Time for T&D? We Reiterate Our Overweight on Regulated Electric Utilities & Add AEP and XEL to Our Preferred List

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Eric Selmon Hugh Wynne

Office: +1-646-843-7200 Office: +1-917-999-8556

Email: eselmon@ssrllc.com Email: hwynne@ssrllc.com

SEE LAST PAGE OF THIS REPORT FOR IMPORTANT DISCLOSURES

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May 22, 2017

Time for T&D?

We Reiterate Our Overweight on Regulated Electric Utilities

& Add AEP and XEL to Our Preferred List

The events of the last two weeks have eroded investor confidence in the Trump administration’s ability to guide the GOP policy agenda through Congress. In particular, doubts that the administration will be able to achieve the reform of corporate taxation have caused investors to reassess equity valuations. The rising risk of domestic policy paralysis coincides with an ongoing confrontation with North Korea that poses material risks to peace. Given this backdrop, it appears likely that the equity market will in the future be both more volatile and more vulnerable to correction than at any time since the election.

  • In this context, we are reiterating our recommendation to overweight the regulated electric utility sector, reflecting its attractive prospective earnings and dividend growth, high dividend yield, historically low beta, and a track record of significant outperformance during major market downturns.
    • We forecast ~6.6% compound annual growth in the industry’s aggregate electric rate base over 2016-2020 (see Exhibit 2 and our note Is This the Golden Age of Electric Utilities? A Primer on Historical and Forecast Rate Base Growth). Allowing for historical rates of equity issuance and earnings dilution during prior periods of comparable rate base growth, we believe 6.6% annual growth in rate base can drive 4.5% to 5.0% growth in earnings per share.
    • Given the average dividend yield of the sector (3.5%), we see regulated electric utilities offering the potential for ~8.0% to 8.5% compound annual returns through 2020 – an expected return that we believe compares favorably with that of the S&P 500. The forward earnings yield of the S&P 500, based on 2018 consensus eps, is currently 6.2%. The expected rate of inflation implied by the difference between the yield on 10 year U.S. Treasury notes and 10 year TIPS is 1.80%, suggesting investors anticipate long run nominal returns of ~8.0% on the equity market as a whole.
    • The relative PE of the regulated utility sector would likely fall were long term interest rates to rise. However, despite rising certainty that the Federal Reserve will continue to raise its target federal funds rate, the yield of the ten year U.S. Treasury bond has dropped by 38 basis points from its March 13th peak of 2.62% to 2.24% as of Friday’s close, apparently reflecting declining investor confidence in the Trump’s administration’s ability to enact growth enhancing tax and regulatory reforms or to push forward its infrastructure investment plans.
    • While regulated electric utilities appear poised to offer returns competitive with the S&P 500, the trailing 12-month beta of the sector is only 0.4 (Exhibit 3). Adding regulated utility stocks to a diversified equity portfolio can thus reduce portfolio volatility without sacrificing returns.
  • We favor utilities whose rate base and future rate base growth are weighted toward transmission and distribution assets (Exhibit 8). We believe these offer superior long term growth compared to vertically integrated utilities, whose rate base and capital investment are heavily weighted toward generation assets.
  • U.S. electricity demand has not increased over the last decade, curtailing the need for generation investment. The EPA’s Cross-State Air Pollution Rule and Mercury and Air Toxics Standards have forced the U.S. coal fired fleet to install controls for SO2, NOx, mercury, acid gases and particulate matter, similarly limiting the scope of future environmental upgrades. With the Trump administration’s withdrawal of the EPA’s Clean Power Plan, we see limited opportunity for utilities to invest in new generation capacity or in environmental remediation of existing power plants.
  • By contrast, distribution capex is likely to benefit from the continued rollout of smart meters and other smart grid technologies designed to collect data from and exercise control over the distribution system; investments to enhance grid reliability in response to a declining tolerance for distribution system outages and to storm harden distribution systems in coastal states; preparations for the integration of distributed solar generation and electric energy storage; and the strengthening of distribution circuits to accommodate the charging of a rising number of electric vehicles.
  • Equally important, transmission and distribution utilities face much lower construction, operation, regulatory and financial risk than do utilities with significant generation assets.
  • Historically, vertically integrated utilities have often encountered in major generation projects a combination of risk factors – technical complexity, high cost, long construction periods and focused regulatory oversight — that on occasion have proved crippling to the companies undertaking them. By contrast, the low technical complexity of transmission and distribution projects renders them far less prone to major cost overruns and completion delays, while the smaller scale and shorter construction periods of these projects implies that the construction delays or cost overruns are far less damaging.
  • Even after they have been successfully commissioned, major generation projects still carry much higher risks, both operational and regulatory, than do T&D assets.
  • In choosing among individual stocks, we favor utilities that trade at below average valuations, based on forward PE multiples, but where rapid prospective rate base growth can drive significant earnings growth.
  • In Exhibit 7, we have highlighted in green those utilities whose forward PE multiples are at or below the average for the regulated electric utilities as a group, but whose rate base growth over 2018-2020 ranks in the top quintile among their regulated peers: AEP, EIX, PCG and XEL. At these companies, moreover, the contribution of transmission and distribution assets to rate base growth is high.
  • Among these, we are adding American Electric Power (AEP) and Xcel Energy (XEL) to our preferred list.
  • AEP’s 2019 earnings multiple of 16.8x is modestly below the regulated utility average of 17.2x, but AEP’s rapid rate base growth over 2018-2020 will put it in the first quintile among its regulated utility peers. Almost three quarters of this growth will come from low risk, high return investments in transmission assets. As AEP’s transmission capex is primarily focused on replacing and upgrading aging transmission infrastructure, the growth in AEP’s transmission rate base should continue beyond 2020. AEP could also accelerate its investment in distribution rate base, which has grown more slowly than the industry average. Ongoing cost control measures and a steadily improving balance sheet imply that AEP should be able to grow earnings with limited equity issuance for several years.
  • Xcel trades at 17.6x 2019 earnings, slightly above the regulated utility average, but we believe the stock could be an attractive holding for long term investors. We expect Xcel’s rate base growth over 2018-2020 to be in the first quintile among its regulated utility peers. Almost 60% of Xcel’s total rate base growth over 2018-2020 comprises transmission and distribution assets, while generation capex is driven by investments in low risk renewable power projects in supportive regulatory jurisdictions. Finally, over the last fifteen years, Xcel has experienced above average growth in operation and maintenance expense. Management’s new focus on cost cutting therefore has the potential to contribute materially to earnings growth, particularly in jurisdictions where XEL is operating under long term rate settlements, and provide ongoing support for management’s 4% to 6% EPS growth target.
  • In addition, we are adding Scana (SCG) and keeping Allete (ALE) on our least preferred list.

