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Georgia Efforts Drag on SCANA’s ’99 Profit
Achieving a vast amount of success in Georgia’s newlyderegulated retail gas industry came at a significant price, SCANAsaid last week as the South Carolina-based company reported 1999earnings of $179 million, or $1.73/share of common stock, down from$223 million, or $2.12/share in 1998.
The primary reason for the earnings decline was start-up costsand operating losses of $.45/share associated with the SCANA’sentry into the deregulated natural gas market in Georgia. However,about 25% of those costs resulted from essentially nonrecurringadvertising and promotional expenses and other start-up costsincurred during the customer acquisition phase of the deregulationprocess, the company noted.
“More importantly, our efforts to increase margins and reducecosts resulted in SCANA Energy achieving profitability in December1999. We emerged from the start-up phase of this new business with94% brand recognition and a customer base of more than 430,000,making us the second largest natural gas marketer in Georgia,” saidKevin B. Marsh, SCANA CFO. “With the positive financial results inDecember, we believe we have turned the corner in this new segmentof our business. Our entire Georgia team is focused on achievingour goal of breakeven results at SCANA Energy in 2000.”
Another depressant to SCANA’s earnings was the mild weatherexperienced during the past year. “The milder weather reducedearnings $.15/share compared to last year while a $22.7 millionannual reduction in retail electric rates, which was implemented inJanuary 1999, reduced earnings another $.16 per share,” said Marsh.
Total kilowatt-hour sales of electricity in 1999 increased 2.6%over 1998. Residential sales declined about 1%, reflecting themilder weather. At year-end 1999 the Company had 523,552 electriccustomers, a 1.2% increase over the last year.
Total sales in SCANA’s regulated natural gas utility businessesin 1999 were relatively unchanged compared to 1998. Increases insales to commercial and resale customers were offset by lowerresidential and industrial sales. The total number of customersincreased to 260,362 at year-end 1999, up 1.3% from 1998. SCANAEnergy, the Company’s nonregulated gas business, ended the yearwith 430,950 customers, up from approximately 78,000 customers atyear-end 1998.
Help is on the way. Besides not having to pay many of the samecosts in Georgia that it had to pay in 1999, SCANA is also lookingforward to synergies gained from the newly completed PSNC merger.That transaction, which will create a company with 517,000 electricand 760,000 gas customers in the Carolinas and Georgia and 350,000telecommunications customers throughout the Southeast, closed lastweek (see Daily GPI, Feb 10).
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