Successfully brought Plant Vogtle Unit 4 to commercial operation, making Vogtle the largest generator of clean energy in the U.S.
This marks the completion of the first new nuclear units in the U.S. in over 30 years.
Financial Performance Q1 2024
Adjusted EPS was $1.03, $0.24 higher than Q1 2023 and $0.13 above estimate.
Performance driven by investments in state-regulated utilities and less mild weather, offset by higher interest and depreciation.
Weather-normal retail electric sales to all classes were 1.7% higher than Q1 2023.
Industrial sales showing recovery, led by lumber and paper industries.
Announced an $0.08 per share increase in annual common dividend, marking the 23rd consecutive increase.
Economic and Customer Growth
Strong economic development within the Southeast footprint, with investment announcements being the second highest for a first quarter on record.
Projected retail electric sales growth accelerating to approximately 6% from 2025 to 2028.
Georgia Public Service Commission approved a stipulated agreement for Georgia Power to procure and deploy resources to meet growing electricity demands.
Forecasting and Pricing Strategy
Forecast includes risk adjustments and conservative views informed by engagement with customers.
Pricing strategy ensures new large load customers bear the marginal cost, protecting existing customers.
New large load customers often pay upfront for local distribution system improvements.
Diversity of supply resources serves as a risk mitigation strategy.
Commitment to Greenhouse Gas Reduction
Focused on achieving net 0 greenhouse gas emissions by 2050.
Over 80% of resource additions from 2023 to 2030 are 0 carbon emitting.
Company Outlook
Southern Company has a strong portfolio and is well-positioned for long-term success, supported by quality state-regulated utilities and complementary businesses.
Question and Answer
Impact of Sales Growth on Earnings
Question
Can you provide sensitivities around the impact of commercial and data center load sales growth on earnings?
Answer
A 1% change in overall sales equates to approximately $40 million in revenue.
For data centers and large industrial customers, a 1% change in sales corresponds to roughly $20 million to $40 million.
Capital Expenditure Requirements for 23 Georgia IRP
Question
Do the recent commission approvals for the 23 Georgia IRP filing require any incremental capital compared to the previously disclosed figures?
Answer
The approvals necessitate additional capital expenditures, primarily for the expansion of battery energy storage systems.
The total incremental capital expenditure is estimated to be between $500 million and $1 billion, including the approved storage resources and an expansion of a solar project.
Earnings Growth Potential and Durability
Question
Does the ongoing capital investment and sales growth have the potential to impact future earnings growth and durability, considering the recent momentum?
Answer
The company acknowledges an upward bias in earnings growth due to the positive momentum, but it is too early to provide specific details.
The focus is on extending the growth runway and ensuring the long-term sustainability of the business.
Updates on Georgia PSC and Legislation
Question
Can you provide an update on the status of the commissioner elections, court cases, and the bill regarding a consumer council?
Answer
The bill proposing a consumer council was not passed, but a separate bill addressing the election cycle for commissioners was approved, providing clarity and setting the schedule for the current commission through 2028.
Assessing Risk in Data Center Growth
Question
How do you assess the risk of data center customers potentially selecting multiple locations and not finalizing agreements with all utilities?
Answer
The company’s forecast is conservative and does not assume projects until firm commitments are secured through bilateral agreements with utilities.
While there is some level of risk due to the high level of activity in the market, the company feels confident in its approach.
Timing of Guidance Update and Trigger Events
Question
Can you elaborate on the timing of a potential guidance update regarding the upward bias in earnings growth and the trigger events that would prompt such an update?
Answer
Any guidance update would be contingent on continued momentum and significant developments beyond the current profile.
The company is unlikely to provide updates intra-year and would likely address any changes during the fourth quarter call.
Customer Preferences and Data Center Growth
Question
What conversations are you having with hyperscale data center customers regarding their preferences for self-generation versus utility-supplied power?
Answer
The company is engaging in discussions with customers that cover a range of options, including self-generation, behind-the-meter solutions, and utility-supplied power.
The focus is on understanding customer needs and providing a range of solutions through the company’s portfolio of subsidiaries.
Sales Growth in Other Jurisdictions
Question
Can you remind us of the assumptions regarding sales growth in other jurisdictions outside of Georgia and the potential upside?
Answer
The current plan does not include specific assumptions for sales growth in other jurisdictions but acknowledges the potential for upside from projects in Alabama and Mississippi.
Credit Implications of Incremental Capital Expenditure
Question
How would the incremental capital expenditure impact credit metrics, specifically the FFO to debt ratio?
Answer
The company plans to issue additional equity, likely through an ATM, to maintain credit metrics within the previously disclosed profile.
Despite the equity issuance, the incremental capital expenditure is expected to be accretive to earnings.
Data Center Sales Growth Composition
Question
Can you provide a breakdown of the 12% data center sales growth, specifically the contribution from new data centers versus existing facilities?
Answer
The growth is primarily driven by existing data centers, which account for approximately 75% of the total, with the remaining 25% coming from new data centers.
Status of House Bill 1192 and Potential Impact
Question
Has House Bill 1192, which addresses the suspension of sales tax exemptions on data centers, been signed into law, and what are the potential implications for data center growth in Georgia?
