Southern Co. on May 21 announced it is selling certain assets in Florida, including Gulf Power Co. and Florida City Gas, to NextEra Energy Inc. for approximately $6.48 billion, including the assumption of approximately $1.4 billion of Gulf Power debt.
The sale also includes Southern Power Co.'s 100% interest in the 791-MW Oleander and 65% interest in the 660-MW Stanton gas-fired power plants.
"These Florida businesses are being sold at a price that provides substantial value to our stockholders, while entrusting the customers of these exceptional franchises to a high-quality utility company that has a well-established presence in the state," said Thomas Fanning, chairman, president and CEO of Southern. The company plans to use sale proceeds to reduce its debt and improve balance sheet.
On Southern's May 2 call, management emphasized the company's plans to pursue "investor-friendly funding" options through asset sales or refinancing to help mitigate a projected equity need of $7 billion over the next five years.
NextEra operates Florida Power & Light Co., which serves nearly five million customer accounts across nearly half of the state of Florida. The company intends to also employ its long-term strategy in FPL of advancing clean energy and making smart infrastructure investments at Gulf Power and Florida City Gas, which have approximately 600,000 customers in total.
"[T]hese transactions are consistent with our long-standing, disciplined approach of maintaining the strength of our balance sheet and credit ratings, both of which are among the strongest in the industry. Following the financing of the transactions and as a result of expanding our regulated operations, we expect to continue to maintain $5 billion to $7 billion of excess balance sheet capacity with which to further support our long-term growth," said NextEra Chairman and CEO Jim Robo. The company plans to finance the approximately $5.1 billion purchase price through the issuance of new debt.
The deal is expected to be immediately accretive to earnings upon closing. NextEra will also raise its adjusted EPS expectations by 15 cents for 2020 and 20 cents for 2021, following deal completion.
The transaction for Florida City Gas is anticipated to close in the third quarter of 2018, while the transactions for Gulf Power and the interests in the two power plants are anticipated to close in the first half of 2019. The transactions are subject to the expiration of any applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, plus approvals from the Federal Energy Regulatory Commission and the Federal Communications Commissions for the deals involving Gulf Power and the two power plants.
Southern has tapped Citigroup Global Markets Inc. as exclusive financial advisor and Jones Day, Troutman Sanders LLP and Gibson Dunn & Crutcher LLP as legal counsel. NextEra Energy has hired Bank of America Merrill Lynch and Goldman Sachs & Co. LLC as financial advisors; Wachtell, Lipton, Rosen & Katz is acting counsel and Skadden, Arps, Slate, Meagher and Flom LLC as regulatory counsel.
NextEra Energy will hold conference call to discuss the transaction at 8:30 a.m. ET today. Southern will hold a financial analyst call at 9:45 a.m. ET today.
