-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MUsHokbw++3H7Fa1dj6lbr8wDkNHDcrTh4iP/rj9vUT+brIkvX6ik73UEpYFvZV5 A1NC6cDeeCZ4DgwPU6hQoQ== /in/edgar/work/0000091882-00-000008/0000091882-00-000008.txt : 20001115 0000091882-00-000008.hdr.sgml : 20001115 ACCESSION NUMBER: 0000091882-00-000008 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001114 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SOUTH CAROLINA ELECTRIC & GAS CO CENTRAL INDEX KEY: 0000091882 STANDARD INDUSTRIAL CLASSIFICATION: [4931 ] IRS NUMBER: 570248695 STATE OF INCORPORATION: SC FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-03375 FILM NUMBER: 762432 BUSINESS ADDRESS: STREET 1: 1426 MAIN ST CITY: COLUMBIA STATE: SC ZIP: 29201 BUSINESS PHONE: 8032179000 MAIL ADDRESS: STREET 1: 1426 MAIN ST CITY: COLUMBIA STATE: SC ZIP: 29201 10-Q 1 0001.txt SCANA & SCE&G FORM 10-Q =============================================================================== UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-Q (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2000 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period from to Commission Registrant, State of Incorporation, I.R.S. Employer File Number Address and Telephone Number Identification No. 1-8809 SCANA Corporation 57-0784499 (A South Carolina Corporation) 1426 Main Street Columbia, South Carolina 29201 (803) 217-9000 1-3375 South Carolina Electric & Gas Company 57-0248695 (A South Carolina Corporation) 1426 Main Street Columbia, South Carolina 29201 (803) 217-9000 Indicate by check mark whether the registrants: (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days. Yes X No Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the last practicable date. Description of Shares Outstanding Registrant Common Stock at October 31, 2000 SCANA Corporation Without Par Value 104,729,131 South Carolina Electric Par Value $4.50 Per Share 40,296,1411 & Gas Company 1Held beneficially and of record by SCANA Corporation. This combined Form 10-Q is separately filed by SCANA Corporation and South Carolina Electric & Gas Company. Information contained herein relating to SCANA Corporation or any of its direct or indirect subsidiaries, other than South Carolina Electric & Gas Company and its consolidated operations, is provided solely by SCANA Corporation and shall be deemed not included in the Form 10-Q of South Carolina Electric & Gas Company. ================================================================================ INDEX Page PART 1. FINANCIAL INFORMATION SCANA Corporation Financial Section........................................ 3 Item 1. Financial Statements Condensed Consolidated Balance Sheets as of September 30, 2000 and December 31, 1999 .................................................... 4 Condensed Consolidated Statements of Income and Retained Earnings for the Periods Ended September 30, 2000 and 1999............................. 6 Condensed Consolidated Statements of Cash Flows for the Periods Ended September 30, 2000 and 1999............................................ 7 Notes to Condensed Consolidated Financial Statements....................... 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.............................................16 Item 3. Quantitative and Qualitative Disclosures About Market Risk.........23 South Carolina Electric & Gas Company Financial Section.....................25 Item 1. Financial Statements Condensed Consolidated Balance Sheets as of September 30, 2000 and December 31, 1999 .................................................... 26 Condensed Consolidated Statements of Income and Retained Earnings for the Periods Ended September 30, 2000 and 1999...............................28 Condensed Consolidated Statements of Cash Flows for the Periods Ended September 30, 2000 and 1999..............................................29 Notes to Condensed Consolidated Financial Statements........................30 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations............................................35 Item 3. Quantitative and Qualitative Disclosures About Market Risk.........40 PART II. OTHER INFORMATION Item 1. Legal Proceedings..................................................41 Item 4. Submission of Matters to a Vote of Security Holders................41 Item 6. Exhibits and Reports on Form 8-K...................................41 Signatures..................................................................42 Exhibit Index...............................................................44 SCANA CORPORATION FINANCIAL SECTION
PART I. FINANCIAL INFORMATION Item 1. Financial Statements SCANA CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) - ------------------------------------------------------------------------------ ------------------ September 30, December 31, 2000 1999 - ------------------------------------------------------------------------------ ------------------ Assets (Millions of Dollars) Utility Plant: Electric $4,671 $4,633 Gas 1,407 632 Other 182 191 - ------------------------------------------------------------------------------ ------------------ Total 6,260 5,456 Less accumulated depreciation and amortization 2,188 1,829 - ------------------------------------------------------------------------------ ------------------ Total 4,072 3,627 Construction work in progress 275 159 Nuclear fuel, net of accumulated amortization 54 43 Acquisition adjustment, net of accumulated amortization 479 22 - ------------------------------------------------------------------------------ ------------------ Utility Plant, Net 4,880 3,851 - ------------------------------------------------------------------------------ ------------------ Nonutility Property, net of accumulated depreciation 70 61 Investments 785 938 - ------------------------------------------------------------------------------ ------------------ Nonutility Property and Investments, Net 855 999 Current Assets: Cash and temporary cash investments 142 116 Receivables (including unbilled revenues) 411 320 Inventories (at average cost): Fuel 130 82 Materials and supplies 56 51 Prepayments 20 18 Deferred income taxes 14 16 - ------------------------------------------------------------------------------ ------------------ Total Current Assets 773 603 - ------------------------------------------------------------------------------ ------------------ Deferred Debits: Emission allowances 26 31 Environmental 31 24 Nuclear plant decommissioning fund 70 64 Pension asset, net 186 144 Other regulatory assets 177 175 Other 130 120 - ------------------------------------------------------------------------------ ------------------ Total Deferred Debits 620 558 - ------------------------------------------------------------------------------ ------------------ Total $7,128 $6,011 ============================================================================== ==================
SCANA CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) - ------------------------------------------------------------------------------------ ------------------- ----------------- September 30, December 31, 2000 1999 - ------------------------------------------------------------------------------------ ------------------- ----------------- Capitalization and Liabilities (Millions of Dollars) Stockholders' Investment: Common Equity $2,068 $2,099 Preferred stock (not subject to purchase or sinking funds) 106 106 - ------------------------------------------------------------------------------------ ------------------- ----------------- Total Stockholders' Investment 2,174 2,205 Preferred Stock, net (subject to purchase or sinking funds) 11 11 SCE&G-Obligated Mandatorily Redeemable Preferred Securities of SCE&G's Subsidiary Trust, SCE&G Trust I, holding solely $50 million principal amount of the 7.55% Junior Subordinated Debentures of SCE&G, due 2027 50 50 Long-Term Debt, net 2,860 1,563 - ------------------------------------------------------------------------------------ ------------------- ----------------- Total Capitalization 5,095 3,829 - ------------------------------------------------------------------------------------ ------------------- ----------------- Current Liabilities: Short-term borrowings 264 266 Current portion of long-term debt 40 303 Accounts payable 212 189 Customer deposits 24 16 Taxes accrued 74 86 Interest accrued 57 29 Dividends declared 32 31 Other 7 13 - ------------------------------------------------------------------------------------ ------------------ ----------------- Total Current Liabilities 710 933 - ------------------------------------------------------------------------------------ ------------------- ----------------- Deferred Credits: Deferred income taxes 825 805 Deferred investment tax credits 116 116 Postretirement benefits 112 98 Reserve for nuclear plant decommissioning 70 64 Regulatory liabilities 70 64 Other 130 102 - ------------------------------------------------------------------------------------ ------------------- ----------------- Total Deferred Credits 1,323 1,249 - ------------------------------------------------------------------------------------ ------------------- ----------------- Total $7,128 $6,011 ==================================================================================== =================== ================= See Notes to Condensed Consolidated Financial Statements.
SCANA CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS (Unaudited) -------------------------------------------------- ------------------------- --------------------------- Three Months Ended Nine Months Ended September 30, September 30, 2000 1999 2000 1999 -------------------------------------------------- ----------- ------------- ------------- ------------- (Millions of Dollars, Except Per Share Amounts) Operating Revenues: Electric $ 397 $ 393 $1,011 $ 953 Gas - Regulated 87 635 299 159 Gas - Nonregulated 78 654 287 260 -------------------------------------------------- ----------- -------------- ------------ ------------- Total Operating Revenues 558 2,300 1,539 816 -------------------------------------------------- ----------- -------------- ------------ ------------- Operating Expenses: Fuel used in electric generation 87 228 221 84 Purchased power 14 36 29 19 Gas purchased for resale 147 1,023 493 366 Other operation and maintenance 105 346 299 Depreciation and amortization 118 43 162 126 54 Other taxes 27 88 79 29 -------------------------------------------------- ----------- -------------- ------------ ------------- Total Operating Expenses 670 423 1,883 1,247 -------------------------------------------------- ------- --------- ----- ------------ ------------- Operating Income 46 135 417 292 -------------------------------------------------- ----------- -------------- ------------ ------------- Other Income, including allowance for equity funds used during construction 10 13 29 29 -------------------------------------------------- ----------- -------------- ------------ ------------- Income Before Interest Charges, Income Taxes, Preferred Stock Dividends and Cumulative Effect of Accounting Change 156 148 446 321 ----------------------------------------------------------- -------------- ------------ ------------- Interest Charges: Interest expense on long-term debt 55 34 150 97 Other interest expense, net of allowance for borrowed funds used during construction 2 17 8 3 ---------------------------------------------------------- -------------- ------------ ------------- Total Interest Charges, Net 58 36 167 105 ---------------------------------------------------------- -------------- ------------ ------------- Income Before Income Taxes, Preferred Stock Dividends and Cumulative Effect of Accounting Change 98 112 279 216 Income Taxes 36 42 108 79 ------------------------------------------------------------------------- ----------- -------------- ------------ ------------- Income Before Preferred Stock Dividends and Cumulative Effect of Accounting Change 62 70 171 137 Preferred Dividend Requirement of SCE&G - Obligated Mandatorily Redeemable Preferred Securities 1 1 3 3 ------------------------------------------------------------------------- ----------- -------------- ------------ ------------- Income Before Cash Dividends on Preferred Stock of Subsidiary and Cumulative Effect of Accounting Change 61 69 168 134 ------------------------------------------------------------------------- ----------- -------------- ------------ ------------- Cash Dividends on Preferred Stock of Subsidiary (At Stated Rates) (2) (2) (6) (6) ------------------------------------------------------------------------- ----------- -------------- ------------ ------------- Income Before Cumulative Effect of Accounting Change 59 67 162 128 Cumulative Effect of Accounting Change, net of taxes (Note 2) - - 29 - ------------------------------------------------------------------------- ----------- -------------- -- Net Income 59 67 191 128 Retained Earnings at Beginning of Period 792 659 720 678 Common Stock Cash Dividends Declared (30) (28) (90) (108) ============================================================== ============== ============ ============= Retained Earnings at End of Period $821 $ 698 $821 $ 698 ============================================================== ============== ============ ============= Earnings Per Share of Common Stock: Basic and diluted Before cumulative effect of accounting change $ .56 $ .65 $1.55 $ 1.23 Cumulative effect of accounting change 1 - .28 - Basic and diluted earnings per share .56 .65 1.83 1.23 Weighted average shares outstanding (millions) 104.7 103.6 104.5 103.6 Cash Dividends Declared Per Share of Common Stock $.2875 $ .2750 $.8625 $1.045 ============================================================== ============== ============ ============= See Notes to Condensed Consolidated Financial Statements.
SCANA CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - ---------------------------------------------------------------------------------------------- --------------------------- Nine Months Ended September 30, 2000 1999 - ---------------------------------------------------------------------------------------------- ------------- ------------- (Millions of Dollars) Cash Flows From Operating Activities: Net income $191 $128 Adjustments to reconcile net income to net cash provided from operating activities: Cumulative effect of accounting change (29) - Depreciation and amortization 170 133 Amortization of nuclear fuel 15 13 Allowance for funds used during construction (6) (6) Over (under) collections, fuel adjustment clauses 6 (8) Changes in certain assets and liabilities, net of effect of subsidiary acquisition: (Increase) decrease in receivables 25 (4) (Increase) decrease in inventories (16) (11) Increase (decrease) in deferred income taxes, net 17 10 (Increase) decrease in pension asset (42) (21) (Increase) decrease in other regulatory assets (4) 31 Increase (decrease) in regulatory liabilities 6 4 Increase (decrease) in post-retirement benefits 10 8 Increase (decrease) in accounts payable (27) (77) Increase (decrease) in taxes accrued (35) 20 Other, net 44 (50) - ----------------------------------------------------------------------------------------------- ------------ ------------- Net Cash Provided From Operating Activities 325 170 - ----------------------------------------------------------------------------------------------- ------------ ------------- Cash Flows From Investing Activities: Utility property additions and construction expenditures, net of AFC (204) (167) Increase in other property and investments (35) (73) Purchase of subsidiary, net of cash acquired (693) - Sale of subsidiary assets 1 17 - ----------------------------------------------------------------------------------------------- ------------ ------------- Net Cash Used For Investing Activities (931) (223) - ----------------------------------------------------------------------------------------------- ------------ ------------- Cash Flows From Financing Activities: Proceeds: Issuance of First Mortgage Bonds 148 99 Issuance of notes and loans 998 150 Repayments: First Mortgage Bonds (100) - Notes and loans (174) (44) Other long-term debt - (9) Dividend payments: Common stock (94) (120) Preferred stock of subsidiary (6) (6) Short-term borrowings, net (140) (33) Fuel and emission allowance financings, net - 11 - ----------------------------------------------------------------------------------------------- ------------ ------------- Net Cash Provided From Financing Activities 632 48 - ----------------------------------------------------------------------------------------------- ------------ ------------- Net Increase (Decrease) In Cash And Temporary Cash Investments 26 (5) Cash And Temporary Cash Investments At January 1 116 62 - ----------------------------------------------------------------------------------------------- ------------ ------------- Cash And Temporary Cash Investments At September 30 $142 $ 57 =============================================================================================== ============ ============= Supplemental Cash Flow Information: Cash paid for - Interest (net of capitalized interest of $4 for 2000 and $3 for 1999) $134 $ 94 - Income taxes 109 37 Noncash investing activities - Unrealized gain/(loss) on securities available for sale, net of (131) 156 taxes In conjunction with the acquisition of Public Service Company of North Carolina, Inc., liabilities were assumed as follows: Fair value of assets acquired $ 1,171 Cash paid for capital stock (212) Stock issued for consideration (475) -------- ----- Liabilities assumed $ 484 =========== See Notes to Condensed Consolidated Financial Statements.
