Upload
others
View
0
Download
0
Embed Size (px)
Citation preview
CompanyName:SouthernCoCompanyTicker:SOSector:Utilit iesIndustry:Utilit ies
EventDescription:Q12015EarningsCallMarketCapasofEventDate:40.60BPriceasofEventDate:44.11
©2014TheStreet,Inc.Al l R ightsReserved Page1of27
SouthernCompany(SO)EarningsReport:Q12015ConferenceCallTranscriptThefollowingSouthernCompanyconferencecalltookplaceonApril29,2015,01:00PMET.Thisisatranscriptofthatearningscall:
CompanyPart icipants
DanTucker;SouthernCompany;VP-IR,FinancialPlanningTomFanning;SouthernCompany;Chairman,President,CEOArtBeattie;SouthernCompany;CFO
OtherPart icipants
GregGordon;EvercoreISI;AnalystJamesvonRiesemann;MizuhoSecurities;AnalystBrianChin;BankofAmericaMerrillLynch;AnalystMarkBarnett;Morningstar;AnalystAnthonyCrowdell;Jefferies;AnalystMichaelWinter;UBS;AnalystDanielEggers;CreditSuisse;AnalystAliAgha;SunTrustRobinsonHumphrey;AnalystMichaelLapides;GoldmanSachs;AnalystShahriarPourreza;GuggenheimPartners;AnalystPaulRidzon;KeyBancCapitalMarkets;AnalystDanJenkins;StateofWisconsinInvestmentBoard;Analyst
MANAGEMENTDISCUSSIONSECTION
Operator :
Goodafternoon.MynameisJoseandIwillbeyourconferenceoperatortoday.Atthistime,IwouldliketowelcomeeveryonetotheSouthernCompany'sfirst-quarter2015earningscall.
(OperatorInstructions)
IwouldnowliketoturntheconferenceovertoMr.DanTucker,VicePresidentofInvestorRelationsandFinancialPlanning.Pleasegoahead,sir.
DanT ucker (VP-IR,FinancialPlanning):
Thankyou,Jose.Welcome,everyone,toSouthernCompany'sfirst-quarter2015earningscall.JoiningmethisafternoonareTomFanning,Chairman,PresidentandChiefExecutiveOfficerofSouthernCompany;andArtBeattie,ChiefFinancialOfficer.
Letmeremindyouthatwewillmakeforward-lookingstatementstodayinadditiontoprovidinghistoricalinformation.Variousimportantfactorscouldcauseactualresultstodiffermateriallyfromthoseindicatedintheforward-lookingstatements,includingthosediscussedonourform10-Kandsubsequentfilings.
Inaddition,wewillpresentnon-GAAPfinancialinformationonthiscall.ReconciliationstotheapplicableGAAPmeasureareincludedinthefinancialinformationwereleasedthismorning,aswellastheslidesfor
CompanyName:SouthernCoCompanyTicker:SOSector:Utilit iesIndustry:Utilit ies
EventDescription:Q12015EarningsCallMarketCapasofEventDate:40.60BPriceasofEventDate:44.11
©2014TheStreet,Inc.Al l R ightsReserved Page2of27
thisconferencecall.Theslideswewilldiscussduringtoday'scallcanbeviewedonourinvestorrelationswebsiteatinvestor.Southerncompany.com.Atthistime,I'llturnthecallovertoTomFanning.
T omFanning (Chairman,President,CEO):
Goodafternoonandthankyouforjoiningus.ManyofyouhaveheardmespeakbeforeaboutthefullportfolioanditssignificancetoSouthernCompanyandtoourindustryaasawhole.Simplyput,weareinventingthefutureofclean,safe,reliableandaffordableenergyforthebenefitofthecustomersandcommunitiesweserve.Ourfullportfoliostrategy,whichincludesnewnuclearandinnovativenewtechnologiesfor21stcenturycoal,aswellasnaturalgas,renewablesandenergyefficiency,isafundamentalcomponentofthatmission.
I'dliketotakeafewmomentstohighlighthowthisall-of-the-aboveapproachcontinuestobebeneficialtocustomersandtodiscussseveralprojectshelpingtoshapethefullportfolioforthefuture.Tobeginwith,ourdiversegenerationfleetenablesustoquicklyadapttoconstantlychangingmarketconditionswiththeabilitytoutilizethemostcostefficientgenerationresourcesatanyparticularpointintime.Whennaturalgaspricesarelow,forexample,weareabletotakeadvantagebyburningmorenaturalgasandlesscoal.
Suchwasthecaseinthefirstquarterofthisyear.Gasenergyclimbedto48%ofourenergyproduction.Ouruseofcoalforthequarterwasthelowestinseveraldecades,fallingto32%ofourenergymix.Andasahallmarkofourintegratedbusinessmodel,wepassedthosesavingsalongtoourcustomers.
Naturalgas,ofcourse,willcontinuetobeadominantsolution.Recently,ourgasconsumptionwasabout1.5Bcfperday.Thisyear,itcouldapproach1.9Bcfperday.Andby2020,theamountcouldbeasmuchas2.3Bcfperday.
Butnaturalgasisnotapanacea,aswecannotassumethatcurrentpriceswillendureindefinitely.Wemust,therefore,continuetopursuethedevelopmentofatrulydiversegenerationportfolio,onethatprovidesthenecessaryoptionalityandflexibilitytoadjusttochangingmarketconditions.
Inadditiontonaturalgas,21stcenturycoalandnewnuclear,wearerapidlybuildingoutourenergyportfoliowithrenewablesincludingsolarandwind.Withthatinmind,Iwouldliketotakeamoredetailedlookathowwe'veexpandedourrenewableresourcesinrecentmonths.
FourSouthernCompanysubsidiariesrecentlymarkedmajormilestonesinthestrategicexpansionofoneofthenation'slargestrenewableenergyportfoliosthroughtheannounceddevelopmentoracquisitionoflarge-scalesolarprojects.GulfPowerandMississippiPowerrecentlyannouncedpowerpurchaseagreementswithsolarfacilitiestotaling173megawattsthatarecurrentlybeingdevelopedonmilitarybasesintheirrespectivestates.GeorgiaPowerbrokegroundatFortBenning,thefirstoffour30-megawattretailratebasedsolarprojectsindevelopmentwiththeUSDepartmentofDefense.
Andthere'smorelikelytocome.InFebruaryourSouthernPowersubsidiaryannouncedtheacquisitionoftwosolarprojectstotaling99megawattsinGeorgia,the80-megawattDecaturParkwaysolarprojectandthe19-megawattDecaturCountysolarproject.Andmostrecently,SouthernPowerannouncedtheacquisitionofacontrollinginterestinthe32-megawattLostHills-BlackwellsolarfacilityinCaliforniafromFirstSolar.
AlsoinMarch,SouthernPowerannouncedanagreementtoacquirethe299-megawattKayWindfacilitycurrentlyunderconstructioninOklahoma.Thisacquisitionisexpectedtocloseinlate2015,uponsuccessfulcompletionoftheproject.
KayWindwillbethelargestrenewableelectricgenerationplantintheSouthernCompanysystemand
CompanyName:SouthernCoCompanyTicker:SOSector:Utilit iesIndustry:Utilit ies
EventDescription:Q12015EarningsCallMarketCapasofEventDate:40.60BPriceasofEventDate:44.11
©2014TheStreet,Inc.Al l R ightsReserved Page3of27
thefirstwindfacilitywewillown.Uponcompletionoftheseprojects,theSouthernCompanysystemexpectstoownorpurchasetheoutputofmorethan3,100megawattsofrenewableresourcessystem-wide,including44solarfacilitiesinsevenstates.
Let'snowdiscussourtwolargeconstructionprojects,whichareequallyimportanttoourfullportfolioofgenerationresources.Ournewnuclearproject,plantVogtleUnits3and4andour21stCenturycoalfacilityinKemperCounty,Mississippi,featuringcoalgasificationtechnologydevelopedbyourresearchersinpartnershipwithKBRandtheDepartmentofEnergy.Bothoftheseprojectsstemfromstate-specificresourceplanningprocessesthatvaluegenerationdiversity,includingthehedgethatthesenewresourcesrepresentagainstpotentialcarbondioxideregulationsinthefuture.
First,anupdateonPlantVogtleUnits3and4.Theprimaryfocusoftheprojectcontinuestobeonqualityandsafety.GeorgiaPowerhasmaintainedanexceptionalsafetyrecordforaconstructionprojectofthissize,whichcurrentlyhasover5,000peopleonsite.Duringthefirstquarter,ouroutstandingsafetyculturemanifesteditselfasweperformedover1millionsafeworkhourswithoutarecordableinjury.
Thequalityoversightfromournuclearteamcontinuestobeinvaluable.Thisisacomplexprojectwithnumerouschallenges.WeareproudofhowwellourprocessesandcontrolsareholdinguptotheinspectionofboththeNRCinspectorsandGeorgiaPower'sregulator.
Moreimportantly,ourownrigorousoversightisbeingmanifestedinthequalityofthefacility.ThenewVogtleUnitsarebeingbuilttoserveGeorgiacustomersfor60-plusyears,andtheoversightinplacetodayshouldhelpensurethattheseunitswillfunctionatahighlevelfordecadestocome.
ConstructionactivitiesaretrackingcloselywiththerevisedscheduleprovidedbythecontractorsinJanuary.Thegreatestrisktothescheduleforbothunitscontinuestobeinthetimelydeliveryofstructuralsub-modules.
I'mpleasedtoreportthatthequalityattheLakeCharlesfacilityhasimprovedandwenolongerexpectsub-modulesfromthatfacilitytorequireremediationonsitebeforebeingreleasedforassembly.WeanticipatecontinueddeliveryofpanelsthroughouttheyearfromLakeCharles,andwe'vebeeninformedthatthescopeofworkmaybeexpandingthere.
Criticalpathremainscloselyalignedwithdeliveryandinstallationofpanelsfortheshieldbuilding.ThesepanelsarefabricatedbyNewportNewsindustrialandqualityhasbeengood.AccelerationofworkatNNI,alongwithimprovingthepanelinstallationprocessrepresentsoneofourbestopportunitiestoimproveonthescheduleprovidedbythecontractors.
