管理層發言
Good afternoon. My name is Paul, and I will be your conference operator today. At this time, I would like to welcome everyone to the Southern Company First Quarter 2025 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. As a reminder, this conference is being recorded. I would now like to turn the call over to Mr. Greg MacLeod, Director, Investor Relations. Please go ahead, sir.
Thank you, Paul. Good afternoon, and welcome to Southern Company's First Quarter 2025 Earnings Call. Joining me today are Chris Womack, Chairman, President, and Chief Executive Officer of Southern Company; and Dan Tucker, 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-Q 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. Good afternoon and thank you for joining us today. As you can see from the materials that we released this morning, we reported adjusted earnings results for the first quarter above our estimate, with year-over-year growth reflected across all our major businesses. The Southeast has a track record of economic resilience, and we continue to be encouraged by robust economic development activity that includes a sizable large load pipeline. Our state-regulated electric utilities continue to experience customer growth, and the service territories that we are privileged to serve remain attractive to a wide variety of commercial and industrial customers. Additionally, the reliability and resilience of our vertically integrated and well-planned grid is hard to beat, and customers, especially data center customers, are increasingly acknowledging that reality with their enthusiasm for our electric service territories.
Before I turn the call over to Dan, we know there is a great deal of interest in tariffs and any potential implications for our business. There is clearly policy uncertainty and in turn, our assessment of tariff implications has varied. For our base capital plan, we currently estimate a range of 1% to 3% of potential cost increases, with the top of the range representing the higher end of tariffs that existed for only a few days last month. Among the advantages for our company is our scale, having a large portfolio of suppliers and strong vendor relationships to help navigate such challenges collaboratively and proactively. For example, while the majority of materials being sourced from Mexico and Canada qualify for zero tariffs because they comply with the United States, Mexico, Canada agreement or USMCA, the company is working proactively to get any remaining vendors or purchases compliant as well.
Our full complement of potential mitigations includes existing project contingencies, contractual provisions, potential regulatory approaches and options to deploy alternative resources. Our commitment to affordability, balanced with our focus on reliability, could also influence the pace of our capital deployment to mitigate the impact of tariffs on our customers. Overall, we do not expect a material impact on our forecast. Our financial outlook remains strong, and we remain focused on disciplined execution. The orderly processes and constructive regulatory frameworks in our service territories combined with our experienced team and our customer-centric business model should serve us well as we prioritize reliable and affordable energy for our nine million-plus customers. Dan? I'll now turn the call over to you for a financial update.
Thanks, Chris, and good afternoon, everyone. For the first quarter of 2025, our adjusted EPS was $1.23 per share, $0.20 higher than the first quarter of 2024 and $0.03 above our estimate. The primary drivers of our performance for the quarter compared to last year were investments in our state-regulated utilities and weather-related impacts, which added $0.08 year-over-year due to a milder than normal first quarter in 2024 and a slightly colder than normal first quarter for 2025. This was partially offset by higher operating costs and depreciation and amortization. A complete reconciliation of year-over-year earnings is included in the materials we released this morning. Our adjusted EPS estimate for the second quarter is $0.85 per share. Overall, weather-normal retail electricity sales to all classes were 0.3% lower than the first quarter of 2024. The lower sales for the quarter were driven largely by usage impacts on our residential customer class, which was partially offset by customer additions.
These usage per customer trends in the first quarter were consistent with our sales forecast for the year, including the approximately 1% year-over-year negative impact of having an extra day in the first quarter of 2024, which affected all customer segments year-over-year. We also believe return to office trends and customers' proactive management of their energy consumption in response to inflation and economic uncertainty continue to be factors. Commercial and industrial sales were higher compared to the first quarter of 2024 as we saw continued strength in data center sales, which were up 11% year-over-year, office buildings, which were up 4% and the transportation sector, which increased 4% year-over-year, primarily driven by the Hyundai Mega plant in Southeast Georgia, beginning production activities several months ago. More broadly, the economy in the Southeast remains well-positioned with unemployment rates and recent population growth in our service territories better than the national averages.
