Virginia energy giant eyes Santee Cooper after nuclear debacle

COLUMBIA Late in 2014, a Virginia utility giant purchased a natural gas pipeline system in South Carolina, signaling its growing interest in the Palmetto State’s energy market.

Since that time, Dominion Energy has announced plans for a major solar farm in the Lowcountry, built a gas pipeline southeast of Columbia, established a regional headquarters in the Capital City, donated to nonprofit groups and hired State House lobbyists.

Now, Dominion is one of at least four major Southeastern utilities looking at the state-owned Santee Cooper power company as a potential takeover target.

The question is whether Dominion would take the risk of buying a debt-ridden state utility, and if so, whether it could beat out other interested energy heavyweights – including Charlotte’s Duke Energy, Atlanta’s Southern Co. and Florida-based NextEra

“To me, they are obviously targeting South Carolina for expansion,’’ said Shelley Robbins, energy issues manager with the Upstate Forever environmental group, which recently opposed Dominion’s plan to build a natural gas pipeline in the Spartanburg area. “They’re a shrewd company.’’

Robbins, who has tracked Dominion’s activity in South Carolina, said the company’s interest in buying Santee Cooper clearly depends on price. Debt from a recent failed nuclear expansion project also is a big hurdle to clear.

Still, Dominion would be “a natural fit to expand its presence in South Carolina’’ because of the investments it already has made in the state, said securities analyst Travis Miller.

If Dominion expands in South Carolina, it will bring a record of using the political system, another observer said.

“They are very good at getting what they want,’’ said Tom Hadwin, a former Midwest utility executive who lives in Virginia.

Already, the utility is flexing its muscles in South Carolina, spending more than $300,000 to lobby legislators and buy goodwill with high-profile contributions to good-works groups.

Pipelines and nukes

Both Santee Cooper and its senior partner, investor-owned SCANA, have been mentioned as possible targets for purchase by other utilities in the aftermath of the bungled nuclear project. Santee Cooper and SCANA spent $9 billion trying to build two nuclear reactors before quitting the construction effort in July.

Dominion spokeswoman Kristen Beckham declined to discuss the company’s interest in acquiring Santee Cooper or SCANA, or whether it would want to finish their failed nuclear project in Fairfield County.

But sources have told The State newspaper that Dominion is one of the four investor-owned utilities that have told Gov. Henry McMaster of their possible interest. The other suitors are Duke Energy, NextEra and the Southern Co., three equally large utilities in the Southeast.

Miller, a financial analyst who follows utilities for Morningstar, said buying either Santee Cooper or SCANA is risky because of the debts the companies have from trying to expand the V.C. Summer nuclear site. And while Miller doesn’t think either Santee or SCANA will be bought any time soon, they could eventually.

“Those are large enough utilities that they could take on some extra risk in return for some attractive growth potential,’’ Miller said of Dominion and Duke. “The Carolinas, in general, are very attractive places to be, with solid demand, growth potential and good regulation.’’

Dominion is in an expansion mode, Miller noted, adding the utility’s management has done a good job of finding markets to expand in. “They are a very high-quality company with a good management team and good growth prospects.’’

Duke and Dominion are more likely to express interest in buying either Santee Cooper or SCANA because they already are doing business in the state, Miller said. Sources said Friday that NextEra also is interested.

Last month, for example, Dominion acknowledged for the first time that it might extend a proposed 600-mile regional pipeline into South Carolina. The highly controversial pipeline, which has stirred opposition from communities over its environmental impact, would run from West Virginia to near Lumberton, N.C., about 12 miles from the S.C. border.

Atlanta-based Southern, on the other hand, “has its hands full’’ with its own troubled nuclear project in Georgia, he said. Officials from Duke and Southern have declined to discuss their interest in Santee Cooper or SCANA.

Dominion, a Fortune 500 company headquartered in Richmond, has extensive expertise running nuclear plants, storing natural gas, operating pipelines, and in recent years, providing solar electricity. The company’s nuclear plants are some of the most profitable in the nation, said Hadwin, the former Midwest utility official.

Dominion’s assets extend from its base in Virginia to New England and the western U.S., where it merged last year with the Questar energy company that serves parts of the Rocky Mountains. That September 2016 merger made Dominion one of the nation’s biggest electric and natural gas companies.

Today, the company owns 15,000 miles of natural gas pipelines, operates three nuclear power stations and 18 natural gas plants. Nationally, it serves more than 6 million customers in 14 states, employing 16,000 people.

In contrast, Santee Cooper and SCE&G, the S.C. division of SCANA, together serve about 2.5 million customers. Collectively, the two companies employ about 7,500 workers.

