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Southern Unit Buys 680 MW Florida Plant from Constellation

Southern Power, a subsidiary of Southern Co., has signed a purchase and sale agreement with Constellation Energy to purchase a 680 MW, dual-fueled simple-cycle generating plant in Cocoa, FL, for $206 million.

An 8-K filing made by Southern Power with the Securities and Exchange Commission (SEC) starts the regulatory process for Southern Power's purchase of Oleander power plant from Constellation Energy.

Once the purchase is finalized, the plant will be owned and operated by Southern Power, which owns, builds, acquires and markets energy in the competitive wholesale supply arena. Through Southern Company Generation, the business unit of Southern that oversees both retail and wholesale generation and generation services, Southern operates 272 generating units in 68 fossil plants.

Oleander is located in the growing Florida market, which is part of Southern Company Generation's competitive wholesale growth strategy. Southern Power already co-owns and operates Stanton A near Orlando, FL, with Orlando Utilities Commission, Florida Municipal Power Agency and Kissimmee Utility Authority.

Oleander supplies electricity through long-term wholesale contracts to Florida Power and Light (FP&L) and Seminole Electric Cooperative, Inc. Once the transaction is completed, Southern Power will assume responsibility for these contracts. Southern has existing long-term wholesale power agreements with FP&L as well as with other customers in Florida.

The transaction is expected to close during the second quarter of 2005 subject to regulatory approvals and other standard closing conditions, noted Constellation Energy.

Standard & Poor's Ratings Services (S&P) said that Southern Power's planned acquisition of Oleander is unfavorable to credit quality, but will not affect the company's corporate credit or debt ratings at this time.

The approximate $220 million ($323 per kilowatt) acquisition increases Southern Power's exposure to merchant markets, and will result in peaking assets being about 27% of total assets of 5,475 MW post-acquisition, S&P noted.

Southern Power expects Oleander to provide about 10% of funds from operations through 2007. The plant is 100% contracted through May 2007, 75% through 2009, and 0% thereafter. S&P said it does not have a favorable view of uncontracted peaking assets in the Florida market.

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