Operator: Good afternoon, ladies and gentlemen. Thank you for standing by. I will be your conference facilitator today. At this time, I would like to welcome everyone to the SCANA Corporation Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer period. As a reminder, this conference call is being recorded on Thursday, April 25, 2013. Anyone who does not consent to the taping may drop off the line.
At this time, I would like to turn the call over to Byron Hinson, Director of Financial Planning and Investor Relations.
Byron Hinson - IR: Thank you and welcome to our earnings conference call, including those who are joining us on the webcast. As you know, earlier today we announced financial results for the first quarter of 2013.
Joining us on the call today are Jimmy Addison, SCANA's Chief Financial Officer; and Steve Byrne, Chief Operating Officer of SCE&G. During the call Jimmy will provide an overview of our financial results and economic development in our service territory. Steve will provide an update on our new nuclear project. After our comments we will respond to your questions. The slides and the earnings release referred to in this call are available at scana.com.
Before I turn the call over to Jimmy, I would like to remind you that certain statements that may be made during today's call are considered forward-looking statements and are subject to a number of risks and uncertainties, as shown on Slide 2. The Company does not recognize an obligation to update any forward-looking statements.
Additionally, we may disclose certain non-GAAP measures during this presentation and the required Reg G information can be found on the Investor Relations section of our website.
I'll now turn the call over to Jimmy.
Jimmy Addison - SVP and CFO: Thanks, Bryon and thank you all for joining us today. I'll begin our earnings discussion on Slide 3. Basic earnings in the first quarter of 2013 were $1.13 per share compared to $0.93 per share in the same quarter of 2012. Higher electric and gas margins were primarily offset by increases in CapEx related costs such as depreciation, property taxes, interest expense and share dilution. Our results during the first quarter of 2013 were slightly better than our forecast due primarily to timing of O&M expenses.
As we projected in our February call, we took down the 6.6 million shares under our equity forward during March. For the remainder of the year, we expect comparable basic earnings per share to moderate due to the related dilution.
Now on Slide 4, I'd like to briefly review results for our principal lines of business. South Carolina Electric & Gas Company's first quarter 2013 earnings denoted in blue were up $0.13 compared to 2012, driven largely by base rate increases along with customer growth. These increases were partially offset by increases in interest and depreciation expenses and share dilution.
PSNC Energy's earnings for the first quarter of 2013 shown in red were $0.24 per share consistent with the first quarter of 2012. Increases in margin due to customer growth were partially offset by higher operations and maintenance expenses and depreciation expenses.
SCANA Energy, the Company's retail and natural gas marketing business in Georgia reported first quarter 2013 earnings of $0.16 per share compared to a $0.09 per share in the first quarter of 2012. The increase is primarily attributable to a return to normal weather. SCANA's corporate and other businesses, which include Carolina Gas Transmission, SCANA Communications, ServiceCare, SCANA Energy Marketing and the holding company, reported earnings of $0.05 per share consistent with the first quarter of 2012.
Next, I would like to touch on sales growth as shown on Slide 5. We continue to see growth in weather normalized sales volumes. For the 12 months ended March 31, 2013, total weather normalized electric sales to residential and commercial customers were up approximately 2.5% and 0.7% respectively. Industrial sales were down approximately 0.9%, primarily due to reduced production at one of our largest customers as a result of a fire as we've discussed in prior quarters.
As we have mentioned previously, we evaluate weather normalized sales on a 12 month rolling basis in order to capture the entire business cycle because of this, the impact of the fire is reflected in our industrial volumes. Excluding the impact of the fire we estimate industrial sales would have increased approximately 0.5%, our total weather normal hours retail sales would have increased approximately 1.4%.
On the bottom left hand side of the slide, you will find the information about economic trends in our service territories. We continue to be encouraged by the level of economic development activity with approximately $1.1 billion announced investment and over 2,600 jobs in our Carolina's territories this year. A significant portion of these investments and jobs are due to a recent announcement by Boeing Corporation that it plans to invest another $1 billion and add at least 2,000 more jobs at its North Charleston campus.
