From Scott Carlberg

A booming economy helps all companies. Corporate sins are easier to hide when money is coming in.

Not so in a bad economy. Dollars are short. Jobs lost. Household budgets crunched. Frankly, it is galling to pay extra hard-earned dollars for power plant failures.

So get ready; might get tough. Business headlines say, “Historic times in the US economy.”

What does that have to do with South Carolina selling or keeping Santee Cooper? Maybe a lot.

What happens if Santee Cooper’s manufacturing and corporate customers scale back? Less work, less power used, less revenue? How would Santee Cooper pay down debt with less money coming in?

Answer: Santee Cooper’s board could raise customers’ rates since they can do that with no outside oversight. Higher rates, a vote away.

Pay attention to the business environment:

  • The economy is in for tough times. (Source – MarketWatch)
  • Crashing financial markets are increasing the risk of a vicious cycle. (Source – NY Times)
  • “…companies of all stripes are drawing down the lines of credit … a leading indicator of extreme financial and economic nervousness.” (Source – Vanity Fair)

Look at the risk of high debt:

  • Corporate Debt Loads a Rising Risk as Virus Hits Economy. (Source – Time)
  • A Decade After the Financial Crisis, Corporate Finance Must Contend with These New Ticking Debt Time Bombs (Source – Fortune)

Finally, this hits home: “There is also concern that some debt may not be financing productive investment. There is evidence that a large share of the borrowing that companies are currently doing is not being used to invest in growing their own productive capacity.” (Source – PBS Newshour)

Put two-and-two together.

What company has extremely high corporate debt, not being used for a productive capacity? Santee Cooper.

A sale wipes that debt clean in what looks like a challenging time ahead.