Scana in Regulatory Settlement Agreement for Nuclear Units - Analyst Blog
Energy holding company, SCANA Corporation’s SCG principal subsidiary – South Carolina Electric & Gas Company or SCE&G – has entered into a settlement agreement with the South Carolina Office of Regulatory Staff and the South Carolina Energy Users Committee. The agreement is related to the company's petition to update the new nuclear units’ construction and capital cost schedules.
Two nuclear electric-generating units are being constructed jointly by SCE&G and state-owned utility Santee Cooper at the V.C. Summer Nuclear Station near Jenkinsville, SC.
The settlement agreement is pending approval from the Public Service Commission of South Carolina. A public hearing on SCE&G's petition request is slated to begin on Jul 21, 2015.
Per the settlement agreement, there are no contested issues among the settling parties who support the approval of the revised construction and capital cost schedules. In addition to supporting approval of the revised construction and capital cost schedules, the settling parties agreed to revise the allowed return on equity for the new nuclear project from 11.00% to 10.50%.
SCANA’s nuclear expansion project is a catalyst for future earnings growth. Given SCANA’s financing plan, construction budget and schedule, we expect it to fund its nuclear expansion project. Management is hopeful of meeting its projected 2015 earnings of $3.60–$3.80 per share on the back of industrial expansion and continued customer growth.
As the company's capital expenditure escalates with new nuclear projects and its investments are recognized in the rate base, the regulated earnings power is also expected to improve.
SCANA is well positioned in a positive regulatory environment, and has a low-risk business with outstanding customer growth and operational efficiency. These in turn favor stable cash flow generation and growth. Another positive for the company’s shareholders is its utility business mix. Most of the company’s total earnings come from the regulated electricity and natural gas utilities business.
Columbia, SC-based SCANA’s operations include generation, transmission, distribution and sale of electricity to retail and wholesale customers within the state. The company also purchases, sells and transports natural gas to retail customers; provides energy-related risk management services; and acquires, owns and provides financing for nuclear fuel, fossil fuel and emission allowances.
Scana currently carries a Zacks Rank #2 (Buy). Some other players that are worth considering from the same space are Transmontaigne Partners L.P. TLP, China Petroleum & Chemical Corp. SNP and LRR Energy, L.P. LRE. All these stocks sport a Zacks Rank #1 (Strong Buy).
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