Tag Archives: industry

Operator Good afternoon, ladies and gentlemen. Thank you for standing by. I will be your conference facilitator for today. At this time, I would like to welcome everyone to the SCANA Corporation Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer period. [Operator Instructions] As a reminder, this conference call is being recorded on Thursday, February 18, 2016. Anyone who does not consent to the taping may drop off the line. At this time, I would like to turn the conference call over to Susan Wright, Director of Financial Planning and Investor Relations. Susan Wright Thank you, and welcome to our analyst call. As you know, earlier today, we announced financial results for the fourth quarter and full year of 2015. Joining us on the call today are Jimmy Addison, SCANA’s Chief Financial Officer and Steve Byrne, Chief Operating Officer of SCE&G. During the call, Jimmy will provide an overview of our financial results and Steve will provide an update of our new nuclear project. After our comments, we will respond to your questions. The slides and the earnings release referenced to in this call are available at scana.com. Additionally, we post information related to our new nuclear project and other investor information directly to our Web site at scana.com. On SCANA’s homepage, there is a yellow box containing links to the new nuclear development and other Investor Information sections of the Web site. It is possible that some of the information that we will be posting from time-to-time may be deemed material information that has not otherwise become public. You can sign-up for e-mail alerts under the Investors section of scana.com to notify you when there is a new posting in the nuclear development and/or other Investor Information sections of the Web site. Finally, before I turn the call over to Jimmy, I would like to remind you that certain statements that may be made during today’s call are considered forward-looking statements and are subject to a number of risks and uncertainties as shown on Slide 2. The Company does not recognize an obligation to update any forward-looking statements. Additionally, we may disclose certain non-GAAP measures during this presentation and the required Reg G information can be found in the Investor Relations section of our Web site under Webcasts & Presentations. I’ll now turn the call over to Jimmy. Jimmy Addison Thanks Susan, and thank you all for joining us today. I’ll begin our earnings discussion on Slide 3. GAAP earnings in the fourth quarter of 2015 were $0.69 per share, compared to $0.73 per share in the same quarter of 2014. The decrease in earnings in the fourth quarter is mainly attributable to the negative impacted weather on electric margins as well as on gas margins in our Georgia business. Lower gas margins also reflect $0.07 per share of loss margins due to the sale of CGT early in the year. These losses were partially offset by higher electric margins due primarily to a base load review act rate increase and customer growth as well as lower depreciation expense as a result of new depreciation study and lower O&M expense due primarily to labor savings and the impact of the sales of CGT during the first quarter of 2015. Note two that abnormal weather decreased electric margins by $0.14 per share and $0.02 per share versus normal in the fourth quarters of 2015 and 2014 respectively. Please turn to Slide 4. Earnings per share for the year ended December 31, 2015 were $5.22 versus $3.79 in 2014. The improved results are mainly attributable to the net of tax gains on the sales of CGT and SCI, higher electric margins due primarily to a base load review act rate increase and customer growth, as well as lower depreciation expense and O&M as described earlier. These were partially offset by lower electric margins due to weather, lower gas margins primarily due to loss gas margins of $0.23 per share resulting from the sale of CGT and the impact of revenue on the Georgia business and normal increases in CapEx related items including interest, property taxes and share dilution. Although electric margins reflected a negative $0.13 per share due to weather year-over-year abnormal weather increased electric margins in both years accounting for $0.08 per share in 2015 compared to $0.21 in 2014. Slide 5, shows earnings on a GAAP adjusted weather normalized basis. Earnings in the fourth quarter of 2015 were $0.83 per share compared to $0.75 per share in the same quarter of 2014. Full year earnings were $3.73 per share in 2015 compared to $3.58 per share in the prior year. As a reminder GAAP adjusted weather normalized EPS excludes the impact of abnormal weather on electric margins and the net of tax gains on the sales of CGT and SCI from the first quarter of 2015. Abnormal weather on gas margins is not adjusted in this measure as gas margins weather normalized for the North and South Carolina businesses and the direct impact of abnormal weather on the Georgia business is generally insignificant. However, the extremely mild weather in the fourth quarter in 2015 was seen in the business’ stand alone results as I’ll discuss later. Now, on Slide 6, I’d like to briefly review results for our principle lines of business. On a GAAP basis South Carolina electric and gas companies’ fourth quarter 2015 earnings were down $0.01 per share compared to the same period of 2014. The decrease in earnings is due to lower electric margins due to abnormal weather and higher expenses related to our capital program including interest expense and property taxes. These decreases more than offset increases due to the continued recovery of financing cost through the BLRA customer growth in both the electric and gas businesses, the application of the previously mentioned new depreciation rates and lower P&M due primarily to labor savings. For the full year of 2015, earnings were higher by $0.12 per share due to increased electric margins primarily from the continued recovery of financing cost through the BRLA and customer growth, improved gas margins due to customer growth and the application of the new depreciation rates. These items were partially offset by the effective abnormal weather on electric margins and higher expenses related to our capital program including interest expense, property taxes, dilution and continued increases in depreciation exclusive of the impact of the depreciation study. Although weather in both years contributed favorably to electric margins versus normal. 