ML20246Q069
| ML20246Q069 | |
| Person / Time | |
|---|---|
| Site: | Summer  |
| Issue date: | 12/31/1997 |
| From: | Timmerman W SOUTH CAROLINA PUBLIC SERVICE AUTHORITY (SANTEE COOPE |
| To: | |
| Shared Package | |
| ML20246Q067 | List: |
| References | |
| NUDOCS 9805040451 | |
| Download: ML20246Q069 (44) | |
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SC AN A CORPOR ATION j
SCANA Corporation is a $4 9 billion energy-based holding company whose businesses include regulated electric and natural gas utility 9perations, telecommunications P o w r se Fon L r v s N (.*
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i SOUTH C AROLIN A
! SC AN A PROPAN E G AS, INC.
l l ELECTRIC & G AS C0MPANY j SCANA Propane Gas is engaged in the purchase, trans-l l South Carolina Electric 6 Gas Company is engaged in l Ponadon and sale of propane to residential, commercial l l the generation. transmission, distribution and sale of
- and industrial customers across South Carolina and in North Carolina. Another SCANA subsidiary, SCANA i
- electricity to nearly 504.000 retail and wholesale electric l Propane Senices, Inc., owns and operates a 60-million-l customers and in the purchase and sale of natural gas l
gallon underground propane storage facility near York. SC.
l to approximately 253 000 retail natural gas customers in l s
i l central and southern South Carolina.
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! SC AN A COMMUNIC ATIONS, INC.
l l SCANA Communications provides fiber optic telecommu-l l S0UTH C AR0LIN A l nications, two-way trunked Boo Milz radio con nunica-l l PIPELINE C0RP0R ATION l ti ns to public safety and utility users, and wireless l South Carolina Pipehne Corporation is engaged in the l 10%M mnnmnicad MS ConskuCd n Senices primarily l purchase, transmission and sale of natural gas to com-l in South Carolina. The company also has investments in l mercial. industrial, and wholesale customers, including l ITC lloidmg Company, a provider of local telephone i
l South Carolina Electric 6 Gas Company. South Carolina l services and audio and video conferencing; Powertel l
l Pipehne also owns and operates LNG liquefaction, l (NASDAQ.PTEL), one of the fastest-growing wireless l
l regasification and storage facilities, and a 62-mile l Personal Communications Services (PCS) providers in l
! propane pipeline.
l the Southeast; ITC^DeltaCom (NASDAQ.lTCD), a Southeast l
l l local and long distance telephone provider to business; l
l l and Knology Holdings, Inc., a multi-functional telecom-l l
l munications provider offe-ing expanded cable television.
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T SC1NA.
l tele j._ _ _ _ phone service and Internet access.
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____________q l SC AN A ENERGY l
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, M A R KETING, INC.
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l SCANA Energy Marketing marke.s electricity, natural gas l l
l and other light hydrocarbons throughout the US. SCANA l P R0S 0 LU TIO N 5, IN C.
l l Energy Marketing also provides energy-related risk man-l ProSolutions provides energy management systems and l
,p l agement services to producers and consumers.
l services, turnkey standby generator systems, interior and l l
l exterior lighting, and power quahty services to com-l mercial and industrial customers in the Southeastern US.
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T SERVIC_EC_ARE.
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! SERVICEC ARE, INC.
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l ServiceCare provides energy-related products and
!IN5TEL l services to retail customers through senice contracts l Instel is engaged in maintenance and testing of low-l l on home appliances.
l witage electrical systems for industrial customers in l
l l the Southeastern US.
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T S C/1 N A~
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l SECURITY l
\\ PRIMESOU,TH.
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! SCAN A SECURITY
! PRIM ES0UTH, INC.
l SCANA Security provides home security to residential l Primesouth provides power plant management and l
l customers through alarm sales, installation, and service l maintenance services to independent power producers l
I l and alarm monitoring services.
j and cogeneration facilities in the Eastern US.
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LETTER TO SHAREHOLDERS 8
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FINANCIAL REVIEW f'
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SCANA Corporation's 1998 Annual Meeting of Shareholders will h
be held at to a.m. on Thursday, April 23, in the Ballroom of the u
DIRECTORS & 0FFICERS j'
Adam's Mark Hotel,1200 Hampton l;
d Street in Columbia, SC. A notice of
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INVESTOR INF0RM AT10N
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I am pleased to present the 1997 Annual Report of are quite indicative of our commitment to service, opera-SCANA Corporation. It was an interesting and active tional excellence, environmental stewardship and year for the Company, which we have detailed for you shareholder value.
In the following pages.
From a marketing perspective, we have continued Operationally, we had an excellent year.
to develop ancillary products and services for Summer Nuclear Station continued its the retail and commercial marketplace that history of excellence with another add value to our basic energy services.
Category a rating from the institute For several years, our industrial of Nuclear Power Operations and a energy marketing group has been capacity factor of 88% for the year
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D active in selling natural gas despite a refueling outage. Overall
,7 throughout the United States, and the costs of generation continue to decline i
growth of this business continues. This for our fossil plants due to negotiated reductions in group also has been a participant in the restructuring rail transportation charges and use of lower w
of the electric industry being attempted in cost spot-market coal. Most of our California. In South Carolina, we have construction budget not targeted to
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benefited from the state's extraordi-new customer growth was spent on nary industrial recruitment suc-projects to ensure early compliance '-
cesses and have signed agreements with provisions of the Clean Air Act.
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to serve several new industries.
4.,.3 At the same time, a very significant Last fall we sold the assets of SCANA N
r Petroleum Resources, Inc. for $no million percentage of our existing industrial customers and exited the natural gas exploration and ~
have signed long-term electric supply contracts production business. We simply were noi with SCANA. In summary, we see mar-large enough to compete effectively in f
keting as the key focus for the fore-this market for undrilled reserves seeable future. It is a discipline and at the same time withstand which was not required in the the exposure to dry hole costs in a electric industry until recently. We volatile marketplace. We have finished
'%q are working hard to make our and shortly will implement a new Customer entire organization more market focused, Information System. The old system was over 20 years and these efforts will be expanded in the coming year.
old and would not meet the informational needs of our Financially, we earned $2.o6 per share in i997 customers in the 2 st century. We will be fully con-compared to $2.o5 per share in 199. The sale of the 6
verted to the new system this fall, and I look forward exploration and production company added $.i6 per to significant improvements in our abilities to answer share in 1997, and there was a non-recurring gain inquiries, schedule with customers, provide additional from our telecommunications business of $.o; per information and, in general, communicate more effec-share in i9g6. Thus, on an ongoing operations basis tively. There are additional operational highlights in earnings declined $.io per share to $190 per share, the report, but I wanted to point these out as they almost exclusively due to milder weather. Had the
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l weather reached the 30-year historical average, earnings in 1997 would have increased $.14 per share. Obviously everyone in the Company had to work hard I
and contribute to help the Company succeed financially. The true growth in customer base which the Company made last year was approximately 2L Following our traditional pra:tice, the Board of Powra Fon L evano Directors, at its meeting in February, raised the cash dividend on common shares 2% to $i.54 per share per annum to reflect this growth. The Board authorized using up to $no million of the proceeds from the sale of the natural gas exploration and production business to implement a stock buyback program to further strengthen the value of your common stock.
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We continue to be pleased with our investments in various telecommunica-tions projects. These investments are comprised primarily of Powertel, a publicly traded providc: of digital Personal Communications Services (PCS) and cellular service in the Southeast, and ITC^DeltaCom, a regional provider of retail and wholesale long distance services. We began i995 with investments in telecom-munications projects of $23 million. By the end of 1997 our investments totaled
$246 million with an indicated value of $325 million based on market prices.
While the returns as measured by market values are quite good, an important added value for SCANA comes from exposure to their marketing process, the future opportunity to sell our products and services on an affiliated C
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As you have noticed SCANA has a new logo as shown on the cover. The graphic design element is a
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" leading edge." The leadership of the Company is ded-icated to performance on the leading edge - excellence in customer service, low production costs and total shareholder return. This logo is a unified expression of the goals of all our companies and affiliates.
" Power For 1.iving" captures the concept that SCANA is a progressive service company - excellent service to customers and excellent service to those communities where we operate - and th.it the products and services we provide create great support, convenience and comfort for our customers to live their lives or run their businesses well.
The success of a service company comes from employee commitment and performance. Excellence in service does require functional physical plant and computer systems infrastructure, but it is the perfor-mance of each employee who interacts with a customer that makes it happen. Our employees, active and retired, own n% of the Company's outstanding shares, so they live the shareholders' interest at work each day. The success of SCANA in the future depends on
- f, their performance. As you read through this report and see the accomplishments of the past year, I hope their commitment and achievement become real to you.
........................................................... 3. e.A-N A '- S - - S E-N -I R - -S-FA-F F- - -
Top photo: Berry Gibbes George Bullwinkel. Jack Skolds.
Respectfully submitted, Bottom photo: Cathy Novinger, Tom Arthur, Kevin Marsh.
wdC W.B. Timmerman Chairman, President and Chief Executive Officer February 17,1998
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l When Bridgestone/Firestone was looking for a site to build a new tire manufacturing l
plant, company officials were clear that energy costs and service reliability would play l
a major role in their decision. But not the only one.
l "When we were considering possible locations for a new plant, one of the key
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considerations was electricity prices and value," said Roger Mohler, who was the project j
manager for the giant tire maker during the selection process. But Mohler said that l
beyond good value, SCANA, through its principal subsidiaries, South Carolina Doctric l
6 Gas Company and South Camlina Pipeline Corporation, " offered us a partner in the community that will be there to grow with our future service needs."
I SCANA worked in partnership with the Economic Development l
....L-A-R-G-E-EU-S4 0 M-E-RS-vesushviaivewsapinas SC spsa or---------
l Commerce to develop incentives to bring the $435 million plant to South Carolina, l
As part of the effort, SCANA pledged $620,000 in community development grants to l
assist in infrastructure developments needed for the new plant, employee training, and l
cultural and language programs for employees moving from the company's headquarters TIRE M AKER VALUES in Japan.
PARTNERSHIP The result is 800 new jobs and Bridgestone/Firestone's selection of SCE6G to pro-ALONG WITH PRICE vide the new plant with 17 megawatts of electricity and South Carolina Pipeline Corporation to supply 821,000 dekatherms of natural gas on an annual basis under AND SERVICE long-term contracts.
The success of the Bridgestone/Firestone project is one of many for SCANA's businesses that together focus on providing products and services to the large customer marketplace.
Just like the new Bridgestone/Firestone plant, a substantial number of SCE6G's large customers have signed long-term agreements for their electric needs. These include Westvaco, Avondale Mills, SMI Owen Steel and the City of Orangeburg.
Through Primesouth and SCE60, these customers can choose from services encom-passing the development, construction, operation, maintenance and ownership of steam units, cogeneration facilities and waste handling systems.
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d Through SCANA Energy Marketing, core product offerings for large customers include electric and natural gas procurement, delivery, scheduling, billing, energy man-agement, risk management and consulting services in 42 states.
To make SCANA a more efficient power marketer and allow the Company to perform better in future markets, SCE60's power marketing operations are now handled by SCANA Energy Marketing as well.
SCANA Energy Marketing continued its growth in the Southeast, Mid-Continent and l
West Coast areas of the United States in i997 with natural gas sales totaling 78 billion cubic feet. Electric power sales totaled more than ut,ooo megawatt-hours.
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Westvaco needed to modernize its manufacturing operations in North Charleston, SC
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Through a joint venture to build a $17o-million cogeneration j
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"The cogeneration project provides tremendous benefits to Q
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Westvaco," said Senior Vice President Brantley D. Thomas.
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' * "When this facility is completed in the fall of 1998, it will replace the steam generated by five power boilers that are 4o to 60 4[k j,
years old. The switch to the new facility will reduce energy costs T h y'A==,
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SCANA is involved in other cogeneration and operations h
f ventures through SCE6G and power service provider Primesouth.
SCANA's system of 22 fossil, hydro, nuclear and internal
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combustion turbines combined produce 4,350 megawatts. The generation business is continuing to reduce busbar costs through maintaining an excellent operating record and capitalizing on opportunities to share resources between its fossil / hydro plants
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and the single-unit V.C. Summer Nuclear Station. Another way
,. i SCEGG is reducing costs is with a unique train-to-truck coal trans-s8 - '* M ',,j'{}, ', f.,
portation operation that serves several of its plants. Coal is directly
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unloaded from train cars onto trucks and taken to the generating
. plants, helping reduce fuel costs at those facilities by opening them C0G EN ER ATION up to alternate coal suppliers. SCE6G's fossil generating plants' availability factor in 1997 was 85%, with a system heat rate of 9,778 BTUs per kilowatt hour. Both opera-FACILITY tional efficiency measures are better than the industry average.
MEETS The V.C. Summer Nuclear Station had a capacity factor of 88% in 1997. The THE NEEDS OF 954-megawatt plant has been recognized repeatedly as one of the top nuclear tenits in the country. In 1997 it again received the highest possible rating from the MORE THAN ONE institute of Nuclear Power Operations, the industry's national oversight organization.
Summer Station also completed its ioth refueling outage in record time, returning to service in 34 days.
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Providing customers with options is gc,od business - whether the product is electricity, l
natural gas or real estate. Matt Sloan knows it firsthand.
"We are in the primary business of selling real estate, so we want to have as many PROVIDING OPTIONS services available as possible," said Sloan, executive vice president and chief operating HELPS BUSINESSES fficer with The Daniel Island Company, one of SCANA's newest natural gas customers.
"Having the gas available now is just a wonderful complement to the other MEET CUSTOMER services we can offer. Plus, there's a strong migration to Charleston by people from EXPECTATIONS the Midwest and the North. Not having gas service feels foreign to them."
The new no-mile natural gas pipeline to Daniel Island is part of SCANA's operations businesses. These wiring and piping systems deliver energy to more than 500,000 electric customers and 250,000 natural gas customers throughout South Carolina, and provide technical services for larger customers beyond the meter.
Daniel Island, a once-remote island located in Charleston Harbor, is expected to be the place to live and work in the future, featuring high-quality residential neighbor.
hoods along with retail and commercial development. Home construction is booming, and Sloan says at the end of the planned 25-year buildout period, the island will consist of as many as 7,000 homes, more than 2 million square feet of commercial space and over i million square feet of light industrial space.
Those are huge potential markets for South Carolina Electric 6 Gas Company, which installed the pipeline and also serves the island's electricity needs.
Where natural gas lines do not exsist, SCANA Pmpane Gas provides an energy alternative for approximately 37,000 customers in North Carolina and South Carolina.
Providing our customers with options for products and services, and delivering them safely and reliably, are fundamental to SCANA's continued success in its operations t usinesses.
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F SCE60's ongoing reliab!!ity improvement process involves using new technologies that identify system improvements for areas of the electric transmission system that are 3,
more susceptible to lightning damage. In addition, a new Distribution Outage Analysis System will allow for faster and more efficient response to outages.
South Carolina Pipeline Corporation's newest addition to its transmission system is a
$io-million compressor station in Cherokee County in Upstate South Carolina. This new y
facility will double delivery pressures entering the system. It will also allow the Company to deliver additional quantities to end users while better balancing its supply delivery l
from the two interstate pipelines serving South Carolina.
..__...... _ _._..._ __To, improve r,eliability from the customer side, Instel offers optio, ns anging f, rom __,,_ _ _ _,,,
j testing and repair of low-voltage electrical equipment to total ekttrical system maintenance l
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l Reliability is critical, but operational success also hinges on making it easier for l
customers to use our products and services. That's the driving force behind the devel-opment of a new Customer Information System being phased in during 1998 that will j
enable us to better analyze data, anticipate customers' needs and respond quickly.
l This new system will manage all customer information, from setting up new l
accounts to scheduling service calls. It will track, compute and generate bills that are l
designed to make it easier for customers to read and understand. The system also allows the option to add more SCANA services and products like home security, appliance j
maintenance and Internet access to the tracking and billing process.
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The Sharper family - Macy Sharper, his wife and two small children - sleep better at night now, knowing their home is protected by SCANA Security.
"It was a necessity," Sharper says of his choice. His home security system features a keyless remote to turn lights on and off from inside and outside the house, fire detector, window sensors, voice box, key pad, yard signs and window signs. "We sleep better. It really giws us a sense of security when we're at home and even when we're away from home."
Tiie Sharpers were in the market to buy a security system and had even had an in-home desionstration from a different company. But the next day, a friend showed Sharper her SCANA Security system. So Sharper made another call. "I immediately
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j SCANA's system by far surpassed the other systems we looked at," said the longshoreman and Army reservist. "It sells itself."
SCANA Security provides alarm services tha*. include sales, installation, service and monitoring of systems to about 4.000 retail cf.stomers in n states at year-end 1997. In addition to South Carolina. SCANA Security products are sold in Georgia and Virginia through authorized dealers.
It is also one of the newest product offerings available through SCANA's retail marketing and sales businesses that provide traditional electric, natural gas and propane products, as welas other beyond-the-meter energy services.
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s The goal of the marketing and sales business is to provide electric and natural gas products in every new home and to offer residential and commercial customers the best value they can get from a variety of prodects and services that SCANA offers.
SCANA Security is a division of ServiceCare, SCANA's appliance protection program that offers peace of mind to homeowners by providing maintenance and repair coverage for major appliances. ServiceCare serves more than 50.000 customers in South Carolina and has additional customers through franchise agreements in the states of Kentucky, Indiana and New York. Traditional energy products are supplied to residential and com-mercial customers by South Carolina Electric 6 Gas Company and SCANA Propane Gas.
ProSolutions offers comrnercial customers specialized, beyond-the-meter energy services such as the installation of stand-by generators, power quality, uninterruptible power supply, surge protection and lighting consultation. This non-regulated company helps commercial businesses identify and control their energy costs. Once those costs are under control SCANA Accutrack can provide ongoing energy information to help businesses increase productivity, reduce costs and enhance profitability by managing their energy dollars more effectively and efficiently.
.s Meredith Anton had seen the newspaper ads. Now she wanted to check out the merchandise. So when Powertel - the wireless Personal Communications Services (PCS) provider - opened its flagship Atlanta store in December, she made a visit and I
came away a customer.
