Q4 2025 Earnings Call Transcript

Good afternoon. My name is Sherry, I will be your conference operator today. At this time, I would like to welcome everyone to Southern Company Fourth Quarter 2025 Earnings Call. [Operator Instructions]. I would now like to turn the conference over to Mr. Greg MacLeod, Director of Investor Relations. Please go ahead, sir.

Thanks, Sherry. Good afternoon, and welcome to Southern Company's Fourth 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 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. 2025 was an outstanding year for Southern Company, and the operational and financial results we delivered are a testament to the dedication of our nearly 30,000 teammates across this company. We achieved adjusted earnings at the very top of our EPS guidance range in 2025, and it is clear that our commitment to putting customers and communities first, while leading the way to a stronger, more resilient energy future is delivering exceptional value to our customers and investors. And this terrific execution across all aspects of our plan over the last year has substantially strengthened our outlook for 2026 and beyond, ultimately driving higher long-term earnings expectations.

David, I'll now turn the call over to you for more details on our financial performance for 2025.

Thanks, Chris, and good afternoon, everyone. As you can see from the materials we released this morning, our reported strong adjusted earnings per share of $4.30 for 2025, which, as Chris mentioned earlier, was the very top of our 2025 guidance range and represents 6% growth from adjusted earnings the prior year and 9% average annual growth from 2023. This also represents adjusted earnings results at the top of or above our annual guidance range for the 11th year in a row, combined with delivering improving credit metrics and a remarkable dividend track record over the last 78 years, including dividend increases every year for the past 24 years, we are delivering on our objectives of regular, predictable and sustainable financial results and superior risk-adjusted long-term returns for investors.

The primary drivers for our performance compared to 2024 were continued investment in our state-regulated utilities, customer growth and increased usage in our electric businesses and growth from wholesale, electric and other revenue sources. These positive drivers were partially offset by higher operations and maintenance expenses, depreciation and amortization and interest costs. A complete reconciliation of our quarterly and annual adjusted earnings is included in the materials we released this morning. Turning now to electricity sales.

Weather-normalized total retail electricity sales for the year were up 1.7% compared to 2024. The electric sales growth in 2025 is substantially higher than the growth we've seen in recent history. To put this in perspective, 1.7% year-over-year retail sales growth in 2025 is more than double the cumulative growth we saw over the last decade. Each of our electric operating companies saw positive weather-normal sales growth for the year with Georgia Power growing 2.5% from 2024. In fact, all 3 customer classes were up for the year, demonstrating a strong and resilient economy in our Southeast service territories.

Commercial sales were particularly strong, led by increased usage from existing and new large load data center customers, which were up 17% year-over-year for the second year in a row. 2025 was another strong year for residential customer growth with the addition of 39,000 new electric -- new residential electric customers and 25,000 new customers across our natural gas distribution businesses. Electricity sales to industrial customers also demonstrated continued strength, growing 1.4% in 2025 over the prior year with 4 of our largest industrial customer segments showing gains, including the primary metals, lumber, paper and transportation segments.

These trends across all 3 customer classes highlight the broad strength we continue to observe across our electric service territories. Chris, I'll now turn the call back over to you to kick off our long-term business update.

Thank you, David. Looking back, I'm convinced that 2025 will stand out as a transformative year for Southern Company, one in which we achieved milestones that will propel the future of our business and customers for generations to come. We're in the midst of a watershed moment for the energy industry and our nation, and Southern Company is extraordinarily positioned to capture and serve growth in a way that delivers value for both customers and investors. Economic development activity at our utilities is robust and provides a tremendous foundation for sustainable growth.

Over the past year, more than 120 companies either made the decision to locate new facilities or announced expanded operations in our electric and gas service territories. These projects are expected to support over 21,000 new jobs, further highlighting the economic strengths of the regions we proudly serve. Our companies have proven to be attractive partners for a diverse mix of new customers, including the large technology companies known as hyperscalers, who have made significant investments in our service territories. In addition to data centers, some of the larger announcements over the past year were in the manufacturing, automotive, aerospace and metals industry, with familiar names that include General Electric, US Steel, Duracell and Mercedes-Benz.

Our model is continuing to prove well suited to serve customers' growing needs while also enabling our local communities to thrive. Recall, our 3 electric utilities, Alabama Power, Georgia Power and Mississippi Power operate in vertically integrated markets where we provide a one-stop shop for customers because we own the generation, transmission and distribution networks to reliably serve their needs, even at significant scale for large load customers. The orderly, transparent and constructive regulatory processes in which our utilities operate are designed to reliably and sustainably serve growth while helping to ensure that all customers benefit from that growth.

And this design is proving effective. We are demonstrating the value of this approach through approvals for a significant investment in energy infrastructure while also providing rate stability over the next several years and into the next decade. Our scale, balance sheet strength and wherewithal in large construction projects further bolstered the necessary execution that would be critical for this ongoing expansion. Our 4 gas utilities, also known as local distribution companies, or LDCs, proudly serve over 4 million customers across Illinois, Georgia, Virginia and Tennessee.

