Last week, Southern Power – a subsidiary of electric utility company Southern Co. (SO) – announced its decision to build one of the country’s largest biomass power plants in eastern Sacul, Texas. Construction of the 100-megawatt plant is slated to commence this fall, with commercial operation projected for the summer of 2012.
As part of the project, Southern Power has agreed to acquire the Nacogdoches Power LLC biomass project from American Renewables LLC, a developer and operator of clean energy facilities utilizing biomass materials as fuels.
The power plant’s output has already been committed through a 20-year power purchase agreement with Austin Energy, the municipal utility owned by and serving Austin, Texas.
The plant, to be built over 165 acres, will use about 1 million tons of biomass materials (including forest residue, wood processing residues and municipal wood waste) annually as fuel, which is planned to be procured within a 75-mile radius of the project site. Southern Power will burn and boil the material to generate steam to turn turbines. Post completion, the $300 million plant will be one of the biggest biomass generators in the U.S., enough to power up to 80,000 homes.
We see the Nacogdoches acquisition and the subsequent construction of the power plant as a good strategic move by Southern Power. Apart from diversifying its fuel mix and ensuring reliable, affordable, and cleaner electricity generation, the deal is consistent with the company’s goal to pursue cost-effective renewable energy options. 
Southern Power owns and operates more than 7,500 megawatts-worth of energy plants across Alabama, Florida, George and North Carolina, with an additional 820 megawatts in development in North Carolina and Texas.
Its parent company, Atlanta-based Southern Co., acquires, develops, builds, owns and operates power production and delivery facilities and provides a broad range of energy-related services to utilities and industrial companies in selected countries around the world. The company businesses include independent power projects, integrated utilities, a distribution company, and energy trading and marketing businesses outside the southeastern U.S.
Read the full analyst report on “SO”
Zacks Investment Research