The Southern Company (SO) 27 Apr 232023 Q1 Earnings call transcript

Good afternoon. My name is Kathy, and I will be your conference operator today. At this time, I would like to welcome everyone to The Southern Company First Quarter 2023 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded, Thursday, April 27, 2023.

I would now like to turn the conference over to Mr. Investor Treasurer. President, Vice Gammill, Relations and Scott Please sir. go ahead,

Good and you, Southern Company's Thank to First afternoon, Call. welcome Kathy. Earnings Quarter XXXX

me Officer. Womack, Dan Joining Chris Southern are and Company; President Tucker, of Financial Chief today

subsequent in Form Let me be to could providing those we'll filings. forward-looking remind differ factors in XX-Q materially information. important Form actual indicated discussed addition in statements. statements Various the making historical cause to forward-looking you, and today XX-K, results from our those including

will in we information this this information website addition, are the financial In present GAAP available which on call, as released both call. Relations non-GAAP at applicable slides on the investor.southerncompany.com. measure we conference Investor for morning well Reconciliations the to as are this included financial our

call Chris turn At Womack. I'll this time, over to the

a excited us energy and future our proud to work of about I've Scott, call and that you, am Southern delighted am my be the Thank in a Company, you communities. energy. thank making of look good President of of of team to I of building and the is significant meeting and future many customers you you as forward us. the of impact months more given first and of for last I we're doing ahead. today in months with over I joining Company. couple the the interact with joining about enjoyed industry ahead opportunities incredibly on earnings the valuable many the you such to opportunity to afternoon, Southern serve and the that to am a part excited be

shareholder proposition energy, focused unchanged, deliver and talented robust a is us mission while sustainable and our of to reposition center with continuing discipline the superior our our we goal our at our total we keep affordable safe, states. our And objectives value ratings strength frameworks the community, our that Also of financial service communities is I plan remain function a customers As model, of customer the return. believe our provide across also regulatory constructive our customers do. is reliable function and our bench risk-adjusted strong our our and supports everything unchanged clean, you've as to watched deep The objective. in system, with the of of It investment-grade and economic a policy. committed growth territories regular, predictable to in dividend business credit remains

we focus and XXXX. executing we're on on accretion, our financial our as -- we our execution to long-term are value well for plans with objectives believe Along positioned achieve and

turn the you for now I'll Dan, over financial update. to our call

everyone. Thanks, Chris, and good afternoon,

first the electric milder-than-normal on quarter, estimate quarter gas and was natural as the first year the for start were complete and earnings growth. regulated of gas and compared the first When morning. somewhat to impact released our at EPS utilities the last amortization of actions. regulatory compared our the and quarter quarter for was to share, were strong earnings and to estimate. above XXXX, looking year-over-year state quarter of by major and our The adjusted EPS $X.XX included $X.XX For for interest first lower strong was also weather the Higher per we our depreciation our this the the record A than main for a impacted reconciliation customer year $X.XX last expense in adjusted driver state drivers materials constructive in offset is of continued XXXX the variance Southeast. XXXX warmest

performance not to earnings estimate last was estimate. weather of a normal for the so mid-February into call, Given factor our we than able quarter, our our February weather our were milder January versus major the timing driver of and

may recall significantly and the our market-driven projected than to adjusted weather of factors. were You other in first half better that due XXXX earnings

supported impact the such Our year, EPS business. in that we well a January remainder flexibility enabled several expect us our more adjusted the entering manageable positioned initiatives to with throughout return early should the XXXX, the had weather Those be significant February of XXXX we in balance weather additional experienced full of performance accelerate over year the and outperformance areas and assuming the normal maintenance of us year. activities spending to

were weather-normal residential a attributed economy. are quarter be quarter weakness the year strong compared as and continued last closure the to see and of quarter, and facility first higher retail from inflationary than housing-related Turning for the now normal market to Industrial more such rates. variance labor increase caustic robust in X.X% a migration reflects business a glass, as we pressures sectors, can clay quarter beginning the XXXX. to X.X% trends. stone sales textiles to In net industrial to Alabama. in our to and commercial Half sales stronger soda of down were to sales electric retail return sales the for the lumber in first of higher the manufacturing due territories, This and service in interest

customer, impact sales the Excluding this were of down approximately single industrial X.X%.

