types of new construction and/or new assets - santee cooper

CRI.2 Please provide detailed context, plans and justification for the statement “going to have to finance some new construction, new assets at some point in time.” Response should include, but is not limited to:

a. Types of new construction and/or new assets b. Business reason and purpose for new construction and/or new assets c. Detail of any capital projects for which Santee Cooper may use the $100 million in new

money d. Purchase and in-service dates of capital projects, new construction and/or new assets e. Identification and provision of the name, title and contact information (phone/e-mail) for

individual responsible for the information contained in the response

Based on Santee Cooper’s most recent capital budget, specific projects have been analyzed to determine tax-exempt eligibility and we have identified projects that we anticipate to be funded with the 2020A new money proceeds.

As you will recall from our February CRI Supplement, Santee Cooper began reimbursing the Capital Improvement Fund for expenditures using the 2020A proceeds and will continue to do so each month until proceeds are depleted. On February 26, 2021 Santee Cooper reimbursed the Capital Improvement Fund from 2020A proceeds for approximately $3.9 million of tax-exempt expenditures made in January 2021. Below you will find details of the reimbursement by project:

Santee Cooper plans to use the remaining 2020A proceeds towards tax-exempt qualified projects in 2021. A tax analysis of potential projects based on budgeted cash flows was completed and based on these cash flows, we plan to use the remaining proceeds on capital projects including improvements to existing power supply facilities, improvements to the distribution system, as well as other general improvements of our system. Our plan is to initially pay expenditures from the CIF and then reimburse from debt proceeds. Expenditures and reimbursements are expected to be completed between January and October 2021.

Distribut ion System $ 584,030.42

VC Summer 1

Winyah Generating Station 382,818.19

Cross Generating Station 2,200,736.82

Rainey Generat ing Station 719,455.74

$ 3,887,041. 17

Office of Regulatory Staff Continuing Request for Information In Response to the Letter Dated October 29, 2020 by the Santee Cooper Oversight Committee Request: CRI.2 (SUPPLEMENTAL 2021-03-16)

INDIVIDUAL RESPONSIBLE FOR 1HE INFORMATION CONTAINED IN THE RESPONSE:

Name Suzanne Ritter Title Treasurer Phone 843-761-8000 ext. 4071 Email shritter(a),santeecooper.com

ATTESTATION:

I, Kenneth W. Lott, attest that the answers provided above, coupled with the information previously provided in response to this Request, are full and accurate as of 3/10/2021.

Signature of Officer:---~----+-------<.,,__----+-~-~-------------

CRI.5 Please provide a detailed description of any and all discussions (whether occurring before or after any bond related financial transactions) with internal or external entities related to the financial transactions, which were announced by Santee Cooper on October 28, 2020. Response should include, but is not limited to:

a. Date of discussions b. Names of individuals that attended the discussions c. Timeline for planning the financial transaction (i.e. the start date and end date) d. Dates on which approval was sought from the Santee Cooper Board of Directors e. Date on which approval was gained from the Santee Cooper Board of Directors f. Purpose of discussion g. Identification and provision of the name, title and contact information (phone/e-mail)

for individual responsible for the information contained in the response. Santee Cooper has continued to have various discussions concerning the 2020AB transaction. The primary topics of these discussions were the use of the bond proceeds and questions on compliance with Cook Settlement. We do not have dates for all discussions because many were impromptu; however, below you will find a list of individuals who participated in at least some of these discussions: Santee Cooper Internal Personnel

• Mark Bonsall, President & CEO • Ken Lott, Chief Financial & Administration Officer • Suzanne Ritter, Treasurer • Pamela Williams, Chief Public Affairs Officer & General Counsel • Shawan Gillians, Director of Legal Services & Corporate Secretary • Faith Williams, Manager of Debt Management & Investor Relations • Nan Cline, Senior Financial Analyst • Rahul Dembla, Senior Director of Finance & Resource Planning • Greg McCormack, Senior Manager of Financial Forecast • Devin Ritter, Financial Analyst III • Rebecca Roser, Associate General Counsel • Mollie Gore, Director Corporate Communications • Geoff Penland, Director State & Federal Government Relations • Yvette Rowland, Senior State & Federal Government Liaison • Brittany Felkel, Administrator Investments

Santee Cooper Board members

• Dan Ray • David Singleton • Kristofer Clark • William Finn • Merrell Floyd • Calhoun Land • Stephen Mudge • Peggy Pinnell • Barry Wynn

• Charles Leaird Other Santee Cooper Team Members

• Public Financial Management (Financial Advisor): Mike Mace, Eric Smith • Nixon Peabody (Tax Counsel): Mitch Rapaport • Nelson Mullins (Outside Legal Counsel & Advisors): Rush Smith, Carmen Thomas, Matt

Bogan, Earle Taylor, Jay Suhr Central Electric Cooperative Frank Ellerbe On February 18th, Mark Bonsall, Ken Lott, Yvette Rowland and Pamela Williams met with Treasurer Curtis Loftis to provide an update on Santee Cooper. This conversation included multiple topics including the attached debt-related slides (including specific results of 2020AB transaction). Please see file named “CRI.5_shritter_Slides 20210218.pdf”.

