Bonds and Financing

Dominion Energy, SCANA unveil $14.6 billion merger

Virginia-based investor-owned utility Dominion Energy and SCANA Corporation, also an IOU, on Jan. 3 unveiled a plan for the two companies to combine in a stock-for-stock merger. Including the assumption of debt, the value of the transaction is approximately $14.6 billion.

Under the transaction, SCANA shareholders would receive 0.6690 shares of Dominion Energy common stock for each share of SCANA common stock, the equivalent of $55.35 per share, or about $7.9 billion based on Dominion Energy’s volume-weighted average stock price of the last 30 trading days ended Jan. 2, 2018.

SCANA would operate as a wholly owned subsidiary of Dominion Energy.

The two companies said the agreement also calls for significant benefits to SCANA’s South Carolina Electric & Gas Company subsidiary electric customers to offset previous and future costs related to the withdrawn V.C. Summer Units 2 and 3 nuclear power project.

After the closing of the merger and subject to regulatory approvals, benefits would include:

  • A $1.3 billion cash payment within 90 days upon completion of the merger to all customers, worth $1,000 for the average residential electric customer. Payments would vary based on the amount of electricity used in the 12 months prior to the merger closing;
  • An estimated additional 5 percent rate reduction from current levels, equal to more than $7 a month for a typical SCE&G residential customer, resulting from a $575 million refund of amounts previously collected from customers and savings of lower federal corporate taxes under recently enacted federal tax reform;
  • A more than $1.7 billion write-off of existing V.C. Summer 2 and 3 capital and regulatory assets, which the companies said would never be collected from customers. This would allow for the elimination of all related customer costs over 20 years instead of over the previously proposed 50-60 years; and
  • Completion of the $180 million purchase of natural-gas fired power station (Columbia Energy Center) at no cost to customers to fulfill generation needs.

In addition, Dominion Energy would provide funding for $1 million a year in increased charitable contributions in SCANA’s communities for at least five years, and SCANA employees would have employment protections until 2020.

In July 2017, SCE&G announced that it would cease construction of two new nuclear units at the V.C. Summer Nuclear Station in Jenkinsville, S.C.

At the time, SCE&G said that the decision was reached after considering the additional costs to complete the units, the uncertainty regarding the availability of production tax credits for the project, the amount of anticipated guaranty settlement payments from Toshiba Corporation, and other matters associated with continuing construction, including the decision of the co-owner of the project, Santee Cooper, the state-owned electric utility, to suspend construction of the project.

Combined company would operate in 18 states

If the merger is completed, the combined company would operate in 18 states from Connecticut to California.

The company would deliver energy to approximately 6.5 million regulated customer accounts in eight states and have an electric generating portfolio of 31,400 megawatts and 93,600 miles of electric transmission and distribution lines. It also would have a natural gas pipeline network totaling 106,400 miles and operate one of the nation’s largest natural gas storage systems with 1 trillion cubic feet of capacity.

The merger is contingent upon approval of SCANA’s shareholders, clearance from the U.S. Federal Trade Commission/the U.S. Department of Justice under the Hart-Scott-Rodino Act, and authorization of the Nuclear Regulatory Commission and Federal Energy Regulatory Commission.

SCANA and Dominion Energy also will file for review and approval from the public service commissions of South Carolina, North Carolina, and Georgia.

“We will seek the approval of the Public Service Commission of South Carolina for the immediate customer payments, rate refunds over time and other conditions related to resolution of the V.C. Summer Units 2 and 3 situation,” said Dominion Energy Chairman, President and CEO Thomas Farrell, in a news release. “We believe it is in the best interests of all parties to reach an agreement on this critical issue. Having certainty on this issue can act as a catalyst for economic development and it is essential for the Dominion Energy-SCANA merger to move forward.”