SCANA CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS September 30, 2000 (Unaudited) The following notes should be read in conjunction with the Notes to Consolidated Financial Statements appearing in SCANA Corporation's (the Company) Annual Report on Form 10-K for the year ended December 31, 1999. These are interim financial statements, and due to the seasonality of the Company's business, the amounts reported in the Condensed Consolidated Statements of Income are not necessarily indicative of amounts expected for the year. In the opinion of management, the information furnished herein reflects all adjustments, all of a normal recurring nature except as described in Notes 2, 3 and 4, which are necessary for a fair statement of the results for the interim periods reported. 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. Basis of Accounting The Company accounts for its regulated utility operations, assets and liabilities in accordance with the provisions of Statement of Financial Accounting Standards No. 71 (SFAS 71). This accounting standard requires cost-based rate-regulated utilities to recognize in their financial statements revenues and expenses in different time periods than do enterprises that are not rate-regulated. As a result, the Company has recorded, as of September 30, 2000, approximately $209 million and $71 million of regulatory assets and liabilities, respectively, including amounts recorded for deferred income tax assets and liabilities of approximately $131 million and $52 million, respectively. The electric and gas regulatory assets (excluding deferred income tax assets) of approximately $25 million and $52 million, respectively, are being recovered through rates, and the Public Service Commission of South Carolina (PSC) has approved accelerated recovery of approximately $2 million of the electric regulatory assets. In the future, as a result of deregulation or other changes in the regulatory environment, the Company may no longer meet the criteria for continued application of SFAS 71 and could be required to write off its regulatory assets and liabilities. Such an event could have a material adverse effect on the Company's results of operations in the period that a write-off would be required, but it is not expected that cash flows or financial position would be materially affected. B. Comprehensive Income Comprehensive income includes net income and all other changes in equity except those resulting from investments by and distributions to stockholders. Comprehensive income of the Company totaled $39 million and $60 million for the three and nine months ended September 30, 2000, respectively, and $143 million and $284 million for the same periods in 1999. Other comprehensive income included unrealized gains/(losses) on securities available for sale of $(20) million and $(131) million for the three and nine months ended September 30, 2000, respectively, and $76 million and $156 million for the same periods in 1999. Accumulated other comprehensive income of the Company totaled $205 million and $336 million as of September 30, 2000 and December 31,1999, respectively. C. Recently Issued Accounting Standard and Bulletin In June 1998 the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments and Hedging Activities." In June 2000, the FASB issued SFAS No. 138, which amends certain provisions of SFAS 133 to expand the normal purchase and sale exemption for supply contracts and to redefine interest rate risk to reduce sources of ineffectiveness, among other things. The Company has appointed a team to implement SFAS 133, as amended. This team has been educating both financial and non-financial personnel, inventorying contracts and addressing various other SFAS 133 related issues. The Company utilizes various derivatives in its risk management activities, including swaps and commodities futures. The Company will adopt SFAS 133, as amended, on January 1, 2001. The Company is determining the impact of adoption of SFAS 133 on its consolidated results of operations and financial position. Adoption of this statement should have no impact on consolidated cash flows. In December 1999 the Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin No 101, "Revenue Recognition in Financial Statements." In June 2000 the SEC amended the Bulletin to delay the implementation date until no later than the fourth fiscal quarter of fiscal years beginning after December 15, 1999. The Bulletin provides the SEC staff's views in applying generally accepted accounting principles to selected revenue recognition issues. This Bulletin, which the Company will adopt for the fourth quarter of 2000, is not expected to have a material impact on the Company's results of operations, cash flows or financial position. D. Stock Option Plan On April 27, 2000 the Company adopted the SCANA Corporation Long-Term Equity Compensation Plan (the Plan). Under the Plan, certain employees and non-employee directors may receive nonqualified stock options and other forms of equity compensation. The Company accounts for this equity compensation under Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" (APB 25). In addition the Company has adopted the disclosure-only provisions of SFAS 123, "Accounting for Stock-Based Compensation." As of September 30, 2000, 160,508 options have been granted at strike prices equal to or greater than market price on the dates of issuance. E. Earnings Per Share Earnings per share amounts have been computed in accordance with SFAS No. 128, "Earnings Per Share." Under SFAS No. 128, basic earnings per share are computed by dividing net income by the weighted average number of common shares outstanding for the period. Diluted earnings per share are computed as net income divided by the weighted average number of shares of common stock outstanding during the period after giving effect to securities considered to be dilutive potential common stock. The Company uses the treasury stock method in determining total dilutive potential common stock. F. Reclassifications Certain amounts from prior periods have been reclassified to conform with the 2000 presentation. 2. Cumulative Effect of Accounting Change Effective January 1, 2000 the Company changed its method of accounting for operating revenues from cycle billing to full accrual. The cumulative effect of this change was $29 million, net of tax. Accruing unbilled revenues more closely matches revenues and expenses. Unbilled revenues represent the estimated amount customers will be charged for service received, but that has not yet been billed, as of the end of the accounting period. If this method had been applied retroactively, net income would have been $66 million ($0.64 per share) and $149 million ($1.44 per share) for the three and nine months ended September 30, 1999, respectively, compared to $67 million ($0.65 per share) and $128 million ($1.23 per share), respectively, as reported. 3. ACQUISITION On February 10, 2000 the Company completed its acquisition of Public Service Company of North Carolina, Inc. (PSNC) in a business combination accounted for as a purchase. PSNC became a wholly owned subsidiary of the Company. PSNC is a public utility engaged primarily in transporting, distributing and selling natural gas to approximately 360,000 residential, commercial and industrial customers in 31 counties in North Carolina. Pursuant to the Agreement and Plan of Merger, PSNC shareholders were paid approximately $212 million in cash and 17,413,013 shares of SCANA common stock. The results of operations of PSNC are included in the accompanying financial statements as of January 1, 2000, the effective date of acquisition . The total cost of the acquisition was approximately $700 million, which exceeded the fair value of the net assets by approximately $467 million. The excess is being amortized over 35 years on a straight line basis. Operating revenues and net income of the separate companies and the combined proforma amounts including the cumulative effect of accounting change (See Note 2), as if the acquisition and the accounting change occurred on January 1, 1999, are as follows: --------------------------------------------------------------------------------------------------------- For the Nine Months Ended September 30, 1999 (Millions of Dollars, Except Per Share Amounts) SCANA PSNC Adjustments1 Combined ------------------------------------------------------------------------ ---------------- ------------ Operating revenues $1,539 $226 - $1,765 Income before cumulative effect 128 21 $(33) 116 Cumulative effect of accounting change 21 1 - 22 Net income 149 22 (33) 138 Earnings per share 1.44 1.04 - 1.32 ============================================================= ============= ================ ============ 1 Adjustments include interest charges (net of income tax effect) on additional debt issued in conjunction with the acquisition and amortization of the acquisition adjustment.
4. RATE AND OTHER REGULATORY MATTERS On July 20, 2000 the PSC issued an order approving SCE&G's request for an out-of-period adjustment to increase the cost of gas component of its rates for natural gas service from 54.334 cents per therm to 68.835 cents per therm, effective with the first billing cycle in August 2000. As part of its regularly scheduled annual review of gas costs, the PSC issued an order on November 9, 2000 which further increased the cost of gas component to 78.151 cents per therm, effective with the first billing cycle in November 2000. On July 5, 2000 the PSC approved SCE&G's request to implement lower depreciation rates for its gas operations. The new rates were effective retroactively to January 1, 2000 and will result in a reduction in annual depreciation expense of approximately $2.9 million. On December 30, 1999 PSNC filed an application with the North Carolina Utilities Commission (NCUC) to extend natural gas service to Madison, Jackson and Swain Counties. Pursuant to state statutes, the NCUC required PSNC to forfeit its exclusive franchises to serve six counties in western North Carolina effective January 31, 2000 because these counties were not receiving any natural gas service. Madison, Jackson and Swain Counties were included in the forfeiture order. On June 29, 2000 the NCUC approved PSNC's requests for reinstatement of its exclusive franchises for Madison, Jackson and Swain Counties and disbursement of up to $28.4 million from PSNC's expansion fund for this project. PSNC estimates that the cost of this project will be approximately $31.4 million. On December 7, 1999 the NCUC issued an order approving the acquisition of PSNC by the Company. As specified in the NCUC order, PSNC reduced its rates by approximately $1 million in August 2000, will reduce rates another $1 million in August 2001 and has agreed to a five-year moratorium on general rate cases. General rate relief can be obtained during this period to recover costs associated with materially adverse governmental actions and force majeure events. On December 30, 1999 the Carolina Utility Customers Association, Inc. (CUCA) filed an appeal of this order with the North Carolina Court of Appeals. On June 15, 2000 CUCA withdrew its appeal. On September 14, 1999 the PSC approved an accelerated capital recovery plan for South Carolina Electric & Gas Company's (SCE&G) Cope Generating Station. The plan was implemented beginning January 1, 2000 for a three-year period. The PSC approved an accelerated capital recovery methodology wherein SCE&G may increase depreciation of its Cope Generating Station in excess of amounts that would be recorded based upon currently approved depreciation rates. The amount of the accelerated depreciation will be determined by SCE&G based on the level of revenues and operating expenses, not to exceed $36 million annually without the approval of the PSC. Any unused portion of the $36 million in any given year may be carried forward for possible use in the subsequent year. As of September 30, 2000 no accelerated depreciation has been recorded. The accelerated capital recovery plan will be accomplished through existing customer rates. On October 30, 1998 the NCUC issued an order in PSNC's general rate case filed in April 1998. The order, effective November 1, 1998, granted PSNC additional revenue of $12.4 million and allowed a 9.82 percent overall rate of return on PSNC's net utility investment. It also approved the continuation of the Weather Normalization Adjustment and Rider D Mechanisms and full margin transportation rates. PSNC's Rider D rate mechanism authorizes the recovery of all prudently incurred gas costs from customers on a monthly basis. Any difference in amounts paid and collected for these costs is deferred for subsequent refund to or collection from customers. On February 4, 2000, in response to an appeal by CUCA, the Supreme Court of North Carolina affirmed the NCUC order. On November 6, 1997 the NCUC issued an order permitting PSNC, on a trial basis, to establish its commodity cost of gas for large commercial and industrial customers on the basis of market prices for natural gas. This procedure allows PSNC to manage its deferred gas costs better by ensuring that the amount paid for natural gas to serve these customers approximates the amount collected from them. PSNC's request for permanent approval of this mechanism was approved by the NCUC in an order issued April 6, 2000. In September 1992 the PSC issued an order granting SCE&G's request for a $.25 increase in transit fares from $.50 to $.75 in Columbia, South Carolina; however, the PSC also required $.40 fares for low income customers and denied SCE&G's request to reduce the number of routes and frequency of service. The new rates were placed into effect in October 1992. SCE&G appealed the PSC's order to the Circuit Court, which in May 1995 ordered the case back to the PSC for reconsideration of several issues including the low income rider program, routing changes, and the $.75 fare. The Supreme Court declined to review an appeal of the Circuit Court decision and dismissed the case. The PSC and other intervenors filed another Petition for Reconsideration, which the Supreme Court denied. The PSC and other intervenors filed another appeal to the Circuit Court which the Circuit Court denied in an order dated May 9, 1996. In this order, the Circuit Court upheld its previous orders and remanded them to the PSC. During August 1996 the PSC heard oral arguments on the orders on remand from the Circuit Court. On September 30, 1996 the PSC issued an order affirming its previous orders and denied SCE&G's request for reconsideration. In response to an appeal of the PSC's order by SCE&G, the Circuit Court issued an order on May 25, 2000, which remanded the matter to the PSC for review of SCE&G's original application and request to terminate the low income rider fare. On September 27, 2000 the PSC issued an order granting the relief requested by SCE&G. On September 29, 2000 the Consumer Advocate filed a motion with the PSC for a stay of this order to which SCE&G filed a response. On October 3, 2000 the PSC accepted the Consumer Advocate's motion and issued a stay of its order. Additional motions are currently pending before the PSC with regard to the order and the stay. 5. LONG-TERM DEBT On February 8, 2000 SCANA issued $400 million of two-year floating rate notes maturing February 8, 2002. The interest rate on the notes is reset quarterly based on a three-month LIBOR plus 50 basis points. The proceeds from these privately sold notes were used to consummate SCANA's acquisition of PSNC. On February 10, 2000 SCANA borrowed $300 million for a three-year term under a credit agreement with several banks. The funds were also used to consummate SCANA's acquisition of PSNC. On June 14, 2000 SCE&G issued $150 million of First Mortgage Bonds having an annual interest rate of 7.50 percent and maturing on June 15, 2005. The proceeds from the sale of these bonds were used to pay the maturity of SCE&G's $100 million First Mortgage Bonds due June 15, 2000, to reduce short-term debt and for general corporate purposes. On July 13, 2000 the Company issued $300 million two-year floating rate notes maturing on July 15, 2002. The interest rate is reset quarterly based on a three-month LIBOR plus 65 basis points. Proceeds from the debt were used to repay medium-term notes totaling $170 million, to reduce short-term debt and for general corporate purposes. In July 2000 PSNC established a $125 million short-term commercial paper program to replace the lines of credit it had with various banks. At September 30, 2000 PSNC had issued all of its $125 million program. 6. RETAINED EARNINGS The Restated Articles of Incorporation of the Company do not limit the dividends that may be payable on its common stock. However, the Restated Articles of Incorporation of SCE&G and the Indenture underlying its First and Refunding Mortgage Bonds contain provisions that, under certain circumstances, could limit the payment of cash dividends on its common stock. In addition, with respect to hydroelectric projects, the Federal Power Act requires the appropriation of a portion of certain earnings therefrom. At September 30, 2000, approximately $32 million of retained earnings were restricted by this requirement as to payment of cash dividends on SCE&G's common stock. 7. INVESTMENTS IN EQUITY SECURITIES At September 30, 2000, SCANA Communications Holdings, Inc. (SCH), a wholly owned, indirect subsidiary of SCANA, held the following investments in ITC Holding Company, Inc. (ITC) and its affiliates: o Powertel, Inc. (Powertel) is a publicly traded company that owns and operates personal communications services (PCS) systems in several major Southeastern markets. SCH owns approximately 4.9 million common shares of Powertel at a cost of approximately $76.5 million. Powertel common stock closed at $76.0625 per share on September 30, 2000, resulting in a pre-tax unrealized holding gain of $298.6 million (a decline of $119.0 million from December 31, 1999). Accumulated other comprehensive income includes the after-tax amount of all unrealized holding gains and losses on common shares. In addition, SCH owns the following series of non-voting convertible preferred shares, at the approximate cost noted: 100,000 shares series B ($75.1 million); 50,000 shares series D ($22.5 million); and 50,000 shares 6.5 percent series E ($75.0 million). Cumulative dividends on preferred series E shares are generally paid in common shares of Powertel and are accrued quarterly. Preferred series B shares become convertible in March 2002 at a conversion price of $16.50 per common share or approximately 4.6 million common shares. Preferred series D shares become convertible in March 2002 at a conversion price of $12.75 per common share or approximately 1.7 million common shares. Preferred series E shares become convertible in June 2003 at a conversion price of $22.01 per common share or approximately 3.4 million common shares. The market value of the convertible preferred shares of Powertel is not readily determinable. However, as converted, the market value of the underlying common shares for the preferred shares was approximately $739.2 million at September 30, 2000, reflecting an unrecorded pre-tax holding gain of $566.6 million (a decline of $236.1 million from December 31, 1999). On August 28, 2000 SCH announced that under terms of separate definitive agreements, Powertel has agreed to be acquired by either Deutsche Telekom AG (DT) or VoiceStream Wireless Corporation (VoiceStream). If DT's previously announced acquisition of VoiceStream is successfully completed, then DT would also acquire Powertel. If the DT - VoiceStream transaction is not completed, then VoiceStream would acquire Powertel. In connection with these transactions, SCH entered into stockholder agreements with each of DT and VoiceStream pursuant to which SCH agreed to vote its Powertel shares in support of either of these transactions. In addition, SCH agreed to certain restrictions on disposition of its Powertel shares and the shares it would receive in either of these transactions. o ITC^DeltaCom, Inc. (ITCD) is a fiber optic telecommunications provider. SCH owns approximately 5.1 million common shares of ITCD at a cost of approximately $43.0 million. ITCD common stock closed at $11.50 per share on September 30, 2000, resulting in a pre-tax unrealized holding gain of $15.8 million (a decline of $82.5 million from December 31, 1999). Accumulated other comprehensive income includes the after-tax amount of all unrealized holding gains and losses on common shares. In addition, SCH owns 1,480,771 shares of series A preferred stock of ITCD at a cost of approximately $11.2 million. Series A preferred shares become convertible in March 2002 into 2,961,542 shares of ITCD common stock. The market value of series A preferred stock of ITCD is not readily determinable. However, as converted, the market value of the underlying common stock for the series A preferred stock was approximately $34.1 million at September 30, 2000, reflecting an unrecorded pre-tax holding gain of $22.9 million (a decline of $47.7 million from December 31, 1999). o Knology Inc. (Knology), previously Knology Holdings, Inc., is a broad-band service provider of cable television, telephone and internet services. SCH owns 71,050 units of Knology. Each unit consists of one 11.875% Senior Discount Note due 2007 and one warrant entitling the holder to purchase .003734 shares of preferred stock of Knology. The cost of this investment was approximately $40 million. Prior to February 24, 2000, SCH owned 451,800 shares of series A preferred stock of Knology at a cost of approximately $1.1 million. On February 24, 2000 Knology Holdings, Inc. was spun off from ITC and was renamed Knology, Inc. As a result of this spin off, SCH received approximately 6.8 million shares of Knology series A preferred stock. The market value of these investments is not readily determinable. o ITC holds ownership interests in several Southeastern communications companies, including those discussed above. SCH owns approximately 3.1 million common shares, 645,153 series A convertible preferred shares, and 133,664 series B convertible preferred shares of ITC. These investments cost approximately $5.8 million, $7.2 million, and $4.0 million, respectively. Preferred series A shares become convertible in March 2002 at a conversion price of $2.73 per common share or approximately 3.2 million common shares. Preferred series B shares become convertible in March 2002 at a conversion price of $8.86 per common share or approximately 0.7 million common shares. The market values of these investments are not readily determinable. 