UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended March 31, 1999
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from to
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
Indicate by check mark whether the registrants: (1) have filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrants were required to file such reports), and (2) have been subject to
such filing requirements for the past 90 days. Yes X No
Description of Shares Outstanding
Registrant Common Stock at April 30, 1999
SCANA Corporation Without Par Value 103,572,623
South Carolina Electric Par Value $4.50 Per Share 40,296,147 1
& Gas Company
1Held, beneficially and of record, by SCANA Corporation.
This combined Form 10-Q is separately filed by SCANA Corporation and
South Carolina Electric & Gas Company. Information contained herein relating to
SCANA Corporation or any of its direct or indirect subsidiaries other than South
Carolina Electric & Gas Company is provided solely by SCANA Corporation and
shall be deemed not included in the Form 10-Q of South Carolina Electric & Gas
Company.
<PAGE>
INDEX
Page
PART 1. FINANCIAL INFORMATION
SCANA Corporation Financial Section..................................... 3
Item 1. Financial Statements
Consolidated Balance Sheets as of March 31, 1999 and
December 31, 1998 ........................................... 4
Consolidated Statements of Income and Retained Earnings for
the Periods Ended March 31, 1999 and 1998.................... 6
Consolidated Statements of Cash Flows for the Periods Ended
March 31, 1999 and 1998...................................... 7
Notes to Consolidated Financial Statements..................... 8
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.......................................... 13
Item 3. Quantitative and Qualitative Disclosure About Market Risk...... 21
South Carolina Electric & Gas Company Financial Section................. 22
Item 1. Financial Statements
Consolidated Balance Sheets as of March 31, 1999 and
December 31, 1998 ........................................... 23
Consolidated Statements of Income and Retained Earnings for
the Periods Ended March 31, 1999 and 1998.................... 25
Consolidated Statements of Cash Flows for the Periods Ended
March 31, 1999 and 1998...................................... 26
Notes to Consolidated Financial Statements..................... 27
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations......................................... 30
Item 3. Quantitative and Qualitative Disclosure About Market Risk...... 35
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.......................................... 36
Item 6. Exhibits and Reports on Form 8-K........................... 36
Signatures.......................................................... 37
Exhibit Index....................................................... 39
2
<PAGE>
SCANA CORPORATION
FINANCIAL SECTION
3
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
<TABLE>
<CAPTION>
SCANA CORPORATION
CONSOLIDATED BALANCE SHEETS
As of March 31, 1999 and December 31, 1998
<S> <C> <C>
March 31, December 31,
- ----------------------------------------------------------------------------- ------ ---------
1999 1998
- ---------------------------------------------------------------------------- ------ ----------
ASSETS (Millions of Dollars)
Utility Plant:
Electric $4,408 $4,406
Gas 604 604
Other 175 175
- ----------------------------------------------------------------------------- ----------------
Total 5,187 5,185
Less accumulated depreciation and amortization 1,765 1,728
- ----------------------------------------------------------------------------- ----------------
Total 3,422 3,457
Construction work in progress 296 251
Nuclear fuel, net of accumulated amortization 56 56
Acquisition adjustment-gas, net of accumulated amortization 23 23
- ----------------------------------------------------------------------------- ----------------
Utility Plant, Net 3,797 3,787
- ----------------------------------------------------------------------------- ----------------
Nonutility Property and Investments (net of accumulated
depreciation) 531 493
- ----------------------------------------------------------------------------- ----------------
Current Assets:
Cash and temporary cash investments 71 62
Receivables 265 276
Inventories (at average cost):
Fuel 69 63
Materials and supplies 60 56
Prepayments 28 22
Deferred income taxes 20 22
- ----------------------------------------------------------------------------- ------- --------
Total Current Assets 513 501
- ----------------------------------------------------------------------------- ----------------
Deferred Debits:
Emission allowances 31 31
Environmental 22 22
Nuclear plant decommissioning fund 58 56
Pension asset, net 121 115
Other 270 276
- ----------------------------------------------------------------------------- ----------------
Total Deferred Debits 502 500
- ----------------------------------------------------------------------------- ----------------
Total $5,343 $5,281
============================================================================= ================
4
<PAGE>
SCANA CORPORATION
CONSOLIDATED BALANCE SHEETS
As of March 31, 1999 and December 31, 1998
(Unaudited)
March 31, December 31,
- ------------------------------------------------------------------------------- --------------------
1999 1998
- ------------------------------------------------------------------------------- --------------------
CAPITALIZATION AND LIABILITIES
(Millions of Dollars)
Stockholders' Investment:
<S> <C> <C>
Common Equity $1,762 $1,746
Preferred stock (not subject to purchase or sinking funds) 106 106
- ---------------------------------------------------------------------------------- -----------------
Total Stockholders' Investment 1,868 1,852
Preferred Stock, Net (subject to purchase or sinking funds) 11 11
SCE&G-Obligated Mandatorily Redeemable Preferred
Securities of SCE&G's Subsidiary Trust, SCE&G Trust I,
Holding solely $50 million principal amount of the 7.55%
Junior Subordinated Debentures of SCE&G, due 2027 50 50
Long-Term Debt, net 1,736 1,623
- ---------------------------------------------------------------------------------- -----------------
Total Capitalization 3,665 3,536
- ---------------------------------------------------------------------------------- -----------------
Current Liabilities:
Short-term borrowings 174 195
Current portion of long-term debt 107 107
Accounts payable 196 219
Customer deposits 18 18
Taxes accrued 12 72
Interest accrued 39 28
Dividends declared 42 42
Other 14 13
- ---------------------------------------------------------------------------------- -----------------
Total Current Liabilities 602 694
- ---------------------------------------------------------------------------------- -----------------
Deferred Credits:
Deferred income taxes 661 628
Deferred investment tax credits 106 108
Reserve for nuclear plant decommissioning 58 56
Postretirement benefits 90 87
Other 161 172
- ---------------------------------------------------------------------------------- -----------------
Total Deferred Credits 1,076 1,051
- ---------------------------------------------------------------------------------- -----------------
Total $5,343 $5,281
================================================================================== =================
See Notes to Consolidated Financial Statements.
5
<PAGE>
SCANA CORPORATION
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
For the Periods Ended March 31, 1999 and 1998
(Unaudited)
Three Months Ended
March 31,
- -------------------------------------------------------------------------------- -------------
1999 1998
- -------------------------------------------------------------------------------- -------------
(Millions of Dollars
Except Per Share Amounts)
OPERATING REVENUES:
<S> <C> <C>
Electric $ 266 $ 269
Gas 130 137
Transit 1 -
- -------------------------------------------------------------------------------- -------------
Total Operating Revenues 397 406
- -------------------------------------------------------------------------------- -------------
Operating Expenses:
Fuel used in electric generation 61 59
Purchased power 4 2
Gas purchased for resale 81 83
Other operation 58 60
Maintenance 18 19
Depreciation and amortization 42 30
Income taxes 28 36
Other taxes 27 26
- -------------------------------------------------------------------------------- -------------
Total Operating Expenses 319 315
- -------------------------------------------------------------------------------- -------------
OPERATING INCOME 78 91
- -------------------------------------------------------------------------------- -------------
OTHER INCOME:
Allowance for equity funds used during construction 1 2
Other income (loss), net of income taxes (5) 3
- -------------------------------------------------------------------------------- -------------
Total Other Income (Loss) (4) 5
- -------------------------------------------------------------------------------- -------------
INCOME BEFORE INTEREST CHARGES AND PREFERRED STOCK DIVIDENDS 74 96
- -------------------------------------------------------------------------------- -------------
INTEREST CHARGES (CREDITS):
Interest expense on long-term debt 31 29
Other interest expense 4 2
Allowance for borrowed funds used during construction (1) (2)
- -------------------------------------------------------------------------------- -------------
Total Interest Charges, Net 34 29
- -------------------------------------------------------------------------------- -------------
INCOME BEFORE PREFERRED DIVIDEND REQUIREMENTS
ON MANDATORILY REDEEMABLE PREFERRED SECURITIES 40 67
PREFERRED DIVIDEND REQUIREMENT OF SCE&G - OBLIGATED MANDATORILY
REDEEMABLE PREFERRED SECURITIES 1 1
- -------------------------------------------------------------------------------- -------------
INCOME BEFORE PREFERRED STOCK CASH DIVIDENDS OF SUBSIDIARY 39 66
PREFERRED STOCK CASH DIVIDENDS OF SUBSIDIARY (At stated rates) 2 2
- -------------------------------------------------------------------------------- -------------
NET INCOME 37 64
RETAINED EARNINGS AT BEGINNING OF PERIOD 678 617
COMMON STOCK CASH DIVIDENDS DECLARED (40) (41)
================================================================================ =============
RETAINED EARNINGS AT END OF PERIOD $ 675 $ 640
================================================================================ =============
NET INCOME $ 37 $ 64
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING (MILLIONS) 103.6 107.3
EARNINGS PER WEIGHTED AVERAGE SHARE OF COMMON STOCK (BASIC AND
DILUTED) $ .36 $ .60
CASH DIVIDENDS DECLARED PER SHARE OF COMMON STOCK $.385 $.385
================================================================================ =============
See Notes to Consolidated Financial Statements.
6
</TABLE>
<PAGE>
SCANA CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Periods Ended March 31, 1999 and 1998
(Unaudited)
Three Months Ended
March 31,
- --------------------------------------------------------------------------------
1999 1998
- ---------------------------------------------------------------------- ---------
(Millions of Dollars)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $37 $ 64
Adjustments to reconcile net income to net cash provided
from operating activities:
Depreciation and amortization 44 32
Amortization of nuclear fuel 5 5
Deferred income taxes, net 3 23
Pension asset (6) (1)
Post-retirement benefits 3 3
Allowance for funds used during construction (3) (4)
Over (under) collections, fuel adjustment clauses 9 16
Changes in certain current assets and liabilities:
(Increase) decrease in receivables 11 (10)
(Increase) decrease in inventories (10) 4
Increase (decrease) in accounts payable (23) 15
Increase (decrease) in taxes accrued (60) (34)
Other, net 11 (17)
- --------------------------------------------------------------------------------
Net Cash Provided From Operating Activities 21 96
- --------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Utility property additions and construction expenditures,
net of AFC (50) (51)
Increase in other property and investments (13) (7)
Sale of subsidiary assets 3 -
- --------------------------------------------------------------------------------
Net Cash Used For Investing Activities (60) (58)
- --------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds:
Issuance of First Mortgage Bonds 99 -
Issuance of notes and loans - 60
Repayments:
Notes and loans - (60)
Other long-term debt (1) -
Repurchase of common stock - (3)
Dividend payments:
Common stock (40) (40)
Preferred stock of subsidiary (2) (2)
Short-term borrowings, net (21) (1)
Fuel and emission allowance financings, net 13 (2)
- --------------------------------------------------------------------------------
Net Cash Provided From (Used For) Financing Activities 48 (48)
- --------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH AND TEMPORARY CASH INVESTMENTS 9 (10)
CASH AND TEMPORARY CASH INVESTMENTS AT JANUARY 1 62 60
- --------------------------------------------------------------------------------
CASH AND TEMPORARY CASH INVESTMENTS AT MARCH 31 $71 $ 50
================================================================================
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for - Interest (includes capitalized interest
of $1 for 1999 and $2 for 1998) $24 $ 24
- Income taxes 5 (3)
Noncash investing activities
- Unrealized gain on securities
available for sale (net of 18 31
tax)
See Notes to Consolidated Financial Statements.
7
<PAGE>
SCANA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1999
(Unaudited)
The following notes should be read in conjunction with the Notes to
Consolidated Financial Statements appearing in SCANA Corporation's (the Company)
Annual Report on Form 10-K for the year ended December 31, 1998. These are
interim financial statements, and the amounts reported in the Consolidated
Statements of Income are not necessarily indicative of amounts expected for the
year. In the opinion of management, the information furnished herein reflects
all adjustments, all of a normal recurring nature except as described in Note 2,
which are necessary for a fair statement of the results for the interim periods
reported.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
A. Basis of Accounting
The Company accounts for its regulated utility operations, assets and
liabilities in accordance with the provisions of Statement of Financial
Accounting Standards No. 71 (SFAS 71). The accounting standard requires
cost-based rate-regulated utilities to recognize in their financial
statements revenues and expenses in different time periods than do
enterprises that are not rate-regulated. As a result the Company has
recorded, as of March 31, 1999, approximately $203 million and $75
million of regulatory assets and liabilities, respectively, including
amounts recorded for deferred income tax assets and liabilities of
approximately $130 million and $56 million, respectively. The electric
and gas regulatory assets (excluding deferred income tax assets) of
approximately $43 million and $27 million, respectively, are being
recovered through rates, and the Public Service Commission of South
Carolina (PSC) has approved accelerated recovery of approximately $12
million of the electric regulatory assets. In the future, as a result of
deregulation or other changes in the regulatory environment, the Company
may no longer meet the criteria for continued application of SFAS 71 and
could be required to write off its regulatory assets and liabilities.
Such an event could have a material adverse effect on the Company's
results of operations in the period that a write-off would be required,
but it is not expected that cash flows or financial position would be
materially affected.
B. Comprehensive Income
Comprehensive income includes net income and all other changes in equity
except those resulting from investments by and distributions to
stockholders. Comprehensive income of the Company totaled $56 million
and $95 million for the three months ended March 31, 1999 and 1998,
respectively. For each period, comprehensive income included net income
and unrealized gains/losses on securities available for sale.
C. Reclassifications
Certain amounts from prior periods have been reclassified to conform
with the 1999 presentation.
2. RATE MATTERS
On December 11, 1998, the PSC issued an order requiring South Carolina
Electric & Gas Company (SCE&G), a wholly owned subsidiary of the
Company, to reduce retail electric rates on a prospective basis. The PSC
acted in response to SCE&G reporting that it earned a 13.04 percent
return on common equity for its retail electric operations for the
twelve months ended September 30, 1998. This return on common equity
exceeded SCE&G's authorized return of 12.0 percent by 1.04 percent, or
$22.7 million, primarily as a result of record heat experienced during
the summer. The order required prospective rate reductions on a per
kilowatt-hour basis, based on actual retail sales for the twelve months
ended September 30, 1998. This action will reduce future reported return
on common equity to the PSC-authorized level if SCE&G experiences the
same weather effect and other business results as that of the twelve
months ended September 30, 1998. On December 21, 1998, SCE&G filed a
motion for reconsideration with the PSC. On January 12, 1999, the PSC
denied SCE&G's motion for reconsideration and reaffirmed SCE&G's return
on equity of 12.0 percent. The rate reductions were placed into effect
with the first billing cycle of January 1999.
8
3. RETAINED EARNINGS:
The Restated Articles of Incorporation of the Company do not limit the
dividends that may be payable on its common stock. However, the Restated
Articles of Incorporation of SCE&G and the Indenture underlying its
First and Refunding Mortgage Bonds contain provisions that, under
certain circumstances, could limit the payment of cash dividends on its
common stock. In addition, with respect to hydroelectric projects, the
Federal Power Act requires the appropriation of a portion of certain
earnings therefrom. At March 31, 1999 approximately $26.0 million of
retained earnings were restricted by this requirement as to payment of
cash dividends on SCE&G's common stock.
4. INVESTMENTS IN EQUITY SECURITIES:
At March 31, 1999, SCANA Communications, Inc. (SCI) held the following
investments in ITC Holding Company, Inc.(ITC) and its affiliates:
o Powertel, Inc. (Powertel) is a publicly traded company that owns and
operates personal communications services (PCS) systems in several
major Southeastern markets. SCI owns approximately 4.7 million common
shares of Powertel. SCI's investment in Powertel's common shares of
approximately $69.2 million had a market value of $67.1 million at
March 31, 1999, resulting in a pre-tax unrealized holding loss of $2.1
million. The after-tax amount of such loss is included in the balance
sheet as a component of "Common Equity." In addition, SCI owns the
following non-voting convertible preferred shares, at the approximate
cost noted: 100,000 shares series B ($75.1 million); 50,000 shares
series D ($22.5 million); and, 50,000 series E 6.5% ($75.0 million).
Preferred series B shares are convertible in March 2002 at a
conversion price of $16.50 per common share or approximately 4.5
million common shares. Preferred series D shares are convertible in
March 2002 at a conversion price of $12.75 per common share or
approximately 1.7 million common shares. Preferred series E shares are
convertible in June 2003 at a conversion price of $22.01 per common
share or approximately 3.4 million common shares. The market value of
the convertible preferred shares of Powertel is not readily
determinable. However, on an as converted basis, the market value of
the underlying common shares for the preferred shares was
approximately $138.5 million at March 31, 1999, resulting in an
unrecorded pre-tax holding loss of $34.1 million.
o ITC Delta^Com, Inc. (ITCD) is a fiber optic telecommunications
provider. SCI owns approximately 4.1 million common shares of ITCD.
SCI's investment in ITCD's common shares of approximately $16.2
million had a market value of $88.4 million at March 31, 1999,
resulting in a pre-tax unrealized holding gain of $72.2 million. The
after-tax amount of such gain is included in the balance sheet as a
component of "Common Equity." In addition, SCI owns 1,480,771 shares
of series A preferred stock of ITCD at a cost of approximately $11.3
million. Series A preferred shares are convertible in March 2002 into
ITCD common shares on a two for one basis. The market value of series
A preferred stock of ITCD is not readily determinable. However, on an
as converted basis the market value of the underlying common stock for
the series A preferred stock was approximately $64.6 million at March
31, 1999, resulting in an unrecorded pre-tax holding gain of $53.3
million.
o Knology Holdings, Inc. (Knology) is a broad-band service provider of
cable, television, telephone and internet services. SCI owns 71,050
units of Knology. Each unit consists of one 11.875% Senior Discount
Note due 2007 and one warrant entitling the holder to purchase .003734
shares of preferred stock of Knology. The cost of this investment was
approximately $40 million. SCI also owns an additional 753 warrants
which entitles it to purchase 753 shares of preferred stock at $1,500
per share.
9
<PAGE>
o ITC has an ownership interest in several Southeastern
communications companies. SCI owns approximately 3.1 million common
shares, 645,153 series A convertible preferred shares, and 133,664
series B convertible preferred shares of ITC. These investments
cost approximately $7.1 million, $8.9 million, and $5.0 million,
respectively. Series A and series B preferred shares are
convertible in March 2002 into ITC common shares at a conversion
price of $13.45 and $43.56, respectively, on a four for one basis.
The market value of these investments is not readily determinable.
5. CONTINGENCIES:
With respect to commitments at March 31, 1999, reference is made to Note
10 of Notes to Consolidated Financial Statements appearing in the
Company's Annual Report on Form 10-K for the year ended December 31,
1998.
Contingencies at March 31, 1999 are as follows:
A. Nuclear Insurance
The Price-Anderson Indemnification Act, which deals with public
liability for a nuclear incident, currently establishes the liability
limit for third-party claims associated with any nuclear incident at
$9.7 billion. Each reactor licensee is currently liable for up to $88.1
million per reactor owned for each nuclear incident occurring at any
reactor in the United States, provided that not more than $10.0 million
of the liability per reactor would be assessed per year. SCE&G's maximum
assessment, based on its two-thirds ownership of V. C. Summer Nuclear
Station (Summer Station), would be approximately $58.7 million per
incident, but not more than $6.7 million per year.
SCE&G currently maintains policies (for itself and on behalf of Santee
Cooper) with Nuclear Electric Insurance Limited (NEIL) and American
Nuclear Insurers (ANI) providing combined property and decontamination
insurance coverage of $2.0 billion for any losses at Summer Station.
SCE&G pays annual premiums and, in addition, could be assessed a
retroactive premium not to exceed five times its annual premium in the
event of property damage loss to any nuclear generating facility covered
under the NEIL program. Based on the current annual premium, this
retroactive premium assessment would not exceed $6.1 million.
To the extent that insurable claims for property damage,
decontamination, repair and replacement and other costs and expenses
arising from a nuclear incident at Summer Station exceed the policy
limits of insurance, or to the extent such insurance becomes unavailable
in the future, and to the extent that SCE&G's rates would not recover
the cost of any purchased replacement power, SCE&G will retain the risk
of loss as a self-insurer. SCE&G has no reason to anticipate a serious
nuclear incident at Summer Station. If such an incident were to occur,
it could have a material adverse impact on the Company's results of
operations, cash flows and financial position.
B. Environmental
The Company has an environmental assessment program to identify and
assess current and former operations sites that could require
environmental cleanup. As site assessments are initiated, estimates are
made of the expenditures, if any, deemed necessary to investigate and
clean up each site. These estimates are refined as additional
information becomes available; therefore, actual expenditures could
differ significantly from the original estimates. Amounts estimated and
accrued to date for site assessments and cleanup relate primarily to
regulated operations. Such amounts are deferred and amortized with
recovery provided through rates. The Company has also recovered portions
of its environmental liabilities through settlements with various
insurance carriers. The Company has recovered all amounts previously
deferred for its electric operations. The Company expects to recover all
deferred amounts related to its gas operations by December 2002.
