Q4 2024 Earnings Call Transcript

Good afternoon. My name is Robert, and I'll be your conference operator today. At this time, I'd like to welcome everyone to the Southern Company Fourth Quarter 2024 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. [Operator Instructions]. 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.

Thanks, Robert. Good afternoon, and welcome to Southern Company's fourth quarter 2024 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 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.subandcompany.com. At this time, I'll turn the call over to Chris.

Thank you, Greg. Good afternoon and thank you for joining us today. 2024 was an outstanding year for Southern Company, both operationally and financially. We achieved adjusted earnings at the very top of our EPS guidance range, which represents 11% growth from our 2023 adjusted results. All of our business units executed on their plans and delivered exceptional value to our customers and investors alike.

I am incredibly proud of how our team continued to put customers first throughout 2024. While this is our daily mission, our dedication was especially evident as our team came together over the past year in response to several weather events, which adversely impacted many of our customers, including the most destructive storm in Georgia Power's history this past fall. Delivering clean, safe, reliable and affordable energy to the communities and customers we are privileged to serve will remain our top priority. Looking forward, we believe our portfolio of companies is incredibly well positioned to capitalize on significant opportunities to serve growth and improve our local economies and to sustain success over the long term.

The foundation of our business model remains our state-regulated utility franchises. The tremendous value inherent in our three electric utilities and four natural gas distribution utilities is a function of our continuous focus on our 9 million customers, our constructive regulatory environments with orderly processes and service territories with strong long-term fundamentals Economic development activities at our utilities is robust. and she provides a tremendous foundation for regular, predictable and sustainable long-term earnings growth. Over the past year, more than 150 companies either announced expanded operations or made the decision to locate new facilities in our southeastern footprint.

These projects are expected to support over 20,000 new jobs further highlighting that the region we proudly serve is thriving. Some of the larger announcements over the past year were in the manufacturing, entertainment, chemical and metals industries. The economic development pipeline from large electric load customers, including data centers and large manufacturers, represents over 50,000 megawatts of potential incremental load by the mid-2030s. Data centers alone represent roughly 80% of that potential load.

While our disciplined approach to forecasting results and a risk-adjusted outlook for sales growth comprised of only a fraction of the economic development pipeline, we are encouraged to have commitments for over 10,000 megawatts with advanced discussions and progress for even more. We remain committed to our approach to sustainably serving this exciting growth opportunity, including pricing and contract terms designed to protect our investments and provide economic benefits back to existing customers. We are also encouraged to see the data center momentum first observed in Georgia, expanding into both Alabama and Mississippi.

We recently signed contracts to serve the power needs of data centers in these two states that total over 1,000 megawatts. While our state-regulated utilities are expected to represent approximately 95% of our projected capital investments, we have also continued to invest in our other complementary strategically aligned businesses. Many of these businesses add depth to our vertical integration and provide us with unique market insights that help us attract and better serve customers in our regulated footprint. They also represent potential opportunities to add durability to our long-term earnings trajectory.

Southern Power, our competitive power business represents a terrific complement to our state-regulated businesses. Substantially, all assets are under long-term contracts with creditworthy counterparties, and we don't take meaningful commodity risk. In total, Southern Power's portfolio has approximately 13,000 megawatts of capacity across 50-plus generating facilities in 15 states including approximately 7,000 megawatts of natural gas generation, 3,000 megawatts of solar and 3,000 megawatts of wind. Southern Power has 500 megawatts of solar currently under construction with projected in-service dates in 2025 and 2026. We will continue to be opportunistic on new renewable energy projects that meet our stringent risk-return criteria.

The burgeoning need for reliable, dispatchable natural gas capacity unlocks four significant opportunities for Southern Power. First, as contracts on our existing natural gas fleet come up for renewal beginning in early 2030s and -- the low growth in the Southeast is expected to support future renewal pricing had is significantly higher than our existing contracts. Second, meaningful upgrade opportunities are being evaluated on Southern Power legacy natural gas fleet. These could translate into several hundred additional megawatts available to meet future market demands for capacity.

Third, Southern Power has options at its existing plant sites to build new brownfield power plants in the Southeast. And lastly, Southern Power is exploring opportunities outside of the Southeast to serve data centers with new natural gas generation. We are very gratified to have developed and retained this incredibly valuable business as it represents a tremendous opportunity to support sustainable growth well into the next decade. In 2016, with Southern Company acquired what is now Southern Company Gas, we sought to further vertically integrate along the energy value chain.

