Prepared remarks
Good afternoon. My name is Diego, and I will be your conference operator today. At this time, I would like to welcome everyone to The Southern Company Third Quarter 2025 Earnings Call. Please note, this conference is being recorded. I will now turn the call over to Greg MacLeod, Director, Investor Relations. Thank you. Please go ahead, sir.
Thanks, Diego. Good afternoon, and welcome to The Southern Company's Third quarter 2025 earnings call. Joining me today are Chris Womack, Chairman, President and Chief Executive Officer of Southern Company; and David Poroch, Chief Financial Officer. Let me remind you that we will make forward-looking statements today in addition to providing historical information. Various important factors could cause actual results to differ materially from those indicated in the forward-looking statements, including those discussed in our Form 10-K, Form 10-Qs and subsequent securities filings. In addition, we will present non-GAAP financial information on this call. Reconciliations to the applicable GAAP measure are included in the financial information we released this morning as well as the slides for this conference call, which are both available on our Investor Relations website at investor.southerncompany.com. At this time, I'll turn the call over to Chris.
Thank you, Greg, and good afternoon to everyone, and we thank you for joining us for today's update. Southern Company continues to perform exceptionally well. As you can see from the materials that we released this morning, we reported strong adjusted earnings results for the third quarter, meaningfully above the estimate provided last quarter, and we expect to deliver on our financial objectives for 2025. Southern Company has an incredibly bright future ahead. Our state-regulated electric and gas utilities continue to provide long-term value to over 9 million customers across the Southeast and beyond with reliable and affordable energy. The vertically integrated markets in which our electric utilities operate continue to provide transparent and orderly processes and have consistently supported our ability to meet the needs of our growing economies and electric demand while providing premier reliability and resilient service day in and day out.
We've done all of this while keeping customers' rates more than 10% below the national average. Further, the rate plan extension at Georgia Power, which freezes base rates until at least 2029, excluding the recovery of storm-related costs, is a testament to the benefits of a constructive regulatory framework and our focus on balancing growth and affordability. Customers continue to be at the center of everything we do. Our focus on the customer underpins our disciplined approach to forecasting, pricing, contracting, and deploying resources to serve this once-in-a-generation growth opportunity. We continue to execute on those plans for the benefits of all of our customers. Over the last 2 months, we have signed 4 contracts with large-load customers across Georgia and Alabama, representing over 2 gigawatts of demand. Consistent with our approach across Southern Company, these contracts include pricing and terms that are designed to pay for the incremental cost to serve new customer demand while also benefiting and protecting existing customers, helping to ensure growth does not come at the expense of affordability. I will now turn the call over to David to give an update on our financial performance.
Thanks, Chris, and good afternoon, everyone. For the third quarter of 2025, our adjusted EPS was $1.60 per share, $0.10 above our estimate and $0.17 higher than the third quarter of 2024. The primary drivers for our performance for the quarter compared to last year were continued investment in our state-regulated utilities, along with strong customer growth and increased customer usage. These positive drivers were partially offset by milder-than-normal year-over-year weather, higher depreciation and amortization and higher interest costs. For the 9 months ended September 30, 2025, our adjusted EPS was $3.76 compared to adjusted earnings of $3.56 for the same period in 2024. Year-to-date, revenue grew at our state-regulated electrics, partially influenced by customer growth and higher usage, which has added $0.12 year-over-year. A complete reconciliation of year-over-year earnings is included in the materials we released this morning.
Our adjusted EPS estimate for the fourth quarter is $0.54 per share, which, combined with our year-to-date performance, would represent full year adjusted earnings at the top of our 2025 annual guidance range of $4.30 per share. Turning now to retail electricity sales. Year-to-date weather-normal retail electricity sales were 1.8% higher compared to the first 3 quarters of 2024. Year-over-year weather-normal retail electricity sales, which are on pace for the highest annual increase since 2010, excluding the pandemic, demonstrate growth across all 3 customer classes. In the third quarter alone, the commercial sector grew 3.5% on a weather-normal basis compared to the third quarter of 2024. This growth was driven partially by increased sales to existing and new customers, which were up 17%. Weather-normal residential sales also showed strong growth and were 2.7% higher than in the third quarter of 2024, bolstered by the addition of roughly 12,000 new electric customers in the quarter, substantially higher than historical trends.
