SCANA, Santee Cooper Monetize Settlement Payments from Toshiba to Minimize Risk

SCANA Corp. and Santee Cooper moved to cash in a $2.2 billion settlement with Toshiba—even though it will cost them $171 million—rather than risk collecting guaranty payments from the Japanese conglomerate over the next five years for the unfinished V.C. Summer nuclear expansion.

Just days before the utilities decided to abandon the project, Toshiba on July 28 agreed to pay the utilities $2.2 billion to cap its liabilities from the long-delayed and highly over-budget nuclear project. The company has been working to close a $4.5 billion hole burned into in its shareholder equity by the bankruptcy of Westinghouse, the subsidiary that spearheaded construction and engineering of four AP1000 reactors, two at Summer in South Carolina and two at Vogtle in Georgia. On September 28, Toshiba announced it had signed a deal to sell its memory chip business for $17.7 billion to a consortium led by Bain Capital to help plug that financial hole.

For SCANA and Santee Cooper, which abandoned the V.C. Summer project based on concerns that total project costs could exceed $20 billion, selling all future guaranty settlement payments will help mitigate credit risk associated with receiving payments from Toshiba.

The project partners accepted Citibank’s bid, which was the highest numeric bid submitted among five broker-dealers and eight investment management firms.

SCANA on September 27 said Citibank paid the project partners $1.85 billion—or about 91.5% of the total amount of the guaranty settlement payments sold. That amount does not include the first scheduled payment from Toshiba, due in October 2017.

SCANA, which was to receive $1.192 billion from Toshiba for its 55% share of the project—and will instead get $1.016 billion—said the decision will ensure “these funds are available to mitigate costs of the abandoned project for [South Carolina Electric & Gas’s (SCE&G’s)] customers.”

“With Toshiba still facing challenges, we believe this was a crucial step to mitigate the risk and realize the value of these payments for the benefit of our customers,” said SCANA Chairman and CEO, Kevin Marsh. “The guaranty settlement payments from Toshiba, as the parent company of Westinghouse, are payable due to the failure of Westinghouse to deliver on its fixed price commitment on our new nuclear project.”

Leighton Lord, chairman of the Santee Cooper Board of Directors, noted in a press release that the sale of the monetary rights “shifts the risk away from Santee Cooper and our customers. “We will use this money to benefit customers by offsetting rate increases in the short term, offsetting debt over the long term and paying our portion of mechanics liens,” he said.

Santee Cooper will receive $832.2 million for its 45% share.

See related stories about the V.C. Summer project from this week here:

S.C. AG, State Lawmakers Press for Criminal Investigation of SCANA’s Role in V.C. Summer Nuclear Expansion Collapse

In-depth: Feds Subpoena Documents Related to 2016 Bechtel Audit of V.C. Summer Nuclear Expansion

—Sonal Patel is a POWER associate editor (@sonalcpatel, @POWERmagazine)