other with the differentiate development announcements country, at investment creation to levels record activity service trend the highs once quarter. Southeast job our a first saw of capital and territories we many In areas that again all-time economic of continues from in

billion to manufacturing supplier investment. Rivian X Hyundai We facilities are capital supplier the Georgia, in the see electric in $X announcements quarter, with totaling jobs and X,XXX over made related during nearly vehicle announcements beginning to and

supplier announcements expect automotive We in months. the coming additional

and QCells manufacturing automotive which jobs. solar expected component new in $X Georgia, is panel a create to billion X,XXX announced Beyond facility industry, recently the

gallons to capacity, The of port of XXX,XXX eliminate busiest Port addition cranes, share continues the market diesel are expected electric of Savannah highest record. emissions second national year. consumption announcement of and Additionally, to records, the and posting the set related February recent per expand including which continues to XX on its ever

$X.XX like our call our the to our action increase I'd This Southern increase back approved of per share for back Company dividend, and last Chris, annualized dating our to share. raising Before common the meeting, that consecutive greater was paid years, to $X.XX Board proposition. attention marks your consecutive value supports Company dividend way call to per previous year. has in I remarkable an to Southern recent rate record dividend a At its track increase. Company's to Directors over Southern than XX all XXXX, the annual XXnd equal or This turn

$X.XX our back it I'll Chris, And me, adjusted lastly per EPS over for for share. the you. turn is second quarter estimate to

Thank you, Dan.

on an X. and recent to Units progress like X update on Plant provide Vogtle I'd questions, your taking Before first

Importantly, successfully that achieved in units the from progress provided cost the we've are time initial updates forecast our quarter. Since line this projected with capital consistent month. completion expectations we and X, sustained each seen criticality the last time, and earlier for grid we've March synced unit. for Unit that both to At unchanged

We and continue with to and in This the plateaus testing testing thermal power testing power XX% test work to commissioning coming trips systems. the currently is the through startup plateau. weeks and safety are higher at force expected unit's to extensions final performing to continue

of a testing, long-term as fine-tuning, plans, enter Following power will necessary before operations. commercial to testing window this appropriate power. into preoperational as extension brief returning After with Unit we ready expect maintenance all and consistent final of X well full Unit successful outage and completion our for any sequencing, X completion to the be

project X We service to XXXX. May of in placing continue June Unit in or

with X, in with on Turning March, testing functional last Unit Unit is the lessons learned to Substantial continuing functional execution X hot quarter, X. now testing approximately hot benefit to complete. progress commencing throughout XX% from Unit continued our

planned of the testing have Unit complete to turnover with an of be first systems progress quarter X, later for we coming hot middle remain quarter to the has the and XXXX. along our test X in are to currently and progress online been and weeks throughout XXX(g) State date already load carbon-free the of these Georgia back look for with and plan. of down year. in-service of to the fourth XXXX fuel the from receipt project planned exciting of to output We with to by Only to We benefit and NRC to energy ITAAC's the peak the the and of test project months achieved weeks ahead in the units unit this consistent provide of as our decades final between surveillance, inspections forward in the in process late for we We functional testing cooling continue end bring come. the reliable, finding followed our that sharing customers our

places for Large XXXX amongst nation higher on ranked Employers Being and of is is second XX Company In highlight the Southern rankings. employers the the is named ranked particularly closing, the nearly We employee XXX like Magazine was This industry honor. to once Forbes next again I'd America the feedback. on top in Best accolade an directly peer consecutive large it the top year. than gratifying best because based utility the that XXX in recognized

everyone creating We the where and all respected. groups levels all valued feels a well and included are of represented, all that fairly with workplace committed to organization within -- are treated welcome, and

aspire At industry. leader be Southern to a we our Company, in

provide tirelessly we possible continue world-class day team will each to have the privilege serve. we thousands such, workplace customers work our that the best who strive every for create to of As to the to service members and to

us for joining to now questions. Operator, are take afternoon. you Thank this we ready

question line of with And Wolf from [Operator our first Instructions] Research. the Fleishman comes Steve