This summer will mark the 10-year anniversary of the acquisition of what is now called Southern Company Gas. Since that acquisition, Southern Company Gas has exceeded all of our expectations, and we're extremely proud to have added these growing businesses. These 4 state-regulated LDCs have continued to work constructively to make significant investments in safety-related pipeline replacements and other modernization efforts, which have combined to triple their authorized rate base since the acquisition while increasing customer value. As we look to future growth opportunities, it's important to recognize that our LDCs operate in 3 of the top data center markets in the country and are active in discussions with several large customers on solutions to directly or indirectly serve this potential growth.

Southern Power, our competitive power business has an industry-leading portfolio of assets with both technology and geographic diversity. Substantially all its assets are under long-term contracts with creditworthy counterparties, and we don't take meaningful commodity risk in these contracts. In total, Southern Power's portfolio has over 13 gigawatts of capacity across 55 generating facilities in 15 states, including over 7 gigawatts of natural gas generation in the Southeast. The burgeoning need for reliable, dispatchable energy provides significant opportunities for Southern Power.

First, as contracts on our existing natural gas fleet come up for renewal beginning in the early 2030s and becoming more meaningful in the mid-2030s, there are significant opportunities for improved upside pricing. The market demand for capacity has increased pricing roughly 2 to 3x higher than where many of these assets are currently contracted. And by 2030, Southern Power has an opportunity to remarket approximately 1,000 megawatts of natural gas generation capacity. Second, we're in late-stage discussions to move forward with up rates of up to an additional 700 megawatts of capacity for Southern Power's legacy natural gas fleet to meet future projected market demands.

And lastly, Southern Power is exploring opportunities to add new natural gas generation at its existing plant sites in the Southeast as well as options for new generation resources in other markets to serve data centers and other large load customers. We are very pleased to have successfully developed this incredibly valued business as it represents a tremendous opportunity to support sustainable growth well into the next decade. We are also excited about the growth opportunities we're seeing at some of our smaller subsidiaries, including PowerSecure and Southern Telecom. PowerSecure specializes in providing utility and energy solutions, including bridge power to commercial, industrial and load-serving customers, and it is uniquely positioned to grow as demand for customer-sided solutions increases, including in response to extreme weather events, utility distributed energy resource programs and bring your own generation mandates.

Southern Telecom in partnership with our electric utilities, 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 territory. David, I'll now turn the call back over to you to discuss our strategy and incredible portfolio support the durability of our further strengthened financial outlook.

Thanks, Chris. Starting with our sales forecast, we project retail electric sales to grow at least 3% across our 3 electric operating companies in 2026. On average, from 2026 through 2030, we project annual electricity sales growth of 10%, an increase of 2 percentage points from our prior long-term sales projections. Georgia Power's total retail electric sales growth is projected to be approximately 13% over the same period. Our long-term sales forecast is supported by robust interest from a wide range of large load customers, including hyperscalers.

And as we continue to see momentum grow in Alabama and Mississippi, our total large load pipeline has increased to over 75 gigawatts. This tangible interest and growing momentum have materialized into 26 signed contracts representing 10 gigawatts of fully contracted electric service agreements today, which is 2 gigawatts higher than what we reported last quarter and 4 gigawatts higher than a year ago. These 26 customer projects, nearly all of which are currently under construction include load ramps totaling 8 gigawatts by the end of our 5-year planning horizon, ultimately ramping up to 10 gigawatts beyond 2030. Importantly, in addition to these signed contracts, we are in late-stage discussions for another 10 gigawatts of load, 3 gigawatts of which are working through final reviews and are highly likely to progress to an executed contract in the near term.

Based on the timing of the associated load ramps for the projects in our risk-adjusted forecast, including the contracts we have signed, we project sales growth and the associated revenues to accelerate into 2027 with an even more pronounced expansion in 2028. Considering the composition and strength of our large load pipeline, we project commercial sales, which currently comprise roughly 1/3 of our total retail sales to more than double, growing roughly 20% annually through the end of the decade. The framework and methodology under which we approach contracting with large load customers are, we believe, one of the best in the industry and are uniquely designed to benefit and protect existing customers and investors.

Across all our electric jurisdictions, our regulatory frameworks allow for bilaterally negotiated contracts for large load customers rather than the use of a standard tariff. This provides each utility with the necessary flexibility to appropriately price large load customers in a manner designed to more than cover the incremental cost to serve them, helping to ensure this growth can immediately benefit existing customers. Our contracts include a robust set of terms and conditions. Contracts carry minimum terms of at least 15 years for data centers with some going out even further.

Over the term of the contract, there are fixed or minimum build provisions similar to take-or-pay structures that factor in the customers' requested load ramps and are designed to cover at least 100% of the annual incremental cost to serve, including the necessary generation and transmission investments, incremental O&M and our cost of capital. These contracts also include strong protections in the form of termination payments tied to the incremental cost to serve over the life of the remaining contract with significant collateral requirements tied to the termination payments to provide additional layer of security and protection for our retail customers and investors.

