Be Well – Sell

From Scott Carlberg

The financial rating of Santee Cooper relies in a large part on its ability to easily raise rates on customers. No other organization reviews and approves a Santee Cooper raise in rates. The Santee Cooper board is the group that can raise rates. By itself.

Are you a customer? As Santee Cooper consumers are on the hook for the billions in debt it is important to know the figures and understand financial ratings.

Let’s look behind the ratings.

Enough revenue to cover debt service -- an important concept in corporate financial ratings. “Ratings are assigned on the basis of extensive economic analysis by the rating agencies mainly to determine revenues available to the issuer to cover debt service. The more money available to cover the debt service, the higher the rating.” (Source: American Association of Individual Investors)

 

Santee Cooper has an “A” financial rating from Fitch. High, not the highest. A clear path to higher revenues to cover expenses (debts included) appeals to rating agencies. More money in the door for the organization. More of customers’ money typically.

The point: Santee Cooper financial ratings can be bolstered by the lack of a regulatory oversight of rates for the customers.

About a million dollars are added everyday on top of the billions owed by Santee Cooper. How will the billions in debt be reduced or zeroed? Here is a news story lead from last year: “With legal and political challenges mounting, Santee Cooper’s debt rating ticked down two notches because of the heightened risks facing the South Carolina-owned electric and water utility. Fitch Ratings lowered its rating to A-minus from A-plus …” Financial ratings can go down without higher rates. Lower financial ratings can translate into higher interest rates for the company.

Then, this from last year. “Any move that prevents South Carolina’s public power agency from raising rates to pay its debts in reaction to the abandoned V.C. Summer nuclear reactor project could negatively impact ratings…”

Worth reading again with ECC italics: “Any move that prevents South Carolina’s public power agency from raising rates to pay its debts in reaction to the abandoned V.C. Summer nuclear reactor project could negatively impact ratings…”

Road to Wellness

So … what if the way to move ahead, or to save the utility to enable the best future for its customers, is for the state of South Carolina to sell it? Pay off the existing debt, stop adding debt costs, add resources that it needs, have a deeper bench for employees and the future? If the legislature finds a buyer that meets all their requirements, and there are several, then Santee Cooper could be in much better shape in the long run. Control of rates, deeper resources, options.