SCANA Nuclear Strategy
Presentation
June 2008
Bill Timmerman
Chairman, President & CEO
Jimmy Addison Kevin Marsh
Senior Vice President & CFO President - - South Carolina Electric & Gas
PLANTS
&
OWNERSHIP
BASE LOAD GENERATION
2
2
Considerations:
• Fuel Supply Diversity
• Fuel Price Volatility
• Emissions
- Carbon Tax
• Costs
Options:
• Nuclear
• Gas (Combined Cycle)
• Coal
NEW NUCLEAR
3
3
Technology
• 2 Westinghouse AP1000 Reactors - 1,117 Mw each plant
• Shared Ownership - 55% to SCE&G, 45% to Santee Cooper
• Generation III - passive design - NRC approved
• 60 Year design life - modular construction concept
• 4 years to construct 1st plant (on-line 2016)
• 3 years to complete 2nd plant (on-line 2019)
Spent Fuel
• On-site pool storage for 18 years followed by dry cask storage
Federal Incentives
• Production Tax Credits
• Loan Guarantee Program
• Government Backed Insurance
Ownership
4
4
Existing Unit: New Units:
Plants: 1 PWR Unit @ 966 Mw* 2 AP1000 Units @ 1,117 Mw each
Total Mw = 966 Total Mw = 2,234
Owners: SCE&G (2/3) = 644 Mw SCE&G (55%) = 1,229 Mw
Santee Cooper (1/3) = 322 Mw Santee Cooper (45%) = 1,005 Mw
Operator: SCE&G SCE&G
* Outstanding 25 year service record
CONTRACT
EPC CONTRACT / BLRA STRUCTURE
7 EPC Cost Categories
• 4 Fixed/Fixed with Escalation (> 50% of Total)*
• 3 Variable Based on Actual Cost
• Risk Profile for Each Category
2 Owners’ Cost Categories
• Variable Risk Profile
Price Escalation linked to Indices in BLRA
• Handy-Whitman Construction Indices • GDP Chained Index
1. All Steam Generation Index
2. All Steam & Nuclear Index
3. Transmission Index
Contingencies
• Contractual
• SCANA
6
6
*Note: Confidentiality agreement with Consortium prevents further disclosure
SCE&G BLRA APPLICATION - EXHIBIT I, CHART A
Public Version
7
7
MAJOR CONTRACTUAL CONSIDERATIONS
8
8
REGULATORY APPROVALS
NRC:
COL Filed: March 31, 2008
COL Docketing: Expected August 2008
COL Review: 2008 - - 2011
COL Issued: Late 2011
SCPSC:
BLRA Filed: May 30, 2008
BLRA Testimony/Discovery: Summer / Fall 2008
BLRA Hearing: Fall 2008
BLRA Order: February 2009
REGULATORY APPROVALS
10
2005
2006
2007
2008
2010
2012
2013
2014
2015
2016/2019
Decision to
Develop COL
Application
Decision to
Submit COL
Application
Decision to
Construct
Full Power
Operation
Prepare COL
Application
Application
NRC Review &
Hearing
Hearing
Plant Construction &
Startup
Prepare Site
Decision to
Fuel
load
load
License
BLRA
Decision
Decision
11
11
DECISION TIME LINE
FINANCING
&
EARNINGS
(Millions)
Plant Costs $5,411 $4,403 / Kw
- includes Owner’s Costs
and Contingencies
Transmission Costs $638 $519 / Kw
- Unit 2 = $136
- Unit 3 = $502
PROJECTED CAPEX
13
13
SCE&G Share*
($ in Future Value)
AFUDC $264 $215 / Kw
Gross Construction $6,313 $5,137 / Kw
*SCE&G 55% of 2 plants = 1,229 Mw
Future $/kw | ||||||||||||||||
2007 | 2008 | 2009 | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | Total | ||||
Plant | 21 | 183 | 458 | 637 | 697 | 734 | 752 | 681 | 503 | 377 | 240 | 128 | 5,411 | 4,403 | ||