8. CONTINGENCIES With respect to commitments at September 30, 2000, reference is made to Note 10 of Notes to Consolidated Financial Statements appearing in the Company's Annual Report on Form 10-K for the year ended December 31, 1999. Contingencies at September 30, 2000 include the following: A. Nuclear Insurance The Price-Anderson Indemnification Act, which deals with public liability for a nuclear incident, currently establishes the liability limit for third-party claims associated with any nuclear incident at $9.5 billion. Each reactor licensee is currently liable for up to $88.1 million per reactor owned for each nuclear incident occurring at any reactor in the United States, provided that not more than $10 million of the liability per reactor would be assessed per year. SCE&G's maximum assessment, based on its two-thirds ownership of V. C. Summer Nuclear Station (Summer Station), would be approximately $58.7 million per incident, but not more than $6.7 million per year. SCE&G currently maintains policies (for itself and on behalf of the South Carolina Public Service Authority) with Nuclear Electric Insurance Limited (NEIL). These policies covering the nuclear facility for property damage, excess property damage and outage costs permit assessments under certain conditions to cover insurer's losses. Based on the current annual premium, SCE&G's portion of the retrospective premium assessment would not exceed $8.1 million. To the extent that insurable claims for property damage, decontamination, repair and replacement and other costs and expenses arising from a nuclear incident at Summer Station exceed the policy limits of insurance, or to the extent such insurance becomes unavailable in the future, and to the extent that SCE&G's rates would not recover the cost of any purchased replacement power, SCE&G will retain the risk of loss as a self-insurer. SCE&G has no reason to anticipate a serious nuclear incident at Summer Station. If such an incident were to occur, it could have a material adverse impact on the Company's results of operations, cash flows and financial position. B. Environmental SCE&G maintains an environmental assessment program to identify and assess current and former operations sites that could require environmental cleanup. As site assessments are initiated, estimates are made of the expenditures, if any, deemed necessary to investigate and clean up each site. These estimates are refined as additional information becomes available; therefore, actual expenditures could differ significantly from the original estimates. Amounts estimated and accrued to date for site assessments and cleanup relate primarily to regulated operations. Such amounts are deferred and amortized with recovery provided through rates. SCE&G has also recovered portions of its environmental liabilities through settlements with various insurance carriers, including all amounts previously deferred for its electric operations. SCE&G expects to recover all deferred amounts related to its gas operations by December 2005. Deferred amounts, net of amounts recovered through rates and insurance settlements, totaled $20.0 million at September 30, 2000. The deferral includes the estimated costs associated with the following matters. o In September 1992 the Environmental Protection Agency (EPA) notified SCE&G, the City of Charleston and the Charleston Housing Authority of their potential liability for the investigation and cleanup of the Calhoun Park area site in Charleston, South Carolina. This site encompasses approximately 30 acres and includes properties which were locations for industrial operations, including a wood preserving (creosote) plant, one of SCE&G's decommissioned manufactured gas plants (MGP), properties owned by the National Park Service and the City of Charleston, and private properties. The site has not been placed on the National Priorities List, but may be added in the future. The Potentially Responsible Parties (PRPs) negotiated an administrative order by consent for the conduct of a Remedial Investigation/Feasibility Study and a corresponding Scope of Work. Field work began in November 1993, and the EPA approved a Remedial Investigation Report in February 1997 and a Feasibility Study Report in June 1998. In July 1998 the EPA approved SCE&G's Removal Action Work Plan for soil excavation. SCE&G completed Phase One of the Removal Action in 1998 at a cost of approximately $1.5 million. Phase Two, which cost approximately $3.5 million, included excavation and installation of several permanent barriers to mitigate coal tar seepage. On September 30, 1998 a Record of Decision was issued which sets forth the EPA's view of the extent of each PRP's responsibility for site contamination and the level to which the site must be remediated. SCE&G estimates that the Record of Decision will result in costs of approximately $13.3 million, of which approximately $2 million remains. On January 13, 1999 the EPA issued a Unilateral Administrative Order for Remedial Design and Remedial Action directing SCE&G to design and carry out a plan of remediation for the Calhoun Park site. The Order is temporarily stayed pending further negotiations between SCE&G and the EPA. However, SCE&G submitted a Comprehensive Remedial Design Work Plan (RDWP) on December 17, 1999 and proceeded with implementation pending agency approval. The RDWP was approved by the EPA in July 2000, and its implementation continues. In October 1996 the City of Charleston and SCE&G settled all environmental claims the City may have had against SCE&G involving the Calhoun Park area for a payment of $26 million over four years (1996-1999) by SCE&G to the City. SCE&G is recovering the amount of the settlement, which does not encompass site assessment and cleanup costs, through rates in the same manner as other amounts accrued for site assessments and cleanup. As part of the environmental settlement, SCE&G constructed an 1,100 space parking garage on the Calhoun Park site (construction was completed in April 2000) and transferred the facility to the City in exchange for a $16.9 million, 20-year municipal bond collateralized by revenues from, and a mortgage on, the parking garage. o SCE&G owns three other decommissioned MGP sites which contain residues of by-product chemicals. For the site located in Sumter, South Carolina, effective September 15, 1998, SCE&G entered into a Remedial Action Plan Contract with the South Carolina Department of Health and Environmental Control (DHEC) pursuant to which it agreed to undertake a full site investigation and remediation under the oversight of DHEC. Site investigation and characterization are proceeding according to schedule. Upon selection and successful implementation of a site remedy, DHEC will give SCE&G a Certificate of Completion and a covenant not to sue. SCE&G is continuing to investigate the other two sites, and is monitoring the nature and extent of residual contamination. In addition, PSNC owns, or has owned, all or portions of seven sites in North Carolina on which MGPs were formerly operated. Intrusive investigation (including drilling, sampling and analysis) has begun at only one site and the remaining sites have been evaluated using historical records and observations of current site conditions. These evaluations have revealed that MGP residuals are present or suspected at several of the sites. The North Carolina Department of Environment and Natural Resources has recommended that no further action be taken with respect to one site. In March and April 1994, an environmental consulting firm retained by PSNC estimated that the aggregate cost of investigating and monitoring the extent of environmental degradation and of implementing remedial procedures with respect to the remaining sites may range from $3.7 million to $50.1 million over a 30-year period. Subsequently, an environmental due diligence review of PSNC conducted in February 1999 estimated that the cost to remediate the sites would range between $11.3 million and $21.9 million. During the second quarter of 2000, the review was finalized and the estimated liability was recorded. PSNC is unable to determine the rate at which costs may be incurred over this time period. The estimated cost range has not been discounted to present value. PSNC's associated actual costs for these sites will depend on a number of factors, such as actual site conditions, third-party claims and recoveries from other PRPs. An order of the NCUC dated May 11, 1993 authorized deferral accounting for all costs associated with the investigation and remediation of MGP sites. Recovery of carrying costs on deferred amounts is not allowed. As of September 30, 2000, PSNC has recorded a liability and associated regulatory asset of $10.2 million, which reflects the minimum amount of the range net of estimated shared cost recovery from other PRPs. Amounts incurred to date are not material. Management intends to request recovery of additional MGP clean-up costs not recovered from other PRPs in future rate case filings, and believes that all costs incurred will be recoverable in gas rates. 9. SEGMENT OF BUSINESS INFORMATION The Company's reportable segments are listed in the following table. The Company uses operating income to measure profitability for its Electric Operations and Gas Distribution segments. Therefore, net income is not allocated to these segments. The Company uses net income to measure profitability for its Energy Marketing segment, which includes the Company's unregulated gas sales in Georgia. Affiliate revenue is derived from transactions between reportable segments as well as transactions between separate legal entities that are combined into the same reportable segment. Disclosure of Reportable Segments (Millions of Dollars) - ------------------------------- ----------- ------------- ------------- ----------- --------- -------------- --------------- Three months ended Electric Gas Gas Energy All Adjustments/ Consolidated September 30, 2000 Operations Distribution Transmission Marketing Other Eliminations Total - ------------------------------- ----------- ------------- ------------- ----------- --------- -------------- --------------- External Revenue $ 397 $ 97 $ 62 $260 - - $ 816 Intersegment Revenue 152 1 41 - - $(194) - Operating Income (Loss) 164 (11) 6 (12) - (1) 146 Net Income (Loss) n/a n/a 3 (8) $ (12) 76 59 Segment Assets 4,873 1,544 258 163 1,125 (835) 7,128 - ------------------------------- ----------- ------------- ------------- ----------- --------- -------------- --------------- - ------------------------------- ----------- ------------- ------------- ----------- --------- -------------- --------------- Three months ended Electric Gas Gas Energy All Adjustments/ Consolidated September 30, 1999 Operations Distribution Transmission Marketing Other Eliminations Total - ------------------------------- ----------- ------------- ------------- ----------- --------- -------------- --------------- External Revenue $ 393 $ 34 $ 53 $78 - - $ 558 Intersegment Revenue 90 4 28 - - $(122) - Operating Income (Loss) 157 (4) 6 (22) $ (1) (1) 135 Net Income (Loss) n/a n/a 3 (14) 2 76 67 Segment Assets 4,732 394 234 86 l,069 (830) 5,685 - ------------------------------- ----------- ------------- ------------- ----------- --------- -------------- --------------- - ------------------------------- ----------- ------------- ------------- ----------- --------- -------------- --------------- Nine months ended Electric Gas Gas Energy All Adjustments/ Consolidated September 30, 2000 Operations Distribution Transmission Marketing Other Eliminations1 Total - ------------------------------- ----------- ------------- ------------- ----------- --------- -------------- --------------- External Revenue $1,011 $ 459 $176 $654 - - $2,300 Intersegment Revenue 368 2 142 2 - $(514) - Operating Income (Loss) 357 42 22 (1) - (3) 417 Net Income (Loss) n/a n/a 11 (3) $ (37) 220 191 Segment Assets 4,873 1,544 258 163 1,125 (835) 7,128 - ------------------------------- ----------- ------------- ------------- ----------- --------- -------------- --------------- - ------------------------------- ----------- ------------- ------------- ----------- --------- -------------- --------------- Nine months ended Electric Gas Gas Energy All Adjustments/ Consolidated September 30, 1999 Operations Distribution Transmission Marketing Other Eliminations Total - ------------------------------- ----------- ------------- ------------- ----------- --------- -------------- --------------- External Revenue $ 953 $163 $136 $287 - - $1,539 Intersegment Revenue 237 4 107 - - $(348) - Operating Income (Loss) 323 16 18 (60) - (5) 292 Net Income (Loss) n/a n/a 8 (40) - 160 128 Segment Assets 4,732 394 234 86 $1,069 (830) 5,685 - ------------------------------- ----------- ------------- ------------- ----------- --------- -------------- --------------- 1 Includes cumulative effect of accounting change
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations SCANA CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion should be read in conjunction with Management's Discussion and Analysis of Financial Condition and Results of Operations appearing in SCANA Corporation's (the Company) Annual Report on Form 10-K for the year ended December 31, 1999. Statements included in this discussion and analysis (or elsewhere in this quarterly report) which are not statements of historical fact are intended to be, and are hereby identified as, "forward-looking statements" for purposes of the safe harbor provided by Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Readers are cautioned that any such forward-looking statements are not guarantees of future performance and involve a number of risks and uncertainties, and that actual results could differ materially from those indicated by such forward-looking statements. Important factors that could cause actual results to differ materially from those indicated by such forward-looking statements include, but are not limited to, the following: (1) that the information is of a preliminary nature and may be subject to further and/or continuing review and adjustment, (2) changes in the utility regulatory environment, (3) changes in the economy in areas served by SCANA's subsidiaries, (4) the impact of competition from other energy suppliers, (5) the management of the Company's operations, (6) variations in prices of natural gas and fuels used for electric generation, (7) growth opportunities for the Company's regulated and non-regulated subsidiaries, (8) the results of financing efforts, (9) changes in the Company's accounting policies, (10) weather conditions in areas served by the Company's subsidiaries , (11) performance of the telecommunications companies in which the Company has made significant investments, (12) inflation, (13) exposure to environmental issues and liabilities, (14) changes in environmental regulations and (15) the other risks and uncertainties described from time to time in the Company's periodic reports filed with the Securities and Exchange Commission. The Company disclaims any obligation to update any forward-looking statements. COMPETITION AND SIGNIFICANT DEVELOPMENTS SINCE DECEMBER 31, 1999 North Carolina Gas Market On February 10, 2000 the Company completed its acquisition of Public Service Company of North Carolina, Inc. (PSNC) in a transaction valued at approximately $900 million, including the assumption of debt. The transaction has been accounted for as a purchase. PSNC is operated as a wholly owned subsidiary of the Company. As a result of the transaction, the Company became a registered public utility holding company under the Public Utility Holding Company Act of 1935 (PUHCA). Georgia Retail Gas Market Energy Marketing's Georgia retail gas operations maintained a base of customers ranging from approximately 431,000 at January 1, 2000 to approximately 423,000 at September 30, 2000. This compares to the corresponding period in 1999 when the customer base grew from approximately 78,000 at January 1 to approximately 421,000 at September 30. In addition, Georgia retail gas operations reported net income of approximately $1.6 million for the nine months ended September 30, 2000, compared to a net loss of approximately $36.1 million for the corresponding period in 1999. This increase in net income resulted from lowering costs and improving efficiency by transitioning from start-up to ongoing operations and from an improved margin on natural gas sales. Due to the seasonality of the retail gas business in Georgia, management anticipates incurring losses for the fourth quarter, and breaking even for the year. Regional Transmission Organization On February 9, 2000 the Federal Energy Regulatory Commission (FERC) issued FERC Order 2000. The Order required utilities which operate electric transmission systems to submit plans for the possible formation of a regional transmission organization (RTO). On October 16, 2000 the Company and two other southeastern electric utilities filed a joint request with FERC to establish GridSouth Transco, LLC (GridSouth). When operational, GridSouth will function as an independent regional transmission company. Initially, the three utilities will continue to own their respective transmission networks, while GridSouth will provide planning and operational oversight of the electric transmission grid. . Power Plant and Gas Transmission Line Construction On November 10, 2000 SCANA and Fayetteville Public Works (PWC) signed a memorandum of understanding to participate in the joint construction and ownership of a 500-megawatt combined cycle natural gas turbine power plant. It is anticipated that the plant will provide electricity to Fayetteville, North Carolina beginning in the summer of 2004, and will cost an estimated $265 million. PWC will own 60% of the plant with SCANA owning the remaining interest. SCANA will also build a 106-mile natural gas transmission line from the Company's pipeline system in South Carolina to Fayetteville. The transmission