Deferred amounts, net of amounts recovered through rates and insurance
settlements, totaled $20.8 million at March 31, 1999. The deferral
includes the estimated costs associated with the following matters .
10
<PAGE>
o In September 1992, the Environmental Protection Agency (EPA) notified
SCE&G, the City of Charleston and the Charleston Housing Authority of
their potential liability for the investigation and cleanup of the
Calhoun Park area site in Charleston, South Carolina. This site
encompasses approximately 30 acres and includes properties which were
locations for industrial operations, including a wood preserving
(creosote) plant, one of SCE&G's decommissioned manufactured gas
plants, properties owned by the National Park Service and the City of
Charleston, and private properties. The site has not been placed on
the National Priorities List, but may be added in the future. The
Potentially Responsible Parties (PRPs) have negotiated an
administrative order by consent for the conduct of a Remedial
Investigation/Feasibility Study and a corresponding Scope of Work.
Field work began in November 1993, and the EPA approved a Remedial
Investigation Report in February 1997 and a Feasibility Study Report
in June 1998. In July 1998, the EPA approved SCE&G's Removal Action
Work Plan for soil excavation. SCE&G completed Phase One of the
Removal Action in 1998 at a cost of approximately $1.5 million. Phase
Two will include excavation and installation of several permanent
barriers to mitigate coal tar seepage. Phase Two began in November
1998, and is expected to cost approximately $2.2 million. On September
30, 1998 a Record of Decision was issued which sets forth EPA's view
of the extent of each PRP's responsibility for site contamination and
the level to which the site must be remediated. On January 13, 1999
the EPA issued a Unilateral Administrative Order for Remedial Design
and Remedial Action directing SCE&G to design and carry out a plan of
remediation for the Calhoun Park site. The Order is temporarily stayed
pending further negotiations between SCE&G and the EPA.
In October 1996 the City of Charleston and SCE&G settled all
environmental claims the City may have had against SCE&G involving the
Calhoun Park area for a payment of $26 million over four years
(1996-1999) by SCE&G to the City. SCE&G is recovering the amount of
the settlement, which does not encompass site assessment and cleanup
costs, through rates in the same manner as other amounts accrued for
site assessments and cleanup as discussed above. As part of the
environmental settlement, SCE&G has agreed to construct an 1,100 space
parking garage on the Calhoun Park site and to transfer the facility
to the City in exchange for a 20-year municipal bond backed by
revenues from the parking garage and a mortgage on the parking garage.
The total amount of the bond is not to exceed $16.9 million, the
maximum expected project cost. The parking garage is currently under
construction and is scheduled for completion in the spring of the year
2000.
o SCE&G owns three other decommissioned manufactured gas plant sites
which contain residues of by-product chemicals. For the site located
in Sumter, South Carolina, effective September 15, 1998, SCE&G entered
into a Remedial Action Plan Contract with the South Carolina
Department of Health and Environmental Control (DHEC) pursuant to
which it agreed to undertake a full site investigation and remediation
under the oversight of DHEC. Site investigation and characterization
are proceeding according to schedule. Upon selection and successful
implementation of a site remedy, DHEC will give SCE&G a Certificate of
Completion and a covenant not to sue. SCE&G is continuing to
investigate the other two sites, and is monitoring the nature and
extent of residual contamination.
11
<PAGE>
6. SEGMENT OF BUSINESS INFORMATION:
The Company's reportable segments are listed in the following table. The Company
uses operating income to measure profitability for its Electric Operations and
Gas Distribution segments. Therefore, net income is not allocated to these
segments. The Company uses net income to measure profitability for its Energy
Marketing segment, which includes the Company's unregulated gas sales in
Georgia. Affiliate revenue is derived from transactions between reportable
segments as well as transactions between separate legal entities that are
combined into the same reportable segment.
Assets for the period did not change significantly.
Disclosure and Reconciliation of Reportable Segments
(unaudited)
Three Months Ended Three Months Ended
March 31, 1999 March 31, 1998
- ------------ --------------------------------- ---------------------------------
Net Operating Net Operating
Income Income Income Income
(Millions of Dollars)
Electric Operations n/a $62 n/a $73
Gas Distribution n/a 14 n/a 16
Gas Transmission $ 3 4 $ 5 5
Energy Marketing (13) n/a (1) n/a
- ----------- ---------------- ---------------- ---------------- ----------------
Total Reportable Segments (10) 80 4 94
Elimination of Affiliates - (1) - (1)
Non-reportable Segments - (1) 1 (1)
Unallocated 47 - 59 (1)
- ---------------------------- ---------------- ---------------- ----------------
Consolidated Totals $37 $78 $64 $91
============================ ================ ================ ================
External Affiliate External Affiliate
Revenue Revenue Revenue Revenue
(Millions of Dollars)
Electric Operations $266 $ 68 $269 $ 67
Gas Distribution 86 - 88 -
Gas Transmission 44 49 49 49
Energy Marketing 142 - 93 -
- ----------- ---------------- ---------------- ---------------- ----------------
Total Reportable
Segments $538 $117 $499 $116
============ ================ ================ ================ ================
12
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
SCANA CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with Management's
Discussion and Analysis of Financial Condition and Results of Operations
appearing in SCANA Corporation's (the Company) Annual Report on Form 10-K for
the year ended December 31, 1998.
Statements included in this discussion and analysis (or elsewhere in
this quarterly report) which are not statements of historical fact are intended
to be, and are hereby identified as, "forward-looking statements" for purposes
of the safe harbor provided by Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended.
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 regulatory
environment, including the pace of deregulation of retail natural gas and
electricity markets in the United States, (3) changes in the economy, (4) the
impact of competition from other energy suppliers, (5) the management of the
Company's operations, (6) variations in prices of natural gas and fuels used for
electric generation, (7) growth opportunities for the Company's regulated and
non-regulated subsidiaries, (8) the results of financing efforts, (9) changes in
the Company's accounting policies, (10) weather conditions in areas served by
the Company's utility subsidiaries, (11) performance of the telecommunications
companies in which the Company has made significant investments, (12) inflation,
(13) exposure to environmental issues and liabilities, (14) changes in
environmental regulation, (15) unsuccessful correction of any material Year 2000
problem or, alternatively, unsuccessful implementation of a contingency plan by
the Company and any critical third party suppliers, and (16) 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.
MATERIAL CHANGES IN CAPITAL RESOURCES AND LIQUIDITY
SINCE DECEMBER 31, 1998
COMPETITION
North Carolina Acquisition
On February 17, 1999, the Company and Public Service Company of North
Carolina, Inc. (PSNC) announced a definitive agreement whereby the Company will
acquire PSNC in a transaction valued at approximately $900 million, including
the assumption of debt. The transaction will be accounted for as a purchase. It
is anticipated that PSNC will be operated as a wholly-owned subsidiary of the
Company. Completion of the transaction is subject to the approval of the
shareholders of both companies and applicable regulatory approvals. It is
anticipated that the approval process can be completed by the end of 1999.
Georgia Retail Gas Market
SCANA Energy Marketing (Energy Marketing), a wholly-owned subsidiary of
the Company, continues to exceed projections for acquiring customers in
Georgia's natural gas market. At March 31, 1999, Energy Marketing had
approximately 236,000 customers compared to approximately 72,000 at December 31,
1998. Energy Marketing's success has resulted in expenses being significantly
higher than expected. For the three months ended March 31, 1999, Energy
Marketing incurred losses (net of taxes) of approximately $12.5 million,
including startup costs which were expensed as incurred. A substantial portion
of those costs came from a $50 per customer promotional sign-up offer, which
expired April 15, 1999. In March 1999, the Georgia legislature approved a bill
that resulted in Georgia's natural gas market being declared competitive. As a
result, customers who have not chosen a new gas supplier by August 11, 1999 will
be randomly assigned to a new supplier based on market share. At the current
rate of expansion, Energy Marketing could have approximately 600,000 customers
after the random assignment process is completed. As a result, Energy Marketing
anticipates incurring significant losses through the
13
<PAGE>
rest of 1999. The level of future revenues and expenditures, including startup
cost, is dependent on several factors that cannot be reasonably predicted. These
factors include how rapidly Energy Marketing gains additional customers and
market share, the intensity of competition as it continues to develop, the
margin Energy Marketing is able to achieve on gas sales and its ability to find
industrial interruptible customers to purchase available capacity.
Proposed Interstate Natural Gas Pipeline
On April 14, 1999, South Carolina Pipeline Corporation, a wholly-owned
subsidiary of the Company, announced plans to develop an interstate natural gas
pipeline to ensure adequate supplies to growing gas markets in South Carolina
and North Carolina. Details of the proposal, which is competing with another
similar proposed project, are being finalized. Construction of the project will
require approval by the Federal Energy Regulatory Commission and other federal
and state agencies.
LIQUIDITY AND CAPITAL RESOURCES
On December 11, 1998, the Public Service Commission of South Carolina
(PSC) issued an order requiring South Carolina Electric & Gas Company (SCE&G), a
wholly owned subsidiary of the Company, to reduce retail electric rates on a
prospective basis. The PSC acted in response to SCE&G reporting that it earned a
13.04 percent return on common equity for its retail electric operations for the
twelve months ended September 30, 1998. This return on common equity exceeded
SCE&G's authorized return of 12.0 percent by 1.04 percent, or $22.7 million,
primarily as a result of record-breaking heat experienced during the summer. The
order required prospective rate reductions on a per kilowatt-hour basis, based
on actual retail sales for the twelve months ended September 30, 1998. This
action will reduce future reported return on common equity to the PSC-authorized
level if SCE&G experiences the same weather effect and other business results as
that of the twelve months ended September 30, 1998. On December 21, 1998, SCE&G
filed a motion for reconsideration with the PSC. On January 12, 1999, the PSC
denied SCE&G's motion for reconsideration and reaffirmed SCE&G's return on
equity of 12.0 percent. The rate reductions were placed into effect with the
first billing cycle of January 1999.
The following table summarizes how the Company generated funds for
property additions and construction expenditures during the three months ended
March 31, 1999 and 1998:
Three Months Ended March 31, 1999 1998
- --------------------------------------------------------------- --------------
(Millions of Dollars)
Net cash provided from operating activities $ 21 $ 96
Net cash provided (used) for financing activities 48 (48)
Cash provided from sale of subsidiary assets 3 -
- --------------------------------------------------------------- --------------
Cash and temporary cash investments available
at the beginning of the period 62 60
=============================================================== ==============
Net cash available for property additions
and construction expenditures $134 $108
=============================================================== ==============
Funds used for utility property additions and
construction expenditures, net of noncash
allowance for funds used during construction $ 50 $ 51
=============================================================== ==============
Funds used for nonutility property additions $13 $ 7
=============================================================== ==============
On March 9, 1999, SCE&G issued $100 million of First Mortgage Bonds
having an annual interest rate of 6 1/8% and maturing on March 1, 2009. These
funds were used to reduce short-term debt.
The Company anticipates that the remainder of its 1999 cash requirements
will be met through internally generated funds, and the incurrence of additional
short-term and long-term indebtedness. The Company anticipates incurring
short-term and long-term debt to fund the cash consideration to be paid to
shareholders related to the Company's acquisition of PSNC. The timing and amount
of such financings will depend upon market conditions and other factors. The
Company expects that it has or can obtain adequate sources of financing to meet
its projected cash requirements for the next twelve months and for the
foreseeable future. The ratio of earnings to fixed charges for the twelve months
ended March 31, 1999 was 3.29.
14
<PAGE>
Investments in Equity Securities
At March 31, 1999, SCANA Communications, Inc. (SCI), a wholly owned
subsidiary of the Company, held the following investments in ITC Holding
Company, Inc. (ITC) and its affiliates:
o Powertel, Inc. (Powertel) is a publicly traded company that owns and
operates personal communications services (PCS) systems in several
major Southeastern markets. SCI owns approximately 4.7 million common
shares of Powertel. SCI's investment in Powertel's common shares of
approximately $69.2 million had a market value of $67.1 million at
March 31, 1999, resulting in a pre-tax unrealized holding loss of $2.1
million. The after-tax amount of such loss is included in the balance
sheet as a component of "Common Equity." In addition, SCI owns the
following non-voting convertible preferred shares, at the approximate
cost noted: 100,000 shares series B ($75.1 million); 50,000 shares
series D ($22.5 million); and, 50,000 series E 6.5% ($75.0 million).
Preferred series B shares are convertible in March 2002 at a
conversion price of $16.50 per common share or approximately 4.5
million common shares. Preferred series D shares are convertible in
March 2002 at a conversion price of $12.75 per common share or
approximately 1.7 million common shares. Preferred series E shares are
convertible in June 2003 at a conversion price of $22.01 per common
share or approximately 3.4 million common shares. The market value of
the convertible preferred shares of Powertel is not readily
determinable. However, on an as converted basis, the market value of
the underlying common shares for the preferred shares was
approximately $138.5 million at March 31, 1999, resulting in an
unrecorded pre-tax holding loss of $34.1 million.
o ITC Delta^Com, Inc. (ITCD) is a fiber optic telecommunications
provider. SCI owns approximately 4.1 million common shares of ITCD.
SCI's investment in ITCD's common shares of approximately $16.2
million had a market value of $88.4 million at March 31, 1999,
resulting in a pre-tax unrealized holding gain of $72.2 million. The
after-tax amount of such gain is included in the balance sheet as a
component of "Common Equity." In addition, SCI owns 1,480,771 shares
of series A preferred stock of ITCD at a cost of approximately $11.3
million. Series A preferred shares are convertible in March 2002 into
ITCD common shares on a two for one basis. The market value of series
A preferred stock of ITCD is not readily determinable. However, on an
as converted basis the market value of the underlying common stock for
the series A preferred stock was approximately $64.6 million at March
31, 1999, resulting in an unrecorded pre-tax holding gain of $53.3
million.
o Knology Holdings, Inc. (Knology) is a broad-band service provider of
cable, television, telephone and internet services. SCI owns 71,050
units of Knology. Each unit consists of one 11.875% Senior Discount
Note due 2007 and one warrant entitling the holder to purchase .003734
shares of preferred stock of Knology. The cost of this investment was
approximately $40 million. SCI also owns an additional 753 warrants
which entitles it to purchase 753 shares of preferred stock at $1,500
per share.
o ITC has an ownership interest in several Southeastern communications
companies. SCI owns approximately 3.1 million common shares, 645,153
series A convertible preferred shares, and 133,664 series B
convertible preferred shares of ITC. These investments cost
approximately $7.1 million, $8.9 million, and $5.0 million,
respectively. Series A and series B preferred shares are convertible
in March 2002 into ITC common shares at a conversion price of $13.45
and $43.56, respectively, on a four for one basis. The market value of
these investments is not readily determinable.
15
<PAGE>
Year 2000 Issue
The Year 2000 is an issue because many computers, embedded systems and
software were originally programmed using two digits rather than four digits to
identify the applicable year. This may prevent them from accurately processing
information with dates beyond 1999. Because the Year 2000 issue could have a
material impact on the operations of the Company if not addressed, the Company's
goal is to be Year 2000 ready. This means that before the year 2000, critical
systems, equipment, applications and business relationships will have been
evaluated and should be suitable to continue into and beyond the year 2000 and
that applicable contingency plans are in place.
In 1993, SCANA began the first of several projects to replace many of
its business application systems to provide increased functionality and to
improve access to business information. Accordingly, SCANA has implemented new
general ledger, purchasing, materials inventory and accounts payable systems,
and is currently implementing a new customer information system. The new
customer information system is being phased into production by geographical
area, and should be fully implemented in the first half of 1999. These new
systems, which comprise a significant portion of SCANA's applications software,
are designed to be Year 2000 compliant, and therefore mitigate overall Year 2000
exposure.
In 1997, SCANA established a Corporate Year 2000 Project Office (Project
Office) to direct Year 2000 efforts throughout the Company. A Steering Committee
was formed to direct the efforts of the Project Office. The Steering Committee
reports to the senior officers of SCANA and to the board of directors. It is
chaired by the chief financial officer of SCANA and is comprised of officers
representing all operational areas. The Project Office is staffed by nine full
time project managers and extensive support personnel. The Project Office is
responsible for addressing Year 2000 issues and coordinating the required
assessment and remediation efforts.
SCANA's Year 2000 efforts encompass three projects, all reporting to the
Steering Committee. The Information Technology Project covers all mainframe and
client server application software, infrastructure hardware, system software,
desktop computers and network equipment. The Embedded Systems Project covers all
microprocessors, instruments and control devices, monitoring equipment on power
lines and in substations, security and control devices, telephone systems and
certain types of meters. The Procedures and External Interfaces Project covers
Year 2000 procedures, documentation and communications with key suppliers,
vendors, customers, financial institutions and governmental agencies.
SCANA's Year 2000 project approach involves the following: (1)
inventorying all Year 2000 internal and external items and entities and updating
the Year 2000 Inventory Database; (2) performing risk analysis and corporate
prioritization of all inventory entries; (3) performing detailed assessments of
all inventory entries to determine Year 2000 readiness and establishing a
remediation action plan where necessary; (4) remediating all inventory entries
assessed as non-compliant, including repairing, replacing or developing
acceptable work-arounds; (5) testing through date simulation and comprehensive
test data; (6) implementation of all converted systems and equipment into
production operations; and (7) contingency planning.
Detailed project plans exist for each of the Year 2000 projects. These
project plans, work schedules and resource requirements are reviewed weekly by
the project managers and monthly by the Steering Committee. The Year 2000
projects, which will address the Company's critical systems and business
relationships, are appropriately staffed and are currently on schedule to be
completed by July 1999. As reported to the North American Electric Reliability
Council (NERC) in March 1999, the Company was 100% complete with inventory
tasks, 78% complete with detailed assessment tasks and 70% complete with
remediation tasks.
The Information Technology Project Team has completed the assessment and
initial code remediation for all application software. Many of the applications
have been tested in an isolated Year 2000 testing environment and the rest are
being tested according to the project schedule. Independent vendor verifications
of remediated code for selected applications are planned for the second quarter
of 1999. The assessment of the technical infrastructure and desktop computing
environment is complete and required remediation is in process. Testing of all
network equipment is in process. An Information Technology Audit Review
Committee has been established to review all assessments for mission critical
applications and technical infrastructure items. The Information Technology
Project was approximately 65% complete through March 1999.
16
<PAGE>
The Embedded Systems Project Team, which includes approximately 20
engineers with prior experience with microprocessors was formed and detailed
assessment, remediation and testing procedures were developed. This team is
currently working closely with each of SCANA's business units to complete the
assessments of critical systems and equipment based on the corporate
prioritization process. An Embedded Systems Audit Review Committee continues to
review all assessments for critical systems. As assessments are completed, any
required remediation efforts are evaluated and implemented. Independent vendor
verifications for selected completed assessments were completed during the first
quarter of 1999 and confirmed the Company's previous conclusions. The Embedded
Systems Project was approximately 75% complete through March 1999.
The Procedures and External Interfaces Project Team has developed
written documentation and procedures for Year 2000 compliance definition,
document control, inventory, prioritization, assessment, remediation, change
control, business continuity planning, and vendor, customer and supplier
communications. This team is coordinating communications with all significant
vendors and suppliers in an attempt to determine the extent to which the Company
may be vulnerable to their failure to remediate their own Year 2000 issues. The
Company has completed an initial survey of vendors and is currently evaluating
the responses to the survey and conducting additional inquiries where necessary.
The Company is also in the process of evaluating critical third party service
providers to ascertain their Year 2000 readiness. The Company has developed
communications materials explaining its year 2000 efforts and is continuing
communications with significant customers and external groups, including the
South Carolina and Georgia Public Service Commissions. The Procedures and
External Interfaces Project was approximately 60% complete through March 1999.
The Company's projected total cost of its Year 2000 efforts and the
anticipated timing and breakdown of those expenditures is as follows:
------------------- -------------- ------------------ ----------------
Internal Out of Pocket Total
------------------- -------------- ------------------ ----------------
(Millions of Dollars)
Project To Date $ 2 $ 9 $11
1999 3 6 9
----- ------- -----
Total $ 5 $15 $20
------------------- -------------- ------------------ ----------------
The cost of the project is based on management's best estimates, which
are based on assumptions regarding future events. These future events include
continued availability of key resources, third parties' Year 2000 readiness and
other factors. The cost of the project is not expected to have a material impact
on the results of operations or on the financial position or cash flows of SCANA
or SCE&G. The costs of implementing the new business application systems
referred to earlier are not included in these cost estimates.
A failure to correct a material Year 2000 problem by the Company or by a
critical third party supplier could result in an interruption in, or a failure
of the Company's ability to provide energy services. At this time, the Company
believes its most reasonably likely worst case scenario is that Year 2000
failures could lead to temporarily reduced generating capacity on the Company's
electrical grid, temporary intermittent interruptions in communications and
temporary intermittent interruptions in gas supply from interstate suppliers or
producers. A Year 2000 problem of this nature could result in temporary
interruptions in electric or gas service to customers. The Company has no
historical experience with interruptions caused by this scenario. However, these
temporary interruptions in service, if any, might be similar to weather-related
outages that the Company encounters from time to time in its business today.