Transmission | -- | -- | -- | -- | -- | 2 | 16 | 46 | 73 | 4 | 190 | 307 | 638 | 519 | ||
AFUDC | 1 | 5 | 18 | 25 | 31 | 34 | 34 | 34 | 28 | 13 | 17 | 24 | 264 | 215 | ||
Gross Construction | 22 | 188 | 476 | 662 | 728 | 770 | 802 | 761 | 604 | 394 | 447 | 459 | 6,313 | 5,137 |
PROJECTED CAPEX
14
14
SCE&G Share*
(Future Value)
*SCE&G 55% of 2 plants = 1,229 Mw
Millions of $
15
15
PROJECTED CAPEX
SCE&G Share
(Millions of $ in Future Value)
2008 | 2009 | 2010 | Total | |||||||||||||||||
Construction Cash | 183 | 458 | 637 | 1,278 | ||||||||||||||||
DEBT* | ||||||||||||||||||||
New Issues | 90 | 230 | 320 | 640 | ||||||||||||||||
Total | 90 | 230 | 320 | 640 | 50 | % | ||||||||||||||
EQUITY* | ||||||||||||||||||||
Internal Funds | 50 | -- | 80 | 130 | ||||||||||||||||
Stock Plan Sales | 40 | 80 | 90 | 210 | ||||||||||||||||
Public Offerings | -- | 150 | 150 | 300 | ||||||||||||||||
Total | 90 | 230 | 320 | 640 | 50 | % |
AMOUNT (Millions) | RATIO | EMBEDDED COSTS | WEIGHTED AVERAGE COST OF CAPITAL | |||||||||||||
Long-Term Debt | $ | 2,211 | 44.68 | % | 6.22 | % | 2.78 | % | ||||||||
Preferred Stock | $ | 114 | 2.31 | % | 6.42 | % | 0.15 | % | ||||||||
Common Equity | $ | 2,623 | 53.01 | % | 11.00 | % | 5.83 | % | ||||||||
Total Capitalization | $ | 4,948 | $ | 100.00 | 8.76 | % | ||||||||||
* December 2007 actual adjusted for actual and planned debt issuances in 2008 |
BASE LOAD REVIEW PROCESS
Initial Rates & Prudence:
• Base Load Review
Application (BLRA)
-incorporates siting
-return on Nuclear CWIP
-order within 9 months
Initial
Filing
Notice
Mar. ‘08
Filing
May
Fall ‘08
Hearing
Decision
&
New Rates
Feb./Mar. ‘09
Discovery
18
Hypothetical Timeline
BASE LOAD REVIEW PROCESS
Initial Rates & Prudence:
• Base Load Review
Application (BLRA)
-incorporates siting
-return on Nuclear CWIP
-order within 9 months
Initial
Filing
Notice
Mar. ‘08
Filing
May
Fall ‘08
Hearing
Decision
&
New Rates
Feb./Mar. ‘09
Discovery
Annual
Filings
Filing
New
Rates
Filing
New
Rates
Filing
New
Rates
May ‘09
Oct. ‘09
May ‘10
Oct. ‘10
May ‘14
Oct. ‘14
19
Subsequent Rate:
• Annual Revised Rate
Adjustments (RRA)
-CWIP balance through
filing date
-order within 5 months
Hypothetical Timeline
BASE LOAD REVIEW PROCESS
Initial Rates & Prudence:
• Base Load Review
Application (BLRA)
-incorporates siting
-return on Nuclear CWIP
-order within 9 months
Initial
Filing
Notice
Mar. ‘08
Filing
May
Fall ‘08
Hearing
Decision
&
New Rates
Feb./Mar. ‘09
Discovery
Annual
Filings
Filing
New
Rates
Filing
New
Rates
Filing
New
Rates
May ‘09
Oct. ‘09
May ‘10
Oct. ‘10
May ‘14
Oct. ‘14
In-Service
Filing
Sep. ‘15
Apr. ‘16
Includes budgeted costs
for production:
•O&M
•Depreciation
•Property Taxes
•Etc.
20
Subsequent Rate:
• Annual Revised Rate
Adjustments (RRA)
-CWIP balance through
filing date
-order within 5 months
In-Service Filing:
• Includes budgeted
operational costs:
-O&M
-Depreciation
-Property taxes
-Etc.
Hypothetical Timeline
Unit 2
Unit 3
Jun. ‘18
Jan. ‘20
KEY ASSUMPTIONS
21
Assumptions Included in Filing……..
Assumptions NOT Included in Filing……..
