Executive Summary

Q4 2022 adjusted EPS was $0.26, above the company’s prior Q4 estimate of $0.23, while reported EPS was -$0.08 due to Vogtle-related charges and a PowerSecure goodwill impairment; operating revenues rose 22.2% year over year to $7.05B, primarily on higher fuel costs .
Management issued FY 2023 adjusted EPS guidance of $3.55–$3.65 and narrowed FY 2024 adjusted EPS guidance to $3.95–$4.10, citing higher parent interest expense and Vogtle timing; Q1 2023 adjusted EPS is guided to $0.70 .
Vogtle Unit 3 in-service was re-baselined to May–June 2023 after addressing testing remediation; Unit 4 was risk-adjusted to late Q4 2023–Q1 2024, with ~two months of margin remaining in the 2023 schedule .
Operations delivered record reliability through extreme conditions; CEO Tom Fanning highlighted “another successful year” and peak load records as a testament to the vertically integrated, state-regulated model .

What Went Well and What Went Wrong

What Went Well
- Reliability and operations: “Our operations team, generation fleet and power delivery system worked exceedingly well” amid record summer and winter peaks, demonstrating value of integrated planning and resilience investments .
- Adjusted performance: FY 2022 adjusted EPS increased to $3.60 (from $3.41), driven by rates/pricing, warmer weather, customer growth, and increased usage, partially offset by higher non-fuel O&M and interest expense .
- Segment execution: Southern Power and Georgia Power improved materially year over year in Q4 net income, with Southern Power at $89M (vs $55M) and Georgia Power narrowing its Q4 net loss to $38M (vs $446M) .
What Went Wrong
- Non-GAAP exclusions: Q4 reported EPS was negative due to an after-tax $150M Vogtle Unit 3/4 charge and a $119M impairment of PowerSecure goodwill; acquisition/disposition impacts at Southern Company Gas also weighed on results .
- Cost headwinds: Higher non-fuel O&M and interest expense offset revenue tailwinds; management flagged parent-level interest rate headwinds and deferred fuel balances (Georgia Power ~$2.1B at YE) affecting near-term bill trajectories .
- Industrial softness: Eight of top ten industrial segments saw slower Q4 growth versus Q3, reflecting macro moderation in construction/housing-related sectors; FY 2023 retail sales growth assumption is 0%–1% .

Financial Results

EPS vs prior quarters and company estimate

Metric	Q2 2022	Q3 2022	Q4 2022	Vs Company Q4 Estimate
Adjusted EPS ($)	$1.07	$1.31	$0.26	Beat by $0.03 vs $0.23
Reported EPS ($)	N/A	N/A	-$0.08	N/A

Note: Q2/Q3 reported EPS not disclosed in transcripts; Q4 company estimate refers to management’s Q4 adjusted EPS estimate provided on Q3 call .

Revenue and margins vs prior year

Metric	Q4 2021	Q4 2022
Operating Revenues ($USD Billions)	$5.767	$7.047
Operating Income (Loss) ($USD Millions)	-$331	$138
EBIT Margin (%)	-5.74% (calc: -331/5,767)	1.96% (calc: 138/7,047)
Net Income (Loss) Attributable ($USD Millions)	-$215	-$87
Net Income Margin (%)	-3.73% (calc: -215/5,767)	-1.24% (calc: -87/7,047)

Margins calculated from cited revenues and operating/net income.

Segment breakdown (Q4 2022 vs Q4 2021)

Segment	Operating Revenues ($USD Millions)	Net Income Available to Common ($USD Millions)
Alabama Power (Q4’21 → Q4’22)	$1,394 → $1,794	$49 → $84
Georgia Power (Q4’21 → Q4’22)	$2,210 → $2,366	-$446 → -$38
Mississippi Power (Q4’21 → Q4’22)	$334 → $415	$26 → $14
Southern Power (Q4’21 → Q4’22)	$606 → $751	$55 → $89
Southern Company Gas (Q4’21 → Q4’22)	$1,386 → $1,964	$150 → $56

KPIs: Kilowatt-hour sales and customers (Q4 2022 vs Q4 2021)

KPI	Q4 2021	Q4 2022	YoY Change	Weather-Adjusted Change
Total Sales (Millions of KWH)	46,804	47,398	+1.3%	N/A
Total Retail Sales (Millions of KWH)	33,623	34,264	+1.9%	-0.1%
Residential (Millions of KWH)	10,441	11,000	+5.4%	-0.5%
Commercial (Millions of KWH)	10,938	11,219	+2.6%	+2.0%
Industrial (Millions of KWH)	12,092	11,899	-1.6%	-1.6%
Wholesale Sales (Millions of KWH)	13,181	13,134	-0.4%	N/A
Total Utility Customers (Thousands)	8,722	8,795	+0.8%	N/A

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Adjusted EPS	FY 2023	N/A	$3.55–$3.65	New
Adjusted EPS	FY 2024	$4.00–$4.30	$3.95–$4.10	Lowered and narrowed
Adjusted EPS	Q1 2023	N/A	$0.70	New
Vogtle Unit 3 ISD	2023	End of Q1 2023 target (prior)	May–June 2023	Deferred ~2–3 months
Vogtle Unit 4 ISD	2023–2024	Dec 2023 target (prior)	Late Q4 2023–Q1 2024	Risk-adjusted window
Dividend policy	Ongoing	Annual increases for 20+ years	Reaffirmed; board may reevaluate pace in 2024 with improved profile	Maintained, potential pace adjustment

Drivers for FY 2024 change: higher parent interest expense, deferred fuel dynamics, and Unit 4 timing (potential -$0.05 EPS in 2024 if ISD slips into late Q1) .

