Published Jan. 27, 2014
South Carolina Electric & Gas plans to increase its ownership share of the two nuclear units under construction at the V.C. Summer Station by 5% and pay its partner in the project, Santee Cooper, $500 million.
At today’s Santee Cooper board meeting, the state-operated utility approved the sale of 5% of units 2 and 3, which are under construction, to SCE&G, principal subsidiary of investor-owned SCANA Corp.
Under the agreement, SCE&G will own 60% of the new, 1,117-megawatt nuclear units and Santee Cooper’s share will be 40%. Under the current ownership agreement, SCE&G owns 55% and Santee Cooper owns 45%.
SCE&G would acquire the 5% ownership interest in three stages, with 1% coming at the commercial operation date of the first new nuclear unit, anticipated to be in late 2017 or the first quarter of 2018. An additional 2% will be acquired no later than the first anniversary of the unit’s commercial operation date and the final 2% no later than the second anniversary the unit’s commercial operation date.
The purchase price would be equal to Santee Cooper's actual cost of the project. The total cost is expected to be approximately $500 million for the entire 5% based on current project cost, the utilities said.
The total project is estimated to cost $9.8 billion.
The agreement also provides that Santee Cooper will not transfer any of its remaining ownership interest in the two new units until both units have been completed.
Santee Cooper has been exploring opportunities to reduce its ownership level since 2011, to better match the new units' capacity with business needs when the units come online and still provide generating diversity that takes into account regulatory and fuel cost considerations.
"The past few years have shown unprecedented volatility in base load fuel costs and increasing regulatory pressures on fossil-fueled generation. Today's action reduces our costs to customers somewhat, while still preserving an ownership level that will position us well for the flexibility we will need going forward," said Lonnie Carter, Santee Cooper president and CEO.
The agreement also appears to put a deal between Santee Cooper and Duke Energy Carolinas for a share of the new units on the back-burner. In July 2011, Duke had signed a letter of intent with Santee Cooper for a potential minority interest in the new nuclear reactors at the V.C. Summer.
Initial plans called for Duke’s minority ownership to be 5% to 10% of the capacity of the two new units, the company said. Santee Cooper said it was trying to reduce ownership in the two V.C. Summer units to about 20%.
"We were pleased to work with our partner Santee Cooper to support the transfer of a portion of their ownership in the V.C. Summer new nuclear project to SCE&G," said Kevin Marsh, chairman and CEO of SCANA.
The additional 5% share in the new units will amount to of approximately 110 megawatts of electricity, enough to help SCE&G replace a portion of 345MW of older coal-fired generation expected to be retired over the next five years, Marsh said.
“This increment of nuclear power fits nicely into our updated Integrated Resource Plan, which is scheduled to be filed with the S.C. Public Service Commission in February 2014,” Marsh said.
Marsh added that increasing SCE&G’s ownership in the new units also will delay the need to build new gas-fired capacity after 2020.
“Once the new nuclear units are completed and go into commercial operation, we would expect to pay for the additional 5% with internal funding without the need for long-term external financing," Marsh said.
Monday’s transaction between SCE&G and Santee Cooper is subject to customary closing conditions and necessary regulatory approvals.
SCE&G owns two-thirds and Santee Cooper the remaining one third of the existing Unit 1 at V.C. Summer, which began commercial operation in 1984.