Baupost Group led investors reap in $170 million in profits

Analysts opine SCANA will face heightened regulatory scrutiny over its decision to sell its stake in the upcoming nuclear power plants in South Carolina and Georgia.

According to three sources familiar with the matter at hand, hedge funds led by the Baupost Group LLC are poised to score a $170 million profit in less than three months from a bet tied to Toshiba Corp’s Westinghouse Electric Corp, a bankrupt nuclear unit.

In September, the credit arm of the Blackstone Group, GSO Capital Partners LP along with Baupost had acquired claims of South Carolina utilities at a discount from Toshiba’s Westinghouse Electric Corp. With Westinghouse failing to finish, the funds are expected to be repaid over a period of 5 years.

However with Toshiba acquiring nearly $5 billion in financing on Tuesday, which it said, it will channel towards immediate repaying its dues with South Carolina and Georgia, the shortened time frame of repayments is expected to boost the returns of the hedge funds, said sources.

Westinghouse, GSO and Baupost declined to comment.

When the hedge funds decided to buy the settlements, it bet that Toshiba would remain solvent till at least 2022. But with the reduced timeline for repayments, the utilities which sold the $170 million claims at a discount are now at a loss.

“It will be an issue with the regulators in terms of the prudence of their decision,” said Todd Shipman, a credit analyst at Standard & Poor’s Global Ratings, of SCANA. “It will be up to (SCANA) to lay out their case (about) why they did what they did and when.”

As for the utilities, they have said they sold the settlements to mitigate the risk the Japanese company would not complete the payments.

Along with the start of a Westinghouse-backed nuclear power plant in Georgia, two other nuclear projects were started and were hailed as the start of a nuclear renaissance in the U.S. But having channeled in billions of dollars, with the project experiencing delays and cost overruns, for both of its projects, at V.C. Summer and the Vogtle project in Georgia, Westinghouse filed for Chapter 11.

With a sunken cost of $9 billion on construction, SCANA and Santee Cooper abandoned the South Carolina project in July, saying they were both not economically viable.

Incidentally, Georgia Power, a unit of Southern Co that is leading the Vogtle project, has held on to its settlement and with Toshiba speeding up the payments of the $3.68 billion guarantee settlement by December 15, 2017, the payments which it originally had hoped to receive in 2021, will now be available shortly.

Significantly, Georgia Power stated it intends to complete the Vogtle project.

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