Timothy Winter, Analyst Gabelli & Company, says SCANA Corporation (SCG) is in a peak construction period. Come 2017, when the company’s development costs decline, he says it will have free cash flow and significantly improved earnings power.
“SCANA, which is South Carolina Electric & Gas, is building two new nuclear units at their existing Summer Nuclear Station in Jenkinsville, South Carolina,” Winter says. “We consider this to be one of the better rate-based growth stories because South Carolina legislation and regulation allows them to earn a return of 11% ROE on nuclear development that they true up every year.”
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When SCANA’s two plants come on line, Winter says they will be highly valued as low-cost baseload power plants with a different fuel than gas. Since the U.S. can no longer build coal plans, he says the addition of high baseload nuclear plants is highly desirable.
“For instance, should gas prices rise significantly then these plants would become tremendously valuable,” Winter says. “Nonetheless, we have earnings growth associated with the development of two new nuclear plants that is being supported by the state via legislation and regulation. And again, that’s a high-quality utility with growing earnings and dividend.”
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