An important additional element of that vertical integration was our 50% investment in the Southern Natural Gas pipeline. Which overlays our three electric service territories as well as one of our largest natural gas franchises. As previously disclosed by our operating partner, Kenda Morgan, this pipeline is poised for growth. largely to support increased natural gas generation throughout the Southeast, Southern natural gas as well as our other smaller FERC-related pipeline investments, provide a terrific complement to our core growth prospects. Even two of our smaller subsidiaries, both of which have seen accelerated growth recently due to expanding computing power demand have been incredibly valuable for deeper appreciation and understanding of the current market.

PowerSecure, which specializes in providing utility and energy solutions to commercial, industrial and low-serving customers has seen as business bolstered by the growth in data centers. This has led to a more comprehensive understanding of data center needs and has enhanced our relationships with many national data center owners. Another example of the value in our smaller complementary subsidiaries is Southern Telecom on its own and in partnership with our electric utilities, Southern Telecom deploys fiber optic infrastructure that serves as an important and attractive additional product offering enhancing the appeal to data-intensive customers to locate in our southeastern service territories.

Over time, we have exercised exceptional discipline and intentionality in refining our portfolio of businesses. We believe this has uniquely positioned Southern Company to deliver reliable and affordable energy to our customers as well as to deliver premier risk-adjusted total shareholder returns to our investors. Dan, I'll now turn the call over to you.

Thanks, Chris. I'm going to pause. Robert, can you hear us. Operator?

Yes, I can. -- very clearly.

We're being told that none of the audience can hear the audio.

Okay. I just sent a message to our supervisor. Everyone everything looks fine on my end.

Okay. We'll continue. I'm getting mixed reports now. So, we'll continue and what we'll do.

I believe this is being recorded. It will be available for webcast. And hopefully, the Q&A goes as far. Thank you, Robert.

Well, thanks, Chris. So, look, as you can see from the materials we released this morning, we reported strong adjusted earnings per share of $4.05 for 2024, which, as Chris mentioned earlier, was the very top of our 2024 guidance range and represents 11% growth from adjusted earnings from the prior year. The primary drivers for our performance compared to 2023 were continued investment in our state-regulated utilities and weather-related impacts. A complete reconciliation of our quarterly and annual adjusted earnings is included in the materials we released this morning.

Turning now to electricity sales. Excluding the impact of temporary sales losses due to Hurricane Helene, weather-normalized total retail electricity sales for the year were up approximately 1% compared to 2023. And Commercial sales were particularly strong, led by power usage from new and existing data centers, which were up 17% year-over-year, 2024 was our strongest year on record in terms of new residential electric customers. We added 57,000 new residential electric customers as well as 26,000 new customers in our natural gas distribution businesses. These trends highlight the broad strength we continue to observe across our service territories, particularly in the Southeast.

We expect this momentum to continue into 2025 with retail electricity sales on a consolidated basis projected to grow approximately 2% to 3% compared to 2024 weather normal sales. Longer term, we project average annual sales growth of approximately 8% from 2025 through 2029, an increase of 2% from our prior long-term sales growth expectations. Georgia Power's total retail electric sales growth is projected to be approximately 12% over the same period. Our Commercial segment, which includes data centers and currently represents approximately 1/3 of total retail electricity sales is projected to grow an average of 18% from 2025 to 2029. As we have highlighted several times in the past, we take a very measured and disciplined approach to forecasting incremental electric load.

As Chris mentioned in his remarks, the extraordinary growth in our forecast represents a fraction of the total economic development pipeline. Informed by our experience and continuous engagement with prospective and existing customers, our forecasts are significantly risk-adjusted as it pertains to both timing and load size. Serving this load reliably requires significant capital investments in the coming years. Our base capital investment forecast over the next 5 years is $63 billion, 95% of which is at our state-regulated utilities.

This represents a $14 billion or an approximately 30% increase from our forecast just 1 year ago. In addition to increases for previously announced new projects at Southern Power and the expansion plans for our largest interstate natural gas pipeline, incremental investment in our transmission system is the largest driver of increased capital expenditures in our forecast. Our capital investment plan supports projected long-term state-regulated average annual rate base growth of approximately 7%, a 1% increase from our forecast 1 year ago. Our forecast reflects an approach to capital forecasting consistent with that, which we have used in the past and that we have not included potential capital investments primarily new or expanded generation resources, which remains subject to regulatory processes.

