After a year in which unusually mild weather depressed electric use, Southern Co. is forecasting 5 to 7% annual earnings growth thanks to a robust economy in Georgia.
The company faced “unprecedented headwinds” in 2023 but achieved numerous milestones during “an exceptional year,” CEO Chris Womack said in announcing the company’s fourth-quarter and full-year earnings Feb. 15.
Among the accomplishments Womack highlighted in his presentation was the long-delayed completion of Unit 3 at the Vogtle nuclear power plant near Waynesboro, Ga., which entered commercial operation on July 31 more than seven years late and $17 billion over budget.
The CEO pointed out that Southern subsidiary Georgia Power reached an agreement with the state’s Public Service Commission last August to resolve all remaining prudency issues at Unit 3 and Unit 4. Under the agreement, the recovery of capital construction costs from ratepayers for both units is capped at $7.6 billion, leaving the remaining costs — estimated at around $2.6 billion — to be paid by Georgia Power. The PSC approved the agreement in December.
Womack said Southern is making “meaningful progress” toward completion on Unit 4, with initial criticality achieved Feb. 14, marking the start of the nuclear chain reaction inside the reactor. The company expects the final unit to be in service by April.
Along with the progress on Vogtle, Womack mentioned the completion of Unit 8 at Alabama Power’s Plant Barry, a 727-MW combined cycle unit that began operating Nov. 1, and the acquisition of two solar projects that will provide 350 MW when finished.
The company’s operating revenue for the three months ending in December came to $6 billion, compared to $7 billion for the same period in 2022. Net income for the period — excluding losses on plants under construction, losses on capital investments and tax impacts — stood at $700 million, compared to $285 million for the same period the year before.
Operating revenue for the full year was $25.3 billion, down from $29.3 billion in 2022; however, net income for the full year — excluding the same elements — was $4 billion, up from $3.9 billion the previous year.
Southern reported adjusted earnings per share of 64 cents for the quarter, up from 26 cents for the same period in 2022, with adjusted earnings per share for the whole year rising from $3.60 to $3.65, which CFO Dan Tucker noted was “at the very top of our 2023 guidance range.” He cited “higher utility revenues and lower nonfuel O&M [operations and maintenance] costs and income taxes.”
Tucker said the company’s electric revenue was reduced because 2023 was “the mildest year in our history for our electric service territories.” Electric retail sales, adjusted for weather, were down 0.4% from 2022, with reduced residential and industrial usage (down 0.5% and 1.9% respectively) balanced by strong commercial sales growth of 1.3%.
The decline in industrial sales was primarily due to “continued slowing in [the] housing and construction-related sectors, as well as lower sales to chemical companies due to outages and long-planned plant closures,” Tucker said. However, he pointed out that the population in Southern’s electric territories grew by 0.8% between July 2022 and July 2023, with Georgia adding more than 26,500 new jobs last year. In 2022, the state added 45,600 jobs, more than 15,000 of them from auto factories being built by Hyundai and EV truck maker Rivian.
Based on these trends, Southern is setting an adjusted earnings per share guidance range for 2024 of $3.95 to $4.05, with long-term adjusted EPS growth rate of 5-7%, Tucker said. These figures assume Vogtle Unit 4 is completed on schedule.
Despite the challenges, Womack said Southern’s electric and gas businesses “continued to excel at the fundamentals and started this year strong,” noting that the company operated reliably during January’s winter storm even as “electricity demands reached all-time winter peaks.”
