ACQUISITIONS AND DISPOSITIONS

9 Months Ended

Sep. 30, 2020

Business Combinations [Abstract]

ACQUISITIONS AND DISPOSITIONS

ACQUISITIONS AND DISPOSITIONSSee Note 15 to the financial statements in Item 8 of the Form 10-K for additional information, including details of assets and liabilities held for sale at December 31, 2019 for Southern Company, Southern Power, and Southern Company Gas. The Registrants had no material assets or liabilities held for sale at September 30, 2020.

Southern Power

Asset Acquisitions

During the nine months ended September 30, 2020, Southern Power acquired a controlling interest in the wind facility listed below. Acquisition-related costs were expensed as incurred and were not material.

Project Facility	Resource	Seller	Approximate Nameplate Capacity (MW)	Location	Southern Power Ownership Percentage		COD	PPA Contract Period
Beech Ridge II	Wind	Invenergy Renewables LLC	56	Greenbrier County, West Virginia	100% of Class A	(*)	May 2020	12 years

(*)In May 2020, Southern Power purchased 100% of the Class A membership interests and now owns the controlling interest in the project, with the Class B member, Invenergy Renewables LLC, owning the noncontrolling interest.

In March 2020, Southern Power entered into an agreement to acquire a controlling membership interest in an approximately 300-MW wind facility located in South Dakota. The acquisition is subject to FERC approval and certain other customary conditions to closing, including commercial operation of the facility, which is expected to occur in the first quarter 2021. The facility's output is contracted under two long-term PPAs. The ultimate outcome of this matter cannot be determined at this time.

Construction Projects

During the nine months ended September 30, 2020, Southern Power completed construction of and placed in service the Reading wind facility, continued construction of the Skookumchuck wind facility, and commenced construction of the Garland and Tranquillity battery energy storage facilities. Total aggregate construction costs, excluding acquisition costs, are expected to be between $475 million and $545 million for the facilities under construction. At September 30, 2020, total costs of construction incurred for these projects were $244 million and are included in CWIP. The ultimate outcome of these matters cannot be determined at this time.

Project Facility	Resource	Approximate Nameplate Capacity (MW)	Location	Actual/Expected COD	PPA Contract Period
Projects Completed During the Nine Months Ended September 30, 2020
Reading(a)	Wind	200	Osage and Lyon Counties, KS	May 2020	12 years
Projects Under Construction as of September 30, 2020
Skookumchuck(b)	Wind	136	Lewis and Thurston Counties, WA	November 2020	20 years
Garland Solar Storage(c)	Battery energy storage system	88	Kern County, CA	Second quarter 2021	20 years
Tranquillity Solar Storage(c)	Battery energy storage system	72	Fresno County, CA	Second quarter 2021	20 years

(a)In 2018, Southern Power purchased 100% of the membership interests of the Reading facility pursuant to a joint development arrangement. At the time the facility was placed in service, Southern Power recorded an operating lease right-of-use asset and an operating lease liability, each in the amount of $24 million. In June 2020, Southern Power completed a tax equity transaction whereby it received $156 million and now owns 100% of the Class B membership interests.

(b)In October 2019, Southern Power purchased 100% of the membership interests of the Skookumchuck facility pursuant to a joint development arrangement. Southern Power expects to complete a tax equity transaction upon commercial operation and retain the Class B membership interests. Shortly after the completed tax equity transaction, Southern Power may sell a noncontrolling interest in these Class B membership interests to another partner. Southern Power would retain the controlling ownership interest in the facility. The ultimate outcome of these matters cannot be determined at this time.

(c)Prior to commercial operation, Southern Power may enter into one or more partnerships, in which case it would ultimately own less than 100% of the Class B membership interests, but would retain ownership of the controlling interest. The ultimate outcome of this matter cannot be determined at this time.

Development Projects

Southern Power continues to evaluate and refine the deployment of the remaining wind turbine equipment purchased in 2016 and 2017 to development and construction projects. During the nine months ended September 30, 2020, certain wind turbine equipment was sold, resulting in an immaterial gain.

Sales of Natural Gas and Biomass Plants

On January 17, 2020, Southern Power completed the sale of its equity interests in Plant Mankato (including the 385-MW expansion unit completed in May 2019) to a subsidiary of Xcel for a purchase price of approximately $663 million, including final working capital adjustments. The sale resulted in a gain of approximately $39 million ($23 million after tax). The assets and liabilities of Plant Mankato were classified as held for sale on Southern Company's and Southern Power's balance sheets at December 31, 2019.

Plants Nacogdoches (sold in June 2019) and Mankato represented individually significant components of Southern Power; therefore, pre-tax income for these components for the three months ended September 30, 2019 and the nine months ended September 30, 2020 and 2019 is presented below:

	Three Months Ended September 30, 2019		Nine Months Ended September 30,
			2020		2019
	(in millions)
Southern Power's earnings before income taxes:(*)
Plant Nacogdoches	$	—	N/A		$	16
Plant Mankato	$	12	$	2	$	20

(*)Earnings before income taxes for components reflect the cessation of depreciation and amortization on the long-lived assets being sold upon classification as held for sale in November 2018 and April 2019 for Plant Mankato and Plant Nacogdoches, respectively.

Southern Company Gas

On March 24, 2020, Southern Company Gas completed the sale of its interests in Pivotal LNG and Atlantic Coast Pipeline to Dominion Modular LNG Holdings, Inc. and Dominion Atlantic Coast Pipeline, LLC, respectively, with aggregate proceeds of $178 million, including working capital adjustments. The loss associated with the transactions was immaterial. Southern Company Gas also expects to receive payments in February 2021 and September 2021 of $5 million each contingent upon Dominion Modular LNG Holdings, Inc. meeting certain milestones related to Pivotal LNG. The assets and liabilities of Pivotal LNG and the interest in Atlantic Coast Pipeline were classified as held for sale at December 31, 2019. See Notes 3 and 7 under "Other Matters – Southern Company Gas – Gas Pipeline Projects" and "Southern Company Gas – Equity Method Investments," respectively, in Item 8 of the Form 10-K and Notes (C) and (E) under "Other Matters – Southern Company Gas" and "Southern Company Gas," respectively.