Fitch Affirms SCANA and SCE&G Outstanding Ratings; SCANA Outlook to Stable

Business Wire, Nov 5, 2004

NEW YORK -- Fitch Ratings has revised the Rating Outlook of SCANA Corporation (SCANA) to Stable from Negative and affirmed the outstanding ratings of SCANA and its wholly owned subsidiary South Carolina Electric & Gas Co. (SCE&G) as follows:

SCANA Corporation

--Senior unsecured debt at 'A-'.

SCE&G

--First mortgage bonds at 'A ';

--Senior unsecured debt at 'A';

--Preferred stock at 'A';

--Short-term debt at 'F1'.

Fitch has also withdrawn the 'A' rating of SCE&G's trust preferred securities issued by SCE&G Trust I, which have been redeemed. SCE&G's Rating Outlook remains Stable.

The revised Rating Outlook to Stable from Negative reflects SCANA's relatively conservative business strategy focused on building and owning regulated electric generation capacity, reduced parent level debt, and Fitch's expectation of further debt reduction, largely from the disposition of financial investments in telecommunication businesses. While consolidated leverage remains aggressive for the rating category, it is mitigated by the stable cash flow and earnings of its principal subsidiary, SCE&G, which accounts for over 80% of consolidated cash flows.

SCE&G's ratings reflect the predictable cash flows of its regulated electric and gas operations, strong financial measures, a constructive regulatory environment, and competitive business position. Commodity price risk is moderate due to annual electric and gas fuel adjustment clauses that permit SCE&G to adjust the fuel component of its rates for projected electric and gas costs, subject to review by the South Carolina Public Service Commission (PSC). In its gas business, SCE&G also benefits from a weather normalization clause that allows the company to adjust its tariffs if weather deviates from the norm. SCE&G filed an electric base rate case in July 2004, requesting an $81 million increase to recover the remaining construction costs for the Jasper generation plant along with capital expenditures relating to environmental compliance. In October 2004, SCE&G reached a settlement agreement with the staff of the PSC for a $51 million rate increase accounting for 63% of the requested amount. The settlement is subject to review by the PSC, and a final decision is expected by the end of the year.

SCE&G's ratings also reflect an improved liquidity position due to the significant reduction in capital expenditures, environmental risk from the ownership of substantial coal-based generation, and nuclear operating risk. With the completion of the Jasper plant earlier this year, the company has completed its capital expenditure program that had previously been a source of pressure for its credit protection measures. Due to a substantial base of coal-fired and nuclear generation, the company's electric rates are below both the regional and national averages.

SCANA Corporation is an energy-based holding company whose businesses include regulated electric and natural gas utility operations, energy marketing, telecommunications, and other energy-related businesses. SCANA's subsidiaries serve approximately 581,000 electric customers in South Carolina and more than one million natural gas customers in South Carolina, North Carolina, and Georgia.