Discontinued Operations

12 Months Ended

Dec. 31, 2014

Discontinued Operations and Disposal Groups [Abstract]

Discontinued Operations

Discontinued Operations

EME Chapter 11 Bankruptcy

In December 2012, EME and certain of its wholly-owned subsidiaries filed voluntary petitions for relief under Chapter 11 of the Bankruptcy Code in the Bankruptcy Court. Effective December 17, 2012, Edison International did not consolidate the earnings and losses of EME or its subsidiaries, except for income tax purposes, and reflected its ownership interest in EME utilizing the cost method of accounting. During the fourth quarter of 2012, Edison International recorded a full impairment of the investment in EME as a result of the deconsolidation of EME, recognition of losses previously deferred in accumulated other comprehensive income, a provision for losses from the EME bankruptcy and estimated tax impacts related to the expected future tax deconsolidation and separation of EME from Edison International. The aggregate impact of these matters resulted in an after tax charge of $1.3 billion. Edison International considered EME to be an abandoned asset under GAAP, and, as a result, the operations of EME prior to December 17, 2012 and for all prior years are reflected as discontinued operations in the consolidated financial statements.

In February 2014, Edison International, EME and the Consenting Noteholders entered into a settlement agreement (the "EME Settlement Agreement") pursuant to which EME amended its Plan of Reorganization to incorporate the terms of the EME Settlement Agreement, including extinguishing all existing claims between EME and Edison International. The Amended Plan of Reorganization, including the EME Settlement Agreement, was completed on April 1, 2014 with the sale of substantially all of EME's assets to NRG Energy, Inc. and the transactions called for in the EME Settlement Agreement, including an initial cash payment to the Reorganization Trust (as defined below) of $225 million in April 2014.

Under the Amended Plan of Reorganization, EME emerged from bankruptcy free of liabilities but remained an indirect wholly-owned subsidiary of Edison International, which was consolidated from April 1, 2014 and will continue to be consolidated with Edison International for income tax purposes. On April 1, 2014, all of the assets and liabilities of EME that were not otherwise discharged in the bankruptcy or transferred to NRG Energy were transferred to a newly formed trust under the control of EME's existing creditors (the "Reorganization Trust"), except for (a) EME's income tax attributes, which are retained by the Edison International consolidated income tax group; (b) certain tax and pension related liabilities in the approximate amount of $342 million, which have been assumed by Edison International and for substantially all of which Edison International had joint and several responsibility; and (c) EME's indirect interest in Capistrano Wind Partners (the indirect investment in Capistrano Wind project is accounted for at fair value) and a small hydroelectric project.

In August 2014, Edison International entered into an amendment of the Settlement Agreement that finalized the remaining matters related to the EME Settlement including setting the amount of the two installment payments at $204 million due on September 30, 2015 and $214 million due on September 30, 2016.

The following table summarizes the results of discontinued operations for the periods presented:

	Years ended December 31,					351 days ended December 16, 2012
(in millions)	2014			2013
Operating revenue	$	—		$	—	$	1,626
Loss before income taxes	(525		)	—		(2,235		)

Income (loss) from discontinued operations, net of tax, was $185 million, $36 million and $(1.69) billion for the years ended December 31, 2014, 2013 and 2012, respectively. For the year ended December 31, 2014, Edison International recorded a pre-tax loss of $525 million primarily related to the $225 million initial cash payment to the Reorganization Trust, the two installment payments discussed above and the other assumed liabilities. Discontinued operations also includes after-tax income of $168 million related to changes in estimates of the net impact of retaining income tax attributes less the above payment obligations and assumed liabilities. Edison International also had income tax benefits of $39 million from resolution of uncertain tax positions from settlement of 2003 – 2006 tax years with the IRS and other impacts related to EME and an income tax loss of $22 million in 2014 (compared to a benefit of $36 million in 2013) from revised estimates of the tax impact of a tax deconsolidation of EME from Edison International. See Note 7 for more information.

The 2012 loss from discontinued operations reflects an earnings charge of $1.3 billion due to the full impairment of the investment in EME during the fourth quarter of 2012 as a result of the deconsolidation of EME, recognition of losses previously deferred in accumulated other comprehensive income, a provision for losses from the EME bankruptcy and estimated tax impacts related to the tax deconsolidation and separation of EME from Edison International. The 2012 loss also reflects a $53 million earnings charge associated with the divestiture by Homer City of substantially all of its remaining assets and certain specified liabilities.