-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SWx4LMv+7Es5yPhmPFVMwHPdBBGnBnJNddy+bXwPIWqyHfePc2x08jv9uwKyDMxh xxIyTi5OJq3kiooP/lr18w== 0000754737-03-000167.txt : 20031027 0000754737-03-000167.hdr.sgml : 20031027 20031027085115 ACCESSION NUMBER: 0000754737-03-000167 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20030930 ITEM INFORMATION: Financial statements and exhibits ITEM INFORMATION: Regulation FD Disclosure FILED AS OF DATE: 20031027 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SCANA CORP CENTRAL INDEX KEY: 0000754737 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC & OTHER SERVICES COMBINED [4931] IRS NUMBER: 570784499 STATE OF INCORPORATION: SC FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-08809 FILM NUMBER: 03957499 BUSINESS ADDRESS: STREET 1: 1426 MAIN ST STREET 2: MAIL CODE - 051 CITY: COLUMBIA STATE: SC ZIP: 29201 BUSINESS PHONE: 8032179000 MAIL ADDRESS: STREET 1: 1426 MAIN STREET STREET 2: MAIL CODE - 051 CITY: COLUMBIA STATE: SC ZIP: 29218 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PUBLIC SERVICE CO OF NORTH CAROLINA INC CENTRAL INDEX KEY: 0000081025 STANDARD INDUSTRIAL CLASSIFICATION: NATURAL GAS DISTRIBUTION [4924] IRS NUMBER: 562128483 STATE OF INCORPORATION: SC FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-11429 FILM NUMBER: 03957498 BUSINESS ADDRESS: STREET 1: 1426 MAIN STREET CITY: COLUMBIA STATE: SC ZIP: 29201 BUSINESS PHONE: 8032179188 MAIL ADDRESS: STREET 1: 1426 MAIN STREET CITY: COLUMBIA STATE: SC ZIP: 29201 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SOUTH CAROLINA ELECTRIC & GAS CO CENTRAL INDEX KEY: 0000091882 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC & OTHER SERVICES COMBINED [4931] IRS NUMBER: 570248695 STATE OF INCORPORATION: SC FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-03375 FILM NUMBER: 03957497 BUSINESS ADDRESS: STREET 1: 1426 MAIN ST CITY: COLUMBIA STATE: SC ZIP: 29201 BUSINESS PHONE: 8032179000 MAIL ADDRESS: STREET 1: 1426 MAIN ST CITY: COLUMBIA STATE: SC ZIP: 29201 8-K 1 october8-k.txt FORM 8-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported): October 24, 2003 Commission Registrant, State of Incorporation I.R.S. Employer File Number Address and Telephone Number Identification No. - ----------- ---------------------------- ---------------- 1-8809 SCANA Corporation 57-0784499 (a South Carolina Corporation) 1426 Main Street, Columbia, South Carolina 29201 (803) 217-9000 1-3375 South Carolina Electric & Gas Company 57-0248695 (a South Carolina Corporation) 1426 Main Street, Columbia, South Carolina 29201 (803) 217-9000 1-11429 Public Service Company of North Carolina, Incorporated 56-2128483 (a South Carolina Corporation) 1426 Main Street, Columbia, South Carolina 29201 (803) 217-9000 Not applicable - ------------------------------------------------------------------------------- (Former name or former address, if changed since last report) This combined Form 8-K is separately filed by SCANA Corporation, South Carolina Electric & Gas Company and Public Service Company of North Carolina, Incorporated. Information contained herein relating to any individual company is filed by such company on its own behalf. Each company makes no representation as to information relating to other companies. Item 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS (c) Exhibits Exhibit 99.1 Press release dated October 24, 2003 Exhibit 99.2 Transcript of Conference Call conducted October 24, 2003 Item 12. RESULTS OF OPERATIONS AND FINANCIAL CONDITION On October 24, 2003, SCANA Corporation, issued the press release attached hereto as Exhibit 99.1 and conducted a conference call, the transcript of which is attached hereto as Exhibit 99.2. The press release discloses a non-GAAP measure, GAAP-adjusted net earnings from operations, which excludes from net income (loss) (i) the cumulative effects of mandated changes in accounting principles and (ii) the effects of sales of certain investments and impairment charges related to certain investments. Management believes that GAAP-adjusted net earnings from operations provides a meaningful representation of the Company's fundamental earnings power and improves comparability of period-over-period financial performance. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, each of the registrants has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. SCANA Corporation South Carolina Electric & Gas Company Public Service Company of North Carolina, Incorporated (Registrants) October 27, 2003 By: s/James E. Swan, IV James E. Swan, IV Controller EXHIBIT INDEX Number 99.1 Press release dated October 24, 2003. 99.2 Transcript of conference call conducted October 24, 2003. EX-99 3 exh99-1.txt PRESS RELEASE Exhibit 99.1 SCANA Corporation South Carolina Electric & Gas Company Public Service Company of North Carolina, Incorporated 1426 Main Street Columbia, South Carolina 29201 Media Contact: Investor Contact: Cathy Love John Winn (803) 217-7777 (803)217-9240 clove@scana.com jwinn@scana.com SCANA Reports Third Quarter 2003 Financial Results, Updates Earnings Guidance Columbia, SC, October 24, 2003...SCANA Corporation (NYSE: SCG) today announced financial results for the three months and nine months ended September 30, 2003, revised the company's 2003 earnings guidance and provided initial guidance for 2004 earnings. For the three months ended September 30, 2003, SCANA's reported earnings were $84 million, or 76 cents per share, compared to $78 million, or 74 cents per share, in the same period in 2002. Results for the third quarter of 2003 include an after-tax gain of $2 million, or 2 cents per share, related to the previously announced sale of a portion of the Company's investment in ITC Holding Company. Excluding this gain from reported earnings, GAAP-adjusted net earnings from operations for the third quarter of 2003 were $82 million, or 74 cents per share. SCANA's reported earnings (loss) are prepared in accordance with Generally Accepted Accounting Principles (GAAP). SCANA's management believes that, in addition to reported earnings (loss) under GAAP, the GAAP-adjusted net earnings from operations provides a meaningful representation of the Company's fundamental earnings power and improves comparability of period-over-period financial performance. A reconciliation of reported (GAAP) earnings (loss) per share to GAAP-adjusted net earnings from operations per share for the three months and nine months ended September 30, 2003 and 2002 is provided in the following table:
3 Months Ended 9 Months Ended September 30, September 30, 2003 2002 2003 2002 ---- ---- ---- ---- Reported (GAAP) Earnings (Loss) per Share $.76 $.74 $2.18 $(1.76) Add: Impairment Charge on Knology Investment - - .04 - Impairment Charge on ITC^DeltaCom Investment - - - .07 Impairment Charge on Deutsche Telekom Investment - - - 1.52 Cumulative Effect of Accounting Change re: Goodwill - - - 2.20 Deduct: Gain on Sale of ITC Holding Company Investment .02 - .35 - Gain on Sale of Radio Network - - - .09 Gain on Sale of Deutsche Telekom Stock - - - .10 GAAP-Adjusted Net Earnings From Operations per Share $.74 $.74 $1.87 $1.84
"Our third quarter per share results were adversely affected by abnormally cool summer weather, higher operating expenses, continued volatility in wholesale natural gas markets and dilution associated with the public offering of 6 million shares of common stock last October, " said Kevin Marsh, senior vice president and chief financial officer. "These negative factors offset the favorable impact of the 5.8 percent retail electric rate increase that was effective in February 2003, improved results in our natural gas marketing business in Georgia and lower interest expense." The impact of the cooler summer weather reduced third quarter after-tax electric sales margins by 10 cents per share compared to the same quarter last year. On a weather-normalized basis, third quarter 2003 after-tax electric sales margins would have been 8 cents per share higher. Marsh noted that SCANA's businesses did not sustain any damage from Hurricane Isabel, which hit North Carolina's Outer Banks in mid-September and moved up the Eastern Seaboard, resulting in a number of fatalities and injuries, causing extensive property damage and knocking out power to millions of people. Reported earnings for the nine months through September 30, 2003 were $242 million, or $2.18 per share. Those results included a net after-tax gain of $34 million, or 31 cents per share, related to the continued monetization and valuation of the Company's telecommunications assets. For the nine months ended September 30, 2002, the Company had a reported loss of $184 million, or $1.76 per share. Those prior period results included impairment charges relating to the Company's telecommunications investments totaling $166 million, or $1.59 per share, a non-cash, after-tax impairment charge of $230 million, or $2.20 per share, related to a mandated change in the method of accounting for goodwill associated with the Company's acquisition of PSNC Energy in 2000, and a net