Southern To Form Power And Water Utility Venture With Virgin Islands

March 23, 2000

NEW YORK -(Dow Jones)- Utility holding company Southern Co. has offered a package that includes $105.4 million in cash to form a water and power venture with with the government of the U.S. Virgin Islands.

In addition to the cash, Atlanta-based Southern (SO) said the package includes the assumption of $153.9 million in bonds and $24 million in debt.

Southern will own an 80% interest in Virgin Islands Electric & Water, or VIEW, which will include the power-generation, water-production and distribution assets of the Virgin Islands' current water and power authority. The government will hold the remaining 20% stake and will receive ongoing dividend payments, the company said.

The water and power authority will continue to exist as a government agency, owning the power lines and poles, while its employees will transfer to work for the VIEW venture. Southern said it plans to protect the jobs of union employees and keep them under existing retirement plans.

Through the Virgin Islands venture, Southern said it would make payments toward fuel, property, gross receipts and income taxes that would likely increase over time.

Southern said its proposal guarantees the improvement of system reliability under the venture. Additionally, there would be no increases in rates during the first two years, after which they would diminish in accordance with inflation.

Southern said the VIEW venture plans to commit $1 million to economic development for attracting new investments and jobs to the Virgin Islands, and another $1 million in revolving credit for current agency vendors or businesses interested in becoming VIEW vendors.

VIEW would operate more than 230 megawatts of oil-fired generation capacity and produce of eight million gallons a day of potable water, Southern said.

Formation of the venture is subject to review by public hearing and approvals from the Virgin Islands' legislature and the Federal Emergency Management Agency.