S-4/A
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As filed with the Securities and Exchange Commission on June 6, 2018

Registration No. 333-223036

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

AMENDMENT NO. 2

TO

FORM S-4

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

DOMINION ENERGY, INC.

(Exact name of Registrant as specified in its charter)

 

 

 

Virginia   4911   54-1229715

(State or other jurisdiction of

incorporation or organization)

 

(Primary Standard Industrial

Classification Code Number)

 

(I.R.S. Employer

Identification No.)

 

 

120 TREDEGAR STREET RICHMOND, VIRGINIA 23219

(804) 819-2000

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

 

 

Carlos M. Brown, Esq.

Vice President and General Counsel

Dominion Energy, Inc.

120 Tredegar Street

Richmond, Virginia 23219

Telephone: (804) 819-2690

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

 

Copies to:

 

Jane Whitt Sellers, Esq.

McGuireWoods LLP

Gateway Plaza

800 East Canal Street

Richmond, Virginia 23219

(804) 775-1000

 

Jim Stuckey, Esq.

Senior Vice President and General

Counsel

SCANA Corporation

100 SCANA Parkway

Cayce, South Carolina 29033

(803) 217-9000

 

William Kucera, Esq.

Mayer Brown LLP

71 South Wacker Drive

Chicago, Illinois 60606

(312) 782-0600

 

 

Approximate date of commencement of proposed sale of the securities to the public: As soon as practicable after this Registration Statement is declared effective and upon completion of the merger described in the enclosed document.

If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box  ☐

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large Accelerated Filer      Accelerated Filer  
Non-accelerated Filer   ☐  (Do not check if a smaller reporting company)    Smaller reporting company  
     Emerging growth company  

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act.  ☐

If applicable, place an X in the box to designate the appropriate rule provision relied upon in conducting this transaction:

Exchange Act Rule 13e-4(i) (Cross-Border Issuer Tender Offer)  ☐

Exchange Act Rule 14d-1(d) (Cross-Border Third-Party Tender Offer)  ☐

 

 


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The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until this Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.


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The information in this document is not complete and may be changed. Dominion Energy, Inc. may not sell the securities offered by this document until the registration statement filed with the Securities and Exchange Commission, of which this document is a part, is declared effective. This document shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any jurisdiction where such offer, solicitation or sale is not permitted.

 

PRELIMINARY—SUBJECT TO COMPLETION—DATED JUNE 6, 2018

 

 

LOGO

MERGER PROPOSED—YOUR VOTE IS VERY IMPORTANT

Dear SCANA Shareholders:

The board of directors of SCANA Corporation, which we refer to as SCANA, has adopted an Agreement and Plan of Merger, which we refer to as the merger agreement, dated as of January 2, 2018, by and among Dominion Energy, Inc., which we refer to as Dominion Energy, Sedona Corp., a wholly owned subsidiary of Dominion Energy, which we refer to as Merger Sub, and SCANA.

Pursuant to the merger agreement, Merger Sub will merge with and into SCANA, which we refer to as the merger, with SCANA surviving the merger as a wholly owned subsidiary of Dominion Energy. In the merger, holders of SCANA common stock, whom we refer to as SCANA shareholders, will have the right to receive 0.6690 of a share of Dominion Energy common stock for each share of SCANA common stock held at the time of the merger, which we refer to as the merger consideration, with cash to be paid in lieu of the issuance of any fractional share of Dominion Energy common stock. The value of the merger consideration to be received in exchange for each share of SCANA common stock will fluctuate with the market value of Dominion Energy common stock. The transaction structure contemplates that the receipt of shares of Dominion Energy common stock will be tax deferred for SCANA shareholders.

 

SCANA shareholders are encouraged to read this entire proxy statement/prospectus carefully, including:

 

    the “Questions and Answers About the Merger and the Special Meeting” section beginning on page iv;

 

    the “Risk Factors” section beginning on page 17; and

 

    the “The Merger—SCANA’s Reasons for the Merger; Recommendation of the SCANA Board” section beginning on page 43.

SCANA will hold a special meeting of shareholders to consider the merger, which we refer to as the special meeting. Based on the number of shares of SCANA common stock outstanding on May 31, 2018, the record date for the special meeting, Dominion Energy expects to issue approximately 95,611,418 shares of Dominion Energy common stock to the SCANA shareholders. As a result, upon the completion of the merger, former SCANA shareholders will own approximately 12–13% of the issued and outstanding shares of Dominion Energy common stock. SCANA common stock is listed on the New York Stock Exchange, which we refer to as the NYSE, under the symbol “SCG” and Dominion Energy common stock is listed on the NYSE under the symbol “D.”

We cannot complete the merger unless the SCANA shareholders approve the proposal related to the merger and, therefore, your vote is very important. Whether or not you expect to attend the special meeting in person, please vote your shares as promptly as possible by (i) accessing the Internet website specified on your proxy card, (ii) calling the toll-free number specified on your proxy card or (iii) signing all proxy cards that you receive from us and returning them in the postage-paid envelopes provided, so that your shares of SCANA common stock may be represented and voted at the special meeting. You may change or revoke your proxy before the vote at the special meeting by following the procedures outlined in this proxy statement/prospectus.

We look forward to the successful completion of the merger.

Sincerely,

 

 

LOGO

Jimmy E. Addison

Chief Executive Officer

SCANA Corporation

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the securities to be issued in connection with the merger or determined that this proxy statement/prospectus is accurate or complete. Any representation to the contrary is a criminal offense.

This proxy statement/prospectus is dated                     , 2018, and is first being mailed to SCANA shareholders on or about                     , 2018.


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SCANA CORPORATION

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON JULY 31, 2018

NOTICE IS HEREBY GIVEN that SCANA Corporation, a South Carolina corporation, which we refer to as SCANA, will hold a special meeting, which we refer to as the special meeting, of the shareholders of SCANA, whom we refer to as SCANA shareholders, on July 31, 2018, at 9:00 a.m., Eastern Daylight Time, at the Columbia Conference Center, 169 Laurelhurst Avenue, Columbia, South Carolina 29210. Registration will begin at 8:30 a.m.

The SCANA shareholders are being asked to consider and vote on the proposals listed below at the special meeting or any adjournment or postponement of the special meeting:

 

  1. the proposal to approve the Agreement and Plan of Merger, dated as of January 2, 2018, by and among Dominion Energy, Inc., a Virginia corporation, which we refer to as Dominion Energy, Sedona Corp., a South Carolina corporation and a wholly owned subsidiary of Dominion Energy, which we refer to as Merger Sub, and SCANA, as such agreement may be amended from time to time, which we refer to as the merger agreement, pursuant to which Merger Sub will be merged with and into SCANA, with SCANA surviving the merger as a wholly owned subsidiary of Dominion Energy, and each outstanding share of the common stock of SCANA, no par value, which we refer to as SCANA common stock, will be converted into the right to receive 0.6690 of a share of the common stock of Dominion Energy, no par value, which we refer to as Dominion Energy common stock, with cash paid in lieu of fractional shares, which we refer to as the merger proposal;

 

  2. the proposal to approve, on a non-binding advisory basis, the compensation to be paid to SCANA’s named executive officers that is based on or otherwise relates to the merger, which we refer to as the merger-related compensation proposal; and

 

  3. the proposal to adjourn the special meeting, if necessary or appropriate in the view of the board of directors of SCANA, which we refer to as the SCANA board, to solicit additional proxies in favor of the merger proposal if there are not sufficient votes at the time of the special meeting to approve the merger proposal, which we refer to as the adjournment proposal.

Approval of the merger proposal by SCANA shareholders is required to complete the merger. Approval of the merger-related compensation proposal and the adjournment proposal are not required to complete the merger.

The SCANA board has unanimously adopted the merger agreement and approved the transactions contemplated thereby, including the merger, and recommends that you vote “FOR” the merger proposal, “FOR” the merger-related compensation proposal and “FOR” the adjournment proposal. Only SCANA shareholders of record at the close of business on May 31, 2018, are entitled to notice of and to vote at the special meeting.

You may vote your shares of SCANA common stock over the Internet at proxy.georgeson.com, by calling toll-free 1-877-456-7915, by completing and mailing the enclosed proxy card, or in-person at the special meeting. We request that you vote in advance whether or not you plan to attend the special meeting.

If you do not vote on the merger proposal, it will have the same effect as a vote by you against the merger proposal (unless your shares are held through the SCANA Corporation 401(k) Retirement Savings Plan, as described on page xi of the accompanying proxy statement/prospectus).

You may revoke your proxy prior to the vote at the special meeting by following the procedures outlined in this proxy statement/prospectus.

Sincerely,

 

LOGO

Gina Champion

Vice President, Corporate Secretary and

Deputy General Counsel

                    , 2018


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ADDITIONAL INFORMATION

This proxy statement/prospectus incorporates important business and financial information about Dominion Energy and SCANA from other documents that Dominion Energy and SCANA have each filed with the U.S. Securities and Exchange Commission, which we refer to as the SEC. For a listing of documents incorporated by reference into this proxy statement/prospectus, please see the section entitled “Where You Can Find More Information” beginning on page 141 of this proxy statement/prospectus. This information is available for you to review at the SEC’s public reference room located at 100 F Street, N.E., Room 1580, Washington, D.C. 20549, and through the SEC’s website at www.sec.gov.

This information is available to you without charge upon your request. You can obtain the documents incorporated by reference into this proxy statement/prospectus by requesting them in writing or by telephone from the appropriate company at:

 

SCANA Corporation    Dominion Energy, Inc.
220 Operation Way, Mail Code C103    120 Tredegar Street
Cayce, South Carolina 29033    Richmond, Virginia 23219
(803) 217-6916    Corporate.Secretary@dominionenergy.com
Attn: Investor Relations    Attn: Corporate Secretary

The firm assisting SCANA with the solicitation of proxies:

Georgeson LLC

1290 Avenue of the Americas, 9th floor

New York, NY 10104

Banks, Brokers and Shareholders

Call Toll-Free: 1-866-482-4943

Via Email: scana@georgeson.com

Investors may also consult SCANA’s or Dominion Energy’s website for more information concerning the merger and other related transactions described in this proxy statement/prospectus. SCANA’s website is www.scana.com. Dominion Energy’s website is www.dominionenergy.com. Each company’s filings with the SEC are also available at www.sec.gov. Information contained on SCANA’s and Dominion Energy’s respective websites is not incorporated by reference into, and does not constitute part of, this proxy statement/prospectus. The references to SCANA’s and Dominion Energy’s respective websites are intended to be inactive textual references only.

If you would like to request documents, please do so by July 24, 2018 in order to receive them before the special meeting.

For more information, see the section entitled “Where You Can Find More Information” beginning on page 141 of this proxy statement/prospectus.


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ABOUT THIS PROXY STATEMENT/PROSPECTUS

This document, which forms part of a registration statement on Form S-4 filed with the SEC by Dominion Energy (File No. 333-223036), constitutes a prospectus of Dominion Energy under Section 5 of the Securities Act of 1933, as amended, which we refer to as the Securities Act, with respect to the shares of Dominion Energy common stock to be issued to SCANA shareholders pursuant to the merger agreement. This document also constitutes a proxy statement of SCANA under Section 14(a) of the Securities Exchange Act of 1934, as amended, which we refer to as the Exchange Act, with respect to the special meeting at which SCANA shareholders will be asked to vote upon and approve the merger proposal, the non-binding merger-related compensation proposal and the adjournment proposal. It also constitutes a notice of meeting with respect to the special meeting.

You should rely only on the information contained in, or incorporated by reference into, this proxy statement/prospectus. No one has been authorized to provide you with information that is different from that contained in, or incorporated by reference into, this proxy statement/prospectus. This proxy statement/prospectus is dated                     , 2018. You should not assume that the information contained in, or incorporated by reference into, this proxy statement/prospectus is accurate as of any date other than, in the case of this proxy statement/prospectus, the date on the front cover of this proxy statement/prospectus and, in the case of information incorporated by reference, the respective dates of such referenced documents. Neither the mailing of this proxy statement/prospectus to SCANA shareholders nor the issuance by Dominion Energy of shares of Dominion Energy common stock in connection with the merger will create any implication to the contrary.

This proxy statement/prospectus does not constitute an offer to sell, or a solicitation of an offer to buy, any securities, or the solicitation of a proxy, in any jurisdiction in which, or from any person to whom, it is unlawful to make any such offer or solicitation in such jurisdiction. Information contained in this proxy statement/prospectus regarding Dominion Energy has been provided by Dominion Energy and information contained in this proxy statement/prospectus regarding SCANA has been provided by SCANA.


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TABLE OF CONTENTS

 

     Page  

QUESTIONS AND ANSWERS ABOUT THE MERGER AND THE SPECIAL MEETING

     iv  

SUMMARY

     1  

Parties to the Merger

     1  

The Merger and the Merger Agreement

     2  

Opinions of SCANA’s Financial Advisors

     2  

The Special Meeting

     9  

Risk Factors

     10  

SELECTED HISTORICAL FINANCIAL DATA OF DOMINION ENERGY

     11  

SELECTED HISTORICAL FINANCIAL DATA OF SCANA

     12  

SELECTED UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION

     13  

EQUIVALENT AND COMPARATIVE PER SHARE INFORMATION

     14  

COMPARATIVE STOCK PRICES AND DIVIDENDS

     15  

RISK FACTORS

     17  

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

     26  

THE COMPANIES

     28  

Dominion Energy

     28  

SCANA

     28  

Merger Sub

     29  

THE SPECIAL MEETING

     30  

Date, Time and Place

     30  

Purpose of the Special Meeting

     30  

Recommendations of the SCANA Board

     30  

Record Date; Stock Entitled to Vote

     30  

Quorum

     31  

Required Vote

     31  

Abstentions and Broker Non-Votes

     31  

Voting at the Special Meeting

     31  

Voting in Person

     31  

Voting by Proxy

     32  

Changing or Revoking Your Proxy or Voting Instructions

     32  

Solicitation of Proxies

     32  

THE MERGER

     33  

Effects of the Merger

     33  

 

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(continued)

 

     Page  

Background of the Merger

     33  

SCANA’s Reasons for the Merger; Recommendation of the SCANA Board

     43  

Opinions of SCANA’s Financial Advisors

     48  

Directors and Management of Dominion Energy After the Merger

     66  

U.S. Federal Income Tax Consequences of the Merger

     66  

Accounting Treatment

     68  

No Dissenters’ Rights

     68  

Regulatory Approvals Required for the Merger

     68  

Material Contracts between SCANA and Dominion Energy

     72  

Legislation Relating to the Merger

     72  

Litigation Relating to the Merger

     73  

Other Legal Proceedings

     74  

Exchange of Shares in the Merger

     75  

Interests of SCANA’s Directors and Executive Officers in the Merger

     75  

Potential Payments upon a Termination in Connection with a Change in Control

     79  

Dividends

     81  

Listing of Dominion Energy Common Stock

     81  

Delisting and Deregistration of SCANA Common Stock

     81  

Certain Forecasts Prepared by SCANA’s Management

     82  

THE MERGER AGREEMENT

     88  

Effects of the Merger

     88  

Amendments to Organizational Documents; Directors and Officers

     89  

Completion of the Merger

     90  

Exchange and Payment Procedures

     90  

Conditions to Completion of the Merger

     92  

Actions to Obtain Required Shareholder Vote

     96  

Reasonable Best Efforts to Obtain Regulatory Approvals

     96  

Non-Solicitation of Alternative Proposals

     99  

Change in SCANA Board Recommendation

     101  

Termination of the Merger Agreement

     103  

Termination Fees

     104  

Conduct of Business

     105  

 

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(continued)

 

     Page  

Other Covenants and Agreements

     107  

Social Commitments

     108  

Indemnification and Insurance

     108  

Employee Matters

     109  

Representations and Warranties

     110  

Material Adverse Effect

     112  

Amendment

     113  

Extension; Waiver

     113  

NON-BINDING ADVISORY VOTE ON NAMED EXECUTIVE OFFICER MERGER-RELATED COMPENSATION

     114  

PROPOSAL TO ADJOURN THE SPECIAL MEETING OF SCANA SHAREHOLDERS

     115  

UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS

     116  

COMPARISON OF SHAREHOLDER RIGHTS

     126  

LEGAL MATTERS

     138  

EXPERTS

     138  

Dominion Energy

     138  

SCANA

     138  

SHAREHOLDER PROPOSALS

     139  

OTHER MATTERS

     140  

WHERE YOU CAN FIND MORE INFORMATION

     141  
ANNEXES   
ANNEX AAGREEMENT AND PLAN OF MERGER      A-1  
ANNEX BOPINION OF MORGAN STANLEY & CO. LLC      B-1  
ANNEX COPINION OF RBC CAPITAL MARKETS, LLC      C-1  

ANNEX DFINANCIAL PRESENTATION PURSUANT TO SECTION 33-11-103 OF THE CODE OF LAWS OF THE STATE OF SOUTH CAROLINA

     D-1  

 

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QUESTIONS AND ANSWERS ABOUT THE MERGER AND THE SPECIAL MEETING

The following questions and answers are intended to briefly address some questions that you, as a SCANA shareholder, may have regarding the merger, the merger agreement and the special meeting. Dominion Energy and SCANA urge you to read carefully the remainder of this proxy statement/prospectus because these questions and answers may not address all questions or provide all information that might be important to you with respect to the merger, the merger agreement and the matters being considered at the special meeting. Additional important information is also contained in the annexes and the documents incorporated by reference into this proxy statement/prospectus. You may obtain the information incorporated by reference into this proxy statement/prospectus without charge by following the instructions under the section entitled “Where You Can Find More Information” beginning on page 141 of this proxy statement/prospectus. For your convenience, these questions and answers have been divided into questions and answers about the merger and questions and answers about the special meeting.

Questions and Answers About the Merger

 

Q: What is the merger?

 

A: SCANA, Dominion Energy and Merger Sub have entered into the merger agreement, a copy of which is attached as Annex A to this proxy statement/prospectus and is incorporated by reference herein. The merger agreement contains the terms and conditions of the merger, in which Merger Sub will merge with and into SCANA, with SCANA surviving the merger as a wholly owned subsidiary of Dominion Energy, which we refer to as the surviving corporation.

 

Q: Why am I receiving this proxy statement/prospectus and proxy or voting instruction card?

 

A: SCANA is sending these materials to the SCANA shareholders to help them decide how to vote their shares of SCANA common stock with respect to the merger and other matters to be considered at the special meeting. SCANA is holding the special meeting to ask its shareholders to consider and vote upon the merger proposal. The merger cannot be completed unless SCANA shareholders approve the merger proposal. At the special meeting, SCANA shareholders will also be asked to consider and vote upon (i) the merger-related compensation proposal, on a non-binding, advisory basis and (ii) the adjournment proposal, if necessary or appropriate in the view of the SCANA board.

This proxy statement/prospectus includes important information about the merger, the merger agreement and the special meeting. SCANA shareholders should read this information carefully and in its entirety. The enclosed voting materials allow SCANA shareholders to vote their shares without attending the special meeting in person.

Your vote is very important. We encourage you to vote as soon as possible.

This proxy statement/prospectus constitutes both a proxy statement of SCANA and a prospectus of Dominion Energy. It is a proxy statement of SCANA because the SCANA board is soliciting proxies from the SCANA shareholders. It is a prospectus of Dominion Energy because Dominion Energy will issue shares of Dominion Energy common stock in exchange for outstanding shares of SCANA common stock in the merger.

 

Q: What will I receive if the merger is completed?

 

A:

If the merger is completed, you will have the right to receive the merger consideration (0.6690 of a share of Dominion Energy common stock for each share of SCANA common stock that you own at the time of the merger). No fractional shares of Dominion Energy common stock will be issued in the merger; instead, if you otherwise would be owed a fraction of a share of Dominion Energy common stock, you will receive the value of that fraction of a share in cash, without interest and rounded to the nearest cent, where value is

 

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  based on a formula that takes into account the volume-weighted average price of Dominion Energy common stock for the ten consecutive trading day period ending on and including the second trading day prior to the time of the closing of the merger. For example, if you own 100 shares of SCANA common stock, in exchange for your shares of Dominion Energy common stock, you will receive 66 shares of Dominion Energy common stock, plus an amount of cash equivalent to the value of 0.90 of a share of Dominion Energy common stock. See the section entitled “The Merger Agreement—Effects of the Merger” beginning on page 88 of this proxy statement/prospectus.

 

Q: Will my shares of Dominion Energy common stock acquired in the merger receive a dividend?

 

A: After the closing of the merger, as a holder of Dominion Energy common stock, you will receive the same dividends on shares of Dominion Energy common stock that all other holders of Dominion Energy common stock will receive with respect to any dividend record date that occurs after the effective time of the merger (as defined below).

Former SCANA shareholders who hold SCANA share certificates will not be entitled to be paid dividends otherwise payable on the shares of Dominion Energy common stock into which their shares of SCANA common stock are exchangeable until they surrender their SCANA share certificates according to the instructions provided to them. Dividends will be accrued for these shareholders and they will receive the accrued dividends when they surrender their SCANA share certificates. Dominion Energy most recently paid a quarterly dividend on March 20, 2018 in an amount equal to $0.835 per share of Dominion Energy common stock. On May 9, 2018, the Dominion Energy board declared a quarterly dividend of $0.835 per share payable on June 20, 2018 to Dominion Energy shareholders of record on June 1, 2018. See the section entitled “Comparative Stock Prices and Dividends” beginning on page 15 of this proxy statement/prospectus.

All future Dominion Energy dividends will remain subject to approval by the board of directors of Dominion Energy, which we refer to as the Dominion Energy board.

 

Q: What will holders of SCANA equity compensation awards receive in the merger?

 

A: At the effective time of the merger (as defined below), each performance share award in respect of SCANA common stock, which we refer to as a performance share award, and restricted stock unit in respect of SCANA common stock, which we refer to as a restricted stock unit, granted under SCANA’s 2015 Long-Term Equity Compensation Plan, 2000 Long-Term Equity Compensation Plan, or Director Compensation and Deferral Plan, as applicable, which we collectively refer to as the SCANA equity award plans, will fully vest (at the target level of performance in the case of the performance share awards) and will be cancelled and converted automatically into the right to receive an amount in cash, without interest, based on a formula that takes into account the volume-weighted average price of Dominion Energy common stock for the ten consecutive trading day period ending on and including the second trading day prior to the closing of the merger for each share of SCANA common stock underlying such performance share award or restricted stock unit, as applicable.

At the effective time of the merger each deferred unit in respect of SCANA common stock, which we refer to as a deferred unit, credited or deemed credited to the SCANA stock ledger under SCANA’s Director Compensation and Deferral Plan or Executive Deferred Compensation Plan shall be converted automatically into a number of deferred unit(s) in respect of Dominion Energy common stock under such plans (which will be assumed by Dominion Energy) equal to the product of (x) such deferred unit multiplied by (y) the merger consideration, to be payable pursuant to the terms of the applicable plan.

For additional information regarding the SCANA equity compensation awards, see the section entitled “The Merger—Interests of SCANA’s Directors and Executive Officers in the Merger—Equity Compensation” beginning on page 75 of this proxy statement/prospectus.

 

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Q: Do any of SCANA’s directors or executive officers have interests in the merger that may differ from or be in addition to my interests as a SCANA shareholder?

 

A: In considering the recommendation of the SCANA board with respect to the merger proposal, you should be aware that SCANA’s directors and executive officers may have interests in the merger that are different from, or in addition to, the interests of the SCANA shareholders generally. The SCANA board was aware of and considered these interests, among other matters, in evaluating and negotiating the merger agreement and the merger, and in recommending that the SCANA shareholders approve the merger agreement. For additional information on the interests of SCANA’s directors and executive officers in the merger, see the section entitled “The Merger—Interests of SCANA’s Directors and Executive Officers in the Merger” beginning on page 75 of this proxy statement/prospectus and “Non-Binding Advisory Vote on Named Executive Officer Merger-Related Compensation” beginning on page 114 of this proxy statement/prospectus.

 

Q: Why am I being asked to consider and vote on the merger-related compensation proposal?

 

A: Under SEC rules, we are required to conduct a non-binding advisory vote of shareholders regarding the compensation that may be paid or become payable to our named executive officers in connection with the completion of the merger.

 

Q: What will happen if the SCANA shareholders do not approve the merger-related compensation proposal?

 

A: Approval of the merger-related compensation proposal is not a condition to completion of the merger. The merger-related compensation vote is advisory and will not be binding. Therefore, if the merger proposal is approved by the SCANA shareholders and the merger is completed, the compensation that is the subject of the merger-related compensation proposal, which includes amounts we are contractually obligated to pay, would still be paid regardless of the outcome of the non-binding advisory vote.

 

Q: If I do not favor the approval of the merger agreement, do I have appraisal or dissenters’ rights?

 

A: No. Because SCANA common stock is listed on the NYSE as of the record date of the special meeting, holders of SCANA common stock are not entitled to exercise appraisal or dissenters’ rights under Section 33-13-102(B) of the South Carolina Business Corporation Act, which we refer to as the SCBCA, in connection with the merger. SCANA shareholders may vote against the merger proposal if they are not in favor of the approval of the merger agreement. For additional information on appraisal or dissenters’ rights, see the section entitled “The Merger—No Dissenters’ Rights” beginning on page 68 of this proxy statement/prospectus.

 

Q: What are the U.S. federal income tax consequences of the merger to SCANA shareholders?

 

A: The merger is intended to be tax deferred to SCANA shareholders, provided it qualifies as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended, which we refer to as the Code. The holders of SCANA common stock are not expected to recognize any gain or loss for U.S. federal income tax purposes on the exchange of shares of SCANA common stock for shares of Dominion Energy common stock in the merger, except with respect to any cash received in lieu of fractional shares of Dominion Energy common stock.

You should read the section entitled “The Merger—U.S. Federal Income Tax Consequences of the Merger” beginning on page 66 of this proxy statement/prospectus for a more complete discussion of the U. S. federal income tax consequences of the merger. Tax matters can be complicated and the tax consequences of the merger to you will depend on your particular tax situation. You should consult your tax advisor to determine the tax consequences of the merger to you.

 

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Q: What will happen to SCANA as a result of the merger?

 

A: If the merger is completed, Merger Sub will be merged with and into SCANA, with SCANA continuing as the surviving corporation and a wholly owned subsidiary of Dominion Energy.

SCANA will no longer be a public company, and its shares will be delisted from the NYSE, deregistered under the Exchange Act and cease to be publicly traded. SCANA shareholders of record at the effective time of the merger (as defined below) will be entitled to receive the merger consideration.

 

Q: What equity stake will SCANA shareholders hold in Dominion Energy immediately following the merger?

 

A: We estimate that upon the closing of the merger, holders of SCANA common stock will hold, in the aggregate, approximately 12–13% of the issued and outstanding shares of Dominion Energy common stock, after giving effect to the expected issuance of Dominion Energy common stock in settlement of the forward sale agreements entered into by Dominion Energy in March 2018.

 

Q: When do you expect the merger to be completed?

 

A: We are targeting a close of the merger near year-end 2018; however, the merger is subject to various regulatory approvals and other conditions set forth in the merger agreement and described elsewhere in this proxy statement/prospectus and it is possible that factors outside the control of SCANA and Dominion Energy could result in the merger being completed at a later time, or not at all. There may be a substantial amount of time between the special meeting and the completion of the merger. We intend to complete the merger as soon as reasonably practicable following the receipt of all required approvals and the satisfaction or waiver of the other conditions.

 

Q: What are the conditions to the completion of the merger?

 

A: In addition to the approval of the merger agreement by SCANA shareholders as described above, closing of the merger is subject to the satisfaction or, to the extent permitted by applicable law, waiver of a number of other conditions, including compliance with applicable federal and state regulatory filing and approval requirements under the terms of the merger agreement, including under the Hart-Scott-Rodino Act, which we refer to as the HSR Act, and from the Nuclear Regulatory Commission, which we refer to as the NRC, and the Federal Energy Regulatory Commission, which we refer to as FERC, as well as from the Public Service Commission of South Carolina, the North Carolina Utilities Commission and the Georgia Public Service Commission, which we refer to as SCPSC, NCUC and GPSC, respectively. Other conditions include that, since the date of the merger agreement, there have been no substantive changes in any applicable law or order with respect to the South Carolina Base Load Review Act of 2007, as amended, which we refer to as the BLRA, or other South Carolina public utility laws that have or would reasonably be expected to have an adverse effect on SCANA or any of its subsidiaries, and that no governmental entity of competent jurisdiction shall have entered any order or enacted any change in law that imposes any condition that would reasonably be expected to result in any material change to the proposed terms, conditions or undertakings of the SCPSC petition (as defined in the section entitled “Summary—Conditions to Completion of the Merger” beginning on page 4 of this proxy statement/prospectus) or any significant change to the economic value of the proposed terms of the SCPSC petition, in each case as reasonably determined by Dominion Energy in good faith. Further conditions to closing include (1) that the SCPSC approve the SCPSC petition (other than the request for the SCPSC to make the SCPSC merger determination (as defined below)), unless otherwise consented to by Dominion Energy in its sole discretion, without any material change to the terms, conditions or undertakings of the cost recovery plan (as defined below) or any significant change to the economic value of the cost recovery plan, in each case as reasonably determined by Dominion Energy in good faith, and (2) that the SCPSC approve the merger with no material changes to the terms of the merger or make a finding that the merger is in the public interest or make a finding that there is an absence of harm to South Carolina rate payers as a result of the merger. We refer to the condition in clause (2) as the SCPSC merger determination.

 

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For a more complete summary of these conditions and additional conditions that must be satisfied or waived prior to the closing of the merger, see the section entitled “The Merger Agreement—Conditions to Completion of the Merger” beginning on page 92 of this proxy statement/prospectus.

 

Q: What happens if I sell my shares of SCANA common stock before the special meeting?

 

A: The record date for SCANA shareholders entitled to vote at the special meeting is May 31, 2018, which is earlier than the date of the special meeting. If you sell or otherwise transfer your shares of SCANA common stock after the record date but before the special meeting, you will retain your right to vote such shares at the special meeting but will otherwise transfer ownership of your shares of SCANA common stock, unless special arrangements (such as provision of a proxy) are made between you and the person to whom you transfer your shares and each of you notifies us in writing of such special arrangements.

 

Q: What happens if I sell or otherwise transfer my shares of SCANA common stock before the completion of the merger?

 

A: Only holders of shares of SCANA common stock at the time the articles of merger have been filed with the South Carolina Secretary of State (unless the parties agree in writing to a later time for the completion of the merger and specify such time in the articles of merger), which we refer to as the effective time of the merger, will become entitled to receive the merger consideration. If you sell your shares of SCANA common stock prior to the completion of the merger, you will not be entitled to receive the merger consideration upon completion of the merger.

 

Q: What happens if the merger is not completed?

 

A: Under the terms of the merger agreement, if the conditions to the merger are not satisfied or waived by January 2, 2019, which we refer to as the termination date (which will automatically be extended to April 2, 2019 if on the termination date certain required regulatory approvals have not been obtained), then either SCANA or Dominion Energy may terminate the merger agreement, subject to certain restrictions. The merger agreement can also be terminated under other circumstances specified under the merger agreement See the section entitled “The Merger Agreement—Termination of the Merger Agreement” beginning on page 103 of this proxy statement/prospectus. Under specified circumstances, SCANA may be required to pay to Dominion Energy, or be entitled to receive from Dominion Energy, a fee with respect to the termination of the merger agreement. See the section entitled “The Merger Agreement—Termination Fees” beginning on page 104 of this proxy statement/prospectus.

We cannot complete the merger unless the SCANA shareholders approve the merger proposal. If the merger agreement is not approved by SCANA shareholders or if the merger is not completed for any other reason, SCANA will remain an independent company, the SCANA shareholders will not receive any merger consideration for their shares of SCANA common stock in connection with the merger, and the shares of SCANA common stock will remain outstanding and will continue to be listed and traded on the NYSE.

Questions and Answers Regarding the Special Meeting and Voting

 

Q: When and where will the special meeting be held?

 

A: The special meeting will be held at 9:00 a.m., Eastern Daylight Time on July 31, 2018 at the Columbia Conference Center, 169 Laurelhurst Avenue, Columbia, South Carolina 29210. Registration will begin at 8:30 a.m.

 

Q: What matters will be voted on at the special meeting?

 

A: You will be asked to consider and vote on the following proposals:

 

    the merger proposal;

 

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    the merger-related compensation proposal; and

 

    the adjournment proposal, if necessary and appropriate in the view of the SCANA board.

SCANA will transact no other business at the special meeting or any adjournment or postponement thereof.

 

Q: What vote is required for approval of the proposals?

 

A:        • Approval of the merger proposal requires the affirmative vote of the holders of at least two-thirds of the outstanding shares of SCANA common stock;

 

    The merger-related compensation proposal will be approved if more votes are cast in favor of the proposal than against the proposal (the outcome of the merger-related compensation proposal will not be binding on SCANA or the SCANA board or the compensation committee of the SCANA board); and

 

    The adjournment proposal will be approved if more votes are cast in favor of the proposal than against the proposal.

 

Q: How does the SCANA board recommend that I vote on the proposals?

 

A: The SCANA board recommends that the SCANA shareholders vote (i) “FOR” the merger proposal, (ii) “FOR” the merger-related compensation proposal and (iii) “FOR” the adjournment proposal.

 

Q: Who is entitled to vote at the special meeting?

 

A: All holders of SCANA common stock as of the close of business on May 31, 2018, the record date for the special meeting, are entitled to vote at the special meeting, unless a new record date is fixed for any adjournment or postponement of the special meeting.

 

Q: What are the quorum requirements?

 

A: A quorum requires the presence, in person or by proxy, of the holders of a majority of the shares of SCANA common stock outstanding and entitled to vote. A quorum is needed to conduct the votes on the merger proposal and the merger-related compensation proposal. Abstentions, if any, will be counted as present and entitled to vote for purposes of determining the presence or absence of a quorum.

 

Q: How can I attend the special meeting in person?

 

A: An admission ticket or proof of share ownership as of the record date is required to attend the special meeting in person. If you plan to use the admission ticket, please remember to detach the admission ticket from your proxy card before mailing your proxy card. If you forget to bring the admission ticket, you will be admitted to the special meeting only if you are listed as a shareholder of record as of the record date and you bring proof of identification. If you hold your shares through a broker, bank or other nominee, you must provide proof of ownership by bringing either a copy of the voting instruction card provided by your broker, bank or other nominee or a brokerage statement showing your share ownership as of the record date. If you are a SCANA shareholder of record and your shares are owned jointly and you need an additional admission ticket, you should contact the SCANA Corporate Secretary, SCANA Corporation, 220 Operation Way, Mail Code D133, Cayce, South Carolina 29033, or call 803-217-7568.

 

Q: How do I vote?

 

A:

If you are a SCANA shareholder of record as of the record date for the special meeting, whether or not you plan to attend the special meeting, you may vote by submitting a proxy via the Internet, touchtone telephone

 

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  or mail before the special meeting, or you may vote in person at the special meeting. To ensure your shares are represented at the special meeting, you may submit your proxy by:

 

    accessing proxy.georgeson.com (this Internet website is specified on your proxy card);

 

    calling 1-877-456-7915 (this toll-free number is specified on your proxy card); or

 

    signing and returning the enclosed proxy card in the postage-paid envelope provided.

If you hold shares of SCANA common stock through a broker, bank or other nominee, please follow the voting instructions provided by your broker, bank or other nominee to ensure that your shares are represented at the special meeting.

 

Q: How many votes do I have?

 

A: You are entitled to one vote for each share of SCANA common stock that you owned as of the record date. As of the close of business on May 31, 2018, there were 142,916,917 outstanding shares of SCANA common stock.

 

Q: What will happen if I fail to vote or I abstain from voting?

 

A: You are strongly encouraged to vote. It is important that your views be represented no matter how many shares you own. Your failure to vote, or failure to instruct your broker, bank or other nominee to vote, or your abstention from voting, will have the same effect as a vote against the merger proposal (unless your shares are held through the SCANA Corporation 401(k) Retirement Savings Plan, as described on page xi of this proxy statement/prospectus), but will not be counted as a vote “for” or “against” the merger-related compensation proposal or the adjournment proposal.

 

Q: Who is SCANA’s transfer agent?

 

A: Equiniti Trust Company, which we refer to as EQ.

 

Q: What is the difference between holding shares as a shareholder of record and as a beneficial owner?

 

A: If your shares of SCANA common stock are registered directly in your name with SCANA’s transfer agent, you are considered the shareholder of record with respect to those shares and you can attend the special meeting and vote in person. You can also vote your shares by proxy without attending the special meeting in any of the ways specified in the section entitled “The Special Meeting—Voting by Proxy” beginning on page 32 of this proxy statement/prospectus.

If your shares of SCANA common stock are held by a brokerage firm, trustee, bank, other financial intermediary or nominee, referred to as an intermediary, you are considered the beneficial owner of shares held in “street name,” and the intermediary is considered the shareholder of record with respect to those shares.

 

Q: How do I vote my shares of SCANA common stock if my shares are held in “street name” by my broker, bank or other nominee?

 

A: If your shares of SCANA common stock are held in “street name” (that is, through a broker, bank or other nominee), you will receive a voting instruction card or other information from your broker, bank or other nominee seeking instruction from you as to how your shares should be voted, and, to vote your shares, you must provide your broker, bank or other nominee with instructions on how to vote them. Please follow the voting instructions provided by your broker, bank or other nominee. Please note that you may not vote shares held in “street name” by returning a proxy card directly to SCANA or by voting in person at the special meeting unless you provide a “legal proxy,” which you must obtain from your broker, bank or other nominee.

 

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Q: If my shares of SCANA common stock are held in “street name,” what will happen if I do not instruct my broker, bank or other nominee on how to vote?

 

A: If you do not instruct your broker, bank or other nominee on how to vote your shares:

 

    your broker, bank or other nominee may not vote your shares on the merger proposal, which broker non-votes will have the same effect as a vote against the merger proposal;

 

    your broker, bank or other nominee may not vote your shares on the merger-related compensation proposal, which broker non-votes will not be counted as a vote “for” or “against” the merger-related compensation proposal; and

 

    your broker, bank or other nominee may not vote your shares on the adjournment proposal, which broker non-votes will not be counted as a vote “for” or “against” the adjournment proposal.

 

Q: If I am a shareholder of record, what will happen if I sign and return my proxy card without indicating how to vote?

 

A: If you sign and return your proxy card without indicating how to vote on any particular proposal, the SCANA common stock represented by your proxy will be voted in favor of that proposal.

 

Q: How do I vote shares I hold as a participant through the SCANA Corporation 401(k) Retirement Savings Plan (formerly named the SCANA Corporation Stock Purchase-Savings Plan)?

 

A: If you own shares of SCANA common stock as a participant through the SCANA Corporation 401(k) Retirement Savings Plan, which we refer to as the Plan, you will receive a proxy card that covers only your Plan shares. Proxies executed by Plan participants will serve as instructions to the Plan’s trustee as to how Plan shares are to be voted. If you do not instruct the Plan’s trustee how your Plan shares are to be voted, the Plan trustee will instruct the proxy agents to vote your shares in the same proportion as the Plan shares for which the Plan’s trustee received instructions were voted. As a result of this proportional voting, if voting instructions are given for only a small percentage of Plan participant shares, the wishes of those participants would determine the voting instructions by the Plan’s trustee. Accordingly, the greater the number of Plan participant shares for which Plan participants complete and execute proxies, the more representative the Plan trustee’s voting instructions will be.

The deadline to provide voting directions for shares allocated to your Plan account through the Plan is 5:00 p.m., Eastern Daylight Time on July 27, 2018, which, for administrative reasons, is earlier than the deadline for voting SCANA common stock not held through the Plan. You will not be able to submit or change voting directions after this deadline. If you own SCANA common stock both through and outside of the Plan, you will be required to vote those shares separately.

 

Q: May I change my vote after I have returned a proxy or voting instruction card?

 

A: Yes. You may change your vote (i.e., revoke your proxy card) at any time before your proxy is voted at the special meeting. If you are a shareholder of record (i.e., you hold your shares directly in your name), you may accomplish this by granting a new proxy (by telephone, Internet or mail) bearing a later date or by attending the special meeting and voting in person (each of which automatically revokes the earlier proxy). However, your attendance at the special meeting alone will not revoke any proxy that you have previously given. If you hold your shares in “street name,” you must follow the instructions on the voting instruction card you received from your broker, bank or other nominee in order to change or revoke your instructions. If you own shares of SCANA common stock as a participant through the Plan, you must follow the directions you receive from the Plan’s trustee in order to change or revoke your vote. As described in the immediately preceding Question & Answer, there is a deadline for providing directions for voting shares allocated to a Plan account that is earlier than the deadline for voting shares not held through the Plan.

 

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Q: What do I need to do now?

 

A: Carefully read and consider the information contained in and incorporated by reference into this proxy statement/prospectus, including its annexes.

In order for your shares to be represented at the special meeting:

 

    you can vote through the Internet or by telephone by following the instructions included on your proxy card;

 

    you can indicate on the enclosed proxy card how you would like to vote and return the card in the accompanying pre-addressed postage paid envelope; or

 

    you can attend the special meeting in person.

 

Q: Do I need to do anything with my SCANA common stock certificates now?

 

A: No. If and after the merger is completed, if you held certificates representing shares of SCANA common stock, which we refer to as SCANA stock certificates, prior to the merger, Dominion Energy’s exchange agent will send you a letter of transmittal and instructions for exchanging your SCANA stock certificates for the merger consideration. Upon surrender of the SCANA stock certificates for cancellation along with the executed letter of transmittal and other required documents described in the instructions, you will receive the merger consideration. The shares of Dominion Energy common stock you receive in the merger will be issued in book-entry form.

 

Q: Who will solicit and pay the cost of soliciting proxies?

 

A: SCANA has engaged Georgeson LLC to assist in the solicitation of proxies for the special meeting, and will pay an estimated fee of $20,000 for their services plus associated costs and expenses. In addition to the use of the mail, proxies may be solicited by officers and directors and regular employees of SCANA, without additional remuneration, by personal interview, telephone, electronic communication or otherwise.

 

Q: Who can help answer my questions?

 

A: If you have questions about the merger or the other matters to be voted on at the special meeting or desire additional copies of this proxy statement/prospectus or additional proxy cards, you should contact our proxy solicitor or our shareholder services provider:

Georgeson LLC

1290 Avenue of the Americas, 9th floor

New York, NY 10104

Banks, Brokers and Shareholders

Call Toll-Free: 1-866-482-4943

Via Email: scana@georgeson.com

or

EQ Shareowner Services

1110 Centre Pointe Curve, Suite 101

Mendota Heights, MN 55120-4100

Telephone: 1-800-401-1957

Website: www.shareowneronline.com

 

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SUMMARY

This summary highlights information contained elsewhere in this proxy statement/prospectus and may not contain all the information that is important to you. We urge you to read carefully the remainder of this proxy statement/prospectus, including the attached annexes, and the other documents to which we have referred you for a more complete understanding of the matters being considered at the special meeting. See the section entitled “Where You Can Find More Information” beginning on page 141 of this proxy statement/prospectus. We have included page references to direct you to a more complete description of the topics presented in this summary.

Parties to the Merger

Dominion Energy

120 Tredegar Street

Richmond, Virginia 23219

(804) 819-2000

Headquartered in Richmond, Virginia and incorporated in Virginia in 1983, Dominion Energy is one of the nation’s largest producers and transporters of energy, with a portfolio of approximately 26,000 megawatts of electric generation, 66,600 miles of natural gas transmission, gathering, storage and distribution pipelines and 64,500 miles of electric transmission and distribution lines. Dominion Energy operates one of the largest natural gas storage systems in the U.S. with approximately 1 trillion cubic feet of capacity, and serves nearly 6 million utility and retail energy customers.

Dominion Energy common stock is listed on the NYSE under the symbol “D.”

Additional information about Dominion Energy is included in the documents incorporated by reference into this proxy statement/prospectus. See the section entitled “Where You Can Find More Information” beginning on page 141 of this proxy statement/prospectus.

SCANA

100 SCANA Parkway

Cayce, South Carolina 29033

(803) 217-9000

SCANA is a South Carolina corporation created in 1984 as a holding company. SCANA, through its wholly owned regulated subsidiaries, is primarily engaged in the generation, transmission, distribution and sale of electricity in the central, southern and southwestern portions of South Carolina and in the purchase, transmission and sale of natural gas in North Carolina and South Carolina. SCANA, through a wholly owned nonregulated subsidiary, also markets natural gas to retail customers in Georgia and to wholesale customers in the southeast United States.

SCANA common stock is traded on the NYSE under the symbol “SCG.”

Additional information about SCANA and its subsidiaries is included in the documents incorporated by reference into this proxy statement/prospectus. See the section entitled “Where You Can Find More Information” beginning on page 141 of this proxy statement/prospectus.



 

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Merger Sub

120 Tredegar Street

Richmond, Virginia 23219

(804) 819-2000

Merger Sub, a wholly owned subsidiary of Dominion Energy, is a South Carolina corporation formed on December 29, 2017 for the purpose of effecting the merger. To date, Merger Sub has not conducted any activities other than those incidental to its formation and the matters contemplated by the merger agreement in connection with the merger.

The Merger and the Merger Agreement

The terms and conditions of the merger are contained in the merger agreement, a copy of which is attached as Annex A to this proxy statement/prospectus. We encourage you to carefully read the merger agreement in its entirety, as it is the principal document that governs the merger.

Pursuant to and in accordance with the terms and conditions of the merger agreement, at the effective time of the merger, Merger Sub will merge with and into SCANA. After the effective time of the merger, SCANA will be the surviving corporation and a wholly owned subsidiary of Dominion Energy. Following the effective time of the merger, SCANA common stock will be delisted from the NYSE, deregistered under the Exchange Act, and cease to be publicly traded.

Merger Consideration (See page 88)

Upon completion of the merger, each issued and outstanding share of SCANA common stock (other than shares owned by Dominion Energy, Merger Sub or any other wholly owned subsidiary of Dominion Energy and shares owned by SCANA or any wholly owned subsidiary of SCANA, which shares we refer to as cancelled shares) will be automatically converted into the right to receive the merger consideration. Cash will be paid in lieu of any fractional shares of Dominion Energy common stock.

Recommendations of the SCANA Board of Directors (See page 43)

On January 2, 2018 the SCANA board adopted the merger agreement by a unanimous vote. For the factors considered by the SCANA board in reaching its decision to approve the merger agreement, see the section entitled “The Merger—SCANA’s Reasons for the Merger; Recommendation of the SCANA Board” beginning on page 43.