Our disciplined approach to pricing these large load contracts is already translating into significant benefits and tangible savings for existing customers. Largely as a result of their ability to sustainably capture growth, Georgia Power and Alabama Power, our 2 largest subsidiaries, worked constructively last year with each of their public service commissions to implement multiyear rate stabilization agreements. As we deploy significant capital to serve this extraordinary projected growth, we're working with our public service commissions to help ensure existing customers benefit as this growth serves to support rate stability.

In December, as a part of its certification process for new generation, Georgia Power was able to quantify at least approximately $1.7 billion of benefits that will help to lower cost to serve existing customers from 2029 through 2031. This customer benefit is directly attributable to the value created by our approach to contracting and serving new large load customers. Recall, our approach to large load contracts includes minimum bill provisions designed to offset other costs throughout our business, ultimately providing savings to customers while helping to ensure that we deliver on our financial commitments.

Combined with continued constructive regulatory outcomes in our states, our unique approach to serving projected growth from large load and data center customers is delivering mutual benefits to all stakeholders. In addition to our recent large load customer outcomes, earlier this week, Georgia Power made filings for its storm and fuel cost recoveries that, if approved, would collectively lower rates for customers starting this summer. Turning to our capital plan. Our base capital investment forecast is $81 billion over the next 5 years, 95% of which is at our state-regulated utilities.

This represents an $18 billion or approximately 30% increase from our forecast just 1 year ago. The main drivers of this capital plans increase are related to new generation facilities, most of which were announced or approved in 2025 and the approved Integrated Resource Plan, or IRP, in Georgia, which included incremental investments in existing infrastructure. These investments include up rates for more capacity at existing natural gas and nuclear facilities as well as modernization of hydroelectric dams. Through 2030, we expect to invest roughly $42 billion or over half of our total 5-year capital plan to reliably serve projected growth through the combination of new generation, enhancements to existing generation assets and expansions of our transmission and interstate pipeline systems.

Our capital investment plan supports projected long-term state-regulated average annual rate base growth of approximately 9%, a 2% increase from our forecast 1 year ago. Our base capital investment forecast reflects an approach to capital planning that is consistent with our approach in the past. We do not include capital placeholders nor do we include potential capital investments, which remain subject to regulatory processes. Beyond our base forecast, there are several opportunities for our capital plan to continue to grow.

For example, Alabama Power and Georgia Power have either begun or expected to begin request for proposal or RFP processes to procure generation resource needs forecasted in the early to mid-2030s. These RFPs could represent several gigawatts of additional new generation. In addition, as we've highlighted before, there are also potential natural gas pipeline investments either through our FERC-regulated interstate pipelines or through midstream-like investments at our LDCs to directly or indirectly serve projected growing energy needs. Similarly, we have not included the opportunities Chris mentioned earlier for Southern Power in our base capital plan.

Ultimately, based on our traditional disciplined planning methodologies, combined with the additional opportunities we see to serve projected growth as we get more line of sight on specific projects, it is reasonable to expect that our capital forecast could continue to increase. The updated financing and equity plan we provided supports our base capital plan and continues to fund the business in a credit supportive manner. Preserving our long -- preserving our strong investment-grade credit ratings continues to be a priority. As we believe that to be a premium equity investment, a company must also be a high-quality credit.

There is no greater evidence of our commitment to credit quality than our actions in 2025 to proactively address $9 billion of equity needs. In addition to our internal equity plans and issuances of junior subordinated notes, which received 50% equity treatment from the rating agencies, our recent actions included pricing $4 billion of equity through our at-the-market or ATM program with forward contracts that settle through 2026. Additionally, in November, we issued $2 billion of equity units through a mandatory convertible, which will settle in shares in 2028. Importantly, in our forecast, nearly all $9 billion of the equity we have already addressed is expected to be issued or settled by 2028. Consistent with our increased capital investment plan, we project a remaining need for equity or equity equivalents of approximately $2 billion through 2030 to continue supporting our long-term credit objectives.

We plan to remain proactive in our approach as we seek to sustain or improve upon current credit metric profile of roughly 15% FFO to debt through 2027 as we continue to deploy significant capital investment to serve our forecasted growth. Beyond 2027, improved projected cash flows from large load customers and the broad growth we project across our businesses, along with the completion of several large capital projects in our base plan, credit metrics are projected to improve and ultimately position us to achieve credit metrics consistent with our continued objective of approximately 17% FFO to debt by 2029. To the extent incremental capital opportunities materialize, our credit quality objectives will remain consistent.

Accordingly, we would expect to finance incremental capital investment above our current plan with approximately 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. As I mentioned earlier, we have a remarkable dividend track record as Southern Company has paid a dividend that is greater than or equal to the previous year for 78 consecutive years with consecutive increases over each of the last 24 years. For decades, our dividend has been an integral part of our value proposition for shareholders.

