NEW YORK–(BUSINESS WIRE)–Fitch Ratings has assigned an ‘A ‘ appraisement to the afterward South Carolina Public Account Authority’s (Santee Cooper or the Authority) bonds:
–$300,000,000 tax-exempt acquirement obligations 2015 alternation E;
–$200,000,000 tax-exempt acquirement refunding obligations 2016 alternation A.
The 2015 E obligations will be acclimated to retire assertive bartering cardboard (CP) addendum and armamentarium a allocation of the authority’s advancing basic improvements, while the 2016 A obligations would be acclimated to acquittance all or a allocation of the 2007 A, 2008 A and 2009 B bonds.
In addition, Fitch has affirmed the outstanding ratings as follows:
–$6.88 billion outstanding adequation acquirement obligations at ‘A ‘.
The Appraisement Outlook is Stable.
The acquirement band obligations are anchored by a affirmation aloft and acceding of, the revenues and moneys in the acquirement armamentarium on adequation with added acquirement obligations, and above-mentioned to the acquittal of CP notes.
KEY RATING DRIVERS
SOLID CUSTOMER BASE: The ascendancy is one of the nation’s bigger borough broad systems, confined either anon or alongside about one-third of the accompaniment of South Carolina. Extension of the Central Electric Cooperative (Central) ability sales acceding to 2058 (about 56% of authority’s 2014 revenues) is cogent in that it provides abiding authoritativeness to bondholders and affords added adaptability in alignment debt and ambience rates.
CHALLENGES REMAIN: Santee Cooper continues to face challenges primarily accompanying to the bulk and achievement dates of the Summer nuclear units 2 and 3, which are 45% endemic by the authority. A ample architecture program, associated acknowledged issues and a slower bulk of electric sales accept accumulated to abnormally appulse the authority. Santee Cooper charcoal structurally sound, is accurate by the abiding ability sales arrangement with Central and should account from the afresh arise adjustment amid activity owners and the consortium.
RECONFIGURING GENERATING CAPACITY: The ascendancy is awful affianced in restructuring its ability accumulation mix, by abbreviation its acknowledgment to coal-fired bearing and abacus to its accustomed gas and nuclear fleet. Efforts to abate its buying absorption in the Summer nuclear bulb amplification activity were alone partly successful, and the ascendancy has absitively to absorb a cogent buying share, which is included in its projections.
FINANCIAL RATIOS STABLE: The authority’s above architecture and costs program, apropos to the Summer nuclear project, has pressured banking ratios and contributed to a antecedent abasement of Santee Cooper bonds. Banking ratios abide able-bodied beneath absolute levels, but arise to accept stabilized, accouterment abutment for the ‘A ‘ rating. The authority’s abiding banking archetypal is predicated on senior-lien debt account advantage (DSC) of 1.50x, but can abatement beneath this arrangement during periods of above basic investment.
ADVERSE NUCLEAR DEVELOPMENTS: Negative developments accompanying to achievement of the Summer nuclear units 2 and 3 projects, which affect aloft South Carolina Public Account Authority’s banking metrics, could aftereffect in a bottomward appraisement action.
ADDITIONAL LOAD GROWTH BENEFICIAL: A allusive advance in electricity appeal that lessens the authority’s balance breeding position would account banking after-effects and chump rates.
The authority’s primary business operation is the production, manual and administration of electrical energy, both at broad and retail, to barter of South Carolina. Santee Cooper sells electricity to about 2 actor broad and retail barter in 46 counties throughout the state.
The account owns assorted ability assets (heavily coal-fired) that accept a accumulated (summer) breeding accommodation of 5,093 megawatts (MW), afterward cease of four atramentous units. When accumulated with SEPA allocations and bazaar purchases, the authority’s about 5,866 MW of accepted breeding adequacy and ability purchases are added than acceptable to accommodated its customers’ aiguille demand, including a 15% summer assets margin.
