The paragraph is a transcript from the Southern Company Fourth Quarter 2024 Earnings Call. The conference operator, Robert, introduces the call and mentions it will include a Q&A session after the speakers' remarks. Greg MacLeod, Director of Investor Relations, then introduces the call and notes the presence of forward-looking statements alongside historical data. He mentions that non-GAAP financial information will be presented and directs listeners to their website for detailed financial information. Chris Womack, the Chairman, President, and CEO, expresses pride in the company's operational and financial performance in 2024, highlighting that they achieved the top of their EPS guidance range, marking an 11% growth from 2023. He commends the team for delivering exceptional value to customers and investors.

The paragraph highlights the company's commitment to delivering clean, safe, reliable, and affordable energy, particularly evident during recent adverse weather events in Georgia. The company is poised for long-term success, supported by its state-regulated utility franchises and significant growth opportunities, including economic development activities that have attracted over 150 companies to the southeastern region. These developments are expected to create over 20,000 new jobs, with major announcements in industries like manufacturing and entertainment. The economic pipeline includes significant potential growth from large electric load customers, such as data centers, which account for about 80% of the projected 50,000 megawatts of additional load by the mid-2030s.

The paragraph discusses the company's disciplined forecasting approach and its commitments to over 10,000 megawatts of power, emphasizing growth in data center energy needs in Georgia, Alabama, and Mississippi. With state-regulated utilities expected to account for 95% of capital investments, the company also invests in complementary businesses for vertical integration and market insights. Southern Power, their competitive business, complements state-regulated operations with over 13,000 megawatts of capacity and takes minimal commodity risk. It includes 7,000 megawatts of natural gas, 3,000 megawatts each of solar and wind, and 500 megawatts of solar under construction, projected to be operational by 2025-2026. The company aims to pursue new renewable energy projects based on risk-return criteria.

The paragraph discusses Southern Power's strategic opportunities in expanding its natural gas capacity. First, there are expectations for higher renewal pricing of existing contracts in the Southeast by the early 2030s. Second, there are plans to upgrade existing natural gas facilities to add capacity. Third, new brownfield power plants could be built in the Southeast. Additionally, Southern Power considers expanding beyond the Southeast to provide natural gas generation for data centers. The acquisition of Southern Company Gas and a 50% investment in the Southern Natural Gas pipeline have enhanced vertical integration. The pipeline supports increased natural gas demand in the Southeast. Smaller divisions also benefit from the growing demand for computing power, complementing core growth prospects.

PowerSecure, a company specializing in utility and energy solutions, has benefited from the growth of data centers, improving its understanding of their needs and strengthening relationships with national data center owners. Southern Telecom, another subsidiary, enhances its appeal to data-intensive customers by deploying fiber optic infrastructure in collaboration with electric utilities. Southern Company’s strategic refinement of its business portfolio aims to deliver reliable, affordable energy and strong shareholder returns. During a call, technical audio issues were noted, but it was mentioned that the presentation is being recorded for future access. The company reported strong adjusted earnings per share of $4.05 for 2024, marking an 11% growth and hitting the top of their guidance range.

The paragraph discusses the company's performance drivers for 2024, including investments in state-regulated utilities and weather impacts. It reports a 1% increase in weather-normalized retail electricity sales compared to 2023, with strong commercial sales driven by data centers. The company added a significant number of new residential and natural gas customers, particularly in the Southeast. They anticipate continued growth in electricity sales, projecting a 2% to 3% increase in 2025 and an average annual growth of 8% from 2025 to 2029, with Georgia Power's sales growing 12% and the commercial segment growing 18% over the same period. The company takes a disciplined approach to forecasting growth in electric load and has a robust economic development pipeline.

The paragraph outlines the company's risk-adjusted capital investment forecast, highlighting a planned $63 billion investment over the next five years, primarily in state-regulated utilities, which is a 30% increase from last year’s forecast. The investment focuses on new projects, natural gas pipeline expansions, and significant enhancements to the transmission system. This plan is expected to support a 7% average annual rate base growth. Additionally, potential investments in new or expanded generation resources and natural gas pipelines could add $10 billion to $15 billion in regulated capital investments between 2025 and 2029, subject to regulatory approvals.

The paragraph discusses the company's current focus on managing regulatory processes and its capital investment plans. It highlights the priority of maintaining investment-grade credit ratings while projecting an average annual equity need of approximately $800 million to support credit quality. The company aims for a target FFO to debt ratio of 17% by the end of its forecast period. It plans to fund these needs through internal sources and an ATM program. If additional capital investment opportunities arise, the company plans to fund 30-40% with equity or equivalents. Recently, the company has already met about $500 million of its equity needs for 2025 through forward contracts and junior subordinated notes, which are treated favorably by credit rating agencies. Dividends remain a key value proposition for shareholders.

