NextEra Energy, Inc. has entered into definitive agreements with Southern Company to acquire Gulf Power, Florida City Gas and its ownership interests in the Oleander and Stanton natural-gas generating plants located in Florida. The transactions are valued at approximately $6.475 billion, including the assumption of approximately $1.4 billion of Gulf Power debt. The companies are expected to benefit from NextEra Energy's operating capabilities, with an intense focus on continuous improvement and a culture of innovation.
NextEra subsidiary Florida Power & Light Co. serves nearly five million customer accounts or an estimated 10 million people across nearly half of the state of Florida. FPL's typical residential customer bill is approximately 20 percent below the other Florida investor-owned utilities and nearly 30 percent below the national average, according to NextEra. In 2017, FPL delivered its best-ever full-year period of service reliability and was recognized as being the most reliable electric utility in the Southeast. FPL also has a track record of making smart investments in modernizing its power generation fleet and strengthening its energy grid. NextEra Energy claims its culture of continuous improvement and focus on smart investments has reduced operations and maintenance (O&M) expenses and has helped drive significant productivity enhancements, which has resulted in FPL's cost position. For the past four years, FPL has had the lowest non-fuel O&M cost per kilowatt-hour in the country.
NextEra Energy expects to employ its long-term strategy of advancing affordable, reliable and clean energy and making smart infrastructure investments at Gulf Power and Florida City Gas. NextEra Energy expects to extend over time its value proposition of low bills, clean energy, high reliability and outstanding customer service to the approximately 600,000 total customers of Gulf Power and Florida City Gas.
NextEra Energy expects the transactions to be immediately accretive to earnings upon closing and $0.15 and $0.20 accretive to its 2020 and 2021 adjusted earnings per share (EPS) expectations, respectively. As a result, upon closing of the transactions, NextEra Energy expects its 2020 adjusted EPS expectations to be in a range of $8.70 to $9.20 and its 2021 adjusted EPS expectations to be in a range of $9.40 to $9.95.
NextEra Energy intends to finance the approximately $5.1 billion purchase price through the issuance of new debt. NextEra Energy has reviewed the transactions with the credit rating agencies and, based upon these discussions, following the financing of the transactions and as a result of the expansion of the company's regulated operations, NextEra Energy is expected to continue to maintain $5 billion to $7 billion of excess balance sheet capacity, while maintaining its current strong credit ratings.
Transaction details, approvals and timeline
Through the transactions, NextEra Energy will acquire:
- Gulf Power, which serves approximately 450,000 customers in eight counties throughout northwest Florida and has roughly 9,500 miles of power lines and 2,300 megawatts (MW) of electric generating capacity.
- Florida City Gas, which serves approximately 110,000 residential and commercial natural-gas customers in Florida's Miami-Dade, Brevard, St. Lucie and Indian River counties with 3,700 miles of natural gas pipelines.
- 100 percent ownership interest in Plant Oleander, a natural-gas fueled, simple-cycle combustion turbine electric generation plant located near Cocoa, Florida, with a generating capacity of 791 MW and power purchase agreements with the Florida Municipal Power Agency and Seminole Electric Cooperative.
- 65 percent ownership interest in Stanton Energy Center, a combined-cycle electric generating unit, with a generating capacity of approximately 660 MW, located near Orlando, Florida. The 65 percent interest is contracted with the Orlando Utilities Commission and Florida Municipal Power Agency.
The acquisitions of Gulf Power and the ownership interests in the Oleander and Stanton generating plants are subject to receipt of approval from the Federal Energy Regulatory Commission and the expiration or termination of the waiting period under the Hart-Scott-Rodino Act. The Florida City Gas acquisition is subject to the expiration or termination of the waiting period under the Hart-Scott-Rodino Act and is conditioned on the consummation of Southern Company's previously announced dispositions of the Elizabethtown Gas and Elkton Gas divisions of Southern Company Gas. Pending receipt of required approvals and other customary conditions and approvals, NextEra Energy expects to complete the acquisition of Florida City Gas in the third quarter of this year, with the Gulf Power and natural-gas generating plant acquisitions anticipated to close in the first half of 2019.
NextEra Energy's management uses adjusted earnings, which is a non-GAAP financial measure, internally for financial planning, analysis of performance, reporting of results to the board of directors and as an input in determining performance-based compensation under the company's employee incentive compensation plans. NextEra Energy also uses earnings expressed in this fashion when communicating its financial results and earnings outlook to analysts and investors. NextEra Energy's management believes that adjusted earnings provide a more meaningful representation of NextEra Energy's fundamental earnings power. Adjusted earnings expectations exclude the effect of certain items, such as nonqualifying hedges and unrealized gains and losses on equity securities held in NextEra Energy Resources' nuclear decommissioning funds, none of which can be determined at this time.