The SCANA board recommends that the SCANA shareholders vote (i) “FOR” the merger proposal, (ii) “FOR” the merger-related compensation proposal and (iii) “FOR” the adjournment proposal.

Opinions of SCANA’s Financial Advisors (See page 48)

Opinion of Morgan Stanley & Co. LLC

The SCANA board selected Morgan Stanley & Co. LLC, which we refer to as Morgan Stanley, to act as its financial advisor based on Morgan Stanley’s qualifications, expertise and reputation, its knowledge of and involvement in recent transactions in SCANA’s industry and its knowledge and understanding of the business and affairs of SCANA. On January 2, 2018, Morgan Stanley rendered its oral opinion, which was subsequently confirmed in writing, to the SCANA board to the effect that, as of that date, and based upon and subject to the assumptions made, procedures followed, matters considered and qualifications and limitations on the scope of



 

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review undertaken by Morgan Stanley as set forth in Morgan Stanley’s written opinion, the merger consideration to be received by the holders of shares of SCANA common stock (other than the holders of the cancelled shares) pursuant to the merger agreement was fair from a financial point of view to the holders of shares of SCANA common stock.

The full text of the written opinion of Morgan Stanley delivered to the SCANA board, dated January 2, 2018, is attached as Annex B and incorporated into this proxy statement/prospectus by reference in its entirety. The opinion sets forth, among other things, the assumptions made, procedures followed, matters considered and qualifications and limitations on the scope of the review undertaken by Morgan Stanley in rendering its opinion. SCANA shareholders are urged to, and should, read the opinion carefully and in its entirety. Morgan Stanley’s opinion is directed to the SCANA board and addresses only the fairness from a financial point of view of the merger consideration to be received by the holders of shares of SCANA common stock (other than the holders of the cancelled shares) pursuant to the merger agreement as of the date of the opinion. Morgan Stanley’s opinion did not address the relative merits of the transactions contemplated by the merger agreement as compared to other business or financial strategies that might be available to SCANA, nor did it address the underlying business decision of SCANA to enter into the merger agreement or proceed with any other transaction contemplated by the merger agreement. In addition, Morgan Stanley’s opinion did not in any manner address the prices at which shares of Dominion Energy common stock will trade following completion of the merger or at any time, and Morgan Stanley’s opinion was not intended to, and does not, express any opinion or recommendation as to how the SCANA shareholders should vote at the special meeting. The summary of Morgan Stanley’s opinion set forth in this proxy statement/prospectus is qualified in its entirety by reference to the full text of Morgan Stanley’s opinion.

For a summary of Morgan Stanley’s opinion and the methodology that Morgan Stanley used to render its opinion, see the section entitled “The Merger—Opinions of SCANA’s Financial Advisors—Opinion of Morgan Stanley & Co. LLC” beginning on page 48 of this proxy statement/prospectus.

Opinion of RBC Capital Markets, LLC

SCANA has engaged RBC Capital Markets, LLC, which we refer to as RBC Capital Markets, as a financial advisor to SCANA in connection with the merger. As part of this engagement, RBC Capital Markets delivered an opinion, dated January 2, 2018, to the SCANA board as to the fairness, from a financial point of view and as of such date, of the merger consideration to be received by holders of SCANA common stock pursuant to the merger agreement. The full text of RBC Capital Markets’ written opinion, dated January 2, 2018, is attached as Annex C to this proxy statement/prospectus and sets forth, among other things, the procedures followed, assumptions made, factors considered and qualifications and limitations on the review undertaken by RBC Capital Markets in connection with its opinion, as more fully described in the section entitled “The Merger—Opinions of SCANA’s Financial Advisors—Opinion of RBC Capital Markets, LLC” beginning on page 59 of this proxy statement/prospectus. RBC Capital Markets delivered its opinion to the SCANA board for the benefit, information and assistance of the SCANA board (in its capacity as such) in connection with its evaluation of the merger. RBC Capital Markets’ opinion addressed only the fairness, from a financial point of view and as of the date of such opinion, of the merger consideration (to the extent expressly specified in such opinion) and did not address any other aspect of the merger. RBC Capital Markets’ opinion also did not address the underlying business decision of SCANA to engage in the merger or the relative merits of the merger compared to any alternative business strategy or transaction that might be available to SCANA or in which SCANA might engage. RBC Capital Markets does not express any opinion and does not make any recommendation to any shareholder as to how such shareholder should vote or act with respect to the merger or any proposal to be voted upon in connection with the merger or otherwise.



 

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Interests of SCANA’s Directors and Executive Officers in the Merger (See page 75)

In considering the recommendation of the SCANA board with respect to the merger proposal and the other information contained in this proxy statement/prospectus, you should be aware that SCANA’s directors and executive officers may have interests in the merger that may be different from, or in addition to, the interests of the SCANA shareholders. These interests include the accelerated vesting of equity awards, arrangements that provide for severance benefits if the employment of a SCANA executive officer is terminated under specified circumstances following the completion of the merger and rights to indemnification and director’s and officer’s liability insurance that will be available after the completion of the merger. For a detailed discussion of the interests that SCANA’s directors and executive officers may have in the merger, please see the section entitled “The Merger—Interests of SCANA’s Directors and Executive Officers in the Merger” beginning on page 75 of this proxy statement/prospectus.

Expected Timing of the Merger (See page 69)

We are targeting the merger closing near year-end 2018, subject to the receipt of required shareholder and regulatory approvals and the satisfaction or waiver of the other conditions to the merger discussed below.

Conditions to Completion of the Merger (See page 92)

As more fully explained below, the obligation of SCANA, Dominion Energy and Merger Sub to effect the merger is subject to the satisfaction or waiver of the following mutual conditions:

 

    the receipt of the affirmative vote of holders of at least two-thirds of the outstanding shares of SCANA common stock entitled to vote thereon at a duly held special meeting (or any adjournment or postponement of the special meeting) with respect to the merger proposal, which we refer to as the SCANA requisite vote;

 

    the absence of any law or order issued by any governmental entity (as defined below) prohibiting the completion of the merger;

 

    the expiration or termination of the waiting period applicable to the completion of the merger under the HSR Act;

 

    authorization of the merger from the FERC;

 

    authorization of the merger from the NRC;

 

    authorization of the merger from the GPSC;

 

    authorization of the merger from the NCUC;

 

    the issuance by the SCPSC of an order approving the SCPSC petition (other than with respect to the SCPSC merger determination, which is discussed in the conditions of Dominion Energy and Merger Sub in the immediately following paragraph), unless otherwise consented to by Dominion Energy in its sole discretion, without any material changes to the proposed terms, conditions or undertakings set forth in the cost recovery plan or any significant changes to the economic value of the proposed terms of the cost recovery plan (we refer to (i) the South Carolina Public Service Authority as Santee Cooper, (ii) the New Nuclear Development Project under which SCANA and Santee Cooper undertook to construct two Westinghouse AP1000 Advanced Passive Safety nuclear units in Jenkinsville, South Carolina as the NND project, (iii) the cost recovery plan set forth in the SCPSC petition as the cost recovery plan and (iv) the joint petition filed by SCANA’s wholly owned utility subsidiary South Carolina Electric & Gas Company, which we refer to as SCE&G, and Dominion Energy with the SCPSC requesting that the SCPSC approve the merger and approve the terms for cost recovery and other regulatory matters with respect to the NND project set forth therein as the SCPSC petition);


 

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    the approval for listing of the shares of Dominion Energy common stock to be issued in the merger on the NYSE; and

 

    the effectiveness under the Securities Act of the registration statement on Form S-4 of which this proxy statement/prospectus is a part.

The obligation of Dominion Energy and Merger Sub to effect the merger is subject to the satisfaction or waiver of the following additional conditions:

 

    the representations and warranties of SCANA relating to SCANA’s capitalization being true and correct in all respects, except for de minimis inaccuracies;

 

    the representations and warranties of SCANA relating to (i) SCANA’s authority to execute and deliver the merger agreement and perform its obligations under the merger agreement and (ii) broker’s and advisor’s fees and commissions owed by SCANA to brokers or other financial advisors in connection with the merger, each being true and correct in all material respects;

 

    the representations and warranties of SCANA relating to (i) the absence of any changes since January 1, 2017 that have or would be reasonably expected to have, individually or in the aggregate, a material adverse effect on SCANA and its subsidiaries, taken as a whole and (ii) the SCANA requisite vote being the only vote of the SCANA shareholders required to approve the merger agreement and the merger, each being true and correct in all respects;

 

    each of the representations and warranties of SCANA other than those referred to in the three immediately preceding bullets being true and correct in all respects, except where the failure of such representations and warranties to be true and correct has not had or would not be reasonably expected to have, individually or in the aggregate, a material adverse effect on SCANA and its subsidiaries, taken as a whole;

 

    performance in all material respects by SCANA of all obligations required to be performed by it under the merger agreement on or prior to the closing date of the merger;

 

    Dominion Energy having received a certificate of the chief executive officer or the chief financial officer of SCANA, certifying that the conditions set forth in the five immediately preceding bullets have been satisfied;

 

    the absence of any regulatory approval or other approval or consent, in each case in connection with the merger, or order of a governmental entity related to any of the foregoing imposing a burdensome condition;

 

    the absence of any changes since the date of the merger agreement that have or would be reasonably expected to have, individually or in the aggregate, a material adverse effect on SCANA and its subsidiaries, taken as a whole;

 

    the absence of any order enacted by a governmental entity of competent jurisdiction or any change in law which, in each case, imposes any condition that would reasonably be expected to result in (i) a material change to the proposed terms, conditions, or undertakings set forth in the SCPSC petition, or (ii) a significant change to the economic value of the proposed terms set forth in the SCPSC petition, in each case as reasonably determined by Dominion Energy in good faith;

 

    the SCPSC shall have made the SCPSC merger determination; and

 

    the absence of any (i) substantive change in applicable law or any order with respect to the BLRA as in effect as of the date of the merger agreement or (ii) substantive change in any applicable law or any order enacted by a governmental entity with respect to any other South Carolina public utility laws as in effect as of the date of the merger agreement, in each case, which has or would reasonably be expected to have an adverse effect on SCANA or any of its subsidiaries.


 

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The obligation of SCANA to effect the merger is subject to the satisfaction or waiver of the following additional conditions:

 

    the representations and warranties of Dominion Energy and Merger Sub relating to Dominion Energy’s and Merger Sub’s capitalization being true and correct in all respects, except for de minimis inaccuracies;

 

    the representations and warranties of Dominion Energy and Merger Sub relating to (i) Dominion Energy’s and Merger Sub’s authority to execute and deliver the merger agreement and perform its obligations under the merger agreement and (ii) broker’s and advisor’s fees and commissions owed by Dominion Energy and Merger Sub to brokers or other financial advisors in connection with the merger, each being true and correct in all material respects;

 

    the representations and warranties of Dominion Energy and Merger Sub relating to (i) the absence of any change since January 1, 2017 that has or would be reasonably expected to have, individually or in the aggregate, a material adverse effect on Dominion Energy and its subsidiaries, taken as a whole and (ii) the approval of the merger agreement by the sole shareholder of Merger Sub being the only vote or consent of any class of capital stock of Dominion Energy or any of its affiliates necessary for Dominion Energy and Merger Sub to approve the merger agreement and complete the merger and the other transactions contemplated by the merger agreement, each being true and correct in all respects;

 

    each of the representations and warranties of Dominion Energy and Merger Sub other than those referred to in the three immediately preceding bullets above being true and correct in all respects, except where the failure of such representations and warranties to be true and correct has not had or would not be reasonably expected to have, individually or in the aggregate, a material adverse effect on Dominion Energy and its subsidiaries, taken as a whole;

 

    performance in all material respects by Dominion Energy and Merger Sub of all obligations required to be performed by them under the merger agreement on or prior to the closing date of the merger; and

 

    SCANA having received a certificate of the chief executive officer or the chief financial officer of Dominion Energy certifying that the conditions set forth in the five immediately preceding bullets have been satisfied.

We cannot be certain when, or if, the conditions to the merger will be satisfied or waived, or that the merger will be completed.

Termination of the Merger Agreement (See page 103)

As more fully explained below, the merger agreement may be terminated and the merger may be abandoned at any time prior to the effective time of the merger:

 

    by mutual written consent of Dominion Energy and SCANA;

 

    by either Dominion Energy or SCANA:

 

    if the merger shall not have been completed on or before January 2, 2019, except that such date will be automatically extended to April 2, 2019 if, as of January 2, 2019, the only conditions to closing not yet satisfied or waived are the ones relating to governmental orders, regulatory approvals or the SCPSC’s approval of the cost recovery plan;

 

    if the SCANA requisite vote is not obtained at the special meeting (or any adjournment or postponement thereof); or

 

    if a governmental entity shall have entered a final, nonappealable order that prohibits completion of the merger;


 

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    by SCANA:

 

    if, prior to obtaining the SCANA requisite vote, the SCANA board has effected a SCANA board adverse recommendation change with respect to a superior proposal in accordance with the procedures set forth in the merger agreement and shall have approved, and concurrently with the termination of the merger agreement, SCANA shall have entered into, an alternative acquisition agreement with respect to a superior proposal and paid to Dominion Energy the applicable termination fee; or

 

    if Dominion Energy or Merger Sub have breached any of their respective representations or warranties or failed to perform any of their respective covenants under the merger agreement where (i) such breach would give rise to a failure of a condition to SCANA’s obligation to complete the merger relating to (a) the accuracy of Dominion Energy’s and Merger Sub’s representations and warranties or (b) the performance by Dominion Energy and Merger Sub of all obligations required to be performed by them under the merger agreement and (ii) the breach cannot be cured by Dominion Energy or Merger Sub prior to the termination date, or is not cured by Dominion Energy or Merger Sub prior to the earlier of (a) the thirtieth day after SCANA provides Dominion Energy written notice of such breach and (b) the third business day immediately preceding the termination date;

 

    by Dominion Energy:

 

    if the SCANA board (or a committee thereof) has effected a SCANA board adverse recommendation change; or

 

    if SCANA has breached any of its representations or warranties or failed to perform any of its covenants under the merger agreement where (i) such breach would give rise to a failure of a condition to Dominion Energy’s and Merger Sub’s obligation to complete the merger relating to (a) the accuracy of SCANA’s representations and warranties or (b) the performance by SCANA of all obligations required to be performed by it under the merger agreement and (ii) the breach cannot be cured by SCANA prior to the termination date, or is not cured by SCANA prior to the earlier of (a) the thirtieth day after Dominion Energy provides SCANA written notice of such breach and (b) the third business day immediately preceding the termination date.

Termination Fees (See page 104)

The merger agreement provides that, upon termination of the merger agreement under certain circumstances, each party may be obligated to pay the other party a termination fee, discussed under the section entitled “The Merger Agreement—Termination Fees” beginning on page 104 of this proxy statement/prospectus.

Directors and Management of Dominion Energy After the Merger (See page 66)

Upon completion of the merger, the board of directors and executive officers of Dominion Energy are expected to remain unchanged. Pursuant to the terms of the merger agreement, as soon as practical after completion of the merger, the Dominion Energy board intends to appoint a mutually agreeable current member of the SCANA board or SCANA’s executive management to serve on the Dominion Energy board. For information on Dominion Energy’s current directors and executive officers, please see Dominion Energy’s proxy statement dated March 23, 2018 and its Annual Report on Form 10-K for the year ended December 31, 2017. See the section entitled “Where You Can Find More Information” beginning on page 141 of this proxy statement/prospectus.

Regulatory Approvals Required for the Merger (See page 68)

Under the terms of the merger agreement, to complete the merger, Dominion Energy and SCANA must obtain approvals or consents from, or make filings with, public utility, antitrust and other regulatory authorities.



 

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The U.S. federal and state approvals, consents and filings required under the terms of the merger agreement to complete the merger include the following:

 

    the expiration or early termination of certain waiting periods under the HSR Act and the related rules and regulations, which provide that certain acquisition transactions may not be completed until required information has been furnished to the Antitrust Division of the Department of Justice, which we refer to as the DOJ, and the Federal Trade Commission, which we refer to as the FTC;

 

    approval of the FERC under the Federal Power Act, which we refer to as the FPA;

 

    consent of the NRC under Section 184 of the Atomic Energy Act and the NRC’s implementing regulations in 10 C.F.R. 50.80;

 

    approval of the GPSC under § 46-4-25 of the Official Code of Georgia, which we refer to as the O.C.G.A.;

 

    authorization of the NCUC under Section 62-111(a) of the North Carolina General Statutes, which we refer to as the N.C.G.S.;

 

    approval by the SCPSC of the SCPSC petition (other than the request for the SCPSC to make the SCPSC merger determination), unless otherwise consented to by Dominion Energy in its sole discretion, without any material changes to the terms, conditions or undertakings of the cost recovery plan or any significant change to the economic value of the cost recovery plan, in each case as reasonably determined by Dominion Energy in good faith; and

 

    the SCPSC merger determination.

While not a condition to the closing of the merger, the transfer of indirect control over certain licenses for private internal communications held by SCANA and certain SCANA subsidiaries will require the approval of the Federal Communications Commission, which we refer to as the FCC, and the indirect transfer of control of certain state issued radioactive material licenses will require state-level consents.

Dominion Energy and SCANA have made or intend to make various filings and submissions for the above-mentioned authorizations and approvals. Dominion Energy and SCANA filed the required HSR Act notification and report forms with the DOJ and FTC on January 19, 2018, requested early termination of the HSR Act waiting period and were granted such early termination on February 1, 2018. We cannot assure that we will obtain such consents or approvals on terms and subject to conditions that will satisfy the requirements of the merger agreement. Please see the section entitled “The Merger—Regulatory Approvals Required for the Merger” beginning on page 68 of this proxy statement/prospectus for additional information about these matters.

U.S. Federal Income Tax Consequences of the Merger (See page 66)

The merger is intended to be tax deferred to SCANA shareholders, provided it qualifies as a “reorganization” within the meaning of Section 368(a) of the Code. The holders of SCANA common stock are not expected to recognize any gain or loss for U.S. federal income tax purposes on the exchange of shares of SCANA common stock for shares of Dominion Energy common stock in the merger, except with respect to any cash received in lieu of fractional shares of Dominion Energy common stock.

You should read “The Merger—U.S. Federal Income Tax Consequences of the Merger” beginning on page 66 of this proxy statement/prospectus for a more complete discussion of the U. S. federal income tax consequences of the merger. Tax matters can be complicated and the tax consequences of the merger to you will depend on your particular tax situation. You should consult your tax advisor to determine the tax consequences of the merger to you.



 

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Accounting Treatment (See page 68)

Dominion Energy prepares its financial statements in accordance with generally accepted accounting principles in the United States, which we refer to as GAAP. The merger will be accounted for using the acquisition method of accounting. Dominion Energy will be treated as the acquiror for accounting purposes.

No Dissenters’ Rights (See page 68)

No SCANA shareholder will be entitled to exercise any dissenters’ rights, appraisal rights or other similar rights in connection with the merger and the other transactions contemplated by the merger agreement.

The Special Meeting (See page 30)

The special meeting will be held at 9:00 a.m., Eastern Daylight Time on July 31, 2018 at the Columbia Conference Center, 169 Laurelhurst Avenue, Columbia, South Carolina 29210. Registration will begin at 8:30 a.m. At the special meeting, SCANA shareholders will be asked to consider and vote on:

 

    the merger proposal;

 

    the merger-related compensation proposal; and

 

    the adjournment proposal, if necessary or appropriate in the view of the SCANA board.

You may vote at the special meeting if you owned common stock of SCANA at the close of business on the record date, May 31, 2018. As of the record date there were 142,916,917 shares of SCANA common stock outstanding and entitled to vote.

You may cast one vote for each share of SCANA common stock that you owned on the record date.

Required Vote (See page 31)

Approval of the merger proposal requires the affirmative vote of the holders of at least two-thirds of the outstanding shares of SCANA common stock. Your failure to vote, or failure to instruct your broker, bank or other nominee to vote, or your abstention from voting, will have the same effect as a vote against the merger proposal (unless your shares are held through the Plan, as described on page xi of this proxy statement/prospectus).

The merger-related compensation proposal will be approved if more votes are cast in favor of the proposal than against the proposal. Because the votes for the merger-related compensation proposal are non-binding, if the merger agreement is approved by the SCANA shareholders and the merger is completed, the compensation that is the subject of the merger-related compensation proposal, which includes amounts SCANA is contractually obligated to pay, would still be paid regardless of the outcome of the non-binding advisory vote. Abstentions and broker non-votes will not be counted as a vote “for” or “against” the merger-related compensation proposal.

The adjournment proposal will be approved if more votes are cast in favor of the proposal than against the proposal. Abstentions and broker non-votes will not be counted as a vote “for” or “against” the adjournment proposal.

If you sign and return your proxy card without indicating how to vote on any particular proposal, SCANA common stock represented by your proxy will be voted in favor of that proposal.

As of the record date for the special meeting, the directors and executive officers of SCANA as a group owned and were entitled to vote 475,112 shares of the common stock of SCANA, or approximately 0.3324% of the outstanding shares of SCANA common stock on that date. SCANA currently expects that its directors and executive officers will vote their shares in favor of approval of the merger agreement, but none of SCANA’s directors or executive officers have entered into any agreement obligating them to do so.



 

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Risk Factors (See page 17)

Before voting at the special meeting, you should carefully consider all of the information contained in or incorporated by reference into this proxy statement/prospectus, as well as the specific factors under the section entitled “Risk Factors” beginning on page 17 of this proxy statement/prospectus.



 

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SELECTED HISTORICAL FINANCIAL DATA OF DOMINION ENERGY

The selected historical consolidated financial data of Dominion Energy for each of the years ended 2017, 2016 and 2015 and at December 31, 2017 and 2016 have been derived from Dominion Energy’s audited consolidated financial statements and related notes contained in its Annual Report on Form 10-K for the year ended December 31, 2017, as updated in its Current Report on Form 8-K, filed on June 6, 2018, which are incorporated by reference into this proxy statement/prospectus. The selected historical consolidated financial data for the years ended 2014 and 2013 and at December 31, 2015, 2014 and 2013 have been derived from Dominion Energy’s audited consolidated financial statements, which have not been incorporated by reference into this proxy statement/prospectus. The selected historical consolidated financial data at March 31, 2018 and for the three months ended March 31, 2018 and 2017 have been derived from Dominion Energy’s unaudited consolidated financial statements and related notes contained in its Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2018, which are incorporated by reference into this proxy statement/prospectus. The selected historical consolidated financial data at March 31, 2017 has been derived from Dominion Energy’s unaudited consolidated financial statements, which have not been incorporated by reference into this proxy statement/prospectus. The information set forth below is only a summary and is not necessarily indicative of the results of future operations of Dominion Energy or the combined company, and you should read the following information together with Dominion Energy’s audited consolidated financial statements, the related notes and the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in its Annual Report on Form 10-K, for the year ended December 31, 2017, as updated in its Current Report on Form 8-K, filed on June 6, 2018, and Dominion Energy’s unaudited consolidated financial statements, the related notes and the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in its Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2018, which are incorporated by reference in this proxy statement/prospectus. For more information, see the section entitled “Where You Can Find More Information” beginning on page 141 of this proxy statement/ prospectus.

 

    Three Months Ended
March 31,
     Year Ended December 31,  
    2018      2017      2017      2016      2015      2014      2013  
(millions, except per share amounts)                                                

Dominion Energy

                   

Operating revenue

  $ 3,466      $ 3,384      $ 12,586      $ 11,737      $ 11,683      $ 12,436      $ 13,120  

Income from continuing operations, net of tax

    503        632        2,999        2,123        1,899        1,310        1,789  

Loss from discontinued operations, net of tax

    —          —          —          —          —          —          (92

Net income attributable to Dominion Energy

    503        632        2,999        2,123        1,899        1,310        1,697  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Income from continuing operations before loss from discontinued operations per common share-basic

    0.77        1.01        4.72        3.44        3.21        2.25        3.09  

Net income attributable to Dominion Energy per common share-basic

    0.77        1.01        4.72        3.44        3.21        2.25        2.93  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Income from continuing operations before loss from discontinued operations per common share-diluted

    0.77        1.01        4.72        3.44        3.20        2.24        3.09  

Net income attributable to Dominion Energy per common share-diluted

    0.77        1.01        4.72        3.44        3.20        2.24        2.93  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Dividends declared per common share

    0.835        0.755        3.035        2.80        2.59        2.40        2.25  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total assets

    77,354        72,852        76,585        71,610        58,648        54,186        49,963  

Long-term debt

    31,120        31,096        30,948        30,231        23,468        21,665        19,199  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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SELECTED HISTORICAL FINANCIAL DATA OF SCANA

The selected historical consolidated financial data of SCANA for the years ended 2017, 2016 and 2015 and at December 31, 2017 and 2016 have been derived from SCANA’s audited consolidated financial statements and related notes contained in its Annual Report on Form 10-K for the year ended December 31, 2017, which are incorporated by reference into this proxy statement/prospectus. The selected historical consolidated financial data for the years ended 2014 and 2013 and at December 31, 2015, 2014 and 2013 have been derived from SCANA’s audited consolidated financial statements, which have not been incorporated by reference into this proxy statement/prospectus. The selected historical consolidated financial data at March 31, 2018 and for the three months ended March 31, 2018 and 2017 have been derived from SCANA’s unaudited consolidated financial statements and related notes contained in its Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2018, which are incorporated by reference into this proxy statement/prospectus. The selected historical consolidated financial data at March 31, 2017 has been derived from SCANA’s unaudited consolidated financial statements, which have not been incorporated by reference into this proxy statement/prospectus. The information set forth below is only a summary and is not necessarily indicative of the results of future operations of SCANA or the combined company, and you should read the following information together with SCANA’s audited consolidated financial statements, the related notes and the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in its Annual Report on Form 10-K for the year ended December 31, 2017, and SCANA’s unaudited consolidated financial statements, the related notes and the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in its Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2018, which are incorporated by reference into this proxy statement/prospectus. See the section entitled “Where You Can Find More Information” beginning on page 141 of this proxy statement/prospectus.

 

     Three Months Ended
March 31,
     Year Ended December 31,  
     2018      2017      2017     2016      2015      2014      2013  
(millions, except per share amounts)                                                

SCANA

                   

Operating revenues

   $ 1,180      $ 1,173      $ 4,407     $ 4,227      $ 4,380      $ 4,951      $ 4,495  

Operating income

     189        320        76       1,153        1,308        1,007        910  

Net income (loss)

     169        171        (119     595        746        538        471  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

Earnings (loss) per share of common stock—basic

     1.18        1.19        (0.83     4.16        5.22        3.79        3.40  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

Earnings (loss) per share of common stock—diluted

     1.18        1.19        (0.83     4.16        5.22        3.79        3.39  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

Dividends declared per common share

     0.6125        0.6125        2.45       2.30        2.18        2.10        2.03  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

Total assets

     18,584        18,458        18,739       18,707        17,146        16,818        15,127  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

Short-term and long-term debt

     6,976        7,352        6,983       7,431        6,529        6,581        5,788  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

 

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SELECTED UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION

The following selected unaudited pro forma consolidated financial information is derived from the unaudited pro forma consolidated statements of income of Dominion Energy for the three months ended March 31, 2018 and the year ended December 31, 2017, which have been prepared to give effect to the merger as if the merger was completed on January 1, 2017, and the unaudited pro forma condensed consolidated balance sheet of Dominion Energy at March 31, 2018, which has been prepared to give effect to the merger as if the merger was completed on March 31, 2018.

The following selected unaudited pro forma consolidated financial information is for illustrative and informational purposes only and is not necessarily indicative of the results that might have occurred had the merger taken place on January 1, 2017, for statements of income purposes, and March 31, 2018, for balance sheet purposes, and is not intended to be a projection of future results. Future results may vary significantly from the results reflected because of various factors, including those discussed in the section entitled “Risk Factors” beginning on page 17 of this proxy statement/prospectus. The following selected unaudited pro forma consolidated financial information should be read in conjunction with the section titled “Unaudited Pro Forma Consolidated Financial Statements” and related notes included in this proxy statement/prospectus beginning on page 116 of this proxy statement/prospectus.

 

     Three Months
Ended

March 31, 2018
     Year Ended
December 31, 2017
 
(millions, except per share amounts)              

Pro Forma Consolidated Dominion Energy

     

Operating revenue

   $ 4,640      $ 16,998  

Income from continuing operations, net of tax

     677        2,903  

Net income attributable to Dominion Energy

     677        2,903  

Income from continuing operations per common share-basic

     0.91        3.97  

Net income attributable to Dominion Energy per common share-basic

     0.91        3.97  

Income from continuing operations per common share-diluted

     0.91        3.97  

Net income attributable to Dominion Energy per common share-diluted

     0.91        3.97  

Total assets

     96,327     

Long-term debt

     37,177     

 

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EQUIVALENT AND COMPARATIVE PER SHARE INFORMATION

The following table summarizes unaudited per share data for (i) Dominion Energy and SCANA on a historical basis, (ii) Dominion Energy on a pro forma combined basis giving effect to the merger and (iii) SCANA on a pro forma equivalent basis calculated by multiplying the Dominion Energy pro forma combined data by the exchange ratio of 0.6690. It has been assumed for purposes of the pro forma combined financial information provided below that the merger was completed on January 1, 2017, for earnings per share purposes, and on March 31, 2018, for book value per share purposes. The following information should be read in conjunction with the section entitled “Unaudited Pro Forma Consolidated Financial Statements” and related notes included in this document beginning on page 116 of this proxy statement/prospectus.

 

     Dominion Energy      SCANA  
     Historical      Pro Forma
Combined
     Historical     Pro Forma
Equivalent(a)
 

Three months Ended March 31, 2018

          

Basic earnings per share of common stock

   $ 0.77      $ 0.91      $ 1.18     $ 0.61  

Diluted earnings per share of common stock

     0.77        0.91        1.18       0.61  

Cash dividends declared per share

     0.835        0.835        0.6125       0.559  

Book value per share(b)

     27.09        30.11        37.37       20.14  

Year Ended December 31, 2017

          

Basic earnings (loss) per share of common stock

   $ 4.72      $ 3.97      $ (0.83   $ 2.66  

Diluted earnings (loss) per share of common stock

     4.72        3.97        (0.83     2.66  

Cash dividends declared per share

     3.035        3.035        2.45       2.03  

 

(a) The unaudited SCANA pro forma equivalents are calculated by multiplying the unaudited Dominion Energy pro forma combined per share amounts by the exchange ratio of 0.6690.
(b) Historical book value per share for Dominion Energy and SCANA represents the total shareholders’ equity at March 31, 2018 divided by the number of shares of Dominion Energy or SCANA shares outstanding. The unaudited Dominion Energy pro forma combined book value per share represents the total pro forma shareholders’ equity at March 31, 2018 divided by the pro forma combined number of shares of Dominion Energy common stock that would have been outstanding at March 31, 2018 had the merger been completed at that date.

 

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COMPARATIVE STOCK PRICES AND DIVIDENDS

Dominion Energy common stock is traded on the NYSE under the symbol “D” and SCANA common stock is traded on the NYSE under the symbol “SCG.” The following table presents the closing prices for shares of Dominion Energy common stock and SCANA common stock on January 2, 2018, the last trading day before the public announcement of the execution of the merger agreement, and June 5, 2018 the latest practicable trading day before the date of this proxy statement/prospectus. The table also shows the equivalent per share value of the merger consideration for each share of SCANA common stock, which per share values are calculated as the product of (i) the Dominion Energy per share values and (ii) 0.6690, the exchange ratio.

 

     Dominion Energy
Common Stock
     SCANA
Common Stock
     Equivalent
Per Share
Information
 

Date

   Closing Price      Closing Price     

January 2, 2018

   $ 80.28      $ 38.87      $ 53.71  

June 5, 2018

   $ 62.77      $ 36.71      $ 41.99  

The above table shows only historical comparisons. These comparisons may not provide meaningful information to SCANA shareholders in determining whether to approve the merger agreement. SCANA shareholders are urged to obtain current market quotations for Dominion Energy common stock and SCANA common stock and to review carefully the other information contained in this proxy statement/prospectus or incorporated by reference into this proxy statement/prospectus in considering whether to approve the merger agreement. See the section entitled “Where You Can Find More Information” beginning on page 141 of this proxy statement/prospectus for instructions on how to obtain the information that has been incorporated by reference. Historical performance is not necessarily indicative of any performance to be expected in the future. See the sections entitled “Risk Factors” and “Cautionary Statement Regarding Forward-Looking Statements” beginning on pages 17 and 26, respectively, of this proxy statement/prospectus.

Market Price and Dividend Data - Dominion Energy

The following table sets forth the high and low sales prices of Dominion Energy common stock as reported on the NYSE and the quarterly cash dividends declared per share in respect of Dominion Energy common stock for the calendar quarters indicated.

 

     Dominion Energy  
     Price Range         
     High      Low      Dividends  

2016

        

First Quarter

   $ 75.18      $ 66.25      $ 0.700  

Second Quarter

     77.93        68.71        0.700  

Third Quarter

     78.97        72.49        0.700  

Fourth Quarter

     77.32        69.51        0.700  

2017

        

First Quarter

   $ 79.36      $ 70.87      $ 0.755  

Second Quarter

     81.65        76.17        0.755  

Third Quarter

     80.67        75.40        0.755  

Fourth Quarter

     85.30        75.75        0.770  

2018

        

First Quarter

   $ 81.67      $ 71.91      $ 0.835  

Second Quarter through June 5, 2018

     68.06        62.31        0.835  

 

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Dividends on Dominion Energy common stock are paid as declared by the Dominion Energy board. On May 9, 2018, the Dominion Energy board declared a quarterly dividend of $0.835 per share payable on June 20, 2018 to shareholders of record on June 1, 2018. Dividends are typically paid on the 20th of March, June, September and December of each year.

As of May 31, 2018, Dominion Energy had approximately 652.8 million shares of its common stock outstanding, and there were approximately 122,000 holders of record of Dominion Energy common stock.

Market Price and Dividend Data - SCANA

SCANA paid a dividend for the quarter ended March 31, 2018 of $0.6125 per share and has agreed in the merger agreement that it will not pay a quarterly dividend of more than that amount prior to the completion of the merger without Dominion Energy’s prior written consent. As previously publicly announced by SCANA, the SCANA board has deferred a decision on whether to pay a dividend for the quarter ending June 30, 2018. The decision to pay a dividend for the quarter ending June 30, 2018 and for any period thereafter, and the amount of any future dividend, will be made by the SCANA board based on many factors, including SCANA’s financial, regulatory and other circumstances at the time the decision is made.

SCANA paid quarterly dividends on its common stock of $0.6125 per share in 2017 and $0.575 per share in 2016. For additional information on the historic market price of SCANA common stock and dividends, see SCANA’s Annual Report on Form 10-K for the year ended December 31, 2017. See the section entitled “Where You Can Find More Information” beginning on page 141 of this proxy statement/prospectus.

 

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RISK FACTORS

In addition to the other information included or incorporated by reference into this proxy statement/prospectus, including the matters addressed in the section entitled “Cautionary Statement Regarding Forward-Looking Statements” beginning on page 26 of this proxy statement/prospectus, you should carefully consider the following risks before deciding how to vote on the proposals set forth in this document. In addition, you should read and consider the risks associated with each of the businesses of Dominion Energy and SCANA because these risks may also affect the combined company. A description of the material risks can be found in the Annual Report on Form 10-K for the fiscal year ended December 31, 2017 for Dominion Energy and in the Quarterly Report on Form 10-Q for the quarter ended March 31, 2018 for SCANA, each of which are filed with the SEC and incorporated by reference into this proxy statement/prospectus. You should also read and consider the other information in this proxy statement/prospectus and the other documents incorporated by reference into this proxy statement/prospectus. See the section entitled “Where You Can Find More Information” beginning on page 141 of this proxy statement/prospectus.

Risk Factors Relating to the Merger

Because the market price of Dominion Energy common stock will fluctuate, SCANA shareholders cannot be certain of the market value of the merger consideration they will receive.

Upon completion of the merger, each outstanding share of SCANA common stock (other than cancelled shares) will be converted into the right to receive 0.6690 of a share of Dominion Energy common stock. The market value of Dominion Energy common stock received in the merger may vary significantly from the closing price of Dominion Energy common stock on the date Dominion Energy and SCANA announced the merger, on the date that this proxy statement/prospectus is mailed to SCANA shareholders, or on the date of the special meeting. Any change in the market price of Dominion Energy common stock prior to the completion of the merger will affect the market value of the merger consideration that SCANA shareholders will receive upon completion of the merger, which may not occur until a significant period of time has passed since the date of the special meeting, and there will be no adjustment to the merger consideration for changes in the market price of either shares of Dominion Energy common stock or shares of SCANA common stock. Neither Dominion Energy nor SCANA is permitted to terminate the merger agreement because of changes in the market price of SCANA common stock or Dominion Energy common stock. On June 5, 2018, the closing price of the Dominion Energy common stock on the NYSE was $62.77 per share.

Stock price changes may result from a variety of factors that are beyond the control of Dominion Energy and SCANA, including, but not limited to, general market and economic conditions, changes in the companies’ respective businesses, operations and prospects, regulatory considerations, litigation and speculation regarding the likelihood that the merger will be completed and the timing of completion. Therefore, at the time of the special meeting you will not know the precise market value of the consideration you will receive upon completion of the merger. As of June 5, 2018, the equivalent per share value of the merger consideration for each share of SCANA common stock based on the product of (i) the Dominion Energy per share value and (ii) 0.6690 was $41.99. You should obtain current market quotations for shares of Dominion Energy common stock and for shares of SCANA common stock.

The completion of the merger is subject to the receipt of consents, approvals and/or findings from governmental entities, which may impose conditions that could have an adverse effect on Dominion Energy or SCANA or could cause either Dominion Energy or SCANA to abandon the merger. The completion of the merger is also subject to there not having been substantive changes in certain South Carolina laws that have or would reasonably be expected to have an adverse effect on SCANA or its subsidiaries or orders of governmental entities or changes in law that impose any condition that would reasonably be expected to result in specified changes to the SCPSC petition.

Dominion Energy and SCANA are not required to complete the merger until after the applicable waiting period under the HSR Act expires or terminates and the requisite authorizations, approvals, consents and/or permits are received from the FERC, NRC, SCPSC, NCUC and GPSC. Any of the relevant governmental entities

 

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may oppose the merger, fail to approve the merger, fail to make required findings in favor of the merger, or impose certain requirements or obligations as conditions for their consent, approval or findings or in connection with their review. Regulatory approvals of the merger or findings with respect to the merger may not be obtained on a timely basis or at all, and such approvals or findings may include conditions that could have an adverse effect on Dominion Energy and/or SCANA, and/or result in the abandonment of the merger. The terms of any conditions imposed in order to obtain the requisite regulatory approvals or findings may not be known by the date of the special meeting. Neither Dominion Energy nor SCANA can provide any assurance that they will obtain the necessary approvals or findings or that any required conditions will not have an adverse effect on Dominion Energy following the merger. If SCANA shareholders vote in favor of the merger proposal at the special meeting, Dominion Energy or SCANA may make decisions after the special meeting to waive a condition or approve certain actions required to obtain regulatory approvals or findings without seeking further approval of the SCANA shareholders.

Subject to the terms and conditions set forth in the merger agreement, the merger agreement may require Dominion Energy to accept conditions from regulators that could adversely impact Dominion Energy after the merger without either of Dominion Energy or SCANA having the right to refuse to close the merger on the basis of those regulatory conditions, except that Dominion Energy is generally not required, and SCANA is generally not permitted without Dominion Energy’s prior approval, to take any action or accept any condition that results in a burdensome condition, as described in the section entitled “The Merger Agreement—Reasonable Best Efforts to Obtain Regulatory Approvals” beginning on page 96 of this proxy statement/prospectus.

In addition, the merger agreement provides that Dominion Energy (but not SCANA) will have the right to refuse to complete the merger if, since the date of the merger agreement, any governmental entity shall have enacted any order, or there shall have been any change in law (including the BLRA and the other laws governing South Carolina public utilities), which imposes any material change to the terms, conditions or undertakings set forth in the SCPSC petition, or any significant changes to the economic value of the proposed terms set forth in the SCPSC petition, in each case as determined by Dominion Energy in good faith.

The merger agreement further provides that Dominion Energy (but not SCANA) will have the right to refuse to complete the merger if there shall have occurred any substantive change in the BLRA or other laws governing South Carolina public utilities which has or would reasonably be expected to have an adverse effect on SCANA or any of its subsidiaries. There are currently pending three bills that would make substantive changes to the BLRA. The bills are H. 4375, S. 954, and H. 4950, the latter of which is the South Carolina 2017-2018 Budget Bill amended to include provisos related to the SCPSC petition. These bills reside in conference committees to finalize differences between the versions of the legislation as passed. If any of these bills becomes law, Dominion Energy would not be obligated to complete the merger if it is determined that the bill has or would reasonably be expected to have an adverse effect on SCANA or any of its subsidiaries. In addition, the adjournment resolution adopted by the South Carolina General Assembly allows the leadership of the House of Representatives or Senate to reconvene those bodies to consider matters related to the NND project which could include new or additional legislation.

Certain lawsuits and regulatory actions have been filed against SCANA and SCE&G in connection with the abandonment of the NND project. If the relief requested in these matters (including a request for declaratory judgment that the BLRA is unconstitutional) is granted, Dominion Energy might not be obligated to complete the merger.

Dominion Energy and SCANA can provide no assurance that these risks will not materialize and either adversely impact SCANA prior to or Dominion Energy after the completion of the merger or result in the abandonment of the merger and adversely impact the results of operations, cash flows and financial condition of SCANA, if (i) the required authorizations, approvals, consents and/or permits are not obtained or received, or (ii) such conditions rise to the thresholds discussed above, some of which are in the subjective determination of Dominion Energy, acting in good faith (as discussed above). See the sections entitled “The Merger—Regulatory Approvals Required for the Merger” beginning on page 68 of this proxy statement/prospectus and “The Merger Agreement—Conditions to Completion of the Merger” beginning on page 92 of this proxy statement/prospectus.

 

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Failure to complete the merger could negatively impact the stock price and the future business and financial results of SCANA.

If the merger is not completed, the ongoing business of SCANA may be adversely affected and SCANA could be subject to several risks, including the following:

 

    the price of SCANA common stock may decline to the extent that the current market price reflects an expectation by the market that the merger will be completed;

 

    obligations to pay certain costs relating to the merger, such as legal, accounting, financial advisory, filing, proxy solicitation, printing and mailing fees;

 

    the disruption of SCANA’s ongoing business or inconsistencies in its services, standards, controls, procedures and policies due to management’s focus on the merger, any of which could adversely affect the ability of SCANA to maintain relationships with customers, regulators, vendors and employees, or could otherwise adversely affect the business and financial results of SCANA, without realizing any of the benefits of having the merger completed;

 

    the potential negative impact on SCANA ultimately resolving the rate and regulatory issues, including pending investigations and legal challenges, relating to the abandonment of the NND project in a manner satisfactory to SCANA on account of SCANA working with Dominion Energy to pursue the resolution of these issues as contemplated by the merger agreement rather than pursuing its regulatory and legal options for resolving these issues independently of considerations and obligations related to the merger; and

 

    the loss of other opportunities that could be beneficial to SCANA that could have been pursued during the pendency of the merger, without realizing any of the benefits of having the merger completed.

In addition to the above risks, SCANA may be required, under certain circumstances, to pay to Dominion Energy a termination fee of $240 million.

If the merger is not completed, SCANA cannot assure SCANA shareholders that these risks will not materialize and will not materially affect its business, financial results and stock price.

The merger agreement contains provisions that limit SCANA’s ability to pursue alternatives to the merger, which could discourage a potential competing acquirer of SCANA or could result in any competing proposal being at a lower price than it might otherwise be.

The merger agreement contains provisions that, subject to certain exceptions, restrict SCANA’s ability to initiate, solicit, knowingly encourage, facilitate or discuss competing third-party proposals to acquire all or a significant part of SCANA, or provide information to a third party that could reasonably be expected to lead to such a proposal. See the section entitled “The Merger Agreement—Non-Solicitation of Alternative Proposals” beginning on page 99 of this proxy statement/prospectus. In addition, Dominion Energy generally has an opportunity to offer to modify the terms of the merger in response to any superior acquisition proposal that may be made before the SCANA board is permitted to withdraw or qualify its recommendation. In some circumstances on termination of the merger agreement, SCANA may be required to pay to Dominion Energy a termination fee of $240 million. See the sections entitled “The Merger Agreement—Non-Solicitation of Alternative Proposals” beginning on page 99 of this proxy statement/prospectus, “The Merger Agreement—Termination of the Merger Agreement” beginning on page 103 of this proxy statement/prospectus and “The Merger Agreement—Termination Fees” beginning on page 104 of this proxy statement/prospectus.

These provisions, which the SCANA board regards as customary for transactions for this type, could discourage a potential competing acquirer that might have an interest in acquiring all or a significant part of SCANA from considering or proposing that acquisition, even if it were prepared to pay consideration with a higher per share cash or market value than the merger consideration, or might result in a potential competing acquirer proposing to pay a lower price than it might otherwise have proposed to pay because of the added expense of the termination fee that may become payable by SCANA in certain circumstances.

 

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The pendency of the merger could adversely affect the business and operations of SCANA.

In connection with the pending merger, some current or prospective customers or vendors of SCANA’s utilities may delay or defer decisions regarding their existing or proposed relationships with those utilities, which could negatively impact the operations, revenues, earnings, cash flows and expenses of SCANA, regardless of whether the merger is completed. Similarly, current and prospective employees of SCANA and its utilities may experience uncertainty about their future roles following the merger, which may materially adversely affect the ability of SCANA and its utilities to attract and retain key personnel during the pendency of the merger. In addition, due to operating covenants in the merger agreement, during the pendency of the merger, SCANA and its utilities may be unable to pursue strategic transactions, undertake significant capital projects, undertake certain significant financing or other specified transactions or pursue actions that are not in the ordinary course of business, even if such actions would prove beneficial.

Certain directors and executive officers of SCANA may have interests in the merger that may differ from, or be in addition to, the interests of SCANA shareholders.