Criticalpathrunssomewhatparallelwithactivitiesinsidethecontainmentvessel.TheCA01moduleisoneofthemajornextstepsinsidethisareaofthenuclearisland.ThefinalconcretepoursnecessarytoinstallCA01werecompletedlatelastweek.CA01isnowprojectedtobeliftedintoplaceearlyinthethirdquarterofthisyear.
Anumberofyouhavevisitedthesiteinpersonandtheprogressisobvious.Whiletheentireprojectisproceedingwell,theUnit3annexbuildingisanareaofnoteworthyprogress.TheannexbuildingisnecessaryfortheinitialenergizationofthecontrolsystemsforUnit3,animportantearlystepinthestartupprocess.
Theconcretefoundationsandstructuralsteelforthisfacilityarewellunderway.AndinlateFebruarythefirstof34wallsub-modulesfortheUnit4CA20modulewasupended,markingthestartoftheassemblyprocess.
Ontheregulatoryfront,$198millioninexpendituressubmittedinthe11thVogtleconstruction
CompanyName:SouthernCoCompanyTicker:SOSector:Utilit iesIndustry:Utilit ies
EventDescription:Q12015EarningsCallMarketCapasofEventDate:40.60BPriceasofEventDate:44.11
©2014TheStreet,Inc.Al l R ightsReserved Page4of27
monitoringreportwereunanimouslyapprovedonFebruary19,withacumulativeamountapprovedtodateof$2.8billion.Additionally,theproceduralandschedulingorderforthe12thVogtleconstructionmonitoringreportwasapprovedonApril7.
Consistentwiththelong-standingGeorgialaw,theorderreaffirmedthatneithertheproject'scertifiedcost,northeVCM8stipulationin2013constituteacostrecoverycap.GeorgiaPowerwillbeallowedrecoveryofallreasonableandprudentstartupcosts,uptoandabovethecertifiedamount.Andwebelievethesemi-annualVCMprocess,includingthetestimonyoftheindependentmonitor,continuestobuildarecordthatthoroughlydocumentsGeorgiaPower'sprudentmanagementoftheproject.
Theorderalsoestablishesascheduleforfilingsandhearingsonourrequest,oftheCommissiontoverifyandapprove$169millioninexpendituresforthesecondhalfof2014.GeorgiaPowerexpectstofiledirecttestimonyonFriday.HearingsarescheduledtobeginonJunethesecond.Andweanticipateadecisioninmid-August.Afullscheduleisincludedinourslidedeck.
Nowlet'sturntoanupdateontheKemperCountyIGCCproject.TheKemperprojectalsoboastsaterrificsafetyrecord.Withnowover2,500workersonsite,nosafetyincidentsoccurredduringthefirstquarter.
InearlyMarchwecompletedthefirstfiringwithnaturalgasofthefacility'sgasifierburners,asignificantmilestone.Wecontinuetomaketremendousprogressonourotherstart-upactivitiesaswelookaheadtothefirstsynthesisgasproductionplannednowforthethirdquarter.Inthemeantime,thecombinedcycleatKempercontinuestoperformexceptionallywell,withafirst-quarterequivalentforcedoutagerateoflessthan1%andacapacityfactorinlinewiththerestofourcombinedcyclefleet.
Turningtothelegalandregulatoryfronts.TheMississippiSupremeCourt'sorder,whichdeemedthatthe2013Kempersettlementunenforceableandreversedthesubsequentrateorder,hasbeenmetwithvocaloppositionfromstate-wideindustrygroups,businessorganizations,thestateeconomiccouncil,andmembersofthepublicutilitystaffandCommission,aswellasotherpublicentities,throughamicusbriefsfiledwiththeMississippiSupremeCourt.
Mostofthebriefsemphasizethattherateplanagreedtoin2013wasofgreatbenefittothecustomersofMississippiPower,andthatatraditionalratecasecouldmeanrateimpactapproaching40%forsomecustomers.Thiscomparestothe25%rateincreasecontemplatedintheoriginalsettlement,18%ofwhichisalreadyinplace.
Whileweawaitthecourt'sdecisiononrehearing,wewillcontinuetoworktowardsareasonable,comprehensivesettlementwiththepublicutilitystaff.However,asapossiblealternativetoasettlement,wearealsopreparingtofilearatecasebymid-May.Withthecompletionoftheprojectinsight,wewanttoensurethattheraterecoveryisadequatelyaddressedinatimelymanner.I'llnowturnthecallovertoArtforafinancialandeconomicoverview.
ArtBeatt ie (CFO):
Thanks,Tom.Asyoucanseefromthematerialswereleasedthismorning,wehadsolidresultsforthefirstquarterof2015,reportingearningsof$508millionor$0.56pershare,comparedwithearningsof$351millionor$0.39pershareinthefirstquarteroflastyear.
Thefirst-quarterresultsfor2015includea$6millionafter-taxchargerelatedtoanincreasedconstructionestimateforMississippiPower'sKemperIntegratedGasificationCombinedCycleproject.Thefirst-quarterresultsfor2014includeda$235millionafter-taxchargefortheKemperIGCCproject,or$0.27pershare.
Excludingtheseitems,SouthernCompanyearned$514millionor$0.56pershareduringthefirstquarter
CompanyName:SouthernCoCompanyTicker:SOSector:Utilit iesIndustry:Utilit ies
EventDescription:Q12015EarningsCallMarketCapasofEventDate:40.60BPriceasofEventDate:44.11
©2014TheStreet,Inc.Al l R ightsReserved Page5of27
of2015,comparedto$586millionor$0.66pershareinthefirstquarterof2014.Earningsforthefirstquarterof2015wereinlinewithourexpectationsandwerepositivelyinfluencedbyretailrevenueeffectsatSouthernCompany'straditionaloperatingcompanies,offsetbymilderwinterweatherthanin2014,andincreasedoperatingandmaintenanceexpenses.
Movingnowtoaneconomicandsalesreviewforthefirstquarter.Economicgrowthinthefirstquarterof2015wasmodest,butourretailsalesacrossallcustomerclassesareencouraging.Totalweather-adjustedretailsalesgrew1%inthefirstquarter,ledbyindustrialsales,whichwereup2%.
Wehavenowenjoyedeightconsecutivequartersofpositiveyear-over-yearindustrialsalesgrowthinourregion.Industrialsalesgrowthremainsbroad-basedacross8ofourlargest10industrialsegments.
Thestrongestindustrialsegmentsincludepetroleum,up10%;stone,clayandglass,up6%duetoimprovementsinthehousingmarket.Transportationimproved5%asautomotivemanufacturersexpandedoutput.Weather-adjustedresidentialsaleswereslightlypositiveforthefirstquarterof2015,primarilyduetostrongcustomergrowthofnearly16,000,a55%increaseovertheapproximate10,000newcustomersgainedinthefirstquarterof2014.
Weatheradjustedcommercialsaleswereup0.7%forthequarter.Officevacancyratescontinuedtoshowsignsofimprovementandmoreofficeretailprojectsarebeingannounced.
Currently,morethan1.9millionsquarefeetofofficespaceisunderconstructioninMetroAtlanta.Inaddition,anumberofnewAtlantaprojectsareexpectedtobeginconstructionsoon,includingtheMercedes-Benzheadquarters.
AccordingtotheUSBureauofLaborstatistics,non-farmemploymentincreasedinallthestatesofourretailserviceterritory,betweenFebruaryof2014andFebruaryof2015.Nationally,Georgiarankednumberfiveamongallstatesforjobgrowth,andAtlantawasrankedamongthetopfivemetroareas.
Meanwhile,oureconomicdevelopmentpipelineremainsrobust,withmorethan300potentialprojectsrepresenting37,000potentialnewjobsandover$34billioninpotentialcapitalinvestment.Theclimateforbusinessandinvestmentremainsstronginourserviceregion.AlabamaandGeorgiawererecentlyrankednumberoneandnumberfour,respectively,amongstatesinwhichtodobusinessbySiteSelectionMagazine.
TurningbrieflybacktoSouthernPower.AsTommentionedinhisopeningremarks,SouthernPowercontinuestofindnewprojectsthatmeetitsinvestmentcriteria.Inourfourth-quartercallinearlyFebruary,weoutlinedtwocategoriesforSouthernPower'sCapExprojections,baseCapExandplaceholderCapExforgrowth.
BaseCapExincludesprojectswehaveidentifiedaslikely,eventhoughwemaynothavereachedfinaltermsorreceivedallregulatoryapprovals.InFebruary,ourbaseCapExincluded,amongothers,theKayWindandDecaturprojectsTommentionedearlier.
Sincethen,SouthernPowerhasidentifiedanumberofadditionalprojectsfor2015and2016.Asaresult,weareshiftingdollarsoutoftheplaceholdercategoryandintobaseCapExforSouthernPower.
Theresultisthatwehaveaccountedforallofouroriginal2015placeholdersandhavemoved$100millionfromtheplaceholdertobasein2016.Withour2015successthusfarandthelongrunwaybetweennowandtheendof2016,weareconfidentaboutourabilitytofindsolidprojectstoaccountforourremaining2016placeholders.
BeforeturningthecallbacktoTom,letmecovertwofinalitems.First,ourearningsestimateforthesecondquarter,whichis$0.69pershare.
CompanyName:SouthernCoCompanyTicker:SOSector:Utilit iesIndustry:Utilit ies
EventDescription:Q12015EarningsCallMarketCapasofEventDate:40.60BPriceasofEventDate:44.11
©2014TheStreet,Inc.Al l R ightsReserved Page6of27
Secondly,I'dliketohighlightourdividendannouncementlastweek.OurBoardofDirectorsapproveda$0.07increaseinourcommondividendtoanannualizedrateof$2.17pershare.Thisisour14thconsecutiveannualincreaseandmarks270consecutivequartersdatingbackto1948,thatSouthernCompanywillhavepaidadividendequaltoorgreaterthanthepreviousquarter,toitsshareholders.
Overthepasttwodecades,ourdividendhasaccountedfornearly70%ofourtotalshareholderreturn.ItisthecornerstoneofourvaluepropositionandtheBoard'sdecisionlastweekreinforcesitsconfidenceinthestrengthofourlong-termfinancialplan.IwillnowturnthecallbackovertoTomforhisclosingremarks.