While future dividend increases are subject to approval by our Board of Directors, we project continued modest increases in the dividend over the next several years. This should serve to lower our dividend payout ratio into the low to mid-60% range in the latter portion of our forecast horizon. As we balance our equity needs, we fund the growth we are projecting. At that point, subject to Board approval, we will be in a position to reevaluate the pace of dividend growth, potentially increasing the rate at which we grow annual dividends to shareholders.

Turning now to our earnings guidance for 2026 and beyond. Our adjusted earnings per share guidance range for 2026 is $4.50 to $4.60 per share. Our adjusted guidance range represents 7% growth from the top and bottom of our 2025 adjusted EPS guidance range. The estimate for adjusted EPS for the first quarter is $1.20. As we've highlighted today, execution and the achievements across our businesses over the prior year have meaningfully strengthened our outlook, and we are positioned for exceptional growth.

Over the next 3 years, we expect to grow adjusted earnings per share 8% to 9% from 2026 through 2028. In recognition of the timing, visibility and confidence associated with projected growth during this period, we are establishing initial guidance ranges for each of these years. In addition to the 2026 range I provided, our initial guidance range for 2027 is adjusted earnings per share of $4.85 to $4.95, which represents approximately 8% growth from 2026. For 2028, we project adjusted earnings per share to grow approximately 9% from 2027, resulting in an initial guidance range of $5.25 and $5.45. Longer term, we expect adjusted earnings to grow approximately 7% to 8% from our 2028 guidance range.

This projected earnings growth trajectory provides for an average annual adjusted earnings growth profile of 8% from the 2026 guidance midpoint to 2030. We expect this outlook to be durable, supported by a large and growing portfolio of large load contracts, a robust capital investment plan and visibility on an efficient equity and debt financing plan that is designed to support credit quality and customer rate stability. With the potential for continued momentum on growth above our base plan and the incremental capital deployment opportunities that would be required to serve it as well as the success we expect in repricing portions of Southern Power's capacity through the next decade, we believe there could ultimately be upside to our long-term outlook beyond what we laid out today.

With that, I'll now turn it back over to Chris for closing remarks.

Thank you, David. We are clearly in a phase of execution. The planned large-scale build-out across our electric system in the Southeast over the next several years is tremendous and Southern Company's experience, expertise and scale support the necessary execution. We secured the labor and equipment for these projects through early EPC agreements and reservation payments well in advance and are leveraging relationships across our vast supply chain.

We have unique experience with large construction projects, recently completing the only 2 new nuclear units in 3 decades, showing we can do hard things. The lessons learned from completing Plant Vogtle Units 3 and 4, along with other recent generation projects have helped inform our robust set of project controls and tools to assist our team's efforts and help ensure we are well positioned for timely execution. Our focus on operational excellence extends into every facet of how we serve customers, including through even the most extreme weather conditions. Over the last 2 months, the daily lives of millions across the Eastern United States, including those in the territories we are privileged to serve, have been impacted by extreme cold weather temperatures and severe weather conditions.

I'm incredibly proud of the way Southern Company's electric and gas teams safely performed under these harsh conditions for our 9 million customers. Events such as Winter Storm Fern in January, where our system served the second highest winter peak electric load of over 39,000 megawatts demonstrate the value that our vertically integrated system brings to our customers and the importance of continued strategic investments in resilience and expansion of energy infrastructure. Our team's exceptional performance, providing reliable energy and quick response to service interruptions throughout these events also speaks to the thorough preparation and commitment of our employees.

Innovations such as recently deployed AI tools that helped our leaders preposition crews to be ready to safely and quickly respond and self-healing networks that allow transmission and distribution lines to isolate outages and reroute power highlight the value that our continued infrastructure investments provide to accelerate restoration efforts and support delivery of the energy on which our customers depend. Our energy-leading innovation, our focus on resilience and our deep commitment to the people and communities we are privileged to serve are but a few key drivers of why Southern Company was recently recognized as the #1 electric and gas utility in Fortune Magazine's list of -- most Admired Companies for 2026, an honor we are proud to receive and a standard we endeavor to earn each and every day.

As we conclude our discussion today, I want to emphasize how excited we are about the future here at Southern Company. We are experiencing incredible growth, and we are making investments in all parts of our business to recognize the value of the extraordinary opportunities in front of us while ensuring that rate stability and reliability and value to customers remains our top priorities. Southern Company was built to serve growing economies and to foster economic prosperity in the territories we serve. I am proud of how we are leading the way with this mission and working to ensure that enduring impact from this extraordinary growth opportunity is unquestionably positive for all stakeholders.

While the size and velocity of this growth is arguably unprecedented, the discipline and customer-focused approaches investors expect from our company remain evident in both our outlook and our execution, whether it's the long-term stability of our customer rates, the economic benefits we're capturing for existing customers, our measured risk-adjusted approach to load forecasting, the high priority we place on balance sheet strength and credit quality or our focus on the long-term durability of EPS guidance. We endeavor every day to be the premier must-own utility and to deliver regular, predictable and sustainable results and superior risk-adjusted returns to investors over the long term.

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.

[Operator Instructions]. Our first question is from Nick Campanella with Barclays.

