Southern Company

Company Overview

Business Model: The Southern Company operates as a holding company, primarily engaged in the generation, transmission, and distribution of electricity and natural gas. Its core operations are conducted through three traditional electric operating companies (Alabama Power Company, Georgia Power Company, and Mississippi Power Company) which are vertically integrated utilities serving retail and wholesale customers in the Southeastern United States. Southern Power Company develops, constructs, acquires, owns, operates, and manages power generation assets, including renewable energy projects, selling electricity at market-based rates in the wholesale market. Southern Company Gas is an energy services holding company focused on natural gas distribution in four states (Illinois, Georgia, Virginia, and Tennessee), gas pipeline investments, and gas marketing services. The Southern Company also owns subsidiaries providing system services (SCS), digital wireless communications (Southern Linc), nuclear plant operations (Southern Nuclear), and distributed energy solutions (PowerSecure).

Market Position: The traditional electric operating companies provide retail electric service across approximately 116,000 square miles to an estimated 17 million people, serving a total of 4,549,000 retail customers as of December 31, 2024. Southern Power Company's generation fleet totaled 12,648 MWs of nameplate capacity in commercial operation at December 31, 2024, with 96% of its investment covered by contracts through 2029. Southern Company Gas operates approximately 78,500 miles of natural gas pipelines and 14 storage facilities, serving approximately 4.4 million customers.

Recent Strategic Developments:

• Plant Vogtle Units 3 & 4: Georgia Power Company placed Plant Vogtle Unit 3 in service on July 31, 2023, and Unit 4 in service on April 29, 2024.
• Acquisitions & Divestitures: Alabama Power Company entered an agreement in October 2024 to acquire Tenaska Alabama Partners, L.P. (Lindsay Hill Generating Station, 855-MW) for approximately $622 million, expected to close by Q3 2025. Mississippi Power Company agreed to acquire Florida Power and Light Company's 50% ownership interest in Plant Daniel Units 1 & 2 in November 2024. Southern Power Company acquired the Millers Branch and South Cheyenne projects in 2023 and completed construction of the 150-MW South Cheyenne solar facility in April 2024.
• Integrated Resource Plans (IRPs): Georgia Power Company's 2023 IRP Update approved 1,400 MWs from three simple cycle combustion turbines at Plant Yates and 500 MWs of battery energy storage facilities. Its 2025 IRP, filed January 31, 2025, requests to extend the operation of Plant Scherer Unit 3 and Plant Gaston Units 1-4. Mississippi Power Company's 2024 IRP included a schedule to retire Plant Watson Unit 4, Plant Greene County Units 1 and 2, and Plant Daniel Units 1 and 2 by the end of 2028, though it notified the Mississippi Public Service Commission in January 2025 of its intent to extend some retirement dates.
• Construction Programs: The Southern Company system's construction program for 2025 is projected at $14.8 billion, including $3.7 billion for new generation and $2.6 billion for transmission.

Geographic Footprint: The Southern Company's operations are primarily concentrated in the Southeastern United States.

• Electric Service: Alabama Power Company serves most of Alabama, Georgia Power Company serves most of Georgia, and Mississippi Power Company serves southeastern Mississippi.
• Natural Gas Distribution: Southern Company Gas distributes natural gas in Illinois (Nicor Gas), Georgia (Atlanta Gas Light), Virginia (Virginia Natural Gas), and Tennessee (Chattanooga Gas).
• Wholesale Generation: Southern Power Company sells electricity in the wholesale market across various U.S. utility markets.
• Other Subsidiaries: All Southern Company system employees are located within the United States.

Financial Performance

Revenue Analysis

Profitability Metrics:

• Net Margin: 15.9% (2024) (Gross Profit and Operating Income are not explicitly provided for the consolidated entity in the filing.)

Investment in Growth:

• Capital Expenditures: $9,510 million (2024) (Sum of Alabama Power, Georgia Power, Southern Power, Southern Company Gas, and Mississippi Power investing activities/capital expenditures)
• Strategic Investments:
  • Alabama Power Company's agreement to acquire Tenaska Alabama Partners, L.P. for approximately $622 million.
  • Southern Power Company incurred $292 million in construction costs for the Millers Branch solar project at December 31, 2024, and committed to repower the Kay Wind facility.
  • Southern Company Gas' capital expenditures for gas distribution operations totaled $1.7 billion in 2024, including infrastructure improvement programs.

