COLUMBIA, SC SCANA and state-owned Santee Cooper announced Wednesday they have sold most of a $2.17 billion settlement that the Toshiba Corp. had agreed to pay the companies as compensation for a failed nuclear construction project in Fairfield County.
The utilities sold the Toshiba guaranty settlement payments to CitiBank N.A. in an effort to guarantee payment to defray the costs of the now abandoned nuclear project. Citibank N.A. paid the companies $1.84 billion.
The sale will cost the companies a net of about $170 million, but it allows them to be paid upfront, rather than being paid in installments by Toshiba over the next five years.
Toshiba, the parent corporation of nuclear contractor Westinghouse, had agreed in July to make the payments to Santee Cooper and SCANA, the project’s senior partner and parent corporation of SCE&G. SCE&G had promised to use the money to help keep customer rates from going up as a result of the nuclear project.
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But Toshiba remains on shaky financial ground and questions have surfaced about whether the company would be able to make the payments. Westinghouse, which was in charge of the Fairfield nuclear project for SCANA and Santee Cooper, filed for bankruptcy in March. Westinghouse is a division of Toshiba.
“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,” SCANA Chairman and CEO Kevin Marsh said in a news release. “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.
“This transaction allows us to ensure these payments are not subject to further credit risk. As we have consistently communicated, SCE&G intends to utilize the net value of these payments to mitigate the cost of the abandoned project to customers.”
SCANA will receive $1.01 billion from the sale to Citibank N.A. and Santee Cooper will receive $831.2 million. The companies said they will keep the first installments of the Toshiba payments, which totaled $150 million.
“This shifts the risk away from Santee Cooper and our customers, allowing for a one-time payment to take place now instead of a number of payments over five years,” Santee board chairman Leighton Lord said in a statement after Wednesday’s board meeting.
“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.”
Wednesday’s announcement by SCANA and Santee Cooper comes amid a furor over the failed nuclear project. The companies quit work on the project July 31 after spending about $9 billion over a decade. The shutdown left more than 5,000 people out of work. Federal and state authorities are now investigating the matter.
“The elimination of the Toshiba risk is expected to be viewed positively by the financial community,’’ Santee Cooper said in a news release after Wednesday’s board meeting.
Santee Cooper, a state-owned utility, provides electricity for more than 2 million people across South Carolina, making it the state’s largest power provider. The company serves mostly eastern South Carolina. SCE&G provides electricity to more than 700,000 customers.