company and to the Parent shall be addressed as follows:
Edison International
Edison Mission Energy
C/O Bryant C. Danner
Executive Vice President and
General Counsel
Edison International
2244 Walnut Grove Avenue
Rosemead, California 91770
FAX: (626) 302-4775
Notices to the Executive shall be addressed as follows:
Mr. Edward R. Muller
502 20th Street
Santa Monica, California 90402
FAX: (310) 394-5756
With a courtesy copy to:
Ronald M. Greenberg, Esq.
Rosenfeld, Meyer & Susman
9601 Wilshire Blvd., 4th Floor
Beverly Hills, California 90210
FAX: (310) 271-6430
<PAGE>
SCHEDULE OF DEFERRED COMPENSATION*
Balances as of January 10, 2000:
Edison 401(k) Savings Plan and Profit Sharing $129,460
Executive Deferred Compensation Plan (EDCP) $1,015,808
----------
Total $1,145,268
==========
*Additional amounts, if any, arising from Profit Sharing amounts for
the 1999 year will be added in the ordinary course when calculated.
<PAGE>
SCHEDULE OF OTHER TERMINATED BENEFITS*
Employee Life Insurance
Executive Incentive Compensation Plan
Long-Term Incentive Compensation Plan
Equity Compensation Plan
Affiliate Long Term Incentive Program
401(k) Savings Plan
Executive Deferred Compensation Plan
Option Gain Deferral Plan
Executive Retirement Plan
Retirement Plan
Estate and Financial Planning
Comprehensive Disability and Executive Disability Plan
Long-Term Disability
Dependent Life Insurance
Dependent AD&D Insurance
Dependent Care Reimbursement Account
Vacation
Vacation Buying and Selling
Holidays
Personal Use of Company Car/Auto Allowance/Driver
Executive Physical
Accidental Death and Dismemberment
24-Hour Business Travel Accident Insurance
Club Memberships
Health Care Reimbursement Account
Preventive Health Care Account
Employee Assistance Plan (EAP)
Retiree Health Care and Medicare
* Executive is entitled to any vested benefits and/or balances in any of
the above plans but will have no further entitlements under any of the plans
except as otherwise provided in this Agreement.
<PAGE>
SCHEDULE OF POSITIONS
Company Position(s)
----------------------------- -----------------------------.
Edison Mission Energy Director, President and Chief
Executive Officer
Edison Mission Energy Global Director, President and Chief
Management, Inc. Executive Officer
Edison Mission Operation & Director and President
Maintenance, Inc.
Mission Energy Holdings, Inc. Director and President
Edison Mission Energy Australia Director
Limited
Edison Mission Energy Holdings Director
Pty Ltd
Edison Mission Operation & Director
Maintenance Kwinana Pty Ltd
Edison Mission Operation & Director
Maintenance Loy Wang Pty Ltd
Latrobe Power Pty Ltd Director
Loy Yang Holdings Pty Ltd Director
Mission Energy Development Director
Australia Pty Ltd
Mission Energy (Kwinana) Pty Ltd Director
Mission Energy Ventures Australia Director
Pty Ltd
Traralgon Power Pty Ltd Director
In addition, any and all positions of responsibility or authority at any
entity appearing on the attached list of subsidiaries.
<PAGE>
02 EDISON MISSION ENERGY is a California corporation having its principal
place of business at 18101 Von Karman Avenue, Suite 1700, Irvine,
California 92612- 1046. Edison Mission Energy owns the stock of a
group of corporations which, primarily through partnerships with non-
affiliated entities, are engaged in the business of developing, owning
and/or operating cogeneration, geothermal and other energy or
energy-related projects pursuant to the Public Utility Regulatory
Policies Act of 1978. Edison Mission Energy, through wholly owned
subsidiaries, also has ownership interests in a number of independent
power projects in operation or under development that either have been
reviewed by the Commission's staff for compliance with the Act or are
or will be exempt wholesale generators or foreign utility companies
under the Energy Policy Act of 1992. In addition, some Edison Mission
Energy subsidiaries have made fuel-related investments and a limited
number of non-energy related investments. The subsidiaries and
partnerships of Edison Mission Energy are listed below. Unless
otherwise indicated, all entities are corporations, are organized
under the laws of the State of California and have the same principal
place of business as Edison Mission Energy.
EDISON MISSION ENERGY DOMESTIC COMPANIES:
03 AGUILA ENERGY COMPANY (LP)
04 American Bituminous Power Partners, LP (Delaware limited
partnership) 49.5%; 50% with Pleasant Valley
05 American Kiln Partners, LP (Delaware limited partnership)
49.5% of 53%
03 ANACAPA ENERGY COMPANY (GP)
04 Salinas River Cogeneration Company 50%
03 ARROWHEAD ENERGY COMPANY (inactive)
03 BALBOA ENERGY COMPANY (GP)
04 Smithtown Cogeneration, LP (Delaware partnership) 50%; 100%
w/Kingspark
03 BERGEN POINT ENERGY COMPANY (GP)
04 TEVCO/Mission Bayonne Partnership (Delaware G.P.) 50%
05 Cogen Technologies NJ Ventures (Delaware G.P.) 0.75%
04 Cogen Technologies NJ Ventures (Delaware G.P.) 0.375%
03 BLUE RIDGE ENERGY COMPANY (GP)
04 Bretton Woods Cogeneration, LP (Delaware limited partnership)
50%; 100% w/Bretton Woods
03 BRETTON WOODS ENERGY COMPANY (GP & LP)
04 Bretton Woods Cogeneration, LP (Delaware LP) 50%; 100%
w/Blue Ridge
03 CAMINO ENERGY COMPANY (GP)
04 Watson Cogeneration Company (general partnership) 49%
03 CAPISTRANO COGENERATION COMPANY (GP)
04 James River Cogeneration Company (North Carolina partnership) 50%
03 CENTERPORT ENERGY COMPANY (GP & LP)
04 Riverhead Cogeneration I, LP (Delaware partnership) 50%; 100%
w/Ridgecrest
03 CHESAPEAKE BAY ENERGY COMPANY (GP)
04 Delaware Clean Energy Project (Delaware general partnership) 50%
03 CHESTER ENERGY COMPANY (no partners; option Chesapeake,VA)
03 CLAYVILLE ENERGY COMPANY
04 Oconee Energy, LP (Delaware LP) 50%; 100% w/Coronado
03 COLONIAL ENERGY COMPANY (inactive)
03 CORONADO ENERGY COMPANY
04 Oconee Energy, LP (Delaware LP) 50%; 100% w/Clayville
03 DEL MAR ENERGY COMPANY (GP)
04 Mid-Set Cogeneration Company 50%
03 DELAWARE ENERGY CONSERVERS, INC. (Delaware corporation) (inactive)
03 DESERT SUNRISE ENERGY COMPANY (Nevada corporation) (inactive)
03 DEVEREAUX ENERGY COMPANY (LP)
04 Auburndale Power Partners, LP (Delaware LP) 49%; 50% w/El
Dorado [see 4.03]
17
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03 EASTERN SIERRA ENERGY COMPANY (GP & LP)
04 Saguaro Power Company, LP 50%
03 EAST MAINE ENERGY COMPANY (inactive) [dissolving]
03 EDISON ALABAMA GENERATING COMPANY
03 EDISON MISSION ENERGY FUEL
04 EDISON MISSION ENERGY OIL AND GAS
05 Four Star Oil & Gas Company 50.1% (owns Lost Hills
Cogeneration Facility)
04 EDISON MISSION ENERGY PETROLEUM (Gas contracts w/ Tex. Gas Mktg)
04 POCONO FUELS COMPANY (inactive)
04 SOUTHERN SIERRA GAS COMPANY
05 TM Star Fuel Company (general partnership) 50%
03 EDISON MISSION ENERGY FUEL SERVICES, INC. [PowerGen project]
03 EDISON MISSION ENERGY FUNDING CORP. (Delaware corporation) 1%
03 EDISON MISSION ENERGY GLOBAL MANAGEMENT, INC. (Delaware corporation)
Address:
04 Majestic Energy Limited (UK private limited company)
Address:
05 EME Royale Limited (New Zealand private limited company)
Address:
