01—Abstract
Summary
Summary of the 8-K filed May 2, 2024. Cited figures are marked; the original filing is the authoritative source.
Southern Company (SO) reported first-quarter 2024 GAAP net income attributable to Southern Company of $1.129 billiona, or $1.03 per basic share, up from $862 million, or $0.79 per share, in Q1 2023, a 31% increase.
Excluding small items (an estimated loss on plants under construction of $4 millionb pre-tax, versus $2 million in 2023, and a $5 million debt extinguishment loss in 2023), adjusted earnings were $1.132 billion, or $1.03 per share, compared with $867 million, or $0.79 per share. Operating revenues rose 2.6% to $6.646 billion, and operating income increased to $1.703 billion from $1.218 billion, though this was helped by a sharp drop in natural gas costs. Diluted EPS matched basic EPS at $1.03.
The growth was driven mainly by the Traditional Electric Operating Companies, which contributed $0.19c of the $0.24 year-over-year EPS increase, followed by Southern Company Gas at $0.09. Retail non-fuel revenues climbed about 15% to $2.93 billion, helped by weather that was less mild than a year earlier and by stronger commercial and residential usage. Management specifically cited higher weather-adjusted commercial sales and increased usage from existing data center customers.
Retail sales volume rose 5.6% overall, or 1.7% on a weather-adjusted basis. Offsetting these gains were higher interest expense, which rose to $665 milliond from $582 million, and higher depreciation and amortization.
The most notable operational milestone was the commercial operation of Plant Vogtle Unit 4, which management said brings the completed Vogtle nuclear complex to roughly 2,200 megawatts of new carbon-free capacity and makes it the largest clean energy generator in the United States. Investors should still watch the remaining uncertainty around possible future charges or credits tied to Vogtle Units 3 and 4, as well as ongoing Kemper County gasifier dismantlement costs of about $15 million annually through 2025.
02—Key points
Key Highlights
- GAAP net income of $1.129 billion ($1.03 per share) rose 31% from $862 million ($0.79 per share) in Q1 2023; adjusted EPS was also $1.03 versus $0.79.
- Operating revenues increased 2.6% to $6.646 billion, while operating income rose about 40% to $1.703 billion, aided by lower natural gas costs (cost of natural gas fell $293 million).
- Traditional Electric Operating Companies were the main driver, adding $0.19 of the $0.24 EPS increase; Southern Company Gas added $0.09, while Southern Power (-$0.01) and Parent Company and Other (-$0.03) were slight drags.
- Retail non-fuel electric revenues rose $381 million (about 15%), and total retail kWh sales grew 5.6% (1.7% weather-adjusted), with residential and commercial usage leading.
- Plant Vogtle Unit 4 reached commercial operation, bringing Units 3 and 4 to over 2,200 MW of carbon-free capacity and completing the four-unit Vogtle plant as the largest U.S. clean energy generator.
- Interest expense, net of capitalized amounts, increased to $665 million from $582 million, a key headwind that reduced the electric utilities' EPS contribution by $0.05.
- Ongoing risks remain: possible future charges or credits related to Vogtle Units 3 and 4, and roughly $15 million per year in Kemper County dismantlement costs through 2025.
03—Questions
Frequently Asked Questions
Did Southern Company's first-quarter 2024 earnings grow, and by how much?
Yes. Net income attributable to Southern Company rose to $1.129 billion, or $1.03 per share, from $862 million, or $0.79 per share, in Q1 2023. That is a 31% increase in net income and a $0.24 increase in EPS. Adjusted earnings excluding minor items were $1.132 billion, or $1.03 per share, versus $867 million, or $0.79 per share, a year earlier.
What drove the earnings increase?
The main driver was the Traditional Electric Operating Companies, which added $0.19 to EPS, reflecting higher retail revenues from less mild weather, stronger commercial and residential demand, and increased usage by existing data center customers. Southern Company Gas added $0.09, helped by higher earnings before income taxes. Higher interest expense and depreciation partly offset these gains.
What is the significance of Plant Vogtle Unit 4 reaching commercial operation?
Vogtle Unit 4 reaching commercial operation completes the Vogtle nuclear expansion, with Units 3 and 4 together providing more than 2,200 megawatts of reliable, carbon-free generation. Management says the plant is now the largest clean energy generator in the United States. Investors should still monitor possible future charges or credits related to Georgia Power's Vogtle Units 3 and 4 construction, since the amount and timing remain uncertain.
Are there any remaining financial risks or one-time costs investors should watch?
Yes. Mississippi Power expects roughly $15 million per year in pre-tax costs through 2025 to dismantle the abandoned Kemper County gasifier assets and complete site restoration. Southern Company also noted that further charges or credits tied to Vogtle Units 3 and 4 may occur, and that similar debt extinguishment costs could arise in the future. Rising interest expense, which increased to $665 million from $582 million, is another ongoing pressure on margins.
How did sales and revenues trend in the quarter?
Total operating revenues rose 2.6% to $6.646 billion. Total retail kilowatt-hour sales increased 5.6%, although that was only 1.7% on a weather-adjusted basis. Residential sales grew 11.7% (1.0% weather-adjusted), and commercial sales grew 5.4% (3.8% weather-adjusted). Wholesale sales fell 15.5%, and natural gas revenues declined 9.0% to $1.707 billion, reflecting lower gas prices.
04—Continue