Executive officers of SCANA negotiated the terms of the merger agreement with their counterparts at Dominion Energy, and the SCANA board approved the transactions contemplated by the merger agreement. In considering these facts and the other information contained in this proxy statement/prospectus, you should be aware that SCANA’s executive officers and directors may have interests in the merger that may be different from, or in addition to, the interests of SCANA shareholders. These interests include the accelerated vesting of equity awards, arrangements that provide for severance benefits if the employment of a SCANA executive officer is terminated under specified circumstances following the completion of the merger and rights to indemnification and director’s and officer’s liability insurance that will be available after the completion of the merger. For a detailed discussion of the interests that SCANA’s directors and executive officers may have in the merger, please see the section entitled “The Merger—Interests of SCANA’s Directors and Executive Officers in the Merger” beginning on page 75 of this proxy statement/prospectus.

SCANA shareholders will have a reduced ownership and voting interest in the combined company.

SCANA shareholders currently have the right to vote in the election of directors of SCANA and on certain other matters affecting SCANA. Following the merger, each SCANA shareholder will become a shareholder of Dominion Energy with a percentage ownership of the combined company that is much smaller than the shareholder’s percentage ownership of SCANA. It is expected that the former SCANA shareholders as a group will own approximately 12–13% of the outstanding shares of Dominion Energy common stock immediately after the completion of the merger. Because of this, the SCANA shareholders, as a group, will have substantially less influence on the management and policies of Dominion Energy than they now have, as a group, with respect to the management and policies of SCANA.

Dominion Energy expects to incur substantial expenses related to the merger.

Dominion Energy expects to incur relatively significant expenses in connection with completing the merger. While Dominion Energy has assumed that a certain level of transaction and integration expenses would be incurred, there are a number of factors beyond its control that could affect the total amount or the timing of its integration expenses. Many of the expenses that will be incurred, by their nature, are difficult to estimate accurately at the present time.

Following the merger, Dominion Energy may be unable to successfully integrate SCANA’s businesses.

Dominion Energy and SCANA currently operate as independent public companies. After the merger, Dominion Energy will be required to devote significant management attention and resources to integrating

 

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SCANA’s business. Potential difficulties Dominion Energy may encounter in the integration process include the following:

 

    the complexities associated with integrating SCANA and its utility businesses, while at the same time continuing to provide consistent, high quality services;

 

    the complexities of integrating a company with different core services, markets and customers;

 

    the inability to attract and retain key employees;

 

    potential unknown liabilities and unforeseen increased expenses, delays or regulatory conditions associated with the merger;

 

    difficulties in managing political and regulatory conditions related to SCANA’s utility businesses after the merger;

 

    the cost recovery plan includes a moratorium on filing requests for adjustments in SCE&G’s base electric rates until 2021 (if the merger is approved by the SCPSC), which would limit Dominion Energy’s ability to recover increases in non-fuel related costs of electric operations for SCE&G’s customers; and

 

    performance shortfalls as a result of the diversion of Dominion Energy management’s attention caused by completing the merger and integrating SCANA’s utility businesses.

For these reasons, you should be aware that it is possible that the integration process following the merger could result in the distraction of Dominion Energy’s management, the disruption of Dominion Energy’s ongoing business or inconsistencies in its services, standards, controls, procedures and policies, any of which could adversely affect the ability of Dominion Energy to maintain or establish relationships with current and prospective customers, vendors and employees or could otherwise adversely affect the business and financial results of Dominion Energy.

Dominion Energy and SCANA may be materially adversely affected by negative publicity related to the merger and in connection with other related matters, including the abandonment of the NND project.

From time to time, political and public sentiment in connection with the merger and in connection with other matters, including the abandonment of the NND project, has resulted and may continue to result in a significant amount of adverse press coverage and other adverse public statements affecting Dominion Energy and SCANA. Adverse press coverage and other adverse statements, whether or not driven by political or public sentiment, have resulted and may continue to result in investigations by regulators, legislators and law enforcement officials or in legal claims. Responding to these investigations and lawsuits, regardless of the ultimate outcome of the proceedings, as well as responding to and addressing adverse press coverage and other adverse public statements, can divert the time and effort of senior management from the management of Dominion Energy’s and SCANA’s respective businesses.

Addressing any adverse publicity, governmental scrutiny or enforcement or other legal proceedings is time consuming and expensive and, regardless of the factual basis for the assertions being made, can have a negative impact on the reputation of Dominion Energy and SCANA, on the morale and performance of their employees and on their relationships with their respective regulators, customers and commercial counterparties. It may also have a negative impact on their ability to take timely advantage of various business and market opportunities. The direct and indirect effects of negative publicity, and the demands of responding to and addressing it, may have a material adverse effect on Dominion Energy’s and SCANA’s respective business, financial condition, results of operations and prospects.

The market price of Dominion Energy common stock after the merger may be affected by factors different from those affecting the market price of SCANA common stock currently.

Upon completion of the merger, holders of SCANA common stock will become holders of Dominion Energy common stock. Dominion Energy’s business differs in important respects from that of SCANA, and,

 

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accordingly, the results of operations of the combined company and the market price of Dominion Energy common stock after the completion of the merger may be affected by factors different from those currently affecting the independent results of operations of each of Dominion Energy and SCANA. For a discussion of the businesses of Dominion Energy and SCANA and of some important factors to consider in connection with those businesses, see the documents incorporated by reference in this proxy statement/prospectus and referred to under the section entitled “Where You Can Find More Information” beginning on page 141 of this proxy statement/prospectus.

The market value of Dominion Energy common stock could decline if large amounts of its common stock are sold following the merger; the market value of Dominion Energy’s common stock could also decline as a result of issuances and sales of Dominion Energy common stock other than in connection with the merger.

Following the merger, shareholders of Dominion Energy and former SCANA shareholders will own interests in a combined company operating an expanded business with more assets and a different mix of liabilities. Current shareholders of Dominion Energy and SCANA may not wish to continue to invest in the combined company, or may wish to reduce their investment in the combined company, in order to comply with institutional investing guidelines, to increase diversification or to track any rebalancing of stock indices in which Dominion Energy common stock or SCANA common stock is or was included. If, following the merger, large amounts of Dominion Energy common stock are sold, the price of its common stock could decline.

Furthermore, Dominion Energy cannot predict the effect that issuances and sales of its common stock, whether taking place before the merger (subject to the limitations of the merger agreement) or after the merger, including issuances and sales in connection with capital markets transactions, such as the forward sale of Dominion Energy common stock entered into in March 2018, or acquisition transactions, such as this offering, or other transactions, may have on the market value of its common stock. The issuance and sale of substantial amounts of its common stock could adversely affect the market value of such common stock.

The merger may not be accretive to operating earnings and may cause dilution to Dominion Energy’s earnings per share, which may negatively affect the market price of Dominion Energy common stock.

Dominion Energy currently anticipates that the merger will be immediately accretive to Dominion Energy’s forecasted operating earnings per share on a standalone basis. This expectation is based on preliminary estimates, which may materially change. Dominion Energy may encounter additional transaction and integration-related costs, may fail to realize all of the benefits anticipated in the merger or be subject to other factors that affect preliminary estimates or its ability to realize operational efficiencies. Any of these factors could cause a decrease in Dominion Energy’s operating earnings per share or decrease or delay the expected accretive effect of the merger and contribute to a decrease in the price of Dominion Energy’s common stock. Dominion Energy expects that the initial effect of the merger on its GAAP earnings will be a decrease in such earnings due to anticipated charges for refunds to SCE&G electric customers, write-offs of regulatory assets and transaction costs.

Pending litigation against SCANA and Dominion Energy could result in an injunction preventing the completion of the merger or may adversely affect the combined company’s business, financial condition or results of operations following the merger.

Following the announcement of the merger, four lawsuits have been filed asserting claims relating to the merger. First, an existing derivative lawsuit was amended to assert direct claims on behalf of a putative class of SCANA shareholders in the Court of Common Pleas of the County of Richland, South Carolina against the members of the SCANA board, Dominion Energy and Merger Sub, alleging breaches of various fiduciary duties by the members of the SCANA board in connection with the merger and alleging that Dominion Energy and Merger Sub aided and abetted such alleged breaches. Second, two putative class actions on behalf of SCANA shareholders have been filed in the Court of Common Pleas of the Counties of Lexington and Richland, South Carolina, respectively. The first of these lawsuits alleges that an officer of SCANA and certain members of the SCANA board breached various fiduciary duties in connection with the merger, and that SCANA, Dominion

 

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Energy and Merger Sub aided and abetted such alleged breaches. The second of these lawsuits alleges that certain members of the SCANA board breached various fiduciary duties in connection with the merger, and that Dominion Energy and Merger Sub aided and abetted the alleged breaches. Among other remedies, the plaintiffs in each case seek to enjoin the merger and rescind the merger agreement. In addition, the second and third lawsuits seek in the alternative, should the merger be completed, an award of unspecified monetary damages. The fourth lawsuit is a complaint for violations of federal securities laws filed in the United States District Court for the District of South Carolina. This lawsuit asserts a claim for securities laws violations against SCANA and members of the SCANA board, and a claim for aiding and abetting against Dominion Energy and Merger Sub, in each case arising out of alleged misstatements and omissions in the Form S-4 containing a preliminary proxy statement of SCANA filed on February 14, 2018. Plaintiff seeks an order requiring defendants to disclose the alleged omitted or misrepresented information and/or an injunction to prevent consummation of the merger unless and until the alleged omitted or misrepresented information is disclosed.

While the defendants believe that dismissal is warranted, the outcome of any such litigation is inherently uncertain. The defense or settlement of any lawsuit or claim that remains unresolved at the time the merger closes may adversely affect the combined company’s business, financial condition or results of operation. See the section entitled “The Merger—Litigation Relating to the Merger” beginning on page 73 of this proxy statement/prospectus for more detail.

Derivative actions are pending against certain current and former SCANA directors and officers, the outcomes of which are uncertain; the actions are not likely to be resolved before the effective time of the merger, and the cost and recovery, if any, following the merger will burden or benefit, as applicable, all Dominion Energy shareholders and not only those Dominion Energy shareholders who had been SCANA shareholders; and it will not be known at the time of the SCANA special meeting whether the underlying claims in the derivative actions will be pursued against current and former SCANA directors and officers following the effective time of the merger.

Derivative actions have been filed in South Carolina state and federal court by putative shareholders of SCANA, asserting breach of fiduciary duty and other state law claims on behalf of SCANA against certain of SCANA’s current and former directors and officers, as described in the sections entitled “The Merger—Litigation Relating to the Merger” and “The Merger—Other Legal Proceedings” beginning on pages 73 and 74, respectively, of this proxy statement/prospectus. Although the underlying claims of SCANA asserted in the derivative actions would survive the closing of the merger, those claims would become controlled by Dominion Energy after the merger. Consequently, for purposes of voting on the merger, SCANA shareholders should assume that if the merger becomes effective, the plaintiffs in the pending derivative actions would lose their standing as SCANA shareholders to continue pursuing the derivative claims in those suits. If the claims asserted in the derivative actions have not been resolved prior to the effective time of the merger, the Dominion Energy board may have the opportunity to determine whether it is in the best interest of Dominion Energy shareholders to pursue those claims. Additionally, Dominion Energy shareholders, including current SCANA shareholders who become Dominion Energy shareholders through the merger, may make a demand on the Dominion Energy board to pursue those claims. Whether any such demand will result in Dominion Energy pursuing such claims, or if not, whether Dominion Energy shareholders would thereafter choose to pursue such claims as so-called double derivative claims, is not known. Thus, if the claims are not resolved prior to the effective time of the merger, it is possible that the derivative claims will not be pursued, despite the allegation by the plaintiffs in the derivative actions that such claims have substantial value to SCANA.

Moreover, while recovery, if any, on the derivative claims in the derivative actions obtained in the absence of the merger would benefit only SCANA and, indirectly as a result, SCANA shareholders, if the derivative claims are successfully pursued by Dominion Energy or its shareholders following the effective time of the merger, any recovery by them will benefit Dominion Energy, and current SCANA shareholders are only expected to own approximately 12–13% of the issued and outstanding Dominion Energy common stock as a result of the merger. At the same time, if such claims are unsuccessfully pursued by Dominion Energy the costs

 

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related thereto will burden Dominion Energy. In addition, any recovery by Dominion Energy after the effective time of the merger may be substantially or completely offset by the obligation of Dominion Energy under the merger agreement to indemnify, and to cause SCANA to honor its obligations to indemnify, directors and officers of SCANA for liabilities relating to their service prior to the effective time of the merger. See the section entitled “The Merger—Interests of SCANA’s Directors and Executive Officers in the Merger—Director and Officer Indemnification” beginning on page 79 of this proxy statement/prospectus.

The unaudited pro forma combined financial information and prospective financial information included in this proxy statement/prospectus are presented for illustrative purposes only and do not represent the actual financial position or results of operations of the combined company following the merger.

The unaudited pro forma combined financial information and prospective financial information contained in this proxy statement/prospectus are presented for illustrative purposes only, contain a variety of adjustments, assumptions and preliminary estimates and do not represent the actual financial position or results of operations of Dominion Energy and SCANA prior to the merger or that of the combined company following the merger for several reasons. See the sections entitled “Equivalent and Comparative Per Share Information” beginning on page 14 of this proxy statement/prospectus and “Unaudited Pro Forma Consolidated Financial Statements” beginning on page 116 of this proxy statement/prospectus.

The actual financial positions and results of operations of Dominion Energy and SCANA prior to the merger and those of the combined company following the merger may not be consistent with, or evident from, the unaudited pro forma combined financial information and prospective financial information included in this proxy statement/prospectus. In addition, the assumptions used in preparing the unaudited pro forma combined financial information and prospective financial information included in this proxy statement/prospectus may not prove to be accurate and may be affected by other factors. Any significant changes in the share price of Dominion Energy may cause a significant change in the purchase price and the pro forma financial information.

Dominion Energy has goodwill and other intangible assets on its balance sheet, and these amounts will increase as a result of the merger. If its goodwill or other intangible assets become impaired in the future, Dominion Energy may be required to record a significant, non-cash charge to earnings and reduce its shareholders’ equity.

Upon the completion of the merger, Dominion Energy will record as goodwill the excess of the purchase price paid by Dominion Energy over the fair value of SCANA’s assets and liabilities as determined for financial accounting purposes. Under GAAP, intangible assets are reviewed for impairment on an annual basis or more frequently whenever events or circumstances indicate that its carrying value may not be recoverable. If Dominion Energy’s intangible assets, including goodwill as a result of the merger, are determined to be impaired in the future, Dominion Energy may be required to record a significant, non-cash charge to earnings during the period in which the impairment is determined.

The shares of Dominion Energy common stock to be received by SCANA shareholders as a result of the merger will have different rights from the shares of SCANA common stock.

Upon completion of the merger, SCANA shareholders will become Dominion Energy shareholders and their rights as shareholders will be governed by the Virginia Stock Corporation Act, which we refer to as the VSCA, and Dominion Energy’s amended and restated articles of incorporation, which we refer to as the Dominion Energy charter, and amended and restated bylaws, which we refer to as the Dominion Energy bylaws. The rights associated with SCANA common stock are different from the rights associated with Dominion Energy common stock. See the section entitled “Comparison of Shareholder Rights” beginning on page 126 of this proxy statement/prospectus for a summary of the material differences between the rights of holders of Dominion Energy common stock and the rights of holders of SCANA common stock.

 

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The merger may fail to qualify as a tax-deferred reorganization for federal tax purposes, resulting in the SCANA shareholders’ recognition of taxable gain or loss in respect of their SCANA common stock.

Dominion Energy and SCANA intend the merger to qualify as a reorganization within the meaning of Section 368(a) of the Code. At the time of effectiveness of the registration statement relating to this proxy statement/prospectus, Dominion Energy and SCANA have obtained written tax opinions from Morgan, Lewis & Bockius, LLP, special tax counsel to Dominion Energy, and from Mayer Brown LLP, legal counsel to SCANA, respectively, that the merger will qualify as a reorganization within the meaning of Section 368(a) of the Code. In addition, Dominion Energy and SCANA expect to receive written tax opinions from Morgan, Lewis & Bockius LLP and Mayer Brown LLP, respectively, dated the closing date of the merger, to the effect that the merger will qualify as a “reorganization” within the meaning of Section 368(a) of the Code. Such tax opinions were and will be based on customary assumptions and representations made by Dominion Energy and SCANA, as well as certain covenants and undertakings by Dominion Energy and SCANA. Such opinions will not bind the Internal Revenue Service, which we refer to as the IRS, or any court, or prevent the IRS from adopting a contrary position. In addition, neither Dominion Energy nor SCANA intends to request a ruling from the IRS regarding the U. S. federal income tax consequences of the merger. Accordingly, even with the tax opinions that conclude that the merger will qualify as a reorganization within the meaning of Section 368(a) of the Code, no assurance can be given that the IRS, will not challenge the conclusions reflected in the opinion or that a court would not sustain such a challenge. If the merger fails to qualify as a reorganization, a SCANA shareholder generally would recognize gain or loss for U. S. federal income tax purposes on each share of SCANA common stock surrendered in an amount equal to the difference between such shareholder’s adjusted tax basis in that share and the fair market value of the merger consideration received in exchange for that share upon completion of the merger. SCANA shareholders should read the section entitled “The Merger—U.S. Federal Income Tax Consequences of the Merger” beginning on page 66 of this proxy statement/prospectus and consult their own tax advisors regarding the U.S. federal income tax consequences of the merger to SCANA shareholders in their particular circumstances.

 

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This proxy statement/prospectus and the information incorporated by reference in this proxy statement/prospectus include forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. These forward-looking statements are subject to risks and uncertainties, and actual results might differ materially from those discussed in, or implied by, the forward-looking statements. Forward-looking statements are based on the current beliefs and assumptions of the management of Dominion Energy and SCANA and can often be identified by terms and phrases that include “anticipate,” “believe,” “intend,” “estimate,” “expect,” “continue,” “should,” “would,” “could,” “may,” “plan,” “project,” “predict,” “will,” “potential,” “forecast,” “target,” “guidance,” “outlook,” or other similar terminology. Various factors may cause actual results to be materially different than the suggested outcomes within forward-looking statements; accordingly, there is no assurance that such results will be realized.

In light of these risks, uncertainties and assumptions, the events described in the forward-looking statements included or incorporated by reference in this proxy statement/prospectus might not occur or might occur to a different extent or at a different time than described. Actual results may differ materially from the current expectations of Dominion Energy and SCANA depending on a number of factors affecting their businesses and risks associated with the successful execution of the merger and the integration and performance of their businesses following the merger. In evaluating these forward-looking statements, you should carefully consider the risks described herein and in other reports that Dominion Energy and SCANA file with the SEC. See the sections entitled “Risk Factors” beginning on page 17 of this proxy statement/prospectus and “Where You Can Find More Information” beginning on page 141 of this proxy statement/prospectus. Factors which could have a material adverse effect on operations and future prospects or which could cause events or circumstances to differ from the forward-looking statements include, but are not limited to:

 

    the occurrence of any event, change or other circumstances that could give rise to the termination of the merger agreement;

 

    the risk that SCANA shareholders may not approve the merger proposal;

 

    the risk that the necessary regulatory approvals may not be obtained or may be obtained subject to conditions that are not anticipated, may be burdensome and/or fail to satisfy the requirements of the merger agreement;

 

    the risk that any repeal of or amendment to the BLRA may be enacted that does not satisfy the requirements of the merger agreement;

 

    the risk that a condition to closing of the merger may not be satisfied;

 

    the timing of the completion the merger;

 

    the possibility that the anticipated benefits from the merger cannot be fully realized or may take longer to realize than expected;

 

    risks related to disruption of management time from ongoing business operations due to the merger;

 

    the possibility that costs, difficulties or disruptions related to the integration of SCANA’s operations into Dominion Energy will be greater than expected;

 

    the timing and extent of changes in interest rates, commodity prices and demand and market prices for electricity;

 

    changes in the future cash requirements of Dominion Energy following the merger, whether caused by unanticipated increases in capital expenditures or otherwise;

 

    risks related to any legal proceedings that have been or may be instituted against Dominion Energy, SCANA and/or others relating to the merger; and

 

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    the effect of the announcement of the merger on Dominion Energy’s and SCANA’s operating results and businesses generally.

Except as otherwise required by law, neither Dominion Energy nor SCANA is under any obligation, and each expressly disclaims any obligation, to update, alter, or otherwise revise any forward-looking statements, whether written or oral, that may be made from time to time, whether as a result of new information, future events, or otherwise. Persons reading this proxy statement/prospectus are cautioned not to place undue reliance on these forward-looking statements which speak only as of the date hereof.

 

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THE COMPANIES

Dominion Energy

120 Tredegar Street

Richmond, Virginia 23219

(804) 819-2000

Headquartered in Richmond, Virginia and incorporated in Virginia in 1983, Dominion Energy is one of the nation’s largest producers and transporters of energy, with a portfolio of approximately 26,000 megawatts of electric generation, 66,600 miles of natural gas transmission, gathering, storage and distribution pipelines and 64,500 miles of electric transmission and distribution lines. Dominion Energy’s strategy is to be a leading provider of electricity, natural gas and related services to customers primarily in the eastern and Rocky Mountain regions of the U.S. Dominion Energy operates one of the largest natural gas storage systems in the U.S. with approximately 1 trillion cubic feet of capacity, and serves nearly 6 million utility and retail energy customers.

Dominion Energy is focused on expanding its investment in regulated electric generation, transmission and distribution and regulated natural gas transmission and distribution infrastructure. Dominion Energy’s nonregulated operations include merchant generation, energy marketing and price risk management activities and natural gas retail energy marketing operations. Dominion Energy’s operations are conducted through various subsidiaries, including (i) Virginia Electric and Power Company, a regulated public utility that generates, transmits and distributes electricity for sale in Virginia and northeastern North Carolina, which we refer to as Virginia Power, (ii) Dominion Energy Gas Holdings, LLC, a holding company for the majority of Dominion Energy’s regulated natural gas businesses, which conducts business activities through a regulated interstate natural gas transmission pipeline and underground storage system, a local, regulated natural gas transportation and distribution network and natural gas gathering and processing facilities, which we refer to Dominion Energy Gas, and (iii) Dominion Energy Questar Corporation, a holding company for Dominion Energy’s primarily regulated natural gas businesses, including retail natural gas distribution in Utah, Wyoming and Idaho and related natural gas development and production. Dominion Energy also owns the general partner, 50.5% of the common and subordinated units and 37.5% of the convertible preferred interests in Dominion Energy Midstream Partners, LP, which was formed by Dominion Energy to own and grow a portfolio of natural gas terminaling, processing, storage, transportation and related assets.

Dominion Energy’s common stock is listed on the NYSE under the symbol “D.”

Additional information about Dominion Energy is included in the documents incorporated by reference into this proxy statement/prospectus. See the section entitled “Where You Can Find More Information” beginning on page 141 of this proxy statement/prospectus.

SCANA

100 SCANA Parkway

Cayce, South Carolina 29033

(803) 217-9000

SCANA is a South Carolina corporation created in 1984 as a holding company. SCANA, through its wholly owned regulated subsidiaries, is primarily engaged in the generation, transmission, distribution and sale of electricity in the central, southern and southwestern portions of South Carolina and in the purchase, transmission and sale of natural gas in North Carolina and South Carolina. SCANA, through a wholly owned nonregulated subsidiary also markets natural gas to retail customers in Georgia and to wholesale customers in the southeast United States.

SCANA common stock is traded on the NYSE under the symbol “SCG.”

 

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Additional information about SCANA and its subsidiaries is included in the documents incorporated by reference into this proxy statement/prospectus. See the section entitled “Where You Can Find More Information” beginning on page 141 of this proxy statement/prospectus.

Merger Sub

120 Tredegar Street

Richmond, Virginia 23219

(804) 819-2000

Merger Sub, a wholly owned subsidiary of Dominion Energy, is a South Carolina corporation formed on December 29, 2017 for the purpose of effecting the merger. To date, Merger Sub has not conducted any activities other than those incidental to its formation and the matters contemplated by the merger agreement in connection with the merger.

 

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THE SPECIAL MEETING

Date, Time and Place

The special meeting will be held at 9:00 a.m., Eastern Daylight Time on July 31, 2018 at the Columbia Conference Center, 169 Laurelhurst Avenue, Columbia, South Carolina 29210. Registration will begin at 8:30 a.m.

Purpose of the Special Meeting

The special meeting is being held for the SCANA shareholders to consider and vote on the following proposals:

 

  1. the proposal to approve the merger agreement, pursuant to which Merger Sub will be merged with and into SCANA, with SCANA surviving the merger as a wholly owned subsidiary of Dominion Energy, and each outstanding share of SCANA common stock will be converted into the right to receive 0.6690 of a share of Dominion Energy common stock, with cash paid in lieu of fractional shares;

 

  2. the proposal to approve, on a non-binding advisory basis, the compensation to be paid to SCANA’s named executive officers that is based on or otherwise relates to the merger; and

 

  3. the proposal to adjourn the special meeting, if necessary or appropriate, in the view of the SCANA board to solicit additional proxies in favor of the merger proposal if there are not sufficient votes at the time of the special meeting to approve the merger proposal.

Recommendations of the SCANA Board

The SCANA board unanimously (i) determined that it is in the best interests of SCANA and the SCANA shareholders that SCANA enter into the merger agreement and complete the merger and the other transactions contemplated by the merger agreement on the terms and subject to the conditions set forth in the merger agreement, (ii) adopted the merger agreement and approved the transactions contemplated by the merger agreement, including the merger, (iii) directed that the approval of the merger agreement be submitted to a vote at a meeting of the SCANA shareholders and (iv) resolved to recommend that the SCANA shareholders approve the merger agreement, which we refer to as the SCANA board recommendation. For a description of factors considered by the SCANA board in making the above recommendation, see the section entitled “The Merger—SCANA’s Reasons for the Merger; Recommendation of the SCANA Board” beginning on page 43 of this proxy statement/prospectus.

The SCANA board recommends that you vote (i) “FOR” the merger proposal, (ii) “FOR” the merger-related compensation proposal and (iii) “FOR” the adjournment proposal.

Record Date; Stock Entitled to Vote

Only holders of record of shares of SCANA common stock at the close of business on May 31, 2018 are entitled to notice of, and to vote at, the special meeting and at any adjournment or postponement of the special meeting. We refer to this date as the record date for the special meeting. Upon written request by a SCANA shareholder, a list of SCANA shareholders entitled to vote at the special meeting will be available for inspection at SCANA’s Corporate Headquarters, 100 SCANA Parkway, Cayce, South Carolina 29033, during business hours from June 8, 2018 through the date of the special meeting. The list will also be available at the special meeting for examination by any shareholder of record of SCANA present at the special meeting.

As of the record date for the special meeting, the directors and executive officers of SCANA as a group owned and were entitled to vote 475,112 shares of SCANA common stock, or approximately 0.3324% of the outstanding shares of SCANA common stock on that date. SCANA currently expects that its directors and executive officers will vote their shares in favor of approval of the merger proposal, but none of SCANA’s directors or executive officers have entered into any agreement obligating them to do so.

 

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Quorum

A quorum requires the presence, in person or by proxy, of the holders of a majority of the shares of SCANA common stock outstanding and entitled to vote. A quorum is needed to conduct the votes on the merger proposal and the merger-related compensation proposal. Abstentions, if any, will be counted as present and entitled to vote for purposes of determining the presence or absence of a quorum.

Required Vote

Approval of the merger proposal requires the affirmative vote of the holders of at least two-thirds of the outstanding shares of SCANA common stock.

The merger-related compensation proposal will be approved if more votes are cast in favor of the proposal than against the proposal. Because the vote on the merger-related compensation proposal is non-binding, if the merger agreement is approved by the SCANA shareholders and the merger is completed, the compensation that is the subject of the merger-related compensation proposal, which includes amounts SCANA is contractually obligated to pay, would still be paid regardless of the outcome of the non-binding advisory vote.

The adjournment proposal will be approved if more votes are cast in favor of the proposal than against the proposal.

Abstentions and Broker Non-Votes

Your failure to vote, or failure to instruct your broker, bank or other nominee to vote, or your abstention from voting, will have the same effect as a vote against the merger proposal (unless your shares are held through the Plan, as described on page xi of this proxy statement/prospectus), but will not be counted as a vote “for” or “against” the merger-related compensation proposal or the adjournment proposal. If you own shares of SCANA common stock as a participant in the Plan, and you do not instruct the Plan’s trustee how your Plan shares are to be voted, the Plan trustee will instruct the proxy agents to vote your shares in the same proportion as the Plan shares for which the Plan’s trustee received instructions were voted.

Voting at the Special Meeting

Whether or not you plan to attend the special meeting, please promptly vote your shares of SCANA common stock by submitting a proxy to ensure your shares are represented at the meeting. You may also vote in person at the special meeting.

Voting in Person

An admission ticket or proof of share ownership as of the record date is required to attend the special meeting in person. If you plan to use the admission ticket, please remember to detach the admission ticket from your proxy card before mailing your proxy card. If you forget to bring the admission ticket, you will be admitted to the special meeting only if you are listed as a shareholder of record as of the record date and you bring proof of identification. If you hold your shares through a broker, bank or other nominee, you must provide proof of ownership by bringing either a copy of the voting instruction card provided by your broker, bank or other nominee or a brokerage statement showing your share ownership as of the record date. If you are a shareholder of record and your shares are owned jointly and you need an additional admission ticket, you should contact the SCANA Corporate Secretary, SCANA Corporation, 220 Operation Way, Mail Code D133, Cayce, South Carolina 29033, or call 803-217-7568.

You may vote in person at the special meeting by submitting your signed proxy card or requesting a ballot at the special meeting. Please note, however, that if your shares of SCANA common stock are held in “street name,” which means your shares of SCANA common stock are held of record by a broker, bank or other nominee, and you wish to vote at the special meeting, you must bring to the special meeting a “legal proxy” from the record holder (your broker, bank or other nominee) of the shares of SCANA common stock authorizing you to vote at the special meeting.

 

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Voting by Proxy

You should vote your proxy even if you plan to attend the special meeting. You can always change your vote at the special meeting or revoke your proxy before the special meeting.

Your enclosed proxy card includes specific instructions for voting your shares of SCANA common stock. SCANA’s electronic voting procedures are designed to authenticate your identity and to ensure that your votes are accurately recorded. When the accompanying proxy is returned properly executed, the shares of SCANA common stock represented by it will be voted at the special meeting or any adjournment or postponement thereof in accordance with the instructions contained in the proxy.

If you return your signed proxy card without indicating how you want your shares of SCANA common stock to be voted with regard to a particular proposal, your shares of SCANA common stock will be voted in favor of each such proposal. Proxy cards that are returned without a signature will not be counted as present at the special meeting and cannot be voted.

If your shares of SCANA common stock are held in an account with a broker, bank or other nominee, you have received a separate voting instruction card in lieu of a proxy card and you must follow those instructions in order to vote.

Changing or Revoking Your Proxy or Voting Instructions

You have the power to change your vote (i.e., revoke your proxy) at any time before your proxy is voted at the special meeting. If you are a shareholder of record (i.e., you hold your shares directly in your name), you may accomplish this by granting a new proxy (by telephone, Internet or mail) bearing a later date or by attending the special meeting and voting in person (each of which automatically revokes the earlier proxy). However, your attendance at the special meeting alone will not revoke any proxy that you have previously given. If you hold your shares in “street name,” you must follow the instructions on the voting instruction card you received from your broker, bank or other nominee in order to change or revoke your instructions. If you own shares of SCANA common stock as a participant in the Plan, you must follow the directions you receive from the Plan’s trustee in order to change or revoke your vote. As described on page xi of this proxy statement/prospectus, there is a deadline for providing directions for voting shares allocated to a Plan account that is earlier than the deadline for voting shares not held through the Plan.

Solicitation of Proxies

SCANA has engaged Georgeson LLC to assist in the solicitation of proxies for the special meeting and has agreed to pay them a fee of approximately $20,000 for their services plus associated costs and expenses. In addition to the use of the mail, proxies may be solicited by officers and directors and regular employees of SCANA, without additional remuneration, by personal interview, telephone, electronic communication or otherwise. SCANA will also request brokers, banks and nominees to forward proxy materials to the beneficial owners of shares of SCANA common stock held of record on the record date and will provide customary reimbursement to such firms for the cost of forwarding these materials.

 

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THE MERGER

Effects of the Merger

Upon completion of the merger, Merger Sub will be merged with and into SCANA. SCANA will be the surviving corporation.

At the effective time of the merger, each share of SCANA common stock issued and outstanding immediately prior to the effective time of the merger (other than cancelled shares), whether represented by a SCANA stock certificate or in non-certificated form and represented by book-entry, will be automatically converted into the right to receive the merger consideration.

Dominion Energy will not issue fractional shares of Dominion Energy common stock in the merger. Instead, each SCANA shareholder who would otherwise be entitled to receive fractional shares of Dominion Energy common stock in the merger (after aggregating all fractional shares of Dominion Energy common stock issuable to such holder) will be entitled to an amount of cash, without interest, rounded to the nearest cent, equal to the product of (i) the amount of such fractional shares of Dominion Energy common stock issuable to such holder and (ii) the volume-weighted average price, rounded to four decimal places, of Dominion Energy common stock for the ten consecutive trading days ending on and including the second trading day prior to the effective time of the merger, which we refer to as the average price.

Background of the Merger

In 2007, lawmakers in South Carolina passed the BLRA which was intended to encourage investment in nuclear construction by enabling electric utilities to finance that investment by commencing to recover financing costs incurred during construction rather than having to wait until the units were placed into service. In 2008, SCE&G and Santee Cooper announced plans to construct the two Westinghouse AP1000 Advanced Passive Safety nuclear units in Jenkinsville, South Carolina which would serve as the centerpiece of the NND project. In 2009, the SCPSC approved SCE&G’s combined application pursuant to the BLRA and other laws seeking a certificate of environmental compatibility and public convenience and necessity and for a base load review order relating to the proposed construction and operation by SCE&G and Santee Cooper of the two nuclear units contemplated by the NND project. In 2012, SCE&G and Santee Cooper received a Combined Operating License from the NRC with respect to the NND project, and in 2013, SCE&G and Santee Cooper officially commenced nuclear construction on the two nuclear units that were the centerpiece of the NND project.

Senior management of SCANA and the SCANA board regularly review and discuss SCANA’s business strategies and prospects.

In late 2016, in light of then-current facts and circumstances related to the electric and gas utility industries in general and SCANA in particular, senior management of SCANA and the SCANA board began preliminary preparations with respect to a process to proactively explore the possibility of a potential strategic transaction. These preliminary preparations included high-level discussions with Mayer Brown LLP, SCANA’s outside legal counsel which we refer to as Mayer Brown, and with Morgan Stanley and RBC Capital Markets, although neither Morgan Stanley nor RBC Capital Markets was formally engaged by SCANA as a financial advisor in connection with exploring the possibility of a potential strategic transaction at this time. These discussions included consulting with Morgan Stanley and RBC Capital Markets regarding certain third parties that Morgan Stanley and RBC Capital Markets would suggest contacting regarding their interest in a potential strategic transaction involving SCANA if the SCANA board elected to commence a process to explore the possibility of a potential strategic transaction. In mid-December 2016, the SCANA board, having completed these preliminary preparations, elected to defer a formal decision about whether or not to commence a process to explore the possibility of a potential strategic transaction until early January 2017. However, in late December 2016 there

 

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were developments that raised questions about the financial well-being of Westinghouse Electric Company LLC, which we refer to as Westinghouse, the primary contractor on the NND project with which SCE&G had a fixed price contract for Westinghouse’s services in connection with the construction of the NND project. In light of these developments, the SCANA board elected in early January 2017 not to commence a process to explore the possibility of a potential strategic transaction.

On March 29, 2017, Westinghouse filed voluntary petitions under Chapter 11 of the U.S. Bankruptcy Code and, in doing so, indicated an intention to reject the fixed price contract with SCE&G for Westinghouse’s services in connection with the construction of the NND project. In connection therewith, SCE&G and Santee Cooper entered into an Interim Assessment Agreement with Westinghouse concerning the NND project. This agreement was designed to allow for a transition and evaluation period during which SCE&G and Santee Cooper could continue to make progress on the NND project.

Westinghouse’s circumstances led SCANA to undertake an extensive analysis of possible alternatives then available for the NND project. In the months following the Westinghouse bankruptcy filing, in addition to extensively analyzing possible alternatives available for the NND project, senior management of SCANA and the SCANA board also considered various strategic alternatives available to SCANA under the circumstances.

In late March 2017, the chief executive officer of another utility company, which we refer to as Party A, approached Kevin B. Marsh, who was at that time the Chairman of the Board, President and Chief Executive Officer of SCANA, at an industry event they were both attending and told Mr. Marsh that Party A would be interested in talking to SCANA if SCANA decided at some point that it was interested in potentially pursuing a strategic transaction. Mr. Marsh informed D. Maybank Hagood, who was at that time the lead independent director of the SCANA board, of this conversation shortly after it occurred and then informed the SCANA board of this conversation at the next regularly scheduled board meeting on April 27, 2017.

On May 5, 2017, Mr. Marsh and Thomas F. Farrell, II, Dominion Energy’s Chairman, President and Chief Executive Officer, met in Columbia, South Carolina. The meeting was arranged at the request of Mr. Farrell. At this meeting, Mr. Farrell conveyed to Mr. Marsh various concepts and potential terms related to a potential strategic transaction between SCANA and Dominion Energy. These concepts and terms, which Mr. Farrell indicated did not constitute an offer with respect to a potential transaction, included, among other things, preliminary indications regarding the potential consideration (consisting of up to 50% cash and the remainder Dominion Energy common stock and reflecting in total a premium of approximately 15% over the recent price of SCANA common stock) that would be received by SCANA’s shareholders in connection with the transaction. Mr. Marsh told Mr. Farrell that SCANA was still in the process of evaluating the NND project and that he would get back to him when the evaluation process was substantially complete.

Later on May 5, 2017, a telephonic meeting of the SCANA board was held. Members of SCANA’s senior management and representatives of Mayer Brown attended the meeting. At this meeting Mr. Marsh described for the SCANA board the meeting he had with Mr. Farrell earlier that day. The SCANA board discussed whether, in light of the preliminary interest in a potential strategic transaction expressed by Dominion Energy, it was prudent to commence a process to explore the possibility of a potential strategic transaction. In light of the considerable uncertainty surrounding the NND project and the challenges that third parties would have in valuing SCANA in light of those uncertainties, the SCANA board elected not to do so at that time.

On May 12, 2017, in a meeting arranged by Mr. Marsh, Mr. Marsh had a conversation with the chief executive officer of another utility company, which we refer to as Party B, and asked whether Party B might be interested in acquiring an ownership interest in the NND project. The chief executive officer responded that Party B would consider the matter. On May 22, 2017, the chief executive officer of Party B informed Mr. Marsh that Party B was not interested in acquiring an ownership interest in the NND project.

In mid-June 2017, Mr. Marsh called Mr. Farrell, telling him that SCANA’s evaluation of the NND project was taking longer than expected and that he still planned to get back to him with respect to the conceptual

 

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proposal made by Mr. Farrell at their meeting on May 5, 2017 after more progress was made in the evaluation of the NND project.

On June 26, 2017, SCANA and Santee Cooper announced that the Interim Assessment Agreement with Westinghouse concerning the NND project had been amended to extend the term of the agreement through August 10, 2017. The agreement extension allowed SCANA and Santee Cooper additional time to maintain their options by continuing construction on the NND project, while examining relevant information for a thorough and careful assessment to determine the most prudent path forward.

On July 12, 2017, Mr. Marsh and Jimmy E. Addison, who was at that time the Executive Vice President and Chief Financial Officer of SCANA, met with Mr. Farrell and Mark F. McGettrick, Dominion Energy’s Executive Vice President and Chief Financial Officer, in Columbia, South Carolina. The meeting was arranged at the request of Mr. Marsh. At the meeting, Mr. Marsh stated that he was not going to respond to the conceptual proposal communicated by Mr. Farrell at their meeting on May 5, 2017, but rather wanted to provide Dominion Energy with an update regarding SCANA’s evaluation of the NND project and to convey to Dominion Energy certain additional information about SCANA’s situation and circumstances and about Santee Cooper and its generation needs for the future. Mr. Marsh asked Mr. Farrell if Dominion Energy had any interest in acquiring all or a portion of Santee Cooper’s interest in the NND project. Mr. Farrell said that Dominion Energy had no such interest. Rather, Mr. Farrell stated that Dominion Energy was interested in proceeding with a due diligence review for a strategic transaction with SCANA. Mr. Marsh responded that SCANA was not prepared to proceed with that step at that time. The participants in the meeting then discussed certain of the terms that would need to be considered if the parties were to proceed to evaluate a strategic transaction. At the end of this meeting, the representatives of SCANA and Dominion Energy agreed to keep in touch as developments warranted.

On July 17, 2017, an in-person meeting of the SCANA board was held. Members of SCANA’s senior management and representatives of Mayer Brown, Morgan Stanley and RBC Capital Markets attended this meeting. At this meeting, the SCANA board engaged in an extensive evaluation and discussion of various alternatives available for the NND project: complete both units, complete one unit and abandon (or postpone further construction of) the other unit or abandon both units. The SCANA board noted that its decision with respect to these three alternatives was heavily dependent on Santee Cooper’s decision regarding its interest in the NND project. Also at that meeting, Mr. Marsh described to the SCANA board the meeting with the representatives of Dominion Energy on July 12, 2017 and further discussions ensued among the directors, management and the advisors regarding the NND project, the meeting with Dominion Energy and other related matters. After discussion, the SCANA board concluded not to pursue further discussions with Dominion Energy or others regarding a strategic transaction at that time.

On July 27, 2017, SCANA and Santee Cooper issued a joint press release that stated, among other things, that there were significant challenges to completing construction of one or both units of the NND project.

On July 31, 2017, Santee Cooper announced its decision to suspend construction of the NND project. Later on July 31, 2017, following a telephonic meeting of the SCANA board, SCE&G announced that, in light of its analysis and evaluation of the NND project and Santee Cooper’s decision to suspend construction, it would cease construction on the NND project. This announcement led various stakeholders, including rate payers, shareholders, legislative committees, regulators, and other government officials, to commence inquiries into, and in some cases legal challenges with respect to, SCANA’s decision to cease construction on the NND project, many of which inquiries and legal challenges remain ongoing.

On August 1, 2017, SCE&G presented the results of its evaluation of the costs necessary to complete the NND project and the basis of its decision to abandon the project in an Allowable Ex Parte Communication Briefing to the SCPSC and filed a petition with the SCPSC under the BLRA seeking, among other things, recovery of certain costs related to the construction of the NND project in light of the decision to abandon construction.

 

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In early August 2017, Mr. Marsh received a call from an executive of another utility company, which we refer to as Party C. During this call, the executive of Party C indicated to Mr. Marsh that Party C would be interested in talking to SCANA if SCANA was interested in pursuing a strategic transaction. At about that time, the chief executive officer of Party A also contacted Mr. Marsh and re-expressed Party A’s interest in discussing a strategic transaction with SCANA if SCANA was interested in such a transaction. Also at about that time, Mr. Marsh had a conversation with the chief executive officer of Party B in which Party B did not raise the topic of a possible strategic transaction with SCANA. Mr. Marsh informed the SCANA board of these conversations shortly after they took place.

On August 15, 2017, SCE&G voluntarily withdrew the petition it had filed with the SCPSC on August 1, 2017 under the BLRA in response to concerns raised by various stakeholders with respect to the petition, and to allow adequate time for governmental officials to conduct their reviews.

On September 26, 2017, the office of Alan Wilson, the Attorney General for the State of South Carolina, issued an opinion of Robert D. Cook, the Solicitor General for the State of South Carolina, contending, among other things, that the BLRA was “suspect” under the Constitution of the United States and the Constitution of the State of South Carolina.

Following up on a telephone call from Mr. Farrell on September 29, 2017, on October 1, 2017, Mr. Marsh and Mr. Addison met with Mr. Farrell and Mr. McGettrick in Columbia, South Carolina at Mr. Farrell’s request. At this meeting, Mr. Farrell conveyed to Mr. Marsh and Mr. Addison various concepts and potential terms related to a potential strategic transaction between SCANA and Dominion Energy. These concepts and terms, which Mr. Farrell indicated did not constitute an offer with respect to a potential transaction, were intended to address the various issues that had arisen since SCE&G announced it was abandoning the NND project. These concepts and terms included consideration to SCANA’s shareholders in the form of 70% Dominion Energy common stock and 30% cash, reflecting in total a premium of approximately 20% over the recent price of SCANA common stock, and an immediate rate credit for SCE&G’s customers, maintenance of rates related to the NND project at or below current levels, a reduced amortization period for SCANA’s investment in the NND project and a write-off of a portion of that investment. The transaction would involve expedited due diligence and would be subject to regulatory approval of the terms. At the end of the meeting, Mr. Marsh told Mr. Farrell and Mr. McGettrick that SCANA’s situation was very complex and involved a number of variables and considerations; however, Mr. Marsh also said that SCANA’s board and management would consider what Mr. Farrell and Mr. McGettrick had conveyed and get back to them.

On October 4, 2017, Mr. Marsh called Mr. Farrell and told him that he would be presenting what Dominion Energy had conveyed at the October 1, 2017 meeting to the SCANA board. Mr. Marsh reiterated to Mr. Farrell that SCANA’s present circumstances that had arisen out of the abandonment of the NND project were very complex and involved a number of variables and considerations.

Also on October 4, 2017, Mr. Marsh received a telephone call from the chief executive officer of Party A. The chief executive officer told Mr. Marsh that Party A had been separately approached about a potential purchase of Santee Cooper and wanted to discuss the potential for SCANA and Party A to also engage in a strategic transaction. The chief executive officer of Party A also asked that SCANA agree to exclusivity obligations to restrict SCANA from seeking or negotiating with other parties regarding a strategic transaction and indicated that Party A would be unwilling to make a proposal to SCANA at that time without such exclusivity terms. Mr. Marsh asked if there were any concepts or terms related to such a potential transaction involving SCANA that Party A was able to provide and the chief executive officer of Party A responded that Party A had no such concepts or terms to provide at that time, but that they were working on several ideas.

On October 6, 2017, a representative of Party C again indicated to Mr. Marsh in a meeting requested by the representative that Party C would be interested in talking to SCANA about a potential strategic transaction if

 

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SCANA was interested in considering such a transaction, but the representative did not propose any concepts or terms that would apply to such a possible transaction or any process that would apply to the consideration of such a transaction.