06 Edison Mission Energy Taupo Limited (New Zealand company) 100%
Address: Southgate Complex, Level 20, Tower East,
40 City Road, South Melbourne, Victoria 3205
07 Contact Energy Limited (New Zealand company) 40%
Address: Level 1, Harbor City Tower, 29 Brandon Street,
Wellington, New Zealand
03 Edison Mission Energy Interface Ltd. (British Columbia company)
04 The Mission Interface Partnership (Province of Ontario G.P.) 50%
03 EDISON MISSION FINANCIAL MARKETING & TRADING CO.
04 EDISON MISSION MARKETING & TRADING, INC.
03 EDISON MISSION HOLDINGS CO. (formerly EME Homer City Holdings Co.)
04 CHESTNUT RIDGE ENERGY COMPANY 100%
05 EME Homer City Generation LP (Pennsylvania) 99%LP
04 EDISON MISSION FINANCE CO. 100%
04 HOMER CITY PROPERTY HOLDINGS, INC. 100%
04 MISSION ENERGY WESTSIDE, INC. 100%
05 EME Homer City Generation LP (Pennsylvania) 1%GP
03 EDISON MISSION OPERATION & MAINTENANCE, INC. (no partnership)
04 Mission Operations de Mexico, S.A. de C.V. 99%
03 EDISON MISSION PROJECT CO. (formerly EME UK International, Inc.)
(Delaware corp) 100%
03 EL DORADO ENERGY COMPANY (GP)
04 Auburndale Power Partners, LP (Delaware LP) 1%; 50% w/
Devereaux [see 4.03]
03 EME UK International LLC (Delaware LLC) 100% [owns 100% of Class B
Shares of MEC International B.V.]
03 EMP, INC. (Oregon corporation) (GP & LP) (inactive)
03 FOUR COUNTIES GAS COMPANY (inactive)
03 GLOBAL POWER INVESTORS, INC.
03 HANOVER ENERGY COMPANY
04 Chickahominy River Energy Corp. (Virginia corporation) (GP & LP)
05 Commonwealth Atlantic LP (Delaware partnership) [see 4.05]
50%
03 HOLTSVILLE ENERGY COMPANY (GP & LP)
04 Brookhaven Cogeneration, LP (Delaware partnership) 50%; 100%
w/Madera
03 INDIAN BAY ENERGY COMPANY (GP & LP)
04 Riverhead Cogeneration III, LP (Delaware partnership) 50%; 100%
w/Santa Ana
03 JEFFERSON ENERGY COMPANY (GP & LP) (inactive)
03 KINGS CANYON ENERGY COMPANY (inactive)
03 KINGSPARK ENERGY COMPANY (GP & LP)
04 Smithtown Cogeneration, LP (Delaware partnership) 50%; 100%
w/Balboa
03 LAGUNA ENERGY COMPANY (inactive) (former interest in Ambit)
18
<PAGE>
03 LA JOLLA ENERGY COMPANY (inactive) (used for Belridge)
03 LAKEVIEW ENERGY COMPANY
04 Georgia Peaker, LP (Delaware LP) 50%; 100% w/Silver Springs
03 LEHIGH RIVER ENERGY COMPANY (inactive)
03 LONGVIEW COGENERATION COMPANY (held for Weyerhauser)
03 MADERA ENERGY COMPANY (GP)
04 Brookhaven Cogeneration, LP (Delaware partnership) 50%; 100%
w/Holtsville
03 MADISON ENERGY COMPANY (LP)
04 Gordonsville Energy, LP (Delaware partnership) [see 4.06] 49%;
50% w/Rapidan
03 Midwest Generation EME, LLC (Delaware LLC) 100%
04 Edison Mission Midwest Holdings Co. 100%
05 Edison Mission Overseas Co. (Com Ed project) 100%
06 Edison Mission Overseas Ltd. (Com Ed project) 100%
05 Midwest Generation, LLC (Com Ed project) 100%
03 Mission Capital, LP (Delaware LP) 3%; MIPS partnership
03 MISSION/EAGLE ENERGY COMPANY (inactive)
03 MISSION ENERGY CONSTRUCTION SERVICES, INC. (Provides construction
services for Paiton Project)