"What attracted me was what you get for the price," said the computer graphics manager and advertising teacher who was sold on Powertel's affordable prices and clear digital quality. "Rather than pay for a cellular service and pager senice, I can consolidate them. Plus, the senice is phenomenal and the clarity is like nothing I've ever had before."
With investments of nearly $i6 million through our telecommunication 3 business -
4 SCANA Communications Inc. - SCANA owns a 27 equity interest in Powertel on a fully converted basis.
~~~-----,
l Powertel provides the largest contiguous digital PCS wireless mtwork in the Southeast.
l Its commercial PCS service is available in 24 metropohtan areas and major highway corridors throughout a 12-state license area with a total population of more than 24 l
million people. Powertel began selling PCS senices last October in its Aiken, SC and l
Macon GA markets before opening the Atlanta market in December. At year-end 1997, I
Powertel PCS subscribers numbered approximately
.--+-TEL-E-E0 MM-U-N-FEAH-0-NS 119,000.
One of SCANA s major =mvestment partners in-------
i i
Powertel is ITC Holding Company, in which SCANA also holds a i6% ownership stake.
l' AFF0RDABLE ITC is a privately held, broad-based telecommunications firm based in West Point, GA.
l PRICE 5, SCANA has approximately $246 million invested in ITC and its affiliated communications l
CLARITY 0F businesses (including Powertel), and the two companies are jointly pursuing several l
SIGNAL SELL rapidly expanding opportunities outside of the PCS arena that offer significant growth l
DIGITAL opportunities.
IT'" Del aCom Inc. is a full-service telecommunications provider for businesses.
SERVICES t
l SCANA not only holds a 13% ownership interest in ITC'DeltaCom on a fully converted l
basis, but is also one of its largest customers. ITC^DeltaCom provides the long distance l
telephone service for most of SCANA's business locations.
l MindSpring Enterprises Inc. is one of the most popular regional Internet providers l
in the Sc.utheast. SCANA is not a direct owner, but ITC first began investing in the company in 1995 efore MindSpring went public in i996. What started as a small regional Internet b
l provider in i994 now has a national presence with mvre than 224 000 subscribers, including l
new Powertel customer Meredith Anton.
One of SCANA's newest investments with ITC is Knology Holdings Inc., a multifunc-P0WERTEL PCS SERVICE AREA tional broad-band serv e provider offering customers expanded cable television, v
12 ST ATES
- 246,000 SQU ARE MILES local and long distance telephone and Internet services. Knology is in the pempy@ngpgy,pgem midst of a major expansion into 20 mid-level markets in the Southeast.
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h' SCANA owns an approximate 8% interest in Knology.
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E When the SC Chapter of the Leukemia Society of America started its Team in Training program a few years back, SCANA employees answered the call. There were only two, but Executive Director Franklin Canning was glad to have them. Now, he doesn't
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EMPLOYEES GIVE "SCANA employees have been involved with Team in Training since 1993 when our first team was formed in South Carolina," Canning says. "Today, the SCANA corporate team BACK TO COMMUNITY has grown to be the largest in the country, raising more than $ioo,ooo in 1997 to support IN M ANY WAYS the Leukemia Society's quest for a cure. SCANA and its employees have been a good friend and powerful ally to the Society "
That same kind of support and enthusiasm for giving something back to the com-munity is evident wherever SCANA employees are found.
The Leukemia Society's Team in Training program prepares walkers, runners and cyclists to handle the rigors of a 26.2-mile marathon or a ioo-mile-plus bicycling ultra-marathon. Nationally, Canning says, TNT teams participate in more than 40 such events and have raised in excess of $ 0 million over the past four years for leukemia treatment 5
and research.
The number of SCANA employees involved in the TNT program has doubled every year, with the i997 team comprised of 6 members who raised $no,ooo through 4
pledges and their own money. But the Leukemia Society isn't the only group to benefit from the efforts of SCANA's employees.
SCANA employees help raise funds or volunteer their time to causes such as Meals on Wheels, the March of Dimes, Junior Achievement, Juvenile Diabetes Foundation.
Easter Seals and the United Way, among others.
Each year the Company's Good Neighbor fund Christmas Project provides toys and food baskets to hundreds of needy families and elderly citizens. This project is an annual event for the Good Neighbor Fund, a program that gets its money through employee contributions.
Throughout the year, assistance is provided to help people with hardships ranging from the inability to pay mortgages and rents to purchasing needed medicines. More than 5.000 families have received assistance since the program was born in i9 2.
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CONSOLID ATED FIN ANCI AL STATEM ENTS g<,
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We have audited the accompanying Consolidated Balance Sheets and Consolidated Statements of Capitalization of SCANA Corporation and subsidiaries (Company) as of December 31,1997 and 1996 and the related Consolidated Statements of Income and Retained Earnings and of Cash Flows for each of the three years in the period ended
.....Dec,e,mhgy,i,997 yse,fi,nanclal,statgment,s,ay,e,the,[gsponsi,b!!!ty g[,thg_Co,mp,any's,,,,,,
Th management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts and dis-closures in the financial statements. An audit also includes assessing the accounting prin-ciples used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reason-able Sasis for our opinion.
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In our opinion, such consolidated financial statements present fairly, in all material l
respects, the financial position of the Company at December 3i,1997 and 1996, and the results of its operations and its cash flows for each of the three years in the period ended December 31,1997 in conformity with generally accepted accounting principles.
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DCLOITTE & TOUCHE LLP Columbia, SC February 9, 998 l
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o pacar.mmwxmmatmemmummnrm=amma;wtmezrazmnumunamminm:::nm CONSO LID ATED B AL AN CE S H EETS December 3i.
1997 1996 ASSETS (Millions ofDollar.,
Utility Plant (Notes i,3 AND ):
4 Electric.........................
$4,292
$4,136 Gas......................
580 540 Other..
84 86 T:tal...........
4,956 4,762 Less accumulated depreciation and amortization....................
1,619 1,518 Total............................................
3,337 3,244 Construction work in progress...................
234 219 Nucitar fuel, net of accumulated amortization........................................
53 41 24 _
25 Acquisition adjustment-gas, net of accumulated amortization....................
Utility Plant, Net.......................
3,648 3,529 i
l Nonutility Property and Investments (Net of accumulated depreciation and depletion) (Note :).....................................................................
364 345 j
1 Current Assets:
l Cash and temporary cash investments (Note 8)..........
60 17 Rec:.tvables.............................
248 239 l
Inventories (At average cost):
Fuel (Notes 3 and 4)......................................
51 68 52 50 M terials and supplies..............
Prepayments................................................
16 13 Deferred income taxes.
25 21 Total Current Assets..........................
452 408 Deferred Debits:
31 31
. Emission allowances-.
Environmental......
32 41 Nucl;ar plant decommissioning fund (Note :)..............................
49 42 Pension asset, net (Note )........................
82 58 Other (Notes i and 1o)..........
274 305
. Total Deferred Debits 468 477 Total.............................................................................................................
$4,932
$4,759 s
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1997 1996 CAPITALIZATION AND LIAllILITIES (uilli,m,fD,Itan)
I 1;
l Stockholders' Investment:
l Common equi ty (Note 5)......................................................................
51,788
$1,684 Pr;firred stock (Not subject to purchase or sinking funds)......
106 26 t
e Total Stockholders' investment.......
1,894 1,710 f,
Preferred Stock, Net (Subject to purchase or sinking funds) g1 (Notes 6and8)....................................................................................................
12
~43 gi j SCESG Obligated Mandar.>rily Redeemable Preferred Securities of SCESG's Subsidiary Trust, SCESG Trust 1, (I
holding solely $50 million principal amount of the 7 55%
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Junior Subordinated Debentures of SCESG, due 2o27m 50 mm....
l Long-Term Debt. Net (Notes 3, 4 and 8)...................................................................
1,566 1,581
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Total Capitalization....
3,522 3,334 d
dll Current Liabilities:
d f
Short-term borrowings (Notes 8 and )..
59 145 Q
9 Curr:nt portion of long-term debt (Note 3).....
73 51 g
Accounts payable....
131 157
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Customer deposits...............
18 16 Tax:s accrued..
59 71 Int: rest accrued........
26 26 i
Dividends declared.
43 41 1
Other.........
14 9
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Total Current Liabilities.....
423 516 k
d Deferred Credits:
Def;rred income taxes (Notes i and )m.
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612 578 1
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7 98 84 Reserve for nuclear plant decommissioning (Note :)....
49 42 j
Postretirement benefits......
61 37 i
Other (Note :)......
167 168 l
i Total Deferred Credits.
987 909 I
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Commitments and Contingencies (Note 10)..............................................................
l 3,
Total..........................................................................................................
$4,932
$4,759 yj Al See Notes to Consolidated Financial Statenents.
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CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS E
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1997 1996 1995 d
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eueps per dare amounts) l Operating Revenues (Notes and 2):
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$1,103
$1,107
$1,006 Gas...
419 403 343 j
a Transit.
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h Total Operating Revenues..
1,523 1,513 1,353 Ilu n
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Operating Expenses:
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Fuel used in electric generation......
248 251 227 y
M Purchased power......
9 11 15 E
p Gas purchased for resale..
287 277 112
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Other operation (Note :)
239 239 229 y
e Maintenance (Note :)......
72 68 53 9
k Depreciation and amortization (Note 1)....
153 148 130 h
income taxes (Notes i and )..
105 118 110 N
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Other taxes.....
87 84 I!
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d Total Operating Expenses..
1,209 1,199 1,065 3
Operating Income....
314 314 288 4
4W Other Income (Note :):
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Other income Goss), net of income taxes..
13 22 (2) h Ij Gain on sale of subsidiary assets. net of income taxes.
18 f
Allowance for equity funds used during construction..
7 7
10 e
}h Total Other income.
38 29 8
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n Income Before Interest Charges K
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352 343 296 9
Cnd Preferred Stock Dividends...
d n
Interest Charges (Credits):
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115 115 117 tj Other interest expense.......
12 13 17 9
h Allowance for borrowed funds used during construction (Note :)..
(6)
(6)
(12) y Total interest Charges. Net.
121 122 122 h
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Income Before Prefernd Dividend Requirements on Mandatorily 9
Redeemable Preferred Securities..
231 221 174 k
Preferred Dividend Requinment of SCEGG Q
- Obligated Mandatorily Redeemable Preferred Securities........
1 3
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h Dividends of Subsidiary....................................................................
230 221 174 i
d Prefernd Stock Cash Dividends of Subsidiary (At stated rates).............
(9)
(6)
(6) b e
a NetIncome.......................................................................................
221 215 168 F
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Retained Earnings at Beginning of Year...............................................
558 498 472 h
Common Stock Cash Dividends Declared (Note 5)...............................
(162)
(155)
(142) y y
Retained Earnings at End of Year......................................................
$ 617
$ 558
$ 498 2
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$ 221
$ 215
$ 168 o
j Weighted Average Number of Common Shares (9
Outstanding (Millions)......................................................................
107.1 105.1 99.0 g
N Earnings Per Weighted Average Share of Common Stock (Basic Q
andDiluteJ)...................................................................................
$2.06
$2.05
$1.70 g
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CO NSO LID ATED STATEM ENTS O F C AS H FLOWS N@
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Cash Flows From Operating Activities:
f Net income.....
$ 221
$ 215
$ 168 4
1 Adjustments to reconcile net income to net cash 4
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provided from operating activities:
k j-Depreciation, depletion and amortization............
176 183 198 h
l Amortization of nuclear fuel..
19 19 20 y
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Deferred income taxes, net..
30 34 (22) 4 d
Pension asset..
(24)
(23)
(15) 3 k
Postretirement benefits....
24 16 8
i Allowance for funds used during construction =
(13)
(13)
(22) j U
' Over (under) collections, fuel adjustment clauses..
(8) 19 b
Changes in certain current assets and liabilities:
k p
(Increase) decrease in receivables...
1 (28)
(28) j
{N Uncrease) decrease in inventories..........
15 (8)
(1) 1 jf Increase (decrease) in accounts payable................
(26) 19 19 j
increase (decrease) in taxes accrued.
(12) 4 20
)I Other, net.
1 (9) 2
... =..
y N t Cash Provided From Operating Activities..
412 401 366 j
Sj ' - Cash Flows From Investing Activities:
I f
Utility property additions and construction expenditures, net of AFC.......
(250)
(235)
(300) d, p.
Uncrease) decrease in nonutility property and investments:
tj Sale of oil and gas producing properties.
110 53 1 l P
0 Nonutility property....
(38)
(37)
(26)
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(75)
(85)
(63) 3 h[
Sale of real estate assets....
8 2
19_
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(245)
(302)
(370) ij
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Cash Flows From Financing Activities:
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Q Issuance of mortgage bonds..
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49
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g issuance of preferred stock...
99 s
j issuance of common stock.....
29 69 172 1
A issuance of notes and loans..
86 64 63 l
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Repayments:
Mortgage bonds..........
(15)
(22)
(65)
(70)
(69)
(70) l 3
Notes and loans.--
Other long-term debt......
(8)
(11) 4 9
Preferred stock...
(53)
(3)
(3) h Dividend payments:
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Common stock..
(160)
(153)
(139)
]4 Preferred stock.
(9)
(5)
(6) j;c Shert-term borrowings, net....
(86) 32 (60) 5 j
Fuel financings, net..
14 (11) 26
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j Net Cash Provided By (Used For) Financing Activities...
(124)
(98) 7 3
l Net increase (Decrease) in Cash and Temporary Cash Investments..............
43 1
3 Cash and Temporary Cash Investments, January v.......................................
17 16 13 y
h Cash and Temporary Cast investments, December 31...................................
$ 60
$ 17
$ 16 D
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i s
Cash paid for - Interest Oncludes capitalized interest of $6. $6 and $12)..
$ 124
$ 126
$ 130
)p d.
'- Income taxes...
113 115 99 h
Noncash Financing Activities:
3 (s
Charleston Franchise Agreement..
21 g
' Charleston Environmental Agreement..
20 p
See Notes to Consohdated Financial Statements.
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'f CONSOLID ATED STATEM ENT O F C APITALIZ ATION HD December 3i.
1997 1996 d
Common E.quity (Note 5):
(Millions ofDollars) la Common stock, without par value, authorized 150,000.000 shares; issued g
199 106,i73 273 shares
$1,153
$1,126 and outstanding. i997 - 107,321.ii3 shares and 6
Unrealized gain on securities available for sale 18 Retained earnings 617 558 d
Totd Common Equity 1,788 51 %
1,684 51 %
h South Carolhia Electric G Gas Company:
h Cumulative Preferred Stock (Not subject to purchase or sinking funds):
o i $100 Par Value Authorized 200.000 shares
$50 Par Value - Authorized 25,209 shares 8
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_- Shares Outstanding Redemption Price W4 Eventual i;
Series 1997 1996 Current Through Minimum M
$100 Par 6.52% 1,000,000 100.00 100.00 100
$100 Par 8.40%
197,668 101.00 101.00 20 y
$50 Par 5.00%
125,209 125.209 52.50 52.50 6
6 h
Total Preferred Stock (Not subject to purchase or sinking funds) 106 3%
26 1%
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South Carolina Electric G Gas Company:
's Cumulative Preferred Stack (Subject to purchase or sinking funds)(Notes 6 and 8):
Q U
$100 Par Value - Authorized 1550,o00 shares H
f Shares' Outstanding Redemption Price
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Eventual 4
Series 1997 1996 Current Through Minimum y
7.70 %
84,000 101.00
- 101.00 8
'f 8.12 %
- 118,812 102.03
- 102.03 12 Total
- 202,812 h
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$50 Par Value - Authorized i,591,og4 shares y
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4.50% -
14,400 16,000 51.00 51.00 1
1 H
4.60 %
87 50.50 50.50 i
4.60% (A) 21,894 24,052 51.00 51.00 1
1 4.60% (B) 70,000 71,400 50.50 50.50 4
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5.125 %
68,000 71,000 51.00 51.00 3
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76,800 80,000 50.50 50.50 4
4 8.72% -
64,000 51.00 12-31-98 50.00 3
y 9.40 %
176,751 51.175 51.175 9
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Total 251,094 503,290 0
$25 Par Value - Authorized 2.000,000 shares; None outstanding in 1997 and 1996 E3 Totcl Preferred Stock (Subject to purchase or sinking funds) 13 45 5
l Less: Current portion, including sinking fund requirements 1
2 E
Total Preferred Stock, Net (Subject to purchase or sinking funds) 12 43 1%
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9 7
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!(i Long Term Debt (Notes 3,4 and 8):
(Millions efDollan) f SCANA Corporation:
f k
Bank Notes, due 1998 6'arious rates between 5 99%
4 h
and 6.o3%, reset annually) 60 60 j
y Medium-Term Notes:
j y@
j Year of Series Maturity
[
5.76 %
1998 20
-20 d
7.17 %
1999 43 43 h
j$
6.60 %
1999 30 30 d
P 6.15 %
2000 20 20 3
h N
6.51 %
2003 20 20 j$
6.90 %
2007 25 9
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South Carolina Electric G Gas Company:
h First Mortgage Bonds:
y' Year of g
y Series Maturity j
p 6%
2000 100 100
]
1 61/4%
2003 100 100 j
b 7.70 %
2004 100 100 fl j[i 71/8%
2013 150 150 71/2%
2023 150 150 1
4 75/8%
2023 100 100 il b
75/8%
2025 100 100
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h First and Refunding Mortgage Bonds:
d Year of j]
Q Series Maturity b
6%
1997 15 i
h 61/2%
1998 20 20
/
4 71/4%
2002 30 30 3
h 9%
2006 131 131-3 W
87/8%
2021 114 114 2
h Pollution Control Facilities Revenue Bonds:
f Fairfie d County Series 19 4, due 204 (6 50%)
57 57
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8 UL Orangeburg County Series 1994, due 2024 (5 70%)
30 30 Other 16 17
!j Charleston Franchise Agreement due 1997-2002 18 22 j
j Charleston Environmental Agreement due 1997-1999 -
13 20 i
d South Carolina Generating Company, Inc.:
h U
Berkeley County Pollution Control j
Facilities Revenue Bonds, Series 19 4 due 20i4 (6 50%)
36 36 8
!j G
Note, 7 78%, due 201:
56 60 j!
