Southern Company Q4 2009 Earnings Call Transcript

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Southern Company (SO)

Q4 2009 Earnings Call

January 27, 2010 1:00 pm ET

Executives

Glen Kundert – Vice President, Investor Relations

David Ratcliffe – President & CEO

Paul Bowers - CFO

Analysts

Dan Eggers – Credit Suisse

Jonathon Arnold – Deutsche Bank

Leslie Rich – Columbia Management

Steve Fleishman – Bank of America/Merrill Lynch

Ali Agha – SunTrust Robinson

Michael Lapides – Goldman Sachs

[Abdula Merti – CDC U.S.]

Paul Patterson – Glenrock Associates

Glen [Becthold] – Raymond James

Angie Storozynski - Macquarie Capital

Presentation

Operator

Welcome everyone to the Southern Company fourth quarter 2009 earnings call. (Operator Instructions) I would now like to turn the call over to Glen Kundert, Vice President of Investor Relations. Please go ahead, Sir.

Glen Kundert

Thank you and welcome to Southern Company’s fourth quarter 2009 earnings call. Joining me today is David Ratcliffe, Chairman, President and Chief Executive Officer of Southern Company and Paul Bowers, our Chief Financial Officer.

Let me remind you that we will make forward-looking statements today in addition to providing historical information. There are various important factors that could cause actual results to differ materially from those indicated in the forward-looking statements, including those discussed in our Form 10-K and subsequent SEC filings.

We will be including slides as part of today’s conference call. The slides provide details on information that will be discussed in today’s call such as our current three-year forecast for capital expenditures. In addition, these slides provide reconciliations for certain non-GAAP financial information that will be discussed on this call. You can access the slides on our Investor Relations website at www.southernco.com if you want to follow along during the presentation.

Now at this time I will turn the call over to David Ratcliffe, Southern Company’s Chairman, President and Chief Executive Officer.

David Ratcliffe

Thanks Glen. Good afternoon. We thank all of you for joining us. As you can see from the information we released this morning we had a good quarter and a solid year of business results. Despite the economic headwinds of 2009 we continued to build out high quality infrastructure and provide high levels of customer service at affordable prices. We also continued to set operational, regulatory and financial milestones which are the hallmarks of our commitment to our customers and our shareholders.

On the operational side of our business our fossil and hydro generation organization achieved an industry-leading peak season equivalent forced outage rate of 1.4% against the industry average EFOR rate of approximately 7%. During 2009 we completed seven major environmental construction projects including four scrubber installations and with an in-service cost of 29% below the industry average.

On the transmission and distribution side of our business 2009 was the best in our history for reliability performance. We also made significant progress on the installation of automated meters, installing more than 1 million smart meters bringing the total number deployed to over 1.9 million against our target of 4.5 million meters by 2012.

In our nuclear business the early site work for Units 3 and 4 at Plant Vogtle is well underway on support buildings, water pipe installation and concrete batch plant. We have removed more than 3 million cubic yards of dirt to an average depth of 54 feet for the reactor building.

On the regulatory side of our retail business we had a constructive year. At Alabama Power base rates in 2010 will begin to reflect the recovery of costs associated with the return of 1,200 megawatts of fossil capacity to retail service. This capacity had been previously dedicated to our wholesale business. Retail base rates in 2010 will also begin to reflect the in-service status of four large scrubbers. These increases in retail base rates will be more than fully offset by fuel rate decreases resulting in a net 7.4% decrease in retail rates.

At Georgia Power we received certification for the Vogtle 3 and 4 units. Both the Georgia legislature and the Public Service Commission authorized the use of construction work in progress in rate base for nuclear construction. In addition, Georgia Power avoided an early rate increase request in 2009 by receiving approval from the Public Service Commission to amortize a regulatory liability account. This partially offsets the decline of retail revenues in 2009 and 2010.

Gulf Power Company received regulatory approval for the recovery of a major scrubber project at Plant Crist and an 885 megawatt purchase power agreement. Rate impacts at Gulf Power in 2010 will be mitigated a recently approved fuel rate decrease of 3.5%.

Finally, Mississippi Power received a favorable outcome on the needs request for additional generating capacity. We propose to meet this need with the Kemper County IGCC facility and expect a decision by May 1 of this year. If approved by the commission construction could begin later this year with an in-service date targeted for 2014.

Turning now to Southern Power in October we announced that Southern Power had agreed to acquire Nacogdoches Power LLC from American Renewables, the original developer of the project. We are moving forward with construction of the 100 megawatt biomass facility with completion expected in 2012. The asset has a 20 year PPA with Austin Energy which serves the city of Austin, Texas. Also in December 2009 Southern Power closed on the acquisition of the West Georgia generating assets from LS Power in exchange for our De Soto facility and $144 million in cash.

In addition, Southern Power completed the construction of Stanton B, a 300 megawatt combined cycle plant for the Orlando Utilities Commission bringing the unit in ahead of schedule. Finally at Southern Power construction began last year on the Cleveland County Generation Plant in North Carolina, a 720 megawatt combustion turbine facility. Purchase power agreements are in place with the public power entities in North Carolina and commercial operation is expected in early 2012.

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