Our electric customer base grew at a rate of 0.8% this past quarter continuing to show stable growth. Growth at our regulated gas businesses in South and North Carolina continues to be strong. As of March 2013, those rates were 1.8% for SCE&G gas, and 2.2% for PSNC. PSNC had its best growth rate since 2008. PSNC also hit a milestone this quarter as they exceeded 500,000 customers.
Slide 6 presents our CapEx forecast, which has not changed since our previous earnings call. The forecast reflects new nuclear spending as reported in our latest BLRA quarterly report filed on February 13 and reflects our new CapEx Budget for 2013 through 2015. Along the bottom of the slide, you can see our anticipated incremental nuclear CWIP as of June 30. This represents the incremental CWIP from July 1 through June 30 for each period on which the BLRA increase is calculated. As you can see from this slide we're beginning to enter a period of new peak nuclear spending.
Please turn to Slide 7 to review our financing plan. This slide presents our estimated financing plan through 2017 and is also consistent with the forecast on our last call. As I mentioned, we settled our equity forward resulting in the issuance of 6.6 million shares in early March. We don't anticipate any additional equity issuances for the balance of 2013 other than through our 401(k) and dividend reinvestment plans. We continue to anticipate new first mortgage bond issuances to support new nuclear construction later in the year.
Please turn to Slide 8. We are reaffirming our earnings guidance of $3.25 to $3.45 basic earnings per share along with our internal target of $3.35 per share. Our long-term outlook remains unchanged as we plan to deliver 3% to 6% earnings growth over the three to five year period, based on 2012 GAAP basic earnings per share of $3.20.
I'll now turn the call over to Steve to provide and update on our nuclear project.
Stephen A. Byrne - SVP, SCANA; COO and President, Generation and Transmission South Carolina Electric & Gas Company: Thanks Jimmy. Let me start by addressing an issue we have been dealing with since last year that has gained notoriety in the past few days based on press release issued by the Nuclear Regulatory Commission on Monday. SCE&G has requested a regulatory conference with the NRC based on the NRC's preliminary categorization of a finding during a construction inspection. The NRC assigned a color coding findings based on their determination of safety significance. The range of colors is green, white, yellow and red with green being the least significant. The green finding is defined as one of having very low safety significance.
In this instance, we were preliminarily issued a white finding, the next lowest level which indicates a low to moderate safety significance. We have not previously received a finding of greater than green on construction and we believe that this one should also be green which is why we requested the conference. This is not a new issue. Having first been raised last September and we have discussed it on previous earnings call, it deals with sheer reinforcement, spacing and the use of T-heads in the concrete basemat. We corrected the problem prior deploying the basemat which was completed on March 11th and no additional work on the basemat will be needed, regardless of the outcome of this conference. In addition, we identified a similar condition that exists in other wall sections of the Nuclear Island. We are submitting license amendment requests or LAR to document the change and gain NRC approval and we expect to receive those LARs shortly and will then be able to begin (quarrying) these wall sections. We continue to anticipate that the Unit 2 will become operational in 2017 and Unit 3 in 2018.
I'd now like to direct your attention to Slide 9, as I mentioned previously, in March, we completed the placement of the Nuclear Island basemat, sometimes referred to as 1st Nuclear Concrete or FNC, among the first new such construction of Nuclear Concrete Pour in United States in three decades. Basemat provides a foundation for the containment building, shied building and auxiliary building that make up the Nuclear Island. Measuring 6 feet in thickness the basemat cover its surface totaling 32,000 square feet and it took just over 50 hours of continuous pouring to complete. We are very pleased with the collaborative efforts of our partners and making this concrete pour a success.
Please turn now to Slide 10. At the beginning of April we set the 500 ton CR10 module on the Unit 2 basemat. This module had been previously assembled on site and was lifted into place using the heavy lift derrick. CR10 supports the containment vessel. One of the next steps for Unit 2 will be to set the Containment Vessel Bottom Head in the CR10 module. The bottom head has also been previously assembled on site.
On the top left of Slide 11, you can see a picture of the Switchyard. The Switchyard was energized and turned over to SCE&G in January of this year. This gives us the ability to back the two new nuclear plants to perform testing when the times come. At top right of that same slide, you will see a picture of cooling tower 2 Alpha progress on all four low-profile forced draft cooling towers continues to progress as anticipated.