For example, there are outstanding request for proposals, or RFPs, for new resources from previously approved Georgia Power Integrated Resource Plan, or IRP, that represent approximately 13,000 megawatts. There are also potential incremental FERC-regulated natural gas pipeline investments to meet the increasing energy needs of customers in the Southeast. Combined, we estimate that reasonable outcomes for these opportunities represent a potential range of incremental regulated capital investments totaling $10 billion to $15 billion for 2025 to 2029. As a reminder, we are currently in active regulatory processes for the vast majority of these opportunities and given the timing of these ongoing regulatory processes, it's likely that we could have better line of sight on a substantial portion of these potential incremental investments later this year, at which time we could update our base capital investment plan.

The financing plan we have provided supports our base capital plan and continues to fund the business in a credit-supportive manner, preserving our investment-grade credit ratings continues to be a priority. As we believe that to be a high-quality equity investment, a company must also be a high-quality credit. Our base plan projects average annual equity needs of approximately $800 million a year to support our credit quality and our progress toward our credit metric target of approximately 17% FFO to debt by the latter part of our forecast horizon. These equity needs should be easily manageable within -- with our internal plans, which provide approximately $350 million to $400 million annually plus our at the market or ATM program.

To the extent incremental capital opportunities become part of our base capital investment plan, our credit quality objectives would remain the same. Accordingly, we would expect to fund incremental capital investments above our current plan with approximately 30% to 40% equity or equity equivalents. We expect to continue to be flexible and to use the same shareholder-focused discipline we have demonstrated historically when it comes to sourcing, incremental equity or equity equivalents. Since our last earnings call, we've already addressed roughly $500 million of equity needs for 2025 by pricing ATM sales under forward contracts and through the issuance of junior subordinated notes or JSNs which received 50% equity treatment by the credit rating agencies.

For decades, our dividend has been an integral part of our value proposition for shareholders. Southern Company has paid a dividend that is equal to or greater than the previous year for 77 consecutive years with consecutive increases over each of the last 23 years. While future dividend increases are subject to approval by our Board of Directors, we project continued modest increases in the dividend over our forecast horizon. This should serve to lower our dividend payout ratio into the low to mid-60% range as we balance our equity needs with this very important component of our value proposition.

Turning now to our earnings guidance for 2025 and beyond. Our adjusted earnings per share guidance range for 2025 is $4.20 to $4.30 per share. Our adjusted guidance midpoint of $4.25 represents 6% growth from our 2024 adjusted EPS guidance midpoint. Our projected long-term adjusted EPS growth rate guidance is unchanged at 5% to 7% from our 2024 guidance.

Clearly, we are seeing strong fundamentals that we expect to support our long-term growth. These growth drivers become increasingly significant in the latter years of our forecast horizon. At the same time, interest rates, which are now expected to be higher for even longer, continue to be a partially offsetting factor as our parent company debt gets refinanced at meaningfully higher rates than the securities outstanding today. That said, we are increasingly encouraged about the strength of our long-term earnings outlook.

All else being equal, and assuming the current positive momentum continues, including the potential for a significant portion of the incremental capital opportunities we've highlighted materializing. We believe our long-term adjusted EPS should be near the top of our projected long-term range and assuming this potentially improved trajectory appears sustainable we also could be positioned to rebase our 5% to 7% projected growth trajectory at a higher starting point as early as 2027. Chris, I'll now turn the call back over to you.

Thank you, Dan. We are very excited about the future here at Southern Company. When it comes to the incredible growth we see, our objective is to serve as much of this growing electric load as we can sustainably serve. The vertically integrated state-regulated service territories that we are privileged to serve are proving well-suited to attracting these large-load customers.

And thanks to integrated resource plans, and the other orderly processes inherent in our regulated frameworks. Our market is also perhaps proven to be better suited than the unregulated markets at effectively deploying new resources to serve them. Our disciplined approach to forecasting these needs will continue to include a measured, risk-adjusted methodology as well as pricing and contract terms for new large local customers that continue to benefit and protect our existing customers and investors. As we continue to grow, strong credit quality remains paramount.

This important buffer against adversity distinguishes Southern Company from much of the industry and serves to insulate investors from sudden market impacts as the world around us changes. Additionally, one of my top priorities is our team here at Southern Company. We believe we have one of the most talented and deepest benches in the industry, continuing to prioritize and invest and the development of our future leaders is crucial to maintain our competitive edge and ensuring our continued long-term success. And finally, we aspire to deliver premier risk-adjusted total returns to investors.

Our aim is to be a high-quality, must-own stock and a company built to endure and we believe delivering exceptional value to our shareholders is best achieved by putting our customers first, including providing reliable and affordable energy. We had a phenomenal year in 2024, and I'm extremely proud of all we have accomplished as one team across our company. Southern Company is poised for a bright future and I cannot be more excited for the opportunities ahead of us. Thank you for joining us this afternoon, and thank you for your continued interest in Southern Company.

