VC Summer owners monetise Toshiba guarantee

28 September 2017

South Carolina Electric & Gas (SCE&G) and Santee Cooper have sold to Citibank NA the settlement payments to be made by Toshiba under its guarantee obligations for the VC Summer nuclear construction project. The sale, for $1.8 billion, covers all payments to be made after October.

Toshiba agreed in July to pay a maximum of $2.168 billion to Scana subsidiary SCE&G and Santee Cooper under a parental guarantee obligation put in place in 2008, when the engineering, procurement and construction (EPC) contract for the two AP1000 units was placed with Westinghouse. Westinghouse filed for Chapter 11 bankruptcy in March of this year, and SCE&G and Santee Cooper subsequently decided to abandon the project.

SCE&G's share of the Citibank payment is worth about $1.016 billion, reflecting its 55% ownership of the Summer project, while Santee Cooper will receive $831.2 million for its 45% share. The sale includes the claims of SCE&G and Santee Cooper in Westinghouse's bankruptcy, allowing Citibank the opportunity to pursue such claims against Westinghouse.

The sale price of $1.847 billion is worth 91.5% of the full amount of the settlements to be made over the next five years, not including the first scheduled payment of $150 million which is due in October. Including the October payment, the two companies will receive about 92% of the total $2.168 billion payable under the guarantee settlement agreement. Selling the payments mitigates the risk to the companies of collecting those future payments, giving them immediate access to the funds.

Santee Cooper said it had received 13 initial bids for the guarantee payments from five broker-dealers and eight investment management firms, the five strongest of which it pursued further. Citibank submitted the highest numeric bid, the company said. Leighton Lord, chairman of the Santee Cooper's Board of Directors, said: "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."

Scana Chairman and CEO Kevin Marsh said monetising the guarantee was crucial to mitigate the risks connected with receiving payments from Toshiba.

"The guarantee 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 utilise the net value of these payments to mitigate the cost of the abandoned project to customers," he said.

A total of four AP1000 units - two each at VC Summer in South Carolina and Vogtle in Georgia - were under construction in the USA prior to Westinghouse's bankruptcy filing. Construction began on Summer unit 2 and Vogtle unit 3 in March 2013, with work beginning on Summer 3 and Vogtle 4 in November of that year. Vogtle's co-owners, led by Georgia Power, in August filed a recommendation with the Georgia Public Service Commission to complete construction of the new units as the most economic choice for customers. Bechtel is now managing daily construction efforts at the Vogtle site under the direction of Southern Nuclear Operating Company.

Researched and written
by World Nuclear News