Chris. would this there, new he's that us the sure that's call -- to could that going be out afternoon, Congrats to listening. filing -- Georgia, -- in prudency good I'm And when the on remind a just in you when first and on hi when comes just for scheduled Hey, Tom year? roughly your role. But

load X. occur scheduled come -- fuel unit -- looking we're is Right for enter It we the July Unit frame. for fuel time now, on to in to load to as

will we'll -- Unit working as on But work fuel enter moving we're started on the the process. that staff load commission get we it So with through X. and

much like things Okay. months I -- most X pretty And take Georgia? think in take

X time frame We It's today. expect we the expect yes, months.

Okay. in color to is I line, that issues you far mentioned remaining have planned? testing kept know process the up? obviously, far say -- the mean, time then any fair X there. just as And gone the it come think I any Are so there so I you -- testing, the Just everything's but Unit start-up, but for

I Steve, operated move very you've ahead. do before, worked I would some experienced we things systems way and through as -- up. has gone they we the and as continue seen testing but should, trips but And say our And We've it. proceed come think to well.

we're and focused to far, always so the far, But make issues. there's so so but is know is go but secondary for we we're to commercial good, side. So, on there's say good, that we we'll testing a start-up, sure so time ready we This always test, through I'd continue operation. first -- why process --

And the our Pourreza with from Partners. next line of question Shar comes Guggenheim

the around your the on you interest inflation the Chris, you with guide? you a some incremental takes like what issued prior you since kind of seems how 'XX back It see things February tailwinds just here. of of got 'XX you I of it that guys saw And revised of manage lowered guess some outlook you are ongoing a recently pushes do today. convertible sales to seeing develop I exposure guidance, better we like in guess the now? there's kind rates. bit note opportunities and are and

'XX Shar, is you 'XX. or about asked

'XX.

Okay.

out -- band So start-up our of I'm expected that. of I'll and start, We lowered range commercial the I down Unit moved because Dan. it [X.XX]. let kick lower the going X. as to We down pushed to then we end moved We me on to

you push on based X. the comment any guidance? of other do So that Unit aspects was on schedule on to Dan, the want

a do, just the to guidance X, end to XXXX akin on Chris said, down typically to range other We'll financing, be following to date. a particularly mentioned, have make you will in year And Unit that the creative we more which we and the managing parent we're Yes. we'll executing actual once All of so how based to need in-service thoughtful were we're kind way we of are where moving to. where next that's what something clarity, or on $X.XX narrow that at around around the Shar, be I mean, parts on what this company. again continue sure we we early year, we -- are

do to think I everyone be specific not opportunistic the We'll deal convertible a that. just a as opportunities then success. we underway the we're perspective, way support other see way are in a was lot we And range. to we tremendous necessarily running efforts that but is make what cost seeing instrument, that from that can pressures, and as got guidance the we've that to in business of sure a But we different. continues no efficiently have,

the then we're you new Got it. obviously any just, I opportunities on your maybe holdco the Southern the is guess, or you about I'm things to target current that O&M CEO just I level managing despite business? your fairly lens, services a fresh as to shared stated kind have of you maybe cut the really from streamlining thoughts to mean, seeing doesn't at even cost a be could plan well. incremental further Chris, like some overall as of opcos? cost there at of see additive guys at kind thinking a And peers guess, plan curious opportunities side maybe I cost-cutting your looking because are like