Southern Company has consistently increased its dividend for 23 consecutive years and plans to continue modest increases, aiming to lower its dividend payout ratio to the low to mid-60% range. The company projects an adjusted earnings per share (EPS) growth rate of 5% to 7%, with a 2025 EPS guidance range of $4.20 to $4.30, representing a 6% increase from 2024. While higher interest rates are a concern, the company is optimistic about its long-term growth prospects, potentially bringing its EPS to the upper end of projections and possibly adjusting its growth trajectory upward by 2027.

The paragraph highlights Southern Company's positive outlook and strategic approach to future growth by sustainably serving increasing electric load demands in their regulated service territories. The company emphasizes the benefits of their regulated market structure for deploying new resources and their disciplined, risk-adjusted forecasting and pricing strategies. Maintaining strong credit quality and investing in team development are top priorities to protect investors and ensure long-term success. Southern Company aims to deliver exceptional value to shareholders by prioritizing reliable and affordable energy for customers, achieving a successful year in 2024.

In the paragraph, Southern Company is optimistic about its future and appreciative of continued interest from stakeholders. A technical issue with the webcast was mentioned, but a full recording will be available afterward. Carly Davenport from Goldman Sachs asks about the company's earnings growth projection in the 5% to 7% range over the next five years, considering rate base growth and capital investment opportunities. Dan Tucker responds by emphasizing their solid long-term outlook and increased confidence in sustaining this growth, supported by strong fundamentals that add stability to their financial expectations.

The paragraph discusses a recent update and potential future capital investments, indicating a strong position within their capital range. Carly Davenport asks about the $10 billion to $15 billion investment opportunities, specifically the division of investments between Georgia Power and a natural gas pipeline project. Dan Tucker responds by saying that most of the investment is for Georgia Power, with up to $14 billion associated with it. However, regulatory processes are ongoing, and more clarity is expected by July. He mentions the substantial nature of these investments, referencing historical contexts where larger dispatchable resources often turned into purchase power agreements.

The paragraph discusses the current market condition where excess capacity is being utilized by load-serving entities, leading to tighter availability and a higher likelihood of needing new construction. Carly Davenport thanks the speaker for the insight, and Julien Dumoulin-Smith from Jefferies asks about the cumulative earnings trajectory and repowering potential of Southern Power's assets, noting the difficulty in discerning opportunities externally. Dan Tucker responds, emphasizing Southern Power's long-term contracts and the sustainability and durability of its growth trajectory through recontracting as opportunities arise.

The paragraph discusses Southern Power's approach to new construction and repowering projects. It mentions that building new brownfield gas plants or new generation outside the Southeast follows a similar timeline due to industry trends. In the interim, Southern Power is repowering its first wind facility and constructing new solar facilities, indicating a selective and opportunistic approach to seizing opportunities. Chris Womack emphasizes how complementary businesses enhance Southern Power's market durability and support earnings growth. Julien Dumoulin-Smith acknowledges the discussion on retail sales acceleration within regulated areas.

The paragraph discusses potential opportunities for Southern Power to expand and optimize its natural gas fleet in the Southeast. Dan Tucker highlights the potential for leveraging existing gas plants and brownfield sites to cater to increasing demand, particularly from data centers. While colocation is not part of Southern Power's current market strategy, the vertically integrated market offers significant opportunities for serving load entities that support data centers. Additionally, the conversation touches on capital growth plans, particularly for the year 2027, though details on new financial baselines or specific figures are not provided. The context suggests anticipating significant strategic developments in that timeframe.

The paragraph discusses the company's strategic planning and challenges they are facing, particularly with refinancing debt and realizing growth opportunities by 2027. The growth is described as long-term, with significant capital spending and revenue generation expected to occur later in the plan. The company is currently dealing with high interest costs as a headwind, but believes these will moderate as they refinance existing low-rate securities. Additionally, recent approval for a change in contracting with data centers in Georgia has formalized practices they were already undertaking, which has been well-received by the market.

The Georgia Public Service Commission has approved new rules aimed at ensuring transparency and fairness in energy costs for large customers using over 100 megawatts. These rules include requirements like credit prerequisites and longer-term contracts. Dan Tucker highlights that these measures will help identify more serious projects by weeding out speculative ones. While this might cause the pipeline to appear smaller in the short term (3 to 6 months), it aligns with the interests of large, committed customers who are eager for these changes to ensure focus on genuine infrastructure needs.

The paragraph is an excerpt from a conference call where Dan Tucker clarifies that the 5% to 7% growth rate for 2024 is based on the company's 2024 guidance, not on any onetime events. Anthony Crowdell asks about updates on the company's $10 to $15 billion capital investments, to which Tucker responds that while the official updates are typically given in the fourth quarter, the company might be able to provide more visibility by the second quarter. Anthony also inquires about parent debt and refinancing rates, with Tucker suggesting a follow-up for specific details. The operator then introduces the next question from David Arcaro, who asks about the availability and pricing of gas turbines.