Exhibit 1: Heat Map: Preferences Among Utilities, IPP and Clean Technology

Source: SSR analysis

Details

The last two weeks have seen a marked increase in U.S. political risk. Trump’s firing of FBI Director James Comey, allegations that Trump was thereby seeking to obstruct the FBI’s investigation into collusion between Trump campaign officials and the Kremlin, and the subsequent appointment of an independent counsel to lead the investigation, have triggered rising uncertainty as to the fate of the administration and eroded confidence in its ability to guide the GOP policy agenda in Congress. The probability has decreased that the administration will achieve its key policy objectives, including the reform of corporate taxation, causing investors to reassess equity valuations. The growing potential for domestic policy paralysis coincides with an ongoing confrontation with North Korea that poses material risks to peace. Given this backdrop, it appears likely that the equity market will in the future be both more volatile and more vulnerable to correction than at any time since the election.

In this context, we are reiterating our recommendation to overweight the regulated electric utility sector, reflecting its attractive prospective earnings and dividend growth, high dividend yield, historically low beta, and a track record of significant outperformance during major market downturns. Within the sector, we favor utilities that trade at below average valuations, based on forward PE multiples, but where rapid prospective rate base growth can drive significant earnings growth through the remainder of the decade. Among these firms, we particularly favor those whose current rate base and future rate base growth are weighted toward transmission and distribution assets, which in our view offer not only superior long term growth potential but, critically, lower construction, operation, regulatory and financial risk. Reflecting this view, we are adding American Electric Power (AEP) and Xcel Energy (XEL) to our preferred list and adding Scana (SCG) and keeping Allete (ALE) on our least preferred list.