T omFanning (Chairman,President,CEO):
Thanks,Art.Afterasuccessfulyearin2014,SouthernCompanyhasenteredthenewyearwithstrongmomentum.Weseeafranchisebusinessthatisoperatingbetterthanever,solidifyingitspositionasanindustryleaderinallphasesofthebusiness.Weseeimportantprogressonmajorcapitalprojectsandwecontinuetoexcelwithourcustomer-focusedbusinessmodel.Wealsoseeastrengtheningeconomyandaregionpoisedtogrowinthemonthsandyearsahead.
Inshort,webelieveSouthernCompanyiswellpositionedtosucceedin2015andintheyearsahead,behindthestrengthofour26,000employeesandtheircommitmenttoprovideclean,safe,reliableandaffordableenergytothecustomersandcommunitiesweserve.SouthernCompanyiskeenlyfocusedonremaininganindustryleaderforthelongtermandforward-thinkingdecisionswithregardtoourgeneratingportfolioareakeyaspectofthateffort.
Buttheevolutionofourbusinessdoesnotstopthere.WerecentlyannouncedthelaunchofanewEnergyInnovationCentertobelocatedinAtlanta'sTechnologySquare.Whileweremainsteadfastinourcommitmenttoexcelatthefundamentalsofmaking,movingandsellingandconsumingelectricity,wealsounderstandthatthewayinwhichcustomersuseenergymaychangeovertime.
Theenergyinnovationcenterisjustonewayinwhichweareworkingtoanticipatethefutureandleadthewaywiththedevelopmentofnewenergyinnovations.Goingforward,wewillcontinuetobuildonourlonghistoryofinventingthefuturebyrelyingonthethinkingofourentireworkforce,andwithpotentialpartnerssuchasMethandothermajorestablishedandnewentrantstotheenergyindustry.
Initialpossibilitiesinvolveexpandingthenotionofenergyinfrastructuretoassetsbeyondthemeter,unmannedaerialvehicles,hydrogenproductionfromunder-utilizedgeneratingfacilitiesanddesalinationplants.AsArtindicatedearlier,thestrengthourunderlyingfranchiseaswellasourcontinuedfocusonremaininganindustryleaderthroughinnovation,underpintheBoard'sdecisionlastweektoincreaseourdividend,whichsupportsourobjectiveofprovidingsuperiorrisk-adjustedtotalshareholderreturntoinvestorsoverthelongterm.Wearenowreadytotakeyourquestions.Operator,we'llnowtakethefirstquestion.
QUESTIONS&ANSWERS
Operator :
Thankyou,sir.
(OperatorInstructions)
AndourfirstquestioniscomingfromthelineofGregGordonfromEvercoreISI.Pleaseproceedwithyourquestion.
T omFanning (Chairman,President,CEO):
CompanyName:SouthernCoCompanyTicker:SOSector:Utilit iesIndustry:Utilit ies
EventDescription:Q12015EarningsCallMarketCapasofEventDate:40.60BPriceasofEventDate:44.11
©2014TheStreet,Inc.Al l R ightsReserved Page7of27
Hello,Greg.Greg?
GregGordon (Analyst-EvercoreISI):
I'mhere.Canyouhearme?
T omFanning (Chairman,President,CEO):
Yes,wecannow.
GregGordon (Analyst-EvercoreISI):
Sorry,Iwasonmute.It'sbeenalongdayalready.You'relikeourfifthcall.SowhatisthelegalpathinMississippitodaythateithergetsyoubacktoasettledratedealorputsyouinaformalratecasefiling?WhatarethedifferentpathsthatgetusbackintoasettledlowratehikeorputusintoaratefilinginMay?
T omFanning (Chairman,President,CEO):
Justaswedescribed,there'stwopaths.Oneiswe'vebeenhaving,asyouallknow,aprolongedseriesofdiscussionswiththestaff.Wecontinuetothinktheyareconstructive.Ithinktheresultofasettlementcould,inessence,preserveandformtheratestructurethatweputinplacein2013.
Failingtoreachasettlement,wewillfilearateincreaseinaconventionalratecase.Itisconceivableyoucouldfiletheratecaseandfilethesettlementatthesametime.Butthosearethetwopaths.
GregGordon (Analyst-EvercoreISI):
Okay,buttheSupremeCourt'sdecisionhasessentiallyclosedoffthecreativeapproachyouusedtopre-fundingthecapitalprojectoristhatnotthecase?
T omFanning (Chairman,President,CEO):
No,that'snotthecase.Thesettlementwouldessentiallypreservethestructure,whichwouldmimicwhatwasapprovedin2013.
GregGordon (Analyst-EvercoreISI):
Thatwouldbegreat.Secondquestionisonyourcontinuedexpansionoftherenewablesplatform.Whenwelookat--soessentiallytheannouncementofthiswindprojectacquisitionfillsinsomeofthenotionalspaceinyourSouthernPowerCapExbudget?
T omFanning (Chairman,President,CEO):
That'sright.
GregGordon (Analyst-EvercoreISI):
It'snotincrementaltothebudgetthatyou'vealreadyarticulatedtous?
T omFanning (Chairman,President,CEO):
It'spartofthe--yes,itwasinthebasealready.
GregGordon (Analyst-EvercoreISI):
Gotyou.
CompanyName:SouthernCoCompanyTicker:SOSector:Utilit iesIndustry:Utilit ies
EventDescription:Q12015EarningsCallMarketCapasofEventDate:40.60BPriceasofEventDate:44.11
©2014TheStreet,Inc.Al l R ightsReserved Page8of27
T omFanning (Chairman,President,CEO):
Whatwe'vedone,isthechangehere,it'sonthegraphweshowed,isthatweessentiallyhavespokenforalltheplaceholdersin2015.Sowe'reveryconfidentofhittingournumbersforSouthernPowerin2015.
GregGordon (Analyst-EvercoreISI):
Right.HowmuchofyourtotalCapExin2016atSouthernPoweriscurrentlymoneyprojectsthataredefinitelygoingforwardversusplaceholders?
T omFanning (Chairman,President,CEO):
About$400million.
GregGordon (Analyst-EvercoreISI):
Oh,that'shereon,sorry,page12.Sorry,Ididn'tseethat.
T omFanning (Chairman,President,CEO):
About$400million.
GregGordon (Analyst-EvercoreISI):
Andthencanyouarticulate--Sorry,goahead.
T omFanning (Chairman,President,CEO):
Wefeelreallygoodabouthittingourplaceholdersin2016also.Butwe'renotatthestatewe'rereadytodeclarethoseaspartofbase.We'veimproveditby$100million.
GregGordon (Analyst-EvercoreISI):
Gotyou.Andthenisthere,whatyoucanarticulate,whatyouthinktheearningscontributionisgoingtobefromtheKayWindfacilitywhenitcomesin?
ArtBeatt ie (CFO):
Well,theKayWindfacility,thebenefitsarenotinvestmenttaxcredits,they'reproductiontaxcredits.SoIdon'trecallthe2016benefit,butitshouldnotbenefit2015atall.Itwillbea2016addition.
T omFanning (Chairman,President,CEO):
Itwillbealittleover$0.01ayear,somethinglikethat,forwhatever,10years.
GregGordon (Analyst-EvercoreISI):
Okay,that'sgreat.Whenisthenextmilestone,ifwehaveafirmmilestone--thisismylastquestion.(laughter)
T omFanning (Chairman,President,CEO):
It'safilibuster.
GregGordon (Analyst-EvercoreISI):
YourconversationswithyourEP&CcontractoratVogtlewithregardtothedelaytheyannouncedinthein-servicedate.
CompanyName:SouthernCoCompanyTicker:SOSector:Utilit iesIndustry:Utilit ies
EventDescription:Q12015EarningsCallMarketCapasofEventDate:40.60BPriceasofEventDate:44.11
©2014TheStreet,Inc.Al l R ightsReserved Page9of27
T omFanning (Chairman,President,CEO):
Sowecontinuetohaveconstructivediscussionsthere.OneofthethingsIthinkwetriedtohighlightintheinitialremarksisthatwecanseeourwaythroughtosomewaystoimprovetheschedulethatthecontractorshavedeliveredtous.We'vebeenprettyclearaboutthatinourdisclosures.Sowecontinuetoworkwiththemandwe'retryingtofindwaystoreachanamicableresolutiontothat.
GregGordon (Analyst-EvercoreISI):
Andisthereasortofdefinitivemilestonetolookforthereintermsofadropdeaddateor--?
T omFanning (Chairman,President,CEO):
Notreally.TheultimateconclusionwouldbelitigationintheCityofAugusta,Georgia.
GregGordon (Analyst-EvercoreISI):
Allright,thankyou,guys.
T omFanning (Chairman,President,CEO):
Yes,sir,thankyou.
Operator :
AndournextquestionscomefromthelineofJamesvonRiesemannfromMizuho.Pleaseproceedwithyourquestion.
T omFanning (Chairman,President,CEO):
Hey,Jim.
JamesvonRiesemann (Analyst-MizuhoSecurities):
Tom,howareyou?
T omFanning (Chairman,President,CEO):
Super.Hopeyou'rewell.
JamesvonRiesemann (Analyst-MizuhoSecurities):
Thankyou,Iam.Ihavetwoquestionsforyou.Thefirstquestionis,canyouguysprovidealittlebitmorecoloronthecontinuingdisconnectbetweenthe3%GDPgrowthintheserviceterritoryandyet0.2%residentialgrowth?
ArtBeatt ie (CFO):
Yes,Jim.Ourexpectationwas,fortheyear,about3%GDPgrowth.Thatwasunderlyingourforecastoflowgrowththisyearofthe1.3%.
We'vehadaverystrongeconomyhereintheSoutheast.Ithinkournumbersandresultsreflectthat.Asweoutlinedinthescript,it'sdrivenbytheindustrialsalesgrowth.Butwe'rebeginningtoseemovementontheresidentialandthecommercialendaswell.