Additionally, economic development activity in the first quarter was robust, with announcements totaling over $11 billion of capital investment and more than 4,000 new jobs announced in our electric service territories. As we look ahead, our large load pipeline across our electric subsidiaries, which includes data centers and large manufacturers, continues to grow, totaling more than 50 gigawatts of potential incremental load by the mid-2030s. With project commitments totaling 10 gigawatts and ongoing advanced discussions for even more, interest from large load customers in our service territories continues to be robust. As we've consistently communicated, our disciplined approach to forecasting means that our sales forecast only assumes a fraction of this pipeline materializes. Georgia Power's ongoing 2025 Integrated Resource Plan or IRP filed earlier this year includes continued investment in the existing fleet with proposed plant life extensions, uprates for more capacity at existing nuclear and natural gas facilities, and the modernization of hydro facilities as we continue to plan our resources to economically and reliably serve our customers for the long term.
Resolution of the 2025 IRP is expected in mid-July. Also in Georgia, the regulatory process continues for 13 gigawatts of new energy resources via competitive request for proposals or RFPs. Various company-owned resources were submitted into these evaluations. Successful bidders are expected to be notified in the coming months for a substantial portion of these RFPs, including 8.5 gigawatts of all-source or technology-agnostic energy resources. Georgia Power expects to file for certification of all projects awarded under these RFPs with the Georgia Public Service Commission in July. Considering the timeline of these ongoing Georgia regulatory processes, we expect to be positioned to provide additional color on potential updates to our capital expenditure outlook and associated financing plan on our second quarter earnings call. All else being equal, this potential incremental capital and continued economic development momentum are key to supporting our potential reevaluation of the base for our long-term EPS growth as early as 2027.
Before I turn the call back over to Chris, I'd like to provide an update on our financing activities through the first quarter. Our state-regulated electric subsidiaries have issued $2.2 billion of long-term debt year-to-date, which is nearly half of 2025's projected financing needs for those entities in our base plan. The quality and credit strength of our subsidiaries continue to draw robust investor interest, providing strong access to capital and supporting lower interest costs for the benefit of customers. At the parent company, we have issued approximately $2.4 billion of junior subordinated notes or JSNs year-to-date, which received 50% equity treatment from the rating agencies. We've also entered into forward contracts through our at-the-market program, or ATM, for the sale of an additional $1 billion of common stock with settlements extending as late as the second half of 2026. Collectively, the ATM and the JSNs equate to $2.2 billion of equity and equity equivalents.
Combined with approximately $350 million of annual equity issuances we forecast through our internal plans, we have a clear path in place to fully address the $4 billion five-year equity needs in our base plan. Our disciplined approach in sourcing equity reinforces our commitment to maintaining strong investment-grade credit ratings and our journey to 17% FFO to debt, while also focusing on delivering value to shareholders. We are well positioned to continue to finance any incremental growth opportunities above our base plan in a credit-supportive and shareholder-focused fashion. I'll now turn the call back over to Chris.
Thank you, Dan. Last week, the Southern Company's Board of Directors approved an $0.08 per share increase in our annual common dividend, raising the annualized rate to $2.96 per share. This action marks our 24th consecutive annual increase, and this will now be 78 consecutive years, dating back to 1948. Southern Company has paid a dividend that is equal to or greater than the previous year. We are incredibly proud of our dividend track record, which continues to be an integral part of Southern Company's long-term value proposition. Southern Company has consistently delivered regular, predictable, and sustainable adjusted results, and our start to this year provides a solid foundation to continue executing on our goals for 2025 and beyond. We remain very excited about the future of this company. Thank you, as always, for your interest in Southern Company. Operator, we are now ready to take questions.
分析師問答
Thank you. We'll now be conducting a question-and-answer session. Our first question is from Carly Davenport with Goldman Sachs.
Hey, good afternoon. Thanks for being here.
How are you?
Doing well. Thanks for taking the time. Maybe just to start on the Q2 EPS guide, the $0.85 represents fairly sizable downside relative to what you guys said last Q2 and 2024. Could you just talk a little bit about the puts and takes there that drive that estimate, particularly relative to the stronger Q1 print?
