Southern Sells Gas Unit That Made $200 Million Off Freeze
(Bloomberg) -- Power provider Southern Company signed an agreement to sell its wholesale gas trading and services business after the unit brought in $200 million during the power crisis in Texas earlier this year.
The sale of the utility’s Sequent Energy Management unit was disclosed in an earnings presentation Thursday, but the buyer and the terms of the deal were not revealed.
“We did sell our wholesale gas trading business in Houston,” Chief Financial Officer Andrew Evans said in an interview with Bloomberg Thursday, adding that the sale reduces Southern’s risk, and was at book value so the company won’t see material gains or losses.
Companies have begun to report profits and losses related to the arctic blast in February that caused widespread power outages across Texas. Last week, Kinder Morgan Inc. divulged a $1 billion gain due to wildly profitable gas sales during the freeze. Others weren’t so lucky. Utility Atmos Energy Corp. racked up $2.5 billion in fuel costs during the disaster.
Southern, one of the biggest power providers in the U.S., donated about $75 million of the income made during the energy crisis to its community partners, Evans said on a conference call with analysts Thursday.
Meanwhile, the Sequent deal was reached Wednesday evening, said Southern Chief Executive Officer Tom Fanning in the interview. The deal has been signed, but hasn’t closed yet. Both Evans and Fanning declined to name the buyer.
The sale also eliminates Southern’s credit support for Sequent of about $1 billion, executives said during the call. They added that Sequent had such variable earnings from year to year that Southern didn’t include the unit’s earnings in its own returns. “If you step back and look at it, because of the balance sheet we are freeing up, that reduces our risk profile,” said Evans.
Sequent was the sixth-biggest marketer of gas ranked by volume in the second quarter of last year in North America, according to the trade publication Natural Gas Intelligence. Southern focuses on asset management and the wholesale marketing, trading, storage and transportation of natural gas, serving utilities, retail aggregators, municipalities and large industrial customers, according to its website.
Southern also expects its nuclear power plant, the only in the U.S. under construction, to start loading fuel in the third quarter and begin service in December. “We’re making great progress on Vogtle,” said Fanning, referring to the Georgia plant. “We can see the light at the end of the tunnel.”
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