By Russell Gold and Imani Moise
Dominion Energy Inc. has struck a deal to buy troubled energy company Scana Corp., ushering in the final chapter for Scana's major South Carolina nuclear project after it became mired in controversy and was abandoned when construction costs skyrocketed.
Dominion, a Virginia-based gas-and-power utility, seized on Scana's struggles to strike the $7.43 billion all-stock deal, which requires a number of state and federal approvals and could face a tough time from South Carolina lawmakers.
Scana's decision to abandon a $10 billion nuclear power plant during construction last year, after costs had doubled and the company concluded it would cost even more to complete, soured its relations with South Carolina officials and regulators. Facing investigations and legislative hearings, Scana's chairman and chief executive said last year that he would step down. The loss of political support for the company, which has roots going back 160 years in the region, damaged it and laid the groundwork for the sale.
The deal includes several sweeteners for South Carolina power customers who were upset by being forced to pay for the unfinished plant. Upon closing of the deal, the combined company will pay $1.3 billion to customers of Scana's South Carolina Electric & Gas Co. subsidiary, or about $1,000 per customer in cash payments to be delivered within 90 days.
The company said it would issue new equity to help pay for the refunds.
Under the deal announced Wednesday, each Scana shareholder will receive roughly two-thirds of a Dominion share. The Dominion price represented a premium of more than 30% for Scana shareholders, based on trading prices as of Wednesday morning.
Shares in Scana were up 22% to $47.40 in early afternoon trading, while Dominion shares fell nearly 5% to $76.39
Dominion has been expanding southward from its historic base in Virginia and North Carolina. A subsidiary already owns 1,500 miles of natural-gas pipeline in South Carolina and Georgia.
Scana abandoned construction of the V.C. Summer nuclear power plant last year after rising costs and delays led to the bankruptcy of nuclear project builder Westinghouse Electric Co. Since then, Scana has faced questions from local and federal officials.
The South Carolina plant and a similar project in Georgia were both begun about 2008. But both projects encountered massive cost overruns, which the utilities blamed on Westinghouse as well as contractors. Westinghouse parent Toshiba Corp. entered into settlement deals to pay utilities fixed sums and cap its liabilities.
The Georgia project, an expansion of the Alvin W. Vogtle Electric Generating Plant being spearheaded by Southern Co., is still going forward despite costs that have ballooned to as much as $25 billion.
Scana, based in Cayce, S.C., had collected more than $1 billion from customers to finance construction of its plant. It was seeking to pass on additional construction costs, which would have raised local power bills considerably. Facing rising pressure from state regulators and consumer groups, Scana last year said it would roll back rates for its South Carolina utility customers.
South Carolina Gov. Henry McMaster called the proposed merger a step forward, but noted that it only addressed part of the political ramifications from the failed power plant, which also involved state-owned utility Santee Cooper. Scana owned 55% of the Summer nuclear plant. Santee Cooper owned the rest.
"We are making progress. Under the proposed agreement between Scana and Dominion Energy, SCE&G ratepayers will get most of the money back they paid for the nuclear reactors and will no longer face paying billions for this nuclear collapse," said Mr. McMaster, a Republican.
Dominion said Wednesday that it wouldn't pursue the merger if South Carolina lawmakers or regulators reject the proposed terms.
The companies said South Carolina Electric & Gas Co. residential customers will get a 5% rate reduction, equal to about $7 a month for the typical customer, compared with the 3.5% reduction proposed to appease regulators and frustrated customers last year.
Parts of these lower rates will come from savings due to the corporate tax cut in the recently enacted federal tax overhaul, Dominion said, adding that it would write off about $1.7 billion of nuclear-related assets, lowering the amount that ratepayers would need to shoulder.
Dominion said the deal, expected to close this year, would immediately boost earnings. The purchase helps Dominion extend its reach in the eastern U.S. where customer growth was faster than in its Virginia and North Carolina territory.
Dominion said it would take on about $6.93 billion in Scana debt.
--Valerie Bauerlein contributed to this article.
Write to Russell Gold at [email protected] and Imani Moise at [email protected]