Southern, Turner Renewable Buy 50MW Plant - Analyst Blog

On May 23, 2014, Southern Power – an affiliate of electric utility firm Southern Company SO − and billionaire Ted Turner-owned Turner Renewable Energy have jointly purchased the Macho Springs Solar Power Plant from First Solar Inc. FSLR. The 50-megawatt MW capacity plant is the largest photovoltaic power facility of New Mexico and will be capable of supplying electricity to more than 18,000 houses.  

This is the seventh solar plant purchase of the partnership, bringing the total capacity to roughly 290 MW. Out of the seven power plants purchased, the Macho Springs facility is the second largest in terms of power generation capacity.

First Solar started the construction of the Macho Springs photovoltaic power plant – spread over 600 acres – in Jul 2013. The plant is expected to start commercial operation by this week. El Paso Electric Co. EE, a public utility firm, will purchase the electricity generated by the plant for a period of 20 years, to efficiently provide clean energy to its 394,000 customers.

Southern Company has been focusing its wholesale business expansion either by acquiring power generating units or building new plants. The recent purchase corroborates this aim.

Headquartered in Atlanta, GA, Southern Company is one of the largest generators of electricity in the nation, serving both regulated and competitive markets across southeastern U.S. Additionally, Southern Company owns all of the common stock of Southern Power, which owns and operates more than 7,500 MW worth of energy plants.

However, Southern Company's heavy reliance on coal-generated energy supply and a lack of meaningful contribution from renewable energy is a matter of concern. With widespread awareness on ‘environment friendly or green' energy, the company may be forced to divert cash flows to ensure regulatory compliance, which can adversely impact profitability.

As a result, Southern Company currently retains a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next one to three months.

Meanwhile, one can look at better-ranked player in the same industry such as Black Hills Corp. BKH. The stock sports a Zacks Rank #1 (Strong Buy).

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