Southern Company (the) · NYSE:SO
Southern Company (the) — Investor Presentation (June 2014)
53 slides from Southern Company (the)'s investor presentation, June 2014
Slide 1: Southern Company Overview June 2014
Southern Company Overview June 2014
Slide 2: Cautionary Note Regarding Forward-Looking Statements
Cautionary Note Regarding Forward-Looking Statements Certain information contained in this presentation is forward‐looking information based on current expectations and plans that involve risks and uncertainties. Forward‐looking information includes, among other things, statements concerning earning
Slide 3: Investor Relations Contact Info
Investor Relations Contact Info • Dan Tucker Vice President, Investor Relations & Financial Planning 1-404-506-5310 dstucker@southernco.com • Jimmy Stewart Manager, Investor Relations 1-404-506-0747 jwstewar@southernco.com Main website: www.southerncompany.com IR website: http://investor.southerncom
Slide 4: Environmental Reports
Environmental Reports Carbon Disclosure Report This update for 2014 details actions the Southern Company system is taking on greenhouse gas emissions and incorporates information the company previously submitted to the Carbon Disclosure Project. http://www.southerncompany.com/what-doing/pdf/Carbon_D
Slide 5: Southern Company – A Solid Foundation
Southern Company – A Solid Foundation • >90% of earnings from our regulated subsidiaries • Forward-looking, constructive regulatory frameworks • Diverse, growing Southeast economy and customer base 5
Slide 6: Other Hallmarks of Southern Company
Other Hallmarks of Southern Company Southern Power – a premier wholesale generation company An Increasingly Diverse Energy Portfolio Dividend History 6
Slide 7: Our Strategic Priorities
Our Strategic Priorities • Excel at the Fundamentals • Achieve Success with Major Construction • Support Building National Energy Policy • Promote Energy Innovation • Value and Develop Our People 7
Slide 8: Constructive, Proven Regulatory Frameworks
Constructive, Proven Regulatory Frameworks 8
Slide 9: Quality Southern Power Assets
Quality Southern Power Assets 8,960 MWs of Capacity Business Model Build or buy assets supported by long‐term contracts with credit‐worthy counterparties Develop long‐term relationships / partnerships that leverage our operational excellence Minimize fuel and transmission risk Commitment to financia
Slide 10: Financial Overview
Financial Overview
Slide 11: Earnings Per Share & Dividend Growth
Earnings Per Share & Dividend Growth1 $3.03 Potential Longer-term $2.91 EPS Growth Drivers • Regulated Capacity $2.89 $2.80 • So Power Capacity • Environmental Rules $2.80 • Effluent Guidelines (ELG) • 316(b) $2.72 • Coal Ash Rules (CCR) • GHG Standards 2014 2015 2016 • Equity ratio Annual Dividends
Slide 12: Dividend Growth Objectives
Dividend Growth Objectives* Goal of regular, predictable, and sustainable EPS growth is supportive of a growing dividend * Future dividend increases are subject to board of directors’ approval 12
Slide 13: Dividends are an integral component of our value proposition
Dividends are an integral component of our value proposition Source: Bloomberg; assumes all dividends are reinvested and returns are compounded monthly, 2001 Mirant spin is treated as a dividend. 13
Slide 14: 2014 Economic and Sales Forecast
