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Fitch Rates SCANA's New CP Program 'F2'

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NEW YORK--(BUSINESS WIRE)--

Fitch Ratings has assigned an 'F2' rating to SCANA Corp.'s (SCG) new $200 million commercial paper program. CP borrowings are fully backed by SCG's $200 million bank credit facility that matures Dec. 19, 2011.

The 'F2' commercial paper rating is based on the cash flow streams available from the company's two regulated utility subsidiaries, South Carolina Electric and Gas Co. (SCE&G, 'BBB+' IDR) and Public Service Company of North Carolina (PSNC, 'BBB+' IDR), which account for approximately 96% of consolidated net income, and the backup liquidity support provided by a committed bank credit facility. SCG's $200 million syndicated credit facility provides 100% liquidity backup for its commercial paper program. The bank credit facility expires Dec. 19, 2011.

The ratings of SCE&G reflect the supportive regulation in South Carolina and the construction and financial risk of building two nuclear units for service in 2016 and 2019, respectively. The SCE&G ratings recognize that financial measures will remain weak relative to its peer group of vertically integrated electric utilities through 2016, when the first of the two nuclear units is expected to enter commercial operation. The construction risk is mitigated by the Base Load Review Act (BLRA), which softens the impact of SCE&G's large construction program, an engineering and procurement contract (EPC) that fixes more than 50% of nuclear construction costs and the equity commitment of SCG. SCE&G will own 55% of the two units. The BLRA permits rates to be adjusted annually to recover capital costs on construction work in progress (CWIP), including an 11% return on equity (ROE), and assures recovery of invested capital in the event the plant is cancelled before completion.

SCE&G's financial measures are expected to improve in 2010 and 2011 largely due to a recently approved electric rate increase. Following a stipulation agreement with the South Carolina Office of Regulatory Staff (ORS) and other intervenors the South Carolina Public Service Commission (PSC), approved a 4.88% electric rate increase to be phased-in over three years, including a 2.5% increase effective July 2010 (approximately $52 million), and an additional 1.2% in both July 2011 and July 2012. The rate order also included a 12-month pilot weather normalization mechanism, which mitigates the impact of abnormal weather on SCE&G's revenues and lowers business risk. The rate agreement is based on a 10.7% return on equity (ROE). SCE&G initially requested a $197.6 million (9.52%) rate increase in January 2010 to be phased in over three periods in July 2010, January 2011, and July 2011, based on an 11.6% ROE.

In October 2010 the PSC approved an additional $47.3 million (2.3%) increase to electric rates under the BLRA to recover nuclear-related capital costs. This is SCE&G's third BLRA rate increase. Under the BLRA process, SCE&G is permitted to file each May to recover the cost of capital on its CWIP balance as of the filing date.

The PSNC ratings reflect solid credit metrics for this low risk gas distribution company that fully support the existing rating. The company operates with a purchased gas adjustment mechanism that provides full recovery of all prudently incurred gas costs from customers, and a customer utilization tracker (CUT), which allows the company to periodically adjust rates for residential and commercial customers based on average consumption, whether impacted by weather or other factors. The CUT replaced a weather normalization adjustment.

Additional information is available at 'www.fitchratings.com'.

Related Research:

--'Corporate Rating Methodology', Aug. 16, 2010;

--'Credit Rating Guidelines for Regulated Companies', July 31, 2007;

--'U.S. Power and gas Comparative Operating Risk (COR) Evaluation and Financial Guidelines', Aug. 22, 2007;

--'Utilities Notching and Recovery Ratings', March 16, 2010.

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE.

Fitch Ratings
Primary Analyst
Robert Hornick, +1-212-908-0523
Senior Director
Fitch, Inc.
33 Whitehall Street
New York, NY 10004
or
Secondary Analyst
Glen Grabelsky, +1-212-908-0977
Managing Director
or
Media Relations:
Cindy Stoller, +1-212-908-0526
Email: cindy.stoller@fitchratings.com

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