Southern Company (SO) Q2 FY26 earnings call: guidance and Q&A

How does the increased visibility on contracted load and ramp-ups impact the ability to extend or commit further on the regulatory front, particularly regarding rate stability?

Management expects to be in the top half of its long-term earnings trajectory, and the success provides flexibility to enhance customer benefits and potentially extend rate stability. The company is close to selling out approved capacity in Georgia and will work through RFP processes for additional generation.

“Clearly, we've got the ability to look for more generation capacity through the structure processes that we have in Alabama and Georgia. And like we've talked about in the past, we are probably about 1 gig or 2 away from, if you will, selling out the capacity that we had approved in Georgia last year.”

asked by Nicholas Campanella · answered by David Poroch

Are the 3 gigawatts of projects in finalizing stages within the 2030 window, and what are the key milestones for them?

These projects are likely to go into 2028 and beyond, with ramp-up periods initiating in 2028 and extending into the next decade. They will follow the typical ramp-up of large-load customers.

“Working through those contracts, those are likely to go into 2028 and beyond. So they'll like every other big data center project. Large-load customer have a ramp-up period. A couple of them that we're working on would initiate that ramp-up in 2028 and bring us into the next decade.”

asked by Nicholas Campanella · answered by David Poroch

How is Southern Company thinking about recontracting expiring Southern Power tolling agreements, potentially with hyperscalers, and would these be captured in the 75 GW pipeline?

The company sees upside opportunities in recontracting pricing as contracts expire, contributing to long-term plan durability. Conversations are ongoing with creditworthy counterparties, and these opportunities are being pursued aggressively.

“But if you look at in terms of where they were contracted from a pricing standpoint in terms of where the market is today, we do see upside opportunities in those pricing opportunities that will contribute to the durability and the length of our long-term plan.”

asked by Shahriar Pourreza · answered by Christopher Womack

Given lessons learned from Vogtle and attention to large-scale reactors, would Southern Company be interested in building new nuclear if there's government backing and hyperscalers take on cost overrun risk? Are hyperscalers showing traction in taking on cost overrun risk?

Southern Company believes new nuclear units are needed in the 2030s and is working constructively with the administration to make it a reality, but will not be 'next' to build. They are having conversations with hyperscalers about the role they can play in the equation, including cost overrun risk.

“I mean Southern is not going to be next, may be clear about that. But we're going to continue to work constructively and very -- I would say, pretty aggressive with this administration and with a lot of other parties to see how we can get this done because I do think it's important for -- from an energy policy standpoint, from the economy to meet this moment and meet this demand that we see in the marketplace today.”

asked by Shahriar Pourreza · answered by Christopher Womack

How do the tariffs work from a credit standpoint for large-load customers like OpenAI who may not be investment-grade, specifically regarding collateral?

Contracts are structured with long terms, minimum bills covering 100% of incremental costs, and default provisions tied to collateral. The company has flexibility to accept various forms of collateral (lines of credit, surety bonds) to ensure an A- or better credit position. The total collateral for the 17 GW portfolio is about $21 billion.

“But at the end of the day, the collateral portfolio that we're going to take to back up these contracts, is going to be put us at about an A- or better position.”

asked by Steven Fleishman · answered by David Poroch

Is the 1 GW of demand response in the OpenAI deal the first time Southern Company has done this for a data center, and what are the benefits?

Yes, this is the first time for a data center. It provides tremendous value and benefits to the entire grid by allowing the system to save peak load during high demand periods, ensuring the most economical resources are utilized and benefiting the broader customer base.

“The rest of the customer base will see benefits across the entire project. I mean what we're doing is during peak load periods, doing high demand periods, we're able to save the peak.”

asked by Andrew Weisel · answered by Christopher Womack

Given the ongoing success and load growth, is there an opportunity for a bigger rate credit or to update tariffs and rate structures in Georgia and Alabama, potentially sidestepping the revenue process?

The company works constructively with regulators to keep rates low and is thrilled to deliver rate stability through 2028. While growth provides opportunities to benefit customers and maintain stability, management will not get ahead of regulatory processes or conversations with the commission.

“I mean our goal at all times is to keep rates as low as possible for our customers. And so we are thrilled with how we are delivering rate stability to our customers through '28.”

asked by Julien Dumoulin-Smith · answered by Christopher Womack