line is projected to cost approximately $90 million and will be owned by SCANA. LIQUIDITY AND CAPITAL RESOURCES On October 7, 2000 the 1,000 megawatt V. C. Summer Nuclear Station was removed from service for a planned maintenance and refueling outage scheduled to last 38 1/2 days. During initial inspection activities, plant personnel discovered a small leak coming from a hairline crack in a weld in a reactor coolant system pipe. SCE&G has performed extensive ultrasonic testing of similar welds in the cooling system, which confirmed that the problem was limited to this single weld. SCE&G will repair the crack prior to restarting the plant. While no specific duration has yet been established for the repair, the plant should be back in operation by late December. Although SCE&G cannot estimate how much this repair will add to the cost of the outage, any costs above the amounts normally accrued for this refueling are expected to be deferred and amortized over the plant's next 18-month operating cycle. The cost of replacement power is expected to be recovered through SCE&G's electric fuel adjustment clause. On July 20, 2000 the PSC issued an order approving SCE&G's request for an out-of-period adjustment to increase the cost of gas component of its rates for natural gas service from 54.334 cents per therm to 68.835 cents per therm, effective with the first billing cycle in August 2000. As part of its regularly scheduled annual review of gas costs, on October 17, 2000 the PSC approved an increase in the cost of gas component to 78.151 cents per therm, effective with the first billing cycle in November 2000. On July 5, 2000 the PSC approved SCE&G's request to implement lower depreciation rates for its gas operations. The new rates were effective retroactively to January 1, 2000 and will result in a reduction in annual depreciation expense of approximately $2.9 million. On September 14, 1999 the PSC approved an accelerated capital recovery plan for SCE&G's Cope Generating Station. The plan was implemented January 1, 2000 for a three-year period. The PSC approved an accelerated capital recovery methodology wherein SCE&G may increase depreciation of its Cope Generating Station in excess of amounts that would be recorded based upon currently approved depreciation rates. The amount of the accelerated depreciation will be determined by SCE&G based on the level of revenues and operating expenses, not to exceed $36 million annually without the approval of the PSC. Any unused portion of the $36 million in any given year may be carried forward for possible use in the succeeding year. As of September 30, 2000 no accelerated depreciation has been recorded. The accelerated capital recovery plan will be accomplished through existing customer rates. On August 7, 1996 the City of Charleston executed 30-year electric and gas franchise agreements with SCE&G. In consideration for the electric franchise agreement, SCE&G is paying the City $25 million over seven years (1996 through 2002) and has donated to the City the existing transit assets in Charleston. The $25 million is included in electric plant-in-service and is being amortized over the 30 year franchise period. In settlement of environmental claims the City may have had against SCE&G involving the Calhoun Park area, where SCE&G and its predecessor companies operated a manufactured gas plant until the 1960's, SCE&G paid the City $26 million over a four-year period (1996 through 1999). As part of the environmental settlement, SCE&G constructed an 1,100 space parking garage on the Calhoun Park site (construction was completed in April 2000) and transferred the facility to the City in exchange for a $16.9 million, 20-year municipal bond collateralized by revenues from, and a mortgage on, the parking garage. The following table summarizes how the Company generated and used funds for property additions and construction expenditures during the nine months ended September 30, 2000 and 1999: - -------------------------------------------------------------------------------- Nine Months Ended September 30, (Millions of Dollars) 2000 1999 - -------------------------------------------------------------------- ----------- Net cash provided from operating activities $ 325 $170 Net cash provided from financing activities 632 48 Cash provided from sale of subsidiary assets 1 17 Cash and temporary cash investments available at the beginning of the period 116 62 ==================================================================== =========== Net cash available for property additions and construction $1,074 $297 expenditures ==================================================================== =========== Funds used for purchase of subsidiary $ 693 - Funds used for utility property additions and construction expenditures, net of noncash allowance for funds used during construction $ 204 $167 ==================================================================== =========== Funds used for nonutility property additions $ 35 $ 73 ==================================================================== =========== On February 8, 2000 SCANA issued $400 million of two-year floating rate notes maturing February 8, 2002. The interest rate on the notes is reset quarterly based on a three-month LIBOR plus 50 basis points. The proceeds from these privately sold notes were used to consummate SCANA's acquisition of PSNC. On February 10, 2000 SCANA borrowed $300 million for a three-year term under a credit agreement with several banks. The funds were also used to consummate SCANA's acquisition of PSNC. On June 14, 2000 SCE&G issued $150 million of First Mortgage Bonds having an annual interest rate of 7.50 percent and maturing on June 15, 2005. The proceeds from the sale of these bonds were used to pay the maturity of SCE&G's $100 million First Mortgage Bonds due June 15, 2000, to reduce short-term debt and for general corporate purposes. On July 13, 2000 the Company issued $300 million two-year floating rate notes maturing on July 15, 2002. The interest rate is reset quarterly based on a three-month LIBOR plus 65 basis points. Proceeds from the debt were used to repay medium-term notes totaling $170 million, to reduce short-term debt and for general corporate purposes. In July 2000 PSNC established a $125 million short-term commercial paper program to replace the lines of credit it had with various banks. At September 30, 2000 PSNC had issued all of its $125 million program. Pursuant to rules of the Securities and Exchange Commission, as a result of PSNC's acquisition by SCANA, PSNC's registration statement (as amended on June 7, 1999) covering up to an aggregate of $150 million of senior unsecured debt securities is no longer effective. On September 6, 2000 PSNC filed a new registration statement with the SEC, the effectiveness of which is expected prior to year end. The Company anticipates that the remainder of its 2000 cash requirements will be met through internally generated funds and the issuance of additional short-term debt. The timing and amount of such financings will depend upon market conditions and other factors. The Company expects that it has or can obtain adequate sources of financing to meet its projected cash requirements for the next 12 months and for the foreseeable future. The Company's ratio of earnings to fixed charges for the 12 months ended September 30, 2000 was 2.92. Environmental Matters In July 2000 the Environmental Protection Agency (EPA) requested information on the Company's repair and maintenance of its coal-fired plants since 1978. This is part of the EPA's New Source Review (NSR) enforcement initiative, in which the EPA claims that utilities and others have committed widespread violations of the Clean Air Act permitting requirements for the past quarter century. In November 1999 the EPA filed suit against seven utilities and issued an administrative order to Tennessee Valley Authority alleging numerous NSR permitting violations. The EPA's allegations run counter to previous EPA guidance regarding the applicability of the NSR permitting requirements. The Company, along with several other utilities, has routinely undertaken the type of repair, replacement and maintenance projects that the EPA now claims are illegal. A suit has not been instituted against the Company, and while it is too early to predict any potential EPA action, the Company believes that all of its electric generation units are properly permitted and have been properly maintained. Because this matter is in its most preliminary stage with respect to the Company, management cannot estimate the effects of these matters on future consolidated results of operations, cash flows or financial position. In October 1998, the EPA issued a final ruling on regional ozone control that requires revised State Implementation Plans (SIPs) for 22 eastern states and the District of Columbia. This EPA ruling was challenged in court by various states, industry and other interests, including the state of South Carolina. In March 2000, the court upheld most aspects of the EPA's rule. Petitioners asked the court to rehear the case and overturn the March decision, but in June the court declined to rehear the case and lifted its earlier stay of the states' obligation to revise their SIPs. Industry and State petitioners have not decided at this time what additional review they may seek. The EPA has undertaken other ozone-related actions having virtually identical goals to its October 1998 action. These actions have likewise been challenged in court by the same or similar parties. The final resolution of the October 1998 action is expected to resolve these other ozone-related actions as well. The South Carolina Department of Health and Environmental Control (DHEC) is considering methods by which to reduce utility emissions of nitrogen oxide. The date for a final state rulemaking is uncertain, but will be likely in 2001. SCE&G will undertake additional nitrogen oxide control projects during 2000 and 2001, at a cost of approximately $100 million as an interim step to address possible contributions to ozone formation in South Carolina. As of September 30, 2000 SCE&G has incurred costs of $0.3 million in relation to these projects. Depending on the resolution of these matters, costs to SCE&G may reach $190 million to meet the full requirements of the 1998 Ozone ruling. Expenditures for these projects will be capitalized, and are expected to be completed by 2004. For additional information on environmental matters see Note 8B "Contingencies - Environmental" of NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS appearing in this Quarterly Report on Form 10-Q. Investments in Equity Securities SCANA Communications Holdings, Inc. (SCH), a wholly owned, indirect subsidiary of SCANA, holds investments in Powertel, Inc. (Powertel) and other telecommunications companies (described in Note 6 "Investments in Equity Securities" of Notes to Condensed Consolidated Financial Statements appearing in this Quarterly Report on Form 10-Q). On August 28, 2000 SCH announced that under terms of separate definitive agreements, Powertel has agreed to be acquired by either Deutsche Telekom AG (DT) or VoiceStream Wireless Corporation (VoiceStream). If DT's previously announced acquisition of VoiceStream is successfully completed, then DT would also acquire Powertel. If the DT-VoiceStream transaction is not completed, then VoiceStream would acquire Powertel. In connection with these transactions, SCH entered into stockholder agreements with each of DT and VoiceStream pursuant to which SCH agreed to vote its Powertel shares in support of either of these transactions and agreed to certain restrictions on its ability to dispose of its Powertel shares and the shares that it would receive in either of these transactions. (See SCANA's Form 8-K dated August 26, 2000 and its Amendment 4 to Schedule 13D filed with respect to Powertel on September 22, 2000). RESULTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2000 AS COMPARED TO THE CORRESPONDING PERIODS IN 1999 Earnings and Dividends Earnings per share of common stock for the three and nine months ended September 30, 2000 and 1999 were as follows: - ------------------------------------------------------------------------------- Three Months Ended Nine Months Ended 2000 1999 2000 1999 - ------------------------------------------------------------------------------ arnings derived from: Operations $.56 $.65 $1.55 $1.23 Change in accounting - - .28 - ============================================================================== Earnings per weighted average share $.56 $.65 $1.83 $1.23 ============================================================================== Earnings per share from operations for the three months ended September 30, 2000 decreased, and earnings for the nine months ended increased, due to improved results from the Company's entry into the Georgia retail gas market (improved $.08 and $.36, respectively) and its acquisition of PSNC (decreased $.07 and increased $.12, respectively). Results for these periods are further explained below. Earnings per share from operations for the three months ended September 30, 2000 decreased $.09 as compared to 1999. The earnings for the third quarter 1999 include a non-recurring $.05 gain from the sale of towers owned by a telecommunications subsidiary. Apart from this gain, earnings for the third quarter 2000 decreased $.04. The Company experienced improved electric and gas margins ($.01 and $.22, respectively). These improvements were more than offset by increased operations and maintenance expense ($.07), interest expense ($.13) and depreciation expense ($.07). Earnings per share from operations for the nine months ended September 30, 2000 increased $.32 as compared to 1999. After considering the effect of the non-recurring $.05 gain in 1999 discussed above, earnings for the period increased $.37. This was primarily attributable to improved electric and gas margins ($.26 and $1.03, respectively). These increases were partially offset by increased operations and maintenance expenses ($.28), interest expense ($.37), depreciation expense ($.21) and property taxes ($.05). For the last several years, the market value of the Company's retirement plan assets have exceeded the total actuarial present value of accumulated plan benefits. As such, pension income for the three and nine months ended September 30, 2000 was $13.2 million and $31.9 million, compared to $9.9 million and $22.8 million, respectively, for the corresponding periods in 1999. As a result of pension income, employee benefit costs were reduced approximately $7.5 million and $17.6 million for the three and nine months ended September 30, 2000. For the corresponding periods in 1999, employee benefit costs were reduced approximately $5.3 million and $12.5 million, respectively. Additionally, other income increased $3.9 million and $9.9 million for the three and nine months ended September 30, 2000. For the corresponding periods in 1999, other income increased $3.1 million and $6.8 million, respectively. Earnings from a change in accounting resulted from the recording of unbilled revenues by SCANA's retail utility subsidiaries (See Note 2 of NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS). Allowance for funds used during construction (AFC) is a utility accounting practice whereby a portion of the cost of both equity and borrowed funds used to finance construction (which is shown on the balance sheet as construction work in progress) is capitalized. Both the equity and the debt portions of AFC are noncash items of nonoperating income which have the effect of increasing reported net income. AFC represented approximately 2% and 1% of income before income taxes, respectively, and approximately 2% and 3% of income before income taxes, respectively, for the three and nine months ended September 30, 2000 and 1999. The Company's Board of Directors declared the following quarterly dividends on common stock: - ---------------------------------------- --------------------- ---------------- Declaration Dividend Record Payment Date Per Share Date Date - ---------------------------------------- --------------------- ---------------- February 22, 2000 $.2875 March 10, 2000 April 1, 2000 April 27, 2000 $.2875 June 9, 2000 July 1, 2000 August 16, 2000 $.2875 September 8, 2000 October 1, 2000 October 17, 2000 $.2875 December 8, 2000 January 1, 2001 - ---------------------------------------- --------------------- ---------------- Electric Operations Changes in the electric operations sales margins (including transactions with affiliates and excluding unbilled revenue) for the three and nine months ended September 30, 2000, when compared to the corresponding periods in 1999, were as follows:
- --------------------------------- ------------------------------------------ ------------------------------------------- Three Months Ended Nine Months Ended (Dollars in Millions) 2000 1999 Change 2000 1999 Change - --------------------------------- ---------- --------- --------------------- ----------- --------- --------------------- Electric operating revenue $365.0 $393.2 $(28.2) $979.1 $952.3 $26.8 2.8% (7.2%) Less: Fuel used in generation 84.6 87.4 (3.2%) 227.5 220.8 6.7 3.0% (2.8) Purchased power 19.0 14.3 4.7 32.9% 36.4 28.6 7.8 27.3% - --------------------------------- ---------- --------- --------- ----------- --------- ----------- Margin $261.4 $291.5 $(30.1) (10.3%) $715.2 $702.9 $12.3 1.7% - --------------------------------- ========== ========= ========= ----------- =========== ========= =========== =========
Changes in electric operations sales margins for the three and nine months ended September 30, 2000 reflect milder weather in the third quarter of 2000 which was partially offset by customer growth throughout the year and more favorable weather in the first and second quarters of 2000. Gas Distribution Changes in the gas distribution sales margins (including transactions with affiliates and excluding unbilled revenue) for the three and nine months ended September 30, 2000, when compared to the corresponding periods in 1999, were as follows: - ------------------------------------ ----------------------------------------- ------------------------------------------ Three Months Ended Nine Months Ended (Dollars in Millions) 2000 1999 Change 2000 1999 Change - ------------------------------------ -------- ---------- --------------------- --------- --------- ---------------------- Gas distribution operating revenue $94.7 $37.8 $56.9 150.5% $456.6 $168.2 $288.4 171.5% Less: Gas purchased for resale 64.6 26.7 37.9 141.9% 283.6 104.8 178.8 170.6% - ------------------------------------ -------- ---------- ---------- --------- --------- ----------- Margin $30.1 $11.1 $19.0 171.2% $173.0 $ 63.4 $109.6 172.9% - ------------------------------------ ======== ========== ========== ---------- ========= ========= =========== ==========
Gas distribution sales margins for the three and nine months ended September 30, 2000 increased primarily as a result of the acquisition of PSNC (which contributed $21.3 million and $113.0 million to the change, respectively). Other factors were milder weather in the second and third quarters of 2000, which was partially offset by customer growth. Gas Transmission Changes in the gas transmission sales margins (including transactions with affiliates) for the three and nine months ended September 30, 2000, when compared to the corresponding periods in 1999, were as follows: - ------------------------------------ ---------------------------------------- ------------------------------------------ Three Months Ended Nine Months Ended (Dollars in Millions) 2000 1999 Change 2000 1999 Change - ------------------------------------ -------- ---------- -------------------- ---------- ---------- -------------------- Gas transmission operating revenue $102.9 $81.3 $21.6 26.6% $318.6 $241.9 $76.7 31.7% Less: Gas purchased for resale 68.9 20.6 29.9% 276.1 206.3 69.8 33.8% 89.5 - ------------------------------------ -------- ---------- ---------- ---------- ---------- ---------- Margin $ 13.4 $12.4 $ 1.0 8.1% $ 42.5 $ 35.6 $ 6.9 19.4% - ------------------------------------ ======== ========== ========== --------- ========== ========== ========== =========
