Acquisitions and Dispositions

3 Months Ended

Mar. 31, 2019

See Note 15 to the financial statements in Item 8 of the Form 10-K for additional information.

Southern Company

On January 1, 2019, Southern Company completed the sale of all of the capital stock of Gulf Power to 700 Universe, LLC, a wholly-owned subsidiary of NextEra Energy, for an aggregate cash purchase price of approximately $5.8 billion (less $1.3 billion of indebtedness assumed), subject to customary working capital adjustments. The preliminary gain associated with the sale of Gulf Power totaled $2.5 billion pre-tax ($1.3 billion after tax). The assets and liabilities of Gulf Power were classified as assets held for sale and liabilities held for sale on Southern Company's balance sheet as of December 31, 2018.

Southern Power

Construction Projects in Progress

During the three months ended March 31, 2019, Southern Power continued construction of the projects set forth in the table below. Total aggregate construction costs, excluding the acquisition costs, are expected to be between $575 million and $640 million for the Plant Mankato expansion and the Wildhorse Mountain and Reading facilities. At March 31, 2019, total costs of construction incurred for these projects were $347 million and are included in CWIP, except for the Plant Mankato expansion, which is included in assets held for sale in the financial statements. The ultimate outcome of these matters cannot be determined at this time.



Project Facility	Resource	Approximate Nameplate Capacity (MW)	Location	Expected COD	PPA Contract Period
Mankato expansion^(a)	Natural Gas	385	Mankato, MN	May 2019	20 years
Wildhorse Mountain^(b)	Wind	100	Pushmataha County, OK	Fourth quarter 2019	20 years
Reading^(c)	Wind	200	Osage and Lyon Counties, KS	Second quarter 2020	12 years


(a)	In November 2018, Southern Power entered into an agreement to sell all of its equity interests in Plant Mankato, including this expansion currently under construction. This transaction is subject to FERC and state commission approvals and is expected to close mid-2019. The ultimate outcome of this matter cannot be determined at this time. See "Sales of Natural Gas and Biomass Plants" below.


(b)	In May 2018, Southern Power purchased 100% of the Wildhorse Mountain facility. Southern Power may enter into a tax equity partnership, in which case it would then own 100% of the class B membership interests. The ultimate outcome of this matter cannot be determined at this time.


(c)	In August 2018, Southern Power purchased 100% of the membership interests of the Reading facility from the joint development arrangement with Renewable Energy Systems Americas, Inc. described below. Southern Power may enter into a tax equity partnership, in which case it would then own 100% of the class B membership interests. The ultimate outcome of this matter cannot be determined at this time.

Development Projects

Southern Power continues to evaluate and refine the deployment of the wind turbine equipment purchased in 2016 and 2017 to potential joint development and construction projects as well as the amount of MW capacity to be constructed. During the three months ended March 31, 2019, approximately $53 million of equipment was marketed for sale and, subsequent to March 31, 2019, was sold. At March 31, 2019, the equipment was classified as held for sale on Southern Company's and Southern Power's balance sheets. See "Assets Held for Sale" herein for additional information.

The ultimate outcome of these matters cannot be determined at this time.

Sales of Natural Gas and Biomass Plants

In November 2018, Southern Power entered into an agreement with Northern States Power to sell all of its equity interests in Plant Mankato (including the 385-MW expansion currently under construction) for an aggregate purchase price of approximately $650 million. The completion of the disposition is subject to the expansion unit reaching commercial operation as well as various other customary conditions to closing, including working capital and timing adjustments. This transaction is subject to FERC and state commission approvals. The assets and liabilities of Plant Mankato are classified as assets held for sale and liabilities held for sale on Southern Company's and Southern Power's balance sheets as of March 31, 2019 and December 31, 2018. See "Assets Held for Sale" herein for additional information.

On April 17, 2019, Southern Power entered into an agreement to sell all of its equity interests in the Nacogdoches biomass-fueled facility to Austin Energy for an aggregate purchase price of $460 million, subject to customary closing conditions and working capital adjustments.

Each of these sales is expected to close in mid-2019; however, the ultimate outcome of these matters cannot be determined at this time.

Assets Subject to Lien

Under the terms of the PPA and the expansion PPA for Plant Mankato, approximately $538 million of assets, primarily related to property, plant, and equipment, are subject to lien at March 31, 2019.

Assets Held for Sale

As discussed above, Southern Company and Southern Power each have assets and liabilities held for sale on their balance sheets at March 31, 2019 and December 31, 2018. Assets and liabilities held for sale have been classified separately on each company's balance sheet at the lower of carrying value or fair value less costs to sell at the time the criteria for held-for-sale classification were met. For assets and liabilities held for sale recorded at fair value on a nonrecurring basis, the fair value of assets held for sale is based primarily on unobservable inputs (Level 3), which includes the agreed upon sales prices in executed sales agreements.

Upon classification as held for sale in November 2018 for Plant Mankato, Southern Power ceased recognizing depreciation and amortization on the long-lived assets to be sold.

The following table provides Southern Company's and Southern Power's major classes of assets and liabilities classified as held for sale at March 31, 2019 and December 31, 2018:



	Southern Company		Southern Power
	(in millions)
At March 31, 2019
Assets Held for Sale:
Current assets	$	55	$	11
Total property, plant, and equipment	637		604
Goodwill and other intangible assets	82		40
Other non-current assets	44		—
Total Assets Held for Sale	$	818	$	655

Liabilities Held for Sale:
Current liabilities	$	38	$	9
Other non-current liabilities	39		—
Total Liabilities Held for Sale	$	77	$	9

At December 31, 2018
Assets Held for Sale:
Current assets	$	393	$	8
Total property, plant, and equipment	4,583		536
Goodwill and other intangible assets	40		40
Other non-current assets	727		—
Total Assets Held for Sale	$	5,743	$	584

Liabilities Held for Sale:
Current liabilities	$	425	$	15
Long-term debt	1,286		—
Accumulated deferred income taxes	618		—
Other non-current liabilities	932		—
Total Liabilities Held for Sale	$	3,261	$	15

Southern Company and Southern Power each concluded that the sale of their assets, both individually and combined, did not represent a strategic shift in operations that has, or is expected to have, a major effect on its operations and financial results; therefore, none of the assets related to the sales have been classified as discontinued operations for any of the periods presented.

Gulf Power and Southern Power's equity interests in Plant Oleander and Plant Stanton Unit A (together, the Florida Plants) represented individually significant components of Southern Company and Southern Power, respectively; therefore, pre-tax profit for these components for the three months ended March 31, 2018 is presented below:



	For the Three Months Ended March 31, 2018
	(in millions)
Earnings before income taxes:
Gulf Power	$	55
Southern Power's Florida Plants	$	8