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Southern Energy to Spin-off in April 2001

Southern Energy to Spin-off in April 2001

In what appears to be a trend toward issuing stock in generation subsidiaries, Southern Company's CEO A.W. "Bill" Dahlberg announced that he will seek approval from the board of directors to completely spin-off the company's Southern Energy subsidiary.

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

The trend of spinning-off generation subsidiaries in the energy industry is not new, but is just beginning to heat up. Xcel Energy successfully issued stock in NRG Energy back in May, and analysts with Deutsche Banc believe others will attempt to reap added value by issuing IPOs for their generation subsidiaries. The firm points out that in addition to Southern Energy completing its initial public offering (IPO) on its common stock in October, other industry leaders are now following the lead (see NGI, Nov. 20).

Constellation Energy and Reliant Energy have already announced similar IPO plans for early 2001. Deutsche Banc believes other candidates prime for IPOs include: Allegheny Energy; American Electric Power,; Duke Energy; Edison International; Entergy Corp.; Exelon Corp.; FPL Corp.; PG&E Corp.; PPL Corp.; Public Service Enterprise Group and UtiliCorp United.

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

The spin-off must receive several approvals including Southern Company's board of directors, which will consider the plan based on general market conditions among other things.

Alex Steis

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