Gas transmission sales margins for the three and nine months ended September 30, 2000 increased primarily as a result of improved industrial margins due to an improved competitive position relative to alternate fuels. Energy Marketing Changes in the energy marketing sales margins for the three and nine months ended September 30, 2000, when compared to the corresponding periods in 1999, were as follows: - ---------------------------------- ------------------------------------------- ------------------------------------------ Three Months Ended Nine Months Ended (Dollars in Millions) 2000 1999 Change 2000 1999 Change - ---------------------------------- --------- ---------- ---------------------- --------- ---------- --------------------- Gas and electric sales revenue $259.9 $78.1 $181.8 232.8% $653.9 $287.6 $366.3 127.4% Less: Gas and electricity purchased for resale 251.9 84.1 167.8 199.5% 606.0 292.8 313.2 107.0% - ---------------------------------- --------- ---------- ----------- --------- ---------- ---------- Margin $ 8.0 $ (6.0) $ 14.0 * $ 47.9 $ (5.2) $ 53.1 * - ---------------------------------- ========= ========== =========== ---------- ========= ========== ========== ========== *Percentage not meaningful
Energy marketing sales margins for the three and nine months ended September 30, 2000 increased primarily as a result of improved margins in the Georgia retail natural gas market. See LIQUIDITY AND CAPITAL RESOURCES. Other Operating Expenses Changes in other operating expenses for the three and nine months ended September 30, 2000, when compared to the corresponding periods in 1999, were as follows: - ------------------------------------- ---------------------------------------- ---------------------------------------- Three Months Ended Nine Months Ended (Dollars in Millions) 2000 1999 Change 2000 1999 Change - ------------------------------------- -------- ---------- -------------------- ---------- ---------- ------------------ Other operation and maintenance $118.2 $105.1 $13.1 12.5% $346.8 $298.9 $47.9 16.0% Depreciation and amortization 42.5 11.3 26.6% 161.5 126.5 35.0 27.7% 53.8 Other taxes 26.4 3.1 11.7% 87.6 78.8 8.8 11.2% 29.5 - ------------------------------------- -------- ---------- ---------- ---------- ---------- -------- Total $201.5 $174.0 $27.5 15.8% $595.9 $504.2 $91.7 18.2% - ------------------------------------- ======== ========== ========== --------- ========== ========== ======== =========
Other operating expenses for the three and nine months ended September 30, 2000 increased from 1999 levels primarily as a result of the acquisition of PSNC. This acquisition accounted for the following increases: Other operation and maintenance ($17.0 million and $51.9 million), Depreciation and amortization ($10.5 million and $31.3 million), and Other taxes ($1.6 million and $5.0 million). Apart from the PSNC acquisition, changes in other operating expenses for the three months ended September 30, 2000 compared to the corresponding period for 1999 were as follows: Other operation and maintenance expenses decreased $3.9 million. This decrease was primarily attributable to a net decrease in employee benefit costs ($3.5 million, including the effect of pension income), decreased expenses related to storm damage ($2.8 million) and early retirements in 1999 ($3.2 million). These decreases were partially offset by increased expenses related to the Company's Energy Marketing segment ($4.1 million), and employee bonus accruals ($3.9 million). Depreciation and amortization increased $0.8 million due to normal property additions, which was partially offset by a reduction in SCE&G's gas depreciation rates (See LIQUIDITY AND CAPITAL RESOURCES). Other taxes increased $1.5 million due to increased property taxes. Apart from the PSNC acquisition, changes in other operating expenses for the nine months ended September 30, 2000 compared to the corresponding period for 1999 were as follows: Other operation and maintenance expenses decreased $4.0 million. This decrease was primarily attributable to a net decrease in employee benefit costs ($8.1 million, including the effect of pension income), decreased expenses related to storm damage ($1.5 million), early retirements in 1999 ($3.2 million), and decreased expenses related to the Company's Energy Marketing segment ($6.2 million). These decreases were partially offset by employee bonus accruals ($9.3 million) and expenses associated with Cogen South, LLC operations ($5.9 million). Depreciation and amortization increased $3.7 million due to normal property additions, which was partially offset by a reduction in SCE&G's gas depreciation rates (See LIQUIDITY AND CAPTIAL RESOURCES). Other taxes increased $3.8 million due to increased property taxes. Interest Expense Interest expense, excluding the debt component of AFC, for the three and nine months ended September 30, 2000 increased approximately $22.6 million and $62.0 million, respectively, when compared to the corresponding periods in 1999. Approximately $5.0 million and $14.7 million was attributable to PSNC debt assumed by the Company as a result of the acquisition. The remaining increase was primarily due to the issuance of debt in the first quarter of 2000 to complete the acquisition of PSNC, and to increased interests rates and borrowings for general corporate purposes. Income Taxes Income taxes for the three and nine months ended September 30, 2000 decreased approximately $5.8 million and increased approximately $28.6 million, respectively, when compared to the corresponding periods in 1999. These changes are primarily due to the changes in operating income. Item 3. Quantitative and Qualitative Disclosures About Market Risk All financial instruments held by the Company and described below are held for purposes other than trading. Interest rate risk - The table below provides information about the Company's financial instruments that are sensitive to changes in interest rates. For debt obligations, the table presents principal cash flows and related weighted average interest rates by expected maturity dates. September 30, 2000 Expected Maturity Date -------- ------- -------------------------------- ---------- ---------------------- (Dollars in Millions) There- Fair Liabilities 2000 2001 2002 2003 2004 after Total Value -------- ------- ---------- ---------- ---------- ---------- ---------- ----------- Long-Term Debt: Fixed Rate ($) 11.9 38.3 337.3 297.1 186.3 1,426.0 2,296.9 2,010.7 Average Fixed Interest Rate (%) 9.01 7.31 7.36 6.38 7.58 7.37 7.26 Variable Rate ($) - - 550.0 150.0 - - 700.0 700.0 Average Variable Interest Rate (%) - - 7.29 7.49 - - 7.33
While a decrease in interest rates would increase the fair value of debt, it is unlikely that events which would result in a realized loss will occur. In addition, the Company has invested in a telecommunications company approximately $40 million for 11.875% senior discount notes due 2007. The fair value of these notes approximates their carrying value. An increase in market interest rates would result in a decrease in fair value of these notes and a corresponding adjustment, net of tax, to other comprehensive income. Commodity price risk - The table below provides information about the Company's financial instruments that are sensitive to changes in natural gas prices. Weighted average settlement/strike prices are per 10,000 mmbtu. As of September 30, 2000 Expected Maturity in 2000 Expected Maturity in 2001 Expected Maturity in 2002 Weighted Weighted Weighted Average Average Average Settlement Contract Fair Settlement Contract Fair Settlement Contract Fair Price Amount Value Price Amount Value Price Amount Value - ---------------------------- ------------- ---------- ------- ------------- --------- -------- ---------------- ---------- ------- Natural Gas Derivatives: (Millions of Dollars) (Millions of Dollars) (Millions of Dollars) Futures Contracts: Long $5.2 $23.8 $27.1 $4.9 $5.3 $6.3 $4.4 $0.1 $0.1 Short 5.3 2.3 4.4 5.1 0.1 0.1 - - - SET Futures Contracts (1): None - ---------------------------- ------------- ---------- ------- -------------- ---------- ------ ---------------- ---------- ------- (1) SCANA Energy Trading, LLC (SET) is a 70% owned subsidiary of SCANA Energy Marketing, Inc.
Equity price risk - Investments in telecommunications companies' marketable equity securities are carried at their market value of $696 million. A ten percent decline in market value would result in a $69.6 million reduction in fair value and a corresponding adjustment, net of tax effect, to the related equity account for unrealized gains/losses, a component of other comprehensive income. SOUTH CAROLINA ELECTRIC & GAS COMPANY FINANCIAL SECTION
Item 1. Financial Statements SOUTH CAROLINA ELECTRIC & GAS COMPANY CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) - -------------------------------------------------------------------------------- September 30, December 31, 2000 1999 - -------------------------------------------------------------------------------- Assets (Millions of Dollars) Utility Plant: Electric $4,377 $4,337 Gas 397 392 Other 181 191 - -------------------------------------------------------------------------------- Total 4,955 4,920 Less accumulated depreciation and amortization 1,698 1,611 - -------------------------------------------------------------------------------- Total 3,257 3,309 Construction work in progress 242 149 Nuclear fuel, net of accumulated amortization 54 43 - -------------------------------------------------------------------------------- Utility Plant, Net 3,553 3,501 - -------------------------------------------------------------------------------- Nonutility Property and Investments, net of accumulated depreciation 26 19 - -------------------------------------------------------------------------------- Current Assets: Cash and temporary cash investments 54 78 Receivables (including unbilled revenues) 234 192 Receivables - affiliated companies 3 3 Inventories (at average cost): Fuel 22 30 Materials and supplies 46 48 Prepayments 10 8 Deferred income taxes 11 16 - -------------------------------------------------------------------------------- Total Current Assets 380 375 - -------------------------------------------------------------------------------- Deferred Debits: Emission allowances 26 31 Environmental 21 24 Nuclear plant decommissioning fund 70 64 Pension asset, net 186 144 Other regulatory assets 150 164 Other 104 82 - -------------------------------------------------------------------------------- Total Deferred Debits 557 509 - -------------------------------------------------------------------------------- Total $4,516 $4,404 ================================================================================
SOUTH CAROLINA ELECTRIC & GAS COMPANY CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) - ----------------------------------------------------------------------------------------------- ------------------- eptember 30, December 31, 2000 1999 - ----------------------------------------------------------------------------------------------- ------------------- Capitalization and Liabilities (Millions of Dollars) Stockholders' Investment: Common equity $1,650 $1,558 Preferred stock (not subject to purchase or sinking funds) 106 106 - ----------------------------------------------------------------------------------------------- ------------------- Total Stockholders' Investment 1,756 1,664 Preferred Stock, net (subject to purchase or sinking funds) 11 11 SCE&G-Obligated Mandatorily Redeemable Preferred Securities of SCE&G's Subsidiary Trust, SCE&G Trust I, holding solely $50 million principal amount of the 7.55% Junior Subordinated Debentures of SCE&G, due 2027 50 50 Long-Term Debt, net 1,268 1,121 - ----------------------------------------------------------------------------------------------- ------------------- Total Capitalization 3,085 2,846 - ----------------------------------------------------------------------------------------------- ------------------- Current Liabilities: Short-term borrowings 105 213 Current portion of long-term debt 28 128 Accounts payable 73 78 Accounts payable - affiliated companies 27 33 Customer deposits 17 17 Taxes accrued 86 60 Interest accrued 26 22 Dividends declared 46 28 Other 7 10 - ----------------------------------------------------------------------------------------------- ------------------- Total Current Liabilities 415 589 - ----------------------------------------------------------------------------------------------- ------------------- Deferred Credits: Deferred income taxes 570 560 Deferred investment tax credits 106 108 Reserve for nuclear plant decommissioning 70 64 Postretirement benefits 112 98 Regulatory liabilities 65 59 Other 93 80 - ----------------------------------------------------------------------------------------------- ------------------- Total Deferred Credits 1,016 969 - ----------------------------------------------------------------------------------------------- ------------------- Total $4,516 $4,404 =============================================================================================== =================== See Notes to Condensed Consolidated Financial Statements.
SOUTH CAROLINA ELECTRIC & GAS COMPANY CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS (Unaudited) - -------------------------------------------------------------------- ------------------------ --------------------------- Three Months Ended Nine Months Ended September 30, September 30, 2000 1999 2000 1999 - -------------------------------------------------------------------- ---------- ------------- ------------- ------------- (Millions of Dollars, Except Per Share Amounts) Operating Revenues: Electric $397 $393 $1,011 $ 953 Gas 51 38 203 168 - -------------------------------------------------------------------- ---------- ------------- ------------- ------------- Total Operating Revenues 448 431 1,214 1,121 - -------------------------------------------------------------------- ---------- ------------- ------------- ------------- Operating Expenses: Fuel used in electric generation 68 69 180 168 Purchased power (including affiliated purchases) 45 41 112 107 Gas purchased from affiliate for resale 40 27 140 105 Other operation and maintenance 75 83 229 228 Depreciation and amortization 40 39 119 115 Other taxes 25 24 75 71 - -------------------------------------------------------------------- ---------- ------------- ------------- ------------- Total Operating Expenses 293 283 855 794 - -------------------------------------------------------------------- ---------- ------------- ------------- ------------- Operating Income 155 148 359 327 - -------------------------------------------------------------------- ---------- ------------- ------------- ------------- Other Income, including allowance for equity funds used during construction 3 2 11 7 - -------------------------------------------------------------------- ---------- ------------- ------------- ------------- Income Before Interest Charges, Income Taxes, Preferred Stock Dividends and Cumulative Effect of Accounting Change 158 150 370 334 - -------------------------------------------------------------------- ---------- ------------- ------------- ------------- Interest Charges: Interest expense on long-term debt 26 24 75 72 Other interest expense, net of allowance for borrowed funds used during construction - 1 4 4 - -------------------------------------------------------------------- ---------- ------------- ------------- ------------- Total Interest Charges, Net 26 25 79 76 - -------------------------------------------------------------------- ---------- ------------- ------------- ------------- Income Before Income Taxes, Preferred Stock Dividends and Cumulative Effect of Accounting Change 132 125 291 258 Income Taxes 49 47 107 94 - -------------------------------------------------------------------- ---------- ------------- ------------- ------------- Income Before Preferred Stock Dividend and Cumulative Effect of Accounting Change 83 78 184 164 Preferred Dividend Requirement of SCE&G - Obligated Mandatorily Redeemable Preferred Securities 1 1 3 3 - -------------------------------------------------------------------- ---------- ------------- ------------- ------------- Income Before Cumulative Effect of Accounting Change 82 77 181 161 Cumulative Effect of Accounting Change, net of taxes (Note 2) - - 22 - - -------------------------------------------------------------------- ---------- ------------- ------------- ------------- Net Income 82 77 203 161 Preferred Stock Cash Dividends (At stated rates) (2) (2) (6) (6) - -------------------------------------------------------------------- ---------- ------------- ------------- ------------- Earnings Available for Common Stockholder 80 75 197 155 Retained Earnings at Beginning of Period 603 500 550 491 Common Stock Cash Dividends Declared (41) (25) (105) (96) ==================================================================== ========== ============= ============= ============= Retained Earnings at End of Period $642 $550 $642 $550 ==================================================================== ========== ============= ============= ============= See Notes to Condensed Consolidated Financial Statements.
SOUTH CAROLINA ELECTRIC & GAS COMPANY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - -------------------------------------------------------------------------------------------- ---------------------------- Nine Months Ended September 30, 2000 1999 - -------------------------------------------------------------------------------------------- -------------- ------------- (Millions of Dollars) Cash Flows From Operating Activities: Net income $203 $161 Adjustments to reconcile net income to net cash provided from operating activities: Cumulative effect of accounting change (22) - Depreciation and amortization 120 115 Amortization of nuclear fuel 15 13 Deferred income taxes, net 15 8 Pension asset (42) (21) Post retirement benefits 14 8 Other regulatory assets 12 9 Other regulatory liabilities 6 5 Allowance for funds used during construction (2) (5) Over (under) collections, fuel adjustment clauses 2 (8) Changes in certain current assets and liabilities: (Increase) decrease in receivables (6) (17) (Increase) decrease in inventories 10 5 Increase (decrease) in accounts payable (11) (39) Increase (decrease) in taxes accrued 12 28 Other, net (9) (39) - -------------------------------------------------------------------------------------------- -------------- ------------- Net Cash Provided From Operating Activities 317 223 - -------------------------------------------------------------------------------------------- -------------- ------------- Cash Flows From Investing Activities: Utility property additions and construction expenditures, net of AFC (178) (161) Other property and investments (7) (2) - -------------------------------------------------------------------------------------------- -------------- ------------- Net Cash Used For Investing Activities (185) (163) - -------------------------------------------------------------------------------------------- -------------- ------------- Cash Flows From Financing Activities: Proceeds: Issuance of First Mortgage Bonds 148 99 Repayments: First Mortgage Bonds (100) - Other long-term debt (3) (9) Dividend payments: Common stock (87) (108) Preferred stock (6) (6) Short-term borrowings, net (108) (45) Fuel and emission allowance financings, net - 11 - -------------------------------------------------------------------------------------------- -------------- ------------- Net Cash Provided From (Used For) Financing Activities (156) (58) - -------------------------------------------------------------------------------------------- -------------- ------------- Net Decrease In Cash And Temporary Cash Investments (24) 2 Cash And Temporary Cash Investments At January 1 78 36 ============================================================================================ ============== ============= Cash And Temporary Cash Investments At September 30 $ 54 $ 38 ============================================================================================ ============== ============= Supplemental Cash Flow Information: Cash paid for - Interest (net of capitalized interest of $3 for 2000 and 1999) $ 72 $ 70 - Income taxes 65 47 See Notes to Condensed Consolidated Financial Statements.