[m South Crsrolina Fuel Company, Inc. Commercial Paper 80 66 M
South Carolina Pipeline Corporation Notes, 6 72%, due 20i3 20 21 1
h Other 4
4 j
h Total Long-Term Debt 1,643 1,636 f(1
' Less Current maturities, including sinking il fund requirements 73 51 i
- i d
- Unamortized discount 4
4
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1,566 45 %
1,581 47 %
l El Total Capitalization
$3,522 100 %
$3,334 100 %
1 l M s
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NOTES TO CONSOLIDATED FIN ANCIAL STATEMENTS h
l
- 1. SUMM A'RY 0F SIGNIFICAN1 bilities of approximately $i23 million and $58 million,
- g ACCOUNTING P0LICIES
respectively. The electric and gas regulatory assets of
$l g?
approximately $7 million and $44 million, respectively A. Organization and Principles of Consolidation (excluding deferred income tax assets), are being recov-l SCANA Corporation (Company), a South Carolina cor-ered through rates and, as discussed in Note 2A, the n
l; poration, is a public utility holding company within the Public Service Comn ission of South Carolina (PSC) has k >
I meaning of the Public Utility Holding Company Act of approved accelerated recovery of approximately $45 mil-Q l935 ut is exempt from registration under such Act. The b
M & de $m m M % % m a y
k, Company, through wholly owned subsidiaries, is engaged result of deregulation or other changes in the regulatory h
%j predominately in the generation and sale of electricity t environment, the Company may no longer meet the crite-3 wholesale and retail customers in South Carolina and in ria for continued application of SEAS 71 and would be R
g the purchase, sale and transportation of natural gas t required to write off its regulatory assets and liabilities.
h N
wholesale and retail customers hi South Carolina. The Such an event could have a material adverse effect on b
lj)
' Company is also engaged in other energy-related busi-
[d the Company's results of operations in the period the
~
nesses, such as natural gas marketing. The Company has write-off is recorded, but it is not expected that cash g
g g
g g
investments in telecommunications companies and pro-vides fiber optic communications in South Carolina.
p The accompanying Consolidated Financial Statements C. System of Accounts f
reflect the accounts of the Company and its wholly The accounting records of the Company's regulated h
$y owned subsidiaries:
subsidiaries are maintained in accordance with the.
f Regulated utilities Uniform System of Accounts prescribed by the Federal Sout 1 Carolina Electric 6 Gas Company (SCEGG)
Energy Regulatory Commission (FERC) and as adopted by y
lN 5
3 South Carolina Fuel Company, Inc. (Fuel Company) the PSC.
g
~ South Carolina Generating Company, Inc. (GEldCO)
D. Utility Plant k
i South Carolina Pipeline Corporation (Pipeline Utility plant is stated substantially at original cost. The f
p Corporation) costs of additions, renewals and betterments to utility i
4 Nonregulated businesSe5 plant, including direct labor, material and indirect h
SCANA Energy Marketing, Inc.
charges for engineering, supervision and an allowance 3
g SCANA Propane Gas, Inc.
for funds used during construction, are added to t tility e
SCANA Propane Services, Inc.
plant accounts. The original cost of utility property N
SCANA Communications, Inc. (SCI) retired or otherwise disposed of is removed from utility 0
l Primesouth, Inc.
plant accounts and generally charged, along with the cost g
l ServiceCare, Inc.
of removal, less salvage, to accumulated depreciation.
d SCANA Resources, Inc.
The costs of repairs, replacements and renewals of items h
SCANA Petroleum Resources, Inc. (Petroleum of property determined to be less than a unit of property Resources) (in liquidation) are charged to maintenance expense.
l; SCANA Development Corporation (in liquidath)
SCE6G, operator of the V. C. Summer Nuclear Station M
l-Certain investments are reported using the cov or (Summer Station), and the South Carolina Public Service f
j equity method of accounting, as appropriate. Significant Authority (PSA) are joint owners of Summer Station in Q
intercompany balances and transactions have been elimi.,
the proportions of two-thirds and one-third, respectively.
p l 1.
nited in consolidation in compliance with Statement of The parties share the operating costs and energy output N
S Financial Accounting Standards No. 71 (SFAS 71),
of the plar.t.'n the proportions. Each party, however, h
" Accounting for the Effects of Certain Types of provides its ow. financing. Plant-in-service related to h
q Regulation" which provides that profit on intercompany SCEGG's portion of Summer Station was approximately fj
]
sales to regulated affiliates are not eliminated if the
$97 2 million and $937 2 million as of December 31,1997 d
8 l j sales price is reasonable and the future recovery of the and 1996, respectively. Accumulated depreciation assocl-h]
g sales price through the rate-making process is probable.
ated with SCE6G's share of Summer Station was approxi-mately $ 23 6 million and $3:3 2 million as of December M
(
B. Basis of Accounting 3
j Y
The Company accounts for its regulated utility opera-
{6 31,1997 and 199, respectively. SCE60's share of the 6
tions, assets and liabilities in accordance with the provi-direct expenses associated with operating Summer sions of SEAS 71. The accounting standard requires cost-Station is included in "Other operation" and
@f based rate-regulated utilities to recognize in their finan-
" Maintenance" expenses.
cial statements revenues and expenses in different time E. Allowance for Funds Used During Construction y
periods than do enterprises that are not rate-regulated.
AFC, a noncash item, reflects the period cost of capital y
As a result the Company has recorded, as of December 31, devoted to plant under construction. This accounting h
1997, approximately $24: million and $68 million of regu-practice results in the inclusion of, as a component of 9
litory assets and liabilities, respectively, including construction cost, the costs of debt and equity capitol y
amounts recorded for deferred income tax assets and lia*
dedicated to construction investment. AFC is incl ded in p
g Y
4p N vw s
~L s'
- wantr
<n e
1j j
rate base investment and depreciated as a component of contract for disposal of spent nuclear fuel.
plant cost in establishing rt(es for utility services. The The acquisition adjustment relating to the purchase of f
a d
Company's regulated subsidiaries calculated AFC using certain gas properties in 1982 is being amostized over a 0
i composite rates of 91%,91% and 8.6% for 1997, i996 and 40-year period using the straight-line method.
1995, respectively. These rates do not exceed the maxi-H. Nuclear Decommissioning j
mum allowable rate as calculated under FERC Order No.
Decommissioning of Summer Station is presently 1
561. Interest on nuclear fuel in process and sulfur diox-scheduled to commence when the operating license ide emission allowances is capitalized et the actual inter-expires in the year 2022. Based on a 1991 study, the est amount.
expenditures (on a before-tax basis) related to SCE6G's 1
F. Revenue Recognition share of decommissioning activities are estimated, in i
Customers' meters are read and bills are rendered on 2022 dollars assuming a 4 5 annual rate of inflation, to l
a month!ycycle basis. Base revenue is recorded during be $545 3 million including partial reclamation costs.
the accounting period in which the meters are read.
SCE60 is providing for its share of estimated decommis-j Fuel costs for electric generation are collected sioning costs of Summer Station over the life of Summer j
through the fuel cost component in retail electric rates.
Station. SCESG's method of funding decommissioning d
)
The fuel cost con ponent contained in electric rates is costs is referred to as COMReP (Cost of Money Reduction 2
established by the PSC during annual fuel cost hearings.
Plan). Under this plan, funds collected through rates ($3 2 f
Any difference between actual fuel costs and that con-million in 1997 and 199 ) are used to pay premiums on j
6 tained in the fuel cost component is deferred and includ-insurance policies on the lives of certain Company per-N l
ed when determining the fuel cost component during the sonnel. SCESG is the beneficiary of these policies.
a 3
next annual fuel cost hearing. SCE6G had undercollected Through these insurance contracts, SCE6G is able to take i
j through the electric fuel cost component approximate'y advantage of income tax benefits and accrue earnings on
$i.3 million at December 31,1997 and overcollected the fund on a tax-deferred basis at a rate higher than approximately $i.9 million at December 3i, i99, which can be achieved using more traditional funding 6
g are included in " Deferred Debits-Other" and " Deferred approaches. Amounts for decommissioning collected i
Credits-Other," respectively.
through electric rates, insurance proceeds, and interest U
Customers subject to the gas cost adjustment clause on proceeds less expenses are transferred by SCESG to J
l are billed based on a fixed cost of gas determined by the an external trust fund in compliance with the financial y
l PSC during annual gas cost recovery hearings. Any differ-assurance requirements of the Nuclear Regulatory 2
I ence between actual gas costs and that contained in Commission. Management intends for the fund, including rates is deferred and included when establishing gas earnings thereort to provide for all eventual decommis-costs during the next annual gas cost recovery hearing.
sioning expenditures on an af ter-tax basis. The trust's O
At December 31, i997 and 1996 the Company had under-sources of decommissioning funds under the COMReP g
collected through the gas cost recovery procedure program include investment components of life insur-
^*
approximately $7.6 million and $10 9 million, respectively, ance policy proceeds, return on investment and the cash M
which are included in " Deferred Debits-Other."
transfers from SCE6G described above. SCESG records its SCE6G's gas rate schedules for residential, small com-liability for decommissioning costs in deferred credits.
mercial and small industrial customers include a weather Pursuant to the National Energy Policy Act passed by normalization adjustment, which minimizes fluctuations Congress in i992 and the requirements of the Department in gas revenues due to abnormal weather conditions.
of Energy (DOE), SCE6G has recorded a liability for its O
G. Depreciation and Amortization estimated share of the DOE's decontamination and g
Provisions for depreciation are recorded using the decommissioning obligation. The liability, approximately d
$.o million at December 31. :997, has been included in straight-line method for financial reporting purposes and 4
are based on the estimated service lives of the various "Long-Term Debt, Net." SCE6G is recovering the cost p
classes of property. The composite weighted average associated with this liability through the fuel cost compo-L depreciation rates were as follows:
nent of its rates; accordingly, this amount has been deferred and is included in " Deferred Debits-Other."
1997 1996 1995 I. Income Taxes SCE6G 3.09 %
3.13 %
3.02 %
Deferred tax assets and liabilities are recorded for the O
GENCO 2.63 %
2.68 %
2.67 %
tax effects of temporary differences between the book
~
Pipeline Corporation 2.62 %
2.56 %
2.78 %
basis and tax basis of assets and liabilities at currently Aggregate of Above 3.05 %
3.08 %
2.98 %
enacted tax rates. Deferred tax assets and liabilities are adjusted for changes in such rates through charges or credits to regulatory assets or liabilitie.s if they are 9
Nuclear fuel amortization, which is included in " Fuel expected to be recovered from, or passed through to,
(;
used in electric generation" and is recovered through the customers of the Company's regulated subsidiaries; oth-fuel cost component of SCE6G's rates, is recorded using erwise, they are charged or credited to income tax the units-of-production method. Provisions for amortiza-expense.
tion of nuclear fuel include amounts necessary to satisfy obligations to the Department of Energy (DOE) under a
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J. Pension Expense The accumulated benefit obilgation is based on the h
1 The Comp:my has a noncontributory defined benefit plan's benefit formulas without considering expected p
future salary increases. The following table sets forth the p
E pension plan, which covers all petmanent employees..
assumptions used in determining the amounts shown y
Benefits are based on years of accredited service and the employee's average annual base earnings received during above for the years 1997 and 1996.
j d
y the last three years of employment. The Company's poll-1997 1996 j
cy has been to fund the plan to the extent permitted by b
Annual discount rate used to
'p j
the applicable Federalincome tax regulations as deter.
h mined by an independent actuary.
determine benefit obligations 7.5%
7.5%
y l Net periodic pension cost for the years ended Assumed annual rate of future d
9 December 3i.1997,1996 and 1995 ncluded the following salary increases for projected g
i fj
(. ' components:.
benefit obligation 4.0%
3.0%.
3 1997 1996 1995 in addition to pension benefits, the Company provides
.k i
certain health care and life insurance benefits to active g
i f
(Miuions ofDouan) 5 Service cost-benefits and retired employees. TI e costs of postretirement bene -
p
,j' (arned during the period $ 6.8 $ 6.5 $ 5.2 fits other than pensions are aurued during the years the
[q s
' interest cost on projected _
employees render the service necessary to be eligible for j
benefit obligation -
23.5 22.0 19.5 the applicable benefits. The Company expensed approxi-d Adjustments:
mately $8. million,59 8 million and $8 5 million, net of h
('
Return on plan assets (119.5) (78.6) (103.9) payments to current retirees, for the years ended y.
L Net amortization December 3i,1997, i996 and 1995, respectively.
y i l and deferral 72.8 40.1 74.8 Additionally, to accelerate the amortization of the y
rema n ng uan n
gadon k posne&ement kne-j
) -
Nei periodic pension fits ther than pensions, as authoitzed by the PSC. the p
Oncome) expense
$ (16.4) $(10.0) $ -(4.4)
Company expensed approximately $15 6 million and $6.2 a
1.
The determination of net periodic pension cost is million for the years ended December 3,1997 and 199,-
h f '
bised upon the following assumptions:
6 d
respectively. (See Note 2A.)
g
' j Net periodic postretirement benefit cost for the years pl g
-1997 1996 1995 ended December 31,1997,1996 and 1995, included the fol-Annual discount rate -
7.5%
7.5% 8.0%
lowing components:
q j
g Expected long-term rate 1997 1996 1995
' of return on plan assets 8.0%
8.0% 8.0%
pn Annual rate of salary increases 3.0%
3.0% 2.5%
IMdh*"' */D'#d")
N' Service cost-benefits earned l
The following table sets forth the funoed status of the during the period
$ 2.5 ' $ 2.6 ' $ ?.1 J
f plin at December 31,1997 and 1996:
Interest cost on accumulated i
l l
1997 1996 p stretirement benefit obligation 7.8 7.8 7.2 f
Ad)""'n;
O 1
Y.
(MiHions ofDouan) f -
Actuarial present value of-Return on plan assets.
Amortization of unrecognized.
g l
1
. benefit obligations:
l
)
Vested benefit obligation
$259.7 $243.9 transition obligation 18.9
- 9.5 3.3 g
other net amortization 3
1-
- Nonvested benefit obilgation 25.4 23.7 3
and deferral 0.8 1.2 0.7 a
I s
Accumulated benefit obligation ' $285.1 $267.6
[k d
Net periodic postretirement h-Plan assets at fair value benefit cost
$30.0 $21.1 $13.3 l
(invested primarily in equity 1*
' and debt sect rities)
$632.9 $523.5
- The determination of net periodic postretirement ben-a
- Projected benuftt obligation -
344.4 306.9 efit cost is based upon the following assumptions:
a h
Plan assets greater than 1997 1996 1995
?
projected benent obligation 288.5 216.6 Armual discount rate 7.5% 7.5% 8.0%.
R j
- Unrecognized net transition liability '
7.4 8.2 Health care cost trend rate 9.0% 9.5 % 11.0 %
[i Unrecognized prior service costs 15.4 8.2 M
Ultimate health care cost trend 3
j Unrecognized net gain-(227.1) (175.1) rate (to be achieved in 2004) 5.5% 5.5% 6.0%
Pension asset recognized in Consolidated Balairce Sheets
$ 82.2 $ 57.9 g
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h The following table sets forth the funded status of the additional information becomes available: therefore.
h h
plan at December 31,1997 and 199 :
actual expenditures could differ significantly from the g
6 B
original estimates. Amounts estimated, accrued and actu-d h
ally expended to date for site assessments and cleanup Q
h n(
h Accumulated postretirement benefit relate primarily to regulated operations: such amounts b
N obligations for-
"I "*
U b
Retirees
$ 76.7 $ 74.2 through rates over a five-year period for electric opera-h h
Other fully eligible participants 5.9 6.6 tl ns and an eight year period for gas operations. The q(j U
Other active participants 26.2 29.3 Company has also recovered portions of its environmen-h tal liabilities through settlements with various insurance p
p Accumulated postretirement carriers. Deferred amounts, net of amounts recovered d
y benefit obligation 108.8 110.1 through rates and insurance settlements, totaled $32 4 d
U.
Plan assets at fair value million and $4i.4 milhon at December 3i,1997 and i99,
ff 6
h Accumulated postretirement respectively. The deferral includes the estimated costs
{j M
benefit obligation 108.8 110.1 associated with the matters discussed in Note ioC.
g
)
Plan assets less than accumulated M.0il and Gas y
A postretirement benefit obligation (108.8) (110.1)
On December I,1997 substantially all of the assets of g
N Unrecognized net transition liability 29.8 48.7 the Company's oil and gas exploration and production g
9 Unrecognized ' prior service costs 5.8 6.2 subsidiary, Petroleum Resources, were sold for $no mil-Q Unrecognized net loss 12.2 17.8 lion, resulting in an after-tax gain of $17 6 mih.on. The ij N
Postretirement benefit liability Company followed the full cost method of accounting for Q
h recognized in Consolidated its oil and gas operations and, accordingly, capitalized all d
Balance Sheets
$ (61.0) $ (37.4) c sts it incurred in the acquisition, exploration and g!
p g
development of interests in oil and gas properties.
d b
The accumulated postretirement benefit obligation is in addition, the capitalized costs were subject to a p
G based upon the plan's benefit provisions and the follow-
" ceiling test." Non-cash write-downs resulting from the j[y h
ing assumptions:
application of the ceiling test were $24 2 million for the year ended December 3i, 095 k
W96 d
kssumed health care cost trend rate N. Temporary Cash Investments gl d
used to measure expected cos^s 9.0%
9.5%
The Company considers temporary cash investments tgg)
Ultimate health care cost trend rate having original maturities of three months or less to be n
(to be achieved in 2004) 5.5%
5.5%
cash equivalents. Temporary cash investments are gener-p 9
Annual discount rate 7.5%
7.5%
""Y "
- I "" I ' *** I P P" I
I deposit and repurchase agreements. ' '"'#C"
f h
Annual rate of salary increases 4.0%
3.0%
g B
- 0. reclassifications p
y The effect of a one percentage-point increase in the u rtain amm.is ' rom prior periods have been reclas-d y
assumed health care cost trend rate for each future year sib.' -
%n with the 1997 presentation.
y on the aggregate of the service and interest cost compo-
- r. ute of Estimates N
g nents of net periodic postretirement benefit cost for the q
year ended December 31,1997 and the accumulated The preparation of financial statements in conformity N'
q postretirement benefit obligation as of December 31.1997 with generally accepted accounting principles requires N
would be to increase such amounts by $o.2 million and management to make estimates and assumptions that k,
h]
$.2 million, respectively.
affect the reported amounts of assets and liabilities and O
3 disclosure of contingent assets and liabilities at the date h'
Q K Debt Premium, Discount and Expense, of the financial statements and the reported amount of b.
f Unamortized Loss on Reacquired Debt revenues and expenses during the reporting period.
h g
For regulatory purposes, long-term debt premium, dis-Actual results could differ from those estimates.
y count and expense are being amortized as components e
i lj cf " Interest on long-term debt, net" over the terms of the
- 2. RATE M ATTERS:
N
, {j respective debt issues. Gains or losses on reacquired A. On January 9, i996 the PSC issued an order grant-U d
debt that is refinanced are deferred and amortized over ing SCEGG an increase in retail electric rates of 7 34%
}j g
the term of the replacement debt.
which was designed to produce additional revenues, G
L. Environmental based on a test year. of approximately $6 5 million d
7
'h The Company has an environmental assessment pro.
annually. The increase was implemented in two phases.
p
- q gram to identify and assess *urrent and former opera.