2015 was milder than 2014 with weather contributing $0.08 of margin versus normal in 2015 compared to $0.21 in 2014. PSNC Energy reported earnings of $0.17 per share in the fourth quarter of 2015 compared to $0.16 per share in the same quarter of the prior year primarily due to higher margins from customer growth. For the year-ended December 2015, earnings are $0.38 per share compared to $0.39 per share in the prior year. SCANA Energy our retail natural gas marketing business in Georgia saw the decrease in fourth quarter earnings of $0.06 per share in 2015 over the same quarter of last year primarily due to lower throughput and margins attributable to the extremely warm weather during the fourth quarter of 2015 as compared to 2014, partially offset by lower bad debt expense. For the 12 months ended December 31, 2015 earnings were down $0.05 per share compared to the same period of 2014, due to same drivers as the quarter. On a GAAP basis, SCANA’s corporate and other businesses reported a loss of $0.01 per share in the fourth quarter of 2015, compared to $0.03 in the comparative quarter of the prior year. Lower interest expense of the holding company and increased margins at our marketing business were primarily offset by foregoing earnings contributions from the subsidiaries that were sold during the fourth quarter of this year. For the 12 month period, these businesses reported earnings per share of $1.36 in 2015 compared to $0.01 loss in 2014. Excluding the net of tax gains on the sales of CGT and SCI of $1.41 per share, GAAP adjusted weather normalized EPS was down $0.04 from the prior year due primarily the foregone earnings from the sale of the businesses earlier this year offset by lower interest expense at the holding company and increased margins on our marketing business. I would now like to touch on economic trends in our service territory on Slide 7. In 2015, companies announced plans to invest over $2 billion with the expectation of creating over 6,000 jobs in our Carolinas territories. The Carolinas continue to be seen as a favorable business environment and we’re pleased by the continuous growth in our service territories. At the bottom of the slide, you can see the national unemployment rate along with the rates for the three states where SCANA has a presence and the SCE&G electric territory. South Carolinas unemployment rate is now at 5.5% and the rate in SCE&G’s electric territory is estimated at 4.7%. At the top of Slide 8 you can see the South Carolina employments statics as of December 2015 and 2014 over the course of 2015 South Carolinas unemployment rate has dropped over a percentage point from its level at the end of 2014. December of 2015 also marked all time highs for the number of South Carolinians employees and in the labor force. Our particular interest in the testing to our state strong economic growth almost 80,000 or 3.8% more south Carolinians are working today than a year ago. So another ways had the labor force not increased during 2015 the unemployment rate would be approximately 3%. The expansion of the labor force is simply evidence of the confidence of some of the workforce to reenter the market and the positive migration to the state of South Carolina. As depicted on the bottom of the slide United Van Lines recently released its annual mover study for 2015 with tracks migration patterns state to state. For the third consecutive year South Carolina finished ranked second in terms of domestic migration destinations co-operating our realized customer growth statistics. North Carolina has also been ranked in the top five for the last three years. Slide 9 presents customer growth and electric sales statistics. On the comp half of the slide is the customer growth rate for each of our regulated businesses. SCE&G’s electric business added customers at a year-over-year rate of 1.5%. Our regulated gas businesses in North and South Carolina added customers at a rate of 2.5% and 2.7%, respectively. We continue to see very strong customer growth in our businesses and in the region. The bottom table outlines our actual and weather-normalized kilowatt hour sales for the 12 months ended December 31, 2015. Overall, weather-normalized total retail sales were up 1.3% on a 12-month ended basis. In conjunction with the continued improvement of economic conditions in South Carolina, the past few quarters have shown an accelerating improvement in usage in the residential market. And now please turn to Slide 10, which recaps our regulatory rate base and returns. The pie chart on the left presents the components of our regulated rate base of approximately $9.6 billion. As denoted in two shades of blue, approximately 86% of this rate base is related to the electric business. In the block on the right, you will see SCE&G’s base electric business in which we are allowed 10.25% return on equity. The earned return for the 12 months ended December 31, 2015 in the base electric business is approximately 9.75%, meeting our stated goal of earning a return of 9% or higher to prevent the need for non-BLRA related base rate increases during the peak nuclear construction years. We continue to be pleased with the execution of our strategy. As a reminder we are allowed a return on equity at 10.25% and 10.6% in our LDCs in South and North Carolina respectively. In response to the normal attrition in the earned returns in our North Carolina business, yesterday the PSNC notify the North Carolina utilities commission of its intention to file a rate case. We plan to file the detailed case within the next 60 days where more clarity will be provided. As you will recall in South Carolina if the earned ROE of the gas business for the 12 months ending in March falls outside of range of 50 basis points above or below the allowed ROE then we will have to adjust rates under the rate stabilization act in June. Slide 11 presents our CapEx forecast. This forecast reflects the Company’s current estimate of new nuclear spending through 2018 and has been updated to reflect what was filed in our quarterly BLRA report which also reflects the amended EPC that was announced in October of 2015. At the bottom of the slide, we have recapped the estimated new nuclear CWRP from July 1 through June 30 to correspond to the periods on which the BLRA rate increases are historically calculated. Slide 12 presents the transition payments information and an expected timeframe for our filing with the public service commission of South Carolina. Once these events are complete we will update the CapEx schedule and the corresponding financing plan. And now please turn to Slide 13, to review our estimated financing plan through 2018. As a reminder we have switched to open rocket purchases instead of issuing new shares to fulfill our 401k and DRIP plans at least until we have fully utilized the net cash proceeds from the sales of CGT and SCI. We do not anticipate the need for further equity issuances until 2017 and again the election of the fixed price option would likely changed planned equity issuances after 2016. Now these are our best estimates of incremental debt and equity issuances, it is unlikely that these issuances will occur in the exact amounts or timing as presented as they are subject to changes in our funding needs for planned project expenses. We continue to adjust the financing to match the related project CapEx on a 50/50 