SCANA Corp. expects to eat more than $200 million of the cost of its failed Midlands nuclear project, hammering its bottom line in a political environment it calls "contentious."
The Cayce-based owner of South Carolina Electric & Gas said Thursday it assumes it won’t be allowed to charge its customers for the bill it racked up since state regulators last formally reviewed the status of the project a year and a half ago.
SCANA estimated it has spent $1.2 billion since then on the two unfinished reactors, which would have extended the life of the V.C. Summer Nuclear Station north of Columbia. But the company said it would soften the blow to its bottom line by covering some of the costs with a recent financial settlement with Toshiba Corp., the parent of the project’s main contractor.
All together, that should result in a $210 million hit to its earnings, the company says. Including the expected write-down, SCANA’s profits plunged 82 percent in the third quarter to $34 million.
Still, executives told investors that they would fight to be repaid the full amount, despite what finance chief Jimmy Addison called an "extremely contentious" political environment. The company said it is trying to negotiate a deal to determine how much its electric customers have to pay to abandon the project, but the talks are preliminary so far.
Key to the talks, executives said, will be how the $1.1 billion from the Toshiba settlement will be spent. The company previously has said it would use the money to offset customers' costs. In a statement last month, SCANA CEO Kevin Marsh said the payments would "mitigate the cost of the abandoned project to customers."
SCANA’s stock ticked up slightly Thursday on news of the write-down, suggesting that investors already expected the company to bear some of the costs of the failed project. SCANA and the state-owned electric utility Santee Cooper spent about $9 billion before killing the expansion in July, citing spiraling costs and construction delays.
It’s not clear whether the company will be allowed to use its payout from Toshiba to cover those costs. Gov. Henry McMaster has asked the company to use that money for customer refunds, and the state’s top utility watchdog has asked regulators to scrutinize how the funds are spent.
"There is significant uncertainty as to SCE&G’s ultimate ability to fully recover its costs," SCANA said in its earnings report. "A disallowance of part of the cost of the abandoned plant is both probable and reasonably estimable."
The uncertainty stems from the political maelstrom SCANA faces in Columbia and the legal questions clouding its future.
The company faces investigations by two legislative panels, the State Law Enforcement Division, a federal grand jury and the Securities and Exchange Commission. Dozens of lawsuits have been filed by investors, contractors and customers. And state regulators are considering whether to keep letting SCE&G charge ratepayers $37 million a month for the unfinished project.
More than half of South Carolina’s electric customers have been paying for the project ever since SCE&G and Santee Cooper broke ground on the reactors in 2008. They include customers of the state’s 20 electric cooperatives, which resell power in every county of the state.
The breadth of the fallout means the nuclear project is sure to dominate next year's legislative session, as lawmakers consider changing the 2007 law that helped finance the reactors and as they look at selling state-owned Santee Cooper to the private sector.
SCANA said it wrote down its profits in part because of the acrimonious nature of the legislative inquiries. But responding to the write-down, lawmakers suggested that the nine-figure haircut wouldn't be enough.
"Ever had a friend start a new diet?" asked Rep. Micah Caskey, a Midlands Republican on one of the Legislature's special investigative panels, in a tweet. "Better get a lot hungrier, SCANA."
Ever had a friend start a new diet? But then you bring them about $6.7 Bn in fresh, hot pizza? Better get a lot hungrier, SCANA. https://t.co/ZL8CMMSoOl— Micah Caskey 🇺🇸 (@MicahCaskey) October 26, 2017