SCANA Corporation (NYSE:SCG) today announced earnings for the third quarter of 2016 of $189 million, or earnings per share of $1.32, compared to $149 million, or earnings per share of $1.04, for the third quarter of 2015.
For the first nine months of 2016, SCANA reported earnings of $471 million, or earnings per share of $3.29, compared to $648 million, or earnings per share of $4.53, for the same period in 2015. Year to date 2015 earnings include a $201 million, or $1.41 per share, net of tax gain from the sale of two subsidiaries, Carolina Gas Transmission (CGT) and SCANA Communications, Inc. (SCI).
“The third quarter of 2016 presented extremely warm weather for our territory resulting in a twenty-seven cents per share positive impact in electric margins versus normal,” said Jimmy Addison, Executive Vice President and Chief Financial Officer. “Customer growth and financing cost recovery through the Base Load Review Act continue to be favorable with expected offsets from operations and maintenance expenses, interest expense, depreciation, and property taxes.”
FINANCIAL RESULTS BY MAJOR LINES OF BUSINESS
South Carolina Electric & Gas Company
Reported earnings for the third quarter of 2016 at South Carolina Electric & Gas Company (SCE&G), SCANA’s principal subsidiary, were $204 million, or earnings per share of $1.43, compared to $167 million, or $1.17 per share, in the same quarter of 2015. Electric margins benefited from a Base Load Review Act rate increase and customer growth, in addition to abnormally hot weather compared to the same quarter of the prior year. These items were partially offset by increases in operations and maintenance expenses, as well as increases in expenses related to our capital program including interest, depreciation, and property taxes. Abnormal weather increased earnings by 27 cents per share in the third quarter of 2016, compared to 11 cents per share in the third quarter of 2015. At September 30, 2016, SCE&G was serving approximately 707,000 electric customers and 353,000 natural gas customers, up 1.5 and 2.9 percent, respectively, over 2015.
PSNC Energy, the Company’s North Carolina-based retail natural gas distribution subsidiary, reported a seasonal loss of $6 million, or 5 cents per share, in the third quarter of 2016, compared to a loss of $5 million, or 4 cents per share, in the third quarter of 2015. This decrease is primarily due to higher interest expense and depreciation related to the growth of PSNC Energy’s system. Based on that system growth, PSNC Energy filed a petition with the North Carolina Utilities Commission earlier this year for a rate increase, and a hearing was held in August. A ruling on the rate increase is expected in October, with new rates to be effective in November. At September 30, 2016, PSNC Energy was serving approximately 536,000 customers, an increase of 2.8 percent over the previous year.
SCANA Energy Marketing
SCANA Energy Marketing, which markets natural gas in deregulated energy markets, including Georgia where the Company does business as SCANA Energy, reported a seasonal loss of $1 million, or 1 cent per share, in the third quarter of 2016, compared to a loss of $4 million, or 3 cents per share, in the third quarter of 2015. This change is primarily due to higher margins versus the same quarter of the prior year.
Corporate and Other, Net
SCANA’s corporate and other businesses, which include the holding company, and prior to their sales, CGT and SCI, reported a loss of $7 million, or 5 cents per share, in the third quarter of 2016, compared to a loss of $9 million, or 6 cents per share, in the third quarter of 2015.
Based on 2015 GAAP earnings per share of $5.22, the Company reaffirms its targeted average annual earnings per share growth rate range to be negative 6 to 0 percent over the next 3 to 5 years due to the impact of the gains on the sales of the subsidiaries and incremental electric margins due to abnormal weather in 2015. (Because of the importance of weather to SCE&G’s earnings and its unpredictability, the Company is not able to provide 2016 GAAP earnings guidance.)
In addition to the GAAP basis guidance above, the Company reaffirms its targeted average annual growth rate for GAAP-Adjusted Weather-Normalized earnings per share to be 4 to 6 percent over the next 3 to 5 years. The Company previously reset its base year for this outlook to 2015 GAAP-Adjusted Weather-Normalized earnings per share of $3.73 (reflecting downward adjustments of 12 cents per share pre-tax and a tax effect of 4 cents per share for a net of tax 8 cents per share to normalize weather in the electric business and $2.39 per share pre-tax and a tax effect of $.98 for a net of tax $1.41 per share to remove the gains on the sales of CGT and SCI). The Company also reaffirms its guidance for 2016 GAAP-Adjusted Weather-Normalized earnings per share of $3.90 to $4.10, with an internal target of $4.00 per share.
The Company’s management believes that these non-GAAP earnings and earnings growth measures provide a meaningful representation of the Company’s fundamental earnings power and can aid in performing period-over-period financial analysis and comparison with peer group data. In management’s opinion, these non-GAAP measures serve as useful indicators of the financial results of the Company’s primary businesses and as a basis for management’s provision of earnings guidance and growth projections. In addition, management uses these non-GAAP measures in part in making budgetary and operational decisions including determining eligibility for certain incentive compensation payments. These non-GAAP measures are not intended to replace the GAAP measures of earnings per share or average annual earnings per share growth rate, but are offered as supplements to those GAAP measures.
Factors and risks that could impact future earnings are discussed in the Company’s filings with the Securities and Exchange Commission and below under the Safe Harbor Statement.
CONFERENCE CALL NOTICE
SCANA will host its quarterly conference call for security analysts at 3:00 p.m. ET on Thursday, October 27, 2016. The call-in numbers for the conference call are 1-888-347-3258 (US), 1-855-669-9657 (Canada) and 1-412-902-4279 (International). Participants should call in 5 to 10 minutes prior to the scheduled start time. A replay of the conference call will be available through November 10, 2016. The telephone replay numbers are 1-877-344-7529 (US), 1-855-669-9658 (Canada), and 1-412-317-0088 (International). The event code for the telephone replay is 10093481.
All interested persons, including investors, media and the general public, may listen to a live webcast and access related presentation materials of the conference call at the Company’s website at www.scana.com. Participants should go to the website at least 5 to 10 minutes prior to the call start time and follow the instructions. A replay of the conference call will also be available on the website through November 10, 2016.
SCANA Corporation, headquartered in Cayce, S.C., is an energy-based holding company principally engaged, through subsidiaries, in electric and natural gas utility operations and other energy-related businesses. The Company serves approximately 707,000 electric customers in South Carolina and approximately 1.3 million natural gas customers in South Carolina, North Carolina and Georgia. Information about SCANA and its businesses is available on the Company’s website at www.scana.com.