after-tax gain of $19 million, or 19 cents per share, from the sale of telecommunications assets. Excluding from reported earnings in both periods the effects of the monetization and valuation of telecommunications assets and the mandated accounting change, GAAP-adjusted net earnings from operations for the nine months ended September 30, 2003 were $208 million, or $1.87 per share, compared to $193 million, or $1.84 per share, for the same period in 2002. "On a year-to-date basis through September, milder than normal weather reduced after-tax electric sales margins by 11 cents per share," said Marsh. "Since our original earnings guidance for 2003 assumed normal weather, we are revising our 2003 guidance for GAAP-adjusted net earnings from operations from a range of $2.50 - $2.60 per share to a range of $2.45 - $2.55 per share to reflect the impact of the milder than normal weather through September." For 2004, the Company announced initial earnings guidance in the range of $2.55 - - $2.75 per share. "As a result of the uncertain economic outlook and the prospect of continued high prices of natural gas relative to alternative fuels in industrial interruptible markets, we are reducing our goal for average annual earnings growth from a range of 6 - 8 percent to a range of 4 - 6 percent," said Marsh. "We believe this slightly lower growth target is more realistic in light of today's challenging business environment." "Notwithstanding the impact of milder weather on electric sales margins, we are pleased with the results we have achieved through the first nine months of the year," said Marsh. "As we look ahead to the remainder of this year and to 2004, we will continue to execute our strategic plan, which is focused on providing high quality services to our customers and increasing value for our shareholders over the long term." REGULATED OPERATIONS South Carolina Electric & Gas Company Reported earnings in the third quarter of 2003 at South Carolina Electric & Gas Company (SCE&G), SCANA's principal subsidiary, were $88 million, or 80 cents per share, compared to $86 million, or 82 cents per share, in the same quarter last year. Milder weather, higher operating expenses and share dilution offset the favorable impact of customer growth and the retail electric rate increase that was effective in February 2003. The weather in SCE&G's electric service area this past summer, as measured by cooling degree days, was 13 percent milder compared to the warmer-than-normal summer in 2002. The milder weather was the primary factor contributing to a 5.4 percent decline in total kilowatt-hour sales of electricity in the third quarter of 2003 compared to the same period last year. Residential sales were down 8.7 percent and commercial sales were down 5.4 percent. Industrial sales were up 1.9 percent. At September 30, 2003, SCE&G was serving approximately 567,000 electric customers, an increase of about 2.0 percent over the past year. PSNC Energy PSNC Energy, the Company's North Carolina-based retail natural gas distribution subsidiary, reported a seasonal loss of $7 million, or 6 cents per share, in the third quarter of 2003, relatively unchanged compared to a loss of $6 million, or 6 cents per share, in the same quarter in 2002. Higher sales margins, driven primarily by customer growth, were offset by higher operating expenses. PSNC Energy's customer base, which totaled approximately 378,000 at September 30, 2003, is growing at an annual rate of about 4 percent. South Carolina Pipeline Corporation South Carolina Pipeline, SCANA's intrastate gas transmission subsidiary, reported breakeven results in the third quarter of 2003 compared to earnings of $4 million, or 3 cents per share in the same quarter last year. That decline reflects lower margins resulting from intense competition with alternative fuels in industrial interruptible markets. Pipeline's earnings were also negatively affected by reduced demand for natural gas as a fuel for electric generation as a result of the milder weather. NON-REGULATED OPERATIONS SCANA Energy - Georgia SCANA Energy, the Company's retail natural gas marketing business in Georgia, reported breakeven results in the third quarter of 2003 compared to a loss of $4 million, or 3 cents per share, in the third quarter of 2002. That improvement was due primarily to improved sales margins resulting from customer growth and more favorable market conditions, which more than offset the negative impact of higher operating and customer service expenses. At September 30, 2003, SCANA Energy was serving more than 350,000 non-regulated customers, maintaining its position as the second largest natural gas marketer in Georgia with about a 25 percent market share. The Company also serves about 31,000 low income and credit challenged customers through its Regulated Division. Corporate and Other Non-Regulated SCANA's other non-regulated businesses had combined reported earnings of $2 million, or 2 cents per share, in the third quarter of 2003. Those results include an additional after-tax gain of $2 million, or 2 cents per share, related to the sale of a portion of the Company's investment in ITC Holding Company, which was completed in the second quarter of 2003. Excluding this gain, 2003 GAAP-adjusted net earnings from operations for these businesses were breakeven in the third quarter of 2003. By comparison, these non-regulated businesses had a combined reported loss of $2 million, or 2 cents per share, in the third quarter of 2002. Lower interest expense contributed to that improvement. 2003 - 2004 EARNINGS OUTLOOK As a result of the negative impact of milder than normal weather on after-tax electric sales margins through the first nine months of 2003, the Company is lowering its guidance for 2003 GAAP-adjusted net earnings from operations from a range of $2.50 - $2.60 per share to a range of $2.45 - $2.55 per share. The revised 2003 guidance assumes normal weather in the Company's electric and natural gas service areas during the fourth quarter of 2003 and excludes any potential gains or losses from investing activities or sales of certain assets. Taking into consideration the net effects of the monetization and valuation of telecommunications investments recorded during the first nine months of 2003, the Company anticipates that reported earnings in 2003 will be 31 cents per share higher than the GAAP-adjusted net earnings from operations. For 2004, the Company estimates that earnings will be in the range of $2.55 - $2.75 per share. The 2004 guidance assumes normal weather in the Company's electric and natural gas service areas and excludes any potential gains or losses from investing activities or sales of certain assets. Other factors that may impact future earnings include changes in interest rates, the performance of the Company's pension plan assets, wholesale natural gas prices and other factors discussed in the Company's Securities and Exchange Commission filings. Due to the uncertainty of these factors and the slower than expected improvement in the national and regional economy, the Company is revising its goal for average annual earnings growth from a range of 6-8 percent to a range of 4-6 percent. PROFILE SCANA Corporation, a Fortune 500 company headquartered in Columbia, SC, is an energy-based holding company principally engaged, through subsidiaries, in electric and natural gas utility operations, telecommunications and other energy-related businesses. Information about SCANA and its businesses is available on the Company's website at www.scana.com. CONFERENCE CALL NOTICE SCANA will host its quarterly conference call for financial analysts at 10:00 a.m. Eastern Time today. The call-in numbers for the conference call are 1-800-374-2396 (Domestic) and 1-706-679-5430 (International). Participants should call in 5 to 10 minutes prior to the scheduled start time. There is no password or I.D. number required. A tape recording of the conference call will be available approximately 2 hours after conclusion of the call through November 7, 2003. The telephone replay numbers are 1-800-642-1687 (Domestic) and 1-706-645-9291 (International). The conference I.D. number for the telephone replay is 3061729. All interested persons, including investors, media and the general public, may listen to a live web cast of the conference call at either of the following internet web sites: www.scana.com or www.videonewswire.com/SCG/102403. Participants should go to either of these web sites at least 10 minutes prior to the call start time and follow the instructions. A replay of the conference call will be available approximately 2 hours after conclusion of the call through November 7, 2003 on either of these web sites. SAFE HARBOR STATEMENT This press release includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Those statements include statements regarding the intent, belief or current expectations of the Company and its management. Although SCANA Corporation believes that its expectations are based on reasonable assumptions, it can give no assurance that its