03 MISSION ENERGY GENERATION, INC. (Inactive)
03 MISSION ENERGY HOLDINGS, INC.
04 Mission Capital, LP (Delaware LP) 97%; MIPS partnership
03 MISSION ENERGY HOLDINGS INTERNATIONAL, INC. [holds all the issued and
outstanding stock of MEC International B.V.--see INTERNATIONAL section]
03 MISSION ENERGY INDONESIA (inactive)
03 MISSION ENERGY MEXICO (inactive)formerly the branch office in
Mexico (no partnership)
03 MISSION ENERGY NEW YORK, INC. (GP & LP)
04 Brooklyn Navy Yard Cogeneration Partners, LP (Delaware
partnership) 50% [see 4.04]
03 MISSION ENERGY WALES COMPANY
04 Mission Hydro Limited Partnership (UK limited partnership)
[See International section for structure of Mission Hydro LP]
03 Mission Operations de Mexico, S.A. de C.V. 1%
03 MISSION TRIPLE CYCLE SYSTEMS COMPANY (GP)
04 Triple Cycle Partnership (Texas G.P.) 50%
03 NORTH JACKSON ENERGY COMPANY (inactive) [held for Akso Salt Proj]
03 NORTHERN SIERRA ENERGY COMPANY (GP)
04 Sobel Cogeneration Company (general partnership)50%
03 ORTEGA ENERGY COMPANY (Mid-County Cogen gas contracts)
03 PANTHER TIMBER COMPANY (GP)
04 American Kiln Partners, LP (Delaware limited partnership) 2%
03 PARADISE ENERGY COMPANY (inactive)
03 PLEASANT VALLEY ENERGY COMPANY (GP)
04 American Bituminous Power Partners, LP (Delaware limited
partnership) 0.5%; 50% w/Aguila
05 American Kiln Partners, LP (Delaware Limited Partnership)
0.5% of 53%
03 PRINCE GEORGE ENERGY COMPANY (LP)
04 Hopewell Cogeneration Limited Partnership (Delaware limited
partnership) 24.75%
04 Hopewell Cogeneration Inc. (Delaware corporation) 25%
05 Hopewell Cogeneration Limited Partnership (Delaware limited
partnership) 1%
03 QUARTZ PEAK ENERGY COMPANY (LP)
04 Nevada Sun-Peak LP (Nevada partnership) [see 4.07] 50%
03 RAPIDAN ENERGY COMPANY (GP)
04 Gordonsville Energy, LP (Delaware partnership) [see 4.06] 1%;
50% w/Madison
03 REEVES BAY ENERGY COMPANY (GP & LP)
04 North Shore Energy LP (Delaware partnership) 50%; 100% w/Santa
Clara
05 Northville Energy Corporation (New York corporation) 100%
03 RIDGECREST ENERGY COMPANY (GP)
19
<PAGE>
04 Riverhead Cogeneration I, LP (Delaware partnership) 50%; 100%
w/Centerport
03 RIO ESCONDIDO ENERGY COMPANY
03 RIVERPORT ENERGY COMPANY (GP & LP)
04 Riverhead Cogeneration II, LP (Delaware partnership) 50%; 100%
w/San Pedro
03 SAN GABRIEL ENERGY COMPANY (inactive) (McKenzie gas contracts)
03 SAN JOAQUIN ENERGY COMPANY (GP)
04 Midway-Sunset Cogeneration Company, LP 50%
03 SAN JUAN ENERGY COMPANY (GP)
04 March Point Cogeneration Company 50%
03 SAN PEDRO ENERGY COMPANY (GP)
04 Riverhead Cogeneration II, LP (Delaware partnership) 50%; 100%
w/Riverport
03 SANTA ANA ENERGY COMPANY (GP)
04 Riverhead Cogeneration III, LP (Delaware partnership) 50%; 100%
w/Indian Bay
03 SANTA CLARA ENERGY COMPANY (GP)
04 North Shore Energy, LP (Delaware partnership) 50%; 100%
w/Reeves Bay
05 Northville Energy Corporation (New York corporation) 100%
03 SILVERADO ENERGY COMPANY (GP)
04 Coalinga Cogeneration Company 50%
03 SILVER SPRINGS ENERGY COMPANY
04 Georgia Peaker, LP (Delaware limited partnership) 50%; 100%
w/Lakeview
03 SONOMA GEOTHERMAL COMPANY (GP & LP)
04 Geothermal Energy Partners Ltd. (Aidlin) 5%LP
03 SOUTH COAST ENERGY COMPANY (GP)
04 Harbor Cogeneration Company 30%
03 SOUTHERN SIERRA ENERGY COMPANY (GP)
04 Kern River Cogeneration Company (general partnership) 50%
03 THOROFARE ENERGY COMPANY (inactive)
03 VIEJO ENERGY COMPANY (GP)
04 Sargent Canyon Cogeneration Company 50%
03 VISTA ENERGY COMPANY (New Jersey corporation) (inactive)
03 WESTERN SIERRA ENERGY COMPANY (GP)
04 Sycamore Cogeneration Company (general partnership) 50%
EDISON MISSION ENERGY INTERNATIONAL COMPANIES:
04 MEC International B.V. (Netherlands corporation) (Holding Company
100% owned by MEC Holdings International, Inc. (California corp.))
Address: Apoliolaan 15, 1077 AB Amsterdam, The Netherlands
05 Adelaide Ventures Ltd. (Cayman Island company) 100%
05 Beheer-en Beleggingsmaatschappij Botara B.V. (LYB Peakers Project)
100%
Address: Croeselaan 18, 3500 GT Utrecht, The Netherlands
06 Valley Power Pty Ltd. (proprietary limited Australia company;
LYB Peakers Project)
05 Beheer-en Beleggingsmaatschappij Hagra B.V. 100%
Address: Croeselaan 18, 3500 GT Utrecht, The Netherlands
05 Beheer-en Beleggingsmaatschappij Trepo B.V. 100%
Address: Croeselaan 18, 3500 GT Utrecht, The Netherlands
05 Edison Mission Energy Asia Pte Ltd. (Singapore private company
limited by shares) 100% (EME's Regional Asia Pacific Headquarters)