•2 plants - AP1000 technology @ 1,117 Mw each
•Ownership - - SCE&G 55% = 1,229 Mw, Santee Cooper 45% = 1,005 Mw
•Additional Equity Required to Maintain Regulated Cap Structure of 52% - 54%
•Federal Tax Credits (post operational)
•Average Annual Retail Rate Increase of 2.49% During Construction
•Supporting Transmission
•Loan Guarantees
•Government Backed Insurance
•Retirement of Any Current Generation Assets
PROJECTED NUCLEAR RATE IMPACT
22
2009 | ||||||||||||||||
Mar | Oct. | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | Total | |||
Increase | $9 | $48 | $66 | $88 | $97 | $100 | $100 | $83 | $298 | $53 | $71 | $216 | $0 | $1,229 | ||
Projected % increase - Gross | 0.49% | 2.8% | 2.8% | 3.8% | 3.5% | 4.0% | 3.7% | 2.8% | 10.4% | 1.1% | 1.6% | 5.9% | -0.6% | Avg. 3.32% | ||
Nuclear Fuel Impact on Increase | -- | -- | -- | -- | -- | -- | -- | -- | ($247) | $23 | $36 | ($165) | -- | ($353) | ||
Projected % increase - Net of Nuclear Fuel | 0.49% | 2.8% | 2.8% | 3.8% | 3.5% | 4.0% | 3.7% | 2.8% | 1.4% | 2.2% | 3.1% | 1.1% | -0.5% | Avg. 2.49% |
(Millions of $ in Future Value)
2003 | 2004 | 2005 | 2006 | 2007 | 2008 | 6-Year Avg. Annual Growth | |
Dividends Declared Per Share | $1.38 | $1.46 | $1.56 | $1.68 | $1.76 | $1.84* | 6.0% |
*Indicated annual rate |
EARNINGS & DIVIDENDS
Dividend History
Increased annual cash dividend 8 consecutive
years and in 54 of last 56 years
years and in 54 of last 56 years
Long-term Earnings Drivers:
• Normal weather in utility
service areas
service areas
• Continued strong regional
customer growth
• Additions to rate base
- Growth
- Environmental
- New Generation
• Supportive regulatory
environment
• Sustained profitability of
non-regulated businesses
non-regulated businesses
• Continue effective O&M
cost controls
• Not M&A dependent
Common Dividends
Dividend Policy:
To increase the annual cash dividend at a rate that reflects the earnings growth in
the Company’s businesses, while maintaining a payout ratio of 55-60%
the Company’s businesses, while maintaining a payout ratio of 55-60%
Earnings Goal:
To increase EPS by an average of 4-6% annually over the next 3-5 years
23
SAFE HARBOR STATEMENT
Statements included in this presentation which are not statements of
historical fact are intended to be, and are hereby identified as, “forward-
looking statements” for purposes of Section 27A of the Securities Act of
1933, as amended, and Section 21E of the Securities Exchange Act of
1934, as amended. Forward-looking statements include, but are not
limited to, statements concerning future debt issuance, cost of capital,
capital structure, revised rates filings, effective dates of rates, inflation
rates, construction costs, AFUDC rates, capital expenditures,
construction schedules, licensing and permitting activities, completion
dates for new units, investment tax credits, fuel costs, generation mix,
customer and demand growth, natural gas prices, uranium prices, coal
prices, CO2 emission costs, and construction and permitting
contingencies and risks. In some cases, forward-looking statements
can be identified by terminology such as “may,” “will,” “could,” “should,”
“expects,” “forecasts,” “plans,” “anticipates,” “believes,” “estimates,”
“projects,” “predicts,” “potential” or “continue” or the negative of these
terms or other similar terminology. Readers are cautioned that any
such forward-looking statements are not guarantees of future
performance and involve a number of risks and uncertainties, and that
actual results could differ materially from those indicated by such
forward-looking statements. Important factors that could cause actual
results to differ materially from those indicated by such forward-looking
statements include, but are not limited to, the following: (1) the
information is of a preliminary nature and may be subject to further
and/or continuing review and adjustment; (2) regulatory actions,
regulatory delay, and intervention by opposing parties in licensing and
permitting proceedings; (3) collateral lawsuits, appeals and other
litigation; (4) changes in rate regulation, environmental laws and
regulations, and nuclear safety laws and regulations; (5) changes in the
cost or availability of labor, equipment, components and materials; (6)
performance of key contractors or suppliers of key components or
services; (7) transportation and shipping problems; (8) delays in
construction related to weather conditions or natural disasters both in
South Carolina and affecting suppliers and contractors; (9) changes in
the economy, especially in areas served by South Carolina Electric &
Gas Company (SCE&G or the Company); (10) changes in the public,
