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McMaster's Proposal to Halt Nuclear Unit Payments Hits SCANA

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SCANA Corporation lost roughly 5% after Henry McMaster, Governor of South Carolina, requested for a bill that will disallow the company from charging customers for the pair of failed reactors at its V.C. Summer nuclear plant.

A report from Office of Regulatory Staff claimed it is unlikely that SCANA will face bankruptcy if the ratepayers are not charged. This prompted McMaster to write to the lawmakers.  However, SCANA did not hold the same opinion about the report.

When the markets thought that the proposed accord between SCANA and Dominion Energy, Inc. (D - Free Report) might be hurt by the letter from the Governor, media reports confirmed that the deal is still on the table.

Recently, electric utility SCANA signed a merger accord with larger peer Dominion Energy. Per the accord, each stock holder of SCANA will likely get 0.669 shares of Dominion. Considering the assumption of $6.7-billion debt of SCANA by Dominion, the transaction is worth roughly $14.6 billion. SCANA and Dominion expect the all-stock transaction to close this year, which awaits regulatory approvals.

SCANA lost 45.7% in 2017, underperforming the industry’s 6.5% gain. The underperformance was led by the company’s decision to conclude construction works of units 2 and 3 at the VC Summer Nuclear Station.

SCANA was forced to discontinue the project after the builder of the plants, Westinghouse Electric Co, went bankrupt. SCANA also filed for withdrawing operating licenses of the units as a series of delays and mounting costs became a concern for the company.

However, the recent merger agreement has pleased customers. This is because upon deal closure, Dominion is expected to make a payment of $1.3 billion to the customers of SCANA. Hence, on average, each client of SCANA will likely receive $1000.

SCANA carries a Zacks Rank #3 (Hold). A few better-ranked players in the energy sector are EOG Resources, Inc. (EOG - Free Report) and Cabot Oil & Gas Corporation (COG - Free Report) . Both the stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Headquartered in Houston, TX, EOG Resources is a leading upstream energy player. We expect the company to see earnings growth of 157.2% and 206.9% in 2017 and 2018, respectively.

Headquartered in Houston, TX, Cabot is involved in the exploration of oil and gas. The stock will likely report earnings growth of 357.1% in 2017.

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