What were the main drivers of Southern Company's revenue growth in 2005?

Revenue growth in 2005 was driven by increases in retail operating revenues, primarily due to approved base rate increases by the Georgia Public Service Commission for Georgia Power and Savannah Electric, and by sales growth. Wholesale revenues ('sales for resale') also increased significantly, largely attributed to new power purchase agreements and a higher average cost of fuel per net kilowatt-hour generated.

How did Southern Company address the significant storm damage costs incurred in 2005?

Southern Company incurred substantial costs due to Hurricanes Dennis and Katrina. Affected operating companies received authorization from their respective state Public Service Commissions to defer restoration costs exceeding their storm damage reserve balances. These deferred costs are subject to PSC approval for recovery, with plans for recovery through rate riders, securitized financing (as proposed by Gulf Power), and the replenishment of storm damage reserves.

What are the key environmental challenges and planned expenditures for Southern Company?

Southern Company faces ongoing compliance requirements under various federal and state environmental statutes, including the Clean Air Act. Significant capital expenditures are planned to reduce emissions (SO2, NOx, mercury) and comply with new regulations like the Clean Air Interstate Rule and Visibility Rule. The company estimates over $7.5 billion in capital expenditures for environmental compliance over the next decade.

What is the company's outlook on fuel costs and their impact?

The company experienced a significant upward trend in coal and natural gas costs since 2003, with volatility expected to continue. While these costs generally do not affect net income for the retail operating companies due to fuel cost recovery provisions in their rates, they do impact cash flow and require continuous monitoring and adjustments to recovery factors. Southern Power's wholesale contracts typically shift fuel cost responsibility to the purchasers.

SOUTHERN CO 10-K FY2005 Annual Report — Revenue, Net Income, EPS

Summary

Southern Company's 2005 Annual Report highlights a period of financial strength with net income of $1.59 billion, an increase of 3.8% from the prior year. The company experienced growth in both retail and wholesale electricity sales, driven by a recovering economy and new power purchase agreements. Despite facing challenges such as rising fuel costs and significant storm restoration expenses (particularly from Hurricanes Katrina and Dennis), Southern Company demonstrated resilience through effective cost management and regulatory approvals for cost recovery. Key strategic initiatives include investments in new generation capacity and a continued evaluation of its diverse business portfolio, which encompasses regulated utilities, competitive wholesale generation, synthetic fuels, and other energy-related services. The company maintains a strong commitment to shareholder returns, evidenced by consistent dividend payments and a focus on earnings per share growth. Regulatory matters, particularly those related to environmental compliance and rate recovery, remain a significant area of focus, with substantial capital expenditures planned for environmental upgrades over the next decade.

Key Highlights

1Reported net income of $1.59 billion in 2005, a 3.8% increase year-over-year.
2Achieved earnings per share (EPS) of $2.14, exceeding the high end of the company's target range.
3Retail operating revenues increased significantly due to base rate increases and sales growth, while wholesale revenues also saw a substantial rise driven by new power purchase agreements and increased fuel costs.
4Managed significant storm restoration costs from Hurricanes Katrina and Dennis, with deferred costs being addressed through regulatory approvals and potential securitized financing.
5Made substantial capital expenditures for environmental compliance, with an estimated $7.5 billion projected over the next decade.
6Continued to provide consistent shareholder returns with regular dividend payments, marking the 233rd consecutive quarter of paying a dividend equal to or higher than the previous quarter.
7Invested in new generation capacity and explored future growth opportunities, including a proposed merger of Georgia Power and Savannah Electric and potential new nuclear projects.

SOUTHERN CO Annual Report (Amendment), Year Ended Dec 31, 2005

Summary

Key Highlights

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