SO Southern Co

By Russell Gold 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (May 22, 2018).

NextEra Energy Inc. is buying a utility and other Florida assets from Southern Co. for $5.1 billion in cash, in a deal that paves the way for America's most valuable power company to grow further.

While NextEra is laying the groundwork for expansion where it is already the dominant player, Southern is selling assets to strengthen a balance sheet battered by cost overruns at a partially built nuclear power plant in Georgia that is billions over budget and years behind schedule.

As part of the deal announced Monday, NextEra said it would issue new debt to purchase Gulf Power, Florida City Gas and partial ownership in two gas-fired power plants from Southern, which is based in Atlanta. It will also assume about $1.4 billion in debt held by the companies it is acquiring. If needed, NextEra said, it could issue another $5 billion to $7 billion in debt before possibly facing a downgrade.

Florida-based NextEra has grown rapidly in recent years and become the most valuable power company in the U.S. by market capitalization, as its subsidiary that builds and operates wind and solar farms has become very profitable. The company, however, has sought to expand its presence in the safer, regulated utility business to maintain investment-grade debt ratings.

NextEra Chairman and Chief Executive Jim Robo said "these transactions are consistent with our longstanding, disciplined approach of maintaining the strength of our balance sheet and credit ratings."

The company serves about 10 million customers in the state through Florida Power & Light and will add about 600,000 new customers in Florida in the transaction. Gulf Power was incorporated in 1925 and has been owned by Southern for the entire time, according to a book of Southern corporate history published in 2011. It provides power to Panama City and Pensacola and surrounding areas.

Southern Chairman and Chief Executive Thomas A. Fanning said on a call with investors Monday that he would not rule out future sales.

"I think we all like to get bigger and stronger, but...if we can improve shareholder prospects by value-enhancing sales, we will certainly consider it," he said.

The deal requires extensive approvals the companies said they expect to be complete by the second quarter of 2019. After the deal, Southern will still operate three utilities: Georgia Power, Alabama Power and Mississippi Power.

Write to Russell Gold at russell.gold@wsj.com

(END) Dow Jones Newswires

May 22, 2018 02:47 ET (06:47 GMT)

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