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

20091231-0037 FERC PDF (Unofficia1) 12/29/2009
ExhibitNo.SCE-5(8)
[1]
South Carolina Electric & Gas Company LTM lQ 09 2008 2007 2006
(CFO Pre- WIC + Interest) I Interest Expense 3.3 4.4 4.7 4.7
(CFO Pre-W/C) I Debt 12% 18% 23% 23%
(CFO Pre-W/C - Dividends) I Debt 8% 13% 18% 17%
(CFO Pre-W/C - Dividends) I Capex 35% 63% 77% 105%
Debt I Book Capitalization 49% 49% 43% 44%
EBITA Margin % 23% 22% 21% 20%
[1]All ratios calculated in accordance with the Global Regulated Electric Utilities
Rating Methodology using Moody's standard adjustments
Note: For definitions of Moody's most common ratio terms please see the accompanying
User's Guide.
Opinion
Rating Drivers
Expected decline in financial metrics over intermediate-term
horizon
New nuclear construction program significantly increases business and operating risk profile, a concern
given the size of the investment relative to the size of the consolidated company
Supportive regulatory environment is a significant credit benefit
Corporate
Profile
South Carolina Electric and Gas Company (SCE&G, Baa1 issuer rating I negative outlook) is a
vertically integrated electric and gas distribution utility which owns or operates approximately 5.8 GWs
of generation capacity including a 67% interest in the approximately 950 MW VC Summer nuclear
facility. SCE&G is a wholly owned subsidiary of SCANA Corp (SCANA, Baa2 senior unsecured I
negative outlook).
SUMMARY RATING RATIONALE
SCE&G's Baa1 issuer rating primarily reflects the company's high degree of regulated electric and gas
utility operations, the supportive political and regulatory environment in South Carolina and the overall
financial and liquidity profile of the company. SCE&G is weakly positioned in the Baa1 rating category,
primarily due to our views of an elevated business and operating risk profile. Ratings could be further
pressured downward over the next 12 to 18 months given the company's significant amount of
projected capital expenditures and infrastructure investment, largely attributable to its new nuclear
development plans. The financing plans associated with these capital investment plans and resulting
credit metric projections, will increasingly represent a critical ratings driver for the credit over the next
several years.
DETAILED RATING CONSIDERATIONS
New Nuclear Generation Plans Raise Business Risk Profile
While Moody's generally views investments into regulated rate base favorably, SCE&G's pursuit of
constructing 2,234 MWs of nuclear generation, in cooperation with Santee Cooper (45% ownership), is
beginning to significantly increase the overall business and operating risk profile of the company. In our
opinion, SCANA has taken very few material steps to strengthen SCE&G's balance sheet on the front
end of a very long construction cycle.