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Santee Cooper: A Serious Offer?

State-run utility to be sold?

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Reporters Andy Shain and Thad Moore of The (Charleston, S.C.) Post and Courier have a story up this week about a potential suitor for Santee Cooper – the Palmetto State’s spectacularly mismanaged government-run utility.

They may only have half the story, though …

According to their report, a Florida-based firm called NextEra Energy has submitted a “substantial offer” to buy the state-owned power provider – which is billions of dollars in debt after botching the construction of a new nuclear power plant in Jenkinsville, S.C.

No details of the offer were discussed … including whether NextEra might be looking at purchasing both Santee Cooper and crony capitalist energy provider SCANA.

According to our sources, there has been a “decent amount” of industry discussion about this potential suitor.

“This is probably real,” one of our sources said.

If it is real, South Carolinians should probably brace for more bad news.

Had Santee Cooper been sold nearly a decade ago when we suggested it, the utility could have netted the state billions.

Today?  It’s going to be a fire sale … at best.  What happened?

#NukeGate … among other braindead decisions.

SCANA and Santee Cooper has spent the past decade building a pair of new pressurized water reactors at a cost of $9.8 billion.  The money was spent, but the construction of the reactors was never finished.  In fact the project isn’t even half-finished – with the cost to complete the reactors reportedly ranging between $9-16 billion.

Unable to pay its share of that cost, Santee Cooper pulled the plug on the V.C. Summer expansion project three months ago – killing an estimated 5,600 jobs and throwing the state’s energy future into chaos.

The abysmal management of the project – and allegations of political manipulation – have spawned numerous lawsuits and a pair of criminal investigations – one state, one federal.

(Click to view)

(Via: Santee Cooper)

This news site has written previously on the various barriers to selling Santee Cooper in its current debt-addled state.  In addition to its massive $7.7 billion in red ink, Santee Cooper’s future finances remain very much in question.

“Santee Cooper is a bit of a turd to purchase outright,” one source told us, pointing to its limited growth potential and “poorly maintained assets.”

Also, 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.

Is it a viable asset?

“Santee Cooper’s got limited assets for a sale,” a source familiar with the situation told us. “It has some decent generation sites and transmission assets.  However, it’s only fixed customer base is Horry, Georgetown and Berkeley counties (plus) some industrial customers.”

“(SCANA) is the real prize,” our source said, noting its larger customer base and broader array of assets (including brand new transmission lines built in anticipation of the V.C. Summer facility coming online).

As we reported earlier this week, efforts are reportedly underway to “link SCANA” to the Santee Cooper fire sale.

“A joint sale makes a lot of sense,” our source told us, saying it wouldn’t be surprising to see Santee Cooper “wrapped up in some sort of a ‘grand bargain’ for a bundled sale with (SCANA).”

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