Yes, absolutely, Carly. This is Dan. Thanks for the question. So there are two big factors in there, really. One is weather. Year-over-year, there is a pretty substantial weather differential. If you're thinking about what normal weather in our forecast relative to a really strong kind of warmer-than-normal quarter a year ago. And then the other one is really just what I'd characterize as timing. There are kind of recurring normal course transactions that happen within the Georgia transmission system that is mutually owned amongst all the parties in the state, not just Georgia Power, but the municipalities that represent the co-ops. And there are ongoing transactions to transfer ownership of assets kind of commensurate with their loads. So we had a sizable transaction that occurred in the second quarter of last year, and there's none anticipated similarly in the second quarter of this year. Those are the two big drivers.
Got it. Great. That's helpful. Thanks for the clarity on that piece. And then maybe just on the Georgia Power load pipeline. Just any update you can provide in terms of size of the pipeline, what's contracted, what's broken ground similar to the disclosures that you guys have provided in prior quarters. And then just more broadly, anything you could share on conversations you're having with your data center customers in Georgia and if there has been any change in tone just given the macro environment relative to last quarter?
Chris, why don't you start with any change in tone, and I'll hit the number.
Yes, Carly. I mean, I think what we've seen is that we've not seen a shift in tone. I mean, I think as you seen a few hyperscalers make some announcements in the past couple of days about capital budgets. I think that's what we have seen in terms of our conversations all across our service territory with these data center and hyperscaler customers regarding looking to continue to make those investments to support their business strategies now and into the future. So we still see a robust degree of high economic activity in our service territory.
Yes. Regarding the Georgia pipeline, there is a total of about 52 gigawatts planned in Georgia alone going out to the mid-2030s. The contracted portion is 4 gigawatts, and the committed amount is 8 gigawatts. What's particularly interesting is that when Georgia Power files in the coming weeks, we will observe a noticeable increase in interest. The near-term pipeline for 2028 and 2029 is actually advancing, which is exciting to see.
Awesome. Thanks so much for that. Appreciate it.
Our next question is from Julien Dumoulin-Smith with Jefferies LLC.
Hey, Julien. How you doing?
Hey, good afternoon, guys. Thanks so much for your time. I appreciate it. Nicely done again I’ll hand it to you. So let me just follow up a little bit, where Carly just left it off there, because I know in the quarter, there's been a lot of talk about Microsoft and others that you're dealing with directly in your service territory. And there's a perception. You just hit it. But are you seeing any churn in the underlying composition of who, and the kind of data centers and the geography that you're seeing? Again, I know folks are at times super fixated on one or two out there. But listening to your comments here, I mean, even if you got fixated on one specific site, it seems like you're still seeing an aggregate acceleration in the opportunity. But I'd love to hear you reconcile in your comments again against some of the concerns about one or two discrete data points here.
Julien, I think you captured it perfectly. There is a broad range of customers, from a few hyperscalers to various developers. We observe a wide spectrum of interest in our market, and this momentum remains strong. It's not limited to just a few entities; rather, we see a consistent level of engagement across the board in our conversations.
Awesome. Yes. I appreciate the commentary as possible here. And you guys provided some nice details on equity and overall financing plan here. Can you elaborate a little bit as you think about marrying up an improving balance sheet with your comments about the rebate potentially in 2027? When and how do you think about getting to that 17% and reconcile that, I guess, rebate? Do you think you'd be at 17% by the time you kind of reevaluate, should we say, your EPS commitments there?
Julien, I have a clearer perspective on this now, and we've mentioned it previously. Everything needs to be approached carefully regarding financing our capital with the appropriate mix to achieve our goals. As we've noted before, the primary factor for short-term improvement is the debt linked to specific regulatory assets that will be expiring. Currently, Georgia Power has approximately $2 billion on the books, comprised of about $1 billion related to remaining under-recovered fuel from previous years and just over $800 million from storm costs due to Hurricane Helene. Recovering these costs over the next few years will naturally increase our figures. Another consideration, which I think relates to your question, is our capital plan. If we identify additional opportunities to invest capital, this might alter our path to reaching the 17% target slightly and potentially extend our timeline by a year or two. However, addressing your core question, by 2027, we might not fully reach that target, but we must ensure we have confidence that it is within our sight in the near future. That’s how we plan to position ourselves.
