(Reuters) - NextEra Energy Inc (NEE.N) said on Monday it is expanding in Florida by buying some utilities from Southern Co (SO.N) for $5.08 billion, the latest move in a sector consolidating as heavy debt drags on the industry.
Consumers, companies and governments across the United States are looking for ways to be more energy efficient, limiting growth and revenue for many power companies.
NextEra, the parent of Florida Power and Light Co, said it would buy almost all of Southern’s assets, including Gulf Power Co and Florida City Gas.
Atlanta-based Southern is building the first nuclear power plant in the United States in decades. It plans to use the transaction proceeds to cut debt. Southern had about $44.46 billion in long term debt as of Dec. 31, 2017, according to the latest annual filing.
For NextEra, buying Southern’s power and gas assets gives it a bigger foothold in Florida, which is seeing an economic boom.
“A key element of the rationale for the transactions are the excellent complementary geographic and strategic fit of both Gulf Power and Florida City Gas with FPL,” Chief Executive Officer James Robo said on a call with investors. Florida Power and Light is the biggest utility in the state.
“Compared to many other regions in the U.S., an attractive and expanding Florida economy should benefit Gulf Power and Florida City Gas over the long term,” Robo said.
Gulf Power serves around 450,000 customers in eight counties throughout northwest Florida, and has roughly 9,500 miles of power lines and 2,300 megawatts of electric generating capacity.
Florida City Gas serves about 110,000 residential and commercial natural-gas customers, and has 3,700 miles of natural gas pipelines.
FPL, Gulf Power and Florida City Gas are regulated by the Florida Public Service Commission, which means there are no additional approvals necessary for the deal to go through, Robo said.
NextEra expects the deal to add to earnings immediately and intends to finance the transaction by issuing new debt.
BofA Merrill Lynch and Goldman Sachs & Co were financial advisers to NextEra, while Citigroup Global Markets Inc advised Southern Co.
Shares of NextEra and Southern were both up nearly 1.5 percent in morning trade on Monday.
Reporting by Laharee Chatterjee in Bengaluru; Editing by Maju Samuel