goals will be achieved. Readers are cautioned that any such forward-looking statements are not guarantees of future performance and involve a number of risks and uncertainties, and that actual results could differ materially from those indicated by such forward-looking statements. Important factors that could cause actual results to differ materially from those indicated by such forward-looking statements include, but are not limited to, the following: (1) that the information is of a preliminary nature and may be subject to further and/or continuing review and adjustment, (2) changes in the utility and non-utility regulatory environment, (3) changes in the economy, especially in areas served by the Company's subsidiaries, (4) the impact of competition from other energy suppliers, including competition from alternative fuels in industrial interruptible markets, (5) growth opportunities for the Company's regulated and diversified subsidiaries, (6) the results of financing efforts, (7) changes in the Company's accounting policies, (8) weather conditions, especially in areas served by the Company's subsidiaries, (9) performance of and marketability of the Company's investments in telecommunications companies, (10) performance of the Company's pension plan assets, (11) inflation, (12) changes in environmental regulations, (13) volatility in commodity natural gas markets and (14) the other risks and uncertainties described from time to time in the Company's periodic reports filed with the Securities and Exchange Commission. The Company disclaims any obligation to update any forward-looking statements. # # #
FINANCIAL AND OPERATING INFORMATION Consolidated Statements of Operations (Millions, except per share amounts) (Unaudited) Three Months Ended Nine Months Ended September 30, September 30, 2003 2002 2003 2002 Operating Revenues: Electric $429 $424 $1,121 $1,075 Gas-Regulated 155 136 775 587 Gas-Non-regulated 167 134 650 503 --- --- --- --- Total Operating Revenues 751 694 2,546 2,165 --- --- ----- ----- Operating Expenses: Fuel and purchased power 110 112 297 300 Gas purchased for resale 262 215 1,127 828 Other operation and maintenance 135 126 420 383 Depreciation and amortization 60 55 180 163 Other taxes 34 32 104 95 -- --- --- -- Total Operating Expenses 601 540 2,128 1,769 --- --- ----- ----- Operating Income 150 154 418 396 --- --- --- --- Other Income (Expense), Net 19 17 101 (170) Interest Charges, Net 48 49 149 151 Income Tax Expense 35 41 120 20 Preferred Dividend Requirement of SCE&G - Mandatorily Redeemable Preferred Securities - (1) (2) (3) Preferred Stock Cash Dividends of SCE&G (2) (2) (6) (6) --- ----- --- --- Income Before Cumulative Effect of Accounting Change 84 78 242 46 Cumulative Effect of Accounting Change, Net of Taxes __- __- ___- (230) - - - ----- Net Income (Loss) $ 84 $ 78 $ 242 $ (184) ----- -- ---- ---- Common Stock Data: Earnings Per Share Before Cumulative Effect of Accounting Change $.76 $ .74 $ 2.18 $ .44 Cumulative Effect of Accounting Change - - __ - (2.20) ----- ---- ---- -------- Reported Earnings (Loss) Per Share $.76 $ .74 $ 2.18 $(1.76) ---- --- ---- ------- Wtg. Avg. Common Shares Outstanding 110.9 104.7 110.9 104.7
Consolidated Condensed Balance Sheets (Millions) (Unaudited) September 30, December 31, 2003 2002 ASSETS Utility Plant, Net $5,906 $5,474 Other Property and Investments 315 326 Current Assets 729 1,137 Deferred Debits 838 809 --- --- Total Assets $7,788 $7,746 ----- ----- CAPITALIZATION AND LIABILITIES Capitalization: Common Equity $2,306 $2,177 Preferred Stock 115 115 SCE&G Obligated Mandatorily Redeemable Preferred Stock - 50 Long-term Debt, Net 2,852 2,834 ----- ----- Total Capitalization 5,273 5,176 ------ ----- Current Liabilities: Short-Term Borrowings 242 209 Current Portion of Long-Term Debt 402 413 Other Current Liabilities 474 651 --- --- Total Current Liabilities 1,118 1,273 ----- ----- Deferred Credits 1,397 1,297 ----- ----- Total Capitalization and Liabilities $7,788 $7,746 ----- -----
Reported (GAAP) Earnings (Loss) per Share by Company: (Unaudited) Three Months Ended Nine Months Ended September 30, September 30, 2003 2002 2003 2002 SC Electric & Gas $.80 $.82 $1.57 $1.68 PSNC Energy (.06) (.06) .15 (2.07) SC Pipeline .00 .03 .04 .01 SCANA Energy-Georgia (1) .00 (.03) .15 .09 Corporate and Other Non-regulated, Net (1) .02 (.02) .27 (1.47) --- ----- ------- ------ Reported (GAAP) Earnings (Loss) per Share $.76 $.74 $2.18 $(1.76) ---- ---- ---- ------- GAAP-Adjusted Net Earnings (Loss) From Operations per Share by Company: (Unaudited) 2002 2003 2002 2003 SC Electric & Gas $.80 $.82 $1.57 $1.68 PSNC Energy (.06) (.06) .15 .13 SC Pipeline .00 .03 .04 .01 SCANA Energy-Georgia (1) .00 (.03) .15 .09 Corporate and Other Non-regulated, Net (1) .00 (.02) (.04) (.07) --- ----- ----- ----- GAAP-Adjusted Net Earnings from Operations per Share $.74 $.74 $1.87 $1.84 ---- ---- ---- ----
(1) Current and prior period results reflect a reclassification of certain interruptible operations from SCANA Energy-Georgia to SCANA Energy Marketing
Variances in Reported (GAAP) Earnings (Loss) per Share: (Unaudited) Three Months Ended Nine Months Ended September 30 September 30 2002 Reported (GAAP) Earnings (Loss) Per Share $.74 $(1.76) Variances: Electric Margin: Change in Rates .14 .32 Customer Growth .01 .08 Weather (.10) (.11) Total Electric Margin .05 .29 Gas Margin .03 .21 O&M Expense (.06) (.22) Depreciation Expense (.03) (.10) Property Taxes (.02) (.06) Interest Expense (net of AFC) .01 .01 Additional Shares Outstanding (Dilution) (.03) (.13) Other, Net .05 .03 --- --- Variance in GAAP-Adjusted Net Earnings From Operations per Share .00 .03 --- --- Gain on Sale of ITC Holding Company Investment .02 .35 Impairment Charge on Knology Investment - (.04) Gain on Sale of Radio Network - (.09) Impairment Charge on ITC^DeltaCom Investment - .07 Cumulative Effect of Accounting Change re: Goodwill - 2.20 Impairment Charge on Deutsche Telekom Investment - 1.52 Gain on Sale of Deutsche Telekom Stock - (.10) -------- ----- Variance in Reported (GAAP) Earnings per Share .02 3.94 ------- ---- 2003 Reported (GAAP) Earnings Per Share $.76 $2.18 ---- ---- Consolidated Operating Statistics Three Months Ended September 30, Nine Months Ended September 30, 2003 2002 % Change 2003 2002 % Change Electric Operations: Sales (Million KWH): Residential 2,071 2,269 (8.7) 5,383 5,498 (2.1) Commercial 1,907 2,016 (5.4) 5,034 5,082 (0.9) Industrial 1,702 1,671 1.9 4,938 4,909 0.6 Other 139 156 (10.9) 392 413 (5.1) --- --- --- --- Total Retail 5,819 6,112 (4.8) 15,747 15,902 (1.0) Wholesale 516 588 (12.2) 1,464 1,699 (13.8) --- --- ----- ----- Total Sales 6,335 6,700 (5.4) 17,211 17,601 (2.2) ----- ----- ------ ------ Customers (Period-End) 566,996 556,697 1.9 Natural Gas Operations: Sales (MillionTherms): Residential 42 36 16.7 440 379 16.1 Commercial 57 46 23.9 278 234 18.8 Industrial 289 362 (20.2) 841 995 (15.5) --- --- --- --- Total Retail 388 444 (12.6) 1,559 1,608 (3.0) Sales for Resale 21 57 (63.2) 115 216 (46.8) Transportation Volumes 84 78 7.7 254 236 7.6 ----- -- --- --- Total Sales 493 579 (14.9) 1,928 2,060 (6.4) --- --- ----- ----- Customers (Period-End) (2) 1,039,256 990,717 4.9 (2) Current and prior period-end natural gas customers reflects a reclassification of customers at PSNC Energy implemented during 2002. Weather Data - Electric Service Territory: Three Months Ended September 30, Nine Months Ended September 30, Actual Percent Change Actual Percent Change 2003 vs 2002 vs Normal 2003 vs 2002 vs Normal Heating Degree Days 8 NM NM 1,390 14.4 4.4 Cooling Degree Days 1,273 (12.7) (7.9) 1,986 (15.0) (9.0) [NM = Not Meaningful] Security Credit Ratings (as of 10/24/03): Standard & Poor's Moody's Rating Outlook Rating Outlook SCANA Corporation: Corporate/Issuer Rating A- Stable A3 Stable Senior Unsecured BBB+ Stable A3 Stable South Carolina Electric & Gas Company: Corporate/Issuer Rating A- Stable A2 Stable Senior Secured A- Stable A1 Stable Commercial Paper A-2 Stable P-1 Stable PSNC Energy: Senior Unsecured A- Stable A2 Stable Commercial Paper A-2 Stable P-1 Stable