Although the Company does not believe that this scenario will occur, the Company
is enhancing existing contingency plans to ensure preparedness and to mitigate
the long term effect of such a scenario. Since the expected impact of this
scenario on the Company's operations, cash flow and financial position cannot be
determined, there is no assurance that it would not be material.
17
<PAGE>
The Company has established eight business continuity planning task
groups to develop Year 2000 business continuity plans. These task groups have
developed initial draft plans to cover the Company's Corporate Operations,
Customer Service Operations, Electric Generation, Transmission and Distribution
Operations, Gas Delivery Operations, Telecommunications and Emergency
Preparedness, Information Technology and Procurement. Detailed contingency plans
that were already in place to cover weather-related outages, computer failures
and generation outages were used and/or referenced as the basis for the initial
draft Year 2000 business continuity plans. The initial draft plans are
continuing to be enhanced, and where necessary, new plans will be developed to
include mitigation strategies and emergency response action plans to address
potential Year 2000 scenarios and critical system failures. The final plans will
also include mitigation strategies to address reliance on critical suppliers.
NERC is coordinating Year 2000 efforts of the electric utility industry
in the United States and contingency planning within the regional electric
reliability councils. Coordination in SCE&G's region is through the Southeastern
Electric Reliability Council (SERC). SCE&G's contingency planning efforts are in
compliance with the SERC and NERC contingency planning guidelines which required
draft contingency plans to be complete by December 31, 1998 and will require
final contingency plans to be complete by June 30, 1999.
On April 9, 1999, the Company participated in the first of two NERC
required contingency planning drills that are intended to test backup
communications systems and the Company's ability to operate the electric grid
with manually read data instead of computerized systems. The Company's gas
transmission and distribution operations areas also participated in the drill.
The drills were successful and no major problems with the Company's backup
procedures were found.
In addition to NERC and SERC, SCE&G is working with the Electric Power
Research Institute to address the issue of overall grid reliability and
protection. To ensure that all Year 2000 issues at its Summer Station nuclear
plant are addressed, SCE&G is closely cooperating with other utility companies
that own nuclear power plants. The utilities are sharing technical nuclear plant
operating and monitoring systems information to ensure the prompt and effective
resolution of the Year 2000 issue.
18
<PAGE>
RESULTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1999
AS COMPARED TO THE CORRESPONDING PERIOD IN 1998
Earnings and Dividends
Net income for the three months ended March 31, 1999 decreased
approximately $27.2 million when compared to the corresponding period in 1998.
Lower electric margins, the impact of a rate reduction, and losses from the
Company's entry into the Georgia retail gas market were only partially offset by
reduced other operation and maintenance expenses. In addition, net income for
the three months ended March 31, 1998 includes a one-time, after-tax reduction
to depreciation expense of approximately $5.5 million related to a change in
depreciation rates retroactive to February 1996. This change in depreciation
rates resulted from the reversal of a $257 million shift of depreciation
reserves from electric transmission and distribution assets to nuclear
production assets, previously approved in a PSC rate order in January 1996.
Allowance for funds used during construction (AFC) is a utility
accounting practice whereby a portion of the cost of both equity and borrowed
funds used to finance construction (which is shown on the balance sheet as
construction work in progress) is capitalized. Both the equity and the debt
portions of AFC are noncash items of nonoperating income which have the effect
of increasing reported net income. AFC represented approximately 5% and 4% of
income before income taxes for the three months ended March 31, 1999 and 1998,
respectively.
The Company's Board of Directors declared the following quarterly
dividends on common stock:
- ------------------- ---------------- ------------------ -------------------
Declaration Dividend Record Payment
Date Per Share Date Date
- ------------------- ---------------- ------------------ -------------------
February 7, 1999 38 1/2 cents March 9, 1999 April 1, 1999
April 22, 1999 38 1/2 cents June 9, 1999 July 1, 1999
- ------------------- ---------------- ------------------ -------------------
On February 17, 1999, the Board of Directors announced the adoption of a
new common stock dividend policy to bring the Company's dividend payout ratio
more in line with that of growth-oriented utilities. Under the new policy, the
board anticipated declaring the current dividend of $0.385 cents per share
payable July 1, 1999 and reducing the dividend to $0.275 per share, effective
with the dividend to be paid thereafter. This action would make the Company's
indicated annual dividend rate on common stock $1.10 per share.
Electric Operations
Electric operations sales margins (including transactions with
affiliates) for the three months ended March 31, 1999 and 1998 were as follows:
Three Months Ended March 31, 1999 1998 Change % Change
- ------------------------------- --------------- --------- --------- ------------
(Million of Dollars)
Electric operating revenue $334.3 $336.2 $ (1.9) (0.6%)
Less: Fuel used in generation 103.8 100.3 3.5 3.5%
Purchased power 28.1 26.3 1.8 6.8%
- ------------------------------- --------------- --------- --------- ------------
Margin $202.4 $209.6 $ (7.2) (3.4%)
=============================== =============== ========= ========= ============
The electric operations sales margin decreased for the three months
ended March 31, 1999 when compared to the corresponding period in 1998 primarily
as a result of milder weather in the first quarter of 1999 and implementation in
January 1999 of a $22.7 million annual rate reduction ordered by the PSC. See
LIQUIDITY AND CAPITAL RESOURCES.
19
<PAGE>
Gas Distribution
Gas distribution sales margins for the three months ended March 31, 1999
and 1998, were as follows:
Three Months Ended March 31, 1999 1998 Change % Change
- ------------------------------------------------ ---------- -------------------
(Million of Dollars)
Gas distribution operating revenue $86.1 $88.2 $(2.1) (2.4%)
Less: Gas purchased for resale 49.1 48.9 0.2 0.4%
- -------------------------------------------------------------------------------
Margin $37.0 $39.3 $(2.3) (5.9%)
===============================================================================
The gas distribution sales margin for the three months ended March 31,
1999 decreased from 1998 levels primarily as a result of increased
competitiveness of alternative fuels and milder weather.
Gas Transmission
Gas transmission sales margins (including transactions with affiliates)
for the three months ended March 31, 1999 and 1998 were as follows:
Three Months Ended March 31, 1999 1998 Change % Change
- --------------------------------------------- ----------------- ---------------
(Million of Dollars)
Gas transmission operating revenue $92.8 $97.2 $(4.4) (4.5%)
Less: Gas purchased for resale 80.5 83.0 (2.5) (3.0%)
- -------------------------------------------------------------------------------
Margin $12.3 $14.2 $(1.9) (13.4%)
===============================================================================
The gas transmission sales margin for the three months ended March 31,
1999 decreased from 1998 levels primarily as a result of increased
competitiveness of alternate fuels.
Energy Marketing
Energy Marketing sales margins for the three months ended March 31, 1999
and 1998 were as follows:
Three Months Ended March 31, 1999 1998 Change % Change
- ---------------------------------------------------------------- ---------------
(Million of Dollars)
Gas and electric sales revenue $149.4 $92.5 $56.9 61.5%
Less: Gas and electricity purchased
for resale 147.8 92.2 55.6 60.3%
- --------------------------------------------------------------------------------
Margin $ 1.6 $ .3 $ 1.3 433.3%
================================================================================
The energy marketing sales margin for the three months ended March 31,
1999 increased from 1998 levels primarily as a result of positive margins
achieved in the Georgia retail natural gas market.
Other Operating Expenses
Other operating expenses, including taxes, for the three months ended
March 31, 1999 and 1998 were as follows:
Three Months Ended March 31, 1999 1998 Change % Change
- --------------------------------------------- --------------- ------------- ---
(Million of Dollars)
Other operation and maintenance $ 76.2 $ 79.2 $ (3.0) (3.8%)
Depreciation and amortization 41.8 29.9 11.9 39.8%
Income taxes 28.3 36.6 (8.3) (22.8%)
Other taxes 27.2 26.0 1.2 4.6%
- -------------------------------------------------------------------------------
Total $173.5 $171.7 $ 1.8 1.0%
===============================================================================
20
<PAGE>
Other operation and maintenance expenses for the three months ended
March 31, 1999 decreased from 1998 levels primarily as a result of decreased
maintenance costs for electric generation and distribution facilities. The
increase in depreciation and amortization expenses for the three months ended
March 31, 1999 reflects the non-recurring adjustment to depreciation expense in
1998 discussed under "Earnings and Dividends." The change in income tax expense
primarily reflects the change in operating income. The increase in other taxes
for the periods primarily results from increases in property taxes.
Other Income
Other income, net of income taxes, for the three months ended March 31,
1999 decreased approximately $8.7 million, when compared to the corresponding
period of 1998. This decrease was primarily attributable to losses from energy
marketing activities as a result of startup costs in new markets.
Interest Expense
Interest expense, excluding the debt component of AFC, for the three
months ended March 31, 1999 increased approximately $4.4 million, when compared
to the corresponding period in 1998. The increase was primarily due to the
issuance of medium-term notes in the third quarter of 1998, the issuance of
First Mortgage Bonds in the first quarter of 1999 and increased borrowings of
short-term debt.
Item 3. Quantitative and Qualitative Disclosure About Market Risk
All financial instruments held by the Company described below are held for
purposes other than trading.
Interest rate risk - The table below provides information about the
Company's financial instruments that are sensitive to changes in interest rates.
For debt obligations, the table presents principal cash flows and related
weighted average interest rates by expected maturity dates.
<TABLE>
March 31, 1999
Expected Maturity Date
-------------- ------------------ ------------------------------- --------- --------------------
(Millions of Dollars)
There- Fair
Liabilities 1999 2000 2001 2002 2003 After Total Value
-------------- --------- ----------- ----------- ----------- ----------- ----------- -----------
Long-Term Debt
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Fixed Rate ($) 106.5 213.5 27.5 27.5 284.4 1,265.8 1,925.3 1,969.1
Average Interest Rate 6.86 5.93 6.87 6.87 6.29 7.35 6.99
</TABLE>
While a decrease in interest rates would increase the fair value of debt,
it is unlikely that events which would result in a realized loss will occur.
In addition, the Company has invested in a telecommunications company
approximately $40 million for 11.875% senior discount notes due 2007. The fair
value of these notes approximates cost. An increase in market interest rates
would result in a decrease in fair value of these notes and a corresponding
adjustment, net of tax, to other comprehensive income.
Equity price risk - Investments in telecommunications companies' marketable
equity securities are carried at their market value of $375.1 million. A ten
percent decline in market value would result in a $37.5 million reduction in
fair value and a corresponding adjustment, net of tax effect, to the related
equity account for unrealized gains/losses, a component of other comprehensive
income.
21
<PAGE>
SOUTH CAROLINA ELECTRIC & GAS COMPANY
FINANCIAL SECTION
22
<PAGE>
Item 1. Financial Statements
SOUTH CAROLINA ELECTRIC & GAS COMPANY
CONSOLIDATED BALANCE SHEETS
As of March 31, 1999 and December 31, 1998
(Unaudited)
March 31, December 31,
- ----------------------------------------------------------------------- --------
1999 1998
- ----------------------------------------------------------------------- --------
ASSETS (Millions of Dollars)
Utility Plant:
Electric $4,135 $4,133
Gas 366 366
Other 175 175
- --------------------------------------------------------------------------------
Total 4,676 4,674
Less accumulated depreciation and amortization 1,552 1,517
- --------------------------------------------------------------------------------
Total 3,124 3,157
Construction work in progress 262 219
Nuclear fuel, net of accumulated amortization 56 56
- --------------------------------------------------------------------------------
Utility Plant, Net 3,442 3,432
- --------------------------------------------------------------------------------
Nonutility Property and Investments, net of accumulated
depreciation 17 16
- --------------------------------------------------------------------------------
Current Assets:
Cash and temporary cash investments 46 36
Receivables 164 178
Inventories (at average cost):
Fuel 47 32
Materials and supplies 47 47
Prepayments 11 8
Deferred income taxes 21 21
- --------------------------------------------------------------------------------
Total Current Assets 336 322
- --------------------------------------------------------------------------------
Deferred Debits:
Emission allowances 31 31
Environmental 22 22
Nuclear plant decommissioning fund 58 56
Pension asset, net 121 115
Other 251 252
- --------------------------------------------------------------------------------
Total Deferred Debits 483 476
- --------------------------------------------------------------------------------
Total $4,278 $4,246
================================================================================
23
<PAGE>
<TABLE>
<CAPTION>
SOUTH CAROLINA ELECTRIC & GAS COMPANY
CONSOLIDATED BALANCE SHEETS
As of March 1999 and December 31, 1998
(Unaudited)
March 31, December 31,
- ------------------------------------------------------------------------------- -----------
1999 1998
- -------------------------------------------------------------------------------------------
CAPITALIZATION AND LIABILITIES
(Millions of Dollars)
Stockholders' Investment:
<S> <C> <C>
Common Equity $1,510 $1,499
Preferred stock (not subject to purchase or sinking funds) 106 106
- -------------------------------------------------------------------------------------------
Total Stockholders' Investment 1,616 1,605
Preferred Stock, Net (subject to purchase or sinking funds) 11 11
SCE&G-Obligated Mandatorily Redeemable Preferred
Securities of SCE&G's Subsidiary Trust, SCE&G Trust I,
holding solely $50 million principal amount of the 7.55%
Junior Subordinated Debentures of SCE&G, due 2027 50 50
Long-Term Debt, net 1,318 1,206
- -------------------------------------------------------------------------------------------
Total Capitalization 2,995 2,872
- -------------------------------------------------------------------------------------------
Current Liabilities:
Short-term borrowings 78 125
Current portion of long-term debt 29 29
Accounts payable 81 97
Accounts payable - affiliated companies 27 23
Customer deposits 17 17
Taxes accrued 26 75
Interest accrued 25 21
Dividends declared 38 38
Other 10 10
- -------------------------------------------------------------------------------------------
Total Current Liabilities 331 435
- ------------------------------------------------------------------------------- -----------
Deferred Credits:
Deferred income taxes 570 549
Deferred investment tax credits 99 100
Reserve for nuclear plant decommissioning 58 56
Postretirement benefits 90 87
Other 135 147
- -------------------------------------------------------------------------------------------
Total Deferred Credits 952 939
- -------------------------------------------------------------------------------------------
Total $4,278 $4,246
===========================================================================================
See Notes to Consolidated Financial Statements.
</TABLE>
24
<PAGE>
SOUTH CAROLINA ELECTRIC & GAS COMPANY
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
For the Periods Ended March 31, 1999 and 1998
(Unaudited)
Three Months Ended
March 31,
- --------------------------------------------------------------------------------
1999 1998
- --------------------------------------------------------------------------------
(Millions of Dollars)
OPERATING REVENUES:
Electric $266 $270
Gas 86 88
Transit 1 -
- --------------------------------------------------------------------------------
Total Operating Revenues 353 358
- --------------------------------------------------------------------------------
Operating Expenses:
Fuel used in electric generation 45 43
Purchased power (including affiliated purchases) 28 26
Gas purchased from affiliate for resale 49 49
Other operation 53 56
Maintenance 17 18
Depreciation and amortization 38 26
Income taxes 26 33
Other taxes 25 24
- --------------------------------------------------------------------------------
Total Operating Expenses 281 275
- --------------------------------------------------------------------------------
OPERATING INCOME 72 83
- --------------------------------------------------------------------------------
OTHER INCOME:
Allowance for equity funds used during construction 1 2
Other income 1 -
- --------------------------------------------------------------------------------
Total Other Income 2 2
- --------------------------------------------------------------------------------
INCOME BEFORE INTEREST CHARGES 74 85
- --------------------------------------------------------------------------------
INTEREST CHARGES (CREDITS):
Interest expense on long-term debt 23 24
Other interest expense 3 2
Allowance for borrowed funds used during construction (1) (2)
- --------------------------------------------------------------------------------
Total Interest Charges, Net 25 24
- --------------------------------------------------------------------------------
INCOME BEFORE PREFERRED DIVIDEND REQUIREMENTS
ON MANDATORILY REDEEMABLE PREFERRED SECURITIES 49 61
PREFERRED DIVIDEND REQUIREMENT OF SCE&G - OBLIGATED MANDATORILY
REDEEMABLE PREFERRED SECURITIES 1 1
- --------------------------------------------------------------------------------
NET INCOME 48 60
Preferred Stock Cash Dividends (At stated rates) (2) (2)
- --------------------------------------------------------------------------------
Earnings Available for Common Stock 46 58
Retained Earnings at Beginning of Period 491 438
Common Stock Cash Dividends Declared (36) (37)
================================================================================
Retained Earnings at End of Period $501 $459
================================================================================
See Notes to Consolidated Financial Statements.
25
<PAGE>
SOUTH CAROLINA ELECTRIC & GAS COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Periods Ended March 31, 1999 and 1998
(Unaudited)
Three Months Ended
March 31,
- -------------------------------------------------------------------- -----------
1999 1998
- -------------------------------------------------------------------- -----------
(Millions of Dollars)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 48 $ 60
Adjustments to reconcile net income to net
cash provided from operating activities:
Depreciation and amortization 38 26
Amortization of nuclear fuel 5 5
Deferred income taxes, net 22 20
Pension asset (7) (1)
Post retirement benefits 3 3
Allowance for funds used during construction (2) (4)
Over (under) collections, fuel adjustment clauses 9 16
Changes in certain current assets and liabilities:
(Increase) decrease in receivables 14 1
(Increase) decrease in inventories (15) (5)
Increase (decrease) in accounts payable (12) (9)
Increase (decrease) in taxes accrued (49) (15)
Other, net (22) (21)
- -------------------------------------------------------------------- -----------
Net Cash Provided From Operating Activities 32 76
- -------------------------------------------------------------------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Utility property additions and construction expenditures,
net of AFC (48) (46)
- -------------------------------------------------------------------- -----------
Net Cash Used For Investing Activities (48) (46)
- -------------------------------------------------------------------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds:
Issuance of First Mortgage Bonds 99 -
Dividend payments:
Common stock (36) (56)
Preferred stock (2) (2)
Short-term borrowings, net (48) 44
Fuel and emission allowance financings, net 13 (2)
- -------------------------------------------------------------------- -----------
Net Cash Provided From (Used For) Financing Activities 26 (16)
- -------------------------------------------------------------------- -----------
NET INCREASE IN CASH AND TEMPORARY CASH INVESTMENTS 10 14
CASH AND TEMPORARY CASH INVESTMENTS AT JANUARY 1 36 6
==================================================================== ===========
CASH AND TEMPORARY CASH INVESTMENTS AT MARCH 31 $ 46 $ 20
==================================================================== ===========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for - Interest (includes capitalized interest
of $1 for 1999 and $2 for 1998) $ 21 $ 21
- Income taxes 4 (20)
See Notes to Consolidated Financial Statements.
26
<PAGE>
SOUTH CAROLINA ELECTRIC & GAS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1999
(Unaudited)
The following notes should be read in conjunction with the Notes to
Consolidated Financial Statements appearing in South Carolina Electric & Gas
Company's (the Company) Annual Report on Form 10-K for the year ended December
31, 1998. These are interim financial statements, and the amounts reported in
the Consolidated Statements of Income are not necessarily indicative of amounts
expected for the year. In the opinion of management, the information furnished
herein reflects all adjustments, all of a normal recurring nature except as
described in Note 2, which are necessary for a fair statement of the results for
the interim periods reported.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
A. Basis of Accounting
The Company accounts for its regulated utility operations, assets and
liabilities in accordance with the provisions of Statement of Financial
Accounting Standards No. 71 (SFAS 71). The accounting standard requires
cost-based rate-regulated utilities to recognize in their financial
statements revenues and expenses in different time periods than do
enterprises that are not rate-regulated. As a result the Company has
recorded, as of March 31, 1999, approximately $195 million and $69
million of regulatory assets and liabilities, respectively, including
amounts recorded for deferred income tax assets and liabilities of
approximately $123 million and $51 million, respectively. The electric
and gas regulatory assets (excluding deferred income tax assets) of
approximately $43 million and $27 million, respectively, are being
recovered through rates, and the Public Service Commission of South
Carolina (PSC) has approved accelerated recovery of approximately $12
million of the electric regulatory assets. In the future, as a result of
deregulation or other changes in the regulatory environment, the Company
may no longer meet the criteria for continued application of SFAS 71 and
could be required to write off its regulatory assets and liabilities.
Such an event could have a material adverse effect on the Company's
results of operations in the period that a write-off would be required,
but it is not expected that cash flows or financial position would be
materially affected.
B. Reclassifications
Certain amounts from prior periods have been reclassified to conform with
the 1999 presentation.
