10-KPeriod: FY2013

SOUTHERN CO Annual Report, Year Ended Dec 31, 2013

Filed February 27, 2014For Securities:SOSOJESOJFSOJCSOJDSOMN

Summary

Southern Company (SO) operates as a prominent utility, providing electric services across Alabama, Georgia, Florida, and Mississippi through its four primary operating subsidiaries: Alabama Power, Georgia Power, Gulf Power, and Mississippi Power. The company also engages in wholesale electricity sales and generation asset management through Southern Power Company, and has diversified interests in telecommunications and leveraged leases. For the fiscal year ending December 30, 2013, Southern Company reported a net income of $1.6 billion, a decrease of 30% from the previous year, largely attributed to significant pre-tax charges of $1.2 billion related to cost revisions for the Kemper IGCC project. Despite this, the company maintained a stable financial condition. Key operational highlights included better-than-target peak season plant availability for fossil/hydro plants and improved transmission/distribution system reliability. However, earnings per share (EPS) on a GAAP basis did not meet targets due to the Kemper IGCC charges. The company also continued its significant construction program, with major investments in Plant Vogtle Units 3 and 4 and the Kemper IGCC, subject to various risks including cost overruns and delays.

Financial Highlights

44 data points
Beta

Revenue

$17.09B

Net Income

$1.71B

10.0% Net Margin

EPS (Diluted)

$1.87

Total Assets

$64.26B

Cash & Equivalents

$659.00M

Free Cash Flow

$766.00M

Financial Statements
Beta
Revenue$17.09B
Operating Expenses$13.83B
Operating Income$3.25B
Net Income$1.71B
EPS (Basic)$1.88
EPS (Diluted)$1.87
Shares Outstanding (Basic)877.00M
Shares Outstanding (Diluted)881.00M

Key Highlights

  • 1Southern Company operates through four traditional operating subsidiaries (Alabama Power, Georgia Power, Gulf Power, Mississippi Power) and Southern Power Company, serving customers across four Southeastern states.
  • 2Net income for 2013 was $1.6 billion, a 30% decrease from 2012, primarily due to $1.2 billion in pre-tax charges related to cost revisions for the Kemper IGCC project.
  • 3The company reported strong operational performance with improved plant availability and system reliability in key metrics.
  • 4Southern Company's construction program includes significant investments in major projects like Plant Vogtle Units 3 and 4 and the Kemper IGCC, which carry associated risks related to cost overruns and project completion timelines.
  • 5The company's strategy involves a balanced approach to regulated operations and competitive wholesale market participation through Southern Power, focusing on long-term capacity contracts.
  • 6Environmental compliance remains a significant focus, with substantial capital expenditures projected for the coming years to meet evolving regulations under the Clean Air Act and other environmental statutes.

Frequently Asked Questions

The primary driver for the decrease in net income was the recognition of $1.2 billion in pre-tax charges related to revisions in the estimated costs for Mississippi Power's construction of the Kemper IGCC project, which exceeded the established cost cap. This significantly impacted overall profitability.

Southern Company's two largest ongoing construction projects are Plant Vogtle Units 3 and 4, two nuclear generating units with Georgia Power holding a 45.7% ownership interest, and the Kemper IGCC facility in Mississippi, in which Mississippi Power is expected to hold an 85% ownership interest. These projects involve substantial capital investment and are subject to regulatory oversight, construction risks, and potential cost overruns.

Southern Company invests significantly in environmental capital retrofit projects to comply with federal and state environmental statutes and regulations, such as the Clean Air Act. The company expects to recover a major portion of these costs through existing ratemaking provisions for its traditional operating companies and market-based rates for Southern Power. However, there is no assurance that all such costs will be recovered, and compliance costs could impact future unit retirement and replacement decisions, as well as overall financial condition if not recovered through rates or contracts.

Southern Power Company operates as an electric wholesale generation subsidiary. It constructs, acquires, owns, and manages generation assets, including renewable energy projects, and sells electricity at market-based rates in the wholesale market. This segment of the business aims to create value through various transactions and is generally insulated from significant fuel supply and transmission risks by making these the responsibility of counterparties to its Power Purchase Agreements (PPAs).