debt and equity basis. On Slide 14, we are reaffirming on 2016 GAAP adjusted weather-normalized earnings guidance as 3.90 per share to 4.10 per share with an internal target of $4 per share. We continue to be cautiously optimistic about our long-term view and are increasing the lower band of our long-term growth rate from 3% to 4%. We are also resetting base year to 2015 GAAP adjusted weather-normalized EPS of $3.73. Therefore our new GAAP adjusted weather-normalized annual growth guidance target will be to deliver 4% to 6% earnings growth over the three to five years using a base of 2015 GAAP adjusted weather-normalized EPS of 3.73. This increase represents our projected earnings momentum driven by our BLRA filings our stated goal to manage base retail electric returns and our view of the economy, balanced with our continued assumption of the impacts of energy conservation and efficiency standards. I also wanted to mention that earlier today we announced an increase of $0.12 in our dividend rate for 2016 to $2.30 per share a 5.5% increase. We continue to anticipate growing dividends fairly consistent with earnings while staying within our stated pay out policy of 55% to 60%. And finally on Slide 15, we are very pleased to report that in late December we successful completed the syndication of an extended credit facility. The additional liquidity is important to our nuclear construction project and accelerated CapEx spending at PSNC. The committed lines of credit now totaled $2 billion. I want to thank our banks for their enthusiastic support of our liquidity needs and therefore the support of our nuclear expansion plans. We are pleased that we continue to receive and excellent response for a nuclear construction from our equity and debt investors as well as our banks. And I’ll now turn the call over to Steve to provide an update on our nuclear project. Steve Byrne Thanks, Jim. I’d like to begin by addressing the status of the settlement with the consortium. Slide 16 presents the outline we have shown in previous discussions as a recap. As you may be aware, Westinghouse closed in the transaction to acquire Stone & Webster from CB&I at the end of December and for beginning work as self-contracted construction manager at the new nuclear construction site on January the 4th. We are continuing our analysis of the fixed price option and will include the input from Fleur as they progress. As a reminder we have until November 1st of this year to unilaterally elect the fixed price option or not and we plan to take as much time as needed to ensure that we make the most prudent decision. Regardless of which scenario we chose one the decision has been made we will file our petition with the public service commission to amend the capital cost and schedule for the project. As Jimmy said earlier we expect to reach a conclusion in the second quarter. Moving onto some of the activities at the new nuclear construction site, Slide 17 presents an aerial photo of the site from September of 2016. I’ve provided this photo to give you a view of the layout of the site. And I’ve labeled both Units 2 and 3, as well as many other areas that make up what we call the table top. On Slide 18, you can see a picture of the Unit 2 Nuclear Island and this picture you can see module CA20 on the right hand side of the slide along with the containment vessel being number 1 which has placed on and welded to the lower bowl. Several rewards structural modules have now been placed inside the Unit 2 containment vessel. As we’ll discuss shortly you can also see the beginnings of the shale building as three courses have now been placed. Slide 19 shows a picture of the Unit 3 Nuclear Island. Module CA04 was placed inside the containment vessel lower bowl back in June and the auxiliary building walls continue to build. As you’ll see shortly we are making progress with the fabrication replacement of containment vessels structural modules on both units. Slide 20 presents a schematic view of the five large structural modules that are located inside the containment vessel. I’ve shown this schematic numerous times before because this expanded view gives you a better feel for how CA01 through 05 fits spatially inside of the containment vessel. As you may know, we have now placed CA01, CA04 and CA05 for Unit 2 and CA04 for Unit 3. Slide 21 shows a picture of the Unit 2 CA02 module, CA02 is a wall section that forms part of the in-containment refueling water storage tank. As mentioned last quarter, CA02 has now structurally complete and awaiting installation. Slide 22 shows a picture of the Unit 2, CA03 which is the west wall of the in-containment, we’re filling water storage tank. 15 of CA03’s 17 sub modules are on site and 12 are now on our assembly platform. Slide 23 shows a picture of the Unit 3 module CA05, this module comprises one of the major walls section within the containment vessel, fabrication and the Unit 3 CA05 has been completed and that has been staged outside of the module assembly building or MAB. Slide 24 shows a picture of the Unit 3 CA20 which is the auxiliary building module that will be located at outside and adjacent to the containment vessel. 68 of the 72 sub modules are on site and 20 of those sub modules have been upended on the construction platform for fabrication in the MAB. Slide 25 shows a picture of the beginnings of the Unit 3 module CA01, module CA01 houses the steam generators and the pressurizer and then forms the refueling canal inside the containment vessel. Currently we have 15 of 47 sub modules on site and 3 of those sub modules are upright and being loaded together in the MAB. Slide 26 shows the progress of the Unit 2 Shield Building panels, a first 6 panel course displays during the first half of 2015 and the fourth quarter of 2015, the second 6 panel course was set on top of the first course and then at the beginning of this month we placed the third 6 panel course. As shield building panels are placed and welded together concrete has core insight of the panel to create the shield building. Concrete has been placed in the first two courses. Slide 27 shows a couple of pictures from the Unit 2 Turbine Pedestal concrete placement from December 25, overall more than 2,300 cubic yards of concrete was placed over the course of about 20 hours. Slide 28 shows a picture of the single phase for the 230 ton Unit 2 Main Transforms. There are four such transformers for each unit and here you can see one of the four being rigged for replacement adjacent to the Unit 2 turbine build each unit will have these four plus 6 other transformers also in placing the two and all time then received in the three. On Slide 29, you see the New Nuclear CapEx projected of the vessel construction. This chart shows CWRP during the years 2008 to 2020, reflecting the Q4 2015 BLRA quarterly report that we filed in February. As a reminder, the BLRA report now reflects the cost from the October 2015 