As set out in our note of September 13, 2016, Is This the Golden Age of Electric Utilities? A Primer on Historical and Forecast Rate Base Growth, our positive outlook on the regulated electric utility sector as a whole reflects the following considerations:

    • Our forecast of rate base growth for the U.S. electric utilities, based upon an analysis of these companies’ capex plans, depreciation rates and prospective deferred tax liabilities, is for ~6.6% compound annual growth in the industry’s aggregate electric rate base over 2016-2020 (Exhibit 2), broadly in-line with the 6.5% compound annual growth realized over 2000-2015.
    • This growth in rate base should, in the medium term, drive commensurate growth in regulated earnings. Based on historical rates of earnings dilution during periods of similar rate base growth, we expect our forecast growth in electric rate base of 6.6% p.a. over 2016-2020 to drive 4.5%-5.0% compound annual growth in earnings per share.
    • Given an average dividend yield of 3.5% across the sector, we would expect 4.5-5.0% annual growth in earnings per share to be consistent with ~8.0-8.5% compound annual shareholder returns, absent a change in the sector PE. While a re-rating of the sector would be expected were long term interest rates to rise, we note that, despite rising certainty that the Federal Reserve will continue to raise its target federal funds rate, the yield of the ten-year U.S. Treasury bond has fallen by 38 basis points from its March 13th peak of 2.62% to 2.24% as of Friday’s close, apparently reflecting declining investor confidence in the Trump’s administration’s ability to enact growth enhancing tax and regulatory reforms or to push forward its infrastructure investment plans.
    • We view the 8.0-8.5% return we expect on U.S. regulated utilities to be highly competitive with prospective returns on the S&P 500. The forward earnings yield of the S&P 500, based on 2018 consensus eps, is currently 6.2%. Adding the expected inflation rate of 1.80% implied by the difference between the yield on 10 year U.S. Treasury notes and 10 year TIPS, investors appear to anticipate long run nominal returns of ~8.0% on the equity market as a whole, again assuming no change in PE.
    • While regulated electric utilities thus appear poised to offer returns competitive with the broader market, the trailing 12-month beta of the sector is only 0.4 (Exhibit 3). Adding regulated utility stocks to a diversified equity portfolio can thus reduce portfolio volatility without sacrificing return.
  • Finally, we note that, across all the major market downturns since 1994, regulated utilities have outperformed by the S&P 500 by an average of 860 basis points, while outperforming other traditionally defensive sectors (consumer staples, health care and telecoms) by 340 to 640 basis points (Exhibit 4). (See Utilities and Other Defensive Sectors During the Trump Era: Which Perform Best – Particularly Against Tweets?, April 6, 2017.)

Exhibit 2: Historical and Estimated Growth of Aggregate Electric Rate Base (2005-2020) (1)

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1. 2016-2020 growth estimates reflect the announced capital expenditure plans of the publicly traded investor owned utilities in the U.S. that have provided such forecasts in their SEC filings and investor presentations. The aggregate electric rate base of the companies providing such capex forecasts is equivalent to approximately 80% of the aggregate electric rate base of the U.S. investor owned utilities as a whole.

Source: FERC Form 1, SEC 10-Q, SNL, SSR analysis

Exhibit 3: Beta of the Philadelphia Utility Index Relative to the S&P 500

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Source: Bloomberg and SSR analysis

Exhibit 4: Average Outperformance vs. the S&P 500 of Indices of the Principal Defensive Sectors (1) During the Largest Market Downturns, 1994-2017

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1. NASDAQ PHLX Utility Index (UTY); Dow Jones U.S. Telecommunications Index (DJUSTL); Dow Jones U.S. Heath Care Index (DJUSHC); Dow Jones U.S. Consumer Goods Index (DJUSNC); Dow Jones Equity All REIT Index (REI); Alerian MLP (AMLP)

Source: Dow Jones, Bloomberg and SSR analysis

Within the sector, we favor utilities whose current rate base and future rate base growth are weighted toward transmission and distribution assets, which we expect to offer superior long term growth compared to vertically integrated utilities whose rate base and investment are heavily weighted toward generation assets.