Thisisthefirstquarterinaboutfouryearswherewe'vehadpositivegrowthinallthreecustomerclasses,sowethinkit'sbroad-based.Andifwelookatemploymentgrowth,bothinthemanufacturingsectorand
CompanyName:SouthernCoCompanyTicker:SOSector:Utilit iesIndustry:Utilit ies
EventDescription:Q12015EarningsCallMarketCapasofEventDate:40.60BPriceasofEventDate:44.11
©2014TheStreet,Inc.Al l R ightsReserved Page10of27
inothersectors,it'sbeatingthenationalnumbers.TheeconomyintheSoutheasthasbeenabitstronger,inourview,thanwhatwe'reseeingonthe0.2%.
T omFanning (Chairman,President,CEO):
AttheriskoffallingintoFed-speak,too,there'sfascinatingdevelopments.Someofthethingswe'reseeingarebetterthan,butinsomewaysmimic,whatwe'reseeingnationally.
Betterthanclearlyisintheindustrialgrowthsector,evensurprisingtoushowstrongitis.Andevenprobablybetterthanwhatwe'reshowing,wethinkthatchemicals,forexample,wasslightlynegative,butthosewereoutages.Soweexpecttoseechemicalsrebound.
Recall,acontinuingthemehasbeensegmentswhicharedependentuponnaturalgas,thosearegoingtobereallystrong,wethink,fortherestoftheyear.Theonlycloudonthehorizonthere,primarymetals,andwethinkthat'sstrongdollar,strongimport,lowoilpricesandtherefore,metalassociatedwithpipelinesprobablyslowingdownabit.
ButoneofthethingsthatIthinkisreallyinterestingthatArtalludedtoontheresidentialsector,we'restartingtoseeapick-upinhouseholdwellformation.Prettymodestbutstillapick-up.Interestingly,theFedguysareconcernedbythat,inthatitlookslikethey'renotconsumingthispick-upineitherthetop-linerevenueorareductionincostlikelowergasolineprices.They'resavingit.
Wearewithinanhistoricalrangeofsavingsrates,soit'snotparticularlytroublingtome.Andfrankly,ifhouseholdsarereducingdebtorinvestingorevenjustputtingmoneyinacheckingaccountfornow,atleasttheyarelessexposed.They'remoreresilienttofutureeconomicdislocations.
Soit'snotallbad.IfvalueisafunctionofriskandreturnandGDPgrowthisreturn,increasedsavingsratesisanimprovementinrisk.Soit'snotallbad.
AndwhenyouconsiderthattheUnitedStates'GDPwas0.2%growthinthefirstquarter,youlookatournumbers,clearlybetter.Wefeelprettygoodaboutourprospectsgoingforward.
JamesvonRiesemann (Analyst-MizuhoSecurities):
Sotheanswer--thankyou--theanswertothequestiononthegrowthandtheimprovementleadsmeintomynextquestion.IfIlookatyourtrailing12months,onaweather-normalizedbasisyou'reat276.ButifIremembercorrectly,inconjunctionwiththefourth-quartercall,youhad276to288wasyourexpectationsfortheyear.Howdoyougettotheupperendofthatband?Oreventhemiddleendofthatband,giventhatyourtrailing12'sattheverybottom?
T omFanning (Chairman,President,CEO):
ImprovementatSouthernPowerisaneasyway.
ArtBeatt ie (CFO):
Weather,goodweather.Betterthanexpectedeconomicoutcomes.
JamesvonRiesemann (Analyst-MizuhoSecurities):
There'snothingelsethatI'mmissing,amI?
ArtBeatt ie (CFO):
Idon'tthinkso.
CompanyName:SouthernCoCompanyTicker:SOSector:Utilit iesIndustry:Utilit ies
EventDescription:Q12015EarningsCallMarketCapasofEventDate:40.60BPriceasofEventDate:44.11
©2014TheStreet,Inc.Al l R ightsReserved Page11of27
T omFanning (Chairman,President,CEO):
No,andifyouremembertoo,oneofthethingsIthinkwesaidthisbefore,Art,wasthelowerendofourrangewasboundbySouthernPowernotfillinginitscomplementofCapEx.Itkindoflivedwiththebasescenario.Well,wethinkwe'retherefor2015,andpotentiallycouldevenimprove.
JamesvonRiesemann (Analyst-MizuhoSecurities):
Okay,thanks,guys.Appreciateit.
T omFanning (Chairman,President,CEO):
Youbet,thankyou,Jim.
Operator :
AndournextquestionscomefromthelineofBrianChinfromMerrillLynch.Pleaseproceedwithyourquestion.
T omFanning (Chairman,President,CEO):
Hi,howareyou?
BrianChin (Analyst-BankofAmericaMerrillLynch):
Verygood.Justaquickone.Thelong-termEPSCAGRslideisn'tinthedeck.Arewejusttoassumethatit'sstill3%to4%longerterm?
ArtBeatt ie (CFO):
Yes,weonlyadjustthatonceayear.WecomeouteveryJanuary.Wegiveguidancefortheyear,andourlong-termgrowthestimate.AndthenweonlyupdatethatinourOctobercalloncewe'vegottenthroughthebigearningsmonthsinthesummer.
BrianChin (Analyst-BankofAmericaMerrillLynch):
That'sright,great.Thanksalot,that'sit.
ArtBeatt ie (CFO):
Allright,thankyou,Brian.
T omFanning (Chairman,President,CEO):
Seeyou,Brian.
Operator :
AndournextquestionscomefromthelineofMarkBarnettfromMorningstarEquityResearch.Pleaseproceedwithyourquestion.
T omFanning (Chairman,President,CEO):
Hey,Mark,howareyou?
MarkBarnett (Analyst-Morningstar):
Goodafternoon,guys.Verywell,thanks.Coupleofquestionshere.Onebiggerpicture.Yougavealittle
CompanyName:SouthernCoCompanyTicker:SOSector:Utilit iesIndustry:Utilit ies
EventDescription:Q12015EarningsCallMarketCapasofEventDate:40.60BPriceasofEventDate:44.11
©2014TheStreet,Inc.Al l R ightsReserved Page12of27
bitofdetailaroundwhatyou'reseeinginthecommercialsector.Obviouslyit's,fromausageperspective,it'slaggedalittlebit,butwehaveanicepick-uphereinthequarter.I'mwondering,isthisaboutthelevelofimprovementthatyou'vebakedinforexpectationsinyourguidancehere?
T omFanning (Chairman,President,CEO):
Actually,we'relookingforalittlemoreimprovement.
ArtBeatt ie (CFO):
That'scorrect.
T omFanning (Chairman,President,CEO):
Theexpectationsfortheyearintermsofsegments--
ArtBeatt ie (CFO):
Like1.4%oncommercial,about1%onresidentialand1.7%onindustrial.Sowe'reabitaheadofourindustrialnumbers.We'vestillgotalittlewaystogooncommercial.
T omFanning (Chairman,President,CEO):
1.3%fortheyeartotal.
MarkBarnett (Analyst-Morningstar):
Sorry,thatnumberhadslipped,the1.4%oncommercial,that'sthelevelthat'sinyourguidance.Okay.Andthenyearoveryear,obviouslybasebusinessgrowthdrivingalotofthatOpEx,I'msure.Isthisleveloftheyear-over-yearincreaseaguidefortheremainderoftheyear?Ordoyouhavealotofflexibilitythere?
ArtBeatt ie (CFO):
I'msorry--
T omFanning (Chairman,President,CEO):
OurflexibilityonCapExisgoingtogoto--
MarkBarnett (Analyst-Morningstar):
I'msorry,OpEx.
T omFanning (Chairman,President,CEO):
Yes,ifit's--O&M.
ArtBeatt ie (CFO):
Operatingexpenses?Yes,thefirstquarterwasabitofananomaly.Youmayremember,Mark,thatfirstquarteroflastyearwedeferredalotofexpensesatAlabamaPower.Theywerenon-nuclearoutagecostsunderanaccountingorderthattheywereoperatingunderlastyear.
Also,ifyoulookatyearoveryear,thereweremoremegawattsoutthisyearacrossthesystemthantherewerelastyear.Sothereweremoreoutagecoststhisyear.Andthenyoujustgotnormalgrowthfortherest.That'sabigpieceofitaaswell.
CompanyName:SouthernCoCompanyTicker:SOSector:Utilit iesIndustry:Utilit ies
EventDescription:Q12015EarningsCallMarketCapasofEventDate:40.60BPriceasofEventDate:44.11
©2014TheStreet,Inc.Al l R ightsReserved Page13of27
Soifwelookatwhatweexpectfortheyear,Istillthinkmyguidancefromthelastcall,ofabouta3%to3.5%growthinnon-fuelO&Mfortheyear,stillapplies.Andthefirstquarterisjustanoutlierthatwillcorrectitselfthroughtheyear.
T omFanning (Chairman,President,CEO):
Whenwecameupwiththe$0.55estimateforthefirstquarter,italmostexactlyexpectedthislevelofO&M.
ArtBeatt ie (CFO):
Gotit.
MarkBarnett (Analyst-Morningstar):
Okay.Thanksforthereminder.Ithasbeenalongday,assomebodyhasmentionedearlier.(laughter)
Lastquestion.CanyouremindmeifGovernorDealhassignedthenewsolarbill,theHB37?Andgenerallywhatyouexpecttoseeasaresultintermsofyourownprogramsorofferingsinthestate.
T omFanning (Chairman,President,CEO):
Hehasnotsignedittoourknowledge.ButIcantellyouallthisisveryconsistentwithourplan.IhavealwaystriedtopositiontheCompanyasgivenwhateverbusinesscircumstancesexistforustofindwaystoplayoffense.Andtotheextentdistributedgenerationbecomesimportanttothecustomersofthisstate,itistheclearmissionofourbusinessestoprovidethatserviceandthoseassetstoourcustomers.
Sowefullysupportanydevelopmentwithrespecttodistributedgeneration,whetherthat'srooftopsolarorsomeideaassociatedwithstorageorcommunitysolarorfinancingoranythingelse.Now,whetherwedothatourselvesordoitthroughthirdparties,ourjobistofindwaystosucceedinthischangingbusinessenvironment.AndIthinkwe'redemonstratingthatinasuperbway.
MarkBarnett (Analyst-Morningstar):
Allright,thanks,guys.
T omFanning (Chairman,President,CEO):
Thanks.
ArtBeatt ie (CFO):
Yes,sir.
