$200 Million CP To Finance Share of Summer Nuclear Expansion
New York, November 11, 2012 --
Issue: Revenue Notes, Tax-Exempt Commercial Paper Notes, Series D and E; Rating: P-1; Sale Amount: $100,000,000; Expected Sale Date: 11/23/2012; Rating Description: Revenue: Government Enterprise
Issue: Revenue Notes and Taxable Commercial Paper Notes, Series DD and EE; Rating: P-1; Sale Amount: $100,000,000; Expected Sale Date: 11/23/2012; Rating Description: Revenue: Government Enterprise
Moody's Investors Service has assigned a P-1 short-term credit rating to the $200 millionSouth Carolina Public Service Authority's (Santee Cooper) Revenue Notes, including the Tax-Exempt Commercial Paper Notes, Series D and E and the Taxable Commercial Paper Notes Series DD and EE. Moody's has also affirmed the P-1 rating on the outstanding Sub-series A, AA, B ,BB, C and CC commercial paper notes. Also, Moody's has affirmed the Aa3 rating on the utility's outstanding $5.6 billion Revenue Obligations and affirmed the stable outlook.
The CP program is supported by the utility's strong internal liquidity and by revolving lines of credit amounting to $200 million split between Barclays Bank PLC (rated A2/P1) for Series D and DD ($100 million) that expires November 2015 and TD Bank (rated Aa2/P1)for Series E and EE ($100 million) that expires November 2015.
Santee Cooper has an existing commercial paper note program outstanding with authorization in the amount of $500 million. The existing program includes Sub-series A and AA ($250 million) with a JP Morgan Revolving Credit Agreement that expires September 15, 2014; Sub-series B and BB ($150 million) with Wells Fargo Revolving Credit Agreement that expires September 15, 2014; and Sub-series C and CC ($100 million) with U.S. Bank Revolving Credit Agreement that expires December 31, 2014.
The new revolving credit agreement is effective November 28, 2012 for Series D and E and Series DD and EE notes.
Santee Cooper utilizes commercial paper notes to fund its ongoing capital improvement program including the Summer nuclear expansion project.
The P-1 rating reflects the credit strengths of Santee Cooper including its strong financial position including strong internal liquidity; the liquidity support provided through the revolving credit agreements and the terms and conditions of those agreements.
Moody's has also affirmed the Aa3 credit rating on South Carolina Public Service Authority. Please see the separate Moody's credit report on South Carolina Public Service Authority dated October 2012 for additional details related to the utility's long-term ratings.
Aa3 RATINGS AFFIRMED RATIONALE
The Aa3 rating takes into consideration Santee Cooper's strong management of its operations; its sound competitive and financial position. Santee Cooper is an unregulated utility owned by the State of South Carolina (rated Aaa by Moody's). The utility is governed by an appointed board of directors and has been successful over its history in being fiscally isolated from the state. The utility has contributed to state policy through providing competitive and reliable power supply to wholesale and retail customers including some of the state's largest industrial customers. Santee Cooper has before it a major challenge to keep its competitive and reliable electricity supplier role secure as it navigates the transition to less carbon intense fuels including participation in the financing of two new nuclear units.
LONG TERM RATING OUTLOOK
While Santee Cooper's outlook is stable, it rests on the expectation that it will lower the financing and construction risks associated with the Summer nuclear expansion plan. Santee Cooper is currently a 45% owner of the Summer Nuclear Unit 2 and 3 expansion project which the utility expects to reduce to a 20% ownership interest. The expected success of the effort to diversify its risk is a critical aspect of the maintenance of the current rating level. Progress towards letters of intent (LOI) to reduce ownership interest and diversify risk to around 20% has taken place which is a credit positive. Another positive development since our last review was the Nuclear Regulatory Commission (NRC)'s certification of the AP 1000 design; approval of the COL and authorization to proceed to construction of the two new nuclear units. Relatively more certain NRC post Fukushima regulatory outlook also seems to be in place. Progress on the extension of the power supply agreement beyond 2030 with Santee Cooper's largest customer Central Cooperative is also noted.
What Could Change the Rating UP:
Given the size of the utility's capital program the current rating level remains appropriate.