Business Segment Analysis

Electric Utilities

Financial Performance:

• Revenue: $19,977 million (2024) (+8.8% YoY from $18,358 million in 2023)
• Segment Net Income: $4,145 million (2024) (+14.0% YoY from $3,637 million in 2023)
• Key Growth Drivers: Continued capital investments in generation, transmission, and distribution infrastructure; recovery of costs through rate mechanisms; in-service of Plant Vogtle Units 3 & 4 for Georgia Power Company; IRP-driven capacity additions. Product Portfolio: Vertically integrated electric service including generation, transmission, and distribution to retail and wholesale customers. Market Dynamics: Regulated utility markets in Alabama, Georgia, and Mississippi. Competition for new large customers in Georgia. Subject to state Public Service Commissions and FERC regulation. Sub-segment Breakdown:
• Alabama Power Company:
  • Operating Revenues: $7,554 million (2024) (+7.1% YoY)
  • Net Income: $1,403 million (2024) (+2.4% YoY)
  • Capital Expenditures: $2,114 million (2024)
• Georgia Power Company:
  • Operating Revenues: $11,331 million (2024) (+12.0% YoY)
  • Net Income: $2,543 million (2024) (+22.3% YoY)
  • Capital Expenditures: $5,355 million (2024)
• Mississippi Power Company:
  • Operating Revenues: $1,463 million (2024) (-0.7% YoY)
  • Net Income: $199 million (2024) (+5.9% YoY)
  • Net cash used for investing activities: $(373) million (2024)

Southern Power Company

Financial Performance:

• Revenue: $2,014 million (2024) (-8.0% YoY from $2,189 million in 2023)
• Net Income Attributable to Southern Power: $328 million (2024) (-8.1% YoY from $357 million in 2023)
• Key Growth Drivers: Development, construction, and acquisition of new generating facilities, particularly renewable energy projects (solar, wind); long-term power purchase agreements (PPAs). Product Portfolio: Wholesale electricity sales from a diversified generation fleet, including natural gas, solar, and wind facilities. Market Dynamics: Operates in the competitive wholesale electricity market, selling to investor-owned utilities, independent power producers, municipalities, and electric cooperatives. Approximately 96% of investment covered by contracts through 2029. Top three customers comprised approximately 24% of total revenues in 2024. Sub-segment Breakdown:
• Generation Fleet: 12,648 MWs of nameplate capacity in commercial operation at December 31, 2024.
• Contract Coverage: Average remaining contract duration of approximately 12 years. 46% of contracted MWs with AAA to A- rated counterparties, 46% with BBB+ to BBB- rated counterparties.

Southern Company Gas

Financial Performance:

• Revenue: $4,456 million (2024) (-5.2% YoY from $4,702 million in 2023)
• Net Income: $740 million (2024) (+20.3% YoY from $615 million in 2023)
• Key Growth Drivers: Infrastructure improvement programs for natural gas distribution utilities, gas pipeline investments, and rate adjustments approved by state regulatory agencies. Product Portfolio: Natural gas distribution, gas pipeline investments, and gas marketing services. Market Dynamics: Regulated natural gas distribution in Illinois, Georgia, Virginia, and Tennessee. Competition from electric utilities, fuel oil, and propane providers. Gas marketing services face competition from other energy marketers. Sub-segment Breakdown:
• Gas Distribution Operations:
  • Revenue: $3,899 million (2024) (-5.0% YoY)
  • Net Income: $550 million (2024) (+24.7% YoY)
  • Key Characteristics: Operates approximately 78,500 miles of natural gas pipelines, serves 4.4 million customers.
• Gas Pipeline Investments:
  • Revenue: $32 million (2024) (Stable YoY)
  • Net Income: $101 million (2024) (+3.1% YoY)
  • Key Characteristics: 50% interest in Southern Natural Gas Company, L.L.C. (SNG) and 50% joint ownership in the Dalton Pipeline. SNG is developing a pipeline project to increase capacity by approximately 1.3 billion cubic feet per day, anticipated completion by 2029.
• Gas Marketing Services:
  • Revenue: $516 million (2024) (-5.9% YoY)
  • Net Income: $102 million (2024) (+12.1% YoY)
  • Key Characteristics: SouthStar Energy Services, LLC serves approximately 668,000 natural gas commodity customers.

