Dominion Energy (NYSE:D) and SCANA (NYSE:SCG) on Jan. 24 filed with the North Carolina Utilities Commission a joint application for authorization to engage in a business combination transaction under which SCANA would become a wholly owned subsidiary of Dominion.
As TransmissionHub reported, Dominion and SCANA 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.
As noted in the Jan. 24 application, Dominion, Sedona – which is a wholly owned subsidiary of Dominion created solely to accomplish the merger – and SCANA on Jan. 2 entered into a merger agreement under which Sedona and SCANA would merger, with SCANA being the surviving entity.
The application noted that upon consummation of the merger, each issued and outstanding share of common stock of Sedona would be converted into and become one validly issued, fully paid, and non-assessable share of common stock of SCANA as the surviving corporation; thus, Dominion would own all the stock of SCANA.
At the effective time, SCANA would become a wholly owned subsidiary of Dominion and at the effective time, Public Service Company of North Carolina (PSNC Energy) – a natural gas utility and wholly owned subsidiary of SCANA – would remain a direct, wholly owned subsidiary of SCANA and would continue to exist as a separate legal entity, the application said.
Following the merger, Dominion and SCANA plan to operate PSNC Energy in substantially the same manner as it is operated today, and Dominion intends to maintain PSNC Energy’s headquarters in Gastonia, N.C.
While there is no plan to materially change the operations of PSNC Energy following the merger, PSNC Energy may make appropriate future modifications to its assets, systems, procedures, and services in compliance with applicable laws and regulations, the application added.
Dominion would maintain compensation levels for employees of SCANA and its subsidiaries following the effective time of the merger until Jan. 1, 2020, the application noted.
The merger would not have a net adverse impact on the rates and services of Dominion Energy North Carolina or PSNC Energy, the application said. Although the applicants have not yet determined the transaction fees, integration costs, and any acquisition premium that would result from the merger, none of those costs would be passed on to the customers of PSNC Energy or Dominion Energy North Carolina, the application noted.
Dominion’s acquisition of PSNC Energy at the holding company level would “create a financially stronger combined company and allow PSNC Energy to more effectively meet the future energy needs of North Carolina,” the application said.
SCE&G and Dominion on Jan. 12 filed a joint application and petition with the Public Service Commission of South Carolina for approval of the proposed merger between Dominion and SCANA.
As noted in that application, the companies also requested commission approval of a customer benefit and cost recovery plan for new nuclear development costs associated with the V.C. Summer Units 2 & 3 Project (NND Project) to accompany the merger.
The application noted that while SCE&G remains committed to its public service obligations to its customers, the issues surrounding the company’s recovery of the costs of the now-abandoned NND Project loom large before the commission and in public debate.
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.
The Jan. 12 application said that while the costs of the NND Project were lawfully and prudently incurred and remain properly recoverable through utility rates, SCE&G recognizes the importance of attempting to ease the burden on customers of those costs, while ensuring the financial viability of the utility and its continued ability to operate.
SCE&G has determined that the proposed merger with Dominion and the associated customer benefits plan present the best options to achieve those goals, the application said.
Among other things, the application noted that post-merger, SCE&G would write off $1.4bn in NND Project costs and about $320m in regulatory assets related to the NND Project, removing any future customer obligation for those costs.
Dominion would further underwrite a $575m refund pool for refunding amounts previously collected that, along with the benefit of recent federal income tax reform, would allow SCE&G to provide an immediate reduction in customer bills of at least 5% on a customer class basis, and would keep the portion of the bill reduction that is not attributable to federal tax reform in place for about eight years, the application said.
The acquisition cost of the partial replacement generation capacity for the NND Project – a $180m investment in the gas-fired Columbia Energy Center – would be absorbed by shareholders, the application said, adding that the petitioners – to further ensure rate stability – also agree to freeze retail electric base rates until at least Jan. 1, 2021.