Acquisitions

3 Months Ended

Mar. 31, 2016

Business Combinations [Abstract]

ACQUISITIONS

ACQUISITIONS

Southern Company

Proposed Merger with AGL Resources

On August 23, 2015, Southern Company entered into the Merger Agreement to acquire AGL Resources. Under the terms of the Merger Agreement, subject to the satisfaction or waiver (if permissible under applicable law) of specified conditions, Merger Sub will be merged with and into AGL Resources. AGL Resources will survive the Merger and become a wholly-owned, direct subsidiary of Southern Company.

The Merger will be accounted for using the acquisition method of accounting whereby the assets acquired and liabilities assumed are recognized at fair value as of the acquisition date. The excess of the purchase price over the fair values of AGL Resources' assets and liabilities will be recorded as goodwill. Southern Company expects total cash of $8.2 billion to be required to fund the purchase price of approximately $8.0 billion to acquire AGL Resources common stock, options to purchase shares of AGL Resources common stock, and restricted stock units payable in shares of AGL Resources common stock and to fund acquisition-related expenses and financing costs of approximately $200 million. Southern Company will also assume AGL Resources' outstanding indebtedness.

Through May 5, 2016, the Maryland PSC, the Georgia PSC, the California Public Utilities Commission, and the Virginia State Corporation Commission have approved the Merger. On April 15, 2016, Southern Company, AGL Resources, and Northern Illinois Gas Company (collectively, the Joint Applicants) and the Retail Energy Supply Association filed a settlement agreement with the Illinois Commerce Commission. On April 28, 2016, the Joint Applicants, the Illinois Attorney General's Office, and the Citizens Utility Board filed a settlement agreement with the Illinois Commerce Commission. Collectively, these agreements resolve all remaining contested issues for Illinois Commerce Commission approval of the Merger. On May 5, 2016, Southern Company, AGL Resources, Merger Sub, Pivotal Utility Holdings, Inc. d/b/a Elizabethtown Gas, the Division of Rate Counsel, the Staff of the New Jersey Board of Public Utilities, and New Jersey Large Energy Users Coalition entered into a comprehensive settlement agreement relating to the New Jersey Board of Public Utilities review of the Merger. Additionally, the Federal Communications Commission (FCC) has approved the transfer of control over the FCC licenses of certain AGL Resources subsidiaries. Consummation of the Merger remains subject to the satisfaction or waiver of certain closing conditions, including, among others, (i) the approval of the Illinois Commerce Commission and the New Jersey Board of Public Utilities and other approvals required under applicable state laws, (ii) the absence of a judgment, order, decision, injunction, ruling, or other finding or agency requirement of a governmental entity prohibiting the consummation of the Merger, and (iii) other customary closing conditions, including (a) subject to certain materiality qualifiers, the accuracy of each party's representations and warranties and (b) each party's performance in all material respects of its obligations under the Merger Agreement.

During the first quarter 2016, Southern Company recorded in its statements of income external transaction costs for financing, legal, and consulting services associated with the proposed Merger of approximately $20 million, of which $6 million is included in operating expenses and $14 million is included in other income and (expense).

The ultimate outcome of these matters cannot be determined at this time. See Note 12 to the financial statements of Southern Company under "Southern Company – Proposed Merger with AGL Resources" in Item 8 of the Form 10-K for additional information.

Merger Financing

Southern Company intends to fund the cash consideration for the Merger using a mix of debt and equity. Southern Company expects to issue the debt to fund the cash consideration for the Merger in several tranches including long-dated maturities. The amount of debt issued at each maturity will depend on prevailing market conditions at the time of the offering and other factors. In addition, Southern Company entered into the $8.1 billion Bridge Agreement on September 30, 2015 to provide financing for the Merger in the event long-term financing is not available. See Note 6 to the financial statements of Southern Company under "Bank Credit Arrangements" in Item 8 of the Form 10-K for additional information regarding the Bridge Agreement.

Proposed Acquisition of PowerSecure

On February 24, 2016, Southern Company entered into an Agreement and Plan of Merger to acquire PowerSecure. Under the terms of this merger agreement, the stockholders of PowerSecure will be entitled to receive $18.75 in cash for each share of common stock in a transaction with a total purchase price of approximately $431 million. Following this transaction, PowerSecure will become a wholly-owned subsidiary of Southern Company. This transaction is expected to close in May 2016. The ultimate outcome of this matter cannot be determined at this time.

Southern Power

See Note 2 to the financial statements of Southern Power and Note 12 to the financial statements of Southern Company under "Southern Power" in Item 8 of the Form 10-K for additional information. During the first quarter 2016, the fair values of the assets and liabilities acquired of Lost Hills, Blackwell, North Star, and Morelos were finalized and there were no changes.

During 2016, in accordance with its overall growth strategy, Southern Power acquired or contracted to acquire through its wholly-owned subsidiaries, Southern Renewable Partnerships, LLC or Southern Renewable Energy, Inc., the projects set forth in the following table. Acquisition-related costs were expensed as incurred and were not material. The acquisitions do not include any contingent consideration unless specifically noted.