The ascendancy and Central auspiciously adopted an alteration to the absolute Central Acceding on May 20, 2013 that bigger aligns their approaching interest, formalizes how they will accordingly plan for new assets and defers the cooperative’s rights to aish the acceding above-mentioned to Dec. 31, 2058.
STATUS OF NUCLEAR CONSTRUCTION
In January 2008, the authority’s lath accustomed a bearing ability plan that included, amid added things, a 45% buying absorption in Summer nuclear units 2 and 3, with South Carolina Electric & Gas (SCE&G) owning the absolute 55%. The advance participants of the bunch developing the activity accommodate Westinghouse Electric Company and CB&I/Stone & Webster.
On Oct. 27, 2015, the EPC acceding amid the parties was amended. The October 2015 Alteration will become able aloft the cleanup of the accretion by Westinghouse of the banal of Stone & Webster from CB&I , and will become absent and abandoned in the accident such accretion is not consummated by March 31, 2016. Afterward that acquisition, Stone & Webster will abide to be a associate of the bunch as a accessory of Westinghouse instead of CB&I. Westinghouse will appoint Fluor Corporation or its affiliate(s) as a subcontracted architecture manager.
Amid added things, aloft effectiveness, the October 2015 Alteration would dness by adjustment and absolution essentially all outstanding disputes amid SCE&G, the ascendancy and the consortium. In addition, the Alteration would accommodate for an absolute analogue of a Change in Law advised to abate the likelihood of assertive bartering disputes. Finally, it would accommodate the owners an assertive option, until Nov. 1, 2016 and accountable to authoritative approvals, to added alter the EPC Acceding to fix the absolute bulk to be paid to the bunch for its absolute ambit of assignment on the activity afterwards June 30, 2015 at $6.082 billion (authority’s 45% allocation actuality about $2.737 billion). Under the October 2015 Amendment, the EPC date is now set at Aug. 31, 2019 for Unit 2 and Aug. 31, 2020 for Unit 3; accountable to added review.
FINANCIAL PERFORMANCE STEADIES
Santee Cooper appear abiding banking after-effects for agenda year 2014, with Fitch affected DSC at 1.52x. The ascendancy is additionally appropriate to accomplish distributions to the accompaniment and payments in lieu of taxes to bounded governments. Based on basic after-effects for the nine-months concluded Sept. 30, 2015, absolute operating assets exceeded account by 8%. The banking anticipation assumes a DSC ambition of about 1.50x, above-mentioned to alteration payments and excluding absorption accuse associated with bartering cardboard notes, which reduces numbers slightly.
The absolute bulk of the basic advance affairs for 2016 through 2019 is estimated to be about $3.27 billion, which includes about $2.15 billion for Summer nuclear units 2 and 3 based on 45% ownership, about $440 actor for ecology acquiescence expenditures and $680 actor for accepted arrangement improvements. Santee Cooper affairs to affair almost $1.1 billion of debt in 2016 through 2018.
As of Nov. 30, 2015, there was $606.4 actor of CP addendum outstanding. The affirmation and acceding of revenues accepting such addendum is inferior to that of the acquirement obligations. The lath has accustomed a resolution that the arising of CP addendum will not beat 20% amend of the authority’s accumulated debt outstanding, accumulation assertive provisions.
To access funds if bare to accord the bartering cardboard notes, the ascendancy has entered into revolving acclaim agreements with several banking institutions. The sum of these agreements totals $750 million. Expiration dates ambit from August 18, 2017 to Nov. 27, 2018. Absolute accessible aqueous assets disconnected by best abeyant clamminess claim is acceptable to accommodated Fitch’s claim for an ‘F1’ rating. The ascendancy has additionally entered into a abstracted revolving acceding (Direct Purchase Revolving Acclaim Agreement) with Barclays Bank PLC that allows the ascendancy to borrow up to $200 actor through Nov. 27, 2019.
Additional advice is accessible at ‘www.fitchratings.com’.
Revenue-Supported Appraisement Criteria (pub. 16 Jun 2014)
U.S. Public Ability Appraisement Criteria (pub. 18 May 2015)
Dodd-Frank Appraisement Advice Disclosure Form
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