Yes. Thank you for understanding the gist of it. I appreciate it, Dan. Best of luck, Chris, nicely done.
Thanks, Julien. Always man.
Our next question is from Nick Campanella with Barclays.
Hi, guys. Good afternoon.
Hi, Nick.
I have a question about the rebates and want to understand better what that will look like. Do you expect to be at the upper end of your 5% to 7% range through 2027, which would set a higher base for growth in 2027? Will it be based on actuals and where you end up? I’ll stop there, but I’m looking for more insights on this in the meantime.
Sure. Nick, yes. And what I'll do is I'll just kind of restate the way we said it on our last call, because again, nothing has changed in the 10 weeks since then in terms of how we think about this. It's to the extent that this incremental capital opportunity that we pointed to emerges. And to the extent that this data center in particular momentum continues and all else being equal, yes, we believe that in the back half of our plan, we could be positioned at or near the top of our existing range. Now, we also pointed to headwinds in the near term, like parent company interest refinancing. And that's why the immediate near term is not up there. This is really about the back half. If that is what we see and where we are and if kind of like going back to Julian's question about having line of sight, if that appears to be a sustainable trajectory, then that provides us the opportunity to potentially rebase the starting point for 5% to 7% growth.
Okay. No, that's helpful. And then just Georgia Power rate case, just wanted to make sure, are you guys still on track to kind of find that at the end of June or by July 1? And has anything kind of changed there in your rate case strategy? Thanks.
Nick, I think you said it very well as required by the 2022 rate case order. We're working towards the filing this summer. So it would be that early July timeframe. So everything is on track to do that and to make sure we comply with that order, but you said it very well.
Thank you.
Thank you.
Our next question is from Jeremy Tonet with JPMorgan.
Hi, Jeremy.
Hi. Good afternoon.
How are you doing?
Good. Thanks. Maybe just kind of picking up on the last point there with regards to the Georgia Power rate case, maybe build pressures and focus, I guess, nationwide. Just wondering any thoughts you could share there with levers that you could potentially pull to manage customer bills there. Is the potential to kind of move timing around rate changes to coincide with fuel cost recovery rolling off? Or just any other thoughts there?
Once again, I mean I think you acknowledging all the factors and the variables and the puts and takes that will be on a consideration as we look at the filing. I mean, it's a little bit too early to say what the exact filing will look like. But yeah, I mean, one of the things we think about is the pricing of these large load growth, how that can impact and help us with our focus on affordability. Yes, I mean, we do have the fuel case, the fuel adjustment occurring that we can recognize next year in June of next year. So that's a factor to also be considered. We also have strong recovery related to Hurricane Helene that has to be dealt with. So I mean, I think you've acknowledged a lot of the factors that will go into what this filing could look like, but it's just way too early to kind of speak to exactly what the nature of the filing will come together.
Got it. No, that's helpful. Thank you. And then just curious on your outlook for the IRA and any potential changes there, how that could impact Southern particularly as it relates to transferability, I guess, is in focus for the market. Just any thoughts in general from what you see or what you guys are thinking at this point?
Sure, Jeremy. I'll start with transferability and then let Chris provide any broader policy insights. Regarding transferability, we're not heavily dependent on it. We utilize it when possible and have an effective program to monetize tax credits quickly and efficiently. If, for some reason, that option became unavailable under our current plan, the effect on funds from operations related to debt would be minimal—about 10 to 20 basis points. While it's not highly significant, it remains important. For the projects we're undertaking in the regulated area, having this in place benefits customers by helping to monetize and maintain an efficient balance sheet. We're actively engaging in discussions to emphasize its importance. Chris?
We continue to engage with policymakers in the administration and on Capitol Hill, highlighting the value and benefits of these credits and tax policies, which directly impact our customers. As we discuss affordability and our strategy, it's crucial to ensure there's a complete understanding that these benefits reach our customers. While we cannot predict how the political landscape will evolve given the current issues in Washington, we are committed to sharing our story and helping others understand the value and advantages of these tax provisions.