2. RATE MATTERS
On December 11, 1998, the PSC issued an order requiring the Company to
reduce retail electric rates on a prospective basis. The PSC acted in
response to the Company reporting that it earned a 13.04 percent return
on common equity for its retail electric operations for the twelve months
ended September 30, 1998. This return on common equity exceeded the
Company's authorized return of 12 percent by 1.04 percent, or $22.7
million, primarily as a result of record heat experienced during the
summer. The order required prospective rate reductions on a per
kilowatt-hour basis, based on actual retail sales for the twelve months
ended September 30, 1998. This action will reduce future reported return
on common equity to the PSC-authorized level if the Company experiences
the same weather effect and other business results as that of the twelve
months ended September 30, 1998. On December 21, 1998, the Company filed
a motion for reconsideration with the PSC. On January 12, 1999, the PSC
denied the Company's motion for reconsideration, ruled that no further
rate action was required, and reaffirmed the Company's return on equity
of 12 percent. The rate reductions were placed into effect with the first
billing cycle of January 1999.
3. RETAINED EARNINGS:
The Restated Articles of Incorporation of the Company and the Indenture
underlying its First and Refunding Mortgage Bonds contain provisions
that, under certain circumstances, could limit the payment of cash
dividends on its common stock. In addition, with respect to hydroelectric
projects, the Federal Power Act requires the appropriation of a portion
of certain earnings therefrom. At March 31, 1999, approximately $26.0
million of retained earnings were restricted by this requirement as to
payment of cash dividends on common stock.
27
<PAGE>
4. CONTINGENCIES:
With respect to commitments at March 31, 1999, reference is made to Note
10 of Notes to Consolidated Financial Statements appearing in the
Company's Annual Report on Form 10-K for the year ended December 31,
1998.
Contingencies at March 31, 1999 are as follows:
A. Nuclear Insurance
The Price-Anderson Indemnification Act, which deals with public liability
for a nuclear incident, currently establishes the liability limit for
third-party claims associated with any nuclear incident at $9.7 billion.
Each reactor licensee is currently liable for up to $88.1 million per
reactor owned for each nuclear incident occurring at any reactor in the
United States, provided that not more than $10 million of the liability
per reactor would be assessed per year. The Company's maximum assessment,
based on its two-thirds ownership of the V. C. Summer Nuclear Station
(Summer Station), would be approximately $58.7 million per incident, but
not more than $6.7 million per year.
The Company currently maintains policies (for itself and on behalf of
Santee Cooper) with Nuclear Electric Insurance Limited (NEIL) and
American Nuclear Insurers (ANI) providing combined property and
decontamination insurance coverage of $2.0 billion for any losses at
Summer Station. The Company pays annual premiums and, in addition, could
be assessed a retroactive premium not to exceed five times its annual
premium in the event of property damage loss to any nuclear generating
facility covered under the NEIL program. Based on the current annual
premium, this retroactive premium assessment would not exceed $6.1
million.
To the extent that insurable claims for property damage,
decontamination, repair and replacement and other costs and expenses
arising from a nuclear incident at Summer Station exceed the policy
limits of insurance, or to the extent such insurance becomes unavailable
in the future, and to the extent that the Company's rates would not
recover the cost of any purchased replacement power, the Company will
retain the risk of loss as a self-insurer. The Company has no reason to
anticipate a serious nuclear incident at Summer Station. If such an
incident were to occur, it could have a material adverse impact on the
Company's results of operations, cash flows and financial position.
B. Environmental
The Company has an environmental assessment program to identify and
assess current and former operations sites that could require
environmental cleanup. As site assessments are initiated, estimates are
made of the expenditures, if any, deemed necessary to investigate and
clean up each site. These estimates are refined as additional
information becomes available; therefore, actual expenditures could
differ significantly from the original estimates. Amounts estimated and
accrued to date for site assessments and cleanup relate primarily to
regulated operations. Such amounts are deferred and amortized with
recovery provided through rates. The Company has also recovered portions
of its environmental liabilities through settlements with various
insurance carriers. The Company has recovered all amounts previously
deferred for its electric operations. The Company expects to recover all
deferred amounts related to its gas operations by December 2002.
Deferred amounts, net of amounts recovered through rates and insurance
settlements, totaled $20.8 million at March 31, 1999. The deferral
includes the estimated costs associated with the following matters.
o In September 1992, the EPA notified the Company, the City of
Charleston and the Charleston Housing Authority of their potential
liability for the investigation and cleanup of the Calhoun Park area
site in Charleston, South Carolina. This site encompasses
approximately 30 acres and includes properties which were locations
for industrial operations, including a wood preserving (creosote)
plant, one of the Company's decommissioned manufactured gas plants,
properties owned by the National Park Service and the City of
Charleston, and private properties. The site has not been placed on
the National Priorities List, but may be added in the future. The
Potentially Responsible Parties (PRPs) have negotiated an
administrative order by consent for the conduct of a Remedial
Investigation/Feasibility Study and a corresponding Scope of Work.
Field work began in November 1993, and the EPA approved a Remedial
Investigation Report in February 1997 and a Feasibility Study Report
in June 1998. In July 1998, the EPA approved the Company's Removal
Action Work Plan for soil excavation. The Company completed Phase One
of the Removal Action in 1998 at a cost of approximately $1.5 million.
Phase Two will include excavation and installation of several
permanent barriers to mitigate coal tar seepage. Phase Two began in
November 1998, and is expected to cost approximately
28
<PAGE>
$2.2 million. On September 30, 1998 a Record of Decision was issued which
sets forth EPA's view of the extent of each PRP's responsibility for site
contamination and the level to which the site must be remediated. On
January 13, 1999 the EPA issued a Unilateral Administrative Order for
Remedial Design and Remedial Action directing the Company to design and
carry out a plan of remediation for the Calhoun Park site. The Order is
temporarily stayed pending further negotiations between the Company and
the EPA.
In October 1996 the City of Charleston and the Company settled all
environmental claims the City may have had against SCE&G involving the
Calhoun Park area for a payment of $26 million over four years
(1996-1999) by SCE&G to the City. The Company is recovering the amount of
the settlement, which does not encompass site assessment and cleanup
costs, through rates in the same manner as other amounts accrued for site
assessments and cleanup as discussed above. As part of the environmental
settlement, SCE&G has agreed to construct an 1,100 space parking garage
on the Calhoun Park site and to transfer the facility to the City in
exchange for a 20-year municipal bond backed by revenues from the parking
garage and a mortgage on the parking garage. The total amount of the bond
is not to exceed $16.9 million, the maximum expected project cost. The
parking garage is currently under construction and is scheduled for
completion in the spring of the year 2000.
o The Company owns three other decommissioned manufactured gas plant
sites which contain residues of by-product chemicals. For the site
located in Sumter, South Carolina, effective September 15, 1998, the
Company entered into a Remedial Action Plan Contract with the South
Carolina Department of Health and Environmental Control (DHEC)
pursuant to which it agreed to undertake a full site investigation and
remediation under the oversight of DHEC. Site investigation and
characterization are proceeding according to schedule. Upon selection
and successful implementation of a site remedy, DHEC will give the
Company a Certificate of Completion and a covenant not to sue. The
Company is continuing to investigate the other two sites, and is
monitoring the nature and extent of residual contamination.
5. SEGMENT OF BUSINESS INFORMATION:
The Company's reportable segments are listed in the following table. The Company
uses operating income to measure profitability for its Electric Operations and
Gas Distribution segments. Therefore, net income is not allocated to these
segments. Affiliate revenue is derived from transactions between reportable
segments as well as transactions between separate legal entities that are
combined into the same reportable segment. Assets for the period did not change
significantly.
Disclosure and Reconciliation of Reportable Segments
(unaudited)
Three Months Ended Three Months Ended
March 31, 1999 March 31, 1998
- --------------------------------------------------------------------- ----------
Operating External Affiliate Operating External Affiliate
Income Revenue Revenue Income Revenue Revenue
(Millions of Dollars)
Electric Operations $60 $266 $44 $69 $269 $42
Gas Distribution 14 86 - 16 88 -
- --------------------------------------------------------------------------------
Total Reportable Segments 74 $352 $44 85 $357 $42
==== === ==== ===
Elimination of Affiliates (1) (1)
Non-reportable Segments (1) (1)
- --------------------------------------------------------------------------------
Consolidated Totals $72 $83
=== ===
29
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
SOUTH CAROLINA ELECTRIC & GAS COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with Management's
Discussion and Analysis of Financial Condition and Results of Operations
appearing in SCE&G's Annual Report on Form 10-K for the year ended December 31,
1998.
Statements included in this discussion and analysis (or elsewhere in
this quarterly report) which are not statements of historical fact are intended
to be, and are hereby identified as, "forward looking statements" for purposes
of the safe harbor provided by Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended.
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 regulatory
environment, including the pace of deregulation of retail natural gas and
electricity markets in the United States, (3) changes in the economy, (4) the
impact of competition from other energy suppliers, (5) the management of SCE&G's
operations, (6) variations in prices of natural gas and fuels used for electric
generation, (7) growth opportunities, (8) the results of financing efforts, (9)
changes in SCE&G's accounting policies, (10) weather conditions in areas served
by SCE&G, (11) inflation, (12) exposure to environmental issues and liabilities,
(13) changes in environmental regulation, (14) unsuccessful correction of any
material Year 2000 problem or, alternatively, unsuccessful implementation of a
contingency plan by SCE&G and any critical third party suppliers and (15) the
other risks and uncertainties described from time to time in SCE&G's periodic
reports filed with the SEC. SCE&G disclaims any obligation to update any
forward-looking statements.
MATERIAL CHANGES IN CAPITAL RESOURCES AND LIQUIDITY
SINCE DECEMBER 31, 1998
LIQUIDITY AND CAPITAL RESOURCES
On December 11, 1998, the South Carolina Public Service Commission (PSC)
issued an order requiring SCE&G to reduce retail electric rates on a prospective
basis. The PSC acted in response to SCE&G reporting that it earned a 13.04%
return on common equity for its retail electric operations for the twelve months
ended September 30, 1998. This return on common equity exceeded SCE&G's
authorized return of 12.0% by 1.04%, or $22.7 million, primarily as a result of
record-breaking heat experienced during the summer. The order required
prospective rate reductions on a per kilowatt-hour basis, based on actual retail
sales for the twelve months ended September 30, 1998. This action will reduce
future reported return on common equity to the PSC-authorized level if SCE&G
experiences the same weather effect and other business results as that of the
twelve months ended September 30, 1998. On December 21, 1998, SCE&G filed a
motion for reconsideration with the PSC. On January 12, 1999, the PSC denied
SCE&G's motion for reconsideration and reaffirmed SCE&G's return on equity of
12.0%. The rate reductions were placed into effect with the first billing cycle
of January 1999.
30
<PAGE>
The following table summarizes how SCE&G generated funds for its utility
property additions and construction expenditures during the three months ended
March 31, 1999 and 1998:
Three Months Ended March 31, 1999 1998
- -----------------------------------------------------------------------------
(Millions of Dollars)
Net cash provided for operating activities $32 $76
Net cash provided from (used for) financing
activities 26 (16)
Cash and temporary cash investments available
at the beginning of the period 36 6
- ----------------------------------------------------------------------------
Net cash available for utility property additions
and construction expenditures $94 $66
============================================================================
Funds used for utility property additions and
construction expenditures, net of noncash
allowance for funds used during construction $48 $ 46
============================================================================
On March 9, 1999, SCE&G issued $100 million of First Mortgage Bonds
having an annual interest rate of 6 1/8% and maturing on March 1, 2009. These
funds were used to reduce short-term debt.
SCE&G anticipates that the remainder of its 1998 cash requirements will
be met through internally generated funds and the incurrence of additional
short-term and long-term indebtedness. The timing and amount of such financings
will depend upon market conditions and other factors. SCE&G expects that it has
or can obtain adequate sources of financing to meet its projected cash
requirements for the next twelve months and for the foreseeable future. The
ratio of earnings to fixed charges for the twelve months ended March 31, 1999
was 4.21.
Year 2000 Issue
The Year 2000 is an issue because many computers, embedded systems and
software were originally programmed using two digits rather than four digits to
identify the applicable year. This may prevent them from accurately processing
information with dates beyond 1999. Because the Year 2000 issue could have a
material impact on the operations of SCE&G if not addressed, SCE&G's goal is to
be Year 2000 ready. This means that before the year 2000, critical systems,
equipment, applications and business relationships will have been evaluated and
should be suitable to continue into and beyond the year 2000 and that applicable
contingency plans are in place.
In 1993, SCE&G began the first of several projects to replace many of
its business application systems to provide increased functionality and to
improve access to business information. Accordingly, SCE&G has implemented new
general ledger, purchasing, materials inventory and accounts payable systems,
and is currently implementing a new customer information system. The new
customer information system is being phased into production by geographical
area, and should be fully implemented in the first half of 1999. These new
systems, which comprise a significant portion of SCE&G's application software,
are designed to be Year 2000 compliant, and therefore mitigate overall Year 2000
exposure.
In 1997, SCANA Corporation (SCANA), SCE&G's parent company, established
a Corporate Year 2000 Project Office (Project Office) to direct Year 2000
efforts for itself and each of its subsidiaries, including SCE&G. A Steering
Committee was formed to direct the efforts of the Project Office. The Steering
Committee reports to the senior officers of SCANA and its board of directors. It
is chaired by SCANA's chief financial officer, and is comprised of officers
representing all operational areas. The Project Office is staffed by nine full
time project managers and extensive support personnel. The Project Office is
responsible for addressing Year 2000 issues and coordinating the required
assessment and remediation efforts.
SCANA's Year 2000 efforts encompass three projects, all reporting to the
Steering Committee. The Information Technology Project covers all mainframe and
client server application software, infrastructure hardware, system software,
desktop computers and network equipment. The Embedded Systems Project covers all
microprocessors, instrument and control devices, monitoring equipment on power
lines and in substations, security and control devices, telephone systems and
certain types of meters. The Procedures and External Interfaces Project covers
Year 2000 procedures, documentation and communications with key suppliers,
vendors, customers, financial institutions and governmental agencies.
31
<PAGE>
SCANA's Year 2000 project approach involves the following: (1)
inventorying all Year 2000 internal and external items and entities and updating
the Year 2000 Inventory Database; (2) performing risk analysis and corporate
prioritization of all inventory entries; (3) performing detailed assessments of
all inventory entries to determine Year 2000 readiness and establishing a
remediation action plan where necessary; (4) remediating all inventory entries
assessed as non-compliant, including repairing, replacing or developing
acceptable work-arounds; (5) testing through date simulation and comprehensive
test data (6) implementation of all converted systems and equipment into
production operations; and (7) contingency planning.
Detailed project plans exist for each of the Year 2000 projects. These
project plans, work schedules and resource requirements are reviewed weekly by
the project managers and monthly by the Steering Committee. The Year 2000
projects, which will address SCE&G's critical systems and business
relationships, are appropriately staffed and are currently on schedule to be
completed by July 1999. As reported to the North American Electric Reliability
Council (NERC) in March 1999, SCE&G was 100% complete with inventory tasks, 78%
complete with detailed assessment tasks and 70% complete with remediation tasks.
The Information Technology Project Team has completed the assessment and
initial code remediation for all application software. Many of the applications
have been tested in an isolated Year 2000 testing environment and the rest
continue to be tested according to the project schedule. Independent vendor
verifications of remediated code for selected applications are planned for the
second quarter of 1999. The assessment of the technical infrastructure and
desktop computing environment is complete and required remediation is in
process. Testing of all network equipment is in process. An Information
Technology Audit Review Committee has been established to review all assessments
for mission critical applications and technical infrastructure items. The
Information Technology Project was approximately 65% complete through March
1999.
The Embedded Systems Project Team, which includes approximately 20
engineers with prior experience with microprocessors, was formed and detailed
assessment, remediation and testing procedures were developed. This team is
currently working closely with each of SCE&G's business units to complete the
assessments of critical systems and equipment based on the corporate
prioritization process. An Embedded Systems Audit Review Committee continues to
review all assessments for critical systems. As assessments are completed, any
required remediation efforts are evaluated and implemented. Independent vendor
verifications for selected completed assessments were completed during the first
quarter of 1999 and confirmed SCE&G's previous conclusions. The Embedded Systems
Project was approximately 75% complete through March 1999.
The Procedures and External Interfaces Project Team has developed
written documentation and procedures for Year 2000 compliance definition,
document control, inventory, prioritization, assessment, remediation, change
control, business continuity planning, and vendor, customer and supplier
communications. This team is coordinating communications with all significant
vendors and suppliers in an attempt to determine the extent to which SCE&G may
be vulnerable to their failure to remediate their own Year 2000 issues. SCE&G
has completed an initial survey of vendors and is currently evaluating the
responses to the survey and conducting additional inquiries where necessary.
SCE&G is also in the process of evaluating critical third party service
providers to ascertain their Year 2000 readiness. The Company has developed
communications materials explaining its year 2000 efforts and is continuing
communications with significant customers and external groups, including the
South Carolina Public Service Commission. The Procedures and External Interfaces
Project was approximately 60% complete through March 1999.
SCE&G's projected total cost of its Year 2000 efforts and the
anticipated timing and breakdown of these expenditures is a follows:
- ----------------------------------------------------------------------------
Internal Out of Pocket Total
- ----------------------------------------------------------------------------
Project To Date $ 2 $ 8 $ 10
1999 3 6 9
- - -
Total $ 5 $ 14 $19
- ----------------------------------------------------------------------------
32
<PAGE>
The cost of the project is based on management's best estimates, which
are based on assumptions regarding future events. These future events include
continued availability of key resources, third parties' Year 2000 readiness and
other factors. The cost of the project is not expected to have a material impact
on the results of operations or on the financial position or cash flows of
SCE&G. The costs of implementing the new business application systems referred
to earlier are not included in these cost estimates.
A failure to correct a material Year 2000 problem by SCE&G or by a
critical third party supplier could result in an interruption in, or a failure
of SCE&G's ability to provide energy services. At this time, SCE&G believes its
most reasonably likely worst case scenario is that Year 2000 failures could lead
to temporarily reduced generating capacity on SCE&G's electrical grid, temporary
intermittent interruptions in communications and temporary intermittent
interruptions in gas supply from interstate suppliers or producers. A Year 2000
problem of this nature could result in temporary interruptions in electric or
gas service to our customers. SCE&G has no historical experience with
interruptions caused by this scenario. However, these temporary interruptions in
service, if any, might be similar to weather-related outages that SCE&G
encounters from time to time in its business today. Although SCE&G does not
believe that this scenario will occur, SCE&G is enhancing existing contingency
plans to ensure preparedness and to mitigate the long term effect of such a
scenario. Since the expected impact of this scenario on SCE&G's operations, cash
flow and financial position cannot be determined, there is no assurance that it
would not be material.
SCE&G has established eight business continuity planning task groups to
develop Year 2000 business continuity plans. These task groups have developed
initial draft plans to cover SCE&G's Corporate Operations, Customer Service
Operations, Electric Generation, Transmission and Distribution Operations, Gas
Delivery Operations, Telecommunications and Emergency Preparedness, Information
Technology and Procurement. Detailed contingency plans that were already in
place to cover weather-related outages, computer failures and generation outages
were used and/or referenced as the basis for the initial draft Year 2000
business continuity plans. The initial draft plans are continuing to be
enhanced, and where necessary, new plans are being developed to include
mitigation strategies and emergency response action plans to address potential
Year 2000 scenarios and critical system failures. The final plans will also
include mitigation strategies to address reliance on critical suppliers.
NERC is coordinating Year 2000 efforts of the electric utility industry
in the United States and contingency planning within the regional electric
reliability councils. Coordination in SCE&G's region is through the Southeastern
Electric Reliability Council (SERC). SCE&G's contingency planning efforts are in
compliance with the SERC and NERC contingency planning guidelines which required
draft contingency plans to be complete by December 31, 1998 and will require
final contingency plans to be complete by June 30, 1999.
On April 9, 1999, SCE&G participated in the first of two NERC required
contingency planning drills that are intended to test backup communications
systems and the Company's ability to operate the electric grid with manually
read data instead of computerized systems. SCE&G's gas distribution operations
also participated in the drill. The drills were successful and no major problems
with the Company's backup procedures were found.
In addition to NERC and SERC, SCE&G is working with the Electric Power
Research Institute to address the issue of overall grid reliability and
protection. To ensure that all Year 2000 issues at its Summer Station nuclear
plant are addressed, SCE&G is closely cooperating with other utility companies
that own nuclear power plants. The utilities are sharing technical nuclear plant
operating and monitoring systems information to ensure the prompt and effective
resolution of the Year 2000 issue.
33
<PAGE>
RESULTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1999
AS COMPARED TO THE CORRESPONDING PERIOD IN 1998
Earnings and Dividends
Net income for the three months ended March 31, 1999 decreased
approximately $11.7 million when compared to the corresponding periods in 1998.