Answer
The bill has been passed and is awaiting the governor’s decision.
The bill aims to signal that Georgia is open for business and may not necessarily impact data center growth in the state.
Impact of Load Growth on Generation Mix and Coal Plant Retirements
Question
How does the significant load growth and data center investments in the service territory impact the future generation mix and potential coal plant retirement dates, considering the new EPA rules?
Answer
The company highlights the need to assess various factors, including load growth, data center demand, new EPA rules, and technology advancements, when determining the future generation mix and potential coal plant retirements.
Feasibility of Carbon Capture in Southern’s Territories
Question
How does Southern Company view the feasibility of carbon capture technology in its territories, considering the geology and technology requirements?
Answer
While there are suitable geologic formations for carbon sequestration in some areas, the practicality of carbon capture technology is questioned, particularly in light of the new EPA rules and their alignment with technology capabilities.
The company is currently reviewing the new EPA rules and considering potential responses, including potential litigation.
Viability of Nuclear Power for Data Center Demand
Question
Given the ability of nuclear power to provide base load generation suitable for data centers, what are Southern Company’s updated thoughts on the viability of nuclear technology and potential future projects?
Answer
The company emphasizes the need for additional nuclear power in the country to support the growing demands of the digital economy and society.
While celebrating the completion of Vogtle Units 3 and 4, the company believes that new nuclear projects should be considered by other entities and supported by federal incentives.
Language on Rate Increases in Georgia IRP Stipulation
Question
Can you provide commentary on the language related to rate increases in the Georgia IRP stipulation, particularly in light of the focus on customer bills and potential limitations on bill increases?
Answer
The stipulation focuses on ensuring that the economic benefits of the Georgia IRP are reflected in customer rates and includes a commitment to incorporate those benefits into the 2025 rate case calculation.
Southern Energy Exchange Market and Load Growth
Question
Does the Southeast Energy Exchange Market, which was initially intended to distribute excess power, present any upside potential or opportunities to address load growth in Georgia?
Answer
The exchange market serves its intended purpose of efficiently distributing excess capacity among participants and does not necessarily signal additional opportunities for addressing the company’s load growth.
The market contributes to a more nimble and cost-effective energy system, benefiting customers across the region.
Utilization of Open Capacity in Southern Power
Question
When will Southern Power have open capacity that could benefit from the current market conditions, and is there a potential for it to participate in negotiations with hyperscale customers seeking net-zero solutions?
Answer
Southern Power’s portfolio is highly contracted for the next five years, but opportunities may arise towards the end of the decade as other resource needs emerge.
The company will evaluate opportunities to serve load-serving entities, including potential participation in net-zero supply negotiations, where it makes sense within its jurisdictions.
Potential Impact of House Bill 1192 on Data Center Growth
Question
If House Bill 1192 is signed into law, would it slow down data center additions in Georgia or put the state at a relative disadvantage compared to other states?
Answer
While the bill may not have a direct impact on data center growth, its potential implications for economic development and infrastructure investment competitiveness will be evaluated.
Potential Acceleration of Coal Plant Retirements due to EPA Rules
Question
If the new EPA rules are adopted, would Southern Company need to accelerate the timeline for coal plant retirements?
Answer
The company is currently evaluating the implications of the new EPA rules on coal plant operations and potential retirements.
The rules are considered impractical and may pose challenges for the continued operation of coal units.
Data Center Customer Decision Timelines and Pending Construction
Question
What time frame or cadence is expected for data center customers to make final decisions, and have the pending construction projects, mentioned in the stipulated agreement testimony, started construction?
Answer
Data center decisions occur continuously, with projects exploring and committing to locations on an ongoing basis.
There are currently 12 data centers under construction in the service territory, totaling approximately 2,400 megawatts.
The company will provide updates on the emerging load through quarterly reports to the commission and staff, leading up to the next formal IRP process in January 2025.
Data Center Customer Preferences for Carbon-Free Resources
Question
Are data center customers stipulating any specific requirements regarding the use of carbon-free resources in their location decisions?
Answer
While early requests often focused on 24/7 carbon-free options, the current emphasis is on securing reliable and cost-effective energy resources.
Southern Company remains transparent about its transition plans and its commitment to building additional carbon-free resources.
Transmission and Distribution (T&D) Investment Opportunities
Question
What does the load forecast, particularly the Georgia IRP, mean for T&D investment opportunities in addition to generation investments?
Answer
T&D investments will be an integral part of the long-term planning discussions with states as the company adds new resources and transitions its generation fleet.
The growth in demand, particularly from data centers, will require significant infrastructure investment, including both transmission and gas infrastructure.
Alabama and Mississippi IRP Schedules and Potential Issues
Question
Can you remind us of the Alabama and Mississippi IRP schedules and whether similar issues to those in Georgia are expected to arise in those states?
Answer
The Alabama IRP process is scheduled for spring 2025, while the Mississippi process is currently underway.
The potential for accelerated load growth and the need for additional resources will be considered in those states’ IRP processes, similar to the approach taken in Georgia.
