Summary
This 8-K filing from Southern Company (SO) primarily concerns Mississippi Power Company's decision to exercise its option to purchase a combined cycle generating facility at Plant Daniel. The lease for this facility was set to expire in October 2011, and Mississippi Power has opted to purchase it rather than renew the lease. This decision involves a cash payment of approximately $84 million and the assumption of $270 million in debt that matures in 2021, carrying a 7.13% fixed interest rate. This transaction will result in the facility being recorded on the balance sheets of Mississippi Power and Southern Company at fair value. Mississippi Power plans to maintain its traditional capital structure by adding equity to support the assumed debt. Additionally, Mississippi Power has requested an accounting order from the Mississippi Public Service Commission (PSC) which, if approved as requested, would align revenue requirements under the purchase option with those of the extended operating lease, deferring differences as a regulatory asset. The outcome of this PSC request is uncertain.
Key Highlights
- 1Mississippi Power will purchase the Plant Daniel combined cycle generating facility, ending its operating lease in October 2011.
- 2The purchase price includes a $84 million cash payment and the assumption of $270 million in Lessor debt maturing in 2021.
- 3The assumed debt has a fixed interest rate of 7.13%.
- 4The facility will be recorded on the balance sheet at its fair value upon purchase.
- 5Mississippi Power intends to add equity to its capital structure to support the assumed debt.
- 6Mississippi Power filed a request for a regulatory accounting order with the Mississippi PSC regarding the purchase.
- 7The outcome of the Mississippi PSC's accounting order request is currently undetermined.