Lower electric margins and the impact of a rate reduction were only partially
offset by reduced other operation and maintenance expenses. In addition, net
income for the three months ended March 31, 1998 include a one-time, after-tax
reduction to depreciation expense of approximately $5.5 million related to a
change in depreciation rates retroactive to February 1996. This change in
depreciation rates resulted from the reversal of a $257 million shift of
depreciation reserves from electric transmission and distribution assets to
nuclear production assets, previously approved in a PSC rate order in January
1996.
Allowance for funds used during construction (AFC) is a utility
accounting practice whereby a portion of the cost of both equity and borrowed
funds used to finance construction (which is shown on the balance sheet as
construction work in progress) is capitalized. Both the equity and the debt
portions of AFC are noncash items of nonoperating income which have the effect
of increasing reported net income. AFC represented approximately 3% and 4% of
income before income taxes for the three months ended March 31, 1999 and 1998,
respectively.
SCE&G's Board of Directors authorized payment of dividends on common
stock held by SCANA, as follows:
- -------------------- ----------------- ----------------- -----------------
Declaration Dividend Quarter Payment
Date Amount Ended Date
- -------------------- ----------------- ----------------- -----------------
February 17, 1999 $35.8 million March 31, 1999 April 1, 1999
April 22, 1999 $35.8 million June 30, 1999 July 1, 1999
- -------------------- ----------------- ----------------- -----------------
Electric Operations
Electric operations sales margins (including transactions with
affiliates) for the three months ended March 31, 1999 and 1998 were as follows:
Three Months Ended March 31, 1999 1998 Change % Change
- --------------------------------------------------------------------------------
(Million of Dollars)
Electric operating revenue $309.8 $311.6 $(1.8) (0.6%)
Less: Fuel used in generation 87.3 84.0 3.3 3.9%
Purchased power 28.1 26.3 1.8 6.8%
- --------------------------------------------------------------------------------
Margin $194.4 $201.3 $(6.9) (3.4%)
================================================================================
The electric operations sales margin decreased for the three months
ended March 31, 1999 when compared to the corresponding period in 1998 primarily
as a result of milder weather in the first quarter of 1999 and implementation in
January 1999 of a $22.7 million annual rate reduction ordered by the South
Carolina Public Service Commission. See LIQUIDITY AND CAPITAL RESOURCES.
Gas Distribution
Gas distribution sales margins for the three months ended March 31,
1999 and 1998 were as follows:
Three Months Ended March 31, 1999 1998 Change % Change
- --------------------------------------------------------------------------------
(Million of Dollars)
Gas operating revenue $86.1 $88.2 $(2.1) (2.3%)
Less: Gas purchased for resale 49.1 48.9 0.2 0.3%
- --------------------------------------------------------------------------------
Margin $37.0 $39.3 $(2.3) (5.6%)
================================================================================
34
<PAGE>
The gas distribution sales margin for the three months ended March 31, 1999
decreased from 1998 levels primarily as a result of increased competitiveness of
alternative fuels and milder weather.
Other Operating Expenses
Changes in other operating expenses, including taxes, for the three months
ended March 31, 1999 when compared to the corresponding periods in 1998, were as
follows:
Three Months Ended March 31, 1999 1998 Change % Change
- -------------------------------------------------------------------------------
(Million of Dollars)
Other operation and maintenance $ 70.2 $ 73.9 $(3.7) (5.0%)
Depreciation and amortization 38.2 26.2 12.0 45.8%
Income taxes 26.1 33.5 (7.4) (22.1%)
Other taxes 24.6 23.5 1.1 4.7%
- -------------------------------------------------------------------------------
Margin $159.1 $157.1 $ 2.0 1.3%
===============================================================================
Other operation and maintenance expenses for the three months ended March
31, 1999 decreased from 1998 levels primarily as a result of decreased
maintenance costs for electric generation and distribution facilities. The
increase in depreciation and amortization expenses for the three months ended
March 31, 1999 reflects the non-recurring adjustment to depreciation expense
discussed under "Earnings and Dividends." The change in income tax expense
primarily reflects the change in operating income. The increase in other taxes
for the period primarily results from increases in property taxes.
Other Income
Other income, net of income taxes, for the three months ended March 31,
1999 increased approximately $0.8 million and is not material.
Item 3. Quantitative and Qualitative Disclosure About Market Risk
All financial instruments held by SCE&G described below are held for
purposes other than trading.
Interest rate risk - The table below provides information about SCE&G's
financial instruments that are sensitive to changes in interest rates. For debt
obligations, the table presents principal cash flows and related weighted
average interest rates by expected maturity dates.
<TABLE>
<CAPTION>
March 31, 1999
Expected Maturity Date
-------------- ------------------ ------------------------------- --------- --------------------
(Millions of Dollars)
There- Fair
Liabilities 1999 2000 2001 2002 2003 After Total Value
-------------- --------- ----------- ----------- ----------- ----------- ----------- -----------
Long-Term Debt
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Fixed Rate ($) 29.1 188.6 22.6 22.6 124.5 1,043.4 1,437.1 1,456.4
Average Interest Rate 6.56 5.89 6.72 6.72 7.56 7.55 7.28
</TABLE>
While a decrease in interest rates would increase the fair value of debt,
it is unlikely that events which would result in a realized loss will occur.
35
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
SCANA Corporation:
For information regarding legal proceedings see Note 2 "Rate Matters,"
appearing in the Company's Annual Report on Form 10-K for the year
ended December 31, 1998, and Note 5 "Contingencies" of Notes to
Consolidated Financial Statements appearing in this Quarterly Report on
Form 10-Q.
South Carolina Electric & Gas Company:
For information regarding legal proceeding see Note 2 "Rate Matters, "
appearing in South Carolina Electric & Gas Company's Annual Report on
Form 10-K for the year ended December 31, 1998, and Note 4
"Contingencies" of Notes to Consolidated Financial Statements appearing
in this Quarterly Report on Form 10-Q.
Items 2, 3, 4 and 5 are not applicable for SCANA Corporation or South Carolina
Electric & Gas Company.
Item 6. Exhibits and Reports on Form 8-K
SCANA Corporation and South Carolina Electric & Gas Company:
A. Exhibits
Exhibits filed with this Quarterly Report on Form 10-Q are
listed in the following Exhibit Index. Certain of such exhibits
which have heretofore been filed with the Securities and
Exchange Commission and which are designated by reference to
their exhibit numbers in prior filings are hereby incorporated
herein by reference and made a part hereof.
B. Reports on Form 8-K during the first quarter 1999 were as follows:
SCANA filed a current report on Form 8-K:
Date of report: February 16, 1999
Items reported: Item 5 and Item 7
SCE&G filed a current report on Form 8-K:
Date of report: February 16, 1999
Items reported: Item 5 and Item 7
36
<PAGE>
SCANA CORPORATION
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SCANA CORPORATION
(Registrant)
May 14 , 1999 By: s/K. B. Marsh
-------------------
K. B. Marsh,Senior Vice President -Finance,
Chief Financial Officer and Controller
(Principal financial officer)
37
<PAGE>
SOUTH CAROLINA ELECTRIC & GAS COMPANY
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SOUTH CAROLINA ELECTRIC & GAS COMPANY
(Registrant)
May 14, 1999 By: s/Jimmy E. Addison
Jimmy E. Addison
Vice President and Controller
(Principal accounting officer)
38
<PAGE>
EXHIBIT INDEX
Applicable to
Form 10-Q of
Exhibit
No. SCANA SCE&G Description
2.01 X X Agreement and Plan of Merger, dated as of February 16, 1999 as
amended and restated as of May 10, 1999, by and among Public
Service Company of North Carolina, Incorporated, SCANA
Corporation , New Sub I, Inc. and New Sub II, Inc. (Filed as
Exhibit 2.1 to SCANA Form S-4 on May 11, 1999)
3.01 X Restated Articles of Incorporation of SCANA as adopted on
April 26, 1989 (Filed as Exhibit 3-A to Registration Statement
No. 33-49145)
3.02 X Restated Articles of Incorporation of SCE&G, as
adopted on December 15, 1993 (Filed as Exhibit
3-A to Form 10-Q for the quarter ended June 30,
1994, File No. 1-3375)
3.03 X Articles of Amendment of SCANA, dated April 27, 1995 (Filed as
Exhibit 4-B to Registration Statement No. 33-62421)
3.04 X Articles of Amendment of SCE&G, dated June 7, 1994 filed
June 9, 1994 (Filed as Exhibit 3-B to Form 10-Q for the
quarter ended June 30, 1994, File No. 1-3375)
3.05 X Articles of Amendment of SCE&G, dated November 9, 1994 (Filed
as Exhibit 3-C to Form 10-K for the year ended December 31,
1994, File No. 1-3375)
3.06 X Articles of Amendment of SCE&G, dated December 9, 1994 (Filed
as Exhibit 3-D to Form 10-K for the year ended December 31,
1994, File No. 1-3375)
3.07 X Articles of Correction of SCE&G, dated January 17, 1995 (Filed
as Exhibit 3-E to From 10-K for the year ended December 31,
1994, File No. 1-3375)
3.08 X Articles of Amendment of SCE&G, dated January 13, 1995 and
filed January 17, 1995 (Filed as Exhibit 3-F to Form 10-K for
the year ended December 31, 1994, File No. 1-3375)
3.09 X Articles of Amendment of SCE&G, dated March 31, 1995 (Filed as
Exhibit 3-G to Form 10-Q for the quarter ended March 31, 1995,
File No. 1-3375)
3.10 X Articles of Correction of SCE&G - Amendment to Statement filed
March 31, 1995, dated December 12, 1995 (Filed as Exhibit 3-H
to Form 10-K for the year ended December 31, 1995,
Filed No. 1-3375)
3.11 X Articles of Amendment of SCE&G, dated December 13, 1995 (Filed
as Exhibit 3-I to Form 10-K for the year ended December 31,
1995, File No. 1-3375)
3.12 X Articles of Amendment of SCE&G, dated February 18, 1997 (Filed
as Exhibit 3-L to Registration Statement No. 333-24919)
3.13 X Articles of Amendment of SCE&G, dated February 21, 1997 (Filed
as Exhibit 3-L to Form 10-Q for the quarter ended
March 31, 1997)
3.14 X Articles of Amendment of SCE&G, dated April 22, 1997 (Filed as
Exhibit 3-M to Form 10-Q for the quarter ended June 30, 1997)
3.15 X Articles of Amendment of SCE&G, dated April 9, 1998 (Filed
herewith on page 43)
3.16 X By-Laws of SCANA as revised and amended on December 17, 1997
(Filed as Exhibit 3-C to Form 10-K for the year ended
December 31, 1997)
39
<PAGE>
Applicable to
Form 10-Q of
Exhibit
No. SCANA SCE&G Description
3.17 X By-Laws of SCE&G as revised and amended on December 17, 1997
(Filed as Exhibit 3-J to Form 10-K for the year ended
December 31, 1997)
4.01 X Articles of Exchange of South Carolina Electric and Gas Company
and SCANA Corporation (Filed as Exhibit 4-A to Post-Effective
Amendment No. 1 to Registration Statement No. 2-90438)
4.02 X Indenture dated as of November 1, 1989 to The Bank of New York,
Trustee (Filed as Exhibit 4-A to Registration Statement No.
33-32107)
4.03 X X Indenture dated as of January 1, 1945, from the South Carolina
Power Company (the "Power Company") to Central Hanover Bank and
Trust Company, as Trustee, as supplemented by three
Supplemental Indentures dated respectively as of May 1, 1946,
May 1, 1947 and July 1, 1949 (Filed as Exhibit 2-B to
Registration Statement No. 2-26459)
4.04 X X Fourth Supplemental Indenture dated as of April 1, 1950, to
Indenture referred to in Exhibit 4.03, pursuant to which SCE&G
assumed said Indenture (Filed as Exhibit 2-C to Registration
Statement No. 2-26459)
4.05 X X Fifth through Fifty-second Supplemental Indenture referred to
in Exhibit 4.03 dated as of the dates indicated below and filed
as exhibits to the Registration Statements and 1934 Act
reports whose file numbers are set forth below:
December 1, 1950 Exhibit 2-D to Registration No. 2-26459
July 1, 1951 Exhibit 2-E to Registration No. 2-26459
June 1, 1953 Exhibit 2-F to Registration No. 2-26459
June 1, 1955 Exhibit 2-G to Registration No. 2-26459
November 1, 1957 Exhibit 2-H to Registration No. 2-26459
September 1, 1958 Exhibit 2-I to Registration No. 2-26489
September 1, 1960 Exhibit 2-J to Registration No. 2-26459
June 1, 1961 Exhibit 2-K to Registration No. 2-26459
December 1, 1965 Exhibit 2-L to Registration No. 2-26459
June 1, 1966 Exhibit 2-M to Registration No. 2-26459
June 1, 1967 Exhibit 2-N to Registration No. 2-29693
September 1, 1968 Exhibit 4-O to Registration No. 2-31569
June 1, 1969 Exhibit 4-C to Registration No. 33-38580
December 1, 1969 Exhibit 4-O to Registration No. 2-35388
June 1, 1970 Exhibit 4-R to Registration No. 2-37363
March 1, 1971 Exhibit 2-B-17 to Registration No. 2-40324
January 1, 1972 Exhibit 2-B to Registration No. 33-38580
July 1, 1974 Exhibit 2-A-19 to Registration No. 2-51291
May 1, 1975 Exhibit 4-C to Registration No. 33-38580
July 1, 1975 Exhibit 2-B-21 to Registration No. 2-53908
February 1, 1976 Exhibit 2-B-22 to Registration No. 2-55304
December 1, 1976 Exhibit 2-B-23 to Registration No. 2-57936
March 1, 1977 Exhibit 2-B-24 to Registration No. 2-58662
40
<PAGE>
Applicable to
Form 10-Q of
Exhibit
No. SCANA SCE&G Description
May 1, 1977 Exhibit 4-C to Registration No. 33-38580
February 1, 1978 Exhibit 4-C to Registration No. 33-38580
June 1, 1978 Exhibit 2-A-3 to Registration No. 2-61653
April 1, 1979 Exhibit 4-C to Registration No. 33-38580
June 1, 1979 Exhibit 2-A-3 to Registration No. 33-38580
April 1, 1980 Exhibit 4-C to Registration No. 33-38580
June 1, 1980 Exhibit 4-C to Registration No. 33-38580
December 1, 1980 Exhibit 4-C to Registration No. 33-38580
April 1, 1981 Exhibit 4-D to Registration No. 33-49421
June 1, 1981 Exhibit 4-D to Registration No. 2-73321
March 1, 1982 Exhibit 4-D to Registration No. 33-49421
April 15, 1982 Exhibit 4-D to Registration No. 33-49421
May 1, 1982 Exhibit 4-D to Registration No. 33-49421
December 1, 1984 Exhibit 4-D to Registration No. 33-49421
December 1, 1985 Exhibit 4-D to Registration No. 33-49421
June 1, 1986 Exhibit 4-D to Registration No. 33-49421
February 1, 1987 Exhibit 4-D to Registration No. 33-49421
September 1, 1987 Exhibit 4-D to Registration No. 33-49421
January 1, 1989 Exhibit 4-D to Registration No. 33-49421
January 1, 1991 Exhibit 4-D to Registration No. 33-49421
February 1, 1991 Exhibit 4-D to Registration No. 33-49421
July 15, 1991 Exhibit 4-D to Registration No. 33-49421
August 15, 1991 Exhibit 4-D to Registration No. 33-49421
April 1, 1993 Exhibit 4-E to Registration No. 33-49421
July 1, 1993 Exhibit 4-D to Registration No. 33-57955
4.06 X X Fifty-Third Supplemental Indenture, dated May 1, 1999, to
Indenture referred to in Exhibit 4.03 (Filed herewith on page 45)
4.07 X X Indenture dated as of April 1, 1993 from South Carolina Electric
& Gas Company to NationsBank of Georgia, National Association
(Filed as Exhibit 4.07 to Registration Statement No. 33-49421)
4.08 X X First Supplemental Indenture to Indenture referred to in Exhibit
4.07 dated as of June 1, 1993 (Filed as Exhibit 4-G to
Registration Statement No. 33-49421)
4.09 X X Second Supplemental Indenture to Indenture referred to in Exhibit
4.07 dated as of June 15, 1993 (Filed as Exhibit 4-G to
Registration Statement No. 33-57955)
4.10 X X Trust Agreement for SCE&G Trust I (Filed as Exhibit 4-G to SCE&G
Form 10-K for the year ended December 31, 1997)
4.11 X X Certificate of Trust for SCE&G Trust I (Filed as Exhibit 4-H to
SCE&G Form 10-K for the year ended December 31, 1997)
4.12 X X Junior Subordinated Indenture for SCE&G Trust I (Filed as Exhibit
4-I to SCE&G Form 10-K for the year ended December 31, 1997)
4.13 X X Guarantee Agreement for SCE&G Trust I (Filed as Exhibit 4-J to
SCE&G Form 10-K for the year ended December 31, 1997)
41
<PAGE>
Applicable to
Form 10-Q of
Exhibit
No. SCANA SCE&G Description
4.14 X X Amended and Restated Trust Agreement for SCE&G Trust I (Filed
as Exhibit 4-K to SCE&G Form 10-K for the year ended December
31, 1997)
10.01 X SCANA Voluntary Deferral Plan as amended through October 21,
1997 (Filed as Exhibit 10.01 to SCANA Form 10-K for the year
ended December 31, 1998)
10.02 X X Supplemental Executive Retirement Plan (Filed as Exhibit 10-A
to SCE&G Form 10-K for the year ended December 31, 1997)
10.03 X SCANA Supplementary Voluntary Deferral Plan as amended and
restated through October 21, 1997 (Filed as Exhibit 10-B to
SCANA Form 10-K for the year ended December 31, 1997)
10.04 X SCANA Key Executive Severance Benefits Plan as amended and
restated effective as of October 21, 1997 (Filed as Exhibit
10-C to SCANA Form 10-K for the year ended December 31, 1997)
10.05 X SCANA Supplementary Key Executive Severance Benefit Plan as
amended and restated effective October 21, 1997 (Filed as
Exhibit 10.06 to SCANA Form 10-K for the year ended December
31, 1998)
10.06 X SCANA Performance Share Plan as amended and restated effective
January 1, 1998 (Filed as Exhibit 10.07 to SCANA Form 10-K for
the year ended December 31, 1998)
10.07 X SCANA Key Employee Retention Plan as amended and restated
effective as of October 21, 1997 (Filed as Exhibit 10-E to
SCANA Form 10-K for the year ended December 31, 1997)
10.08 X Description of SCANA Whole Life Option (Filed as Exhibit 10-F
to SCANA Form 10-K for the year ended December 31, 1991, under
cover of Form SE, File No. 1-8809)
10.9 X Description of SCANA Corporation Annual
Incentive Plan (Filed as Exhibit 10-G to SCANA
Form 10-K for the year ended December 31, 1991,
under cover of Form SE, File No. 1-8809)
27.01 X Financial Data Schedule (Filed herewith)
27.02 X Financial Data Schedule (Filed herewith)
42
3
Exhibit 3.15
STATE OF SOUTH CAROLINA
SECRETARY OF STATE
ARTICLES OF AMENDMENT
Pursuant to Section 33-10-106 of the 1976 South Carolina Code,
as amended, the undersigned corporation adopts the following Articles of
Amendment to its Articles of Incorporation:
1. The name of the corporation is SOUTH CAROLINA ELECTRIC & GAS COMPANY.
2. On , the corporation adopted the following Amendment(s) of its Articles
of Incorporation:
NOT APPLICABLE
3. The manner, if not set forth in the amendment, in which any exchange,
reclassification, or cancellation of issued shares provided for in the
Amendment shall be effected, is as follows:
(a) The number of redeemable shares of the corporation reacquired
by redemption or purchase is 659,276 itemized as follows:
Class Series No. of
Shares
Cumulative Preferred Stock ($50 par value) 4.50% 1,600
Cumulative Preferred Stock ($50 par value) 4.60% 87
Cumulative Preferred Stock ($50 par value) 4.60% (Series A) 2,158
Cumulative Preferred Stock ($50 par value) 4.60% (Series B) 6,800
Cumulative Preferred Stock ($50 par value) 5.125% 1,000
Cumulative Preferred Stock ($100 par value) 7.70% 84,000
Cumulative Preferred Stock ($100 par value) 8.12% 118,812
Cumulative Preferred Stock ($50 par value) 9.40% 176,751
Cumulative Preferred Stock ($50 par value) 8.72% 64,000
Cumulative Preferred Stock ($50 par value) 6.00% 6,400
Cumulative Preferred Stock ($100 par value) 8.40% 197,668
(b) The aggregate number of issued shares of the corporation after
giving effect to such cancellation is 41,665,850, itemized as
follows:
Class Series No. of
Shares
Cumulative Preferred Stock ($50 par value) 5% 125,209
" " " " 4.60% 0
" " " " 4.50% 14,400
" " " " 4.60% (Series A) 21,894
" " " " 5.125% 70,000
" " " " 4.60% (Series B) 64,600
" " " " 6% 73,600
" " " " 9.40% 0
" " " ($100 par value) 8.12% 0
" " " " 7.70% 0
" " " " 8.40% 0
" " " ($50 par value) 8.72% 0
" " ($100 par value) 6.52% 1,000,000
Common Stock ($4.50 par value) ------ 40,296,147
----------
41,665.850
(c) The amount of the stated capital of the corporation after
giving effect to such cancellation is $299,817,811.50.
