SCG
#Thanks, <UNK>
Up again, our earnings discussion on slide 6. Earnings in the second quarter of 2017 were $0.85 per share compared to $0.74 per share in the same quarter of 2016. And our electric margins were slightly offset by the impact of less extreme weather in the second quarter of 2017, when compared to the same quarter of last year
In the footnote, you will notice that weather increased electric margins about $0.04 per share in the second quarter 2017, compared to $0.05 per share in the second quarter 2016, resulting in a negative $0.01 per share impact to earnings quarter-over-quarter
Additionally, increases in gas more margins due to customer growth and rate increases, as well as positive variances O&M and other income will partially offset by CapEx related items, including interest expense, depreciation and property taxes
Please turn to Slide 7. Earnings per share for the six months ended June 30 2017 were $2.04 per share versus $1.97 for the same period in 2016. Our electric margins were significantly offset by the impact of milder weather in 2017, compared to the prior year
As noted at the bottom of the slide, weather decreased earnings by $0.20 per share for the first six months of 2017,while weather was earnings neutral for the comparable period of 2016. Additionally, increases in gas margins, as well as positive variances in O&M and another income will partially offset increases in interest expense, depreciation and property taxes
Now on slide 8, I'd like to briefly review the earnings results for our principal lines of business
SCE&G second quarter 2017 earnings increased versus the same quarter of 2016, due primarily to increasing electric margins, actually offset by the impact of weather, as well as increases in gas margins and lower O&M
PSNC earnings were up $0.01 per share for the second quarter of 2017 over the comparable period in 2016, due to higher margins as a result of the late 2016 rate increase and customer growth
SCANA Energy’s earnings for the quarter increased due to higher gas margins
I would now like to touch on economic trends in our service territory on slide 9. Through the second quarter of 2017, companies announced plans to invest approximately $480 million with the expectation of creating over 7500 jobs in our North and South Carolina territories
At the bottom of this slide, you can see the South Carolina unemployment statistics as of June 2017 and 2016. South Carolina's unemployment rate is 4% and it's the lowest to state has been since December of 2000. South Carolina continues to see a decrease in unemployment despite continued growth in the labor force
The other states in which we have service territories, North Carolina and Georgia also continue to see declining unemployment rates of 4.2% and 4.8% respectively
This positive business development continues to play a significant role in the strong customer growth numbers for our business
On slide 10, we present customer growth and electric sales statistics
The top half of the slide shows the customer growth rate for each of our regulated businesses
SCE&Gs Electric business added customers at a year over year rate of 1.6%
Our regulated gas businesses in South and North Carolina added customers at a rate of 2.9% and 2.6% respectively
The strong customer growth continues to be a key fundamental for our businesses
The bottom table outlines are actual and weather normalized kilowatt hour sales to retail customers for the 12 months ended June 30, 2017. On the 12 month ended basis weather normal sales are higher by eight tenths of a percent versus the prior period
Please look to slide 11, which recaps our regulatory rate base and returns
The pie chart on the left presents the components of our regulated rate base of approximately $11.5 billion
In the box on the right you will SCE&G base electric business in which we are allowed a tentative quarter percent return on equity
The adjusted earned return for the 12 months ended June 30 2017 and the base selection business continues to meet our stated goal of earning a return of 9% or higher
As you recall, we're allowed a return on equity of 10.25% in our gas LDC in South Carolina
These rates are set according to the Rate Stabilization Act
The earned ROE of the gas business for the 12 months ended March 31 falls outside of range of 50 basis points above or below the allowed ROE then we filed to adjust rates
As of March 31 2017, the 12 month earned return for SCE&G gas was below the band
And we recently filed for an annual increase of approximately $9 million in mid-June
These rates will become effective beginning with the first billing cycle in November
As of June 30 2017, the 12 month earned return for PSNC Energy was 10.78%
This temporary situation is mainly due to timing and will move back towards the allowed ROE, as CWRT [ph] placed into service
Slide 12 and 13 present our CapEx forecast and financing plans slides respectively
These are both consistent with the slides for Mondays call covering the new nuclear project decision
I would now like to discuss our 2017 earnings guidance on slide 14. We are reiterating our 2017 GAAP adjusted, weather normalized earnings guidance range of 415 to 435 per share in our internal target of 425 per share
I also wanted to reset O&M expectations for the year, as we now project 2017 O&M expense to be relatively flat
This is primarily due to labor and related savings
Our long-term GAAP adjusted, weather normalized annual growth guidance target remains unchanged as we plan to deliver 4% to 6% earnings growth over three to five years using a base of 2016s GAAP adjusted, weather normalized EPS of 397 per share
On slide 15, we present some of the main drivers that are contemplated as part of the growth strategy
PSNC Energy has had a solid growth story for the last few years
We will continue to grow this business using the integrity management rider and periodic rate cases to keep up with the growing demands of our North Carolina territory
Additionally, rates stabilization increases may be needed to maintain a reasonable earned return at the SCE&G business as we continue to make investment in that system to meet demand due to customer growth in South Carolina
As you are aware, these plans are not new to SCANA, but I've been overshadowed by the focus on the new nuclear projects
As we continue to refine our strategy there could be additional growth at these gas businesses
Additionally, we will focus on O&M control, particularly at SCE&G
We will also reap the benefits of lower projecting interest expense, as we issue less debt and accretion from our share buyback program
Slide 16, compare some of the aspects of our five year plan before and after our decision to cease construction and pursue abandonment of the new nuclear project and it's consistent with what we presented on Monday's call
As we previously discussed, we planned to focus our strategy on the core electric gas business and on the redeployment of capital
I will now turn the call over to Steve to discuss wind down activities at the site
It’s just kind of the timeframe
Earlier we were really just taking a little shoulder view of it of the period over the next, I guess, three to four years and here we're got a little further down in our financial plan and I guess getting a little more prescriptive about it
And I'm quite confident we'll make adjustments on that as we move through time due to a variety of changes in cash flows and share prices and things like that
But that's just our late assessment
Yes…
Very fair question
So the asset itself is not - is not going to be used in the business <UNK>
So the asset can't be used for its intended purpose initially
So it's less much like inventory, parts or something like that it can't be used for its intended purpose, then you can deduct it for tax purposes
But we're confident in that tax position
Now again, we're going to – and think of the other side of that, that revenue that's coming in from that abandonment is going to be taxable income
So certainly the cost associated with it should be a taxable deduction
Before you move on, let me point it this way for you
If we didn't deducted then how would you ever deduct it, it would have been deducted through depreciation, had it been put into service
You clearly get a deduction for any incurred cost, so it would never get deducted if you didn't deduct it now
Sorry to interrupt you
What was your other one?
Okay
Very good
