A principal subsidiary of
SCANA Corp.
(
SCG
) - South Carolina Electric & Gas Company (SCE&G) - struck
a preliminary agreement with Westinghouse Electric Company and The
Shaw Group Inc. - the project managers, to resolve a dispute
regarding construction cost overruns for its planned new nuclear
units.
SCE&G had proposed to construct two 1,117 megawatt nuclear
reactors in partnership with state-owned electric agency Santee
Cooper to the U.S. Nuclear Regulatory Commission (
NRC
) in March 2008. The project is estimated to cost about $11
billion.
The project in which, SCE&G holds a 55% stake, while the
remaining 45% stake is held by Santee Cooper, got deferred due to
the delay in receiving the combined construction and operating
licenses from the NRC.
Taking into account the effect of this preliminary agreement,
SCE&G will have to pay $138 million, which is $50 million lower
than the initially announced higher end of $188 million.
SCE&G also received consent of the NRC to build the above
mentioned nuclear reactors, which represents the second approval by
the agency to build additional units in the U.S. in a period of two
months, after a gap of 30 years.
SCANA rescheduled its delivery dates for the two reactors. The
company has postponed the commissioning of its first reactor by a
year to 2017 while it expects to deliver the second unit in 2018, a
year ahead of the plan.
Further, SCANA's nuclear expansion project is a catalyst for
future earnings growth. Given SCANA's financing plan, construction
budget and schedule, we are hopeful that it will be able to fund
its nuclear expansion project.
SCANA holds a Zacks #4 Rank, which is equivalent to a Sell
rating for a period of one to three months. Longer-term, we
maintain our Neutral recommendation on the stock. The company faces
competition from
Northeast Utilities
(
NU
) and
Integrys Energy Group
(
TEG
).
NORTHEAST UTIL (
NU
): Free Stock Analysis Report
SCANA CORP (
SCG
): Free Stock Analysis Report
INTEGRYS ENERGY (
TEG
): Free Stock Analysis Report
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