  • Over the period 2000-2015, the aggregate generation rate base of U.S. investor owned utilities has expanded at a compound annual rate of 7.1%, far exceeding nominal GDP growth of 3.8% over the period (Exhibit 5). Critically, the drivers of this growth – the need to augment the reserve margin of the bulk power system in the early years of this century, followed by a decade of environmental upgrades to the coal fired fleet – are now behind us. Looking forward, the prospects for growth in generation rate base are less enticing. U.S. electricity demand has not increased over the last decade, rendering capacity expansion unnecessary. The EPA’s Cross-State Air Pollution Rule and Mercury and Air Toxics Standards have forced the U.S. coal fired fleet to install controls for SO2, NOx, mercury, acid gases and particulate matter, severely limiting the potential scope of future environmental upgrades. With the Trump administration’s withdrawal of the EPA’s Clean Power Plan, little additional expenditure on environmental compliance will be required.
  • By contrast, over 2000-2015 distribution rate base grew at only 4.1% p.a., lagging the 6.5% CAGR in aggregate electric rate base (Exhibit 5) and leaving distribution rate base at its lowest share of aggregate rate base in 25 years (Exhibit 6). Looking forward, distribution capex is likely to benefit from the continued rollout of smart meters and other smart grid technologies designed to collect data from and exercise control over the distribution system; investments to enhance grid reliability in response to a declining tolerance for distribution system outages and to storm harden distribution systems in coastal states; preparations for the integration of distributed solar generation and electric energy storage; and the strengthening of distribution circuits to accommodate charging of a rising number of electric vehicles. (See Electric Vehicles and the Grid: The Impact of EVs on Power Demand, Peak Load and Electric Energy Storage — and the Impact of the Grid on EVs, May 1, 2017.)
  • Over the last 15 years, transmission rate base has grown most rapidly of all, expanding at an 8.4% CAGR (Exhibit 5). As a result, transmission rate base now constitutes a larger proportion of aggregate rate base than it has at any point over the last 30 years (Exhibit 6). While we believe the rate of growth of transmission rate base is likely to slow beyond 2020, transmission capex will continue to be supported by the replacement of obsolete assets, the need to connect isolated sources of renewable generation with load centers, and investments to eliminate transmission bottlenecks so as to better integrate regional power markets. Moreover, the financial benefit of these investment opportunities is compounded by the higher ROEs allowed by the Federal Energy Regulatory Commission (FERC) on investment in interstate transmission assets; these allow utilities to achieve more earnings growth per dollar of investment in FERC-regulated transmission than is possible through investment in most state regulated generation assets.

Exhibit 5: CAGR in Electric Rate Base by Asset Class

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Source: FERC Form 1, Bureau of Economic Analysis, SNL, SSR analysis

Exhibit 6: Breakdown of Total Electric Rate Base of Investor Owned Utilities by Asset Class (%)

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Source: FERC Form 1, SNL, SSR analysis

Equally important, transmission and distribution utilities face much lower construction, operation, regulatory and financial risk than do vertically integrated utilities, with their greater exposure to generation assets.

  • Historically, vertically integrated utilities have often encountered in major generation projects a combination of risk factors – technical complexity, high cost, long construction periods and focused regulatory oversight — that on occasion have proved crippling to the companies undertaking them. Recent examples include the nuclear power plants being built by Southern and SCANA (Vogtle and V.C. Summer) and the integrated coal gasification facilities undertaken by Southern and Duke (Kemper County and Edwardsport). The high cost and long construction periods of these projects imply that, once they encounter technical difficulties, the financial consequences for their owners are necessarily large and prolonged. Regulators, seeking to protect ratepayers, compound utilities’ risk by imposing limits on the recovery of cost overruns.
  • By contrast, the low technical complexity of transmission and distribution projects renders them far less prone to major cost overruns and completion delays. In addition, the much smaller scale and shorter construction periods of these projects implies that the consequences any such delays or cost overruns are far less damaging. Shorter construction times also allow utilities to respond quickly to unforeseen risks by reducing their capital allocation to similar projects, or making changes to the choice of technology or contractor.

Even after they have been successfully commissioned, major generation projects still carry much higher risks, both operational and regulatory, than do T&D assets.

  • Time and again, equipment failures at nuclear power plants (e.g., FirstEnergy’s Three Mile Island and Davis Besse, AEP’s Cook, Edison International’s San Onofre) have created multi-year financial burdens for their owners.
  • Nor are the risks associated with generation assets limited to nuclear power plants: the cost of compliance with increasingly stringent environmental regulations has long eroded the financial performance of the U.S. coal fired fleet. The most striking recent example has been the high cost of compliance with the EPA’s Mercury and Air Toxics Standards; this standard, which came into effect in 2015, forced the retirement of ~15% of U.S. coal fired capacity, whose owners deemed the capital expenditures required to comply with the regulation to be unrecoverable over the remaining useful life of the plants.

