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

20091231-0037 FERC PDF (Unofficia1) 12/29/2009
Exhibit No. SCE-S(A)
Summary: SCANA
Corp.
Through SCANA Energy, SCANA is exposed to retail gas marketing operations in Georgia, serving abour 460,000
customers, including about 95,000 customers under a provider-of-last-resort arrangement that includes low-income
and high credit risk customers. SCANA Energy will hold this role as the provider of last resort through August
2009. Standard & Poor IS views this operation as having significantly higher business risk compared to the regulated
utility operations, stemming from the potential for customers to leave SCANA Energy for alternative suppliers as
well as the challenge of matching supply and demand without any regulatory recourse for cost under-recoveries. The
latter risk is partly mitigated by a significant percentage of customers who are on variable pricing plans that adjust
monthly to reflect current market prices.
SCANA's consolidated financial risk profile is aggressive. For 2008, adjusted funds from operations
(FFO) were
$714.3 million and adjusted total debt was $5.16 billion. Credit metrics have weakened from prior years' levels, in
large part due to a significant increase in debt to fund capital spending which totaled $914 million in 2008.
Adjusted FFO interest coverage was 3.4x, adjusted FFO to total debt was 13.8% and adjusted total debt to total
capital was 62.5%. The expected capital spending program is significant with about $1.2 billion annually in 2009
and 2010 and $1.4 billion in 2011, a material portion of which will be for the proposed nuclear plants. The large
capital spending program contributes to the aggressive financial risk profile and necessitates not only a balanced
funding approach but, importantly, timely rate relief for both the nuclear construction
construction
to collect a cash return on
work in process, but also through base rate relief to address the ongoing capital spending needs of the
remaining company. Absent such relief, the financial profile C3n weaken further, placing additional downward
pressure on ratings, even after accounting for the company's
with equity issuances.
plan to fund a portion of these capital expenditures
Liquidity
SCANA's liquidity is adequate to meet capital spending and other needs. SCANA's liquidity consists of $1.1 billion
in revolving credit facilities (SCANA: $200 million, SCE&G: $650 million; and PSNC: $250 million) that expire in
2011 and which had $564 million still undrawn. Liquidity also benefits from $272 million of cash on hand as of
Dec. 31, 2008. Debt maturities are manageable and somewhat mitigate refinancing risk at least over the
intermediate tern, with $144 million in 2009, $25 million in 2010, about $546 million in 2011, $275 million in
2012 and $167 million in 2013.
Outlook
The stable outlook on SCANA incorporates expectations that the proposed nuclear construction proceeds on
schedule and on budget within the SCPSC-approved scheduling and budget mechanism. In addition, the stable
outlook incorporates expectations that the financial risk profile will remain aggressive with adjusted FFO to interest
coverage of no less than 3.5x, adjusted FFO to total debt of 14% to 15%, and adjusted total debt to total capital
that will begin to moderate from the end of 2008 levels of 62.5% as a result of retained earnings and proposed
equity issuances to support the construction program. Ratings could be lowered if credit merrics underperform
expectations principally as a result of waning regulatory support resulting in delays for the recovery of unanticipated
capital expenditures for the nuclear construction or schedule delays that are deemed imprudent with associated costs
not recovered. Therefore, FFO to interest coverage of less than 3.0x, FFO to total debt of lower than 14%-15% and
debt leverage that increases above current levels of about 62.5% are pressure points towards lower ratings. Standard
& Poor's does not currently contemplate a higher rating during the construction period, given the size and scale of
the project.
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