The acquisition-hungry utility giant NextEra Energy, which has been eyeing Santee Cooper for months, says it’s still “on the hunt” for a power company after buying one in Florida.
NextEra said Monday that it has agreed to purchase Gulf Power, an electric company on the Florida panhandle, and a natural gas distributor. The deal — worth $6.5 billion, including debt — is NextEra’s third try at an acquisition in two years.
The first two deals, for utilities in Hawaii and Texas, were rebuffed, and NextEra has built a reputation in the utility business as a company hungering for a transaction.
Much of the speculation around its interest has swirled around Santee Cooper, the state-owned utility that provides power to nearly 1 million South Carolina homes and businesses. Gov. Henry McMaster put the utility on the auction block last fall after its massive nuclear project went belly up.
NextEra has emerged as a leading contender for a sale, if one ever takes shape. The Florida-based energy giant has enlisted a team of nine lobbyists in Columbia, and it has floated terms for a deal. The Legislature would have to bless a sale.
The company’s Gulf Power deal isn’t expected to satisfy its appetite for another power company. Thanks to the Florida utility’s steady profits, it’s not expected to eat into NextEra’s ability to borrow for an acquisition.
“We’re going to be, as we always are, on the hunt for attractive opportunities,” NextEra chief executive James Robo said on a conference call Monday. “Having done this transaction, the strategy hasn’t changed.”
NextEra is buying Gulf Power from Atlanta-based Southern Co., another giant in the electric industry. Southern is leading the only effort to build nuclear reactors in the U.S., at a massive construction site in Georgia. The deal is meant to shore up its finances and pay down some of Southern’s debt.
Santee Cooper’s canceled project was a twin to Southern’s, but Santee Cooper has less flexibility to wiggle out of a jam. It doesn’t have investors, it has a smaller base of customers, and it doesn’t have a huge cache of assets to sell.
The nuclear project already accounts for nearly 5 percent of Santee Cooper’s electric rates, but that number is expected to increase closer to 13 percent in a few years.
That’s why the governor is trying to sell Santee Cooper in the first place. His aim is to sell the utility and use the proceeds to pay off the debt it racked up on the unfinished reactors north of Columbia. Santee Cooper borrowed some $4 billion to cover its share of the $9 billion failure.
The fiasco in South Carolina has already lured one out-of-state utility owner into the fray: Virginia-based Dominion Energy offered this year to buy SCANA Corp., which owned the majority of the failed V.C. Summer project.
NextEra’s interest in buying Moncks Corner-based Santee Cooper is to replicate a playbook its executives developed in the Sunshine State, where it owns Florida Power & Light. It depended on aging power plants that burned coal and oil, it didn’t have much renewable energy, and it operated an electric grid vulnerable to storms.
It turned that narrative around by building new natural gas-burning power plants, planning large solar farms and putting power lines below ground. In South Carolina, analysts say, it could do the same — and profit off the fixes.
But such a deal is no sure bet. For one thing, keeping the utility’s rates low in the private sector would be a tricky needle to thread: Santee Cooper doesn’t pay taxes, it gets low interest rates when it borrows money and it doesn’t pay dividends to investors.
And then there’s the political reality in Columbia, where lawmakers have spun their wheels on the future of the state’s utilities. The Legislature is poised to finish the year without any serious consideration of a sale of Santee Cooper.