Electricity sales to individual customers also demonstrated continued strength, growing 1.5% in the quarter compared to the prior year. Year-to-date, all of our largest industrial customer segments are up year-over-year, including primary metals, paper, and transportation segments, which were each up 4% or higher through the first 3 quarters. Economic development activity across our electric service territories remains robust with 22 companies making announcements to either establish or expand operations in our service territories during the third quarter, generating nearly 5,000 potential new jobs and representing expected capital investments totaling approximately $2.8 billion. Clearly, between robust customer growth, increasing customer usage in the commercial and industrial segments, and the flourishing economic development activity in our service territories, the economy in the Southeast remains strong and extremely well-positioned.
Transitioning to our financing, I'd like to take an update on our activities for the quarter, including the progress made addressing our future equity needs. In the third quarter, we issued $4 billion of long-term debt across Alabama Power, Georgia Power, Southern Company Gas, and Southern Power. The quality and credit strength of our subsidiaries continue to draw robust investor interest. Strong demand for our subsidiary securities ultimately translates into lower interest costs, which will provide benefits to customers at our regulated subsidiaries over the long term. With these issuances, combined with what we issued in the first half of the year, we have fully satisfied our long-term debt financing needs for 2025 at each of our subsidiaries. On the equity financing front, we continue to be opportunistic in our proactive approach and have made significant progress on our plans to source equity in a disciplined and credit-supportive manner.
This approach reflects our steadfast commitment to credit quality, including our strong investment-grade credit ratings across all 3 major rating agencies. We plan to continue utilizing equity or equity equivalents in support of our path towards 17% FFO to debt within our planning horizon. Recall this long-term credit quality objective is intended to provide cushion to the quantitative credit metric targets provided by the rating agencies. As a reminder, on our July earnings call, we highlighted a cumulative equity need of $9 billion through 2029 to fund our $76 billion capital investment plan in a credit supportive manner. Since our last earnings call, we priced an additional $1.8 billion of equity through forward sales agreements under our at-the-market program. These forward equity contracts contain final settlement dates that extend through mid-2027 with the ability to call sooner if we choose.
This progress and flexibility it provides significantly reduces risk in our financing plans. When considering these forward sales, other hybrid security issuances, and past and projected issuances under our internal equity plans, we have solidified over $7 billion of our $9 billion equity need through 2029. We are extremely well-positioned to address the remaining amounts in a shareholder-friendly manner. Looking ahead and as we continue to take steps to require strong customer protections and credit provisions, our pipeline of large load data centers and manufacturers continues to be robust. Across our electric subsidiaries, the total pipeline remains more than 50 gigawatts of potential incremental load by mid-2030s. Our disciplined approach to forecasting assumes that only a fraction of this load pipeline materializes. As Chris mentioned earlier, in just the last 2 months, we have 4 contracts across Southern Company system that represent over 2 gigawatts of load.
Projects within our pipeline are maturing into executed contracts, which, along with their associated load ramps over the next several years, solidifies a substantial portion of our total forecasted electric sales growth of 8% annually through 2029, including average annual growth at Georgia Power of 12% through the same period. Across Alabama, Georgia, and Mississippi, we now have contracts in place with large load customers, representing 7 gigawatts through 2029, which ultimately ramp to 8 gigawatts in the 2030s, and we are in advanced discussions for several more gigawatts of load. I'll now turn the call back over to Chris for further insights into the progress we are making on our plans.
Thank you, David. As David noted, we have made great progress with signing new large load contracts. Just last month, as part of Georgia Power's ongoing RFP certification proceedings, Georgia Power filed an update to its load forecast. This updated forecast continues to project the capacity need consistent with the 10 gigawatts of capacity resources being requested, which include 5 natural gas combined cycle units and 11 battery energy storage facilities. These proceedings are scheduled to have a final determination by the commission by the end of this year. Separately, Alabama Power, following approvals from the Alabama Public Service Commission and the Federal Energy Regulatory Commission, has completed the acquisition of the 900-megawatt Lindsay Hill natural gas generating facility to serve projected long-term capacity needs in the state. In addition, construction continues on approximately 2.5 gigawatts of new generation in both Georgia and Alabama, which includes 3 natural gas combustion turbines and 7 battery storage facilities, all of which are projected to go online over the next 2 years.
