SCANA stock hit a 52-week low today after its primary subsidiary, South Carolina Electric & Gas and Santee Cooper agreed to accept $2.168 billion from Toshiba Corp. to cover costs of the unfinished reactor project at V.C. Summer Nuclear Station that’s being built by its bankrupt Westinghouse Electric subsidiary.
The deal, announced Thursday, allows Westinghouse, which in late March filed for Chapter 11 bankruptcy protection to walk away from the project. Westinghouse designed the two 1,117-megawatt reactor units that SCE&G and Santee Cooper are building at the Jenkinsville plant and has served as the project’s contractor.
Shares of SCANA stock dropped about 6% by noon today to $61.77 after company executives said that the cost of completing the project, which is behind schedule and plagued by cost overruns, would “materially exceed” the guarantee from Toshiba.
StreetInsider.com, an online financial news analysis service, reported today SCANA stock was downgraded by Gabelli Funds to Hold from Buy because of increasing worries that the project will be abandoned. Gabelli also noted that SCANA said in a press release that construction may not be completed before Jan. 1, 2021, the current deadline to qualify for production tax credits under current federal tax rules.
Members of the state’s congressional delegation have been working on legislation to extend the deadline so that the V.C. Summer project may qualify for the credits.
The agreement with Toshiba would yield $1.192 billion to SCE&G for its 55% share of the new nuclear construction project and $976 million to Santee Cooper for its 45% share. The two utilities currently operate one reactor unit at V.C. Summer, which went into operation in 1984.
In the agreement, Toshiba commits to make payments in a series of installments over a period beginning in October 2017 and ending in September 2022, according to a joint press release issued by SCANA and Santee Cooper.
Meanwhile, SCE&G and Santee Cooper are continuing to determine “the most prudent path forward” for the reactor project, the release said.
“However, the project owners anticipate that the additional cost to complete both units beyond the amounts payable in connection with the EPC (engineering, procurement, and construction) contract will materially exceed” prior Westinghouse estimates as well as the settlement from Toshiba, the release said.
The Jan. 1, 2021 deadline to qualify for production tax credits, under current tax rules, also is problematic the release said.
“At this point, the project owners believe that the units could not be brought online until after this date,” the release said. SCE&G and Santee Cooper are “considering these factors, as well as their future generation needs, in their evaluation of the project. Based on these considerations, the alternatives of completing both units or one unit are subject to significant challenges.”
SCANA executives are scheduled to brief the S.C. Public Service Commission on Tuesday about the agreement and progress on the project. The session is scheduled for 10-11:30 a.m.
Options being considered by SCE&G and Santee Cooper include:
• Continue with construction on both units.
• Focus on construction of one unit and delay work on the other.
• Continue with one unit and abandon the other, seeking recovery of money spent on the project under the state Base Load Review Act.
• Abandon the project altogether and seek recovery under the state law.
At least two companies appear interested in taking over Westinghouse’s role as contractor, according to Bloomberg.
San Francisco-based Bechtel Corp., and Fluor Corp., of Irving, Texas, reportedly were preparing bids to serve as contractor on both the V.C. Summer and Plant Vogtle projects. Plant Vogtle is Georgia Power’s nuclear facility.
Bechtel and Fluor are major engineering and construction firms and Fluor already is working as construction manager on the Summer and Vogtle projects.
On Thursday, SCANA is scheduled to announce second quarter financial results.