SCANA's Management Discusses Q1 2012 Results - Earnings Call Transcript

SCANA Corporation (SCG)

Q1 2012 Earnings Conference Call

May 3, 2012 14:00 ET

Executives

Byron Hinson – Director, Financial Planning and Investor Relations

Jimmy Addison – Chief Financial Officer

Steve Byrne – Chief Operating Officer, SCE&G

Analysts

Travis Miller – Morningstar

Jim von Riesemann – UBS

Jay Dobson – Wunderlich Securities

David Paltz – Bank of America/Merrill Lynch

Chris Godby – Stephens

Paul Patterson – Glenrock Associates

Michael Lapides – Goldman Sachs

Andy Levi – Avon Capital

Presentation

Operator

Good afternoon, ladies and gentlemen. Thank you for standing by. My name is (Amily) 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. After the speakers' remarks, there will be a question-and-answer period. (Operator Instructions) As a reminder, this conference call is being recorded on Thursday, May 3, 2012. Anyone who does not consent to this taping may drop off the line at this time.

I would like to turn the conference call over to Byron Hinson, Director of Financial Planning and Investor Relations.

Byron Hinson – Director, Financial Planning and Investor Relations

Thank you. I'd like to welcome everyone to our earnings conference call including those who are joining us on the webcast. As you know earlier today, we announced financial results for the first quarter of 2012.

Joining us on the call today are Jimmy Addison, SCANA's Chief Financial Officer; and Steve Byrne, Chief Operating Officer of SCE&G. The slides and the earnings release that we'll refer to in this call are available at scana.com.

Before I turn the call over to Jimmy, I would like to remind you that certain statements that maybe made during today's call, which are not statements of historical facts are considered forward-looking statements and are subject to a number of risks and uncertainties, which are shown on slide two and discussed in the company's SEC filings. The company does not recognize an obligation to update any forward-looking statements.

Finally, as noted on slide two, we will disclose certain non-GAAP measures during this presentation and the required Reg G information can be found in the slides used in conjunction with this call.

I'll now turn the call over to Jimmy.

Jimmy Addison – Chief Financial Officer

Thanks, Byron and thank you all for joining us today. During today's call, I will discuss our financial results and economic activity for the first quarter and provide an update on our outlook for the remainder of the year. Additionally, Steve will provide an update on our nuclear project after which we will respond to your questions.

As shown on slide three, basic earnings per share were $0.93 for the first quarter of 2012 versus $1 in 2011. Increases in electric margin from rate increases under the Base Load Review Act were more than offset by lower gas margins in Georgia due to significantly milder weather, higher operating and maintenance expenses and the costs of our capital program, interest expense, depreciation, and share dilution.

According to the National Oceanic and Atmospheric Administration, this winter was one of the warmest in over 100 years. Our gas margins in Georgia were impacted by $0.06 due to milder than normal weather and an additional $0.02 compared to the colder than normal quarter in 2011 for $0.08 total. Additionally, although the electric WNA mechanism largely mitigates the impact of weather on electric margins, certain weather-sensitive load is not subject to the mechanism, churches and schools as an examples. So, there can be some earnings impact during extreme weather periods such as this quarter. As a result, SCE&G's electric margin was negatively impacted by $0.01 of abnormal weather this quarter. As an aside, it would have been down $0.14 without the WNA mechanism.

Now, on slide four, I would like to review results for our principal lines of business. South Carolina Electric & Gas Company's 2012 first quarter earnings per share denoted in blue were flat compared to the first quarter of 2011. Electric margin was $0.07 higher due to increases under the Base Load Review Act, net of the $0.01 weather decline. This increase in margin was offset by higher operating and maintenance expenses, interest expense and depreciation, as well as share dilution. Total weather-normalized electric sales to residential and commercial customers were relatively flat over the first quarter.

Industrial sales were down approximately 2% due to reduced production at one of our largest customers as a result of a fire. We understand this customer's production will likely be limited for the majority of the year. PSNC Energy's earnings for the first quarter of 2012 shown in red were $0.24 per share compared to $0.25 per share in 2011. Increases in customer growth were slightly more than offset by higher operating and maintenance expenses and share dilution.

SCANA Energy in green reported lower earnings for the first quarter of 2012 due to the aforementioned milder weather. In the first quarter of 2011, weather increased SCANA Energy's margins by $0.02. However, the extremely mild weather in the first quarter of 2012 resulted in an $0.08 swing in margins.

Next, I would like to touch on economic trends in our service area as shown on slide five. We continue to see business growth and expansion. In the first quarter, companies announced plans to invest $124 million with expectations of creating over 200 jobs in our South Carolina territory. Our gas businesses in North Carolina also saw a promising quarter of economic announcements with companies projecting investment of $194 million and over 2,900 jobs. These announcements covered a variety of industries such as plastics, metals, and food and beverage. As I have mentioned previously, 2011 was an excellent year in terms of economic announcements and we are pleased that this trend appears to be continuing. Another measure – container volume at the Port of Charleston also continues to improve.

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