SCANA Corp. Q1 2010 Earnings Call Transcript

SCANA Corp. Q1 2010 Earnings Call Transcript
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Q1 2010 Earnings Call Transcript

May 6, 2010 2:00 pm ET


Byron Hinson – Director, Financial Planning & IR

Jimmy Addison – SVP and CFO

Kevin Marsh – President of SCE&G

Steve Byrne – EVP, Generation of SCE&G


Dan Jenkins – State of Wisconsin Investment Board

Michael Lapides – Goldman Sachs

Paul Patterson – Glenrock Associates

Jonathan Reeder – Wells Fargo



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Good afternoon, ladies and gentlemen. Thank you for standing by. My name is Kwanda and I will be your conference facilitator today. At this time, I would like to welcome everyone to the SCANA Corporation conference call. All lines have been placed on mute to prevent any background noise. (Operator

Instructions) As a reminder, this conference call is being recorded on Thursday, May 6th, 2010. Anyone who does not consent to the taping may drop off the line at this time.

I would now like to turn the call over to Byron Hinson, Director of Financial Planning and Investor Relations. Please proceed, sir.

Byron Hinson

Thanks. I'd like to welcome everyone to our earnings conference call, including those who are joining us on the webcast. For those of you following on the web, there are accompanying slides we'll refer to throughout the call today. You can manually advance the slides, or you can print a hard copy and print along with each speaker's prompts.

Early today we announced financial results for the first quarter of 2010. In just a moment, Jimmy Addison, Senior Vice-President and Chief Financial Officer and Kevin Marsh, President of SCE&G will review those results and respond to questions. The earnings press release that we will refer to in this conference call is available on our website at

Beginning on slide two, I would like to remind everyone that certain statements that may be made during today's call, which are not statements of historical fact, are considered forward-looking statements and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those indicated by such forward-looking statements, Including the risks and uncertainties discussed in the company's SEC filings. The company does not recognize an obligation to update any forward-looking statements.

I would now like to turn the call over to Jimmy.

Jimmy Addison

Thanks, Byron. I would like to start on slide three, which reflects SCANA's first quarter earnings on a GAAP basis of $1.02 per share compared to $0.94 per share in the first quarter of 2009.

These results were driven by several positive factors, including higher consumption due to weather and other factors, increased revenues associated with the Base Load Review Act and Natural Gas Rate Stabilization Act and customer growth on our system. These factors more than offset the negative impact of higher operating and maintenance expenses, incremental interest expense, increased property tax and share dilution.

During this recession, we've been very diligent with our cost control. The majority of the $13 million increase in O&M expense is due to recorded bad debt expense related to substantially increased sales and some increase in incentive compensation accruals due in part to the recent performance of our sock.

O&M, net of these two components, is only up about $6 million or $0.03 per share. Principal factors for this increase are outage costs at our Jasper plant, the performance of more tree trimming earlier in the year and growth in labor at PSNC to support new customer adds.

As shown in the graph on slide four, kilowatt hour sales of electricity to our retail customers in 2010 were up 10% over 2009. Residential sales increased 18.6%. Commercial sales were up 3.4% and industrial sales rose 6.9%. Overall, total kilowatt hour sales of electricity, which includes sales to other utilities were up just under 9%. We estimate sales exclusive of weather were up approximately 3.7%. We're encouraged by these results.

Consolidated therm sales of natural gas in 2010 were up 11.9%. Residential sales increased 24.6%, commercial sales rose 11.8% and industrial sales were up 3.8%. Additionally, this quarter we deferred for potential refund $25 million of estimated incremental electric revenues earned during the quarter due to the unusually cold weather.

This deferral is part of a proposed pilot weather normalization or WNA mechanism we made to the office of regulatory staff or ROS in rate case settlement negotiations. Kevin Marsh will talk more about the rate case including this provision in a few minutes.

Now, I'd like to review first quarter results for our principal lines of business on slide five. As you know, the majority of SCANA's operations are regulated. Our regulated utility businesses, South Carolina Electric & Gas, PSNC Energy and Carolina Gas Transmission collectively represent more than 90% of the company's total assets and annual earnings per share.

SCE&G, our largest subsidiary reported earnings of $0.51 per share, unchanged compared to the same quarter last year. These results are net of the $25 million WNA revenue deferral previously discussed and are attributable to higher non-weather related consumption, customer growth and the impact of increases in rates under the base load review act and the national gas rates stabilization act. These increases were offset by higher O&M and interest expenses and share dilution.

On slide six, as of March 31 of this year, SCE&G was serving approximately 659,000 electric customers, which represents a 1.1% increase during the year. Over the same period, SCE&G's natural gas customer base increased 1.2% to approximately 313,000. PSNC Energy, our retail natural gas distribution company in North Carolina, reported earnings for the first quarter of $0.25 per share, unchanged compared to the same quarter in 2009.

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