Fitch Rates SCE&G First Mortgage Bonds 'A+'; Outlook Negative

Business Wire, Sept 26, 2008

NEW YORK -- Fitch Ratings has assigned a rating of 'A+' to the $300 million, 6.5% First Mortgage Bonds issued by South Carolina Electric & Gas Co. (SCE&G). The bonds mature Nov. 1, 2018. The Rating Outlook is Negative. Net proceeds will be used to reduce short-term borrowings and for other general corporate purposes.

The Negative Outlook reflects Fitch's expectation of a decline in SCE&G's currently strong credit quality due to the substantial financial commitment of its plan to construct two nuclear generating units for service in 2016 and 2019, respectively as well as the construction risk and uncertainties associated with a project of this size and complexity. Management estimates SCE&G's 55% share of the two nuclear units will cost approximately $5.4 billion, more than doubling the company's existing $4.4 billion electric rate base. The impact on credit quality is softened by the Base Load Review Act (BLRA), which permits utilities in South Carolina to earn a cash return on construction work in progress (CWIP). An Engineering, Procurement and Construction (EPC) contract that fixes a portion of plant costs also mitigates construction risk.

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