Capital Allocation Strategy

Shareholder Returns:

• Dividend Payments: $3,133 million (2024)
• Cash Dividends Per Share: $2.8600 (2024)

Balance Sheet Position:

• Cash and Equivalents: $1,070 million (2024)
• Total Debt: $63,200 million (2024, carrying amount of long-term debt including current portion)
• Net Cash Position: $(62,130) million (2024)
• Debt Maturity Profile (Southern Company, in millions):
  • 2025: $4,727
  • 2026: $3,792
  • 2027: $4,075
  • 2028: $2,827
  • 2029: $1,990
• Credit Rating: Not disclosed in the filing.

Cash Flow Generation: (Consolidated cash flow data is not explicitly provided for The Southern Company in the filing. Cash flow from operations for key subsidiaries are as follows: Alabama Power Company: $2,895 million (2024); Georgia Power Company: $4,793 million (2024); Southern Power Company: $708 million (2024); Southern Company Gas: $1,552 million (2024).)

Operational Excellence

Production & Service Model: The Southern Company system operates an integrated electric system, or Southern Company power pool, for coordinated operation and centralized economic dispatch of generating resources from its traditional electric operating companies and Southern Power Company. The traditional electric operating companies are vertically integrated, owning generation, transmission, and distribution facilities. Southern Power Company focuses on wholesale generation, including a growing portfolio of renewable assets. Southern Company Gas primarily operates natural gas distribution networks and invests in pipeline infrastructure.

Supply Chain Architecture: Key Suppliers & Partners:

• Fuel Supply: SCS contracts for natural gas, coal, and nuclear fuel. Natural gas supply for 2025 is 627 Bcf. Coal burn requirements for 2025 are substantially covered. Nuclear fuel needs are covered by contracts up to 10 years.
• Nuclear Operations: Southern Nuclear Operating Company, Inc. operates and provides services to the Southern Company system's nuclear power plants.
• System Services: Southern Company Services, Inc. (SCS) provides general executive, engineering, operations, purchasing, and other support services.
• Pipeline Investments: Southern Company Gas has a 50% ownership interest in Southern Natural Gas Company, L.L.C. (SNG) and the Dalton Pipeline.

Facility Network:

• Generation: The system includes hydroelectric (e.g., Alabama Power Company's 1.7 million KWs, Georgia Power Company's 1.1 million KWs), nuclear (Plants Farley, Hatch, Vogtle), natural gas, coal, solar, and wind facilities. Southern Power Company's generation fleet totals 12,648 MWs.
• Transmission & Distribution: The traditional electric operating companies own extensive transmission and distribution facilities interconnected within the Southern Company power pool.
• Natural Gas Infrastructure: Southern Company Gas operates approximately 78,500 miles of natural gas pipelines and 14 storage facilities with a total capacity of 157 Bcf.

Operational Metrics:

• Total Employees: Approximately 28,600 employees at December 31, 2024.
• Serious Injury Rate: 0.05 in 2024.
• Turnover Rate: 7.2% in 2024.

Market Access & Customer Relationships

Go-to-Market Strategy: Distribution Channels:

• Direct Sales: The traditional electric operating companies provide retail electric service directly to residential, commercial, and industrial customers.
• Channel Partners: Wholesale electricity sales are made to municipal electric distribution systems (e.g., AMEA), rural distributing cooperative associations, Municipal Electric Authority of Georgia (MEAG Power), Oglethorpe Power Corporation (OPC), and other load-serving entities.
• Digital Platforms: Not explicitly detailed in the filing.

Customer Portfolio: Enterprise Customers:

• Wholesale Electric: Alabama Power Company sells wholesale to 11 municipally-owned electric distribution systems and two rural distributing cooperative associations. Georgia Power Company sells wholesale to OPC, MEAG Power, Dalton, various EMCs, and non-affiliated utilities. Mississippi Power Company's wholesale contracts represented 13.9% of its total operating revenues in 2024.
• Wholesale Power (Southern Power Company): Sells to investor-owned utilities, independent power producers, municipalities, electric cooperatives, and commercial and industrial customers. Customer Concentration: Southern Power Company's top three customers comprised approximately 24% of its total revenues for the year ended December 31, 2024.

Geographic Revenue Distribution: Not explicitly detailed as a percentage of total revenue for the consolidated entity in the filing.

