(Source: Business Wire)
Fitch Ratings has downgraded the Issuer Default Ratings (IDRs) of SCANA Corp. (SCANA) and its subsidiaries South Carolina Electric & Gas Co. (SCE&G) and Public Service Co. of North Carolina (PSNC) to 'BBB+' from 'A-'. Fitch also downgraded the individual issue ratings one notch as shown in the list of rating actions at the end of this release. The short-term IDRs of SCANA, SCE&G and PSNC and commercial paper ratings of SCE&G, PSNC and South Carolina Fuel Company are affirmed at 'F2'. The Rating Outlook for each entity is Stable.
The downgrades are driven by the financial pressure and increased business risk from SCE&G's plans to construct and finance two nuclear generating units for service in 2016 and 2019, respectively, and a decline in credit quality measures over the past 18 months. SCE&G will own 55% of the two units at an estimated cost of $6.3 billion. The nuclear investment, together with maintenance capital expenditures of approximately $500 million annually, will more than double SCE&G's existing net investment in property plant and equipment. Expenditures are expected to peak in the years 2012 to 2014. Management expects to fund approximately 50% of the expenditures with new debt.
The credit impact of the incremental debt burden is softened by legislation in South Carolina, the Base Load Review Act (BLRA), which permits utilities to recover capital costs, including a return on equity, during construction. Other risk mitigants include an EPC contract that fixes a portion of the plant cost and a substantial equity commitment. Although the credit quality of subsidiary PSNC is not directly affected by the events at SCE&G, the weakening consolidated credit quality of SCANA accounts for the lower rating for PSNC.
Fitch has downgraded SCANA and its subsidiaries' ratings as follows:
SCANA Corporation
--IDR to 'BBB+' from 'A-';
--Senior Unsecured debt to 'BBB+' from 'A-'.
SCE&G
--IDR to 'BBB+' from 'A-';
--First Mortgage bonds to 'A' from 'A+';
--Senior Unsecured debt to 'A-' from 'A';
--Preferred Stock to 'BBB+' from 'A-'.
PSNC
--IDR to 'BBB+' from 'A-';
--Senior Unsecured debt to 'A-' from 'A'.
Fitch has affirmed SCANA and its subsidiaries' ratings as follows:
SCANA Corporation
--Short-term IDR at 'F2'.
SCE&G
--Short-term IDR at 'F2';
--Commercial Paper at 'F2'.
PSNC
--Short-term IDR at 'F2';
--Commercial Paper at 'F2'.
Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, 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.
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