On the bottom left, you will see the Unit 2 turbine building. The basemat for the Unit 2 turbine building is complete and the forming and pouring of the walls has begun. At bottom right, you'll see a picture of Unit 3 Nuclear Island, lower end concrete has been poured and the lower mud mat is completed. Installation of the waterproof membrane in the upper mud mat will be completed in the coming months and the basemat will follow. Again, the schedule continues to support commercial operation dates in 2017 for Unit 2 and 2018 for Unit 3.
As you can see on Slide 12, we have two Base Load Review Act or BLRA filings coming up in May. Around mid-May, we will file our quarterly status update with the Public Service Commission and on May 30, we'll make our annual request for revised rates under the BLRA. Both of these filings will be made available for review on the Investor Relations section of the scana.com.
That concludes our prepared remarks. We will now be glad to respond to any questions you might have.
Operator: Travis Miller, Morningstar.
Travis Miller - Morningstar: Wondering if you could walk through some of the cost implications that might be related to the NRC finding the meeting, anything related to that potentially?
Stephen A. Byrne - SVP, SCANA; COO and President, Generation and Transmission South Carolina Electric & Gas Company: Travis, this is Steve Byrne. At this point in time we are still hopeful that we will be able to make our case that this is a lower safety significant item than the NRC perhaps preliminarily thought it was, and if that's the case we won't see any changes to the cost of the project based on this. Really when you look at the significant termination process that the NRC goes through in categorizing these findings, even if it would be categorized as a wise finding what that would mean for us is increased inspection. Of course I don't know at this point, how much increased inspection that really becomes a burden on our staff, the cost of which would be difficult to quantify. But there is no direct co-relation to say that if you get a finding, it's going to cost you x, because we would not anticipate a find from this, so from a cost point of view, we don't think it's going to be material.
Travis Miller - Morningstar: Now related to capital investment, potentially CapEx, also you wouldn't expect to see much impact on that side?
Stephen A. Byrne - SVP, SCANA; COO and President, Generation and Transmission South Carolina Electric & Gas Company: That's correct we would not.
Operator: Julien Dumoulin-Smith, UBS.
Mose - UBS: Hi, this is (Mose) for Julien. Just a quick question on retail any chance if you guys could give us an update on your outlook and expectations for retail in (Georgia) prospectively?
Jimmy Addison - SVP and CFO: It really hasn’t changed since what we've guided at the yearend call in February. So we expect that business on a normal weather basis to be about $0.18 to $0.20 a share in earnings for 2013. And the first quarter of 2013 was normal, it's just that first quarter of '12 as compared to was so abnormal almost 50% below in heating degree day. So we are right on track so far.
Mose - UBS: Just going back to nuclear for a second. If you just kind of help us understand how the safety violation kind of differs from Southern's rebar issue?
Jimmy Addison - SVP and CFO: It’s the same issue the rebar issue that they had at Southern initially was same issue that we had and in fact it came up at our plant. So when we talk about the rebar issue for the basemat, this is the same issue and again it was correct and prior to us pouring the basemat and the same thing would be the case for Southern corrected prior to the end point at basemat. So there is no impact to the basemat from this violation.
Operator: Leslie Rich, JPMorgan.
Leslie Rich - JPMorgan: I wondered if I could ask you to review again you said you need to file another license amendment request for the walls. I wondered if you could just go through that again?
Jimmy Addison - SVP and CFO: Similar to the way we handled the basemat we filed a license amendment request to handle the changes that we wanted to make to the basemat. If you remember that issue probably from our last earning's call, we did some physical changes to the reinforcing bar in the basemat and we also changed the applicable code section from the concrete code from one section to another. So for the wall section we are going to do the same thing. So we'll change the reference from ACI-349 to ACI-318 and then we'll do some physical changes to reinforcing bar itself. Now, for the lower levels, the critical section, the ones that we are going to need next, we have already submitted that license amendment request to the Nuclear Regulatory Commission and expect approval of that relatively soon. And we think that more than likely that will be other license amendment requests for the upper levels, these would be levels that obviously we won't be needing for some time in the months or years to come.