SOUTH CAROLINA ELECTRIC & GAS COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS September 30, 2000 (Unaudited) The following notes should be read in conjunction with the Notes to Condensed Consolidated Financial Statements appearing in South Carolina Electric & Gas Company's (the Company) Annual Report on Form 10-K for the year ended December 31, 1999. These are interim financial statements, and due to the seasonality of the Company's business, the amounts reported in the Condensed Consolidated Statements of Income are not necessarily indicative of amounts expected for the year. In the opinion of management, the information furnished herein reflects all adjustments, all of a normal recurring nature except as described in Notes 2 and 3, which are necessary for a fair statement of the results for the interim periods reported. 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. Basis of Accounting The Company accounts for its regulated utility operations, assets and liabilities in accordance with the provisions of Statement of Financial Accounting Standards No. 71 (SFAS 71). This accounting standard requires cost-based rate-regulated utilities to recognize in their financial statements revenues and expenses in different time periods than do enterprises that are not rate-regulated. As a result, the Company has recorded, as of September 30, 2000, approximately $172 million and $65 million of regulatory assets and liabilities, respectively, including amounts recorded for deferred income tax assets and liabilities of approximately $121 million and $47 million, respectively. The electric and gas regulatory assets (excluding deferred income tax assets) of approximately $25 million and $25 million, respectively, are being recovered through rates, and the Public Service Commission of South Carolina (PSC) has approved accelerated recovery of approximately $2 million of the electric regulatory assets. In the future, as a result of deregulation or other changes in the regulatory environment, the Company may no longer meet the criteria for continued application of SFAS 71 and could be required to write off its regulatory assets and liabilities. Such an event could have a material adverse effect on the Company's results of operations in the period that a write-off would be required, but it is not expected that cash flows or financial position would be materially affected. B. Recently Issued Accounting Standard and Bulletin In June 1998 the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments and Hedging Activities." In June 2000 the FASB issued SFAS No. 138, which amends certain provisions of SFAS 133 to expand the normal purchase and sale exemption for supply contracts and to redefine interest rate risk to reduce sources of ineffectiveness, among other things. The Company has appointed a team to implement SFAS 133, as amended. This team has been educating both financial and non-financial personnel, inventorying contracts and addressing various other SFAS 133 related issues. The Company will adopt SFAS 133, as amended, on January 1, 2001. The Company is determining the impact of adoption of SFAS 133 on its consolidated results of operations and financial position. Adoption of this statement should have no impact on consolidated cash flows. In December 1999 the Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements." In June 2000 the SEC amended the Bulletin to delay the implementation date until no later than the fourth fiscal quarter of fiscal years beginning after December 15, 1999. The Bulletin provides the SEC staff's views in applying generally accepted accounting principles to selected revenue recognition issues. This Bulletin, which the Company will adopt for the fourth quarter of 2000, is not expected to have a material impact on the Company's results of operations, cash flows or financial position. C. Reclassifications Certain amounts from prior periods have been reclassified to conform with the 2000 presentation. 2. Cumulative Effect of Accounting Change Effective January 1, 2000 the Company changed its method of accounting for operating revenues from cycle billing to full accrual. The cumulative effect of this change was $22 million, net of tax. Accruing unbilled revenues more closely matches revenues and expenses. Unbilled revenues represent the estimated amount customers will be charged for service received, but that has not yet been billed, as of the end of the accounting period. Previously these revenues were recognized as operating revenues as customers were billed. If this method had been applied retroactively, net income would have been $76 million and $182 million for the three and nine months ended September 30, 1999, respectively, compared to $77 million and $161 million as reported. 3. RATE AND OTHER REGULATORY MATTERS On July 20, 2000 the PSC issued an order approving SCE&G's request for an out-of-period adjustment to increase the cost of gas components of its rates for natural gas service from 54.334 cents per therm to 68.835 cents per therm, effective with the first billing cycle in August 2000. As part of its regularly scheduled annual review of gas costs, the PSC issued an order on November 9, 2000 which further increased the cost of gas component to 78.151 cents per therm, effective with the first billing cycle in November 2000. On July 5, 2000 the PSC approved SCE&G's request to implement lower depreciation rates for its gas operations. The new rates were effective retroactively to January 1, 2000 and will result in a reduction in annual depreciation expense of approximately $2.9 million. On September 14, 1999 the PSC approved an accelerated capital recovery plan for the Company's Cope Generating Station. The plan was implemented beginning January 1, 2000 for a three-year period. The PSC approved an accelerated capital recovery methodology wherein the Company may increase depreciation of its Cope Generating Station in excess of amounts that would be recorded based upon currently approved depreciation rates. The amount of the accelerated depreciation will be determined by the Company based on the level of revenues and operating expenses, not to exceed $36 million annually without the approval of the PSC. Any unused portion of the $36 million in any given year may be carried forward for possible use in the subsequent year. As of September 30, 2000 no accelerated depreciation has been recorded. The accelerated capital recovery plan will be accomplished through existing customer rates. In September 1992 the PSC issued an order granting the Company's request for a $.25 increase in transit fares from $.50 to $.75 in Columbia, South Carolina; however, the PSC also required $.40 fares for low income customers and denied the Company's request to reduce the number of routes and frequency of service. The new rates were placed into effect in October 1992. The Company appealed the PSC's order to the Circuit Court, which in May 1995 ordered the case back to the PSC for reconsideration of several issues including the low income rider program, routing changes, and the $.75 fare. The Supreme Court declined to review an appeal of the Circuit Court decision and dismissed the case. The PSC and other intervenors filed another Petition for Reconsideration, which the Supreme Court denied. The PSC and other intervenors filed another appeal to the Circuit Court which the Circuit Court denied in an order dated May 9, 1996. In this order, the Circuit Court upheld its previous orders and remanded them to the PSC. During August 1996 the PSC heard oral arguments on the orders on remand from the Circuit Court. On September 30, 1996 the PSC issued an order affirming its previous orders and denied the Company's request for reconsideration. In response to an appeal of the PSC's order by the Company, the Circuit Court issued an order on May 25, 2000, which remanded the matter to the PSC for review of the Company's original application and request to terminate the low income rider fare. On September 27, 2000 the PSC issued an order granting the relief requested by the Company. On September 29, 2000 the Consumer Advocate filed a motion with the PSC for a stay of this order to which SCE&G filed a response. On October 3, 2000 the PSC accepted the Consumer Advocate's motion and issued a stay of its order. Additional motions are currently pending before the PSC with regard to the order and the stay. 4. LONG-TERM DEBT On June 14, 2000 SCE&G issued $150 million of First Mortgage Bonds having an annual interest rate of 7.50 percent and maturing on June 15, 2005. The proceeds from the sale of these bonds were used to pay the maturity of SCE&G's $100 million First Mortgage Bonds due June 15, 2000, to reduce short-term debt and for general corporate purposes. 5. RETAINED EARNINGS The Restated Articles of Incorporation of the Company and the Indenture underlying its First and Refunding Mortgage Bonds contain provisions that, under certain circumstances, could limit the payment of cash dividends on its common stock. In addition, with respect to hydroelectric projects, the Federal Power Act requires the appropriation of a portion of certain earnings therefrom. At September 30, 2000, approximately $32 million of retained earnings were restricted by this requirement as to payment of cash dividends on common stock. 6. CONTINGENCIES With respect to commitments at September 30, 2000, reference is made to Note 10 of Notes to Consolidated Financial Statements appearing in the Company's Annual Report on Form 10-K for the year ended December 31, 1999. Contingencies at September 30, 2000 include the following: A. Nuclear Insurance The Price-Anderson Indemnification Act, which deals with public liability for a nuclear incident, currently establishes the liability limit for third-party claims associated with any nuclear incident at $9.5 billion. Each reactor licensee is currently liable for up to $88.1 million per reactor owned for each nuclear incident occurring at any reactor in the United States, provided that not more than $10 million of the liability per reactor would be assessed per year. The Company's maximum assessment, based on its two-thirds ownership of the V. C. Summer Nuclear Station (Summer Station), would be approximately $58.7 million per incident, but not more than $6.7 million per year. The Company currently maintains policies (for itself and on behalf of the South Carolina Public Service Authority) with Nuclear Electric Insurance Limited (NEIL). These policies covering the nuclear facility for property damage, excess property damage and outage costs permit assessment under certain conditions to cover insurer's losses. Based on the current annual premium, the Company's portion of the retrospective premium assessment would not exceed $8.1 million. To the extent that insurable claims for property damage, decontamination, repair and replacement and other costs and expenses arising from a nuclear incident at Summer Station exceed the policy limits of insurance, or to the extent such insurance becomes unavailable in the future, and to the extent that the Company's rates would not recover the cost of any purchased replacement power, the Company will retain the risk of loss as a self-insurer. The Company has no reason to anticipate a serious nuclear incident at Summer Station. If such an incident were to occur, it could have a material adverse impact on the Company's results of operations, cash flows and financial position. B. Environmental The Company maintains an environmental assessment program to identify and assess current and former operations sites that could require environmental cleanup. As site assessments are initiated, estimates are made of the expenditures, if any, deemed necessary to investigate and clean up each site. These estimates are refined as additional information becomes available; therefore, actual expenditures could differ significantly from the original estimates. Amounts estimated and accrued to date for site assessments and cleanup relate primarily to regulated operations. Such amounts are deferred and amortized with recovery provided through rates. The Company has also recovered portions of its environmental liabilities through settlements with various insurance carriers, including all amounts previously deferred for its electric operations. The Company expects to recover all deferred amounts related to its gas operations by December 2005. Deferred amounts, net of amounts recovered through rates and insurance settlements, totaled $20.0 million at September 30, 2000. The deferral includes the estimated costs associated with the following matters. o In September 1992 the Environmental Protection Agency (EPA) notified the Company, the City of Charleston and the Charleston Housing Authority of their potential liability for the investigation and cleanup of the Calhoun Park area site in Charleston, South Carolina. This site encompasses approximately 30 acres and includes properties which were locations for industrial operations, including a wood preserving (creosote) plant, one of the Company's decommissioned manufactured gas plants (MGP), properties owned by the National Park Service and the City of Charleston, and private properties. The site has not been placed on the National Priorities List, but may be added in the future. The Potentially Responsible Parties (PRPs) negotiated an administrative order by consent for the conduct of a Remedial Investigation/Feasibility Study and a corresponding Scope of Work. Field work began in November 1993, and the EPA approved a Remedial Investigation Report in February 1997 and a Feasibility Study Report in June 1998. In July 1998 the EPA approved the Company's Removal Action Work Plan for soil excavation. The Company completed Phase One of the Removal Action in 1998 at a cost of approximately $1.5 million. Phase Two, which cost approximately $3.5 million, included excavation and installation of several permanent barriers to mitigate coal tar seepage. On September 30, 1998 a Record of Decision was issued which sets forth the EPA's view of the extent of each PRP's responsibility for site contamination and the level to which the site must be remediated. The Company estimates that the Record of Decision will result in costs of approximately $13.3 million, of which approximately $2 million remains to be incurred. On January 13, 1999 the EPA issued a Unilateral Administrative Order for Remedial Design and Remedial Action directing the Company to design and carry out a plan of remediation for the Calhoun Park site. The Order is temporarily stayed pending further negotiations between the Company and the EPA. However, the Company submitted a Comprehensive Remedial Design Work Plan (RDWP) on December 17, 1999 and proceeded with implementation pending agency approval. The RDWP was approved by the EPA in July 2000, and its implementation continues. In October 1996 the City of Charleston and the Company settled all environmental claims the City may have had against the Company involving the Calhoun Park area for a payment of $26 million over four years (1996-1999) by the Company to the City. The Company is recovering the amount of the settlement, which does not encompass site assessment and cleanup costs, through rates in the same manner as other amounts accrued for site assessments and cleanup. As part of the environmental settlement, the Company constructed an 1,100 space parking garage on the Calhoun Park site (construction was completed in April 2000) and transferred the facility to the City in exchange for a $16.9 million, 20-year municipal bond collateralized by revenues from, and a mortgage on, the parking garage. o The Company owns three other decommissioned MGP sites which contain residues of by-product chemicals. For the site located in Sumter, South Carolina, effective September 15, 1998, the Company entered into a Remedial Action Plan Contract with the South Carolina Department of Health and Environmental Control (DHEC) pursuant to which it agreed to undertake a full site investigation and remediation under the oversight of DHEC. Site investigation and characterization are proceeding according to schedule. Upon selection and successful implementation of a site remedy, DHEC will give the Company a Certificate of Completion and a covenant not to sue. The Company is continuing to investigate the other two sites, and is monitoring the nature and extent of residual contamination. 7. SEGMENT OF BUSINESS INFORMATION The Company's reportable segments are listed in the following table. The Company uses operating income to measure profitability for its Electric Operations and Gas Distribution segments. Therefore, net income is not allocated to these segments. Affiliate revenue is derived from transactions between reportable segments as well as transactions between separate legal entities that are combined into the same reportable segment. Assets for the period did not change significantly. Disclosure of Reportable Segments (Millions of Dollars) - --------------------------------------- ------------ ------------ ---------- ----------------- -------------- Three months ended Electric Gas All Adjustments/ Consolidated September 30, 2000 Operations Distribution Other Eliminations Total - --------------------------------------- ------------ ------------ ---------- ----------------- -------------- External Revenue $397 $51 - - $448 Intersegment Revenue 63 - - $(63) - Operating Income (Loss) 160 (4) - (1) 155 - --------------------------------------- ------------ ------------ ---------- ----------------- -------------- - --------------------------------------- ------------ ------------ ---------- ----------------- -------------- Three months ended Electric Gas All Adjustments/ Consolidated September 30, 1999 Operations Distribution Other Eliminations Total - --------------------------------------- ------------ ------------ ---------- ----------------- -------------- External Revenue $393 $38 - - $431 Intersegment Revenue 63 - - $(63) - Operating Income (Loss) 153 (4) - (1) 148 - --------------------------------------- ------------ ------------ ---------- ----------------- -------------- - --------------------------------------- ------------ ------------ ---------- ----------------- -------------- Nine months ended Electric Gas All Adjustments/ Consolidated September 30, 2000 Operations Distribution Other Eliminations Total - --------------------------------------- ------------ ------------ ---------- ----------------- -------------- External Revenue $1,011 $203 - - $1,214 Intersegment Revenue 169 - - $(169) - Operating Income 345 17 - (3) 359 - --------------------------------------- ------------ ------------ ---------- ----------------- -------------- - --------------------------------------- ------------ ------------ ---------- ----------------- -------------- Nine months ended Electric Gas All Adjustments/ Consolidated September 30, 1999 Operations Distribution Other Eliminations Total - --------------------------------------- ------------ ------------ ---------- ----------------- -------------- External Revenue $953 $168 - - $1,121 Intersegment Revenue 159 - - $(159) - Operating Income 314 17 - (4) 327 - --------------------------------------- ------------ ------------ ---------- ----------------- --------------
