Dominion Energy (NYSE:D) and SCANA (NYSE:SCG) on Jan. 3 announced an agreement for the companies to combine in a stock-for-stock merger, with the transaction having a value of about $14.6bn, including assumption of debt.
Under the agreement, 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 $7.9bn based on Dominion Energy’s volume-weighted average stock price of the last 30 trading days ended Jan. 2, the companies added.
SCANA would operate as a wholly owned subsidiary of Dominion Energy, and would maintain its community presence, local management structure, and the headquarters of its South Carolina Electric & Gas (SCE&G) utility in South Carolina, the companies said.
According to the companies, the agreement calls for benefits to SCE&G electric customers to offset previous and future costs related to the withdrawn V.C. Summer Units 2 and 3 project, including:
- A $1.3bn 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. According to the Dominion Energy South website, customers would not have to apply for the cash payment, which would be sent to them automatically. On why PSNC Energy and SCANA Energy gas customers are not getting a cash payment, the site noted that the cash payment is to help cover costs paid for the withdrawn construction of the two nuclear units. Only electric customers have paid toward that project, not natural gas customers, the site noted. According to a Dec. 28, 2017, SCANA press release, SCANA has filed a formal request with the U.S. Nuclear Regulatory Commission (NRC) to withdraw the combined operating licenses (COLs) for Units 2 & 3. That notification followed the July 2017 NRC notification that the company stopped construction activities on the Units 2 & 3 site. SCE&G has offered to cede its abandoned interest in the Units 2 & 3 project to Santee Cooper, for no consideration, SCE&G added. If, prior to the NRC approval of the request to withdraw the COLs, Santee Cooper chooses to seek to become the sole licensee for the project, then SCE&G will support an application to the NRC to transfer the licenses to Santee Cooper, the statement noted.
- An estimated additional 5% rate reduction from current levels, equal to more than $7 a month for a typical SCE&G residential customer, resulting from a $575m refund of amounts previously collected from customers and savings of lower federal corporate taxes under recently enacted federal tax reform
- A more than $1.7bn write-off of existing V.C. Summer 2 and 3 capital and regulatory assets that would never be collected from customers. That allows for the elimination of all related customer costs over 20 years instead of over the previously proposed 50-60 years
- Completion of the $180m purchase of natural gas-fired power station (Columbia Energy Center) at no cost to customers to fulfill generation needs
Additionally, Dominion Energy would provide funding for $1m a year in increased charitable contributions in SCANA’s communities for at least five years, and SCANA employees would have employment protections until 2020, the companies said.
The transaction would be accretive to Dominion Energy’s earnings upon closing, which is expected this year upon receipt of regulatory and shareholder approvals, the companies said.
Once the merger is completed, the combined company – which would operate in 18 states from Connecticut to California – would deliver energy to about 6.5 million regulated customer accounts in eight states, as well as have an electric generating portfolio of 31,400 MW, and 93,600 miles of electric transmission and distribution lines, the companies said. In addition, the combined company would have a natural gas pipeline network totaling 106,400 miles and operate one of the country’s largest natural gas storage systems with 1 trillion cubic feet of capacity, according to the companies.
The merger is contingent upon approval of SCANA’s shareholders, clearance from the U.S. Federal Trade Commission/U.S. Department of Justice under the Hart-Scott-Rodino Act, as well as authorization of the NRC and FERC.
The companies added that they will also file for review and approval from regulators in South Carolina, North Carolina, and Georgia.
McGuire Woods LLP served as legal counsel and Morgan, Lewis & Bockius LLP served as tax counsel to Dominion Energy, with Credit Suisse Securities (USA) LLC acting as the company’s financial adviser for the transaction.
The companies also said that Mayer Brown LLP acted as legal counsel to SCANA, while Morgan Stanley & Co. LLC acted as lead financial adviser, and RBC Capital Markets, LLC acted as financial adviser to SCANA.