Operator :
AndournextquestionscomefromthelineofAnthonyCrowdellfromJefferies.Pleaseproceedwithyourquestion.
T omFanning (Chairman,President,CEO):
Anthony,howareyou?
AnthonyCrowdell(Analyst-Jefferies):
Notbad.IjustwantedtofollowuponMr.GordongoestoWashington'squestionsonMississippi.(laughter)Itseemslikethere'sadisconnectthere,whenyoulookatthetworoadmapsyouhaveofa
CompanyName:SouthernCoCompanyTicker:SOSector:Utilit iesIndustry:Utilit ies
EventDescription:Q12015EarningsCallMarketCapasofEventDate:40.60BPriceasofEventDate:44.11
©2014TheStreet,Inc.Al l R ightsReserved Page14of27
conventionalratecase,witha30%to40%rateincrease,or,I'mnotsureifyouusedthisterm,butmaybeaglidepathorsometypeofnicetrajectoryofrateincreases.
Itwouldseemlikeano-brainerifyouwerearegulatororyouwereoneoftheintervenerparties.CouldyouhighlightwhatthatdisconnectisandhandicapwhatyouthinkthechancesareofapotentialsettlementinMississippi?
T omFanning (Chairman,President,CEO):
Anthony,theonlythingIcantellyou,Idon'twanttocharacterizethedecisionthat'sinfrontofthesefolks.Butifyoulookatthebroad-basedsupportthattheCompanyhasenjoyed,toasktheSupremeCourttoreconsidertheirdecisionintheamicusbriefs,includingthestaff,tomeitisanobviousdecisionthatbenefitsthecitizensofMississippitopursuethesettlement,oratleastrestorewhattheSupremeCourtinvalidatedinitsrecentorder.Eitheroneofthoseis,Ithinkinabroadsense,theobviouswaytogointhestate.
AnthonyCrowdell(Analyst-Jefferies):
Great,thanksfortakingmyquestion,guys.
T omFanning (Chairman,President,CEO):
Youbet,hopeyou'rewell.
ArtBeatt ie (CFO):
Operator?Operator,canwetakethenextcall?
Operator :
OurnextquestionscomefromthelineofMichaelWinterfromUBS.Pleaseproceedwithyourquestion.
T omFanning (Chairman,President,CEO):
Goodafternoon.
MichaelWinter (Analyst-UBS):
Hello,howyoudoing?
T omFanning (Chairman,President,CEO):
Good.
MichaelWinter (Analyst-UBS):
Firstquestionisaboutpipelinesandmidstreamopportunities.Wonderingifyou'restillconsideringgoingforwardwiththat,andhowseriousisthatconsideration?
T omFanning (Chairman,President,CEO):
Yes,here'ssomefascinatingsupportingdata.We'reactuallylookingatseveralopportunities,inactivediscussions.We'llseehowthatgoes.
Whenyouthinkaboutit,beforeIcameintothisrole,wewereconsumingcoal.70%ofourenergycamefromcoalandthen16%fromnaturalgas.Whenyoulookatrecenthistory,1.5Bcfperday,nowthisyearmaybeashighas1.9.Anddependingonwhathappenswith111(d)andavarietyofotherthings,thatper
CompanyName:SouthernCoCompanyTicker:SOSector:Utilit iesIndustry:Utilit ies
EventDescription:Q12015EarningsCallMarketCapasofEventDate:40.60BPriceasofEventDate:44.11
©2014TheStreet,Inc.Al l R ightsReserved Page15of27
daygasconsumptioncanaveragesomewherearound2.3Bcfperday.
SowhenyouthinkabouttheattractivenessofSouthernCompanybeingoneofthenation'slargestconsumersofnaturalgas,ourvalueasakeytenanttoanyoftheinfrastructurethatneedstobebuiltouttomeetthatkindofdemand,reallygivesussomeopportunitiestopursueavarietyofinvestments.Andwe'realloverthatstuff.Sowe'llseewhathappens.
MichaelWinter (Analyst-UBS):
Howaboutgasreservesandratebase?You'reconsidering--
T omFanning (Chairman,President,CEO):
ThisgoeswaybackevenwhenIwas--geewhiz,IthinkIwasCFOandCOO.Sowe'retalking10yearsagowe'vebeenkickingthataround.Backthenweweren'tconsumingthatmuchnaturalgasanditwasn'tasimportant.
Certainlyitisanideathathasmerit.Andasnaturalgasbecomesmoreimportanttous,especiallygivenitsvolatilityrelativetootherfuelstocks,we'llcertainlykeepthatonthefrontburnerofideas.
MichaelWinter (Analyst-UBS):
Andalso--
T omFanning (Chairman,President,CEO):
Inanycase,wewouldnotwanttotakepriceriskonmoleculesintheground.Thiswouldallbeafuelclause-relatedissue.
MichaelWinter (Analyst-UBS):
Right.Oneotherquestionaboutnuclear.We'veheardrecentlyfromCommissionerEcholsthatheseestheneedforanothertwounitsbeyondthecurrent.Andthatitdependsonhowwelltheprojectgoesandwhether111(d)goes(technicaldifficulty).
I'mjustwonderingifyouhaveactuallybeeninconversationsaboutthat.Isthatsomethingthat'sactuallybeenplannedoutatthispoint?Orisitjustbeing--isitjusttalkfornow?Andalso,isthissomethingthatyoucanholdovertheconsortium'sheadso-to-speak,thatguaranteessomekindofgoodperformancegoingforwardalsointhelitigation.
T omFanning (Chairman,President,CEO):
Somanyofyouonthecallmayrememberin2014,Iwanttosayitwasthesummer,inaQ&Asessionatthebipartisanpolicycenter,Ithink,afteratalkImade,thatIdidalludetothefactthatwewouldbe,Iforget,delightedtoconsidernewnuclear.Thestepsthatwouldbetakenfirstwouldbetoessentiallybeginthepermittingprocesstoundertakeanewplan,notnecessarilytocommittobuildanewplant.Soinessenceit'sfairlymodestdollarsinordertosecuretheoption.
WemovedalongandthenwewerehitinDecemberwiththechangeinscheduleputforthbyourcontractorgroup.Wewereveryclearthatwedon'tbelievethatthecontractorsaredoingeverythingtheycandoinordertofullymitigatetheirschedulepertherequirementsofthecontract.
AndsowhatIsaidatthattimewasthatIthoughtitwassensibleforustosetasidealotoftalkaboutnewprojectsuntilwecametomoreresolutionastothecommercialdispute.ItiscleartomethatifthecontractorswanttosucceedintheUnitedStateswithAP1000,thentheyneedtoperformwellonVogtle3
CompanyName:SouthernCoCompanyTicker:SOSector:Utilit iesIndustry:Utilit ies
EventDescription:Q12015EarningsCallMarketCapasofEventDate:40.60BPriceasofEventDate:44.11
©2014TheStreet,Inc.Al l R ightsReserved Page16of27
and4.Itis,infact,thebenchmarkplantforallAP1000sgoingforward.Youcandrawyourownconclusionsastotheirmotives.
MichaelWinter (Analyst-UBS):
Thanksalot,Tom.
T omFanning (Chairman,President,CEO):
Youbet.
Operator :
AndournextquestionscomefromthelineofDanielEggersfromCreditSuisse.Pleaseproceedwithyourquestions.
T omFanning (Chairman,President,CEO):
Hey,Dan.
DanielEggers (Analyst-CreditSuisse):
Hey,goodafternoon.Hey,howareyou?
T omFanning (Chairman,President,CEO):
Great.
DanielEggers (Analyst-CreditSuisse):
Tom,onthenuclearconversation,canyousharesomeofthethingsthatyouguyssawtoexpediteortocatchuponthedelaysoftheEPCfolks,numberone?Numbertwo,ifyoulookathowtheygottheirdelaysinschedule,aretherethingsyou'regoingtobeabletodotomitigatethatfromhappeninggoingforward?Sowedon'trunintothis12or18monthsfromnow,themsayingwehadthesamesortofdelayproblems.
T omFanning (Chairman,President,CEO):
Yes.Sowetriedtosuggestthatinthepreparedremarksattheoutset.Ithinkthere'saclearopportunitytoadvancesomeschedulemitigationwithNewportNews.That'souropinion.
It'snotonlyproductionoutoftheirfacilities,butalsotheinstallationofthepanels.Weneedtomakesurethatallofthatisdonewell.
Also,youmustknowthat,especiallythoseofyouthathavevisitedthesite,andweencourageeverybodyonthephone,ifyoucanfigureoutawaytogettothesite,weloveshowingitoff.Ithinkthepeoplethatweretherewere,Ithink,reallystruckwiththekindofprogressandqualityoftheworkthere.
Wehaveanenormousqualityassuranceprogram.Andaslicenseeoftheplant,weultimatelyareresponsibleforhavingtherightkindofplantbuiltthere.OurQAprogramhasbeenfocusednotonlyonsitebutalsoatplaceslikeLakeCharles.AndIthinkourworkingwiththecontractorhashelpedputtheminthepositionwherenowweessentiallyhavebeenabletoacceptproductionoutofthatfacilityandgoaheadandputitinaproductionprocess.
Aswemovetomoreworkinsidethenuclearisland,thatprocessimprovement,qualityassurance,andultimatelyproductiononsiteisgoingtomovetheneedleintherightdirection.Soweremainrelentlessly
CompanyName:SouthernCoCompanyTicker:SOSector:Utilit iesIndustry:Utilit ies
EventDescription:Q12015EarningsCallMarketCapasofEventDate:40.60BPriceasofEventDate:44.11
©2014TheStreet,Inc.Al l R ightsReserved Page17of27
focusedonwaystoworkwiththemtodothat.AndIwouldargueinthepastquarterorso,Ithinkwemadesomeprogressinourthinking.
DanielEggers (Analyst-CreditSuisse):
IknowMikejustaskedthequestion,butonthegasreservesandratebaseissue,thelegislationinMississippiseemedtoopenthatasalittlebitmoreofawindowthanpreviouslydiscussed.Isthatsomethingyouguysaregoingtolooktopursue?Orhowdoyoureadthatlegislativeaction?