Address: 391-B Orchard Road, Ngee Ann City, Tower B,
14th Floor, #14-08/10, Singapore 238874
06 Edison Mission Energy Asia Pacific Pte Ltd. (Singapore
corporation) 100%
Address: 391-B Orchard Road, Ngee Ann City, Tower B,
14th Floor, #14-08/10, Singapore 238874
06 Edison Mission Energy Fuel Company Pte Ltd. (Singapore
corporation) 100%
Address: 391-B Orchard Road, Ngee Ann City, Tower B,
14th Floor, #14-08/10, Singapore 238874
20
<PAGE>
06 Edison Mission Operation & Maintenance Services Pte Ltd 100%
Address: 391-B Orchard Road, Ngee Ann City, Tower B,
14th Floor, #14-08/10, Singapore 238874
06 P.T. Edison Mission Operation and Maintenance Indonesia
(Indonesian company) 99%
Address: Jl. Gen. A Yani No. 54
Probolinggo, East Java, Indonesia
05 Edison Mission Energy International B.V. (Netherlands company) 99%
Address: Croeselaan 18, 3500 GT Utrecht, The Netherlands
05 Edison Mission Energy Services B.V. (Netherlands company) 100%
Address: Croeselaan 18, 3500 GT Utrecht, The Netherlands
05 Edison Mission Operation & Maintenance Services B.V.
(Netherlands company) 100%
Address: Croeselaan 18, 3500 GT Utrecht, The Netherlands
06 Edison Mission Operation & Maintenance (Thailand) 100%
05 EME Tri Gen B.V. 100%
Address: Croeselaan 18, 3500 GT Utrecht, The Netherlands
06 Tri Energy Company Limited (Thai limited liability company)
(Tri Energy Project) (equity) 25% [see 4.17]
Address: 16th Floor, Grant Amarin Tower, New Petchburi Road,
Ratchathewi, Bangkok 10320 Thailand
05 EME Victoria B.V. 100% (inactive)
Address: Croeselaan 18, 3500 GT Utrecht, The Netherlands
05 Global Generation B.V. 100%
Address: Apoliolaan 15, 1077 AB Amsterdam, The Netherlands
06 Caresale Services Limited
06 Edison First Power Holdings I 100% [PowerGen project]
07 Edison Mission Marketing and Services Limited
(UK company)100%
07 EME Finance UK Limited 100%
07 Energy Generation Finance PLC 100%
07 Maplekey Holdings Limited 100%
08 Maplekey UK Finance Limited (UK company) 100% [Steamboat
project]
09 Maplekey UK Limited (UK company)100%
[Steamboat project]
10 Edison First Power Limited (Guernsey company) 100%
07 South Australia Holdings Ltd. 100%
08 Edison Mission Ausone Pty Ltd. (Australian company) 100%
08 EME Adelaide Energy Ltd. (UK company) 100%
08 EME Monet Ltd. (UK company) 100%
09 Edison Mission De Laide Pty Ltd. (Australian company)
100%
09 Edison Mission Vendesi Pty Ltd. (Australian company)
100%
09 Edison Mission Utilities Pty.Ltd.(Australian company)
100%
06 Redbill Contracts Limited 100%
05 Hydro Energy B.V. (Netherlands limited liability company) 10%
Address: Croeselaan 18, 3500 GT Utrecht, The Netherlands
06 Iberica de Energias, S.A. (Spain corp) 96.65% [see 4.08]
Address: Paseo de Gracia 18, Planta 4, 08007,
Barcelona, Spain
07 Electrometalurgica del Ebro, S.A. ("EMESA") (Spain
corporation) 91.32% [see 4.09]
Address: Paseo de Gracia 18, Planta 4, 08007,
Barcelona, Spain
08 Monasterio de Rueda, S.L. (Spain) 100%
Address: Paseo de Gracia 18, Planta 4, 08007,
Barcelona, Spain
05 Iberian Hy-Power Amsterdam B.V. (Netherlands limited liability
company) 100%
Address: Strawinskylaan 1725, Amsterdam, NOORD-HOLL 1077 XX
06 Hydro Energy B.V. (Netherlands company) 90%
07 Iberica de Energias,S.A.(Spain corporation)96.65% [see 4.08]
08 Electrometalurgica del Ebro, S.A. ("EMESA") (Spain
corporation) 91.32% [see 4.09]
09 Monasterio de Rueda, S.L. (Spain) 100%
06 Iberica de Energias, S.A. (Spain corporation) 3.35% [see 4.08]
07 Electrometalurgica del Ebro, S.A. ("EMESA") (Spain
21
<PAGE>
corporation) 91.32% [see 4.09]
08 Monasterio de Rueda, S.L. (Spain) 100%
05 Latrobe Power Pty. Ltd. (Australian corporation) 99%
Address: Southgate Complex, Level 20, Tower East,
40 City Road, South Melbourne, Victoria 3205
06 Mission Victoria Partnership (Australian partnership) 52.31%
(100% w/ Traralgon PPL 46.69% and MEVALP 1%)
07 Latrobe Power Partnership (Australian partnership) 99% (owns
51% of the Loy Yang B facility; 49% to Gippsland
05 Loy Yang Holdings Pty Ltd (Australia corporation) 100%
Address: Southgate Complex, Level 20, Tower East,
40 City Road, South Melbourne, Victoria 3205
06 Edison Mission Energy Holdings Pty Ltd (Australian corp.) 100%
Address: Southgate Complex, Level 20, Tower East,
40 City Road, South Melbourne, Victoria 3205
07 Edison Mission Energy Australia Ltd. (Australian public
company) 100%
Address: Southgate Complex, Level 20, Tower East,
40 City Road, South Melbourne, Victoria 3205
08 Latrobe Power Partnership (Australian partnership)1%
(owns 51% of the Loy Yang B facility; 49% to Gippsland
07 Edison Mission Energy Australia Pilbara Power Pty Ltd.
(Australia company) 100%
Address: Southgate Complex, Level 20, Tower East,
40 City Road, South Melbourne, Victoria 3205
07 Edison Mission Operation & Maintenance Kwinana Pty Ltd.
(Australia) 100% (Operator of Kwinana Project)
Address: Southgate Complex, Level 20, Tower East,
40 City Road, South Melbourne, Victoria 3205
07 Edison Mission Operation & Maintenance Loy Yang Pty Ltd.
(Australian corporation) 100%
Address: P.O. Box 1792, Traralgon, Victoria 3844,Australia
07 Mission Energy Development Australia Pty Ltd.
08 Gippsland Power Pty Ltd 100% (owns 49% of the Loy
Yang B facility; 51% to Latrobe Power Partnership)
07 Mission Energy Holdings Superannuation Fund Pty Ltd.
(retirement fund required by Australia law) 100%
07 Mission Energy (Kwinana) Pty Ltd. (Australia) 100%
Address: Southgate Complex, Level 20, Tower East,
40 City Road, South Melbourne, Victoria 3205
08 Kwinana Power Partnership (Australian G.P.) 1%
Address: Level 23, St. Martins Tower
44 St George's Terrace, Perth WA 6000
06 Latrobe Power Pty. Ltd. (Australian corporation) 1%
07 Mission Victoria Partnership (Australian partnership) 52.31%
08 Latrobe Power Partnership (Australian partnership) 99%
(owns 51% of the Loy Yang B facility; 49% to Gippsland
06 Mission Energy Ventures Australia Pty. Ltd. (Australian
company) 100%
Address: Southgate Complex, Level 20, Tower East,
40 City Road, South Melbourne, Victoria 3205
07 Mission Victoria Partnership (Australian partnership) 1%
08 Latrobe Power Partnership (Australian partnership) 99%
(owns 51% of the Loy Yang B facility; 49% to Gippsland
06 Traralgon Power Pty. Ltd. (Australian corporation) 1%
Address: Southgate Complex, Level 20, Tower East,
40 City Road, South Melbourne, Victoria 3205
07 Mission Victoria Partnership (Australian partnership)
46.69%
08 Latrobe Power Partnership (Australian partnership) 99%
(owns 51% of the Loy Yang B facility; 49% to Gippsland
05 MEC Esenyurt B.V. (Netherlands company) (Doga Project) 99%
Address: Croeselaan 18, 3500 GT Utrecht, The Netherlands
06 Doga Enerji Uretim Sanayi ve Ticaret L.S. (Turkish
corporation) (Project company) 80%
22
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Address: Merkez Man, Mahallesi Caddesi 11/8,
Esenyurt, Istanbul, Turkey
06 Doga Isi Satis Hizmetleri ve Ticaret L.S. (Turkish corporation)
(Heat company) 80%
Address: Merkez Man, Mahallesi Caddesi 11/8,
Esenyurt, Istanbul, Turkey
06 Doga Isletme ve Bakim Ticaret L.S. (Turkish corporation) (O&M
company) 80%
Address: Merkez Man, Mahallesi Caddesi 11/8,
Esenyurt, Istanbul, Turkey
05 MEC IES B.V. (Netherlands company) (ISAB Project) 99%
Address: Croeselaan 18, 3500 GT Utrecht, The Netherlands
06 ISAB Energy Services s.r.l. 49% (services co ISAB
Project)
05 MEC India B.V. (Netherlands company) (Jojobera Project) 99%
Address: Croeselaan 18, 3500 GT Utrecht, The Netherlands
06 Edison Mission Energy Power (Mauritius corporation) (Branch
office in India)
Address: Louis Leconte Street, Curepipe, Mauritius
05 MEC Indo Coal B.V. (Netherlands company) (Adaro Project) 99%
Address: Croeselaan 18, 3500 GT Utrecht, The Netherlands
06 P. T. Adaro Indonesia (equity) 10%
Address: Suite 704, World Trade Centre, Jl. Jend.
