Tags: Scana | utility | growth | SCG

Scana: High-Yielding Utility Offers Sunbelt Growth

By    |   Thursday, 03 May 2012 04:41 PM

Scana (SCG) is a high-yielding utility in a Sunbelt area primed for growth. Its foray into unregulated gas distribution should help it support cash flow, analysts say, despite unusuallly warm weather over the past winter, which dented heating demand.

Scana is holding company which owns companies in the gas business. Chief among those is SCE&G, which is engaged in the generation, transmission, distribution and sale of electricity to approximately 664,000 customers and the purchase, sale and transportation of natural gas to approximately 317,000 customers, all in South Carolina.

Scana owns PSNC Energy, which purchases, sells and transports natural gas to approximately 487,000 residential, commercial and industrial customers in North Carolina. The company also owns CGT, which operates as an open access, transportation-only interstate pipeline company in southeastern Georgia and in South Carolina

Scana unit SEMI markets natural gas primarily in the southeast and provides energy-related risk management services. SCANA Energy, a division of SEMI, sells natural gas to approximately 455,000 customers in Georgia’s natural gas market.

SCANA Energy’s contract to serve as Georgia’s regulated provider of natural gas has been renewed through Aug. 31, 2014. SCANA Energy’s total customer base represents an approximately 30 percent share of the approximately 1.5 million customers in Georgia’s deregulated natural gas market.

In addition, Scana unit SCI owns and operates a 500-mile fiber optic telecommunications network and ethernet network and data center facilities in South Carolina. Through a joint venture, SCI has an interest in an additional 2,280 miles of fiber in South Carolina, North Carolina and Georgia. SCI also provides tower site construction, management and rental services in South Carolina and North Carolina.

Scana today announced basic earnings for the first quarter of 2012 of $121 million, or 93 cents per share, compared to $128 million, or $1 per share, for the first quarter of 2011.

"Although we experienced one of the mildest winters in several decades, the impact to earnings was tempered by weather normalization mechanisms in our regulated subsidiaries,” said Jimmy Addison, Scana’s executive vice president and CFO. “The decline in first quarter earnings was primarily driven by an 8-cent swing in weather in our non-regulated natural gas business in Georgia.”

Scana has a market cap of $5.99 billion in a sector, multi-utilities, where the average company size is $4.71 billion. Its trailing 12-month P/E ratio is 15.37 and its five-year projected price-to-earnings-growth (PEG) ratio is 2.80.

Scana’s projected earnings per share growth for the coming year is 6.37 percent, higher than the sector average at 4.04 percent. It recently yielded 4.32 percent.

Base increases

Wall Street is generally bearish on Scana, offering up a flock of neutral ratings with a few sells, including from Goldman Sachs and from GMI. Standard & Poor’s rates the stock as neutral.

“We think above-average population growth in SCG's service areas will provide solid opportunities for further rate and rate base increases. SCG's cash flow generation has been solid, in our view,” S&P analysts wrote in mid-February, adding that the unregulated gas business in Georgia should provide more growth than its regulated businesses.

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Thursday, 03 May 2012 04:41 PM
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