The first phase, an increase in revenues of approximately d
'h tions sites that could requPe environmental cleanup. As
$59 5 million annually, or 6 47%, commenced in January 9
'h sit 2 assessments are initiated an estimate is made of the 199. The second phase, an increase in revenues of h
6 h
7 lh amount of expenditures, if any, necessary to investigate approximately $8.o million annually, or.8 %, was imple-Q and clean up each site. These estimates are refined as mented in january 1997. The PSC authorized a return on 0
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common equity of 2.0%. The PSC also approved estab-SCESG's request for reconsideration. SCE6G has appealed 3
lishment of a Storm Damage Reserve Account capped at these two PSC orders to the Circuit Court where they are J
. $50 million to be collected through rates over a ten-year awaiting action.
d period. Additionally, the PSC approved accelerated D. On August 8,1990, the PSC issued an order approv-f
' recovery of a significant portion of SCE60's electric regu-ing changes in Pipeline Corporation's gas rate design for 4
latory assets (excluding deferred income tax assets) and sales for resale service and upholding the "value-of-ser-i the remaining transition obligation for postretirement.
vice" method of regulation for its direct industrial ser-
?
m j$
benefits other than pensions, changing the amortization vice. Direct industrial customers seeking " cost-of-service" periods to allow recovery by the end of the year 2000.
based rates appealed to the Circuit Court, which reversed SCESG's request to shift, for ratemaking purposes, and remanded to the PSC its August 8,1990 order.
3 approximately $257 million of depreciation reserves from Pipeline Corporation appealed that decision to'the 3
transmission and distribution assets to nuclear produc-Supreme Court, which on January to, i994 reversed the
]
tion assets was also approved. The Consumer Advocate Circuit Court decision and reinstated the PSC order, y
appealed certain issues in the order to the South Additionally, the Supreme Court interpreted the rate-4 making statutes of South Carolina to give discretion to j
Carolina Circuit Court, which affirmed the PSC's deci-
~
i sions, and subsequently to the South Carolina Supreme the PSC in selecting the methodology to be used in set-3 Court, which is expected to hear the case and issue a rul-ting rates for natural gas service. The PSC then held j
h ing prior to ths end of i998. While the outcome of this another hearing and issued its order dated December iz, j
I proceeding is uncertain, the Company does not believe '
1995 maintaining the present level of the maximum a
that any significant adverse change in the rate order is markup on industrial sales (" cap"). This order was j
likely. The PSC's order does not apply to wholesale elec-appealed to the Circuit Court by Pipeline Corporation 3
tric revenues under the FERC's jurisdiction, which consti-
. and the industrial customer group with several other par-i tute approximately two percent of the Company's electric ties intervening, including the Consumer Advocate of 3
}
revenues. The FERC rejected the transfer of depreciation South Carolina. On October io, i997, the Circuit Court 6
reserves for rates subject to itdirisdiction.
Issued an order in favor of the Consumer Advocate and g
B. In 1994 the PSC issued an order approving SCE60's the industrial customer group and remanded the case to y
request to recover through a billing surcharge to its gas the PSC to determine an overall rate of return for
?j j
customers the costs of environmental cleanup at the sites Pipeline Corporation. The Circuit Court also issued a sec-h of former manufactured gas plants. The billing surcharge ond order which ruled against Pipeline Corporation and g'
Is subject to annual review and provides for the recovery affirmed the PSC's decision that the cap should not be g
of substantially all actual and projected site assessment increased. Several motions and appeals were filed subse-g 4
and cleanup costs and environmental claims settlements quently at the Supreme Court. The Supreme Court has 4
g for SCESG's gas operations that had previously been dismissed the appeals of the PSC and Pipeline
'J Corporation from the first order without prejudice until j
k deferred. In October 1997, as a result of the annual q
review, the PSC approved SCEGG's request to increase the the PSC completes proceedings on remand and has held j
billing surcharge from $.oo6 per therm to $.on per therm Pipeline Corporation's appeal of the second order in j
3 which should enable SCE6G to recover the remaining bal-abeyance until the PSC completes proceedings on b.
ance of $29 6 million by December 2002.
remand. The Company expects the remanded case to be
?
C. In September i992 the PSC issued an order granting heard at the PSC in May 1998. The impact, if any, on the I
h
' SCEGG a $.25 increase in transit fares from $.50 to $.75 in Company's results of operations, cash flows and financial -
~
i j
both Columbia and Charleston, South Carolina: however, position is not presently determinable.
1 the JSC also required $.4o fares for low income cus-
}
placed into effect in October 1992. SCE60 appealed the including the amounts due under the nuclear and fossil..
' y
{~
tomas and denied SCE60's request to reduce the number
- 3. LONG-TERM. 0EBT:
of routes and frequency of service. The new rates were The annual amounts of long-term debt maturities, PSC's order to the Circuit Court, which in May 1995 fuel agreements (see Note 4), and sinking fund require-j p -
ordered the case back to the PSC for reconsideration of ments for the years 199 through 2002 are summarized as n
8 several issues including the low income rider program, follows.
N I'
routing changes, and the $.75 are. The Supreme Court y
f Year Amount Year Amount declined to review an appeal of the Circuit Court deci-j (Millions ofDollars) 1 k
slon and dismissed the case. The PSC and other inter-6
-venors filed another Petition for Reconsideration, which 1998
$ 73.0 2001
$ 26.2 f
I
' the Supreme Court denied. The PSC and other inter-1999 105.2 2002 56.2 venors filed another appeal to the Circuit Court which 2000 226.5 d
Approximately $i7 2 million of the portion of long-
)
the Circuit Court denied in an order dated May 9, i996 In this order, the Circuit Court upheld its previous orders term debt payable in 1998 may be satisfied by either h
f and remanded them to the PSC. During August 1996, the deposit and cancellation of bonds issued upon the basis PSC heard oral arguments on the orders on remand from of property additions or bond retirement credits, or by l
the Circuit Court. On September 30, ig96, the PSC issued deposit of cash with the Trustee.
an order affirming its previous orders and denied On January i3 199 the Company issued $60 million of 8
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medium-term notes due January 13 2003 at an interest
- 5. C0MMON EQUITY:
rit) of 6.05. Proceeds from the notes were used to The changes in " Common Stock," without par value, i
- repay unsecured bank loans totaling $60 million due during 6997,1996 and 1995 are summarized as follows:
januay 9,1998 which were classified as long-term debt at i
December 3i, i997 Number Millions I
On August 7,'199 the City of Charleston executed 30-f mara of Man 7
6 g
- yer.r tjectric end gas franchise agreements with SCESG.
Balance December 3i,1994 96,035,020 $ 886.8 F
in consideration for the electric franchise agreement, Issuance of common stock 7,588,843 169.9 SCE60 is paying the City $25 million over seven years Balance December 31,1995 103,623,863 1,056.7 0996-2002) and has donated to the City the existing tran-Issuance of common stock 2,551,410 68.6 t
sit cssets in Charleston. The $25 million is included in clectric plent-in-service. In settlement of environmental Balance December 3i, i996 106,175,273 1,125.3-issuance of common stock 1,145,840 27.6 E
claims the Oty may have had against SCE6G involving the
?
Calhoun Paik area, where SCESG and its predecessor Balance Deumber 31, s997 107,321,113 $1,152.9 -
companies operated a manufactured gas plant until the 1960 s, SCE6G is paying the City $26 million over a four-The Restated Articles of Incorporation of the Company t
ye:r period (i996-1999). Such amount is deferred (see do not limit the dividends that may be payable on its '
I common stock.1lowever, the Restated Articles of-Nota 10. The unpaid balances of these amounts are incorporation of SCE60 and the Indenture underlying its E G has thr -ye r ev lying lines of credit totaling nt and Mundng Ngage Bd mntain prWons a, un cma n ckcunstances, Mu e par q
$75 million, in addition to other lines of credit. that pro-
. vide liqu.dity for issuance of commercial paper. The ment of cash dividends on its common stock. In additfor.,-
i three-year lines of credit provide back-up liquidity when with respect to hydroelectric projects, the Federal Power i
~ commercial paper outstanding is in excess of $175 million" Act requires the appropriation of a portion of certain N
' The long-term nature of the lines of credit allow com-earnings therefrom _. At December 31,1997 approximately N
' mercial paper in excess of $175 million to be classified as 828 5 million of retained earnings were restricted by this h
long-term debt. SCESG,s commercial paper outstanding requirement,as to payment of cash dividends on SCE60's d
common stock.
k' totiled $i3 3 million and $90 million at December 31,1997 Cash dividends on common stock were declared at an P
l-end 199 at weighted average interest rates of.90% and 6
5 annual rate per share of $158, $147 and $i.44 for 1997, b
Subs lly i utility plant and fuel inventories are
'99 * "' ##'
pledged as collateral in connection with long-term debt.
- 6. PREFERRED 5TOCKt
- 4. FUEL. FIN ANCINGS, The call premium of the respective series of preferred Nuclear and fossil fuel inventories and sulfur dioxide emission allowances are financed through the issuance dend. Retirements under sinking fund requirements are at par values.
by Fuel Company of short-term commercial paper. These short term borrowings are supported by an irrevocable The aggregate annual amount of purchase fund or b
revolving credit agreement which expires December 19, sinking fund requirements for preferred stock for the years 1998 through 2002 is $o.6 million.
2000. Accordingly, the amounts outstanding have been
~ '
included in long-term debt. The credit agreement p' ~
The changes in " Total Preferred Stock (Subject to pur-vides for a maximum amount of $i25 million that may be chase or sinking funds)" during 1997,199 and i995 are 6
summarized as follows:
, outstanding at any time.
9 Commercial paper outstanding totaled $80 3 million Number Mihlons
'h
' gnd $66.i million at December 3i,1997 and 1996 at of Shares of Dollars g
weighted average interest rates of.8 % and 5 62%,
Balance December 3i, i994 822,094
$51.9 d
57 respectively.
Shares Redeemed:
h
$ioo par value -
(6,809)
(0.7) f
$50 par value (51,666)
(2.5)
Balance December 3i,1995 763,619 48.7 f3 Shares Redeemed:
l
$ioo par valu&
(7,198)
(0.7) a
$50 par value -
(50,319)
(2.6)
{
Balance December 31,1996 706,102 45.4
@l Shares Redeemed:
f!
$soo par value (202,812)
(20.3)
$, {
$ 0 par value (252,196)
(12.6) d' 5
hi.
Balance December 3i,1997 251,094
$12.5 eM mmummmm=n=m=m=www mvxmmr =nw=w=@ * '
ymsum:mmswea-==mrmmanum.-u.m,asmaweemanagemmew:g l
- On October 28,1997, SCESG Trust I (the " Trust"). a
- 7. INCOME TAXES:
I wholly owned subsidiary of SCEGG, issued $ 0 million Total income tax expense for i997,1996 and 199, t, as 5
(2.000,000 shares) of 7 53 Trust Preferred Securities, follows:
Series A (the " Preferred Securities"). SCEGG owns all of the Common Securities of the Trust (the " Common Securi-1997 1996 1995 tlIs"). The Preferred Securities and the Commori Secu, Wuhens ofDauon)
Current taxes:
rities (the " Trust Securities") represent undivided beneft-Federal
$101.3 $ 98.3 $101.6 cial ownership interests in the assets of the Trust. The State (5.4) 14.1 16.2 Trust exists for the sole purpose of issulns the Trust Securities and using the proceeds thes-of a purchase Total current taxes 95.9 112.4 117.8 frem SCEGG its 7 55% junior Subordinated Debentures due Deferred taxes, net:
September 30, 2027. The sole asset of the Trust is $50.o
. Federal 3.5 8.6 (13.9) million of junior Subordinated Debentu es of SCEGG.
State 0.3 1.7 (1.2)
Accordingly, no financial statements of the Trust are pre-fotal deferred taxes 3.8 10.3 (15.1) sented. SCE6G's obligations under the Guarantee Agree-Investment tax credits:
ment intered into in connection with the Preferred Deferred-State '
19.0 Securitiesi when taken together with the SCEGG's obliga-Amortization of amounts ti:n to make interest and other payments on the junior deferreo-state (1.5)
Subordinated Debentures issued to the Trust and SCESG's Amortization of amounts obilgations under the indenture pursuant to which the deferred-Federal (3.6)
(3.6)
(3.6)
Junior Subordinated Debentures were issued, provide a full cnd unconditional guarantee by SCEGG of the Trust's Totalinvestment tax credit 13.9 (3.6)
(3.8 o'oligations under the Preferred Securities. Proceeds Total income tax expense
$113.6 $119.1 $99.1' -
w:re used to redeem preferred stock of SCESG.
The preferred securities of SCESG Trust I are redeem.
The difference in total income tax expense and the abla cnly in conjunction with the redemption of the amount calculated from the application of the statutory rilited.55 junior Subordinated Debentures. The junior Federal income tax rate (35% for J997, i99 and 1995) to 7 %
6 Subordinated Debentures will mature on September 30, pretax income is reconciled as follows:
2027 rnd m3y be redeemed, in whole or in part, at any 1997 1996 1995-tima on or a ter September 30,2002 or upon the occur-r 7yjyj,,,,fg,y,yj rcnce of a Tax Event. A Tax Event occurs if an opinion is Net income
$220.7 $215.3 $168.3 received from counsel experienced in such matters that
' Total income tax expense:
thtre is more than an insubstantial.1sk that: (i) the Trust Charged to operating is or will be subject to Federal ineme tax, with respect expenses.
105.4 118.0 109.9
- to income received or accrued on the junior Charged (credited) to Subordinated Debentures, (2) interest payable by SCESG on ths junior Subordinated Debentures will not be Preferr st k dividends deductible, in whole or in part, by SCESG for Federal income tax purposes, or (3) the Trust will be subject to Total pretax income
$343.5 $339.8 $273.1 more than a de minimis amount of other taxes, duties, or income taxes on above other governmental charges.,
at statutory Federal Upon the redemption of the junior Subordinated income tax rate
$120.2 $118.9 $ 95.6 Debentures, payment will simultaneously be applied to increases (decreases) redeem Preferred Securities having an aggregate liquida-attributable to:
tion amount equal to the aggregate principal arrount of State income taxes dess the junior Subordinated Debentures. The Preferred l Federal income tax effect) 8.1 10.2 9.8
' Securities are redeemable at $25 per preferred security Deferred income tax reversal plus cccrued dividends.
at higher than statutory rates (4.2)
(4.1).(3.9)
Amortization of Federal investment tax credits (3.6)
(3.6)
(3.6)
Allowance for equity funds used during construction (2.5)
(2.5)
(3.5)
Other differences, net (4.4) 0.2 4.7 Total income tax expense.
$113.6 $119.1 $ 99.1 l
m e m %
e m w - m w egggg g w, g m g g g g m a g l g e m m mLT a m
uestumanmhe.w-ammammmmummme.mmmmmmmmeraamraram::mem I
i The tax effects of significant temporary differences The information presented herein is based on perti-comprising the Company's net deferred tax liability of nent information available to the Company as of Decem-
$58 5 million at December 31,1997 and $ 56 7 million at 7
5 ber 3i,1997 and 199. Although the Company is not aware 6
4 December 3i,1996 are as follows:
of any factors that would significantly affect the estimat-ed fair value amounts, such financial instruments have (A
ensofDolar) n t been comprehensively revalued since December 3i, Deferred tax assets-1997, and the current estimated fair value may differ sig-Unamortized invehtment tax credits $ 60.7 $ 52.1 nificantly fr m the estimated fair value at that date.
Cycle billing 20.5 19.8 The following methods and assumptions were used to g
Nuctrar operations expenses 3.1 4.7 estimate the fair value of the above classes of financial j
fe e com t n 6
s an temp rary cash investments, including com-Other postretirement benefits 14.6 10.8 mercial paper, repurchase agreements, treasury bills and
'Other 11.2 12.9
" I "'""I"'d "* 'h* 'Y "I ""*""'
Fair values of investments and long-term debt are Total deferred tax assets 117.0 115.3 based on quoted market prices of the instruments or Deftrred tax liabilities:
similar instruments, or for those instruments for which Property, plant and equipment 634.3 611.0 there are no quoted market prices available, fair values l
Pension expense 27.5 21.8 are based on net present value calculations. Investments l:
l Rese1rch and experimentation 19.5 12.5 which are not considered to be financial instruments Reacquired debt 7.5 8.3 have been excluded from the carrying amount and esti-Deferred fuel 3.6 3.7 mated fa:r value. Settlement of long-term debt may not Other 12.1 14.7 be possible or may not be a prudent management dect-4
'I $ ort-term borrowings are valued at their carrying Totil deferred tax liabilities 704.5 672.0 Net deferred tax liability
$587.5 $556.7 -
amount.
The Internal Revenue Service has examined and The fair value of preferred stock (subject to purchase or sinking funds)is estimated on the basis of market k
closed consolidated Federal income tax returns of the prices.
