Energy Consumers of the Carolinas
April 15, 2020
By Scott Carlberg, Executive Director
Coronavirus May Light Fuse on ‘Unexploded Bomb’ of Corporate Debt said the New York Times. Santee Cooper is loaded with debt in uncharted territory in a new sort of recession.
The virus may sweep through in a wave but will likely shake family and business finances for years. That is why the State of South Carolina cannot afford the Santee Cooper money pit. Especially now.
The virus re-calibrates debt risk. Coronavirus Lesson: Balance Sheets Matter – Companies with plenty of cash and little debt will be just fine, said a business expert.
This is a measure of fiscal health Santee Cooper cannot meet. Even before the pandemic Santee Cooper debt was a weakness. Even during prosperous times the company suffered two financial downgrades, landing with ratings just above what some call “junk.”
Times have changed. A recession – some say depression – is looming. Fiscal weakness matters more. Debt that may have been a dead-weight in good economic times, is now deadly in an economy seeking to recover or avoid collapse.
Santee Cooper debt is owed by its customers, who may be shouldering loads of debt themselves after weeks of sheltering at home with no paycheck. Keeping Santee Cooper heaps additional debt on customers’ backs, outside of their control. Fair?
Ominous numbers roll in. South Carolina’s Department of Employment and Workforce processed 266,000 initial claims for unemployment since the virus hit. “That compares to just 7,000 initial claims processed during the four weeks prior to the pandemic.” It paid $53 million in Federal Pandemic Unemployment Compensation this past Sunday. (Source)
Predictions in February were that South Carolina would have $1.9 billion extra in its state spending plan starting July 1. That estimate of extra revenue is now reduced to about $700 million. (Source) How will the next set of numbers look as the economy has shriveled further?
Warnings are pointed. “These are going to be lean times the likes of which the United States hasn’t faced in quite a while. Cut where you can,” said one business expert.
Santee Cooper debt can be cut. Keeping Santee Cooper is not necessary. There is a buyer to defuse the debt bomb.
Tough economic times wait for no one. Speed is essential. “This is not the time for committees, study groups, or widespread consensus building,” said the Harvard Business Review. Success depends on “your ability to make rapid decisions and start acting.”
How much is sentiment worth? Holding on to Santee Cooper is sentiment. Consumers especially can’t afford sentiment after Coronavirus. Sentiment does not generate power, pay the bills or excuse debt, mismanagement and, after last week, deception.
How many warning signs are needed before the legislature makes the only responsible choice and sells Santee Cooper?