S&P Downgrades Edison International (EIX) to BBB- on Concerns About Wildfire Fund

Edison International (NYSE:EIX) is one of the S&P 500 stocks with a low PE ratio. On September 17, concerns over a diminishing wildfire fund led S&P Global Ratings to downgrade Edison International from BBB to BBB- with a negative outlook.

S&P lowered the rating based on forecasts that California’s wildfire fund will not touch prior projections. While Senate Bill 254 authorizes an $18 billion increase through a continuation account, the net present value provides only $10.5 billion more.

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S&P estimates that after financing the Eaton Fire obligations, the remaining fund will be about 70-75% of the original $21 billion, which amounts to around $14 billion-$16 billion, thereby impacting Edison’s credit quality.

The firm revised Edison’s comparable rating analysis modifier to negative from neutral, emphasizing that a stable $20 billion wildfire fund is necessary to preserve credit quality without additional substantial changes.

According to S&P, utilities were not meant to be the ultimate vehicles for wildfire prevention, as they generate modest 9-11% returns on equity and maintain roughly 50% leverage. The agency suggested that industries such as insurance, which have lower financial leverage, are better positioned to handle these risks.

The agency continues to consider Edison’s financial risk as crucial, expecting its FFO-to-debt ratio to improve in 2025, supported by larger cash collections from balancing accounts, about $1.6 billion in securitization proceeds from past fire events, and projected constructive regulatory outcomes.

Edison International (NYSE:EIX) produces and delivers electricity across nearly 50,000 square miles in southern California, catering to homes, businesses, industries, public authorities, and farms.

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