I Yes. create are opportunities wonderful say has efficiencies to to mean this places, at opportunity I we will service we do would I'd how can build shared there what And run that. question Shar, in business more a will find to look I it's efficiently. Dan said. we mean, on continue

of As you conversation and to affordability. soon the interest of a it lot very know, there's we take issue in, and

ways continue flat to find but to look is over to sure, either find perspective, pressure our and or period. implications, that And to on rate inflation declining make the ways from interest so our look will put at O&M we forecast downward ways pricing, to find

So of past, to done do in kind And those continue to pursue we opportunities. continue the and it do it will we'll that the we've and future. in

internal would addition opportunities -- as other optimize in deployed X shared we have, to to really service say, expenses how have you'd between great the hope which we is are opportunities, and the resources mentioned, our of I'd particularly And investments. operating Chris capital the

the doing to and way spend can we to the our reduce time. optimize focus certainly everything same we're capital So on costs at they're deployed

line And our Ross next from with of the UBS. comes question Fowler

fully So Dan, I sure kind prepared seasonality in it I want the your make up just I want understand to just through you brought to your remarks, there. again, go but of drivers

first had you of the of half a -- in over 'XX. little half about $X hear You a little got and 'XX, in you've first over $X.XX the

to in goes I you you I in that's the X too, of heard correctly, think so of that, Vogtle Unit into part of So the But last X would some once said the And that then of be lot forward pieces if I QX there's outperformance it. in part was think year. year, a outside band in. allowed reduction there you O&M penalty 'XX here, pull a other sharing

So into sort half range other there than versus anything X around with better those I'm back second this last? pieces, year missing a getting the of is guidance number

important saw year moving in the prices getting but other really up the start half Ross, year-over-year, last terms earnings think of were that energy get was by those that that terms us really driven where that part of helped in strong were. to in first not Yes, back, comparisons of I making just we

allowed So us commercial of not on energy a benefited prices to side, pricing and some those to had because only off from side just industrial lot but start regulated where got Power also where a of we on it our great the things. that, market Southern do that

kind element year-over-year our of of notion. Big is doing customers back or accrued quarter. refunds terms of you was of refund a just last up you're year second jurisdictions. back you our to half $X.XX the was what reserves, in jurisdictions what some this to either of obvious a reserves into all regulatory That reliability the fourth as to when be looking So customers' at a not That significant will always rebates in in put that's just the or was was so if comparison, that brought thing have of combine difference. that we the

pretty there midpoint. this a necessarily but item that And able year-over-year a support we'll as significant to that reconciling will still so be $X.XX that's be year,

mentioned was industrial in like to that backdrop for the kind facility, context? what seeing lateral in seen Maybe currently on one-off sales decline, and was caustic the soda due are a ex-housing, the sectors. of then housing-related half of item rest sort of that And you about you economic the

of lot want you show to Yes. Still, of going and But anything here to add in Southeast bit of is the I a kind want continues to there? Chris just still overall growth in but add There from this. itself. overall a the Chris, an on perspective, do to year-over-year on, seeing slowing sales sectors. strength

Yes.

the and investment expect look projects which also and robust, And -- the the and sees Georgia very quarter some remains continues mean I like to announced supply here full. XX-plus so quarter 'XX versus at XX,XXX increases of of 'XX $X of to we thousand the And billion jobs and first Southeast, development pipeline here I at battery in first economic in be be around chain. pipeline in EV look Alabama

to pipeline continue the the XX,XXX somewhere gas the the side, from growth, population excited growth, some to economic we economic activity, electric development X,XXX So saw side. in on the on be customer we migration about

that territory a continue say we activity we economic people continue ongoing there be strength maybe we of very see this in some recession, positive that see. -- economic may So our to lessen think to but and continuing factors because here

