SOUTHERN Q1 FY26 earnings call SO

Southern Company is experiencing extraordinary growth, with 23 gigawatts of contracted or latent stage load across its electric service territories. In the last two months, the company signed contracts for an additional 1.9 gigawatts of customer load with high credit quality hyperscalers, bringing fully contracted large load agreements to over 11 gigawatts. These bilateral agreements are structured to ensure that customers driving incremental demand cover the full cost of service, protecting existing customers and contributing to rate stability.

The company maintains a focus on rate stability, with base rates held stable in Alabama and Georgia until at least 2029. A recent filing in Georgia aims to lower rates through the recovery of fuel and storm costs. This approach, supported by constructive regulatory frameworks, allows for additional capital investment to serve incremental growth opportunities while providing meaningful benefits to customers and communities.

Construction on several key investments is underway, including Georgia Power achieving commercial operations for two battery energy storage systems, adding nearly 200 megawatts of capacity. These projects are part of a 10 gigawatt portfolio of approved new generation resources in development, with multiple battery systems and natural gas combustion turbines projected to be online in late 2026 and 2027. The company is also evaluating an all-source RFP for 2 to 6 gigawatts of new dispatchable generation for 2032-2033.

Southern Company announced historic $26.5 billion loan agreements with the Department of Energy, which are expected to translate into meaningful long-term customer savings of $7 billion over approximately 30 years. These lower-cost financing arrangements also reduce pressure on the company's capital market needs. Proactive equity management, including $500 million sourced through an ATM program, supports strong credit quality and the path towards a 17% FFO to debt target by 2029.

First quarter weather-normal retail electricity sales to all classes increased 2.3% year-over-year, driven by meaningful customer growth and increased usage, particularly from data centers. Residential customer additions totaled 46,000, while commercial sales grew 4.5% (weather-adjusted) and data center usage expanded 42% year-over-year. The Southeast continues to attract significant economic development, with over $7 billion in capital investment and nearly 4,000 new jobs announced in Q1 FY26.

Southern Power is moving forward with 400 megawatts of additional capacity upgrades through natural gas turbine upgrades at existing facilities in Alabama and Georgia, with commercial operation projected between 2029 and 2031. This incremental investment adds approximately $700 million to the capital plan. The company is also evaluating an additional 300 megawatts of natural gas upgrades and other new generation opportunities to meet future demand, consistent with its strategy of contracting with high credit quality counterparties.