Got it. That's helpful. I'll leave it there. Thanks.
Thank you.
Our next question is from Andrew Weisel with Scotiabank.
Hi, Andrew?
Hey, good afternoon, everybody. I'm hoping to elaborate a little bit on the commentary on demand trends. Even after adjusting for the Leap Day, each customer class showed a sequential slowdown. Data centers, in particular, still grew at a double-digit pace, but down from 17% last quarter to 11%. Can you talk about that a little bit? I realize the year ago, weather was atypical, certainly skewed the residential comps, but that shouldn't matter as much for C&I. Can you elaborate a little bit?
Yeah. I don't think there's anything to read into it, Jeremy. Again, if you adjust commercial and industrial, in particular, for that Leap Day effect just for the first quarter, again, these are just quarter numbers, not kind of 12 months ended numbers. It's almost a full 1%, so up 1.5% or so. The underlying stuff, like you mentioned data centers, look, you're doing growth year-over-year on an increasing ramp, right? And so you're not comparing to the same numbers as you were a quarter ago, you're comparing off a higher base a year ago. And so the numbers aren't going to necessarily align or continue to escalate in that fashion and total volume they continue to go up. Other things relative to our forecast, look, there are things that are just, again, timing related. There are some large industrial outages, not economy related, just kind of operational-related. There was a delay in a steel manufacturer that was expected to come on in the first quarter that is baked into our numbers for the full year that's expected now in the next several months. And so from our seats, nothing in the first quarter results gives us any pause about any kind of systemic trends we're seeing in the economy or underlying customer base?
Okay, that's great to hear. Regarding the large load pipeline, the slide mentioned well over 50. Did I hear you correctly that it's now 52 gigawatts? I'm not sure if I misunderstood, but could you provide a bit more detail on that? You're clearly indicating that activity remains strong. Perhaps you could elaborate further on the numbers.
Yes. And I think the tone, Andrew, is what's more important than the numbers. I answered the question earlier, specific to the Georgia pipeline that we make filings on. So that's 52 gigawatts on its own. The characterization we made in the prepared remarks is for the total consolidated pipeline across all three electric service territories. And we said over 50%. And it grew quarter-over-quarter. In fact, it was over 50% last quarter, it's over 50% this quarter, but it's a bigger over 50%. We're trying to be a little less precise about the total because, look, everyone has acknowledged that these pipelines include some degree of double counting. They include some degree of speculative projects, and that's where it's really important to focus on the way in a very measured way that we are only including and counting on and planning for a small fraction of these numbers. So we're trying not to get hung up too much on the big headline number and focus more on kind of the underlying tangible trends that we're seeing within that pipeline?
Okay. As long as you're clarifying that they are, in fact, rising, that's reassuring. Thank you very much. Appreciate it.
You bet, Andrew.
Our next question is from David Arcaro with Morgan Stanley.
Hey, David.
Thanks so much. I guess maybe on data center activity, I was just wondering if there had been any changes following the modifications of the rate structure that you've now implemented in Georgia? Any feedback on that? Is that manageable for the industry to work with now in that state?
Yes, Dave, this is Dan. It's still early in the process, and it's important to understand the journey we've been on. Earlier this year, we highlighted the high-level rules that were approved by the commission, which serve as the foundation for a framework. Since then, a more detailed framework has been developed by the public utility staff in collaboration with the company. This is essentially a tariff framework that does not include specific pricing but outlines the approach moving forward. That was finalized recently, around April 15. We're currently in the process of making sure potential customers understand these details, so it’s still a bit early to get feedback.
I believe some of the feedback we've received indicates that we frequently discuss orderly processes. This framework offers an additional level of order and certainty as we engage with our customers. You may have observed that other states are also considering implementing similar rules and regulations. We see this evolving market as a way to introduce certainty, which instills discipline and positions us to ensure that we provide benefits to all our customers. Therefore, we recognize significant value in the approved rules and regulations and this framework established by the commission.
David, as I mentioned in response to Andrew's question, the pipeline has expanded over the last three months. While the specific details of these rules haven't been disclosed, their general nature has been consistent for this period, and we have seen continued growth.
