Southern Co. will sell nearly all the assets it owns in Florida to NextEra Energy Inc. for $5.1 billion as the utility owner pushes to cut debt and pursue a long-delayed nuclear project.
The sale, which includes Gulf Power and Florida City Gas, comes as Atlanta-based Southern has been forging ahead with plans for the first new U.S. nuclear power plant in decades, a project that’s faced construction delays and costs that have soared to more than $25 billion.
Earlier this month Chief Executive Officer Tom Fanning told investors that Southern, which is down 10 percent this year, needed to raise cash to cut debt, boost utility returns and pay for the new reactors. NextEra, meanwhile, is buying into a region it knows well.
“NextEra’s been in the market for a big acquisition for a long time,” Andrew Bischof, an analyst at Morningstar Inc., said in a interview. “For all the transactions that NextEra has gone after, this one makes the most sense.”
Based in Juno Beach, Florida, NextEra owns Florida Power & Light, which serves about 10 million people across the state.
Including debt, the NextEra deal totals $6.48 billion, Southern said in a statement. The Florida City Gas deal may be completed in the third quarter, while the Gulf Power and plant sales may be completed in the first half of 2019. The sale also includes companies holding Southern Power’s interests in the Oleander and Stanton plants. Southern is maintaining its interest in liquefied natural gas assets in Florida.
Southern rose 1.5 percent to $43.37 at 10:49 a.m. in New York. NextEra rose 2.1 percent.
The Vogtle nuclear project in Georgia hasn’t been Southern’s only troubled undertaking. The company also scrapped plans last year for a clean-coal power plant in Mississippi, resulting in $6 billion of pretax charges. At the same time, Southern needs capital to pay for growth at its regulated utilities, where cash flow has been weakened by the U.S. tax overhaul.
The sale will allow Southern to reduce its $7 billion in forecast equity needs by about $3 billion, Fanning said Monday in a call with investors. The company can meet the rest of its fund-raising requirements through internal programs as well as a potential $1 billion in third-party tax equity financing for its wind projects, he said.
“It eliminates the overhang on the equity needs we have,” Fanning said. “Everything else is very manageable.”
Gulf Power serves more than 460,000 customers in Northwest Florida. Florida City Gas has more than 108,000 customers in Miami-Dade and three other Florida counties. Oleander is a gas and distillate-fueled power project with 791 megawatts of capacity. Stanton also burns gas and fuel oil and is near Orlando.
Citigroup Inc. is serving as Southern’s financial adviser, while Jones Day, Troutman Sanders LLP and Gibson Dunn & Crutcher LLP are providing legal counsel.