T omFanning (Chairman,President,CEO):
Well,it'salawlargelyfocusedontheEMC'srecoveryofeconomicdevelopmentprojects.ItdoesauthorizethePSEtodeemthatnaturalgasreservesareusedandusefulasutilityplan,orwhatever.
Soitissomethingwewouldconsider,asthereisnaturalgasgenerationinMississippi.Ithinkonceyou'repostKemper,PlantRatcliffe,it'sathird,athird,athird,coal,gasandKemper.
AsimilarconceptthatwehaveatKemperis,infact,thelignitemine.It'sasimilarideawhereessentiallyweowntheligniteandit'sinratebaseanditservestohedgeanyfuturepriceswings.Remember,thatisalmostnovolatilitygoingforward.Soit'scertainlyavalididea,somethingweconsider,andmakessense.
DanielEggers (Analyst-CreditSuisse):
Okay.Andontherenewablesideofthebusiness,youguysareabletoputrenewablesandratebaseinGeorgia.You'vebeendoingPPAsintheotherstates.Istheregoingtobeanopportunitywhenyouguyscanstartputting,orfeelmorecomfortableputting,someofthoseassetsintoyourratebaseratherthancontractingoutwherethecostofcapital'shigher?
T omFanning (Chairman,President,CEO):
Yes,sure.AndIthinktotheextentthoseassetsevergetflipped,sold,whathaveyou,Ithinkwe'reanaturalbuyer.Oneofthethingsthatwealwaysthinkaboutis,foranyofourassets,andalthoughwetendtoacquiresome,youknowwe'vesoldsomeorswappedsome,whoisthebestowner.Andwealwaysseektoachievethatposition.
SoIthinktherewillbeopportunitiesforusshouldthoseassetsevercometothemarket,forustobeastrongplayerinacquiringthem.ThatmaybeatSouthernPower.ItcouldbeattheOpCo.
DanielEggers (Analyst-CreditSuisse):
Butyoudon'tnecessarilyseetheutilitiesdoingmoretodeveloprenewablesinterritoryinaratebaseasset.
T omFanning (Chairman,President,CEO):
Oh,no,absolutelywecould.Infact,ItriedtosuggestthatinthatlittlefunnysentencewhereIsaidthere'sprobablymoretocome,ifyourememberthatsentence.We'vedonealotofbusinessinGeorgia.We'vedonefourtimes30withDoDfacilities,andIsaidandthere'smoretocome.
SoI'mverybullishonthat.We'vehadaterrificrelationshipwiththeDoD.YouknowthattheDoDhasarenewablesmandategoal,whathaveyou.AndIthinkwewereprobablythefirstonesintheUnitedStatestoworkwiththemconstructivelytofulfillthatmandate.
DanielEggers (Analyst-CreditSuisse):
Verygood,thankyouguys.
CompanyName:SouthernCoCompanyTicker:SOSector:Utilit iesIndustry:Utilit ies
EventDescription:Q12015EarningsCallMarketCapasofEventDate:40.60BPriceasofEventDate:44.11
©2014TheStreet,Inc.Al l R ightsReserved Page18of27
T omFanning (Chairman,President,CEO):
Yes,sir,thankyou.
Operator :
AndournextquestionscomefromthelineofAliAghafromSunTrust.Pleaseproceedwithyourquestion.
T omFanning (Chairman,President,CEO):
Ali,howareyou?
AliAgha(Analyst-SunTrustRobinsonHumphrey):
Hey,Tom,goodafternoon.
T omFanning (Chairman,President,CEO):
Goodafternoon.
AliAgha(Analyst-SunTrustRobinsonHumphrey):
Firstquestion,Tom,justwantedtoclarifyyourscenariosongettingclosureontheMississippiissue.IrecalloneoftheoptionspreviouslywasfortheSupremeCourttooverturntheruling,whichIguesswas5-4.Isthatstillanoption?Orareyoureallythinkingit'sglobalsettlementcouldaddressalltheissuesthereisintheoriginalrulingandtakecareofitfromthatperspective?
T omFanning (Chairman,President,CEO):
Ali,it'sbothofthose.TheCommission--Imean,theSupremeCourtcouldcertainlyreconsidertheirdecision.Thatobviously.Andthinkaboutthebroadsupportinthestate.Justabouteverybodyinthestatethatwehadhugeparticipationintheamicusbrief.
Butfailingthat,wecouldreachaglobalsettlementwhichwouldineffect,mimicmanyofthecharacteristicsoftheoriginalrateorderthatenteredintoin2013.Wecouldgetthataswell.
Wethinkanyofthosearebetterthanfilingfora40%increaseinaratecase.Butwe'llseehowitgoes.Thosearethepathswewillfollow.
AliAgha(Analyst-SunTrustRobinsonHumphrey):
Alsotobeclear,Ithinkyoumentionedthinkingaboutfilingthatratecasebymid-May,acoupleofweeksfromhere.Soinyourmind,theothertwoparts,whetheraglobalsettlementoraSupremeCourtreversal,realisticallycouldhappenwithinthenextcoupleofweeks?
T omFanning (Chairman,President,CEO):
Sure.AndthenIsuggestedonthecallearliertodaythatanotheralternativeforustofilethesettlementproposalatthesametime,contemporaneouswiththeconventionalratecase.
AliAgha(Analyst-SunTrustRobinsonHumphrey):
That'sright.Secondly,thisforshowcausenoticethattheyputouttheretoyouguys,onmarketballotissues.Howbigofadealisthatandhowdoyouseethatplayingout?
T omFanning (Chairman,President,CEO):
CompanyName:SouthernCoCompanyTicker:SOSector:Utilit iesIndustry:Utilit ies
EventDescription:Q12015EarningsCallMarketCapasofEventDate:40.60BPriceasofEventDate:44.11
©2014TheStreet,Inc.Al l R ightsReserved Page19of27
Wedon'tthinkit'sabigdealrightnow.Look,Idon'tthinkthere'sanyevidence.Inmyopinion,there'sverylittleevidence,noevidence,thatSouthernPowerhasanymarketpowerinthesoutheast.
IthinkthiswasareactionbytheFERCstaffthatbasicallypointedoutthattherewasnotmuchactivityinourauctionmechanismthatwehadputinplacereallyupuntil2014.In2015,weintroducedatweakonthatauctionprocesswhichincreasedtheactivityoftheauctionmany-fold.
Butyougottounderstand,throughthisperiodwe'vebeenanetpurchaser,notseller.Soheavenssakes,Idon'tknowhowweexercisemarketpowerasanetpurchaserofenergy.
Numbertwo,thesoutheasthasbeentraditionallyabilateralmarketandpeopleareveryhappy.There'sbeennocontentionatFERCthatsuggeststhatthere'ssomethingwrongwiththeauctionprocesswehaveinplace.This,infact,wasarulebytheFERCthatbasicallyisraisingaquestionwhereI'mnotsurethere'sanyproblematall.
Sowehaveachancetorespond.We'llprovideourevidenceandhaveagood,constructivedialoguewithFERC.Andwe'llseehowitgoes.Inthenearterm,youshouldthinkaboutthatinthenextthreetofiveyears,atleastinthethinkingwe'vedonesofar,there'salmostnopotentialadversefinancialimpactsfromthis.
AliAgha(Analyst-SunTrustRobinsonHumphrey):
Isee,okay.Andtheninyourfinancialplanning,youstillhaveassumednoequityissuancethrough2017.Iwasjustcurious,howmuchcushiondoyouhaverightnowsothatscenario,differentscenarios,keepyouinthatnoequityissuancemode?Orareyoufairlyclose,ifyougetmoreSouthernPoweractivity,etcetera,thatequitycomesbackintotheequation?
ArtBeatt ie (CFO):
Yes,Ali.Justrecall,lastyearweissued$800millionversusthe$600millionweplanned.Sowewereabitaheadofwherewethoughtwe'dbe.
Wedon'treallyhaveanyscenariosintheforeseeablefuture,evenwiththeSouthernPowerinvestmentsthatwehaveoutlined,inourCapExprogramwhereweneedmoreequity.Itwouldhavetobeinexcessoftheamountsthatweforecastedandyoucanseewefilledupourbucketin2015onplaceholderprojects,andwestillhaveawaystogoin2016.
SoIthinkwe'regood,togiveyouafeelforit.Idon'thaveanumbertogiveyouaboutwhereweareinthelimit,butIthinkwe'reinprettygoodshape.
T omFanning (Chairman,President,CEO):
Ithinkwe'vesuggestedinthepastthataswestarttowinddownourCapEx,andifyoulookatourCapExslides,whatwasit,6.8to5.5orsoto4.3orsomethinglikethat.We'reprobablyover-equitizedtosomedegree.Sothere'snotpressuretosellmoreequity.
AliAgha(Analyst-SunTrustRobinsonHumphrey):
Gotit,thankyou.
T omFanning (Chairman,President,CEO):
Youbet.
ArtBeatt ie (CFO):
CompanyName:SouthernCoCompanyTicker:SOSector:Utilit iesIndustry:Utilit ies
EventDescription:Q12015EarningsCallMarketCapasofEventDate:40.60BPriceasofEventDate:44.11
©2014TheStreet,Inc.Al l R ightsReserved Page20of27
Thankyou,Ali.
Operator :
AndournextquestionscomefromthelineofMichaelLapidesfromGoldmanSachs.Pleaseproceedwithyourquestion.
T omFanning (Chairman,President,CEO):
Hey,Michael.
MichaelLapides (Analyst-GoldmanSachs):
Hey,Tom,congratsonagoodstarttotheyearandespeciallyontherenewableside.OnequickMississippiquestionandthenonenaturalgasquestionforyou.
InMississippi,thecourtdecisionreferencedprettyclearlytheneedforaprudencyreviewbeforetheCommissioncangrantanykindofrateincreases.Andgiventhatthisstemsfromaratepayeroracustomer'sactingaslitiganthere,doyouneedtohaveaprudencyhearingofsomekindaspartofanysettlementdocket?
T omFanning (Chairman,President,CEO):
We'vealreadyfiledaprudencyrecordlastyear.SowethinkalltheevidenceistherenecessaryfortheCommissiontoactrightnow.
MichaelLapides (Analyst-GoldmanSachs):
Gotit.SotheCommissioncouldissueaprudencydeterminationbasedonwhat'sintherecordrightnow,andthatshouldsatisfyeffectivelywhattheSupremeCourtsaidhadnotbeensatisfiedwhentheSupremeCourtmadeitsruling?