reductions. think this walk achievement mean, it an in power and That's both EPA around anyway. natural the I'm pose plant are needed of risks potentially great, those press you question, gas do seen unfair going How definitely emissions this for natural rule of we What regulation? about the Chris. coming you of opportunities that an I the affordability energy that about gas type and is versus reliability week sustainability because things you've think And transition? as is but through to do maybe and How terms around -- in

our Yes. number And before, of and figure different let mean understanding parts. process in I that think the a using mean final I iterations. this me on through through and go we will been what our I rule, fleet net and assess do there us. commitment break real continue we transition, as that of to zero. have with to out terms in toward up it I proposal fleet focus And a mean, a transition. affordability we'll in sustainability the pursuing of balancing we'll sustainability with to two when is and our that means -- and go it moving

our So path will continue.

make so And I mean, gas take for natural to a the to to we'll and economy is a regions new think Natural at I comes whenever very electric. would important look I from this affordability a important. to standpoint, also rule it. economy, the all a an cannot, lot that transition country say out, gas of is

so standpoint, the national go And from it's forward. policy as natural I important energy I importance we a think, think recognize of to gas

my that that be to response would So question.

the of Bank question with America. And comes next line our Dumoulin-Smith of Julien from

again. Congrats,

I So want pivot look, with to that credit said, back to the conversation.

they're of narrower -- gyrations improvement? of how What Obviously, there prospects kind about you've we at the thinking at that What metrics in target? target? target credit that does want in improvement course terms kind Again, the far guys? then this the time targeted the metrics mean What do of little pivot to here. to different And service? ultimately, right, you seen of you translate bit they side? does some what time through As are the you of you FFO terms as a look the that getting And want to of UX, guys in, that I UX, you out of look have in would construction get you broad agencies the go metrics? lines today rating for line on

Julien, Yes, it's Dan.

means an improvement flow rates once FFO Unit this and FFO be but the and improvement, zone is thus let's we in before, from perspective, a in in It call million debt cash high from given about debt. to we've that high our that current as as could what X service, with of should is operating combined a in talked rating XX business, reflected look, above flow comfortably -- perspective, a cash with So to improvement comfortably in XXs, could X rest in and it, thresholds. from it's $XXX X-ish our about in just the certainly an be be years, FFO

in And but what the anything I've execute. I our an to and category to have BBB+. without all And at achieve think objective continued of to can having utilities we as that company do parent articulate our regulated A

But that of terms further Right. in the underlying per a improvement metrics se?

Absolutely.

sorry, more then, And X here. subject Okay. pivot if can I

this in focused I prospects Georgia on Just around on and/or And opportunities. for necessarily to front. IRA. know the on isn't opcos right. Power placeholder, Southern that Power other had has opportunities. of maybe in the and solar I'm Georgia specifically know investing not solar today more unlocked IRA post specifically Power, process given touch you've But any flight the Obviously, certain the of RFP? that I but at that Georgia

Yes. have between the opportunity playing us we think policy, renewables inflation you to know, plan, as of integrated a And opportunity result ourselves. we from offers also own with it resource -- XXXX the as act, level a tax fields reduction the of but as the, Julien,

commissions affords forward. these also with And and be the opportunities, so and to to pursue us of the we'll inflation opportunity looking owner forward, at of more Act lease taking opportunities Reduction as projects who's -- those are renewables not And build us. the opportunities for own our advantage the but going is the teams best have at looking the working the we but go that just cost, we cost

But also wonderful you opportunity mentioned, we Power think, I as opportunities for there're as Southern for So forward. it's also, a us. go

as opportunities looking are executing to them. we around we're wonderful investigating go fully So and us forward, forward there and for

bit little maybe But it. quarter Got the there? get in more next we'll detail so, a or

posted. We'll keep you

line Morgan Stanley. our of next comes question the David Arcaro with from And

Unit when the Unit Vogtle at wondering on ramping be Wondering see we We've full might we capacity. seen at down, when power. expect have units. that it delays so frame? up smoothly the on I to full June questions I far the running this quick X but within to of before, to and capacity? the time push out you to X, was touched getting testing incremental not and would just then -- any been XX% May couple think on going And has A it like running enough

No.

