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SOUTHERN COMPANY FINALIZES SETTLEMENT WITH GULF STATES

      SOUTHERN COMPANY FINALIZES SETTLEMENT WITH GULF STATES
    ATLANTA, Nov. 7 /PRNewswire/ -- Subsidiaries of The Southern Company (NYSE: SO) and Gulf States Utilities (NYSE: GSU) today signed a final settlement that ends a five-year dispute over major power sales contracts between the utility systems.
    The settlement -- which has been approved by a federal district court and all necessary government agencies -- terminates the contracts and ends litigation between the parties.
    Under the settlement, Gulf States is providing the Southern subsidiaries with a financial package -- including cash, common stock and deferred payments -- that has a net present value of up to $300 million, before taxes.
    The exact impact of today's settlement on The Southern Company's 1991 earnings will be determined in the next few weeks after tax and accounting reviews are completed.
    Specifically, Southern receives:
    -- Approximately $79 million in cash, including $73 million being
       held by the court in escrow.
    -- Six million new shares of Gulf States common stock.  In accepting
       these previously unissued shares, Southern agrees to remain a
       passive holder for the entire period that it owns the stock --
       exercising the voting rights that accompany these shares only
       in very limited circumstances.
    -- If the highest price of Gulf States common stock does not average
       at least $18.25 a share for five consecutive days between the
       settlement date and Jan. 1, 1993, Gulf States will pay Southern
       the difference between $18.25 and the highest average price
       during that period for each of the 6 million shares.
    -- Promissory notes for $160 million.
    -- All cash amounts that Gulf States will owe Southern -- with the
       exception of the initial $79 million -- must be paid by Jan. 1,
       1999.  However, beginning Jan. 1, 1993, Gulf States is required
       to make payments to the extent that Gulf States has adequate
       cash available.  Interest at the prime rate plus 1 percent will
       begin accruing on all unpaid amounts after Jan. 1, 1993.
    As collateral for all future payments, a subsidiary of Gulf States has pledged the Lewis Creek Generating Plant -- a 520-megawatt gas-fired facility near the city of Willis in eastern Texas.
    In announcing today's development, Southern Company President Edward L. Addison said, "We're pleased that this contract dispute has been resolved in out-of-court negotiations and resolved in a manner that protects the long-term interests of our companies."
    In 1982, the Southern subsidiaries agreed to provide Gulf States with power from specific coal-fired generating units.  Deliveries were scheduled to begin with 500,000 kilowatts of capacity in June 1984, rising to 600,000 kilowatts in 1987, and 700,000 kilowatts annually from 1988 through May 1992.  In addition, the contracts called for Southern to provide various amounts of interruptible power over this period.  Total value of the contracts was estimated at approximately $1 billion.
    In 1985, Gulf States asked Southern to consider eliminating or suspending sales because the energy needs of its customers had fallen below forecast levels.  In late 1986, Gulf States discontinued most of the payments owed under the contracts.  In July 1988, Southern -- with approval from the Federal Energy Regulatory Commission -- suspended all transactions under the contracts.
    The dispute has been the subject of legal actions before FERC, the U.S. Court of Appeals for the District of Columbia Circuit, and the U.S. Supreme Court.  A separate suit in the U.S. District Court for the Eastern District of Texas also is terminated as a result of this settlement.
    The Southern Company is the parent firm of five electric utilities:  Alabama Power, Georgia Power, Gulf Power, Mississippi Power and Savannah Electric.  (At the time the contracts with Gulf States were signed, Savannah Electric was not a member of the Southern electric system.)  The Southern Company's common stock is one of the 20 most widely held corporate stocks in America.
    -0-                 11/7/91
    /CONTACT:  Gale Klappa or David Mould of The Southern Company, 404-455-1077/
    (SO GSU) CO:  The Southern Company; Gulf States Utilities ST:  Georgia IN:  UTI SU: BN-BR -- AT013 -- 2286 11/07/91 14:03 EST
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Publication:PR Newswire
Date:Nov 7, 1991
Words:665
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