“The times, they are a-changing” could be Southern Company’smotto after a recent blitz of reorganization. The company reportedthat its board of directors approved the long-awaited spin-off ofMirant Corp. – formerly known as Southern Energy – and ChairmanA.W. “Bill” Dahlberg is retiring upon completion of thetransaction.

Mirant will be separated by the distribution of 272 millionshares, or 80.3% of Mirant, to Southern’s shareholders of record.The company said pending an Internal Revenue Service ruling, thedistribution will be made on April 2 to the company’s shareholdersof record as of 5 p.m. (EST) on March 21.

“This is the final step in unlocking the value we created inbuilding a fast-growing North American and worldwide energybusiness,” said Dahlberg. “With the planned spinoff, we’redelivering that value to our shareholders. We’re also creating twogreat companies from one. I believe each has an outstandingfuture.”

Although the final tally is not yet set, Southern expects thatshareholders will receive a distribution ratio of 0.4 shares ofMirant for each company share they currently hold. Mirant – theglobal power producer and energy marketer – sold some 66.7 millionshares (19.7%) in an initial public offering in September 2000.

The company also released a new strategy that it will implementupon completion of Mirant’s spin-off. Southern said it would focuson its traditional retail business in the Southeast, competitivewholesale generation in the eight-state “Super Southeast” andenergy-related products and services.

“Our strategy going forward allows us to take our strengths as acompany and match them with the considerable growth opportunitieswe see in the Southeast – the region we know best,” said Dahlberg.

Dahlberg, a 40-year Southern Co. veteran, will be replaced byAllen Franklin on April 2. Franklin, who has been with the companyfor 31 years, will also keep his current positions as president andCEO.

“Southern Company plans to sustain solid revenue and earningsgrowth by refocusing and capitalizing on the strength of the regionwe’ve known best for more than 100 years. the ‘Super Southeast’,”said Franklin. “We are ideally positioned to serve the nation’sfastest growing region because of our size, financial strength,low-cost position and reliability. Our vision keeps us focused onsustainable growth, shareholder value and quality customerservice.”

Franklin outlined some of the company’s future goals: lead theindustry in service and customer satisfaction; continue to earntop-quartile returns, with EPS growth of at least 5% a year; doubleearnings from the competitive generation business over the nextfive years; and produce $50 million in net income fromenergy-related products and services over the next five years.

Southern wasted no time breaking in their new strategy, as thecompany reported that it is increasing its electricity generatingcapacity by 6,600 MW by 2004. Of that, 4,600 MW is earmarked forthe competitive wholesale market in the Southeast.

“The new plants we are building over the next three years arestate of the art in terms of efficiency and environmentalcontrols,” said Franklin. “Our goal is to maintain a strongelectricity network to ensure that our four-state region does notexperience major interruptions in the supply of electricity in theyears ahead.”

Franklin stated that electricity demand is expected to grow by3% a year during the next three years. He added that peak demand onSouthern’s system is projected to be 34,917 MW by 2004, compared to31,854 MW in 2000.

“The critical shortages and high cost of electricity inCalifornia today clearly show what can happen when generatingcapacity does not keep pace with economic growth, and whendependence on a single fuel source – primarily natural gas -increases the cost of production,” Franklin said. Southerncurrently has a diversified electricity generating portfolio, withcoal contributing 72%, nuclear 15%, hydroelectric 3% and oil andgas 7% during 2000.

Franklin said that the company has set reserve margins on itsgenerating capacity of 13.5% to 15%. “Our experience shows thatthis margin is adequate to provide a highly reliable supply ofelectricity to our customers,” the executive said. The company alsosaid it is investing $950 million over the next three years foradditional environmental controls on several of its plants.

Alex Steis

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