43
<PAGE>
(d) The number of shares which the corporation has authority to issue
after giving effect to such cancellation is 56,459,703, itemized as follows:
Class Series No. of
Shares
Cumulative Preferred Stock ($50 par value) 5% 125,209
" " " " 4.60% 0
" " " " 4.50% 14,400
" " " " 4.60% (Series A) 21,894
" " " " 5.125% 70,000
" " " " 4.60% (Series B) 64,600
" " " " 6% 73,600
" " " " 9.40% 0
" " " ($100 par value) 8.12% 0
" " " " 7.70% 0
" " " " 8.40% 0
" " " ($50 par value) 8.72% 0
" " " ($100 par value) 6.52% 1,000,000
Serial Preferred Stock ($50 par value) (1 vote) ---- 640,000
Serial Preferred Stock ($100 par value) (1 vote) ---- 1,750,000
Serial Preferred Stock ($25 par value) (1/4 vote) ---- 2,000,000
Serial Preferred Stock ($50 par value) (1/2 vote) ---- 700,000
Common Stock ($4.50 par value) ---- 50,000,000
----------
56,459,703
--
4. (a) |__| Amendment(s) adopted by shareholder action.
At the date of adoption of the amendment, the number of
outstanding shares of each voting group entitled to vote separately on
the Amendment, and the vote of such shares was:
Number of Number of Number of Votes Number of Undisputed
Voting Outstanding Votes Entitled Represented at Shares Voted
Group Shares to be Cast the meeting For Against
----- ------------- ---------------- ---------------- --------------------
---
(b) |XX| The Amendment(s) was duly adopted by the incorporators or
board of directors without shareholder approval pursuant to Sections
33-6-102(d), 33-10-102 and 33-10-105 of the 1976 South Carolina Code,
as amended, and shareholder action was not required.
5. Unless a delayed date is specified, the effective date of these
Articles of Amendment shall be the date of the acceptance for filing by
the Secretary of State (See Section 33-1-230(b)):
SOUTH CAROLINA ELECTRIC & GAS COMPANY
Date: April 9, 1998 By:___s/Lynn M. Williams________________
----------------------
Secretary
44
SOUTH CAROLINA ELECTRIC & GAS COMPANY
TO
THE CHASE MANHATTAN BANK,
Trustee
______________________________
FIFTY-THIRD SUPPLEMENTAL INDENTURE
(SUPPLEMENTAL TO INDENTURE OF SOUTH CAROLINA POWER COMPANY
DATED AS OF JANUARY 1, 1945)
PROVIDING FOR
FIRST AND REFUNDING MORTGAGE BONDS,
0% SERIES DUE DECEMBER 31, 2098
ISSUED BY SOUTH CAROLINA ELECTRIC & GAS COMPANY, AS SUCCESSOR
CORPORATION
TO SOUTH CAROLINA POWER COMPANY
Dated as of May 1, 1999
THE INDENTURE OF SOUTH CAROLINA ELECTRIC & GAS COMPANY TO CENTRAL HANOVER
BANK AND TRUST COMPANY, PREDECESSOR TRUSTEE TO THE CHASE MANHATTAN BANK, AS
TRUSTEE, DATED AS OF JANUARY 1, 1945 (THE "INDENTURE"), RECORDED IN THE RMC
OFFICE OF THIS COUNTY AS DESCRIBED ON EXHIBIT A HERETO, AS HERETOFORE AMENDED
AND SUPPLEMENTED AND AS AMENDED AND SUPPLEMENTED BY THIS FIFTY-THIRD
SUPPLEMENTAL INDENTURE THERETO IS SUBJECT TO, AND IS INTENDED TO TAKE ADVANTAGE
OF, THE PROVISIONS OF SECTIONS 29-1-10 AND 29-3-80, S. C. CODE OF LAWS (1976),
AS AMENDED. THE LIEN OF THE INDENTURE, AS SUPPLEMENTED OR AMENDED FROM TIME TO
TIME, SHALL CONTINUE UNTIL SATISFIED OR RELEASED OF RECORD REGARDLESS OF WHETHER
OR NOT SUCH INDENTURE STATES A MATURITY DATE. FURTHER, AS SET FORTH IN THE
INDENTURE, THE LIEN AFFECTS AFTER-ACQUIRED PROPERTY.
(The Chase Manhattan Bank, formerly known as Chemical Bank)
45
<PAGE>
THIS FIFTY-THIRD SUPPLEMENTAL INDENTURE, dated as of May 1, 1999, made and
entered into by and between SOUTH CAROLINA ELECTRIC & GAS COMPANY, a corporation
organized and existing under the laws of the State of South Carolina, with its
principal place of business in Columbia, Richland County, South Carolina (the
"Company"), party of the first part, and THE CHASE MANHATTAN BANK (successor to
Central Hanover Bank and Trust Company), a corporation organized and existing
under the laws of the State of New York, with its principal office in the
Borough of Manhattan, The City of New York (the "Trustee"), as Trustee under the
Indenture dated as of January 1, 1945 between the South Carolina Power Company
(the "Power Company") and Central Hanover Bank and Trust Company, as Trustee,
party of the second part;
Whereas, the Power Company heretofore executed and delivered to the Trustee
an Indenture dated as of January 1, 1945 (the "Original Indenture"), a
Supplemental Indenture thereto dated as of May 1, 1946, a Supplemental Indenture
thereto dated as of May 1, 1947 and a Third Supplemental Indenture thereto dated
as of July 1, 1949; and
Whereas, the Company heretofore executed and delivered to the Trustee a
Fourth Supplemental Indenture, dated as of April 1, 1950, wherein, among other
things, (i) the Company assumed the due and punctual payment of the principal
of, premium, if any, and interest on all bonds theretofore authenticated under
the Original Indenture as theretofore supplemented, according to their tenor,
and the due and punctual performance of all of the covenants and agreements of
the Original Indenture, as theretofore supplemented, required to be kept or
performed by the Power Company and (ii) the Company conveyed, transferred and
mortgaged to the Trustee and subjected to the lien of the Original Indenture as
theretofore supplemented, as supplemented by the Fourth Supplemental Indenture,
and as it might thereafter be supplemented, all property then owned or
thereafter to be acquired by the Company, except property of a character similar
to that excluded from the lien of the Original Indenture; and
Whereas, upon the execution and delivery of said Fourth Supplemental
Indenture, dated as of April 1, 1950, the Company succeeded to and became
substituted for the Power Company as Successor Corporation to the Power Company
under the Original Indenture, as contemplated by Article XV of the Original
Indenture; and
Whereas, the Company, as such Successor Corporation, has heretofore
executed and delivered to the Trustee the following supplemental indentures:
DESIGNATION DATED AS OF
Fifth Supplemental Indenture..........................December 1, 1950
Sixth Supplemental Indenture..............................July 1, 1951
Seventh Supplemental Indenture............................June 1, 1953
Eighth Supplemental Indenture.............................June 1, 1955
Ninth Supplemental Indenture..........................November 1, 1957
Tenth Supplemental Indenture.........................September 1, 1958
Eleventh Supplemental Indenture......................September 1, 1960
Twelfth Supplemental Indenture............................June 1, 1961
Thirteenth Supplemental Indenture.....................December 1, 1965
Fourteenth Supplemental Indenture.........................June 1, 1966
Fifteenth Supplemental Indenture..........................June 1, 1967
Sixteenth Supplemental Indenture.....................September 1, 1968
Seventeenth Supplemental Indenture........................June 1, 1969
Eighteenth Supplemental Indenture.....................December 1, 1969
Nineteenth Supplemental Indenture.........................June 1, 1970
46
<PAGE>
Twentieth Supplemental Indenture.........................March 1, 1971
Twenty-first Supplemental Indenture....................January 1, 1972
Twenty-second Supplemental Indenture......................July 1, 1974
Twenty-third Supplemental Indenture........................May 1, 1975
Twenty-fourth Supplemental Indenture......................July 1, 1975
Twenty-fifth Supplemental Indenture...................February 1, 1976
Twenty-sixth Supplemental Indenture...................December 1, 1976
Twenty-seventh Supplemental Indenture....................March 1, 1977
Twenty-eighth Supplemental Indenture.......................May 1, 1977
Twenty-ninth Supplemental Indenture...................February 1, 1978
Thirtieth Supplemental Indenture..........................June 1, 1978
Thirty-first Supplemental Indenture......................April 1, 1979
Thirty-second Supplemental Indenture......................June 1, 1979
Thirty-third Supplemental Indenture......................April 1, 1980
Thirty-fourth Supplemental Indenture......................June 1, 1980
Thirty-fifth Supplemental Indenture...................December 1, 1980
Thirty-sixth Supplemental Indenture......................April 1, 1981
Thirty-seventh Supplemental Indenture.....................June 1, 1981
Thirty-eighth Supplemental Indenture.....................March 1, 1982
Thirty-ninth Supplemental Indenture.....................April 15, 1982
Fortieth Supplemental Indenture............................May 1, 1982
Forty-first Supplemental Indenture....................December 1, 1984
Forty-second Supplemental Indenture...................December 1, 1985
Forty-third Supplemental Indenture........................June 1, 1986
Forty-fourth Supplemental Indenture...................February 1, 1987
Forty-fifth Supplemental Indenture...................September 1, 1987
Forty-sixth Supplemental Indenture.....................January 1, 1989
Forty-seventh Supplemental Indenture...................January 1, 1991
Forty-eighth Supplemental Indenture...................February 1, 1991
Forty-ninth Supplemental Indenture.......................July 15, 1991
Fiftieth Supplemental Indenture........................August 15, 1991
Fifty-first Supplemental Indenture.......................April 1, 1993
Fifty-second Supplemental Indenture.......................July 1, 1993
all supplemental to the Original Indenture; the Original Indenture,
together with all instruments stated to be supplemental thereto to which the
Trustee has heretofore been or shall hereafter be a party, including the
aforesaid supplemental indentures and this Fifty-third Supplemental Indenture
(herein sometimes referred to as "this Supplemental Indenture"), being herein
sometimes referred to collectively as the "Mortgage"; and
Whereas, the Company, as such Successor Corporation, has executed certain
mortgages, specifically subjecting to the lien of the Mortgage certain property
purchased, constructed or otherwise acquired by the Company subsequent to
January 1, 1965; and
Whereas, there have been issued under the Original Indenture as heretofore
supplemented, the following series of First and Refunding Mortgage Bonds, of
which the following principal amounts were outstanding at the date of this
Supplemental Indenture:
47
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PRINCIPAL PRINCIPAL
AMOUNT AMOUNT
SERIES ISSUED OUTSTANDING
3% Series due 1975
"Bonds of the First Series".................... $ 8,000,000 None
3% Series due 1977
"Bonds of the Second Series"................... 4,000,000 None
3 1/8% Series due 1979
"Bonds of the Third Series".................... 4,000,000 None
3% Series due 1980
"Bonds of the Fourth Series"................... 72,445,000 None
3% Series A due 1980
"Bonds of the Fifth Series".................... 4,000,000 None
3 3/4% Series due 1981
"Bonds of the Sixth Series".................... 6,000,000 None
4 1/8% Series due 1983
"Bonds of the Seventh Series".................. 4,000,000 None
3 1/2% Series due 1985
"Bonds of the Eighth Series"................... 5,000,000 None
5 1/2% Series due 1987
"Bonds of the Ninth Series".................... 10,000,000 None
4 7/8% Series due 1988
"Bonds of the Tenth Series".................... 10,000,000 None
5% Series due 1990
"Bonds of the Eleventh Series"................. 10,000,000 None
5% Series due June 1, 1991
"Bonds of the Twelfth Series".................. 8,000,000 None
4 7/8% Series due 1995
"Bonds of the Thirteenth Series"............... 16,000,000 None
5.45% Series due 1996
"Bonds of the Fourteenth Series"............... 15,000,000 None
6% Series due June 1, 1997
"Bonds of the Fifteenth Series"................ 15,000,000 None
6 1/2% Series due September 1, 1998
"Bonds of the Sixteenth Series"................ 112,064,000 None
8% Series due June 1 1999
"Bonds of the Seventeenth Series".............. 35,000,000 None
9 1/8% Series due December 1, 1999
"Bonds of the Eighteenth Series"............... 15,000,000 None
9 7/8% Series due June 1, 2000
"Bonds of the Nineteenth Series"............... 30,000,000 None
8% Series due March 1, 2001
"Bonds of the Twentieth Series"................ 35,000,000 None
48
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PRINCIPAL
AMOUNT AMOUNT
SERIES ISSUED OUTSTANDING
7 1/4% series due January 1, 2002
"Bonds of the Twenty-first Series".................. $30,000,000 None
10 1/2% Series due July 1, 1979
"Bonds of the Twenty-second Series"................. 35,000,000 None
10 1/2% Series due May 1, 1990
"Bonds of the Twenty-third Series".................. 15,000,000 None
9 3/8% Series due July 1, 1984
"Bonds of the Twenty-fourth Series"................. 25,000,000 None
9 1/8% Series due February 1, 2006
"Bonds of the Twenty-fifth Series".................. 50,000,000 None
8.40% Series due December 1, 2006
"Bonds of the Twenty-sixth Series".................. 50,000,000 None
8 3/8% Series due March 1, 2007
"Bonds of the Twenty-seventh Series"................ 30,000,000 None
7% Series due May 1, 1982
"Bonds of the Twenty-eighth Series"................. 50,000,000 None
8.90% Series due February 1, 2008
"Bonds of the Twenty-ninth Series".................. 30,000,000 None
8.45% Series due June 1, 1981
"Bonds of the Thirtieth Series"..................... 40,000,000 None
10 1/8% Series due April 1, 2009
"Bonds of the Thirty-first Series".................. 35,000,000 None
9 7/8% Series due June 1, 2009
"Bonds of the Thirty-second Series" ................ 50,000,000 None
14 1/2% Series due 1983-1987
"Bonds of the Thirty-third Series".................. 80,000,000 None
12.15% Series due June 1, 2010
"Bonds of the Thirty-fourth Series"................. 50,000,000 None
14 1/2% Series due April 1, 1982
"Bonds of the Thirty-fifth Series".................. 15,000,000 None
14 3/8% Series due October 1, 1986
"Bonds of the Thirty-sixth Series".................. 15,000,000 None
16% Series due June 1, 2011
"Bonds of the Thirty-seventh Series"................ 70,000,000 None
14 1/2% Series due April 1,1984
"Bonds of the Thirty-eighth Series"................. 15,000,000 None
15 1/2% Series due April 15, 1989
"Bonds of the Thirty-ninth Series".................. 60,000,000 None
15 5/8% Series due May 1, 1987
"Bonds of the Fortieth Series"...................... 25,000,000 None
15% Series due September 1, 2014
"Bonds of the Forty-first Series"................... 57,000,000 $ 56,820,000
49
<PAGE>
PRINCIPAL
SERIES ISSUED OUTSTANDING
15% Series A due September 1, 2014
"Bonds of the Forty-second Series".............. $ 5,500,000 $ 5,210,000
15% Series B due September 1, 2014
"Bonds of the Forty-third Series"............... 1,100,000 1,090,000
8 3/4% Series due February 1, 2017
"Bonds of the Forty-fourth Series".............. 100,000,000 None
15% Series C due September 1 2014
"Bonds of the Forty-fifth Series"............... 4,365,000 4,365,000
20% Series due February 1, 1991
"Bonds of the Forty-sixth Series"............... 75,000,000 None
20% Series due January 14, 1991
"Bonds of the Forty-seventh Series"............. 70,000,000 None
20% Series due February 4, 1992
"Bonds of the Forty-eighth Series".............. 75,000,000 None
9% Series due July 15, 2006
"Bonds of the Forty-ninth Series"............... 145,000,000 130,771,000
8 7/8% Series due August 15, 2021
"Bonds of the Fiftieth Series".................. 155,000,000 113,450,000
Series A due December 1, 2093
"Bonds of the Fifty-first Series"............... 375,000,000 375,000,000
Series B due December 1, 2093
"Bonds of the Fifty-second Series".............. 740,035,000 425,000,000
; and
Whereas, it is provided in Section 2.01 of the Original Indenture that the
aggregate principal amount of bonds which may be secured by the Mortgage shall
be such aggregate principal amount as may from time to time be authenticated and
delivered under the provisions thereof, provided, however, that until an
indenture or indentures supplemental thereto shall be executed and delivered by
the Company to the Trustee pursuant to authorization by the Board of Directors
and filed for record in all counties in which the mortgaged and pledged property
is located, increasing or decreasing the amount of future advances and other
indebtedness and sums which may be secured thereby, the Mortgage may secure
future advances and other indebtedness and sums not to exceed in the aggregate
$50,000,000; and
Whereas, Section 1.01 of the aforesaid Sixth Supplemental Indenture
increased the aggregate principal amount of bonds which may be secured by the
Mortgage, including future advances and other indebtedness and sums, from
$50,000,000 to $100,000,000; and
Whereas, Section 1.01 of the aforesaid Twelfth Supplemental Indenture
increased the aggregate principal amount of bonds which may be secured by the
Mortgage, including future advances and other indebtedness and sums, from
$100,000,000 to $200,000,000; and
Whereas, Section 2.01 of the aforesaid Seventeenth Supplemental Indenture
increased the aggregate principal amount of bonds which may be secured by the
Mortgage, including future advances and other indebtedness and sums, from
$200,000,000 to $300,000,000; and
50
<PAGE>
Whereas, Section 2.01 of the aforesaid Twenty-first Supplemental Indenture
increased the aggregate principal amount of bonds Whereas, Section 2.01 of the
aforesaid Twenty-first Supplemental Indenture increased the aggregate principal
amount of bonds which may be secured by the Mortgage, including future advances
and other indebtedness and sums, from $300,000,000 to $500,000,000; and
Whereas, Section 2.01 of the aforesaid Twenty-seventh Supplemental
Indenture increased the aggregate principal amount of bonds which may be secured
by the Mortgage, including future advances and other indebtedness and sums, from
$500,000,000 to $1,000,000,000; and
Whereas, Section 1.04 of the aforesaid Forty-ninth Supplemental Indenture
increased the aggregate principal amount of bonds which may be secured by the
Mortgage, including future advances and other indebtedness and sums, from
$1,000,000,000 to $1,500,000,000; and
Whereas, the Company, as Successor Corporation as aforesaid, by appropriate
corporate action taken by its Board of Directors in accordance with the
provisions of said Section 2.01 of the Original Indenture, has determined to
increase the aggregate principal amount of bonds which may be secured by the
Mortgage, including future advances and other indebtedness and sums, from
$1,500,000,000 to $5,000,000,000 and has duly authorized the execution and
delivery to the Trustee of this Fifty-third Supplemental Indenture to effect
such increase; and
Whereas, it is provided in Section 2.01 of the Twenty-third Supplemental
Indenture that Article XVII of the Original Indenture shall be amended as set
forth therein at such time after the required consents, if any, of the holders
of bonds of other series shall have been given as therein provided; and
Whereas, it is further provided in Section 2.01 of the Twenty-third
Supplemental Indenture that the amendments to Article XVII of the Original
Indenture set forth therein shall, subject to the Company and the Trustee
entering into an indenture or indentures supplemental to the Original Indenture
for the purpose of so amending said Article XVII, become effective at the
earlier of (a) such date as no bonds created prior to the bonds of the
Twenty-third Series shall remain outstanding or (b) such date as the holders of
all series created prior to the bonds of the Twenty-third Series shall have
consented thereto; and
Whereas, no bonds created prior to the bonds of the Twenty-third Series
remain outstanding on the date of this Supplemental Indenture and the holders of
all bonds of other series thereafter issued and now outstanding under the
Original Indenture have consented to the aforesaid amendments to Article XVII of
the Original Indenture; and
Whereas, the Company, as Successor Corporation as aforesaid, by appropriate
corporate action taken by its Board of Directors in accordance with the
provisions of the Original Indenture as heretofore supplemented, has duly
authorized the execution and delivery to the Trustee of this Fifty-third
Supplemental Indenture to effect such amendments to said Article XVII; and
Whereas, the Company, as Successor Corporation as aforesaid, by appropriate
corporate action in conformity with the terms of the Original Indenture has duly
determined to create a series of bonds under the Original Indenture, to be
issued under the name of the Company, to be designated as "First and Refunding
Mortgage Bonds, 0% Series due December 31, 2098" (hereinafter sometimes referred
to as the "bonds of the Fifty-third Series"); and
51
<PAGE>
Whereas, all acts and things necessary to make the bonds of the Fifty-third
Series, when authenticated by the Trustee and issued as in the Original
Indenture and herein provided, valid, binding and legal obligations of the
Company and to constitute the Original Indenture as heretofore supplemented and
this Supplemental Indenture valid, binding and legal instruments for the
security thereof, have been done and performed, and the execution and delivery
of this Supplemental Indenture, and the creation, execution and issue of the
bonds of the Fifty-third Series subject to the Original Indenture as heretofore
and hereby supplemented, have in all respects been duly authorized;
Now, therefore, in consideration of the premises and of the acceptance by
the holders thereof of bonds of the Fifty-third Series, and to set forth the
form and substance of the bonds of the Fifty-third Series and the terms,
provisions and conditions thereof, the Company does hereby covenant and agree to
and with the Trustee and its successor or successors in trust and its and their
assigns forever for the benefit of those who shall hold the bonds of the
Fifty-third Series, as follows:
ARTICLE ONE
BONDS OF THE FIFTY-THIRD SERIES AND CERTAIN
PROVISIONS RELATING THERETO
Section 1.01. A. Creation of bonds of the Fifty-third Series. There is
hereby created a series of bonds designated First and Refunding Mortgage Bonds,
0% Series due December 31, 2098. Such bonds of the Fifty-third Series shall be
issued by the Company in its name, shall be unlimited in principal amount,
subject to the limitation on the maximum aggregate principal amount of bonds
permitted to be secured by the Mortgage pursuant to Section 2.01 of the Original
Indenture and Section 1.04 of this Supplemental Indenture ($5,000,000,000 as of
the date hereof), as the same may hereafter be increased or decreased by
amendment or supplement to the Mortgage, shall mature on December 31, 2098,
unless previously redeemed pursuant to the provisions hereof, and shall be
issuable only in fully registered form without coupons in denominations of
$1,000 and any multiple thereof. The serial numbers of bonds of the Fifty-third
Series shall be such as may be approved by any officer of the Company, the
execution thereof by any such officer to be conclusive evidence of such
approval. Bonds of the Fifty-third Series shall not bear interest. The principal
of said bonds shall be payable in any coin or currency of the United States of
America which at the time of payment is legal tender for public and private
debts, at the corporate trust offices of the Trustee. Bonds of the Fifty-third
Series shall be dated as of their date of authentication, and shall be executed
on behalf of the Company by its President or a Vice President by his manual
signature or a facsimile thereof.
