The Southern Company (SO) Q1 2026 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call highlights strong growth projections in retail electric sales and large load customer contracts, coupled with a significant capital investment plan. Despite some churn in Georgia, overall activity remains robust, with a focus on rate stability and shareholder returns. Management's strategic approach to regulatory challenges and leveraging vertically integrated structures is positive. However, the lack of commitment to new nuclear units and vague responses on bill credits slightly temper the outlook. Given the absence of market cap data, the prediction leans towards a positive stock movement within 2% to 8%.
Key Financial Performance
Adjusted EPS $1.32 per share, $0.09 higher than the first quarter of 2025 and $0.12 above the estimate. The increase was driven by meaningful customer growth, increased usage (including from data centers), increased revenues in gas utilities, and higher energy-related revenues in unregulated businesses. This was partially offset by higher financing costs and milder weather year-over-year.
Retail Electricity Sales Weather-normal retail electricity sales to all classes were 2.3% higher than the first quarter of 2025. This growth represents the highest total retail sales growth in the first quarter in recent history. Sales to all three customer classes were up year-over-year, including residential (46,000 new customers added), commercial (4.5% growth bolstered by data centers), and industrial (1.5% growth driven by steel manufacturers in Alabama).
Data Center Usage Data center usage expanded by 42% year-over-year, primarily due to accelerating usage ramps at large load facilities.
Economic Development Announcements Over $7 billion of capital investment and nearly 4,000 permanent jobs were announced in the first quarter, including a $2 billion biopharmaceutical manufacturing project in Georgia creating over 300 jobs.
Loan Agreements with DOE $26.5 billion in loan agreements with the Department of Energy, projected to generate cumulative savings of $7 billion for customers over a 30-year term by reducing pressure on capital market needs.
Southern Power Capital Plan Projected $700 million incremental investment for 400 megawatts of additional capacity uprates through natural gas turbine upgrades in Alabama and Georgia, with commercial operation projected between 2029 and 2031.
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Operating Highlights
Battery Energy Storage Systems: Georgia Power achieved commercial operations for 2 battery energy storage systems, providing nearly 200 megawatts of capacity. These are part of a 10-gigawatt portfolio of approved new generation resources.
Natural Gas Combustion Turbines: Multiple natural gas combustion turbines are projected to be online later in 2026 and 2027.
Large Load Customer Agreements: Signed contracts for 1.9 gigawatts of customer load with hyperscalers, bringing the total contracted large load agreements to over 11 gigawatts across electric subsidiaries.
Economic Development in Southeast: Over $7 billion of capital investment and nearly 4,000 permanent jobs announced in the first quarter, including a $2 billion biopharmaceutical project in Georgia.
Hyundai Investment in Illinois: Hyundai announced a $500 million investment and 2,500 jobs in the Nicor Gas service territory.
Rate Stability: Base rates in Alabama and Georgia are held stable until at least 2029, with a recent filing to lower rates in Georgia.
Retail Electricity Sales Growth: First quarter weather-normal retail electricity sales grew 2.3% year-over-year, with significant growth in residential, commercial, and industrial sectors.
Data Center Usage: Data center usage expanded by 42% year-over-year, driven by large load facilities.
DOE Loan Agreements: Secured $26.5 billion in loan agreements with the Department of Energy, projected to generate $7 billion in customer savings over 30 years.
Future Generation Resources: Georgia Power initiated regulatory processes for an all-source RFP to procure 2 to 6 gigawatts of new generation resources, including thermal generation, battery energy storage, and renewables, projected for 2032-2033.
Southern Power Investments: Plans to add 400 megawatts of capacity through natural gas turbine upgrades, with an additional $700 million investment projected.
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Risk or Challenges
Higher Financing Costs: The company experienced higher financing costs during the first quarter of 2026, which partially offset positive revenue drivers.
Milder Weather Impact: Milder weather year-over-year compared to the first quarter of 2025 negatively impacted energy usage and revenues.
Equity Needs: The company projects a remaining need for equity or equity equivalents of approximately $1.8 billion through 2030 to support its capital plan and long-term credit objectives.
Regulatory and Approval Risks: Future generation investments and RFP processes are subject to regulatory approvals, which could pose challenges to the timely execution of projects.
Supply Chain and Project Execution Risks: The construction and development of new generation resources, including battery systems and natural gas turbines, could face delays or cost overruns.
