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Selling Santee Cooper …

Better late than never?

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Against all odds, South Carolina governor Henry McMaster appears to have lined up a buyer for Santee Cooper – the Palmetto State’s spectacularly failed state-owned energy provider.

At least that’s what sources are telling The (Columbia, S.C.) State newspaper, which appears to be McMaster’s go-to source for leaks these days …

According to reporter Avery Wilks, an “out-of-state utility has submitted a proposal to buy some or all of Santee Cooper.”

Really?

McMaster’s office told Wilks that three additional firms are eying the utility, and are expected to submit offers soon.

Will those offers be worth the paper they’re printed on?  That remains to be seen …

Obviously we’re very interested in seeing the terms of these proposals, because last time we checked this government-run energy bureaucracy was essentially dead in the water – barring a multi-billion dollar taxpayer bailout, anyway.

We’re also very interested in seeing what comes of a Santee Cooper asset valuation that McMaster’s office is in the process of commissioning (yet another expense of tax dollars related to this ongoing debacle).

In addition to its massive $7.7 billion debt load, Santee Cooper’s future finances remain very much in question.  For starters, any entity interested in purchasing the utility would be forced to borrow money at higher rates than those currently available to it – effectively lowering the value of the asset.

As a government agency, Santee Cooper has benefited from municipal bonds – enabling it to issue debt at below market rates.  Assuming the utility were sold to a private sector provider, those competitive advantages would disappear – leading some to label the purchase of the utility as “non-economic.”

Furthermore, Santee Cooper has been able to raise rates on consumers with impunity for the last decade – something it will no longer be able to do in the aftermath of the #NukeGate debacle.

For these reasons, we do not believe the utility is a viable asset … at least not without taxpayers being forced to shoulder additional risk related to the investment.

Is that a good idea?  Hell no …

(Click to view)

(Via: Santee Cooper)

Santee Cooper and its private sector partner, publicly traded power company SCANA, spent the past decade collaborating on a massive expansion of the V.C. Summer nuclear power station in Jenkinsville, S.C.  This project was supposed to have produced a pair of next-generation AP1000 pressurized water reactors at a cost of $9.8 billion.  The money was spent, but the reactors were never finished.  In fact they’re not even half-finished.  Not only that, they could cost another $9-16 billion to complete.

Unable to pony up its share of that amount, Santee Cooper pulled the plug on the deal on July 31 … killing an estimated 5,600 jobs, squandering billions of dollars in investment (including more than $2 billion raised through rate increases on consumers) and throwing the state’s energy future into chaos.

Documents released last month revealed executives at the two utilities knew over a year-and-a-half ago the project was doomed – yet continued to raise rates on consumers anyway.

Not surprisingly, the project’s failure has spawned numerous lawsuits and a pair of criminal investigations -one state, one federal.

It has also created potentially career-ending consequences for politicians who approved the projects … as well as for former governor Mark Sanford, who allowed the now-notorious Base Load Review Act to become law without his signature.

As if all that weren’t enough, there are serious questions as to the constitutionality of the Base Load Review Act – which is the law that enabled the utilities involved in this project to socialize their investment risk.

Bottom line?

Had South Carolina sold Santee Cooper a decade ago when we recommended it, the taxpayers of the Palmetto State could have made billions of dollars.

Now having lost billions of dollars … they’ll be lucky to give it away.

***

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