Southern Power, the newly launched non-regulated generation subsidiary of Southern Co., is seeking to round up $1.5 billion in the form of a non-recourse bank deal to back expansion, according to Chris Kysar, director of capital markets and leasing at Southern Co. Kysar told Power Finance & Risk, an LMW sister publication, that Southern Power plans to build plants in Alabama, Florida, Georgia, Kentucky, Mississippi, North Carolina, South Carolina and Tennessee.
Southern Co. has begun sounding out banks and plans to hire up to five lenders to arrange the deal, says a New York banker familiar with its plans. Kysar declined to comment on the lenders it has spoken to and on Southern Power's specific construction plans.
Andre Meade, an equity analyst with Commerzbank Securities in New York, says the proceeds will be used to construct between 4,600-5,000 MW of combined cycle gas turbine plants. The plants' output will be sold to wholesale customers, including municipalities and electricity cooperatives in the southeast, he adds.
Meade says adding gas-fired plants to Southern's predominantly coal- and nuclear-fired generation portfolio will make the company more competitive. "Operating a large portfolio with a mix of fuel [sources] and different types of plants is highly advantageous," he argues.
Kysar says Southern Power has yet to be fully established, but should become functional this year. "We received approval to set up the company from the [Securities and Exchange Commission] and [Federal Energy Regulatory Commission] at the end of December, and everything is proceeding according to plans," he said.
Southern Co., the largest utility in the southeast region, has about 32,000 MW of generation capacity.