Project Facility	Seller; Acquisition Date	Approx. Nameplate Capacity	Location	Southern Power Percentage Ownership		Expected/Actual COD	PPA Counterparties for Plant Output	PPA Contract Period	Approx. Purchase Price
		(MW)							(in millions)
SOLAR
Calipatria	Solar Frontier Americas Holding, LLC February 11, 2016	20	Imperial County, CA	90	%	February 11, 2016	San Diego Gas & Electric Company	20 years	$	51	(a)
East Pecos	First Solar, Inc. March 4, 2016	120	Pecos County, TX	100	%	Fourth quarter 2016	Austin Energy	15 years	$	41	(b)
WIND
Grant Wind	Apex Clean Energy Holdings, LLC April 7, 2016	151	Grant County, OK	100	%	April 8, 2016	Western Farmers, East Texas, and Northeast Texas Electric Cooperative	20 years	$	258	(c)
Passadumkeag	Quantam Wind Acquisition I, LLC	40	Penobscot County, ME	100	%	Second quarter 2016	Western Massachusetts Electric Company	15 years	$	127	(d)

(a) Calipatria - The total purchase price, including the minority owner, TRE's 10% ownership interest and contingent consideration of $6 million, is approximately $57 million. As of March 31, 2016, the fair values of the assets and liabilities acquired through the business combination were recorded as follows: $58 million as property, plant, and equipment, $1 million as a transmission interconnection prepaid, and $2 million as payables; however, the allocation of the purchase price to individual assets has not been finalized.

(b) East Pecos - The total purchase price is approximately $41 million. As of March 31, 2016, the fair values of the assets acquired through the business combination were recorded as $41 million to CWIP; however, the allocation of the purchase price to individual assets has not been finalized. Total construction costs, which include the acquisition price allocated to CWIP, are expected to be approximately $200 million to $220 million. The ultimate outcome of this matter cannot be determined at this time.

(c) Grant Wind - Subsequent to March 31, 2016, Southern Power acquired all of the outstanding membership interests of Grant Wind, LLC. The purchase price includes approximately $23 million of contingent consideration which may be adjusted based on performance testing and production over the first 10 years of operation.

(d) Passadumkeag - On March 11, 2016, Southern Power entered into an agreement to acquire all of the outstanding membership interests of Quantum Wind Acquisition I, LLC, which is expected to close in the second quarter 2016. The ultimate outcome of this matter cannot be determined at this time.

Construction Projects

During the first quarter 2016, in accordance with its overall growth strategy, Southern Power completed construction of and placed in service the Butler Solar Farm and Pawpaw solar facilities. In addition, Southern Power continued construction of the projects set forth in the table below. Through March 31, 2016, total costs of construction incurred for the projects below were $2.2 billion, of which $1.5 billion remains in CWIP. The ultimate outcome of these matters cannot be determined at this time.

Solar Facility	Seller	Approx. Nameplate Capacity	Location	Expected/Actual COD	PPA Counterparties for Plant Output	PPA Contract Period	Estimated Construction Costs
		(MW)					(in millions)
Butler	CERSM, LLC and Community Energy, Inc.	103	Taylor County, GA	Fourth quarter 2016	Georgia Power(a)	30 years	$	220	-	230	(b)
Desert Stateline	First Solar, Inc.	299(c)	San Bernardino County, CA	Through third quarter 2016	Southern California Edison Company (SCE)	20 years	$	1,200	-	1,300	(d)
Garland and Garland A	Recurrent Energy, LLC	205	Kern County, CA	Fourth quarter 2016   Third quarter 2016	SCE	15 years and 20 years	$	532	-	552	(e,f)
Roserock	Recurrent Energy, LLC	160	Pecos County, TX	Fourth quarter 2016	Austin Energy	20 years	$	333	-	353	(e,f)
Sandhills	N/A	146	Taylor County, GA	Fourth quarter 2016	Cobb, Flint, Irwin, Middle Georgia and Sawnee Electric Membership Corporations	25 years	$	260	-	280
Tranquillity	Recurrent Energy, LLC	205	Fresno County, CA	Third quarter 2016	Shell Energy North America (US), LP/SCE	18 years	$	473	-	493	(f,g)

(a) Butler - Affiliate PPA subject to FERC approval.

(b) Butler - Total estimated construction costs include the acquisition price of all outstanding membership interests of the related entity.

(c) Desert Stateline - The facility has a total of 299 MWs, of which 110 MWs were placed in service in the fourth quarter 2015 and 76 MWs were placed in service in the first quarter 2016. Subsequent to March 31, 2016, 38 MWs were placed in service. The remaining 75 MWs are expected to be placed in service by the end of the third quarter 2016.

(d) Desert Stateline - On March 29, 2016, Southern Power acquired an additional 15% interest in Desert Stateline. As a result, Southern Power and the class B member are entitled to 66% and 34%, respectively, of all cash distributions from Desert Stateline. In addition, Southern Power will continue to be entitled to substantially all of the federal tax benefits with respect to the transaction. Total estimated construction costs include the acquisition price allocated to CWIP; however, the allocation of the purchase price to individual assets has not been finalized.

(e) Total estimated construction costs include the acquisition price allocated to CWIP. During the first quarter 2016, the allocation of the purchase price to individual assets was finalized with no changes.

(f) Southern Power owns 100% of the class A membership interests and a wholly-owned subsidiary of the seller owns 100% of the class B membership interests. Southern Power and the class B member are entitled to 51% and 49%, respectively, of all cash distributions from the project.

(g) Total estimated construction costs include the acquisition price allocated to CWIP; however, the allocation of the purchase price to individual assets has not been finalized.