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Guidance & Outlook
Projected demand from large load customers: The company anticipates significant growth in demand for power across its electric service territories, with 23 gigawatts of contracted or late-stage load. Over the past two months, 1.9 gigawatts of customer load contracts were signed, bringing fully contracted large load agreements to over 11 gigawatts.
Rate stability and capital investment: Base rates in Alabama and Georgia are expected to remain stable until at least 2029. The company has filed to lower rates in Georgia, associated with the recovery of fuel and storm costs. Additional capital investments are planned to serve incremental growth opportunities under established regulatory processes.
New generation resources: The company is developing a 10-gigawatt portfolio of approved new generation resources, including battery systems and natural gas combustion turbines, projected to be online in 2026 and 2027. Georgia Power has initiated a regulatory process for an all-source RFP to procure 2 to 6 gigawatts of new dispatchable generation resources, projected to be in service in 2032 and 2033.
DOE loan agreements: The company secured $26.5 billion in loan agreements with the Department of Energy, expected to generate $7 billion in cumulative customer savings over 30 years and reduce pressure on capital market needs.
Southern Power investments: Southern Power plans to add 400 megawatts of additional capacity through natural gas turbine upgrades in Alabama and Georgia, projected to be operational between 2029 and 2031. This represents an incremental $700 million in capital expenditures. Additional growth opportunities, including 300 megawatts of natural gas uprates, are under evaluation.
Equity financing needs: The company projects a remaining need for $1.8 billion in equity or equity equivalents through 2030 to support its capital plan and long-term credit objectives.
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Shareholder Return Plan
Dividend Increase: The Southern Company Board of Directors approved an increase of $0.08 per share in the annual common dividend, raising the annualized rate to $3.04 per share.
Dividend History: This marks the 25th consecutive annual increase in dividends and 79 consecutive years of paying a dividend equal to or greater than the previous year.
Dividend Strategy: The company emphasizes its focus on delivering regular, predictable, and sustainable value for shareholders through its dividend policy.
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Key Q&A
Q:What are Southern Company's views on new nuclear and their involvement in the consortium for AP1000s?
A:Southern Company is excited about the actions supporting new nuclear, particularly around AP1000s. However, they are not currently in a position to commit to building a new unit. They are sharing experiences from Vogtle Unit 3 and 4 and are positive about the ongoing discussions and actions in the sector.
Q:Have renegotiation conversations started for Southern Power's existing tolling agreements, and are there discussions with hyperscalers?
A:Yes, renegotiation conversations have started, and Southern Power is also having discussions with hyperscalers and other sectors to explore opportunities that fit their profile.
Q:Is the 7%-8% CAGR growth target embedding assumptions from Southern Power's activities?
A:No, the 7%-8% CAGR growth target does not embed assumptions from Southern Power's activities. These activities are seen as potential upside opportunities that could add durability to their growth trajectory.
Q:How is Southern Company addressing regulatory strategy in light of load growth and visibility?
A:Southern Company focuses on rate stability and ensuring large loads pay their full share through structured contracts. This approach supports rate stability and benefits existing customers, allowing for freezes in Georgia through 2028 and Alabama through 2029.
Q:What is the status of the $850 million cumulative bill credits and potential revisions?
A:Southern Company does not get ahead of regulators but focuses on using growth to support rate stability and put downward pressure on rates. They are exploring opportunities to provide additional benefits to customers.
Q:Is there a softening in contracted commitments in Georgia compared to other states?
A:There is some churn in Georgia, but activity remains strong. There is increasing activity in Alabama and Mississippi, and the overall pipeline remains robust with 75 gigawatts of activity.
Q:What are the uprate opportunities at Southern Power, and what is the timing?
A:Southern Power is exploring uprate opportunities across its gas fleet, with construction scheduled to begin in 2026. This covers the entire fleet, and the timing for the remaining 300 megawatts is being evaluated.
Q:What are the latest thoughts on the Georgia PSC elections and their impact on affordability and development?
A:Southern Company is confident in its ability to navigate political changes and maintain a constructive regulatory environment. The elections are focusing on issues like data centers, large load customers, and rate stability.
Q:How does Southern Company view the acceleration of large load contracts and its impact on RFPs?
