Dominion Energy is buying troubled South Carolina holding utility SCANA in a deal estimated at almost $15 billion, the companies announced Wednesday morning.
The deal, if completed, also promises close to $3 billion in payments or writeoff benefits for those South Carolina utility customers served by SCANA’s subsidiary.
SCANA, through its South Carolina Electric & Gas unit, has held a huge stake in the failed work to build two new nuclear reactors at the V.C. Summer Station. The utility and its partner, state-owned Santee Cooper, abandoned work on Units 2 and 3 this summer after years of delays, billions in cost overruns and contractor Westinghouse’s bankruptcy filing.
A Dominion spokesman said that the merged company will not restart development of the Summer nuclear station.
Dominion’s offer includes about $7.9 billion stock and, including debt, totals about $14.6 billion. The all-stock merger, if completed, would result in an immediate, average cash payment of $1,000 to South Carolina Electric & Gas customers within 90 days of closing, according to the release.
News reports have indicated that the customer payments could total about $1.3 billion.
“We believe this merger will provide significant benefits to SCE&G's customers, SCANA's shareholders and the communities SCANA serves,” Dominion CEO Thomas Farrell said in a statement. “It would lock in significant and immediate savings for SCE&G customers—including what we believe is the largest utility customer cash refund in history—and guarantee a rapidly declining impact from the V.C. Summer project.”
The deal also promises a write-off of $1.7 billion in V.C. Summer’s 2 and 3 capital and regulatory assets. This means that amount will not be collected from customers and speeds up the overall customer-cost timeline to 20 years instead of previously proposed 50 to 60 years.
Dominion’s offer also vows to complete the $180 million purchase of natural-gas fired Columbia Energy Center at no cost to customers.
"Dominion Energy is a strong, well-regarded company in the utility industry and its commitment to customers and communities aligns well with our values," said Jimmy Addison, CEO of SCANA, in the announcement. "Joining with Dominion Energy strengthens our company and provides resources that will enable us to once again focus on our core operations and best serve our customers."
SCANA shareholders will receive 0.6690 shares of Dominion Energy common stock for each SCANA share, according to the release. The combined company will provide electric and natural gas to more than 6.5 million customers in eight states, making it one of the largest utility holding companies in the U.S.
Exelon Corp.’s $6.8 billion merger with Pepco Holdings two years ago created the largest investor-owned utility in the nation with about 10 million customers.
Already struggling with cost overruns and delays, the Summer project became insurmountable for SCE&G and Santee Cooper after contractor Westinghouse declared bankruptcy earlier in 2017.
Work started in 2009. The projects would need to be completed by New Year’s Day on 2021 to qualify for production tax credits, according to the companies, but they believed that deadline was not achievable.
Santee Cooper and SCANA executives said they sought help from the Trump Administration to save the Summer reactor work, but no response was forthcoming.
Both Santee Cooper CEO Lonnie Carter and SCANA CEO Kevin Marsh resigned in the wake of the project abandonment.
South Carolina Electric & Gas Co. late last month filed a formal request with the federal Nuclear Regulatory Commission to withdraw the combined operating licenses (COLs) for the Summer Station Units 2 and 3. SCE&G’s parent company, SCANA Corp., and partner Santee Cooper announced they were abandoning work on the long delayed, hugely expensive reactors on July 31 after nine years.
SCANA originally reported that no customer refunds were forthcoming but last week’s release indicated that tax deductions might help offset the enormous bill from the alleged $20 billion project.
Advising SCANA Corp. on the merger was the Mayer Brown LLP law firm, while Morgan Stanley & Co. LLC acted as lead financial adviser and RBC Capital Markets, LLC acted as financial adviser to SCANA.
McGuireWoods LLP served as legal counsel and Morgan, Lewis & Bockius LLP as tax counsel to Dominion Energy. Credit Suisse Securities (USA) LLC acted as the company's financial adviser for the transaction.
The merger, if approved, should close sometime in 2018, according to reports.