The Southern Company (NYSE:SO) Q1 2024 Earnings Call Transcript

Chris Womack: Yeah. I mean I think that I mean, it passed and now sitting on the governor’s desk and so waiting to see what happens there. I think one of the things the government wants to do is let economic development activities know that Georgia is still open for business. And so I think that’s one of the key factors in consideration that he will pay attention to as he makes a decision on that bill. But right now, I don’t know what will happen, but it’s there for him to take action on. And so we’re waiting just like everybody else to see what happens.

Durgesh Chopra: That’s fair. Thanks Chris and Dan. Thank you.

Chris Womack: Thank you. Durgesh.

Dan Tucker: Thank you.

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

Jeremy Tonet: Good afternoon.

Dan Tucker: Hey, Jeremy.

Chris Womack: Good afternoon.

Jeremy Tonet: Congratulations on Vogtle Unit 4 there. Just wanted to continue with the topic as you are and given the notably higher than expected load growth in earnings, in ongoing data center investment in your service territory, just wondering how you think this impacts future generation mix and specifically coal plant retirement dates given what’s happening here? Is there — could there be deferrals or just any thoughts on that?

Chris Womack: I think that’s a lot to come. And I’d add one more factor there. It’s the new EPA rules, and we saw the suite of announcements that came out of EPA last week, which we are reviewing. And many of the rules we think are in practical in terms of aligning with the kind of demand that we see forthcoming, and also from a technology standpoint, some expectations that they are advocating and putting forward don’t align necessarily with the reality. So there’s a lot of — I think a lot of issues that are up in the air. At the state level, I think as we look at how we respond to the demand, how we respond to this need, all those considerations must be on the table in terms of new generation, what happens to existing generation.

Those all get extended, what happens there. All of that has to be on the table, but we also have to factor in what are the potential new rules from the Environmental Protection Agency. So I would say all of that is very subject to for the consideration as we move forward through all the processes that we’ll be a part of.

Jeremy Tonet: That makes sense. And how do you think about the feasibility of carbon capture in your territories?

Chris Womack: Geologically, yes. I mean there are places down on the coast. The mobile [ph] area, some parts of Mississippi, where we have the geology for sequestration. But once again, I think as you look at what is somewhat predicated in some of these roles and the expectations and what the desires are — is the technology available at a commercial scale to do what they’re asking us to do. I think there are a lot of questions there So I think it’s — I go back to these rules, I think they are in practical at this time. And so I think there’s more work to be done and more conversations to be had about how they should go forward. But we’re still doing the analysis because it’s a lot of pages, a lot of work, and then we’ve got to decide what we do going forward in terms of litigation and whether it’s with our stage, whether it’s with the other different associations. So there’s a lot of work to be done there, a lot more conversations to be had.

Jeremy Tonet: Got it. That’s very helpful. Thanks. And one last one, if I could. Just given nuclear’s ability to offer base load that is very suitable for data center and other demand as such. Just wondering any updated thoughts on the viability of that technology down the road? And how Southern thinks about that? Thanks.

Chris Womack: I mean I can give you my speech if you’d like to hear it. I mean the country is going to need more nuclear. I mean there’s clearly no technology better suited to support demands of this increasingly digital economy and society. And so I think the federal government has got to step in and provide great leadership to incent companies to move in that direction. I’d also say we’re going to celebrate what we’ve done at Vogtle for a very long time before we give any consideration to any more. But we think others, they have the opportunity and should really look at this country has to look at new nuclear to go forward to meet this growing demand.

Jeremy Tonet: Makes sense. Thank you for that. I’ll leave it there.

Chris Womack: Thank you.

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

Anthony Crowdell: Yes. I think that last question was asking you about Vogtle 5 and 6, but I’m not sure. But I guess just a quick one. Last month, there was approval overwhelmingly approved the Georgia Public Service Commission, the IRP. But just curious, any commentary on some of the language related to rate increases. And you guys have laid out, especially on the slides, great information on how you’re navigating the challenges of adding all this infrastructure, but focus on the customer bill. And just if you could tie that to the language on one of the approved — during the approval with maybe no more bill increases.