In the paragraph, Chris Womack discusses the company's strategy for ensuring access to turbine suppliers, emphasizing the importance of diversified relationships and reservation fees to secure supply amidst high demand. Dan Tucker adds that they are similarly engaged with EPC providers. David Arcaro inquires about their financial strategy, specifically regarding their FFO to debt ratio. Dan Tucker explains that reaching a 17% FFO to debt level is achievable within their 5-year forecast, acknowledging there might be some challenges and a flat trend around 2025, but overall, they will take a measured approach to meet their financial objectives.

In the paragraph, Jeremy Tonet from JPMorgan Chase inquires about growth opportunities in Alabama and Mississippi, particularly regarding data centers and other economic developments. Chris Womack responds by highlighting significant projects, including a Meta project in Alabama and a Compass project in Mississippi, which involve substantial megawatt capacities. He mentions ongoing economic activities and a migration trend moving westward that presents growth opportunities for their company. Jeremy also asks about Southern's perspective on new construction, noting some market concerns due to past issues.

In the paragraph, Chris Womack emphasizes the need for more nuclear power in the country, citing it as the best long-term solution given the current low growth in the energy industry. He acknowledges the risks associated with developing nuclear energy but suggests that these can be mitigated through federal or private sector support. Womack highlights the efficiency gains and operational benefits experienced when transitioning from Unit 3 to Unit 4 and advocates for continued investment in nuclear power to improve efficiencies in supply chain, workforce, and other areas. He expresses a commitment to collaborating with partners and other utilities to promote the advantages of nuclear energy. The paragraph concludes with a transition to a new question from Durgesh Chopra of Evercore.

The paragraph discusses the increase in capital expenditures (CapEx) by $13 billion and the equity allocation in a 5-year plan. Dan Tucker, responding to Durgesh Chopra's questions, indicates that the allocation involves various elements, including adjustments in dividend growth, tax transferability, and cash flow improvements. He emphasizes a long-term pragmatic view on financial objectives rather than focusing on immediate targets. Tucker doesn't have the specific tax credit monetization figures but mentions the involvement of Southern Power projects, storage assets, and various tax credits, some of which can be transferred or are impacted by the Inflation Reduction Act (IRA). Tucker suggests contacting the IR team for more detailed information.

The paragraph discusses a Q&A session regarding Southern Power’s business activities and potential future projects. Paul Fremont from Ladenburg Thalman asks if it would be practical for anyone to finish or restart construction on the summer plant, to which Chris Womack responds that it’s not something Southern Power would consider, mentioning the risk and capital needs involved. Fremont also inquires about potential construction of gas facilities outside the utility service territories, questioning if areas with gas LDCs might be targeted. Dan Tucker explains that it wouldn’t necessarily be logical to focus only on those areas, as Southern Power's strategy includes having renewable assets in regions favorable for bilateral agreements, often involving large commercial and industrial customers.

In the paragraph, Paul Fremont asks if there might be a future consideration to spin off the Southern Power subsidiary. Dan Tucker responds, indicating that while it's not a current plan, they continually evaluate their options and are pleased with retaining the business as it's beneficial to their portfolio. Chris Womack adds that they value their current assets and the contributions they make towards their long-term goals. Following this, Travis Miller from Morningstar Research asks about the balance between generation and transmission capital expenditures (CapEx) for the years 2028 and 2029, noting a seemingly lower figure on the generation side.

The paragraph discusses the capital outlook and strategy for a company involving loan growth and the need for transmission to support large loads. Dan Tucker explains that, while transmission can't be purchased from third parties due to the company's vertically integrated structure, generation resources have more flexibility and optionality. The company is dealing with 13 gigawatts of outstanding requests for proposals (RFPs) in Georgia, with potential capital investments of $10 billion to $15 billion once these needs are firmed up. Tucker highlights that power purchase agreements (PPAs) may not meet all RFP demands. In response to Travis Miller's question about transmission supply chain availability, Chris Womack acknowledges challenges but notes that it's not as difficult as on the generation side, emphasizing the company's strong position due to its size and engagement in the sector.

In the Southern Company Fourth Quarter 2024 Earnings Call, Ryan Levine from Citi inquires about potential policy support to promote data center growth in Alabama and possible changes to tariff design for hyperscale customers. Chris Womack mentions he is not aware of any current legislative efforts or incentives specific to Alabama but notes the existence of some incentive packages for economic development. Dan Tucker adds that there's significant flexibility in contracting with large load customers, so no tariff changes are necessary. The call concludes with Chris Womack expressing excitement about the company's future and gratitude for the participants' interest.

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