And mean, in or so XXX% to testing we're look power for estimate we're increases. I process. schedule in David, some ramping May not any May. announcing through cost to say, the working XXX% the I and sometime get would We're we're up. doing time power. all

question. Okay. And XQ during Got even the pop XXXX time guess, issues on testing you within any would phase hot seen just you. to I XQ then that that Have up window? functional, add Unit X, during similar incremental

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good. far, so so So,

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line the Durgesh Chopra of from comes Evercore question next Our with ISI.

Durgesh - Q Chopra

you based maintenance standard at Chris, about X. talked confirm process, to just an I Just on... outage first, Unit not just right? that's added the That's step want

Durgesh. go Yes, -- ahead, it's

No, that's ahead. it. go Please

some a has I learned. removed testing have outage. you're we Yes. I standard that some to be right. that and things it's mean, No, equipment there's mean

so yes, And some standard we'll things, maintenance fine-tune will what's probably remediation occur mean, a I But XX-day and outage. some expected. it's about maybe that

then Perfect. you filing. I can that. in Thank Power under-recovered Georgia believe you February. made that the And maybe I for just to pivot clarifying fuel

going I we the initial know balance gas any offsetting feedback in talked last see there some we Just call, as it. with prices of perhaps stakeholder lower about that forward

great. you on front anything that with can Just share would us be

at under-recovered a in and balance, As to we recover the and than a know, that over that looking XX% was retail less on fuel rates reached you June. we're is period would than And and what think XX% that about And may stipulation in price initial X-year as a that look our we staff, expected. to increase take but we with this in request that lower affordability what of must reflects our fuel how at the this kind this paying our it do sensitivity and it do outcome, stipulation, recognizing and we balance, impact customers. recover under-recovered minimizes I attention interest we manner on effect

the And More so will that's to but kind rates place, of starting and take where consideration are. we hearings take effect in June.

KeyBanc. next And our with Sophie question comes from of Karp the line

been of actually. my Most answered have questions

capital you Vogtle quite some the completion now? on right you and Unit at at time just the moving Would could with wise own to be look the track this me vision. guys X line and With maybe towards which direct and X in of Or Unit guys. Let take remain the and in throw recycled mix? the X medium term to business you happy you are have that another be figure ones out optimize maybe businesses what you completed

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opportunity And and full forward. just this to we the unlock so think for I us it's really company go an value potential as full of

Our of the Seaport. line question with Storozynski next from Angie comes

So question. I'll for ask a bit

actually acquire a slate. some be assets clean you willing now seemingly to have we that So

You mentioned have no you equity needs.

improving strongly cash there have You a and are available for assets flow, sale.

way believe roughly you've growth, basically you cannot earnings look sold that for now, average sector we the I For at happy you which with. be guys, the would

and to said you, I the on the last last I it question. tell think I'll Angie, answer

from time, same we buyer return enough hand, are. for good where are. in our sure look and our said, We are the to we're always mean, as bringing seller we're making we the units to units. looking units are on to At a stand-alone. do a this are market, We'll excited full the really we're our look at I the about Vogtle continue these for we always completed. is those X we're do about both online on business opportunities Once we that at going continuing really the have, potential that, as -- to over good through perspective. homework. this the and But and the that and us progress large feel to we we getting I we about unlocking to both be to focus we where full industry, best good risk-adjusted feel and making forward enough X And do look

Khan question Verition. of the comes Ashar next with from Our line

you. questions My been Thank answered. have Congratulations.

conclude Sir, are will question-and-answer closing remarks? session. there today's That any

future. for thank for with you thank today. speaking call. we forward in to with and being the you operator, But you much look we us otherwise, the very Guys,

Company concludes gentlemen, First sir. Call. Southern you, the Ladies Quarter this XXXX Thank and Earnings

disconnect. day. great may a You now Have