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S&P Global Ratings upgrades SCANA, revises Dominion outlook on deal approval

S&P Global Ratings on Dec. 27 upgraded SCANA Corp. and its subsidiaries and revised its outlook to stable from negative for Dominion Energy Inc. and its subsidiaries on the expected closing of their all-stock merger.

The Public Service Commission of South Carolina on Dec. 14 voted unanimously to approve Dominion Energy's acquisition of SCANA. S&P Global Ratings said it expects Dominion will be able to close on the deal "in the very near term."

S&P Global Ratings upgraded SCANA to BBB+ from BBB- and raised its senior unsecured notes to BBB from BB+. The rating agency said it is also raising its short-term and commercial paper rating on SCANA to A-2 from A-3 and removing the company and its subsidiaries from CreditWatch.

S&P Global Ratings also upgraded SCANA subsidiary South Carolina Electric & Gas Co., or SCE&G, to BBB+ from BBB-. In addition, the rating agency raised the preferred stock ratings for SCE&G to BBB- from BB and its first mortgage bonds ratings to A from BBB+. SCE&G's short-term and commercial paper rating was raised to A-2 from A-3.

S&P Global Ratings upgraded Public Service Co. of North Carolina Inc., or PSNC, to BBB+ from BBB- and raised its senior unsecured notes to BBB+ from BBB-. The rating agency also raised its short-term and commercial paper rating on PSNC to A-2 from A-3 and raised its short-term and commercial paper rating on South Carolina Fuel Co. to A-2 from A-3.

"The upgrades reflect the higher-rated Dominion's pending acquisition of SCANA," S&P Global Ratings wrote. "We consider SCANA, SCE&G, and PSNC to be core subsidiaries of Dominion with no significant insulation measures in place."

Separately, S&P Global Ratings on Dec. 27 affirmed its ratings on Dominion and subsidiaries Virginia Electric and Power Co., Dominion Energy Gas Holdings LLC and Questar Gas Co. and revised the outlooks to stable from negative. The rating agency also raised the issuer credit and unsecured debt issue rating on Dominion Energy Questar Pipeline LLC to BBB+ from BBB.

"The stable outlook reflects our expectations that Dominion's lower-risk utility businesses will show modest improvement to about 75% of consolidated EBITDA [up from about 70%] following the SCANA acquisition," S&P Global Ratings wrote in its report. "We expect that financial measures will reflect the lower half of the range for its financial risk profile category, with [funds from operations] to debt of 15%-16%."

The rating agency said it also expects Dominion to soon close on its definitive agreement to acquire Dominion Energy Midstream Partners LP.

The rating agency said its upgrade on Dominion Energy Questar Pipeline "reflects our revised assessment of the relationship" between Dominion and the pipeline company, which is a subsidiary of Dominion Energy Midstream Partners.

"Because Dominion will very shortly complete its acquisition of Dominion Energy Midstream Partners ... we expect that Dominion's relationship to [Dominion Energy Questar Pipeline] will be consistent with that of Dominion's other subsidiaries," S&P Global Ratings wrote.

The original S&P Global Ratings documents referred to in this news article can be found here and here.