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations SOUTH CAROLINA ELECTRIC & GAS COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion should be read in conjunction with Management's Discussion and Analysis of Financial Condition and Results of Operations appearing in South Carolina Electric & Gas Company's (SCE&G) Annual Report on Form 10-K for the year ended December 31, 1999. Statements included in this discussion and analysis (or elsewhere in this quarterly report) which are not statements of historical fact are intended to be, and are hereby identified as, "forward looking statements" for purposes of the safe harbor provided by Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Readers are cautioned that any such forward-looking statements are not guarantees of future performance and involve a number of risks and uncertainties, and that actual results could differ materially from those indicated by such forward-looking statements. Important factors that could cause actual results to differ materially from those indicated by such forward-looking statements include, but are not limited to, the following: (1) that the information is of a preliminary nature and may be subject to further and/or continuing review and adjustment, (2) changes in the utility regulatory environment, (3) changes in the economy in SCE&G's service territory, (4) the impact of competition from other energy suppliers, (5) the management of SCE&G's operations, (6) variations in prices of natural gas and fuels used for electric generation, (7) growth opportunities, (8) the results of financing efforts, (9) changes in SCE&G's accounting policies, (10) weather conditions in areas served by SCE&G, (11) inflation, (12) exposure to environmental issues and liabilities, (13) changes in environmental regulations and (14) the other risks and uncertainties described from time to time in SCE&G's periodic reports filed with the Securities and Exchange Commission. SCE&G disclaims any obligation to update any forward-looking statements. SIGNIFICANT DEVELOPMENTS SINCE DECEMBER 31, 1999 Regional Transmission Organization On February 9, 2000 the Federal Energy Regulatory Commission (FERC) issued FERC Order 2000. The Order required utilities which operate electric transmission systems to submit plans for the possible formation of a regional transmission organization (RTO). On October 16, 2000 SCE&G and two other southeastern electric utilities filed a joint request with FERC to establish GridSouth Transco, LLC (GridSouth). When operational, GridSouth will function as an independent regional transmission company. Initially, the three utilities will continue to own their respective transmission networks, while GridSouth will provide planning and operational oversight of the electric transmission grid. LIQUIDITY AND CAPITAL RESOURCES On October 7, 2000 the 1,000 megawatt V. C. Summer Nuclear Station was removed from service for a planned maintenance and refueling outage scheduled to last 38 1/2 days. During initial inspection activities, plant personnel discovered a small leak coming from a hairline crack in a weld in a reactor coolant system pipe. SCE&G has performed extensive ultrasonic testing of similar welds in the cooling system, which confirmed that the problem was limited to this single weld. SCE&G will repair the crack prior to restarting the plant. While no specific duration has yet been established for the repair, the plant should be back in operation by late December. Although SCE&G cannot estimate how much this repair will add to the cost of the outage, any costs above the amounts normally accrued for this refueling are expected to be deferred and amortized over the plant's next 18-month operating cycle. The cost of replacement power is expected to be recovered through SCE&G's electric fuel adjustment clause. On July 20, 2000 the PSC issued an order approving SCE&G's request for an out-of-period adjustment to increase the cost of gas components of its rates for natural gas service from 54.334 cents per therm to 68.835 cents per therm, effective with the first billing cycle in August 2000. As part of its regularly scheduled annual review of gas costs, on October 17, 2000 the PSC approved an increase in the cost of gas component to 78.151 cents per therm, effective with the first billing cycle in November 2000. On July 5, 2000 the PSC approved SCE&G's request to implement lower depreciation rates for its gas operations. The new rates were effective retroactively to January 1, 2000 and will result in a reduction in annual depreciation expense of approximately $2.9 million. On September 14, 1999 the PSC approved an accelerated capital recovery plan for SCE&G's Cope Generating Station. The plan will be implemented beginning January 1, 2000 for a three-year period. The PSC approved an accelerated capital recovery methodology wherein SCE&G may increase depreciation of its Cope Generating Station in excess of amounts that would be recorded based upon currently approved depreciation rates. The amount of the accelerated depreciation will be determined by SCE&G based on the level of revenues and operating expenses, not to exceed $36 million annually without the approval of the PSC. Any unused portion of the $36 million in any given year may be carried forward for possible use in the succeeding year. As of September 30, 2000 no accelerated depreciation has been recorded. The accelerated capital recovery plan will be accomplished through existing customer rates. On August 7, 1996 the City of Charleston executed 30-year electric and gas franchise agreements with SCE&G. In consideration for the electric franchise agreement, SCE&G is paying the City $25 million over seven years (1996 through 2002) and has donated to the City the existing transit assets in Charleston. The $25 million is included in electric plant-in-service and is being amortized over the 30 year franchise period. In settlement of environmental claims the City may have had against SCE&G involving the Calhoun Park area, where SCE&G and its predecessor companies operated a manufactured gas plant until the 1960's, SCE&G paid the City $26 million over a four-year period (1996 through 1999). As part of the environmental settlement, SCE&G constructed an 1,100 space parking garage on the Calhoun Park site (construction was completed in April 2000) and transferred the facility to the City in exchange for a $16.9 million, 20-year municipal bond collateralized by revenues from, and a mortgage on, the parking garage. The following table summarizes how SCE&G generated and used funds for its utility property additions and construction expenditures during the nine months ended September 30, 2000 and 1999: - ----------------------------------------------------------------------------------- ----------------------------- Nine Months Ended September 30, 2000 1999 - ----------------------------------------------------------------------------------- --------------- ------------- (Millions of Dollars) Net cash provided from operating activities $317 $223 Net cash provided used for financing activities (156) (58) Cash and temporary cash investments available at the beginning of the period 78 36 - ----------------------------------------------------------------------------------- --------------- ------------- Net cash available for utility property additions and construction expenditures $239 $201 - ----------------------------------------------------------------------------------- --------------- ------------- Funds used for utility property additions and construction expenditures, net of noncash allowance for funds used during construction $178 $161 - ----------------------------------------------------------------------------------- --------------- ------------- Funds used for nonutility property additions and investments $ 7 $ 2 =================================================================================== =============== =============
On June 14, 2000 SCE&G issued $150 million of First Mortgage Bonds having an annual interest rate of 7.50 percent and maturing on June 15, 2005. The proceeds from the sale of these bonds were used to pay the maturity of SCE&G's $100 million First Mortgage Bonds due June 15, 2000, to reduce short-term debt and for general corporate purposes. SCE&G anticipates that the remainder of its 2000 cash requirements will be met through internally generated funds and the incurrence of additional short-term debt. The timing and amount of such financings will depend upon market conditions and other factors. SCE&G expects that it has or can obtain adequate sources of financing to meet its projected cash requirements for the next twelve months and for the foreseeable future. SCE&G's ratio of earnings to fixed charges for the twelve months ended September 30, 2000 was 4.24. Environmental Matters In July 2000 the Environmental Protection Agency (EPA) requested information on SCE&G's repair and maintenance of its coal-fired plants since 1978. This is part of the EPA's New Source Review (NSR) enforcement initiative, in which the EPA claims that utilities and others have committed widespread violations of the Clean Air Act permitting requirements for the past quarter century. In November 1999 the EPA filed suit against seven utilities and issued an administrative order to Tennessee Valley Authority alleging numerous NSR permitting violations. The EPA's allegations run counter to previous EPA guidance regarding the applicability of the NSR permitting requirements. SCE&G, along with several other utilities, has routinely undertaken the type of repair, replacement and maintenance projects that the EPA now claims are illegal. A suit has not been instituted against SCE&G, and while it is too early to predict any potential EPA action, SCE&G believes that all of its electric generation units are properly permitted and have been properly maintained. Because this matter is in its most preliminary stage with respect to SCE&G, management cannot estimate the effects of these matters on future consolidated results of operations, cash flows or financial position. In October 1998, the EPA issued a final ruling on regional ozone control that requires revised State Implementation Plans (SIPs) for 22 eastern states and the District of Columbia. This EPA ruling was challenged in court by various states, industry and other interests, including the state of South Carolina. In March 2000, the court upheld most aspects of the EPA's rule. Petitioners asked the court to rehear the case and overturn the March decision, but in June the court declined to rehear the case and lifted its earlier stay of the states' obligation to revise their SIPs. Industry and State petitioners have not decided at this time what additional review they may seek. The EPA has undertaken other ozone-related actions having virtually identical goals to its October 1998 action. These actions have likewise been challenged in court by the same or similar parties. The final resolution of the October 1998 action is expected to resolve these other ozone-related actions as well. The South Carolina Department of Health and Environmental Control (DHEC) is considering methods by which to reduce utility emissions of nitrogen oxide. The date for a final state rulemaking is uncertain, but will be likely in 2001. SCE&G will undertake additional nitrogen oxide control projects during 2000 and 2001, at a cost of approximately $100 million as an interim step to address possible contributions to ozone formation in South Carolina. As of September 30, 2000 SCE&G has incurred costs of $0.3 million in relation to these projects. Depending on the resolution of these matters, costs to SCE&G may reach $190 million to meet the full requirements of the 1998 Ozone ruling expenditures for these projects will be capitalized, and are expected to be completed by 2004. For additional information on environmental matters see Note 6B "Contingencies - Environmental" of NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS appearing in this Quarterly Report on Form 10-Q. RESULTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2000 AS COMPARED TO THE CORRESPONDING PERIODS IN 1999 Earnings and Dividends Net income for the three and nine months ended September 30, 2000 and 1999 were as follows: Three Months Ended Nine Months Ended - -------------------------------- ----------------------------------------- ----------------------------------------- (Millions of Dollars) 2000 1999 Change 2000 1999 Change - -------------------------------- -------------- -------------- ----------- ------------- -------------- ------------ Net income derived from: Operations $82.0 $76.6 $5.4 $180.5 $160.9 $19.6 Change in accounting - - - 22.3 - 22.3 - -------------------------------- -------------- -------------- ----------- ------------- -------------- ------------ Total net $82.0 $76.6 $5.4 $202.8 $160.9 $41.9 income ================================ ============== ============== =========== ============= ============== ============
Net income from operations for the three months ended September 30, 2000 increased $5.4 million over the corresponding period in 1999. This increase is primarily due to decreased other operation and maintenance expenses. Net income from operations for the nine months ended September 30, 2000 increased $19.6 million over the corresponding period in 1999. This increase is primarily due to improved electric margins and is partially offset by increased other operation and maintenance expenses, depreciation, property taxes and income taxes. For the last several years, the market value of the Company's retirement plan assets have exceeded the total actuarial present value of accumulated plan benefits. As such, pension income for the three and nine months ended September 30, 2000 was $12.6 million and $30.7 million, compared to $9.6 million and $22.0 million, respectively for the corresponding periods in 1999. As a result of pension income, employee benefit costs were reduced approximately $6.9 million and $16.4 million for the three and nine months ended September 30, 2000. For the corresponding periods in 1999, employee benefit costs were reduced approximately $5.0 million and $11.7 million, respectively. Additionally, other income increased $3.9 million and $10.0 million for the three and nine months ended September 30, 2000. For the corresponding periods in 1999, other income increased $3.1 million and $6.8 million, respectively. Earnings from a change in accounting resulted from recording of unbilled revenue (See Note 2 of NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS). Allowance for funds used during construction (AFC) is a utility accounting practice whereby a portion of the cost of both equity and borrowed funds used to finance construction (which is shown on the balance sheet as construction work in progress) is capitalized. Both the equity and the debt portions of AFC are noncash items of nonoperating income which have the effect of increasing reported net income. AFC represented approximately 1% of income before income taxes for the three and nine months ended September 30, 2000 and 1999. SCE&G's Board of Directors authorized payment of dividends on common stock held by SCANA, as follows: - ---------------------- ------------------ --------------------- ---------------- Declaration Dividend Quarter Payment Date Amount Ended Date - ---------------------- ------------------ --------------------- ---------------- February 17, 2000 $32.0 million March 31, 2000 April 1, 2000 April 27, 2000 $32.0 million June 30, 2000 July 1, 2000 August 16, 2000 $41.0 million September 30, 2000 October 1, 2000 October 17, 2000 $42.0 million December 31, 2000 January 1, 2001 - ---------------------- ------------------ --------------------- ---------------- Electric Operations Changes in the electric operations sales margins (including transactions with affiliates and excluding unbilled revenue) for the three and nine months ended September 30, 2000, when compared to the corresponding periods in 1999, were as follows: - --------------------------------- ------------------------------------------ ------------------------------------------- Three Months Ended Nine Months Ended (Dollars in Millions) 2000 1999 Change 2000 1999 Change - --------------------------------- ----------- ---------- ------------------- ----------- ---------- -------------------- ----------- Electric operating revenue $365.0 $393.3 $(28.3) (7.2)% $979.1 $952.4 $26.7 2.8% ----------- Less: Fuel used in generation 67.6 69.3 (2.5%) 179.8 168.4 11.4 6.8% (1.7) Purchased power 45.2 41.2 4.0 9.7% 111.9 107.0 4.9 4.6% - --------------------------------- ----------- ---------- --------- ----------- ---------- --------- Margin $252.2 $282.8 $(30.6) (10.8)% $687.4 $677.0 $10.4 1.5% - --------------------------------- =========== ========== ========= --------- =========== ========== ========= ==========
