Attached files
| file | filename |
|---|---|
| 8-K - 8-K - SOUTHERN POWER CO | sopower8-kflamingoclosing1.htm |
Exhibit 99.1
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL INFORMATION
The Unaudited Pro Forma Condensed Consolidated Financial Statements (pro forma financial statements) have been derived from the historical consolidated financial statements of Southern Power Company (Southern Power).
The Unaudited Pro Forma Condensed Consolidated Statements of Income (pro forma statements of income) for the nine months ended September 30, 2018 and the year ended December 31, 2017 give effect to the disposition of two wholly-owned subsidiaries—Southern Company - Oleander LLC (Oleander) and Southern Company - Florida LLC (Stanton)—of Southern Power as if it were completed on January 1, 2017. The Unaudited Pro Forma Condensed Consolidated Balance Sheet (pro forma balance sheet) as of September 30, 2018 gives effect to the disposition as if it were completed on September 30, 2018.
The historical consolidated financial information has been adjusted in the pro forma financial statements (A) to give effect to pro forma events that are: (1) directly attributable to the disposition; (2) factually supportable; and (3) with respect to the statements of income, expected to have a continuing impact on the results of Southern Power, and (B) to eliminate historical events directly attributable to the disposition that are not, with respect to the statements of income, expected to have a continuing impact on the results of Southern Power.
Assumptions and estimates underlying the pro forma adjustments are described in the accompanying note, which should be read in connection with the pro forma financial statements. The pro forma financial statements have been prepared based on estimates at September 30, 2018. The final amounts recorded at the date of the disposition are not expected to be materially different from the information presented herein.
The pro forma financial statements have been presented for illustrative purposes only and are not necessarily indicative of the results of operations and financial position that would have been achieved had the pro forma events taken place on the dates indicated, or the future consolidated results of operations or financial position of Southern Power.
The following pro forma financial statements should be read in conjunction with:
• | the accompanying note to the Unaudited Pro Forma Condensed Consolidated Financial Statements; |
• | the audited consolidated financial statements of Southern Power included in its Annual Report on Form 10-K for the year ended December 31, 2017; and |
• | the unaudited condensed consolidated financial statements of Southern Power included in its Quarterly Report on Form 10-Q for the quarter ended September 30, 2018. |
Southern Power Unaudited Pro Forma Condensed Consolidated Income Statement For the nine months ended September 30, 2018 | ||||||||||||||||
Southern Power | Stanton and Oleander | Pro Forma Adjustments | Pro Forma | |||||||||||||
(in millions) | ||||||||||||||||
Operating Revenues: | ||||||||||||||||
Wholesale revenues, non-affiliates | $ | 1,363 | $ | (59 | ) | $ | — | $ | 1,304 | |||||||
Wholesale revenues, affiliates | 326 | — | — | 326 | ||||||||||||
Other revenues | 10 | — | — | 10 | ||||||||||||
Total operating revenues | 1,699 | $ | (59 | ) | $ | — | $ | 1,640 | ||||||||
Operating Expenses: | ||||||||||||||||
Fuel | 511 | — | — | 511 | ||||||||||||
Purchased power | 137 | — | — | 137 | ||||||||||||
Other operations and maintenance | 278 | (11 | ) | — | 267 | |||||||||||
Depreciation and amortization | 370 | (5 | ) | * | — | 365 | ||||||||||
Taxes other than income taxes | 36 | (3 | ) | — | 33 | |||||||||||
Asset impairment | 155 | — | (119 | ) | (a) | 36 | ||||||||||
Total operating expenses | 1,487 | (19 | ) | (119 | ) | 1,349 | ||||||||||
Operating Income | 212 | $ | (40 | ) | $ | 119 | $ | 291 | ||||||||
Other Income and (Expense): | ||||||||||||||||
Interest expense, net of amounts capitalized | (138 | ) | 2 | (2 | ) | (b) | (138 | ) | ||||||||
Other income (expense), net | 22 | (2 | ) | — | 20 | |||||||||||
Total other income and (expense) | (116 | ) | — | (2 | ) | (118 | ) | |||||||||
Earnings Before Income Taxes | 96 | (40 | ) | 117 | 173 | |||||||||||
Income taxes (benefit) | (210 | ) | (10 | ) | 29 | (c) | (191 | ) | ||||||||
Net Income | 306 | (30 | ) | 88 | 364 | |||||||||||
Net income attributable to noncontrolling interests | 71 | — | — | 71 | ||||||||||||
Net Income Attributable to Southern Power | $ | 235 | $ | (30 | ) | $ | 88 | $ | 293 | |||||||
* Depreciation and amortization for Stanton and Oleander ceased when the assets were classified as held for sale in May 2018. As such, the $5 million of depreciation and amortization recorded through September 30, 2018 represents approximately five months of depreciation expense.