T omFanning (Chairman,President,CEO):
Thatisourbelief.
MichaelLapides (Analyst-GoldmanSachs):
Okay.Onthenaturalgasside,whenyoulookattheinfrastructureofthenaturalgassystemthroughoutyourservicecareterritoryandmaybeevenslightneighboringareas,wheredoyouallseeasthebiggestbottlenecks?Meaning,whereistherealackofmidstreaminfrastructurethatisneededtobeableoverthenext,Iwanttosay,5to10years,becauseit'shardtolookmuchmorebeyondthat,tohelpalleviatesomenaturalgasorothermidstreamrelatedbottlenecksinyourarea?
T omFanning (Chairman,President,CEO):
That'safascinatingquestion.IwishIhadmymapandmypointerand--itreallydependsonwhatyoubelieveoutof111(d)andwhatwedowithotherdisplacedcoalassets,shouldtheyarise.Recall,underhalf-MATSorMATS,wewentfrom20,000megawattsdownto13,with4ofthe1,000coalunitsbeingretired,beingconvertedtogas,3,000retiredcompletely.ByEPA'sownmath,andI'mnotgoingtostandbytheirmathbecauseIfranklydon'tbelieveit'sachievableinthetimeframestheydo,buttheywouldhaveusretireenoughcoaldowntoabout4,000megawatts.
Sowhatdoyoudo?Doyouconvertthattogas?Doyoubuildgreenfieldgas?Wheredoyoubuildit?Ifyouwanttothinkaboutthewaythepipesworkinthesoutheast,there'stwobigthemes.Thenormalconventional,historicalthemewouldhavecomefromthewest.
CompanyName:SouthernCoCompanyTicker:SOSector:Utilit iesIndustry:Utilit ies
EventDescription:Q12015EarningsCallMarketCapasofEventDate:40.60BPriceasofEventDate:44.11
©2014TheStreet,Inc.Al l R ightsReserved Page21of27
AndyougotalotofpipelinesthatrunfromtheGulfofMexico,upthroughthenorthwesternpartofGeorgia,ifyouwanttothinkaboutitthatway.Whereyoudon'thaveawholelotofdistancetocover,youhavesomeembeddedcoststhatareattractiveandwecouldcertainlylinkintosystemstothewest.Andthere'seven--it'snotjustGulfofMexicostuff--there'sFayettevilleandsomeotherareasouttherethatareshalegasrelated.
Theotherthemewouldcomeoutofthenorth.Soyouwouldthinkaboutpipesthatmaycomedownnorthtosouthandapproachourterritorymorefromtheeast.Andsowe'llseehowthatgoes.
You'retalkingaboutprobablymoreexpensivepipes.Socanyougetabasisdifferenceinthegasbetweenthenorthand,say,aHenryHub-lookingkindofproxy.That'sreallythetwobigthemesingasinfrastructurethatweseemtosee.
MichaelLapides (Analyst-GoldmanSachs):
Gotit.Andmyapologies,realquickbackonMississippi,andthismaybeanArtquestion.Art,giventhecourtcaseandwhereitstandsnow,whathappenedinthefirstquarterfromaGAAPaccountingperspectiveinrevenuesinMississippiversuswhathadbeenbasicallygoingonthroughallof2013and2014?
I'mjusttryingtomatchupourGAAPrevenuenumberstotheMississippirateincreases.AretheyreflectedinGAAPrevenue?Iknowthecashwascollectedpreviously.I'mjusttryingtothinkthroughtheputsandtakeshere.
ArtBeatt ie (CFO):
Michael,wedidn'trecordany[Miraquip]revenueinthefirstquarter.Butthereweresomeimpactsforequityreturnonsomeotherpiecesthatactuallywentbackintofourthquarteroflastyear,whereweun-bookedsomeofthat.Butitwasallreallydeferred.Idon'thaveanumbertogiveyou,butIcangetyousomethingafterthecall.
MichaelLapides (Analyst-GoldmanSachs):
Justtryingtothinkbigpicture.You'rebasicallynolongerbookingtherevenuerelatedtoKemper,that$156millionnumber.
ArtBeatt ie (CFO):
Well,allofthatwasnevergoingtoincome,perse.Itwasallbeingbookedonthebalancesheetasaregulatoryliability.Anditwasgoingtobeusedtooffsetrateincreasesastheplantwentintoserviceovertime.ThatwasthewholedesignofMiraquip.
MichaelLapides (Analyst-GoldmanSachs):
Right,okay.I'llfollowupoff--
ArtBeatt ie (CFO):
SoIdidn't--Yes.
MichaelLapides (Analyst-GoldmanSachs):
Icanfollowupoffline.Sorrytogettoofardownintheweedsonthisoneonthecall.Muchappreciated,guys.
CompanyName:SouthernCoCompanyTicker:SOSector:Utilit iesIndustry:Utilit ies
EventDescription:Q12015EarningsCallMarketCapasofEventDate:40.60BPriceasofEventDate:44.11
©2014TheStreet,Inc.Al l R ightsReserved Page22of27
T omFanning (Chairman,President,CEO):
Yes,welovethatstuff.Noproblem.
Operator :
AndournextquestionscomefromthelineofShahriarPourrezafromGuggenheimPartners.Pleaseproceedwithyourquestion.
T omFanning (Chairman,President,CEO):
Goodafternoon.
ShahriarPourreza(Analyst-GuggenheimPartners):
Howareyou,Tom?Hi,Art,howareyou?
T omFanning (Chairman,President,CEO):
Super.
ArtBeatt ie (CFO):
Hey,Shar.
ShahriarPourreza(Analyst-GuggenheimPartners):
ArealquickquestiononMississippi.Iknowyou'reworkingonpotentiallystrikingtheglobalsettlement.Canyouremindusiftheassethasacapacityfactorhurdleithastomeetonceit'slive?It'sgoodtoseethatit'srunninglikeaCCGT,butI'mcuriousonwhatthehurdlesareonceit'slive.
T omFanning (Chairman,President,CEO):
Well,recallthatthecombinedcyclethat'srunningrightnowisrunningonnaturalgas.Ultimately,wehavebeenworkingwiththeCommissiononanarrangementinwhich,whenyouthinkaboutit,whenwehadtheprojectcertified,therewasacapitalcostcomponentandthentherewasanenergycostcomponent.Andwhatwe'vebeenabletothinkaboutinthesettlementisawayforustoessentiallyassurethatMississippicustomersareheldharmlessfromanycostoverruns.We'vedonethat,painfully,forallofus.
AndthenotherwisetoassurethattheenergybenefitsarethereforMississippi'scustomers.AndIthinkwecangetthatdone.
Now,youallmustrecognizethatwhenPlantRatcliffewasoriginallyapproved,thisisaprocessthatoccurredin2009and2010,andrememberweonlyhad10%oftheengineeringdone.Therehavebeenahostofchangesinavarietyoffronts,includingnaturalgasprices,commodityprices,awholehostofthings.
IthinkwhatwewouldundertaketodoismakesurethatwecoulddelivertheenergybenefitthattheCommissionthoughttheyweregettingwhentheprojectwasapproved.We'vealreadyspokenforthecapitalcost.Ithinkwecangetthatdone.
ShahriarPourreza(Analyst-GuggenheimPartners):
Gotit.Andthenonequestiononrenewables,Tom.We'restartingtoseesomemorecontractsbeingsignedpostITCstep-down.Curiousonifyou'reseeingthatwithinthesoutheast?Andthenwhatthat
CompanyName:SouthernCoCompanyTicker:SOSector:Utilit iesIndustry:Utilit ies
EventDescription:Q12015EarningsCallMarketCapasofEventDate:40.60BPriceasofEventDate:44.11
©2014TheStreet,Inc.Al l R ightsReserved Page23of27
placeholdercouldlooklikeforSouthernPowerbetweenwindandsolar,saypost2016.
T omFanning (Chairman,President,CEO):
Yes,soyouknowwhat'sinteresting,Shar,isthatrightnowthere'sanenormousrushtogetstuffdone,particularlyinsolar,beforetheendof2016.Andcertainlythathasfilledupourwheelbarrowofcapitalplaceholdersfor2015.Andwefeelreallygoodaboutwherewearefor2016.
Thewinddeal,wasawaytostraddle--infactitwasinteresting,oneofourowndirectorsusedthephraseadivot,inthedevelopmentactivityofrenewablesandthereforeearningsassociatedwiththerenewables.Theotherthingthat'sfascinatingisaswestarttoconsiderbeyondrenewablesto111(d),we'llprobablyhaveafinalrulethereinthesummer,say,August.Thestateswillnowhavetostartprovidingfortherealityofcomplyingwiththatrule.
Andtherefore,we'vegottostartthinkingaboutgas.Andremember,asIsuggestedearlieronthecall,ifwe'regoingtodonewgasgeneration,weneednewgasinfrastructure.Thosethingscangohandinhandinfillinginthatflatspot.
ShahriarPourreza(Analyst-GuggenheimPartners):
Gotit.Andthenonanyofthesoutheaststates,isanybodyclosetosubmittingastateimplementationplan?Orarewelikereallyfaroff?
T omFanning (Chairman,President,CEO):
Youdon'thaveafinalruletoreactto.Hey,Shar,Artjustpointedsomethingout.Whydon'tyousaywithitonthesolar?
ArtBeatt ie (CFO):
IfyoulookatourCapExbudgetintermsofgrowthCapExin2017,it'slike$200million,but--
T omFanning (Chairman,President,CEO):
Ofsolarprojects.
ArtBeatt ie (CFO):
Ofsolarprojects.Soit'svery,verysmallcomparedto2015and2016.
T omFanning (Chairman,President,CEO):
Sothereis$200million,anyway.It'swaylessthanwhatwe'reseeingrightnow.
ShahriarPourreza(Analyst-GuggenheimPartners):
Gotit.Excellent,thankssomuch.
T omFanning (Chairman,President,CEO):
Youbet.Thankyou.
Operator :
AndournextquestionscomefromthelineofPaulRidzonfromKeyBanc.Pleaseproceedwithyourquestion.