political and regulatory perception and support for nuclear power; (11)
the results of financing efforts; (12) changes in SCANA’s or its
subsidiaries’ accounting rules and accounting policies; (13) payment
historical fact are intended to be, and are hereby identified as, “forward-
looking statements” for purposes of Section 27A of the Securities Act of
1933, as amended, and Section 21E of the Securities Exchange Act of
1934, as amended. Forward-looking statements include, but are not
limited to, statements concerning future debt issuance, cost of capital,
capital structure, revised rates filings, effective dates of rates, inflation
rates, construction costs, AFUDC rates, capital expenditures,
construction schedules, licensing and permitting activities, completion
dates for new units, investment tax credits, fuel costs, generation mix,
customer and demand growth, natural gas prices, uranium prices, coal
prices, CO2 emission costs, and construction and permitting
contingencies and risks. In some cases, forward-looking statements
can be identified by terminology such as “may,” “will,” “could,” “should,”
“expects,” “forecasts,” “plans,” “anticipates,” “believes,” “estimates,”
“projects,” “predicts,” “potential” or “continue” or the negative of these
terms or other similar terminology. Readers are cautioned that any
such forward-looking statements are not guarantees of future
performance and involve a number of risks and uncertainties, and that
actual results could differ materially from those indicated by such
forward-looking statements. Important factors that could cause actual
results to differ materially from those indicated by such forward-looking
statements include, but are not limited to, the following: (1) the
information is of a preliminary nature and may be subject to further
and/or continuing review and adjustment; (2) regulatory actions,
regulatory delay, and intervention by opposing parties in licensing and
permitting proceedings; (3) collateral lawsuits, appeals and other
litigation; (4) changes in rate regulation, environmental laws and
regulations, and nuclear safety laws and regulations; (5) changes in the
cost or availability of labor, equipment, components and materials; (6)
performance of key contractors or suppliers of key components or
services; (7) transportation and shipping problems; (8) delays in
construction related to weather conditions or natural disasters both in
South Carolina and affecting suppliers and contractors; (9) changes in
the economy, especially in areas served by South Carolina Electric &
Gas Company (SCE&G or the Company); (10) changes in the public,
political and regulatory perception and support for nuclear power; (11)
the results of financing efforts; (12) changes in SCANA’s or its
subsidiaries’ accounting rules and accounting policies; (13) payment
by counterparties as and when due; (14) the results of efforts to license,
site and construct facilities for baseload electric generation; (15) the
availability and prices of fuels such as coal, natural gas and enriched
uranium used to produce electricity; (16) the level and volatility of future
market prices for such fuels and purchased power; (17) the impact of
competition from alternate energy sources; (18) the availability of
purchased power and natural gas for distribution; (19) inflation; (20)
capital market conditions; (21) compliance with regulations; and (22)
the other risks and uncertainties described in Exhibit J to this
Application and as described from time to time in the periodic reports
filed by SCANA Corporation or SCE&G with the United States
Securities and Exchange Commission (SEC). The Company disclaims
any obligation to update any forward-looking statements.
site and construct facilities for baseload electric generation; (15) the
availability and prices of fuels such as coal, natural gas and enriched
uranium used to produce electricity; (16) the level and volatility of future
market prices for such fuels and purchased power; (17) the impact of
competition from alternate energy sources; (18) the availability of
purchased power and natural gas for distribution; (19) inflation; (20)
capital market conditions; (21) compliance with regulations; and (22)
the other risks and uncertainties described in Exhibit J to this
Application and as described from time to time in the periodic reports
filed by SCANA Corporation or SCE&G with the United States
Securities and Exchange Commission (SEC). The Company disclaims
any obligation to update any forward-looking statements.
Questions ???
24
Nuclear Strategy Presentation - June 2008