Debt ~ antee cooper"

• Since 2017: Reduced the amount, cost and risk of debt

• Debt Defeasances = $938 million

• Long-term Debt Principal Payments = $325 million

• Net Reduction in Short-term Debt= $185 million

• New Long-term Debt Issuance= $100 million proceeds

• In addition, debt refinancings have reduced future interest payments by approximately $330 million

• Board approved setting aside $85 million for 2023 debt bullet maturity

• Callable debt

• Approximately $2.2 billion is callable through 2024

• Federal law precludes us from advanced refundings of tax-exempt debt

• Bond Counsel advises us that interest rate swaps are not consistent with the provisions of Act 135

14

Market Conditions ~antee cooper·

Santee Cooper's 2020AB transaction took advantage of historically low interest rates

• The graph below is the Municipal Market Data Index AAA-rated 10 year maturity for tax-exempt bonds

O.~IO•

01/IJ2f1l;il 03!11:11Q 05/2011" 07120110 toJ0711'0 1;2tl6l10 OJ!2""'° OSAJ41'20 07/Ut2tJ OQJ'21!2()

!J~HI 04'1~/lrjl, Oll12'l/UI CDID211D 1111,111- ti~ t;l"t/3CIIZIJ Of:l·~ OBJJ7,:;?CI ,on:i:ino I- MAGO 1 0 yr 01i'01120; 9 - 1 0.-~91~020 Dalt'li

• In early 2020, rates shot upward and issuance came to a near standstill in reaction to the COVID-19 pandemic

• Later in 2020, rates fell to historic lows and Santee Cooper reacted quickly to take advantage of the low interest rate environment

•

15

2020AB Transaction ~ antee cooper"

• The 2020AB transaction totaled $638.2 million in bond sales with an all-in true interest cost (TIC) of 2.87%

• This transaction consisted of refunding existing debt and issuing new money:

• Refunding Existing Debt ($553. 7 million par) - $569.5 million of existing debt was refunded at lower interest rates (all-in TIC of 2.72%) - Tax-exempt: $292.4 million Taxable: $277 .1 million - Reduced cost: Approximately $330 million in gross savings and $134 million in NPV - Reduced the average life: 8.5 years (21.4 years to 12.9 years)

• New Money Issuance ($84 million par) - Issued $84 million par - The average life of the new debt is 22. 7 years - All in TIC of 3.432°/o

• Structure of entire transaction allowed us to flatten our debt service beyond the rate freeze which will help to stabilize future rates and benefit our customers

• The 2020AB transaction provided extraordinary benefits for our customers

16

Debt is Declining 14l~antee cooper'

Total Debt Outstanding 201,0-2020

$9.0

$8.0 $6.8 $6.9

$7.7 $8.2

$7.9 $7.3

$6.9 $5.8 $7.0

$5.9 $5.5 en $6.0 $5.3 t=.

C - $5.0 ·-

r CD

$4.0

$3.0

$2.0 Debt level before

Santee Cooper Debt peaks

$1.0 began nuclear

$0.0 borrowin.g

2010 2011 201.2 2013 2014 2015 2016 2017 2018 .2019 2020

17

Debt Service is De-risked ~~antee cooper' and Levelized ~~~~===~~~-------------------------

$600

$500

$400

Ill

.2 $300

·-E $200

$100

$0

2021 2026

Revenue Obligation Debt Service1

2031 2036 2041

Defeasance

- Principal

2046

1. Does not include benefit of BABs subsidy, estimated at approximately $7. 6mlyear

Interest

- Total Debt Service

2051 2056

18




ATTESTATION:

I, Kenneth W. Lott, attest that the answers provided above, coupled with the information previously provided in response to this Request, are full and accurate as of 03/ 10/2021.

SignatureofOfficer: ~~

Office of Regulatory Staff Continuing Request for Information In Response to the Letter Dated October 29, 2020 by the Santee Cooper Oversight Committee Request: CRI.9 (SUPPLEMENT 2021-03-16)

CRI.9 Please provide copies of the following documents that contain information related to the financial transactions announced by Santee Cooper on October 28, 2020. a. Presentations given to the Board of Directors and any subcommittees b. Board of Directors Meeting Minutes c. Investor communications d. All releases to the media.

