Southern Co. is shopping a $3.7 billion nuclear settlement and part of its solar-generation business to raise cash after recent acquisitions nearly doubled its debt.
Potential asset sales announced Wednesday follow an earlier decision to offer two natural-gas utilities for $1.4 billion. The Atlanta-based utility owner has held talks with potential buyers over the settlement from Toshiba Corp. for failing to complete the expansion of the Vogtle nuclear plant in Georgia, Chief Executive Officer Tom Fanning said by phone Wednesday.
Southern needs to raise cash as it anticipates about $1.4 billion in added costs to complete Vogtle, a project that has seen costs soar to more than $25 billion. The company is also bailing out its Mississippi Power unit after regulators said they wouldn’t allow it to recover costs for a failed coal-gasification power project from ratepayers, and has debt remaining from expanding into the gas pipeline business.
The asset sales “would minimize our equity need to a degree,” Chief Financial Officer Art Beattie said in the interview. The $1.4 billion sale of two natural-gas distributors, announced last month, “will also mitigate that need somewhat.”
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The solar sale, to be handled by Citigroup, is expected to begin this quarter and would include about a one-third stake in Southern Power’s 1.7-gigawatt solar portfolio, Beattie said. He declined to estimate a sales price.
For its Toshiba settlement, Southern wants less of a discount than Scana Corp. received in September for a similar guarantee, Fanning said. Citigroup paid about $1.85 billion, or 92 percent, for the balance of guarantees held by Scana and Santee Cooper, Scana’s partner in the canceled V.C. Summer nuclear plant in South Carolina. That project was also plagued by cost increases and a bankruptcy filing by Toshiba’s nuclear unit Westinghouse Electric Co.
Scana said selling its claim would help reduce the risk of getting the funds from Toshiba, which has been hit by financial woes tied to Westinghouse, and would help reduce the cost to customers of the abandoned reactors. Southern also would sell the claim to reduce risk, Beattie said.
Southern Power owns 27 U.S. solar projects, 19 of which are already co-owned with third parties. The projects span much of the southern part of the country, from California to North Carolina.
“There’s a tremendous amount of demand,” for the portfolio, Nathan Serota, a New York-based analyst at Bloomberg New Energy Finance, said in an interview.
Institutional investors and pension funds are hungry for renewable-energy projects, emerging this year as leading buyers. Solar farms typically benefit from utility contracts that ensure consistent revenue streams, which dovetail with the long-dated liabilities that insurers and pension fund managers accrue.
For Southern, a sale would come after a major buying spree of solar and wind farms across the U.S., including a 120-megawatt Texas solar project from First Solar Inc. last year. In parts of 2015 and 2016, it was among the most prolific buyers of such assets.
Net debt at Southern has almost doubled since 2015 after a raft of deals including the $8 billion takeover of gas distributor AGL Resources Inc. and the purchase of a 50 percent stake in Kinder Morgan Inc.’s Southern Natural Gas pipeline system for $1.5 billion.
“This is relatively uncommon in the U.S., but it’s a common strategy in Europe to monetize their assets to raise money to redeploy into future projects and to continue to build their pipeline,” Serota said.