Industryweek 26981 010318 Dominion Energy

Dominion Scoops Up Scana for $7.9 Billion After Nuclear Flop

Jan. 3, 2018
The transaction is valued at about $14.6 billion including the assumption of debt, with the acquisition expected to close this year pending regulatory and shareholder approval.

Dominion Energy Inc. will buy Scana Corp. for $7.9 billion in a stock-for-stock deal, purchasing a utility battered by a failed nuclear project that’s drawn scrutiny from federal and state regulators.

The acquisition would be the largest ever by Richmond, Virginia-based Dominion. Scana investors will receive 0.669 shares of Dominion for each share they own, valuing the stock at about $55.35. To win over regulators, Dominion is offering a $1,000 cash payment to the average residential customer and promising 5% rate cuts to reflect gains from recent U.S. tax legislation.

Scana, based in South Carolina, made an attractive target as the company’s market value plummeted after the utility halted expansion of its V.C. Summer nuclear plant in late July. The shares were trading at $48 at 8:47 a.m. in New York, after sitting above $70 as recently as June.

“Dominion acquiring Scana makes a lot of sense,” Shahriar Pourreza, a New York-based analyst for Guggenheim Securities LLC, said by phone Wednesday. Dominion is building a major natural gas pipeline, the Atlantic Coast line, to the South Carolina border, and state officials want it extended, he said. The line could serve Scana customers.

The transaction is valued at about $14.6 billion including the assumption of debt, according to a statement Wednesday. The acquisition is expected to close this year pending regulatory and shareholder approval.

Federal and state investigators are probing the V.C. Summer nuclear project, which triggered a review of the law that allows utilities to charge customers for unfinished or abandoned power plant projects.

“Dominion is still going to have a very big uphill climb” for approval of the deal in South Carolina, said Pourreza, who had upgraded Scana to hold from a sell on the prospect for a takeover.

The deal is the latest in a string of massive utility mergers: The industry saw a combined $68.2 billion of acquisitions in 2017, the most in a decade, according to data compiled by Bloomberg. Stagnant electricity prices and tight profit margins have stoked the buying spree.

The acquisition would include a more than $1.7 billion write-off of existing V.C. Summer 2 and 3 capital and regulatory assets, allowing the elimination of all related customer costs over 20 years.

Southern Co., which is developing the only new nuclear power in the U.S. after Scana abandoned the Summer project, has also seen its stock decline. Shares traded at $47.18 in New York after rising above $53 as recently as November.

By Christine Buurma and Jim Polson

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