Bonds of the Fifty-third Series may be transferred at the principal office
of the Trustee in the Borough of Manhattan, the City of New York.
B. Form of bonds of the Fifty-third Series. The bonds of the Fifty-third
Series and the Trustee's authentication certificate to be executed on all of the
bonds of the Fifty-third Series shall be substantially in the following forms,
respectively:
52
<PAGE>
(Form of Bond of the Fifty-third Series)
SOUTH CAROLINA ELECTRIC & GAS COMPANY
First and Refunding Mortgage Bond,
0% Series due December 31, 2098
No. $
South Carolina Electric & Gas Company, a South Carolina corporation
(hereinafter called the "Company"), for value received, hereby promises to pay
to _______________ or registered assigns, the principal sum of _________________
Dollars on December 31, 2098, unless previously redeemed pursuant to the
provisions hereof, without interest. The principal of this bond shall be payable
at the office or agency of the Company in the Borough of Manhattan, The City of
New York, designated for such purpose, in any coin or currency of the United
States of America which at the time of payment is legal tender for public and
private debts.
This bond is one of the bonds issued and to be issued from time to time
under and in accordance with and all secured by an indenture of mortgage or deed
of trust dated as of January 1, 1945 (the "Original Indenture"), and indentures
supplemental thereto, given by South Carolina Power Company to Central Hanover
Bank and Trust Company (now The Chase Manhattan Bank and hereinafter sometimes
referred to as the "Trustee"), as trustee, and indentures supplemental thereto
dated as of April 1, 1950, as of December 1, 1950, as of July 1, 1951, as of
June 1, 1953, as of June 1, 1955, as of November 1, 1957, as of September 1,
1958, as of September 1, 1960, as of June 1, 1961, as of December 1, 1965, as of
June 1, 1966, as of June 1, 1967, as of September 1, 1968, as of June 1, 1969,
as of December 1,1969, as of June 1, 1970, as of March 1, 1971, as of January 1,
1972, as of July 1, 1974, as of May 1, 1975, as of July 1, 1975, as of February
1, 1976, as of December 1, 1976, as of March 1, 1977, as of May 1, 1977, as of
February 1, 1978, as of June 1, 1978, as of April 1, 1979, as of June 1, 1979,
as of April 1, 1980, as of June 1, 1980, as of December 1, 1980, as of April 1,
1981, as of June 1, 1981, as of March 1, 1982, as of April 15, 1982, as of May
1, 1982, as of December 1, 1984, as of December 1, 1985, as of June 1, 1986, as
of February 1, 1987, as of September 1, 1987, as of January 1, 1989, as of
January 1, 1991, as of February 1, 1991, as of July 15, 1991, as of August 15,
1991, as of April 1, 1993, as of July 1, 1993, and as of May 1, 1999,
respectively, given by the Company to said Trustee, to which Original Indenture
and all indentures supplemental thereto (hereinafter referred to collectively as
the "Indenture") reference is hereby made for a description of the property
mortgaged and pledged, the nature and extent of the security and the rights,
duties and immunities thereunder of the Trustee and the rights of the holders of
said bonds and of the Trustee and of the Company in respect of such security,
and the limitations on such rights. By the terms of the Indenture, the bonds to
be secured thereby are issuable in series which may vary as to date, amount,
date of maturity, rate of interest and in other respects as in the Indenture
provided. By the terms of the aforesaid supplemental indenture, dated as of
April 1, 1950, the Company, among other things, assumed the due and punctual
payment of the principal of, premium, if any, and interest on all of the bonds
of South Carolina Power Company then outstanding under the aforesaid indenture
of mortgage or deed of trust, dated as of January 1, 1945, of South Carolina
Power Company, as theretofore supplemented, and, except as therein provided, the
due and punctual performance of all the covenants and agreements of South
Carolina Power Company contained in said indenture of mortgage or deed of trust
as so supplemented.
53
<PAGE>
Bonds of this series are issuable only in fully registered form without
coupons in denominations of $1,000 and any multiple thereof. This bond may be
exchanged by the registered holder hereof, in person or by attorney duly
authorized, at the principal office of the Trustee, in the Borough of Manhattan,
City of New York, for a like aggregate principal amount of bonds of this series
of any other authorized denomination or denominations, but only in the manner
and subject to the conditions prescribed in the Indenture, upon the surrender
and cancellation of this bond and the payment of any taxes or other governmental
charges payable upon such exchange.
Upon the giving of notice of redemption, by first class mail postage
prepaid, not less than thirty nor more than forty-five days prior to the date
fixed for redemption to each registered holder of a bond to be redeemed, in
whole or in part, at the last address of such holder appearing on the registry
books, any or all of the bonds of this series may be redeemed by the Company, at
its option, or by operation of various provisions of the Indenture, at any time
and from time to time, upon payment of the principal amount thereof.
In case of certain defaults as specified in the Indenture, the principal of
this bond may be declared or may become due and payable on the conditions, at
the time, in the manner and with the effect provided in the Indenture.
No recourse shall be had for the payment of the principal of or premium, if
any, or interest on this bond, or for any claim based hereon, or otherwise in
respect hereof or of the Indenture, to or against any incorporator, stockholder,
director or officer, past, present or future, as such, of the Company, or of any
predecessor or successor company, either directly or through the Company, or
such predecessor or successor company, or otherwise, under any constitution or
statute or rule of law, or by the enforcement of any assessment or penalty, or
otherwise, all such liability of incorporators, stockholders, directors and
officers, as such, being waived and released by the holder and owner hereof by
the acceptance of this bond and being likewise waived and released by the terms
of the Indenture.
Subject to the restrictions noted hereon, this bond is transferable by the
registered holder hereof, in person or by attorney duly authorized, at the
principal office of the Trustee, in the Borough of Manhattan, the City of New
York, but only in the manner and subject to the conditions prescribed in the
Indenture, upon the surrender and cancellation of this bond and the payment of
any taxes or other governmental charges payable upon such transfer, and upon any
such transfer a new bond or bonds of the same series and for the same aggregate
principal amount, in authorized denominations, will be issued to the transferee
in exchange herefor. The Company and the Trustee may deem and treat the person
in whose name this bond is registered as the absolute owner for the purpose of
receiving payment and for all other purposes.
This bond shall not be valid or become obligatory for any purpose unless
and until it shall have been authenticated by the execution by the Trustee or
its successor in trust under the Indenture of the certificate endorsed hereon.
53
<PAGE>
IN WITNESS WHEREOF, South Carolina Electric & Gas Company has caused this
bond to be executed in its name by its President or one of its Vice Presidents,
by his manual signature or a facsimile thereof, and its corporate seal or a
facsimile thereof to be affixed hereto or imprinted hereon and attested by its
Secretary or one of its Assistant Secretaries.
Dated................................................
SOUTH CAROLINA ELECTRIC & GAS COMPANY,
By
President or Vice President
Attest:
.....................................................
Secretary or Assistant Secretary
(FORM OF TRUSTEE'S AUTHENTICATION CERTIFICATE)
TRUSTEE'S AUTHENTICATION CERTIFICATE
This bond is one of the bonds, of the series designated therein,
described in the within-mentioned Indenture.
as Trustee,
By
Authorized Officer
Section 1.02. Redemption Provisions. Any or all of the bonds of the
Fifty-third Series shall be redeemable, at the option of the Company, or by
operation of various provisions of the Original Indenture, at any time and from
time to time, prior to maturity, upon the giving of notice of redemption, by
first class mail postage prepaid, not less than thirty nor more than forty-five
days prior to the date fixed for redemption to each registered holder of a bond
of the Fifty-third Series to be redeemed in whole or in part, at the last
address of such holder appearing on the registry books, upon payment of the
principal amount thereof.
Section 1.03. Sinking Fund. The respective portions of the sinking fund
requirement for any year which are measured by bonds of the Fifteenth through
Twenty-second Series, bonds of the Twenty-fourth through Thirty-first Series,
bonds of the Thirty-third Series, bonds of the Thirty-seventh Series, bonds of
the Thirty-ninth Series, bonds of the Forty-first Series, bonds of the
Forty-second Series, bonds of the Forty-fourth Series, bonds of the Forty-sixth
Series, bonds of the Fiftieth Series, bonds of the Fifty-first Series, bonds of
the Fifty-second Series and bonds of the Fifty-third Series or by bonds of any
other series the holders of which shall have consented thereto may be satisfied
by certifying to the
54
<PAGE>
Trustee unfunded net property additions in an amount equal to 166-2/3% of
such portion of such sinking fund requirement; provided, further, however, that
no unfunded net property additions shall be used to satisfy any portion of any
sinking fund requirement unless there shall be delivered to the Trustee, with
such certification, the applicable certificates, opinions of counsel,
instruments and cash, if any, required by paragraphs (3), (4), (5), (7), (9) and
(10) of Section 4.01 of the Original Indenture showing that the Company has
unfunded net property additions equal to the amounts so certified.
Section 1.04. Increase in amount of indebtedness which may be secured by
the Mortgage. The aggregate principal amount of bonds which may be secured by
the Mortgage, including future advances and other indebtedness and sums, is
increased from $1,500,000,000 as specified in Section 2.01 of the Original
Indenture, as amended by Section 1.01 of the Sixth Supplemental Indenture dated
as of July 1, 1951, by Section 1.01 of the Twelfth Supplemental Indenture dated
as of June 1, 1961, by Section 2.01 of the Twenty-first Supplemental Indenture
dated as of January 1, 1972, by Section 2.01 of the Twenty-seventh Supplemental
Indenture dated as of March 1, 1977, and by Section 1.04 of the Forty-ninth
Supplemental Indenture dated as of July 15, 1991, to $5,000,000,000.
Section 1.05. Waiver of certain rights in respect of property additions.
The Company covenants and agrees that the provisions of Section 3.01 of the
Fourth Supplemental Indenture, dated as of April 1, 1950, shall remain in full
force and effect so long as any bonds of the Fifty-third Series shall be
outstanding under the Mortgage.
Section 1.06. Certain restriction on sale of property. The Company
covenants and agrees that so long as any bonds of the Fifty-third Series shall
be outstanding under the Mortgage it will not enter into any agreement with any
governmental or public body, authority, agency or licensee, providing for the
sale by the Company to such governmental or public body, authority, agency or
licensee of any part of the mortgaged and pledged property for a consideration
less than the current fair value of such property at the time of payment to the
Company of such consideration.
Section 1.07. Waiver of service charge for exchange or transfer of bonds of
the Fifty-third Series. Notwithstanding the provisions of Section 2.05 of the
Original Indenture, the Company covenants and agrees that so long as any bonds
of the Fifty-third Series shall be outstanding under the Mortgage it will not
impose any service charge for any new bond of the Fifty-third Series issued upon
any exchange or transfer thereof as permitted by Section 2.06 of the Original
Indenture, but the Company shall be entitled to receive funds sufficient to
reimburse it for any tax or taxes or other governmental charge required to be
paid by the Company in relation thereto.
Section 1.08 . Limitations on certain transfers of bonds of the Fifty-third
Series. In case less than all of the bonds of the Fifty-third Series at the time
outstanding are called for redemption, the Company shall not be required to
transfer or exchange any bonds of the Fifty-third Series for a period of ten
days before the mailing of a notice of redemption of bonds of the Fifty-third
Series selected for redemption, to transfer or exchange any bond of the
Fifty-third Series called for redemption in its entirety or to transfer or
exchange any portion of a bond of the Fifty-third Series which portion has been
called for redemption.
55
<PAGE>
ARTICLE TWO
AMENDMENT OF MORTGAGE
Section 2.01. Amendments described in Twenty-third Supplemental Indenture
and subsequent supplemental indentures. Article XVII of the Original Indenture
is hereby amended in the following respects:
A. The introductory clause of Section 17.02, which presently reads "In each
and every case provided for in this Article," shall be amended so as to read "In
each and every case provided for in Section 17.01 above,".
B. Section 17.02 shall be further amended by the addition of the following
new paragraph immediately after the existing text, as amended by Paragraph A
above:
"Any supplemental indenture authorized by the provisions of Section 17.01
above may be executed by the Company and the Trustee without the consent of the
holders of any of the bonds at the time outstanding, notwithstanding any of the
provisions of Section 17.03 hereof."
C. There shall be inserted new Sections 17.03, 17.04 and 17.05, which
Sections shall read as follows:
"Section 17.03. With the consent (evidenced as provided in Section 12.01
hereof) of the holders of not less than sixty-six and two-thirds per centum (66
2/3%) in aggregate principal amount of the bonds at the time outstanding which
would be affected by the action proposed to be taken, the Company, when
authorized by a resolution of its Board of Directors, and the Trustee may, from
time to time and at any time, enter into an indenture or indentures supplemental
hereto for the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of this Indenture or of any supplemental
indenture or of modifying in any manner the rights of the holders of the bonds
and coupons; provided, however, that anything in this Article to the contrary
notwithstanding (a) the bondholders shall have no power (i) to extend the fixed
maturity of any bonds, or reduce the rate or extend the time of payment of
interest thereon, or reduce the principal amount thereof, or change in any
manner provisions relating to the sinking fund or the redemption provisions of
any series of bonds outstanding hereunder, without the express consent of the
holder of each bond which would be so affected, or (ii) to reduce the aforesaid
percentage of bonds, the holders of which are required to consent to any such
supplemental indenture, without the consent of the holders of all bonds
outstanding, or (iii) to permit the creation by the Company, after the date
hereof, of any mortgage or pledge or lien in the nature thereof, ranking prior
to or equal with the lien of this Indenture on any of the mortgaged property, or
(iv) to deprive the holder of any bond outstanding hereunder of the lien of this
Indenture on any of the mortgaged property; (b) no action hereinabove specified
which would affect the rights of the holders of bonds of one or more but less
than all series as evidenced by an opinion of counsel may be taken unless
approved by holders of not less than sixty-six and two-thirds per centum (66
2/3%) in principal amount of outstanding bonds of such one or more series
affected, but if any such action would affect the bonds of two or more series,
the approval of such action on behalf of the holders of bonds of such two or
more series may be approved by holders of not less than sixty-six and two-thirds
per centum (66 2/3%) in aggregate principal amount of outstanding bonds of such
two or more series, which approval need not include sixty-six and two-thirds per
centum (66 2/3%) in principal amount of outstanding bonds of each of such
series.
56
<PAGE>
Upon the request of the Company, accompanied by a copy of a resolution of
its Board of Directors certified by the Secretary or an Assistant Secretary of
the Company authorizing the execution of any such supplemental indenture, and
upon the filing with the Trustee of any required evidence of the consent of
bondholders as aforesaid, the Trustee shall join with the Company in the
execution of such supplemental indenture unless such supplemental indenture
affects the Trustee's own rights, duties or immunities under this Indenture or
otherwise, in which case the Trustee may in its discretion but shall not be
obligated to enter into such supplemental indenture.
It shall not be necessary for the consent of the bondholders under this
Section to approve the particular form of any proposed supplemental indenture,
but it shall be sufficient if such consent shall approve the substance thereof.
Promptly after the execution by the Company and the Trustee of any
supplemental indenture pursuant to the provisions of this Section, the Company
shall publish a notice, setting forth in general terms the substance of such
supplemental indenture, at least once in a daily newspaper of general
circulation in the Borough of Manhattan, The City of New York. Any failure of
the Company to publish such notice, or any defect therein, shall not, however,
in any way impair or affect the validity of any such supplemental indenture.
"Section 17.04. Upon the execution of any supplemental indenture pursuant
to the provisions of this Article, this Indenture shall be and be deemed to be
modified and amended in accordance therewith and the respective rights, duties
and obligations under this Indenture of the Company, the Trustee and the holders
of bonds of all series outstanding thereunder shall thereafter be determined,
exercised and enforced hereunder subject in all respects to such modifications
and amendments, and all the terms and conditions of any such supplemental
indenture shall be and be deemed to be part of the terms and conditions of this
Indenture for any and all purposes.
"Section 17.05. Bonds authenticated and delivered after the execution of
any supplemental indenture pursuant to the provisions of this Article may bear a
notation in form approved by the Trustee as to any matter provided for in such
supplemental indenture. If the Company or the Trustee shall so determine, new
bonds so modified as to conform, in the opinion of the Trustee and the Board of
Directors of the Company, to any modification of this Indenture contained in any
such supplemental indenture may be prepared by the Company, authenticated by the
Trustee and delivered without cost to the holders of bonds then outstanding,
upon surrender of such bonds and, in the case of coupon bonds, with all
unmatured coupons and all matured coupons not fully paid, the new bonds so
issued to be of an aggregate principal amount equal to the aggregate principal
amount of those so surrendered."
D. Section 17.03 shall be renumbered as Section 17.06.
E. There shall be inserted a new Section 17.07, which Section shall read as
follows:
"Section 17.07. For all purposes of this Indenture, in any case in which
the "sinking fund requirement" for any year (as such term is used in Section
2.12 of the Original Indenture as modified by any supplemental indenture) shall,
because of the provisions of any supplemental indenture, include an amount in
excess of one per centum (1%) of the aggregate principal amount of bonds of any
series authenticated and delivered by the Trustee pursuant to the provisions of
Articles III, IV and VI of the Original Indenture prior to January 1 of such
year, to the extent that
(i) the principal amount of bonds of such series deposited with the Trustee
pursuant to said Section 2.12 in such year and/or the principal amount of bonds
of such series purchased, paid or redeemed by the use of cash deposited pursuant
to said Section 2.12 in such year,
57
<PAGE>
shall, as a result of the provisions of such supplemental indenture, exceed
(ii) an amount equal to one per centum (1%) of the aggregate principal
amount of bonds of such series authenticated and delivered by the Trustee
pursuant to the provisions of Articles III, IV and VI of the Original Indenture
prior to January 1 of the year of such deposit of bonds and/or cash (after
deducting from such aggregate principal amount of bonds of such series so
authenticated, the principal amount of bonds of such series which, prior to such
January 1, have been deposited with the Trustee for cancellation as the basis
for the release of property or for the withdrawal of cash representing proceeds
of released property or have been purchased, redeemed or paid at maturity by the
use of proceeds of released property),
from and after the time when all bonds of such series shall have ceased to
be outstanding, such excess principal amount of bonds of such series shall be
deemed not to have been cancelled or redeemed pursuant to the provisions of said
Section 2.12 of the Original Indenture, but shall be deemed to have been
redeemed pursuant to Section 9.01 of the Original Indenture."