An in-person meeting of the SCANA board was held on October 6, 2017. Members of SCANA’s senior management and representatives of Mayer Brown, Morgan Stanley and RBC Capital Markets attended this meeting. At this meeting, Mr. Marsh described for the SCANA board the recent discussions with each of Dominion Energy, Party A and Party C. The SCANA board, together with SCANA’s management, Morgan Stanley, RBC Capital Markets and Mayer Brown, then discussed whether it was prudent to commence a limited process to identify potential acquirors of SCANA at that time. After weighing the considerations involved and the consequences of commencing such a process, the SCANA board determined to move forward with exploring the possibility of a strategic transaction with Dominion Energy and with Party A, including providing due diligence information to each of Dominion Energy and Party A, and authorized SCANA’s management and advisors to proceed accordingly. After the representatives of Morgan Stanley and RBC Capital Markets were excused from the meeting, representatives of Mayer Brown summarized for the SCANA board the material terms proposed by Morgan Stanley and RBC Capital Markets regarding their respective engagements as a financial advisor to SCANA in connection with a possible strategic transaction.

After the conclusion of the meeting of the SCANA board on October 6, 2017, Mr. Marsh called Mr. Farrell to inform him of the SCANA board’s decision to proceed to explore a potential transaction with Dominion Energy (without any exclusivity obligations on SCANA) and called the chief executive officer of Party A to inform the chief executive officer of the SCANA board’s decision to proceed to explore a potential transaction with Party A (without any exclusivity obligations on SCANA).

On October 8, 2017, SCANA entered into a confidentiality agreement with Dominion Energy and a confidentiality agreement with Party A. Each of such confidentiality agreements contained standstill provisions which, among other things, restricted the ability of Dominion Energy and Party A to acquire or offer to acquire any SCANA securities and to submit any proposal or offer relating to a business combination with SCANA without the SCANA board’s prior written consent, except that the standstill restrictions would terminate (other than those relating to acquisitions of SCANA securities) in the event that SCANA announced it had entered into a definitive agreement relating to a strategic transaction. In connection with or prior to entering into such confidentiality agreements, each of Dominion Energy and Party A sought restrictions on SCANA’s ability to seek or negotiate with other parties regarding a possible strategic transaction, but SCANA did not agree to any such restrictions. Shortly thereafter, Dominion Energy and Party A were granted access to a data room and a due diligence process was commenced with Dominion Energy and with Party A.

On October 10, 2017, the chief executive officer of Party B called Mr. Marsh and indicated that Party B did not have any interest in acquiring an interest in the NND project but that Party B was willing to talk with SCANA about a potential strategic transaction if SCANA was considering strategic options. The chief executive officer of Party B did not propose any concepts or terms that would apply to such possible transaction or any process that would apply to the consideration of such a transaction.

Also, on October 10, 2017, Mr. Marsh, Mr. Addison and Jim O. Stuckey, SCANA’s Senior Vice President and General Counsel, met with the chief executive officer and other representatives of Party A in Columbia, South Carolina. At this meeting, the representatives of Party A conveyed some of the benefits and opportunities that might result from a potential strategic transaction between SCANA and Party A and indicated that a combination of Party A and SCANA would involve SCANA’s shareholders receiving solely the common stock of Party A in the transaction. The chief executive officer of Party A stated that Party A was not in the position at that time to indicate the amount of consideration SCANA’s shareholders would receive. The chief executive officer again requested that SCANA agree to exclusivity obligations restricting SCANA’s ability to seek or negotiate with other parties regarding a potential strategic transaction.

 

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A telephonic meeting of the SCANA board was held on October 12, 2017. Members of SCANA’s senior management and representatives of Mayer Brown attended this meeting. At this meeting, Mr. Marsh described for the SCANA board the recent telephone call with Party B, recent meeting with Party A and recent communications from Dominion Energy indicating its desire to move forward with discussions expeditiously. Also, representatives of Mayer Brown summarized for the SCANA board certain matters related to the proposed engagements of Morgan Stanley and RBC Capital Markets as SCANA’s financial advisors, including the material proposed terms for such engagements and the disclosures made by Morgan Stanley and RBC Capital Markets with respect to their respective material relationships with Dominion Energy, Party A, Party B and Party C. In consultation with Mayer Brown, the SCANA board determined that none of such relationships of SCANA’s financial advisors were sufficiently material to adversely affect the ability of Morgan Stanley or RBC Capital Markets to act as financial advisors to SCANA in connection with a potential strategic transaction.

On October 13, 2017, the SCANA board, acting by written consent, approved the engagements of Morgan Stanley and RBC Capital Markets to serve as financial advisors to SCANA in connection with a possible strategic transaction and SCANA subsequently engaged each of Morgan Stanley and RBC Capital Markets.

Throughout October and November 2017, Dominion Energy conducted due diligence on SCANA and SCANA conducted reverse due diligence on Dominion Energy. However, no significant negotiation of terms of a potential strategic transaction between SCANA and Dominion Energy occurred during this time.

In mid-October 2017, Party A’s chief executive officer told Mr. Marsh that, in light of the considerable uncertainty resulting from SCE&G’s decision to abandon the NND project, including uncertainty regarding future electric rates, Party A was not able to narrow a valuation range for SCANA. Subsequent to this, Party A did not continue participation in the due diligence process and ceased to communicate interest in a potential strategic transaction with SCANA.

An in-person meeting of the SCANA board was held on October 24, 2017. Members of SCANA’s senior management and representatives of Mayer Brown attended this meeting. Among other things discussed at this meeting, the SCANA board discussed the status of discussions with Dominion Energy and Party A as well as the status of SCANA’s analysis of a potential strategic transaction more generally.

A telephonic meeting of the SCANA board was held on October 26, 2017. Members of SCANA’s senior management and representatives of Mayer Brown, Morgan Stanley and RBC Capital Markets attended this meeting. Mr. Marsh informed the SCANA board of developments with respect to SCANA’s consideration of a potential strategic transaction. Mr. Marsh explained that SCANA had primarily been focused on trying to reach a settlement on rates and other regulatory matters resulting from the decision to abandon the NND project and participating in legislative hearings related to the same and further discussions ensued among the directors, management and the advisors regarding the potential for a strategic transaction with Dominion Energy and regulatory and related matters. After discussion, the SCANA board concluded that it was prudent to continue to seek a rate settlement and also to continue discussions with Dominion Energy on a parallel path.

On October 31, 2017, SCANA announced that Mr. Marsh would retire as the chief executive officer of SCANA and SCE&G and that on January 1, 2018 Mr. Addison would become chief executive officer of SCANA and SCE&G, among other leadership changes.

On November 16, 2017, SCE&G publicly proposed a $4.8 billion comprehensive solution to outstanding rate and regulatory issues relating to the abandoned NND project. Based on the reaction from legislators and other stakeholders to the proposal, it quickly became clear that this proposal was not a viable solution to the rate and regulatory issues relating to the abandoned NND project.

During the week of November 20, 2017, Mr. McGettrick and Mr. Addison spoke on multiple occasions by telephone. Among other things discussed between Mr. McGettrick and Mr. Addison, Mr. McGettrick told

 

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Mr. Addison that Dominion Energy was considering providing an updated proposal to SCANA regarding a potential strategic transaction.

On November 27, 2017, at the request of Mr. Farrell, Mr. Marsh, Mr. Addison and Mr. Hagood met with Mr. Farrell and Mr. McGettrick in Columbia, South Carolina. At this meeting, Mr. Farrell conveyed a proposal with respect to a potential strategic transaction between SCANA and Dominion Energy, which Mr. Farrell stated did not constitute an offer for a potential transaction. Key terms of this proposal included consideration to SCANA’s shareholders in the form of 75% to 80% Dominion Energy common stock and 20% to 25% cash, reflecting in total a premium of approximately 30% over the recent price of SCANA common stock, the retention of SCE&G’s headquarters in South Carolina and an updated plan for the regulatory resolution of the NND project which continued to include immediate cash refunds to SCE&G customers, prospective customer bill reductions for the NND project, a reduced amortization period for investments in the NND project, and a partial write-off of capital spent on the NND project. The representatives of SCANA told Mr. Farrell and Mr. McGettrick that the proposal would be shared with the SCANA board.

A telephonic meeting of the SCANA board was held on November 29, 2017. Members of SCANA’s senior management and representatives of Mayer Brown, Morgan Stanley and RBC Capital Markets attended this meeting. Mr. Addison summarized the terms of the proposal conveyed by Dominion Energy on November 27, 2017. Mr. Addison expressed his view that in light of the current issues, risks and challenges facing SCANA, the Dominion Energy proposal merited further consideration. Mr. Marsh agreed with that assessment. The SCANA board then unanimously concluded that the Dominion Energy proposal warranted further consideration and authorized SCANA’s management and advisors to pursue discussions with Dominion Energy accordingly.

On December 1, 2017, Mayer Brown provided to Dominion Energy an initial draft of a merger agreement with respect to a potential strategic transaction between SCANA and Dominion Energy. From this time until January 2, 2018, SCANA, Dominion Energy and their respective advisors, including McGuireWoods LLP, Dominion Energy’s outside legal counsel which we refer to as McGuireWoods, had extensive negotiations with respect to the terms of the proposed merger agreement.

On December 5, 2017, an in-person due diligence session was held in Richmond, Virginia between representatives of SCANA and representatives of Dominion Energy. Also on December 5, 2017, representatives of SCANA and Dominion Energy met to discuss the timeline for a potential transaction and the terms of Dominion’s proposal.

A telephonic meeting of the SCANA board was held on December 8, 2017. Members of SCANA’s senior management and representatives of Mayer Brown, Morgan Stanley and RBC Capital Markets attended this meeting, as did a representative of McNair Law Firm, P.A., SCANA’s South Carolina corporate counsel which we refer to as McNair. At this meeting, SCANA’s management discussed the due diligence Dominion Energy was conducting on SCANA, the status of Dominion Energy’s review of the proposed merger agreement, the proposed timeline for a potential transaction with Dominion Energy and the terms of Dominion Energy’s anticipated updated proposal. After that discussion, at the request of the SCANA board, the representatives of Morgan Stanley and RBC Capital Markets indicated that they were unaware of any material change in their respective institution’s material relationships disclosure previously provided to the SCANA board and that an updated material relationships disclosure would be provided before the next meeting of the SCANA board. Then, at the request of the SCANA board, each of Mayer Brown and McNair confirmed that their respective firms did not have a conflict of interest in representing SCANA in a transaction with Dominion Energy. SCANA’s financial advisors then provided an overview of, among other things, (a) Dominion Energy’s historical share price performance for the last three years, (b) Dominion Energy’s capital expenditures plan, key earnings drivers and master limited partnership structure as provided by Dominion Energy’s management, (c) certain financial projections provided by Dominion Energy’s management relating to Dominion Energy for fiscal years 2017 through 2022, and (d) based on publicly available information and the projections provided by Dominion Energy, Dominion Energy’s credit profile. Next, Iris N. Griffin, who was at that time the Vice President of Finance and

 

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Treasurer of SCANA, made a presentation of SCANA’s forecasted earnings per share growth rates, which had been prepared by SCANA management, using various rate and regulatory settlement scenarios. Such scenarios did not take into account potential federal tax reform given the uncertainty with respect to such reform at that time. Following Ms. Griffin’s presentation, representatives of Mayer Brown provided the SCANA board an overview of the terms of the proposed merger agreement, including, among other things, a description of the structure of the transaction, the closing conditions of the parties, the obligations of the parties with respect to pursuing regulatory approvals and the terms restricting SCANA’s ability to solicit alternative transactions. At the end of the meeting, representatives of Mayer Brown reviewed with the members of the SCANA board their fiduciary duties under applicable law and asked the members of the SCANA board to provide updated information regarding past or current business or personal relationships with Dominion Energy or individuals associated with Dominion Energy in order to determine whether any potential conflicts of interest existed.

Also on December 8, 2017, McGuireWoods sent Mayer Brown a revised draft of the merger agreement that included, among other changes, a closing condition providing that the key terms related to the rate settlement would receive SCPSC approval with no deviation in terms from those proposed by Dominion Energy in connection with the merger.

On December 15, 2017, Dominion Energy provided SCANA with an updated proposal with respect to a potential strategic transaction between SCANA and Dominion Energy. This updated proposal reflected the due diligence that Dominion Energy had conducted on SCANA as well as the various discussions among the parties and their respective advisors to that point. Key terms of this updated proposal included: an all-stock, tax deferred transaction with a value of $54.50 per share of SCANA common stock (based on recent market prices of Dominion Energy common stock) reflecting an implied premium of approximately 27.9% over the closing price of SCANA common stock prior to a November 27, 2017 media report that SCANA had retained Morgan Stanley to explore strategic alternatives, various commitments by Dominion Energy to SCANA’s community including a commitment to maintain SCE&G’s headquarters in South Carolina, immediate cash refunds to customers totaling approximately $1.3 billion, which Dominion Energy estimated would result in an average refund of approximately $1,000 for residential customers, a 3.5% bill reduction related to the NND project going forward, a substantial write down of the investment in the NND project and exclusion from rate base of a gas-fired generation facility being acquired to help replace the NND project. The updated proposal also included certain requirements of Dominion Energy in order to proceed with the transaction, including that the key terms related to the rate settlement would receive SCPSC approval with no material changes in the terms of the rate settlement proposal and no change to the economic value of the rate settlement proposal and that, prior to the closing of the merger, there would be no changes in laws that impact SCANA, the BLRA or other utility laws.

An in-person meeting of the SCANA board was held on December 18, 2017. Members of SCANA’s senior management and representatives of Mayer Brown, Morgan Stanley, RBC Capital Markets and McNair attended this meeting. Also attending a portion of the meeting were representatives from SCANA’s various regulatory counsel in connection with the proposed transaction. After some introductory matters, the meeting commenced with regulatory counsel providing the SCANA board with an overview of the various regulatory clearances that would be needed in connection with the proposed transaction, including the likely timing for seeking and obtaining such clearances and the possibility of issues arising in obtaining such clearances. After regulatory counsel was excused from the meeting, representatives of Mayer Brown discussed with the SCANA board, as it had done in prior board meetings, information that the directors had provided regarding past or current business or personal relationships with Dominion Energy or individuals associated with Dominion Energy. After considering such relationships and in consultation with Mayer Brown, the SCANA board reaffirmed its prior determination that each director was independent and disinterested in connection with a potential strategic transaction with Dominion Energy. Mayer Brown also discussed with the SCANA board, as it had done in prior board meetings, the disclosures made by Morgan Stanley and RBC Capital Markets, which had been updated by Morgan Stanley and RBC Capital Markets prior to the meeting, with respect to their respective material relationships with Dominion Energy. After considering such relationships and in consultation with Mayer Brown, the SCANA board reaffirmed its prior determination that none of such relationships of SCANA’s financial

 

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advisors were sufficiently material to adversely affect the ability of Morgan Stanley or RBC Capital Markets to act as financial advisors to SCANA in connection with a potential strategic transaction with Dominion Energy.

Next, Ms. Griffin made a presentation of SCANA’s financial projections, which had been prepared by SCANA’s management, using various rate and regulatory settlement scenarios. Such scenarios took into account the potential consequences of federal tax reform given the additional certainty with respect to such reform at that time. Then, each of Morgan Stanley and RBC Capital Markets discussed certain preliminary financial information relating to SCANA and the proposed transaction. Next, representatives of Mayer Brown, Morgan Stanley and RBC Capital Markets provided an update on the reverse due diligence that had been conducted on Dominion Energy and representatives of Mayer Brown summarized for the SCANA board certain key open issues in the merger agreement. The meeting concluded with Mr. Stuckey explaining to the SCANA board the terms of the change of control plans covering SCANA officers in the event a transaction was consummated.

On December 19, 2017, Mr. Addison had a meeting with an executive of Party C that had been arranged at the request of that executive. At that meeting, the executive indicated that Party C had a long-term interest in acquiring SCANA. The executive did not however propose any concepts or terms that would apply to a transaction between SCANA and Party C or any process that would apply to consideration of such a transaction. The executive also indicated that Party C would be interested in acquiring Public Service Company of North Carolina, a subsidiary of SCANA, for $2.2 billion. Mr. Addison informed the executive that he would present these matters to the SCANA board and would respond to the executive if and as directed by the SCANA board.

A telephonic meeting of the SCANA board was held on December 19, 2017. Members of SCANA’s senior management and representatives of Mayer Brown, Morgan Stanley, RBC Capital Markets and McNair attended this meeting. At this meeting, Mr. Addison reported on his recent meeting with an executive of Party C. Mr. Addison explained that, in his view, Party C’s proposal to acquire SCANA’s subsidiary, Public Service Company of North Carolina, was not particularly attractive given the valuation proposed by Party C and the fact that Public Service Company of North Carolina was a key driver of SCANA’s growth. The SCANA board concurred with this assessment. SCANA’s management and advisors then discussed with the SCANA board certain significant open issues with respect to the merger agreement with Dominion Energy, including the triggers for and amount of the reverse termination fee payable by Dominion Energy, certain deal protection terms, including the amount of the termination fee payable by SCANA, closing conditions relating to South Carolina regulatory approvals and changes that cannot be considered in determining whether a material adverse effect on SCANA has occurred. After discussion, the SCANA board provided SCANA’s management and advisors with guidance on these issues.

Later on December 19, 2017, SCANA, through its financial advisors, had a discussion with Dominion Energy regarding various potential methods to determine a mutually acceptable reference stock price for each party for calculating the fixed exchange ratio, as well as with respect to other open issues. SCANA’s proposed method for calculating the exchange ratio reflected a value of $57 per share of SCANA common stock.

On December 21, 2017, SCANA’s stock price declined approximately 9.5%. On the following day, SCANA’s stock price rose approximately 4.3%.

On December 22, 2017, McGuireWoods circulated a revised draft of the merger agreement on behalf of Dominion Energy. Among other changes, the revised draft reflected a closing condition that provided Dominion Energy the right not to close the transaction if after the signing of the merger agreement there were any changes to the BLRA or other South Carolina public utility laws and a termination fee amount of 3.5% of the equity value of the transaction for each of the termination fee payable by SCANA in certain instances and the termination fee payable by Dominion Energy in certain instances.

On December 27, 2017, Dominion Energy revised its proposal to, among other changes, increase the initial bill reduction to customers to at least 5% from the prior proposal of 3.5%. This increased benefit to customers

 

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was attributed to Dominion Energy passing through to customers the benefits associated with the recently enacted reduction in federal income tax rates (estimated at the time to be at least 1.5%). Also on December 27, 2017, Dominion Energy proposed establishing the proposed transaction value through a fixed exchange ratio of 0.6620 of a share of Dominion Energy common stock for each outstanding share of SCANA common stock.

A telephonic meeting of the SCANA board was held on December 29, 2017. Members of SCANA’s senior management and representatives of Mayer Brown, Morgan Stanley, RBC Capital Markets, McNair and a representative of Womble Bond Dickinson, LLP, SCANA’s South Carolina regulatory counsel which we refer to as Womble Bond, attended this meeting. At this meeting, each of Morgan Stanley and RBC Capital Markets discussed with the SCANA board certain preliminary financial matters related to SCANA and the proposed transaction, including an update with respect to the negotiations on the exchange ratio. Following such discussion, Mr. Stuckey and representatives of Mayer Brown summarized the remaining significant open issues in the merger agreement and the representatives of Mayer Brown summarized the material terms of the merger agreement for the SCANA board. Among other material terms, Mayer Brown summarized the terms of the merger agreement relating to employee benefits and executive compensation, including treatment of equity and equity-based awards, post closing covenants relating to treatment of employees and employee benefits, including protection of severance benefits and the period of post-closing protection, and the proposed exceptions to the interim operating covenants, including salary increases, ordinary course equity grants, and retention bonuses. The representative of Womble Bond then summarized the material terms of the merger agreement relating to South Carolina regulatory matters and the rate settlement proposal.

Later on December 29, 2017, SCANA, through its financial advisors, conveyed a counterproposal to Dominion Energy with respect to the transaction consideration of an exchange ratio of 0.6690 of a share of Dominion Energy common stock for each outstanding share of SCANA common stock.

On December 30, 2017, Dominion Energy agreed to SCANA’s counterproposal on the proposed exchange ratio of 0.6690 of a share of Dominion Energy common stock for each outstanding share of SCANA common stock. On December 31, 2017, the parties also reached agreement on certain of the other significant open issues, including that the merger agreement would include a closing condition that provided Dominion Energy the right not to close the transaction if after the signing of the merger agreement there were any substantive changes to the BLRA or other South Carolina public utility laws that would have an adverse effect on SCANA and a termination fee in the amount of 3.0% of the offered equity value of the transaction for the termination fee payable by SCANA in certain instances and a termination fee in the amount of 3.5% of the offered equity value of the transaction for the termination fee payable by Dominion Energy in certain instances. Counsel for the parties then completed final documentation reflecting these agreements.

A telephonic meeting of the SCANA board was held on January 2, 2018. Members of SCANA’s senior management and representatives of Mayer Brown, Morgan Stanley, RBC Capital Markets and McNair attended this meeting. At this meeting, SCANA’s management and financial advisors provided the directors with an update of the final negotiations with respect to the exchange ratio and representatives of Mayer Brown summarized the resolution of the remaining significant open issues in the merger agreement. Then, Morgan Stanley and RBC Capital Markets separately provided the SCANA board with their respective financial analyses performed in connection with the proposed transaction. Next, Mr. Addison, Ms. Griffin, Mr. Stuckey and other members of SCANA management shared with the SCANA board their views on the merits of the proposed transaction with Dominion Energy and the alternatives to the transaction. Each member of management present at the meeting stated that, in his or her view, the proposed transaction with Dominion Energy was the best alternative available to SCANA under its present circumstances. The SCANA board then engaged in further discussions and deliberations, with the assistance of SCANA’s management and advisors, with respect to the proposed transaction with Dominion Energy.

Next, at the request of the SCANA board, Morgan Stanley rendered its oral opinion to the SCANA board (which was subsequently confirmed in writing by delivery of Morgan Stanley’s written opinion to the SCANA

 

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board dated the same date) to the effect that, as of January 2, 2018, and based upon and subject to the assumptions made, procedures followed, matters considered and qualifications and limitations on the scope of review undertaken by Morgan Stanley as set forth in Morgan Stanley’s written opinion, the merger consideration (as such term is defined in the merger agreement) to be received by holders of SCANA common stock (other than certain excluded holders) pursuant to the merger agreement was fair from a financial point of view to such holders. Also at this meeting and at the request of the SCANA board, RBC Capital Markets rendered its oral opinion, confirmed by delivery of a written opinion dated January 2, 2018, to the SCANA board to the effect that, as of that date and based on and subject to the procedures followed, assumptions made, factors considered and qualifications and limitations described in the opinion, the merger consideration to be received by holders of SCANA common stock pursuant to the merger agreement was fair, from a financial point of view, to such holders. The full texts of the opinions of Morgan Stanley and RBC Capital Markets are attached as Annex B and Annex C, respectively, to this proxy statement/prospectus and set forth, among other things, the procedures followed, assumptions made, factors considered and qualifications and limitations on the review undertaken in connection with their respective opinions, as more fully described in the section entitled “—Opinions of SCANA’s Financial Advisors” beginning on page 48 of this proxy statement/prospectus.

The SCANA board then unanimously (a) determined that it is in the best interests of SCANA and the shareholders of SCANA that SCANA enter into the merger agreement and consummate the merger and the other transactions contemplated by the merger agreement on the terms and subject to the conditions set forth in the merger agreement, (b) adopted the merger agreement and approved the transactions contemplated by the merger agreement, including the merger, (c) directed that the approval of the merger agreement be submitted to a vote at a meeting of the shareholders of SCANA and (d) resolved to recommend that the shareholders of SCANA approve the merger agreement.

In the early evening of January 2, 2018, the parties executed the merger agreement.

In the early morning of January 3, 2018, SCANA and Dominion Energy issued a joint press release announcing the transaction.

SCANA’s Reasons for the Merger; Recommendation of the SCANA Board

SCANA’s Reasons for the Merger

At a meeting held on January 2, 2018, the SCANA board unanimously (i) determined that it is in the best interests of SCANA and the SCANA shareholders that SCANA enter into the merger agreement and complete the merger and the other transactions contemplated by the merger agreement on the terms and subject to the conditions set forth in the merger agreement, (ii) adopted the merger agreement and approved the transactions contemplated by the merger agreement, including the merger, (iii) directed that the approval of the merger agreement be submitted to a vote at a meeting of the SCANA shareholders, and (iv) resolved to recommend that the SCANA shareholders approve the merger agreement. In evaluating the merger, the SCANA board consulted with SCANA’s management and legal and financial advisors and, in reaching its unanimous decision to adopt the merger agreement and to recommend that the SCANA shareholders approve the merger agreement, considered numerous factors which are discussed below.

Among the information and material factors considered by the SCANA board were the following (not in any relative order of importance):

 

    The understanding of SCANA’s management and the SCANA board of SCANA’s business, operations, financial condition, financing needs, earnings, strategy and prospects, as well as SCANA’s historical and projected financial performance;

 

    The SCANA board’s consideration of the current state of the economy, debt and equity financing markets, and uncertainty regarding near-term and long-term forecasted economic conditions, both generally and within SCANA’s industry in particular;

 

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    The fact that, since the bankruptcy filing of Westinghouse and SCANA’s decision to abandon the NND project, SCANA has been under increasingly intense regulatory, political and legal scrutiny which has resulted in, and could result in further, significant financial uncertainty for SCANA and could lead to significant negative financial impacts on SCANA, including possible bankruptcy;

 

    The fact that the exchange ratio of 0.6690 of a share of Dominion Energy common stock for each outstanding share of SCANA common stock provided for in the merger represents:

 

    an implied price of approximately $54.23 per share of SCANA common stock based on the closing price of Dominion Energy common stock on December 29, 2017, the last trading day prior to the date on which the SCANA board adopted the merger agreement, which reflects an implied premium of approximately 36.3% based on the closing price of SCANA common stock on December 29, 2017; and

 

    an implied price of approximately $55.39 based on the 30-day Bloomberg intraday volume weighted average price of Dominion Energy common stock as of December 29, 2017, the last trading day prior to the date on which the SCANA board adopted the merger agreement, which reflects an implied premium of approximately 29.7% based on the 30-day Bloomberg intraday volume weighted average price of SCANA common stock as of December 29, 2017;

 

    The fact that SCE&G publicly proposed on November 16, 2017 a $4.8 billion comprehensive solution to outstanding rate and regulatory issues relating to the abandoned NND project and that, based on the reaction from legislators and other stakeholders to the proposal, it quickly became clear that the proposal, in the view of SCANA’s management and the SCANA board, was not an acceptable solution to these issues;

 

    The fact that Dominion Energy committed to propose to the SCPSC, among other things, a one-time rate credit to SCE&G’s electric customers equal to an aggregate of $1.3 billion, at least a 5% bill reduction from 2017 bills to SCE&G’s electric customers, an approximately $1.7 billion write-off of capital and regulatory assets relating to the NND project (including a 20-year amortization period for costs associated with the NND project) and the completion of the $180 million purchase of a natural gas fired power station (the cost of which would not be included in setting rates for SCE&G’s electric customers), which in the aggregate represents a significant improvement over the plan SCE&G publicly proposed on November 16, 2017 and, in the view of SCANA’s management and the SCANA board, represents a comprehensive solution to outstanding rate and regulatory issues relating to the abandoned NND project that provides SCE&G’s electric customers greater overall value than what SCANA could offer on a standalone basis (see the section entitled “—Regulatory Approvals Required for the Merger—SCPSC Approval” beginning on page 69 of this proxy statement/prospectus);

 

    The fact that, upon completion of the merger, SCANA would become part of a much larger company with a considerably stronger balance sheet and access to greater financial resources, which should lower SCANA’s cost of capital (taking into account the regulatory and political uncertainty SCANA was facing at the time the SCANA board adopted the merger agreement) and allow SCE&G the ability and resources to address and resolve the issues arising from or relating to Westinghouse’s bankruptcy and the abandonment of the NND project;

 

    The historical trading ranges of SCANA’s common stock and the potential trading range of SCANA’s common stock absent announcement of the merger agreement and in light of the ongoing regulatory, political and legal scrutiny SCANA is facing;

 

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    The fact that SCANA had conducted preliminary discussions with parties other than Dominion Energy with respect to a potential strategic transaction, none of which resulted in a proposal that set forth proposed transaction consideration or other developed terms, and the SCANA board’s conclusion, based on these preliminary discussions, industry dynamics, advice and market insights received from Morgan Stanley, input and market insights of RBC Capital Markets and regulatory and other challenges for SCANA, among other factors, that the merger provided the most likely path for enhanced value for SCANA shareholders;

 

    The recommendation of SCANA’s senior management that SCANA should proceed with the proposed transaction based on its knowledge of SCANA’s industry and the regulatory, political, legal and financial challenges facing SCANA in connection with the abandonment of the NND project;

 

    The results of SCANA’s due diligence investigation of Dominion Energy conducted with the assistance of SCANA’s management and certain of SCANA’s outside advisors;

 

    The fact that, following the merger, SCANA’s shareholders would hold stock in a combined company that will have increased scale and scope, including increased financial scale, greater diversification of markets and more regulatory jurisdictions than SCANA on a standalone basis, thereby diversifying certain risks currently associated with SCANA common stock;

 

    The financial analyses performed by Morgan Stanley with respect to the proposed transaction, and the opinion of Morgan Stanley, dated January 2, 2018, the full text of which is attached as Annex B, that, based upon and subject to the assumptions made, procedures followed, matters considered and qualifications and limitations on the scope of review undertaken by it, as set forth in Morgan Stanley’s written opinion and as described in “—Opinions of SCANA’s Financial Advisors—Opinion of Morgan Stanley & Co. LLC” beginning on page 48 of this proxy statement/prospectus, the merger consideration to be received by holders of SCANA common stock (other than holders of the cancelled shares) pursuant to the merger agreement was fair from a financial point of view to such holders;

 

    The financial presentation and opinion, dated January 2, 2018, of RBC Capital Markets to the SCANA board as to the fairness, from a financial point of view and as of such date, of the merger consideration to be received by holders of SCANA common stock pursuant to the merger agreement, the full text of which opinion is attached as Annex C to this proxy statement/prospectus and sets forth, among other things, the procedures followed, assumptions made, factors considered and qualifications and limitations on the review undertaken by RBC Capital Markets in connection with its opinion, as more fully described in the section entitled “—Opinions of SCANA’s Financial Advisors—Opinion of RBC Capital Markets, LLC” beginning on page 59 of this proxy statement/prospectus;

 

    The terms and conditions of the merger agreement, including, among other things, the representations, warranties, covenants and agreements of the parties, the form and structure of the merger consideration and the termination rights of the parties;

 

    The fact that, while the merger agreement contains a covenant prohibiting SCANA from soliciting third-party acquisition proposals, the merger agreement permits SCANA, prior to the time that SCANA’s shareholders approve the merger agreement, to discuss and negotiate, under specified circumstances, an unsolicited acquisition proposal should one be made and, if the SCANA board determines in good faith, after consultation with SCANA’s financial advisors and outside legal counsel, that the unsolicited acquisition proposal constitutes a superior proposal within the meaning of the merger agreement and, after consultation with SCANA’s outside legal counsel, that the failure to take any of the following actions would reasonably be expected to be inconsistent with the SCANA board’s fiduciary duties under applicable law, the SCANA board is permitted, after taking certain steps, to change or withdraw its recommendation of the merger agreement in response to a superior proposal or terminate the merger agreement in order to enter into a definitive agreement for that superior proposal, subject to payment of a termination payment of $240 million to Dominion Energy;

 

   

The fact that the merger agreement allows the SCANA board, prior to the time that SCANA shareholders approve the merger agreement, to change or withdraw its recommendation of the merger

 

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agreement in response to a material event, development or change in circumstances that first becomes known to the SCANA board or certain officers of SCANA after the date of the merger agreement and which was not reasonably foreseeable as of or prior to the date of the merger agreement or which would not reasonably be expected to have become known after reasonable investigation or inquiry as of or prior to the date of the merger agreement, subject, in all cases, to specified exceptions, if the SCANA board determines in good faith, after consultation with SCANA’s outside legal counsel, that the failure to change or withdraw its recommendation would be inconsistent with the SCANA board’s fiduciary duties under applicable law;

 

    The fact that, in the event that the merger agreement is terminated and a regulatory approval or clearance (other than the approval or clearance of the SCPSC) is not obtained under certain circumstances specified in the merger agreement or is terminated by SCANA for a material breach by Dominion Energy of its covenants to obtain regulatory approvals or clearances with respect to the proposed transaction and that breach caused a failure of any of the closing conditions relating to regulatory matters, SCANA will be entitled to receive a termination fee of $280 million from Dominion Energy (see the sections entitled “The Merger Agreement—Termination of the Merger Agreement” and “The Merger Agreement—Termination Fees” beginning on pages 103 and 104, respectively, of this proxy statement/prospectus);

 

    The likelihood that the merger will be completed based on, among other things (not in any relative order of importance):

 

    the business reputation and capabilities of Dominion Energy, and the SCANA board’s assessment that Dominion Energy is willing to devote the resources necessary to close the merger in an expeditious manner;

 

    the termination date under the merger agreement, after which SCANA or Dominion Energy, subject to specified exceptions, may terminate the merger agreement, allowing for sufficient time to close the merger;

 

    SCANA’s ability to seek specific performance to prevent breaches of the merger agreement by the Dominion Energy parties and to enforce specifically the terms of the merger agreement; and

 

    the exclusions from what would contribute to or constitute a material adverse effect on SCANA under the terms of the merger agreement;

 

    The fact that the merger is intended to qualify as a “reorganization” within the meaning of Section 368(a) of the Code, with the result that a U.S. holder of SCANA common stock generally would not recognize any gain or loss upon receipt of Dominion Energy common stock solely in exchange for SCANA common stock in the merger, except with respect to cash received in lieu of fractional shares of Dominion Energy common stock;

 

    The provisions of the merger agreement that require, as soon as practicable after the effective time of the merger, the appointment of a current member of the SCANA board or SCANA’s executive management to the Dominion Energy board;

 

    The fact that the merger agreement is subject to approval by holders of at least two-thirds of the outstanding shares of SCANA common stock;

 

    The SCANA board’s belief regarding the likelihood of obtaining the regulatory approvals, findings and clearances necessary to complete the merger; and

 

   

The fact that the merger agreement reflects Dominion Energy’s agreement to make a good faith commitment to give SCANA’s employees due and fair consideration for other employment and promotion opportunities within the combined company to the extent any employment positions are re-aligned, reduced or eliminated in the future as a result of the merger; to maintain SCE&G’s corporate headquarters in Cayce, South Carolina; to increase, for at least five years following the merger, SCANA’s historical levels of charitable contributions to certain charities to be specified by

 

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SCANA’s leadership and to maintain or increase historical levels of community involvement, low income funding and economic efforts in SCANA’s current operating area.

The SCANA board also considered a variety of potentially negative factors in its deliberations concerning the merger agreement and the merger, including the following (not in any relative order of importance):

 

    The fact that, because the merger consideration is a fixed exchange ratio of shares of Dominion Energy common stock for shares of SCANA common stock, SCANA shareholders could be adversely affected by a decrease in the trading price of Dominion Energy common stock and the fact that the merger agreement does not provide for any adjustment of the merger consideration if the trading price of Dominion Energy common stock decreases and does not provide a price-based termination right or other similar protection in favor of SCANA or SCANA shareholders;

 

    The risk that the merger will be delayed or will not be completed, including the risk that the required regulatory approvals and clearances may not be obtained or other conditions to closing in the merger agreement may not be satisfied, as well as the potential loss of value to SCANA shareholders and the potential negative impact on the financial position, operations and prospects of SCANA if the merger is delayed or is not completed for any reason;

 

    The fact that Dominion Energy will not be obligated to complete the merger (and may not have to pay a termination fee) if (i) any South Carolina public utility law including the BLRA (as in effect as of the date of the merger agreement) is substantively changed in a manner that has or would reasonably be expected to have an adverse effect on SCANA or any of its subsidiaries, (ii) the SCPSC fails to make a SCPSC merger determination, or (iii) unless otherwise consented to by Dominion Energy in its sole discretion, the SCPSC fails to approve the SCPSC petition without any material changes to the proposed terms, conditions or undertakings of the cost recovery plan and without a significant change to the economic value of the proposed terms set forth in the cost recovery plan, in each case as reasonably determined by Dominion Energy in good faith (see the section entitled “The Merger Agreement—Conditions to Completion of the Merger” beginning on page 92 of this proxy statement/prospectus);

 

    The fact that SCANA did not conduct a formal sale process to solicit other developed acquisition proposals from parties other than Dominion Energy;

 

    The fact that, since Westinghouse’s bankruptcy filing and SCANA’s decision to abandon the NND project, SCANA’s stock has been trading significantly below historical levels in the recent past, resulting in an implied premium in the merger based on a relatively low stock price;

 

    The fact that, by virtue of the merger, SCANA has foregone the opportunity to resolve the issues arising from or relating to Westinghouse’s bankruptcy and the abandonment of the NND project on its own which, if successful, might have resulted in the price of SCANA common stock increasing to a level in excess of the merger consideration;

 

    The significant costs involved in connection with negotiating the merger agreement, the pursuit of regulatory approvals and otherwise completing the merger, the substantial management time and effort required to effectuate the merger and the potential disruptions to SCANA’s day-to-day operations during the pendency of the merger;

 

    The risk, during the pendency of the merger, that SCANA’s relationship with regulators, customers, employees, suppliers, agents and others with which SCANA and its subsidiaries have business dealings could be adversely affected as a result of, among other things, the restrictions in the merger agreement on the conduct of SCANA’s business prior to the completion of the merger, which could delay or prevent SCANA from undertaking business opportunities that may arise or other action it would otherwise take with respect to the operations of SCANA’s business;

 

   

The fact that SCANA’s executive officers and directors may have interests in the merger that are different from, or in addition to, the interests of SCANA shareholders, including the accelerated vesting

 

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of stock-based awards held by executive officers, the payment of cash severance to certain executives of SCANA if a termination of employment were to occur under specified circumstances in connection with the merger, and the rights of SCANA’s directors and officers to indemnification and insurance coverage under the terms of the merger agreement (see the section entitled “The Merger Agreement—Indemnification and Insurance” beginning on page 108 of this proxy statement/prospectus);

 

    The fact that the termination payment to be paid to Dominion Energy under the circumstances specified in the merger agreement, which, while as a percentage of the equity value of the transaction is within a customary range for similar transactions, may discourage other parties that might otherwise have an interest in a business combination with, or an acquisition of, SCANA, or may reduce the price offered by those other parties in a competing bid (see the section entitled “The Merger Agreement—Termination Fees” beginning on page 104 of this proxy statement/prospectus);

 

    The fact that the right afforded to Dominion Energy under the merger agreement to match acquisition proposals that the SCANA board determines in good faith are superior proposals may discourage other parties that might otherwise have an interest in a business combination with, or an acquisition of, SCANA; and

 

    The risks described in the section entitled “Risk Factors” beginning on page 17 of this proxy statement/prospectus.

The foregoing discussion of the information and factors considered by the SCANA board is not intended to be exhaustive, but includes the material factors considered by the SCANA board. In view of the variety of factors considered in connection with its evaluation of the merger, the SCANA board did not find it practicable to, and did not, quantify or otherwise assign relative weights to the specific factors considered in reaching its determination and recommendation. In addition, individual directors may have given different weights to different factors. The SCANA board did not undertake to make any specific determination as to whether any factor, or any particular aspect of any factor, supported or did not support its ultimate determination. The SCANA board based its recommendation on the totality of the information presented.

Portions of this explanation of the reasons for the merger and other information presented in this section are forward-looking in nature and, therefore, should be read in light of the section entitled “Cautionary Statement Regarding Forward-Looking Statements” beginning on page 26 of this proxy statement/prospectus.

Recommendation of the SCANA Board

The SCANA board recommends that you vote “FOR” the merger proposal.

Opinions of SCANA’s Financial Advisors

Opinion of Morgan Stanley & Co. LLC

Morgan Stanley was retained by SCANA to act as its financial advisor in connection with the merger and to provide financial advice and assistance and, upon SCANA’s request, to render a financial opinion, in each case in connection therewith. The SCANA board selected Morgan Stanley to act as its financial advisor based on Morgan Stanley’s qualifications, expertise and reputation, its knowledge of and involvement in recent transactions in SCANA’s industry and its knowledge and understanding of the business and affairs of SCANA. On January 2, 2018, Morgan Stanley rendered its oral opinion, which was subsequently confirmed in writing, to the SCANA board to the effect that, as of that date, and based upon and subject to the assumptions made, procedures followed, matters considered and qualifications and limitations on the scope of review undertaken by Morgan Stanley as set forth in Morgan Stanley’s written opinion, the merger consideration to be received by the holders of shares of SCANA common stock (other than the holders of the cancelled shares) pursuant to the merger agreement was fair from a financial point of view to the holders of shares of SCANA common stock.

 

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The full text of the written opinion of Morgan Stanley delivered to the SCANA board, dated January 2, 2018, is attached as Annex B and incorporated into this proxy statement/prospectus by reference in its entirety. The opinion sets forth, among other things, the assumptions made, procedures followed, matters considered and qualifications and limitations on the scope of the review undertaken by Morgan Stanley in rendering its opinion. SCANA shareholders are urged to, and should, read the opinion carefully and in its entirety. Morgan Stanley’s opinion is directed to the SCANA board and addresses only the fairness from a financial point of view of the merger consideration to be received by the holders of shares of SCANA common stock (other than the holders of the cancelled shares) pursuant to the merger agreement as of the date of the opinion. Morgan Stanley’s opinion did not address the relative merits of the transactions contemplated by the merger agreement as compared to other business or financial strategies that might be available to SCANA, nor did it address the underlying business decision of SCANA to enter into the merger agreement or proceed with any other transaction contemplated by the merger agreement. In addition, Morgan Stanley’s opinion did not in any manner address the prices at which shares of Dominion Energy common stock will trade following completion of the merger or at any time, and Morgan Stanley’s opinion was not intended to, and does not, express any opinion or recommendation as to how the holders of shares of SCANA common stock should vote at the special meeting. The summary of Morgan Stanley’s opinion set forth in this proxy statement/prospectus is qualified in its entirety by reference to the full text of Morgan Stanley’s opinion.

For purposes of rendering its opinion, Morgan Stanley, among other things:

 

    reviewed certain publicly available financial statements and other business and financial information of SCANA and Dominion Energy, respectively;

 

    reviewed certain internal financial statements and other financial and operating data concerning SCANA and Dominion Energy, respectively;

 

    reviewed certain financial projections prepared by the managements of SCANA and Dominion Energy, respectively, which we refer to as the SCANA management projections and Dominion Energy management projections, respectively;

 

    discussed the past and current operations and financial condition and the prospects of SCANA with senior executives of SCANA;

 

    discussed the past and current operations and financial condition and the prospects of Dominion Energy with senior executives of Dominion Energy;

 

    reviewed the pro forma impact of the merger on Dominion Energy’s earnings per share, cash flow, consolidated capitalization and certain financial ratios;

 

    reviewed the reported prices and trading activity for SCANA common stock and Dominion Energy common stock;

 

    compared the financial performance of SCANA and the prices and trading activity of SCANA common stock with that of certain other publicly traded companies comparable with SCANA, and their securities;

 

    reviewed the financial terms, to the extent publicly available, of certain comparable acquisition transactions;

 

    participated in certain discussions and negotiations among representatives of SCANA and Dominion Energy and their financial and legal advisors;

 

    reviewed the merger agreement and certain related documents; and

 

    performed such other analyses and considered such other factors as Morgan Stanley deemed appropriate.

 

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In arriving at its opinion, Morgan Stanley assumed and relied upon, without independent verification, the accuracy and completeness of the information that was publicly available or supplied or otherwise made available to Morgan Stanley by SCANA and Dominion Energy, and formed a substantial basis for Morgan Stanley’s opinion. With respect to the SCANA management projections and the Dominion Energy management projections, Morgan Stanley assumed that they had been reasonably prepared on bases reflecting the best currently available estimates and judgments of the respective managements of SCANA and Dominion Energy of the future financial performance of SCANA and Dominion Energy. In addition, Morgan Stanley assumed that the merger will be completed in accordance with the terms set forth in the merger agreement without any waiver, amendment or delay of any terms or conditions, including, among other things, that the merger will be treated as a tax-free reorganization, pursuant to the Code. Morgan Stanley relied upon, without independent verification, the assessment by the management of SCANA of: (i) the timing and risks associated with the integration of SCANA and Dominion Energy and (ii) their ability to retain key employees of SCANA and Dominion Energy, respectively. Morgan Stanley assumed that in connection with the receipt of all the necessary governmental, regulatory or other approvals and consents required for the merger, no delays, limitations, conditions or restrictions will be imposed that would have a material adverse effect on the contemplated benefits expected to be derived in the merger (but Morgan Stanley assumed, without independent verification, the reasonableness of those delays, limitations, conditions and restrictions contained in the financial projections prepared by the managements of SCANA and Dominion Energy).

Morgan Stanley is not a legal, tax, or regulatory advisor. Morgan Stanley is a financial advisor only and has relied upon, without independent verification, the assessment of SCANA and its legal, tax, and regulatory advisors with respect to legal, tax, and regulatory matters. For purposes of its analysis Morgan Stanley did not make any assessment of the status of outstanding litigation or regulatory proceedings involving SCANA and excluded the effects of any such litigation or proceedings in its analysis, other than those effects included in the financial projections prepared by the managements of SCANA and Dominion Energy, upon which Morgan Stanley relied without independent verification. Morgan Stanley expresses no opinion with respect to the fairness of the amount or nature of the compensation to any of SCANA’s officers, directors or employees, or any class of such persons, relative to the merger consideration to be received by the holders of shares of SCANA common stock (other than the holders of the cancelled shares) in the merger. Morgan Stanley did not make any independent valuation or appraisal of the assets or liabilities of SCANA or Dominion Energy, nor was Morgan Stanley furnished with any such valuations or appraisals. Morgan Stanley’s opinion is necessarily based on financial, economic, market and other conditions as in effect on, and the information made available to Morgan Stanley as of January 2, 2018. Events occurring after January 2, 2018 may affect Morgan Stanley’s opinion and the assumptions used in preparing it, and Morgan Stanley did not assume any obligation to update, revise or reaffirm its opinion.

