Competitive Strategy Analysis on Edison International Essay

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EXECUTIVE SUMMARY

Edison International generates and sells electricity as both a utility to the public and as a commodity in regulated and deregulated markets across the US and Turkey. Tightening emission regulations threaten the company’s growth and sustainability. To address this Edison must invest heavily in R&D, increase presence domestically and internationally, negotiate emission standards, and obtain government funding.

COMPANY OVERVIEW

Edison International started as Southern California Edison Company in 1886 when small companies began experimenting with power generation and transmission. Since then, Edison has participated in more than two hundred mergers, acquisitions and start-up companies. They have a long legacy said to be driven by core values: integrity, excellence, respect, continuous improvement and teamwork. These values have contributed to their new slogan, “Leading the Way in Electricity”.

Edison International is a publicly traded company that generates electricity for North America and Turkey. There are operations in nine countries; with a little more than 15,000 employees and $11.4 billion in sales, it is the fourth largest electric company in the US. Edison sells electricity on the open market and as a utility. The regulated market in California is handled by Southern California Edison (SCE) and the deregulated markets throughout the US and Turkey is handled by Edison Mission Group and its subsidiaries. Southern California Edison (SCE) distributes electricity in a regulated market as a utility to a population of more than 13 million people in central, coastal, and southern California and is the leading purchaser of renewable energy in the US. Edison Mission Group (EMG) sells power in a deregulated market through contracts with large utilities, regional distributors, and other energy companies; it also trades energy on the open markets. EMG also conducts price risk management and energy trading activities in power markets open to competition. EMG has interests in 28 power plants in the US and one in Turkey (Doga project) that give it a net physical generating capacity of more than 10,620 MW. EMG’s power generation assets include fossil-fuel power plants in California, Illinois, Pennsylvania, Washington, West Virginia and Doga, Turkey; a biomass facility in New York; and one of the largest portfolios of wind energy projects in the U.S., with 18 projects currently in operation or under construction in Iowa, Minnesota, New Mexico, Oklahoma, Pennsylvania, Texas and Wyoming. EMG is working through joint development agreements to advance wind projects in additional states, including Illinois, Maine, Maryland, Nebraska, New York, Pennsylvania, Utah, West Virginia, Wisconsin and Wyoming.

FINANCIAL ANALYSIS

Edison International (EIX: NYSE) is a mature company and its financial performance has been fairly successful over the last five years. A few key performance characteristics should be highlighted. The common peers comparison approach has been employed, and Edison International has been weighed against its closest competitors, which are AES Corporation (AES: NYSE), PG&E CP (PCG: NYSE), and Sempra Energy (SRE: NYSE).

As follows from net profit margin comparison provided in Table 2, Edison International appears to be somewhat more efficient than its peers retaining in net profit about 10% of the earnings annually. Comparative figures for the peers are about 6-8%. Net Profit Margin figure is stable over the recent years (no significant growth or decline noted). This fact is common for mature companies. Instable Revenue Growth is puzzling (Table 1): the company’s revenue grew at 16% in 2005, and after that kept growing but at a decreasing rate. However, positive tendency is noted in the current year, and expected revenue growth in 2008 is about 6%, which is 2% above 2007 revenue growth. Both AES Corporation and PG&E CP performed better than Edison in terms of
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