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Income Insights

Southern Bounces Back, A Breakout May Take Longer

By Roger S. Conrad on Feb. 20, 2019

Back in October, I urged Conrad’s Utility Investor readers to stick with Southern Company (NYSE: SO)—despite the utility’s struggles building America’s first new nuclear power plant since the 1980s.

The company had just reached a deal with its partners to keep the Vogtle project on track. The key feature was Municipal Electric Authority (22.7 percent ownership), Oglethorpe Power (30 percent) and Dalton Utilities (1.6 percent) would continue financial support. In return, Southern’s Georgia Power unit (45.7 percent) would shoulder 55.7 percent of any future cost overruns between $800 million and $1.6 billion, and 65.7 percent of anything higher.

In addition, cost overruns exceeding $2.1 billion would trigger two possibilities: First, the three minority partners would have the right to “put” their ownership interests to Southern in lieu of paying their share of costs. Second, Southern could unilaterally cancel the project.

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