Several buyers show interest in South Carolina's Santee Cooper
A consultant hired by South Carolina to take non-binding bids for the state-owned Santee Cooper utility says three proposals would fully defease the public utility’s bonds and a fourth would assume the debt.
Gov. Henry McMaster’s office released consultant ICF’s 40-page summary of offers, which will be reviewed by the Legislature’s Public Service Authority Evaluation and Recommendation Committee on Wednesday.
The committee, composed of McMaster, four senators and four representatives, is expected to make a recommendation to the full Legislature this session about whether to sell Santee Cooper, formally known as the South Carolina Public Service Authority.
McMaster, who has pushed to sell Santee Cooper because of debt tied to two nuclear reactors that won’t be completed, said the report by Virginia-based ICF brings the state to a “historic moment” because it shows the utility could be sold free of debt.
“There is no longer any significant reason to delay action needed to solve the Santee Cooper crisis,” McMaster said. “I ask that members of the General Assembly objectively review this report and place the interest of our state’s ratepayers and taxpayers first and those of the naysayers last.”
The ICF report, which doesn’t name companies that submitted offers, said Santee Cooper had a total of $7.9 billion of outstanding debt as of December. The portfolio consisted of long-term tax-exempt and taxable bonds, mini-bonds, and $300 million in short-term debt.
About half the debt is attributable to financing for the failed reactor project, whose construction was managed by South Carolina Electric & Gas, an investor-owned utility recently sold to Dominion Energy with the approval of the South Carolina Public Service Authority.
Santee Cooper’s board voted in July 2017 to discontinue being a partner in the reactor with SC&G project because of soaring costs and delays.
ICF said it received 15 offers from 10 different companies, all of which were discussed in the consultant's report.
However, the report also analyzed four proposals that the firm said would result in a complete acquisition of Santee Cooper and its debt. Santee Cooper provides mostly wholesale electric power sales and operates two wholesale water systems.
The four "full purchase" proposals were from U.S. electric utility companies and non-utility companies, including leading financial entities involved in the electric power sector. “Some entities have significant presence and a long history within the state,” ICF said.
Three of the proposals would convert Santee Cooper into an investor-owned utility regulated by the PSC, while a fourth would maintain public ownership “but the details of the structure cannot be fully discussed due to confidentiality issues,” the report said.
Three proposals included the acquisition of Santee Cooper’s hydro assets, while one did not envision owning those assets or the water utility.
ICF said the estimated prices it received for the utility “are close to the low end” of its estimated range of Santee Cooper’s value, which is between $8.1 billion to $10.1 billion.
The indicative bids received ranged from $7.9 to $9.2 billion.
The process of obtaining proposals “revealed a robust level of interest in Santee Cooper,” ICF said, but only one proposal resolved problems associated with the multi-year wholesale power purchase agreement Santee Cooper has with its largest public power customer, the Central Electric Cooperative.
While one proposal dealt with Central Electric’s agreement, ICF said the party was unable to defease Santee Cooper’s debt.
McMaster, a Republican, has threatened to veto any attempt by Santee Cooper to raise rates, and has said that ratepayers shouldn’t have to pay for money spent on reactors that will never be used. He won a full four-year term as governor in the Nov. 6 election. He ascended from the lieutenant governor's office to become governor in 2017 after Nikki Haley resigned to become ambassador to the United Nations.
Santee Cooper is also involved in a number of lawsuits challenging the legality of rates it charges to customers, including electric cooperatives, to pay for the reactor project.