Southern company to sell stakes in up to 26 solar projects

In one of the biggest sales of solar assets since SunEdison went belly-up, yesterday power giant Southern Company announced that it will sell a minority share in up to 1.7 GW of solar assets that it has collected over the years.

Southern Company Executive VP and Chief Financial Officer Arthur Beattie estimates that this could include up to 26 individual solar assets, which stretch from California to North Carolina, and typically feature 20-year power contracts.

The power company’s plans to sell its solar assets follows conclusion of a deal to sell its Elizabethtown and Elkton gas plants for $1.7 billion. Southern’s debt rose sharply in mid-2016 and now stands at just under $50 billion, according to Bloomberg.

Southern’s sudden need for cash is in part due to an additional $1.4 billion in costs to complete the Vogtle 3 & 4 nuclear reactors in Georgia, which have been in trouble following Westinghouse’s bankruptcy in March. Bloomberg estimates that total costs for the projects have risen to more than $25 billion.

Southern Company is one of the few diversified power companies in the United States to remain staunchly loyal to nuclear power. This is despite ballooning costs and a failure to meet timelines on Vogtle and other projects, and as other power companies such as Duke abandon nuclear power projects in favor of utility-scale solar.

This appears to be a good time to sell a stake in solar plants, and during the company’s Q3 earnings call the company agreed with Wells Fargo’s assumption that demand remains strong for such projects.

“There are investors out there, we think they’re looking for passive kind of deployment of capital into 20-year average life assets, very predictable, high-quality kind of cash flows coming off of that,” noted Beattie. “So we think there’s value in the marketplace.”

Mercom Capital CEO Raj Prabhu notes that even with flagging demand from yieldcos, that there is demand from investment firms. “For the right price it always a good time to sell,” muses Prabhu. “According to Mercom Q3 funding report, project acquisitions from yieldcos fell off in Q3. But investment firms continue to be strong acquirers of solar projects.”