EX-99 4 exh99-2.txt CONFERENCE CALL TRANSCRIPT Exhibit 99.2 SCANA CORPORATION Moderator: John Winn October 24, 2003 9:00 am CT Operator: Good morning ladies and gentlemen. Thank you for standing by. My name is (Amy) and I will be your conference facilitator today. At this time I would like to welcome everyone to the Scana Corporation conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks there will be a question and answer period. At that time if you would like to ask a question, simply press Star then the number 1 on your telephone keypad. If you would like to withdraw your question, press Star then the number 2. As a reminder this conference call is being recorded on October 24, 2003. Anyone who does not consent to the taping may drop off the line at this time. I would now like to turn the call over to John Winn, Director of Investor Relations and Chairholder Services. John Winn: Thank you (Amy) and good morning. I'd like to welcome everyone to our third quarter earnings conference call, including those who are joining us on the Web broadcast over the Internet. Earlier this morning we issued a press release announcing comparative financial results for the third quarter and first nine months of 2003. In just a minute Kevin Marsh, Scana's Senior Vice President and Chief Financial Officer, will review those results and respond to questions. Before I turn the call over to Kevin I do have several administrative items to review. Those of you who are on our mailing list should have received a copy of our earnings press release this morning either by fax or email. If you did not get the release please call our Investor Relations office at (803) 217-9466 and we will be glad to get one to you. You can also let us know at that time if you want to be added to our press release distribution list or switch from fax to electronic delivery of future press releases. All of our press releases including today's earnings release are available on our web site at www.scana.com. A recording of today's conference call will be available for replay starting approximately two hours after conclusion of the call. The replay may be accessed through November 7 either by telephone or on the Internet at Scana's web site. The dial-in number and conference ID number for the telephone replay are provided in the press release. As a reminder, the reported earnings that we refer to in our quarterly earnings press release and in this conference call are prepared in accordance with generally accepted accounting principles. In addition to these GAAP numbers we also provide where applicable another measure of our financial results that excludes from those GAAP numbers certain gains or charges as described in our press release. In compliance with Securities and Exchange Commission guidelines relating to use of non-GAAP financial measures, we will continue to provide where appropriate this additional financial measure which is referred to as GAAP adjusted net earnings from operations together with the reconciliation to the GAAP numbers. We believe this non-GAAP financial measure provides additional clarity to our earnings analysis, is more indicative of the company's fundamental earnings power, and improves comparability of period over period financial performance. Finally I'd like to caution everyone that certain statements that may be made during today's call which are not statements of historical fact are considered forward-looking statements and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those indicated by such forward-looking statements, including the risks and uncertainties discussed in the company's Securities and Exchange Commission filings. The company does not recognize an obligation to update any forward-looking statements. I will now turn the call over to Kevin. Kevin Marsh: Thanks John and good morning. I would also like to welcome each of you to our call. For the third quarter of 2003, Scana reported GAAP earnings of $84 million or 76 cents per share. Those earnings included an additional after-tax gain of $2 million or 2 cents per share related to the previously announced sale of (Intercall) by ITC Holding Company in the second quarter of this year. Excluding that gain, GAAP adjusted net earnings from operations in the third quarter were $82 million or 74 cents per share, essentially unchanged compared to reported earnings in the third quarter of last year of $78 million or 74 cents per share. Our third quarter results were negatively affected by abnormally cool summer weather, high natural gas prices relative to alternative fuels, and industrial interruptible markets, increases in operating expenses and share dilution. These factors offset the favorable impact of higher electric rates, improved results in our retail natural gas marketing business in Georgia, and lower interest expense. We recorded a favorable variance of 5 cents per share in our third quarter after-tax electric margin. Positive variances of 14 cents per share from the 5.8% retail electric rate increase that was effective in February of this year and 1 cent per share from customer growth were partially offset by 10 cents per share unfavorable variance due to milder weather. As measured by cooling degree days, the weather in our electric service area during the third quarter was 13% milder than the warmer than normal weather we experienced in the third quarter last year. The milder weather was reflected in a 5.4% decline in total kilowatt hour sales of electricity. If we had experienced normal weather during the quarter we estimate that our after-tax electric sales margin would have been 8 cents per share higher. Our consolidated after-tax natural gas sales margin was up 3 cents per share compared to the third quarter last year. That increase was primarily attributable to more favorable market conditions in our retail natural gas marketing business in Georgia. On a consolidated basis, total firm sales of natural gas were down about 15% compared to the third quarter of last year. That decrease was driven by a 20% decline in industrial sales due primarily to intense competition with lower priced alternative fuels and interruptible markets. Other factors impacting third quarter earnings were increases in operating and maintenance expenses of 6 cents per share, higher depreciation expense of 3 cents per share, and higher property taxes of 2 cents per share. Dilution associated with the issuance of 6 million shares of common stock through a public offering in October of last year reduced quarterly per share earnings by 3 cents. We did record a favorable variance of 1 cent per share from lower interest expense for the quarter due to a combination of lower interest rates and debt refinancings and redemptions completed during the past year. Scana's reported earnings for the first nine months of 2003 were $242 million or $2.18 per share compared to the reported loss of $184 million or $1.76 per share for the same period last year. GAAP adjusted net earnings from operations for the first nine months of 2003 were $208 million or $1.87 per share compared to $193 million or $1.84 per share for the same nine month period in 2002. Reconciliations of reported earnings to GAAP adjusted net earnings from operations as well as variance explanations for the quarter and year to date periods are included in our press release. And now some comments on our earnings guidance for 2003 and 2004. The milder than normal weather we experienced in the first nine months of 2003 reduced our after-tax electric sales margin by 11 cents per share with 8 cents of that reduction occurring in the third quarter. Since our original earning guidance for 2003 was based on normal weather, we are reducing our 2003 guidance for GAAP adjusted net earnings from operations from a range of $2.50 to $2.60 per share to a range of $2.45 to $2.55 per share to reflect the impact of milder than normal weather through September. If the economy and our electric and natural gas service areas remain soft and if we continue to experience high natural gas prices relative to alternative fuels and industrial interruptible markets through the fourth quarter, the full year earnings could be in the lower half of that revised range. Beyond 2003 we are projecting average annual earnings growth of 4% to 6% compared to our previous earnings growth target of 6% to 8%. We believe this slightly lower annual growth rate is more realistic given the slower than expected recovery we've seen in the national and regional economy and the prospect of continued high natural gas prices relative to alternative fuels and industrial interruptible markets. On that basis our initial guidance for 2004 earnings is in a range of $2.55 to $2.75 per share. Our earnings guidance assumes that we experience normal weather in our electric and natural gas service areas during the fourth quarter of 2003 and in 2004. Other factors which may impact our future earnings include changes in interest rates, the performance of our pension plan assets, the relative level of wholesale natural gas prices, and other factors discussed in our Securities and Exchange Commission filings. As we have said before, attaining our annual earnings growth target is not dependent on completing any mergers or acquisitions nor does it assume the addition of any new businesses. We believe we can achieve that growth by continuing to work the strategic plan we have in place today which is focused on increasing the profitability of our existing businesses. Key earnings drivers for us over the next several years include maintaining historical growth rates in our electric and natural gas customer base, improving industrial gas sales and margins at South Carolina Pipeline, experiencing a sustained economic recovery in our electric and natural gas service areas, maintaining consistent earnings in our non-regulated natural gas marketing business in Georgia, declining capital expenditures and allow us to become cash flow positive after completion of the Jasper County Electric Plant