Utility Dominion Energy has agreed to acquire Scana Corp., the parent company of the South Carolina utility that terminated its efforts to build two nuclear reactors after delays and cost overruns, for $7.9 billion in stock, the two companies said Wednesday.
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The deal, which must be approved by South Carolina regulators reviewing the collapse of the Summer nuclear plant expansion, would bring together Virginia-based Dominion with the smaller footprint of Scana, based in South Carolina, and create one of the largest energy utility companies in the US.
A crucial element of the deal is a refund of an average $1,000 per SCE&G customer, a 5% reduction in bills representing most of what customers have already paid for the Summer expansion project, Dominion CFO Mark McGettrick said on a conference call with analysts Wednesday.
Should South Carolina's Public Service Commission or legislature reject the terms of the settlement of the nuclear project cost question, Dominion would walk away from the agreement, CEO Thomas Farrell said on the call.
South Carolina Governor Henry McMaster said the proposed sale to Dominion of Scana meant the state was "headed in the right direction" in terms of resolving the problem caused by the project termination.
McMaster, in a statement Wednesday, called for SCE&G's partner in the nuclear project, Santee Cooper, to be sold to compensate electric customers for remaining costs related to the abandoned reactors.
Dominion serves more than 6 million retail and utility customers with electricity and natural gas, holding 25,700 MW of generating capacity.
Scana is the parent company of South Carolina Electric & Gas, which serves 700,000 electric customers and 900,000 regulated natural gas customers, including some in North Carolina.
The acquisition provides Dominion with regulated utility franchises in a fast-growing region of the country, Farrell said.
The deal would require approval of regulators in South Carolina and North Carolina, as well as the US Federal Energy Regulatory Commission and the Nuclear Regulatory Commission, among others.
Scana shareholders would receive 0.67 share of Dominion stock for each Scana share. After completion of the acquisition, Scana shareholders would own about 13% of Dominion.
The deal includes assumption by Dominion of debt, bringing the total value of the deal to $14.6 billion, the companies said.
The transaction would increase Dominion's earnings immediately and could close in the third quarter of 2018, CFO McGettrick said.
Farrell said the refunds to SCE&G customers were believed to be the largest in US utility history. The value of the SCE&G customer refunds is $1.3 billion, the company said.
As part of its proposed settlement of the Summer nuclear expansion issue, Dominion has also agreed to absorb an estimated $1.7 billion in Summer costs that will never be collected from ratepayers, it said. SCE&G ratepayers will pay other Summer costs, about $3.5 billion, spread over 20 years.
The deal hinges on approval by South Carolina regulators of the resolution of the question of recovery of Summer nuclear plant expansion costs from ratepayers.
The purchase agreement includes protections for Dominion from adverse regulatory or legislative actions that impact the deal, Farrell said.
SCE&G and partner Santee Cooper canceled the two-unit expansion of their jointly owned Summer plant in July after the bankruptcy reorganization filing of main contractor Westinghouse, which had provided a fixed-price contract for the AP1000 nuclear units being built there.
The project, about two-thirds complete overall with around $9 billion spent, had been slowed by first-of-a-kind licensing, procurement and design issues.
South Carolina officials have criticized the handling of the project by SCE&G and Santee Cooper, and investigations by state and federal agencies are underway. The state Public Service Commission said in December a hearing will be held on a proposal to deny SCE&G the ability to collect $445 million annually related to the canceled project.
Analysts on the conference call questioned whether Dominion could persuade regulators and elected officials in South Carolina to endorse the deal.
Farrell said he has spoken with McMaster and other elected officials, as well as the executive director of the South Carolina Office of Regulatory Staff, which represents ratepayers and has proposed ending SCE&G's ability to collect Summer expansion costs.
"I am pleased with where things stand right now," Farrell said, declining to characterize the discussions further.
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