Release Date: August 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Southern Co (SO, Financial) reported strong adjusted earnings results for the second quarter, significantly ahead of the previous estimate.
- The company experienced higher-than-expected weather-adjusted electricity sales in the commercial customer class, driven by strong local economies and increased usage by data centers.
- Southern Co (SO) saw residential customer additions of 14,000 in electric businesses and 6,000 in natural gas distribution businesses.
- The company has a robust pipeline of potential new industrial and commercial customers, with nearly 200 projects and over 30 gigawatts of potential load over the next decade.
- Southern Co (SO) continues to execute on its disciplined approach to attracting, serving, pricing, and forecasting new incremental electric load, ensuring economic benefits to existing customers.
Negative Points
- Higher interest and depreciation expenses somewhat offset the positive earnings performance.
- The company remains cautious about the full-year guidance due to the significant revenue impact of the summer period for its electric utilities in the Southeast.
- There are ongoing discussions and potential challenges regarding ROEs and equity ratios in the upcoming Georgia GRC.
- The potential expansion of the SONAT system with a $3 billion investment is still in very early stages, with significant diligence required.
- The company faces regulatory hurdles and must engage in detailed processes with commissions to confirm the reality and financial implications of new data center projects.
Q & A Highlights
Q: With the significant beat relative to your initial $0.90 guidance, how are you thinking about the full-year guidance and your execution there at this point?
A: (Daniel Tucker, CFO) We're cautious as there's a lot of year left, especially with the summer being a big revenue period. We're well positioned and aim to deliver on the current year while improving our positioning for future years. If we don't end up in the top half of our range, we'd be disappointed.
Q: What do you think the industry needs to do to support the build-out of new large-scale nuclear?
A: (Christopher Womack, CEO) The industry needs to continue planning and reviews, but ultimately, strong leadership from the government is crucial to mitigate risks and build momentum for nuclear energy. Nuclear must play a prominent role in meeting future demand.
Q: What other trigger points are you looking for to revisit your longer-range plan?
A: (Daniel Tucker, CFO) Continued momentum is key. We feel good about the current pipeline and the 2025 IRP will help button up the latter part of the decade. More capital investment will be needed for continued load growth, but this is a later in the decade phenomenon.
Q: Can you provide an update on the valve issue at Vogtle 3?
A: (Christopher Womack, CEO) The issue has been resolved, and Vogtle 3 is back online, operating at more than 98% capacity factor. We're pleased with the performance of both Vogtle 3 and Vogtle 4.
Q: Can you clarify the data center pipeline and commitments?
A: (Daniel Tucker, CFO) The total pipeline has grown from 21 gigawatts to 24.3 gigawatts, and firm commitments have increased from 6.2 gigawatts to 7.3 gigawatts. Commitments are essentially signed requests for service, but we risk-adjust these numbers to be conservative in our forecasts.
Q: How do you think about the current business mix given the changing electric load growth?
A: (Daniel Tucker, CFO) We are satisfied with our current portfolio, which includes strong electric and gas jurisdictions and Southern Power. There are no plans for asset rotation at this time.
Q: What are the regulatory hurdles for data center load growth?
A: (Christopher Womack, CEO) We work closely with commissions to confirm the reality of projects and understand pricing implications. We negotiate contracts without needing regulatory sign-off but ensure they provide benefits to all stakeholders.
Q: How will DOE loans affect your overall financing plans?
A: (Daniel Tucker, CFO) The DOE loan program could finance up to 80% of $15 billion to $20 billion in eligible capital over the next seven to eight years, providing significant customer savings and low-cost debt financing.
Q: How do you view the economic development in your service territory despite broader economic indicators showing a slowdown?
A: (Christopher Womack, CEO) Our service territory remains attractive due to factors like reliability, cost of living, and business climate. This is reflected in the strong pipeline of projects and economic development activity.
Q: Will you exclude one-time benefits in 2024 when providing forward-looking guidance?
A: (Daniel Tucker, CFO) The base for the 5% to 7% growth is the current 2024 guidance of $3.95 to $4.05. We manage short-term opportunities like weather to ensure sustainable results year in and year out.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
