In what appears to be a trend toward issuing stock in generationsubsidiaries, Southern Company’s CEO A.W. “Bill” Dahlberg announcedthat he will seek approval from the board of directors tocompletely spin-off the company’s Southern Energy subsidiary.

The move follows the company’s previously announced intentionsto spin-off its remaining 80% ownership in the subsidiary to thecompany’s shareholders between April and Sept. 2001. The companyhopes that the separation will take place on or about April 2,2001.

The trend of spinning-off generation subsidiaries in the energyindustry is not new, but is just beginning to heat up. Xcel Energysuccessfully issued stock in NRG Energy back in May, and analystswith Deutsche Banc believe others will attempt to reap added valueby issuing IPOs for their generation subsidiaries. The firm pointsout that in addition to Southern Energy completing its initialpublic offering (IPO) on its common stock in October, otherindustry leaders are now following the lead (see NGI, Nov. 20).

Constellation Energy and Reliant Energy have already announcedsimilar IPO plans for early 2001. Deutsche Banc believes othercandidates prime for IPOs include: Allegheny Energy; AmericanElectric Power,; Duke Energy; Edison International; Entergy Corp.;Exelon Corp.; FPL Corp.; PG&E Corp.; PPL Corp.; Public ServiceEnterprise Group and UtiliCorp United.

Southern Energy received total gross proceeds in the amount of$1.8 billion from its 20% IPO, and a concurrent securitiesoffering. Currently the parent company holds 272 million shares(80%), of the outstanding shares of Southern Energy. 66.7 millionshares (20%) are privately held.

The spin-off must receive several approvals including SouthernCompany’s board of directors, which will consider the plan based ongeneral market conditions among other things.

Alex Steis

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