The operator, Malika, welcomes everyone to the Southern Company Fourth Quarter 2023 Earnings Call and introduces Scott Gammill, Vice President of Investor Relations and Treasurer. Gammill reminds listeners that forward-looking statements will be made and non-GAAP financial information will be presented. CEO Chris Womack then discusses the company's strong financial results in 2023, despite challenges, and the successful completion of Plant Vogtle Unit 3, the first newly constructed nuclear unit in the US in over 30 years.

In 2023, Unit 3 exceeded expectations by delivering over 5 million megawatt hours of safe, reliable, carbon-free energy. Other accomplishments included resolving issues with the Vogtle 3 and 4 prudence process, completing construction of a new combined cycle plant, acquiring new solar projects, and making progress towards greenhouse gas emission reduction goals. Southern Company also received awards for customer engagement and satisfaction and was ranked as the top utility company in Fortune magazine's list. The company's electric and gas franchises performed well during the winter storm, Heather, and continued to serve customers reliably despite severe weather conditions.

The company's ability to navigate severe weather events showcases the benefits of their vertically integrated state-regulated business model and long-term integrated planning processes. They also provided an update on the progress of Vogtle Unit 4, which achieved initial criticality, and their 2024 adjusted earnings per share guidance. The financial update showed strong performance in 2023, with higher utility revenues and lower expenses offset by mild weather conditions.

The company's ability to meet its 2023 adjusted results is a testament to its team and strong portfolio. Retail electric sales were down slightly due to lower residential usage and impacts from the return to office dynamic. However, there was strong customer growth in the residential sector. Industrial sales were down due to various factors, but economic development in the company's service territory is strong and is expected to drive future sales growth. The company's outlook includes increased capital investments to support this growth.

The projected growth in kilowatt hour sales from new manufacturing facilities and data centers presents an opportunity to lower rates for existing customers. The company's adjusted earnings per share guidance range for 2024 is $3.95 to $4.05, with a projected long-term growth rate of 5% to 7%. However, the world has changed significantly since the initial projections were made in early 2021, with inflation and higher interest rates leading to higher expenses. Despite these challenges, the company is working hard to grow and create value for investors. The state-regulated utility rate base for 2024 is projected to be $6 billion higher than previously estimated, and the company's capital investment plan is primarily focused on state-regulated utilities.

The company has increased its capital spending by 12% in order to improve the resiliency of its electric and gas networks and technology infrastructure. This increase also reflects new resources proposed in Georgia Power's 2023 IRP update. The company maintains a disciplined approach to capital forecasting and expects the trend of capital increases to continue in the future. This investment supports annualized state-regulated rate base growth of 6% and the company prioritizes maintaining strong investment-grade credit ratings. The completion of Vogtle Unit 4 is expected to improve the company's credit profile.

Southern Company has laid out a plan to fund capital investments and maintain financing flexibility. They strive to deliver a superior return for shareholders and prioritize customer and community-focused business practices. The company had an exceptional year in 2023 and credits their success to hard work, collaboration, perseverance, and leadership. This level of success is not achieved without a prepared and dedicated team.

Southern Company has a long history of investing in their people and prioritizing leadership development. In 2023, they made 75 officer level changes to strengthen their team and prepare for the future. They are confident in the company's ability to deliver results and have provided new guidance for 2024, which may include a Vogtle charge. They are comfortable with their 6% rate base growth estimate and are focused on hitting the midpoint of their EPS growth range.

The guidance range for 2024 includes impacts from Vogtle 4 and is adjusted for flexibility and mitigations, but not by the full amount. The company does not factor in the 5-7% range from the midpoint, but rather from the top and bottom of the range. The rate base growth is expected to be solid, despite a slight increase in shares over time.

The speaker discusses the potential impact of nuclear PTCs on their company's credit metrics and funding plans. They state that they have not factored in any cash flow from nuclear PTCs into their outlook, but there is a possibility of receiving them in the future. They also mention their goal of achieving a 17% FFO to debt metric, which they believe they will reach in the next few years.

Moody's metrics show that the company's results for 2023 were at 14%, but with the addition of Vogtle 4 in 2024, the metrics are expected to improve by over 100 basis points. The company's forecast shows a continuous improvement in credit metrics over the next five years, reaching a range of mid-16 to 17. The company's sales growth in Georgia at 9% per year is unprecedented and is a result of economic development activities. The company carefully evaluates growth projects and only includes those that are certain to happen in their plan. This growth is considered conservative and risk-adjusted compared to its peers.

The speaker discusses their conservative approach to factoring in economic development activity in their filings. They consider factors such as building permits and demonstrated commitment from companies before including them in their filings. They mention a strong pipeline of potential projects and note that data centers represent around 80% of the emerging load.

The speaker is asked about their assumptions for the new five-year plan and the inclusion of spend on incremental resource needs in the Georgia IRP. They explain that the growth in resources is happening quickly and they wanted to get ahead of regulatory outcomes. They also mention specific projects that were included in the plan and the possibility of further updates in the future. The speaker also mentions the ongoing process for Vogtle Unit 4 and keeping the investment community updated.

The next major milestone for the company is connecting to the grid, which could happen later this month. They expect Unit 4 to be completed in the second quarter, but they are taking time to ensure they get it right. They have flexibility to address any potential delays and have a range for their projected earnings for the year. It is too early to determine exactly how this might play out.

Julien Dumoulin-Smith from Bank of America asks a question about Southern's forecasted sales growth. He wants to know if the improved ROE is underpinned by the IRP or if there is more to come in the process. The response clarifies that the improved ROE is not from a regulated utility perspective, but rather an opportunity to put downward pressure on rates for existing customers. The sales growth numbers presented are actually conservative compared to the IRP update, and have the potential to increase further.

