Virginia-based Dominion Energy is buying SCANA Corp. in a $14.6 billion deal that offers $1.3 billion in refunds to SCE&G power customers who unwittingly helped bankroll SCANA’s failed nuclear expansion project.
In a news release announcing the deal, contingent on a myriad of regulatory and shareholder approvals, Dominion pledged cash refunds of about $1,000 per household to customers of SCE&G, SCANA’s Cayce-based electric utility.
The Richmond-headquartered utility also promised to cut SCE&G’s electric rates by $7 a month, on average, and to put a halt sooner to customers’ ongoing charges for the abandoned V.C. Summer nuclear project.
But the proposal has a major weakness in the eyes of S.C. lawmakers: Those customers still would be charged higher electricity bills to pay off debt for two abandoned, unfinished nuclear reactors over the next two decades. SCANA had said it would pay off that debt over the next 60 years.
“We believe this merger will provide significant benefits to SCE&G’s customers, SCANA’s shareholders and the communities SCANA serves,” Dominion Energy chief executive 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.”
Many S.C. leaders were more cautious in evaluating the proposal, which could take up to nine months to gain approval from state and federal agencies.
“Dominion Energy’s proposal to acquire SCANA is an interesting starting point,” said S.C. House Speaker Jay Lucas, R-Darlington, whose chamber has introduced legislation that would halt the $27 a month that SCE&G is charging its customers for the failed nuclear project. “However, I believe more can be done to provide ratepayers with the relief and protections they deserve.
“As negotiations continue, the House will press forward with certain provisions in our ratepayer protection package to increase safeguards so that SCE&G consumers no longer feel the burden of the VC Summer collapse.”
Farrell said later Wednesday his company is willing to discuss lawmakers’ concerns.
Other utilities could make offers
The deal, the largest business transaction in S.C. history, would leave SCANA as a subsidiary of Dominion.
The acquisition also would break a precipitous fall in SCANA’s fortunes that began July 31, when its SCE&G subsidiary announced that it and junior partner Santee Cooper, the state-owned utility, would abandon a $9 billion, 10-year-long effort to build two nuclear reactors in Fairfield County.
As S.C. lawmakers and the public turned on what was once South Carolina’s largest publicly traded company, SCANA’s stock value plummeted.
The company’s stock was selling for $38.87 a share when the New York Stock Exchange closed Tuesday, down from $73.25 a share a year ago. Dominion valued its takeover offer Wednesday at $55.35 a share, sparking a rally in SCANA’s stock price.
The deal also would solidify Dominion’s foothold in the Palmetto State.
Since late 2014, the Virginia energy giant – which operates in 18 states and has roughly 5 million power customers – has expanded its solar energy and gas pipeline businesses into South Carolina and established a regional headquarters in Columbia.
Dominion also is one of four out-of-state utilities interested in buying Santee Cooper, which Gov. Henry McMaster wants to sell after its role in the nuclear fiasco.
At least two of those companies, Charlotte-based Duke Energy and Florida-based NextEra Energy, are said to be considering bids for SCANA as well. Both declined comment Wednesday.
SCANA chief executive Jimmy Addison said Wednesday that Dominion is the only company to make an offer thus far.
McMaster praised the Dominion deal’s refunds for SCE&G customers. But he said Santee Cooper, which serves 2 million customers directly and indirectly, also must be sold.
“The only way to resolve this travesty is to sell Santee Cooper,” the Richland Republican said. “There is more work to be done, but today, we are headed in the right direction.”
SCANA workers get job security through 2020
Dominion touted the deal as a boon for SCANA shareholders who have lost billions of dollars and for SCE&G’s 700,000 S.C. electric customers, who so far have paid $1.8 billion in higher electricity rates for the unfinished reactors.
The average SCE&G customer, still paying $27 a month toward the nuclear project’s financing costs, will get a roughly $1,000 cash payout within 90 days of the acquisition, Dominion said. The company expects to close on the purchase within nine months.
The amount each customer will get will vary, based on the amount of electricity they used over the last 12 months, Dominion said.
Dominion has not determined whether or how to pay new SCE&G customers, who only recently began paying the higher nuclear-related charges, or those who paid the higher charges for years but recently moved away.