Section 2.02. Additional amendments requiring consent of requisite holders
of outstanding bonds. The holder of all of the outstanding bonds of the
Fifty-first and Fifty-second Series, being the holder of 82.0% of the
outstanding bonds under the Original Indenture, having consented thereto, the
Original Indenture is further amended in the following respects:
A. Clause (a) of Section 1.11 of the Original Indenture shall be amended to
read as follows:
"(a) ten-sevenths (10\7ths) of the aggregate principal amount of bonds
theretofore authenticated and delivered upon the basis of unfunded net property
additions or for the authentication and delivery of which upon such basis any
other application is then pending;"
B. Section 7.07 of the Original Indenture (except the first paragraph of
such Section) and all provisions and references relating to Section 7.07 in the
Mortgage, and clause (c) of Section 1.11 of the Original Indenture, shall be
deleted.
C. The fraction set forth at the beginning of clause (b) of Section 1.11 of
the Original Mortgage is hereby amended from "ten-sixths (10/6ths)" to
"ten-sevenths (10/7ths)".
D. The first paragraph of Section 4.01 and paragraph 3(b) of Section 10.03
of the Original Mortgage shall be amended by changing the percentage therein
from "sixty per centum (60%)" to "seventy per centum (70%)".
E. Section 1.03 of the Original Indenture shall be amended to read as
follows:
"Section 1.03. The term 'net earnings certificate' shall mean an
accountant's certificate stating:
I. for a period of twelve (12) consecutive calendar months within the
eighteen (18) consecutive calendar months immediately preceding the date of the
application for the authentication and delivery of bonds of which the net
earnings certificate is a part, the 'net earnings' of the Company, which shall
be the amount stated in (7) below;
and specifying
58
<PAGE>
(1) its gross operating revenues (which may include revenues of the Company
subject when collected to possible refund at a future date);
(2) its operating expenses, including, without limitation, (A) expenses and
accruals for repairs and maintenance, (B) expenses for taxes (other than income,
profits and other taxes measured by, or dependent on, net income), (C)
assessments, (D) rentals and (E) insurance, but excluding (W) provisions for
reserves for renewals, replacements, depreciation, depletion or retirement of
property (or any expenditures therefor), or provisions for amortization of
property, (X) expenses or provisions for interest on any indebtedness of the
Company, for the amortization of debt discount, premium, expense or loss on
reacquired debt, for any maintenance and replacement, improvement or sinking
fund or other device for the retirement of any indebtedness, or for other
amortization, (Y) expenses or provisions for any non-recurring charge to income
of whatever kind or nature (including without limitation the recognition of
expense due to the non-recoverability of investment), whether or not recorded as
an extraordinary item in the Company's books of account, and (Z) provisions for
any refund of revenues subject to possible refund at a future date;
(3) the amount remaining after deducting the amount required to be stated
in such certificate by clause (2) above from the amount required to be stated
therein by clause (1) above;
(4) its non-operating revenues, which amount may include any portion of the
allowance for funds used during construction (or any analogous amount);
(5) the sum of the amounts required to be stated in such certificate by
clauses (3) and (4) above;
(6) the amount, if any, by which the amount required to be stated in such
certificate by clause (4) above exceeds twenty per centum (20%) of the sum
required to be stated by clause (5) above; and
(7) the Company's 'net earnings' for such period (being the amount
remaining after deducting in such certificate the amount required to be stated
by clause (6) above from the sum required to be stated by clause (5) above).
II. (A) the interest requirements for one year, at the respective interest
rates, if any, borne prior to maturity, upon;
(i) all bonds authenticated hereunder and outstanding at the date of such
certificate, except any for the payment or redemption of which the bonds applied
for are to be issued; provided, however, that, if outstanding bonds of any
series bear interest at a variable rate or rates, then the interest requirement
on the bonds of such series shall be determined by reference to the rate or
rates in effect on the date next preceding the date of such certificate;
(ii) all bonds then applied for in pending applications for new bonds,
including the application in connection with which such certificate is made;
provided, however, that if bonds of any series are to bear interest at a
variable rate or rates, then the interest requirement on the bonds of such
series shall be determined by reference to the rate or rates to be in effect at
the time of the initial authentication and delivery of such bonds; and
59
<PAGE>
(iii) the principal amount of all other indebtedness (except indebtedness
for the payment of which the bonds applied for are to be issued and indebtedness
secured by a lien, prior to the lien of this Indenture, for the payment of which
money in the necessary amount shall have been irrevocably deposited in trust
with the trustee or other holder of such lien) outstanding on the date of such
certificate and secured by a lien prior to the lien of this Indenture on any
property subject to the lien of this Indenture, if such indebtedness has been
issued, assumed or guaranteed by the Company or if the Company customarily pays
the interest on the principal thereof; provided, however, that if any such
indebtedness bears interest at a variable rate or rates, then the interest
requirement on such indebtedness shall be determined by reference to the rate or
rates in effect on the date next preceding the date of such certificate.
(B) the principal amount of the respective bonds and other obligations and
indebtedness on which the annual interest charges referred to in subdivision
II.(A) of this Section are calculated and the respective interest rates at which
computed; and
III. the 'interest earnings requirement', which shall be a figure equal to
200% of the aggregate annual interest charges specified in accordance with
subdivision II (A) of this Section.
"Notwithstanding anything herein to the contrary, neither profits nor
losses from the sale or other disposition of property, nor extraordinary items
of any kind or nature, whether items of revenue or expense, shall be included in
calculating the 'interest earnings requirement'.
"If any of the property of the Company owned by it at the time of the
making of any net earnings certificate (a) shall have been acquired during or
after any period for which the Company's net earnings are to be computed, (b)
shall not have been acquired in exchange or substitution for property the net
earnings of which have been included in the Company's net earnings and (c) had
been operated as a separate unit and items of revenue and expense attributable
thereto are readily ascertainable, then the net earnings of such property
(computed in the manner in this Section provided for the computation of the
Company's net earnings, during such period or such part of such period as shall
have preceded the acquisition thereof, to the extent that the same have not
otherwise been included in the Company's net earnings, shall be so included.
"In any case where a net earnings certificate is required as a condition
precedent to the authentication and delivery of bonds, such certificate shall
also be made and signed by an independent public accountant, if the aggregate
principal amount of bonds then applied for plus the aggregate principal amount
of bonds authenticated and delivered hereunder since the commencement of the
then current calendar year (other than those with respect to which a net
earnings certificate is not required, or with respect to which a net earnings
certificate made and signed by an independent public accountant has previously
been furnished to the Trustee) is ten per centum (10%) or more of the aggregate
principal amount of the bonds at the time outstanding; but no net earnings
certificate need be made and signed by any person other than an accountant, as
to dates or periods not covered by annual reports required to be filed by the
Company, in the case of conditions precedent which depend upon a state of facts
as of a date or dates or for a period or periods different from that required to
be covered by such annual reports."
6. Section 7.05 of the Original Indenture shall be amended by changing the
second percentage therein from "sixty per centum (60%)" to "seventy per centum
(70%)".
G. Section 7.15 of the Original Indenture shall be deleted.
60
<PAGE>
H. Section 7.06 of the Original Indenture shall be amended by substituting
for the amount of "$50,000", wherever the same appears therein, the phrase "an
amount equal to the greater of $10,000,000 and 3% of the aggregate principal
amount of the bonds then outstanding hereunder".
I. The first paragraph of Section 10.04 shall be amended to read as
follows:
"The Trustee shall, whenever from time to time requested by the Company,
such request to be evidenced by an officer's certificate, without requiring
compliance with any of the foregoing provisions of Section 10.03 hereof unless,
under the provisions of said Section 10.03, the Company would then be required
to furnish an independent engineer's certificate, in which event this paragraph
shall not be applicable, release from the lien hereof any property, the fair
value of which shall be stated in an engineer's certificate delivered to the
Trustee simultaneously with such officer's certificate, which property, as
stated in such engineer's certificate, is not useful or necessary in the conduct
of the business of the Company, and provided further that the aggregate fair
value of all property released pursuant to this Section in any calendar year
shall not exceed an amount equal to the greater of $5,000,000 and 3% of the
aggregate principal amount of bonds outstanding hereunder. Said engineer's
certificate shall also state that such release will not impair the security
under this Indenture in contravention of the provisions thereof. The Company
covenants that it will deposit with the Trustee the consideration, if any,
received by it upon the sale or other disposition of any property so released."
J. A new Section 15.04 reading as follows shall be added:
"Section 15.04.
(a) Nothing in this Indenture shall be deemed to prevent or restrict any
consolidation or merger after the consummation of which the Company would be the
surviving or resulting corporation or any conveyance or other transfer or lease,
subject to the lien of this Indenture, of any part of the mortgaged and pledged
property which does not constitute the entirety, or substantially the entirety,
thereof.
(b) Unless, in the case of a consolidation or merger described in
subsection (a) of this Section, an indenture supplemental hereto shall otherwise
provide, this Indenture shall not become or be, or be required to become or be,
a lien upon any of the properties acquired by the Company in or as a result of
such transaction or any improvements, extensions or additions to such properties
or any renewals, replacements or substitutions of or for any part or parts of
such
properties."
K. Section 7.16 of the Original Indenture shall be amended by deleting the
word "independent" therefrom wherever it
appears.
L. The proviso at the end of paragraph (1) of Section 10.02 of the Original
Indenture shall be deleted.
Section 2.03. Additional amendments requiring consent of holders of all
outstanding bonds. Each holder of a bond of the Fifty-third Series, by his
acceptance thereof, shall thereby consent that at any time after the requisite
consents, if any, of the holders of the bonds of other Series shall have been
given as hereinafter provided, the Mortgage shall be amended in the following
respects:
61
<PAGE>
A. Section 2.12 of the Original Indenture and all references to Section
2.12 within the Mortgage shall be deleted.
B. Clause (a) of Section 1.11 of the Original Indenture shall be amended to
read as follows:
"(a) ten-sevenths (10\7ths) of the aggregate principal amount of bonds
theretofore authenticated and delivered upon the basis of unfunded net property
additions (other than bonds deposited with the Trustee in satisfaction of
sinking fund requirements under former Section 2.12 hereof) or for the
authentication and delivery of which upon such basis any other application is
then pending;"
The amendments to the Mortgage set forth above shall become effective at
the earlier of (a) such date as no bonds created prior to the bonds of the
Fifty-third Series shall remain outstanding or (b) such date as the holders of
all then outstanding bonds of all series created prior to the bonds of the
Fifty-third Series shall have consented thereto. No further vote or consent of
the holders of bonds of the Fifty-third Series shall be required to permit such
amendments to become effective.
ARTICLE THREE
SUNDRY PROVISIONS
Section 3.01. This Supplemental Indenture is executed and shall be
construed as an indenture supplemental to the Original Indenture, and shall form
a part thereof, and the Original Indenture as heretofore supplemented is hereby
confirmed and adopted by the Company as its obligation. All terms used in this
Supplemental Indenture shall be taken to have the same meaning as in the
Original Indenture except in cases where the context clearly indicates
otherwise.
Section 3.02. All recitals in this Supplemental Indenture are made by the
Company only and not by the Trustee; and all of the provisions contained in the
Original Indenture as heretofore supplemented in respect of the rights,
privileges, immunities, powers and duties of the Trustee shall be applicable in
respect hereof as fully and with like effect as if set forth herein in full. The
Trustee shall not be responsible in any manner whatsoever for or in respect of
the validity or sufficiency of this Supplemental Indenture or the due execution
hereof by the Company.
Section 3.03. Although this Supplemental Indenture is dated for convenience
and for the purpose of reference as of May 1, 1999 the actual date or dates of
execution by the Company and by the Trustee are as indicated by their respective
acknowledgments hereto annexed.
Section 3.04. Nothing in this Supplemental Indenture contained shall, or
shall be construed to, confer upon any person other than a holder of bonds
issued under the Mortgage, the Company and the Trustee any right or interest to
avail himself of any benefit under any provision of the Mortgage.
Section 3.05. This Supplemental Indenture may be simultaneously executed in
several counterparts and all such counterparts executed and delivered, each as
an original, shall constitute but one and the same instrument.
Section 3.06. The headings of Articles, Sections and subsections contained
in this Supplemental Indenture are included for convenient reference only and
shall not be deemed to be a part of this Supplemental Indenture.
62
<PAGE>
Section 3.07. The Company gives notice that it claims the benefit of
Sections 29-1-10 and 29-3-80, S.C. Code of Laws (1976), as amended, concerning
the continuation of the lien until satisfied or released of record and
attachment to after-acquired real property of the lien of both the Original
Indenture, dated as of January 1, 1945, and all supplements and amendments
thereto, consisting of Fifty-two Supplemental Indentures (and various other
unnumbered, but recorded supplemental mortgages of after-acquired property for
individual tracts or parcels), including the Fourth Supplemental Indenture,
dated as of April 1, 1950, under which the Company assumed the Original
Indenture as described on page two herein. The Original Indenture and the
Fifty-two Supplemental Indentures and unnumbered supplements are recorded in the
mortgage book of the appropriate counties; the Original Indenture and the Fourth
Supplemental Indenture being recorded at the book and page numbers in such
counties as set forth on Exhibit A attached hereto. The notice on the cover of
this Fifty-third Supplemental Indenture is given pursuant to the aforesaid laws.
Section 3.08. This Supplemental Indenture is intended by the parties
hereto, as to properties now or hereafter encumbered by the Mortgage and located
within the State of Georgia, to operate and is to be construed as granting a
lien only on such properties and not as a deed passing title thereto.
The debtor and its mailing address are South Carolina Electric & Gas
Company, 1426 Main Street, Columbia, South Carolina 29218. The secured party and
its address from which information concerning the security interest may be
obtained are The Chase Manhattan Bank, 450 West 33rd, New York, New York 10001.
63
<PAGE>
IN WITNESS WHEREOF, South Carolina Electric & Gas Company has caused this
Supplemental Indenture to be executed in its corporate name by its President or
one of its Vice Presidents and its corporate seal to be hereunto affixed and to
be attested by its Secretary or one of its Assistant Secretaries, and The Chase
Manhattan Bank, to evidence its acceptance hereof, has caused this Supplemental
Indenture to be executed in its corporate name by its President or one of its
Vice Presidents or Assistant Vice Presidents and its corporate seal to be
hereunto affixed and to be attested by its Secretary or one of its Assistant
Secretaries, in several counterparts, all as of the day and year first above
written.
SOUTH CAROLINA ELECTRIC & GAS
COMPANY
(SEAL)
By ...............................................
President or Vice President
Attest:
.................................................
Secretary or Assistant Secretary
In the presence of:
.................................................
.................................................
THE CHASE MANHATTAN BANK
(SEAL)
By ....................................................
Vice President
Attest:
.............................................
Assistant Secretary
In the presence of:
.............................................
.............................................
64
<PAGE>
CONSENT
The Bank of New York, as successor to NationsBank of Georgia, N.A., as the
holder under the Indenture of the South Carolina Electric & Gas Company, dated
as of April 1, 1993, as supplemented, of $1,115,035,000 principal amount of the
First and Refunding Mortgage Bonds, hereby consents to the amendments set forth
in Sections 2.02 and 2.03 of the Fifty-third Supplemental Indenture of South
Carolina Electric & Gas Company dated as of May 1, 1999.
THE BANK OF NEW YORK, as successor to NATIONSBANK OF GEORGIA, N.A.
(SEAL)
By ...............................................
Its .............................................
ATTEST:
By .....................................................................
Its ......................................................................
65
<PAGE>
STATE OF SOUTH CAROLINA ) ss.:
COUNTY OF RICHLAND )
Personally appeared before me _______________, and, being duty sworn, made
oath that she saw the corporate seal of SOUTH CAROLINA ELECTRIC & GAS COMPANY
affixed to the above written Supplemental Indenture, and that she also saw
______________, the ___________________, with ____________, Secretary, of said
SOUTH CAROLINA ELECTRIC & GAS COMPANY sign and attest the same, and that she,
deponent, with ______________, witnessed the execution and delivery thereof as
the act and deed of SOUTH CAROLINA ELECTRIC & GAS COMPANY.
Kelly Elkins
Subscribed and sworn to before me this
____ day of _______________, ______. (NOTARIAL SEAL)
Patricia K. Haltiwanger
Notary Public for South Carolina
My Commission Expires May 15, 2006.
STATE OF SOUTH CAROLINA ) ss.:
COUNTY OF RICHLAND )
On this 1st day of May, in the year one thousand nine hundred and
ninety-nine, before me personally came Kevin Marsh, to me known, who, being by
me duly sworn, did depose and say that he resides at 1003 Steeple Ridge Road,
Irmo, South Carolina; that he is the Senior Vice President and Chief Financial
Officer of SOUTH CAROLINA ELECTRIC & GAS COMPANY, the corporation described in
and which executed the foregoing instrument; that he knows the seal of said
corporation; that the seal affixed to said instrument is such corporate seal;
that it was so affixed by order of the Board of Directors of said corporation;
and that he signed his name thereto by like order.
Patricia K. Haltiwanger...................
Notary Public for South Carolina
My Commission Expires May 15, 2006
(NOTARIAL SEAL)
66
<PAGE>
STATE OF NEW YORK ) ss:
COUNTY OF NEW YORK )
Personally appeared before me Eric Butler, and, being duly sworn, made oath
that he saw the corporate seal of THE CHASE MANHATTAN BANK affixed to the above
Supplemental Indenture, and that he also saw Glenn G. McKeever, Vice President,
with William G. Keenan, Trust Officer, of said THE CHASE MANHATTAN BANK, sign
and attest the same, and that he, deponent, with Natalia Rodriguez, witnessed
the execution and delivery thereof as the act and deed of THE CHASE MANHATTAN
BANK.
Subscribed and sworn to before me this Eric Butler
1st day of May, 1999.
Emily Fayan (NOTARIAL SEAL)
Notary Public, State of New York
No. 24-4737006
Qualified in Kings County
Certificate filed in New York County
Commission Expires December 31, 1999
STATE OF NEW YORK ) ss:
COUNTY OF NEW YORK )
On this 1st day of May, in the year one thousand nine hundred and
ninety-nine, before me personally came Glenn G. McKeever, to me known, who,
being by me duly sworn, did depose and say that he resides at 213-08 73rd
Avenue, Bayside, New York; that he is a Vice President of THE CHASE MANHATTAN
BANK, the corporation described in and which executed the foregoing instrument;
that he knows the seal of said corporation; that the seal affixed to said
instrument is such corporate seal; that it was so affixed by order of the Board
of Directors of said corporation, and that he signed his name thereto by like
order.
Emily Fayan
Notary Public, State of New York
No. 24-4737006
Qualified in Kings County
Certificate filed in New York County
Commission Expires December 31, 1999 (NOTARIAL SEAL)
67
<PAGE>
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE CONSOLIDATED
BALANCE SHEET AS OF MARCH 31, 1999 AND THE CONSOLIDATED STATEMENTS OF INCOME AND
RETAINED EARNINGS AND OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 1999
AND IS QUALIFIED IN ITS ENTIRETY TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000754737
<NAME> SCANA CORPORATION
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1999
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 3,797
<OTHER-PROPERTY-AND-INVEST> 531
<TOTAL-CURRENT-ASSETS> 513
<TOTAL-DEFERRED-CHARGES> 502
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 5,343
<COMMON> 1,052
<CAPITAL-SURPLUS-PAID-IN> (8)
<RETAINED-EARNINGS> 675
<TOTAL-COMMON-STOCKHOLDERS-EQ> 1,762
61
106
<LONG-TERM-DEBT-NET> 1,736
<SHORT-TERM-NOTES> 174
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 107
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 1,397
<TOT-CAPITALIZATION-AND-LIAB> 5,343
<GROSS-OPERATING-REVENUE> 397
<INCOME-TAX-EXPENSE> 28
<OTHER-OPERATING-EXPENSES> 291
<TOTAL-OPERATING-EXPENSES> 319
<OPERATING-INCOME-LOSS> 78
<OTHER-INCOME-NET> (4)
<INCOME-BEFORE-INTEREST-EXPEN> 74
<TOTAL-INTEREST-EXPENSE> 34
<NET-INCOME> 39
2
<EARNINGS-AVAILABLE-FOR-COMM> 37
<COMMON-STOCK-DIVIDENDS> 40
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 21
<EPS-PRIMARY> 0.36
<EPS-DILUTED> 0.36
</TABLE>
<TABLE> <S> <C>
<ARTICLE> UT
<CIK> 0000091882
<NAME> SCE&G
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1999
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 3,442
<OTHER-PROPERTY-AND-INVEST> 17
<TOTAL-CURRENT-ASSETS> 336
<TOTAL-DEFERRED-CHARGES> 483
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 4,278
<COMMON> 181
<CAPITAL-SURPLUS-PAID-IN> 828
<RETAINED-EARNINGS> 501
<TOTAL-COMMON-STOCKHOLDERS-EQ> 1,510
61
106
<LONG-TERM-DEBT-NET> 1,318
<SHORT-TERM-NOTES> 78
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 29
0
<CAPITAL-LEASE-OBLIGATIONS> 0
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2
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</TABLE>
