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May 21-25: NextEra to buy Southern utilities in $6.48B deal; PJM results surge

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May 21-25: NextEra to buy Southern utilities in $6.48B deal; PJM results surge

A look back and successes and setbacks in the energy industry.

Highs

NEXTERA — NextEra Energy Inc. on May 21 announced that it is acquiring Southern Co. utilities Gulf Power Co. and Florida City Gas as part of a $6.48 billion deal. NextEra also agreed to buy Southern Power Co.'s 791-MW Oleander Power Project and 65% interest in the 660-MW Stanton combined-cycle natural gas plant. The deal terms include a $5.1 billion cash purchase price, which NextEra expects to finance through the issuance of new debt, and the assumption of $1.4 billion of Gulf Power debt. NextEra estimates the deal will increase EPS by 15 cents in 2020 and by 20 cents in 2021. NextEra still expects to maintain $5 billion to $7 billion of excess balance sheet capacity, which management indicated could go toward share buybacks, capital investments or future acquisitions. Southern, meanwhile, plans to use sale proceeds to reduce its debt and improve its balance sheet.

GREAT PLAINS/WESTAR — Regulators in Kansas and Missouri on May 24 approved the "merger of equals" combining Great Plains Energy Inc. and Westar Energy Inc. under a new holding company with a combined equity value of nearly $15 billion. The decision is an about-face for the Kansas Corporation Commission, which in April 2017 shot down a previous bid for Great Plains to acquire Westar because of cost concerns. The Federal Energy Regulatory Commission signed off on the new stock-for-stock deal earlier this year. The new holding company, to be named Evergy Inc., will be jointly headquartered in Topeka, Kan., and Kansas City, Mo.

Between

PJM AUCTION — The clearing price for PJM Interconnection's 2021/2022 capacity auction surged about 83% to a minimum of $140/MW-day. The results released May 23 indicate the auction cleared 500 MW of additional coal generation compared to last year's auction. The auction also cleared 1,000 MW of additional gas-fired generation, but about 7,400 MW less nuclear generation. While independent power producers NRG Energy Inc. and Vistra Energy Corp. appeared to be winners, FirstEnergy Corp. and Exelon Corp. identified several nuclear plants that failed to clear the auction. FirstEnergy bankrupt subsidiary FirstEnergy Solutions Corp. confirmed May 24 that its 1,268-MW Perry and 908-MW Davis-Besse plants in northern Ohio and 1,872-MW Beaver Valley nuclear plant in western Pennsylvania did not clear. FirstEnergy Solutions on March 28 notified PJM of its plans to retire all three nuclear plants within the next three years based on current market conditions. Exelon reported that Three Mile Island, Dresden and a portion of the 2,346-MW Byron Generating Station failed to clear the auction.

Lows

ENERGEN — Activist investor Carl Icahn is teaming up with a former pupil for a potential takeover of Permian Basin driller Energen Corp. Icahn said in a May 21 interview on CNBC that he thinks Energen is worth roughly $9.7 billion, which is about $2.8 billion more than Energen's market value. Icahn and Corvex Management LP, headed by Icahn protege Keith Meister, together own 9.9% of Energen's stock, according to a May 21 SEC filing. The same filing disclosed that Icahn bought 2 million Energen shares from Corvex and took out options on 2 million more shares with the potential to buy Energen and flip it to another oil and gas producer. "I don't presume to feel I'm the right buyer for [Energen] because there's such synergies for another company," Icahn said in the interview.