in the spring of 2004, continued paydown of debt from internal cash flow and with proceeds from monetization of our remaining telecommunications investments, and recovery of our remaining expenditures required to complete the Jasper plant as well as the cost of building the backup dam at Lake Murray. Our dividend policy remains unchanged. Our goal is to increase our annual common stock cash dividend at a rate that is consistent with the growth in GAAP adjusted net earnings from operations while maintaining a 50% to 55% payout ratio. Our current quarterly dividend rate is 34-1/2 cents per share which results in an indicated annual dividend of $1.38 per share. As we look to 2004 and beyond, we will remain focused on fundamentals of operating our businesses efficiently and profitably for the long term maintaining our position as an industry leader in customer satisfaction and providing increasing value for our shareholders. Now I'd like to review third quarter results for our major businesses. First I will review results in our regulated businesses. As we have noted before, these operations represent more than 90% of Scana's total assets and has consistently contributed more than 90% of our GAAP adjusted net earnings from operations. Reported earnings in the third quarter in South Carolina Electric and Gas Company, our principal subsidiary, were $88 million or 80 cents per share compared to $86 million or 82 cents per share in the same quarter in 2002. As with Scana, the major factors impacting third quarter earnings at SCE&G were milder weather, increases in operating expenses, and share dilution. Those factors offset the favorable impact of higher electric rates and solid growth in our electric customer base. As I mentioned earlier, total kilowatt hour sales of electricity were down 5.4% in the third quarter of this year compared to the same quarter last year. That decline reflected the milder summer weather and a soft economy. Residential sales which is the most weather sensitive were down nearly 9%, commercial sales were down about 5-1/2%, industrial sales rose about 2%, wholesaler all systems sales were down 12% reflecting the milder weather and the sluggish economy. At September 30, 2003 SCE&G were serving approximately 567,000 electric customers and about 270,000 natural gas customers. Over the past year SCE&G's electric customer base has increased about 2% while the number of natural gas customers increased about 1-1/2%. SCE&G's summer nuclear station was shut down on October 10 for a normal refueling and maintenance outage. This outage is scheduled to last about 36 days and is currently on schedule. On October 20 a routine inspection revealed a small amount of dry boron powder on a non-corrosive, stainless steel injection line pipe attached to one of the plant's three reactor coolant pumps. Boron is added to the coolant to help regulate the core and control the nuclear reaction and is also used in leak detection. Follow up examinations revealed two surface crack indications at a weld attaching a 1-1/2 inch pipe to the pump. We reported this problem to the NRC that same day. There was no impact to safety or plant operations from this leak. Subsequent inspections of the other two reactor coolant pumps have been completed and no problems were found. Plant personnel have decided to replace a small section of the pipe and put in a new weld. The work should take about a day to complete and will be this weekend. Similar repairs of this type which are minor in nature have been performed twice at the plant in the past. This action will not alter the outage timeline nor will it materially impact the total cost of the outage. The approval process as it relates to the company's August 2002 application to the NRC for a 20 year license extension for summer station is now more than halfway complete. In a draft environmental impact statement issued in July, the NRC found that there are no adverse environmental reasons that would prevent the plant from operating over the extended period of time. Public hearings on the license extension were held at the plant in August with no major issues. We expect a final decision from the NRC on our application around the middle of next year. Renewal of the plant's license would extend its operating life from 2022 to 2042. South Carolina was very fortunate not to have received any significant damage from Hurricane Isabel which came ashore in North Carolina's outer banks in mid-September and moved northward. Tragically, this tremendous storm resulted in a number of deaths and injuries and caused extensive damage to both personal and business property including electric transmission and distribution systems up the East Coast. In response to the widespread power outages, SCE&G sent two storm teams totaling more than 140 personnel to assist with power restoration in parts of North Carolina and Virginia. These crews worked for nearly two weeks under extremely adverse conditions to repair and rebuild portions of the electric systems destroyed by the hurricane. We at Scana greatly remember the timely assistance we received of utilities after Hurricane Hugo caused significant damage to our electric distribution system in 1989 so we were pleased to be able to lend a helping hand to restore electricity and some semblance of normalcy in areas devastated by this terrible storm. PSNC Energy, our North Carolina retail natural gas distribution company, reported a seasonal loss of $7 million or 6 cents per share in the third quarter of 2003, relatively unchanged compared to the third quarter of 2002. Improved sales margins driven primarily by customer growth were offset by higher operating expenses. Since 1996 PSNC Energy has been working to extend natural gas service to areas of western North Carolina. This expansion has been made possible through the North Carolina Natural Gas Expansion Act which was enacted in 1991 and provides funds to extend natural gas service into areas of the state that would otherwise be uneconomical to serve. In July 2003 PSNC Energy began the final phase of its western North Carolina expansion which includes the addition of 22 miles of transmission pipeline and 23 miles of distribution pipeline that will stretch into the cities of Dillsboro, Cherokee, and Bryson City which are located in the mountainous areas of western North Carolina. A unique element of this project includes running service to the Cherokee Indian Reservation. Construction has been completed up to the Cherokee City gate. The remaining installation of 6 miles of 6-inch transmission pipeline will finish the project at Bryson City. The overall project remains on schedule and construction should be completed by April of 2004. South Carolina Pipeline Company, our intrastate natural gas transmission subsidiary, reported break even results in the third quarter of 2003 compared to earnings of $4 million or 3 cents per share in the same quarter last year. Two factors continue to have a constraining effect on pipeline's results. First and most importantly, sales margins on competitive sales of natural gas to our industrial interruptible customers have been reduced as a result of higher natural gas commodity prices. As we have said before, the wholesale prices of natural gas rise relative to competing fuels, Pipeline must produce its margins in order to retain industrial customers who have the ability to burn lower priced alternative fuels --principally the number two fuel oil. In addition, the demand for natural gas as a fuel for electric generation has declined as a result of milder spring and summer weather across the Southeast region. As I mentioned earlier, improving Pipeline's future profitability is an important part of our earnings growth strategy. From an operating perspective we are continuing our efforts to expand the available supply of natural gas in our existing markets. SCG Pipeline, our newest subsidiary, has completed construction of an 18-mile intrastate transmission pipeline that will bring additional supplies of regassified, liquified natural gas from a facility of Elba Island, Georgia in Jasper County, South Carolina. This $32 million project which was completed during the third quarter on schedule and on budget will provide a new source of natural gas for our existing markets in South Carolina and Georgia and will also supply SCE&G's new 875 megawatt natural gas powered electric generating facility which is currently under construction in Jasper County. In August South Carolina Pipeline began construction on a 38-mile natural gas transmission pipeline that will link the new SCG pipeline in Jasper County with South Carolina Pipeline's existing intrastate transmission system in Hampton County, South Carolina. Over 90% of the route for this extension which is called the South System Loop will parallel an existing electric transmission corridor, lowering construction costs and minimizing the impact to the environment. Connecting these two pipelines will allow us to continue to deliver natural gas to our existing customers in a