Earnings Call Themes & Trends

Topic	Q2 2022 (Prior-2)	Q3 2022 (Prior-1)	Q4 2022 (Current)	Trend
Vogtle execution & schedule	Unit 3 ITAAC near completion; Unit 4 electrical terminations a key risk; end-Q1 ‘23 and Dec ‘23 targets reiterated	Unit 3 fuel load achieved; initial criticality planned Jan; Unit 4 testing becomes critical path; schedule unchanged	Unit 3 remediation of piping vibration and valve issues; ISD moved to May–June; Unit 4 risk-adjusted to late Q4 ‘23–Q1 ‘24	Slight delay with risk mitigation; improved Unit 4 testing outcomes
Macro/industrial demand	Robust sales, strong customer adds; watch supply chain/inflation	1.8% weather-normal sales growth; strong customer adds; cautious on rates/inflation	Eight of top 10 industrial segments slowed; 0%–1% retail growth assumption	Moderation vs strong H1
IRA impacts	PTCs & tech-neutral credits viewed positively for customers; hydrogen/RNG R&D focus	Improved competitiveness for utility-owned solar; transferability benefits at Southern Power	Continued favorable view; storage normalization opt-out under evaluation	Supportive policy tailwinds
Interest rate headwinds	Portfolio duration strong; liability management focus	Managing rate volatility; offsets via operations	Parent interest expense headwind cited in guidance; credit metrics expected to improve post-Vogtle	Elevated rates, plan adjusted
Regulatory & fuel	Georgia rate case timeline; fuel under-recovery emerging	Georgia under-recovery ~$1.7B; file in early ’23	Georgia under-recovery ~$2.1B at YE; filing expected end of Feb; lower gas prices mitigate customer bill impacts	Recovery plans progressing

Management Commentary

“Southern Company enjoyed another successful year in 2022…to provide customers with clean, safe, reliable and affordable energy.” – Tom Fanning, Chairman, President & CEO .
“Our operations team…worked exceedingly well in 2022…meeting an all-time peak load of over 41,000 megawatts in June, and an extremely frigid Christmas weekend…a December record.” – Tom Fanning .
“Our adjusted earnings guidance range for the year is $3.55 to $3.65 per share…we are providing an adjusted 2024 earnings guidance range of $3.95 to $4.10 per share.” – Dan Tucker, CFO .
“We will continue to take the time needed to get it right and will not sacrifice safety or quality to meet schedule.” – Tom Fanning on Vogtle Units 3 and 4 .

Q&A Highlights

Guidance framework: CFO clarified the 5%–7% CAGR remains “consistent with” the narrowed 2024 range, with Unit 4 timing a one-year -$0.05 effect if late Q1 ISD occurs .
Capex upside and mix: Management discussed potential $3B upside over the five-year plan in franchise investments, with Southern Power allocations contingent on market conditions and contracting; utility renewables favored as IRA improves competitiveness .
Customer growth vs sales: Conservatively assuming flat to slight retail sales growth despite robust customer additions and economic development pipeline; hybrid work supports residential strength .
Vogtle remediation & NRC: Specific Unit 3 testing fixes (piping vibrations, valve leak, reactor coolant pump flow calibration) were addressed; NRC license amendments obtained quickly where needed .
Credit metrics: Moody’s CFO/debt near ~12% for 2022 impacted by fuel under-recovery; projected 17–18% in 2024 after Vogtle in-service; potential for lower downgrade thresholds post-Vogtle .
Unit 3 2023 contribution: Estimated ~$0.04 incremental EPS in 2023 vs 2022 with a little more than half-year in service .

Estimates Context

S&P Global Wall Street consensus (EPS and revenue) for Q4 2022 was unavailable at the time of analysis; tool returned an error (daily request limit exceeded). As a proxy, management’s Q3 call estimated Q4 adjusted EPS of $0.23, which SO exceeded with $0.26 adjusted EPS in Q4 .
Where Street estimates are needed for future revisions, use S&P Global data when accessible; this recap notes the unavailability during this session.

Key Takeaways for Investors

Adjusted EPS beat company’s prior Q4 estimate and FY 2022 adjusted EPS rose to $3.60, but reported results reflect Vogtle charges and PowerSecure impairment; underlying operations remain strong .
FY 2023 guidance ($3.55–$3.65) and narrowed FY 2024 guidance ($3.95–$4.10) appropriately embed higher interest expense and Vogtle timing; watch Unit 3/4 in-service milestones as key catalysts in 2023–2024 .
Reliability performance through extreme conditions and continued customer growth strengthen medium-term rate base expansion, with potential upside capex in grid hardening and generation transition (subject to constructive regulation and market conditions) .
IRA enhances utility-owned renewables economics and Southern Power contracting optionality; expect improved competitiveness for solar and storage, though supply chain and contracting dynamics remain gating factors .
Industrial demand moderation warrants caution in near-term sales growth; however, economic development pipeline is robust, suggesting medium-term load and investment visibility .
Deferred fuel recovery actions (Georgia filing) and declining gas prices should mitigate customer bill impacts; monitor regulatory outcomes and recovery timelines .
Post-Vogtle completion, credit metrics are set to improve; dividend growth track record remains intact, with potential pace reevaluation in 2024 as cash flow uplift materializes .

Citations: Press release and exhibits ; Q4 2022 call transcript ; Q3 2022 call ; Q2 2022 call .

SOUTHERN CO (SO)·Q4 2022 Earnings Summary