Southern Co. executives indicated during their third-quarter earnings call they would be open to an asset sale to offset any equity needs.

"As we have done so well over the last several years, we also continue to evaluate opportunities for asset sales," Southern Co. CFO Daniel Tucker said during the Nov. 4 call. "Within a portfolio the size of Southern Co., we have several investments which warrant continuous review for whether or not a better owner exists."

The Atlanta-headquartered utility traces its history back to the 1920s, according to its website. It has operated its three electric utility subsidiaries — Georgia Power Co., Alabama Power Co. and Mississippi Power Co. — under a multistate holding company structure since 1947 that today serves about 4.3 million electric customers and owns nearly 32,000 MW of generating capacity.

There have been some changes to the company's portfolio. In 1982, the company launched an unregulated subsidiary called Southern Energy Co., which was eventually renamed Mirant and in 2001 was spun off into a separate company. Today, a successor to that company operates as GenOn Holdings Inc. Also in 2001, Southern Co. launched another unregulated subsidiary called Southern Power Co., an independent power producer that it still retains and that now has more than 11,400 MW of gas-fired and renewable resources.

Like several other large electric utilities in the mid-2010s, Southern Co. looked to broaden its scope. In 2016, it completed the acquisition of natural gas utility AGL Resources Inc., adding seven gas distribution utilities in seven states, for $8 billion plus the assumption of $3.59 billion in debt. Since then, Southern Co. has sold off three of the gas distributors, and the remaining business, now Southern Co. Gas, serves 4.2 million customers through four subsidiaries: Atlanta Gas Light Co., Chattanooga Gas Co., Northern Illinois Gas Co. and Virginia Natural Gas Inc.

Southern Co.'s most recent notable change in its utility portfolio was Jan. 1, 2019, when it completed the sale of its northwest Florida electric utility Gulf Power Co. for $6.48 billion, including the assumption of about $1.4 billion in debt. A few months earlier, it sold one of the gas utilities it had acquired in the AGL deal, Florida City Gas, for $530 million in cash.

Whatever approach Southern Co. might take to asset sales, several of its utility peers have made moves this year that could serve as examples:

* Duke Energy Corp. in late January announced plans to sell a 19.9% interest in its Duke Energy Indiana LLC utility subsidiary to an affiliate of Singapore sovereign wealth fund GIC Pte. Ltd. in an all-cash deal valued at $2.05 billion.

* Similarly, FirstEnergy Corp. in November announced plans to sell a 19.9% interest in its FirstEnergy Transmission LLC business to Brookfield Super-Core Infrastructure Partners LP, a fund managed by Brookfield Asset Management Inc., for $2.4 billion.

* Exelon Corp. said February that it would spin off its unregulated Exelon Generation Co. LLC business, which includes a 31,000-MW power generation portfolio and a retail energy business, into a separate, publicly traded company, going forward as a regulated utility business.

* CenterPoint Energy Inc. in April announced plans to sell gas utility operations in Arkansas and Oklahoma, two of the eight states in which it operates, for $2.15 billion.

* American Electric Power Co. Inc., following a strategic review of its portfolio, in late October announced plans to sell its Kentucky Power Co. utility and a related transmission business in a deal with a $2.85 billion enterprise value. Kentucky Power is the smallest of AEP's seven electric utilities and has the lowest earned return on equity.

Southern Co. regulatory profile

Southern Co.'s utility subsidiaries operate in jurisdictions that are viewed to varying degrees as constructive for investors, according to Regulatory Research Associates, a group within S&P Global Market Intelligence, with four of the six jurisdictions ranked in the "Above Average" category. For additional information regarding RRA's rankings and methodology, refer to State Regulatory Evaluations — Energy.

The jurisdictions within which the company has electric operations — Alabama, Georgia and Mississippi — have not implemented retail competition for generation service, and the utilities remain vertically integrated. Formula-based rates, under which the company is permitted to adjust rates annually to reflect incremental investment, expenses and changes in revenues, are in place for the electric operations in Alabama and Mississippi. A more traditional framework, with limited issue adjustments for certain items, is in place for the electric operations in Georgia.

For Southern Co.'s gas operations, a traditional, cost-of-service-based framework is in place in Illinois, while Virginia has a traditional paradigm, with certain limited-issue riders in place. The company's gas operations in Tennessee are subject to an alternative ratemaking mechanism.

The most recently authorized ROEs for the operating companies, where specified, range from 9.5% to 10.5%, and these ROEs were at or above prevailing industry averages when established. For detailed information concerning trends in authorized ROEs, refer to RRA's Major Rate Case Decisions — January-September 2021.

Merger activity in these jurisdictions has been relatively light in recent years, but regulators have not been particularly punitive when it comes to reviewing past deals.

For a more comprehensive discussion of each state's regulatory policies, refer to RRA's Commission Profile for each state.