reliable, cost effective manner while providing for future growth. The South System Loop project is expected to be completed in the spring of 2004 at an estimated cost of approximately $25 million. Turning to our non-regulated businesses, Scana Energy, our retail natural gas marketing business in Georgia, reported break even results in the third quarter of 2003 compared to a loss of $4 million or 3 cents per share in the same quarter last year. That improvement primarily reflects higher sales margins resulting from customer growth and more favorable market conditions which more than offset higher operating and customer service expenses. Scana Energy continues to maintain its position as the second largest natural gas marketer in Georgia with about a 25% market share. As of September 30 the company was serving more than 350,000 non-regulated retail customers and an additional 31,000 customers through its regulated division. Our other non-regulated businesses which include Scana Communications, Service Care, Prime South, and the non-Georgia component of Scana Energy Marketing and the holding company have combined reported earnings in the third quarter of 2003 of $2 million for 2 cents per share. Those results include the additional gain of $2 million or 2 cents per share related to the customary host closing working capital true-up following the sale of our ITC holding company investment in the second quarter of this year. By comparison, these non-regulated business reported a combined loss of $2 million or 2 cents per share in the third quarter of 2002. Lower interest expense was a major factor contributing to the favorable quarterly variance. And now I'd like to review the status of the two major capital projects we currently have underway at Scana. Work on SCE&G's new Jasper County Electric Generating Plant continues on schedule and on budget. This $450 million plant will utilize three natural gas fired, combustion, turbine generators and one steam turbine generator to generate up to 875 megawatts of electricity that will help us meet the growing energy needs of our customers for many years to come. The facility is being constructed under a fixed price, turnkey contract and is expected to be completed on budget and on schedule in the spring of 2004. Approximately 60% of the estimated $450 million cost of the Jasper plant is currently included in our electric rates. As we have said before, we will finalize our strategy for recovery of the remaining capital costs associated with the Jasper plant after it is completed next year. Construction of the backup dam at Lake Murray near Columbia is now about 1/3 complete and the $275 million project remains on budget and on schedule for completion in 2005. This 50,000 acre lake is part of a federally licensed hydroelectric project that is under the jurisdiction of the Federal Energy Regulatory Commission. FERC is requiring SCE&G to construct the backup dam to comply with more stringent earthquake safety criteria. The second dam would assure the stability and integrity of the lake during or after a hypothetical, worst case earthquake. We are continuing our evaluation of potential alternatives and scenarios that will allow for recovery of the estimated $275 million in capital costs associated with the construction of the backup dam. A final decision on this matter will not be made until the project is closer to completion. And now a few comments on our synthetic fuel operations. For those on today's call who may be new to our story, I would like to provide a brief summary of our syn fuel business. South Carolina Electric & Gas Company culled Equity Investments and two partnerships involved in producing synthetic fuel. These syn fuel production facilities which are located at the Wateree and Canada generating stations were placed in operation in 2000 and 2001 respectively. The partnership that operates with Wateree syn fuel facility received a private letter ruling from the IRS in December of 2001 which we can rely on as a partner. A PLR has not been requested for the sun fuel production facility at the Canada station which uses virtually the same production process as the Wateree facility. Through September 30 of 2003, these syn fuel production facilities have generated a combined total of approximately $59 million in net syn fuel tax credits for SCE&G. And like most utilities, SCE&G has not been recognizing the value of the syn fuel tax credits in its income statement. Under an accounting plan requested by the company and approved by the South Carolina Public Service Commission in 2000, the company is deferring the current income statement benefit of the syn fuel tax credits net of the applicable partnership operating losses and recording that benefit on the balance sheet as a deferred credit. SCE&G does receive a cash flow benefit from a reduction in current federal income taxes. The syn fuel credits that are currently being deferred are expected to be applied in the future for the benefit of our customers. The IRS review of the syn fuel industry has recently focused on the scientific validity of test procedures and results that have been presented as evidence that solid coal based synthetic fuels have undergone a significant chemical change as a result of the syn fuel process. As was widely reported earlier this week, Progress Energy announced it has been advised by the Internal Revenue Service that the Internal Revenue Service had concluded its inquiry of chemical change at one of that company's synthetic fuel facilities. Although this news has no direct impact on SCE&G, we do believe it is a positive development for the industry. The chemical change agents used in the syn fuel production process at SCE&G's plant is a complex, hydrocarbon emulsion that differs from those used in some other syn fuel processes. We systematically collect samples of our syn fuel production that are subjected to regular testing by both internal and independent experts. Based on the results of those tests, we are confident that we have operated these facilities in a way that is in compliance with the procedures outlined in the private letter ruling submission. Primesouth, one of our non-regulated subsidiaries, also operates a syn fuel production facility for a third party and receives management fees, royalties, and expense reimbursements related to those services that contribute about $7 million to that company's annual net income. Primesouth does not receive any tax credits associated with the production of syn fuel at this facility. To date there has been no negative impact to Primesouth syn fuel operations as a result of the Internal Revenue Service review. And now a brief update on our telecommunications investments. Our investment portfolio remains unchanged with investments in (Knowledgy), (ITC Delta Com), and Magnolia Holding Company representing a total cost basis of approximately $154 million. As we have said before, our plan is to monetize our remaining telecom investments in a prudent and timely manner and continue to use the cash proceeds to pay down debt at the holding company. And finally some comments related to the issuance of stock options by Scana. During the period 2000 to 2002, our Board of Directors granted non-qualified stock options to certain key employees under the company's long-term equity compensation plan. The total number of options granted was approximately 2 million shares or less than 2% of the total shares currently outstanding. To date, approximately 284,000 new shares of Scana common stock have been issued under this plan. About 664,000 options are currently exercisable and an additional 1 million shares will be exercisable in the future. The Board ceased issuing options in 2002. Since there are no longer options being issued under this plan and to limit any dilution related to these options, the company is purchasing outstanding shares of its common stock on the open market as the options are exercised. The number of shares repurchased will be limited to the total number of options exercised. To date approximately 264,000 shares of common stock have been repurchased at a net cost to the company of approximately $1.4 million. That concludes my prepared remarks and I will now be happy to respond to your questions. Operator: Ladies and gentlemen, I would like to remind you in order to ask a question, please press the Star then the number 1 on your telephone keypad. We'll pause for just a moment to compile the Q&A roster. Your first question comes from the line of (Tim Winter) with AG Edwards. Kevin Marsh: Hello (Tim). (Tim Winter): Hello Kevin, good morning. Could you talk a little bit about what some of your options will be for rate relief at Lake Murray and what your plans are for Jasper? Kevin Marsh: Let me address Jasper first. That plant we expect to be completed around May of next year. I believe the deadline - schedule date is May 1. At that time we'll assess the amount and timing of any rate relief that may be necessary to recover from that remaining investment so we wouldn't have a final