South Carolina Electric & Gas Company (SCE&G), principal subsidiary of SCANA Corporation (NYSE: SCG), and Santee Cooper, South Carolina's state-owned electric and water utility, announced an agreement for SCE&G to acquire from Santee Cooper a 5 percent ownership interest in the two new nuclear units which are currently under construction at V.C. Summer Station in Jenkinsville, S.C.
The Santee Cooper Board of Directors approved the sale of 5 percent of V.C. Summer units 2 and 3 to SCE&G. Under the terms of the transaction, SCE&G will own 60 percent of the new nuclear units and Santee Cooper, 40 percent. Under the current ownership agreement, SCE&G owns 55 percent and Santee Cooper owns 45 percent.
The 5 percent ownership interest would be acquired in three stages, with one percent to be acquired at the commercial operation date of the first new nuclear unit, which is anticipated to be in late 2017 or the first quarter of 2018, an additional two percent to be acquired no later than the first anniversary of such commercial operation date and the final two percent to be acquired no later than the second anniversary date of such commercial operation date. The purchase price would be equal to Santee Cooper's actual cost of the percentage conveyed as of the date of the conveyance. Such cost is anticipated to be approximately $500 million for the entire 5 percent interest based on current project cost. The agreement also provides that Santee Cooper will not transfer any of its remaining ownership interest in the two new units until both units have been completed. The transaction is subject to customary closing conditions, including receipt of necessary regulatory approvals.
Santee Cooper has been exploring opportunities to reduce its ownership level since 2011, to better match the new units' capacity with business needs when the units come online and still provide generating diversity that takes into account regulatory and fuel cost considerations.
"The past few years have shown unprecedented volatility in base load fuel costs and increasing regulatory pressures on fossil-fueled generation. Today's (Jan. 27) action reduces our costs to customers somewhat, while still preserving an ownership level that will position us well for the flexibility we will need going forward," said Lonnie Carter, Santee Cooper president and CEO.
"SCE&G has done a stellar job as managing partner of V.C. Summer Unit 1, and they are supervising construction of our two new units in similar fashion," Carter continued. "Today's (Jan. 27) board decision lets us strengthen that longstanding relationship with SCE&G. It also gives Santee Cooper a more precise future nuclear capacity that meets our generating targets and our customer needs."
"We were pleased to work with our partner Santee Cooper to support the transfer of a portion of their ownership in the V.C. Summer new nuclear project to SCE&G," said Kevin Marsh, chairman and CEO of SCANA. "The addition of approximately 110MW from this purchase will help us replace a portion of 345MW of older coal fired generation expected to be retired over the next five years. This increment of nuclear power fits nicely into our updated Integrated Resource Plan, which is scheduled to be filed with the SC Public Service Commission in February 2014.
"A 5 percent increase in our ownership of the new nuclear project will delay the need to build new gas fired capacity after 2020 with clean, non-emitting nuclear energy. Once the new nuclear units are completed and go into commercial operation, we would expect to pay for the additional 5 percent with internal funding without the need for long-term external financing."
SCE&G is a regulated utility engaged in the generation, transmission, distribution and sale of electricity to approximately 675,000 customers in South Carolina. The company also provides natural gas service to approximately 325,000 customers throughout the state. More information about SCE&G is available at www.sceg.com.
SCANA Corporation, headquartered in Cayce, S.C., is an energy-based holding company principally engaged, through subsidiaries, in electric and natural gas utility operations and other energy-related businesses. The Company serves approximately 675,000 electric customers in South Carolina and more than 1.2 million natural gas customers in South Carolina, North Carolina and Georgia. Information about SCANA and its businesses is available on the Company's website at www.scana.com.
Santee Cooper is South Carolina's largest power producer, the largest Green Power generator and the ultimate source of electricity for 2 million people across the state. Through its low-cost, reliable and environmentally responsible electricity and water services, and through innovative partnerships and initiatives that attract and retain industry and jobs, Santee Cooper powers South Carolina. To learn more, visit www.santeecooper.com.
SAFE HARBOR STATEMENT
Statements included in this press release which are not statements of historical fact are intended to be, and are hereby identified as, "forward-looking statements" for purposes of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements include, but are not limited to, statements concerning key earnings drivers, customer growth, environmental regulations and expenditures, leverage ratio, projections for pension fund contributions, financing activities, access to sources of capital, impacts of the adoption of new accounting rules and estimated construction and other expenditures. In some cases, forward-looking statements can be identified by terminology such as "may," "will," "could," "should," "expects," "forecasts," "plans," "anticipates," "believes," "estimates," "projects," "predicts," "potential" or "continue" or the negative of these terms or other similar terminology. Readers are cautioned that any such forward-looking statements are not guarantees of future performance and involve a number of risks and uncertainties, and that actual results could differ materially from those indicated by such forward-looking statements. Important factors that could cause actual results to differ materially from those indicated by such forward-looking statements include, but are not limited to, the following: (1) the information is of a preliminary nature and may be subject to further and/or continuing review and adjustment; (2) regulatory actions, particularly changes in rate regulation, regulations governing electric grid reliability and pipeline integrity, environmental regulations, and actions affecting the construction of new nuclear units; (3) current and future litigation; (4) changes in the economy, especially in areas served by subsidiaries of SCANA; (5) the impact of competition from other energy suppliers, including competition from alternate fuels in industrial markets; (6) the impact of conservation and demand side management efforts and/or technological advances on customer usage; (7) growth opportunities for SCANA's regulated and diversified subsidiaries; (8) the results of short- and long-term financing efforts, including prospects for obtaining access to capital markets and other sources of liquidity; (9) changes in SCANA's or its subsidiaries' accounting rules and accounting policies; (10) the effects of weather, especially in areas where the generation and transmission facilities of SCANA and its subsidiaries (the Company) are located and in areas served by SCANA's subsidiaries; (11) payment and performance by counterparties and customers as contracted and when due; (12) the results of efforts to license, site, construct and finance facilities for electric generation and transmission; (13) maintaining creditworthy joint owners for SCE&G's new nuclear generation project; (14) the ability of suppliers, both domestic and international, to timely provide the labor, components, parts, tools, equipment and other supplies needed, at agreed upon prices, for our construction program, operations and maintenance; (15) the results of efforts to ensure the physical and cyber security of key assets and processes; (16) the availability of fuels such as coal, natural gas and enriched uranium used to produce electricity; the availability of purchased power and natural gas for distribution; the level and volatility of future market prices for such fuels and purchased power; and the ability to recover the costs for such fuels and purchased power; (17) the availability of skilled and experienced human resources to properly manage, operate, and grow the Company's businesses; (18) labor disputes; (19) performance of SCANA's pension plan assets; (20) changes in taxes; (21) inflation or deflation; (22) compliance with regulations; (23) natural disasters and man-made mishaps that directly affect our operations or the regulations governing them; and (24) the other risks and uncertainties described from time to time in the periodic reports filed by SCANA or SCE&G with the United States Securities and Exchange Commission. The Company disclaims any obligation to update any forward-looking statements.