CompanyName:SouthernCoCompanyTicker:SOSector:Utilit iesIndustry:Utilit ies
EventDescription:Q12015EarningsCallMarketCapasofEventDate:40.60BPriceasofEventDate:44.11
©2014TheStreet,Inc.Al l R ightsReserved Page24of27
T omFanning (Chairman,President,CEO):
Hello,Paul.
PaulRidzon (Analyst-KeyBancCapitalMarkets):
Tom,howareyou?
T omFanning (Chairman,President,CEO):
awesome,howareyou?
PaulRidzon (Analyst-KeyBancCapitalMarkets):
Well,thankyou.Itseemsincrementallywitheachcallyou'reembracingmoreandmorerenewables.Ifthistrendcontinues,whatareyourcurrentthoughtsaboutwhenaYieldComightcomeintoseriousconsideration?
T omFanning (Chairman,President,CEO):
Sowe'rereallyfollowingthroughonwhatwesaidwewoulddo.It'sfunny,it'swhatyousayandhowyousayit,Iguess.Thewhatsofwhatwe'vebeensayingherehavebeenprettyconsistentforawhilenow,thatwethoughtthatrenewableswouldbeimportant.Certainlysolarrenewablesthrough2015and2016whileyouhadthe30%investmenttaxcreditenvironment.Andthatbeyond2016,into2017and2018,where30%goesto10%,allofasuddenwindstartslookinglikeawaytoaddressthatgap.
Also,youshouldknowthestrategicsynergy.Westartedprocuringwindenergyviacontract.Soforustotakeanequitypositioninwindputsusinadifferentposturethanwehadbeenbefore.
WithrespecttoaYieldCo,youknowthatwe'llconsideranything,butIthinkonbalancewefeltthatSouthernCompanyinandofitselfwasaYieldCoanyway.Wehavereallyefficientwaystoraisecapital.Ithinkitintroducescomplexityintoyourbalancesheet.Andlongterm,I'mnotsurethatitinurestothebenefitofshareholders.Itcertainlyhasshort-termappealbutIwouldneverwanttoimpairthelong-termviabilityofthisCompanybydoingfinancialengineeringortricks.
Theotherthingyoushouldknowandlet'spointoutagain,wehaven'treallytalkedaboutonthiscallbutwehaveinothercalls,wehaveterrifictaxappetite.Andgivenourscale,givenourtaxappetite,youknowthatwe'vealwaysbeenconservative.Geewhiz,ourtaxappetiteremainsacompetitiveadvantageforustoplayinthesefields.
Linkinthatwithourexperiencewiththemajorvendors,ourlowcostofcapital,accesstocapitalmarkets,geewhiz,IthinkthedevelopersthatwanttodosomethingsignificantlooktoSouthernasthepremierpartnerrightnow.That'swhywe'vebeenabletofillupourdancecard.
PaulRidzon (Analyst-KeyBancCapitalMarkets):
Okay,thankyou.AndthenitwasrefreshingtoseetheKemperchartsimmaterialthisquarter.How'sthefuturelookthere?
T omFanning (Chairman,President,CEO):
Tellmeaboutit.(laughter)Hey,look,we'reinstart-uprightnow.There'sasmidgenofconstructionleft,butwe'reessentiallyinstart-upandtheteamthereisworkingwonderfully.
Webroughtinaguythathashadatremendousamountofexperienceinstart-upofthesetypesofprocesses,ChipTroxclair.Heandhisteamhavereallydoneadynamitejobofstayingtoscheduleand
CompanyName:SouthernCoCompanyTicker:SOSector:Utilit iesIndustry:Utilit ies
EventDescription:Q12015EarningsCallMarketCapasofEventDate:40.60BPriceasofEventDate:44.11
©2014TheStreet,Inc.Al l R ightsReserved Page25of27
workingaroundtheissues.It'srefreshingtousaswell.They'redoingagreatjob.
PaulRidzon (Analyst-KeyBancCapitalMarkets):
Okay,thankyou.
T omFanning (Chairman,President,CEO):
Youbet.
ArtBeatt ie (CFO):
Thanks,Paul.
Operator :
AndournextquestionscomefromthelineofDanJenkinsfromStateofWisconsinInvestmentBoard.Pleaseproceedwithyourquestion.
T omFanning (Chairman,President,CEO):
Hey,Dan,howareyou?
DanJenkins (Analyst-StateofWisconsinInvestmentBoard):
Verygood,goodafternoon.Firstquestion'sonslide18,yourfinancingplan.Inoticethereareacouplerevisionsfromtheslidefromlastquarter.ThebigonesbeingAlabamain2015wentfrom$700millionto$1.375billion.AndtheninMississippibankdebtin2016wentfromzeroto$900million.Waswonderingifyoucouldtalkaboutwhat'sdrivingthosechanges?
ArtBeatt ie (CFO):
IbelievetheAlabamatookadvantageandissuedsomeadditionaldebtthisyear.Itactuallydidsomerefundingthatprobablywasn'treflectedinthescheduleweshowedyouonthelastcall.
TheMississippibankdebtwasreallyarenewalofbanknotesthatwerematuringthisyear.Therewasabout$775millionmaturingthisyear.Andweactuallyrenewedthose,plusacoupleofhundredmillionor$175millionorsoofadditionalmoney.Andreallythat'sservingasbridgefinancinguntilwegetintopositionwherewecaneithergotothecapitalmarketsordooursecuritizationfinancing.
DanJenkins (Analyst-StateofWisconsinInvestmentBoard):
Okay.AndIwantedtogobackalittlebitonyourretailsalesgrowth.Youtalkedaboutthechangeintheweather-normalizedsales.Iwaswonderingifyoucouldgiveusalittlecoloronthecustomergrowth.Isthatgoingconsistentwithyourexpectationorhowisthatplayingout?
T omFanning (Chairman,President,CEO):
Yes.Well,wetalkedalittlebitaboutcustomergrowthintheresidentialside.Wehad16,000new.Ithinklastyearweadded10,000inthefirstquarter.Soprettygoodjumpingrowth.
Ithinkifyoudoayear-over-yearlook,it'sabouta37,000increase.Ifyoutookwhatwehaveaddedsincethefirstquarteroflastyear,37,000.Youmayrecallthatpriortotherecession,wewereaddingalmost60,000ormoreayear.Soit'snotbacktowhereitwas,butit'sshowingstrongergrowth.
DanJenkins (Analyst-StateofWisconsinInvestmentBoard):
CompanyName:SouthernCoCompanyTicker:SOSector:Utilit iesIndustry:Utilit ies
EventDescription:Q12015EarningsCallMarketCapasofEventDate:40.60BPriceasofEventDate:44.11
©2014TheStreet,Inc.Al l R ightsReserved Page26of27
Okay.Andthenlast,IwaslookingattheVogtleconstructionupdateonslide5,Ithinkitis,andInoticedyoudidn'treallychangeanyoftheinformationrelatedtoUnit4.Iwaswonderingifthatwasstillaccordingtoplanorifthere'sbeensomeslippageintheneartermandonthehorizonthey'reessentiallythesameaswhatyourecordedlastquarter?
ArtBeatt ie (CFO):
Idon'thavelastquarter'sslideinfrontofmebutIbelievethatwhatyou'reseeingthereisstillconsistentwithwhereweare.Thebiggestnewmodule,thatCA04moduleisnotaverybigone.NeitherareCB65or66.SothenextbiggestmoduleforUnit4willbeCA20,andwementionedthatinthescript.ThatisjustnowbeginningassemblyintheMAB,themoduleassemblybuilding.
DanJenkins (Analyst-StateofWisconsinInvestmentBoard):
Sotheschedulehasn'treallychangedforUnit4fromwhatyoureportedlasttime?
ArtBeatt ie (CFO):
NotthatI'maware.
DanJenkins (Analyst-StateofWisconsinInvestmentBoard):
Okay.Thankyou.That'sallIhad.
T omFanning (Chairman,President,CEO):
Yes,sir.
Operator :
Andatthistimethere'snofurtherquestions.Mr.Fanning,arethereanyclosingremarks?
T omFanning (Chairman,President,CEO):
Yes,thankyou.Listen,everybody,weappreciateyoubeingonthecall.IthinktheCompany'sofftoagreatstart,aswe'vesaid.Thefranchiseforsometimenowhasbeeninasgoodofshapeasit'severbeen.Wecontinuetoexecutelikechampionsandwe'regoingtodoourbesttomakesurethatasshareholdersyou'rehandsomelyrewarded.Thanksverymuch.Talktoyousoon.
Operator :
Ladiesandgentlemen,thisdoesconcludetheSouthernCompanyfirst-quarter2015earningscall.
Allrightsreserved(c)2014TheStreet,Inc.
Pleasefeelfreetoquoteupto200wordspertranscript.Anyquoteshouldbeaccompaniedby"ProvidedbyTheStreet"andalinktothecompletetranscriptandwww.thestreet.com.Anyotheruseormethodofdistributionisstrictlyprohibited.
THEINFORMATIONCONTAINEDINEACHWRITTENORAUDIOTRANSCRIPT(the"TRANSCRIPT")ISAREPRODUCTIONOFAPARTICULARCOMPANY'SCONFERENCECALL,CONFERENCEPRESENTATIONOROTHERAUDIOPRESENTATION.THETRANSCRIPTSAREPROVIDED"ASIS"AND"ASAVAILABLE"ANDTHESTREETISNOTRESPONSIBLEINANYWAYNORDOESITMAKEANYREPRESENTATIONORWARRANTYREGARDINGTHEACCURACYORCOMPLETENESSOFTHETRANSCRIPTSASPRODUCED,NORTHESUBSTANCEOFAPARTICULARCOMPANY'SINFORMATION.
CompanyName:SouthernCoCompanyTicker:SOSector:Utilit iesIndustry:Utilit ies
EventDescription:Q12015EarningsCallMarketCapasofEventDate:40.60BPriceasofEventDate:44.11
©2014TheStreet,Inc.Al l R ightsReserved Page27of27
THETRANSCRIPTSAREPROVIDEDFORINFORMATIONALPURPOSESONLY.THESTREETISNOTPROVIDINGANYINVESTMENTADVICEORENDORSINGANYPARTICULARCOMPANY.