January 3, 2018 Read More →

Merger Deal Between Dominion and SCANA Would Write Off $1.7 Billion for Failed Nuclear Plant

Utility Dive:

Dive Brief:

  • Dominion Energy and SCANA Corp. have agreed to an all-stock merger that company officials say will lower customer rates and help unwind financial obligations related to the abandoned V.C. Summer nuclear project. 
  • SCANA shareholders would receive 0.669 shares of Dominion stock for every share of SCANA — or $55.35/share, a 28% premium on Tuesday’s closing price. That amounts to a deal value of $14.6 billion, including debt, should the agreement be approved by shareholders and state and federal regulators.
  • Dominion says it would write off $1.7 billion in costs related to the Summer plant, allowing it to eliminate customer costs for the project over 20 years, instead of the 50-60 years proposed by SCANA. The deal would give Dominion 6.5 million regulated electric and gas customers in eight states. 

Dive Insight:

SCANA, parent company of South Carolina Electric & Gas (SCE&G), has been looking for a buyer since late summer, after it and state-owned utility Santee Cooper announced they would abandon construction of the V.C. Summer nuclear plant, having already spent $9 billion in ratepayer cash. 

The plant was originally estimated to cost less than $12 billion, but mismanagement and problems with reactor design from contractor Westinghouse pushed final cost estimates to $25 billion. SCANA now faces multiple lawsuits and an SEC investigation into whether it misled shareholders about the project, while Santee Cooper could be sold off to pay for the abandoned plant.

Dominion says acquiring SCANA could help cushion the blow of the Summer debacle. In addition to a $1.7 billion writeoff of nuclear costs, the company proposes a $1.3 billion payment to SCE&G customers, amounting to about $1,000 for the average residential ratepayer. That would come on top of an additional 5% residential rate reduction, Dominion said in a release, resulting from refunds of previously collected funds and the impact of lower federal taxes. 

In addition, Dominion said it would complete the purchase of the $180 million gas-fired Columbia Energy Center “at no cost to customers to fulfill generation needs.”

Without debt, the deal is valued at about $7.7 billion. SCANA shares were up nearly 22% in pre-market trading.

If approved, SCANA would operate as a wholly-owned subsidiary of Dominion, saddling the Virginia-based holding company with the baggage of the Summer plant, but also significantly expanding its rate base.

More: Dominion, SCANA agree to $14.6B all-stock merger

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