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#NukeGate: NextEra Chatter Ramps Up (Again)

Is it for real this time?

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Speculation regarding a new potential suitor for embattled South Carolina crony capitalist utility SCANA escalated over the weekend – with some believing another proposed deal for the scandal-scarred firm could be floated as soon as this week.

We’ve heard this chatter before, though.  State lawmakers were convinced two weeks ago that a new offer was coming – but as of this writing nothing has materialized.

There are also legitimate questions as to whether all this corporate rumormongering is part of a calculated effort to manipulate stock prices.  To wit: SCANA’s stock rose by 3.4 percent during the last ninety minutes of public trading on Friday.

It then climbed another 1.7 percent in after hours trading Friday …

The longer such speculation persists, the higher its beleaguered stock could climb … although our guess is the U.S. Securities and Exchange Commission (SEC) is eyeing all of this very closely.

The potential suitor at the heart of all this intrigue?  NextEra Energy, a Florida-based firm that’s reportedly preparing an offer for both SCANA and Santee Cooper – the two utilities at the heart of a spectacularly failed, colossally costly government intervention in the Palmetto State’s energy industry.

According to two different sources familiar with the rumored offer, it would provide for the purchase of both utilities – and include “more ratepayer relief” than a deal offered earlier this year by Virginia-based Dominion Energy for SCANA.

Of course there are serious questions as to whether the math adds up for a purchase of Santee Cooper – which Dominion doesn’t want.

“How are they going to pull off managing Santee Cooper’s debt?” one source familiar with the rumored NextEra offer told us.  “This is going to be fascinating.”

Actually there’s only one way we see a deal for Santee Cooper making mathematical sense – a massive taxpayer bailout.

How did South Carolina land in such an untenable position?  Its politicians, that’s how …

With state lawmakers cheering them on, these two firms spent the past decade building a pair of next-generation nuclear reactors in Jenkinsville, S.C. 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 – with the cost to complete them reportedly ranging from anywhere between $9-16 billion.

As of this writing, there are no plans to complete the project – which we’ve dubbed #NukeGate.

(Click to view)

(Via: SCANA)

Drowning in debt, Santee Cooper pulled the plug on the reactors six months ago – killing an estimated 5,600 jobs, squandering billions of dollars in investment and throwing the state’s energy future into chaos.

Much of the investment risk associated with this project was effectively socialized via a now notorious bill called the “Base Load Review Act.”  This special interest legislation – which enabled the utilities to bill ratepayers for the costs of constructing the reactors – was advanced by  “Republican” lawmakers and allowed to become law in 2007 by former governor Mark Sanford.

Documents released last fall revealed executives at SCANA and Santee Cooper knew nearly two years ago that the reactors were doomed – yet continued to raise rates on consumers anyway.  In fact, ratepayers are still shelling out an estimated $37 million per month on the project (all while Santee Cooper’s former leader receives a massive taxpayer-funded bailout).

In fact, just eight days before it pulled the plug on the project Santee Cooper announced massive rate increases on customers tied to “costs associated with nuclear construction and other system improvements.”

Yeah … no wonder people are so livid, right?

In addition to its political fallout, #NukeGate has prompted a flood of lawsuits and a rapidly escalating, multi-jurisdictional criminal probe.  It’s also prompted a major corporate battle.

Earlier this month, Dominion submitted a $14.6 billion deal to buy SCANA – including $1.3 billion in relief for ratepayers and a significant reduction in the nuclear surcharge they’ve been paying each month on this project.

Dominion’s deal doesn’t get ratepayers completely off the hook for the future costs associated with this project, though, which is why many lawmakers have criticized it – and why governor Henry McMaster recently withdrew his initial support for the deal.

McMaster is deeply conflicted in this drama, and not just in terms of the campaign cash he’s pocketed from numerous insider interests with direct stakes in the outcome of #NukeGate.  The governor and his administration have been deeply involved in any number of backchannel negotiations – including efforts to unload Santee Cooper for a song.

Speaking of backchannel negotiations, late Friday this news site exclusively reported on secret conversations between NextEra and Mike Fanning – the S.C. senator who represents the Fairfield County town where the reactors were to be built.

Fanning told us he’s talking to two other companies, too, hoping to “flesh out additional offers.”

This is reportedly just one of several offline discussions undertaken by state leaders – many of whom bear direct culpability for landing ratepayers in this mess in the first place.

Where is all of this heading?  God only knows …

As we’ve stated from the beginning of this drama, we don’t trust the politicians who created this disaster to get us out of it.  At all.  Nor do we believe any of the current offers provide enough relief for ratepayers.

The question is this: Can we get to the right amount of relief without torpedoing a negotiated settlement completely?  Leaving ratepayers with nothing?

Ideally, a deal will be reached that avoids a protracted legal battle that could conceivably cripple the state’s economic viability for years to come – and potentially destroy its credibility in the bond markets.

“Our goal is simple: A reasonable settlement that maximizes ratepayer relief, within the confines of what the courts will accept and the markets will bear,” we wrote last week.

The worst-case scenario?  A bitter legal fight that lasts for years, hamstrings economic growth and ruins our state’s already deteriorating reputation with the financial markets.

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