amended EPC. As you can see, we’re probably in the middle of the peak nuclear construction period the green line represents the related to actual and projected customer rate increases under the BLRA and is associated with the right hand access. Please now turn to Slide 30. As we mentioned during our third quarter call in September, the PSA approved a rate increase of $64.5 million, a new rate were effective for bills rendered on and after October 30th. Our BLRA filings for 2016 are showed at the bottom of the slide as you can see originally filed our quarterly status report for the fourth quarter and our next quarterly update would be filed in mid May. Not depicted here is the update filing addressed earlier as the timing of that petition didn’t get [indiscernible]. And I want to mention that the results of an analysis performed at the direction of South Carolina Office of Regulatory Staff. As you may be aware the ORS contracted an independent accounting firm to determine whether the revised rate provision under the base load review act is cost beneficial to SCE&G customers consistent with our clients. This independent attestation concluded in January and reaffirmed a significant cost advantage that the BLRA has envisioned when the law was originally passed this report is available on the ORS’s Web site and linked to the independent accounting firm report can be found in the regulatory documents section of the nuclear development area of SCANA’s Investor Web site. That concludes our prepared remarks, we’ll now be glad to respond any questions you might have. Question-and-Answer Session Operator We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from Jim von Riesemann of Mizuho Securities. Please go ahead. Jim von Riesemann A couple of questions on the 4% to 6% growth rate, can you just elaborate again on how that’s calculated, how we should think about the out years because if somebody would do a linear analysis 2016 would be less than the 4% if you are just growing ’16 versus ’15? Did I make sense on that, I have been on too many conference calls today? Jimmy Addison The first part of your question, made sense so how we calculated is the average of the annual increases over that three to five year period. So we’re comfortable that that average growth and our plan to-date is at that 4% to 6% level. Now the second part I’m not sure I followed. Jim von Riesemann Yes, I don’t think I followed it either, but it’s just really to get to ’16 versus ’15 because you’re not on a 4% plain year-over-year Especially with your guidance of $4? Jimmy Addison You are saying it’s above it right? Jim von Riesemann Yes. Jimmy Addison Yes. And so — but that’s why we considered over the entire period not just any one year. So every year wouldn’t necessarily be within that cone, but overall the average would be. Jim von Riesemann Okay that I understand. So the question then becomes with the fixed price option and your updated CapEx on the slide. How much of that is reflective, is anything reflective in I guess either your growth rate or for the fixed price option for the — in your CapEx or even your earnings growth rate? Jimmy Addison So the CapEx is based upon the amended agreement it does not include the fixed price option. And that’s what our growth rate is based upon, I’m not sure that if we would adopt that option that it would have a material impact on the earnings growth rate, but if we do later this year and if it’s approved we’ll certainly consider that. Jim von Riesemann Okay. And then I guess I have a question on bonus depreciation. Jimmy Addison Sure. Jim von Riesemann Previously, that was about 75 million a year. Have you updated those numbers given the tax extenders from December? Jimmy Addison Yes, that still is a good reference of 75 million a year in the base business. And of course what’s different now is the five year view. So did not have that in the past. So there is a — obviously potential for the new nuclear units themselves to qualify for bonus depreciation, although not at the 50% level because it phases down to 40% and 30% and 18% and 19% respectively. So that’s the only thing that’s outside of the $75 million estimate. Jim von Riesemann Okay. And then I guess the last question really maybe is for Steve. How — if you think about all the components to build the two summer units. How much of them are still say overseas and still need to be shipped to the place, or I mean most of the components are on-site at this point in time? Steve Byrne A majority of the major components are on-site, I would say about 85%, and the remainder would be either overseas or domestic production of the major components left outstanding that would be overseas see you wanted a — we’ve got two same generator to do some or one of those is being shipped and the other one is nearing completion. I think all the turbine generator stuff is on-site, condenser stuff on-site, containments on-site. We’ve got couple of passive heat exchangers they are being reworked at in Italy those should be finished shortly. We have cone pumps those are domestic, but those won’t show up till 2017. That’s most of the major stuff. Now we’ll get into sub-modules, we still have some of the sub-modules for the structural modules particularly for the trailing unit, unit three, they are still in fabrication. And so for example CAO1 is being fabricated between Toshiba in Japan and IHI in Japan, there are 47 different sub-modules that are associated with that unit. ’15 have been delivered ’16 in the 47 have shift, it just takes a while for them to get here and so 25 or yet to be shipped. So we’ve got almost half of those are either on-site or on the ocean. So I think I’d like to more to characterize it 85% of major equipments on-site and of the remaining stuff, a lot of it is physically complete, some of it is waiting to be shipped. Some of it’s on the ocean now on its way to our site. Operator Our next question comes from Julien Dumoulin-Smith of UBS. Please go ahead. Unidentified Analyst Hi, this is Mike Weirton, a Couple of questions, one did you say what was causing the drop off in industrial growth weather adjusted? Jimmy Addison No, I really didn’t address it’s not a significant change just showing down there about half a percent. The one thing that it makes it difficult to really address this quarter is as you will probably remember from the national news is we had an historic five year in simple South Carolina and they were expensive impact on our industrial customers. Everything from simple is logistics of workers not being able to get to plan to industrial in-takes malfunctioning, because of the extremely high water to impacts on rail. So it’s really difficult to quantify that so I am not too alarmed by one period here of slightly down. Unidentified Analyst Okay. And what’s causing the steep drop in SCE&G’s on the GAAP side, on its ROE versus PSNC Yes I can see when you look at the September numbers