The speaker is discussing the company's FFO to debt ratio and how it has not changed despite a slower ramp-up due to increased capital deployment. They state that the financial profile supports the company's objectives and is above any thresholds. They also mention that they have identified the cause of an issue with reactor cooler pumps and have tested all other pumps.

Nick Campanella asks about the root cause of the pump issue at Vogtle Unit 3 and when it will no longer be a concern. Chris Womack explains that they have identified the issue and have confidence in the pump's performance. They will continue to monitor it and provide updates as needed. Dan Tucker adds that any regulatory outcomes will be transparent and there will be opportunities for updates along the way. They also remain cautious about owning renewables in their electric service territories.

In response to a question about the potential for rate base growth, the company's executives expressed optimism and transparency about the process. They stated that the load growth trajectory is expected to continue at a rate of 6%, but there is potential for upward pressure on rate base growth as economic development activity increases. The company remains conservative in its forecasting and will have a better understanding of the situation after regulatory decisions are made in April.

A question is posed to the speaker about the impact of load growth on rates and how it will be managed. The speaker responds by stating that they expect rates to decrease due to the additional sales and customer growth. They also mention that affordability is a key consideration and that this growth presents an opportunity to derisk their outlook. The next question asks about debt funding, specifically related to the increase in Georgia Power's debt due to the IRP.

The speaker asks about the increase in expected debt issuance at the holdco and is told it is largely due to funding Georgia Power's equity contribution. The amount of new money is small compared to the total amount of maturities coming due. The speaker also asks about the Georgia PSC elections, but the speaker has no insight on how it will play out. The speaker also asks if there is an RFP process for the Georgia IRP and how Southern Power and Georgia Power compare in it.

Dan Tucker discusses the IRA's plans to make their electric utilities more competitive in self-build options, which may not come to fruition until the back end of the plan. He declines to give a specific range for the current capital plan, but notes that the incremental capital associated with what they didn't include will be a meaningful number. He also declines to give a rule of thumb for incremental CapEx upside.

The speaker clarifies that the company plans to add $5 billion of capital over the next few years, with a portion of that being financed through equity and the rest through debt. They also mention maintaining an at-the-market plan for additional financing if needed. The speaker emphasizes that the current plan is representative of their overall approach to financing future opportunities.

In a recent conference call, Dan Tucker, the CFO of Southern Company, discussed the company's outlook for growth and dividend growth. He stated that there will be no new rate-based solar included in their projections and that the company plans to remain conservative in their outlook. Tucker also mentioned that the company will continue to issue equity and that they will reevaluate their dividend growth trajectory once Vogtle 4 is in service. Lastly, he addressed the potential for load growth in the data center sector.

The speaker is discussing the potential impact of data centers on rate design and customer bills. They believe that increased sales and customer growth can lead to downward pressure on rates, and they will evaluate each customer to ensure this happens. They also mention that data centers prioritize reliable service and that they will price services appropriately for their size and demand.

Chris Womack of Georgia Power discusses the considerations that go into the decision to locate a data center in their service territory, including connecting to the grid and conversations about renewable resources. They use Georgia Power as a first source of power. Agnieszka Storozynski asks about the impact of load growth on earnings, and Dan Tucker explains that interest expense is a significant headwind in a higher for longer environment.

The speaker explains that the company is investing in resources to serve peak energy usage, which is different from overall kilowatt hour usage. This is reflected in the capital deployment and the company remains comfortably in the 5-7% growth range. The speaker also clarifies that potential changes in sales growth after 2025 will not affect the 5-7% growth target. The gas capital spending is expected to remain stable, with potential increases in capital spending in Atlanta. Any changes in Illinois are expected to be modest.

The speaker discusses the company's recent performance in a specific jurisdiction and how it has provided a roadmap for future success. They also mention that the majority of capital invested is for compliance purposes. In response to a question about EPS growth, the speaker explains that the company's 6% rate base growth includes a small portion of shares being issued. They also mention that the dividend growth will likely be lower than earnings growth for the next few years.

Travis Miller asks a question about the company's growth and operating costs and Dan Tucker explains that there is a correlation between demand growth and operating cost growth, but it is not a direct correlation. He also mentions the company's plans for modest growth and keeping a comfortable payout ratio. Chris Womack thanks the caller and operator introduces the next caller, Ryan Levine.

Chris Womack and Dan Tucker of Georgia Power discuss the company's efforts to reduce O&M spending and increase efficiency, while also focusing on completing Vogtle 3 and 4. They mention the importance of paying attention to customer service and keeping costs down. They also mention the peak hour load growth forecast and potential limitations with supply chains in regards to growth opportunities.

The speaker discusses the company's strong supply chain and their ability to handle the current demand. They also mention a question about peak demand and plan to follow up with the investor relations team. The speaker then answers a question about data centers, stating that the companies involved likely have a price in mind for electricity costs and that negotiations include factors such as location and reliability.

In some jurisdictions, backup power providers need approval from regulatory commissions, but this is not the case in Georgia. The average data center rate compared to the system rate is not known and may be considered a trade secret. The 9% increase in demand for Georgia Power between 2026-2028 is fairly ratable and not a significant jump.

The significant load for Georgia Power is expected to come in late 2025 and into 2026, with resource proposals in place to serve the 2026-2027 winter peak. This trend is expected to continue growing. Southern Company had an exceptional year in 2023, and the company's future looks promising. The speaker thanks everyone for joining the call and concludes the meeting.

This summary was generated with AI and may contain some inaccuracies.