10-QPeriod: Q1 FY2014

SOUTHERN CO Quarterly Report for Q1 Ended Mar 31, 2014

Filed May 8, 2014For Securities:SOSOJESOJFSOJCSOJDSOMN

Summary

Southern Company reported strong first-quarter results for 2014, with consolidated net income increasing to $33.5 million for Southern Power Company, a 14.7% rise from the prior year. The traditional operating companies, including Alabama Power, Georgia Power, Gulf Power, and Mississippi Power, generally experienced increased revenues driven by colder weather, which boosted electricity demand. Alabama Power saw a 32.6% increase in net income, and Georgia Power reported a 35.0% rise, both benefiting from warmer customer usage patterns and, in Georgia's case, rate increases. Gulf Power also reported a significant 68.6% jump in net income, attributed to rate increases and weather-related demand. However, Mississippi Power continued to face significant challenges related to its Kemper IGCC project, recording a substantial pre-tax charge of $380 million for estimated losses due to cost overruns and project delays. This negatively impacted its financial performance, though overall group results were bolstered by the other subsidiaries. Southern Power continued its growth strategy with the acquisition of Adobe Solar, LLC, adding a 20-MW solar facility in California.

Financial Highlights

42 data points
Beta

Revenue

$4.64B

Net Income

$368.00M

7.9% Net Margin

EPS (Diluted)

$0.39

Total Assets

$64.84B

Cash & Equivalents

$590.00M

Free Cash Flow

-$77.00M

Financial Statements
Beta
Revenue$4.64B
Operating Expenses$3.94B
Operating Income$700.00M
Net Income$368.00M
EPS (Basic)$0.39
EPS (Diluted)$0.39
Shares Outstanding (Basic)890.00M
Shares Outstanding (Diluted)893.00M

Key Highlights

  • 1Consolidated net income for Southern Power Company increased by 14.7% to $33.5 million in Q1 2014 compared to Q1 2013.
  • 2Alabama Power reported a 32.6% year-over-year increase in net income, driven by higher retail revenues, partly due to colder weather.
  • 3Georgia Power's net income rose 35.0% due to increased retail revenues from rate increases and favorable weather conditions.
  • 4Gulf Power experienced a significant 68.6% increase in net income, benefiting from a base rate increase and colder weather.
  • 5Mississippi Power recorded a substantial $380 million pre-tax charge related to cost overruns and delays in its Kemper IGCC project.
  • 6Southern Power acquired Adobe Solar, LLC, a 20-MW solar facility in California, as part of its growth strategy.
  • 7Overall revenue increases across most subsidiaries were driven by colder weather boosting electricity demand, while regulated rate adjustments and cost recovery mechanisms helped offset increased operating expenses.

Frequently Asked Questions

For Alabama Power and Georgia Power, increased retail revenues in the first quarter of 2014 were primarily driven by colder weather, which led to higher electricity consumption. Georgia Power also benefited from rate increases that became effective in January 2014.

Mississippi Power revised its cost estimate for the Kemper IGCC project upwards again, leading to a $380 million pre-tax charge for estimated probable losses in Q1 2014. The project's in-service date has been further delayed to the first half of 2015, and the company does not intend to seek rate recovery for costs exceeding the $2.88 billion cost cap. This project continues to be a significant financial challenge for Mississippi Power.

Southern Power continued to execute its growth strategy by acquiring Adobe Solar, LLC, a 20-MW solar photovoltaic facility in Kern County, California. This facility is under a long-term power purchase agreement with Southern California Edison Company and is expected to commence commercial operation in May 2014.

The report mentions ongoing litigation and regulatory reviews concerning environmental matters, such as air and water quality regulations. For instance, the U.S. Supreme Court's decision on the Cross State Air Pollution Rule (CSAPR) is noted, with its ultimate outcome still pending. Additionally, Georgia Power faces complexities with its Plant Vogtle Units 3 and 4 construction, including potential cost overruns and ongoing negotiations with the contractor. Mississippi Power's Kemper IGCC project also involves extensive regulatory oversight and potential challenges.