What Could Change the Rating DOWN:
The rating could be lowered if Santee Cooper doesn't implement its plan to reduce the risk of its 45% ownership in the Summer nuclear expansion project to approximately 20% prior to the ramp up in construction spending. While the cash flow required for the project has been increasing, progress towards reducing the risk and lowering Santee Cooper's interest in the project has taken place. The rating could also be lowered should new NRC regulatory changes significantly impact the cost of the expansion program.
The rating could also be lowered if the Authority's debt service coverage ratio falls below the 1.50 -1.60 times level on a sustained basis. The rating could also be lowered if there were political interference in the way Santee Cooper operates, affecting its financial strength or operating flexibility.
*Competitive rates for wholesale and retail customers in the service area
*Strong management of capital plan
*Governing board sets rates without external rate regulation; customers bear fuel cost risk with a monthly fuel cost adjustment mechanism
*Below-average power production costs and strong generation performance*Authority is owned by the State of South Carolina (General Obligation bonds rated Aaa with stable outlook by Moody's); authority fiscally separate from state
*Regulatory risk has heightened as NRC reacts to concerns post Fukushima about safety of US nuclear fleet. Thus far new regulation has been reasonable and managed
*AP 1000 reactor design used in Summer Nuclear Units 2 and 3 has first-in kind engineering risk
*Customer concentration, with a significant amount of sales under long-term contract to 2030 to the Central Electric Power Cooperative (Central-not rated by Moody's), an association of 20 electric distribution cooperatives
*Significant exposure to environmental regulatory uncertainty since more than 70% of energy is from coal-fired generation
*Significant large industrial load-a customer class that is more susceptible to any future risks related to retail competition or customer relocation
*Construction risk is present as Santee Cooper implements its share of the substantial new nuclear generation plan
The methodologies used in this rating were U.S. Public Power Electric Utilities With Generation Ownership Exposure published in November 2011, and Rating Methodology for Municipal Bonds and Commercial Paper Supported by a Borrower's Self-Liquidity published in January 2012. Please see the Credit Policy page on www.moodys.com for a copy of these methodologies.
The Global Scale Credit Ratings on this press release that are issued by one of Moody's affiliates outside the EU are endorsed by Moody's Investors Service Ltd., One Canada Square, Canary Wharf, London E 14 5FA, UK, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that has issued a particular Credit Rating is available on www.moodys.com.
For ratings issued on a program, series or category/class of debt, this announcement provides relevant regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides relevant regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides relevant regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.
Information sources used to prepare the rating are the following: parties involved in the ratings, parties not involved in the ratings, public information, and confidential and proprietary Moody's Investors Service's information.
Moody's considers the quality of information available on the rated entity, obligation or credit satisfactory for the purposes of issuing a rating.
Moody's adopts all necessary measures so that the information it uses in assigning a rating is of sufficient quality and from sources Moody's considers to be reliable including, when appropriate, independent third-party sources. However, Moody's is not an auditor and cannot in every instance independently verify or validate information received in the rating process.
Please see the ratings disclosure page on www.moodys.com for general disclosure on potential conflicts of interests.
Please see the ratings disclosure page on www.moodys.com for information on (A) MCO's major shareholders (above 5%) and for (B) further information regarding certain affiliations that may exist between directors of MCO and rated entities as well as (C) the names of entities that hold ratings from MIS that have also publicly reported to the SEC an ownership interest in MCO of more than 5%. A member of the board of directors of this rated entity may also be a member of the board of directors of a shareholder of Moody's Corporation; however, Moody's has not independently verified this matter.
Please see Moody's Rating Symbols and Definitions on the Rating Process page on www.moodys.com for further information on the meaning of each rating category and the definition of default and recovery.
Please see ratings tab on the issuer/entity page on www.moodys.com for the last rating action and the rating history.
The date on which some ratings were first released goes back to a time before Moody's ratings were fully digitized and accurate data may not be available. Consequently, Moody's provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com for further information.
Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.
Dan Aschenbach Senior Vice President Public Finance Group Moody'sInvestors Service, Inc.250 Greenwich StreetNew York, NY 10007 U.S.A. JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653Michael G. Haggarty Senior Vice President Public Finance Group JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653 Releasing Office: Moody's Investors Service, Inc.250 Greenwich StreetNew York, NY 10007 U.S.A. JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653(C) 2012 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved.
