NextEra, Dominion complete major utility acquisitions, expanding reach in the South
The new year opened with the completion of acquisitions that expand the reach of two of the South's dominant utility companies, making them even larger.
NextEra Energy on Tuesday closed on the acquisition of Gulf Power from Southern Company in a deal valued at $6.475 billion. NextEra already owns Florida Power & Light, the state's largest utility with nearly 5 million customers.
- And, after a contentious process, Dominion Energy closed its $14.6 billion deal to buy SCANA Corp., parent company of South Carolina Electric & Gas.
The acquisition of Gulf Power "increases NextEra's dominant position in Florida," analyst Paul Patterson at Glenrock Associates, told Utility Dive.
In addition to Gulf Power, NextEra's acquisition, announced last spring, also included Florida City Gas and interests in two natural gas-fired plants in Florida: full ownership of the 791 MW Plant Oleander and a 65% stake in the Stanton Energy Center, a 660 MW combined cycle plant in which the Orlando Utilities Commission and the Florida Municipal Power Agency both have stakes.
Gulf Power is the main electric utility in northwest Florida with 450,000 customers. Florida City Gas serves about 110,000 residential and commercial natural gas customers in Miami-Dade, Brevard, St. Lucie and Indian River counties.
For NextEra, the deal comes after two failed acquisition attempts. In 2015, NextEra's $4.3 billion bid to acquire Hawaiian Electric was shot down by state regulators. And in 2017, regulators in Texas rejected NextEra's attempt to buy Oncor Electric for $18.7 billion. In Florida, however, the utility had a home-court advantage.
"NextEra has done well in the Florida regulatory environment," Patterson said. In addition, he said there could be "incredible synergies" to having both utilities under a single corporate parent.
For Southern, the price for Gulf Power was a less expensive means of raising capital than offering new stock, Patterson said. Southern is looking to raise as much as $7 billion, in part to make up for recent bad bets.
After years of rising costs and missed deadlines, Southern's Mississippi Power subsidiary had to abandon its $7.5 billion Kemper coal gasification project. More recently, Southern has had to absorb some of the costs associated with the massively over budget Vogtle nuclear plant under construction in Georgia.
A similar nuclear project was the impetus for the sale of SCANA to Dominion Energy. Dominion made an offer for SCANA after SCANA subsidiary SCE&G and Santee Cooper abandoned the V.C. Summer nuclear project that was being built in South Carolina. The project was billions of dollars over budget and years behind schedule.
Dominion's offer for SCANA included $1.9 billion in refunds to customers for the failed Summer nuclear project, but Dominion said that any legislative or regulatory changes that would hinder its ability to recover costs associated with the Summer project would scuttle the deal.
Several battles ensued, and some analysts said it would be a better deal for Dominion and its shareholders than it would be for SCE&G customers. Eventually Dominion agreed to settle a $2 billion class action lawsuit and in mid-December South Carolina regulators approved the acquisition.
Some lawsuits remain, but they are not considered to be material to the acquisition.
"Not everything is resolved," Patterson said, "I wouldn't be surprised if litigation continues," but regulators clearly wanted the acquisition to move forward.
The combination expands Dominion's operations in Georgia and the Carolinas with the addition of gas utility customers of SCANA's Public Service Company of North Carolina and about 737,000 electric utility customers from SCANA's SCE&G subsidiary.
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