decision on that until sometime probably near the middle of next year. I think with respect to the dam work that's being done, that's not going to be completed until near the end of 2005. So we've got a considerable amount of time between now and then to wait and see. The impact of any rate relief that might be in effect for the remaining Jasper plant as well as just where we stand on earnings as a result of turnaround in the economy, the fact that we should be cash flow positive at that point should have allowed us to pay down some additional debt, improve the earnings situation. So we're really not close enough to any final decision on the dam. We do have the syn fuel tax credits that we talked about on our last call that continue to be deferred on the books at SCE&G that could be considered in the evaluation of offsetting some of the costs of the dam if that's the direction the Commission wanted to go. (Tim Winter): Okay, and can you talk a little bit about AFUDC expectations for '03 and then '04 once the plant is complete? Kevin Marsh: I believe we estimate about $43 million on an annual in AFUDC for this year. Let me get somebody to check that number while we're talking. That certainly will go down when that plant goes into service in May. We'll have to cease AFC on that. Yeah, I think on the AFC, yeah $43 million for 2003. I don't have the exact number on that. I could get you to follow up with John Winn and we could give you the AFC balance of the - construction balance at that time the plant would go down. (Tim Winter): Okay great, thank you. Operator: Your next question comes from the line of (Tom Hanlen) with Wachovia Securities. (Tom Hanlen): Good morning Kevin. Kevin Marsh: Good morning. (Tom Hanlen): About the two plants with the tax credits, one with the PLR and one without. Can you break down the $59 million of credits between the two plants? Kevin Marsh: I don't have a breakdown here in front of me. I'll be glad to follow up with you on that question. I think the important thing to note about those two plants is they use the same technology and the same process. They're pretty much the same vintage plant so there's not really any significant differences in their operations. (Tom Hanlen): Have you applied for PLR for the second one? Kevin Marsh: We have not. (Tom Hanlen): Okay, thanks a lot. Kevin Marsh: Okay. Operator: Your next question comes from the line of (Jay Henelo) with UBS. Kevin Marsh: Hey (Jay). (Jay Henelo): Hi, good morning. I realize you mentioned the impact of high gas prices kind of at the industrial level and what that might have on your guidance and growth rate going forward. Have you reflected on the impact that might have on elasticity of demand at the retail level -- what impact that might have, it might not have? And also while we're on the subject of gas, can you give us a little update on what's going on with Scana Energy, what type of contracting is going on and what the overall environment is there. Thank you. Kevin Marsh: Okay. The question related to the impact of elasticity really just for other demand on the gas side of the business is something we are studying at this very point, trying to understand what impact that may have on our long term margins. I think the combination of the economy downturn with the high gas prices has made it somewhat difficult to make an exact distinction between the two. We do know from research we've already done that as newer homes come on service or come online with more efficient appliances, that does put some downward pressure on the actual gas that's burned in homes of the same size. But that's been offset at this point - more than offset by the additional growth we've seen on the system. I think in areas of North Carolina for example where we certainly have more cold weather there than we do in South Carolina and in Georgia, we've been able to outstrip that decline by increases in customers on the system. It is something we will continue to watch. I think we'll also need to watch the impact of that just relative to the electric alternatives that customers have. But at this point we've not seen any significant change from the patterns we've seen in previous years. We've not had a sustained period of three or four years of high gas prices. Certainly we're all anxious to see what happens this fall and this winter and what that does to gas prices over the long term and we'll stay close to that. (Jay Henelo): Okay, the reason I brought it up is that I appreciate you're going to stay close to it. That is great. NFG announced this morning that they are lowering guidance because of that and I just thought that was noteworthy and that was the catalyst for asking. Kevin Marsh: Yeah, we don't see any impacts on our guidance related to the gas business at the retail level for your residential and commercial customers. Our concerns really come on the industrial interruptible sales where we have to compete against alternative fuels where we've seen pressure at South Carolina Pipeline this year. (Jay Henelo): Okay. Kevin Marsh: I think your final question was on the contracts we have in Georgia, I think you were referring to those. The majority of our customers are still on variable contracts. I think it's about 10% are on fixed and the rest are on variable. (Jay Henelo): Okay. And any dynamics about competition, lack thereof or just any other flavor down there you could provide? Kevin Marsh: You know, the market compared to prior years seems to be fairly settled. The competitors seem to be acting rationally. I think gas prices are high which has put pressure on everybody to watch margins very carefully. The customer service aspects of the business which were some of the biggest problems we had in early years seem to have leveled out. I know we are very satisfied with the customer service operation we have in service. But we will continue to be aggressive in that market and make sure we can maintain our market share. (Jay Henelo): All right, thank you. Kevin Marsh: Okay. Operator: Your next question comes from the line of (Paul Patterson) with (Glenrock) Associates. Kevin Marsh: Hey (Paul). (Paul Patterson): Hi, how are you doing? Kevin Marsh: Good. (Paul Patterson): Just - I was wondering if you could just go over for us the allowed - the earned ROE at the utilities the last 12 months. Kevin Marsh: Yeah, the allowed is of course at SCE&G is 12.45% which is what we got in the last case. You know, so far we're probably running slightly below that, probably around 11% for the first part of this year. And at PSNC in North Carolina they're allowed I believe it's 11.4% and we're right at 11% in those operations. (Paul Patterson): Okay great. Then I also wanted to ask you in terms of the pipeline, I mean, you always mention that the reason why you're lowering your growth target to 4% to 6% is because of the economy and the pipeline. And I can see how the pipeline did worse in the third quarter, but year to date it looks like it's done better by 4 cents - or by 3 cents I guess versus the year, looking at the variance. What are your expectations I guess going forward? I mean, what are the dynamics that, I mean, is there something in the last quarter that's, I mean, because we've had high gas prices, you know, I mean. I'm just trying to get an idea as to what's going on there at the pipeline that - other than obviously you mentioned the switching and stuff. But it looks like you guys had better year over year at least the nine months. So could you clarify that for me? Kevin Marsh: Yeah, I think if you go back to '01, '01 was especially tough because we had some fixed price gas. We were working through the system and that really hurt us on a competitive basis. That was early in 2002. That was what I meant, 2002. So you're really comparing into a year that was down. We have seen the pressure this year. Prices have been up above $5. When they get at the $5 level or below that, that certainly improves our ability to compete. If you go back and look at pipeline on an annual basis, they've generally contributed between 10 to 15 cents a share which is a pretty normal range for them. We've seen pressure on that last year. We've seen pressure that will likely bring us in below those numbers for this year. So we're not talking about a huge increase in dollars they need to turn around to pipeline. But even, you know, 4 cents a share for us has a big impact on the overall growth rates. So we need to see them return to more normal levels to again push us, you know, from the 4 to 6 we're talking about now, you know, up to the high end and possibly higher on that range. (Paul Patterson): With respect to that though, when you say the 4% to 6% growth, is that a longer term growth rate or is that just for 2004? Kevin Marsh: We're going to give that I think on an annual basis. I mean, certainly I think what we expect to see annually and long term I would tell you are both 4 to 6 right now based on what we can see and as far out as we think the picture is clear with the economy. I know we had talked about 