A Company through 1989, and has examined and proposed Potential taxes and other expenses that would be adjustments to the Company's Federal returns for i990 incurred in an actual sale or settlement have not been through 1995. The Company does not anticipate that any taken into consideration, adjustments which might result from these examinations a
will hive a significant impact on the results of opera-SCANA Communications, Inc. (SCI), owns approximately p
j{i 4 5 million common shares and 100,000 non voting series tions, cash flows or financial position of the Company.
B and 0,000 non-voting series D convertible preferred 5
shares of Powertel. Inc. (Powertel), formerly InterCel,
- 8. FINANCIAL. INSTRUMENTS:
n Inc., a publicly traded telecommunications company j
Th3 carrying amounts and estimated fair values of the which owns and operates personal communications ser-a Company's financial Instruments at December 31.1997 vices (PCS) systems in several major markets in the and i99 are as follows:
Southeast. The costs of such investments were approxi-
{
6 mately $66 7 million, $ 5 8 million and $22 5 million.
{
1997 1996 7
respectively. Common shares were initially recorded at j
Estimated Estimated
$t485 Per share. Preferred series B shares are convert-Carrying Fair Carrying Fair ible in March 2002 at a conversion price of $i6.So per Amount Value Amount Value common share or approximately 4 5 million common j
(Milliens efDallan) shares. Preferred series D shares are convertible in i
.' Assets:
March 2002 at a conversion price of $i2 75 Per common cash and share or approximately i.7 million common shares.
temporary Powertel common stock, which trades on NASDAO,
(
cash-closed at $i6 3 4 on December 3i,1997, resulting in a pre-
/
- ]
investments
$ 59.7 $ 59.7 $ 17.3 $ 17.3 tax unrealized holding gain of $8 5 million. The after-tax investments 290.5 341.9 176.4 167.7 amount of such gain is included in the balance sheet as a
{
- Liabilities:
component of " Common Equity " The market value of Short-term the convertible preferred shares of Powertel is not readi-borrowings 58.5 58.5 144.6 144.6 ly determinable. However, on an as converted basis, the l
Long-term debt 1,639.5 1,722.4 1,632.8 1,673.1 market value of the underlying common shares for the 0!
preferred shares was approximately $io5 7 million at f'
Przfirred stock (subject to December 3i. i997, resulting in an unrecorded pre-tax g
purchase or holding gain of $8.i million.
j sinking funds) 12.5 11.3 45.4 44.3 in March 1997, SCI sold its interest in GulfStates h
= = m u m s.w m ag e = '~ ~ ~ ~ 7 en z a.n u m a m - " "
- U m 2 N m.2 2 N m M c S @ #
f mzw m m an n wim mrm m mu m m m x a mnw x m a wg a g m t
V G
h Fibernet, a Georgia general partnership (constituting SCI's.
borrowings, excluding amounts classified as long-term M
i remaining interests in the Gulfstates Fibernet joint ven.
(Notes 3 and 4), at December 31,1997 and 199 and for k
6 f$
ture), and certain fiber optic assets of SCI located within the years then ended are as follows:
h i
the State of Georgia, to ITC Holding Company Inc. (lTC), a 1997 1996 Georgia-based telecommunications company and an affil-g l
g lati of Powertel, in exchange for 588,4n shares of series (Millo5o/ M m) u-Authorized lines of credit l b A convertible preferred stock of ITC (lTC Preferred) and a subordinated note of ITC. As part of an earnout provi.
at year-end
$564.0
$525.1 6
! ]d sion related to the GulfStates Fibernet transaction and Unused lines of credit I
l h
the receipt of ITC Preferred through the earnout provi.
at year-end
$518.8
$470.4 sion, SCI received in October 1997 5,742 additional Short-term borrowings (k
6
' shares of ITC Preferred, resulting in a pre-tax gain of $2.2 outstanding at year-end:
-f Bank loans
$ 45.2
$ 54.6 d
h million which was recorded in "Other income "
j On October 20,1997, as part of a reorganization Weighted average interest rate 6.43 %
5.81 %
g i
L involving ITC, its subsidiary, ITC West Point, Inc., and ITC Commercial paper
$ 13.3
$ 90.0 g.
5 DeltaCom, Inc. (lTCD), a Georgia-based telecommunica.
Weighted average interest rate 5.90 %
5.53 %
q, i
l L
with ITCD, and each of ITC's common shareholders (includ-
- 10. C0MMITMENTS AND C0NTINGENCIES*
f l
7 tions company and an affiliate of Powertel, ITC merged ing SCD received one share of common stock of ITC West A. Construction M
)j i
Point, Inc. for each whole share of ITC common stock The Company and Westvaco Corporation have formed h.
g owned by such shareholders. In addition, SCI received a limited liability company, Cogen South LLC, to build and N-one share of series A convertible preferred stock of ITC operate a $i70 million cogeneration factity at Westvaco's yl q
3 West Point, Inc. for each share of ITC Preferred owned Kraft Division Paper Mill in North Charleston, South
? I by SCI. ITC West Point, Inc changed its name to ITC Carolina. The Company and Westvaco ench own a 50%
1*
4)
Holding Company, Inc. subsequent to the ITC merger.
Interest in the LLC. The facility will proside industrial q
j J JThrough the merger, SCI received approximately process steam for the Westvaco paper mill and shaft j
1,777,919 shares, representing approximately 7 2%, of ITCD horsepower to enable SCESG to generate up to 99 h
I common stock, and 1,4 0,771 shares of series A preferred megawatts of electricity. Construction financing is being 8
ld stock of ITCD convertible in March 2002 into 1,480,77:
provided to Cogen South LLC by banks. A $i5 million capi-shares of ITCD common stock. ITCD common stock, which tal contribution to the LLC by each partner is expected a'
]b began trading on NASDAQ on October 24, i997, closed at prior to operation of the facility. In addition to the
,f
$i6 t/2 per share on December 3i,1997. resulting in a pre-cogeneration 1.LC, Westvaco has entered into a 20-year l
'6 tax unrealized holdig gain of $20 3 million. The after-tax contract with SCE6G for all its electricity requirements at i
amount of such gain is teluded in the balance sheet as a the North Charleston mill at SCE6G's standard industrial b
]
component of " Common Equity." The market value of rate. Construction of the plant began in September 1996 9
series A preferred stock of ITCD is not readily deter-and it is expected to be operational in the fall of 1998.
k, j]
minable. However, on an as converted basis the market B. Nudear Insurance 8I:
vilue of the underlying common stock for the series A The Price-Anderson Indemnification Act, which deals p -
preferred stock was approximately $24 4 million at with public liability for a nuclear incident, currently December 31,1997 resulting in an unrecorded pre-tax establishes the liability limit for third-party claims associ-holding gain of $i3 2 million.
ated with any nuclear incident at $8 9 billion. Each reac-g-
Knology Holdings, Inc. (Knology), also an affiliate of tor licensee is currently liable for up to $ 9 3 million per h,
7 Powertel, is developing a system designed to provide reactor owned for each nuclear incident occurring at any 3-g interactive video, voice and data services for broadband reactor in the United States, provided that not more than systems in certain southeastern markets. SCI on October
$io million of the liability per reactor would be assessed g
4
,22,1997 purchased from Knology 71,o50 units, each con-per year. SCE60's maximum assessment, based on its g
sisting of one si.8 5% Senior Discount Note (Note) due 7
two-thirds ownership of Summer Station, would be bd' 2 07 and one Warrant to purchase preferred stock of approximately $52 9 million per incident, but not more k
w$ - Knology. The purchase price of the units was approxi-than $6 7 million per year.
mately $40 million. In addition to the acquisition of the SCESG currently maintains policies (for itself and on l
' Knology units, SCI has invested $5 3 million to purchase behalf of the PSA) with Nuclear Electric Insurance Limited 3.6 9 shares of preferred stock of Knology and Knology 3
"I h
S) his agreed to issue to SCI warrants to purchase 753 c mbined property and decontamination insurance cover-3 shares of preferred stock at $1,500 per share.
F age of $2.o billion for any losses at Summer Station.
SCE6G pays annual premiums and, in addition, could be p;
3
- 9. SH0RT-TERM B0RR0 WINGS:
assessed a retroactive premium not to exceed five times d
j The Company pays fees to banks as compensation for its annual premium in the event of property damage loss j
lts committed lines of credit. Commercial paper borrow-to any nuclear generating facilities covered under the ings are for 270 days or less. Details of lines of credit NEll program. Based on the current annual premium, this g
a g
(including uncommitted lines of credit) and short-term retroactive premium would not exceed $5. million.
f
% _____--------=n==
D
.s Wgypsammemamw:mmmmmmmmman==mwnmwww mww ww%g 9
To the extent that insurable claims for property dam-D. Franchise Agreement cge, decontamination, repair and replacement and other See Note 3 for a discussion of an electric franchise 8
costs and expenses arising from a nuclear incident at agreement between SCESG and the City of Charleston.
Q Summer Station exceed the policy limits of insurance, or E. SCI Matters b
to the extent such insurance becomes unavailable in the SCl, as a result of an internal audit, informed the O
' ' future, and to the extent that SCES6s rates would not Federal Communications Commission (FCC) that it violat-S recover the cost of any purchased replacement power, ed certain licensing requirements in establishing and
=.
i
. SCESG will retain the risk of loss as a self-insurer. SCESG operating an 800 Mhz radio system in South Carolina for i
lus no reason to anticipate a serious nuclear incident at public safety and utility use. As a result. SCI has returned.
- p!
p Summer Station. If such an incident were to occur, it to the FCC several licenses obtained in violation of FCC
[
could have a material adverse impact on the Company's -
rules and the FCC is conducting an investigation of the
- results of operations, cash flows and financial position.
system. The Company does not believe that the resolu-y j
C. Environmental tion of this issue will have a material impact on results j
s in September 1992 the Environmental Protection of operations, cash flows or financial position.
p j-
. Agency (EPA) notified SCESG, the City of Charleston and F. Claims and Litigation j:
the Charleston Housing Authority of their potential liabil-The Company is engaged in various claims and litiga -
g
[1 -
ity for the investigation and cleanup of the Calhoun Park tion incidental to its business operations whicle manage '
y f
area site in Charleston, South Carolina. This site encom-ment anticipates will be resolved without material loss to d
. passes approximately 30 acres and includes ' roperties the Company. No estimate of the range of loss from these d~
r p
- which were the locations for industrial operations, matters can currently be determined.
including a wood preservi.ng (creosote) plant, one of F
SCESGs decommissioned manufactured gas plants, prop-
- 11. SEGMENT OF BUSINESS INFORMATION:
h a crties owned by the National Park Service and the City of Segment information at December 3i, i997, i996 and
((
y' Chirleston and private properties. The site has not been 1995 and for the years then ended is as follows:
{
b pitced on the National Priorities 1.ist, but may be added M
f before cleanup is initiated. The Potentially Responsible h
I Parties (PRPs) have agreed with the EPA to participate in d
an innovative approach to site investigation and cleanup (Millieu ofDellan) h y$
operating revenues
$1,103 $419 $1 $1,523 d
called "Superfund Accelerated Cleanup Model." allowing
'h the pre-cleanup site investigation process to be com-
'j",8 '
b
,deprec tion j.
pressed significantly. The PRPs have negotiated an
- and amortization 692 359 5
1,056 j
administrative order by consent for the conduct of a Depmciation and f
3 Remedial Investigation / Feasibility Study and a corre-amortization '
136 17 -
153-p sponding Scope of Work. Field work began in November Total operating expenses 828 376 5
1,209
%y j
i993 and the EPA conditionally approved a Remedial Operating income Goss)
$ 275 $ 43 $(4) 314 d
Investigation Report in March 1997. Although SCESG is Add--other income, net 38 h
h continuing to investigate cost-effective clean-up method-h less-Intenst charges, net 121 d
ologies, further work is pending EPA approval of the final I.ess-Preferred Dividend t@i
[
draft of the Remedial Investigation Report. See Note IL Requirements, including (j l,
. In October 1996 the City of Charleston and SCESG set-SCE6G-obilgated h
?
- tied all environmental claims the City may have had Mandatorily Redeemable against SCE6G involving the Calhoun Park area for a pay.
Pmferred Securities 10 g
[
ment of $26 million over four years (1996-1999) by SCESG Net income
$ 221 f
capital expenditures:
k
' to the City, SCESG is recovering the amount of the settle-
- ment, which does not encompass site assessment and ~
identifiable
$ 220 $ 32 $ -
$ 252 h
cleanup costs, through rates in the same manner as other Utill ed for overall f,
h. > amounts accrued for site assessments and cleanup as dis-company operations 24 p
g : cussed above. See Note iL As part of the environmental Total
$ 276 g
settlement, SCESG has agreed to construct an i,ioo space Identifiable assets at le
' parking garage on the Calhoun Park site and to transfer December n i993 I[
,i the facility to the City in exchange for a 20-year munici-Utility plant, net
$3,125 $387 $2 $3,514 Q
j i
L pal bond backed by revenues from the parking garage Inventories 75 20 -
95
-N..
- End a mortgage on the parking garage. Construction is Total
$3,200 $407 $2 3,609 y
)
expected to begin in 199. The total amount of the bond 8
other assets 1,323 5
is not to exceed $16 9 million, the maximum expected Total assets
$4,932 b
project cost.
l SCESG owns three other decommissioned manufactured g
p gas plant sites which contain residues of by-product d
chemicals. SCESG is investigating the sites to monitor the y
L nature and extent of the residual contamination.
g/!
%mawwwwmmmwww-w w m g
== - - -
NMbIENbbTMbN$YJ M1N5M.N2dM bIE YM d"s iD /
c Iw cNSI 2.
3g(
i '.C - -
4t Ei i
f 1996
- 12. QUARTERLY FIN ANCIAL DATA g
g nectric cas Transi rotai (UN AU DITED):
[
(Millsons of Dollars)
O Operating revenues
$1,107 $403 $3 $1,513 1997 P
First second Third fourth Operating expenses, Quarter Quarter Quarter Quarter Annual j
h excluding depreciation and amortization 692 350 9
1,051 (usuio,,s ofDonars, <x,ept per s/,ar, a>,,,unts) lj f1 Depreciation and Total operating amortization 130 18 -
148
$385 $332 $418 $388 $1,523 revenues Total operating expenses 822 368 9
1,199 Operating g
Operating income co s)
$ 285 $ 35 $(6) 314 income 81 61 100 72 314 n
h Addather income, net 29 Net income 57 30 75 59 221 f]
Less-interest charges, net 122 Earnings per Less-Preferred stock dividends 6
weighted average G
ig d
Net income
$ 215 share of common l}
Capital expenditures:
stock as reported.54
.28
.69.55 2.06 h
identifiable
$ 199 $ 48 $-
$ 247 g
Utilized for overall 1996 p
Company operations 24 nrst second Third fourth bI Total
$271 Ouarter Quarter Quarter Quarter Annual p((
Identifiable assets at (Millions of Dollars, except per share amounss) tj December 31,1996:
Total operating h
Uttitty plant, net
$3,047 $371 $2 $3,420 revenues
$395 $351 $402 $365 $1,513 inventories 84 26 -
110 Operating g
qy Total
$3,131 $397 52 3,530 income 85 67 98 64 314 I
Other assets 1,229 Net income 69 38 70 38 215
[
Total assets
$4,75')
Earnings per u
4 weighted average N
h share of common y
1995 stock as reported
.66
.37
.66.36 2.05 Dectric Gas Transit Total
]
(Millions ofDollars) p y
Operating revenues
$1,006 $343 $4 $1,353 5j Operating expenses, d
excluding depreciation O
and amortization 638 287 10 935 Depreciation and amortization 111 18 1
130 s
Tctal operating expenses 749 305 11 1,065 h
. Operating income Ooss)
$ 257 $ 38 $(7) 288 4
N Add-Other income, net 8
Less-Interest charges, net 122 g
. lass-Preferred stock dividends 6
(
g Net income
$ 168 h
Capital expenditures:
Identifiable
$ 253 $ 39 $ - $ 292
[h Utilized for overall
)'
Company operations
_ 28 i
' Total
$ 320 hp
- Identifiable assets at
?
December 3t. i995:
[b Utiltty plant, net
$3,034 $338 $2 $3,374 Inventories 87 16 -
103 H
O Total 53,121 $354 $2 3,477 3
Other assets 1,057 Total assets
$4,534 s<
4
(.
Rl 4
qmmummwxc=x aw
-.v
~
t.
4 J'
e 5
MB M3.
f e
a et f'
EP i
d B
e j
M AN AGEMENT'S DISCUSSION AND AN ALY-SIS OF 9
7 y
4 FINANCIAL CONDITION-AND RESULTS OF OPERATIONS b
d W
Statements included in this discussion and analysis (or tory open access tariffs that offer to others the same k
tisewhere in this annual report) which are not state -
transmission service they provide themselves. The FERC h-ments of historical fact are intended to be, and are here-has also permitted utilities to seek recovery of wholesale
.d 1
8 by identified as, " forward looking statements" for pur-stranded costs from departing customers by direct f
poses of the safe harbor provided by Section 27A of the assignment. Approximately two percent of the Company's yi d
Securities Act of 1933, as amended, and Section 2iE of the electric revenues is under FERC jurisdiction for the pur-b, Securities Exchange Act of 1934, as amended. Readers are pose of setting rates for wholesale service. Legislation is 2
p cautioned that any such forward-looking statements are pending in South Carolina that would deregulate the j
fg not guarantees of future performance and involve a state's retail electric market and enable customers to number of risks and uncertainties, and that actual results choose their supplier of electricity. The Company is not 4
h could differ materially from those indicated by such for-able to predict whether the legislation will be passed h
H ward-looking statements. Important factors that could and, if it is, the conditions it will impose on utilities that h
g
- cause actual results to differ materially from those indi-currently operate in the state and future market partici-y J~
cated by such forward-looking statements include, but pants.
h y
. tre not limited to, the following: (1) that the information The Company is aggressively pursuing actions to posi.
_ h a
i is of a preliminary nature and may be subject to further tion itself strategically for the transformed environment.
