SOUTHERN CO Q2 FY2024 earnings call

• Strong adjusted earnings results for Q2, meaningfully ahead of the estimate.
• Warmer-than-normal weather in Q2 and focus on managing operating costs contributed to results.
• Higher-than-expected weather-adjusted electricity sales in the commercial customer class due to local economy strength and data center customers.
• Residential and natural gas distribution customer additions in Q2.
• Aggregate pipeline of potential new customers with nearly 200 projects and over 30 gigawatts of potential load.
• Georgia Power filed and the Georgia Public Service Commission approved its 2023 Integrated Resource Plan Update, with the pipeline of potential large load additions by mid-2030s grown ~40% and committed peak demand more than doubled.
• Recognized team members' efforts in power restorations in Texas after Hurricane Beryl.

For the second quarter of 2024, Southern Company reported an adjusted earnings per share of $1.10, which was $0.31 higher than the second quarter of 2023. All businesses performed strongly. Warmer-than-normal weather in Q2 contributed to results. Residential customer additions were 14,000 in electric businesses and 6,000 in natural gas distribution businesses. Sales to existing data centers for the quarter were up approximately 17% year-over-year. The aggregate pipeline for potential new industrial and commercial customers across 3 state electric utility footprint includes nearly 200 projects and over 30 gigawatts of potential load over the next decade, with about 40% of the projects being data centers.

• Adjusted EPS estimate for Q3 is $1.30 per share, meaningfully higher than the estimate of $0.90 per share.
• Mid-year strong start, but will remain focused on executing the plan and optimizing for future years.
• Expect to continue delivering superior performance for the remainder of the year.

• Regulatory uncertainties in rate cases and equity ratio discussions.
• Risks associated with nuclear build-out, needing government leadership for momentum.
• Weather impact variability affecting quarterly results.
• Potential delays or changes in data center project commitments.

Q: Maybe just to start on the quarter itself, I guess just with the significant beat relative to your initial $0.90 guidance, sort of how are you thinking about the puts and takes around the full year guidance and your execution there at this point?

A: Look, we're always very cautious. While we're halfway through the year, there's a lot of year left to go. And in particular, with our electric utilities being in the Southeast, the summer is a pretty big period from a revenue perspective. So we've typically kind of hone in on a more specific expectation after our third quarter call. That said, to your point, we are incredibly well-positioned. We're off to a great start. And what we also have a history of doing is really taking that kind of opportunity and doing anything and everything that we can to not only deliver on the current year, but use that as an opportunity to improve our positioning for future years. So that might look like advancing maintenance work out of future years into 2024 or getting ahead on other programs or reliability reserves. We have the opportunity to kind of optimize in some of our states. And so with how we're positioned, we're working hard to do all those things, focus on this year, but focus on the long term. But, you know, all that to say, given how we started, if we, you know, don't end up in the top half of our range, I think Chris and I would be disciplined. Chris Womack: But I think, Dan, I think as we say internally a lot, when we have the opportunity to fix the roof while the sun is shining, and so thinking about '24 and '25 and '26, those are some things we'll consider as we continue to move forward through this year.

Q: Just to kick it off, you've probably seen some continuation of that good weather from 2Q into 3Q. Is that already reflected in that $1.30 or is there some more upside there? Because you already had $0.10 versus normal in the second quarter?

A: What we would typically do, Julian, and what we've certainly done in this case is put out a quarterly estimate that is weather normal. There's always still at least 2 months left in the quarter when we put these out and just anecdotally, I would say, I think this is the first day in about 3 weeks that it hasn't rained here in Atlanta. So I'm not so sure that July has looked like June too.

Q: The -- on Kinder Morgan's call, they mentioned expanding the SONAT system with $3 billion, I think, growth investment and kind of, I think, implied that you would represent half of it? And could you just talk to your thoughts on that and likelihood you'll do that?

A: Yes. Look, it's really early for that. So yes, we're a 50% partner on Southern Natural. There is a project that is proposed that total capital is $3 billion. Our share would be $1.5 billion. It's just really early days. You know how these projects evolve. Look, we're very encouraged by it. It’s 90-plus percent, I believe, brownfield, existing rights of way, a tremendous opportunity there. We will kind of at the right time down the road once this thing has solidified a little bit more, there's some traction from a FERC perspective, in terms of approval kind of reflect that more in our outlook. But that's still -- all that said, it's an encouraging opportunity. Chris Womack: Steve, the only thing I would add, I think Dan said it, but it's just very early on in that process. I think there's a great deal of diligence to be done. But I think at this point in time, I think the thing to note is that's just very early on in that consideration. Dan Tucker: Going to say just policy wise, I mean we're excited about it. To the extent that we can get this done, it's important for everything else is happening, right? To the extent that all this large load is down the road has the opportunity to be served with more gas capacity like this is really important. And so we're super supportive. Chris Womack: Yes, Steven, let me add 1 more thing on that. I mean -- and we talk a lot about the importance of this country, building infrastructure. So these kind of things need to happen to support this economy going forward. But for us, it's just very early on, but it's somethings that this country must embrace and must move forward on.