Santee Cooper Financial Rating is Lowered

From Scott Carlberg

The financial rating agency Fitch* lowered the rating of Santee Cooper’s bonds. Admittedly it is a change from A+ to A-, but a two-step downgrade nonetheless. The direction is not what is desired. Also, the rating went from a “negative watch” to “negative.” The change happened the week of November 13.

Typically, if an organization has lower credit ratings, the more it has to pay in interest to attract investors, adding “return” in exchange for more risk. This makes the cost of borrowed money costlier – the borrowing organization has to pay more.

The borrowing organization in this case is Santee Cooper. Customers pay, through their electric rates, to support Santee Cooper’s cost of doing business.

The Santee Cooper website has a posting about the rating here. It is useful to read that explanation.

The rating report is about more than electricity. It notes various business risks that can affect business performance. Some of these risk items may carry more weight than others. For instance, in noting overall business issues the ratings agency called them, “Pronounced legal and political risk.”

That is a mighty direct statement by the rating agency. A call for clear and deliberate action, no halfway measures, it could seem. Adhere to the criteria that have been outlined to make organizational changes or transfers that are good for consumers.

Legal, political and regulatory issues about SCANA and its terminated nuclear project are being debated now in South Carolina Public Service Commission hearings. The impact on Santee Cooper is not part of the official discussion, though any discussion about the nuclear debt and the future, at minimum, keeps the name in the back of the mind.

So those hearings can make a substantial contribution to reduce “pronounced legal and political risk” noted by analysts. Clearing the obstacles from the path of an improved financial rating – which can include ownership – have to be high on the priority list.

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*Fitch is an international rating agency. Some of the text from its website: “Fitch Ratings provides forward-looking credit opinions, as indicated by its ratings, that reflect its expectations of credit behavior over a range of scenarios. …Rating Reports provide full analysis on the credit profile of an individual issuer, including key rating drivers, rating sensitivities, financials with adjustments, and peers. Rating reports are updated annually or event-driven.” (website)