almost hasn’t changed in north Carolina but south Caroline has come off? Jimmy Addison Yeah, it’s a fortune of the obviously the right day’s additions as well as the operating costs etc involved in the units and as well as the timing I believe the south Caroline is as of September 30 and the PSNC number is I believe at 12.31 we just have a thought the south Carolina report, yes we haven’t updated that one. Unidentified Analyst And on the nuclear side the CapEx looks like it is about 200 million higher in the peak spending year ’17 and ’18 and it seems to flow through right into the clip and I am just wondering does that mean that, does that result in higher BLRAs rate increases going forward and is that as a results of the new, it is all as a result of the settlement right? Jimmy Addison Yes so the CapEx numbers haven’t changed at all from what we presented in the third quarter and just assume just the amended agreement not the fixed price option. All that’s change is the timing of when they occurred in this presentation Michael so that’s the only adjustment. Unidentified Analyst Okay, it’s just a timing issue. Okay all right and I guess thank you. Operator Our next question comes from Travis Miller of Morningstar. Please go ahead. Travis Miller You mentioned the second quarter you want to make the decision then on the fixed price option, what do you think, give me a timeline and thoughts on why you wouldn’t wait until November and then secondly if you do make that decision in the second quarter what’s the regulatory schedule look like from that point? Jimmy Addison Let me start and then let Steve jump in. We said that it’s like to be Q2 that’s our best judgment but Steve also said in the opening comments that we have until November and if we think we need all that time we will take all that time. So, we’re just giving you our most likely estimate of when we think we’ll have a good assessment of Fleur’s input et cetera that we’ll be able to make that, to make that call. And at the point that we feel like we have that and have our information together we’ll make a filing with the Public Service Commission and then they have their statutory six months to rule on that and that part sometime in the middle of that six months we would be before them to present our information ask for their support. Steve Byrne It is Steve one that would be take us long as you’ve got to make the decision which we fully understand but we did in an ex-parte fashion brief our Public Service Commission on the two options that we would have going forward and what we told them was as soon as we will complete with our valuation we will come back to them with the option that we selected so we tend to do that. One complication that you might not see that makes my life a little more difficult in the interim I have to sort of key to set the books and if I have to base assumptions on both we are exercising fixed price option and we are not exercising the fixed price option and if we’re going to exercise one of the other it’s a lot simpler for me like the drop the other set of books. so it take all kind of commercial issues off the table and just make the life a lot of easier. Travis Miller So, you did the, you briefed the regulators there is been any conversation or interaction with interveners or other groups that you think might have opposition to so your fixed price option or is it a preference to one or the other? Steve Byrne We’ve done a number of brief things some of which were public, we’re briefing for the legislature for examples and we are briefings with the governors and advisor council and some intervenes were present during the ex-parte briefing we had last November with the Public Service Commission but there was no interaction with them at that point of time. So, we have and will continue to have some interactions but we don’t know who all the interveners might be until we file something and given the opportunity to intervene. So, it’s not a surprise but we won’t have any more conversation with our Public Service Commission until we make a filing we are not allowed to have any conversation on above topic. Operator Our next question comes from Steven Byrd of Morgan Stanley. Please go ahead. Steven Byrd I wanted to just talk about Toshiba for a moment Toshiba has been in the press off late and on a high level just wanted to understand as you think about their credit position and sort of safe guards and protections for you how should we think about way that you can sort of receive protection against the potential deterioration of credit quality at Toshiba? Jimmy Addison Yes, well let me just talk briefly about some contract provisions in a conceptual form and then I’ll let Steve talk some about operationally about the project. So, we do have some security provisions in the contract if their ratings fall below a certain grade and they have forget those now and we have initiated that security now for Company’s other reason I am just not going get into the details of what that is, how much that is et cetera but it is essentially meant to handling kind of payment obligations where they will not be able to pay sub contractors things of that nature as well as performance obligations if they don’t went up to their terms of the contract. So, there is our best kind of the financial construct just in the contract that we have pulled the trigger on and I’ll just let Steve talk a little about the project itself. Steve Byrne Yes we’ve been tracking the situation at Toshiba obviously very large company I think the Japanese government we love to see them fail but they have submitted obviously our restructuring plan we are hardened to see in the structuring plan they intend to stay in the energy business while they do intend to shed some of the business are going to stay in the energy business which would include nuclear such a good thing for us. Also we are glad to see that with the significant changes in the leadership and the Board at Toshiba that the persons we have been largely dealing with in the nuclear arena survive that turmoil again we think that’s a good thing. I do believe that Toshiba has been successful at securing some debt from some large Japanese banks just recently. Bankruptcy also definitely maturely mean that the things would stop other various kinds of bankruptcies not that we think it will get to that point it definitely assume things that the site will stop. In addition to the sort of the financial protections and Jimmy just alluded to we did actually forecast situation like this back and we were negotiating the EPC contract not necessarily that we thought that the larger corporation Toshiba might have financial difficulties but we are really focusing on perhaps the smaller corporations like Westinghouse and [indiscernible] might have some financial difficulties so we do have in the contracts some provisions to Escrow intellectual property such that if that were to be a