Release Date: May 02, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Southern Co successfully brought Plant Vogtle Unit 4 into commercial operation, making Vogtle the largest generator of clean energy in the U.S.
- Adjusted EPS for Q1 2024 was $1.03 per share, $0.24 higher than Q1 2023, driven by investments in state-regulated utilities and favorable weather conditions.
- Electricity sales to commercial customers, particularly data centers, increased significantly, with a 12% rise in sales to data centers compared to last year.
- The company announced a dividend increase, marking the 23rd consecutive increase and maintaining a 77-year track record of consistent or growing dividends.
- Southern Co is experiencing strong economic development activity within its Southeast footprint, with a diverse mix of sectors contributing to growth.
Negative Points
- The company faced higher interest expenses and depreciation costs which offset some of the positive financial impacts.
- Industrial sales only began to show recovery signs after a soft 2023, indicating potential volatility in this customer segment.
- There are ongoing challenges and uncertainties with regulatory changes and environmental policies that could impact operational strategies.
- The completion of Vogtle Units 3 and 4 was described as an arduous journey, highlighting the potential risks and difficulties associated with large-scale nuclear projects.
- Southern Co must navigate complex and potentially costly EPA regulations that could impact the future operation of coal plants and other generation resources.
Q & A Highlights
Q: Good to see the strong sales growth coming in during the quarter. I guess just as we think about the impact to earnings from some of these volumes, are there any sensitivities that you can provide around the commercial load or the data center load specifically there?
A: Daniel S. Tucker - The Southern Company - Executive VP & CFO: Yes, absolutely. So just big as a bread box. So it's roughly -- if you think about our total sales, kind of the average price, you're talking about $40 million for a 1% change in our overall sales. Now for the vast majority of what's showing up here, whether it's data centers, some of these other large load industrial customers, it may skew slightly below that. So really it's somewhere in the range of $20 million to $40 million for 1% change in sales.
Q: Got it. That's super helpful. And then, just as a follow-up, as you think about the recent commission approvals on the 23 Georgia IRP filing, do you see any incremental capital needed relative to what you previously laid out on the fourth quarter call?
A: Daniel S. Tucker - The Southern Company - Executive VP & CFO: So there will be some additions based on the approval, Carly, and that largely pertains to the additional storage resources, the battery energy storage system. So if you recall what we included was two very specific projects in our outlook, but the commission actually approved 500 megawatts of owned storage, which is a little more than double what we had assumed. And so total dollars is going to -- I'm going to give you a big range. And I'm going to throw in here if you didn't see, we also announced an expansion of one of our solar projects in Southern Power. So that also was not included in our forecast back in February. So all told you're somewhere above $500 million, a little south of $1 billion, probably and what we'll do, we don't want to get too far ahead of the regulatory processes. There's specific certification processes to go through. So we'll let all that play out and then update our forecast more formally later on.
Q: Well, first, congrats on getting Vogtle up and running. That's great. And just -- I know on the last call, you talked to the better sales growth, and you raised the CapEx and now there's a little bit more potential to come, and that kind of your reaffirmed squarely in the 5% to 7%. And I know you're a big company, and obviously, it's a lot to move the needle of 5% to 7%. But just is it fair to say that as you are adding this capital that at least within this range of 5% to 7% or some benefits of adding the capital even net of financing?
A: Daniel S. Tucker - The Southern Company - Executive VP & CFO: Yes. Look, I think it's fair to characterize that everything that is occurring and particularly if the momentum continues and what we're seeing, I would characterize that as adding an upward bias to where we are from an earnings perspective. And you kind of said it, Steve, and we certainly saw your commentary and your note yesterday. We are a big company. We are issuing equity. But even with all of that, these incremental investments should have an accretive effect. But I think it's just too soon to say exactly what that means, but an upward bias, absolutely exists, particularly if this momentum continues.
Q: Can you -- just a follow up from Steve's question. Just can you elaborate a little bit on the timing of sort of any guidance update around that "upside bias" you just kind of referenced. I guess what's the trigger event, whether you guide to the top end a rebased higher and grow 5% to 7% off of that? I guess I'm just trying to figure out what would move that needle. What's the event?
A: Daniel S. Tucker - The Southern Company - Executive VP & CFO: Yes. So importantly, Shahr, the way I characterize that is that if we continue to see this momentum, right? So it's certainly not the cards we have today. The cards we have today have greatly improved our overall profile. It's added that durability. It's massively derisked kind of the outlook. But it's going to take continued momentum on this front more investment, more sales growth over the long term.
Q: Congrats on Vogtle, really excited stuff. So on the sales growth, you talked about things bubbling up in other jurisdictions just outside of Georgia. And can you just kind of remind us what you're assuming there, what's embedded in the plan versus where the upside of those tickers could go?
A: Christopher C. Womack - The Southern Company - CEO, President & Chairman: I don't think there's anything embedded in the plan. I think we -- it's about announcements and that we see forthcoming. We know I think there was an announcement today in Alabama of a 200-megawatt facility that Meta just announced. And then you saw also some legislation in Mississippi that was providing incentives for data centers and other hyperscalers to come into Mississippi. So we see it coming, but that activity -- those projects have not assumed are not included in the forecast as we talk about it today.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