Operator, we are now ready to take questions.

And before we do, let me just say thanks for everyone's patience is the webcast apparently was only not working temporarily, dial-in is working fine. We will have the entirety of the recording posted for replay after the call.

[Operator Instructions]. The first question comes from Carly Davenport with Goldman Sachs. Please proceed with your question.

Maybe just to start on the earnings growth cadence. Could you just flesh out your comments a bit more there just in terms of where you could trend in that 5% to 7% range as we move through the 5 years of the current plan, just as you think about the increased rate base growth and the upside capital investment opportunities? And maybe just anything that you see at this point that could potentially derail that trend?

Sure, Carly. Thanks for the question. Thanks for joining us. The -- look, I think the first thing to say is what we've continued to reinforce over time is we are where we were, right?

So, we have this terrific outlook 5% to 7% long term. And now we are seeing some incremental fundamental things being additive to the overall profile. And look, the words we're using are adding durability. That's not code for anything that's simply suggesting that this is not a fight every year to just get to where we need to be.

There are enough fundamentals coming into play, that this is a long-term outlook that we're beginning to get even more confidence in being able to sustain for a long period of time. And so, the with this incremental update that we just had today and the potential incremental capital that we could get more clarity on in the very foreseeable future, we're solidly within our range and potentially with those incremental updates sustainably near the top. And I think how we feel positioned. Again, in the long term, as early as 2027 is to be able to not change the 5 to 7 per se or perhaps start that growth rate from a higher sustained point.

In the near term, we are where we were.

Great. That's super helpful. I appreciate that. And then maybe just on that $10 billion to $15 billion of investment opportunities above the plan.

Could you talk a little bit about how we should think about the split between sort of what's at Georgia Power versus you referenced that natural gas pipeline opportunity? And any color in terms of sort of the outcomes that underpin that estimated CapEx.

Yes, absolutely. It is substantially all Georgia Power. There is some degree of the natural gas pipelines. I think in our 10-K, we disclosed a number of up to $14 billion associated with that the Georgia Power item.

As I mentioned in my prepared remarks, for those that could hear them, he regulatory processes are ongoing for those. And so, we're going to maintain the same discipline we have in the past. We're not going to get ahead of digging into details and speaking to that. So around July, we'll start to get some clarity.

What I will say is, look, the dollars are substantial -- if you look at the RFPs that are on Slide 16 and the nature of those, I'll just give you historical context, right? I mean the all source, as an example, that's a big megawatt amount. And historically, all source RFPs have tended to be larger dispatchable resources. And in the market environment we've been in historically, those often turned into purchase power agreements.

In the current market, all of that excess capacity previously kind of bid in as purchases, I say all a substantial amount is being soaked up by all the load serving entities in the region. So, the availability of excess capacity is much tighter, the likelihood of having to build new is much greater. I'll stop there, Carly, and see if that addresses your question.

That does. Thank you so much for the color.

Our next question comes from Julian Dumilo Smith with Jefferies. Please proceed with your question.

Julien Dumoulin-Smith: Team, very nicely done. I feel the confidence exceeding from you guys. With that said, just maybe to add to the commentary on the regulated side of the business. You provided a number of comments about Southern Power. Is there any kind of metric you can disclose around the cumulative earnings trajectory that you guys are seeing there today or the potential of repowering on a cumulative basis through the early part of the decade? Obviously, you have a number of different assets at which prices are not disclosed that come up. So clearly, there's an opportunity. It's just difficult to discern externally and how does that add incrementally ultimately to that commentary on 5% to 7%, if you can elaborate, if you don't mind.

Yes. Happy to answer that, Julien. And what I would say, again, I'll keep coming back to the work because I think it just fits the opportunities at Southern Power really play into this concept of durability and the sustainability, if you will, of that trajectory over the long term. Substantially, all of Southern Power's current assets are under long-term contracts, and that's true through the end of this decade.

And so, the opportunities that exist for recontracting all kind of lend themselves to benefits into the next decade, kind of adding to that durability concept. When it comes to options to build new brownfield gas plants or to build new generation outside of the Southeast -- those two lend themselves to a similar time frame, not because of a lack of opportunity, but because of what you're seeing broadly in the industry in terms of the time-line to deploy such resources. Getting new equipment and then obviously, the construction process. And so that, too, becomes a kind of end of the plan into the next decade opportunity.

