From range limits to battery costs, electric vehicles have a long way to go before they rule America’s roads. And even the leading name in EV manufacturing Tesla (TSLA) still relies on tax credits and outside capital to fund operations, explains Roger Conrad, editor of Conrad's Utility Forecaster.
Conservative Holding Edison International (EIX), however, occupies a corner of the EV space where success is guaranteed. That’s installing and maintaining electric vehicle charging stations and related infrastructure inside of regulator-approved utility rate base.
Edison’s Charge Ready 2 program will support 38,000 charging ports for light duty vehicles in its southern California service territory, as well as 8,500 for medium and heavy-duty vehicles.
That’s part of an $800 million plus investment approved by the California Public Utility Commission. It’s the largest for any US utility and includes electrification of all company vehicles by 2030.
Funding from Biden Administration’s infrastructure plans will further accelerate Edison’s EV efforts. And the company should also get a big boost for building electrification, starting with expanding heat pump installations.
During the company’s most recent guidance call, CEO Pedro Pizzaro targeted -30 percent lower all-energy spending for customers by 2045, resulting from electrification and efficiency efforts. That would more than support upper single digit percentage annual rate base and dividend growth.
Getting there depends on Edison effectively addressing the state’s wildfire crisis. That means effectively using the 25 percent of CAPEX earmarked for hardening power infrastructure against what appear to be worsening conditions. And it requires minimizing financial liability with timely power shutoffs when weather conditions overwhelm systems.
California’s nascent wildfire insurance fund appears to be doing its job. And despite a record amount of acreage burned in 2020, Edison avoided major liability, even while settling remaining claims resulting from the 2018 Woolsey Fire.
Another fire season is fast approaching and the Golden State is mired in drought. So it’s little surprise Edison shares have so far been unable to move past a discounted valuation of 13.3 times expected 2021 earnings.
The utility, however, is arguably far better prepared for what may come than it was in February 2020, when shares last traded near $80. Buy Edison up to our highest recommended entry point of $75.