Dominion also pledged to cut SCE&G’s electricity rates by about 5 percent – or $7 a month – and to stop charging customers for the nuclear project within 20 years, rather than the 60-year time line SCE&G had proposed.
“This agreement is unprecedented in the benefits it provides for customers,” Farrell said at an afternoon press conference.
Dominion says it will meet the SCANA’s growing energy needs by buying a $180 million natural gas facility in Calhoun County at no cost to customers.
In November, SCE&G offered to buy the same plant and cut customers’ electricity rates by $5 a month, a deal S.C. lawmakers roundly rejected as inadequate. Instead, lawmakers called for SCE&G to stop billing customers for the nuclear project and return the $1.8 billion the utility already has charged.
While some lawmakers have filed legislation to force those moves, others have worried aloud about driving SCANA into bankruptcy or into the arms of an acquirer. They cautioned that an out-of-state acquirer might run SCANA like a robber baron, laying off employees while jacking up power bills and providing shoddier service.
To address those concerns, Dominion promised SCANA employees’ jobs are safe until at least 2020. Dominion also said it plans to contribute at least $1 million a year more to charity in SCANA’s communities for at least five years.
As Dominion’s subsidiary, SCANA “would maintain its significant community presence, local management structure and the headquarters of its SCE&G utility in South Carolina,” according to the Wednesday news release.
‘I think it’s a difficult sell’
S.C. elected leaders were cautious in their reaction to the deal.
“It’s a step in the right direction, but there’s still a number of questions that have to be answered. We’ve got to get more specific details,” said state Senate Majority Leader Shane Massey, an Edgefield Republican who chairs the Senate committee investigating the failed V.C. Summer expansion effort. “I’m still having difficulty with customers continuing to pay for V.C. Summer. Regardless of who the entity is, I think it’s a difficult sell to ask customers to continue paying anything toward V.C. Summer.”
Senate Minority Leader Nikki Setzler, D-Lexington, called Dominion an “outstanding company” and praised its olive branches to SCE&G customers and employees.
“The ratepayers are going to get money back, which is a huge plus,” Setzler said. “They are going to maintain a South Carolina headquarters, which is clearly important. Those people that committed their lives to that company and built it are going to be taken care of, which is important.”
State Rep. Kirkman Finlay, R-Richland, called Dominion’s bid an “interesting proposal” but said lawmakers must ensure SCE&G customers aren’t paying for nuclear reactors that won’t be built.
“That forces us to ask additional questions: What are the ratepayers paying, and what are they getting for what they’re paying?” Finlay said.
Farrell told reporters Wednesday that Dominion is willing to discuss terms of the deal with lawmakers. But, Dominion added, it needs the ability to continue charging customers for the nuclear project in order to make the deal equitable for all stakeholders.
Mike Couick, chief executive of the Electric Cooperatives of South Carolina, said the state’s 20 electric cooperatives want to learn how the deal will affect their working relationship with SCE&G. The cooperatives, who buy most of their electricity from Santee Cooper, also want to know how they might benefit from a sale of that state-run utility.
“How do we get similar ratepayer relief out of Santee Cooper?” Couick asked.
Dominion values deal at $55.35 a share
As part of the stock-for-stock merger, SCANA shareholders will receive 0.669 shares of Dominion Energy stock for each share of SCANA stock that they own.
Based on a 30-day average closing price for Dominion shares, Dominion’s offer valued SCANA stock at about $55.35 a share as of Tuesday. SCANA shareholders would own 13 percent of the combined company.
Dominion will take on all of SCANA’s assets and debt, including the company’s 55-percent ownership stake in the unfinished V.C. Summer nuclear station reactors. However, Dominion does not want to restart construction on the reactors, Farrell said Wednesday.
The deal needs the approval of SCANA’s shareholders; the U.S. Federal Trade Commission; the U.S. Department of Justice; the Nuclear Regulatory Commission; the Federal Energy Regulatory Commission; and the public service commissions of South Carolina, North Carolina and Georgia.
“Dominion Energy is a strong, well-regarded company in the utility industry and its commitment to customers and communities aligns well with our values,” SCANA CEO Addison said in a statement. “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.”