Fitch Rates South Carolina Public Service Auth (Santee Cooper) $200MM CP Note Program 'F1+'
Fitch Ratings assigns an 'F1+' rating to South Carolina Public Service Authority's (Santee Cooper) $200,000,000 revenue notes: consisting of commercial paper (CP) notes tax-exempt series D and E; and taxable CP notes series DD and EE (the notes).
Goldman Sachs & Co., J.P. Morgan Securities LLC, Wells Fargo Securities, LLC and Barclays Bank PLC will serve as commercial paper dealers for the offering.
In addition, Fitch affirms the 'F1+' rating on the following outstanding notes:
--$250 million CP notes series A and AA;
--$150 million CP notes series B and BB;
--$100 million CP notes series C and CC.
Proceeds will be used to fund capital expenditures, relating to two new units under construction at the Summer nuclear facility, and for other system outlays.
The notes (both outstanding and to be issued) are secured by a lien upon and pledge of revenues junior to the lien and pledge securing: i) revenue obligations, ii) expenses of operating and maintaining the system and iii) payments into the lease fund, but prior to the payments into the capital improvement fund.
KEY RATING DRIVERS
SIGNIFICANT LIQUIDITY: The 'F1+' rating on the CP notes (tax-exempt series D and E and taxable series DD and EE) is based on both internal liquidity support of Santee Cooper, which is obligated to pay interest due on any or all maturing notes and two separate Revolving Credit Agreements (RCAs), if needed, to repay the maturing principal of the notes. The RCAs, each totaling $100,000,000, expire on Nov. 27, 2015, and are with Barclays Bank PLC (Barclays) and TD Bank, N.A. (TD).
CRITERIA FOR 'F1+' RATING ACHIEVED: Santee Cooper has successfully met Fitch's Short-Term Rating Criteria for Internal Liquidity based upon: the utility's long-term debt rating of 'AA-', a reasonable liquidation procedures plan, and available liquid resources equal to at least 125% of maximum liquidity requirement.
LARGE AND DIVERSIFIED WHOLESALE SYSTEM: Santee Cooper is one of the nation's largest municipal electric systems, serving either directly or indirectly (through Central Electric Cooperative), nearly one-third of the state of South Carolina.
Santee Cooper has a long history of selling electricity to customers throughout South Carolina. The authority owns and operates various power resources, with a combined generating capacity of 5,651 megawatts. Coal generation accounts for the largest component of the energy resource mix (70%), with nuclear power contributing 5.6%.
Santee Cooper is participating in the construction of the V.C. Summer units No. 2 and No. 3, which are expected to be commercial operable in March 2017 and May 2018, respectively. Capital expenditures for the years 2013 through 2015 are estimated at $3.469 billion with nuclear accounting for $2.635 billion (based on 45% ownership).
Santee Cooper financial ratios have declined in recent years, reflecting slower growth in sales, higher operating costs, and expenses associated with the development of new units at the nuclear project. Future ratios are projected to remain stable, but at lower levels than historically achieved. These concerns were incorporated in Fitch's downgrade of Santee Cooper's long-term rating from 'AA' to 'AA- in January 2012.
COMMERCIAL PAPER PROGRAM
Santee Cooper expects to maintain about $300 million of CP outstanding. During the construction of Summer Nuclear units No.2 and No.3, outstanding amounts could reach $600 million, which is within the authorized amount allowed under the Note Resolution. Bond proceeds will periodically be used to refund a portion of the notes.
Additional information is available at 'www.fitchratings.com'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.
In addition to the sources of information identified in Fitch's Revenue-Supported Rating Criteria and U.S. Public Power Rating Criteria, this action was informed by information from CreditScope.
Applicable Criteria and Related Research:
--'Revenue-Supported Rating Criteria', June 12, 2012;
--'U.S. Public Power Rating Criteria', Jan. 11, 2012.
--'Criteria for Assigning Short-Term Ratings Based on Internal Liquidity', June 15, 2012
Applicable Criteria and Related Research:
Criteria for Assigning Short-Term Ratings Based on Internal Liquidity
U.S. Public Power Rating Criteria
Revenue-Supported Rating Criteria
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