Sudirman Kav. 31, Jakarta 12920 Indonesia
05 MEC Indonesia B.V. (Netherlands company) 99%
Address: Croeselaan 18, 3500 GT Utrecht, The Netherlands
06 P. T. Paiton Energy Company (Indonesia company) (equity)
(Paiton Project) 40% [see 4.11]
Address: Menara Batavia, 8th Floor, Jl. K. H.
Mas Mansyur Kav. 126, Jakarta 10220 Indonesia
05 MEC International Holdings B.V. (Netherlands corp) 100%
Address: Croeselaan 18, 3500 GT Utrecht, The Netherlands
06 Edison Mission Energy International B.V.(Netherlands company)1%
06 MEC Esenyurt B.V. (Netherlands company) (Doga Project) 1%
07 Doga Enerji Uretim Sanayi ve Ticaret L.S. (Turkish
corporation) (Project company) 80%
07 Doga Isi Satis Hizmetleri ve Ticaret L.S. (Turkish
corporation) (Heat company) 80%
07 Doga Isletme Bakim Ticaret L.S. (Turkish corporation)
(O&M company) 80%
06 MEC IES B.V. (Netherlands company) (ISAB Project) 1%
07 ISAB Energy Services s.r.l. 49%
06 MEC India B.V. (Netherlands company) 1%
07 Edison Mission Energy Power (Mauritius corporation)
06 MEC Indo Coal B.V. (Netherlands company) (Adaro Project) 1%
07 P. T. Adaro Indonesia (equity) 10%
06 MEC Indonesia B.V. (Netherlands company) 1%
07 P. T. Paiton Energy Company (Indonesia company) (equity)
(Paiton Project) 40% [see 4.11]
06 MEC Laguna Power B.V. (Netherlands company) (Thailand
Project) 1%
07 Gulf Power Generation Co. Ltd. (Bangkok corporation) 40%
06 MEC Perth B.V. (Netherlands company) (Kwinana Project) 1%
07 Kwinana Power Partnership (Australian G.P.) [see 4.16]
06 MEC Priolo B.V. (Netherlands company) (ISAB Project) 1%
07 ISAB Energy, s.r.l. (Italian J.V. company) (equity) [see
4.12] 1% of 49% (quota, not shares)
06 MEC San Pascual B.V. (Netherlands company) 1%
07 San Pascual Cogeneration Company International B.V. 50%
08 San Pascual Cogeneration Company (Philippines) Ltd.
(San Pascual Project) (equity) 1%GP and 74%LP
07 Morningstar Holdings B.V. (formerly Beheer-en
Beleggingsmaatschappij Vestra B.V.) 50%
06 MEC Sidi Krir B.V. (Netherlands company) 1%
23
<PAGE>
06 MEC Sumatra B.V. (Netherlands company) 1%
06 MEC Wales B.V. (Netherlands Company) 1%
07 Mission Hydro Limited Partnership (UK limited partnership)
08 EME Generation Holdings Limited (UK company) 100%
09 Loyvic Pty Ltd. (Australia company) 100%
10 Energy Capital Partnership (Australia partnership)
1%
11 Enerloy Pty Ltd. (Australia company) 100%
09 EME Victoria Generation Limited (UK company) 100%
10 Energy Capital Partnership (Australia partnership
98%
11 Enerloy Pty Ltd. (Australia company) 100%
09 Energy Capital Partnership (Australia partnership)
1%LP
10 Enerloy Pty Ltd. (Australia company) 100%
09 First Hydro Holdings Company (Australia partnership)
99%
10 First Hydro Company [see 4.13] 99%
10 First Hydro Finance plc
11 First Hydro Company [see 4.13] 1%
06 Mission Energy Italia s.r.l. 10% (Office in Italy)
06 P.T. Edison Mission Operation and Maintenance Indonesia
(Indonesian company) 1%
05 MEC Laguna Power B.V. (Netherlands co) (Malaya Project) 99%
Address: Croeselaan 18, 3500 GT Utrecht, The Netherlands
06 Gulf Power Generation Co. Ltd. (Bangkok corporation) 40%
Address: 888/101 Mahatun Plaza Tower, 10th Floor, Ploenchit,
Lumphini, Patumwan, Bangkok 10330
05 MEC Perth B.V. (Netherlands company) (Kwinana Project) 99%
06 Kwinana Power Partnership (Australian G.P.) 99% [See 4.16]
Address: Level 23, St. Martins Tower
44 St George's Terrace, Perth WA 6000
05 MEC Priolo B.V. (Netherlands company) (ISAB Project) 99%
Address: Croeselaan 18, 3500 GT Utrecht, The Netherlands
06 ISAB Energy, s.r.l. (Italian J.V. company) (equity) [see
4.12] 99% of 49% (quota, not shares)
Address: Corso Gelone No. 103, Siracusa, Sicily, Italy
05 MEC San Pascual B.V. (Netherlands company) 99%
Address: Croeselaan 18, 3521 CB Utrecht, The Netherlands
06 San Pascual Cogeneration Company International B.V. 50%
Address: Croeselaan 18, 3521 CB Utrecht, The Netherlands
07 San Pascual Cogeneration Company (Philippines) Ltd (San
Pascual Project) (equity) 1%GP and 74%LP
Address: Unit 1610/1611, Tower One, Ayala Triangle, Ayala
Avenue, 1200 Makati City, Metro Manila, Republic of the
Philippines
06 Morningstar Holdings B.V. (formerly Beheer-en
Beleggingsmaatschappij Vestra B.V.) 50%
Address: Croeselaan 18, 3521 CB Utrecht, The Netherlands
05 MEC Sidi Krir B.V. (Netherlands company) 99%
Address: Croeselaan 18, 3500 GT Utrecht, The Netherlands
05 MEC Sumatra B.V. (Netherlands company) 99%
Address: Croeselaan 18, 3500 GT Utrecht, The Netherlands
05 MEC Wales B.V. (Netherlands company) 99%
Address: Croeselaan 18, 3500 GT Utrecht, The Netherlands
06 Mission Hydro Limited Partnership 69%
Address: Lansdowne House, Berkeley Square,
London W1X5DH England
07 EME Generation Holdings Limited (UK company) 100%
08 Loyvic Pty Ltd. (Australia company) 100%
09 Energy Capital Partnership (Australia partnership) 1%
10 Enerloy Pty Ltd. (Australia company) 100%
08 EME Victoria Generation Limited (UK company) 100%
09 Energy Capital Partnership (Australia partnership 98%
10 Enerloy Pty Ltd. (Australia company) 100%
08 Energy Capital Partnership (Australia partnership) 1%LP
09 Enerloy Pty Ltd. (Australia company) 100%
08 First Hydro Holdings Company (Australia partnership) 99%
24