Leslie Rich - JPMorgan: So, I guess this license amendment request process, is it getting a little bit more streamlined? When the first one was filed it was sort of potentially a big deal. Now is it just more – we have a change here we have a change there, it's not likely to be hung up at the NRC for any extended period of time?
Stephen A. Byrne - SVP, SCANA; COO and President, Generation and Transmission South Carolina Electric & Gas Company: Well, Leslie I think as with everything else, the more often you do it on our side and on the regulator side they become more efficient at handling and processing them, so I do expect some efficiencies to be gained there. But to their credit, even with the basemat license amendment requests and preliminary approval request we submitted, the NRC did exactly what they said that they would do and pretty well followed their timeline. So, we have no complaints about how expeditiously they processed those changes, and we would anticipate similar handling of these changes.
Operator: Michael Lapides, Goldman Sachs & Co.
Michael Lapides - Goldman Sachs & Co.: Jimmy, Congrats on a really good quarter. Just some nuts and bolts questions. First of all, O&M was basically flat on a year-over-year basis. Just curious, because when you – in some of you prior slides from last year, you outlined some of the pressures like pension, like environmental, cost, there were embedded in the rate case, but would also create upward movement in O&M. It didn't look like that flowed through. Just kind of would love your thoughts on what happened there?
Jimmy Addison - SVP and CFO: Sure, those costs did flow through. The reason they might not appear on the surfaces, they were offset by other kind of reductions. We had two or three things going on in the first quarter that will relate to what we call internally timing. They are going to show up later in the year rather than in the first quarter when we initially expect. Let me give you a couple of examples. We had some really – we had a really mild January and we had a really wet and cold February and March. Overall, it was statistically normal, so for example the Georgia business ended up like I said earlier with normal weather. However, with very mild weather in January and the colder weather at the end of the quarter, we really didn't see the same level of bad debts or write-offs that we had expected in Q1. Lot of those bills are just showing up in April and May to the customer. So, we expect there might be a couple of cents of that. It trickles over into Q2. We don't have any significant storms that would require us to hit our storm deductible which is $2.5 million a year before we go against our storm reserve. So, we didn't hit any of that, but we had hit some of it in the past comparative quarter. We were lower than expected on our Vegetation Management our tree trimming in Q1 because of that wet weather prevent the guys from being out there and executing on some of those plans. So, those were some of the things that were really netting and offsetting those costs that are there we discussed earlier.
Michael Lapides - Goldman Sachs & Co.: So, when we think about what's embedded in your 2013 guidance what should we assume kind of year-over-year O&M growth?
Jimmy Addison - SVP and CFO: Yeah, as we discussed couple of months ago on year end call. I said overall we expected to be close to 5% range. About half of that is driven by amortized costs that are coming out of the rate case order pension cost those kinds of things. So, on the net at this point I really see it maybe being slightly less than that maybe 4% to 4.5%, but not significantly less. I think it still show up in the full overall period.
Michael Lapides - Goldman Sachs & Co.: So, little bit more backend loaded rather than kind of spread like we were assuming it was just kind of spread evenly throughout the quarters?
Jimmy Addison - SVP and CFO: Yeah, frankly we presume some of that in our plan too but we can't tell in advance what the weather is going to be and the rain is going to be. That's the reality.
Michael Lapides - Goldman Sachs & Co.: One follow on just trying to get a feel for how much of the rate increases that were (indiscernible) it as SCE&G going into 2013, really just the core base rate not the nuclear. How much of that has already been incurred that you benefited from versus what's leftover to take rest of the year?
Jimmy Addison - SVP and CFO: At start of January 1st so we got a full quarter in there and I don't know the exact cyclical breakdown of it but net of those related costs you and I were discussing earlier it is probably $0.02 to $0.03 earnings contribution in Q1 net of those costs, but I don't really have the revenue breakdown on a cyclical basis.
Michael Lapides - Goldman Sachs & Co.: Finally, just from a reporting perspective, how do you'll allocate the holding company (indiscernible) when you show your segment EPS?
