Southern Co. Offloads Minor Stake – Analyst Blog

Through its subsidiary Mississippi Power, Atlanta based Southern Company (SO) has agreed to sell a minority stake in the underdeveloped coal-fired electric-generating plant to South Mississippi Electric Power Association (“SME”). The board of SME has approved the purchase of the stake. The unit is located in Kemper County.

 

The coal plant, worth $2.88 billion, is a 582 megawatt integrated gasification combined-cycle (IGCC) power plant. SME will acquire a 17.5% interest in the aforesaid unit for about $450 million. The facility is scheduled to be operational in 2014.

 

Mississippi Power already supplies electricity in the range of approximately 750 to 950 megawatts to SME under an all-requirements contract. With the purchase of the 103 megawatt Kemper output, SME will be able to lower the impact of the operational cost on the existing contract with Mississippi Power.

 

On a separate note, in an effort to retain its premier position in the industry, Southern Company announced a reshuffling in the company’s top managerial levels. Two long-time executives, Ronnie L. Bates, president and CEO of Southern Power and Jerry L. Stewart, chief production officer of Southern Company and senior vice president of Alabama Power, disclosed their retirement plans, effective October 1.

 

Bates will be succeeded by Oscar C. Harper, the vice president of the company’s Georgia Power subsidiary, while Douglas E. Jones, senior production officer of Georgia Power, will take over the position of Stewart. In addition, management designated Theodore J. McCullough to be the senior vice president of Southern Co. Services and also voted him to the position of senior production officer and senior vice president of Alabama Power.

 

Southern Company engages in the generation, transmission, distribution and supply of electricity in the southeastern United States. We believe that there exists limited upside potential for the shares in the near future and expect the stock to perform in line with the broader market over the next six months. Hence, we retain a Neutral recommendation on the stock.