Southern's CEO Discusses Q1 2011 Results - Earnings Call Transcript

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Southern (SO)

Q1 2011 Earnings Call

April 27, 2011 1:00 pm ET

Executives

Glen Kundert - Vice President of Investor Relations

Art Beattie - Chief Financial Officer and Executive Vice President

Thomas Fanning - Chairman of the Board, Chief Executive Officer and President

Analysts

Michael Lapides - Goldman Sachs Group Inc.

Vedula Murti - Tribeca Global Management

Angie Storozynski - Macquarie Research

Paul Ridzon - KeyBanc Capital Markets Inc.

Ashar Khan - SAC Capital

Andrew Levi - Caris & Company

Jonathan Reeder - Wachovia Securities

Marc de Croisset - FBR Capital Markets & Co.

Mark Barnett - Morningstar

Nathan Judge - Atlantic Equities LLP

Ali Agha - SunTrust Robinson Humphrey, Inc.

Dan Jenkins - State of Wisconsin Investment Board

Brian Chin - Citigroup Inc

Steven Fleishman - BofA Merrill Lynch

Presentation

Operator

Good afternoon. My name is David, and I will be your conference operator today. At this time, I would like to welcome everyone to the Southern Company First Quarter 2011 Earnings Conference Call. [Operator Instructions] I would now like to turn the call over to Mr. Glen Kundert, Vice President of Investor Relations. Please go ahead, sir.

Glen Kundert

Thank you, David, and welcome to Southern Company's first quarter earnings call. Joining me this afternoon are Tom Fanning, Chairman, President and Chief Executive Officer of Southern Company; and Art Beattie, 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 filings. We'll be including slides as part of today's conference call. The slides provide details on information that will be discussed in today's call. You can access the slides on our Investor Relations website at www.southerncompany.com if you want to follow along during the presentation.

Now at this time, I'll turn the call over to Tom Fanning, Southern Company's Chairman, President and Chief Executive Officer.

Thomas Fanning

Good afternoon, and thank you for joining us. Our first quarter results show we're off to a good start in 2011. In addition, as you can see from materials released this morning, the economy, as shown by sales to industrial customers, continues to gain strength and momentum. The year-over-year increase in industrial sales in 2010, compared with 2009, was 7.7%. In the first quarter of 2011, we've already seen a 6.7% increase in industrial sales compared with the first quarter of 2010. This momentum is reflected in the results of a recent Southern Company survey of our top industrial customers in Georgia. In that survey, 60% of those customers said they expect production increases over the next 6 months. In addition, 1/3 of those industrial customers told us that they anticipate employment increases, and 28% expect increases in exports.

The result of this survey serve to reinforce our own confidence about the near-term and long-term future of our region. So our businesses are performing well, and we are on plan.

Turning now to an event, which is focused the world attention on nuclear energy. I'd like to offer some comments on how we believe that event at the Fukushima plant in Japan might impact the nation's existing and future fleet of nuclear power plants.

First, the supporting commitment for nuclear energy remains strong at the grassroots level here in the Southeast, among key members of Congress on both sides of the aisle and within the Obama administration. No doubt, there will be lessons learned from the tragic events at Fukushima that will almost certainly apply to the current fleet of nuclear generation in America. Certainly, we expect there'll be a thorough, thoughtful review of those facilities located in seismically sensitive areas, plants along coastal zones and perhaps other design modifications particularly with older plans. We believe any mandated changes will not significantly impact the operations of our existing fleet or be cost prohibitive.

Finally, we believe that any potential impacts to our Vogtle 3 and 4 units should be minimal. Recall that the Vogtle site is not in a seismically sensitive area. We are not on a coastline. We are some 130 miles inland and are 220 feet above sea level. Finally, the AP1000 design is robust, and its passive safety systems should preclude many of the problems, which occurred in Japan. Our current fleet is safe. Our proposed new units are even safer.

With respect to units 3 and 4 Plant Vogtle, we are still on track to receive the combined construction and operating license, or COL. By the end of this year, we had no indication that the issuance of the COL will be delayed as a result of the NRC's review of the events [ph] in Japan.

My final business update concerns the potential for adding a risk sharing or incentive regulation mechanism into our current rate mechanism for Vogtle 3 and 4. Our position is that we are always open to constructive agreements that benefit customers. We believe the current Georgia law with respect to new nuclear construction is very clear from a cost-recovery standpoint. Therefore, any agreement must be an improvement on the existing law and must include a formal recognition of the work that has already been done to reduce the cost to customers of the new units by specifically including the benefits of: conditional federal loan guarantees, production tax credits, changes made in the EPC contract and CWIP in rate base. We believe, in the aggregate, that since the certification approval, Georgia Power has brought to the table additional benefits to our customers of more than $1 billion. Georgia will file its testimony today. A decision on whether to adopt an incentive plan is expected on August 2.

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