Jimmy Addison - SVP and CFO: That's really rolled up in the HoldCo and others in that category that's not broken out in any of the separating OpCo. So, it remains in there netted with the others.
Michael Lapides - Goldman Sachs & Co.: I'll follow-up with that offline, much appreciated.
Operator: (Jonathan Reeder), Wells Fargo.
Jonathan Reeder - Wells Fargo: Steve, you mentioned that you're still on track for 2017 and '18 for the new nuclear units, is that still March and May respectively?
Stephen A. Byrne - SVP, SCANA; COO and President, Generation and Transmission South Carolina Electric & Gas Company: Jonathan, we haven't had any changes to the in-service dates that we lasted to our commission. Now you know that with the Base Load Review Act order, we do have some schedule flexibility and so it's 18 months before we will have to go back and say we were not on schedule. So, as of this point in time, I don't have any information to say that we're going to be outside of the specific dates that we have in our last order, which you just mentioned, March and May.
Jonathan Reeder - Wells Fargo: Jimmy, on the trailing 12 months weather normalized retail sales growth of 1.4%, the adjusted amount. Is that net of the energy efficiency efforts? I'm just kind of wondering since I believe your 2013 guidance embeds only 0.5% growth for the whole year?
Jimmy Addison - SVP and CFO: Yeah. We are using 12 months rolling, so that's including three quarters from 2012 and the first quarter of '13. We try to do that to take out some of the -- to get a full cycle in there, and I think what you are talking about our plan for '13 obviously excludes those prior periods in 2012.
Jonathan Reeder - Wells Fargo: Right, but is the 1.4%, is that net of energy efficiency efforts because I know you're kind of indicating the 0.5% for 2013 reflected a headwind effort some efficiency efforts in particular kind of CFL bulb adoption and stuff like that.
Jimmy Addison - SVP and CFO: Net we expect it to be – net we expect to be somewhere around 0.5% or slightly less, overall retail growth.
Jonathan Reeder - Wells Fargo: I guess you feel pretty comfortable that, that's on a conservative side if anything right now based on how Q1 shaped up?
Jimmy Addison - SVP and CFO: No I wouldn't really say that, I'd say, I'd say I feel it's pretty accurate at this point. I wouldn't characterize it as conservative or aggressive either way.
Operator: Dan Jenkins, State of Wisconsin Investment Board.
Dan Jenkins - State of Wisconsin Investment Board: Going to your Slide 6 on the CapEx, I was wondering if you could update what you've spent in the first quarter?
Jimmy Addison - SVP and CFO: No Dan, I really don't, I don't have handy with me here now. But on the general part of the business other than generation which tends to be projects, and when we do those in the shoulder months or either the spring or the fall, generally the other is going to flow fairly ratably throughout the year and the new nuclear, Steve I don't know if you have comments to characterize.
Stephen A. Byrne - SVP, SCANA; COO and President, Generation and Transmission South Carolina Electric & Gas Company: Yeah, I have a first quarter update.
Jimmy Addison - SVP and CFO: Yeah, we really don't have that. I'm sorry.
Dan Jenkins - State of Wisconsin Investment Board: I was curious on the prior Slide 5, if you had -- could give any color, you talked a little bit about on the industrial with the impact for the customer with the fire. But have you seen any change in trend among the industrial classes that improve about the same any color related to that.
Jimmy Addison - SVP and CFO: It's really a case by case deal, in fact I was looking over those a couple of days ago at our top 30 or 40 customers and it's kind of hodge-podge there is not any one certain trend or its not like all our flap like the average is as you might imagine there is some volatility on both sides of that. Somewhat sector specific there'll be fits and starts with housing and chemicals and things of that nature. But nothing really stands out as a trend.
Operator: Andrew Weisel, Macquarie Capital.
Andrew Weisel - Macquarie Capital: Just a bookkeeping one. What was the basic and diluted share count ending the quarter after the equity floor was drawn?
Jimmy Addison - SVP and CFO: Page 4 of the press release right at the bottom of that page you can get those. So basic was 134.4, diluted 136.1.
Andrew Weisel - Macquarie Capital: Wasn’t that the average for the quarter, I am asking the ending?
Jimmy Addison - SVP and CFO: You are looking for an ending.