6% to 8% being the longer term view over a three to five year period and not necessarily in one particular year. I think with this 4% to 6% guidance we've got out there for you now, you can expect that each year. (Paul Patterson): Okay, and then in terms of weather year to date versus normal, I mean, I know that's 8 cents I think it is for the - or is it 3 cents - it's, yeah, just year to date what was versus normal? What are we looking at in terms of weather? Kevin Marsh: Versus normal on a year to date basis, 11 cents per share. (Paul Patterson): It's negative? Kevin Marsh: Yes, negative. (Paul Patterson): So okay, so okay, that's going to benefit theoretically if you have normal weather next year, right? Kevin Marsh: Yes. (Paul Patterson): Okay so - and then finally in terms of Georgia Gas, you guys mentioned improved sales margin and customer growth. Could you just elaborate a little bit more? I mean, what's causing sales margin growth? What's actually happened there? Is it just - have you guys gotten a lot of new customers? I mean, you guys mentioned that there are also some expenses that have increased. What are the dynamics that allowed you to do so well there this quarter? Kevin Marsh: Well I think the biggest piece of that is we understand the market better every year. The market has been less volatile than it has been in prior years in terms of customers coming and leaving the system as well as gas prices. Although gas prices have been up, we have done I think a good job improving our ability to purchase gas and manage our storage and blend that with our hedging activities where necessary to keep us competitive and improve the margins. It would be difficult to point to just one thing. Certainly margins is a real driver in the market over there. So our ability to price the gas competitively and just improve the cost of gas, we can bring the marketplace to our back office operations has had the biggest impact. (Paul Patterson): Okay, thanks a lot. I appreciate it. Kevin Marsh: Okay. Operator: Once again ladies and gentlemen, I would like to remind you in order to ask a question, please press Star then the number 1 on your telephone keypad. We'll pause for just a moment to compile the Q&A roster. Your first question is a follow-up question from the line of (Tim Winter) with AG Edwards. Kevin Marsh: Hello again (Tim). (Tim Winter): Hello Kevin. Can you talk about what's going into your expectations as far as pension goes? Are you looking for an improvement there? Kevin Marsh: We do expect to see an improvement in the pension income next year. I think last year we had pension income somewhere around $20 million, $22 million in total for Scana. That number is done probably to around $6 million or $7 million this year. That was based on a pension asset base of around $670 million which is now up probably around $730 million, $740 million. So we've seen improvement in the asset base that's in the pension plan. And as you know, that's the real driver for us on pension income. The difficult part in predicting that is under the accounting rules that determine the actual income you'll recognize. You take a snapshot of that market value at the end of the year. So certainly as those assets continue to improve, the asset market values continue to improve that will improve the likelihood of an increase in pension income for next year which we do anticipate. (Tim Winter): Okay, thank you. Kevin Marsh: Okay. Operator: Your next question comes from the line of (Neil Stein) with (John Levin) & Company. (Neil Stein): Hi. When you were in New York last time, you mentioned there might be some change in the way Commissioners - the South Carolina Public Service Commissioner appoints it. I don't remember the exact details but do you have an update on that issue? Kevin Marsh: Nothing has really changed. The legislature continued to debate that issue as time expired earlier this year. I suspect that will be one of the first items up on the agenda next year. So you really won't have a decision in 2003 on that. That would come - I think the state House takes office up there around - end of January, early February next year. And I expect it to be one of the first items they bring up for debate. (Neil Stein): Could you just sort of take a step back and remind me exactly what the issue was? Kevin Marsh: Our Commissioners here in South Carolina go through a qualification process where they're reviewed by a merit panel and then put up to the legislature for a vote. They have been debating the qualifications of people that can go through that process. They are trying to decide what the educational requirements are and some issues related to nepotism and things of that nature. So I think it will have some impact on us. It would be difficult to predict how it might impact the Commissioners that are sitting today. But mot of those issues have to do with the qualification of the candidates and not the process whereby they are selected. You know, right now they come in, they're in two year terms, and then they're talking about possibly changing some of the terms, staggering some of the terms, so issues of that nature more than the actual way they're selected. (Neil Stein): Right now I think all their terms have kind of expired but they're kind of just going to stay on the Commission until this issue gets resolved? Kevin Marsh: Yes, the current Commission will remain in place. (Neil Stein): Okay, very good. Thank you. Kevin Marsh: Thank you. Operator: Your next question comes from the line of (Douglas Lee) with UBS. (Douglas Lee): Hi, good morning guys. I have two questions related to the syn fuel business. The first is about $59 million in net syn fuel tax credits. Is that a since inception number or is that year to date '03? Kevin Marsh: That's a since inception number. (Douglas Lee): Okay. My second question related to syn fuels is my understanding is that there are three primary processes that you can use to process the syn fuel -- (earth coal), (start tech), or (Coval). Which methodology do you use for your facilities? Kevin Marsh: Well the facilities we have were designed and built by (Coval) technologies. The process we use is one that uses a complex hydrocarbon emulsion which is manufactured by the Heritage Research Group referred to as the Heritage Technology which is what we employ at the plants. (Douglas Lee): Okay, thanks guys. Kevin Marsh: Okay. Operator: Your next question is a follow-up question from the line of (Paul Patterson) with (Glenrock) Associates. Kevin Marsh: Hey (Paul). (Paul Patterson): Hey. Just a little bit more of a picture on the economy down there, you know, what is it that's primarily causing the drag down there? You know, any insight there that you could just share with us and why you guys think it isn't going to improve in 2004, what have you? Or whether you guys are just being cautious about it? Kevin Marsh: Well we're being cautious. But I will tell you if you go back and look at the past three or four years, we have not come close really towards the end of '02 and especially in '03 bringing in a new business to the state, we saw it in three to four years prior to that. We had a couple of record-setting years where I think we actually brought in more than North Carolina and Georgia if you compared us to each of those two states which was really I think a good sign for us. And you had all of course the ancillary benefits that go along with that with new people coming to the state that are just healthier people economically in the state able to do other things and run related businesses. We continue to see growth, it's just not as robust as it has been in prior years. And we think it's more prudent for us to be conservative in the estimates based on what we see until we see some clear indications of, you know, consistent turnarounds. We have seen I guess on the industrial side we have continued to see some shutdowns in textile industries. All of that has not occurred this year. That's a process that has actually occurred over two or three years. But that continues to be a drag. And I don't know that those businesses will ever come back as strong as they have been in the past. (Paul Patterson): Okay, what is the retail sales growth that you guys are predicting? I mean projecting going forward from the utility business? Kevin Marsh: Our growth is usually in that 2%, 2-1/2% range. (Paul Patterson): Okay. And what did you guys have before? Kevin Marsh: It's pretty much 2%, 2-1/2% on the retail side. (Paul Patterson): Okay, great. Thanks a lot. Kevin Marsh: Okay. Operator: At this time there are no further questions. Do you have any closing remarks? Kevin Marsh: I want to thank everybody for participating in the call today. I know there was a lot of information we went through. If you have any follow-up questions or any additional information, please contact John Winn in Investor Relations. Thanks and have a great day. Operator: Thank you for participating in today's conference. You may now disconnect. END -----END PRIVACY-ENHANCED MESSAGE-----