Southern Power Unaudited Pro Forma Condensed Consolidated Income Statement For the year ended December 31, 2017 | |||||||||||||||
Southern Power | Stanton and Oleander | Pro Forma Adjustments | Pro Forma | ||||||||||||
(in millions) | |||||||||||||||
Operating Revenues: | |||||||||||||||
Wholesale revenues, non-affiliates | $ | 1,671 | $ | (78 | ) | $ | — | $ | 1,593 | ||||||
Wholesale revenues, affiliates | 392 | — | — | 392 | |||||||||||
Other revenues | 12 | — | — | 12 | |||||||||||
Total operating revenues | $ | 2,075 | $ | (78 | ) | $ | — | $ | 1,997 | ||||||
Operating Expenses: | |||||||||||||||
Fuel | 621 | — | — | 621 | |||||||||||
Purchased power | 149 | (1 | ) | — | 148 | ||||||||||
Other operations and maintenance | 386 | (18 | ) | — | 368 | ||||||||||
Depreciation and amortization | 503 | (14 | ) | — | 489 | ||||||||||
Taxes other than income taxes | 48 | (4 | ) | — | 44 | ||||||||||
Total operating expenses | 1,707 | (37 | ) | — | 1,670 | ||||||||||
Operating Income | $ | 368 | $ | (41 | ) | $ | — | $ | 327 | ||||||
Other Income and (Expense): | |||||||||||||||
Interest expense, net of amounts capitalized | (191 | ) | 5 | (5 | ) | (b) | (191 | ) | |||||||
Other income (expense), net | 1 | (1 | ) | — | — | ||||||||||
Total other income and (expense) | (190 | ) | 4 | (5 | ) | (191 | ) | ||||||||
Earnings Before Income Taxes | 178 | (37 | ) | (5 | ) | 136 | |||||||||
Income taxes (benefit) | (939 | ) | (14 | ) | (2 | ) | (c) | (955 | ) | ||||||
Net Income | 1,117 | (23 | ) | (3 | ) | 1,091 | |||||||||
Net income attributable to noncontrolling interests | 46 | — | — | 46 | |||||||||||
Net Income Attributable to Southern Power | $ | 1,071 | $ | (23 | ) | $ | (3 | ) | $ | 1,045 | |||||
Southern Power Unaudited Pro Forma Condensed Consolidated Balance Sheet As of September 30, 2018 | |||||||||||||||
Southern Power | Stanton and Oleander | Pro Forma Adjustments | Pro Forma | ||||||||||||
(in millions) | |||||||||||||||
Assets | |||||||||||||||
Current Assets: | |||||||||||||||
Cash and cash equivalents | $ | 192 | $ | 203 | (d) | $ | — | $ | 395 | ||||||
Receivables -- | |||||||||||||||
Customer accounts receivable | 150 | — | — | 150 | |||||||||||
Affiliated | 71 | — | — | 71 | |||||||||||
Other | 62 | — | — | 62 | |||||||||||
Materials and supplies | 214 | — | — | 214 | |||||||||||
Prepaid income taxes | 44 | — | — | 44 | |||||||||||
Assets held for sale, current | 18 | (18 | ) | — | — | ||||||||||
Other current assets | 29 | — | — | 29 | |||||||||||
Total current assets | 780 | 185 | — | 965 | |||||||||||
Property, Plant, and Equipment: | |||||||||||||||
In service | 13,603 | — | — | 13,603 | |||||||||||
Less: Accumulated provision for depreciation | 2,087 | — | — | 2,087 | |||||||||||
Plant in service, net of depreciation | 11,516 | — | — | 11,516 | |||||||||||
Construction work in progress | 586 | — | — | 586 | |||||||||||
Total property, plant, and equipment | 12,102 | — | — | 12,102 | |||||||||||
Other Property and Investments: | |||||||||||||||
Intangible assets, net of amortization | 391 | — | 391 | ||||||||||||
Total other property and investments | 391 | — | — | 391 | |||||||||||
Deferred Charges and Other Assets: | |||||||||||||||
Prepaid LTSAs | 106 | — | — | 106 | |||||||||||
Accumulated deferred income taxes | 1,281 | (1 | ) | — | 1,280 | ||||||||||