In arriving at its opinion, Morgan Stanley was not authorized to solicit, and did not solicit, interest from any party with respect to the acquisition, business combination or other extraordinary transaction, involving SCANA. At the direction of the management and the SCANA board, Morgan Stanley did not negotiate with anyone other than Dominion Energy.

Summary of Morgan Stanley Financial Analyses

SCANA Financial Analysis

The following is a brief summary of the material financial analyses performed by Morgan Stanley in connection with the preparation of its opinion. The following summary is not a complete description of Morgan Stanley’s opinion or the financial analyses performed and factors considered by Morgan Stanley in connection with its opinion, nor does the order of analyses described represent the relative importance or weight given to those analyses. The financial analyses summarized below include information presented in tabular format. In order to fully understand the financial analyses used by Morgan Stanley, the tables must be read together with the text of each summary. The tables alone do not constitute a complete description of the financial analyses. The analyses listed in the tables and described below must be considered as a whole; considering any portion of such

 

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analyses and of the factors, without considering all analyses and factors, could create a misleading or incomplete view of the process underlying Morgan Stanley’s opinion. Furthermore, mathematical analysis, such as determining the mean, median or average, is not in itself a meaningful method of using the data referred to below. Except as otherwise noted below, all implied values per share of SCANA common stock included in Morgan Stanley’s presentation to the SCANA board, as described in this section, were rounded to the nearest $0.25.

In performing the financial analyses summarized below and arriving at its opinion, Morgan Stanley used and relied upon the financial forecasts under the 5% regulatory settlement scenario and 9.75% regulatory settlement scenario. For more information, please see the section entitled “—Certain Forecasts Prepared by SCANA’s Management” beginning on page 82 of this proxy statement/prospectus. In addition, Morgan Stanley analyzed certain financial projections based on Wall Street research reports, which we refer to as IBES. With respect to the financial forecasts under the 3.5% regulatory settlement scenario, the terms of the 3.5% regulatory settlement scenario had been publicly proposed by SCANA on November 16, 2017 and, based on the reaction from regulators and other constituencies to such proposal, it quickly became clear that the proposal, in the view of SCANA’s management and the SCANA board, was not an acceptable solution to the outstanding rate and regulatory issues relating to the abandoned NND project. Accordingly, SCANA directed Morgan Stanley not to use and rely upon the financial forecasts under the 3.5% regulatory settlement scenario for purposes of Morgan Stanley’s financial analyses and opinion and SCANA provided such financial forecasts to Morgan Stanley for informational reference purposes only.

Comparable Companies Analysis

Morgan Stanley performed a comparable companies analysis, which attempts to provide an implied value of a company by comparing it to similar companies that are publicly traded. Morgan Stanley reviewed and compared certain financial information, ratios and multiples relating to SCANA to corresponding financial information, ratios and multiples for publicly traded regulated electric and gas and electric-only utility companies that shared characteristics with SCANA to derive an implied valuation range for SCANA.

The companies included in the comparable companies analysis were:

 

    Duke Energy Corporation

 

    The Southern Company

 

    American Electric Power Company, Inc.

 

    Xcel Energy Inc.

 

    WEC Energy Group, Inc.

 

    DTE Energy Group, Inc.

 

    Ameren Corporation

 

    CMS Energy Corporation

 

    Pinnacle West Capital Corporation

The foregoing companies were chosen based on Morgan Stanley’s knowledge of the industry and because such companies have businesses that may be considered similar to SCANA’s. Although none of such companies are identical or directly comparable to SCANA, these companies are publicly traded companies with operations and/or other criteria, such as lines of business, markets, business risks, growth prospects, maturity of business and size and scale of business, that, for purposes of its analysis, Morgan Stanley considered similar to those of SCANA. The foregoing summary and underlying financial analyses involved complex considerations and judgments concerning differences in financial and operating characteristics and other factors that could affect the values of the companies to which SCANA was compared. In evaluating comparable companies, Morgan Stanley

 

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made judgments and assumptions with regard to industry performance, general business, economic, market and financial conditions and other matters, which are beyond the control of SCANA, including, among other things, the impact of regulatory changes, industry growth and the absence of any adverse material change in the financial condition and prospects of SCANA or the industry or in the financial markets in general.

In performing this analysis, Morgan Stanley used the financial forecasts under the 5% regulatory settlement scenario and the 9.75% regulatory settlement scenario and IBES to compare the financial information and multiples of market value of the companies included in the comparable companies analysis to the following metrics of SCANA:

 

    stock price to 2019 estimated earnings per share, which we refer to as EPS (based on the financial forecasts under the 5% regulatory settlement scenario);

 

    stock price to 2019 estimated EPS (based on the financial forecasts under the 9.75% regulatory settlement scenario); and

 

    stock price to 2019 estimated EPS (based on IBES).

Morgan Stanley did not compare SCANA’s stock price to its 2018 estimated EPS because of significant write-downs expected to be made by SCANA in 2018 that would cause SCANA’s earnings in 2018 to be unrepresentative. In addition, Morgan Stanley applied a discount of 1.5 multiple points to the multiples of stock price to estimated 2019 EPS for the comparable companies referred to above to reflect the long-term average (based on the past 10 years) next-twelve-month multiple discount at which SCANA common stock has traded as compared to the trading prices of the stock of such comparable companies (based on historical trading prices as a multiple of estimated next-twelve-month EPS) and the expected low rate of growth of dividends per share reflected in the SCANA management projections relative to peers. The range of multiples of stock price to estimated EPS for 2019 for the companies included in the comparable companies analysis based on a compilation of earnings estimates by selected equity research analysts (after giving effect to the 1.5 multiple point discount described above) is 14.0x to 18.0x.

Applying this range of multiples, Morgan Stanley derived a range of approximate implied equity values per share of SCANA common stock as follows:

 

Metric

   Implied Value
Per Share of
SCANA
Common Stock
 

Stock price to 2019 estimated EPS (based on the financial forecasts under the 5% regulatory settlement scenario)

     $47.00 - $60.50  

Stock price to 2019 estimated EPS (based on the financial forecasts under the 9.75% regulatory settlement scenario)

     $41.00 - $52.50  

Stock price to 2019 estimated EPS (based on IBES)

     $41.50 - $53.25  

These implied value ranges were compared to the value of the merger consideration of $54.23 (based on the merger consideration of 0.6690 of a share of Dominion Energy common stock per share of SCANA common stock and a Dominion Energy common stock per share price of $81.06, which was the closing price of Dominion Energy common stock as of December 29, 2017) and to the value of the merger consideration of $55.39 (based on the merger consideration of 0.6690 of a share of Dominion Energy common stock per share of SCANA common stock and a Dominion Energy common stock per share price of $82.80, which was the 30-day intraday volume weighted average price of Dominion Energy common stock as of December 29, 2017, as reported by Bloomberg).

Discounted Cash Flow Analysis

Morgan Stanley performed a discounted cash flow analysis of SCANA, which is designed to provide an implied value of a company by calculating the present value of the estimated future unlevered cash flows and

 

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terminal year value based upon a price-to-earnings multiple applied to net income in the terminal year. Morgan Stanley calculated a range of implied equity values per share for SCANA common stock based on estimates of future cash flows for calendar years 2018 through 2022 and the terminal year (assuming, at the direction of SCANA’s management, that, with respect to the financial forecasts under the 5% regulatory settlement scenario, terminal year net income grew at 2.6%, the compound annual growth rate from 2018 through 2022 for SCANA’s net income in this scenario and, with respect to the financial forecasts under the 9.75% regulatory settlement scenario, terminal year net income grew at 1.0%, the compound annual growth rate from 2018 through 2022 for SCANA’s net income in this scenario).

Morgan Stanley used estimates from the financial forecasts under the 5% regulatory settlement scenario and the 9.75% regulatory settlement scenario for purposes of the discounted cash flow analysis, as more fully described below. In performing a discounted cash flow analysis of SCANA using estimates from the financial forecasts under the 5% regulatory settlement scenario and 9.75% regulatory settlement scenario, Morgan Stanley first calculated the estimated unlevered free cash flows of SCANA and then calculated a terminal value for SCANA common stock by applying a 13.5x to 15.0x range of price-to-earnings multiples to SCANA’s terminal year estimated net income per share. This terminal year price-to-earnings multiple range was derived from the ten-year average (for the ten-year period ending December 29, 2017) of stock price to the estimated next-twelve-month EPS multiples for the companies in the comparable companies analysis, and then applying the 1.5 multiple point discount, as described above with respect to the comparable companies analysis, to reflect the long-term average multiple discount at which SCANA’s stock price to EPS traded as compared to the price to earnings multiples of the comparable companies. In view of the expected low rate of growth of dividends per share reflected in the SCANA management projections relative to peers, Morgan Stanley, based on its professional judgment and experience, did not consider it appropriate to assume that SCANA’s stock would cease to trade at this 1.5 multiple point discount.

Unlevered free cash flows were calculated by tax-effecting earnings before interest and taxes and adding back the aggregate of depreciation and amortization, deferred taxes and other cash flow adjustments provided by management, including the change in working capital, less the sum of capital expenditures. The free cash flows and range of terminal values were then discounted to present value as of December 31, 2017 using discount rates ranging from 5.2% to 6.1%, which were chosen by Morgan Stanley based upon prevailing interest rates and Morgan Stanley’s judgment of the estimated range of SCANA’s weighted average cost of capital. This analysis indicated the following implied range of values per share of SCANA common stock:

 

Metric

   Implied Value
Per Share of
SCANA
Common Stock
 

5% regulatory settlement scenario

     $53.50 - $62.25  

9.75% regulatory settlement scenario

     $46.75 - $54.75  

These implied value ranges were compared to the value of the merger consideration of $54.23 (based on the merger consideration of 0.6690 of a share of Dominion Energy common stock per share of SCANA common stock and a Dominion Energy common stock per share price of $81.06, which was the closing price of Dominion Energy common stock as of December 29, 2017) and to the value of the merger consideration of $55.39 (based on the merger consideration of 0.6690 of a share of Dominion Energy common stock per share of SCANA common stock and a Dominion Energy common stock per share price of $82.80, which was the 30-day intraday volume weighted average price of Dominion Energy common stock as of December 29, 2017, as reported by Bloomberg).

Future Stock Price Analysis

Using estimates from the financial forecasts under the 5% regulatory settlement scenario and the 9.75% regulatory settlement scenario, Morgan Stanley performed an illustrative analysis of SCANA’s potential future stock price as compared to the merger consideration. This analysis compared (i) SCANA’s potential future stock

 

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price for each of the years 2018 and 2019 based on SCANA’s standalone projected next-twelve month EPS using an illustrative price-to-EPS multiple range derived from historical trading analyses described below and based on Morgan Stanley’s professional judgment and experience to (ii) the value of the merger consideration of $54.23 (based on the merger consideration of 0.6690 of a share of Dominion Energy common stock per share of SCANA common stock and a Dominion Energy common stock per share price of $81.06, which was the closing price of Dominion Energy common stock as of December 29, 2017) and the value of the merger consideration of $55.39 (based on the merger consideration of 0.6690 of a share of Dominion Energy common stock per share of SCANA common stock and a Dominion Energy common stock per share price of $82.80, which was the 30-day intraday volume weighted average price of Dominion Energy common stock as of December 29, 2017, as reported by Bloomberg).

The illustrative price to EPS multiple range selected by Morgan Stanley in this analysis was derived from the following metrics based on the closing price of SCANA common stock as of December 29, 2017:

 

    multiple to 2018 estimated EPS (13.7x), as well as a 1.5 multiple point premium and discount to such multiple (15.2x to 12.2x);

 

    average next twelve month multiple of EPS for the past five years (15.1x); and

 

    average next twelve month multiple of EPS for the past 10 years (14.0x).

This analysis indicated that the potential future value per share of SCANA common stock in all of the ranges of potential future values calculated using each of the financial forecasts under the 5% regulatory settlement scenario and the 9.75% regulatory settlement scenario described above would be lower than the value of the merger consideration on a per-share basis as of December 29, 2017. Specifically, across the range of multiples analyzed, this analysis indicated the following high and low range of implied values per share of SCANA common stock:

 

Metric

   Implied Value
Per Share of SCANA
Common Stock*
 
     2018      2019  
   Low      High      Low      High  

5% regulatory settlement scenario

   $ 40.86      $ 50.93      $ 43.01      $ 53.61  

9.75% regulatory settlement scenario

   $ 35.56      $ 44.32      $ 37.61      $ 46.87  

 

* These amounts were not rounded to the nearest $0.25 in the presentation to the SCANA board.

Morgan Stanley also presented the median potential future value per share of SCANA common stock based on the ranges calculated in the analysis described above and discounted the median potential future values per share of SCANA common stock to present value using an 8.1% discount rate, which is the midpoint of SCANA’s cost of equity, selected by Morgan Stanley based on the application of its professional judgment and experience, inclusive of projected dividends per share over the applicable time period discounted to present value using the same discount rate. This analysis indicated the following implied discounted median values per share of SCANA common stock:

 

Metric

   Implied Value
Per Share of SCANA
Common Stock*
 
     Discounted Median Value  
       2018              2019      

5% regulatory settlement scenario

   $ 44.72      $ 45.68  

9.75% regulatory settlement scenario

   $ 39.21      $ 40.07  

 

* These amounts were not rounded to the nearest $0.25 in the presentation to the SCANA board.

 

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Reference Data

In addition to conducting the analyses described above, Morgan Stanley reviewed the following data, which was used for reference purposes only and not as a component of its fairness analysis.

Reference Discounted Cash Flow Analyses

For reference only and not as a component of its fairness analysis, Morgan Stanley performed additional discounted cash flow analyses of SCANA using the financial forecasts under the 3.5% regulatory settlement scenario and the 5% regulatory settlement scenario but, in each case, without applying the 1.5 multiple point discount mentioned above. Morgan Stanley calculated a range of implied equity values per share for SCANA common stock based on estimates of future cash flows for calendar years 2018 through 2022 and the terminal year (assuming at the direction of SCANA’s management, that, with respect to the 3.5 % Rate Reduction Scenario, terminal year net income grew at 3.1%, the compound annual growth rate from 2018 through 2022 for SCANA’s net income in this scenario and, with respect to the financial forecasts under the 5% regulatory settlement scenario, terminal year net income grew at 2.6%, the compound annual growth rate from 2018 to 2022 for SCANA’s net income in this scenario).

In performing a discounted cash flow analysis of SCANA using estimates from the financial forecasts under the 3.5% regulatory settlement scenario and the 5% regulatory settlement scenario, Morgan Stanley first calculated the estimated unlevered free cash flows of SCANA and then calculated a terminal value for SCANA common stock by applying a 15.0x to 16.5x range of price to earnings multiples to SCANA’s terminal year estimated net income. Although, as discussed above, Morgan Stanley, based on its professional judgment and experience, determined that application of the 1.5 multiple point discount was appropriate, it presented a discounted cash flow analysis using the financial forecasts under the 5% regulatory settlement scenario without applying such discount in order to illustrate for the SCANA board the potential impact on the implied range of values presented to the SCANA board if this historic multiple discount were considered not to be applicable in these scenarios. With respect to the discounted cash flow analysis using the financial forecasts under the 3.5% regulatory settlement scenario, Morgan Stanley did not apply the 1.5 multiple point discount because it concluded, based on its professional judgment and experience, that if the results projected by such scenario were achieved (despite the views of SCANA’s management and the SCANA board that the 3.5% regulatory settlement scenario was unlikely to be achieved, as noted above), it would be reasonable to expect that SCANA common stock could trade at a multiple more consistent with the trading multiples of comparable companies. The terminal year price-to-earnings multiple range was derived from the ten-year average (for the ten-year period ending December 29, 2017) of stock price to the estimated next-twelve-month EPS multiples for the companies in the comparable companies analysis.

Unlevered free cash flows were calculated by tax-effecting earnings before interest and taxes and adding back the aggregate of depreciation and amortization, deferred taxes and other cash flow adjustments provided by management including the change in working capital less the sum of capital expenditures. The free cash flows and range of terminal values were then discounted to present value as of December 31, 2017 using discount rates ranging from 5.2% to 6.1%, which were chosen by Morgan Stanley based upon prevailing interest rates and Morgan Stanley’s judgment of the estimated range of SCANA’s weighted average cost of capital. This analysis indicated the following implied range of values per share of SCANA common stock:

 

Metric

   Implied Value
Per Share of SCANA
Common Stock
 

3.5% regulatory settlement scenario

     $64.50 - $73.75  

5% regulatory settlement scenario

     $58.25 - $67.25  

These implied value ranges were compared to the value of the merger consideration of $54.23 (based on the merger consideration of 0.6690 of a share of Dominion Energy common stock per share of SCANA common

 

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stock and a Dominion Energy common stock per share price of $81.06, which was the closing price of Dominion Energy common stock as of December 29, 2017) and to the value of the merger consideration of $55.39 (based on the merger consideration of 0.6690 of a share of Dominion Energy common stock per share of SCANA common stock and a Dominion Energy common stock per share price of $82.80, which was the 30-day intraday volume weighted average price of Dominion Energy common stock as of December 29, 2017, as reported by Bloomberg).

Precedent Transactions Analysis

For reference only and not as a component of its fairness analysis, Morgan Stanley performed a precedent transactions analysis, which is designed to imply a value of a company based on publicly available financial information of selected transactions that share some characteristics with the merger.

Precedent Transaction Premiums. For reference only and not as a component of its fairness analysis, Morgan Stanley reviewed the premiums paid by acquirors in selected transactions in which regulated electric and gas and electric-only utilities were the target between January 1, 2014 and December 29, 2017, which was the last trading day prior to the date Morgan Stanley rendered its opinion, and that Morgan Stanley judged to be similar in certain respects to the merger or aspects thereof based on Morgan Stanley’s professional judgment and experience.

For each transaction included in this analysis, Morgan Stanley noted the implied premium to the target share price one day prior to announcement, except where the share price had been affected by pre-announcement events, in which case the unaffected target share price was used. The following is a list of the transactions reviewed:

 

Date Announced

  

Acquiror

  

Target

April 30, 2014

  

Exelon Corporation

  

Pepco Holdings, Inc.

June 23, 2014

  

Wisconsin Energy Corporation

  

Integrys Energy Group, Inc.

October 20, 2014

  

Macquarie (consortium)

  

Cleco Corp.

February 26, 2015

  

Iberdrola, S.A.

  

UIL Holdings Corporation

September 4, 2015

  

Emera Incorporated

  

TECO Energy, Inc.

February 9, 2016

  

Fortis Inc.

  

ITC Holdings Corp.

February 9, 2016

  

Algonquin Power & Utilities Corp.

  

The Empire District Electric Company

July 10, 2017

  

Great Plains Energy Incorporated

  

Westar Energy, Inc.

July 19, 2017

  

Hydro One Ltd.

  

Avista Corp.

Based on the foregoing results and Morgan Stanley’s professional judgment and experience, Morgan Stanley applied the range of premiums of 14.7% to 50.1% for the precedent transactions to the closing price of the shares of SCANA common stock of $39.78 as of December 29, 2017 to derive a range of implied equity values per share. The results of the analysis were as indicated in the following table:

 

Precedent Transactions Premiums Range

  

Implied Value
Per Share of SCANA
Common Stock

14.7% - 50.1%

   $45.75 - $59.75

This implied value range was compared to the value of the merger consideration of $54.23 (based on the merger consideration of 0.6690 of a share of Dominion Energy common stock per share of SCANA common stock and a Dominion Energy common stock per share price of $81.06, which was the closing price of Dominion Energy common stock as of December 29, 2017) and as compared to the value of the merger consideration of $55.39 (based on the merger consideration of 0.6690 of a share of Dominion Energy common stock per share of SCANA common stock and a Dominion Energy common stock per share price of $82.80, which was the 30-day intraday volume weighted average price of Dominion Energy common stock as of December 29, 2017, as reported by Bloomberg).

 

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Precedent Transaction Multiples. For reference only and not as a component of its fairness analysis, Morgan Stanley observed the range of stock prices to estimated one-year-forward EPS multiples for each of the selected precedent transactions as 20.1x to 27.2x. Morgan Stanley applied these multiples to SCANA’s estimated 2019 EPS based on the financial forecasts under the 5% regulatory settlement scenario and 9.75% regulatory settlement scenario. Morgan Stanley then calculated implied equity value per share of SCANA common stock:

 

Metric

   Stock Price / 2019
Estimated EPS Multiple Range
   Implied Present Value
Per Share of SCANA
Common Stock
 

5% regulatory settlement scenario

   20.1x to 27.2x      $62.50 - $84.50  

9.75% regulatory settlement scenario

   20.1x to 27.2x      $54.50 - $73.50  

These implied value ranges were compared to the value of the merger consideration of $54.23 (based on the merger consideration of 0.6690 of a share of Dominion Energy common stock per share of SCANA common stock and a Dominion Energy common stock per share price of $81.06, which was the closing price of Dominion Energy common stock as of December 29, 2017) and as compared to the value of the merger consideration of $55.39 (based on the merger consideration of 0.6690 of a share of Dominion Energy common stock per share of SCANA common stock and a Dominion Energy common stock per share price of $82.80, which was the 30-day intraday volume weighted average price of Dominion Energy common stock as of December 29, 2017, as reported by Bloomberg).

No company or transaction utilized in the precedent transactions analysis is identical to SCANA or the merger, respectively. In evaluating the precedent transactions, Morgan Stanley made judgments and assumptions with regard to industry performance, general business, market and financial conditions and other matters, which are beyond SCANA’s control, including, among other things, the impact of competition on SCANA’s business or the industry generally, regulatory changes, industry growth and the absence of any adverse material change in SCANA’s financial condition or the industry or in the financial markets in general, which could affect the aggregate value, equity value and premium paid of the transactions to which they are being compared.

Equity Research Analysts’ Price Targets. For reference only and not as a component of its fairness analysis, Morgan Stanley reviewed and analyzed the analyst price targets for SCANA common stock, of $38.50 to $60.00 as of December 29, 2017, which was the last trading day prior to the date Morgan Stanley rendered its opinion. Morgan Stanley then discounted the range of analyst price targets for SCANA common stock to present value using a 8.2% discount rate, which is the midpoint of SCANA’s cost of equity, selected by Morgan Stanley based on the application of its professional judgment and experience, which produced an implied equity value per share range of SCANA common stock of $35.50 to $55.50. The public market trading price targets published by equity research analysts do not necessarily reflect current market trading prices for SCANA common stock, and these estimates are subject to uncertainties.

Historical Trading Range. For reference only and not as a component of its fairness analysis, Morgan Stanley reviewed the historical trading range of shares of SCANA common stock for the last 6 months and the last 3 months, in each case ending on December 29, 2017, and observed a range of $37.50 to $69.75, for the last 6 months, and a range of $37.50 to $56.25, for the last 3 months.

Dominion Energy Common Stock

Morgan Stanley performed only limited financial analyses related to the value of Dominion Energy common stock, for reference only and not as a component of its fairness analysis. Morgan Stanley observed the trading performance of Dominion Energy common stock for the two-year period ended December 29, 2017 as well as the commentary from selected equity research analysts with respect to Dominion Energy common stock and the observed trading liquidity of Dominion Energy common stock as compared to the number of shares of Dominion Energy common stock to be issued in the merger. As noted above, Morgan Stanley also reviewed, for reference only and not as a component of its fairness analysis, the pro forma impact of the merger on Dominion Energy’s

 

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earnings per share, cash flow, consolidated capitalization and certain financial ratios. After discussion of these factors with the SCANA board, Morgan Stanley was not requested to and did not perform additional financial analyses to assess the value of Dominion Energy common stock.

General

In connection with the review of the merger by the SCANA board, Morgan Stanley performed a variety of financial and comparative analyses for purposes of rendering its opinion. The preparation of a financial opinion is a complex process and is not necessarily susceptible to a partial analysis or summary description. In arriving at its opinion, Morgan Stanley considered the results of all of its analyses as a whole and did not attribute any particular weight to any analysis or factor it considered. Morgan Stanley believes that selecting any portion of its analyses, without considering all analyses as a whole, would create an incomplete view of the process underlying its analyses and opinion. In addition, Morgan Stanley may have given various analyses and factors more or less weight than other analyses and factors, and may have deemed various assumptions more or less probable than other assumptions. As a result, the ranges of valuations resulting from any particular analysis described above should not be taken to be Morgan Stanley’s view of the actual value of SCANA or Dominion Energy.

In performing its analyses, Morgan Stanley made judgments and assumptions with regard to industry performance, general business, regulatory, economic, market and financial conditions and other matters, which are beyond the control of SCANA and Dominion Energy. These include, among other things, industry growth, and the absence of any adverse material change in the financial condition and prospects of SCANA, Dominion Energy and the industry, and in the financial markets in general. Any estimates contained in Morgan Stanley’s analyses are not necessarily indicative of future results or actual values, which may be significantly more or less favorable than those suggested by such estimates.

Morgan Stanley conducted the analyses described above solely as part of its analysis of the fairness, from a financial point of view, of the merger consideration pursuant to the merger agreement to the SCANA shareholders (other than the holders of the cancelled shares), and in connection with the delivery of its opinion, dated January 2, 2018, to the SCANA board. Morgan Stanley’s opinion did not address any other aspect of the merger or related transactions. The merger consideration pursuant to the merger agreement was determined through arm’s-length negotiations between SCANA and Dominion Energy and the merger agreement was adopted by the SCANA board. Morgan Stanley acted as financial advisor to the SCANA board during these negotiations but did not, however, recommend any specific exchange ratio for purposes of determining the merger consideration to SCANA or the SCANA board, nor opine that any specific exchange ratio constituted the only appropriate exchange ratio for the merger.

Morgan Stanley’s opinion and its presentation to the SCANA board was one of many factors taken into consideration by the SCANA board in deciding to adopt the merger agreement and approve the transactions contemplated thereby and to recommend the approval of the merger agreement by the SCANA shareholders. Consequently, the analyses as described above should not be viewed as determinative of the opinion of the SCANA board with respect to the merger consideration pursuant to the merger agreement or of whether the SCANA board would have been willing to agree to a different merger consideration. Morgan Stanley’s opinion was approved by a committee of Morgan Stanley investment banking and other professionals in accordance with its customary practice.

SCANA retained Morgan Stanley based on Morgan Stanley’s qualifications, experience and expertise and its familiarity with SCANA. Morgan Stanley is a global financial services firm engaged in the securities, investment management and individual wealth management businesses. Its securities business is engaged in securities underwriting, trading and brokerage activities, foreign exchange, commodities and derivatives trading, and prime brokerage, as well as providing investment banking, financing and financial advisory services. Morgan Stanley, its affiliates, directors and officers may at any time invest on a principal basis or manage funds that invest, hold long or short positions, finance positions, and may trade or otherwise structure and effect

 

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transactions, for their own account or the accounts of its customers, in debt or equity securities or loans of SCANA, Dominion Energy or any other company, or any currency or commodity, that may be involved in the merger, or any related derivative instrument.

Under the terms of its engagement letter dated October 18, 2017, Morgan Stanley provided SCANA financial advisory services and a financial opinion, described in this section and attached to this proxy statement/prospectus as Annex B, in connection with the merger, and SCANA has agreed to pay Morgan Stanley a fee of approximately $27 million for its financial advisory services, $5 million of which was paid upon delivery of Morgan Stanley’s opinion, 25% of which is contingent upon SCANA shareholder approval of the merger proposal and the remainder of which is contingent upon closing of the merger. In addition, SCANA may, in its sole discretion, pay Morgan Stanley an incremental incentive fee to be paid upon closing of the merger. SCANA has also agreed to reimburse Morgan Stanley for its reasonable out-of-pocket expenses incurred from time to time in connection with this engagement. In addition, SCANA has agreed to indemnify Morgan Stanley and its affiliates, its and their respective officers, directors, employees and agents and each other person, if any, controlling Morgan Stanley or any of its affiliates, against any losses, claims, damages or liabilities, relating to, arising out of or in connection with Morgan Stanley’s engagement and to reimburse certain expenses relating to such indemnity.

In the two years prior to the date of its opinion, Morgan Stanley has provided financial advisory and financing services for SCANA and has received fees in connection with such services in the range of $0 to $1 million. In addition, in the two years prior to the date of its opinion, Morgan Stanley has provided financing services to Dominion Energy and has received fees in connection with such services in the range of $10 million to $11 million. Morgan Stanley may also seek to provide financial advisory and financing services to SCANA, Dominion Energy and their respective affiliates in the future and would expect to receive fees for the rendering of these services.

Opinion of RBC Capital Markets, LLC

SCANA engaged RBC Capital Markets as a financial advisor in connection with the merger. As part of this engagement, the SCANA board requested that RBC Capital Markets evaluate the fairness, from a financial point of view, of the merger consideration to be received by holders of SCANA common stock pursuant to the merger agreement. At a January 2, 2018 meeting of the SCANA board held to evaluate the merger, RBC Capital Markets rendered an oral opinion, confirmed by delivery of a written opinion dated January 2, 2018, to the SCANA board to the effect that, as of that date and based on and subject to the procedures followed, assumptions made, factors considered and qualifications and limitations described in the opinion, the merger consideration to be received by holders of SCANA common stock pursuant to the merger agreement was fair, from a financial point of view, to such holders. The full text of RBC Capital Markets’ written opinion, dated January 2, 2018, which is attached as Annex C to this proxy statement/prospectus and incorporated in this document by reference, sets forth, among other things, the procedures followed, assumptions made, factors considered and qualifications and limitations on the review undertaken by RBC Capital Markets in connection with its opinion, as more fully described in this section. The following summary of RBC Capital Markets’ opinion is qualified in its entirety by reference to the full text of the opinion. RBC Capital Markets delivered its opinion to the SCANA board for the benefit, information and assistance of the SCANA board (in its capacity as such) in connection with of its evaluation of the merger. RBC Capital Markets’ opinion addressed only the fairness, from a financial point of view and as of the date of such opinion, of the merger consideration (to the extent expressly specified in such opinion) and did not address any other aspect of the merger. RBC Capital Markets’ opinion also did not address the underlying business decision of SCANA to engage in the merger or the relative merits of the merger compared to any alternative business strategy or transaction that might be available to SCANA or in which SCANA might engage. RBC Capital Markets does not express any opinion and does not make any recommendation to any shareholder as to how such shareholder should vote or act with respect to the merger or any proposal to be voted upon in connection with the merger or otherwise.

 

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For purposes of rendering its opinion, RBC Capital Markets undertook such review, inquiries and analyses as it deemed necessary or appropriate under the circumstances and, among other things:

 

    reviewed the financial terms of a draft, dated January 2, 2018, of the merger agreement;

 

    reviewed certain publicly available financial and other information, and certain historical operating data, relating to SCANA and Dominion Energy made available to RBC Capital Markets from published sources and internal records of SCANA and Dominion Energy, respectively;

 

    reviewed certain financial projections and other estimates and data (including as to certain tax attributes) relating to SCANA prepared by the management of SCANA based on alternative regulatory settlement cases, and reviewed certain financial projections and other estimates and data relating to Dominion Energy prepared by the management of Dominion Energy, which projections and other estimates and data RBC Capital Markets was directed by SCANA to utilize for purposes of its analyses and opinion;

 

    conducted discussions with members of the senior managements of SCANA and Dominion Energy with respect to the respective businesses, prospects and financial outlook of SCANA and Dominion Energy;

 

    reviewed the reported prices and trading activity for shares of SCANA common stock and Dominion Energy common stock;

 

    compared certain financial metrics of SCANA and Dominion Energy with those of selected publicly traded companies in lines of businesses that RBC Capital Markets considered generally relevant in evaluating SCANA and Dominion Energy, respectively;

 

    reviewed certain potential pro forma financial effects of the merger on Dominion Energy; and

 

    considered other information and performed other studies and analyses as RBC Capital Markets deemed appropriate.

In rendering its opinion, RBC Capital Markets assumed and relied upon the accuracy and completeness of all information that was reviewed by RBC Capital Markets, including all financial, legal, tax, accounting, operating and other information provided to or discussed with RBC Capital Markets by or on behalf of SCANA or Dominion Energy (including, without limitation, financial statements and related notes), and upon the assurances of the respective managements and other representatives of SCANA and Dominion Energy that they were not aware of any relevant information that was omitted or that remained undisclosed to RBC Capital Markets. RBC Capital Markets did not assume responsibility for independently verifying and it did not independently verify such information. RBC Capital Markets also assumed that the financial projections and other estimates and data (including potential tax attributes relating to SCANA) that RBC Capital Markets was directed to utilize in its analyses were reasonably prepared on bases reflecting the best currently available estimates and good faith judgments of the respective managements of SCANA and Dominion Energy, as the case may be, as to the future financial performance of, and were a reasonable basis upon which to evaluate, SCANA under the alternative regulatory settlement cases reflected therein, Dominion Energy, the potential pro forma effects of the merger and the other matters covered thereby. RBC Capital Markets expressed no opinion as to any such financial projections and other estimates and data or the assumptions upon which they were based. RBC Capital Markets relied upon the assessments of the managements of SCANA and Dominion Energy as to, among other things, (i) the potential impact on SCANA and Dominion Energy of market, competitive, seasonal, and other trends and developments in and prospects for, and governmental, regulatory and legislative matters relating to or otherwise affecting, the utility, power and energy industries and the sectors of such industries and geographic regions in which SCANA and Dominion Energy operate (including, without limitation, with respect to future commodity prices and availability, which are subject to significant volatility, existing, planned and/or abandoned infrastructure and other capital projects, including the construction and abandonment of the NND project, and pending and future rate cases, cost recovery and other regulatory proceedings and determinations) and assumptions of the managements of SCANA and Dominion Energy, respectively, as to such matters which,

 

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if different than as provided to RBC Capital Markets, could have a meaningful impact on RBC Capital Markets’ analyses or opinion, (ii) existing and future relationships, agreements and arrangements with, and the ability to attract, retain and/or replace, key employees, customers, suppliers, contractors and subcontractors and other commercial relationships of SCANA and Dominion Energy, and (iii) the ability to integrate the operations of SCANA and Dominion Energy. RBC Capital Markets assumed that there would be no developments with respect to any of the foregoing that would have an adverse effect on SCANA, Dominion Energy or the merger or that otherwise would be meaningful in any respect to its analyses or opinion.

In connection with its opinion, RBC Capital Markets did not assume any responsibility to perform, and it did not perform, an independent valuation or appraisal of any of the assets or liabilities (contingent, off-balance sheet, accrued, derivative or otherwise) of or relating to SCANA, Dominion Energy or any other entity and RBC Capital Markets was not furnished with any such valuations or appraisals. RBC Capital Markets expressed no view or opinion as to the potential impact on SCANA, Dominion Energy or any other entity of any pending or potential litigation, claims or governmental, regulatory or other proceedings or investigations. RBC Capital Markets did not assume any obligation to conduct, and it did not conduct, any physical inspection of the properties or facilities of SCANA, Dominion Energy or any other entity. RBC Capital Markets did not evaluate the solvency or fair value of SCANA, Dominion Energy or any other entity under any state, federal or other laws relating to bankruptcy, insolvency or similar matters. RBC Capital Markets assumed that the merger would be completed in accordance with the terms of the merger agreement and in compliance with all applicable laws, documents and other requirements, without waiver, modification or amendment of any material term, condition or agreement, and that, in the course of obtaining the necessary governmental, regulatory or third-party approvals, consents, releases, waivers and agreements for the merger, no delay, limitation, restriction or condition would be imposed or occur, including any divestiture or other requirements, that would have an adverse effect on SCANA, Dominion Energy or the merger or that otherwise would be meaningful in any respect to its analyses or opinion. RBC Capital Markets also assumed that the merger would qualify as a reorganization within the meaning of Section 368(a) of the Code for U.S. federal income tax purposes. In addition, RBC Capital Markets assumed that the final executed merger agreement would not differ, in any respect meaningful to its analyses or opinion, from the draft that RBC Capital Markets reviewed.

RBC Capital Markets’ opinion spoke only as of the date of the opinion, was based on conditions as they existed and information supplied or reviewed as of the date of the opinion, and was without regard to any market, economic, financial, legal, regulatory or other circumstances or event of any kind or nature which may exist or occur after such date. RBC Capital Markets did not undertake and has no obligation to reaffirm, revise or update its opinion or otherwise comment upon events occurring after the date of its opinion with respect to its opinion. RBC Capital Markets did not express any opinion as to the actual value of Dominion Energy common stock when issued in connection with the merger or the price or range of prices at which SCANA common stock, Dominion Energy common stock or any other securities of SCANA or Dominion Energy may trade or otherwise be transferable at any time, including following announcement or completion of the merger. As the SCANA board was aware, the credit, financial and stock markets, and the industries in which SCANA and Dominion Energy operate, have experienced and continue to experience volatility and RBC Capital Markets expressed no opinion or view as to any potential effects of such volatility on SCANA or Dominion Energy (or their respective businesses) or the merger.

RBC Capital Markets’ opinion addressed the fairness, from a financial point of view and as of the date of the opinion, of the merger consideration (to the extent expressly specified in the opinion), without regard to individual circumstances of specific holders that may distinguish such holders or the securities of SCANA held by such holders. RBC Capital Markets’ opinion did not in any way address any other terms, conditions, implications or other aspects of the merger or the merger agreement, including, without limitation, the form or structure of the merger, or any other agreement, arrangement or understanding to be entered into in connection with or contemplated by the merger or otherwise. RBC Capital Markets did not express any opinion or view with respect to, and RBC Capital Markets relied upon the assessments of SCANA and SCANA’s representatives regarding, legal, regulatory, tax, accounting and similar matters (including changes resulting from, and the

 

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impact of, the recent U.S. tax reform), as to which RBC Capital Markets understood that SCANA obtained such advice as SCANA deemed necessary from qualified professionals. Further, in rendering its opinion, RBC Capital Markets did not express any view on, and its opinion did not address, the fairness of the amount or nature of the compensation (if any) or other consideration to any officers, directors or employees of any party, or class of such persons, relative to the merger consideration or otherwise. In connection with its engagement, RBC Capital Markets was not requested to, and it did not, undertake a third-party solicitation process on SCANA’s behalf with respect to the acquisition of all or a part of SCANA. The issuance of RBC Capital Markets’ opinion was approved by RBC Capital Markets’ fairness opinion committee.

In preparing its opinion to the SCANA board, RBC Capital Markets performed various financial and comparative analyses, including those described below. The summary below of RBC Capital Markets’ material financial analyses provided to the SCANA board in connection with RBC Capital Markets’ opinion is not a comprehensive description of all analyses undertaken or factors considered by RBC Capital Markets in connection with its opinion. The preparation of a financial opinion is a complex analytical process involving various determinations as to the most appropriate and relevant methods of financial analysis and the application of those methods to the particular circumstances and, therefore, a financial opinion is not readily susceptible to partial analysis or summary description.

In arriving at its opinion, RBC Capital Markets employed several analytical methodologies and no one method of analysis should be regarded as critical to the overall conclusion reached by RBC Capital Markets. Each analytical technique has inherent strengths and weaknesses, and the nature of the available information may further affect the value of particular techniques. The overall conclusion reached by RBC Capital Markets was based on all analyses and factors presented, taken as a whole, and also on application of RBC Capital Markets’ experience and judgment. Such conclusion may have involved significant elements of subjective judgment and qualitative analysis and no opinion was given as to the value or merit standing alone of any one or more portions of such analyses or factors.

In performing its analyses, RBC Capital Markets considered industry performance, general business and economic conditions and other matters, many of which are beyond the control of SCANA and Dominion Energy. The estimates of the future performance of SCANA and Dominion Energy in or underlying RBC Capital Markets’ analyses are not necessarily indicative of actual values or actual future results, which may be significantly more or less favorable than those estimates or those suggested by RBC Capital Markets’ analyses. The analyses do not purport to be appraisals or to reflect the prices at which a company or business might actually be sold or acquired or the prices at which any securities have traded or may trade at any time in the future. Accordingly, the estimates used in, and the implied reference ranges resulting from, any particular analysis described below are inherently subject to substantial uncertainty and should not be taken as RBC Capital Markets’ view of the actual value of SCANA or Dominion Energy.

The merger consideration was determined through negotiations between SCANA and Dominion Energy and the decision of SCANA to enter into the merger agreement was solely that of the SCANA board. RBC Capital Markets’ opinion and analyses were only one of many factors considered by the SCANA board in its evaluation of the merger and should not be viewed as determinative of the views of the SCANA board, SCANA’s management or any other party with respect to the merger or the merger consideration to be received by holders of SCANA common stock pursuant to the merger agreement.

Financial Analyses

The summary of the financial analyses described below under this heading “—Financial Analyses” is a summary of the material financial analyses provided by RBC Capital Markets to the SCANA board in connection with RBC Capital Markets’ opinion, dated January 2, 2018. The financial analyses summarized below include information presented in tabular format. In order to fully understand the financial analyses performed by RBC Capital Markets, the tables must be read together with the text of each summary. The tables alone do not constitute a complete description of the financial analyses. Selecting portions of RBC Capital Markets’

 

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financial analyses or factors considered or focusing on the data set forth in the tables below without considering all analyses or factors or the full narrative description of such analyses or factors, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of RBC Capital Markets’ financial analyses. In RBC Capital Markets’ opinion, the term merger consideration is defined as the implied per share value payable in the merger utilizing the 0.6690 exchange ratio and, for purposes of RBC Capital Markets’ financial analyses described below performed in connection with such opinion, the implied value was $54.23 per share based on the 0.6690 exchange ratio and the closing price of Dominion Energy common stock on December 29, 2017 (the last trading day prior to the date of RBC Capital Markets’ opinion to the SCANA board), which implied per share amount is referred to below as the implied per share merger consideration. Financial data utilized for SCANA in the financial analyses described below, to the extent based on internal financial forecasts and estimates of SCANA’s management, were based on two potential alternative regulatory settlement cases, referred to individually as the 5% regulatory settlement case and the 9.75% regulatory settlement case, respectively, and collectively as the SCANA forecasts, that SCANA directed RBC Capital Markets to use and rely upon for purposes of its analyses and opinion. Financial data utilized for Dominion Energy in the financial analyses described below, to the extent based on internal financial forecasts and estimates of Dominion Energy’s management, were based on financial forecasts and other information and data relating to Dominion Energy provided to or discussed with RBC Capital Markets by the management of Dominion Energy, which we refer to as the Dominion Energy forecasts.

SCANA Financial Analyses

Selected Public Companies Analysis. RBC Capital Markets performed a selected public companies analysis in which RBC Capital Markets reviewed certain financial and stock market information of SCANA and the following nine selected companies that RBC Capital Markets considered generally relevant as publicly traded companies with predominantly regulated integrated utility operations and over $5 billion in market capitalization, which we collectively refer to as the SCANA selected companies:

 

    Alliant Energy Corporation

 

    Ameren Corporation

 

    American Electric Power Company, Inc.

 

    CMS Energy Corporation

 

    Duke Energy Corporation

 

    Pinnacle West Capital Corporation

 

    The Southern Company

 

    WEC Energy Group, Inc.

 

    Xcel Energy Inc.

In its selected public companies analysis of SCANA, RBC Capital Markets reviewed, among other things, closing stock prices on December 29, 2017 as a multiple of calendar year 2019 estimated earnings per share, which we refer to as EPS. Financial data of the SCANA selected companies was based on publicly available research analysts’ estimates and other publicly available information. Financial data of SCANA was based on publicly available research analysts’ estimates, other publicly available information and the SCANA forecasts.

 

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The overall low to high calendar year 2019 estimated EPS multiples observed for the SCANA selected companies were 15.4x to 19.2x (with a mean of 18.0x and a median of 18.5x). RBC Capital Markets also observed that the calendar year 2019 estimated EPS multiple for SCANA was 13.3x (based on publicly available research analysts’ estimates). RBC Capital Markets then applied a selected range of calendar year 2019 estimated EPS multiples of 13.3x to 18.5x to corresponding data of SCANA based on the SCANA forecasts. This analysis indicated the following approximate implied per share equity value reference ranges for SCANA based on the 5% regulatory settlement case and the 9.75% regulatory settlement case, respectively, as compared to the implied per share merger consideration:

 

Approximate Implied Per Share

Equity Value Reference Ranges Based on:

  

Implied Per Share Merger

Consideration

5% Regulatory Settlement Case

  

9.75% Regulatory Settlement Case

    

$44.55 – $62.17

   $38.77 – $54.11    $54.23

No company used in this analysis is identical to SCANA. Accordingly, an evaluation of the results of this analysis is not entirely mathematical. Rather, this analysis involves complex considerations and judgments concerning differences in financial and operating characteristics and other factors that could affect the public trading or other values of the companies to which SCANA was compared.

Discounted Cash Flow Analysis. RBC Capital Markets performed a discounted cash flow analysis of SCANA by calculating the estimated present values of the standalone unlevered, after-tax free cash flows that SCANA was forecasted to generate during the fiscal years ending December 31, 2018 through December 31, 2021 based on the SCANA forecasts. RBC Capital Markets calculated terminal values for SCANA at the end of 2021 by applying to the terminal year 2022 estimated net income of SCANA a selected range of one-year forward EPS multiples of 14.2x to 16.9x. The unlevered, after-tax free cash flows and terminal values were then discounted to present value (as of December 31, 2017) using a selected discount rate range of 5.10% to 6.10%. This analysis indicated the following approximate implied per share equity value reference ranges for SCANA based on the 5% regulatory settlement case and the 9.75% regulatory settlement case, respectively, as compared to the implied per share merger consideration:

 

Approximate Implied Per Share

Equity Value Reference Ranges Based on:

  

Implied Per Share Merger

Consideration

5% Regulatory Settlement Case

  

9.75% Regulatory Settlement Case

    

$52.59 – $65.51

   $47.24 – $58.89    $54.23

Dominion Energy Financial Analysis

Selected Public Companies Analysis. RBC Capital Markets performed a selected public companies analysis in which RBC Capital Markets reviewed certain financial and stock market information of Dominion Energy and the following five selected companies that RBC Capital Markets considered generally relevant as publicly traded diversified, integrated utilities with over $10 billion in market capitalization, which we collectively refer to as the Dominion Energy selected companies:

 

    Avangrid, Inc.

 

    CenterPoint Energy, Inc.

 

    DTE Energy Company

 

    NextEra Energy, Inc.

