SCANA officials looking at fixed price option for new reactors

South Carolina endured a “historic flood” during 2015 and SCANA (NYSE:SCG) saw a shakeup in its nuclear contractor team building the new V.C. Summer Units 2 and 3, company officials noted during a Feb. 16 quarterly earnings call.

SCANA is the corporate parent of South Carolina Electric & Gas (SCE&G), which is building the two new nuclear units along with minority partner Santee Cooper.

“2015 was certainly an eventful year,” said SCANA Executive Vice President and CFO Jimmy Addison.

“We sold two subsidiaries during the first quarter of the year, experienced a thousand year flood in parts of our SCE&G service territory, had a change in the structure of the New Nuclear construction team, and again experienced a positive electric margin impact from weather in both the winter and summer seasons, with abnormal weather contributing 8 cents per share to electric margins,” Addison said.

Toward the end of 2015, contractor Westinghouse Electric Co. (WEC) bought CB&I Stone & Webster, the nuclear construction and integrated services business of Chicago Bridge & Iron (NYSE:CBI).

With the transaction, Westinghouse became the chief contractor in charge of getting the Units 2 and 3 built at V.C. Summer. With the departure of CBI, Westinghouse has retained Fluor as a subcontractor.

Currently, SCE&G’s cost of developing the two Westinghouse AP 1000 reactors is $7.1bn. If, however, the utility opts for a fixed price option, then the cost will be $7.6bn.

The units are scheduled to enter operation in August 2019 and August 2020 respectively.

SCANA has until November to decide upon whether to take the fixed cost estimate but it might reach its decision as early as the second quarter. SCANA officials also said during the call they are not overly worried about financial difficulties affecting Toshiba.

“We are currently in the middle of the peak nuclear construction period,” said SCE&G COO Steve Byrne. Capital expenditures at the nuclear project will gradually decrease over the next few years, he added.

SCANA said that 85% of the major equipment for the new nuclear units is already on-site.

The flooding of 2015 that affected everything from the state’s industrial activity to employee ability to make it to work, SCANA officials said. But overall 2015 was milder weather-wise than 2014.

SCANA’s earnings for the fourth quarter of 2015 were $98m, or 69 cents per share, compared to earnings of $105m, or 73 cents per share, for 4Q 2014.

Unemployment in SCE&G territory only 4.7%, which is a lower jobless rate than either South Carolina, North Carolina or the nation as a whole.

For the year ended Dec. 31, 2015, SCANA reported earnings of $746m, or $5.22 per share, compared to earnings of $538m, or $3.79 per share, for the same period in 2014. Year to date 2015 earnings include a $201m, net of tax gain or $1.41 per share, from the sale of two subsidiaries, Carolina Gas Transmission (CGT) and SCANA Communications, Inc. (SCI).

About Wayne Barber 4201 Articles
Wayne Barber, Chief Analyst for the GenerationHub, has been covering power generation, energy and natural resources issues at national publications for more than 20 years. Prior to joining PennWell he was editor of Generation Markets Week at SNL Financial for nine years. He has also worked as a business journalist at both McGraw-Hill and Financial Times Energy. Wayne also worked as a newspaper reporter for several years. During his career has visited nuclear reactors and coal mines as well as coal and natural gas power plants. Wayne can be reached at wayneb@pennwell.com.