Income taxes receivable, non-current | 84 | — | — | 84 | |||||||||||
Assets held for sale | 185 | (185 | ) | — | — | ||||||||||
Other deferred charges and assets | 426 | — | — | 426 | |||||||||||
Total deferred charges and other assets | 2,082 | (186 | ) | — | 1,896 | ||||||||||
Total Assets | $ | 15,355 | $ | (1 | ) | $ | — | $ | 15,354 | ||||||
Southern Power Unaudited Pro Forma Condensed Consolidated Balance Sheet As of September 30, 2018 | |||||||||||||||
Southern Power | Stanton and Oleander | Pro Forma Adjustments | Pro Forma | ||||||||||||
(in millions) | |||||||||||||||
Liabilities and Stockholders' Equity | |||||||||||||||
Current Liabilities: | |||||||||||||||
Securities due within one year | $ | — | $ | — | $ | — | $ | — | |||||||
Notes payable | 237 | — | — | 237 | |||||||||||
Accounts payable -- | |||||||||||||||
Affiliated | 86 | — | — | 86 | |||||||||||
Other | 88 | — | — | 88 | |||||||||||
Accrued income taxes | 233 | — | — | 233 | |||||||||||
Liabilities held for sale, current | 4 | (4 | ) | — | — | ||||||||||
Other current liabilities | 165 | — | — | 165 | |||||||||||
Total current liabilities | 813 | (4 | ) | — | 809 | ||||||||||
Long-term Debt | 5,029 | — | — | 5,029 | |||||||||||
Deferred Credits and Other Liabilities: | |||||||||||||||
Accumulated deferred income taxes | 111 | — | — | 111 | |||||||||||
Accumulated deferred ITCs | 1,842 | — | — | 1,842 | |||||||||||
Other deferred credits and liabilities | 259 | — | — | 259 | |||||||||||
Total deferred credits and other liabilities | 2,212 | — | — | 2,212 | |||||||||||
Total Liabilities | 8,054 | (4 | ) | — | 8,050 | ||||||||||
Common Stockholder's Equity: | |||||||||||||||
Common stock, par value $0.01 per share — | |||||||||||||||
Authorized — 1,000,000 shares | |||||||||||||||
Outstanding — 1,000 shares | — | — | — | — | |||||||||||
Paid-in capital | 2,604 | — | — | 2,604 | |||||||||||
Retained earnings | 1,478 | 3 | — | 1,481 | |||||||||||
Accumulated other comprehensive income (loss) | 31 | — | — | 31 | |||||||||||
Total common stockholders' equity | 4,113 | 3 | — | 4,116 | |||||||||||
Noncontrolling interests | 3,188 | — | — | 3,188 | |||||||||||
Total stockholders' equity | 7,301 | 3 | — | 7,304 | |||||||||||
Total Liabilities and Stockholders' Equity | $ | 15,355 | $ | (1 | ) | $ | — | $ | 15,354 | ||||||
Note 1. Adjustments to Pro Forma Financial Statements
Adjustments to Pro Forma Statements of Income
(a) | Asset Impairment-Reflects the reversal of the asset impairment charge related to the sale of Stanton and Oleander. |
(b) | Interest Expense-Reflects the reversal of interest expense related to corporate level debt allocated to Stanton and Oleander that will not be repaid. |
(c) | Income Taxes-Reflects the income tax effects of the pro forma adjustments calculated using an estimated statutory income tax rate of 25.2% for the nine months ended September 30, 2018 and 38.1% for the year ended December 31, 2017. |
Adjustments to the Pro Forma Balance Sheet
(d) | Cash and Cash Equivalents-Reflects the sale proceeds of $203 million increasing available cash, which is expected to be used for general corporate purposes. Does not include any adjustment for the potential repayment of a portion of Southern Power’s short-term borrowings that have a weighted average interest rate of 2.8%. |