In the interim, there were actively in the process of repowering our first repowering project that are one of our wind facilities. We've got new solar facilities under construction. I think you'll see us continue to kind of use -- be opportunistic, if you will, where those opportunities make sense. They may be very limited.

But if we see them and we like them, we'll certainly pursue them. All of that to say, Julien, Southern Power will kind of remain -- I'd characterize it as just a steady contributor to the status quo, the opportunity exists at the end of the period and into the next decade.

And Julien, one thing I would add, me, I think even us having this conversation seeks to show you kind of the -- how these complementary businesses afford us greater durability with the opportunities we see in the marketplace today and the excitement that we have around them. We now had a lot of discussion about them in the past. But as we see what is transpiring in the marketplace today and the opportunities that are in front of us with these complementary businesses, we thought it was important to share what we see and what we understand, but how this supports kind of our path, our earnings growth in terms of where we're headed, but also how it supports our durability.

Julien Dumoulin-Smith: Yes. And if I can complement that question further, I mean you talk about retail sales accelerating, obviously, within your regulated confines. How do you think about leveraging the sites themselves for co-location opportunities or supplementing not just with repowering but additional outright potential gas turbines here to serve these data center opportunities? I mean, again, if you think about Southern Power recontracting, but truly additional within or in adjacent service territories, how does that fit into the plant as well, just to be clear.

Yes. Julian, so like if you're looking at Slide 8 in our deck for Southern Power, kind of getting to the heart of what you're asking in terms of leveraging what's happening in the Southeast. The things to look to there up rates on the current natural gas fleet opportunity, brownfield gas plants in the Southeast. Again, those are when we talk about the pipeline, you see it on one of our other slides, that pipeline of 50 gigawatts to the mid-2030s.

So, this is clearly a very long-term opportunity. Southern Power absolutely has the opportunity to play into that. you mentioned kind of colocation, et cetera, that's not part of our market design, and we're perfectly fine with that. We appreciate and are benefited by this wonderful vertically integrated market that we operate in. But in terms of them being able -- Southern Power being able to serve load serving entities that are then in turn serving data centers, tremendous opportunity.

Our next question comes from Steve Fleishman with Wolfe Research. Please proceed with your question.

So, I appreciate the additional color on the capital plan and potential kind of growth opportunity. Just wanted clarity on one piece of that. So, Dan, you mentioned the ability to reach the high end and also mention this possibility of rebasing. And I guess, first of all, why is '27 kind of a key year for that that might drive it?

And is there any way to give any sense of the size of rebasing that might be there?

Yes. Thanks for the question, Steve. So, this won't surprise you. We're not going to get ahead of ourselves.

And so, in terms of assessing the magnitude of any rebasing, let's just wait until we rebase if that happens to measure it. In terms of why 2027, it's a lot of different moving parts. It's, to a large degree, exactly what we keep describing this tremendous growth that is happening is long term in nature. The ramp-up in the capital spending and the revenues from these large load customers are more back-end loaded in the plan than not.

But it also -- and I mentioned this very briefly in the prepared remarks is a function of what's happening right in front of us with interest cost. So that is probably the biggest ballast in the early years and kind of weighting it down to a degree. As we refinance some current -- some of our existing securities that are today at ultra-low rates that are having to be refinanced in this current market. But then once we get past that and these opportunities really become more tangible than just a forecast, and we feel really good about them.

That's kind of the said a different way, that's really what's behind the 2027.

Got it. Okay. So basically, some of the headwind maybe moderates then that's been there in the earlier years than this.

There's only so much debt needs to be refinanced.

Yes. That's good. Okay. And then I guess just in terms of -- I think you recently got approval for a change in the way that you can contract with data centers in Georgia. So, I guess I'd be curious kind of like what have you been doing to date before that? What are you now able to do differently going forward that -- and...

Steve there Steve, we were doing a lot of that already. I think the codification and the signaling to the data center customers was something that I think, has been very appreciative to them and into the marketplace. But yes, as you know, the Georgia Public Service Commission approve these rules and rigs in January to just make sure all the risk and cost is shown with large low customers, 100-plus megawatts to make sure that there was balance and a fair approach to all customers providing tools like credit requirements, longer-term contracts from 5 years to 15 years, minimum billing, slight Pacific costs already being paid by customers.

These things are already being done. But I think that kind of certainty and codification of these processes brings more certainty and clarity to the marketplace. So not -- I mean, some of it is new and different, but some of it's not. We're already deploying a lot of these practices before.