<PAGE>
Address: Lansdowne House, Berkeley Square,
London W1X5DH England
09 First Hydro Company [see 4.13] 99%
Address: Bala House, St. David's Park
Ewloe, Dlwyd, Wales CH5 3XJ
09 First Hydro Finance plc 100%
Address: Lansdowne House, Berkeley Square,
London W1X5DH England
10 First Hydro Company [see 4.13] 1%
Address: Bala House, St. David's Park
Ewloe, Dlwyd, Wales CH5 3XJ
05 Mission Energy Company (UK) Limited (United Kingdom private
limited company) 100%
Address: Lansdowne House, Berkeley Square,
London W1X5DH England
06 Derwent Cogeneration Limited (United Kingdom private limited
liability company) (equity) [see 4.14] 33%
Address: Lansdowne House, Berkeley Square,
London W1X5DH England
06 Edison Mission Energy Limited (UK private limited company) 100%
Address: Lansdowne House, Berkeley Square,
London W1X5DH England
06 Edison Mission Operation & Maintenance Limited (a United
Kingdom corporation) 100%
Address: Lansdowne House, Berkeley Square,
London W1X5DH England
06 Edison Mission Services Limited(UK private limited company)100%
Address: Lansdowne House, Berkeley Square,
London W1X5DH England
06 Mission Hydro (UK) Limited 100%
Address: Lansdowne House, Berkeley Square,
London W1X5DH England
07 First Hydro Holdings Company 1%
08 First Hydro Company [see 4.13] 99%
08 First Hydro Finance plc 100%
09 First Hydro Company [see 4.13] 1%
07 Mission Hydro Limited Partnership 1%GP
08 EME Generation Holdings Limited (UK company) 100%
09 Loyvic Pty Ltd. (Australia company) 100%
10 Energy Capital Partnership(Australia partnership)1%
11 Enerloy Pty Ltd. (Australia company) 100%
09 EME Victoria Generation Limited (UK company) 100%
10 Energy Capital Partnership (Australia partnership
98%
11 Enerloy Pty Ltd. (Australia company) 100%
09 Energy Capital Partnership (Australia partnership)
1%LP
10 Enerloy Pty Ltd. (Australia company) 100%
09 First Hydro Holdings Company (Australia partnership)
99%
10 First Hydro Company [see 4.13] 99%
10 First Hydro Finance plc 99%
11 First Hydro Company [see 4.13] 1%
06 Mission (No. 2) Limited (UK private limited company) 100%
Address: Lansdowne House, Berkeley Square,
London W1X5DH England
06 Pride Hold Limited (United Kingdom corporation) 99%
Address: Lansdowne House, Berkeley Square,
London W1X5DH England
07 Lakeland Power Ltd. (United Kingdom private limited
liability company) [see 4.15] 80%
Address: Roosecote Power Station, Barrow-In-Furness,
Cumbria, England LA13 OPX
07 Lakeland Power Development Company (UK corporation) 100%
Address: Lansdowne House, Berkeley Square,
London W1X5DH England
06 Rapid Energy Limited
05 Mission Energy Italia s.r.l. 90% Representative Office in Italy
25
<PAGE>
Address: Villa Brasini, Via Flaminia 497, 00191 Rome Italy
05 Pride Hold Limited (United Kingdom corporation) 1%
Address: Lansdowne House, Berkeley Square,
London W1X5DH England
06 Lakeland Power Ltd. (United Kingdom private limited liability
company) [see 4.15] 80%
Address: Roosecote Power Station, Barrow-In-Furness,
Cumbria, England LA13 OPX
06 Lakeland Power Development Company (UK corporation) 100%
Address: Lansdowne House, Berkeley Square,
London W1X5DH England
05 Rillington Holdings Limited (Gibraltar)
Address: 57/63 Line Wall Road, Gibraltar
06 EcoElectrica S.a.r.l. (Luxemburg) to be dissolved by 08/99
Address: Luxemburg
07 EME del Caribe Holding GmbH (Austria)
Address: 4020 Linz, Landstrasse 12, Austria
08 EME del Caribe (Cayman Islands)
Address: First Floor, Caledonian House, Mary Street,
George Town, Grand Cayman, Cayman Islands
09 EcoElectrica Holdings, Ltd. (Cayman Islands) 50%
Address: 1350 GT, The Huntlaw Building, Fort Street,
Grand Cayman, Cayman Islands
10 EcoElectrica Ltd. (Cayman Islands) 100%
Address: 1350 GT, The Huntlaw Building,
Fort Street, Grand Cayman, Cayman Islands
11 EcoElectrica LP (Bermuda partnership)(equity)1%
Address: Plaza Scotiabank, 273 Ponce de Leon
Avenue, Suite 902, Hato Rey, Puerto Rico 00918
10 EcoElectrica LP (Bermuda partnership) (equity) 99%
Address: Plaza Scotiabank, 273 Ponce de Leon
Avenue, Suite 902, Hato Rey, Puerto Rico 00918
05 Southwestern Generation B.V. 100%
Address: Croeselaan 18, 3521 CB Utrecht, The Netherlands
05 Traralgon Power Pty. Ltd. (Australian corporation) 99%
Address: Southgate Complex, Level 20, Tower East,
40 City Road, South Melbourne, Victoria 3205
06 Mission Victoria Partnership (Australian partnership) 46.69%
(100% w/ Latrobe PPL 52.31% and MEVALP 1%)
07 Latrobe Power Partnership (Australian partnership)
(owns 49% of the Loy Yang B facility; 51% to Latrobe
Power Partnership)
Prepared by:
Bonita J. Smith, Business Analyst
Corporate Governance, SCE Law Department
(626) 302-1930 Email: [email protected]
26
<PAGE>
SCHEDULE OF RETIREMENT BENEFITS(1)(2)
Projected annual and lump-sum values(3)
Executive Retirement
Retirement Plan Plan
--------------- ----------
Annual Value of Life Annuity
- ----------------------------
Payment commencing March 1, 2000 N/A 6,360
Payment commencing March 1, 2007 63,720 N/A
Lump Sum Value
- --------------
As of February 1, 2000 N/A 89,500(4)
As of March 1, 2007 730,000(4)(5) N/A
- --------------------------
(1) All benefits under these Plans are subject to the express terms of the
relevant Plans.
