Southern Co. (SO) agreed to acquire a planned east Texas biomass power plant from American Renewables LLC as utilities continue to build their alternative-energy presence.

Wind and solar have been among the biggest areas of focus for utilities looking to diversify from coal- and natural gas-powered facilities amid the potential of U.S. climate-change legislation.

Terms of the deal weren't disclosed. The 165-acre project is slated to break ground this fall and be in operation by mid-2012. It is billed as one of the nation's largest biomass-fueled electricity-producing plants and is aimed at generating about 100 megawatts of power.

There is a 20-year deal in place to sell the plant's output to Austin Energy, the municipal utility owned and serving Texas' capital city.

"This acquisition fits Southern Power's business strategy of growing the business in the wholesale market through acquiring generating assets and building new units - for which the output is significantly covered by long-term bi-lateral contracts," said Southern Power Co. President and Chief Executive Ronnie Bates.

Southern Co., whose business is focused in the Southeast, is one of the largest owner of coal-powered plants in the U.S. and like other power producers has continued to see reduced demand. The company is one of four power companies expected to split $18.5 billion in federal financing to build the next generation of nuclear reactors. It also is involved in efforts to capture and store greenhouse-gas emissions from coal-fired power plants and is planning to expand its presence in industrial-scale plants that burn wood and other plant material, or biomass.

Shares closed Thursday at $31.82 and were inactive premarket. The stock is down 14% this year.

-By Kevin Kingsbury, Dow Jones Newswires; 201-938-2136;