Yes. And I'll tell you one of the ones that are kind of incremental, Steve, that we think is just going to bring tremendous benefits to us and kind of executing on serving this growth are some of the credit or collateral requirements that are going to be required of customers in our pipeline. Those provisions are frankly going to help us weed out the more speculative projects and so the result of that optically for those that are watching, you may see the size of the pipeline shrink a little bit over the next 3 months to 6 months. That's not because the customers that are ultimately going to end up locating in our state have gone away.

It's because the more speculative ones are unwilling to kind of put up the collateral necessary in order to stay in the queue. The feedback we've heard from many of the large customers, the customer names you'd be familiar with that want to build all this infrastructure are excited about these changes because it helps them ensure that the company is focused on serving the needs that are for lack of a better term, more real than not.

Our next question comes from Anthony Crowdell with Mizuho. Please proceed with your question.

Just quick, I guess, housekeeping. The 5% to 7% growth rate from '24, is that off of '24 actual or off the midpoint of the '24 range?

It's off of our 2024 guidance. So yes, not a fact we're just trying to reflect the kind of normal course of business, not any kind of onetime things that might be in the number.

Great. Perfect. And on Slide 17, I think maybe following up on Carly's question earlier, the $10 billion to $15 billion capital investments. The company typically gives us this refresh on this fourth quarter call -- just how will the announcements go or how can we track chipping away at this wood here? Is it on you give quarterly updates or we should wait until fourth quarter?

I think with the clarity we'll have, it's -- it's certainly possible that by the time of our second quarter call, we could provide a little more visibility on this. I think the fourth quarter will remain kind of our official time to update everything, but with the magnitude and pace of this, perhaps there will be an update in July.

Great. And just last one. I think it's on Steve's question. You talked about the parent and some of the financing on Slide 26. Thanks for the clarity. But on the $9 billion of parent debt over the next 3 years that mature, do you have an average coupon -- and if not -- I could follow up off-line. I wasn't looking to put you on the hot seat.

Yes, a follow-up with IR to kind of get something a little more specific. I'm sure that's all available in the [indiscernible]. But the just in terms of magnitude, it's largely, these are having to be refinanced at rates that are, in some cases, 150 basis points to 200 basis points higher.

Our next question comes from David Arcaro with Morgan Stanley. Please proceed with your question.

Thanks, so much. I was wondering if you could touch on what you're seeing in terms of the availability of gas turbines and what the pricing backdrop is looking like? I'm thinking with the you've got all source RFPs coming up that may lean toward dispatchable gas generation over time? It seems like there could be more coming in your plans in the future and then also thinking about Southern Power.

So, I guess what's your access to turbine these days?

We feel pretty good. I mean, we have diversified our suppliers, and we are engaged with a number of different suppliers. Clearly, we're having to pay reservation fees to get in line. But I mean, I'll tell you right now, we feel pretty good about where we are because of our history with these OEMs and having this diverse supplier experience that we've been engaged with over a number of years.

So yes, it's challenging. I mean there's a heavy demand on the supplier part. But right now, we're having ongoing conversations with them, let them know what our needs are. And like I said, we're making the reservations to make sure we're in line to respond to the needs that we have.

And we're doing the exact same thing, Dave, with EPC providers.

Okay. Excellent. And let me see, Dan, I was curious, just looking at FFO to debt in the path here, 15.5% when you exclude the storm impact, could you talk about the trajectory when you'd be aiming for that 17% FFO to debt level and kind of describe the path to get there from here?

Yes, absolutely, Dave. Look, I'd characterize it, particularly with our base forecast kind of the middle to late part of our 5-year horizon is certainly reasonable and achievable. And again, I mentioned if we have this increased capital need, the objective doesn't change, but we're going to take a measured approach as to how we get there. I think back half of the plan is still perfectly reasonable.

I will say what you'll see in 2025 is a little bit of, I don't know, flattish kind of trend in the FFO to debt and it's -- and again, from that adjusted number that you mentioned, David, that's the right place to start. And that's really attributable to the same thing. It's the fact that there will be some lag in the storm cost getting addressed, and it's unlikely they'll begin to get recovered in 2025.

Our next question comes from Jeremy Tonet with JPMorgan Chase. Please proceed with your question.

A lot of growth coming through there. And maybe just want to peel back a little bit more on Alabama in Mississippi there. I think you talked about data centers, a bit of growth there. But just wondering I guess, if you could provide a bit more color on what you're seeing there, what could the upside be there over time?

It seems like these states are Mississippi in particular, is really kind of pursuing some of growth more aggressively than others? And just any other thoughts would be helpful.