A:The acceleration reflects updates in load forecasts and strong demand. Southern Company is leveraging its vertically integrated structure to align with customer needs and sees repeat buyers as a positive indicator of its success.
Q:What is the impact of minimum bills on customer rates and regulatory discussions?
A:Minimum bills are designed to recover the full cost of serving large loads, providing benefits to existing customers and supporting rate stability. This approach differentiates Southern Company and protects customers.
Q:How does Southern Company leverage its vertically integrated structure for large load contracts?
A:Southern Company uses its vertically integrated structure to provide transparency and certainty to customers, ensuring alignment with their needs and expediting the process of delivering power.
Q:What is Southern Company's approach to mitigating supply chain and labor challenges?
A:Southern Company leverages its size, scale, and long-standing relationships with suppliers and labor organizations to address supply chain and labor challenges. They are well-positioned but continue to actively manage these areas.
Q:What is the timing and scope of the Georgia RFP process?
A:The Georgia RFP process is expected to conclude by the end of the year, with in-service dates for new generation in 2032-2033. The process aligns with updated load forecasts and orderly planning.
Q:What is the equity outlook related to DOE loan guarantees and Southern Power gas uprates?
A:DOE loan guarantees reduce traditional debt without impacting equity. Southern Power gas uprates are funded with 40% equity, and additional equity may be required for further opportunities.
Q:What is the status of Southern Power's contracted capacity and future opportunities?
A:Southern Power has mid-90% of its capacity contracted, with many contracts extending into the mid-2030s. They are exploring recontracting and new opportunities as capacity becomes available.
Q:Review of Unclear Management Responses
A:Management avoided directly answering questions about potential revisions to the $850 million cumulative bill credits, stating they do not get ahead of regulators. Additionally, they provided vague responses regarding the timing and specifics of the remaining 300 megawatts of uprate opportunities at Southern Power.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Alabama Georgia
Alabama Southeast
Atlanta investment
DOE loan
Department Energy
Energy Alabama
Gas service
Generation procurement
Power megawatt
amount
battery energy
business
capital plan
cost financing
credit quality
energy storage
gas utility
generation resource
gigawatts stage
investment opportunity
load process
manufacturer
manufacturing
megawatt capacity
month Georgia
objective
opportunity Southeast
opportunity Southern
planning
power
progress
project gigawatts
region country
revenue
saving
stability
stage load
turbine
SO Transcript
The Southern Company (SO) Q1 2026 Earnings Call Transcript
Positive4-30
The earnings call highlights strong growth projections in retail electric sales and large load customer contracts, coupled with a significant capital investment plan. Despite some churn in Georgia, overall activity remains robust, with a focus on rate stability and shareholder returns. Management's strategic approach to regulatory challenges and leveraging vertically integrated structures is positive. However, the lack of commitment to new nuclear units and vague responses on bill credits slightly temper the outlook. Given the absence of market cap data, the prediction leans towards a positive stock movement within 2% to 8%.
The Southern Company (SO) Q4 2025 Earnings Call Transcript
Positive2-19
The earnings call summary and Q&A reveal a positive outlook with strong financial performance expectations, strategic partnerships, and growth plans. The company is confident in its capacity expansion and sees opportunities for recontracting at higher rates. While there are some concerns about affordability and legislation, management remains optimistic. The emphasis on dividend growth and durable large load contracts further supports a positive sentiment. Overall, the sentiment is positive, indicating a likely stock price increase in the short term.
The Southern Company (SO) Q3 2025 Earnings Call Transcript
Positive10-30
The earnings call indicates strong growth in retail electricity sales and a robust large load pipeline, alongside significant capital investment plans. The Q&A section revealed management's proactive approach to regulatory challenges and strategic equity financing. Despite some uncertainties in nuclear and gas-fired projects, the overall sentiment is positive, driven by increased demand forecasts and potential financial growth. The lack of a market cap suggests a more pronounced reaction, likely in the positive range.
The Southern Company (SO) Q2 2025 Earnings Call Transcript
Unknown7-31
The earnings call summary presents a mixed picture. The dividend increase and large load pipeline are positive, but management's reluctance to provide clear guidance on growth rebasing and asset sales creates uncertainty. The Q&A session further highlights management's cautious approach to growth projections and asset sales. These factors, combined with the lack of a market cap, suggest a neutral stock price movement in the short term.
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