Q Q
and/or continuing review and adjustment, (2) changes in To enhance its flexibility and responsiveness to change, B
s M
ths utility regulatory environment, (3) changes in the the Company's electric and gas utility, SCE6G, operates Fhl f?
economy in areas served by the Company's subsidiaries, S'rategic Business Units. Maintaining a competitive cost pd (4) the impact of competition from other energy suppli-structure is of paramount importance in the utility's p
['
ers, (5) the management of the Company's operations, strategic plan. SCESG has undertaken a variety of initla-d (6) growth opportunities for the Company's regulated and tives, including reductions in operation and maintenance h
diversified subsidiaries, (7) the results of financing costs and in staffing levels, the accelerated recovery of y
a{d
- (fforts, (8) changes in the Company's accounting policies, SCEGG's electric regulatory assets and the shift, for retail 9
ratemaking purposes only, of depreciation reserves from Ij k y(9) weather conditions in areas served by the Company's
. utility subsidiaries, Go) performance of the telecommuni-transmission and distribution assets to nuclear produc-h h
cati:ns companies in which the Company has made sig-tion assets. SCESG also has established open access f
M nificant investments, (n) Inflation, (12) changes in envi-transmission tariffs and is selling bulk power to whole-0 ronmental regulations and 63) the other risks and uncer-sale customers at market-based rates. Significant new y
fl, 1
tainties described from time to time in the Company's customer and management information systems will be U
implemented in 199. Marketing of services to commer-f hj f
periodic reports filed with the Securities and Exchange 8
i[~
Ccmmission. The Company disclaims any obligation to cial and industrial customers has been increased signifi-d update any forward-looking statements.
cantly. SCEGG has obtained long-term power supply con-l
.h.
tracts with a significant portion of its industrial cus-p f
C0MPETITION..
tomers. The Company believes that these actions as well 1
4l The electric utility industry has begun a major transi-as numerous others that have been and will be taken j
?
tion that could lead to expanded market competition and demonstrate its ability and commitment to succeed in p(
l 'L 1rss regulation. Deregulation of electric wholesale and the new operating environment to come.
' i-retill markets is creating opportunities to compete for Regulated public utilities are allowed to record as i;
. new and existing customers and markets. As a usult, assets some costs that would be expensed by other f
f pr: fit margins and asset values of some utilities could be enterprises. If deregulation or other changes in the regu-d i
adversely affected. Legislative initiatives at the h deral -
latory environment occur, the Company may no longer M
'1 and state levels are being considered and, if enacted, be eligible to apply this accounting treatment and may l
h[!
could mandate market deregulation. The pace of deregu.
be required to eliminate such regulatory assets from its
[f
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3
' latirn, future prices of electricity, and the regulatory balance sheet. Although the potential effects of deregula-d
' actions which may be taken by the Public Service.
tion cannot be determined at present, discontinuation of q
lh Jt = Commission of South Carolina (PSC) and the Federal the accotating treatment could have a material adverse b
l l Energy Regulatory Commission (FERC) iri response to the effect on the Company's results of operations in the peri-f
~ changing environment cannot be predicted. However, the y@
od the write-off is recorded. It is expected that cash FERC, in issuing Order 888 in April 1996,' has accelerated flows and the financial position of the Company would p<
l 4' competition among electric utilities by providing for not be materially affected by the discontinuation of the y
st open access to wholesale transmission service. Order 888 accounting trear ent. The Company reported approxi-d yi requiles utilities under FERC jurisdiction that own, con-mately $241 million and $68 mill!cn of regulatory assets d
trcl or operate transmission lines to file nondiscrimina-and liabilities, respectively, including amounts recorded g
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y lh for deferred income tax assets and liabilities of approxi-SCEGG is paying the City $25 million over seven years mately $i23 million and $5 million, respectively, on its (1996-2002) and has donated to the City the existing tran-
'N.
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balance sheet at December 3i,1997, sit assets in Charleston. The $25 million is included in g
The Company's generation assets are exposed to con-electric plant-in-service. In settlement of environmental js
'siderable financial risks in a deregulated electric market, claims the City may have had against SCEGG involving the h
j
. If market prices for electric generation do not produce Calhoun Park area, where SCE6G and its predecessor j'
Q adequate revenue streams and the enabling legislation or companies operated a manufactured gas plant until the Qi i9 0's, SCE6G is paying the City $26 million over a four-y l y sregulatory actions do not provide for recovery of the 6
h resulting stranded costs, the Company could be required year period (1996-1999). As part of the environmental set-4 l y to write down its investment in these assets. The Com-tiement, SCE6G has agreed to construct an i,ioo space
.y parking garage on the Calhoun Park site and to transfer d
' pany cannot predict whether any write-downs will be lp necessary and, if they are, the extent to which they the facility to the City in exchange for a zo-year munici.
- y would adversely affect the Company's results of opera-pal bond backed by revenues from the parking garage y
- y tions in the period in which they are recorded. As of and a mortgage on the parking garage. The total amount y
.y December 3i,1997, the Company's net investment in of the bond is not to exceed $i6 9 million, the maximum y
6 fossil / hydroelectric generation and nuclear generation expected project cost.
N l
h assets was approximately $1,095 7 million and $625 3 The revised estimated primary cash requirements for h
ig9, excluding requirements for fuel liabilities and million, respectively, 8
short-term borrowings, and the actual primary cash q
p 1
LIQUIDITY AND CAPITAL RESOURCES
- requirements for i997 are as follows:
b d
The cash requirements of the Company arise primarily 1998 1997 1
4' from SCEGG's operational needs, the Company's construc-H i h tion program and the need to fund the activities or (Milliam ofDollars) g y
investments of the Company's nonregulated subsidiaries.
Property additions and g
4 l The ability of the Company's regulated subsidiaries to.
construction expenditures, y
net of allowance for funds b
L replace existing plant investment, as well as to expand to
$250
$258 g
k meet future demand for electricity and gas, will depen f used during construction.
23 31 g
[d upon their ability to attract the necessary financial cr.pl.
Nuclear fuel expenditures tal on reasonable terms. The Company's regulated sub.
Maturing obligations, b;
sidiaries recover the costs of providing services through redemptions and sinking M
rates charged to customers. Rates for regulated services and purchase fund N
f are generally based on historical costs. As customer requirements 117 146 y
growth and inflation occur and the regulated subsidiaries Total
$390
$435 y
g continue their ongoim construction programs, it is nec-g Q
essary to seek increases in rates. As a result, the Approximately 62% of total cash requirements (after S
h Company's future financial position and results of opera-payment of dividends) was provided from internal 9
p tions will be affected by the regulated subsidiaries
- ability sources in i997 as compared to 55% in i996.
d p
to obtain adequate and timely rate and other regulatory The Company has in effect a medium-term note pro-
[N g
relief.
gram for the issuance from time to time of unsecured.
j-The Company and Westvaco Corporation have formed medium-term debt securities. The proceeds from the 4
{d - a limited liability company, Cogen South LLC, to build and sales of these securities may be used to fund additional operate a $i70 million cogeneration facility at Westvaco's business activities in nonutility subsidiaries, to reduce y)
Kraft Division Paper Mill in North Charleston, South short-term debt incurred in connection therewith or for E
y Carolina. The Company and Westvaco each own a 50%
general corporate purposes. Subsequent to the issuance N
h.
interest in the LLC. The facility will provide industrial of $60 million on January 13,1998, the Company had d
.p process steam for the Westvaco paper mill and shaft available for issuance $i90.o million under this program.
horsepower to enable SCESG to generate up to 99 SCE6G's First and Refunding Mortgage Bond indenture, g
megawatts of electricity Construction financing is being g
dated April I,1945 (Old Mortgage), contains provisions D
b prohibiting the issuance of additional bonds thereunder h
h <. provided to Cogen South LLC by banks. A $t5 million capi-tal contribution to the LLC by each partner is expected (Class A Bonds) unless net earnings (as therein defined)
Q
. y prior to operation of the facility. In addition to the for twelve consecutive months out of the fifteen months i
q cogeneration LLC, Westvaco has entered into a 20-year prior to the month of issuance are at least twice the 9
contract with SCE6G for all its electricity requirements at annual interest requirements on all Class A Bonds to be the North Charleston mill at SCE6G's standard industrial outstanding (Bond Ratio). For the year ended December y
k rr,te. Construction of the plant began in September 1996 3i,1997 the Bond Ratio was 4 32. The issuance of addi-d y
. End it is expected to be operational in the fall of i998 tional Class A Bonds also is restricted to an additional h
f.j.
. On August 7,199 the City of Charleston executed 30-principal amount equal to (i) 60% of unfunded net prop-9 6
A year electric and gas franchise agreements with SCE60.
erty additions (which unfunded net property additions h
in consideration for the electric franchise agreement-totaled approximately $579 million at December 3i,1997),
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(ii) retirements of Class A Bonds (which retirement cred-such issue or assumption, the total principal amount of its totaled $6.5 million at December 31,1997), and (111) all such unsecured indebtedness would exceed so% of the 7
cash on deposit with the Trustee.
aggregate principal amount of all of SCE6G's secured SCE6G has a bond indenture dated April 1, i9g3 (New indebtedness and capital and surplus; however, no such Mortgage) covering substantially all of its electric proper-consent is required to enter into agreements for pay-ties under which its future mortgage-backed debt (New ment of principal, interest and premium for securities Bonds) will be issued. New Bonds are issued under the issued for pollution control purposes.
New Mortgage on the basis of a hke principal amount of Pursuant to Section 204 of the Federal Power Act, Class A Bonds issued under the Old Mortgage which have SCE6G and GENCO must obtain FERC authority to issue been deposited with the Trustee of the New Mortgage (of short-term debt. The FERC has authorized SCE6G to issue which $iB5 million were available for such purpose as of up to $250 million of unsecured promissory notes or December 31, 997), until such time as all presently out-commercial paper with maturity dates of twelve months standing Class A Bonds are retired. Thereafter, New or less, but not later than December 3i,1999. GENCO has Bonds will be issuable on the basis of property additions not sought such authorization.
In a principal amount equal to 70% of the original cost of At December 31, i997 SCE6G had $3i5 million of autho-electric and common plant properties (compared to 60%
rized lines of credit which includes a credit agreement of value for Class A Bonds under the Old Mortgage), cash for a maximum of $250 million to support the issuance of deposited with the Trustee, and retirement of New commercial paper. Unused lines of credit at December 3, Bonds. New Bonds will be issuable under the New 1997 totaled $3:5 million. SCE6G comrnercial paper out-Mortgage only if adjusted net earnings (as therein standing at December 31,1997 and December 3i, 99 was 6
defined) for twelve consecutive months out of the eigh-
$13 3 million and $90 million, respectively. In addition, teen months immediately preceding the month of Fuel Company had a credit agreement for a maximum of issuance are at least twice the annual interest require-
$i25 million with the full amount available at December ments on all outstanding bonds (including Class A Bonds) 3i,1997. The credit agreement supports the issuance of and New Bonds to be outstanding (New Bond Ratio). For short-term commercial paper for the financing of nuclear the year ended December 3i, i997 the New Bond Ratio and fossil fuels and sulfur dioxide emission allowances.
was 5 0.
Fuel Company commercial paper outstanding at 7
The following additional financing transactions have December 3i,1997 was $80 3 million, occurred since December 31,199 :
SCE6G's Restated Articles of Incorporation prohibit 6
- On January so, i997 SCANA closed on unsecured bank issuance of additional shares of preferred stock without loans totaling $60 million due January 9,1998 and consent of the preferred stockholders unless net earn-used the proceeds to pay off a loan in a like total ings (as defined therein) for the twelve consecutive amount. On January 13, :99 SCANA refinanced the months immediately preceding the month of issuance are 8
loans with $60 million of medium term notes due at least one and one-half times the aggregate of all it'ter-January i3,2003 at an interest rate of 6.05%.
est charges and preferred stock dividend requirements 2, i997 CANA closed on the sale of $25 (Preferred Stock Ratio). For the year ended December 31,
- On February S
million of Medium-Term Notes having an annual inter-
'997 * *
- " '
- 9' est rate of 6.9% and matuiing Februar y 15,2007. These On January 14, i997 an additional 2,500,000 shares of funds were used to reduce short-term borrowings at SCANA common stock were registered for sale under the SCANA' Investor Plus Plan. During i997, prior to its conversion to a market purchase plan from an original issue plan on
- On April 24,1997, SCE6G sold $100 million of 6 52%
February n,1997, SCANA issued 184,743 shares of the cumulative preferred stock, par value $100 per share.
Company's common stock under its Investor Plus Plan. In Proceeds from the sale were used to reduce short-addition, pursuant to its Stock Purchase-Savings Plan term indebtedness incurred for SCEGG's construction (SPSP), SCANA issued 9 1,o97 shares of its common stock 6
program, to refinance senior securities and for general during 1997, prior to the plan's conversion from an original corporate purposes.
Issue plan to a market purchase plan on July 1,1997. On
- On October 28,1997 SCE6G Trust I (the " Trust"), a january 26,1998 an additional 3,000,000 shares of SCANA Delaware statutory business trust and a subsidiary of common stock were registered for sale under the SPSP.
SCE6G, issued $ 0 million of.55% Trust Preferred The Company anticipates that its ig98 cash require-5 7
Securities, Series A. The Trust used the proceeds from ments of $3 9.6 million will be met through internally 8
the sale to purchase unsecured 7 55 junior generated funds (approximately 59%, after payment of Subordinated Debentures of SCE6G. SCE6G used the dividends), and the incurrence of additional short-term funds to redeem certain series of its preferred stock.
and long-term indebtedness. Sales of additional equity The financial statements of the Trust are consolidated securities may also be made.
with those of SCE6G.
The Company expects that it has or can obtain ade-Without the consent of at least a majority of the total quate sources of financing to meet its projected cash voting power of SCEGG's preferred stock, SCEGG may net requirements for the next twelve months and for the issue or assume any unsecured indebtedness if, after foreseeaMe future.
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d ENVIR0NMENTAL M ATTERS additional information becomes available therefore, y
The Clean Air Act requires electric utilities to reduce actual expenditures could differ significantly from the B
cmissions of sulfur dioxide and nitrogen oxide substan-original estimates. Amounts estimated, accrued and actu-9 s
tially by the year 2000. These requirements are being ally expended to date for site assessments and cleanup k
phased in over two periods. The first phase had a com-relate primarily to regulated operations; such amounts 6
. pliance date of Janu;ry I.1995 and the second, January 1, are deferred and are being amortized and recovered k
2000. The Company's facilities did not require modifica-through rates over a five-year period for electric opera-W tions to meet the requirements of Phase 1. The Company tions and an eight-year period for gas operations. The O
A will most likely meet the Phase 11 requirements through Company also has recovered portions of its environmen-B
. the burning of natural gas and/or lower sulfur coal in its tal liabilities through settlements with various insurance M
a generating units and the purchase and use of sulfur diox.
carriers. Deferred amounts, net of amounts recovered
]
f ide emission allowances. l.ow nitrogen oxide burners are through rates and insurance settlements, totaled $ 2 4 3
h being installed to reduce nitrogen oxide emissions to the million and $414 million at December 31,1997 and ig9,6 4
i
]: - levels required by Phase 11. Air tox.icity regulations for respectively. The deferral includes the estimated costs b
the electric generating industry are likely to be promul.
associated with the matters discussed below.
y I
gated around the year 200o.
- In September 1992 the Environmental Protection R
. SCE6G and GENCO filed with the South Carolina Agency (EPA) notified SCE6G, the City of Charleston i
Department of Health and Environmental Control (DHEC) and the Charleston Housing Authority of their poten-0 F
. compliance plans related to Phase 11 sulfur dioxide tial liability for the investigation and cleanup of the j
requirements in 1995 and Phase 11 nitrogen oxide Calhoun Park area site in Charleston, South Carolina.
h requirements in December,1997. The Company currently This site encompasses approximately 30 acres and b
~: ~ estimates that air emissions control equipment will includes properties which were locations for industrial y
require capital expenditures of $to2 million over the operations, including a wood preserving -(creosote) p 199 -2002 period to retrofit existing facilities, with plant, one of SCEGG's decommissioned manufactured lj 8
g gas plants, properties owned by the National Park
.p f
Increased operation and maintenance cost of approxi-mately $1 million per year. To meet compliance require.
Service and the City of Charleston and private proper-
- y '
ments through the year 2o07, the Company anticipates ties. The site has not been placed on the National h
total capital expenditures of approximately $209 million.
Priorities 1.ist, but may be added before cleanup is ini-q' The Federal Clean Water Act, as amended, provides tlated. The Potentially Responsible Parties (PRPs) have a
e for the imposition of effluent limitations that require agreed with the EPA to participate in an innovative j
virious levels of treatment for each wastewater dis.
approach to site investigation and cleanup called 8
charge. Under this Act, compliance with applicable limi.
"Superfund Accelerated Cleanup Model," allowing the y
4 pre-cleanup site investigation process to be com-y tations is achieved under a national permit program.
pressed significantly. The PRPs have negotiated an y
l.'
Discharge permits have been issued for all and renewed administrative order by consent for the conduct of a y
for nearly all of SCE6G's and GENCO's generating units.