 

    Sempra Energy

In its selected public companies analysis of Dominion Energy, RBC Capital Markets reviewed, among other things, closing stock prices on December 29, 2017 as a multiple of calendar years 2018 and 2019 estimated EPS. Financial data of the Dominion Energy selected companies was based on publicly available research analysts’ estimates and other publicly available information. Financial data of Dominion Energy was based on publicly available information and the Dominion Energy forecasts.

 

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The overall low to high calendar year 2018 estimated EPS and calendar year 2019 estimated EPS multiples observed for the Dominion Energy selected companies were 19.3x to 21.5x (with a mean of 20.2x and a median of 19.8x) and 16.1x to 20.1x (with a mean of 18.5x and a median of 18.7x), respectively. RBC Capital Markets also observed that the calendar year 2018 estimated EPS and calendar year 2019 estimated EPS multiples for Dominion Energy were 20.1x and 19.0x, respectively (based on publicly available research analysts’ estimates). RBC Capital Markets then applied selected ranges of calendar year 2018 estimated EPS and calendar year 2019 estimated EPS multiples of 19.3x to 21.5x and 16.1x to 20.1x, respectively, to corresponding data of Dominion Energy based on the Dominion Energy forecasts. This analysis indicated the following approximate implied per share equity value reference ranges for Dominion Energy, as compared to the per share closing price of Dominion Energy common stock on December 29, 2017:

 

Approximate Implied Per Share

Equity Value Reference Ranges Based on:

  

Dominion Energy Per Share Closing
Stock Price on December 29, 2017

CY2018E EPS

  

CY2019E EPS

    

$80.18 – $89.59

   $68.49 – $85.50    $81.06

No company used in this analysis is identical to Dominion Energy. Accordingly, an evaluation of the results of this analysis is not entirely mathematical. Rather, this analysis involves complex considerations and judgments concerning differences in financial and operating characteristics and other factors that could affect the public trading or other values of the companies to which Dominion Energy was compared.

Certain Additional Information

RBC Capital Markets observed certain factors that were not considered part of RBC Capital Markets’ financial analyses with respect to its opinion but were referenced for informational purposes, including, among other things, the following:

 

    the historical trading performance of SCANA common stock and Dominion Energy common stock during the 52-week period ended December 29, 2017, which indicated low and high closing prices during such 52-week period of approximately $37.39 and $73.61 per share for SCANA common stock and approximately $71.68 and $84.91 per share for Dominion Energy common stock; and

 

    publicly available research analysts’ forward stock price targets for SCANA common stock and Dominion Energy common stock, discounted to present value using discount rate ranges of 6.40% to 7.40% and 5.40% to 6.40%, respectively, which indicated target stock price ranges of approximately $36.01 to $56.13 per share for SCANA common stock and approximately $72.71 to $84.99 per share for Dominion Energy common stock.

Miscellaneous

SCANA has agreed to pay RBC Capital Markets for its services as a financial advisor an aggregate fee estimated to be approximately $14 million, of which $5 million was payable upon delivery of RBC Capital Markets’ opinion, 25% is payable upon receipt of approval of the merger by SCANA shareholders and the balance is contingent upon completion of the merger. RBC Capital Markets also may be entitled to an incremental incentive fee (the amount of which has not yet been determined) payable, in SCANA’s sole discretion, upon completion of the merger. SCANA also has agreed to reimburse RBC Capital Markets for expenses incurred in connection with RBC Capital Markets’ services and to indemnify RBC Capital Markets and related persons against certain liabilities arising out of RBC Capital Markets’ engagement.

As the SCANA board was aware, RBC Capital Markets and certain of its affiliates in the past have provided, currently are providing and in the future may provide investment banking and commercial banking services to SCANA and/or its affiliates unrelated to the merger, for which services RBC Capital Markets and its affiliates have received and expect to receive customary compensation, including, during the two-year period

 

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prior to the date of RBC Capital Markets’ opinion, having acted or acting as a lender under certain credit facilities of SCANA. During such two-year period, RBC Capital Markets and such affiliates received aggregate fees for such commercial banking services described above of approximately $0.5 million from SCANA. As the SCANA board also was aware, RBC Capital Markets and certain of its affiliates in the past have provided, currently are providing and in the future may provide investment banking and commercial banking services to Dominion Energy and/or its affiliates, for which services RBC Capital Markets and its affiliates have received or expect to receive customary compensation, including, during the two-year period prior to the date of RBC Capital Markets’ opinion, having acted or acting as (i) joint lead manager or joint book-running manager for certain debt and equity offerings of Dominion Energy and certain of its affiliates in 2016 and 2017 and (ii) joint lead arranger for, and as a lender under, certain bridge and other credit facilities of Dominion Energy and certain of its affiliates. During such two-year period, RBC Capital Markets and such affiliates received aggregate fees for such investment banking and commercial banking services of approximately $24 million from Dominion Energy and certain of its affiliates.

RBC Capital Markets, as part of its investment banking services, is regularly engaged in the valuation of businesses and their securities in connection with mergers and acquisitions, corporate restructurings, underwritings, secondary distributions of listed and unlisted securities, private placements and valuations for corporate and other purposes. In the ordinary course of business, RBC Capital Markets and/or certain of its

affiliates may act as a market maker and broker in the publicly traded securities of SCANA, Dominion Energy and/or other entities involved in the merger or their respective affiliates and receive customary compensation in connection therewith, and may also actively trade securities of SCANA, Dominion Energy and/or other entities involved in the merger or their respective affiliates for RBC Capital Markets’ or its affiliates’ account or for the account of customers and, accordingly, RBC Capital Markets and its affiliates may hold a long or short position in such securities.

RBC Capital Markets is an internationally recognized investment banking firm which is regularly engaged in providing financial advisory services in connection with mergers and acquisitions. SCANA selected RBC Capital Markets as SCANA’s financial advisor in connection with the merger on the basis of RBC Capital Markets’ experience in similar transactions, reputation in the investment community and familiarity with SCANA and its business.

Directors and Management of Dominion Energy After the Merger

Upon completion of the merger, the board of directors and executive officers of Dominion Energy are expected to remain unchanged. Pursuant to the terms of the merger agreement, as soon as practical after completion of the merger, the Dominion Energy board intends to appoint a mutually agreeable current member of the SCANA board or SCANA’s executive management to serve on the Dominion Energy board. For information on Dominion Energy’s current directors and executive officers, please see Dominion Energy’s proxy statement dated March 23, 2018 and its Annual Report on Form 10-K for the year ended December 31, 2017. See the section entitled “Where You Can Find More Information” beginning on page  141 of this proxy statement/prospectus.

U.S. Federal Income Tax Consequences of the Merger

The following is a general discussion of the U.S. federal income tax consequences of the merger to “U.S. holders” (as defined below) of SCANA common stock that receive shares of Dominion Energy common stock in exchange for their shares of SCANA common stock in the merger. The following discussion is based upon the Code, the U.S. Treasury regulations promulgated thereunder and judicial and administrative authorities, rulings and decisions, all as in effect as of the date of this proxy statement/prospectus. These authorities may change, possibly with retroactive effect, and any such change could affect the accuracy of the statements and conclusions set forth in this discussion. This discussion does not address any tax consequences arising under the unearned income Medicare contribution tax pursuant to the Health Care and Education Reconciliation Act of 2010, nor does it address any tax consequences arising under the laws of any state, local or foreign jurisdiction, or under any U.S. federal laws other than those pertaining to the income tax.

 

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The following discussion applies only to U.S. holders of shares of SCANA common stock who hold such shares as capital assets within the meaning of Section 1221 of the Code (generally, property held for investment). Further, this discussion does not purport to consider all aspects of U.S. federal income taxation that might be relevant to U.S. holders in light of their particular circumstances and does not apply to U.S. holders subject to special treatment under the U.S. federal income tax laws (such as, for example, dealers or brokers in securities, commodities or foreign currencies, traders in securities that elect to apply a mark-to-market method of accounting, banks and certain other financial institutions, insurance companies, mutual funds, tax-exempt organizations, holders subject to the alternative minimum tax provisions of the Code, partnerships, S corporations or other pass-through entities or investors in partnerships, regulated investment companies, real estate investment trusts, controlled foreign corporations, passive foreign investment companies, former citizens or residents of the United States, U.S. expatriates, holders whose functional currency is not the U.S. dollar, holders who hold shares of SCANA common stock as part of a hedge, straddle, constructive sale or conversion transaction or other integrated investment, holders who acquired SCANA common stock pursuant to the exercise of employee stock options, through a tax qualified retirement plan or otherwise as compensation or holders who actually or constructively own more than 5% of SCANA common stock).

For purposes of this discussion, the term “U.S. holder” means a beneficial owner of SCANA common stock that is for U.S. federal income tax purposes (i) an individual citizen or resident of the United States, (ii) a corporation, or entity treated as a corporation for U.S. federal income tax purposes, organized in or under the laws of the United States or any state thereof or the District of Columbia, (iii) a trust if (a) a court within the United States is able to exercise primary supervision over the administration of the trust and one or more U.S. persons have the authority to control all substantial decisions of the trust or (b) such trust has made a valid election to be treated as a U.S. person for U.S. federal income tax purposes or (iv) an estate, the income of which is includible in gross income for U.S. federal income tax purposes, regardless of its source.

If an entity or arrangement treated as a partnership for U.S. federal income tax purposes holds SCANA common stock, the tax treatment of a partner in such partnership generally will depend on the status of the partner and the activities of the partnership. Any entity treated as a partnership for U.S. federal income tax purposes that holds SCANA common stock, and any partners in such partnership, should consult their own independent tax advisors regarding the tax consequences of the merger to their specific circumstances.

Determining the actual tax consequences of the merger to you may be complex and will depend on your specific situation and on factors that are not within our control. You should consult your own independent tax advisor as to the specific tax consequences of the merger in your particular circumstances, including the applicability and effect of the alternative minimum tax and any state, local, foreign and other tax laws and of changes in those laws.

Consequences of the Merger

The parties intend for the merger to be treated as a “reorganization” within the meaning of Section 368(a) of the Code for U.S. federal income tax purposes. At the time of effectiveness of the registration statement relating to this proxy statement/prospectus, Dominion Energy and SCANA have obtained written tax opinions from Morgan, Lewis & Bockius, LLP, special tax counsel to Dominion Energy, and from Mayer Brown LLP, legal counsel to SCANA, respectively, that the merger will qualify as a “reorganization” within the meaning of Section 368(a) of the Code. In addition, Dominion Energy expects to receive an opinion from Morgan, Lewis & Bockius LLP dated the closing date of the merger, to the effect that the merger will qualify as a “reorganization” within the meaning of Section 368(a) of the Code and SCANA expects to receive an opinion from Mayer Brown LLP, dated the closing date of the merger, to the effect that the merger will qualify as a “reorganization” within the meaning of Section 368(a) of the Code. These opinions were and will be based on facts and representations contained in representation letters provided by Dominion Energy and SCANA and on customary factual assumptions. The obligations of Dominion Energy and SCANA are not, however, contingent on receipt of these opinions. None of the opinions described above will be binding on the IRS or any court. Dominion Energy and

 

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SCANA have not sought and will not seek any ruling from the IRS regarding any matters relating to the merger, and as a result, there can be no assurance that the IRS will not assert, or that a court would not sustain, a position contrary to any of the conclusions set forth below. In addition, if any of the representations or assumptions upon which those opinions are based are inconsistent with the actual facts, the U.S. federal income tax consequences of the merger could be adversely affected. Assuming that, in accordance with the opinions described above, the merger qualifies as a “reorganization” within the meaning of Section 368(a) of the Code, upon the exchange of SCANA common stock for Dominion Energy common stock and cash in lieu of fractional shares, the U.S. federal income tax consequences will be as follows:

Upon exchanging your SCANA common stock for Dominion Energy common stock, you generally will not recognize gain or loss, except with respect to cash received in lieu of fractional shares of Dominion Energy common stock (as discussed below). The aggregate tax basis of Dominion Energy common stock that you receive in the merger (including any fractional shares deemed received) will equal your aggregate adjusted tax basis in the shares of SCANA common stock you surrender in the merger. Your holding period for the shares of Dominion Energy common stock that you receive in the merger (including any fractional share deemed received) will include your holding period for the shares of SCANA common stock that you surrender in the merger. If you acquired different blocks of SCANA common stock at different times or at different prices, Dominion Energy common stock you receive will be allocated pro rata to each block of SCANA common stock, and the basis and holding period of each block of Dominion Energy common stock you receive will be determined on a block-for-block basis depending on the basis and holding period of the blocks of SCANA common stock exchanged for such Dominion Energy common stock.

If you receive cash in lieu of a fractional share of Dominion Energy common stock, you will be treated as having received such fractional share of Dominion Energy common stock pursuant to the merger and then as having sold such fractional share of Dominion Energy common stock for cash. As a result, you generally will recognize capital gain or loss equal to the difference between the amount of cash received for such fractional share and your basis in your fractional share of Dominion Energy common stock as set forth above. Such capital gain or loss generally will be long-term capital gain or loss if, as of the effective date of the merger, your holding period for such fractional share (as described above) exceeds one year. Long-term capital gains of individuals are generally eligible for reduced rates of taxation. The deductibility of capital losses is subject to limitations.

Accounting Treatment

Dominion Energy prepares its financial statements in accordance with GAAP. The merger will be accounted for using the acquisition method of accounting. Dominion Energy will be treated as the acquiror for accounting purposes.

No Dissenters’ Rights

In accordance with Section 33-13-102(B) of the SCBCA, SCANA shareholders will not be entitled to exercise dissenters’ rights, appraisal rights or other similar rights in connection with the merger and the other transactions contemplated by the merger agreement because the shares of SCANA common stock were listed on the NYSE as of the record date of the special meeting.

Regulatory Approvals Required for the Merger

General

Under the terms of the merger agreement, to complete the merger, Dominion Energy and SCANA must obtain approvals or consents from, or make filings with, a number of U.S. federal and state regulatory authorities. The material regulatory approvals, consents and filings include the following:

 

    approval by the SCPSC of the cost recovery plan;

 

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    the SCPSC shall have made a SCPSC merger determination;

 

    authorization from the NCUC for Dominion Energy and SCANA to enter into the proposed business combination transaction as required by N.C.G.S. § 62-111(a);

 

    approval by the GPSC of the indirect change of ownership of SCANA Energy Marketing, Inc., which we refer to as SEMI, from SCANA to Dominion Energy as required by O.C.G.A. § 46-4-25;

 

    the expiration or early termination of certain waiting periods under the HSR Act and the related rules and regulations, which provide that certain acquisition transactions may not be completed until required information has been furnished to the Antitrust Division of the DOJ and the FTC (early termination of the HSR Act waiting period was granted on February 1, 2018);

 

    authorization from the FERC pursuant to Section 203 of the FPA;

 

    consent by the NRC to the indirect transfer of control of NRC licenses from SCANA to Dominion Energy as required by Section 184 of the Atomic Energy Act and the NRC’s implementing regulations in 10 C.F.R. 50.80; and

 

    consent from the FCC, for the transfer of control over certain FCC licenses for private internal communications held by certain SCANA subsidiaries (completion of the merger is not conditioned on receipt of FCC approval).

Dominion Energy and SCANA have made and will make various filings and submissions for the above-mentioned authorizations and approvals and will each use their reasonable best efforts to obtain these authorizations and approvals, subject to certain conditions, including that these authorizations and approvals (other than the applicable SCPSC approvals which are subject to a different standard described in the immediately following paragraph) or any law or order relating to them do not impose or require any undertakings, obligations or remedial actions that constitute a burdensome condition (which is described in the section entitled “The Merger Agreement—Reasonable Best Efforts to Obtain Regulatory Approvals” beginning on page 96 of this proxy statement/prospectus). Dominion Energy and SCANA are targeting receipt of the required authorizations, approvals and consents described in further detail below and the closing of the merger near year-end 2018. However, there can be no assurance as to the precise timing of or ultimate ability of Dominion Energy and SCANA to obtain such authorizations, approvals and consents (or any additional authorizations, approvals or consents which may otherwise become necessary) or as to the timing of or occurrence of the completion of the merger. The following is a brief summary of required federal and state regulatory filings and approvals related to the merger.

SCPSC Approval

No statute or rule expressly requires approval of the merger by the SCPSC. However, the SCPSC has in the past sought to exercise authority to review and approve business combinations similar to the merger pursuant to South Carolina Code Ann. § 58-27-1300 or, without expressly asserting jurisdiction over a merger, has issued findings that the merger was in the public interest or that there was an absence of harm to South Carolina rate payers as a result of the merger. As a result, the merger agreement contains a closing condition to the effect that the SCPSC shall have made a SCPSC merger determination. If the SCPSC fails or declines to make a SCPSC merger determination, then Dominion Energy will not be obligated to complete the merger.

In addition, on December 12, 2017, SCE&G made a public commitment to the SCPSC that on or before January 12, 2018, it would submit a comprehensive plan to reduce the costs incurred by customers associated with the abandoned NND project. On January 12, 2018, Dominion Energy and SCE&G filed the SCPSC petition with the SCPSC seeking a ruling from the SCPSC approving the merger with no material changes to the terms of the merger or making a finding that the merger is in the public interest or that there is an absence of harm to South Carolina rate payers as a result of the merger. The SCPSC petition further requests the SCPSC to approve

 

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the cost recovery plan with no material change to the proposed terms, conditions or undertakings set forth in the cost recovery plan and no significant change to the economic value of the cost recovery plan, in each case as reasonably determined by Dominion Energy in good faith. There is no guarantee that the SCPSC will take these actions, or that it will not impose conditions on such approvals that result in a failure of a closing condition to the merger. It is also possible that the South Carolina General Assembly will enact legislation that will prevent the SCPSC from approving the cost recovery plan in a form that does not result in a failure of closing conditions. The SCPSC consolidated the proceedings related to the SCPSC petition with separate actions filed by the South Carolina Office of Regulatory Staff and environmental interests seeking immediate reductions to SCE&G’s rates and other relief. The SCPSC has not scheduled a date for a hearing on the consolidated proceedings but has issued a proposed schedule for comments by the parties to that proceeding which would support a hearing in November 2018.

NCUC Approval

Approval of the business combination transaction is required under N.C.G.S. § 62-111(a) for the indirect transfer of ownership of Public Service Company of North Carolina, Inc., which we refer to as PSNC, from SCANA to Dominion Energy. The standard for approval is that the merger is justified by the public convenience and necessity. In a 2016 decision, the NCUC concluded that a merger was justified by the public convenience and necessity and serves the public interest upon findings that the merger would have no adverse impact on the rates and services provide by the utility, the utility’s rate payers were protected as much as reasonably possible from potential costs and risks resulting from the merger, and the known and potential benefits of the merger were sufficient to offset the potential costs and risks. See Order Approving Merger Subject to Regulatory Conditions and Code of Conduct, Docket Nos. E-2, Sub 1095, E-7, Sub 1100, G-9, Sub 682, at 69 (Sept. 29, 2016). On January 24, 2018, Dominion Energy and SCANA filed a joint application with the NCUC seeking approval to engage in the business combination transaction. There is no guarantee that the NCUC will approve the merger or that it will not impose conditions on its approval that are unacceptable to either Dominion Energy or SCANA.

GPSC Approval

Approval of the merger is required under O.C.G.A. § 46-4-25 for the indirect transfer of ownership of SEMI, from SCANA to Dominion Energy. The GPSC must act on an application to amend a certificate of authority to reflect a change in ownership within 90 days from the date the application is deemed complete. On January 19, 2018, Dominion Energy and SEMI filed a joint application with the GPSC seeking approval of the change of ownership. The GSPC approved the change of ownership on March 20, 2018.

HSR Act and Antitrust

Completion of the merger is subject to the receipt of antitrust clearance in the United States. Under the HSR Act and the rules and regulations promulgated thereunder, the merger may not be completed until notification and report forms have been filed with the DOJ and the FTC and the applicable waiting period has expired or been terminated.

The waiting period with respect to the notification and report forms filed under the HSR Act expires 30 calendar days after the date both parties have submitted such filings, unless otherwise extended or terminated. Dominion Energy and SCANA filed the required HSR Act notification and report forms with the DOJ and FTC on January 19, 2018, and requested early termination of the HSR Act waiting period. On February 1, 2018, the FTC notified Dominion Energy and SCANA that it had granted early termination of the waiting period.

At any time before or after completion of the merger, notwithstanding the termination of the waiting period under the HSR Act, the DOJ, FTC, or any U.S. state, could take such action under the antitrust laws as each deems necessary or desirable in the public interest, including seeking to enjoin the completion of the merger or seeking divestiture of substantial assets of Dominion Energy and SCANA. Private parties also may seek to take

 

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legal action under the antitrust laws under certain circumstances. There can be no assurance that the DOJ, the FTC or any other governmental entity or any private party will not attempt to challenge the merger on antitrust or competition grounds, and, if such a challenge is made, there can be no assurance as to its result. Under the merger agreement, Dominion Energy and SCANA generally must use reasonable best efforts to take all necessary actions to obtain all regulatory approvals required to complete the merger, subject to certain exceptions. If the merger is not completed within 12 months after the expiration or early termination of the applicable HSR Act waiting period, Dominion Energy and SCANA will be required to submit new notification and report forms to the DOJ and the FTC, and a new HSR Act waiting period will have to expire or be terminated before the merger can be completed.

FERC Approval

Each of Dominion Energy and SCANA is a holding company under the Public Utility Holding Company Act of 2005, which we refer to as PUHCA, that has subsidiaries that either are “public utilities,” “transmitting utilities,” “electric utilities,” “electric utility companies” or a “holding company in a holding company system that includes a transmitting utility or an electric utility company” as such terms are defined under PUHCA, the FPA and the FERC’s implementing regulations. One of the requirements of Section 203 of the FPA is that no holding company in a holding company system that includes a transmitting utility or an electric utility may purchase, acquire, merge or consolidate with a transmitting utility, an electric utility company or a holding company in a holding company system that includes a transmitting utility or electric utility company without prior FERC authorization. Consequently, the FERC’s approval of the merger under Section 203 of the FPA is required.

The FERC must authorize the merger if it finds that the merger is consistent with the public interest. The FERC has stated that, in analyzing a merger or transaction under Section 203 of the FPA, it will evaluate the impact of the merger on:

 

    competition in electric power markets;

 

    the applicants’ wholesale rates; and

 

    state and federal regulation of the applicants.

The FERC must also find that the merger will not result in the cross-subsidization by utilities of their non-utility affiliates or the improper encumbrance or pledge of utility assets. If such cross-subsidization or encumbrances were to occur as a result of the merger, the FERC then must find that such cross-subsidization or encumbrances are consistent with the public interest.

The FERC will review these factors to determine whether the merger is consistent with the public interest. If the FERC finds that the merger would adversely affect competition in wholesale electric power markets, rates for transmission or the wholesale sale of electric energy, or regulation, or that the merger would result in cross-subsidies or improper encumbrances that are not consistent with the public interest, it may, pursuant to the FPA, impose upon the merger remedial conditions intended to mitigate such effects or it may decline to authorize the merger. On February 23, 2018, Dominion Energy and SCANA filed an application with FERC seeking approval of the merger under Section 203 of the FPA. On February 26, 2018, FERC issued a notice of filing setting April 24, 2018, as the deadline for interventions and comments. Three parties filed interventions. One of the three parties commented on the application. FERC has not yet acted on the application. The FERC is required to rule on a completed merger application not later than 180 days from the date on which the completed application is filed. The FERC may, however, for good cause, issue an order extending the time for consideration of the merger application by an additional 180 days. If the FERC does not issue an order within the statutory deadline, then the transaction is deemed to be approved. Dominion Energy and SCANA expect that the FERC will approve the merger within the initial 180-day review period. However, there is no guarantee that the FERC will not extend the time period for its review or will not impose conditions on its approval that are unacceptable to Dominion Energy or SCANA.

 

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NRC Approval

Completion of the merger is subject to the issuance of an order by the NRC consenting to the indirect transfer of control of NRC License No. NPF-93, Docket No. 52-027, NRC License No. NPF-94, Docket No. 52-028, and NRC License No. NPF-126, Docket No. 50-395 from SCANA to Dominion Energy as required by Section 184 of the Atomic Energy Act and the NRC’s implementing regulations in 10 C.F.R. 50.80. On January 25, 2018, Dominion Energy and SCANA filed an application requesting that NRC issue an order consenting to the indirect transfer of control of the licenses. There is no guarantee that the NRC will consent to the indirect transfer of control or that it will not impose conditions on its consent that are unacceptable to either Dominion Energy or SCANA. On March 8, 2018, NRC published a Notice regarding the proposed license transfer in the Federal Register and provided an opportunity for interested parties to request a hearing or submit written comments. The NRC’s records indicate that no timely requests for hearing or comments were submitted to the NRC, and the NRC staff’s review continues. In the meantime, the State of South Carolina and the State of Tennessee have issued their required consents to the indirect transfer of control of certain other related licenses.

FCC Approval

Under FCC regulations implementing provisions of the Communications Act of 1934, as amended, an entity holding private radio licenses for internal communications purposes generally must obtain the approval of the FCC before the direct or indirect transfer of control or assignment of those licenses. SCANA and certain SCANA subsidiaries hold FCC licenses for private internal communications and, thus, must obtain prior FCC approval to assign or transfer direct or indirect control of those licenses. Once the FCC has consented to the transfer of control, the parties have 180 days to complete the merger. If the merger does not close within 180 days of receiving FCC consent, the parties can request an extension of time to complete the transaction. The FCC customarily grants extension requests of this nature. There is no guarantee that the FCC will consent to the transfer of control or that it will not impose conditions on its consent that are unacceptable to either Dominion Energy or SCANA. While the FCC’s consent or a work-around agreement is required in connection with the transaction, if the licenses are to be maintained post-closing, the parties have not made such consents or work-around a formal condition to closing.

Three transfer of control applications were filed with the FCC on February 2, 2018. All of the applications have been consented to by the FCC. The application pertaining to PSNC was consented to on February 6, 2018. The application pertaining to SCE&G was consented to on February 21, 2018. The application pertaining to SCANA’s subsidiary SCANA Services, Inc. was consented to on March 8, 2018. In all cases, the transferor is SCANA and the transferee is Dominion Energy.

Material Contracts between SCANA and Dominion Energy

In December 2014, SCANA and Dominion Energy entered into a definitive agreement for the sale by SCANA of its subsidiary, Carolina Gas Transmission Corporation, to Dominion Energy for approximately $450 million. The sale was completed by the parties in January 2015.

Legislation Relating to the Merger

Following the announcement of the merger, the South Carolina General Assembly has considered legislation related to the merger. Three pieces of legislation are currently in conference committees having passed both Houses of the South Carolina General Assembly in different forms. The legislation is H.4375, S.954, and H.4950, the latter of which is the South Carolina 2017-2018 Budget Bill amended to include provisos related to the SCPSC petition. These bills include the following provisions, among others:

All three bills would require the SCPSC to hold a hearing on the SCPSC petition no earlier than November 1, 2018 and all three bills would require the SCPSC to issue a final order no later than December 21, 2018.

 

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Both S.954 and the House version of H.4375 direct the SCPSC to impose experimental rates on SCE&G that would reduce SCE&G’s lawfully approved revenue by approximately $37 million per month (H.4375) or $26 million per month (S.954). The bills require the SCPSC to impose the experimental rates either three or five days after enactment of the legislation and the experimental rates would remain in effect pending a final order on the SCPSC petition. S.954 further requires the SCPSC to review the experimental rates 30 business days after they are imposed and allows the SCPSC to adjust the rate to the minimum degree necessary to ensure that SCE&G does not become insolvent as a result. Both S.954 and H.4375 and the provisos to H. 4950 redefine the terms “prudent” and “prudency,” require a consideration of prior acts in determining the prudency of later acts, and ascribe any lack of prudency by contractors or subcontractors to the utility. In other respects, the definitions are divergent between S.954 and H.4375 and the other bill or versions of bills.

The South Carolina General Assembly has adjourned, but will reconvene in late June 2018, and may consider a conference committee report on this legislation or other legislation. In addition, the adjournment resolution adopted by the South Carolina General Assembly allows the leadership of the House of Representatives or Senate to reconvene those bodies to consider matters related to the NND project which could include new or additional legislation.

If this legislation becomes law, it is possible that Dominion Energy would not be obligated to complete the merger if Dominion Energy reasonably determines that the legislation has or would reasonably be expected to have an adverse effect on SCANA or any of its subsidiaries. It is also possible that the SCPSC may not take action on matters that are required to satisfy Dominion Energy’s conditions to closing under the merger agreement until December 21, 2018, and Dominion Energy would not be obligated to complete the merger until such conditions are satisfied.

Litigation Relating to the Merger

Following the announcement of the merger, four lawsuits have been filed asserting claims relating to the merger. First, on January 12, 2018, a pre-existing shareholder derivative action filed purportedly on behalf of nominal defendant SCANA was amended to assert putative class action claims on behalf of SCANA shareholders in the Court of Common Pleas of the County of Richland, South Carolina: Firemen’s Retirement System of St. Louis v. Addison, et al., 2017-CP-400-7547. This lawsuit asserts claims against certain current and former officers of SCANA and members of the SCANA board for breach of fiduciary duties, waste of corporate assets, and unjust enrichment, and against Dominion Energy and Merger Sub for aiding and abetting the alleged breaches of fiduciary duties. The second and third lawsuits are two putative class actions on behalf of SCANA shareholders which have been filed in the Court of Common Pleas of the Counties of Lexington and Richland, South Carolina, respectively: City of Warren Police and Fire Retirement System v. SCANA Corporation, et al., 2018-CP-320-0268, filed January 23, 2018, and Metzler Asset Management GmbH and Joseph Heinz v. Aliff, et al., 2018-CP-400-0816, filed February 8, 2018. The second lawsuit asserts claims against an officer of SCANA and certain members of the SCANA board for breach of fiduciary duties in connection with the merger, and against SCANA, Dominion Energy and Merger Sub for aiding and abetting the alleged breaches. The third lawsuit asserts claims against certain members of the SCANA board for breach of fiduciary duties in connection with the merger, and against Dominion Energy and Merger Sub for aiding and abetting the alleged breaches. These three lawsuits were removed by Dominion Energy to the United States District Court for the District of South Carolina. The plaintiffs in the first two lawsuits have filed motions to remand those cases back to state court. Collectively, these three lawsuits allege, among other things, that the individual defendants breached their fiduciary duties by creating a false impression to investors and state regulators that the NND project was running smoothly within a reasonable budget and on schedule to increase their compensation and maintain their positions, which has exposed SCANA to billions of dollars in costs and damages in connection with numerous civil and criminal proceedings. The lawsuits also allege that the merger is designed to unlawfully divest SCANA shareholders of their holdings without providing them the maximized value to which they are entitled and without adequate information to evaluate the transaction. Specifically, these plaintiffs allege that the individual defendants were motivated to approve the merger for an inadequate price for the purpose of extinguishing the standing of SCANA shareholders to pursue the derivative claims asserted against the individual defendants in the derivative actions (as described in the section entitled “—Other Legal Proceedings” beginning on page 74 of this

 

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proxy statement/prospectus) to avoid personal liability, and because they will receive significant personal financial benefits in the merger not shared by other SCANA shareholders. The lawsuits also allege that the consideration proposed in the merger fails to adequately account for and value the derivative claims asserted in the derivative actions against the individual defendants that Dominion Energy will acquire in the merger, and that, because Dominion Energy has agreed to indemnify the individual defendants in the merger agreement, it is unlikely that Dominion Energy will pursue these claims if the merger is consummated. The lawsuits also allege that the merger is unfair to SCANA shareholders because if SCANA were offered the same rate settlement terms that Dominion Energy is proposing in connection with the transaction, SCANA’s stock price would increase substantially above the value of the merger consideration. The lawsuits also allege that the merger was the result of a flawed process and self-dealing, that the merger consideration was insufficient and that certain provisions of the merger agreement might dissuade an alternative bidder from surfacing. The lawsuits seek to enjoin the merger and rescind the merger agreement. In addition, the second and third lawsuits seek in the alternative, should the merger be completed, an award of unspecified monetary damages. The fourth lawsuit is a complaint for violations of federal securities laws filed on March 15, 2018, by an alleged SCANA shareholder in the United States District Court for the District of South Carolina: Turner v. Addison, et al., 3:18-cv-728-MBS. This lawsuit asserts a claim for violation of Section 14(a) of the Exchange Act against SCANA and the SCANA board, a claim for violation of Section 20(a) of the Exchange Act against the SCANA board, and a claim for aiding and abetting against Dominion Energy and Merger Sub. The claims arise out of alleged misstatements and omissions in the Form S-4 containing a preliminary proxy statement of SCANA filed on February 14, 2018. Plaintiff seeks an order requiring defendants to disclose the alleged omitted or misrepresented information and/or an injunction to prevent consummation of the merger unless and until the alleged omitted or misrepresented information is disclosed.

Other Legal Proceedings

Certain lawsuits and regulatory actions have been filed against SCANA and SCE&G in connection with the abandonment of the NND project. If the relief requested in these matters (including a request for declaratory judgment that the BLRA is unconstitutional) is granted, Dominion Energy might not be obligated to complete the merger.

Further, several identical or substantially similar derivative actions have been filed in South Carolina state and federal court on behalf of SCANA by putative shareholders of SCANA in connection with the NND project: In re SCANA Corporation Derivative Litigation, Consol. C.A. No. 3:17-cv-03166-MBS (D.S.C.) (consolidated complaint filed January 30, 2018), Crangle v. Marsh, et al., C.A. No. 2017-CP-40-05791 (S.C. Ct. Comm. Pl., Richland Cty.) (filed September 26, 2017), Firemen’s Retirement System of St. Louis v. Addison, et al., C.A. No. 2017-CP-400-7547 (S.C. Ct. Comm. Pl., Richland Cty.) (filed December 13, 2017), subsequently removed to the United States District Court for the District of South Carolina, C.A. No. 3:18-cv-00501-MBS (D.S.C.), and Todd v. Marsh, et al., C.A. No. 2017-CP-40-006621 (S.C. Ct. Comm. Pl., Richland Cty.) (filed October 30, 2017), which we refer to collectively as the derivative actions. The plaintiffs in the derivative actions seek to assert claims derivatively on behalf of SCANA pursuant to Section 33-7-400 of the SCBCA against certain current and former SCANA directors and officers for breach of fiduciary duty, gross mismanagement, waste of corporate assets, and/or unjust enrichment arising out of the oversight, management, and abandonment of the construction of the NND project. The plaintiffs in the derivative actions allege, among other things, that SCANA’s management failed to manage the NND project, that the SCANA board failed to hold management accountable for its purported failure to manage the NND project, and that the SCANA board and SCANA’s management caused or allowed SCANA to make false and misleading statements regarding the NND project to investors. The plaintiffs in the derivative actions seek, among other things, to hold the individual defendants personally liable for the losses suffered by SCANA in connection with the abandonment of the NND project.

In the event the merger is completed, the underlying claims of SCANA asserted in the derivative actions would survive but control of the claims would transfer from SCANA to Dominion Energy. Consequently, for purposes of voting on the merger, SCANA shareholders should assume that the plaintiffs in the pending

 

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derivative actions would lose their standing as SCANA shareholders to continue pursuing the derivative claims in those suits. If the derivative claims underlying the derivative actions are not resolved prior to the effective time of the merger, the Dominion Energy board may have the opportunity to determine whether it is in the best interest of Dominion Energy to pursue those claims. Additionally, Dominion Energy shareholders, including current SCANA shareholders who become Dominion Energy shareholders through the merger, may make a demand on the Dominion Energy board to pursue those claims derivatively. Whether any such demand will result in Dominion Energy pursuing such claims, or if not, whether Dominion Energy shareholders would thereafter choose to pursue such claims as so-called double derivative claims, is not known. Any recovery by Dominion Energy after the effective time of the merger may be substantially or completely offset by the obligation of Dominion Energy under the merger agreement to indemnify, and to cause SCANA to honor its obligations to indemnify, directors and officers of SCANA for liabilities relating to their service prior to the effective time. See the section entitled “—Interests of SCANA’s Directors and Executive Officers in the Merger— Director and Officer Indemnification” beginning on page 79 of this proxy statement/prospectus. Thus, if the claims are not resolved prior to the effective time of the merger, it is possible that they will not be pursued, despite the assertion by the plaintiffs in the derivative actions that such claims have substantial value to SCANA.

As has been previously disclosed in SCANA’S Form 10-K for the year ended December 31, 2017 and Form 10-Q for the quarter ended March 31, 2018, for each of SCANA and SCE&G, on January 26, 2018, the South Carolina Department of Revenue, which we refer to as the SC DOR, notified SCE&G that it was initiating an audit of SCE&G’s sales and use tax returns for the period September 1, 2008 through December 31, 2017. SCANA and SCE&G understand that the SC DOR’s position is that the exemption for sales and use tax for purchases related to the NND project should not apply because Unit 2 and Unit 3 will not be placed into service and no electricity will be manufactured for sale. On June 1, 2018, SCE&G received via email from the SC DOR a notice of proposed assessment arising from that audit of approximately $410 million plus interest, along with a transmittal / explanation of that proposed assessment. SCE&G intends to appeal the proposed assessment.

Exchange of Shares in the Merger

For a description of the exchange and payment procedures with respect to the shares of SCANA common stock under the merger agreement, please see the section entitled The Merger Agreement—Exchange and Payment Procedures beginning on page 90 of this proxy statement/prospectus.

Interests of SCANA’s Directors and Executive Officers in the Merger

In considering the SCANA board’s recommendation that you vote to approve the merger, you should be aware that SCANA’s directors and executive officers have economic interests in the merger that are different from, and in addition to, those of SCANA’s shareholders generally. These interests, which may create actual or potential conflicts of interests, are, to the extent material, described below. The SCANA board was aware of and considered these interests, among other matters, in evaluating and negotiating the merger agreement, in reaching its decision to approve the merger agreement, and in recommending to SCANA’s shareholders that the merger agreement be approved. For the purposes of the SCANA plans and agreements described below, the completion of the transactions contemplated by the merger agreement will constitute a change in control of SCANA.

Allegations of Class Action Suits

The directors and officers of SCANA are also alleged to have certain interests in the transaction as described in the section entitled “—Litigation Relating to the Merger” beginning on page 73 of this proxy statement/ prospectus.

Equity Compensation

Pursuant to the merger agreement, upon completion of the merger, each performance share award and restricted stock unit award will be cancelled in exchange for a cash payment, as described below. The payment

 

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shall be made as soon as reasonably practicable after the effective time of the merger, but in any event within three business days thereafter; provided, however, that any performance share awards and restricted stock unit awards that are subject to Section 409A of the Code shall be paid at the earliest time permitted under, and in accordance with, the terms of the applicable award agreements and relevant documents and in accordance with Section 409A of the Code.

Treatment of Performance Share Awards

At the effective time of the merger, each performance share award that is outstanding immediately prior to the effective time of the merger will fully vest at the target level of performance and shall be cancelled and converted automatically into the right to receive the following in respect of each share of SCANA common stock underlying such performance share award: (i) the merger consideration multiplied by (ii) the average price, in cash and without interest (we refer to the product of clauses (i) and (ii) in this sentence as the equity award consideration).

Treatment of Restricted Stock Units

At the effective time of the merger, each restricted stock unit award that is outstanding immediately prior to the effective time of the merger will fully vest and be cancelled and converted automatically into the right to receive the equity award consideration in respect of each share of SCANA common stock underlying such restricted stock unit award.

Treatment of Deferred Units

At the effective time of the merger, each deferred unit in respect of SCANA common stock credited or deemed credited to the SCANA stock ledger under the SCANA Director Compensation and Deferral Plan or the SCANA Executive Deferred Compensation Plan that is outstanding immediately prior to the effective time of the merger shall be converted automatically into a number of deferred units in respect of Dominion Energy common stock equal to the product of (i) the deferred unit, multiplied by (ii) the merger consideration, to be payable pursuant to the terms of the applicable plan.

Payments under the Supplementary Key Executive Severance Benefits Plan

The SCANA Corporation Supplementary Key Executive Severance Benefits Plan, which we refer to as the Supplementary Severance Plan, provides for payments to SCANA’s senior executive officers if, within 24 months after a change in control of SCANA, a senior executive officer’s employment is terminated without “just cause” or the senior executive officer terminates his or her employment for “good reason.”

Under the Supplementary Severance Plan, SCANA would be deemed to have “just cause” for terminating the employment of a senior executive officer if he or she: (i) willfully and continually failed to substantially perform his or her duties after SCANA made demand for substantial performance; (ii) willfully engaged in conduct that is demonstrably and materially injurious to SCANA; or (iii) were convicted of a felony or certain misdemeanors.

A senior executive officer would be deemed to have “good reason” for terminating his or her employment under the Supplementary Severance Plan if, after a change in control, without his or her consent, any one or more of the following occurred: (i) a material diminution in his or her base salary; (ii) a material diminution in his or her authority, duties, or responsibilities; (iii) a material diminution in the authority, duties, or responsibilities of the supervisor to whom he or she is required to report, including a requirement that he or she report to one of our officers or employees instead of reporting directly to the SCANA board; (iv) a material diminution in the budget over which he or she retains authority; (v) a material change in the geographic location at which he or she must perform services; or (vi) any other action or inaction that constitutes a material breach by SCANA of the agreement under which he or she provides services.

 

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In the event of such a termination, the Supplementary Severance Plan entitles participants to the following payments and benefits:

 

    an amount intended to approximate 2.5 times the sum of: (i) his or her annual base salary (before reduction for certain pre-tax deferrals) in effect as of the change in control, plus (ii) his or her full targeted annual incentive opportunity in effect as of the change in control;

 

    an amount equal to the participant’s full targeted annual incentive opportunity in effect under each existing annual incentive plan or program for the year in which the change in control occurs;

 

    if the participant’s benefit under the SCANA Corporation Supplemental Executive Retirement Plan, which we refer to as the SERP, is determined using the final average pay formula under the SCANA Corporation Retirement Plan, which we refer to as the Retirement Plan, an amount equal to the present lump sum value of the actuarial equivalent of his or her accrued benefit under the Retirement Plan and the SERP through the date of the change in control, calculated as though he or she had attained age 65 and completed 35 years of benefit service as of the date of the change in control, and as if his or her final average earnings under the Retirement Plan equaled the amount determined after applying cost-of-living increases to his or her annual base salary from the date of the change in control until the date he or she would reach age 65, and without regard to any early retirement or other actuarial reductions otherwise provided in any such plan (this benefit will be offset by the actuarial equivalent of the participant’s benefit provided by the Retirement Plan and the participant’s benefit under the SERP);

 

    if the participant’s benefit under the SERP is determined using the cash balance formula under the Retirement Plan, an amount equal to the present value as of the date of the change in control of his or her accrued benefit, if any, under the SERP, determined prior to any offset for amounts payable under the Retirement Plan, increased by the present value of the additional projected pay credits and periodic interest credits that would otherwise accrue under the Retirement Plan (based on the Retirement Plan’s actuarial assumptions), assuming that he or she remained employed until reaching age 65, and reduced by his or her cash balance account under the Retirement Plan, and further reduced by an amount equal to his or her benefit under the SERP;

 

    an amount equal to the value of all amounts credited to each participant’s SCANA Corporation Executive Deferred Compensation Plan, which we refer to as the EDCP, ledger account as of the date of the change in control, plus interest on the benefits payable under the EDCP at a rate equal to the sum of the prime interest rate as published in the Wall Street Journal on the most recent publication date prior to the date of the change in control plus 3%, calculated through the end of the month preceding the month in which the benefits are distributed, reduced by the value of his or her benefit under the EDCP as of the date of the change in control; and

 

    an amount equal to the projected cost for medical, long-term disability and certain life insurance coverage for three years following the change in control as though he or she had continued to be a SCANA employee.

Pursuant to the merger agreement, with respect to Mr. Addison, Mr. Kissam and Ms. Griffin, if any such executive’s salary has not been adjusted to at least the low point of SCANA’s pre-established salary range for his or her applicable pay grade which pay grade was adjusted in respect of recent promotions, benefits under the Supplementary Severance Plan will be provided to such executive as if such executive’s salary had been adjusted to the low point. The low point of the salary range represents a salary at 85% of the midpoint of the range for an executive’s applicable pay grade. Ms. Griffin’s salary has since been adjusted to above the low point of SCANA’s pre-established salary range for her applicable pay grade.

In addition to the benefits above (unless their agreements with SCANA provide otherwise), participants in the Supplementary Severance Plan are entitled to benefit distribution under the Long-Term Equity Compensation Plan equal to 100% of the target awards for all performance periods not completed as of the date of the change in control, if any; however, the treatment of equity awards is prescribed under the merger agreement and further

 

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described under the section entitled “—Interests of SCANA’s Directors and Executive Officers in the Merger—Equity Compensation” beginning on page 75 of this proxy statement/prospectus. Participants in the Supplementary Severance Plan are also be entitled to any amounts previously earned, but not yet paid, under the terms of any of SCANA’s other plans or programs.

Retirement Benefits

Supplemental Executive Retirement Plan

The SERP is an unfunded nonqualified defined benefit plan that was established for the purpose of providing supplemental retirement income to certain SCANA employees, including the executive officers. Subject to the terms of the SERP, a participant becomes eligible to receive benefits under the SERP upon termination of his or her employment with SCANA (or at such later date as may be provided in a participant’s agreement), if the participant has become vested in his or her accrued benefit under the Retirement Plan prior to termination of employment. However, if a participant is involuntarily terminated following or incident to a change in control and prior to becoming fully vested in his or her accrued benefit under the Retirement Plan, the participant will automatically become fully vested in his or her benefit under the SERP and a benefit will be payable under the SERP.

Executive Deferred Compensation Plan

The EDCP is a nonqualified deferred compensation plan in which SCANA’s executive officers, including the named executive officers, and SCANA’s directors, may participate. Amounts deferred under the EDCP are required to be paid, or begin to be paid, as soon as practicable following the earliest of a participant’s death, separation from service, or with respect to pre-2005 deferrals and hypothetical earnings thereon, disability.

Director Deferred Compensation

The Director Compensation and Deferral Plan, which we refer to as the DCDP, is a nonqualified deferred compensation plan pursuant to which SCANA’s non-employee directors may defer annual stock and cash retainer fees. Amounts are generally paid, or begin to be paid, on a separation from service from the SCANA board for any reason or a date certain previously elected by the director (and subject to the ability to make subsequent deferrals pursuant to the terms set forth in the DCDP). In addition, one director has an account balance under the Voluntary Deferral Plan, a nonqualified deferred compensation plan that was closed effective January 1, 2001, which account balance will generally be paid, or begin to be paid, upon separation from service from the SCANA board for any reason (and subject to the ability to make subsequent deferrals pursuant to the terms set forth in the Voluntary Deferral Plan).