So I guess you've always been a pretty conservative company, and you've taken 5% to 7% to 7% to 8%. I know it takes a lot to go there. I appreciate the new outlook. Maybe just wondering how you're kind of trending in the beyond '28 time frame at the base level, just acknowledging your comments that you kind of said that the Southern Power repricing might put you higher maybe at the top end.

So is this plan really built for the midpoint in '29 and 2030? And what would kind of put you lower or higher in the range based on the range of outcomes?

Nick, I mean, I think you got to go back to your initial comment. I mean you know us. I mean you know how disciplined we are, you know how thoughtful we are in terms of setting expectations. And so as we look forward in terms of the execution around these 10 gigawatts of projects and what we see, the 3 gigawatts in final stages of 7 gigawatts in late stages and looking at the pipeline of some 75 gigawatts.

I mean, that gave us confidence to make the changes and the adjustments that we've announced today. And not only here through '26, but as we speak to additional growth in '27 and '28, I mean, this work -- this activity we see supports what we've outlined. I mean we've also announced the economic expansion that we see all across the company, 120 companies locating in our territory, 21,000 jobs, the 17% year-over-year data center growth, sales growth this year of 1.7% and what we've spoken to going into the latter part of the decade. So we see the strength we see -- as we talked about, the potential upside from Southern Power.

So yes, I mean, we're very confident. And we -- as we talked about earlier in years past, it was important for us to see that the durability, the long-term focus for us that we thought was necessary to make this adjustment.

And I might add on to that, that we put guidance expectations out there, and they're a target for us to go get. And we'd be pretty disappointed if we didn't achieve near the top end of that. Now 2028 is a long way out, but we do see opportunities out there that provide upside and there's potential to be higher.

And then maybe just as we think about the 3 gigawatts that you highlighted on the load side, which seem to be much more near term, just would that be served entirely with gas and -- can we do the math on what that CapEx would be if it's all new build? Or how are you kind of thinking about sourcing the generation for that?

It continues to support our all-of-the-above strategy. Clearly, I mean, I think there's -- as we talked about in our plan, there's a lot of gas in the plan, but you're going to continue to see battery energy storage, I mean some of the opportunities that we have. I mean, we'll look at all the resources in terms of how we meet this growth opportunity going forward from an all-in above approach.

Our next question is from Steve Fleishman with Wolfe Research.

Thanks for the very extensive update. And a couple of questions. So first on the -- you mentioned the 3 gigawatts that are in late stage, highly likely. Just would those impact the current plan? Or would they come on afterward? Just how do we think about the timing of the investment for that? Is that part of your kind of potential upside comment?

Yes, Steve, those contracts, I mean, they're very near term, and they're working through our counterparties' approval process, Board approvals, all that. So we see those contracts being signed imminently, and they are baked into our forecast today. Keep in mind, these have ramp rates that move out beyond our planning horizon right now. But they are baked in.

And keep in mind, we also have a very conservative risk-adjusted approach to modeling our loads and those load models then drive into our revenue expectations and projections, which bake into our plan. So they're in there, but they do go beyond. They do extend beyond our planning horizon, and they just help us with the confidence in what we're trying to achieve.

Okay. So just maybe I didn't understand this. So the current plan that you laid out for 2030 includes the 10 gigawatts that are signed plus this 3 gigawatts that are highly likely?

Correct.

Okay. And -- but that's it. The stuff beyond that is not included.

Correct. Yes.

All right. Good. And then when you talk about the upside to the growth rate, is that within the plan to 2030? Or is it thinking like beyond 2030 or both? Because you kind of talked about Southern Power and a lot of those drivers, I think you talked about are kind of 2030 and beyond.

Yes, Steve, great observation. It really is kind of both. I mean we see the opportunity to grow at that 7% to 8% trajectory beyond 2030. I can't necessarily commit that, that's indefinite, but it certainly goes beyond our planning horizon right now. And everything we see in front of us with the contracts that are near term, the contracts that we've signed, what we've been able to accomplish on the regulatory front, just give us a lot of confidence in where we're looking.

Okay. Two other quick questions. First, just on the data center growth in Georgia. Just there's been, I think, generally more noise in a lot of states, but also in Georgia on data center siting and zoning. Just how do you feel about the 13 gigawatts, I guess, in your plan on that? Are they all pretty much zoned and the like? And how are you thinking about that issue?

Those 13 -- I think the 10 gigs are under construction. So we feel very confident about the projects that -- the numbers we're talking about across Georgia, Alabama and Mississippi, we feel good about those projects. And yes, there's a lot of conversation, but these projects continue to advance and progress across our states.

Our next question is from Julien Dumoulin-Smith with Jefferies.

Julien Dumoulin-Smith: I'll pick it up where Steve left off, honestly. As you said, it's reasonable to expect CapEx increases, right? And you've alluded to this Alabama Power RFP for 31 and 32, Georgia Power's own further RFP for 32 and 33. Can you speak to what you're seeing at the leading edge on those? Rather than talking about the demand side, let's talk about the procurement side and try to feather that against how you would think about that increase in CapEx even through 2030. What's the total scope? And then also, maybe in light of the latest quarterly large load update, I think that increased by 15 gigawatts in the latest update, I think, from last week. How does that impact the scope of that RFP when you think about what could credibly get done here?