CREDIT RATINGS ISSUED BY MOODY'S INVESTORS SERVICE, INC. ("MIS") AND ITS AFFILIATES ARE MOODY'S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND CREDIT RATINGS AND RESEARCH PUBLICATIONS PUBLISHED BY MOODY'S ("MOODY'S PUBLICATIONS") MAY INCLUDE MOODY'S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES. MOODY'S DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL, FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS AND MOODY'S OPINIONS INCLUDED IN MOODY'S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. CREDIT RATINGS AND MOODY'S PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND CREDIT RATINGS AND MOODY'S PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. NEITHER CREDIT RATINGS NOR MOODY'S PUBLICATIONS COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY'S ISSUES ITS CREDIT RATINGS AND PUBLISHES MOODY'S PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.
ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY LAW, INCLUDING BUT NOT LIMITED TO, COPYRIGHT LAW, AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED,DISSEMINATED, REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT MOODY'S PRIOR WRITTEN CONSENT.
All information contained herein is obtained by MOODY'S from sources believed by it to be accurate and reliable. Because of the possibility of human or mechanical error as well as other factors, however, all information contained herein is provided "AS IS" without warranty of any kind. MOODY'S adopts all necessary measures so that the information it uses in assigning a credit rating is of sufficient quality and from sources MOODY'S considers to be reliable including, when appropriate, independent third-party sources. However, MOODY'S is not an auditor and cannot in every instance independently verify or validate information received in the rating process. Under no circumstances shall MOODY'S have any liability to any person or entity for (a) any loss or damage in whole or in part caused by, resulting from, or relating to, any error negligent or otherwise or other circumstance or contingency within or outside the control of MOODY'S or any of its directors, officers, employees or agents in connection with the procurement, collection, compilation, analysis, interpretation, communication, publication or delivery of any such information, or (b) any direct, indirect, special, consequential, compensatory or incidental damages whatsoever (including without limitation, lost profits), even if MOODY'S is advised in advance of the possibility of such damages, resulting from the use of or inability to use, any such information. The ratings, financial reporting analysis, projections, and other observations, if any, constituting part of the information contained herein are, and must be construed solely as, statements of opinion and not statements of fact or recommendations to purchase, sell or hold any securities. Each user of the information contained herein must make its own study and evaluation of each security it may consider purchasing, holding or selling.
NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY SUCH RATING OR OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY MOODY'S IN ANY FORM OR MANNER WHATSOEVER.
MIS, a wholly-owned credit rating agency subsidiary of Moody's Corporation ("MCO"), hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MIS have, prior to assignment of any rating, agreed to pay to MIS for appraisal and rating services rendered by it fees ranging from $1,500 to approximately $2,500,000. MCO and MIS also maintain policies and procedures to address the independence of MIS's ratings and rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold ratings from MIS and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually at www.moodys.com under the heading "Shareholder Relations -- Corporate Governance -- Director and Shareholder Affiliation Policy."
Any publication into Australia of this document is by MOODY'S affiliate, Moody's Investors Service Pty Limited ABN 61 003 399 657, which holds Australian Financial Services License no. 336969. This document is intended to be provided only to "wholesale clients" within the meaning of section 761G of the Corporations Act 2001. By continuing to access this document from within Australia, you represent to MOODY'S that you are, or are accessing the document as a representative of, a "wholesale client" and that neither you nor the entity you represent will directly or indirectly disseminate this document or its contents to "retail clients" within the meaning of section 761G of the Corporations Act 2001.
Notwithstanding the foregoing, credit ratings assigned on and after October 1, 2010 by Moody's Japan K.K. ("MJKK") are MJKK's current opinions of the relative future credit risk of entities, credit commitments, or debt or debt-like securities. In such a case, "MIS" in the foregoing statements shall be deemed to be replaced with "MJKK". MJKK is a wholly-owned credit rating agency subsidiary of Moody's Group Japan G.K., which is wholly owned by Moody's Overseas Holdings Inc., a wholly-owned subsidiary of MCO.
This credit rating is an opinion as to the creditworthiness or a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail investors. It would be dangerous for retail investors to make any investment decision based on this credit rating. If in doubt you should contact your financial or other professional adviser.