Q3 2024 Earnings Summary
- 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.
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Adjusted EPS | FY 2024 | $3.95–$4.05 | $4.05 | raised |
Adjusted EPS | Q4 2024 | no prior guidance | $0.49 | no prior guidance |
| Metric | Period | Guidance | Actual | Performance |
|---|---|---|---|---|
Adjusted EPS | Q3 2024 | $1.30 | $1.40 | Beat |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Data center-driven load growth | Consistent strong growth: 17% yoy in Q2 , 12% yoy in Q1 , and a key driver in Q4. | 10% year-over-year increase, continuing positive momentum. | Consistent, remains a major growth driver |
Long-term load growth and capacity needs | Anticipated 6% to 9% growth in Q2, Q1, and Q4 , robust pipeline of industrial and commercial projects. | Projected 36 GW by the mid-2030s, with 8 GW already committed , disciplined expansion. | Consistent, robust expansions planned |
Potential nuclear uprates and IRA incentives | No mention in Q2 or Q1; only a brief reference to nuclear PTC timing in Q4. | Evaluating 6 legacy nuclear units for uprates; IRA incentives enhance feasibility. | Newly elevated in Q3 |
Storm cost recovery from Hurricane Helene | Not mentioned in Q2, Q1, or Q4. | Costs estimated at $1.1 billion, deferred approach for regulatory recovery, constructive PSC. | Newly introduced in Q3 |
Pipeline expansions and legal challenges | Q2 discussed a $3 billion SONAT project; no mention of legal challenges. Absent in Q1, Q4. | SONAT expansion mostly brownfield (~90%), potential legal/permitting issues toward decade-end. | Expanded from Q2 details |
Regulatory proceedings and rate case outcomes | Consistently featured: Q2 (load growth/regulatory nexus) , Q1 (2025 IRP) , Q4 (Georgia IRP). | Emphasized discipline, constructive approach to storm cost deferral and recovery. | Ongoing, central to planning and execution |
Equity issuance to fund capital programs | Q1 plan for ATM equity issuance to maintain credit metrics ; Q4 indicated ~$350M per year. | No specific mention. | No current update |
DOE loan program financing opportunities | Q2 highlighted potential $15–$20B in eligible capital, up to 80% debt financed. | Not discussed in this period. | Not revisited post-Q2 |
Weather-driven one-time earnings impacts | Q2 warmer weather boosted EPS , Q1 saw higher usage , Q4 reported mild weather was a headwind. | Weather variations improved results; -0.4% from Hurricane Helene impacts. | Consistent, ongoing earnings factor |
Dividend growth constraints vs earnings growth | Q1 noted a $0.08 dividend increase ; Q4 indicated dividend growth remains below EPS growth for now. | No discussion. | No new details |
FFO-to-debt ratio and overall credit metrics | Q2 aiming for 14% by end of 2024, reaching 16–17% by 2028 ; Q1 at 14–15% ; Q4 targeting ~17% long term. | Not mentioned. | Skipped in Q3 |
Environmental regulations affecting fossil fuel generation | Q1 flagged new EPA rules on coal as “impractical,” possible litigation. No mentions in Q2 or Q4. | Noted 111(d), shift to gas, carbon capture R&D. | Reappeared in Q3 following Q1 highlights |
Higher capacity values and contract renewals | Not mentioned in Q2, Q1, or Q4. | Doubling of capacity rates expected for Southern Power’s gas contracts post-2030. | New in Q3 |
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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 ( ). -
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 ( , ). -
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 ( , , , ). -
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 ( , , ). -
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 ( , ). -
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 ( ). -
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 ( ). -
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 ( ).