Competitive Intelligence

Market Structure & Dynamics

Industry Characteristics: The electric utility industry in the service territories of the traditional electric operating companies is characterized by vertical integration and state-level regulation, with some customer choice for large loads in Georgia. The wholesale power market, where Southern Power Company operates, is competitive. The natural gas distribution sector is also regulated at the state level, with competition from other energy sources and, in some deregulated areas, from other marketers.

Competitive Positioning Matrix:

Direct Competitors

Primary Competitors:

• Wholesale Electric Market: Southern Power Company competes with investor-owned utilities, independent power producers, and other entities.
• Natural Gas Marketing: Southern Company Gas' marketing services segment competes with other energy marketers in unregulated territories like Illinois and Georgia.
• Natural Gas Distribution: Southern Company Gas' natural gas distribution utilities face competition from electric utilities, fuel oil, and propane providers.

Competitive Response Strategy: The Southern Company system's strategy includes integrated resource planning (IRPs) to ensure future capacity, significant investments in new generation (including renewables), infrastructure modernization programs for natural gas distribution, and the use of long-term power purchase agreements to manage risk.

Risk Assessment Framework

Strategic & Market Risks

• Market Dynamics: The Inflation Reduction Act of 2022 (IRA) imposes a 15% Corporate Alternative Minimum Tax (CAMT), impacting tax liabilities. The U.S. Securities and Exchange Commission (SEC) adopted new rules relating to climate-related matters, though their effectiveness is currently stayed.
• Technology Disruption: The company is investing in distributed energy and resilience solutions through PowerSecure, and actively pursuing renewable energy projects through Southern Power Company, indicating a response to evolving energy technologies.
• Customer Concentration: Southern Power Company's top three customers accounted for approximately 24% of its total revenues in 2024. Mississippi Power Company's wholesale contracts represented 13.9% of its total operating revenues in 2024.

Operational & Execution Risks

• Supply Chain Vulnerabilities: Fuel supply for electric generation (natural gas, coal, nuclear fuel) is critical. The U.S. Department of Energy's (DOE) failure to begin disposing of spent nuclear fuel in 1998 has led to legal remedies and ongoing costs for Alabama Power Company and Georgia Power Company.
• Capacity Constraints: Integrated resource plans (IRPs) are regularly filed to address future generating capacity needs and potential retirements of existing units.
• Storm Damage: Hurricane Helene caused approximately $870 million in restoration costs for Georgia Power Company in September 2024, with approximately $750 million deferred to a regulatory asset. The Southern Company system maintains storm damage and reliability reserves.

Financial & Regulatory Risks

• Demand Volatility: The Southern Company system's electric power sales peak during both summer and winter. Natural gas demand for Southern Company Gas generally peaks during the winter (November through March).
• Foreign Exchange: Southern Power Company and The Southern Company parent use foreign currency derivatives to hedge exposures.
• Credit & Liquidity: The Southern Company system has significant long-term debt obligations. Bank credit arrangements provide liquidity, with $7,891 million unused across the system at December 31, 2024.
• Regulatory & Compliance Risks: The traditional electric operating companies and natural gas distribution utilities are subject to state Public Service Commissions. The Federal Energy Regulatory Commission (FERC) regulates rates and financial aspects of public utilities. The U.S. Nuclear Regulatory Commission (NRC) regulates nuclear power plants. Compliance with the Coal Combustion Residuals (CCR) Rule involves significant estimated costs for closure and monitoring of surface impoundments and landfills.

Innovation & Technology Leadership

Research & Development Focus: Core Technology Areas:

• Distributed Energy & Microgrids: PowerSecure develops distributed energy and resilience solutions and deploys microgrids for various customers.
• Renewable Energy: Southern Power Company is actively developing and constructing solar and wind facilities, including the 150-MW South Cheyenne solar facility and the Millers Branch solar project.
• Nuclear Energy: Southern Nuclear Operating Company, Inc. operates the system's nuclear power plants, with ongoing licensing and operational management.

Leadership & Governance

Executive Leadership Team

Human Capital Strategy

Workforce Composition:

• Total Employees: Approximately 28,600 employees on payroll at December 31, 2024.
• Geographic Distribution: All Southern Company system employees are located within the United States.
• Diversity Metrics: At December 31, 2024, people of color represented 31% and women represented 26% of the workforce.
• Average Age: 44 years at December 31, 2024.
• Average Tenure: 14 years at December 31, 2024.
• Turnover Rate: 7.2% for 2024.

Diversity & Development:

• Diversity Metrics: Workforce composition includes 31% people of color and 26% women at December 31, 2024.