Remedial Investigation / Feasibility Study and a corre-q
. Concurrent with renewal of these permits, the permitting
[j; sponding Scope of Work. Field work began in agency has implemented a more rigorous program in November 1993 and the EPA conditionally approved a b
monitoring and controlling thermal discharges and Remedial Investigation Report in March 1997. Although g
h-strategies for toxicity reduction in wastewater streams.
is continuing to inedgate cost ehem ckan-
%p
- The Company has been developing compliance plans for up methodologies, further work is pending EPA these initiatives. Amendments to the Clean Water Act Q-proposed in Congress include several provisions which, if fnvest t on Re in October 199 the City of Charleston and SCE6G h
f passed, could prove costly to SCEGG. These include, but 6
. cre not limited to, limitations to mixing zones and the settled all environmental claims the City may have had 4
b Implementation of technology-based standards.
against SCEGG involving the Calhoun Park area for a E
2-The South Carolina Solid Waste Policy and Manage-payment of $26 million over four years (1996-i999) by ment Act of 1991 directed DHEC to promulgate regulations SCEGG to the City. SCE6G is recovering the amount of for the disposal of industrial solid waste. DHEC has pro-the settlement, which does not encompass site assess-f mulgated a proposed regulation, which, if adopted as a ment and cleanup costs, through rates in the same N
final regulation in its present form, would significantly manner as other amounts accrued for site assessments J
increase SCEGG's and GENCO's costs of construction and and cleanup as discussed above. As part of the envi-
~
operation of existing and future ash management facilities.
ronmental settlement, SCE60 agreed to construct a The Company has an environmental assessment pro-i,ioo space parking garage on the Calhoun Park site d
gram to identify and assess current and former opera-and to transfer the facility to the City in exchange for R
tions sites that could require environmental cleanup. As a 20-year municipal bond backed by revenues from site assessments are initiated, an estimate is made of the the parking garage and a mortgage on the parking U
g'
. amount of expenditures, if any, necessary to investigate garage. Construction is expected to begin in 1998. The l
cnd clean up each site. These estimates are refined as total amount of the bond is not to exceed $i6 9 hp p
l
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@$j million, the' maximum expected project cost.
significant portion of SCESG's electric regulatory assets 6
- SCESG owns three other decommissioned manufac-(excluding deferred income tax assets) and the remaining k
tured gas plant sites which contain residues of by-transition obligation for postretirement benefits other p
. product chemicals. SCESG is investigating the sites to than pensions, changing the amortization periods to d
,j monitor the nature and extent of the residual contami-allow recovery by the end of the year 200o. SCESG's d
y nition.
request to shift, for ratemaking purposes, approximately 4
$257 million of depreciation reserves from transmission h, l 6
REGULATORY M ATTERS -
and distribution assets to nuclear production assets was M
h On August 8,1990 the PSC issued an order approving also approved. The Consumer Advocate appealed certain.
t changes in Pipeline Corporation's gas rate design for issues in the order to the South Carolina Circuit Court, it b
sales for resale service and upholding the "value-of-ser-which affirmed the PSC's decisions, and subsequently to N
ff vice" method of regulation for its direct industrial ser-the South Carolina Supreme Court, which is expected to p
h vice. After appeals to the Circuit Court initiated by direct hear the case and issue a ruling prior to the end of 1998.
d
' industrial customers and a subsequent appeal to the While the outcome of this proceeding is uncertain, the h
y -
Supr:me Court initiated by Pipeline Corporation, the PSC Company does not believe that any significant adverse 9
{k order was reinstated. The Supreme Court held that the change in the rate order is likely. The PSC's order does h
h irdustrial customer group's appeal was premature and not apply to wholesale electric revenues under the p
fall:d to exhaust administrative remedies. Additionally, FERC's jurisdiction, which constitute approximately two y
%y the Suprer. e Court interpreted the rate-making statutes percent of the Company's electric revenues. The FERC
.d of South Carolina to give discretion to the PSC in select-rejected the transfer of depreciation reserves for rates
'y ing the methodology to be used in setting rates for nat-subject to its jurisdiction.
Q p
ural gas service. The PSC held another hearing and issued The Company % regulated business operations were -
j its Order dated December 12,1995 maintaining the pie-impacted by the National Energy Policy Act (NEPA) and y
d sent level of the maximum markup on industrial sales FERC Orders No. 6 6 and 888. NEPA was designed to cre-y 3
9
("cip"). This Order was_ appealed to the Circuit Court by ate a more competitive wholesale power supply market d
Pipeline Corporation and the industrial customer group by creating " exempt wholesale generators" and by poten-y j
with several other parties intervening. including the tially requiring utilities owning transmission facilities to g
d Consumer Advocate of South Carolina. On October io, provide transmission access to wholesalers. See P
f 1997, the Circuit Court issued an order in favor of the
" Competition" for a discussion of FERC Order 888. Order k
d Consumer Advocate and the industrial customer group No. 6 6 was intended to deregulate the markets for k
3 E
which remanded the case to the PSC to determine an interstate sales of natural gas by requiring that pipelines k
N ovzrill rate of return for Pipeline Corporation and a sec-provide transportation services that are equal in quality h
M ond order which ruled against Pipeline Corporation and for all gas suppliers whether the customer purchases gas l
affirmed the PSC's decision that the cap should not be from the pipeline or another supplier. In the opinion of N
f' increased. Several motions and appeals were filed subse-the Company, it continues to be able to meet successfully j
d d
quently at the Supreme Court. The Supreme Court has the challenges of these altered business climates and g
dismissed the appeals of the PSC and Pipeline does not anticipate there to be any material adverse d
q-Corporation from the first order without prejudice until impact on the results of operations, cash flows, financial y
[d
~ ths PSC completes proceedings on remand and held position or business prospects.
b i
Pil eline Corporation's appeal of the second order in h _
abeyance until the PSC completes proceedings on f
OTHER q
h r: mand. The Company expects the remanded case to be On December i,1997, Petroleum Resources sold sub- _Q hard at the PSC in May 1998. The impact, if any, on the stantially all of its assets for $no millio t. Proceeds from h [8 Company's results of operations, cash flows and financial the sale are expected to be used to repurchase up to $tio h . position is not presently determinable. million of SCANA's outstanding common stock from time 4 i On january 9,199 the PSC issued an order granting to time through open market purchases and through pri-6 g: SCE6G an increase in retail electric rates of.34, which vately negotiated transactions. The Company may also 7 % q _ w:s designed to produce additional revenues, based on a use the proceeds from the sale to pay down debt or for h test year, of approximately $6 5 million annually. The other corporate activities. All of the shares repurchased 7 lj increase was implemented in two phases. The first phase, under this program will be retired, reducing the number h - ' In increase in revenues of approximately $59 5 million of shares issued and outstanding. The common stock p f (nnually or 6.47, commenced in January 199. The sec-repurchase program was authorized by the Company's f 6 f ond phase, an increase in revenues of approximately board of directors on October 21,1997 D 9 $8.o million annually or 8 %, was implemented in SCANA Communications, Inc. (SCD, owns approximately H 7 j' -J nuiry 1997. The PSC authorized a return on common 4 5 million common shares and 100,000 non voting series h d. equity of 2.0%. The PSC also approved establishment of a B and 0,000 non-voting series D convertible preferred y 5 ] Storm Damage Reserve Accoum capped at $ 0 million to shares of Powertel, Inc. (PowerteD, formerly Intercel, y 5 {ji be collected through rates car a ten-year period. Inc., a pubhcly traded telecommunications company g 4 Additionally, the PSC apsoved accelerated recovery of a which owns and operates personal communications y J-q p h be S 3 + ~
m<.wun wwanwrup 0 m ww m m + m e,w n =u' oc n mm [4 ?U E services (PCS) systems in several major markets in the value of the underlying common stock for the series A h Southeast. The costs of such investments were approxi-preferred stock was approximately $24 4 million at h D mately $66 7 million, $75.s million and $22 5 million, December 31,1997 resulting in an unrecorded pre-tax p [ respectively, Common shares were initially recorded at holding gain of $i3 2 million. d b $y.85 per share. Preferred series B shares are convert-Knology Holdings, Inc. (Knology), also an affiliate of N B ible in March 2002 at a com ersion price of $i6 50 per Powertel, is developing a system which will provide b M common share or approximately 4 5 million common interactive video, voice and data services for broadband [j M shares. Preferred series D shares are convertible in systems in certain southeastern markets. SCI on October p h March 2002 at a conversion price of $i2 75 per common 22,1997 purchased from Knology 71,o50 units, each con-f Q share or approximately 17 million common shares. sisting of one n.875% Senior Discount Note (Note) due .4 V Powertel common stock, which trades on NASDA0. 2007 and one Warrant to purchase preferred stock of fi closed at $i6 3 4 on December 31,1997, resulting in a pre-Knology. The purchase price of the units was approxi-h h / tax unrealized holding gain of $8 5 million. The after-tax mately $4o million. In addition to the acquisition of the p 9 amount of such gain is included in the balance sheet as a Knology units, SCI has invested $5 3 million to purchase d s component of " Common Equity." The market value of 3.639 shares of preferred stock of Knology and Knology y E the convertible preferred shares of Powertel is not readi-has agreed to issue to SCI warrants to purchase 753 d h ly determinable. However, on an as converted basis, the shares of preferred stock at $i,5oo per share. f b in September i996 SCI, as a result of an internal audit, H h. market value of the underlying common shares for the preferred shares was approximately $io5 7 million at informed the FCC that it violated certain licensing Q p December 3i, i997, resulting in an unrecorded pre-tax requirements in establishing and operating an 800 Mhz N y holding gain of $8.i million. radio system in South Carolina for public safety and utili-y h in March i997, SCI sold its interest in GulfStates ty use. As a result, SCI has returned to the FCC several p B Fibernet, a Georgia general partnership (constituting SC1's licenses obtained in violation of FCC rules and the FCC is M remaining interests in the Gulfstates Fibernet joint ven-conducting an investigation of the system. The Company h P. ture), and certain fiber optic assets of SCI located within does not believe that the resolution of this issue will m the State of Georgia, to ITC Holding Company Inc. (lTC), a have a material impact on its results of operations, cash E Georgia-based telecommunications company and an affil-flows or financial position. y h g _ late of Powertel, in exchange for 588,4n shares of series The year 200o issue could have a material impact on R A convertible preferred stock of ITC (lTC Preferred) and the operations of the Company if required modifications M a subordinated note of ITC. As part of an earnout provi-and conversions are not made to ensure that all system h _ sion related to the Gulfstates Fibernet transaction and software is date code compliant. The Company has W y. the receipt of ITC Preferred through the earnout provi-formed a steering committee to direct the resolution of k h sion, SCI received in October 1997 5,742 additional this major issue. The steering committee, which reports [ 6 shares of ITC Preferred, resulting in a pre-tax gain of $2.2 to the senior officers of the Company and to the board [ q .nillion which was recorded in "Other income." of directors, is chaired by the chief financial officer of C y On October 20,1997, as part of a reorganization the Company and is comprised of officers representing h n involving ITC, its subsidiary, ITC West Point, Inc., and ITC all operational areas. Reporting to the committee are the C y DeltaCom, Inc. (ITCD), a Georgia-based telecommunica-technical personnel responsible for the evaluation and [ p tions company and an affiliate of Powertel, ITC merged remediation of system software. ( pl with ITCD, and each of ITC's common shareholders The Company has eva: uated the impact of the year 8 i including SCI) received one share of common stock of 2000 on its information systems applications and operat-9 h. (ITC West Point, Inc. for each whole share of ITC common ing software and is implementing a plan of remediation h stocP owned by such shareholders. In addition, SCI expected to be completed during the first quarter of B fj received one share of series A convertible preferred 1999. The present estimated cost of the plan of remedia- { d stock of ITC West Point, Inc. for each share of ITC tion is not material to results of operations, financial E Preferred owned by SCI. ITC West Point, Inc. changed its position or cash flows. [b ] name to ITC Holding Company, Inc. subsequent to the ITC The Company also has begun evaluating embedded y [p y
- merger, processors located in field operations areas for the pur-Through the merger, SCI received approximately pose of identifying those that will have to be modified or p$
i,777,919 shares, representing approximately 7 2%, of ITCD replaced. The initial inventory has been completed and E l common stock, and i,4 0,77: shares of series A preferred impact assessment is expected to be completed by mid-l f 8 d stock of ITCD convertible in March 2002 into i,4 o,77: 1998, At that time the Company will prepare and imple-p 8 shares of ITCD common stock. ITCD common stock, which ment a plan designed to complete all substantive p {4 began trading on NASDAO on October 24,1997, closed at required modifications and replacements in time to pre-6 ) $i6 s/2 per share on December 3i,1997, resulting in a pre-vent problems with operational systems related to date [ p tax unrealized holding gain of $20 3 million. The after-tax codes. An estimate of the cost of the required changes is [ Q amount of such gain is included in the balance sheet as a not available. L component of " Common Equity." The market value of in particular, with regard to the evaluation and reme- [ c h N-series A preferred stock of ITCD is not readily deter-diation of the year 200o issue at SCE60's V.C. Summer p minable. However, on an as converted basis the market Nuclear Station, SCE6G is closely cooperating with other Y(TQ x m mtwwmnw2x w w w r: w s n u m mm r" mn x= w
e. gedr.ammmuraramwamewts mmmm&mmmermrw v. am:m a mm <mg g utility companies, including utilities in the southeast, of increasing reported net income. AFC represented that own nuclear power plants. The utilities are sharing approximately 4 0% of income before income taxes in n technical nuclear plant operating and monitoring sys-1997, 3 9 in 1996 and 8.0% in 1995 i tems information to ensure the prompt and effective in 1997 SCANA's Board of Directors raised the quarter-d resolution of the year 200o issue, ty cash dividend on common stock to 37 3 4 cents per f / The Company is communicating with all of its signifi-share from 3 3 4 cents per share. The increase, effec-6/ cant suppliers to determine the extent to which the tive with the dividend payable on April i,1997, raised 2 Company is vulnerable to those suppliers' failure to the indicated annual dividend rate to $i.5: per share h remediate their own year 2000 issue. The extent to from $i.47. SCANA has increased the dividend rate on its b which significant customers have resolved the year 2000 common stock in 44 of the last 45 years. N I issue, and the resulting impact on the demand for the On December i,1997, Petroleum Resources sold sub-h Company's products, is not determinable. There can be stantially all of its assets for $no million. The resulting F no guarantee that the systems of other companies on after-tax gain of $17 6 million is recorded in "Other (( which the Company's systems rely will be timely con-Income." v:rted. A failure to convert by another company, or a y conversion that is incompatible with the Company's sys-Electric Operations t:ms could have material adverse effect on the results Electric sales margins for 1997,1996 and 1995 were as I of operations, financial position or cash flows of the follows: h
- P"" Y' h4 1997 1996 1995 RESULTS OF OPERATIONS fMilliam */Dollan) bI e
perating Earnings and Dividends $1,103.0 $1,106.5 $1,006.4 Earnings per share of common stock, the percent Less: Fuel used in p i increise (decrease) from the previous year and the rate of return earned on common equity 'or the years 1995 electric generation 248.4 250.5 227.4 d through 1997 were as follows: Purchased power 9.4 11.4 14.7 NE Margin $ 845.2 5 844.6 $ 764.3 h 1997 1996 1995 f Earnings per weignted
- 1997 The electric sales margin increased slightly due N
to the favorable impact of the rate increase E everage share $2,06 $2.05 $1.70 Percent increase in placed into effect in January i997 and economic A growth factors, which were offset by the effect of 2 earnings per share 0.5% 20.6 % 39.3 % 1 milder weather. bl , eturn earned on R common equity 12.3 % 12.8 % 10.8 %
- i996 The electric sales margin increased primarily as a
? result of the rate increase received by SCESG in p
- 1997 Earnings per share and return on common January 199. Economic growth factors also con-6 equity increased primarily as a result of the $i7 6 tributed to the increase.
million after-tax gain on the sale of the oil and increases (decreases) from the prior year in megawatt-G gas properties of Petroleum Resources and high-hour (MW10 sales volume by classes were as follows: a er gas sales margins which more than offset increases in operating expenses and a reduction Classification 1997 1996 bg to other income from the 1996 after-tax gain Residential (292,518) 212,888 y reported by SCI, discussed below, Commercial 100,324 144,536 y industrial 113,717 110,147 a
- 1996 Earnings per share and return on common S les for Resale equity increased primarily as a result of higher electric sales margins at SCE60 and improved (excluding interchange)
(538,005) (39,853) y ~ Other 15 (1,013) earnings at Petroleum Resources which more "g than offset increases in operating expenses. Total territorial (616,467) 426,705 Additionally, SCI reported a nonrecurring after. Negotiated Market Sales Tariff 564,081 699,425 tax gain of $5 7 mi!!!on as a result of the business Total 52,386 1,126,130 h combination of Powertel PCS Partners and B Powertel (formerly InterceD in February 1996 The electric sales volume for residential sales f The Company's financial statements include AFC. AFC decreased for 1997 as a result of milder weather. The is a utility accounting practice whereby a portion of the decrease in ules for resa e and the increase of sales cost of both equity and borrowed funds used to finance under the Negotiated Marbt Sales Tariff from 1996 to construction (which is shown on the balance sheet as 1997 were the result of a muelcipality terminating its construction work in progress)is capitalized. An equity wholesale power contract and transferring to a negotiat-fl portion of AFC is included in nonoperating income and ed market sales tariff. a debt portion of AFC is included in interest charges (credits) as noncash items, both of which have the effect %tanrm mmm w ww w m m m 5 Q m~ ~ m. O
&g e' .ma wwwmummmmmw.- mm ^ m wm M ' Gas Operations plants and other operating costs. The increase in
- l Gas sales margins for 1997; i99 and 1995 were as follows:
depreciation and amortization expenses for 1997 g% 6 reflects the additi ns t plant-in-service. The change k 1997 1996 1995 f[ in income tax expense is primarily due to changes in g (Millions ofDollan) pre-tax operating income and differences between y h Gas operating revenues $418.7 $403.2 $342.7 estimated income taxes accrued and actual income w 4 l_ess: Gas purchased tax expense per the tax returns as filed. The increase d for resale - .286.5 276.8. 212.4 in other taxes results primarily from the accrual of f Margin ' $132.2 $126.4 $130.3 additional property taxes, beginning in January 1997, ti-related to the Cope plant and other property addi-3
- i997 The gas sales margin increased primarily as a tions which was partially offset by a reduction in the C
ql result of higher margins on sales to industrial inter' i997 property tax assessment. Recovery of the Cope 'h ruptible customers. The higher margins were attribut-plant property taxes is provided for in a retail elec. g py able to fewer curtailments and higher system capaci-tric rate increase that became effective January 1997 "'N II - ty from a pipehne expansion completed in 1996. n
- i996 Other operation and maintenance expenses g
- i996 Ti e gas sales margin decreased primarily as a increased primarily as a result of higher production g
result of higher gas rosts and curtailments imposed costs attributable to the Cope plant which became j on interruptible industrial customers during abnor-operational in January 199. The increase in depreci-if 6 4 . mally cold weather. Also, contributing to the dechne ation and amortization expenses reflects the addition d y in the gas sales margin from 1995 to 199 were lower of the Cope plant and other additions to plant-in-ser-T 6 gas prices in 1995 which allowed Pipeline Grpora-vice. The increase in income tax expense corre- $j tion to compete more successfully in tha: vear with sponds to the increase in operating income. The d g alternate fuel suppliers in industrial markets, increase in other taxes reflects higher property taxes d increases (decreases) from the prior year in resulting from property additions and higher millages and assessments. g dekatherm (DT) sales volume by classes, including trans. 3 [ j- 'portation gas, were as follows: Other income h Classification - 1997 199d
- :997 Other income, net of taxes, increased approxi-h k
Residential ' (2,188,215) 1,774,289 mately $8 5 million. The primary factors accounting [ Commercial (119,324) '585,669 for the change in other income were the Petroleum N Industrial 7,427,503 (1,564,759) Resources gain on the sale of oil and gas properties f Sales for resale 160,658 .583,040 in 1997, offset by the gain reported by SCI in 199 as f3 6 j i Transportation gas (953,901) (1,219,903) discussed under " Earnings and Dividends" and which q is included in ther income reported for i996. f Total - 4,326,721 158,336
- 1996 Other income, net of taxes, increased approxi-
{ The gas sales volume increased for i997 as a result of mately $23 9 million in i996 primarily4ue to the h g 7 fewer curtailments to industrial interruptible customers improved earnings performance of Petroleum h and higher demand. Resources attributable to a noncash reserve adjust-d j% ment recorded in the second quarter of 1995 and to h! .Other Operating Expenses and Taxes higher gas prices and lower production costs. The {y / Increases (decreases) in other operating expenses, gain reported by SCl, discussed under " Earnings and p f including taxes, were as follows: Dividends" is also included in other income reported f I 99 Classification 1997 1996 (Miuions ofDollan) Intercu Expense j Increases (decreases) m interest expense, excluding y f Other operation and I maintenance $3.1 $20.1 - the debt component of AFC, were as follows: i y Depreciation and Classification 1997 1996 3 4 amortization' ~ 5.5 17.7 L I##h*"'"lD"#'"> $y T Income taxes' (12.5) 8.1 Interest n i ng-term debt, net $1.1 $(1.4) j. Other taxes - 8.6 L '3.3 [f ? Other interest expense (1,5) (3.8) f.. ' Total $4.7 $49.2 Total $(0.4) $(5.2) j {R
- 1997 Other operation and maintenance expenses j.
