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Fitch Affirms SCANA and Subsidiaries' Ratings



  Fitch Affirms SCANA and Subsidiaries' Ratings

Business Wire

NEW YORK -- June 26, 2013

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

Predictable Utility Earnings: SCG's two regulated utilities, SCE&G and PSNC,
account for approximately 95% of consolidated net income, providing a
predictable source of earnings and cash flow. Each of the utilities operates
with fuel recovery and weather normalization adjustment mechanisms that limit
commodity price exposure and volumetric risk and consequently reduce business
risk.

Sizeable Nuclear Construction Program: The ratings also reflect the
substantial financial commitment of SCE&G's on-going construction of two
nuclear units and the beneficial impact of the Base Load Review Act (BLRA).
SCE&G will own 55% of each nuclear unit. Staying on schedule and within budget
is critical to maintaining the existing ratings. Approximately $2 billion of
the $5.8 billion projected cost was expended through 2012. Peak spending
occurs over the three-year period 2013-2015, aggregating approximately $2.8
billion, with a peak of about $1 billion in 2014.

State Law Reduces Risk: The construction and financing risk of the nuclear
construction program is mitigated by the BLRA. The BLRA process provided an
upfront determination that the plant is used and useful that is binding on all
future proceedings and that its costs are properly included in rate base as
long as the plant is constructed within the schedules and cost estimates in
the approved application. The BLRA also provides for annual tariff adjustments
to provide a cash return on construction work in progress (CWIP), based on an
11% return on equity, and recovery of invested capital if the plant is
cancelled before completion. To date, BLRA rate increases have been
implemented in each of the past five years and, in each case, SCE&G received
100% of its requested increase.

Rate Support: On Jan. 1, 2013, SCE&G implemented a $97.1 million base rate
increase based on a 10.25% return on equity (ROE) and 52.18% equity ratio that
will benefit 2013 earnings and cash flow. Previously, in November SCE&G
implemented a $52.1 million BLRA related tariff increase and has requested an
additional $69.7 million BLRA increase to be effective in November 2013.

Financial Measures: Incorporated in the ratings is Fitch's expectation that
financial measures of both SCG and SCE&G will remain weak relative to their
peer groups through the peak in spending over the next three years and then
trend upward reflecting the additional CWIP related earnings and cash flow
boost. Over the next three years, Fitch estimates SCG's ratios of
EBITDA/interest, funds from operations (FFO)/interest, Debt/EBITDA and
FFO/Debt will average about 4.1x, 3.7x, 4.5x and 14.5%, respectively. For
SCE&G, Fitch estimates these measures for the same three-year period will
average approximately 4.5x, 3.9x, 4.2x, and 15.6%, respectively.

Revised Nuclear Construction Schedule: Due to a delay in the delivery of
prefabricated parts, the commercial operation date of V.C. Summer unit 2 has
been delayed to late 2017 or early 2018 from March 2017. A similar delay is
likely for unit 3, which had been scheduled for service in May 2018. The delay
is within the 18-month construction contingency allowed by the South Carolina
Public Service Commission (SCPSC). Management's preliminary estimate of the
cost impact of the revised schedule is $200 million or less, which falls
within the original $6.3 billion cost estimate approved by the SCPSC. It is
unclear whether the cost will be borne by SCE&G or the equipment supplier.

Conservative Financing Plan: Management has committed to fund the nuclear
expenditures with a balanced mix of debt and equity, requiring regular equity
sales by SCG. Earlier this year the company settled a $200 million forward
equity sale and expects to raise an additional $900 million over the next four
years through public common stock offerings ($500 million) and the dividend
reinvestment plan ($400 million).

Liquidity is Adequate: Fitch believes that SCG has adequate liquidity. In
October 2012, SCG, SCE&G and PSNC extended their five-year credit agreements
aggregating $1.6 billion to October 2017. Then in December 2012, SCE&G entered
into a separate three-year $200 million credit agreement which expires in
October 2015. The credit agreements extend beyond SCE&G's peak capital
spending years.

PSNC's Ratings: Solid credit metrics for this low-risk gas distribution
company fully support the existing rating. PSNC 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.

Rating Sensitivities

Unrecoverable Cost Overruns: Full and timely recovery of SCE&G's capital and
operating costs is critical to maintenance of existing ratings. An increase in
nuclear construction costs beyond the approved cost is the primary risk for
bondholders. Price escalation due to lower labor productivity, changes in
regulation, or equipment delivery problems that give rise to construction
delays may not be recoverable from ratepayers. The risk is mitigated by
contingencies built into the construction budget and the terms of an
Engineering, Procurement and Construction (EPC) contract. Approximately
two-thirds of the EPC costs are either fixed or firm with escalation.

Change in Financing Plans: Management's inability or reluctance to issue the
expected level of equity would negatively impact ratings.

Change in the BLRA Process: While not expected, any change in the BLRA process
that affects the timeliness and amount of nuclear cost recovery could
adversely affect current ratings.

Increased Nuclear Ownership: An increase in SCE&G's 55% ownership of the two
nuclear units could adversely affect ratings.

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' (August 8, 2012)

-- 'Recovery Ratings and Notching Criteria for Utilities' (November 13, 2012)

-- 'Parent and Subsidiary rating Linkage' (August 8, 2012)

-- 'Rating North American Utilities, Power, Gas and Water Companies' (May 16,
2011)

-- 'Treatment and Notching of Hybrids in Nonfinancial Corporate and REIT
Credit analysis' (December 13, 2012)

-- 'Short-term Ratings Criteria for Nonfinancial Corporates' (August 9, 2012)

Applicable Criteria and Related Research:

Short-Term Ratings Criteria for Non-Financial Corporates

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=685553

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=794724

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 MAY HAVE PROVIDED ANOTHER
PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS
OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN
EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER
ON THE FITCH WEBSITE.

Contact:

Fitch Ratings
Primary Analyst
Robert Hornick
Senor Director
+1-212-908-0523
Fitch Ratings, Inc.
One State Street Plaza
New York, NY 10004
or
Secondary Analyst
Philippe Beard
Senior Director
+1 212 908-0242
or
Committee Chairperson
Glen Grabelsky
Managing Director
+1-212-908-0577
or
Media Relations:
Brian Bertsch, New York, +1 212-908-0549
Email: brian.bertsch@fitchratings.com
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