SCEG OATT Formula Transmission Rate Filing.pdf - SCANA ...

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20091231-0037 FERC PDF (Unofficia1) 12/29/2009 Exhlibit No. SCE-3(A) Research Update: SCANA Corp. Downgraded To 'BBB+' From 'A-' On Planned Nuclear Plants Construction Primary Credit Analyst: Dimitri Nikas. New Yorl
20091231-0037 FERC PDF (Unofficia1) 12/29/2009 Exhibit No. SCE-3(A) Research Update: SCANA Corp. Downgraded To 'BBB+' From 'A-' On Planned Nuclear Plants Construction Rationale On April 22, 2009, Standard & Poor's Ratings Services lowered the corporate credit ratings on SCANA Corp., South Carolina Electric & Gas Co. (SCE&G), and Public service Co, of North Carolina (PSNC) to 'BBB+' from 'A-'. The outlook is stable. See end of release for complete list of ratings. The rating action reflects an increase in business risk associated with SCE&G's plans to build two new nuclear units combined with the need to source a meaningful amount of external financing in order to complete the projects. While we still consider the business risk profile for the consolidated enterprise as excellent in our assessment, the expected deterioration and pressure on the financial risk profile are not consistent with our expectations for lA' category ratings. SCE&G will build the two new nuclear units in partnership with the South Carolina Public Service Authority (Santee Cooper, AA-/Stable/--). SCE&G will own 55% of the two new units at an estimated cost of about $5.4 billion ($6.3 billion after including transmission costs) which includes forecasted inflation, owner's costs, and various contingencies. The aggressive consolidated financial risk profile in part reflects the substantial amount of financing for the project, especially in light of SCANA's total asset size at Dec. 31, 2008 of about $11.5 billion. The proposed project introduces significant construction and financing risk which places considerable pressure on the consolidated credit profile of SCANA and necessitates that all remaining aspects of the business perform satisfactorily in order to provide support and preserve the current ratings. The new units are Westinghouse AP1000 designs, each with 1,117MW of generation capacity and anticipated commercial operation dates of 2016 and 2019. The new units, while evolutions of existing plant designs, have not been built before and have significant first-of-a-kind risk. SCE&G has received the necessary regulatory approvals, including a Base Load Review Order that approves the proposed construction budget and schedules and includes both scheduling and financial contingencies. To supplement the regulatory framework, which provides for recovery of financing costs during construction, periodic progress reviews, inability of future commissions to review previously approved capital expenditures for prudency, and ability to recover the abandoned investment, SCE&G has entered into an engineering procurement and construction contract with Shaw and Stone & Webster to design and build the two units. Without the regulatory framework that provides support to the project, business risk would be significantly higher that would place even more pressure on the ratings. SCANA's business risk profile is excellent, characterized by operations in generally supportive regulatory environments in North Carolina and South Carolina that provide for timely recovery of fuel costs through adjustment Standard & Poor's RatingsDirect I April 22,2009 2 Standard & Poor·s. All rights rHelVed. No reprint or dissemination willlotn S&P"s permission. See Terms 01 Use/Disclaimer on the last page.
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