2014 Economic and Sales Forecast Economic Roundtable 2014 Sales Growth Forecast GDP projected to grow 2.5% – 3.0% Industrial activity continues to improve with many new entrants being international firms Housing markets continue to improve with housing-related sectors benefiting Economic momentum fr
Slide 15: Q1 2014 Retail Sales
Q1 2014 Retail Sales As Reported Weather Normal • 2nd coldest Q1 in 20 years Residential 14.8% 1.2% • 10,000 new residential customers Commercial 3.7% -0.2% • Economic development pipeline Industrial 2.8% 2.8% reflects a 58% increase in Total Retail 7.1% 1.3% potential projects Industrial Segment Hi
Slide 16: $17B Capital Expenditure Program (2014-2016)
$17B Capital Expenditure Program (2014-2016) $6.9B $5.6B ‘14 - '16 Potential Southern Power $4.5B Growth Projects 1.4 Southern Power Base 0.4 Environmental 3.2 New Generation 3.3 Base T&D Growth 1.3 $15.5B Nuclear Fuel 0.9 Maintenance 5.4 Other 1.0 2014 2015 2016 Notes: Totals may not add due to rou
Slide 17: 2014 – 2016 Financing Plan
2014 — 2016 Financing Pian ($ in billions) 2014 2015 2016 Remaining Total Projected Projected Georgia DOE Loan $ 02 $ 12 $ 14 $ 04 Mississippi Secuntization - 09 : Capital Markets New Money 05 05 04 05 Maturity & Bridge Financing Replacement 04 04 13 13 Long Term Securities Issuances' $ 1414$ 21 $ 4
Slide 18: Strong Credit Ratings Benefit our Customers
Strong Credit Ratings Benefit our Customers 18
Slide 19: Our Debt Portfolio Compares Favorably
Our Debt Portfolio Compares Favorably 6.50 % 6.00 % Ameren Corp. 0% AEP 0% Con Edison 0% 5.50 % PG&E 0% Wisconsin Energy 9% Exelon Corp. 9% Average Cost (%) 5.00 % Dominion 4% NextEra 7% Entergy Corp. 16% Duke Energy 0% 4.50 % Public Service Entp. Grp. 0% Gulf 21% 4.00 % Alabama 5% Southern Co. 5% 3
Slide 20: Generation Overview
Generation Overview Including Major Construction Projects
Slide 21: Committed to “All of the Above”
Committed to “All of the Above” Plant McDonough-Atkinson 2,520 MW Natural Gas CC Among of the most efficient in the nation Utility Scale Solar at Southern Power and initiatives at Georgia Power Vogtle Units 3 & 4 ~1,005MW Ownership Multiple AP1000 technology Wind Energy PPAs Kemper County IGCC ~495M
Slide 22: Transitioning the coal fleet to comply with EPA rules
Transitioning the coal fleet to comply with EPA rules Coal MWs as of 12/31/13 20,860 MWs to Convert to Natural Gas 3,200 MWs fuel switch (to PRB) / ACI / DSI 1,200 MWs to be retired by 2015 2,900 Well‐controlled MWs for long‐term use (scrubber+) 13,200 EPA’s MATS rule will drive most of the Southern
Slide 23: A Diverse Generation Fleet Benefits our Customers
A Diverse Generation Fleet Benefits our Customers Resources What We’ve Used Future Flexibility (GWs of Capacity) (GWHs of Energy) (Depends on Fuel Prices) 2000 2013 2020E 2000 2013 2020E 2020E Nuclear 16% 16% Nuclear 18% 18% Hydro/Renew Nuclear 4% 4% Converted Gas Total Gas CTs 2013: 46% 23% 42% 202
Slide 24: Historical Generation Mix Trends
Historical Generation Mix Trends 24
Slide 25: Historical GHG Intensity
Historical GHG Intensity (CO2e lbs/MWH) 25
Slide 26: Renewables
Renewables Southern Power invested in ~260 MW of utility scale solar, mainly in desert Southwest Solar initiatives in Georgia initiated to provide ~800 MW of solar capacity to Georgia Power by 2016 • 90MW of PV solar to be located at military bases • 2014 Utility Scale RFP for 495 MW • Bids were due