Even in the absence of difficulties in the construction or operation of major power plants, the long construction periods and high cost of these projects implies a much higher risk for utilities from regulatory lag. In jurisdictions where a power plant must be “used and useful” to enter rate base and thus be included in the calculation of the utility’s revenue requirement, costly generation projects with long construction periods can absorb substantial capital and yet generate no cash return for their owners. (To offset this risk, more states in recent years have allowed cash returns on capital invested in large generation projects.) By contrast, utilities adding transmission and distribution assets, individually small and quicker to build, are far more likely to be granted prompt rate relief, often through tracking mechanisms and formula rates.

In choosing among individual stocks, we favor utilities that trade at below average valuations, based on forward PE multiples, but where rapid prospective rate base growth can drive significant earnings growth through the remainder of the decade.

  • Exhibit 7 ranks the regulated electric utilities into quintiles based upon (i) their forward PE ratios (price to consensus 2019 earnings), and (ii) their rate of growth in regulated electric rate base over the period 2018-2020. The table also presents the percentage of each utility’s rate base growth from 2018 through 2020 that is attributable to generation, transmission and distribution assets.
  • We have highlighted in green those utilities whose forward PE multiples are at or below the average for the regulated electric utilities as a group, but whose rate base growth over 2018-2020 ranks in the top quintile among their regulated peers: AEP, EIX, PCG and XEL. At each of these companies, moreover, the contribution of transmission and distribution assets to rate base growth is relatively high.

Exhibit 7: Which Utilities Offer the Most Rapid & Least Risky Rate Base Growth?

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Source: FERC Form 1, SNL and SSR analysis

Exhibit 8: Breakdown of Rate Base Growth by Class of Asset, 2018-2020

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Source: FERC Form 1, SNL and SSR analysis

Among the group of companies that screen favorably in Exhibit 7, we are adding American Electric Power (AEP) and Xcel Energy (XEL) to our preferred list.

  • AEP’s 2019 earnings multiple of 16.8x is modestly below the regulated utility average of 17.2x, yet we estimate that AEP’s rapid rate base growth over 2018-2020 will put it in the first quintile among its regulated utility peers. Also attractive is the fact that almost three quarters of this growth will come from low risk, high return investments in transmission assets. In addition, because AEP’s transmission capex is primarily focused on replacing and upgrading aging transmission infrastructure, we expect the growth in AEP’s transmission rate base to continue beyond 2020. AEP may also have the opportunity in the next decade to accelerate its investment in distribution rate base, which has grown more slowly than the industry average. Ongoing cost control measures and a steadily improving balance sheet imply that AEP should be able to grow earnings with limited equity issuance for several years.
  • Xcel trades at 17.6x 2019 earnings, slightly above the regulated utility average, but we believe the stock could be an attractive holding for long term investors. We expect Xcel’s rate base growth over 2018-2020 to be strong, putting the company in the first quintile among its regulated utility peers. Nearly 60% of Xcel’s total rate base growth over 2018-2020 comprises transmission and distribution assets, while generation capex is driven by investments in low risk renewable power projects in supportive regulatory jurisdictions. Finally, we note that over the last fifteen years, Xcel has experienced above average growth in operation and maintenance expense. Management’s new focus on cost cutting therefore has the potential to contribute materially to earnings growth, particularly in jurisdictions where Xcel’s earnings are lagging behind allowed returns or it is operating under long term rate settlements, and provide ongoing support for management’s 4% to 6% EPS growth target.

Other stocks that in our view may be attractive long term investments include Edison International (EIX) and PG&E Corp. (PCG), although risks associated with each company prevent us from including them on our preferred list.