Furthermore, the South System 4 expansion at Southern Natural Gas within our Southern Company Gas subsidiary continues to move forward and will provide a valuable resource in serving the projected growth in our service territories. It is clear that we continue to make great progress executing on our plan as we deliver exceptional value to customers and investors. Consistent with our past practice and representative of our continued discipline, we expect to provide a complete update to our long-term plan during our fourth quarter 2025 earnings call this coming February. As always, this update will include refreshes to our 5-year capital investment outlook, sales forecast, financing plans, as well as our 2026 and long-term EPS guidance. Consistent with our comments throughout 2025, as a part of that communication, we expect to provide additional clarity on our long-term earnings trajectory, which, as we've highlighted before, could translate into increasing the base from where our long-term EPS growth starts, potentially as early as 2027.
We have delivered exceptional operational and solid financial results through the first 3 quarters of the year. Just this week, Southern Company was named to Newsweek's World's Most Trustworthy Companies for 2025 list and was the highest ranked energy company in the United States on that list. Recognized companies were identified in an independent survey, and our inclusion at the top of this list is a testament to the hard work and unwavering commitment of our employees to uphold our values and operate each day at the highest standards of integrity, transparency, and accountability. We are honored by this recognition, and I am incredibly proud of our team and the execution across all of our businesses. In conclusion, we're extraordinarily well-positioned to finish the year strong. We have the team, we have the experience and the scale to capture and execute on the exciting opportunities in front of us. We really have a bright and exciting future ahead. Operator, we're now ready to take questions.
Questions and answers
Our first question comes from Steve Fleishman with Wolfe Research.
I have no idea how I got on the list for questions because I didn't ask one, but I appreciate that. I didn't have any questions.
And your next question comes from Carly Davenport with Goldman Sachs.
Maybe to start just on the kind of load growth outlook in Georgia, I guess, as you continue to lock in contracts under the new tariff structure there, can you talk a little bit about the reception from customers to the new structure and also how you approach the minimum bill components and ensure cost recovery from investments to support that load?
Yes. Sure. Carly, thanks. Great question. Like we've talked about, we've moved into a mode working underneath the Georgia Public Service Commission, new rules that came into place in the spring. What we're finding is that customers totally get it. They understand that these are long-term commitments that we are making to deploy resources to serve their needs. I think these rules have really helped bring forward more credit quality, more serious counterparties. We've made great strides in structuring these contracts. The contracts we have signed now have protections for customers and our investors. The minimum bills cover all of our costs, whether or not the meter spins. Once they hit their ramps and they start moving up, it's just very beneficial for the company and for our customers. We're really happy with the educational effort we've made over the past year. This is an indicator of why these contracts have taken a while to resolve, just because we're taking customers along the journey of the structure and the need to protect them going forward.
Great. Really helpful. And then maybe the follow-up, just on the Georgia regulatory environment, just with the upcoming certifications and potential for incremental needs on the generation side for approval. How are you thinking about potential impacts from the PSC election and those processes as you think about the longer-term plan?
Yes, Carly, let's start with the election question first. Elections in Georgia for the 2 commission seats will be held next Tuesday. We've had a couple of weeks of early voting. One of the things we talk a lot about in all of our states is that we have an incredibly long history of working constructively with whoever is in those seats. The 5 seats that are occupied in Georgia have always brought different views and perspectives. We expect that will indeed be the same. We will work with whoever is there. As those positions are filled, they keep the citizens and customers in mind. We have a lot of alignment there. We have always constructively worked with whomever has been elected in those seats.
And Carly, you asked about status and kind of where we are. Recall that in September, Georgia Power filed an updated load forecast and testimony. That load forecast, using the same methodologies as several months ago, supported the need for the whole 10 gigawatts we are requesting. That process is ongoing. Staff and other interveners will file their testimony in the next couple of weeks, and we are scheduled to receive a ruling from the commission by the latter part of December.
Your next question comes from Julien Dumoulin-Smith with Jefferies.
Chris, can we talk about the rebasing? You use the same language again about as early as 2027. Many folks are curious to understand the metrics that you're looking at, whether it's operational or regulatory or incremental signed data center deals to get you comfortable in making a firmer timeline for that rebasing. Any thoughts here on how you're thinking about that timeline?
Julien, I think we've stated before that there isn't a specific list. There are several factors that we're going to look at to make a decision. We will consider how the economy is performing, what's happening with interest rates, where we are with large load contracts, and other factors that must go into that consideration. We need confidence and certainty to make that decision. Without a doubt, there are more concrete indicators as we move forward, and we will provide more clarity in our February call next year.