(2) Benefit payment commencement on March 1, 2000 for the Retirement Plan
and March 1, 2007 (age 55) for the Executive Retirement Plan, assuming final
date of employment is during January 2000.
(3) Assumes Executive receives a bonus of 75% of base pay (125% of his
target bonus of 60%) for 1999.
(4) The annuity value of the Retirement Plan is determined as of the
assumed payment commencement date using a 6.07% interest rate. The lump sum for
the Executive Retirement Plan uses an interest rate of 7.33%.
(5) Lump-sum distributions are not available for those employees
terminating prior to age 55. This value is shown for illustrative purposes only.
<PAGE>
SCHEDULE OF VESTED OPTIONS
- ------------ --------- ---------- ---------- ---------
Date Grant Vesting Grant Vested
Grant Type Schedule Price Shares
- ------------ --------- ---------- ---------- ---------
- ------------------------------------------------------
Options For Parent Company Stock
- ------------------------------------------------------
8/23/93 EIXD 3 $24.4375 20,000
1/3/94 EIXD 3 $20.1875 10,000
1/3/94 EIXD 3 $20.1875 4,100
1/3/95 EIXD 3 $14.5625 10,000
1/2/96 EIXD 3 $17.6250 10,200
1/2/97 EIXD 3 $19.7500 10,500
1/2/98 EIXD 4 $27.2500 6,650
1/4/99 EIX 4 $28.1250 3,935
1/4/99 EIXD 4 $28.1250 1,840
------
Total 77,225
- ------------------------------------------------------
Company Phantom Options
- ------------------------------------------------------
1/3/94 EME 3 $169.2742 17,820
1/3/95 EME 3 $154.2317 43,190
1/2/96 EME 3 $181.0666 30,800
1/2/97 EME 3 $226.6772 22,800
1/4/98 EME 4 $313.8153 3,930
1/4/99 EME 4 $334.4392 2,670
-------
Total 121,210
<PAGE>
FORM OF GENERAL RELEASE
THIS GENERAL RELEASE ("Release") is being delivered as of January 17, 2000
by Edward R. Muller (the "Executive") to Edison Mission Energy, a California
corporation (the "Company"), pursuant to Section 2.07 of that certain agreement
related to Executive's employment with the Company being executed concurrently
herewith by Executive and the Company (the "Agreement"). All capitalized terms
not otherwise defined herein have the same meaning as is given to them in the
Agreement.
(a) Executive, on behalf of himself and his descendants, ancestors, heirs,
executors, successors, assigns and administrators (collectively, "Releasor"),
hereby releases, remises, acquits and forever discharges, and agrees to
indemnify and hold harmless, (x) the Company, (y) each of its Affiliates, and
(z) each of its and/or their partners, predecessors, successors, assigns,
officers, directors, shareholders, representatives, insurers, attorneys,
employees and agents, past, present and future, in their respective capacities
as such (collectively, "Releasees"), from and against any and all claims,
demands, obligations, causes of action, debts, expenses, damages, judgments,
orders and liabilities of whatever kind or nature, in law, equity or otherwise,
whether now known or unknown, suspected or unsuspected, matured or unmatured,
and whether concealed or hidden (collectively, "Claims"), which Executive now
owns or holds or has at any time heretofore owned or held or had, or may at any
time own or hold or have, against the Releasees or any of them, including, but
not limited to any Claim arising out of or in any way connected to any
transactions, occurrences, acts or omissions regarding or relating to his
employment with the Company, or the end of his employment with the Company,
including, but not limited to, Claims arising from any alleged violation by the
Company of any federal, state or local constitutions, statutes, ordinances or
common laws, including but not limited to, the California Fair Employment and
Housing Act, Employee Retirement Income Security Act, Americans With
Disabilities Act and Title VII of the Civil Rights Act of 1964 and/or the Civil
Rights Act of 1991.
(b) Except for those matters that are expressly excluded, the release set
forth herein is intended as a release of all Claims that the Releasor may have
against the Releasees or any of them, whether now known or unknown. In
furtherance thereof, Executive expressly waives and relinquishes any right to
assert hereafter that any claim, demand, obligation and/or cause of action has,
through ignorance, oversight, error or otherwise, been omitted from the terms of
this Agreement. Executive makes this waiver with full knowledge of his rights,
after consulting with legal counsel, and with specific intent to release both
his known and unknown claims. Accordingly, Releasor specifically waives all
rights and benefits afforded by California Civil Code Section 1542 and does so
understanding and acknowledging the significance of such specific waiver of such
statutory protection, which provides as follows:
<PAGE>
"A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE
CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE
TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE
MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR."
Thus, notwithstanding the foregoing provisions of the California Civil Code, and
for the purposes of implementing a full and complete release and discharge of
the Releasees, Executive expressly acknowledges that the foregoing release is
intended to include in its effect, without limitation, all Claims that Executive
does not know or suspect to exist in his favor at the time of the execution
hereof, and the foregoing release contemplates the extinguishment of any such
Claim or Claims except to the extent expressly set forth herein. Executive
further acknowledges that he has been advised to consult with an attorney and is
receiving compensation beyond that to which he is entitled.
(c) Executive represents and warrants that he has not filed or caused to be
filed any complaints or charges against the Company, any of its Affiliates or
any of its or their officers, directors, agents, employees or representatives
with or before any local, state or federal governmental agency or court or any
arbitrator or other tribunal, and no such complaint or charge by or on behalf of
the Executive is currently pending. Executive further agrees not to file any
complaints, actions or charges of any nature against the Releasees relating to
any event or alleged event including, but not limited to, those arising from
Executive's employment with and/or separation from employment with the Company,
which occurred from the beginning of time until the execution of this Release.
(d) Nothing in this Release shall be construed or interpreted as a release,
acquittal, discharge or waiver of:
(i) Executive's rights to the compensation, reimbursements, benefits and
perquisites described in Article 2 of the Agreement;
(ii) Any of the Company's other obligations arising under the Agreement;
(iii) Any right which Executive now has or may have to claim indemnity
(including advancement of expenses) for liabilities in connection with his
lawful activities as a director, officer or employee of the Company and certain
of its Affiliates, pursuant to the terms of any applicable statute, under any
insurance policy, pursuant to the certificate or articles of incorporation,
bylaws or similar charter documents of any Releasee, or pursuant to the terms of
any applicable indemnification agreement to which Executive and the Company or
any Affiliate of the Company are or have been parties; or
<PAGE>
(iv) Claims arising under the Federal Age Discrimination in Employment Act.
(e) The provisions of Section 5.01 through 5.05, 5.07, 5.08, and 5.12
through 5.14 of the Agreement apply to this Release and are incorporated herein
by reference as though fully set forth hereat.