Changes in electric operations sales margins for the three and nine months ended September 30, 2000 reflect milder weather in the third quarter of 2000, which was partially offset by customer growth throughout the year and more favorable weather in the first and second quarters of 2000. Gas Distribution Changes in the gas distribution sales margins (excluding unbilled revenue) for the three and nine months ended September 30, 2000, when compared to the corresponding periods in 1999, were as follows: - ------------------------------------ ---------------------------------------- ------------------------------------------- Three Months Ended Nine Months Ended (Dollars in Millions) 2000 1999 Change 2000 1999 Change - ------------------------------------ -------- ---------- -------------------- ---------- ---------- --------------------- Gas operating revenue $50.0 $37.8 $12.2 32.3% $201.5 $168.2 $33.3 19.8% Less: Gas purchased for resale 40.2 26.7 13.5 50.6% 140.4 104.8 35.6 34.0% - ------------------------------------ -------- ---------- --------- ---------- ---------- --------- Margin $ 9.8 $11.1 $(1.3) (11.7)% $ 61.1 $ 63.4 $(2.3) (3.6%) - ------------------------------------ ======== ========== ========= ---------- ========== ========== ========= ===========
Gas distribution sales margins decreased for the three and nine months ended September 30, 2000 primarily as a result of milder weather in the second and third quarters of 2000, which was partially offset by customer growth. Other Operating Expenses Changes in other operating expenses for the three and nine months ended September 30, 2000 when compared to the corresponding periods in 1999, were as follows: - -------------------------------------- ---------------------------------------- ----------------------------------------- Three Months Ended Nine Months Ended (Dollars in Millions) 2000 1999 Change 2000 1999 Change - -------------------------------------- ---------- ---------- ------------------ ---------- --------- -------------------- Other operation and maintenance $ 75.2 $ 83.6 $(8.4) (10.0%) $229.3 $227.2 $ 2.1 0.9% Depreciation and amortization 39.6 38.5 1.1 2.9% 118.8 115.0 3.8 3.3% Other taxes 25.5 23.9 1.6 6.7% 75.0 71.3 3.7 5.2% - -------------------------------------- ---------- ---------- ------- ---------- --------- --------- Total $140.3 $146.0 $(5.7) (3.9%) $423.1 $413.5 $ 9.6 2.3% - -------------------------------------- ========== ========== ======= ---------- ========== ========= ========= ==========
Other operation expenses for the three months ended September 30, 2000 decreased primarily as a result of a net decrease in employee benefit costs ($3.5 million, including the effect of pension income), decreased expenses for storm damage ($2.8 million), and early retirement expenses recorded in 1999 ($3.2 million). These decreases were partially offset by employee bonuses ($3.9 million). Other operation expenses for the nine months ended September 30, 2000 increased primarily as a result of employee bonuses ($9.3 million) and charges related to the operation of CogenSouth ($5.9 million). These increases were partially offset by a net decrease in employee benefit costs ($8.1 million, including the effect of pension income), decreased expenses for storm damage ($1.5 million), and early retirement expenses recorded in 1999 ($3.2 million). The increase in depreciation and amortization expenses for the three and nine months ended September 30, 2000 resulted from normal property additions, and is partially offset by a reduction in gas depreciation rates retroactive to January 1, 2000 (See LIQUIDITY AND CAPITAL RESOURCES). Other taxes increased primarily due to increased property taxes. Other Income Other income for the three and nine months ended September 30, 2000 increased approximately $1.5 million and $3.9 million, respectively, when compared to the corresponding periods in 1999. These increases are primarily attributable to increased pension income. Income Taxes Income taxes for the three and nine months ended September 30, 2000 increased approximately $2.4 million and $13.3 million, respectively, when compared to the corresponding periods in 1999. These increases are primarily due to the changes in operating income. Item 3. Quantitative and Qualitative Disclosures About Market Risk All financial instruments held by SCE&G and described below are held for purposes other than trading. Interest rate risk - The table below provides information about SCE&G's financial instruments that are sensitive to changes in interest rates. For debt obligations, the table presents principal cash flows and related weighted average interest rates by expected maturity dates. September 30, 2000 Expected Maturity Date --------- ------------- ------------------------------- --------- ---------------- (Dollars in Millions) There- Fair Liabilities 2000 2001 2002 2003 2004 after Total Value --------- ------- -------- --------- ---------- ----------- ----------- ---------- Long-Term Debt: Fixed Rate ($) 1.3 27.6 27.7 129.5 123.9 1,082.9 1,392.9 1,282.7 Average Interest Rate (%) 6.50 6.72 6.72 6.33 7.52 7.55 7.40
While a decrease in interest rates would increase the fair value of debt, it is unlikely that events which would result in a realized loss will occur. PART II. OTHER INFORMATION Item 1. Legal Proceedings SCANA Corporation: For information regarding legal proceedings see Note 2 "Rate Matters," of NOTES TO CONSOLIDATED FINANCIAL STATEMENTS appearing in the Company's Annual Report on Form 10-K for the year ended December 31, 1999, and Note 8 "Contingencies" of NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS appearing in this Quarterly Report on Form 10-Q. South Carolina Electric & Gas Company: For information regarding legal proceedings see Note 2 "Rate Matters," of NOTES TO CONSOLIDATED FINANCIAL STATEMENTS appearing in South Carolina Electric & Gas Company's Annual Report on Form 10-K for the year ended December 31, 1999, and Note 6 "Contingencies" of NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS appearing in this Quarterly Report on Form 10-Q. Item 2, 3, 4 and 5 are not applicable. Item 6. Exhibits and Reports on Form 8-K A. Exhibits SCANA Corporation and South Carolina Electric & Gas Company: Exhibits filed with this Quarterly Report on Form 10-Q are listed in the following Exhibit Index. Certain of such exhibits which have heretofore been filed with the Securities and Exchange Commission and which are designated by reference to their exhibit numbers in prior filings are hereby incorporated herein by reference and made a part hereof. B. Reports on Form 8-K during the third quarter 2000 were as follows: SCANA: Date of Report: August 26, 2000 Item reported: Item 5 South Carolina Electric & Gas Company: None SCANA CORPORATION SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. SCANA CORPORATION (Registrant) November 13, 2000 By: s/M. R. Cannon M. R. Cannon Controller (Principal accounting officer) SOUTH CAROLINA ELECTRIC & GAS COMPANY SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. SOUTH CAROLINA ELECTRIC & GAS COMPANY (Registrant) November 13, 2000 By: s/Mark R. Cannon Mark R. Cannon Controller (Principal accounting officer) EXHIBIT INDEX Applicable to Exhibit Form 10-Q of No. SCANA SCE&G Description 2.01 X X Agreement and Plan of Merger, dated as of February 16, 1999 as amended and restated as of May 10, 1999, by and among Public Service Company of North Carolina, Incorporated, SCANA Corporation, New Sub I, Inc. and New Sub II, Inc. (Filed as Exhibit 2.1 to Registration Statement No. 333-78227) 3.01 X Restated Articles of Incorporation of SCANA as adopted on April 26, 1989 (Filed as Exhibit 3-A to Registration Statement No. 33-49145) 3.02 X Restated Articles of Incorporation of SCE&G, as adopted on December 15, 1993 (Filed as Exhibit 3.01 to Registration Statement No.333- 86387) 3.03 X Articles of Amendment of SCANA, dated April 27, 1995 (Filed as Exhibit 4-B to Registration Statement No. 33-62421) 3.04 X Articles of Amendment of SCE&G, dated June 7, 1994 filed June 9, 1994 (Filed as Exhibit 3.02 to Registration Statement No. 333-86387) 3.05 X Articles of Amendment of SCE&G, dated November 9, 1994 (Filed as Exhibit 3.03 to Registration Statement No. 333-86387) 3.06 X Articles of Amendment of SCE&G, dated December 9, 1994 (Filed as Exhibit 3.04 to Registration Statement No. 333-86387) 3.07 X Articles of Correction of SCE&G, dated January 17, 1995 (Filed as Exhibit 3.05 to Registration Statement No. 333-86387) 3.08 X Articles of Amendment of SCE&G, dated January 13, 1995 and filed January 17, 1995 (Filed as Exhibit 3.06 to Registration Statement No. 333-86387) 3.09 X Articles of Amendment of SCE&G, dated March 30, 1995 (Filed as Exhibit 3.07 to Registration Statement No. 333-86387) 3.10 X Articles of Correction of SCE&G - Amendment to Statement filed March 31, 1995, dated December 13, 1995 (Filed as Exhibit 3.08 to Registration Statement No. 333-86387) 3.11 X Articles of Amendment of SCE&G, dated December 13, 1995 (Filed as Exhibit 3.09 to Registration Statement No. 333-86387) 3.12 X Articles of Amendment of SCE&G, dated February 18, 1997 (Filed as Exhibit 3-L to Registration Statement No. 333-24919) 3.13 X Articles of Amendment of SCE&G, dated February 21, 1997 (Filed as Exhibit 3.11 to Registration Statement No. 333-86387) 3.14 X Articles of Amendment of SCE&G, dated April 22, 1997 (Filed as Exhibit 3.12 to Registration Statement No. 333-86387) Applicable to Exhibit Form 10-Q of No. SCANA SCE&G Description 3.15 X Articles of Amendment of SCE&G, dated April 9, 1998 (Filed as Exhibit 3.13 to Registration Statement No. 333-86387) 3.16 X Articles of Amendment of SCE&G, dated May 19, 1999 (Filed as Exhibit 3.16 to Form 10-K for the year ended December 31, 1999) 3.17 X Articles of Amendment of SCE&G, dated August 13, 1999 (Filed as Exhibit 3.17 to Form 10-K for the year ended December 31, 1999) 3.18 X Articles of Amendment of SCE&G, dated March 1, 2000 (Filed as Exhibit 3.18 to Form 10-K for the year ended December 31, 1999) 3.19 X By-Laws of SCANA as revised and amended on February 22, 2000 (Filed as Exhibit 3.19 to Form 10-K for the year ended December 31, 1999) 3.20 X By-Laws of SCE&G as amended and adopted on February 22, 2000 (Filed as Exhibit 3.20 to Form 10-K for the year ended December 31, 1999) 4.01 X Articles of Exchange of South Carolina Electric and Gas Company and SCANA Corporation (Filed as Exhibit 4-A to Post-Effective Amendment No. 1 to Registration Statement No. 2-90438) 4.02 X Indenture dated as of November 1, 1989 between SCANA Corporation and The Bank of New York, as Trustee (Filed as Exhibit 4-A to Registration Statement No. 33-32107) 4.03 X X Indenture dated as of January 1, 1945, between the South Carolina Power Company and Central Hanover Bank and Trust, as Trustee, as supplemented by Supplemental Indentures dated respectively as of May 1, 1946, May 1, 1947 and July 1, 1949 (Filed as Exhibit 2-B to Registration Statement No. 2-26459) 4.04 X X Fourth Supplemental Indenture dated as of April 1, 1950, to Indenture referred to in Exhibit 4.03, pursuant to which SCE&G assumed said Indenture (Filed as Exhibit 2-C to Registration Statement No. 2-26459) 4.05 X X Fifth through Fifty-third Supplemental Indenture referred to in Exhibit 4.03 dated as of the dates indicated below and filed as exhibits to the Registration Statements whose file numbers are set forth below: December 1, 1950 Exhibit 2-D to Registration No. 2-26459 July 1, 1951 Exhibit 2-E to Registration No. 2-26459 June 1, 1953 Exhibit 2-F to Registration No. 2-26459 June 1, 1955 Exhibit 2-G to Registration No. 2-26459 November 1, 1957 Exhibit 2-H to Registration No. 2-26459 September 1, 1958 Exhibit 2-I to Registration No. 2-26459 September 1, 1960 Exhibit 2-J to Registration No. 2-26459 June 1, 1961 Exhibit 2-K to Registration No. 2-26459 December 1, 1965 Exhibit 2-L to Registration No. 2-26459 June 1, 1966 Exhibit 2-M to Registration No. 2-26459 June 1, 1967 Exhibit 2-N to Registration No. 2-29693 September 1, 1968 Exhibit 4-O to Registration No. 2-31569 June 1, 1969 Exhibit 4-C to Registration No. 33-38580 Applicable to Exhibit Form 10-Q of No. SCANA SCE&G Description December 1, 1969 Exhibit 4-O to Registration No. 2-35388 June 1, 1970 Exhibit 4-R to Registration No. 2-37363 March 1, 1971 Exhibit 2-B-17 to Registration No. 2-40324 January 1, 1972 Exhibit 2-B to Registration No. 33-38580 July 1, 1974 Exhibit 2-A-19 to Registration No. 2-51291 May 1, 1975 Exhibit 4-C to Registration No. 33-38580 July 1, 1975 Exhibit 2-B-21 to Registration No. 2-53908 February 1, 1976 Exhibit 2-B-22 to Registration No. 2-55304 December 1, 1976 Exhibit 2-B-23 to Registration No. 2-57936 March 1, 1977 Exhibit 2-B-24 to Registration No. 2-58662 May 1, 1977 Exhibit 4-C to Registration No. 33-38580 February 1, 1978 Exhibit 4-C to Registration No. 33-38580 June 1, 1978 Exhibit 2-A-3 to Registration No. 2-61653 April 1, 1979 Exhibit 4-C to Registration No. 33-38580 June 1, 1979 Exhibit 2-A-3 to Registration No. 33-38580 April 1, 1980 Exhibit 4-C to Registration No. 33-38580 June 1, 1980 Exhibit 4-C to Registration No. 33-38580 December 1, 1980 Exhibit 4-C to Registration No. 33-38580 April 1, 1981 Exhibit 4-D to Registration No. 33-49421 June 1, 1981 Exhibit 4-D to Registration No. 2-73321 March 1, 1982 Exhibit 4-D to Registration No. 33-49421 April 15, 1982 Exhibit 4-D to Registration No. 33-49421 May 1, 1982 Exhibit 4-D to Registration No. 33-49421 December 1, 1984 Exhibit 4-D to Registration No. 33-49421 December 1, 1985 Exhibit 4-D to Registration No. 33-49421 June 1, 1986 Exhibit 4-D to Registration No. 33-49421 February 1, 1987 Exhibit 4-D to Registration No. 33-49421 September 1, 1987 Exhibit 4-D to Registration No. 33-49421 January 1, 1989 Exhibit 4-D to Registration No. 33-49421 January 1, 1991 Exhibit 4-D to Registration No. 33-49421 February 1, 1991 Exhibit 4-D to Registration No. 33-49421 July 15, 1991 Exhibit 4-D to Registration No. 33-49421 August 15, 1991 Exhibit 4-D to Registration No. 33-49421 April 1, 1993 Exhibit 4-E to Registration No. 33-49421 July 1, 1993 Exhibit 4-D to Registration No. 33-57955 May 1, 1999 Exhibit 4.04 to Registration No. 333-86387 4.06 X X Indenture dated as of April 1, 1993 from South Carolina Electric & Gas Company to NationsBank of Georgia, National Association (Filed as Exhibit 4-F to Registration Statement No. 33-49421) 4.07 X X First Supplemental Indenture to Indenture referred to in Exhibit 4.07 dated as of June 1, 1993 (Filed as Exhibit 4-G to Registration Statement No. 33-49421) 4.08 X X Second Supplemental Indenture to Indenture referred to in Exhibit 4.07 dated as of June 15, 1993 (Filed as Exhibit 4-G to Registration Statement No. 33-57955) Applicable to Exhibit Form 10-Q of No. SCANA SCE&G Description 4.09 X X Trust Agreement for SCE&G Trust I (Filed as Exhibit 4-G to SCE&G Form 10-K for the year ended December 31, 1997) 4.10 X X Certificate of Trust for SCE&G Trust I (Filed as Exhibit 4-H to SCE&G Form 10-K for the year ended December 31, 1997) 4.11 X X Junior Subordinated Indenture for SCE&G Trust I (Filed as Exhibit 4-I to SCE&G Form 10-K for the year ended December 31, 1997) 4.12 X X Guarantee Agreement for SCE&G Trust I (Filed as Exhibit 4-J to SCE&G Form 10-K for the year ended December 31, 1997) 4.13 X X Amended and Restated Trust Agreement for SCE&G Trust I (Filed as Exhibit 4-K to SCE&G Form 10-K for the year ended December 31, 1997) 10.01 X SCANA Voluntary Deferral Plan as amended through October 21, 1997 (Filed as Exhibit 10.01(a) to Registration Statement No. 333- 86803) 10.02 X X Supplemental Executive Retirement Plan (Filed as Exhibit 10.01(b) to Registration Statement No. 333-86803) 10.03 X SCANA Supplementary Voluntary Deferral Plan as amended and restated through October 21, 1997 (Filed as Exhibit 10-B to SCANA Form 10-K for the year ended December 31, 1997) 10.04 X SCANA Key Executive Severance Benefits Plan as amended and restated effective as of October 21, 1997 (Filed as Exhibit 10.01(c) to Registration Statement No. 333-86803) 10.05 X SCANA Supplementary Key Executive Severance Benefits Plan as amended and restated effective October 21, 1997 (Filed as Exhibit 10.01(d) to Registration Statement No. 333-86803) 10.06 X SCANA Performance Share Plan as amended and restated effective January 1, 1998 (Filed as Exhibit 10.01(e) to Registration Statement No. 333-86803) 10.07 X SCANA Key Employee Retention Plan as amended and restated effective as of October 21, 1997 (Filed as Exhibit 10-E to SCANA Form 10-K for the year ended December 31, 1997) 10.08 X Description of SCANA Whole Life Option (Filed as Exhibit 10-F to SCANA Form 10-K for the year ended December 31, 1991, under cover of Form SE, File No. 1-8809) 10.09 X Description of SCANA Corporation Annual Incentive Plan (Filed as Exhibit 10-G to SCANA Form 10-K for the year ended December 31, 1991, under cover of Form SE, File No. 1-8809) 10.10 X Service Agreement between SCE&G and SCANA Services, Inc., effective April 1, 2000 (Filed as Exhibit 10.10 to SCANA Form 10-K for the quarter ended June 30, 2000, File No. 1-8809) 27.01 X Financial Data Schedule (Filed herewith) 27.02 X Financial Data Schedule (Filed herewith) EX-27 2 0002.txt FDS -- SCANA WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
UT THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 2000 AND THE CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS AND OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000,000 9-MOS DEC-31-1999 SEP-30-2000 PER-BOOK 4,880 855 773 620 0 7,128 0 1,247 821 2,068 61 106 2,860 264 0 0 40 1 0 0 1,728 7,128 2,300 108 1,883 1,991 417 29 446 167 200 9 191 90 0 325 1.83 1.83
EX-27 3 0003.txt FDS -- SCE&G
UT THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 2000 AND THE CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS AND OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000,000 9-MOS DEC-31-1999 SEP-30-2000 PER-BOOK 3,553 26 380 557 0 4,516 0 1,008 642 1,650 61 106 1,268 105 0 0 28 1 0 0 1,297 4,516 1,214 107 855 962 359 11 370 79 206 9 197 105 0 317 0 0
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