Morningstar | Tricks or Treats for Dominion and Scana Shareholders? Tense Regulatory Hearings Kickoff
We are reaffirming our $56 fair value estimate for Scana and our $84 per share fair value estimate for Dominion Energy after the first day of regulatory hearings that will determine the fate of Dominion's proposed acquisition and Scana's new nuclear project customer rates. State legislation requires the South Carolina Public Service Commission to issue its decision by Dec. 21. We are reaffirming our narrow moat and stable moat trend ratings for Scana and wide moat and stable moat trend for Dominion.We continue to assume a 75% probability that regulators approve the acquisition, including about $2 billion of rate concessions. The acquisition has no material impact on our Dominion fair value estimate and adds $1 per share to our Scana fair value.
Dominion made several moves this week that appear to have won more public support for its acquisition but won't have a material impact on our fair value estimate if regulators approve them. These include an alternative rate plan that removes Dominion's initial proposed $1.3 billion customer refund but lowers rates by about twice as much as its initial proposal. It also includes an offer to assume management of Scana's partner in the new nuclear project, Santee Cooper.
We still consider Scana a favorable risk-reward opportunity even after the stock rebounded 10% on Oct. 30 following Dominion's revised offer and support from Speaker of the South Carolina House of Representatives Jay Lucas, who supported temporary rate cuts this summer. The merger terms imply a $47 per share market value for Scana and 18% upside based on market close prices Nov. 1. We estimate the market is pricing in about a 40% chance that the merger will close.
If regulators reject the acquisition, we believe ultimately the state Supreme Court will have to rule on the constitutionality of the state's Baseload Review Act, which could delay resolution well into next year.
Dominion Energy is a holding company. Through its subsidiaries , the company is engaged in producing and transporting energy. The company's operations are conducted through its subsidiaries: Virginia Electric and Power Company, which is a regulated public utility that generates, transmits and distributes electricity for sale in Virginia and North Carolina; and Dominion Energy Gas Holdings, LLC, which serves as the intermediate parent company for the company's Federal Energy Regulatory Commission-regulated interstate natural gas transmission pipeline and underground storage systems in the eastern and Rocky Mountain regions, as well as for the liquefied natural gas import/export and storage facility.
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors.
Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.
We have operations in 27 countries.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.