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Southern Company Focuses on Expanding Its Generation Assets

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Capital expenditure

Southern Company’s (SO) expansion plans for its regulated segment are backed by a solid capital expenditure plan. SO is planning to spend approximately $13 billion in the next two years as part of its expansion strategy. It should be noted that this does not include ~$8 billion in anticipated debt financing for its AGL Resources acquisition (GAS).

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Focus on capacity addition

Southern Company is aggressively investing to fortify its power generation facilities. Major capital expenditure is allocated for the ongoing construction of its Kemper and Vogtle nuclear projects.

Southern Company’s construction program is currently estimated at $7.7 billion for 2015, $5.6 billion for 2016, and $4.3 billion for 2017. This includes expenditures of $834 million for 2015 and $281 million for 2016 related to the construction of a nuclear plant at Kemper and ~$2.2 billion for acquisitions and construction of new Southern Power generating facilities in 2015.

Renewables

Southern Company is also increasing its renewable energy asset base. It is aiming to increase its renewable generation capacity to 2,600 megawatts. It spent more than $2 billion on renewables (PBW) development and plans to spend $1.3 billion more in 2016.

In 2015, Southern Power contracted over 1,000 megawatts of renewables at an average contract length of 22 years. Duke Energy (DUK) is also diversifying its generation fleet, with a focus on solar energy (TAN) to lessen its dependence on coal.

Southern Company’s capital spending plan, with its stress on strengthening its generation facilities, could be a growth driver in the next few years. Diversifying into renewable generation assets could also improve SO’s fuel mix in the near future.

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