01—Abstract
Summary
Summary of the 10-K filed March 2, 2015. Cited figures are marked; the original filing is the authoritative source.
Southern Company (SO) operates as a major utility company, providing electricity to millions of customers across the Southeastern United States.
The company's diverse operations include regulated utilities in Alabama, Georgia, Florida, and Mississippi, as well as a competitive wholesale generation subsidiary, Southern Power. The company's 2014 annual report highlights significant investments in construction programs, with substantial capital expenditures planned for new generation, environmental compliance, generation maintenance, transmission, and distribution upgrades. A key focus for Southern Company is managing the costs and timelines of its major construction projects, notably the development of Plant Vogtle Units 3 and 4 and the Kemper IGCC, which represent substantial capital commitments and potential risks.
The company's financial performance in 2014 was impacted by charges related to the Kemper IGCC project, but it also saw increases in retail revenues due to base rate adjustments and favorable weather conditions. Southern Company remains committed to its dividend payments, with a history of consistent payouts to shareholders.
02—Key points
Key Highlights
- Southern Company's primary business is electricity sales through its four traditional operating companies (Alabama Power, Georgia Power, Gulf Power, Mississippi Power) and its wholesale generation subsidiary, Southern Power.
- The company is undertaking significant construction programs, with projected capital expenditures of approximately $6.7 billion in 2015, $5.4 billion in 2016, and $4.3 billion in 2017.
- Key construction projects include Plant Vogtle Units 3 and 4 (nuclear generation) and the Kemper IGCC (integrated coal gasification combined cycle), which are subject to cost overruns and delays.
- Environmental compliance remains a significant focus, with substantial capital expenditures planned for pollution control equipment and adherence to evolving regulations, including those related to air quality and greenhouse gas emissions.
- Southern Company is subject to substantial governmental regulation from federal, state, and local agencies, including state Public Service Commissions and the FERC, which can impact rates, service regulations, and asset acquisition/disposition decisions.
- The company's financial performance in 2014 showed an increase in net income compared to 2013, primarily driven by higher retail revenues, though this was partially offset by increased operating expenses.
- Southern Company maintained its focus on shareholder returns, paying dividends on its common stock since 1948, with the dividend payout ratio in 2014 at 95%.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2014filed March 2, 2015Financial Statements
FY2014 against FY2013
| Line item | FY2014FY2013 | Change |
|---|---|---|
| Revenue | $18.47B$17.09B | +8.1% |
| Operating Expenses | $14.82B$13.83B | +7.2% |
| Operating Income | $3.64B$3.25B | +11.9% |
| Net Income | $2.03B$1.71B | +18.8% |
| EPS (Basic) | $2.19$1.88 | +16.5% |
| EPS (Diluted) | $2.18$1.87 | +16.6% |
| Shares Outstanding (Basic) | 897.00M877.00M | +2.3% |
| Shares Outstanding (Diluted) | 901.00M881.00M | +2.3% |
05—Questions
Frequently Asked Questions
What are Southern Company's main lines of business?
Southern Company's primary business is the sale of electricity through its four regulated operating companies (Alabama Power, Georgia Power, Gulf Power, and Mississippi Power) and its wholesale generation subsidiary, Southern Power. It also has other business activities, including investments in leveraged leases and telecommunications.
What are the major construction projects impacting Southern Company?
The two largest construction projects are Plant Vogtle Units 3 and 4, which are new nuclear generating units, and the Kemper IGCC (integrated coal gasification combined cycle) project. Both projects involve significant capital expenditures and are subject to risks related to cost overruns and construction delays.
How does Southern Company manage environmental compliance costs?
Southern Company invests significantly in environmental capital retrofit projects to comply with federal and state environmental statutes and regulations. A major portion of these costs are expected to be recovered through existing ratemaking provisions or market-based contracts. However, there is no assurance that all such costs will be recovered, and compliance costs could impact future unit retirement and replacement decisions and overall financial performance.
What is the impact of regulatory oversight on Southern Company's financial performance?
Southern Company and its subsidiaries are subject to substantial regulation from federal, state, and local agencies. State Public Service Commissions set retail rates, and the FERC regulates wholesale rates. Changes in these regulations or the inability to recover costs through approved rates can significantly impact the company's net income, cash flows, and financial condition.
06—Continue