Friday, September 20, 2013

SCANA: Nuclear Reactor Primer

Another member of the NuStart Energy group is SCANA Corporation (SCG:  NYSE).  The group had its sights on getting a nuclear power plant construction and operating licenses from the Nuclear Regulatory Commission (NRC).  The group was set up in 2004 and SCANA wasted no time in seeking a license for two new nuclear reactor units at its Summer facility in Fairfield County, South Carolina.  It is one of the most public nuclear projects in U.S. history as the company regularly posts photos and notes providing step-by-step updates on construction progress.  SCANA’s updates offer investors an informative primer on nuclear power.

SCANA current sources about 19% of its generating capacity from nuclear technology.  The company owns two-thirds of the first unit at the Summer facility, which has a generating capacity of 548 megawatts.  The rest of SCANA’s power is sources from coal- or gas-fired steam, gas turbines and hydroelectric dams.

The company generated $4.49 billion in total sales in the most recently reported twelve months.  Gas distribution contributes approximately 17% of revenue.  Sales provided $1.36 billion in earnings before interest, taxes, depreciation and amortization, representing an ‘EBITDA’ profit margin of 30.3%.  SCANA’s profit margins are higher than most utilities in its regulated utility peer group.

The analysts following SCANA have forecast a five-year growth rate near 4.75%, just a bit faster than the company delivered over the last few years.  The tepid growth rate is probably one of the reasons the stock is trading at an earnings multiple well below the utility peer group.  An ample dividend provides an attractive yield of 4.4% at the current price level.

Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein.


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