Staff Report
Published Jan. 25, 2012

South Carolina Electric & Gas Co., the principal subsidiary of Cayce-headquartered SCANA Corp., announced Monday that it sold $250 million worth of its first mortgage bonds.

The bonds were priced to SCE&G at 99.042%, and initially are being offered to the public at 99.917% with a yield to maturity of 4.355%. The 4.350% series bonds are due Feb. 1, 2042.

SCE&G intends to apply the net proceeds from the sales to repay short-term debt primarily incurred as a result of its construction program, to finance capital expenditures, including costs to build two 1,100-megawatt reactor units at the V.C. Summer Nuclear Station in Fairfield County, and for general corporate purposes.

Credit Suisse Securities, Morgan Stanley & Co. and UBS Securities acted as joint book-running managers, or underwriters controlling the offering. Deutsche Bank Securities Inc., Mitsubishi UFJ Securities Inc. and U.S. Bancorp Investments Inc. served as co-managers for the transaction.

The bonds are expected to be issued Jan. 30. The transaction is subject to normal closing conditions, SCE&G said.

Fitch Ratings has assigned an “A” rating to the bond sale, adding that key drivers include SCE&G's plan to build the two reactor units for service in 2016 and 2019. It also cited the risk mitigation features of the state’s Base Load Review Act, which allows the utility to seek permission to cover financing costs of the project through rate increases.

“SCE&G's planned capital investments will increase net plant by an estimated 52% and will require on-going capital market access and equity contributions from parent SCANA,” the ratings service said.

SCE&G, which is waiting for a final OK from the Nuclear Regulatory Commission, will own 55% of the two units at an estimated cost of $5.8 billion. The remainder will be owned by state-operated Santee Cooper. The project’s total cost is estimated at $9.8 billion.

Fitch, though, said positive factors for SCE&G included the management’s commitment to fund the nuclear project with a balanced mix of debt and equity, requiring regular equity sales by SCANA. Over the past three years, SCANA issued more than $400 million of common equity and expects to settle a forward equity sale of approximately $200 million in 2012.

SCE&G also has ample liquidity, Fitch said. A $1.1 billion credit agreement expiring in October 2015 extends beyond SCE&G's peak capital spending years on the nuclear project.