South Carolina Electric & Gas Company Requests Update To Construction and Capital Cost Schedules For New Nuclear Units

Mar 12, 2015, 16:40 ET from SCANA Corporation

CAYCE, S.C., March 12, 2015 /PRNewswire/ -- SCANA Corporation (NYSE: SCG, the Company) subsidiary South Carolina Electric & Gas Company (SCE&G) today filed a petition with the Public Service Commission of South Carolina (SCPSC) seeking approval to update the construction milestone schedule as well as the capital cost schedule for the two new nuclear units being constructed in Jenkinsville, South Carolina.  Although negotiations continue with Westinghouse Electric Company and Chicago Bridge & Iron (Consortium), this updated filing was necessary at this time as several project milestone dates previously approved by the SCPSC have now exceeded their allowable contingency time periods.  In making this filing, SCE&G does not waive any claims related to delay and other related contested costs with the Consortium.

The construction schedule reflected in the petition, without consideration of all mitigating strategies, indicates a substantial completion date for Unit 2 of June 2019 and a substantial completion date for Unit 3 of June 2020.  These estimated completion dates are based upon information received from the Consortium.  This petition includes incremental capital costs that total $698 million (SCE&G's portion in 2007 dollars), of which $539 million are associated with these delays and other contested costs.  The total project capital cost is now estimated at approximately $5.2 billion (SCE&G's portion in 2007 dollars) or $6.8 billion including escalation and allowance for funds used during construction (SCE&G's portion in future dollars).  As noted in the petition, the construction and capital cost schedules are subject to continuing review and negotiations by the parties.

"Substantial progress has been made towards the completion of the units," said SCANA Chairman and CEO Kevin Marsh.  "As outlined in the petition, eighty five percent of the major equipment for Unit 2 has been received on site, the containment vessel bottom heads of both units have been set, and all three of the steel rings that comprise the vertical walls of the Unit 2 containment vessel have been completed or are near completion. Also, the first ring for Unit 2 has been set in place and a total of twenty three million man-hours have been worked with an excellent safety record."

Marsh added "However, we are not pleased with the delays in the construction schedule for our new nuclear plants.  These delays and related cost increases are principally due to design and fabrication issues associated with the production of submodules used in construction of the units.  We continue to negotiate with Westinghouse and Chicago Bridge & Iron regarding the responsibility for delay costs associated with the submodules.  Despite these challenges, we remain firmly committed to completing these plants that will bring clean, safe, and reliable electricity to meet the long-term energy needs of South Carolina.  With a construction project of this scale we knew there would be challenges along the way.  While some of the contractual project construction costs have increased, we have enjoyed lower escalation on the project to date, and we have locked in significantly lower long-term financing costs than projected on a large portion of the project's debt financing.  We also expect more production tax credits to benefit our customers once the units are online.  Our commitment to the Public Service Commission of South Carolina in 2008 was to keep them informed regarding changes in the construction schedule and related cost of the project.  Today's filing and our subsequent appearances before the Commission will allow us to fulfill our commitment to transparency."

SCE&G filed its application for an order under South Carolina's Base Load Review Act (BLRA) in 2008, which the SCPSC approved in 2009. Although the capital cost schedule for which approval is being sought includes higher costs than were approved in that original BLRA order, important elements of the costs to customers from the project have been reduced from the projections that were presented during initial approval. 

  • Inflation has been significantly lower than originally anticipated and escalation is now projected to be over $200 million less than initial estimates
  • Interest rates have also been significantly lower than those incorporated in the original projections, resulting in approximately $1.2 billion of expected benefits to be realized by SCE&G's customers
  • Fewer new nuclear projects than expected have been pursued in the United States, and SCE&G now anticipates that an additional $1.2 billion in fuel cost reductions will be realized by its customers through the application of the production tax credits, based upon current construction schedules and current tax law

Although construction cost estimates have increased, these favorable changes in the financing costs, inflation and production tax credits are expected to offset the ultimate cost to customers.

Based upon today's filing date, SCE&G anticipates a hearing date this summer with an order due by September 12, 2015.  The petition will be available on the Company's website, www.scana.com, as well as the SCPSC's website.

PROFILE

SCANA Corporation, headquartered in Cayce, S.C., is an energy-based holding company principally engaged, through subsidiaries, in electric and natural gas utility operations and other energy-related businesses. The Company serves approximately 688,000 electric customers in South Carolina and approximately 1.3 million natural gas customers in South Carolina, North Carolina and Georgia. Information about SCANA and its businesses is available on the Company's website at www.scana.com.

SAFE HARBOR STATEMENT

Statements included in these press releases 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 key earnings drivers, customer growth, environmental regulations and expenditures, leverage ratio, projections for pension fund contributions, financing activities, access to sources of capital, impacts of the adoption of new accounting rules and estimated construction and other expenditures. 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)  legislative and regulatory actions, particularly changes in rate regulation, regulations governing electric grid reliability and pipeline integrity, environmental regulations, and actions affecting the construction of new nuclear units; (3) current and future litigation; (4) changes in the economy, especially in areas served by subsidiaries of SCANA; (5) the impact of competition from other energy suppliers, including competition from alternate fuels in industrial markets; (6) the impact of conservation and demand side management efforts and/or technological advances on customer usage; (7) the loss of sales to distributed generation, such as solar photovoltaic systems; (8) growth opportunities for SCANA's regulated and diversified subsidiaries; (9) the results of short- and  long-term financing efforts, including prospects for obtaining access to capital markets and other sources of liquidity; (10) the effects of weather, especially in areas where the generation and transmission facilities of SCANA and its subsidiaries are located and in areas served by SCANA's subsidiaries; (11) changes in SCANA's or its subsidiaries' (the Company) accounting rules and accounting policies; (12) payment and performance by counterparties and customers as contracted and when due; (13) the results of efforts to license, site, construct and finance facilities for electric generation and transmission, including nuclear generating facilities and results of efforts to operate its electric and gas systems and assets in accordance with acceptable performance standards; (14) maintaining creditworthy joint owners for SCE&G's new nuclear generation project; (15) the ability of suppliers, both domestic and international, to timely provide the labor, secure processes, components, parts, tools, equipment and other supplies needed, at agreed upon quality and prices, for our construction program, operations and maintenance; (16) the results of efforts to ensure the physical and cyber security of key assets and processes; (17) the availability of fuels such as coal, natural gas and enriched uranium used to produce electricity; the availability of purchased power and natural gas for distribution; the level and volatility of future market prices for such fuels and purchased power; and the ability to recover the costs for such fuels and purchased power; (18) the availability of skilled and experienced human resources to properly manage, operate, and grow the Company's businesses; (19) labor disputes; (20) performance of SCANA's pension plan assets; (21) changes in taxes and tax credits, including production tax credits for the new nuclear units; (22) inflation or deflation; (23) compliance with regulations; (24) natural disasters and man-made mishaps that directly affect our operations or the regulations governing them; and (25) the other risks and uncertainties described from time to time in the reports filed by SCANA or SCE&G with the United States Securities and Exchange Commission.  The Company disclaims any obligation to update any forward-looking statements.

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