Director Endowment Plan

The SCANA Director Endowment Plan, which was closed to new participants effective January 1, 2013, provides for SCANA to make tax deductible, charitable contributions totaling $500,000 per eligible director to institutions of higher education designated by the applicable director. A portion is contributed upon retirement of the director and the remainder upon the director’s death.

Agreements with Dominion Energy

As of the date of this proxy statement/prospectus, none of the SCANA executive officers has entered into any agreement with Dominion Energy or any of its affiliates regarding employment with, or the right to purchase or participate in the equity of, Dominion Energy or one or more of its affiliates. Prior to or following the closing of the merger, however, some or all of the SCANA executive officers may discuss or enter into agreements with Dominion Energy or any of its affiliates regarding employment with, or the right to purchase or participate in the

 

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equity of, Dominion Energy or one or more of its affiliates. For information on Dominion Energy’s directors and management after the merger, please see the section entitled “—Directors and Management of Dominion Energy After the Merger” beginning on page 66 of this proxy statement/prospectus.

Director and Officer Indemnification

Under the merger agreement, after the effective time of the merger, the SCANA directors and officers are entitled to indemnification and insurance coverage relating to their service as SCANA directors and officers prior to the effective time of the merger. For a more complete description, please see the section entitled “The Merger Agreement—Indemnification and Insurance” beginning on page 108 of this proxy statement/prospectus.

Potential Payments upon a Termination in Connection with a Change in Control

In accordance with Item 402(t) of Regulation S-K under the Securities Act, the table below sets forth the estimated amounts of compensation that are based on or otherwise relate to the merger and that may be payable to those individuals who were listed in the “Summary Compensation Table” that was set out in SCANA’s most recent securities filing for which disclosure was required under Item 402(c) of Regulation S-K under the Securities Act other than executive officers who ceased to be employed by SCANA during 2017 but including Ms. Griffin, who became Chief Financial Officer of SCANA effective January 1, 2018. We refer to these individuals as the “named executive officers.” Similar information for SCANA’s other current executive officers as a group is also included in the table below.

Please see the section entitled “—Interests of SCANA’s Directors and Executive Officers in the Merger” beginning on page 75 of this proxy statement/prospectus for further information about the compensation disclosed in the table below. The amounts shown in the table below are estimates based on multiple assumptions that may or may not actually occur or be accurate on the relevant date, including the assumptions described below and in the footnotes to the table. For purposes of calculating the amounts set forth below, the salary of each of Mr. Addison and Mr. Kissam has been assumed to be adjusted to the low point of the pre-established salary range for his applicable pay grade (which pay grade was adjusted in respect of recent promotions). The amounts in the table do not otherwise reflect certain compensation actions that may occur before completion of the merger, including certain compensation actions that SCANA is permitted to take prior to the completion of the merger, as described in the section entitled “The Merger Agreement—Conduct of Business” beginning on page 105 of this proxy statement/prospectus. For purposes of calculating such amounts, the following additional assumptions were used:

 

    the relevant price per share of SCANA common stock is $45.19, which is the average closing price of a share of SCANA common stock over the first five business days following the first public announcement of the merger agreement;

 

    the effective time of the merger is October 31, 2018, which is the assumed date of completion of the merger solely for purposes of the disclosure in this section; and

 

    the employment of each executive officer of SCANA will have been terminated by Dominion Energy without cause or due to the executive officer’s resignation for good reason, as such terms are defined in the relevant plans and agreements, in either case following the assumed effective time of the merger on October 31, 2018.

 

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Merger-Related Compensation

 

Named Executive Officer   Cash ($)(1)     Equity($)(2)     Pension/NQDC
        ($)(3)         
    Perquisites/
Benefits($)
    Tax
Reimbursement
($)
    Other ($)     Total ($)  

K. B. Marsh(4)

  $ 0     $ 3,058,911     $ 0     $         0     $         0     $         0     $ 3,058,911  

J. E. Addison

  $ 5,297,314     $ 3,599,065     $ 821,648     $ 0     $ 0     $ 0     $ 9,718,027  

S. A. Byrne(4)

  $ 0     $ 1,111,410     $ 0     $ 0     $ 0     $ 0     $ 1,111,410  

W. K. Kissam

  $ 2,369,140     $ 1,343,380     $ 334,939     $ 0     $ 0     $ 0     $ 4,047,459  

J. B. Archie

  $ 1,830,563     $ 1,152,695     $ 218,108     $ 0     $ 0     $ 0     $ 3,201,366  

I. N. Griffin

  $ 2,000,089     $ 756,911     $ 253,758     $ 0     $ 0     $ 0     $ 3,010,758  

 

Other Executive Officers   Cash ($)(1)     Equity($)(2)     Pension/NQDC
        ($)(3)         
    Perquisites/
Benefits($)
    Tax
Reimbursement
($)
    Other ($)     Total ($)  

Aggregate for other executive officers (five individuals)

  $ 8,556,815     $ 4,809,643     $ 962,359     $         0     $             0     $         0     $ 14,328,817  

 

(1) Cash. The amounts listed in this column consist of (a) an amount equal to 2.5 times the sum of base salary and target short-term incentive award, (b) an amount equal to the full target annual incentive opportunity for the year in which the merger occurs, and (c) an amount equal to the projected cost for insurance benefits for three years. All such benefits are “double trigger” and are provided only on a termination without just cause or resignation for good reason during the period within 24 months after a change in control of SCANA. For further details, see the section entitled “—Interests of SCANA’s Directors and Executive Officers in the Merger—Payments under the Supplementary Key Executive Severance Benefits Plan” beginning on page 76 of this proxy statement/prospectus. Messrs. Marsh and Byrne retired effective January 1, 2018 and are not eligible for any severance as a result of the merger.

 

Named Executive Officer    Severance      Target Bonus      Amount Related to
Benefits
     Total  

K. B. Marsh

   $ 0      $ 0      $ 0      $ 0  

J. E. Addison

   $ 4,395,223      $ 832,779      $ 69,312      $ 5,297,314  

S. A. Byrne

   $ 0      $ 0      $ 0      $ 0  

W. K. Kissam

   $ 1,968,410      $ 310,174      $ 90,556      $ 2,369,140  

J. B. Archie

   $ 1,545,714      $ 219,392      $ 65,457      $ 1,830,563  

I. N. Griffin

   $ 1,668,752      $ 250,313      $ 81,024      $ 2,000,089  

 

Other Executive Officers    Severance      Target Bonus      Amount Related to
Benefits
     Total  

Aggregate for other executive officers (five individuals)

   $ 7,175,645      $ 1,011,249      $ 369,921      $ 8,556,815  

 

(2) Equity. Consists of (a) unvested performance share awards and (b) unvested restricted stock units (each including dividend equivalents) that will become vested at the effective time of the merger and paid out in cash as described above pursuant to the merger agreement. Pursuant to the merger agreement, all such benefits are “single trigger.” For Messrs. Marsh and Byrne, only a pro rata portion of the performance shares (relating to the period during which each was employed) is included pursuant to the terms of their award agreements. For further details regarding the treatment of SCANA equity awards in connection with the merger, see the section entitled “—Interests of SCANA’s Directors and Executive Officers in the Merger—Equity Compensation” beginning on page 75 of this proxy statement/prospectus.

 

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Named Executive Officer    Performance
Share Awards
     Restricted Stock
Units
     Total  

K. B. Marsh

   $ 1,622,177      $ 1,436,734      $ 3,058,911  

J. E. Addison

   $ 2,446,280      $ 1,152,785      $ 3,599,065  

S. A. Byrne

   $ 589,376      $ 522,034      $ 1,111,410  

W. K. Kissam

   $ 913,571      $ 429,809      $ 1,343,380  

J. B. Archie

   $ 786,643      $ 366,052      $ 1,152,695  

I. N. Griffin

   $ 508,614      $ 248,297      $ 756,911  

 

Other Executive Officers    Performance
Share Awards
     Restricted Stock
Units
     Total  

Aggregate for other executive officers (five individuals)

   $ 3,277,657      $ 1,531,986      $ 4,809,643  

 

(3) Pension/Non-Qualified Deferred Compensation. Consists of increased payments pursuant to the EDCP, (with interest as provided under the Supplementary Severance Plan), and the SERP (including the excess payable as provided under the Supplementary Severance Plan). All such benefits are “double trigger.” For further details, see the section entitled “—Interests of SCANA’s Directors and Executive Officers in the Merger” beginning on page 75 of this proxy statement/prospectus. Messrs. Marsh and Byrne retired effective January 1, 2018 and are not eligible for any pension/non-qualified deferred compensation benefit as a result of the merger.

 

(4) Messrs. Marsh and Byrne retired effective January 1, 2018.

Dividends

SCANA paid a dividend for the quarter ended March 31, 2018 of $0.6125 per share and has agreed in the merger agreement that it will not pay a quarterly dividend of more than that amount prior to the completion of the merger without Dominion Energy’s prior written consent. As previously publicly announced by SCANA, the SCANA board has deferred a decision on whether to pay a dividend for the quarter ending June 30, 2018. The decision to pay a dividend for the quarter ending June 30, 2018 and for any period thereafter, and the amount of any future dividend, will be made by the SCANA board based on many factors, including SCANA’s financial, regulatory and other circumstances at the time the decision is made. Dominion Energy currently pays a quarterly dividend of $0.835 per share. Following the closing of the merger, Dominion Energy expects to continue its current dividend for shareholders of the combined company, subject to any factors that the Dominion Energy board in its discretion deems relevant. For additional information on the treatment of dividends under the merger agreement, see the section entitled “The Merger Agreement—Conduct of Business” beginning on page 105 of this proxy statement/prospectus.

Listing of Dominion Energy Common Stock

Shares of Dominion Energy common stock currently trade on the NYSE under the stock symbol “D.” It is a condition to the completion of the merger that Dominion Energy common stock issuable in the merger be approved for listing on the NYSE, subject to official notice of issuance. Dominion Energy has agreed to use its reasonable best efforts to cause Dominion Energy common stock issuable in connection with the merger to be approved for listing on the NYSE and expects to obtain NYSE’s approval to list such shares prior to completion of the merger, subject to official notice of issuance.

Delisting and Deregistration of SCANA Common Stock

Shares of SCANA common stock currently trade on the NYSE under the stock symbol “SCG.” SCANA has agreed pursuant to the merger agreement to cooperate with Dominion Energy to use its reasonable best efforts to take all actions, and do or cause to be done all things, reasonably necessary, proper or advisable on its part under

 

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applicable laws and rules and regulations of the NYSE to enable the delisting of SCANA common stock from the NYSE and deregistration of SCANA common stock under the Exchange Act as promptly as practicable after the effective time of the merger.

Certain Forecasts Prepared by SCANA’s Management

While SCANA provides public earnings guidance from time to time, SCANA does not as a matter of course publicly disclose other financial forecasts as to future earnings or financial performance or results because of, among other reasons, the uncertainty underlying assumptions and estimates. However, SCANA’s management prepared and provided the SCANA board with certain non-public financial forecasts in connection with the SCANA board’s consideration and evaluation of a possible merger with Dominion Energy. As described below, certain of these financial forecasts were also provided to SCANA’s financial advisors, Morgan Stanley and RBC Capital Markets, for their use and reliance in connection with their respective financial analyses and opinions summarized in “—Opinions of SCANA’s Financial Advisors” beginning on page 48 of this proxy statement/prospectus. In addition, as described below, certain of these financial forecasts were provided to Dominion Energy and its advisors in connection with the proposed transaction.

Neither SCANA’s independent auditors nor any other independent accountants have compiled, examined, or performed any procedures with respect to the prospective financial information contained herein, nor have they expressed any opinion or any other form of assurance on such information or its achievability, and assume no responsibility for, and disclaim any association with, the prospective financial information. Further, the report of SCANA’s independent auditors included in this proxy statement/prospectus relates to SCANA’s historical financial information. It does not extend to prospective financial information and should not be read to do so.

SCANA has included a summary of these financial forecasts to give SCANA shareholders access to certain non-public information made available to the SCANA board, SCANA’s advisors, and Dominion Energy and its advisors in connection with the proposed transaction with Dominion Energy. SCANA has not included these financial forecasts to influence the decision of the SCANA shareholders as to whether to vote for or against the merger proposal.

The inclusion of this information should not be regarded as an indication that SCANA, Dominion Energy or any of their respective affiliates, directors, officers, employees, agents, advisors or other representatives considered, or now considers, such financial forecasts to be material or to be necessarily predictive of actual future results, and readers are cautioned not to place undue reliance on this information.

The financial forecasts have been prepared by, and are the responsibility of, SCANA’s management. SCANA’s management believes that the financial forecasts were prepared in good faith and on a reasonable basis based on the best information available to SCANA’s management when prepared. The financial forecasts were not prepared with a view toward complying with GAAP, the published guidelines of the SEC regarding projections and the use of non-GAAP measures, or the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of prospective financial information.

The financial forecasts include non-GAAP financial measures, which were presented because SCANA’s management believed they could be useful indicators of SCANA’s projected future operating performance and cash flow. However, non-GAAP measures presented in the financial forecasts may not be comparable to similarly titled measures of other companies.

The financial forecasts prepared by SCANA’s management were prepared for SCANA’s internal use and not with a view toward public disclosure and are subjective in many respects. As a result, there can be no assurance that the prospective earnings or financial performance or results set forth in the financial forecasts will be realized or that actual future results will not be significantly higher or lower than estimated. These financial forecasts were based on numerous variables, which are inherently uncertain and may be beyond SCANA’s control. Since the financial forecasts cover multiple years, by their nature, they become subject to greater uncertainty with each successive year.

 

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Important factors that may affect actual results and cause these financial forecasts not to be achieved include, but are not limited to, risks and uncertainties relating to SCANA’s business, regulatory decisions and the regulatory environment generally, changes in applicable laws, general business and economic conditions, the occurrence of unusual weather events, and other factors described or referenced under “Cautionary Statement Regarding Forward-Looking Statements” beginning on page 26 of this proxy statement/prospectus.

In addition, financial forecasts also reflect assumptions that are subject to change and do not reflect revised prospects for our business, changes in applicable laws or regulations, changes in general business or economic conditions or any other transaction or event that has occurred or that may occur subsequent to the time the financial forecasts were prepared and that was not anticipated at the time the financial forecasts were prepared. The financial forecasts also do not take into account the merger or other transactions contemplated by the merger agreement or the effect of the failure of the merger to occur, and should not be viewed as necessarily indicative of actual or continuing results in that context.

Accordingly, there can be no assurance that the financial forecasts will be realized, and actual results may vary materially from those shown, including because of the risks and other factors described in the section entitled “Cautionary Statement Regarding Forward-Looking Statements” beginning on page 26 of this proxy statement/prospectus. None of SCANA, Dominion Energy or any of their respective affiliates, directors, officers, employees, agents, advisors or other representatives gives or can give any assurance that actual results will not differ from the financial forecasts, and none of SCANA, Dominion Energy or any of their respective affiliates, directors, employees, agents, advisors or other representatives undertakes any obligation to update or otherwise revise or reconcile the financial forecasts to reflect circumstances existing after the date the financial forecasts were generated or to reflect the occurrence of future events even in the event that any or all of the assumptions underlying the financial forecasts are shown not to be appropriate.

SCANA does not intend to make publicly available any update or other revision to the financial forecasts, except as otherwise required by law. None of SCANA, Dominion Energy or any of their respective affiliates, directors, officers, employees, agents, advisors or other representatives has made or makes any representation or warranty to any shareholder of SCANA or other person regarding the ultimate performance of SCANA compared to the information contained in the financial forecasts or that the financial forecasts will be achieved. The financial forecasts do not take into account any circumstances or events occurring after the date on which such forecasts were prepared.

Additional information relating to the principal assumptions used in preparing the projections is set forth below. See the section entitled “Risk Factors” beginning on page 17 of this proxy statement/prospectus for a discussion of various factors that could materially affect SCANA’s financial condition, results of operations, business, prospects and securities.

The financial forecasts were prepared based on SCANA’s management’s belief that it was preferable to seek a settlement that offered a comprehensive solution to the outstanding rate and regulatory issues relating to the abandoned NND project in order to resolve those issues rather than pursue an outcome that did not include such a settlement. In light of that context, SCANA’s management prepared financial forecasts (taking into account SCANA’s management’s views on the estimated anticipated effect of the U.S. tax reform enacted on December 22, 2017, referred to as the Tax Cuts and Jobs Act of 2017) under various settlement scenarios, each of which reflect the following material assumptions:

 

    A compound annual growth rate, which we refer to as CAGR, of revenues for SCANA’s gas business from FY2018E through FY2022E as follows:

 

    SCE&G: 4.5%;

 

    PSNC: 5.7%; and

 

    SEMI: 3.1%; and

 

    A CAGR of SCANA’s Operations and Maintenance growth from FY2018E through FY2022E of approximately 0.3%.

 

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The specific regulatory settlement scenarios prepared by SCANA’s management and focused on by the SCANA board in connection with the proposed transaction were a 5% regulatory settlement scenario and a 9.75% regulatory settlement scenario, which scenarios SCANA directed Morgan Stanley and RBC Capital Markets to use and rely upon for purposes of their respective financial analyses and opinions in connection with the proposed transaction without ascribing any relative weighting, probability or likelihood of success to either scenario. The financial forecasts under the 5% regulatory settlement scenario reflect circumstances under which SCE&G would provide a 5% reduction in electricity rates and an upfront cash refund to customers that would provide a higher benefit to customers than the publicly disclosed 3.5% regulatory settlement scenario (described below). The financial forecasts under the 9.75% regulatory settlement scenario reflect circumstances under which SCE&G would provide the largest reduction in electricity rates it could on a stand-alone basis while still maintaining an investment-grade credit rating for SCANA. Both the 5% and the 9.75% regulatory settlement scenarios assume that a portion of the invested capital from the NND project is written off and that SCE&G is able to recover the remaining portion of the invested capital. The following are the material assumptions for the 5% regulatory settlement scenario and the 9.75% regulatory settlement scenario:

 

    5% regulatory settlement scenario:

 

    SCE&G reduces its retail electricity rates by 5% from current levels, an aggregate discount of approximately $125 million per year;

 

    SCE&G writes-off approximately $697 million in assets;

 

    SCE&G provides its electric customers a one-time $500 million credit in 2018;

 

    SCANA repurchases approximately $300 million of its shares of common stock through 2022;

 

    SCE&G purchases a natural gas-fired power station for approximately $180 million in order to increase electricity generation, for which the acquisition cost will not be recovered from customers and only certain ongoing costs will be recovered in future base and fuel rates; and

 

    SCE&G absorbs through existing revenues approximately $3.0 billion in nuclear construction amortization costs over 50 years.

 

    9.75% regulatory settlement scenario:

 

    SCE&G reduces its retail electricity rates by 9.75% from current levels, an aggregate discount of approximately $233 million per year;

 

    SCE&G writes-off approximately $1.83 billion in assets;

 

    SCANA does not repurchase any of its shares of common stock;

 

    SCE&G purchases a natural gas fired power station for approximately $180 million in order to increase electricity generation, for which the acquisition cost will not be recovered from customers and only certain ongoing costs will be recovered in future base and fuel rates; and

 

    SCE&G absorbs through existing revenues approximately $1.9 billion in nuclear construction amortization costs over 50 years.

 

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The following is a summary of the financial forecasts prepared by SCANA’s management regarding SCANA for the fiscal years ending 2018 through 2022 under each of the 5% regulatory settlement scenario and the 9.75% regulatory settlement scenario:

5% Regulatory Settlement Scenario

 

     FY
2018E
    FY
2019E
     FY
2020E
     FY
2021E
     FY
2022E
 
     (in $ millions, except for per share data)  

Revenues

     3,908       4,512        4,577        4,693        4,845  

EBITDA

     997       1,471        1,514        1,593        1,649  

EBIT

     (324     972        1,004        1,054        1,102  

Net Income

     (510     480        505        550        594  

Weighted-Average Outstanding Shares

     142.9       142.9        142.9        141.9        139.9  

Earnings Per Share

   ($ 3.57   $ 3.36      $ 3.53      $ 3.87      $ 4.24  

Normalized Net Income(1)

     537       480        505        550        594  

Adjusted Earnings Per Share(1)

   $ 3.76     $ 3.36      $ 3.53      $ 3.87      $ 4.24  

Dividend Per Share

     2.45       2.43        2.43        2.43        2.58  

Capital Expenditures (including Other Investing)

     1,034       792        876        882        848  

 

(1) In FY2018E, excludes a net of tax write-off and one-time credit of approximately $1.04 billion in assets with an earnings per share impact of $7.33.

9.75% Regulatory Settlement Scenario

 

     FY
2018E
    FY
2019E
     FY
2020E
     FY
2021E
     FY
2022E
 
     (in $ millions, except for per share data)  

Revenues

     4,350       4,398        4,463        4,580        4,732  

EBITDA

     1,438       1,358        1,401        1,480        1,536  

EBIT

     (1,004     890        922        972        1,022  

Net Income

     (1,020     418        442        486        531  

Weighted-Average Outstanding Shares

     142.9       142.9        142.9        142.9        142.9  

Earnings Per Share

   ($ 7.13   $ 2.92      $ 3.09      $ 3.40      $ 3.71  

Normalized Net Income(1)

     510       418        442        486        531  

Adjusted Earnings Per Share(1)

   $ 3.57     $ 2.92      $ 3.09      $ 3.40      $ 3.71  

Dividend Per Share

     2.45       2.41        2.41        2.41        2.41  

Capital Expenditures (including Other Investing)

     1,034       792        876        882        848  

 

(1) In FY2018E, excludes a net of tax write-off of approximately $1.53 billion in assets with an earnings per share impact of $10.70.

In addition to the financial forecasts under the 5% regulatory settlement scenario and the 9.75% regulatory settlement scenario, SCANA’s management prepared and provided to the SCANA board and SCANA’s financial advisors for informational purposes financial forecasts under the following scenario, which reflects the following material assumptions:

 

    3.5% regulatory settlement scenario:

 

    SCE&G reduces its retail electricity rates by 3.5% from current levels, an aggregate discount of approximately $90 million per year;

 

    SCE&G writes-off approximately $330 million in assets (which, disregarding the effects of the Tax Cuts and Jobs Act of 2017, equates to a write-off of approximately $811 million in assets);

 

    SCANA repurchases approximately $650 million of its shares of common stock through 2022;

 

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    SCE&G purchases a natural gas fired power station for approximately $180 million in order to increase electricity generation, for which the acquisition cost will not be recovered from customers and only certain ongoing costs will be recovered in future base and fuel rates; and

 

    SCE&G absorbs through existing revenues on equity approximately $3.4 billion in nuclear construction amortization costs over 50 years (which, disregarding the effects of the Tax Cuts and Jobs Act of 2017, equates to approximately $2.9 billion in nuclear construction amortization costs over 50 years).

The terms of the 3.5% regulatory settlement scenario had been publicly proposed by SCANA on November 16, 2017. Based on the reaction from legislators and other stakeholders to the proposal, it quickly became clear that the terms of the 3.5% regulatory settlement scenario, in the view of SCANA’s management and the SCANA board, were not an acceptable solution to the rate and regulatory issues relating to the abandoned NND project. Accordingly, SCANA directed Morgan Stanley and RBC Capital Markets not to use and rely upon the financial forecasts under the 3.5% regulatory settlement scenario for purposes of their respective financial analyses and opinions in connection with the proposed transaction.

The financial forecasts under the 3.5% regulatory settlement scenario were provided to Dominion Energy and its advisors in connection with the proposed transaction. The financial forecasts under the 5% regulatory settlement scenario and the 9.75% regulatory settlement scenario were not provided to Dominion Energy or its advisors because, in the view of SCANA’s management, such financial forecasts were not relevant to Dominion Energy’s valuation of SCANA in light of the fact that they reflected scenarios considered by the management of SCANA, based on its judgment and the financial resources of SCANA as a standalone company, whereas any regulatory settlement ultimately proposed by Dominion Energy would reflect the judgments and strategy of Dominion Energy’s management and the financial resources of a much larger company (Dominion Energy) that would include SCANA.

The following is a summary of the financial forecasts prepared by SCANA’s management regarding SCANA for the fiscal years ending 2018 through 2022 under the 3.5% regulatory settlement scenario:

3.5% Regulatory Settlement Scenario

 

     FY
2018E
     FY
2019E
     FY
2020E
     FY
2021E
     FY
2022E
 
     (in $ millions, except for per share data)  

Revenues

     4,429        4,552        4,617        4,733        4,885  

EBITDA

     1,517        1,511        1,554        1,633        1,689  

EBIT

     562        1,014        1,045        1,093        1,139  

Net Income

     162        513        537        579        621  

Weighted-Average Outstanding Shares

     142.9        142.2        140.4        137.7        135.1  

Earnings Per Share

   $ 1.14      $ 3.61      $ 3.82      $ 4.21      $ 4.60  

Normalized Net Income(1)

     551        513        537        579        621  

Adjusted Earnings Per Share(1)

   $ 3.85      $ 3.61      $ 3.82      $ 4.21      $ 4.60  

Dividend Per Share

     2.48        2.51        2.66        2.89        3.13  

Capital Expenditures (including Other Investing)

     1,034        792        876        882        848  

 

(1) In FY2018E, excludes a net of tax write-off of approximately $389 million in assets with an earnings per share impact of $2.71.

None of the foregoing financial forecasts prepared by SCANA’s management included any adjustment to account for the potential value of possible claims asserted on behalf of SCANA against its current and former directors and officers for damages arising out of the NND project, including the claims asserted in the derivative actions, nor any adjustment to account for potential liabilities of SCANA from claims in current or future litigation against SCANA. In determining to recommend the merger, the SCANA board was aware that the

 

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financial forecasts prepared by SCANA’s management did not include any adjustment to account for the potential value of these claims, and the SCANA board did not attempt to value the claims asserted in the derivative actions or in any other current or future litigation against SCANA. Among the factors that made any meaningful and useful estimate of the value of the derivative claims impossible to perform were the early stage of the proceedings, the fact that SCANA’s liability for damages, if any, in the various regulatory and litigation proceedings referenced in the derivative actions arising out of the abandonment of the NND project has not been determined, the potential bar to recovery imposed by the provision in the SCANA charter limiting directors’ liability to SCANA for damages for breaches of the duty of care, the possible offset to any recovery imposed by SCANA’s indemnification obligations to its directors and officers, as well as potential exclusions under applicable insurance policies for other breaches of fiduciary duties and the potential erosion of the limits of liability under those policies for payment of other covered loss. In light of the above factors, the SCANA board does not believe that the magnitude of reasonably foreseeable recoverable amounts on the derivative claims is significant in relation to the overall magnitude of the transaction.

 

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THE MERGER AGREEMENT

The following summarizes material provisions of the merger agreement, which is attached as Annex A to this proxy statement/prospectus and is incorporated by reference herein. The rights and obligations of the parties are governed by the express terms and conditions of the merger agreement and not by this summary or any other information contained in this proxy statement/prospectus. SCANA shareholders are urged to read the merger agreement carefully and in its entirety as well as this proxy statement/prospectus before making any decisions regarding the merger.

In reviewing the merger agreement, please remember that it is included to provide you with information regarding its terms and is not intended to provide any other factual information about Dominion Energy or SCANA. The merger agreement contains representations and warranties by each of the parties to the merger agreement. These representations and warranties have been made solely for the benefit of the other parties to the merger agreement and:

 

    may be intended not as statements of fact, but rather as a way of allocating the risk to one of the parties if those statements prove to be inaccurate;

 

    have been qualified by certain confidential disclosures that were made to the other party in connection with the negotiation of the merger agreement, which disclosures are not reflected in the merger agreement;

 

    may apply standards of materiality in a way that is different from what may be viewed as material by you or other investors; and

 

    information concerning the subject matter of the representations, warranties and covenants may have changed after the date of the merger agreement.

Accordingly, the representations and warranties and other provisions of the merger agreement should not be read alone, but instead should be read together with the information provided elsewhere in this proxy statement/prospectus and in the documents incorporated by reference herein. See the section entitled “Where You Can Find More Information” beginning on page 141 of this proxy statement/prospectus.

Effects of the Merger

The merger agreement provides for the merger of Merger Sub with and into SCANA upon the terms and subject to the conditions set forth in the merger agreement and in accordance with the SCBCA. Upon completion of the merger, the separate corporate existence of Merger Sub will cease and SCANA will be the surviving corporation and a wholly owned subsidiary of Dominion Energy.

At the effective time of the merger:

 

    each share of SCANA common stock issued and outstanding immediately prior to the effective time of the merger (other than cancelled shares), whether represented by a certificate or in non-certificated form and represented by book-entry, will be automatically converted into the right to receive the merger consideration, as may be adjusted in accordance with the immediately following sentence. The merger consideration will be adjusted to reflect the effect of any reclassification, stock split (including a reverse stock split), stock dividend or distribution, recapitalization, exchange or readjustment of shares, merger, issuer tender or exchange offer or other similar transaction with respect to the shares of either Dominion Energy common stock or SCANA common stock that occurs between the date of the merger agreement and the effective time of the merger to provide SCANA shareholders the same economic effect as provided under the merger agreement before such change;

 

    each performance share award outstanding immediately prior to the effective time of the merger shall fully vest at the target level of performance and shall be cancelled and converted automatically into the right to receive the equity award consideration in respect of each share of SCANA common stock underlying such performance share award;

 

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    each restricted stock unit award outstanding immediately prior to the effective time of the merger shall fully vest and shall be cancelled and converted automatically into the right to receive the equity award consideration in respect of each share of SCANA common stock underlying such restricted stock unit; and

 

    each deferred unit credited or deemed credited to SCANA’s stock ledger under SCANA’s Director Compensation and Deferral Plan or Executive Deferred Compensation Plan that is outstanding immediately prior to the effective time of the merger will be automatically converted into a number of deferred unit(s) in respect of shares of Dominion Energy common stock equal to the product of (i) the deferred unit multiplied by (ii) the merger consideration, to be payable pursuant to the terms of the applicable plan.

Dominion Energy will issue cash in lieu of fractional shares of Dominion Energy common stock in the merger. Each SCANA shareholder who would otherwise be entitled to receive fractional shares of Dominion Energy common stock in the merger (after aggregating all fractional shares of Dominion Energy common stock issuable to such SCANA shareholder) will be entitled to an amount of cash, without interest, rounded to the nearest cent, equal to the product of (i) the amount of such fractional shares of Dominion Energy common stock issuable to such SCANA shareholder and (ii) the average price.

At the effective time of the merger, each cancelled share will cease to be outstanding, will be cancelled without payment of any consideration therefor and shall cease to exist.

At the effective time of the merger, each share of common stock, without par value, of Merger Sub issued and outstanding immediately prior to the effective time of the merger will be automatically converted into and become one share of common stock, without par value, of the surviving corporation, and all such shares together shall constitute the only outstanding shares of capital stock of the surviving corporation.

Amendments to Organizational Documents; Directors and Officers

The restated articles of incorporation of SCANA, as amended, which we refer to collectively as the SCANA charter, as in effect immediately prior to the effective time of the merger will be the articles of incorporation of the surviving corporation until thereafter amended in accordance with the provisions thereof and applicable law, except that no such amendment will be inconsistent with Dominion Energy’s obligation to honor the provisions regarding exculpation of directors, limitation of liability of directors and officers, advancement of expenses and indemnification contained in SCANA’s and its subsidiaries’ respective organizational documents in existence immediately prior to the effective time of the merger. See the section entitled “—Indemnification and Insurance” beginning on page 108 of this proxy statement/prospectus.

The amended and restated bylaws of SCANA, which we refer to as the SCANA bylaws, as in effect immediately prior to the effective time of the merger will be amended as of the effective time of the merger to be in the form of Merger Sub’s bylaws as of the date of the merger agreement, except with respect to the name of the surviving corporation which shall be “SCANA Corporation,” and as so amended will be the bylaws of the surviving corporation until thereafter amended in accordance with the provisions thereof and applicable law, except that no such amendment will be inconsistent with Dominion Energy’s obligation to honor the provisions regarding exculpation of directors, limitation of liability of directors and officers, advancement of expenses and indemnification contained in SCANA’s and its subsidiaries’ respective organizational documents in existence immediately prior to the effective time of the merger. Furthermore, the bylaws of the surviving corporation following the effective time of the merger will include any changes necessary so that such bylaws comply with the provisions in the merger agreement relating to indemnification and insurance coverage for SCANA’s directors and officers. See the section entitled “—Indemnification and Insurance” beginning on page 108 of this proxy statement/prospectus.

The directors of Merger Sub will be appointed by Dominion Energy pursuant to applicable law to be the directors of the surviving corporation after the effective time of the merger, following the resignation or removal

 

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of the individuals serving as directors of SCANA prior to the effective time of the merger. Such directors will serve until their respective successors have been duly elected or appointed and qualified or until their earlier death, resignation or removal in accordance with the surviving corporation’s articles of incorporation and bylaws. Dominion Energy intends that the Dominion Energy board will take all necessary action as soon as practicable after the effective time of the merger to appoint a member of either the SCANA board or SCANA’s executive management that is mutually agreeable to Dominion Energy and SCANA to serve as a director on the Dominion Energy board.

The officers of SCANA immediately prior to the effective time of the merger will, from and after the effective time of the merger, be the officers of the surviving corporation, until their respective successors have been duly elected or appointed and qualified or until their earlier death, resignation or removal in accordance with the surviving corporation’s articles of incorporation and bylaws.

Completion of the Merger

The closing of the merger will take place on the third business day following the day on which all of the conditions to closing (see the section entitled “—Conditions to Completion of the Merger” beginning on page 92 of this proxy statement/prospectus) have been satisfied or waived (other than those conditions that by their nature are to be satisfied at the closing of the merger, but subject to the satisfaction or waiver of those conditions at the closing), or at such other time and place as SCANA and Dominion Energy may agree in writing.

The merger will become effective at the time when SCANA and Dominion Energy file the articles of merger with respect to the merger with the Secretary of State of the State of South Carolina or at such later time as Dominion Energy and SCANA agree in writing and specify such time in the articles of merger.

Exchange and Payment Procedures

Prior to the effective time of the merger, Dominion Energy will select an exchange agent reasonably acceptable to SCANA, which we refer to as the exchange agent. Dominion Energy will enter into an agreement with the exchange agent in form and substance reasonably acceptable to SCANA pursuant to which the exchange agent will (i) act as agent for the SCANA shareholders in connection with the merger and receive payment and delivery of the merger consideration to which the SCANA shareholders shall become entitled pursuant to the merger agreement and (ii) act as agent for Dominion Energy in transmitting the merger consideration to the SCANA shareholders following the effective time of the merger in accordance with the merger agreement. At or prior to the effective time of the merger, Dominion Energy will deposit or cause to be deposited with the exchange agent, in trust for the benefit of the SCANA shareholders, an amount of shares of Dominion Energy common stock in book-entry form sufficient for the exchange agent to deliver the merger consideration required to be paid and delivered by Dominion Energy pursuant to the merger agreement. Dominion Energy will also deposit or cause to be deposited with the exchange agent from time to time following the effective time of the merger (i) any dividends or other distributions payable pursuant to the merger agreement, which we refer to as the dividend payment and (ii) any cash in lieu of fractional shares of Dominion Energy common stock payable pursuant to the merger agreement (see the section entitled “—Effects of the Merger” beginning on page 88 of this proxy statement/prospectus), which we refer to as the fractional shares payment.

Promptly after the effective time of the merger (and in any event within three business days thereafter), Dominion Energy will cause the exchange agent to mail or otherwise provide to each person who was, as of immediately prior to the effective time of the merger, a holder of record of shares of SCANA common stock (other than holders of cancelled shares) transmittal materials, including a letter of transmittal, and instructions for effecting the surrender of SCANA common stock to the exchange agent.

Upon surrender of SCANA stock certificates, or an affidavit of loss in lieu of such SCANA stock certificates along with the posting of a bond, if required by the exchange agent or Dominion Energy, for

 

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cancellation, in accordance with the instructions set forth in the transmittal materials, a SCANA shareholder will be entitled to receive the number of shares of Dominion Energy common stock equal to the number of shares of SCANA common stock represented by such SCANA stock certificates (or affidavit of loss in lieu of such SCANA stock certificates) multiplied by the merger consideration (subject to the treatment of fractional shares described in the section entitled “—Effects of the Merger” beginning on page 88 of this proxy statement/prospectus) and a cash amount equal to the dividend payment and the fractional shares payment such SCANA shareholder has the right to receive pursuant to the merger agreement. The shares of Dominion Energy common stock issued in exchange for such SCANA stock certificates will be in non-certificated, book-entry form and no interest will be paid or accrued on any cash amount payable upon surrender of such SCANA stock certificates.

Holders of SCANA common stock in book-entry form, which we refer to as book-entry shares, will not be required to obtain and deliver SCANA stock certificates or an executed letter of transmittal to the exchange agent in order to receive the merger consideration that such holder is entitled to receive. Instead, each holder of record of book-entry shares (other than cancelled shares) will be deemed to have surrendered such book-entry shares upon receipt by the exchange agent of an “agent’s message” in customary form (or such other evidence, if any, as the exchange agent may reasonably request). Upon the exchange agent’s receipt of such an “agent’s message,” each such holder of book-entry shares will be entitled to receive, and Dominion Energy will cause the exchange agent to pay and deliver as promptly as practicable following the effective time of the merger, to each such holder of book-entry shares, the number of shares of Dominion Energy common stock equal to the number of book-entry shares held by such holder multiplied by the merger consideration (subject to the treatment of fractional shares described in the section entitled “—Effects of the Merger” beginning on page 88 of this proxy statement/prospectus) and a cash amount equal to the dividend payment and the fractional shares payment such holder has the right to receive pursuant to the merger agreement. The shares of Dominion Energy common stock issued in exchange for such book-entry shares will be in non-certificated, book-entry form and no interest will be paid or accrued on any cash amount payable upon surrender of such book-entry shares.

At any time after the effective time of the merger, until surrendered or exchanged in the manner contemplated above, each share of SCANA common stock will be deemed to represent only the right to receive, upon such surrender or exchange, the merger consideration, the dividend payment and the fractional shares payment. Dominion Energy is required to pay or cause to be paid all charges and expenses of the exchange agent set forth in the agreement with the exchange agent.

Any merger consideration and any amounts with respect to the aggregate dividend payments and the aggregate fractional share payments deposited with the exchange agent (including the proceeds of any investment thereof) that remain undistributed one year after the effective time of the merger will be delivered to Dominion Energy or the surviving corporation upon demand by Dominion Energy. Thereafter, any holders of shares of SCANA common stock (other than cancelled shares) will be entitled to look only to Dominion Energy and the surviving corporation for payment and delivery of the merger consideration, the dividend payment and the fractional shares payment due upon surrender of their SCANA stock certificates or exchange of their book-entry shares in accordance with the procedures for surrender and exchange set forth above, and Dominion Energy and the surviving corporation will remain liable (subject to applicable abandoned property, escheat or other similar law) for payment of claims for the merger consideration payable upon surrender of such SCANA stock certificates or exchange of such book-entry shares.

From and after the effective time of the merger, the stock transfer books of SCANA will be closed and there will be no transfers on the stock transfer books of SCANA of the shares of SCANA common stock that were outstanding immediately prior to the effective time of the merger.

If any SCANA stock certificate has been lost, stolen, or destroyed, upon the making of an affidavit of that fact by the person claiming such SCANA stock certificate to be lost, stolen or destroyed and, if required by the exchange agent or Dominion Energy, the posting by such person of a bond in a reasonable amount as indemnity against any claim that may be made against it with respect to such SCANA stock certificate, the exchange agent will pay and deliver in exchange for such SCANA stock certificate the merger consideration, the dividend

 

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payment and the fractional share payment the holder of such SCANA stock certificate is entitled to pursuant to the merger agreement.

Holders of SCANA common stock will not be entitled to receive any dividends or other distributions on Dominion Energy common stock until the merger is completed and such holders have surrendered (or are deemed to have surrendered) their SCANA common stock in exchange for Dominion Energy common stock in accordance with the instructions included with the letter of transmittal. If Dominion Energy effects any dividend or other distribution on Dominion Energy common stock with a record date after the effective time of the merger and a payment date before a SCANA shareholder surrenders (or is deemed to surrender) their SCANA common stock, such SCANA shareholder will be entitled to receive such dividend or distribution, without interest, with respect to the shares of Dominion Energy common stock to be issued to such SCANA shareholder promptly after the proper surrender (or deemed surrender) of such SCANA shareholder’s SCANA common stock. If Dominion Energy effects any dividend or other distribution on Dominion Energy common stock with a record date after the effective time of the merger and a payment date after the date a SCANA shareholder surrenders (or is deemed to surrender) their SCANA common stock, such SCANA shareholder will be entitled to receive such dividend or distribution, without interest, with respect to the shares of Dominion Energy common stock that were issued to such SCANA shareholder on the appropriate payment date.

Dominion Energy and the surviving corporation will be entitled to deduct and withhold any applicable taxes from the consideration otherwise payable pursuant to the merger agreement to any holder of shares of SCANA common stock, performance share awards and restricted stock units, and pay over such withheld amount to the appropriate governmental entity. Any amount so withheld will be promptly remitted to the applicable governmental entity and be treated for all purposes under the merger agreement as having been paid to the person in respect of whom such deduction and withholding was made.

The merger consideration and any other payments to be made to SCANA shareholders pursuant to the merger agreement will be adjusted to reflect the effect of any reclassification, stock split (including a reverse stock split), stock dividend or distribution, recapitalization, exchange or readjustment of shares, merger, issuer tender or exchange offer, or other similar transaction with respect to the shares of either Dominion Energy common stock or SCANA common stock that occurs between the date of the merger agreement and the effective time of the merger to provide the SCANA shareholders and the holders of performance share awards and restricted stock units the same economic effect as provided under the merger agreement before such change.

Conditions to Completion of the Merger

The obligation of SCANA, Dominion Energy and Merger Sub to effect the merger is subject to the satisfaction or waiver of the following mutual conditions:

 

    the receipt of the SCANA requisite vote, which we refer to as the shareholder vote condition;

 

    the absence of any law, executive order, ruling, judgment, injunction or other order, which we refer to as an order, issued by any federal, state, local, or non-United States government, any court or tribunal of competent jurisdiction, any administrative, regulatory (including any stock exchange) or other governmental or quasi-governmental agency, commission, branch or authority or other governmental entity or body, which we refer to as a governmental entity (except such reference does not include Santee Cooper in its capacity as a commercial counterparty of SCE&G in connection with the NND project), that is in effect and restrains, enjoins, prevents or otherwise prohibits the completion of the merger or makes the completion of the merger illegal, which we refer to as the governmental order condition;

 

    the issuance of an order from the FERC authorizing the merger under Section 203 of the FPA;

 

    the expiration or early termination of certain waiting periods under the HSR Act and the related rules and regulations, which provide that certain acquisition transactions may not be completed until required information has been furnished to the DOJ and the FTC;

 

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    the issuance of an order from the NRC (i) consenting to the indirect transfer of control of NRC License No. NPF-93, Docket No. 52-027 and NRC License No. NPF-94, Docket No. 52-028 (to the extent that either (a) the NRC has not already approved the termination or withdrawal of such licenses or (b) such licenses have not already been transferred to a third party pursuant to an NRC approval) and (ii) consenting to the indirect transfer of control of NRC License No. NPF-126, Docket No. 50-395, in each case from SCANA to Dominion Energy, as required by Section 184 of the Atomic Energy Act and the NRC’s implementing regulations in 10 CFR 50.80;

 

    the issuance by the NCUC of an order authorizing SCANA and Dominion Energy to engage in the business combination transaction contemplated by the merger agreement pursuant to North Carolina General Statutes, or N.C.G.S. § 62-111(a);

 

    the issuance of an order from the GPSC of an order approving the indirect change of ownership of SEMI from SCANA to Dominion Energy pursuant to Official Code of Georgia Annotated, or O.C.G.A. § 46-4-25, this condition and the previous four bullet points we refer to collectively as the regulatory approval conditions;

 

    the issuance by the SCPSC of an order approving the SCPSC petition (other than the request to make the SCPSC merger determination), unless otherwise consented to by Dominion Energy in its sole discretion, without any (i) material changes to the proposed terms, conditions or undertakings set forth in the cost recovery plan or (ii) significant changes to the economic value of the proposed terms of the cost recovery plan, in each case as reasonably determined by Dominion Energy in good faith, which we refer to as the SCPSC condition;

 

    the approval for listing on the NYSE of the shares of Dominion Energy common stock to be issued in connection with the transactions contemplated by the merger agreement, subject to official notice of issuance; and

 

    the effectiveness under the Securities Act of the registration statement on Form S-4 of which this proxy statement/prospectus is a part, and there not having been any stop order suspending the effectiveness of such Form S-4 issued or any proceedings for that purpose, which we refer to as the Form S-4 condition.