session of operations by the contractor that we could finish the plan on our own. Steven Byrd That’s really helpful. Since they should be been able to Sanmen project in China just wondered if yet any update there in terms of this status of Sanmen. Steve Byrne I don’t have any recent updates on Sanmen we have a team that’s supposed to go over there I think it’s in the April or May timeframe so will get some more firsthand information then my understanding is that we still anticipate that Sanmen 1 will come online sometime this year. Operator Our next question comes from the line of Andrew Weisel of Macquarie. Please go ahead. Andrew Weisel Few questions, first one is about the new long-term growth rate. Could you maybe talk outside of whether major pickup in the economy what are some factors that will potentially take you to or above the high end of that 6% level? Jimmy Addison Yes I think the largest kind of at risk variable from a positive or a negative standpoint Andrew is probably what happens with usage on electric on the electric side unrelated to weather so what goes on in that area I mean it’s obviously related to the economy but what do people do with every day electric consumption and that’s been very difficult for our industry to model the last several years it flattened out and was slightly up for us in 2015 that surprised us in a good way a little but that continues to be the most difficult thing for us to model. Andrew Weisel Anything on the capital side obviously there are Nuclear CapEx that is constantly being adjusted but anything in the base business that might get you like I said that towards or above the high ends or potentially a thing that can do wrong that might take you below that low end? Jimmy Addison No we feel pretty good about our CapEx plan I mean setting aside the nuclear as you said in your question which has the down adjustment due to the project we were doing in the base business the things we need to do to have safe reliable power but we’re not doing a great deal of things beyond that in order to maintain no base rate increases during this period or pressure on returns if we were not to have increases. PSNC is probably the biggest story outside of that with the growth in that area particularly in the transmission area and of course we have said earlier that we found yesterday a notice of a pending rate increase their but that is fairly well laid out that could change some based prices deal and compression in that kind of thing overtime but I don’t expect it to vary a great deal. Andrew Weisel Then my other question is about the dividend obviously a bigger increase there then what we’ve seen in the past few years and that takes you right to the midpoint of your targeted payout ratio if we assume the midpoint of the EPS guidance going forward should we expect the dividend to grow more at that kind of 5% range which is the midpoint of the EPS growth or would it be more likely to revert back to the earlier 3% to 4% range that we would have seen in the past several years? Jimmy Addison Yes if you will bear with me let me give you 30 seconds of history here. When the recession hit and earnings slowed a great deal we got outside of our payout policy of 55% to 60% we get up in the close to 63% to 65%. We continued to grow dividends during those next few year but we grew them at about half the way of the earnings growth. So that we can get back within the policy and now we are comfortably back within the policy and our position at this point is we expect to grow those dividends fairly consistent with earnings growth. Operator Our next question comes from Dan Jenkins with The State of Wisconsin Investment Board. Please go ahead. Dan Jenkins First of all I was just curious on your financing plan for 2016 and I show about a 1 billion for SCE&G I was wondering if you could give any insight of the timing would that be like throughout the year or first half, second half? Jimmy Addison Yes so, today we would model in roughly half of it about mid year and half of it near the end of the year. That is definitely going to need to be dynamically adjusted to which option we end up electing being and the payment schedule that goes on with that, we’ve talked about on the last call as well as briefly on this one so that’s really going to cause adjustments in that schedule so I’m fairly sure it will adjust from this but today’s best guess is about half midyear and about half near the end of the year. Dan Jenkins Going to the nuclear unit, and in particular I was stuck to the report you just filed for the fourth quarter report and in particular mentioned how the Shield building is one of the primary critical path of things, items that’s potentially had I guess some of those modules you’re having trouble with or whatever size, wonder if you could expand on that what the timing as you think with that kind of [indiscernible] will be exiting resolved? Jimmy Addison Yes I think the Shield building items when you say resolved I think we’ve resolved much of our Shield building issues there, the biggest issue that we had really was that — we anticipated that the fit up of this first of the kind item are taking these individual panels that come from Newport News Industrial or NNI and then putting them together at the site loading them up within the tolerance of and filling them with concrete was going to be very difficult, we’ve done a lot of mark ups, to receive our half the panels for the first unit may be a 25% for the second unit. The placement so far like you characterize is going a little better than we had anticipated and so we’ve got 16 courses of steel panels that go in a ring that we eventually will fill with concrete. We’ve placed the first three of those courses already, the first two have been welded fit and put concrete in and the third of course we recently placed that we’re welding that but again that’s going I think better than we had anticipated. So, now our focus since that is a critical path is ensuring that we get the sub modules the pieces of the panels from NNI in a timely fashion and so Westinghouse has taken over the contract it is really nice to have so that’s now our exclusively our Westinghouse to NNI deal, we think it’s good. And then the delivery schedule looks to be good and their negotiating a mitigation strategy and in fact I’ll be going to NNI tomorrow to talk through the mitigation strategy that will accelerate some of those panel delivered to the site so. I think the Shield building right now it’s going pretty well, but it is our focus area because it is critical path. Dan Jenkins And then similarly talks a little bit about secondary critical path being the CA20 and CA01 the CA03 are those like parallel paths to the Shield building issues or are they dependant on the Shield building path? Jimmy Addison No, not — they’re not necessarily dependant on the Shield building but they would come in right in line after the Shield