Yes, Julien, great question. The portfolio grows across all 3 of our electric -- the opportunities grow across all 3 of our electric companies. And last couple of quarters, we talked about growing momentum, conversations, spreading to the west, and we're really seeing that. What you noticed in the Georgia Power large load update is just normal churn coming in and out of the pipeline.

And we actually look at that being really healthy in terms of getting the highest opportunities to contract to the top of the list. And as we get closer in terms of contracting in these negotiations, our counterparties really start to refine and sharpen their pencils about what their needs really are. And so I think you pointed out a good observation that, that kind of short end of that pipeline has contracted a little bit, but that really brings more precision to us, and we're really pretty excited about getting those better opportunities to the front of the line. In terms of opportunities beyond what we have in the capital plan, if you think about a rough rule of thumb, I would think you could probably maybe estimate $2 billion for a gig of incremental generation.

I think that's kind of what we're seeing in the marketplace and what our expectations might be.

Julien Dumoulin-Smith: Yes. That's pretty sizable in turn then. And then maybe if I can, right, the release last week flagged the potential pivot in the near term, right, the energization ramp, if you will, for '28, '29, slight downtick in that period of time. What exactly are customers doing? Are they deferring initial energization dates? Are they starting at lower utilization? Are they restructuring the ramp profiles? And then maybe in terms of earnings impact, you guys provided this latest update. How do like the minimum bill protections in your contracts potentially insulate earnings from these -- what seemed like every quarter, some slight fluctuations in the near years of this ramp?

There's a lot in there, Julien. Let's start to unpack some of that. So in terms of the way we design the contracts, we talked about the minimum bills and what that looks like. And so we have the opportunity to negotiate exactly what our counterparties ask of us.

And like I mentioned before, as you make your way through the pipeline and we start having conversations about your needs and have those negotiations, counterparties are really sharpening their pencils about what they need. Keep in mind, as we have those conversations, counterparties are also posting collateral. So they're really having to put up some assets backing up their asks. And so that kind of motivates people to sharpen their pencils as well.

And so in terms of what we see out in the future, we look through these things moving through our pipeline and are really excited about the ability to close on these contracts.

And Julien, one thing I'd add, I mean one of the things we're experiencing as we see these existing data centers come online, we're learning about their profiles, their ramp rates. And so like the past 2 years, we've seen 17% year-over-year. I mean, so we're learning how this is playing out and that factors into the plan, but we know it will be -- it may be variable to some extent, but it's a great learning that we're experiencing through these existing data centers that we already have online.

Yes. And those learnings really drive into how we shape the outlook and how we formulate the load forecast and that translates into how we drive our revenue expectations.

Our next question is from Carly Davenport with Goldman Sachs.

Maybe just on the data center outlook in Georgia and just some of the noise around affordability. There's been some legislation introduced on moratoriums or other regulations around data centers. So could you just provide your views on how much [ do ] you think some of those pieces of legislation have and if it's kind of coming up in any of your conversations with prospective customers?

Yes. I mean there's a lot of conversations and activity around data centers all across the country, as you know very well. The thing that we're excited about here is that the projects continue to advance. The pipeline continues to grow.

We continue to bring these data centers online, continue to reach agreements, with projects that we've talked about with projects that are in final stages and late stages. The momentum here will continue. Yes, I think there will be continued conversations around what will be the impact on pricing. I think we have to continue to tell the story about the benefits to all existing customers because of these projects.

And also, the thing that I also get excited about is some of the data center partners that we have, their involvement in the communities across the state, making charitable investments in these communities to show the benefits that they bring to those communities. So I think support for communities, also how we price these projects in terms of support for lower cost and also the value they bring. I mean those are stories we got to tell. And I think we'll continue to see strong support across our territories for these projects.

Got it. Great. And then I think you had mentioned in your prepared just some opportunities on on-site or sort of bridge power solutions at PowerSecure. Could you talk just a little bit about demand for those types of solutions that you're seeing in your conversations and maybe what you think the duration of that opportunity set could be?

Carly, a couple of things there. I mean I think it's a combination of the conversations that we're in the midst of, but I also think as you look across the entire sector across the country, where there may be a need for temporary power. And so these bridge solutions, I think, will provide great value for these customers, but also these resources can provide some degree of resiliency in latter stages as well. So we think in the near term, there will be continued opportunities for bridge solutions in the market as we see it today.

Our next question is from Stephen D’'Ambrisi with RBC Capital Markets.

Stephen D’Ambrisi: Just had a couple of quick ones. Just on the Southern Power opportunity, can you give a little -- it sounded like you said that you have a potential to recontract a gigawatt and capacity prices have moved up 2 to 3x. Can you just give us a little flavor on like what the all like energy plus capacity or how impactful that could be? Because it looks like on the slide, in 2035, you open up a pretty significant amount, almost 4 gigs. And so I just want to understand kind of what that opportunity could be? And then I had a follow-up on the gas expansion and what the hurdle is there.