  • Edison’s multiple of price to 2019 earnings (16.8x) is slightly below the regulated utility average of 17.2x, yet the company should see rapid rate base growth through the end of the decade, ranking in the first quintile among its regulated utility peers. Even beyond 2020, the electrification of transportation in California, combined with the growth of distributed generation and storage, means there is a need for sustained investment in distribution grid modernization at levels materially higher than today. Given Edison’s conservative dividend payout ratio of ~50%, the utility is expected to fund this growth primarily with retained earnings, with very limited if any access to external equity and should offer above average dividend growth, as well. Finally, Edison also benefits from California’s highly supportive regulatory framework. While we believe Edison stock will likely offer attractive long run returns, we expect it to underperform the regulated utilities as a group through the next 12 to 18 months, reflecting the uncertainty created by the proposed review of, and potential reduction in the company’s allowed return on equity in a cost of capital proceeding scheduled to begin in April of next year (see our note of May 12, 2017, California Cost of Capital Proposed Decision: A Year’s Reprieve Before ROEs Drop for EIX and PCG).
  • Broadly the same advantages and risks attend PG&E, whose forward PE multiple of 16.4x also falls below the regulated utility average but whose rate base growth through the end of the decade ranks in the first quintile among its regulated utility peers. A key differentiating characteristic of PG&E relative to Edison, however, has been its historically inferior quality of management, resulting in greater operational and regulatory risk for shareholders, as exemplified by the San Bruno gas pipeline explosion and its aftermath. On the other hand, the recent installation of a new senior management team may be reflected over time in an improvement in operational efficiency and regulatory relations at PG&E, and a consequent recovery in earned ROEs relative to allowed that could cause growth in regulated earnings to exceed that in rate base. Also differentiating it from Edison, PG&E’s earnings growth is likely to be diluted through new share issuance, reflecting the company’s more generous dividend payout and historical practice of issuing equity to fund rate base growth. Finally, PG&E faces the risk of a reduction of its allowed equity ratio from its current 52% in the cost of capital review next year.

The two regulated utility stocks where we have significant concerns are Allete (ALE) and Scana (SCG). Allete screens least attractively among the regulated utilities on both valuation and 2018-20 rate base growth. We are adding Scana (SCG) to our list of least preferred companies due to the potential risks from its V.C. Summer nuclear project.

  • Allete is currently trading at 18.2x 2019 consensus earnings estimates, placing it in the fifth or most expensive quintile among regulated utilities, yet its forecast rate base growth is one of the slowest of all the regulated electric utilities over 2018-2020: 1.4% p.a. We believe Allete’s rate base growth will continue to be constrained beyond 2020 by the fact that 65% of its rate base comprises generation assets, the highest percentage among electric utilities, while distribution assets account for only 10%, the lowest percentage among electric utilities. A further concern is Allete’s heavy reliance on industrial sales, due to the large concentration of taconite mines in its service territory, which renders its revenues and earnings more cyclical than is the norm for regulated utilities. Earnings growth at Allete would benefit from any recovery in the steel industry that the taconite mines supply, as well as from the development of new wind projects at its renewable development subsidiary; however, we believe neither of these will result in earnings growth strong enough to justify its current premium valuation. Finally, we do not see Allete as an attractive takeover candidate.
  • While Scana is trading at a significant discount to the group at 13.8x 2019 consensus earnings, we see little opportunity for investors in this stock while the fate of the V.C. Summer nuclear project is unresolved. Following the bankruptcy of Westinghouse, its construction contractor for the project, Scana must now decide whether to take over responsibility for construction, with the option of completing one or both new units, or to abandon the project and seek recovery from regulators for its investment to date. The safer option would be to abandon the project and seek recovery for construction work in progress, which totaled $4.2 billion at the end of 2016 and should total around $4.8 billion by the middle of 2017. However, this path could dramatically reduce future earnings growth, especially if Scana’s current investment in the project were securitized, removing it from rate base. Abandoning the project also raises the risk of a prudency review and potential disallowance of any expenditures since the financial troubles of Westinghouse and its parent Toshiba came to light. The riskier option would be to complete the project without Westinghouse or Toshiba, seeking recovery from them for future cost overruns in court, but maintaining a path to modest rate base growth (~4.1% p.a., by our estimate, over 2018-2020). Our view, however, is that it is highly likely that there will be delays and cost overruns in completing Summer beyond what is currently forecasted, that the recovery from Westinghouse and Toshiba will be limited, and that any unrecovered cost overruns would be subject to a prudency review for disallowance by regulators. Given the large size of the project (>70% of Scana’s market cap, at the current cost cap under its contract with Westinghouse), the possibility of a multi-billion dollar write-off will be an overhang on the stock.

©2017, SSR LLC, 225 High Ridge Road, Stamford, CT 06905. All rights reserved. The information contained in this report has been obtained from sources believed to be reliable, and its accuracy and completeness is not guaranteed. No representation or warranty, express or implied, is made as to the fairness, accuracy, completeness or correctness of the information and opinions contained herein.  The views and other information provided are subject to change without notice.  This report is issued without regard to the specific investment objectives, financial situation or particular needs of any specific recipient and is not construed as a solicitation or an offer to buy or sell any securities or related financial instruments. Past performance is not necessarily a guide to future results.

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