Environmental & Social Impact

Environmental Commitments: Climate Strategy:

• Emissions Targets: Intermediate goal of a 50% reduction in Greenhouse Gas (GHG) emissions from 2007 levels by 2030. Long-term goal of net zero GHG emissions by 2050.
• Air Emissions Reductions: Reduced SO2 and NOX air emissions by 99% and 92%, respectively, through 2023 (since 1990). Reduced mercury air emissions by 97% through 2023 (since 2005). Supply Chain Sustainability:
• Responsible Sourcing: Compliance with the Coal Combustion Residuals (CCR) Rule for disposal of coal combustion residuals.

Business Cyclicality & Seasonality

Demand Patterns:

• Seasonal Trends (Electric): The Southern Company system's electric power sales peak during both the summer and winter seasons.
• Seasonal Trends (Natural Gas): In most areas Southern Company Gas serves, natural gas demand peaks during the winter, referred to as the Heating Season (November through March), leading to generally higher natural gas usage and operating revenues during this period.

Planning & Forecasting: Integrated resource plans (IRPs) are regularly filed with state Public Service Commissions to forecast demand and plan for future generation and resource needs. Fuel supply contracts are in place to meet anticipated demand.

Regulatory Environment & Compliance

Regulatory Framework: Industry-Specific Regulations:

• State Regulation: The traditional electric operating companies and natural gas distribution utilities are subject to the jurisdiction of their respective state Public Service Commissions (PSCs) or applicable state regulatory agencies.
• Federal Energy Regulatory Commission (FERC): The traditional electric operating companies, Southern Power Company, and Southern Electric Generating Company (SEGCO) are public utilities subject to FERC's rate, financial, and accounting jurisdiction. FERC also licenses hydroelectric generating stations.
• U.S. Nuclear Regulatory Commission (NRC): Alabama Power Company, Georgia Power Company, and Southern Nuclear Operating Company, Inc. are subject to NRC regulation, including licensing of nuclear power plants. Licenses for Plant Hatch Units 1 and 2 expire in 2034 and 2038, respectively, with renewal applications projected by Q3 2025. Licenses for Plant Farley Units 1 and 2 expire in 2037 and 2041, respectively, with renewal applications projected by Q4 2026.
• Environmental Regulations: Compliance with the U.S. Environmental Protection Agency's (EPA) Coal Combustion Residuals (CCR) Rule for coal ash disposal.

Legal Proceedings:

• The Southern Company and Mississippi Power Company: Civil action filed August 2023 alleging False Claims Act violations related to Kemper County energy facility DOE grants.
• Alabama Power Company: Mobile Baykeeper lawsuit regarding Plant Barry surface impoundment closure dismissed January 4, 2024, with an appeal filed. An EPA settlement in September 2024 resolved two of three allegations.
• Georgia Power Company: Plant Scherer lawsuits alleging personal injuries and property damage were settled November 18, 2024, for an immaterial amount.

Tax Strategy & Considerations

Tax Profile:

• Effective Tax Rate (Southern Company): 18.5% (2024).
• Investment Tax Credits (ITCs) and Production Tax Credits (PTCs): Southern Power Company received $71 million in Federal ITCs cash in 2024. Georgia Power Company received $11 million and Southern Power Company received $24 million from selling ITCs and PTCs in 2024. Georgia Power Company made payments of $131 million for Advanced Nuclear PTCs (Plant Vogtle Units 3 & 4) in 2024.
• Carryforwards: The Southern Company has $765 million in Federal ITC/PTC carryforwards (expiring 2031) and $515 million in Georgia state investment and other tax credit carryforwards. Net Corporate Alternative Minimum Tax (CAMT) carryforwards are approximately $40 million.

Insurance & Risk Transfer

Risk Management Framework: The Southern Company system utilizes insurance and other mechanisms to manage various risks.

• Insurance Coverage: Nuclear power plants are covered by the Price-Anderson Amendments Act for public liability claims (up to $16.3 billion) and Nuclear Electric Insurance Limited (NEIL) policies for property damage (up to $1.5 billion), decontamination, excess property, premature decommissioning, and replacement power.
• Risk Transfer Mechanisms: Southern Company Gas uses weather derivative contracts as economic hedges for warmer-than-normal weather. Southern Power Company and The Southern Company parent use foreign currency derivatives, and The Southern Company parent and Southern Company Gas use interest rate derivatives for hedging purposes.