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Southern Company to Sell Its Florida Assets to NextEra Energy

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Deal valued at $6.5 billion

Top utility stocks NextEra Energy (NEE) and Southern Company (SO) soared 2.4% and 1.7%, respectively, on May 21 after the latter agreed to sell its Florida-based assets to NextEra Energy. The deal has been valued at $6.5 billion including debt and involves the sale of Southern Company’s Gulf Power and Florida City Gas along with its Stanton and Oleander power plants. The Florida City Gas transaction is expected to close by Q3 2018, while the Gulf Power deal is expected to close by the first half of next year.

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NextEra gets mightier

Renewables giant NextEra Energy has been looking for acquisitions for quite a few years, failing to buy Oncor and Hawaiian Electric. The Southern Company deal, subject to regulatory approval, is expected to make NextEra Energy’s footprint even stronger in its principal operating state, Florida. For NextEra Energy, one of the fastest-growing utilities, the deal is expected to add $0.15 and $0.20 to its adjusted earnings per share in 2020 and 2021, respectively.

Southern Company is planning to use the proceeds of the deal to cut debt and strengthen its balance sheet. Its power plants have dented its financials in the last few years, and management expects to save ~$3 billion in new equity issuances due to the asset sale. The deal involves 6% of Southern Company’s total customer base. This year, NextEra Energy stock has risen more than 3%, while Southern Company stock has fallen ~10%, mirroring weakness in broader utilities (XLU).

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