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SCANA (SCG) Rate Hike Okayed for South Carolina Customers

SCANA CorporationSCG announced that the Public Service Commission of South Carolina (SCPSC) has approved a $64.5 million rate hike for South Carolina Electricity and Gas customers. The hike was approved to account for cost increases for two nuclear units being constructed in Jenkinsville, SC. The increase is however about $5.1 million less than what was filed for in May.

Per the company estimate, the hike will drive up rates by 2.57% overall. A typical residential customer would see a $3.71 increase in the average monthly bill, which would rise to $149.58 from $145.87.

SCANA's nuclear expansion project is a catalyst for earnings growth. Given SCANA's financing plan, construction budget and schedule, we believe that the company will be able to fund its nuclear expansion. Management expects 2015 earnings in the range of $3.60-$3.80 per share. It expects to achieve the target based on industrial expansion and continued customer growth. As the company's capex escalates with new nuclear projects and the investments are recognized in the rate base, the regulated earnings power is expected to improve.

Headquartered in Cayce, SC, SCANA is an energy-based holding company principally engaged, through subsidiaries, in electric and natural gas utility operations and other energy-related businesses.

SCANA is well positioned in a positive regulatory environment. The company has a low risk business with outstanding customer growth and operational efficiency. These, in turn, are favorable for stable cash flow generation and growth. Another positive for SCANA's shareholders is its utility business mix. Its regulated electricity and natural gas utilities business accounts for the majority of total earnings.

However, SCANA's heavy debt level and the overall business risk associated with the nuclear generation construction project is a major concern. Moreover, SCANA's capital program primarily includes two nuclear plants, which will cost it $6 billion through 2018. Risks allied with financing the projects will be aggravated during the peak nuclear construction period of 2015-2017 when the company's capital spending levels rise.

Execution risks latent in such large projects and regulatory uncertainties are some other concerns. Further, delay in commissioning its first reactor by a year, to 2017, is likely to further intensify SCANA's capital expenses.

SCANA currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks from the energy space are Alon USA Partners, LP ALDW , Braskem S.A. BAK and Mitcham Industries Inc. MIND . Each of these stocks sports a Zacks Rank #1 (Strong Buy).

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SCANA CORP (SCG): Free Stock Analysis Report

BRASKEM SA (BAK): Free Stock Analysis Report

ALON USA PTNRS (ALDW): Free Stock Analysis Report

MITCHAM INDS (MIND): 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.


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

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