Growing SC presence

Since buying SCANA’s pipeline network late in 2014 for nearly $500 million, Dominion has handed out at least $155,000 in donations to an array of S.C. interest groups, colleges and charitable organizations.

Among those is the Palmetto Conservation Foundation, an organization working to establish a nature trail from the coast to the mountains. The foundation has received about $35,000 from Dominion, it reports. Much of that money was to replace a bridge that washed out on part of the existing Palmetto Trail in the Upstate, and to establish more trail area and boardwalks on another section near Fort Jackson.

Dominion has sent out employees to help with work on trails that needed upgrades, said Suzette Anderson of the Palmetto Conservation Foundation.

Its regional pipeline executive, Dan Weekley, has joined the conservation foundation’s board, which also includes SCANA nuclear official Jeff Archie.

“They don’t just give the money,” Anderson said of Dominion. “They come out and help do the work.’

Other S.C. recipients of Dominion’s grants since 2015 include: the S.C. Waterfowl Association, a well-known hunting organization; the S.C. Department of Parks, Recreation and Tourism; Horry Georgetown Tech; Leadership South Carolina; the Columbia Museum of Art; Clemson University; and the S.C. Forestry Association.

Former utility official Hadwin and David Sligh, an opponent of Dominion’s planned regional pipeline in western Virginia, said they aren’t surprised by the amount of money the utility has spent on S.C. community groups. Dominion operates the same way in Virginia, they said.

“From conservation groups to all kinds of things, they spread money around,’’ Sligh said. “Some groups that claim to be advocacy groups, this can put a little bit of a damper on when and how loudly they will speak out’’ against Dominion.

Dominion also is becoming known at the S.C. State House.

For now, its lobbying activities and campaign contributions are relatively small when compared to Duke, another potential suitor for Santee Cooper.

But Dominion has spent more than $100,000 over the past three years lobbying S.C. lawmakers. Since Nov. 4, 2015, Dominion also has donated $44,550 to state-level S.C. candidates, political parties and State House caucuses, campaign records show. The bulk of the giving came last year, records show.

Republican Gov. McMaster has been complimentary of the utility, as has Columbia Mayor Steve Benjamin, a Democrat.

After Dominion announced in March that it would build two solar farms in Jasper County, McMaster said the investment ”represents the continuance of a lasting partnership between the state of South Carolina and Dominion.’’

When Dominion established its regional pipeline headquarters in Columbia in 2016, Benjamin said he was “thrilled’’ the company would bring jobs to the Columbia area.

Dominion opened its regional pipeline headquarters in Columbia after launching a 28-mile-long natural gas project through eastern Richland County.

The $36 million project initially drew opposition from landowners, who didn’t want to give the company permission to cross their rural property with its pipeline. The company worked out agreements with most property owners and, eventually, built the project to link a site in Calhoun County with International Paper’s mill in Richland County, below Eastover.

Influential utility

These days, Dominion is talking about bringing a much larger regional pipeline — known as the Atlantic coast pipeline — into South Carolina.

At a recent energy conference in Columbia, regional pipeline executive Weekley said "everybody knows" the pipeline, which starts in West Virginia, is not going to stop at the North Carolina border, the Associated Press reported. However, Dominion spokeswoman Beckham said no final decision had been made on bringing it into South Carolina. The proposed pipeline remains under review by regulators in West Virginia, Virginia and North Carolina.

“We hear from economic developers and utilities in South Carolina all the time about the need for new infrastructure to expand access to natural gas across the state,’’ Beckham said in an email. “The manufacturing sector is growing, and utilities are increasingly talking about using natural gas to generate cleaner electricity. Everyone agrees, at some point, the state will need new infrastructure to meet those growing needs.’’

If the regional pipeline comes into South Carolina, Robbins said Dominion could hook up with the 1,500-mile pipeline system it purchased from SCANA in 2014. That system crisscrosses the state and a hook-up would give Dominion a route to deliver natural gas to Savannah, where the fuel could be exported worldwide, she said.

The company’s current effort to build the regional pipeline has stirred opposition in small, rural communities through the southern Appalachian mountains. Critics say the massive line would cut a swath as wide as a road through many communities and expose creeks to sediment pollution from the denuded landscape.

But stopping the pipeline will be a challenge because of Dominion’s political clout, opponents said.

Dominion’s influence in Virginia is pervasive, Hadwin said, extending to virtually every politician in the state, Republican or Democrat, and community organizations.

Said Hadwin: “They really have quite a bit of leverage over the political process here.’’

Staff Writer Avery G. Wilks contributed to this story.

This story was originally published October 13, 2017 at 12:49 PM with the headline "Virginia energy giant eyes Santee Cooper after nuclear debacle."