The obligation of Dominion Energy and Merger Sub to effect the merger is subject to the satisfaction or waiver of the following additional conditions:

 

    the representations and warranties of SCANA relating to SCANA’s capitalization being true and correct in all respects, except for de minimis inaccuracies, as of the date of the merger agreement and as of the closing date of the merger as though made on and as of such date (except for any such representation or warranty that is made as of a specified date (including the date of the merger agreement), in which case such representation or warranty shall be true and correct only as of such specified date);

 

    the representations and warranties of SCANA relating to (i) SCANA’s authority to execute and deliver the merger agreement and perform its obligations under the merger agreement and (ii) broker’s and advisor’s fees and commissions owed by SCANA to brokers or other financial advisors in connection with the merger, each being true and correct in all material respects (disregarding all qualifications or limitations as to materiality and words of similar import set forth therein) as of the date of the merger agreement and as of the closing date of the merger as though made on and as of such date (except for any such representation or warranty that is made as of a specified date (including the date of the merger agreement), in which case such representation or warranty shall be true and correct only as of such specified date);

 

   

the representations and warranties of SCANA relating to (i) the absence of any changes since January 1, 2017 that has or would be reasonably expected to have, individually or in the aggregate, a material adverse effect on SCANA and its subsidiaries, taken as a whole (which is described in “—Material Adverse Effect” beginning on page 112 of this proxy statement/prospectus) and (ii) the

 

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SCANA requisite vote being the only vote of the SCANA shareholders required to approve the merger proposal, each being true and correct in all respects as of the date of the merger agreement and as of the closing date of the merger as though made on and as of such date (except for any such representation or warranty that is made as of a specified date (including the date of the merger agreement), in which case such representation or warranty shall be true and correct only as of such specified date);

 

    each of the representations and warranties of SCANA other than those referred to in the immediately preceding three bullets being true and correct in all respects (disregarding all qualifications or limitations as to materiality and words of similar import set forth therein) as of the date of the merger agreement and as of the closing date of the merger as though made on and as of such date (except for any such representation or warranty that is made as of a specified date (including the date of the merger agreement), in which case such representation or warranty shall be true and correct only as of such specified date), except where the failure of such representations and warranties to be true and correct has not had or would not be reasonably expected to have, individually or in the aggregate, a material adverse effect on SCANA and its subsidiaries, taken as a whole, which (collectively with the immediately preceding three bullets) we refer to as the SCANA representation condition;

 

    performance by SCANA in all material respects of all obligations required to be performed by it under the merger agreement on or prior to the closing date, which we refer to as the SCANA covenant condition;

 

    Dominion Energy having received a certificate of the chief executive officer or the chief financial officer of SCANA, certifying that the SCANA representation condition and the SCANA covenant condition have been satisfied;

 

    the absence of any regulatory approval or other approval or consent, in each case in connection with the merger, or order of a governmental entity related to any of the foregoing imposing or requiring any undertakings, terms, conditions, liabilities, obligations, commitments or sanctions, or any structural or remedial actions, that constitute a burdensome condition (which is described in the section entitled “—Reasonable Best Efforts to Obtain Regulatory Approvals” beginning on page 96 of this proxy statement/prospectus and which we refer to as the burdensome condition closing condition);

 

    the absence of any changes since the date of the merger agreement that have or would be reasonably expected to have, individually or in the aggregate, a material adverse effect on SCANA and its subsidiaries, taken as a whole, which we refer to as the MAE condition;

 

    the absence of any order enacted by a governmental entity of competent jurisdiction or any change in law, in each case which imposes any condition that would reasonably be expected to result in (i) a material change to the proposed terms, conditions, or undertakings set forth in the SCPSC petition or (ii) a significant change to the economic value of the proposed terms set forth in the SCPSC petition, in each case as reasonably determined by Dominion Energy in good faith, which we refer to as the change in SCPSC petition condition;

 

    the SCPSC shall have made the SCPSC merger determination; and

 

    since the date of the merger agreement, there shall not have occurred any (i) substantive change in applicable law or any order with respect to the BLRA, as in effect on the date of the merger agreement, which has or would reasonably be expected to have an adverse effect on SCANA or any of its subsidiaries or (ii) substantive change in any applicable law or any order with respect to any other laws of the State of South Carolina governing public utilities as contained in Title 58 of the Code of Laws of South Carolina, as in effect on the date of the merger agreement which has or would reasonably be expected to have an adverse effect on SCANA or any of its subsidiaries, which changes we refer to collectively as SC law changes and which condition we refer to as the absence of changes in law condition.

 

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The obligation of SCANA to effect the merger is subject to the satisfaction or waiver of the following additional conditions:

 

    the representations and warranties of Dominion Energy and Merger Sub relating to Dominion Energy’s and Merger Sub’s capitalization being true and correct in all respects, except for de minimis inaccuracies, as of the date of the merger agreement and as of the closing date of the merger as though made on and as of such date (except for any such representation or warranty that is made as of a specified date (including the date of the merger agreement), in which case such representation or warranty shall be true and correct only as of such specified date);

 

    the representations and warranties of Dominion Energy and Merger Sub relating to (i) their authority to execute and deliver the merger agreement and perform their respective obligations under the merger agreement and (ii) broker’s and advisor’s fees and commissions owed by Dominion Energy to brokers or other financial advisors in connection with the merger, each being true and correct in all material respects (disregarding all qualifications or limitations as to materiality and words of similar import set forth therein) as of the date of the merger agreement and as of the closing date of the merger as though made on and as of such date (except for any such representation or warranty that is made as of a specified date (including the date of the merger agreement), in which case such representation or warranty shall be true and correct only as of such specified date);

 

    the representations and warranties of Dominion Energy and Merger Sub relating to (i) the absence of any changes since January 1, 2017 that has or would be reasonably expected to have, individually or in the aggregate, a material adverse effect on Dominion Energy and its subsidiaries, taken as a whole (which is described in the section entitled “—Material Adverse Effect” beginning on page 112 of this proxy statement/prospectus) and (ii) the approval of the merger agreement by the sole shareholder of Merger Sub being the only vote or consent of any class of capital stock of Dominion Energy or any of its affiliates necessary for Dominion Energy and Merger Sub to approve the merger agreement and complete the merger and the other transactions contemplated by the merger agreement, each being true and correct in all respects as of the date of the merger agreement and as of the closing date of the merger as though made on and as of such date (except for any such representation or warranty that is made as of a specified date (including the date of the merger agreement), in which case such representation or warranty shall be true and correct only as of such specified date);

 

    each of the representations and warranties of Dominion Energy and Merger Sub other than those referred to in the immediately preceding three bullets being true and correct in all respects (disregarding all qualifications or limitations as to materiality and words of similar import set forth therein) as of the date of the merger agreement and as of the closing date of the merger as though made on and as of such date (except for any such representation or warranty that is made as of a specified date (including the date of the merger agreement), in which case such representation or warranty shall be true and correct only as of such specified date), except where the failure of such representations and warranties to be true and correct has not had or would not be reasonably expected to have, individually or in the aggregate, a material adverse effect on Dominion Energy and its subsidiaries, taken as a whole, which (collectively with the immediately preceding three bullets) we refer to as the Dominion Energy representation condition;

 

    performance by Dominion Energy and Merger Sub in all material respects of all obligations required to be performed by them under the merger agreement on or prior to the closing date, which we refer to as the Dominion Energy covenant condition; and

 

    SCANA having received a certificate of the chief executive officer or the chief financial officer of Dominion Energy, certifying that the Dominion Energy representation condition and the Dominion Energy covenant condition have been satisfied.

If the conditions required to obligate any party to effect the merger are not satisfied, then such party may elect to not effect the merger (and may not be required to pay a termination fee). We cannot be certain when, or if, the conditions to the merger will be satisfied or waived, or that the merger will be completed.

 

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Actions to Obtain Required Shareholder Vote

Subject to the fiduciary duties of the SCANA board, under applicable law, SCANA has agreed to take, in accordance with applicable law and SCANA’s organizational documents, all action necessary to call, give notice of, convene and hold the special meeting as promptly as practicable after the Form S-4 (of which this proxy statement/prospectus is a part) is declared effective under the Securities Act. The merger agreement requires the SCANA board to recommend approval of the merger proposal and take all lawful action to solicit and obtain the SCANA requisite vote unless the SCANA board changes its recommendation in accordance with the terms of the merger agreement (see the section entitled “—Non-Solicitation of Alternative Proposals” beginning on page 99 of this proxy statement/prospectus). SCANA may, but is not required to, adjourn or postpone the special meeting (i) to the extent necessary to ensure that any necessary supplement or amendment to this proxy statement/prospectus is provided to the SCANA shareholders a reasonable amount of time in advance of the vote on the approval of the merger proposal, (ii) if SCANA reasonably believes it is necessary and advisable to do so in order to solicit additional proxies in order to obtain the SCANA requisite vote, (iii) if, as of the time for which the special meeting is originally scheduled, there are insufficient shares of SCANA common stock represented (either in person or by proxy) to constitute a quorum necessary to conduct the business of the special meeting or (iv) as required by law.

Reasonable Best Efforts to Obtain Regulatory Approvals

Dominion Energy, SCANA and Merger Sub are required under the terms of the merger agreement to (and shall cause their respective subsidiaries to) cooperate and use their respective reasonable best efforts to (i) promptly make any required submissions and filings under applicable law or to governmental entities with respect to the merger and the other transactions contemplated by the merger agreement, (ii) promptly furnish information requested in connection with such submissions and filings to such governmental entities or under such applicable law, (iii) keep the other parties reasonably informed with respect to the status of any such submissions and filings to such governmental entities or under such applicable law, (iv) obtain all consents and permits from any governmental entity or any other person necessary to consummate the transactions contemplated by the merger agreement as soon as practicable and (v) take or cause to be taken all other actions, and do or cause to be done all other things, reasonably necessary to consummate and make effective the merger and the other transactions contemplated by the merger agreement as soon as practicable.

Under the merger agreement, SCANA and Dominion Energy also agreed to use their respective reasonable best efforts to take or cause to be taken all actions consistent with the terms of the merger agreement and the SCPSC petition to obtain the SCPSC’s approval of the SCPSC petition as soon as practicable. The material terms of the SCPSC petition agreed to by the parties in the merger agreement include, among other things, (i) an aggregate up-front, one-time rate credit totaling $1.3 billion to all customers who are current customers of SCE&G at the effective time of the merger, (ii) a write down of approximately $1.4 billion by SCE&G of its investment in construction work in the NND project, (iii) SCE&G not seeking recovery of approximately $320 million in regulatory assets, (iv) a total estimated reduction of 5% in retail electric customer bills by Dominion Energy and SCE&G resulting from a $575 million refund underwritten by Dominion Energy for amounts previously collected in connection with the NND project and from the impact of federal tax reform passed in December of 2017, (v) an approximately $180 million capital investment in the Columbia Energy Center, a natural gas-fired power plant located in Gaston, South Carolina, will be excluded from rate base and rate recovery, with only certain ongoing costs to be recovered in future base and fuel rates, (vi) a finding by the SCPSC that approximately $3.3 billion of invested capital for the NND project is prudent and may be amortized over a 20-year period (without offset or disallowance) and recovered through retail rates, (vii) a ruling by the SCPSC that until the balance of the $3.3 billion is fully recovered, the capital costs of the unrecovered balance shall be reflected in retail rates at a return on common equity of 10.25%, a weighted average cost of debt of 5.85%, and a capital structure consisting of 52.81% equity and 47.19% debt, with these percentages fixed over the 20-year amortization period and (viii) apart

 

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from the 5% customer bill reduction mentioned above, that retail electric base rates will remain frozen at current levels until January 1, 2021, except for rate adjustments for fuel and environmental costs, demand side management costs and other rates routinely adjusted on an annual or biannual basis.

Subject to the limitations set forth in the merger agreement and as further described below, Dominion Energy, SCANA and Merger Sub have agreed to promptly take any and all steps necessary to avoid, eliminate or resolve each and every impediment to and obtain all consents under applicable laws that may be required by any governmental entity (including any regulatory clearances with respect to the transactions contemplated by the merger agreement and the SCPSC’s approval of the SCPSC petition), so as to enable the parties to consummate the merger and the other transactions contemplated by the merger agreement as soon as practicable, including taking any remedial action (as described in the paragraph that immediately follows). However, any remedial action may, at the discretion of SCANA or Dominion Energy, be conditioned upon completion of the transactions contemplated by the merger agreement.

The merger agreement provides that a “remedial action” means, with respect to Dominion Energy, SCANA and each of their respective subsidiaries, committing to and effecting, by consent decree, hold separate orders, trust, or otherwise, (i) selling, licensing, holding separate or otherwise disposing of assets or businesses of Dominion Energy or SCANA or any of their respective subsidiaries, (ii) terminating, relinquishing, modifying, or waiving existing relationships, ventures, contractual rights, obligations or other arrangements of Dominion Energy or SCANA or any of their respective subsidiaries and (iii) creating any relationships, ventures, contractual rights, obligations or other arrangements of Dominion Energy or SCANA or any of their respective subsidiaries.

Subject to the limitations set forth in the merger agreement, Dominion Energy has agreed to use reasonable best efforts to take or cause to be taken any and all action, including a remedial action, to avoid or resolve as promptly as practicable any legal proceeding challenging any of the transactions contemplated by the merger agreement that seeks, or would reasonably be expected to seek, to prevent, materially impede or materially delay the consummation of such transactions. Dominion Energy, SCANA and Merger Sub have agreed to cooperate with each other and use their respective reasonable best efforts to contest, defend and resist any such proceeding and to have any order that is in effect lifted that prohibits, prevents, delays, interferes with or restricts the completion of the transactions contemplated by the merger agreement as promptly as practicable.

In connection with obtaining any consent, permit or regulatory approval as described in the above paragraphs, Dominion Energy and its affiliates are not required to, and SCANA and its subsidiaries are not required to (unless conditioned on the completion of the merger) and are not permitted to (without Dominion Energy’s prior written consent), offer or accept, or agree, commit to agree or consent to, any undertakings, terms, conditions, liabilities, obligations, commitments or sanctions (including remedial actions) that constitutes a burdensome condition (as described in the immediately following paragraph).

The merger agreement provides that a “burdensome condition” means any undertakings, terms, conditions, liabilities, obligations, commitments or sanctions (including remedial actions) that, in the aggregate, would have or would reasonably be expected to have, a material adverse effect on the business, financial condition, assets, liabilities or results of operations of SCANA and its subsidiaries or of Dominion Energy and its subsidiaries, in each case taken as a whole. However, for purposes of determining whether a burdensome condition exists, Dominion Energy and its subsidiaries will be deemed to be a consolidated group of entities of the size and scale of a hypothetical company that is one hundred percent (100%) of the size and scale of SCANA and its subsidiaries, taken as a whole as of immediately prior to the effective time of the merger. Notwithstanding the foregoing, any undertakings, terms, conditions, liabilities, obligations, commitments or sanctions relating to implementing, or otherwise arising or resulting from or imposed by, the social commitments (as described

 

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below), or any relief or other matters contemplated by the SCPSC petition or the SCPSC’s approval of the SCPSC petition, shall not constitute or be taken into account in determining whether a burdensome condition exists.

Under the terms of the merger agreement, none of Dominion Energy and its affiliates are required to, and none of SCANA and its affiliates are required to (unless conditioned on the completion of the merger) and are not permitted to (without Dominion Energy’s prior written consent), offer or accept, or agree, or commit to agree or consent to, any undertakings, terms, conditions, liabilities, obligations, commitments or sanctions (including remedial actions) that (i) materially change the proposed terms, conditions or undertakings set forth in the SCPSC petition or (ii) significantly change the economic value of the proposed terms set forth in the SCPSC petition, in each case as reasonably determined by Dominion Energy in good faith.

Unless otherwise agreed to by Dominion Energy and SCANA, Dominion Energy, SCANA and/or certain SCANA subsidiaries (as applicable) are required to (i) file the SCPSC petition by January 12, 2018, (ii) file the notification and report form pursuant to the HSR Act within 15 business days after the date the merger agreement is signed, (iii) file an application for FERC approval within 40 business days after the date of the merger agreement, (iv) file an application for NRC approval within 20 business days after the date of the merger agreement, (v) file applications for FCC approvals no later than 90 business days prior to the anticipated closing date of the merger, (vi) file an application for NCUC approval within 15 business days after the date of the merger agreement and (vii) file an application for GPSC approval within 15 business days after the date of the merger agreement.

In furtherance of the foregoing, Dominion Energy, SCANA and/or certain SCANA subsidiaries (as applicable) (i) filed the SCPSC petition on January 12, 2018, (ii) filed an application for GPSC approval on January 19, 2018, (iii) filed an application for NCUC approval on January 24, 2018, (iv) filed applications for NRC approvals on January 25, 2018, (v) filed an application for FERC approval on February 23, 2018, and (vi) filed three transfer of control applications with the FCC on February 2, 2018. Additionally, each of Dominion Energy and SCANA filed a Notification and Report form pursuant to the HSR Act on January 19, 2018 (see the section entitled “The Merger—Regulatory Approvals Required for the Merger” beginning on page 68 of this proxy statement/prospectus for information regarding the status of such approvals).

Dominion Energy, SCANA and Merger Sub have agreed to, subject to applicable law relating to the exchange of information:

 

    promptly notify the other parties of (and if in writing, furnish the other parties with copies of) any communication to such person from any third party (other than a representative of any of the parties to the merger agreement or any of their respective subsidiaries) or any governmental entity regarding the filings and submissions made in connection with the transactions contemplated by the merger agreement and permit the other parties to review and discuss in advance (and to consider in good faith any comments made by the others in relation to) any proposed written response to any communication from any third party (other than a representative of any of the parties to the merger agreement or any of their respective subsidiaries) or any governmental entity regarding such filings and submissions;

 

    keep the other parties reasonably informed of any developments, meetings or discussions with any third party (other than a representative of any of the parties to the merger agreement or any of their respective subsidiaries) or any governmental entity in respect of any filings, submissions, investigations, or inquiries concerning the transactions contemplated by this agreement; and

 

    not independently participate in any meeting or discussion with any third party (other than a representative of any of the parties to the merger agreement or any of their respective subsidiaries) or any governmental entity in respect of any filings, submissions, investigations or inquiries concerning the transactions contemplated by the merger agreement without giving the other party or parties to the merger agreement prior notice of such meeting or discussions to the extent it is reasonably practical to do so and, unless prohibited by such third party or governmental entity or otherwise not reasonably practical, the opportunity to attend or participate.

 

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Notwithstanding the obligations described in the three immediately preceding bullets, Dominion Energy, SCANA and Merger Sub are (i) permitted to redact any correspondence, filing, submission or communication prior to furnishing it to the other parties to the extent it contains competitively or commercially sensitive information and (ii) not prohibited from independently participating in meetings and discussions with third parties or governmental entities that solely relate to an explanation of the terms of this agreement.

SCANA and its subsidiaries are required, to the extent reasonably practicable, subject to applicable law relating to the exchange of information and except as would be in violation of, or result in a waiver or loss of, the attorney-client privilege or work-product doctrine, to do the following with respect to any material claim, hearing, investigation or proceeding, whether criminal or civil in nature, relating to or arising out of the NND project or the bankruptcy of Westinghouse.

 

    within 48 hours of receipt, notify Dominion Energy of (and if in writing, furnish Dominion Energy with copies of) any material communication to SCANA or its subsidiaries from any governmental entity related to or arising out of such claim, hearing, investigation or proceeding and permit Dominion Energy to review and discuss in advance (and consider in good faith any comments made by Dominion Energy in relation to) any proposed written response to any material communication from any governmental entity related to or arising out of any such claim, hearing, investigation or proceeding;

 

    keep Dominion Energy reasonably informed of any developments, meetings or discussions with any governmental entity related to or arising out of such claim, hearing, investigation or proceeding; and

 

    use good faith efforts to give Dominion Energy notice (which notice shall be prior notice to the extent providing prior notice is reasonably practical) of any material meetings or discussions relating to or arising out of such claim, hearing, investigation or proceeding (and consider in good faith any comments or guidance from Dominion Energy in relation to such meeting or discussions) and, if appropriate in SCANA’s reasonable judgment, provide Dominion Energy the opportunity to attend or participate in such meetings or discussions.

Non-Solicitation of Alternative Proposals

The merger agreement provides that neither SCANA nor any of its subsidiaries nor any of their respective directors or officers will, and SCANA will instruct and use its reasonable best efforts to cause its and its subsidiaries’ employees, investment bankers, attorneys, accountants and other advisors or representatives, which we refer to as representatives, not to, directly or indirectly:

 

    initiate, solicit or knowingly encourage any acquisition proposal (which is described in the following paragraph) or the making or any inquiry, indication of interest, proposal or offer that constitutes, or could reasonably be expected to lead to an acquisition proposal;

 

    engage in, continue or otherwise participate in any discussions or negotiations regarding any inquiry, indication of interest, proposal or offer that constitutes or could reasonably be expected to lead to, an acquisition proposal;

 

    furnish or provide any information or data to any third party in connection with any inquiry, indication of interest, proposal or offer that constitutes or could reasonably be expected to lead to, an acquisition proposal; or

 

    otherwise knowingly facilitate any effort or attempt with respect to any of the actions contemplated by the three immediately preceding bullets.

The merger agreement provides that an “acquisition proposal” means any bona fide proposal or offer from any third party or group of third parties (other than Dominion Energy, Merger Sub or any of their respective affiliates) relating to (i) any acquisition or purchase directly or indirectly, in a single transaction or series of transactions, of a business that constitutes more than fifteen percent (15%) of the net revenues, net income or consolidated assets of SCANA and its subsidiaries, taken as a whole, or more than fifteen percent (15%) of the total voting power of the equity securities of SCANA, (ii) any tender offer or exchange offer that if completed

 

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would result in any third party beneficially owning more than fifteen percent (15%) of the total voting power of the equity securities of SCANA or (iii) any merger, reorganization, consolidation, share exchange, business combination, recapitalization, liquidation, joint venture, partnership, dissolution or similar transaction involving directly or indirectly, in a single transaction or series of transactions, SCANA (or any subsidiaries of SCANA whose business constitutes more than fifteen percent (15%) of the net revenues, net income or consolidated assets of SCANA and its subsidiaries, taken as a whole).

In addition, the merger agreement requires SCANA and its subsidiaries and their respective directors, officers and employees to, and SCANA will instruct and use its reasonable best efforts to cause its and its subsidiaries’ representatives to, immediately (i) cease and terminate any solicitation, discussions, negotiations or knowing facilitation or encouragement with any third party that may be ongoing with respect to any inquiry, indication of interest, proposal or offer that constitutes, or could reasonably be expected to lead to, an acquisition proposal, (ii) terminate any such third party’s access to any physical or electronic data rooms and (iii) request that any such third party promptly return or destroy all confidential information concerning SCANA and its subsidiaries previously furnished to such third party by or on behalf of SCANA or any of its subsidiaries, and destroy all analyses and other materials prepared by or on behalf of such third party that contain, reflect or analyze such information, in each case, to the extent required by, and in accordance with the terms of the applicable confidentiality agreement between SCANA and such third party.

Notwithstanding the restrictions described above, prior to the time the SCANA requisite vote is obtained, the SCANA board will be permitted to (i) furnish or provide information (including non-public information or data) regarding, and provide access to, the business, properties, assets, books, records and personnel of, SCANA and its subsidiaries, to a third party making an unsolicited bona fide written acquisition proposal (and shall as promptly as is reasonably practicable make available to Dominion Energy any non-public information concerning SCANA or its subsidiaries that is provided to any such third party pursuant to this clause (i) to the extent not previously made available to Dominion Energy) and (ii) engage in discussions and negotiations with such third party with respect to such acquisition proposal, provided that the SCANA board has determined in good faith, (a) after consultation with SCANA’s financial advisors and outside legal counsel, that such acquisition proposal is, or could reasonably be expected to lead to, a superior proposal (which is described in the following paragraph) and (b) after consultation with SCANA’s outside legal counsel, that failure to take such action would reasonably be expected to be inconsistent with the SCANA board’s fiduciary duties under applicable law. Furthermore, such acquisition proposal must be unsolicited, bona fide and in writing and must not have resulted from a breach of the non-solicitation restrictions described above. Before SCANA is permitted to take any of the actions described in clauses (i) or (ii) of this paragraph, the third party making such acquisition proposal is required to enter into a confidentiality agreement, which we refer to as an acceptable confidentiality agreement, having provisions with respect to the confidential treatment of SCANA’s information that are not materially less favorable to those contained in the confidentiality agreement executed by Dominion Energy and SCANA on October 8, 2017 (as may be amended from time to time).

The merger agreement provides that a “superior proposal” means any unsolicited bona fide written acquisition proposal relating to any direct or indirect acquisition or purchase of (i) assets that generate more than fifty percent (50%) of the consolidated total revenues or operating income of SCANA and its subsidiaries, taken as a whole, (ii) assets that constitute more than fifty percent (50%) of the consolidated total assets of SCANA and its subsidiaries, taken as a whole or (iii) more than fifty percent (50%) of the total voting power of the equity securities of SCANA, in each case, that the SCANA board determines in good faith after consultation with SCANA’s financial advisors and outside legal counsel is more favorable to the SCANA shareholders than the merger, taking into account the third party making the acquisition proposal and all legal, financial and regulatory aspects of the acquisition proposal (including the likelihood that such acquisition proposal would be completed in accordance with its terms) and all other relevant circumstances.

The merger agreement also requires that SCANA promptly (but in any event within 48 hours) notify Dominion Energy in writing of the receipt of any acquisition proposal or any inquiry or offer that could

 

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reasonably be expected to lead to an acquisition proposal, indicating the identity of the third party making such proposal and the material terms and conditions of such proposal or inquiry and providing Dominion Energy with the most current version (if any) of such inquiry or proposal.

The merger agreement also requires that SCANA promptly (but in any event within 48 hours) notify Dominion Energy in writing of the receipt of any acquisition proposal or any inquiry or offer that could reasonably be expected to lead to an acquisition proposal, indicating the identity of the third party making such proposal and the material terms and conditions of such proposal or inquiry and providing Dominion Energy with the most current version (if any) of such inquiry or proposal. With respect to any such acquisition proposal, SCANA must keep Dominion Energy reasonably informed, on a prompt basis (but in any event within 48 hours) of any changes or modifications to the terms of such acquisition proposal and any communications between SCANA and such third party with respect to any changes or modifications to the terms of any such acquisition proposal.

Except as required by law, SCANA may not terminate, amend, modify, waive or fail to enforce any standstill provisions or similar obligation with respect to any class of equity securities of SCANA or any of its subsidiaries.

Change in SCANA Board Recommendation

The merger agreement requires that, subject to certain exceptions described below, the SCANA board (and each committee thereof) will not (i) withdraw, change, qualify, withhold or modify, or propose to do any of the foregoing, in a manner adverse to Dominion Energy or Merger Sub, the SCANA board recommendation, (ii) adopt, approve or recommend, or propose to adopt, approve or recommend, any acquisition proposal, (iii) fail to recommend against any acquisition proposal subject to Regulation 14D promulgated under the Exchange Act in any solicitation or recommendation statement made on Schedule 14D-9 within ten business days after Dominion Energy requests in writing, (iv) if an acquisition proposal or any material modification thereof is made public or sent to the SCANA shareholders, fail to issue a press release that reaffirms the SCANA board recommendation within ten business days after Dominion Energy requests in writing or (v) agree or resolve to take any action set forth in the foregoing clauses (i) though (iv), which we collectively refer to as a SCANA board adverse recommendation change. The SCANA board may not, subject to certain exceptions described below, authorize, cause or permit SCANA or any of its affiliates to enter into any letter of intent, memorandum of understanding, agreement in principle, definitive agreement or other similar commitment that would reasonably be expected to lead to an acquisition proposal (other than an acceptable confidentiality agreement), which we refer to as an alternative acquisition agreement.

Notwithstanding the general restrictions described above, at any time prior to obtaining the SCANA requisite vote, the SCANA board may make a SCANA board adverse recommendation change under two circumstances:

 

    the SCANA board (or a duly authorized committee thereof) determines that an acquisition proposal that was not received in violation of the non-solicitation provisions of the merger agreement constitutes a superior proposal and further determines in good faith, and after consultation with SCANA’s outside legal counsel, that the failure to make a SCANA board adverse recommendation change in response to the receipt of such superior proposal would reasonably be expected to be inconsistent with its fiduciary duties under applicable law; or

 

    an intervening event (which is described in the following paragraph) occurs and in response thereto the SCANA board determines in good faith, after consultation with SCANA’s outside legal counsel, that the failure to take such action would reasonably be expected to be inconsistent with its fiduciary duties under applicable law.

The merger agreement provides that an “intervening event” means any material event, development or change in circumstances that materially affects the business, assets or operations of SCANA and its subsidiaries,

 

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taken as a whole, that first becomes known to the SCANA board or certain officers of SCANA after the date of the merger agreement but before the SCANA requisite vote is obtained, to the extent that such event, development or change in circumstances was not reasonably foreseeable as of or prior to the date of the merger agreement or which would not reasonably be expected to have become known after reasonable investigation or inquiry as of or prior to the date of the merger agreement; provided, however, that in no event will (i) the receipt, existence or terms of an acquisition proposal or any matter relating thereto or consequence thereof, (ii) any action taken by the parties pursuant to or in compliance with the merger agreement, including any action taken in connection with seeking any regulatory approvals, (iii) any changes in law or the settlement of any lawsuits or proceedings, (iv) changes in the market price or trading volume of SCANA shares or Dominion Energy shares, or SCANA or Dominion Energy or any of their respective subsidiaries meeting or exceeding internal or published projections, forecasts or revenue or earnings predictions for any period, (v) changes in the energy markets or industry or to rates, or (vi) any event, development or change relating solely to Dominion Energy or its affiliates, in each case, constitute an “intervening event” or be taken into account in determining whether an intervening event has occurred or would reasonably be expected to result.

In each of the two circumstances described above, to make a SCANA board adverse recommendation change (and, solely with respect to a superior proposal, terminate the merger agreement to enter into an alternative acquisition agreement in accordance with the merger agreement), (i) SCANA must provide Dominion Energy with prior written notice of its intent to make such SCANA board adverse recommendation change (or, solely with respect to a superior proposal, terminate the merger agreement) at least four business days prior to the SCANA board taking such action, which notice shall specify the basis for such SCANA board adverse recommendation change (or termination) and include the most current draft of any letter of intent, memorandum of understanding, agreement in principle, definitive agreement or other similar commitment that would reasonably be expected to lead to an acquisition proposal (we refer to such agreement or commitment as an alternative acquisition agreement) and any other material documents with respect to the superior proposal, if applicable, (ii) during such four business day period, if requested by Dominion Energy, SCANA must make its representatives reasonably available to negotiate in good faith with Dominion Energy and its representatives regarding any modifications to the terms and conditions of the merger agreement that Dominion Energy proposes to make, and (iii) at the end of such four business day period, after taking into account any modifications to the terms of the merger agreement proposed by Dominion Energy to SCANA in a written, binding and irrevocable offer, the SCANA board must determine in good faith, (a) after consultation with SCANA’s outside legal counsel, that the failure to effect a SCANA board adverse recommendation change would reasonably be expected to be inconsistent with the SCANA board’s fiduciary duties under applicable law and (b) in the case of a SCANA board adverse recommendation change with respect to a superior proposal, after consultation with SCANA’s outside legal counsel and financial advisors, that such superior proposal still constitutes a superior proposal. In the event of a change in price or material revision or material amendment to the terms of a superior proposal, or a material change to the facts or circumstances relating to an intervening event, SCANA must deliver an additional written notice summarizing such change, revision or amendment and comply anew with the obligations described in this paragraph, except that, in the case of such a new notice, the four business day period referred to above shall instead be deemed to refer to a two business day period. We refer to the obligations set forth in this paragraph as the match right obligations.

Nothing contained in the merger agreement prohibits SCANA or any of its subsidiaries from (i) complying with its disclosure obligations under U.S. federal or state law, (ii) making any “stop, look or listen” communication to the SCANA shareholders pursuant to Rule 14d-9(f) promulgated under the Exchange Act (or any similar communications to the SCANA shareholders) or (iii) making any other disclosure to its shareholders if the SCANA board determines in good faith after consultation with SCANA’s outside legal counsel that the failure to make such disclosure would be inconsistent with its fiduciary duties under applicable law.

 

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Termination of the Merger Agreement

The merger agreement may be terminated and the merger may be abandoned at any time prior to the effective time of the merger (subject to certain exceptions and limitations described in the merger agreement), whether before or after (except as set forth below) the SCANA requisite vote is obtained:

 

    by mutual written consent of Dominion Energy and SCANA;

 

    by either Dominion Energy or SCANA:

 

    if the merger has not been completed on or before the termination date, provided, however, that the termination date shall be automatically extended to April 2, 2019 if, as of the termination date, any of the governmental order condition, regulatory approval condition or the SCPSC condition has not been satisfied, provided, further, that this termination right will not be available to a party whose breach of its obligations under the merger agreement in any manner that was the principal cause of or resulted in the failure of a condition to any party’s obligation to effect the merger, which termination we refer to as a termination date termination;

 

    if at the special meeting (or any adjournment or postponement thereof), the SCANA requisite vote is not obtained, which termination we refer to as a SCANA “no” vote termination;

 

    if any order permanently restraining, enjoining, preventing or otherwise prohibiting completion of the merger shall have become final and non-appealable, provided, however, that this termination right will not be available to a party whose breach of its obligations under the merger agreement was the principal cause of such order, which termination we refer to as a legal restraint termination;

 

    by SCANA:

 

    if the SCANA board has effected a SCANA board adverse recommendation change with respect to a superior proposal and has approved and entered into concurrently with the termination of the merger agreement an alternative acquisition agreement with respect to such superior proposal, provided, however, that such termination will not be effective and SCANA will not be permitted to enter into an alternative acquisition agreement unless (i) SCANA complied with the match right obligations, and (ii) SCANA has paid Dominion the SCANA termination fee (which is described in the section entitled “—Termination Fees” beginning on page 104 of this proxy statement/prospectus); provided, further, that this termination right will not be available after the SCANA requisite vote shall have been obtained, which termination we refer to as a superior proposal termination;

 

    if Dominion Energy or Merger Sub have breached any of their respective representations or warranties or failed to perform any of their respective covenants under the merger agreement and such breach or failure to perform (i) would give rise to the failure of the applicable conditions to SCANA’s obligation to complete the merger and (ii) cannot be cured by Dominion Energy or Merger Sub by the termination date, or if capable of being cured, is not cured prior to the earlier of (a) the thirtieth day after written notice thereof is given by SCANA to Dominion Energy and (b) the third business day immediately preceding the termination date, provided, however, that SCANA will not have this termination right if SCANA is then in material breach of the merger agreement, which termination we refer to as a Dominion Energy breach termination;

 

    by Dominion Energy:

 

    if the SCANA board (or a committee thereof) has effected a SCANA board adverse recommendation change, except that this termination right will not be available after the SCANA requisite vote shall have been obtained, which termination we refer to as a change of recommendation termination; or

 

   

if SCANA has breached any of its representations or warranties or failed to perform any of its covenants under the merger agreement and such breach or failure to perform (i) would give rise to

 

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the failure of the applicable conditions to Dominion Energy’s and Merger Sub’s obligation to complete the merger and (ii) cannot be cured by SCANA by the termination date, or if capable of being cured, is not cured prior to the earlier of (a) the thirtieth day after written notice thereof is given by Dominion Energy to SCANA and (b) the third business day immediately preceding the termination date, except that Dominion Energy will not have this termination right if either Dominion Energy or Merger Sub is then in material breach of the merger agreement, which termination we refer to as a SCANA breach termination.

Termination Fees

SCANA will be required to pay Dominion Energy a termination fee equal to $240 million (which we refer to as the SCANA termination fee) if:

 

    SCANA effects a superior proposal termination;

 

    (i) Dominion Energy or SCANA effects a termination date termination or a SCANA “no” vote termination or Dominion Energy effects a SCANA breach termination, (ii) a bona fide acquisition proposal has been publicly announced or publicly disclosed and has not been withdrawn (a) in the case of a termination date termination or a SCANA breach termination, prior to the date of such termination, and (b) in the case of a SCANA “no” vote termination, prior to the special meeting, and (iii) thereafter during the twelve-month period immediately following such termination, (a) SCANA enters into an alternative acquisition agreement or (b) an acquisition proposal is completed (except that for the purpose of determining whether SCANA will be required to pay the SCANA termination fee under these circumstances, the references to “fifteen percent (15%)” in the definition of acquisition proposal in the merger agreement shall be deemed to be references to “fifty percent (50%)”); or

 

    Dominion Energy effects a change of recommendation termination.

Dominion Energy will be required to pay SCANA a termination fee equal to $280 million (which we refer to as the Dominion Energy termination fee) if:

 

    Dominion Energy or SCANA effects a termination date termination and, at the time of such termination, (i) the burdensome condition closing condition shall not have been satisfied or waived with respect to a regulatory approval or consent in connection with the merger (other than in connection with South Carolina regulatory approvals), (ii) (a) the governmental order condition, (b) the regulatory approval condition and (c) the SCPSC condition shall each have been satisfied or waived (unless such condition was not satisfied solely due to the proposal of a burdensome condition to which Dominion Energy did not agree) and (iii) each of (a) the shareholder vote condition, (b) the Form S-4 condition, (c) the SCANA representation condition, (d) the SCANA covenant condition and (e) the MAE condition, in each case has been satisfied or waived (except for any such conditions that have not been satisfied as a result of a breach by Dominion Energy or Merger Sub of any of their respective obligations under the merger agreement);

 

    Dominion Energy or SCANA effects a legal restraint termination and, at the time of such termination, (i) the burdensome condition closing condition shall not have been satisfied or waived with respect to a regulatory approval or consent in connection with the merger (other than in connection with South Carolina regulatory approvals), (ii) (a) the governmental order condition, (b) regulatory approval condition and (c) the SCPSC condition shall each have been satisfied or waived (unless such condition was not satisfied solely due to the proposal of a burdensome condition to which Dominion Energy did not agree) and (iii) each of (a) the shareholder vote condition, (b) the Form S-4 condition, (c) the SCANA representation condition, (d) the SCANA covenant condition and (e) the MAE condition, in each case has been satisfied or waived (except for any such conditions that have not been satisfied as a result of a breach by Dominion Energy or Merger Sub of any of their respective obligations under the merger agreement); or

 

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    SCANA effects a Dominion Energy breach termination due to a material breach by Dominion Energy or Merger Sub of their respective obligations to obtain the regulatory approvals and consents in connection with the merger (which are described in the section entitled “—Reasonable Best Efforts to Obtain Regulatory Approvals” beginning on page 96 of this proxy statement/prospectus), which breach has caused the failure of any of the following conditions to completion of the merger from being satisfied: (i) the governmental order condition, (ii) the regulatory approvals condition, (iii) the SCPSC condition, (iv) absence of a burdensome condition, (v) the change in SCPSC petition condition, (vi) the SCPSC merger determination and (vii) the absence of changes in law condition.

In the event the merger agreement is terminated under circumstances in which SCANA is required to pay the SCANA termination fee or Dominion Energy is required to pay the Dominion Energy termination fee and such termination fee, as applicable, is paid, the payment of such termination fee will be the sole and exclusive remedy of Dominion Energy and Merger Sub against SCANA, or of SCANA against Dominion Energy and Merger Sub, as applicable.

Conduct of Business

Under the merger agreement, each of SCANA and Dominion Energy has agreed to restrict the conduct of its respective business between the date of the merger agreement and the earlier of the effective time of the merger and the termination of the merger agreement.

In general, SCANA has agreed to, and to cause each of its subsidiaries to, conduct its business in all material respects in the ordinary course consistent with past practice and to use commercially reasonable efforts to preserve substantially intact its current business organizations, maintain adequate and comparable insurance coverage, and preserve its relationships with its employees, counterparties, customers and suppliers and governmental entities with jurisdiction over SCANA and any of its subsidiaries.

In addition, between the date of the merger agreement and the effective time of the merger, SCANA has agreed to various specific restrictions relating to the conduct of its business and the business of its subsidiaries, including restrictions on the following (in each case, subject to Dominion Energy’s prior written consent, certain exceptions specified in the merger agreement, the related SCANA disclosure materials, which we refer to as the SCANA disclosure letter, or as may be required by applicable law or by a governmental entity):

 

    declaring or paying dividends or other distributions (other than regular quarterly cash dividends payable in respect of SCANA common stock, not in excess of a certain amount);

 

    splitting, combining, subdividing or reclassifying any of its capital stock or issuing any other securities in respect of, in lieu of or in substitution for shares of its capital stock;

 

    purchasing, redeeming or otherwise acquiring any of its or its subsidiaries’ capital stock or securities convertible into or exchangeable or exercisable for any such shares of capital stock;

 

    issuing, selling, pledging, disposing or encumbering shares of its capital stock;

 

    amending its articles of incorporation or bylaws or the comparable organizational documents of any of its subsidiaries;

 

    acquiring (whether by merger, consolidation, purchase of property or assets or otherwise) any corporation, partnership or other business organization or any material assets or interests in any third party with a value in excess of $50 million in the aggregate;

 

    selling, licensing, transferring, abandoning or otherwise disposing of any of its properties, rights or assets which are material to SCANA or its subsidiaries taken as a whole or have a value in excess of $25 million;

 

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    incurring indebtedness except for (i) borrowings under existing revolving credit facilities (or replacements thereof on comparable terms, including in regards to maturity) or commercial paper programs in the ordinary course of business, (ii) incurring indebtedness in the ordinary course of business (including interest rate swaps on customary commercial terms consistent with past practice) not in excess of $200 million, (iii) redeeming, prepaying, defeasing, cancelling or modifying any indebtedness in the ordinary course of business (including interest rate swaps on customary commercial terms consistent with past practice) not to exceed $200 million, (iv) incurring, redeeming, prepaying, defeasing, canceling or modifying any indebtedness among SCANA or any of its subsidiaries, (v) incurring any indebtedness to replace, renew, extend, refinance or refund any existing indebtedness in the same principal amount and upon the maturity of such existing indebtedness and to the extent such existing indebtedness is indebtedness of SCANA, on terms that can be redeemed or prepaid at any time upon payment of the outstanding principal amount plus accrued interest without any make whole or similar prepayment penalty and (vi) providing guarantees and other credit support by SCANA with respect to obligations of any of its subsidiaries; provided, however, that no such indebtedness shall contain any term that would accelerate the payment thereof or require its immediate repayment due to the transactions contemplated by the merger agreement;

 

    settling any claim, investigation or proceeding with a governmental entity or third party, in each case, threatened, made or pending against SCANA or any of its subsidiaries which provides injunctive relief which is material to SCANA or any of its subsidiaries or requires payment in excess of $10 million in the aggregate, other than the settlement of any claims, investigations or proceedings made in the ordinary course of business or for an amount (excluding any amounts covered by insurance) not in excess of the amount reflected or reserved therefor in the most recent financial statements of SCANA; provided, however, that neither SCANA nor any of its subsidiaries are permitted to settle any claim, investigation or proceeding relating to or arising out of (i) the construction (or cessation of the construction), abandonment or disposal of the NND project, (ii) the bankruptcy of Westinghouse (including the settlement agreement entered into with Toshiba Corporation and any contract relating to the proceeds thereof), or (iii) any other aspect of the abandoned NND project (other than (a) the termination of any contract related to the abandoned NND project, so long as such termination results in no additional liability of SCANA or any of its subsidiaries in excess of $5 million in the aggregate, (b) any immaterial amendment of any contract related to the abandoned NND project and (c) after prior notice to Dominion Energy, settling any mechanic liens related to the cessation of construction of the abandoned NND project);

 

    making capital expenditures in any fiscal year, except for (i) capital expenditures made in accordance with the capital expenditure plans included in the SCANA disclosure letter in an amount not to exceed $50 million in excess of the amounts set forth in such plans during any calendar year, (ii) capital expenditures related to operational emergencies, equipment failures or outages or expenditures that SCANA reasonably determines are then necessary to maintain the safety and integrity of any asset or property in response to any unanticipated or unforeseen and subsequently discovered events, occurrences or developments or (iii) as required by law or a governmental entity;

 

   

except as required by any SCANA benefit plan or other written agreement in effect on the date of the merger agreement, (i) granting any director or officer any increase in compensation or pay, or award any bonuses or incentive compensation, including in the case of any SCANA officer, any changes associated with promotions or other position changes, regardless of whether such promotions or changes were previously announced, (ii) granting to any current or former director, officer or employee any increase in severance, retention or termination pay, (iii) granting or amending any equity awards, (iv) entering into any new, or modifying any existing, employment or consulting agreement with any current or former director or officer or individual consultant pursuant to which the annual base salary of such individual exceeds $250,000 or the term of which exceeds twelve months, (v) establishing or amending in any material respect any material collective bargaining agreement or material benefit plan, (vi) taking any action to accelerate any rights or benefits under any benefit plan, or (vii) hiring or

 

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promoting any new officer (other than any officer whose hiring or promotion has been publicly announced, but that has not yet taken effect as of the date of the merger agreement); provided, however, that, other than as set forth in subclause (i), the foregoing shall not restrict SCANA or its subsidiaries from entering into or making available to newly hired employees or to employees in the context of promotions based on job performance or workplace requirements, in each case, in the ordinary course of business, plans, agreements, benefits and compensation arrangements that have a value that is consistent with its past practice of making compensation and benefits available to newly hired or promoted employees in similar positions under similar circumstances;

 

    changing its accounting methods, principles or practices, where such changes would reasonably be expected to be material to SCANA and its subsidiaries, taken as a whole (other than as required by GAAP);

 

    (i) making, changing or rescinding any material tax election, any tax accounting period or adopting or changing any material method of tax accounting, (ii) settling any material tax liability or consenting to any material claim or assessment or obtaining any material ruling related to taxes, (iii) filing any amended material tax return or (iv) entering into any material closing agreement relating to taxes;

 

    materially amending, modifying, terminating or waiving any material rights under any contract (i) required to be filed by SCANA as a “material contract” pursuant to Item 601(b)(10) of Regulation S-K under the Securities Act, (ii) that provides for indebtedness of SCANA or any of its subsidiaries of more than $50 million, (iii) that resulted in expenditures, receipts, liabilities, or payments by SCANA or any of its subsidiaries of more than $80 million in the 2016 fiscal year or 2017 fiscal year or (iv) that requires SCANA or any of its subsidiaries to incur indebtedness or liabilities, or to make payments or expenditures of more than $80 million in any one future fiscal year (in the case of clauses (ii) and (iii), excluding (a) contracts that can be terminated for convenience on less than 90 days’ notice without material payment or material penalty and (b) any contracts for the supply of natural gas capacity or commodity) (we refer to such contracts as SCANA material contracts), or entering into any contract that if entered into prior to the date of the merger agreement, would have been deemed a SCANA material contract;

 

    adopting or entering into a plan of complete or partial liquidation, dissolution, merger (other than the merger), consolidation, restructuring, recapitalization or other reorganization;

 

    materially changing or entering into any IT systems or cyber-security contracts that are material to SCANA and its subsidiaries; and

 

    authorizing, agreeing or committing to take any of the foregoing actions.

Other Covenants and Agreements

The merger agreement contains certain additional covenants and agreements between Dominion Energy and SCANA relating to the following matters, among other things:

 

    cooperation between Dominion Energy and SCANA in preparation of the Form S-4 (of which this proxy statement/prospectus is a part);

 

    the delivery of certain comfort letters and tax representation letters by Dominion Energy and SCANA for use in connection with the Form S-4 (of which this proxy statement/prospectus is a part);

 

    cooperation between Dominion Energy and SCANA to obtain all governmental approvals, consents and waiting period expirations required to complete the merger;

 

    providing prompt notice to the other parties of any communications received from any governmental entity with respect to the merger or