Yes. We -- in Alabama, there was a meta project that was announced mid last year, I think, and that was a couple of hundred megawatts. I think, I mean, there is more activity occurring there now. Their broader economic development pipeline is very full of activities and projects in the same Mississippi.

Mississippi, I think, did publicly announce the Compass project. I think -- and then they also had a chemical manufacturer that expand the line. So, there was significant capacity opportunities for them. So, I think we said it earlier, we see this migration, this activity moving westward across our territory.

And once again, it adds to that excitement and the opportunities we see across our company and across just in the future.

Got it. That's helpful there. And just want to pivot towards new cure for a minute, if I could, and clearly, Southern has been a leader here historically. But in the marketplace, there's been some trepidation with newbuilds given some of the issues in the past.

But just wondering, any updated thoughts you could share there. It seems like there's strong stakeholder momentum building there, and particularly as it relates to if a federal backstop were to come together on EPC in case of -- for catastrophic insurance? Or if a hyperscaler is really willing to step in for that similar type of protection there. I guess how that could impact your thought process at this point in time?

Let me be perfectly clear. This country needs more nuclear. I mean New leis the best long-term fit for the kind of low growth that the industry is experiencing right now. I'll stop, to be perfectly clear.

You've identified the risk and whether it's through federal activity or whether it's through some private concerns, willing to participate, those risks must be mitigated. And yes, I mean, we're going to continue to make the case to tell the story. -- talk about the virtues that we're experiencing with Bob and I and how well these units are running and the value of them with this growth that we're experiencing. And what we experienced as we went from Unit 3 to Unit 4 in terms of efficiency gains. I mean, so there's a wonderful story there. for this country to begin to make this investment in building more nuclear units because the more we build, the great efficiencies we experience, supply chain, workforce, all aspects of this process we get better at it, and that will help us with each project as we move forward.

So yes, I mean, we're going to continue to work with our partners, work with others of the utility companies to talk about the virtues and the benefits and the value of new nuclear going forward.

Our next question is from Durgesh Chopra with Evercore. Please proceed with your question.

Just one quick question. we've discussed a lot already, and all my other questions have been answered. Just reconciling the CapEx increase to equity -- so CapEx went up $13 billion and it looks like -- and you only give -- you gave partial equity last time around now this time you've given the equity towards the 5-year plan. Thank you for doing that. But just it would put the equity on my math, that roughly 20% of the capital increase, and you pointed to 30% to 40%, so maybe what are the moving pieces?

Is it slowing down dividend growth? Is it more tax transferability monetization? Just what's -- what are the moving pieces there?

Yes, Durgesh, I want to cop out and just say it's all of the above. I mean you really did hit on some of the key things. It's -- it is the other cash flow improvements. The transferability is certainly supporting the overall 5-year plan with all the tax credits that we have, the kind of everything that we've done to kind of take equity need off the table prior to this, not just the $500 million worth that we took off the day of 2025, but just how we thought about our financing plan last year with equity content.

It's also just making sure that we are taking a pragmatic long-term view on our objectives, right? I think we are incredibly well positioned. We definitely prioritize having that buffer against adversity, but there's absolutely no need to knee jerk to hit a particular number in any particular year as long as our long-term objectives and discipline remain.

Would you happen to have the tax credit number, handy? What are you monetizing in terms of dollars on average?

I don't have that, certainly follow-up with the IR team we can give you some sense of that. But it's -- and again, it's really just things for, whether it's Southern Power projects or storage assets in the regulated business, a lot of our tax credits can't be kind of transferred. We've got nuclear PTCs for VOI and four that can be transferred all of our legacy credits prior to IRA that were unwinding can't be transferred. But that doesn't -- but the transferring of the new ones means that we can monetize the old ones at the same time.

So that's part of the uplift as well.

Our next question is from Paul Fremont with Ladenburg Thalman. Please proceed with your question.

Congratulations. First -- my question is, I guess, from sort of relates to Southern Power. Maybe the first question would be, is it practical for somebody to consider finishing the summer plant or restarting construction on the summer plant?

Not Southern Power. I mean seriously, I mean, we know there's a process underway. Not sure how that's going to play out and what that will look like. I would suspect it will also end up with a need for some of the things we talked about to mitigate some risk, I mean, unless somebody is willing to put up the necessary capital to cover it.

But I -- it's kind of a novel idea, but we'll see how that plays out. But most certainly, that is not something in the wheelhouse of Southern Power -- no consideration.