Increased somewhat from i99 'evels. A decrease in There was no material change m interest expense 6 1 transit operating costs resulting from the Company's from 1996 to i997. The decrease in interest expense from I [f. transfer of the ownership of the Charleston transit 1995 to i996 was due primarily to reductions in outstand-i system to the City of Charleston in October i996 ing debt through most of the year. d largely offset increases in costs at electric generating ga m -w =* gym==www -<w
.Q MAC M.m7,L M ?) M W %m WJ% a&%L M*9-s ?. D " GCsW 2Th ?~ % 21 .W:3 _, y M 0 SELECTED FIN ANCI AL D ATA-R d ) t For the Years Ended December y, 1997 1996 1995 1994 1993-j (Millions ofdollars, except statistics andper share amounts) . Statement of Income Data L ' ~ ' Operating Revenues $1,523 $1,513 $1,353 $1,322 $1,264 d ~ Operating income 314 314 288 260 245-Q 9 Other income 38 29 8 (30) - 27 h Net income 221 215 168 115 165 0 Balance Sheet Data d@ d) . Utility Plant, Net $3,648 $3,529 $3,469 $3,294 $3,004 Tctal Assets 4,932 4,759 4,534-4,317 4,027 0 . Capitalization: 8 ~ Common Equiry 1,788 1,684 1,555 1,359 1,317 d Preferred Stock (Not subject to purchase h w or sinking fund) 106 26 26 26 26 h 9 Preferred Stock, net (Subject to purchase or fi l '_ sinking fund). 12 43 46 50-53 d SCEGG-Obligated Mandatorily Redeemable h Preferred Securities of SCESG's Subsidiary, SCEGG Trust 1, holding solely $50 million y h principal amount of.55 junior Subordinated E 7 % b Debentures of SCESG due 2027 50 Q Long-Term Debt Net 1,566 1,581 1,589 1,549 1,424 {j p-Total Capitalization $3,522 $3,334 $3,216 $2,984 $2,820 .d Common Stock Data h Weighted Average Namber of Common Shares C Bj - Outstanding (Millions) 107.1 105.1 99.0 94.7 90.4 3 h Earnings Per Weighted Average Share of Common Stock $2.06 $2.05 $1.70 $1.22 $ 1.83 !? W Dividends Declared Per Share of Common Stock $1.51 $1.47 $1.44 $1.41 $1.37 s y Common Shares Outstanding (Year-End) (Millions) 107.3 106.1 103.6 96.0 93.2 h, '. Book Value Per Share of Common Stock (Year-End) $16.66 $15.86 $15.00 $14.15 $14.13 J Number of Common Shareholders of Record 33,395 36,178 38,231 39,516 41,564 @y j Other Statistics ij Electric: 'A f-Total Sales (Million KWID 18,852 18,904 17,779 17,009 17,078 Customers (Year-End) 503,904 493,320 484,354 476,412 468,874 II g Residential: y 1 ' Average annual use per customer (KWH) 13,214. 14,149 13,859 13,048 14,077 Average annual rate per KWH $.0799 $.0785 $.0747 $.0743 $.0707 g) . Generating CapaSility - Net MW (Year-End) 4,350 4,316 4,282 3,876 3,864 j N), ' Territorial Peak Demand - Net MW 3,"13 4 3,698 3,683 3,444 3,557 4 Gis: f Customers (Year-End) 252,816 248,681 243,523 23d,614 234,736 W Sales, excludirg transportation (Thousand Therms) 949,100 896,294 882,511 781,109 717,417 8 Residential: N g Average annual use per customer (Therms) 531 639 570 543 605 y gj ~ Average arnual rate per therm $.86 $.74 $.82 $.84 $.76 j M h il C O M M'O N STO C K IN FO R M ATIO N ti 1997 1996 h f k 4th 3rd 2nd 1st 4th 3rd 2nd 1st g@ Qtr. Qtr. Qtr. Qtr. Qtr. Qtr. Qtr. Qtr. y Price F.ange: (a) p/ id@.. If.w 24 23 7/8 23 3/8 24 7/8 25 3/8 25 1/2 25 1/4 25 1/2 i High ' 29 15/16 25 5/8 25 5/8 26 7/8 28 28 1/4 28 1/4 28 5/8 nk (a) /a reported on the New hk Stock Exchange Composite Listing. sd w---- ~. - g
e [ ... _.... _.. _ _ _...... _... _ _ _... _.. _ _. _ _ _ _ _ _ _ _........ B A-R- D - - F - - D - F R - E
- 50 L. Amick
' James A. Bennett ' Wluiam B. Bookhart Jp t M J a-4 M 'qh ,3 0.l
- ,j
- l \\ r g.,
$g s Elaine T. Freeman Lawrenca M. Gressette.. iHugh M. Chapman e T p ~, ' 7R .F 4 t f s W[ }< Oj ,o Lynne M. Miller F. Creighton McMaster / John B. Rhodes 1 ~ ' m-Bill L. Amick Hugh M. Chapman F. Creighton McMaster Chairman of the Board and Rettred Chairman President and Manager Chief Executive Officer NationsBank South Atlanta, GA Winnsboro Petroleum Company Winnsixiro, SC Amick Farms, Inc. Batesburg. SC (a wholesale distributor of petroleum prtxtucts) Elaine T. Freeman (a vertically integrated broiler operation) John B. Rhodes Executive Director James A. Bennett ETV Endowment of South Carolina, Inc. Chairman and Chwf Executive Officer Senior Vice President and Spartanburg, SC Rhodes Oil Company, Inc. Walterboro, SC Director of Community Banking (a non-profit organization) (a distributor of petroleum products) First Citizens Bank Columbia, SC Lawrence M. Gressette, Jr. Maceo K. Sloan William B. Bookhart, Jr. Chairman of the Board Emeritus Chairman, President and Chief Executive Officer Partner SCANA Corporation Columbia, SC Sloan Financial Group, Inc. and Bookhart Farms Ellorce, SC NCM Capital Management Group, Inc. Durham, NC; W. Hayne Hipp (a holding company and an investment company, (a general farming business) ? resident and Chief Executive Officer respectively) William T. Cassels, Jr. The Liberty Corporation Greenville, SC Chairman of the Board (an insurance and broadcasting holding company) William B. Timmerman Atern Freight Lines, Inc. Colunhia, SC Chairman, President and m Lynne M. Miller Chief Executive Officer (a uwcking business) President SCANA Corporation Columbia, SC Environmental Strategies Corporation Reston, VA (an environmental and engineerin; firm)
4* 4 primwm;m vm, 2> ,-. - u - 1 ,am~ ~ - + u g William B.Timmorman 0FFICERS 4 (4 Clwirman, President
- 3 h and Chief Executive Officer H
h sCAu Corpo,ation SCAN A C0RP0 RATION q n u [p H. Thomas Arthur,II AND SUBSIDIARIES L Mce President and General Counsel p i William T. Cassels, Jr. 1 h sCANA Corporat*on Cathy B. Novinger 4 s1 b ^** b d Lynn M. Williams Senior Mce President g i<s U Secretary Administration, Governmental and Pubhc Affairs p SCANA Corpora:lon SCANA Corporation fl Asbury H. Gibbes Theodore E. Boone, III d j Group Executive Vice President Human Resourtes
- q q SCANA Gas Group SCANA Corporation y
1 President h South Carohna Pipehne Corporation Ch3rtes B. MCFadden !q h Vice President Governmental Affairs George Fasano, Jr. and Economic Development D h Senior Vice President SCANA Corporation t M South Carohna Pipehne Corporation b p S.C. MCMeekin, Jr. O y Samuel L Dozier nce President Customer Service ( .W. Nayne hipp q "y M Vice President South Cart. lina Electric 6 Gas Company d South Carohna Pipehne Corporation b 1% 6 N John L. Skolds N b E.H. KleCkley President and Chief Operating Officer a + ,i w7 [j Vice President South Carohna Electric G Gas Company N y' [ ' s 6 South Carohna Pipehne Corporation George J. Bullwinkel, Jr. e h Warren A. Darby Senior Vice President Retal Dectric g Senior Vice President Gas Operations South Carolina Electric 6 Gas Company h W South Carchna Dectric 6 Gas Company President U E President SCANA Communications, Inc. k; W ServiceCare, Inc. g Don R. Harris g g Steve Burns Vice President Electric Service d y Mce President South Carohna Electric 6 Gas Company [3 p ServiceCare. Inc. W w 9 Kristin L. Aebersold j #cceo K. Sloan h Judith H. Evans Mce President Commercial Marketing and Sales +n' y Mce President Gas Accounting and South Carohna Electric 6 Gas Company k' Administration h , South Carohna Electric G Gas Company 088R 03IR d i Vice President ~ p W. Keller Kissam Primesouth, Inc. ' f_ Wce President Gas Operations L;
- e South Carchna Dectric G Gas Company Paul V. Fant e
g Vice President Support Services N [; Charles A. Rampey, Jr. South Carohna acetric s Gas Company 1 f: President b SCANA Energy Marketing. Inc. Fred h. Hanna I E Vice President Customer Service Robert G. Edwards south Carohna sectric s Gas Company h a Vice President k SCANA Energy Marketing, Inc. Neville 0. LoriCk ' William B. Timmerman Q Vice President Fossil / Hydro Operations w John Tufts south Carohna Electric s Gas Company + Vice President w& j SCANA Energy Marketing. Inc. Gary J. Taylor 9 %ce President Nuclear Op' rations p h Dabney L. Sharp south Carchna acetric s Gas Company ,H P J &' " Q President 5 hy h SCAM Propane Gas. Inc. Mitchell S. Tibshrany 7 Mce President k James M. Clark, Jr. Industrial strategic susiness unit U ff ' %ce President South Carohna Electric 6 Gas Company h N SCANA Propane Gas, Inc. 5 Belton T. Zeigler G H Kevin B. Marsh wce President } b Mce President Finance, South Carohna Dectne G Gas Company t, f Chief Financial Officer and Controller p SCANA Corporation Stuart JaCLon tl NCTORS EMERITl! William R. Brure. Sr.. $1 Vice President i meth W. French. Jack F. Hassell. Jr. Jimmy E. Addison instel. Inc. O n H. Lumpkin. Sr., Allan C. Mustard. N Vice President and Controller pl C. Summer, John A. Warren f South Carohna Bectric 5 Gas Company David N. Vannort j Vice President Corporate Comphance it, Mark R. Cannon SCANA Corporation N Treasurer k SCANA Corporation S S :: M C t W W r ' CD 1 0- .t, w,f
l o f_......._......._......---F N VE S -T-0 -R -I -N F O -R RA -H-0 -N ------------- C0RP0 RATE 0FFICES Company's Shareholder Services Department for transfer. There SCANA Corporation is no charge for this senice. The Company recommends that cer-y26 Main Street tificates be mailed by registered or certified mail. Signatures Columbia, SC 292o128 5 required for transfer must be guaranteed by an official of a 4 Telephone: (803) 74 -3000 financial institution that is an approved member of a Medallion 8 STOCK EXCH ANGE LISTINGS SCANA Corporation's Common Stock is listed and traded on TRUSTEE AND PAYING AGENT the New York Stock Exchange (NYSE). The trading symbol is SCG. Ques 6ons concerr.mg reWacement of interest checks, tax The newspaper listing is SCANA. informr,on, transfers and other account information related to The 5 Series Cumulative Preferred Stock of South Carolina the following securcies should be directed to the appropriate Electric 6 Gas Company (SCE6G) is listed on the NYSE. The trading Trustee and Paying Agent: symbol is SAC Pr, The newspaper listing is SCrE pf. SCE60's SCEGG First and Refunding Mortgage Bonds other series of Cumulative Preferred Stock ace not listed and Chase Manhattan market prices are not published. Corporate Trust Department s;th Floor d5 The 7 55% Trust Preferred Securities, Series A, issued by as[est 33yy g SCE6G Trust i, is also listed on the NYSE. The trading symbol is Telephone: (80o) 6 8-8 80 4 3 SAC PrT, The newspaper listing is SCEG Tr pfA. SCEGG First Mortgage Bonds 8'"' "' N'" Y 'k DIVIDEND 5 too Asheford Center North, suite 52o Dividends on SCANA's Common Stock and SCE6G's Atlanta. GA 30338 Cumulative Preferred Stock are declared quarterly by the board Telephone: (800) 254 2826 of directors, and are normally payable on the first day of p January, April, July and October to shareholders of record on or Bank of New York about the noth day of the preceding month. ion Barclay Street. 2: West Quarterly distributions on the 7 55 Trust Preferred Attn: Corporate Trust Administration Securities, Series A, issued by SCE6G Trust i, are payable March New York, NY io286 31, June 30, September 30 and December 3 to holders of record Telephone: (2:2) Bis-5763 on the last business day before such dates. AUDITORS Deloitte 6 Touche LLP SCANA INVESTOR PLUS PLAN Certified Public Accountants The Plan provides investors a convenient and economical y26 Main Street,8th Floor means of acquiring holding and transferring shares of SCANA's Columbia, SC 2920i Common Stock. Participants may purchase additional shares of ADDIT 10N AL INF0RM ATION Common Stock through automatic reinvestment of all or a portion Publications: The Company provides a quarterly report to of their cash dividends on SCANA s Common Stock and SCE6G's shareholders highlighting financial and operating results for the Cumulative Preferred Stock and/or by makin : optional cash pay ~ first, second and third quarters. A copy of SCANA's i997 Annual ments of up to $ioo.ooo per year. The Plan also features a direct Report on Form to-K (as filed with the Securities and Exchange purchase provision through which investors can acquire their Commission) is available without charEe. Requests for these first shares of SCANA s Common Stock directly from the Company. and other financial publications should be directed to the A variety of other services, including direct deposit of dividends Investor Relations Department. and safekeeping of share certificates, are also available. A Plan Internet: Information about the Company, including financial prospectus and enrollment card are available upon request. reports, press releases and descriptions of customer products SH AREH0LDER INQUIRIES and services, is available on SCANA's home page on the World Wide Ouestions concerning the SCANA Investor Plus Plan. stock Web at http:nwww.5Cana.Com. Investor Line: In ddition to information on a variety of share-transfer requirements, replacement of lost or stolen stock cer-holder account services, the latest information on dividends, tificates or dividend checks, address changes, direct deposit of financial results and other significant Company developments is dividends, elimination of duplicate mailings, or other account services should be directed to the Sharehokler Services Department: available by calling SCANA's 24-hour, toll-free Investor Line at 6 8 t-8oo-7 3-5 9. By writing: SCANA Corporation Attention: Shareholder Services (o34) Investor Relations
Contact:
Columbia, SC 292i8-ooo H. John Winn, lll (Boo) 7 3-5 91 (toll-free Investor Line) Manager - Investor Relations and Shareholder Services (o;4) By calling: 6 8 (803) 733-68:7 (in Columbia) Telephone: (803) 74 -3240 8 (803) 343-2389 (fax) Facsimile: (Hol) 343-2344 Investors' Association: TRANSFER AGENT AND REGISTRAR For information about this organization's activities, please write to: SCANA Corporation maintains shareholder records, issues Association of SCANA Corporation Investors dividend checks and acts as Transfer Agent and Registrar for the c/o Paul Quattlebaum, Jr. Company's Common Stock and SCE6G's Cumulative Preferred 22 Broughton Road Stock. Shareholders may send stock certificates directly to the (.harleston, SC 294o7 7529 This report is issued snlely for the purpose of proudmg mformadon it is not miended for use in connecuon with any sale or purchase of, or any solicitauon of offers to buy or sell. any securines. g
O g 9 1 I l H - - - - - - S C-A N A - - E & R-P- & R-AH O N - - - - -- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - COLUMBI A, SOUTH C AROLIN A 29218 1 l l I l-I l l i l t l l l i l l t I l l 1 4 I ? l l 1 I I}}