CRI.9.a No responsive documents

CRI.9.b No responsive documents

CRI.9.c No responsive documents

CRI.9.d See attached media release “Correcting Club for Growth.Santee Cooper Delivers Benefit

to South Carolina.pdf”

Santee Cooper Has a Plan that is Working Well

Three Key Takeaways:

• Transformation is well underway at Santee Cooper with important structural changes,

debt reduction, and a shift to leaner and greener energy production.

• Key achievements in the past two years include resolving all nuclear-related litigation,

redesigning and launching a new resource plan, paying down debt and otherwise

improving our financial status, and reorganizing staff.

• We have also maintained top-1% distribution reliability, excellent safety metrics,

significant economic development support and low prices.

A recent “memo” and series of oversized postcards published by the South Carolina Club for

Growth promote a series of claims and misrepresentations about Santee Cooper’s progress that

simply must not go unanswered. We believe a fact-based response is essential, and is

responsive to legislative requests that we set the record straight on other misinformation

campaigns as the General Assembly determines the future of Santee Cooper.

Club for Growth incorrectly claims in a very expensive, two-color mail piece sent statewide, that

Santee Cooper is failing to execute on the resource (more renewables, less coal) and financial

components of our Reform Plan, which built on our 2019 Business Forecast. Club for Growth

further claims that our 2020 updates to the resource plan (which would provide a 55%

reduction in carbon emissions by the 2030s) are evidence that the original failed and we are “all

talk and no action.”

For the record, since developing our 2019 Business Forecast and then our Reform Plan, Santee

Cooper has:

• Removed all threat of pending nuclear-related litigation, benefiting customers

o Settled the Cook case and paid the first installment of customer refunds

o Settled the Westinghouse case and contracted for disposition of the V.C. Summer

equipment we own

o Agreed to a settlement in the Turka case that is pending Court approval

• Redesigned and launched a new resource direction

o Hedged natural gas through 2024, for significant savings

o Renegotiated coal commodity and transportation contracts for significant savings

o Bid and contracted nearly 500 MW of new solar power with Central

o Launched a plan to close Winyah Generating Station and idled one unit

• Redesigned and launched a new financial direction

o Paid off $600 million in debt, net

o Refinanced $750 million in debt, producing over $340 million in savings

o Levelized debt service

o Achieved “stable A” credit ratings (reflecting outlook upgrades to stable by two

major credit rating agencies)

• Reorganized

o Reduced staff through attrition and retirement, with no layoffs

o Reduced the executive ranks nearly 20%

o Increased senior management diversity

Santee Cooper has also continued to maintain top-1% distribution reliability, excellent safety

metrics, significant economic development support and low prices as we moved through the list

above.

S.C. Code 58-31-30 (A) (21) makes clear that the state of South Carolina is not responsible for

Santee Cooper debt, even though we are state-owned. We operate as a business, our expenses

are covered by customer revenues, and we receive no state tax dollars. On the other hand,

Santee Cooper makes an annual payment to the state (approximately $17 million for 2020) and

since 1990, that benefit has totaled more than $400 million.

Club for Growth is misrepresenting Santee Cooper’s progress and status, but a decision about

our future should be made based on facts. The fact is, a State Department of Administration

comparison of our Reform Plan and the leading bid to purchase Santee Cooper last year showed

customers would pay lower rates with our Reform Plan. The typical Santee Cooper residential

customer already pays 9% less than the average residential bill of the investor-owned utilities

doing business in South Carolina.

Our 2019 Business Forecast committed to a leaner, greener Santee Cooper. We are already

both: leaner in terms of debt, operating and fuel expenses, and staff, and greener in terms of

an idled coal-fired unit at Winyah and executed contracts to bring enough solar power online by

2023 to equal 45% of the state’s current total installed capacity. We have continued to update

our resource and financial plans to achieve more, not less, benefit for customers and the state.

Additionally, we stand ready to work with legislators in the coming weeks as they consider

options to reform our governance and oversight.

Santee Cooper has a comprehensive plan to transform our operations and finances. We are

implementing it, improving it, and it is working.




Name Pamela Williams Title Chief Public Affairs and General Counsel Phone 843-761-7043 Email Pamela. williams0l,santeecooper.com

ATTESTATION:

I, Kenneth W. Lott, attest that the answers provided above, coupled with the information previously provided in response to this Request, are full and accurate as of 03/ 10/2021.

Signature of Officer: --~---+-~~----+-~----------------

types of new construction and/or new assets - santee cooper

Documents