Let's Call The Whole Thing Off'...Deutsche Bank Cuts Edison View In Downgrade

In a report published Tuesday, Deutsche Bank analyst Jonathan Arnold downgraded the rating on Edison International (NYSE: EIX) from Buy to Hold, while reducing the price target from $68 to $62 on increased uncertainty in the state regulatory framework.Analyst Jonathan Arnold pointed out that the indication by The Office of Ratepayer Advocates (ORA) of withdrawing from the San Onofre nuclear plant (SONGS) settlement, which was approved by the California PUC late last year, "raises the risk that the PUC with throw out the settlement."In the report, Deutsche Bank noted that the ORA announcement came after last week's ALJ ruling on EIX's ex parte violations. "Acting director Como indicated that since potential penalties discussed by the ALJ do not approach the $648M which ORA had argued for, they no longer support the settlement," the report mentioned.The other key party to the settlement, The Utility Reform Network or TURN, has already withdrawn its support.The resultant uncertainty in the midst of an "already tumultuous state regulatory political backdrop" does not bode well for Edison International's valuation, in comparison to other regulated electric companies. This may also impact the timing and pace of dividend growth at Edison International, the report noted."While California utility regulation has many constructive features, for now these seem set to be overshadowed by prospects of a continuing SONGS overhang," Arnold noted.