And then when you talk about sort of construction by Southern Power of gas outside of your utility service territories, would it be logical to look at where you have gas LDCs as to where that new construction might take place.

No, not necessarily, Paul. If you think about Southern Power's existing portfolio to put the gas aside, so we used to have gas assets in various parts of the country where we had some in Minnesota we had some in Florida and other places. We've largely divested of everything, but what's in the Southeast, but our renewable portfolio kind of spans the Southwest and the Midwest and it's really where the market design is kind of ripe for bilateral agreements like that. In some cases, serving load serving entities but what you're able to do in some of those other markets as you well know, is have kind of direct arrangements with large commercial and industrial customers.

And we've done a lot of that with our renewable fleet. We'll look for those kinds of opportunities on the gas side.

Then last question for me. Would there comes a point in time where you would consider a potential spin-off of your Southern Power subsidiary.

I mean we're going to look at everything all the time. That's not in our plans today. I will tell you, we're gratified to have held on to this business when others didn't. It is a tremendous optionality selling it certainly would be dilutive, spinning it off. We'll see how big it gets and whether or not that seems to make sense, but we love it as a complement to our portfolio today.

And Paul, I think we've said this before, I mean we love the cards we have. And as all of the utilities and these other complementary businesses, the contributions they make, the participation they make, the opportunities they afford us we think, supports just our principal objectives and the long-term durability of our company. So yes, I mean, as Dan said it, but kind of -- but we're very pleased with the cards we have.

Our next question comes from Travis Miller with Morningstar Research. Please proceed with your question.

It's a little chilly up here in the Chicago suburbs. So, keep that guess. Following forward.

Are you in Nicor territory?

Nicor, that's my house yes. right on the neighbor. So, keep you going and don't blow up any price, please?

Thanks for your business.

So welcome. I got the bill on the table and make sure to pay in the next couple of days. But anyway, aside from that, I wonder if you could talk a little bit about the dynamic between generation CapEx and transmission CapEx, especially in '28 '29. It looks like a lower even not material number on the generation side. You had obviously all the loan growth you talked about and then the large number on the transition side, is transmission really the need here to serve that large load?

Or would there be more generation coming?

Yes. That's a very fair question, Travis. And it really gets back to how we have bifurcated the capital outlook here. There is a better line of sight on the transmission and typically, just given our structure, that's something that unlike a generation resource can't be purchased from a third party in our market.

We're vertically integrated. The generation tends to have optionality around it. You can buy excess capacity from others. You've got to go through a process to determine the best resource.

And as I mentioned, we've got 13,000 or 13 gigawatts of outstanding RFPs just in Georgia alone right now. And so, once that firms up, that potential capital of $10 billion to $15 billion includes a lot of dollars associated with those very same generation resources you're trying to find in the table. Once they materialize to the extent they do, that's when you'll see them kind of marry up it's transmission.

Okay. That makes sense. And I think it goes back to your comment about PPAs and maybe not satisfying all the RFP request out there, right?

That's right.

Yes. Okay. And then one quick follow-up. In terms of transmission supply chain, and that equipment what's the availability there? What does that look like? There's a lot of talk about the generation side of it, but what about transmission side of it.

It's challenging also, but not as difficult as on the generation side. But once again, with our -- with the size and scale of our company and engagement of the work that we involve ourselves in we find ourselves in a pretty good place. But it's worked that our supply chain organization is constantly staying on top of assessing the market working with our suppliers and vendors to make sure we understand what the dynamics are and making sure we let them know what our needs are now and into the future.

Our next question is from Ryan Levine with Citi. Please proceed with your question.

Are you looking at any policy support to help attract data center growth in Alabama specifically? And are you looking at any changes to tariff design for these hyperscale customers like the changes made in Florida.

I'm not aware of any tariff legislation or incentives in Alabama at this time. I mean, they do happen as they do overall economic development, there are some incentive packages that they have available, but I'm not aware of any kind of legislative effort underway. And the second part of your question was?

Yes, tariffs. I'll take that, Ryan. And look, we've got tremendous flexibility in the way we contract with large load customers. There's really not any kind of changes necessary to attract and serve and price appropriately those customers.

And that will conclude today's question-and-answer session. Sir, there are any closing remarks.

Again, let me thank each of you for taking time to spend time with us today, and thank you for your interest in Southern Company. We are incredibly excited about our future. and we look forward to talking to you again in the future. Thank you very much, and have a good day.

Thank you, sir. Ladies and gentlemen, this concludes the Southern Company Fourth Quarter 2024 Earnings Call. You may now disconnect, and we thank you for your participation.