Sure. Steve, it's David here. I'll take a crack at that. Yes, as we look into the next decade, we do see opportunities rising up through the portfolio as these contracts come up for renewal.

We're seeing data points and examples in the marketplace that similar capacity is being recontracted at 2 to 3x the rate at which we're in right now. And we're seeing examples in the marketplace of around $20, maybe $25 a kilowatt month. So I think that might be a good rule of thumb to think about what that opportunity can look like out in the future for us.

Stephen D’Ambrisi: Okay. That's really helpful. Sorry, is that 2025 incremental? Or is that -- that's the...

That's the price.

Stephen D’Ambrisi: Yes. Okay. Perfect.

And that's what we're seeing.

Stephen D’Ambrisi: Yes. And then just on the evaluating new gas expansion at 6 brownfield sites. Just can you talk to, I guess, how big that could be and then what effectively you'd be looking for and your ability to potentially marry those expansions with some of your data center offtakers or provide [ UOG ] solutions? Or just what that opportunity set looks like for you guys?

I mean we're not going to change the risk profile of Southern Power. We're going to have a long-term contract agreement with a creditworthy counterparty. And right now, we're looking at evaluating some 6 brownfield sites in the Southeast for potential new gas development. And so that's kind of -- in kind of a very disciplined way how we will approach this as we always do.

Once again, you guys know us. You know how we work, how we run this company. And so that risk profile will not change. So we'll be evaluating the market, working with customers, understanding their needs, and we will make decisions accordingly.

Our next question is from Jeremy Tonet with JPMorgan.

Just wanted to come back, if I could, towards the guidance and what are some of the parameters that drive the high and the low end? And specifically here, just ROE and equity ratio assumptions. Any color, I guess, what drives the low end there? Or just how we should think about some of those factors?

Yes. No, good question. In building these expectations that we've communicated today, our disciplined approach, we run through exhaustive scenarios, all kinds of different expectations and outcomes to try to create bounding exercises, if you will, that we feel good about achieving. And so we've got some durability in there to be able to get to certainly the 7% range.

And again, like I said earlier, it's a long ways out, but we do feel good about what we see in terms of the contracts that we're signing in terms of the in-migration of population into our service territories, customer growth and expansion, some of the things that Chris mentioned in the prepared remarks around investment coming into the state, whether it be businesses expanding or relocating into our service territories. All those aspects give us good visibility and durability into those projections. And then some of the things we talked about create upside to achieve top end or perhaps even expand that band in the future.

Got it. That's very helpful. And just want to follow up maybe a little bit more with the affordability questions there. It seems like there's so much growth in front of you. Just wondering how that could impact build trajectory going forward, possible downward pressure there? And any other thoughts you could share on the '29 and '30 period for how build trajectory might look?

And you've heard a lot from us our focus on rate stability in both Georgia and Alabama in terms of rate stability through '27 and through '28. And then once again, I think as you look at how we price these projects, how we do our large load projects, the opportunities we have for downward pressure on rates for existing customers is a real opportunity that we'll take advantage of. And so we see the opportunity to continue rate stability as we move into the future. And so that's our focus, making sure we continue to provide value to our customers from a service standpoint, but also making sure we have this real disciplined focus on rate stability now and into the future.

Our next question is from Andrew Weisel with Scotiabank.

Just a quick one from me. I think you mentioned the potential to accelerate the dividend growth. Could you elaborate? I think that's new commentary from you. I don't remember hearing you talk about that before. Maybe just a little bit more detail on why you talk about that and what you'd be looking for out of it and when?

Sure, sure. Thanks, Andrew. As we mentioned before, just historically, we believe that the dividend is a very important part of our value proposition. And obviously, in conjunction with our Board, who obviously has to approve every dividend that we offer, we would look to kind of grow -- our earnings would grow into that rate.

And at some point, we want to be able to revisit that and maybe look around the 60%-ish window of dividend payout ratios. But again, that's out on the horizon and just something to think about. But again, like I mentioned before, it's integral to the long-term value proposition that we see in our stock.

Our next question is from Shahriar Purreza with Wells Fargo.

It's actually Alex on for Shar. I just want to touch on the 13 gigs that you mentioned that you have in the plan. Can you just remind us what the minimum take is for those contracts? And is that assumed in your current plan? So I guess if you look at it, if customers were to ramp quicker and take on more power over time, would that be accretive to the current plan?

Sure. Good question. Yes, keep in mind, these -- all these contracts have minimum bills associated with them that are designed to recover 100% of the cost that we incur to serve. But you're absolutely right.

To the extent that ramps are achieved sooner and maybe go beyond the contract, there is upside to that. That pricing is sort of at the marginal cost, once we get beyond the minimum take. But we do feel really good about the way we structure these contracts to protect everybody.

