The cornerstone of Southern's deregulation strategy is growth in generation capacity and a trading and marketing operation to turn the newly acquired power into profit. Generation projects are cultivated by the company's Southern Energy subsidiary, which is focused on four regions of the country: the Northeast, the Upper Midwest, California and Texas. Dahlberg says 1999 was a powerful year for the business. "We

completed major transactions in New England, New York and California and have access to generation in Texas," he said. "We have entered the four regions we said we would and are growing the energy supply business profitably."

In a partnership with

Vastar Resources

(VRI)

, the company's Southern Company Energy Marketing (SCEM) subsidiary leverages the unregulated generation through a series of supply agreements. "We can optimize the value of our generation assets through a first-class trading and marketing operation," Dahlberg says. SCEM is among the top three power traders in the country and is a top-tier gas marketer with Vastar's gas portfolio. On the gas front, SCEM recently acquired the assets of Canada's Pan Alberta Gas, the company's first move northward. "North America will continue to grow together," Dahlberg says. "Canada represents incredible potential for us."

Further away from home, Dahlberg acknowledges that Southern's international operations have been a learning experience. "A year ago we went through a critical review of what we were doing internationally and we tightened our focus." Going forward, the company will focus on a few areas where it can "build a business, not just a power plant." As such, Southern aims to become the dominant power supplier to the Philippines.

Other than a joint venture with a local developer in China and a small interest in an Indian project, however, the company will stay away from the rest of the East, near or far. "We are not going to look anywhere else right now," says Dahlberg. "We don't think we can add much value in Indonesia or Pakistan. We won't go there." But he does hold out the possibility that the company may look at Australia in the future. "We like the country and the economics. We could build a business there."

In the immediate future, Europe may be the key to Southern's overseas success. In January, Southern launched a trading and marketing operation based in Amsterdam to leverage its ownership of a German utility. Dahlberg says Southern will be aggressive in building its European platform, looking to acquire generation assets on the continent. "We think we may be able to replicate what we are doing in the U.S. as European markets become competitive. That may happen more rapidly than it occurs here."

Still, Dahlberg thinks domestic utilities will soon accelerate the move toward deregulation. "I think you will see a new driver toward deregulation," he said. "There is a growing perspective that companies with a larger unregulated business have a higher value than those that remain regulated. I think you will see a new catalyst for some movement and it will be utilities themselves. We are going to have to move more rapidly in that direction to assure solid returns for investors." He adds a caveat, however: "We have to guarantee our customers don't get hurt in the process."

As for the stock price, "

We have to keep pounding away and make sure we execute our business plan. We have to remember we run a good business," he says, reminding himself that shareholders deserve better returns. "

My other job is to evaluate the business plan and see how we can create more value for the owners. They are entitled to a better return. Just because the industry is in the dumps, I won't accept being in the dumps with them."

Do these options include spinoffs, IPOs or the other options Dahlberg mentioned? Anything is possible, Dahlberg says, but right now nothing jumps out as a panacea. "I just don't see anything that's a Silver Bullet. If I did, by God, I'd shoot it."

Christopher S. Edmonds is president of Resource Dynamics, a private financial consulting firm based in Atlanta. At time of publication, Edmonds was long Southern Company, although holdings can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. While Edmonds cannot provide investment advice or recommendations, he welcomes your feedback at

invest@cjnetworks.com .