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

20091231-0037 FERC PDF (Unofficia1) 12/29/2009
Exhibit No. seE-SIC)
Corporates
Global Power
U.S. and Canada
Credit Analysis
South Carolina Electric & Gas
Company
Subsidiary
of SCANA Corporation
Ratings
Security Class Current
Rati
Issuer DefauLt Rating
AM
Senior Unsecured
AM
Outlook
Stable
Financial Data
South Carolina Electric & Gas CO.
($M;!.)
LTM
Ended
3/31/09
Year
Ended
12/31/08
Revenue
Gross Margin
Cash flow from
Operations
Operating EBITDA
TotaL Debt
TotaL Capitalization
ROE (%)
(APEX/Depreciation
(x)
Analysts
Robert Homick
+ t 2 IZ 908-0523
robert.hornick@fitchratings.com
Jill Schmidt
+1 21Z 908·0644
jiLl.schmidt@fitchratings.com
2,780
1,484
413
827
3,363
6,283
9.7
2.'
2,816
1,485
430
824 •
3,234
6,120
10.0
2.8
Rating Rationale
• Fitch lowered South Carolina Electric ft Gas Company's (SCEftG) ratings to their
present level in June 2009,
• The downgrade reflects the financial pressure from the company's plans to
construct and finance two nuclear generating units for service in 2016 and 2019,
respectively. SCEftG will own 55% of the two units at an estimated cost of
$6,3 billion,
• The downgrade also reflects the increase in business risk from the construction of a
project of this size and complexity, and the substantial increase in debt and total
capital over the extended construction period, The nuclear expenditures together
with investments in its existing utility plant will more than double SCEftG's net
plant investment and total capital by the end of the construction period_
The credit impact of the incremental debt burden is softened by legislation in South
Carolina, the Base Load Review Act (BLRA), which permits utilities to recover
capital costs, including a return on equity, during construction; and by sharing the
construction costs with its joint owner Santee Cooper, a state-owned electric and
water utility in South Carolina,
• Other risk mitigants include an engineering procurement and construction (EPC)
contract that fixes a portion of the plant cost and a financing plan that includes 50%
equity financing.
Key Rating Drivers
• Maintaining budget and schedule for nuclear construction program will be critical to
maintaining existing ratings.
• Ratings will also be dependent on the timely receipt of annual rate adjustments to
reflect nuclear-related construction work in progress in rate base.
• The company's ability to secure non-nuclear rate adjustments is an important
ratings factor,
• Adherence to the financing plan of using a balanced mix of debt and equity to fund
nuclear construction program is an important component of the ratings.
Recent Events
Nuclear Plant Progress
On Feb, 11, 2009, the South Carolina Public Service Commission (PSC) approved
SCEftG's combined application for a certificate of environmental compatibility and
public convenience and necessity, and for a base load review order to construct and
operate a two-unit 2,234-megawatt (MW) nuclear facility to be located at the site of
the existing V_c. Summer Nuclear Station_ The PSC determined the capacity was
needed and that SCEftG's decision to construct the plant was prudent and the capital
costs were reasonable, The prudency finding is binding on all future commissions as
www.fitchratings.com August 3, 2009