And Andrew, (sic) [ Alex ] just adding on, I mean, you hear us talk a lot about durability. What you mentioned provides greater durability to our plan going forward. And so those are real upside opportunities as we look into the future.

Got it. That's very helpful. I guess just shifting gears here, just look at the regulatory side, obviously, given the growth that you're seeing in Georgia, the rate freeze is in place until at least 2029. So did you see any opportunity where you can extend that rate freeze beyond 2028? And if you could just remind us, do you have to file something with the commission prior to the end of the current terms?

Just want to get a sense on what that could potentially look like.

Yes, Georgia has to file in '28, and we're not going to get ahead of that process. But as we continue to look at the opportunity with the growth that's in front of us, how we price these large load contracts to make sure it provides benefits to existing customers. We think there are real opportunities to continue to have this deep focus on rate stability. And that's something that we're going to continue to be focused on and continue to make sure we pay attention to in terms of providing value to our customers.

So yes, that's a major principal focus of us as we look into the future.

Our next question is from Nick Amicucci with Evercore ISI.

A couple of quick ones for me. So I'm just -- I just wanted to look -- I was kind of drilling down on Slide 39. So it seems like the vast majority of kind of the increased capital investment plan is associated with new generation. And just kind of in the context of Carly's question before when we're thinking about the bridge solution, should we be considering some potential upside just on the transmission side as we kind of think of these new generation assets, maybe kind of being a stand-alone asset currently just to get -- meet the ramp rate and then kind of connecting it at a later term into the broader grid?

There's a lot of options at play in that business. And we stand ready to really take care of whatever the needs are of the customer. And that's kind of part of the beauty that our 3 electric companies are operating in, is not necessarily being bound by a static tariff that they have the ability to bilateral negotiations to get exactly what the customer needs when they need it and probably have the ability to partner with -- to bring that -- those services to bear. So yes, your question is dead on, and we want to go and explore those opportunities all over the country.

Yes. And as we said, I mean, the bridge solutions are very complementary. And yes, I mean, they also -- I mean, as we said, I mean, they're at Southern Power and PowerSecure, those are potential upsides to the plan.

Okay. Great. That makes sense. And then just as we kind of think about -- we've talked -- we've spoken kind of ad nauseam here about kind of the minimum take on the contracts and kind of the pricing surrounding these large load contracts.

Any kind of insight as to -- because I know those last through the duration of the contract. Just any kind of insight into the typical time frame that you guys are seeing on the duration? Is there a minimum there that you guys are seeking? Or is there some type of appetite for -- from kind of the counterparties just on longer duration versus shorter duration?

Yes. Great question. And as we're negotiating these things, we're pretty much pegging to a 15-year window or longer. We want to make sure that we've got durability and lasting relationship as we sign these contracts.

Our next question is from Paul Fremont with Ladenburg Thalmann.

Congratulations on a good showing here. First question, I think it is just a point of clarification. The gas plants on Slide 21, those are all for your regulated utilities, right? So those -- none of that is -- includes Southern Power?

Correct.

You are correct, Paul. Yes.

Okay. So I guess you talked about 700 megawatts of upgrades and incremental construction. Would that take place in the '31 through '35 time frame? Or when would that take place?

As soon as '29.

Yes. Yes, those are where the opportunities are that we're considering right now, and they'll stretch out over a little bit of a period of time. And those are -- keep in mind, those were some of the upside opportunities that Chris had mentioned related to Southern Power, and they're not included in our plan at the moment.

Okay. So that would be incremental and it could come in as early as '29. And if you did it, it would be fully contracted when it was completed, right?

Absolutely.

Consistent with the -- yes, business models not changing in Southern Power.

And then is it safe to say that those contracts would most likely be with like co-ops and other power companies versus, let's say, selling directly to data centers?

Yes, that's a very safe bet.

It would definitely be a creditworthy counterparty.

Okay. Great. And then do you need regulatory approval if you get some of the additional contracts that you're talking about and you need, let's say, that incremental 3 gigawatts of generation, does that need to go through commission approval?

Well, we mentioned that there's -- that all of that would be subject to review. Keep in mind, we just closed in December on 10 gigawatts at Georgia Power. And then we kind of referred to 2 proceedings that just are beginning and then we expect to start between Alabama and Georgia that will probably take us through 2026 and likely see conclusion in 2027.

Okay. And then last question for me. Any sense on who's going to -- which Republican is going to run for [ Pridemore ] seat on the commission?

We're not political prognosticators. We have no idea. What we do is we work with whoever is there, and we look forward to you.

Our final question is from Travis Miller with Morningstar.

This is a follow-up, you answered most of my questions. So the '28 and '29 projects, in particular, generation project you outlined, what's the status of the gas supply and then for the battery ones, battery components. And then in addition, anything beyond 2030, what -- are those going to be constraints potentially?

It's all secured.

Even the physical is secured or just financially?

It is physically secured.

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

Again, let me say thank you very much for your continued interest in Southern Company. Have a great day.

Thank you. Ladies and gentlemen, this concludes the Southern Company's Fourth Quarter 2025 Earnings Call. You may now disconnect.