Market Overview

Fitch Affirms SCANA and Subsidiaries' Ratings

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NEW YORK--(BUSINESS WIRE)--

Fitch Ratings has affirmed the 'BBB+' Issuer Default Ratings (IDR) and all instrument ratings of SCANA Corp. (SCG) and its regulated subsidiaries South Carolina Electric and Gas Company (SCE&G) and Public Service Company of North Carolina (PSNC). The Rating Outlook for all entities is Stable. Fitch has also affirmed the commercial paper rating of South Carolina Fuel Company. A full list of the rating actions appears at the end of this release.

Key Ratings Drivers

SCG's ratings reflect the earnings and cash flow predictability of the company's two regulated utilities SCE&G and PSNC, which account for approximately 96% of consolidated net income, constructive regulation in both South Carolina and North Carolina where the two subsidiaries operate, and a solid liquidity position. Each of the utility subsidiaries operates with fuel recovery and weather normalization adjustment mechanisms that severely limit commodity price exposure and volumetric risk.

The ratings of SCE&G reflect the substantial financial commitment of its plan to construct two nuclear units for service in 2016 and 2019, respectively, constructive regulation in South Carolina and the beneficial impact of the Base Load Review Act (BLRA) described below. SCE&G will own 55% of the two nuclear units. Continued equity support from SCG and adherence to the nuclear construction budget is critical to maintaining current ratings.

The ratings of SCG and SCE&G recognize that financial measures will remain below Fitch's guideline ratios over the next several years, due in large measure to the elevated capital expenditures associated with SCE&G's nuclear construction program.

PSNC's 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 affected by weather or other factors.

State Law Reduces Risk

In Fitch's view, the construction and financial risk of SCE&G's nuclear construction program is mitigated by the BLRA. The BLRA provided an upfront determination of prudency for the nuclear construction program that is binding on all future proceedings, permits tariffs to be adjusted annually to provide a cash return 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. The BLRA also permits SCE&G to file revised rates to go into effect upon commercial operation seven months prior to the plants entering service.

To date, BLRA rate increases have been implemented in each of the past three years and in each case the company received 100% of its rate request. A fourth BLRA rate request of $58.5 million (2.7%) is pending. A decision is required by November, which should benefit 2012 financial results. SCE&G's financial performance for the remainder of 2011 and 2012 will also benefit from the second and third phases of a 4.88% rate increase approved and implemented in July 2010. In July 2011, SCE&G implemented phase 2, a 1.2% base rate increase, and will implement an additional 1.2% base rate increase in July 2012.

Nuclear Cost Forecast Lowered

Management recently lowered the estimated cost of SCE&G's share of the two nuclear units to $5.8 billion from $6.2 billion due primarily to lower escalation costs. Approximately $1 billion has been spent to date. Expenditures on the new nuclear units peak in 2012 and 2013 at nearly $900 million in addition to SCE&G's maintenance capital expenditures of about $400 million-$450 million annually. The units are being constructed under an engineering and procurement contract (EPC) with a consortium of Westinghouse and Stone and Webster.

Liquidity is Adequate

Fitch believes that SCG has ample liquidity. In October 2010 SCG, SCE&G and PSNC entered into five-year credit agreements aggregating $1.5 billion. The five-year term extends beyond SCE&G's peak capital spending years. The new facilities replaced previous agreements aggregating $1.1 billion. At March 31, 2011, short-term borrowing totaled $512 million, including $486 million at SCE&G and $26 million at SCG. PSNC had no short-term borrowings. Debt maturities are also manageable. At March 31, 2011 available cash aggregated $122 million, including $24 million at SCE&G, $7 million at PSNC and the remainder at SCG.

Fitch affirms the following ratings:

SCANA Corporation:

--Long-term IDR at 'BBB+';

--Senior Unsecured debt at 'BBB+';

--Junior Subordinated Notes at 'BBB-';

--Short-term IDR at 'F2';

--Commercial Paper at 'F2'.

SCE&G:

--Long-term IDR at 'BBB+' ;

--First Mortgage bonds at'A';

--Senior Unsecured debt at 'A-' ;

--Short-term IDR at 'F2';

--Commercial Paper at 'F2'.

PSNC

--Long-term IDR at 'BBB+';

--Senior Unsecured debt at 'A-' ;

--Short-term IDR at 'F2';

--Commercial paper at 'F2'.

South Carolina Fuel Company

--Commercial paper at 'F2'.

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

Applicable Criteria and Related Research:

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

--'Rating North American Utilities, Power, Gas and Water Companies' (May 16, 2010).

Applicable Criteria and Related Research:

Corporate Rating Methodology

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=546646

Rating North American Utilities, Power, Gas, and Water Companies

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=625129

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
Senor Director
Fitch, Inc.
One State Street Plaza
New York, NY 10004
or
Secondary Analyst
Philip Smyth, +1-212-908-0531
Senior Director
or
Committee Chairperson
Ellen Lapson, +1-212-908-0504
Managing Director
or
Media Relations:
Brian Bertsch, +1-212-908-0549 (New York)
brian.bertsch@fitchratings.com

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