IN WITNESS WHEREOF, the Executive has executed and delivered this Release
as of the day and year first above written.
Edward R. Muller
--------------------------------------
Edward R. Muller
<PAGE>
FORM OF AGE DISCRIMINATION RELEASE
THIS AGE DISCRIMINATION RELEASE ("Release") is being delivered as of
January 17, 2000 by Edward R. Muller (the "Executive") to Edison Mission Energy,
a California corporation (the "Company"), pursuant to Section 2.07 of that
certain agreement related to Executive's employment with the Company being
executed concurrently herewith by Executive and the Company (the "Agreement").
All capitalized terms not otherwise defined herein have the same meaning as is
given to them in the Agreement.
(a) Executive, on behalf of himself and his descendants, ancestors, heirs,
executors, successors, assigns and administrators (collectively, "Releasor"),
hereby releases, remises, acquits and forever discharges, and agrees to
indemnify and hold harmless, (x) the Company, (y) each of its Affiliates, and
(z) each of its and/or their partners, predecessors, successors, assigns,
officers, directors, shareholders, representatives, insurers, attorneys,
employees and agents, past, present and future, in their respective capacities
as such (collectively, "Releasees"), from and against any and all claims,
demands, obligations, causes of action, debts, expenses, damages, judgments,
orders and liabilities of whatever kind or nature, in law, equity or otherwise,
whether now known or unknown, suspected or unsuspected, matured or unmatured,
and whether concealed or hidden (collectively, "Claims"), which Executive now
owns or holds or has at any time heretofore owned or held or had, or may at any
time own or hold or have, against the Releasees or any of them, arising out of
or in any way connected to the Federal Age Discrimination in Employment Act.
(b) Except for those matters that are expressly excluded, the release set
forth herein is intended as a release of all Claims that the Releasor may have
against the Releasees or any of them, whether now known or unknown, arising
under the Federal Age Discrimination in Employment Act. In furtherance thereof,
Executive expressly waives and relinquishes any right to assert hereafter that
any such claim, demand, obligation and/or cause of action has, through
ignorance, oversight, error or otherwise, been omitted from the terms of this
Agreement. Executive makes this waiver with full knowledge of his rights, after
consulting with legal counsel, and with specific intent to release both his
known and unknown claims. Accordingly, Releasor specifically waives all rights
and benefits afforded by California Civil Code Section 1542 and does so
understanding and acknowledging the significance of such specific waiver of such
statutory protection, which provides as follows:
"A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE
CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE
TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE
MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR."
<PAGE>
Thus, notwithstanding the foregoing provisions of the California Civil
Code, and for the purposes of implementing a full and complete release and
discharge of the Releasees in respect of Claims arising under Federal Age
Discrimination in Employment Act, Executive expressly acknowledges that the
foregoing release is intended to include in its effect, without limitation, all
Claims arising under such Act that Executive does not know or suspect to exist
in his favor at the time of the execution hereof, and the foregoing release
contemplates the extinguishment of any such Claim or Claims except to the extent
expressly set forth herein.
(c) Executive acknowledges that as of the date hereof, he will have had at
least twenty-one (21) days to consider the terms of the release set forth herein
and that he has been advised that he has a period of seven (7) days following
his execution of this Release in which to revoke the entire release granted
hereby and that any such revocation must be in writing, signed by Executive, and
hand delivered to the Chairman of the Board of the Company prior to the
expiration of such seven (7) day period. Executive further acknowledges that he
has been advised to consult with an attorney and is receiving compensation
beyond that to which he is entitled.
(d) Executive represents and warrants that he has not filed or caused to be
filed any complaints or charges against the Company, any of its Affiliates or
any of its or their officers, directors, agents, employees or representatives
with or before any local, state or federal governmental agency or court or any
arbitrator or other tribunal arising under the Federal Age Discrimination in
Employment Act, and no such complaint or charge by or on behalf of the Executive
is currently pending. Executive further agrees not to file any such complaints,
actions or charges of any nature against the Releasees relating to any event or
alleged event including, but not limited to, those arising from Executive's
employment with and/or separation from employment with the Company, which
occurred from the beginning of time until the execution of this Release.
(e) Nothing in this Release shall be construed or interpreted as a release,
acquittal, discharge or waiver of:
(i) Executive's rights to the compensation, reimbursements, benefits and
perquisites described in Article 2 of the Agreement;
(ii) Any of the Company's other obligations arising under the Agreement; or
<PAGE>
(iii) Any right which Executive now has or may have to claim indemnity
(including advancement of expenses) for liabilities in connection with his
lawful activities as a director, officer or employee of the Company and certain
of its Affiliates, pursuant to the terms of any applicable statute, under any
insurance policy, pursuant to the certificate or articles of incorporation,
bylaws or similar charter documents of any Releasee, or pursuant to the terms of
any applicable indemnification agreement to which Executive and the Company or
any Affiliate of the Company are or have been parties.
(f) The provisions of Section 5.01 through 5.05, 5.07, 5.08, and 5.12
through 5.14 of the Agreement apply to this Release and are incorporated herein
by reference as though fully set forth hereat.
IN WITNESS WHEREOF, the Executive has executed and delivered this Release
as of the day and year first above written.
Edward R. Muller
--------------------------------------
Edward R. Muller
Exhibit 11
EDISON INTERNATIONAL
COMPUTATION OF BASIC AND DILUTED EARNINGS PER SHARE
For the Quarter ended
March 31
------------------------------
In thousands, except per-share amounts 2000 1999
--------------- -------------
Consolidated net income $ 109,541 $ 143,211
Basic weighted average shares 344,922 348,327
Diluted weighted average shares 345,633 349,409
Basic earnings per share $0.32 $0.41
Diluted earnings per share $0.32 $0.41
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 917,474
<SECURITIES> 0
<RECEIVABLES> 1,371,393
<ALLOWANCES> (34,794)
<INVENTORY> 494,497
<CURRENT-ASSETS> 2,971,507
<PP&E> 27,710,646
<DEPRECIATION> 8,232,334
<TOTAL-ASSETS> 36,461,641
<CURRENT-LIABILITIES> 7,328,505
<BONDS> 13,570,390
255,700
1,393,659
<COMMON> 2,035,271
<OTHER-SE> 2,989,092
<TOTAL-LIABILITY-AND-EQUITY> 36,461,641
<SALES> 2,580,444
<TOTAL-REVENUES> 2,723,320
<CGS> 835,725
<TOTAL-COSTS> 2,194,355
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 13,964
<INTEREST-EXPENSE> 323,685
<INCOME-PRETAX> 198,705
<INCOME-TAX> 89,164
<INCOME-CONTINUING> 109,541
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 109,541
<EPS-BASIC> 0.32
<EPS-DILUTED> 0.32
</TABLE>