Yeah, yeah. Got it. Okay. Great. That makes sense. Separately, I was curious, is there any feedback that you'd offer on what you're seeing in the RFPs that are underway? There have been so many moving pieces around like tariffs, inflation, price increases for equipment. So I'm just wondering, are there any changes in the preference, like technology preference or strategy or the split among solar storage, natural gas as you're executing against these RFP?
Yeah. And David, unfortunately, we can't speak to the RFP process. It's very intentionally done by an independent evaluator, very confidentially with a lot of trade secret information. So disclosing, answering any of the questions you just asked, I think would be stepping outside the bounds of what we were allowed to do.
Okay. Got it. We'll revisit as you get toward the end there, but I appreciate it. Thanks so much.
And I will just say, David, what's important about the RFP itself being the nature, it's all sourced. Right? And so it does inherently have in it a multitude of technologies and options. So at the end of the day, given all the factors you've listed, that independent evaluator and the commission will have options to kind of address.
Yeah, understood. Okay. Thank you.
You bet.
Our next question is from Durgesh Chopra with Evercore ISI.
Durgesh, how are you doing?
Hey, good afternoon. You've actually answered all my questions, but I just need a quick clarification on the RFP. I noticed there's some mention in the slides about clarity expected by July regarding the Georgia RFP. However, it seems there are also references in the release indicating that more incremental data points will be available throughout 2025. Additionally, I believe Dan mentioned during the Q2 call, presumably in July, that we will receive more information regarding CapEx. Will we get concrete data points from the RFP in July?
So definitely, Durgesh by the time of our Q2 call, we will be able to speak to, we believe, incremental capital opportunities at least associated with that largest all-source RFP and maybe some degree of the other RFPs. And so that will kind of address most, I think, of the potential upside capital that we pointed to.
Okay. Got it. Okay. Perfect. That's all I had. I will give time to somebody else. Really appreciate your time.
Thanks, Durgesh.
Our next question is from Shar Pourreza with Guggenheim Securities.
Hi. Good afternoon, everyone. It's actually Alex here on for Shar.
Hi, Alex.
Just on the impact from tariffs as we think about the growth opportunities at Southern Power. Sort of what's the exposure there? You could be looking at building contracted gas. And conversely, does the tariff and supply chain environment further conversations for contract renewals for the expiring tolling agreements? Thanks.
Yes. Look, Alex, I think the way to think about Southern Power is two-fold. One, it's projects they already have underway. And when it comes to that, I think they're incredibly well-positioned when it comes to this the solar facility they have under construction is in great shape from that perspective. It's far enough along and materials on the ground enough that there's very little exposure there. There's a wind repowering project underway. I also feel pretty good about how we're protected there. Your question really spoke to new contracted gas in the future. And that's a little bit the beauty of our business model at Southern Power. We don't go out and do speculative projects where we build something and then go get a contract. It's get a contract to make sure the risk mitigations are in place for that contract, understand the environment from a cost perspective and then go execute. And so I feel confident that we'll have the ability to price in whatever the future holds in terms of cost to build new natural gas. There's always some degree of risk, but that's where we're also incredibly measured from a contingency and contractual provision perspective.
Great. Thanks. And just a quick one, just a quick one on the upcoming GRC, just sort of how you're thinking about it. It's an election year, the PSC has been more vocal. Just any sense how we should be thinking about the ask or the rate impact you haven't filed yet or conversations happening ahead of silence? Thanks.
Yes. In response to an earlier question, I believe it's too soon to determine how the filing will turn out. There are multiple variables and considerations that need to be addressed. Affordability is definitely a key concern that will be a primary focus for us. However, I think it's premature to provide details on what this will entail. We are expected to file in early July, but it would be too early to discuss the exact provisions and considerations at this point.
Got it. Thanks. I will leave there. Thanks for taking my questions.
Thank you.
And that will conclude today's question-and-answer session. Sir, are there any closing remarks?
Yes. We thank you for your interest in Southern Company, and we look forward to speaking with you on our next call. Thank you very much. Have a great day.
Thank you, sir. Ladies and gentlemen, this concludes Southern Company's First Quarter 2025 Earnings Call. You may now disconnect.