Dominion-SCANA Merger Approved By Shareholders

Deal clears critical hurdle …

Shareholders of embattled crony capitalist utility SCANA have approved the company’s proposed merger with Virginia-based Dominion Energy – a critical milestone in the evolution of this roughly $15 billion deal.

“We are pleased with the approval from our shareholders,” said Maybank Hagood, chairman of SCANA’s board of directors. “We believe the merger with Dominion Energy offers the most comprehensive solution for our customers and aligns SCANA with a company that mirrors our commitment to delivering safe and reliable energy.”

Hagood and SCANA chief executive officer Jimmy Addison presided over the company’s shareholder meeting in Columbia, S.C., during which the company said the proposed merger “received the requirement of receiving an affirmative vote from at least two-thirds of the outstanding shares of SCANA’s common stock.”

Under the terms of the proposed agreement, SCANA shareholders would receive two-thirds of a Dominion stock for every share of SCANA stock they hold.  As of this writing, SCANA was trading at around $40.60 while Dominion was trading at around $71.03 – meaning SCANA shareholders stand to make around $6.75 per share if the deal goes through.

Of course that remains a big “if …”

Also, it’s important to remember the deal isn’t based on today’s stock prices.  If approved, it would be based on the value of the companies’ stock at the time the deal is closed.

As we reported last week, this was the fourth of seven hurdles the deal must clear in order to go through.  The margin of victory wasn’t immediately available, but SCANA sources told us numbers would be posted soon.

Backers of the Dominion-SCANA deal say it is the only viable private sector option to extricate the state from #NukeGate – a calamitously failed government experiment in the energy business.  Back in 2007, members of the S.C. General Assembly put ratepayers on the hook for more than $2 billion of the costs associated with the construction of a pair of generation nuclear reactors at the V.C. Summer nuclear generating station in Jenikinsville, S.C.

The socialization of this $2 billion in investment risk was accomplished via the notorious Base Load Review Act (BLRA) – legislation advanced by liberal state lawmakers and allowed to become law by former governor Mark Sanford.  Additional rate increases related to the project were imposed by government-run Santee Cooper, a state-owned utility that partnered with SCANA on the since-abandoned reactors.

Santee Cooper is now drowning in debt – and has filed suit with the S.C. Supreme Court in an effort to continue raising rates related to the abandoned project.

The reactors at the V.C. Summer nuclear generating station were supposed to have been operational in 2016 and 2017, respectively, at a cost of $9.8 billion.  Obviously that didn’t happen.  And won’t be happening.

The money was spent, the project simply wasn’t finished – and the two utilities couldn’t afford the estimated $10-16 billion price tag necessary to complete them.  A year ago, Santee Cooper pulled the plug on the project – killing an estimated 5,600 jobs in the process.

That was the detonation point for #NukeGate.

The last year has been nothing but fallout …

Supporters of the Dominion-SCANA deal say it is the only option that will provide immediate cash relief to beleaguered ratepayers – $1.6 billion at last count (or roughly $1,500 per residential customer).  Opponents of the agreement claim Dominion is merely trying to “lock in artificially high energy costs” in the aftermath of the #NukeGate fiasco – and that a legislative solution approved last month would provide ratepayers with more relief over time.

Are they correct?

(Click to view)

(Via: High Flyer)

Both sides make compelling arguments … but a key wild card to consider is whether the state’s decision to approve these rate hikes (and ostensibly “oversee” the #NukeGate project) has compromised its ability to now retroactively remove them.

There is precedent in federal court – where the case is being heard – to suggest lawmakers have bet the house on a losing hand.

Either way, three additional steps remain if the Dominion-SCANA agreement is to move forward.  The deal still must be approved by the North Carolina Utilities Commission (NCUC), the U.S. Nuclear Regulatory Commission (NRC) and last but not least the South Carolina Public Service Commission (SCPSC).

That final hurdle could prove quite difficult to clear, too, considering the ostensibly independent SCPSC has become little more than an arm of the all-powerful state legislature – whose leaders appear to be hellbent on sinking this deal.

As we previously reported, in late June legislators refused to even consider a recent $300 million “sweetener” offered by SCANA to ratepayers – money that would have been added to the $1.3 billion in relief Dominion is providing.  This $300 million would have been taken directly out of the pockets of its shareholders.

Even more interesting?  Lawmakers blamed SCANA for negotiating “in secret” despite the fact they solicited the “sweetener” offer from the company in the first place.

Our view?  We think Dominion and SCANA can still come up with more for ratepayers, and we said so earlier this week.

Having said that, as we’ve said all along “we don’t trust the politicians who created this disaster to get us out of it.  At all.”

Our goal is for ratepayers to receive the “maximum amount of relief the market will bear and the courts will accept.”

The closer we get to that goal, the better …



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