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Travis Miller (Morningstar, SCG)

Nov 29, 2017|

Transcript - Not for consumer use. Robot overlords only. Will not be accurate.

Travis Miller for morningstar's with the snout here for a little bit of stock talking Travis thank you for coming on with us. Thank you Mari terms Mirant were talking about SCANA corporation. Yes cannot host South Carolina utility and disclaimer before we get into this this is not your grammar utility. This does value play in space that since way overvalued right now given where interest rates are so. Just a cautionary. Yet there when talking about utility. I look at this in the stock is down 40% this year so let's start first with how we got here what what's been going wrong. As the big thing they start about ten years ago started building in new nuclear plant in South Carolina kills all the rage in a god in got a lot of support politicians and the governor's office from regulators. And ten years forward here now. They've run into big time cost overruns the budget has blown out and back in July they decided management decided that it is also worked. Going forward so we've got about two thirds complete. Nuclear plants sitting in the middle South Carolina. And now the battle is on in terms of who page that. So what's the potential upside here what what is the good situation that leads them out of this. Yes some of the good situation here is unfortunately a long intently long. Or process but there is a law in place that would guarantee them full recovery and don't be shareholders getting pulled recovery. Of the project. We think they're gonna subtle and Tuesday a point below that shareholders do. There are some holocaust but he looked good upside if they get back a substantial amount of money Deluca stuck between 6070 dollars we think it's sixty. Dollars is where they're gonna end up settling. Looking at this company let's say that you strip away this this whole issue with the the nuclear plan so forced it isn't a well run company aside from that. Yeah absolutely this is really her crown jewel in the industry right announces the South Carolina when the only state that actually has growing energy usage. There's a lot of and a corporate industrial commercial development going on in the state. South Carolina and then scanner and particularly well positioned to benefit from gas demand so as gas prices have fallen a lot of customers are going from electricity gas that's creating a lot of investment opportunity of definitely good business outside of your resolving this one nuclear plant issue. We've talked but the best case scenario in some of the positives here. What's the worst case scenario for SCANA. Or spaces 42 dollars for sure and you know given it took 44 that's why we think that it's one of the best values right now 42 that would. So adjust that so politicians come back with a really strong. Opposition. To ratepayers bearing any of that cost of the nuclear plants it would. Contemplates get a potentially having fines penalties from regulators because they weren't able to complete the project. So you would think at that Ford Ford knows for sure right now that a lot of that downside is already big bin and that any kind of settlement before year end with. Result in a stock price more like fifty touched sixty. Good Travis thank you very much of the time we appreciate it. I Travis Miller from Morningstar talking about SCANA corporation with a ticker SCG. Gets a big utility. But a much riskier one due to that nuclear plant that is in question that the guy it's a matter who's gonna pay for. It in those types of situations they can pay off well but it eats its risky enough that you typically you're wary of getting into them lose one off situations aren't. You know they're tough to predict and so because of that it's it's a case where you have to be willing to accept a higher level of risk if you wanna get involved. Welling you're getting paid for that risk in terms of the dividend. If you do get five and record gets its it's a 53 quarter percent dividends there's a good yield that's attached to the stock but they could have to take special charge. In black and white about the dividend for a while they cousin they could see you don't know if that dividends going to be there in the long run that same level. They do a very good track record of raising that dividend historical moment but I think the cause of that nuclear plant that is near two thirds completed. If it does raise some questions about the sustainability of their take a big charge and if they end up on the hook for that. Near that that could have an impact there at six point three billion is that something that somebody else would acquire. It is I mean you could potentially Selig duke energy of someone like that commend. You know they got through once they get through it Darrow duke could be the the most logical one southern companies and other when the ticket around.