Staff Report
Published July 12, 2012

Projected costs of South Carolina Electric & Gas’ new nuclear construction remain about $400 million below budget, according to an analysis by Fitch Ratings.

SCE&G’s projected cost of $5.8 billion for a 55% share of two reactor units at the V.C. Summer Nuclear Station was unchanged and remains below the $6.2 billion cost estimate that was approved by the S.C. Public Service Commission, Fitch said in a press release issued Wednesday.

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Fitch reported the finding following a financial analysis that led the firm to give an “A” rating to a $250 million issue of 4.35% first mortgage bonds that SCE&G, principal subsidiary of SCANA Corp., announced earlier this week.

Proceeds from the bond sale will be used to repay short-term debt, fund capital expenditures such as the new reactor units, and general corporate purposes.

Fitch said the ratings outlook for the Cayce-based utility is stable.

“Staying on schedule and within budget is critical to maintaining the existing ratings,” Fitch said, noting SCE&G’s financial commitment to the nuclear project.

SCE&G’s state-operated partner, Santee Cooper, will own the remaining 45% of the $10 billion project.

The new 1,100-megawatt nuclear units are scheduled to go into service in March 2017 and May 2018, respectively. An existing 966-megawatt reactor, which the utilities jointly operate, went into operation in 1984.

Fitch reported that about $1.4 billion of SCE&G’s $5.8 billion projected cost was spent through 2011. SCE&G management expects to spend an additional $2.7 billion between 2012 and 2014, leaving approximately $1.6 billion of capital investment in the 2015-2018 period, Fitch added.

South Carolina’s Base Load Review Act has helped lower the cost and risk of the new nuclear program, Fitch said.

The law permits annual rate increases to provide a cash return on construction work in progress, including an 11% return on equity, and recovery of invested capital if the plant is canceled before completion, Fitch said.