SCANA Nuclear Units Approved - Analyst Blog

By Zacks Equity Research,

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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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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Stocks
Referenced Stocks: NRC , NU , SCG , TEG

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