building so once we demonstrate proficiency with Shield building than we could focus on whatever’s next so we’re always looking at primary, secondary, tertiary critical paths. So, the secondary path is as you mentioned that CA20 module for the trailing Unit 3, we’ve already set CA20 Unit to our facility we did come up with a interesting mitigation strategy for the CA20 module whereas on the first unit on Unit 2 we set it as one piece, on the second one we’re going to set it in two half. So, that will save us probably a couple of months in the fabrication and that’s important because it actually forms a part of the concrete formwork for the rest of the plant so it’s important that we set that half of that and use it is as form concrete while we’re working on the second half and then set the second half. So, that said right now so that was — that the team onsite came up with that plan, we’re executing on that plan and we’ve to set that first half CA20 for the second unit in Q1 — last Q1 and then we should set the second half of CA20 bringing the three probably early in Q2. Dan Jenkins And somewhat related to that you mentioned some I don’t know if you have the report in front of you on Page 15 of it, in the middle of it kind of related to the CA01 and CA20 that and the current schedule the date doesn’t support the construction schedule for the Units and so how I guess what is how is that being impacting in overall schedule, how should we think about that, how much can that be mitigated? Jimmy Addison Yes I think, a good example of mitigation is the plan that we came up with to split the CA20 module into two halves and CA01, we’re looking at similar things, we’re looking to expedite the delivery of the sub modules from IHI and Toshiba in Japan. Toshiba obviously has all the incentive in this world under the agreement that we negotiated in October to expedite whatever they can so that they both have the sensitive parent company of Westinghouse so they are both the families that they don’t do things on time and there are significant bonus and centers that they finish on time so they’ve got as much incentive as we could possibly put into an agreement. So we are looking to accelerate the schedule for the modules coming out of Japan, for CA01 and we are implementing strategy to slit CA20 and set in two halves instead of one large piece [indiscernible] CA20 portion. Operator Our next question comes from Jonathan Reeder of Wells Fargo. Please go ahead. Jonathan Reeder One quick point of clarity, so with Fleur’s assessment of the schedule kind of comes back, the current schedule isn’t feasible, how does that work then, do you have to negotiate and other emended EPC contract before, you would file that with the commission, so that how the benchmarks the milestones are set appropriately in the next approved BLRA? Jimmy Addison Jonathan I think the short answer is, it depends on far out they are if you remember with our last order from the public service commission, we had a plus 18 months for each of the milestones, so as long as you stay within that 18 months, we don’t need to go back in on the schedule. So, really it’s going to depend on how far but what I more envision that Fleur might come back and say in order to get the schedule on time to accelerate this you might have to bring in more resources than we have on the current plan, so we’re going to see just a 4,000 employees, that they might come back and say they need to get 4,500 employees, that input might drive us towards opting for the fixed price because more people mean more dollars. Jonathan Reeder Right, so that would impact, I guess the non fix price option and win more creditability towards slight in the fixed price, that’s the way to think about it? Jimmy Addison Correct. Operator Our next question comes from Michael Lapides of Goldman Sachs. Please go ahead. Michael Lapides A couple of nuts and bolts questions on the gas side of the business. First of all at PSNC as you filed later this spring, when would rates go into effect, does that actually get a six or a 12 month process in North Carolina? Jimmy Addison 6. Michael Lapides Okay, so rates would go and no later than [indiscernible] next year and that’s historical looking rate case there, can you do it for it or a [indiscernible] measureable? Jimmy Addison It’s a bit about, it’s a base historical test here but you can update for equipped as well as cap structure concurrent with the information being presented and any settlement being discussed or hearing before the commission. Michael Lapides Got it and on the GAAP side of SCE&G when would you file and do the rate stabilization act taking out revenue increase, when does that normally happen and when would that go into effect? Jimmy Addison Yes, so that runs through the end of the heating season, the measurement period through the end of March and we make the filing in May of each year and any adjustment either way for 50 basis points out would be effective the 1st of November for the implementation of the heat, typical heating season in the fall, although that did not happened this past year. Michael Lapides Got it, understood and then one question, just want to make sure understood that your comments about Toshiba and some of the financial and credit metric issues, Toshiba has and you mentioned that you’ve already started the process with Toshiba to cover some of the security related funds did you do that because of their downgrades did you do that because Toshiba is having issues paying some of their local subcontractors or some of the vendors or suppliers what was the main driver for starting the process now? Jimmy Addison Hi Michael this is Jimmy, I’ve commented on that earlier, so clean it up to you, that’s just procedural is just an option afforded that is under the contract, we’ve had no issues with that we’re well aware at all of any subs being paid or anything like that. Operator Our next question comes from Claire Tse of Wolfe Research. Please go ahead. David Paz Hi this is actually David Paz. Sorry if I missed this earlier, does your 4% to 6% EPS growth rate assume any bonus depreciation impact on the new nuclear units when they come into service in 2019 and 2020? Jimmy Addison The guidance assumes the bonus depreciation on the base business. We have really not contemplated yet or model exactly what might happen with the bonus depreciation on the new unit themselves. So a lot of consideration has going into that long production tax credit et cetera to make sure maximize the value for the customer. David Paz I see. So it’s not essentially haven’t the modeled in the 4% to 6%. Jimmy Addison Right. David Paz Okay. Do you happen to know or kind of find somewhere in the BLRA filings what the cumulative cost per Unit 2 would be through 2019 as you currently stand today? Jimmy Addison Well on the amended contract is about the total units is about 7.1 billion. So you can roughly estimate 50% of that. David