Slide 27: Vogtle 3&4 - New Nuclear Construction
Vogtle 3&4 - New Nuclear Construction • Approved by Georgia Public Service Commission in 2009 • Westinghouse AP1000 Technology • Each unit totals approximately 1,100MW units • Georgia Power is a 45.7% owner (Oglethorpe, 30%; MEAG, 22.7%; and Dalton Utilities, 1.6%) • Received Combined Construction a
Slide 28: Latest Vogtle Construction Monitoring Report (9th/10th VCM)
Latest Vogtle Construction Monitoring Report (9th/10th VCM) Summary of Customer Benefits As reflected in VCM 9 & 10 • $389M of capital spend in 2013 Interest Savings Total • Projected in-service dates of Q4 2017 $750M $2.3B and Q4 2018 for units 3 & 4, respectively DOE LG $250M • $2.3B of anticipate
Slide 29: No Change in Latest Cost Estimate (9th/10th VCM)
No Change in Latest Cost Estimate (9th/10th VCM) Largely schedule‐related costs 29
Slide 30: Estimated Cumulative Rate Impact of 6% to 8% at COD
Estimated Cumulative Rate Impact of 6% to 8% at COD • Fuel savings, along with the additional customer benefits, significantly lessen the overall rate impact to customers at the time the units are put into service. The remaining projected rate impact for customers is only 2 to 4 percent 30
Slide 31: DOE Loan Guarantee – Georgia Power
DOE Loan Guarantee – Georgia Power • Finalized February 20, 2014 • Credit Facility = $3.46B (70% of eligible project costs) • Draws mature February 20, 2044, with amortization of principal beginning in 2020. • Interest Rate = Treasury + 0.375% • First draw of $1B taken the day of closing • Estimated
Slide 32: Vogtle Construction Update
Vogtle Construction Update Unit 3 Unit 4 Set CA-20 Set containment cradle Progress Concrete under bottom head Containment vessel bottom head set Set turbine island condensers Condenser assembly Cooling tower above 300’ Cooling tower above 50’ Upcoming • Set CA-05 (wall module) • Modu
Slide 33: Vogtle 3&4 Update – Key Risk Mitigations
Vogtle 3&4 Update – Key Risk Mitigations • 100% fixed/firm EPC contract • Significant front-end engineering during NRC design certification • PWR is not new technology (safety features of AP1000 are new) • Significant oversight (SNC, NRC, GPSC, co-owners) • Remaining annual rate increases <1% per ye
Slide 34: Vogtle 3 & 4 – Construction Site
Vogtle 3 & 4 – Construction Site 34
Slide 35: Vogtle Unit 3 Nuclear Island – 2014 Activity
Vogtle Unit 3 Nuclear Island – 2014 Activity CA-20 Current View CA-04 CB-65 Auxiliary Building Walls to Elevation 82’6” CA-03 CA-01 CA-20 CA-02 (Inside Vessel) Target Middle Ring Year-End Lower Ring CA-05 (Inside Vessel) View Auxiliary Building Walls to Elevation 100’ Shield Building Panel Installat
Slide 36: AP1000 Nuclear and Turbine Islands
AP1000 Nuclear and Turbine Islands 36
Slide 37: Vogtle 3 Nuclear Island & Cooling Tower
Vogtle 3 Nuclear Island & Cooling Tower 37
Slide 38: Major Vogtle 3 Components
Major Vogtle 3 Components CA‐05 Module Containment Vessel Rings inside Module Assembly Building (MAB) Shield Building Turbine Wall Panels Building 38
Slide 39: Vogtle 4 Nuclear Island
Vogtle 4 Nuclear Island \ a 7 v “* fl oe \)
Slide 40: Kemper County IGCC
Kemper County IGCC • First of a kind technology developed by SO and KBR • Carbon footprint equivalent to a combined cycle natural gas unit – 65% CO2 capture for enhanced oil recovery (EOR) • Affordable, abundant, low-rank coal resource – Mine mouth lignite coal 40
