NextEra (NEE) to Acquire Southern Company Assets for $6.475B
NextEra Energy NEE announced that it has signed a definite agreement with The Southern Company SO to acquire some of its Florida assets for $6.475 billion, including the assumption of nearly $1.4 billion of Gulf Power debt.
The agreement to acquire will include Gulf Power, which serves electric customers in northwest Florida; Florida City Gas, which serves residential and commercial natural-gas customers and ownership interests in the Oleander and Stanton natural-gas generating plants located in Florida. Acquisition is expected to be completed in the first half of 2019, subject to all regulatory approval and permissions.
NextEra Energy is expected to fund the $5.1 billion purchase price through the issuance of new debt.
Benefits for NextEra
NextEra Energy through its subsidiary Florida Power & Light Company (“FPL”) serves nearly 10 million people across Florida and the acquisition of additional assets from Southern Company will supplement existing operations of the company.
The acquisition will be immediately accretive to NextEra Energy’s earnings on closing and is expected to boost 2020 and 2021 adjusted earnings of the company by 15 to 20 cents per share.
Benefits for Southern Company Customers
NextEra Energy is among the cleanest energy providers of the United States and thanks to its advanced technology and high-quality assets, FPL's residential customer bill is nearly 20% below the other Florida investor-owned utilities and nearly 30% below the national average.
Nearly 600,000 customers of Gulf Power and Florida City Gas will enjoy the low rates and high-quality services from FPL.
Future Plans of FPL
FPL is among the cleanest electricity generators of the United States, at present nearly 87% of its electricity comes from natural gas (70%) and nuclear power (17%). FPL currently aims to expand its renewable power generation portfolio by adding new solar plants in its portfolio.
FPL has plans to build four new solar energy centers across Florida by mid-2019, adding to its existing fleet of 14 solar plants. The cost-effective new solar plants will result in net savings to FPL customers in the long run.
Acquisition & Merger in Utility Space
Utility sector operators don’t shy away from merger and acquisition (M&A) activities to supplement organic growth. In addition to giving their operations greater scale and scope, such measures also lead to cost synergies and better utilization of resources. The larger the companies, the more access they have to funds essential for vital infrastructure upgrades.
We believe that in a mature energy market like the United States, M&As represent a sure way of enhancing market share.
Beginning of this year, SCANA Corporation SCG entered into a merger agreement with Dominion Energy D. Per the accord, each stock holder of SCANA will likely get 0.669 shares of Dominion. Considering the assumption of $6.7 billion debt of SCANA by Dominion, the transaction is worth roughly $14.6 billion.
Price Movement
In a year’s time, shares of NextEra Energy have gained 15.8% against its industry’s decline of 5.7%.
Zacks Rank
NextEra Energy currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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