Paz Okay. Jimmy Addison David, are you looking for what’s been spent to-date? David Paz Well, not just to-date, but if I, I mean obviously you have the BRLAs by year, but if I knew what just Unit 2’s portion was through that, through ’19 as well as trying to get more exact number, but obviously I can ballpark it? Jimmy Addison Yes. We’ve not spoken about between Unit 2 and Unit 3 so yes you have to ballpark it. David Paz And then just can you just go through the process for how each unit goes into rate base. So is there formal filing with the PSC when each unit is completed. How is that process? Jimmy Addison So what we do is we have to prepare a projected operating cost year if you will. So an implementation year the first phase of the BRLA is to get plans proved. The second phase happens each year on the revise phrase in the third is the operating cost going in. And so we’ll have to project what the depreciation and the operating costs et cetera are and that does not require a hearing just requires us to present it to the office of regulatory staff and to the commission like we do the revise rates each year. Operator Our next question comes from Paul Patterson of Glenrock Associates. Please go ahead. Paul Patterson I wanted to touch base to you on the just on the last question on the BLRA and the bonus depreciation. It sounds like you guys were trying to analyzing the PTC in the impact of taking bonus and what have you. And I’m just trying to get a sense as to what that process is kind of like and sort of some of the factors that sort of go around if you follow me and how that might change the four to six potentially? Jimmy Addison Well, the only real impact is likely to be just on financing itself and any temporary benefits on financing. I mean bonus depreciation is simply accelerating a deduction that you’re going to get at some point in the future to an earlier point in time. So it’s you’re not going to change your total taxes per books, this is and changer differ taxes. So if you end up with the larger deferred tax credit, because of the bonus depreciation you can end up with lower rate base there in the short run. But in the very short run it’s just going to have some financing benefits to it just like the bonus depreciation does on the base business. Paul Patterson Well that is what I was wondering, I mean, I’m just wondering whether or not, I mean I understand that. I guess what I’m wondering is there any potential impact in the near-term, if the bonus depreciation was factored into. Another word how should we think about the potential sensitivity in the near-term, if bonus depreciation, my understanding is not be factored in now, if it were to coming. Is there any, can you give us any rule of thumb or any thought process as to, if there would be impact and what that impact might be? Jimmy Addison No. We’re talking about something is going to that would potentially be a cash impact in the second half of 2019. So I don’t really see in the near-term impact on that. Paul Patterson Okay. So in another words, it’s a bonus depreciation, there is no potential for take. It would happen then regardless one would be happening anytime earlier in terms of your analysis regardless? Jimmy Addison That’s right. That’s correct. Paul Patterson Okay. Thanks so much for the clarity. And then just finally on the sales growth, I believe you guys in your last IRP were around 1.4% for retail sales growth. I think just over the long period. Is that still pretty much what you guys are looking at? Jimmy Addison Yes, we’re going to be filing a new IRP, one of the next few week space and we’re just reviewing and after that earlier this week. And I don’t think where we add at this point is materially different but we will be filling that in the next few weeks. Operator Our next question comes from Mitchell Moss of Lord, Abbett. Please go ahead. Jimmy Addison Mitchell, we can’t hear you. Mitchell Moss Sorry about that. Jimmy Addison Okay. Mitchell Moss Just a follow-up and some of the questions on Toshiba’s credit ratings and downgrades, in terms of next steps there are further downgrades for Toshiba. Is there a — is it kind of like incremental steps or it is a single Toshiba’s rating moves down one more moth there is sort of one or two more steps or is there sort of Toshiba has just all several rating options from here before you guys would be to I guess do further action regarding taking any security actions? Jimmy Addison Right so the contractual on a security provision I mentioned earlier their ratings meet the criteria for us to like those or they don’t and they’ve met those so there are no further impacts there is no greatest dealing? Mitchell Moss So I guess you would so in other words so the ratings where they are at now you haven’t needed to take any, there haven’t been any security provisions activated or there have been? Jimmy Addison There have not been in the past, we recently initiated those and they have 60 days for those to be fulfilled. Mitchell Moss Okay. Jimmy Addison And those are all other provisions once fulfilled. Mitchell Moss Okay. And just on a more of a technical question, your Slide 13 I believe yes Slide 13 shows debt refinancing at SCANA in 2018 are 170 million utility is 550. Last quarter you had combined it at about 720 all that SCANA and so I just wanted to find out to better understand I see the 550 in terms of just that at the utility I just want those understand 170 million of SCANA debt is? Jimmy Addison That relates to South Carolina generating company but it is one plant that operates solely for SC&G all the power goes to SC&G so it’s just the separately financed plant but it’s solely related to we call it Genco something like a generating company. Mitchell Moss Okay. So, it’s not a really holding company debt. Jimmy Addison That’s right but it technically is a subsidiary of SCANA and that’s the reason we presented it that way. Operator And this concludes our question-and-answer session. I would like to turn the conference back over to Jimmy Addison for any closing remarks. Jimmy Addison Well. Thank you so far this has been a very eventful and productive year and we’re excited about the new arrangement with Westinghouse and Fleur. We continue to focus on the new nuclear construction and on operating all of our businesses in a safe and reliable manner. We thank you all for joining us today and for your interest in SCANA. Have a good afternoon. Operator The conference has now concluded. We thank you for attending today’s presentation. You may now disconnect your lines. Have a great day. Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited. THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY’S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY’S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY’S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS. If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com . Thank you!