January 3, 2018 / 12:45 PM / 9 months ago

Dominion Energy to buy Scana, assume failed nuclear project costs

(Reuters) - Dominion Energy Inc (D.N) said on Wednesday it would buy Scana Corp (SCG.N) in an all-stock deal worth about $7.9 billion, offering the utility a way to appease customers and investors angered by the cost of a failed nuclear project.

Dominion Virginia Power's North Anna Power Station in Mineral, Virginia. Courtesy Dominion Power/via REUTERS

Richmond, Virginia-based Dominion will pay Scana’s customers $1.3 billion, averaging about $1,000 for each customer, and has promised to cut bills by 5 percent to appease users who have been overcharged for years as Scana funded the nuclear project.

Shares of Dominion, which will also assume Scana’s debt of $6.7 billion, were down 4 percent in after-market trading.

Dominion’s $55.35 per share offer represents a premium of 42.4 percent to Scana’s Tuesday close. South Carolina-based Scana’s shares were trading well below the offer price at $47.89, suggesting some investors were skeptical of the deal.

Scana, which owns the South Carolina Electric & Gas Co (SCE&G), has been under pressure since it scrapped the V.C. Summer nuclear project in July after spending about $9 billion on it with state-owned utility Santee Cooper.

The company received a subpoena in October from the Securities and Exchange Commission related to an investigation of the nuclear project. (bit.ly/2qjxaB1)

Scana was funding some of the project’s costs from SCE&G, a move that angered customers and led to the utility rolling back electricity rates for residential users.

The nuclear project became a lightning rod for criticism, with local politicians arguing over who should pay for the aborted project.

South Carolina Governor Henry McMaster said while the deal is a step in the right direction, it will not resolve all problems for customers.

As part of the deal, Dominion will also write off more than $1.7 billion in connection with the abandoned nuclear plant.

Guggenheim Securities analyst Shahriar Pourreza said he expects regulators to approve the deal.

“Scana does not have any other option and regulators will be aware of that, so the deal is likely to go through but it will be noisy,” Pourreza said.

Dominion is offering 0.6690 of its shares for each Scana share, or about $55.35, based on Dominion’s average stock price of the last 30 trading days ended Jan. 2.

The deal is expected to immediately add to earnings after its closure in the third quarter, Dominion said.

Credit Suisse was the financial adviser for Dominion. Morgan Stanley and RBC Capital Markets advised Scana.

Reporting by Yashaswini Swamynathan and Anirban Paul in Bengaluru; Writing by Nivedita Bhattacharjee; Editing by Saumyadeb Chakrabarty and Shounak Dasgupta

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