Scana Plunges to Lowest in Almost Two Years on Criminal Probe

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  • Scana received federal subpoena related to canceled reactors
  • Utility faces questions on how much customers will be billed

Scana Corp. slid to the lowest level in almost two years as the U.S. began a criminal investigation into the $21 billion nuclear power project in South Carolina that the utility owner abandoned two months ago.

The U.S. Attorney’s office in South Carolina is carrying out a grand jury probe that involves agents at the Federal Bureau of Investigation, a Sept. 7 subpoena disclosed on Friday by Scana’s partner on the nuclear project, Santee Cooper, shows. The government asked for copies of correspondence, notes and reports related to the V.C. Summer nuclear plant, including a study engineering firm Bechtel Corp. drafted last year suggesting Scana was aware of challenges plaguing the project since early last year.

Scana declined on Friday to release the subpoena it had received or comment on the one Santee Cooper disclosed. Shares of the utility owner were down as much as 3.2 percent at $55.33 as of 2:46 p.m. New York time, the lowest since October 2015.

The federal probe and intensifying backlash from South Carolina legislators doesn’t bode well for Scana as the utility owner seeks to recoup billions of dollars it spent on the project from South Carolina’s utility customers. The company’s battle to recover costs may become a flash point in the debate over who should pay for nuclear power projects that have failed to be built across the U.S. in the past decade.

“This kind of activity is troubling and is something that is going to cause investors concern,” said Paul Patterson, a utility analyst at Glenrock Associates. “People shouldn’t leap to any conclusions, but bottom line -- it’s a negative development.”

Scana spokesman Eric Boomhower said by email Thursday that there are legislative and regulatory review processes that the company must go through regarding the project. “We will not speculate on the outcomes of those processes,” he said.

Scana’s decision to halt construction has rattled both the state and the entire U.S. nuclear industry. The company called it quits after lead project contractor Westinghouse Electric Co. filed for bankruptcy and Santee Cooper pulled out. That left Southern Co. in Georgia as the only utility building a nuclear power plant in the U.S.

‘Political Fallout’

While South Carolina Governor Henry McMaster is still pushing to get the V.C. Summer plant finished, state legislators are already grilling Scana and Santee Cooper executives in special hearings about how plans for the reactors unraveled. They’ve asked South Carolina’s attorney general, Alan Wilson, to look into whether the law that would allow Scana to recoup costs is constitutional.

Wilson is expected to issue an opinion next week on the law.

“Political fallout from the V.C. Summer new nuclear construction termination has opened Pandora’s box,” Christopher Ellinghaus, a utilities analyst for the Williams Capital Group, in a research note Monday.

U.S. utility customers have ended up on the hook for more than $2.5 billion for nuclear power plants proposed and never built -- excluding the costs of Scana’s V.C. Summer plant. Duke Energy Corp. and Dominion Energy Inc. are among the companies that have faced backlash for charging customers for yet-to-be-built reactors.

Cost Recovery

Under state law, Scana may be allowed to recover $4.9 billion in expenses for its abandoned reactors so long as the spending is deemed prudent. But the report by Bechtel, made public by McMaster’s office earlier this month, could undermine its case.

The February 2016 study found “significant issues” with the project’s construction, including unrealistic schedules and a lack of project management. Regulators could use it to block Scana from recovering costs, Scott Elliott, special counsel for the state House committee investigating the project, told legislators last week.

The U.S. Attorney’s office in South Carolina asked for a copy of the report from McMaster after it was made public, said Brian Symmes, a spokesman for the governor. Scana said Thursday that the subpoena from the U.S. Attorney required the company to “produce a broad range of documents” and that it would cooperate with the investigation.

The subpoena disclosed by Santee Cooper covers all external audits starting in 2010, all external reports related to V.C. Summer, documents related to the Bechtel report and a list of those who received the study.

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