Southern Co (SO)

• Southern Company has secured 8 GW of committed load growth, with the majority funded by specific customers, potentially leading to positive impacts on existing customer bills. -
• Southern Power is experiencing increased demand for capacity, with capacity prices doubling, and is exploring new opportunities in both natural gas and renewables under disciplined, long-term contracts with creditworthy counterparties. -
• The company delivered exceptional operational and solid financial results through the first three quarters, demonstrating resilience and is well-positioned to finish the year strong, highlighting their capability to capitalize on growth opportunities. -

• Environmental regulatory uncertainties and risks associated with coal retirements and future fossil generation investments may impact the company's growth and profitability. - - The company is closely monitoring EPA rules that will inform coal retirement timelines and is cautious about adding new fossil generation due to potential environmental regulations and infrastructure challenges.
• Significant storm-related costs of $1.1 billion may lead to increased regulatory scrutiny and potential delays or disallowances in cost recovery, affecting financial results. - While all costs have been deferred, recovery depends on constructive regulatory processes, and there is uncertainty regarding how much will be capitalized versus expensed.
• Supply chain challenges, including longer lead times on major equipment, could delay project timelines and increase costs, impacting the company's ability to meet growing demand. - Extended lead times on large transformers and other critical equipment may affect the timely completion of new projects despite the company's planning efforts.

1. Load Growth Outlook
   Q: Will increasing load growth affect your 5-7% growth rate?
   A: Daniel Tucker explained that while they are seeing significant load growth projections, with 36 GW expected by mid-2030s and 8 GW already committed, they do not anticipate changing their 5-7% growth rate in the near term. Any acceleration is long-term in nature and may be considered later ( - ).

2. Nuclear Expansion Plans
   Q: Are you considering nuclear uprates or new nuclear units?
   A: Southern Company is evaluating nuclear options in their Integrated Resource Plan scenarios, including potential uprates for 6 legacy units. While the Inflation Reduction Act makes these more viable, significant capital and time are required, and they will not proceed until risks are mitigated ( - , - ).

3. Storm Costs and Recovery
   Q: How will you recover the $1.1 billion storm costs?
   A: Daniel Tucker stated that all storm costs have been deferred, with ongoing work to finalize numbers. Recovery will depend on regulatory processes. Historically, recovery periods ranged from 2 to 6 years, based on storm magnitude and circumstances ( - , - , - , - ).

4. Southern Power Growth Opportunities
   Q: Are there opportunities to expand Southern Power's capacity?
   A: Southern Power is exploring opportunities as capacity values have doubled. They are considering new assets, including natural gas and renewables, while maintaining discipline with long-term contracts and creditworthy counterparties. Growth is not expected to outpace the regulated utility business ( - , - , - ).

5. Gas Pipeline Expansion
   Q: What are your plans regarding gas pipeline expansion?
   A: Southern Company is considering participating in the Southern Natural Gas pipeline expansion, potentially being a large participant due to their significant usage. The project is expected to culminate by late this decade, with 90% being brownfield work, reducing risks, though regulatory challenges remain ( - , - ).

6. Carbon Capture and Coal Retirements
   Q: What is your stance on carbon capture and coal retirements?
   A: They are monitoring EPA rules to inform coal retirement timelines. Southern Company has shifted carbon capture research to natural gas, recognizing gas's vital role in electricity generation. They continue to invest in carbon capture technologies for scalability ( - ).

7. SMR Technology and Nuclear Innovation
   Q: What is your view on SMR technology?
   A: Southern Company is engaged in SMR and advanced nuclear research but believes more work is needed before commercialization. They are cautious about fully committing to one nuclear technology and emphasize the need for further design and engineering development ( - ).

8. T&D Supply Chain and Timing
   Q: How are supply chain issues affecting T&D projects?
   A: While lead times for transformers and major equipment are longer, Southern Company is planning accordingly and believes they are in good shape with their projects ( - ).

Quarterly guidance for Q4 2024:

• Adjusted EPS: $0.49 - (no prior guidance)
• Sales growth outlook: Robust outlook driven by strong electricity sales and customer additions - (no prior guidance)
• Long-term load growth: Potential addition of over 36 gigawatts, with 8 gigawatts already committed - (no prior guidance)
• Capital plan: Incremental capital projects of approximately $3 billion on top of the existing $48 billion plan - (no prior guidance)

Annual guidance for FY 2024:

• Adjusted EPS: $4.05 - (no prior guidance)