Dan Tucker: Yes, Anthony, this is Dan. Look, I think largely, any commentary you heard was simply focused on affordability and ensuring that the benefits that Georgia Power said we’re there, end up reflected in customer rates. And that’s exactly what the stipulation does is provide that commitment so that when we file the 2025 rate case, 1 of those moving parts is going to include incorporating those economic benefits for all customers into that calculation.

Anthony Crowdell: Great. That’s all I had and congrats again.

Chris Womack: Thanks.

Dan Tucker: Thank you.

Operator: Our next question comes from Angie Storozynski with Seaport Global. Please proceed with your question.

Chris Womack: Hi Angie.

Angie Storozynski: Thank you. So first maybe about your — the Southeast Energy exchange market. So, when it was first created, I thought that was a sign that maybe there’s some excess power in your neck of boots and then you’re trying to distribute it to other parts of the Southeast. Now, I’m thinking the other way. But maybe there’s a way to move some power into Georgia to actually address the load growth. Again, I’m just clearly fishing for any upside potential associated with this newly created power market?

Chris Womack: Angie, I think it is what it is. I mean it was intended to move around the partners and participants of excess capacity. And so that’s what it has been doing, I think, has been very successful, but I don’t think it signals anything more than that. I mean that simply is it’s doing what we intended to do with all the participants and so we’ll continue to utilize that. Now, how does it factor into the additional growth? I mean we’ll step back and look at it. But it doesn’t signal anything more than what we intended to be when we made all the filings and got all the approval.

Dan Tucker: Yes Angie, really just to create a more nimble market for those intermittent resources to make sure that customers, wherever it’s needed benefit from that very, very low-cost energy.

Angie Storozynski: And so on a similar vein here, about Southern Towers. I understand that it’s fully contracted for now. And I’m just wondering when do you have some open capacity there, which could potentially benefit from this run up and full with power curves that we’re seeing in other markets? That’s number one. And number two is, so when you hear hyperscalers talk about contracting for supply of power, they do talk about net zero, right? So, I’m wondering, is there a way for Southern Power to, for example, participate in these negotiations, for example, plug into the Mississippi Power Grid, but address the carbon footprint of that supply with building contract-based solar or some other resources that could basically provide the carbon-free offsets?

Dan Tucker: Yes. Look, so I’ll start with the second question first. Look, Southern Power is always going to evaluate opportunities to serve load-serving entities, right? And so to the extent those opportunities present themselves in any of our jurisdictions where it makes sense, we’ll evaluate that. And you’ve seen that happen in the past, particularly in Georgia. On the first question in terms of the kind of the portfolio, yes, look, it’s very highly covered the next five years. And — but if you think about five years out, that’s the end of the decade, that’s when other resource needs begin to emerge. That’s when you start seeing utilities around the Southeast, begin to consider assets be on the ground. So, I think once you start looking towards the end of the decade and into the 2030s, Southern Power will have a lot of opportunity to take advantage of what we’re seeing today.

Angie Storozynski: Great. Thank you.

Chris Womack: Thank you, Angie.

Operator: Our next question comes from Paul Fremont with Ladenburg. Please proceed with your question.

Chris Womack: Hey, Paul.

Paul Fremont: Hey, congrats on Vogtle, great seeing both units and commercial operations. So, great job there. I guess my first question is on HB 1192, if the governor were to sign the bill, would that essentially slow down the addition of data centers in the state of Georgia or put you in a relative — or put your stated at a relative disadvantage to other states?

Chris Womack: And Paul, I think it’s hard to answer that question, but I would think not, but also I think you have to look at the competitive nature of economic development across states. And where does it put Georgia and then what signal does it send. But also, I think it’s about — it’s a big question about resilience and the ability to meet the demands of these customers and not just reliably, but providing them the resilience they expect and the demand. But I think it’s I think just a straight answer to your question, I think it’s probably not, but I think at the same time, it’s a competitive nature of economic development by states that I think you have to say what have to evaluate very closely.