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Southern Co. continues asset acquisition spree with Texas wind deal

Southern Co. unit Southern Power Co. has acquired the 174-MW Salt Fork and 126-MW Tyler Bluff wind facilities in Texas from EDF Renewable Energy for an undisclosed sum.

The 87-turbine Salt Fork facility is in Donley and Gray counties, and will sell electricity and associated renewable energy credits, or RECs, under two separate power purchase agreements. The city of Garland, Texas, has a 14-year PPA for 150 MW and Salesforce.com Inc. has a 12-year PPA for 24 MW.

Meanwhile, the 52-turbine Tyler Bluff facility is in Cooke County, and will sell a majority of its output to Procter & Gamble Co. under a PPA. Southern Power will have the option to keep or sell the remaining RECs.

"These projects fit Southern Power's business strategy of growing its wholesale business through the acquisition and construction of generating assets substantially covered by long-term contracts," the company said in a Dec. 22 statement.

The addition of these facilities grows Southern Power's wholesale renewable portfolio to more than 3,000 MW, including more than 1,000 MW of wind power.

Southern Co. has been investing aggressively at its generation business. But Citi Research analyst Praful Mehta recently questioned whether the asset acquisition spree represents an attempt on the part of Southern to "buy growth" that may not be creating long-lasting value at the company.

"It's no secret that returns for renewable projects are facing pressure from increased competition, and the company's high leverage and limited tax appetite create additional hurdles to achieving reasonable equity returns," Mehta wrote in a Dec. 15 research note.

EDF Renewable Energy subsidiary EDF Renewable Services will provide balance-of-plant services for the Texas wind facilities, which achieved commercial operation this month.

"The sale of a portion of our assets represents an integral part of our business model to maintain a balance between growing our own portfolio while continuing to help fund the development of new projects," said Raphael Declercq, vice president of portfolio strategy for EDF Renewable Energy.

EDF Renewable Energy is a subsidiary of EDF Group.