Awesome. Excellent. And a little more of a nitpicky question. The $9 billion of equity you discussed, if you were to get this incremental $5 billion, how do you think about that being reflected in that $9 billion?
The upside we discussed in the second quarter call, Julien, you mean? The upside, if the Georgia Public Service Commission approves all our requests, is about another $4 billion of incremental capital. That's likely to be financed in the neighborhood of about 40% equity going forward. Once we achieve clarity on that, we'll be able to execute on that plan.
And there's a little rounding out between the $4 billion and the $5 billion with gas, if I understand correctly?
You're exactly right, Julien. The $4 billion relates specifically to the remainder at the Georgia Public Service Commission. We've talked about opportunities within our FERC-regulated jurisdictions in the gas infrastructure business, and that's about $1 billion. So you're exactly on point.
Your next question comes from Shar Pourreza with Wells Fargo.
So just real quick on Southern Power. I mean, obviously, there are a lot of opportunities there, and you've got existing tolling agreements that start to expire. How do we think about the value of the assets, the pricing environment? Have conversations started? Are there opportunities to renegotiate these tolls ahead of the expirations, just given the value of the assets?
Yes. So like we've talked about, we've got a very large portion of these contracts under long-term agreements, about 95% or so through 2029. There are opportunities, and as those contracts near their expiration dates, we will start having conversations to renegotiate and renew those where appropriate. The recent data points we've established in the RFP approved in Georgia show that Southern Power won 2 PPAs that go into effect in the early 2030s, repricing nearly 3 times higher than where they sit today. Assuming that market holds, we see great future opportunities as those contracts expire and we can renegotiate them.
Got it. Okay. Perfect. And then just lastly, you talked about the amount of gas needed in the Southeast. Just around the SNG pipeline expansion, any thoughts on timing there? How are the conversations going with the counterparties?
The SNG expansion is progressing well, on track. We've mentioned it being about a $3 billion investment, 100% dollars, and we're a 50% owner. This project is moving along as scheduled, and we expect great interest in contracting that capacity. That pipeline runs through our service territory, and we see its ability to serve our needs as well as the adjoining states.
Okay. Perfect. And then just lastly, if I could slip in one quick one on the equity question. Chris, there have been some healthy transactions around partial asset sales, with some peers being successful. Want to get a sense on whether you've considered other avenues versus these equity instruments, and if some parts of Southern Power could be opportunities?
Shar, we don't comment on speculative transactions or rumors. We're always looking at who is the best owner of a given asset. We like our portfolio but will consider potential changes. It's premature to discuss at this stage.
Your next question comes from Anthony Crowdell with Mizuho Securities.
Two easy ones. You mentioned in the fourth quarter call that you're going to give us a capital refresh and, potentially, an update on the EPS CAGR. Will we also receive guidance for 2027 on the fourth quarter call?
Anthony, we've been discussing this opportunity for some time. The momentum around these contracts has been unique. Those contracts are coming into play toward the latter end of our planning horizon, so we do expect to share some clarity on that. Like Chris mentioned, many factors will be in play, and once we finalize contracts, we’ll provide more clarity in February.
Great. And then just last question. From your last to this call, I believe Moody's put the holding company on a negative outlook. Does that change your view of pulling forward or timing the remaining $2 billion of equity?
No. We have a strong path towards 17% FFO to debt. Retaining our ratings is essential, and we are working to build a cushion toward that 16% threshold, our downgrade threshold. Our path to 17% has improved, especially as we proactively execute equity issuances.
Your next question comes from Jeremy Tonet with JPMorgan.
Just one quick question regarding nuclear. Southern has talked about nuclear development being important for the future of the country. Federal government support seems to be moving things forward. Are there specific actions out there that would make expanding Vogtle or pursuing SMRs more attractive?
First of all, I was incredibly excited about the actions that the administration took with Westinghouse, Cameco, and Brookfield regarding collaboration. I believe these steps are crucial to bring forth new nuclear in this country. With the growing demand, building new units is essential. The actions taken, including executive orders from the President on the regulatory side, are important in helping support nuclear development as new units could have lives of 60 to 80 years and meet future demand. It's vital to recognize these actions as instrumental in shaping risk and risk-mitigation strategies. I'm excited about the steps being taken by this administration.
Your next question comes from Andrew Weisel with Scotiabank.
Does all of that federal government activity change your appetite? I appreciate the industry commentary, but what about your appetite?