Slide 41: TRIG Attributes / Advantages
TRIGTM Attributes / Advantages Presalter Cyclone syngas • Simple, well established design – Based on technology in use for 70 years Standpipe • Either Air- or Oxygen-blown Cyclone – Air for power – Oxygen for liquid fuels and chemicals • High Reliability Design Riser – Non-slagging design: – Expect
Slide 42: Kemper IGCC Update
Kemper IGCC Update • Pneumatic testing of Gasifer A complete in May 2014; Gasifer B scheduled for June • First gasifier heat-up targeted for mid to late summer 2014 • Combined cycle expected in-service in summer 2014 • Current cost estimates assume in-service date extension to May 31, 2015 • Prudenc
Slide 43: Kemper IGCC – Construction Site
Kemper IGCC – Construction Site Lignite Gasifier Delivery Combined Cycle Gas Clean- Up Cooling Towers 43
Slide 44: Kemper IGCC – Major Components
Kemper IGCC – Major Components Acid Gas Removal Area Gasifier Structure CO2 Flash Drums Gasifier 44
Slide 45: Kemper IGCC – Combined Cycle
Kemper IGCC – Combined Cycle 45
Slide 46: Appendix
APPENDIX
Slide 47: 2014 – 2016 CapEx Forecast – Company
2014 – 2016 CapEx Forecast – Company Total $billions 2014 2015 2016 '14 - '16 Alabama Power $1.7 $1.7 $1.2 $4.6 Georgia Power 2.5 2.4 2.1 7.0 Gulf Power 0.4 0.3 0.2 0.9 Mississippi Power 1.6 0.5 0.2 2.3 Other Subsidiaries 0.2 0.1 0.1 0.3 Traditional OpCo Total $6.4 $4.9 $3.8 $15.1 Southern Power 0.2
Slide 48: 2014 – 2016 CapEx Forecast – Functional
2014 – 2016 CapEx Forecast – Functional Total $billions 2014 2015 2016 ‘14-’16 New Generation $2.0 $0.9 $0.5 $3.3 Environmental Compliance 1.5 1.1 0.6 3.2 Transmission 0.1 0.2 0.1 0.4 Distribution 0.3 0.3 0.3 0.9 Total T&D Growth 0.4 0.4 0.4 1.3 Generation 0.9 0.9 0.8 2.7 Transmission 0.6 0.5 0.4 1.
Slide 49: 2014 – 2016 Long-term Securities Issuances
2014 – 2016 Long-term Securities Issuances , 49
Slide 50: 2014 Key Regulatory Dockets
2014 Key Regulatory Dockets Georgia Power • Vogtle Construction Monitoring Report (VCM) – Docket 29849 • Advanced Solar Initiative – Docket 36498 & 36325 Mississippi Power Company • Kemper IGCC Project – Docket 2009-UA-0014 • 7 Year Rate Mitigation Plan for Kemper IGCC Project – Docket 2013-UN-0039
Slide 51: Georgia Advanced Solar Initiatives – 735MW
Georgia Advanced Solar Initiatives – 735MW PSC approved the 210 MW ASI program in November 2012 PSC approved the 525 MW of additional solar in the 2013 IRP order Distributed Generation: 100 MW Utility Scale: 425 MW Program 2014 2015 2016 ASI DG 45MW 45MW 2013 ASI Utility Scale 60MW 60MW ASI Prim
Slide 52: Georgia Power Rate Settlement Summary (Docket 36989)
Georgia Power Rate Settlement Summary (Docket 36989) Original Filing • Original filing of $482M levelized rate ROE midpoint reduced 20bps from increase ($1,446M over 3 years) current level (11.15% to 10.95%) • 11.5% ROE (band of 10.25% to 12.25%) Top end of allowed retail range Settlement dropped 25
Slide 53: Gulf Power Rate Settlement Summary (Docket 130140-EI)
Gulf Power Rate Settlement Summary (Docket 130140-EI) Original Filing • Original filing of $74M in 2014 & $16M in 2015 – Rates effective April 2014 ($56M collection) Maintains current allowed & July 2015 ($8M collection) ROE midpoint and range with • Midpoint of 11.5% ROE potential for an increase S