Andrew Weisel - Macquarie Capital: Going forward what should we be assuming.
Jimmy Addison - SVP and CFO: We are going to put that into 10-Q will be filed in another week or so. But the yearend number. We took down 6.6 million shares so I mean the actual number outstanding is just slightly under 140 million but it will take full 12 months for that to average into the annual average of shares.
Operator: Timothy Winter, Gabelli & Company.
Timothy Winter - Gabelli & Company: I was wondering if you could just kind of talk about some of the puts and takes with the equity going forward. Your stock saving, all-time high again today and the forward – how did that workout for you, what are you thinking going forward?
Jimmy Addison - SVP and CFO: Well, I might just refer those. I hope that you have the slides nearby to Page 7. So nothing has changed since the last call on this. We still estimate about $500 million of equity in addition to that that would come through our K and dividend plans and that would cover the balance of the construction of the projects. We indicate that in kind of that blue hash box because it may or may not occur just like it's laid out there on the chart. The forward helped us a great deal and that we did the forward originally in the middle of 2010, we had expected to take it down in six to nine months based on the planned construction schedule. Because of the bonus depreciation and stimulus passed by congress, because of some of the change in our tax strategies we really didn't need that cash at that point, so we extended the forward twice. So on one hand it has really worked out well, we avoided the basic dilution for close to three years. On the other hand the market – frankly you guys have been about 50-50, some have included it in – you picked up diluted, some have picked up basics, so it's kind of a hodgepodge. So, it certainly helped our actual earnings per share basis. But it's been a little bit of a disappointment that it's just the non-animal, as I've discussed before, and about half the market has followed on the diluted basis. So, I just see it really different than options or something like that, so it does have that drawback. How we do it going forward, we are going to continue to monitor this. The good news is we don't need any more for the balance of the year other than what we will get through the plans, which is kind of pro rata each quarter and we'll watch the market and see what's going on, watch the projected inflation with the project and project schedule, and I'm just too early to tell any more about when or how we'll do that.
Operator: Andrew Levi, Avon Capital.
Andrew Levi - Avon Capital: Actually most of my questions were answered, but just a follow-up. I guess based on your comments, it's safe to kind of say that your opinion of a forward sale is not as favorable as it was, since you've experienced the forward sale, is that kind of what you are trying to say?
Jimmy Addison - SVP and CFO: I'm glad we did it. I wish it did not come with the baggage of the dilution associated with it. Because again about half of the market has focused on the diluted and about half are focused on basic. I wish we're clear there. But no, if I had to do over again knowing everything we know now, it would still be the best option, because it gave us that flexibility for such period of time.
Operator: Michael Lapides, Goldman Sachs & Co.
Michael Lapides - Goldman Sachs & Co.: Jimmy, real quick follow-up. Tax this year, how big of a difference do you expect between book and GAAP in cash taxes, or how impactful, how much do you expect in terms of cash flow related to bonus D&A?
Jimmy Addison - SVP and CFO: Bonus D&A we expect to be somewhere in the $70 million to $90 million range for 2013 and the effective tax rate, we projected at the beginning of the year and is held through so far about 32%. So, I can't tell you exactly what the cash basis will be, but it will start ramping up here this year.
Michael Lapides - Goldman Sachs & Co.: Meaning the 80 million of bonus (G&A) is basically the only major offset to both taxes you can imaging from a cash tax perspective?
Jimmy Addison - SVP and CFO: Well, we've got one other one in that change in our tax strategy to 263A, but it is not as significant as bonus appreciation.
Operator: This concludes our question-and-answer session. I would like to now turn the conference back over to Mr. Jimmy Addison for any closing remarks.
Jimmy Addison - SVP and CFO: Well, thank you and thank you all. To summarize we are very pleased with our results for the first quarter of 2013. We remain on track to meet our target and have met several major milestones with our new nuclear project. Finally, I want to again mention at upcoming Analyst Day event to be held in New York on June 5th please mark your calendars and plan to attend either in person or online. We thank you for joining us today and for your interest in SCANA.
Operator: The conference has now concluded. We thank you for attending today's presentation. Please disconnect your lines.