Not at this time.
I was actually interested in Slide 9. The demand from large load customers for 2029 and then the mid-30s. It appears that only 1 incremental gigawatt is contracted, and 1 additional gigawatt is committed. How much of that would you say is the same projects ramping versus incremental projects? Is the small increase more conservativism or risk-adjusting?
Yes. The 7 gigawatts in the 2029 column are included in the 2030 column. We're displaying ramp-up timing, expectations based on contracts and modeling we've done through negotiations. Ramp-ups do take time and vary between contracts due to their tailor-made nature, so it's a bit different for each.
And your next question comes from David Arcaro with Morgan Stanley.
Looking at the 10 gigawatt large load contracted or committed numbers by 2029, is there an opportunity to add more gigawatts in that timeframe? Are there system constraints or limits in absorbing additional data centers soon?
The ability to bring on more capacity is present. Yes, we are in advanced discussions with other large-load companies to explore additional possibilities. There are upside opportunities for the latter part of this decade.
Could you characterize the plan for the next set of RFPs? What years would those years be? When would you introduce those RFPs?
The 2025 IRP stipulation allowed for another all-source RFP to begin as early as 2026. At the moment, we don’t have specific size parameters and are assessing our needs. After completing our current processes, we will inform about potential RFPs in early 2030s, maybe 2032-ish. We're encouraged by the conversations we've had, and the momentum continues to build.
Your next question comes from Angie Storozynski with Seaport.
My first question is about the contract-based gas-fired new build. In the past, you mentioned waiting to see demand or interest for loaded economics under long-term contracts by Southern Power. Have we achieved that point? Or still in a waiting period?
We're evaluating opportunities to recontract at Southern Power, maintaining a high filter for credit quality counterparties, long-term commitments, and locking up capacity without fuel risk. We continue to assess those opportunities that fit our criteria.
The answer is no, you haven’t seen them yet, or are you still debating if the terms are attractive?
Yes, we're evaluating and having some discussions around that.
Regarding nuclear new builds, especially with interest from large operators in the U.S., has there been any discussion about expanding Vogtle or pursuing SMRs? How should we brace for potential announcements from you?
I can't speak for others, but for Southern Company, we are not yet ready to announce new nuclear plants. As we have stated previously, we want to mitigate all risks before making such a decision. I am excited about the growth in interest surrounding new nuclear. However, until we can adequately address all related risks, we won't make that choice. We will continue to collaborate with the administration to discuss the importance of new nuclear.
Your next question comes from Paul Fremont with Ladenburg Thalmann.
I want to understand the difference between contracted and committed. Is it just an ESA versus an LOA? What's the distinction?
Let's start with a contract, which is a signed agreement—we have commitment to deliver based on negotiated terms. The request for service is in the discussions phase, where we engage with entities exploring options. It's a deeper conversation with collateral posted, engineering studies happening, and when we are working through terms before reaching a signed contract.
Could you characterize how many gigawatts are in advanced stage negotiations? I think some peers provide that layer of breakout.
In that bucket, we're probably in the neighborhood of 12 gigs. It's quite dynamic and spread across the system.
You're targeting or guiding to 8% sales growth. What year do you expect to achieve that?
That's in the latter part of the horizon. We've discussed 2029 as the target for that, and we will grow into that over time.
Your next question comes from Travis Miller with Morningstar.
If I run through the large load projects, it looks like average projects are somewhere between 300 to 500 megawatts. Is that a fair assessment? What does the extra 50 gigawatts look like? Have heard some utilities mentioning gigawatt projects.
Yes. I wouldn't apply simple math. These are wide-ranging; we have projects from about 100 megawatts up to north of 1 gigawatt. Each contract is tailored to specific needs. As for the pipeline, we have discussed the entire 50 gigawatts across various stages of negotiation.
Are these generally greenfield or brownfield? Are they expansions or greenfield projects?
Both. We've seen industrial customers expanding and new businesses relocating. The data centers are also expanding. Our portfolio of data centers has grown by 17% year-over-year this quarter. We're excited about the growth across our customer base.
And that will conclude today's question-and-answer session. Sir, are there any closing remarks?
Again, let me thank everybody for joining us today on our call. We have a bright future ahead, and we look forward to what's coming. Thank you very much, and have a great day.
Thank you, sir. Ladies and gentlemen, this concludes The Southern Company Third Quarter 2025 Earnings Call. You may now disconnect.