10-QPeriod: Q3 FY2012

SOUTHERN CO Quarterly Report for Q3 Ended Sep 30, 2012

Filed November 7, 2012For Securities:SOSOJESOJFSOJCSOJDSOMN

Summary

Southern Company (SO) reported its third-quarter and year-to-date results for the period ending September 29, 2012. The filing provides financial performance data for its subsidiary companies, including Alabama Power, Georgia Power, Gulf Power, Mississippi Power, and Southern Power. Overall, the company's subsidiaries experienced mixed results. Alabama Power saw a slight increase in net income for the quarter but a decrease year-to-date, impacted by milder weather and increased O&M expenses, though offset by rate adjustments and sales growth. Georgia Power's net income also saw a slight increase for the quarter, but a year-to-date decrease, primarily due to lower retail revenues driven by milder weather and decreased customer usage, despite positive rate effects. Gulf Power and Mississippi Power both reported year-over-year increases in net income for both the quarter and year-to-date periods, driven by rate increases and operational efficiencies. Southern Power, which operates in the wholesale market and manages generation assets, reported increased net income for both periods, benefiting from higher energy and capacity revenues from affiliates and lower fuel costs. Key areas of focus for investors include ongoing regulatory matters, environmental compliance costs, and major construction projects like the Kemper IGCC and Plant Vogtle. While the company generally expects to recover costs through regulated rates, the timing and potential impact of environmental regulations and litigation remain key considerations.

Financial Highlights

42 data points
Beta

Revenue

$5.05B

Net Income

$993.00M

19.7% Net Margin

EPS (Diluted)

$1.11

Total Assets

$61.96B

Cash & Equivalents

$1.26B

Free Cash Flow

$1.08B

Financial Statements
Beta
Revenue$5.05B
Operating Expenses$3.31B
Operating Income$1.74B
Net Income$993.00M
EPS (Basic)$1.11
EPS (Diluted)$1.11
Shares Outstanding (Basic)876.00M
Shares Outstanding (Diluted)883.00M

Key Highlights

  • 1Net income increased year-over-year for Gulf Power and Mississippi Power for both the quarter and year-to-date periods, driven by rate adjustments and operational factors.
  • 2Georgia Power's retail revenues declined year-over-year due to milder weather and reduced customer usage, although rate adjustments provided some offset.
  • 3Southern Power's net income grew due to increased wholesale revenues from affiliates, higher capacity revenues, and lower fuel expenses.
  • 4Mississippi Power is facing regulatory uncertainty regarding its Kemper IGCC project, with a significant rate increase request currently pending a Supreme Court decision.
  • 5Georgia Power's construction of Plant Vogtle Units 3 and 4 is proceeding, but is subject to ongoing legal and regulatory challenges, as well as potential cost disputes with contractors.
  • 6Several subsidiaries are updating environmental compliance cost estimates, particularly related to EPA regulations like the MATS rule, which may impact future capital expenditures.
  • 7Bonus depreciation provisions from the Tax Relief Act are expected to provide positive cash flow benefits through 2013 for several subsidiaries.

Frequently Asked Questions

Southern Company's subsidiaries showed mixed performance. Alabama Power's quarterly net income increased, but its year-to-date net income decreased. Georgia Power's quarterly net income saw a slight increase, but year-to-date net income declined. Gulf Power and Mississippi Power reported improved net income for both the quarter and year-to-date periods. Southern Power, focused on wholesale markets, also showed improved net income driven by higher revenues and lower costs.

Major construction projects highlighted include Mississippi Power's Kemper IGCC and Georgia Power's Plant Vogtle Units 3 and 4. Both projects face significant risks. The Kemper IGCC is subject to regulatory uncertainty with a pending Mississippi Supreme Court decision on rate recovery, and potential cost overruns. Plant Vogtle's construction is ongoing but faces legal and regulatory challenges, as well as potential cost disputes with contractors.

Environmental regulations, particularly the EPA's MATS rule, are a significant factor. Subsidiaries are reassessing their compliance cost estimates, which could lead to substantial future capital expenditures. While these costs are generally expected to be recovered through regulated rates, the ultimate impact and recovery timing are subject to regulatory approvals and potential changes in regulations.

Milder weather negatively impacted revenues for several retail-focused subsidiaries, including Georgia Power and Gulf Power, primarily due to lower energy sales. This was a contributing factor to the year-to-date net income decline for Georgia Power.